New Hampshire Lottery Commission

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					New Hampshire Lottery Commission
A Department of the State of New Hampshire

COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2008

Front cover photo taken in Portsmouth, New Hampshire at Strawberry Banks, by Linda S. Murphy of Lasting Moments Photography (603) 520-2106.

NEW HAMPSHIRE LOTTERY COMMISSION®
A DEPARTMENT OF THE STATE OF NEW HAMPSHIRE

COMPREHENSIVE ANNUAL FINANCIAL REPORT
For the fiscal year ended June 30, 2008

Prepared by: The Finance Department

Georges Roy Administrator And Kassie Strong Chief Accountant

During fiscal year 2008 the Lottery added instant tickets that sell for $30 each to its array of instant ticket sales prices; making it the highest priced ticket the Lottery sells.

New Hampshire Lottery Commission® Comprehensive Annual Financial Report For the Year Ended June 30, 2008
Table of Contents Page

Introductory Section - Unaudited Letter of Transmittal.................................................................................................. 1 GFOA Certificate of Achievement ........................................................................... 10 Appointed Officials.................................................................................................. 11 Organizational Chart............................................................................................... 11 Financial Section Independent Auditors’ Report ................................................................................. 13 Management’s Discussion and Analysis ................................................................. 15 Financial Statements: Statement of Net Assets ..................................................................................... 26 Statement of Revenues, Expenses, and Changes in Net Assets ........................ 27 Statement of Cash Flows .................................................................................... 28 Notes to the Financial Statements ...................................................................... 29 Supplemental Schedule of Revenues, Expenses, and Transfers ............................ 40 Statistical Section New Hampshire Lottery Statistics: Revenues, Expenses, Transfers, and Changes in Net Assets............................. 41 Revenues and Sales........................................................................................... 42 Expenses and Distributions to Education ............................................................ 43 Instant Games Sales versus On-Line Games Sales............................................ 44 Employee Statistics, Demographic Summary and Economic Information............ 45 Who Plays N.H. Lottery Games – Demographic Summary ................................. 46 Who are the Lottery’s Top Ten Revenue Producers ........................................... 47 Other Various Fiscal Year Statistics.................................................................... 48 U.S. Lottery Statistics: Revenue and Expense Analysis – Fiscal Year 2007 ........................................... 49 Sales by Game and Total Sales Per Capita – Fiscal Year 2007.......................... 50 Sales Per Capita Graph – Fiscal Year 2007........................................................ 51 Per Capita Sales................................................................................................. 52 Ticket Sales ........................................................................................................ 53 Net Operating Income as Percentage of Ticket Sales ......................................... 54 Prize Expense Percentage of Ticket Sales ......................................................... 55 Number of Products Sold .................................................................................... 56

Introductory Section

The New Hampshire Lottery is the first lottery in the nation to give every player the chance to enter their non-winning tickets via the Internet to win exciting prizes. To participate in NH Lottery Replay, customers sign up online and enter the Replay® codes from any New Hampshire non-winning lottery tickets. Once they set up their online account they can accumulate points to be used to win prizes. This internet based program is also a great advertising and marketing tool for the Lottery.

GOVERNOR John H. Lynch CHAIRMAN Richard Campbell, Jr. COMMISSIONER Paul J. Holloway COMMISSIONER Arthur P. Klemm, Jr. EXECUTIVE DIRECTOR Rick Wisler

December 12, 2008 To the Citizens of the State of New Hampshire, The Governor of the State of New Hampshire, and The New Hampshire Lottery Commission: We are pleased to submit the Comprehensive Annual Financial Report of the New Hampshire Lottery Commission (the Lottery) for the fiscal year ended June 30, 2008. The finance department of the Lottery has prepared this comprehensive report. Management assumes full responsibility for the completeness and reliability of all information presented in this report. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position, results of operations, and cash flows of the Lottery. All disclosures necessary to enable the reader to gain an understanding of the Lottery's financial activities have been included. Management of the Lottery is responsible for establishing and maintaining internal controls designed to ensure that assets are protected from loss, theft, or abuse and to ensure that the accounting systems allow compilation of accurate and timely financial information. Internal controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. Access to the Lottery’s office and instant ticket warehouse is limited through high-level security. The Lottery has segregated responsibilities to enhance controls over accounting procedures relative to personnel and payroll; purchasing and accounts payable; sales and accounts receivable; and general ledger. Management personnel maintain oversight and approval authority over all areas of operation. The Lottery’s independent auditors review significant and relevant areas annually and issue a report to the Legislative Fiscal Committee on internal control and compliance in conjunction with their financial audit. The Lottery manages a valuable ticket inventory and controls the payment of prizes. As such, various precautions are taken to ensure the integrity and security of lottery operations. They are as follows: • • • High-level security at the Lottery’s headquarters restricts access to office and warehouse areas to certain lottery personnel. Security cameras are located in key locations throughout the inside and outside of the Lottery headquarters building. Criminal record checks are performed on all new lottery employees.
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• •

All instant lottery tickets are printed with special inks, dyes and security codes. Drawings held at Lottery headquarters have a designated secure drawing room, which is monitored 24 hours a day. The actual drawings are executed according to detailed procedures, witnessed by certified public accounting firm personnel, videotaped by primary, backup and security cameras, and are reviewed regularly by Lottery security staff. Credit checks are performed on all lottery retailers and contractors. Various levels of access and other controls are provided within the computer system.

• •

The Lottery’s financial statements have been audited by KPMG LLP. KPMG has issued an unqualified (“clean”) opinion on the Lottery’s financial statements for the year ended June 30, 2008. The independent auditors’ report is presented as the first component in the financial section of this report. Management's discussion and analysis (MD&A) immediately follows the independent auditors’ report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. The Lottery, as a department of the State of New Hampshire, is included within the State’s Comprehensive Annual Financial Report. This report presents all activities of the Lottery in a single enterprise fund and does not include data or information related to any other state agency or fund. Profile of the Lottery The lottery industry in the United States is comprised of 42 states and the District of Columbia. The New Hampshire Lottery Commission (the Lottery) was created in 1963 through the enactment of New Hampshire Revised Statutes Annotated (RSA) 284:21-a for the sole purpose of raising revenues to help fund education in New Hampshire. The first tickets went on sale in March of 1964, making New Hampshire the first state-run lottery. A three-member appointed commission serves at the pleasure of the Governor. The Lottery headquarters is located in the capitol city of Concord, which is in the central part of the state. The Lottery operates enterprise activities as a department of the State of New Hampshire. These activities include the sale of lottery tickets to the public and all necessary support functions. All profits are used exclusively for state aid to education in New Hampshire. The Lottery is required to submit a biennial operating budget to the Governor for approval. The budget is further submitted to the Legislature for its approval and is ultimately included in the State of New Hampshire’s operating budget. The Lottery’s official budget, as adopted by the Legislature, is prepared principally on a modified cash basis. Due to the nature of the Lottery’s activities, the majority of its cost of sales expenses, such as prizes, vendor fees and retailer commissions, are not included in the budget. The Lottery budgets for approximately 5% of its total expenses that consist primarily of salaries and benefits, rental expenses, advertising and instant ticket printing costs. Financial management staff consistently monitors adherence to budgeted appropriations.
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The New Hampshire Lottery Commission provides customers the opportunity to participate in a variety of instant and on-line lottery games. The Lottery is a member of two joint lottery ventures, the Tri-State Lotto Commission, comprised of New Hampshire, Maine and Vermont lotteries, and the Multi-State Lottery Association, which is comprised of many United States lotteries; therefore, it operates a number of on-line games under those jurisdictions. The following paragraphs describe the products offered by the Lottery.

Instant Games were introduced in New Hampshire in 1975 with a ticket called ‘Lucky X’. Instant games are played by scratching the latex covering off the play area on the ticket. There are several ways to win on an instant or "scratch" ticket, including matching three like dollar amounts, symbols or letters, or adding up numbers to a specified total. If the correct combination appears, the player becomes an "instant winner” without having to wait for the results of a drawing. The instant games offer a wide variety of game themes and ticket prices. Players have won anywhere from $1 to $1 million, depending on the game. The Lottery offered 91 Instant games during fiscal year 2008 with ticket prices ranging from $1 to $30.

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Tri-State Pick 3/Pick 4 has been offered by Tri-State since 1996, and prior to that by New Hampshire since 1977 and is one of the Lottery’s most consistently played games. Players can win twice a day, once at mid-day and again in the evening. For as little as fifty cents or as much as $5 a player can purchase a ticket for a chance to win. This is the only game that offers tickets for less than a dollar. Players select a three or four digit number and select from several different play options. Numbers are drawn twice a day, seven days a week, for fixed prize amounts ranging from $25 to $25,000, depending on the dollar amount bet. Although the Pick 3/Pick 4 game is considered a mature product, it continues to maintain strong sales through its loyal players.

Tri-State Megabucks was the first multi-state product to be offered by any jurisdiction in the United States. It was also the Lottery’s first lotto-type game and year after year it maintains a faithful player base. Megabucks has undergone some significant enhancements since its introduction in September 1985. The Megabucks game began with a 6 of 30 matrix and a weekly drawing each Saturday. The matrix changed to 6 of 36 in 1986 and to 6 of 40 in 1988. In 1990, the Tri-State Lotto Commission added a second jackpot drawing on Wednesdays. More changes faced the Megabucks game in 1997 with the addition of a bonus number, a new matrix of 6 of 42, and a guaranteed jackpot of $500,000. The cost is a minimum of $1 to play. Currently, Megabucks offers several prize tiers ranging from $1 to $10,000 and a rolling jackpot. A jackpot winner may designate how the jackpot will be paid whether in cash or as an annuity in 25 annual installments. Although this game is 23 years old, it still remains a profitable product for the Lottery, with a committed player base. This game is available as a subscription.

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Tri-State Paycheck replaced Tri-State Triple Play on January 17, 2007. Tickets cost $2 per chance. Players pick five numbers from 1 to 39 or choose an Easy Pick. They have four chances to win: $2, $20, $600 or the top prize of $2,500 a month for 10 years. Drawings are held every Tuesday and Friday evening.

Fast Play is a Tri-State online game. Sales began in June of fiscal year 2006. It is an on-line game that plays like an instant game and is generated by the lottery terminal at the time of purchase. There is no waiting for a drawing like the other on-line games. A player plays the game and determines if they have won instantly. Each Fast Play game has a shelf life of approximately three months. Over the course of a year, approximately four different Fast Play games are offered to players, which keep the product fresh and exciting. Examples of the different games offered are Lucky Roll, Black Jack, Holly-Day Bucks, and Play Ball. The games have nine prize levels ranging from $1 to $250. The Lottery’s web site, www.nhlottery.org explains how each game plays.

New Hampshire Powerball is an on-line game jointly operated by the 31 member state lotteries of the Multi-State Lottery Association (MUSL). This game was introduced in New Hampshire in November 1995, although it has been operated by the MUSL Association since April 1992. For as little as $1, players purchase a chance at becoming a millionaire. Players select one set of five numbers and one additional number designated as the “powerball” for each draw. The matrix is “5 of 55” for the set and “1 of 42” for the powerball. The minimum
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jackpot is $15 million, which rolls in the event that no ticket matches all five numbers and the powerball. Powerball offers eight secondary prizes of fixed amounts ranging from $3 to $200,000. In fiscal year 2001 the Power Play feature was added to the game giving players the chance to increase their winnings, except for the jackpot prize, by up to five times. In order to upgrade to a Power Play, a player needs only to pay an extra dollar. A jackpot winner may designate how the jackpot will be paid whether in cash or as an annuity in 30 annual installments. Drawings are held in Des Moines, Iowa on Wednesdays and Saturdays. This game also offers ticket sales through subscriptions.

New Hampshire Hot Lotto is sponsored by the Multi-State Lottery Association (MUSL). Currently nine United States lotteries participate in the Hot Lotto game. The cost of a ticket is $1. Each ticket has a two-part play. First, the player selects five numbers from a matrix of 1 to 39 and then one hot ball number from a matrix of 1 to 19. Drawings are held on Wednesday and Saturday evenings. The jackpot starts at $1 million and grows until someone wins. In addition to the jackpot, there are eight other ways to win from $2 up to $10,000. Local economy New Hampshire is a small state with a population of 1,315,828 and a favorable economic environment. Local indicators point to continued stability. According to the Morgan Quinto 2008 rankings, New Hampshire ranks as the number one most livable state in the nation and the second healthiest state in the nation. Morgan Quitno Press is an independent private research and publishing company. The company specializes in reference books that compare states and cities in several different subject areas. The corporation is not a subsidiary of any other company nor is it subsidized by any outside interest group. Its books are found in reference libraries throughout the United States and around the world. Some of the positive factors considered in awarding a state the most livable state award are per capita gross state product, per capita personal income, median household income, public high school graduation rate, percent of population with bachelor’s degrees or higher, job growth, and homeownership. The Tax Foundation, a nonprofit fiscal policy research group, estimated New Hampshire’s 2008 local and state tax burden as the fifth lowest in the United States at 7.6% of income; the U.S. average of state and local tax burden is 9.7% of income. For September 2008, according to the Economic and Labor Market Information Bureau, the September 2008 seasonally adjusted unemployment rate for New Hampshire was 3.9%, compared with the national average of 5.5%. New Hampshire offers a low tax environment for businesses as well. There is no sales tax, use
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tax, broad-base income tax, or capital gains tax in New Hampshire. New Hampshire ranks seventh in the nation for best business tax climate. A state’s business tax climate measures how each state’s tax laws affect economic performance.

New Hampshire’s per capita personal income ranks tenth highest in the nation and third in New England. According to the Bureau of Economic Analysis for calendar year 2007, New Hampshire’s per capita personal income was $41,444, which is higher than the United States average of $38,564. The percentage change in New Hampshire’s per capita personal income increased by 4 % for 2007 as compared to 2006; the United States per capita income growth rate for 2007 was 5%. According to the New Hampshire Business Resource Center, New Hampshire offers exceptional quality of life because of its overall low taxes, low crime, high quality health care, good schools, affordable housing, cultural opportunities, location, and environment. In New Hampshire, within reasonable driving distance, one can visit beautiful mountains, the ocean, or the city of Boston, attracting a wide range of active, talented, and creative people, who in turn attract diverse industries. All of these favorable qualities suggest continued growth for New Hampshire. As everyone is well aware cost of living expenses in America have increased and the economy is suffering. According to New Hampshire Employment Security New Hampshire’s economy is dependent on consumer spending, so decreases in disposable income hurt economic growth for the State. The Lottery is dependant on customer’s discretionary income, so when there is less available, customers spend less on lottery tickets. The Lottery will likely see decreases in revenues in fiscal year 2009. The New Hampshire Lottery does well in per capita sales. When compared with other U.S. lotteries in the United States, New Hampshire ranked 13 of 43 in fiscal year 2007. Un-audited fiscal year 2008 sales for all U.S. lotteries’ increased 2%. According to La Fleur’s Magazine, a research company that reports facts and statistics on lotteries, fiscal year 2008 was a modest year for lotteries; only 11 of 43 lotteries saw decreases in fiscal year 2008 sales. New Hampshire was one of the 11 lotteries that had decreased sales. Long-term financial planning The Lottery as a department of the state of New Hampshire follows a two year budget process and is limited by state regulations in long term financial planning. The Lottery transfers all estimated net profits on a monthly basis to the State Education Trust Fund. Due to increased pressure put on the State to produce more revenues and because New Hampshire does not have a sales tax or income tax, sources of revenues are limited. The Lottery plays a significant part in the State revenue process by producing revenue to fund education in the State. As such, the Lottery is exploring additional gaming options for ways of producing higher revenues. The traditional lottery games, such as online lotto-style games are greatly affected by the amount of the jackpot. The only way to greatly increase Lottery revenues would be to expand to other types of gambling; however governing bodies of New Hampshire have not supported the expansion of gambling.

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Relevant financial policies All investments of the Lottery’s excess cash are made by the New Hampshire State Treasury Department, which is responsible for the investment of all State funds. RSA 6:8 sets forth the policies the State Treasurer must adhere to when investing State funds. The types of investments authorized, with the approval of the Governor and Council, include obligations of the United States Government, legal investments for savings banks and trust companies, savings accounts, participation units in the public deposit investment pool, and various certificates of deposit. All profits from Lottery operations are designated for education in New Hampshire. Once a month, these profits are transferred to the Education Trust Fund from the investments made by the State Treasurer. Prize payments due winners for jackpot prizes awarded under Megabucks are fully funded by investments in U.S. Treasury STRIPs held by the Tri-State Lotto Commission (Tri-State). The payments due winners for jackpot prizes awarded under Powerball are satisfied through securities purchased by the Multi-State Lottery Association (MUSL). MUSL purchases U.S. government obligations to fund jackpot prizes, which are held in irrevocable trust or securities clearing accounts. As such, the Lottery does not record a liability for jackpot awards which are payable in installments from funds provided by Tri-State or MUSL. Upcoming initiatives The Lottery in conjunction with the other Tri-State member states is developing a new online game to replace the current Pay Check game. Also, there are plans to make enhancements to the current Megabucks game. The Lottery has launched a retailer incentive program that rewards retailers a 1% increase in sales commissions if they increase their sales by 12% in a given three month period. The MUSL members have agreed to make enhancements to the current Powerball game in January 2009. They feel the enhancements will increase the size of jackpots. Because of the effect jackpot amounts have on sales, increased jackpot amounts create increased ticket sales, which means higher revenues for the Lottery. The Lottery is planning new advertising campaigns for the instant scratch ticket games. Awards and acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the New Hampshire Lottery Commission for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2007. This was the tenth consecutive year that the Lottery has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year. We believe that our current CAFR continues to meet the Certificate of Achievement Program requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
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This CAFR reflects our commitment to improve and maintain the Lottery’s financial statements and record keeping systems in conformity with the highest standards of accountability. This report also reflects the Lottery’s commitment to maintaining the public’s trust through high ethics and uncompromising integrity. The dedicated efforts of the entire lottery team, especially those in the finance department are greatly appreciated. We would also like to recognize Executive Director Rick Wisler, Commission Chairperson Richard Campbell Jr., Commissioners Paul Holloway, and Arthur Klemm for their support, guidance, and dedication in operating the New Hampshire Lottery Commission.

Respectfully submitted,

Georges J. Roy Administrator

Kassie L. Strong Chief Accountant

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New Hampshire Lottery Commission Appointed Officials and Organizational Chart Appointed Officials Richard J. Campbell, Jr Commission Chairperson Term ends 6/29/2011 Paul J. Holloway Commissioner Term ends 6/29/2009 Arthur P. Klemm, Jr Commissioner Term ended 6/29/2007*

Organizational Chart

Citizens of the State of New Hampshire Governor of the State of New Hampshire Lottery Commissioners (3)

Executive Director

Operations

Security

Marketing

Administration

Sales

Shipping and Receiving

Finance

*Currently in hold over status

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Financial Section

Birthdays, holidays, or just because... New Hampshire Lottery Gift Certificates are the perfect size, color, and fit for anybody on any occasion. Players may exchange give-a-gift for any N.H. Lottery game ticket, including subscriptions.

99 High Street Boston, MA 02110-2371

KPMG LLP

Telephone Fax Internet

617 988 1000 617 988 0800 www.us.kpmg.com

Independent Auditors’ Report

To the Fiscal Committee of the General Court and the New Hampshire Lottery Commission State of New Hampshire Concord, New Hampshire: We have audited the accompanying statement of net assets of the New Hampshire Lottery Commission (Lottery Commission), as of June 30, 2008, and the related statements of revenues, expenses, and changes in net assets, and cash flows for the year then ended. These financial statements are the responsibility of the Lottery Commission’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Lottery Commission’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Lottery Commission at June 30, 2008 and the changes in its financial position and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. The Management’s Discussion and Analysis on pages 15 to 25 is not a required part of the financial statements but is supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements of the New Hampshire Lottery Commission. The Introductory Section, the Statistical Section and the Supplemental Schedule of Revenues, Expenses and Transfers on page 40 are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Supplemental Schedule of Revenues, Expenses and Transfers on page 40 has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The Introductory Section and Statistical Section have not 13
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been subjected to auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. In accordance with Government Auditing Standards, we have also issued our report dated December 12, 2008 on our consideration of the Lottery Commission’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

December 12, 2008

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Management’s Discussion and Analysis As management of the New Hampshire Lottery Commission, we offer readers of the Lottery’s financial statements this narrative overview and analysis of the financial activities of the New Hampshire Lottery Commission for the fiscal year ended June 30, 2008. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which begins on page 1 in the introductory section of this comprehensive annual financial report. Financial Highlights • Operating revenues for the Lottery program decreased by $2.8 million, or 1% for the current fiscal year. Powerball revenues increased $2.0 million, while Instant scratch ticket revenues decreased by $4.6 million. Hot Lotto decreased $1.1 million. Tri-State games, which contribute approximately 10% to total revenues, netted an increase of approximately $700,000. The Lottery’s operating expenses for the current fiscal year decreased slightly by approximately $41,456, or less than 1%. Normally there would have been more of a decrease in operating expenses that would have correlated with the decrease in Lottery program revenues; however increases in advertising expense offset decreases in cost of sales. At the end of the current fiscal year the Lottery’s assets decreased $1.2 million, or 13% over fiscal year end 2007. Liabilities also decreased, by approximately $1.3 million, or 23%, from the end of the previous fiscal year. There was an increase in the Lottery’s total net assets of $98,750, which consist solely of restricted prize funds for the Powerball, Hot Lotto, and Megabucks programs. Distributions to the Education Trust Fund, which are equal to net income less change in restricted assets, decreased $3.4 million or 4%, due to the decrease in Instant scratch ticket revenues.

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Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the New Hampshire Lottery’s (the Lottery) basic financial statements. The Lottery is accounted for as an enterprise fund, reporting on all of the activity’s assets and liabilities using the accrual basis of accounting much like a private business entity. The Lottery’s basic financial statements comprise four components: 1) the statement of net assets, 2) the statement of revenues, expenses and changes in fund net assets, 3) the statement of cash flows, and 4) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. The statement of net assets presents information on all of the Lottery’s assets and liabilities, with the difference between the two reported as net assets. The increase or decrease in net assets does not reflect the condition of the Lottery’s financial position, because by law the Lottery is required to transfer all net profits to the Education Trust Fund on a monthly basis. The statement of revenues, expenses and changes in net assets reports the Lottery’s net assets and changes in them. As stated above, the Lottery is required by law to transfer all revenues, in

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excess of its operating costs, to the Education Trust Fund; therefore the change in net assets does not reflect the actual results of the Lottery’s operating activities. The statement of cash flows outlines the cash inflows and outflows related to the activity of selling lottery products. Notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the financial statements. The Lottery is a self-supporting department of the State of New Hampshire. The financial statements of the Lottery represent all its functions, which are supported from the sale of Lottery tickets. The Lottery is also included within the State of New Hampshire’s Comprehensive Annual Financial Report as an enterprise fund. For fiscal year 2008, the Lottery produced $261 million in total operating revenues, a 1% decrease over fiscal year 2007’s $264 million. Instant scratch ticket sales were down from the previous fiscal year $4.6 million, which is being attributed to the economy. A new instant scratch ticket price of $30 was introduced for the first time in fiscal year 2008. Powerball sales during fiscal year 2008 increased as compared to fiscal year 2007 due to high jackpot amounts. Sales in the lotto style games are directly affected by jackpot amounts, the higher the jackpots, the greater amount of tickets that sell; the lower the jackpot amounts, the lesser amount of tickets that sell. The Lottery generated $75.6 million of net profit for the Education Trust Fund in fiscal year 2008. Distributions to the Education Trust Fund were down approximately $3.4 million in fiscal year 2008 over fiscal year 2007. Total revenues since the inception of the Lottery in 1963 are almost $4 billion. To date, the Lottery has generated more than $1.2 billion of net profits to help fund education in New Hampshire. Net Assets and Changes in Net Assets Article 6-b of the Constitution of the State of New Hampshire declares “All moneys received from a state-run lottery and all the interest received on such moneys shall, after deducting the necessary costs of administration, be appropriated and used exclusively for the school districts of the state. Such moneys shall be used exclusively for the purpose of state aid to education and shall not be transferred or diverted to any other purpose.” As a result, the net assets of the Lottery consist only of prize funds held on deposit with the Multi-State Lottery Association (MUSL) and the Tri-State Lotto Commission (Tri-State), and capital assets (equipment). Comparable figures for total assets at June 30, 2008 and 2007 were $8.1 million and $9.4 million, respectively. Cash and cash equivalents were $246,418 at June 30, 2008 and $1.5 million at June 30, 2007. Accounts receivable at the same time were $2.9 million for both fiscal years. The decrease in cash and cash equivalents was due to timing of distributions to the Education Trust Fund. Instant scratch ticket inventory was $832,099 for fiscal year 2008 and $935,776 for fiscal year 2007; less instant scratch ticket inventory on hand made up this decrease. Non current, restricted assets, which represent New Hampshire’s share of prize reserve funds held by MUSL and Tri-State, increased $98,750 during the current fiscal year. Capital assets, net of depreciation, increased during the current fiscal year from $235,145 in 2007 to $242,504 in 2008. The Lottery is required by law to transfer all revenues, in excess of its operating costs, to the Education Trust Fund, therefore the change in net assets does not reflect the actual results of the Lottery’s operating activities.

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The following table shows condensed net assets as of June 30, 2008 and 2007 (in thousands).
2008 Current and Other assets Capital assets (net of accumulated depreciation) Total assets Current liabilities Noncurrent liabilities Total liabilities Net assets: Invested in capital assets Restricted assets Unrestricted (deficit) Total net assets $ 7,893 243 8,136 4,095 278 4,373 $ 2007 9,120 235 9,355 5,412 279 5,691

$

243 3,763 (243) 3,763

$

235 3,664 (235) 3,664

Liabilities The Lottery’s current liabilities consist primarily of unclaimed prizes, accrued operating expenses, and deferred revenue. Noncurrent liabilities consist of compensated absences and workmens compensation. Total liabilities during the current fiscal year decreased by $1.3 million or 23.1%. The year end balances for total liabilities for fiscal years 2008 and 2007 were $4.4 million and $5.7 million, respectively. The decreases in fiscal year 2008 were in unclaimed prizes and due to the Education Trust Fund. The majority of decreases were attributable to the timing of fiscal year end 2008 distributions to the Education Trust Fund for remaining profits. The change in unclaimed prizes was due to decreased sales. Operating Revenues – Games Sales The New Hampshire Lottery game revenues/sales are made up of a variety of instant and on-line lottery products. The Lottery is an active member of two separate joint venture arrangements; the Tri-State Lotto Commission (Tri-State) and the Multi-State Lottery Association (MUSL), and it operates a number of on-line games under those jurisdictions. Tri-State games consist of Megabucks, Pick 3/Pick 4, Fast Play, and the newest game Paycheck. MUSL online games consist of Powerball and Hot Lotto.

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The following table shows sales by lottery game for the years ended June 30, 2008 and 2007 (in thousands). Tri-State Other represents Triple Play, Paycheck and Fast Play.
Game Instant Scratch Tickets MUSL Powerball MUSL Hot Lotto Tri-State Megabucks Tri-State Pick 3/Pick 4 Tri-State Other Other - contributed prizes Total sales 2008 $ 183,991 46,421 3,538 10,459 10,507 5,774 442 $ 261,132 2007 $ 188,565 44,391 4,633 9,657 10,873 5,446 375 $ 263,940 Change $ (4,574) 2,030 (1,095) 802 (366) 328 67 $ (2,808) Change -2.4% 4.6% -23.6% 8.3% -3.4% 6.0% 17.9% -1.1%

The Lottery saw a 1% decrease in the lottery program sales revenues for fiscal year 2008. Instant scratch ticket sales continue to be the Lottery’s most popular product, contributing approximately 71% to total fiscal year sales for both fiscal years 2008 and 2007. Instant scratch ticket sales decreased 2.4% in fiscal year 2008 over fiscal year 2007. The Lottery added a $30 instant scratch ticket product line during fiscal year 2008, increasing the price range of instant scratch tickets to between $1 and $30. Under normal circumstances the addition of a higher priced ticket would increase sales, but do to the economy that did not happen. More money needed at the gas pumps and grocery stores likely decreased the amount spent on lottery products. The following graph shows percentages of Instant scratch games sales for fiscal year 2008 and 2007 by selling price of ticket.

INSTANT SALES BY PRICE POINT
25%
$7 games ended in FY 2007.
$1 Games $2 Games $3 Games $5 Games $7 Games $10 Games $20 Games $30 Games

20% 15% 10% 5%

$30 games 0% began in FY 2008.

FY 2008

FY 2007

Powerball, a game in the MUSL jurisdiction, is the Lottery’s second most popular product contributing 17.8% and 16.8% to total fiscal year 2008 and 2007 sales, respectively. Sales for Powerball increased 4.6% in fiscal year 2008 over fiscal year 2007. This increase was due to a high jackpot amount of $300 million in fiscal year 2008. As jackpots rise in amount so do the sales of tickets. The more frequently jackpots are won, the smaller the jackpot amount, which

18

consequently sells less tickets. The less frequently jackpots are won, the more time they have to build in amount. In fiscal 2008 the jackpot was hit 11 times compared to 13 times in fiscal year 2007. High jackpot amounts bring higher sales for the online games. The trend has shown that the public demands higher jackpot amounts every year. See the following graphs showing the relationship between jackpot amount and sales for fiscal years 2007 and 2008.

JACKPOTS

POWERBALL HIGHEST MONTHLY JACKPOT TOTAL MONTHLY SALES FY 2008 Jackpots Sales

SALES $9,500,000 $8,500,000 $7,500,000 $6,500,000 $5,500,000 $4,500,000 $3,500,000 $2,500,000 $1,500,000 $500,000

$312,000,000 $262,000,000 $212,000,000 $162,000,000 $112,000,000 $62,000,000 $12,000,000 Jul Aug Sept Oct Nov Dec Jan Feb

Mar Apr May June

Jackpot s $312,000,000 $262,000,000 $212,000,000 $162,000,000 $112,000,000 $62,000,000 $12,000,000 Jul

POWERBALL HIGHEST MONTHLYJACKPOT TOTAL MONTHLY SALES FY 2007 Jackpots Sales

Notice the effect jackpot amounts have on sales, and how high jackpots need to raise before sales show noticeable increases.
Sales

`

$9,500,000 $8,500,000 $7,500,000 $6,500,000 $5,500,000 $4,500,000 $3,500,000 $2,500,000 $1,500,000 $500,000

Aug Sept Oct

Nov Dec

Jan

Feb

Mar Apr May June

Hot Lotto is another game that is offered through MUSL, which decreased $1.1 million or 23.6% in the current fiscal year as compared to the previous fiscal year. This decrease was related to low jackpot amounts during the fiscal year. Hot Lotto contributed 1.4% and 1.8% to total Lottery sales for both fiscal years 2008 and 2007, respectively.

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MUSL games sales overall contributed 19.1% and 18.6% to total Lottery sales for fiscal years 2008 and 2007, respectively. Tri-State games sales increased 2.9% overall from fiscal year 2007 to 2008, and amounted to 10% of total Lottery sales for fiscal year 2008. Megabucks increased $802,613, an 8.3% increase from the previous fiscal year, due to high jackpot amounts in fiscal year 2008. Pick 3/Pick 4 decreased $366,581 or 3.4%. The other Tri-State games increased almost $1 million or 16.8%, mostly due to the sales of a one time Raffle game. Tri-State games in total amounted to 10% of total Lottery sales in fiscal year 2008 and 9.8% in fiscal year 2007. The following graph displays Lottery revenues by product/game for the fiscal year ended June 30, 2008.

Lottery Revenues by Game
4% 18% 4% 1% 2%

71%
Instant Games Pick 3 / Pick 4 Powerball Hot Lotto Megabucks Tri-State Other

Operating Expenses – Cost of Sales Prizes Prizes are the largest operating expense the Lottery incurs. In general, prize expense by game will increase or decrease from year to year in proportion to the increase or decrease in sales for a particular game. Fiscal year 2008 prize expense of $154.7 million reflects a 1% decrease from fiscal year 2007 prize expense of $155.9 million. This decrease is mostly due to the decrease in instant scratch ticket sales experienced in fiscal year 2008. Instant scratch ticket games pay out at a higher percentage than online games. Online games typically have a 50% (of sales) prize payout built into the design of the game, where as instant scratch ticket games on average have a 65% (of possible sales) prize pay-out built into each game. The actual prizes paid percentage can be slightly less than the prize percentage built into the game design, because of unclaimed prizes (prizes that winners never cash in). Prize winners have one year (365 days) to claim their prizes. Unclaimed prize money for Instant scratch games and MUSL games goes to the Education Trust Fund. Unclaimed prize money for Tri-State games goes back to the players through promotions or increases to jackpots.

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The following table shows prize expense by lottery game for the years ended June 30, 2008 and 2007 (in thousands). Tri-State Other represents Triple Play, Paycheck and Fast Play.
Percent Change (2.2)% 5.6 % (22.9)% 9.0 % (3.4)% 14.8 % 17.9 % (0.8)%

Game Instant Scratch Tickets MUSL Powerball MUSL Hot Lotto Tri-State Megabucks Tri-State Pick3/Pick4 Tri-State Other Other - contributed prizes Total prize expense

2008 $ 116,738 22,127 1,720 5,248 5,253 3,159 442 $ 154,687

2007 $ 119,378 20,957 2,230 4,813 5,437 2,751 375 $ 155,941

Change $ (2,640) 1,170 (510) 435 (184) 408 67 $ (1,254)

The following table shows prizes to sales (operating revenues) profit margin for lottery games by venture for the years ended June 30, 2008 and 2007 (in thousands).

Instant Tickets 2008 Gross games revenues Prize expense Gross profit after prizes Profit margin after prizes $ 183,991 116,738 $ 67,253 36.6% 2007 $ 188,565 119,378 $ 69,187 36.7%

Tri-State Games 2008 $ 26,740 13,660 $ 13,080 48.9% 2007 $ 25,976 13,001 $ 12,975 49.9%

MUSL Games 2008 $ 49,958 23,847 $ 26,111 52.3% 2007 $ 49,024 23,187 $ 25,837 52.7%

As the table above shows, the profit after prizes paid is less for instant scratch games versus online games. High jackpots drive sales for online games, where as the number and variety of different games on the market at one time and the number of winning tickets in a game drives instant scratch ticket sales. Other Cost of Sales In addition to prizes there are other costs of sales that include retailer commissions, vendor fees, cost of printing instant scratch tickets, costs for delivering instant scratch tickets to retailers, and expense pool costs (budget costs) for joint ventures. These other costs of sales totaled $23.1 million for fiscal year 2008 and $23.2 million for fiscal year 2007. The small decrease was actually a net of decreases in vendor fees and retailer commissions and an increase in the cost of printing instant scratch tickets.

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The table below shows comparative costs of sales expenses for lottery games for the years ended June 30, 2008 and 2007 (in thousands).
Percent 2008 Retailer commissions Vendor fees Cost of instant tickets Expense pools Other cost of sales Prize expense Total cost of sales $ 14,279 6,514 2,197 145 23,135 154,687 $ 177,822 of Sales 5.5% 2.5% 1.2% 0.1% 8.9% 59.2% 68.1% $ 2007 14,311 6,742 1,983 151 23,187 155,941 $ 179,128 Percent of Sales 5.4% 2.6% 1.1% 0.1% 8.8% 59.1% 67.9%

The table below shows cost of sales to sales for lottery games for the years ended June 30, 2008 and 2007 (in thousands).
Total Lottery Games Gross ticket sales Cost of sales Gross profit Gross profit margin 2008 $ 261,132 177,822 $ 83,310 31.9% 2007 $ 263,940 179,128 $ 84,812 32.1% Change $ (2,808) (1,306) $ (1,502) Percent Change -1.1% -0.7% -1.8%

Other Operating Expenses Administrative costs increased $1.3 million in fiscal year 2008 from fiscal year 2007. The majority of the increase was attributed to advertising costs. The supplemental schedule of revenues, expenses, and transfers located after the notes to the financial statements, itemizes the components of other operating expenses. Non-operating Revenues (Expenses) Nonoperating revenues totaling $813,781 consist largely of income earned on deposits with the State Treasury, Tri-State Lotto, and Multi-State Lottery. Other nonoperating revenue consists of various fees assessed to retailers due to insufficient funds. There was a decrease of $489,950 in non-operating revenues for fiscal year 2008 over 2007. This decrease was due to prize money returned to the Lottery by MUSL in fiscal year 2007. Non-operating expenses are distributions to the education trust fund, which is all Lottery profit. Fiscal year 2008 distributions were $75,553,292 and for fiscal year 2007 they were $79,043,331. The decrease in fiscal year 2008 was due to lower ticket sales.

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The following graph displays total Lottery revenues and expenses for the years ended June 30, 2008 and 2007.

Total Revenues and Expenses
Millions $300 $250 $200 $150 $100 $50 $0 2008 2007 revenues expenses

The following table shows total revenues, expenses, net profit, and change in net assets for the Lottery for the years ended June 30, 2008 and 2007 (in thousands)
2008 Operating revenues: Instant and online ticket sales: Operating Expenses: Cost of sales Administrative costs Depreciation expense Total operating expenses Nonoperating revenues - Investment income: Net profit before Transfers Nonoperating expenses Distributions to Education Trust Fund Change in net assets Net assets - July 1 Net assets - June 30 Distributions to Education Trust Fund (net profit) as a percent of operating revenues $ $ 261,132 177,822 8,416 56 186,294 814 75,652 (75,553) 99 3,664 3,763 28.9% $ $ 263,940 179,128 7,162 45 186,335 1,304 78,909 (79,043) (134) 3,798 3,664 29.9% $ -1.0% $ (2,808) (1,306) 1,254 11 (41) (490) (3,257) 3,490 233 (134) 99 2007 Change

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The following graph displays expenses and distributions to the Education Fund as a percentage of operating revenues for the Lottery for the year ended June 30, 2008.

Expenses and Distributions as a Percentage of Revenues 3%

29% 59% 1% 2% 6%

Prizes Vendor fees Distributions to Education Trust Fund

Retailer commissions Instant tickets & delivery Administrative costs

Other Potentially Significant Matters A significant factor affecting the Lottery currently for fiscal year 2009 is the American economy; as of September 2008 New Hampshire Lottery sales are down almost 13%. The Lottery is dependant on customer’s discretionary income, so when there is less available, customers spend less on lottery tickets. There is, as always, ongoing research and development to enhance current games or replace them with new games in order to increase sales; in January 2009 there are plans to enhance the current Powerball game. Budgetary Highlights The Lottery is required to submit a biennial operating budget to the Governor for approval. The budget is further submitted to the Legislature for its approval and is ultimately included in the State of New Hampshire’s operating budget. The Lottery’s official budget, as adopted by the Legislature, is prepared principally on a modified cash basis. Due to the nature of the Lottery’s activities, the majority of its cost of sales expenses, such as prizes, vendor fees and retailer commissions, are not included in the budget. The Lottery budgets for approximately 5% of its total expenses that consist primarily of salaries and benefits, rental expenses, advertising and instant scratch ticket printing costs. Financial management staff consistently monitors adherence to budgeted appropriations. Contacting the Lottery’s Financial Management This financial report is designed to provide New Hampshire citizens, the New Hampshire state legislature and the executive branch of government, and other interested parties, a general

24

overview of the Lottery’s financial activity for fiscal year 2008 and to demonstrate the Lottery’s accountability for the money it received for the sale of lottery products. If you have any questions about this report or need additional information, contact the New Hampshire Lottery Commission, Chief Accountant, 14 Integra Drive, P.O. Box 1208, Concord, New Hampshire 03302.

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New Hampshire Lottery Commission Statement of Net Assets June 30, 2008 ASSETS Current assets: Cash and cash equivalents Accounts receivable Instant ticket inventories Prepaid expenses & Other Total current assets Noncurrent assets: Restricted deposits - (note 8) Capital assets net of accumulated depreciation - (note 4) Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Accrued payroll and benefits Deferred revenue Unclaimed prizes net of estimated expired prizes - (note 1) Due to Education Trust Fund Compensated absences & workers compensation Total current liabilities Noncurrent liabilities: Compensated absences & workers compensation Total noncurrent liabilities Total liabilities NET ASSETS Invested in capital assets Restricted for prize funds (note 8) Unrestricted (deficit) Total net assets

$

246,418 2,909,736 832,099 142,123 4,130,376

3,762,879 242,504 4,005,383 8,135,759

1,572,570 142,213 1,117,365 1,083,413 76,507 102,750 4,094,818

278,062 278,062 4,372,880

242,504 3,762,879 (242,504) $ 3,762,879

The notes to the financial statements are an integral part of this statement.

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New Hampshire Lottery Commission Statement of Revenues, Expenses, and Changes in Net Assets For the Year Ended June 30, 2008

Operating revenues: Instant games Multi-State online games Tri-State online games Other Total operating revenues $ 183,990,655 49,958,343 26,740,285 442,519 261,131,802

Operating expenses: Cost of Sales Administration Depreciation Total operating expenses Operating income 177,821,668 8,415,492 56,381 186,293,541 74,838,261

Nonoperating revenues (expenses): Investment income Distributions to the State's Education Trust Fund Total nonoperating revenues (expenses) 813,781 (75,553,292) (74,739,511)

Change in net assets Total net assets - beginning Total net assets - ending $

98,750 3,664,129 3,762,879

The notes to the financial statements are an integral part of this statement.

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New Hampshire Lottery Commission Statement of Cash Flows For the Year Ended June 30, 2008 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers, retailers and joint ventures (net of retailer commissions and prizes paid by retailers) Payments to winners, retailers and joint ventures Payments to suppliers (goods and services) Payments to employees Net cash provided by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Nonoperating transfers to education trust fund Net cash used for noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sales of capital assets Purchases of capital assets Net cash used by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Interest and other income received Net cash provided by investing activities Net increase in cash and cash equivalents Cash and cash equivalents, July 1 Cash and cash equivalents, June 30 Reconciliation of operating income to net cash provided by operating activities: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense (Increase) decrease in accounts receivable (Increase) decrease in instant ticket inventory (Increase) decrease in prepaid expenses (Increase) decrease in restricted deposits Increase (decrease) in accounts payable Increase (decrease) in unclaimed prizes Increase (decrease) in deferred revenue Total adjustments Net cash provided by operating activities $

$ 136,026,587 (51,921,018) (7,321,307) (1,820,324) 74,963,938

(77,016,978) (77,016,978)

101 (66,878) (66,777)

813,680 813,680 (1,306,137) 1,552,555 246,418

$ 74,838,261

56,381 (46,535) 103,677 (37,561) (98,750) 369,411 (333,147) 112,201 125,677 $ 74,963,938

The notes to the financial statements are an integral part of this statement.

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New Hampshire Lottery Commission Notes to the Financial Statements Fiscal Year ended June 30, 2008 Note 1 – Summary of Significant Accounting Policies A. Reporting Entity The New Hampshire Sweepstakes Commission officially changed its name to The New Hampshire Lottery Commission, per Chapter Law 97 of 2004, effective July 10, 2004. The New Hampshire Lottery Commission also known as the New Hampshire Lottery (the Lottery), was established in 1964 in accordance with the provisions of Chapter 284:21-a of the New Hampshire Revised Statutes Annotated (RSA). The Lottery has three commissioners appointed by the Governor. The executive director is appointed by and serves at the pleasure of the commissioners. The Lottery is authorized to operate both instant and on-line games for the sole purpose of funding state aid to education pursuant to RSA 198:38-49 and RSA 284:21-j. In 1990, the New Hampshire Constitution was amended by Part 2, Article 6-b, which restricted all lottery revenue and interest, after the deduction of necessary administration costs, exclusively for the benefit of public education. For financial reporting purposes, the New Hampshire Lottery Commission is considered a department of the State of New Hampshire. The Lottery’s financial statements include all Lottery activity in a separate enterprise fund and do not include any activity related to any other state agency or fund. The State of New Hampshire issues a publicly available comprehensive annual financial report, which may be obtained by writing to the State of New Hampshire, Department of Administrative Services, 25 Capitol Street, Room 310, Concord, New Hampshire, 03301-6312 or accessed online at www.admin.state.nh.us/accounting. B. Measurement Focus, Basis of Accounting and Basis of Presentation The accompanying financial statements of the Lottery have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and as prescribed by the Governmental Accounting Standards Board (GASB), which is the primary standard-setting body for establishing governmental accounting and financial reporting principles. The Lottery accounts for its operations as a single enterprise fund and accordingly uses the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recognized when the related liability is incurred. The Lottery’s operations are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and liabilities associated with the operation of the Lottery are included on the Statement of Net Assets. The Statement of Revenues, Expenses, and Changes in Net Assets present increases (e.g. revenues) and decreases (e.g. expenses) in net total assets. The Lottery applies applicable pronouncements of the Financial Accounting Standards Board (FASB) issued on or before November 30, 1989, unless those pronouncements conflict with or contradict the pronouncements of the Governmental Accounting Standards Board. Cash equivalents are investments with a maturity date of three months or less from the date of purchase. The majority of the Lottery’s cash is held by the state treasurer for pooled investment purposes in short-term, highly liquid investments, which are considered to be cash equivalents.

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Accounts receivable consists of amounts due from retailers for lottery ticket sales and interest from joint venture investments (see Note 8 for information about the Tri-State and Multi-State Lottery joint ventures). Inventory represents Instant scratch ticket inventories, which are valued at the lower of cost or market value using the specific identification method. The cost of consumable supplies is expensed when received. Prepaid expenses and other consist of payments to vendors that reflect costs applicable to future accounting periods and the value of contributed merchandise (prizes) inventory to be awarded to players. These contributed prizes are donated to the Lottery by local area vendors in exchange for promotional consideration as part of the Replay program (see note 9). Capital assets and depreciation, capital assets including equipment, computers, and vehicles, are recorded at cost. The Lottery’s level for capitalization is $10,000. Depreciation on capital assets is computed using the straight-line method over an estimated useful life of five years. Salvage values are not recognized as asset disposals are officially transferred to the New Hampshire Surplus Property program. Any income derived from surplus property sales is recorded as miscellaneous income when received. Losses on the disposal of surplus equipment are recorded at the time of disposal. Restricted deposits represents noncurrent, restricted assets, deposited with the Multi-State Lottery Association (MUSL) and the Tri-State Lotto Commission (Tri-State), that are held as prize reserves to protect the Lottery against unforeseen liabilities. These prize reserves are a condition of participation in the joint ventures and are refundable after a one year waiting period if a member leaves. The Tri-State portion of the reserves is committed to be returned to the players, however the MUSL reserves would be returned to New Hampshire state aid to education. At June 30, 2008 MUSL reserves were $2,267,624 and Tri-State reserves were $1,495,255. Compensated absences represent accrued leave for the Lottery’s 46 full-time, classified employees at June 30, 2008. Full-time classified employees of the Lottery accrue annual, bonus, compensatory, and vested sick leave at various rates within the limits prescribed by a collective bargaining agreement. In conformity with GASB Statement No. 16, the Lottery accrues all types of leave benefits as earned by its classified employees. The compensated absences liability represents the total liability for the cumulative balance of employees' annual, bonus, compensatory, and sick leave based on years of service rendered along with the state's share of social security and retirement contributions. The current portion of the leave liability is calculated based on the characteristics of the type of leave and on a LIFO (last in first out) basis, which assumes employees use their most recent earned leave first. The accrued liability for annual leave does not exceed the maximum cumulative balance allowed which ranges from 32 to 50 days based on years of service. The accrual for sick leave is made to the extent it's probable that the benefits will result in termination payments rather than be taken as absences due to illness. Unclaimed prizes represent prizes won, but not paid. the Lottery is required to hold unclaimed prize money for one year (365 days) after the prize is won for online prizes or one year after the official game end for instant scratch prizes. Due to the nature of Instant scratch games’ not being “online” or computerized the Lottery records a liability for unclaimed and unpaid prizes on an estimated basis for instant scratch prizes. For online games the Lottery knows exactly what it’s unclaimed and unpaid prize liability is at fiscal year end. The one year prize liability is adjusted based on past history of expired prizes (prizes that are not claimed within the one year). The unclaimed prize

30

liability for fiscal year 2008 of $1,083,413 is the net amount after being reduced by an estimate for Powerball and Hot Lotto prizes to expire as unclaimed of $984,056. Deferred revenue consists of advanced wagers for all on-line games and subscriptions for Megabucks and Powerball. Sales relating to future draws are recorded as deferred revenue when received and sales revenue is recognized when the related drawings occur. Operating revenues represents gross lottery sales less any sales adjustments and promotional tickets. Cost of sales represents expenses directly related to lottery operating revenue, including paid and accrued prizes, retailers’ sales commissions and incentives, the Lottery’s pro-rata share of joint venture expenses, vendor fees, the printing cost of instant scratch tickets, and the cost for shipping instant scratch tickets to retailers. Administration expense represents those expenses indirectly related to the operation of the Lottery programs. These expenses consist mainly of advertising and promotional materials, employee salaries and benefits, and other Lottery operating expenses including, but not limited to, lease expenses. See Supplemental Schedule of Revenues, Expenses, and Transfers following these notes to the financial statements. Nonoperating revenue represents revenues such as investment income received from the State Treasury Department and Tri-State Lotto and Multi-State Lottery (MUSL) interest income and miscellaneous income for returned prize money not paid that was previously expensed in a prior period. Miscellaneous income includes items such as insufficient funds penalties. Non-operating expense represents distributions to the Education Trust Fund, which represent Lottery revenues transferred to help fund education in New Hampshire. The Lottery, as a department of the State of New Hampshire, in accordance with RSA 284:21–j, transfers its total net income, less changes in net assets, to the State’s Education Trust Fund for distribution to local school districts. Total net assets represent restricted deposits held in prize reserves with MUSL and Tri-State. These deposits are a condition of participation in the joint ventures. The Tri-State reserves are committed to be returned to the players upon dissolution or termination of participation. Changes in net assets represent changes required, by MUSL and Tri-State guidelines, in the amounts of the Lottery’s deposits. At June 30, 2008 MUSL reserves were $2,267,624 and TriState reserves were $1,495,255. Note 2 – Cash and Cash Equivalents The Lottery’s cash and cash equivalents as reported on the Statement of Net Assets as of June 30, 2008 consist of the following:
Cash in banks (carrying amount) Cash and cash equivalents in State Treasury Petty cash Total cash and cash equivalents $ 771,616 (526,798) 1,600 246,418

$

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The Lottery maintains two non-interest bearing commercial bank accounts, one being a revolving account, used to pay prizes and the other being a zero-balance account. The revolving account is replenished by the state treasurer’s office using Lottery income. The bank sweeps the net balance of the zero-balance account at the end of each business day into the New Hampshire State Treasury Department’s bank account, in order to aggregate the State’s assets and maximize the investment of available balances. Cash in excess of operating requirements is deposited into a money market mutual fund account held with Fidelity. These cash equivalents are highly liquid with a maturity date of three months or less from the date of purchase. Statutory requirements and Treasury Department policies have been adopted to minimize risk associated with deposits. RSA 6:7 establishes the policy the state Treasurer must adhere to when depositing public monies. All depositories used by the state must be approved at least annually by the Governor and Executive Council. All banks, where the State has deposits and/or active accounts, are monitored as to their financial health through the services of Veribanc, Inc., a bank rating firm. In addition, ongoing reviews with officials of depository institutions are used to allow for frequent monitoring of custodial credit risk. All payments to the State are to be in U.S. dollars, therefore there is no foreign currency risk. Custodial credit risk. In the case of deposits held with financial institutions, this is the risk that in the event of a bank failure, the government’s deposits may not be returned. At June 30, 2008 the Lottery’s total deposits held with financial institutions were $764,253 (bank balance), all of which were insured and collateralized. Note 3 – Compensated Absences and Workers Compensation A summary of compensated absences and workers compensation activity for year ended June 30, 2008 is presented below.
Compensated Absences and Workers Compensation Fiscal Year 2008 Beginning Balance $ 374,293 Ending Balance $ 380,812 Amounts Due Within One Year $ 102,750

Increases $ 288,353

Decreases $ 281,834

Note 4 – Capital Assets Capital asset activity for the year ended June 30, 2008 was as follows:
Beginning Balance Capital assets: Equipment Vehicles Total capital assets Less accumulated depreciation for: Equipment Vehicles Total accumulated depreciation Total capital assets, net $ $ 166,034 277,480 443,514 $ Increases 66,878 66,878 Decreases $ (10,869) $ (10,869) Ending Balance 222,043 277,480 499,523

(132,039) (76,330) (208,369) 235,145 $

(7,938) (51,581) (59,519) 7,359 $

10,869 10,869 $

(129,108) (127,911) (257,019) 242,504

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Note 5 - General Budgetary Policies and Procedures As a department of the State of New Hampshire, the Lottery is required to submit a biennial budget to the Governor of the State of New Hampshire where it is approved and further submitted to the Legislature for its approval. Approved biennial appropriations are provided in annual amounts. The Lottery’s official budget, as adopted by the Legislature, is prepared principally on a modified cash basis. Due to the nature of the Lottery’s activities, the majority of its expenses, such as prizes, retailer commissions, and vendor fees are not included in the State’s biennial budget. The Lottery budgets for approximately 5% of its expenses, primarily salaries and benefits, advertising, and rental expense. Note 6 - Employee Benefit Plans A. Retirement Plan All permanent, full-time employees of the Lottery participate in the New Hampshire Retirement System Plan (the Plan) as a condition of employment in accordance with New Hampshire Revised Statutes Annotated (RSA) 100-A. The Plan is a contributory defined-benefit, cost sharing, multipleemployer Public Employee Retirement System, which provides service, disability, death and vested retirement benefits to members and beneficiaries. The Plan is financed by contributions from the members, the State and local employers and investment earnings. Employees of the Lottery are required, by statute, to contribute 5% of their gross earnings. The Lottery contributes an amount required to cover Plan costs not met by the members’ contributions. The Lottery’s required contribution rate is determined by the Plan’s actuary. The Lottery’s payments for normal contribution costs for fiscal year 2008 amounted to 8.74% of the covered payroll or $154,201. Fiscal year 2007 amounted to 6.81% of the covered payroll, or $113,728. Fiscal year 2006 amounted to 5.9% of the covered payroll or $109,943. Each of the three years costs was equal to the required contributions for those years. The New Hampshire Retirement System (NHRS), administrator of the Plan, issues a publicly available annual financial report, which contains detailed information regarding the Plan as a whole, including information on payroll, contributions, actuarial assumptions and funding method, and historical trend data. This report may be obtained by writing to the NHRS, 4 Chenell Drive, Concord, New Hampshire 03301-8509. B. Other Postemployment Benefits In addition to the benefits described above, the Lottery provides post-employment health care benefits in accordance with RSA 21-I:30 to eligible retired employees, their spouses and certain dependents on a non-contributory basis. In fiscal year 2008, the Lottery paid $222,216 for health benefits for 47 retirees and spouses into the State’s Self-Insurance Fund. The Fund, established in 2003, accounts for risk management and health related fringe benefits for State employees and retirees. Contribution rates for the Fund are adjusted periodically to recover any deficits and to maintain a statutorily required Fund reserve.

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The Governmental Accounting Standards Board (GASB) No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits other than pensions requires governments to account for other postemployment benefits (OPEB), primarily healthcare, on an accrual basis rather than on a pay as you go basis. The effect is the recognition of an actuarially required contribution as an expense when a future retiree earns their post employment benefit rather than when they use their postemployment benefit. To the extent that the entity does not fund their actuarially required contribution, a postemployment benefit liability is recognized on the balance sheet over time. The State appropriately implemented GASB 45 during fiscal year 2008 and recognizes the actuarial accrued liability and costs for all State employees, including Lottery employees, on the government wide financial statements. The State Legislature currently plans to only partially fund (on a pay-as-you-go-basis) the annual required contribution (ARC), an actuarially determined rate in accordance with the parameters of GASB Statement 45. Note 7 - Operating Leases A. Building Lease The Lottery, as lessee, leases an office and warehouse facility located on Integra Drive in Concord. The agreement is a long-term operating lease, which commenced on May 1, 2008 and expires on April 30, 2013. The total building lease cost for fiscal year 2008 amounted to $362,272. The Lottery’s commitment for future lease payments required under the operating lease is as follows: Lease Obligation Fiscal Years
2009 2010 2011 2012 2013 Total Future Lease Payments $ $ $ $ $ 382,522 388,597 394,672 398,747 338,175 1,902,713

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B. Instant scratch Ticket Vending Machines The Lottery, as lessee, leases Instant scratch ticket vending machines from GTECH Corporation. The lease is for a term of three years, beginning July 1, 2005, with an option to extend for one additional two-year period under the same terms and conditions. On July 1, 2008 the Lottery utilized the option to extend the contract through fiscal year 2010. The cost to the Lottery varies by machine based on size and type, not to exceed $871,500 annually for as long as the lease is in effect. The Lottery may lease up to 500 machines; currently it leases 300 machines of various sizes. Total lease payments for fiscal year 2008 were $664,898. The Lottery’s commitment for future lease payments required under the operating lease is as follows: Lease Obligation Not to Exceed Fiscal Years
2009 2010 Total Future Lease Payments Not to Exceed $ $ 871,500 871,500 1,743,000

Note 8 - Joint Ventures GASB Statement No.14, The Financial Reporting Entity, defines a joint venture as a legal entity which results from a contractual arrangement and that is owned, operated or governed by two or more participants as a separate and specific activity subject to joint control in which the participants retain (a) an ongoing financial interest or (b) an ongoing financial responsibility. The New Hampshire Lottery Commission is an active participant in two separate joint venture arrangements; the Tri-State Lotto Commission (Tri-State) and the Multi-State Lottery Association (MUSL). Both joint ventures are audited by separate audit firms hired by the particular joint venture. For fiscal year 2008 Berry, Dunn, McNeil, and Parker of Manchester, New Hampshire audited Tri-State and Brooks Lodden P.C. of West Des Moines, Iowa audited MUSL. A. Tri-State Lotto Commission – Unaudited In September 1985, RSA 287-F established the Tri-State Lotto Commission (Tri-State) whereby the New Hampshire Lottery Commission entered into a joint venture with the Maine and Vermont lotteries. Tri-State is composed of one commissioner from each of the three state lotteries and is authorized to promulgate rules and regulations regarding the conduct of lottery games and the licensing of retailers. In addition, each of the member states contributes services towards the management and advisory functions. The payments due winners for prizes awarded under Megabucks are fully funded by deposit fund contracts and investments in U.S. Treasury STRIPs, held by Tri-State. Accordingly, the New Hampshire Lottery Commission does not record a liability for jackpot awards which are payable in installments from funds provided by Tri-State. At June 30, 2008 Tri-State reported total installment prize obligations owed to jackpot winners of $93.9 million, payable through the year 2031. Each state's share of revenues, expenses and interest income is based on their respective share of sales except for direct charges, such as advertising, vendor fees and the Lottery’s per-diem payments.

35

Tri-State has established a Designated Prize Reserve, which acts as a contingency to protect TriState against unforeseen liabilities. The balance in the reserve at June 30, 2008 was $4.1 million. The allocation for this reserve is based on each state’s pro-rata share of sales; it is estimated that New Hampshire’s portion of the reserve amounts to approximately $1.5 million. Lottery prize reserves held by the Tri-State are invested in U.S. Treasury notes. Tri-State policy dictates that if Tri-State dissolves or a state leaves the compact these reserve amounts will be used as future prizes to the state’s lottery players. The Tri-State Lotto Commission maintains its own financial statements, which have been audited by an independent CPA firm known as Berry, Dunn, McNeil, & Parker. The report dated August 15, 2008 gave an opinion that the Tri-State Lotto financial statements presented fairly in all material aspects the financial position of the Tri-State Lotto Commission as of June 30, 2008 and 2007, and the results of operations and cash flows for those years then ended, in conformity with U.S. GAAP. The New Hampshire Lottery Commission’s portion of the Tri-State Lotto Commission games for fiscal year 2008 is summarized below:
Operating revenues Expenses: Prizes Retailer commissions & incentives Advertising & promotional Vendor fees Other operating expenses Total expenses Net operating income Interest income Net income from Tri-State $ 26,744,354 13,642,022 1,382,338 1,289,145 597,267 112,462 17,023,234 9,721,120 236,240 9,957,360

$

The Tri-State Lotto Commission issues a publicly available annual financial report, which may be obtained by writing to the Tri-State Lotto Commission, P.O. Box 420 South Barre, Vermont 05670. B. Multi-State Lottery Association - Unaudited The New Hampshire Lottery Commission became a member of the Multi-State Lottery Association (MUSL) in November 1995. MUSL is currently comprised of 31 member state lotteries, including the District of Columbia and the United States Virgin Islands. MUSL is managed by a Board of Directors, which is comprised of the lottery directors or their designee from each of the party states. The Board of Directors’ responsibilities to administer the Multi-State Lottery Powerball and Hot Lotto games are performed by advisory committees or panels staffed by officers and independent contractors appointed by the board. These officers and consultants serve at the pleasure of the board and the board prescribes their powers, duties and qualifications. The Executive Committee carries out the budgeting and financing of MUSL, while the board contracts the annual independent audit. The Lottery sells Powerball tickets, collects all revenues, and remits prize funds to MUSL net of lower tier prize awards. Jackpot prizes that are payable in installments, are satisfied through

36

investments purchased by MUSL. MUSL purchases U.S. government obligations, which are held in irrevocable trusts established by MUSL for the benefit of participating state lotteries. Accordingly, the Lottery does not record an obligation for jackpot awards which are payable in installments from funds provided by MUSL. Each member state participates in the sale of Powerball tickets. Each week MUSL allocates 50 percent of sales to the prize pool. Two percent of that prize pool is placed into two Powerball prize reserve funds. One of these funds, the Powerball prize reserve fund acts as a contingency reserve to protect MUSL members against unforeseen liabilities and is to be used at the discretion of the MUSL Board of Directors. The prize reserve fund monies, which are maintained on MUSL’s balance sheet, are refundable after a one-year waiting period if a member leaves the Association or if the Association disbands. New Hampshire’s total share of prize reserves held by MUSL amounted to $2,267,624 at June 30, 2008. This represented an increase of $102,185 from June 30, 2007. Lottery prize reserves held by the MUSL are invested according to a Trust agreement the Lottery has with MUSL outlining investment policies. The policies restrict investments to direct obligations of the United States Government, perfected repurchase agreements, and obligations issued or guaranteed as to payment of principal and interest by agencies or instrumentalities of the United States Government, and mutual funds of approved investments. The average portfolio maturity is never more than 1.33 years. The maximum maturity for any one security does not exceed five years. At June 30, 2008 the total MUSL – Powerball prize reserve fund had a balance of $73,237,975. New Hampshire’s portion of the prize reserve fund balance amounted to $1,511,475. The second Powerball prize reserve fund, Powerball set prize reserve, is used when low tier prizes won exceed statistically calculated low tier prize monies. At June 30, 2008 the total MUSL – Powerball set prize reserve fund had a balance of $25,000,000. New Hampshire’s portion of the prize reserve fund balance amounted to $503,825. The interest earned on prize reserve fund monies is used to pay MUSL operating expenses and any amounts over and above that are credited to an unreserved fund. The Lottery records this as interest when earned. This fund had a balance of $23,693,034 at June 30, 2008. New Hampshire’s portion of this unreserved fund amounted to $126,732. MUSL’s Powerball operating expenses are paid from interest earned on the prize reserves. The remaining interest is returned to the member states based upon the member’s proportionate share of total Powerball game sales. For fiscal year 2008, New Hampshire’s share of remaining interest was $200,088. Twelve member states have elected to participate in the sale of Hot Lotto tickets. Hot Lotto has been offered since April 2002. MUSL allocates 50 percent of the weekly sales to the prize pool. At June 30, 2008 the MUSL Hot Lotto prize reserve fund was $4,191,108 with New Hampshire’s share being $252,324. Each participating member pays for a share of Hot Lotto operating expenses based upon the member’s proportionate share of total Hot Lotto game sales.

37

The New Hampshire Lottery Commission’s portion of the Multi-State Lottery’s games for fiscal year 2008 is summarized below. Operating revenues $ 49,958,343 Expenses: Prizes 23,847,209 Retailer com m issions 2,503,234 Vendor fees 1,150,760 Advertising & promotional 639,043 O ther operating expenses 20,000 Total expenses 28,160,246 Net operating incom e 21,798,097 Interest incom e 200,088 Net income from MUSL $ 21,998,185 MUSL financial statements are audited by an independent audit firm hired by MUSL. MUSL issues a publicly available annual financial report, which may be obtained by writing to the MultiState Lottery Association, 1701-48th Street, Suite 210, West Des Moines, Iowa 50266-6723. Note 9 – Replay Program In June 2007 the Commission implemented a new program called “Replay” in which players become eligible for merchandise drawings by submitting non-winning lottery ticket codes through the internet. Merchandise (prizes) is contributed by area vendors in exchange for promotional consideration. The Commission accounts for contributed prizes by recording offsetting assets, liabilities, revenues, and expenses in Prepaid and Other, Accounts Payable, Other Operating Revenue, and Prize Expense, respectively. Note 10 - Risk Management The Lottery is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The State generally retains the risk of loss except where the provisions of law allow for the purchase of commercial insurance or where commercial insurance has been proven beneficial for the general public. There are approximately 30 commercial insurance programs in effect including fleet automobile liability and faithful performance position schedule bond. The State employs a blanket commercial policy that covers fleet automobile liability. The Lottery pays an annual premium for its vehicles to be covered under this policy. The Lottery also purchases indemnification bonds through the State for its commissioners to be bonded in accordance with New Hampshire RSA 284:21-c. Settled claims under these insurance programs have not exceeded commercial insurance coverage in any of the last three fiscal years. Claim liabilities not covered by commercial insurance are recorded by the State when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. For the State of New Hampshire the liability not covered by commercial insurance relates primarily to worker’s compensation claims and health benefit claims.

38

Supplementary Schedule

39

New Hampshire Lottery Commission Supplemental Schedule of Revenues, Expenses, and Transfers For the Year Ended June 30, 2008 Operating Revenues: Instant tickets $ Tri-State Megabucks Tri-State Pick 3 / Pick 4 Tri-State Paycheck Tri-State Fast Play Tri-State Raffle MUSL Powerball MUSL Hot Lotto Other - Contributed Prizes Total operating revenues Operating Expenses: Cost of sales: Prize awards: Instant tickets Tri-State Megabucks Tri-State Pick 3 / Pick 4 Tri-State Paycheck Raffle Tri-State Fast Play MUSL Powerball MUSL Hot Lotto Other - Contributed Prizes Paid Total prize awards Retailers' commissions Vendor fees Cost of instant tickets (printing & delivery of) Expense pools Total cost of sales Administration: Salaries and benefits Advertising & promotional Space rental Race track purses Information Technology Other expenses Total administration Depreciation expense Total operating expenses Operating income Nonoperating revenues Net Income Transfers to Education Trust Fund Change in Net Assets (restricted prize reserve funds) $ See accompanying independent auditor's report. 183,990,655 10,459,367 10,506,888 3,428,585 1,311,625 1,033,820 46,420,721 3,537,622 442,519 261,131,802

116,737,902 5,247,688 5,252,500 1,669,694 830,416 659,406 22,127,401 1,719,808 442,519 154,687,334 14,278,699 6,514,123 2,196,540 144,972 177,821,668 3,152,276 3,788,365 362,273 325,000 196,384 591,194 8,415,492 56,381 186,293,541 74,838,261 813,781 75,652,042 (75,553,292) 98,750

40

Statistical Section
This part of the New Hampshire Lottery Commission’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and supplementary information says about the Lottery’s overall financial health. Contents Pages

Financial Trends These schedules and graphs contain information to help the reader understand how the Lottery’s financial performance has changed over time. Please keep in mind the increase or decrease in net assets does not reflect the condition of the Lottery’s financial position, because by law the Lottery is required to distribute all net profits to the Education Trust Fund on a monthly basis. Demographic and Economic Information These schedules and graphs offer demographic and economic indicators to help the reader understand the environment within which the Lottery’s operations take place and where its revenues come from. Operating Information These schedules offer miscellaneous statistics showing the reader yearly comparisons of certain information contained in the Lottery’s financial report as it relates to the programs it offers and the activities it performs. Industry Comparisons These schedules offer the reader an understanding of how the New Hampshire Lottery Commission performs financially in comparison to other lotteries in the industry.

41 - 44

45B - 47

45A, 48

49 - 56

New Hampshire Lottery Commission
Revenues, Expenses, Transfers and Changes in Net Assets Last Fiscal 10 Years
Thousands

Revenues Instant Games Powerball Tri-State Megabucks Tri-State Daily Pick 3/Pick 4 Tri-State Other Games Hot Lotto & Previous MUSL Lotto Games Other Total Lottery Sales Revenue 3 Bingo/Lucky 7 Program Revenue 2 Interest & Misc. Income Total Sales and Other Revenues Expenses Prizes Retailer Commissions & Incentives Other Costs of Sales Administration & Depreciation Expenses Total Expenses Transfers Distributions to Education Change in Net Assets Change in Net Assets 1 Net Assets 4 Invested in capital assets Restricted for prize funds 4 Unrestricted (deficit)

1999 $ 119,873 48,743 14,136 9,334 4,535 2,321 198,942 2,115 1,436 202,493 112,913 10,630 7,829 6,496 137,868 64,578

2000 $ 125,790 36,257 13,483 9,736 4,082 1,586 190,934 2,080 1,213 194,227 108,659 10,296 7,162 6,562 132,679 61,517

2001 $ 139,226 30,110 12,243 9,960 3,194 1,516 196,249 2,059 1,664 199,972 115,083 10,671 8,196 6,661 140,611 59,349

2002 $ 140,320 44,525 11,668 10,897 3,683 1,740 212,833 2,030 1,054 215,917 123,650 11,472 7,789 7,254 150,165 66,126

2003 $ 150,936 43,061 10,982 11,012 2,946 2,261 221,198 2,041 366 223,605 129,843 11,991 8,232 6,815 156,881 66,569

2004 $ 157,016 52,646 10,412 11,339 3,327 2,265 237,005 2,078 546 239,629 137,231 12,801 8,403 7,181 165,616 73,744

2005 $ 161,358 39,097 10,254 10,650 3,140 3,481 227,980 976 514 229,470 132,686 12,344 8,158 6,934 160,122 69,349

2006 $ 176,978 57,232 10,184 10,818 4,529 3,001 262,742 1,014 263,756 152,392 14,179 9,479 7,379 183,429 80,378

2007 $ 188,565 44,391 9,657 10,873 5,446 4,633 375 263,940 1,304 265,244 155,941 14,311 8,876 7,207 186,335 79,043

2008 $ 183,991 46,421 10,459 10,507 5,774 3,538 442 261,132 814 261,946 154,687 14,279 8,856 8,472 186,294 75,553

47

31

12

(374)

155

269

(1)

(51)

(134)

99

$

343 3,757 (343) $

373 3,788 (373) $

401 3,800 (401) $

276 3,426 (276) $

189 3,581 (189) $

119 3,850 (119) $

127 3,849 (127) $

191 3,798 (191) $

235 3,664 (235) $

242 3,763 (242)

1 The change in net assets does not reflect the condition of the Lottery's financial position, because by law the Lottery is required to transfer all net profits to the Education Trust Fund on a monthly basis. 2 Effective January 1, 2005, the responsibilities for the regulation of charitable gaming and activities in the State were transferred from the Lottery to the Pari-Mutuel Commission. 3 State law restricts the maximum sales amount of a ticket to $30. 4 Net assets consist only of restricted prize funds held on deposit with the Mult-State Lottery Association and the Tri-State Lottery Commission. 41

New Hampshire Lottery Commission

Total Sales and Other Revenues By Fiscal Year
$270 $260 $250 $240 $230 Millions ($) $220 $210 $200 $190 $180 $170 $160 $150 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Fiscal Years

Sales By Game Last 10 Fiscal Years

Instant Games

5% 19%

5%

2%1%
Powerball Tri-State Megabucks Tri-State Daily Pick 3/Pick 4 Tri-State Other Games

68%

Hot Lotto & Previous MUSL Lotto Games

42

New Hampshire Lottery Commission

Expenses
Last 10 Fiscal Years

$192 $182 $172 $162 $152 $142 $132 $122 $112 $102 $92 $82 $72 $62 $52 $42 $32 $22 $12 $2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Prizes

Millions ($)

Other Costs of Sales Retailer Commissions & Incentives Administration & Depreciation Expenses

Fiscal Years

Distributions to Education
Last 10 Fiscal Years

$82 $80 $78 $76 $74 $72 $70 $68 $66 $64 $62 $60 $58 $56 $54 $52 $50

Millions ($)

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Fiscal Years

43

NH Lottery Commission
Instant vs On-line Sales Last 10 Fiscal Years
Millions ($)
$190 $170 $150 $130 Instant Games $110 $90 $70 $50 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Online Games

Fiscal Years

Prizes and Advertising Expenses as a Percentage of Sales for Instant and Online Games
Dollars in thousands

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Instant Games Sales Prizes Prizes % of sales Instant advertising expense Instant advertising expense % of Insant ticket sales Online Games Sales Prizes Prizes as a % of sales Online advertising expense Online games advertising expense % of online games sales

$125,801 $119,903 $139,104 $140,320 $150,936 $157,016 $161,359 $176,978 $188,565 $183,991 74,587 78,519 87,686 89,331 96,801 99,304 100,764 110,256 119,378 116,738 59.29% 65.49% 63.04% 63.66% 64.13% 63.24% 62.45% 62.30% 63.31% 63.45% $656 $970 $966 $963 $806 $825 $930 $958 $1,048 $1,673 0.52% $79,069 38,326 48.47% 1,181 1.49% 0.81% $65,144 30,140 46.27% 2,177 3.34% 0.69% $57,023 27,397 48.05% 1,777 3.12% 0.69% $72,513 34,319 47.33% 1,824 2.52% 0.53% $70,262 33,042 47.03% 1,975 2.81% 0.53% $79,989 37,927 47.42% 1,867 2.33% 0.58% $66,622 31,922 47.92% 1,944 2.92% 0.54% $85,764 42,136 49.13% 1,811 2.11% 0.56% $75,000 36,563 48.75% 2,055 2.74% 0.91% $76,699 37,949 49.48% 2,115 2.76%

44

New Hampshire Lottery Commission Lottery Employee Operating Information and State of New Hampshire Demographic and Economic Information A. NH Lottery Commission Employee Statistics (Information available for fiscal years 2001 – 2008): Number of Employees 1 67 74 76 78 79 79 79 72 Salaries Paid $2,008,383 1,716,133 1,920,437 1,681,328 1,952,369 1,737,377 1,900,401 1,724,135 Benefits Paid to Employees $893,401 892,886 944,916 819,267 844,594 816,901 617,421 598,389 Number of Retirees 47 46 48 45 45 49 47 43 Post Employment Benefits Paid 2 $222,216 267,366 255,528 251,919 176,816 172,732 152,424 142,040

Fiscal Year 2008 2007 2006 2005 2004 2003 2002 2001

1 Includes part-time employees 2 The Lottery is required to pay retiree benefits due to being a self-funded agency.

B. New Hampshire Demographic and Economic Statistics (Information available for fiscal years 2000 – 2007): Gross Domestic Product (billions) $57.3 56.1 53.5 51.4 48.2 46.2 44.3 43.5

Calendar Year 2007 2006 2005 2004 2003 2002 2001 2000

Population 1,315,828 1,309,940 1,299,169 1,287,594 1,274,666 1,258,546 1,240,554 1,235,786

Personal Income $54,533,423 49,561,044 47,462,507 44,548,717 43,393,153 42,623,930 41,429,037 37,124,444

Per Capita Personal Income $41,444 39,311 36,533 34,598 34,043 33,396 30,380 28,443

Median age 39.8 37.5 39.5 39.2 38.8 38.2 38.1 37.5

High School Graduate or More 1 91.6% 91.9% 90.8% 92.1% 90.2% 88.3% 87.0% 87.5%

Bachelor’s Degree or More 1 32.1% 32.8% 35.4% 34.0% 31.0% 32.1% 29.0% 30.3%

Unemployment Rate 3.9% 3.2% 3.6% 3.9% 4.4% 4.5% 3.4% 2.7%

1 Calculation is based on persons 25 years and older. Data sources: US Census Bureau, US Dept of Commerce, US Dept of Labor, and NH Dept of Education.

45

New Hampshire Lottery Commission Who Plays New Hampshire Lottery Games? Demographic Summary of Players and Non-Players
Gender

Income ($ thousands) Female Male Female

Male

60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
Male Female Under $30 $30 - $59 $60 - $100 Over $100

Age

Level of Education

Male
40% 35% 30% 25% 20% 15% 10% 5% 0% 18-20 21-24 25-40

Female
25% 20% 15% 10% 5% 0%

Male

Female

me So
41-65 Over 65

ol cho hs hig

l oo sch h Hig

D GE or d. gra

ge olle ec m So

ate du gra e lleg Co

ate du gra st Po

Source: Survey conducted on Lottery Replay website. November 2007.

46

New Hampshire Lottery Commission Top Ten Revenue Producing Sources Last 10 Fiscal Years
In millions 2008 Retailers Cumberland Farms Irving Hannaford Bros Co. Market Basket NH State Liquor Comm Shaws 7-Eleven AGR Foodmart Inc Store 24 Nouria Energy Amount 15.0 13.4 12.1 10.7 10.0 9.5 8.0 5.3 3.7 3.4 2007 Retailers Cumberland Farms Irving Hannaford Bros Co. Market Basket NH State Liquor Comm Shaws 7-Eleven Store 24 AGR Foodmart Inc Nouria Energy Amount 15.3 11.8 11.7 10.6 9.9 9.9 7.2 5.4 4.8 3.3 2006 Retailers Cumberland Farms Hannaford Bros Market Basket Irving Shaws NH State Liquor Comm 7-Eleven Store 24 AGR Foodmart Inc Nouria Energy Amount 14.7 11.2 10.6 10.5 9.7 9.3 6.2 3.7 3.6 3.0 2005 Retailers Cumberland Farms Hannaford Bros Shaws Market Basket Irving NH State Liquor Comm 7-Eleven Store 24 AGR Foodmart Inc Cheshire Oil Amount 11.8 9.3 8.6 8.5 7.7 6.8 5.4 3.2 3.1 2.6 2004 Retailers Cumberland Farms NH State Liquor Comm Hannaford Bros Market Basket Shaws Irving 7-Eleven Store 24 AGR Foodmart Inc Jiffy Mart Amount 11.5 9.2 9.1 8.5 8.5 6.9 3.9 3.2 2.9 2.8

2003 Retailers Cumberland Farms Hannaford Bros Co. NH State Liquor Comm Market Basket Shaws Irving 7-Eleven Store 24 Jiffy Mart Mr. Mikes

Amount 10.6 8.5 8.4 7.6 7.0 5.9 3.2 3.0 2.6 2.4

2002 Retailers Cumberland Farms NH State Liquor Comm Hannaford Bros Co. Market Basket Shaws Irving Store 24 Jiffy Mart Mr. Mikes 7-Eleven

Amount 10.0 8.4 7.9 7.3 6.3 4.8 2.7 2.4 2.1 2.0

2001 Retailers Cumberland Farms Hannaford Bros Co. NH State Liquor Comm Market Basket Shaws Irving Store 24 Jiffy Mart Mr. Mikes CN Brown

Amount 8.7 7.3 6.9 6.5 5.3 4.3 2.3 2.1 1.7 1.4

2000 Retailers

Amount

1999 Retailers

Amount

INFORMATION FOR FISCAL YEAR 2000 WAS UNAVAILABLE

INFORMATION FOR FISCAL YEAR 1999 WAS UNAVAILABLE

47

New Hampshire Lottery Commission Miscellaneous Game Statistics

Game Statistics for Last 10 Fiscal Years
Please note that Information was only available going back to fiscal year 2001. Number of Online Games Offered 4 8 7 6 5 5 5 5 5 Number of Instant Games On the Market 106 91 88 61 61 57 52 50 Highest Priced Instant Ticket $30 20 20 10 10 10 7 7 Number of Powerball Jackpot Runs that Exceeded $100 Million 2 24 5 5 3 8 3 1 1 Highest Powerball Jackpot Amount $ 300,000,000 204,000,000 365,000,000 340,000,000 214,700,000 261,300,000 314,924,354 294,964,114 Expired Unclaimed Powerball Prizes 3 $ 933,305 1,145,287 1,078,540 1,714,458 1,307,376 1,689,179 992,741 1,179,542
5

Fiscal Year 2008 2007 2006 2005 2004 2003 2002 2001
1 2

Number of Lottery Terminals 1256 1256 1225 1220 1227 1215 1186 1200

Number of Subscriptions 21,869 21,869 21,866 24,946 10,353 11,100 13,000 13,000

Number of Replay Members 138,535 100,000 -

1

Powerball subscriptions began.

The higher the jackpot amount, the more ticket sales increase. Expired unclaimed Powerball prize money goes to the Education Trust fund. 4 Pick 3 & Pick 4 counted as two games. 5 This is an estimate.
3

Prizes by Game for Last Ten fiscal Years
Fiscal Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Instant Games $116,737,902 119,378,231 110,256,485 100,763,773 99,304,490 96,800,965 89,331,116 87,686,018 78,518,710 74,587,146 MUSL Powerball $22,127,401 20,956,832 27,540,712 18,229,249 24,215,055 19,478,318 19,797,373 14,008,596 15,761,316 23,179,648 MUSL Other Lotto $1,719,808 2,230,231 1,479,781 1,652,591 1,098,587 1,089,128 823,621 731,620 756,093 1,137,254 Tri-State Megabucks $5,247,688 4,813,274 5,147,580 5,143,028 5,200,787 5,549,961 5,842,139 6,124,590 6,744,786 7,072,662 Tri-State Pick 3 & Pick 4 $5,252,500 5,437,311 5,410,637 5,322,821 5,665,202 5,588,329 5,642,046 4,947,686 4,868,096 4,668,197 Tri-State Other Lotto $2,500,110 2,063,821 2,338,749 1,574,702 1,663,694 1,491,024 1,839,696 1,596,730 2,040,608 2,267,602 Tri-State Fast Play $659,406 685,565 218,404 Fiscal Year Total Prizes $154,687,334 155,940,732 152,392,348 132,686,164 137,147,815 129,997,725 123,275,991 115,095,240 108,689,609 112,912,509

Other $442,519 375,467 -

48

U.S. Lottery Revenue and Expense Analysis - Fiscal Year 2007
(as a percentage of ticket sales) (millions of dollars) Net Oper Net Oper Retailer Retailer Prizes Income Prizes Comm. Exp. Income Commission Expenses $ 257.5 $ 31.1 $ 34.5 $ 139.1 55.7% 6.7% 7.5% 30.1% 1,765.6 233.8 166.5 1,152.4 53.2% 7.0% 5.0% 34.7% 276.9 33.7 29.1 116.2 60.7% 7.4% 6.4% 25.5% 579.9 53.6 45.4 278.2 60.6% 5.6% 4.7% 29.1% 61.3 7.0 12.9 37.0 51.9% 5.9% 10.9% 31.3% 145.3 16.0 31.0 64.5 56.6% 6.2% 12.1% 25.1% 2,484.5 234.3 151.3 1,252.0 60.3% 5.7% 3.7% 30.4% 1,978.4 225.7 129.0 845.4 62.2% 7.1% 4.1% 26.6% 78.9 7.7 12.8 31.2 60.4% 5.9% 9.8% 23.9% 1,177.2 100.7 110.2 611.0 58.9% 5.0% 5.5% 30.6% 477.8 55.1 44.7 211.5 60.6% 7.0% 5.7% 26.8% 133.4 14.7 29.0 58.0 56.7% 6.2% 12.3% 24.7% 134.2 13.9 22.8 69.1 55.9% 5.8% 9.5% 28.8% 456.4 47.7 46.3 193.8 61.3% 6.4% 6.2% 26.0% 179.4 19.7 29.5 125.6 50.7% 5.6% 8.3% 35.5% 143.8 16.5 20.6 49.2 62.5% 7.2% 9.0% 21.4% 927.0 112.2 54.8 483.3 58.8% 7.1% 3.5% 30.6% 3,225.0 251.7 91.9 867.9 72.7% 5.7% 2.1% 19.6% 1,329.1 172.7 108.3 732.5 56.7% 7.4% 4.6% 31.3% 250.1 25.3 36.5 108.7 59.5% 6.0% 8.7% 25.8% 595.0 58.3 40.9 240.1 63.7% 6.2% 4.4% 25.7% 21.4 2.5 6.5 11.2 51.5% 5.9% 15.7% 26.8% 65.4 7.2 13.3 28.6 57.1% 6.3% 11.6% 25.0% 155.9 14.3 16.1 77.7 59.1% 5.4% 6.1% 29.4% 1,359.4 131.2 81.8 778.8 57.8% 5.6% 3.5% 33.1% 85.1 9.8 19.1 34.2 57.5% 6.6% 12.9% 23.1% 3,970.7 398.4 264.1 2,019.1 59.7% 6.0% 4.0% 30.4% 451.8 61.9 41.7 306.2 52.4% 7.2% 4.8% 35.5% 11.3 1.2 3.6 6.6 49.8% 5.1% 15.9% 29.1% 1,338.4 140.0 109.8 671.3 59.2% 6.2% 4.9% 29.7% 116.0 13.4 15.6 70.0 53.9% 6.2% 7.3% 32.6% 233.6 31.0 29.1 61.0 65.9% 8.7% 8.2% 17.2% 1,832.6 166.3 161.3 916.1 59.6% 5.4% 5.2% 29.8% 143.9 29.8 9.6 61.5 58.8% 12.2% 3.9% 25.1% 600.1 70.0 45.7 272.3 60.7% 7.1% 4.6% 27.6% 22.3 2.2 5.3 10.0 56.1% 5.5% 13.4% 25.1% 584.9 69.2 52.9 351.2 55.3% 6.5% 5.0% 33.2% 2,315.3 193.2 182.6 1,083.1 61.3% 5.1% 4.8% 28.7% 66.2 6.1 8.9 23.3 63.4% 5.8% 8.5% 22.3% 791.8 76.5 68.1 426.0 58.1% 5.6% 5.0% 31.3% 304.8 31.2 42.4 114.2 61.9% 6.3% 8.6% 23.2% 115.8 13.5 5.4 58.0 60.1% 7.0% 2.8% 30.1% 292.1 34.1 28.9 137.7 59.3% 6.9% 5.9% 27.9% $ 31,535.6 $ 3,234.1 $ 2,460.1 $ 15,184.6 60.2% 6.2% 4.7% 29.0%

LOTTERY Arizona California ~ Colorado Connecticut Delaware * D.C. ~ Florida Georgia ~ Idaho Illinois Indiana Iowa Kansas ~ Kentucky Louisiana Maine Maryland ~ Massachusetts ~ Michigan ~ Minnesota Missouri ~ Montana Nebraska New Hampshire New Jersey New Mexico New York ~ North Carolina North Dakota Ohio Oklahoma Oregon * ~ Pennsylvania Rhode Island * ~ South Carolina South Dakota * ~ Tennessee Texas Vermont Virginia Washington ~ W. Virginia * ~ Wisconsin TOTALS

Ticket Sales $ 462.2 3,318.4 455.9 957.0 118.3 256.8 4,122.1 3,178.4 130.5 1,999.0 789.1 235.1 240.0 744.2 354.2 230.0 1,577.3 4,436.5 2,342.6 420.6 934.3 41.6 114.5 264.0 2,351.3 148.1 6,652.4 861.7 22.7 2,259.4 215.1 354.6 3,076.3 244.9 988.2 39.8 1,058.1 3,774.2 104.5 1,362.3 492.6 192.7 492.8 $ 52,414.3

* Data represents only revenue and expenses from traditional lottery games and not video lottery terminal (VLT) operations. ~ Total Revenues include Keno sales. Note: Fiscal Year 2007 is the latest data available. The fiscal year for most states ends on June 30, except for New York (March 31); Texas (August 31); Washington DC and Michigan (September 30).
Source: The 2008 LaFleur’s World Lottery Almanac

49

U.S. Lottery Sales By Game - Fiscal Year 2007 Online Games Population Instant 3/4 Digit Lotto Other Total Per Capita VLT* LOTTERY (millions) Sales Sales Sales Sales Sales Sales (net) Arizona 6.3 $261.0 $8.9 $192.3 $462.2 $73.4 California ~ 36.6 1,824.4 152.4 1,170.5 171.1 3,318.4 90.7 Colorado 4.9 297.1 158.8 455.9 93.0 Connecticut 3.5 594.9 197.6 164.5 957.0 273.4 Delaware * 0.9 33.1 44.5 39.7 1.0 118.3 131.4 $635.7 D.C. ~ 0.6 40.4 154.4 47.3 14.7 256.8 428.1 Florida 18.3 2,283.6 574.0 1,061.8 202.7 4,122.1 225.3 Georgia ~ 9.5 2,077.8 721.7 302.1 76.9 3,178.4 334.6 Idaho 1.5 84.4 1.4 44.7 130.5 87.0 Illinois 12.9 1,039.6 478.9 435.6 44.9 1,999.0 155.0 Indiana 6.3 525.4 57.8 194.4 11.5 789.1 125.2 Iowa 3.0 146.2 8.5 80.4 0.0 235.1 78.4 Kansas ~ 2.8 124.1 5.6 72.6 37.7 240.0 85.7 Kentucky 4.2 458.0 151.8 123.2 11.2 744.2 177.2 Louisiana 4.3 134.7 76.9 142.7 354.2 82.4 Maine 1.3 169.5 9.7 49.2 1.7 230.0 176.9 Maryland ~ 5.6 425.1 532.0 151.2 469.1 1,577.3 281.7 Massachusetts ~ 6.4 3,067.8 344.2 247.6 777.0 4,436.5 693.2 Michigan ~ 10.1 756.3 704.3 320.6 561.4 2,342.6 231.9 Minnesota 5.2 260.8 13.2 132.3 14.3 420.6 80.9 Missouri ~ 5.9 607.5 89.1 184.4 53.3 934.3 158.4 Montana 1.0 12.4 28.7 0.5 41.6 41.6 Nebraska 1.8 59.6 2.8 52.1 114.5 63.6 New Hampshire 1.3 188.6 10.9 58.7 5.9 264.0 203.1 New Jersey 8.7 1,193.1 704.8 443.4 10.0 2,351.3 270.3 New Mexico 2.0 91.4 2.7 54.0 148.1 74.1 New York * ~ 19.3 3,518.0 1,548.5 998.3 587.8 6,652.4 522.7 344.7 North Carolina 9.1 466.7 89.5 295.5 10.0 861.7 94.7 North Dakota 0.6 22.7 22.7 37.8 Ohio 11.5 1,353.8 553.9 312.6 39.1 2,259.4 196.5 Oklahoma 3.6 98.1 8.0 108.4 0.6 215.1 59.7 Oregon * ~ 3.7 128.8 1.4 88.8 135.6 354.6 853.5 95.8 Pennsylvania 12.4 1,703.5 684.7 663.7 24.4 3,076.3 248.1 Rhode Island * ~ 1.1 80.0 27.8 52.8 84.2 244.9 416.7 222.6 South Carolina 4.4 617.5 200.6 161.1 9.1 988.2 224.6 South Dakota * ~ 0.8 18.2 21.6 39.8 222.8 49.8 Tennessee 6.2 771.1 91.6 184.7 10.7 1,058.1 170.7 Texas 23.9 2,857.5 312.7 555.6 48.4 3,774.2 157.9 Vermont 0.6 80.0 3.1 20.8 0.7 104.5 174.2 Virginia 7.7 698.3 445.3 199.1 19.6 1,362.3 176.9 Washington ~ 6.5 325.2 19.0 141.7 6.7 492.6 75.8 W. Virginia * ~ 1.8 106.5 13.9 62.5 9.8 192.7 107.0 1,369.6 Wisconsin 5.6 284.1 37.5 167.7 3.5 492.8 88.0 Total 283.7 $29,863.9 $9,085.4 $10,010.0 $3,455.0 $52,414.3 $184.8 $4,021.0 % of total 57.0% 17.3% 19.1% 6.6% 100.0% * VLT = Sales from Video Lottery Terminals
~ Other sales include Keno sales. Note: Fiscal Year 2007 is the latest data available. The fiscal year for most states ends on June 30, except for New York (March 31); Texas (August 31); Washington DC and Michigan (September 30).
Source: The 2008 LaFleur’s World Lottery Almanac

( $ Millions)

50

U.S. Lottery Sales Per Capita Fiscal Year 2007
WI WV* WA* VA VT TX TN SD* SC RI* PA OR* OK OH ND NC NY* NM NJ NH NE MT M0* MN MI* MD* ME LA KY KS* IA IN IL ID GA* FL D.C.* DE CT CO CA* AZ MA*

0

*These states include Keno sales.

50

100

150

200

250

300

350

400

450

500

550

600

650

700

Data represents only sales from traditional lottery games and not VLT sales. Source: 2008 LaFleur's World Lottery Almanac.

Dollars

51

U.S. Lottery Per Capita Sales Fiscal Years 2002 - 2007 Lottery Arizona California ~ Colorado Connecticut D.C. ~ Delaware * Florida Georgia ~ Idaho Illinois Indiana Iowa Kansas ~ Kentucky Louisiana Maine Maryland ~ Massachusetts ~ Michigan ~ Minnesota Missouri ~ Montana Nebraska New Hampshire New Jersey New Mexico New York ~ North Carolina North Dakota Ohio Oklahoma Oregon * ~ Pennsylvania Rhode Island * ~ South Carolina South Dakota * ~ Tennessee Texas Vermont Virginia Washington ~ W. Virginia * ~ Wisconsin 2002 $ 54 82 91 262 370 125 139 271 69 124 102 62 70 156 70 122 239 652 168 75 103 37 43 167 241 72 248 n/a n/a 174 n/a 232 157 1,095 82 828 n/a 136 133 152 72 471 79 2003 $58 78 86 248 422 125 169 282 72 124 107 64 75 164 69 126 240 651 167 70 124 38 47 172 240 73 281 n/a n/a 182 n/a 100 172 222 175 37 n/a 142 128 154 75 106 80 2004 $ 64 81 87 259 402 136 176 308 78 133 119 70 83 177 76 143 249 683 195 76 136 41 54 182 252 78 302 n/a 10 187 n/a 101 190 227 82 43 72 155 154 168 78 115 88 2005 $67 92 89 267 392 143 195 300 81 142 117 70 77 168 68 161 265 698 205 80 135 38 56 175 261 73 313 n/a 32 188 n/a 100 213 220 223 41 131 160 154 176 73 108 82 2006 2007 $76 $73 98 91 99 93 277 273 458 131 146 428 217 225 316 335 90 87 153 155 129 125 114 78 85 86 176 177 77 82 174 177 278 282 699 693 219 232 87 81 156 158 42 42 64 64 200 203 276 270 79 74 336 345 26 95 35 38 193 196 57 60 98 96 247 248 244 223 265 225 50 50 154 171 161 158 168 174 179 177 75 76 120 107 92 88 2007 Order by Ranking 1 Massachusetts ~ 693 2 Delaware * 428 3 New York ~ 345 4 Georgia ~ 335 5 Maryland ~ 282 6 Connecticut 273 7 New Jersey 270 8 Pennsylvania 248 9 Michigan ~ 232 10 Florida 225 11 South Carolina 225 12 Rhode Island * ~ 223 13 New Hampshire 203 14 Ohio 196 15 Kentucky 177 16 Maine 177 17 Virginia 177 18 Vermont 174 19 Tennessee 171 20 Missouri ~ 158 21 Texas 158 22 Illinois 155 23 D.C. ~ 131 24 Indiana 125 25 Washington ~ 107 26 Oregon * ~ 96 27 North Corolina 95 28 Colorado 93 29 California ~ 91 30 Wisconsin 88 31 Idaho 87 32 Kansas ~ 86 33 Louisiana 82 34 Minnesota 81 35 Iowa 78 36 W. Virginia * ~ 76 37 New Mexico 74 38 Arizona 73 39 Nebraska 64 40 Oklahoma 60 41 South Dakota * ~ 50 42 Montana 42 43 North Dakota 38

* Data represents only revenue from traditional lottery games and not video lottery terminal (VLT) operations. ~ Amount includes Keno sales. Note: Fiscal Year 2002 through 2007 is the latest data available. The fiscal year for most states ends on June 30, except for New York (March 31); Texas (August 31); Washington DC and Michigan (September 30).
Source: The 2008 LaFleur’s World Lottery Almanac

52

U.S. Lottery Industry Ticket Sales Fiscal Years 2002 - 2007 (in Millions) LOTTERY Arizona California ~ Colorado Connecticut Delaware * D.C. ~ Florida Georgia ~ Idaho Illinois Indiana Iowa Kansas ~ Kentucky Louisiana Maine Maryland ~ Massachusetts ~ Michigan ~ Minnesota Missouri ~ Montana Nebraska New Hampshire New Jersey New Mexico New York ~ North Carolina N. Dakota Ohio Oklahoma Oregon * ~ Pennsylvania R. Island * ~ S. Carolina S. Dakota * ~ Tennessee Texas Vermont Virginia Washington ~ W. Virginia * ~ Wisconsin

2002 $ 295 2,896 408 908 674 211 2,330 2,322 93 1,567 626 181 190 639 312 158 1,307 4,194 1,688 377 585 34 74 213 2,069 134 4,754 n/a n/a 1,983 n/a 817 1,934 1,171 335 630 2,966 n/a 82 1,108 439 849 428

2003 $ 322 2,782 391 865 102 238 2,868 2,452 98 1,565 664 188 203 673 311 165 1,322 4,191 1,682 352 708 35 81 221 2,076 137 5,396 n/a n/a 2,078 n/a 355 2,133 239 724 29 n/a 3,131 79 1,136 460 192 435

2004 $ 367 2,924 401 908 109 241 3,071 2,710 109 1,688 735 209 224 725 340 186 1,395 4,368 1,974 387 791 37 93 237 2,188 149 5,826 n/a 6 2,155 n/a 362 2,352 249 950 34 428 3,486 92 1,262 481 207 483

2005 $ 398 3,334 417 933 114 235 3,471 2,734 114 1,814 740 211 207 707 307 209 1,486 4,466 2,069 408 786 34 101 228 2,274 139 6,039 n/a 19 2,159 n/a 360 2,645 242 957 33 784 3,662 93 1,334 458 194 452

2006 $ 469 3,585 469 970 125 266 3,929 2,955 131 1,964 816 340 236 742 332 230 1,561 4,501 2,212 450 914 40 113 263 2,407 155 6,487 230 22 2,221 205 363 3,070 261 1,145 39 928 3,775 105 1,365 478 218 509

2007 $ 462 3,318 456 957 118 257 4,122 3,178 131 1,999 789 235 240 744 354 230 1,577 4,437 2,343 421 934 42 114 264 2,351 148 6,652 862 23 2,259 215 355 3,076 245 988 40 1,058 3,774 105 1,362 493 193 493

* Data represents only ticket sales from traditional lottery games and not video lottery terminal (VLT) operations. ~ Total ticket sales include Keno sales. Note: Fiscal Year 2002 through 2007 is the latest data available. The fiscal year for most states ends on June 30, except for New York (March 31); Texas (August 31); Washington DC and Michigan (September 30).
Source: The 2008 LaFleur’s World Lottery Almanac

53

U.S. Lottery Net Operating Income as a Percent of Ticket Sales Fiscal Years 2002 - 2007 LOTTERY Arizona California ~ Colorado Connecticut Delaware * D.C. ~ Florida Georgia ~ Idaho Illinois Indiana Iowa Kansas ~ Kentucky Louisiana Maine Maryland ~ Massachusetts ~ Michigan ~ Minnesota Missouri ~ Montana Nebraska New Hampshire New Jersey New Mexico New York ~ North Carolina N. Dakota Ohio Oklahoma Oregon * ~ Pennsylvania R. Island * ~ S. Carolina S. Dakota * ~ Tennessee Texas Vermont Virginia Washington ~ W. Virginia * ~ Wisconsin 2002 29.0% 36.4% 26.8% 30.0% 30.1% 29.8% 40.6% 31.3% 25.0% 35.4% 26.9% 26.0% 30.8% 27.0% 35.7% 25.3% 33.6% 21.3% 36.1% 21.6% 27.0% 21.5% 24.7% 30.6% 36.9% 22.9% 33.2% n/a n/a 31.7% n/a 16.8% 38.5% 27.4% 26.0% 23.5% n/a 31.4% 20.3% 32.9% 25.0% 30.0% 29.3% 2003 28.8% 38.2% 26.7% 29.6% 30.5% 30.3% 38.4% 31.0% 22.3% 33.7% 26.4% 25.0% 31.3% 28.7% 35.4% 24.1% 33.2% 21.2% 33.5% 22.5% 28.6% 21.5% 24.5% 29.8% 35.6% 24.8% 34.6% n/a 32.9% 17.1% n/a 37.2% 28.0% 30.2% 23.1% 30.9% 20.3% 32.8% 26.4% 22.4% 29.8% 29.2% 35.7% 2004 29.0% 30.2% 25.6% 30.9% 33.6% 30.4% 30.7% 30.2% 22.3% 33.2% 27.1% 26.3% 31.4% 24.8% 35.7% 22.6% 32.8% 20.8% 32.0% 26.0% 27.9% 22.1% 21.3% 30.9% 35.8% 25.2% 33.2% n/a 27.6% 27.7% n/a 19.4% 34.5% 25.6% 30.5% 23.6% 30.5% 21.6% 32.2% 16.7% 20.7% 27.6% 29.8% 2005 29.2% 34.1% 24.8% 28.7% 29.7% 30.2% 31.8% 29.1% 21.2% 32.0% 25.1% 24.3% 29.6% 22.2% 35.0% 22.9% 32.3% 20.6% 31.6% 25.8% 26.7% 18.2% 23.4% 29.8% 33.9% 26.4% 30.3% n/a 32.9% 30.0% n/a 15.7% 31.5% 25.0% 28.6% 20.4% 30.0% 29.2% 22.5% 31.3% 25.0% 22.2% 28.7% 2006 29.9% 34.6% 26.0% 29.2% 25.0% 27.2% 30.9% 27.4% 25.7% 30.8% 26.8% 23.6% 29.0% 27.3% 35.3% 21.9% 32.0% 20.6% 30.4% 26.2% 26.4% 22.3% 26.2% 30.2% 33.4% 26.4% 28.5% 33.5% 30.0% 29.7% 33.7% 18.0% 31.4% 25.1% 27.5% 22.1% 29.4% 28.8% 21.5% 32.7% 25.3% 29.5% 29.5% 2007 30.1% 34.7% 25.5% 29.1% 31.3% 25.1% 30.4% 26.6% 23.9% 30.6% 26.8% 24.7% 28.8% 26.0% 35.5% 21.4% 30.6% 19.6% 31.3% 25.8% 25.7% 26.8% 25.0% 29.3% 33.1% 23.1% 30.4% 35.5% 29.1% 29.7% 32.6% 17.2% 29.8% 25.1% 27.6% 25.1% 33.2% 28.7% 22.3% 31.3% 23.2% 30.1% 27.9%

* Data represents only revenue from traditional lottery games and not video lottery terminal (VLT) operations. ~ Percentage includes Keno sales. Note: Fiscal Year 2002 through 2007 is the latest data available. The fiscal year for most states ends on June 30, except for New York (March 31); Texas (August 31); Washington DC and Michigan (September 30). For purpopses of this table only net operating income is equal to ticket sales less prizes, retailer commissions, vendor fees, and instant ticket printing fees.
Source: The 2008 LaFleur’s World Lottery Almanac

54

U.S. Lottery Prize Percentage Payout Based on Ticket Sales Fiscal Years 2002 - 2007 LOTTERY Arizona California ~ Colorado Connecticut Delaware * D.C. ~ Florida Georgia ~ Idaho Illinois Indiana Iowa Kansas ~ Kentucky Louisiana Maine Maryland ~ Massachusetts ~ Michigan ~ Minnesota Missouri ~ Montana Nebraska New Hampshire New Jersey New Mexico New York ~ North Carolina N. Dakota Ohio Oklahoma Oregon * ~ Pennsylvania R. Island * ~ S. Carolina S. Dakota * ~ Tennessee Texas Vermont Virginia Washington ~ W. Virginia * ~ Wisconsin 2002 54.8% 50.7% 58.0% 60.1% 50.5% 52.3% 48.7% 56.0% 55.4% 54.2% 58.9% 53.7% 51.8% 59.4% 49.5% 57.0% 56.1% 71.2% 50.1% 58.9% 59.5% 50.8% 52.9% 57.1% 54.5% 56.3% 56.0% n/a n/a 56.9% n/a 66.2% 51.5% 58.7% 59.5% 53.1% n/a 57.8% 63.6% 54.9% 61.6% 53.7% 56.0% 2003 54.9% 49.4% 57.6% 60.4% 51.5% 51.8% 51.8% 56.1% 57.6% 55.7% 59.5% 54.9% 52.8% 58.1% 49.7% 58.8% 56.2% 71.6% 53.5% 58.0% 59.4% 50.6% 52.8% 58.1% 55.4% 55.4% 55.5% n/a n/a 56.1% n/a 66.1% 52.4% 58.3% 57.2% 54.7% n/a 58.9% 64.3% 55.7% 60.4% 60.0% 55.7% 2004 55.1% 56.4% 58.9% 59.3% 49.0% 50.7% 58.7% 58.3% 59.1% 56.8% 59.3% 54.4% 53.6% 62.1% 49.9% 61.0% 57.0% 71.9% 55.8% 58.2% 60.8% 50.8% 56.5% 57.2% 55.5% 55.3% 56.7% n/a 46.2% 61.2% n/a 64.2% 55.1% 59.2% 58.0% 55.4% n/a 59.3% 62.4% 56.8% 68.0% 61.5% 58.2% 2005 50.4% 53.9% 59.8% 61.4% 52.5% 51.3% 58.9% 59.7% 61.3% 57.5% 61.6% 53.9% 54.4% 64.7% 49.9% 60.7% 57.6% 71.9% 56.2% 59.1% 62.1% 52.6% 58.0% 58.2% 57.0% 54.7% 58.3% n/a 47.5% 59.3% n/a 68.1% 57.8% 59.4% 59.9% 56.5% 56.7% 60.8% 62.5% 58.1% 61.3% 60.3% 58.0% 2006 55.3% 53.9% 60.1% 60.5% 52.1% 55.1% 59.6% 61.4% 58.4% 59.0% 60.4% 36.0% 55.5% 59.9% 50.7% 61.9% 57.9% 71.9% 57.3% 59.6% 62.7% 51.9% 56.3% 59.1% 57.4% 54.7% 59.4% 51.8% 49.4% 59.0% 53.5% 66.0% 58.8% 59.3% 61.4% 56.7% 57.9% 61.2% 63.4% 56.7% 61.1% 60.5% 57.8% 2007 55.7% 53.2% 60.7% 60.6% 51.9% 56.6% 60.3% 62.2% 60.4% 58.9% 60.6% 56.7% 55.9% 61.3% 50.7% 62.5% 58.8% 72.7% 56.7% 59.5% 63.7% 51.5% 57.1% 59.2% 57.8% 57.5% 59.7% 52.4% 49.8% 59.2% 53.9% 65.9% 59.6% 58.8% 60.7% 56.1% 55.3% 61.3% 63.4% 58.1% 61.9% 60.1% 59.3%

* Data represents only revenue from traditional lottery games and not video lottery terminal (VLT) operations. ~ Percentage includes Keno sales. Note: Fiscal Year 2002 through 2007 is the latest data available. The fiscal year for most states ends on June 30, except for New York (March 31); Texas (August 31); Washington DC and Michigan (September 30).
Source: The 2008 LaFleur’s World Lottery Almanac

55

U.S. Lotteries - Number of Products (Games) Offered Fiscal Years 2002 - 2007 LOTTERY Arizona California Colorado Connecticut D.C. ~ Delaware * Florida Georgia ~ Idaho Illinois Indiana Iowa Kansas ~ Kentucky Louisiana Maine Maryland ~ Massachusetts ~ Michigan ~ Minnesota Missouri ~ Montana Nebraska New Hampshire^ New Jersey New Mexico New York * ~ North Carolina N. Dakota Ohio Oklahoma Oregon * ~ Pennsylvania R. Island * ~ S. Carolina S. Dakota * Tennessee Texas Vermont Virginia Washington ~ W. Virginia * ~ Wisconsin 2002 2003 2004 2005 2006 2007 5 5 5 5 5 6 5 5 6 7 7 7 4 4 4 4 4 4 6 6 6 6 6 6 6 6 7 9 8 8 6 6 6 6 6 7 5 5 5 6 6 6 7 7 7 7 6 8 5 5 5 5 5 7 6 6 6 7 7 7 7 7 7 8 8 8 6 7 7 8 8 7 6 6 6 8 9 7 7 7 7 8 7 8 6 6 6 6 6 7 5 5 6 5 6 7 7 7 7 8 8 8 8 8 8 7 7 9 7 9 9 9 8 10 5 5 5 6 6 6 8 8 8 8 9 9 5 5 5 6 6 6 3 3 3 5 6 4 7 7 7 7 7 8 6 6 6 6 6 7 4 4 4 5 5 6 9 9 9 8 8 10 n/a n/a n/a n/a 2 5 n/a 1 3 3 3 3 7 7 7 7 7 8 n/a n/a n/a n/a n/a 5 7 7 7 9 8 7 6 6 6 6 7 7 7 7 7 8 6 7 5 5 5 5 5 6 6 6 6 6 5 7 n/a n/a n/a 5 5 6 4 5 5 6 6 5 5 6 6 5 6 7 6 6 6 6 5 7 6 6 6 7 7 7 8 8 8 8 7 8 7 7 7 7 8 8

^Pick 3/Pick 4 counted as two games * Data includes video lottery terminal (VLT) operations. ~ Data includes Keno game. Note: Fiscal Year 2002 through 2007 is the latest data available. The fiscal year for most states ends on June 30, except for New York (March 31); Texas (August 31); Washington DC and Michigan (September 30).
Source: The 2008 LaFleur’s World Lottery Almanac

56

14 INTEGRA DRIVE, P. O. BOX 1208, CONCORD, NH 03302-1208 603-271-3391 http://www.nhlottery.com/pdf/cafr.pdf


				
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