Message from the President and CEO

2010-2011 Q2 Report
During the past quarter ended September 27, 2010, Loto-Québec generated consolidated revenues of $899.2 million and net earnings of $345.7 million. These figures represent declines of 3.8% and 6.9% respectively as compared to the same period in the previous fiscal year. Due in part to the existing economic context, these results were reflected in the performance of all activity sectors. In order to offset the situation, which we anticipated during the last fiscal year, the Corporation continued to implement innovative new initiatives while maintaining tight controls on expenses. In fact, our costs have seen zero growth during the first six months of the current fiscal year.

For example, Loto-Québec has taken advantage of this second quarter to launch its online gaming site, Espacejeux, as well as the new Kinzo game, a pilot project initiated by the Société des bingos du Québec. The second quarter was also marked by various other actions, including the tabling of the Corporation’s 2010-2013 Strategic Plan in the National Assembly.

Lotteries
At $41.3 million, the Lottery sector posted a decline of 4.6% in its revenues vis-à-vis the second quarter of fiscal 2009-2010. This decline is attributable primarily to the instant lottery segment. With respect to online games, sales remained at the same level as during the second quarter of the previous fiscal year thanks to the Lotto Max lottery, which generated highly positive performance in the order of
$200 million during the quarter.

Casinos
The Casino sector, encompassing related food and beverage and lodging operations, recorded combined revenues of $458.3 million during the second quarter of this year, down 3.1% from the same period in fiscal 2009-2010. One highlight within this activity sector was the recent opening of the new Altitude restaurant at the Casino de Mont-Tremblant, which serves to enhance the entertainment offerings within the region and responds to the expectations of the Casino’s clientele. Moreover, the Casino de Charlevoix also enriched the visitor experience with the introduction of a new multimedia system integrated into its interior décor.

Video Lotteries
The Video Lottery sector’s consolidated revenues totalled $505.4 million, down 5.0% from the second quarter of the previous year. The closure of the Montréal and Aylmer hippodromes in autumn 2009 resulted in the withdrawal of 265 video lottery terminals (VLTs), as well as the removal of other units from zones in proximity to Québec’s gaming centres constitute the primary factors explaining the decline in this sector’s earnings. For their part, the gaming centres in Trois-Rivières and Québec City continue to progress, having posted a 5.7% increase in their combined revenues as compared to the second quarter of fiscal 2009-2010.

Bingo
The Bingo sector’s Q2 consolidated revenues equalled $15.4 million, representing a 5.9% drop compared to the same period last year. Nevertheless, this is a considerably smaller decline than that observed at the end of fiscal 2009-2010. A development of particular note during the past quarter was the opening of a hall in Montréal offering the new Kinzo game, which is aimed at supporting so-called orphan non-profit organizations by providing them with a source of additional revenue.

In Conclusion
As the holiday season fast approaches, I would like to take this opportunity to wish all our readers Happy Holidays and a healthy and joyous New Year!

Alain Cousineau
President and Chief Executive Officer

1) Non-profit organizations holding a bingo license whose hall no longer exists and who have had no stream of financing originating from network bingo since April 1, 2008.