Dear Reader: Presented herewith is the Annual Gaming Report pursuant to Section 56 of the Gaming Control Act for the year ending March 31, 2013.

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2 Dear Reader: Presented herewith is the Annual Gaming Report pursuant to Section 56 of the Gaming Control Act for the year ending March 31, The Annual Gaming Report covers the activities of the Alcohol and Gaming Division relative to the gaming industry during the 2012/2013 fiscal year, and explains its working mandate received from my responsibility pursuant to Part II of the Gaming Control Act for "regulating casinos and other lottery schemes and for administering this Part in the public interest and in accordance with the principles of honesty and integrity." Yours truly, Honourable John M Donell ac Minister of Service Nova Scotia and Municipal Relations

3 ALCOHOL AND GAMING DIVISION 3 TABLE OF CONTENTS TABLE OF CONTENTS...3 ABOUT THE DIVISION...4 Mandate...4 Workforce....4 CORE FUNCTIONS...4 Registration and Licensing Investigation and Enforcement PROVINCIAL GAMING ACTIVITY Overview...8 Fiscal Year 2012/ Video Lottery Terminals Casinos...14 ALC Lotteries Charitable Bingo Charitable Ticket Lotteries CANADIAN JURISDICTIONAL GAMING COMPARISON...24

4 4 ALCOHOL AND GAMING DIVISION ABOUT THE DIVISION Mandate Pursuant to Section 40 of the Gaming Control Act, the Minister of Service Nova Scotia and Municipal Relations is "responsible for regulating casinos and other lottery schemes and for administering this Part in the public interest and in accordance with the principles of honesty and integrity." On behalf of the Minister, the Alcohol and Gaming Division (the "Division") licenses and monitors the conduct of casinos, bingos, lotteries and other games of chance (except harness racing), to ensure that these games are carried out in the best social and economic interests of Nova Scotians. Workforce With its head office located in Dartmouth, and a regional office in Sydney, the Alcohol and Gaming Division maintains a workforce around the province. CORE FUNCTIONS Registration and Licensing Pursuant to the Gaming Control Act, the Nova Scotia Alcohol and Gaming Division registers individuals and companies who supply goods and services to regulated gaming activities. During the 2012/2013 fiscal year, the Division s registry consisted of a total of 143 casino gaming, casino non-gaming, and bingo suppliers, compared to a total of 126 in 2011/2012.

5 ALCOHOL AND GAMING DIVISION 5 The Division also conducts security checks on personnel related to the gaming industry, including all casino staff, employees of the Nova Scotia Provincial Lotteries and Casino Corporation and the Alcohol and Gaming Division. Different levels of security clearances are applied, depending on one s position in an organization or the type of service one provides (i.e., suppliers of actual gambling equipment are held to a higher degree of scrutiny than the suppliers of non-gaming related suppliers such as restaurant equipment). In 2012/2013, the Division conducted security checks on 201 new and 258 renewal casino employees, compared to 284 new and 248 renewal casino employees in 2011/2012. Furthermore, the Division conducted security checks on 15 ticket lottery suppliers to the Atlantic Lottery Corporation (ALC) in 2012/2013. The Alcohol and Gaming Division issues gaming licenses to organizations that raise funds for charitable purposes, including bingos, ticket lotteries (prize value over $500), and carnival games of chance. In addition, permits are issued for ticket lotteries with a prize value of less than $500. Licenses are issued in accordance with the provisions of the applicable regulations and policies, as established by the Alcohol and Gaming Division.

6 6 ALCOHOL AND GAMING DIVISION Gaming Registration Issuance 2012/ /2012 Casino Registrations Gaming supplier Non-gaming supplier - exemption Non-gaming supplier Casino employees Bingo Registrations Bingo supplier 5 4 ALC Registrations Lottery Equipment Suppliers TOTAL Series bingo and ticket lottery licenses are issued to organizations wishing to carry on a series of regular events. Single licenses are issued for individual events. Games of chance events include commercial carnivals, fun-night Monte Carlo events, and games conducted during annual fairs and exhibitions. Gaming License Active 2012/ /2012 Bingo (Series + Single + Manor) Ticket Lottery License 1,172 1,100 Ticket Lottery Permit 5,023 5,041 Break-open Games of chance/carnival TOTAL 6,892 6,777

7 ALCOHOL AND GAMING DIVISION 7 Investigation and Enforcement Investigation and Enforcement regularly inspects licensed premises to ensure that gaming activities comply with the applicable regulations. For example, video lottery play is checked for underage play and credit granting, and bingos are checked for such things as the proper use of bingo operating equipment. Furthermore, Investigation and Enforcement staff conduct inspections at the two casinos to ensure compliance with casino regulations and detailed internal control procedures. Investigation and Enforcement has a staff complement located throughout the province. The gaming analyst section of Investigation and Enforcement conducts regular as well as random testing of casino slot machine software to ensure each machine is compliant with the legislated minimum payout percentage, as well as other requirements. The Section also monitors payout percentages for video lottery terminals (VLTs) in liquor licensed premises in the province. Investigation and Enforcement is also responsible for reviewing and making recommendations with respect to all approval requests from the casino operator pertaining to: casino surveillance and security systems; permitted games of chance played in casinos; Rules of Play; and slot machine installations, modifications, removals and relocations.

8 8 ALCOHOL AND GAMING DIVISION PROVINCIAL GAMING ACTIVITY Overview The Nova Scotia Alcohol and Gaming Division is responsible for the regulation of legal gaming in this province. These gaming activities include video lottery terminals (VLTs), casinos, Atlantic Lottery Corporation (ALC) products, bingos and charitable ticket lotteries. For the purpose of measuring the volume of gaming activities on a consistent basis, the Alcohol and Gaming Division uses the wager as a base unit. This figure represents the amount of money actually wagered on each gaming activity before prizes are awarded, operating expenses are deducted, and other assorted expenditures are accounted for. The wager for each type of gaming activity is defined in the following manner: cash deposited when referring to VLTs; cash deposited and value of tickets inserted into casino slot machines plus the chips purchased for table games when referring to casinos; cash paid for the purchase of bingo cards when referring to bingo; and cash paid for the purchase of tickets when referring to ticket lotteries.

9 ALCOHOL AND GAMING DIVISION 9 Fiscal Year 2012/2013 Total gaming wager in the province decreased by 7.8 per cent in 2012/2013 to $1.306 billion, from $1.416 billion in 2011/2012. Prizes of $993 million in 2012/2013 were down from $1.08 billion in 2011/2012, and accounted for 76.1 per cent of the total wager. Net gaming revenue amounted to $312 million in 2012/2013, down 6.4 per cent from $334 million in 2011/2012. Total Wager By Gaming Activity ($ thousands) Change VLTs $579,753 $676, % Casinos 427, , % ALC Lotteries 214, , % Bingo 50,419 52, % Charitable Lotteries 34,590 34, % Total Wager $1,305,989 $1,416, % Prizes 993,445 1,082, % Net Revenue $312,544 $334, % The VLT wager decreased by 14.3 per cent, representing a decline of $97 million. Casino wager dropped 4.0 per cent, with $18 million less wagered this year. Bingo wager dropped 4.1 per cent, to $50.4 million in 2012/2013. Wagers for ALC lotteries rose 3.3 per cent to $214.0 million in 2012/2013, while wagers for charitable lotteries were unchanged at $34.6 million. The proportion of total wager accounted for by VLTs was 44.4 per cent in 2012/2013, down from 47.8 per cent in 2011/2012. The proportion of total wager for casinos increased to 32.7 per cent, from 31.4 per cent in 2011/2012. The proportion of total wager

10 10 ALCOHOL AND GAMING DIVISION spent on ALC lotteries represented 16.4 per cent of total wager, while bingos and charitable lotteries accounted for 3.9 and 2.6 per cent respectively. Provincial revenue from gaming decreased 15.4 per cent on a year over year basis, to $142.7 million in 2012/2013, compared to $168.7 million last year, and accounted for 10.9 per cent of the total wager. Commercial revenue fell 6.8 per cent to $72.6 million in 2012/2013, from $77.8 million in 2011/2012. Operating expenses increased 16.8 per cent to $71.0 million, from $60.8 million last year. At $26.3 million, charitable revenue was down 1.8 per cent from $26.8 million the year before.

11 ALCOHOL AND GAMING DIVISION 11 Total Wager Distribution ($ thousands) Change Total Wager $1,305,989 $1,416, % Prizes 993,445 1,082, % Net Revenue $312,544 $334, % Operating Expenses 70,983 60, % Commercial Revenue 72,556 77, % Charitable Revenue 26,287 26, % Provincial Revenue $142,718 $168, %

12 12 ALCOHOL AND GAMING DIVISION Video Lottery Terminals In 2012/2013, VLT wager dropped 14.3 per cent to $579.7 million, from $676.8 million in 2011/2012. The VLT wager accounted for 44.4 per cent of the total provincial gaming wager in 2012/2013, compared to 47.8 per cent the year before. Prize payouts from VLTs totalled $465.9 million in 2012/2013, a decrease of 13.7 per cent from the previous year, and represented 80.4 per cent of the total VLT wager. VLT Wager Distribution ($ thousands) Change Total Wager $579,753 $676, % Prizes 465, , % Net Revenue $113,872 $137, % Operating Expenses 21,242 20, % Commercial Revenue 17,268 20, % Charitable Revenue 3,886 4, % Provincial Revenue $71,476 $91, % At $3.9 million, charitable revenue from VLTs was down 20.2 per cent from the previous year. Similarly, commercial revenue decreased 13.9 per cent to $17.3 million, from $20.0 million in 2011/2012. During the same period, operating expenses rose 2.5 per cent to $21.2 million, from $20.7 million in 2011/2012. Provincial revenue from VLTs fell 21.9 per cent to $71.5 million in 2012/2013, compared to $91.5 million last year. Provincial revenue represented 12.3 per cent of total VLT wager in 2012/2013, compared to 13.5 per cent the year before.

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14 14 ALCOHOL AND GAMING DIVISION Casinos At $427.2 million, the wager at Nova Scotia s Halifax and Sydney casinos this year was down 4.0 per cent from $444.9 million in 2011/2012. Casino wager accounted for 32.7 per cent of the total provincial wager in 2012/2013, compared to 31.4 per cent the year before. Prize payouts at the casinos decreased 4.0 per cent to $354.9 million this year, representing 83.1 per cent of the total casino wager. Provincial revenue from casino operations dropped 28.1 per cent to $28.8 million in 2012/2013, from $40.1 million in 2012/2012. Last year, an increase in provincial revenue was primarily due to a one-time HST credit of $11.1 million, which had reduced expenses along with other operating costs in 2011/2012. Casino Wager Distribution ($ thousands) Change Total Wager $427,192 $444, % Prizes 354, , % Net Revenue $72,296 $75, % Operating Expenses 2,019 (8,734) % Commercial Revenue 41,461 43, % Provincial Revenue $28,816 $40, % Commercial revenue dropped 5.6 per cent on a year over year basis, to $41.5 million, while operating expenses fell per cent to $2.0 million from -$8.7 million last year.

15 ALCOHOL AND GAMING DIVISION 15 Casino Nova Scotia Halifax Sydney Wager ($ millions) $321.3 $334.5 $105.9 $110.4 Revenue to Province ($ millions) Gaming Floor Area (sq. ft.) $20.9 $30.2 $7.9 $9.9 34,000 34,000 11,100 11,100 Employees Visitors 939, , , ,296 Slot Machines Table Games

16 16 ALCOHOL AND GAMING DIVISION ALC Lotteries At $214.0 million, total wager for ALC lotteries increased 3.3 per cent in 2012/2013, from $207.3 million a year ago. ALC lotteries accounted for 16.4 per cent of the total provincial wager this year, a decrease from 14.6 per cent in 2011/2012. Prizes paid out for ALC lotteries in 2012/2013 increased to $119.1 million, from $117.5 million last year. Prizes represented 55.6 per cent of total ALC lotteries wager, compared to 56.7 per cent last year. ALC Lotteries Wager Distribution ($ thousands) Change Total Wager $214,035 $207, % Prizes 119, , % Net Revenue $94,944 $89, % Operating Expenses 39,780 40, % Commercial Revenue 13,827 13, % Charitable Revenue % Provincial Revenue $41,285 $35, % Operating expenses of $39.8 million for ALC lotteries in Nova Scotia in 2012/2013 were essentially unchanged $40.0 million in 2011/2012. Commercial revenue of $13.8 million in 2012/2013 was unchanged from last year. Revenue to charities decreased 46.9 per cent to $52 thousand in 2012/2013, from $98 thousand in 2011/2012. Provincial revenue from ALC lotteries rose 15.2 per cent to $41.3 million, from $35.8 million last year.

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18 18 ALCOHOL AND GAMING DIVISION Charitable Bingo Total charitable bingo wager decreased 4.1 per cent to $50.4 million in 2012/2013, from $52.6 million last year. Charitable revenue fell 7.4 per cent to $8.8 million, from $9.5 million last year. Bingo prizes amounted to $36.9 million in 2012/2013, and accounted for 73.2 per cent of the total charitable bingo wager. The prize value awarded this year was down 3.7 per cent from $38.3 million in 2011/2012. Charitable Bingo Wager Distribution ($ thousands) Change Total Wager $50,419 $52, % Prizes 36,893 38, % Net Revenue $13,526 $14, % Operating Expenses 3,953 3, % Charitable Revenue 8,787 9, % Provincial Revenue $786 $ % In the 2012/2013 fiscal year, financial reports were received from 210 bingo licensees, compared to 224 licensees in 2011/2012. In 2012/2013, 45.7 per cent of the 210 bingo licensees had gross receipts under $150,000, and generated 16.2 per cent of the total charitable bingo wager. Conversely, 20.0 per cent of charitable bingos had gross receipts exceeding $300,000, and yielded 53.0 per cent of the total charitable bingo wager.

19 ALCOHOL AND GAMING DIVISION 19 In 2012/2013, there were 34 media bingos (TV or radio bingo) that generated $7.5 million in wagers, compared to 36 media bingos last year with a total wager of $7.8 million. Charitable revenue from media bingos amounted to $2.7 million this year, down 5.3 per cent from $2.9 million in 2011/2012.

20 20 ALCOHOL AND GAMING DIVISION Charitable Bingo Licensees Grouped By Wager Category Licensees % Wager ($ thousands) % $0-50, % $ % 50, , % 2, % 100, , % 4, % 150, , % 5, % 200, , % 5, % 250, , % 5, % 300, , % 9, % 500,000-1,000, % 8, % $1,000, % 9, % TOTALS % $50, % Charitable Bingo Licensees Grouped By Net Profits Licensees By Net Profit Average Category Licensees <0% 0-15% >15% Net Profit $0-50, % 50, , % 100, , % 150, , % 200, , % 250, , % 300, , % 500,000-1,000, % $1,000, % TOTALS %

21 ALCOHOL AND GAMING DIVISION 21 Charitable Ticket Lotteries The wager on charitable ticket lotteries was $34.6 million in 2012/2013, unchanged from last year. Prizes awarded in charitable ticket lotteries decreased 2.6 per cent to $16.7 million in 2012/2013, and accounted for 48.2 per cent of total charitable ticket lotteries wager. Charitable revenue rose 10.3 per cent to $13.6 million this year, from $12.3 million in 2011/2012. Provincial revenue amounted to $355 thousand this year, down 2.7 per cent from $365 thousand last year. Charitable revenue represented 39.2 per cent of total charitable ticket lotteries wager, while the province realized 1.0 per cent. At $4.0 million, operating expenses for charitable ticket lotteries this year decreased 16.3 per cent from $4.8 million in 2011/2012. Operating expenses accounted for 11.5 per cent of the total charitable ticket lottery wager in 2012/2013, compared to 13.8 per cent last year. Charitable Lotteries Wager Distribution ($ thousands) Change Total Wager $34,590 $34, % Prizes 16,684 17, % Net Revenue $17,906 $17, % Operating Expenses 3,989 4, % Charitable Revenue 13,562 12, % Provincial Revenue $355 $ %

22 22 ALCOHOL AND GAMING DIVISION In 2012/2013, financial reports were received from 1,104 charitable ticket lottery licensees, compared to 1,040 last year. Of the 1,104 charitable ticket lotteries, 1,027 (93.0 per cent) reported ticket sales of $50 thousand or less. Conversely, 13 (1.2 per cent) ticket lotteries reported sales of over $300 thousand, totalling $22.2 million (64.3 per cent) of the total charitable ticket lotteries wager.

23 ALCOHOL AND GAMING DIVISION 23 Charitable Lotteries Licensees Grouped By Wager Category Licensees % Wager ($ thousands) % $0-50,000 1, % $6, % 50, , % 3, % 100, , % 1, % 150, , % % 200, , % % 250, , % % 300, , % 1, % 500,000-1,000, % 3, % $1,000, % 17, % TOTALS 1, % $34, %

24 24 ALCOHOL AND GAMING DIVISION Province CANADIAN JURISDICTIONAL GAMING COMPARISON Agencies Involved Casinos VLTs Internet NL PE NS NB QC ON MB SK AB BC NT YT NU Service Newfoundland, Consumer Affairs Division Atlantic Lottery Corporation PEI Lotteries Commission Department of Environment, Labour and Justice, Consumer Services Division Atlantic Lottery Corporation Nova Scotia Alcohol and Gaming Division Nova Scotia Gaming Corporation Atlantic Lottery Corporation New Brunswick Gaming Control Branch NB Lotteries and Gaming Corporation Atlantic Lottery Corporation Régie des alcools, des courses et des jeux Loto-Québec Alcohol and Gaming Commission of Ontario Ontario Lottery and Gaming Corporation Manitoba Gaming Control Commission Manitoba Lotteries Corporation Saskatchewan Liquor and Gaming Authority Saskatchewan Gaming Corporation Saskatchewan Indian Gaming Authority Alberta Gaming and Liquor Commission Alberta Gaming Research Council BC Gaming Policy and Enforcement Branch British Columbia Lottery Corporation Consumer Services, Community Operations Department of Consumer Services, Consumer Services Branch Yukon Lottery Commission Department of Community and Government Services, Consumer Affairs Section U U U U U U U U U U U U U U U U U U U U U U U

25 Service Nova Scotia and Municipal Relations Alcohol and Gaming Division Halifax Torrington Place, 2nd floor 780 Windmill Road P.O. Box 545 Dartmouth NS B2Y 3Y8 Tel: (902) Toll Free: Fax: (902) Sydney 1030 Upper Prince Street, Suite 1 Sydney NS B1P 5P6 Tel: (902) Toll Free: Fax: (902)