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Message from the Chairman and President

We take pride in writing this summary of 2014 to you, our shareholders. Once again, your Company has delivered remarkable financial performance in the face of great challenges.

Net Income for the year more than quadrupled to P904 million from P203 million a year ago. This feat was attained even as the number of PAGCOR e-Games outlets grew by only six new approvals to a total of 305 at year end. Instead of focusing on new sites, our Casino group improved and expanded existing sites, growing the number of gaming terminals to a total of 8,193 versus 7,638 the year before, a 7.3% growth rate. Site renovations pushed up our revenue figures even more dramatically, as more players enjoyed our offerings and spent more in the outlets, resulting in total Revenue of P1.64 billion, a 9.8% growth versus 2013’s revenue of P1.49 billion.

On an EBITDA basis, the results are just as excellent. We ended the year with P1.18 billion in EBITDA, a 19.3% improvement on 2013. Our strong cash flows enabled us to pare down our debt levels by P500 million. With continued robust cash flows in 2015, we expect to pare down debt by another P500 million this year, and will be debt free by early 2016.

We also used cash to pay dividends, with quarterly payments of P0.10 per share each, for a total of P469 million in cash paid to you, our stockholders, in 2014. In January this year, we declared our first dividend for 2015, this one a 50% increase to P0.15 per share. With our stock price averaging around P12.50 per share, continuing this dividend trend would result in a 4.8% Dividend Indicated Gross Yield, clearly much better than most financial instruments available in the market today. We believe that your Company remains a valuable stock to own on the Philippine Stock Exchange, one with solid financial performance and the added potential for price appreciation.

As we wrote last year, all our e-Games patrons are now full-fledged, card-carrying members, with everyone having given appropriate identification details to obtain membership. We have over 70,000 members nationwide who enjoy the gaming and sports betting offerings in our e-Games outlets.

This year, these accounts will be enabled into electronic wallets, and members will have the added convenience of being able to keep with gaming funds for e-Games as e-money, all accounted for by us. This enhancement will better enable us to reward our loyal customers and focus all our marketing on player development.

In 2014, the e-Games network grew by 7.7% to a Total Casino Win of P5.43 billion, with a winning percentage of 3.94%, an improvement on the previous year’s win rate of 3.79%. Of the Casino Win, a total of P2.15 billion was remitted to PAGCOR, solidifying our position as one of the biggest contributors of revenue to the government, all of which comes with no capital expenditures or operating expenses on their part. As it has for over a decade of e-Games, every peso we give to PAGCOR flows directly to their nation-building efforts.

On the Asia Pacific side of the business, we continue to reassess our commitment to a number of markets. We continue to believe that there are exciting gaming opportunities in the region, but will be more conservative as we move forward in choosing projects that are right for us.

Similarly, we are proceeding cautiously with our e-Magine Gaming terminals business. While we continue to believe there are good opportunities for gaming terminals on a worldwide basis, we also recognize that manufacturing in our country has its own unique challenges, and therefore, we are looking for the cheapest cost manufacturing options available to us. In the interim, we are already rolling out the Genesis terminal, the first e-Magine terminal, for testing in our Big Game e-Games outlets.

Let me end by once again thanking our Board of Directors, which has remained supportive during this challenging year, and you, our shareholders, who have continued to trust us to deliver results. We look forward to continuing to serve you in the years to come.