A N N U a L R E P O R T 2 0

annual report 2010 1 Our mission 2 Key figures 3 Our contributions 4 Message from the Chairwoman of the Board 7 Message from the President and Chief Executive Officer 12 40th anniversary 16 Social commitment 20 Lotteries 24 Casinos 28 Video lotteries 32 Bingo 36 Ingenio 40 Casino Mundial 42 Financial review 44 Consolidated financial statements 49 Notes to the consolidated financial statements 72 Comparative results 73 Follow-up on the actions outlined in the 2008-2013 Sustainable development action plan 83 Code of ethics and rules of professional conduct 94 Access to information and protection of personal information 96 Board of Directors and Corporate Secretariat 99 Board and Committee reports 108 Organizational structure 110 Contact Our mission Loto-Québec’s primary mission is to assure the systematic and effective operation of games of chance in the province. Created in 1969 to implement a public lottery, the Corporation has diversified its activities over the years in order to carry out new mandates entrusted to it by the Government. In addition to a public lottery, through its subsidiaries, Loto-Québec operates four casinos, related restaurant and hotel services, a video lottery network, including two gaming halls, along with network bingo activities. In addition, the Corporation exports multimedia products to international markets and holds a financial interest in Casinos Développement Europe, the third largest casino operator in France. Loto-Québec returns the fruits of its commercial activities to the Government and to all of Québec society. In recognition of its social responsibilities, the Corporation is committed to combating excessive gaming and to promoting healthy gaming behaviour. Moreover, it manifests its social commitment through the sponsorship of numerous events that bring people together throughout the province. LOTO-QUÉBEC 2rapport 0 1 0 annual annuel report 2 0 1 0 p. 1 Key figures As at March 31 (in thousands of dollars) 2010 2009 $ Variation % Variation Total revenues 3,810,283 3,870,272 (59,989) (1.5) Lotteries 1,850,171 1,901,534 (51,363) (2.7) Casinos 935,307 915,443 19,864 2.2 Video lotteries 1,043,332 1,062,720 (19,388) (1.8) Bingo 32,025 35,392 (3,367) (9.5) Ingenio 771 1,083 (312) (28.8) International – 1,582 (1,582) (100.0) Inter-sector transactions (51,323) (47,482) (3,841) 8.1 Prizes awarded – Lotteries 977,560 1,015,208 (37,648) (3.7) Prizes awarded – Bingo 16,521 16,804 (283) (1.7) Gross margin 2,363,961 2,384,954 (20,993) (0.9) Operating expenses 847,258 800,333 46,925 5.9 Net earnings 1,340,687 1,455,759 (115,072) (7.9) Dividends 1,251,597 1,375,400 (123,803) (9.0) Other amounts contributed to the Québec and Canadian Governments 236,806 226,646 10,160 4.5 Total assets 1,185,789 1,205,049 (19,260) (1.6) Shareholder’s equity 134,477 134,477 – – TOTAL REVENUES (in thousands of dollars) 2010 2009 2008 2007 2006 3,810.3 3,870.3 3,850.2 3,798.8 4,016.0 NET EARNINGS (in millions of dollars) 2010 2009 2008 2007 2006 1,340.7 1,455.8 1,436.2 1,468.1 1,613.9 p. 2 LOTO-QUÉBEC 2 0 1 0 annual report Our contributions ECONOMIC CONTRIBUTIONS Commissions and Dividends to prizes awarded other compensations to the Government to lottery and lottery, video lottery and of Québec bingo winners bingo network partners $1.252 B $994.1 M $360.5 M purchases from companies conducting Salaries and taxes to Special contributions business in Québec employee benefits governments to governments $399.4 M $413.1 M $132.5 M $104.3 M social CONTRIBUTIONS Contributions to the Ministère de la Santé et des Contributions to the Contributions to Services sociaux in aid to the Ministère de l’agriculture, Contributions and the fight against elderly who have lost their des pêcheries et commissions to excessive gaming autonomy de l’alimentation non-profit organizations $31.2 M $30.0 M $14.2 M $18.0 M Fonds d’aide à l’action Fonds d’aide à l’action communautaire autonome – communautaire autonome – assistance for independent assistance for international Collection community action humanitarian action Sponsorships loto-Québec $15.8 M $3.2 M $14.2 M $0.4 M LOTO-QUÉBEC 2 0 1 0 annual report p. 3 Message from the Chairwoman of the Board HÉLÈNE F. FORTIN, FCA, ICD.D Chairwoman of the Board In 2009-2010, the Board of Directors and its committees worked [...] to ensure the ongoing integration of governance-related measures within a clear structure, enabling the Corporation to maintain the highest standards of good corporate governance. p. 4 LOTO-QUÉBEC 2 0 1 0 annual report M e s s a g e f r o M t h e C h a i r w o M a n o f t h e B o a r d My first full year as Chairwoman of Loto-Québec’s Board Also with a commitment to continuous improvement, the Board of Directors was marked by continuity in the composition of furthered its work on sound risk management. It monitored the the Board and its committees. My fellow Directors and I actively Internal Audit annual plan and the implementation of certification pursued our mandate of ensuring that the Corporation was programs for internal controls and the integrated risk management managed in compliance with the provisions of its Act of framework. Each decision taken at Loto-Québec undergoes a Incorporation and its regulations along with the other laws rigorous process of analysis, in the interests of compliance with the and regulations that govern it, including the Act Respecting many requirements and the added value of interventions, thereby the Governance of State-Owned Enterprises. maximizing the Corporation’s ability to fulfil its mission long-term. The Board of Directors made several important decisions during RULES OF GOVERNANCE fiscal 2009-2010, including authorizing a regulatory amendment In 2009-2010, the Board of Directors and its committees worked request to allow the Corporation to develop an online gaming with Loto-Québec’s Internal Auditor and the Auditor General to offering. This decision was taken for a number of reasons ensure the ongoing integration of governance-related measures connected with Loto-Québec’s mission, first and foremost to within a clear structure, enabling the Corporation to maintain redirect illegal gaming activity to a secure, controlled site. This the highest standards of good corporate governance. It was this evolution of its mandate enables the Corporation to adjust to new approach that set in motion the process for adopting measures market realities. for evaluating the Corporation’s efficiency and performance. Board The Board also decided to approve the opening of a Kinzo hall, a new members began a process to determine the best performance game to be launched as a pilot project by the Société des bingos du indicators to use and commissioned an outside firm to benchmark Québec (SBQ). Kinzo will make it possible for the SBQ to ultimately it against similar organizations. maintain its average annual contribution of $10 million to non-profit organizations (NPOs), to provide timely assistance to NPOs that Furthermore, the Governance and Ethics Committee initiated the became “orphans” when many bingo halls were closed in recent annual review process of the mandates and performance of each years, and to create a regional development fund for this industry. committee and the Board of Directors, as well as the annual review by each committee of the Corporation’s operational policies under Throughout the year, the Board followed the progress of day-to-day their respective governance. The codes of ethics and professional matters at the Corporation to ensure that its business plan objectives conduct applicable to Board members, managers and employees were achieved. It also continued its work on the 2010-2013 strategic of Loto-Québec were also subject to an annual review. The purpose planning exercise. I can confirm that the organization’s mission, of these systematic reviews is to maintain best governance practices its major orientations and its established policies and regulations with a view to compliance, efficiency and added value, all within are respected. a context of optimizing resources. FINANCES AND RISK MANAGEMENT The Loto-Québec Board fulfilled its responsibilities with respect to auditing and monitoring the Corporation’s finances. On the recommendation of the Audit Committee, the Board approved Loto-Québec’s quarterly and annual financial statements as well as its budget. Works in regards to co-auditing with the Auditor General and KPMG as well as the transition to IFRS were also carried out. Here again, I can attest to the rigourous standards and quality of the financial information produced by the Corporation, as well as the ongoing efforts to comply with the best accounting practices. LOTO-QUÉBEC 2 0 1 0 annual report p. 5 Message froM the ChairwoMan of the Board BETTER VALUE FOR MONEY ACKNOWLEDGEMENTS Throughout the year, the Board and its committees made resource It is with the utmost sincerity that I thank Mr. Alain Cousineau, optimization a core priority. What this means in real terms is ensuring who fulfi ls his role as President and Chief Executive Offi cer of that the interests of sound management are factored into the Loto-Québec with heartfelt enthusiasm, diligence and integrity. strategic planning exercise and that measures taken in this respect His ability to identify priorities and mobilize a team around clear are integrated into the action plan and Internal Audit plan so that, objectives inspires confi dence.

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