<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[LOGO]
INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC. (TM)
2131 FARADAY AVENUE
CARLSBAD, CALIFORNIA 92008-7297
NOTICE OF ANNUAL MEETING
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE, SIGN AND
MAIL PROMPTLY THE ENCLOSED PROXY, FOR WHICH A RETURN ENVELOPE IS
PROVIDED.
The 1996 Annual Meeting of Shareholders of International Lottery & Totalizator
Systems, Inc. (the "Company") will be held at 3:00 p.m., Pacific Daylight
Savings Time, on Thursday, June 6, 1996 at Pea Soup Andersen's, 850 Palomar
Airport Road, Carlsbad, California, for the following purposes:
1. To elect directors for the ensuing year.
2. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on April 12, 1996 will be
entitled to vote at the meeting. The transfer books will not be closed. The
approximate date on which the proxy statement and form of proxy are first being
sent or given to shareholders is April 17, 1996.
By order of the Board of Directors,
/s/ WILLIAM A. HAINKE
-----------------------------------
William A. Hainke
Corporate Secretary
April 17, 1996
Carlsbad, California
<PAGE> 3
INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.
2131 FARADAY AVENUE
CARLSBAD, CA 92008-7297
PROXY STATEMENT
Proxies in the form enclosed with this statement are solicited by the
Board of Directors of the Company for use at the Annual Meeting of Shareholders
to be held in Carlsbad, California, on June 6, 1996, including any adjournments
or postponements thereof. Execution of a proxy will not in any way affect a
shareholder's right to attend the meeting and vote in person, and any holder
giving a proxy has the right to revoke it at any time before it is exercised by
filing with the Secretary of the Company a written revocation or duly executed
proxy bearing a later date. The proxy will be suspended if the holder is present
at the meeting and elects to vote in person.
VOTING SECURITIES
The voting securities of the Company consist of its Common shares of
which 16,816,211 shares are outstanding as of April 12, 1996. Only holders of
Common shares of record on the books of the Company at the close of business on
April 12, 1996 (the "Record Date") will be entitled to vote at the meeting. Each
such holder of Common shares is entitled to one vote for each said share, and
has the right to cumulate his or her vote for directors if his or her candidate
or candidates' names have been placed in nomination prior to the voting and any
shareholder has given notice at the meeting prior to the voting of that
shareholder's intention to cumulate his or her votes. The persons named in the
enclosed proxy may or may not elect to give such notice and vote the shares they
represent in such a manner.
Votes cast by proxy or in person at the Annual Meeting will be counted
by the person appointed by the Company to act as Inspector of Election for the
Annual Meeting. The Inspector of Election will treat shares represented by
proxies that reflect abstentions or include "broker non-votes" as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions or "broker non-votes" do not constitute a vote "for" or
"against" any matter and thus will be disregarded in the calculation of "votes
cast." Any unmarked proxies, including those submitted by brokers or nominees,
will be voted in favor of the nominees of the Board of Directors, as indicated
in the accompanying proxy card.
The approximate date on which the proxy statement and form of proxy are
first being sent or given to shareholders is April 17, 1996.
ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual Meeting, each to hold
office for the term of one year and until his successor is elected. Proxy
holders will, unless authorization to do so is withheld, vote the proxies
received by them for the election of the nominees listed in the following table,
reserving the right, however, to distribute their votes among the nominees
listed below in their discretion.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common shares as of April 1, 1996 by (i)
each director and nominee for director of the Company, (ii) certain executive
officers, (iii) executive officers and directors of the Company as a group and
(iv) each person or entity who is a beneficial owner of more than 5% of the
Company's outstanding Common shares. With respect to each director of the
Company, the table also sets forth his age, the year he was first elected as a
director, employment history for the past five years, and other directorships.
For purposes of this Proxy Statement, beneficial ownership of securities is
defined in accordance with the rules of the Securities and Exchange Commission
and means generally the power to vote or exercise investment discretion with
respect to securities, regardless of any economic interests therein. Except as
otherwise indicated, the Company believes that the beneficial owners of the
securities listed below have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
1
<PAGE> 4
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY OWNED
AS OF APRIL 1, 1996
Percent
NAME OF BENEFICIAL OWNER Amount of Class
Nominees for Director
<S> <C> <C>
FREDERICK A. BRUNN, 51, Director since 1989. 113,226 (A) *
President since February 1994.
Executive Vice President, Planning and
Development 1990 to February 1994.
CHAN KIEN SING, 39, Director since June 1993. 10,000 (B)(C) *
Group Executive Director of Berjaya Group
Berhad since 1990.
THEODORE A. JOHNSON , 55, Director since 1979. 45,825 (B) *
President, Minnesota Cooperation Office
for Small Business and Job Creation, Inc.
from 1980 to present. Director of Surgidyne, Inc.
M. MARK MICHALKO, 41, Director since February 1994. 15,000 (A) *
Executive Vice President, Business Development since
February 1994. President of Quantum Gaming
Corp., a gaming industry consulting firm for more
than five years prior to February 1994.
NG AIK CHIN, 41, Executive Assistant to the President 1,250 (A) *
since 1994. Senior member of Berjaya Group
Berhad's management for more than five years prior to 1994.
NG FOO LEONG, 45, Director since June 1993. 10,000 (B)(C) *
Executive Director, Sports Toto Malaysia Sdn Bhd,
a lottery gaming company from 1985 to present.
MARTIN J. O'MEARA, JR., 67, Director since 1979. 113,926 (B) *
President, The Budget Plan, Inc., a privately-
owned company engaged in the consumer loan
business and has been so employed for more
than five years.
SIR MICHAEL G.R. SANDBERG, 69, Director since 100,000 (B) *
1987. Private investor. Chairman and
Chief Executive of the Hong Kong and Shanghai
Banking Corporation from 1977 to 1986.
Director of Broadstreet Fund, Global Yield Fund
and Global Utility Fund, closed-end
investment companies listed on the NYSE.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
Named Executive Officers (excluding those listed above)
<S> <C> <C>
TIMOTHY R. GROTH 3,750 (A) *
WILLIAM A. HAINKE 26,320 (A) *
LENNART K. SUNDIN 76,274 (A) *
All Directors and Executive Officers as a group 7,124,321 (A)(B)(C) 4%
(11 persons)
Significant Shareholder
BERJAYA LOTTERY MANAGEMENT (H.K.) LIMITED 6,600,000 (C) 39%
Level 28, Shahzan Prudential Tower
30 Jalan Sultan Ismail
5020 Kuala Lumpur, Malaysia
</TABLE>
- ----------
(A) Includes the number of Common shares subject to unexercised stock
options which were exercisable within 60 days under the Company's 1986,
1988 and 1990 Employee Stock Option Plans as follows: 60,000 for Mr.
Brunn; 25,000 for Mr. Hainke; 7,500 for Mr. Sundin; 15,000 for Mr.
Michalko; 1,250 for Mr. Ng; 3,750 for Mr. Groth; and 122,500 for all
executive officers as a group.
(B) Includes the number of Common shares subject to unexercised stock
options which were exercisable within 60 days under the Company's 1993
Directors' Stock Option Plan and 1990 Employee Stock Option Plan.
(C) Mr. Chan Kien Sing and Mr. Ng Foo Leong are employees of an affiliate
of Berjaya Lottery Management (H.K.) Limited. Each disclaim beneficial
ownership of such shares.
* Less than one percent of the outstanding Common shares.
Although it is not contemplated that any nominee will be unable to
serve as a Director, in such event the proxies will be voted by the proxy holder
for such other persons as may be designated by the Board of Directors.
During 1995, five meetings of the Board of Directors were held. Each
incumbent Director attended all meetings of the Board of Directors held during
the year in which he was a Director, except for Mr. Tan who attended no meetings
and both Mr. Chan Kien Sing and Mr. Ng Foo Leong who each missed one meeting.
The Company has an Executive Committee which consists of Messrs. Chan, Johnson,
Brunn and Michalko. The Executive Committee held no meetings during the year.
The Executive Committee may exercise all the authority of the Board in
management of the Company except for matters expressly reserved by law for board
action. The Board also has an Executive Compensation Committee consisting of
Messrs. Johnson, O'Meara, Sandberg, and Chan. The Executive Compensation
Committee met twice during the year. Its function is to establish compensation
for all executive officers of the Company and administer the Company's 1986,
1988, and 1990 Employee Stock Option Plans. The Company has an Audit Committee
consisting of Messrs. Sandberg, O'Meara, Johnson and Chan which held one meeting
during the year. The Audit Committee provides advice and assistance regarding
accounting, auditing and financial reporting practices of the Company. Each year
it recommends to the Board a firm of independent public accountants to serve as
auditors. The Audit Committee reviews with such auditors the scope and result of
their audit, fees for services and independence in servicing the Company. The
Company also has a Nominating Committee consisting of Messrs. Tan, O'Meara,
Johnson and Brunn. The Nominating Committee held one meeting during the year.
The Nominating Committee seeks out, evaluates and recommends to the Board
qualified nominees for election as directors of the Company and considers other
matters pertaining to the size and composition of the Board. The Nominating
Committee will give appropriate consideration to qualified persons recommended
by shareholders for nomination as directors provided that such recommendations
are accompanied by information sufficient to enable the Nominating Committee to
evaluate the qualifications of the nominee.
3
<PAGE> 6
COMPENSATION OF DIRECTORS
Each Director who is not an employee of the Company receives an annual
retainer of $4,000 plus $500 and reimbursement for all related expenses per
Board meeting. The chairman of each committee who is not an employee of the
Company receives an additional annual retainer of $1,000. Each committee member
receives $500 and reimbursement of all related expenses per meeting, only if a
committee meeting is held at a time when it does not coincide with a Board
meeting. Mr. Sandberg is also a financial consultant to the Company and received
compensation of $44,250 in 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1994 and July 1995, the Company received orders for lottery
terminals totaling approximately $8.0 million from the Philippine Gaming
Management Corporation, an affiliate of Berjaya Lottery Management (U.K.)
Limited ("Berjaya") which is a 39% shareholder of the Company. Pursuant to these
contracts, the Company was paid $5.2 million in 1994 and $2.6 million in 1995
and the remaining terminals with a contract value of $200,000 were shipped in
the first quarter of 1996.
In May 1994, the Company entered into a letter of intent with Sports
Toto Malaysia Sdn Bhd ("Sports Toto"), an affiliate of Berjaya and the employer
of Ng Foo Leong, a nominee for Director, pursuant to which the Company is to
supply certain lottery equipment, software and support services to Sports Toto
for lottery operations in China. The aggregate sales price was approximately
$758,000, of which, the Company has received $567,000 to date. The remainder is
payable on the first day of sales of lottery tickets through the Company's
lottery system. This event has not occurred.
In October 1995, the Company received an order for $2.2 million for
lottery terminals and a computer system from Natural Avenue Sdn Bhd of Malaysia
("Natural Avenue") , an affiliate of Berjaya, for an on-line lottery in the
state of Sarawak, in eastern Malaysia. Natural Avenue made a down payment of
$0.5 million and is paying equal monthly installments for the $1.7 million
balance through August 1996. A total of $896,000 was received by the Company
during 1995.
4
<PAGE> 7
EXECUTIVE COMPENSATION AND OTHER INFORMATION
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
As members of the Executive Compensation Committee (the "Committee"),
we evaluate the performance of senior management, including the president, and
review and approve the base compensation and lump sum distributions for the
Company's executive officers. The Committee also administers the Company's
Executive Bonus Plan and employee stock option plans. The Committee periodically
reports to the Board on its activities.
Compensation Philosophy
The Committee bases its decisions on the Company's executive
compensation philosophy, which relates the level of compensation to the
Company's success in meeting its annual and long-term performance goals, rewards
individual achievement and seeks to attract and retain qualified executives. The
Company's executive compensation program consists of three principal components:
(i) base salary, (ii) potential for an annual lump-sum distribution based on
individual performance and (iii) potential for an annual bonus under the
Company's Executive Bonus Plan based upon the Company achieving a threshold
level of profitability as well as individual performance. The second and third
elements constitute "at-risk" portions of the compensation program. The Company
positions its overall executive compensation levels at or near the median of the
range of compensation levels for other companies comparable to the Company
located in Southern California and who are viewed as competitors for executive
talent in the overall labor market. This data is obtained from surveys conducted
by external compensation consultants and trade associations. In reviewing this
data, ILTS takes into account how its compensation policies and overall
performance compare to similar indices for comparable companies.
The Company employs a formal performance review system for all
employees, including the president and the other Named Executive Officers (as
defined on page 7). This process generates information that the Committee uses
in making decisions on base compensation, lump-sum distributions and awards
under the Company's Executive Bonus Plan. The president is responsible for
preparing the reviews on all executive officers other than himself. The
Committee Chairman is responsible for preparing the review on the president. All
reviews are then discussed and approved by the Committee. Executive performance
is measured both in terms of the performance of the Company as a whole and
various individual performance factors, including the performance of divisions
for which such officer had management responsibility and individual managerial
accomplishments.
The Internal Revenue Code of 1986 denies a deduction to any publicly
held corporation for compensation paid to any "covered employee" (which are
defined as the president and the Company's other four most highly compensated
officers, as of the end of a taxable year) to the extent that the compensation
of any individual "covered employee" exceeds $1 million in any taxable year of
the corporation beginning after 1993. Compensation which is payable pursuant to
written binding agreements entered into before February 18, 1993 and
compensation which constitutes "performance based compensation" is excludable in
applying the $1 million limit. It is the Company's policy to qualify the
compensation paid to its top executives for deductibility under the new law in
order to maximize the Company's income tax deductions. Based upon the Internal
Revenue Service's regulations and projected compensation payable to the
Company's "covered employees" for the 1996 taxable year, all compensation
payable by the Company in 1996 to such covered employees should be deductible by
the Company.
Base Salaries
In determining base salaries for executive officers, the Committee
reviews external comparative data and also receives recommendations from
management. The Committee bases its decisions on such data, as well as internal
salary comparisons and individual performance evaluations. Under this system,
salary increases have generally the same effect as a cost of living adjustment,
although increases are not expressly tied to any cost of living indicator.
Increases are awarded, however, only to those executives who are performing at a
satisfactory level or above. The Company's philosophy is that the base salary
taken alone is generally lower than salary levels at comparable companies. Thus,
executives are required to earn awards under the "at-risk" portions of the
compensation program described below in order to reach a competitive
compensation level.
5
<PAGE> 8
Lump Sum Distributions
Under traditional compensation systems, merit compensation increases
are made through increases in base pay. Under such systems, once the merit
component has been earned it is included in base salary going forward and
becomes a permanent part of cash compensation. In 1990, the Company instituted a
different system in which the merit component of compensation for employees was
divided into a base salary increase (discussed above) and a lump sum
distribution awarded annually.
The lump sum distribution is delivered apart from base salary in a
separate annual check and must be re- earned by employees each year. The Company
believes that this lump sum distribution system emphasizes a performance culture
and provides a more direct link between employee compensation and performance.
The system also allows the Company to create greater differences in employee
compensation based upon performance. The relationship of pay to performance is
further strengthened by the high visibility of the lump sum distribution.
Lump sum distributions are paid in October of each year based upon the
employee performance reviews. Determinations as to whether an employee has
earned a lump sum distribution are not tied directly to Company performance.
Employees have no entitlement to receive a lump sum distribution. Accordingly,
the decision as to whether or not to make a lump sum distribution is impacted by
the overall performance of the Company.
Executive Bonus Plan
In addition to base compensation and lump sum distributions, executives
are eligible to participate in the Company's Executive Bonus Plan. Under the
Executive Bonus Plan, the Committee has set threshold levels of net after tax
profit, exclusive of extraordinary items, for 1995 and 1996. No bonus awards are
made for any year in which the Company does not meet the threshold profitability
level. The amount of the bonus pool is based on a percentage of the Company's
net after tax profits above the profitability thresholds and shall not cause the
net after tax profit to fall below the threshold after computation of the bonus
pool. During each year of the Executive Bonus Plan, the Company's research and
development budget must be maintained at a level to ensure that the Company's
new product development is sufficient to keep it competitive in its marketplace,
and continuation engineering sufficient to maintain the Company's existing
products must also be maintained. The Committee retains discretion to adjust the
bonus pool and awards based upon extraordinary circumstances and other criteria
as determined by the Committee.
Individual awards under the Executive Bonus Plan are determined by the
size of the bonus pool and individual performance of the executive. The
Committee has structured the Executive Bonus Plan so that award potential is
consistent with competitive norms and potentially represents a significant
percentage of the executive's overall compensation in any given year. Awards are
paid after completion of the Company's audited financial statements for that
year.
The Company did not meet the profitability threshold under the
Executive Bonus Plan for 1995. Accordingly, no awards were made with respect to
1995.
Stock Options
The Committee believes that grants of stock options serve to align the
interests of executive officers with shareholder value. The number of stock
options granted takes into account the recipient's position and is intended to
recognize different levels of responsibility. In determining the level of stock
option grants, the Committee also considers competitive practices. As a result,
grants may vary from year to year. No stock options or stock appreciation rights
were granted to any of the Named Executive Officers in 1995.
EXECUTIVE COMPENSATION COMMITTEE
Theodore A. Johnson, Martin J. O'Meara, Jr.
Chairman
Sir Michael G.R. Sandberg Chan Kien Sing
April 12, 1996
6
<PAGE> 9
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following table shows, for the years ended December 31, 1995, 1994
and 1993, the compensation earned by the president and the four most highly
compensated executive officers of the Company (the "Named Executive Officers")
in 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
Name and
Principal Number of All Other
Position(s) Year Salary (1) Bonus (2) Options (3) Compensation (4)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Frederick A. Brunn, 1995 $140,915 $ 0 0 $3,834
President 1994 $144,263 $17,161 25,000 $6,862
1993 $113,560 $ 9,012 20,000 $5,678
- ---------------------------------------------------------------------------------------------------
M. Mark Michalko 1995 $122,600 $ 0 0 N/A
Executive Vice President (5) 1994 $ 91,895 $ 4,017 40,000 N/A
1993 N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------
Lennart K. Sundin, 1995 $120,140 $ 0 0 $3,334
Senior Vice President, 1994 $124,848 $12,698 5,000 $5,772
Marketing and Sales 1993 $112,978 $ 8,966 20,000 $5,649
- ---------------------------------------------------------------------------------------------------
William A. Hainke 1995 $ 99,418 $ 0 0 $2,738
Chief Financial Officer, 1994 $104,059 $ 5,713 0 $4,761
Corporate Secretary and 1993 $ 87,127 $ 2,153 20,000 $4,722
Treasurer
- ---------------------------------------------------------------------------------------------------
Timothy R. Groth 1995 $ 94,115 $ 0 0 N/A
Vice President, (5) 1994 $ 17,987 $ 0 15,000 N/A
Technical Operations 1993 N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Perquisites for each Named Executive Officer in 1995, 1994, and 1993
are included under Salary and did not exceed the lesser of $50,000 or
10% of the total salary and bonus for any such officer.
(2) Amounts reflect lump sum distributions paid in October 1994 and 1993.
(3) All awards are incentive stock options, granted pursuant to the
Company's 1986, 1988 and 1990 Employee Stock Option Plans.
(4) All payouts are Company matching contributions to the Employee Stock
Bonus Plan (401(k) plan).
(5) Salaries shown for 1994 reflect partial-year salaries from date of
employment.
7
<PAGE> 10
STOCK OPTION HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning unexercised stock options held as of December 31,
1995. There were no stock option exercises in 1995 and there were no
unexercised, in-the-money stock options at December 31, 1995.
UNEXERCISED OPTIONS
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED
OPTIONS AT
DECEMBER 31, 1995
-----------------
Name Exercisable Unexercisable
- -----------------------------------------------------------------------------------
<S> <C> <C>
Frederick A. Brunn 57,500 31,250
- -----------------------------------------------------------------------------------
M. Mark Michalko 10,000 30,000
- -----------------------------------------------------------------------------------
Lennart K. Sundin 16,250 15,000
- -----------------------------------------------------------------------------------
William A. Hainke 25,000 15,000
- -----------------------------------------------------------------------------------
Timothy R. Groth 3,750 11,250
- -----------------------------------------------------------------------------------
</TABLE>
Note: Stock options were issued under any of the Company's Employee Stock Option
Plans and are exercisable starting one year after the grant date, with 25% of
the shares covered thereby becoming exercisable at that date and an additional
25% of the shares becoming exercisable on each successive anniversary date, with
full vesting occurring on the fourth anniversary date.
OTHER MATTERS
The Company believes that during 1995 its officers and directors
complied with all filing requirements under Section16(a) of the Securities
Exchange Act of 1934.
All shareholders of record at the close of business on April 12, 1996,
the record date for the determination of shareholders entitled to vote at the
Annual Meeting, have been sent or are currently being sent a copy of the
Company's Annual Report, including financial statements for the year ended
December 31, 1995.
The expense of preparing, printing and mailing the Notice of Annual
Meeting and proxy material and all other expenses of soliciting proxies will be
borne by the Company. In addition to the solicitation of proxies by use of the
mails, the directors, officers and regular employees of the Company, who will
receive no compensation in addition to regular salary, may solicit proxies by
mail, telegraph, telephone, or personal interview. The Company may also
reimburse brokerage firms, banks, trustees, nominees and other persons for their
expenses in forwarding proxy material to the beneficial owners of shares held by
them of record.
The Management knows of no business which will be presented for
consideration at the Annual Meeting other than that stated in the Notice of
Annual Meeting. However, if any such matter shall properly come before the
meeting, the persons named in the enclosed proxy form will vote the same in
accordance with their best judgement.
Shareholder proposals for presentation at the 1997Annual Meeting must
be received by the Company no later than December 31, 1996 to be considered for
inclusion in the 1997 proxy and proxy statement.
By order of the Board of Directors,
/s/ WILLIAM A. HAINKE
-----------------------------------
William A. Hainke
Corporate Secretary
Carlsbad, California
8
<PAGE> 11
<TABLE>
<CAPTION>
Research Data Group Total Return - Data Summary
Cumulative Total Return
----------------------------------------
12/90 12/91 12/92 12/93 12/94 12/95
<S> <C> <C> <C> <C> <C> <C> <C>
Intl Lottery & Totalizator ITSI 100 110 239 806 132 71
PEER GROUP PPEER1 100 129 116 101 59 57
S & P SMALLCAP 600 I600 100 148 180 213 203 264
</TABLE>
<PAGE> 12
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.
The undersigned hereby appoints Frederick A. Brunn and William A. Hainke
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote as designated on the other side,
all the shares of stock of International Lottery & Totalizator Systems, Inc.,
standing in the name of the undersigned with all powers which the undersigned
would possess if present at the Annual Meeting of Shareholders to be held June
6, 1996 or any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 13
Please mark your votes as indicated in this example. /X/
The Board of Directors recommends a vote FOR Item 1.
WITHHELD
FOR FOR ALL
Item 1 - ELECTION OF DIRECTORS Nominees:
Frederick A. Brunn Martin J. O'Meara, Jr. / / / /
Chan Kien Sing Ng Aik Chin
Theodore A. Johnson Ng Foo Leong
M. Mark Michalko Sir Michael G.R. Sandberg
WITHHELD FOR: (Write that nominee's name in the space provided below).
Item 2 - In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Signature(s)____________________________________________________________________
Date________________ NOTE: Please sign as name appears hereon. Joint owners
should each sign. When signing as attorney, executor, administrator trustee or
guardian, please give full title as such.
- FOLD AND DETACH HERE -
