Final Binding Offer List of Redacted items - Illinois Lottery

Final Binding OfferList of Redacted itemsCertain information has been redacted from this copy of the Final Binding Offer. Theredacted information is exempt from public disclosure under the Freedom of InformationAct as commercial or financial information which is proprietary, privileged, or confidentialand disclosure would cause competitive harm (5 ILCS 140/7(1)(g)).The following information has been redacted:2.5 ONLINE GAMESFigures showing a product development and needs assessment tools.2.6 INSTANTSInformation describing game development and game design processes.2.7 LOTTERY RETAILERSInformation describing retailer and sales team assessment mechanisms.2.8 E-COMMERCEInformation depicting and describing website development processes.2.9 MARKETINGInformation describing marketing strategies.2.11. OPERATIONSFigures showing business and technology integration and platforms.APPENDICESSurveys and reports containing confidential market information.The information generally described above is proprietary, privileged, or confidentialcommercial and financial information used by Camelot Illinois, LLC, or its affiliates, in theconduct of its business in the U.S. and elsewhere. Disclosure of this information wouldcause competitive harm to Camelot Illinois, LLC and/or it affiliates.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manageri

Section 2 Final Business PlanOPERATIONAL RESPONSIBILITIES OF MANAGERSection 2 contains Camelot’s Final Business Plan in response to the Request forProposal (RFP) for the Illinois Lottery Private Manager – Step 2. This RFP stipulates thatthe Final Business Plan must include strategies and activities for each of the followingoperational responsibilities set forth in Schedule 2.1 of the PMA:AreaTechnologyCamelotBid SectionCentral Gaming System 2.11.3Data and Reports 2.11.2WebsitesSales ChannelsRetail HardwareInstant Ticket VendingInternet and Mobile2.11.32.11.102.8.32.11.32.11.102.11.32.11.102.11.32.8.3DescriptionInstall, maintain, and update as necessary acentral gaming system, and provide for adisaster recovery system, reasonably acceptableto the State, which includes hardware, software,communications, network, and equipment andother components necessary for the sales,validation, and inventory management of theLotteryProvide the data and reports as necessary toenable or facilitate the State’s ability to carry outits obligations (including Lottery Retailersettlements and adjustments)Design, maintain, and host the Lottery website;and design, maintain, and host a separate anddistinct website for Manager’s owncommunicationsInstall, maintain, and update retail hardware andsoftware components necessary for the sales,validation, and inventory management of theLotteryInstall, maintain, and update as necessary instantticket vending reasonably acceptable to theState, including dispensing machines,distribution channels, networking, and othercomponents necessary for the sale of instantticket Lottery GamesProvide, maintain, and upgrade as necessary thefunctionality to sell Lottery Tickets via theInternet or mobile devices, which functionalityshall include geo-location, age verification, andelectronic payment technology; provide andmaintain customer relationship managementfunctionalitiesCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 27

Section 2 Final Business PlanAreaProductNew Lottery Game DesignPayout StructureManaging Product PortfolioPricingSubscriptionsCamelotBid SectionOnline 2.5.3.1Instants 2.6.3.1Online2.5.3.2Instants 2.6.3.1Online2.5.3.4Instants 2.6.3.1Online2.5.3.3Instants2.6.3.12.11.9.22.11.10.22.8.3.1DescriptionDesign, format, and maintain the appearance andmechanics of Lottery GamesEstablish prize structures for Lottery GamesManage the portfolio of current Lottery Games,including any recommended adjustment to theformat and rules of Lottery GamesEstablish the price of each Lottery GameDevelop and implement a subscription programfor Lottery GamesPlatform and ChannelDevelopment2.11.4 Develop new Lottery platforms, as appropriateLogisticsPrinting 2.11.5.8 Print Lottery TicketsDistribution 2.11.7.2Distribute Lottery Tickets and consumables(including management of returns anddestruction)Warehousing 2.11.7.2 Warehouse Lottery TicketsInventory Management2.11.7.22.11.7.32.6.3.2Develop an inventory management andpredictive ordering systemLottery RetailersRecruitment 2.7.3.1 Recruit new Lottery RetailersTraining2.7.3.3 Develop and implement training for LotteryRetailersSupervisionCommissions andIncentivesRelationshipManagement2.7.3.22.7.3.32.7.3.42.11.7.52.7.3.2Supervise Lottery RetailersDetermine commissions andother incentives for Lottery RetailersProvide for customer relations managementRevocation 2.7.3.5 Execute state suspension and revocation ordersSecondary DrawingsConduct 2.11.3.6Establish system of selecting and identifyingwinners of secondary drawings or promotionaldrawingsDesign 2.11.3.6Design, format, and maintain prize structures ofsecondary drawings added to Lottery Games28 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanAreaMarketingCamelotBid SectionDescriptionAdvertising 2.9.3.2Design, implement, and maintain advertising andpromotional campaignsBranding 2.9.3.4 Develop Lottery brandsLoyalty Program 2.9.3.3Design, maintain, and operate a customer loyaltyprogramStrategy 2.9.3.5 Create a general marketing strategySponsorships 2.9.3.1 Select and negotiate sponsorship opportunitiesCustomer Insights 2.9.3.9Design and implement a consumer researchstrategy to inform and measure marketingstrategies and productsCustomer Service Center – Player and Lottery RetailerDesign, operate, and maintain service and callOperation 2.11.7.5 centers for Lottery Retailers and Lotterycustomers (call centers may be combined)Responsible Gaming ProgramOperation 2.10.3.1Develop, operate, and maintain a responsiblegaming programStaffingManagement of LotteryEmployees2.11.1.32.11.8.2Direct and control the duties of each Lotteryemployee subject to the Employee UseAgreement; provided, however, that suchdirection and control must be consistent withState Policies and Rules, and where applicable,any collective bargaining agreementProcurementBidding 2.11.5Create proposals necessary to procure bids forrequired services of the Lottery in accordancewith the AgreementSelection 2.11.5Select Subcontractors and Vendors in support ofLottery operationsManagement 2.11.5 Manage Vendors and SubcontractorsComplianceUnderage Play 2.10.3.2Develop and implement policies and programsaimed at preventing underage playExcessive Play 2.10.3.3Develop and implement policies andprograms aimed at preventing excessive playGame Rules 2.11.8.4Comply with rules related to multi-jurisdictionalgames offered by the LotteryCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 29

Section 2 Final Business PlanAreaLegalCamelotBid SectionLegislation 2.11.8.1Collective BargainingAgreement2.11.8.2Contracts 2.11.8.3Game Rules 2.11.8.4Intellectual Property 2.11.8.5DescriptionMonitor and maintain compliance with all StatePolicies and RulesMonitor and maintain compliance with collectivebargaining agreements, as applicable pursuant tothe Employee Use AgreementPrepare, negotiate and monitor contracts withSubcontractors and VendorsPrepare game rules consistent with applicablelawMaintain the legality and validity of, conductsearches regarding, and investigate claims madeagainst, Intellectual Property that is owned,licensed, or otherwise related to the operationsof the Lottery in any way; maintain compliancewith State Policies and Rules applicable toIntellectual Property; and, perform any and allregistrations, renewals, transfers,assignments, procedural oppositions, and, ifnecessary, prosecution activities with respect toIntellectual Property that is owned, licensed, orotherwise relatedto the operations of the Lottery in any way30 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.1 INTRODUCTIONThe Illinois Lottery Private Manager Request for Proposal (“the RFP”) has set anobjective for the Private Manager to increase the sales and Net Income of the IllinoisLottery. This Step 2 Final Business Plan sets out Camelot Illinois’ strategy to achieve thisobjective.Camelot Illinois will drive responsible andsustainable growth in sales and Net IncomeThe core objective of Camelot Illinois’ Final Business Plan is to transform the Lotteryfrom a traditional ticket selling business, selling through conventional retail outlets intothe premier lottery operation in the U.S. with social responsibility at its core.Through this transformation, the Lottery will significantly increase both the overallpenetration and frequency of play of Illinois lottery games, generating a sustainedincrease in sales and Net Income. Camelot Illinois proposes to work in a collaborativepartnership with the Illinois Lottery, combining Camelot’s expertise and best practicewith the in-depth knowledge and experience of the Illinois Lottery employees.The Business Plan describes the current and future market environment in Illinois, thefactors affecting growth and the needs of the Illinois consumer (Situation Analysissection2.2 and Future Trends-section 2.3). The Business Plan then sets out theinitiatives required to delight existing players and encourage more consumers (be theylapsed or non-players) to play lottery games on a regular basis. These initiatives are asfollows: Re-invigorating the Illinois Lottery Brand (section 2.4): Implement a stakeholder outreach and marketing communications programs The Online Game Plan (section 2.5): Enhance the core product range and then diversify into new products to bettersatisfy consumer needs and engage lapsed and new players The Instants Game Plan (section 2.6): Optimize the Instant product set and develop a new, best-in-class, FMCG inspiredsupply chain that optimizes game availability, increases play by occasional playersand attracts new and lapsed players The Lottery Retailers Plan (section 2.7): Give consumers easy access to Lottery products by optimizing and expanding thecurrent retail network and adding new, convenient ways to play The E-Commerce Plan (section 2.8): Deliver a successful Internet Pilot, selling Lotto and Mega Millions tickets togetherwith an industry-leading suite of proven controls to manage responsible play The Marketing Plan (section 2.9): Develop an integrated marketing strategy consistent across all marketing channels(product development, channel marketing, pricing and promotions) to ensure that allCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 31

Section 2 Final Business Planaspects work together to drive responsible and sustainable growth in sales and NetIncome Build a direct dialogue with consumers, alongside traditional mass communications,differentiating the games and engaging consumers through traditional media as wellas data-driven direct marketing programsIn order to implement the above initiatives in an efficient and effective manner, theLottery organization will need to successfully transition to the Private ManagerAgreement (“PMA”) arrangements and evolve into an FMCG 1 style business. Section2.11 of the Business Plan sets out the phases and plans required to achieve thisorganizational transformation. Key initiatives that Camelot will undertake to transform theLottery include: The Transition and Ramp-Up Period which ensures that the Private Manager canintegrate itself into the business and be effective immediately at the start of thePMA (section 2.11.9); The Organization plan which sets out the people and resources Camelot Illinois willput in place to allow the Private Manager to perform its functions and interacteffectively with the Lottery and the State (section 2.11.1); The Technology Enablement plan that will introduce the latest gaming and businesssystems technology during 2011 to support the evolution of the Lottery into anFMCG business (section 2.11.10); and The Responsible Gaming and Compliance plan which sets out the strategies andcontrols Camelot Illinois will implement to ensure consumer protection andresponsible play are at the core of all its plans (section 2.10).The Business Plan forecasts an increase in ticket sales from $2.2 billion in FY2010 to$3.8 billion in FY2016 which implies a compound annual growth rate (“CAGR”) of 9.6%.The key components of this increase through to FY2016 are:Online Games: $366 million from a sales uplift in Online Games (before applying thebenefit of retail and E-Commerce initiatives). This sales uplift assumes spend percapita on Online Games increases from $79 to $131 by FY2016 (which would bemarginally above the estimated Online game spend per capita in Pennsylvania inFY2016 of $115. Pennsylvania is Camelot Illinois’ benchmark peer state for Illinoiswith respect to the maturity of the lottery and the socio-demographic profile of thestate relative to Illinois 2 ;Instants: $567 million (before applying the benefit of retail and E-Commerceinitiatives) from a sales uplift which assumes spend per capita on Instants increasesfrom $92 today to $161 by FY2016. (This would be in line with the estimatedInstants spend per capita for Pennsylvania in FY2016 of $153);Retail: $564 million sales uplift from retail initiatives. This sales uplift represents ourestimate, based on UK experience, of the benefit of transforming the in-storeenvironment and expanding the retail network;1FMCG - Fast Moving Consumer Goods – is a term used to describe consumer goods or products that arenormally purchased by consumers at regular intervals.2Pennsylvania has broadly the same size population and socio-demographic make up as Illinois yet deliverednearly 50% more in sales than Illinois in FY2010. Camelot assumes a growth of 2% p.a. in per capita sales forPennsylvania such that total spend per capita increases from $245 in FY2009 to $311 in FY2021.32 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan E-Commerce: $89 million sales uplift from Internet sales of Mega Millions andLotto, should the Internet Pilot be permitted to run to FY2016; and Base Sales: $40 million sales uplift representing the estimated sales growthrequired to achieve Base Net Income of $659 million (Camelot’s estimate for theIllinois Lottery’s Net Income for FY2010).As a result of the Final Business Plan, overall spend per capita in Illinois is forecast toincrease from $171 to $292 in FY2016 (per capita spend in Pennsylvania is estimated tobe $268 in FY2016) and overall penetration is forecast to increase from 49% to 58% byFY2016 (the highest penetration for a lottery in the U.S. with sales in excess of $1 billionis Connecticut at 62% 3 ).Based on these sales, Business Plan Net Income is forecast to increase from anestimated $659 million in FY2010 to $1.146 billion in FY2016, which implies a CAGR of9.7%.The waterfall charts in figures 2.1.1 and 2.1.2 illustrate the reconciliation between actualticket sales and business plan Net Income in FY2010 and projected ticket sales andbusiness plan Net Income for FY2016 and highlights the contributors to sales growth.FIGURE 2.1.1: SOURCES OF TICKET SALES GROWTH FOR THE LOTTERY$4,000564893,835$3,500$3,000567366Sales ($Mn)$2,500$2,000$1,5002,20940$1,000$500$0FY2010Base SalesGrowthInstants Online Retail Internet FY2016Source: Camelot3Source: Simmons 2010 dataCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 33

Section 2 Final Business PlanFIGURE 2.1.2: SOURCES OF NET INCOME GROWTH FOR THE LOTTERY$1,600Net Income ($Mn)$1,200$800$400659 2 (16)138 (1)156 (1)174 35 1,146$0FY10 Net IncomeNewOrganization andContractBusinessSystems ChangeInstantsDevelopmentMarketingCommunicationsOnline GamesDevelopmentCorporate SocialResponsibilityRetail InitiativesInternet PilotFY16 Net IncomeSource: CamelotThe key initiatives that will contribute toward the forecast sales growth over the first 5years are detailed below:Contract Year 1 Transform the Lottery organization by employing the best standards of FMCG andsocial responsibility in the operation of the lottery; Implement new gaming and retailer technology; Optimize and expand the retail network (increase retail network by 2,000 newterminals, add new Permanent Point of Sale (“PPOS”) capability, introduce mediascreens at retail outlets, and improve the effectiveness of Instants dispensers); Re-invigorate the Illinois Lottery brand (stakeholder outreach and marketingcommunications programs); Launch Internet pilot; Roll out Instants product development strategy; and Launch Powerball and Mega Millions differentiation and brand communications.Contract Year 2 Launch multi-channel Player Club; Launch new and improved Lotto game; Launch enhancements to Pick 3 and Pick 4; Roll out new IPOS (Intelligent Predictive Ordering System) supply chain system; Roll out 3,000 FSVMs (“Full Service Vending Machines”); and Launch additional event draws on July 4th and the Holiday Season.Contract Year 3 Roll out EMoP (“Extended Means of Play”) in retailers i.e. sales across cashregisters via retailers’ EPOS (“Electronic Point of Sale”) systems; Expand retail network by a further 1,500 terminals; and34 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanRoll out further games on the Internet and new interactive channels (subject toDepartment of Justice (“DOJ”) ruling).Contract Year 4/5 Introduce new online multi-jurisdictional game innovation; and Launch new experiential, raffle-based games.All of the initiatives have been based on Camelot Illinois’ understanding of activities thatare permitted under the Lottery Law and Operating Standards. To the extent that any ofthese initiatives are not fully consistent with these laws and standards then theinitiatives will be adjusted to ensure that they are fully compliant.Camelot Illinois strongly believes that together with the existing Lottery managementteam it can achieve the forecast growth in Net Income as the Business Plan forecastsare supported by existing precedent in the U.S. market. It is important to note that thedifference between the Net Income Targets provided in Section 3 (Binding Offer Form 5)and the Business Plan Net Income forecasts do not reflect a lack of confidence on behalfof Camelot Illinois as to the potential for the Lottery to achieve the Business Planforecasts. The difference merely represents an appropriate risk sharing between theState and Camelot Illinois, given that the Lottery retains control.The Business Plan strategies to drive sales and NetIncome are tested and provenBoth the State’s and Camelot Illinois’ research clearly indicate that the Lottery hastremendous potential. This is clearly evidenced by the fact that only 32% of the playerpopulation account for 84% of sales 4 . The strategies that Camelot Illinois will use to tapthat potential to drive sales and Net Income, are tested and proven. Camelot hasemployed these strategies with great success to ensure wide player participation for theUK National Lottery, with 72% 5 of the UK adult population playing compared with 49% inIllinois and has begun to adapt and implement them into the California Lottery. ThisBusiness Plan sets out how Camelot Illinois will adapt these strategies to the Illinoismarket to meet the State’s objectives of driving responsible and sustainable growth insales and Net Income.Camelot Illinois will deliver a fresh approach to themanagement of the Lottery4Experian Simmons player participation and profiles (Appendix A10)5Conquest Tracker,UKCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 35

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Section 2: Final Business Plan2.2. SITUATION ANALYSIS2.2.1 INTRODUCTIONThe Illinois Lottery is a significant enterprise and an important revenue generator for theState. 49% of the Illinois adult population or 4.7 million people are customers of theLottery. In FY2010, the Lottery generated sales of $2.2 billion and estimated NetIncome of $659 million, making it the fifth largest source of revenue for the State.Since its inception in 1974, the Lottery has grown to become the 11th largest lottery inthe U.S., with a diversified product range and retail network and a base of regularplayers. As a result, the Lottery has delivered sales growth by growing revenue at aCAGR of 4.0% over the last 5 years.However, close examination of the data available in the Data Room and throughCamelot’s own research, indicates that the Illinois Lottery has yet to achieve bestpractice and ranks behind a number of peer states in key business metrics, suggestingthe business has significant upside potential.2.2.2 CAMELOT RESEARCH PARTNERS ANDMETHODOLOGYTo better prepare its Business Plan for the Illinois Lottery, Camelot has conductedextensive research. In addition to using readily available information, Camelot hascommissioned research covering a diverse range of relevant subject areas. In line withthe corporate philosophy of having the consumer at the heart of everything that Camelotdoes, insight and research was used to build a picture of who the Lottery players are,their participation, frequency of play, and their attitudes toward the Lottery. This wasused to guide the strategic plans presented in the Business Plan.The research included: 16 customer focus groups across the State of Illinois: 14 groups of Lottery players andtwo of non-players Quantitative research involving over 1,000 non-players Third party research into lottery technology and emerging industry trends Experian Simmons survey of Illinois Lottery player participation rates and playerattributes.In total Camelot received input from eight companies: The Future Foundation Experian Simmons Rabin Research Company Forrester GBGC EMNOS The Nielsen Company MPGCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 37

Section 2: Final Business PlanTheir credentials and fuller detail of the information they provided are contained inSupporting Information 2.2.A.The top level findings are as follows; supporting evidence is presented in Section 2.2.3. Low penetration. The overall penetration of lottery play in Illinois is relatively lowcompared to other states at 49% of the adult population. The top performing lotteries,from a penetration perspective in the U.S., are Pennsylvania at 61% and Connecticutat 62% 1 . In the UK, lottery penetration is 72%. Low frequency. Only 9% of Illinois adults buy a ticket every week. In the UK 50% ofadults purchase a lottery ticket on a weekly basis. The Illinois Lottery relies on a smallnumber of players to generate the majority of lottery sales with 32% of playersgenerating 84% of Lottery revenue. Spend per capita below U.S. average. Per capita spend on lottery tickets is lower inIllinois than the top quartile of U.S. lotteries and lower than the U.S. lottery average. Low number of retailers per head of population. The number of retailers per capitais low compared to other states, penetration among chain accounts and big boxretailers remains low and the quality of the in-store Lottery presentation isinconsistent. Consumer apathy. Both Instants and Online Games are viewed positively by regularplayers but there is considerable apathy towards a number of games that areperceived not to provide enough winning experiences. Poor awareness of how funds are used. There is a lack of public awareness as tohow funds generated by the Lottery are spent, resulting in low trust levels of theoverall Lottery operations. Net Income not tracking sales. Growth in sales has not flowed through tocorresponding growth in Net Income.1Source: Simmons data 201038 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.2.3 SUPPORTING EVIDENCE2.2.3.1 Low penetrationFIGURE 2.2.3.1.1: LOTTERY PARTICIPATION RATES AMONG ADULTSparticipation (%)80%70%60%50%40%30%49%52%45%61%47%72%20%10%0%Illinois Ohio Michigan Penn U.S. UKSource: Simmons data 2010Figure 2.2.3.1.1 demonstrates that the player participation rate is consistent withaverage U.S. standards but not close to leading U.S. or global lotteries. The strongerparticipation rate in Pennsylvania flows through to stronger sales – spend per capita forPennsylvania in FY2009 was $245 compared with $161 for Illinois.2.2.3.2 Low frequencyFIGURE 2.2.3.2.1: ILLINOIS PLAYERS – FREQUENCY OF PLAY 201060%50%51%Participation (%)40%30%20%20% 19%10%9%0%Regular (>1 ticket aweek)Occasional (~1 ticketa month)Infrequent (~1 ticket ayear)Non-playerSource: Simmons data 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 39

Section 2: Final Business PlanThe majority of residents of Illinois do not play the lottery at all. Of the 49% who do playthe lottery, most are occasional or infrequent players, and only a small number areregular players. The Lottery has a heavy reliance on a small group of regular players togenerate the majority of its revenue. Only 9% of adults buy a ticket at least once a week(Figure 2.2.3.2.1); the figure in the UK is 50%. Approximately 84% of lottery revenuesare generated from 32% of players who in turn represent less than 16% of the adultpopulation 2 .The demographics of those who do play regularly show only a small percentage from theyoungest eligible age group (Figure 2.2.3.2.2).FIGURE 2.2.3.2.2: LOTTERY PARTICIPATION BY AGE GROUP% of Population30%25%20%15%10%5%0%25% 24%26%25%20%21%19%17%17%15%16%15%15%16%15%9%9% 9%11%6%1%Total 18 - 24 25 - 34 35 - 44 45 - 54 55 - 64 65+Regular (Once a week) Occasional (Once a month) Infrequent (< Once a month)Source: Simmons data 20102.2.3.3 Per capita below U.S. averageSpend per capita is significantly below the first quartile and below the averageperformance in the U.S. (Figure 2.2.3.3.1).2Ipsos Reid 200640 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanFIGURE 2.2.3.3.1: LOTTERY PER CAPITA EXPENDITURE$250Spend Per cap ($)$200$150$100$50$91$106$77 $80$127$95$0Illinois U.S. Average U.S.- Top QuartileDBGInstantsSource: La Fleur’sDBG = Draw Based Games2.2.3.4 Low number of retailers per head of populationThe number of retailers is lower in Illinois than in other states on a per capita basis. Thismay be a contributory factor to the below average per capita sales figures (Figure2.2.3.4.1).The Illinois Lottery is also under-represented in types of outlet that could prove to bevaluable to the retailer network. The situation analysis for the retail channel in Section2.7 Lottery Retailers expands on this and other observations about the current retailernetwork.FIGURE 2.2.3.4.1: RETAILERS PER 100,000 POPULATION AND COMPARATIVE SALESPER CAPITAMAVTORMIRIMENHWVGANYSDSCMT MOHDCCTMDARFLNJTXPANEINILSource: La Fleur’s12412210711593 9810180 82839180798077777971727366677159 6565BenchmarkOthersMADCNYMDNJCTPAMIRISCFLOHKYNHVAILMOVTDENCINTXWVCOLA4073372982902822452382272202142091801801731621621541391381141879198109InstantsOnlineNo BreakdownsBenchmark669Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 41

Section 2: Final Business Plan2.2.3.5 Consumer apathyFrom quantitative research conducted with non-players, respondents said that theydidn’t play because of the odds against winning. Over 60% think the odds againstwinning are too high; 39% of respondents cited the perception or past experience of‘never winning’ as a primary reason for not playing lottery games (Figure 2.2.3.5.1).FIGURE 2.2.3.5.1: TOP FIVE REASONS FOR NOT PLAYING THE LOTTERYDo not have enoughmoney to playNever winNever think about playingWork too hard for moneyto lose playing lotteryOdds against winning aretoo high0% 10% 20% 30% 40% 50% 60% 70%Source: Rabin Research SurveyInfrequent winning or inadequate returns, causing players to lose motivation and atworst stop playing, was a common theme throughout all of the focus groups:I felt like I was wasting my moneybecause I never won anything!-Lapsed player“If you don't win it’s kind of tough to play or to stay motivated to play” (Lapsed player)“You don’t wanna play $9 and just get $1 back and you definitely don’t want anotherfree ticket!”(Core Online Game player)2.2.3.6 Poor awareness of how funds are usedThe Ipsos Reid report of 2006 noted that 40% of lapsed players said that they hadstopped playing because they didn’t know where the proceeds were going. Camelotfocus groups confirmed that these perceptions are still evident; many current and lapsedplayers said they were unaware of where the Lottery surpluses are allocated:42 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanWhat are they doing with the money? Ithink someone’s hiding something.-Online Games, weekly player“They should be more public about where the money goes.” (Online Games –occasional player)“I think we should be able to see where it goes” (Online Games - Lapsed)“What are they doing with the money? I think someone’s hiding something.” (OnlineGames – weekly player) 3With a greater understanding of how the funds are used, Illinois could increase sales.Research shows that lotteries that contribute to a charitable cause have higherparticipation rates than lotteries that have a non-charitable purpose (Figure 2.2.3.6.1).FIGURE 2.2.3.6.1: LOTTERY PARTICIPATION RATES FOR CHARITY AND NON-CHARITY SPECIFIC LOTTERIES75%70%70%participation (%)65%60%55%50%45%50%62%46%40%European"CharityLotteries" (UK,Spain, Portugal)Other EuropeAustralia"CharityLotteries" (SA,WA)Rest ofAustraliaSource: Roy Morgan, Camelot, An Post Lottery, LAE, SCML, EuroMillions2.2.3.7 Net income not tracking salesGrowth in sales has not resulted in corresponding growth in Net Income (Figure2.2.3.7.1). This has been the result of increasing focus on lower margin Instants(Instants grew from 44% of sales in 2004 to 54% of sales in 2009) and a 70% increasein lottery vendor costs over five years.3Source: Camelot focus groups 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 43

Section 2: Final Business PlanFIGURE 2.2.3.7.1: ILLINOIS LOTTERY SALES AND NET INCOMESales ($Bn)2.22.12.01.91.81.7Net Income ($Mn)7006005004003002001001.62004 2005 2006 2007 2008 20090SalesNet IncomeSource: Data Room2.2.4 OBSERVATIONS BY BUSINESS PLAN FUNCTIONSection 2.2.3 has presented an overview of the research data on the Illinois Lottery. Theresearch conducted for Camelot sought to understand the underlying factors thatproduce the outcomes presented above. This additional information is set out in theInsights that precede the Strategies and Activities in each of the Business Plan functionalareas. A brief summary of the key findings is as follows:Illinois LotteryMarket FeatureIllinois State LotteryBrandingKey Findings The corporate brand is not closely associated with the returns to theCommon School Fund and other beneficiaries in the minds of theconsumer Some players think the distribution of funds is not transparentOnline Games Very low frequency of regular play i.e. play once a week (only 5%regular play of Little Lotto, Pick 3 and Pick 4 and 7% regular play ofLotto and Mega Millions) No increase in weekly participation in Mega Millions following largejackpot series Lack of differentiation in the product offering and communicationsbetween Powerball and Mega Millions Lotto is no longer left with a defined role Concept of raffles is very popular, with nearly all selling out Numbers games contributed over 50% of sales in 2009Instants Year on year growth is slowing Flat consumer penetration, flat frequency of play There appear to be too many games available in the Lottery’s Instantsportfolio, causing inventory and distribution challenges Prize structures are not maximizing the winning experience The best selling games aren’t always on display in retail Inconsistent display and presentation of Instant tickets across the retail44 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanIllinois LotteryMarket FeatureKey Findingsnetwork Instants marketing activity is not sustained all through the yearLottery Retailers The number of retailers is very low relative to domestic best practice,with Illinois ranked 39th in the U.S. (59 retailers per 100,000 population)and revenue per capita is low versus peer states The Lottery is not widely available in some important retail categorieswhere people regularly shop In-store furniture is somewhat outdated and in need of modernization The in-store execution is not uniform across retailers The retail incentive program could be structured to provide an evengreater incentive for retailers to perform The support services to retailers can be made more efficientE-Commerce The performance of the Illinois website has declined over the past 12months when compared to peer states In 2006, 16% of lapsed Illinois lottery players claimed they didn’t playbecause it was no longer convenient 93% of those with on-line access in Illinois use the Internet every dayMarketing Too many small scale marketing activities to deliver a consistentconsumer experience across all touch points Production costs are much higher as a proportion of total marketingbudget than lottery and FMCG best practice Scheduled marketing support for Powerball and Mega Millions isdetached from being able to fully support jackpot roll cyclesLottery Technology Lottery systems and facilities are outdated and costs are significantlyabove current market ratesThese findings suggest that there are significant opportunities for the Private Manager toenhance the sales and Net Income performance of the Lottery. The Brand, Product,Channel and Marketing plans outlined in the Business Plan address these findings andset forth the Camelot strategy to reach best in class performance. In developing theseplans Camelot has considered the existing strengths of the Illinois Lottery operations,the strategies that have worked for Camelot in other markets (i.e. UK, California andSouth Africa) and how these strategies might be adapted for the Illinois market.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 45

Section 2: Final Business Plan2.2 SUPPORTING INFORMATION2.2.A RESEARCH PARTNERS AND METHODOLOGYCamelot commissioned research from a number of companies to gain an understandingof the consumer and Lottery player in Illinois as well as the wider market trends thatcould have an influence on the future of the Lottery. The identities, credentials and workcarried out by each of the groups are as follows:The Future FoundationCamelot wished to understand the major trends that could affect the U.S. and Illinoisover the tenure of the Private Management Agreement. This would provide Camelotwith data and information covering the social and consumer trends that are likely toaffect lottery players and the wider FMCG (Fast Moving Consumer Goods) category inthe U.S.The Future Foundation is renowned for and specializes in forecasting and analyzingbusiness and consumer trends. This enables businesses to plan ahead and alignproducts to the changing needs of consumers. Camelot UK has used Future Foundationon several high level strategic initiatives in the past.These trends and the associated insights into consumer behavior in the U.S. and Illinoishave directly influenced Camelot’s plans to develop the Lottery’s business and futurestrategy.Experian SimmonsAt the very centre of Camelot’s business philosophy is a deep understanding of theconsumer. To fully understand the Illinois Lottery it is was essential to paint a picture ofthe Illinois Lottery player. This includes the most straightforward understanding of howmany Lottery players there are, through to understanding their habits and lifestyles.To get under the skin of the Illinois Lottery player Camelot commissioned ExperianSimmons to conduct an analysis of the Lottery player base. Experian Simmons is theleading source of high quality research and single-source measurement ofdemographics, consumer lifestyle, attitudes, brand preferences and media usagebehaviors of the American consumer. Experian Simmons is used by Camelot tounderstand and build player profiles in the UK.Experian Simmons provided data to ascertain the level of lottery participation in the U.S.,in each individual state and an in-depth analysis in Illinois. A further deep-dive of theIllinois Lottery player was conducted to gain a greater understanding of who theselottery players are. Through this research Camelot was able to gain visibility of the levelof player participation of specific game types: Instants, weekly and daily Online Games,plus frequency of participation: regular, occasional and irregular.Experian Simmons also holds data on the physical retail network. This was combinedwith Illinois Lottery retailer locations (data from the Illinois Lottery Data Room), and byfusing these data sources it was possible to build ‘value’ maps of the balance of thedistribution network.The Illinois Lottery Player Profile report can be found in Appendix A10.46 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanRabin Research CompanyAs part of the research into the Illinois Lottery players, a more personal understanding oftheir attitudes and motivations was sought. This was achieved through the use of guidedfocus groups and specifically targeted surveys, respectively termed qualitative andquantitative techniques.Rabin Research is a global research agency providing qualitative and quantitativeresearch services and is based in downtown Chicago.Rabin Research was engaged to undertake both the qualitative and quantitative research.They have conducted this type of research of numerous companies in Illinois, the U.S.and globally. Michelle Ester who led the research engagement is currently the ChairmanEmeritus, American Marketing Association FoundationQualitative research (focus groups)Camelot commissioned a series of sixteen focus groups to obtain an extensiveunderstanding of the Illinois players, lapsed players and non-players and their motivationsto play.The groups were formed using a broad spread of socio-demographic participants. Lotteryplayers were also segmented by the game they played, frequency of play; regular andoccasional/ lapsed players. In addition, a consideration was made to investigate thoseplayers who were frequent users of and made purchases via the Internet. Regionalvariances were also taken into account to ensure a general representation of the Illinoispopulation. Groups were held in both suburban and downtown locations.In total 16 focus groups were held; 14 focus groups of Lottery players and 2 focusgroups of non-players.These groups brought to life the numerical research and allowed an exploration of thedeeper motivations to playing. Also attitudes towards the Lottery were explored. Thefindings are in Appendices A6, A7 and A8 but also run through and are applied in all ofthe sections on Games and Channels.Quantitative research (targeted surveys)Quantitative research was undertaken to obtain a broader understanding of non playersand their rationale behind non play. The objective of this research was to provideCamelot with an understanding of the main barriers to persons not playing the Lottery.This also complemented the findings of the non-player focus groups.A sample of over 1,000 respondents was selected and invited to participate in an e-mailsurvey. After careful screening, over 300 eligible non players answered the survey. Thereport can be found in Appendix A9.ForresterAn integral part of Camelot’s Business Plan is to launch an Internet Pilot for the IllinoisLottery. Camelot sought the expertise of Forrester Research Inc. to fully understand thisunique arena in the U.S. and specifically Illinois.Forrester Research is the leading source of advice on the business implications oftechnology change and technology's impact on consumers. Forrester is used extensivelyby Camelot’s interactive team which has assisted in building the world’s mostsuccessful interactive Lottery website.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 47

Section 2: Final Business PlanForrester Research provided Camelot with an analysis of the current digital consumerand digital market within the U.S. and Illinois. This consisted of levels of Internet usageand how consumers use the Internet. Also a deeper understanding of the likely Internettrends and consumer penetration was provided for the next seven years. Using thisinformation Camelot has been able to make confident decisions and recommendationsabout how to approach the digital consumer within the Illinois market.GBGCIn order to gain a deeper vision of the interactive Lottery market, Camelot required anindependent and external source to validate several hypotheses regarding this market.Global Betting and Gaming Consultants (GBGC) has established itself as the mostcredible specialist in international gambling consultancy in the world.Camelot commissioned GBGC to conduct a review of the Interactive gaming marketspecifically focusing on lottery and Camelot’s existing position. The full report can befound in Appendix A5.EMNOSIn order to increase the loyalty of Lottery players and as part of its Business Plan,Camelot has outlined how it would launch a Player Club and Player Card. To build a bestin-classPlayer Card Camelot sought the advice of EMNOS, a leading internationalStrategy and Consulting company that is regarded as a leader in developing customercentricstrategies for channel management (online and in-store) and strategic loyalty cardCRM initiatives.EMNOS is a key contributor to Camelot’s UK interactive business. EMNOS is also at theforefront of loyalty card schemes, working with four of the top ten global retailers,including Target. EMNOS also works with many of the leading on-line gaming companiesin their player programs.EMNOS has assisted in planning, proposing the architecture and maintenance of thePlayer Card. This is outlined in greater detail in Section 2.9 Marketing.The Nielsen CompanyAs part of the analysis of the retail channel, Camelot required up to date and accuratesales data for the Lottery’s sales channels.Nielsen is a global market research agency that provides measurements of retail Point ofSale (POS) for retail outlets such as grocery stores, drug stores, mass merchandisersand convenience stores. It is widely regarded as the definitive source of FMCG retailsales data.Nielsen provided Camelot with precise sales figures for various retail sectors in the U.S.,Illinois and specifically Chicago. This data was utilized to evaluate the relativeperformance of retail channels and those which are specifically relevant to the Lottery.These findings are referenced in the Section 2.7 Lottery Retailers.MPGFor any consumer-facing business, including the Lottery, it is essential to communicateand be able to do this effectively. Camelot approached MPG to gain a full understandingof how the Illinois Lottery can communicate effectively with the Illinois public.48 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanMPG is a division of Havas Media, one of the world's leading groups in Communicationsconsulting. In the UK Camelot has had a working partnership with MPG for 11 years.Based on key learning from the successes of driving incremental sales in the UK throughmedia strategies, Camelot briefed MPG to provide recommendations on communicationplans using both traditional and Internet media.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 49

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Section 2: Final Business Plan2.3. FUTURE TRENDSCamelot views the lottery as part of the competitive Fast Moving Consumer Goods(FMCG) market place. In order to produce a strong and robust business plan that growsthe Lottery over the 10 year period of the Private Manager Agreement (PMA) Camelotmust consider the likely social and consumer trends that will influence behavior over thistime – only by understanding these trends can the strategies and activities developed inthe Business Plan stand the test of time enabling the Illinois Lottery to deliver fresh andengaging consumer propositions that are in line with consumers’ expectations.Camelot therefore commissioned research on future trends that are likely to affect thefuture success of the Illinois Lottery, consulting experts from the Future Foundation,before developing the detailed Business Plan. The work highlighted five key issue areas.Each issue area including any related sub-trend is discussed in more detail, supported byrelevant research data, within this section, together with a summary of how Camelot’sinsight has influenced the Final Business Plan.2.3.1 INTRODUCTIONTo better understand issues that may affect the success of the Illinois Lottery in thedecade covered by the Private Manager Agreement (PMA), Camelot engaged in researchwith experts from the Future Foundation. The Future Foundation specializes inforecasting and analyzing business and consumer trends. Their insight and analysisenable businesses to plan ahead and align products to the changing needs ofconsumers. The research provided Camelot with insight on the social and consumertrends that are likely to affect lottery players.Camelot has been successful in managing lottery businesses by applying FMCG bestpractices. Like the FMCG category, lotteries have to compete for the consumer’sexpenditure. Only by understanding consumer behavior and future trends can the IllinoisLottery successfully compete for the consumer’s dollar.Using a structured facilitation process led by the Future Foundation, Camelot reviewed25 separate issue areas ranging from “Ageless Society” to “Universal Play”, and thenranked them according to their likely impact on Illinois Lottery revenue and Net Income.The five broad areas with the greatest relevance, according to this research are: Retail trends Trust and loyalty Leisure culture Interactive / digital technology Common valuesThese five broad areas with their related sub-trends are described in the following pagesin Sections 2.3.2 - 6. Supporting Information concerning Camelot’s understanding of theimpact of the recession upon the U.S. and Illinois is included at the end of the section.The assessment of each trend area has enabled Camelot Illinois to develop the followingkey strategies: Retail trends – grow the network and move the Lottery to where consumers are;improve retail merchandizing.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 51

Section 2: Final Business Plan Trust and loyalty – engage with stakeholders to renew the link between lottery playand the beneficial outcome for Illinois. Leisure culture – allow players to access the Illinois Lottery anywhere in the state viathe Internet using mobile devices and social networking sites. Use play to attract andengage the new generation of players, for whom gaming is already an importantfeature of their leisure time. Interactive / digital technology – create a personalized website that targets new,lapsed and infrequent lottery players using sophisticated customer relationshipmanagement tools to drive engagement, based on individual preferences; create amobile ‘app’ that enables players to access the Lottery website on their phonesanywhere in the state. Common values – creation of a leading-edge, multi-channel responsible gamingprogram in retail and on the Internet; increase awareness of funding generated by theLottery through the brand strategies and stakeholder outreach activities.2.3.2 RETAIL TRENDS2.3.2.1 MaximizingMaximizing is the tendency of consumers to spend time and effort to get the bestpossible product or the best possible price. During the recession, there has been anincrease in the number of U.S. consumers reporting that they are more likely to go outshopping knowing what they will purchase, and to gather information about products andprices beforehand. This move, which is likely to impact footfall and any propensitytowards purchasing products impulsively, will directly affect the largest sector of theIllinois Lottery retailer estate, the convenience store sector.2.3.2.2 Discount foreverWith incomes under pressure and unemployment relatively high, the consumer’s searchfor value has increased. The recession has seen the popularity of ‘dollar stores’ and valueretailers increasing throughout the U.S. Unlike other trends it appears that this search isnot exclusive to lower-income groups but applies across most demographic groups – theAmerican consumer is increasingly likely to want discounted prices, and to choose basicproducts or brands, rather than more expensive or exclusive brands.2.3.2.3 Car cultureWhen the price of gasoline spiked quickly in 2008, consumer behavior changed. Theresult has been more shopping around for the lowest price per gallon. Even when gasprices eased slightly, the consumer behavior change remained. The gasoline crisiscreated a cost-consciousness among car owners which has also been seen in thecontinued trend toward self-serve and away from full service stations. The highproportion of in-lane payment machines at pumps has reduced the need to go into thestore to pay for gas. The unfortunate result for the Illinois Lottery is that this trend hasreduced the opportunity for an in-store lottery purchase while fueling up. This is asignificant issue, given that ‘C-Stores w/Gas’ are the largest retail sector for the Lottery.These changes in “retail trends” suggest to Camelot that: There is an opportunity to move retail outlets to follow consumers. Illinois needs to target the in-lane sales opportunity both at supermarkets and gasstations.52 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.3.4.2 Culture of immediacyThe appetite for time-saving devices and immediate access to all things is increasing. Aslifestyles become less traditional, consumers will demand higher levels of service andconvenience, at any time of the day or night. This level of access to all types of shopsand services is increasingly common in the U.S.In the future, provision of 24/7 services will increase with technology covering suchthings as fast-payment options in stores, more self-check-out kiosks and continuedgrowth of online shopping.2.3.4.3 The ‘experience economy’As simple material needs have become satisfied via increased affluence, people’spriorities have changed. People have begun to differentiate themselves by what theyhave done, or experienced, rather than by what they have purchased. In some cases,Americans severely affected by the economic crisis have been forced to definethemselves through their experiences rather than through possessions – particularlywhen they have suffered loss of a job, loss of their home, or been forced to sellpossessions.The leisure time of millions of people is now filled with activities that allow them toexperience something different – this ‘experience economy’ has also driven a change interms of consumers’ expectations towards stores and retailers that offer an engagingshopping environment, or personalized service.2.3.4.4 Cult of homeFor many Americans, the emotional connection with the home means that it is animportant hub of socializing and entertainment. This is where consumers spendsubstantial amounts of their leisure time (57% of U.S. residents spend more leisure timeat home than elsewhere, with 16% of respondents stating that they spent nearly all theirleisure time at home 5 ). The trend towards saving money also means it is more likely thatAmericans will be at home rather than elsewhere during their leisure hours.This trend will remain important in the future. With many homes well equipped with afull range of technology, there is less of a need to go elsewhere; at the same time theprevalence of broadband Internet enables the delivery of multiple forms of entertainmentin a way and at a time chosen by the individual.2.3.4.5 Universal playWhile many sectors suffered during the recession, spending on personal electronicsgrew. Within the U.S. the already high presence of game consoles continued toincrease. In the U.S., six in ten households owned video games consoles by the end ofthe last decade including 44% of households in the 46-64 year old ‘baby boomer’demographic and 70% of households made up of 27-43 year-olds 6 . Using the popularityof gaming could become important in attracting younger age groups who are generallydisengaged with the Lottery to trial and play the Lottery.The increasing prevalence of gaming devices in the home is accompanied by a growingtrend towards play on mobile devices and within social networking sites, all of which arelikely to have implications for the future:5nVision Research, 20086The State of the Media Democracy Survey 200954 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan Social games are increasingly popular. Games such as Pet Society, Café World, MafiaWars, and Farmville feature heavily on social networking sites, meaning that gamesare increasingly central to online social interaction. Mobile games are becoming more prominent. By April 2010 26,000 different gameswere available to download in the Apple App Store for iPhone users; more than thetotal number of apps in the travel, sport, music and navigation categories combined 7 .At the same time, 60% of smartphone users in the US claim to have downloadedgames from online app stores to play on their handsets 8 . Geo-tagging technology, which is available on a variety of smartphone devices viaapplications such as FourSquare invites people to ‘geo-tag’ locations they have visited(or are currently in) using GPS technology. Users are scored depending on thelocations they frequent and, as is the case with other social games, are able tocompare progress with friends and other users.As future trend predictors regarding “leisure culture”, Camelot will apply these variousinsights to Illinois as follows: Develop the availability of the lottery to allow access anywhere in the state via theInternet and mobile devices, delivering a quick and easy purchasing experience. Use play to add fun to the lottery product range and enable engagement with a newgeneration of players. Offer experiences as prizes, rather than just cash, and tie-ins with third partypartnerships and opportunities for licensed products. The possibilities of geo-tagging could show players where their nearest lottery retaileris, supporting local businesses.2.3.5 INTERACTIVE / DIGITAL TECHNOLOGY2.3.5.1 Digital revolutionThe U.S. leads most other developed nations in terms of access to the Internet. In theU.S., 76% of the population is online compared with Europe as a whole, where 53% ofcitizens have Internet access 9 . With most consumers online accessing the web on adaily basis (of those consumers who are online, 93% access the Internet on a dailybasis 10 ), this means that the Internet is a given in consumers’ lives and its influence islikely to continue to increase even further.The prevalence of the Internet has created the opportunity to develop personalizedengagement with consumers with the advent of sophisticated tools that enableeffective, targeted marketing on the basis of a one-to-one relationship to drive sales.2.3.5.2 e-powered consumersAmerican consumers are more likely than their counterparts in other countries to use theInternet to source information and use it as their main reference tool. Internet shoppinghas become widely adopted, with 70% of Internet users in Illinois having purchased aproduct or service online in the past six months 11 . During the recession, online shopping7Mobclix 20108J.D Power and Associates 20109Internet World Stats 200910nVision research 200911nVision Research 2009Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 55

Section 2: Final Business Planhas seen growth compared with traditional retailing, highlighting the importance of anattractive online offer. Increasingly, many large retailers regard their presence on theInternet as a key strategy for the future – indeed Mike Duke the recently appointed CEOof Wal-Mart has been quoted saying at their recent shareholders meeting “Building thebest website will be just as important as getting our store formats right”.As consumers become more aware of what is available to purchase online, it appearsthat they move away from the purely functional experience towards something that theyfind more appealing and engaging. The development of the UK online landscape gives aninsight into the future with retailers moving towards an online retail experience includingrecommendation sites, personalized sites and loyalty cards.2.3.5.3 Networked collaboratorsThe use of social media sites to share information or rate products has becomeincreasingly popular. According to research, 41% of Internet users in the U.S. havecreated or updated a social networking site in the past six months 12 . This figure isgrowing steadily.Recognizing this trend, commercial organizations have already started to communicatevia consumers’ social networks.The fact that social media enable a consumer to give ratings and to provide feedback tocompanies they use will be an important part of the future online retail experience. Thepopularity of these media explains the increasing percentage of online advertising beingplaced on such sites – a study in June 2009 showed that social networking sitesaccounted for more than 20 percent of all display ads viewed online 13 .The use of online blogs has become an important communication channel thatsupplements traditional media in carrying word of mouth information and feedback todiverse groups.2.3.5.4 Mobile interactionThe number of mobile Internet users is increasing, both world-wide and in the U.S. withapproximately 38% of U.S. mobile phone owners using their phone at least once everymonth to access the Internet. In Illinois, 48% of mobile phone consumers access theInternet at least once a month. 31% claim to do this every day 14 . The increasingprevalence of mobile phones, particularly those that are web-enabled has created ageneration of people who are continually interacting via electronic media in an effort tostay “connected”.The number of people with mobile Internet access is expected to increase rapidly in thenext three years, with smart phones increasingly replacing traditional cell phones ascontracts come up for renewal.2.3.5.5 TransparencyOne effect of the increase in Internet usage and the related search functionality is theincreased transparency that users expect from companies.12nVision research, 200913ComScore – June 200914nVision Research 200956 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanThere is an increasing trend towards consumers being aware of the provenance of theirpurchases and also wanting to track where their money has gone. This is particularlyrelevant to the Illinois Lottery where, as a reason for disengagement a significantproportion of lapsed players mentioned the fact that they do not know where theproceeds are going as the most important factor for their change in behavior.This need for transparency drives trust and engagement, provided that organizationsreact accordingly. Examples where this has already been achieved include the “MyProjects” initiative by Cancer Research UK. This pilot project enables supporters todonate to a specific research project that matches their reasons for giving. The sitekeeps donors informed about how their particular research project is progressing.The transparency principle also enables innovation. Already, other FMCG companiessuch as Hershey’s, Kraft and Pepsi invite consumers to contribute their ideas for productinnovation.The wealth of relevant trends in the area of “interactive / digital technology” has drivenCamelot’s strategy in the following ways: Digital revolution: development of a personalized website driven by choice of games,using sophisticated, targeted one-to-one marketing principles, making it convenient forall. e-powered consumers: as a new venue for the Lottery, the introduction of the newchannels can attract new ‘footfall’ as sections of the e-consumer base are notgenerally traditional lottery purchasers; the creation of the Player Club. Networked collaborators: the addition of jackpot alerts on social media; enable directdialogue with players; use blogs as a communication tool to link with various groups tocommunicate the Lottery brand initiatives; find local retailers via geo-tagging.technology; place the Lottery in areas where there is a ready audience via relevantpartnerships with organizations such as Facebook. Mobile interaction: the earliest possible introduction of a mobile app to enabletransactional sales on the move. Transparency: vote online for the Instants specialty ticket; develop plans to increaseawareness of funding generated by the Lottery; research game ideas and get feedbackfrom consumers using the social media platforms.2.3.6 COMMON VALUES2.3.6.1 Assault on pleasureMany everyday pleasures, including lottery tickets, are subject to moral judgments bysome groups. As a result, there are restrictions and regulation placed on purchases tocontrol their potential for social harm.Camelot’s own research indicates that although many players recall a “play responsibly “tag in advertising, it seems that most Illinois consumers when questioned, believe that itis up to the player to control their spending, not State or Federal government to dictate.As a socially aware operator with a strong background of probity, Camelot believes it isimportant to ensure that appropriate mechanisms are in place to assist responsible playand ensure help is available when required.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 57

Section 2: Final Business Plan2.3.6.2 LocalismAmericans typically have strong attachment to their community, which can be a factor indriving behavior, particularly consumer loyalty and philanthropy. Research shows thatU.S. consumers continue to support local businesses and suppliers wherever possible tosupport their local communities.2.3.6.3 PhilanthropyMany Americans have a strong attachment to personal causes and willingly contribute tothem. In 2009, 55% of U.S. philanthropic donations went to religious causes, educationor public social benefit, with 34% going towards religion (education received 13%,causes promoting public social benefit like the Illinois Lottery received 8%) 15 . Themajority of the over 35 to 55 plus age groups in the U.S. regularly donate to charity.It is also the case that ‘cause marketing’ has begun to change consumer behavior.Research in the U.S. found that 79% of consumers would switch to a brand associatedwith a good cause, up from 66% in 1993, and that 38% have bought a productassociated with a cause, compared with 20% in 1993 16 .The trends surrounding “common values” have developed Camelot’s strategy for Illinoisin the following ways: Assault on pleasure: provide guidance covering responsible play and sources of helpfor worried consumers. Localism: consider developing games with local and community themes; show thatthe Illinois Lottery is fundamentally a local organization, with key local partners,including local sports teams; engage with local communities and retailers; highlightbenefits of lottery funding for local communities. Philanthropy: increase awareness of funding generated by the Lottery as a majorphilanthropic donor / charitable giver; rebrand and promote the Illinois Lottery; work toengage with stakeholders on the Lottery brand initiatives.2.3.7 SUMMARYThis exploration of Future Trends has provided invaluable insights that Camelot Illinoishas been able to use to develop its strategies covering the period of the PMA. In thisway Camelot Illinois has developed a Final Business Plan that is future-proofed -cognizant of the macro social, economic, political and technological issues that willconfront the Illinois Lottery over the next ten years.15GivingUSA Foundation/nVision, 200916The Economist , February 11, 201058 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.3 SUPPORTING INFORMATIONPrior to considering the key trends that were likely to influence player’s behavior towardsthe Lottery over the period of the PMA, Camelot gained important contextual informationcovering the U.S. economy, particularly in terms of the recent impacts on state funding,and consumers in Illinois. This is summarized below.ECONOMIC SITUATIONThe current economic crisis has caused a steep decline in revenues available to states.Even with the federal stimulus funding to states, massive cuts in state governmentspending have proliferated as state sales taxes, property taxes and income taxes haveslipped. According to the National Association of State Budget Officers, state generalfund spending is expected to be $52 billion lower in FY2011 than it was in FY2008 17 .Mid-year budget cuts have again been common among the states, and for last fiscalyear, the mid-year cuts were higher than in any previous recession 18 . With Recovery Actfunding set to expire at the end of this year, the fiscal future is challenging for all states.Illinois has not been immune to the effects of the economic crisis, and has been forcedto make cuts across many categories of government service. During this recession, theunemployment rate in Illinois has consistently exceeded the national average. Inmanufacturing-based Rockford, the unemployment rate is now 14.8%, significantlyhigher than the 10.4% statewide rate, and the national unemployment rate of 9.5% 19 .According to the Federal Reserve Bank of Chicago, in addition to its current fiscalshortfall, the State of Illinois carries a debt burden significantly greater than otherstates 20 .In challenging times, the Lottery can provide a growing source of revenue for the State.Illinois Lottery executives may not be able to reverse the global economic crisis, but dohave the opportunity to select a Private Manager for the Lottery who can increase salesand Net Income.17National Association of State Budget Officers, Spring 2010 Fiscal Survey of the States18Ibid.19United States Department of Labor, Bureau of Labor Statistics, June 2010 data, Midwest Information Office.20Federal Reserve Bank of Chicago, “Charting Illinois Fiscal Future,” August 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 59

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Section 2: Final Business Plan2.4. REINVIGORATING THE ILLINOIS LOTTERYBRANDCAMELOT ILLINOIS’ STRATEGYCamelot Illinois will strengthen the Lottery brand and give it universal adult consumerappeal by focusing on the Lottery’s social good and its contribution to the StateINSIGHTS There is a recognized lack of trust in the Lottery and a lack of clarity about where thefunds go. 40% of lapsed players stopped playing because they didn’t know where the proceedswere going. Trust is an essential underpinning for support for State and National lotteries. Withouttrust and belief that the funds raised are contributing to worthy causes the public willnot participate.STRATEGIES AND ACTIVITIESCamelot Illinois will re-establish the brand of the Illinois Lottery through a series ofproven initiatives that have worked in the UK and U.S.; Camelot Illinois is highlyconfident that the proposed strategy will work in Illinois.Camelot Illinois will: Establish the Camelot Illinois Charitable Foundation to fund education initiatives andother social causes within the State of Illinois, with Camelot Illinois potentiallycontributing over $35 million during the course of the PMA Develop a Brand essence to guide the way in which the Lottery brand is portrayed toall stakeholders. In the UK, Camelot has developed a brand essence based on SPIRIT:(Society, Positivity, Inclusivity, Responsibility and Integrity) = TRUST Engage in a formal stakeholder outreach program focused on players, the public,retailers, employees and legislators.Camelot Illinois will engage in a specific marketing campaign to build trust: Introduce state wide signage for locations and projects that receive Lottery support Focus on raising positive public awareness of Lottery funded projects Establish an Illinois Lottery Awards program to give the public a chance to vote fortheir favorite Lottery funded project.WHY CAMELOT?Camelot has proven experience as a custodian of the UK National Lottery brand: The UK National Lottery brand is recognized by 92% of the UK adult population. In the UK 74% of the population agree that the Lottery is trustworthy. 64% say knowing the lottery funds Good Causes makes them feel better aboutplaying.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 61

Section 2: Final Business Plan Camelot co-funds and participates in a joint promotional unit, with the UK Governmentand distributors of lottery funds, to raise awareness of the projects funded by thelottery. Jeff Perlee, who will be the Camelot Illinois President, launched the New York LotteryFoundation, directly linked to improved player participation and brand improvement.62 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.4.1 INTRODUCTIONStrengthen the Lottery brand and give it universal adult consumer appeal byfocusing on the Lottery’s social good and its contribution to the StateA consistent message heard during research Camelot conducted was that people justdon’t know what happens with lottery proceeds. Some interviewees even expressedmistrust of the Illinois Lottery and how its proceeds are distributed. The concerns variedfrom “What are they doing with the money? I think someone’s hiding something”’ tothe more measured “We need accounting. The money is there but the accounting isn’tclear.”Clearly, those who worry about where the money goes will be less likely to buy a lotteryticket and creating a clear, positive message about how proceeds are used can helpincrease lottery sales.Lack of transparency concerning the connection between the Lottery and education is atthe root of the negative opinions. Even for those who believe the money is correctlyaccounted, because it goes into an amorphous general fund without clear end benefits,they have no compelling reason to participate.It is necessary to reinvigorate the Illinois Lottery brand by reconnecting it in the public’smind with its original purpose and this section proposes strategies and activities toachieve that objective.The activities include: Defining a brand ‘essence’ that expresses the values of the brand and will be a guidein all the activities of the Lottery. Reaching out to key lottery stakeholders to engage them in supporting the campaignto elevate public understanding of and trust in the Lottery. These initiatives willdovetail with Camelot’s emphasis on social responsibility. A compelling marketing campaign to ensure nobody in the State is left unaware of thebenefits the Lottery brings to the State and its citizens.Camelot believes the key is in tackling head on the perceived lack of transparency andlack of connection between the Lottery and education. In addition to a $1 million perannum contribution recovered from Lottery Expenses, Camelot Illinois will re-invest aproportion of its Incentive Compensation to establish the Camelot Illinois CharitableFoundation. This has the potential to make available more than $35 million over thecourse of the PMA. Distribution of the funds will be targeted at clearly identifiableeducation projects having wide public approval. Through concentrated advertising acrossall media and points at which the Lottery touches the Illinois public, these projects willbe seen to be tangible benefits from the Illinois Lottery.The detail of the Foundation and its deployment is the first of the Strategies andActivities described in section 2.4.3.Camelot and its Illinois team have engaged in similar campaigns in the U.S. and the UKto raise awareness of the widespread benefits that the Lottery can bring. Jeff Perlee,President designate for the Camelot Illinois Lottery team, has extensive experience indesigning and executing lottery community benefits communications programs in NewYork State. He established a foundation in New York to cut through the uncertainty overhow lottery funds were deployed with dramatic results. Research showed an increaseCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 63

Section 2: Final Business Planof public awareness of the Lottery mission and an increase in general positive attitudesabout the Lottery. The effort contributed to an environment in which lottery salesincreased by a double digit percentage over a two year period. His experience is set outin a Case Study within the Foundation description.Within the UK, Camelot is responsible for creating the Good Cause fund but the use ofthe fund is the responsibility of independent distributing bodies over which Camelot hasno control. Nevertheless, Camelot saw that public understanding of the use of lotteryfunds was important in maintaining trust and participation. It worked with theGovernment and the distributing bodies to set up a single promotional unit; this had theimpact of raising awareness of the benefits of the Lottery to national and local projects.The net result of this and other Camelot initiatives, described in more detail in a CaseStudy within Section 2.4.3, is that around 50% of respondents to tracking research agreethey’re ‘always hearing about Good Causes’ and 74% agree that the National Lottery istrustworthy. 11Source: Camelot Conquest Tracker64 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.4.2 INSIGHTSIllinois Lottery proceeds are designated for the Common School Fund and for CapitalProjects. Unfortunately, this is not widely known. The importance of transparency andtrust as essential underpinnings of support for a State or National lottery cannot beoverstated. A study by Roy Morgan research illustrates the positive impact uponparticipation rates when the public clearly perceives the lottery as a funder/supporter ofworthy causes and being operated in a fair and efficient manner (Figure 2.4.2.1).FIGURE 2.4.2.1: LOTTERY PARTICIPATION RATES FOR CHARITY AND NON-CHARITYSPECIFIC LOTTERIES75%70%70%65%participation (%)60%55%50%45%50%62%46%40%European"CharityLotteries" (UK,Spain, Portugal)Other EuropeAustralia"CharityLotteries" (SA,WA)Rest ofAustraliaSource: Roy Morgan, Camelot, An Post Lottery, LAE, SCML, EuroMillions2.4.2.1 Camelot qualitative researchCamelot has surveyed a wide range of Lottery players in Illinois, including weeklyInstants players, lapsed Mega Millions players, non-players, and new Powerball players.Within every focus group and survey, there were at least some players who stated thatthey either did not know to whom the Lottery funding was passed or commented thatthey did not feel the distribution of funds was transparent. The corporate brand was notclosely associated with the returns to the Common School Fund in the minds of theconsumers.When people are given the opportunity to vent their feelings invariably they do just thatand so Camelot appreciates that any such research needs to be treated with caution.However, some of the verbatim comments demonstrate concern that is worth takingnote of. For example, various interviewees said: “I’ve read articles that the money that was supposed to be allotted to schools hasbeen siphoned off” (Weekly Online Game player) “What are they doing with the money? I think someone’s hiding something.” (WeeklyOnline Game player) “It’s not public like it should be” ( Weekly On-line Game player) “We need accounting. The money is there but the accounting isn’t clear” (OccasionalOnline Game player)Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 65

Section 2: Final Business Plan “The Illinois Lottery has now become a faceless agency” (Weekly Online Game player)2.4.2.2 Ipsos Reid Report 2006These verbatim quotes are corroborated by the 2006 Ipsos Reid report, where lapsedplayers were asked why they had reduced spend compared with the previous sixmonths. 40% stated it was because they didn’t know where the proceeds were going.2.4.2.3 Camelot quantitative researchCamelot asked Rabin Research to conduct a quantitative study into the reasons whypeople have not played or have stopped playing the Lottery in Illinois. This took place inJuly 2010 and the methodology and Rabin’s credentials are described more fully inSection 2.2 – Situation Analysis.A number of results from the survey confirmed the belief by some people that themoney just goes to the administration and does not go to charitable causes or to pay outthe players.Given the consistency of response from a number of sources, there is a clear need toposition the Lottery brand as a trusted institution, whose core purpose is to return fundsto the community. This will be fundamental to encouraging more adults to play lotterygames more frequently.Camelot’s strategies and activities to tackle the issue are presented in the followingsections: Camelot Illinois Charitable Foundation 2.4.3.1 Develop a Brand essence 2.4.3.2 Launch a formal comprehensive stakeholder outreach 2.4.3.3program, building trust and understanding of the centralrole the Lottery plays within the State among key opinion leaders Launch a multi-faceted and creative marketing campaign to 2.4.3.4increase community awareness of the direct link betweenthe Lottery brand and the funding for returns to the State Stakeholder Outreach Plan and press releases from Camelot SupportingBrand campaignsInformation66 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.4.3 STRATEGIES AND ACTIVITIES2.4.3.1 Camelot Illinois Charitable FoundationEstablish the Camelot Illinois Charitable Foundation to fund education initiatives andother social causes within the State of Illinois, with Camelot Illinois potentiallycontributing over $35 million during the course of the PMAInsightThe Illinois Lottery was established nearly forty years ago to support public educationand since its inception the Lottery has transferred billions of dollars to the CommonSchool Fund. However because this support is necessarily combined with generalrevenues, the funds do not track to a specific project or area of activity. They are insteadjust one part of a large state line item of support to local education. As a result, manyIllinoisans do not know that there is a connection between Lottery revenues and publiceducation. Further, there is not a consistent, clear and strong marketing message fromthe Lottery that informs the public about this connection. This has led to cynicism anddistrust in some segments of the population and has, more generally, inhibitedparticipation rates and overall sales. Where the Lottery has successfully branded aspecific game and connected the proceeds to a charitable cause, as in the case withbreast cancer research and support for veterans’ services, there has been strongdemand across Illinois.Some newer lottery jurisdictions, including Georgia and Arkansas, have avoided thisstructural challenge by earmarking their proceeds for specific charitable causes which,but for the support of the lottery, would not exist. The organizational structure of the UKNational Lottery also directs funds to specific charitable causes. As a result, Camelot hasbecome well familiar with, and expert in, the processes and benefits of connecting alottery’s mission to a lottery’s current and would-be customer base.As for applying this expertise in Illinois, Camelot Illinois fully recognizes that the PMAprocess does not involve a change in the structural framework of how the State directsits lottery revenues. Understandably, because Illinois schools depend on and need thecurrent (and increased) lottery revenue stream, the State is not realistically able to directeven a portion of its profits from the Lottery towards new, specific charitable causes.But the Private Manager’s profits are a different story. Camelot Illinois is able to dedicatea portion of the profits it will earn from managing the Lottery primarily towards new andspecific educational initiatives as well other social causes. Because Camelot understandshow valuable this specificity is towards growing consumer trust, confidence,participation and sales, Camelot Illinois commits to do so through the creation of theCamelot Illinois Charitable Foundation.The Camelot Illinois Charitable FoundationIn addition to a $1 million per annum contribution recovered from Lottery Expenses,Camelot Illinois will re-invest a proportion of its Incentive Compensation to establish theCamelot Illinois Charitable Foundation (“the Foundation”). This has the potential to makeavailable more than $35 million over the course of the PMA.The Foundation will create new education related initiatives and will support new orexisting social causes within Illinois which focus on public education. The Foundation’sprimary focus on education is consistent with the Lottery’s original purposes. AlthoughCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 67

Section 2: Final Business Planthe Foundation’s primary focus will be on education, a smaller portion of the funds willbe devoted to the support of other social causes, including small business developmentwith a particular emphasis on businesses that are owned by women, minorities andentrepreneurs with disabilities.Foundation StructureThe Foundation will be structured as a private Illinois not-for-profit corporation. CamelotIllinois, its affiliates and associated partners will provide the entirety of financial support;solicitations of, and donations from, individuals is not contemplated. Upon selection asthe Private Manager of the Illinois Lottery, the Foundation will seek 501(c)(3) status fromthe Internal Revenue Service. To minimize costs associated with the management ofthe Foundation and maximize dollars available for distribution, the Foundation willcontract with the Foundation Source (www.foundationsource.com), a U.S. basedorganization which provides ‘back office’ services to private foundations in the UnitedStates. The Foundation Source will be responsible for the state and federal compliancefilings for the Camelot Illinois Foundation. An independent auditor will be hired to reviewthe financial records of the Foundation and the auditor’s report will be publicly availableon the Foundation’s website. The Foundation Board will also hire an investment adviserto invest any undistributed annual profits and maximize the endowment’s income.Board GovernanceThe Foundation will be governed by a Board of Directors comprised of Camelot Illinoisexecutives and other business, civic and community leaders in Illinois. The Board ofDirectors will be responsible for governance of the Foundation in accordance with allstate and federal laws. Consistent with Camelot’s commitment to diversity andinclusion, the Camelot Foundation’s board members will be representative of thepopulation demographics of the state. Similarly, the Foundation’s grant-making approachwill be both diverse and inclusive. (See Council on Foundations Statement onInclusiveness, www.cof.org). The Foundation will work to ensure that the pool of grantapplicants is diverse and reflective of the citizens of Illinois. The Foundation will beassisted in its diversity and inclusion objectives by its outside consultant, O-HCommunity Partners and Sharon E. Jones, an expert in the field of diversity andinclusion.The term of Foundation Board members will be four years and members may serve twoconsecutive terms. The Chairperson of the Foundation Board will be appointed byCamelot Illinois. Board members will be reimbursed for travel and accommodationexpenses associated with Board participation. No fees will be paid to Board members forBoard service.Community Advisory BoardThe Foundation will establish a Community Advisory Board which will be comprised ofIllinois residents from throughout the state. Community Advisory Board members will bepaid an honorarium for their time and expenses associated with board service in order toensure that the cost of board service does not act as an impediment to the decision toserve on the board. The Community Advisory Board will assist the Foundation Board inoutreach to charities and not-for-profits throughout the state to ensure that theFoundation’s grant-making focus is understood and that interested groups apply forfunding to support their charitable organization and programs in Illinois. The CommunityAdvisory Board will also make recommendations to the Foundation Board regardinggrant applicants. The term of the Community Advisory Board members will be three68 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Planyears. Members may serve two consecutive terms. The chairperson of the AdvisoryBoard will be appointed by the Camelot Illinois Foundation Board Chair.Grant-making Outreach and FocusThe Foundation will use the Internet to assist in outreach and to gather applications forgrants. In an effort to promote transparency, the Foundation will publish on its websitethe criteria used in its grant-making selection process. Each year, the Foundation willpublish the names and locations of the grant recipients and a summary description of theprograms that have been supported by each grant. The Foundation will also includeinformation in an annual report published each year, which will be available on itswebsite, about grantee program outcomes and the diversity and inclusion of itsapplicants, grantees and the populations their organizations serve.The Foundation will provide both Camelot Illinois and the State with the most proactiveand effective tool to address the issues that have limited participation rates and, byextension, limited sales and revenues. In order to be most effective this tool requires thetype of sophisticated and integrated charitable cause marketing with which Camelot hasdeep experience and recognized proficiency. This experience will be supplemented withexperience and best practices gained by Camelot Illinois senior leadership in anotherjurisdiction (New York) which, like Illinois, was challenged by a revenue structure whichdid not provide for specific beneficiaries of lottery proceeds. There the Lottery utilizedmarketing funds to create and support new public policy initiatives. It then proceeded toapply the Lottery’s substantial marketing power to ensure that the public was aware ofthe initiatives and associated the new initiatives with the Lottery. The Case Studydescribes in more detail the New York initiative and its beneficial outcome.Camelot’s approach, via the Camelot Illinois Charitable Foundation, is an amplification ofthis proactive approach. As an improvement on the New York Program, Camelot Illinoiswill provide charitable causes with a more robust, dedicated source of funding closer indesign to the desirable situations found in newer lottery jurisdictions like Georgia. LikeNew York, Camelot Illinois will direct and integrate the Lottery’s marketing muscle(television and radio ad, Internet, sports marketing programs, etc.) in such a way as toensure that all Illinoisans are aware of the programs and aware of the Lottery’s supportfor them.In this way the limitations of Illinois’ revenue beneficiary framework can be mitigated andthe benefits of positive, top of mind consumer identification between Lottery andcharitable causes will flow to the Lottery and the State.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 69

Section 2: Final Business PlanCASE STUDYNEW YORK LOTTERYThe situation in New York in the late ‘90s was very similar to the present situation inIllinois: lottery sales and support were inhibited by public misconceptions and confusionregarding the Lottery’s mission to support education. Under the leadership of JeffPerlee, President designate for the Private Management initiative in Illinois, the NewYork Lottery undertook a comprehensive analysis and determined to revamp its entire$70 million annual marketing and communications programs to more effectively connectthe Lottery with its mission to support education.As part of this effort, new educational initiatives were created, funded and promoted bythe Lottery including the New York Wired initiative designed to provide Internet accessto New York Public Schools as well as the Lottery’s New York Wired Scholars Programin which competitively selected high school students from throughout the stateparticipate in a year long, travelling seminar focusing on state history and culture. Theexperiences of the students were filmed and aired each week via a half hour televisionshow, financed and produced by the Lottery and broadcast via NBC New York.In addition to new broadcast television productions, all of the Lottery efforts to betterconnect its messages to its mission were integrated across all of the Lottery’s marketingand communications platforms including broadcast television and radio ad buys, outdooradvertising, sports marketing programs, county fair and community festivals, lotterywebsite and Internet advertising, the daily televised drawings and even terminalmessaging in retail locations.The comprehensive efforts to better align the Lottery’s message proved successful.Attitude and Usage surveys indicated an increase of public awareness of Lottery missionand an increase in general positive attitudes about the Lottery. The effort contributed toan environment in which lottery sales increased by a double digit percentage over a twoyear period. In addition the effort bore fruit in the legislature, which, prior to the Lottery’smoves to revamp its mission messaging, had been considering a series of measureshostile to the Lottery, including a specific measure to slash overall lottery marketingfunding. In time this measure was withdrawn and following favorable press coverage ofthe Lottery’s new messaging the Legislature went on to approve major enhancementsto the Lottery program, including approvals of new games which went on to generateseveral billion dollars in new funding for New York education.2.4.3.2 Develop a Brand EssenceDevelop a framework for ensuring all Lottery activities are linked to and consistentwith its essential Brand valuesThrough its operation of the UK National Lottery, Camelot has experience in establishingthe values a brand stands for and ensuring that all of its activities are supportive of andconsistent with those values.Camelot has developed a simple, memorable and practical framework for ensuring all ofits activities are linked to its brand and its role in supporting the UK Good Causes. Thesimple mnemonic – SPIRIT – guides the way in which the National Lottery brand isportrayed to all stakeholders.SPIRIT (Society, Positivity, Inclusivity, Responsibility and Integrity) = TRUST70 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanExpanding the meaning of the terms shows how they relate to the essence of theNational Lottery and its benefits:Society The UK National Lottery is a force for good. Its unique role to raise billions ofpounds for Good Causes has a transformative effect on lives across Britain.+ Positivity The National Lottery is a chance to dream. Its optimism, its belief in abetter future, is inherent in everything it says and does.+ Inclusivity The National Lottery is for all UK adults. Its brands seek the widestappeal, accessibility and simplicity – simple to understand, simple to play, simple to win.+ Responsibility The National Lottery is ethical. The consumer is boss, so thehighest standards of player protection are maintained.+ Integrity The National Lottery is true. Its promises are delivered upon in everystep from tickets to draws to prizes to the provision of Good Cause monies.= TRUST The epitome of the United Kingdom National Lottery.In association with the Illinois Lottery marketing team and all relevant stakeholdersCamelot Illinois will recommend the development of a similar single minded, brandmnemonic to be embedded in the organization to encapsulate the essence of theLottery.To enhance trust in the Illinois Lottery brand, Camelot considers that the key focusshould be to link more closely the Lottery brand to the Common School Fund and theCapital Projects Program and to ensure that this is better understood by the community.Camelot proposes a two stage process to promote the link between the Lottery and thereturns to the community: Stakeholder outreach program Creative marketing campaign2.4.3.3 Stakeholder Outreach ProgramCamelot Illinois will launch a formal, comprehensive stakeholder outreach program,building trust and understanding of the central role the Lottery plays within the Stateamong key opinion leadersCamelot has identified the key stakeholders who have an interest in the Lottery’s healthand development. A list of the stakeholders and the types of outreach planned areprovided as Supporting Information 2.4.A.By engaging with these stakeholders, they can all have a role to play in promoting thebenefits that the Lottery brings to the State, wherever possible drawing attention to thestrong commitment to the responsible gaming program described in Section 2.10 –Responsible Gaming and Compliance. Activities proposed with the stakeholders topromote the benefits of the Lottery are as follows:Lottery Players and the PublicInteraction with Lottery players and with the public will take many forms; for example,the direct interaction with players in their purchase of tickets and, for those who win alarge prize, their receipt of payment. This section proposes other specific interactionsthat would enhance player and public involvement:Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 71

Section 2: Final Business Plan Set up a Lottery Players’ Forum: this will be a quarterly consultative consumers’group. It will enable public consultation on the operation of the Lottery, acting as achannel to inform representatives of the public how Lottery money is spent. It willalso act as a sounding board on any issues of concern; this would in turn indicate howthe Lottery should respond so that concerns do not go unchecked that might have theeffect of turning away players. The Forum would use both traditional and innovativeoutreach techniques such as social media to ensure wide socio-demographicrepresentation. An initiative will be implemented for players to vote directly, through the new Lotterywebsite, for a charity they wish to receive funding from Specialty Tickets. Thisinitiative will enable the Lottery to give players direct evidence of how the money theyspend on Lottery products is raised and allocated. One important group of players are the winners of significant prizes. By continuing totake every opportunity to publicize their wins, with their permission, it will countersome of the comments heard in the focus groups that ‘nobody ever wins’ and thewilder suspicions that the games are ‘fixed’.RetailersSet up a quarterly Retailer Forum that will have representation from all types of outletand trade bodies. The Forum should also have geographical representation.By involving retailers, the Lottery can keep them informed of the good works that theLottery funds. In the UK, Camelot distributes information to retailers on the projectslocal to their store that have been funded by the lottery. A similar approach may bebeneficial in Illinois, particularly as Capital Projects are approved and funded. Those willprovide concrete (in some cases literally) examples of where the funding goes.Lottery EmployeesIntroduce regular organization-wide briefings which will provide employees with anupdate on Lottery performance.Employees have the most direct interest in the success of the Lottery. By involving allemployees with regular briefings, they will see the part they play in its success and theywill be given the information with which to trumpet the Lottery’s benefits to their friendsand contacts outside of the Lottery.LegislatorsDevelop communication and hold one-to-one meetings on topics that are of particularinterest to the legislature and education communities. Regular dialogue with legislatorswill enable the Lottery to promote the benefits of the Lottery to the voters in their area.Responsible Gaming ForumIntroduce a Responsible Gaming Forum to discuss how Camelot Illinois can help theLottery prevent underage and excessive play. By showing that the Lottery takesseriously any potential harm, the standing of the Lottery as a socially responsible entitywill be confirmed and enhanced.BeneficiariesWork with education groups on projects that recognize excellence in education. Byworking directly with the beneficiaries, there is the possibility of creating joint72 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Planpromotional campaigns, to demonstrate the effective use of Lottery funds withendorsement from the beneficiaries themselves.The Case Study describes a similar approach Camelot took in the UK to work with therelevant Government department and the beneficiaries to create a joint National LotteryPromotions Unit.CASE STUDYNATIONAL LOTTERY PROMOTIONS UNIT (NLPU)Camelot advocates strong, coordinated promotion of the UK National Lottery and themoney that it raises for the Good Causes. Its research has consistently shown that theUK lottery playing public, opinion-formers and retailers all have a keen interest inknowing where lottery funding goes. Effective promotion of the impact of lotteryfunding is therefore vital in preserving the long-term health of the UK National Lotteryplayer base.While Camelot is responsible for raising funds for the Good Causes, it is not responsiblefor the distribution of those funds. In the early years of the UK National Lottery, the GoodCause message was being lost among the various distributors, each having its ownbrand and identity which in most cases had no obvious connection to the UK NationalLottery. This made it extremely difficult for players to know where lottery funding wasbeing spent.Camelot therefore worked with the relevant Government department and thebeneficiaries to introduce two new, fundamental steps to help raise awareness of GoodCause funding: The development of a common brand – incorporating the easily recognizable UKNational Lottery crossed fingers logo – which would acknowledge lottery funding foruse by the Distributing Bodies (DBs) and beneficiaries of lottery funding. The establishment of a public relations unit, co-funded by Camelot and the DBs, toraise positive public awareness of lottery funding through creative PR campaigns andregular features.As a result, the proposals were adopted and the National Lottery Promotions Unit(NLPU) came into being, with the aims of: Raising awareness of UK National Lottery funding Showing players the difference their money has made Demonstrating how the lottery has changed people’s lives and communities for thebetter Working in positive partnership with stakeholders Championing the Good Causes common brand.One of the results of Camelot’s drive to link revenue raised by the Lottery with the fundsfor Good Causes was the introduction of Blue Plaques identifying causes that havereceived funding and thus increasing public awareness. An example of a blue plaque isshown. The Press Release accompanying the launch of the Blue Plaques is attached atSupporting Information 2.4.B.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 73

Section 2: Final Business Plan2.4.3.4 Marketing campaignsCamelot Illinois will launch a multi-faceted and creative marketing campaign to increasecommunity awareness of the direct link between the Lottery brand and the funding ofreturns to the State.Camelot is proposing specific campaigns to show Lottery players the difference theirmoney has made by demonstrating how the Lottery has changed people’s lives andcommunities for the better. Working in partnership with stakeholders, a variety oftechniques will be used to raise awareness, for example: Signage: Instigate a state wide signage initiative at locations and projects that havereceived funding throughout the State. The aim will be to draw on Camelot’sexperience in the Case Study above of the benefits that came from the visible symbolof lottery funding through the Blue Plaques. Website: Ensure Common Schools and Capital Projects funding stories featureprominently on the website homepage. The website could display a map of Illinoiswith stories about Lottery funding in each area. Marketing communications and PR campaigns focusing solely on raising positive publicawareness of Lottery-funded projects across the State. Launch high profile TV andbillboard campaigns. Create platforms for debate through local media channels. Retailers: recruit retailers as advocates so that players get a real sense of how theLottery is directly benefiting their neighborhoods. Illinois Lottery Awards: instigate annual Illinois Lottery Awards giving the public thechance to nominate and vote for their favorite Lottery-funded project. Roadshows: reach out to the Illinois public through festivals, parades, fairs, sportingevents, concerts, charitable events and retail venues (selling tickets where possible aswell). Local sporting personalities and heroes: use as Lottery ambassadors to champion theLottery and the benefits it brings to the State.74 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanCamelot has experience running similar high profile advertising campaigns in the UK topromote the lottery brand: In 2002 a TV advertisement featured local beneficiaries all thanking the nation for themoney raised with the message ‘You played, the nation won’. A Press Releaseannouncing the campaign is attached in Supporting Information 2.4.C.The advertisement was part of a £3.2 million ($4.8 million) campaign which alsoincluded four-page pullouts in 69 regional newspapers, stakeholder receptions,website activity and Point of Sale material, highlighting local projects in each retailerarea as well as the amount each individual retailer had raised for Good Causes. In 2006, Camelot ran the award winning ‘Big Win’ campaign (described in Section 2.9 -Marketing). This was to re-engage players with the parent National Lottery brand byreminding them of its brand promise ‘A chance to dream’ and the benefits thatwinning could bring to them but, as importantly, the good they could do for otherpeople by sharing their winnings. Camelot has strengthened the UK National Lottery brand and directly grown itscustomer base through its close association with the London 2012 Olympic andParalympic Games (see Case Study – Olympic and Paralympic Games).CASE STUDYOLYMPIC AND PARALYMPIC GAMESThe UK National Lottery is playing a key role in funding the London 2012 Olympic Gamesand Paralympic Games through directing the proceeds of Olympic-themed Instants, adraw-based game and all returns from Interactive Instant Win games to the OlympicDistribution Fund. The standing of the brand was further enhanced by Camelot’sproactive work in soliciting powerful public testimonials from numerous leading UKathletes commenting on the significant role which lottery funding played in their successin the Beijing Olympics.Research in August 2008 following the end of the Games clearly showed how this‘Beijing Boost’ and the testimonials from leading athletes helped to increase UK NationalLottery player penetration. The research found that, of those who had recently startedplaying UK National Lottery games - around one in ten stated that they had startedplaying because of the Olympics; around one in four stated that the Olympics had playeda part in their decision to play.Based on this research and actual recent behavior, the link between the UK NationalLottery and the London 2012 Olympic Games was shown to have achieved a 1%increase in player penetration or around 500,000 new players. In addition, the frequencyof weekly players of UK National Lottery games increased in the second half of 2008,around the staging of the Beijing Games.Since the launch of the earlier campaigns and the Blue Plaques, Camelot hascontinued to track perceptions of Trust and Good Causes. Awareness of GoodCauses has been maintained at the level achieved at the time of the campaigns.Levels of Trust continue to show an upward trend (Figure 2.4.3.4.1)Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 75

Section 2: Final Business PlanFIGURE 2.4.3.4.1: AWARENESS OF GOOD CAUSE FUNDING ANDTRUSTWORTHINESS OF THE UK NATIONAL LOTTERY%80706050403020100Pre Stage08/25/0201/12/0306/01/0310/19/0303/07/0407/26/0412/11/0404/30/0509/17/0502/03/0606/23/0611/10/0603/30/0708/17/0701/04/0805/23/0810/10/0802/27/0907/17/0912/04/0904/23/10% Agree - Always hearing about different Good Causes % Agree - TNL is TrustworthySource: Camelot Conquest trackerCamelot’s work in this area has been recognized in the wider business community asdemonstrated by Camelot’s listing in the highest category (‘Platinum’) in Business in theCommunity’s index for overall corporate responsibility achievements. Business in theCommunity (BITC) was set up in 1982 and now has over 830 members. It is the largestand one of the oldest national business-led coalitions dedicated to corporateresponsibility.BITC also awarded Camelot the prestigious ‘Big Ticks’ for its environmental leadershipand responsible marketing work.With this experience to draw on, Camelot Illinois will work with the Illinois Lotterymarketing team and key stakeholders to develop similar campaigns to ensure that theconsumers in Illinois are left in no doubt as to where their Lottery funds are deployedand what a valuable asset the State has in its Lottery.76 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.4 SUPPORTING INFORMATION2.4.ASTAKEHOLDER OUTREACH PLANCamelot’s stakeholder outreach plan for Illinois is based on the AccountAbility AA1000series. AccountAbility is a global, not-for-profit organization founded in 1995 to helpcorporations, non-profits and governments to embed ethical, environmental, social andgovernance accountability into their processes. The standards are set to helporganizations become more accountable, responsible and sustainable; they aredeveloped through multi-stakeholder consultation processes which ensure they arewritten for those they impact, not just those who may gain from them. The standardsare based on three main principles: Inclusivity: the participation of stakeholders in developing and achieving anaccountable and strategic response to a sustainable business. Materiality: the relevance and significance of an issue to an organization and itsstakeholders. A material issue is one that influences the decisions, actions andperformance of an organization or its stakeholders. Responsiveness: an organization’s response to stakeholder issues affects itssustainability, and is realized through decisions, actions and performance, as well ascommunication with stakeholders.Primary and secondary stakeholdersCamelot has defined primary and secondary stakeholders that it envisions including inthe outreach process. A primary stakeholder is identified as someone who has a directand strong impact on the Illinois Lottery business and vice versa. Secondarystakeholders, while still important, are somewhat less influential on the Lottery’sperformance and reputation, though still essential to its ability to operate and run asuccessful state lottery.Types of outreach – Primary StakeholdersThe Primary stakeholders and the types of outreach that Camelot Illinois will set up andconduct with each are as follows:Players and the PublicStakeholders: Players Potential players Winners Non-players Opinion formers.Public involvement is an important means of securing public confidence in the IllinoisLottery. Camelot Illinois’ approach to public involvement will be to: Ensure the public knows there are regular opportunities to express its views Provide the public with accessible and relevant information so that players and nonplayersare well placed to express their views about the LotteryCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 77

Section 2: Final Business Plan Proactively – and innovatively – solicit public views about how the Lottery operates Respond to public opinion in a transparent fashion.Camelot Illinois will work alone or in partnership with the Illinois State Government andbeneficiaries to deliver its public involvement plans.Player ForumCamelot Illinois will set up a ‘Player Forum’ in Illinois, similar to that already present inthe UK. This will be a quarterly consultative consumers’ group. Membership will beregionally and demographically representative. The Forum will be chaired by a seniorlottery director, so that members have a direct line to company decision-makers at bothBoard and operational levels. Members will be kept informed about how the Lottery isresponding to any questions or concerns through a running, feedback agenda item. ThisForum will form a key part of Camelot Illinois’ approach to ensuring public involvement inIllinois.Camelot’s commitment to the idea of a Forum is driven by a conviction that the benefitsof public involvement have already been demonstrated, and continue to help thecompany make appropriate decisions that benefit the UK National Lottery.Tracking studyCamelot recommends installing regular tracking ‘waves’ with a set number of keymeasures which are shared widely throughout the business to make sure thatemployees, vendors and retailers are aware of changes in attitudes about the Lotteryfrom the players and the public. These tracking surveys should be based aroundtrustworthiness, and awareness of the Illinois Lottery’s contribution to education. Thequestions in the study should be asked in a positive way.It is important that this data is shared widely among departments and is reported on aregular basis at senior management meetings in order to raise awareness of anychanges to attitudes at an early stage. Camelot Illinois will select a number of keyindicators from this study which will be included in the public reporting about the Lotteryto increase transparency and accountability to stakeholders.In addition to the tracking study, Camelot Illinois will use the website presence toencourage players to take part in brief ‘pulse’ surveys (which are usually done in theform of an on-screen pop-up survey) on issues that are of particular interest, either tothem personally or to the Lottery. These surveys can be tactically deployed and are ofparticular use in addressing immediate concerns and issues.Wider public engagementIn addition to the playing population, it is important that the Lottery reaches out to thewider public. Camelot Illinois will therefore introduce a variety of mechanisms to achievethis goal: Run regular citizens’ juries and online surveys on the Illinois Lottery website Establish a web tracker (linked to the Illinois Lottery website) and player polls (InternetUser Monitor) and ad-hoc surveys Introduce a social media strategy which will highlight achievements of the Lotteryregarding funding, social responsibility etc.78 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan Within the first three years of operation, conduct a high profile public consultation onthe operation of the Lottery. This would take the form of a one-day Citizens’ Summitmeeting, with up to 1,000 people who have been carefully selected representing thebroader make-up of the State, to discuss and vote on specific aspects of the Lottery.Participants will have time to assimilate and scrutinize relevant information. They willbe presented with evidence from experts and individuals representing sometimesconflicting views. They will be able to cross-examine witnesses, debate and grapplewith the issues in smaller groups, weigh priorities, and, finally, vote on decisions.Innovative technology and social media will connect the debate being held in the maindebating hall to a team of analysts, so that the discussions can be tracked andcommon themes identified and reported to delegates. Following the summit, CamelotIllinois will publish a summary of the discussions and this can be followed up with afurther publication setting out any specific actions Camelot Illinois has taken as aresult, or how it has taken views into account in its decision making process.The Citizens’ Summit and its outcomes will demonstrate real transparency andaccountability on the part of the operator. It will provide Camelot Illinois with clear policyand commercial steers, and will demonstrate to the public and the media that CamelotIllinois is serious about public involvement because the media and PR teams will work tosecure significant visibility for the event. Most importantly, it will reinforce overall publictrust in the Lottery operation in Illinois.Camelot Illinois believes that the Players’ Forum and associated projects such ascitizens’ juries present exciting opportunities for greater public involvement in Illinois.RetailersStakeholders: Bodies representing retailers’ interests (e.g. NACS, Illinois Petroleum MarketersAssociation, Illinois Food Retailers Association , 7-Eleven Franchise OwnersAssociation, National Restaurant association, MPact, other gas and retail trade bodies) RestaurantsRetailer ForumCamelot Illinois will set up a quarterly Retailer Forum that will have representation fromall types of outlet and trade bodies and will also have geographical representation. TheForum will provide a platform to discuss issues of mutual concern between the Lotteryand its retailers, and enable retailers to receive regular updates on future sales plans.Clear terms of reference will be set up and meetings will normally be chaired by a seniorLottery director and co-chaired by a retailer to ensure that relevant issues and/orconcerns can be voiced on both sides.Retailer Satisfaction StudyCamelot Illinois will introduce a regular quantitative retailer satisfaction study whichtracks retailers’ satisfaction on a number of issues. The findings of this study will bereported back to the Retailer Forum to gain further qualitative insight into the issues orconcerns highlighted.EmployeesStakeholders:Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 79

Section 2: Final Business Plan Employees Potential employees Long-term contractorsCamelot Illinois will introduce two initiatives to drive outreach to this key group.Employee surveyAn employee survey will be used as a baseline for future annual surveys, using the samemethodology. The survey will contain a number of questions which can be tracked andreported upon internally. This will measure the effectiveness of policies and enableresponse to any concerns employees have, as well as addressing managerial issues atan early stage. It is important that this survey and its evaluation are conducted by anindependent third party and that responses are completely anonymous.Organization-wide briefingsIntroducing regular organization-wide briefings will provide employees with an update onLottery performance and the progress of any major projects that are happening in theorganization. The briefings will occur weekly with a strong commercial focus on theperformance of the business, while also enabling other critical business issues to beshared and discussed.Governmental bodiesStakeholders: Governor’s office Budget deficit office Legislators Administration Department of Revenue Illinois Racing Board Illinois Gaming BoardOne-to-one meetingsCamelot Illinois will talk directly with legislators, the governor’s office and others viastructured one-on-one meetings.Annual publicationIn addition, Camelot Illinois will develop an annual publication that will focus on topicsthat are of particular interest to the legislature and the education community. This wouldshow how much money has been raised for the Common Schools Fund, where thisfunding has gone, while also demonstrating the integrity of Lottery operations, providingtransparent sales and penetration data, and providing information and feedback on theresponsible gaming strategies.BeneficiariesStakeholders: Common School Fund Illinois State Fund80 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan Charitable causes that benefit from funding through the sale of Specialty tickets (e.g.Breast Cancer Research, Illinois Veteran’s support programs)WorkshopCamelot Illinois will interact at a grass roots level with the Common School Fund. Thiscould be achieved by inviting education groups to a workshop that focuses on how tomaximize funding for public education.Awards program and direct outreach to education groups and charitiesCamelot Illinois will work with charities and education groups on projects that recognizeexcellence in education, for example sponsoring a Lottery ‘School of the Year’ award.Camelot Illinois will also make special efforts to inform education groups about theeducation-related charity events that the Illinois Lottery will sponsor. There will also bedirect engagement of the Lottery with education groups and with charities that receivefunding through lottery products such as Specialty tickets.Small Business Development Program Not for ProfitsAs noted in 2.4.3.1 above, a portion of the Camelot Illinois Charitable Foundation fundswill go to support the continued development of small businesses owned by women,minorities and individuals with a disability through donations to small businessdevelopment centers and other not for profits. These small business developmentcenters create a pipeline of businesses which are capable of contracting with CamelotIllinois directly and subcontracting to prime vendors for Lottery contracts and areimportant to Camelot Illinois’ overall diversity and inclusion strategy for the Lottery.Responsible Gaming Public Interest GroupsStakeholders: Leyden Family Services/SHARE Chestnut Health Systems Illinois Institute for Addiction Recovery Proctor Hospital BroMenn Regional Medical Center IIAR at Springfield The Outreach Foundation for Problem & Compulsive Gambling Rehabilitation Institute of Southern Illinois University The Fellowship House Gambling Recovery Center Adventist Hinsdale Hospital Way Back Inn 1-800-GAMBLER Gambling Assistance Hotline Gambler’s Anonymous (Chicago, St. Louis, Indianapolis and Wisconsin) Gam-Anon (Illinois and Missouri) National Council on Problem Gambling National Council for Responsible Gaming Illinois Council for Problem GamblingCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 81

Section 2: Final Business PlanResponsible Gaming Group ForumCamelot Illinois will introduce a responsible gaming group forum, similar to one in theUK. This will meet every six months to discuss how Camelot Illinois can help Illinoistackle underage and excessive play and where improvements could be made. Memberswill include children’s charities, faith groups, problem gambling support services andacademics.Initial discussions with this group will necessarily focus on showing how the IllinoisLottery works to prevent problems, mitigating any risks, covering proposals for newgames and channels.This work will support the WLA Responsible Gaming certification application for theLottery as one of the WLA Responsible Gaming principles states:“WLA Members will work with stakeholders — including governments, nongovernmentalorganizations, regulators, researchers, public health professionals, and thegeneral public — to share information, develop research and promote responsiblegaming as broadly as possible, and encourage a better understanding of the socialimpact of gaming.”Types of outreach – Secondary StakeholdersVendorsStakeholders: Large vendors Broadcast partner stations Paid news media Fair and festival partners Sports sponsorship partners Advertising agenciesCamelot Illinois will work with vendors on an ongoing basis to make sure they complywith the Lottery’s regulations, including its Code of Ethics.Public Interest GroupsStakeholders: Organizations concerned with disability rights and environmental protection Organizations reflecting broader public non-player issuesWorkshopsCamelot Illinois will conduct a program of workshops with public interest groups onenvironmental and accessibility issues, while also introducing and discussing with themIllinois’ policies on environmental protection and disability access.Law EnforcementStakeholders: Law Enforcement Agencies and units Conference and trade show organizers82 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanInformation sharing and networkingCamelot Illinois will increase the presence of information on law enforcement initiativeswithin the Illinois Lottery corporate website and will highlight relevant information whileimproving visibility through changes to online navigation. Camelot Illinois will alsoengage with the law enforcement agencies in Illinois through information sharing andnetworking. The Lottery’s Law Enforcement team will attend regular meetings andconferences organized by law enforcement organizations.CommunitiesStakeholders: Community organizations around Lottery offices Groups representing the impact retailers have on local communities Charities benefitting from community investment programSponsorships and employee volunteeringCamelot Illinois will support local community sponsorships on an ongoing basis and alsosupport an employee volunteer program for Lottery employees (similar to an existingprogram in the UK). Camelot Illinois will also establish a community investment programwhich measures the success of sponsorships and provides employees with theopportunity to become active in their local community.Camelot Illinois will engage with other U.S. government agencies that have launchedsimilar programs to learn local best practice. The intention is that the program introducedin Illinois will have a direct tie to education to reinforce the message of the Illinois Lotteryhelping schools.News MediaStakeholders: Print, TV, Radio and Broadcast Media Social Media Entertainment News National and Local Broadcast PartnersIntegrated multi-media strategyCamelot Illinois will implement an integrated multi-media strategy to make Illinoisansaware of significant jackpot winners, unclaimed tickets, exciting new products andpromotions etc. The goal is to make people aware of winners and new products andpromotions, and to portray the Lottery’s accomplishments to the public in a favorablelight to enhance the Lottery’s reputation.Lottery PR staff will continue to issue news releases, produce videos and use socialmedia outlets, including Facebook and Twitter. Depending on the individual winner, orthe nature of the promotion, the communications staff will use its expertise inknowledge and use of the Illinois media to efficiently target appropriate media outlets,including regional media, ethnic, and entertainment media.Engagement with key trade media contactsCommunications staff will also work with trade media contacts to get word out aboutnew Lottery promotions and products.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 83

Section 2: Final Business Plan2.4.B PRESS RELEASE ANNOUNCING THE BLUE PLAQUESCHEMETESSA JOWELL LAUNCHES NATIONAL LOTTERY BLUE PLAQUESTessa Jowell, Secretary of State for Culture, Media and Sport, today launched the first ofthousands of National Lottery blue plaques to recognise how The National Lottery hastransformed communities across the UK.The first 10,000 blue plaques will be sponsored by lottery operator, Camelot, anddistributed to lottery-funded venues across Britain by the 10th anniversary of TheNational Lottery in November 2004. Blue plaques were also launched today at projectsin Cardiff, Edinburgh and Belfast and over the next week one hundred plaques will beunveiled at regional venues across the UK.Nearly every lottery beneficiary - from the major national projects to tiny communityschemes - will eventually receive a plaque with the crossed fingers logo and the words“Awarded National Lottery Funding”.Since the launch in 1994, National Lottery players have raised £14 billion for GoodCauses – benefiting over 150,000 projects, large and small, across the UK. However,despite the huge impact the lottery has made, many players are not aware of how theirmoney has been spent – the launch of the blue plaques will highlight exactly whereGood Cause money has gone and how lottery players have made a difference to thecommunities of Britain.Tessa Jowell and Dianne Thompson, Camelot’s Chief Executive, launched the campaigntoday in the Great Court of the British Museum in London. The museum has itselfreceived £30million of lottery funding from the Millennium Commission and £17millionfrom the Heritage Lottery Fund. The money paid for the construction of the spectaculargiant glass canopy which spans the central courtyard and new education centre.At the UK launch one hundred children from Langdon School in East London formed agiant-sized plaque to demonstrate the 100 schemes that are unveiling their plaques thisweek. The school received lottery funding through the New Opportunities Fund to builda new sports hall.Tessa Jowell said:“The National Lottery has made such a tremendous difference for the better to the livesof so many people. The blue plaques with the crossed fingers logo will for the first timemark exactly how much has changed in this country thanks to the National Lottery.“We must explain how the lottery is working if we want people to continue to support itand feel good about how their money is being spent.”To support the campaign, Camelot, operator of The National Lottery, has decided tosponsor the first 10,000 plaques which will rollout in the first year leading up to the 10thanniversary of the lottery next year.Camelot’s Chief Executive, Dianne Thompson, said:“As operator of The National Lottery, Camelot is aware how crucial it is to communicateto the playing public where their money has gone. Lottery players have raised aCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 85

Section 2: Final Business Planphenomenal £14 billion for Good Causes and they have a right to know where theirmoney is going.“We are delighted that blue plaques with the crossed fingers logo will appear on lotteryfundedprojects so the public can see exactly how their money has been spent and how– by playing lottery games - they have helped transform communities throughout theUK.”Chief Executive of the New Opportunities Fund, Stephen Dunmore, a member of theNational Lottery Promotions Unit Management Board representing the16 distributorssaid:"The lottery blue plaques make an important link between the national lottery games andthe projects which are supported by National Lottery funding. Everyone who purchasesa ticket is contributing 28p in the pound to projects which benefit communities acrossthe UK.”86 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.4.C PRESS RELEASE ‘YOU PLAYED, THE NATION WON’CAMPAIGNCAMELOT LAUNCHES £3.2 MILLION GOOD CAUSES CAMPAIGN ANDREFRESHED CROSSED FINGERS LOGOCamelot in a joint initiative with the independent distribution bodies, who decide wheremonies raised for the Good Causes should be spent, today (Wednesday 10 April)launched a £3.2 million National Lottery campaign using the strapline “You played, thenation won”.The above and below the line campaign aims to create greater public awareness of theimpact of National Lottery funding which has reached over £11 billion and creates aplatform for beneficiaries to say ‘Thank you’ to players.The initial three-week campaign is the first phase of Camelot’s plans to re-launch theNational Lottery in May and for the first time features a refreshed version of the wellknowncrossed fingers logo.The National Lottery campaign features a 60 second TV ad, four page pull outs in 69regional newspapers, stakeholder receptions, National Lottery web site activity and pointof sale material for all 36,000 retailers highlighting local beneficiary projects in their area.The campaign will run until Tuesday 30th April.To bring the messages to life, the film talks directly to the players of the National Lottery,with the beneficiaries saying “thank you” to them for the change, opportunity andtransformation made possible with National Lottery funding.Over the last seven years the UK has seen support going to over 97,000 projects.Projects that are highlighted in the 60” epic include stories from all six awarding bodies:The Heritage Fund, Community Fund, New Opportunities Fund, The Sports Councils,The Arts Councils and the Millennium Commission.The film was designed to demonstrate the national impact that Lottery funding has hadon the UK, by showcasing everything from high profile projects (such as GlasgowScience Centre, Cardiff Castle, The Millennium Stadium and The Angel of the North)right through to touching local stories. For instance we see a gaggle of excited preschoolchildren running into their beautiful new day-care centre, and a deaf girl in hernew classroom signing “thank you” to camera.Steve Redgrave also appears to say “thank you” to the players of the National Lotterypersonally. This is to show his appreciation for the Lottery funding that has helped thesport of rowing and British gold medal success in the 2000 Sydney Olympics.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 87

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Section 2: Final Business Plan2.5. ONLINE GAMESCAMELOT ILLINOIS’ STRATEGYCamelot Illinois will attract new andlapsed players to the lotterycategory through the enhancementof the existing portfolio of gamesand the diversification into new,differentiated games designed toinject 21 st century relevance andappeal to broad but specificaudiences.KEY INSIGHTS There has been no significant Online Games portfolio growth from 2004 to 2009 Only 7% of Illinois adults played Lotto and/or Mega Millions weekly in 2009 Win frequency is the most important factor to players No clear role in the portfolio for Lotto (which is being impacted negatively byPowerball) Consumers are confused on the difference between Powerball and Mega Millions No evidence of player retention following big Mega Millions jackpots Powerball sales have not yet reached the levels of Mega Millions sales atcomparable jackpot levels Numbers games contributed 50% of Online Games sales in 2009 The last three Raffles games sold-out completely.STRATEGIES AND ACTIVITIESCamelot Illinois has identified a number of preliminary activities to increase penetrationand frequency of play in order to enhance the existing portfolio, before diversificationinto new games:New Lottery Game Design Develop new games using a new product innovation process adopting the classicmethodologies of leading Fast Moving Consumer Goods (FMCG) companies, rootingthe process in consumer insight.Prize Structure Rebuild Lotto as the Illinois game and improve the overall winning experience Optimize payout structures (e.g. modification of the Lotto prize structure to establisha reserve fund for weekly.Pricing Increase price of Raffles.TurnoverOptimise the CoreExtend the CoreDeliver Breakthrough InnovationVenture into Near AdjacenciesManaging Product Portfolio Drive relevance with younger generation through Internet-based partnerships$TargetTimeCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 89

Section 2: Final Business PlanDrive long term growth of Mega Millions and Powerball, through a differentiationstrategy to increase play frequencyIntroduce a new multi-state innovation e.g. “World Lottery Draw” in FY2015Maximize growth by increasing choice across popular Numbers games- Pick 3 andPick 4Evolve the current event based category (including Raffles) to provide exciting,regular and varied draws with a variety of prizes and diversify the portfolio offeringwith a local focus on Illinois.FINANCIAL RESULTS Camelot Illinois will grow Online Games from $1,019 million in FY2010 to $1,720million in FY2016, representing a CAGR of 9.1% to the end of FY2016.WHY CAMELOT?Camelot has successfully attracted new, infrequent and lapsed players to engagewith the UK National Lottery through a compelling Online Games portfolio, designedto meet consumer needs, resulting in 72% player penetrationCamelot grew its own UK Online Games category by $107m (1.8%) in 2008 and$291m (4.9%) in 2009In 2009, Camelot enhanced the EuroMillions multi-state game with an add-on UKonly raffle game that provided a 51% uplift in sales in the first six weeks after launchIn 2008 and 2009, Camelot outperformed its nine EuroMillions partners by driving62% and 54% of the game’s total year-on-year growthOver a 3 month period in 2010, Camelot’s marketing plan for California’s MegaMillions resulted in an estimated 25% sales increase.90 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.5.1 INTRODUCTIONCamelot Illinois will increase penetration andfrequency of play by enhancing the current gameportfolio before diversifying into new types of game.This section provides Camelot’s response to the Product areas in Schedule 2.1 of thePMA, as they apply to Online Games: New Lottery Game Design; Prize Structure; Pricingand Managing Product Portfolio.INSIGHTSThe current Online Games portfolio provides a good mix of games which appeal to thevarying requirements of existing players. Current regular players speak knowledgeably ofthe different games and their attributes, although there is some confusion on thedifferentiation between Powerball and Mega Millions.Online Games are already the most widely played games from the Illinois Lottery asmeasured by penetration; nevertheless only 7% of adults play Lotto or Mega Millionsevery week. There is a very low frequency of regular play and many lapsed playersexpress frustration with unsatisfactory winning experiences.There has been no significant Online Games portfolio growth in the past 5 years and asmall decline in the most recent full year when the category delivered 46% of totalrevenue; however the introduction of Powerball to the portfolio in January 2010 looks tohave made a significant impact on overall sales although it is too early to assess the fulleffect of the Powerball introduction on the Online Game portfolio as a whole.Several strong reoccurring themes ran through Camelot Illinois’ research of current,lapsed and non player groups:Those still playing the games enjoy playing and sustain the dream of winning a bigprize.Players do not win enough, and for many this is a reason why they have reducedtheir play frequency or do not now play.As in other states, Lotto game sales have been adversely impacted by introductionof multi-state games.Only big jackpots cut through to occasional and infrequent groups, otherwiseengagement with the Lottery within these groups is low.Confusion around Powerball and Mega Millions.Assessment of the individual games showed the Pick 3, Pick 4 (‘Numbers’ game)and Raffles to be the most popular. The numbers games contributed over 50% ofOnline Game sales in 2009; the last three Raffle games sold out completely.The large multi-state games attract players according to the jackpot size but do notretain players after the jackpot is won.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 91

Section 2: Final Business PlanPick and Play, which was introduced and then withdrawn after poor sales, appears tohave been a game that did not resonate with enough consumers to be commerciallyviable.CAMELOT PRIOR EXPERIENCECamelot has significant experience in growing sales and Net Income in a responsiblemanner through its management of Online Games in the UK and abroad:Camelot has successfully attracted new, infrequent and lapsed players to engagewith the UK National Lottery by means of a proven commercial approach whichdelivers a compelling product portfolio designed to provide what players want and inreturn drive weekly participation. This approach has maintained a mass appealcategory through brand engagement and product innovation resulting in 72% playerpenetration.In the UK in 2008 and 2009, the Online Games category grew by $107m (1.8%) and$291m (4.9%) respectively.In 2009, Camelot enhanced the EuroMillions multi-state game with an add-on UKonly raffle game that provided a 51% uplift in sales in the first six weeks after launchwith an average 35.4% weekly uplift over the first eight months.Camelot has successfully driven year-on-year growth of EuroMillions where otherlotteries’ sales within the EuroMillions community have stagnated or growth hasslowed. In 2008 and 2009, 62% and 54% of the game’s total year-on-year growthwas driven by UK sales.In California, Camelot’s marketing plan for Mega Millions jackpots resulted in anestimated 25% sales increase compared with similar jackpots across a 3 monthperiod in 2010.STRATEGIES AND ACTIVITIESOver the period of the PMA, Camelot Illinois plans to attract new and lapsed players tothe Lottery category through the enhancement of the existing portfolio of games and thediversification into new, differentiated games designed to inject 21st Century relevanceand appeal to broad but specific audiences. Activities to achieve these objectives withineach of the PMA Online Games Product areas are as follows:New Lottery Game DesignCamelot has attracted new, infrequent and lapsed players in the UK by researching indepth consumer demand and then developing products to meet identified motivationsvia ‘Needs Mapping’.Camelot Illinois will adopt the same strategy for the Illinois Lottery by introducing a NewProduct Development process centered on consumer needs.Priority will be given to optimizing the existing portfolio, prior to diversification into fullyresearched new game offerings. Subject to research on consumer response andrevenue opportunities, Camelot Illinois has defined the following plans for driving adultpenetration:Prize StructureCamelot Illinois will rebuild Lotto as the game that is ’played in Illinois / won in Illinois’and improve its overall win experience.92 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanTo ensure retention of existing players and to attract occasional and lapsed players, thematrix will be restructured to include an additional Match 2 tier and to deliver overallodds of 1 in 10,or better.Wednesday draws will be defended against Powerball by the introduction of a ReserveFund to pay for additional non-cash prizes that dramatize the Millionaire lifestyle that aLotto win could offer.Lotto Saturday draws will be defended against Powerball by introducing a series ofadded value ‘Lotto Rewards’ available to all players including non-winners.PricingCamelot Illinois will capitalize on the current strong popularity of the Raffle format byincreasing the price point to fund more top prizes.Managing Product PortfolioDrive long term growth of Mega Millions and Powerball, through a differentiationstrategy to increase play frequency and introduce a new multi-state game: Camelot Illinois will define clear differentiated roles and positioning in the portfoliofor both Powerball and Mega Millions, through a brand modeling framework,research and creative positioning. Media planning strategies will drive weekly consideration. The benefits and goododds of playing the Powerplay and Megaplier options will be promoted. There willbe maximum publicity for every Illinois winner. Camelot Illinois will work in partnership with other state lotteries and internationalorganizations, bringing its experience in developing EuroMillions to the NationalGame project, enhancement and differentiation of Powerball and the exciting WorldLottery Draw project. Maximize growth by increasing choice across popular ‘Numbers’ games - Pick 3 andPick 4: Camelot Illinois will ensure the top prizes on Pick 3 are still compelling and adjustedif required. Additional play options will be offered to give players more choice andchances to win.Diversify the portfolio offering – with a focus on attracting younger adults andpromoting themes: Evolve the current event based category (including Raffles) to provide exciting,regular and more frequent variety of prizes Camelot Illinois will extend the ‘limited edition’ category to offer a broader range ofthemes, designed to attract new audiences with appeal to local State interests.BUSINESS PLAN FORECASTThe Online Games activities described in the Final Business Plan will grow from $1,019million in FY2010 to $1,720 million in FY2016.RESPONSE TO SCHEDULE 2.1The proposed strategies and activities that respond to the areas in Schedule 2.1 are setout in the document as follows:Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 93

Section 2: Final Business PlanArea: Product Description SectionNew Lottery GameDesignDesign, format, and maintain the appearance andmechanics of Lottery Games2.5.3.1Payout Structure Establish payout structures for Lottery Games 2.5.3.2Managing ProductPortfolioManage the portfolio of current Lottery Games, includingany recommended adjustment to the format and rules ofLottery Games2.5.3.4Pricing Establish the price of each Lottery Game 2.5.3.3The Business Plan for Online Games is structured as follows:Insights 2.5.2Strategies and Activities 2.5.3Implementation Plan 2.5.4Business Plan forecasts 2.5.5Supporting Information 2.5.A94 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.5.2 INSIGHTSNew Lottery Game Design Consumers determine the fate of brands, as has been seen in the decline of theState Lotto game and the removal of Pick and Play from the portfolio. If a brand doesnot have a “reason to exist” in consumers’ minds i.e. they have a clearunderstanding on why to play; (e.g.‘This is the game that….offers huge jackpots orgood odds’), they will not purchase it and it will wither and/or die. If a lottery cannot articulate clearly the brand proposition for each game category, itwill be difficult for retailers to explain games and the reason to play to interestedplayers, which is why the plotting of games and the needs they meet as in Figure2.5.3.1.2 is a critical first step. Lotto: In 2009 sales of Lotto were $46 million lower compared to 1999 sales. Furtherdecline is evident in 2010, since the introduction of Powerball, where bothWednesday and Saturday Lotto draws have been reduced by approximately $250kper week thus far. Pick and Play: Peaking at weekly sales of circa $25,000 during launch, it is clear thatdespite this initial period of support and player trial, the game design format was notsustainably appealing or salient with players, when unsupported, to the extent thattowards the end of 2009, some days experienced sales of less than $5,000.Payout Structure After up to 35 years of playing Lottery games, for some players win frequency hasbecome a key area of concern. Lack of win frequency is a key reason why playerslapse.Pricing The good odds to win a prize and the strong sales of Raffle issues indicate both theappeal of the format and the potential to explore the elasticity of the price. Scheduled twice a year and themed around St Patrick’s Day and Halloween, nearlyall Raffles issues have sold out.Managing Product Portfolio In 2010 Lotto is left without a clearly defined role. Its long roll series deliver minimalsales uplift until the very later stages and its proposition is squeezed, falling betweenthe two big rolling multi-state games and Little Lotto in the portfolio. The introductionof Powerball has further weakened the Lotto proposition, and thus sales, because itoverlaps with the Lotto Wednesday and Saturday draws. Without changes that willimprove the game and define its role in the Lottery product portfolio, Lotto is likely tocontinue to erode with the potential risk of removal like other state Lotto gamesacross the U.S. The introduction of Powerball has delivered additional sales, but not yet atcomparable levels to Mega Millions at comparable jackpot levels. Having two gameswith the same consumer proposition, i.e. win a life changing amount of money, iscausing consumer confusion and many simply chase the highest jackpot of themoment. Additionally, there is no evidence of player retention post big Mega Millionsjackpots i.e. increased frequency of play, after a long roll series with large jackpots.This represents a significant lost sales opportunity.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 95

Section 2: Final Business Plan The appeal of big jackpots is indisputable, so the concept of a National Game offers asignificant opportunity to increase player frequency and attract new players via evenbigger jackpots and/or portfolio innovation. However, it is one that must be viewedwith care to avoid undermining the existing offerings of Mega Millions andPowerball. Qualitative research to date in France, USA, Austria and the UK, indicates theconcept of "the World's biggest Lottery" appeals to existing players of big jackpotgames and additionally has strong potential with young adults. Pick 3 and Pick 4 contributed just over 50% of all Online Game sales in 2009. For audiences not engaged with the Lottery category, there is an opportunity tobroaden prizes offered beyond cash by tapping in to their dreams and ambitions andgiving them either a fantastic life experience or an exclusive opportunity to broadenappeal relevantly with new audiences and drive frequency.SummaryIn summary, the current Online Games portfolio provides a good mix of games whichappeal to the varying requirements of existing players. Current regular players speakknowledgeably of the different games and their attributes, although there is someconfusion on the differentiation between Powerball and Mega Millions.Online Games are already the most widely played games from the Illinois Lottery asmeasured by penetration; nevertheless only 7% of adults play Lotto or Mega Millionsevery week. There is a very low frequency of regular play and many lapsed playersexpress frustration with an unsatisfactory winning experience.There has been no significant portfolio growth in the past 5 years and a small decline inthe most recent full year when the category delivered 46% of total revenue. However,the introduction of Powerball to the portfolio in January 2010 appears to have made asignificant impact on overall sales, although it is too early to assess the full effect of thePowerball introduction on the Online Game portfolio.Based on this insight and experience both in the UK and with the California StateLottery, Camelot Illinois is confident it can deliver sales growth across the OnlineGame category. Further insights into the Online Games portfolio can be found in“2.5A Additional Insights”.96 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.5.3 STRATEGIES AND ACTIVITIES2.5.3.1 New Lottery Game DesignCamelot Illinois will develop a new productinnovation process to design, format and maintainthe appearance and mechanics of Illinois OnlineLottery Games. It will adopt the classicmethodologies of leading fast-moving consumergoods and services companies and the process willbe rooted in consumer insight.Objective Gain full insight into consumers through research aiding understanding of theirpreferences, to enable the development of new and existing products to meetidentified needs for current, lapsed and new playersInsight Consumers determine the fate of brands, as has been seen in the decline of theState Lotto game and the fate of Pick and Play, if a brand does not have a reason toexist in consumers’ minds, they will not purchase it and it will wither and/or die.Camelot has attracted new, infrequent and lapsed players to the Lottery in the U.K. byunderstanding consumer preferences and then developing products to meet identifiedneeds. In this way the portfolio of games has not remained stagnant, but has changed inresponse to market demand.Camelot invests in research to understand its consumers’ needs. Consumers purchaselottery tickets as they do other small-dollar entertainment items such as food, candy, andsoft drinks. Just as in these other Fast Moving Consumer Goods (FMCG) industries, tobe successful, the first essential is to know the consumer and to respond to their needswith the best products. Camelot approaches the lottery business this way, taking care tounderstand consumer needs and develop relevant products. These must be specifiedand developed from within the company’s own game development team. Ideas might beinternally generated or gleaned from multiple sources but all must be subject to rigorousresearch and testing. The final choice of new game developments must be under thecontrol of the company’s own development team who have the deep understanding ofthe consumer provided by the research.Camelot’s requirement for its portfolio is that every game must have a “reason to exist”in consumers’ minds. This “reason to exist” may come from a consumer need,appealing to a specific audience (e.g. young adults), overcoming a barrier to play or a wayto increase frequency and spend (e.g. an extra draw day).Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 97

Section 2: Final Business PlanCamelot’s successful portfolio of games in the UK was developed using the new productdevelopment methodologies of leading FMCG and services companies. Camelot Illinoisplans to implement this approach in Illinois to grow revenue and Net Income.The Gaming ‘Needs Map’To formalize and document understanding of consumer needs for existing and newgames, Camelot Illinois will develop ‘Needs Maps’. An example is shown in Figure2.5.3.1.1.Confidential Information removedA consumer ‘Needs Map’ plots the types of satisfaction players or groups of players lookfor from their entertainment. An understanding of where they are on the ‘Needs Map’makes it possible to tailor games to deliver those feelings and emotions. As an exampleof its use, Figure 2.5.3.1.2 shows how the groups of games in the current Illinois Lotteryportfolio map onto consumer needs.98 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanConfidential Information removedBased on their game attributes, the current Illinois Lottery portfolio can be classifiedbased on the following criteria: Pick 3 and Pick 4 with small, daily wins at good odds, can be seen to fulfill the ‘Achance to brighten up my day’ need Powerball and Mega Millions offering huge jackpots clearly deliver on ‘the chance totransform my life’ need Lotto is still able to offer multi million dollar jackpots at times, delivers on ‘the chanceto change my life’ need Little Lotto offering decent size cash jackpots, delivering on ‘the chance to enhancemy life’ need The limited nature of the Raffle issues, stimulates an urgency to buy a ticket whilestocks last, at the same time offering a good top prize and a good win ratio and thusfalls in to the overlap need areas of ’avoid being the one to miss out’, ‘the chance totransform my life’ and ‘for the thrill of taking a chance’ Instants, can vary depending upon the specific game design but generally as acategory fall in to ‘ to let go and have fun’ and ‘for the thrill of taking a chance’ needareas.The consumer ‘Needs Map’ identified needs gaps that are not currently met by anygame in the portfolio. The ‘Needs Map’ is the first filter in the process. If a new gameappears to fill a needs gap, that has to be confirmed by qualitative and quantitativeresearch. In particular, this is to ensure that the market opportunity is of significantCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 99

Section 2: Final Business Planenough size to deliver enough revenue to justify taking the game through the stages ofdetailed design, development and distribution.New Product Development PipelineTo keep existing players interested and to attract new players, the development of newgames is essential to build excitement. Camelot has a New Product DevelopmentPipeline process which takes an idea through various stages of development, andultimately produces successful new games based on solid market research and testing.For those games that meet a clear need with a very good prospect of generatingincremental revenue, they emerge from the pipeline for production, distribution andsales as new members of the portfolio. As can be seen in the chart below, while manyideas may make it into the top of the funnel, they are filtered and sorted so that only thegames which meet true market demand and will be successfully deployed will make itthrough to the end of the process.The New Product Development pipeline is depicted in Figure 2.5.3.1.3.Confidential Information removed100 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanThe importance of the final stage – continuous tracking of game performance andconsumer response – is illustrated by the following case study in which Camelotresponded to dissatisfaction with one important aspect of the EuroMillion games as itplayed out in the UK. Camelot paid close attention to consumer feedback and tested arange of options to come up with the best way to meet player demand and createincremental revenue, despite involving an increase in price:CASE STUDYTRANSFORMING EUROMILLIONS INTO A $1.5BILLION+ AYEAR GAME IN THE UK ALONEEuroMillions is a large jackpot, rolling game, conceived by Camelot and implementedinitially with the French and Spanish lotteries. It has since been joined by six othercountries – Austria, Belgium, Ireland, Luxembourg, Portugal and Switzerland.The consumer insight from 2008 research said that UK players perceived that ‘there arenot enough EuroMillions millionaires in the UK.’ By the very nature of the game, thecountry that has the big jackpot winners each week is a matter of luck. For many weeksin the early days of the game there were no big winners in the UK.The research also showed that, because of the size of the jackpots, consumers wouldaccept paying a higher ticket price than £1.50 ($2.25).Camelot responded to these key insights by introducing a raffle with every weekly drawthat would guarantee at least one UK millionaire every week. The raffle was funded by a33.3% price increase to £2.00 ($3.00). It is an enhancement unique to the UK, notaffecting the way EuroMillions is played in the other countries.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 101

Section 2: Final Business PlanThe result has been a great success: no drop in ticket volume and sales increased inbase weeks (i.e. the first draw after a jackpot winner) from $16.5million to $24 millionper week:51% uplift in sales in the first six weeks35% uplift in sales over the first eight monthsThis game, driven via a consumer-led benefit of a “Guaranteed UK millionaire everydraw” has not only allowed Camelot to introduce a price increase that players haveaccepted and has also transformed the game into a $1.5+ billion per year brand.Without tracking consumer attitudes and the extensive rounds of research that went intothis product enhancement, such a successful step change would not have beenpossible. (Source: Camelot UK sales 2009/10)The iCAMELOT process follows the classic innovation methodologies typically found atleading FMCG and services companies – with tailoring where necessary to fit theparticulars of operating a Lottery: Identification of consumer needs that are not met by Camelot’s current gameportfolio (or are insufficiently met), both for the present and the future Generation of a wide set of possible game solutions Refinement of concepts against social responsibility and various business criteria,qualitative and quantitative consumer appeal, levels of cannibalization, return oninvestment, brand risk, player protection issues and time to market. The strongestcandidate games are moved through to the next stage. Sign off by a senior management group, having representation from all relevantdisciplines within the company at all key stages. Each individual game initiative becomes part of Camelot’s rolling three-yearcommercial activity plan and the validated game proposals are delivered throughCamelot’s program team. After Camelot launches a new game into the market, it closely monitors itsperformance.The process is therefore continuous and iterative, ensuring that the pipeline is always fulland at any one time the organization is simultaneously undertaking work at all of theabove stages. The result is a pipeline of potential activities to deliver the strategic needs,featuring a blend of renovation and innovation initiatives, with differing profiles of riskand reward that create quality choices for the business.Camelot Illinois will deploy similar processes, adapted as necessary to take account ofexisting procedures. The fundamental maxim will apply: to base all decisions on adetailed knowledge of the needs of the Illinois consumer. No game enhancement ornew game will be launched without rigorous testing against those consumer needs.Camelot has successfully used its New Product Development pipeline to form acompelling Online Game portfolio, designed to meet a broad range of consumer needs,which since 2004 has been valued consistently above $6 billion and resulted in 72%player penetration. 11 Camelot Sales102 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.5.3.2 PAYOUT STRUCTURECamelot Illinois will deliver the right balancebetween win frequency and responsible play,without impacting profitability.Objective Deliver a better winning experience to maintain the current player base and drivefrequency of playInsight After many years of playing Lottery games (up to 35 years for some), win frequencyis a key area of concern among current players and a key reason why players lapse.Camelot Illinois will maintain the majority of the current payout structures for OnlineGames.However, Camelot Illinois proposes to make enhancements to the Numbers games,Raffle issues and Lotto prize payout structures in order to improve player win frequency.New Lotto Payout StructureBased on insights from player research in Illinois, Camelot Illinois would develop apayout structure for Lotto that would deliver the following:Maintain a minimum guaranteed $1 million (annuity) rolling jackpot to maintain theLotto essenceIntroduce a reserve fund to deliver non-cash prizes delivering “new news”Introduce an improved win frequency to foster loyaltyWithin the current 6 from 52 matrix these ambitions could be delivered as follows.Assumptions: Assumed sales of $100 million per year Total prize payout of 50%, delivering a prize pool of $50 million per year 5% of total prize pool of $50 million per year funds the reserve, equating to $2.5million per year. Remaining prize pool equates to $47.5 millionCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 103

Section 2: Final Business PlanFIGURE 2.5.3.2.1: ODDS OF WINNINGPrize levelsOdds ofmatching prizelevel 1 in:EstimatedNumber ofwinners a yearDesiredPercentage ofPari-mutual PrizePoolAverage Value ofPrize6 of 6 of 52 20,358,520.0000 9.82 11.50% $556,042.085 of 6 of 52 73,762.7536 2,711.40 5.50% $963.534 of 6 of 52 1,311.3378 152,516.00 10.00% $31.143 of 6 of 52 67.057 2,982,537.24 22.50% $3.582 of 6 of 52 8.3172 24,046,554.13 50.50% $1.00overall odds of aprizeSource: Camelot7.36 27,184,328.60Annuity factoredat ratio of 1.8Lotto could thus go forward delivering: $1 million+ rolling jackpots Significantly improved overall win ratio of under 1 in 8 (vs. the current 1in 32) An improved Match 3 prize payout An additional 24 million+ low level winning experiences per year Fund $48,000 in non cash prizes every Wednesday.To reiterate, this is just one prize structure example, and Camelot Illinois would modeland test it alongside other variations to sense check for appeal. The same principlestands for any considered enhancements to the Numbers games and Raffle games.Additionally, as cross sell occurred without change to either of the Multi-State games, inthe context of increased player numbers and thus overall number coverage across bothPowerball and Mega Millions, Camelot Illinois would consider reviewing prize payout ofPowerball in conjunction with MUSL and the other state Lotteries, alongside otheroptions for differentiation.These proposals fulfill the opportunity prize payout structure changes can deliver toimprove overall win frequency for players, contributing to their overall satisfaction, and isfocused on driving overall penetration of the game by demanding reappraisal amongstlapsed and new players through the introduction of a new news generating non cashprize fund.Camelot has successfully adjusted the prize payout structure of its Lotto add-on game inthe UK, adding in additional prize tiers and improving overall odds of winning a prize toimprove the win frequency and appeal of the game. This Lotto add-on gameenhancement generated $42.6 million (120%) more revenue over the first eight months104 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Planthan the game it replaced had in the preceding eight months. 2 The most recentenhancement Camelot has implemented was in May 2010, on the ThunderBall OnlineGame, where a combination of structural changes which included prize payout structure,enhanced the game to offers players a more relevant top prize and improved winningexperience. This ThunderBall enhancement has thus far generated $2.25 millionadditional revenue per week 3 .2.5.3.3 PRICINGCamelot Illinois will manage the pricing strategyacross the Online Game portfolio to ensure value formoney and as a portfolio differentiator.Objective Use pricing to differentiate the Online Games for easier player navigation through theportfolio and to increase revenuesInsight: Limited edition games (Raffles) offer good odds to win a prize and strong sales. Thisindicates both the appeal of the format and the potential to explore the elasticity ofthe price.Currently $1 is the dominant price point for Online Games in the Illinois Lottery portfolio,with a few variations, those being: The option to play either Pick 3 or Pick 4 at $0.50 or $1 Receive two x $0.50 entries for a minimum entry price of $1 on Lotto $20 per ticket for Raffles Historically Pick and Play also offered differing price points, ranging from $2, $3, or$5Price of games, alongside matrix changes, draw frequency and, add-on games is a keydifferentiator of games. In line with Instants, Camelot’s pricing principle for games is thatthe higher the price of the game, the more potential it should offer back to the player tojustify that price. This typically means a combination of better odds, bigger prizes and /ormore prizes.Due to the proven appeal of the Raffles, Camelot Illinois will introduce an increase inticket price from $20 to $25, delivering both additional prizes to players and revenues tothe Lottery. Through increasing the price point to $25, it will allow the Lottery to offer prizes of: 5 x $1 million ( 1 x $1 million prize, more than current games) 5 x $100,0002Camelot Sales3 Camelot SalesCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 105

Section 2: Final Business Plan 750 x $1,000 (250 x $1,000 prizes, more than current games)Camelot has successfully utilized pricing to help differentiate the portfolio and driverevenue in the UK via the EuroMillions enhancement in November 2009 as detailed inthe ‘Transforming EuroMillions into a $1.5billion+ a year game in the UK alone’ CaseStudy.2.5.3.4 MANAGING PRODUCT PORTFOLIOCamelot Illinois will enhance the core product range and then diversify into new productsto better satisfy consumer needs across the Online Game portfolioThe first priority for Camelot Illinois is to maximize sales from the current games in theLottery’s portfolio. This will involve reviewing the respective role of each game,appropriateness of current prize structures and tailoring marketing communication basedon insight into consumer attitudes. This will be completed through the brand modelingframework, detailed in the marketing procedures discussion in Section 2.9.This optimization of the existing portfolio offering will provide the platform for marketingcommunications around a core of revenue driving games and the enhancement of thecurrent games, before evolving the portfolio to bring in new types of games to fulfillthose player needs that are not being met. Figure 2.5.3.4.1 illustrates the direction oftravel.FIGURE 2.5.3.4.1: STAGES IN PORTFOLIO DEVELOPMENTTurnover$TargetDeliver Breakthrough InnovationVenture into Near AdjacenciesExtend the CoreOptimise the CoreSource: CamelotTimeThe rationale for reviewing and optimizing the existing portfolio first is that:Renovation is quicker to define and to bring to market, thus more cost effective andprofitable than developing brand new productsIt requires less change in all facets of operation and promotionExisting product propositions and roles within the portfolio need to be addressedbefore new ones are introduced to avoid cannibalization.106 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanExtending the core entails enhancements to the products to gain more revenue from theexisting set. This might be through, for example, price increases, matrix changes, addongames, and so on.When the most profitable growth from the existing portfolio and enhancements isexhausted, then diversification comes to the fore with new types of game. Initially newgames might be close in type to those already in the portfolio so that existing players canreadily appreciate them. But eventually the aim is to offer entirely new types of game tomeet the enthusiasms of new groups of players or offer new forms of enjoyment forexisting players and where possible, Camelot Illinois will look to introduce games with alocal relevance or theme to maximize appeal to existing and new audiences.In summary, Camelot Illinois will strengthen the core existing Online Game offerings toaddress the needs of the current player base before extending the portfolio. CamelotIllinois will start investigating future revenue opportunities from 2011 onwards using theNew Product Development processes described. The following proposed enhancementsare preliminary only and would be subject to extensive modeling and research in the firstyear of the PMA as part of the general game portfolio review. The key activities of theOnline Game Plan are described below:State Lotto GameObjective Re-build Lotto as the Illinois game and improve the overall winning experience tomaintain player base, drive frequency of play and attract new players.Insight In 2010 Lotto is left without a clearly defined role, its long roll series deliveringminimal sales uplift until the very later stages and its proposition is squeezed fallingbetween the two big rolling multi-state games and Little Lotto in the portfolio.Without changes that will improve the game and define its role in the Lotteryproduct portfolio, Lotto is likely to continue to erode with the potential risk ofremoval like other state Lotto games across the U.S.Lotto in its current format is finding it very difficult to compete with Powerball or MegaMillions, both of which offer a similar ‘winning a life changing prize’ proposition at thesame price point but on a grander scale with the huge jackpots they can offer. The Lottogame will benefit from a significant restructure to ensure that it has a clear role in theOnline Game portfolio and is protected from the introduction of Powerball. The relevantconsiderations are as follows: Lotto sales have been in decline for many years. 2009 sales were down $46 millioncompared with 1999. The rate of this decline has been driven by the launch of MegaMillions and more recently exacerbated by the introduction of Powerball, which hasseverely impacted sales on the overlapping draw days of Wednesday and Saturday. The Lotto game has had structural challenges. The matrix is too big for a game with the current levels of participation:On occasion in 2009 the jackpot was won only every 20 plus draws. Based onthe current level of sales, the early indication is that since the launch ofPowerball there will be even longer roll series.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 107

Section 2: Final Business PlanThe 6/52 matrix (odds to win the jackpot of 1:20,358.520), despite the minimumof $1 entry point for two lines, is too big for the player base, resulting in long rollseries and minimal growth as the jackpot grows until late on in the roll cycle. Only the jackpot and three other prize tiers are offered and overall odds of winning aprize are 1 in 32 (based on $1 purchase providing two boards):This indicates that a player playing at $1 per draw, i.e. playing three times aweek, will win once in approximately ten weeks, which is a poor return for suchregular play. 69.5% of prize payout is allocated to the jackpot tier:But the jackpots funded by this allocation do not drive up sales significantly fromdraw to draw and so the level is more generous than it needs to be. As acomparison the jackpot tier prize payout allocation for Lotto in the UK is 52%. Players speak fondly of Lotto as “the local game”. Discussion groups also showedthat it benefits from the recognition that it offers a better opportunity to win ajackpot and that someone in Illinois will win. But the game has lost relevance andsalience, as players and non players do not hear about the benefits of playing orabout winners.To defend current penetration and spend levels Camelot Illinois will define a new role forLotto in the Illinois Lottery portfolio by introducing a better win frequency to the portfolioand positioning Lotto as a specific game to leverage appeal of a localized in-state game.In response to these structural findings Camelot Illinois proposes to revise the prize tiers,prize structure and matrix of the Lotto game through modeled options and consumerresearch. It will introduce value-added propositions to the game.Through a combination of changes to these elements, Camelot Illinois will retain therolling nature of a jackpot above $1 million as a top prize and introduce new ways to winand features that will provide regular new news - delivering a much improved winfrequency and relevance to foster player loyalty to the game and reasons to play eachweek. In particular, Camelot Illinois proposes to:Modify the Lotto prize structureIntroduce a new lower prize tier (Match 2) which will be funded by using a percentage ofprize payout currently allocated to the jackpot tier. One example, of how a Match 2 prizetier could be introduced is detailed in the Prize Structure Section 2.5.3.2.Offering a Match 2 prize would significantly improve the win rate versus the currentodds and directly address the current and lapsed player insight that Camelot hasidentified through focus groups, that win frequency must be improved in Illinois, asdetailed in Section 2.2, to help improve frequency of play and attract new players.Camelot Illinois will review and model further options, within the context of the overallmatrix options, with a clear view to improving player win frequency by offering overallodds of better than 1 in 10.Establish a reserve fund for weekly promotionsEstablish a reserve fund from a prize payout allocation in the region of 5 -10%, to fundspecial weekly promotions for a wide range of aspirational prizes such as sports cars e.g.Mustangs and Corvettes and luxury holidays to provide weekly ‘new news’. Thefollowing two case studies show that this technique has worked well for other108 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Planjurisdictions. Camelot Illinois believes that a similar offering is applicable to freshen upLotto in Illinois, especially in light of recent poor sales on the Lotto Wednesday drawfollowing the launch of Powerball. Camelot Illinois will test this through research, with aview of offering non-cash prizes some of which could have a specific relationship toIllinois e.g. private box at the Blackhawks, Cubs, or White Sox.CASE STUDYRESERVE FUND- EUROMILLIONSIn Europe, within the EuroMillions community, the game’s prize structure provides for a‘Reserve Fund’ which is currently 6% of prize payout. This fund, over time, providesextensive marketing opportunities to help direct the performance of the game. To date,the EuroMillions community has used this ‘Reserve Fund’ as follows at varying timesthrough the game’s history to date:Guarantee a minimum jackpot for base week draws following a jackpot win. This deliversa motivating jackpot level and a good foundation for any subsequent roll series to grow.Fast track jackpot growth in the early phases of a roll series. The community utilizedfunds from the Reserve Fund to boost the jackpot up to the 5th roll, at which pointjackpot levels naturally excite players and justify marketing investment. This use of thefund has not been employed since February 2007, as the game is now established; butin the first three years of the game, it played an important role in helping to establish thegame and drive frequency of play.‘Event draws’, which are set for a mutually agreed date for the community some nine totwelve months in advance, and offer a guaranteed minimum jackpot of 100 million Eurosor more. Since 2007, the community has run such draws every six months, delivering‘planned excitement’ to what by its very nature is an unpredictable game. Fixing the datewell in advance means that media can be booked to support the draw and a full sell-in toretailers can be prepared and implemented. More often than not Event Draws havedelivered the best weeks of sales in the year and attracted new players to the game.CASE STUDYWEEKLY PROMOTIONS –NEW ZEALAND ‘BIG WEDNESDAY’ GAMEIn New Zealand the ‘Big Wednesday’ Game approach has had outstanding success andhas helped stablize sales, with a minimal cannibalization impact on existing sales.‘Big Wednesday’ was launched in 2005, adding an incremental $1 million per weekrevenue, with minimal cannibalization of the existing product (Source: New ZealandLottery).An example of how the New Zealand lottery present ‘Big Wednesday’ on theirwebsite: ‘Big Wednesday’ is positioned as the game that offers players the chanceto win the ultimate lifestyle! Every week, players are in to win millions of dollars ofcash and incredible luxury prizes.In New Zealand, ‘Big Wednesday’ offers up to five weeks of luxury prizes. As well ascash, on offer could be an Audi R8 and a Porsche Cayenne, a pre loaded VISA card,Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 109

Section 2: Final Business PlanFirst Class Travel access, a Four Winns V258 Boat and cash prize towards a bach (alake house). All prizes would come with one year’s comprehensive insurance whererelevant and if desired, all of the luxury prizes can be exchanged for cash.FIGURE 2.5.3.4.2: NEW ZEALAND LOTTERY – ‘BIGWEDNESDAY’The key premise of the format is to encourage consumers, especially under-representedyounger adults, to think about the aspirational possibilities of a big lottery win, bringing tolife visually the benefits of a big win.Under the working title ‘Lotto Winsday’, to help counter the impact of Powerball onLotto Wednesday draws, Camelot Illinois will look to bring excitement and opportunity tothe middle of the week, through actively showing what winning could mean, promotingplay of both Wednesday Lotto and Powerball, highlighting how, by playing both games,players will be giving themselves the best possible chance.Camelot Illinois will ensure that the aspirational prizes offered in Illinois are relevant anddesired by the public of Illinois. By utilizing a ’crowd-sourcing’ format through the IllinoisLottery website, the public will not only be able to vote for the non cash prizes availableeach week, but there will also be a social forum created called ‘Millinoians’ to invite andprompt debate - where players can discuss, debate and build on each other’s dreams,helping build relevancy with a younger adult audience and build much more affinity to thelocal in-state Lotto format game.In a mature portfolio, Camelot Illinois believes that this type of game format will helpsignificantly in addressing any lottery apathy, sidestep any jackpot fatigue, generatedebate and stimulate reappraisal. By offering an ever changing range of non cashaspirational prizes, this game format will deliver on-going new news that will help reengageplayers and lapsed players through a more emotive, consumer insight creativeplatform that delivers messaging about becoming a Millionaire and also dramatizes aMillionaire lifestyle into a language non-players / lapsed players / occasional players willrelate to (so not just in terms of dollars but emotional drivers).Offer rewards to all players of Saturday LottoTo help counter the impact of Powerball on Lotto Saturday draws, Camelot Illinois willtake an approach, that looks to focus less on life changing winnings and more on thesmall moments of happiness that add to your life. As the draw takes place at theweekend most players will be out of their work routines and workplaces and enjoying110 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plantime with friends and family. Camelot Illinois will look to how it can make Lotto part of agreater shared experience, leaving non-winners with something more thandisappointment and make it appealing to new consumers.Under the umbrella of the title ‘Lotto Rewards’, Camelot Illinois will look to partner withsources of enjoyment and entertainment to deliver relevant added value to every singleLotto ticket, in addition to whether it is a winning ticket or notCamelot Illinois will negotiate a series of compelling ‘Rewards’ available to all playerswith a valid Saturday Lotto ticket in hand, which on presentation or entry of the uniquecode on the ticket, will entitle the players to a series of value added rewardsThese rewards will be selected on the basis of mass regular consumption to ensurerelevance, appeal and motivation to have a Saturday Lotto ticket in hand and in returngive something back to regular players and help attract new players.‘Lotto Rewards’ would be rewards that are available State wide, be viable through easyredemption for the consumer and be relevant on a frequent occasion basis. Such ‘LottoRewards’ could include:$1 back discounts on cinema tickets, fuel etc2 for the price of 1 on Starbucks coffee or Dunkin DonutsFree access code to a Direct TV pay per view show of your choiceFree ‘Go Large’ meal upgrade at McDonalds or Burger King24 hour period of free cell phone SMS messagingFree iTunes download.Develop Internet based partnershipsTo further broaden the appeal of the Lotto game, and help drive relevance and thusfrequency of play, Camelot Illinois will look to provide further added value to every Lottoticket in the state of Illinois by developing Internet based partnerships: For example, Camelot Illinois will look to build a partnership with Zynga andFacebook for the cultural phenomenon Farmville, where every Lotto ticket acrossMonday, Wednesday and Saturday draws will be $ for $ matched in credits for thehighly desirable redeemable Farmville $s, delivering on-going compelling relevanceand reward to every Lotto purchase. Win or lose, Lotto tickets will reward regular play with on-going relevance and avirtual currency that is never ending and always of use, helping drive appeal andbroaden appeal of Lotto with new audiences.These structural changes to Lotto would be supported by a flexible marketing campaignre-positioning Lotto as ‘the local in-state Lotto game’, focusing on the game’s heritage,value, its local nature and emphasizing that all winners are from Illinois. The campaignwould be developed through the best practice FMCG marketing principles that aredetailed in Section 2.9. An indicative example of what this would entail, specificallyrelating to the needs of Lotto, is as follows:Redefine the Lotto brand essence (the brand’s primary benefit) …’Enriching lives inIllinois’Deliver a big idea communications platform that drives home the new propositionthat Lotto is the Online Game that is ’Played in Illinois / Won in Illinois’360 degree through the line launch campaign announcing enhancements to:Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 111

Section 2: Final Business Plan Engage and excite Lottery core players about positive benefits of much improvedwin frequency (delivering a call to action) Attract lapsed players and drive re-appraisal Simply explain “uniqueness of non-cash prize” Lotto Winsdays and ‘added value’ ofLotto Rewards.Media and channel plans will be designed to rapidly build impact in retail outlets, pluscoverage and frequency using the familiar equity of local Illinois media channels e.g.WGN and other Tribune Media Group owned media outlets.Post launch aftercare communications strategy will be flexible to highlight costeffectively the latest new news of the prizes and offers available and will be used toconsistently highlight the improvements and proactively stimulate ‘what would youdo?’ debates ensuring presence so that Lotto remains top of mind, relevant andsalient with a specific focus on social media.Such strong structural and positioning changes to Lotto will act to draw new, lapsed andinfrequent players to Lotto and subsequently other Lottery games in the first years of thePrivate Management Agreement and is forecast to generate in excess of $135 million(before the impact of the additional terminals) in additional revenues from launch to theend of the FY2016.Multi-State games - Powerball and Mega MillionsObjective Drive long term growth of Mega Millions and Powerball, through a differentiationstrategy to increase understanding and play frequencyInsight The introduction of Powerball has delivered additional sales, but not yet at similarlevels to Mega Millions at comparable jackpot levels. Having two games with thesame consumer proposition i.e. win a life changing amount of money, is causingconsumer confusion and many simply chase the highest jackpot of the moment.Additionally, there is no evidence of player retention post big Mega Millions jackpotsTo date Mega Millions sales fluctuations have been driven by the roll series, and therehas been no increase in the base level of weekly sales in Mega Millions once a jackpothas been won following a large jackpot series.As outlined in the Situation Analysis (2.2) marketing focus on differentiating the benefitsof Mega Millions and Powerball would benefit both games.From Camelot Illinois’ own research, the common player perception of Powerball andMega Millions is that they are not clearly distinguished from one another, and so playersplay the biggest jackpot of the week. Both games offer players the license to fantasize –but after years of not winning, many are not solely dreaming of the really big win, insteadplaying has become very functional and rational, driven largely by the relative size of thejackpots.The duplication of the propositions for the two games, if not countered bycommunication strategies that position the games differently, leaves player confused,112 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Planwhich means they will take the least complicated decision, either to chase the biggestjackpot in any given week or just do as they have habitually done: play Mega Millions,which is why Powerball sales at comparable jackpots have not yet reached that of MegaMillions.In response to these findings, Camelot Illinois proposes a number of steps to increasefrequency on multi-state games in Illinois. The components of this plan are as follows: To address functional play - Camelot Illinois will re-engage players and lapsed playersthrough a emotive creative platform that delivers both jackpot messaging andtranslates the communication of jackpots into a language non-players / lapsedplayers / occasional players will relate to (so not just $$$s but emotional drivers e.g.sharing, security, freedom). To address player confusion and jackpot chasing – Camelot Illinois will introduce abrand differentiation model, detailed fully in the Marketing Section 2.9, to provideclarity on the brand characteristics for each of the products in the Lottery productportfolio. This will make positioning between the games clearer, giving consumersan understanding as to why the games exist and why they should/could play bothPowerball and Mega Millions, thereby: Equalizing, and thus increasing Powerball sales, at comparable jackpots Targeting best benchmark state levels of sales on both games.To address win frequency in the context of not being able to change either game inisolation, Camelot Illinois will promote Powerplay and Megaplier to drive weight of spendper player. The focus would be on the $1 million in cash prize tier, which offers greatodds to become a Millionaire.In the longer term, subject to research, consideration will be given to brand extensionse.g. PowerPicks (for a $1 stake pick 1 from 59 to win $5) and MegaPicks (for a $1 stakepick 1 from 56 to win $5), where the appeal and principles of numbers games areintroduced to Powerball and Mega Millions. In the UK, a similar format - Lotto HotPicks -delivers $6 million per week 4 .To address player belief – Camelot Illinois will maximize the opportunity of local jackpotwinners as and when they occur and take publicity through all media channels and retail,emphasizing that Illinoisans are winning and ‘it could be you’/ ‘you have to be in it to winit’ messaging. For wins in the $100,000 to $1 million range Camelot Illinois will focusefforts on support in the winning retailer outlet.To address cut through and ensure rebasing – Camelot Illinois will develop a regular playcommunications strategy, targeting broader audiences through the line to increaseweekly consideration. Encouraging play at lower level jackpots is the key to growth as itis not dependent on the vagaries of roll series.These principles will ensure year round presence to ensure the category remains top ofmind, relevant and salient:To maximize play across both games at comparable jackpots.To drive frequency and attract new players.4Camelot UK salesCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 113

Section 2: Final Business PlanCamelot Illinois will introduce similar strategies it has successfully implemented toincrease base sales in EuroMillions after a large jackpot which are as follows: Ensure the media targets under-represented audiences (e.g. younger adult groups)during the roll series leading up to the climax of the big jackpot. Deliver on-going jackpot prominence through one-to-many mass broadcast mediaand one-to-one direct communication i.e. ensure the game receives continuity ofmarketing communication support, rather than wait many weeks until the jackpothits over $100 million again.Based on experience with driving EuroMillions weekly consideration and jackpotoptimization, and repeating this success again on Mega Millions in California; theintroduction of Camelot’s proven strategies and activities are forecast to generate inexcess of $537 million (before the impact of the additional terminals) in additionalrevenues from launch to the end of FY2016. This is based on achieving annual sales peradult in line with Pennsylvania’s average of $47.40 rather than the current Illinois averageof $33.74 on weekly draw games.Multi-State innovationIn the medium to long term, subject to extensive research and partner discussions,Camelot Illinois will work with other States and countries to develop and launch a newmulti-state game in 2014.Camelot has considerable experience in working with other jurisdictions to develop blocgames having spearheaded the development of the EuroMillions game with La Françaisedes Jeux (FDJ). Camelot Illinois will ensure that the Lottery is at the forefront of drivingthe agenda for future innovation in the multi-state Online Game category; workingclosely with partner states and using existing relationships Camelot has with Multi-StateLottery Association (MUSL) to reinvigorate, differentiate and drive the big rolling jackpotgame category.Through this process Camelot Illinois will seek to launch a new bloc game such as theproposed ‘national game’ or the exciting World Lottery Draw project, a concept thatCamelot is currently developing, in conjunction with MUSL and La Française des Jeux.Camelot’s involvement with these projects is as follows:The National Game projectObjective Reinvigorate, differentiate and drive incremental sales in the Online Game categoryby increasing frequency of current players and appealing to new player segments,especially younger consumersInsight The appeal of big jackpots is indisputable, so the concept of a National Game offers asignificant opportunity. However it is one that must be viewed with care so as toavoid undermining the existing offerings of Mega Millions and Powerball.Camelot is currently working with MUSL on the World Lottery Draw Project and is thusaware of the on-going discussions and research for a viable National Game.114 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanCamelot Illinois will bring not just its considerable operator experience of working withother lottery jurisdictions, gained through the development and running of EuroMillions,but also a structured approach to influencing and managing a situation outside of theLottery’s immediate control.For the games within Illinois, where the control is retained by the Lottery, CamelotIllinois will look to clearly define the roles of games within the portfolio; for example,making sure the proposed changes to the Lotto game, previously detailed in the sectionwith ‘Winsday’ events, are robust and unlikely to compete against other existing gameswithin the portfolio and be future proofed as much as possible against the unknown of:Any yet to be determined National GameAny potential changes to either Powerball and/or Mega Millions.Camelot Illinois believes that the discussions around a National Game are a significantopportunity to reinvigorate, differentiate and drive the Online Game category but onethat needs to be reviewed with significant care so as to avoid undermining the existingofferings of Mega Millions and Powerball. Since the cross sell initiative in January 2010these games already offer two almost national games.It is clear that differentiation is required between Mega Millions, Powerball and anyNational Game format, if incremental sales are to be delivered and for a ‘wow’ factorresponse to be created with consumers.Camelot Illinois will look to highlight in any discussions still ongoing in January 2011 andonwards that any fundamental changes need to deliver:Incremental revenue / Net Income, not necessarily immediately, but with a realisticlong term prospect of adding value to the portfolioIncreased average per capita spendPrice point differentiation between the three games and in the context of theNational Game the ability to command a price premiumMaintain the lotteries’ reputation(s) for responsible gamingAttract new player segments, especially younger consumersA fun and exciting new game, demonstrating that the lottery category can beinnovative and contemporary and thus reflect social trendsPublic and political appeal and acceptance.The World Lottery Draw projectObjective Deliver a compelling game with a prize structure that no single lottery could deliveron its own or as part of any existing multi-state community, with appeal to youngadultsInsight Qualitative research to date in France, USA, Austria and the UK, indicates theconcept of "the World's biggest Lottery" appeals to existing players of big jackpotgames and additionally has strong potential with young adults.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 115

Section 2: Final Business PlanIn conjunction with MUSL and La Française des Jeux, Camelot has been working on theambitious project to create the first global lottery game that engages and excites newand existing consumers. The concept is to deliver a compelling game with a prizestructure that no single lottery could deliver on its own or as part of any existing multistatecommunity.Camelot believes the success of the World Lottery Draw project will depend on itsappeal to the mainstream, combined with its capacity to expand the lottery targetaudience to include a new type of player and thus minimize cannibalization of existinggames. Appeal to young adults is therefore a priority. This group of 20-30 year olds, notyet encumbered with the costs of mortgages or raising children, has historically hadlower penetration in most lotteries around the world; but qualitative research to date inFrance, USA, Austria and the UK, shows that the concept of "the World's biggestLottery" has strong potential with this audience. Typically, they are well travelled, moretolerant and more multi-cultured than their parents’ generation. They are connecteddigitally with a stronger need to belong.The World Lottery Draw project, potentially with a global cause-related component, hasthe potential to act as a 21st century global force for positivity and optimism for thistarget group.This young adult audience represents an inspiring target for developing thinking andideas, while never losing sight of the need to ensure mainstream adoption andengagement. A broad range of game options has been created and a short list of theseconcepts, selected by Lottery directors at the 2009 WLA meeting in Santiago, Chile, isgoing into research across Australia, Europe and U.S. in late Summer / early Fall 2010.The introduction of the World Lottery Draw project, across the current interested Lotterycommunities Camelot is working with, which includes EuroMillions, MUSL, Oz Lotto andViking Lotto, provides a population base of circa 550 million. Game modeling is based onachieving 20% to 30% penetration across participating markets, and in the context ofthe Illinois Lottery is forecast to generate $200 million (before the impact of theadditional terminals) in additional revenues from launch to the end of the FY2016.Numbers Games- Pick 3 and Pick 4 enhancementsObjective Maximize growth by increasing choice across popular ‘Numbers’ games- Pick 3 andPick 4 to maintain player base and drive revenuesInsight Pick 3 and Pick 4 provide a popular base to capitalize on the recurring theme from allthe player research relating to player motivation, which is to provide more choice andopportunities to improve their prospects of a larger prize value.Camelot Illinois will capitalize on the recurring theme from all the player research relatingto player motivation for games with good prizes and better odds, by introducing furtherchoice and chances to win, through the following initiatives:Review current top prizes on Pick 3 To ensure the top prizes remain relevant against inflation.116 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanIntroduce a Multiplier function: While further research is required, Camelot Illinois’ preliminary view is that there isstrong support for the introduction of an optional $1 multiplier for Pick 3 and Pick 4games, providing players with the chance to double their prizes. The appropriateness and effectiveness of a multiplier function is demonstrated bythe popularity of this function for Powerball, where since their introduction in 2010,the Powerplay (running at 20% of total Powerball sales in Illinois) format has alreadyincreased the weight of spend and offers players the choice to increase theirpotential winnings.Based on the recent success of achieving 20% penetration of the Powerplay optionwithin total Powerball sales, the introduction of these strategies and activities for theNumbers games target a similar 20% penetration of both Pick 3 and Pick 4 although at aslower rate given the absence of dynamic jackpots and is forecast to generate in excessof $135 million (before the impact of the additional terminals) in additional revenues fromlaunch to the end of the FY2016.Event GamesObjective Evolve the current event based category (including Raffles) to provide exciting,regular and varied draws with a variety of prizes so that player demand for the Raffleformat is better satisfiedInsight Build upon the strong player interest in raffles.Raffles are a great way to create an event that can attract new, lapsed or infrequentplayers into the Lottery. Camelot Illinois proposes to address overall win frequency andengagement in the category, via leveraging the opportunity to offer players more of whatthey like and want by:Introducing raffles on a more frequent basis in the early years of the PMA. Thetiming and form of these additional raffles will be determined by detailed playerresearch but could be themed around July 4th, Thanksgiving, end of year festiveholiday period. Camelot Illinois will be careful not to make raffles too common place,thus spoiling their ‘event’ status.Branding will be seasonally themed but will consistently drive home a propositionaround ‘‘Best chance to be a $ Millionaire plus good supporting prizes.”Marketing support for Raffles will differ from the other Online Games due to thelimited time nature of the games – it will be planned on a cost effective, short termbasis, designed to maximize 1+ coverage of all adults as quickly as possible in alimited window of time. 5Based on increasing the price (as detailed in Section 2.5.3.3) and frequency of thesuccessful Raffles, activities for the Raffle games are forecast to generate in excessof $137 million (before the impact of the additional terminals) in additional revenuesfrom launch to the end of the FY2016.51+ coverage is the total percentage of an audience reached by advertising 'at least once', 2+ coverage wouldbe the total percentage of an audience reached by advertising 'at least twice' and so onCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 117

Section 2: Final Business PlanExperiential ‘Must be Won’ weekly raffle formatsObjective Diversify the portfolio offering – with a focus on Illinois – to drive frequency of play,and importantly broaden appeal and increase penetration via attracting new playersto the LotteryInsight For those not engaged with the Lottery category, there is an opportunity to broadenprizes offered beyond cash, to appeal to new audiences by tapping in to their dreamsand ambitions and giving them either a fantastic life experience or an exclusiveopportunity.Camelot Illinois considers the combination of mass appeal and consumer passion as apotent opportunity to deliver new game format innovation - specifically for youngeradults. Camelot Illinois will leverage the appeal of sports and ‘money can’t buy’experiences across a variety of interests to specifically develop a low cost entry point foryounger adult audiences. For example: It is not always possible to get tickets to ‘must-see’ games, and access to starplayers is always limited A game from the Lottery that offers these opportunities as prizes will deliver appealand ongoing relevancy and front of mind saliency through excitement and reach tospecific player segments. An example of how such a game could work is as follows: Pay $1, for four unique raffle codes, enter into a ‘Must Be Won’ weekly draw Win $100,000 and a VIP limo ride to the game of your choice, to take yourself plusfive buddies to the game: Watch the match from your own box, then meet the starsafter the game Runner up prizes of standard tickets and $100 spending money. Desired consumer takeout for such a game would be: “For just a buck a week,having four chances per raffle draw to get VIP tickets is a no brainer!”With such prizes in mind, Camelot Illinois already has entered into discussions with theChicago Cubs and Chicago Fire on a future partnership.The ‘must be won’ raffle mechanic will also be utilized to offer further games designedto appeal to a younger adult audience, Camelot Illinois will look to attract a younger adultaudience to the lottery category through tapping in to their dreams and ambitions andgiving them either a fantastic life experience or an exclusive opportunity. This will inspireand involve them with the Lottery category by letting them experience it, and give thema taste of what winning a large lottery prize could mean for their future lifestyle.Subject to appeal defined by research, such games could offer the following types ofprizes:118 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan‘Ride of your life’ “3000 miles, 100s of cars, dozens of countries, 8-10 days, 1 amazing adventure –play this game to win and be sponsored by the Illinois Lottery to enter this year’sGumball3000 rally 6 . We will supply the car too!” Offered once per year in line with the dates of the event.‘Job of your dreams’ “Play this game to become an Artists & Repertoire (A&R) man or woman at a majorrecord label” Go to all the right gigs in Chicago, LA, New York and then pick the artist you think isgoing to be the next big thing Work with the record label to launch your artist Offered once or twice per year.‘Window to the world – try B4 U buy!’ “What’s your idea of the Millionaire lifestyle? The roar of an Aston Martin Vanquishor the roar of ‘Foo Fighters’ Best of You from the front row in the Hollywood Bowl?Everyone’s idea of luxury is different and how do you know, when you experience it,if it will be less than you thought? Well this game offers the opportunity to try beforeyou buy! Play to win $100,000 in cash and a further $100,000 to bring to life your idea of theMillionaire lifestyle Offered once per month.Because of the more targeted nature of these potential game offerings, Camelot Illinoisenvisions tightly targeted cost effective marketing communication, with a specific focuson Internet based connections and forums to develop a groundswell of awareness,through the recruitment of ‘early adopter’ advocates to instigate awareness and appeal.6For reference, further details of the annual Gumball300 rally can be found at http://www.gumball3000.com/Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 119

Section 2: Final Business PlanThrough a combination of new news, excitement and exclusivity the introduction ofthese strategies and activities for a range of new experiential themed ‘must be won’style Raffles games will address engagement and drive frequency of play with existingand new audiences and are forecast to generate in excess of $30 million in additionalrevenues from launch to the end of the FY2016.Summary of Strategies and ActivitiesThese proposals for enhancing the current core portfolio across the PMA areas of NewLottery Design, Payout structures, Pricing and Managing the Product Portfolio are basedon Camelot’s preliminary findings to date.Camelot Illinois will develop New Lottery Game Designs using a new product innovationprocess adopting the classic methodologies of leading FMCG companies, rooting theprocess in consumer insight, while adopting Payout Structures to responsibly improvethe overall winning experience for players without impacting Net Income contribution.Pricing changes will be explored to deliver portfolio differentiation, better prize pools andhigher Net Income contribution per Limited Edition Raffle issue.Camelot Illinois will Manage the Product Portfolio development to drive relevance withyoung adults through Internet-based partnerships; diversify the portfolio through theintroduction of new multi-state innovation e.g. “World lottery draw”; increase playerchoice around existing popular games and drive long term growth of both Mega Millionsand Powerball.Camelot Illinois is confident that there is considerable potential to revitalize the OnlineGame portfolio, re-engaging with lapsed players and attracting new players.120 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.5.4 ONLINE GAMES IMPLEMENTATION PLANThe indicative timeframe for implementing the Online Game Plan is illustrated in Figure2.5.4.1 below.FIGURE 2.5.4.1: ONLINE GAMES 5 YEAR PLANSource: CamelotCamelot Illinois’ strategy is to optimize the core existing games in the portfolio in theearly period of the PMA, before enhancing and diversifying into other game types. Thismeans that in the first 12 months of the PMA contract, there will not be significant newgame launches in the Online Games category, apart from an additional Raffle.It is important to note that this is a deliberate strategy. As detailed in section 2.5.3.1, it isvital that before any exciting new games are introduced to the portfolio, the rightfoundations are in place for any new games to have the best possible platform forsuccess. New game launches can take up considerable investment of time, effort andmoney; all of which can be easily wasted if new games are not understood by players,not accepted by players, cannibalize sales of other existing games or culminate innegativity towards the Lottery.The existing portfolio is mature, and to a large degree already differentiated, with theexceptions of Lotto, Mega Millions and Powerball; covering a broad range of playerneeds. Therefore, it is Camelot Illinois’ view that there is no immediate necessity tointroduce new game formats before understanding all the issues and consumer attitudesrelated to the existing games. Instead, in the early period of the PMA Camelot Illinois willbuild long term growth through utilizing the following category management principles:Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 121

Section 2: Final Business Plan Introduction of a brand modeling framework (detailed in Section 2.9) to clearly definethe role of each game in the portfolio, allowing time for this to be received andunderstood Optimize the approach to marketing communications to deliver a step change inperformance of Powerball and Mega Millions Launch an Illinois Lottery brand campaign to improve perceptions and clarify theequity of the Lottery, so that when new games are introduced, they have the biggestpossible audience receptive to trial (detailed in Section 2.4) Allow time and due diligence for modeling and consumer research through theiCAMELOT innovation funnel to ensure enhancements to existing games and newgames are the best possible options to drive participation of adults in Illinois andincremental sales for the portfolio.This approach allows the operational technology enhancements to be completed asquickly as possible, so that they can provide an important part of the platform for theenhancement and diversification of the portfolio.Only through this strategy of enhancing the existing product range first before thendiversifying into new game and play styles, will the portfolio be optimized to deliver longterm sales growth and player satisfaction through increased win frequency.122 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.5.5 BUSINESS PLAN FORECASTSBoth the State’s and Camelot Illinois’ research clearly indicate that the Lottery hastremendous potential. This is clearly evidenced by the fact that only 32% of playersaccount for 84% of sales 7 .The strategies that Camelot Illinois will use to tap that potential to drive sales and NetIncome are tested and proven; responsibly increasing the frequency of play of currentplayers and attracting new and lapsed players to engage with the Lottery through acompelling portfolio, designed to meet consumer needs.Camelot has employed these strategies with great success to ensure wide playerparticipation for the UK National Lottery (with 72% of the UK adult population playingcompared with 49% 8 in Illinois) and has begun to adapt and implement them into theCalifornia Lottery. This Business Plan sets out how Camelot will adapt these strategiesto the Illinois market to meet the State’s objectives of driving responsible andsustainable growth in sales and Net Income.A forecast has been produced for the Online Games category to FY2016.The forecast assumes the successful introduction of all of the initiatives describedabove, including an increase in the number of retailers and other in-store activities (seeSection 2.7), Marketing support (see Section 2.9) and the Internet Pilot (see Section 2.8).With the introduction of the changes proposed in the Business Plan, the forecastprojects that sales of Online Games in Illinois will at least match those in similar statesby 2016.The graph below illustrates Camelot Illinois’ initial forecast for the Lottery performanceover five years to FY2016. It demonstrates Camelot’s view that Online Games sales willincrease from $1,019 million in FY2010 to $1,720 million in FY2016. This represents aCAGR between FY2010 and FY2016 of 9.1%.For Online Games, the growth in sales from FY2010 to FY2016 implies an increase inoverall spend per capita from $79 to $131. This compares to an estimated per capitaspend in Pennsylvania of $153 for FY2016 9.7Simmons8Simmons9Pennsylvania has broadly the same size population and socio-demographic make up as Illinois yet deliverednearly 50% more in sales than Illinois in FY2010. Camelot assumes a growth of 2% p.a. in per capita sales.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 123

Section 2: Final Business PlanFIGURE 2.5.2.5.1: CAMELOT ILLINOIS’ ONLINE GAMES BUSINESS PLAN FORECASTTO FY20162,0001,8001,600$Mn1,4001,2001,000800600400200-FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016Base SalesForecasted SalesSource: Base sales provided by Illinois Lottery; forecasted sales Camelot analysis124 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business Plan2.5 SUPPORTING INFORMATION2.5A ADDITIONAL INSIGHTSPortfolio PerformanceFor the purposes of reviewing the Online Game Illinois Lottery portfolio, Camelot hassegmented it into four distinct classes: State Lotto game Multi-jurisdictional games (Powerball and Mega Millions) ‘Numbers’ games (Pick 3, Pick 4, Little Lotto) Event / Limited Edition games / New formats (Raffles, Pick and Play)The current Online Games portfolio provides a good mix of games which appeal to thevarying requirements of existing players. Current regular players speak knowledgeably ofthe different games and their attributes, except for isolated confusion relating to therecent launch of Powerball.However, there has been no significant growth in the past five years and a small declinein the most recent full year delivering 46% of total revenue contribution in 2009. Basedon Camelot’s experience in both the UK and the California State Lottery, Camelotbelieves that the Online Game category has the potential for significantly higherperformance.Of the Online Games, as can be seen in Figure 2.5.A.1, Pick 4 (listed as 4 digit games byLa Fleur’s categorization) and Mega Millions have shown increases while there has beena decline in Pick 3 (listed as 3 digit games by La Fleur’s categorization), Lotto and LittleLotto (listed as Cash Lotto games by La Fleur’s categorization).FIGURE 2.5.A.1: ONLINE GAMES SALES IN $ MILLIONS600500Sales ($Mn)4003002001000FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY20093-digit Numbers 4-digit Numbers Lotto Cash Lotto Mega MillionsSource: La Fleur’s – Traditional Sales FY09Across the Online Game portfolio there is a very low frequency of regular play i.e. playonce a week (only 5% regularly play Little Lotto, Pick 3 and Pick 4 and 7% regularly playLotto and Mega Millions) (Figure 2.5.A.2) indicating low day to day public engagementCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 125

Section 2: Final Business Planwith the category and only slightly better weekly engagement, which Camelot expects isdriven by big jackpots on Mega Millions.FIGURE 2.5.A.2: ILLINOIS LOTTERY PENETRATION RATESPercentage of adult population35%30%25%20%15%10%5%0%13%Total Daily5% 6%DailyDrawing -Regular(>1 /Week)DailyDrawing -Occasional(1/ Week -1/Month)2%DailyInfrequent33%TotalWeekly7%WeeklyDrawing -Regular(>1 /Week)14% 13%WeeklyDrawing -Occasional(1/ Week -1/Month)WeeklyInfrequentSource: Simmons 2009State Lotto gameIn research Camelot conducted in Illinois in June and July, there were positivecomments about ‘their’ Lotto game: A strong recognition and state pride from existing players. ‘This is our (Illinois’s)game when comparing to Mega Millions/Powerball.’ Players recognize this is a better opportunity to win a good jackpot and someone inIllinois will win, hence ‘perceived’ better odds than Mega Millions/Powerball. ‘It could be me!’ mentality exists amongst a core of regular players, playingregardless of jackpot level and with limited wallet elasticity for the game.However, there were also comments that: They don’t win often enough; a common sentiment not just with Lotto; and Lotto is losing salience and distinction versus other games.This latter point is confirmed by the analysis of the recent performance of Lotto and howit has been impacted by the introduction of the multi-state games.In 2009 sales of Lotto were $46 million lower compared to 1999 sales. Further decline isevident in 2010, since the introduction of Powerball, where in Figure 2.5.A.2, it can beseen that both Wednesday and Saturday Lotto draws have been reduced byapproximately $250k per week (Figure 2.5.A.3).126 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanFIGURE 2.5.A.3: IMPACT OF POWERBALL ON LOTTO DRAW GAME BY DRAW DAY$ Difference50,000-(50,000)(100,000)(150,000)(200,000)(250,000)1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35$ Difference % Difference5%-%(5%)(10%)(15%)(20%)(25%)(30%)% DifferenceSource: Illinois Lottery Data roomHowever, thus far, the Monday draw is currently holding stable at pre-Powerball levels –as there is no overlapping competing draw – as seen by the peaks on Figure 2.5.A.3 thatare within +5% / -5% range.The impact on Wednesday and Saturday Lotto draws equates to a combined loss ofaround $2.5 million, across the period January 30th to April 14th 2010 from Lotto,compared with draws before the Powerball launch. Figure 2.5.A.4 highlights, that untilthe advent of Powerball, Lotto demonstrated a small but loyal player base, whereregardless of jackpot level sales remained static per week for all but the highestjackpots.FIGURE 2.5.A.4: LOTTO JACKPOT VERSUS DRAW SALES40JackpotsDraw SalesSales ($Mn)3020100Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Source: Illinois Lottery Data roomIllinois is not alone in seeing its Lotto game in decline following the introduction of amulti-state game. The Ohio Lotto game was dramatically impacted by the launch ofCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 127

Section 2: Final Business PlanMega Millions. Illinois and Pennsylvania lotteries have fared better – although Lottodecline has continued, it hasn’t been accelerated by Mega Millions or Powerball pre2010.In the context of the current portfolio offering, with three rolling jackpot games, offeringthe same proposition, Lotto has been reduced to third place. This is compounded by alack of game enhancement prior to the introduction of Powerball to bolster Lotto’sprotection against cannibalization by Powerball.The 6/52 Lotto matrix (odds to win the jackpot of 1:20,358.520), despite the minimum $1entry point for two lines, is too big for the player participation levels, resulting in long rollseries and minimal uplifts in sales from draw to draw as the jackpot grows until the verylater stages (Figure 2.5.A.4). This is compounded further by the 68.5% prize payoutallocation for the jackpot tier, which is not driving sales enough to justify such a highallocation of prize payout. As a comparison, the UK Lotto game, with a 6/49 matrix, hasonly 52% of total prize payout allocated to the jackpot tier, leaving more of the prize fundfor allocation to more prize tiers.The introduction of Powerball has further weakened the Lotto proposition and thus salesbecause it overlaps with the Lotto Wednesday and Saturday draws. In 2010 Lotto is leftwithout a clearly defined role, falling between the two big rolling multi-state games andLittle Lotto in the portfolio.Without changes that will improve the game and define its role in the Lottery productportfolio, Lotto is likely to continue to erode with the potential risk of removal like otherstate Lotto games across the U.S.However, with the level of local pride and awareness that remains for Lotto, Camelot isconfident that a campaign to increase its distinctive proposition and some changes toimprove the winning experience can secure its continuing place in the portfolio.Multi-State Games: Mega Millions & PowerballMega Millions sales grew significantly between FY2003 and FY2004 in Illinois when thegame was re-branded from The Big Game to Mega Millions. Prior to this, sales were indecline and since the period of growth sales have been largely flat, with salesfluctuations being driven by the roll series. Pennsylvania, meanwhile, has seen muchmore dynamic jackpot driven sales behavior with it multi-state game, Powerball, over thisperiod (Figure 2.5.A.5)128 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanFIGURE 2.5.A.5: ILLINOIS STATE MULTI-STATE SALES 1999 TO 2009.500400Sales ($Mn)3002001000FY99FY00FY01FY02FY03FY04FY05FY06FY07FY08FY09IL- Mega Million MH- Mega Million OH- Mega Million PY-Mega MillionSource La Fleur’s FY09The Mega Millions performance in Illinois across the years shows no sign of base growthi.e. increased frequency of play, after a long roll series that culminates in large jackpots(Figure 2.5.A.6). This represents a significant lost sales opportunity that would comefrom retaining occasional and/or new players by re-basing Mega Millions sales at a higherlevel after a large jackpot series.FIGURE 2.5.A.6: LOSS OF SALES DUE TO LACK OF MEGA MILLIONS SALES RE-BASES30BaseTotal25Sales ($Mn)20151050Jun-05Dec-05Jun-06Dec-06Jun-07Dec-07Jun-08Dec-08Jun-09Dec-09Source: Illinois Lottery Data RoomAs a comparison (Figure 2.5.A.7), with EuroMillions Camelot has been able to recruitrevenue-driving, regular players and raise the base level of sales from weekly players,through its media strategies, optimizing support behind large jackpots and maximizingpositive publicity from UK winners.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 129

Section 2: Final Business PlanFIGURE 2.5.A.7: EUROMILLIONS SALES (FEB’04 - FEB’10)908070ActualBaseSales ($Mn)6050403020100Feb-04Aug-04Feb-05Aug-05Feb-06Aug-06Feb-07Aug-07Feb-08Aug-08Feb-09Aug-09Feb-10Source: Camelot sales - Camelot analysisFrom January 30th to April 14th 2010 the introduction of Powerball and Powerplay addedapproximately $27.5 million in sales to the Illinois Lottery.However, with the addition of Powerball to the portfolio, there are two big rolling jackpotgames with the same consumer proposition i.e. win a life changing amount of money, inaddition to a traditional State Lotto game. This brings with it a number of potential risksdepending upon actual sales and roll cycles across the participating states: Players wait for larger and larger jackpots before they play Without clear differentiation between the Mega Millions and Powerball to explainwhy players should play both games, players will choose by jackpot alone Having two to three times as many big jackpots in the year, without differentiationbetween the games and without any change to overall win frequency to win anyprize, is likely to accelerate jackpot fatigue and further player drop out due tonegativity over win frequency Without any change in either games matrix, the increased sales and thus numbercoverage through the extra states involved with both games, if significantly high willlead to shorter roll cycles and the potential of fewer really high sales driving jackpots.The research groups conducted by Camelot consistently showed that for those stillplaying, their mindset, after years of not winning big, leads to purchase decisions thatare very functional and rational. The majority said they work out the relative odds and thesizes of the competing jackpots and play accordingly - which is contrary to the spirit ofthe category that should rely for its appeal on ‘the chance to dream’.From player response in research groups, it also appears that the marketingcommunication strategies do not sufficiently differentiate the games. Consumers needto have a clear understanding of what characteristics different brands offer. Theseelements are missing between Powerball and Mega Millions which risks playerconfusion and game selection only by which has the biggest jackpot in any given week.Loyalty to individual games based on their unique entertainment properties is notevident.130 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanThe focus groups showed there was little to differentiate Mega Millions and Powerball inpeople’s minds other than the jackpot of the moment:“I think for me Mega is in less states than Powerball is so I think my odds of winning arebetter in Mega than Powerball” (Online Games - weekly player)“(Size of jackpot to excite me) Anything over $100m is irresistible” (Online Games –weekly player)“Depends on my mood. Depends on the jackpot. Depends on how much money I have.How much money I want to spend” (Online Games – occasional player)The inevitable disappointment experienced by the ‘jackpot chasers’ who do not win,leads to a small static base of regular players that does not grow and at worst a decliningregular player base, and an increasing number of ‘occasional players’. While Powerballand Mega Millions will always have a split of regular and occasional players, the key todriving up revenues is to get as many occasional players as possible to come in earlierduring a roll series and retain them after the next big jackpot has been won.FIGURE 2.5.A.8: POWERBALL AND MEGA MILLION SALES5PowerballMega Millions4Sales ($Mn)3210Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10Source: Data room Mega Millions vs. Powerball sales 2010Rationally, a player who chases a jackpot in excess of $100 million should play eithergame, but figure 2.5.A.8 indicates that Powerball is yet to match the same sales successof Mega Millions at comparable jackpot levels.The longer term interaction and impact between Mega Millions and Powerball can not bedetermined at this early stage from available data.Camelot believes clear portfolio differentiation and effective marketing communicationstrategies will address this and deliver comparable sales at comparable jackpot levelsacross both games (detailed in section 2.5.A.7).Powerplay and MegaplierMegaplier offers $1m cash for matching five numbers at odds of 1 in 3,904,701alongside the choice to increase Mega Millions prizes by 2, 3 or 4 times (does notinclude the jackpot) at a cost of an additional $1.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 131

Section 2: Final Business PlanPowerplay offers $1m cash at odds of 1 in 5,138,133, and players can multiply theirPowerball prizes by 2, 3, 4 or 5 times (does not include the jackpot) at a cost of anadditional $1.Introduced at the same time as Powerball in January 2010, between March 2 nd and April24 th Powerplay delivered approximately $5 million in sales, a level which equates toapproximately 20% of main game sales.The Megaplier option was also introduced at this time as part of the Mega Millions offer,however no dataroom sales figures have been supplied for this game; but because oftheir similar nature it is envisioned Megaplier will be delivering a similar level and patternof sales i.e. increased levels of sales as the jackpot grows to that shown below in Figure2.5.A.9.FIGURE 2.5.A.9: POWERBALL AND POWERPLAY SALES 03.02.10 AND 04.24.102,500,0002,000,000Sales ($)1,500,0001,000,000500,0000Sat Wed Sat Wed Sat Wed Sat Wed Sat Wed Sat Wed Sat Wed Sat Wed Sat Wed Sat Wed Sat Wed Sat6- 10- 13- 17- 20- 24- 27-Feb- Feb- Feb- Feb- Feb- Feb- Feb-10 10 10 10 10 10 103-Mar-106-Mar-1010-Mar-1013-Mar-1017-Mar-1020-Mar-1024-Mar-1027-Mar-1031-Mar-103-Apr-107-Apr-1010-Apr-1014-Apr-1017-Apr-1021-Apr-1024-Apr-10PowerballPowerplaySource: Illinois DataroomBased on the early indication of Powerplay performance, achieving 20% of main gamesales, Camelot’s observation is that there is a good platform of consumer appeal withinthis multiplier format for further growth.Numbers games: Pick 3 and Pick 4Available to play either at $0.50 or $1, offering good odds and win frequency: Pick 3 offers 9 different ways to play and 3 different ways to win $500 at odds of1:1,000; Pick 4 offers 13 different play styles and 5 different ways to win $5,000 at odds of1:10,000Pick 3 and Pick 4 dominate the Online Game portfolio, contributing just over 50% of allOnline Game sales in 2009. Figures 2.5.A.10 and 2.5.A.11 show the performance of thetwo games and compare it with games in the peer states of Michigan, Ohio andPennsylvania.132 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanWhile the Illinois Lottery Pick 3 has the lowest sales of the four states, it has seen lowerdecline than Michigan and Pennsylvania across the ten year period under review.FIGURES 2.5.A.10: ILLINOIS LOTTERY PICK 3 SALES 1999 TO 2009.Sales ($Mn)$600$500$400$300$200$100$0FY99FY00FY01FY02FY03IL-3-digit numbersOH-3-digit numbersFY04FY05FY06FY07FY08MH- 3-digit numbersPY 3-digit numbersFY09Source La Fleur’s FY2009Conversely all Pick 4 games are in growth, though the Illinois game is still lowest in totalsales, with growth at a slightly slower rate than that seen in Michigan and Ohio buthigher than that of Pennsylvania.FIGURES 2.5.A.11: ILLINOIS LOTTERY PICK 4 SALES 1999 TO 2009.400350300Sales ($Mn)250200150100500FY99FY00FY01FY02FY03FY04FY05FY06FY07FY08FY09IL- 4-digit numbersOH- 4-digit numbersMH- 4-digit numbersPY- 4-digit numbersSource La Fleur’s FY2009Across the ten years, the combined sales of Pick 3 and 4 are flat, indicating that thedifference between the two individual games is partly through migration of Pick 3purchase to Pick 4. A possible reason for this is that the top prizes offered by the Pick 3game have over time reduced in appeal due to the effects of inflation i.e. the perceptionand reality of $500 and what can be purchased with it in 2010 is less than it was in 1999,Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 133

Section 2: Final Business Planthus impacting the appeal of prizes at that level. While the inflation impact is uniformacross all prizes levels, the smaller the prize, the more acute the impact. Between 2009 vs. 1999 sales of Pick 3 sales were -$38 million Between 2009 vs. 1999 sales of Pick 4 sales were +$32 million.There is some early indication of a sales impact from the introduction of Powerball butnot to the degree that has already been seen on Lotto, but it is an issue that requiresmonitoring.In our research players said about the Numbers games: The evening draw is their preference A significant segment of players have an attachment to specific numbers, particularlyPick 3 and Pick 4.Pick 3 and Pick 4 are the only games where meaningful ‘regular’ numbers are utilizedWhen playing Pick 3 and Pick 4 players have a greater tendency to pick specific,meaningful numbers e.g. Lucky Numbers or birthdays than on other Online Games.However, when playing other Online Games, they mimic other player types (such as apreference for Quick Pick).Little Lotto (also known as Cash Lotto)Little Lotto offers a pick 5 from 39 matrix, which equates to 1 in 575,757 to win the$100,000 cash starting jackpot. Prizes start from matching just 2 and the overall odds towin a prize are 1 in 9.FIGURE 2.5.A.12: ILLINOIS STATE LITTLE LOTTO SALES 1999 TO 2009.350300250Sales ($Mn)200150100500FY99FY00FY01FY02FY03FY04FY05FY06FY07FY08FY09IL- Cash Lotto MH- Cash Lotto OH- Cash Lotto PY-Cash LottoSource La Fleur’s FY09Across FY2003 - FY2004, some states saw significant dips in sales of Little/Cash Lottogames (Figure 2.5.A.12). Based on the timings, this is assumed to be an impact by therebranding of Mega Millions from The Big Game and associated marketing. Since thistime, sales have been stable, as they have across all benchmark states over the pastfour years.134 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2: Final Business PlanNB: No FY2010 Little Lotto sales have been provided in the Data Room as yet and so itis not yet possible to assess the impact on Little Lotto of the introduction of Powerball.Event/ Limited Edition/ New Format - Pick and PlayFIGURE 2.5.A.13: PICK N PLAY SALES300,000250,000200,000Sales ($)150,000100,00050,00003/27/20066/27/20069/27/200612/27/20063/27/20076/27/20079/27/200712/27/20073/27/20086/27/20089/27/200812/27/20083/27/20096/27/20099/27/2009Source: Data Room sales 2006 - 2009Though no longer detailed on the Illinois website as a game within the portfolio,Camelot’s research into the background of Lottery performance indicates that the Pickand Play game cards prices ranged from $2, $3, or $5 and offered daily prizes up to$100,000.The 2006 launch was supported through advertising, point of sale materials and a Buy XGet Y type promotion, connected to Little Lotto. Players received a coupon for a free $2Lucky Dough Pick and Play ticket for every purchase of a $5 single-drawing Little Lottoticket. Over 1 million winning Pick and Play tickets were paid out during the first sixweeks of the game. Further support for the game, came through Pick and Play beingeligible as part of a summer-long promotion called “Set for Life .”From Figure 2.5.A.13, it is clear that despite an initial period of support and player trial,the game design format was not sustainably appealing or salient with players whenunsupported, to the extent that towards the end of 2009, some days experienced salesof less than $5,000.The game appeared to offer a differentiated offering with a combination of both Onlineand Instant game characteristics. But from the poor performance in the market, itappears that pre-launch research must have given a misleading impression of playersupport, with the resulting negative effect on the portfolio and probably a knock-oneffect on the Lottery brand itself.This is consistent with investigations and research into the Pick and Play format thatCamelot has conducted with players in the UK. While the perception is that the gameformat offers the best of both Online Games and Instants, in that it can be re-skinned todiffering themes, the actual logistics of playing the game detracted from its appeal. Theprocess of activating a selected game card to receive a ticket and then having to matchrandomly selected numbers, words or symbols between the ticket and the play card,Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 135

Section 2: Final Business Planwas a play style that did not have a broad enough appeal to be a sustainable Lotterygame.Event/ Limited Edition/ New Format Games - RafflesScheduled twice a year and themed around St Patrick’s Day and Halloween, Raffles havelimited edition releases of 500,000 tickets costing $20 per ticket. They arecommunicated via the compelling proposition of ‘Best chance to be a $ Millionaire’.While the launch to end date for the raffles issued thus far has varied because ofdiffering lengths of time in market, sell through rates have been impressive: the lastthree Raffles have all been complete sell outs and all the other Raffles, with the oneexception of St Patrick’s Day 2008, almost totally sold out by the game end date.Raffles benefit from great odds, which despite the high cost per ticket, has clear appealwithin Illinois. This is not only demonstrated by the near or complete sell through of allticket releases by the date of the relevant event but Raffles also featured strongly inopen discussion in Camelot’s focus groups:“The St Patrick’s Day Raffle- there’s only so many (tickets) they make. I figure my oddsare better so I buy a few.” (Instants & Online Games - weekly player)“I would play more of the St Patrick’s Day and Halloween draws. I would like them morethan twice a year….four times as they have the best odds, so many prizes for $20 butyou can win and I always play this. If it was available once a month I would play this.”(Instants & Online Games - weekly player)“The Illinois Lottery should be doing more of the holiday raffles.” (Instants & OnlineGames - weekly player)(Source: Camelot Illinois’ Qualitative Research June & July 2010)136 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.6 INSTANTSCAMELOT ILLINOIS’ STRATEGYCamelot will grow both revenue and Net Income in Instants by increasing bothpenetration and frequency of play among occasional players.INSIGHTSIntroduction of high price point games has driven strong sales over the last five yearsFlat consumer penetration (26% all adults). Flat frequency of play (12% all adultsplayed last month)The prize-payout ratio has increased to 68.8%, resulting in a lower relative growth ofNet IncomeThere were 100 games available across the entire FY2010. Only 30 of theseaccounted for 90% of the sales revenue.STRATEGIES AND ACTIVITIESCamelot will focus on four key strategies to deliver Instants growth:1) Managing Product Portfolio and New Lottery Game Design. Prize structures andPricing Delivering an Insight led, strategically grounded, consumer game developmentprogram Improving Instants ticket differentiation Reducing the number of Instants ticket launches Delivering a more balanced game plan Establishing prize structures for Lottery Games Maintaining Instants Price Points.2) Develop an inventory management and predictive ordering system Introducing an improved supply chain system (iPOS) Improving retailer compliance.3) Maximizing the opportunities to purchase in retail Implementing new dispenser solution Improve retailer adherence to consistent display of games across retail network.4) Stimulating the consumer to play through strong communicationDevelop a new mass media communication strategy and maximize the impulsemoment in store.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 137

Section 2 Final Business PlanFINANCIAL RESULTSCamelot Illinois will grow the revenue from Instants from $1.2 billion in FY2010 to$2.1 billion in FY2016.WHY CAMELOT?Camelot has experience driving growth in InstantsCamelot grew UK Instants sales by 120% in 10 years, keeping the actual prizepayout ratio at 61%Camelot optimized and simplified price points to increase playing frequency amongoccasional players, up from 29% in FY2006 to 33% in FY2008Camelot’s Instants development process delivers world-leading innovation, based onthe best practices of Fast Moving Consumer Goods (FMCG) companies In California in FY2010, Camelot delivered an additional $60 million in the last 20weeks of the fiscal year.138 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.6.1 INTRODUCTIONThe Business Plan for Instants will drive growth inNet Income through enhanced Instants portfoliomanagement and world class Fast MovingConsumer Goods inspired supply chainmanagement.This section describes the plans that Camelot Illinois has for growing revenue fromInstants games, by optimizing the games themselves, improving availability of the bestselling games, maximizing retail exposure for Instants and aggressively marketingInstants through a compelling media presence.INSIGHTSThe Illinois Lottery has achieved excellent levels of sales over the past five years throughthe successful introduction of higher price point Instants games. However, the rate ofgrowth has declined. At the same time, the prize payout has grown to 68.8%. 1 Theresult is that Instants are not driving as much Net Income as they could.The Lottery has successfully encouraged core players to purchase higher price pointgames and increase their spend on Instants, so that per capita spend has increased from$68.66 in FY2005 to $91 in FY2009. However, this trend has not been matched by anygrowth in the player base with penetration remaining at 26% since FY2005, nor in thefrequency of play among occasional players. In essence the overall strategy has reacheda stage where it is not feasible to grow sales through further payout increases withoutsignificantly compromising the contribution to Net Income.Alongside this structural dilemma there appears to be too many games available in theLottery’s Instants portfolio, causing inventory and distribution challenges that have led toa lack of availability of the fastest selling games. For instance, the Illinois Lottery had 51games available to order on average, each week in FY2010. However, the largestdispensers and ITDMs each have 24 facings. Also, of the 100 games available across theentire FY2010, 30 account for 90% of the sales revenue with the balance precipitatingthe difficulty in ensuring top game availability as they fill dispenser facings.CAMELOT PRIOR EXPERIENCEThe insights provided above describe why the Lottery must attract new players throughthe lower price point games and increase frequency of play. Camelot believes that theseobjectives will be best served through range simplification and improved retailpresentation of Instants games. Camelot believes it is best placed to address this marketposition and fully realize the Lottery’s growth potential.1 In FY2010 the Illinois Instant prize payout is stated at 68.8% by La Fleur’s 2009.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 139

Section 2 Final Business PlanCamelot has been extremely successful with Instants games in the UK and can bring thesame strategies to Illinois. With Camelot’s strategic positioning, Instants have becomethe second highest selling consumer good in their category, beating other householdnames like Coca-Cola and Wrigley’s. Camelot has grown UK Instants sales 120% in 10years, so that in FY2010 sales totaled $1.76 billion, while maintaining actual prize payoutlevels at 61%. Camelot has successfully adopted a strategy of growth through theintroduction of higher price point games while maintaining strong performance from itslowest price point games which has helped drive an increase in the frequency of play, sothat weekly players have increased from 29% in FY2006 to 33% in FY2008.Camelot derives innovation from consumer insight to improve the design, distributionand promotion of Instants games. In the UK, the result has been a greater contributionto Net Income than other lotteries that have used very high prize payouts to stimulatesales. Camelot insight helped the California Lottery achieve an additional $60 million inInstants sales during the last 20 weeks of the FY2010.STRATEGIES AND ACTIVITIESThe Camelot Illinois Business Plan for success in Instants departs from Lottery commonpractice and instead relies on best practice principles from Fast Moving ConsumerGoods companies such as Unilever, Procter & Gamble and Coca Cola. This is theapproach Camelot believes will grow Instants game revenue for Illinois.Camelot Illinois’ strategy will be to grow revenue by increasing both penetration and thefrequency of play among occasional players with marginal increases to prize payout sothat the opportunity to grow Net Income is fully exploited. Camelot Illinois will focus onfour key strategies to deliver Instants growth. These are summarized below anddiscussed in greater detail within the relevant strategies and activities section of theplan.PRODUCT PORTFOLIO, NEW LOTTERY GAME DESIGN,PRIZE STRUCTURES AND PRICINGCamelot Illinois will initiate an insight led refreshment of the Instants product offeringusing processes that have a proven track record in the UK. The first key step will be toreduce the number of available games to order by 21% in year one so that retailerdisplay will be immediately improved allowing occasional and non-players a betteropportunity to interact with the category.Camelot Illinois will then use consumer insight to deliver strong game differentiationamong the price points and will develop a design guide to help improve the look of theentire portfolio. Camelot has used a design guide to simplify and dramatically improvethe visual appeal of Instants to consumers in the UK (see Supporting Information B forselected pages from the Camelot design guide for the UK). Prize structures will beadapted to deliver greater win frequency. Improved win frequency is expected toincrease play among the existing player base, and also to attract players who are new orplay less frequently.140 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanIn addition, Camelot Illinois will seek to optimize the mixture of heritage, new games,price points and themes to ensure that the Instants category is more accessible to newand existing players alike. 2The Illinois Lottery’s pricing portfolio is well developed. There are no plans to make anychanges to the tickets prices which will remain at: $1, $2, $3, $5, $10, $20 and $30. TheInstants Prize Payout will marginally drift to 69.2% by FY2016 as a result of thecontinued growth from high prize point games. The slight increase in payout will not beto the long term detriment of Instants Net Income as detailed in Section 2.12.DEVELOP AN INVENTORY MANAGEMENT AND PREDICTIVEORDERING SYSTEMA reduction in the number of games will assist Camelot Illinois in delivering a moreconsistent and positive in store merchandizing program, from dispensers, Full ServiceVending Machines (FSVMs) and ITDMs. Processes will be implemented that will ensurethe consistent availability of the best selling games across the entire retail network.Camelot has developed a unique supply chain process for Instants replenishment thatdelivers outstanding levels of stock availability, when compared to the availablealternatives from other lottery operators. This is enabled by a software tool iPOS(Intelligent Predictive Ordering System), built for Camelot to automate the best in classretail supply chain processes. Using iPOS will enable the Illinois Lottery to significantlyenhance inventory management.MAXIMIZING THE OPPORTUNITIES TO PURCHASE IN RETAILCamelot Illinois will ensure that retailers maximize the display of Instants game productsby installing new modular dispenser units and ensuring “Perfect In-store Execution” intheir merchandizing, giving consumers access to the evolved portfolio of games.STIMULATING THE CONSUMER TO PLAY THROUGHSTRONG COMMUNICATIONCamelot Illinois plans to launch a clear, consistent marketing and communications planfor Instants to drive increased play frequency among occasional players and re-appraisalof the category among lapsed and non players.This will be achieved by a strong presence in mass media channels, supported by mediascreens at the point of purchase in the retail environment.BUSINESS PLAN FORECASTSInstants sales are driven by a number of inter-related factors, very often all influencingthe outcome at the same time. For this reason it is very difficult to isolate the precisefinancial effect of any one of these with any degree of certainty2 Heritage games are defined as games in market for at least 20 weeks in FY2010 that were also in market formore than 16 weeks in FY2009Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 141

Section 2 Final Business PlanThe Illinois Instants category annual sales are forecast to grow from $1.2 billion inFY2010 to $2.1 billion in FY2016. This assumes spend per capita on Instants increasesfrom $91 in FY2009 to $161 by FY2016.RESPONSE TO SCHEDULE 2The proposed strategies and activities in respect of the Operational Responsibilities(PMA Schedule 2.1) relating to Instants can be found as follows:Product Description SectionNew Lottery GameDesignDesign, format and maintain the appearance andmechanics of Lottery Games2.6.3.1Payout Structure Establish prize structures for Lottery Games 2.6.3.1Pricing Establish the price of each Lottery Game 2.6.3.1Inventory ManagementDevelop an inventory management and predictiveordering system2.6.3.2The Instants Business Plan is split into five sections:2.6.2 Insights2.6.3 Strategies and Activities2.6.4 Implementation Plan2.6.5 Business Plan Forecasts2.6.ASupporting Information – Additional Insights142 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.6.2 INSIGHTS Year on year growth slowing: Although Instants sales have continued to growannually, the year-on-year growth rate has been slowing. Increasing Prize Payout: Prize payout has increased since FY2005 from 62.4% to68.8% in FY2010. The Lottery has increasingly apportioned payout to higher pricepoint games which have driven growth. The Lottery has exhausted the option tosqueeze additional growth through further significant payout increases, withoutcompromising Net Income. Flat consumer penetration, flat frequency of play: Growth is driven by coreplayers who are spending more as a result of playing higher price point games;Player penetration has remained flat at 26% since 2005. Similarly, consumers whohave played in the last month remain flat at 12%. Differentiation exists but can be improved: The Lottery has a solid gamedifferentiation strategy in place, which assists consumer game selection andprovides clear reasons to trade up the price points. Differentiation can be enhancedfurther. There are too many games available in the Instants portfolio, causing inventoryand distribution challenges: There were 100 games available across the entireFY2010. Only 30 of these accounted for 90% of the sales revenue. Best practice use of regular prize amounts, reducing the number of prize tiersand ensuring the game has the right amount of winners by tier is notconsistently demonstrated. There is an opportunity to improve the winningexperience with better prize structures to maintain the player base and drivefrequency of play. The Lottery has a full range of price points in place at: $1, $2, $3, $5, $10, $20and $30. The average revenue per themed game and per price point show imbalance:There is imbalance with some of the themes. For example, there appears to be toomany seasonal games which demonstrate low average revenue numbers per gamein relation to other themes. The number of launches for $1 and $2 games isexcessive in relation to the revenue contribution from these price points. The combination of small print runs and large pack sizes negatively impacts theslower selling retailers and leads to empty cassettes / ITDMs at the topperforming retailers for the fastest selling games: The mixture of small print runs,large pack size and low revenue generated per dispenser facing, means that theinitial allocation of stock to launch a game will drive a disproportionate level of stockinto lower selling retailers and consume proportionately too much of the print run.This leads to stock outs in higher performing retailers and stock congestion in slowerselling retailers. The best selling games aren’t always on display in retail: There are too manygames available in the Instants portfolio, causing inventory and distributionchallenges that have led to a lack of availability of the fastest selling games. TheLottery had on average 51 games available to order, each week in FY2010. Thismeans retailers are forced to make choices on what Instants tickets to display as thelargest dispensers and ITDMs have 24 facings. Consumers have limited sight of the Instants tickets in dispenser: Consumerschoose Instants for many different reasons such as top prize, design, chances toCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 143

Section 2 Final Business Planwin, color, games to play and callouts. It is very difficult to see these ticket elementsbecause of poor dispenser display. Inconsistent display and presentation of Instants tickets across the retailnetwork: Inconsistent display and presentation of games means consumers areexperiencing the category differently across the retail network. ITDM header card design is confusing: Many of the images used in the headercard to depict the Instants ticket are busy, with too many call-out messagesproviding a barrier to play. Instants marketing activity appears sporadic and fragmented across a host ofactivities: Media advertising of the Instants product is relatively infrequent throughthe year and so salience and awareness are not sustained. TV advertising mainlytakes place across the summer (secondary drawings) and winter (holiday gifting). Prompting purchase at the Point of Sale: There were no media screens at thepoint of purchase to capitalize on the highly impulsive nature of Instants ticketpurchase and therefore an important and missing communications tool.All the above Insights are discussed in more detail in 2.6.A. Supporting Information –Additional Insights.144 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.6.3 STRATEGIES AND ACTIVITIESThe four key areas to deliver Instants growth are bulleted below and discussed in greaterdetail within the following subsections: Managing Product Portfolio and New Lottery Game Design. Prize structures andPricing Develop an inventory management and predictive ordering system Maximizing the opportunities to purchase in retail Stimulating the consumer to play through strong communication.Each section captures the observations from the Insights and proposes the activities thatwill most benefit the Illinois Lottery.2.6.3.1 Managing Product Portfolio and New Lottery Game Design. Prizestructures and PricingStrategy: Enhance and diversify the current Instantsproduct offering with an insight led, betterdifferentiated and more balanced game portfoliothat fully satisfies consumer needs and amplifiesthe winning experience.There are six key activities to deliver upon these strategies:Delivering an insight led, strategically grounded, consumer game developmentprogramImproving Instants ticket differentiationReducing the number of Instants ticket launchesDelivering a more balanced game planEstablish prize structures for Lottery GamesMaintaining Instants Price Points.Activity: Delivering an insight led, strategically grounded, consumer gamedevelopment programObjective: To deliver an insight led consumer game development program that drivesconsumer penetration and increased frequency of play.Insight: Flat consumer penetration and flat frequency of play.Camelot has an important process in place for game development which is grounded inconsumer insight and plays an essential role in the optimization of the product. Thissubsection outlines Camelot Illinois’ recommendation for its usage in Illinois.One of the first steps Camelot Illinois will take will be an assessment of Lotterymanagement information systems. This is to ensure that the right reports are in place toCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 145

Section 2 Final Business Planprovide a proper performance assessment of the Instants business. Key PerformanceIndicators will be set and assessed on a weekly, monthly, quarterly and annual basis.To ensure the greatest revenue generating products are in the marketplace, Camelot hasstrong focus on planning to define strategy and direction.Confidential Information Removed146 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanConfidential Information RemovedCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 147

Section 2 Final Business PlanConfidential Information Removed148 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanConfidential Information RemovedActivity: Improving Instants ticket differentiationObjective: Increase product differentiation to assist consumer Instants ticket choice foroccasional and new players.Insight: Differentiation exists but can be improved in the areas captured in Figure2.6.3.1.3.Differentiation is important because it helps players make product choices. For lessfrequent players or new consumers it is particularly important.The Illinois Lottery has a strong differentiated range of price points. Figure 2.6.3.1.3makes a number of recommendations in the interests of making it even better:Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 149

Section 2 Final Business PlanFIGURE 2.6.3.1.3: AREAS FOR A BETTER DIFFERENTIATED RANGEAreas forimprovementDesignTop PrizeAnnuity GamesThe number oftimes a playercan win perprice pointPrize PayoutTacticCamelot recommends using design to further differentiate price points andpropositions. A document defining the UK design principles is attached asSupporting Information B.Either change all the top prizes of the same price point to the same amount (forexample $9,000 for a $1 game), or vary the available games in market such thatthey differ, within the defined price point range. For example, $1 prize rangesfrom $100 to $9,000.The prize range for each price point captured in Figure 2.6 A.22 should remain asit is currently.There is great equity in the $2 Win for Life proposition, which offers $50,000 ayear for life. However, apart from falling outside the top prize range discussedabove, the game value overshadows the $10 proposition which offers $100,000every year for life i.e. five times the price, for double the prize.Subject to confirmation with additional consumer research, it is recommendedthat Win for Life is elevated to a $5 proposition. A new type of annuity product issuggested for $2, called a ‘regular payment’ game. Instead of winning a ‘for life’prize, this proposition wins a prize for a year.The Win for Life name resonates strongly with consumers and in itself couldgrow into a strong sub brand. Assuming there is no legal opposition to this, it issuggested leveraging the name for the $10 game too.Subject to consumer testing, Illinois could potentially have a family ofcompelling, ‘Win For’ propositions. For example:$1 - Win $500 every week for a year$2 - Win $1,000 every week for a year$5 - Win $50,000 every year for life$10 – Win $100,000 every year for lifeThe number of times a player can win should increase as the price pointincreases. There were some exceptions to this rule e.g. Cash for Grabs. Gamesof this nature being considered for future inclusion in the game plan shouldeither be amended to have fewer opportunities to win or be promoted to ahigher price point or removed.The prize structures in the data room included some $1 holiday games. Prizepayouts for these $1 games were exceptionally high at 68%. Camelot Illinoisappreciates that prize payout has been deliberately ratcheted with a view tocapturing new players into the category during the holiday season. While there isan excellent prize winning experience, the impact of printing 18 million tickets at68% will drain prizes away from the rest of the game plan. Ratchet games arefine in principle but an increase in payout from 58% to 68% is too much and theincrease applied to one game should not be at the expense of the overall gameplan.Source: The Illinois Lottery data room, the Illinois Lottery websiteActivity: Reducing the number of Instants ticket launchesObjective: To deliver fewer, bigger, better products to aid consumer appeal and ensuresupply chain effectiveness.150 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanInsight: There are too many games available in the Lottery’s Instants portfolio, causinginventory and distribution challenges.The Illinois Lottery should move towards a longer term strategy of ‘fewer, bigger,better’. This will drive improved retail display, which in turn will enhance the consumerinteraction with the Instants brand. Ultimately, range simplification (reduction) willcontribute significantly towards meeting key commercial objectives – which include:growing player penetration and increasing play frequency from occasional players.Fewer games – so that there are only as many games to order as there are averagenumber of facings.Bigger print runs – (certainly for the new game introductions) which will deliver betterprize structures and more motivating prize fund call outs.Better prize structures – which will enhance the winning experience, will improve brandperception, increase play frequency and spend, as well as drive new player recruitment.To allow this to happen, there must be a reduction in the number of long standing(heritage) games that are feeding into the plan. This must coincide with a reduction inthe number of new games introduced across the year. The number of games available toorder should look like this and should be phased over a three year period:Base year 51 gamesYear 1 40 gamesYear 2 35 gamesYear 3 30 gamesYear 1 will see a significant removal of older, slower selling games. The number ofgames available to order would also be significantly reduced. Figure 2.6.A.10demonstrates the contribution from the bottom 60 games that featured in the 2010 plan;Camelot Illinois believes the commercial risk of removing these games is therefore low.Camelot successfully adopted this approach in the UK where the number of games inmarket reduced by 35% over the past two years. More recently, Camelot recommendeda significant game reduction in California, which benefited spectacularly within fiveweeks of implementation. There was an incremental uplift in California of $3 million perweek, generating an additional $60 million in revenue in 20 weeks of the fiscal year justended.Activity: Delivering a more balanced game planObjective: Deliver a range of high performing games that appeal to core, occasional andnew players.Insight: The average revenue per themed game and per price point show imbalance.The mixture of heritage, new games, the price points and thematic category mix are allessential ingredients to a successful game plan.Illinois consumers have established their commitment to heritage games. They haveindependently indicated that they like seeing new games too, because this means thereare new prizes to play for. It is possible to accommodate both objectives.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 151

Section 2 Final Business PlanCamelot Illinois recommends having heritage games in market but not for more than 35weeks. It is suggested that heritage games are color pulsed every eight months. 3 A newcolor will signify to players that there are new prizes to play for. One color willseamlessly take over from an earlier version of the same game.The reduction in total game launches per year, coupled with the increase in print runs ofthe new games and the reduction of print runs of some of the heritage games willcompletely change the game performance and product life cycle.The Illinois Lottery should expect a marked increase in Instants ticket game availabilityand on sale across the retail network. There will also be a steep increase in the rate ofsale and sales will peak far more quickly and to higher levels than they are currently.With fewer launches, Instants games will reach higher sales peaks because they willavoid being prematurely replaced / cannibalized by the next game introduction. Gamereduction will be aided by a lessening of $1 and $2 games particularly, which have beenshown to have an excessive game launch frequency. Revenue from these price pointswill be offset by increased print runs from fewer $1 and $2 games. The number of $5games across the year should also be reduced. To be clear, game reduction will push upthe average revenue by price point and positively impact sales of these highly importantprice points.Camelot Illinois’ desire to reduce $1, $2 and $5 Instants game launches does not conflictwith Camelot Illinois’ aspiration to develop lower price point games. Camelot Illinoisadvocates a range simplification that will drive easier choices for less frequent and nonplayers. There is a huge opportunity for the Illinois Lottery to increase play frequency, aswell as attract new players through lower price point games. Camelot Illinoisunderstands the value of low price point entry level games. Camelot has successfullyadopted this strategy in the UK, where despite creditable growth rates of higher pricepoint games, over 90% of Instants players still purchase £1 Instants tickets. As a result,£1 sales in the UK have been relatively stable over the years.Activity: Establish prize structures for Instants.Objective: Deliver a better winning experience to maintain player base and drivefrequency of play.Insight: Best practice use of regular prize amounts, reducing the number of prize tiersand ensuring the game has the right amount of winners by tier is not consistentlydemonstrated by the Illinois Lottery.3 A color pulse game is defined as an Instant game which is replaced by another version of that game. It isidentical in every way, apart from the color and game number.152 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFigure 2.6.3.1.4 shows how prize payouts for the Illinois Lottery are aligned to pricepoints:FIGURE 2.6.3.1.4: THE ILLINOIS LOTTERY PRIZE PAYOUT ALLOCATIONPrice Point Payout %$1 58.3$2 63$3 64.7$5 66$10 75$20 77$30 78Source: Illinois Lottery data roomBy FY2016 Camelot Illinois forecasts that the average Instants Prize Payout willmarginally drift to 69.2% as a result of the expected growth from high prize point games.The slight increase in payout will not be to the long term detriment of Net Income, asdetailed in Section 2.12.There is an opportunity in Illinois to improve the winning experience. New prizestructures will give consumers a better win frequency, as they will experience cash winsmore regularly. The increase in cash wins will help to maintain purchasing habits andpositive attitudes towards the Instants brand.Camelot has produced a series of Instants prize structure templates which engender thebest winning experience by price point for UK Instants games. Key brand statementsfrom Camelot’s tracker study (Conquest) demonstrate the success of this strategy. Inthe UK, the number of people disagreeing with the Instants statement, ‘nobody winsanything decent’ has moved from a score of 21% of all adults in Quarter 2, FY2003 to36% of all adults in Quarter 4 FY2010. These scores are notable given there has been noincrease in prize payout in this time frame.Camelot Illinois will similarly shape prize structure templates for Illinois for all pricepoints, once there is absolute clarity on the newly formed game plan which willaccommodate new print runs. Broadly they follow a number of principles which arecaptured below:(i) Getting the print run size rightThe Insight Section 2.6.2 identified that new games (not heritage games) introduced tothe plan invariably had small print quantities.Reducing the number of Instants launches would allow for an increase in the size of theprint quantities for the new game introductions. Camelot Illinois believes that the Lotterywould benefit from bigger print runs for new games. Benefits include:Opportunity for more compelling prize callouts on the front of ticketLess resources spent on developing and launching so many gamesPotential for ticket production cost savings due to economies of scale.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 153

Section 2 Final Business PlanIt is too early to make a recommendation on print runs for heritage games becauseproduct life cycles for these games will be impacted by the game reduction.Furthermore, not every prize structure was available in the data room and because ofthis; there is an important question that remains surrounding heritage games i.e. to whatextent the print run (which impacts the prize fund) could be reduced, without overlycompromising the winning experience / proposition / ticket call out? With this data,Camelot Illinois would look very closely at games such as $250 Million Millionaire’s Club(which the data room information shows have been in market for over 3½ years).Camelot Illinois would analyze the impact on the prize structure of reducing the printquantity for this game. It would be this that would ultimately shape the final print runrecommendation.(ii) The tactical removal and replacement of irregular prizesCamelot Illinois advocates the tactical removal and replacement of irregular prizesthroughout prize structures to ensure that payouts are used as effectively as possibleand players experience meaningful cash wins more regularly. Tactical removal ofirregular prizes has been employed in other successful U.S. lotteries such asPennsylvania, Texas, Florida, Massachusetts and New York. This is highlighted inSupporting Information 2.6.A.21.Consumer research in the UK clearly shows that players do not perceive a £6 win as anymore fulfilling than a £5 win. They also say the same about a £12 compared to a £10 or£25 compared to a £20, even £150 compared to £100. With this in mind, it makes senseto offer $5 prizes rather than $6. This allows six $5 prizes to be offered instead of five $6prizes and, when this rule is applied to an entire game, the odds of winning $5 can begreatly improved.(iii) Reducing the number of prize tiersCamelot Illinois also noticed that some of the prize structures contain a large number ofdifferent prize tiers, which again extract unnecessary funds out of the prize structure.Reducing the number of prize levels will only improve the winning experience becausethere will be more funds for the remaining regular prize levels.For example, instead of offering 100 $100 prizes and 50 $150 prizes, it is possible tooffer 175 $100 prizes. That’s 16% more prizes when players perceive a $100 win just asmotivating as a $150 win.(iv) Ensuring the game has an appropriate number of winnersThe number of winners at each prize tier determines the odds of winning that particularprize. Camelot Illinois’ approach is to lengthen the odds as the prize level increases. Thisapproach has been validated by consumers. It is logical that they have a better chance ofwinning $10 than they do $25.Figure 2.6.3.1.5 demonstrates the benefits of changes made to "7-11-21" (INSTANTSGAME NO. 637) when you apply principles (ii) to (v). The winning experience (overallodds of winning) is maximized as irregular prize amounts are removed and the number ofprize levels reduced. The overall odds of winning $10, for example, has shifted from 1 in87, to 1 in 65.86.154 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.6.3.1.5: 7-11-21 – CAMELOT ILLINOIS ADJUSTED PRIZE STRUCTUREOriginalCamelot AdjustedTotal prizes available 4,236,856 4,257,443Overall odds 4.76 4.74$2+ 10.47 9.57$5+ 60.63 39.71$10+ 87.00 65.86$20+ 122.53 117.43$40/50+ 2,055.46 1,937.90$100+ 24,585.37 17,334.48$1,000+ 315,000.00 283,943.66Source: Illinois Lottery data room, Camelot Illinois analysisActivity: Maintaining Instants Price Points.Objective: Deliver a range of differentiated price points that meet the needs of regular,occasional and new players.Insight: The Illinois Lottery has a full range of price points in place at: $1, $2, $3, $5, $10,$20 and $30.The Illinois Lottery’s pricing portfolio is fully developed and with a balanced,differentiated range will meet the needs of its current player base and future players.Camelot Illinois recommends a consolidation of Instants pricing and does not advocateeither the removal of existing price points or the introduction of even higher games.Tickets prices will remain at: $1, $2, $3, $5, $10, $20 and $30.2.6.3.2 Develop an inventory management and predictive ordering systemStrategy: Drive availability of the best sellingInstants with the immediate removal of older gamesand through the introduction of an improved supplychain system (iPOS), which will deliver the rightproduct, in the right place, at the right time.Activity: Changing the pack sizesObjectives: Ensure best selling games are on display.Insight: The combination of small print runs and large pack sizes negatively impacts theslower selling retailers and leads to empty cassettes / ITDMs at the top performingretailers for the fastest selling games.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 155

Section 2 Final Business PlanPack size decisions must not be based on printing economies of scale, as the adverseimpact of overstocks (resulting from large pack sizes selling in lower selling retailers) cansignificantly diminish the Lottery’s sales potential.The relatively large pack size and small sales per display facing mean that the initialallocation of stock to launch a game will drive disproportionate levels of stock into lowerselling retailers and proportionately consume too much of the print run.It is sensible to review pack sizes, once the number of games in market and print runsizes have been adjusted, because product life cycles for individual games will bedramatically adjusted.In June 2003, Instants pack sizes in the UK were reduced from £200 to £120 whenweekly sales were around £12 million ($18 million) per week. The £200 pack sizes weretoo large in relation to the weekly sales and this was causing huge stock congestion. Thereduction to packs of £120 was well received by retailers and it alleviated the issuesCamelot faced with inventory management in retail.By FY2009, Instants weekly sales exceeded £21 million ($31.5 million). It becamenecessary to adjust Instants pack sizes from £120 to £160, across each price point.Instants packs consequently lasted longer once displayed, resulting in a reduction ofempty dispenser facings. Instants games such as Christmas Bonus, demonstrated thesuccess of this pack size change. The Christmas Bonus, £120 version that launched in2008 was on sale across 70% of the retail network by week seven. In contrast, the 2009Christmas Bonus game (£160 pack), was on sale across 78% of retailers at week seven.This was testament to the highest selling retailers being able to keep the game ondisplay for longer.Activity: Implement the Camelot Illinois supply chain solution.Objective: To ensure optimal stock levels of the best selling games across the retailernetwork.Insight: The best selling games aren’t always on display in retail.Camelot Illinois will address the supply chain issues through the adoption of acomprehensive ‘end-to-end’ supply chain management approach that seeks to optimizesales and stock availability by taking a holistic approach to supply chain management:Optimization of new game launches to ensure the correct balance between printruns, pack size, sales potential and prize structureOptimization of dispenser sizes and store ranges to ensure each store can maximizeits sales turnover by balancing the number of games on sale with total store salespotential to optimize stock turnOptimization of pack sizes to ensure lower quartile stores are not undulyoverstocked while also ensuring that upper quartile retailers do not turn theirinventory too quickly which may result in issues with replenishment frequency instoreEnhanced initial stock allocation logic that only distributes new games to stores inline with the sell through of the predecessor game. This prevents the unnecessaryallocation of stock into stores that are unable to display the new game due tooverstocks of the old game and thus ensures that a greater proportion of the printrun is available to replenish faster selling stores.156 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanInstants supply chain impact on salesRetailers long ago recognized that excellence within the supply chain is a key enabler ofsales performance and this is typified by Wal-Mart who has widely acknowledged that itssupply chain management has been at the root of its sales success.The best retail supply chains cater to a demanding consumer and deliver high standardsof in-store product presentation and stock availability. Too often, when compared toother categories being sold in retailer outlets throughout the world, the Instants categorydemonstrates poorer display standards and poor stock availability with a large number ofgaps in the dispenser. This is in marked contrast to other categories within the store andtends to reinforce the image of Instants as a ‘down-market’ brand.A large part of this differential is as a result of differences between Instants supplychains and the supply chains used by retailers for the other categories on sale. Camelothas worked with retail supply chain experts to create a new supply chain solution thatcombines the best elements of global Instants operating practice and best practice fromretail supply chains.Many lottery operators around the world still utilize a simple telephone based orderingsystem for the replenishment of Instants into the store. These tend to be inefficient atoptimizing the stock allocation to the retail network, when unaccompanied by asophisticated supply chain system.In some cases, certain lottery operators have tried to improve order accuracy and stockavailability in store by introducing a more sophisticated approach to forecasting andordering using a forecasting system based on GLEPS (Guaranteed Low End Prizes).Because all packs of Instants tickets have a guaranteed number of low tier prizes,GLEPS is an approximation of how much of each pack has been sold. In some cases,GLEPS information is supplemented by trend analysis based upon historical patterns ingame lifecycles, price points, payout percentages, unclaimed prize levels and salespatterns.The problem with GLEPSHowever, while a GLEPS-based approach helps, it does have known weaknesses whichcan give rise to major inefficiencies within the supply chain.All GLEPS based forecasts assume a uniform level of prize claims. Any deviation fromthis assumption, either due to the dynamics of a particular game or a particular retailer,will result in an inaccurate sales forecast and inaccurate stock replenishment for thatgame or retailer. This is a fundamental weakness which results in a requirement for‘workarounds’ within the supply chain process, without which the process wouldcollapse.GLEPS-based Instants supply chains tend to deliver sub-optimal availability in store:Systems must operate with high stock covers in store in order to overcome theseinherent sales forecast weaknesses. This results in having too many games incirculation to fit in the dispenser, meaning that retailers are making choices as towhich games are displayed where and when.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 157

Section 2 Final Business PlanForcing retailers to make choices means a lack of consistency in product availabilitybetween stores, meaning that customers can’t buy the most recent games in allstores. New lines cannot be launched consistently across the retail network.Having too much stock means that retailers tend to sell through old lines instead ofdisplaying newer, faster selling games.Distribution of new games must be forced through the bulk allocation of stock,independently of the core replenishment process, in order to guarantee distributioneven in the face of high stock covers in store.Stock availability cannot be guaranteed and neither can the order process, so allGLEPS-based systems are also supplemented by Helpdesk operations to allowretailers to phone the lottery operator and place manual orders in the event of astock-out.The high levels of stock cover resulting from these inefficiencies require expensiveuse of field based resource to collect and return unused game stock in order to freethe retailer selling space and allow newer games to be placed on sale.Confidential Information RemovedA description of how iPOS is used to support best practice is described in the OperationsSection 2.11.7.158 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanConfidential Information RemovedFigure 2.6.3.2.1 summarizes the relative merits of Telsels 4 , GLEPS-based replenishmentand the Camelot Supply Chain Solution, based on iPOS.Confidential Information Removed4Telephone order is defined as Telsels, unaccompanied by a supply chain system.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 159

Section 2 Final Business PlanImplementation of iPOS for the UKConfidential Information RemovedImplementation of iPOS for IllinoisConfidential Information Removed2.6.3.3 Maximizing the opportunities to purchase in retailStrategy: Provide consumers with better access toInstants by maximizing their opportunities topurchase at the dispenser / ITDMs / FSVMs, throughperfect execution in store - fully and correctlymerchandized dispensers, which are located in theright quantities, in the appropriate mix of retailers.Activity: New dispenser solution and simplification of ITDM header cards.Objective: To enhance clear Instants display to encourage player choice and attract newplayers.Insight: Consumers have limited sight of the Instants tickets in dispenser. ITDM headercard design is confusing.Section 2.6.2 identified an inconsistency with the types of dispensers on display and thatthe 24 tier dispenser only displayed a very small section of the ticket. This made it160 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plandifficult for consumers to make choices by shopping the dispenser. For consumers tomake reasonable choices, they need to see more of the ticket.In the UK Camelot decided that its original dispensers were not displaying tickets to thebest advantage and replaced the entire stock (see Case Study).Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 161

Section 2 Final Business PlanConfidential Information Removed162 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanConfidential Information Removed5Confidential Information RemovedActivity: Improving retailer adherence to Lottery Point of Sale guidelines.5Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 163

Section 2 Final Business PlanObjective: To ensure consistent display of the right games across the retail network.Insight: Inconsistent display and presentation of Instants tickets across the retailnetwork.Even when the Lottery gets it right and distributes the right stock to the right retailers,good display depends on retailers complying with instructions from the Lottery.As noted, some retailers had excellent levels of adherence with evidence of planogramsbeing used by retailers. This was by no means universal.Part of the task of the Illinois Lottery sales force will be to achieve higher levels ofadherence with the instructions from the Lottery with the objective of achieving ‘PerfectIn-store Execution’ in the display and merchandizing of Lottery games and material. Thisimportant role of the sales force is described in more detail in Lottery Retailers, Section2.7.2.6.3.4 Stimulating the consumer to play through strong communicationStrategy: Stimulate consumer play with a stronger,new Instants communications strategy to drive reappraisalof the category among lapsed and nonplayers and increase the level, frequency and mix ofcommunications to existing players.Activity: Develop a new mass media communication strategy and maximize theimpulse moment in store with media screens.Objective: To have an all year media presence to encourage increased frequency of playfrom occasional players and introduce new players to Instants.Insight: Instants marketing activity is not present all year and is fragmented across ahost of activities.The following section addresses increasing player penetration and play frequency andmaximizing the impulse moment in retail. The Instants communications strategy isoutlined in greater detail in Marketing Section 2.9.Developing a new communications strategyThe objective of all the Instants initiatives is to grow penetration from the relatively staticposition of 26% to 34% and increase the frequency of play among existing occasionalplayers.Driving PenetrationThe primary role for Instants communications will be to create broad product awarenessand a sense of exciting ‘new news’. The Illinois State Lottery is in a fortunate position ofmarketing products that bring joy and fun into people’s lives, as depicted by the “Have aBall” slogan.To maintain the level of awareness and interest needed to increase Instants penetration,Camelot Illinois proposes a full year of Instants marketing communication. Products will164 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planbe featured in advertising across the year. The game development process will identifytop performing games with the highest propensity for sales growth.Driving frequency of playThe opportunity is to improve player conviction in order to convert occasional players intoregular weekly players. It is noted the Illinois Lottery appears overly reliant on the valuegenerated from a small core group of regular high spending consumers. This group hasdriven Instants growth over the last five years.To convert the occasional players, promotional game mechanics such as secondarydrawings will continue to be used to encourage repeat purchase. Camelot Illinois wouldgauge their return on investment before making a longer term judgment on theireffectiveness.Maximizing the impulse moment in storeRetail is where the vast majority of purchase decisions are made and so Camelot isconstantly looking for ways to ensure that UK National Lottery products have aubiquitous presence, not just in the dispenser; for example, by the use of counter cardsand POS kits as well as specific communications direct to the retailer to excite themabout the game portfolio.A particularly effective medium is the use of media screens mounted on the dispenserand displaying exciting and interesting graphics, not just on the Instants product but alllottery games. Camelot Illinois strongly recommends this for the Illinois Lottery.Camelot Illinois believes innovation is the key to long term growth in lotteries, which isone of the reasons why Camelot introduced Lottery media screens across its entireretailer network in FY2010. The screens are used to advertise National Lottery productsand jackpots, in addition to providing a wide range of messages, such as localinformation and jackpot alerts. Camelot’s use of media screens in the UK forms thelargest media network of its kind in the world.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 165

Section 2 Final Business Plan2.6.4 IMPLEMENTATION PLANConfidential Information Removed166 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.6.5 BUSINESS PLAN FORECASTThe Instants Final Business Plan in Illinois examines all aspects of managing the productportfolio to optimize consumer appeal. As with all Camelot marketing activity, thestrategy and activity recommendations are solidly based on consumer insight. Theobjective for the Illinois Lottery will be a more balanced product portfolio that fullysatisfies consumer needs and amplifies the winning experience.Processes will be implemented that ensure the availability of the best selling gameswithin retail outlets. Camelot Illinois will implement its unique supply chain process forInstants replenishment that delivers outstanding levels of stock availability whencompared to available alternatives from other lottery vendors or operators.There will be intense focus on giving consumers better access to Instants by improvingthe product mix and merchandising from dispensers, ITDMs and FSVMs in store.The level, frequency and mix of marketing communications to consumers will improvethe Instants category salience and drive increased play and spend among existing andlapsed players.Camelot has doubled Instants growth in the UK while maintaining actual prize payoutlevels at 61%. Camelot has successfully adopted a strategy of growth through theintroduction of higher price point games whilst maintaining strong performance from itslowest price point games. This has helped drive an increase in the frequency of play, sothat weekly players have increased from 29% in 2006 to 33% in 2008.Significant innovation, as a direct result of consumer insight, has been found in thedesign, distribution and promotion of the Instants category.It is focus on these facets of the Instants category that has enabled Camelot to grow UKInstants sales from $819 million in FY2001 to more than $1.76 billion in FY2010.Figure 2.6.5.1 below shows how Camelot Illinois will grow Instants sales fromapproximately $1.2 billion in FY2010 to approximately $2.1 billion by FY2016. 6The growth in sales represents a percentage increase of 78% between FY2010 andFY2016, or a compound annual growth rate of 10% including FY2016.6 Base sales provided from Illinois Lottery data room; forecasted sales from Camelot Illinois analysis.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 167

Section 2 Final Business PlanFIGURE 2.6.5.1 BUSINESS PLAN FORECAST FOR INSTANTS GAMES TO FY20162,5002,000$Mn1,5001,000500-FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016Base SalesForecasted SalesSource: Camelot Illinois The forecast assumes the successful introduction of all of the activities describedabove, including an increase in the number of retailers In FY2010, The Illinois Lottery had an Instants per capita spend of $92. ThePennsylvanian Lottery had an Instants per capita spend of $106 Camelot Illinois will drive the per capita spend In Illinois to $161 by FY2016 The per capita spend will surpass the Pennsylvanian Lottery by $8 in FY2016 7 The average ticket price will move from $3.13 in FY2009 to $3.83 in FY2016.7 The Pennsylvania sales growth has been indexed to an annual 2% inflationary growth from FY2010.168 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.6 SUPPORTING INFORMATION2.6.A ADDITIONAL INSIGHTSSales performanceThe Instants category has seen consistent growth over the past five years. Althoughsales have continued to grow annually, the year-on-year growth rate has been slowingdown as demonstrated in Figure 2.6.A.1FIGURE 2.6.A.1: YEAR-ON-YEAR GROWTH RATE18%16%14%12%10%8%6%4%2%0%FY04 FY05 FY06 FY07 FY08 FY09Sales ($Mn) YOY Growth Rate %$1,200$1,000$800$600$400$200$0Sales ($Mn)Source: Illinois Lottery data room, Camelot Illinois analysisDrivers of growthSales growth in Illinois appears to be driven by the introduction of higher price pointgames, which has been made possible by an increase in prize payout. This hasexhausted the option to squeeze additional growth through further significant payoutincreases, without compromising Net Income.Figure 2.6.A.2 shows the increase in average annual prize payout for the past five years.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 169

Section 2 Final Business PlanFIGURE 2.6.A.2 ILLINOIS SALES AND PAYOUT69.0%68.0%67.0%66.0%65.0%64.0%63.0%62.0%61.0%60.0%59.0%FY05 FY06 FY07 FY08 FY09Total Rev ($Mn) Ave Payout %$1,200$1,000$800$600$400$200$0Total Revenue ($Mn)Source: Illinois Lottery data room, Camelot Illinois analysisCamelot Illinois has benchmarked prize payout with other state lotteries, from FY2005 toFY2010. This is included in Figure 2.6.A.3 below. It shows that Illinois has increased itsprize payout since FY2005 from 62.4% to 68.8% in 2010. 8 This is similar to Michigan andOhio. The Illinois Lottery has increasingly apportioned payout to higher price pointgames.Similar to Michigan and Ohio, Illinois has increased its prize payout since FY2005. Figure2.6.A.3 indicates that, by FY2010, Illinois has the second highest prize levels afterPennsylvania.FIGURE 2.6.A.3 COMPARISON STATE LOTTERIES AVERAGE PAYOUT, FY2005 –FY2010FY05 Avg.payoutFY06 Avg.payoutFY07 Avg.payoutFY08 Avg.payoutFY09 Avg.payoutFY10 Avg.payoutMichigan 63.4% 65.0% 65.0% 65.0% 67.0% 67.0%Ohio 65.5% 66.8% 68.6% 68.8% 68.8% 68.0%Pennsylvania 68.2% 68.5% 67.7% 67.2% 69.2% 69.5%Illinois 62.4% 66.8% 68% 67.1% 67.4% 68.8%Source: La Fleur’s, Illinois Lottery data roomFigure 2.6.A.4 shows how prize payout is allocated across the price points by therespective state lotteries. In line with other benchmark states, payout in Illinois has beenincreasingly apportioned to higher price point games.8The payout data for Illinois has been extracted from the Illinois data room, up to FY2009. La Fleur’s datastates Illinois prize payout was set at 68.8% for FY2010.170 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.6.A.4 COMPARISON STATE LOTTERIES AVERAGE PAYOUT, BY PRICEPOINT, FY2010FY10FY10Avg.payout $1 $2 $3 $5 $10 $20 $30Michigan 67.0% 60.0% 64.0% - 69.0% 73.0% 75.0% -Ohio 68.0% 61.0% 65.0% 66.0% 69.0% 73.0% 75.0% -Pennsylvania 69.5% 58.0% 64.0% 65-66% 70.0% 72.0% 73.0% -Illinois 68.8% 58.3% 63.0% 64.7% 66.0% 75.0% 77.0% 78.0%Source: La Fleur’sThe relationship between prize payout and higher price point games is logical; higherpayout levels are required to fund an increased win frequency, key mid tier prizes, aswell as higher top prizes associated with more premium priced games.The success of new price point introductions has been rewarded through the increasedaverage ticket price for Illinois. This is captured in Figure 2.6.A.5 that shows a continuousincrease in the average price of tickets purchased, moving from $2.00 in FY2004 to$3.13 in FY2009.FIGURE 2.6.A.5: AVERAGE INSTANTS TICKET PRICE COMPARISON$4.50$4.00$3.50$3.00$2.50$2.00$1.50$1.00$0.50$0.00FY04 FY05 FY06 FY07 FY08 FY09Pennsylvania IllinoisSource: Illinois Lottery data room, La Fleur’s, Camelot Illinois analysisFigure 2.6.A.6 shows the sales contribution from each price point. It expresses the pricepoints through time as a percentage of total Instants sales. 99The FY2010 included 43 weeks of sales data. The use of percentage largely negates the missing weeks.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 171

Section 2 Final Business PlanFIGURE 2.6.A.6: PERCENTAGE CONTRIBUTION OF EACH PRICE POINT TO TOTALINSTANTS SALESPricePoint FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10$1 27.3% 23.4% 19.4% 15.7% 15.3% 13.3% 12.3%$2 26.1% 22.3% 18.9% 16.3% 14.6% 15.0% 13.5%$3 11.4% 12.5% 10.8% 10.8% 9.6% 9.4% 9.9%$5 20.2% 20.9% 23.5% 23.8% 24.6% 26.6% 27.1%$10 15.0% 16.4% 13.2% 18.8% 18.8% 18.8% 17.3%$15 0.0% 0.0% 0.0% 0.8% 0.4% 0.0% 0.0%$20 0.0% 4.5% 14.2% 13.8% 16.6% 16.8% 12.4%$30 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 7.6%Total 100% 100% 100% 100% 100% 100% 100%Source: Illinois Lottery data room, Camelot Illinois analysisThe percentage contribution analysis demonstrates the following: $1 and $2 games have dropped significantly in revenue year on year and this is seenin the percentage contribution of total sales, where: $1 games have declined from 27.3% in FY2004 to 12.3% in FY2010 $2 games have declined from 26.1% in FY2004 to 13.5% in FY2010$3 game revenue has dropped but not dramatically. It has been relatively flat sinceFY2006 and contributes less than 10% of total revenue$5 games have prospered since FY2004, moving its contribution from 20.2% to27.1% in FY2010. It is the most successful price point in the category, generatingsome $94 million more in revenue than the $20 ticket category in FY2010The percentage contribution of $10 tickets peaked in FY2007 at 18.8% and remainedflat until FY2010, which has seen small declineThe largest percentage growth has come from $20. The $20 price point increasedfrom its contribution of 4.5% in FY2005 to 16.8% in FY2009. The growth markedlydropped in FY2010 by 4.4%. The $30 game was introduced in FY2009 and it is likelythat there is some cannibalization as some players choose to trade up from $20 to$30The $15 ticket never really caught on. Its percentage contribution to total sales wasnegligible because there was little perceived difference from the $10 and $20 pricepoints. Camelot Illinois believes this is the reason why the Illinois Lottery chose toremove this price point.Consumer insightCamelot Illinois’ analysis suggests that the Illinois Lottery growth is driven by coreplayers who are spending more as a result of playing higher price point games. Figure2.6.A.7 clearly demonstrates that Instants penetration and play frequency in Illinois hasremained flat between FY2005 and FY2010. Camelot Illinois established in Figure 2.6.A.5that the average Instants ticket price has continually increased over the past six years.172 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanThis corroborates the increase consumer spend data presented in Figure 2.6.A.8, whichnotably shows an increase between FY2005 and FY2009.Camelot Illinois highlighted earlier the success of higher price point Instants games inIllinois. This has coincided with declining sales numbers from $1 and $2 particularly,which is problematic because new and less frequent players often look to lower pricepoint games as their entry into the category.Figure 2.6.A.7 further compares Illinois consumer penetration and frequency of playnumbers, with Pennsylvania – Camelot Illinois’ benchmark state lottery. Pennsylvaniahas a higher number of adults playing at approximately 34%, some 8% more than theIllinois Lottery in FY2010.FIGURE 2.6.A.7: PLAY FREQUENCY, 2005 AND 2010 BY BENCHMARK STATE34%34%26%14%26%20% 18%14%12% 14% 16%12%2010 2010 2005 2005ILLINOIS PENNSYLVANIA ILLINOIS PENNSYLVANIAPlayed L1M Played L12M but not L1M Played L12MSource: SimmonsIn addition to the penetration and play frequency data it is also helpful to understandplayer spend.Figure 2.6.A.8 reviews benchmark state spend per capita and average spend per weekand per month. It highlights that player spend in Illinois has increased from $6.99 perweek in FY2005 to $8.63 in FY2009.FIGURE 2.6.A.8: PLAYER PENETRATION AND SPEND BY BENCHMARK LOTTERYSTATE, FY2005 AND FY2009YearPopulationAdultpopulationAdultpenetrationInstantPlayersActualPlayersPopulationPenetrationSales (m)Per CapSpendPAAdultSpendPAPlayerSpendPAPlayerSpendPMPlayerSpendPW2005 12.8 9.3 26.0% 2.418 18.9% $878.83 $68.66 $94.50 $363.45 $30.29 $6.99ILLINOIS2009 12.9 9.7 27.0% 2.619 20.3% $1,119.74 $91.00 $120.00 $449.00 $37.42 $8.632005 12.4 9.2 34.0% 3.128 25.2% $1,301.81 $104.98 $141.50 $416.18 $34.68 $8.00PENNSYLVANIA2009 12.6 9.8 33.0% 3.234 25.7% $1,757.65 $137.00 $176.00 $532.00 $44.33 $10.23Source: La Fleur’s, Simmons, Camelot Illinois Financial Model, US Census Bureau- 2010 forecast dataCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 173

Section 2 Final Business PlanPennsylvania has a higher spend per week - $10.23 vs. $8.63. Achieving a similar level ofspend per week as Pennsylvania would significantly increase Illinois Lottery Net Income.The Game PlanTo understand Illinois Instants category performance, it is necessary to examine thegame plan itself. Camelot Illinois has assessed the following elements which areanalyzed in greater detail below:Game launchesPrice point mix and contributionGame segments and contributionProduct Life Cycles, pack sizes and implications for supply chain.Game launchesCamelot Illinois believes the number of Instants game launches in Illinois is too great.The number of games exceeds the number of facings in retail and this is contributing tosupply chain issues, as well as consumer confusion.In streamlining the game launches, there are a number of metrics to consider, including:number of Instants game launches per year, number of Instants games available to orderand number of Instants games in market across the entire year.Instants game launches per yearFigure 2.6.A.9 captures the number of game launches for the Illinois Lottery and otherbenchmark states between FY2005 and FY2010. Illinois is the only state increasing thenumber of game launches per year. The peer states all decreased game launches overthe past five years.FIGURE 2.6.A.9: COMPARISON STATE LOTTERIES - AVERAGE NUMBER OF GAMELAUNCHES PER FISCALFY05GameLaunchesFY06GameLaunchesFY07GameLaunchesFY08GameLaunchesFY09GameLaunchesMichigan 70 74 71 76 77 60Ohio 53 56 59 55 46 40Pennsylvania 52 53 52 53 58 48Illinois 67 59 70 59 70 70La Fleur’sFY10GameLaunchesInstants games available to orderThe average number of games available to order each week for Illinois, across FY2010was 51.To understand the significance of both game launches per year and available to order, itis also important to take into account the total number of games which have featured inthe plan across the entire year.Instants games in market across the entire yearAs with all lotteries, the Instants game plan is fluid. There are new games coming intomarket and those that are being withdrawn once they reach the end of their life cycle.174 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanAcross FY2010, there were 100 games that featured, at some stage, in the Illinois gameplan across the year. The analysis accounts for all new game launches and includes thelong standing games inherited from the previous fiscal year/s (such as $250 MillionMillionaires Club).Figure 2.6.A.10 demonstrates that the top 30 games, featured in the FY2010 game plan,have generated approximately 90% of revenue. This means that 70 games arecontributing just 10% of total revenue. This highlights the need for a balancedassessment of the range, price points and game themes that appear in the plan becausetoo many games are clogging up the dispenser / ITDMs.FIGURE 2.6.A.10: AVERAGE WEEKLY REVENUE CONTRIBUTION FROM THE TOP 100GAMES FEATURED IN FY2010Cumm. Contribution100%90%80%70%60%50%40%30%20%10%0%Top 10 11 - 20 21 - 30 31 - 40 41 - 50 51 - 100Source: Illinois Lottery data room, Camelot Illinois analysisPrice point mix and contributionFigure 2.6.A.11 analyses the 100 games that featured in the FY2010 game plan. Itcaptures the number of games in market and the contribution made by each of theseven price points. It shows that the number of launches for $1 and $2 is excessive inrelation to the revenue contribution from those price points. For example, $1 and $2games constituted 52% of the total games but generated 26% of revenue. This wouldindicate that there are too many of these tickets in the market, which is causingsubstitution, or trading among them.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 175

Section 2 Final Business PlanFIGURE 2.6.A.11: PRICE POINT CONTRIBUTION AND NUMBER OF GAMESLAUNCHES FEATURING IN THE FY2010 GAME PLAN30%25%27%353020%15%10%5%12%14%10%17%12%8%252015105Number of launches0%$1 $2 $3 $5 $10 $20 $302010 Launches % contribution0Source: Illinois Lottery data room, Camelot Illinois analysisGame Segments and contributionCamelot Illinois has reclassified all Instants ticket themes (segments) assigned toInstants games with tighter definitions. For example, Bingo and Crossword games wereclassified as ‘Basic’. Camelot Illinois has termed these types of games as Extended Play.Figure 2.6.A.12 below highlights a sample selection of the Camelot-defined categoriesgames that have been reclassified. 10 These new classifications are not meant in any wayto devalue the strategic thinking currently in place but rather to aid Camelot Illinois’product differentiation understanding. The revised thematic segment definitions havebeen applied to the analysis that follows in this section.10Not all 100 games have 20 weeks of associated data to evaluate and compare.176 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.6.A.12 SELECTION OF CAMELOT ILLINOIS DEFINED CATEGORY (THEMES)GAMES FY2010Ticket NamePriceGameSTATE L/ CATEGORY CAMELOT CATEGORYPointNumberWIN FOR LIFE 2 BASIC ANNUITY 574WIN FOR LIFE 2 BASIC ANNUITY 708SET FOR LIFE 10 MONEY ANNUITY 602BINGO 5 BASIC EXTENDED PLAY- BINGO 660BINGO 5 BASIC EXTENDED PLAY- BINGO 632BUBBLE GUM BINGO 3 BASIC EXTENDED PLAY- BINGO 671BINGO 2 BASIC EXTENDED PLAY- BINGO 705BINGO 2 BASIC EXTENDED PLAY- BINGO 670BINGO 2 BASIC EXTENDED PLAY- BINGO 630BINGO 3 BASIC EXTENDED PLAY- BINGO 631JUKE BOX BINGO 5 BINGO EXTENDED PLAY- BINGO 710BLIZZARD BINGO 5 SEASONAL/ LICENSED EXTENDED PLAY- BINGO 684POT OF GOLD BINGO 3 SEASONAL/ LICENSED EXTENDED PLAY- BINGO 706$75,000 CROSSWORD 5 BASIC EXTENDED PLAY- CROSSWORD 651CROSSWORD 3 BASIC EXTENDED PLAY- CROSSWORD 593CROSSWORD 5 BASIC EXTENDED PLAY- CROSSWORD 693CROSSWORD 3 BASIC EXTENDED PLAY- CROSSWORD 692$75,000 CROSSWORD 5 BASIC EXTENDED PLAY- CROSSWORD 622CANDY CANE CROSSWORD 3 SEASONAL/ LICENSED EXTENDED PLAY- CROSSWORD 683SCRABBLE 3 EXTENDED PLAY EXTENDED PLAY- LICENSED 657JACKPOT FORTUNE 10 GAMING GAMING 636KINGS & QUEENS 5 GAMING GAMING 654LINE 'EM UP 2 GAMING GAMING 633SLOTS OF MONEY 5 MONEY GAMING 665BLACKHAWKS CASH 2 SEASONAL/ LICENSED LICENSED 698PINK PANTHER 2 SEASONAL/ LICENSED LICENSED 656HOT TAMALES 2 SEASONAL/ LICENSED LICENSED 676MONOPOLY 5 SEASONAL/ LICENSED LICENSED 597LUCKY SHAMROCK 2 SEASONAL/ LICENSED LUCK 702LUCKY LOOT 5 MONEY MONEY 628CASH SPECTACTULAR 30 MONEY MONEY 600$250 MILL MILLIONAIRE'S CLUB 10 MONEY MONEY 469Source: Illinois Lottery data room, Camelot Illinois analysisOf the 100 games that featured in the game plan across FY2010, Figure 2.6.A.13assesses 68 of these games. 11 This is because the table captures the number of gamesper category and the percentage contribution, by segment, across a 20 week period inFY2010.Figure 2.6.A.13 highlights the imbalance of segment performance and the need toreaddress the Instants game mix. For example, there were 16 whimsical games (lighthearted / cartoon style games) contributing 11% towards total revenue. Conversely,eight money themed games are generating approximately 24% of revenue. Thispresents an opportunity for the Illinois Lottery to increase revenue with a more strategicapproach to segment mix.11The FY2010 included 43 weeks of sales data. The use of percentage largely negates the missing weeks.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 177

Section 2 Final Business PlanFIGURE 2.6.A.13: FY2010 INSTANTS REVENUE AND CONTRIBUTION BY CAMELOTILLINOIS SEGMENTSegment themeNumbers ofgames in thatcategoryCumulative 20week Revenue% 20 Wk RevContributionAverage 20 WkRev persegmentMoney 8 $159,941,327 24% $19,992,666Extended play 11 $147,637,861 22% $13,421,624Annuity 2 $21,170,644 3% $10,585,322Seasonal 14 $148,172,752 22% $10,583,768Gaming 3 $26,882,836 4% $8,960,945Numbers 9 $76,510,860 11% $8,501,207Whimsical 16 $76,429,545 11% $4,776,847Specialty 3 $9,340,412 1% $3,113,471Licensed 2 $6,011,098 1% $3,005,549Source: Illinois Lottery data room, Camelot Illinois analysisIt is also clear from the game data that a large volume of games have been in market fora very long time.Camelot Illinois therefore reviewed all the games that had been in market for more thana year and assessed the cumulative sales over time, the average sales per week, salesover a 20 week period, as well as the number of years in market.Figure 2.6.A.14 below captures the top 10 games that have been in market for longperiods of time. The far right column makes an approximate assessment of theoptimization opportunity, i.e. the revenue the game could generate if it sustained itsinitial average weekly sales over 20 weeks. The calculation is estimated from thedifference between the total average weekly sales and the twenty week average. Thedifference is multiplied by the number of weeks the game has been in market beyondtwenty weeks. Games are sorted according to the highest to lowest optimization.178 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.6.A.14: OPTIMIZING LONG PRINT RUN GAMESGame NameTotalWeeksinMarketTotal Avg.WeeklySales20 Week Avg.Weekly SalesDif btw TotalAvg. Wkly Sales& 20 Wk Avg.Wkly SalesOptimizationOpportunity$250 MILL. 191 $1,511,394 $2,009,029 $497,634 $85,095,476MILLIONAIRE'SCLUB$2,000,000 GO 54 $1,149,146 $1,780,862 $631,716 $21,478,334FOR THE GOLDDOUBLE MY 54 $1,700,843 $2,032,761 $331,918 $11,285,226MILLIONDEAL OR NO 68 $422,588 $620,320 $197,732 $9,491,158DEALFEELIN' LUCKY 46 $637,435 $1,001,206 $363,771 $9,458,046JACKPOT 45 $654,679 $993,201 $338,522 $8,463,047TREASURESTOTALLY TOPAZ 43 $711,083 $1,022,898 $311,814 $7,171,7227SSUMMER 40 $437,797 $687,360 $249,562 $4,991,245SPECTACULARLUCKY SYMBOL 44 $446,364 $633,673 $187,310 $4,495,428BINGOICY HOT 7-11-21 48 $285,580 $363,968 $78,388 $2,194,868Source: Illinois Lottery data room, Camelot Illinois analysisGames such as $250 Million Millionaire’s Club, for example, have fantastic heritage butthe data suggests are in market for way too long. The cumulative average weekly salesin the first twenty weeks for this game equated to $2 million. This compares to theaverage weekly sales across its entire life cycle of approximately $1.5 million. This clearlydemonstrates diminishing returns. Over 171 weeks, this equates to a potential loss ofapproximately $85 million. Had the $250 Million Millionaire’s Club been replaced after 20weeks, with another game or another color pulsed version of the same game, saleswould have been optimized. Figure 2.6.A.15 demonstrates the theory of introducing agame sooner into the market to replace a game that has been in market for a long time:Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 179

Section 2 Final Business PlanFIGURE 2.6.A.15: OPTIMIZING LONG PRINT RUN GAMES4Sales ($Mn)321Instants revenue gap00 20 40 60 80 100 120 140 160Source: Illinois Lottery data room, Camelot Illinois analysisweeksGame 1 Game 2 Game 3 Game 4Camelot Illinois recognizes that games such as $250 Million Millionaire’s Club exist as aresult of large ticket quantities, which substantiate the $250 million prize fund. It is alsounderstood that economies of scale present compelling motivation to an Instants ticketprinter to have games with large print runs.Earlier in the document, Figure 2.6.A.10 demonstrated that the top 30 games featured in2010 have generated approximately 90% of revenue. These are the most importantInstants games in the portfolio because they are driving most of the sales. It is thereforeparticularly important to understand these revenue driving 30 games in greater detail. Itis this product specific insight that has produced the portfolio mix recommendationcontained in the Strategy and Activities Section 2.6.3.The following charts assess these 30 games in closer detail. Figure 2.6.A.16 belowshows that ‘heritage’ (long standing games) makes up the majority (62%) of the top 30games. 1212Heritage games are defined as games in market for at least 20 weeks in 2010 that were also in market formore than 16 weeks in FY2009.180 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.6.A.16: BREAKDOWN TOP 30 GAMES – HERITAGE V. NEW GAMEINTRODUCTIONSpercentage (%)100908070605040302010037 3863 62Total GamesTotal RevenueHeritage NewSource: Illinois Lottery data room, Camelot Illinois analysisFigure 2.6.A.17 provides a break down of ‘heritage’ games and new game introductionsby theme.Superficially, money, seasonal and crossword extended play games appear to contributethe largest proportion of revenue (respectively, $154 million, $124 million and $93 millioneach across FY2010).However, the average revenue per themed category tells a different story. 13 It shows theimportant contribution of money ($25.66 million) and extended play games ($23.25million); it highlights the underachievement of seasonal games ($13.77 million).The average revenue per themed game indicates where there are too many or perhapstoo few games of a particular theme. For example, a lower performing theme such asseasonal games does not mean Camelot Illinois advocates the removal of seasonalgames from the mix. What it highlights is the opportunity to better balance the portfoliowith slightly fewer seasonal games which will increase the average revenue per themedgame in line with other themes. This is addressed in the Strategy and Activities Section2.6.3.13The Average Revenue is calculated by dividing the 20 week revenue by the Total Games (for each themedgame).Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 181

Section 2 Final Business PlanFIGURE 2.6.A.17: GAME CATEGORY CONTRIBUTIONS FOR TOP 30 GAMES FY2010100000605040223446100%80%60%40%212535935115410 5012 50116623 2512 525 66302010920%124130Number of Games0%20 Week Revenue ($Mn)Source: Illinois Lottery data room, Camelot Illinois analysisFigure 2.6.A.18 provides a breakdown of top 30 games by price point. It highlights that$5 ($188 million) and $10 tickets ($113 million) make up the largest revenue componentof the top 30 games in FY2010. Again, the average revenue per price point tells adifferent story. The data shows the average revenue per price point for $5 equates to alow $13.42 million.Camelot Illinois is not undermining the contribution from $5. It is a very important pricepoint that has enjoyed huge success. There are simply too many of these games in themix. Slightly fewer $5 game launches in market would increase the average revenue for$5 games, by providing simpler choices for retailers to display and for consumers topurchase. This presents a positive opportunity to further grow the $5 price point.182 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.6.A.18 BREAKDOWN OF TOP 30 GAMES BY PRICE POINT100%90%80%70%60%50%40%30%20%10%122310140%Number of GamesSource: Illinois Lottery data room, Camelot Illinois analysis451226427811318820 Week Revenue($Mn)$5 $10 $20 $3 $1 $2 $3045 0012001300210026 0016141342Product Life Cycles, pack sizes and implications for supply chainFigure 2.6.A.19 highlights the higher price point games achieving superior levels of salesand peaking far more quickly than lower priced Instants tickets. This is because there arefewer high price point Instants launches than those of lower priced games, reducingcompetition for display in dispensers.FIGURE 2.6.A.19: PRODUCT LIFE CYCLE BY PRICE POINT$3,500,000$3,000,000Cumulative Sales$2,500,000$2,000,000$1,500,000$1,000,000$500,000$0Week 1Week 2Week 3Week 4Week 5Week 6Week 7Week 8Week 9Week 10Week 11Week 12Week 13Week 14Week 15Week 16Week 17Week 18Week 19Week 20$1 $2 $3 $5 $10 $20 $30Source: Illinois Lottery data room, Camelot Illinois analysisCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 183

Section 2 Final Business PlanThe strongest driver of sales is achieved when games can quickly reach their peak,ideally within three weeks. In situations when this is not working, it is indicative of asupply chain which can be improved. This presents an excellent opportunity for Illinois.Prize structuresThis section assesses prize structures in Illinois. Figure 2.6.A.20 summarizes the averageoverall odds and prize payout levels. 14 It demonstrates the differentiation in place; theoverall odds and assigned prize payout levels get better as the ticket price increases.FIGURE 2.6.A.20: PRIZE STRUCTURE SUMMARY 2008 TO 2010Overall OddsPrize Payout$1 4.61 58%$2 4.47 63%$3 3.91 65%$5 3.80 66%$10 3.44 74%$20 2.97 77%$30 2.46 78%Source: Illinois Lottery data room, Camelot Illinois analysisThis practice is reflected across the vast majority of successful lotteries worldwide asthe increasing value encourages consumers to trade up to the higher price points.Figure 2.6.A.21 captures Instants game multi jurisdiction prize structure analysis. Ithighlights a number of Instants prize structure game examples from $1 and $2 games,chosen randomly. The examples emanate from the following lotteries: Pennsylvania,Texas, Florida, New York, Massachusetts, Gratta Vinci and the UK. They highlight thebest practice use of ‘regular prize amounts’ – a strategy not consistently employed inIllinois. 1514 The prize structure data has been averaged from a large sample of prize structures contained in the dataroom.15 The full multi jurisdiction prize structure analysis is not included as supporting documentation. CamelotIllinois has a far more comprehensive supply of randomly chosen examples, which includes a greater numberof games by price point, per jurisdiction. The analysis extends to $3, $5 and higher price point Instant games.184 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.6.A.21 INSTANTS GAME MULTI JURISDICTION PRIZE STRUCTUREANALYSISPricePoint$1PennsylvaniaTexas FloridaHolidayBucksCashBountyDiamondDazzlerNewYorkHappyHolidaysGrattaVinciUn MareDi FortunaFree Tkt $1 $1 $1 $1 €1 £1$2 $2 $2 $2 $2 €2 £2$5 $4 $4 $4 $4 €5 £5$10 $5 $5 $8 $5 €10 £10$20 $10 $10 $10 $10 €15 £15$40 $20 $20 $20 $20 €20 £25$100 $40 $40 $40 $40 €25 £40UKPrizePumpkin$1,000 $100 $100 $100 $50 €40 £100$1,000 $5,000 $250 $100 €100 £500$500 $5,000 €500 £2,000$2,500 €1,000PricePoint$1Massachusetts$5KPayDayPennsylvaniaTexas FloridaAmazing8sMonopoly MonopolyNewYork$500PWFLCool 7sMassachusettsGrattaVinciPortafortunaFree Tkt $1 $1 $1 $1 €1 £1$1 $2 $2 $2 $2 €2 £2$2 $4 $4 $4 $4 €5 £5UKMoneyTo Go$5 $5 $5 $5 $5 €10 £10$10 $10 $10 $10 $10 €20 £20$20 $20 $20 $20 $20 €40 £40$40 $40 $30 $40 $40 €100 £100$100 $100 $50 $100 $100 €500 $200$400 $1,000 $100 $500 $5,000 £9,000$1,000 $200$8,000 $5,000Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 185

Section 2 Final Business PlanPricePoint$2PennsylvaniaTexas FloridaFreezinGreetingsWeeklyGrandTropicalRichesNewYorkHolidayCashX10Aces &EightsGrattaVinciSpiaggiaD'oro$2 $2 $2 $2 $2 €2 £2$4 $4 $4 $4 $4 €5 £4$5 $5 $5 $5 $5 €10 £5$10 $10 $10 $10 $10 €15 £10$20 $20 $25 $15 $25 €25 £20$40 $40 $50 $20 $50 €50 £40UKGold 7sDoubler$50 $3,000 $100 $25 $100 €100 £100$100 £1KPW $500 $30 $400 €250 £200$400 $1,000 $500 $2,000 €500 £777$500 $2,000 $2,500 $1,000 €1,000 £7,777$1,000 $20,000 $25,000 €5,000 £77,777$20,000PricePoint$2MassachusettsPennsylvaniaTexas FloridaWinnerTake AllBreak TheBank25 GrandNewYorkInstantPaydayMassachusettsDollarsFor DadGrattaVinciMercantein Fiera$2 $2 $2 $2 $2 €2 £2$4 $4 $4 $4 $4 €5 £4$5 $6 $5 $5 $5 €10 £5$10 $8 $10 $10 $10 €20 £10$20 $10 $20 $20 $20 €50 £20$40 $12 $50 $25 $40 €100 £40UK£250,000Green$50 $20 $100 $50 $50 €200 £100$100 $50 $250 $100 $100 €250 £200$400 $200 $2,000 $250 $200 €500 £1,000$500 $1,000 $25,000 $500 $400 €1,000 £5,000$1,000 $3,000 $25,000 $1,000 £250,000$24,000 $30,000 $2,000$20,000Source: Camelot Illinois multi jurisdiction prize structure analysis 2010Print quantities - It is also clear that print quantities vary according to whether they are‘heritage’ or new game introductions.186 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCamelot Illinois also observed a number of areas of prize structure improvement, which,if rectified, would amplify the consumer winning experience. This is captured in theStrategy and Activities Section 2.6.3.Irregular prize amounts - Some of the Illinois games contain irregular prize amounts andthese put an unnecessary drain on the available prize payout. Irregular prize amounts arethose prizes above $5 that are not divisible by five (e.g. $6, $12, and so on). For example,you can deliver six $5 prizes instead of five x $6 prizes. The odds of wining $5 will be farbetter than the odds of winning $6, across the game as a whole.Prize levels - Some of the Illinois prize structures contain a large number of differentprize tiers, which again extract unnecessary funds out of the prize structure. Too manyprize levels means that the payout can get spread too thinly over numerous prize tiersinstead of being concentrated in a smaller number of prize levels.Number of winners - In theory, the odds should lengthen as the prize level increases.This was not always the case in Illinois and means payout is not being utilized aseffectively as it could be. For example, for Win for Life ($2), the odds of winning $40 arefour times better than the odds of winning $30. The odds of winning $100 are also betterthan the odds of winning $50.Game differentiationIllinois has a solid game differentiation strategy in place, which assists consumer gameselection, as well as providing clearer reasons to trade up to higher price points.Consumers need to understand that a higher price point ticket provides a higher valueproposition. Camelot Illinois has reviewed the Instants product differentiation in Illinois ingreater detail.Figure 2.6.A.22 highlights the detailed differentiation in place in Illinois: 16FIGURE 2.6.A.22: DETAILED ILLINOIS LOTTERY DIFFERENTIATION OBSERVATIONS$1 $2 $3 $5 $10 $20 $30Top Prize $100 to$9k$40k to$50k$2m $1m to$3mTicket SizeNo of timesyou can win(predominantly)$20k to$30k &$50k forLife$77k to$100k &$10k forLife$250k to$1m &$100k forLife4 x 2.5 & 4 x 4 4 x 6 4 x 6 4 x 8 4 x 9 4 x 92.5 x 41 7 to 12 10 8 to 15 15 to 20 25 26Prize Payout 58% 63% 65% 66% 75% 77% 78%Average Odds 4.55 4.38 3.92 3.66 3.42 2.96 2.46PredominantCamelotCategoriesWhimsicalNumbersSeasonalExtendedPlayNumbersSeasonalGamingAnnuityMoneySeasonalMoneyWhimsicalSeasonalSpecialityLicensedNumbersExtendedPlaySeasonal16 The chart has been pulled together using current Instant ticket information gathered from the Illinois StateLottery website. This has been used in combination with proxy data extracted from FY2009 prize structuresand La Fleur’s. The employed methodology is not 100% accurate but does provide an indicative situationanalysis, which of course would be reviewed again with more robust data.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 187

Section 2 Final Business Plan$1 $2 $3 $5 $10 $20 $30AnnuityMoneyAnnuitySource: Illinois State Lottery data room, Camelot Illinois analysis, La Fleur’sHowever, Camelot Illinois has made a number of observations which will improve thedifferentiation further:Some Instants tickets are not differentiated in terms of proposition. Figure 2.6.A.23, forexample, shows a $2 ticket called Win for Life, with a top prize of $50,000 a year forLife. This compares to a $10 annuity game called Set for Life which offers $100,000 ayear for life - five times the price, for double the prize. Sales data shows Win for Lifeoutperforms Set for Life. This is unsurprising given the positioning.FIGURE 2.6.A.23: EXAMPLE: $2 ANNUITY PROPOSITION WITH FAR GREATER VALUETHAN $10Source: Illinois Lottery website 2010A number of Instants tickets, at the same price point, share the same top prize but notall do. ‘Toad Ally’ and ‘Time-Out Tripler’; both have $9,000 top prizes; ‘Cash 4 Grabs’, hasa top prize of $1,000.Similarly, there is only one chance to win on ‘Toad Ally’ and ‘Time-Out Tripler’, but sevenchances to win on, ‘Cash for Grabs’. This puts, ‘Cash 4 Grabs’, on a par with a $2 ticket.Retail and supply chainThis section outlines Instants retail and supply chain observations. A broader, moredetailed, retail assessment can be found in Lottery Retailers Section 2.7. It highlightsthere are a small number of high performing retailers that provide most of the sales.In FY2010, the Illinois Lottery had approximately 51 games available to order, onaverage, each week. Figure 2.6.A.24 shows there are, on average, 23 combineddispenser and ITDM facings across the network. (The largest dispensers are the 24 tier.The largest ITDMs have 24 facings. There are additional one-off Bingo dispensers).188 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanGiven that there are far more Instants games than facings, it makes it necessary forretailers to make choices about which games to display.FIGURE 2.6.A.24: BREAKDOWN OF FACINGS BY DISPENSER AND ITDM (BASED ON8,160 RETAILERS)Plastic DispenserNo of facingsIn counter 33,184On counter 25,504Bingo 4,428Individual plastics 54,870Other 4,891ITDM8 tier 1,53616 tier 8,73624 tier 55,680Total 188,829Average numbers of facings per retailer 23Source: Illinois Lottery data room, Camelot Illinois analysisThe Lottery’s rationale for the high number of Instants ticket launches is that it appealsto regular players who look for new games, on the consumer mistaken assumption thatthere are better chances of winning with a new game. This consumer behavior is basedon a perception and is not grounded with actual fact. It has been termed in UK researchas ‘fuzzy logic’ and is seen across many jurisdictions around the world. It is unlikely thatthis behavior will ever change, so getting the right frequency of launches, withoutclogging up the dispenser is important.Illinois Lottery print runs for many games are small, relative to industry norms. This is anecessary strategy to complement the desired high number of game launches in Illinoisbut it generates inventory issues.Because of the volume of live games, there are too many games to fit into thedispensers. This means there is a lack of display consistency across retail. Retailers arenot always selling the best selling games. This stock congestion at retail means theinventory of slow selling games is excessive and retailers tend to sell through old linesbefore displaying newer, better-selling games. Retail site visits observed the lack ofavailability of the newest, fastest selling games – particularly in the ITDMs.The problem is compounded further by the pack sizes, data for which have beenextracted from the prize structures provided in the data room.Figure 2.6.A.25 provides an analysis of Illinois Lottery data; it suggests that while theaverage pack quantity represents around one week of sales per facing in the fastestselling retailers, it would typically represent around 10-20 weeks of sales in the lowestselling retailers.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 189

Section 2 Final Business PlanFIGURE 2.6.A.25: PACK SIZE AND SALES IN FY2010riceointverage evby ameacalueverageo ofac s byameypical o ofacingsoccupied byprice pointaleseeacingverageetailerales perweeowperformingretailerslpmopperformingretailerstpmactoccovertpmactoccoverlpm1 5 315 50 300 1 1 3 114 341 2 3 1 . .2 4 2 31 300 14 2 6 5 5 3 5 1 263 1 . 1.111 36 52 300 3 123 2 13 2 4 34 4 . .10 323 334 600 1 206 6 126 53 31 43 1 .1 1.1 20 54 46 600 34 24 4 120 4 0 30 420 2 . 1.2 23 614 2 6 600 3 35 3 115 345 2 402 2 . 1.2 162 0 0 00 0 1 0 1 211 211 53 3 1 .1 1.2Source: Illinois Lottery data room, Camelot Illinois observation in store, Camelot Illinois analysisIt is anticipated that this will manifest itself in store as follows: The lowest performing retailers will only have sufficient sales turnover to effectivelysell around 50% of new game launches Those new games that they are able to sell will be delayed in implementation aspack sizes are large, representing typically between 10 and 20 weeks of salesdemand in lower selling retailers. This will delay the sell through of the old line andthe vacation of the dispenser facing to accept the new game.Additionally and most significantly, the combination of relatively large pack sizes andsmall print runs will drive inefficiencies into the initial stock allocation process which islikely to result in major stock availability issues soon after launch.Presentation in retail outletsThere was inconsistency in the display of Instants at retail outlets, so players buying indifferent stores would experience the category differently. Retailers do not appear tosite dispensers in primary location(s) and the dispenser compliance (percentage fullfacings) varied across the network. It was unclear whether Illinois has the rightdispensers and facings in the correct retail outlets.Camelot Illinois noted commendable retailer compliance in a handful of stores; Figure2.6.A.26 shows a dispenser 100% full. The positioning of the pricing stickers alsosuggested a planogram approach, with the highest price points at the top of thedispenser and the lowest at the bottom. This was not however consistent across everyretailer visited.190 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.6.A.26: ILLINOIS LOTTERY DISPENSER MERCHANDISINGSource: Camelot Illinois observations in retail June 2010Despite the excellent dispenser compliance identified above, it was almost impossible tosee what tickets were being displayed. The close up picture on the right (Figure2.6.A.26) shows the elements a consumer sees – this essentially includes the pricesticker and the dispenser facing number. Camelot research indicates that 75% ofInstants tickets are purchased on impulse. Retail presentation must clearly show theproduct and the price, in a way that is appealing to the consumer – otherwise, they maynot make the purchase. With the inconsistent and unclear presentation, a consumer isunable to make real Instants choices because they are unable to shop the dispenser.Typically, consumers choose Instants for many different reasons such as top prize,design, chances to win, color, games to play and callouts.Apart from UK Instants research and the qualitative findings from Camelot Illinois’ JuneIllinois research, the Ipsos Reid segmentation, November 2006 also evidences thisconsumer purchase behavior.The following examples capture scores attributed to Conflicted Allies on what makesthem choose tickets: 86% said they looked for a game with doublers and triplers 83% looked for a game with Bonus Features and autowins 81% said they were influenced by the number of prizes to be won on the ticket.However, the dispenser does not enable them to see these features clearly. CamelotIllinois sees this as a barrier to play which needs to be addressed.The images captured in Figure 2.6.A.27 highlight some of the different types ofdispenser Camelot Illinois saw in retail. Ideally, a brand needs to be consistentlypresented.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 191

Section 2 Final Business PlanFIGURE 2.6.A.27: DISPENSER TYPE AND DISPLAYSource: Camelot Illinois observations in retail, June 2010Additionally, retailers were observed cascading their tickets in store.Apart from this, tickets were displayed in ITDMs, which were in the main 24 tiers.Observations from the retail site visits were that there was no ITDM display consistency.Price points were randomly allocated across the 24 spaces. The team further notedmany out of stock games, which were invariably the newest and/or the highest pricepoint and/or the most popular games. This is a lost revenue opportunity, particularlygiven that some ITDMs are sited in high footfall retailers.Many of the images used in the header card to depict the Instants ticket were as busy asthe ticket themselves, with too many call-out messages and confusing images.Finally, execution in store varied. Figure 2.6.A.28 shows a store with point of sale in poorposition, which will inhibit the retail store’s Instants sales potential.FIGURE 2.6.A.28: POINT OF SALE IN RETAILSource: Camelot Illinois observations in retail, June 2010192 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanMarketing CommunicationsOverall observations TV media advertising of the Instants product is sporadic through the year and sosalience and awareness are unlikely to be sustained. From the analysis of media purchase, it appears that TV, for the FY2009 secondarydrawings promotion, was bought consistently across the entire campaign period,presumably to encourage weekly play over the summer. The Holiday Scratch campaign was targeted at light / lapsed Lottery players, lookingfor a quick, easy and affordable gift option to gift to family and friends. There is little evidence of media screens in retail for a more targeted approach.Media screens capitalize on the highly impulsive nature of Instants ticket purchaseand therefore are an important and missing communications tool. The appearance at shows and events and the sales of Instants tickets and drawbased games through mobile sales units is beneficial in raising awareness of theIllinois Lottery and its leading products. The metric that Camelot Illinois will wish toprobe is the return on investment from this activity and whether their frequency isideal.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 193

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Section 2 Final Business Plan2.7 LOTTERY RETAILERSCAMELOT ILLINOIS’ STRATEGYCamelot Illinois will expand the Illinois Lottery retail network and invigorate thesupervision and training provided to retailers; the in-store environment will be energizedto drive participation and sales growth.The core objectives of the strategy are the following:• Be in locations where consumers shop• Deliver and maintain a high-quality in-store execution standard• Provide the appropriate support services to retailers so they can meet their targets• Offer effective retailer incentive programsCURRENT SITUATION• The Illinois Lottery ranks low compared to other states for the number of retailersper 100,000 people• Key types of retailers are under represented, in particular big box retailers• Players do not experience a consistent presentation of the Lottery across outlets• Sales force is oriented towards tasks like restocking, rather than proactive tasks likeselling• Overall commission paid to retailers in Illinois is lower than in other states; however,there is no evidence that this has a negative impact on retailer attitudes or salesgrowthINITIATIVESCamelot has identified a number of initiatives to enhance the lottery retailer landscapeleveraging the principles used by leading Fast-Moving Consumer Goods (FMCG)companies.Primary initiatives include:• Recruitment – increase the number of retailers to achieve a ratio to populationcomparable to peer states (from 7,500 to 9,500 in Year 1 of the PMA alone).• Recruitment - introduce new ways to play, including vending and play using theretailer’s existing electronic Point-of-Sale (EPOS).• Supervision and Relationship Management – invest up to $15.3 million over the fiveyears to FY2016 in re-energizing the Lottery brand in-store with media screens,Playcenters and Instants dispensers to provide an exciting and engagingenvironment for consumers and retailers alike.• Training – establish a Camelot Illinois best practice sales force, focusing on revenuegeneration and sales training opportunities, with an emphasis on developing keychains.• Commissions and incentives – retain current commissions, continually review theireffectiveness, and offer an annual reward program.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 203

Section 2 Final Business PlanFINANCIAL RESULTS• Camelot Illinois will grow the ticket sales from retail channels from $2.2 billion inFY2010 to $3.7 billion in FY2016.WHY CAMELOT?Camelot Illinois will bring the following experience in successful retail and salesoperations:• The recruitment of retailers, complete with a sophisticated recruitment model thatuses data on demographics and likely propensity to play to find the best locations forgrowth. Since 2003, Camelot has extended and managed the UK Lottery networkfrom 23,500 to 28,500 retailers.• An industry recognized collaborative approach with retailers. Camelot Illinois hasinitiated discussions with Sears, Target, Walgreens and the NACS and there isopportunity for dialogue with Wal-Mart via Camelot’s relationship with ASDA in theUK.• Innovative new ways to play in-store. The EPOS lottery ticket purchase systemdeveloped by Camelot with Tesco delivers annual EPOS sales to the UK Lottery of$62.5 million per year.• Best in class retail FMCG practices to develop high quality Lottery equipment.The tailored Lottery Counter Units placed in one of the UK’s largest conveniencegrocery retailers realized an additional $15.6 million per year in sales, a 10% uplift insales in one group.• Unique lottery experience in the management of a best in class FMCG sales forceranked as the best in the UK, beating out Coca Cola, Cadburys/Kraft, Wrigley’s andall the tobacco suppliers. Currently working to apply FMCG best practices for salesteam pilot program for the California State Lottery.204 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.7.1 INTRODUCTIONThis section provides Camelot Illinois’ response to the Lottery Retailers areas ofSchedule 2.1 of the PMA – Recruitment, Supervision, Training, Commissions andIncentives, Relationship Management and Revocation.InsightsResearch into the Illinois Lottery has identified a number of areas to address to improvethe sales opportunity:• Low number of retailers per capita - with 7,500 retailers, Illinois ranks lowcompared to other states. The Lottery has 59 terminals per 100,000 populationcompared to 66 and 79 in Pennsylvania and Ohio respectively.• Under representation in key types of retail - comparisons to other states indicate alow representation in pharmacy and big box retailers – the largest chain is 7- Elevenwith 7.3% of business.• Quality of retail display is inconsistent - Camelot Illinois site visits evidenced someretailers merchandizing the Lottery to best effect, however, there was majorinconsistency including gaps in display 1 .• The sales force is not optimized - the Lottery has 66 sales staff whose main tasksare directed towards the control of inventory and the delivery of point-of-salematerials. There is a single account manager to deal with 95 key chains.• Commissions are lower than in other states - while there is no evidence that thisis a deterrent to sales growth, commissions and incentives should be continuouslyreviewed.Camelot prior experienceCamelot runs a very effective retail operation and has the experience necessary toimprove retail sales in Illinois. Camelot has:• Substantial experience in increasing retailer penetration - Camelot nearly tripledthe number of UK lottery retail outlets from 10,000 at launch (1994) to 28,500 (2010),and is well positioned to grow the base of retailers for Illinois. Camelot Illinois isbest placed to demonstrate the success of expanding a lottery retail network inaddition to launching, managing and developing an Internet channel. The retailchannel has continued to grow and remains at the core of the UK Lottery with salesexceeding $7 billion in 2010.• Been recognized as the best FMCG sales force in the UK - Camelot won againstCoca Cola, Cadburys (Kraft), Wrigleys and all the tobacco suppliers 2 . A wellorganized and optimized sales team can deliver 2 – 4% additional sales.• A unique and sophisticated model for recruitment - Camelot employssophisticated software modelling tools to develop intelligent retail growth plans,matching consumer spend and propensity to play lottery against current retail gaps.This assures investment in new retail terminals will achieve maximum returns.A recent recruitment drive in the UK realized $3.3 million per week in sales 3 .1Camelot field visits, Spring 20102 HIM! – research and consultative operation who undertake an annual survey of consumer habits and surveyretailers regarding supplier relationships; Camelot voted best FMCG sales force, 20103 Assessment of 1,400 recruited retailers, 2007. Camelot sales database.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 205

Section 2 Final Business Plan• Launched more convenient ways to play - Camelot worked with the largest retailerin the UK (Tesco) to enable consumers the opportunity to purchase their lotterytickets through their EPOS – a world first. This initiative is currently generating anestimated $62.5 million per year.• Developed award winning display materials - the latest Permanent Point-of-Sale(PPOS) items won gold at the Point of Purchasing Advertising International Awards(Paris, 2010).• Substantial experience improving retail display - Camelot has successfullylaunched a retail focused training package for retailers demonstrating the benefits ofimproved display. This has been shown to add 5% to sales.Strategies and activitiesCamelot Illinois proposes to:• Recruit to extend the networkIncreasing the number of lottery retailers is critical to future success and it isimportant to have a clear retail strategy that encompasses all distribution channelsand all retail sectors. The goal is to provide the Illinois consumer with theopportunity to play wherever they wish.The Illinois Lottery retail network will be expanded and will include new ways to playin-store. Camelot Illinois has already begun to develop ideas on expanding the retailchannel. Some examples of Camelot Illinois’ efforts include:• Partnering with leading retailers already in the State – Camelot Illinois hasinitiated discussions with Sears, Target and Walgreens, and there is anopportunity for dialogue with Wal-Mart through the association Camelot has withits UK subsidiary, ASDA.• Leveraging sporting arenas and distribution channels - Camelot Illinois hasalready received support from Chicago Cubs and Chicago Fire indicating awillingness to work with the Lottery to explore the potential for a retailopportunity.• Delivering a lottery kiosk strategy through a partnership with lottery kioskoperator, Rieves to deploy kiosks that give Illinois customers additionalopportunities for responsible play.Camelot Illinois will also offer consumers more ways to play in-store by bringing toIllinois the technology to enable purchase through retailer EPOS terminals and willinstall Full Service Vending Machines (FSVMs) in selected stores.The phasing on recruitment and the implementation of new ways to play is asfollows:• Year 1 Phase One- 2,000 Terminals – (lottery retail network to 9,500)• Year 2 3,000 FSVMs - (1,500 in new stores, therefore total lottery retail networkto 11,000)• Year 3 Phase Two- 1,500 Terminals – (lottery retail network to 12,500)• Year 3-4 New ways to play – (Extended Means of Play (EMoP)) to 4 major chains206 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan• Supervise retailers to drive sales and provide for customer relations managementA trailblazer in forging effective retail distribution channels, Camelot Illinois will invest$15.3 million over the five years to FY2016 to provide retailers with exciting newPPOS to support the operation of the Lottery in-store.The presentation of the Lottery brand in-store will be transformed. A program todeliver Perfect In-store Execution (PIE) – will be implemented across the network togive consumers and retailers an engaging environment. In-store display is critical toFMCG categories to ensure advantageous placement against other products and togive the best possible opportunity for the Lottery to be seen and purchased.The focus of the Lottery sales force will be channelled into selling and providingincreased support for retailers. The sales force will be re-energized, motivated andprepared for the delivery of a commercial program of which they feel a part.Camelot Illinois will appoint three additional managers to drive revenues across thekey chains and to provide greater focus on larger groups and gain greater insight intotheir operation and the development of the lottery category.• Train retailers to enhance salesTraining of Lottery retailers will be enhanced to ensure both new and existingretailers are continually trained (and developed) to understand the games, operationsand their responsibilities to sell the Lottery in a socially responsive manner.Training will be extended beyond initial classroom training with sales trainingdeveloped to the latest FMCG standards. Camelot Illinois has communication toolsto support and train retailers.• Provide commissions and incentives to enhance salesCurrent retailer commissions will be reviewed and other ways to remunerateretailers explored. Any change in the levels of commissions could potentially beexpensive against the possible sales return. A basic rise of 1% in commission rateson Instants, for example, would cost an additional $10 million per year and so mustbe weighed against the expected benefits.Current commissions will therefore be retained but will be continuously reviewed toensure they represent the best motivation to retailers to enhance Lotteryperformance.Camelot Illinois will however initiate an incentive program to motivate retailers toimprove display and drive sales of particular games. An initial investment of $0.5million per year will be made.• RevocationFor underperforming retailers, a Sales Improvement Program (SIP), developed withretailers and trade associations (e.g. NACS – The Association for Convenience andPetroleum Retailers) through the introduction of a Retailer Forum, will be developedto help assess when it may be best to remove terminals from poor performingretailers.Building on Camelot’s successful compliance monitoring program in the UK, aprogram to monitor sales to underage players will be introduced with offenderslosing their terminals; this is another program that will be discussed and agreed witha Retailer Forum.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 207

Section 2 Final Business PlanCamelot Illinois will work with other state departments to ensure that whereappropriate revocation occurs where retailers violate State law.208 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.7.2 INSIGHTSWhile the Illinois Lottery is a fundamentally sound business and enjoys broad brandrecognition, there are a number of areas for improvement of the lottery retailer network.Retailer innovation, agility and market responsiveness that cannot be fully realized underthe current structure can result in significant increases in revenue and Net Income.Key challenges facing the Illinois Lottery retail network:• Low number of retailers per capita - with 7,500 lottery retailers spread across theentire State, Illinois ranks low compared to other states, and among the lowest ofsimilar-sized states. The Illinois Lottery has 59 terminals per 100,000 populationcompared to 66 in Pennsylvania and 79 in Ohio. What this means is that manyIllinois consumers do not even have the opportunity to purchase a lottery ticket nearwhere they work, live, or shop. As a result, Illinois lags behind many other states inthe per capita spend on lottery tickets. Research shows that four of ten non-players,when asked why they don’t play, said they “never think about playing” 4 .Clearly, a greater retail presence can help boost sales and can bring the idea top ofmind for consumers.• Under representation in key types of retail - Camelot Illinois’ analysis of availabledata indicated that there is a low representation of the Illinois Lottery in pharmacyand big box retailers, and no noted presence at entertainment venues or via kiosks.Currently, the largest lottery retail chain in Illinois is 7- Eleven with 7.3% of all sales.Concentration of retailers is predominantly among convenience stores and gasstations which represent 70% of total sales. Compared with other states, this is asub-optimal mix and a lag on revenue.• Quality of retail display is inconsistent - Camelot Illinois’ site visits evidenced someretailers merchandizing the Lottery to best effect, however, there was majorinconsistency from store–to-store 5 . There were significant differences noted in thedisplay of games, the availability of best-selling games, and the accessibility of aspace for filling out play slips or playing Instants. The lack of visual consistency fromstore-to-store poses a challenge to developing a consistent and recognizable brand.• The sales force is not optimized - the Lottery has 66 sales staff whose main tasksare directed towards the control of inventory and the delivery of point-of-salematerials, rather than focusing on proactive optimization of the effectiveness of theretail channel. There is currently one Illinois Lottery account manager to deal with 95key chains. Camelot has achieved great success in the UK by assigning a singleaccount manager to the largest retailers. For example, the top four retailersrepresent over 25% of the UK Lottery business (approximately $1.2 billion per year)and each has one account manager.Further details of the assessments of the lottery network and penetration are atSupporting Information – Section 2.7.4Player research undertaken by Rabin Research, July 20105Camelot field visits, Spring 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 209

Section 2 Final Business Plan2.7.3 STRATEGIES AND ACTIVITIESThe key strategies are detailed below and are numbered as follows:Recruit to extend the network 2.7.3.1Supervise retailers to drive sales and provide for retailer relationsmanagement to drive sales2.7.3.2Train retailers to enhance sales 2.7.3.3Provide commissions and incentives to enhance sales 2.7.3.4Revocation 2.7.3.52.7.3.1 Recruit to extend the networkBe in locations where consumers shop to provide awider choice for consumers and improvedopportunities for salesDescribed below are the strategies Camelot Illinois will execute to grow revenue andNet Income for the Illinois Lottery, specifically targeting the lottery retailer network.Camelot Illinois proposes to increase the ratio of retailers to population nearer to its U.S.peers, extending the number of retailers from 7,500 to 9,500 in year one of the PMA,and by a further 1,500 in years two and three of the PMA.Additional ways to play will also be implemented including an extended means of play(EMOP) that allows Lottery sales via retailers EPOS and FSVMs.The proposed increase in total outlet numbers will be phased as follows:Year 1 Terminals – 2,000 (lottery retail network to 9,500)Year 2 FSVMs – 3,000 (1,500 new retailers, thereforetotal lottery retail network to 11,000)Year 3 Terminals – 1,500 (lottery retail network to 12,500)Year 3-4 Extended Means of Play (EMoP) – to four of major chainsThe marketplace is continually changing, in response to consumer shopping needs andhabits, and the Lottery must keep pace with these changes. Distribution needs to followthe consumer and a formal evaluation of the Lottery retail network will need to beundertaken to assure that consumers are able to purchase lottery products where theyshop.The Illinois Lottery has a sound base on which to build both retailer numbers within theexisting retail network and from new sectors. There is opportunity to improve thefollowing:• Extend the range of key account retailers.210 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan• Engage with key retailers to drive wider penetration of retail sectors.• Match future shopping trends to Lottery players and non- players, providing both awider opportunity for existing players to play and an opportunity to increasepenetration.• Re-model the existing retail network to ensure retailers are best placed to serveIllinois consumers.• Model the overall retail network to determine the size of the potential expansion.The section comprises:• An indication of immediately available opportunities including existing and new retailchannels• Camelot’s recruitment tool, Optimum• Extended recruitment (new ways to play)• Camelot’s approach to retail engagement• Summary.Immediate opportunitiesCamelot Illinois has already begun efforts to improve the retail network in Illinois, asdescribed below.• Entertainment Venues:Both the Chicago Cubs and Chicago Fire have indicated a willingness to work withCamelot Illinois to explore the potential for a retail opportunity. Partnership with theChicago Cubs presents a tremendous opportunity for visibility to the Lottery.Over 3 million people a year attend a game at Wrigley Field, and Chicago ranks thirdin the nation for MLB radio listeners 6 . Chicago Fire has regular attendances of20,000 across the soccer season (up to 25 games) and regularly holds concerts forup to 30,000. A mobile kiosk would be considered, as part of a broad-basedmarketing partnership.• KiosksCamelot Illinois has a letter indicating willingness to partner from Rieves, an operatorof sales kiosks (Appendix A2). The proposal is to place kiosks in high-traffic areas ofshopping malls and potentially within big box retailers (e.g. Dominicks) Figure2.7.3.1.1 is a diagram of a potential unit that will be available for installation duringthe first year of the PMA.6 2009 season data, Ballparks.com, SportsBusinessJournal.com, MLB 2010 season to date data.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 211

Section 2 Final Business PlanFIGURE 2.7.3.1.1: POTENTIAL KIOSK UNIT FOR THE ILLINOIS LOTTERY• Traditional RetailCamelot Illinois has leveraged its strong existing retailer relationships to establish adialogue with Target and Walgreens (who currently do not list lottery in stores in theU.S.) and Sears (limited current Lottery presence). All indicated a willingness todevelop options based on Camelot’s track record of innovative ways to play.Furthermore there exists an opportunity to hold a dialogue with a number of big boxretailers, including Wal-Mart. In the UK, Camelot currently has a partnership withASDA, part of the Wal-Mart family. ASDA ($309 million per year) are supportive ofthe lottery in-store and are jointly working with Camelot on initiatives to further drivesales, epitomized by:“The National Lottery has become an important partof our overall offer and Camelot has successfullydeveloped the category and demonstrated a clearunderstanding of the needs of ASDA.”Damon Dover, Lottery Manager.Camelot Illinois will also pursue extended distribution opportunities with Dominicks andJewel-Osco. Expansion will not be limited to these discussions and a full and detailedreview of the shape, size and layout of the retail network will be required.212 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCamelot’s intelligent retailer assessment tool - OptimumConfidential Information RemovedCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 213

Section 2 Final Business Plan214 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanThis, the largest retail initiative will realize $0.84 billion benefit through to FY2016.Review of phase one will also determine the full extent and range for phase two anddetermine the appropriateness of bringing this phase forward with potential earlierincremental benefit.Extended recruitmentCamelot Illinois will bring to market two additional ways to play the Lottery – Full ServiceVending Machines (FSVMs) and Extended Means of Play (EMoP), as described below.• Full Service Vending Machines (FSVMs)Camelot Illinois plans to leverage the technology to enable FSVMs to deliveradditional revenue in retailers where traditional means of selling the Lottery has beenpreviously rejected or is limited in its application (e.g. big box retailers). FSVMs candispense all games and can pay prizes. This technology is currently being piloted inPennsylvania through the retailer Wawa, Inc. (a long-term opponent of lottery instorebecause of operational requirements and servicing). Discussions with thePennsylvanian Lottery team indicate an immediate impact; two stores which hadpreviously not been lottery retailers averaged $5,000- $6,000 per week during thepilotIn the first year of the PMA, Camelot Illinois will negotiate with the suppliers ofFSVMs to strike the most advantageous terms for the Illinois Lottery. This methodof selling lottery tickets, both Online Games and Instants, is strategically andtactically more viable in large areas and where operational simplicity is required tomaximize the opportunity for the retailer. It is particularly suitable for new andevolving lottery sectors.Introduction of this technology will be targeted at sporting venues for which Camelothas received support (including the Chicago Cubs and Chicago Fire) and as additionalpoints of purchase in larger retail arenas to complement the traditional terminaldistribution and the introduction of EMoP, described below. Camelot has extensiveexperience within the company to bring full FMCG principles to vending.This initiative will yield $0.54 billion benefit through to FY2016.• Extended Means of Play (EMoP)In most lotteries around the world, tickets are sold through dedicated terminals.For smaller, independent retailers this does not present an inconvenience, as theytypically have a limited number of cash registers which are often co-located.Both staff and customers are in easy reach of the lottery terminal when at the checkoutcounter. Even with limited staff, the need to process a lottery transactionthrough a dedicated terminal does not detract from their other selling opportunities.In big box retailers the picture is different – to facilitate quick check-out for thecustomer there are many cash registers, so a central lottery terminal is not typicallyconvenient to the check-out registers. For the consumer, having to visit a customerservice desk or central location where lottery is available, as well as the check-outaisles may take too much time and may inhibit their propensity to play lottery gamesat that retailer. For the store, the opportunity to sell lottery tickets at more than one7 Open discussion and field visits with Pennsylvania Lottery, June 11, 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 215

Section 2 Final Business Plancentral location within the store could be both a service to their customers and aboost to revenue.Camelot worked with Tesco, the world’s 3 rd biggest grocery retailer, to develop ameans of buying tickets through their EPOS called Fast Pay. Players make theirselections at a central lottery terminal, which produces a paper card containing theirnumbers. On the next occasion they are in-store and they reach the check-out,customers simply swipe the lottery card to pay for the lottery purchase. This makestheir lottery ticket no different than any other item in their shopping cart – a bar codescans the price and it gets added to their check. To add further convenience andease of play, players can opt to choose a Quick Pick at the check-out.Figure 2.7.3.1.4 depicts how Fast Pay works at Tesco stores.FIGURE 2.7.3.1.4: FAST PAY CHECKOUT PURCHASE OF LOTTERY TICKETSA quick way for customers to buy their Lottery tickets when they buy their shopping1. Players choose numbersat the kiosk / terminal2. NationalLottery FastPay card isproduced3. Customer presentsFast Pay card at tillOR just asks for aLucky Dip5. Prizeclaims atLotteryterminalbut notTesco till4. Lotterynumbersappear onTesco tillreceipt paperSource: CamelotIn Illinois, this development will support the opportunity to develop the sales of lottery innon traditional stores. Early discussions with both Walgreens (a non lottery retailer) andSears (limited lottery presence) suggested interest in EMoP as a way to bring lotteryrevenue to their stores and provide convenience for their customers.The introduction of EMoP in 2013, to four retail chains will generate $54 millionthrough to FY2016.Camelot’s approach to retail engagementTo ensure the smooth introduction of new initiatives, new concepts and new channels,Camelot has an established approach, dialogue and partnership with the relevant UKtrade associations including, the National Federation of Retail Newsagents (NFRNrepresenting20,000+ retailers) and the Association of Convenience Stores (ACS –representing 30,000 retailers), who are closely aligned to the NACS in the U.S..216 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCamelot Illinois has a reference from the ACS to demonstrate both the importance of thepartnership and their understanding of Camelot’s commitment to the retail channelacross the smaller convenience channel and this can be found in Appendix A2. CamelotIllinois will seek to replicate this spirit of partnership in Illinois.Separately NACS has been engaged in discussions on retailer research programs theycurrently undertake. Camelot has bought into this format in the UK and now has adialogue with NACS.An abridged text version of the ACS reference is shown below:Camelot takes their responsibilities as partners forthe small store sector extremely seriously, andinvests in effective ways of developing relationshipswith retailers. Camelot took time to consult withretailers and their representatives and sought toarrive at a fair solution that balanced the commercialneeds of the National Lottery with the need to dealsensitively with all their partners. Camelot use aretailer forum to consult on changes to theoperation of the lottery, and this is an effective wayof ensuring that the business is always operatingwith due regard for retailers’ interests.The success of the UK National Lottery has beenbuilt on a number of factors, one of which has beenthe leadership and skills within Camelot, and theirknowledge of every aspect of lottery operations isunarguable and unique.James Lowman, Chief Executive, Association ofConvenience Stores (affiliate of NACS)Camelot is proud of its track record in engaging with the right organizations with theability to arrive at fair solutions for both the retailer network and the lottery.Furthermore, Camelot has pioneered the use of Retailer Forums which bring togetherindependent retailers, chain and corporate individuals and trade associations. In the UKthis has been established for over ten years and includes senior representatives andindividual retailers from a wide range of retail sectors and diverse divisions from withinCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 217

Section 2 Final Business Planorganizations. The group meets quarterly to review future developments and considerinitiatives that will have an impact on retail.Camelot has been pivotal in the re-introduction of a Retailer Forum to the California StateLottery following an absence of 2½ years. This latest reincarnation includes a charterspecifically developed by Camelot. While the initiative is still in its early stages, feedbackfrom retailers has been positive.2.7.3.2 Supervise retailers to drive sales and provide for retailer relationsmanagementConsistent and high quality in-store executionthrough the supervision and training of retailers todeliver sales growth.In-store presentationTo be successful, the Lottery should be well represented in-store so that consumers cansee and purchase the product. Camelot Illinois will invest up to $15.3 million over thefive years to FY2016 in re-energizing the Lottery brand in-store to provide anexciting and engaging environment for consumers and retailers alike.Emphasis will be on improved standards and consistency for in-store display andmonitoring retailer compliance. The estimated incremental benefit from theseimprovements is $0.41 billion through to FY2016.In-store display improvement efforts will encompass:• A dramatic improvement in the current in-store point-of-sale (POS) and permanentpoint-of-sale (PPOS), including media screens that promote visibility for the Lottery.• An agreed program for in-store standards with retailers, independents and chains.• An agreed training and support package for retailers, clearly measured against bestFMCG practices and retailer requirements.The following section outlines the approach to be introduced and how it will benefit theIllinois Lottery.There will be an immediate introduction of Camelot’s proven ‘Perfect In-store Execution’(PIE) program that will help retailers improve in-store display, providing better cutthrough for the Lottery in high traffic areas.Execution begins with providing high quality POS and Permanent Point-of-Sale (PPOS)material. Camelot Illinois will perform a detailed assessment of the current material in allstores and instigate any changes or additions to improve quality. This will include theprovision of new state of the art media screens for promotional display and Playcentersto facilitate player selection and completion of play slips.Establishing strong and collaborative management of both small and large retail groups iscentral to providing consistent in-store display. Camelot has nurtured relationshipsacross all UK retail groups and is proud of the retailer advocacy extended to the Lottery218 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planand ensures the Lottery is clearly visible in-store and continues to be included inretailers’ own store development plans.This effective in-store management strategy for retailers will be brought to Illinois.Figure 2.7.3.2.1 outlines the typical layout for UK Lottery stores, demonstrating aconsistency and clarity of message and providing consumers with clear direction ongames, jackpots and where to play.FIGURE 2.7.3.2.1: CAMELOT’S CATEGORY APPROACHSource: CamelotCamelot Illinois will introduce (a) media screens, (b) Playcenters, and (c) new Instantsdispensers to improve retail standards in Illinois, as described below.(a) Media ScreensCamelot Illinois will introduce to every store a state-of-the-art media screen (Figure2.7.3.2.2). Software on the central system will download and display colorful graphicsand messages on the flat screen LCD display located on top of the Instant dispenser orintegrated with the lottery terminal. These messages can be changed wheneverdesired.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 219

Section 2 Final Business PlanFIGURE 2.7.3.2.2: MULTI-MEDIA SCREEN MOUNTED ON INSTANTS DISPENSERSource: CamelotThe facility will enable the control of all multi-media content from a single point ofoperation and can be downloaded and displayed in real time, providing up-to-dateinformation.The system provides the kind of entertainment and excitement expected by the nextgeneration of lottery players, without sacrificing security.Screens can also be used to support State initiatives such as the AMBER alert systemfor endangered children.(b) PlaycentersAlongside media screens, Camelot Illinois will introduce (Figure 2.7.3.2.3) award winningdisplays to enable consumers to complete play slips for games. Suitable in-storePlaycenters will be developed (to fit within retail environments) and provide greatervisibility for the Lottery.FIGURE 2.7.3.2.3: UK LOTTERY PLAYCENTERSource: Camelot220 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan(c) Instants DispensersClear presentation and displays are essential to encourage sales of Instants, as they areoften an impulse purchase. Dispensers have to be placed in the most effective location.Within the dispenser, consumers must be able to see the games offered. Retailers needguidance on where to place games within the dispenser, and in particular need help toassure the fastest selling games are shown to best advantage.Camelot has developed a number of opportunities (Figure 2.7.3.2.4) for extending salesof Instants including in-lane dispensers at large grocers and at gas stations where salesnow average $300 per week. This best practice will be applied in Illinois.FIGURE 2.7.3.2.4: INSTANT DISPENSER (WITH INTEGRATED MEDIA SCREEN) ANDSINGLE TIER DISPENSERSSource: CamelotCase StudiesCamelot has worked hard with retailers to understand the optimum location for lotteryequipment and the greatest merchandising opportunities. The following case studiesdemonstrate the merits of ensuring the Lottery is visible and is best positioned tomaximize sales.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 221

Section 2 Final Business PlanConfidential Information Removed222 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.7.3.3 Train retailers to enhance salesTraining retailers is covered in 3 parts:• Support materials for training retailers in-store on best practice displays (Perfect InstoreExecution - PIE)• LSR role and support• Additional training tools, including initial training.Support materialsThe objective of a successful PIE program is to ensure a consistent standard of operationby all retailers and make it impossible for consumers to miss the in-store visibility of theLottery.Once the complement of POS and PPOS has been settled, the next step is to define anddocument what makes a perfect layout of lottery products and material in-store andagree, monitor and continuously measure the impact of execution. Materials for definingPIE in the UK are illustrated in Figure 2.7.3.3.1 and a program to implement PIE will becreated to be delivered by the Illinois Lottery sales force.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 223

Section 2 Final Business PlanFIGURE 2.7.3.3.1: MATERIAL FROM THE UK PERFECT IN-STORE EXECUTION (PIE)PROJECTIn store standards brochureIn store scorecardSource: CamelotThe brochure and scorecard above will be developed for the Illinois retail network.This scorecard will help monitor retailers’ performance and their compliance to theprogram. An actual brochure and scorecard can be found in Appendix A11.Retailers will be engaged in the program with incentives, (section 2.7.3.4) designed toencourage them to participate. Camelot Illinois will launch PIE through a targeted, wellestablished and simple directive - using the principle of SucceSS (Site, Stock and Sell).These three simple steps improve positioning and merchandising and will form a corepart of the LSRs schedule of retail visits. Figure 2.7.3.3.2 demonstrates the type ofquestions that would be asked to ensure compliance.224 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.7.3.3.2: SAMPLE QUESTIONS FOR SUCCESS (SITE, STOCK AND SELL)We plan to simplify the questions to the known areas that drive sales uplift, and weightthem with simple, clear and consistent definitionsSITE (3 points)Is the Playstation in prime footfall locationIs the Playstation correctly merchandisedSTOCK (4 points)Are the Hot (4) games available in ALL dispensersPrimary dispenser in right location, full and to planoValue1231SELL (3 points)Is all available POS to current event blueprintIs the retailer up-sellingSucceSS2110Source: CamelotThis will require a step change in the current approach, support and training for both thesales force and the retailers.Camelot has embarked on a similar process with the California State Lottery sales team.A step by step program, with training and coaching, has been developed. A pilot projectin San Francisco trained six LSR’s to use a different approach for sales calls – movingfrom merchandiser to sales consultant. This approach is bringing a greater sense of jobsatisfaction to the team, as can be seen in this comment from a LSR – ‘I enjoy theoverall feeling of accomplishment at the ‘end’ of the day. The enjoyment isintangible but nonetheless fuels my desire to continue the next day’.A full transitional plan will be prepared with clear communication on the steps to betaken outlined. Because of the need for training of LSR’s, the benefits of the in-storeprogram have not been scheduled to be realized until year two of the PMA.SucceSS will be pivotal in the execution of excellence in the retail environment. Camelothas experienced buy-in to the process from retailers small and large. An example of thisworking is Camelot’s relationship with UK retailer, Tesco. The extent of the relationshipis summed up by their Customer Service Operations Manager, Richard Melling:Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 225

Section 2 Final Business Plan“Camelot has worked across the organization to thevery highest level to grow sales, integrate thelottery business and ensure our operation isefficient and effective.Camelot has a professional approach to everythingthat they undertake and we have established astrong and positive partnership approach to our jointinitiatives. They have demonstrated a passion anddrive to help us deliver significant sales growth innew areas of our business in a short period oftime”.Richard Melling, Customer Service Operations ManagerFigure 2.7.3.3.3 shows a sample communication used by key retailers to ensureunderstanding of the importance of clear direction to their stores on lottery POS andPPOS.226 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.7.3.3.3: KEY ACCOUNT COMMUNICATION OF SUCCESSWhat Good looks like• Correct POS, 2 working pens, playslips for all draw-based games inthe correct location and player guides in correct location• Dispensers full and correctly displayed – facing theright way, the right way up and correctly justified inthe cassette• Producing Fast Pay cards for National Lottery players andactively explaining how National Lottery games workSource: CamelotCamelot Illinois will fully engage and support the retail network with the appropriate toolsand techniques to drive sales and transform the image of the Illinois Lottery.In addition to this training program on in-store display and its subsequent compliance,Camelot Illinois will introduce additional training and communication materials to keepretailers abreast of new initiatives.Camelot also communicates through a regular newsletter and bulletins to independentand chain stores. There is a clearly integrated communication plan that also includesindustry internal communications and magazines.These communications are tailored to support the development of retailers and lotterysales, act as training aids and also provide clear messaging on retailer responsibilities,including, for example, messaging on avoiding underage sales and excessive play.Figure 2.7.3.3.4 shows an example of these communications.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 227

Section 2 Final Business PlanFIGURE 2.7.3.3.4: RETAILER COMMUNICATION AND TRAINING MAGAZINESource: CamelotLottery Sales Representative SupportCommunication provided by the sales team will be crucial to retailer success. The IllinoisLottery has 66 sales staff who visit every retailer once every two weeks . Visitingretailers every two weeks with a narrow focus on POS and inventory does not direct thesales team towards revenue growth opportunities – the role is more one of amerchandiser.With 7,500 retailers little time is spent with each retailer to fully develop the Lotterybrand and maximize sales. For example, each LSR will have around 120 stores to visit,meaning 12 or more visits per day. In reality with absence and other business meetingsthis will be more. In the UK, on average, the LSR will spend up to 40 minutes in a call,averaging eight – ten retailer visits per day depending on the geography. This providesample time for detailed review of sales performance and opportunities for growth.Camelot Illinois’ objective will be to establish a U.S. best practice sales force that isenergized, invigorated and motivated to deliver increased revenue and Net Income forthe Lottery. The focus of the teams will be directed at sales training and there will beadded emphasis on key chains to develop and engage existing and new key retailers.Confidential Information Removed8Illinois Lottery Data Room228 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCamelot Illinois’ analysis of current Illinois Lottery sales force deployment indicates thereis only one manager for many key chains. This individual would be greatly challenged totruly understand the retailers’ businesses or fully develop the Lottery in these chainaccounts. The scale of the 7-Eleven business as the Lottery’s largest retailer (at 7.3% oftotal business) would, in Camelot’s experience, warrant the support of a dedicated KeyAccount Manager.Camelot Illinois will bolster this area with a minimum of three Key Account Managers todeliver a true understanding of the retailer and to fully engage them in the developmentof the Lottery and ensure all staff are suitably trained and developed.Camelot Illinois will bring the processes and ways of working by which its sales teamsprovide support to UK Lottery retailers. Testimony to the effectiveness of theseprocesses and the teams involved is given by Tom Fender, Managing Director, HIM!who confirmed that Camelot had the best FMCG sales team, as voted by storemanagers (of larger stores) and owners, beating those of Coca Cola, Cadburys (Kraft),Wrigleys and all the tobacco suppliers.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 229

Section 2 Final Business PlanHe commented:“Camelot has a best-in-class national field salesforce, recently winning our best supplier as voted byc-store managers, beating over 40 national andglobal FMCG brands. There are very feworganizations with such a high and respected profilein the UK retail industry.Camelot’s field teams are supported by a highlyeffective and very professional head office supportteam universally perceived to be a top quartilenational account team. This team is run far morecost effectively than other FMCG manufacturerorganizations.”Tom Fender, MD HIM!Illinois Lottery sales teams will be developed so that they may confidently explain salestrends and support and train retailers with the joint benefits of increasing sales.As part of a project being undertaken within the California State Lottery, Camelot hasestablished a clear pathway for the development of the State’s Lottery sales teams andis helping them to work as partners with retailers. One key element of this approach isthe re-introduction of engagement with trade organizations and the establishment of aregular retailer forum.Confidential Information Removed230 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFigure 2.7.3.3.5 shows an example of a suitable in-store training tool for driving sales.This tool is used by the sales force in driving consistency across retailers and providesclear direction on merchandizing and will be introduced to Illinois.FIGURE 2.7.3.3.5: IMPROVING IN-STORE DISPLAYS AND EDUCATING RETAILERS(AN EXAMPLE)Summary… CONVERSION of purchase in store is where the opportunity liesIMPROVE SCRATCHCARDSGet the key games availableMake sure the dispenser is full andmerchandised to planogramFIX THE PLAYSTATIONGet it in the right locationMake sure it is always merchandised tothe BlueprintEXECUTE THE EVENT & UP-SELLActivate the current BlueprintWhere possible increase the direct localconsumer interactionSource: CamelotAn assessment of the tools currently used by the sales teams will be undertaken but allreporting and recording will be evaluated to determine the best options available.The most up to date selling and sales technology (via laptop or hand held devices) willCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 231

Section 2 Final Business Planenable LSR’s to perform their role and ensure retailers are continually trained in the bestpractices.The support of the sales teams and the relevant tools, techniques, reporting andcommunications to supervise and train retailers will support growth in the retail channelto realize the overall opportunity of an increase of $1.84 billion revenue through toFY2016.Additional TrainingTraining and relevant materials will be developed to continuously support retailers.In addition to the ongoing support and training outlined above, retailers will receive:• Detailed instruction on their roles and responsibilities, including terminal operationsas part of their induction training• Reference guides• In-store top selling tipsRetailers will be provided with the highest level of training using sophisticated tools andwill follow on the implementation of new, refreshed and consistent POS and PPOSdescribed in section 2.7.3.2.2.7.3.4 Provide Commissions and Incentives to enhance salesHave effective incentive programs for retailers toengage and motivate retailers in selling the LotteryThe reward structure for retailers needs to be carefully calibrated to ensure the rightincentive for retailers. The rewards need to reflect the level of involvement from theretailer to sell lottery products. For example, a 1% rise in the commission for Instants,based on current sales levels, would cost $10 million per year, however the retailerwould not necessarily need to do any additional work.The overall commission paid to retailers in Illinois is lower than other states (Figure2.7.3.4.1).232 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.7.3.4.1: COMMISSIONS AS A PERCENTAGE OF TICKET SALESCommissions as a percentage of sales (%)14%12%10%8%6%4%2%0%Rhode IslandOregonColoradoMichiganMarylandGeorgiaSouth CarolinaCaliforniaNorth CarolinaWest VirginiaTennesseeIndianaWisconsinArizonaOklahomaKentuckyNew MexicoMaineWashingtonIowaD.C.NebraskaOhioMissouriMassachusettsMinnesotaDelawareNew YorkIdahoVermontKansasMontanaSouth DakotaVirginiaConnecticutFloridaNew JerseyLouisianaNew HampshirePennsylvaniaNorth DakotaIllinoisTexasSource: La Fleur’s, Camelot analysisCamelot Illinois proposes to retain the current commission rate in Illinois and the existingcashing bonus structure. The funding difference between the level in Illinois and that inother lotteries could be put to better use in retailer incentives that will increase sales.Additionally Camelot Illinois will be investing $15.3 million through to FY2016 to upweightthe in-store displays for retailers to support sales growth.An annual reward program will be aligned to in-store execution and sales. The annualincentive costs of implementing a program will be $500k.This will provide a robust reward package for retailers – i.e. reducing their costs whilegrowing their overall profitability in increased sales.Case StudyCamelot has previously organized incentive programs. An example with one of itslargest grocer chains, Sainsbury’s is shown in figure 2.7.3.4.2.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 233

Section 2 Final Business PlanFIGURE 2.7.3.4.2; EXAMPLE OF ONE KEY ACCOUNT INCENTIVEOBJECTIVE:To drive an incremental £300k (+2%) Lotto sales from the Sainsbury’ s retail estate (vsCamelot index) over a 6-week period from Sunday 26 th - July 2009SUCCESSES!• Helped to stem Lotto decline by 1%(£80k)• Simple and easy to understand• Stores could win one of manysubstantial prizes• Fantastic opportunity to drive PIE andimplement positive change in store• Stores that were aware of thecompetition were engaged - this wasreflected in their resultsDEVELOPMENT!• Polarized engagement levels so plannedsell-in and support time from RSTrequired• Ensure JS Internal Comms messagesreach key staff• Provide stores with an effective POStoolkit to promote brands• Engage with Regional Management orCustomer• Service Regional coaches to enhancecompetitionRECOMMENDATION:To trial further with longer planning/delivery time and increased support from Sales teams.Engagement at a regional level to generate ‘competition’ should also be explored.Source: CamelotThis incentive delivered $120,000 uplift in sales during the six week period in theselected stores. While this was successful, Camelot has evaluated the incentive andhas recognized that wider awareness of the incentive and its purpose would have madeit even more successful. This demonstrates clearly that all programs can becontinuously improved.For the independent retail network an immediate reward scheme will be piloted.This scheme will recognize retailers reaching the appropriate level of compliance on eachLSR visit. Detailed discussions with a team of LSRs and sales managers coupled withretailer research will help determine the appropriate levels of reward and key attributesto measure.No direct benefit has been attributed to retailer incentives; however any retailer incentiveprogram will help deliver excellent in-store standards, identified as delivering $0.41 billionthrough to FY2016.2.7.3.5 RevocationCamelot Illinois will work with the State to execute state suspension and revocationorders. Camelot Illinois believes that there are three key areas that may result in suchsteps being taken:• The revocation of poor performing retailers• The revocation of retailers selling to underage players• The revocation of retailers following State investigation234 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanPoor performing retailersCamelot Illinois will segment the retailer network into sales volume bandings to tailor thesupport relevant to each segment. For example, the better performing retailers will needless focus on their selling techniques and more focus on checking they are receivingenough inventory; those performing less well will need more assistance in selling.New retailers will also receive additional calls during their first six months of trading tohelp facilitate their development and to reach sales maturity much faster.By reviewing the content and frequency of the sales call and tailoring them to the needsof each retailer, the sales team will optimize its activities and provide sufficient levels oftraining and support to the retailers.There will be retailers who sell insufficient levels of tickets. Camelot Illinois will look atthe efficacy of the current retailers. A Sales Improvement Plan (SIP) for retailers who arenot meeting minimum sales will be introduced. Assistance will be given to improveperformance. If they are unable to demonstrate sufficient improvement their terminalwill be redeployed. Camelot decisions to revoke retailer terminals based on poorperformance would be undertaken in consultation with the State.SIP will be introduced in 2012 to allow Camelot Illinois to coordinate with the relevanttrade bodies (e.g. NACS). An ongoing review, (figure 2.7.3.5.1) will be undertaken.FIGURE 2.7.3.5.1: CAMELOT’S TERMINAL OPTIMIZATION PROGRAM (TOM)1. HOW MANYRETAILERS?TOM can:• Identify the optimal networksize• Identify potential new fasciasfor expansion2. SELECTIONSTOM can:• Forecast how a store willperform• Identify reasons forperformance• Forecast incremental sales3. PERFORMANCEMANAGEMENTTOM can:• Measure actual vs potentialsales• Identify reasons forunderperformance• Identify key sales driversTOM can:• Identify potential deselections• Provide robust reasons fordeselection• Identify key store types toavoid4. DE-SELECTIONSSource: CamelotCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 235

Section 2 Final Business PlanUnderage salesCamelot is well aware of the importance of enforcing regulations that prohibit thepurchase of lottery tickets by those who are under the legal age.Retailers play a strong role in the efforts to prevent underage play. For the majority ofplayers, the retailer is the face of the lottery. It is crucial that the Lottery is committed tohelping retailers prevent underage play. Camelot trains retailers in the UK on theirobligation to uphold the law and not sell tickets to underage players.Camelot also promotes retailer vigilance through a program called Operation Child, itsunique test purchasing scheme. Using a ‘three-strikes-and-you’re-out’ system, theprogram monitors retailers’ compliance with the safeguards already in place. Developedin consultation with the National Lottery Commission, Operation Child involves over9,000 test purchasing visits to check and test retailer understanding and compliance.Retailers are visited and the small minorities that sell to a test purchaser receive on-thespotcoaching, a warning letter and follow-up visit. If they sell again, they receive asecond and potentially third and final visit. In the rare cases where retailers sell a thirdtime, their lottery terminal is removed. Due to the high level of vigilance shown byretailers during 2009, Camelot only needed to remove one terminal.Camelot Illinois will introduce a test purchasing scheme in Illinois, designed incollaboration with retailer groups, trade associations and the State.State ConsiderationCamelot Illinois will work with state agencies to ensure appropriate procedures are inplace to manage retailers in violation of state and federal law. Camelot Illinois will rely onthe State to facilitate co-ordination among state and federal regulatory and oversightagencies regarding retailer compliance.Camelot takes its social responsibility seriously and has an excellent track record.This expertise and collaborative approach will be brought to Illinois.236 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.7.4 IMPLEMENTATION PLANThe Implementation Plan for the initiatives proposed for the Retail Channel is set out inoutline in Figure 2.7.4.1.FIGURE 2.7.4.1: LOTTERY RETAILER – IMPLEMENTATION PLANQ4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4INSTANTSFY2011 FY2012 FY2012 FY2012 FY2012 FY2013 FY2013 FY2013 FY2013 FY2013 FY2013 FY2013 FY2013 FY2015Increase by 2000retailersFurther increase by1500 retailersFull vending (3000)Extended methodsof play (EMOP)implementPPOS ChangesPIE implementationRemodelling of theestate incorporatinggeo-demographicmodellingIntroduce salesimprovement plansSalesReorganizationRetailer vigilancecampaignRetailerengagementprogramCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 237

Section 2 Final Business Plan2.7.5 BUSINESS PLAN FORECASTThe contributions of the individual Retail Channel initiatives through to FY2016 areestimated as follows:InitiativeIncremental revenue increase2,000 new retailers (Phase One) (FY2012) $0.61 billion1,500 new retailers (Phase Two) (FY2014) $0.23 billionFull Service Vending (FY2013) $0.54 billionIn-store execution (PIE) (FY2013) $0.41 billionExtended Means of Play (FY2014) $0.05 billionTotal$1.84 billionThese forecasts have taken an uncompromising view of their impact as described below:• New terminals (Phase One- 2,000); the benefit is calculated at 35% incrementalbased on 50% of the average weekly sales of a current retailer; this is in line with UKexperience.• New terminals (Phase Two – 1,500); the benefit is calculated at 35% incrementalbased on 40% of the average weekly sales of a current retailer (a reduction as thenetwork is broadened, again based on UK experience).• FSVMs will realize a 35% incremental on 35% of the current average weekly sales –this reflects the impact of additional terminals and their self serve nature, i.e. nocustomer service and their positioning in-store (traditionally alongside other vending).An average FSVM will start at around $650 per week versus an existing retailer whowill average $5,000+ per week.• In-store execution has been calculated to reach full benefit in year 4 (FY2015) with aphased benefit as retailers and the sales force understand and implement the bestpractices. The impact of PIE is based on best practice in the UK.• EMOP will realize a 1% incremental benefit in line with Camelot’s experience withTesco in the UK.238 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.7. SUPPORTING INFORMATION2.7.A ADDITIONAL INSIGHTSVolume and mix of retailers in IllinoisIn comparing Illinois with other state lotteries, Camelot Illinois has chosen Ohio,Michigan and Pennsylvania given the demographics of these states, their proximity andtheir lottery operations. Figure 2.7.A.1 shows that Illinois has a low penetration withtotal revenue per capita also low compared to other states ($162 per year versus $245 inPennsylvania).The Illinois Lottery is ranked 39 th in terminals per 100,000 population when compared toother U.S. lotteries. The Lottery has 59 terminals per 100,000 compared to 66 and 79 inPennsylvania and Ohio respectively. This means that access to the Lottery is limited andreduces the opportunity for sales.There is clear scope to deliver a targeted expansion of the network.FIGURE 2.7.A.1: RETAILERS PER 100,000 POPULATION AND COMPARATIVE SALESPER CAPITAMAVTORMIRIMENHWVGANYSDSCMT MOHDCCTMDARFLNJPATXNEINIL7777797172736566677165598391 93 9810180 82807980124122107115BenchmarkOthersMADCNYMDNJCTPAMIRISCFLOHTXKYNHVAILMVTDENCINWVCOLA$407 $669$298$337$290$282$245$238$227$220$214$209$187$180$180$173$162$162$154$139$138$114Instants$98$109 Online$91No BreakdownsSource: La Fleur’s 2010 and LEK AnalysisCompared to the selected peer states, the Illinois Lottery also has a higher proportion ofstores categorized as ‘C-Stores with Gas’ than other states, and has little presence in bigbox retailers and no presence at entertainment venues nor a kiosk presence. (Groupedas other in figure 2.7.A.2.).Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 239

Section 2 Final Business PlanFIGURE 2.7.A.2: LOTTERY RETAIL MIX BY STATE100%90%80%70%60%50%40%30%20%10%0%YGrocers C-store C-store/Gas Restaurants Liquor StoreSource: La Fleur’s/LEK Analysis, 2010Information in the data room shows that the state’s biggest retailer is 7- Eleven (7.3% oftotal sales from 361 stores) and Jewel-Osco (3.4% from 204 stores).The review of the available sales data indicates the following:• There is a heavy reliance on the convenience and gas sectors. 7-Eleven represent7.3% of total sales and the two sectors make up over 70% of sales for the top tenretailers.• The mix of key accounts does not include a number of big box or different sectorretailers, e.g. Target, Walgreens (564 stores in Illinois) Wal-Mart, and CVS, withlimited distribution in others (e.g. Sears, 34 from 118 stores). There is also noevidence of a kiosk operation (for shopping malls) or an option for entertainmentvenues (e.g. Chicago Cubs / Chicago Fire).• Retailers (e.g. Circle K and Casey’s General Stores) rank high in total sales butunderperform against other retailers when measuring average annual sales per store.• Figure 2.7.3.A.3 shows that smaller retailers provide an excellent return per store(e.g. JJ Peppers Food, only 16 stores but ranked 12 th in overall sales and number onefor average store sales).240 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.7.A.3: ILLINOIS LOTTERY RETAILERS RANKED BY AVERAGE STORE SALESSales ($)$500,000$450,000$400,000$350,000$300,000$250,000$200,000$150,000$100,000$50,000$0JJ PEPPERS FOOD STOREJEWEL-OSCODOMINICKSROAD RANGERAYERCO CONV CTRSCHNUCKS7-ELEVENEXPRESS LANEGAS MARTGATEWAY NEWSTANDGAS CITYCOUNTY MARKET LIQCIRCLE KHUCKS FOOD & FUELSPEEDWAYRetailers ranked by average sales per storeTHORNTON GAS&FD MTSHELL FOODMOBILCASEYS GEN STOREBP CONNECTAverage Sales by Store- InstantsAverage Sales by Store- DBGSource: Camelot analysis of data room informationInconsistent in-store presentationCamelot research and site visits to Illinois Lottery retailers revealed that there is aninconsistent display of the Lottery in stores. Often retailers have created their owndisplay arrangement or signage. As a result, the player experience varies by store,players having to go past other in-store presentations to find lottery products, whilstfinding where to play can also be a problem. This lack of consistent display is a particularchallenge for lapsed and occasional players and does not encourage new players to trythe games.Figure 2.7.A.4 shows examples of the inconsistent standard of presentation.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 241

Section 2 Final Business PlanFIGURE 2.7.A.4: IN-STORE PRESENTATION IS INCONSISTENT AND IN SOME CASESPOORSource: Camelot Field Visits, 2010There is good compliance with updating jackpot data and focus on publicizing winners,but in the latter case the execution is often confused with dated information (and out ofdate), as shown in the figure below (Figure 2.7.A.5).FIGURE 2.7.A.5: PRESENTATION OF WINNING TICKETS/ INCONSISTENCIESSource: Camelot Field Visits, 2010The photographs demonstrate that the in-store environment is inconsistent and lacks anappeal for the consumer, with mixed messaging and poor merchandising. There is oftennowhere convenient for players to fill out play slips or to scratch off their Instants.Promotional material is often of poor quality and haphazardly located. As a result, theIllinois Lottery product does not stand out in high traffic areas, and that means losing theopportunity for consumers to see and purchase Lottery product.242 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.8 E-COMMERCECAMELOT ILLINOIS’ STRATEGYCamelot Illinois will deliver asuccessful Internet Pilot that isaccessible by PC and mobiledevices, selling Lotto and MegaMillions tickets together with anintegrated subscription program totransform sales. The site willincorporate a suite of industryleadingcontrols to manageresponsible gaming as required bylocal legislation.INSIGHTSIn d e x120010008006004002000100 1002922484163372004/05 2005/06 2006/07 2007/08 2008/09 2009/10Registrations (Indexed)568431785UK Interactive Sales (Indexed)GROWTH IN NATIONAL LOTTERY INTERNET CHANNEL TICKET SALESAND REGISTRATIONSIllinois has higher than average Internet penetration, with 86% of Illinois Lotteryplayers having access to a computer, and 93% of those online accessing the Internetdaily 1 .The performance of the Illinois website in respect of numbers of visitors hasdeclined over the last 12 months when compared to peer statesIn 2006, 16% of Illinois Lottery players claimed they no longer play because it isn’tconvenient 2 .The take-up level of the current subscriptions program is low at 0.6% of total salesand sales have remained flat since 2005, generating just $3.6 million annually.STRATEGIES AND ACTIVITIESPrimary activities include: Improve the existing website to offer 1) a more user-friendly subscription program;2) a consumer-focused loyalty program; and 3) email alerts for all games. Sell Lotto and Mega Millions tickets via a new transactional Internet site developedusing Camelot’s 10-step process that ensures every element incorporates playerinsights. Enable mobile play. Build the Internet platform to provide flexibility for additional games on the site, aslegislation allows.FINANCIAL RESULTSRunning the Internet Pilot (excluding addition of the whole game portfolio and extendingaccess to mobile devices) will generate $249 million in incremental sales in the five years5669946761Simmons 2009 and NVision Research 20092IPSOS 2006Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 243

Section 2 Final Business Planto FY2016 ($276m sales through the Internet channel, less $27 million cannibalizationfrom the retail channel.WHY CAMELOT?Camelot is the best choice to lead this opportunity because it has operated the world’smost successful Internet lottery for the last six years. Other key highlights of Camelot’sexperience include: Camelot is the only company in the world that delivered a successful interactivelottery offering of the scale and standard required by the Private Manager. The Internet Pilot is envisioned to last four years and in the UK Camelot increasedInternet sales from $18.4 million to $433 million in the same time period. In the UK, Camelot has over 6 million registered Internet lottery players and 800,000weekly players, generating more than $1 billion in sales or 13% of Camelot’s totalannual sales. UK players are supported by an award-winning CRM (Customer RelationshipManagement) program – 1.2 million players registered in the last 12 months and theplayer retention rate is 78%. The UK website provides the highest levels of protection to players (both in terms ofdata security and responsible play) – this functionality combined with the visual frontenddeveloped by Camelot cannot currently be provided by any lottery equipmentvendors on a standalone basis. Camelot has successfully transformed its subscription program achieving over 570%growth since subscriptions were launched on the Internet (from $26 million in 2004to $175 million in 2010.) Camelot’s mobile sales channel launched in 2004 and has enjoyed a growth rate of600% from 2004 to 2010 and is now being enhanced with a new smart phoneapplication to keep pace with changes in the mobile marketplace.244 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

2.8.1 INTRODUCTIONCamelot Illinois will deliver a successful InternetPilot, selling Lotto, Mega Millions and promotingsubscriptions, together with an industry-leadingsuite of controls, managing responsible gaming asrequired by Illinois legislation. The Internet Pilot willbe extended onto mobile devices.This section describes the strategies and activities Camelot Illinois will implement tolaunch and manage a successful Internet Pilot to include access via mobile devices, andto include an improved subscriptions program.The Internet Pilot as envisioned by 20 ILCS 1605/7.12, provides the opportunity to drivesales in a well established channel, and has the potential to be a significant value driverfor the Lottery. This potential arises from the fact that Internet distribution platforms canadd value to the Lottery on multiple levels.InsightsE-Commerce is no longer a novelty with the purchase of products via the Internet nowcommonplace. Camelot’s research shows that: Illinois has a high level of Internet penetration in the home of 80% 3 . 70% of Internet users in Illinois claim to have bought a product or service on theInternet in the past six months 4 . The Internet is increasingly being accessed by devices other than PCs, with 38% ofUS consumers stating they use their mobile phone to access the Internet at leastonce every month 5 .Camelot’s Prior ExperienceCamelot operates the world’s largest and most sophisticated Internet lottery. Camelothas been so successful at driving traffic to the National Lottery site that it is now one ofthe UK’s Top 20 e-commerce sites 6 . The six million registered Internet players and800,000 weekly players generate $1 billion of sales every year, for a total of 13% ofCamelot’s annual sales. The Camelot website offers the full range of Online and InstantWins games for purchase on a daily basis or on an ongoing subscription basis.Many countries have launched Internet lottery offerings but none have successfullygrown their service year-on-year with double digit growth as Camelot has done.3 Forrester North American Benchmark Survey 20104 Forrester 20105 nVision Research: Base: Owners of Internet-enabled phones aged 16+, 20096 ComScore 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 245

Section 2 Final Business PlanCamelot’s mobile channel and subscriptions program have been very popular withplayers.The strong Internet sales growth has been primarily due to the expertise of the CamelotInternet sales and marketing team. These subject matter experts have the tools andinsight to continually drive new players to the site and then generate value from existingplayers through Camelot’s award winning Customer Relationship Management (CRM)program. 7 Camelot registered 1.2 million new players in the past 12 months and theprogram has a player retention rate of 78%.Camelot built the National Lottery website to the highest standards, and is as obsessiveabout player protection on Interactive platforms as in retail. Camelot built into thewebsite a range of player authentication and safety measures offering the highest levelof protection to players: Geo-location checks to ensure that players are located within the UK when theypurchase a ticket, as required by law. Identity checks to ensure all players reside in the UK and are over the legal playingage. Electronic Payment Technology including 3D-secure transaction verification toensure that players are in possession of the payment card they are using for thepurchase. Play Limits supported by GamCare (the leading UK charitable group for theprevention of problem gambling.) CRM tools to manage email alerts to keep players informed of important accountinformation (the expiration of a payment card or ticket, a win, etc.) as well as toinform them of the latest jackpots, if they choose.This offering is unique to Camelot. The robust player protection tools are built into thepowerful back-end support and processing engine. What the player sees, however, isthe user-friendly and visually appealing front-end developed exclusively by and forCamelot. This combination cannot currently be provided by any existing lotteryequipment vendor on a standalone basis. To date, Camelot is the only company in theworld that has delivered a successful Internet lottery offering of the scale and standardrequired of the Private Manager.Strategies and ActivitiesCamelot Illinois is committed to running a successful Internet Pilot program for theIllinois Lottery. However, even before launching the Internet Pilot we plan to beginimproving the current Lottery web offering to make the current functionality more userfriendly.Further, should the Internet Pilot be successful, Camelot Illinois will be wellplaced to roll out games in addition to Lotto and Mega Millions if legislation allows. Inthis way Camelot Illinois believes that there are three clear phases to its Internetstrategy over the term of the Private Manager Agreement.A) Pre-Pilot PhaseThe pre-pilot phase involves remodeling the existing website, with an improvedsubscriptions program, to supplement the existing telephone and mail purchase routes.Refreshing the website design will improve usability, and enable players to sign-up tohave results, details of rollover draws or large jackpot amounts emailed to them for all7 Best Use of Data and Best Use of CRM in a Marketing Campaign – UK Direct Marketing Awards 2009.246 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

games. Players could choose to receive these emails via their smart phone. Experiencefrom the UK shows that the simple addition of jackpot alerts for all games helps keepinfrequent players engaged with the game portfolio.As part of this refresh of the Illinois Lottery web presence, Camelot will create anInternet Loyalty Program for players, allowing players to accrue rewards for their play.The full multi-channel Loyalty Program is described in section 2.9.3.4.This work will ensure that the Lottery is prepared to maximize the revenue opportunityof the Pilot when it launches. The refreshed design will improve the consumerexperience, which in turn will boost the number of players visiting the site and frequencyof visit in readiness for the Pilot.B) Pilot phaseThe launch of Lotto and Mega Millions on the Internet will transform the Illinois Lotteryinto the first multi-channel lottery in the U.S. Internet ticket sales will be driven through abest-in-class lottery Internet advertising campaign accompanied by a sophisticated CRMprogram (described in detail in section 2.9).The Loyalty Program will initially launch on the website. This will then be supplementedwith the rollout of the Loyalty Program in lottery retailers tying in with the installation ofnew terminals as they are added in-store.The pilot will then extend to enable ticket sales through multiple devices, such as mobilephones, and through social media sites, such as Facebook and FourSquare. This willenable residents to access the Lottery but only from within the State. The extension ofthe platform will be accomplished while maintaining responsible play. Each rollout of anew capability will be supported by underage and excessive play protection tools for alltransactions.Increasing numbers of people are using mobile devices to access the Internet. In the UKCamelot generates 2% of all Internet sales through smart phones. The new website willbe re-purposed to enable player access through smart phone handsets, as well as tabletproducts such as the iPad.C) Post-Pilot PhaseCamelot Illinois will develop the Internet platform to allow flexibility, in readiness for thesale of tickets from the full Online Game portfolio should the legislation allow. Thiswould be accompanied by a range of engaging Interactive Instant Win Games (IIWG)with an array of additional consumer features to drive sales.Provided permission is granted, Camelot intends to add the Powerball, Pick 3, Pick 4 andLittle Lotto games to the website offering, together with IIWG. Camelot Illinois will alsolaunch the Lottery onto a Web TV platform.Financial BenefitBased on running the Internet Pilot, Camelot expects sales from the Internet will add$276 million in annual sales by FY2016 less $28 million through cannibalization.2.8.1.5 Response to Schedule 2.1Camelot Illinois’ proposed strategies and activities in respect of the operationalresponsibilities of the Private Manager address the following section of the Step 2 RFP.The technical implementation of these PMA responses can be found in Section 2.11.10Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 247

Section 2 Final Business PlanArea Description SectionTechnologyInternet and MobileProvide, maintain and upgrade as necessary thefunctionality to sell Lottery Tickets via the Internetor mobile devices, which functionality shall includegeo-location, age verification, and electronic2.8.3.1 and 2.8.3.2payment technology; provide and maintaincustomer relationship management.Website Design, maintain and host the Lottery website 2.8.3.1 and 2.8.3.2SubscriptionsDevelop and implement a subscription program forLottery Games2.8.3.1 and 2.8.3.2The following sections describe:Insights 2.8.2Strategies and activities 2.8.3Implementation Plan 2.8.4Business Plan Forecast 2.8.5Supporting Information 2.8.A and 2.8.B248 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

2.8.2 INSIGHTSThis section offers Camelot observations relevant to the launch of the Internet Pilot.2.8.2.1 Channel Overview - Illinois and U.S. e-commerce environmentThe introduction of the Internet channel via the Pilot program presents the Lottery with agreat opportunity to increase penetration and frequency of play. Camelot’s research witha number of leading companies such as Forrester and Simmons shows that there is ahigh propensity already for people to play Lotto and Mega Millions via the Internet:High Internet Penetration in IllinoisIllinois has a high level of Internet penetration in the home of 80%, and according to thedemographic data available it is estimated that 86% of Illinois lottery players have accessto a computer . This is higher than the U.S. average of 76% . In addition, with most ofthese consumers accessing the web on a daily basis (of those consumers who areonline, 93% access the Internet daily 10 ), this fact alone shows the Lottery has promisingpotential on the Internet.High Propensity to Purchase via Internet in Illinois70% of Internet users in Illinois claim to have bought a product or service via the Internetin the past six months 11 . In Illinois high income groups are 70% more likely to regularlypurchase via the Internet than low income groups 12 . This difference between thebehavior of low and high income groups is more pronounced in Illinois than in the rest ofthe US, where high income groups are 52% more likely to purchase via the Internet 10 .Simply making Lottery tickets available for sale via the Internet is likely to extend Lotteryappeal within the higher income demographic which already has shown greaterpropensity to shop online for other goods and services.Players are Looking for Convenience in IllinoisIn 2006, 16% of Lottery players within Illinois claimed that they no longer play because itisn’t convenient, so the convenience of purchasing on the Internet is likely to attractfurther new and lapsed consumers 13 .Mobile OpportunityThe adoption of smart phones is growing rapidly and will soon eclipse standard cellphones – by the end of next year, an estimated 49% of U.S. cell phones will be smartphones 14 . A growing number of U.S mobile phone owners are already using their phoneto access the Internet, with 38% stating they do so at least once every month 8 .Mobile e-commerce (or M-Commerce) is on the rise in the U.S. ABI research predictsthat consumers will make $2.4 billion in purchases through their mobile phones this year,up 100% from $1.2 billion in 2009. The same research also shows that 25% of thosesurveyed plan to make a purchase via their cell phone before the end of this year.8Simmons 2009 and NVision Research 20099Internet World Statistics 200910nVision Research 200911Simmons 200912Forrester 200913Ipsos Reid 200614Nielsen 2009Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 249

Section 2 Final Business PlanThis huge predicted growth is driven by consumer acceptance, growing smart phonepenetration and increasing availability of desirable applications. Today, the leaders in M-commerce are eBay and Amazon (Amazon enjoyed sales of over $1 billion via cellphones last year).GamingAdults in the U.S. have a high propensity to play games on an electronic device. In theU.S. the already high presence of game consoles has continued to increase with six inten households owning video games consoles by the end of the last decade. Thisincludes 44% of households in the 44-62 year old ‘baby boomer’ demographic and 70%of households made up of 27-43 year-olds 15 . Interestingly, during the economicdownturn, as consumers have tightened discretionary spending in many categories,electronic device sales have held steady and game console sales have actuallyincreased. It follows that these consumers may be interested in playing lottery gameson the Internet.2.8.2.2 Existing Website PresenceThe Lottery has a solid website presence providing consumers and retailers withinformation regarding operations, current draw results and promoting awareness ofnews, winners, and the latest Instants games. This information portal uses a similardesign and layout to other state operated sites and is not currently designed to take thenext step of developing into an e-commerce site. In fact, Illinois ranked 38 out of the 50states in the most recent Brookings Institute survey of state government web sites,scoring 41.9 out of 100 points awarded over a dozen different categories assessingavailability of information, security of information, and the ability to transact online. 16There is room to improve the features and the user-friendliness of the Illinois Lotteryweb site.When compared to peer states of similar size and demographic make-up, Camelot cansee that the Pennsylvania Lottery website (which includes a Player Club) has increasedvisitors to its site over the past 12 months. Conversely, the Illinois Lottery website hasbeen in relative decline, as shown by Figure 2.8.2.2.1, declining to just over 20% of allvisits to the three websites.15Deloitte 200916Brookings Institute, State and Federal Electronic Government in the United States, 2008250 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

FIGURE 2.8.2.2.1 WEBSITE MARKET SHARE COMPARISON TO OTHER PEER USLOTTERIESVisits to US Lottery websites50%42%34%26%18%10%May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10MonthsPennsylvania Illinois OhioSource: Experian Hitwise US2.8.2.3 Scale of opportunityExtending the sale of lottery tickets to the Internet is the fundamental objective ofsection 20 ILCS 1605/7.12This represents a ground-breaking opportunity for Illinois to grow the Lottery in a waythat is relevant and attractive to consumers that fits with the increasing trend towardsInternet shopping in the U.S.The Internet channel is expected to increase Lottery participation rates among newdemographics by appealing to new, lapsed and infrequent players. Managed effectively,the Illinois Lottery website will also encourage greater frequency of play resulting inhigher player spend, within the boundaries of responsible play.Figure 2.8.2.3.2 demonstrates the differing level of spends between retail, Internet andmulti-channel players. Figure 2.8.2.3.1 shows that in the 25-44 year old age group in theUK, the rate of Internet play far outpaces retail play. In the 45-54 year old age group, andin the 75+ age group, Internet play exceeds retail play slightly. For all other age groups,retail play predominates. (Note that in the UK the legal age to play is 16 as compared to18 in Illinois.)Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 251

Section 2 Final Business PlanFIGURE 2.8.2.3.1 BREAKDOWN OF UK INTERNET AND RETAIL PLAYER BY AGEUK Internet players skew towards the younger demographics% of the player base30%25%20%15%10%5%0%16-18 19-24 25-34 35-44 45-54 55-64 65-74 75+InteractiveRetailAge (years)Source: CamelotFIGURE 2.8.2.3.2 BREAKDOWN OF UK SPEND BY CHANNELThe spend of UK Internet players is well above the spend of retail network players.The spend of players who play through retail and the Internet is even higher.claimed spend ($)$14$12$10$8$6$4$5.03$9.80$11.81$2$0Retail Interactive Multi-channelPlayer by channelSource: CamelotGiven that use of the Internet, particularly purchasing, is more commonplace than whenCamelot launched the Lottery on the Internet in the UK in 2003, Camelot believes thatIllinois is likely to outperform the UK experience when launching the Internet Pilot. Asthe first state to launch a Lottery Internet service, Illinois will be in a unique position tomaximize its position as first mover in raising awareness and interest withindemographic groups that may be disengaged with the Lottery at present.There is significant untapped potential for the Lottery operating on the Internet. Thelegislative change proposed by ILCS 1605/7.12 is therefore timely. This fact wasconfirmed by Camelot’s research study which confirmed that players are keen to play via252 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

the Internet, as it removes the inconvenience of having to go in-store to buy 1 . The studyalso showed: Players believe it will be more engaging: “I’d want it to be colorful and exciting so you want to come to the site “ “It’d probably have music and sounds” Players believe it should be more relevant in line with their recent Internet shoppingexperiences: “I’d like the site to be user-friendly. I’d like a minimum of clicks and easy tonavigate.” “Make the language of the site in plain English” “It should have a system for adding and subtracting money. “ Players expect to play more frequently on the Internet: “I would play more - I think there would be quite a lot of people who can’t get to aplace to buy a ticket, and half the time everyone does everything behind thecomputer anyway. I just think a lot of people will play more.” “You don’t want to stand in a long line when the jackpot is up” “If I can’t run to the store and get it (my ticket), like at 10 o’clock on the dot, I canget it in there right away” “I like the fact I can just hop on the computer if I have a feeling. Sometimes you getthis feeling and you think ‘I’m gonna win’, but maybe I don’t feel like going to theMobil gas station“ “I’d play more too because there’s a distance factor - If you want to go out to a storeyou’ve got to go over there.” There is also significant potential for an Internet subscriptions program: “I’m personally interested in this concept, that’d be the only way I’d do it”The legislation makes clear that it is imperative that the sale of lottery tickets on theInternet is limited, “to transactions initiated and received or otherwise made exclusivelywithin the State of Illinois” and that individuals, “must satisfy the verification procedurebefore he or she may establish one Internet lottery account and purchase lotterytickets.”This is where Camelot’s experience of setting up, running and monitoring the UKNational Lottery website, together with the suite of Internet player protection measuresas utilized in the UK will be invaluable. Camelot regards a successful Pilot as one that:Ensures players are over 18, present within the State, properly authenticated andverified with each transaction and with play limits in place (For example, if you visitwww.national-lottery.co.uk you will not be able to buy tickets if you are not withinthe UK.)Allows players a safe and easy method of playing the Lottery at their ownconvenience.17Rabin Player Research 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 253

Section 2 Final Business PlanExpands participation into new demographics by appealing to new, lapsed andinfrequent players.Simultaneously grows sales and Net Income through the Internet sales and the retailchannel.Camelot’s credentials as an e-commerce operatorWithin the four year time frame envisioned for the Internet Pilot, Camelot had grown UKInternet sales from $18 million in year one (FY2004) to $433 million in year four (FY2007).This growth rate was also ahead of the market growth rate for e-commerce across thesame period.FIGURE 2.8.2.3.3 GROWTH IN NATIONAL LOTTERY INTERNET CHANNEL TICKETSALES AND REGISTRATIONS12001000994800785676Index600400292248416337568431566200100 10002004/05 2005/06 2006/07 2007/08 2008/09 2009/10Registrations (Indexed)UK Interactive Sales (Indexed)Source: CamelotThe Internet channel now contributes 13% of total UK sales annually with FY2010Internet sales reaching $1.03 Billion.Camelot has the fastest growing website in the UK,ahead of Facebook and GoogleSource: UK Online Measurement (UKOM), powered by Nielsen – Sep 2, 2010254 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

As Figure 2.8.2.3.4 shows, when compared to other Internet lotteries Camelot hasgrown the Internet channel at the fastest rate.FIGURE 2.8.2.3.4 UK NATIONAL LOTTERY INTERNET SALES GROWTH FAR EXCEEDSPEERSSales as percentage of business(%)14%12%10%8%6%4%2%0%1 2 3 4 5 6Years since internet sales launchedCamelot (UK)Norsk Tipping (Norway)Sisal (Italy)Tatts Lotteries (Australia)BCLC (Canada)La Francaise des Jeux (France)ONLAE (Spain)Svenska Spel (Sweden)Veikkaus (Finland)Lottomatica (Italy)Source GBGC data, Camelot analysisThe UK National Lottery site and its accompanying advertising have won numerousawards: WebUser ‘Best of the Web’ Review:” Overall, the new website is a much slickerexperience” New Media Age (NMA) Magazine Awards, (New Media) Best Integrated Campaign2008 NMA Effectiveness Awards, Best Retail Website 2006 AOL Planning Awards, Best Integrated Campaign 2009 Marketing Connect Awards, Best use of email in a CRM (Customer RelationshipMarketing) campaign 2009.This record of achievement is a result of Camelot’s expertise in bringing this technologyto life via E-Commerce. E-Commerce requires the optimization of every customer touchpoint, whether it is website messaging, the emails sent to players or digital advertising.Camelot’s approach to delivering this e-commerce philosophy is to:Architect the front end Graphical User Interface (GUI) to the highest possiblestandards by using consumer insight to drive the delivery of a site that consumerslove. Camelot maintains the highest standards of usability and accessibility by beingcompliant to Worldwide Web Consortium W3C accessibility standards and playerprotection mechanisms.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 255

Section 2 Final Business Plan Bring best-in-class FMCG marketing principles and experience that apply to theInternet. Camelot ensures that the games within the portfolio meet with consumerneeds (as discussed in section 2.5.3.1) and that players are communicated withthroughout the player lifecycle via an award winning Customer RelationshipManagement (CRM) program. Expertly create a multi-channel experience. Camelot communicated and engagedwith retailers when the UK National Lottery website launched, to alleviate theirconcerns and to ensure that one channel did not cannibalize the other.Camelot’s market entry strategy for Internet services and the application of integratedmarketing plans in the UK have allowed continued growth of the Internet channel whilesimultaneously achieving strong growth in the traditional retail channel.Camelot’s 10-step approach to creating the optimum website is grounded in a wealth ofE-Commerce expertise. The underlying technology that enables the site to function isjust one of these steps (see Figure 2.8.2.3.5 below).FIGURE 2.8.2.3.5 – CAMELOT’S 10-STEP APPROACH TO DELIVERING THE OPTIMUMWEBSITE.Confidential Information Removed256 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Once the site is launched, E-Commerce plays a vital and continuing role in maximizingthe success of the website. Camelot believes that successful E-Commerce includes: Constantly refining the site to meet changing needs of players, which minimizes costof acquisition and maximizes marketing ROI. Using best-in-class authentication measures, to ensure players are always offeredthe highest levels of protection (e.g. Experian identity checks, Quova Geo-locationchecks, Electronic Payment Technology including 3D secure transaction verification). Continuously testing alternative screens with players before including them on thewebsite (this applies to everything from the content and creative used on the sitethrough to functionality and journey flows). Managing player journey flows (i.e. the number and pattern of clicks it takes a playerto complete a particular task), to understand the points at which players drop out ofthe registration process and why, as well as to what extent improvements in eacharea would increase sales. This granular understanding enables effort to be focusedon the areas that deliver real results, which increases player yields and reduceslapsed players.The National Lottery website was custom built to Camelot’s requirements and is anexample of business practice defining the technology platform, rather than reverse. Thisis the approach Camelot will follow in Illinois. By taking this holistic e-commerceapproach and using Camelot’s 10 step process, and creating a flexible website platform,Camelot has successfully managed the key dynamics of the National Lottery website inthe UK, leading to Camelot being named the most successful Internet lottery in theworld. 1Multi-channel management of the LotteryIn countries that currently have both Internet and retail lottery offerings, the Internet isoften perceived as a competitive channel to a traditional retail network. This can causelotteries to promote their Internet offering ineffectively – as to do so effectively wouldpotentially cause friction with the retailers who lose their commission earnings if playersare attracted elsewhere to play.To learn how best to handle this friction, Camelot commissioned a study to assesscannibalization between the retail and Internet channels of the existing web-enabledlotteries around the world. The study conducted by Global Betting and GamingConsultants (GBGC) in June 2010 concluded there was little or no cannibalization asshown in Figure 2.8.2.3.6:FIGURE 2.8.2.3.6 CANNIBALIZATION SURVEY DATALottery Sales Internet Lottery CannibalizationLottery(£,000)Sales (£,000) of retail?Camelot 5,149 488 NoBritish Columbia Lottery Corporation 954 24 Year 1 onlyLa Francaise des Jeux 9,214 273 SlightIrish National Lottery 815 1 NoLottomatica 9,435 76 No18 GBGC 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 257

Section 2 Final Business PlanLottery Sales Internet Lottery CannibalizationLottery(£,000)Sales (£,000) of retail?New Zealand Lotteries 908 27 NoNorsk Tipping 8,629 693 NoONLAE 9,465 13 NoSisal 3,776 5 No (new)Svenska Spel 4,844 645 NoTatts Lotteries 2,348 78 NoTipos 5,186 28 NoVeikkaus 1,189 102 NoSource: GBGC 2010In reality, the Internet appears to be a complementary channel, not a competitor to thetraditional retail channel. This is because of its ability to attract customers with differingdemographic profiles utilizing the greater convenience of the Internet shopping model.Camelot’s experience is that both traditional retailers and lotteries have seen their totalretail revenues grow while Internet channels have grown exponentially at the same time.Camelot’s success in simultaneously growing sales across both retail and Internetchannels is due to its proactive engagement with retailers through the launch process,combined with the carefully developed communications programs where marketingmessages and media selections are planned to ensure a positive effect on all channels.Camelot also builds on existing retail relationships. It is key, for the Lottery to engagewith the retailers as a stakeholder to develop and share this understanding with them toavoid any misconception of the nature of any ‘threat’. For example, in the UK Camelotadvertises its Internet products on Tesco’s website, the UK’s largest grocer.It is due to this multi-channel capability and performance that Camelot has been rated asthe most successful Internet lottery in the world by GBGC who are a specialistinternational gambling consulting group.For the smooth introduction of new channels, Camelot has an established approach,dialogue and partnership with the relevant UK trade associations including, amongothers, the National Federation of Retail Newsagents (NFRN – representing 20,000+small retailers), and the Association of Convenience Stores (ACS), who are closelyaligned to NACS in the U.S. Camelot Illinois will fully engage with the appropriate partieswithin the State to advise and reassure on the overall benefits of a multi-channelapproach and to proactively address any issues raised.258 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

2.8.3 STRATEGIES AND ACTIVITIESCamelot Illinois is committed to running a successful Internet Pilot program. However,prior to the Internet Pilot there is an opportunity to improve the current Lottery weboffering. Should the Internet Pilot be successful Camelot Illinois will be well placed to rollout games in addition to Lotto and Mega Millions if legislation allows. In this wayCamelot Illinois believes that there are three clear phases to its Internet strategy over theterm of the Private Manager Agreement.2.8.3.1 Pre-Pilot: Remodel existing website including subscriptions programObjective: To refresh the website offering an improved subscription service and newloyalty program so that the consumer experience is enhanced.Insight: The Illinois Lottery website does not appear to be engaging consumers and hasa declining relative share of visits to lottery websites.Subscriptions ProgramThe Lottery already operates a facility for players to subscribe to Lotto, Little Lotto andMega Millions games. Players can apply for a subscription which operates for amaximum fixed period of one year and may subscribe via telephone or mail. The level oftake-up of the current subscription program is very low and has remained flat for severalyears generating just $3.6 million annually.Camelot saw a relatively similar level of sales with its subscription program in the UKwhen it only offered via a traditional telephone or mail application service. Camelotredeveloped the subscriptions program, launching it on the Internet in January 2004. Thesubscriptions program has since been further improved and is now fully integrated intothe website, powering revenue growth. As can be seen from the graphic below,Internet subscriptions far outpace traditional offline (telephone and mail) subscriptionrates. This has been a key driver of increased revenue for the UK Lottery.FIGURE 2.8.3.1.1 GROWTH OF UK SUBSCRIPTIONS PROGRAM, DEMONSTRATINGSTEP CHANGE IN REVENUE ONCE INTEGRATED WITH WEBSITE OFFERINGAnnual Sales ($Mn)$200$180$160$140$120$100$80$60$40$20$01998/991999/002000/012001/022002/032003/42004/052005/062006/072007/082008/092009/10Internet Offline TotalCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 259

Section 2 Final Business PlanCamelot Illinois will improve the Lottery’s subscriptions program via the existing websiteat the earliest opportunity, by providing an on-screen application form that can besubmitted without the need to be printed and mailed.Loyalty ProgramThe Lottery does not currently appear to provide ‘rewards’ to its players, despite thefact that loyalty programs are commonplace among other state lotteries, and incomparable industries such as the fast moving consumer goods (FMCG) retailers, bankand airline companies. The objective of the Loyalty Program is to responsibly drivefrequency of play and improve retention across all sales channels by rewarding thoseplayers who play lottery games on a regular basis.Camelot Illinois will introduce a Loyalty Program that engages players in both retail andInternet environments with the Lottery and creates a one-to-one marketing tool enablingtargeted CRM and providing the Lottery with valuable information about these players.The Loyalty Program will offer attractive rewards supported by major brands andretailers.In line with Camelot’s philosophy of consistent play at responsible levels of spend acrossa broad population of Lottery participants, players will be rewarded for regular play,rather than the value that they spend. It will commence by offering players the chance toenter draws for non-cash and ‘money can’t buy’ prizes, such as tickets to sell out events,signed sports merchandise, etc.Additional detail on this activity can be found in section 2.9.3.4Email alertsBuilding on the existing success of the Lottery in offering email alerts for Mega Millionsand Powerball for Office Pool players, Camelot Illinois will expand and improve the rangeof emails available to players. Using analytic tools and consumer insight, Camelot willimplement its extensive email marketing knowledge to improve the impact of each emailsent.By offering players an email alert service on all games when there is a rollover, andoffering to send them the draw results, the Lottery will provide a useful value-addedservice for players, and at the same time acquire player data. Capturing this player datacreates a one-to-one marketing relationship that provides the Lottery with a strong‘prospects’ base ready for the launch of the Internet Pilot site.The popularity of these services can be illustrated by the fact that half of all UK NationalLottery Internet players have opted-in to receive emails (covering results, rollovers, newsof latest Instants released, etc.). The emails sent also generate revenue. Camelot knowsthat on average in the UK, over 12% of the people who receive an email with rolloverinformation go on to make a purchase because of the email 1 . This is a high conversionrate compared to the industry average email conversion rate of 1.73% 20 . Our experienceshows that players want to play when there is a big jackpot – and the Lottery can ensureplayers are informed of the jackpots at these times when they are most likely to play.As well as adding email services, Camelot Illinois will simplify the design of the homepage to prominently include all the latest results and raise the profile of forthcomingjackpots for upcoming draws as well as more prominently displaying winner stories.19Camelot20Direct Marketing Association 2010260 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Camelot believes that this will improve sales by making more people aware of jackpotsand winners.2.8.3.2 Pilot: Provide, Maintain and upgrade as necessary the functionalityto sell Lottery Tickets via the Internet or mobile devicesObjective: To drive Net Income by offering Lotto and Mega Millions on a transactionalwebsite, accessible from multiple devices and with world class player protectionmeasures.Insight: Illinois has a high level of Internet penetration and 70% of users have purchasedproducts or services through this channel.The new transactional site for the Internet Pilot will be created using Camelot’s 10-stepprocess (as illustrated previously by Figure 2.8.2.3.5). This process is used to ensure thatevery element of e-commerce development is based on insight from players.The technical implementation of the Internet Pilot can be found in Section 2.11.10. Thissection covers in detail how Camelot Illinois will host the Lottery website and integratevital functionality such as Electronic Payment Technology, Geo-Location, and ageverification.Camelot Illinois will employ Camelot’s proven and pioneering 10-Step approach tobuilding a transactional website. The 10-Step process is summarized as follows:Confidential Information RemovedCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 261

Section 2 Final Business PlanConfidential Information Removed262 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Confidential Information RemovedLaunch Lotto and Mega Millions via the InternetIn FY2012 Camelot Illinois will have completed the development and prototyping workand will launch the Illinois Lottery Internet Pilot offering Lotto and Mega Millions ticketsfor sale via the website.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 263

Section 2 Final Business PlanFollowing is an outline example of the ticket purchase process. More detail, includingscreenshots can be found in Supporting Information 2.8.AOnce a player chooses to open an Internet account, they will be prompted to completetheir personal details and address information. The player’s age and identity is checkedat this point (in line with statutory requirements) to ensure that they are: not assuming a false identity; 18 years of age or over resident within the state of IllinoisThese checks are made instantly, using a verification source such as Experian. Theplayer will experience a seamless transition to the following screen without delay.Subsequent screens will allow the player to choose a username and password and inputdetails of the credit or debit card they wish to link to their Internet account.Camelot Illinois will ensure (as part of the prototype testing referred to earlier) that it willonly take minutes to set up an account and once successfully registered, players will beable to play immediately.The website will then prompt the player to transfer funds into their Internet wallet, sothat they can pay for their ticket when they are ready to transact. When transferringfunds to an Internet wallet, players will be asked to re-enter their password for securityreasons. The amount that the player chooses to transfer to their wallet is charged to thebank card linked to the account and shows up within their Internet walletinstantaneously. Players will use the same process to transfer any winnings or unusedfunds back to their bank card from the Internet wallet.Once a player has opened an Internet account and added funds for the first time they areready to purchase their tickets. On subsequent visits the player will simply sign in and beready to purchase their tickets.Once a player chooses to purchase a ticket, having signed in using their username andpassword, they will be able to select the game they wish to play (either Lotto or MegaMillions for the duration of the Pilot) and then using the Internet play slip, choose whichdrawings (days of the week) they would like to enter, and for how many weeks. Theplayer can also choose whether to select their own choice of numbers or select QuickPick lines.Before the purchase is confirmed, the Internet system will access the Geo-locationsoftware to check the player’s Internet Protocol (IP) address to confirm that the player islocated within Illinois at the time of making the purchase. The player’s tickets are thenconfirmed and displayed to them with the option to print, and the player can choose toview their tickets at any time by simply signing into their account.Once the drawing has taken place, if the player purchased a winning ticket they nolonger need to check and redeem the ticket themselves. Systems will be set up to notifythe player by email if they have won. For security reasons, no details of the amount wonwill be disclosed in the email. To learn the win amount the player must sign into theiraccount. As soon as a player signs into their account a winning message will bedisplayed on screen. The player will simply click on this message to be taken through theprocess of claiming their winnings. Depending on the size of the win, the amount will betransferred back to the player’s Internet wallet, or for larger wins paid to them by checkor bank transfer.264 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Camelot Illinois is convinced, as is the State legislature, that the time is right to create anE-Commerce channel for the Illinois Lottery. Camelot’s own research supported by awealth of independent sources shows that a significant opportunity exists with playerswelcoming the convenience of purchasing via the Internet, particularly those sections ofthe population who are presently disengaged with the lottery.In introducing the Internet Pilot, Camelot Illinois will ensure that the legislativerequirements are addressed. All aspects of the legislation will be covered, including thecreation of a simple, yet robust registration process that checks an individual’s eligibilitybefore permitting them to play, with location checks occurring for each transaction.These checks will be incorporated with the highest standards of player protection– whilestill delivering an engaging proposition for the audience of lottery players attracted to thisnew E-Commerce site. This will be supported with the additional expertise in monitoringthe performance and effectiveness of the website offering so that it continues to providean optimal experience for players.Re-purpose the Internet offering to enable purchase via mobile devicesIncreasing numbers of consumers today access the Internet through mobile devices. Itis for this reason that Camelot Illinois intends to make the Lottery website accessible viamobile platforms to all players, anywhere in the state. This would be achieved by anapproach that ensures the Lottery can be easily accessed via the widest possible rangeof devices such as smart phones (e.g. iPhone, Blackberry, etc.) tablet devices, (e.g.iPads), and through integrating the Lottery with the leading social networks.Camelot Illinois plans to make the Illinois Lottery available through additional devices atthe appropriate time as new devices come to market and gain popularity. All playerprotection measures will be triggered regardless of the device through which a playerchooses to access the website.Smart phone appCamelot Illinois will develop an application (app) that can be used on a range of smartphones (e.g. iPhone, Blackberry, Nokia OVI, Android, etc.).Players will be able to access the Illinois Lottery website through this app, and CamelotIllinois will ensure that the player experience is optimized on each device.CASE STUDYCAMELOT IPHONE APPCamelot has produced an iPhone app for The National Lottery to improve brandengagement, encourage regular play, appeal to new audiences and raise awareness ofnew products. The application appeals to players because it is free, it’s official andincludes features such as a results checker, news, a number generator game, storelocator and draw reminders with rollover alerts. Camelot has taken great care to ensurethat the new app will delight players.FIGURE 2.8.3.2.1 EXAMPLES OF IPHONE RESULTS SCREEN AND STORELOCATOR SCREENCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 265

Section 2 Final Business Plan2.8.3.3 Post-PilotObjective: To drive further returns to Net Income by offering the full Online Gamesportfolio and Interactive Instant Win Games on the Illinois Lottery Website.Insight: 16% of lottery players claim they no longer play because it is not convenient.70% of Internet users transact through the channel.The opportunity to roll out all Online Games and add Interactive Instant Win Games isdependent on a change to the current Legislation. However, Camelot has considered theopportunity and additional detail on this strategy and Camelot’s approach can be found inSupporting Information 2.8.B.266 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

2.8.4 IMPLEMENTATION PLANFIGURE 2.8.4.1 IMPLEMENTATION TIMELINE SHOWING FIVE-YEAR ROLLOUT PLANFOR THE INTERNET AND MOBILE CHANNELQ3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 2014 2015Internet Pilot- Lotto andMegaMillionsLaunchRoll out newchannelsSmartphoneresultsapp.SocialnetworkstrategyLaunchmobilechannelLaunchweb TVCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 267

Section 2 Final Business Plan2.8.5 BUSINESS PLAN FORECASTPresuming that only the legislatively-described Internet Pilot (Lotto and Mega Millionsplay) is permitted for the duration of the Private Management Agreement, Camelotforecasts that Internet annual sales will generate a total of $276 million (excludingcannibalization) from launch to FY2016. Figure 2.8.5.1 shows the resulting pattern ofsales split by game, including the additional subscription program revenue, over theperiod to FY2016.FIGURE 2.8.5.1 INTERNET PILOT BUSINESS PLAN FORECAST TO FY2016120100Sales ($Mn)806040200FY2012 FY2013 FY2014 FY2015 FY2016Mega Millions Lotto Lotto Subscription Mega Millions Internet SubscriptionSource: Forecasted sales Camelot analysisMega Millions will deliver $220 million in Internet sales by FY2016Lotto will deliver $56 million in Internet sales by FY2016AssumptionsThe Internet forecast for each Illinois game is based on a multi-year analysis of data fromthe implementation Camelot led in the UK for Internet based play. Comparing best fitUK National Lottery games, the Illinois Lotto is most closely equivalent to UK Lotto andMega Millions is most closely equivalent to EuroMillions. For each game Camelot hasanalyzed Internet sales as a percentage of retail sales in the UK, and have factored thesepercentages across the Illinois retail sales. In addition, the figures have been uplifted by40% to reflect several factors: 15% uplift from increased Internet usage compared towhen Camelot launched the UK Internet facilities in 2003; 10% uplift because of thenon-competitive market operating via the Internet in U.S. due to restrictions preventingInternet gambling.; 15% uplift because Camelot’s understanding of how to operate anInternet sales channel has increased significantly since 2003. Cannibalization across thechannels has been assumed at 10%.268 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

2.8 SUPPORTING INFORMATION2.8.A SCREEN SHOTS OF EXAMPLE PLAYER JOURNEYFLOW FOR INTERNET PILOTWhat follows is a series of indicative, mocked up screen shots illustrating the playerjourney flow when purchasing a Lotto ticket via the Internet. They are intended as anexample journey flow only and are not the recommended or actual designs. As describedbefore, the actual screens will be developed by Camelot Illinois using extensive playerresearch before commencing the design or build of a transactional website for Illinois.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 269

Section 2 Final Business PlanOpening an Internet accountOnce a player chooses to open an account they are prompted to complete their personaldetails and address details. At this point the player’s age and identity is checked toensure that the player is: not assuming a false identity 18 years of age or over resident in IllinoisThese checks are made instantly, using a verification source such as Experian, (whoCamelot have successfully partnered with in the UK, performing the same role) and theplayer experiences a seamless transition to the following screen with no delay. Thefollowing screen would allow the player to select their username, password as well asthe card details of the credit or debit card that they choose to link to their Internetaccount.It will take a player just a couple of minutes to set up their account, and they will be ableto play immediately. The website will next prompt the player to transfer some funds intotheir Internet account wallet so that they can pay for their ticket.FIGURE 2.8.A.1 SCREEN SHOT OF ’OPEN ACCOUNT’ PAGE ON WEBSITE270 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Lotto Internet Playslip On arriving at the site the player would select the game that they would like to play,in this example Lotto. The player would complete the Internet playslip, choosingwhat drawings (days of the week) they would like to be entered into and over howmany weeks. The player chooses how many Quick Pick lines they would like to play, or enterstheir chosen numbers. The total at the bottom of the playslip dynamically updates to always reflect the totalcost of the player’s current selections. Once the player chooses to ‘play’ their selections they will be presented with asimple screen asking them to either ‘Sign in’ if they already have an Internetaccount, or to ‘Open an account’ if they haven’t played via the Internet before. If theplayer is already signed in, they will simply progress to the screen confirming theirticket purchase.FIGURE 2.8.A.2 SCREEN SHOT OF LOTTO’ PLAYSLIP PAGE ON WEBSITECamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 271

Section 2 Final Business PlanTransferring funds The player chooses the amount of money that they would like to transfer into theirInternet wallet. For security reasons they are asked to re-enter their password. Theamount that the player has chosen to transfer is then taken from the debit or creditcard that the player has linked to their Illinois Lottery account. This amount shows upin their Internet wallet instantly. Players will use this same process to transfer any winnings (or unused funds) backto their bank card from their Internet wallet. The player can then choose to purchase and confirm their Lotto ticket. At this pointthe Internet system would use leading Geo-location software to interrogate theplayer’s IP address to confirm that the player is in the state of Illinois at the time theyare making the purchase. Camelot currently works with market leader Quova in theUK to provide similar checks on players accessing the National Lottery website.Should legislation changes render these checks unnecessary in future years, thesoftware could swiftly be disabled to allow people from outside the state to play.FIGURE 2.8.A.3 SCREEN SHOT OF ’TRANSFER FUNDS’ PAGE ON WEBSITE272 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Viewing an Internet ticket Once purchased the player can view their ticket at any time, and can choose to printa copy. The Internet ticket would be intentionally designed to replicate the look ofthe retail ticket as this is what players are familiar with. Research shows that players in Illinois feel it is important they have a ticket that theycan view. This was also the case in the UK and Camelot have successfully alleviatedplayer’s concerns by allowing them to print their own ticket which is a visual replicaof the familiar retail ticket. The player would sign into their Internet account and select ‘View Tickets.’ Theplayer would then see a table listing all of their ticket purchases, and click the ‘ViewTicket’ link for an individual transaction to actually view any ticket chosen.FIGURE 2.8.A.4 SCREEN SHOT OF ’VIEW ALL TICKETS’ PAGE ON WEBSITECamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 273

Section 2 Final Business PlanFIGURE 2.8.A.5 SCREEN SHOT OF ’VIEW TICKET’ PAGE ON WEBSITE274 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Winning email notification If a player has purchased a winning ticket, they no longer need to check the numbersthemselves. Systems would be set up to notify the player by email if they havewon. Of course, some players enjoy checking their numbers after the drawing andcan continue to do so if they choose, and results would remain a major featurewithin the website. Here is an example of the email that a player might receive if they have won. Forsecurity reasons Camelot Illinois will not reveal the amount of the win until the playerhas safely signed into their account, as some people may use a shared emailaddress or shared computer.FIGURE 2.8.A.6 EXAMPLE SCREEN SHOT OF ’WINNER EMAIL’ MESSAGECamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 275

Section 2 Final Business PlanWinning notification within Internet accountAs soon as the player signs in to their Internet account, their winning message is clearlydisplayed to them on screen. The player simply clicks this message to be guided throughthe process of claiming their winnings. Depending on the size of the win, the winningscan then be transferred to the player’s Internet Wallet, or for larger wins, paid to themvia bank transfer or check.FIGURE 2.8.A.7 EXAMPLE SCREEN SHOT OF ’MESSAGES SECTION’ WITHINACCOUNT FOLLOWING WIN.276 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

2.8.B POST PILOT: INTERNET GAME EXTENSIONThe implementation of additional games on the Internet is subject to Department ofJustice approval as the Internet Pilot only currently allows for Lotto and Mega Millions.Should legislation allow, Camelot Illinois will add all remaining Online Games to thewebsite, such as Powerball, Pick 3, Pick 4 and Little Lotto.In addition Camelot Illinois proposes the launch of a portfolio of Interactive Instant WinGames. Adding Interactive Instant Win Games (IIWG’s) represents the next logical stepin growing revenue for the state - despite stringent controls to prevent excessive play byregistered players IIWG’s still represent a significant revenue stream in the UK eachweek, comprising 25% of the total UK Internet channel sales.IIWG’s are an Internet version of an Instants ticket optimized by the visual capability ofcomputer software to deliver engaging game play. The outcome (i.e. win or lose) ispredetermined at the point of purchase with the use of random number generatorsdetermining the outcome, which is then played out on the screen.The full portfolio of IIWG’s designed to appeal to all players will offer:A range of price points (new players want lower price points, which encourages trial,whereas regular players tend to go for slightly higher price points).Different prize levels.Multiple themes (e.g. numbers games, word games, sports themed games, etc.).Licensed Property games (e.g. Monopoly).Familiar traditional games (e.g. board games).Seasonal/topical games (e.g. Ghostville at Halloween, Prize Puddings for the Holidayseason).PotentialConsumers will expect the Lottery to have the full product range available for purchasevia the Internet. At this point the website becomes the real ‘Internet store’ as it has thecomplete product offering.Interactive Instant Win Games (IIWG) will be added to the site in a way that is fullyaccessible, and that offers an easy and fun player experience. Existing marketing plansto acquire new players (digital display advertising, search, and affiliate and partneractivities as detailed in Supporting Information 2.9.C will extend to cover all games.IIWG would be researched and developed within the Illinois market to ensure theyappeal to Illinois players. Camelot has a wealth of experience working with significantlicensed products such as Deal or No Deal, Monopoly and others, as well as developinggames from scratch, using insight to assess the different types of players anddeveloping different game types to suit.If research shows that some of Camelot’s existing IIWG portfolio (as illustrated by Figure2.8.21), appeals to Illinois players, there is the possibility of using these in the Illinoismarket.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 277

Section 2 Final Business PlanFIGURE 2.8.B.1 SOME OF THE SUCCESSFUL IIWGS CREATED BY CAMELOTCamelot’s approach to player protection remains at the heart of this initiative. Players willhave full visibility of their play levels and can reduce their limits if they feel that they areplaying too much, or choose to exclude themselves completely (either from the IIWGcategory, or from all games, as is the case in the UK). For additional detail on playerprotection see Section 2.10.3.3The launch of an IIWG portfolio on the Lottery website can be achieved in relatively shorttime and will bring immediate revenue benefits to the State, while there is also greatpotential to further develop this area in future years, for example by creating a multiplayer Connect 4 or Monopoly game, allowing players to invite friends to play one gametogether with both players having the chance to win. This type of development linkslogically with the social media strategy detailed in Supporting Information 2.9.C.278 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Example screen shots of purchasing and playing an Interactive Instant Win Game –Deal or No DealUsing the example of a “Deal or No Deal” Game that is popular in the UK, Camelotvisualizes the following player experience: (this is for illustration purposes only, the exactplayer experience would be led by insight from the Illinois market).FIGURE 2.8.B.2 CHOOSING TO PLAY THE GAMEFIGURE 2.8.B.3 CONFIRMATION OF PURCHASEFIGURE 2.8.B.4 INSTRUCTIONS ON HOW TO PLAYCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 279

Section 2 Final Business PlanFIGURE 2.8.B.5 CHOOSING BOXESFIGURE 2.8.B.6 BANKER CALLS - CHOOSE DEAL OR NO DEALFIGURES 2.8.B.7 BONUS GAME - OPEN THE BOXES.280 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

FIGURE 2.8.B.8 WIN OF £250FIGURE 2.8.B.9 ADD WINNINGS TO YOUR LOTTERY ACCOUNTFIGURE 2.8.B.10 LIST OF TRANSACTIONS IN YOUR LOTTERY ACCOUNTAdditional Game TypesCamelot Illinois will ensure that its Internet platform is built in a flexible way to becapable of supporting other gaming products such as bingo etc. Although these gametypes may not be relevant or appropriate today, a flexible platform will allow for theaddition of these game types in the future if legislation allows and will provide the Statethe opportunity to pursue these game types.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 281

Section 2 Final Business PlanWeb TVAs more and more TVs become Internet enabled and technology within the homeconsolidates, people are able to access the Internet and make purchases via their TV.Camelot is experienced in the field of Internet TV through a successful partnership withSky TV (the leading UK satellite TV provider), which allowed players to buy their lotterytickets via their TV set using their remote control.At the time Internet TV suffered from limited processing power and slow return-pathconnections. This is at odds with broadband access enjoyed by consumers today,meaning that consumers had low tolerance of the relative performance of the iTVservice. Since Camelot originally launched the Sky interactive channel in 2004 thetechnologies in this field have advanced significantly, and launching a similar channel viaweb TV in Illinois today is likely to appeal to more players as technological advances haveled to improved experiences for users.Camelot has already engaged with Comcast in the U.S. with a view to partnering on aweb TV channel in Illinois, and would bring the experience and expertise gained insuccessfully launching the Sky Interactive channel in the UK to the Illinois markettogether with local partners such as Comcast.282 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.9 MARKETINGCAMELOT ILLINOIS’ STRATEGYCamelot Illinois will build a direct dialoguewith customers alongside traditional masscommunications to differentiate gamesand engage consumers to:Confidential Information removedBuild brand momentumGrow adult penetrationIncrease play frequencyDrive Net IncomeINSIGHTSIn Illinois, approximately half the adult population are not playing the lottery at all.40% of lapsed players stopped playing because they didn’t know where theproceeds were going.Scheduled marketing support for Powerball and Mega Millions is largely detachedfrom being able to fully support jackpot roll cycles, despite big jackpots offering thebest opportunity to engage a wider audience and drive penetration.The majority of current Illinois Lottery marketing activity supports short term, timespecificactivities across multiple channels, failing to build long term brandengagement.This fragmented marketing approach results in higher overall production costs.STRATEGIES AND ACTIVITIESCamelot Illinois will focus on delivering Fewer, Bigger, Better activities, within the sixPMA Marketing areas, to ensure retention of those currently playing, and increase theirfrequency, while expanding participation of lapsed and new younger players:Customer Insights Establish a Customer Insight team to conduct research that will inform all marketingactivity and will place the consumer at the heart of all the Illinois Lottery does.Branding Re-invigorate the Illinois Lottery brand, strengthening the link with Lottery fundedprojects as a core message of goodwill as to why the Lottery exists. Increase the differentiation across brands in the Online Game portfolio to build brandloyalty. Focus on brand building a core range of games that marketing activity can influencesufficiently to deliver brand momentum and incremental sales uplifts.Advertising & Public Relations Design emotive, creative content that will deliver a flexible and constant lotterypresence through 52 weeks of the year, based upon strong Return on Investment(ROI) and econometric modeling.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 283

Section 2 Final Business PlanLoyalty Program Introduce a loyalty program focused on players to encourage regular play andestablish one-to-one marketing.Sponsorships and third party associations Broaden the appeal of the Lottery through commercial partnerships with popularentertainment and sporting brands.Why Camelot? Camelot is a world leading lottery operator with over 15 years experience indeveloping and implementing powerful and dynamic multi-media lottery-specificmarketing campaigns: Raising the UK player participation rate from 63% to 72% in three years Delivering revenue-driving marketing activities with an average ROI of $13.5 to $1 in2009 Recruiting 6 million registered Internet players Positioning and promoting differentiated brands within the portfolio, increasing UKweekly spend by over 26% from November 2004 to July 2010 Increasing EuroMillions sales revenue, of a base week jackpot of $18 million, by454% from $4.2 million in April 2005 to $23.3 million in April 2010.284 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.9.1 INTRODUCTIONBuilding a direct dialogue with consumers, alongsidetraditional mass communications, differentiating thegames and engaging consumers to drive NetIncomeThis following section provides Camelot Illinois’ response to the Marketing areas inSchedule 2.1 of the PMA, and by addressing strategy, customer insights, branding,advertising, loyalty program and sponsorships, details how Camelot Illinois will engagethe public of Illinois to drive an increase in player penetration and frequency of playthrough marketing communications.InsightsThe Illinois Lottery has an ongoing marketing communications program to promoteestablished game propositions. Compared to other states, Illinois has low penetrationamong adults, and low play frequency. In addition, 40% of lapsed players stoppedplaying because they didn’t know where the proceeds were going 1 . The existingmarketing program can be improved to more effectively engage existing players and thewider public.Marketing plans from recent years highlight a large number of activities implemented ina variety of channels and of differing size. The result is a complex and fragmentedapproach. In effect the plans deliver short bursts of activity, which in FY2010 centeredon Mega Millions, 2nd Chance Summer, Holiday Instants, Halloween Raffle, Bags &Bucks and Powerball. For Mega Millions the FY2010 marketing plan resulted in sixweeks of mass media presence followed by five short bursts of TV with no furtherexposure, irrespective of Jackpot level. This pattern fails to fully capitalize on theincreased propensity to play at differing jackpot levels. Stops and starts such as thisprevent the development of momentum in the marketing program, and reduce thedegree to which the message will “stick” in the minds of consumers.Marketing support of this nature neither engages lapsed and non players nor encouragesgreater frequency of play among occasional players. But this approach drives productioncosts upwards. Developing too many small campaigns consumes resources, requiresnumerous creative treatments to be produced, and dilutes media effectiveness byspreading thin the available marketing budget. As a result, the Lottery FY2010 productioncosts are 16% of total marketing budget. In the fast moving consumer goods (FMCG)category, 10% is a much more typical level to invest in a well balanced communicationsstrategy.1Camelot Illinois consumer research June 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 285

Section 2 Final Business PlanCamelot’s prior experienceCamelot has over 15 years of experience in developing and implementing powerful anddynamic multi media, award winning marketing campaigns specifically tailored to lotteryplayers.Expertly executed marketing campaigns, across a differentiated portfolio of core brandsin the UK, targeting new, lapsed and infrequent players over the last three years havebeen a major contributor to the growth in participation rate from 63% in 2007 to 72% in2010. Growth in participation generated a 26% increase in weekly spend fromNovember 2004 to July 2010, and the marketing program consistently achieved averageROI’s of $13.5 to $1.Camelot has proven ability to focus on brands within the portfolio to drive consumerengagement and sales, for example on EuroMillions where across a five year period, UKsales revenue from a base week jackpot of $18Mn has increased by 454% from$4.2million in April 2005 to $23.3 million in April 2010.Camelot has promoted its Internet channel offering so that it now has six millionregistered interactive players and has been recognized by the wider UK e-commerceindustry by winning awards for “Intelligent use of data in an email campaign” and “Bestuse of email in a CRM campaign” at the Marketing Connect Awards.To achieve these results Camelot uses best practice FMCG marketing principles, whichare applied through its Insight, Strategy, Planning and Execution (iSPEX) process, forstrategic media planning and creative development and which Camelot will bring to theIllinois Lottery.Strategies and activitiesCamelot Illinois’ strategy and approach to marketing communications will be to promotethe Lottery brand and product portfolio in a way that retains the current player base,increasing their frequency and spend, expands participation of lapsed players andreaches out to engage new younger players.Camelot Illinois will put the consumer at the heart of everything it does, being driven andguided by continuous consumer insight in the development of marketing campaigns andbrand communication.Camelot Illinois will look to deliver Fewer, Bigger, Better activities than are currentlydelivered. To make the most strategic use of marketing resources, the efforts will betargeted, rather than distributed across the entire portfolio.This approach will be delivered through a variety of activities, within the six PMAMarketing areas, as highlighted below and discussed in further depth within theBusiness Plan.Consumer InsightCamelot Illinois will create a Consumer Insight team that will instigate arolling research program, which will ensure that Illinois has the consumerinsights required to develop effective marketing campaigns, and launchbrand communications strategies. As these will be based on insight theywill drive re-appraisal of the lottery category amongst lapsed and non286 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planplayers and increase the level, frequency and mix of communications toexisting players encouraging greater frequency of play and higher spend.BrandingCamelot Illinois will address the low level of public awareness and understanding of theuses of lottery proceeds by launching a compelling marketing campaign connecting theLottery to concrete examples of projects funded by the Common School Fund andplanned Capital Projects. This strong message of public good created by lottery proceedswill significantly enhance the brand and help consumers understand the public benefitgenerated by their lottery spend. In this way the Illinois Lottery parent brand will bestrengthened and a barrier to broader public participation and engagement with theLottery will be removed.In addition to re-invigorating the Illinois Lottery brand, a brand modeling framework willbe developed to provide clear differentiation across the brands in the game portfolio.This differentiated branding will make it easier for new and existing consumers tochoose which game to play. Particular attention will be given to ensuring that Powerballand Mega Millions are positioned so that both can maximize their revenue potential.Advertising & Public RelationsCamelot Illinois will use a five stage process based on best practice consumer researchto generate powerful and persuasive creative marketing content. To further reinforce thebrand, the same messages will be consistently executed across all channels.The use of mass media will be guided by an obsessive focus on ROI while ensuring aflexible and constant presence across 52 weeks of the year. In this way Camelot Illinoiswill maximize opportunities to engage consumers with Powerball and Mega Millionswhen they are at their optimum jackpot level, and provide the greatest likelihood ofattracting new and lapsed players. Growing the base of players will be a key part ofincreasing revenue and Net Income.For the Internet Pilot launch, Camelot will drive penetration using sophisticatedconsumer segmentation and targeted one-to-one communication. The Internet Pilot isintended to broaden the audience for the Lottery and will require new and innovativeways of thinking for customer outreach. Camelot stands ready to achieve success withthe Internet Pilot, having successfully launched the most successful Internet lottery inthe world, with six million registered players.In addition, Camelot Illinois will undertake a rigorous Public Relations program promotingboth state wide and local winners through the media and in retail, to reinforce the beliefof long term players that there really are “big winners” like them and that it must beworth continuing to play.Loyalty ProgramCamelot Illinois will introduce a Player Club that engages players with the Lottery andcreates a one-to-one marketing tool enabling targeted relationship management in bothretail and on the Internet. Personalization provides value to the players who can accrueloyalty rewards, but the State receives value as well. Tracking Internet and retail play forPlayer Club members will provide the Lottery with valuable data on the playing patternsof these players. The club will offer an attractive rewards program based on frequencynot weight of spend that works in partnership with local and state organizations andlarger household name brands e.g. Coca-Cola or Hershey’sCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 287

Section 2 Final Business PlanSponsorships and third party associationsCamelot Illinois will look to enhance and broaden the appeal of the Lottery so that it canreach new players and re-engage lapsed players by leveraging existing sponsorships andalso by developing new relationships with popular entertainment and sporting brands.Camelot has a strong and successful track record of working with corporations such asDisney, Universal Studios and New Line Cinema on film properties, and TV programmakers such as Endemol.The Business Plan for Marketing is structured as follows:Section nameSection numberInsight 2.9.2Strategies and Activities 2.9.3Area: Marketing Description SectionCustomerInsightsAdvertisingDesign and implement a consumer research strategy toinform and measure marketing strategies and productsDesign, implement, and maintain advertising and promotionalcampaigns2.9.3.12.9.3.3Branding Develop Lottery brands 2.9.3.2Loyalty Program Design, maintain, and operate a customer loyalty program 2.9.3.4Strategy Create a general marketing strategy 2.9.3Sponsorships Select and negotiate sponsorship opportunities 2.9.3.5It should be noted that the contribution from Marketing Communications strategies andactivities is included within the stated revenue contributions of other sections, and arenot delineated here in Section 2.9.288 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.9.2 INSIGHTSOverview of current Illinois Lottery marketingcommunication programs.2.9.2.1 Customer Insights Illinois has a large proportion of the population (approximately half) who have notengaged with or played the lottery for years. This participation rate is low comparedto other states. For example, the top performing lotteries are Pennsylvania withparticipation at 61% and Connecticut with 62% 2 . In the UK, lottery penetration is72%. A small core of players generate a disproportionate amount of revenue. The IllinoisLottery relies on a small number of players to generate the majority of lottery sales,with 32% of players generating 84% of revenue 3 . Frequency of play is low among Illinois Lottery players, with only 9% of adultspurchasing a ticket on a weekly basis. In the UK, 50% of adults purchase a lotteryticket on a weekly basis. There appears to be limited insight informing marketing activities that are attemptingto drive increased player penetration other than the existing sporting sponsorshipassociations.2.9.2.2 Branding In Illinois, there is low awareness of the link between the Lottery and the CommonSchools fund, which has resulted in 40% of lapsed players claiming this to be thereason why they stopped playing 4 . Differentiation exists within the Online Game category but can be improved,specifically relating to player confusion over Powerball and Mega Millions whichcurrently both offer the fundamental proposition of winning ‘a life changing’ amountof money and are communicated together in the same advertising. The current marketing and associated media plan attempts to support too much,changing too often between brands and activities, through a variety of differentmediums. This results in insufficient time for any one brand or message toeffectively gain traction with the consumer.2.9.2.3 Advertising & Public Relations Current creative campaigns are well executed but often lack clear consumer benefit.For example the Mega Millions ‘Can find you twice a week’ campaign clearlyhighlights Mega Millions is available twice a week but does not provide a playerbenefit or call to action by highlighting the jackpot amount. The majority of marketing activity supports short term, time specific activities,spread across a variety of channels, creating short bursts of publicity for individual2Simmons 20103Ipsos 20064Camelot Illinois Research June 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 289

Section 2 Final Business Plangames. This dilutes the effectiveness of the program and fails to build long termbrand engagement. Given this focus on activities with a limited window of relevancy,and the resulting lack of continuity for brands like Mega Millions and Powerball,current media is not aiding consumer advertising recall.Scheduled marketing support for Powerball and Mega Millions is largely detachedfrom being able to fully support jackpot roll cycles, despite big jackpots offering thebest opportunity to engage a wider audience and drive penetration. This type ofmedia phasing can lead to the chance that the high jackpots of a roll cycle do not fallconveniently when media is scheduled leaving such sales driving opportunities eitherunder supported in media or supported at a premium expense. This phasing is alsonot helping contribute to increased weekly consideration post the engagementachieved from high jackpots.Using multiple channels for each of these activities is financially expensive andresource intensive. Developing too many small scale marketing activities distractstime, energy, and focus away from delivering a consistent consumer experience thatcan deliver against revenue targets. For example, the FMCG best practice relating toproduction costs is that production should, as a rule of thumb, equate toapproximately 10% of the total media cost the production is supplied for. Inreviewing the FY2010 General Marketing expenditures, production costs were$3,180,322, which equates to 16% of the total non production General Marketingexpenditure. Further detail with regards to the impact of the current media planningis provided in Supporting Evidence Section 2.9.A.Research highlighted how important it was for players still dreaming of their big winto see and hear about other people they can relate to i.e. people in Illinois, winningon Lotto, Mega Millions or Powerball. During Camelot Illinois’ research playersconfirmed they did not hear about local jackpot winners enough and stressed theimportance of hearing about local winners to sustain their own belief.The Lottery does not currently have a transactional Internet site that can leverage thehigh number of people who purchase other products and services on a daily basisthrough the Internet, attracting new, younger adults to the Lottery.2.9.2.4 Loyalty Program Loyalty programs are commonplace among other FMCG retailers, bank and airlinecompanies and many U.S. lotteries. However, the Illinois Lottery does not currentlyprovide such a program of rewards and benefits to its players.2.9.2.5 Sponsorships and third party associations Illinois has a large proportion of the population (circa 50%) that have not engagedwith or played the lottery for many years. Third party sponsorships will propelincreased play frequency among occasional players and drive brand reappraisal fromlapsed and non players.SummaryWhen the participation data is reviewed together with actual sales contribution by gametype and player frequency information (as provided in the data room and present in otherpublicly available sources such as La Fleur’s), a picture begins to build of a marketingcommunication program that does not engage occasional players enough or attract newplayers. This contributes to low frequency of play and low penetration overall, due to theselection of activities supported and the media planning approach to campaign flighting.290 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCamelot Illinois believe the current low levels of adult penetration represent a significantopportunity for improvement through the delivery of differentiated, time relevant,compelling marketing communications plans.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 291

Section 2 Final Business Plan2.9.3 STRATEGIES AND ACTIONSThis following section provides Camelot Illinois’ response to the Marketing areas inSchedule 2.1 of the PMA, as they apply to general marketing strategy, and within thisconsumer insights, branding, advertising, loyalty program and sponsorships.StrategyCamelot Illinois’ strategy and approach to marketing communications over the course ofthe PMA will be to promote the Lottery brand and product portfolio in a way that retainsthe current player base, increasing their frequency and spend, and expands participationof occasional, lapsed and new younger players.The consumer trend towards time-shifting their media viewing and self-editing ofcontent means that the Lottery requires a marketing communications strategy thatreflects consumer motivations and behavior around different types of content.Camelot Illinois will put the consumer at the heart of everything it does, being driven andguided by continuous consumer insight in the development of marketing campaigns andbrand communication.Camelot Illinois will look to deliver Fewer, Bigger, Better activities than are currentlydelivered. This will be done across a core range of games being Instants, Lotto,Powerball and Mega Millions, which effective and compelling marketing communicationscan make the biggest impact on in terms of incremental sales and Net Income.Through research, Camelot Illinois will deliver benefit led, consumer insight drivencreative work, based on compelling creative ideas that transcend all media and emotivelyearn a permanent place in the hearts of the consumers of Illinois.The first step to achieving this place in the heart of the consumer is to embed “best inclass” strategic tools and processes. This success is achieved by a combination offactors synchronously planned, developed and executed. Camelot has developed asingle, repeatable process, known as iSPEx, shown in Figure 2.9.3.1, which is used todeliver these activities. The process incorporates a number of integrated sub-processessuch as iCAMELOT (a structured new product development process- see Section 2.5)and Integrated Marketing Activity Plan (iMAP) which is a process to synchronize multichannelmarketing plans. Camelot Illinois will introduce the iSPEx process at the firstopportunity in 2011 in preparation for FY2012.292 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.9.3.1: ISPEX END-TO-END PROCESS FOR DEVELOPING INSIGHT DRIVENPRODUCTS AND INTEGRATED MARKETING CAMPAIGNSConfidential Information Removed2.9.3.1 Customer InsightsObjective: Initiate a Customer Insight Team to deliver a rolling research program. This researchwill drive consumer re-engagement with the Lottery and will inform both short andlong term business decisions.Insight: Illinois has a large proportion of the population (nearly 50%) that have notengaged\with or played the lottery for years.Holistic consumer insights, derived from both qualitative and quantitative research, formthe foundation and starting point of the iSPEx process (Figure 2.9.3.1).Consumers ultimately decide the fate of any product or brand, whether it be the wellknown case of VHS vs. Betamax video formats or, in the context of Illinois, the Pick andPlay game. It is vital to have a comprehensive understanding of the influences, thoughts,motivations and barriers for the differing groups of players and potential players. Onlywith this understanding can the Lottery start addressing existing perceptions, positioningthe Lottery and the games in such a way that removes perceived barriers.The objective of the Consumer Insight team is to drive “thought leadership” in thebusiness and provide the Illinois Lottery with leading competitive advantage within itsCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 293

Section 2 Final Business Planmarketplace. This will be achieved through making the best possible commercialdecisions based upon facts.It is essential to build a Consumer Insight Team that is capable of being the guardian ofthe consumer understanding and truth. In this manner there would only be one versionof the truth. The Consumer Insight team will provide: A centralized team dedicated to Insight. Consistent understanding and facts. Sharing of knowledge across teams.To provide this there are some overarching capabilities that the Consumer Insight teamare required to possess. To this end Camelot Illinois will look to create three new roleswithin the Lottery to ensure that this insight is developed under the umbrella guidance oflottery category experts. This function would be led by a Head of Insight, with twofurther key roles reporting into this Head of Insight; one a qualitative research expert andthe other a quantitative research expert.This core team will drive the design and implementation of a strategic rolling consumerresearch program that informs and measures marketing strategies and productdevelopment.Camelot Illinois’ strategic rolling consumer research program will: Invest in comprehensive research plans to understand consumers. Invest in and refresh core tools including segmentation models, sales trackers, brandand retailer health studies. Rigorously track player use, attitudes, satisfaction and marketing program impact. Leverage global best practice and benchmarks.This is particularly important for addressing the low levels of penetration by adults andlow levels of regular participation in the Online Games within Illinois, to ensure thatactivities are insight informed to be able to: Drive re-appraisal of the lottery category among lapsed and non players (drivingpenetration); and Increase the level, frequency and mix of communications to existing players (drivingfrequency and spend).This will be achieved via a virtuous four step cycle: A quantitative research segmentation of players, lapsed and non players, by keyDesignated Market Areas (DMAs), to identify the groups most likely to play. Qualitative and further quantitative research among the identified group(s) tounderstand the barriers to play. Using findings to understand and begin addressing the barriers. This relies on bothperception, (impact of marketing communication materials) and experience (via gameenhancements / new games). Post evaluation reviews that inform and refine the next round of activities.An example of how this rolling consumer research program process informed Camelot’splanning and creative development is illustrated by the following EuroMillions casestudy:294 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCASE STUDY EUROMILLIONSUsing consumer research to address barriers to play and inform creativedevelopmentIn January 2009, 26% of UK adults played EuroMillions. With over 65% of UK adultsplaying Lotto, Camelot wanted to understand if there were any barriers to playingEuroMillions for non-players.Camelot therefore instigated the strategic rolling consumer research programprocess detailed above, and by doing so discovered EuroMillions could generatemore revenue.Research showed that one quarter of adults considered playing, but had never givenit a go. Initial thoughts were that this must be because of a major barrier. But furtherinvestigation showed the only thing stopping these people from trying the game wastheir own imagination. The Insight team described this as the ‘Dream Ceiling.’Players could easily dream what a Lotto win would bring them but when theythought about a EuroMillions win, they couldn’t imagine what the extra millionswould bring.When the researchers then spoke to the people who were already playingEuroMillions it was clear that they didn’t have a ‘Dream Ceiling’ at all. They knewthat a Lotto win would be life changing – but they were also playing EuroMillionsbecause it would be ‘lives’ changing.This insight was sufficient; if Camelot wanted other people to get through the‘Dream Ceiling’ it was clear what advertising should do – show players that aEuroMillions win would be big enough to share, as shown in Figure 2.9.3.2, which isthe endframe from the resulting ‘EuroMillionaires’ advertising campaign.Camelot then tested various marketing pitches with non-players to determine whichwas most appealing. By using the most appealing pitch, which spoke about havingmoney to share, Camelot was able to create excitement. Before long more peoplewere talking about what they would do if they won and this made more nonparticipantswant to play. This idea is still used as the platform for marketingcommunications for the game and has contributed to EuroMillions now having over30% of UK adults playing.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 295

Section 2 Final Business PlanFIGURE 2.9.3.1.1: ADVERTISING ENDFRAME FROM EUROMILLIONS‘EUROMILLIONAIRES’ MARKETING CAMPAIGNThe outcome of this virtuous research cycle is that as consumer attitudes and needs areunderstood, strategies can be developed to target and engage consumers to purchasethe brand in question. The iSPEx framework enables Camelot to develop the broad plansinto an iMap, which covers all activities over a rolling 18 month period.It is a single plan, reviewed on a monthly basis and approved by cross functional seniormanagement. Visible to everyone in the Marketing department and to the widerorganization, activities are selected on an optimized marketing funding & priority focusi.e. prioritizing balanced portfolio support based on a ROI basis to drive revenue returns.The flexibility of the iMap process will enable the delivery of all player access plans inIllinois, across established and new channels.Camelot has successfully implemented insight informed marketing to grow UK Lotteryrevenue. In the EuroMillions case study, in only one year, participation grew from 26% toover 30%. EuroMillions play contributed to driving and/or maintaining total portfoliopenetration of all UK adults, which has increased from 63% to 72% in three years.2.9.3.2 BrandingThrough its operation of the UK National Lottery and portfolio differentiation work inCalifornia, Camelot has experience in establishing the values a brand stands for andensuring that all of its activities are supportive of, and consistent with, those values.It is vital that there is clarity with the public around what the Illinois Lottery parent brandand the brands within the game portfolio stand for. This section proposes initiatives toachieve that objective. The initiatives include the need to define individual brand‘essences’ that express the values of the brand and define exactly what it stands for.Brands not only reflect consumers’ self-image, but in a world where time is at apremium and convenience has become a core consumer benefit, they are also becoming296 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planan important tool to short cut or navigate through the vast amounts of choice that arenow available for many decisions in everyday life.For consumers to trust a brand, they have to have a significant amount of understandingof what it provides. This is vital in the retail environment where stores are overloadedwith brands, messages, and an ever increasing number of products. Consumers haveless time and space to interact with brands. The objective of all marketingcommunication is therefore to deliver sufficient cut through to achieve a brand profile,whose role is understood, favored and with which consumers have a positive ‘emotional’relationship leading them to purchase.This section covers how Camelot Illinois will deliver cut through and understandingaround both the Illinois Lottery brand and the core brands the players play within theOnline Game portfolio.Re-invigorate the Illinois Lottery brandObjective: Strengthen the Illinois lottery brand and give it universal consumer appeal to ensurethe best possible platform of a receptive public, when activities are implemented toreach new and lapsed players.Insight: In Illinois, there is low awareness of the link between the Lottery and the CommonSchools fund.The objective of this first activity is to deliver a multi-faceted and creative marketingcampaign to increase community awareness of the direct link between Lottery ticketpurchases and public benefit to schools and to capital projects. The details of theseissues and how Camelot Illinois will address them are covered fully in Section 2.4.Camelot has excellent experience in commissioning engaging advertising campaigns forboth the core Lottery brand and the various brands within the portfolio. An example of aLottery brand campaign that was introduced in the UK to re-invigorate public perceptionsin an emotive way, dramatizing the positivity, optimism and altruism that ‘winning on thelottery’ offers, is the award winning 5 ‘The Big Win’ brand campaign, shown in Figure2.9.3.2.1.5The ‘The Big Win’ brand campaign won a range of Industry Awards, the highlights of which include:• Cannes 2006 Bronze in the TV Entertainment & Leisure category,• Winner - best computer animation BTAA CRAFT 2006• EUROBEST 2006 – Gold TV• BTAA 2007 – Silver – Corporate• Creative Circle 2007 – Gold – Best use of Music• Creative Circle 2007 – Gold – Best use of Animation• CLIOS 2007 – Gold Animation, TV• D&AD 2007 – In Book: TV Art Direction• D&AD 2007 – In Book: TV 41-60”• D&AD 2007 – In Book: Animation and Motion GraphicsCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 297

Section 2 Final Business PlanFIGURE 2.9.3.2.1: ADVERTISING STILLS FROM THE ‘THE BIG WIN’ BRANDCAMPAIGNDifferentiate the Online Game portfolioObjective: Provide clear differentiation across the brands in the portfolio to make it easier fornew and existing consumers to make choices on which games to play and drivemultiple game play.Insight: Differentiation exists within the Online Game category but can be improved,specifically relating to player confusion over Powerball and Mega Millions which298 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plancurrently both offer the fundamental proposition of winning ‘a life changing’ amountof money and are communicated together in the same advertising.The aim of this initiative is to provide a clear and concise method of communicating thebenefits of each brand within the portfolio; preventing feelings of confusion,apprehension and lack of understanding from being barriers to Illinois consumers. Thiswill be achieved through the use of a brand modeling framework (shown in Figure2.9.3.2.2 and Figure 2.9.3.2.3).Camelot recognizes that the Illinois Lottery has already taken steps in this direction bygiving each of the major game categories their own selling proposition and graphics, asdetailed below:Powerball A new way to celebrate with life changing jackpots starting at $20 million; a newoption to add to the fun. Welcome Powerball to a line-up of Lottery toe tappingexcitement!Mega Millions Eye-popping, life changing jackpots and over-the-top fun have made Mega Millions afreewheelin' Lottery phenomenon.Lotto This Illinois-exclusive classic has had players getting out their dancing shoes formore than 30 years.Little Lotto Get a leg up with this winner-friendly party starter, a favorite with the "in-the-know"Lottery crowd.Instants Great odds and incredible selection let you play when, where and how you want.Pick 3 Keep it all in the family - or between friends - by playing anniversaries, birthdays orany other three special numbers.Pick 4 Keep it all in the family - or between friends - by playing anniversaries, birthdays orany other four special numbers.To develop the existing and new Lottery brands, Camelot Illinois will introduce a brandmodeling framework for the portfolio, with a view to refreshing the brand identitieswhere appropriate, and re-presenting them to the consumers to reawaken their interest.The output of the brand modeling is a series of brand wheels for each featured game,including the Illinois Lottery parent brand. A key difference between the brand wheelsfor each featured game vs. that of the parent brand, is that, where for the parent brandthere is an ‘Audience’ which is everyone, for the games, ‘Audience’ is changed to ‘NeedState’, which plays a key role in both communication positioning and how / where thegame is promoted.Examples for the UK National Lottery parent brand and Instants category are shown inFigure 2.9.3.2.2 and Figure 2.9.3.2.3.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 299

Section 2 Final Business PlanFIGURE 2.9.3.2.2 EXAMPLE OF UK NATIONAL LOTTERY PARENT BRAND WHEELConfidential Information Removed300 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.9.3.2.3 EXAMPLE OF UK NATIONAL LOTTERY INSTANTS BRAND WHEELConfidential Information RemovedIt is important to produce brand wheels to develop the Lottery brands as they:Provide a written framework for the development of all brand activity.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 301

Section 2 Final Business Plan Ensure one single point of reference to ensure the brand is consistently presented inthe right way. Provide a clear and concise method of communicating strategy vision for the brandfor design agencies and colleagues. Demonstrate simply and effectively the strength of the brand (particularly itscompetitiveness).The brand modeling framework will allow Camelot Illinois to review the brand propositionof each game to understand what the brand is and any key reason for buying it, versusplayer insights and targeting profiles to identify ways to strengthen and differentiateeach brand in the most compelling and relevant way. Some brands will evolve to buildrelevance with younger adults and occasional buyers. Others will be reinforced to protectsales with regular players.The process will also reposition the Illinois Lottery brand as the overarching parent brandof the game portfolio. By separating the game brands in this way from the corporateimage of the Illinois Lottery, the corporate brand will be able to act distinctly, endorsingthe integrity and trust for the games.From this basis, marketing communication campaigns can be used to position Powerballand Mega Millions differently, to reduce switching and build loyal player bases for bothgames.Providing clear differentiation across the portfolio will make it easier for new and existingconsumers to make choices on which games to play. If the Lottery is unable todifferentiate which games should be played and why, it is more likely that consumerswill take the easy option of dismissing the Lottery from their shopping repertoire, orotherwise just continue habitually with what they always have done e.g. only play tochase big jackpots or use regular numbers to play the Numbers category.Camelot has an excellent pedigree in developing unique compelling game propositionsacross the Online Games category, evidenced through strong levels of multiple gameplay across the UK game portfolio where: 37% of adults play just Lotto, but 42% ofadults play both Lotto & EuroMillions, 30% play Lotto & Instants and 23% play Lotto andat least one of the other Online Games 6 .Strategies that drive multiple game play through clarity of game proposition are vital fordriving frequency of play and spend. In the UK this strategy has allowed Camelot toincrease average spend across the UK portfolio by over 26%, from $9.23 per week inNovember 2004 to $11.68 in July 2010.For the California State Lottery, Camelot has recently completed a similar brandmodeling framework, as a platform for marketing communications for Mega Millions,Super Lotto Plus and Instants.6Camelot Brand Assessor as of July 16, 2010302 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanBuild strong brands, supported with the right marketing investmentObjective: Use marketing to deliver front of mind, week on week, awareness on a core range ofrevenue driving games.Insight: The current marketing and associated media plan attempts to support too much,changing so often between brands and activities, through many different mediums,resulting in insufficient time for any one brand or message to bed in effectively.Camelot Illinois will focus on implementing and maintaining fewer marketing activitiesacross any given fiscal calendar, advertising a core of compelling, differentiated revenuedrivinggames. Campaigns will deliver front of mind, week on week, awareness.The selection of the core games to receive marketing support will be primarily throughapplying two key criteria: Sufficient base of current revenue and potential for incremental revenue. Product appeal and ability alongside the other selected core games to addressconsumer needs.Camelot Illinois will develop campaign advertising designed to ensure the Lotteryportfolio brands remain top of mind, relevant and salient. This will be achieved by: Flexibly deploying 52 weeks of mass broadcast media. Developing distinct and compelling executions. Delivering synergized campaigns, where each touch point communication buildsawareness, thus improving or prompting consumer recall. Monitoring communication effectiveness wear out levels, refreshing executions asrequired.These tasks can be achieved by approaching media planning primarily on the basis ofrevenue return and ensuring econometric modeling is used to inform the best mix ofmedia.Camelot has successfully used econometric modeling in the UK to answer manyquestions, all of which have helped formulate brand strategies and media campaigns thatuse marketing budgets optimally producing good rates of ROI.The use of econometric modeling can help the Lottery answer such questions as:What is driving year on year changes in sales patterns?Is there any relationship between the performance of Online Games and Instants?How (and to what extent) do new game launches cannibalize existing games?How many incremental sales have new terminals generated?How do weather patterns or seasonal events impact sales? (e.g. snowstorms, heatwaves, holiday periods etc.)How many sales were generated in the period when the advertising ran?How quickly does the effect decay away afterwards?What is the ROI of each wave of activity?How does effectiveness vary by media?Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 303

Section 2 Final Business PlanAt what level of spend do diminishing returns begin?What is the optimum media split among the various channels?Which creative was most effective?Does advertising Lotto boost or cannibalize the performance of other games in theportfolio?How many new Internet registrations did the advertising generate?Camelot Illinois will deliver cost effective, ROI obsessive, econometrically informedmarketing communication plans for the Lottery, which: Use mass broadcast media, based on engaging the widest possible audience. Use one-to-one marketing opportunities to deliver time relevant and compellingmarketing messaging direct to players. Use the most cost-effective media. Are adjusted tactically as required to deliver the Right Message, Right Place, RightTime to the Right Person/People. Optimize the Illinois Lottery brand and product portfolio to retain the current playerbase. Expand the participation of occasional, lapsed and new younger players.An example of the success of Camelot’s results focused media planning can behighlighted when comparing the sales performance variations of two similar big rollingjackpot games EuroMillions and Mega Millions.FIGURE 2.9.3.2.4 MEGA MILLIONS WEEKLY SALES VS. CALCULATED BASE (JUN ’05TO DEC ’09)3025Sales ($Mn)20151050Jun-05Dec-05Jun-06Dec-06Jun-07Dec-07Jun-08Dec-08Jun-09Dec-09BaseTotalSource: Illinois State Lottery Data RoomThe above chart (Figure 2.9.3.2.4) illustrates that after the sales peaks achieved duringperiods with high jackpots, sales dropped right back down to base levels. This meansthat occasional and / or new players who were attracted by the high jackpots were notretained in the subsequent weeks – this is highlighted by the flat nature of the red linerepresenting base level of play across the period shown.304 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanIn contrast, over a similar period of time, it can be observed in Figure 2.9.3.2.5 that in theUK, the high jackpot periods on EuroMillions attracted occasional and / or new players,and retained many of these players even after the jackpot amount dropped. The overallupward trend of the base participation rate can be seen on the red line, specifically thestep changes post the peaks achieved from high jackpots.FIGURE 2.9.3.2.5: EUROMILLIONS WEEKLY SALES VS. CALCULATED BASE (FEB ‘04 -FEB ‘10)908070Sales ($Mn)6050403020100Feb-04Aug-04Feb-05Aug-05Feb-06Aug-06Feb-07Aug-07Feb-08Aug-08Feb-09Aug-09Feb-10ActualBaseSource: Camelot sales and calculation analysis – base based on average of three prior basesCamelot Illinois will execute the same brand building principles which it has successfullyimplemented to rebase the EuroMillions UK sales after a large jackpot: During the roll series, leading up to the climax of the big jackpot, ensure mediatargets audiences that are under represented (e.g. younger adult groups). Deliver ongoing jackpot saliency through one to many mass broadcast media andone to one direct communication. Ensure the game receives continuity of marketingcommunication support, rather than waiting until it hits over $100 million again. Maximize visibility of local jackpot winners as and when they occur and take publicitythrough all media channels.By implementing these proven brand building strategies in 2011, Camelot Illinois willensure that Powerball and Mega Millions rebase to a higher level post large jackpots.Camelot Illinois’ ambition is to equalize Powerball sales to those of Mega Millions atcomparable jackpot levels. Ultimately by FY2014, Camelot Illinois is targeting the levelsof sales on both games that Pennsylvania currently experiences on Powerball.Camelot excels at maximizing ROI and sales revenues across its game portfolio,optimizing revenue driving opportunities and driving weekly play, where in a five yearperiod UK sales revenue from a base week jackpot of $18 million has increased by 454%from $4.2 million in April 2005 to $23.3 million in April 2010. Camelot’s marketingstrategies have allowed EuroMillions in the UK to outperform its nine EuroMillionspartners by driving 62% in 2008 and 54% in 2009 of the game’s total year-on-yeargrowth. In addition, over a three month period in 2010, Camelot’s marketing strategy forCalifornia’s Mega Millions resulted in an estimated 25% sales increase vs. comparableroll cycle.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 305

Section 2 Final Business Plan2.9.3.3 Advertising and Public RelationsThis following section provides Camelot Illinois’ specific response to the Advertising areain Schedule 2.1 of the PMA, and as such covers all contributing aspects to advertisingranging from the creative design process, implementation of media planning and buying,including the launch of the Internet Pilot and public relations.Creative designObjective: Deliver benefit led, insight driven big creative ideas to transcend all media andemotively earn a permanent place in the hearts of consumersInsight: Current creative executions are well executed but can lack clear consumer benefit.The difference between a creative execution and a big creative idea platform is that agreat execution can be anything that communicates a thought or idea in a compellingmanner. However, for something to be a great idea creatively, it must transcend allmedia. It must be as persuasive and powerful in a print ad as it is on a bumper sticker orwebsite banner. It must not only make consumers want to buy a lottery ticket, but also,inspire them to associate with it. So while a creative execution can often get 30 secondsof consumers’ time, a big creative idea, if founded on insights, can gain a permanentplace in their hearts.Camelot uses research to inform and aid creative design development with advertisingagencies to build relevant and compelling big creative idea platforms, from which allcreative executions stem.The process is organized around five key stages. At each design stage it’s important toallow the time for rigorous thinking and research, as well leaving the space necessary formoments of inspiration. The stages are as follows:Defining the business opportunity.Finding the key insight into the target audience.Developing a communication platform to address the challenge.Developing creative campaigns from the communications platform.Evaluating the success of the campaign.1. Defining the business opportunityCamelot makes sure that there is a very clear understanding of the business opportunity- typically this will mean analyzing the audience data on a particular game to understandwhere future sales are going to come from.2. Finding the key insight into the target audienceOnce the opportunity has been identified, Camelot looks at how it can unlock it, whichmeans understanding the audience.This usually involves qualitative research to get a deep understanding of the audience. Inparticular, what might motivate them to play a particular game, and what barriers mightbe getting in their way?From this Camelot identifies the key insight: the one thing that needs to be addressed toget the audience playing.306 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan3. Developing a communications platform to address the challengeThe third stage of the process involves developing communications platforms. That is,finding a big idea for the brand that will address the insight about the audience, andunlock the business opportunity.This involves Camelot working closely with agencies, but also working with the targetaudience. Camelot develops a number of ‘candidate’ big creative ideas, and usesresearch to refine them.4. Developing creative campaigns from the communications platformOnce Camelot is agreed on a big creative idea platform the process of developingcampaigns is initiated. The big idea platform is the start point for the work in every mediachannel. Camelot’s advertising agencies work from the big creative idea platform anddevelop a number of integrated campaigns which are researched again in focus groupschecking for comprehension, takeout and appeal through qualitative focus groups. Thisenables refinement prior to commissioning expensive advertising commercials. Ifnecessary, this can be done across a period of time, to test and refine further specificideas.Camelot uses this research to inform which campaign has the most potential, andprovide the guidance needed to develop it to the point when Camelot marketing is happyto start the production process.5. Evaluating the success of the campaignCamelot tracks the performance of all campaigns in three ways: Firstly via the use of an advertising and brand tracker. This tracks the perceptions ofthe campaign, as well as any change in perceptions of the brand and monitors wearout of executions based on monthly consumer panel feedback. Secondly, through the use of an econometric model. This tracks the campaignagainst sales, and calculates the return on investment. Thirdly, reviewing post launch impact and sales performance for the specific activityand any broader portfolio impact.All evaluation is used to inform and improve the development and planning of Camelot’ssubsequent activities.Such a rigorous approach to marketing communication development enables Camelot toensure that brand strategies across all consumer and channel touch points are perfectlyexecuted so that new, infrequent or lapsed players can be engaged.The key output from a player perspective is the consistent execution of brand strategiesand campaigns coupled with continual re-enforcement of the brand messages. Figure2.9.3.3.1 shows the consistent communication and branding process, for a recentenhancement on the UK Thunderball Online Game, where a new matrix, prize tier anddraw day were introduced in all channels.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 307

Section 2 Final Business PlanFIGURE 2.9.3.3.1 DELIVERING INTEGRATED ACTIVITIES ACROSS CHANNELS ANDCONSUMER TOUCH POINTS – THUNDERBALL ‘PROJECT THOR’ 2010For Illinois, this means each supported initiative will be executed to ensure consistencyacross all channels from in-store, to the radio, through PR or via the website. In additionno game, channel or promotion will receive marketing support unless there iseconometric evidence that the activity will deliver a minimum return on investment.Camelot has successfully implemented many creative campaigns through the years,which not only drive sales and win industry plaudits, but importantly resonate andengage their intended audience. These insight informed, consumer benefit ledadvertising campaigns have been key to maintaining The National Lottery and itsportfolio of games relevancy and appeal in the face of intensive competition fromInternet based gambling sites and against a backdrop of economic hardship anduncertainty. With this strategy, Camelot has been able to successfully launch gameenhancements such as the “Millionaire Raffle” add-on game to EuroMillions, achieving35.4% uplift in sales and 85% awareness among players over the first eight months andalso grow existing games and categories, such as Instants and Thunderball, throughinsight informed creative and media planning.Media planning and buying from 2011-13Objective: Utilize a multi-platform media mix to attract new, younger players to the Lotterycategory and drive relevant mass awareness on a core range of revenue drivingbrands308 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanInsight: The majority of marketing activity supports short term, time specific activities, in avariety of multiple channels, creating short bursts of publicity for individual gameswhich ultimately impacts the media effectiveness in building long term brandengagement and results in higher than necessary production costs.In principle, playing the lottery is a mass participation behavior because of the intrinsicaspiration of spending a dollar for the chance to win millions of dollars.Usually this mass participation is stimulated when jackpots are really high, when theamount stimulates people to dream, creates consumer buzz, word of mouth andexcitement.It is the role of Advertising and Public Relations to inform as many people, as quickly aspossible about such jackpots, because even a really high jackpot will not deliver massparticipation if only a few people are aware how much is available to be won.Importantly it is this front of mind of saliency, that big jackpots intrinsically generate, thatcan provide the Lottery with the opportunity to re-connect with less engaged audiences.Camelot Illinois’ approach to media planning will ensure that no revenue driving jackpotgoes unsupported due to inflexible media buying plans.Camelot Illinois media flighting will achieve this by utilizing a buying strategy to delivercontinuity every week of the year for Lottery messaging 7 . Changes to the core mediumsused will follow a ‘Fewer, Bigger, Better’ principle to maximize effectiveness and withadjustments to how adult audiences are targeted, as follows: Broadcast communication needs will be delivered as an ‘always on’ media with 52weeks in support. To engage the best, broadest audience possible, the buying targetwill be Adults 18+ with a programming skew of Adults 18-34, which allows broadreach, effectively communicates to the younger audience, but still reaches the oldersegment (Adults 25-54) who currently represent the largest audience of currentlottery players. This broader target is more efficient to buy and thus will enable theaffordability of greater continuity of support throughout the year than is seen in thecurrent Lottery media plan. Out-of-home (OOH) will remain a core channel to drive impact through unique andcompelling units (digital screens, bus wraps, street furniture) and allowing for tailoredmessaging to be effectively delivered to the diverse neighborhoods across the stateof Illinois. The Internet enhances reach and is an effective mass reach channel. Advancedtargeting will effectively deliver the most appropriate message to various segmentsof the broad target. Other digital channels such as mobile and social media will beconsidered, budgets permitting, to drive engagement and encourage frequency ofplay. Experiential marketing will be utilized but on a strictly controlled basis; use will beincluded as part of added value programs negotiated with broadcast and othersponsorship partners.Media flighting is the term for a timing pattern in which TV commercials are scheduled to run during intervalsthat are separated by periods in which no advertising messages appear for the advertised item. Any period oftime during which the messages are appearing is called a flight, and a period of message inactivity is usuallycalled a hiatus.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 309

Section 2 Final Business Plan Newspaper/Print will not be included in the media mix to support the games, in orderto afford a greater presence within digital channels.To reach the majority of the public in Illinois, Camelot Illinois will look to buy across allDMAs in neighboring states, as seen in Figure 2.9.3.3.2, but so as to avoid wastage itwill invest in evaluating the use of the advanced functionality of Addressable TV andshared buys with other lotteries for Mega Millions and Powerball to maximize budgetefficiencies. The "Addressable advertising" platform brings many of the advantages ofInternet advertising to offline media, including better targeting and tracking capabilities.These capabilities make it a potentially potent tool, so Camelot Illinois will look to testrelevant functionality and measure ROI potential.FIGURE 2.9.3.3.2: ILLINOIS DMASSource: Nielsen ClaritasCamelot Illinois has drafted an approach that will provide 52 weeks’ continuity across acore range of initiatives and deliver the Right Message, in the Right Place, at the RightTime to the Right Person/People, using: TV as the driver of reach to as many adults within Illinois as possible across the year. Radio will be utilized to deliver and build frequency of campaign messages. Internet media will be utilized to provide targeting precision. Outdoor media will be utilized as a ‘community megaphone’ for jackpots and otherbold messaging. Mobile will be utilized tactically in proximity to retail.An indicative media support plan for FY 2012 is shown below (Figure 2.9.3.3.3).310 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanThe media support plan is built around the strategy of utilizing a multi-platform media mixto attract new, younger players to the Lottery, drive relevant mass awareness of brand,games and channels and deliver continuity on a core range of revenue driving brands.FIGURE 2.9.3.3.3: TOPLINE FY2012 INDICATIVE MEDIA SUPPORT PLANThe focus of FY2012 will be on the following initiatives as highlighted in Figure 2.9.3.3.3. Jackpot support for Powerball and Mega Millions – via TV, Radio, Internet and OOHmedia. Positioning, brand building and regular play for Powerball and Mega Millions – via TVand Internet media. The Lottery Brand – via TV and OOH media. Instants game launch and /or category benefits / 2nd chance summer promotion –via TV, Radio and Internet media. Internet channel launch – via TV and Internet media. Limited Edition Raffles – via TV, Radio and Internet media. Seasonal gifting – via TV, Radio and Internet media.NB: Hispanic and African American audience is included within this media mix In depth detail behind these FY2012 plans and examples of activity media supportfor FY2013 and FY2014 are provided in Supporting Evidence Section 2.9.B.Camelot excels at successfully maximizing ROI and sales revenues, through costeffective, econometric informed media planning and buying which provides the platformfor brand momentum through continuity across the year. Camelot’s media approach inCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 311

Section 2 Final Business Planthe UK has delivered sales growth of 11% from FY2007 to FY2010 and an increase inthe participation rate, from 63% in 2007 to 72% in 2010. It has also driven media savingsof $4.7 million (35%) from 2005 to 2009, enabling greater portfolio support andimproving media ROI, which in 2009 consistently achieved an average ROI’s of $13.5 to$1.Public RelationsPublic relations for winner publicity opportunitiesObjective: Highlighting real life jackpot wins in Illinois to sustain the belief of the big win forlong term players.Insight: Research highlighted how important it was for players still dreaming of their big winto see and/or hear about other people they can relate to i.e. people in Illinois, winningon Lotto, Mega Millions or Powerball.The objective of this initiative is to highlight the benefits of playing the lottery throughpublicizing the real-life fulfillment of people’s dreams because winner publicity provides acrucial opportunity to maintain believability for players that there are real ‘big winners’out there.A powerful public relations strategy around winner publicity will deliver belief that thedream is possible, helping to keep players playing when they hear about winners whowork or live in Illinois, their city or town, their office building, etc.Implementation of this initiative will be achieved via a two pronged approach coveringboth new winners and existing winners:New winnersNew winners can create a massive amount of positive exposure for the Lottery. Tomaximize positive media coverage of winners, it is essential to balance supportingindividual winners’ needs so they are comfortable participating in publicity activity andenjoy a positive winning experience, while still managing the media requirements. Anexample of the coverage Camelot achieves can be seen in Figure 2.9.3.3.4312 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.9.3.3.4 EXAMPLES OF UK NATIONAL MEDIA COVERAGE GAINED BYCAMELOT PUBLIC RELATIONS TEAMMedia interest in winners varies according to jackpot size and individual stories, dictatingwhether a story has national media interest or is focused more regionally. CamelotIllinois’ strategy will be to leverage the news of local winners to other players in Illinois,state wide where possible and always in regional newspapers.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 313

Section 2 Final Business PlanExisting winnersThe majority of media coverage focuses on new winners, however news of previouswinners still provides a major opportunity to demonstrate the benefits of playing thelottery.Ongoing coverage of winners who are further along the winning life cycle can keep thewinning experience in the forefront of the mind, in the absence of new winners goingpublic. The appearance of their stories can help communicate that winning continues tobe a positive experience, balancing any negative stories or perceived ideas.Existing winners are valuable advocates for the brand and can help support commercialinitiatives such as game launches or big jackpots, reinforcing the ‘winning’ message.Camelot Illinois believes regular continuing contact with previous winners is essential. Inthe UK this happens immediately, continuing for as long as winners wish, with a range ofevents set up to maintain contact and also enables them to meet up with other people insimilar circumstances.Follow up coverage can be focused around the following key areas: Winner research – facts around luckiest names, professions, star signs, ways ofchoosing numbers, superstitions. Promotion of new games or events through photographs of check presentations. Winner anniversaries – features about them one year after the win, five years later,and so on. Features focused on winners with specific hobbies / interests (e.g. luxury holidays,gardening, makeovers, interior design) in niche media/columns. Voluntary days – arranging for groups of local winners to give some of their time tohelp a charitable project. Documentaries/TV programs – featuring either winners on entertainment programs,quiz shows and/or documentaries looking at life after the win. Milestones/landmarks – gathering winners together to celebrate number ofmillionaires created, X years of the lottery, X being raised in prizes / for education orcapital projects.Camelot has had great success over the years working with the media to publicize thereal-life fulfilment of people’s dreams through those winners that decide to allowpublicity. While most people come into contact with Online Games via TV advertising(34% of players), the second largest number of people come into contact withEuroMillions, the UK’s big jackpot game, by either ‘hearing about a big win’ (19% ofplayers), or ‘stories in the media’ (16% of players) which can be directly attributed toCamelot’s work in building relationships with the media.Advertising the Internet Pilot ProgramObjective To deliver a marketing plan that will fully support the launch of the Internet Pilotmaximizing the benefit to Net IncomeInsight The Lottery does not currently have a transactional Internet site that can leverage thehigh number of people who purchase products and services through the Internet.314 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanOne of the major marketing milestones during FY2012 of the PMA will be the advertisinglaunch of the Internet Pilot Program.Camelot will implement a world class marketing plan supporting the launch of theInternet Pilot. This activity will not only be designed to attract players to the site, andensure that they engage with the site. Furthermore, once they register, Camelot Illinoiswill support and communicate with them using communications tailored to theirinterests and behavior.Camelot will use its threefold marketing approach of player acquisition, conversion andretention, which covers the entire player lifecycle and is shown in Figure 2.9.3.3.5.FIGURE 2.9.3.3.5 CAMELOT’S ‘ACE’ INTERNET MARKETING APPROACHAAcquisitionCConversionEEngagement& RetentionAcquisition – get the player to the site by building awareness and interest, throughword of mouth, media coverage or advertising.Conversion – once they are on the site promote consideration of purchaseby showing them the most appealing messages and benefits to playing via theInternet so that they open an Internet account and start playing.Engagement and Retention – keep players engaged with the site and keep themplaying (minimize lapsed players and encourage infrequent players to adopt regularplay).AcquisitionThe first step in Camelot’s acquisition plan will be to identify the target audience. Basedon Camelot’s experience in the U.K. this audience is likely to be a younger (18 to 34years old), higher income group who are technologically experienced. This group will alsobe made up of new, infrequent or lapsed players of the Lottery. Camelot will conductresearch in Illinois to specifically identify the launch target market in Illinois.Camelot will adopt a three-pronged strategy to launch the Internet Pilot once the launchtarget audience has been identified1 – Build awareness that you can now buy Lottery tickets on the InternetPR opportunities, for example the Governor being the first to buy a ticket on the newwebsite.Advertising on the sites where players enjoy spending time (e.g. Ebay,entertainment sites).Connecting with players on sites that are part of their daily routine (e.g. news sites).Identifying pools of people to advertise to by Advanced Targeting (behavioraltargeting, keyword targeting, day part targeting, contextual targeting, geographictargeting) across Internet advertising networks which include a broad range of sites.Being in places where players chat e.g. social media sites.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 315

Section 2 Final Business Plan2 - Boost number of visitors to the website with heavyweight marketing activityaround the launch period and when there are large jackpotsUsing rich media to create digital experiences (e.g. on hulu, vevo etc.).Being the sole advertiser for a digital advertising space within local media (creating a‘road-block’ effect) on sites such as Chicago Tribune, nbcchicago.com, etc.Communicating jackpot messages via social media and search activity on sites suchas Foursquare, Facebook and Google.3 – Continuous stream of Internet marketing activities to support the websitethroughout the yearCamelot’s website-support activities in the U.K. continue to drive in excess of one millionregistrations per year to the National Lottery site. Camelot Illinois will deploy six keywebsite support activities throughout the duration of the Internet Pilot:1) Digital display advertisingAdvertising Lotto and Mega Millions on a range of websites2) Search Engine OptimizationContinually improving the pages on the Lottery website to ensure the site ranks highlyin Google search listings.3) Pay Per Click search activityUsing sponsored links within Google to drive additional visitors to the website4) Social MediaCreating a Lottery presence on popular social networking sites such as Facebook5) PartnershipsWork with partners (e.g. Tribune Media Group) to reach new audiences and providethe Lottery with a presence on websites residents visit every day.6) AffiliatesAffiliates can send visitors to the Lottery website in exchange for commissions andCamelot Illinois will set up a program to maximize this opportunity.Each of these acquisition activities are detailed in Supporting Information 2.9.C. Theyinclude proven and pioneering partnerships with the likes of Tribune Media Group, theChicago Cubs and Facebook. For example, Camelot enjoys a successful commercialpartnership with Facebook in the UK. Camelot’s activity across Facebook is now thegreatest source of registrations for the National Lottery. Camelot has already discussedrunning similar activity with the Facebook office in Chicago. Camelot and Facebookbelieve that the range of successful advertising concepts utilized in the UK couldsuccessfully be deployed to drive a large number of registrations in Illinois.Conversion StrategyWhile Camelot’s acquisition strategy focuses on attracting players to the site, theconversion strategy focuses on ensuring that players arriving on the site then take thenext step to register and play.Camelot will utilize two key tools in its conversion strategy, which are a journeymodeling tool and web analytics reporting:Journey modeling toolsCamelot Illinois will introduce sophisticated modeling tools, as used in the UK, based onsite visitor data to gain a deep understanding of how consumers behave when they316 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planarrive at the website. For example, these tools can determine at exactly what stage ofthe registration process players may be dropping out. Camelot is then able to focus onimproving the areas of the website that will generate the highest number of successfulregistrations.Web analyticsWeb analytics is the process of analyzing the behavior of visitors on a web site in orderto highlight any issues that particular pages on a site may be causing. For example, it willindicate if players are struggling to locate particular content, such as past results, on thesite.Camelot Illinois will deploy web analytics on the Illinois Lottery website to gain anunderstanding of how players use the site and to inform site improvements.Engagement and retentionOnce a player has arrived at the Lottery website and registered, it is the role of theLottery to continually engage that player to ensure that the player keeps coming back tothe site to play. Camelot will employ its proven engagement and retention strategy inIllinois through four key email retention activities: Jackpot and results communicationsNotification of the latest drawing results and forthcoming jackpot levels Automatic trigger emailsTo alert a player of a win, or that their payment card is about to expire Campaign emailsTo tie in with marketing campaigns for Online Games ‘Best fit product’ marketing underpinned by player segmentationTailored marketing emails based on a players behavior on the websiteThese four engagement and retention activities are described in detail in SupportingInformation 2.9.C.2.9.3.4 Loyalty Program - the Illinois Lottery Player ClubObjective: Launch a Player Club to responsibly drive frequency of play across all sales channelsby rewarding those players who play lottery games on a regular basis.Insight: Loyalty programs are commonplace among other FMCG retailers, bank and airlinecompanies and many U.S. lotteries. However, the Illinois Lottery does not providesuch a program of rewards and benefits to its players.Camelot has conducted a wide review of loyalty programs offered by lotteries, retailersand gaming companies across the U.S. and has consulted industry experts to develop abest in class loyalty program for the Illinois Lottery.Camelot runs a successful loyalty program on the Internet in the UK where players areincentivized to increase their frequency of play or are rewarded for trying games theydon’t normally play. Players may receive a £1 token incentive to spend on a particulargame or may be entered into a prize draw to win non-cash prizes such as a vacation or acar.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 317

Section 2 Final Business PlanThe proposed Camelot Illinois program will begin on the Internet and, once established,the program will be extended into retail via the launch of the Player Card.How it worksFIGURE 2.9.3.4.1 PLAYER CARD END TO END PROCESSPlayers will be encouraged to register on the Internet. They will be given a Lotteryaccount and be rewarded with points whenever they play a game on the Internet on aregular basis. These points can be exchanged for merchandise, entry into a prize draw ortokens to play other Lottery games.Players will also receive an Illinois Lottery Player Card. This card can store a player’sfavorite numbers and be linked to their Internet account. In this way, players will berewarded for playing on the Internet or in-store. In-store players will ask a retailer to scanor swipe their card whenever they make a Lottery purchase. The retailer will see asummary of the customer’s account on screen and will be prompted to ask whether thecustomer would like to cash in their points. Larger rewards would need be redeemed onthe Internet (instant cash draws, movie tickets, sports merchandise) and immediateredemptions in retail would be handled by printing a receipt showing the reward (e.g. acan of soft-drink, free Instants ticket, etc.) or confirming entry into a prize draw.The loyalty program will: Develop true one-to-one marketing capabilities by obtaining a single view of the playeracross multiple channels and an understanding of consumer preferences Utilize data analytics to segment customers, understand their play and then create adirect line of communication to players with promotions of games and messages thatbest address their tastes and preferences Be supported by a Customer Relationship Management (CRM) program similar toCamelot’s CRM program that supports six million players in the UK. Camelot’scarefully constructed CRM campaigns not only provide an uplift in sales (averaging318 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan14% across campaigns 8) but also provide invaluable player data to assist in thedevelopment of responsible play measures.Player benefitsThe Player Club will provide loyalty rewards and benefits to players based on theirfrequency, not weight of spend. This is in line with both Camelot Illinois’ principles andthe desire of the legislature that efforts are made to grow the lottery’s customer base ina responsible manner. For each week of play, players will earn one point.The Player Club will offer registered players intrinsic benefits: Never lose a winning ticket- your card / Internet account records your transactions andyou will be notified of any win by email. Making retail play faster and easier without the need for a play slip as favorite numbersare stored on the card. Providing a thank-you to players via tailored rewards.Camelot envisions the initial program commencing with the provision of a plastic, barcodedcard. However, players will also be able to receive a personalized mobile ‘app’.This ‘app’ will contain a player’s personal bar code that a retailer can scan on theterminal, just as they would scan the Player Card.Raise profile and improve perception of the role of the LotteryBy establishing new direct communication channels with customers, the Player Club canpromote the Common Schools Fund supported with a quarterly newsletter that wouldeither be emailed or mailed out. The newsletter will focus on local beneficiaries (linked topostal zip codes of the recipient), making it relevant to their life, or community andraising awareness.Role in responsible playBy collecting play data, the Club and retail card enables the Lottery to play a bigger rolein helping players play responsibly and within their means.The data collected will enable the definition and tracking of 'problem' play behaviors,enable regular reporting as part of any responsible gaming initiative and documentvolumes of players affected and actions taken. Additional information on Loyalty Clubcan be found in Appendix A3.2.9.3.5 Sponsorships and third party associationsObjective: Camelot Illinois will broaden the appeal of the Lottery through commercialpartnerships with popular entertainment and sporting brandsInsight: Illinois has a large proportion of the population (circa 50%) that have not engagedwith or played the lottery for many years. Third party sponsorships will propelincreased play frequency among occasional players and drive brand reappraisal fromlapsed and non-players.Camelot is well connected in the global licensing industry and knows how to fullyleverage the value of the lottery to negotiate cost effective fees. Camelot Illinois willbring this expertise to the Illinois Lottery. Camelot has worked with third party partners8Camelot sales dataCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 319

Section 2 Final Business Planacross retail and interactive channels. Over the past five years, this has generated over$875 million in Instant ticket licensed game revenue; it is estimated over $280 millionhas been incremental revenue growth.Camelot Illinois will write a detailed strategy to ensure the Illinois Lottery is clear on whatpartners to approach, when, why, how and the amount they should be spending. Thestrategy will define the frequency and mix of all third party activities across the year.Camelot Illinois includes the following elements under its sponsorship definition: sportsand TV, Instant game licensing and Instant Speciality games. Each of these has beenaddressed in the following subsections:Sport sponsorshipsCamelot Illinois will explore the scope of existing sponsorships and look to extend thesponsorship program to include relevant partners across appropriate platforms.Camelot Illinois endorses the use of sports sponsorships because fans are more likely toform a deeper emotional relationship with a sponsoring brand. Camelot Illinois believesthat current associations with the Bulls and Blackhawks form a relevant platform toengage a broader customer base through a multi-media approach of Internet, TV, Radio,Text and so on.Camelot has plenty of relevant sponsorship experience and Camelot Illinois feels wellplaced to deal with U.S. sporting bodies. Camelot has worked closely with a number ofsignificant organisations spanning soccer, the Olympics and UK rowing:London 2012 – The UK is hosting the Olympic Games and Paralympics’ Games in2012; Camelot has worked closely with many of the associated sporting bodies topromote the National Lottery financial contribution towards the game.The Premier League – the leading soccer league in the world.The Football Association – the governing body for all UK soccer.Camelot has a rich history of sponsoring elite rowing in the UK. A four-year personalsponsorship of former coxless pair Sir Matthew Pinsent, Commander of the Order ofthe British Empire (CBE) and James Cracknell, Officer of the Order of the BritishEmpire (OBE) from 2000 evolved into a sponsorship of the coxless four, including EdCoode Member of the Order of the British Empire (MBE) and Steve Williams MBE,who won a gold medal at the Athens Olympics.TV sponsorshipsCamelot has experience with TV sponsorship and will extend this expertise to Illinois.This is summarized in the case study below.Camelot Illinois will work with media owners such as ABC 7, 5 Chicago, Fox Chicago todevelop broadcast sponsorship opportunities around Chicago Prime Time programming.This could include elements such as opening and closing billboards, with customizedmessaging announcing large jackpots, or as reminders to play the Lottery. CamelotIllinois will also consider jackpot triggers – using “In-Program” overlays i.e. “SpecialAnnouncements”, promoting higher jackpots.CASE STUDYTV GAME SHOW MARATHON SPONSORSHIP320 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCamelot’s Instants positioning in 2007 focussed on ‘transformation’ - a creative vehiclewhich demonstrated how your life could be enhanced or ‘transformed’ as the result of awin on Instants.The vehicle was a simple construction of a ‘before and after’ framework which would betailored to individual games in a light, fun way whilst demonstrating the effect of a win.To ensure the Instants category was supported throughout the year, sponsorship wasproposed to showcase the category in an innovative way, whilst complimenting the sixindividual game launches throughout the year.Sponsorship ObjectivesA high profile show which targeted occasional players and could help position the brandin a fun way to drive positive appraisal and play of Instants.ActivityCamelot sponsored a series of Gameshows called ‘The Gameshow Marathon, whichwas a high profile Saturday night peak viewing programme, hosted by a very popularpresenter.Vernon Kay’s Gameshow Marathon was on air each Saturday night from 7 April to 26May 2007, from 18.50 – 19.54 on ITV1, as shown below in Figure 2.9.3.5.1Each week, a classic UK game show format was brought back to life with celebritiescompeting for a top prize of £100,000 for their chosen charity. Classic shows included“The Price is Right”, “Blockbusters”, “Bullseye”, “Blankety Blank” and “Mr and Mrs”.The creative idents leveraged the existing creative (transformation) thus complimentingthe individual TV executions that ran alongside the sponsorship strand throughout theyear and enabled Camelot to have more dialogue with its players through theendorsement of a fun gameshow 9 . The activity consisted of 80” ident footage allowedper show i.e. six different creative idents split across 8 x 10” idents.ResultsEconometric modelling suggests the sponsorship generated an estimated $3.29 millionof incremental sales. At a media cost of $712,000, this equated to an ROI of $4.62Sponsorship delivered a stronger ROI than any other ‘secondary media’ for Instants.9Idents are branded sponsorship commercials that run pre and post the sponsored show but are separatedfrom standard commercial breaks, via close association to the sponsored show and the Channel’s one logointermission.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 321

Section 2 Final Business PlanFIGURE 2.9.3.5.1 VERNON KAY’S GAMESHOW MARATHON – INSTANTSSPONSORSHIPLicensingThe range and execution of licensed properties on offer in Illinois does not appear to bedriving revenue to its full potential. Camelot Illinois’ experience with licensing will deliverfar better results.Camelot has been at the forefront of Lottery film licensing and is a highly sought afterpromotional partner for film production and distribution companies. Camelot has had astrategic partnership in place with The Licensing Company (TLC) for over 7 years.Through TLC, Camelot has worked with New Line Cinema, Universal Studios, SonyPictures and Paramount Studios. TLC are globally well placed and well represented inthe US. They are the world licensing leader and they are keen to work with Camelotoverseas. Together, the two companies will be able to bring fresh innovative content toIllinois, which will help shape more positive Instant brand opinion. Camelot has spokento TLC about the Illinois possibility and they are keen to extend the strategic relationshipto Illinois. They have provided a letter of reference which is included in the SupportingInformation 2.9.D.2.Camelot has close commercial ties with Endemol which since its formation in 1994, hasrocketed from a small production company in the Netherlands to become one of thelargest TV, cross platform and digital production companies in the world. Endemol nowhas 80 companies in 26 countries and produces more than 40,000 hours of television ayear for over 400 networks. Camelot forged a strategic partnership with Endemol nearlyfive years ago. Endemol produces high quality draw formats, factual good causeprogramming and excellent digital content for the UK National Lottery website. Camelot322 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planalso has close ties with their commercial licensing division. Camelot Illinois has spokento Endemol about the Illinois possibility and they are keen to extend the strategicrelationship to Illinois. Camelot Illinois believe Endemol would be an excellent strategicpartner, providing relevant and exciting content across multi platforms. They haveprovided a letter of reference which is included in the Supporting Information 2.9.D.3.Camelot Illinois has a number of suggestions which, subject to consumer research, willprovide exciting content for Instant games. Figure 2.9.3.5.2 below provides an exampleof one such idea:FIGURE 2.9.3.5.2 INSTANTS LICENSING CONCEPT ‘EXTREME MAKEOVER’ Camelot Illinois licenses Extreme Makeover from Endemol for use on an Instantticket. The Instant ticket offers a top prize where the Extreme Makeover team comes tothe winners’ house and arranges for it to be knocked down and then builds a dreamhome prize. Endemol provides Ty Pennington imagery, show iconography, logo, and so on. Ty features in a Lottery advert trailing the ticket with the exciting top prize. The winner is put up for a week in a top hotel. They are filmed across the week. The Extreme Makeover team are filmed as they build the winners a new home. A winner’s film is added as digital content on the Illinois website. A follow up product advertising campaign shows the moment the winners see theirhouse for the first time.The proposed licensing route is entirely innovative. It presents a compelling consumerproposition; a sought after prize with huge excitement.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 323

Section 2 Final Business PlanFrom a commercial perspective, it provides the kudos associated with a broadcast show,and a great media exposure opportunity. Together this will help change some of thenegative opinions surrounding the brand.Dealing with third parties for Speciality gamesThe Illinois Lottery is understandably proud of the money it raises for cause-specific“specialty” games. The Lottery raised more than $1.13 million for Illinois veteran groups,$850,000 for the battle against breast cancer, $1.02 million to improve the lives ofpeople living with AIDS and $1.28 million to help create a world free of MultipleSclerosis. (Source: Illinois Press release July 13th 2010).Whilst individual sales of these games are not remarkable, there is a huge residualbenefit of having speciality games in the portfolio. Camelot recommends these gamesremain an important feature of the game plan. Care should be taken to maximise salesfor each cause. This means not having a number of speciality games overlapping in themarket. Emphasis about the Capital Projects should focus more on the Illinois website.Endemol, for example, could produce mini human interest films on the Capital Projectswhich could be watched via the website. Camelot Illinois recommends closer ties to theCapital Projects to ensure maximum coverage and understanding of where Lotterymonies have been channelled.2.9.3.6 Summary of Strategies and ActivitiesThe Business Plan for Marketing details the approach Camelot Illinois will take to growNet Income by retaining the current player base, increasing their frequency of play, whileexpanding participation of occasional, lapsed and new younger players.Camelot Illinois will deliver Fewer, Bigger, Better activities than those being delivered inthe current marketing plans, to establish and build longer term brand engagement on acore range of games that marketing strategies can most influence to drive incrementalsales.This will be achieved by adopting Camelot’s proven iSPEX process which will put theconsumer at the heart of everything the Illinois Lottery does. The creation of a CustomerInsight Team and a rolling research program will inform and influence both strategy andactivities.A successful re-invigoration of the Illinois Lottery brand, making players and the widerpublic more aware of lottery funded projects will help to remove a barrier to broaderparticipation. Alongside this activity, a greater differentiation between the brands in thegame portfolio, particularly the positioning between Powerball and Mega Millions, willensure new and existing consumers can make choices on which games to play, drivingrepertoire play and more frequent play.Camelot Illinois will bring this approach to life with compelling and engaging creativedesign using a proven five stage process steeped in creativity and consumer insightwhich will ensure consistent execution across all channels.Creative content will be delivered through media plans that have an obsessive focus onROI and are based on econometric modeling. Camelot Illinois has described plans thatprovide 52 weeks of continuous media presence, maximizing the opportunity to promotethe revenue driving jackpots of Powerball and Mega Millions and build long term brandengagement.324 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCamelot Illinois will implement a world class Internet marketing activity plan to supportthe launch of the Internet Pilot. Adopting the ‘ACE’ approach, which is growing thenumber of UK registered Internet players by over one million each year, Camelot Illinoiswill use sophisticated journey modeling tools and web analytics to grow a younger,higher income demographic who will be new, infrequent or lapsed players of the Lottery.To compliment these activities Camelot Illinois will introduce a Player Card and LoyaltyProgram for Illinois that will set a benchmark within U.S. state lotteries. The program willoffer engaging rewards, responsibly based on frequency of play rather than total spend.It will create a powerful one-to-one marketing tool which will enable precisely targetedCRM in both the retail and digital environments.Camelot Illinois will enhance and broaden the appeal of the Lottery so that it can reachnew players and re-engage lapsed players, leveraging relationships with householdnames in the entertainment and sporting sectors. Camelot has a strong track record inthis area and through its existing relationship with Endemol will deliver a licensingopportunity with the highly successful TV show Extreme Makeover: Home Edition.With over 15 years of experience in delivering powerful and flexible multi-mediamarketing campaigns, Camelot Illinois believes that the exciting plans in this section willengage consumers with the Illinois Lottery and drive growth in Net Income.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 325

Section 2 Final Business Plan2.9 SUPPORTING INFORMATION2.9.A. ADDITIONAL INSIGHTS ON MARKETING AND MEDIAPHASINGThe Illinois Lottery has created and implemented an ongoing busy program of marketingcommunications activity supported by an established game branding structure covering arange of core and secondary initiatives across the fiscal year.However, with both low penetration and frequency levels it is possible that themarketing communication program does not engage existing players and the widerpublic in the way that it could.The campaign plans in Figure 2.9.A.1 highlight a large number of activities in a variety ofchannels and of differing size that produce a complex and fragmented approach. Ineffect the plans deliver short bursts of activity, which in FY2010, centered on 2nd chancesummer, Mega Millions, Halloween Raffle, Holiday Instants, Bags & Bucks andPowerball. For Mega Millions this has resulted in only six weeks of mass mediapresence, followed by five bursts of TV for either two or three weeks irrespective ofJackpot level, the main motivator to play the game. Continuity support for jackpots postthe six weeks of mass media was executed through traffic radio and Out of Homeadvertising.326 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.9.A.1 COMPLETE FY2010 ILLINOIS LOTTERY MASTER FLOWCHART –MEDIA AND ACTIVITIESSource: Illinois State Lottery Data roomThe Master Flowchart also details a number of additional secondary activities aroundIllinois Lottery sponsorships and support for hypothecated Instants e.g. ‘MS Ticket’ inMarch 2010, ‘Ticket for the Cure’ in May 2010, and ‘Veteran’s Cash in November 2010.These short bursts, when reviewed alongside the ‘Retail Promotions’ document whichstates the ‘…Lottery conducts hundreds of ongoing onsite retailer promotionsthroughout the year…’ suggest a marketing plan designed to try and support allscheduled activities on the Lottery’s calendar.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 327

Section 2 Final Business PlanIn essence, the marketing plan has a focus skewed to supporting and promoting asignificant number of initiatives that have a short term, specific time-relevant focus e.g.Raffles, Summer Promotion, Holiday gifting and Instants launches - rather than gamesthat have a week-in, week-out relevance e.g. Powerball and Mega Millions.The implication of this plan is that there can be little carryover benefit arising from theadvertising, due to the activity being advertised having a time specific shelf life inmarket; whereas games that are on sale all the time would be able to benefit from acarryover effect 10 .However, for example, the periods when advertising for Mega Millions appears(“flighting”) 11 , is delivered through medium to short bursts in the 2010 calendar,meaning carryover benefits will decay to negligible levels. The only exception to this isthe continuity through Out of Home advertising.In Camelot’s experience, given the focus on activities with a limited window ofrelevancy, the lack of continuity and consistency within the media flighting will beimpacting consumer advertising recall and the multiple hiatus periods for brands acrosslong periods will prevent the benefits of carryover.10 Advertising Carryover is the prolonged or lagged effect of advertising on consumer purchase behavior.Carryover is a model of how response to advertising builds and decays in consumer markets based on mediaschedules. Carryover (or Adstock) builds on the principle that the exposure to TV advertising builds awarenessin the minds of consumers, influencing their purchase decision. Each new exposure to advertising buildsawareness and this awareness will be higher if there have been recent exposures and lower if there have notbeen. In the absence of further exposures to advertising, carryover eventually decays to negligible levels.11Media flighting is the term for a timing pattern in which TV commercials are scheduled to run duringintervals that are separated by periods in which no advertising messages appear for the advertised item. Anyperiod of time during which the messages are appearing is called a flight, and a period of message inactivity isusually called a hiatus.328 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.9. B. INDICATIVE MEDIA SUPPORT PLAN FOR FY2012The media support plan is built around the strategy of utilizing a multi-platform media mixto attract new, younger players to the Lottery, drive relevant mass awareness anddeliver continuity on a core range of revenue driving brandsFIGURE 2.9.B.1: TOPLINE FY2012 INDICATIVE MEDIA SUPPORT PLAN NEEDSUPDATINGThe focus for FY2012 will be on the following initiatives as highlighted in Figure 2.9.B.1: Jackpot support for Powerball and Mega Millions – via TV, Radio, Internet and OOHmedia. Positioning, brand building and regular play for Powerball and Mega Millions – via TVand Internet media. The Lottery Brand – via TV and OOH media. Instants game launch and / or 2nd chance summer promotion – via TV, Radio andInternet media. Limited Edition Raffles – via TV, Radio and Internet media. Seasonal gifting – via TV, Radio and Internet media.TV:52 weeks in 10 DMAs (Cedar Rapids, Rockford, Davenport, Quincy, Chicago, Peoria,St. Louis, Paducah, Terra Haute, Evanston).Targeting Adults 18+ planning and buying demo.TV Day part mix: Primetime, Sports, Cable Prime, Late News.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 329

Section 2 Final Business PlanRadio:Commercial Spot Length Mix: 75% :15s / 25% :30s.52 weeks in 10 DMAs (as above).Targeting Adults 18+ planning and buying demo.Radio Day part mix is based on: AM and PM Drive.This plan is designed to deliver combined A18+ Reach & Frequency Chicago only TV &Radio across FY2012 of: 1+ Reach: 95%. 3+ Reach: 86%. Avg. Freq: 17.Indicative FY2012 media split: OOH 10%. Internet 12%. Spot radio 25%. Spot TV 53%.Illinois State Lottery 2013 indicative media support planStrategy: Broaden presence of Lottery messaging within Internet media platforms toreach younger players, drive relevant mass awareness and maintain continuity on a corerange of revenue driving brands.FIGURE 2.9.B.2: INDICATIVE MEDIA SUPPORT PLAN FOR FY2013330 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFY2013 focus will be on the following initiatives as highlighted in Figure 2.9.B.2: Jackpot support for Powerball and Mega Millions - via TV, Radio, Internet and OOHmedia. Positioning, brand building and regular play for Powerball and Mega Millions - via TVand OOH media. The Lottery Brand – via TV and OOH media. Instants game launches – via TV, Radio and Internet media. Limited Edition Raffles – via TV, Radio and Internet media. Seasonal gifting – via TV, Radio and Internet media. Lotto enhancements and aftercare - via TV, Radio and Internet media. Internet Channel - via TV, Radio & Internet media. Instants category communication e.g. 2nd chance summer – via TV & Internetmedia.TV: 52 weeks in 10 DMAs (as above). Targeting Adults 18+ planning and buying demo. TV Day part mix : Primetime, Sports, Cable Prime, Late News. Commercial Spot Length Mix: 75% :15s / 25% :30s. Cable Prime heavy-up impacts 13 weeks in all 10 DMAs – this allows Lottery tosupport messaging when there is an increase in jackpots and specialgames/promotions. Apply advanced TV technology learnings from 2011 to increase engagement amongyounger players.Radio: 52 weeks in 10 DMAs (as above). Targeting Adults 18+ planning and buying demo. Radio Day part mix is based on: AM and PM Drive. Inclusion of live reads, remotes, and sudden impact activations.Digital/Mobile/Social media spend increases to support Internet launch.This plan is designed to deliver combined A18+ Reach & Frequency Chicago only TV &Radio across FY2013 of: 1+ Reach: 95%. 3+ Reach: 88%. Avg. Freq: 17.Indicative FY2013 media split: OOH 8%. Internet 29%. Spot radio 17%. Spot TV 37%. Spot cable 9%.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 331

Section 2 Final Business PlanIllinois State Lottery 2014 indicative media support planStrategy: Refine and optimize media mix/message to continue and build Internet lotteryplay momentum, drive relevant mass awareness and maintain continuity on a core rangeof revenue driving brands.FIGURE 2.9.B.3: TOPLINE ISL 2014 INDICATIVE MEDIA SUPPORT PLANFY2014 focus will be on the following initiatives as highlighted in Figure 2.9.B.3: Jackpot support for Powerball and Mega Millions - via TV, Radio, Internet and OOHmedia. Positioning, brand building and regular play for Powerball and Mega Millions - via TVand OOH media. The Illinois Lottery Brand – via TV and OOH media. Instants game launches – via TV, Radio and Internet media. Limited Edition Raffles – via TV, Radio and Internet media. Seasonal gifting – via TV, Radio and Internet media. Lotto enhancements and aftercare - via TV, Radio and Internet media. Internet Channel – via TV, Radio and Internet media. Instants category communication e.g. 2nd chance summer – via TV and Internetmedia. Numbers enhancements and aftercare – via TV and Radio media.TV:332 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan 52 weeks in 10 DMAs (as above). Targeting Adults 18+ planning and buying demo. TV Day part mix : Primetime, Sports, Cable Prime, Late News. Commercial Spot Length Mix: 75% :15s / 25% :30s. Cable Prime heavy-up impacts 13 weeks in all 10 DMAs – this allows Lottery tosupport messaging when there is an increase in jackpots and specialgames/promotions. Expand usage of advanced TV – buy Online Game tickets with a click of yourremote! Intensify video tactics to include online video full episode players, syndicated longform content and user generated content.Radio: 52 weeks in 10 DMAs (as above). Targeting Adults 18+ planning and buying demo. Radio Day part mix is based on: AM and PM Drive. Inclusion of online streaming personalized targeted messaging. Addition of HD radio.Internet /Mobile/Social media will be mainstream and Lottery must have dominant,consistent presence to align with the consumer trend. Continued growth of diversity population within Chicago DMA will result incustomized media programs, content and messaging.This plan is designed to deliver combined A18+ Reach and Frequency Chicago only TVand Radio across FY2014 of: 1+ Reach: 95%. 3+ Reach: 88%. Avg. Freq: 17.Indicative FY2014 media split: OOH 4%. Internet 31%. Spot radio 17%. Spot TV 39%. Spot cable 9%.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 333

Section 2 Final Business Plan2.9.C DETAILS OF PROPOSED ACQUISITION INTERNETADVERTISING ACTIVITY IN ILLINOIS1. Internet Display advertisingThis advertising will be used throughout the week to tactically advertise relevant gameson different days of the week. Using Lotto as an example, digital advertising would runon Monday, Wednesday and Saturday advertising the next jackpot and encouragingpeople to play online today. This strategy maximizes the efficiency of the advertising andminimizes media wastage. This would be an effective reminder to infrequent players.2. Search Engine Optimization (SEO)In building the new Internet site Camelot Illinois will incorporate the key principles ofSEO to ensure that the site ranks highly in Google and other search engines, whilstproviding accessibility to individuals with disabilities.3. Pay per Click Search Advertising (PPC)PPC or paid search marketing can be used tactically as a cost efficient way of drivingadditional traffic to the site.Camelot has a deep understanding of the techniques used to maximize the performanceof this channel without needing to increase bids on keywords. Camelot recently ran anumber of tests covering National Lottery PPC activity. The insights gained from thesetest results informed a complete restructure of all PPC activity, resulting in aperformance improvement of 26%.4. Social MediaCamelot is interested to see that the Lottery has already seen the benefits that canderive from social media (currently the greatest driver of internet activity with Facebooknow exceeding Google in terms of weekly traffic) by creating a Facebook page, howeverCamelot believes there is still significant potential in this area for Illinois. New andyounger players particularly can be reached using an effective Social Media strategy.Camelot has a launch strategy for its own social media activity and has a very clear ideaof how social media can be used most effectively when the opportunity arises, and whatit can bring to lottery players.It should integrate the lottery into places that players visit as part of their daily routine,rather than ask them to change their routine to visit the Lottery website. For socialmedia to be used successfully by a brand, players have to be provided with somethingthat is engaging, or useful, preferably both. Camelot is familiar with the ForresterTechnographics ladder which segments people’s use of social media, and has alreadyestablished that National Lottery players are around twice as likely to use Social Mediaas the national average.Camelot will expand the Lottery Facebook page to include information on the entiregames portfolio (jackpots, results, etc.) initially. The key to unlocking the potential relieson providing content that is entertaining, and to make use of the unique technologyavailable in this platform, for example the ‘Like’ and ‘Calendar’ features.334 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.9.C.1 – THE IMPACT OF ‘SOCIAL ADVOCACY’ ON CONSUMER BEHAVIOR35%30%30%Percentage (%)25%20%15%10%10%16%13%8% 8%8%5%4%2%0%Ad Recall Awareness Purchase IntentHomepage ad exposure Homepage ad + social advocacy Homepage ad + organic exposureSource: Nielsen BrandLiftThe social media platform enables the Lottery to have a direct conversation with players,listen to what excites them and use the insight gained from them. Facebook is ideallyplaced as a stakeholder forum (as discussed in more detail in Section 2 4), which wouldinvolve players / potential players in the following ways: Allow them to vote online for the ‘speciality’ Instant ticket charity. Provide an avenue for research feedback on future Instants games that are underdevelopment, which could prevent the lottery from wasting money on unpopulargame designs. Drive awareness of Lottery funding and the good that it does in Illinois communities.This social media activity also dovetails with the cellular phone (anywhere / any time)strategy. The use of social media sites such as FourSquare, via cell phones means thatthe Lottery can communicate with players while knowing their location: this will allowplayers to find their nearest retailer, or enable the Lottery to offer promotions based ongeo-location tagging technology.In the UK, Camelot has enjoyed a successful commercial partnership with Facebook forthe last nine months. This success has resulted in more registrations on the NationalLottery site originating from Facebook, than from any other UK advertising partner.Camelot has met with the Illinois Facebook office and both parties are keen to establisha similar partnership to benefit the Illinois State Lottery.5. PartnershipsCamelot has nurtured a number of successful marketing partnerships in the UK,including leading brands such as AOL, MSN and Yahoo, with mutually beneficial resultsfor both parties.Camelot has already engaged with the Tribune Media Group and the Chicago Cubs inconversation around creating such partnerships for the Illinois market. The rationale forcreating these partnerships is straightforward; their ability to reach and engage newaudiences while providing the lottery with a presence in places that residents goeveryday rather than asking them to modify their routine in order to access the lotterywebsite.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 335

Section 2 Final Business PlanWith these partnerships the Lottery would receive a branded presence on their websiteswhere players can check their numbers, and find out about the latest lottery news. Anonline playslip would be included where players could enter their numbers, or choose aQuick Pick, which would link them through to the Lottery website and pull their numbersthrough.CASE STUDYAOL PARTNERSHIPCamelot began an initial trial with the AOL portal five years ago. This was a small testcampaign which proved successful in not only driving registration volumes but alsodriving them efficiently regardless of the jackpot levels of the games.The initial test quickly moved into a more integrated partnership with AOL which allowedCamelot to develop a page of lottery content and host it on the AOL website, furtherpromoting The National Lottery in a new and different environment.The partnership evolved further when Camelot started to use both AOL display mediaand the AOL Advertising Network, both of which have proven to be effective ways ofboosting registration volume. Together with this, Camelot began to test and deployadvertising across new areas of the AOL site by using placements such as the AOLWelcome Screen and simple Text Links which changed depending on the jackpots.Advances in DoubleClick ad-serving technology mean that today Camelot tracks exactlywhich areas of the AOL site perform well and generate the most registrations.Camelot has also moved into Behavioral and Re-targeting through Tacoda and the AOLNetwork which is some of the most efficient advertising Camelot runs. As Camelot’sstrategy has evolved, the AOL relationship has been extended to include video and richmedia, meaning Camelot is using nearly every platform and offering within the AOLestate.Over the past few years, AOL has gone from contributing 0.3% of total registrations toover 7%. 25% of Camelot’s annual registrations are now delivered through partnershipactivities (1.3 million total registrations produced during the 09/10 fiscal year). In addition,AOL accounts for nearly a quarter of all National Lottery registrations arising from digitaldisplay advertising. Camelot’s great relationship with AOL means PR and WinnersStories are shared with them that are then featured on their UK Home Page and otherrelevant areas of the site. As technology and the digital market place have evolved, soour partnerships have evolved too to always remain mutually beneficial.Figure 2.9.C.2 Lottery link on AOL UK home page menu336 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanSource: CamelotFigure 2.9.C.3 The National Lottery page within AOL UK siteSource: Camelot6. AffiliatesIn Internet marketing, an affiliate is a person or company which sends visitors to awebsite in exchange for commissions. Affiliates can be great ambassadors for the lotterybrand, and Camelot has seen great success in the UK by working with them. In Illinois,Camelot will set up an affiliate program with leading affiliate networks such as‘TradeDoubler’ to drive traffic to the website.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 337

Section 2 Final Business PlanAffiliates will be provided with online advertising and e-mails which they could use tomarket the Lottery, with the affiliates being paid based on results (i.e. only beingrewarded when a player successfully registers and sets up an Internet Account). Thisensures that the Lottery only pays for affiliate activity that is successful.Campaign OptimizationThe tracking of digital advertising is fundamental to analyzing its ROI and performance ofevery area. Camelot will implement a similar monitoring regime in Illinois to that used inthe UK focusing on three particular aspects: assessing click through rates; registrationlevels; and Cost Per Acquisition. This detailed monitoring would run across all theacquisition activities detailed above.Camelot has found it helpful in developing the UK business to look at this informationseveral times a week, to ensure that all activity is optimized and focused on improvingperformance; as a direct result the efficiency of digital advertising has improved by 25%over the past 12 months, reducing the cost per acquisition from $12 to $9.Camelot will also track player value by source so that it can be determined which mediapartners provide regular players to the Lottery and tailor commercial agreementsaccordingly.CASE STUDYLOTTO ‘MASSAGE’ CAMPAIGN - INTEGRATED MARKETINGBackgroundIn 2007, Camelot faced a challenge in acquiring additional interactive customers.Success in previous years had decreased the total pool of those consumers aware of theability to play online but unregistered, making digital advertising less and less efficientfrom an acquisition perspective.ObjectiveThe hypothesis was that success in previous years had eroded the Total AvailableMarket (TAM) of consumers aware of the ability to play online. The campaign’s objectivewas to drive awareness of the ability to play online, while at the same time not hinderingretail sales. The TV ad, ‘Massage’, featured an aspirational theme highlighting the joy ofwinning Lotto whilst also providing a powerful call to action to Play Online. Theaccompanying digital advertising activity was optimized and upweighted to maximize theeffect of the “Play Online” message within the TV campaign.Figure 2.9.C.4: Advertising still from Lotto ‘massage’ marketing campaign338 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanInteractive SuccessThe campaign was a great success. Camelot saw an increase in weekly registrations of55%. However, this was only part of the overall impact. By reacting quickly to theincreasing awareness being driven by the ‘Massage’ TV advertising Camelot was alsoable to increase the digital spend during this period by 27% and still deliver a cost peracquisition 28% lower than before the campaign launched.Retail SuccessThe advert appealed to retail players too, delivering an additional $18 million of retailrevenue. Additionally post-campaign awareness tracking measured that spontaneousawareness of the ability to play online had risen from 19%* to 30%* confirming that thecampaign had significantly grown the total available market.Over the entire duration of the campaign ‘Massage’ contributed $74 million incrementalrevenue. The synergistic effect between TV and the Internet on both the retail and e-commerce channels have made the ‘Massage’ activity Camelot’s most successfulcampaign of recent years.*Source: TNS CAPI OmniBusDetail of proposed engagement and retention activities in IllinoisJackpot and results communicationsThe most basic form of retention marketing is to provide players with email servicessuch as rollover alerts and results emails. These communications are simple emails thatcan be sent to opted-in players to advise them of the draw results or of upcomingjackpots. Camelot has noticed that Illinois now offer jackpot alert emails for office poolsplayers, which is a great start. Camelot will build on this foundation by introducing emailbest practices to improve the sales impact of each email sent. As in the UK, Camelot willconsider not only the content of the email but the way it is displayed, the scheduledemail delivery date and time, subject headers, and opportunities for cross selling withinCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 339

Section 2 Final Business Planthe email. All these factors are scored to ensure that every email broadcast is the best itcan be. Camelot constantly test and refine these processes.The visual impact of an optimized email can clearly be seen below:FIGURE 2.9.C.5 – CURRENT NATIONAL LOTTERY JACKPOT ALERT EMAILSource: CamelotFIGURE 2.9.C.6 – CURRENT ILLINOIS STATE LOTTERY JACKPOT ALERT EMAILSource: CamelotAutomatic trigger emailsAutomatic trigger emails are pre-prepared emails that are automatically sent to a player iftriggered by a particular action. As part of its approach, Camelot intelligently uses systemdriven email communications at key trigger points in the player lifecycle, such as:Registration emailNewly registered players receive an email welcoming them to the website andexplaining how they can enjoy all the features of the site.Winning notificationWhen a player has a winning ticket they are automatically notified that they have won.Payment Card expiry notificationShortly before a players credit or debit card expires they are sent a reminder to updatetheir details on the site.Ticket expiry remindersIf a player has bought a ticket that covers several weeks, they will be emailed a reminderbefore expiry, to encourage them to buy another, with a hyperlink back to thetransactional Internet site.340 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanSubscription expiry remindersIf a player has a subscription that is due to expire they will be emailed to remind them tocontinue the subscription.Camelot has proven expertise in this area and has won the award for 'Best use of emailin a CRM campaign’, 2008 Marketing Connect AwardsAll of these emails have revenue benefits (for example notifying players of low level winsoften results in the purchase of additional tickets) as well as operational benefits (forexample when players are reminded that their registered payment card is about to expirethey will update it, whereas they are often frustrated if they later try to make a purchaseand discover that they need to register a new card and then call the contact center).Campaign EmailsThese emails are used to communicate new marketing campaigns to registered playerson a one-to-one basis. Camelot co-ordinates the timing of email communications with TVand other marketing activities. When a marketing campaign is launched, for examplefocusing on regular play for Lotto, then the interactive player base (those that havechosen to receive email) will receive an email portraying similar messaging. These emailscan also include a prize draw to engage players with a prize relevant to the campaign.‘Best fit product’ marketing underpinned by player segmentationPlayer segmentation provides a wealth of data on the play behavior of different groups ofplayers. Based on an individuals’ current play behavior it is possible to identify whichgame they are most likely to be interested in, outside those that they are already playing.An email will then be sent to the player inviting them to try an additional game (forexample suggesting that a Lotto player try Mega Millions) or product (for examplesuggesting that a regular Lotto player take out a subscription). This is referred to as the‘best fit product’ for that player based on our knowledge of their current play.Marketing emails based on player segmentation are layered on top of essential accountinformation during the player lifecycle.Camelot uses player segmentation to gain a deep understanding of the player base, andthe diverse groups within it. This enables the insight team and, more widely, the entiremarketing team to understand the behaviors, attitudes and needs of players that supporta series of tactical and strategic initiatives across the business.Player segmentation in Illinois will evolve over time as the player database grows.Camelot has experience of using a simple segmentation approach (see Figure 2.9.C.7,below left) as well as more complex models (below right)Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 341

Section 2 Final Business PlanFIGURE 2.9.C.7 – ILLUSTRATION OF BASIC (LEFT) AND DETAILED (RIGHT) DATASEGMENTATION METHODS.Confidential Information removedSource: Camelot/EmnosThe figure on the left illustrates the database segmented into seven groups, each ofwhich can be marketed to in a different way. Over time this evolved to the figure on theright, which includes segments for new, active (five segments), lapsed, inactive andsubscription players (four segments). Camelot tailors marketing communications to eachof these segments.Activities conducted at segment level include campaign planning, targeting and creativeexecution. These data segments can then be used to inform multiple reports, coveringPlayer Behavior, Player Profiles, Mosaic Profiles and Attitudes (see Figure 2.9.C.8). Eachof these reports is based on a wealth of robust data, and provides player behavior acrosssegments e.g. frequency and value of play, opt-in rates to marketing communicationsacross segments, demographic break down across segments, and any geographicskews between segments. By then linking this data to Simmons / TGI this shows playerattitudes and beliefs across segments as well as a detailed profile of each segment,including their favorite brands, the type of homes and cars they have, and other insightsas to how they live their lives.342 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.9.C.8 – EXAMPLE OF THE DETAILED REPORTING CAMELOT STUDIES ONEACH SEGMENT OF THE PLAYER DATABASEConfidential Information removedSource: CamelotThis reporting gives a detailed picture of each segment of players, which facilitates thetailoring of communications to players based on their behavior. Multi-tiered campaignscan be delivered using triggers based on whether a player has positively responded ornot to the previous message. This enables a second email to be generated as a reminderor an alternative one if they haven’t responded to the initial one.Camelot recognizes that there is potential for consumers to be saturated by e-mailmessaging and therefore carefully manages the number of email messages that any oneplayer receives to ensure players regard any emails received from the National Lottery ashelpful, rather than an annoyance that could cause them to disengage. At all timesplayers can choose to opt out of receiving marketing emails at any time by simplyadjusting their personal preferences within their personal account.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 343

Section 2 Final Business Plan2.9.D SPONSORSHIPSThis page left intentionally blank344 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.9.D.1 STRATEGIC PARTNERSHIP WITH ENDEMOL - LETTER OF REFERENCECamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 345

Section 2 Final Business Plan2.9.D.2 STRATEGIC PARTNERSHIP WITH TLC - LETTER OF REFERENCE346 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.10 RESPONSIBLE GAMING AND COMPLIANCECAMELOT ILLINOIS’ STRATEGYCamelot Illinois will ensure that responsible gaming is at the core of its operations. It willintroduce a proven responsible gaming strategy and develop and implement policies andprograms that enforce compliance to prevent underage play excessive play.Camelot Illinois will also be committed to careful environmental management in all areasof its operations.INSIGHTSThe legislative framework for the Illinois Lottery makes it clear that revenues fromthe Lottery must be captured responsibly;Camelot’s research indicates the Lottery has a heavy reliance on a small group ofplayers to generate the majority of its revenue, who come from the lowest socioeconomicgroups;Local public interest groups are concerned that the Lottery is currently focused ondisadvantaged groups and a high proportion of sales are made to this group.STRATEGIES AND ACTIVITIESCamelot Illinois has identified a number of activities that will ensure that it protectsdisadvantaged groups and prevents compulsive gambling. Camelot has proven thatproper protection does not stop revenue growth. In fact proper protection reinforcestrust and is a crucial component of ensuring success.Preliminary activities include: Development of a responsible gaming program and policy which will effectivelyprevent underage and excessive play Engaging in local research, memberships and outreach with key stakeholders toensure the responsible gaming program meets the local needs of Illinois; The use of leading-edge game design tools such as GAM-GaRD (GamingAssessment Measure – Guidance about Responsible Design) to rigorously policegame development ensuring that games are both compelling and commercial whileensuring they do not target disadvantaged groups; Establishing a clear Code of Marketing and Advertising Conduct that sets out astandards of acceptable and unacceptable themes or details; Education of employees as part of a comprehensive introduction process all newstaff will be made aware of the importance of responsible gaming and theprevention of underage and excessive play; Put in place comprehensive and rigorous compliance monitoring methods to ensureunderage and excessive play is discouraged and prevented, especially online; Introducing robust public reporting mechanisms and key performance indicators toensure the responsible gaming strategy and programs remain effective andtransparent and accountable to stakeholder concerns;Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 347

Section 2 Final Business PlanAchieve independent certification of the responsible gaming strategy through theWorld Lottery Association’s Responsible Gaming Framework demonstrating IllinoisLottery as a best in class example in responsible gaming among U.S. lotteries;Establish a proper environmental strategy and deploy a “Green Team” to raiseawareness among employees of environmental management and reducing theLottery’s environmental impact.INVESTMENTCamelot Illinois will invest $1million on improving the Lottery’s Social Responsibility in2010.WHY CAMELOT?Camelot is recognized as the lottery industry’s leader in responsible gaming and socialresponsibility:CEO Dianne Thompson co-chairs the World Lottery Association’s (WLA) CorporateResponsibility Committee;In California, Camelot developed the California State Lottery’s corporate socialresponsibility and stakeholder engagement strategy, which will result in Californiabeing the first lottery in the U.S. to achieve Level 3 certification with the WLA;The WLA Responsible Gaming Framework was based on processes pioneered byCamelot in the UK, and Camelot was the first lottery to reach its highest level;Camelot is considered the most socially responsible gaming operator in the UK;The WLA presented Camelot with the “Best Reporting Award” in 2008 to recognizeits work in encouraging responsible gaming among the global lottery community andits transparent way of public reporting on responsible gaming.2.10.1 INTRODUCTIONThe objective of this Plan is to introduce a leadingedgeresponsible gaming program enforcingcompliance to develop and implement programsaimed at preventing underage and excessive play.This section will outline Camelot Illinois’ plan for developing a leading-edge responsiblegaming program which broadens the base of players and targets new, infrequent andlapsed players rather than relying solely on existing players for revenue growth.The legislative framework for the Illinois Lottery makes clear the wish to have asuccessful operation that delivers revenue for the Common School Fund and othercapital projects, but not at all costs; growth must be managed within clear boundaries,with emphasis on making sure the Lottery is managed responsibly delivering an increasein penetration and per capita sales while ensuring the most vulnerable groups areprotected from harm.348 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanInsightsCamelot’s research shows that the Lottery currently has a heavy reliance on a smallgroup of regular players to generate the majority of its revenue, and also that few peopleare aware of the fact that the Lottery contributes so strongly to state funding to theCommon Schools Fund and other designated projects.Camelot’s Prior ExperienceThrough its experience in the UK, Camelot can demonstrate that embracing responsiblegaming does not impede growth in revenue. Camelot has driven growth in revenue andNet Income in the UK by improving player penetration (now 72% of the adult population)rather than simply increasing per capita spending. In addition, Camelot launched and nowmanages the most successful Internet lottery in the world (one of the UK’s Top 20 e-commerce sites – now representing 13% of total sales), while maintaining world classprotection measures preventing underage, non-UK, and excessive play.Camelot has long been internationally recognized as a leader in social responsibilitywithin the lottery industry showing other organizations how to embrace and embed theprinciples in everything the business does.Mark Griffiths, Professor of Gambling Studies at Nottingham Trent University and one ofthe world’s leading experts in gambling, has said “Camelot is probably the most sociallyresponsible gaming operator in the UK. You could say that's because the company ishighly regulated and subject to intense scrutiny, but my sense is that they've really takenthe idea of responsible play on board. Even though the nature of its products puts TheNational Lottery at the softer end of the gambling spectrum, Camelot thinks hard aboutthe consequences of everything it does. So much so, the company is a role model forother parts of the gaming sector."In fact, the Camelot social responsibility program in the UK is recognized as best practicewithin the industry. The World Lottery Association’s (WLA) Responsible GamingFramework, which certifies the effectiveness of responsible gaming programs in lotteryjurisdictions worldwide, was based on processes pioneered by Camelot in the UK.Further, Camelot was the first lottery in the world to achieve the highest level ofcertification in the WLA Responsible Gaming Framework (Level 4). More than 100lotteries worldwide have subsequently achieved a Level 1 certification with only 15organizations having achieved Level 4.Camelot executives take an active role in setting policy for responsible gaming. Forexample, Chief Executive Dianne Thompson co-chairs the WLA Corporate SocialResponsibility Committee and champions responsible play on the European Lotteries(EL) and WLA Executive Committees. Camelot’s Head of Sustainability is co-chair of theWLA Responsible Gaming Working group and chairs the European Lotteries’Responsible Gaming Working Group. The WLA has also recognized Camelot’s leadershipposition for excellence in social reporting by presenting the company with the ‘BestReporting Award’ in 2008.Camelot has not only demonstrated leadership in the UK and elsewhere as chair of theWLA initiatives; it has also influenced practice in the U.S. lottery sector through theexisting project with the California State Lottery. Camelot has developed the CaliforniaCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 349

Section 2 Final Business PlanState Lottery’s Corporate Social Responsibility and Stakeholder Engagement Strategywhich will result in California becoming the first lottery in the U.S. to achieve the Level 3certification in the WLA Responsible Gaming Framework. With Camelot’s support theCalifornia State Lottery will also publish its first Corporate Social Responsibility Reportlater this year.Camelot has proven experience of implementing successful and effective responsiblegaming strategies which prevent underage and excessive play. It measures relativeperformance against the results from the British Gambling Prevalence Study, a largescalenationally representative survey of participation in gambling and the prevalence ofproblem gambling in Great Britain. The most recent study found that the problemgambling prevalence rate was the same as it had been in 1999 (0.6%) and that theNational Lottery draw had the lowest impact on problem gambling figures with less than1% of those playing National Lottery Draw based games and 1.9% Scratchcards(Instants), compared to 14.7% involved in spread betting 1 .Another way that Camelot tracks the impact that the game portfolio has on vulnerablegroups, is by monitoring how many calls are made to GamCare, the leading provider ofinformation, advice, support and free counseling for the prevention and treatment ofproblem gambling in the UK. Disclosure of National Lottery activity during GamCare callsis very low with less than 0.8% relating to lottery and 2% relating to Scratchcards(Instants) compared to 30% for Video Lottery Terminals.Strategies and activitiesAs the leading exponent of social responsibility in the lottery industry, Camelot is awareof and understands how to develop a responsible gaming program which ensurescompliance in preventing under age and excessive play. Camelot’s approach todeveloping a responsible gaming program for Illinois covers the product lifecycle and theindividual activities are discussed in more detail in Section 2.10.3. In summary, using aplanned investment of $1 million, the company will;Develop and implement a leading-edge responsible gaming program ensuringcompliance in preventing underage and excessive play.This strategy will ensure that new, infrequent and lapsed players are targeted rather thanrelying solely on existing players for revenue growth. This reduces the chancessignificantly that existing players will be led toward excessive play.The activities cover the entire lottery product lifecycle including:Outreach and research through a Responsible Gaming Forum, active membership inresponsible gaming organizations and the support of independent research;Game design: Camelot will introduce two tools to Illinois, GAM-GaRD and the GameDesign Protocol;Advertising and marketing the games to players;1 http://www.gamblingcommission.gov.uk/pdf/British%20Gambling%20Prevalence%20Survey%202007.pdf350 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanPlayer authentication and responsible play tools incorporated within the Internet pilotproject;Training of retailers to prevent the sale of tickets to underage individuals;Test purchasing scheme in retail to prevent underage play;Player education and training for lottery employees;Measurement and reporting of the success of the responsible gaming policies andprograms;Achieve independent certification of Illinois’ responsible gaming strategy.This work will be integrated into all commercial strategic decision-making in Illinois andwill adhere to the highest standards of consumer protection.All initiatives launched will be tested for their impact on player behavior, to ensurecompliance with preventing excessive and underage play. Robust systems and rigorousmeasures will be in place to monitor performance and take action where required.Having implemented the Responsible Gaming Program, work with the Lottery to achieveLevel 3 certification against the World Lottery Association’s Responsible GamingFramework by 2012.Response to Schedule 2The proposed strategies and activities in respect of the operational responsibilitiesrelating to the Responsible Gaming Program and compliance can be found as follows;Area Description SectionResponsible gaming programOperationComplianceUnderage playExcessive PlayDevelop, operate, and maintain a responsiblegaming programDevelop and implement policies and programsaimed at preventing underage playDevelop and implement policies and programsaimed at preventing excessive play2.10.3.12.10.3.22.10.3.3The following sections describe:i) Insights – Section 2.10.2ii) Strategies and Activities - Section 2.10.32.10.2 INSIGHTSThis section comments on some observations seen by Camelot relating to this topic,which have influenced the initiatives that Camelot Illinois plans to introduce onappointment as the Private Manager.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 351

Section 2 Final Business Plan2.10.2.1 Proportion of vulnerable groups contributing to revenueAmong the playing population in Illinois there is a disproportionate appeal of the Lotteryto low income groups.The Lottery has a heavy reliance on a small group of regular players to generate themajority of its revenue – Camelot’s analysis indicates that the majority of Lottery revenue(82%) is generated from daily Online and Instant games which are purchased by a smallloyal core of players (only 13% 2 of adults purchase tickets for daily Online games) whocome from the lowest socio-economic groups 3 .FIGURE 2.10.2.1.1: BREAKDOWN OF ILLINOIS PLAYERS BY FREQUENCY OF PLAY201060%50%52%Participation (%)40%30%20%20% 19%10%9%0%Regular (>1 ticket aweek)Occasional (~1 ticket amonth)Infrequent (~1 ticket ayear)Non-playerSource: SimmonsWhile this appeal is understandable given the ability for the lottery to potentially deliver alife-changing amount of money that lifts people out of poverty there is concern voiced bylocal public interest groups, such as CitizenLink that these players are being targetedunfairly.These concerns reinforce the need to widen the player base within Illinois and to ensurethat responsible gaming policies are implemented rigorously.2.10.3 STRATEGIES AND ACTIVITIES2.10.3.1 Develop a leading- edge responsible gaming programThe objective of Camelot’s responsible gaming strategy is to minimize problem gamingrisks to players throughout the game development process, from the early stages ofinitial development through to selling the game when launched. Its activities will includeengagement with public interest groups, research and game design, how products are2 Simmons3 Simmons data ranks players of daily games at SEL4 and players of Instants at SEL3. SEL (Socio EconomicLevel) consists of 4 levels based on education and ownership of durables where 1 is the highest and 4 is thelowest352 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planadvertised and marketed, employee training, and the prevention of excessive andunderage play.The basis of Camelot’s responsible gaming strategy is derived from the principles of theinternationally-recognized Reno Model (Figure 2.10.3.1.1). This emphasizes the need foroperators, academics, clinicians and healthcare providers to focus on prevention andeducation rather than simply focusing on treatment referral, which is a last resort. 4FIGURE 2.10.3.1.1 – RENO MODEL FOR RESPONSIBLE GAMINGThe National LotteryReferralLowRiskModerateRiskHighRiskProblemgamblersEducation & PreventionTreatmentIn assisting Illinois, Camelot will maintain its established approach as a leader in socialresponsibility. Camelot will continue its thought leadership position in the most relevantarea to being a responsible operator of a lottery, responsible gaming.“I am in no doubt that Camelot is unrivalled in theseriousness, thoughtfulness and practicaleffectiveness with which it approaches all aspectsof responsible play.”Peter Collins, Director of the Center of the Study of Gamblingat the University of Salford and independent reviewer ofCamelot’s player protection strategy during the recent third license bidThe following table (Figure 2.10.3.1.2) provides an overview of the different programareas and activities detailed under the Responsible Gaming Program (2.10.3.1) and theirapplication to prevent underage and excessive play. It also outlines specific activities forthe prevention of underage and excessive play that are detailed in sections 2.10.3.2 and2.10.3.3, providing an overview of the comprehensive responsible gaming policies andprograms that will be developed and implemented by Camelot Illinois.4A Science-Based Framework for Responsible Gambling: The Reno Model, Blaszczynski A, Ladoceur R,Shaffer HJ.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 353

Section 2 Final Business PlanFIGURE 2.10.3.1.2 OVERVIEW OF RESPONSIBLE GAMING PROGRAMProgramareasPolicyOutreachmemberships& researchResponsible gaming program (based on Reno model) 2.10.3.1Policy and program to preventunderage play2.10.3.2ActivitiesPolicy and program to preventexcessive play2.10.3.3Policy which outlines how Camelot Illinois will prevent underageand excessive playRegular Responsible Gaming ForumActive memberships and supportIndependent researchGame design Game Design ProtocolGame Design ProtocolGAM-GaRDAdvertising &marketingProtection inRetailProtection onthe InternetPilotProjectPlayereducationEmployeeeducationMeasuringand reportingIndependentcertificationSource: CamelotRobust Code of Marketing and Advertising Conduct in accordancewith 20 ILCS 1605/7Operation Child – testpurchasing scheme Retailer vigilance campaignsRetailer vigilance Retailer trainingcampaigns Self exclusion programRetailer trainingAge verification invending. A broad suite of playerRigorous age verificationprotection measures e.g. playsystemslimits, spend limits, selfexclusion etc.Include information on agerestriction of lotteryproducts on all productsand point-of-sale material.Odds of winning on allproducts and ‘how to play’informationLeaflets and point-of salematerial displaying helplinenumbersInformation and tools on theInternet Pilot projectIntroduce a comprehensive employee training programme whichcovers compliance with preventing underage and excessive playPublicly report and measure performance of the responsiblegaming strategy and the polices and programs to preventunderage and excessive playAchieve independent certification of Camelot Illinois’ ResponsibleGaming program against the World Lottery Association’sResponsible Gaming Framework, initially Level 3 by 2012 andeventually Level 4354 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanResponsible gaming activitiesThe proposed activities are based upon Camelot’s long standing experience andleadership in developing and implementing robust responsible gaming strategies thathave successfully proven to prevent underage and excessive play. They are alsosupported by the insights described in section 2.10.2 concerning the Illinois market.PolicyCamelot Illinois will develop a policy to prevent underage and excessive play. This policywill be supported by a program which will be developed and implemented based on theresponsible gaming strategy as outlined in 2.10.3.1. The prevention of underage play willbe incorporated into the following initiatives:Outreach, memberships and researchCamelot Illinois will seek regular input from academics and specialist groups with aninterest in preventing problem gambling, to inform the Lottery’s approach to theseissues. In Illinois, Camelot will involve key stakeholders in developing checks andbalances to assure responsible gaming and to prevent targeting of vulnerable groups.Broad-based outreach will assure that any issues of concern of public interest groups areunderstood and responded to by Camelot Illinois. As part of the stakeholder outreachprogram described in the Branding section (see Section 2.4), Camelot will consult publicinterest groups when developing new games and marketing strategies.Camelot Illinois will become an active member of both the National Council of ProblemGambling and the National Council for Responsible Gaming and work with bodies suchas the Illinois Gaming Board Statewide Voluntary Self Exclusion Program for ProblemGambling. Camelot will also seek to engage with other local treatment relatedorganizations such as Leyden Family Services/SHARE, Chestnut Health Systems, theOutreach Foundation for Problem & Compulsive Gambling, and the Illinois Institute forAddiction Recovery to continuously understand the potential impact of the Lottery’sproducts on consumers.Camelot Illinois will provide financial support for independent research to improvesociety’s understanding of problem gambling and will actively support national researchon problem gambling. For example, in the UK Camelot donates $195,000 per year to theGambling Research Education and Treatment (GREaT) Foundation.In the UK, Camelot is the only individual company which is part of the Advisory Group tothe British Gambling Prevalence Survey. This group comprises members from tradeassociations, academics and clinical experts on problem gambling and treatmentorganizations to discuss the most effective way of conducting national prevalencestudies. Camelot continuously reviews the latest research in the area of responsiblegaming and incorporates it into the responsible play strategy.Game DesignDesigning games that are fun and entertaining while at the same time not being overlyattractive to vulnerable groups prevents problem issues occurring and is an essential partof a successful responsible play strategy. Camelot uses two groundbreaking gamedesign tools which were developed by the company with input from leading academicsCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 355

Section 2 Final Business Planand clinicians and which it will introduce to Illinois: the GAM-GaRD tool and the GameDesign Protocol risk matrix.GAM-GaRD (Gambling Assessment Measure – Guidance about Responsible Design)GAM-GaRD has been designed to aid the development of socially responsible gamesand utilizes up-to-date research findings from around the world. GAM-GaRD wasdeveloped by a team of expert researchers and clinicians from the UK, U.S., Canada,Australia, and Germany. By examining the available evidence world-wide, it is possible todevelop measures that utilize the most-up-to-date findings about the impact of thespecific elements of a game for influencing vulnerable players.Prior to its adoption in the UK GAM-GaRD was tested against 40 existing games and thefindings accurately reflected the known impact of those games in terms of theirassociation with problem gambling behavior. GAM-GaRD is updated annually to ensurethat it remains current and takes into account new developments in technology. It can beused at every stage of the game design process and helps the game development teamto consider each feature of the game as it is built. By identifying problematic elements ina game, it is possible to easily modify the game rather than abandon it altogether.GAM-GaRD is a tool that takes into account structural characteristics (i.e. eventfrequency, jackpot size, continuity of play, multi-stake opportunities etc.) and to a certaindegree situational characteristics (i.e. those that get people to play in the first place suchas accessibility points and currency/ease of play). It can be used in conjunction withother responsible gaming measures or online player protection measures such as walletupload limits, play limits, reality checks and self exclusion options.GAM-GaRD rates each game tested with a simple-to-interpret color code. Green meanslow risk for vulnerable players, amber means medium risk for vulnerable players and redmeans the game is a high risk for vulnerable players. In addition to the color code, GAM-GaRD identifies which elements of a game are problematic so that they can be modifiedto make the game safer.In pioneering the development of GAM-GaRD, Camelot wanted to contribute to theglobal lottery community and therefore ensured that GAM-GaRD could be adopted byother lottery and gaming operators across the sector. It is pleasing to see that thisleading approach has encouraged lotteries such as La Française des Jeux and SvenskaSpel, to take up GAM-GaRD and apply it to their own operations – another example ofCamelot’s thought leadership and position on consumer protection.Relevant members of the Illinois Lottery staff will be trained on the application of GAM-GaRD which is easy to integrate into every game design process. The training willinvolve staff from key functions such as Marketing and Game Design, Sales,Responsible Gaming and any other departments that are involved in the development ofnew game concepts.Game Design ProtocolAnother tool that will be introduced to Illinois is a quantitative risk matrix, working on thesame principles as Camelot’s long established and still leading-edge Game Design356 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanProtocol. It can be used both pre and post game launch and will be fully integrated intothe Lottery’s sales and marketing research strategy.The tool, which was designed by Camelot in partnership with universities and gamblingrelatedcharities, is a risk matrix that enables Camelot to assess any potential problemswith proposed new games. It tests game concepts through quantitative consumerresearch. The research assesses the likely spend and participation of the generalpopulation and three vulnerable groups – those on low incomes, those underage andthose with a gambling problem. Spend and participation levels are then mapped againstother products in the market to assess above average, average or below average riskbased on relevant thresholds. Because it is very difficult to carry out research amongstthe three vulnerable groups identified, particularly problem gamblers, proxy groups havebeen formed to represent the three groups. The behavior of the proxy groups shows astatistical correlation to the behavior of the actual groups. Camelot then uses theassessment of whether a game concept is below average, average or above average riskin order to re-design the game if necessary or put in place appropriate risk mitigationstrategies in terms of marketing, education and retailer training. Checking the actualexperience of specific games against the predictions of the Protocol has shown thepredictions to be accurate.Advertising and marketingIn accordance with 20 ILCS1605/7.8a Camelot Illinois will establish an Code ofAdvertising and Marketing Conduct to ensure that as well as producing captivatingadvertisements, the Lottery sells and markets products in a responsible way. The codewill govern the marketing, advertising, public relations and promotions of the Lottery.The code will establish the internal controls that ensure Camelot Illinois’ advertisingcontent and marketing practices do not target disadvantaged economic classes ofpeople, are accurate, and do not, (directly or by ambiguity, omission, or inference, or bythe addition of irrelevant, scientific or technical matter), create a misleading impression.Camelot Illinois will establish a process for the review and approval of all advertising andproposed marketing concepts and campaigns to ensure that these do not:Target or exploit specific groups or economic classes of peopleProvide inaccurate or misleading informationThe code will follow the best practice approach that Camelot uses in the UK and will setout conditions about style and content, explain how to avoid promoting the lottery tothose who are underage or likely to engage in excessive play and outline relevantsafeguards within the advertising strategy relevant to local conditions in Illinois.Camelot Illinois will ensure that all relevant vendors or subcontractors to comply with theCode of Advertising and Marketing Conduct.Protection in retail – training and communicationRetailers play a strong role in Camelot’s efforts to prevent underage and excessive play.For the majority of players, the retailer is the face of the Lottery. It is therefore of crucialCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 357

Section 2 Final Business Planimportance that the Lottery is committed to helping retailers prevent underage andexcessive playConsumer protection is a major part of the training package Camelot Illinois will provideto all Lottery retailers to prevent underage and excessive play. Camelot trains retailers inthe UK on their obligation to uphold the law and not sell tickets to an underage orexcessive player. Camelot Illinois will introduce a tailored training model which willensure that retailers are aware of the importance of not selling lottery products tounderage and excessive players and how to spot the signs of excessive or underageplay.Player educationCamelot Illinois believes it is in a unique position to help raise public awareness of therisks of compulsive gambling. Camelot Illinois will work on a wide range of initiatives,helping to educate players and the general public building on its long standing trackrecord of this in the UK.As the operator of the UK National Lottery, Camelot is trusted by millions of players andits other stakeholders to behave in a responsible manner. Despite the fact that NationalLottery games carry very low risks for problem gambling Camelot believes it has a dutyto help raise public awareness of problem gambling risks relating to underage andexcessive play.Although Camelot is not required to do this work because of its operating license, itundertakes several initiatives designed to help educate its players and retailers on howto prevent underage and excessive play. Information about responsible play appears in awide range of marketing materials.Camelot supports the work of The Responsibility in Gambling Trust and GamCare,referencing the GamCare helpline number on the back of all National Lottery draw-basedtickets and Instants, as well as in its Player’s Guide which is available in all Camelot’sretail outlets. Advice is also included in additional materials supplied to retailers – point ofsale materials and covered in monthly retailer ‘Lottery Updates’ and the bi-monthlyretailer magazine, Jackpot.CASE STUDYSERIOUS FUNIn partnership with GamCare Camelot developed ‘Serious Fun’, a leaflet aboutresponsible play. The leaflet is targeted at women who either have a gambling problemthemselves or know someone close to them who has. Problem gambling among womenis on the increase, and GamCare identified a gap in existing literature on sensiblegambling for this group. The leaflet is available from doctors’ surgeries, libraries, Citizens’Advice Bureaux and from GamCare’s website. It was when introduced one of the mostdownloaded leaflets. Camelot also provides it to National Lottery retailers and contactcenter staff for information purposes.358 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.10.3.1.3 – THE “SERIOUS FUN” LEAFLET PRODUCED BY CAMELOT INASSOCIATION WITH GAMCARE.Educating staffIt is crucial that Lottery staff understand the role they play in designing, implementingand administering the responsible play strategy. Camelot Illinois will train all newemployees as part of their introduction to the organization on the responsible gamingprogram. Game designers will receive additional training in the use of GAM-GaRD andthe Game Design Protocol.All marketing staff will be introduced to the Code of Marketing and Advertising Conductand are expected to both adhere to it and train and educate any advertising agency staffthey employ, about it.Of particular importance is the training given to staff who are in direct contact withconsumers, such as the retail sales force and the contact center staff. They will receiveadditional, tailored training on how to deal with questions such as how to refer a playerto the local helplines and how to support a distressed customer.Measuring and reportingCamelot has a long-standing and embedded approach to reporting. It has produced asocial report every year since 1999 and has won or been shortlisted for eight of theawards presented by the Chartered Association of Certified Accountants (ACCA).The effectiveness of the responsible gaming strategy and its actions will be measuredand reviewed though the introduction of a comprehensive reporting process. CamelotIllinois will introduce reporting on social responsibility and consumer protection topics aspart of Illinois’ annual reporting process two years into the PMA. When reporting isfurther established and embedded in the management processes Camelot Illinoisanticipates undertaking further second party verification as part of the WLA Frameworkcertification.Every year Camelot Illinois will measure its performance against the commitments that itmade to the stakeholders of the Illinois Lottery, and the key indicators published in theprevious year's report. The report will be made widely available utilizing existingcommunication channels such as Internet and print media.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 359

Section 2 Final Business PlanCamelot’s 2009 UK Stakeholder Report is available at: http://camgrpwb01-p01-alwsp609.prod.cis.camelot/crreport2009/.Camelot Illinois sees reporting as an essential ingredient of transparency and corporateaccountability. The reporting process has five key objectives to:Measure how well the company lives its valuesEnsure that the organization is accountable to its stakeholdersEnsure that what Camelot Illinois learns year on year is reflected in processesthroughout the businessImprove business performanceAccount for the value added to society during the year.Achieve independent certification of Illinois’ responsible gaming programHaving implemented the responsible gaming strategy throughout all activitiesundertaken by the Lottery, Camelot Illinois will work to achieve accreditation of thewhole program.The WLA Responsible Gaming Framework (RGF) was created to establish commonstandards and make sure lottery operators keep improving their responsible gamingprogram. The Framework covers areas such as retailer and employee training, gamedesign, interactive channels, player education, reporting and stakeholder engagement.It allows for cultural and jurisdictional differences and is therefore globally applicable.Camelot Illinois will seek to achieve, in 2012, initially a Level 3 WLA RGF certification andeventually the highest Level possible (Level 4 certification) for the Lottery’s responsiblegaming practices. This will demonstrate the leadership position and best practiceapproach developed by Illinois.In order to be awarded Level 3 certification the Lottery will have had to establish itsstakeholder outreach programs and developed internal and external communicationssupporting planning and implementation of responsible gaming. Level 4 certificationbuilds on this platform, requiring programs to be incorporated in the daily operations ofthe lottery having taken into account the views of external stakeholders and undertakenan independent review of Illinois’ implementation of the 10 program elements.“Camelot’s exemplary role in drawing up theframework and the standards has confirmed it asthe world’s leader in corporate social responsibilityamong lottery operators, but also opened theprospect of other companies eventually reachingthis level.”Thomas Nilsson, CEO Spelinstitutet, Sweden, a leading charityproviding treatment support and help to problem players.360 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.10.3.2 Compliance: Develop and implement policies and programs toprevent underage playCamelot Illinois is well aware of the importance of enforcing regulations that prohibit thepurchase of lottery tickets by those who are under the legal age. In the UK, Camelot hasa long standing track record of successfully developing and implementing strategies toprevent underage and excessive play. In the previous section some of the initiatives thatwill be part of the program to prevent underage play have already been described.Activities as part of the overall responsible gaming program (detailed under2.10.3.1)Camelot Illinois will use the following activities as part of its program to preventunderage play. These have been described in detail in section 2.10.3.1 but will betailored to address the particular challenges of discouraging underage play.Application of the quantitative risk matrix based on Camelot’s Game Design Protocolto assess likely spend and participation of those underage;Ensure through the Code of Advertising and Marketing Conduct in accordance with20 ILCS1605/7.8a that lottery products are sold and marketed in a way that preventsunderage play;Train retailers to ensure that they are aware of the importance of not selling lotteryproducts to underage players;Player education: Include information on age restriction of lottery products on allproducts and point-of-sale material.Specific activities to prevent underage play in retailIn addition to these activities the following activities will be introduced to ensure thatunderage play in retail will be prevented.Test Purchasing SchemeCamelot also promotes retailer vigilance through Operation Child, its unique testpurchasing scheme. Using a ‘three-strikes-and-you’re-out’ system, the program monitorsNational Lottery retailers’ overall compliance with the safeguards already in place toprevent the sale of lottery tickets to underage players. Developed in consultation withthe National Lottery Commission, Operation Child involves over 9,000 test purchasingvisits being carried out annually by young people who are aged 16 (the legal age to playthe lottery in the UK), but look younger.Retailers are visited once and the very small minority that do sell to a test purchaserreceive on-the-spot coaching, a warning letter and a follow-up visit. If they sell again,they will receive a third and final visit. In the very rare cases where retailers sell a thirdCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 361

Section 2 Final Business Plantime, their lottery terminal is removed. Due to the exceptionally high level of vigilanceand co-operation shown by its retailers during the last year, Camelot only needed toremove one terminal.Camelot Illinois proposes to introduce a similar test purchasing scheme in Illinois which itwill design so that it is in line with best practice and which targets those retailers whohave a higher proportion of young people purchasing goods (e.g. 7-Eleven stores).Retailer vigilance campaignCamelot Illinois will also introduce a retailer vigilance campaign supporting the testpurchasing scheme to ensure that retailers are aware of their obligations with regards topreventing underage play. The campaign will provide retailers with posters and leafletshighlighting the importance of preventing sales to underage people and will ensure thatretailers are aware of their role in preventing underage play.Age verification on Instant Ticket Dispenser Machine (IDTM)Camelot Illinois will where technically possible work with vendors and subcontractors toconsider the introduction of age verification on ITDMs.Specific activities to prevent underage play on the Internet Pilot projectThe following activities will be introduced to ensure that underage play on the InternetPilot project will be prevented.Robust age verificationPreventing underage play will also be a major part of the embedded functionality withinthe Internet Pilot project. Leveraging experience from the UK, Camelot Illinois will ensureplayers are only able to access lottery games by registering and having their identitybeing correctly verified – this means players have to be 18 or over to play. The UKchildren’s charity, Action For Children, found the UK National Lottery website to be oneof only two that stopped a young person from registering out of 32 gaming sites tested.2.10.3.3 Compliance: Development and implementation of programspreventing excessive playCamelot has implemented a series of programs in the UK aimed at preventing excessiveplay. Many of these strategies will be applicable in Illinois. To help prevent excessiveplay, Camelot’s Retailer Agreement includes requirements to prevent sales to customerswho appear to be playing excessively.362 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanActivities as part of the overall responsible gaming program (detailed under2.10.3.1)Camelot Illinois will use the following activities as part of its program to preventexcessive play. These have been described in detail in section 2.10.3.1 but will betailored to address the particular challenges of discouraging excessive play.Application of the quantitative risk matrix based on Camelot’s Game Design Protocolto assess likely spend and participation of those on low incomes and those with agambling problem to prevent excessive play;Use of the GAM-GaRD tool to prevent excessive play from vulnerable players;Ensure through the Code of Marketing and Advertising Conduct in accordance with20 ILCS1605/7.8a that lottery products are sold and marketed in a way that preventsexcessive play and the targeting of disadvantaged groups;Train retailers to ensure that they are aware of the importance of not selling lotteryproducts and to spot the signs of excessive play. The training will also enableretailers to refer to helpline numbers if a player approaches them for this assistance,and also train retailers of their obligations under the existing voluntary self-exclusionprogram that exists in Illinois;Player education on the Internet pilot which will feature player protection informationand a self-diagnostic tool to help users who may be concerned about their own – orsomeone else’s – playing habits;Employee education: Interactive contact center staff will receive additionalresponsible gaming training and regular briefings on the subject to ensure that theyhave a high level of awareness for responsible gaming issues and the importance ofpreventing excessive play.Specific activities to prevent excessive play in retailSelf exclusion programAs part of its commitment to responsible play principles, Camelot will continue topromote awareness of the self-exclusion program available to traditional retail basedplayers. This program enables people who regard their lottery play as problematic to signaway their right to receive lottery prizes totaling more than $600 and opt out of receivingany promotional materials from the Lottery.Camelot Illinois will establish controls that Train and permit employees and Lottery Retailers to identify persons listed on theVoluntary Self Exclusion Database and, upon such identification, notify the relevantCamelot Illinois personnel;Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 363

Section 2 Final Business PlanRefuse and deny membership and drawings, and lottery games to any loyaltyprogram or similar privileges and benefits to any person identified on the VoluntarySelf Exclusion Database;Ensure that any person identified on the Voluntary Self Exclusion Database does notreceive, either from private manager or any Lottery retailer, solicitations, targetedmailings, telemarketing promotions, or other promotional materials relating to theLottery;Specific activities to prevent excessive play on the Internet PilotInteractive player protection measuresHaving conducted a series of research groups in Illinois, Camelot is aware that whilesome players welcome the ease with which they will be able to purchase tickets on theInternet, this is also tempered by concern that they might be tempted to spend beyondtheir means 5 :“I would play more if I could purchase my tickets online and play at home ‘cos then Idon’t have to leave the house and always having to be on my way from somewhere”(Internet user)“I would have to set a limit for myself ‘cos I could play more. If I could play the Pick 3,Pick 4 on there that would easily be $20 a week” (Internet user)“This is too much freedom to keep gambling. It’s just too easy” (Internet user)Camelot Illinois recognizes these concerns. They can be positively addressed withrelevant consumer protection and responsible play strategies.Camelot carefully developed a series of online checks and balances, including selfimposedspending limits, time-outs, self-exclusion and robust age-verification systems,in conjunction with GamCare. Camelot was subsequently the first organization in the UKto receive GamCare accreditation for its interactive services and has recently receivedaccreditation for the fifth successive year.Camelot Illinois will introduce a number of specific interactive player protectionmeasures in Illinois based on this best practice approach. The scope of this segmentpredominately focuses on the Internet but includes all current and emerging platforms.These strategies will include, but not be limited to:Players only being able to access lottery games by registering and having theiridentity being correctly verified – this means players have to be 18 or over to playgames;Two ways of setting spend limits: customers can choose limits themselves, or thesystem routinely imposes a weekly wallet load limit which will be determined upon5Illinois Lottery Player Research – Rabin Research Company July 2010364 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planintroduction of the interactive platforms in cooperation with academics and leadingclinicians;As required by 20 ILCS 1605/7.16, players who are concerned about their use oflottery games will be able to exclude themselves temporarily or permanently fromGames;Introducing play limits, limiting the time that can be spent playing interactive Instantsif regulatory authorization is received to introduce them;The opportunity to opt out of player marketing material, determining the level ofmarketing communication, if any, that players would like to receive;Sending emails to registered users concerning aspects of player protection;Reality checks on gaming screens, which force players to take a break betweengames;An on-screen summary of expenditure and time played allowing players to assesswhether they are playing responsibly.Camelot Illinois will ensure that online services remain safe and secure in the future.Where possible the company will seek independent verification of the services providedby clinicians and academics and will consider the introduction of further player behavioralanalysis tools which are currently under development.Specific player education activities to prevent excessive playIn Illinois, Camelot will maintain existing practices that aim to prevent excessive play,such as:The odds of winning being displayed in any ‘how to play’ informationOdds and gambling help message on the corporate websiteProviding gambling help messages on all online tickets and entry formsResponsible gaming message on all advertising and marketingIn-store posters with gambling help messagesGambling help message on all print advertising.New practices that Camelot Illinois will introduce will include:Putting the odds of winning on all Instants tickets and advertising them clearly onlineand on other ticket stock;Work with charities that provide leaflets with information on national helplinenumbers to ensure that information on treatment providers is made easily accessibleto players and independently endorsed. This information will also be used to raiseinternally awareness levels on issues such as problem play amongst contact centerand retailer service staff.Camelot Illinois will continue to provide a dedicated player services helpline andintroduce dedicated support for Interactive players.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 365

Section 2 Final Business Plan2.10.3.4 Reducing the Illinois Lottery’s environmental impactEnvironmental policy and managementAlthough Camelot Illinois core focus in social responsibility practice will be theResponsible Gaming Program, there are other elements of good practice that will beintroduced underlying the overall commitment to responsible and sustainable businesspractice.Camelot Illinois is committed to careful environmental management. The mainenvironmental impacts from lotteries come usually from the use of paper and transport.It takes a lot of energy, paper, water and ink to produce play slips, Instants and drawbasedlottery tickets.Running offices has other significant impacts, with heating, lighting, air-conditioning andIT making a large contribution to overall energy use. Office paper use, waste andrecycling are other issues to consider.Camelot Illinois will proactively manage environmental impacts and risks in Illinois in linewith good practice. Camelot will work to reduce carbon emissions, recycle equipmentand reduce the amount of office waste going to landfill.Camelot Illinois will focus on the environmental impacts of core operations – printing anddistributing tickets, Instants and paper-based point-of-sale (POS) materials, as well aslooking at the impacts of staff practices in the Lottery organization.Camelot Illinois will deploy a ‘Green Team’ of employees interested in environmentalmanagement to promote the reduction in its use of resources and increase recyclingactivities. The Green Team will help colleagues understand how they can save energy,recycle and cut down on waste. They will review and if necessary implement recyclingopportunities in the offices and ensure that initiatives such as turning out lights at theend of the day, turning down thermostats during out of office hours and switching offmonitors and computers when not in use are taken on by their colleagues. CamelotIllinois will leverage international best practice in this effort.Camelot has a strong track record of success in the UK on environmental stewardship.As paper is one of the main environmental impacts Camelot has worked hard overrecent years to reduce the amount of virgin paper used in products. 88% of Camelot’stotal paper consumption in the UK comes from recyclable or sustainable sources (thisincludes tickets, Instants, play slips, office paper and point-of-sale material). It iscommitted to use energy and resources as efficiently as possible by consuming less andrecycling more. In the last year Camelot has decreased energy use by 14% in its offices.It has also undertaken work to define its carbon footprint and is currently working to cutCO 2 emissions at offices, for example through using more energy efficient officefeatures.366 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanCAMELOT ILLINOIS’ STRATEGYCamelot Illinois will manage the Illinois Lottery with the highest levels of integrity andpropriety lead by a high caliber team combining a blend of local, experienced Illinoisprofessionals and senior management from Camelot’s United Kingdom and UnitedStates operations. This combination of Camelot and local expertise will drive a rapidTransition in order that that the benefits of Camelot’s business plan be realised from thestart.CAMELOT ILLINOIS’ OPERATIONAL PLANS INCLUDE:Organization: Augment existing Illinois Lottery staff with Camelot Staff and a robustcollaborative and knowledge transfer plan to integrate the teams and embed newprocesses;Establish a transparent governance structure for decision making between Camelotand the State;Comprehensive diversity plans that will meet or exceed the State’s diversity andinclusion goals, both with respect to employment within Camelot Illinois and to the20% M/W/DBE supplier diversity target;Establishing a Program Delivery capability to drive delivery of Camelot’s BusinessPlan for the long term;Implement a comprehensive technology enablement plan to upgrade all criticalLottery gaming systems using the latest technology supplied by the leading, bestvalue, providers;Introduce new Internet trading capability based on Camelot’s lottery-leadingexpertise in Internet lotteries;Introduce Camelot’s proven and efficient Lottery operations processes, supported byCamelot’s customized Business Systems suite that encompass all areas of Lotteryoperations including Retailer selection, management and revocation; Customer Services and Customer Relationship Management processes andsystems; Inventory and Warehouse Management and predictive ordering systems; Real-time business intelligence solution that will deliver near real-time data andreports to facilitate the monitoring and decision making of the Illinois Lottery.Responsible Gaming (including attainment of the Level 3 WLA Responsible GamingFramework);Dedicated legal staff monitoring all state policies and rules and regularly reviewinglottery operations and policies for compliance;Dedicated Procurement professionals to ensure the maximum value is deliveredfrom every cent spent by the State including the use of accredited suppliermanagement processes.WHY CAMELOT?Camelot has proven experience in all aspects of Lottery operations having operated theUnited Kingdom National Lottery for the last 15 years. It is one of the most cost efficientCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 367

Section 2 Final Business PlanLottery operators in the world combined with a strong track record of innovation ledgrowth. In addition, Camelot’s operational capabilities have been proven to translate tothe United States market through its consultancy agreement with the California Lotterywhere immediate financial benefits ($100 million incremental revenue) have already beenrealized in the first 6 months. Camelot is also experienced in managing complextechnology conversions having converted the United Kingdom Lottery twice in the lastten years. The last conversion in 2008/09 was the largest and most complex Lotterytechnology conversion in the Lottery industry, completed on time and within budget.368 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.11 OPERATIONSCamelot Illinois’ Operations Strategy is one of the key drivers supporting its BusinessPlan to transform the Illinois State Lottery organization and deliver a step change in profitgrowth. Camelot Illinois will implement an Operations Strategy that will support all of theBusiness Plan objectives through a set of tools, processes and insight that is derivedfrom the best Consumer Goods industry standards. Through the selective and intelligentuse of technology, Camelot has been able to embed these processes and costefficiencies in its United Kingdom operations into a business suite that is easilycustomized and integrated within any Lottery operation and with any third party gamingsystem or service provider. Through its proposed tools and processes, Camelot Illinoiswill put in place a transparent governance and reporting framework by which the Statewill be able to measure Camelot Illinois’ performance as a Private ManagerThe operation of the Lottery is very much an enabling capability that supports therealization of Net Income growth through implementation of the Business Plan over thefirst 5 years and beyond. As such, the individual components of operation described herecomprise both the principles and details of steady state operation for the life of the PMA,which are set out in Part A, and a mixture of start-up activities required to assemble thepieces – such as the Transition, Ramp-Up and Technology Enablement activities -described in Part B.The concept of phases of operation is very important to understand. For consistencypurposes, Camelot Illinois is proposing to define operations around the following phasesof activity. This terminology will be used throughout this section:FIGURE 2.11.1: PHASING OVERVIEWPMADecisionEnd ofTransitionEnd ofRamp-UpSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec20102011Transition PeriodRamp-Up PeriodBusiness as usual OperationTech Enablement PrepTechnology EnablementCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 369

Section 2 Final Business PlanPART A – OPERATING MODELSection 2.11.1: Organization - defines the proposed organization, sets out proposals forpartnering with the current Lottery management team, to define processes that will givethe business a consumer focus operating as a consumer goods entity, and explains themechanisms that will be applied, and Camelot has used in its own organizationaltransformation as a template to make sure all staff are aware of the changes takingplace.Section 2.11.2: Governance and Interaction with the State - proposes a governancestructure that will ensure the decision-making and internal review processes are clear,and draws on Camelot’s experience as a closely regulated operator in the UnitedKingdom to propose working arrangements between the Private Manager and the Stateto ensure transparency of the operation and well defined procedures for obtaining theapprovals required in the implementation of the Business Plan.Section 2.11.3: Technology - gives a summary of the main components of thetechnology that will support the gaming products and business systems and the processfor acquiring those facilities.Section 2.11.4: Operating principles – puts forward some key operating principles thatwill inform all the activities of the company. At all times the company will act withpropriety with a rigorous approach to integrity, risk management, business assuranceSection 2.11.5: Procurement - describes the principles of procurement that Camelothas followed in the United Kingdom and that will ensure procurements in Illinois obtainbest value for money and align supplier incentives with the objectives of the Lottery.Section 2.11.6: Diversity – describes Camelot Illinois’ approach to ensuring thatbusinesses owned by minorities, women and persons with disabilities continue to, undera Private Manager, enjoy a fair opportunity to compete for contracts in relation to theoperation of the Illinois Lottery through a transparent process.Section 2.11.7: Business Capability – Sets out the areas of: Logistics – describes Camelot Illinois’ approach to printing, distribution, warehousingand inventory management Customer Operations, draws on Camelot’s experience in handling 2.7 million calls ayear from the public and its retailers to propose a plan for customer service in Illinois. Management InsightSection 2.11.8: Legal – Details specific responses to the legal items listed in Schedule2.1 of the Step 2 RFPPART B OPERATIONS TRANSFORMATION PROGRAMSection 2.11.9: Phased Transition and Ramp-Up Period - describes two phases ofactivity to build the new organization, establish agreed working practices and theinitiation of the refresh of the technology platform370 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanSection 2.11.10: Technology enablement – describes Camelot’s track record indelivering implementations of new technology and how those processes will be appliedin Illinois.Section 2.11.11: Program management - focuses on the program managementfunction which will be essential to the successful roll out of the Business Plan.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 371

Section 2 Final Business PlanPART A – OPERATING MODEL2.11.1 ORGANIZATIONThe State is appointing a Private Manager to manage the Illinois Lottery while at thesame time being clear in its need to retain the ability to retain control over its conductand all significant business decisions. In addition, public trust in the operation of theLottery is essential to its success and requires careful management. Camelot Illinois’commitment is to establish strong corporate governance that instils an environment andculture of diligence, integrity and transparency, so ensuring that its operations are visible,highly credible, and widely respected.2.11.1.1 Organization StructureFigure 2.11.1.1.1 sets out the organization structure of the team that Camelot Illinoiswould seek to introduce as the Private Manager for the Lottery. The key features of thisstructure are as follows: Camelot Illinois will be the Private Manager of the Lottery. Camelot Illinois is a member-managed Illinois limited liability company. The companywill have Illinois headquarters, employees, operations, and assets. Jeff Perlee would be the President of Camelot Illinois. Jeff was the former Directorand Chief Executive Officer of the New York Lottery from 1995 to 1999 and wasGeneral Counsel of the Illinois Lottery from 1993 – 1995. Jeff was born andeducated in Illinois and has spent much of his career in the State. Richard Wheeler would be the Transition and Operations Director for Camelot Illinoisand will be accountable for leading the transition of operations from the State to thePrivate Manager, implementing the ramp-up plan to the Base ServicesCommencement Date and the technology enablement of the lottery systems andprocesses to support the Business Plan. Richard would report to Jeff Perlee.Richard has been leading the Camelot team working with the California State Lotteryon their business improvement initiatives and he also led the transition of Camelot toits third lottery license in the United Kingdom and the associated transformation ofCamelot’s business systems, process and culture to support its business plan for thethird license The other key executive roles for the Private Manager are as follows:RoleTransition andOperationsDirectorProposedAppointeeRichardWheelerResponsibilityResponsible for delivering and operating all aspects of thelottery that include: IT infrastructure that will support the new games andchannels provided by Camelot Illinois throughout the termof the PMA, Customer Services support infrastructure that will provideboth retailers and players with a high quality service. Logistics function to include planning, warehousing anddistribution of instant tickets and POS Procurement and supplier management capabilities372 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanRoleMarketing & e-CommerceDirectorRetail SalesDirectorGovernanceDirectorCorporateAffairs DirectorHead ofFinanceHead ofTransformationHead ofTechnologyEnablementProposedAppointeeRobert MayMark BiscoeIan ArnoldRoxanneWardTim HaldenbyGraham PoolePeri ElsmoreResponsibilityResponsible for driving the revenue growth of the businessthrough an insight led approach. This role will also lead theinternet pilot program and all consumer facing initiatives.The Retail Sales Director will be responsible for the customerfacing teams that manage all aspects of the day-to-dayrelationship with individual retail outlets and key chains. Themain objective will be to deliver a professional sales force thatdifferentiates its offering to retailers based on their specificrequirements while delivering the commercial aims of theLottery.All governance matters will be overseen by a dedicatedGovernance Director, aided by a Head of Risk Management,together comprising responsibility for Security, Enterprise RiskManagement, Internal Auditing, Business Continuity,Regulation.The Governance director will be the primary point of contactbetween the Private Manager and the State.The Corporate Affairs Director will be responsible fordeveloping policy and managing public affairs and relations withthe media.The Corporate Affairs director will also be responsible for socialresponsibility and managing the Illinois Lottery’s reputation andtransparency of operation in dealings.A critical part of the Private Manager success will be to activelyengage with all stakeholders of the Lottery and ensure thatthey are supportive of the commercial and operational of thebusiness.Responsible for the overall Financial Control of the PrivateManager and working with the State of Illinois to ensure thatthey are able to obtain the best overall value from all suppliers /sub-contractors to the lotteryResponsible for all aspects of HR working with the Illinois HRteam to build understanding of each other’s cultures and tobuild a single integrated team focused on delivery of theBusiness PlanResponsible for the delivery of all aspects of the technologyenablement program (including both Lottery technology coreconversion, Internet pilot program and business systemimplementation)The resumes and relevant credentials for the Proposed team members are provided inSection 4.0Camelot is a lottery management firm, which succeeds by managing each lottery in away that reflects local market conditions. Camelot has proven its ability to integrate itsglobal best practices with the challenges and market opportunities that are unique toeach different marketplace.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 373

Section 2 Final Business PlanAt the same time, Camelot Illinois wants to ensure that the Illinois Lottery is managed ina socially responsible manner, so that the development, modification, implementationand growth of the Illinois Lottery is focused on more players playing the Lottery ratherthan on existing players playing more. Lottery management success must be defined bygame development and implementation that targets socially responsible growth in theLottery.Camelot Illinois is committed to developing diverse supplier and business relationshipsthrough a robust program to utilize and mentor minority business enterprises, womenownedbusiness enterprises, and disabled business owner enterprises. Camelot Illinoishas committed to a 20% MBE/WBE/DBE supply and has developed a comprehensiveprogram to grow that supply portfolio. Success means achieving and exceeding ourdiversity goals.The Lottery will be operated by Camelot Illinois pursuant to the Illinois Lottery OperatingStandards, the Private Management Agreement, and other applicable regulations.Camelot Illinois wants to ensure that its management timely addresses any noncomplianceissues through appropriate changes, including changes in business practicesif appropriate, in order to remain fully compliant in all material respects.A key driver of success in Illinois will be the Camelot Illinois Advisory Board. (“Board”)The Board’s primary purpose is to provide Camelot management with on-going insight,advice and feedback concerning the execution of the Lottery Business Plan for thebenefit of Illinois and its people. We expect the Board to be a resource for, and acomplement to both the corporate managers of Camelot Illinois and the board ofdirectors of the parent company of Camelot Illinois.Specifically, the Board is organized and Board members will be selected to adviseCamelot Illinois on the following items:Commercial success within the Illinois market;Monitoring the development and implementation of games, marketing channels, andpractices in a socially responsible manner;Effective compliance with, and a goal to exceed, the 20% target for MBE/WBE/DBEsupply, including as more specifically administered under the Business Enterprise forMinorities, Females and Persons with Disabilities Act.Review any reports of non-compliance with the Illinois Lottery Operating Standards,Private Management Agreement and other applicable regulations, and discuss thecauses and effects with the management of Camelot Illinois;Meet quarterly with Camelot Illinois management and annually with the board ofdirectors of the parent company of Camelot Illinois, to review the achievement ofCamelot Illinois of the financial and operational targets and goals for themanagement of the Illinois Lottery;Advise Camelot Illinois on the role of the retail network;Review and comment on first time application to the broader lottery sector of cuttingedge consumer goods best practices;Review and comment on transitioning the lottery from a paper and terminalparadigm to an interactive, digital future;Help build the understanding of the Lottery’s intimate connection to the causes itsupports and the communities it serves;374 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanTo these ends, members of the Board will be drawn from: Illinois business leaders; Top managers of major national consumer brands; architects of successful Internet-based brand transformations; Former public servants who appreciate the necessary balance between commercialand regulatory objectives; and Leaders of Illinois not for profits and other civic leaders who reflect the diversity ofthe various communities which the Illinois Lottery serves.The Board members will receive a board stipend, paid by Camelot Illinois, that isconsistent with the amount received for service on the advisory boards of other similarenterprises.FIGURE 2.11.1.1.1: CAMELOT ILLINOIS PRELIMINARY ORGANIZATION STRUCTUREFOR THE LOTTERYChairmanLee SiennaGroup ChiefExecutiveOfficerDianne Thompson(Camelot Director)Advisory BoardPresidentJeff PerleeTransitionandOperationsDirectorRichardWheelerRobertMayMarketing &E-CommerceDirectorMarkBiscoeRetail SalesDirectorRoxanneWardCorporateAffairsDirectorTimHaldenbyHead ofFinanceIanArnoldGovernanceDirectorGrahamPooleHead ofTransformationPeriElsmoreHead ofTechnologyEnablementNames in yellow boxes indicate Operating Board MembersNames with red outline indicate Key Personnel to be inplace by the end of TransitionWithin each functional unit of the Lottery, Camelot Illinois proposes to augment existingLottery staff who will transfer under the Employee Use Agreement, with Camelot Illinoisstaff in order to carry out its operator responsibilities as set out in Schedule 2.1 of thePMA. At this stage, during the RFP process, the assignment of roles and integration ofstaff from both organizations represents only a preliminary view. This will be validatedand finalised in detail during Transition, as per the approach set out in Section 2.11.9. Anexample of the way the Camelot Illinois team will interact with the existing teams in theIllinois State Lottery is illustrated in Figure 2.11.1.1.2.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 375

Section 2 Final Business PlanFIGURE 2.11.1.1.2: PROPOSED MARKETING ORGANIZATIONMarketing Director1P10Marketing & E-Commerce Director1P61Promotions Director1P14Product DevelopmentDirector1P19Head of Insight1P66Head of E-Commerce1P71Head of BrandComms1P67Head of Instants1P112Head of OnlineGames1P68Channel Analyst1P69ConsumerAnalyst1P70Head ofProduction1P72E-CommerceSupport1P73Executive II1P12Events/SponsorshipOffice1P13HispanicMarketingLiaison1P16Instant productmanager1P21Online productmanager1P20Specialty ticketManager1P22CommunicationsCommunicationsManagerManagerassistant11P17P18AdministrativeAssistant1P11Secretary (ProdDev Mgr)1P23OfficeCoordinator1P15Assumed that 15 FTE in TechEnablement are building websiteand 7 FTE will transition to BAUsupportThe yellow boxes in Figure 2.11.1.1.2 are posts filled now by staff from the Lottery. Theblue boxes are posts that Camelot Illinois plans to fill with Camelot employees. At theDirector level, the Camelot Illinois nominee and the existing Lottery Director will work inconcert to direct the activity of the unit.Preliminary organization charts for all other functions are attached in SupportingInformation 2.11.A2.11.1.2 Partnering with existing managementKnowledge transfer – a two way processOne of the central benefits that a Private Manager will bring to the Illinois Lottery is afresh perspective on the Lottery and the opportunity to enhance, where appropriate, theway in which it operates as a business.376 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanPrior to managing the Lottery, Camelot Illinois only has a high level overview of thecurrent business processes and practices but as with any business, believes there maybe opportunities for improvement in certain areas whereas others may be runningoptimally. This observation stems from Camelot’s own experience in its recentTransformation program. The company was performing well prior to the program anddelivering good results; but a review proved that there were areas where improvementscould be made and they have proved beneficial.One of Camelot Illinois’ first actions, as outlined in the Transition and Ramp-Up Section2.11.9, will be to gain a full understanding of the current processes and procedures thatIllinois Lottery teams are employing. Camelot Illinois has set out in its Business Plan itsheavy focus on the consumers and their needs, as the essential underpinning fordesigning and delivering games that will meet those needs. Camelot has modeled itscentral processes on the practices of consumer goods companies. It is against theirproducts that the Lottery has to compete and so at least matching the quality of theirtechniques, for knowing and responding to consumer needs, seems a necessity. TheCamelot Illinois processes are described in detail in various sections of the BusinessPlan.But Camelot Illinois is open to ideas from the many years of knowledge and experienceof the Illinois teams that have been operating the Lottery, not least their knowledge ofthe local cultural and economic environment in which the Lottery operates.So Camelot Illinois sees the development of new ways of working as a two-way process– each learning from the other to design the best way of transforming the company’soperation.For its part Camelot Illinois will transfer its knowledge by the following. It will: Provide Subject Matter Experts who will work alongside the current managementteams to explain the Camelot Illinois way of working in their area of expertise; tounderstand in detail their subject as it applies in Illinois; and to make proposalsdrawing on their experience on how current processes or practices could beenhanced or built upon.Camelot Illinois is proposing to supply up to 10 individuals from the United Kingdombusiness covering the following disciplines for periods of up to 20 days per year: Sales Consumer Marketing Product Development Insight Instants End-End Operations Winners Services Retail and Sales Execution Allocate funds to a program of knowledge transfer visits by Illinois staff to Camelotin the United Kingdom, to work alongside their Camelot equivalents for a period tosee first hand how the procedures work and to be trained in the use of those thatwill be adopted in Illinois.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 377

Section 2 Final Business PlanDeveloping and delivering the Business PlanCamelot Illinois has set out in some detail a Business Plan for taking the Lottery forwardto higher levels of sales and consumer penetration.These represent the best view Camelot Illinois can take at this stage, of developmentsthat can grow the Lottery and Camelot Illinois is confident that they will deliver theincreased sales and Net Income that are forecast.But Camelot Illinois will not be delivering the Business Plan alone. And just as it will beworking closely with the current Illinois team to deliver, so it will be ready to work withand take the views of the staff in defining the further detail of the Plan. Camelot Illinoiswants to deliver a Business Plan that has the enthusiastic support of the people who willmake it a reality. Joint detailing of the Business Plan will be one of the earliest tasks thatthe combined team will undertake and will be facilitated by a number of mechanisms: Town hall meetings will be used to play back individual elements of the businessplan to promote discussion and receive feedback in an informal setting. Structured feedback sessions by functional department where components of thebusiness plan are further analysed, quantified and refined. Staff surveys used to test opinion on significant thematic issues facing the lotteryand business plan. Director’s open house where functional directors and the president will invite 1-1open discussion on any business plan related issues that concern employees.2.11.1.3 Engaging Existing State Lottery staffSupporting staff through TransformationCamelot Illinois recognizes that the way to maximize lottery revenue in Illinois will be tocombine the very best people, processes and technology from both Camelot Illinois andthe current Illinois operation. In order to deliver this combined model and therefore thebusiness plan, the support, commitment and dedication of the Illinois Lottery staff will bevital.Camelot Illinois understands that the process of change is unsettling to most individuals.At the start of the recent United Kingdom transformation program, Camelot took theopportunity to fully understand the impact of change and ensured that it had anextensive employee training and development program in place to support the changesat the outset. The purpose of this program was to enhance employees’ commitment toboth the Transformation and Camelot as a whole, while at the same time providingclarity on the content of the program. Camelot Illinois also recognizes that it will beoperating in a different environment and culture to that in the United Kingdom andbelieves it is absolute critical understand all of these factors before determining astrategy and the implementation approach to be followed during the ramp-up phase.Camelot Illinois would, however, during Transition: Identify frequent, two way communication opportunities between the beginning ofTransition and the end of the ramp-up period to understand employee views Provide further feedback mechanisms, to ensure that all views are taken intoaccount. These range from meetings with the appropriate staff representativegroups and/or Unions through to staff surveys and focus groups.Both of these tactical communication methodologies would help Camelot Illinois tounderstand staff concerns and issues and develop appropriate responses and solutions.378 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanAs well as providing valuable insight from which it can determine “EmployeeStrategies”.As Camelot did in the United Kingdom as part of its Transformation Program, the aimwould be to keep its Illinois employees well informed of proposed plans and would alsoprepare them to deal with the changes that could result from moving from a State bodyto a Private Manager. Continued two way communication is vital and Camelot Illinoiswould ensure that it put appropriate opportunities in place. In addition to the existingcommunication mechanisms, these could include: Change Awareness workshops for all staff. The workshops would be designed toexplain proposed changes and prepare people for the challenges ahead. Establishing a “Change Network” made up of current Illinois employees and newand established Camelot Illinois employees. This “Cross Business Team” could bemade up of managers and employees of all grades from across the business andwould facilitate networking and discussions across the business. Additional management training to prepare the leaders to deal with the opportunitiesand challenges ahead.In addition, Camelot Illinois recognizes the context of delivering the Business Plan withinthe framework of the “Employee Use Agreement”. On initial reflection Camelot Illinoisfeels that this will bring two opportunities as the transformation program is planned indetail:The first is to work closely with the State to ensure that the appropriate level ofservices are being delivered and that these services can be flexed to providemaximum opportunities for staff at the same time as delivering the Business Plan.The second opportunity is for Camelot Illinois to ensure that Illinois staff, both Stateand Camelot Illinois employees, can work as one entity, driven by the achievementof common goals rather than as two individual units.Training and developmentThe activities described above detail the collaborative approach that Camelot Illinois willadopt to partnering and engaging with staff, and the initial steps to effect knowledgetransfer where required.However, in addition to these activities it is also proposed to conduct an objectiveassessment of the skills available to fill the roles identified in the new organizationstructure. This will be conducted jointly by the existing management and Camelot Illinoismanagers, working with the State HR department, and consistent with State Policiesand rules and, where applicable, any collective bargaining agreements.Where existing staff require additional development, or more insight into relevantCamelot Illinois techniques or experience, Camelot Illinois will create individual learningand development plans. These will be designed to enable the growth of skills thatsupport the delivery of the Business Plan.Specific areas of activity will only be identified as part of needs analysis conductedduring Transition, however, recent initiatives within Camelot have included:An extensive Retail Sales training program to enhance capability in negotiation skills,consultative selling skills and broader coaching skills to help proactively manageperformance across the sales teams.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 379

Section 2 Final Business Plan A broad Leadership development program that would sustain a high performanceculture for the long term The adoption of essential working principles that ensure all employees have clearobjectives, understand how their work contributes to the business performance andhave an opportunity to discuss their career aspirations at regular intervals. Specific technical training to enable individuals to develop in their particular area ofexpertise The introduction of a Mentoring Program that empowers high performanceindividuals within the organization to offer support and development to otheremployees.The list above represents a guide to the type of development opportunities that Camelothas routinely made available to its existing employees and would be committed toproviding as part of the private management agreement.380 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.11.2 GOVERNANCE AND INTERACTION WITH THE STATECamelot Illinois is a member-managed Illinois limited liability company. The shareholdersof Camelot Illinois are Premier USA Inc 95% Camelot Global Services Limited 5%Camelot Illinois will have Illinois headquarters, employees, operations, and assets.Camelot Illinois will be led by Jeff Perlee and will report directly to Dianne Thompson,Camelot’s Group Chief Executive. Dianne is the Chief Executive of both Premier USAand Camelot Global Services, which are the key decision making forums for CamelotIllinois.A critical component of global leadership is to understand and adapt to local marketconditions. Camelot has become the world’s leading lottery management firm bymodifying its best in class business model and applying its operational expertise to besuccessful in different markets in different jurisdictions.The distinction between a supplier of lottery technology and a true lottery manager is, inthis context, of fundamental importance. Provision of core lottery technology – terminals,a central system or Instants products – has matured over the years to an extent wherethere are a number of established industry players who can provide a broadly similar, andgeneral high quality capability. For a supplier, local conditions may inform a change inscope or scale but at the end of the day the supplier provides essentially the samepackage of services and goods whether a customer is an American state, a Mongolianprovince or a Russian republic.In contrast, a lottery management firm realizes success by managing each lottery in away that reflects local market conditions. Understanding this fact is a keystone ofCamelot’s success. Whether the challenge is to create a new lottery managementoperation in a developing nation like South Africa; developing and subsequently reengineeringa lottery in a large, industrialized market as Camelot did in the UnitedKingdom; or refurbishing an underperforming lottery in the state of California, Camelothas proven its ability to integrate its global best practices with the challenges and marketopportunities that are unique to each different marketplace.At the same time, Camelot Illinois wants to ensure that the Illinois Lottery is managed ina socially responsible manner, so that the development, modification, implementationand growth of the Illinois Lottery is focused on more players playing the Lottery ratherthan on existing players playing more. Lottery management success must be defined bygame development and implementation that targets socially responsible growth in theLottery.Camelot Illinois is committed to developing diverse supplier and business relationshipsthrough a robust program to utilize and mentor minority business enterprises, womenownedbusiness enterprises, and disabled business owner enterprises. Camelot Illinoishas committed to a 20% MBE/WBE/DBE supply and has developed a comprehensiveprogram to grow that supply portfolio. Success for Camelot Illinois will mean achievingand exceeding our diversity goals.The Lottery will be managed by Camelot Illinois pursuant to the Illinois Lottery OperatingStandards, the Private Management Agreement, and other applicable regulations.Camelot Illinois wants to ensure that its management timely addresses any non-Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 381

Section 2 Final Business Plancompliance issues through appropriate changes, including changes in business practicesif appropriate, in order to remain fully compliant in all material respects.2.11.2.1 Advisory BoardOverviewCamelot Illinois proposes to establish an Advisory Board as part of its governance modelto help achieve these overarching objectives.Jeff Perlee and Richard Wheeler will be able to draw upon the necessary skills andexpertise of the Advisory Board. The role of the Advisory Board would be to providestrategic advice to the President and management team of Camelot Illinois on mattersrelating to the needs of Illinois stakeholders and the Business Plan.Primary purposeThe Board’s primary purpose is to provide Camelot Illinois management with on-goinginsight, advice and feedback concerning the execution of the Lottery Business Plan forthe benefit of Illinois and its people.Specifically, the Board is organized and Board members will be selected to adviseCamelot Illinois to manage the Illinois Lottery based upon its core principles: Commercial success within the Illinois market; Monitoring the development and implementation of games, marketing channels, andpractices in a socially responsible manner; Effective compliance with, and a goal to exceed, the 20% target for MBE/WBE/DBEsupply, including as more specifically administered under the Business Enterprise forMinorities, Females and Persons with Disabilities Act. An understanding of the Lottery’s intimate connection to the causes it supports andthe communities it serves;To these ends, members of the Board will be drawn from the ranks of:Illinois business leaders;top managers of major national consumer brands;architects of successful Internet-based brand transformations;former public servants who appreciate the necessary balance between commercialand regulatory objectives; andleaders of Illinois not for profits and other civic leaders who reflect the diversity ofthe various communities which the Illinois Lottery serves.The Board members will receive a board stipend, paid by Camelot Illinois, that isconsistent with the amount received for service on the advisory boards of other similarenterprises.2.11.2.2 Operating BoardOverviewCamelot Illinois adopts a trading mindset to lottery operations, with a relentlessmanagement focus on sales, marketing and operational performance. Underpinning thismindset, Camelot Illinois will convene an Operating Board, meeting on a weekly basisand comprising the key members of the executive team – highlighted in yellow boxes inthe Organizational Chart in Section 2.11.1.1.382 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanThe Operating Board is a critical component of Camelot Illinois’ Lottery Operationsphilosophy providing a regular forum for all key decisions made in the business.Availability of information to support high quality issue assessment and risk mitigationplanning and decision making is key to this forum.Primary purposeThe Operating Board performs a number of specific functions, but in general is thesenior level forum that supports day to day decision making in the business, as well asfeeding into broader corporate governance structures of the Advisory Board andStanding Meetings with the State: Top level review of business performance for the prior week, looking at trendsagainst prior week, last comparable week and same week last fiscal year. Review of trading performance previous week by product category and brand Performance of channel communications previous week, and view of upcomingweek activity PR and Corporate Communications activity Operational and IT performance metrics: System availability Project delivery performance Customer Service performanceRegulatory and Governance activities including upcoming or in process reviews andapprovals for new game or strategic channel developmentsOutlook for coming week2.11.2.3 Building a transparent control environment for the Illinois LotteryCamelot Illinois’ focus on transparency and propriety is so central to its approach that allgovernance matters will be overseen by a dedicated Governance Director, aided by aHead of Risk Management, together comprising responsibility for Security, EnterpriseRisk Management, Internal Auditing, Business Continuity, Regulation.The Governance Director will be Ian Arnold. Ian has 12 years of experience in working forCamelot in the United Kingdom and abroad. Before becoming the company’s Controllerof Regulatory Policy in 2006, he worked as the company’s Head of Internal Audit. Hisexperience has included work in South Africa with Uthingo, representing Camelot duringthe development of the WLA responsible gaming framework, and leading assuranceactivities across Europe during the creation of the EuroMillions multi-state game. Since2006, Ian has (in partnership with the NLC) pioneered and modernized the ways ofworking between the State and the lottery in the United Kingdom, and he led the teamthat worked to finalise and implement the third license regulatory requirements between2007 and 2009. The key focus since the beginning of the third United Kingdom licensehas been working towards a model of earned autonomy and output based regulationwhich focuses on achieving the respective stakeholder ambitions in the most efficientway.The Governance Director will implement an assurance strategy with the following aims:All lottery staff and key suppliers are fit and proper and therefore can be trusted tooperate the Lottery with propriety.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 383

Section 2 Final Business PlanAppropriate policies, procedures and control systems are in place to safeguard theintegrity and availability of the Lottery at all times.Best practices are established in all key areas of Lottery operations, including anyperformed under sub-contract, and where beneficial these will be aligned withnational and/or international Standards.A corporate focus on risk management is embedded in the operation of the Lotteryand the company’s risk profile is reviewed at appropriate levels of management andis well understood.Stakeholders are regularly briefed and consulted through a variety of channels,including a Stakeholder Panel, in relation to the Lottery’s commercial and operationalactivities, to enable these to be understood and challenged as necessary.Independent monitoring of the efficacy of the assurance strategy is performedthrough internal and external audit programs and compliance reviews which arereported to the President.Tools, reports and processes that facilitate the exercise of control and ensure totaltransparency of operations are embedded in the fabric of the company.2.11.2.4 Fostering a positive relationship between the State and CamelotIllinoisCamelot, through its successful operation of the United Kingdom National Lottery, hasdeveloped a ‘touch-point’ process with its regulator that ensures each is aware of thepriorities for the Lottery, the crucial activities that support the delivery of these priorities,and the responsibilities and accountabilities that attach to these.This process was developed jointly with the National Lottery Commission during thetransition period to the Third License (2007 to 2009) and has proved so effective that ithas now been adopted and improved as part of the ongoing operation of the Lottery.The Illinois Lottery will benefit from an adapted touch-point process to ensure that allprojects are visible to the State and their priority understood, and that timeframes foractions by Camelot Illinois and by the State are met within service level agreements(SLA) related to the Private Management Agreement.An executive summary report will be shared with the State regularly, in advance of thestanding meetings, in compliance with Schedule 5.1 of the Private ManagementAgreement, to ensure that critical strategic activities are aligned. The GovernanceDirector will ensure that Camelot Illinois acts at all times in accordance with Schedule5.1. In addition to the executive summary report, Camelot Illinois proposes to provide theState with the following data and reports to support their obligations in Schedule 2.2 (asrequired under our obligations defined in Schedule 2.1):384 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanNameRetailer Accounting ReportFrequencyCancelled Retailer Invoice ReportsWeekly Retailer Adjustment SummaryGross Sales and Net Income ReportUnclaimed Draw-based Prize ReportWeeklyUnpaid Prize ReportDaily Internet ReportDormant Internet Wallet Payment ReportInternet DashboardPrize PaymentDraw-Based Systems AvailabilitySubscription Service StatisticsRetailer Selection and CoverageWithin 14 days after period endScratchcards Prize Payout Percentage TrendPrize LiabilitySales PerformanceSLA PerformanceRetail OutletsWithin 21 days of the end of the quarterBy 30 April and 31 October each yearIn order to guarantee the successful operation of the Private Management AgreementCamelot Illinois will also ensure that effective two-way communication processesoperate smoothly. Importantly, the State will benefit from Camelot Illinois’ uniqueappreciation of the key contact arrangements necessary to provide open dialogue,transparency and management of the Lottery. Camelot Illinois’ commitment is toestablish the following two-way communications arrangements: Duty liaison officers will communicate with State officials as necessary outside ofoffice hours to bring them close to any major incident and enable involvement indecision making (to the extent required under the PMA). Outside of the standing meetings between the Lottery Lead and the PM Lead,Camelot Illinois proposes that the following meetings would be scheduledperiodically with appropriate State officials: Strategy days Board to Board Policy and Government Relations Trading update/consumer insight Game and channel plans Touchpoint review relating to plans in the pipeline and in-flight projects SLA reviewCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 385

Section 2 Final Business Plan Internal and External audit plans Assurance reviews with the Governance Director Stakeholder Forum Technology strategy2.11.2.5 Easy access to relevant informationThe Illinois Lottery will additionally benefit from Camelot’s Business Intelligence (BI)solution, customized to the Lottery industry and based on SAP. SAP is the world’sleader in collaborative business software and its BI solution gives everyone the ability toaccess, understand and use information without programming skills, technical expertise,or knowledge of underlying data sources or structure. By leveraging this tool the Statewill have access to: Advanced analytics Query and analysis Reporting Search and navigationCamelot uses each of these technologies successfully in the United Kingdom and isaiming to offer these world leading technologies as an integrated solution to the State ofIllinois. BI will enable the State to have direct, read-only access to Lottery data to enabletotally transparent self-serve reporting on all key Lottery operations. Examples include:Sales and Marketing Sales of tickets by region, type of Retailer and by each individual Retail Outlet, bygame, by Draw and by day. The proportion of sales of tickets paid in prizes (broken down by game) and theproportion transferred to the specified State funds. Sales of tickets by game broken down by distribution channel (retail or interactive). The speed of payment of prizes. The distribution of prizes by value for each game. Detailed marketing expenditure in respect of each game. Coverage information for each relevant game expressed as a percentage of allpossible combinations chosen by Players, by game and by Draw. Branding and marketing activity and plans.Customer Services The speed of answering of telephone enquiries as well as availability of the customersupport infrastructure. The speed of reply to contact from a Player, other than by telephone, requiring aresponse. The number and type of complaints and copies of all correspondence relating tocomplaints received and the outcome of such complaints. The speed of response to and resolution of complaints received.386 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanIT and Operations The length, regularity and timing of periods when systems which allow Players topurchase entries into games could not be used. The speed of restoration of any facilities providing games following occasions onwhich they ceased to be available for use in whole or part. Systems reliability and availability statistics covering any part of the gaming solution. Systems performance statistics, including response times at Distributor terminalsand any other user access device used to access any part of the gaming solution. The Lottery infrastructure performance including system and network availability.Audit and Compliance Internally and externally prepared assurance or audit reports, and any other internalor external reports produced concerning the running, management or developmentof Lottery. Any other matter which may be required in accordance with the PrivateManagement Agreement.Camelot Illinois will also provide electronic Dashboards and Visualisation through BI thatpresent KPI data (based on agreed performance targets) in easily accessible formats forthe Lottery and State, accessed by secure network infrastructure.An electronic incident and security log-file will be maintained to which the State will haveshared access in order that problems encountered in the operation of the Lottery arejointly understood. An escalation process will exist alongside this so that critical mattersare openly and swiftly explored with the Lottery.These mechanisms will provide timely analysis and tracking capability which supporteffective corporate governance - the meetings described in this section and in Schedule5.1 of the PMA -and are essential pillars in the control framework that will benefit theLottery. Importantly, Camelot Illinois’ commitments go far beyond this and will enablethe Lottery to benefit from a range of processes that further strengthen the governancearrangements. The Lottery will be provided (by the Governance Director) withdocumentation arising from the risk management, responsible gaming and internalaudits, such as ‘key risk’ mitigation plans, minutes and accompanying papers from allrelevant committee meetings under the responsibility of the Governance Director, andany other documentation required in the Private Management Agreement.2.11.2.6 SummaryCamelot’s global success in operating and consulting to lotteries and creatingincremental growth demonstrates that the company understands that high standards ofcorporate governance are essential and integral to running a flourishing lottery andmaintaining the confidence of key stakeholders.Camelot is dedicated to the highest levels of corporate responsibility, governance anddisclosure in all its activities globally. As well as its experience in South Africa andCalifornia, Camelot has over 15 years experience of successfully operating the UnitedKingdom National Lottery, which is overseen by the National Lottery Commission (NLC).As a result of its unmatched experience of working in a tightly monitored environment,Camelot Illinois is uniquely positioned to operate a Private Management Agreement withthe Illinois State Lottery that enables the degree of control and governance overoperations and transparency that is necessary under the State legislation.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 387

Section 2 Final Business Plan2.11.3 TECHNOLOGY2.11.3.1 Technology StrategyCamelot Illinois believes it offers a very different type of technology approach to thatoffered by traditional lottery technology suppliers.The Camelot philosophy for technology solution design is based around analysing thebusiness need and delivering enabling technology that exactly meets those needs.Camelot is truly independent of lottery technology providers and is a skilled integrator.This puts Camelot Illinois in the unique position of being able to choose the besttechnology to meet the State’s needs with no compromise.Lottery technology suppliers are very good at providing core lottery systems andterminals, but in our opinion they are often poor at delivering effective solutions beyondthe scope of their core products. Too often, in Camelot’s view, technology supplierspropose inappropriate technology products to their customers. The requirements aremodified to fit the technology…Camelot believes it should be the other way around.Camelot Illinois’ approach is to carefully focus on business requirements and businessanalysis prior to designing a solution. When the problem is properly understood, Camelotworks with the customers to identify an appropriate solution that offers real businessbenefit. Solutions may not require new technology; a business process change is oftenquicker and more effective. The available products from lottery and non-lotterytechnology suppliers are reviewed to determine which solution best fits the customer’sneed and then integrated using Camelot’s open integration technology; the CamelotTrading Platform.This independence prevents Camelot Illinois from being constrained by reviewing everybusiness need from the view of the lottery vendor product catalogue. It gives CamelotIllinois the freedom to be truly innovative and refreshingly open minded. Camelotcontrols the technology suppliers to provide exactly what they need to and no more.2.11.3.2 Core Technology ImplementationThe foundation of a highly successful modern lottery has to be: A first class lottery central system with open integration capability, A fast, reliable and flexible retailer network, Powerful, expandable, purpose-built, PC-based lottery terminals.It is possible to source the central system components and lottery terminal productsfrom separate vendors and integrate them together, but the exceptional performance,integrity and security requirements of lottery systems make this a complicatedundertaking with limited benefits. The central systems and on-line terminals (OLTs) tendto work best together when they are supplied by the same vendor – they come preintegratedout-of-the-box with a very low risk of integrity or performance issues. TheOLTs and Full Service Vending Machines (FSVMs), could also be sourced from separatevendors, but this complicates all future upgrades and maintenance because of the needto work with multiple solutions and suppliers. FSVMs use a standard OLT at their heartand in Camelot Illinois’ view it will result in a simpler, cheaper and more agile solution ifthe same underlying terminal platform is used for both the OLTs and FSVMs.Balancing the State’s requirement for a fast, low-risk technology enablement programand a reliable, agile core lottery platform, Camelot Illinois proposes that a single RFP388 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planshould be issued to the tier 1 lottery technology vendors for the supply of a core suite oftechnology including:Lottery central system including instants management and a web-services gateway,11,000 OLTs,3,000 FSVMs,An in-store multi-media system.For all other technology components, Camelot Illinois will select from the relevantleading suppliers from the open market. The web services gateway supplied by thelottery vendor allows Camelot Illinois an effective and straight-forward integration pointfor the Camelot Trading Platform, thereby giving access for integration with alternativesales channels.Immediately on winning the private management contract, Camelot Illinois will issue thefollowing technology RFPs:1. Lottery central system and other core components previously described2. Retailer Communications NetworkIn Camelot Illinois’ view only 3 vendors currently have the capability and track record thatqualifies them to supply the required core product suite and services. They are ScientificGames Corporation, GTECH Corporation and Intralot S.A.Camelot Illinois will support the core lottery technology enablement with a suite of “outof the box” business processes and systems based on the United Kingdom NationalLotteries highly successful consolidation of lottery back-office systems onto SAP’sbusiness suite. This approach has benefited the United Kingdom National Lottery bybringing the leading technology enabled business processes, thoroughly joined-up, withthe option of plug-and-play integration to hundreds of other industry leading products.Consolidation of a myriad of diverse applications onto a single platform has dramaticallysimplified Camelot Illinois’ architecture leading to a far more agile business able toquickly and decisively seize new business opportunities. Some processes are toobespoke to lottery to be configurable within the SAP product suite and to address this,Camelot Illinois proposes to use its Intelligent Predictive Ordering System (IPOS) toprovide advanced instants supply chain processes and the Optimum geo-demographicmodelling tool for identifying the most suitable terminal locations.More information on Camelot Illinois’ proposal for business systems technology is givenin Section 2.11.7 Business Capability2.11.3.3 New Lottery PlatformsThe core technology platform will provide the foundation for a modern, efficient retailcentriclottery, but additional technology is required to expand into new channels, newbusiness opportunities and a continually improving and evolving set of businessprocesses.Camelot’s Trading Platform will be used to facilitate the integration of the selected coresystems, Interactive player services, alternative sales channels and new businesssystems.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 389

Section 2 Final Business PlanCamelot’s Trading Platform is the key to unlocking the value potential of a vendorindependent technology strategy. Integration of the best specialist products with aleading core lottery system provides a reliable lottery foundation with an unconstrainedability to take-on new channels and services. The Camelot Trading Platform opens theopportunity for a single direct player relationship across a rich range of retailer andalternative sales channels. It has opened new revenue possibilities for Camelot in theUnited Kingdom by allowing lottery and non-lottery services to be sold through the samechannels without the crippling dependencies caused by coupling both services togetherin the same applications.An overview of Camelot Illinois’ proposed technology architecture is shown in Figure2.11.3.3.1:Confidential Information Removed2.11.3.4 Lottery Central SystemCamelot will use its 15 years of experience operating one of the 5 largest lotteries in theworld and its recent experience of upgrading its entire technology platform in 2009 torun a tender process for the selection of a new core gaming system for the State. Thecharacteristics of the core gaming system have a major impact on the successfuloperation of the lottery. Camelot Illinois will run a selection process that uses all itsexperience to procure the best possible central system for the State:Modern and SustainableA modern lottery system needs to support the latest best practice features expected ofany leading mission critical business application:390 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan24 hour by 7 days a week (24*7) trading capability. This is especially important forthe introduction of Internet sales channels and new game types such as Instant WinGames and multi-player game.Automated operations. A modern lottery operation should not be heavily dependenton manual processes such as tape switching and file backups. A well designedlottery central system should be able to take advantage of modern technologies suchas virtual tape libraries and scheduling software to reduce necessary manualintervention to just those tasks where it is desired to allow for responsible checksand auditing. The reduction of manual processes reduces the possibility foroperations errors, frees-up operations staff to more effectively monitor and managesystems and contributes to the ability to support 24*7 operations and minimal salesbreaks between draws.Virtualization – Virtualization technology allows the efficient use of hardware andsoftware, but the application software must be designed with virtualization in mind inorder to make the best use of it. Camelot has found virtualization technology to beparticularly effective for supporting the simple, rapid, low cost setup of developmentand test environments.Monitoring – A well designed, centralized, consolidated monitoring capability isessential for a modern lottery operation. In Camelot, any one of the managementteam can remotely log onto the monitoring console from their PC and view graphicalrepresentations of real-time transaction volumes by game, system status for eachkey system, current status of batch jobs and console output for each system.Support for upgrades – The system must be designed to facilitate regular updatesfor hardware components, platform software components and application softwarecomponents. This allows the system to be kept up-to-date throughout the period ofthe license and reduces the risk of components becoming obsolete andunsupported.Resilience and AvailabilityThe systems must support the highest standards of “up-time” in order to maximizesales. This up-time is measured by the selling time available to the retail and alternativesales channels. In order for this to be possible, the system must support features suchas terminal software downloads during normal business hours and the ability toefficiently upgrade individual components with minimal possible disruption to sales.The system must be extremely resilient to component failure and must continue toperform reliably and predictably under heavy load. This requires both the applicationsoftware and the infrastructure to be well designed to react rapidly to all failure scenarioswith no single points of failure.Camelot Illinois expects the core lottery systems to be constructed from the latestversions of a family of products that have been well proven in multiple lotteries of asimilar size and scale to the State. Completely new systems and technology may beacceptable outside of the core system where the risk of failure is minimized, butCamelot Illinois will only use well proven products in the core platform. Version upgradeswill be accepted, but only where they are revisions of a proven base product and arethoroughly tested during the Technology Enablement program.Integrity and SecurityCamelot has always maintained extremely high standards for ticket integrity and systemsecurity. The system must be designed to guarantee that every ticket is securely loggedCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 391

Section 2 Final Business Planon the central system prior to printing on the terminal and to get as close as possible to100% successfully printing of all logged tickets. These criteria become increasinglydifficult to achieve when extending the core system into new channels, but a welldesigned system should facilitate that extension rather than hindering it.Protection against insider, retailer and player fraud is even more important in today’senvironment where relying on specially printed ticket paper and private retailer networksare no longer sufficient mitigations in a world where many people have advanced colourscanner/printers in the their home and the majority of private telecommunicationsnetworks have at least one component of publicly shared infrastructure. Camelot Illinoiswill insist on the use of the most modern security mechanisms to counter these riskssuch as the latest encryption technologies and security devices.Agility and FlexibilityCamelot Illinois has an aggressive and ambitious plan of new game and channelchanges. The business needs the systems to support this plan by allowing rapid changesfor the minimal possible cost and risk. This can only be achieved if the systems aredesigned to facilitate this change. Camelot Illinois will look for well engineeredapplications with good separation of functions using modern programming technologiesand development methodologies. In our experience the claims made by the technologysuppliers for the turn-around of new game developments often fall short of the reality.Camelot Illinois has found that one of best tests of this ability is to apply the games andfeatures of the business plan to the new systems to review how easily their design andconfiguration features will adapt and how much change will be required to each of thesystem components.OpennessIn order to expand into new channels, new game types and non-lottery revenueopportunities, the core lottery system must have the ability to easily integrate with 3 rdparty systems. The modern approach to this integration is to offer a service orientedmessaging interface to the core system. This Application Programming Interface (API)should support transactional Web services based on either Simple Object ApplicationProtocol (SOAP) or Representation State Transfer (REST) protocol standards and willallow access to services such as “place wager”, “validate ticket” and “get winningnumbers report”.Capacity and PerformanceCamelot Illinois' understanding of the required levels of capacity, scalability andperformance by service, channel, and access point is founded on industry insight, actualexperience, observed trends, sales forecasted by the business plan and data from UnitedKingdom operations. This understanding provides a thorough and accurate referencefrom which the required levels of capacity, scalability and performance can beconfidently projected.Camelot’s experience is that the internet channel usually presents the greatestchallenges to managing capacity and performance in a modern lottery, however greatcare will be taken to select and design a central gaming system with the requiredcapacity and performance capability. Camelot Illinois’ operation will be capable ofdelivering the high levels of performance and scalability expected of a modern lotteryoperation.392 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanThe approach Camelot takes is to anticipate and plan for any high-demand situation thatmay occur on any sales channel at any time. The safest approach is to continually planfor the worst case scenario likely to happen during the term of the PMA, then make it arequirement that, during this time, levels of service are achieved that are acceptable toall users. For the purposes of planning capacity for the Lottery services operated byCamelot Illinois, the worst case scenario is defined as being peak draw-based salesdemandoccurring at the same time as a failure leading to the unavailability of all thecomputing resources within one data centre. If the worst case scenario occurs, CamelotIllinois’ Technology Solution will be able to cope with it.The high-demand sales patterns and peaks for each channel are all driven by the size ofthe jackpot. The predicted jackpot figure can be used to predict sales and requiredcapacity. Other factors, such as advertising and encouraging advanced play, can havesome effect on sales patterns but they do not have as great an influence on thatchannel’s peak as the jackpot.To plan for all scenarios, it is important to understand the transaction profile for eachsales channel. Figure 2.11.3.4.1 shown below, depicts the typical transaction profile fordraw-based retail sales on a Saturday for the United Kingdom National Lottery, the periodfrom start of day until draw break is shown. What has been observed is that, regardlessof jackpot size, there are two transaction rate peaks during the day; the highest peakoccurs between 17:00 and 17:30, with a lower peak occurring in the morning at around11:00. This is true of sales purchased both through Electronic Points of Sale (EPoS) andthrough lottery terminals.FIGURE 2.11.3.4.1: RETAIL CHANNEL TRANSACTION RATES ON A SATURDAY FORTHE UNITED KINGDOM NATIONAL LOTTERY. THERE ARE TYPICALLY TWOTRANSACTION RATE PEAKS ON SATURDAYSRetail Channel - Saturday Transactions per minuteTpm6 7 8 9 10 11 12 13 14 15 16 17 18 19HourOn the other hand, the transaction profile for new channels is very different. The habitsof these players, particularly those using the Internet channel, are to play much closer todraw break. Interactive players expect to be able to quickly and conveniently place anonline wager; they count on being able to do this right up until just before the drawcloses, often leaving little time to spare. Their typical behavior is shown in Figure2.11.3.4.2. Observations have shown that demand tends to increase over mid-day levelsCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 393

Section 2 Final Business Planby around 350% during a Saturday afternoon, and can increase by as much as 600%during a Wednesday afternoon for the mid-week Lotto draw.FIGURE 2.11.3.4.2 INTERACTIVE CHANNEL TRANSACTION RATES ON A SATURDAYFOR THE UNITED KINGDOM NATIONAL LOTTERY. THE INTERACTIVE PEAK HAPPENSCLOSE TO DRAW BREAKNew Channels - Saturday Transactions per minutetpm6 7 8 9 10 11 12 13 14 15 16 17 18 19HourCompared to the retail channels, the transaction peak of the new channels happensmuch later in the day, usually within the last 30 minutes and sometimes with as little as5 minutes to go before draw break. From a capacity planning perspective, the initialimplication of this seems positive in that the peaks from the two major sales channelsoccur at different times and therefore spread the load throughout the day. However,analysis has also shown that outside factors, major sporting events in particular, canhave dramatic impact on the draw day transaction profile. An example of this is shown inFigure 2.11.3.4.3 showing the retail transaction profile on the day of a major footballmatch 1 that started at 17:15 on a Saturday afternoon. Clear peaks in transaction rate canbe seen at half-time and at full-time just after 19:00. In fact, on this day the peak activityfor both the established retail and new channels occurred at exactly the same time:19:20. Therefore, there is a clear requirement to plan for wagering peaks occurringsimultaneously on all sales channels. Camelot has created a performance model thatanticipates peak transaction rates in each year of the next License Period. For safety, thisassumes that peaks will occur on all channels simultaneously.1Chelsea v Liverpool FA Cup Semi-Final April 22nd 2006.394 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.11.3.4.3 RETAIL CHANNEL TRANSACTION RATES ON 22/04/06. THEIMPACT OF A MAJOR SPORTING EVENT CAUSES TRANSACTION RATE PEAKS ONTHE ESTABLISHED RETAIL AND NEW CHANNELS TO OCCUR SIMULTANEOUSLYRetail Channel 22/04/06 Transactions per minute20000tpm1800016000140001200010000800060004000200006 7 8 9 10 11 12 13 14 15 16 17 18 19HourThe business plan for the next License Period foresees increases in overall sales and theintroduction of direct sales through new channels such as the internet. However,Camelot Illinois is confident that, in an increasingly diverse lottery environment, peakdemand will still be led by high jackpots. Nevertheless, the overall solution needs to beflexible enough to deal with both the planned growth foreseen in the sales plan as wellas unanticipated change that may occur during the license period. The TechnologySolution will address these needs through its ability to meet a clear requirement to scaleup(adding capacity to existing larger systems) and scale-out (increasing overall capacityby using more smaller systems) where appropriate and when necessary to growcapacity in line with the business plan.2.11.3.5 Lottery Terminals and POSOLTs, Mobile OLTs and FSVMLottery terminals are fundamental to the success of a modern lottery and will be for along time in to the future. Selection of the right terminal to meet the needs of the lotteryis essential. A modern lottery terminal is much more that just a lottery playslip reader, itnow has to act as a hub for various activities: Multi-media marketing Sales channel for new non-lottery services Expansion hub for new POS devices and upgraded peripherals An attractive and eye-catching marketing toolIn order to achieve these requirements, Camelot Illinois will select a family of terminalswith the following basic criteria: PC-based architecture with a powerful processor of at least 1.3GHz Colour, touch screen Ample, powered USB and RS expansion ports At least 2GB of flash memory for persistent storage of software, video and otherassetsCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 395

Section 2 Final Business PlanAt least 1 GB of working memoryIntegrated A4 width CIS scannerFast, reliable thermal printerIntegrated or handheld barcode scanner capable of scanning linear and 2D barcodeformats (e.g. data matrix)Standard Linux operating system and ability to run 3rd party apps including webbrowsersEthernet connection and support for standard IP communicationsSoftware upgradeable over the WANAttractive, eye-catching and ergonomic designVery high MTBF reliability and qualityConforming to all required safety and quality standardsCost effectiveIn Camelot’s view it is important to select a “family” of terminals, particularly for theOLT and the FSVM, that are based on the same basic terminal platform. This approachimproves operation effectiveness by allowing the re-use of hardware and softwarecomponents between terminal types. It also speeds-up software development andtesting of new games and features.In its selection criteria, Camelot Illinois will not only review the terminal hardware, butwill also require well designed and architected terminal application software thatconforms to the same standards required of the central system i.e. modern, robust,reliable, agile, open and with strong integrity and security features.Integrated Retailer POSCamelot was a pioneer in integrated POS lottery solutions when it launched the Fast Payin-lane solution at 1,200 Tesco United Kingdom supermarket stores in 2005. Camelot hasbuilt on this experience to develop new solutions for its Trading Platform that addressthe valuable lessons learned to create functionally richer, more flexible and easier tointegrate solutions.In Camelot’s experience the requirements for integrated solutions vary widely dependingon the services needed by the lottery, the retailer requirements and the local factors inthe target jurisdiction. Camelot has found that the integrated POS solutions provided bythe lottery technology suppliers are typically deficient in some crucial areas: Too much integration work is required by the retailers and too much responsibility isplaced on them for transaction integrity. Most solutions only support Quick Pick and typically just for the most populargames, they do not support other features such as ticket validations and instantticket functions. The solutions do not support new game launches or game changes without the needto change the retail POS software. They do not integrate well into the shopping basket for features such ascancellations and refunds.For these reasons Camelot Illinois proposes to complement the lottery technologysupplier’s solutions with enhanced Trading Platform Services to provide a marketchanging integrated lottery service to the broadest possible range of retailers.396 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanRetailer NetworksFast, reliable, secure and flexible communications are essential for the continuingsuccess of a lottery operation, and advances in technologies over the past few yearshelp facilitate this. The communications networks are the base platform for growth andflexibility, and if implemented correctly, will provide the opportunity to easily expandexisting, or implement new, channels. The communication network technologiesimplemented by Camelot Illinois will offer the flexibility, bandwidth and dependabilityrequired for an efficient modern lottery operation.The desired characteristics of the chosen technology are: IP protocol support Fast installation to allow setup in the time available Flexible to new traffic loads, profiles and protocols Low installation and ongoing line rental costs Resilient and highly fault tolerantThe passing of Senate Bill 107 in June this year has opened the opportunity for anincreased level of private investment in broadband telecommunications technology inIllinois. This makes it all the more important to carefully select network technologies andproviders that avoid locking the lottery into legacy technology that rapidly becomesobsolete or uncompetitive from a cost perspective.Immediately on winning the contract to manage the Illinois Lottery, Camelot Illinois willissue an RFP to selected network providers of wired and wireless broadbandtelecommunication technologies including AT&T, Verizon, Hughes Network Systems andGilat Satellite Networks. More providers may be added to this list closer to the date ofissuing the RFP.2.11.3.6 Camelot Trading PlatformCamelot’s Trading Platform will allow the State to break-out of the constraints of thetraditional bespoke lottery terminal sales channel and take advantage of lottery and nonlotteryservices seamlessly integrated into a broad range of existing retailer Point of Sale(POS) terminals and internet enabled consumer devices. The Trading Platform alsoallows sharing of lottery data and services between applications, businesses and users.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 397

Section 2 Final Business PlanConfidential Information RemovedSupermarket customers can buy their lottery tickets with their groceries and unlike therudimentary integrated lottery solutions emerging in a small number of internationallotteries, Camelot’s innovative solutions allow customers to play Quick Picks, favoritenumbers, choose new numbers and validate winning on-line and instant tickets all at astandard POS.Services ProxyLottery products no longer have to be treated as a special case for retailers; Camelot’sintegrated lottery solutions allow lottery products to be sold, validated, cancelled andmanaged in-lane, as standard retail basket products, without any special lotteryequipment and with minimal or no cashier training.Camelot’s Services Proxy is unique in the industry in providing the robust security andintegrity mechanisms of a purpose-built lottery terminal in a highly portable, easy tointegrate and functionally rich software client that can be integrated into any standardMicrosoft Windows or Linux POS device. The Services Proxy can operate in a standardPOS cash register, a self service cash register or a low-end Financial POS terminal. TheServices proxy provides an XML-based messaging interface to the POS that allows allstandard lottery functions to be supported. Services such as number selection thatrequire user interface interaction are cleverly supported using a range of Camelot’swidget components which allow beautifully presented, thoroughly tested, touch-screenlottery playslips to be provided on retailers POS systems, all under the change control ofthe lottery. This breakthrough represents a real revolution for the lottery industry. Anexample of a “Play Lotto” widget can be seen in Figure 2.11.3.6.2.398 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanThe Services Proxy opens up an entirely new revenue opportunity for the Illinois lottery.It has adaptability, without retailer POS software changes, to support new game typesand new routes to marketFIGURE 2.11.3.6.2: ILLUSTRATION OF A LOTTO ENTRY WIDGET SHOWING BOTHTHE MAIN PAGE AND THE MANUAL ENTRY PAGE.Web ChannelsProviding a high performing lottery website is not enough for Camelot; the world of theInternet is changing rapidly and lotteries need modern, agile solutions that provide thequality experience on the wide range of consumer devices expected by today’s andtomorrow’s interactive players. Camelot can truly claim to be leading edge with itsinteractive solutions, not just by its peers in the lottery industry, but measured againstany internet trading company. Camelot has worked with expert partners to developlottery website technology that provides a fantastic user experience on a broad range ofmobile phones and can be easily re-purposed to create rich mobile phone apps for theiPhone, Blackberry and Android handsets as well as desktop gadgets and widgets.Enterprise Services BusAn incredible breadth and depth of sales channel clients is only one dimension of theCamelot Trading Platform. At the heart of the platform is the modern, truly openstandards, flexible technology that is so obviously lacking in the proprietary, closed,solutions provided by the traditional lottery technology suppliers. Camelot’s radicallydifferent approach puts high performing integration technology at the heart of thearchitecture. Enterprise Service Bus (ESB) technology is a mature solution to theintegration of diverse applications and systems. The ESB allows normally incompatiblesystems to communicate with each other by translating and routing the messagesbetween them. All Services Proxy messages are routed through the ESB, allowing theServices Proxy to communicate with any supplier’s lottery or non-lottery system.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 399

Section 2 Final Business PlanServices LibraryThe final component of the Camelot Trading platform is the Services Library. Camelotuses a Service Oriented approach to technology design to allow it to avoid designdependencies on specific systems. For instance, in the Camelot Trading Platform thewebsite will access a Player Authorization service, rather than calling a function on theInteractive System. This approach allows the website to be designed in such a way thatit avoids having to know how the player authorization service is provided. ServiceOrientation removes the dependencies on systems and gives the lottery the ability torapidly improve services or introduce new services without relying on the lotterytechnology provider. Further examples of commons business services are player walletfunctions, placing a lottery wager or formatting a ticket for printing.2.11.3.7 Internet and Mobile Player ServicesIn the United Kingdom, Camelot develops their own website and associatedtechnologies, and GTECH supplies the back-end system. Camelot is currently in theprocess of re-architecting the connection between the website and the backendsystems to fit into the service oriented Trading Platform architecture. This will first beused on the new mobile channel and then subsequently applied to the full website. Theadvantage of this approach is the separation of the website and the functional back end,thereby removing the dependency on a single proprietary system and freeing CamelotIllinois to select services from alternative suppliers.Camelot Illinois proposes to use the same approach for the internet pilot, therebyallowing an RFP to be issued to different technology suppliers to provide the interactiveservices such as player accounts and e-Wallets.Services such as player accounts, e-wallets, player authentication, playing games andresults checking will be covered by the proposed RFP.The services will be defined by Camelot Illinois and will be available for use either by thewebsite or by mobile phone applications. Integration with the lottery system forfunctions such as wagering and ticket validations will be through the Trading Platform.Instant Win GamesCamelot has a library of highly successful Adobe Flash-based Instant Win Games. Thesesame games can be re-used, under license, by the Illinois Lottery, or new games can bedeveloped by local specialist suppliers, if/when the Department of Justice permits theirimplementation. (subject to regulatory consent from the UNITED KINGDOM NationalLottery Commission)Player ClubThe Player Club features will be provided by the chosen technology supplier. They will beprovided as discrete services that can be re-used by mobile phone applications and 3 rdparty websites.2.11.3.8 Secondary DrawsSecondary draws fall into two categories:Promotional draws for merchandise, or other non-cash prizesFull secondary draws with cash prize tiers funded from the regular prize fund400 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanPromotional draws can be organised, operated and drawn using various differentmechanisms. The level of draw integrity and auditing required for a promotional draw islow and the draws are usually held off the main system environment.Full secondary draws, require a level of security, integrity and audit equivalent to anormal draw. They are handled on the core gaming systems and verified by the ICSsystem. The process and draw mechanisms are rigorously tested, fully audited and fullyresilient to system component failures.Camelot operates the Millionaire Raffle in the UNITED KINGDOM that uses a drawprocess identical to that used for a secondary draw. The process, which uses anAutomated Draw Machine (ADM) has been operational since November 2009 andconforms to the highest levels of integrity and security. The approach is agnostic oftechnology supplier and can be re-used for secondary draws in Illinois.An ADM only produces random numbers and has no facility for loading tickets, so inorder to be used for a raffle or second chance draw an indexing approach is used toallow the ADM to be used to select the winning ticket or tickets.At draw close, the core gaming system allocates each valid secondary draw board orticket an index in the range 1 to n, where 1 is the first valid board/ticket in the draw and‘n’ is the last. The gaming system then requests the ADM to pick a random number inthe range 1 to n and uses this number to select the ticket with the matching index.This process is illustrated in the following diagram where there are a total of 9,432, 724secondary draw boards in the draw. The ADM randomly selects number 9,432,721which corresponds to ticket serial number 10,000,000. Note that in this example thecancelled Lotto ticket is not allocated any index numbers and, therefore, cannot bepicked as a winning ticket.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 401

Section 2 Final Business PlanFIGURE 2.11.3.8.1: OVERVIEW OF SECONDARY DRAW SOLUTIONOperation of Secondary DrawsA Quadplex ADM configuration across both Data Centers including automatic fail-overfunctionality will be used.Camelot Illinois will perform all the ‘draw processing’ in conjunction with an IndependentAdjudicator at the draw site. Camelot’s System Management Tool has been developedand configured to allow simple controlled input that also displays messages to the Drawteam and the independent auditors about the progress of the draw.Access is controlled and monitored as per Camelot’s normal strict security standards andall actions are logged for auditing purposes.The first action of the Draw team and Auditors is to check and verify the gameparameters for the secondary draw, which is confirmed via the Systems ManagementInterface.At draw-break wagering and cancellations closure is verified via the SystemsManagement monitor and a system generated Draw-Seal is produced, checked andbalanced across all configured Gaming Systems. Both the draw closure and Draw-Sealchecksums are also compared and verified in parallel by the ICS system and theIndependent Adjudicator. The System Management tool will automatically emailappropriate reports to nominated stakeholders, including the main checkpoint controlpoints such as the Draw closure and Draw-Seal results.Following successful Draw-Seal verification across the Gaming Systems and ICS theGame is automatically progressed to the next state to commence the ADM processing.The ‘Start ADM’ menu option is initiated and once the Game details have been checkedand verified a request is sent to the ADM to process and select the winning numbers as402 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planper the game configuration, i.e. select one or several winning lines from a pre-configurednumber selection.The ADM selects the winning numbers and transfers these to the Gaming Systems andICS for identification of the winning Tickets. ICS verifies that the transmission of thewinning tickets originated from the ADM (by comparing the encrypted and nonencryptedparts of the winning numbers) and confirms winner selection. Finally, systemgenerated emails are sent to the auditors, Customer Operations, Internal and ExternalMedia organizations for broadcasting.2.11.3.9 Data Centers and InfrastructureData CentersCamelot Illinois will support two fully resilient data centers in the state of Illinois allowingfor fast fail-over and continuity of operation in the event of a disaster.Data Center provision will be one of the core component of the lottery central systemRFP described earlier in this section. Both data centers will be “lights out” operations,remotely managed and operated by the lottery central system provider.InfrastructureThe infrastructure selection will be influenced by the selection of the lottery technologysupplier. Camelot Illinois proposes to use the following principles in designing the finalsolution once the recommendation of the chosen lottery supplier has been taken intoconsideration:A single enterprise technology platform should be used for all mission criticalsystems i.e. server technology, storage, operating system, database, applicationserver, Local Area Network, applications/operations monitoring, data backup. Thisapproach simplifies the architecture and lowers the cost of ownership throughreduced licensing fees and lower support costs.Virtualization – Camelot Illinois recommends the use of modern virtualizationtechnologies for processing and storage to significantly reduce costs throughefficient use of hardware and licenses, and dramatically simplify the setup of testand development environments.2.11.3.10 Data Center Service Delivery and Service OperationsA key factor to maximising sales opportunities is Service availability; this is achieved byinstilling strong disciplines and Operating Standards that have been implemented in theUNITED KINGDOM by deploying ITIL (Information Technology Infrastructure Library)Service Management structure.This entails processes and functions to manage:Service Transition ManagementChange / Release ManagementIncident / Problem ManagementEnvironments ManagementConfiguration ManagementService Level ManagementCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 403

Section 2 Final Business PlanStandards are set and agreed early in the change lifecycle to ensure high quality ofdelivery. Processes and disciplines built up over 15 years using the ITIL Framework toforce this level of quality.Service Operations monitor services 24 hours a day, 365 days a year, using businessalerts via enterprise system management tools that quickly highlight any Service impactsthat can be proactively and reactively responded to. Screenshot examples of availableenterprise system management tools and alerts can be seen in Figure 2.11.3.10.1.FIGURE 2.11.3.10.1: ENTERPRISE SYSTEM MANAGEMENT TOOLS SUPPORTINGSERVICE OPERATIONS404 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanBusiness critical systems necessitate a higher degree of focus and awareness andCamelot Service Delivery continually reinforce this mindset. Continual ServiceImprovement is an embedded process to ensure alignment of IT Service Delivery toevolving business needs.FIGURE 2.11.3.10.2: ITIL SERVICE MANAGEMENT OVERVIEWCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 405

Section 2 Final Business PlanService Operations maintain a high level of system availability efficiently by utilisingautomation tools and processes including draw processes, results distribution acrossmulti system platforms and external media channels and End of Day auto balancingroutines.2 nd and 3 rd line support complement the Service Operations team with the processes,tools and business awareness that have been developed. Service Delivery monitors andmanages Gaming and Supply Chain systems that handle in excess of $450 million perweek of transactions across all aspects of our business - from consumers playing ourgames, paying prizes, supply chain components, retailer charges, supplier services andpayments to Good Causes. Retail Systems – Supports over 28,700 Retailers across the United Kingdom Peak transactions around $70,000 per minute on a Saturday afternoon Event draw for Euromillions peak in February of £90,000 per minute! Tesco Checkout (FastPay) adds 20,000 points of sale Terminal repair time of less than 4 hours to 97% of the estate Channel availability 100% this year to date. Last year total 99.99% Internet – over 4 million registered players Peak transactions approximately $450,000 per hour Saturday evening Event Draw for Euromillions peak was $1.5 million per hour! Channel availability 99.84% this year to date. Last year total 99.80% Supply Chain (SAP) Pick, pack and dispatch $1.5billion Scratch Cards per Annum Average Retailer direct despatches per week 17,000 – in the top 20% of UnitedKingdom Suppliers Availability 100% this fiscal. Last Year total 99.99%Service Level Management measures the services from suppliers to ensure that Qualityof Services (QoS) is maintained by regular service review meetings with key suppliers,which has been instrumental in ensuring that Services are operated at optimum runningcosts to deliver the required performance.There are a number of business processes that form part of Service Level Management.These are: Reviewing existing services Negotiating with the Customers Reviewing the underpinning contracts of 3rd party service providers Producing and monitoring the Service Level Agreement (SLA) Implementation of Service Improvement policy and processes Establishing priorities Planning for service growth Involvement in the Accounting process to cost services and recover these costsOperations will be provided by a combination of local staff and an operations teamprovided by the chosen technology supplier if such a service is available.406 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.11.4 OPERATING PRINCIPLES2.11.4.1 ProprietyA lottery can only succeed if the people who participate in the games believe that whenthey buy their ticket it will be entered into a valid draw, that the draw is legitimate, andthat if they win they are paid the full prize they are entitled to. Behind the scenes alottery company has to have many controls in place and the ability to monitor theapplication of those controls to maintain the trust of these players and otherstakeholders. These activities include audit and security, they cover principles of integrityand transparency, and they have to be underpinned by people of the highest ability. Wein Camelot collectively call this Propriety.2.11.4.2 IntegrityIntegrity is fundamental to the success of a lottery – public suspicion of a lack of integrityin its operation would fatally damage the standing of the lottery and so Camelot ensuresthat integrity of its operation is at the root of all activity.Camelot Illinois will adopt these same principles and standards so that in all of its areasof responsibility Camelot Illinois will be align with the International StandardsOrganization 27001 security standard and the WLA Security standards. Camelot wasone of the pioneering lotteries for the WLA standards and was instrumental in creatingthem. Camelot Illinois will establish strong corporate governance that instills anenvironment and culture of diligence, care and transparency and implement effectiveinternal controls, ethics and compliance programs aimed at preventing corruption. Aspart of these objectives, Camelot Illinois will undertake a review of all existing IllinoisLottery security procedures around information, business processes and draw processesto ensure they meet internationally recognized, high standards. Any gaps will beidentified and an action plan to address them will be put in place.2.11.4.3 Business AssuranceCamelot Illinois will develop and implement a business assurance strategy that willbecome embedded in the day to day operation of the Lottery. The business assurancestrategy will set out a structured and consistent process which manages risk andthereby improves business performance, while providing players, retailers and the publicof Illinois with the assurance that the confidentiality, integrity and availability of theLottery will be safeguarded.Camelot has significant experience in embedding Business Assurance into its operationsas demonstrated in the United Kingdom, where Camelot operates the Lottery to thehighest standards, utilizing processes that are fully compliant with the Institute ofInternal Auditors Standards, ISO 27001 and WLA Security Standards.2.11.4.4 Risk ManagementCamelot Illinois will establish, as Camelot has done successfully in the United Kingdom,a corporate focus for risk management that is embedded in the operation of the Lottery,providing players and the State of Illinois with independent assurance that theconfidentiality, integrity and availability of the Lottery will be safeguarded. CamelotCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 407

Section 2 Final Business PlanIllinois will leverage its well established risk methodology which has been developedover a number of years and is an enabling component of Camelot Illinois’ capability todeliver on business objectives for the State of Illinois. The methodology enables theLottery to avoid losses, raise standards and improve business performance through theprovision of staff with the ability to make informed risk based decisions. Throughadherence to international standards for information risk management and businesscontinuity, players can be confident of Camelot Illinois’ commitment to the highest levelof propriety.In order to maintain recognition of the statutory requirement that the Lottery must be runwith all due propriety, Camelot Illinois will create a highly qualified and experiencedpropriety capability to implement and manage core work streams that will include: Risk Management Regulation and Compliance Internal Audit Security and Law Enforcement Business ContinuityThese activities will ensure that the executive management, though the GovernanceDirector, has the necessary oversight of the internal control environment and will ensurethat the risk exposures are understood at all levels of the business and that resourcesare focused on the appropriate areas.To give effect to the executive management commitment to transparency, corporateintegrity and ethical business practices, Camelot Illinois will provide the Department ofRevenue with a quarterly report that will define the risk profile of the business, and as aminimum include: significant operational risk exposures, losses or significant risk events(both internal and external), and deviations from policies.408 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.11.5 PROCUREMENTThe optimal procurement process will not only secure the best product at the best price,but also align suppliers’ incentives with those of the State and the Illinois Lottery. As apure lottery operator, Camelot Illinois is uniquely qualified to negotiate key contracts onbehalf of the State to achieve these goals. The following pages describe:Bidding processes and proceduresSelection of vendorsManagement practices for assuring best quality and service from vendors andsubcontractors2.11.5.1 Bidding processes and proceduresCamelot Illinois will create proposals necessary to procure bids for required services ofthe Lottery in accordance with the Private Manager Agreement. Camelot will bring tothis task its best in class procurement practices as a lottery manager for 15 years aroundthe globe. In addition, our team has the unique benefit of the leadership of Jeff Perleeand his experience managing lottery operations in Illinois and New York. Our team’sunderstanding of lottery management best practices and Illinois state procurement law isunmatched.2.11.5.2 Selection of vendors -- ensuring value for moneyCamelot Illinois will direct and undertake all price and value for money negotiations foreach key supplier relationship. It will also conduct value for money reviews of all existingcontracts. Cost benchmarking will be undertaken using Camelot’s extensive marketintelligence in order to drive and inform effective negotiations with suppliers. Camelot’sreputation, goodwill, and relationships with other lottery operators around the world willprove especially useful in benchmarking potential suppliers’ pricing.For its negotiations with suppliers it will bring its well-tried procurement policies,procedures and practices. These have been attested by Camelot’s certification by theChartered Institute of Purchasing and Supply (CIPS), an independently assessed andrecognized standard for “best in class” purchasing practices, policies and procedures.CIPS is recognized by the Institute of Supply Management (ISM), North America andboth institutes are members of the International Federation of Purchasing and SupplyManagement (IFPSM).Camelot is one of only around 100 organizations to hold the prestigious CIPS award.CIPS certification proves that Camelot undertakes widely recognized purchasing bestpractices and demonstrates high standards of corporate governance, risk managementand professional practice, which is core to delivery of value for money and ultimatelyreturns to the State. To maintain certification Camelot is subject to a regular andindependent assessment every 18 months and is required to demonstrate that itcontinues to benchmark against “best in class” purchasing and value for moneydisciplines.Camelot Illinois is cognizant and supportive of the State’s provision in the RFP thatencourages the Private Manager to award contracts, other than contracts with salesagents or technical advisors, to businesses that are owned and operated by minorities,females, and persons with disabilities, as defined in the Business Enterprise forMinorities, Females, and Persons with Disabilities Act. Camelot Illinois hasenthusiastically committed to meet or exceed the 20% goal for contract expendituresCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 409

Section 2 Final Business Planwith M/W/DBEs. This requirement will be accommodated in the procurement processand the same value for money principles will apply. Camelot Illinois’ proactive strategy tomeet or exceed the State’s M/W/DBE goals is set forth in Section 2.11.6 Diversity.Price and value for money benchmarking will continue with all key suppliers throughouttheir contract life to ensure continuing cost control, not just at the outset of the contract.2.11.5.3 Alignment of IncentivesAll formal agreements with suppliers will be specified, agreed and committed in writing.All key contracts will include Service Level Agreements (SLAs); an essential componentof any commercial agreement to ensure the delivery of timely, cost efficientcommitments from the supplier.Alignment of incentives is an integral part of a successful SLA regime. Contracts will bestructured in such a way that suppliers’ income is directly aligned to the success of theLottery’s trading outcomes. This will provide a strong commercial incentive to doeverything possible to grow sales and help the Lottery maximize returns to itsbeneficiary.2.11.5.4 Management: Managing Vendors and SubcontractorsOnce contracts have been agreed and the supplier is performing on the contract, theSupplier Relationship Manager (SRM), under initial guidance from Camelot Illinois, willmanage the relationship with the supplier. Camelot Illinois views suppliers as importantstakeholders in its Corporate Social Responsibility strategy. Camelot’s supplierstakeholder model states that:‘Camelot aims to work with its suppliers in open partnership – being consistent,committed and responsible in everything we contract with one another. Seekingexcellence and innovation, we want to develop realistic and mutual understanding to actfairly and with high integrity’.These principles will be followed to foster beneficial and effective working relationships,while ensuring that suppliers and Camelot Illinois do not become over reliant on oneanother.Suppliers will be allocated to a Supplier Relationship Manager (SRM). This person is theday-to-day manager and prime contact, charged with managing the supplier andimplementation of any specific Service Level Agreements on a regular, formal andinformal basis. The principles of ‘comply or explain’ will be rigorously applied.SRMs will be a mix of full and part time roles dependent upon the supplier complexityand size. Key suppliers will be closely and carefully monitored by dedicated SRMs toensure delivery and performance. Regular and formal contract reviews will beundertaken (at least monthly for key and quarterly for non-key suppliers), with the SRMtaking the lead in order to provide 360 degree feedback on performance, innovation andmatters concerning propriety.SRMs will be supported centrally by the Procurement Team. The establishment ofExecutive Steering Groups will be applied to certain key suppliers, in order to focus notonly on the day-to-day successful delivery but to give a formal management discipline toraise performance levels to a group of senior stakeholders within the Lottery in order tofurther drive performance.410 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.11.5.5 Supplier GovernanceCamelot Illinois will insist that high standards of corporate governance are upheld by itssuppliers, to ensure that they demonstrate integrity and propriety at all times.Sarbanes-Oxley standards will apply to all suppliers who are publicly traded in the U.S.and regulated by the Securities and Exchange Commission (SEC). Other public andprivate companies, where risk levels are greater, will be subject to bespoke scrutinythrough annual Supplier Conduct Reviews (SCRs).SCRs will be undertaken with suppliers for whom good governance and reputation aresufficiently core to the Lottery’s activity. The right of audit will be enshrined in allcontracts with key suppliers.Camelot Illinois will require all suppliers to subscribe to the principles of a WhistleBlowing Policy. The aim of the policy will be to encourage all suppliers and theiremployees to protect the ethics, security, and integrity of the Lottery.2.11.5.6 Annual Supplier Relationship SurveyAn annual Supplier Relationship Survey will be undertaken covering ethical workingpractices, tendering policy and communication with suppliers to promote an open andtransparent dialogue. In addition, the Survey will provide the opportunity to annuallybenchmark the supplier’s performance.2.11.5.7 Supplier Award SchemeIn order to incentivize performance further, consideration will be given to introducing aSupplier Award Scheme. The award categories – at Bronze, Silver and Gold levels – willrecognize initiatives in corporate and social responsibility (sustainability), ethicalapproaches to business, account management excellence, innovation and cost savinginitiatives.The objective of an Award Scheme is to promote competition among all suppliers - toencourage innovation, exceptional performance and high levels of awareness of what isessential in moving relationships from good to excellent.2.11.5.8 Instant Ticket ProcurementInstant ticket procurement activity will be undertaken consistently with Camelot Illinois’approach as outlined in this section. Camelot Illinois will maintain multiple suppliers forthe provision of Instant tickets, to ensure that full contingency, printing capacity,business continuity and innovation of supply is maintained at all times. They will operateon a primary and secondary supplier basis, with the secondary supplier(s) accounting forup to twenty five percent (25%) of the annual instant ticket production.Instant tickets will be subject to a percentage of net sales fee arrangement written intoeach supplier contract to ensure that each supplier is incentivized to design tickets thatwill sell the maximum number of instant tickets possible, with optimal payout structureand profitability, in a socially responsible manner. This means that each supplier willdirectly benefit from increased net sales each year.All instant ticket production and destruction services provided by the supplier shouldhave least possible harm to the environment, by ensuring that all ticket components arefor example acquired utilising cardstock that is only sourced from sustainable sourcesand printed with inks that are water based. This approach will form part of the ServiceLevel Agreement agreed with each supplier, which will be subject to regular review.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 411

Section 2 Final Business Plan2.11.5.9 Development of existing and new vendor relationships relating toMarketing and Public RelationsAs highlighted in Section 2.9 – Marketing the media landscape is undergoingfundamental change, meaning that the channels of communication are increasing at afaster rate that the real resources available to develop and manage suchcommunications.In this context of delivering against Camelot Illinois’ business plans, working with andretaining the right agency expertise is critical because of the key support role agenciesplay in the delivery and implementation of marketing communications.As an operator and consultant, Camelot’s lottery category expertise is second to noneand to ensure its strategies and commercial objectives are effectively achieved, Camelotbuilds working partnerships with similar best in class category agencies in the majormarketing and communication disciplines, including advertising, design, digital, directmarketing, integrated communications, internal communications, media planning andbuying, public relations and sales promotion.The most recent example of this experience, as part of the consultancy work for theCalifornia State Lottery, where Camelot has a marketing representative embeddedwithin the evaluation committee of six individuals evaluating the Lottery’s currentRequest for Proposal (RFP) for General market advertising and media services.Camelot Illinois is aware that both the incumbent General Market and African Americanadvertising agencies contracts are due for renewal in the 1 st half of 2011 and that theother agencies for public relations and experiential marketing are at some stage ofcontract extension. Camelot’s experience is that the first 100 days in any businessrelationship are critical. Camelot believes investment of effort at this stage pays realdividends both in the short and long term; so where legally possible, Camelot Illinois willlook to extend each of these contracts by a period of 12 months (extending the expirydate to the first half of 2012) in order to retain the benefit of continuity and marketknowledge of existing campaigns and providing a chance for Camelot Illinois to conducta comprehensive review of campaign and agency performance. By actively maintainingsuccessful long-term relationships this makes a lot more sense than change for changessake, because if truly successful, it leads to greater mutual understanding, increasedproductivity and much better results year on year.This extension period will serve to provide stability and give every chance for businessrelationships to be soundly established, allowing sufficient time to identify and then ironout any emerging issues and ensure expectations are clear and understood by all sides.Where contractually not possible, in circumstances where Camelot Illinois’ conclusion isthat the Lottery could potentially be served better by consideration of different agenciesor in circumstances of mutual consent, Camelot Illinois will as appropriate, and relevantcontractually, instigate a RFP process to hire a new agency vendor. Additionally, eachagency will be subject to a best overall value assessment by Camelot Illinois within thefirst 150 days.Given the experience of the Camelot procurement department in marketing services itwould have been easy to dismiss the use of a third party but it is paramount to CamelotIllinois that any such review be fair and transparent. To ensure an appropriate appraisalprogram is in place, Camelot Illinois would take the following steps:412 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanEmploy an Illinois based independent assessor to oversee and co-ordinate eachreview. Having an independent assessor involved in such processes is a valuable addition toensure unbiased insights and perspective, ensuring fair and equitable terms ofbusiness for both parties. In conjunction with the independent assessor, the Camelot Illinois RFP reviewprocess would take a 360-degree approach involving staff at all levels and will becapable of covering several agency relationships in one go (if required)These steps will ensure that at the end of the process the Lottery will be in a position toinject new energy, expertise and momentum into the reviewed service(s) through theselected agency vendor, and have more assurance that the new relationship has culturalfit, on sound commercial terms.2.11.5.10 Minority/Female/Disabled Business EnterpriseCamelot Illinois will seek to achieve at least twenty percent (20%) of the cost of allprocurements or contracts (other than contracts with sales agents or technical advisors)with businesses that are owned and operated by minorities, females, and persons with adisabilities; pursuant to the Business Enterprise for Minorities, Females, and Personswith Disabilities Act.This will be sought at both the direct procurement level (Tier 1) and through subcontracts (Tier 2) that suppliers to Camelot Illinois utilize in fulfilling their own contractswith Camelot Illinois. This will be enshrined in the terms & conditions of purchase withall suppliers.Camelot Illinois’ approach is more fully explained in Section 2.11.6 Diversity.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 413

Section 2 Final Business Plan2.11.6 DIVERSITYCamelot Illinois’ prime business objective is to maximize Net Income of the IllinoisLottery in a socially responsible way. A core component of social responsibility isensuring that businesses owned by minorities, women and persons with disabilitiescontinue to, under a Private Manager, enjoy a fair opportunity to compete for contracts inrelation to the operation of the Illinois Lottery through a transparent process.Camelot Illinois shares the public policy objective of the State of Illinois and of the IllinoisDepartment of Revenue to promote and encourage the continuing economicdevelopment of businesses owned and operated by minorities, females and people withdisabilities ("MBE/WBE/DBE businesses"). As Private Manager of the Illinois Lottery,Camelot Illinois will work to help the Illinois Department of Revenue achieve its diversityand inclusion goals—both with respect to employment of Camelot Illinois employees andwith respect to supplier diversity.As part of Camelot’s corporate commitment to transparency, Camelot Illinois will ensurethat its procurement process and its progress with respect to these goals are visible tothe public—through its website, annual reports, and reporting to the State. CamelotIllinois will undertake the activities and adopt the policies specified in the RFP, PMA andOperating Standards aimed at promoting this objective. Neither Camelot Illinois, nor itsvendors or sub-contractors, will discriminate on the basis of: race, ethnicity, color, creed,religion, sexual orientation, national origin, gender, age, or any other category.Moreover, Camelot Illinois will ensure that its prime vendors and sub-contractors whoare not MBE/WBE/DBE businesses also have contractual obligations and controls whichrequire them to meet the state’s goals for diversity and inclusion. Additionally, as setforth below, Camelot Illinois has identified some of the ways it will not only meet, butattempt to exceed, the State’s goals.Beyond the mere requirements of the State law, the RFP, the PMA, and the OperatingStandards, as part of Camelot Illinois’ Business Plan and its commitment toMBE/WBE/DBE businesses, diversity and inclusion in employment, Camelot Illinois hasidentified and undertaken a three phased approach for proactively engaging andsupporting MBE/WBE/DBE businesses, the organizations that represent them, and thediversity and inclusion of its employees:2.11.6.1 Phase 1- Prior to the award of the PMAAppointment of an Independent Diversity and Compliance Consultant and AuditorCamelot Illinois has appointed O-H Community Partners (OHcp)(www.ohcommunitypartners.com) which has been working to develop and implement along term plan to ensure that Camelot Illinois maintains an open, diverse and inclusiveenvironment for all employees and contractors, subcontractors, and vendors, includingMBE/WBE/DBE businesses.[Operating Standards 6.2.1] OHcp is itself a certified MBEmanagement consulting firm providing services to corporations, philanthropies, financialinstitutions, real estate developers, and non-profit leaders in the area of supplierdiversity, organizational development, real estate, sustainability, workforce development,small business, diversity and inclusion, and finance. This firm is led by Sharon E. Jones, alawyer by training and former federal prosecutor with over 25 years of experience in theareas of diversity and inclusion, minority business development and employment; andChinwe Onyeagoro, a consultant with over ten years of strategy consulting experience414 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planworking for the Pritzker Realty Group and two global management consulting firms,McKinsey & Company and The Monitor Group.OHcp is serving and will continue to serve as Camelot Illinois’s’ supplier diversitycontractor with responsibility for outreach, screening, evaluating and recommendingbusinesses to meet Camelot Illinois’ procurement needs and which comply with theState of Illinois’ supplier diversity requirements. Additionally, OHcp will keep the recordsrequired for compliance purposes to meet state requirements and provide support toCamelot Illinois during the state audit process of Camelot Illinois’ supplier diversityprogram. Additionally, Sharon Jones will serve as Camelot Illinois’ Independent DiversityConsultant and Auditor (on an outsourced basis) to provide advice on staffing andemployment and to create a diverse and inclusive workforce in Illinois.Create a framework to encourage greater participation of MBE/WBE/DBEbusinessesCamelot Illinois intends to proactively execute on the following plan geared towardsensuring the participation of MBE/WBE/DBE businesses:MBE/WBE/DBE Proactive Outreach Plan [Operating Standards 6.1.1 (b)]Camelot Illinois has proactively met with the following organizations regarding the lotteryopportunity to establish relationships and facilitate the identification of MBE/WBE/DBEbusinesses for the Lottery: Illinois Black Chamber of Commerce Illinois Hispanic Chamber of Commerce Chinatown Chamber of Commerce Women’s Business Development Center Chicago Urban League Chicago Minority Business Development Center Access Living Philippine American Chamber of Commerce Alliance of Business Leaders and Entrepreneurs Korean Chamber of CommerceCamelot Illinois will also:Create a database of businesses certified as MBE/WBE/DBE in areas of contractingidentified by the State and/or Camelot Illinois as suitable for subcontracting.Create and document a Supplier Diversity Outreach Plan and ComplianceManagement Plan [Operating Standards 6.1.1 (b)]Create and provide content for a Camelot Illinois website page which allowsinterested MBE/WBE/DBE businesses to register for existing and potentialopportunities. This website will be launched prior to signing of the PMA in order tomaximize business community awareness and allow businesses to register ifinterested in potential Camelot Illinois contracts. [Operating Standards 6.1.1 (b)]Develop a Corporate Mission Statement which aligns Camelot Illinois’ strategic goalswith its diversity and inclusion goals. This statement will be set forth on CamelotIllinois’ website.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 415

Section 2 Final Business Plan2.11.6.2 Phase 2- PMA Award to Base Services Commencement Date Continue with outreach program to MBE/WBE/DBE businesses, including a proactiveawareness program and the pursuit of potential contract relationships with thecertified MBE/WBE/DBE businesses whom Camelot Illinois has contacted or is incurrent negotiations with to provide potential contract services. Complete and start implementation of a Compliance Management Plan andprocedures.[Operating Standards 6.2.2 (d) Complete and start implementation of a Supplier Diversity Outreach Plan. [OS 6.1.1(b)] Appoint an Advisory Council pursuant to Section 6.1.1 of the Operating Standards.The Advisory Council members will include a designee from the followingorganizations: Women’s Business Development Center; Illinois Hispanic Chamber ofCommerce; the Chicago Urban League, ABLE; the Chicago Minority BusinessDevelopment Center; Philippine American Chamber of Commerce and AccessLiving, among others. [OS 6.1.1(a)] This Advisory Council, working with CamelotIllinois’ consultant, O-H Community Partners, will review Camelot Illinois’ supplierdiversity outreach plan and provide regular feedback on the plan’s content andprogress.[OS 6.1.1(c)] These Advisory Council members will also serve as aneducational, research and technical resource to diverse businesses who aresubcontractors or vendors of Camelot Illinois.[OS 6.1.1(d)] The Advisory Board shallelect from its membership a chairperson, vice- chair and any other officers it deemsnecessary. [OS 6.1.1.(e)] (All expenses of the Advisory Council will be included in theAnnual Business Plan as an Operating Expense.) [OS 6.1.2 ] Provide to the state an equal employment and business opportunity plan (“EEBOP”)which will include a narrative description of how Camelot Illinois intends to complywith the minimum 20% goal (excluding contracts with sales agents or technicaladvisors). [OS 6.2.1] The EEBOP will also include procedures for the monitoring andreview of all aspects of the personnel and contracting decisions of Camelot Illinois,including the suspension of any personnel procedure, decision or transaction whichis not consonant with the approved EEBOP or any state equal employmentopportunity laws.[OS 6.2.2(c)] Camelot Illinois’ EEBOP will provide: 1) statistical data on workforce composition; 2)efforts to insure that equal employment opportunity is being extended to all persons;3) information on Camelot Illinois’ good faith efforts to implement the EEBOP; 4)contractor and subcontractor rates of pay and other compensation; 5) training andselection procedures; 6) grievance procedures for and disposition of complaintsrelated to equal employment opportunity; and 7) information on the activities of theAdvisory Council. [OS 6.2.2 (d)] Appoint a member of the Camelot Illinois executive team to serve as the equalemployment opportunity officer who is directly responsible for the implementation ofthe EEBOP. [OS 6.2.2(a)]Key Activities: Meet with any MBE/DBE/WBE businesses that are currently contracted by the Stateand transferring to Camelot Illinois to work with them and update them on CamelotIllinois’ Supplier Diversity procedures and compliance programs. Work with existing and potential vendors to make them aware of both first andsecond tier supplier diversity opportunities and record-keeping procedures.416 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanImplement supplier diversity program by identifying, screening, evaluating andrecommending businesses to Camelot Illinois.Continue to seek out and encourage certified MBE/WBE/DBE Businesses locatedthrough out the State to bid on contracts issued by Camelot Illinois for goods andservices.Seek to achieve at least twenty percent (20%) of the cost of all contracts (otherthan contracts with sales agents or technical advisors) to businesses that areminority owned businesses, female owned businesses or a businesses owned by aperson with disability, pursuant to the terms as defined in the Business Enterprisefor Minorities, Females, and Persons with Disabilities Act.Review and approve all subcontractor’s utilization plans and certifications;Review data submitted by prime contractors regarding payments made toMBE/DBE/WBE subcontractors.Subcontract with certified M/W/DBEs.Actively seek to purchase supplies and/or services directly related to theperformance of the management agreement from certified M/W/DBEs.Actively work to purchase supplies and/or services not directly related to theperformance of the management agreement from certified M/W/DBEs.Hire a diverse staff and leadership team and create a diverse and inclusive workplaceculture.Regularly report to the Advisory Council on the status and progress of CamelotIllinois’ supplier diversity and inclusion goals and commitments. [OS 6.1.1(c)]2.11.6.3 Phase 3- Post the Base Service Commencement date Track and compile data to evidence actual M/W/DBEs participation based uponpayment dollars rather than projected spend. If supplier diversity goals are not metin any years, a supplementary business plan will be provided to improveperformance in subsequent years. Work with Advisory Council on the content of thesupplementary business plan, if needed. [OS 6.1.1 (b)] Attend various outreach events on a statewide basis to ensure awareness of andparticipation in Camelot Illinois’ M/W/DBEs supplier diversity programs. Conduct periodic outreach/networking events on a statewide basis to disseminateinformation about programs. Continue activities described above. Report to the Governor or the Governor’s designee annually regarding CamelotIllinois’ performance pursuant to the EEBOP. [OS 6.2.2(e)] Conduct training sessions for key Camelot Illinois personnel on supplier diversitycommitment and importance, as needed. [OS 6.2.2(b)] Camelot’s offices in Illinois will be available for inspection by the state as set forth inOperating Standard 6.2.3.In an effort to make the public aware of Camelot Illinois’ commitments to corporatesocial responsibility and diversity and inclusion, Camelot Illinois will publish on itswebsite information on an annual basis describing its outreach efforts in employmentand supplier diversity as well as its contracting results for supplier diversity and data onthe diversity and inclusiveness of its workplace.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 417

Section 2 Final Business Plan2.11.7 BUSINESS CAPABILITYCamelot has spent a lot of time and money continually optimizing its Lottery processesover the last five years and encapsulating them into open, standards based systems thatare configurable to different lotteries and agnostic of gaming systems suppliers. Thisapproach enables easy integration into any third party system including gaming systemsand third party systems and/or service providers.These “out of the box” processes and systems facilitate the quick transformation of aLottery business, delivering the efficiency benefits that have resulted from years ofrefinement and investment, and are unique to Camelot (very few Lottery operators orservice providers can offer this level of sophistication and process efficiency).Traditionally, Lotteries have been reliant on sub-optimal business systems to supporttheir operation as these have often be sourced from gaming system suppliers forconvenience, even though they are not necessarily experts in this specialist field.Camelot itself was no exception but in 2003 it recognized these limitations and theconstraints they were creating in allowing it to operate its business according to FMCGbest practice, in both the quality of relevant decision making reporting and the flexibilityneeded to adapt to changing needs and business practices. As a result it undertook anextensive evaluation of the potential solutions, culminating in the selection of the globalleader SAP. SAP has developed Best Practice templates for key industry verticals suchas Oil, Pharmaceutical etc but none for Lottery. Camelot, in conjunction with SAP, wenton to develop Lottery industry Best Practice templates that it retains the ownershiprights to and which Camelot Illinois proposes to provide as part of its OperationsStrategy.As articulated in the Technology architecture section, Camelot Illinois’ aim is to introducethe full Camelot Business Systems suite, comprising SAP-based Lottery Best Practice,Intelligent Predictive Ordering System (IPOS) and Optimum that enable the core lotterybusiness processes.2.11.7.1 Key BenefitsImplementation of SAP-enabled business processes allow separate managementfunctions across the entire business to be integrated into a single back-office system,serving the different needs of each department while: Providing greater visibility of each function. Establishing standard processes that are based on best practices. Creating the facility for greater process automation. Standardizing data and enabling its accurate use throughout the business. Facilitating improved workflow and efficiency. Allowing intensive data analysis and reporting for long-term planning. Removing departmental silos of data and expertise.One of the key over-arching benefits of business processes underpinned by anintegrated SAP based business suite is the accuracy of the data upon which the Lotteryoperates on a daily basis and makes decisions. Traditionally, Lotteries use the gamingsystems to manage this information resulting in multiple views of the financials andretailers (Gaming system view, Finance System view, Contact Center system view etc),where the data would deviate and the Lottery would have difficulty knowing whichsystem was more accurate. Camelot has uniquely taken this view to encapsulate the418 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plandata within the SAP-based business suite, this facilitates centralized data managementof master data. such as retailer information, hierarchies, customer records, which itpropagates out to service providers (gaming systems and third party suppliers). Thisensures all master data, across the enterprise, remains up to date, accurate andaccessible. SAP also provides a single view of data: Information remains readily availableto support an efficient and effective business decision making process through theappropriate use of business intelligence and data analytical processes.In the area of information and data governance, SAP integrated design facilitatesadherence to any statutory or regulatory constraints and policies that maybe applicable.The introduction of such a system forms a key part of Camelot Illinois’ strategic plan totransform the Illinois lottery organization. Based on Camelot’s own experience inoperating the United Kingdom National Lottery the introduction of this tailored systemwill also deliver a step change in the profit growth / financial performance of the Lottery:enabling it to drive down costs by reducing the total cost of ownership and deliverefficiency savings over the longer term.CASE STUDYPROJECT FUSION – CAMELOT’S IMPLEMENTATION OF ANERP SOLUTION FOR THE UNITED KINGDOM NATIONALLOTTERYCamelot set out to implement an ERP solution with two aims in mind: Reduce operational complexity. Standardize processes.Camelot had originally developed a number of bespoke standalone systems to supportthe lottery business. Over time, these legacy systems, which had been created using avariety of software platforms, had become unwieldy, expensive to develop in line withbusiness need and also difficult to maintain over the longer term. Camelot thereforetook the strategic decision to replace back-office systems wherever possible using anopen architecture approach. This decision, utilizing SAP software as the primary solutionfor supporting office systems, became a key strategic consideration within Camelot’srecent successful bid for the Third Lottery License, as SAP enables: The replacement of legacy systems where appropriate. Reductions in operating costs and complexity. Improvements in customer services (call handling / e-mail management). Efficiency improvements. Business growth.Camelot commenced implementation in November 2005 using the SAP CRM module tosupport the player services Contact Center’s link to the Interactive gaming system. Thismodule enabled all interactions with the growing interactive player base to be recorded,logged and managed, including all telephone calls, emails and correspondence.In February 2006 the CRM module was supplemented by the Financials module goinglive. This enabled general ledgers, statutory accounts, cash flow reporting, assetaccounting and tracking, accounts receivables/payables and bank reconciliation activitiesto be managed via the SAP system. This module also delivered significantCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 419

Section 2 Final Business Planimprovements in the purchase requisition process as well as automating HR and Payrollactivities such as monthly salaries, overtime submissions and payments of expenses.In March 2007 Camelot was able to close the outsourced Interactive Contact Center andbring the capability in-house. Despite the additional workload created within thededicated Contact Center, dealing with the multi-channel environment, no additionalheadcount was required within the department. This activity also delivered annualsavings of £0.5m per annum as a result of not renewing the outsourcing agreement.Five months later, in August 2007 the SAP SCM module was introduced. This SupplyChain Module facilitated further development of the ‘Pick and pack’ process surroundingInstants and their subsequent dispatch to retailers from the warehouse. In the first yearthis supported 40% growth on the Instants product range; while sales increasedoperational costs did not.One specific example that demonstrates this point, is the use of volumetrics within thesoftware which enables the most appropriate courier to be used, depending on packagesize, retailer’s location etc. enabling the selection of small packages to use the RoyalMail network whereas larger parcels can be more cost-effectively delivered via aselection of multiple courier providers, such as DHL.Within three months of this module being introduced Instants sales in the UnitedKingdom increased from average of £16m per week to £20m per week. The weekly runrate for Instants in the United Kingdom is now approximately £23m per week, which isenabled by the systems’ ability to get the right product out at the right time and to theright place, without increasing staffing levels and without unnecessary additional parceltraffic. At present Camelot consolidates 25% of the orders received from retailers(including both terminal consumables such as ink cartridges, lottery play slips andInstants orders) in a single parcel. At present Camelot’s Distribution Center dispatchesan average of 15-17,000 orders each week.In March 2009 additional functionality was added to SAP CRM, supporting the salesteams’ vision of achieving a “360 degree view of their retailers”. This has beenachieved by enabling the data held by the head-office to be downloaded each night bythe individual account executives. They can then view recent contacts, salesperformance, accounts receivable data etc. in advance of their forthcoming visit to thestore and prepare accordingly to maximize the interaction and relationship with theretailer concerned. Following each visit the Retail Business Executive completes a callreport that is then downloaded back to head-office to update systems and thecompany’s intelligence accordingly.Two months later in May 2009 the TAM (Tele Account Management) functionality wentlive. This enabled the remote telesales team operating out of Aintree to be combinedwith the retailer sales team in Watford with a corresponding reduction in headcount andimproved grade of service without additional support costs being incurred.At the same time the Business Objects functionality was rolled out. This has enabled: An estimated 700 additional annual hours trading on the Interactive Services platform(i.e. website, SMS and Sky Active), by reducing the need for end-of-day reporting andbalancing to complete successfully on the GTECH derived gaming platforms, beforesystems can be opened up for sales each morning.420 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan A suite of interactive BI dashboards to be created saving approximately 30 hours perweek of manual data collation for key executive reports, and a 50% reduction inanalyst resource for the Commercial Business Team by offering self service reporting. The delivery of near “real time” sales reporting and the production of weeklyperformance dashboards/reports distributed to the business teams on Sundayevenings in advance of their trading reviews on Monday morning.The original benefit statement approving the project declared that it would reduceheadcount and save approximately £1.5m in IT staff costs annually, at an estimated costof £8.6m. Reassessment of the outcome shows that the introduction of SAP hasdelivered total benefits of $4.7m per annum.2.11.7.2 LogisticsSophisticated supply chain/warehouse management and dispatchThe primary purpose of any Supply Chain is to deliver the right stock to the right store atthe right time, in order to facilitate sales. In achieving this there are two complementaryobjectives that an efficient supply chain is aiming to achieve:Operational Efficiency High levels of in store stock availability to maximize potential sales. Low levels of inventory to facilitate rapid range changes with minimal levels ofresidual stock. Efficient new game introduction in order to maximize distribution and sales. Efficient order generation to minimise supply chain operating costs.Trading Optimization The provision of a consistent and effective range of games to ensure that sales aremaximized for an individual retailer. This, in turn, provides a basis for trading performance analysis in order to drivefurther sales growth through range and dispenser size optimization.Camelot Illinois proposes to introduce the following: Order Consolidation – minimizing the number of packages sent out to retailers(instants, point of sale material, consumables etc) and therefore: Reducing postage costs to the Lottery Minimizing warehouse work load Easier management by retailers of their stock control and overheads Volumetric Management – optimization of postage costs through the ability toautomatically select the appropriate carrier for each parcel based on urgency, sizeand weight of the package and therefore: Further reducing postage costs to the Lottery Automatically interfacing into carrier’s systems and printing postage labels as orderscome down the lineDistribution Center Management – optimization of distribution and logistics costs is afunction of both the Distribution Center operating model and the management ofworkflow into the Distribution Center. Camelot Illinois proposes:-Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 421

Section 2 Final Business Plan The introduction of Distribution Center workload smoothing modules as part of theroll out of the iPOS Automatic Instants Stock Management system which will ensurethe balancing of daily Distribution Center workload to minimise operating costs A strategic review of the relative merits and operating costs of an insource vsoutsource Distribution Center operating model in order to ensure optimum servicelevels and value for money are secured for the businessThe decision as to whether to insource or outsource Distribution operations is dependentupon a number of factors and is also contingent upon the underlying strategy of theorganization.Typically, decisions to outsource are taken when a distribution operation is either underperformingor is inefficient. In these instances, the opportunities to capitalise on theknowledge base and operational excellence of 3 rd Party Logistics providers (3PLs) inorder to drive reductions in cost and improvements in performance far outweigh themanagement fees involved in outsourced contracts. There may also be other reasons foroutsourcing such as the opportunity to share warehousing infrastructure with othercustomers of the 3PL, to drive logistics synergies through optimising vehicle loadsacross several suppliers (not applicable in the case of lottery operators due to the use ofparcel post for deliveries) or simply to ensure warehousing assets are kept ‘off balancesheet’ due to differences in the relative cost of capital between the businesses.However, where distribution operations are long established and already embody a highlevel of cost and operational efficiency, there may be little to be gained from outsourcing.Indeed, in these instances many outsourced operations cost more that their insourcedequivalent due to the requirement to fund management fees and central overheadrecovery on behalf of the incumbent 3PL operator.The ultimate decision as to which Distribution operating model is the most appropriate ishighly dependent upon each individual business. Camelot has considerable knowledgeand experience of operating insourced Instants Distribution operations within the UnitedKingdom, but they also have access to experts who have extensive experience ofcommissioning and operating outsourced operations in the United Kingdom and globally,including within the United States. Our aim would be to utilise this knowledge andexperience to undertake a strategic review of the Instants Distribution operation inIllinois with a view to establishing the optimum operating model within the first year ofoperation.”2.11.7.3 Automatic Instants Stock Management (iPOS)As detailed in the Section covering initiatives for Instants, Camelot has developed aunique supply chain process for Instants replenishment, supported by a software systemiPOS. The software is transportable to Illinois and Camelot aims to license to Illinois forinstallation by January 2012. The iPOS system evolved from the recognition thatexcellence in driving the Instants supply chain cannot be delivered by furtherimprovements within the industry-standard GLEPS-based approach. Using a variety ofparameters Camelot has developed the system to a level that enables 50% automaticreplenishment at a specific game level, not just price point, thereby ensuring the bestselling games are in stock at the best retailers. As a parameter-driven system iPOS canbe adapted to suit any local jurisdiction and Camelot will make it available to Illinoisimmediately it is appointed.422 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlaniPOS provides an integrated suite of features and functionality that enable managementcontrol and intervention across the end-to-end Instants Supply Chain.These features include:Stock management at game level (not just dollar value level)Management of instant tickets at planogram level bespoke to store - Stockmanagement at instant ticket dispenser bin level i.e. Lucky 7 number in bin 2 in store239 is out of stockEnsures best selling games are always in stock at the best retailersParameter driven algorithms allowing customization to each Lottery jurisdiction,based on their retailers, their dispensers, their instant games, their planograms etcRange Definition and Set UpGame Set Up and ManagementStore SegmentationAllocations/Initials ManagementEnhanced Sales ForecastingStock ForecastingPredictive Stock Replenishment/Order GenerationSeasonality and Event ManagementConsumables ManagementContact Center AdministrationCall Center Handling and ManagementLogistics Workload SmoothingReporting and AnalyticsFIGURE 2.11.7.3.1: IPOS SCREENSHOT – PLANOGRAM VISUALISATIONCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 423

Section 2 Final Business PlanFIGURE 2.11.7.3.2: iPOS SCREENSHOT – SEASONALITY PROFILE REVIEWImplementation of iPOS for IllinoisThe iPOS system has been developed utilising SQL Server 2008 64bit Standard Edition,Windows 2008 O/S, .NET 3.5 for Web Services and functions, XML for messaging and issupported on Internet Explorer 6 and above. This technology has been utilized with thespecific goal of ensuring that iPOS is transportable and configurable for use within otherlottery operations globally.Final details of the proposed implementation methodology and timetable for Illinois willbe developed at a later stage, but it is envisaged that the solution would be hosted ondedicated hardware within Illinois with software support being provided from the UnitedKingdom.Implementation is dependent upon a number of factors and includes configuration of theiPOS system to enable it to meet the specific needs of the Illinois Lottery, systemstesting, the roll out of changes to retailer ways of working and the introduction of tightercontrols around Instants displays using planograms. It is envisaged that this could becompleted within a 9-12 month timeline from contract award. At this stage Camelotwould begin a testing program and aim to have a fully operational supply chain system in24 months.How Camelot’s iPOS (Intelligent Predictive Ordering System) supports best practiceThe primary purpose of any Supply Chain is to deliver the right stock to the right store atthe right time in order to facilitate sales. In achieving this there are two complementaryobjectives that an efficient supply chain is aiming to achieve:Operational EfficiencyHigh levels of in store stock availability to maximise potential sales.Low levels of inventory to facilitate rapid range changes with minimal levels ofresidual stock.424 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanEfficient new game introduction in order to maximise distribution and sales.Efficient order generation to minimise supply chain operating costs.Trading Optimisation The provision of a consistent and effective range to ensure that sales are maximizedfor an individual retailer. This, in turn, provides a basis for trading performance analysis in order to drivefurther sales growth through range and dispenser size optimization.Camelot delivers these outcomes by combining use of IPOS with other components ofRetail Supply Chain Best Practice:Pre-defined RangesIndividual retailers or groups of retailers are analyzed to understand how their tradingperformance can be optimized through the tailoring of ranges. This allows Camelot totailor ranges to suit the needs of different consumer demographics and levels ofdisposable income in order to optimize average selling prices. Retailers are allocated arange based upon their historical trading performance and their customer base.Trading performance can be further developed by understanding retailer sales in relationto dispenser size and number and in optimizing the dispenser size(s) to maximize saleswhilst also ensuring high levels of stock turn. This ensures that older games are soldthrough efficiently and do not ‘clog up’ the dispenser and prevent newer, faster selling,games from being placed on sale.Consistent In Store DisplayBecause iPOS can guarantee which ranges are being replenished into which stores,retailers can be provided with specific layout guidelines using detailed ‘planograms’ toguide in-store execution. This generates distinct benefits:- It presents a consistent layout to the consumer that gives familiarity and aidsconsumer purchasing decisions. Dispenser layout can be optimized according to price point and to reflect Instantsbrand segmentation/game design.Figure 2.11.7.3.3 shows some examples of how Camelot demonstrates to retailers howto display in retail. Planograms help that ensure consistency of presentation approachacross the estate and with different dispenser sizes. .Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 425

Section 2 Final Business PlanFIGURE 2.11.7.3.3: EXAMPLES OF UNITED KINGDOM 10 AND 12 CASSETTEDISPENSER PLANOGRAMIn addition, by controlling ranges in store, the management of new game introductionand the sell-through of discontinued games can be improved and forecasts of sales andstock at an individual store level are more accurate.Enhanced Stock ForecastingThe provision of consistent store ranges (see above) also enables improvements to bemade in the basic forecasting algorithms:- Sales forecasts for new games are derived from the rates of sale of linkedpredecessor games within the same retailer. Sales forecasts can be supplemented by more accurate stock forecasts based uponthe observation of pack activation events within a defined store range.One unique element of Camelot’s Supply Chain solution is the ability to eliminate thevagaries of sales forecasting altogether and instead to manage Instants replenishmentbased on retailer EPOS sales records transmitted into Camelot systems via EDI. Bytaking scanned game sales data from those large retailers that can routinely provide itand to use this data to drive the supply chain, sales forecasting error is eliminated fromreplenishment solutions altogether.ReplenishmentBy controlling store ranges and dispenser layout, Camelot develops a detailedunderstanding of which games are currently on sale in which dispenser windows inindividual retailers.Replenishment algorithms have then been developed that optimize stock availability andsupply chain efficiency by:Automating the replenishment process so that it can be run remotely and does notrequire retailer or telesales intervention to generate an order.426 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan Allowing for efficient operation through the creation of balanced stock orders thatintelligently build order quantities to meet minimum order size criteria and logisticscost minimization. Optimizing the initial distribution of new game launches based upon predecessorsales performance within individual stores. Depleting stock of old games as their successor launch date approaches, thusenabling faster sell through of old stock and enabling new games to be placed onsale sooner than would otherwise be the case. Allowing for the controlled phasing of order volumes in order to smooth logisticsworkload.Efficient Game LaunchesWhen dealing with new game launches, particularly games with a limited print run, theinitial launch of the game has to be managed carefully in order that too much stock is notcommitted into stores too early and before sales patterns are evident.If too much stock is committed to new game launches too early then this can result inpoor stock distribution and the apparent anomaly of high stock levels in store but lowstock availability because of differences in actual sales patterns when compared to thosethat were anticipated by the initial new game stock allocation.iPOS eliminates this possibility by tailoring new game allocation quantities to actual salesof linked predecessor games within each individual outlet, to ensure optimized stockavailability and consistent safety stocks to counter sales volatility post-launch and tomaintain high stock availability across all retailers.Seasonality and EventsRetail sales can fluctuate according to external events and retail supply chains need to beable to manage replenishment at all times to ensure sales fluctuations do not result inpoor availability and potential lost sales.iPOS enables Camelot to manage sales fluctuations driven by seasonality (Christmas orholiday impact) or sales fluctuations driven by specific retailer events or game eventssuch as sales incentives or TV advertisingReturns ManagementCamelot’s solution eliminates the ‘boot stock’ process widely used by Instantsoperators. This is the process whereby obsolete stocks of old games or over-stocks ofcurrent games are collected from store and delivered to other retailers or returned to thelottery operator by field based employees.iPOS enables stock to be distributed ‘just in time’ to achieve high levels of stockavailability but low levels of stock in store. When this is combined with information onnew game introduction dates, old games that are being discontinued and the priordepletion of old game stock, the mass return of stock as a planned workaround toovercome deficiencies in supply chain is eliminated. Where returns of stock is required,the process for this will be managed both through the sales force taking back stockdirectly from the retailer through the regular visitation schedule, and through direct mailback facility from the retailer – subject to a more detailed review of permitted controlsand processes required in the state of Illinois.Supply Chain AnalyticsCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 427

Section 2 Final Business PlanThe provision of enhanced data analysis capability within iPOS provides the opportunityfor improved management information to drive decision making on: Optimization of ranges over time. Optimization of average selling prices. Analysis of the effectiveness of multiple facings. Introduction of new price points. Optimization of dispenser size. Optimization of pack size.This is in addition to a full performance management suite that enables supply chainperformance to be actively managed and reported upon in order to identify and correctissues at source.One of the initiatives that Camelot recommended in California was to hold weeklyreviews to measure the performance of games in the marketplace. Unless the Illinoisteam already has something similar, Camelot will recommend a similar regular reviewwith all relevant departments represented.A small set of Key Performance Indicators will be defined (for example, stock available atretail outlets, activations, rate of sale), to identify the better games so that actions can betaken to withdraw or reprint games as appropriate. This will enable games to beprioritized based on their rate of sale and enable actions to be taken to ensure the rightstock is distributed.2.11.7.4 Retailer Management, Procurement and Communications SupportOptimal Retailer Selection (Optimum)Optimum is a geo-demographic modelling tool that makes recommendations on terminallocation using data on population density, shopping patterns and the location of existingoutlets. These recommendations are cross-checked against those from the sales teamsin each location who have local knowledge that either confirms or modifies the computermodel outputs. This will allow the Lottery to: Identify the optimal retail estate number through an iterative process, continuallymeasuring the impact and benefit Identify under-served/gaps in the retail estate, both in current retail sectors that haslottery and those that show an opportunity (kiosk, pharmacy etc) Ensure new retailers are located in positions that will drive the maximumincremental revenue Targeting to zip code level, ensuring new retailers are located in areas which aretargeted by the Lottery e.g. more affluent areas, younger areas etc - addressingpenetration challengesCamelot Illinois will utilize the model to drive the installation of the 2,000 additionalterminals that will be put in the field during 2011 once Camelot Illinois has beenappointed as the Private Manager.Holistic View of the RetailerThrough an integrated business suite, the systems provide a single source of dataallowing a holistic, 360 o view of the retailer in one place and shared with the sales force.Both Lottery Head Office and the field sales force have one view of the retailer including428 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planaccounts payable data, sales data, instants and consumables orders, calls to the contactCenter, reports on retailer site visits etc.This allows the sales force to be more effective when visiting retailers allowing them todiscuss issues with the retailers and help them grow their lottery business.The suite also fully supports one integrated process managed through an optimized workflow to manage the retailer selection process, installation process, fault reporting andfault resolution. By encapsulating this within the integrated business suite as opposed toa gaming system, the Lottery will be able to have access to the full life-cycle of a retailerand most importantly know that the data is always accurate and up-to-date due to itbeing from a single source.Streamlining of ProcurementThe workflow capability has been used to reduce processing time and paper beingpassed around the business: the “Procure to Pay” (P2P) process creates an onlinepurchase requisition, approvals are requested via email with hyperlinks to the PurchasingOffice which is then forwarded to the supplier. Once goods are delivered the invoice isprocessed by being scanned into the SAP system before being shown to the purchaserfor approval and payment.Targeted Marketing Communications at ScaleProvides the capability for all targeted player marketing communications consistentlysupporting millions of emails per week. At present Camelot generates approximately260m marketing email messages to the opted in player base annually.2.11.7.5 Customer ServicesA high performing Customer Services function has the ability to actively support a drivefor revenue and growth, while ensuring the overarching brand values are brought to lifethrough any consumer contact. A successful operation will always balance the effectiveuse of available resource with providing first class customer service.Camelot’s ExperienceCamelot has a proven track record in delivering both business-to-consumer andbusiness-to- business support through its in-house contact centers and customer servicefunction and will use this understanding to ensure that both players and retailers receivea positive experience which reflects the brand essence, when contacting the IllinoisState Lottery.Camelot has operated its own customer service functions since the inception of TheNational Lottery in 1994 recognising that these areas are critical touch points for bothplayers and retailers alike. It has operated both single site contact centers and virtualcontact centers, where contacts are flowed across multiple locations. A full suite ofmulti-channel services has been developed as the lottery has matured, so that thefollowing activities now form an integral part of Camelot’s daily operations:Players – General player and public support for those playing in the retailenvironment.Interactive Players – Support for players using digital technology to play the lottery.Subscriptions – For those players who play by subscribingTel sel – Outbound and inbound telephony support for retailers ordering Instants.Hotline – Immediate telephony assistance for all retailer queries.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 429

Section 2 Final Business PlanTelephone Account Management – Retailer account management.Through these operations Camelot has been able to successfully support the growth inplayer numbers and revenue, the introduction of digital channels and the development ofthe lottery’s presence in the retail environment.During FY2010 Camelot received almost 3 million contacts across the activities listedabove, while operating to the highest level of service so that, for example, 94% ofgeneral player queries received by telephone were answered within 20 seconds. Theselevels of service are reflected across the operation and are achieved by continuallyrefining and improving processes, alongside the introduction of contact enhancementsthat allow both players and retailers to self serve and the adoption of a SAP technologyplatform. This constant quest for continuous improvement has resulted in costs beingreduced by 30% in FY 2010 compared to the previous year.It is this depth of experience and knowledge that Camelot will bring to the Illinois StateLottery to develop an enhanced service that will ensure a holistic approach to thecustomer journey, for both players and retailers.StrategyCamelot Illinois’ strategy and approach will be to offer a multi-channel contact center thatallows players and retailers the options to self serve and for players the ability to accessthe customer service function through the means of communication that they prefer(figure 2.11.7.5.1).FIGURE 2.11.7.5.1: OVERVIEW OF PROPOSED CONTACT CENTER MODELPlayer SupportRetailer Support(Multi-channel)(Telephony – One Number)RetailerInstantsSubscriptions Interactive Retail Hotline TelselsMulti-skilled agentsMulti-skilled agentsMulti-skilledagentsSAP Technology PlatformThe approach adopted will encourage the functional and transactional contacts to behandled by automation, so that a team of highly trained multi-skilled agents, capable ofhandling a wide range of contacts, can deal with the more challenging issues. Thecontact handling capability will be under pinned by the implementation of a new ContactManagement tool, adapted from Camelot’s SAP CRM system, which will manage, trackand report on all contacts. Camelot Illinois will review the current lottery contact centerorganization and take a view on whether this model will need to function in only onecenter or across more than one as virtual contact center.430 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanPlayersConsumers are increasingly demanding to contact organizations at a time that suits themthrough their channel of choice. Given this accelerating trend Camelot Illinois will have acontact center that is multi-channel enabled and can therefore handle a range ofchannels including traditional telephony, email, web chat, SMS and white mail. Figure2.11.7.5.1 demonstrates the three main areas where players require assistance andrecognizes the need to introduce the new requirement to support internet playersthrough the pilot period and beyond.Players will have one number to call for all of their needs and through the use ofautomated voice platforms will be presented with the option to hear a recording of theinformation they require, such as winning numbers for draws or be intelligently routed toan agent who possess the skills to help them.Email will also be a popular method of communication, particularly once the InternetPilot is initiated and Camelot Illinois will introduce an automated email handler that willimmediately acknowledge all emails, respond to those that are less complicated andallow the management of those that require an individually tailored response.As the interactive channel offering develops, Camelot Illinois will be able to allow playersand agents to use web chat so that assistance can be provided in real time while a playerengages with the transactional website. This has the great advantage of immediatelyhelping the player complete or make a transaction, but also enables an agent to handlemore than one player contact at a time by having multiple web chat sessions open.Whichever channel a player opts for the approach will be to continually improve theservice so that the range of self serve facilities can resolve the majority of incomingcontacts and therefore be available every hour of every day. For those contacts thatrequire personal assistance there will be a team of agents who are trained to handle alltypes of player interaction across Subscriptions, Interactive and Retail. This will ensurethat from a given pool of resource there is always an agent that has the ability to dealwith a player or member of the public, rather than having agents trained in only one area,Subscriptions for example, who then cannot support players in Interactive or Retail whomay need assistance but who find all agents trained in these disciplines are occupiedwith other contacts.RetailersRetailers have traditionally used telephony as a preferred method of communication withthe lottery, as it suits the environment in which they operate. Camelot Illinois isrecommending using one number for retailers to call for ordering Instants (Telsel) orgeneral/technical support (Hotline). A similar methodology as described for players inhandling these calls, with an automated front end and a team of multi-skilled agentsbehind it providing the person to person conversation when required.Figure 2.11.7.5.1 also shows that Camelot Illinois will have an outbound Telsels team ofcontact center agents selling Instants to Retailers. They will form an integral part of theenhanced supply chain, ensuring the availability of the best selling Instants games andoutstanding levels of stock availability within the retailer estate. In line with player andretailer support the team of agents will have outbound Telsel’s as their core skills, butwill be able to support Hotline and inbound Telsels as a minimum.Multi-skilling will bring greater role satisfaction into the agents daily work, the level ofskilling across the whole operation will develop overtime, but is necessary to helpCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 431

Section 2 Final Business Planeffectively manage contact peaks in a particular area, such as the launch of the InternetPilot.SummaryCamelot’s depth of experience and SAP CRM system will be fully utilised to deliver aCustomer Service function that is reflective of a best in class FMCG organization andwhich provides multi-channel access points for consumers to engage with the lotteryand a supportive and efficient service for the expanding retail estate.2.11.7.6 Management InsightInformed and Insightful Decision MakingData is the lifeblood of any organization, none more so than a Lottery business that ishighly dependent on day-by-day, week-by-week decisions due to the nature of theproduct i.e. large jackpots with unpredictable rollovers.The implementation of the Business Intelligence (BI) solution, driven by SAP, will providethe organization with easy access to the right information at the right time to supportdecision making. The BI strategy will vastly improve user access to data by combiningthe information needs of all departments and presenting data from disparate sourcesinto a single repository.Key benefits of the business intelligence suite are: Rapid availability of information and Lottery data Data that is automatically processed and presented in formats that are meaningful tolottery business staff (not raw data as has traditionally been the case within theLottery industry) Allows staff to be more insightful and spend their time on developing meaningfulaction plans to address issues and opportunities as opposed to spending manyperson-hours deciphering raw data Improved access to data and reducing the time required to analyze it – this hasenabled the insight team to spend more time considering the information received,rather than toil to create meaningful data with over 30 hours per week saved sinceintroducing automated dashboards Improved confidence in data through being able to track data items back to theiroriginal source. Reduced total cost of ownership through technology standardization (reducesrequirements for training and maintenance). Reduced opportunity for manual errors through report automation; Eliminating IT as a bottleneck in management reporting by enabling self-servicefunctionality.The screenshots below show examples of the business intelligence sales dashboardsthat have been implemented by Camelot for the United Kingdom National Lottery.432 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.11.7.6.1: BUSINESS INTELLIGENCE SALES DASHBOARD EXAMPLESCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 433

Section 2 Final Business PlanManagement Communication WebsiteIn addition to the internet pilot implementation, Camelot Illinois will design, maintain andhost an internal ‘intranet’ site. This site, based on the highly successful United Kingdommodel will deliver: Communications – The site will contain; Corporate communications setting out the Illinois State Lottery mission statement,vision and values. Information relating to good causes and how the funds aredistributed and any examples of the Illinois State lottery in the media Regular weekly internal communications highlight key achievements and more‘social’ communications which are critical in building an maintaining employeemorale Employee related information such as organizational charts, useful contact numbers,relevant online forms, health and safety information and details of key employeerelated benefits Specific project or business plan related communications to keep all employeesaware of significant achievements, timelines and upcoming events Facility for a two way communications channel. It will enable anonymous feedbackand questions to be raised, regular ‘employee temperature check’ surveys, and anonline suggestion box. This will facilitate the development of the business plan asoutlined in the Developing and delivering the Business Plan section above434 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan Process adherence – over time the site will become a repository for all Illinois StateLottery business processes. This will improve the levels of process compliance,increase efficiency and reduce opportunities for error.Tools and techniques will be provided to nominated individuals within the internalcommunications department to allow them to keep the site content updated andrelevant.Camelot will shortly be upgrading their internal communications website to useMicrosoft’s SharePoint 2010 Business Collaboration Platform and it is proposed thissame approach is used by Camelot Illinois.Financial ManagementThe SAP Business suite provides the ability to efficiently and accurately manage thefinancial aspects of the Lottery within one integrated system. This ensures that theFinance department always has accurate and up-to-date information about the overallcompany financial position, details about its assets and liabilities, about its positionagainst budget and forecasts as well as the details relating to each individual retailer. Thelevel of detail held enables either a top down view of the entire company or a bottom upview from each retailer. The system provides the right information to the right person atthe right time through the right medium. This means a credit controller taking a call froma retailer regarding their latest bill payment has one view whereas a cost center managerchecking their month to date spend has a different view.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 435

Section 2 Final Business Plan2.11.8 LEGAL2.11.8.1 Monitor and maintain compliance with all State Policies and RulesCamelot Illinois will have a compliance function led by the Governance Director reportingto the President, Jeff Perlee. Camelot Illinois expects that in addition to employeesproviding compliance pursuant to the Employee Use Agreement, as required, CamelotIllinois will have dedicated staff monitoring all State Policies and Rules and reviewing ona regular basis the operations and policies of Camelot Illinois for compliance. CamelotIllinois will be assisted with Illinois-based outside counsel, who regularly monitorproposed and promulgated State Policies and Rules.During Transition, Camelot Illinois will review and assess the capabilities and jobresponsibilities of the employees under the Employee Use Agreement who currentlyprovide the compliance function to the Illinois Lottery. By the end of Transition, CamelotIllinois will have established a functioning and effective compliance function consisting ofEmployee Use Agreement employees, additional Camelot Illinois staff, and outsidecounsel.2.11.8.2 Monitor and maintain compliance with collective bargainingagreements, as applicable pursuant to the Employee Use AgreementCamelot Illinois will have a transformation and human resources (“HR”) functionreporting to the Transition and Operations Director, Richard Wheeler. Camelot Illinoisexpects that HR will monitor and maintain compliance with the collective bargainingagreements (“CBAs”) pursuant to the Employee Use Agreement on a day-to-day basis,assisted by Camelot Illinois’s compliance function and outside counsel. Since theemployees under the Employee Use Agreement will remain employees of the State,Camelot Illinois will need to coordinate closely with the Department of Revenue on CBAissues and procedures.During Transition, Camelot Illinois will review the practices and procedures under theCBAs which have been utilized to implement the terms and conditions of the contracts.In addition, Camelot Illinois will review any violation claims or work rule variances tobetter understand the operation of the CBA. The goal of Transition is to understand theCBAs, procedures and work rules such that Camelot Illinois can effectively utilize theemployees under the Employee Use Agreement.2.11.8.3 Prepare, negotiate and monitor contracts with Subcontractors andVendorsCamelot Illinois will operate and staff a procurement function reporting to Transition andOperations Director, Richard Wheeler. The procurement function will also administerCamelot Illinois’s MBE/WBE/DBE supplier diversity program, which will be a key aspectof contracting with Subcontractors and Vendors. Camelot Illinois has proposed acomprehensive MBE/WBE/DBE supplier diversity program, which has been developed toachieve the 20% goal for MBE/WBE/DBE supply, with additional steps and actionstargeted to increase the level of MBE/WBE/DBE supply.The procurement function will also prepare, negotiate and monitor contracts withsuppliers who have been procured through the procurement process required by thePMA. As required by law and the PMA, contracts that exceed $50,000 will becompetitively bid and the contracts will be addressed through the bidding process.436 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanDuring Transition, Camelot Illinois will establish the procurement function and develop itsprocedures to implement Camelot Illinois’s MBE/WBE/DBE supplier diversity programand to comply with the relevant procurement requirements.2.11.8.4 Prepare game rules consistent with applicable lawThe compliance function of Camelot Illinois will evaluate each of the existing andproposed game rules for consistency with applicable law. New games will undergoextensive review to ensure compliance with applicable law, the Operating Standards,and Camelot Illinois’s social responsibility program requirements.2.11.8.5 Review of all activities to ensure protection of existing and newLottery intellectual propertyThe Governance Director of Camelot Illinois will be responsible for protecting new andexisting Lottery intellectual property (“IP”). Appropriate policies will be implemented toensure that IP protections, whether through contracts, trademarks, licensing rights, orpatents, are utilized to protect Lottery IP.During Transition, Camelot Illinois will review the existing Lottery IP, the steps currentlyimplemented to protect the IP, and prepare any additional filings or submittals required.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 437

Section 2 Final Business PlanPART B – OPERATIONS TRANSFORMATION PROGRAM2.11.9 PHASED TRANSITION AND RAMP-UPCamelot Illinois is planning a Transition to Private Management to be complete by theend of 2010. The Ramp Up period will follow on immediately from the completion oftransition and will be completed by July 1st 2011.FIGURE 2.11.9.1: TRANSITION AND RAMP-UP PERIOD PHASING OVERVIEWPMADecisionEnd ofTransitionEnd ofRamp-UpSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec20102011Transition PeriodRamp-Up PeriodBusiness as usual OperationTech Enablement PrepTechnology EnablementTransition:The objective of Transition is to: Deploy the senior management team required to carry out operation of the lottery inaccordance with the ramp-up period as set out in the ramp-up period plan; Conduct all preliminary people, organization, functional and compliance activitiesrequired to operate the lottery during the Ramp-Up period; Initiate a series of jump-start activities concerning requirements generation andsupplier selection processes relating to the replacement of existing contracts, inpreparation for the technology enablement program.Ramp-Up Period:The ramp-up period consists of the bridge between the establishment of the keymanagement team that will be in place on Jan 1 st 2011 at the conclusion of transition,and the full scale organization that will be in place in order to fully carry out all necessaryresponsibilities under the PMA from the base services commencement date on July 1 st2011. It will consist of a number of key activities:1. The implementation of the new Private Manager organization and all HRtransformation activities that support this2. The formal initiation of the technology enablement program that supports theimplementation of the long term business strategy3. The implementation of a series of business plan initiatives that are not reliant on newtechnology platforms, in order to drive earliest possible value for the State.The detailed ramp-up period plan will be agreed with the State during Transition.438 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanTechnology Enablement:The principal activity during the second half of 2011 and into 2012 will be the ongoingtechnology enablement of the Lottery to support the longer term strategic commercialplan. The technology enablement program is described in further detail in section 2.11.10This section describes the scope of the Transition and Ramp-Up Period phases, groupedby the streams of work that will form the basis of the transition and ramp-up period plansto be agreed with the State.2.11.9.1 TransitionThe objective of Transition is to put in place the key management team required to carryout operation of the Lottery in accordance with the requirements for the ramp-up period,and conduct all preliminary activities required to execute the Ramp-Up plan. Finalizationand agreement on the Ramp-Up Plan itself will be completed during the Transition. Thekey elements of this phase will be:People and Organization tasksCamelot Deployment Introduction of the Camelot Illinois Management team on Day One followingsignature of the PMA Deployment of the Camelot Illinois Transition team. These are the individuals whowill be embedded within the organization to work alongside the existing IllinoisLottery team.Establishing the governance and decision-making structures Establish a governance structure for decision-making within the Private Managemententity, defining the respective roles of current Lottery management and CamelotIllinois management.Employee Engagement A communication phase in which the Camelot Illinois team engages with the Illinoisemployees. The first 30 days will set the foundation for the relationship betweenthe teams. This has to be based on mutual respect and understanding of eachother’s views so that the achievement of the 10-year Business Plan is a sharedcommon goal. Camelot Illinois will work with the incumbent HR team to review the Employee UseAgreement to ensure complete understanding of its correct implementation. Camelot Illinois will also want to understand the current culture of the organization,local labor laws, State Policies and Rules and any other relevant factors that canensure the initial communication between the teams is conducted in the mostappropriate way, emphasizing Camelot Illinois’ commitment to grow the Lottery andto explain the plans for the Private Management of the Lottery.Organization structure Design and implementation of an organization structure, in cooperation with thecurrent employees, aligned to the organizational structure of the Lottery andintegrating Camelot Illinois employees into the business. The objective will be tohave the revised organization fully designed by Jan 2011, in preparation forimplementation of the HR Transformation changes during the Ramp-Up periodCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 439

Section 2 Final Business PlanJoint assessment of the skills needed to fill the roles in the organization.Identification of requirements for skills transfer or training.Where existing employees have skills gaps or would benefit from more insight intorelevant Camelot Illinois techniques or experience, Camelot Illinois will provideSubject Matter Experts who will work alongside the current teams to explain theCamelot Illinois way of working and share knowledge in their area of expertise.Camelot Illinois is also planning to set aside funds for a program of knowledgetransfer visits by Illinois staff to Camelot in the United Kingdom, to work alongsidetheir Camelot equivalents for a period to see first hand how the Camelot processeswork and to be trained in the use of those that will be adopted in Illinois.Business Plan With the Camelot Illinois and Illinois teams working together, a detailed review of theBusiness Plan will define and agree the content and timing of the components of thePlan.External relationships Establish working relationships with the State regulator to begin the process ofagreeing policies and governance structures for the regulation of the Lottery. Implement the tools, report and processes and use the existing business systemsthat will enable the State to perform its monitoring functions. Make contact with the Lottery retailers through the Lottery sales force. As the faceof the Lottery, the retail employees will need to be equipped to answer questions onthe change in management of the Lottery and its implication for players. Establish the Camelot Illinois Charitable Foundation and build a working relationshipwith the bodies with whom the Lottery will work to apply Foundation funds todesignated educational causes. Reach out through the media to the wider Illinois public and stakeholders in theLottery to inform them of the changed management structure of the Lottery andwhy they presage a bright future for the Lottery.Functional tasksCompletion and post-Completion activitiesA number of essential tasks have to be completed around the award and signing of thePrivate Management Agreement and which need to be completed within the first daysof Transition. Finalize and sign the Private Management Agreement Finalize and sign Employee Use Agreement. Finalization and Approval of the Ramp-Up Period Plan Provide Certificates of Insurance (PMA 17.2.3) Provide letter of credit (PMA 18.1) Obtain any necessary Government Approvals (PMA 19.1) Receive Operating Standards from the State (PMA 5.2)Compliance Camelot Illinois will establish processes for ensuring PMA compliance. The PMAobligations will be tabulated and each obligation will have nominated individuals440 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planwithin the company who will be responsible for maintaining compliance within theirfunctional area.Camelot implemented this same methodology for ensuring compliance with theconditions in the United Kingdom Operating License. It was accompanied by trainingsessions to emphasize the importance of compliance; these were repeated regularly.Meeting compliance obligations was also built into the objectives of affected staffand taken into consideration during their annual appraisals.Review and assess the capabilities and job responsibilities of the employees underthe Employee Use Agreement who currently provide the compliance function to theIllinois Lottery. By the end of Transition, Camelot Illinois will have established afunctioning and effective compliance function consisting of Employee UseAgreement employees, additional Camelot Illinois staff, and outside counsel.Review the practices and procedures under the Collective Bargaining Agreements(CBAs) which have been utilized to implement the terms and conditions of thecontracts. In addition, Camelot Illinois will review any violation claims or work rulevariances to better understand the operation of the CBA. The goal of Transition is tounderstand the CBAs, procedures and work rules such that Camelot Illinois caneffectively utilize the employees under the Employee Use Agreement from the startof the ramp-up period.Ramp-up period Planning Development and agreement with the State, of a ramp-up plan for the Ramp-Upperiod following completion of Transition and prior to the Base ServicesCommencement Date. The ramp-up plan should comprise: Identification of critical systems, operations and activities and an approach toconduct these activities during the ramp-up period Identification of non-critical systems, operations and activities and an approach toconduct these activities during the ramp-up period An HR Transformation Plan that ensures full ramp-up of the Private Managerorganization and resourcing before the Base Services Commencement Date A plan for the formal initiation of the technology enablement program that supportsthe implementation of the long term business strategy A plan for the implementation of a series of business plan initiatives, that are notreliant on new technology platforms, in order to drive earliest possible value for theStateIdentification of Critical Process and Systems Identify ‘critical’ systems, processes and procedures which Camelot Illinois musthave control of both during the Ramp-Up phase and following the Base ServicesCommencement Date in order to ensure satisfactory operation of the Lottery asrequired by the PMA. Areas identified as critical include:Critical Finance Transactions Retailer payments and collections Supplier payments Prize payments Returns to StateCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 441

Section 2 Final Business PlanFinancial ReportingCritical Operations Draw Operations Draw Integrity and Validation Instants Distribution Retail Essentials Winner Processes End of day/week IT system operations Disaster Recovery Procedures Regulatory Reporting Retailer Fault Management Contract Management Facilities Operations Information Security Processes and Standards Illinois Lottery Staff IT SupportOperational integration and control of non-Critical Activities These activities consist of identifying and ensuring the continued operation of all thecurrent functions of the Lottery that are not vital to critical systems or processes butwhich are necessary to run the business. This ranges from regular production andapproval of future scratchcard designs to ordering of office consumables.Audit and Information Gathering A formal audit of all assets and accounts of the Lottery so that Camelot Illinoisunderstands fully any financial or asset liabilities. A review of the existing business systems of the Lottery (e.g. customermanagement systems, procurement systems, supply chain support systems,accounting and business assurance systems etc) with a view to identifying the newsystems that would need to be implemented so that the Lottery has the tools tofunction as a best of breed FMCG business. A review of existing Lottery IP, the steps currently implemented to protect the IP,and preparation of any additional filings or submittals required.Procurement and Replacement Contracts Identification and Analysis of all Key Supplier contracts, paying particular attention totermination dates (existing or via the State’s obligation to terminate before thePrivate Manager takes over), extension clauses and re-tendering obligations. Ownerswill be assigned to each Key Supplier relationship to assess next steps as necessary. A detailed review of the current lottery systems to determine the requirements forimplementation of the new system. A detailed review of the design and specifications of the proposed Internet platformwith the State and the Lottery employees. Preparation of RFPs for new core systems, data centers and infrastructure, terminalsand media screens, communications and an ICS system and the selection of vendorsby competitive tender. The focus of the procurement will be greater alignment ofincentives between the Lottery and the lottery systems vendors, to rebase the cost442 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Planto current market rates and to ensure that service level agreements in the contractssupport the Business Plan initiatives.Development of RFPs and execution of a tendering process to conclude with theselection of suppliers and commitments to delivery dates.Establishment of the procurement function and development of its procedures toimplement Camelot Illinois’ MBE/WBE/DBE supplier diversity program and to complywith the relevant procurement requirements.Business Plan Preparation for implementation of Business Plan strategies. Implementation willcommence at the beginning of the Ramp-Up Period.2.11.9.2 Ramp-Up PeriodThe Ramp-Up period will see the full mobilization of the Private Manager organizationrequired to be in place prior to the Base Services Commencement Date. It will comprisethree main components:HR TransformationCamelot Illinois understands that the transition to the Private Manager is going to be anunsettling experience for most individuals. Once the final organization design iscompleted and agreed with the State during the Transition, it is Camelot’s ownexperience that the implementation of this new Organization will need to be carried outin an orderly and well structured way.An HR Transformation Plan will be developed as part of the Ramp-Up Period Plan.Formal Initiation of the Technology Enablement ProgramThe selection of new technology providers will be completed during Transition. Themove into the Ramp-Up phase will see the formal initiation of the TechnologyEnablement Programs that will deliver the new technology capability.Section 2.11.10 sets out the detailed scope and plans for the Technology EnablementProgram.Business PlanCamelot Illinois has defined a short Transition to be completed by the end of 2010, sothat the company is equipped with the right organization and skills to begin theimplementation of the Business Plan as soon as possible. The earlier the Business Planinitiatives are implemented the sooner the company will achieve the forecast NetIncome growth.By way of example, in California, Camelot signed a consultancy services agreement withthe state at the end of July 2009 and had embedded personnel with the Lottery bySeptember of the same year. At this time, sales in the Instants category were trackingtowards an end-of-year outcome of around 7% under budget. In December 2009Camelot implemented a number of commercially focused initiatives that were not relianton changes to technology. As a result, the California Lottery recovered not only thepreviously expected revenue deficit, but actually exceeded the budgeted revenue for theInstants category by the end of the fiscal year.By the start of the Ramp Up period in Illinois there will be a detailed plan of the activityand timing for each of the main functional areas – brand, products, channels andCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 443

Section 2 Final Business Planmarketing. The plans will have been agreed by the participants who will deliver themand implementation can begin.Activity in all functional areas will begin in the Ramp Up period, for example:Lottery Retailers: Camelot Illinois sales team specialists and the Illinois sales teamsreview current call cycles, call duration and content along with the assistance theretailers expect and need, with a view to adding focus on the selling activity; engageRetail Trade bodies to create a forum in which retailers of all major trade styles canbe represented.Social responsibility: Prepare for the Level 3 Accreditation against the WLAResponsible Gaming Framework; preparatory work to include aspects of ConsumerProtection within the Illinois Lottery Annual Report in 2012; introduce training forretailers on responsible play.Instants: Deliver an insight led, strategically grounded, consumer game developmentprogram; reduce the number of Instant ticket launches; prize structure development;ensure top selling games are in every retailer; development of media screens.Internet: pre-pilot work, to remodel the existing website to offer more email services(results / rollovers); commence data collection (CRM preparation) ready for the Pilotand provide some enhanced subscriptions functionality, to supplement the existingtelephone and whitemail routes; development of the transactional site.Online Games: Design and research revised Lotto prize structures; develop adifferentiation model for Mega Millions and PowerBall.Marketing: Implement activities to reinvigorate the Illinois Lottery brand; detailedreview and planning of media use and purchase.444 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.11.10 TECHNOLOGY ENABLEMENTCamelot has a proven ability to deliver large scale, complex technological change. Indelivering a successful technology transition from the second to third operating licensesin the United Kingdom, Camelot completed the largest – and fastest – lottery upgrade ofits kind in the world within the agreed timescales. The Camelot team completelyreplaced the entire network of United Kingdom National Lottery terminals, introducingnew touch-screen GTECH Altura models, cutting-edge media screens and thermalprinters – connecting over 27,500 retailers to an upgraded gaming system via a brandnew communications network. Although the transition was from one GTECH platform toanother, the scale of the change required the program to be approached as if the futurearchitecture was a ‘green field site’ therefore comprehensive parallel run and migrationactivities were planned and successfully completed. The program could equally havebeen used to transition to a platform and terminal of any technology provider (e.g.Intralot, Scientific Games).Despite the challenges of technology transition, Camelot continued to grow sales of bothdraw-based and non draw-based games – leading it to unveiling its best salesperformance in a decade and delivering even more money for the Good Causes.The Program was recognized by the United Kingdom government as one of the mostsuccessful IT programs undertaken in the United Kingdom. A letter of reference from theUnited Kingdom National Lottery Commission is included in Appendix A2 Referencesand Letters of Intent. Regular independent reviews of the program showed thatCamelot’s management of the program was highly effective in minimizing technologytransition risk.The same principles and methodologies that were applied to the technology transition tothe 3 rd License for the United Kingdom National Lottery will be brought to bear in thedelivery of enabling technology for the Illinois State Lottery.The technology strategy section 2.11.3 sets out the long term vision and technicalcomponents of a lottery platform that will support Camelot Illinois’ future plans andinnovation agenda. Camelot Illinois believes that implementation of the core componentsof this technology vision, as well as bringing the proposed Internet Pilot to market assoon as possible, are the most critical priorities upon being appointed Private Manager inorder to support the long term commercial growth strategies for the Illinois Lottery.Camelot Illinois proposes to initiation a Technology Enablement program that comprises2 key phases:Core technology ImplementationInternet Pilot Implementation2.11.10.1 Core Technology ImplementationScopeA complete upgrade of core and retailer lottery systems is part of the work to beundertaken immediately after being appointed the Private Manager of the Illinois Lottery.As the current technology supplier contract ends in Oct 2011 an opportunity exists toplan a refresh of the core lottery gaming systems and retail terminals by this date.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 445

Section 2 Final Business PlanThe implementation will be planned so that a seamless continuation of lottery service isprovided to players and retailers, enabling anticipated growth realized following transitionto the Private Manager, while removing legacy hardware and software and moving to amore open and modern technology.Implementation of new core technology will facilitate future developments such asexpansion into internet and other revenue generating channels with greater efficiency.Furthermore, visible new technology, such as new terminals, will have the benefit ofassisting in re-energizing interest in the lottery for retailers and players.The technology to be upgraded consists of: Replacement of the Core Gaming system, data centers and infrastructure Rollout of new state of the art Lottery terminals, FSVMs, Media Screens and thecommunications capability across the entire retail network, including an increase of2000 retailers to a total of 9500 retailers by October 2011. This will subsequently befollowed by a further 1500 uplift to 11000 retailers by 2013 in a second wave of retailtechnology roll-out. Existing business systems to be replaced with: SAP ERP SAP CRM iPOS Optimum BI Reporting and dashboards; allowing a deep analysis and insight into the day to daylottery business. This will feed into effective marketing strategies, efficiencyopportunities and feed into the decision making process of development andexpansion of the lottery throughout the license period.Existing processes and procedures will be updated to reflect these new systems andimproved working methods.ApproachThe approach will adopt identical principles, methodologies, key management resourcesand governance structures applied with great success to Camelot’s transition to the 3 rdLicense for the United Kingdom National Lottery in 2009. This has proved to be asuccessful method for delivering complex and large scale programs to tight timescalesand budgets while carefully managing the key risks across the business.The technology refresh will comprise 6 streams of work.Choose new Technology partners for Network, Terminal, Central Gaming System,business systems and infrastructure.Conduct new retailer communications network rolloutConduct new terminal rollout (including Vending Machines and In-store Multimedia)Design, Implement and Support New Central Lottery SystemDesign and Implement new gaming System Operations and MonitoringSAP business system responsible for Company finance and procurement as well asoperational functions of CRM (retailer and player management), Instants supply chainmanagement, Retailer Management.446 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanExisting Camelot staff representing Program and project management, testing, ITArchitecture, operations, security and business systems will undertake the following: Manage teams consisting of local and Camelot United Kingdom staff Define and review strategies, requirements, designs, test and operationaldocumentation Manage external technology and consultancy providers for both on and offshoredelivery models.Current Staff and incumbent suppliers from the Illinois Lottery will also fulfil a critical roleto maintain and operate the Lottery throughout the technology refresh period while alsocontributing local expertise, knowledge and management to the technology refreshprojects.More specifically Camelot Illinois will adopt a number of best practice approaches acrossthe project lifecycle for each of the streams of work identified above. These sameapproaches will apply not only to the initial technology enablement phase, but to all othersignificant components of technical delivery throughout the life of the privatemanagement agreement.Requirements GatheringCamelot Illinois understands that the foundation of successful delivery of any technicalinitiative is the clear and accurate articulation of requirements that meet a business needand translating those requirements into well structured technical specifications. It isCamelot’s experience that technology suppliers will all too often adapt requirements tofit with a particular product offering they provide, ultimately resulting in a technologysolution that does not meet the specific customized need of the business.Camelot Illinois believes that priorities should be set the other way around, with atechnology solution tailored to meet the specifics needs of the business problem.Camelot has invested heavily in a highly capable team of business analysts who possessa deep understanding of the lottery business and are able to articulate requirements ofthe business in a form that can be easily translated into technical specifications. Where atechnical solution is not available, or the cost-benefit of providing a technical solution isnot compelling, the business analyst team will work closely with the business to designand implement process based approaches to fulfil the requirement.Development and Test Methodologies for Software DeliveryIn spite of providing leading and well proven technology solutions, it has been Camelot’sexperience that openness and transparency with respect to development and testmethodologies from vendors in the lottery industry during large scale implementationprograms are all too often behind the standards set in other industries.Camelot demands full transparency and traceability of requirements in terms offunctionality, developed and tested throughout the software delivery lifecycle. In order togain assurance of traceability, end of stage reviews will be conducted with the lotteryvendor physically on their development site, with Camelot Illinois Program Managementteams attending to work through the specifics of functionality developed and tested, aswell as agreeing remedial steps for those elements of functionality not developed, or notmeeting test criteria.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 447

Section 2 Final Business PlanCustomer Acceptance TestingCamelot Illinois believes that Technology Vendors should be held to account fordelivering software that is fit for purpose as defined through the mutually agreedbusiness requirements. However, in order to assure both the State and players ofcomplete integrity of lottery operations, Camelot Illinois proposes to engage anindependent 3 rd Party to perform acceptance testing of all software delivered fromtechnology vendors before it is deployed into a live environment. It is Camelot’sexperience from the United Kingdom that this approach has played a crucial role inprotecting the player from the introduction of erroneous software that would haveotherwise significantly compromised the integrity of live lottery operations.AssumptionsGeneral Planning Assumptions Winning bid to be announced 15th September 2010 Technology refresh to be live by 30th September 2011 (with extensions to thecurrent technology supplier contract available as a contingency or reduce schedulerisk in critical areas) Management Transition to Private Management will be completed by Jan 1st 2011and existing contracts with GTECH will remain in place through to current end dateof October 15th 2011. Technology partners and contracts should be prepared before bid is won in orderthat appointment can take place prior to completion of transition to privatemanagement on Jan 1st 2011 Resources will be dedicated solely to this project and not shared in any way withother projects or Camelot activities Requirements gathering, drafting and finalizing will be within the full control ofCamelot Illinois. No changes to games during technology refreshTerminal Rollout Assumptions The requirement for Emulation – the approach to ensuring newly rolled out terminalscan still operate with the old gaming system until they’re replaced - will only be partof the plan if GTECH is chosen as technology partner; otherwise central system andterminals will go live at the same time If GTECH is not chosen - retailers have to have two terminals in store at go live andCamelot Illinois would have to make two visits to retailers to install new terminal andcollect old terminal Scrappage of old terminals will be an inherent part of the new terminal rollout Playstations and other in-store furniture will be rolled out as soon as they have beenordered and delivered even if this is several months before terminal rollout is due tocomplete. Rollout will be managed by Camelot Illinois – primarily retailer planning, contact andscheduling, with execution in the field managed by two 3rd parties. Camelot hasfound that using two suppliers is an effective way to manage capacity fluctuations inroll-out activities.448 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanGaming System Assumptions Data migration is assumed to have a static data conversion and parallel runningcomponent There will be an ICS equivalent system provided by the State. Number of development and test environments will not be limited.Data Center Assumptions Access to existing Data Centers to install early development and test systems andEmulation software and hardware No requirement to develop office systems, infrastructure etc. as part of a technologyrefresh e.g. file systems, exchange or web servers, pc management. Primary and Secondary data Centers are designed and located to provide fullDisaster Recovery.Business Systems Assumptions United Kingdom Lottery SAP templates will be used as a basis for gap analysiswhich will support the definition of Illinois specific requirements. Only Finance, Procurement, CRM and Supply Chain SAP functionality will bedelivered initially with further functionality being evaluated and considered for futuredevelopment. iPOS is not included in first wave of technology enablement, and will plan to go-livein Jan 2012. A separate SAP deployment using United Kingdom code is the chosen option in thisplan. Initially iPOS functionality will be performed by the main gaming system software,with a plan to introduce iPOS system by Jan 2012. Winners database and functions will be performed by the main gaming systemsoftware Assume core gaming system includes/provides prize payment systemKey Risks & ContingenciesRiskLarge amount of parallel work means that thecritical path is often split across more than onetask meaning that whichever task runs latestwill push out the dates.Tight implementation timescales with limitedschedule contingency (only schedulecontingency is one month at the end – plannedgo-live in September and contract expires inOctober) – only contingency options areincrease staffing and requirements de-scoping.This assumes that extending the currenttechnology supplier is unacceptable.In the first two months the vast majority ofsignificant decisions must be made.Contingencies/MitigationsDesign technical architecture to de-link systemdependencies as far as possible.Tight dependency management throughimplementation program managementmethodologies and processesIdentify over-staffing contingencies early in theplanning phase.Commence business requirements specificationactivities prior to bid being won.Commence project planning and requirementsspecification activities prior to bid being wonMobilize technology enablement team on theground immediately following bid decision.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 449

Section 2 Final Business PlanRiskHigh reliance on untested new relationshipswith regulation, state, suppliers and existingbusiness place a risk on schedule or cost.Difficulties in mobilizing a new, large capableteam very quickly.Potentially uncooperative incumbenttechnology supplier should a different supplierbe chosen causing potential delaysSystem documentation may be old, out of dateor non-existent hindering gap analysis and/ordata migration activitiesContingencies/MitigationsEstablish close and formal relationships withstate regulatory bodies from day one.Conduct supplier reviews and establishrelationship contacts from day one.Identification of critical resources has alreadycommenced.Resourcing recruitment and United Kingdombackfill activities already underwayEstablish project plans and program governanceprior to transition and sign off with incumbentupon supplier selectionImplementation of rigorous programmanagement methodologies to ensure strictlevels of risk and issue management.Implement focused program of workimmediately following bid decision to refreshcurrent system documentation.Delivery TimelineFIGURE 2.11.10.1.1: HIGH LEVEL DELIVERY TIMELINE FOR CORE GAMINGIMPLEMENTATIONA more complete version of this table can be found in 2.11 Supporting Information:Figure 2.11.A.15.2.11.10.2 Internet Pilot ImplementationScopeInteractive Systems provide a means to sell Lottery products direct to customersthrough an Internet Channel. This includes the ability to sell all the Draw Based Gameofferings of the Illinois Lottery through an Internet e-Commerce platform directly toregistered players.450 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanThe Interactive Systems will provide the following key functions to a player:Information: on all aspects of the Lottery, including draws, results and winners forany visitor to the siteRegistration: Becoming a member of the Interactive Community while checkingeligibility to play and setting up at least one means of payment.Game Purchase: Initially for Lotto and Mega MillionsSubscriptions: The ability to register for weekly, automatic play of Lotto, Little Lottoand Mega MillionsPlayer Club: A facility to share the gaming experience with other on-line playersInternet Enabled Games: For instance Secondary Draws for those losing in the initialOnline GameComponents of the Internet Pilot An E-Commerce capability, able to maintain player accounts, payments and pay midandlow-tier prizes Integration with Core Gaming, allowing draw based game ticket purchases Instant Win Games, when permitted by state law, will provide an immediateinteractive gaming experience for players A subscriptions engine able to manage continuous play Social gaming facilities through a Player Club A user interface delivered over the Internet allowing end users to be informed andinteract with the Lottery Full transaction security and reliability, allowing all financial and gaming transactionsto be reliably executed, audited and accounted for Hardware, software and networking which provide a secure and high performancegaming platform Interaction with third party suppliers for special facilities, for instance: Geo-location to assure play within regulatory boundaries Credit and identity checking agencies to assure the age and creditworthiness ofplayersPayment systems to execute secure cash transfers within banking standards andrequirementsVolume management solutions to ensure continued service during periods ofextreme loadSystem and solution monitoring to visualize the performance and functionality ofsystem componentsOrganization ImpactAccomplishing an effective Internet presence is a technical and marketing challenge.Illinois will require a specialized marketing function focussed on the Internet channel,ensuring the overall marketing objectives of the Lottery are achieved through themedium of the Internet.Execution of marketing directives will be through the specialized function of e-Commerce Production, designing, testing and deploying the Website to meet themarketing objectives and tactical improvements to accomplish player expansion andsales growth.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 451

Section 2 Final Business PlanThe technical implementation will be supported by the technology team at Camelotwhich has many years experience running highly available platforms transacting largevolumes of data. The software will be based on the Camelot Trading Platform andintegration with the chosen Core Gaming provider.Future Developments of InteractiveBeyond the Pilot, it is possible for the Internet offering to be expanded in twodimensions.Firstly the Internet offering can be extended to cover all existing Online Games, as wellas extending to other gaming experiences including Instant Win Games.Secondly, these services provided through the Internet could be delivered throughMobile Hand Sets, utilising the flexible architecture and implementation approachenabled by the Camelot Trading Platform.All these expansions will be constrained by Regulation and State Law, with CamelotIllinois striving to assure both that we play can be expanded in a controlled andresponsible manner.ApproachCamelot Illinois will use its Trading Platform architecture and Internet marketingexpertise to implement a best of breed Internet solution.The Trading Platform approach allows Camelot Illinois to separate the core functionalcomponents of an Internet offering (like the Gaming System integration, e-Commercefunctionality) from the graphical user interface delivered through the Web Browser.In this way we can bring to bear our expertise in developing Interactive trading throughexcellence in Web design, while still assuring the core security and reliability of theunderlying transactions.Trading Platform ArchitectureThe concept of the Camelot Trading Platform is to allow the separation of underlyingLottery transactions from the method of sale. This allows the expertise of Camelot’s e-Commerce Production team to be brought to good effect, irrespective of the CoreGaming provider selected for Illinois.The Trading Platform is a Camelot product that will be modified for use within the IllinoisLottery by Camelot Illinois’ technology suppliers. The Trading Platform is described inmore detail in Section 2.11.3, but simply put, the Trading Platform provides all Lotteryand Account transactions on which the Website depends.For instance, the Website will gather information about the user in order to open a newaccount. This information will be passed to the Trading Platform which will then executethe Account Open transaction.Hosting and IntegrationExact arrangements for hosting and integration with the Core Gaming Systems willdepend upon the selection of Core Gaming provider. It is most likely that the Internetsolution will be co-hosted with Core Gaming in the Primary and Secondary Data Centersin Illinois.Integration will form part of the Gaming Systems implementation supported by ourchosen Core Gaming supplier Core Gaming integration will be for purchase of Online452 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanGames and other Online Game information services while the remainder of the Internetsolution (user and account management, subscriptions etc) will be based on the moreportable Trading Platform tailored for the United States market (for instance in fundstransfers).Marketing for Internet SalesCamelot Illinois brings its expertise in marketing and internet sales, having built thelargest on-line Lottery sales in the world. Part of our marketing presence in the state willspecialize on marketing the Internet, directing the remote Camelot Illinois e-CommerceProduction team in their development and maintenance of the Illinois Website.Web Design CapabilityCamelot Illinois’ experienced team of Web designers will bring their skills, methods andtools to effect the launch of industry-leading websites.We use best-in-class tools to monitor how our users actually use the site, then tailor andtune the player journey and user experience to maximize their interest, dwell time andgaming sales within regulatory constraints.This capability would be provided as a service from the United Kingdom based team asan extension of their duties for the United Kingdom National Lottery.Solution ComponentsIn its simplest terms, the Internet solution comprises a Website to provide a userinterface for our players, supported by the Trading Platform that processes playertransactions and provides Lottery information.Some significant sub-systems also provide a complete solution for the Internet whichaddresses the special issues encountered with delivering Lottery transaction processingWebsites, or support the specialized Sales and Marketing activities required forsuccessful E-Commerce.WebsiteThe principal user-facing component is the Website, developed to use standard Browsertechnology for maximum penetration in the Internet E-Commerce market place.Pragmatic use of different technologies will be used to maximize the user experiencewhile maintaining a website of exceptional performance and availability. This will includeHTML pages with Flash, Movie and other dynamic content, designed to engage andretain the interest of players seeking on-line Lottery information and game purchase.Player Experience ImprovementPart of the key offering we can make is continuous improvement in player experience,driving up player retention and sales. This is accomplished by a number of activities andsupporting tools from suppliers like Autonomy who provide integrated contentdevelopment, management and analysis tools.Player Analysis: We use tools like Web Analytics to discover exactly where our playerscome from, what pages they use, where they follow or end a particular process. Thisinformation is used to redesign and augment the player journey and experience.Multi-Variant Testing: Some parts of any Lottery Web site will be critical to maximisingsales, for instance the home page, registration, IWG selection. Prototyping and researchcan only take you so far towards optimising the outcome from these pages. We can thenCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 453

Section 2 Final Business Plango further by producing multiple versions of the same pages and see which works thebest with Players, then use that version as the next iteration in continuous improvement.Personalisation: In association with the Player activity analysis and classification, it ispossible to personalise some parts of the site to both deliver the Player facilities thatthey most frequently use, and to encourage them to explore the next best desiredoutcomes, i.e. new games that they may like to play. This is achieved throughpersonalisation tools, integrating player past behaviors with player type profiling andspecialized versions of key pages, delivered for that person at run time.Campaign ManagementMarketing to your e-Commerce community is a critical part of growing the online playerbase. Campaigns can be designed around existing players and how they currently play,as well as email and Web Advertising campaigns designed to bring in new players to thesite.Such campaigns must be carefully managed, first to identify the target audience,manage the execution and subsequently measure the success of the campaign againstits original objectives. This can be achieved through our expertise built up over nearly adecade of continued growth of Internet sales, supported by industry leading CampaignManagement tools such as Unica.Payments IntegrationA fundamental component of the on-line offering is the ability to take payments and payprizes on-line. This is achieved through a Payment Services solution and an AcquirerBank.Payment Services are provided through a specialist supplier, most likely to be the LogicGroup and the Solve product set. This product allows a highly configurable interface frome-Commerce applications into the Banking providers for secure, online transactions all ofwhich will be 3D-Secure and PCI compliant.In turn, the Payment Services are integrated with an appropriate Acquirer Bank whichwill be selected from Banks with a local Illinois presence which also have an existingintegration with the Logic Group. Through them we will be able to take payment and payprizes (within regulatory constraints) through Debit and Credit cards and potentially otherlocal regular payment options like Standing Orders.In addition Payment Services can integrate with other payment methods used on-line,for example Pay Pal and Google Checkout. Integration with any or all of these paymentmethods depends on regulatory agreement and the cost of the service which can take asignificant proportion of Operator margin.Player VerificationA key part of regulatory compliance of on-line systems is to ensure that players areallowed to play. The approach we take is to ensure that a player complies with the localLottery rules at the point they apply for an on-line account.Typically we seek to confirm the player’s age, address and credit-worthiness at the timethey apply. We do this through on-line services to confirm an accurate address is given,that this corresponds to on-line credit checks such as Experian or our Acquirer Bank.Ultimately the player must also confirm that they are allowed to play, having read andunderstood the rules of play.454 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanGeo-locationMany Lottery regulation regimes restrict play to within the geographical limits of theirjurisdiction. We will meet this regulatory requirement using a Geo-location solution thatidentifies the location of the individual based on their Internet address using a constantlyupdated on-line service such as Quova which associated the Internet address with aphysical location world wide.We can be confident of the location of a domestic internet connection from the sourceInternet address. From this we can be reasonably sure (92-97%) that they are inside oroutside State boundaries and either allow them to play or prevent them accordingly.In some circumstances, the Quova data can show that we do not know the location of aplayer. For instance an individual may play from work in an international business, inwhich case they may be sitting in Chicago, but linked to the Internet through New York.Using the Internet from a mobile phone browser presents similar problems.The Geo-Location solution can identify this situation and ask the individual concerned toconfirm their physical location before they play, putting the obligation on the player toensure they play within the rules.Peak Demand ManagementOnline Games tend to have peak sales as a large rollover approaches, often with manymultiples of average sales in the few hours before a draw break. We propose thatanother proven solution is put in place for Illinois which protects both the Internetsolution from stress under such circumstances, and increases the overall capacity of thesolution under peak load conditions.The Virtual Queue will allow a steady rate of new players onto the site, at a rate that thesite can support. This allows a more even load on the Internet infrastructure andapplication, avoiding mini-spikes which can cause application faults. The result is thatpeak through put is increased by 10-15% for the same application infrastructure andthere is better player information and retention in times of peak load.When activated and the site is very busy, the player sees a count-down screen showingwhen they will get onto the site, which is anything from say 5 seconds up to 60sdepending on load. Our experience is that players wait for access under thesecircumstances and in doing so, the application is protected from fault during peak loadswhen we are able to make approaching $1.5 billion/hour lottery sales.Managing Responsible PlayEncouraging and policing responsible play is a core obligation of any Lottery operator.This is accomplished through careful reporting and business rules surrounding the totalvalue of purchases from a particular player’s account over varying periods of time.Business rules are intrinsic to the Internet Solution, and allow the Lottery to ensure aplayer does not play excessively during any particular day, week or month, while stillallowing the exceptional circumstances of, say, a player breaking a daily limit to buymultiple tickets for one big draw while remaining below a weekly or monthly play limit.Assumptions Develop and initial Test is on the existing infrastructure at Camelot, Illinois or CoreGaming supplier. Trading Platform integration will be part of the Core Gaming systems contractCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 455

Section 2 Final Business PlanConstraints Local law and regulation will be an important constraint to progress from an InternetPilot through to full Interactive offering of all Illinois Lottery services. We would workclosely with local regulators and State Legislature to progressively extend the servicesand sales through Interactive Platforms while building confidence that we can do thiswhile protecting Illinois State and Players from inappropriate exposure. For complete success, the selection of a technology supplier for Core Gaming will bedone considering the medium and longer term requirements for Internet and TradingPlatform integration. Care must be taken to ensure the Technology Supplier will beable to complete Technology Transformation while also providing integration with theTrading Platform.Key Risks & ContingenciesRiskLegislation does not allow the expansion ofgaming to the Internet.Establishing and the Camelot Illinois e-Commerce Production team to conductimplementation within the timescales.Contingency/MitigationBusiness plan contains 2 scenarios with/withoutinternet capabilityIdentification of critical resources has alreadycommenced.Resourcing Recruitment and United Kingdombackfill activities already underwayDelivery TimelineFIGURE 2.11.10.2.1: HIGH LEVEL DELIVERY TIMELINE FOR INTERNET PILOTIMPLEMENTATIONA more complete version of this table can be found in 2.11 Supporting Information:Figure 2.11.A.16.456 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.11.11 PROGRAM MANAGEMENTHaving the best Business Plan in the world is only one element of delivering revenue andNet Income growth: the ability to execute the plan is the other key factor. CamelotIllinois will bring its time-tested project management tools and capabilities. Thesestandard management practices have allowed Camelot to successfully complete thelargest lottery systems transformation in the world on time and on budget.The Camelot Illinois Program Management team will oversee delivery of all commercial,operational and technology initiatives throughout the period of the Private Managementcontract. This starts with the delivery of the technology enablement plan described inSection 2.11.10, and continues into a ‘Business As Usual’ function that will beresponsible for delivery of all strategic initiatives, or projects, set out in the commercialroadmap. In order to successfully manage the implementation of a range of diversestrategic projects at such a scale over multiple years, projects will be logically groupedinto a series of programs that will define the organizing principle for the programgovernance model.Camelot’s Program Management office was responsible for the delivery of the LotteryIndustry’s largest, fastest and most complex Transition in 2008 as well as the successfulTransition in 2000 and the launch of the Lottery in 1994. The Program Managementoffice also delivered other Camelot successes such as EuroMillions, Interactive and FastPay.There are a number of elements and capabilities that comprise Camelot Illinois’ proposalfor Program Management in Illinois.2.11.11.1 Center of ExcellenceCamelot Illinois will create a center of excellence within the Illinois Lottery similar toCamelot’s in the United Kingdom, staffing it with relevant experienced professionalscombined with Camelot’s proven Program and Project Management processes,knowledge, tools and templates. Utilizing this experience will allow Camelot Illinois todeliver not only the Technology Enablement program, but more importantly, all futurecommercial initiatives to the highest standards, within the proposed timescales and onbudget.The foundation of Camelot’s own excellent track record has been its skills and expertisein managing inter-dependent commercial, operational and technology projects within aProgram framework. All Camelot initiatives are planned and co-ordinated through acenter of excellence containing Project and Program Managers, Business Analysts andProject Support Office. Their clear focus is on ensuring Stakeholders are managedeffectively and all projects are in full compliance with regulatory requirements. Allsuppliers are integrated into the project, ensuring their commitments are met while theLottery remains in control.2.11.11.2 Program GovernanceAll programs of any size or complexity require strong alignment between businessstrategy, and the implementation path to achieve the desired outcomes over the life ofthe program. For Illinois, this alignment is critical to ensure the technology enablementprogram – and strategic initiatives beyond this - deliver to the desired potential, and givethe confidence and visibility to the State that objectives are being met. In addition tostrategic alignment there is a strong need for a formal mechanism to provide oversightCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 457

Section 2 Final Business Planand control during program execution. This mechanism will ensure Camelot Illinois’senior management are able to assess the program's current state to allow foradjustment of content and direction if necessary, as well as ensuring the State retainscontrol over all significant business decisions.Camelot Illinois will define and implement a governance structure within which toexecute program management. This governance structure will: Provide active direction, periodically review interim results, and identify and executeadjustments to ensure the objectives of the business plan are achieved (whichcontributes to success of the overall business strategy) Ensure that the tactical implementation priorities remain aligned to the longer termobjectives of the business strategy Define a touchpoint process for regular engagement with the State.The specific program governance structure will need to be agreed with the State, butindicatively, Camelot Illinois would expect the governance structure for the technologyenablement phase to take the shape set out in figure 2.11.11.2.1.FIGURE 2.11.11.2.1: PROPOSED PROGRAM GOVERNANCE STRUCTURE FORDELIVERY OF STRATEGIC INITIATIVESState GovernanceForumProgram SteeringCommitteeChannels ProgramBoardProduct ProgramBoardBusinessCapability ProgramBoardStrategic ProjectsChange ControlBoard2.11.11.3 Proven Tools, Processes and MethodologiesSupporting the overall Program governance will be a robust set of key processes thatdescribe how the project management activities will be conducted by Camelot Illinois.These processes have been the foundation of successful program delivery for the UnitedKingdom National Lottery, have been successfully transported to California and havecomplete transferability to Illinois:Formal Status Reporting Formal reporting of individual projects will be conducted via weekly HighlightReports, reporting to an agreed set of milestones for each project. The HighlightReport will provide the status of the whole project across all streams of work. Thiswill be done to a required level of granularity for effective project tracking (schedule,cost, risks, issues etc.) with the full coverage needed for highlight reportconsolidation.458 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanIndividual project Highlight reports will be rolled up into program level dashboards forreview by Program Boards and the Steering Committee.Exception Reporting If it can be forecast that there will be a deviation beyond the tolerance levels set forthe project in terms of effort, cost or schedule, this will result in an exception. Anexception is most likely to originate from a significant change request, issue or risk. If an exception occurs, then a formal exception report will be completed that setsout the reason for the exception and the remedial activities to be taken in order tobring the project out of exception. The exception report is then reviewed andapproved for action by the Program Board.Project Interdependency Management Project interdependency management will be co-ordinated by the ProgramManagement Office. Each project, within their project plans, will identify tasks whichare either awaiting a dependency from another project or delivering a pre-requisite toanother task. These dependencies can then be extracted into management reports,so that the effectiveness of delivery of these tasks can be tracked and downstreamimpact understood. The number of dependencies, whether they are on-time or atrisk, will be regularly reported in Program Board and Steering CommitteeGovernance Forums. Dependencies on third parties, including the State, will be managed using a‘touchpoint’ process. This will involve the tagging of project tasks with dependencyinformation, which will then be extracted and handed over to the relevant thirdparties who will integrate it into their own project plans. New, modified, deleted orlate items will be managed using an exception report and escalated as appropriate.Change Management The process for change management involves the establishment of a ChangeControl Board that meets on a regular (probably weekly) basis, to review andapprove/reject any project changes: Raise Change Request Perform Change Request impact assessment Change Control Board review impact assessment and make approval decision Change is implemented Change is verified Change Request is closedRisk Management A comprehensive risk framework will be introduced to manage risk within theProgram and to ascertain how it relates to the overall Private Manager risk profile forCamelot Illinois and lottery risk profile for the State. Project risks will be evaluated fortheir absolute impact (multiplying the financial impact, were the risk to materialize,by the likelihood of the risk materializing). Controls will then be applied to the riskand subsequently re-scored, before planned treatments will finally be applied to therisk for it to be re-scored again. All risks in the Program will be articulated withreference to the business impact, rather than simple failure of a project milestone –in this way, focus will continue to be maintained on the ultimate benefits of theproject.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 459

Section 2 Final Business PlanThis risk management approach will allow the automatic escalation of risks fromprojects to the Program, and from the Program to the corporate level riskmanagement processes. Escalation to the corporate level will be based on the scoreof the risk following the application of mitigating controls. Risk performance will betracked at the Program Board and Steering Committee level using the risk scorecard,which will define movement in risk scoring, quantity of risks, adherence to actiondates and provision of mitigations.Issue Management Project issues are formally reported to Camelot Illinois via the Highlight Report. Issue logs will physically exist at project and program levels. Issues will be monitored, assessed and resolved at project and program levels.Quality Management Every project will produce a formally approved Quality Plan. The Quality Plan will contain exact lists of the work products that each project willdeliver and will be developed and signed off during the Start-up & Initiation stage ofthe project. The specific quality control requirements for each product will be definedin the Quality Plan. In addition to the quality control of products, quality assurance is also applied in theform of End Stage Assessments throughout the project lifecycle, Post DevelopmentReviews at the end of the project to identify Lessons Learned and processcompliance audits.Configuration Management Camelot Illinois will deploy a Configuration Management (CM) capability as part of itsorganization structure for operating the Illinois Lottery. This CM capability will employa CM Repository where all official versions of code and documentation will beplaced. The State will have read access to all CM repositories at all times. Copies may be made of the master copy of software and documents, but theintegrity of the master copy will remain, as any changes made to it will need tocomply with the relevant acceptance criteria, before being checked back in, whichwill include Camelot Illinois having access to revision history created by the softwaresupplier. Camelot Illinois will only accept code from third parties that conforms to the formalacceptance criteria. This will include Release Notes that detail results of testingalready carried out, defect logs, known errors, details of the changes to the file setand status of other key deliverables. It is expected that all 3rd parties will make available their baseline designdocumentation repositories. The project CM Plan will be defined at the Initiation of each project to set out the CMmilestones for the project in accordance with the project timetable. CM will be responsible for the quality control of all release documentation that isassociated with the release of code to ensure that all required items have beendelivered with the release and are correctly labeled. Access to the CM repositories will be audited by Camelot Illinois.460 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanStakeholder ManagementThe Programs Organization is an agent of change and the driving force for delivering thestrategic platforms that will be the foundation for the forecasted growth throughout thelife of the Private Management Agreement. This means that the interests of a number ofdifferent groups of stakeholders, both internal and external, need to be managed andconsidered in the execution of Program Initiatives.The Stakeholder management strategy will apply to both individuals and groups. It willdefine who the stakeholders are, what their interests and influences are likely to be,how the program will engage them, what information will be communicated and howfeedback will be processed.The stakeholders will be grouped into five categoriesStakeholder groupThe StateCamelot IllinoisExecutive TeamEmployeesRetailersPlayersManagement approachFormal Program Reviews, to be completed every six to eight weeksJoint attendance at Camelot Illinois/Lottery Board meetings to shareupdates and informationIndependent testing of the software solution will be completed andreviewed to assist the State with launch decision-makingWeekly progress highlights will be provided for onward cascade to all staffExecutive team will play key roles in program governance structureUse, where required, of formal Executive Team sub-committees withspecific delegated powers to assist with decision-makingWeekly cascade meetings from departmental directors keep all employeesup to date with key program milestonesRegular mailshots and news posted to intranet site highlight key eventsRegular consultation and progress reporting to be conducted at ‘RetailerForum’ meetingsSatisfaction surveys to be issued following installation of new equipmentAny planned system upgrades will be communicated in advance, using thewebsite, emails, advertising and on draw showsContinual briefing to Player Contact Centers to enable high-qualityresponse to enquiriesCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 461

Section 2 Final Business Plan2.11 SUPPORTING INFORMATION2.11 A. Functional Organization ChartsFIGURE 2.11.A.1 PRESIDENTPresident1P58Head ofFinance1P59Corp AffairsDirector1P60Marketing &E-CommerceDirector1P61LotteryGeneralCousnsel1P39Transition &OperationsDirector1P62Sales Director1P63GovernanceDirector1P111New roles introduced as part of PMAExisting Illinois State Lottery rolesFIGURE 2.11.A.2 ACTING SUPERINTENDENTActingSuperintendent1Executive ExecutiveP1Private Secretary1Executive StaffP8Lottery ApplicationProgramming Manager1Executive ManagerP7Lottery TelecomManager1Executive ManagerP4Strategic Planning1Executive ManagerP6AssistantSuperintendent1Executive StaffP5Budget Liaison1Executive ManagerP3ApplicationsProgramming Staff8Executive StaffP9462 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.11.A.3 FINANCEHead of Finance1P59CommercialFinanceAnalyst1P64TreasuryManager1P65FinanceManager(Compliance)1P42Secretary [FinMgr]1P23Return ticketcontrolmanager1P46Claims andprocessingmanager1P44Licensing andsubscriptionsmanager1P45Coordinator[Finance]1P27AssistantManager1P52Officeassociate4P36Accounttechnician6P49Publicinformationofficecoordinator1P48Prize paymentcoordinator1P50AssistantManager1P52Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 463

Section 2 Final Business PlanFIGURE 2.11.A.4 MARKETINGMarketing Director1P10Marketing & E-Commerce Director1P61Promotions Director1P14Product DevelopmentDirector1P19Head of Insight1P66Head of E-Commerce1P71Head of BrandComms1P67Head of Instants1P112Head of OnlineGames1P68Channel Analyst1P69ConsumerAnalyst1P70Head ofProduction1P72E-CommerceSupport1P73Executive II1P12Events/SponsorshipOffice1P13HispanicMarketingLiaison1P16Instant productmanager1P21Online productmanager1P20Specialty ticketManager1P22CommunicationsCommunicationsManagerManagerassistant11P17P18AdministrativeAssistant1P11Secretary (ProdDev Mgr)1P23OfficeCoordinator1P15Assumed that 15 FTE in TechEnablement are building websiteand 7 FTE will transition to BAUsupport464 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.11.A.5 TRANSITION & OPERATIONSTransition &Operations Director1P62OperationsManager (Dist)1P54ChiefInformationOfficer1P24SecurityOfficer1P2Head of IT1P74Head of TechEnablement1P76Head ofTransformation1P77LotteryCommoditiesDistributor2P57Warehousemanager1P55Storekeeper1P56IT Department18TechnologyEnablement20 Senior HRBusinessPartner1P78Personnelrelations staff1P41IntegrationManager1P79Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 465

Section 2 Final Business PlanFIGURE 2.11.A.6 SALESSales Director1P63Secretary [Sales Mgr]1P23Sales Manager1P25Call Center Manager1P80Corporate Accountsmanager1Corporate accountsSenior ManagerP37Retailerrelationsmanager1P29RegionManager6P28Telemarketingmanager1P30Call CenterStaff [2012]12P82Call CenterStaff –Interactive[2012]3P83Assistand[Corp a/c’s]1Corporateaccounts StaffP38CustomerBusinessManager3P81Assistant[Sales]1P32Regionalcoordinator11P31AssistanttelemarketingManager1P33Lottery salesrepresentative58P34Coordinator[Sales]4P27OfficeassociateSales6P36Lotterytelemarketingrepresentative17P35FIGURE 2.11.A.7 CORPORATE AFFAIRSCorp Affairs Director1P60Social ResponsibilityManager1P82Head of Policy &Public Affairs1P84466 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.11.A.8 GOVERNANCEGovernanceDirector1P111BusinessAssurance2P75Head ofRegulation1P83Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 467

Section 2 Final Business PlanFIGURE 2.11.A.9 TECHNOLOGY ENABLEMENTE-CommerceManager1P71These roles inc inperm headcountTransition &Operations Director1Executive ExecutiveP60eCommerceProgrammeManager1Head ofTechnicalEnablement1P76PMO &ProjectGovernanceManager1InteractiveProjectManager1RetailerProgrammeManager1CoreTechnologyProgrammeManager1BusinessAnalystManager1P84ProjectManager1P114Oct-10 –Jun-11QualityManager1P87ArchitectureManager1P89InfrastructureArchitect (IT)1P113Oct-10 –Jun-11PMOTeamMember6TradingPlatformManager1TerminalEmulationPM1ROCManager1BusinessSystems PM1BusinessAnalystLeads3P85Test Leads3P88ApplicationArchitect3P90NetworkArchitect (IT)1P115Oct-10 –Jun-11QualityAssuranceAnalyst1eCommerceProductionTeam15TerminalRollout PM1ROCOperator10Core SystemsPM1BusinessAnalysts10BusinessAnalysts5P86Testers30eCommerceArchitect3P91InstoreEnvironmentPM1Insource:1 Heads of9 BA Managers/Leads/Analysts4 Test Managers/Leads7 Architects2 IT Architects (Oct-10 – Jun-11)1 Project Manager24 FTE TotalInfrastructure& DatacentrePM1Day OneReadinessPM3Resource Required duringPhase 1 from Sept 16th112 Total HeadsProposed OutsourceOutsource:30 Testers – Local/low cost provider10 Bas – Gaming System supplier15 ecommerce Production – Local Supplier11 ROC Management/Operations – Local Supplier8 PMO – Tier 1 Consultant3 Project Managers – Tier 1 Consultant11 Project Managers – Tier 1 Consultant88 FTE Total468 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.11.A.10 ITHead of IT1ITP74Head of IT ServiceDelivery1ITP92Head of BusinessSystems1ITP93Head of Networks1ITP94*Overall team size dependant upon selection of both architecture and gaming services providerLead SystemsArchitect1ITP95FIGURE 2.11.A.11 IT SERVICE DELIVERYHead of ServiceDelivery1P92SupplierRelationship Lead1P96ServiceManagement Lead1P97Configuration Lead1P98Change/ReleaseLead1P99Incident ProblemLead1P100Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 469

Section 2 Final Business PlanFIGURE 2.11.A.12 IT EIGHead of ServiceDelivery1P92EnterpriseApplication Lead1P101Enterprise SystemLead1P103System AdminTechnical Lead1P102FIGURE 2.11.A.13 IT BUSINESS SYSTEMSHead of BusinessSystems1P93Business SystemsFunctional Manager1P104Business SystemsTechnical Mgr1P106Enterprise LeadDatabase Manager1P108Functional AnalystFI/CO-P2P1P105Software Engineer/Developer1P107470 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.11.A.14 IT NETWORKSHead of Networks1P95Network TechnicalLead1P109*Contact CentreTechnical Analyst1P110*Assumes Lottery hasinternal contact centreCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 471

Section 2 Final Business PlanFIGURE 2.11.A.15 HIGH LEVEL DELIVERY TIMELINE FOR CORE GAMINGIMPLEMENTATION472 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.11.A.16 HIGH LEVEL DELIVERY TIMELINE FOR INTERNET PILOTIMPLEMENTATIONCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 473

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Section 2 Final Business Plan2.12 PRO-FORMA PROFIT AND LOSS STATEMENTWe believe the Illinois Lottery has the potential to increase sales and Net Income by over70% from FY2010 to FY2016. As shown below in Figure 3.1, ticket sales increase to$3.8 billion by FY2016, a CAGR of 9.6% from FY2010 to FY2016 and Net Incomereaches $1.1 billion, a CAGR of 9.7%.FIGURE 2.12.1: SUMMARY FINANCIALS FOR ILLINOIS LOTTERY ($MN)$Mn FY12 FY13 FY14 FY15 FY16 SV/NSV 1Driver2 61 3 01 0 3 341 3 663 3 35 126122 2 65 32 4 35 0 3 351 42 1 6 1 3 2 030 2 11411 24 12 6 13 6 154 162066 305 56 32 33 0 452 503 541 563Total revenues 2,657.9 3,062.2 3,392.1 3,718.0 3,891.4Direct Expenses (1,726.8) (2,000.6) (2,220.3) (2,426.8) (2,537.5)1 5 4 1 4 2 054 5 2 246 1 2 34 0131 150 165 1 0 1 6Operating expenses (170.6) (179.4) (189.9) (200.9) (207.5)36 1 36 36 36 6 36134 5 142 5 152 164 4 1 0 631 3 36 3 3 43 0 443 4 2 2 24 25 FY20035 3 2 4 32 5 36 3 3 325 FY20010 16 6 1 1 3 20 1F0 0 2 4F 2 564 6 5 1 514 15 2 15 5 15 16 3 25 FY20020 3 24 2 2 2 5 2 40412 0 14 1 15 1 0 114 32 36 36 360 0 10 10 11 251 1 1 1 1 25 FY20012 1 1 1 121 21 22 22 23 25 FY200F 11 11 11 11 12 25Net Operating Income 760.6 882.2 981.9 1,090.2 1,146.4Source: Camelot Illinois, August 2010; SV = Sales Variable; NSV = Non-Sales VariableThe following section sets out the assumptions supporting the projections shown above.The assumptions section covers: Approach in preparing the forecast Sales Other Revenues Prizes Commissions Operating Expenses Management FeeCamelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 475

Section 2 Final Business Plan Lottery ExpensesAPPROACH IN PREPARING FORECAST AND KEYASSUMPTIONSThese forecasts represent Camelot’s best estimates of the potential sales and NetIncome achievable by the Illinois Lottery as well as the likely costs of fulfilling the role ofPrivate Manager and delivering the business plan. However, it should be noted that theBusiness Plan Net Income forecasts shown here differ from those contained withinCamelot’s Net Income Targets detailed in Binding Offer Form 5. Although Camelotbelieves the Business Plan Net Income forecasts are achievable, it is proposing NetIncome Targets at lower levels (consistent with point 4 of the Transaction Advisors’additional RFP instructions dated 25 th August 2010). This reflects the fact that CamelotIllinois will not have overall control of the Illinois Lottery. A reconciliation betweenBusiness Plan Sales and Net Income Target sales is shown in Section 3.0 Net IncomeTarget.Camelot Illinois has made the following general assumptions in its forecast:We have used the audited FY2009 accounts as a basis for preparing LotteryExpenses projections. As per the Final PMA, we assumed that Camelot Illinois isresponsible for these costs and will be reimbursed by the State; We have assumed that some of these costs (such as Marketing and Branding) willvary with sales during the forecast period whereas others (such as Professionalservices costs) will grow with inflation at 2.5% per annum; We have assumed that Camelot will restructure the Technology and Instants printingcontracts to achieve savings, on a percentage of sales basis, versus FY2009 levels; We have overlaid on this forecast the incremental costs associated with deliveringCamelot’s business plan such as IT investment and appointment of additionalpersonnel; We have assumed that Camelot Illinois will bear the cost of legacy contracts to theextent that such costs accrue after the Base Services Commencement Date and thatCamelot Illinois will recover those costs from the State via Lottery Expenses; We have assumed that Camelot Illinois will bear the cost of telecommunications tothe extent that such costs accrue after the Base Services Commencement Date andthat Camelot Illinois will recover these costs from the State via Lottery Expenses;Camelot Illinois recovers depreciation on capital expenditures in respect of the IllinoisLottery via Lottery Expenses with that depreciation calculated on a straight line basisover the useful life of the asset;On the basis that Camelot Illinois is acting as a supplier to the State, the forecastassumes that Camelot Illinois will incur no irrecoverable sales tax;Camelot Illinois is likely to incur significant costs in the Ramp-Up Period (which wehave assumed will end by June 2012). We have assumed that this will be subject toagreement with the State following signing of the Private Management Agreement.476 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.12.1 SALESBase SalesCamelot’s Base Sales forecast reflects the estimated sales required to achieve NetIncome of $659 million, our estimation of Net Income for FY2010, throughout each ofthe five years to FY2016. Figure 2.12.1.1 below shows the Base Sales forecast bygame. Camelot analyzed FY2009 audited accounts to develop cost assumptions andforecast FY2010 Net Income. Sales variable costs such as prizes, commissions,marketing and branding, gaming platforms, logistics and instants printing costs werecalculated using FY2009 rates. Non-sales variable costs were assumed to be at thesame level as FY2009 plus annual growth of 2.5%.FIGURE 2.12.1.1: SALES BY GAME – BASE SALES$Mn FY12 FY13 FY14 FY15 FY16Instants 1,193 1,215 1,227 1,229 1,229Online Games 1,024 1,017 1,017 1,018 1,020State Games 673 668 667 667 669Pick 3 276 272 271 269 270Pick 4 182 183 186 189 189Little Lotto 98 97 97 97 97Lotto 97 95 94 92 93Raffle 20 20 20 20 20Multi-state Games 351 349 350 351 352Mega Millions 219 218 218 219 220Powerball 132 131 131 132 132Total Base Sales 2,217 2,232 2,244 2,247 2,250Source: Camelot Illinois, August 2010Proposed scenarioHaving detailed Camelot’s Base Sales scenario above, this section will now consider theimpact upon sales of the initiatives within Camelot’s business plan including: Instant Games Development Online Games Development Retail Initiatives Internet (Lotto and Mega Millions sales) Pilot Program.The section will consider sales contribution by initiative, by channel and by game.2.12.1.1 Sales contribution by initiativeThe initiatives in Camelot’s business plan contribute to sales over the forecast period.The incremental sales from these initiatives are driven by the key assumptions outlinedbelow. A summary of how the various initiatives contribute to Business Plan Sales isshown in Section 2.12.7.1.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 477

Section 2 Final Business PlanBase Sales ForecastAs described previously, sales are adjusted to keep the Base Level Income at theestimated FY2010 levels of $659 million throughout the forecast period.Instant Games DevelopmentEnhancements to the Instant games portfolio generate incremental sales (before theInstant games sales improvement from the Retail initiatives) of $567 million in FY2016.This is due to:increased sales resulting from increased spend per player and higher penetration ofthe Instants categorysales per capita levels (which include effects of the Retail initiatives) increasing from$92 in FY2010 to $161, compared to Pennsylvania’s adjusted sales per capita of$153 in FY2016 1 .Online Games DevelopmentEnhancements to the current Online Games portfolio and the addition of new gamesgenerate incremental sales of $366 million (before Retail and Internet Pilot Initiatives) inFY2016. Cumulatively, these initiatives raise on-line sales per capita (which includeRetail and Internet Pilot Initiative effects) from $79 in FY2010 to $131, compared toPennsylvania’s on-line sales per capita of $115 in FY2016 2 . This is due to the followingchanges in State games and Multi-state games:Restructuring of the current Lotto game, adding $45 million in FY2016Addition of two more annual raffle events to St. Patrick’s Day Raffle and increasingthe number of tickets sold in each event, adding $30 million in FY2016Additional price points are added to Pick3 and Pick4 games, adding $69 million inFY2016Addition of an Experiential Raffle game in FY2016, adding $31 million in its first yearImproved marketing and brand positioning of Mega Millions and Powerballrepresenting incremental sales of $91 million in FY2016Addition of a World Lottery Draw game in FY2015, adding $100 million in FY2016.Retail InitiativesAdditional sales uplift of $564 million in FY2016. Our forecast assumes the following: Additional 2,000 terminals begin contributing revenue in October 2011, adding $147million in FY2016, averaging $73,500 in incremental sales per terminal Additional 1,500 terminals begin contributing revenue in July 2013, adding $88million in FY2016, averaging $58,800 in incremental sales per terminal Additional 3,000 full-service vending machines begin contributing revenue in July2012, adding $154 million in FY2021, averaging $51,400 in incremental sales perterminal Improvement in in-store execution begins to increase sales from July 2012. Basedon experience in the UK market, we have assumed a sales uplift of 1.5%, rising to4.5% by FY2016, adding $143 million in FY20161The Pennsylvania sales growth has been indexed to an annual 2% inflationary growth from FY20102The Pennsylvania sales growth has been indexed to an annual 2% inflationary growth from FY2010478 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanIntroduction of Extended Means of Play increases sales from July 2013. We haveassumed a sales uplift of 0.25%, rising to 1.00% by FY2016, based on performancein the UK market, adding $32 million in FY2016.Internet Pilot ProgramLaunch of Internet sales for Lotto and Mega Millions – uplifts total sales by $89 million inFY2016: Lotto and Mega Millions subscriptions are made available by January 2012 The forecast assumes that operation of the internet channel continues after theInternet Pilot Program is complete (the lottery legislation envisages the Internet PilotProgram lasting 36 to 48 months) Cannibalization of retail sales for these games is an estimated 10% Sales for the individual games are modeled on similar Internet games’ performancein relation to retail sales within the UK market. The percentages of retail salesassumed for the Internet Pilot Program are shown in Figure 3.2.2.1.5.2 below. Forexample, we have assumed that by FY2016, Lotto sales through the Internetchannel represent 12% of sales.FIGURE 2.12.1.1.1: INTERNET SALES BY GAME$Mn FY12 FY13 FY14 FY15 FY16Internet channel effect 6.6 30.5 56.8 83.2 99.3Mega Millions 5.9 25.1 42.9 61.4 70.2Lotto 0.6 4.1 9.8 15.8 19.0Mega Millions subscriptions 0.1 1.1 3.4 4.3 7.3Lotto subscriptions 0.0 0.2 0.7 1.7 2.9Cannibalization effect on retail sales (0.7) (3.1) (5.7) (8.3) (9.9)Total 6.0 27.5 51.2 74.8 89.3Source: Camelot Illinois, August 2010FIGURE 2.12.1.1.2: INTERNET SALES BY GAME% of Retail Sales / Subscriptions FY12 FY13 FY14 FY15 FY16Mega Millions 2.3% 9.3% 15.2% 22.5% 25.6%Lotto 0.6% 3.5% 7.0% 10.1% 12.0%Mega Millions subscriptions 2.3% 26.5% 88.3% 111.7% 205.8%Lotto subscriptions 1.9% 11.4% 34.4% 82.8% 148.6%Total 0.3% 1.0% 1.7% 2.3% 2.6%Source: Camelot Illinois, August 20102.12.1.2 Sales contribution by channelThe introduction of the Internet Pilot Program, continued sales from the Internet channeland further development of subscriptions leads to a decrease in the percentage of salesfrom the retail channel of 99.8% in FY2009 to 97.2% in FY2016 as shown below inFigure 2.12.1.2.1.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 479

Section 2 Final Business PlanFIGURE 2.12.1.2.1: PROPOSED SCENARIO – SALES BY CHANNELFY12 FY13 FY14 FY15 FY16Retail ($Mn) 2,604.7 2,979.1 3,277.9 3,573.8 3,729.4Internet ($Mn) 6.6 30.5 56.8 83.2 99.3Subscription ($Mn) 7.5 7.3 7.1 6.9 6.5Total sales 2,618.9 3,017.0 3,341.8 3,663.8 3,835.1Retail (% of total) 99.5% 98.7% 98.1% 97.5% 97.2%Internet (% of total) 0.3% 1.0% 1.7% 2.3% 2.6%Subscription (% of total) 0.3% 0.2% 0.2% 0.2% 0.2%Total sales 100.0% 100.0% 100.0% 100.0% 100.0%Source: Camelot Illinois, August 20102.12.1.3 Sales contribution by gameWithin the proposed scenario, total ticket sales rise from $2.2 billion in FY2010, through$2.6 billion in FY2012 to $3.8 billion in FY2016, as shown in Figure 2.12.1.3.1 below, aCAGR of 9.6%. This growth from FY2012 to FY2016 is driven by Instant games ($685million), World Lottery Draw ($118 million), Mega Millions ($89 million) and Pick 3 ($84million).FIGURE 2.12.1.3.1: PROPOSED SCENARIO – SALES BY GAME$Mn FY12 FY13 FY14 FY15 FY16Instants 1,429.9 1,698.9 1,897.3 2,030.8 2,114.9Online Games 1,189.0 1,318.1 1,444.4 1,633.0 1,720.2State Games 707.0 785.6 869.7 939.2 1,012.2Pick 3 282.1 298.8 326.2 347.5 365.6Pick 4 186.1 201.1 224.1 243.5 256.2Little Lotto 100.4 106.5 111.1 113.2 114.0Lotto 100.1 124.6 151.1 176.4 181.2Pick N Play - - - - -Raffle 38.4 54.6 57.2 58.6 58.9Experiential Raffles - - - - 36.3Multi-state Games 482.0 532.5 574.7 693.8 708.0Mega Millions 265.3 300.7 332.0 342.2 354.6Powerball 216.7 231.8 242.8 234.4 235.7World Lottery Draw - - - 117.3 117.8Total sales 2,618.9 3,017.0 3,341.8 3,663.8 3,835.1Source: Camelot Illinois, August 2010480 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.12.2 OTHER REVENUESBase sales forecastThe Base Sales forecast assumes no changes to historical rates for unclaimed prizes andretailer communication and license fees. Unclaimed prizes are calculated by multiplying retail sales in a given year by 1.3%(representing FY2009 unclaimed prizes of $26 million over FY2009 retail sales of$2.1 billion); Retailer communication and license fees calculated on a per terminal basis areprojected forward with fees assumed to increase with inflation.Proposed scenarioAs part of Camelot’s plans to increase the retail estate, an additional 3,500 retailers willbe recruited for terminal placements and half of the 3,000 FSVMs will be placed in newretailers. This results in additional fees for applications as well as communication andlicense fees. Shown in Figure 2.12.2.1 below, this Effect from Retailer Initiativescontributes c.$3-4 million per annum to Other revenues from FY2014.FIGURE 2.12.2.1: OTHER REVENUES$Mn FY12 FY13 FY14 FY15 FY16Unclaimed prizes 32.7 37.4 41.2 44.9 46.8Retailer communication fees 5.0 5.2 5.3 5.4 5.6License fees 0.1 0.1 0.1 0.1 0.1Effect from Retailer initiatives 1.1 2.5 3.7 3.7 3.8Total Other Revenues 39.0 45.2 50.3 54.1 56.3Source: Camelot Illinois, August 20102.12.3 PRIZESIn preparing its forecast, Camelot has assumed prize payout ratios based on the FY2009audited accounts. To determine the prize payout level by game, Camelot used data fromthe FY2009 audited accounts and adjusted prize expense to exclude unclaimed prizes(based on additional figures within the VDR), demonstrated in the figure below.FIGURE 2.12.3.1: PRIZE PAYOUTFY2009Sales($Mn)ReportedPrize expense($Mn)Add backUnclaimedprizes ($Mn)Adjusted Prizeexpense($Mn)AdjustedPrize payout(%)Instants 1,119.7 743.3 11.2 754.5 67.4%Pick 3 297.7 153.7 3.6 157.3 52.8%Pick 4 176.9 87.8 2.6 90.5 51.1%Little Lotto 129.0 60.6 2.7 63.4 49.1%Mega Millions 204.6 100.1 4.2 104.3 51.0%Powerball - - - - -%Lotto game 122.7 66.5 1.4 67.9 55.4%Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 481

Section 2 Final Business PlanFY2009Sales($Mn)ReportedPrize expense($Mn)Add backUnclaimedprizes ($Mn)Adjusted Prizeexpense($Mn)AdjustedPrize payout(%)Pick N Play 7.7 4.5 0.3 4.8 62.9%Raffle 18.9 9.2 0.0 9.2 48.6%Total 2,077.2 1,225.9 26.1 1,251.9 60.3%Source: Camelot Illinois, August 2010Prize payout ratios over the forecast period are shown in Figure 2.12.3.2 below. Instantgames prize payout increases due to higher sales growth in the higher price points andthe introduction of the $30 Instant games. However, the increase in Instants prizepayout on overall prize payout is moderated by the growth in on-line games. Based onour discussions with the State during the bid process, we have assumed that the currentprize ratio for Powerball is 50% and will remain at this level during the forecast period.FIGURE 2.12.3.2: PRIZE PAYOUT BY GAME% of Ticket Sales FY12 FY13 FY14 FY15 FY16Total Instant Games (68.8%) (69.0%) (69.1%) (69.2%) (69.2%)Pick 3 game (52.8%) (52.8%) (52.8%) (52.8%) (52.8%)Pick 4 game (51.1%) (51.1%) (51.1%) (51.1%) (51.1%)Little Lotto game (49.1%) (49.1%) (49.1%) (49.1%) (49.1%)Little Lotto Subscription game (49.1%) (49.1%) (49.1%) (49.1%) (49.1%)Mega Millions (51.0%) (51.0%) (51.0%) (51.0%) (51.0%)Powerball (50.0%) (50.0%) (50.0%) (50.0%) (50.0%)Lotto game (55.4%) (55.4%) (55.4%) (55.4%) (55.4%)Lotto subscription game (55.4%) (55.4%) (55.4%) (55.4%) (55.4%)Raffle (48.6%) (48.6%) (48.6%) (48.6%) (48.6%)World Lottery Draw -% -% -% (50.0%) (50.0%)Experiential Raffles -% -% -% -% (50.0%)Mega Millions subscription (51.0%) (51.0%) (51.0%) (51.0%) (51.0%)Total prizes over sales (60.9%) (61.3%) (61.5%) (61.3%) (61.2%)Source: Camelot Illinois, August 2010482 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.12.4 COMMISSIONCamelot has assumed retail commissions do not change from historical rates, thuscommission rates on Instant tickets remain at 5% and rates on on-line games remain atc. 5.1% due to bonuses paid to retailers in respect of high-value winning tickets.However, the Retailer initiatives also provide additional incentives for retailers in the formof a bonus commission equal to $0.5 million per annum, as shown in Figure 2.12.4.1below.FIGURE 2.12.4.1: RETAILER COMMISSIONS$Mn, unless otherwise stated FY12 FY13 FY14 FY15 FY16Online sales 1,174.9 1,280.3 1,380.5 1,543.0 1,614.4Instants sales 1,429.9 1,698.9 1,897.3 2,030.8 2,114.9Total retail sales (excludingsubscriptions) 2,604.7 2,979.1 3,277.9 3,573.8 3,729.4Online commission rate (5.1%) (5.1%) (5.1%) (5.1%) (5.1%)Instant commission rate (5.0%) (5.0%) (5.0%) (5.0%) (5.0%)Online commission (59.9) (65.3) (70.4) (78.7) (82.3)Instant commission (71.5) (84.9) (94.9) (101.5) (105.7)Retailer Initiative - Bonus commission (0.5) (0.5) (0.5) (0.5) (0.5)Total commissions (131.9) (150.7) (165.8) (180.7) (188.6)Source: Camelot Illinois, August 2010OPERATING EXPENSESThe next two sections describe the assumptions supporting the Operating Expensesforecasts in the financial projections. They will consider in detail the components ofprojected Management Fee and Lottery Expenses.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 483

Section 2 Final Business Plan2.12.5 MANAGEMENT FEEUnder the Private Management Agreement, the Management Fee is described as:‘the fixed amount established annually to reimburse Manager for the expenses, otherthan Lottery Expenses… including the Manager’s good faith estimation of its baseemployee compensation and employee benefits (excluding any bonuses),… andoverhead for its business operations with respect to the Lottery.’ (Schedule 10.1Payments Schedule).We have assumed that the Management Fee recovers the following items: senior management salaries and benefits (excluding any bonuses) additional staff employed directly by Camelot Illinois (excluding any bonuses) legal and professional costs property and related overhead costs insurance costs human resources outsourcing costs capital support overhead charge.Figure 2.12.5.1 below provides a summary of the Management Fee components whichrepresent an annual cost of c.$37 million.FIGURE 2.12.5.1: MANAGEMENT FEE COMPONENTS$Mn) FY12 FY13 FY14 FY15 FY16Employment expenses (8.9) (10.1) (10.4) (9.9) (10.1)Legal/professional (0.5) (0.5) (0.6) (0.6) (0.6)Property costs (3.1) (3.2) (3.2) (3.3) (3.4)Insurance costs (1.0) (1.1) (1.1) (1.1) (1.1)HR Outsourcing costs (1.5) (1.0) (0.5) (0.6) (0.6)Consultancy costs (1.0) (1.1) (1.1) (1.1) (1.1)Capital support overhead charge (20.0) (20.0) (20.0) (20.0) (20.0)Management fee (36.1) (36.9) (36.9) (36.6) (36.9)Source: Camelot Illinois, August 20102.12.5.1 Employment expensesThe senior management salaries represent the costs of: Preliminary Organization Structure (Figure 2.11.1.1.1) a charge of $0.1 million p.a. in respect of the costs of the Advisory Board of CamelotIllinois, which increases with inflation.As part of delivering its business plan, Camelot believes it is necessary to create anumber of new roles to support initiatives, described by initiative in Figure 2.12.5.1.1below. We anticipate that there will be c.70-80 additional roles assigned as follows:484 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.12.5.1.1: FULL TIME EMPLOYEES BY INITIATIVENumber of full-time employees FY12 FY13 FY14 FY15 FY16New organization and business systems changes 42.0 40.0 40.0 40.0 40.0Marketing and Communications 6.0 6.0 6.0 6.0 6.0Corporate social responsibility 1.0 1.0 1.0 1.0 1.0Internet Pilot 13.5 24.0 24.0 24.0 24.0Senior management 7.0 7.0 7.0 7.0 7.0Total 69.5 78.0 78.0 78.0 78.0Source: Camelot Illinois, August 2010The key cost assumptions are as follows:base salary of $31,000 for junior staff, $40,000-115,000 for supervisory managementroles, $70,000-145,000 for senior management and $85,000-200,000 for departmentheadsemployee benefits of 14.7%, based on data from our consultant Towers Watsonemployment tax costs of 9.6%, based on data from our consultant Towers Watsonrelocation costs of $40,000 per annum for employees relocated from Camelot UKrecruitment fees of 20% of annual salary for new hires.2.12.5.2 Legal and professional costsWe have assumed that Camelot Illinois would incur c.$0.5 million in respect of legal andprofessional costs including:audit fees ($0.1 million)legal fees ($0.3 million)taxation advice ($0.1 million).2.12.5.3 Property costsWe have assumed property costs of c.$3 million per annum which grow 2.5% per year.2.12.5.4 Insurance costsWe have estimated insurance costs for Camelot Illinois of $1 million per annum initially.However, Camelot would seek to re-visit these estimates once the specific risks andresponsibilities under the PMA are more clearly defined.2.12.5.5 Human Resources Outsourcing costsThis line item includes the costs of outsourcing the human resources function forCamelot Illinois. This line also includes the cost of “transformation” activities incurred inintegrating the Employee Use Agreement and Camelot Illinois employees of $1 million inFY2012 and $0.5 million in FY2013.2.12.5.6 Consultancy costsWe have assumed consultancy costs of $1 million per annum which grows 2.5% peryear. These cover the costs of obtaining third-party advice to support Camelot Illinois indelivery of its business plan.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 485

Section 2 Final Business Plan2.12.5.7 Capital support overhead chargeThe Capital Support Overhead Charge is the portion of the Management Fee whichreimburses Camelot Illinois for the expense that it must pay to Premier US in order tosecure and maintain the credit support required under the PMA and underwrite thecapital risk associated with the PMA.486 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.12.6 LOTTERY EXPENSESWe have assumed that Camelot Illinois recovers all other Private Manager costs via theLottery Expenses mechanism. As described earlier, our approach in preparing theforecast is to use the FY2009 cost base as disclosed in the audited accounts as the basisfor the projections, but adjusting a number of these costs (such as technology) to reflectCamelot’s plans. These are considered in detail in the following section. A summary ofLottery Expenses is shown in Figure 2.12.6.1 below.FIGURE 2.12.6.1: LOTTERY EXPENSES BY CATEGORY$Mn FY12 FY13 FY14 FY15 FY16Marketing and Branding (31.3) (36.3) (39.7) (43.0) (44.7)Customer Loyalty and Related Marketing (3.8) (4.7) (2.8) (2.8) (2.9)Game Development / R&D (4.7) - - - -Gaming Platforms (35.3) (29.4) (32.5) (36.3) (38.3)Other IT and Infrastructure / Technology (10.9) (16.6) (17.8) (19.3) (20.1)Telecommunications (7.0) (7.9) (9.0) (9.2) (9.4)Logistics (6.4) (7.6) (8.5) (9.1) (9.5)EUA Salaries and Related Costs (14.8) (15.2) (15.5) (15.9) (16.3)Other costs (20.3) (24.8) (27.2) (28.5) (29.4)Instants printing and disposal costs,commodities (12.0) (14.1) (15.9) (17.0) (17.7)Leased in-store equipment (1.4) (3.2) (3.6) (3.6) (3.6)Corporate social responsibility (0.9) (0.9) (1.0) (1.0) (1.1)Contractual services-other, professionalservices (1.7) (1.8) (1.8) (1.9) (1.9)Depreciation (1.2) (1.7) (1.7) (1.7) (1.7)Other (SME Costs, Shared Services,Automotive Equipment) (2.1) (2.1) (2.2) (2.2) (2.3)Foundation Expense (1.1) (1.1) (1.1) (1.1) (1.2)Lottery expenses (134.5) (142.5) (152.9) (164.4) (170.6)Source: Camelot Illinois, August 20102.12.6.1 MarketingWe have used the information contained in the FY2009 audited accounts and theFY2009 transactional data as the starting point for preparing the marketing costsforecast. We have assumed that of the $24.5 million disclosed under contractual costsin the FY2009 accounts, $22.9 million relates to advertising activity. We have alsoclassified game promotion and promotional prizes ($1.3 million FY2009) costs as part ofthe Illinois Lottery’s marketing spend, representing 1.2% of gross sales, shown in Figure2.12.6.1.1.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 487

Section 2 Final Business PlanFIGURE 2.12.6.1.1: HISTORICAL MARKETING COSTSFY08/09($Mn) % of salesAdvertising (16.6) (0.8%)Contractual services - marketing (6.2) (0.3%)Game promotion (1.3) (0.1%)Marketing and Branding (24.2) (1.2%)Source: Camelot Illinois, August 2010The forecast assumes that base advertising and game promotion and promotional prizescosts will increase in line with sales throughout the forecast period (in FY2009, theseitems represented 1.16% of sales).FIGURE 2.12.6.1.2: MARKETING COSTS$Mn FY12 FY13 FY14 FY15 FY16Marketing - historical rate (30.5) (35.1) (38.9) (42.7) (44.7)Additional marketing from initiatives (0.8) (1.1) (0.8) (0.4) -Total marketing (31.3) (36.3) (39.7) (43.0) (44.7)Source: Camelot Illinois, August 2010As shown in Figure 2.12.6.1.2 above, in addition to this base level expenditure, we haveassumed that Camelot would incur additional marketing spend of $3 million,cumulatively, from FY2012 to FY2015 for advertising to support the launch of theInternet Pilot.2.12.6.2 Customer Loyalty / Engagement Programs and Other CustomerInsightsOur proposal to include an online Player Club customer loyalty program, which is thenexpanded to include retail customers, estimates additional costs (see Figure 2.12.6.2.1)for the following activities:Product development/licensing expenses of Player Club for both the Internet andretailPromotional expenses of $5 million in the first twelve months starting JanuaryFY2012, followed by $1 million per annum thereafterEstimated cost of outsourcing targeted customer monitoring, research andmarketing.FIGURE 2.12.6.2.1: CUSTOMER LOYALTY EXPENSES$Mn FY12 FY13 FY14 FY15 FY16Development and maintenance (1.2) (1.3) (1.3) (1.4) (1.4)Promotional expenses (2.6) (3.0) (1.0) (1.0) (1.1)Playercard licensing and development costs (0.1) (0.4) (0.4) (0.4) (0.4)Total Customer Loyalty expenses (3.8) (4.7) (2.8) (2.8) (2.9)Source: Camelot Illinois, August 2010488 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.12.6.3 Game Development / R&DWe do not have enough information to understand key drivers of the game developmentcost disclosed in the FY2009 audited accounts. We have assumed these costs willcease in October 2011 with the existing GTECH contract.2.12.6.4 Gaming PlatformsGaming platform costs are comprised of the GTECH technology fee and ITDM contract,which are replaced by a new technology contract under the proposed business plan,shown in Figure 2.12.6.4.1 below.FIGURE 2.12.6.4.1: GAMING PLATFORM COSTS BY CATEGORY$Mn FY12 FY13 FY14 FY15 FY16GTECH technology fee (13.0) - - - -ITDM contract (5.0) - - - -New technology contract (17.3) (29.4) (32.5) (36.3) (38.3)Total technology contract fees (35.3) (29.4) (32.5) (36.3) (38.3)Source: Camelot Illinois, August 2010GTECH technology feeIn preparing the forecast we have assumed that the GTECH technology contract with theIllinois Lottery was extended by one year and will expire in October 2011. The forecastedcost of 1.52% of gross revenues is consistent with the contract disclosed in the dataroom. This represents a cost to the Illinois Lottery of approximately $35 million perannum ($43 million including the costs of the ITDM contract).Instants Ticket Dispensing Machines (ITDM) contractFrom our analysis of the GTECH ITDM contract, we understand that this contract willexpire on December 31, 2010. Based on analysis of ITDM sales (using the matrix withinthe contract and sales by retailer in the VDR), this would equate to an annual cost of $8-9million. We have assumed that the contract would be renewed for an additional year,concluding in December 2011.New technology contractWe have assumed that a new technology contract would come into effect on November1, 2011 with Camelot renegotiating and restructuring the contract at a significant savingversus the current arrangement. Camelot has assumed that the technology supplier willbe remunerated on a percentage of gross margin basis and that the scope of thecontract would include:lottery terminalsInstant Ticket Distributing Machines (ITDMs)Full Service Vending Machines (FSVMs)software development and maintenanceone data centerIT operationsconsumablesfield maintenance and repair.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 489

Section 2 Final Business PlanWe anticipate the costs of the revised contract to be between $30 million and $40million (or $25 million at current sales levels) over the forecast period, depending on thegross margin performance of the Illinois Lottery.We would note however that Camelot firmly believes, based on its experience in the UK,that Camelot Illinois will achieve significantly better value for money by disaggregatingthe technology supply arrangement and putting these services out to competitive tender.Whereas the Illinois Lottery currently purchases technology equipment and services inreturn for a percentage of sales, Camelot’s preferred approach would be to: take certain parts of the currently outsourced activities in-house purchase lottery equipment on a ‘cost-plus’ basis rather than via a percentage ofsales seek providers outside of the lottery industry for commodity-type services such asfield maintenance and data center provision.Figure 2.12.6.4.2 below provides a summary of the tranche structure that Camelot hasassumed. Its key features are: a bottom tranche which, even in the event of low sales, represents a fixed fee to thetechnology supplier to enable recovery of the supplier’s capital investment of c. $20million per annum; upper tranches which provide the technology supplier with a marginal return of 3-4%of incremental gross margin as an incentive to increase overall returns to state.490 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.12.6.4.2 TECHNOLOGY PROVIDER FEE CALCULATIONFY12 FY13 FY14 FY15 FY16Percentage of year contract operational 67% 100% 100% 100% 100%Gross profit available for TechnologyProvider fee 600.6 1,016.4 1,121.5 1,237.0 1,297.6Tier 1 - Retention ratio (36%) (36%) (36%) (36%) (36%)Tier 2 - Retention ratio (1%) (1%) (1%) (1%) (1%)Tier 3 - Retention ratio (3%) (3%) (3%) (3%) (3%)Tier 4 - Retention ratio (4%) (4%) (4%) (4%) (4%)Tier 5 - Retention ratio (4%) (4%) (4%) (4%) (4%)Tier 1 - Upper boundary 35.9 55.2 56.6 58.0 59.4Tier 2 - Upper boundary 538.4 827.9 848.6 869.8 891.5Tier 3 - Upper boundary 717.9 1,103.8 1,131.4 1,159.7 1,188.7Tier 4 - Upper boundary 825.6 1,269.4 1,301.1 1,333.6 1,367.0Tier 1 - Technology fee (12.9) (19.9) (20.4) (20.9) (21.4)Tier 2 - Technology fee (2.5) (3.9) (4.0) (4.1) (4.2)Tier 3 - Technology fee (1.9) (5.7) (8.2) (8.7) (8.9)Tier 4 - Technology fee - - - (2.7) (3.8)Tier 5 - Technology fee - - - - -Technology provider fee - total (17.3) (29.4) (32.5) (36.3) (38.3)Source: Camelot Illinois, August 20102.12.6.5 Other IT and Infrastructure / TechnologyWithin Other IT and Infrastructure / Technology, we have included costs for legacysystems that will remain in place at the Lottery as well as estimated costs for newsystems proposed in our initiatives. Figure 2.12.6.5.1 below shows which costs havebeen aggregated in this line item.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 491

Section 2 Final Business PlanFIGURE 2.12.6.5.1: OTHER IT AND INFRASTRUCTURE / TECHNOLOGY EXPENSES$Mn FY12 FY13 FY14 FY15 FY16Electronic data processing (3.2) (3.3) (3.4) (3.5) (3.5)IPOS maintenance and licensing costs (0.1) (0.2) (0.2) (0.2) (0.2)SAP maintenance and licensing costs (5.0) (7.7) (7.9) (8.1) (8.3)Contact center costs - (0.2) (0.5) (0.5) (0.5)Other infrastructure related costs (2.2) (4.1) (4.2) (5.0) (5.1)Internet related costs (0.3) (1.1) (1.6) (2.1) (2.5)Total Other IT and Infrastructure /Technology expenses (10.9) (16.6) (17.8) (19.3) (20.1)Source: Camelot Illinois, August 2010Electronic data processingBased on our analysis of FY2009 transactional data, we understand that the c.$3 millioncost within Electronic data processing represents the costs of a data center, supportstaff and end-user support services. The forecast assumes that Camelot Illinois willcontinue to bear these costs in operation of the Illinois Lottery and that these costs willgrow with inflation.IPOS maintenance and licensing costsAs part of its Instants business plan, Camelot proposes to implement IPOS, a bespokeInstants distribution system, in October 2011. This line item represents the annual costof maintaining and licensing this system as well as the cost of the operating lease tocover the costs of developing and installing the system.SAP maintenance and licensing costsThis line item includes costs for setting up the back-office operation system SAP, itsoperation and maintenance. As part of its back-office operations strategy, Camelot,through Camelot Global Services (CGS) or one of its affiliates, will implement the leadingERP solution SAP in November 2011. The licensing and ongoing support ofimplementing SAP and related software comprises the c.$8 million per annum fee.Contact center costsWe are also planning an upgrade of the call center telephony system, due to go live inJanuary 2013. The annual cost of implementing, licensing and supporting this system isc.$0.5 million per annum.Other infrastructure related costsThis line item (see Figure 2.12.6.5.2 below) includes costs of independent testing, theCamelot Trading Platform and the operating lease for development and installation ofExtended Means of Play. Camelot will outsource its independent test function, at anestimated annual cost of c.$1 million from November 1, 2011. Camelot will purchasethrough Camelot Global Services (CGS) or one of its affiliates the Camelot TradingPlatform and software for Extended Means of Play. The forecast assumes that CamelotIllinois will purchase licensing and maintenance services for both these softwarecomponents at a cost of c.$3-4 million per annum.492 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business PlanFIGURE 2.12.6.5.2: OTHER INFRASTRUCTURE RELATED COSTS$Mn FY12 FY13 FY14 FY15 FY16Independent test costs (0.7) (1.0) (1.1) (1.1) (1.1)Camelot Trading Platform (1.5) (3.1) (3.2) (3.2) (3.3)Extended Means of Play - - - (0.7) (0.7)Total Other Infrastructure Relatedexpenses (2.2) (4.1) (4.2) (5.0) (5.1)Source: Camelot Illinois, August 2010Internet-Related CostsThe Internet (Lotto and Mega Millions) Pilot Program will incur payment card transactionfees, as shown in the figure below. Based on estimated transaction face value fees andper transaction fees, commission for Internet transactions are estimated to be 3%initially in January 2012, decreasing down to 2.2%. This is based on the assumptionsthat the average purchase size would increase, minimizing the effect of the “pertransaction” fees, and that having larger sales would enable the Lottery to negotiatebetter terms for the contract. Additionally, this item also includes operating lease costsof c.$0.2 million per annum for development and installation of the transactional website.FIGURE 2.12.6.5.3: INTERNET-RELATED COSTS$Mn, unless otherwise noted FY12 FY13 FY14 FY15 FY16Internet sales 6.6 30.5 56.8 83.2 99.3Internet commission rate (3.0%) (2.7%) (2.3%) (2.2%) (2.2%)Internet commissions (0.2) (0.8) (1.3) (1.8) (2.2)Player checking fee (0.0) (0.1) (0.1) (0.1) (0.1)Operating lease for website (0.1) (0.2) (0.2) (0.2) (0.2)Total Internet-related costs (0.3) (1.1) (1.6) (2.1) (2.5)Source: Camelot Illinois, August 20102.12.6.6 TelecommunicationsThe forecast assumes that the Illinois Lottery will continue to use the existingtelecommunications network until September 1, 2011. Based on our analysis of theFY2009 transactional data, the cost of the retailer telecommunications network is $6-8million per annum with the cost of other telecommunications services being c.$1.1million per annum, shown in Figure 2.12.6.6.1 below.FIGURE 2.12.6.6.1: TELECOMMUNICATIONS COSTS BY CATEGORY$Mn FY12 FY13 FY14 FY15 FY16Telecommunications - retail (6.0) (6.8) (7.8) (8.1) (8.2)Telecommunications - other (1.1) (1.1) (1.1) (1.2) (1.2)Telecommunications - total (7.0) (7.9) (9.0) (9.2) (9.4)Source: Camelot Illinois, August 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 493

Section 2 Final Business PlanWe have assumed that Camelot will refresh the retailer telecommunications network aspart of the technology enablement and that this will transfer over in September 2011.We have assumed that each retailer connection will represent a cost of c.$620 perannum. This represents a cost of $6.0 million in FY2012 growing to $8.2 million inFY2016, due to the projected increase in the size of the retail estate and 2.5% growth infixed costs per terminal.The forecast assumes that Camelot will continue to require the services represented bythe ‘other telecommunications services’ cost of $1 million per annum. The forecastassumes that this cost will increase with inflation of 2.5% over the forecast period.2.12.6.7 LogisticsThe current Instants, on-line game and POS distribution contract with IGOR willterminate on December 31, 2010. We have assumed that from January 1, 2011,Camelot will procure distribution services on broadly the same terms at a fee of 0.45%of Instants sales. This would equate to costs of $6-10 million per annum in the first yearsof the Private Manager contract.2.12.6.8 Employee Use Agreement Salaries and Related CostsFIGURE 2.12.6.8.1: EMPLOYEE USE AGREEMENT SALARIES AND RELATED COSTS$Mn FY12 FY13 FY14 FY15 FY16EUAPersonnel services (9.6) (9.9) (10.1) (10.4) (10.6)Contribution to retirement fund (2.0) (2.1) (2.1) (2.2) (2.2)Social security (0.7) (0.7) (0.7) (0.8) (0.8)Insurance (2.4) (2.5) (2.5) (2.6) (2.7)EUA and Related Costs - total (14.8) (15.2) (15.5) (15.9) (16.3)Source: Camelot Illinois, August 2010Given the uncertainty around the allocation of the existing Illinois Lottery staff betweenthe State and Camelot Illinois, we have assumed that the EUA costs will equate to all thestaff costs shown in the FY2009 audited accounts. This assumption may be revisedonce specific roles and functions covered by the EUA are clarified. In the projections,we have grown personnel services costs at a rate of 2.5% from FY2009. Retirementfund contributions, social security and insurance as a percentage of personnel servicesremain the same. These costs collectively (see Figure 2.12.6.8.1) are included within theEmployee Use Agreement line item within Lottery Expenses as of January 1, 2011.494 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.12.6.9 Other costsFIGURE 2.12.6.9.1: OTHER COSTS BY CATEGORY$Mn FY12 FY13 FY14 FY15 FY16Instants printing and disposal costs,commodities (12.0) (14.1) (15.9) (17.0) (17.7)Leased in-store equipment (1.4) (3.2) (3.6) (3.6) (3.6)Corporate social responsibility (0.9) (0.9) (1.0) (1.0) (1.1)Contractual services-other, professionalservices (1.7) (1.8) (1.8) (1.9) (1.9)Depreciation (1.2) (1.7) (1.7) (1.7) (1.7)Other (SME Costs, Shared Services,Automotive Equipment) (2.1) (2.1) (2.2) (2.2) (2.3)Foundation Expense (1.1) (1.1) (1.1) (1.1) (1.2)Other - total (20.3) (24.8) (27.2) (28.5) (29.4)Source: Camelot Illinois, August 2010Figure 2.12.6.9.1 above breaks Other costs into individual cost categories, which areprimarily dominated by the costs for Instants printing.Instants printing and disposal costs, commoditiesFIGURE 2.12.6.9.2: INSTANTS PRINTING AND DISPOSAL COSTS AND COMMODITIESCOSTS$Mn FY12 FY13 FY14 FY15 FY16New Instants contract (11.5) (14.0) (15.8) (16.9) (17.6)Disposal costs (0.4) (0.1) (0.1) (0.1) (0.1)Commodities (0.0) (0.0) (0.0) (0.0) (0.0)Total (12.0) (14.1) (15.9) (17.0) (17.7)Source: Camelot Illinois, August 2010From our analysis of the contracts, we understand the current Scientific Games contractexpires in December 2010 and that the Pollard contact expires in February 2011. Wehave assumed that these contracts represent a cost of c.0.95% of Instants sales.We have assumed that Camelot is able to renegotiate these contracts on moreadvantageous terms giving a cost of c.$12-18 million per annum or c.0.8% of Instantssales in the first years of the Private Management Agreement and that this contractcomes into effect in January 2011, as shown in Figure 2.12.6.9.2 above.As with the technology contract, we are proposing a structure under which the Instantsvendor would see higher marginal returns for generating gross margin above today’slevels. These are calculated in Figure 2.12.6.9.3 below. The instant ticket provider earnsthe Tier 1 fee rate of c.3% until the upper boundary is reached. The fees earned on theincremental gross profit above the Tier 1 upper boundary is at c.4%, thus providing apositive incentive for the contractor.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 495

Section 2 Final Business PlanFIGURE 2.12.6.9.3: INSTANTS PRINTING FEE CALCULATION$Mn, unless otherwise noted FY12 FY13 FY14 FY15 FY16Percentage of year contract operational 100% 100% 100% 100% 100%Instants gross profit (retail only) 373.9 440.9 490.6 522.2 543.9Tier 1 - Retention ratio (3%) (3%) (3%) (3%) (3%)Tier 2 - Retention ratio (4%) (4%) (4%) (4%) (4%)Tier 1 - Upper boundary 355.4 364.3 373.4 382.7 392.3Tier 1 - Instants ticket fee (10.8) (11.1) (11.4) (11.7) (12.0)Tier 2 - Instants ticket fee (0.7) (2.9) (4.4) (5.2) (5.7)Instant ticket provider fee - total (11.5) (14.0) (15.8) (16.9) (17.6)Source: Camelot Illinois, August 2010Disposal costs are related to the Instants initiative in which we reduce the number ofgames in market to improve availability of faster-selling games. We have estimated anupfront cost of $0.75 million from January 2011 to December 2011 and additional annualcosts of c.$0.1 million for these activities but further data is necessary to understand themagnitude of reduction necessary.Commodities are based on FY2009 audited accounts and are grown in line with inflationat a rate of 2.5%.Leased in-store equipmentLeased in-store equipment includes the permanent point-of-sale items we expect toreplace in current retailers and will install along with terminals when we add to theterminal estate.FIGURE 2.12.6.9.4: LEASED IN-STORE EQUIPMENT COSTS$Mn FY12 FY13 FY14 FY15 FY16PPOS related to current retail estate (1.1) (2.2) (2.2) (2.2) (2.2)PPOS related to launch of 2,000 newterminals (0.3) (0.6) (0.6) (0.6) (0.6)PPOS related to launch of 1,500 newterminals - - (0.2) (0.3) (0.3)PPOS related to launch of FSVMs - (0.4) (0.5) (0.5) (0.5)Leased In-Store Equipment - total (1.4) (3.2) (3.6) (3.6) (3.6)Source: Camelot Illinois, August 2010Corporate Social ResponsibilityA key feature of Camelot’s business plan is its focus on Social Responsibility. Theforecast assumes expenditure of c.$1 million per annum to cover the activities detailedin the Corporate Social Responsibility initiative, including:496 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plancommunity investment programcorporate social responsibility managementretailer vigilance campaignannual membership at various responsible gaming organizationsgame design protocol.Other contractual services and professional servicesBased on our analysis of FY2009 transactional data, we have assumed that the balanceof ‘other contractual services’, representing costs of c.$1.4 million per annum, coversthe following activities: premises rental, ITDM maintenance, equipment rental fromtechnology supplier and temporary staff.The forecast assumes that professional services will grow from FY2009 levels of $0.2million at the rate of inflation.DepreciationThis line item includes depreciation from FY2009 levels of $0.1 million, as we haveassumed that additional investment into Lottery capital will be necessary to maintainassets. Additionally, Camelot expects to capitalize staff costs for the transition phase forbusiness systems, the development of the transactional website for the Internet PilotProgram, and the technology enablement phase for a total cost of c.$1.7 million perannum.The capital expenditures associated with this depreciation include capital expenditures inline with historical Lottery costs, $0.6 million for the Internet Pilot program, $13.4 millionfor technology enablement.FIGURE 2.12.6.9.5: DEPRECIATION COSTS$Mn FY12 FY13 FY14 FY15 FY16Lottery base depreciation levels (0.1) (0.1) (0.1) (0.1) (0.1)Depreciation - Transactional website (0.0) (0.1) (0.1) (0.1) (0.1)Depreciation - Technology enablement (1.0) (1.5) (1.5) (1.5) (1.5)Depreciation - total (1.2) (1.7) (1.7) (1.7) (1.7)Source: Camelot Illinois, August 2010Other (SME Costs, Shared Services, Automotive Equipment)We have projected the remaining expenses from FY2009 levels at the rate of inflation(2.5%). Printing costs, while present in previous fiscal years, were not present inFY2009, thus we have assumed they remain at zero. The forecast assumes a cost of $1million per annum for Subject Matter Experts (SME) from Camelot UK to Camelot Illinoiswho will support the implementation of the business plan during the forecast period. ForSubject Matter Expert costs, we have added previous levels of travel expenses andadded the expected travel costs of having Camelot Subject Matter Experts consult at theLottery.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 497

Section 2 Final Business PlanFIGURE 2.12.6.9.6: OTHER COSTS BY CATEGORY$Mn FY12 FY13 FY14 FY15 FY16Printing - - - - -Subject Matter Expert costs (1.0) (1.0) (1.0) (1.0) (1.1)Equipment (0.0) (0.0) (0.0) (0.0) (0.0)Operation of automotive equipment (0.5) (0.5) (0.5) (0.5) (0.5)Expenses of Lottery Control Board (0.0) (0.0) (0.0) (0.0) (0.0)Refunds (0.0) (0.0) (0.0) (0.0) (0.0)Court of Claims - - - - -CMS and Comptroller transfers and mailing (0.1) (0.1) (0.1) (0.1) (0.1)Shared Services (0.6) (0.6) (0.6) (0.6) (0.6)Other costs - total (2.1) (2.1) (2.2) (2.2) (2.3)Source: Camelot Illinois, August 2010Foundation CostsCamelot Illinois will contribute up to $4 million per annum to the Foundation. Of this $4million per annum, $1 million will be funded through Lottery Expenses. Additionally,Camelot Illinois will contribute 10% of its Incentive Compensation (net of any shortfallpayments) up to a maximum of $3 million per annum.498 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.12.7 RECONCILIATION BETWEEN BASE SALES ANDBUSINESS PLAN SALESThe schedule below provides a summary of how Camelot’s proposed initiativescontribute to the Business Plan Sales Forecast.FIGURE 2.12.7.1: RECONCILIATION$Mn FY12 FY13 FY14 FY15 FY16Base sales forecast 2,217 2,232 2,244 2,247 2,250Instants 205 332 425 503 567Game development 35 33 43 50 57Diff of price points 17 17 21 25 28Balanced portfolio 35 33 43 50 57Improve prize structures 17 17 21 25 28Improve avail. of best games 35 33 43 50 57New supply chain system (IPOS) - 100 128 151 170New dispensers/ better in-store 31 66 85 101 113Regular advertising of best games 35 33 43 50 57Online 133 160 198 312 366Pick 3 and Pick 4 - - 23 46 69Mega Millions 35 35 35 23 23Powerball 80 80 80 68 68Lotto - 15 30 45 45Raffle 18 30 30 30 30New games - - - 100 131Retail 59 265 424 527 564Tranche 1 of terminals 59 126 132 141 147FSVM installation - 99 139 148 154Tranche 2 of terminals - - 59 85 88Perfect in-store execution - 41 86 137 143EMoP - - 7 15 32Internet 6 27 51 75 89Business plan sales 2,619 3,017 3,342 3,664 3,835Source: Camelot Illinois, August 2010Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 499

Section 2 Final Business PlanIt should be noted that schedule 3.2.1 within section 3.0, Net Income Targets, providesan analysis of those initiatives (and their sales impact) which are critical to Camelot’s NetIncome Targets. Should Camelot Illinois be unable to execute the initiatives identified onthis schedule as a result of the State unreasonably withholding or delaying its approval, itwill seek adjustment to its Net Income Targets through the Adverse Action provision ofthe PMA.500 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.13 CONTRACT YEAR 1 OF THE PRO-FORMAPROFIT AND LOSS STATEMENTThe schedule below provides a reconciliation between Base Net Income for FY2012,Contract Year 1 and forecast Net Income. This represents an increase of $102 millionover the base position.CONTRACT YEAR 1 OF THE PRO-FORMA PROFIT AND LOSS STATEMENTIn $millionsFY2012Base Net Income 659Revenue InitiativesOnline Games Development 58Instants Development 51Retail Initiatives 17Internet Pilot (0)Total - Revenue initiatives 126Cost InitiativesNew Organization and Contract Structures (11)Business System Change (11)Marketing Communications (1)Corporate Social Responsibility (1)Total – Cost initiatives (24)Business Plan Net Income 761Source: Camelot Illinois, August 2010ONLINE GAMES DEVELOPMENTThe business plan forecasts that the Illinois Lottery will see an uplift in sales of $133million in Online Games in FY2012, primarily driven by growth within Powerball andMega Millions. This results in Net Income growth of $58 million.INSTANTS DEVELOPMENTThe business plan forecasts that the Illinois Lottery will be able to achieve growth inInstants sales (before the benefit of the retail initiatives) of $205 million in FY2012. Thisresults in Net Income growth of $51 million.RETAIL INITIATIVESCamelot Illinois is proposing to expand the Illinois Lottery retailer estate by 2,000 inFY2012, generating an incremental $59 million in incremental sales and $17 million inincremental Net Income.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 501

Section 2 Final Business PlanINTERNET PILOTCamelot Illinois is proposing to launch the Internet Pilot in January 2012, generating $6million in incremental sales. The additional gross margin generated in FY2012 is morethan offset by additional operating costs giving a net cost in the year of $0.3 million.NEW ORGANIZATION AND CONTRACT STRUCTURESAs part of implementing its business plan, Camelot proposes to restructure the currenttechnology agreement and other key contracts as well as appointing a number ofadditional roles within the organisation. The cost of $11 million shown within this sectionrepresents the net cost of i) savings within the technology, Instants printing andtelecommunications contracts of c.$25 million in FY2012 and ii) the incremental costs ofthe Capital Support Overhead Charge, property costs and new appointments of c.$36million.BUSINESS SYSTEMS CHANGEThe incremental costs of $11 million within Business Systems changes reflect the costsof implementing a range of back office systems to support Camelot’s business planwhich include the implementation and maintenance of:SAP, Camelot’s back office platformCRM systemIPOS, Camelot’s Instants distribution systemMARKETING COMMUNICATIONSThe incremental cost of $1 million per annum reflects Camelot’s planned appointment ofadditional staff within its marketing department to support the delivery of its businessplan.CORPORATE SOCIAL RESPONSIBILITYAs part of its business plan, Camelot Illinois proposes to implement a range of CorporateSocial Responsibility activities, including the appointment of a Corporate SocialResponsibility Manager. These activities represent a cost of c.$1 million per annum.502 Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager

Section 2 Final Business Plan2.14 SIGNIFICANT INVESTMENTSCamelot is not planning any single activity which would meet the criteria of a SignificantInvestment.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 503

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Section 2 Final Business Plan2.15 BUSINESS PLAN CONCLUSIONThe Illinois Lottery is a large and well established lottery with tremendous growthpotential. Further, the State of Illinois is a large and attractive market in North Americawith strong household income. For these reasons, Camelot agrees with the State’sassessment that there is an outstanding opportunity for the Private Manager to assist ingrowing the sales and Net Income of the Lottery in a sustainable and responsiblemanner.Camelot will transform the Illinois Lottery into thepremier lottery operation in the U.S. with socialresponsibility at its coreCamelot’s core strategy to achieve this outcome is to transform the Lottery from itsheritage as a traditional lottery, selling tickets through conventional retail outlets, into thepremier U.S., consumer focused, multi-channel, fast moving consumer good businessthat has social responsibility at its core. Through this transformation, the Lottery will bewell placed to significantly increase the overall penetration and frequency of Illinoisadults playing lottery games and thus generate a sustained and responsible increase insales and Net Income.The strategies which Camelot will use to implement this transformation have been triedand proven in the UK over the last 16 years and have met with immediate success inCalifornia over the last 12 months. The 72% penetration rate in the UK for lottery gamesand the delivery of an incremental $100 million of revenue in California since ourappointment as a business consultant for the California Lottery in July 2009, is evidenceof that success. Camelot will verify and adapt the proposed strategies if necessary, toensure compliance with applicable laws and regulations.Camelot’s Business Plan will generate a sustainedand responsible increase in sales and Net IncomeIn this Final Business Plan we have set out how we would adapt these proven strategiesto maximize Net Income over the first five years of the PMA and create the foundationfor further responsible growth over the remaining five years.Camelot Illinois Response to Step 2 of the RFP Illinois Lottery Private Manager 505