The Updated Annual Business Plan FY19 1 FINAL (June 22, 2018) 2 3 Dear Director Smith, Over the past months, it has been a privilege to be part of the business transition process as Camelot Illinois works with you and your team to assume responsibility as private manager for the Illinois Lottery. Together we have met a number of signifcant milestones, and I believe the development of effective working relationships between the teams is well underway. I would like to take this opportunity to thank you and your team for the support and encouragement offered since the start of the transition process last October. As part of our commitment under the Private Management Agreement (PMA), each year Camelot Illinois will submit an annual plan that outlines business objectives, detailed strategies and key activities, and ultimately set projections for fnancial performance in the coming fnancial year. It is therefore my pleasure to submit the frst annual business plan under the new PMA for fnancial year 2019 (FY19), which starts July 1, 2018 and will end June 30, 2019. Being the frst full year of operation, FY19 will present some unique challenges and opportunities. There is still much transition work to complete, with the go-live of a new website, central gaming system and a full refresh of equipment for over 7,600 retailers. In the later half of the year, we will also roll out a $15 million investment in permanent point of sale equipment (PPOS) that will transform the presentation of lottery in the retail environment. We also will further increase our detailed understanding of our players, what motivates them and how to better position what the Lottery contributes to the people of Illinois. FY19 is a foundation year to establish operational fundamentals and to continue to build trust in the Lottery through responsible and accountable management. Our long-term aim remains the same; implement a consumer-frst philosophy to create an innovative, modern lottery that will attract new players, rather than relying on a small group of people that play a lot. In formulating these plans, we have drawn on experiences from around the world as a successful leading lottery operator and provider of technology and professional services with a proven track record of growing lottery contributions through successful public-private partnerships. Camelot is now operational across three jurisdictions including Illinois, the U.K. and Ireland. Our sister company, Camelot U.K., has operated the U.K. National Lottery since 1994 and has an unrivaled track record of success, helping the U.K. National Lottery deliver over $92 billion to winners and $52 billion to good causes (as of November 2017). Premier Lotteries Ireland (PLI) won a 20-year license to operate the Irish National Lottery in February 2014. Over the three years to the end of 2017, PLI has grown overall sales by 16 percent and nearly tripled digital sales. FINAL (June 22, 2018) 4 Overarching Strategy The plans for FY19 sit within a broader framework that underpins what we will undertake and how we expect to transform the Lottery over the full period of the Private Management Agreement. Our vision: To be a Lottery Illinoisans want to play. Our mission: To maximize returns to the state of Illinois in a socially responsible way. The strategy is to focus on building stronger brand demand and ultimately create consumer understanding and a better emotional connection with the Lottery. Building strong relationships with players and making the Lottery easier to access and more convenient to play will create a sound foundation for growth and greater participation. We will achieve this by: • Revitalizing the brand for consumers and stakeholders. • Providing compelling reasons to play lottery games. • Understanding, then building stronger relationships with consumers. • Providing greater access and convenience for consumers. Revitalizing the brand for consumers Providing compelling reasons to play lottery games and stakeholders • Link the brand back to education, capital • Give each game a clear reason for being. projects and good causes. • Ensure the portfolio is clearly differentiated and • Demonstrate good corporate citizenship. each game has a clear proposition. • Build a winner awareness program giving • New product development for Game renovation players proof points around winning. scheduled for FY20. • Link the brand back to Illinois consumers and • Develop effective communications. build a platform for consumers to reappraise the Lottery. Understanding, then building stronger Providing greater access and convenience relationships with consumers for consumers • Further develop knowledge of players and their • Invest in retail to expand access and improve the behaviors. player experience. • Adopt a consumer-frst strategy. • Revitalize retail and iLottery. Improve look, feel and consistency. • Segment the player base and target all commercial decisions around consumer insight. • Drive digital channels and engagements to unlock latent demand and attract new • Build out a CRM and loyalty program for players. consumers. A shift of focus from one-to-many to one-to-one communication. FIGURE 1 Four strategic priorities 5 The Upcoming Year Plan (FY19) In FY19, we plan to deliver sales of $3,033 million, which is a projected growth of 3.7 percent versus the previous year. This sales increase will be delivered through projected growth in Instant sales of 3.3 percent of $61.8 million and projected growth in Draw game sales of 4.6 percent of $48 million. This will result in a projected increase in contribution to the state of $39.4 million, which is a growth of 5.7 percent compared to FY18.* To deliver our growth ambitions, the FY19 Business Plan focuses on four pillars and details our strategies, goals and planned activities for each. They encompass: Marketing/Brand, Games, Channel, and Communications and Public Affairs. Underpinning the four pillars is a Corporate Social Responsibility (CSR) plan, which highlights the importance of this part of the business and how operating in a responsible way is foremost in our priorities. VISION To be a lottery Illinoisans want to play 10 YEAR vision and mission MISSION To maximize returns to good causes in a socially responsible way BRAND & COMMUNICATIONS GAMES CHANNEL MARKETING & PUBLIC AFFAIRS TheCorporate Four Pillars Social of theResponsibility. Plan Being a consumer-first organization BUSINESS ENABLERS Organizational effciencies, technology, key external stakeholder relationships, etc. FIGURE 2 The Four Pillars of the Plan Within The Upcoming Year Plan (FY19) each pillar is further detailed with a full situational analysis along with the chosen strategies, goals, activities and revenue projections. FINAL (June 22, 2018) *Based on Camelot Illinois’ April 2018 forecast data. 6 (i) BRAND & MARKETING In FY19, we will build the foundation of a new, trusted brand that offers broader appeal to consumers and stakeholders and create an emotional connection. The new brand platform for consumers will reappraise their thinking and opinions of the lottery. We will work to improve win belief in and out of retail, maximizing the potential of impulse purchases and reinforcing the Lottery’s presence in-store. Jackpots, new game launches, Instant game family launches and game improvements will be supported through a comprehensive set of campaigns that range from a constant presence across all media to smaller tactical approaches. In particular, campaigns that support the launch of two Instant game families, seasonal launches and the new Draw annuity game will be designed to drive awareness, play frequency, participation and sales. Our focus in FY19 will be to have fewer experiential events but to make them bigger and better. We will still maintain an active presence in the communities we serve and will continue to work with our sports teams and with other headline events statewide. We will also implement a media buying strategy to take advantage of our volume of spend to drive economies of scale and better return on dollars spent. (ii) GAMES (Instants and Draw) In FY19, we will deliver games with clearly defned and exciting propositions. We will continue to launch Instant games that have proven appeal and use consumer insights to shape and diversify the Instant game portfolio in the second half of the year. The Instant game plan includes launch of two new families and a strong seasonal offering in time for the end-of-year holiday. In FY19, we will work with the Illinois Lottery to improve the policies and procedures that guide how Instant win games are marketed, activated and closed at retail locations. Our goal will be to ensure the Illinois Lottery meets and exceeds current industry practice so our players are able to make informed decisions about how to play while we maximize fnancial returns to the state. In Draw games, improved positioning of large jackpot games will encourage participation earlier in the roll cycles, an approach that has been successful for us in other jurisdictions. An ongoing program of evaluation will be initiated for the current portfolio of Draw games, that will support larger Draw game categories (Pick 3, Pick 4) and develop consumer insights to evaluate, prepare and recommend an approach to renovate parts of the Draw game portfolio in FY20. In the second half of the year, we will launch a brand new annuity based Draw game that will offer a unique proposition for winners to receive regular annuity type payments for life, rather than a single jackpot. (iii) CHANNEL (Retail and iLottery) In FY19, there will be a focus on better access, category presentation and making play easier and more convenient. Our retail world will be dominated by technical transition on December 4, 2018, with new equipment being installed and activated across approximately 7,600 locations. In addition, we will transform the retail experience with a $15 million investment in new permanent point of sale equipment (PPOS), which will roll out in the second half of the year.