Rodolfo Ma. A. Ponferrada

003962 dated 10 November 2005) 2. e-Casino Filipino (Registration No. 4-2004-003963 dated 10 November 2005) 3. Playaway and device (Registration No. 4...

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18 October 2012

PHILIPPINE STOCK EXCHANGE 3rd Floor, Philippine Stock Exchange Plaza Ayala Triangle, Ayala Avenue Makati City Attention:

Ms. JANET A. ENCARNACION Head, Disclosure Department

Ladies and Gentlemen: Re: 2011 Annual Report (SEC Form 17-A) This refers to the Amended 2011 Annual Report of Philweb Corporation (“WEB” or the “Corporation”) that we filed with the Securities and Exchange Commission (“SEC”) in compliance with the letter dated 2 May 2012 of the Corporation Finance Department of the SEC. For your guidance, enclosed is a table of the changes that were introduced in the said report. Enclosed as well are the cover letter the Corporation filed with the SEC, the amended report, and the 2011 Audited Financial Statements of the Corporation

Very truly yours,

Rodolfo Ma. A. Ponferrada Corporate Information Officer

The Penthouse Alphaland Southgate Tower 2258 Chino Roces Avenue corner EDSA Makati City

SEC Comments

PhilWeb Reply

(2) BUSINESS OF ISSUER (a) Business of Issuer : This section shall describe in detail what business the registrant does and proposes to do, including what products or goods are or will be or services that are or will be extent material to an understanding of the registrant. Percentage of sales or revenues and net income contributed With only few months of operations for PWAP, it contributed by foreign sales (broken down into major markets such as 3% of the total annual revenue in 2011. Western Europe, Southeast Asia, etc.) for each of the last three years.

Status of any publicly-announced new product or service (e.g. whether in the planning stage, whether prototypes exist), the degree to which product design has progressed or whether further engineering is necessary. Indicate if completion of development of the product would require a material amount of the resources of the registrant and the estimated amount;

Product design and mechanics is different per country depending upon the market need. There is no engineering or material investments necessary for further product development.

Competition. Describe the industry in which the registrant is selling or expects to sell its products or services, and where applicable, any recognized trends within that industry. Describe the part of the industry and geographic area in which the business competes or will compete. Identify the principal methods of competition (price, service, warranty or product performance). Name the principal competitors that the registrant has or expects to have in its area of competition. Indicate the relative size and financial and market strengths of the registration’s competitors. State why the registrant believes that it can effectively compete with other companies in its area of competition.

The Company is the first and largest Internet gaming company in the Philippines. It is the dominant technologybased gaming firm listed on the Philippine Stock Exchange. The Company excels in the gaming industry by providing superior and innovative products with the highest standards of customer service. It establishes strategic partnerships to ensure a fair, secure and legal gaming experience for the customers. The Company creates a rewarding and dynamic work environment where it attracts, retains and motivates highly competent, passionate and innovative people, and delivers above-market value for its shareholders.

Disclose how dependent the business is upon a single No PeGS operators accounts for a major portion or 20% or customer or a few customers, the loss of any or more of more of the revenues of the Company. which would have a material adverse effect on the registrant and its subsidiaries taken as a whole. Identify any customer that accounts for, or based upon existing orders will account for, twenty percent (20%) or more of the registrant’s sales; Describe any major existing sales contracts;

Summarize the principal terms and expiration dates of all patens, trademarks, copyrights, licenses, franchises, concessions, and royalty agreements held; Indicate the extent to which the registrant’s operation depend, or are expected to depend, on the foregoing and what steps are undertaken to secure these rights; 1.

Patents, Trademarks, Licenses, Franchises, Concessions, and Royalty Agreements The Company has the following trademarks registered with the Intellectual Property Office (IPO) of the Philippines: Basketball Jackpot and device (Registration No. 4-2004-

003962 dated 10 November 2005) 2. e-Casino Filipino (Registration No. 4-2004-003963 dated 10 November 2005) 3. Playaway and device (Registration No. 4-2005-010481 dated 25 June 2007) 4. PhilWeb Corporation (Registration No. 4-2007-001914 dated 13 August 2007) 5. e-pitaka and device (Registration No. 4-2007-003086 dated 13 August 2007) 6. TV Sabong (Registration No. 4-2006-003973 dated 11 February 2008) 7. Premyo sa Resibo and device (Registration No. 4-2006007828 dated 3 September 2007) 8. Wannabet and device (Registration No. 4-2007-005623 dated 14 April 2008) 9. Txtingo 7 (Registration No. 4-2007-006258 dated 11 November 2007) 10. Txtingo Super 5 and device (Registration No. 4-2008-013452 dated 4 May 2009)

Moreover, the Company also registered the following copyrights with the National Library: 1. Premyo Sa Resibo (Registration No. 0-2006-174 dated 26 May 2006) 2. BasketballJackpot.net Program Source Code (Registration No. 0-2006-3055 dated 20 October 2006) 3. Txtingo Super Singko Program Source Code (Registration No. 0-2008-393 dated 17 October 2008) 4. Resibonanza Program Source Code (Registration No. 0-2009159 dated 12 March 2009) 5. Station Manager PAGCOR E-Games Station POS System Source Code (Registration No. N2010-23 dated 19 February 2010) 6. PAGCOR E-City POS Station Manager Source Code (Registration No. N 2010-118 dated 1 October 2010) Pending Applications for Registration of Trademarks The Company has five pending trademarks applications with the IPO: 1. 2. 3. 4. 5. 6. State the number of the registrant’s present employees and number of employees it anticipates to have within the

BigGame Inc and device (Application No. 4-2007-012198) Stylized Bidwars and device (Application No. 4-2009-005479) Gold Master Brand Logo (Application No. 4-2011-003790) Gold Lotto 4/38 (Application No. 4-2011-003788) e-Games (Application No. 4-2011-003789) The Company currently has 224 employees broken down as follows: 107 rank and file, 36 supervisors, 54 managers, 27

ensuring twelve (12) months. Indicate the no. by type of employee (i.e. clerical, operations, administrative, etc.) Wether or not any of them are subject to Collective Bargaining Agreements (CBA) and the expiration dates of CBA. If the registrant’s employees are on strike, or have been in the past three (3) years, incentive arrangements the registrant has or will have with it employees.

executives. There is no union and neither is there a collective bargaining agreement with its employees. There have been no strikes or threats to strike in the past three years. Supplemental benefits given to employees include stock option plan to qualified employees, among others. The Company does not expect any material change in the number of its employees over the next 12 months.

Discuss the major risk/s involved in each of the businesses of There are no major risks involved in each of the business of the company and subsidiaries. Include a disclosure of the the Company and its subsidiaries. procedures being undertaken to identify, assess and manage such risks.

3. DIVIDENDS (b)

Describe any Dividends restrictions that limit the ability to pay dividends on common equity or that are likely to do so in the future. PhilWeb declared a cash dividend of P0.10 per share which was paid on May 13, 2011 to the holders of common stock of record as of April 28, 2011. PhilWeb again declared a cash dividend of P0.10 per share which was paid on October 4, 2011 to the holders of common stock of record as of September 20, 2011. The Company’s future retained earnings corresponding to undistributed equity in net earnings are not available for dividend distribution until declared by the affiliates. There are no restriction on the Company that limit the payment of dividends on common shares.

ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS For both full fiscal years and interim periods, disclose the company’s and its majority-owned subsidiaries’ top five (5) key performance indicators. It shall include a discussion of the manner by which the company calculates or identifies the indicators presented on a comparable basis.

The current capitalization of the Company, and expected future revenues from its various Internet gaming activities are projected to sufficiently meet the Company’s current operating cash requirements. The Company does not expect to conduct any material product research and development in the foreseeable future. No extraordinary purchase or sale of plant and equipment are expected beyond those in the regular course of the Company’s operations. All purchases will be financed through internally-generated funds and existing capitalization, except for the limited leasing facilities that may be utilized for the above-mentioned purchases. Hiring of employees will continue in the regular course of

business. There are no known trends, events or uncertainties that are reasonably expected to have a material impact on the Company’s revenues or continuing operations. There are no significant elements of income or loss that has not been disclosed. The Company’s key performance indicators for the first three months of 2011 are the following: 1.) The Company’s Net Income margin for the aforementioned period was at 63%. This was computed as Net Income of P173,748,914 divided by Net Revenues of P273,816,422.

2.) Current ratio was at 13:1.00 computed as Current Assets of P1,815,041,379 divided by Current Liabilities of P132,075,976.

3.) Debt to equity ratio was at 0.06:1.00, computed as Total Liabilities of P179,050,573 divided by Total Stockholders’ Equity of P2,750,260,485.

4.) The increase in revenues in 2010 was 15%. It was computed by dividing the difference between 2011 and 2010 Revenue by 2010 Revenue.

5.) Operating Income margin was 60%, which was computed as Operating Income of P165,742,969 divided by Net Revenues of P273,816,422.

The Company’s key performance indicators for the first three months of 2010 are the following: 1.) The Company’s Net Income margin for the aforementioned period was at 63%. This was computed as Net Income of P150,238,232 divided by Net Revenues of P238,519,083.

2.) Current ratio was at 3.06:1.00 computed as current assets of P1,566,362,823 divided by current liabilities of P511,829,312.

3.) Debt to equity ratio was at 0.25:1.00, computed as

total liabilities of P518,652,956 divided by total stockholders’ Equity of P2,107,898,008.

4.) The increase in revenues in 2010 was 42%. It was computed by dividing the difference between 2010 and 2009 Revenue by 2009 Revenue.

5.) The operating income margin was 61%, which was computed as operating income of P146,315,965 divided by net revenues of P238,519,083.

The Company’s key performance indicators for the first half of 2011 are the following: 1.) The Company’s Net Income margin for the aforementioned period was at 66%. This was computed as Net Income of P370,433,262 divided by Net Revenues of P557,039,667. 2.) Current ratio was at 15.2:1.00 computed as Current Assets of P1,885,675,844 divided by Current Liabilities of P123,971,904.

3.) Debt to equity ratio was at 0.06:1.00, computed as Total Liabilities of P175,096,501 divided by Total Stockholders’ Equity of P2,820,788,686.

4.) The increase in revenues in 2010 was 10%. It was computed by dividing the difference between 2011 and 2010 Revenue by 2010 Revenue.

5.) Operating Income margin was 61%, which was computed as Operating Income of P339,172,801 divided by Net Revenues of P557,039,667.

The Company’s key performance indicators for the first half of 2010 are the following: 1.) The Company’s Net Income margin for the aforementioned period was at 64%. This was computed as Net Income of P322,364,221 divided by Net Revenues of P507,730,620.

2.) Current ratio was at 3.28:1.00 computed as current assets of P1,752,532,798 divided by current liabilities

of P533,697,706.

3.) Debt to equity ratio was at 0.24:1.00, computed as total liabilities of P540,597,600 divided by total stockholders’ Equity of P2,280,023,997.

4.) The increase in revenues in 2010 was 40%. It was computed by dividing the difference between 2010 and 2009 Revenue by 2009 Revenue.

5.) The operating income margin was 61%, which was computed as operating income of P308,442,063 divided by net revenues of P507,730,620.

The Company’s key performance indicators for the first nine months of 2011 are the following: 1.) The Company’s Net Income margin for the aforementioned period was at 66%. This was computed as Net Income of P548,460,280 divided by Net Revenues of P831,531,819.

2.) Current ratio was at 7.20:1.00 computed as Current Assets of P2,113,972,162 divided by Current Liabilities of P293,492,875.

3.) Debt to equity ratio was at 0.12:1.00, computed as Total Liabilities of P348,242,472 divided by Total Stockholders’ Equity of P2,872,660,659.

4.) The increase in revenues in 2010 was 10%. It was computed by dividing the difference between 2011 and 2010 Revenue by 2010 Revenue.

5.) Operating Income margin was 61%, which was computed as Operating Income of P506,248,114 divided by Net Revenues of P831,531,819.

The Company’s key performance indicators for the first nine months of 2010 are the following: 1.) The Company’s Net Income margin for the aforementioned period was at 63%. This was

computed as Net Income of P477,333,966 divided by Net Revenues of P754,500,903.

2.) Current ratio was at 6.25:1.00 computed as Current Assets of P1,534,238,818 divided by Current Liabilities of P245,183,775.

3.) Debt to Equity ratio was at 0.10:1.00, computed as Total Liabilities of P253,283,669 divided by Total Stockholders’ Equity of P2,335,153,480.

4.) The increase in revenues in 2010 was 30%. It was computed by dividing the difference between 2010 and 2009 Revenue by 2009 Revenue.

5.) The Operating Income margin was 58%, which was computed as Operating Income of P440,376,862 divided by Net Revenues of P754,500,903. (i) Any known trends or any demands, commitments, There were no known trends, events or uncertainties that will events or uncertainties that will result in or that are reasonably have material impact on the Company’s liquidity. likely to result in the registrant’s liquidity increasing or decreasing in any material way. The registrant shall indicate balance sheet conditions or income or cash flow items that it believes may be indicators of its liquidity condition. The following conditions shall be indicated: whether or not the registrant is having or anticipates having within the next 12 months any cash flow or liquidity problems; whether or not the registrant is in default or breach of any note, loan, lease or other indebtedness or financing arrangement requiring it to make payments; whether or not a significant amount of the registrant’s trade payables have not been paid within the stated trade terms. If a material deficiency is identified, the course of action that the registrant has taken or proposes to take to remedy the deficiency should also be indicated. The registrant should identify and separately describe internal and external sources of liquidity and briefly discuss any sources of liquid assets used. (ii) Any events that will trigger direct or contingent There were no events that will trigger direct or contingent financial obligation that is material to the company, including financial obligation that is material to the Company, including any default or acceleration of an obligation; any default or acceleration of an obligation. (iii) All material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the company with unconsolidated entities or other persons created during the reporting period.

There were no material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons created during the reporting period.

(iv) Any material commitments for capital expenditures, The current capitalization of the Company, and expected the general purpose of such commitments, and the expected future revenues from its various activities are projected to sources of funds for such expenditures should be described; sufficiently meet the Company’s operating cash requirements. (v) Any known trends, events or uncertainties that have had or that are reasonably expected to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations should be described. If the registrant know of events that will cause a material change in the relationship between costs and revenues (such as known future increases in cost of labor or materials or price increases or inventory adjustments), the change in the relationship shall be disclosed.

No extraordinary purchase of plant and equipment are expected beyond those in the regular course of the Company’s operations. There were no known trends, events or uncertainties that have had or that are reasonably expected to have a material impact on the Company’s revenues or continuing operations.

(vi) Any significant elements of income or loss that did not There are no significant elements of income that did not arise arise from the registrant’s continuing operations; from the Company’s continuing operations. (vii) The causes for any material change from period to There were no known causes for any material changes from period which shall include vertical and horizontal analyses of period to period of financial statements, which shall include any material item; vertical and horizontal analyses of any material item. (viii) Any seasonal aspects that had a material effect on the There are no seasonal aspects that have material effect on financial condition or results of operations. the Company’s financial condition or results of operation. (a) Under the caption Audit and Audit-Related Fees, the aggregate fees billed for each of the last two (2) fiscal years for There were neither changes in nor disagreements with accountants on accounting/ financial disclosure. professional services rendered by the external auditor for: 1. The audit of the registrant’s annual financial Audit fees in relation with the services rendered for the statements or services that are normally provided by the examination and preparation of the Company’s financial external auditor in connection with statutory and regulatory statements for the last three years were as follows: filing or engagements for those fiscal years; Year Amount

2. Other assurance and related services by the external auditor that are reasonably related to the performance of the audit or review of the registrant’s financial statements. The registrant shall describe the nature of the services comprising the fees disclosed under this category

2011

P 869,300.00

2010

P 813,000.00

2009

P 680,000.00

The auditor of the Company conducted its audit in accordance with the auditing standards generally accepted in the Philippines with the objective of expressing an opinion as to whether the presentation of the financial statements, taken as a whole conforms with the accounting principles generally accepted in the Philippines. They performed tests of the accounting records and such other procedures, as they considered necessary in the circumstances to provide a reasonable basis for an opinion on the financial statements.

They also assessed the accounting principles used and significant estimates made by the management and evaluated overall financial statements presentation.

(b) Under the caption “Tax Fees”, the aggregate fees billed in each of the last two (2) fiscal years for professional services rendered by the external auditor for tax accounting, compliance, advice, planning and any other form of tax services. Registrant shall describe the nature of the services comprising the fees disclosed under this category.

The auditor also considered the Company’s internal control in order to determine the nature, timing and extent of the audit procedures for the purpose of expressing an opinion on the financial statements. There were no additional fees related to this.

(c) Under the caption “All Other Fees”, the aggregate fees There were no products and services provided by the external billed in each of the last two (2) fiscal years for products and auditor other than the services reported under the above services provided by the external auditor, other than the items. services reported under items (a) & (b) above. Registrants shall describe the nature of the services comprising the fees disclosed under this category; (d) The audit committee’s procedures for the above services

approval

policies

and There are no approved policies and procedures from the Audit Committee regarding the above services of the external auditor.

FAMILY RELATIONSHIP Describe any family relationships up to the fourth civil degree Messrs. Eric O. Recto, Dennis O. Valdes and Rafael G. Ongpin either by consanguinity or affinity among directors, executive are nephews of Mr. Roberto V. Ongpin. officers or persons nominated or chosen by the registrant to become directors or executive officers.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS (Occurred during the past 5 years and material to evaluation) Describe any of the following events that occurred during the past five (5) years up to the latest date that are material to an evaluation of the ability or integrity of any director, any nominee for election as director, executive officers, underwriter or control person of the registrant:

On 5 August 2011, the Development Bank of the Philippines (DBP) filed a case against Mr. Roberto V. Ongpin (RVO) and twenty-seven other individuals before the Office of the Ombudsman (docketed as OMB Case No. C-C-11-0492) in connection with certain loan and share purchase transactions RVO had with DBP in 2009. The matter is still pending. On 7 December 2011, Atty. Mario Ongkiko filed a "derivative suit" against RVO and other companies beneficially owned by RVO before the Regional Trial Court of Pasig City (docketed as SEC Case No. 11-166) in connection with Section 23.2 of the Securities Regulation Code. The matter is also pending. In any event, the counsel of RVO has advised him that the first case “will not prosper” and the second case “is baseless and will be eventually dismissed for lack of merit and/or for being a mere harassment suit.” Other than the foregoing, the Company is not aware that any of its directors and officers is involved in the past five years up to the date of the filing of this Statement in any

bankruptcy proceeding. Neither have they been convicted by final judgment in any criminal proceeding, nor been subject to any order, judgment or decree of competent jurisdiction, permanently enjoining, barring, suspending, or otherwise limiting their involvement in any type of business, securities, commodities or banking activities, nor found in action by any court or administrative body to have violated a securities or commodities law.

(2) Summary Compensation Table The information specified in paragraph (B)(2)(b), concerning the compensation of the named executive officers, and in the aggregate as to all officers and directors as a group, shall be supplied for each of the registrant’s last two completed fiscal years, and shall be provided in Summary Compensation Table.

Annual Compensation

(a)

(b)

(c)

(d)

(e)

Name and Principal Position Year Salary Bonus Other Annual Comp. 1. Roberto V. Ongpin Chairman (elected January 18, 2000)

2. Eric O. Recto Vice Chairman (elected May 31, 2005)

3. Dennis O. Valdes President (elected in July 2006)

4. Antonio K. Garcia Senior Vice President (effective February 2010)

5. Brian K Ng Senior Vice President (effective January 2011)

6. Rafael G. Ongpin Senior Vice President (effective November 2006)

7. Zaldy M. Prieto Senior Vice President & CFO (effective November 2008)

8. Ferdimark L. Mariano Vice President (effective January 2011)

9. Cliburn Anthony A. Orbe Vice President (effective June 2006)

10. Raymund S. Aquino Assistant Vice President (effective February 2010)

11. Samuel A. Dela Cuesta Assistant Vice President (effective June 2011)

12. Ronald M. Cuevas Assistant Vice President (effective September 2011)

13. Teresita R. Gonzales Assistant Vice President (effective April 2011)

14. Alexander Manabal Assistant Vice President (effective August 2009)

15. Benjamin G. Parungo Assistant Vice President

(effective August 2011)

16. Paulo J. Perez Assistant Vice President (effective September 2011)

17. Gina D. Pinza Assistant Vice President (effective October 2011)

18. Anthony San Pedro Assistant Vice President (effective March 2010)

19. Mazy V. Tayamen Assistant Vice President (effective October 2008)

20. Carla Maria S. Vargas-Nuyda Assistant Vice President (effective February 2010)

Aggregate Compensation of the CEO & Five Most Highly-Paid Executives 2009

13 ,775,700

1,474,400

688,785

2010

15,153,270

1,621,840

757,663

2011

19,612,000

1,634,333

662,000

2012

21,180,600

2,302,650

695,100

All Officers and Directors as a Group Unnamed

2009

18,285,600

1,798,600

1,280,000

2010

20,114,160

1,978,460

1,408,000

2011

38,269,000

3,189,083

1,178,000

2012

43,785,000

3,648,750

1,236,900

PART IV. CORPORATE GOVERNANCE The following information, as declared and approved by the Board of Directors of the company, shall be discussed:

(a) The evaluation system established by the company to measure or determine the level of compliance of the Board of The Company through its Compliance Officer Atty. Cliburn Directors and top-level management with its Manual of Anthony A. Orbe, has monitored the Company’s compliance with SEC Memorandum Circular No. 2 dated April 15, 2002 Corporate Governance; and the relevant SEC Circulars on Corporate Governance and noted that no substantive or major deviations occurred. The Company’s directors and officers have complied with the practice and policies contained in the Company’s Manual on Corporate Governance. The Company has submitted its selfrating performance assessment sheet in compliance with SEC requirements. All of the Company’s directors and officers attended a seminar on corporate governance. The Company’s new directors will be encouraged to attend seminars as well. (b) Measures being undertaken by the company to fully comply with the adopted leading practices on good corporate The Company’s Board of Directors and officers have been properly briefed on their specific responsibilities as embodied governance; on the Manual on Corporate Governance. The compliance officer monitors the Company’s compliance with the provisions and requirements of the manual and determines violations if any. (c) Any deviation from the company’s Manual of Corporate Governance. It shall include a disclosure of the There were no deviations made from the adopted Manual on name and position of the person/s involved, and the Corporate Governance. sanction/s imposed on said individual; (d) Any plan to improve corporate governance of the The Company’s management considers its Manual on company. Corporate Governance sufficient and believes that there is no need to amend it. It ensures that the provisions of the manual are properly implemented.