News release

Gaming Corp. Set To Leave Lottery Corp.

The Nova Scotia Gaming Corp. today announced that Nova Scotia will withdraw from the Atlantic Lottery Corp. unless a new agreement for sharing profits is put in place.

"Under the current profit-distribution formula, Nova Scotia is subsidizing the other three Atlantic provinces and losing out on $4 million to $4.5 million in profits each year. That's not fair to Nova Scotia," said Dara Gordon, vice-chair of the Nova Scotia Gaming Corp.

In 1997, Nova Scotia's Auditor General confirmed that under the existing profit-distribution formula -- which determines how the four Atlantic provinces split lottery profits -- the province was losing profits. The gaming corporation wants an amended formula that distributes profits more fairly, plus repayment of approximately $8 million in profits dating back to April 1, 1997. Any amendments to the profit-distribution formula require the unanimous approval of lottery corporation shareholders.

The gaming corporation today informed the Atlantic Lottery Corp. board that if the profit-distribution formula is not amended soon, Nova Scotia will officially withdraw. Should that happen, the province will establish a new lottery operation that will provide Nova Scotians and video and ticket lottery retailers with all the gaming products and services currently offered by the Atlantic Lottery Corp. A withdrawal from the lottery corporation would not be expected to affect Nova Scotia's continued involvement in the revitalization of harness racing in the province.

"We have carefully looked at the feasibility of a new, independent Nova Scotia lottery operation. If we must withdraw from the Atlantic Lottery Corp., Nova Scotia will have a viable lottery program of its own, one that ensures our profits remain in our province," said Ms. Gordon.

Ms. Gordon stressed that the main priority is to resolve the outstanding issues with the Atlantic Lottery Corp., not to withdraw. She added that the province requires a fair and timely resolution of all its concerns.

The profit-distribution formula is a critical issue, but it is not the only concern the gaming organization has about its existing relationship with the Atlantic Lottery Corp. The gaming group also seeks a new arrangement that allows it to be more responsive and accountable to its regulator, the Nova Scotia Alcohol and Gaming Authority. The gaming corporation operates under a different regime than its Atlantic Canadian counterparts. Nova Scotia is the only province in the region with separate gaming bodies; one - the Nova Scotia Gaming Corp. - that oversees the gaming business; the other - the Gaming Authority - is the regulator of gaming.

NOTE: The following is intended for use by broadcast media.

The Nova Scotia Gaming Corporation may pull out of the Atlantic Lottery Corporation.

Nova Scotia officials say they are losing up to $4-point- five million dollars a year in profit. They argue Nova Scotia is subsidizing the other three Atlantic provinces, and they want a new profit-distribution formula.

The gaming corporation will create an independent Nova Scotia lottery operation if a new deal is not reached.

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Contact:

John Gray
donalee Moulton Nova Scotia Gaming Corp. 902-424-2203

N.S. GAMING CORP. BACKGROUNDER--Lottery Profit Formula


An Amended Profit-Distribution Formula: An Issue of Fairness

The Atlantic Lottery Corp. distributes its profits to the Nova Scotia Gaming Corp., New Brunswick, PEI and Newfoundland based on a profit-distribution formula that was last reviewed in 1991, prior to the creation of Nova Scotia's Gaming Corp. in 1995.

Under the current profit formula, the four Atlantic provinces contribute jointly to the lottery corporation's operating costs -- such as retailer commissions and overhead -- based on the percentage of sales in each province relative to total lottery corporation sales. Compared to the other provinces, Nova Scotia's operating costs are lower than its percentage of sales. Consequently, Nova Scotia Gaming Corp. contributes more than its fair share to the Atlantic Lottery Corp.'s costs.

In 1996, the gaming corporation requested that Nova Scotia's Auditor General conduct an independent review of the Atlantic Lottery Corp., including the profit-distribution formula.

The Auditor General's report, released in March 1997, confirmed that the profit-distribution formula resulted in Nova Scotia subsidizing the other three Atlantic provinces and a significant loss of profits for the province. The Nova Scotia Gaming Corp. calculates this amount to be $4 million to $4.5 million a year.

In May 1997, the gaming corporation tabled a motion to amend the profit-distribution formula, retroactive to April 1, 1997. The new formula deals with operating costs and distribution of profits more fairly. The amendment requires each province to bear the costs associated with sales generated in their own province.

Any amendments to the profit-distribution formula require the unanimous approval of all shareholders. To date, no agreement has been reached.

The Nova Scotia Gaming Corp. also seeks repayment of about $8 million in profits dating back to early 1997 when the profit-distribution inequity was confirmed (and not back to 1991 when the profit-distribution formula was last reviewed). The gaming corporation simply wants a fair and timely resolution to the profit-distribution issue.

Since early 1997, Nova Scotia Gaming Corp. has worked diligently and patiently with the Atlantic Lottery Corp. board to resolve the inequities of the profit-distribution formula.

Nova Scotia Gaming Corp. can no longer wait to resolve this issue. The longer the matter goes unresolved, the longer Nova Scotia loses out on $4 million to 4.5 million annually in profits.

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Editor's Note: A profile of the Nova Scotia Gaming Corp. is available by telephoning John Gray or donalee Moulton at 902-424-2203.

ngr                   March 9, 1999                  10:47 a.m.