CONSOLIDATING AND AMENDING PRESIDENTIAL DECREE NOS. 1067-A, 1067-B, 1067-C, 1399 AND 1632, RELATIVE TO THE FRANCHISE AND POWERS OF THE PHILIPPINE AMUSEMENT AND GAMING CORPORATIO…

WHEREAS, Presidential Decree Nos. 1067-A, 1067-B, 1067-C,
1390 and 1632 relative to the Franchise and Powers of the Philippine Amusement
and Gaming Corporation (PAGCOR), were enacted to enable the Government to
regulate and centralize thru an appropriate institution ail games of chance
authorized by existing franchise or permitted by law;

WHEREAS, to facilitate the enforcement and application of
the above-mentioned Presidential Decrees, it is imperative to consolidate them
into one statute;

WHEREAS, since its creation in 1977, PAGCOR has demonstrated
its reliability as a source of income for the Government, particularly for the
funding of government infrastructure projects, such that, as of December 1982,
PAGCOR has generated gross revenue of P1.677 Billion, contributing P956 Million
as the 60% share of the Government plus P83 Million in the form of 5% franchise
tax;

WHEREAS, PAGCOR’s operation has enabled the Government to
identify the potential sources of additional revenue, provided games of
chance are strictly managed and made subject to close scrutiny, regulation,
supervision and control by the Government;

WHEREAS, to make it more dynamic and effective in its tasks,
PAGCOR should now be reorganized by (a) increasing the participation of the
private sector in the subscription of the authorized capital stock of PAGCOR and
by adjusting the share of the Government in the gross earnings to 50%;
provided, that the annual income of the Government is not less than
P150 Million and, if it is less, then the share of the Government shall be 60%
of the gross earnings; (b) providing for a settlement of the portion of the
Government’s share that was utilized for the stabilization of casino operations,
and (c) providing for greater flexibility in operation by limiting governmental
audit only to the determination of the 15% franchise tax and the Government’s
share of 50% of the gross earnings;

WHEREAS, in order to make PAGCOR’s regulatory powers more
effective, it is necessary that businesses primarily engaged in gambling
operations be affiliated with PAGCOR, and become subject to its regulatory
powers with respect to operation, capitalization and organizational
structure;

WHEREAS, under Presidential Decree No. 1416, as amended, the
President of the Philippines is authorized to reorganize the administrative
structure of government offices:

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the Constitution and by
Presidential Decree No. 1416, as amended, do hereby decree;

TITLE I — GENERAL PROVISIONS

SECTION 1. Declaration of Policy. — It is hereby
declared to be the policy of the State to centralize and integrate all games of
chance not heretofore authorized by existing franchises or permitted by law in
order to attain the following objectives:

1. To centralize and integrate the right and authority to operate and conduct
   games of chance into one corporate entity to be controlled, administered and
   supervised by the Government;
2. To establish and operate clubs and casinos, for amusement and recreation,
   including sports gaming pools (basketball, football, lotteries, etc.) and such
   other forms of amusement and recreation including games of chance, which may be
   allowed by law within the territorial jurisdiction of the Philippines and which
   will: (1) generate sources of additional revenue to fund infrastructure and
   socio-civic projects, such as flood control programs , beautification, sewerage
   and sewage projects, Tulungan ng Bayan Centers, Nutritional Programs, Population
   Control and such other essential public services; (2) create recreation and
   integrated facilities which will expand and improve the country’s existing
   tourist attractions; and (3) minimize, if not totally eradicate, the evils,
   malpractices and corruptions that are normally prevalent in the conduct and
   operation of gambling clubs and casinos without direct government
   involvement.

TITLE II — CREATION OF PHILIPPINE AMUSEMENT AND GAMING
CORPORATION

SEC. 2. Philippine Amusement and Gaming Corporation
(PAGCOR), Creation and Purpose. — To implement State policy and pursue the
objectives set forth in the preceding Section, there is hereby created a body
corporate to be known as the Philippine Amusement and Gaming Corporation,
hereinafter referred to as the “Corporation”, which shall have its principal
office in Metropolitan Manila. The Corporation may establish such offices,
agencies, subsidiaries, or branches in the Philippines as its operations would
require and its Board of Directors may determine.

SEC. 3. Corporate Powers. — The Corporation shall
have the following powers and functions, among others:

1. to prescribe its By-Laws;
2. to adopt, alter and use a corporate seal;
3. to own real or personal property, and to sell, alienate, mortgage, encumber
   or otherwise dispose of the same;
4. to make contracts, and to sue and be sued;
5. to employ such officers and personnel as may be necessary or proper to carry
   on its business;
6. to acquire, lease or maintain, whether on land, water or air, personal
   property and such other equipment and facilities as may be necessary or proper
   to carry out its purposes;
7. to import, buy, sell, or otherwise trade or deal in merchandise, goods,
   wares and objects of all kinds and descriptions that may be necessary or proper
   to carry out the purposes for which it has been created;
8. to enter into, make, perform, and carry out contracts of every kind and for
   any lawful purpose pertaining to the business of the Corporation, or in any
   manner incident thereto, as principal, agent or otherwise, with any person,
   firm, association, or corporation.
9. to borrow money from local or foreign sources as may be necessary or proper
   for its operations;
10. to invest its funds as the Corporation may deem necessary or proper in any
    activity related to its principal operation, including in any bonds or
    securities issued or guaranteed by the Government of the Philippines;
11. to perform such other powers and functions as may be provided by
    law; and
12. to do anything and everything necessary, proper, desirable, convenient or
    suitable for the accomplishment, of any of the purposes or the attainment of any
    of the objects or the furtherance of any of the powers herein stated, either
    alone or in’ association with other corporations, firms or individuals, and to
    do every other act or thing incidental, pertaining to, growing out of, or
    connected with, the aforesaid purposes, objects or powers, or any part
    thereof.

SEC. 4. Authorized Capital Stock. — The Corporation
shall have an authorized capital stock divided into one million voting and no
par value shares, to be subscribed, paid for and voted as follows:

1. 550,000 shares of stock to be subscribed to and paid for by the Government
   of the Republic of the Philippines at an original issue value of P200.00 per
   share; and
2. 450,000 shares remaining may be subscribed to by persons or entities
   acceptable to the Board of Directors at issue value to be determined by such
   Board of Directors.

The voting power pertaining to shares of stock subscribed to by the
Government of the Republic of the Philippines shall be vested in the President
of the Philippines or in such person or persons as he may designate.

The voting power pertaining to shares of stock subscribed by private persons
or entities shall be vested in them.

SEC. 5. Government Investment. — The Government
advances to the Corporation authorized on May 29, 1978, having reached the
amount of P70,430,752.03, shall be converted into equity as part of the
investment of the Government to be applied to the subscription of 550,000
shares.

SEC. 6. Board of Directors. — The Corporation shall
be governed and its activities be directed, controlled and managed by a Board of
Directors, hereinafter referred to as the Board, composed of five (5) members,
three (3) of whom shall come from the Government sector and shall be appointed
by the President, while the ether two (2) shall be from the private sector, who
own at least 1 share of stock in the Corporation and who shall be elected by the
stockholders of the corporation in the annual general meeting or in a special
meeting called for such purpose.

Each Director shall serve for a term of one (1) year and until his successor
shall have been duly appointed and qualified.

SEC. 7. Powers, Functions and Duties of the Board of
Directors. — The Board shall have the following powers, functions and
duties;

1. To allocate and distribute, with the approval of the Office of the President
   of the Philippines, the earnings of the Corporation earmarked to finance
   infrastructure and socio-civic projects;
2. To designate the commercial bank that shall act as the depository bank of
   the Corporation and/or trustee of the funds of the Corporation;
3. To prepare and approve at the beginning of each calendar year the budget
   that may be necessary under any franchise granted to it, to insure the smooth
   operation of the Corporation; and to evaluate and approve budgets submitted to
   it by other corporations or entities with which it might have any existing
   contractual arrangement;
4. To submit to the Office of the President of the Philippines before the end
   of February of each year a list of all the infrastructure and/or socio-civic
   projects that might have been financed from the Corporation’s earnings, and to
   submit such periodic or other reports as may be required of it from time to
   time; and
5. To perform such other powers, functions and duties as may be directed and
   authorized by the President of the Philippines or as may be necessary or proper
   for the accomplishment of its purposes and objectives.

TITLE III — AFFILIATION PROVISIONS

SEC. 8. Registration. — All persons primarily
engaged in gambling, together with their allied business, with contract or
franchise from the Corporation, shall register and affiliate their businesses
with the Corporation. The Corporation shall issue the corresponding certificates
of affiliation upon compliance by the registering entity with the promulgated
rules and regulations thereon.

SEC. 9. Regulatory Power. — The Corporation shall
maintain a Registry of the affiliated entities, and shall exercise all the
powers, authority and the responsibilities vested in the Securities and Exchange
Commission over such affiliated entities mentioned under the preceding section,
including but not limited to amendments of Articles of Incorporation and
By-Laws, changes in corporate term, structure, capitalization and other matters
concerning the operation of the affiliating entities, the provisions of the
Corporation Code of the Philippines to the contrary notwithstanding, except only
with respect to original incorporation.

TITLE IV — GRANT OF FRANCHISE

SEC. 10. Nature and term of franchise. — Subject to
the terms and conditions established in this Decree, the Corporation is hereby
granted for a period of twenty-five (25) years, renewable for another
twenty-five (25) years, the rights, privilege and authority to operate and
maintain gambling casinos, clubs, and other recreation or amusement places,
sports, gaming pools, i.e. basketball, football, lotteries, etc. whether on land
or sea, within the territorial jurisdiction of the Republic of the
Philippines.

SEC. 11. Scope of Franchise. — In addition
to the rights and privileges granted it under the preceding Section, this
Franchise shall entitle the Corporation to do and undertake the following:

1. Enter into operating and/or management contracts with any registered and
   accredited company possessing the knowledge, skill, expertise and facilities to
   insure the efficient operation of gambling casinos; provided, that the
   service fees of such management and/or operator companies whose services may be
   retained by the Corporation shall not in the aggregate exceed ten (10%) percent
   of the gross income;
2. Purchase foreign exchange that may be required for the importation of
   equipment, facilities and other gambling paraphernalia indispensably needed or
   useful to insure the successful operation of gambling casinos;
3. Acquire the right of way or access to or thru public land, public waters or
   harbors, including the Manila Bay Area; such right shall include but not be
   limited to the right to lease and/ or purchase public lands, government
   reclaimed lands, as well as lands of private ownership or those leased from the
   Government. This right shall carry with it the privilege of the Corporation to
   utilize piers, quays, boat landings, and such other pertinent and related
   facilities within these specified areas for use as landing, anchoring or
   berthing sites in connection with its authorized casino operations;
4. Build or construct structures, buildings castways, piers, decks, as well as
   any other form of landing and boarding facilities for its floating casinos; and
5. To do and perform such other acts directly related to the efficient and
   successful operation and conduct of games of chance in accordance with existing
   laws and decrees.

SEC. 12. Special Condition of Franchise. — After
deducting five (5%) percent as Franchise Tax, the Fifty (50%) percent share of
the Government in the aggregate gross earnings of the Corporation from this
Franchise shall be immediately set aside and allocated to fund the following
infrastructure and socio-civic projects within the Metropolitan Manila Area:

1. Flood Control
2. Sewerage and Sewage
3. Nutritional Control
4. Population Control
5. Tulungan ng Bayan Centers
6. Beautification
7. Kilusang Kabuhayan at Kaunlaran (KKK) projects; provided, that
   should the aggregate gross earning be less than P150,000,000.00, the amount to
   be allocated to fund the above-mentioned project shall be equivalent to sixty
   (60%) percent of the aggregate gross earning.

In addition to the priority infrastructure and socio-civic projects within
the Metropolitan Manila specifically enumerated above, the share of the
Government in the aggregate gross earnings derived by the Corporate from this
Franchise may also be appropriated and allocated to fund and finance
infrastructure and/or socio-civic projects throughout the Philippines as may be
directed and authorized by the Office of the President of ‘he Philippines.

SEC. 13. Exemptions. —

1. Customs duties, taxes and other imposts on importations. — All
   importations of equipment, vehicles, automobiles, boats, ships, barges, aircraft
   and such other gambling paraphernalia, including accessories or related
   facilities, for the sole and exclusive use of the casinos, the proper and
   efficient management and administration thereof, and such other clubs,
   recreation or amusement places to be established under and by virtue of this
   Franchise shall be exempt from the payment of all kinds of customs duties, taxes
   and other imposts, including all kinds of fees, levies, or charges of any kind
   or nature, whether National or Local.

   Vessels and/or accessory ferry boats imported or to be imported by any
   corporation having existing contractual arrangements with the Corporation, for
   the sole and exclusive use of the casino or to be used to service the operations
   and requirements of the casino, shall likewise be totally exempt from the
   payment of all customs duties, taxes and other imposts, including all kinds of
   fees, levies, assessments or charges of any kind or nature, whether National or
   Local.

2. Income and other taxes. — (a) Franchise Holder: No tax of any kind
   or form, income or otherwise, as well as fees, charges or levies of whatever
   nature, whether National or Local, shall be assessed and collected under this
   Franchise from the Corporation; nor shall any form of tax or charge attach in
   any way to the earnings of the Corporation, except a Franchise Tax of five (5%)
   percent of the gross revenue or earnings derived by the Corporation from its
   operation under this Franchise. Such tax shall be due and payable quarterly to
   the National Government and shall be in lieu of all kinds of taxes, levies, fees
   or assessments of any kind, nature or description, levied, established or
   collected by any municipal, provincial, or national government authority.

   (b) Others: The exemption herein granted for earnings derived from the
   operations conducted under the franchise specifically from the payment of any
   tax, income or otherwise, as well as any form of charges, fees or levies, shall
   inure to the benefit of and extend to corporations(s), associations(s),
   agency(ies), or individuals) with whom the Corporation or operator has any
   contractual relationship in connection with the operations of the casino(s)
   authorized to be conducted under this Franchise and to those receiving
   compensation or other remuneration from the Corporation or operator as a result
   of essential facilities furnished and/or technical services rendered to the
   Corporation or operator.

   The fee or remuneration of foreign entertainers contracted by the Corporation
   or operator in pursuance of this provision shall be free of any tax.

3. Dividend Income. — Notwithstanding any provision of law to the
   contrary, in the event the Corporation should declare a cash dividend, that
   portion of the dividend income corresponding to the participation of the private
   sector shall, as an incentive to the beneficiaries, be subject only to a final
   income tax rate of ten (10%) percent in lieu of the regular income tax rates.
   The dividend income shall not in such case be considered as part of
   beneficiaries’ taxable income; provided, however, that such dividend
   income shall be totally exempted from income or other forms of taxes if invested
   within six (6) months from the date the dividend income is received, in the
   following:

   (a) operation of the casino(s) or investments in any affiliate activity that
   will ultimately redound to the benefit of the Corporation or any other
   corporation with whom the Corporation has any existing arrangements in
   connection with or related to the operations of the casino(s);

   (b) Government bonds, securities, treasury notes, or debentures; or

   (c) BOI — registered or export-oriented corporation(s).

4. Utilization of Foreign Currencies. — The Corporation shall have the
   right and authority, solely and exclusively in connection with the operations of
   the casino(s), to purchase, receive, exchange and disburse foreign exchange,
   subject to the following terms and conditions:

   (a) A specific area in the casino(s) or gaming pit shall be put up solely and
   exclusively for players and patrons utilizing foreign currencies;

   (b) The Corporation shall appoint and designate a duly accredited commercial
   bank agent of the Central Bank, to handle, administer and manage the use of
   foreign currencies in the casino(s);

   (c) The Corporation shall provide an office at casino(s) exclusively for the
   employees of the designated bank, agent of the Central Bank, where the
   Corporation shall maintain a dollar account which will be utilized exclusively
   for the above purpose and the casino dollar treasury employees;

   (d) Only persons with foreign passports or certificates of identity (for Hong
   Kong patron only) duly issued by the government or country of their residence
   will be allowed to play in the foreign exchange gaming pit;

   (e) Only foreign exchange prescribed to form part of the Philippine
   International Reserve and the following foreign exchange currencies: Australian
   Dollar, Singapore Dollar, Hong Kong Dollar, shall be used in this gaming
   pit;

   (f) The disbursement, administration, management and recording of foreign
   exchange currencies used in the casino(s) shall be carried out in accordance
   with existing foreign exchange regulations; and periodical reports of the
   transactions in such foreign exchange currencies by the Corporation shall be
   duly recorded and reported to the Central Bank thru the designated Agent Bank;
   and

   (g) The Corporation shall issue the necessary rules and regulations for the
   guidance and information of players qualified to participate in the foreign
   exchange gaming pit, in order to make certain that the terms and conditions as
   above set forth are strictly complied with.

SEC. 14. Other Conditions. —

1. Place. — The Corporation shall conduct the gambling activities or
   games of chance on land or water within the territorial jurisdiction of the
   Republic of the Philippines. When conducted on water, the Corporation shall have
   the right to dock the floating casino(s) in any part of the Philippines where
   vessels/boats are authorized to dock under the Customs and Maritime Laws.
2. Time. — Gambling activities may be held and conducted at anytime of the day
   or night; provided, however, that in places where curfew hours are
   observed, all players and personnel of the gambling casinos shall remain within
   the premises of the casinos.
3. Persons allowed to play. —

   (a) Tourist and/or foreigners who are not residents of the
   Philippines;
   (b) Residents with a gross income for the previous year of at
   least P50,000.00, which fact shall be certified to by the Bureau of Internal
   Revenue; and
   (c) The number of guests of the above-mentioned qualified
   persons shall be limited to two (2) only; provided, that the said
   guests are at least 21 years of age;

4. Persons not allowed to play. —

   (a) Government officials connected directly with the operation of the
   Government or any of its agencies;
   (b) Members of the Armed Forces of the
   Philippines, including the Army, Navy, Air Force or Constabulary; and
   (c)
   Persons under 21 years of age or students of any school, college or university
   in the Philippines.

   From these are excepted the personnel employed by the casinos, special
   guests, or those who at the discretion of the Management may be allowed to stay
   in the premises.

5. Operation of related services. — The Corporation is authorized to
   operate such necessary and related services, shows and entertainment. Any income
   that, may be realized from these related services shall not be included as part
   of the income of the Corporation for the purpose of applying the franchise tax,
   but the same shall be considered as a separate income of the Corporation and
   shall be subject to income tax.

TITLE V — GOVERNMENT AUDIT

SEC. 15. Auditor. — The Commission on Audit or any
government agency that the Office of the President may designate shall appoint a
representative who shall be the Auditor of the Corporation and such personnel as
may be necessary to assist said representative in the performance of his duties.
The salaries of the Auditor or representative and his staff shall be fixed by
the Chairman of the Commission on Audit or designated government agency, with
the advice of the Board, and said salaries and other expenses shall be paid by
the Corporation. The funds of the Corporation to be covered by the audit shall
be limited to the 5% franchise tax and the 50% of the gross earnings pertaining
to the Government as its share.

TITLE VI — EXEMPTION FROM CIVIL SERVICE LAW

SEC. 16. Exemption. — All position in the
Corporation, whether technical, administrative, professional or managerial are
exempt from the provisions of the Civil Service Law, rules and regulations, and
shall be governed only by the personnel management policies set by the Board of
Directors. All employees of the casinos and related services shall be classified
as “Confidential” appointee.

TITLE VII — TRANSITORY PROVISIONS

SEC. 17. Transitory Provisions. — The properties,
monies, assets, rights, choses in action, obligations, liabilities, records and
contracts of the Philippine

Amusement and Gaming Corporation (PAGCOR) under Presidential Decree Nos.
1067-A, 1067-B, 1067-C, 1399 and 1632 shall continue to be vested in and assumed
by the Corporation, pursuant to this Decree.

Likewise, all personnel of PAGCOR under the above-mentioned Decree shall be
absorbed by the Corporation under this Decree and shall remain in their
respective positions without demotion in rank or reduction in salary:
provided, that employees who shall be separated from the Corporation
shall be given at least one month gratuity for every full year of service, a
fraction of over six months being considered a full year, but in no case more
than twenty-four months salary, in addition to all benefits to which they may be
entitled under existing laws, rules and regulations.

TITLE VIII — REPEALING, SEPARABILITY AND EFFECTIVITY CLAUSES

SEC. 18. Repealing Clause. — All laws, decrees,
executive orders, administrative orders, rules or regulations, inconsistent
herewith are hereby repealed, amended or modified accordingly.

SEC. 19. Separability Clause. — The provisions of
this Decree are hereby declared to be separable, and in the event any one or
more of such provisions are held unconstitutional, the validity of the other
provisions shall not be affected.

SEC. 20. Effectivity. — This Decree shall take
effect immediately.

Done in the City of Manila, this 11th day of July, in the year of Our Lord,
nineteen hundred and eighty-three.