Via ODiSy March 22, 2012 PHILIPPINE STOCK EXCHANGE ... - BDO

Via ODiSyMarch 22, 2012PHILIPPINE STOCK EXCHANGE, INC.Tower One and Exchange PlazaAyala Triangle, Ayala AvenueMakati CityAttention:Ms. Janet A. EncarnacionHead, Disclosures DepartmentMs. Christina Marie C. FortesAnalyst, Disclosure DepartmentRe:SEC Form 17-A (Annual Report)========================Ladies:We hereby transmit with this letter SEC Form 17-A or the Annual Reportof BDO Unibank, Inc., submitted today to the Securities and ExchangeCommission.Thank you.Very truly yours,ELMER B. SERRANOCorporate Information Officer

COVER SHEET3 4 0 0 1S.E.C. Registration NumberB D O U N I B A N K , I N C .(Company’s Full Name)B D O C o r p o r a t e C e n t e r7 8 9 9 M a k a t i A v e n u e M a k a t i C i t y(Business Address: No. Street/ City/ Town/ Province)ATTY. ELMER B. SERRANO 687-1195 to 961 2 3 1Contact PersonSEC 17-ACompany Telephone NumberLast Fridayof MayMonth Day Month DayFiscal Year FORM TYPE Annual MeetingSecondary License Type, If ApplicableCF DDept. Requiring this Doc.Amended Articles Number/SectionTotal Amount of BorrowingsTotal No. of Stockholders Domestic ForeignTo be accompanied by SEC Personnel concernedFile NumberDocument I.D.STAMPS

SEC FORM 17-A

12. Check whether the issuer:(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26and 141 of The Corporation Code of the Philippines during the preceding twelve (12)months (or for such shorter period that the registrant was required to file such reports);Yes [ X ] No [ ](b)has been subject to such filing requirements for the past ninety (90) days.Yes [ X ] No [ ]13. Aggregate market value of the voting stock held by non-affiliates: P39,815,143,195.20

TABLE OF CONTENTSPage No.PART I- BUSINESS AND GENERAL INFORMATIONItem 1 Business 1Item 2 Properties 8Item 3 Legal Proceedings 35Item 4 Submission of Matters to a Vote of Security Holders 36PART II - OPERATIONAL AND FINANCIAL INFORMATIONItem 5 Market for Issuers Common Equity and Related Stockholders36MattersItem 6 Management’s Discussion and Analysis or Plan of Operations 39Item 7 Financial Statements 46Item 8 Changes in and Disagreements with Accountants on Accountingand Financial Disclosures46PART III - CONTROL AND COMPENSATION INFORMATIONItem 9 Directors and Executive Officers of the Issuer 46Item 10 Executive Compensation 67Item 11 Security Ownership of Certain Beneficial Owners and68ManagementItem 12 Certain Relationships and Related Transactions 71PART IV - CORPORATE GOVERNANCEItem 13 Corporate Governance 71PART V - EXHIBITS AND SCHEDULESItem 14 List of Branches, Reports on SEC Form 17-C 72SIGNATURES 77EXHIBITS & ANNEXES

Part I – Business and General informationItem 1. Business1) Business Development(a) Form and Year of OrganizationBDO Unibank, Inc. (BDO or the “Bank”), originally known as Acme Savings Bank, was acquired bythe SM Group in 1976. The SM Group is one of the largest conglomerates in the Philippines, withsubstantial interests in financial services, real estate development, and tourism and entertainment,founded around its core business in commercial centers and retailing. BDO listed its shares on thePhilippine Stock Exchange (PSE) on 21 May 2002.BDO is now the market leader in most of its core business lines following its merger with EquitablePCI Bank (EPCI) in May 2007. The Bank offers a complete array of products and services, i.e.Retail Banking, Lending (Corporate, Commercial, Consumer, and SME), Treasury, Trust, CreditCards, Corporate Cash Management and Remittances. Through its subsidiaries, the Bank offersLeasing and Financing, Investment Banking, Private Banking, Bancassurance, InsuranceBrokerage and Stock Brokerage services. It has one of the largest branch networks, with 744operating branches and 1,596 ATMs 31 December 2011.Over the past several years, the Bank has experienced significant growth. This resulted fromorganic growth arising from a wider array of products and services, as well as through mergers andacquisitions of banks. Sustaining earlier gains, the Bank is currently the largest bank in thePhilippines in terms of assets, loans and deposits as of the end of the fourth quarter of 2011.BDO’s market shares of the commercial banking sector are as follows:• Assets – 16%• Assets Under Management (Trust) – 25%• Customer Loans – 21% and• Deposits – 17%BDO registered a net income of P10.6 billion for the year 2011. Total resources expanded by 10%year-on-year to P1.1 trillion due to the increase in customer receivables. Net Loans and OtherReceivables rose by 19% with gross customer receivables expanding by 24% on sustained loandemand across all market segments. Total Deposit Liabilities went up by 10% on aggressivemarketing efforts and additional branch redeployments. Trust Assets under Management alsoexpanded 25% year-on-year to P711 billion. Meanwhile, Total Equity grew 9% to P97.0 billion.BDO’s diverse subsidiaries and investments in allied undertakings provide an extensive range ofbanking and other financial services. The Bank’s subsidiaries and associates are as follows:SEC FORM 17-A 1

Philippine Subsidiaries% Interest HeldBDO Private Bank, Inc. (BDO Private) 100%BDO Strategic Holdings, Inc. (BDOSHI, formerly EBCII) 100%BDO Leasing and Finance, Inc. 87%BDO Elite Savings Bank, Inc. (formerly GE Money Bank, Inc.) 99%BDO Capital & Investment Corporation (BDO Capital) 100%Equimark – NFC Development Corp. 60%PCIB Securities, Inc. 100%PCI Realty Corporation 100%BDO Insurance Brokers, Inc. (BDOI) 100%PCI Insurance Brokers, Inc. (PCI Insurance) 100%Foreign Subsidiaries% Interest HeldExpress Padala HK Ltd. 100%BDO Remittance (USA), Inc. 100%PCIB Europe, S.P.A 100%Express Padala Frankfurt GmbH 100%Associates% Interest HeldManila North Tollways Corporation (MNTC) 12%SM Keppel Land, Inc. 50%Generali Pilipinas Holdings, Inc. 40%Northpine Land Incorporated 20%Taal Land 33%2) Business of Issuer(i)Principal Products and ServicesDepositsBDO offers a wide array of Peso, Dollar, and Third Currency deposit products and servicescatering to a broad and diversified client base. These products cut across age groups (to includethe young, teen, and senior generations) and customer profiles (such as OFWs and USGovernment pensioners and their beneficiaries). Further details on the Bank’s various depositproducts can be accessed at its website www.bdo.com.ph.Remittance ServicesBDO’s strength in providing top remittance services lies in its extensive international reachspanning Asia, Europe, North America, and the Middle East. On the distribution side, a strongdomestic coverage consisting of the Bank’s wide branch network and remittance partners thatSEC FORM 17-A 2

include, among others, ShoeMart (SM), thrift banks, pawnshops, as well as other financial servicepartners, complements the Bank’s international presence. BDO also has tie-ups with SM and itspartner establishments, as well as food outlets (like Jollibee and Max’s) that provide clients withunique value-added services such as gift and food remittance delivery.Trust ServicesIn addition to investment management and wealth advisory services, BDO offers a good mix ofready-made products such as the Unit Investment Trust Funds (UITFs) for individual and corporateclients; customized portfolios targeted at corporate and institutional accounts; as well asspecialized trust services and directed accounts.Treasury Dealership and Brokering ServicesThe Bank offers a broad range of treasury services to corporate, institutional and individual clientswith specific needs and varied risk profiles. These services include the purchase and sale offoreign exchange, fixed-income securities investments, and derivatives, for which the Bank’scompetence has been recognized through several awards for securities dealership and foreignexchange services provider. Exclusive economic briefings and forums in regional centers are alsoconducted on a periodic basis to enhance clients’ awareness of prevailing financial marketconditions.Transaction BankingBDO’s transaction-based services provide high value-added cash management solutions tovarious market segments that include large corporations, financial institutions, government entities,and small- and medium-enterprises (SMEs). The Bank’s electronic banking services, which includethe Bank’s over 1,600 ATMs nationwide, as well as the internet, mobile, and phone bankingfacilities, allow customers to access their accounts and perform an extensive range of bankingtransactions at their convenience, anytime, anywhere. Meanwhile, the Bank’s debit card facility letscustomers enjoy the convenience of hassle-free cashless payment and easy cash access with justone card.Credit CardsThe Bank offers an extensive array of locally- and internationally-accepted credit cards bearing theBDO Shopmore, American Express, JCB, MasterCard, Union Pay, and Visa brands, as well asother co-brand tie-ups (Amex Cathay Pacific and Forever 21). BDO credit cards likewise cover abroad market spectrum across different age groups ranging from the young upwardly mobilegeneration (with Amex Blue) to high net worth individuals (Elite cards).Investment BankingThrough its subsidiary, BDO Capital & Investment Corp., the Bank provides expertise and optimalsolutions to address the capital raising needs of corporations, government entities, andSEC FORM 17-A 3

sophisticated investors. The Bank’s strong origination and structuring capabilities, robustdistribution network, dominant presence in both the equities and capital markets, and establishedtrack record all highlight BDO’s brand of investment banking.InsuranceThe Bank provides its clients property and casualty insurance through BDO Insurance Brokers,Inc., a wholly-owned subsidiary. In partnership with Generali Pilipinas Holding, the Bank alsoacquired a bancassurance license that permits it to market and sell both life and non-life insuranceproducts through its nationwide network of more than 740 branches, permitting customers accessto a wide array of insurance products.Trade ServicesThe Bank offers a complete range of trade finance products and services, ranging from letters ofcredit to inventory financing that respond to the specific trade- and international requirements of itscorporate customers.Wholesale Lending and International DesksBDO offers structured and trade finance services to suit the specialized business requirements ofcompanies from within the region and around the globe, namely, Japanese, Mainland Chinese,Taiwanese, Singaporean, Korean, and other Asian companies, as well as North American andEuropean commercial interests in the Philippines. The Bank also provides cross-border financesupported by export credit agencies, rated export-import banks, and other foreign banks frommember countries of the Organization for Economic Development and Cooperation (OECD) andmultilateral organizations. Wholesale funds from government financial institutions are also availablefor specialized financing purposes.Private BankingBDO provides high value investment, financial, and estate advisory services to a niche market ofemerging affluent and high network individuals, as well as corporate and institutional clientsthrough its wholly-owned subsidiary, BDO Private Bank, Inc.. BDO Private Bank Inc.’s openarchitecture platform allows it to provide bespoke or custom-made structures to address clients’specific financial needs.LeasingBDO Leasing and Finance, Inc. offers comprehensive leasing and financing solutions tocommercial clients across various industries.SEC FORM 17-A 4

From the above mentioned products and services, the Bank’s revenues are divided into two majorcategories, namely, (1) interest income from the Bank’s deposit taking, lending and investingactivities which accounts for 71% of revenues, and (2) other income which includes servicecharges, fees & commissions, trading gain, foreign exchange gains, trust fees, income from sale ofacquired assets and other miscellaneous income which account for 29% of revenues. Of all therevenue accounts, the following contributes more than 10% to total revenues:Income Accounts% to Total Income1. Interest Income on Loans & Other Receivables 52.3%2. Interest Income on Investment & Trading Securities 14.8%3. Service Charges, Fees and Commissions 14.8%(ii)Distribution Methods of Products or ServicesThe Bank’s products and services are available mainly through the branches, but select servicesare also accessible through other channels such as call centers, mobile and landline telephones,internet, and point-of-sale terminals. The Bank’s extensive distribution network provides it goodmarket coverage that is superior to many of its competitors. Aside from a branch in Hong Kongand a consolidated domestic network of 743 operating branches, the Bank has 1,596 ATMs as of31 December 2011.(iii)Status of Publicly Announced New Products or ServiceOn 25 November 2011, the BDO Institutional Cash Reserve Fund was launched and is now fullyoperational.(iv)CompetitionAs of 31 December 2011, the Philippine commercial banking sector consisted of 38 commercialbanks, 19 of which are private domestic banks, 16 are branches/subsidiaries of foreign commercialbanks and 3 are government-controlled banks. Of the 38 commercial banks, 20 are universalbanks, of which 6 are branches of foreign banks.Based on published statements of condition, the total assets of the commercial banking system asof 31 December 2011 reached P7.0 trillion. The five largest banks, namely, BDO, MetropolitanBank and Trust Company, Bank of the Philippine Islands, Land Bank of the Philippines and RizalCommercial Banking Corp., accounted for 55% of total assets.As of 31 December 2011, the loans and receivables (net) of the commercial banking systemamounted to P3.5 trillion, while total deposits was at P5.1 trillion. The total capital accounts of thecommercial banking system amounted to P746 billion as of December 2011.Note: All the data used in the discussion above are based on published statements of condition ofall commercial banks.SEC FORM 17-A 5

(v)Transactions with and/or Dependence on Related PartiesIn the ordinary course of business, the Bank has loans, deposits and other transactions with itsrelated parties, and with certain directors, officers, stockholders and related interest (DOSRI).These loans and other transactions are made on the same terms as with other individuals andbusinesses of comparable risks and in compliance with all regulatory requirements.(vi)Patents, Trademarks, Licenses, Franchises, Concession, Royalty Agreement orlabor contracts including durationThe Bank has registered the following trademarks with the Intellectual Property Office of thePhilippines:Trademark DurationExpress Padala 17 March 2008 to 17 March 2018We find ways 7 April 2008 to 7 April 2018(vii)Governmental Approval of Principal Products or ServicesThe Bank secures approval from the Bangko Sentral ng Pilipinas (BSP) for all its products andservices, as required.(viii)Effect of Existing or Probable Governmental Regulations on the BusinessBeing a banking institution subject to the General Banking Law and banking regulations, BDO isunder the supervision of the BSP, whose approval BDO requires to undertake certain activities.BDO strictly complies with the BSP requirements in terms of reserves, liquidity position, limits onloan exposure, cap on foreign exchange holdings, provision for losses, anti-money launderingprovisions and other regulatory requirements.(ix)Estimate of Amount Spent for Research and Development ActivitiesThis is not applicable to the Bank.(x)Total Number of EmployeesThe Bank has a total of 20,804 employees as of 31 December 2011, broken down as follows:Non-Officers Officers Executives TOTALTotal Head Office 3,219 4,065 563 7,847Branches 8,768 3,216 194 12,178Total for Subsidiaries 300 384 95 779TOTAL EMPLOYEES 12,287 7,665 852 20,804SEC FORM 17-A 6

The Risk management Group (RMG) is mandated to adequately and consistently evaluate,manage, control, and monitor the overall risk profile of the Bank’s activities across the different riskareas (i.e. credit, market, liquidity, and operational risks) to optimize the risk-reward balance andmaximize return on capital.Item 2 – PropertiesDescription of Property1) Principal Properties OwnedPresented below is a list of the Bank’s real properties as of 31 December 2011 owned by the Bankand utilized as BDO branches.BDO BANK-OWNED PROPERTIES UTILIZED AS BRANCHESBRANCHADDRESS1 ADB Avenue - Ortigas Robinson's PCIBank Tower, ADB Avenue, Ortigas Center,1600 Pasig City2 Airport Road Airport Road corner Quirino Avenue, Baclaran, ParañaqueCity3 Alfaro - Salcedo Village GF PCCI Bldg. , 118 Leviste Street (Formerly Alfaro St.) ,Salcedo Village, Makati City4 Angeles City - Miranda PCIB Bldg., Miranda St., 2009 Angeles City, Pampanga5 Antique Corner Gov. Villavert St. and Gov. Gella St., San Jose,Antique 57006 Arranque - T. Alonzo 733 T. Alonzo St., Manila7 Asia Tower - Paseo G/F Asia Tower corner Paseo De Roxas & Benavides St.,1229 Makati City8 Aurora Blvd - Yale Aurora Boulevard corner Yale Street, Cubao, Quezon City9 Aurora Blvd - Notre Dame 0137 Aurora Blvd. corner Notre Dame St., Cubao, 1110Quezon City10 A. Santos - St. James 8406 A. Santos Ave., Sucat, Parañaque City 170011 Baclaran-Redemptorist Road Redemptorist Road, Baclaran, Parañaque, M.M..12 Bacolod Plaza Araneta cor.Gonzaga Sts., 6100 Bacolod City- NegrosOccidental13 Bacolod - Capitol Shopping Benigno Aquino Drive, Capitol Shopping 6100 Bacolod City,Negros Occidental14 Bacolod - Gatuslao 26 & 28 Gov. V. Gatuslao St., Bacolod City, NegrosOccidental15 Bacolod - Lacson Lacson cor.Galo Sts., 6100 Bacolod City, NegrosOccidentalSEC FORM 17-A 8

BDO BANK-OWNED PROPERTIES UTILIZED AS BRANCHESBRANCHADDRESS43 Cebu - F. Gonzales F. Gonzales corner Magallanes St., Cebu City44 Cebu Fuente Circle Fuente Osmeña Rotonda, Cebu City45 Cebu - Gorordo Gorordo Avenue, Lahug, 6000 Cebu City, Cebu46 Cebu - Magallanes Plaridel Magallanes corner Plaridel Sts., 6000 Cebu City47 Cebu - North Mandaue National Highway, Mandaue City48 Cebu - North Reclamation Blk.20-A cor. Port Centre Ave. and Juan Luna Ave., NorthReclamation Area, Cebu City49 Corinthian Gardens BDO Leasing Center, Ortigas Ave., Quezon City50 Cotabato - Kidapawan Quezon Blvd., 9400 Kidapawan, North Cotabato51 Cotabato - Makakua Makakua St., 9600 Cotabato City, Maguindanao52 C. Palanca - Quiapo 132 Carlos Palanca St., Quiapo, Manila53 C.M. Recto C M Recto Avenue corner Nicanor Reyest St., Manila54 C.M. Recto- San Sebastian 2070 C.M. Recto St., 1008 Sampaloc, Manila55 Dagupan - Fernandez A.B. Fernandez Ave., 2400 Dagupan City, Pangasinan56 Dasmariñas St.-Binondo Dasmarinas St., Binondo, 1006 Manila57 Davao - C.M. Recto 383 Claro M. Recto St., Davao City58 Davao - Digos Rizal Avenue, Zone II, Digos, Davao del Sur59 Davao - Mati Rizal cor. Mabini Sts., 8200 Mati, Davao Oriental60 Davao - Tagum 577 Rizal St., 8100 Tagum, Davao Del Norte61 Davao - Toril Agton Street, Davao City62 Dian - Gil Puyat G/F EPCIB Bldg., Sen. Gil Puyat Avenue, corner Dian St.,Makati City63 Dipolog Quezon Ave, 7100 Dipolog City, Zamboanga Del Norte64 Dumaguete Colon St. fronting Bldg. V of City Public Market, Poblacion003, Dumaguete City65 E. Rodriguez 1162 E. Rodriguez Sr. Avenue, New Manila, Quezon City66 Edsa - Reliance St. G/F Paragon Plaza, corner Reliance St., Mandaluyong City67 Fairview Don Mariano Marcos Avenue, Barangay Fairview, QuezonCity68 General Santos - Pioneer National Highway cor. Roxas Ave., 9500 Gen. Santos City,S. Cotabato69 General Santos - Santiago Ireneo Santiago Blvd., 9500 Gen. Santos St., SouthCotabato70 Grace Park - 8th Avenue Rizal Avenue Extension, Grace Park, Caloocan city71 Grace Park - 9th Avenue 414 Rizal Avenue Extension, Grace Park, 1400 CaloocanCitySEC FORM 17-A 10

BDO BANK-OWNED PROPERTIES UTILIZED AS BRANCHESBRANCHADDRESS72 Greenhills-Roosevelt Ortigas Avenue corner Roosevelt Ave., Greenhills, SanJuan, Metro Manila73 Ilaya - M. De Santos 632 M. De Santos Street, Manila74 Iligan - Del Pilar B.C. Labao corner Del Pilar Street, Iligan City75 Iloilo - Iznart Iznart St., 5000 Iloilo City, Iloilo76 Iloilo - Valeria Valeria Street, Iloilo City77 Isabela - Roxas 23 Osmeña Rd., Bantug, Mallig Plain, 3320 Roxas, Isabela78 Kalentong MRDC Bldg., Shaw Boulevard corner Gen. KalentongStreet, Mandaluyong City79 Laoag - Balintawak Cor.Rizal & Balintawak Sts., 2900 Laoag City, Ilocos Norte80 Las Pinas - Pamplona Alabang-Zapote Road, Pamplona, Las Piñas City81 Las Piñas - Philamlife Alabang-Zapote Road, Pamplona Tres, 1740 Las Pinas,Metro Manila82 La Union San Fernando - Q.AvenueQuezon Ave., 2500 San Fernando, La Union83 Leveriza - Libertad 212 Libertad St., Pasay City, Metro Manila84 Leyte - Ormoc Burgos St. cor. Rizal St., 6541 Ormoc City, Leyte85 Lipa - C.M. Recto 131 C. M. Recto St, 4217 Lipa City, Batangas86 Lipa - Rotonda C.M. Recto Avenue, Lipa City87 Luneta - TM Kalaw 707 T.M. Kalaw St. corner Churruca St., Ermita, Manila88 Makati Avenue - Ayala L.V. Locsin Bldg., Ayala Avenue corner Makati Avenue,1228 Makati City89 Makati Cinema Square Makati Cinema Square, Pasong Tamo, 1229 Makati City90 Malabon - Rizal Ave 694 Rizal Ave., 1470 Malabon, Metro Manila91 Malolos - Congreso Paseo Del Congreso, San Agustin 3000 Malolos, Bulacan92 Marikina - Concepcion 17 Bayan-bayanan Avenue, Barangay Concepcion 1,Marikina City93 Marikina- Sumulong Highway Corner E. Dela Paz Street Amang Rodriguez Avenue, Sto.Nino, Marikina City94 Marulas - McArthur Highway Lot 16 & 17 McArthur Highway, Valenzuela, Metro Manila95 Mayon GF, Alpha Building, 174 Mayon Street, La Loma, QuezonCity96 Medical Plaza - Legaspi Village Unit 101, G/F Medical Plaza Makati, Amorsolo Street cornerDela Rosa Street, Legaspi Village, Makati City97 Meycauayan - Zamora Zamora St., Barrio Calvario, Meycauayan, Bulacan98 Naga - Plaza Rizal Gen. Luna St., 4400 Naga City, Camarines SurSEC FORM 17-A 11

BDO BANK-OWNED PROPERTIES UTILIZED AS BRANCHESBRANCHADDRESS99 Negros Occidental - Cadiz Cabahug St., 6121 Cadiz, Negros Occidental100 Negros Occidental - Escalante National Highway, Escalante City, 6124 Negros Occidental101 Negros Occidental - Kabankalan Guanzon St., Kabankalan, 6111 Negros Occidental102 Novaliches - Forest Hills Lot 2 D 1 Quirino Ave., Novaliches, Quezon City103 Nueva Ecija - Gapan Tinio St., 3105 Gapan, Nueva Ecija104 Nueva Ecija - Guimba Afan Salvador St., 3115 Guimba, Nueva Ecija105 Nueva Ecija - Munoz T. Delos Santos St., Science City of Munoz, Nueva Ecija106 Ortigas Avenue 209 Ortigas Avenue, Greenhills, San Juan, Metro Manila107 Ortigas Exchange Road G/F, PSE Center, Exchange Road, Ortigas CommercialComplex, Pasig City108 Ortigas-San Juan Units 102-103 Sunrise Condo., Ortigas Ave., 1500 SanJuan, MM109 Ozamiz Cebedo St., corner Gallardo St., Centro, Ozamiz City,Misamis Occidental110 Paco - A. Linao 1635-1641 A. Linao St., Paco, Manila111 Padre Faura-A. Mabini A. Mabini Cor. Padre Faura Sts., 1000 Ermita, Manila112 Pagadian F. S. Pajaras Ave., Pagadian City, 7016 Zamboanga DelSur113 Pasay Libertad corner Colayco Streets, Pasay City114 Pasay Road 845 Corporate Plaza Bldg. , Pasay Road, Makati City115 Paseo-Gil Puyat Paseo De Roxas corner Gil Puyat Ave., Makati City116 Paseo Tower - Makati 8751 Paseo De Roxas, Makati City117 Pasig - Manggahan Amang Rodriguez Avenue, Barangay Manggahan, PasigCity118 Perea - Paseo G/F Universal Re Bldg., 106 Paseo De Roxas, 1228 MakatiCity119 Pitimini - Roosevelt Roosevelt Avenue corner Pitimini Street, San Francisco DelMonte, Quezon City120 Plaza Sta. Cruz-Dasmariñas St. 377 Plaza Sta. Cruz, 1003 Sta. Cruz, Manila121 Potrero 110 MacArthur Highway corner Riverside Street, BarangayPotrero, Malabon122 President's Avenue - BFParañaquePresident's Ave. corner J. Elizalde St., BF HomesParañaque, Metro Manila123 Puerto Princesa 261 Rizal Ave., 5300 Puerto Princesa City, Palawan124 Quezon Avenue - Heroes Hill 1052 Quezon Avenue, 1103 Quezon City125 Quezon - Candelaria Rizal Ave cor. Valle St., 4323 Candelaria, QuezonSEC FORM 17-A 12

BDO BANK-OWNED PROPERTIES UTILIZED AS BRANCHESBRANCHADDRESS126 Reposo - Makati JP Rizal cor. N. Garcia (formerly Reposo), Makati City127 Rizal Avenue 2502 -2504 Rizal Avenue corner Cavite Street, Sta. CruzDistrict, Manila128 Rockwell Center - Makati Lot 3, Block 7, Rockwell Drive, Rockwell Center, Poblacion,Makati City129 Roxas - Roxas Avenue Roxas Avenue, Roxas City, Capiz130 San Pablo - Rizal St 2nd Floor, Equitable PCI Bldg., Rizal St. cor. P. Alcantara,San Pablo City, Laguna131 Shaw Blvd. - Stanford Shaw Blvd. Corner Stanford St., Mandaluyong City132 Silay - Figueroa Figueroa cor. Rizal St., Silay City, 6116 Negros Occidental133 South Cotabato - Koronadal R. Alunan Ave. cor. Osmeña St., 9506 Koronadal, SouthCotabato134 Sta. Rosa-South Expressway National Road, Pulong Sta. Cruz, 4026 Sta Rosa, Laguna135 Strata 100-Ortigas GF Strata 100 Bldg., Emerald Avenue, Pasig City136 Sultan Kudarat - Isulan 075 National Highway, Kalawag 2, Isulan, Sultan Kudarat137 Sultan Kudarat - Tacurong Alunan Highway, 9800 Tacurong, Sultan Kudarat138 St. Ignatius - Katipunan BDO Bldg. 137 Katipunan Avenue, St. Ignatius, QuezonCity139 Taft- Vito Cruz Bankard Bldg., 2422 Taft Ave., 1004 Malate, Manila140 Tarlac - Luisita MacArthur Highway, Barangay San Miguel, Tarlac City141 Tarlac - J. Luna J. Luna St. near corner Mc Arthur, Tarlac, Tarlac142 Tomas Morato - Kamuning Corner Kamuning & Tomas Morato, Quezon City143 Tuguegarao - Bonifacio St. Bonifacio Street, Tuguegarao, Cagayan144 U.N. Avenue - J. Bocobo UN Avenue cor. J. Bocobo St., Ermita, Manila145 Urdaneta - Alexander Alexander St., Urdaneta City, Pangasinan146 V.A. Rufino GF Chatham House, Herrrera St., corner Valero and SanAgustin St., Salcedo Village, Makati City147 West Trade Center - West Avenue Unit # 1, G/F West Trade Center, West Avenue, QuezonCity148 Vigan - Quezon Avenue Corner Bonifacio St. & Quezon Ave., 2900 Vigan, IlocosSur149 Zamboanga - Rizal St. Rizal St., Zamboanga City, 7000, Zamboanga Del SurSEC FORM 17-A 13

2) Leased PropertiesThe Group leases a majority of its banking premises for periods ranging from 1 to 15 years fromthe date of the contracts; terms are renewable upon the mutual agreement of the parties. Rentexpense, reported as part of Occupancy under Other Operating Expense account in the incomestatement, amounted to P1.89 billion in 2011, P1.76 billion in 2010, and P1.65 billion in 2009 in theGroup financial statements and P1.81 billion in 2011, P1.66 billion in 2010 and P1.53 billion in2009 in the Parent Bank financial statements.A list of these leased properties is as follows:(a)Metro Manila BranchesBranch Address Lease Lease ExpiryEffectivity1 ABS CBN - MotherIgnacia St.Stall no. 25 South Wing, GF ELJCC Bldg., Sgt. E. A.Esguerra Avenue corner Mother Ignacia St. QuezonCity 08/05/07 08/04/122 Acropolis - E. Rodriguez GF ACO Bldg., 191 E. Rodriguez Jr. Avenue,Jr.Bagumbayan, Quezon City 05/01/08 04/30/133 Alabang Hills RBC Corporate Center, Don Jesus Blvd., BarangayCupang, Muntinlupa 08/01/04 07/31/14Unit 5 & 6, Molito Commercial Complex, MadrigalBusiness Park, Madrigal Avenue, Muntinlupa City 06/20/10 06/20/154 Alabang - MadrigalAvenue5 Alabang - Muntinlupa West Service Road, Alabang, Muntinlupa City Month to month6 Amorsolo GF Queensway Bldg., No.118 Amorsolo Street,Legaspi Village, Makati City 03/01/11 02/29/167 Anonas - Kamias Security Bank Bldg., Anonas St. corner K-6 St., EastKamias, 1102 Quezon City 09/01/11 08/31/168 Antipolo - B.V. Soliven Blk. 24, Lot 1, Benito V. Soliven Avenue,Greenheights Subdivision, Brgy. Mayamot, AntipoloCity 05/01/10 04/30/209 Antipolo - Sumulong BDO Bldg., Sumulong Highway, Masinag Highway,Mayamot, Antipolo 5/1/1998 04/30/1810 Arranque 1359 -1361 Soler St., Sta. Cruz, Manila 09/01/11 08/31/1711 Aurora Blvd. - Anonas Manahan Bldg., Aurora Blvd. corner Anonas Avenue,Quezon City 12/01/08 11/30/1812 Aurora Blvd. - Broadway Broadway Centrum Cond., Aurora Blvd. cor. DonaCentrumJuan Rodriguez St., 1112, Valencia, QC 12/31/10 12/31/1313 Aurora Blvd. - Hemady 708 Aurora Blvd. corner Hemady St., New Manila,1110 Quezon City 06/01/09 05/31/1214 Ayala - Rufino GF Rufino Bldg., Ayala Avenue corner Herrera St.,1226 Makati City 02/01/07 01/31/1215 Ayala Alabang GF Condominium C Unioil Center Bldg., AcaciaAvenue corner Commerce Avenue, Muntinlupa City 08/01/11 07/31/1616 Ayala Alabang - Richville Richville Center 1314 Commercial Avenue Extension,CenterMadrigal Business Park, Ayala Alabang, Muntinlupa 07/01/97 07/01/1317 Ayala Avenue 6805 Multinational Bancorporation Centre, AyalaAvenue, Makati City 11/01/11 10/31/1618 Ayala Avenue - People's GF People Support Center, Amorsolo Street cornerSupportAyala Avenue, Makati City 12/16/10 07/31/15SEC FORM 17-A 14

Branch Address Lease Lease ExpiryEffectivity19 Ayala Triangle 1 GM-B GF Tower 1, Ayala Triangle, Ayala Avenue,Makati City 05/01/11 04/30/1620 A. Arnaiz - San Lorenzo L & R Bldg., 1018 A. Arnaiz Avenue, Makati CityVillage11/13/08 11/12/1321 A. Bonifacio Avenue - 960 A. Bonifacio Avenue, Balintawak, Quezon CityBalintawak06/01/10 05/31/2022 A. Santos - South Units E & F, 8365, Dr. A Santos Avenue., Parañaque,ExpresswayM. M. 02/01/05 01/31/1523 Baclaran 2987 Taft Avenue Extension, Pasay City 10/01/02 09/30/1724 Bacoor FRC Mall, Gen. Evangelista Street corner ZapoteRoad, Bacoor, Cavite 07/16/02 07/15/1225 Bacoor - AguinaldoHighwayGen. Aguinaldo Highway, Panapaan, Bacoor, Cavite08/01/09 07/31/2426 Banawe - Agno 202-204 Banawe corner Agno St., 1100 Quezon City 03/01/10 03/28/1527650 N. S. Amoranto Avenue corner Banawe St.,Banawe - AmorantoQuezon City1/1/11 12/31/1528 Banawe - Kitanlad 23-25 Banawe corner Kitanlad, Quezon City 02/16/07 09/15/1229 Banawe - N. Roxas 71 N. Roxas St. corner Banawe, Quezon City 12/01/02 11/30/1230 Bel-Air GF, SM Makati Cyberzone 1, Sen Gil J. PuyatAvenue, Makati City 08/16/08 08/15/1331 Better Living Doña Soledad Avenue corner France Street, BetterLiving, Parañaque City 12/01/06 11/30/2632 Better Living - Bicutan 43 Doña Soledad Avenue, Betterliving Subd., DonBosco, Parañaque City 03/24/07 03/23/1733 BF Homes - Aguirre RGM Building, 326 Aguirre Avenue, BF Homes,Parañaque City 02/16/08 02/15/1834 BF Homes - Parañaque 65 President's Avenue Plaza, near corner AguirreAvenue, BF Homes, Parañaque City 12/01/11 11/30/1635 Bicutan - South SuperHighwayColumbian Motors Cmpd., KM 16 West ServiceRoad, South Super Highway, Bicutan, 1700Parañaque, Metro Manila 06/22/11 06/21/1236 Boni - Ligaya 654 Boni Avenue, 1550 Mandaluyong City 04/01/97 04/01/1237 Bonifacio Global City -Burgos CircleUnit 1F - & 1 - E, GF Crescent Park Residences, 2ndAvenue, Burgos Circle, Bonifacio Global City, TaguigCity 10/01/10 09/30/2038 Bonifacio Global City -Fort LegendsGF Fort Legends Tower, corner 31st Street and 3rdAvenue, Bonifacio Global City, Taguig City 03/15/09 03/14/1939 Bonifacio Global City -Market MarketSpace No.101, Market Market, Bonifacio Global City,Fort Bonifacio, Taguig, MM 10/01/07 09/30/1340 Bonifacio Global City -One Mckinley PlaceGF One Mckinley Place Global City, 4th Ave. Corner25th St., Bonifacio Global City, Taguig City 08/16/10 08/15/2041 Bonifacio Global - MCHome DepotGF MC Home Depot, 32nd Street corner BonifacioAvenue, Bonifacio Global City, Taguig 06/08/08 06/07/1342 Bonifacio Global City -Picadilly StarGF Picadilly Corporate Center, 4th Avenue corner 27Street, Bonifacio Global City, Taguig 09/01/09 08/31/1943 Bonifacio Global City - St.Luke'sSt. Luke's Medical Center, Rizal Drive corner 5thAvenue & 32nd Street, Bonifacio Global City, Taguig 12/10/09 08/27/1944 Bonifacio Global City -University ParkwayGF Avecshares Center, 1132 University Parkway,Bonifacio North Triangle, Bonifacio Global City,Taguig 04/16/10 04/15/1545 Buendia-Taft 317 Sen. Gil Puyat Avenue, Pasay City 09/01/06 08/31/12SEC FORM 17-A 15

Branch Address Lease Lease ExpiryEffectivity46 C5 - Taguig GF Ridgewood Square, C5 Avenue, Ususan, TaguigCity, Metro Manila 02/15/08 02/14/1347 Caloocan Rizal Avenue Extension near 11th Avenue, GracePark, Caloocan City 09/01/08 08/31/1848 Caloocan - A. Mabini GF Corazon Bldg., 432 - A. Mabini St., Poblacion,Caloocan City 10/15/05 10/14/1549 Caloocan - 7th Avenue Rizal Avenue Extension corner 7th Avenue, GracePark, Caloocan City 05/01/11 04/30/1650 Carmen Planas 812 O' Racca Bldg., Carmen Planas Street, Divisoria,ManilaMonth to month51 Carmen Planas - Padre 1033-1035 C. Planas St., 1012 Tondo, ManilaRada07/14/03 07/13/1852 Carmen Planas - 921 Carmen Planas St. corner Zaragosa St., Tondo,ZaragosaManila 08/01/05 07/31/1553 Cash & Carry GF Unit # GO1A, Cash & Carry Mall, South SuperHighway & Filmore Street, Makati City 10/01/07 09/30/1254 Central Market - V. 1711 V. Fugoso St. corner Sulu St., Sta. Cruz, ManilaFugoso04/04/08 04/03/1355 Chino Roces Avenue Unit 3 & 4 La Fuerza Plaza, Chino Roces, Makati City 05/01/08 04/30/1856 Commonwealth GF Teresita Bldg., Holy Spirit Drive, Don AntonioHeights, Quezon City 11/01/05 10/31/1557 Commonwealth - DonAntonioDon Antonio Sports Center, Don Antonio, DonAntonio Heights Subdivision, QC 12/01/09 11/30/1458 Congressional -Mindanao AvenueCongressional Avenue Ext. corner MindanaoAvenue, Quezon City 10/01/04 04/30/1259 Congressional Avenue The Excelland System1, Congressional Avenue,Quezon City 05/15/98 07/15/1360 Connecticut 53 Connecticut Street, Fox Square Bldg., EastGreenhills, San Juan 11/01/08 10/31/1361 Cubao - General Araneta GF Philamlife Cubao Bldg., Aurora Blvd, corner Gen.Araneta Malvar Ave, Cubao Quezon City 02/01/08 01/31/1862 C.M. Recto - ReinaRegente1059 CM Recto Avenue corner Reina Regente St.,Binondo, Manila 08/01/10 07/31/2063 Dapitan St. - A. H.Lacson Ave.Dioresa Plaza, Dapitan St. corner A. H. LacsonAvenue, Sampaloc, Manila 07/01/10 06/30/1564 Del Monte - Sienna 409 Del Monte Avenue, Quezon City 1105 10/16/07 10/15/1765 Del Monte Avenue 63 Del Monte Avenue, Barangay Manresa, QuezonCity 03/01/08 02/28/1866 Dela Rosa - Rada Ace Bldg., corner Dela Rosa & Rada Street, LegaspiVillage, 1229 Makati City 05/01/08 04/30/1367 Diliman - Capitol Hill 16 Capitols Hills Drive, Old Balara, Diliman, QuezonCity 12/01/08 11/30/1868 Diliman - Matalino GF J & L Bldg., Matalino Street, Diliman, Quezon City 01/01/08 12/31/1269 Divisoria 744-748 Ylaya Street, Tondo, Manila 04/01/03 03/31/1370 DPC Place - Chino Roces GF Unit 102 of DPC Place, 2322 Chino RocesAvenue, Makati City 01/31/11 01/31/1271 Dr. A Santos Avenue L T Bldg., Dr. A. Santos Avenue, Parañaque City 06/01/03 05/31/1372 E. Rodriguez - WelcomeRotondaGF AEK Building, 40 E. Rodriguez Sr. Avenue, DonManuel, Quezon City 11/01/08 10/30/1873 Eastwood City - E.Rodriguez Jr. AvenueMagnitude Commercial Arcade, E. Rodriguez Jr.Avenue, Bagumbayan, Quezon City 06/16/02 06/15/12SEC FORM 17-A 16

Branch Address Lease Lease ExpiryEffectivity74 Eastwood City - IBM GF IBM Plaza, Eastwood City, E. Rodriguez Jr.PlazaAvenue, Libis, Quezon City 04/15/09 06/14/1475 Eastwood City - Olympic GF Olympic Heights, Eastwood City Cyberpark,HeightsBagumbayan, Quezon City 08/01/11 07/31/1676 Echague No. 116- 120 C. Palanca St., Quiapo, Manila 03/16/05 03/15/1577 EDSA Cubao 596 Simeon Medalla Bldg., Gen. MacArthur Avenue,EDSA, Quezon City 02/01/11 01/31/1678 EDSA - A. De Jesus 474 EDSA corner B. Serrano & A. De Jesus Sts.,1403 Caloocan City 03/01/02 02/29/1279 EDSA - Bangkal No. 3 EDSA Barangay Bangkal, Makati City 05/16/11 05/15/2180 EDSA - Balintawak Unit 17-19 ANPN Plaza, KM 12 EDSA, Balintawak,Quezon CityMonth to month81 EDSA - East Caloocan L & E Bldg., EDSA corner Gen. Concepcion St.,Caloocan City 09/01/07 11/30/1482 EDSA - New FarmersPlazaUnit 1-B, New Farmers Plaza, Gen. Roxas Avenue,Cubao, Quezon City 07/17/10 07/17/2083 EDSA - New York EDSA corner New York St., Cubao, 1111 QuezonCity 09/01/08 08/31/1384 EDSA - Pasay 507 EDSA corner B. Garcia St., 1300 Pasay City 04/16/93 04/15/1385 EDSA - POEA POEA Bldg., EDSA corner Ortigas Avenue,07/01/08 06/30/13Mandaluyong86 Elcano SHC Tower, 619 Elcano St., San Nicolas, Manila 11/01/08 10/31/1387 Emerald Avenue GF 101 Taipan Place, Don Francisco Ortigas Jr,Road, Pasig 07/16/09 07/15/1488 Enterprise Center - AyalaAvenue3rd Level Tower 1, The Enterprise Center, 6766Ayala Avenue, Makati City 02/16/08 02/15/1389 España Carmen Bldg., España corner G. Tolentino Street,Sampaloc, Manila 07/03/08 07/02/1390 España - Blumentritt 2101-2103 España Avenue corner Blumentritt St.,1008 Sampaloc, Manila 02/01/02 01/31/1291 España - M. Dela Fuente Esperanza Place, España Blvd. corner M. DelaFuente St., Sampaloc, Manila 04/01/09 03/31/1992 Evangelista - Makati 1695 Evangelista Street corner Lacuna St., Bangkal,1233 Makati City 04/01/08 12/31/1293 Filinvest - Alabang GF Insular Life Corporate Centre, Corporate Avenue,Filinvest Corporate City, Alabang, 1781 MuntinlupaCity 03/15/08 05/14/1894 Fort Bonifacio - BayaniRoadBayani Road corner M. Roxas St., Fort Bonifacio,Taguig 06/01/10 05/31/2095 Fort Bonifacio - McKinleyHillGF Three World Square, McKinley Hill, FortBonifacio, Taguig 07/01/09 06/30/1496 Gandara 811-813 Sabino Padilla St., Sta. Cruz, Manila 02/01/07 01/31/1297 Gandara - Soler 1268 Soler St. corner S. Padilla St., 1006, Binondo,Manila 03/01/98 02/28/1398 GC Corporate Plaza -Legaspi St.150 GC Corporate Plaza, Legaspi St., LegaspiVillage, Makati City 01/01/11 12/31/1599 General Luis 297 Gen. Luis Street, Bo. Kaybiga, Caloocan City 08/15/97 08/14/12100 Gil J. Puyat Union Ajinomoto Building, Sen. Gil Puyat Avenue,Makati City 01/01/10 12/31/11101 Glori - Del Monte 627 Del Monte Avenue, San Francisco Del Monte,Quezon CityMonth to monthSEC FORM 17-A 17

Branch Address Lease Lease ExpiryEffectivity102 Grace Park GF A & R Bldg., 213 Rizal Avenue Extension, GracePark, Caloocan City 02/11/09 02/10/14103 Grace Park - 11th Avenue 1619 Rizal Avenue, Extension corner 11th Avenue,1400 Caloocan City 12/16/03 12/15/13104 Greenbelt GF 108 Legaspi St corner Paseo De Roxas, PioneerHouse Bldg., Legaspi Village, Makati City 11/01/11 10/31/16105 Greenhills Greenhills Shopping Complex, Ortigas Avenue, SanJuan, Metro Manila 01/01/11 12/31/13106 Greenhills - Annapolis Unit 101, GF, Vasquez Madrigal Plaza, Annapolis St.,Greenhills, San Juan 06/01/10 05/31/15107 Greenhills Shopping GF Jeweller Center, Greenhills Shopping Center,CenterOrtigas Avenue, San Juan, Metro Manila 01/01/12 12/31/13108 Greenhills - West 101 Limketkai Bldg., Ortigas Avenue, San Juan,Metro Manila 03/01/09 02/28/12109 Greenhills - Wilson 227 Wilson Street corner Don Miguel Street, SanJuan, Metro Manila 05/27/05 05/26/15110 G. Araneta - Brixton Hill GF ILO Bldg., 195 G. Araneta Avenue, Quezon City 07/01/05 06/30/15111 Harrison Plaza Unit R-5 URDI Building, Harrison Plaza ShoppingComplex, F. B. Harrison, Malate, Manila 03/01/07 03/01/12112 Herrera V.A. Rufino Street corner Sotto Street, LegaspiVillage, Makati City 05/15/07 05/14/12113 H.V. Dela Costa 120 Westgate Plaza Condominium, Salcedo Village,Makati City 02/01/08 01/31/13114 Ilaya 1049-1051 Ilaya Street, Divisoria, Manila 06/01/07 05/31/12115 Ilaya - Padre Rada 940-942 Ilaya St., Tondo, Manila 03/01/05 02/28/15116 Intramuros GF Chamber of Commerce Bldg., 3 MagallanesDrive, Intramuros, Manila 12/16/07 12/15/17117 Isidora Hills BDO Bldg., Pook Ligaya, Interneighborhood Road,Isadora Hills, Brgy Holy Spirit, QC 05/07/98 05/06/18118 J Abad Santos GF Ching Leong Temple, J. Abad Santos Avenue,Tondo, Manila 09/01/05 08/31/15119 JAS-Antipolo GF Intercast Corp., Tower, Jose Abad SantosAvenue, Tondo, Manila 08/01/06 07/31/16120 JAS-Recto 1174 J. Abad Santos Avenue, Tondo, Manila 10/01/95 09/30/20121 JP Rizal 872 J. P. Rizal Street, Brgy. Poblacion, Makati City 06/15/98 06/14/13122 Julia Vargas IBP Building, Julia Vargas Avenue, Ortigas, PasigCity 01/01/07 12/31/11123 Juan Luna 262 Juan Luna Street, Binondo, Manila 07/01/09 12/31/14124 Jupiter - Reposo GF CEI Headquarters, 158 Jupiter Street corner N.Garcia Street, Bel-Air Village, Makati City 08/01/09 07/31/19125 Kamagong 2567 P. Ocampo (Vito Cruz Ext. ) corner Madre PerlaStreet, Manila 01/01/12 12/31/13126 Kamias Road Trinidad Bldg., Kamias Road corner K.- J St., QuezonCity 08/01/07 07/31/17127 Karuhatan - MacArthurHighwayKM. 13 MacArthur Highway, 1441 Karuhatan,Valenzuela, Metro Manila 04/24/02 04/23/12128 Katipunan Regis Center, No 327 Katipunan Avenue Corner F.Dela Rosa St., Loyola Heights, Quezon City 10/01/11 09/30/21129 Katipunan - XaviervilleAvenueGF Xavierville Square Condominium, 38 XaviervilleAvenue, Loyola Heights, Quezon City 11/01/08 10/31/18130 Kawit - Binakayan 1497 National Road, Binakayan, 4104, Kawit, Cavite Month to monthSEC FORM 17-A 18

Branch Address Lease Lease ExpiryEffectivity131 Las Piñas - Almanza Alabang Zapote Road, Almanza Uno, Las Piñas,Metro Manila 08/16/06 08/15/16132 Las Piñas - BF Resort BDO Bldg. , BF Resort Drive, Phase 4, BF ResortVillage, Las Piñas City 05/15/03 05/14/18133 Las Piñas - Naga Near corner Naga Road, and Main Access Road, E.T. Homes 2, Pulanglupa 2, Las Piñas City 05/15/11 05/15/21134 Las Piñas - Talon GF MotionTrade Bldg, Alabang-Zapote Road, Talon,Las Piñas City 01/01/06 12/31/15135 Lavezares 321-325 Garden City Condominium corner Lavezares& Camba Street, Binondo, Mla 01/16/09 01/15/19136 Legaspi Village - C. GF Colonade Residences, No. 132 Legaspi Village,PalancaMakati City 11/01/10 10/31/20137 Legaspi Village - Salcedo EBC Bldg. 203 Salcedo St., Legaspi Village, MakatiSt.,City 4/01/12 3/31/17138 Loyola Heights - Berkeley GF, Berkeley Residences, Katipunan Avenue cornerResidencesEscaler St, Loyola Heights, Quezon City 11/19/10 11/18/20139 Magallanes Village Unit 104, The Gate Way Center, Paseo deMagallanes, Magallanes Village, Makati City 08/01/03 07/31/13140 Makati - Esteban GF A & V Crystal Tower, 105 Esteban St., LegaspiVillage, Makati City 06/01/10 05/31/15141 Makati Medical Center GF Makati Medical Center Bldg., Salcedo St. cornerDela Rosa St., Legaspi Village, Makati City 05/31/11 05/30/21142 Makati Shangrila Hotel Unit 191 Shangri-la Hotel Manila, Ayala Center,Makati City 05/01/10 04/30/15143 Makro - Cainta Makro Cainta, Felix Avenue, Cainta Rizal 10/09/07 10/08/12144 Malabon 685 JP Rizal St., Brgy. San Agustin, Malabon City 10/01/08 09/30/13145 Malabon - Gov. Pascual GF MGC Veranda Bldg., 31 Gov. Pascual Avenue,Tenejeros, Malabon City 08/16/08 08/15/18146 Malate - Adriatico Adriatico Executive Center, Adriatico Street, Ermita,Manila 03/16/08 03/15/13147 Mandaluyong - Calbayog DMG Center, Libertad Street corner M. Cruz,Mandaluyong City 01/01/09 12/31/18148 Mandaluyong - Dansalan GF Exbonytz, Inc. Bldg., Boni Avenue corner M.Vicente St. (formerly Dansalan St.) Mand. City 07/01/11 06/30/21149 Mandaluyong - Libertad Sierra Madre Street corner Libertad Street,Mandaluyong City 06/01/09 05/31/19150 Marcos - SumulongHighwayKingsville Commercial Arcade, Marcos Highway,1870 Antipolo, Rizal 07/07/92 07/07/17151 Marcos Highway Town & Country Commercial Arcade, MarcosHighway corner Narra, Cainta, Rizal 10/01/08 09/30/18152 Marikina - Bayanbayanan BDO Bldg., Bayan-Bayanan Avenue near cornerMolave Avenue, Marikina City 07/01/98 06/30/13153 Marikina - Calumpang Florida 1 Bldg., JP Rizal corner M. A. Roxas Sts.,Calumpang, Marikina City 07/16/08 07/15/18154 Marikina - Gil FernandoAvenueGil Fernando Avenue corner Dragon Street, MarikinaCity 10/01/07 09/30/17155 Marikina - J.P. Rizal 265 Jose Rizal St., Sta. Elena 1800, Marikina City 03/01/08 02/28/18156 Marikina - Lamuan J. P. Rizal St. near corner Malaya St., BarangayLamuan, Marikina City 05/01/09 04/30/19157 Marikina - Nangka Unit 1A-GF Bldg 2, Citi Centre Nangka, J.P.RizalAvenue corner Puerto Rico St., Marikina City 06/01/10 05/31/20SEC FORM 17-A 19

Branch Address Lease Lease ExpiryEffectivity158 Masangkay Lung Hong Townmates Association Bldg., 1226Masangkay, Sta. Cruz, Mla. 05/01/04 04/30/14159 Masangkay - CM Recto 1029-1031 JP. Bldg., Masangkay corner Tronqued 04/01/11 03/31/21St., Sta. Cruz, Manila160 Masangkay - Luzon St. 907 Luzon St. corner Masangkay St., Tondo, Manila 06/01/07 05/31/12161 Mayon - Amoranto 489 Units A & B, Mayon Street, Sta. Mesa Heights,Quezon City 10/15/08 10/14/18162 Mayon - N. Roxas No. 241 Mayon Avenue corner Nicanor Roxas St.,1111 Quezon City 08/01/04 07/31/14163 Meralco - Ortigas Meralco Compound, Ortigas Avenue, 1604 Pasig City 01/01/11 12/31/11164 Metropolitan Avenue GF Metropolitan Terraces, Metropolitan Avenuecorner Sacred Heart(formerly Dao St), Makati City 07/01/11 06/30/16165 Mezza Residences GF Mezza Residences, Aurora Blvd. corner AranetaAvenue & Guirayan St., Quezon City 03/01/09 04/30/14166 Monumento MacArthur Highway corner Calle Uno, Caloocan City 10/01/92 09/30/12167 Muñoz - Roosevelt No. 328 Mesa Holding Bldg., Roosevelt Avenue,SFDM, Quezon City 04/21/05 04/20/15168 Muntinlupa - Poblacion GF Elizabeth Center Bldg., National Road Poblacion,Muntinlupa City 09/02/08 09/01/18169 Nagtahan GF SM Nagtahan, Magsaysay Blvd. corner NagtahanRoad, Sampaloc, Manila 08/28/08 10/31/13170 NAIA Arrival Area, Ninoy Aquino Intl. Airport, Ninoy AquinoAvenue, 1705 NAIA, Parañaque CityMonth to month171 Navotas Seafront Commercial Bldg., North Bay Blvd.,Navotas, Metro Manila 01/01/08 12/31/17173 New Manila - E.Rodriguez Sr.Unit 1G & 2E 284 Dona Anita Bldg., E. Rodriguez Sr.Avenue, Quezon City 03/01/11 02/28/16174 Newport City GF Newport Office Building 1, Newport City, PasayCity 09/21/09 09/30/14175 Northbay - Virgo Drive Melandrea III Bldg., Northbay Blvd. near cor. VirgoDrive, Navotas, Metro Manila 03/31/08 03/30/13176 Novaliches 1016 Quirino Highway Town Proper, Brgy. Monica,Novaliches, Quezon City 09/01/91 08/31/16177 Novaliches - Lagro Lot 2-B-6 233 (LRC) PSD 341349, Quirino Highway,Lagro, Novaliches, Quezon City 04/15/09 04/14/29178 Novaliches - Zabarte GF C. I. Plaza, 1151 Quirino Highway near cornerZabarte Road, Brgy. Kaligayahan, Novaliches,Quezon City 05/24/10 05/23/20179 Old Sta. Mesa - Albina Newton Plaza, Old Sta. Mesa corner Albina Street,Sampaloc, Manila 05/06/10 05/05/20180 OneE-comCenter GF OneE-comCenter, Palm Coast Avenue, Mall ofAsia Complex, Pasay City 02/12/08 02/11/13181 Ongpin Unit ABC Imperial Sky Garden, Ongpin Street cornerT. Pinpin, Binondo, Manila 10/01/07 09/30/12182 Ongpin - T. Alonzo Unit 564 and 566 Gel Tower, T. Alonzo St., Sta.Cruz, Manila 01/01/10 12/31/14183 Ongpin-Tomas Mapua 1004-1006 Ongpin Street, Sta. Cruz, Manila 03/04/11 03/03/16184 Ortigas Avenue Ext. -PasigAlong Ortigas Avenue Extension, Rosario, Pasig City07/16/08 07/15/18185 Ortigas Avenue Ext. -CaintaUnit 7-9 Philfoam Furnishing Bldg., Km. 23 OrtigasAvenue Extension, Cainta, Rizal 11/28/03 11/27/13SEC FORM 17-A 20

Branch Address Lease Lease ExpiryEffectivity186 Ortigas Avenue Ext. - St. 15 A. Ortigas Avenue Extension corner Monaco St.,JosephPasig City 01/01/08 12/31/17187 Ortigas Center UGF SM Megamall Bldg. A, Ortigas Center,Mandaluyong City 08/16/09 10/31/14188 Ortigas - Octagon Center GF Octagon Center, San Miguel Avenue, OrtigasCenter, Pasig City 03/01/09 02/28/14Barko Bldg., Pablo Ocampo Sr. Street cornerArellano St., Malate, Manila 06/16/10 06/15/20189 Pablo Ocampo Sr. St. -Arellano190 Pacific Star - Makati GF Pacific Star Bldg., Sen. Gil Puyat Avenue cornerMakati Avenue, Makati City 03/01/11 02/28/16191 Paco 1054-1060 Pedro Gil St., Paco, Manila 06/01/09 05/31/19192 Padre Rada Gosiupo Bldg., 480-482 Padre Rada Corner ElcanoSt., Tondo, Manila 01/01/03 12/31/12193Sky Freight Bldg., Ninoy Aquino Avenue near cornerPascor Drive, Sto. Niño, Parañaque City 03/01/08 02/28/18Parañaque-Pascor Drive194 Parañaque - La Huerta 0422 Quirino Avenue corner J. Ferrer St., La Huerta,Parañaque City 1700 04/26/05 04/25/15195 Parañaque - Moonwalk GF Seal 1 Bldg., Armstrong Avenue corner YosemiteSt., Moonwalk Subdivision, Parañaque City 04/01/09 03/31/14196 Parañaque - N. Aquino JJM Bldg., 2 N. Aquino Ave., Sto. Niño, ParañaqueAvenueCity 06/16/98 06/15/13197 Pasay - Domestic Road Caltex Compound (PDSC/Park 'N Fly Bldg.), NAIAcorner Domestic Road, 1300, Pasay City 10/01/10 09/30/15198 Pasay - Two Shopping 2nd Level, Retail Shop Area, Two Shopping Center,CenterTaft Avenue, Pasay City 11/15/11 11/14/21199 Paseo de Roxas 2 GF BDO Plaza, 8737 Paseo de Roxas St., MakatiCity 12/16/07 12/15/17200 Pasig Caruncho SG Bldg. Caruncho Avenue corner Market Avenue,Pasig City 04/01/10 03/31/20201 Pasig - Kapasigan Mariposa Arcade, A. Mabini cor. Dr. Pilapil St., PasigCity 01/01/04 12/31/13202 Pasig - A. Mabini GF CFM Bldg., No. 97 A. Mabini St., Pasig City Month to month203 Pasig Blvd. Extension -Rosario Along Pasig Blvd. Extension, Rosario, Pasig City 09/01/04 08/31/14204 Pasig - Kapitolyo GF AB Sandoval Bldg., Shaw Blvd. corner OranboDrive, Pasig City 10/01/02 09/30/12205 Pasig - Meralco Avenue GF One Corporate Bldg., Julia Vargas Avenue cornerMeralco Avenue, Pasig City 06/01/10 05/31/20206 Pasig - Pioneer Pioneer Centre, Pioneer St. corner Brixton andUnited Streets, Pasig City 12/16/08 12/15/18207 Pasig - Valle Verde Reliance Center, 99 E. Rodriguez Jr. Avenue, BarrioUgong, Pasig City 06/01/10 05/31/20208 Paso De Blas – NorthExpressway 97 Paso De Blas, 1442 Valenzuela, Metro Manila 09/01/97 08/31/12209 Pasong Tamo Ext. GF Allegro Center, Pasong Tamo Extension, MakatiCity 01/1/12 12/31/16210 Pateros - Elisco Road East Mansion Homes, Phase 1, Eliseo Road, Sto.Rosario, Pateros, Metro Manila 08/01/08 07/31/13211 Pateros - Poblacion GF Milaor Bldg., No. 509 M. Almeda St., Poblacion,Pateros 11/01/08 09/30/18212 Pedro Gil - Adriatico Adriatico near corner Pedro Gil St., Malate, Manila 10/01/10 09/30/20SEC FORM 17-A 21

Branch Address Lease Lease ExpiryEffectivity213 Pedro Gil - A. Mabini 1567-1571 Salud Bldg., Pedro Gil corner A. MabiniSt., Ermita, Manila 02/16/10 02/15/14214 Philam Tower-Valero GF, Philam Tower, 8767 Paseo de Roxas, MakatiCity 12/16/08 12/15/13215 Plaza Calderon - Pedro GF Unit C, Harmonic Seven Bldg., 2332- 2334 PedroGilGil corner Vesta St., Sta. Ana, Manila 01/21/02 01/20/12216 Pioneer Highlands -MadisonUnit 01 (facing Madison St.) Lower Ground Floor ofGlobe Telecom Plaza 1 Building, Pioneer St. cornerMadison St, Mandaluyong City 10/09/07 10/08/12217 Port Area - South Harbor GF Velco Centre, RS Oca Corner A. C. DelgadoStreets, Port Area, Manila 05/01/08 04/30/16218 Project 8 - Shorthorn BDO Bldg., No. 41 Shorthhorn Street, Brgy Toro,Project 8, Quezon City 10/01/99 09/30/19219 Q. I. - E. Rodriguez Sr. GF Ablaza Bldg., 117 E. Rodriguez Ave., QuezonCity 05/01/07 04/30/12220 Quezon Avenue - Araneta GF CSP Bldg., 815 Quezon Avenue, Quezon City 03/07/11 03/06/21221 Quezon Avenue - Quezon Avenue corner Cordillera St., Quezon CityCordillera04/15/00 04/14/15222 Quiapo - Quezon Blvd. Quezon Blvd., 1001 Quiapo, Manila 05/22/07 05/21/12223 Quiapo - Quinta Market Quezon Blvd. corner C. Palanca St., Quiapo, Manila 01/16/08 01/15/18224 Quintin Paredes 524 Enterprise Bldg., Quintin Paredes St.cornerCarvajal St., Binondo, Manila 07/01/07 06/30/17225 Quirino Paco CRS Tower Center, Perdigon Street, Pres. QuirinoAvenue, Paco, Manila 03/01/11 09/30/21226 Rada GF One Legaspi Place, Rada Street, Legaspi Village,Makati City 09/01/11 08/31/16227 Resorts World Manila Newport Blvd., Newport City, Pasay City 12/01/10 11/30/15228 Rizal Avenue - Bambang 1607 Alvarez St. corner Rizal Avenue, Sta. Cruz,1003 Manila 11/04/11 11/03/21229 Rizal Avenue - BatangasSt.230 Rizal - Montalban GF Montalban Town Center, Rodriguez Highwaycorner Lardizabal St., Barangay San Jose,2200 Rizal Avenue corner Batangas St., Sta. Cruz,Manila 09/01/98 08/31/13Rodriguez, Rizal 06/16/10 06/15/20Robinson's Galleria, Ortigas Avenue, 1602 QuezonCity 11/01/08 10/31/13Robinson's Mall corner Pedro Gil M. Orosa St.,Ermita, Manila 08/16/08 08/15/13231 Robinsons Galleria -Ortigas232Robinson's Place - Manila233 Rockwell GF Power Plant Mall, Rockwell Centre, Amapolacorner Estrella St., Makati City 05/15/09 10/31/15234 Rockwell - Ortigas Level 1, Tower 2 The Rockwell Business Center,Ortigas Avenue, Pasig City 10/01/09 09/30/14235 Roxas Blvd. - R. Salas S & L Bldg., Roxas Blvd. St. corner Romero SalasSt., Ermita, Manila 03/01/05 02/28/15236 Rustan's Cubao RC-01A, Times Square Ave. near corner Gen. RoxasSt., Araneta Center, 1109 QC 12/01/12 12/31/12237 Salcedo Golden Rock Bldg., 168 Salcedo St., Legaspi Village,Makati City 01/01/09 12/31/13238 Sales St. - Raon 545 Sales St. cor. G. Puyat St. (Raon), 1016 Sta.Cruz, Manila 5/21/11 5/20/21239 Samson Road GF Unit G Ma. Cristina Bldg., Samson Road corner 08/01/07 07/31/17SEC FORM 17-A 22

Branch Address Lease Lease ExpiryEffectivityUE Tech, Caloocan City240 San Andres San Andres corner A. Linao St., Malate, Manila 07/01/02 06/30/12241 San Juan 88 N. Domingo Street, San Juan 09/01/07 08/31/12242 Savemore - Novaliches Savemore Novaliches, Gen. Luis, Novaliches,Quezon City 01/10/10 12/31/14243 Scout Albano - QuezonAvenue1488 Quezon Ave. , 1103 South Triangle, QuezonCity 04/01/09 03/31/14244 Scout Limbaga - T.Morato102 & 103 The Forum, Tomas Morato Avenue cornerSct. Limbaga Street, 1103, Quezon City 12/03/03 12/02/13245 Shangri-la Plaza Mall -EDSAUnit 129-A Level 1 Shangrila Plaza Mall, EDSAcorner Shaw Blvd., Mandaluyong City 06/01/10 03/31/15246 Shaw - Pasig Blvd. 145 Shaw Boulevard, Pasig City 03/01/10 02/29/20247 Shaw Blvd 555 Shaw Boulevard, Mandaluyong City 01/01/07 10/31/12248 Shaw Blvd. - BeaconPlazaUG 105-UG 106 Beacon Plaza, Shaw Blvd. cornerIdeal St., Mandaluyong City 10/15/03 10/14/13249 Shaw Blvd. - EscrivaDriveAmber Square, Shaw Blvd. near Escriva Drive, PasigCity 04/01/10 05/31/15250 Shaw Blvd. - LibertyCenterGF Units 1 & 2 Bldg. B, Liberty Center, Shaw Blvd.,Mandaluyong City 03/16/11 03/31/21251 Shaw Blvd.-Yulo 285 A. Shaw Blvd. corner L. Cruz Street,Mandaluyong City 01/01/06 12/31/12252 Silver City - Pasig L1-012, L1-013 & L1-014, Level 1, Auto Mall,Frontera Verde Drive corner Julia Vargas St.,Ortigas, Pasig City 09/08/11 09/07/12253 Sixto Antonio - Pasig Sixto Antonio Ave. corner R. Bedaña St., Pasig City 10/27/04 10/26/14254 SM Center Las Piñas LGF SM Center Las Piñas, Alabang Zapote Road,Barangay Pamplona Dos, Las Piñas City 10/02/09 10/31/14255 SM Center Molino GF (Unit 127-130), SM Super Center Molino, MolinoRoad, Bacoor, Cavite 06/01/09 04/30/14254 SM City Bacoor UGF SM City Bacoor, Gen. Aguinaldo Highwaycorner Tirona, Bacoor, Cavite 08/01/09 07/31/14255 SM City Bicutan LGF SM City Bicutan, Doña Soledad corner WestService Road, Parañaque City 10/01/09 10/31/14256 SM City Fairview A Quirino Highway corner Regalado Street, Fairview,Quezon City 08/01/09 07/31/14257 SM City Fairview B SM City Fairview, Quirino Highway corner RegaladoAve., Fairview, Quezon City 11/1/10 10/31/15258 SM City Fairview C LGF Annex 2 SM City Fairview, Quirino Highway cor.Regalado Ave., Fairview, Quezon City 01/15/09 01/31/14259 SM City Manila LGF SM City Manila, Concepcion corner Arrocerosand San Marcelino St., Manila 08/01/10 07/31/15260 SM City Marikina GF SM City Marikina, Calumpang, Marikina City 09/05/08 07/31/13261 SM City Masinag GF SM City Masinag, Marcos Highway, Mayamot,Antipolo City 05/06/11 07/31/16262 SM City North EDSA A GF The Block SM City North, EDSA corner NorthAvenue, Quezon City 08/01/08 07/31/13263 SM City North EDSA B SM City North EDSA Annex 1 Bldg., North Avenuecorner EDSA, Quezon City 12/12/08 01/31/14264 SM City North EDSA C SM City Center Complex, North Avenue cornerEDSA 1105 Quezon City 03/01/08 01/31/13265 SM City Novaliches GF SM City Novaliches, Quirino Highway, 10/22/10 10/31/15SEC FORM 17-A 23

Branch Address Lease Lease ExpiryEffectivityNovaliches, Quezon City266 SM City San Lazaro Felix Huertas cor. A. H. Lacson St., Sta. Cruz, Manila 08/01/07 07/31/12267 SM City Sta. Mesa SM City Sta. Mesa Annex Bldg., Aurora Boulevard,Quezon City 02/01/09 01/31/14268 SM City Sucat A GF SM Supercenter, Sucat, Parañaque City 11/11/09 10/31/14269 SM City Sucat B GF Annex Bldg. B SM City Sucat, Dr. A SantosAvenue, Parañaque City 11/11/08 10/31/14270 SM Corporate Offices Bldg. 104 D.J.W Diokno Blvd., Mall of Asia Complex,Pasay City 02/01/10 01/31/13271 SM Cubao GF SM Cubao, Cubao, Quezon City 10/31/08 10/31/13272 SM HypermarketAdriaticoGF SM Hypermarket Adriatico, M. Adriatico St.,Manila 06/29/10 06/28/15273 SM Hypermarket Cubao EDSA corner Main Street, Cubao, Quezon City 07/01/10 06/30/15274 SM Hypermarket Makati SM Hypermarket Makati, 5560 Osmeña Highwaycorner Finlandia St, San Isidro, Makati City 06/29/10 06/28/15275 SM Makati Shoemart Annex Building, Ayala Center, Makati City 08/01/07 07/31/12276 SM Mall Of Asia A GF Main Mall, SM Mall of Asia, J.W. Diokno Blvd.,Mall of Asia Complex, Pasay City 05/01/10 04/30/15277 SM Mall Of Asia B GF Entertainment Mall, SM Mall of Asia, J.W. DioknoBlvd., Mall of Asia Complex, Pasay City 05/01/10 04/30/15278 SM Megamall A GF SM Megamall Bldg. A, Ortigas Center,Mandaluyong City 11/01/10 10/31/12279 SM Megamall B UGF & LGF SM Megamall Bldg. B, Ortigas Center,Mandaluyong City 08/01/10 07/31/12280 SM Southmall A UGF & LGF SM Southmall, Alabang - Zapote Road,Las Piñas City 02/01/11 01/31/16281 SM Southmall B UGF SM Southmall, Alabang - Zapote Road, LasPiñas CityMonth to month282 SM SupercenterMuntinlupaUGF Supercenter Muntinlupa, Barangay Tunasan,National Road, Muntinlupa City 11/16/07 01/31/13283 SM Supercenter Pasig GF SM Supercenter Pasig, Frontera Verde, OrtigasCenter, PasigMonth to month284 SM SupercenterValenzuelaGF Unit 126 SM City Valenzuela, MacArthurHighway, Karuhatan, Valenzuela City 11/01/07 10/31/12285 Soler U-1118 & 1120 Gracetown Building corner Soler &Alvarado Sts., Binondo, Manila 03/15/97 03/14/17286 Soler - Reina Regente 1087 Soler St., Binondo, Manila 12/31/08 12/31/11287 Southgate Mall - EDSA GF Southgate Mall, EDSA corner Pasong TamoExtension, Makati City 05/14/09 05/14/14288 St. Ignatius - Katipunan 134 Katipunan Avenue, St. Ignatius Village, QuezonCity 09/10/03 09/09/13289 Starmall - Alabang Unit G33 Manuela Metropolis, South Super Highway, 12/01/96 12/01/16Alabang Interchange, Muntinlupa City290 Sto. Cristo 475-477 Kim Siu Ching Foundation Building, Sto.Cristo St., Binondo, Manila 03/01/09 02/28/15291 Sto. Cristo - Commercio No. 686 Sto Cristo St., Binondo, Manila 05/01/11 04/30/13292 Sto Domingo 6 Sto. Domingo Avenue, Quezon City 03/01/11 02/28/21293 Sto. Niño St. - Roosevelt 284 Roosevelt Avenue, San Francisco Del Monte,1105 San Antonio, Quezon City 10/16/08 10/15/18294 Sucat Parañaque Cable TV Bldg., 8210 Dr. A SantosAvenue, Parañaque City 10/01/97 09/30/12SEC FORM 17-A 24

Branch Address Lease Lease ExpiryEffectivity295 Sucat - Villa Mendoza Dr. A. Santos Avenue corner Villa Mendoza Subd.,Sucat Road, Parañaque City 1700 10/01/07 09/30/17296 Tabora 859-861 L & J Building, Tabora Street, Divisoria,Manila 04/01/08 03/31/13297 Taft - Libertad MCF Building, 2250 Taft Avenue corner CollegeRoad, Pasay City 05/25/04 05/24/14298 Taft - Pedro Gil 1430 Taft Avenue, Manila 02/16/07 02/15/12299 Taft Avenue - J. Nakpil 1747 Taft Avenue Corner J. Nakpil Street, Manila 02/01/04 01/31/14300 Taft Avenue - Pres.QuirinoGround Floor, FFW Bldg., 1943 Taft Avenue, Malate,Manila 08/17/11 08/16/16301 Tandang Sora Tandang Sora Avenue corner Marcel Road, QuezonCity 10/01/07 09/30/17302 Tandang Sora -TagumpayM & J Bldg., 578 Tandang Sora Avenue cornerTagumpay, Brgy. New Era, Quezon City 01/01/09 12/31/18303 Tayuman GF Delton Bldg., 1808 Rizal Avenue, Sta. Cruz,Manila 04/01/96 03/31/16304 Teacher's Village GF Luisa 2 Bldg., 107 Maginhawa Street, Teacher'sVillage, Quezon City 08/12/99 08/11/14305 Tierra Nueva - Alabang Sycamore Arcade, Alabang-Zapote National Road,1702 Alabang, Muntinlupa City 04/01/09 03/31/14306 Timog 26 Cedar Executive Building, Timog Avenue cornerScout Tobias St., Quezon City 01/01/10 12/31/14307 Timog - EDSA No. 134 Timog Avenue, 1103 Quezon City 04/20/92 04/19/12308 Timog - Rotonda GF Imperial Palace Suites, Tomas Morato cornerTimog Avenue, South Triangle, Quezon City 01/16/03 09/15/14309 Timog - Victoria Towers Unit F-2 & F-3 Victoria Towers, Timog Avenue cornerPanay Avenue, Quezon City 06/15/08 06/14/13311 Tondo - Pritil 1815 N. Zamora St., 1012 Tondo, Manila 12/02/05 12/01/15312 Tordesillas GF MME Bldg., 108 Tordesillas St. corner GallardoSt., Salcedo Village, Makati City 05/01/09 04/30/19313 Trident - Gil Puyat GF Trident Tower Bldg., 312 Sen. Gil. Puyat Avenue,Makati City 02/01/09 01/31/14314 Tutuban DS-17-18 Tutuban Prime Block, Tutuban Center, CM 09/17/96 08/22/14Recto, Manila City315 Tutuban Centermall M1-B055 B, Ground Floor, Centermall Bldg., TutubanCenter, CM Recto Avenue, Manila 10/22/04 10/21/13316 UN Avenue Puso ng Maynila Bldg., UN Avenue corner A. MabiniStreet, Ermita, Manila 07/01/92 06/30/12317 UN Avenue - Philamlife GF & MF Philamlife U. N. Ave. Bldg., U.N. Avenuecorner Orosa St., Ermita, Manila 02/01/08 01/31/18318 Valenzuela KM. 15 MacArthur Highway, Dalandanan, Valenzuela 03/06/10 03/05/30319 Valenzuela - Gen. T. DeLeon Gen. T. De Leon Street, Valenzuela City 09/20/06 09/19/16320 Valero GF Pearl Center, 145 Valero Street, Salcedo Village,Makati City 11/16/11 11/15/16321 V.A. Rufino - Tuscan GF Tuscan Building, 114 V. A Rufino St., LegaspiVillage, Makati City 06/01/10 05/31/20322 Villar - Salcedo Village Eurovilla III Condominium, 154 Villar St. corner L.P.Leviste St., Salcedo Village, Makati City 06/15/10 06/14/16323 V-Mall GF New V- Mall, Greenhills Shopping Center, SanJuan, Metro Manila 01/16/11 01/15/13SEC FORM 17-A 25

Branch Address Lease Lease ExpiryEffectivity324 Visayas Avenue M & L Bldg. , Visayas Avenue corner Road 1, Brgy.Vasra, Quezon City 10/01/02 09/30/12326 Walter Mart - North EDSA GF Walter Mart Center - North EDSA, Dangay St.,Veterans Village, Quezon City 02/08/08 02/07/13327 Washington - Gil Puyat G/F Keystone Bldg., 220 Gil Puyat Avenue, MakatiCity 05/05/08 05/04/18328 West Avenue 68 Carbal Bldg., West Avenue, Quezon City 04/01/11 03/31/16329 West Avenue - Baler No. 118 Jafer Bldg., West Avenue, Quezon City 3/1/1/11 2/29/2016330 West Avenue - Del Monte No. 40 West Ave., 1104 West Triangle, Q.C 01/02/07 01/01/12331 West Avenue - East Maya 160 West Avenue corner East- Maya Drive, QuezonCity 7/01/11 6/30/2016332 Zurbaran Rizal Avenue corner Fugoso Street, Sta. Cruz,Manila 01/01/11 12/31/15(b)Provincial Branches:Branch Address Lease Lease ExpiryEffectivity1 Abra - Bangued Unit 12 the Rosario Bldg., Taft St. corner MagallanesSt., 2800 Benguet, Abra 02/11/11 01/31/162 Aklan - Kalibo Along XIX Martyrs Street, Kalibo, Aklan 02/01/06 01/31/163 Albay - Daraga Rizal St., 4501 Daraga, Albay 05/08/92 05/07/124 Albay - Polanqui Provincial Road corner Brgy. Road, Brgy. Ubaliw,Polangui, Albay 04/14/10 04/13/255 Albay - Tabaco Along Ziga Avenue, Tabaco, Albay 09/16/05 09/15/156 Angeles - Balibago GF Lawrence Plaza, Macarthur Highway near cor.Charlot St., Balibago, Angeles City, Pampanga 06/10/00 06/09/157 Angeles - MacArthurHighwayGF Excelsior Bldg., 314 Macarthur Highway, Brgy.CM Recto, Angeles City, Pampanga 11/16/11 11/15/168 Angeles City - Nepo Mart GF Angeles Business Center, Teresa Avenue, NepoMart Complex, Angeles City, Pampanga 12/01/98 11/30/139 Angeles - Sto. Rosario Plaza Rafael 1, 1151- D. Sto. Rosario St., Sto.Domingo, Angeles City 05/16/08 05/15/1810 Angono - M.L. QuezonAvenueGF AB Commercial Plaza, ML. Quezon Avenue,Brgy. San Isidro, Angono, Rizal 07/15/06 07/15/1611 Angono - NationalHighwayAurora Bldg., Manila East Road corner Duhat Street,Angono Rizal 06/01/10 05/31/2012 Antipolo Masinag Tripolee Building, Marcos Highway near cornerSumulong Highway, Mayamot, Antipolo City 09/01/03 08/31/1313 Antipolo Plaza Gatsby Building II, M. L. Quezon Street, Antipolo City 08/15/96 08/14/1614 Antipolo -CircumferentialRoadCircumferential Road corner F. Manalo St., AntipoloCity 06/15/05 06/14/1515 Bacolod - Araneta Cineplex Complex, Araneta St., Bacolod City 08/15/99 08/14/1416 Bacolod - Goldenfield Goldenfield Comml Complex, Sincang Araneta St.,Bacolod City 6100 05/01/04 04/30/1417 Bacolod - Gonzaga Gonzaga - Lopez Enterprise Building GonzagaStreet, Bacolod City 05/01/07 04/30/1218 Bacolod - Hilado Hilado cor. F/ Y Manalo Sts., 6100 Bacolod City,Negros Occidental 11/01/07 10/31/17SEC FORM 17-A 26

Branch Address Lease Lease ExpiryEffectivity19 Bacolod - Libertad Corner Hernaez St. and Lopez Jaena St., BacolodCity, Negros Occidental 04/16/11 04/15/2120 Bacolod - Lopue's East Unit 24 & 25 Lopue's East Center, Annex Bldg.,Carlos Hilado, National Highway Brgy. Villamonte,Bacolod City 10/01/11 09/30/1621 Bacolod - Mandalagan GF Sta. Clara Estate Building, Lacson St.,Mandalagan, Bacolod City 10/01/10 09/30/2022 Baguio - Luneta Luneta Hill corner Governor Pack Road, SessionRoad, Baguio CityMonth to month23 Baguio - Abanao Square Abanao Square, Abanao corner Zandueta Sts.,Baguio City 08/01/07 07/31/1424 Baguio - Legarda Our Lady of Fatima Building, Yandoc St. KayangExtension, Baguio City 02/01/06 09/30/1825 Baguio - Session Road GF National Life Bldg., Session Road, Baguio City 04/01/09 03/31/1426 Baliuag - Tagle Corner Rizal & Tagle St., Baliuag, Bulacan 02/18/06 09/30/1627 Batangas - Balayan Antorcha St., Balayan, Batangas 09/12/03 09/11/1328 Batangas - Bauan Kap. Ponso St., Bauan, Batangas 07/01/94 06/30/1429 Batangas - Kumintang Along National Highway, Brgy. Kumintang Ilaya,Batangas City 08/01/08 05/31/1830 Batangas - Lemery Ilustre Avenue corner Lakandula St., Lemery,Batangas 01/01/08 12/31/1731 Batangas - Pallocan West Manuel Pastor Avenue, Pallocan West, BatangasCity 05/05/05 05/04/1532 Batangas - P. Burgos CM Ilagan Building P. Burgos St., Batangas City 12/16/09 12/15/1933 Batangas - Rosario BDO Building G. Carandang St. Corner V. Noble Ally,Brgy.Poblacion, Rosario, Batangas 05/01/11 04/30/3634 Batangas - San Juan Marasigan corner Kalayaan Sts., San Juan,Batangas 06/01/08 05/31/1835 Benguet - La Trinidad GF VC Arcadain Bldg., Km 5, La Trinidad, Benguet 03/01/11 02/28/2136 Biñan - A. Mabini Rey Bldg., A. Mabini St. Poblacion, 4024 Binan,Laguna 01/01/05 12/31/1437 Biñan Cental Mall GF Biñan Central Mall, Unit 8 & 9 Malvar St. CornerOld National Highway, Biñan, Laguna 12/01/11 11/30/2138 Bohol - Tagbilaran CP Garcia Avenue., 56300 Tagbilaran City, Bohol 06/25/06 06/24/1639 Bulacan - Balagtas MacArthur Highway, Brgy. San Juan, 3016 Balagtas,Bulacan 09/29/92 09/28/1240 Bulacan - Bocaue MacArthur Highway, Brgy. Biñang 1st, Bocaue,Bulacan 04/01/07 03/31/1741 Bulacan - Hagonoy GF Ang Puso ng Hagonoy Shopping Center Plaza,Hagonoy, Bulacan 12/01/09 11/30/1942 Bulacan - Obando JP Rizal St., Barangay Catanghalan, 3021 Obando,Bulacan 09/01/97 09/01/1243 Bulacan - Plaridel Along Cagayan Valley Road, Banga, Plaridel,Bulacan 02/01/09 01/31/1944 Bulacan - Pulilan Doña Remedios Trinidad Highway, Sto. Cristo,Pulilan, Bulacan 06/30/04 06/29/1445 Bulacan - San Jose DelMonteNational Highway (Quirino Highway), TungkongMangga, Sn Jose Del Monte City, Bulacan 06/01/10 05/31/2046 Bulacan - San Rafael KM 60, Cagayan Valley Road, Cruz na Daan, SanRafael, Bulacan 04/01/01 03/31/2147 Bulacan - Sta. Maria Gov. NEM Bldg., Gov. F. Halili Avenue, Bagbaguin, Sta. 02/01/03 01/31/13SEC FORM 17-A 27

Branch Address Lease Lease ExpiryEffectivityF. Halili Maria, Bulacan48 Bulacan - Sta. Maria M.G. M. De Leon St., Poblacion, 3022 Sta. Maria, BulacanDeleon03/15/93 03/14/1349 Butuan - J.C. Aquino D & V Plaza II Bldg., JC Aquino Avenue, Butuan CityAvenue02/18/06 02/17/1250 Butuan - Montilla Montilla Blvd. near corner Lopez Jaena St., ButuanCity, Agusan Del Norte 12/01/07 11/30/1251 Cabantuan-Maharlika GF DBS Bldg., along Maharlika Road, Bitas,Highway NorthCabanatuan City 08/01/11 07/31/2152 Cabanatuan - Megacenter Unit 49- B and Unit 3 UGF Megacenter, The Mall, 10/01/98 09/30/18MallGen.Tinio & Melencio Sts. Cabanatuan City53 Cabanatuan - NE Pacific GF, Unit CM-2 (Mall Entrance 2) NE Pacific Mall, KM 11/08/09 11/07/14Mall111 Maharlika Hway, Cabanatuan City, Nueva Ecija54 Cabanatuan - PacoRomanAlong Paco Roman Street, Cabanatuan City08/01/10 07/31/2055 Cabanatuan - Sanciangco Maharlika Road near corner Sanciangco St.,Cabanatuan City 04/30/01 04/29/2158 Cagayan de Oro - Cogon J. R Borja Street, Cagayan De Oro City 05/01/04 04/30/1459 Cagayan de Oro - Hayes GF Trendline Dept. Store, Arch James Hayes St.,Cogon, Cagayan de Oro City 09/01/08 08/31/1860 Cagayan de Oro -OsmeñaPres. S. Osmena corner Ramon Chavez St., Cogon9000, Cagayan de Oro Misamis Oriental 10/01/09 09/30/1961 Cagayan De Oro - Xavier Library Annex Building Corrales Avenue, Cagayan deOro City 02/15/09 02/15/1262 Cainta Junction Hipolito Bldg., Ortigas Avenue Extension, CaintaJunction, Cainta, Rizal 02/01/04 01/31/1463 Cainta - A. Bonifacio Ledor Commercial Center, A. Bonifacio Avenuecorner Samonte Street, Brgy. San Juan, Cainta, Rizal 1/01/2012 12/31/201664 Calamba - Paseo Uno GF Paseo Uno de Calamba, National Highway,Barangay Paciano, Calamba City, Laguna 12/01/10 11/30/2065 Camarines Norte - Daet J. Lukban Street corner Moreno Street Poblacion,Daet, Camarines Norte 03/07/05 03/06/1566 Camarines Sur - Pili Santiago, Pili, Camarines Sur 10/01/08 09/30/1867 Catanduanes - Virac San Juan corner Rizal Sts., 4800 Virac, Catanduanes 05/14/11 05/14/1268 Cavite - Carmona Governor's Drive, Bo. Maduja, 4116 Carmona,Cavite 12/15/96 12/14/1369 Cavite-DasmariñasAguinaldoHighwayGen. Emilio Aguinaldo Highway corner Natividad St.,Dasmarinas, Cavite 05/16/11 05/15/3170 Cavite - EPZA Cavite EPZA Compound, 4106 Rosario, Cavite 08/14/07 08/13/1771 Cavite - Dasmariñas FCIE Governor's Drive, Brgy. Langkaan, Dasmariñas,Cavite 12/16/97 12/15/1272 Cavite - Imus AguinaldoHighwayGF DCR Building, Aguinaldo Highway, 4103 Imus,Cavite 11/18/08 10/31/1873 Cavite - Imus-NuenoAvenue358 Exodus Building, Nueno, Imus, Cavite01/31/11 01/31/1674 Cavite - Naic Governor's Drive corner Soriano Highway, NaicCavite City 11/01/09 10/31/2975 Cavite - Puregold Tanza GF Puregold Tanza, Provincial Road, Tanza, Cavite 10/07/10 10/06/1576 Cavite - Silang 194 J. Rizal corner M. Belen Street, Silang, Cavite 08/01/10 07/31/2077 Cavite - Trece Martires El Paseo Arcade, Indang, Trece Road near CornerGov. Drive, Trece Martires City 07/16/08 07/15/18SEC FORM 17-A 28

Branch Address Lease Lease ExpiryEffectivity78 Cebu - Asiatown IT Park GF TGU Tower, Salinas Drive corner J. M. Del MarSt., Asiatown IT Park, Apas, Cebu City 07/01/09 06/30/1479 Cebu - A.S. Fortuna GF Tanaka Bldg., 869 A. S. Fortuna Banilad,Mandaue City 01/01/06 06/02/2080 Cebu - Ayala Business GF Cebu Towers, Mindanao corner Bohol Avenue,ParkCebu Business Park, Cebu City 06/15/07 06/14/1281 Cebu - Ayala Mall Stall 286A Level 2, West Entry, Ayala Center MallCebu, Cebu Business Park, Cebu City 09/01/10 08/31/1282 Cebu - Banilad TPE Bldg., Governor Cuenco Avenue, Banilad, CebuCity 10/01/10 09/30/2083 Cebu - Bogo P. Rodriguez corner San Vicente Sts., 6010 Bogo,Cebu City 06/18/07 06/17/1784 Cebu - Capitol Osmeña Blvd. corner Ma. Cristina St., 6000 CebuCity 01/01/11 12/31/1585 Cebu - Consolacion GF Annex Bldg. Fooda Saversmart, Consolacion,Cebu 07/23/08 07/22/1386 Cebu - F. Ramos 134 Borromeo Bldg., F. Ramos corner ArlingtonPond, Cebu City 6000 01/01/05 12/31/1487GF Insular Life Cebu Business Centre, MindanaoCebu - Insular LifeBusiness CentreAvenue Corner Biliran Road, Cebu Business ParkCebu City 01/24/11 01/23/2188 Cebu - GaisanoUGF Gaisano Grand Mall Minglanilla, Poblacion,MinglanillaMinglanilla, Cebu City 04/15/11 04/14/2189 Cebu - Magallanes Plaridel Street corner Magallanes St., Cebu City 06/01/11 05/31/1690 Cebu - Mambaling Grand Orchard Commercial Building, C. PadillaStreet, Mambaling, Cebu City 05/16/10 05/15/2091 Cebu - MEZ II Unit 204 NGA Building 2, Pueblo Verde MEZ II,Basak, Lapu Lapu City 09/01/08 08/31/1892 Cebu - North Road National Highway, Labogon, Mandaue City, Cebu 01/01/08 12/31/1793 Cebu - Parkmall Unit 29 - 31 Parkmall, No. 168 Ouano Avenue,Mandaue Reclamation Road, Mandaue City, Cebu 03/26/08 03/25/1394 Cebu - Tabo-an T. Abella St., San Nicolas Central, 6000, Cebu City 05/01/07 04/30/1295 Cebu Cuenco NSLC Building, M. J. Cuenco Avenue, Cebu City 11/01/11 10/31/1296 Cebu Elizabeth Mall GF Elizabeth Mall, Leon Kilat corner SouthExpressway, Cebu City 12/05/08 12/04/1397 Cebu Escario Cebu Escario Street, Cebu City 07/01/09 06/30/1298 Cebu - Guadalupe R. Duterte Corner V. Rama Sts. Guadalupe, CebuCity 07/01/10 06/30/2099 Cebu - J. Mall LGF 01 & LGF 02 J. Mall A.S. Fortuna St., MandaueCebu 09/30/11 09/29/21100 Cebu - Lapu Lapu Unit 9, The Arcade, ML Quezon Highway, Pajo, LapuLapu City 06/01/10 05/31/15101 Cebu Legaspi Legaspi corner Zamora Street, Cebu City 12/16/07 12/15/12102 Cebu Mandaue La Fuerza Building, Subangdaku, Mandaue City 09/01/06 08/31/21103 Cebu Osmeña B. Rodriguez St., Fuenta Osmeña Rotunda, CebuCity 01/01/06 12/31/14104 Cebu - Plaridel 21 Dy Bldg., Plaridel St., Cebu City 07/31/07 08/01/12105 Cebu Tabunok PBS Bldg., 2668 National Highway Tabunok, Talisay,Cebu City 10/16/03 10/15/13106 Clark SEZ - Centennial Centennial Road, Clark Special Eco. Zone, Clarkfield,Pampanga 01/01/07 01/01/22SEC FORM 17-A 29

Branch Address Lease Lease ExpiryEffectivity107 Clark SEZ - Puregold Puregold Duty Free (Expansion) Bldg., Claro M.Recto Highway (formerly Dyess Hway) Clark SpecialEconomic Zone, Clarkfield, Pampanga 09/17/11 09/16/12108 Cotabato - Kabacan Rizal Avenue, National Highway, 9407 Kabacan,North Cotabato 04/28/07 04/27/12109 Cotabato - Midsayap Jaycee St., 9410 Midsayap, North Cotabato 05/01/08 04/30/18110 Dagupan - Perez 386 Perez Boulevard, Dagupan City 07/01/10 06/30/16111 Dagupan - Tapuac Unit 8-10 Mother Goose Play House Bldg.,MacArthur Highway, Tapuac District, Dagupan City,Pangasinan 02/09/06 02/08/16112 Davao - Agdao Lapu- Lapu St., 8000 Agdao, Davao City 08/22/03 08/21/13113 Davao - Bangoy R. Magsaysay Avenue corner C. Bangoy St., 8000Davao City 07/01/02 06/30/12114 Davao - Buhangin Carlos P. Garcia Highway, Buhangin Diversion Road,Davao City 12/01/08 11/30/18115 Davao - Claveria CM Recto St., Davao City 01/01/07 12/31/11116 Davao - Lanang SJRDC Building, Insular Village 1 Commercial Area,Lanang, Davao City 05/01/07 04/30/17117 Davao - Lizada Ramon Magsaysay Avenue corner Lizada St., 8000Davao City, Davao del Sur 08/07/03 08/06/13118 Davao - Monteverde GF Sequoia Inn., Monteverde Avenue, Davao City 09/01/08 08/31/18119 Davao - Narra Tomas Monteverde Avenue corner Narra St., DavaoCity 11/01/08 10/31/18120 Davao - Quirino Avenue Nicolas 1 Bldg. Quirino Ave., 8000,Davao City 09/01/02 08/31/12121 Davao - Rizal Caritas Building Rizal Street corner Pelayo Street,Davao City 06/16/06 06/15/16122 Davao - San Pedro GF KDC, Bldg., San Pedro Street, Davao City, DavaoDel Sur 06/03/02 06/02/12123 Davao - Sta. Ana Monteverde corner F. Bangoy Sts., 8000 Davao City,Davao del Sur 10/01/11 09/30/16124 Davao JP Laurel Landco-PDCP Corporate Center, JP Laurel Avenue,Davao City 12/16/2011 12/15/2013125 Davao Magsaysay R. Magsaysay Avenue, Davao City 12/16/07 12/15/17126 General Santos Santiago Boulevard corner JP Laurel Street, GeneralSantos City 6/16/2011 6/15/2021127 General Santos -PendatunGF Sydney Hotel, corner Pioneer and PendatunAvenue, General Santos City 9500 03/19/10 03/18/20128 Iligan - Quezon Avenue Quezon Avenue, 9200 Iligan City, Lanao, Del Norte 03/01/08 02/28/18129 Ilocos Norte - Batac Aoigan Bldg., Washington St. Batac 2906, IlocosNorte 10/01/07 09/30/17130 Ilocos Sur - Candon National Highway corner Abaya St., 2710 Candon,Ilocos Sur 04/15/97 04/15/12131 Iloilo - Central Iznart St., Lot 317- B - 2- A-1, 5000, Iloilo City, Iloilo 05/29/02 05/28/22132 Iloilo - Gen. Luna 48 LPHTP Bldg. Gen. Luna St., Iloilo City 06/01/09 05/31/19133 Iloilo - Jaro NB Bldg., Lopez Jaena Street, Jaro, Iloilo City 07/15/98 07/14/13134 Iloilo - JM Basa JM Basa Street, Iloilo City 03/01/08 02/29/18135 Iloilo - La Paz GF INJAP Bldg., corner Luna St. & Huervana St., LaPaz, Iloilo City 01/01/11 12/31/20136 Iloilo - Ledesma GF Esther Building, Ledesma Street, Iloilo City 04/01/08 03/31/18137 Iloilo - Molo M. H. Del Pilar corner Jocson Streets, Molo, IloiloCity 02/01/10 01/31/30SEC FORM 17-A 30

Branch Address Lease Lease ExpiryEffectivity138 Iloilo - Quezon St. Lots 3 & 5, Quezon St., Iloiilo City 01/01/08 12/31/17139 Iloilo - Tabuc Suba Roger's Bldg., MacArthur Highway, Tabuc Suba,Iloilo City 07/14/05 07/13/15140 Iriga City Iriga Plaza Hotel, Msgr. Lanuza St., San Francisco,Iriga City, Camarines Sur 04/21/08 04/20/18141 Isabela - Cauayan Along National Highway, Cauayan, Isabela 01/01/08 12/31/22142 Isabela - Ilagan Along Maharlika Highway, Calamagui 2nd, Ilagan,Isabela 03/28/01 09/30/17143 Isabela - Santiago Centro A & A Musgni Bldg., City Road corner Carreon St.,Centro East, Santiago City 03/01/09 02/28/19144 Isabela - SantiagoMaharlika HighwayMaharlika Highway corner Quezon Avenue, VictoryNorte, Santiago City, Isabela 09/01/07 08/31/12145 La Union, Agoo Along National Highway, Barangay San Nicolas,Agoo, La Union 05/16/09 05/15/19146 La Union San Francisco -Rizal Ave.Rizal Avenue corner Ortega Street, San Fernando,La Union 12/16/07 12/15/17147 Laguna - Cabuyao GF Lim-Bell Business Center, JP Rizal St., Cabuyao, 10/01/10 09/30/15Laguna148 Laguna - Pagsanjan J P Rizal Street corner F. De San Juan St., Barangay 05/11/10 05/10/20Dos, Poblacion, Pagsanjan, Laguna149 Laguna - Sta. Cruz Along Regidor Street, Sta. Cruz, Laguna 07/01/08 06/30/18150 Laguna - Technopark GF Laguna Technopark Admin. Bldg. 1, North MainAvenue, Laguna Technopark Biñan, Laguna 12/01/08 11/30/13151 Laoag - Castro Pichay Bldg., JP Rizal corner A. Castro St., LaoagCity 11/01/07 10/31/12152 Legaspi City - Rizal St. Rizal corner Gov. Imperial Street, Legaspi City 05/01/03 04/30/13153 Legaspi City - Rotonda Rizal St., 4500 Legaspi City, Albay 07/01/95 06/30/15154 Leyte - Maasin Tomas Oppus Street, 6600 Maasin, Southern Leyte 08/01/11 07/30/14155 Lipa - Ayala Highway Casa Esparanza Building, Pres. JP Laurel Highway,Mataas na lupa, Lipa City 10/01/03 09/30/13156 Lipa - Robinson's Place Level 1, Space L1- 177, Robinson's Place-Lipa, LipaHighway, Lipa City, Batangas 10/29/08 10/28/13157 Los Baños Olivarez Plaza Cinema & Supermarket Complex,along National Highway, Brgy. Batong Malake, LosBaños 04/15/99 04/15/14158 Lucena - Enriquez Enriquez corner Evangelista St., Quezon 11/20/02 11/19/12159 Lucena - Merchan Merchan Street corner San Fernando Street, LucenaCity 04/02/03 04/01/13160 Lucena - Gulang Gulang No . 505 Quezon Avenue Extension, Brgy. GulangGulang, Lucena City 08/01/08 07/31/18161 Lucena - Quezon Avenue Quezon Avenue corner Profugo St., Lucena City,Quezon 09/20/10 09/19/15162 Mactan - EPZA Mactan - EPZA Compound, 6000 Lapu-Lapu City,Cebu 05/27/07 05/26/17163 Malanday - McArthurHighwayKM 17 MacArthur Highway, Malanday, Valenzuela,Metro Manila 04/02/99 04/02/19164 Malolos - MacArthurHighwayS1 Cabana Space A, The Cabanas Mall, MacArthurHighway, Malolos City 09/01/08 08/31/18165 Marilao - MacArthurHighwayUnit 1-3 Cecila Commercial Complex, AbanganNorte, MacArthur Highway, 3019 Marilao, Bulacan 03/15/03 03/14/13166 Meycauayan - MacArthur Liberty Building, MacArthur Highway Calvario, 06/01/11 05/31/16SEC FORM 17-A 31

Branch Address Lease Lease ExpiryEffectivityHighwayMeycauayan, Bulacan167 Meycauayan - Malhacan Brgy. Northern Hills, Malhacan, Meycauayan,Bulacan 10/01/08 09/30/13168 Mindoro - Calapan JP Rizal St., 5200 Calapan, Oriental Mindoro 07/15/07 07/14/12169 Misamis Occ. - Oroquieta Mayor A. Enerio St., Oroquieta City, 7207 MisamisOccidental 08/01/07 07/31/17170 Misamis Oriental -GingoogNational Highway, Gingoog City, Misamis Oriental09/01/08 08/31/18171 Naga - General Luna Nos. 80-82 Gen. Luna Street, Dinaga, Naga City 02/15/06 02/14/16172 Naga - MagsaysayAvenueMagsaysay Avenue, Naga City05/12/08 05/11/18173 Naga - San Francisco Brgy. San Francisco Peñafrancia Avenue, Naga City 12/01/03 11/30/13174 Negros Occ - Binalbagan Biscom Compound Binalbagan, Negros Occidental 12/01/05 11/30/20175 Negros Occ - Hinigaran Aguinaldo corner Rizal St., Hinigaran 6106, NegrosOccidental 06/23/08 06/22/18176 Negros Occ - San Carlos S. Carmona St. corner Rizal St., San Carlos City,Negros Occidental 08/01/05 07/31/15177 Negros Occ - Victorias Osmeña Ave., Victorias City, Negros Occidental,6119 03/01/09 03/28/19178 Nueva Ecija - San Jose Maharlika Road, 3121 San Jose City, Nueva Ecija 06/19/11 06/18/21179 Nueva Ecija - Sta. Rosa Along Maharlika Highway, Sta. Rosa, Nueva Ecija 12/01/08 11/30/18180 Nueva Ecija - Talavera Maharlika Highway, Marcos District, Talavera, NuevaEcija 09/16/07 09/15/17181 Nueva Vizcaya - Solano National Highway, Solano, Nueva Vizcaya 09/15/98 09/14/13182 Olongapo GF & 2F KT Tower, Rizal Avenue East corner 18thSt., Bajac, Olongapo City 01/16/08 01/15/18183 Pampanga - Apalit GF Quintos Bldg., MacArthur Highway, San Vicente,Apalit, Pampanga 08/28/01 08/27/21184 Pampanga - Guagua Yabut Bldg., Plaza Burgos 2003, Guagua, Pampanga 02/12/02 02/11/12185 Pampanga - Lubao Olongapo-Gapan Road, Lubao, Pampanga 07/01/10 06/30/20186 Pampanga -SanFernando DoloresMcArthur Highway, Dolores, 2000 City of SanFernando, Pampanga 07/01/09 06/30/19187 Pampanga-San FernandoMacArthur HighwayGF Doña IsaFel Building II, Dolores, City of SanFernando, Pampanga 10/01/07 09/30/17188 Pampanga-San FernandoGen. HizonGen. Hizon Extension, San Fernando, Pampanga12/18/11 12/17/12189 Pampanga-San FernandoSindalanPalm Building, McArthur Highway, Sindalan, SanFernando City, Pampanga 12/16/02 12/15/12190 Pangasinan - Alaminos Marcos Avenue, Palamis, 2404 Alaminos,Pangasinan 06/01/10 05/31/15191 Pangasinan - Carmen MacArthur Highway, Carmen East, 2441 Rosales,Pangasinan 06/11/99 06/10/14192 Pangasinan - Calasiao GF Señor Tesoro Academy Bldg., San Miguel,Calasiao, Pangasinan 06/01/08 05/31/18193 Pangasinan - Lingayen 80 Avenida Rizal East, Lingayen, Pangasinan 04/06/01 04/05/16194 Pangasinan - San Carlos Polaris St., 2420 San Carlos City, Pangasinan 03/22/93 03/21/13195 Pangasinan - Tayug Along Quezon Blvd., Poblacion Tayug, Pangasinan 01/01/11 12/31/20196 Rizal - Tanay Tanay Town Center, Sampaloc Road corner F. T.Catapusan St., Plaza Aldea, Tanay, Rizal 05/16/20 05/15/20197 Robinson's Dumaguete Robinsons Dumaguete, Dumaguete Business Park,South Road, Calingdagan, Dumaguete City 03/15/10 03/14/15SEC FORM 17-A 32

Branch Address Lease Lease ExpiryEffectivity198 Robinson's - Metro East Level 1 (L1, 160, 162) Robinsons Metro Manila East,Marcos Highway, Pasig City 03/01/11 02/28/21199 Robinson's Place - San Unit 1-0144, Robinson's Place, San Nicolas, IlocosNicolasNorte 10/15/07 10/14/12200 Samar - Catbalogan Del Rosario St. corner Allen Avenue, 6700Catbalogan, Samar 11/01/10 10/31/15201 San Pablo - Maharlika GF Bien Paz Arcade, Maharlika Highway Junction,HighwaySan Rafael, San Pablo City 06/17/08 06/16/18202 San Pablo - Paulino M. Paulino St., San Pablo City 06/01/08 05/31/18203 San Pedro Tayao Bus. Ctr. Bldg., A Mabini St., San Pedro,Laguna 05/08/07 05/07/12204 San Pedro-NationalHighwayMega Building, National Highway, San Pedro,Laguna 02/25/06 12/31/17205 San Pedro - Pacita GF M. Allen Bldg., Km 31, Old National, NationalHighway, San Pedro, Laguna 01/16/08 01/15/20206 San Pedro - RosarioComplex 1Lots 11 & 12 Rosario Avenue Complex 1, San Pedro,Laguna 05/01/11 04/30/36207 Savemore - AmangRodriguezGF Savemore Amang Rodriguez, GBU Bldg., AmangRodriguez Avenue corner Evangelista Street,Barangay Santolan, Pasig City 07/29/10 07/28/15208 SM City Bacolod GF Southwing Bldg., SM City Bacolod, PoblacionReclamation Area, Bacolod City 02/01/09 01/31/14209 SM City Baguio UGF SM City Baguio, upper Session Road, BaguioCityMonth to month210 SM City Baliwag GF SM City Baliwag, Barangay Sto. Cristo, Baliuag,Bulacan 12/12/08 10/31/13211 SM City Batangas GF SM City Batangas, Barangay Pallocan West,Batangas City 11/01/09 10/31/14212 SM City Cagayan De Oro GF SM City Cagayan de Oro, Pueblo de OroBusiness Park, Upper Canituan, Cagayan de Oro,Misamis Oriental 04/01/08 01/31/13213 SM City Calamba GF SM City Calamba, National Highway, BarangayReal, Calamba City 10/15/10 10/31/15214 SM City Cebu SM City Cebu North Reclamation Area, Cebu City 05/01/10 04/30/12215 SM City Cebu B UGF, The North wing - SM City Cebu, NorthReclamation Area, San Jose dela Montaña cornerM.J. Cuenco Avenue, Cebu City 11/01/09 10/31/14216 SM City Clark GF SM City Clark, Clark Field, Pampanga 08/01/08 07/31/13217 SM City Dasmariñas SM City Dasmarinas, Bo. Pala-Pala, Dasmarinas,Cavite 08/01/09 07/31/14218 SM City Davao UGF SM City Davao, Brgy., Matina, Davao City Month to month219 SM City Iloilo UGF SM City Iloilo, Benigno Aquino Avenue,Mandurriao, Iloilo City 08/01/10 07/31/15220 SM City Lipa GF SM City Lipa, Ayala Highway, Lipa City, Batangas 08/01/08 07/31/13221 SM City Lucena GF SM City Lucena (LC - 177- 178), PagbilaoNational Road, Lucena City 07/01/08 07/31/13222 SM City Marilao GF SM City Marilao, MacArthur Highway, Marilao,Bulacan 02/01/08 01/31/13223 SM City Naga GF SM City Naga, Brgy. Triangulo, Central BusinessDistrict II, Naga City 05/01/09 04/30/14224 SM City Pampanga A GF SM City Pampanga, San Fernando Mexico, 08/01/07 07/31/12SEC FORM 17-A 33

Branch Address Lease Lease ExpiryEffectivityPampanga225 SM City Pampanga B GF SM City Pampanga Annex Bldg. 4, SanFernando, Pampanga 10/19/07 10/31/12226SM City Rosales, Carmen East, Rosales,SM City Rosales Pangasinan 11/28/08 01/31/14227 SM City Rosario GF SM City Rosario, General Trias Drive, Brgy.Tejero, Rosario, Cavite 11/20/09 10/31/14228 SM City San Pablo GF SM City San Pablo, National Highway, BarangaySan Rafael, San Pablo City, Laguna 10/01/10 09/30/15229 SM City Sta. Rosa GF SM City Sta. Rosa, Barrio Tagapo, Sta. Rosa,Laguna 5/1/2011 4/30/2014230 SM City Tarlac UGF & LGF, SM City Tarlac, MacArthur Highway,Barangay San Roque, Tarlac City 04/23/10 07/31/15231 SM City Taytay GF Building A, SM City Taytay, Manila East Road,Brgy. Dolores, Taytay, Rizal 11/09/07 10/31/12232 SM Delgado GF SM Delgado Building, Valeria Street, Iloilo City 02/01/10 01/31/14233 SM Market MallDasmariñasGF Dasmariñas, Bagong Bayan Resettlement,Project Area (DBB-B), Congressional Road, Kadiwa,Dasmariñas City, Cavite 12/09/11 10/31/16234 Sorsogon City Son Bldg., R. Magsaysay Avenue, Sorsogon City 02/14/07 02/13/17235 Sta. Lucia East - Cainta Sta. Lucia East Grand Mall, Marcos Highway cornerFelix Avenue, 1900 Cainta, Rizal 01/01/10 12/31/11236 Sta. Lucia East - Felix GF Phase 1, Sta. Lucia Grand Mall, Marcos HighwayAvenuecorner Felix Avenue, Cainta 7/1/2011 6/30/2012237 Sta. Rosa - Don Jose PCC Bldg., Sta. Rosa Tagaytay Road, Brgy. DonJose, Sta. Rosa, Laguna 05/01/09 04/30/14238 Subic - Times Square 420 Rizal Highway, Subic Bay Freeport Zone, 2200Olongapo City, Zambales 03/16/09 03/15/19239 Surigao Magallanes corner San Nicolas St., 8400 SurigaoCity 03/01/08 02/28/13240 Tacloban - Justice Philamlife Bldg., Justice, Romualdez St. corner P.RomualdezPaterno St., Tacloban City 07/01/07 06/30/12241 Tacloban - Rizal Avenue Roqson Building, Rizal Avenue corner P. Burgos St.,6500 Tacloban City, Leyte 07/01/02 07/30/12242 Tacloban - Zamora Carlos Chan Bldg. P.Zamora Street, Tacloban City 08/02/04 08/01/14243 Tagaytay - Mendez Along National Road, Barangay Mendez Junction,JunctionTagaytay City 03/01/11 02/28/21244 Tagaytay - Rotonda Frablyn Tower (Tolentino Bldg.), Emilio AguinaldoHighway, Tagaytay 10/24/05 10/23/15245 Tanauan - A. Mabini A. Mabini St., Tanauan, 4232 Batangas 04/01/08 03/31/18246 Tanauan - JP Laurel Pres. J. P. Laurel Highway corner Sixto Castillo St.,HighwayPoblacion, Tanauan, Batangas 12/16/07 12/15/17247 Tarlac - Camiling Romulo St., Brgy. Poblacion, A. Camiling, Tarlac 05/01/09 04/30/19248 Tarlac - Concepcion L. Jaena cor. L. Cortes Sts., San Nicolas, 2316Concepcion, Tarlac 08/01/98 07/31/13249 Tarlac - F. Tañedo F. Tanedo cor. Juan Luna St., Tarlac City 07/01/04 06/30/14250 Tarlac - Paniqui M. H. Del Pilar St. McArthur H-way 2307, Paniqui,Tarlac 10/09/97 10/08/17251 Taytay - Metro East Road BDO Bldg., East Road, Taytay, Rizal 07/09/98 07/08/18252 Taytay National Highway Korte Rosario Restaurant, Taytay National Highway,Ilog Pugad, Brgy. San Juan, Taytay, Rizal 10/27/04 10/26/14SEC FORM 17-A 34

Branch Address Lease Lease ExpiryEffectivity253 Urdaneta - MacArthur 182 LIS Bldg., McArthur Highway, San Vicente,HighwayUrdaneta 06/01/08 05/31/18254 Vigan - Plaza Maestro GF Plaza Maestro Commercial Complex, Burgos &Florentino Sts., Vigan City, Ilocos Sur 04/01/03 03/31/13255 Waltermart Center - GF Waltermart Center - Makiling, National Highway,MakilingBrgy. Makiling, Calamba, Laguna 07/26/11 07/25/16256 Watermark - Pampanga GF Waltermart Pampanga, MacArthur Highway, SanAgustin, San Fernando Pampanga 01/07/11 01/06/16257 Waltermart - Sta. Maria GF Sta. Maria Provincial Road corner By Pass Road,Brgy.Sta.Clara, Sta. Maria, Bulacan 01/08/09 01/07/14258 Waltermart - Sta. Rosa San Lorenzo Drive Corner Balibago Road, Brgy.Balibago, 4026 Sta. Rosa, Laguna 10/01/07 09/30/12259 Zambales, Iba Zambales - Pangasinan Provincial Road, Brgy.Sagapan, Iba, Zambales 10/01/11 09/30/21260 Zamboanga Grand Astoria Hotel, Annex Building, M. D. JaldonStreet, Zamboanga City 06/01/06 05/31/14261 Zamboanga - Ipil National Highway Ipil, 7001 Zamboanga Del Sur 04/01/10 03/31/15262 Zamboanga - MayorJaldonMayor Jaldon Avenue, Brgy. Canelar, ZamboangaCity 11/01/06 10/31/163) Limitations on PropertyOther than the properties owned by the Bank, the other properties utilized by the Bank are subjectto the respective terms of lease.4) Properties to be acquiredThe Bank does not have any current plans to acquire any property within the next twelve (12)months.Item 3. Legal ProceedingsThe Bank is a party to various legal proceedings which arise in the ordinary course of itsoperations. Following existing regulatory requirements, no such legal proceedings, eitherindividually or in the aggregate, are expected to have a material adverse effect on the Bank or itsconsolidated financial condition. A discussion of the other legal proceedings of the Bank is found inthe Notes to the Audited Financial Statements as of the year ended 31 December 2011.OthersThe Group is also a defendant in various cases pending in courts for alleged claims against theGroup, the outcome of which are not fully determinable at present. As of 31 December 2011,management believes that, liabilities or losses, if any, arising from these claims would not have amaterial effect on the financial position and results of operations of the Group and will be taken upif and when a final resolution by the courts is made on each claim.SEC FORM 17-A 35

Item 4. Submission of Matters to a Vote of Security HoldersThere were no matters submitted during the fourth quarter of the fiscal year covered by this reportto a vote of security holders.Part II Operational and Financial InformationItem 5. Market for Issuers Common Equity and Related Stockholder Matters1) Stock PricesThe Bank’s common shares are traded at the PSE. The high and low sales prices for each quarterwithin the last two (2) fiscal years are as follows:High LowFirst Quarter 2010 42.00 34.00Second Quarter 2010 52.50 38.50Third Quarter 2010 63.00 45.00Fourth Quarter 2010 63.95 53.60First Quarter 2011 59.00 45.80Second Quarter 2011 59.50 51.50Third Quarter 2011 64.50 46.00Fourth Quarter 2011 59.40 47.50Source: www.pse.com.phAs of 16 March 2012, the closing price of the Bank’s common shares is P69.00.2) Holders of SecuritiesThe number of common shareholders of record as of 31 December 2011 was 13,517. Commonshares outstanding as of 31 December 2011 stood at 2,607,437,907. The top twenty (20) commonshareholders are as follows:Name Holdings % to Total1 PCD Nominee Corp. (Filipino) 718,702,393 27.56%2 PCD Nominee Corp. (Non-Filipino) 691,357,854 26.51%3 SM Investments Corporation 683,841,602 26.23%4 DBMN OT-024 SM Investments Corporation 208,097,814 7.98%5 Trans Middle East Philippines Equities, Inc. 93,289,752 3.58%6 Multi Realty Development Corporation 64,035,334 2.46%7 Shoemart, Inc. 54,307,615 2.08%8 United Overseas Bank Limited 22,429,906 0.86%9 Sysmart Corporation 3,553,023 0.14%10 Edilberto Narciso 2,539,274 0.10%SEC FORM 17-A 36

11 DHS Investment 2,269,679 0.09%12 Keng Koc Co &/or Mary D. Co 1,981,656 0.08%13 Senen T. Mendiola 1,758,676 0.07%14 Ismael M. Estella 1,545,006 0.06%15 Andrew L. Tan 1,227,592 0.05%16 Anita S. Lim 1,224,000 0.05%17 Lily S. Lim 1,215,000 0.05%18 Simeon Tan 1,146,474 0.04%19 Ernest Lee Go 1,011,771 0.04%20 San Lim 1,009,558 0.04%Sub-Total 2,556,543,979 98.07%Others 50,893,928 1.93%Total Outstanding Shares 2,607,437,907 100.00%3) DividendsThe Bank’s Board of Directors is authorized to declare dividends annually. Stock Dividenddeclarations require further approval of stockholders representing not less than two-thirds (2/3) ofall stocks outstanding and entitled to vote. Such stockholders’ approval may be given at a generalor special meeting duly called for the purpose. Dividends may be declared only from surplusprofits after making proper provisions for necessary reserves in accordance with applicable lawsand the regulations of the BSP. The declaration of dividends by Philippine banks also requiresBSP approval.On 28 February 2009, the Board approved the declaration of annual dividend on pesodenominated and semi-annual dividend on U.S. dollar denominated preferred shares at the rate of6.5% per annum each for a total dividend of P84 million for the peso denominated preferred sharesand US$1.6 million for the U.S. dollar denominated preferred shares. The dividends wereapproved by the BSP on 17 July 2009 and were paid to the stockholders on 23 July 2009.On 23 May 2009, the Board approved the declaration of cash dividends amounting to P0.28 percommon share or a total of P645 million payable to stockholders of record as of 11 August 2009.The cash dividends were approved by the BSP on 17 July 2009 and were paid to the stockholderson 28 August 2009.On 9 January 2010, the Board approved the declaration of annual cash dividends on pesodenominated preferred shares at the rate of 6.5% per annum amounting to P330 million. Thedeclaration was approved by BSP on 19 February 2010 and was paid on 19 March 2010.On 28 May 2010, the Board of the Parent Bank approved the declaration of cash dividendsamounting to P0.80 per common share or a total of P2.1 billion payable to stockholders of recordas of 17 August 2010. The cash dividends were approved by BSP on 1 July 2010 and were paid tothe stockholders on 27 August 2010.SEC FORM 17-A 37

On 29 January 2011, the Board of the Parent Bank approved the declaration of annual dividendson peso denominated preferred shares at the rate of 6.5% per annum for a total dividend of P330million. The declaration was approved by BSP on 3 March 2011 and was paid on 15 March 2011.On 27 May 2011, the Board of the Parent Bank approved the declaration of cash dividendsamounting to P1.00 per common share or a total of P2.6 billion payable to stockholders of recordas of 16 August 2011. The cash dividend declaration was approved by BSP on 23 June 2011 andwas paid on 31 August 2011.4) Recent Sales of Unregistered Securities (within 3 years)On 20 March 2009, the Bank issued P3.0 billion unsecured subordinated debt qualifying as Tier 2Capital due on 20 March 2019 with coupon interest of 7.5% per annum callable with step-up in2014 (the Series 3 Notes). This issuance was approved by the Board on 31 January 2009.The Notes represent direct, unconditional, unsecured and subordinated peso-denominatedobligations of the Parent Bank, issued in accordance with the Terms and Conditions under theMaster Note. The Notes, like other subordinated indebtedness of the Parent Bank, aresubordinated to the claims of depositors and ordinary creditors, are not a deposit, and are notguaranteed nor insured by the Parent Bank or any party related to the Parent Bank, such as itssubsidiaries and affiliates, or the PDIC, or any other person. The Notes shall not be used ascollateral for any loan made by the Parent Bank or any of its subsidiaries or affiliates. The Notescarry interest rates based on prevailing market rates, with a step-up provision if not called on thefifth year from issue date. The Parent Bank has the option to call the Notes on the fifth year,subject to prior notice to Noteholders. The Notes were used to expand the Parent Bank’sconsumer loan portfolio and to refinance an existing issue of Lower Tier 2 debt. The Notes alsoincreased and strengthened the Parent Bank’s capital base, in anticipation of continued growth inthe coming years.On 27 June 2011, the Bank issued P8.5 billion unsecured subordinated notes eligible as LowerTier 2 Capital due on 27 September 2021, callable on 2016 (the Series 4 Notes) bearing aninterest rate of 6.50% per annum, pursuant to the authority granted by the BSP to the Bank on 7April 2011 and BSP Circular No. 280 Series of 2001, as amended, and BSP Circular No. 709Series of 2011. The issuance was approved by the Board on 28 August 2010.On 7 October 2011, the Bank issued P6.5 billion unsecured subordinated notes eligible as LowerTier 2 Capital due on 7 January 2022, callable on 2016 (the Series 5 Notes) bearing an interestrate of 6.375% per annum, pursuant to the authority granted by the BSP to the Bank on 7 April2011 and BSP Circular No. 280 Series of 2001, as amended, and BSP Circular No. 709 Series of2011. The issuance was approved by the Board on 28 August 2010.SEC FORM 17-A 38

On 22 October 2010, the Bank completed a US$300 million Senior Bond Issue. The bondsrepresent direct, unsecured obligations of BDO and have a coupon of 3.875% and a yield of3.95%. Proceeds of the Senior Bonds were meant to support the Bank’s business expansion plansand for general banking and re-lending purposes.Item 6 – Management’s Discussion and Analysis or Plan of Operations1) Management’s Discussion and AnalysisBalance Sheet – 2011 vs. 2010Total Resources expanded by 10% settling at P1.1 trillion on account of a 24% surge in grosscustomer loans.Cash and Other Cash Items grew 24% to P33.1 billion from higher levels of deposit liabilities. Duefrom BSP, on the other hand, declined 10% to P124.9 billion as excess liquidity was used to fundloan growth. Due from Other Banks was up 14% to P24.7 billion from increased levels ofplacements and working balances with counterparty banks.Investment Securities slid slightly by 5% to P188.4 billion. Financial Assets at Fair Value throughProfit or Loss as well as Held-to-Maturity Securities went down by 35% to P4.8 billion and by 10%to P93.7 billion, respectively. On the other hand, Available for Sale (AFS) Securities rose 5% toP89.9 billion.Net Loans and Other Receivables expanded by 19% to P673.9 billion as continued demand forcorporate and consumer loans pushed gross customer receivables up by 24%. SecuritiesPurchased Under Reverse Repurchase Agreements and Other Receivables likewise grew by 71%and 29%, respectively. On the other hand, Interbank Loans and Unquoted Debt SecuritiesClassified as Loans fell by 72% and 37%, respectively.Equity Investments climbed 24% to P4.2 billion due to earnings from investments in associatesengaged in real estate and insurance. Investment Properties dropped 15% to P10.1 billion onaccount of continued ROPA disposal programs. Other Resources went up 15% to P16.8 billionmainly owing to higher levels of miscellaneous assets consistent with growing business volumes.Total Deposits expanded by 10% to P858.6 billion from aggressive marketing efforts for low costdeposits. Demand and Savings Deposits rose by 7% and 13%, respectively, to P48.5 billion andP482.5 billion as Time Deposits went up by 5% to P327.6 billion.Bills Payable contracted by 10% to P59.5 billion following lower levels of interbank borrowings.Subordinated Notes Payable increased 65% to P38.3 billion owing to an P8.5 billion issuance inJune 2011 and a P6.5 billion issuance in October 2011.Other Liabilities went up 9% to P44.1 billion mainly from increased levels of outstanding checks,accounts payable and accrued expenses.SEC FORM 17-A 39

Total Equity grew by 9% to P97.0 billion owing to the Bank’s profitable operations.Contingent Accounts – 2011 vs. 2010Total Contingent Accounts climbed 16% to P1.3 trillion on account of the following:• Trust Department Accounts increased 25% to P711.4 billion from a larger portfolio of funds managed.• Unused Letters of Credit and Outstanding Guarantees Issued rose 8% and 42% to P33.4 billion andP1.2 billion, respectively, owing to higher volume of trade transactions.• Bills for Collection and Late Deposits and Payments Received grew by 9% and 44% to P6.0 billion andP2.2 billion, respectively, due to a larger volume of outstanding transactions as of year-end 2011.• Increased treasury activities brought about the following:• Spot Exchange Bought surged 116% to P7.8 billion• Spot Exchange Sold rose by 7% to P4.5 billion• Forward Exchange Bought went up by 6% to P151.9 billion• Forward Exchange Sold grew 16% to P188.6 billion• Other Contingent Accounts expanded 18% to P133.1 billion primarily from an increase in committedcredit card lines on account of a larger cardholder customer base.Export L/Cs Confirmed declined 25% to P97 million from reduced levels outstanding as of the cut-off date.Likewise, Interest Rate Swap Receivable and Interest Rate Swap Payable dropped 66% and 67% to P8.8billion and P8.6 billion, respectively.Income Statement – For the years ended 31 December 2011 vs. 2010Net Income attributable to Equity holders of the Parent Company improved 19% to P10.5 billionprimarily owing to higher fee-based income and foreign exchange gains.Net Interest Income was slightly down by 1% to P33.8 billion as higher loan volumes and animprovement in funding mix coming from an expansion in low cost deposits, were tempered bydeclining market rates and competitive pricing pressures. The Bank continued with itsconservative asset approach setting aside P6.1 billion in Provision for Impairment Losses for loans,securities and other assets.Other Income grew by 17% to P20.9 billion led by increases in recurring fee-based income fromTrust, credit cards, electronic banking and payments as well as capital markets businesses.Foreign Exchange Gain also soared to P1.7 billion due to increased trade transactions, OFWremittances as well as treasury trading activities. On the other hand, Trading Gain was down 16%to P4.7 billion owing to less favorable market conditions in 2011.Operating Expenses were prudently managed, showing a growth of 4% ending at P36.3 billion.The increases were mainly from the following accounts:• Insurance expenses rose 12% owing to higher deposit levels.SEC FORM 17-A 40

• Advertising expenses went up 7% from continued advertising, marketing and promotionalcampaigns.• Litigation/Assets Acquired expenses increased 24% due to ROPA-related maintenance anddisposal expenses.Comprehensive Income – For the years ended 31 December 2011 vs. 2010From a Net Income of P10.6 billion, Total Comprehensive Income for 2011 registered at P11.2billion owing to unrealized fair value gains on AFS Securities of P637 million and a translationadjustment related to foreign operations amounting to negative P9 million.The Total Comprehensive Income was 9% lower compared to 2010, which included a P3.8 billionunrealized gains on AFS Securities and a negative P350 million translation adjustment related toforeign operations.Key Performance Indicators – 2011 vs. 20102011 2010 Inc/(Dec)Return on Average Common Equity 11.7% 11.7% 0.0%Return on Average Equity 11.4% 11.3% 0.1%Return on Average Assets 1.0% 1.0% 0.0%Net Interest Margin 3.5% 4.1% -0.6%Capital to Risk Assets 15.8% 13.8% 2.0%Basic Earnings Per Share 3.91 3.37 0.54Return on Average Common Equity was steadfast at 11.7% while Return on Average Equityinched up to 11.4%, as the higher bottomline profits were set against an also higher equity base.Return on Average Assets was likewise steady at 1.0% due to a similar increase in the Bank’sasset base.Net Interest Margin went down to 3.5% due to margin compression arising from prevailing systemliquidity and competitive pricing pressures.Capital to Risk Assets rose by 2.0% to 15.8% on account of profitable operations and the twoissuances of Unsecured Subordinated Notes totaling P15.0 billion.Basic Earnings Per Share grew by P0.54 to P3.91 owing to the increase in bottomline profts.SEC FORM 17-A 41

Balance Sheet – 2010 vs. 2009Total Resources expanded by 16% reaching P1.0 trillion primarily owing to growth in customerloans and liquid assets.Cash and Other Cash Items contracted by 13% to P26.7 billion as the Bank maximized earningson reserve assets. Due from BSP surged 114% to P138.5 billion on account of a larger depositbase as well as deployment of excess funds. Due from Other Banks increased by 30% to P21.8billion from higher levels of placements and working balances with foreign banks.Investment Securities went up 15% to P197.3 billion as Available-for-Sale Securities expanded by82% to P85.7 billion. On the other hand, Financial Assets at Fair Value through Profit or Loss aswell as Held-to-Maturity Securities went down 13% and 10% to P7.4 billion and P104.2 billion,respectively.Net Loans and Other Receivables rose 8% to P566.0 billion owing to a 15% expansion in grosscustomer receivables from sustained demand for corporate and consumer loans. Conversely,Interbank loans, Securities Purchased Under Reverse Repurchase Agreements (SPURRA),Unquoted Debt Securities Classified as Loans (UDSCL) and other receivables dropped 18%, 74%,34% and 29%, respectively, to provide additional funding for the expansion in customer loans.Equity Investments climbed P1.7 billion due to investment banking underwriting activities as well asadditional investments in insurance business.Investment Properties dropped 13% to P12.0 billion attributed mainly to the effective ROPAdisposal programs undertaken by the Bank.Other Resources went down 16% to P14.6 billion due to subsequent disposition of miscellaneousassets and float items.Total Deposits expanded by 13% to P782.6 billion on account of aggressive marketing efforts fordeposits partly through extended banking hours. Demand and Savings Deposits grew by 6% and20% to P45.4 billion and P426.0 billion, respectively, while Time Deposits likewise went up by 5%to P311.2 billion.Bills Payable grew 110% to P65.9 billion due to the US$300 million Senior Notes issuance as wellas higher level of borrowings from foreign banks.Other Liabilities declined by 10% to P40.5 billion primarily owing to reduced levels of accountspayable and domestic bills purchased.Total Equity expanded by 31% to P88.7 billion from profitable operations and an P11.1 billioncommon share issuance in April 2010.SEC FORM 17-A 42

Contingent Accounts – 2010 vs. 2009Total Contingent Accounts went up by 15% to P1.1 trillion owing to the following:• Trust Department Accounts grew 25% to P570.0 billion from higher levels of InvestmentManagement Accounts and Unit Investment Trust Funds.• Unused Commercial Letters of Credit and Export Letters of Credit Confirmed increased by17% and 196% to P31.0 billion and P130 million, respectively as a consequence of highervolume of trade transactions.• Bills for Collection expanded by 31% to P5.5 billion as reflected in higher levels of bills, draftsand checks sent for collection as of year-end 2010.• Other Contingent Accounts increased by 17% to P112.8 billion owing to an expansion incommitted credit card lines.Outstanding Guarantees Issued dropped by 31% to P862 million from lower levels of outstandingguarantees for foreign loans, shipside bonds and airway bills as of the cut-off date. Late Deposits /Payments Received slid 7% to P1.5 billion as less transactions were received from clients afterclearing cut-off time.Income Statement – For the years ended 31 December 2010 vs. 2009Net Income for 2010 was registered at P8.9 billion, an increase of 46% over the bottomline profitfor the previous year. The marked increase came from an expansion in the Bank’s gross incomeas well as an improvement in operational efficiencies.Net Interest Income climbed 12% to P34.2 billion owing to loan growth and an improvement infunding mix. The Bank continued its conservative provisioning level and set aside P6.7 billion asProvision for Impairment Losses for loans, securities and other assets.Other Income went up by 15% to P17.8 billion from the increases in both fee-based income as wellas treasury trading gains. Service Charges and Fees rose by 7% to P8.9 billion on account ofhigher volume from major business lines. Trust Fees likewise grew 21% to P1.5 billion resultingfrom higher level of funds managed. Trading Gain surged 52% to P5.6 billion as the Bankcapitalized on market opportunities. On the other hand, Foreign Exchange Gain slid 11% due tolower levels of swap and other foreign exchange transactions while Miscellaneous Income dropped19% as the previous year’s level included one-time gains from the sale of non-core assets.Operating expenses rose 8% to P34.8 billion. Employee Benefits went up by 10% on account of ahigher manpower count brought about by business expansion. Insurance expenses increased by11% owing to sustained growth in deposit levels. Advertising expenses went up 58% on continuedmarketing and advertising campaigns.SEC FORM 17-A 43

Comprehensive Income – For the years ended 31 December 2010 vs. 2009Total Comprehensive Income for 2010 stood at P12.3 billion from a Net Income of P8.9 billion.This included unrealized fair value gains on AFS Securities of P3.8 billion and a translationadjustment related to foreign operations amounting to negative P350 million.The Total Comprehensive Income represents a 29% increase compared to 2009, which included aP3.4 billion unrealized gains on AFS Securities and a negative P1 million translation adjustmentrelated to foreign operations.Key Performance Indicators – 2010 vs. 20092010 2009 Inc/(Dec)Return on Average Equity 11.3% 9.7% 1.6%Return on Average Assets 1.0% 0.7% 0.3%Net Interest Margin 4.1% 4.1% 0.0%Capital to Risk Assets 13.8% 12.2% 1.6%Basic Earnings Per Share 3.37 2.57 0.80Return on Average Equity and Return on Average Assets grew to 11.3% and 1.0%, respectively,from higher bottomline profits.Net Interest Margin stayed at 4.1% despite the lower interest rate environment as funding miximproved given the growth in low cost deposits.Capital to Risk Assets increased by 1.6% on account mainly of the common share issuance in April2010.Basic Earnings Per Share rose to P3.37 owing to the increase in net income.2) Past and Future Financial Condition and Results of OperationsThe Bank registered an audited Net Income of P10.6 billion in 2011, a 19% growth from 2010bottomline profits of P8.9 billion. The improvement is a product of the Bank’s solid businessfranchise and sound financial fundamentals. The Bank is the industry leader in most of itsbusiness lines displaying above-industry growth rates. Its strong balance sheet ensures a diverseand sustainable earnings quality. It has a robust platform in place for sustainable growth and scalewith information technology infrastructure as well as branches and premises upgraded for bettermarket coverage.In 2011, the Bank completed two issuances of unsecured subordinated notes totaling P15.0 billion.The notes classified as Tier 2 Capital not only strengthens the Bank’s capital position, but it alsoprovides the Bank support for continued business expansion.SEC FORM 17-A 44

Prospects for the Future/Plans of OperationFor 2012, the tenuous US economic recovery, the debt-stressed Eurozone region, and a slowdownin China continue to weigh on market confidence and global demand. The Philippines, however, isexpected to weather the continuing challenges on the back of its consumption-based anddomestic-driven nature supported by a tame inflation outlook and low interest rates. Augmentingthese are prospects for increased government spending as well as the faster roll-out of 15identified projects under the Public-Private Partnerships that should further open up growthopportunities in services (e.g., tourism, logistics), mining, power/energy, real estate/property andtransportation and infrastructure (roads, railways, airports, ports, among others).Amid this operating environment, the Bank aims to improve its 2011 performance by seizingopportunities particularly in the areas of infrastructure spending as well as the expanding middlemarket and consumer sectors.3) Material Changes(a)Any Known Trends, Events or Uncertainties (material impact on Liquidity)Trends, events or uncertainties, which can have a material impact on liquidity, are explained underitem 6(2) of SEC 17-A of the Bank.(b)Internal and External Sources of LiquidityThe internal and external sources of liquidity are herein discussed under item 6(2) of SEC Form17-A of the Bank.(c)Any Material Commitments for Capital Expenditure and Expected FundsNone.(d)Any Known Trends, Events or Uncertainties (material impact on sales)Trends, events or uncertainties, which can have a material impact on sales, are explained underitem 6(2) of SEC 17-A of the Bank.(e)Causes for any Material Changes from Period to Period of Financial StatementsThe causes for any material changes from 2010-2011 are explained in item 6(1) of SEC Form 17-Aof the Bank.(f)Seasonal Aspects that has material Effect on the Financial StatementsNone.SEC FORM 17-A 45

Item 7. Financial StatementsThe consolidated financial statements and schedules are filed as part of this Form 17-A.Item 8. Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure (updated)The financial statements of the Bank for the year ending 31 December 2010 and 31 December2011 have been audited by Punongbayan and Araullo, in accordance with generally acceptedaccounting principles. The Bank has not had any disagreements with any of its former or presentaccountants on any matter of accounting principles or practices, financial statement disclosure, orauditing scope or procedure which led to a change in external auditors and it not resolved to thesatisfaction of any of these accountants, would have caused the latter to make reference to thesubject matter of the disagreement in connection with its report.Part III – CONTROL AND COMPENSATION INFORMATIONItem 9. Directors and Executive Officers of the Issuer1) Directors and Executive OfficersThe Board of Directors is empowered to direct, manage and supervise, under its collectiveresponsibility, the affairs of the Bank. It is also responsible for the proper administration andmanagement of the Bank's trust business. The following is the list of the members of the Board andthe corporate officers:Teresita T. Sy, 61, Filipino, is the Chairperson of BDO and was first elected to the Board in 1997.Concurrently, she serves as the Chairperson, Vice Chairperson, and/or Director of varioussubsidiaries and affiliates of BDO such as BDO Private Bank, Inc., BDO Leasing & Finance, Inc.,BDO Capital & Investment Corporation, BDO Foundation, Inc., Generali Pilipinas HoldingCompany, Inc., Generali Pilipinas Life Assurance Company, Inc., and Generali Pilipinas InsuranceCo., Inc. Ms. Sy is the Vice Chairperson of SM Investments Corporation and adviser to the Boardof SM Prime Holdings, Inc. She also sits as Chairperson, Vice Chairperson and/or Director of suchcompanies as Multi-Realty Development Corporation, SM Commercial Properties, Inc. (formerlySM Land, Inc.), Supervalue, Inc., SM Mart, Inc., SM Retail, Inc., Super Shopping Market, Inc.,Pilipinas Makro, Inc., and First Asia Realty Development Corp. A graduate of Assumption College,she brings to the board her varied expertise in banking and finance, retail merchandising, mall andreal estate development.Corazon S. de la Paz-Bernardo, 70, Filipino, is currently the Vice Chairperson of BDO. She isalso a Director of Republic Glass Holdings, Inc., and Advisor to the Audit Committee of PLDT. Shewas President of the Social Security System and Vice Chairman of the Social Security CommissionSEC FORM 17-A 46

from 2001 to 2008. She was also President of the International Social Security Association from2004 to 2010. She was Chairman and Senior Partner of Joaquin Cunanan & Co.(PricewaterhouseCoopers, Philippines) from 1981 to 2001. She served as Chairperson ofEquitable PCI Bank, Inc. from February 21, 2006 until its merger with Banco de Oro UniversalBank. Ms. Bernardo is also a member of the Board of Trustees of the BDO Foundation, Inc., theUniversity of the East, the UE Ramon Magsaysay Memorial Medical Center, Miriam College, MFIFoundation, Inc., Makati Business Club, Inc., Jaime V. Ongpin Foundation, Inc., Laura VicuñaFoundation for Street Children, and Children’s Hour. She is the Chairperson of the ExecutiveCouncil of NAMFREL. She is past president of the Philippine Institute of Certified PublicAccountants, the Management Association of the Philippines, the Financial Executives Institute ofthe Philippines, Inc., and the Philippine Fulbright Scholars Association. Other memberships includethose in the Asia Society, the Association of TOWNS Awardees, and the Board of Advisors ofRamon V. del Rosario, Sr. - AIM Center for Corporate Social Responsibility.Jesus A. Jacinto, Jr., 64, Filipino, was elected Vice Chairman of BDO in May 1996, and isconcurrently the Chairman and President of BDO Insurance Brokers, Inc. He also heads JacesCorp. as Chairman and President; and Janil Realty, Inc. and JAJ Holdings, Inc. as President. He islikewise Director of Bayer Phil., Inc. Formerly, he was Director and Executive Vice President ofCityTrust Banking Corp.; Director of CityTrust Investments Phil. and CityTrust Finance Corp.; andVice President and Managing Partner of Citibank N.A. He holds a Bachelor’s degree in BusinessAdministration from Fordham University in New York City and MBA (International Business) fromColumbia University, New York.Farida Khambata, 63, Canadian, was elected Director of BDO in September 2010. She is aPartner of Cartica Management, L.P., an asset management company focused exclusively onemerging markets. Prior to joining Cartica, she was IFC’s Regional Vice President heading IFC'soperations in East Asia and the Pacific, South Asia, Latin America and the Caribbean, and theMiddle East and North Africa. She was responsible for the Corporation's strategy, financialproducts, and advisory services in member countries in these regions. Previously, she served asVice President for Portfolio and Risk Management, with responsibility for the Corporation's portfolio(about $14 billion) and risk management operations, as well as for information technology,controller's and financial reporting, budgeting, and back-office functions. Prior to be being namedVice President, Mrs. Khambata was Director of IFC's Treasury Department. She also held positionsas Director, Division Manager, and Senior Investment Officer at IFC's former Central CapitalMarkets Department. Mrs. Khambata transferred from the World Bank to IFC in 1986. She joinedthe World Bank as a Young Professional, working later as a Senior Pension Officer for the WorldBank Group's Pension Fund, and as a Senior Investment Officer in the East Asia and PacificRegion. Mrs. Khambata holds post-graduate degrees in Economics and Business Managementfrom Cambridge University and the London Business School. A Certified Financial Analyst, she hasalso participated in the Executive Development Program at Wharton Business School.Cheo Chai Hong, 59, Singaporean, was elected Director of BDO in May 2010. He currently sits asDirector of United Overseas Bank Philippines (UOB Philippines), UOB Global Capital PrivateLimited, United Overseas Bank (Thai) Public Company Limited, and Encus International Pte. Ltd.He is Managing Director and Head of Corporate Planning and International Strategy Department ofSEC FORM 17-A 47

UOB Singapore. He was formerly the Executive Vice President of Group Credit (Middle Market &STCF) Department of UOB Singapore. He holds an Honor’s Degree in Business Administrationfrom the University of Singapore.Teodoro B. Montecillo, 77, Filipino, was first appointed Independent Director of BDO in August2004. He is also currently an Independent Director of Citibank Savings, Inc. He was appointed byformer President Fidel V. Ramos as a member of the Monetary Board of the Bangko Sentral ngPilipinas from 1996 to 2002, and appointed by former President Joseph Estrada as Chairman ofthe Central Bank Board of Liquidators from 1999 to 2002. He was an Advisor and Consultant toGovernor Rafael B. Buenaventura from 2002 to 2004. In addition, he held various positions inareas of operations, credit and external debt management in Citibank, N.A. (Manila) and CitibankHead Office (New York) from 1965 to 1996. He holds a Bachelor of Science in Education degreefrom University of the East, Bachelor of Science degree in Business Administration from theUniversity of the Philippines, and received his MBA from Northwestern University, Chicago, USA.Antonio C. Pacis, 70, Filipino, currently serves both BDO and BDO Capital & InvestmentCorporation as a director. He has been in law practice since 1967 counseling bank and corporateclients in the areas of regulatory, business, corporate and trust law, and individuals in the areas offamily law and estate plans. In the course of his practice, he has served in various capacities incompanies upon invitation of clients. He holds degrees from the Ateneo de Manila University (AB),from the Ateneo School of Law (LLB) and from the Harvard Law School (LLM).Josefina N. Tan, 66, Filipino, is presently Director of BDO and President of BDO Private Bank, Inc.She is also the Chairman of the Board of Miriam College and a Trustee in both DevelopmentCenter for Finance and Laura Vicuña Foundation. She was a Director of Banco de Oro UniversalBank from 2001 to August 2005. She was also Executive Vice President of the former Far EastBank & Trust Co.; Director and President of FEB Leasing & Finance Corp.; Executive Director andTrustee of FEB Foundation, Inc.; and Executive Vice President of FEB Investments, Inc. until 2000.She was a director of Equitable PCI Bank, Inc. from September 2005 until its merger with BDO inMay 2007.Nestor V. Tan, 54, Filipino, was elected President of BDO in July 1998. He also concurrently holdsvice chairmanships and/or directorships in the following subsidiaries of BDO Unibank, Inc.: BDOCapital & Investment Corporation, BDO Insurance Brokers, Inc., BDO Leasing and Finance, Inc.,BDO Private Bank, Inc., BDO Remit (USA), Inc., Generali Pilipinas Life Assurance Company, Inc.,and SM Keppel Land, Inc. He also concurrently holds chairmanship of BDO Strategic Holdings,Inc. and Megalink, Inc. He is a Director and the Treasurer of Generali Pilipinas Insurance Co., andTrustee of BDO Foundation, Inc. He is also a director of the Bankers Association of the Philippines.Mr. Tan had a fifteen-year banking career with the Mellon Bank (now Bank of New York – Mellon)in Pittsburgh, PA, the Bankers Trust Company (now Deutsche Bank) in New York, and theBarclays Group in New York and London. Prior to joining the Bank, he was the Chief OperatingOfficer for the Financial Institution Services Group of BZW, the investment banking subsidiary ofthe Barclays Group. He holds a Bachelor’s degree in Commerce from De La Salle University andreceived his MBA from Wharton School, University of Pennsylvania.SEC FORM 17-A 48

Henry T. Sy, Jr., 57, Filipino, is presently Director of BDO. He is also the Vice Chairman of theBoard of Directors of SM Investments Corporation (SMIC), SM Development Corporation (SMDC);and Vice Chairman & President of Highlands Prime, Inc., SM Land, Inc.; and Director of SM PrimeHoldings, Inc. (SMPHI). He is likewise the President of National Grid Corporation of the Philippines(NGCP). He is responsible for the real estate acquisitions and development activities of the SMGroup which include the identification, evaluation, and negotiation of potential sites as well as theinput of design ideas. He graduated with a management degree from De La Salle University. Healso holds board positions in several companies within the SM Group.Jimmy T. Tang, 76, Filipino, has been an Independent Director of BDO since July 27, 2002. Heserved as a regular director of BDO from 1984 until his election as independent director. He is thePresident and Chairman of the Board of the Avesco Group of Companies. He currently serves asHonorary Adviser of the Federation of Electrical and Electronics Suppliers and Manufacturers ofthe Philippines, Inc. (PESA) & PESA Foundation; and Honorary President of the Federation ofFilipino-Chinese Chambers of Commerce and Industry, Inc. (FFCCCII). Mr. Tang was the 9 thPresident of PESA and the first Chairman of the PESA Foundation, which he served for seven (7)years. He also served two (2) terms as the 11 th President of FFCCCII. He holds a Bachelor’sDegree in Electrical Engineering from the Mapua Institute of Technology and was awarded the“Top Outstanding Mapuan for Entrepreneurship” in 1987.Edmundo L. Tan, 66, Filipino, was appointed Corporate Secretary of BDO on July 27, 2007. Heconcurrently holds directorship in BDO Leasing and Finance, Inc. and is presently the Chairman ofthe Company’s Corporate Governance, Nomination, and Compensation & RemunerationCommittee. He is also the Corporate Secretary of BDO Private Bank, Inc. He serves as Directorand Corporate Secretary of APC Group, Inc. He is currently a director of Philippine GlobalCommunications, Inc., Sinophil Corporation, Aragorn Power & Energy Corporation, and PRC-Magma Energy Resources, Inc. Atty. Tan was the Officer-in-Charge of EBC Strategic Holdings,Inc., and Chairman of the Board of EBC Investments, Inc. He was elected member of the Board ofTrustees of Philippine Dispute Resolution Center, Inc. (PDRCI) in 2010. He was formerly theChairman of the Board of EBC Investments, Inc. He is the Managing Partner of Tan Acut Lopez &Pison Law Offices. He was formerly Senior Partner in Ponce Enrile Cayetano Reyes & ManalastasLaw Offices, and a Partner in Angara Abello Concepcion Regala & Cruz Law Offices.Sabino E. Acut, Jr., 61, Filipino, was appointed Assistant Corporate Secretary of the Bank on July27, 2007, a position he currently holds. He is presently a Senior Partner and Head of the LitigationDepartment of Tan Acut Lopez & Pison Law Offices. He was a former Senior Partner and Head ofthe Litigation Department of Ponce Enrile Cayetano Reyes & Manalastas Law Offices (PECABAR)and, before that, a Partner of Angara Abello Concepcion Regala & Cruz Law Offices (ACCRA). Atvarious times, he was Corporate Secretary of Boulevard Holdings, Inc., Puerto Azul Golf & CountryClub, Philippine Hospital Association, and Eastern General Reinsurance Corporation; LegalCounsel of Alabang Country Club; Trustee of Makati Law Foundation; and President of the LegalManagement Council of the Philippines. He was Journal Editor of the 1971 ConstitutionalConvention, Special Assistant to the Director of the Bureau of National and Foreign Information,and Confidential Attorney to former Supreme Court Justice Cecilia Muñoz Palma. He is a memberof the Integrated Bar of the Philippines and the Philippine Bar Association. He is currently aSEC FORM 17-A 49

Director of the Philippine Global Communications, Inc. He was the Corporate Secretary of theformer EPCIB until its merger with the Bank. He holds the degrees of Bachelor of Arts, Magna CumLaude, from Mindanao State University; Bachelor of Laws, Cum Laude, from the University of theEast; and Master of Laws from the University of Pennsylvania.Rebecca S. Torres, 59, is Senior Vice President. She was appointed Assistant CorporateSecretary of BDO on January 1, 2011. She is concurrently the Senior Anti-Money Laundering(AML) Officer and Head of the Anti-Money Laundering Unit. She is also the Assistant CorporateSecretary of BDO Leasing and Finance, Inc., BDO Private Bank, Inc., BDO Rental, Inc., ArmstrongSecurities, Inc., and Equimark-NFC Development Corp. She likewise serves as AssistantCorporate Secretary and Trustee of BDO Foundation, Inc. She is the Corporate Secretary of PCIBSecurities, Inc., BDO Strategic Holdings Inc., and the Sign of the Anvil, Inc. She was formerly theChief of Staff of the President involved in project management for the Bank's merger activities.She is a CPA and a graduate of St. Theresa's College, Quezon City with a degree of Bachelor ofScience major in Accounting. She has completed the Advanced Bank Management Program of theAIM.The independent directors of the Bank are Teodoro B. Montecillo and Jimmy T. Tang.Senior Executive Officers of the BankThe members of Senior Management, subject to control and supervision of the Board, collectivelyhave direct charge of all business activities of the Bank. They are responsible for theimplementation of the policies set by the Board. The following is a list of the Bank's key officers:Name Age PositionNestor V. Tan 54 President and DirectorAntonio N. Cotoco 63 Senior Executive Vice President, Director -- BDO Leasing & Finance;Inc.Walter C. Wassmer 55 Senior Executive Vice President, Head – Institutional Banking Group;Director – BDO Leasing and Finance, Inc.Jaime C. Yu 53 Senior Executive Vice President, Head – Branch Banking GroupAdor A. Abrogena 58 Executive Vice President, Head – Trust and Investments GroupStella L. Cabalatungan 47 Executive Vice President, Head - BDO Private Bank, Inc.- RelationshipManagementJulie Y. Chua 60 Executive Vice President, Head – Commercial Banking (Metro Manilaand Luzon)Gerard Lee B. Co 53 Executive Vice President, Head - Commercial Banking (Visayas andMindanao)Lucy Co Dy 56 Executive Vice President, Comptroller and Head – ComptrollershipGroupPedro M. Florescio III 57 Executive Vice President, Treasurer and Head – Treasury GroupSEC FORM 17-A 50

Name Age PositionEduardo V. Francisco 50 Executive Vice President, President/Director – BDO Capital &Investment CorporationBienvenido M. Juat, Jr. 58 Executive Vice President, Treasurer - BDO Private Bank, Inc.Ricardo V. Martin 54 Executive Vice President, Head – Corporate Compliance, LegalServices and Internal Audit GroupEdmundo S. Soriano 56 Executive Vice President, Head – Corporate Banking 1Rolando C. Tanchanco 50 Executive Vice President, Head – Consumer Lending GroupDennis B. Velasquez 58 Executive Vice President, Head – Central Operations GroupEvelyn L. Villanueva 53 Executive Vice President, Chief Risk Officer and Head – RiskManagement Group, Director – BDO Leasing and Finance, Inc.Ursula A. Alano 57 Senior Vice President, Head - Treasury MarketingNoel L. Andrada 49 Senior Vice President, Business Development Head – Trust andInvestments GroupVictor C. Arboleda 59 Senior Vice President; Chief Compliance OfficerMelanie S. Belen 51 Senior Vice President, Head – Remedial Management UnitGamalielh Ariel O.Benavides45 Senior Vice President, Head - BDO Private Bank, Inc.- Wealth Advisoryand Trust GroupRafael G. Besa 53 Senior Vice President, Head - Marketing Communications GroupMa. Ophelia Ll. Camiña 58 Senior Vice President, Head – Consumer Lending Group -Card Issuingand Operations UnitArthur Dee Chung 48 Senior Vice President, Head – Financial Institutions Group and Loansand Trade (Hong Kong)Angelita O. Cortez 57 Senior Vice President, Head – Legal ServicesJonathan T. Cua 40 Senior Vice President, Head – BDO Private Bank, Inc.- RelationshipManagement (Visayas and Mindanao Region)Ramon S. David 53 Senior Vice President, Head - Branch Banking Group - Metro ManilaEast RegionMa. Lourdes T. de Vera 56 Senior Vice President, Trust and Investments GroupMontiel H. de los Santos 50 Senior Vice President, Head – Treasury Group- Foreign CurrencySalesGeronimo D. Diaz 56 Senior Vice President, Region Head – Branch BankingJonathan C. Diokno 39 Senior Vice President, Head – Transaction Banking Group RemittanceOriginationIsmael G. Estela, Jr. 55 Senior Vice President, Corporate Governance Officer – CorporateCompliance, Legal Services and Internal Audit GroupMarvin V. Fausto 50 Senior Vice President, Chief Investment Officer – Trust andSEC FORM 17-A 51

Name Age PositionInvestments GroupGeorgiana A. Gamboa 55 Senior Vice President, President – BDO Leasing and Finance, Inc.Jonathan C. B. Go 57 Senior Vice President, Asset Management GroupMarilyn K. Go 59 Senior Vice President, Assistant TreasurerEnrico R. Hernandez 41 Senior Vice President, Head – IT DevelopmentL. Jerome C. Guevarra 45 Senior Vice President, Head - BDO Capital & Investment Corporation-Advisory and Mergers & Acquisitions PracticeEleanor Lee M. Hilado 48Senior Vice President, Head - BDO Capital & Investment Corporation-Debt PracticeJeanette S. Javellana 52 Senior Vice President, Head - Commercial Banking (Metro ManilaWest, Metro Manila North)Roberto E. Lapid 56 Senior Vice President; Vice Chairman – BDO Leasing and Finance,Inc.Gabriel U. Lim 51 Senior Vice President, Head – BDO Capital & Investment Corporation-Equities Practice UnitRuby G. Lim 64 Senior Vice President, Region Head – Branch Banking GroupMercedes M. Limson 49 Senior Vice President, Head – Consumer Lending Group- UnsecuredSales and Distribution UnitLilia E. Lising 59 Senior Vice President, Head - Corporate Banking 2Emerenciana H. Luistro 51 Senior Vice President, Head - Business Systems, Chief of Staff –Office of the President, Deputy Head – Remittance-OriginationMaria Corazon A. Mallillin 49 Senior Vice President, Branch Banking GroupLuis Enrique T. Mangosing 52 Senior Vice President, Central Operations Group – Special ProjectsManagement DepartmentAngelita C. Manulat 50 Senior Vice President, Head - Consumer Lending Group- HomeLoans BusinessDalmacio D. Martin 50 Senior Vice President, Head – Portfolio Management for Fixed Incomeand DerivativesJose Noel M. Mendoza 49 Senior Vice President, BDO Private Bank, Inc.- Wealth Advisory andTrust GroupRamon T. Militar 53 Senior Vice President, Region Head – Branch Banking GroupEmmanuel T. Narciso 50 Senior Vice President, Head – Transaction Banking GroupJaime M. Nasol 48 Senior Vice President, Head – Transaction Banking Group- CashManagement ServicesAnnie H. Ngo 57 Senior Vice President, Region Head – Branch Banking GroupEstrellita V. Ong 56 e Senior Vice President, Internal Audit Division – Branches AuditSEC FORM 17-A 52

Name Age PositionMaria Rhoda B. Orsolino 50 Senior Vice President, Head – Commercial Banking (North and SouthLuzon)Virgilio C. Pamatmat 59 Senior Vice President, Head - Consumer Lending Group- SmallBusiness Loan BusinessJose Alfredo G. Pascual 49 Senior Vice President, Head – Executive Committee SecretariatAntonio O. Peña 54 Senior Vice President, Head - Consumer Lending Group- Auto LoansBusinessDomingo A. Ramos, Jr. 63 Senior Vice President, Region Head – Branch Banking Group(Mindanao)Luis S. Reyes, Jr. 54 Senior Vice President, Head – Investor Relations and CorporatePlanningEvelyn C. Salagubang 48 Senior Vice President, Group Head – Human ResourcesShirley M. Sangalang 52 Senior Vice President, Adviser to the Board Audit CommitteeEvylene C. Sison 58 Senior Vice President, Head – Asset ManagementErlaster C. Sotto 54 Senior Vice President, Chief Operating Officer - BDO Capital andInvestment CorporationNoel B. Sugay 47 Senior Vice President, Treasury Group- Foreign Exchange Trading andPortfolio ManagementRobert “Sui Gui” W. Sy 52 Senior Vice President, Region Head – Branch Banking GroupEdwin R. Tajanlangit 42 Senior Vice President, Head – Market and Liquidity Risk ManagementArthur L. Tan 47 Senior Vice President, Head - IT OperationsMaria Theresa L. Tan 43 Senior Vice President, General Manager – BDO Insurance Brokers,Inc.Edel Mary D. Vegamora 51 Senior Vice President, Chief Internal Auditor and Head - Internal AuditDivisionRosola A. Vivas 49 Senior Vice President, Head – Marketing Communications Group-Customer Development UnitEdward G. Wenceslao 56 Senior Vice President, Head - Corporate Banking 2Ma. Teresita Susana L. Yap 60 Senior Vice President, Head - Commercial Banking (Metro ManilaSouth)Rebecca S. Torres 57 Senior Vice President, Asst. Corporate Secretary, Senior Anti-MoneyLaundering OfficerSEC FORM 17-A 53

Antonio N. Cotoco, 63, is Senior Executive Vice President and is a member of the ExecutiveCommittee. He currently serves as Director of BDO Leasing and Finance, Inc.; BDO InsuranceBrokers, Inc.; BDO Remit (Macau), Ltd.; BDO Remit (USA), Inc.; BDO Remit Limited; ExpressPadala (Hong Kong), Limited; Express Padala Frankfurt GmbH; and Chairman of BDO Rental, Inc.He has been involved in Investment Banking, Corporate Finance, Treasury, Consumer Banking,Credit, Business and Development, and Account Management over the past thirty-two (32) years.He currently also serves as a Director of OAC Realty & Development Corporation.Walter C. Wassmer, 55, is Senior Executive Vice President of the Bank’s Institutional BankingGroup. He is concurrently the Chairman of BDO Elite Savings Bank, Inc.; and Director of BDOLeasing and Finance, Inc.; MDB Land, Inc.; Mabuhay Vinyl Corporation; Carmen CopperCorporation; Atlas Consolidated Mining & Development Corporation; and Indophil Resources NL.He is also currently the President of L.P. Wassmer Trading, Inc. and Treasurer of WT & T, Inc.Jaime C. Yu, 53, is Senior Executive Vice President. He holds a Bachelor of Arts degree inEconomics from De La Salle University and is a MBA graduate from the Ateneo de ManilaUniversity. He has extensive experience in commercial, corporate, and investment banking fromthe International Corporate Bank and Union Bank of the Philippines, where he held variouspositions up to his appointment as First Vice President and Region Head for the Manila-Pasayarea. He joined BDO in December 1997 and is currently the Group Head of Branch Banking wherehe manages the entire branch network.Ador A. Abrogena, 58, is Executive Vice President and Head of Trust and Investments Group. Heholds a Bachelor’s degree in Chemical Engineering from De La Salle University and a Master’sdegree in Business Economics from the University of Asia and the Pacific. He was previouslyconnected with First Pacific Securities, Philippines, Inc. as Vice President and with PrivateDevelopment Corporation of the Philippines as Assistant Vice President.Stella L. Cabalatungan, 47, is Executive Vice President. She holds a Bachelor of Science degreein Marketing Management from De La Salle University. Prior to joining BDO, she was VicePresident of Banco Santander Philippines, Inc., and Head of the Personal Investment BankingGroup from 2000 to 2003. She was also Vice President of Citibank, N.A. from 1998 to 2000 whereshe spent fifteen (15) years in retail and priority banking in Singapore and the Philippines, her lastassignment being the Citigold Priority Banking Head. She is presently seconded to BDO PrivateBank, Inc. as Executive Vice President –Relationship Management Head.Julie Y. Chua, 60, is Executive Vice President, holds a Bachelor’s degree in Commerce, major inBanking and Finance, Cum Laude, from the University of Santo Tomas. She has more than twentyfive(25) years of experience in branch banking and lending business. Previous to her assignment,she was connected with BPI, Far East Bank & Trust Company and Producers Bank. She iscurrently Commercial Banking Head of Institutional Banking Group (IBG) Metro Manila and Luzonand also Unit Head of IBG Metro Manila East.SEC FORM 17-A 54

Gerard Lee B. Co, 53, is Executive Vice President and Group Head for Commercial Banking(Visayas, Mindanao). He is a Director of BDO Leasing and Finance, Inc., Agencia de Calidad, Inc.,and Markham One Development Corp. He served as Director of PCI Leasing and Finance, Inc. andPCI Capital Corporation from 2002-2005. He graduated from the University of San Carlos with adegree in Bachelor of Science in Commerce Major in Banking and Finance. He attended theAdvanced Management Program for International Bankers at the Wharton School of the Universityof Pennsylvania, U.S.A. He likewise completed the program for Executive Development at IMD inLaussane, Switzerland. He joined the Bank in October 1993 as Vice President for Visayas Division.Lucy Co Dy, 56, is Executive Vice President and Comptroller. She is also Director of BDO EliteSavings Bank, Inc. (formerly GE Money Bank, Inc.), BDO Remit Limited, Express Padala HongKong Limited, BDO Remit (Italia), S.p.A., and Express Padala Frankfurt GmbH; Director andTreasurer of BDO Strategic Holdings, Inc., and PCIB Securities, Inc.; Trustee and Treasurer ofBDO Foundation, Inc.; and Chairperson and President of The Executive Banclounge, Inc. and TheSign of the Anvil, Inc. She holds a Bachelor’s degree in Accounting from the University of SantoTomas.Pedro M. Florescio III, 57, is Executive Vice President and Treasurer. He is also a Director ofBDO Elite Savings Bank (formerly GE Money Bank, Inc.). He holds a Bachelor’s degree inBusiness Administration from the University of the East, Manila and had attended numeroustreasury programs and trainings in major financial centers. He has more than twenty-five (25) yearsof experience in treasury functions within and outside the country. He was previously connectedwith Equitable PCI Bank, Inc., Far East & Trust Company, Dao Heng Bank Ltd. (Hong Kong),International Bank of Asia (Hong Kong), Chemical Bank (Manila), Societe Generale (Manila),European Asian Bank (Manila), and PCIBank. He was the past President of MART (The MoneyMarket Association of the Philippines year 2005) and ACI Philippines (The Financial MarketsAssociation of the Philippines year 1997, 1998, and 2007).Eduardo V. Francisco, 50, is Executive Vice President. He is President/Director of BDO Capital &Investment Corporation, the investment house of BDO. He is also the Co-Chairman of the CapitalMarket Development Council (CMDC) of the Philippines; President/Director of the ManagementAssociation of the Philippines (MAP); Treasurer/Director/Trading Nominee of BDO SecuritiesCorp.; and Treasurer/Director of the Foundation for Filipino Entrepreneurs (FFE). He also sits onthe boards of the Investment Houses Association of the Philippines (IHAP), Wharton-Penn Club ofthe Philippines, UP-Development Center for Finance, CIBI Foundation, LGU GuaranteeCorporation, and International School of Manila. He is also a fellow of the Institute of CorporateDirectors (ICD); and a member of Rotary Makati West and the Bike King Triathlon Team. He wasformerly the President of BDO Securities Corporation, Financial Executives Institute of thePhilippines (FINEX), and Wharton–Penn Club. He was also a previous member of Capital MarketsCommittee of the Bankers Association of the Philippines and the Strategic Advisory Committee ofthe Philippine Stock Exchange and the Makati Business Development Council. Mr. Francisco hasworked with other financial institutions in New York and Hong Kong. He holds a Master’s degree inBusiness Administration from the Wharton School of the University of Pennsylvania and Bachelor’sdegree in Business Administration from the University of the Philippines. He is also a recipient ofthe Distinguished Alumnus Award from the U.P. College of Business Administration.SEC FORM 17-A 55

Bienvenido M. Juat, Jr., 58, is Executive Vice President. He is currently seconded as Treasurer ofBDO Private Bank, Inc. (BDOPB). He holds a degree in Bachelor of Arts major in Economics andMBA (candidate) from Ateneo de Manila University. He joined Equitable PCI Bank, Inc. in August2001 and upon merger, was assigned to BDOPB.Ricardo V. Martin, 54, is Executive Vice President for Corporate Compliance, Legal Services andInternal Audit Group and administratively oversees the Corporate Secretary’s Office, Anti-MoneyLaundering Unit, Legal Services, Compliance, and Internal Audit. He is also a Director of BDOStrategic Holdings, Inc., BDO Remit (Italia), S.p.A., and BDO Remit (USA), Inc. Previously, heserved as Chief Finance Officer & Executive Vice President for Equitable PCI Bank, Inc. Earlier, hewas the Chief Finance Officer of Solidbank Corporation.Edmundo S. Soriano, 56, is Executive Vice President and Group Head for the Corporate BankingGroup. He holds a Bachelor’s degree in Economics (Honors) from Ateneo de Manila University. Hefinished his MBA (With Distinction) from Adelphi University, New York, USA. Prior to joining BDO,Mr. Soriano was President of Lightspeed Holdings, Inc., a private equity firm. He was also VicePresident at JP Morgan Chase where his last assignment gave him Asia-Pacific regionalresponsibility for corporate and investment banking based in Hong Kong. Prior to this, he was anAssistant Vice President at First Chicago Leasing and Equipment Credit Corp., an affiliate of FirstNational Bank of Chicago. He holds directorships in various companies. He attended continuingeducation programs at Euro-Insead, University of California at Berkeley and American Institute ofBanking.Rolando C. Tanchanco, 50, is Executive Vice President for Consumer Lending. He holds aBachelor’s degree in Business Economics from the University of the Philippines. He acquired hisMBM at the Asian Institute of Management. Mr. Tanchanco joined BDO to head the BDO’sConsumer Lending. Prior to his joining BDO, Mr. Tanchanco was President of Philam SavingsBank and head of AIG Credit Card. He is currently a Director of BDO Elite Savings Bank, Inc. andTrans Union Phils.Dennis B. Velasquez, 58, is Executive Vice President for Central Operations. He is also a Directorof the Executive Baclounge, Inc. He was Equitable PCI Bank, Inc.’s Operations Group Head fromMay 2006 until its merger with BDO in May 2007. He served in 2000 as the Integration Manager forRetail Banking and was Retail Banking Group Head from March 2002 to April 2006. He has beenwith the Bank since August 1995. He is also a Director of Philippine Clearing House Corporation,and Chairman and President of Denmar Property Managers, Inc.Evelyn L. Villanueva, 53, is Executive Vice President of BDO’s Risk Management Group, and isBDO’s Chief Risk Officer. She is also a Director BDO Leasing and Finance, Inc.; Chairperson andChief Executive Officer of Mabuhay Vinyl Corporation, and Chairperson of Bayantel MonitoringCommittee. She holds a Bachelor degree in Statistics from the University of the Philippines. Sheobtained her Master in Business Management (“MBM”) degree from the Asian Institute ofManagement. She has over twenty (20) years of banking experience in credit, risk and accountmanagement. She started out as a management trainee in Citytrust Banking Corporation and wasconnected with HSBC as Senior Vice President for Credit Risk Management before joining BDO.SEC FORM 17-A 56

Ursula A. Alano, 57, is Senior Vice President and Head of Treasury Marketing Unit. She is also aDirector of Albulario and Sons, Inc. She holds a Bachelor of Arts degree in Psychology from St.Theresa’s College. She joined the Bank in January 2001 as Senior Vice President for TreasuryMarketing Unit. Prior to joining the Bank, she was a First Vice President and Head of TreasuryMarketing Group at Far East Bank & Trust Company.Noel L. Andrada, 49, is Senior Vice President and Business Development Head for Trust andInvestments Group. He joined BDO in 2003 as Vice President of the Group. He was formerlyconnected with BPI Asset Management and Trust Group as Head of Business Development forCorporate/Institutional accounts. He acquired a Master’s Degree in Business Management at DeLa Salle University. He graduated from the same university with a degree in BS Commerce.Victor C. Arboleda, 58, is Senior Vice President and Chief Compliance Officer of BDO sinceOctober 27, 2007. Mr. Arboleda, a Certified Public Accountant, has had more than thirty (30) yearsof extensive experience in internal audit and bank operations. He headed the TransactionProcessing Division when he joined Equitable PCI Bank, Inc. (EPCIB) in January 2001 and wasappointed Internal Auditor of EPCIB on March 16, 2006. He holds a degree in Bachelor of Sciencein Commerce, major in Accounting, from the University of Santo Tomas. He completed theExecutive Development Program at the Asian Institute of Management.Melanie S. Belen, 51, is Senior Vice President and Unit Head of Remedial Management Unit ofBDO. She graduated from the University of Santo Tomas with a Bachelor of Science degree inCommerce, Major in Accounting and obtained her Master's degree in Management from the AsianInstitute of Management. She joined the Bank in July 2008 and prior to joining the Bank, she wasa Country Head at Scholastic Inc., Philippines/Grolier International.Gamalielh Ariel O. Benavides, 45, is Senior Vice President. He is seconded to BDO PrivateBank, Inc. as Senior Vice President and the Head of the Wealth Advisory and Trust Group. He hasover twenty (20) years of banking experience in the areas of Treasury and Financial Markets,Capital Markets Operations, Securities Broking, Deposits and Investment Services, SecuritiesCustody, Settlement and Trust with various financial institutions such as Citibank, N. A. Manila andSingapore Branches, Abacus Securities Corporation, Banco Santander Philippines, Inc., and BDOPrivate Bank. In 2005, he was conferred the “Registered Financial Consultant (RFC)” designationby the International Association of Registered Financial Consultants (IARFC), a certificationorganization based in the U.S. In 2010, he completed the One-Year Course on Trust Operationsand Investment Management conducted by the Trust Institute Foundation of the Philippines. Mr.Benavides has a Bachelor of Science degree in Management minor in Philosophy from the Ateneode Manila University.Rafael G. Besa, 53, is Senior Vice President. He is a graduate of De La Salle University withdouble degree majors in Communication Arts and Marketing Management. Mr. Besa currentlyheads Marketing Communications, and was formerly the General Manager of Pfizer, Inc. –Consumer Healthcare Division where he was connected from 2004 to 2006.SEC FORM 17-A 57

Ma. Ophelia Ll. Camiña, 58, is Senior Vice President and Credit Cards Business Head, ConsumerLending Group. She previously held directorship and acting President positions in Equitable CardNetwork, Inc., a BDO subsidiary. Prior to joining the Bank, she was Executive Vice President of SMEquicom Computer Services Inc. She holds a Bachelor’s degree in Commerce from the Universityof San Carlos and MBA from De La Salle University.Arthur Vincent D. Chung, 48, is Senior Vice President and Head of Financial Institutions Groupand Loans and Trade in Hong Kong Branch. He holds a Bachelor of Science degree in Commercemajor in Marketing Management from De La Salle University and a Master’s degree in BusinessAdministration from the University of Western Australia. Prior to joining BDO, he was the ChiefFinancial Officer of Liwayway China Ltd. Shanghai and Liwayway Marketing Corporation in Manila.He also held various positions in banking with Philippine Bank of Communications as InstitutionalBanking Head, Bank of America as Senior Investment Banker, and Societe Generale as DeputyCountry Manager.Angelita O. Cortez, 57, is Senior Vice President and Head of Legal Services. She has more thantwenty-five (25) years of experience as a corporate and banking lawyer, having started her legalcareer as an associate at the Sycip Salazar Hernandez & Gatmaitan law firm. Prior to joining BDO,she held the position of Vice President, Legal and Compliance Officer of BPI Capital Corporation;and Director of BPI Securities Corporation. She obtained her BS Education and Bachelor of Lawsdegrees from the University of the Philippines.Jonathan T. Cua, 40, is Senior Vice President. He is also the Regional Head for BDO PrivateBank’s Relationship Management in the Visayas and Mindanao region. He holds a Bachelor’sdegree in Commerce, Major in Legal Management from the De La Salle University. He has eleven(11) years banking experience.Ramon S. David, 53, is Senior Vice President and currently Region Head of Metro Manila East.Prior to joining the Branch Banking Group in January 2009, he was President of Equitable SavingsBank for almost five (5) years. He joined the then PCIBank in 1993 as a Division Head in CorporateBanking..Ma. Lourdes T. de Vera, 56, is Senior Vice President. She holds a Bachelor’s degree inEconomics from the Ateneo de Manila University. She is also a graduate of the Masters inBusiness Management Program of the Asian Institute of Management and the ExecutiveDevelopment Program of the Research Institute of Management Science, Delft, Netherlands. Priorto joining BDO, she worked for the Private Development Corporation of the Philippines, holdingvarious positions in the Trust and Investments Department, Investment Banking Group, andEconomic and Corporate Research. She currently heads the Product and Market DevelopmentUnit of BDO’s Trust and Investments Group. She was the past President of the Trust OfficersAssociation of the Philippines and Governor of the Market Governance Board of Philippine Dealingand Exchange Corporation (PDEx).SEC FORM 17-A 58

Montiel H. de los Santos, 50, is Senior Vice President and Head of Foreign Currency Sales,Treasury Group. He is a graduate of De La Salle University in Manila with a Bachelor of Sciencedegree major in Management of Financial Institutions. He has thirty (30) years of bankingexperience in Treasury Function and Account Management.Geronimo D. Diaz, 56, Senior Vice President, holds a Bachelor’s degree in Accounting, MagnaCum Laude, from the University of the East and is a Certified Public Accountant. He joined theBank in April 1998 as Head of the Corporate Planning & Marketing Support of the Bank. He ispresently with Branch Banking as Region Head.Jonathan C. Diokno, 39, is Senior Vice President and Head of Transaction Banking Group (TBG)Remittance Origination. He joined at BDO last 2001 as Senior Assistant Vice President in TBGCash Management, was transferred to TBG Remittance International Operations as VicePresident, and was promoted to First Vice President last 2008. He was also a member ofAssociation of Bank Remittance Officers Inc. He holds a Bachelor’s degree in BusinessAdministration in University of the Philippines, Diliman, Quezon City.Ismael G. Estela, Jr., 55, is Senior Vice President and newly-appointed Corporate GovernanceOfficer, while he is assigned to Corporate Compliance and Legal Services & Internal Audit Group.Previously, he was Head of Transaction Banking doing cash management, electronic banking, andremittance services; and Chairman and President of Express Padala International, Inc. He is acertified public accountant (“CPA”) and holds a Bachelor of Science degree in Accounting from theUniversity of San Carlos.Marvin V. Fausto, 50, is Senior Vice President and Chief Investment Officer of Trust andInvestments Group. He is the founding President and Director of the Fund Managers Association ofthe Philippines. He is the Adviser of the Trust Officers Association of the Philippines.Georgiana A. Gamboa, 55, is Senior Vice President of BDO. She was appointed President ofBDO Leasing and Finance, Inc. (BDOLF) on December 1, 2010. She concurrently holds theposition of President of BDO Rental, Inc. She was formerly connected with City Trust BankingCorporation for sixteen (16) years and the Bank of the Philippine Islands for seven (7) years. Herbanking career spanned several functions including: Branch Manager – Consumer BankingRelationship Manager – Corporate Bank (where she grew from Assistant Manager to VicePresident), and Remedial Management Head. Prior to joining BDOLF, she was the President ofBPI Leasing Corporation, a subsidiary of Bank of the Philippine Islands, for seven (7) years. Sheholds a Bachelor’s Degree in Economics from De La Salle University where she finished SummaCum Laude and received her Master of Arts in Economics from the University of the Philippines.Jonathan C. B. Go, 57, is Senior Vice President. He is Chairman of PCIB Securities, Equiland,and Equitable Insurance Corporation. He is also a Director of Northpine Land, Inc. and President ofOlympus Import Export Corporation. He was formerly a director of Strategic Property Holdings,Inc., The Executive Banclounge, Inc., EBC Insurance Brokerage, Inc., Jardine Equitable FinanceCorporation, PCIB Properties, Inc., Property Care, Inc., and Equimark – NFC DevelopmentSEC FORM 17-A 59

Corporation; a Trustee of PCI Bank Foundation, and The Sign of the Anvil, Inc.; and Executive VicePresident of Equitable Savings Bank, Inc.Marilyn K. Go, 59, is Senior Vice President and Assistant Treasurer of BDO. She holds a Bachelorof Arts degree in Mathematics from St. Paul’s College of Manila. She joined the Bank in 1987 asManager of the Treasury Department.Enrico R. Hernandez, 41, was promoted to Senior Vice President and Head of IT Development(ITD) in 2011. He previously handled the ITD Unit responsible for Consumer Lending and servedas the IT Head of BDO Private Bank Inc. He was the Applications Development Head of BancoSantander Philippines, which BDO acquired in 2003. Mr. Hernandez graduated from Ateneo deManila University with Bachelor of Science degrees in Chemistry and Computer Engineering.Lazaro Jerome C. Guevarra, 45, is Senior Vice President. He is the Head of Advisory andMergers & Acquisitions Practice for BDO Capital and Investment Corporation. He is a graduate ofthe University of the Philippines School of Economics. He has over twenty-two (22) years ofexperience in investment banking and financial analysis. He is currently the Treasurer of BDOCapital & Investment Corporation; and is a Director of NorthPine Land Inc., BDO StrategicHoldings, Inc., PCI Insurance Brokers, Inc., PCI Travel Corp., and PCI Management Consultants,Inc. He is also a Trustee and Corporate Secretary of BDO Foundation, Inc. and the CorporateSecretary of Equimark – NFC Development Corporation.Eleanor Lee M. Hilado, 48, is Senior Vice President. She is the Debt Practice Head of BDOCapital and Investment Corporation. She is also concurrently President and Director of ArmstrongSecurities, Inc. She is a Bachelor of Arts in Economics graduate (Cum Laude) of the University ofthe Philippines. She was likewise a recipient of the Japan Airlines Scholarship for Asian Studies atthe Sophia University in Tokyo, Japan.Jeanette S. Javellana, 52, is Senior Vice President and Unit Head for Commercial Banking MetroManila West and Metro Manila North. She joined the Bank in October 2001.Roberto E. Lapid, 56, is Senior Vice President. He was appointed as the Vice Chairman of BDOLeasing and Finance, Inc. (BDOLF) in December 1, 2010. He is concurrently the Director in awholly-owned subsidiary of BDOLF: BDO Rental, Inc. He was formerly the President of BDOLF,BDO Rental, Inc., and Equitable Exchange Inc.; and Vice Chairman / Director of EBC Investments,Inc. He holds a Bachelor’s degree in Business Administration from the University of the Philippines.Gabriel U. Lim, 51, is Senior Vice President. He is the Unit Head for Equities Practice of BDOCapital and Investment Corporation. He is also Director and President of PCIB Securities, Inc. Mr.Lim’s extensive twenty-six (26) year banking experience includes key participation in the PhilippineGovernment’s privatization programs on behalf of both the Government and private institutions. Mr.Lim has MBM units from the Asian Institute of Management and holds a Bachelor of Sciencedegree in Commerce from San Beda College.SEC FORM 17-A 60

Ruby G. Lim, 64, is Senior Vice President. She is a holder of a Bachelor of Science in Commercedegree major in Accounting, Cum Laude, from Assumption College. She joined the Bank in 2001as a Consultant and assumed the position of First Vice President with Branch Banking as RegionHead based in Cebu. Ms. Lim currently sits in the Board of Mango Park Hotel.Mercedes M. Limson, 49, is Senior Vice President and Unsecured Sales and Distribution Head ofConsumer Loans Group. She has a Masters Degree in Business Management from the AsianInstitute of Management. Prior to joining BDO in November 2009, she was a Senior Vice Presidentat GE Money Bank.Lilia E. Lising, 59, is Senior Vice President. She graduated from the University of the Philippineswith a Bachelor of Arts degree in Political Science. She obtained her MBA from Ateneo de ManilaUniversity. She is currently Team 6 Head of Corporate Banking 2.Emerenciana H. Luistro, 51, is Senior Vice President and concurrently the Chief of Staff of theOffice the President, Division Head of Business Systems of BDO and Deputy Head of Remittance -Origination. She joined the Bank in November 1995 as Assistant Vice President under the Office ofthe COO.Maria Corazon A. Mallillin, 49, is Senior Vice President. She graduated from the University of thePhilippines with a Bachelor of Arts degree in Economics as well as a Bachelor of Laws degree.She joined the Bank in March of 2005 as Region Head of Branch Banking and presently headsBranch Banking Administration of the Bank.Luis Enrique T. Mangosing, 52, was appointed as a Senior Vice President of BDO on February 1,2012 in-charge of the Special Projects Management Department, the unit created and tasked tosupervise the construction/development of the Bank’s corporate building assets. He was formerlyconnected with Philam Properties Corporation (PPC), the Asset Management company of thePhilamlife Group, as its President and CEO. Prior to joining PPC, he was the General Manager ofLandev Corporation (the Real Estate company of the House of Investments and the YuchengcoGroup of Companies); Vice President of Regatta Properties, Inc. (a subsidiary of the Science ParkGroup); and the Senior Development Manager of San Miguel Properties Corporation, in that order.He holds a Bachelor of Arts degree major in Economics from the University of Santo Tomas andtook graduate school studies at the Center for Research and Communications and De La SalleUniversity.Angelita C. Manulat, 50, is Senior Vice President for Home Loans Wholesale Unit underConsumer Lending Group. Prior to the merger with Equitable PCI Bank, Inc. (EPCIB), she headedthe Home Mortgage Loan Division under the same consumer lending business with EPCIB and asProduct Manager in a concurrent position for both Auto and Home Loans product for more thanfour (4) years. She holds a Bachelor’s Degree in Accountancy from the University of San Carlos,Cebu City and earned Master’s units in Business Administration with the Ateneo de ManilaUniversity.SEC FORM 17-A 61

Dalmacio D. Martin, 50, is Senior Vice President for Treasury. He was the Head of HSBCMarkets’ Institutional Sales and Delta Rates Structuring – Treasury for Philippines. From October2007 to February 2009, he headed HSBC Market’s Delta Rates Structuring – Treasury forPhilippines, Vietnam, Sri Lanka, and Mauritius. He was also HSBC Markets’ Derivatives TradingHead – Treasury from December 1998 until October 2007.Jose Noel M. Mendoza, 49, is Senior Vice President. He is seconded to BDO Private Bank, Inc., awholly-owned subsidiary of BDO Unibank, Inc., as Senior Vice President of the Wealth Advisoryand Trust Group. He has over 20 years of research and investment advisory experience in theareas of fixed income and equity markets and have worked with institutions such as PeregrineSecurities (now ATR-Kim Eng), Citibank Securities, Inc., Urbancorp Securities, Inc., and BancoSantander Philippines, Inc. which was acquired by BDO in September 2003. He was conferred the“Registered Financial Consultant (RFC)” designation by the International Association of RegisteredFinancial Consultants (IARFC) based in the U.S. in 2004. He completed his one-year PhilippineTrust Institute course with distinction in 1997. He holds a Master of Science degree in IndustrialEconomics from the University of the Asia and the Pacific (formerly Center for Research andCommunications) and a Bachelor of Science degree in Industrial Management Engineering minorin Chemical Engineering from De La Salle University.Ramon T. Militar, 53, is Senior Vice President. He is a CPA and holds a Bachelor of Sciencedegree in Business Administration, major in Accounting, from the University of the Philippines. Heis also a graduate of the Advanced Bank Management Program (Superior Performance Awardee)of the Asian Institute of Management. He is currently with Branch Banking as Region Head.Emmanuel T. Narciso, 50, Senior Vice President, was appointed Head of the Transaction BankingGroup of BDO Unibank Inc. on June 27 th 2011. He is concurrently a director of Prospect PlaceHoldings Corporation. He was formerly connected with HSBC Bank Vietnam Ltd., the Hong Kongand Shanghai Banking Corporation in the Philippines, Security Bank Corporation, Citibank N.A.Philippines, and Bank of the Philippine Islands. He holds a Bachelor’s Degree in Economics,Honors Program, from the Ateneo de Manila University, and received his MBA from the AsianInstitute of Management in Manila under a professional scholarship from Citibank N.A. Philippines.Jaime M. Nasol, 48, is Senior Vice President and the current head of the newly reorganizedTransaction Banking Group – Cash Management Services. He is a graduate of University of thePhilippines at Los Baños with a Bachelor’s degree in Agribusiness Management and also holds anMBA degree in University of the Philippines Diliman. He started his career with BDO in August2000, where he was tasked with the establishment of the cash management services unit of theBank.Annie H. Ngo, 57, is Senior Vice President and Region Head of Metro Manila West Region underBDO’s Branch Banking Group. She graduated Magna Cum Laude from the College of the HolySpirit and took up MBA units at the Ateneo Graduate School of Business. She joined the Bank inOctober 1988.SEC FORM 17-A 62

Estrellita V. Ong, 56, joined BDO as Senior Vice President for the Internal Audit Division headingBranches Audit. She was formerly connected with Security Bank Corporation retiring as the ChiefInternal Auditor (CIA). Prior to being CIA, she had held position in Security Bank as AssistantController and Executive Assistant to the Chairman handling the Centro Escolar University Financeportfolio. She was also formerly a Director of the 6776 Ayala Condo Corp. and Corporate Secretaryof the Eastman Enterprises Corp. Prior to joining the bank mainstream, she had held Controllershipposition in Evergreen Shipping Corp.’s General Agent’s office and Pioneer IntercontinentalInsurance. She had varied experience also in manufacturing being General Manager andTreasurer of several Import/Export businesses subcontracting for branded US luggage andapparels. She is a Certified Public Accountant graduating from the University of the East – Rectowith a BSBA degree.Maria Rhoda B. Orsolino, 50, is Senior Vice President for Institutional Banking Group -Commercial Banking Group, covering the provinces of North and South Luzon. She hasexperience in the fields of Corporate Banking, Commercial Banking, Special AccountsManagement and Corporate Planning. She was formerly Education Officer/Computer ProjectOfficer with British Council, British Embassy, Manila. Ms. Orsolino is a graduate of Bachelor of Artsin Economics from the University of the Philippines.Virgilio C. Pamatmat, 59, is Senior Vice President of BDO’s Consumer Lending Group. He joinedEquitable Bank in 1994 as Vice President and became First Vice President and Head of ConsumerFinance Division in 2001. He was promoted to Senior Vice President in 2006. He graduated fromthe University of the Philippines in Diliman with a Business Administration Degree Major inFinance. He also completed thirty-two (32) units of MBA Program from the Ateneo de ManilaUniversity.Jose Alfredo G. Pascual, 49, is Senior Vice President. He was appointed Credit CommitteeSecretariat Head of BDO in June 2011. Prior to this appointment, he assumed various positionsrelated to credit risk management in PCIBank and Equitable PCI Bank, Inc. He holds a Bachelor'sdegree in Commerce, major in Accounting from the University of Santo Tomas. He is also aCertified Public Accountant.Antonio O. Peña, 54, was appointed Senior Vice President of BDO in June 2009. He was formerlyconnected with the Development Bank of Singapore, Bank of Southeast Asia, Insular SavingsBank, International CorporateBank (Interbank) and Bank of America Finance Corp. (BAFC). Heholds a Bachelors’ Degree in Commerce Major in Marketing from San Beda College.Domingo A. Ramos, Jr., 63, is Senior Vice President and Region Head for Region 9 (MindanaoRegion) of Branch Banking Group. He is a CPA and graduated from the University of the East witha degree in Business Administration (Accounting). He joined the former PCI Bank in 1971 as anExaminer of the Bank's Internal Audit Group.SEC FORM 17-A 63

Luis S. Reyes, Jr., 54, is Senior Vice President for Investor Relations and Corporate Planning. Heis concurrently a Director of BDO Strategic Holdings, Inc. He holds a Bachelor of Science degree inBusiness Economics from the University of the Philippines. He was First Vice President of Far EastBank & Trust Company, Trust Banking Group before joining the BDO.Evelyn C. Salagubang, 48, is Senior Vice President. She assumed the position of Group Head forHuman Resources of the Bank in July 2011. She was formerly the Head of Human Resources ofAmerican Express Savings Bank, with oversight HR role over the American Express International,Inc., and American Express Bank Philippines. Prior to this, she was the HR Manager for KraftFoods Philippines, Inc. She holds a degree in Psychology from Assumption College and completeda Diploma Program in Human Resource Management from the same institution.Shirley M. Sangalang, 52, is Senior Vice President. She is also Adviser to the Board AuditCommittee of BDO, BDO Leasing and Finance, Inc., and BDO Private Bank, Inc. She graduatedfrom the University of the East, Cum Laude with a Bachelor’s degree in Commerce major inAccounting. She also completed her masters in Business Economics at the University of Asia andthe Pacific. She is a Certified Public Accountant who served as Head of BDO’s Internal Audit from1984 to 2007. Apart from being the Bank’s Chief Auditor for more than two (2) decades, shespearheaded major bank undertakings such as the merger and integration of four (4) banksacquired by BDO, Bank reengineering, implementation of the Bank’s core system/migration to Y2Ksystems, implementation of the Bank’s first Internet and Phone Banking Systems, RewardsProject, Bank Management and Profitability Reporting System and the first off-shoreimplementation of the Bank’s core system.Evylene C. Sison, 58, was hired as Senior Vice President of BDO in August 2, 2010. She holdsthe position of Group Head for the Asset Management Group. She was formerly connected withSecurity Bank as Corporate Services Group Head. She holds a degree in Bachelor of Science inCommerce – Accounting, CPA from St. Theresa’s College.Erlaster C. Sotto, 54, Senior Vice President, is a Bachelor of Arts and Laws graduate of theAteneo de Manila University and a graduate with honors of the Philippine Trust Institute on Trustand Investment Management. He has completed the Strategic Business Economics Program of theUniversity of Asia and the Pacific. Mr. Sotto is a member of the Integrated Bar of the Philippines.He is concurrently the President of BDO Securities Corp. and the Chief Operating Officer of BDOCapital and Investment Corporation which are the securities house subsidiary and the investmenthouse subsidiary of BDO, respectively. He has been with the investment banking and securitiesindustry for over twenty-six (26) years. He has vast experience in corporate finance and securitiesunderwriting, distribution and trading business. Mr. Sotto was previously the President of theInvestment House Association of the Philippine and a professor of banking laws at the College ofLaw, Ateneo de Manila University.Noel B. Sugay, 47, is Senior Vice President in Treasury – FX Trading and Portfolio Managementsince 2011. He was hired by BDO in 2004 as part of the BDO Private Bank Treasury. Hetransferred to BDO Universal Bank in 2005 to head the foreign exchange desk in Treasury. Prior toemployment in BDO, he was connected with RCBC also as head of the bank’s foreign exchangeSEC FORM 17-A 64

trading desk. He graduated from the Ateneo de Manila University with a Bachelor of Arts degree inEconomics.Robert “Sui Gui” W. Sy, 52, is Senior Vice President and Region Head of BDO’s Branch BankingGroup. He has been serving the Bank for more than fifteen (15) years.Edwin R. Tajanlangit, 42, is Senior Vice President. He joined the then Equitable PCI Bank, Inc. in2001 as Head of Market and Liquidity Risk Management and continued to head this unit after themerger with BDO Unibank. He holds a Bachelor of Science degree in Applied Mathematics withSpecialization in Statistics, Magna Cum Laude, from De La Salle University. He is a CharteredFinancial Analyst (CFA) Charterholder from the CFA Institute, and a Certified Financial RiskManager (FRM) from the Global Association of Risk Professionals (GARP). He is a former Facultyof De La Salle University’s Mathematics Department and the Professional Schools GraduateSchool of Business. He is currently a member of the Bankers Association of the Philippines (BAP)Risk Management Committee and currently heads its Market Risk Sub-Committee.Arthur L. Tan, 47, is Senior Vice President. He joined the Bank in 2002 as Vice President for ITApplications Development and became IT Operations Head in 2003. He was formerly withAccenture as an associate partner in the firm’s technology practice, working on client projects inthe communications and financial services industries. He holds a Bachelor’s degree in Economicsfrom the University of the Philippines Diliman.Maria Theresa L. Tan, 43, is Senior Vice President. She is General Manager of BDO InsuranceBrokers, Inc. (BDOI). She has had more than two (2) decades of experience in sales,marketing/product management, and general management in the consumer, services, andinsurance industries. She graduated from the Ateneo de Manila University with a degree inBusiness Management minor in Marketing. Prior to joining BDO, she was the General Manager ofInternational SOS, Philippines, Inc. She joined the Bank in July 2009.Edel Mary D. Vegamora, 51, is Senior Vice President and Head of Internal Audit Division (ChiefInternal Auditor) of the Bank. She graduated Magna Cum Laude from the University of the East,with a Bachelor of Science in Business Administration, major in Accountancy. She is a CertifiedPublic Accountant, and subsequently earned the global designation of Certified Internal Auditor.She joined the Bank on September 10, 2008. Prior to joining the Bank, she was Chief FinancialOfficer and Senior Vice President of Sun Life Assurance Company of Canada (Philippines) Inc.,and of its subsidiaries, Sun Life Asset Management Company, and Sun Life Financial Plans, Inc.;and she was a member of the Board of Directors for Sun Life Asset Management Company and forfour of the ten companies comprising the Sun Life Prosperity Funds. Her earlier seniormanagement position includes that of being the location CFO of ING Bank N.V.-Manila Branch.Rosola A. Vivas, 49, Filipino, was appointed Senior Vice President of BDO in February 2011. Sheis currently the Head of Customer Development Unit under the Marketing Communications Group.Her unit manages and administers BDO Rewards, the Bank’s loyalty program. Prior to thisassignment, she was First Vice President of the Retail Banking Group of the merged Equitable PCIBank. She joined the Bank as Assistant Vice President for Trust Banking Group of the thenSEC FORM 17-A 65

Equitable Banking Corporation in July 1997. She was previously connected with the PhilippineStock Exchange, Global Business Bank and the Philippine Deposit Insurance Corporation. She is aCum Laude graduate of the University of Santo Tomas with a degree of Bachelors of Arts major inBehavioral Science. She was in the Dean’s list at the Asian Institute of Management where sheobtained her Master’s degree in Management. She graduated at the top of her class in TrustBanking and Investment Course and was awarded a scholarship by the Trust Institute Foundationof the Philippines to the National Trust School at the University of Chicago in July 2000.Edward G. Wenceslao, 56, is Senior Vice President and Head of Corporate Banking Unit 2. Priorto the merger with BDO, he was group Head of Corporate Banking and a member of the SeniorCredit Committee and Small Business Credit Committee of Equitable PCI Bank, Inc. He was alsoDivision Head of Corporate Banking and Concurrent Marketing Head of Electronic Banking atPhilippine Commercial International Bank. He completed his Bachelor of Science degree inBusiness Management at the Ateneo de Manila University. He also pursued his post-graduatestudies at the Ateneo Graduate School of Business.Ma. Teresita Susana L. Yap, 60, is Senior Vice President and Unit Head of Commercial BankingGroup - Metro Manila South. She is a graduate of Assumption College and the Asian Institute ofManagement. She joined the Bank in August 2003 after working for two (2) large universal banks.She has over thirty-seven (37) years of experience in lending to both the corporate and commercialmarkets nationwidee.NOTE: The Bank is not dependent on the services of any particular employee and does not haveany special arrangements to ensure that any employee will remain with the Bank and will notcompete upon termination.2) Significant EmployeesThe Bank’s senior executives have been enumerated above under item 9 (1).3) Family RelationshipsThe Chairperson of the Board of Directors, Ms. Teresita T. Sy, and Mr. Henry T. Sy, Jr. aresiblings.4) Involvement of directors/executive officers in legal proceedingsNone of the directors or executive officers is named or is involved in any legal proceedings whichwill have any material effect on the Bank, its operations, reputation, or financial condition.To the knowledge of the Bank, none of its directors and senior executives has been subject of thefollowing:SEC FORM 17-A 66

(a)(b)(c)(d)bankruptcy petition by or against any business of which such director was a generalpartner or executive officer either at the time of the bankruptcy or within two (2) years priorto that time;a conviction by final judgment, in a criminal proceeding, domestic or foreign, or beingsubject to a pending criminal proceeding, domestic or foreign;to any order, judgment, or decree, not subsequently reversed, suspended or vacated, ofany court of competent jurisdiction, domestic or foreign, permanently or temporarilyenjoining, barring, suspending or otherwise limiting his involvement in any type ofbusiness, securities, commodities or banking activities;being found by a domestic or foreign court of competent jurisdiction (in a civil action), theCommission or comparable foreign body, or a domestic or foreign Exchange or otherorganized trading, market or self-regulatory organization, to have violated the securities orcommodities law or regulation, and the judgment has not been reversed, suspended orvacated.Item 10. Executive Compensation1) President and four (4) most highly compensated executive officers:in million pesos Year Salary BonusesOther AnnualCompensationPresident and four (4) 2012(estimate) 81.96 41.35 n.a.most highly2011 74.51 37.59 n.a.compensatedexecutive officers2010 67.39 33.71 n.a.Year Name Position/TitleNestor V. TanPresidentWalter C. WassmerSEVP2011 Jaime C. YuSEVPEduardo V. FranciscoEVPRolando C. TanchancoEVPNestor V. TanPresidentWalter C. WassmerSEVP2010 Jaime C. YuSEVPEduardo V. FranciscoEVPRolando C. TanchancoEVPSEC FORM 17-A 67

The above compensation includes the usual bonus paid to bank officers. Except for salaries,allowances, retirement benefits provided under the Bank’s retirement plan, and company-widebenefit extended to all qualified employees under the Bank’s stock option plan, there is no separatestock option, stock warrant or other security compensation arrangement between the Bank and itsindividual officers.2) Compensation of Directors and Officers as a Groupin million pesos Year Salary BonusesOther AnnualCompensationAggregate Officers 2012 (estimate) 447.60 242.81 n.a.(from senior vice2011 406.91 220.74 n.a.presidents) &Directors2010 374.16 188.95 n.a.Each director shall receive a reasonable per diem for attendance in every Board meeting.Furthermore, every member of the Board may receive as compensation such amount as may bedetermined by the President. As provided by law, the total compensation of directors shall notexceed ten percent (10%) of the net income before income tax of the Bank during the precedingyear.3) Employment Contracts and Termination of Employment and Change-in-ControlArrangementsThere are no special contracts of employment between the Bank and the named directors andexecutive officers, as well as special compensatory plans or arrangements, including payment tobe received from the Bank with respect to any named director or executive officer.Item 11. Security Ownership of Certain Beneficial Owners and Management1) Security Ownership of Certain Record/Beneficial OwnersAs of 31 December 2011, the following are known to the Bank to be directly or indirectly the recordand/or beneficial owners of more than 5% of the Bank’s voting Securities:Class Name of Beneficial Owner No. of Shares Percentage1 PCD Nominee Corp. (Filipino) 718,702,393 27.56%2 PCD Nominee Corp. (Non-Filipino) 691,357,854 26.51%3 SM Investments Corporation 683,841,602 26.23%4 DBMN OT-024 SM Investments Corporation 208,097,814 7.98%Total 2,301,999,663 88.28%SEC FORM 17-A 68

2) Security Ownership of ManagementAs of December 31, 2011, the total number of shares owned by the directors and management ofthe registrant as a group unnamed is 2,602,675 common shares, which is equivalent to 0.0998% ofthe total outstanding common capital stock of the registrant. The Bank’s directors and officers ownthe following common shares of the Bank:Title ofClassName of BeneficialOwnerPosition Citizenship No. ofSharesPercent ofClassCommon Teresita T. Sy Chairperson Filipino 240,400 0.0092%Common Corazon S. de la Paz- Vice Filipino 270 0.0000%BernardoChairpersonCommon Jesus A. Jacinto, Jr. Vice Filipino 255,000 0.0098%ChairmanCommon Cheo Chai Hong Director Singaporean 1 0.0000%Common Teodoro B. Montecillo Independent Filipino 640 0.0000%DirectorCommon Farida Khambata Director Canadian 1 0.0000%Common Henry T. Sy, Jr. Director Filipino 132,300 0.0051%Common Josefina N. Tan Director Filipino 154,786 0.0059%Common Antonio C. Pacis Director Filipino 4,108 0.0002%Common Nestor V. Tan President & Filipino 200,000 0.0077%DirectorCommon Jimmy T. Tang Independent Filipino 13,692 0.0005%DirectorCommon Jaime C. Yu SEVP Filipino 54,065 0.0021%Common Ador A. Abrogena EVP and Filipino 63,466 0.0024%Trust OfficerCommon Stella L. Cabalatungan EVP Filipino 14,210 0.0005%Common Julie Y. Chua EVP Filipino 113,466 0.0044%Common Lucy Co Dy EVP & Filipino 122,466 0.0047%ComptrollerCommon Pedro M. Florescio III EVP & Filipino 97,466 0.0037%TreasurerCommon Eduardo V. Francisco EVP Filipino 114,605 0.0044%Common Edmundo S. Soriano EVP Filipino 20,000 0.0008%Common Rolando C. Tanchanco EVP Filipino 113,466 0.0044%Common Evelyn L. Villanueva EVP Filipino 113,466 0.0044%Common Aristotle L. Villaraza EVP Filipino 10,000 0.0004%Common Noel L. Andrada SVP Filipino 6,641 0.0003%Common Victor C. Arboleda SVP & ChiefComplianceFilipino 4,140 0.0002%SEC FORM 17-A 69

Title ofClassName of BeneficialOwnerPosition Citizenship No. ofSharesOfficerPercent ofClassCommon Gamalielh Ariel O. SVP Filipino 12,607 0.0005%BenavidesCommon Ma. Ophelia Ll. Camina SVP Filipino 1,207 0.0000%Common Ma. Lourdes T. de Vera SVP Filipino 77,035 0.0030%Common Montiel H. de losSVP Filipino 36,888 0.0014%SantosCommon Ismael G. Estela, Jr. SVP Filipino 35,016 0.0013%Common Lesmes L. Garate SVP Filipino 723 0.0000%Common Jonathan C.B. Go SVP Filipino 15,382 0.0006%Common Marilyn K. Go SVP &AssistantTreasurerFilipino 35,099 0.0013%Common L. Jerome C. Guevarra SVP Filipino 16,705 0.0006%Common Enrico R. Hernandez SVP Filipino 2,000 0.0001%Common Jeanette S. Javellana SVP Filipino 414 0.0000%Common Gabriel U. Lim SVP Filipino 1 0.0000%Common Ruby G. Lim SVP Filipino 31,770 0.0012%Common Emerenciana H. Luistro SVP Filipino 3,726 0.0001%Common Ma. Corazon A. Mallillin SVP Filipino 100 0.0000%Common Jose Noel M. Mendoza SVP Filipino 38,615 0.0015%Common Ramon T. Militar SVP Filipino 65,099 0.0025%Common Jaime M. Nasol SVP Filipino 32,535 0.0012%Common Antonio O. Peña SVP Filipino 28,812 0.0011%Common Domingo A. Ramos, Jr. SVP Filipino 93 0.0000%Common Maria Nanette R.SVP Filipino 54,746 0.0021%RegalaCommon Luis S. Reyes, Jr. SVP Filipino 86,065 0.0033%Common Shirley M. Sangalang SVP Filipino 78,466 0.0030%Common Erlaster C. Sotto SVP Filipino 723 0.0000%Common Noel B. Sugay SVP Filipino 19,847 0.0008%Common Arthur L. Tan SVP Filipino 63,178 0.0024%Common Rebecca S. Torres SVP & Asst.CorporateSecretaryCommon Edmundo L. Tan CorporateSecretaryFilipino 16,340 0.0006%Filipino 828 0.0000%Total 2,602,675 0.0998%SEC FORM 17-A 70

(Note: There are no voting trust shares or shares issued pursuant to a Voting Trust Agreementregistered with the Bank nor has there been any change in control of the Bank. The Bank is alsonot aware of any contractual arrangement or otherwise between its shareholders and/or thirdparties, which may result in change in control of the Bank.)Item 12. Certain Relationships and Related TransactionsIn the ordinary course of business, the Bank has loan transactions with its affiliates and with certaindirectors, officers, stockholders and related interests (DOSRI). Under existing policies of the Bankthese loans are made on substantially the same terms as loans to other individuals and businessesof comparable risks. Under the General Banking Act and BSP regulations, the total outstandingloans, other credit accommodations and guarantees to each of the Bank’s DOSRI shall be limitedto an amount equivalent to their respective unencumbered deposits and book value of their paid-incapital contribution in the Bank. Unsecured loans, other credit accommodations and guarantees toeach of the Bank’s DOSRI shall not exceed thirty percent (30%) of their respective total loans,other credit accommodations and guarantees.Except with the prior approval of the Monetary Board, the total outstanding loans, other creditaccommodations and guarantees to the Bank’s DOSRI shall not exceed fifteen percent (15%) ofthe total loan portfolio of the Bank or one hundred percent (100%) of net worth whichever is lower.The total unsecured loans, other credit accommodations and guarantees to the Bank’s DOSRIshall not exceed thirty percent (30%) of the aggregate ceiling or the outstanding loans, other creditaccommodations and guarantees, whichever is lower. For the purpose of determining compliancewith the ceiling on unsecured loans, Banks shall be allowed to average their ceiling on unsecuredloans, other credit accommodations and guarantees every quarter.Item 13. Corporate GovernanceEvaluation SystemPART IV - CORPORATE GOVERNANCEThe Bank has required in its Corporate Governance Manual (the “Manual”) that all Board-createdcommittees shall report regularly to the Board of Directors on compliance with the Manual’spolicies and procedures. The Bank’s Board of Directors is directed to appoint a Chief ComplianceOfficer who shall oversee the implementation of the Bank’s compliance system and program inaccordance with the requirements of the BSP and monitor compliance with the provisions of theSEC’s Revised Code of Corporate Governance and the Bank’s Manual.As part of its increasing focus on corporate governance, the Bank established its Board AuditCommittee and Corporate Governance Committee. The Board Audit Committee provides oversightof the Bank's financial reporting and control as well as internal and external audit functions. It alsoprovides oversight on the Bank’s compliance function. The Board Audit Committee is alsoSEC FORM 17-A 71

esponsible for the setting up of the internal audit department and for the appointment of theinternal auditor as well as the independent external auditor. It monitors and evaluates theadequacy and effectiveness of the Bank's internal control systems. The Board Audit Committee ischaired by Teodoro B. Montecillo. Its other members are Corazon de la Paz-Bernardo, Antonio C.Pacis, Jimmy T. Tang, Jesus A. Jacinto, Jr., Christopher A. Bell-Knight (Adviser) and Shirley M.Sangalang (Adviser).The Corporate Governance Committee assists the Board of Directors in shaping the Bank’scorporate governance policies and practices, recommending applicable guidelines and monitoringcompliance with said policies and practices. It monitors the Board of Directors’ effectiveness anddue observance of governance principles and guidelines. It also oversees the annual performanceself-evaluation of the Board of Directors, its committees, and executive management. TheCorporate Governance Committee is chaired by Teodoro B. Montecillo. Its other members areJesus A. Jacinto Jr., Jimmy T. Tang, Antonio C. Pacis, Farida Khambata and Christopher A. Bell-Knight (Adviser).b) Measures on leading practices of good-corporate governanceThe Bank is constantly examining leading practices on good corporate governance, particularly bytaking advantage of its partnership with the International Finance Corporation, the private arm ofthe World Bank, and where appropriate, adopts said practices in its Manual. On December 5,2009, the Board approved its Manual incorporating the provisions prescribed by the SEC in theRevised Code of Corporate Governance, set forth in SEC Memo. Circular No. 6, Series of 2009.c) Any Deviation from the ManualNone.d) ImprovementThe Bank has adopted the policy of reviewing its Manual on an annual basis at the Board level withthe aim of constantly improving its corporate governance.Part V – Exhibits and SchedulesItem 14. List of Branches, Reports on SEC Form 17-Ca) Directory of Branch OfficesA list of the Bank’s branch branches are provided in Item 2, on pages 8-35 of this report.SEC FORM 17-A 72

) The summary of reports on SEC Form 17-C (Current Report) filed in 2011 and firstquarter of 2012 is as follows:DateSubject10 January 2011 Resignation of Mr. Norman Lee Hong Man, Sr., Senior Vice President ofHong Kong Branch effective 31 December 2010.31 January 2011 Declaration of dividends on Preferred Shares Series “A” at the rate of 6.5%per annum for a total dividend amount of Php329,513,888.89 subject toprior approval by the Bangko Sentral nf Pilipinas.Change of corporate name of BDO from “Banco De Oro Unibank, Inc.” to“BDO Unibank, Inc.” and the resignation of the following business nameswith the Securities and Exchange Commission: BDO, BDO Unibank, BancoDe Oro, Banco De Oro Unibank, BDO Banco De Oro and the consequentamendment to BDO’s Articles of Incorporation.1 February 2011 Submission of the press statement on BDO’s consolidated resources in2010 to be published in a newspaper of general circulation.1 February 2011 Submission of the Statement of Condition of BDO as of 31 December 2010to be published in a newspaper of general circulation on 2 February 2011.4 February 2011 Submission of update on the acquisition and assumption by BDO of theassets and liabilities of Export Import Bank and possible areas ofcooperation with Asiatrust Development Bank, Inc.28 February 2011 Submission of the press statement of BDO regarding its audited netincome for the year 2010.1 March 2011 Disclosure on the sale by BDO of its 5% stake in Philamlife Equitable LifeAssurance Company, Inc. to The Philippine American Life and GeneralInsurance Company.2 March 2011 Holding of the annual shareholders’ meeting of BDO on 27 May 2011 with4 April 2011 as the record date for stockholders entitled to vote andparticipate at said meeting.15 March 2011 Reply on the inquiry on the possible effects of the calamity that hit Japan.21 March 2011 Submission of the Notice and Agenda for the 2011 annual shareholders’meeting on 27 May 2011.24 March 2011 Submission of the revised Notice and Agenda for the 2011 annualshareholders’ meeting on 27 May 2011.13 April 2011 Disclosure on the receipt of the approval by the Philippine DepositInsurance Corporation of BDO’s purchase of the assets and assumption ofliabilities of Export and Industry Bank subject to the execution of definitiveagreements.SEC FORM 17-A 73

2 May 2011 Retirement of Ms. Nenita Chipongian Indiongco, Senior Vice President forInstitutional Banking Group – Corporate Banking effective 1 May 2011.2 May 2011 Submission of the statement on the results of operations of BDO for thefirst quarter of 2011.2 May 2011 Disclosure on the agreement with SM Keppel Land, Inc. for thedevelopment and expansion of the Podium Complex.5 May 2011 Submission of the statement of condition of BDO as of 31 March 2011.23 May 2011 Clarification on the press statement entitled, “BDO to issue P15-B capital”30 May 2011 Submission of the results of the annual shareholders’ and organizationalboard meetings of BDO held on 27 May 2011.3 June 2011 Submission of statement of beneficial ownership of securities of newlypromoted senior officers of BDO.5 June 2011 Submission of statement to be released to the press regarding theissuance by BDO of Tier 2 Notes.6 June 2011 Submission of the Certification of Qualification of Independent Directors ofBDO.9 June 2011 Submission of the Certification of Qualification of Independent Directors ofBDO.16 June 2011 Submission of statement to be released to the press regarding thesuccessful closing of Tier 2 Notes offer.21 June 2011 Clarification on news article entitled, “BDO finds ways”.27 June 2011 Approval of the hiring of Mr. Emmanuel T. Narciso as Senior VicePresident for Transaction Banking Group effective 27 June 2011 andretirement of Ms. Perla F. Toledo as Senior Vice President of HumanResources Group effective 1 July 2011.27 June 2011 Submission of statement to the press regarding its Php8.5 billion Tier 2Notes Issuance.1 August 2011 Submission of the results of operations of BDO for the second half of 2011.1 August 2011 Disclosure on the approval by the Bangko Sentral ng Pilipinas on the cashdividends of Php1.00 per share declared by BDO on 27 May 2011.1 August 2011 Submission of statement to be released to the press on the results ofoperations of BDO for the first half of 2011.8 August 2011 Submission of the Statement of Condition of BDO as of 31 June 2011 to bepublished in a newspaper of general circulation on 9 August 2011.15 September 2011 Clarification on the disclosure of Rizal Commercial Banking Corporation onBankard, Inc.SEC FORM 17-A 74

20 September 2011 Submission of statement to be released to the press regarding the launchof its additional Tier 2 issuance.29 September 2011 Submission of statement to be released to the press regarding theacceleration of closing of Tier 2 Notes offer.7 October 2011 Submission of statement to the press regarding its Php6.5 billion Tier 2Notes Issuance.2 November 2011 Resignation of Mr. Arsenio L. Severino as Senior Vice President for RiskManagement Group effective 1 November 2011.3 November 2011 Submission of the results of operations of BDO for the third quarter of2011.3 November 2011 Submission of the Statement of Condition of BDO as of 30 September2011 to be published on 4 November 2011.4 November 2011 Disclosure on the approval by the Securities and Exchange Commission(SEC) of the change of name of BDO from Banco De Oro Unibank, Inc. toBDO Unibank, Inc.5 December 2011 Approval of the hiring of Ms. Strellita V. Ong as Senior Vice President forInternal Audit Group effective 2 January 2012 and retirement of Mr.Aristotle L. Villaraza as Executive Vice President of Institutional BankingGroup – Wholesale Lending & International Desk effective 1 December2011.6 December 2011 Submission of statement of beneficial ownership of securities of Ms.Estrellita V. Ong.9 December 2011 Clarification on the news articles entitled, “BDO close to hitting P10.5Bprofit”.3 January 2012 Disclosure on the SEC approval of the merger of the following whollyownedsubsidiaries of BDO: BDO Strategic Holdings, Inc. (“BDOSHI”),Equitable Card Network, Inc., EBC Strategic Holdings Corporation, BDOTechnology Center, Inc. and Strategic Property Holdings, Inc. with BDOSHIas the surviving corporation.9 January 2012 Approval of the hiring of Mr. Luis Enrique T. Mangosing as Senior VicePresident for Central Operations Group effective 2 February 2012 andretirement of Mr. Lesmes Lamparas Garate as Region Head and SeniorVice President of Branch Banking Group – Region 8/Eastern Visayas,effective 1 February 2012.12 January 2012 Submission of statement of beneficial ownership of securities of Mr. LuisEnrique T. Mangosing.30 January 2012 Declaration of dividends on Preferred Shares Series “A” at the rate of 6.5%per annum or a total dividend amount of Php329,513,888.89, subject toprior approval by the BSP.SEC FORM 17-A 75

Setting the annual shareholders’ meeting on 20 April 2012 and fixing therecord date on 9 March 2012.Extension of the corporate term of BDO for another fifty (50) years from 20December 2017 and the corresponding amendment to the Articles ofIncorporation of BDO.6 February 2012 Submission of statement to be released to the press on BDO’s proposal toissue U.S. dollar-denominated fixed rate senior notes.7 February 2012 Submission of statement to be released to the press on BDO’s issuance ofU.S. dollar-denominated fixed rate senior notes.20 February 2012 Submission of the Notice and Agenda for the annual shareholders’ meetingof BDO to be held on 20 April 2012.28 February 2012 Submission of the press statement of BDO regarding its audited netincome for the year 2011.SEC FORM 17-A 76

STATEMENT OF MANAGEMENT’SRESPONSIBILITY

AUDITED FINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009

BDO UNIBANK, INC. AND SUBSIDIARIES(Formerly Banco De Oro Unibank, Inc. and Subsidiaries)STATEMENTS OF INCOMEFOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos Except Per Share Data)BDO Unibank GroupParent BankNotes 2011 2010 2009 2011 2010 2009INTEREST INCOME 20 P 50,467 P 49,930 P 48,810 P 48,024 P 46,544 P 45,011INTEREST EXPENSE 21 16,688 15,772 18,251 16,039 14,990 17,181NET INTEREST INCOME 33,779 34,158 30,559 31,985 31,554 27,830IMPAIRMENT LOSSES - Net 14 6,144 6,698 6,153 5,945 6,374 5,775NET INTEREST INCOMEAFTER IMPAIRMENT LOSSES 27,635 27,460 24,406 26,040 25,180 22,055OTHER OPERATING INCOME 22 20,899 17,841 15,483 17,976 16,404 14,375OTHER OPERATING EXPENSES 22 36,316 34,789 32,129 33,863 31,854 28,811PROFIT BEFORE TAX 12,218 10,512 7,760 10,153 9,730 7,619TAX EXPENSE 27 1,630 1,631 1,659 1,199 1,297 1,263NET PROFIT P 10,588 P 8,881 P 6,101 P 8,954 P 8,433 P 6,356Attributable To:Shareholders of the Parent Bank P 10,531 P 8,825 P 6,035Non-controlling Interests 57 56 66P 10,588 P 8,881 P 6,101Earnings Per Share:Basic 28 P 3.91 P 3.37 P 2.57 P 3.31 P 3.21 P2.71Diluted 28 P 3.91 P 3.37 P 2.47 P 3.31 P 3.21 P2.60

BDO UNIBANK, INC. AND SUBSIDIARIES(Formerly Banco De Oro Unibank, Inc. and Subsidiaries)STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos)BDO Unibank GroupParent BankNote 2011 2010 2009 2011 2010 2009NET PROFIT P 10,588 P 8,881 P 6,101 P 8,954 P 8,433 P 6,356OTHER COMPREHENSIVE INCOME (LOSS)Unrealized fair value gainson available-for-sale securities 846 3,020 2,356 1,096 1,951 2,173Transfer of realized fair value losses (gains)on available-for-sale securities to statements of income ( 209 )768 1,057 ( 118 )1,352 231Net fair value gains on available for sale securities 9 637 3,788 3,413 978 3,303 2,404Translation adjustment related to foreign operations ( 9 ) ( 350 ) ( 1 )- ( 317 )-Other comprehensive income, net of tax 628 3,438 3,412 978 2,986 2,404TOTAL COMPREHENSIVE INCOME P 11,216 P 12,319 P 9,513 P 9,932 P 11,419 P 8,760Attributable To:Shareholders of the Parent Bank P 11,218 P 12,231 P 9,447Non-controlling Interests ( 2 )88 66P 11,216 P 12,319 P 9,513See Notes to Financial Statements.

BDO UNIBANK, INC. AND SUBSIDIARIES(Formerly Banco De Oro Unibank, Inc. and Subsidiaries)STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos)BDO Unibank GroupNet UnrealizedFair ValueGains (Losses) on Accumulated Total AttributableCommon Stock Additional Available-for-sale Revaluation Translation to Shareholders Non-controllingNotes Common Stock Preferred Stock Options Paid-in Capital Surplus Reserves Surplus Free Securities Increment Adjustment of the Parent Bank Interests Total EquityBALANCE AT JANUARY 1, 2011 P 26,074 P 5,000 P - P 25,175 P 1,550 P 25,737 P 3,664 P 1,165 ( P 356 ) P 88,009 P 723 P 88,732Transaction with ownersCash dividends 19 - - - - - ( 2,937 ) - - - ( 2,937 ) ( 88 ) (3,025 )Total comprehensive income - - - - - 10,531 696 - ( 9 )11,218 ( 2 )11,216Transfer to (from) Surplus FreeTrust reserve 25 - - - - 146 ( 146 ) - - - - - -Revaluation increment on land and building sold - - - - - 86 - ( 47 ) - 39 - 39- - - - 146 ( 60 ) - ( 47 ) - 39 - 39BALANCE AT DECEMBER 31, 2011 P 26,074 P 5,000 P - P 25,175 P 1,696 P 33,271 P 4,360 P 1,118 ( P 365 ) P 96,329 P 633 P 96,962BALANCE AT JANUARY 1, 2010 P 23,397 P 5,000 P 7 P 16,858 P 1,532 P 19,377 ( P 92 ) P 1,179 ( P 6 ) P 67,252 P 635 P 67,887Transactions with ownersIssuance of additional shares 19 2,677 - - - - - - - - 2,677 - 2,677Premium on issuance of new shares, net of listing fees 19 - - - 8,317 - - - - - 8,317 - 8,317Cash dividends 19 - - - - - ( 2,447 ) - - - ( 2,447 ) - (2,447 )Contribution to stock options - - ( 7 ) - - - - - - ( 7 ) - (7 )Total transactions with owners 2,677 - ( 7 )8,317 - ( 2,447 ) - - - 8,540 - 8,540Total comprehensive income - - - - - 8,825 3,756 - ( 350 )12,231 88 12,319Transfer to (from) Surplus FreeReversal of appropriation - - - - ( 71 )71 - - - - - -Trust reserve 25 - - - - 89 ( 89 ) - - - - - -Revaluation increment on land and building sold - - - - - - - ( 14 ) - ( 14 ) - (14 )- - - - 18 ( 18 ) - ( 14 ) - ( 14 ) - (14 )BALANCE AT DECEMBER 31, 2010 P 26,074 P 5,000 P - P 25,175 P 1,550 P 25,737 P 3,664 P 1,165 ( P 356 ) P 88,009 P 723 P 88,732BALANCE AT JANUARY 1, 2009 P 23,020 P 5,000 P 76 P 15,937 P 1,329 P 14,049 ( P 3,505 ) P 1,311 ( P 5 ) P 57,212 P 562 P 57,774Transactions with ownersIssuance of additional shares 19 377 - - - - - - - - 377 - 377Premium on issuance of new shares, net of listing fees 19 - - - 921 - - - - - 921 - 921Cash dividends 19 - - - - - ( 791 ) - - - ( 791 ) - (791 )Merger of subsidiaries 19 - - - - - 110 - - - 110 - 110Contribution to stock options, net of recognition - - ( 69 ) - - - - - - ( 69 ) - (69 )Acquisition of GEMB 26 - - - - - - - - - - 7 7Total transactions with owners 377 - ( 69 )921 - ( 681 ) - - - 548 7 555Total comprehensive income - - - - - 6,035 3,413 - ( 1 )9,447 66 9,513Transfer to (from) Surplus FreeAdditional appropriation - - - - 128 ( 128 ) - - - - - -Trust reserve 25 - - - - 75 ( 75 ) - - - - - -Revaluation increment on land and building sold - - - - - 177 - ( 132 ) - 45 - 45- - - - 203 ( 26 ) - ( 132 ) - 45 - 45BALANCE AT DECEMBER 31, 2009 P 23,397 P 5,000 P 7 P 16,858 P 1,532 P 19,377 ( P 92 ) P 1,179 ( P 6 ) P 67,252 P 635 P 67,887

- 2 -Net UnrealizedFair ValueGains (Losses) onAccumulatedCommon Stock Additional Available-for-sale Revaluation TranslationNote Common Stock Preferred Stock Options Paid-in Capital Surplus Reserves Surplus Free Securities Increment Adjustment Total EquityBALANCE AT JANUARY 1, 2011 P 26,074 P 5,000 P - P 25,156 P 1,189 P 21,098 P 3,187 P 1,162 ( P 317 ) P 82,549Parent BankTransactions with ownersCash dividends 19 - - - - - ( 2,937 ) - - - (2,937 )Total comprehensive income - - - - - 8,954 978 - - 9,932Transfer to (from) Surplus FreeTrust reserve - - - - 106 ( 106 ) - - - -Revaluation reversal, inclusive of tax component - - - - - 86 - ( 47 ) - 39- - - - 106 ( 20 ) - ( 47 ) - 39BALANCE AT DECEMBER 31, 2011 P 26,074 P 5,000 P - P 25,156 P 1,295 P 27,095 P 4,165 P 1,115 ( P 317 ) P 89,583BALANCE AT JANUARY 1, 2010 P 23,397 P 5,000 P 7 P 16,839 P 1,100 P 15,169 ( P 116 ) P 1,176 P - P 62,572Transactions with ownersIssuance of additional shares 19 2,677 - - - - - - - - 2,677Premium on issuance of shares, net of listing fees 19 - - - 8,317 - - - - - 8,317Cash dividends 19 - - - - - ( 2,415 ) - - - (2,415 )Contribution to stock options, net of recognition - - ( 7 ) - - - - - - (7 )Total transactions with owners 2,677 - ( 7 )8,317 - ( 2,415 ) - - - 8,572Total comprehensive income - - - - - 8,433 3,303 - ( 317 )11,419Transfer to (from) Surplus FreeTrust reserve - - - - 89 ( 89 ) - - - -Revaluation reversal, inclusive of tax component - - - - - - - ( 14 ) - (14 )- - - - 89 ( 89 ) - ( 14 ) - (14 )BALANCE AT DECEMBER 31, 2010 P 26,074 P 5,000 P - P 25,156 P 1,189 P 21,098 P 3,187 P 1,162 ( P 317 ) P 82,549BALANCE AT JANUARY 1, 2009 P 23,020 P 5,000 P 76 P 15,918 P 1,025 P 9,439 ( P 2,520 ) P 1,302 P - P 53,260Transactions with ownersIssuance of additional shares 19 377 - - - - - - - - 377Premium on issuance of shares, net of listing fees 19 - - - 921 - - - - - 921Cash dividends 19 - - - - - ( 729 ) - - - (729 )Contribution to stock options, net of recognition - - ( 69 ) - - - - - - (69 )Total transactions with owners 377 - ( 69 )921 - ( 729 ) - - - 500Total comprehensive income - - - - - 6,356 2,404 - - 8,760Transfer to (from) Surplus FreeTrust reserve - - - - 75 ( 75 ) - - - -Revaluation reversal, inclusive of tax component - - - - - 178 - ( 126 ) - 52- - - - 75 103 - ( 126 ) - 52BALANCE AT DECEMBER 31, 2009 P 23,397 P 5,000 P 7 P 16,839 P 1,100 P 15,169 ( P 116 ) P 1,176 P - P 62,572See Notes to Financial Statements.

BDO UNIBANK, INC. AND SUBSIDIARIES(Formerly Banco De Oro Unibank, Inc. and Subsidiaries)STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos)BDO Unibank GroupParent BankNotes 2011 2010 2009 2011 20102009CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax P 12,218 P 10,512 P 7,760 P 10,153 P 9,730 P7,619Adjustments for:Interest received 47,288 49,859 46,791 45,336 46,384 44,476Interest income 20 ( 50,467 ) ( 49,930 ) ( 48,810 ) ( 48,024 ) ( 46,544 ) (45,011 )Interest expense 21 16,688 15,772 18,251 16,039 14,990 17,181Interest paid ( 16,519 ) ( 16,657 ) ( 16,800 ) ( 15,944 ) ( 15,291 ) (16,341 )Impairment losses 14 6,144 6,698 6,153 5,945 6,374 5,775Depreciation and amortization 11, 12, 13 2,850 2,880 2,848 2,503 1,986 1,684Fair value loss (gain) 587 131 ( 1,719 )392 270 (1,663 )Operating profit before changes in operatingresources and liabilities 18,789 19,265 14,474 16,400 17,899 13,720Decrease in financial assets at fair valuethrough profit or loss 1,969 1,126 300 1,578 1,950 563Increase in loans and other receivables ( 113,511 ) ( 57,878 ) ( 52,460 ) ( 115,467 ) ( 66,108 ) (48,417 )Decrease in investment properties 1,498 1,235 973 1,266 992 1,102Decrease (increase) in other resources ( 4,687 )5,721 273 214 ( 31 ) (1,494 )Increase in deposit liabilities 75,929 91,969 59,989 76,094 95,896 59,145Increase (decrease) in other liabilities 5,192 ( 6,157 )4,585 2,233 ( 5,507 )1,459Cash generated from (used in) operations ( 14,821 )55,281 28,134 ( 17,682 )45,091 26,078Cash paid for income tax ( 1,687 ) ( 1,846 ) ( 1,933 ) ( 1,090 ) ( 1,329 ) (1,253 )Net Cash From (Used in) Operating Activities ( 16,508 )53,435 26,201 ( 18,772 )43,762 24,825CASH FLOWS FROM INVESTING ACTIVITIESNet decrease in held-to-maturity investments 9,894 19,717 6,620 10,427 19,074 5,747Net increase in available-for-sale securities ( 545 ) ( 36,329 ) ( 7,204 ) ( 1,385 ) ( 32,603 ) (4,006 )Net acquisitions of premises, furniture,fixtures and equipment 11 ( 2,558 ) ( 2,239 ) ( 2,636 ) ( 2,598 ) ( 2,105 ) (1,623 )Acquisitions of equity investments 13 - ( 1,405 ) ( 2,000 )- ( 1,405 ) (2,000 )Net Cash Used In Investing Activities 6,791 ( 20,256 ) ( 5,220 )6,444 ( 17,039 ) (1,882 )CASH FLOWS FROM FINANCING ACTIVITIESNet proceeds from (payments of) bills payable ( 6,353 )19,993 ( 18,801 ) ( 4,580 )20,564 (20,137 )Proceeds from issuance of senior notes payable - 13,105 - - 13,105 -Proceeds from issuance of common shares 19 - 10,993 1,299 - 10,994 1,299Dividends paid 19 ( 3,025 ) ( 2,447 ) ( 791 ) ( 2,937 ) ( 2,415 ) (729 )Proceeds from issuance of subordinated notes payable 14,905 - 3,000 14,905 - 3,000Net Cash From (Used In) Financing Activities 5,527 41,644 ( 15,293 )7,388 42,248 (16,567 )NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS (Carried Forward) ( P 4,190 ) P 74,823 P 5,688 ( P 4,940 ) P 68,971 P6,376

- 2 -BDO Unibank GroupParent BankNotes 2011 2010 2009 2011 2010 2009NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS (Brought Forward) ( P 4,190 ) P 74,823 P 5,688 ( P 4,940 ) P 68,971 P6,376CASH AND CASH EQUIVALENTS AT BEGINNING OF YEARCash and other cash items 7 26,673 30,544 21,770 26,660 30,365 21,763Due from Bangko Sentral ng Pilipinas 7 138,482 64,833 62,669 129,718 62,864 59,940Due from other banks 8 21,777 16,732 17,102 20,433 14,611 14,881Interbank call loans receivable - - 4,880 - - 4,880186,932 112,109 106,421 176,811 107,840 101,464CASH AND CASH EQUIVALENTS AT END OF YEARCash and other cash items 7 33,129 26,673 30,544 33,102 26,660 30,365Due from Bangko Sentral ng Pilipinas 7 124,894 138,482 64,833 115,992 129,718 62,864Due from other banks 8 24,719 21,777 16,732 22,777 20,433 14,611P 182,742 P 186,932 P 112,109 P 171,871 P 176,811 P 107,840Supplemental Information on Noncash Financing and Investing ActivitiesThe following are the significant noncash transactions:a. In 2011, the Parent Bank agreed to transfer, cede, and convey absolutely to SM Keppel Land, Inc. (SM Keppel)the outstanding advances totalling P364 recognized as part of Other receivables from customers under Loans andOther Receivables in exchange for 36,401,500 preferred shares for a subscription price of P364 (see Notes 10 and 13).b. On April 30, 2011, the Board of Directors approved the five-way merger (the Merger) of wholly-owned subsidiaries:BDO Strategic Holdings, Inc. (BDOSHI), Equitable Card Network, Inc., EBC Strategic Holdings Corporation (ESHC),BDO Technology Center, Inc. and Strategic Property Holdings, Inc. with BDOSHI as the surviving corporation. The Mergerwas approved by the BSP and the SEC on November 29, 2011 and on December 29, 2011, respectively. As a considerationfor the Merger, the Bank invested additional P4,580 in BDOSHI through dacion en pago by ESHC of its 3,621,159 preferredshares and 2,000,001 common shares and conversion of advances to the subsidiaries (see Note 13).c. In 2010, the BDO Unibank Group and the Parent Bank participated in the Global Bond Exchange by exchangingRepublic of the Philippines (ROP) bonds booked under Financial Assets at Fair Value through Profit or Loss (FVTPL)amounting to US$1.3 million of the Parent Bank (see Note 9.01) and Held-to-maturity (HTM) Investments amounting toUS$111.5 million and US$75.4 million of the BDO Unibank Group and Parent Bank, respectively (see Note 9.3). Thisresulted to a gain of P1 for FVTPL shown as part of Trading gain - net under Other Operating Income (see Note 22)and P824 and P728 for HTM by the BDO Unibank Group and Parent Bank, respectively, shown as part of UnearnedIncome under Other Liabilities (see Note 18).See Notes to Financial Statements.

BDO UNIBANK, INC. AND SUBSIDIARIES(Formerly Banco De Oro Unibank, Inc. and Subsidiaries)NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)1. CORPORATE MATTERS1.01 Incorporation and OperationsBDO Unibank, Inc. (formerly Banco de Oro Unibank, Inc., the Bank, BDO Unibankor the Parent Bank) was incorporated in the Philippines on August 16, 1967 to engagein the business of banking. It was authorized to engage in trust operations onJanuary 5, 1988 and in foreign currency deposit operations on November 23, 1990.The Bangko Sentral ng Pilipinas (BSP) granted approval to the Parent Bank to operateas an expanded commercial bank on August 5, 1996. The Parent Bank commencedoperations as such in September of the same year. The Parent Bank and its subsidiaries(collectively referred to as the BDO Unibank Group) offer a wide range of commercial,investment, private and other banking services. These services include traditional loanand deposit products, as well as treasury, asset management, realty management, leasingand finance, remittance, trade services, retail cash cards, insurance, credit card services,stockbrokerage, trust and others.On January 29, 2011, the Parent Bank’s Board of Directors (BOD) approved thechange in the Bank registered name from Banco De Oro Unibank, Inc. to BDOUnibank, Inc. The change in the Bank’s registered name was approved by thePhilippine Securities and Exchange Commission (SEC) on November 4, 2011.As a banking institution, the BDO Unibank Group’s operations are regulated andsupervised by the BSP. In this regard, the BDO Unibank Group is required to complywith the rules and regulations of the BSP such as those relating to maintenance ofreserve requirements on deposit liabilities and deposit substitutes and those relating tothe adoption and use of safe and sound banking practices, among others, aspromulgated by the BSP. BDO Unibank Group is subject to the provisions of theGeneral Banking Law of 2000 [Republic Act (RA) No. 8791].The Parent Bank’s common shares are listed in the Philippine Stock Exchange (PSE).As of December 31, 2011, the Parent Bank has 744 branches (including one foreignbranch) and 934 on-site and 662 off-site automated teller machines. The Parent Bank’sregistered address is at BDO Corporate Center, 7899 Makati Avenue, Makati City.The BDO Unibank Group operates mainly within the Philippines with a bankingbranch in Hong Kong and various remittance subsidiaries operating in Asia, Europeand the United States. In 2011, 2010 and 2009, these foreign operations accounted for0.5%, 0.4% and 1.0%, respectively, of the BDO Unibank Group’s total revenues and1.1%, 0.1% and 1.1%, respectively, of the BDO Unibank Group’s total resources. TheBDO Unibank Group’s subsidiaries and associates are shown in Note 13.01.

1.02 Approval of Financial Statements- 2 -The financial statements of the BDO Unibank Group and the Parent Bank for the yearended December 31, 2011 (with comparatives for the years ended December 31, 2010and 2009) were approved and authorized for issue by the Board of Directors (BOD) onFebruary 25, 2012.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe significant accounting policies that have been used in the preparation of thesefinancial statements are summarized in the succeeding pages. The policies have beenconsistently applied to all the years presented, unless otherwise stated.2.01 Basis of Preparation of Consolidated Financial Statements(a) Statement of Compliance with Financial Reporting Standards in the Philippines for BanksThe consolidated financial statements of BDO Unibank Group and the financialstatements of the Parent Bank have been prepared in accordance with the FinancialReporting Standards in the Philippines (FRSP) for banks. FRSP and PhilippineFinancial Reporting Standards (PFRS) are similar except for the reclassification ofthe embedded derivatives in credit-linked notes (CLNs) that are linked to Republicof the Philippines (ROP) bonds from fair value through profit or loss (FVTPL) tounquoted debt securities classified as loans or UDSCL (included as part of Loansand Other Receivables), that are outstanding as of the effective date ofreclassification, which is permitted by the BSP for prudential reporting, and by theSEC for financial reporting.PFRSs are adopted by the Financial Reporting Standards Council (FRSC) from thepronouncements issued by the International Accounting Standards Board.The financial statements have been prepared using the measurement bases specifiedby PFRS for each type of assets, liabilities, income and expense. The measurementbases are more fully described in the accounting policies that follow.The reconciliations and explanatory notes in the succeeding pages thereto describethe difference on the statements of financial position under FRSP and PFRS.

- 3 -(i) The reconciliations of the equity reported under FRSP to equity under PFRS asof December 31 follow:BDO Unibank GroupParent Bank2011 2010 2011 2010Equity under FRSP P 96,962 P 88,732 P 89,583 P 82,549Prior year reconciling items 311 381 240 301Current year reconciling items:Amortization of premium/discount dueto change in effective interest rates ( 16) ( 222 ) ( 16 ) ( 209 )Amortization of negative fair value ofembedded derivatives on CLNsreclassified to loans and other receivables 9 - - -Reversal of net adjustments to equity due to:Unwinding of CLNs ( 80) - - -Unrealized mark-to-market gain (loss) onembedded derivatives on CLNsreclassified to loans and other receivables( 202) 152 ( 202) 148( 289) ( 70 ) ( 218) ( 61 )Total adjustments to equity 22 311 22 240Equity under PFRS P 96,984 P 89,043 P 89,605 P 82,789(ii) Differences in the measurement of items in the statements of financial positionas of December 31 are summarized below.BDO Unibank Group2011FRSP Difference PFRSChanges in resources:Trading and investment securities P 188,418 (P 218) P 188,200Loans and other receivables 673,927 240 674,167P 862,345 P 862,367Total adjustments to equity P 222010FRSP Difference PFRSChanges in resources:Trading and investment securities P 197,287 P 41 P 197,328Loans and other receivables 566,021 270 566,291P 763,308 P 763,619Total adjustments to equity P 311

- 4 -Parent BankFRSP Difference PFRSChanges in resources:Trading and investment securities P 171,081 ( P 218 ) P 170,863Loans and other receivables 653,857 240 654,0972011P 824,938 P 824,960Total adjustments to equity P 222010FRSP Difference PFRSChanges in resources:Trading and investment securities P 177,641 ( P 61 ) P 177,580Loans and other receivables 548,618 301 548,919P 726,259 P 726,499Total adjustments to equity P 240(iii) The reconciliations of net profit reported under FRSP to net profit under PFRS forthe years ended December 31 follow:BDO Unibank GroupParent Bank2011 2010 2011 2010Net profit under FRSP P 10,588 P 8,881 P 8,954 P 8,433Unrealized mark-to-market gain (loss)on embedded derivatives on CLNsreclassified to loans and otherreceivables ( 202 ) 152 ( 202) 148Reversal of net adjustments to equity due tounwinding of CLNs ( 80) - - -Amortization of premium/discountdue to change in effective interest rates ( 16 ) ( 222 ) ( 16) ( 209 )Amortization of negative fair value ofEmbedded derivatives on CLNsReclassified to loans and receivables 9 - - -( 289 ) ( 70 ) ( 218) ( 61 )Net profit under PFRS P 10,299 P 8,811 P 8,736 P 8,372(b) Presentation of Financial StatementsThe financial statements are presented in accordance with Philippine AccountingStandards (PAS) 1, Presentation of Financial Statements. The BDO Unibank Grouppresents the statement of comprehensive income in two statements: a statement ofincome and a statement of comprehensive income. Two comparative periods arepresented for the statement of financial position when BDO Unibank Groupapplies an accounting policy retrospectively, makes retrospective restatement ofitems in its financial statements, or reclassifies items in the financial statements.

- 5 -(c) Functional and Presentation CurrencyThese financial statements are presented in Philippine pesos, the BDO UnibankGroup’s functional and presentation currency, and all values represent absoluteamounts, except when otherwise indicated (see also Note 2.25). The financialstatements of the foreign currency deposit units (FCDUs) of BDO UnibankGroup and foreign subsidiaries are translated at the prevailing current exchangerates (for statement of financial position accounts) and average exchange rate duringthe period (for statement of income accounts) for consolidation purposes.Items included in the financial statements of BDO Unibank Group are measuredusing its functional currency. Functional currency is the currency of the primaryeconomic environment in which BDO Unibank Group operates.2.02 Adoption of New and Amended PFRS(a) Effective in 2011 that are Relevant to BDO Unibank GroupIn 2011, BDO Unibank Group adopted the following amendments, interpretationand annual improvements to PFRS that are relevant to the BDO Unibank Groupand effective for financial statements for the annual period beginning on or afterJanuary 1, 2011.PAS 24 (Amendment) : Related Party DisclosuresPhilippine InterpretationInternational FinancialReporting InterpretationsCommittee (IFRIC) 14(Amendment) : Prepayment of a Minimum FundingRequirementIFRIC 19 : Extinguishing Financial Liabilities withEquity InstrumentsVarious Standards : 2010 Annual Improvements to PFRSDiscussed below are the effects in the financial statements of the revised andamendment to the accounting standards and interpretations.(i) PAS 24 (Amendment), Related Party Disclosures (effective from January 1, 2011).The amendment simplifies and clarifies the definition of a related party byeliminating inconsistencies in determining related party relationships. Theamendment also provides partial exemption from the disclosure requirementsfor government-related entities to disclose details of all transactions with thegovernment and other government-related entities. The adoption of thisamendment did not result in any significant changes on BDO Unibank Group’sdisclosures of related parties in its financial statements.

- 6 -(ii) Philippine Interpretation IFRIC 14 (Amendment), Prepayment of a MinimumFunding Requirement (effective from January 1, 2011). This interpretationaddresses unintended consequences that can arise from the previousrequirements when an entity prepays future contributions into a defined benefitpension plan. It sets out guidance on when an entity recognizes an asset inrelation to a surplus for defined benefit plans based on PAS 19, Employee Benefits,that are subject to a minimum funding requirement. The BDO Unibank Groupis not subject to minimum funding requirement, hence, the adoption of therevised standard has no material effect on its financial statements.(iii) Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with EquityInstruments (effective from July 1, 2010). This interpretation clarifies theaccounting when an entity renegotiates the terms of a financial liability throughissuance of equity instruments to extinguish all or part of the financial liability.These transactions are sometimes referred to as “debt for equity” exchanges orswaps. The interpretation requires the debtor to account for a financial liabilitywhich is extinguished by equity instruments as follows:• the issue of equity instruments to a creditor to extinguish all or part of afinancial liability is consideration paid in accordance with PAS 39, FinancialInstruments: Recognition and Measurement;• the entity measures the equity instruments issued at fair value, unless thiscannot be reliably measured;• if the fair value of the equity instruments cannot be reliably measured,then the fair value of the financial liability extinguished is used; and,• the difference between the carrying amount of the financial liabilityextinguished and the consideration paid is recognized in profit or loss.The adoption of the interpretation did not have a material effect on BDOUnibank Group’s financial statements as it did not extinguish financial liabilitiesthrough equity swap during the year.(iv) 2010 Annual Improvements to PFRS. The FRSC has adopted the 2010Improvements to PFRS. Most of these amendments became effective for annualperiods beginning on or after July 1, 2010 or January 1, 2011. Among thoseimprovements, only the following amendments which are effective fromJuly 1, 2010 were identified to be relevant to BDO Unibank Group’s financialstatements but which did not have any material impact on its financial statements:• PAS 1 (Amendment), Presentation of Financial Statements: Clarification ofStatement of Changes in Equity (effective from July 1, 2010). The amendmentclarifies that, for each component of equity, an entity may present ananalysis of other comprehensive income either in the statement of changesin equity or in the notes to the financial statements. As the BDO UnibankGroup’s other comprehensive income only includes fair value changes onAvailable-for-sale (AFS) securities, revaluation of certain items of bankpremises, furniture, fixtures and equipment, and cumulative translationadjustment, the BDO Unibank Group has elected to continue presentingeach item of other comprehensive income in the statement of changes inequity.

- 7 -• PAS 27 (Amendment), Consolidated and Separate Financial Statements(effective from July 1, 2010). This amendment clarifies that theconsequential amendments made to PAS 21, The Effect of Changes in ForeignExchange Rates, PAS 28, Investment in Associate, and, PAS 31, Investment in JointVentures, arising from the PAS 27 (2008) amendments apply prospectively,to be consistent with the related PAS 27 transition requirements. Theamendment has no impact on BDO Unibank Group’s financial statements.• PAS 34 (Amendment), Interim Financial Reporting – Significant Event andTransactions (effective from January 1, 2011). The amendment providesfurther guidance to illustrate how to apply disclosure principles underPAS 34 for significant events and transactions to improve interim financialreporting. It requires additional disclosure covering significant changes tofair value measurement and classification of financial instruments, and toupdate relevant information from the most recent annual report. Thisamendment has no significant effect on the financial statements since theBDO Unibank Group already provides adequate information in its financialstatements in compliance with the disclosure requirements.• PFRS 3 (Amendments), Business Combinations (effective from July 1, 2010).The amendment clarifies that contingent consideration arrangement andbalances arising from business combinations with acquisition dates prior tothe entity’s date of adoption of PFRS 3 (Revised 2008) shall not be adjustedon the adoption date. It also provides guidance on the subsequentaccounting for such balances.It further clarifies that the choice of measuring non-controlling interest(NCI) at fair value or at the proportionate share in the recognized amountsof an acquiree’s identifiable net assets, applies only to instruments thatrepresent ownership interests and entitle their holders to a proportionateshare of the acquiree’s net assets in the event of liquidation. All othercomponents of NCI are measured at fair value unless PFRS requires anothermeasurement basis.This amendment also clarifies accounting for all share-based paymenttransactions that are part of a business combination, including unreplacedand voluntary replaced share-based payment awards. Specifically, thisprovides guidance for situations where the acquirer does not have anobligation to replace an award but replaces an existing acquiree award thatwould otherwise have continued unchanged after the acquisition, thusresulting to the accounting for these awards being the same as for theawards that the acquirer is obliged to replace. This amendment has nosignificant effect on the BDO Unibank Group’s financial statements sincethe manner of measuring NCI at the time of business combination is basedon net identifiable assets and there are no share-based payment transactionsthat are part of a business combination.

- 8 -• PFRS 7 (Amendment), Financial Instruments: Clarification of Disclosures(effective from January 1, 2011). The amendment clarifies the disclosurerequirements which emphasize the interaction between quantitative andqualitative disclosures about the nature and extent of risks arising fromfinancial instruments. It also amends the required disclosure of financialassets including the financial effect of collateral held as security. Thisamendment has no significant effect on the financial statements since BDOUnibank Group already provides adequate information in its financialstatements in compliance with the disclosure requirements.• Philippine Interpretation IFRIC 13, Customer Loyalty Programmes – Fair ValueAwards Credits (effective from January 1, 2011). The improvement clarifiesthat when the fair value of award credits is measured on the basis of thevalue of the awards for which they could be redeemed, the fair value of theaward credits should take into account the expected forfeitures as well asdiscounts or incentives that would otherwise be offered to customers whohave not earned award credits from an initial sale. This improvement hasno significant effect on the consolidated financial statements of BDOUnibank Group.(b) Effective in 2011 but not Relevant to BDO Unibank GroupThe following amended standards are mandatory for accounting periods beginningon or after July 1, 2010 or January 1, 2011 but are not relevant to BDO UnibankGroup’s financial statements:PAS 32 (Amendment) : Financial Instruments: Presentation -Classification of Rights IssuesPFRS 1 (Amendments) : First-time Adoption of PFRS(c) Effective Subsequent to 2011 but not Adopted EarlyThere are new PFRS, amendments, annual improvements and interpretations toexisting standards that are effective for periods subsequent to 2011. Managementhas initially determined the following pronouncements, which the BDO UnibankGroup will apply in accordance with their transitional provisions, to be relevant toits financial statements:(i) PAS 1 (Amendment), Financial Statements Presentation – Presentation of Items of OtherComprehensive Income (effective from July 1, 2012). The amendment requires anentity to group items presented in Other Comprehensive Income into those that,in accordance with other PFRSs: (a) will not be reclassified subsequently toprofit or loss and (b) will be reclassified subsequently to profit or loss whenspecific conditions are met. The management expects that this will not affect thepresentation of items in other comprehensive income since BDO UnibankGroup’s other comprehensive income only includes unrealized fair value gainsand losses on AFS securities and cumulative translation, which can bereclassified to profit or loss when specified conditions are met.

- 9 -(ii) PAS 12 (Amendment), Income Taxes – Deferred Tax: Recovery of Underlying Assets(effective from January 1, 2012). The amendment provides an exception to theexisting principle in PAS 12 that recovery of the carrying amount of investmentproperty measured at fair value under PAS 40, Investment Property, will be ornormally be through sale. The amendment introduces a rebuttable presumptionthat the measurement of a deferred tax liability or asset on an investmentproperty measured at fair value should reflect the tax consequence of recoveringthe carrying amount entirely through sale. The presumption is rebutted fordepreciable investment property (e.g., building) measured at fair value that isheld with an objective to consume substantially the economic benefitsembodied in the asset over time, rather than through sale. As a result of theamendment, Standing Interpretation Committee (SIC) 21 Income Taxes –Recovery of Revalued Non-Depreciable Assets, is accordingly withdrawn. Themanagement does not expect that this amendment will impact the financialstatements since BDO Unibank Group does not measure its investmentproperty at fair value.(iii) PAS 19 (Amendment), Employee Benefits (effective from January 1, 2013). Theamendment made a number of changes as part of the improvements throughoutthe standard. The main changes relate to defined benefit plans as follows:• eliminates the corridor approach under the existing guidance of PAS 19and requires an entity to recognize all gains and losses arising in thereporting period;• streamlines the presentation of changes in plan assets and liabilitiesresulting in the disaggregation of changes into three main components ofservice costs, net interest on net defined benefit obligation or asset, andremeasurement; and,• enhances disclosure requirements, including information about thecharacteristics of defined benefit plans and the risks that entities areexposed to through participation in them.Currently, BDO Unibank Group is using the corridor approach. Theunrecognized actuarial losses of BDO Unibank Group and the Parent Bank asof December 31, 2011 amounted to P4,520 and P4,252, respectively, whichwill be retrospectively recognized as loss in other comprehensive income in2013.(iv) PFRS 7 (Amendment), Financial Instruments: Disclosures – Transfers of FinancialAssets (effective from July 1, 2011). The amendment requires additionaldisclosures that will allow users of financial statements to understand therelationship between transferred financial assets that are not derecognized intheir entirety and the associated liabilities; and, to evaluate the nature of, and riskassociated with any continuing involvement of the reporting entity in financialassets that are derecognized in their entirety. BDO Unibank Group does notusually enter into this type of arrangement with regard to transfer of financialasset, hence, the amendment may not significantly change BDO UnibankGroup’s disclosures in its financial statements.

- 10 -(v) PFRS 9, Financial Instruments: Classification and Measurement (effective fromJanuary 1, 2015). This is the first part of a new standard on classification andmeasurement of financial assets and financial liabilities that will replace PAS 39in its entirety. This chapter deals with two measurement categories forfinancial assets: amortized cost and fair value. All equity instruments will bemeasured at fair value while debt instruments will be measured at amortizedcost only if the entity is holding it to collect contractual cash flows whichrepresent payment of principal and interest. The accounting for embeddedderivatives in host contracts that are financial assets is simplified by removingthe requirement to consider whether or not they are closely related, and, inmost arrangement, does not require separation from the host contract.For liabilities, the standard retains most of the PAS 39 requirements whichinclude amortized-cost accounting for most financial liabilities, with bifurcationof embedded derivatives. The main change is that, in case where the fair valueoption is taken for financial liabilities, the part of a fair value change due to anentity’s own credit risk is recorded in other comprehensive income rather thanin profit or loss, unless this creates an accounting mismatch.To date, other chapters of PFRS 9 dealing with impairment methodology andhedge accounting are still being completed.BDO Unibank Group does not expect to implement and adopt PFRS 9 untilits effective date or until all chapters of this new standard have been published.In addition, management is currently assessing the impact of PFRS 9 on thefinancial statements of BDO Unibank Group.(vi) PFRS 13, Fair Value Measurement (effective from January 1, 2013). Thisstandard aims to improve consistency and reduce complexity by providing aprecise definition of fair value and a single source of fair value measurementand disclosure requirements for use across PFRS. The requirements do notextend the use of fair value accounting but provide guidance on how it shouldbe applied where its use is already required or permitted by other standards.BDO Unibank Group is yet to assess the impact of this new standard.(vii) Consolidation Standards• PAS 27 (Revised), Separate Financial Statements (effective fromJanuary 1, 2013). This revised standard now covers the requirementspertaining solely to separate financial statements after the relevantdiscussions on control and consolidated financial statements have beentransferred and included in the new PFRS 10. No new major changesrelating to separate financial statements have been introduced as a resultof the revision.• PAS 28 (Revised), Investments in Associate and Joint Venture (effective fromJanuary 1, 2013). This revised standard includes the requirements forjoint ventures, as well as associates, to be accounted for using equitymethod following the issuance of PFRS 11, Joint Arrangement.

- 11 -• PFRS 10, Consolidated Financial Statements (effective from January 1, 2013).This standard builds on existing principles of consolidation by identifyingthe concept of control as the determining factor in whether an entityshould be included within the consolidated financial statements. Thestandard also provides additional guidance to assist in determiningcontrol where this is difficult to assess.• PFRS 12, Disclosure of Interest in Other Entities (effective from January 1, 2013).This standard integrates and makes consistent the disclosure requirementsfor all forms of interests in other entities, including joint arrangements,associates, special purpose vehicles and unconsolidated structured entities.This also introduces new disclosure requirements about the risks to whichan entity is exposed from its involvement with structured entities.BDO Unibank Group is currently reviewing the impact of the aboveconsolidation standards on its financial statements in time for its adoption in2013.2.03 Presentation of Consolidated Financial StatementsThe consolidated financial statements are presented in accordance with PAS 1. BDOUnibank Group has elected to present the statement of comprehensive income in twostatements: a statement of income and a statement of comprehensive income.Two comparative periods are presented for the statements of financial position whenBDO Unibank Group:(a) Applies an accounting policy retrospectively;(b) Makes a retrospective restatement of items in its financial statements; or,(c) Reclassifies items in the financial statements.2.04 Basis of ConsolidationBDO Unibank Group obtains and exercises control through voting rights. BDOUnibank Group’s consolidated financial statements comprise the accounts of the ParentBank and its subsidiaries as enumerated in Note 13.01, after the elimination of materialintercompany transactions. All significant intercompany balances and transactions withsubsidiaries, including income, expenses and dividends, are eliminated in full.Unrealized profits and losses from intercompany transactions that are recognized inassets are also eliminated in full. Intercompany losses that indicate impairment arerecognized in BDO Unibank Group financial statements.Business combinations arising from transfers of interests in entities that are under thecommon control of the shareholder that controls BDO Unibank Group are accountedfor under the pooling-of-interests method and reflected in the financial statements as ifthe business combination had occurred at the beginning of the earliest comparativeperiod presented, or if later, at the date that common control was established; for thispurpose, comparatives are restated. The resources and liabilities acquired arerecognized in BDO Unibank Group’s controlling shareholder’s financial statements atthe carrying amounts recognized previously. The components of equity of the acquiredentities are added to the same components within BDO Unibank Group equity.

- 12 -The financial statements of subsidiaries are prepared for the same reporting period asthe Company, using consistent accounting principles.BDO Unibank Group accounts for its investments in subsidiaries and non-controllinginterest (previously called “minority interest”) as follows:(a) Investments in SubsidiariesSubsidiaries are all entities over which BDO Unibank Group has the power tocontrol in terms of financial and operating policies generally accompanying ashareholding of more than one half of the voting rights. BDO Unibank Groupobtains and exercises control over subsidiaries through voting rights. The existenceand effect of potential voting rights that are currently exercisable or convertible areconsidered when assessing whether BDO Unibank Group controls another entity.Subsidiaries are consolidated from the date BDO Unibank Group obtains controluntil such time that such control ceases.Except as otherwise indicated, the acquisition of subsidiaries are accounted forusing the acquisition method (previously called “purchase method” - see Note 2.13).Acquisition method requires recognizing and measuring the identifiable assetsacquired, the liabilities assumed and any non-controlling interest in the acquiree.The consideration transferred for the acquisition of a subsidiary is the fair values ofthe assets transferred, the liabilities incurred and the equity interests issued by theBDO Unibank, if any. The consideration transferred also includes the fair value ofany asset or liability resulting from a contingent consideration arrangement.Acquisition-related costs are expensed as incurred and subsequent change in the fairvalue of contingent consideration is recognized directly in profit or loss.Identifiable assets acquired and liabilities and contingent liabilities assumed in abusiness combination are measured initially at their fair values at the acquisitiondate. On an acquisition-by-acquisition basis, the BDO Unibank Group recognizesany non-controlling interest in the acquiree either at fair value or at the noncontrollinginterest’s proportionate share of the acquiree’s net assets.The excess of the consideration transferred, the amount of any non-controllinginterest in the acquiree and the acquisition-date fair value of any previous equityinterest in the acquiree over the fair value of the Group’s share of the identifiablenet assets acquired is recognized as goodwill. If this is less than the fair value of thenet assets of the subsidiary acquired in the case of a bargain purchase, the differenceis recognized directly as a gain in profit or loss (see Note 2.13).(b) Transactions with Non-controlling InterestsBDO Unibank Group’s transaction with non-controlling interests that do not resultin loss of control are accounted for as equity transactions – that is, as transactionwith the owners of BDO Unibank Group in their capacity as owners. Thedifference between the fair value of any consideration paid and the relevant shareacquired of the carrying value of net assets of the subsidiary is recognized in equity.Disposals of equity investments to non-controlling interests results in gains or lossesfor the Group that are also recognized in equity.

- 13 -When BDO Unibank Group ceases to have control, any interest retained in thesubsidiary is remeasured to its fair value, with the change in carrying amountrecognized in profit or loss. The initial carrying amount for the purposes ofsubsequently accounting for the interest retained as an associate, joint venture orfinancial asset is the fair value. In addition, any amounts previously recognized inother comprehensive income in respect of that entity are accounted for as if BDOUnibank Group had directly disposed of the related resources or liabilities. Thismay mean that amounts previously recognized in other comprehensive income arereclassified to profit or loss.In BDO Unibank Group’s financial statements, the non-controlling interestcomponent is shown in BDO Unibank Group’s statement of changes in equity andin BDO Unibank Group’s statement of income. Non-controlling interests in 2011and 2010 represent the interests not held by BDO Unibank Group in BDO Leasingand Finance, Inc., BDO Elite Savings Bank, Inc. and Equimark – NFCDevelopment Corp.2.05 Segment ReportingOperating segments are reported in a manner consistent with the internal reportingprovided to the BDO Unibank Group’s chief operating decision-maker. The chiefoperating decision-maker is responsible for allocating resources and assessingperformance of the operating segments.In identifying its operating segments, management generally follows the BDO UnibankGroup's products and services as disclosed in Note 5, which represent the mainproducts and services provided by the BDO Unibank Group.Each of these operating segments is managed separately as each of these servicesrequires different technologies and resources as well as marketing approaches. Allinter-segment transfers are carried out at arm's length pricesThe measurement policies of the BDO Unibank Group uses for segment reportingunder PFRS 8, Operating Segments, is the same as those used in its financial statements.In addition, corporate assets which are not directly attributable to the business activitiesof any operating segment are not allocated to a segment.There have been no changes from prior periods in the measurement methods used todetermine reported segment profit or loss.The BDO Unibank Group’s operations are organized according to the nature of theproducts and services provided. Financial information on operating segments ispresented in Note 5.

- 14 -2.06 Financial AssetsFinancial assets include cash and other financial instruments. Financial assets, otherthan those designated and effective as hedging instruments, are classified into thefollowing categories: at FVTPL, loans and receivables, held-to-maturity (HTM) andavailable-for-sale (AFS). Financial assets are assigned to the different categories bymanagement on initial recognition, depending on the purpose for which theinvestments were acquired. Except for derivative financial instruments and financialassets designated at FVTPL, the designation of financial assets is re-evaluated at the endof each reporting period at which date a choice of classification or accounting treatmentis available, subject to compliance with specific provisions of applicable accountingstandards.Regular purchases and sales of financial assets are recognized on their settlement date.All financial assets that are not classified as at FVTPL are initially recognized at fairvalue plus any directly attributable transaction costs. Financial assets carried at FVTPLare initially recorded at fair value and transaction costs related to it are recognized inprofit or loss.The foregoing categories of financial instruments are more fully described below.(a) Financial Assets at Fair Value Through Profit or LossThis category includes derivative financial instruments and financial assets that areeither classified as held for trading (HFT) or are designated by BDO UnibankGroup to be carried at FVTPL upon initial recognition. A financial asset isclassified in this category if acquired principally for the purpose of selling in the nearterm or if so designated by management. Derivatives are also categorized as“held for trading” unless they are designated as hedges.Subsequent to initial recognition, the financial assets included in this category aremeasured at fair value with changes in fair value recognized in profit or loss.Financial assets (except derivatives and financial assets originally designated asfinancial assets at FVTPL) may be subsequently reclassified out of FVTPL category:(i) Only in rare circumstances and if there is a change in intention (i.e., the financialasset is no longer held for the purpose of selling or repurchasing it in the nearfuture);(ii) If the financial asset would have met the definition of loans receivables and ifthe financial asset had not been required to be classified as HFT at initialrecognition and the entity has the intention and ability to hold the financial assetfor the foreseeable future or until maturity; and,(iii) For CLNs and derivatives embedded in CLNs linked to ROP bonds aspermitted by BSP for prudential reporting and by the SEC for financialreporting.

- 15 -(b) Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. These arise when BDO UnibankGroup provides money, goods or services directly to the debtor with no intentionof trading the receivables. Included in this category are financial assets arising fromdirect loans to customers, interbank loans and receivables, sales contract receivablesand all receivables from customers and other banks. Loans and receivables alsoinclude the aggregate rental on finance lease transactions. Unearned income onfinance lease transactions is shown as a deduction from loans and receivables.Loans and receivables are subsequently measured at amortized cost using theeffective interest method, less impairment losses. Any change in the value of loansand receivables is recognized in profit or loss, except for reclassified financial assetsunder PAS 39 and PFRS 7. Increases in estimates of future cash receipts fromfinancial assets that have been reclassified in accordance with PAS 39 and PFRS 7shall be recognized as an adjustment to the effective interest rate from the date ofthe change in estimate. The difference between the sale and repurchase price isrecognized as interest and accrued over the life of the agreements using the effectiveinterest method. Securities Purchased Under Reverse Repurchase Agreement(SPURRA), wherein BDO Unibank Group enters into short-term purchases ofsecurities under reverse repurchase agreements of substantially identical securitieswith the BSP, are included in this category.BDO Unibank Group’s financial assets categorized as loans and receivables arepresented as Cash and Cash Equivalents and Loans and Other Receivables in thestatement of financial position. Cash and cash equivalents consist of cash andnon-restricted balances with the BSP and amounts due from other banks. Forpurposes of reporting cash flows, cash and cash equivalents include cash and othercash items, amounts due from BSP and other banks, interbank call loans receivableand SPURRA with original maturities of three months or less from placement date.Impairment loss is the estimated amount of loss in BDO Unibank Group’s loanportfolio, based on the evaluation of the estimated future cash flows discounted atthe loan’s original effective interest rate or the last repricing rate for loans issued atvariable rates (see Note 2.23). Impairment is established through an allowanceaccount which is charged to expense. Loans and receivables are written off againstthe allowance for impairment when management believes that the collectibility ofthe principal is unlikely, subject to BSP regulations.(c) HTM InvestmentsThis category includes non-derivative financial assets with fixed or determinablepayments and a fixed date of maturity that BDO Unibank Group has the positiveintention and ability to hold to maturity. Investments intended to be held for anundefined period are not included under this category.

- 16 -HTM investments consist of government and private debt securities. If BDOUnibank Group were to sell other than an insignificant amount of HTMinvestments, the entire category of HTM securities would be tainted and would bereclassified as AFS securities. The tainting provision will not apply if the sales orreclassifications of HTM investments: (i) are so close to maturity or the financialasset’s call date that changes in the market rate of interest would not have asignificant effect on the financial asset’s fair value; (ii) occur after BDO UnibankGroup has collected substantially all of the financial asset’s original principalthrough scheduled payments or prepayments; or, (iii) are attributable to an isolatedevent that is beyond the control of BDO Unibank Group, is nonrecurring andcould not have been reasonably anticipated by BDO Unibank Group.Subsequent to initial recognition, HTM investments are measured at amortizedcosts using effective interest method, less impairment losses, if any. Impairmentloss, which is the difference between the carrying value and the present value ofestimated cash flows of the investment, is recognized when there is objectiveevidence that the investment has been impaired. Any changes to the carryingamount of the investment due to impairment are recognized in profit or loss.(d) AFS SecuritiesThis category includes non-derivative financial assets that are either designated tothis category or do not qualify for inclusion in any of the other categories offinancial assets.Non-derivative financial asset classified as AFS may be reclassified to loans andreceivables category that would have met the definition of loans and receivables ifthere is an intention and ability to hold that financial asset for the foreseeable futureor until maturity.All financial assets within this category are subsequently measured at fair value,unless otherwise disclosed, with changes in value recognized in othercomprehensive income, net of any effects arising from income taxes. Cumulativegains and losses arising from securities classified as AFS are reclassified from othercomprehensive income to profit or loss when these are sold or when the investmentare impaired and presented as a reclassification adjustment within othercomprehensive income.In the case of impairment, any loss previously recognized in other comprehensiveincome is reclassified to profit or loss. Reversal of impairment losses are recognizedin other comprehensive income, except for financial assets that are debt securitieswhich are recognized in profit or loss only if the reversal can be objectively relatedto an event occurring after the impairment loss was recognized.The fair values of quoted investments in active markets are based on current closingprices. If the market for a financial asset is not active and for unlisted securities, BDOUnibank Group establishes the fair value by using valuation techniques, which includethe use of recent arm’s length transactions, discounted cash flow analysis, optionpricing models and other valuation techniques commonly used by market participants.

- 17 -Gains and losses arising from changes in the fair value of the financial assets at FVTPLcategory are reported as part of Trading Gain under Other Operating Income accountin the statement of income in the period in which these arise. Gains and losses arisingfrom changes in the fair value of AFS securities are recognized in other comprehensiveincome until the financial asset is derecognized or impaired, at which time thecumulative gain or loss previously recognized in other comprehensive income shall bereclassified to profit or loss. However, interest calculated using the effective interestmethod is recognized in profit or loss.Non-compounding interest, dividend income and other cash flows resulting fromholding impaired financial assets are recognized in profit or loss when received,regardless of how the related carrying amount of financial assets is measured.Derecognition of financial assets occurs when the right to receive cash flows from thefinancial instruments expire or are transferred and substantially all of the risks andrewards of ownership have been transferred.2.07 Derivative Financial Instruments and Hedge AccountingBDO Unibank Group is a party to various foreign-currency forward and swap contractsand cross-currency and interest rate swaps. These contracts are entered into as a serviceto customers and as a means of reducing or managing BDO Unibank Group’s foreignexchange and interest rate exposures, as well as for trading purposes.Derivatives are initially recognized at fair value on the date on which derivative contract isentered into and are subsequently measured at their fair value (except for the embeddedderivatives in CLNs linked to ROP bonds which BDO Unibank Group reclassified toloans). Fair values are obtained from quoted market prices in active markets, includingrecent market transactions, and valuation techniques, including discounted cash flowmodels and option pricing models, as appropriate. All derivatives are carried as assetswhen fair value is positive and as liabilities when fair value is negative.The best evidence of the fair value of a derivative at initial recognition is the transactionprice (the fair value of the consideration given or received) unless the fair value of theinstrument is evidenced by comparison with other observable current markettransactions in the same instrument or based on a valuation technique whose variablesinclude only data from observable markets. When such evidence exists, BDO UnibankGroup recognizes profit or loss at initial recognition.For more complex instruments, BDO Unibank Group uses proprietary models, whichusually are developed from recognized valuation models. Some or all of the inputs intothese models may not be market observable, and are derived from market prices orrates or are estimated based on assumptions. When entering into a transaction, thefinancial instrument is recognized initially at the transaction price, which is the bestindicator of fair value, although the value obtained from the valuation model may differfrom the transaction price. This initial difference in fair value indicated by valuationtechniques is recognized as profit or loss depending upon the individual facts andcircumstances of each transaction and not later than when the market data becomesobservable.

- 18 -The value produced by a model or other valuation technique is adjusted to allow for anumber of factors as appropriate, because valuation techniques cannot appropriatelyreflect all factors market participants take into account when entering into a transaction.Valuation adjustments are recorded to allow for model risks, bid-ask spreads, liquidityrisks as well as other factors. Management believes that these valuation adjustments arenecessary and appropriate to fairly state financial instruments carried at fair value in thestatement of financial position.Certain derivatives embedded in other financial instruments are considered as separatederivatives when their economic characteristics and risks are not closely related to thoseof the host contract and the host contract is not carried at fair value through profit orloss. These embedded derivatives are bifurcated from the host contracts and aremeasured at fair value with changes in fair value recognized in profit or loss (except forthe embedded derivatives in CLNs linked to ROP bonds which were not bifurcated fromthe host contracts and were reclassified to loans as permitted for prudential reporting).Certain derivatives may be designated as either: (i) hedges of the fair value of recognizedassets or liabilities or firm commitments (fair value hedge); or, (ii) hedges of highlyprobable future cash flows attributable to a recognized asset or liability, or a forecastedtransaction (cash flow hedge). Changes in the fair value of derivatives are recognized inprofit or loss. The method of recognizing the resulting fair value gain or loss onderivatives that qualify as hedging instrument depends on the hedging relationshipdesignated by the BDO Unibank Group.2.08 Non-current Assets Held for SaleAssets held for sale include real and other properties acquired through repossession orforeclosure that BDO Unibank Group intends to sell within one year from the date ofclassification as held for sale.Assets classified as held for sale are measured at the lower of their carrying amountsimmediately prior to their classification as held for sale and their fair value less costs tosell. Assets classified as held for sale are not subject to depreciation or amortization.The profit or loss arising from the sale of held for sale assets is included as part ofIncome from Assets Acquired under Other Operating Income account in profit or loss.2.09 Investment PropertiesInvestment properties are stated at cost. The cost of an investment property comprisesits purchase price and directly attributable cost incurred. This also includes land andbuilding acquired by BDO Unibank Group from defaulting borrowers not held for salein the next 12 months. For these assets, the cost is recognized initially at fair value.Investment properties except land are depreciated on a straight-line basis over a periodof 10 years.BDO Unibank Group adopted the cost model in measuring its investment properties;hence, these are carried at cost less accumulated depreciation and any impairment invalue. Depreciation and impairment loss are recognized in the same manner as inpremises, furniture, fixtures and equipment.

- 19 -Investment properties are derecognized upon disposal or when permanently withdrawnfrom use and no future economic benefit is expected from their disposal. Any gain orloss on the retirement or disposal of an investment property is recognized in profit orloss in the year of retirement or disposal.2.10 Real Properties for Development and SaleReal properties for development and sale consist of subdivision land for sale anddevelopment, and land acquired for home building, home development, and other typesof real estate development. These are carried at the lower of aggregate cost and netrealizable value (NRV). Costs include acquisition costs and costs incurred fordevelopment, improvement and construction of subdivision land. NRV is the sellingprice less estimated cost to complete, commissions and other marketing costs.Land acquired for home building, home development and other types of real estatedevelopment is also carried at the lower of aggregate cost and NRV. Cost includeacquisition costs and, once land development commences, the cost of these properties,including development costs incurred, will be classified to Real Properties forDevelopment and Sale.2.11 Equity InvestmentsIn the BDO Unibank Group’s financial statements, investments in associates areaccounted for under the equity method of accounting and are initially recognized at cost(see Note 2.24).The BDO Unibank Group’s share of its associates’ post-acquisition profits or losses isrecognized in profit or loss, and its share of post-acquisition movements in reserves isrecognized in reserves. The cumulative post-acquisition movements are adjustedagainst the carrying amount of the investment. When BDO Unibank Group’s share oflosses in an associate equals or exceeds its interest in the associate, including any otherunsecured receivables, BDO Unibank Group does not recognize further losses, unless ithas incurred obligations or made payments on behalf of the associate.Unrealized gains on transactions between BDO Unibank Group and its associates areeliminated to the extent of BDO Unibank Group’s interest in the associates.Unrealized losses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred. Accounting policies have been changed wherenecessary to ensure consistency with the policies adopted by BDO Unibank Group.Associates are all entities over which BDO Unibank Group has significant influence butnot control, generally accompanying a shareholding of between 20% and 50% of thevoting rights.In the Parent Bank’s financial statements, the investments in subsidiaries and associatesare carried at cost, less any impairment in value.

- 20 -2.12 Premises, Furniture, Fixtures and EquipmentPremises, furniture, fixtures and equipment are carried at acquisition cost lessaccumulated depreciation and amortization and any impairment in value. Propertyitems of the former EPCIB stated at appraised values were included in BDO UnibankGroup balances at their deemed costs at date of transition to PFRS on January 1, 2005.The revaluation increment is credited to Revaluation Increment account in the Equitysection, net of applicable deferred tax.The cost of an asset comprises its purchase price and directly attributable costs ofbringing the asset to working condition for its intended use. Expenditures foradditions, major improvements and renewals are capitalized; expenditures for repairsand maintenance are charged to expense as incurred. When assets are sold, retired orotherwise disposed of, their cost and related accumulated depreciation and amortizationand impairment losses are removed from the accounts and any resulting gain or loss isreflected in profit or loss for the period.Depreciation is computed on a straight-line basis over the estimated useful lives of thedepreciable assets as follows:BuildingsFurniture, fixtures and equipment10 - 50 years3 - 5 yearsLeasehold rights and improvements are amortized over the terms of the leases or theestimated useful lives of the improvements, whichever is shorter.An asset’s carrying amount is written down immediately to its recoverable amount if theasset’s carrying amount is greater than its estimated recoverable amount (see Note 2.24).The residual values and estimated useful lives of premises, furniture, fixtures andequipment are reviewed and adjusted, if appropriate, at the end of each reporting period.An item of premises, furniture, fixtures and equipment is derecognized upon disposal orwhen no future economic benefits are expected to arise from the continued use of theasset. Any gain or loss arising on derecognition of the asset (calculated as the differencebetween the net disposal proceeds and the carrying amount of the item) is included inprofit or loss in the period the item is derecognized.2.13 Business CombinationExcept as indicated otherwise, business acquisitions are accounted for using theacquisition method of accounting.Goodwill acquired in a business combination is initially measured at cost being theexcess of the cost of a business combination over BDO Unibank Group’s interest inthe net fair value of the identifiable assets, liabilities and contingent liabilities.Subsequent to initial recognition, goodwill is measured at cost less any accumulatedimpairment losses. Goodwill is reviewed for impairment annually or more frequently ifevents or changes in circumstances indicate that the carrying value may be impaired(see Note 2.24).

- 21 -Impairment losses on goodwill are not reversed. Negative goodwill, if any, which is theexcess of BDO Unibank Group’s interest in the net fair value of acquired identifiableassets, liabilities and contingent liabilities over cost is recognized directly in profit orloss.For the purpose of impairment testing, goodwill is allocated to cash-generating units orgroups of cash-generating units that are expected to benefit from the businesscombination in which the goodwill arose. The cash-generating units or groups of cashgeneratingunits are identified according to operating segment.Gains and losses on the disposal of an interest in a subsidiary include the carryingamount of goodwill relating to it.If the business combination is achieved in stages, the acquirer is required to remeasureits previously held equity interest in the acquiree at its acquisition-date fair value andrecognize the resulting gain or loss, if any, in the profit or loss or other comprehensiveincome, as appropriate.Any contingent consideration to be transferred by the Group is recognized at fair valueat the acquisition date. Subsequent changes to the fair value of the contingentconsideration that is deemed to be an asset or liability is recognized in accordance withPAS 37 either in profit or loss or as a change to other comprehensive income.Contingent consideration that is classified as equity is not remeasured, and itssubsequent settlement is accounted for within equity.Transfers of assets between commonly-controlled entities are accounted for underhistorical cost accounting.2.14 Intangible AssetsGoodwill represents the excess of the cost of acquisition over the fair value of the netassets acquired and branch licenses at the date of acquisition. Goodwill is classified asintangible asset with indefinite useful life, and thus, not subject to amortization but toan annual test for impairment (see Note 2.24). Goodwill is subsequently carried at costless any accumulated impairment losses.Goodwill is allocated to cash-generating units for the purpose of impairment testing.Each of those cash generating units is represented by each primary reporting segment.Acquired computer software licenses are capitalized on the basis of the costs incurred toacquire and install the specific software. These costs are amortized on straight-line basisover the expected useful life of five years. Costs associated with maintaining computersoftware are expensed as incurred.2.15 Financial LiabilitiesFinancial liabilities include deposit liabilities, bills payable, derivative liabilities,subordinated notes payable and other liabilities.Financial liabilities are recognized when the BDO Unibank Group becomes a party tothe contractual terms of the instrument.

- 22 -Deposit liabilities and other liabilities are recognized initially at fair value andsubsequently measured at amortized cost less settlement payments.Bills payable and subordinated notes payable, except for government financial assistanceare recognized initially at fair value, which is the issue proceeds (fair value ofconsideration received), net of direct issue costs. Bills payable and subordinated notespayable are subsequently measured at amortized cost; any difference between proceeds,net of transaction costs, and the redemption value is recognized in profit or loss overthe period of the borrowings using the effective interest method.Preferred shares, which carry a mandatory coupon or are redeemable on a specific dateor at the option of the shareholder are classified as financial liabilities and are presentedas part of Bills Payable in the statement of financial position. The dividends on thesepreferred shares are recognized in profit or loss as interest expense on an amortizedcost basis using the effective interest method.The fair value of the liability portion of a convertible bond is determined using a marketinterest rate for an equivalent non-convertible bond. This amount is recorded as aliability on an amortized cost basis until extinguished on conversion or maturity of thebond. The remainder of the proceeds is allocated to the conversion option. This isrecognized and included in equity, net of income tax effects.Derivative liabilities are recognized initially and subsequently measured at fair value withchanges in fair value recognized in profit or loss.Dividend distributions to shareholders are recognized as financial liabilities when thedividends are declared by BDO Unibank Group and are subject for approval by theBSP.Financial assistance from the Philippine Deposit Insurance Corporation (PDIC), arisingfrom the acquisition of First e-Bank in 2002, is accounted for under PAS 20, Accountingfor Government Grants and Disclosure of Government Assistance, whereby the loan received isinitially recorded at the amount borrowed with no re-measurement to fair value orimputation of market interest.Financial liabilities are derecognized in the statement of financial position only when theobligations are extinguished either through discharge, cancellation or expiration.2.16 Offsetting Financial InstrumentsFinancial assets and liabilities are offset and the net amount is reported in the statementof financial position when there is a legally enforceable right to offset the recognizedamounts and there is an intention to settle on a net basis or realize the asset and settlethe liability simultaneously.2.17 Terminal Value of Leased Assets and Deposits on Finance LeaseThe residual value of leased assets, which approximates the amount of guaranty depositpaid by the lessee at the inception of the lease, is the estimated proceeds from thedisposal of the leased asset at the end of the lease term. At the end of the lease term,the residual value of the leased asset is generally applied against the guaranty deposit ofthe lessee. The residual value of leased assets is included as part of Other Liabilitiesaccount in the BDO Unibank Group statement of financial position.

- 23 -2.18 Related Party TransactionsRelated party transactions are transfers of resources, services or obligations betweenBDO Unibank Group and its related parties, regardless whether a price is charged.Parties are considered to be related if one party has the ability to control the other partyor exercise significant influence over the other party in making financial and operatingdecisions. These include: (a) individuals owning, directly or indirectly through one ormore intermediaries, control or are controlled by, or under common control with theBDO Unibank Group; (b) associates; and, (c) individuals owning, directly or indirectly,an interest in the voting power of the BDO Unibank Group that gives them significantinfluence over BDO Unibank Group and close members of the family of any suchindividual.In considering each possible related party relationship, attention is directed to thesubstance of the relationship and not merely on the legal form.2.19 EquityCapital stock represents the nominal value of shares that have been issued.Common stock options pertain to the cumulative amount of stock option arising fromthe stock option plan granted by BDO Unibank Group to its qualified officers. Theoptions under the stock option plan were fully exercised and paid for in 2010.Additional paid-in capital includes any premiums received on the issuance of capitalstock. Any transaction costs associated with the issuance of shares are deducted fromadditional paid-in capital.Surplus reserves pertain to a portion of BDO Unibank Group’s income from trustoperations set-up on a yearly basis in compliance with BSP regulations. Surplusreserves also consist of reserve for contingencies and self-insurance.Surplus free includes all current and prior period results as disclosed in profit or lossand which are available and not restricted for use by BDO Unibank Group.Net unrealized fair value gains (losses) on AFS securities pertains to cumulativemark-to-market valuation of AFS financial assets.Revaluation increment consists of gains arising from the revaluation of land under bankpremises, furniture, fixtures and equipment.Accumulated translation adjustment pertains to exchange differences arising ontranslation of the assets and liabilities of foreign subsidiaries and overseas branch thatare taken to other comprehensive income.Non-controlling interests represents the portion of the net assets and profit or loss notattributable to BDO Unibank Group and are presented separately in the BDO UnibankGroup statement of income and within equity in the BDO Unibank Group statementof financial position and changes in equity.

- 24 -2.20 Revenue and Expense RecognitionRevenue is recognized to the extent that it can be reliably measured; it is probable thatthe economic benefits will flow to BDO Unibank Group; and the expenses incurred orto be incurred can be measured reliably. The following specific recognition criteria ofincome and expenses must also be met before revenue is recognized:(a) Interest – Interest income and expenses are recognized in profit or loss for allfinancial assets or instruments using the effective interest method.The effective interest method is a method of calculating the amortized cost of afinancial asset or a financial liability and of allocating the interest income or interestexpense over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash payments or receipts through the expected life ofthe financial instrument or, when appropriate, a shorter period to the net carryingamount of the financial asset or financial liability. When calculating the effectiveinterest rate, BDO Unibank Group estimates cash flows considering all contractualterms of the financial instrument but does not consider future credit losses. Thecalculation includes all fees and points paid or received between parties to thecontract that are an integral part of the effective interest rate, transaction costs andall other premiums or discounts.Once a financial asset or a group of similar financial assets has been written down asa result of an impairment loss, interest income is recognized using the rate ofinterest used to discount the future cash flows for the purpose of measuring theimpairment loss.(b) Service charges, fees and commissions – Service charges, fees and commissions aregenerally recognized when the service has been provided. Loan syndication fees arerecognized as revenue when the syndication has been completed and BDO UnibankGroup retained no part of the loan package for itself or retained a part at the sameeffective interest rate for the other participants. Commission and fees arising fromnegotiating, or participating in the negotiation of a transaction for a third party –such as the arrangement of the acquisition of shares or other securities or thepurchase or sale of businesses – are recognized at the completion of the underlyingtransaction. Portfolio and other management advisory and service fees arerecognized based on the applicable service contracts, usually on a timeproportionatebasis. Asset management fees related to investment funds arerecognized ratably over the period the service is provided. The same principle isapplied for wealth management, financial planning and custody services that arecontinuously provided over an extended period of time.(c) Trading gain – Trading gain is recognized when the ownership of the securities istransferred to the buyer (at an amount equal to the excess of the selling price overthe carrying amount of securities) and as a result of the mark-to-market valuation ofthe securities at year-end. Only trading gain arising from mark-to-market valuationof financial assets at FVTPL is recognized in profit or loss by the BDO UnibankGroup.

- 25 -(d) Income from assets sold or exchanged – Income from assets sold or exchanged isrecognized when the title to the assets is transferred to the buyer or when thecollectability of the entire sales price is reasonably assured. This is included as partof Other Operating Income account in profit or loss.(e) Dividend income – Dividend income is recognized when BDO Unibank Group’s rightto receive dividend is established.(f) Rental income – Rental income arising from leased properties is accounted for on astraight-line basis over the lease terms on ongoing leases and is recorded in profit orloss as part of Other Operating Income.(g) Commissions earned on credit cards – Commissions earned on credit cards are taken upas income upon receipt from member establishments of charges arising from creditavailments by credit cardholders. These commissions are computed based oncertain agreed rates and are deducted from amounts remittable to memberestablishments.(h) Income on direct financing leases and receivables financed – Income on loans and receivablesfinanced with short-term maturities is recognized using the effective interestmethod. Interest and finance fees on finance leases on loans and receivablesfinanced with long-term maturities and the excess of the aggregate lease rental plusthe estimated terminal value of the leased equipment over its cost are credited tounearned discount and amortized over the term of the note or lease using theeffective interest method. Unearned income ceases to be amortized whenreceivables become past due.(i) Real property sales – Revenue is accounted for using the full accrual method. Underthis method, sale is recognized when the earning process is virtually complete andcollectability of the entire sales price is reasonably assured.Collections from accounts which did not qualify from revenue recognition aretreated as customers’ deposit included in accounts payable under Other Liabilities inthe statements of financial position.The BDO Unibank Group records its revenue at gross and separately recognizes anexpense and liability relative to the fair value of the reward points earned by clients andcustomers (see Note 3.02) since such points are redeemable significantly from the goodsor services provided by a third party participating in the program, for example, SMGroup (a related party) and rewards partners of the Bank.Cost and expenses are recognized in profit or loss upon utilization of the assets orservices or at the date these are incurred.2.21 Provisions and ContingenciesProvisions are recognized when present obligations will probably lead to an outflow ofeconomic resources and these can be estimated reliably even if the timing or amount ofthe outflow may still be uncertain. A present obligation arises from the presence of a legalor constructive commitment that has resulted from past events, for example, legaldisputes or onerous contracts.

- 26 -Provisions are measured at the estimated expenditure required to settle the presentobligation, based on the most reliable evidence available at the end of reporting period,including the risks and uncertainties associated with the present obligation. Where thereare a number of similar obligations, the likelihood that an outflow will be required insettlement is determined by considering the class of obligations as a whole. In addition,long-term provisions are discounted to their present values, where time value of money ismaterial.Provisions are reviewed at the end of each reporting period and adjusted to reflect thecurrent best estimate.In those cases where the possible outflow of economic resource as a result of presentobligations is considered improbable or remote, or the amount to be provided for cannotbe measured reliably, no liability is recognized in the financial statements. On the otherhand, any reimbursement expected to be received in the course of settlement of thepresent obligation is recognized, if virtually certain, as a separate asset, not exceeding theamount of the related provision. Similarly, probable inflows of economic benefits that donot yet meet the recognition criteria of an asset are considered contingent assets, hence,are not recognized in the financial statements.2.22 LeasesBDO Unibank Group accounts for its leases as follows:(a) BDO Unibank Group as LessorLeases, wherein BDO Unibank Group substantially transfers to the lessee all risksand benefits incidental to ownership of the leased item, are classified as financeleases and are presented as receivable at an amount equal to BDO Unibank Group’snet investment in the lease. Finance income is recognized based on the patternreflecting a constant periodic rate of return on BDO Unibank Group’s netinvestment outstanding in respect of the finance lease.Leases, which do not transfer to the lessee substantially all the risks and benefits ofownership of the asset, are classified as operating leases. Operating lease collectionsare recognized as income in profit or loss on a straight-line basis over the leaseterm.(b) BDO Unibank Group as LesseeLeases, which do not transfer to BDO Unibank Group substantially all the risks andbenefits of ownership of the asset are classified as operating leases. Operating leasepayments are recognized as expense in profit or loss on a straight-line basis over thelease term.BDO Unibank Group determines whether an arrangement is, or contains a lease basedon the substance of the arrangement. It makes an assessment of whether the fulfillmentof the arrangement is dependent on the use of a specific asset or assets and thearrangement conveys a right to use the asset.

2.23 Impairment of Financial Assets- 27 -BDO Unibank Group assesses at the end of each reporting period whether there isobjective evidence that a financial asset or group of financial assets is impaired. Afinancial asset or a group of financial assets is impaired and impairment losses areincurred if, and only if, there is objective evidence of impairment as a result of one ormore events that occurred after the initial recognition of the asset (a loss event) and thatloss event has an impact on the estimated future cash flows of the financial asset or groupof financial assets that can be reliably estimated. Objective evidence that a financial assetor group of assets is impaired includes observable data that comes to the attention ofBDO Unibank Group about certain loss events, including, among others: (i) significantfinancial difficulty of the issuer or debtor; (ii) a breach of contract, such as a default ordelinquency in interest or principal payments; (iii) the probability that the borrower willenter bankruptcy or other financial reorganization; (iv) the disappearance of an activemarket for that financial asset because of financial difficulties; or, (v) observable dataindicating that there is a measurable decrease in the estimated future cash flows from agroup of financial assets since the initial recognition of those assets, although the decreasecannot yet be identified with the individual financial assets in the group.(a) Assets carried at amortized cost. BDO Unibank Group first assesses whether objectiveevidence of impairment exists individually for financial assets that are individuallysignificant and individually or collectively for financial assets that are notindividually significant. If BDO Unibank Group determines that no objectiveevidence of impairment exists for an individually assessed financial asset, whethersignificant or not, BDO Unibank Group includes the asset in a group of financialassets with similar credit risk characteristics and collectively assesses them forimpairment. Assets that are individually assessed for impairment and for which animpairment loss is or continues to be recognized are not included in a collectiveassessment of impairment.If there is objective evidence that an impairment loss on loans and receivable orHTM investments carried at amortized cost has been incurred, the amount of theloss is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows (excluding future credit losses that havenot been incurred) discounted at the financial asset’s original effective interest rate.The carrying amount of the asset is reduced through the use of an allowanceaccount and the amount of the loss is recognized in profit or loss. If a loan orHTM investment has a variable interest rate, the discount rate for measuring anyimpairment loss is the current effective interest rate determined under the contract.When practicable, BDO Unibank Group may measure impairment on the basis ofan instrument’s fair value using an observable market price.The calculation of the present value of the estimated future cash flows of acollateralized financial asset reflects the cash flows that may result from foreclosure lesscosts for obtaining and selling the collateral, whether or not foreclosure is probable.For the purpose of a collective evaluation of impairment, financial assets aregrouped on the basis of similar credit risk characteristics, i.e., on the basis of BDOUnibank Group’s or BSP’s grading process that considers asset type, industry,collateral type, status and other relevant factors. Those characteristics are relevantto the estimation of future cash flows for groups of such assets by being indicativeof the debtors’ ability to pay all amounts due according to the contractual terms ofthe assets being evaluated.

- 28 -Future cash flows in a group of financial assets that are collectively evaluated forimpairment are estimated on the basis of the contractual cash flows of the assetsand historical loss experience for assets with credit risk characteristics similar tothose in the group. Historical loss experience is adjusted on the basis of currentobservable data to reflect the effects of current conditions that did not affect theperiod on which the historical loss experience is based and to remove the effects ofconditions in the historical period that do not exist currently.Estimates of changes in future cash flows for groups of assets should reflect and beconsistent with changes in related observable data from period to period. Themethodologies and assumptions used for estimating future cash flows are reviewedregularly by BDO Unibank Group to reduce any differences between loss estimatesand actual loss experience.When a loan is uncollectible, it is written off against the related allowance for loanimpairment. Such loans are written off after all the necessary procedures, includingapproval from the management and the BOD, have been completed and theamount of the loss has been determined. Subsequent recoveries of amountspreviously written off decrease the amount of the impairment loss in profit or loss.If in a subsequent period the amount of the impairment loss decreases and thedecrease can be related objectively to an event occurring after the impairment wasrecognized (such as an improvement in the debtor’s credit rating), the previouslyrecognized impairment loss is reversed by adjusting the allowance account. Theamount of the reversal is recognized in profit or loss.(b) Assets carried at fair value with changes recognized in other comprehensive income. In the caseof investments classified as AFS securities, a significant or prolonged decline in thefair value of the security below its cost is considered in determining whether theassets are impaired. If any such evidence exists for AFS securities, the cumulativeloss – measured as the difference between the acquisition cost and the current fairvalue, less any impairment loss on that financial asset previously recognized in profitor loss – is reclassified from other comprehensive income to profit or loss as areclassification adjustment. Impairment losses recognized in profit or loss on equityinstruments are not reversed through profit or loss. If, in a subsequent period, thefair value of a debt instrument classified as AFS increases and the increase can beobjectively related to an event occurring after the impairment loss was recognized inprofit or loss, the impairment loss is reversed through profit or loss.(c) Assets carried at cost. BDO Unibank Group assesses at the end of each reportingperiod whether there is objective evidence that any of the unquoted equity securitiesand derivative assets linked to and required to be settled in such unquoted equityinstruments, which are carried at cost, may be impaired. The amount of impairmentloss is the difference between the carrying amount of the equity security and thepresent value of the estimated future cash flows discounted at the current marketrate of return of a similar asset. Impairment losses on assets carried at cost cannotbe reversed.

- 29 -When possible, BDO Unibank Group seeks to restructure loans rather than to takepossession of collateral. This may involve extending the payment arrangements andthe agreement of new loan conditions. Once the terms have been renegotiated, theloan is no longer considered past due. Management continuously reviewsrestructured loans to ensure that all criteria are met and that future payments arelikely to occur. The loans continue to be subject to an individual or collectiveimpairment assessment, calculated using the loans’ original effective interest rate.The difference between the recorded sale of the original loan and the present valueof the restructured cash flows, discounted at the original effective interest rate, isrecognized as part of Impairment Losses account in profit or loss.2.24 Impairment of Non-financial AssetsBDO Unibank Group’s real properties for development and sale, equity investments,goodwill, intangible assets (recorded as part of Other Resources), premises, furniture,fixtures and equipment and investment properties are subject to impairment testing.Intangible assets with an indefinite useful life, such as goodwill are tested forimpairment at least annually. All other individual assets or cash-generating units aretested for impairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable.For purposes of assessing impairment, assets are grouped at the lowest levels for whichthere are separately identifiable cash flows (cash-generating units). As a result, assets aretested for impairment either individually or at the cash-generating unit level.An impairment loss is recognized for the amount by which the asset’s or cashgeneratingunit’s carrying amount exceeds its recoverable amounts which is the higherof its fair value less costs to sell and its value in use. In determining value in use,management estimates the expected future cash flows from each cash-generating unitand determines the suitable interest rate in order to calculate the present value of thosecash flows. Discount factors are determined individually for each cash-generating unitand reflect management’s assessment of respective risk profiles, such as market andasset-specific risk factors.All assets are subsequently reassessed for indications that an impairment loss previouslyrecognized may no longer exist and the carrying amount of the asset is adjusted to therecoverable amount resulting in the reversal of the impairment loss.2.25 Foreign Currency Transactions and TranslationsThe financial statements of the FCDUs of BDO Unibank Group and foreignsubsidiaries are translated at the prevailing current exchange rates (for statement offinancial position accounts) and average exchange rate during the period (for statementof income accounts) for consolidation purposes.The accounting records of BDO Unibank Group are maintained in Philippine pesosexcept for the FCDUs and foreign subsidiaries which are maintained in US dollars orEuropean Union Euro (Euro). BDO Remittance, an overseas branch, and ExpressPadala HK are maintained in Hong Kong dollars. Foreign currency transactions duringthe period are translated into the functional currency at exchange rates whichapproximate those prevailing on transaction dates.

- 30 -Foreign exchange gains and losses resulting from the settlement of such transactionsand from the translation at period-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognized in profit or loss.The operating results and financial position of foreign subsidiaries and an overseasbranch, which are measured using the US dollar or Euro and Hong Kong dollars,respectively, are translated to Philippine pesos, the BDO Unibank Group’s functionalcurrency, as follows:a. Assets and liabilities are translated at the closing rate at the end of the reportingperiod;b. Income and expenses are translated at the monthly average exchange rates (unlessthis average is not reasonable approximation of the cumulative effect of the ratesprevailing on the transaction dates, in which case income and expenses aretranslated at the dates of the transactions), except for FCDU which uses the bookrate or the previous month-end Philippine Dealing System closing rate in translatingincome and expenses and the overseas branch which used the month-endPhilippine Dealing System closing rate in translating income and expenses; and,c. All resulting exchange differences are recognized as a separate component of othercomprehensive income.On consolidation, exchange differences arising from the translation of the netinvestment in foreign subsidiaries and an overseas branch is recognized to othercomprehensive income as part of Accumulated Translation Adjustment. When aforeign operation is sold, such exchange differences are recognized in profit or loss.The translation of the financial statements into Philippine peso should not be construedas a representation that the US dollar, Euro or Hong Kong dollar amounts could beconverted into Philippine peso amounts at the translation rates or at any other rates ofexchange.2.26 Employee BenefitsPost-employment benefits are provided to employees through a defined benefit plan, aswell as defined contribution plan.(a) Post-employment Defined BenefitA defined benefit plan is a post-employment plan that defines an amount ofpost-employment benefit that an employee will receive on retirement, usuallydependent on one or more factors such as age, years of service and expected rateof salary increases. The legal obligation for any benefits from this kind ofpost-employment plan remains with BDO Unibank Group, even if plan assets forfunding the defined benefit plan have been acquired. Plan assets may includeassets specifically designated to a long-term benefit fund, as well as qualifyinginsurance policies. BDO Unibank Group’s defined benefit post-employment plancovers all regular full-time employees. The post-employment plan is tax-qualified,noncontributory and administered by a trustee.

- 31 -The asset recognized in the statement of financial position for defined benefitpost-employment plans is the fair value of plan assets at the end of reportingperiod less the present value of the defined benefit obligation (DBO), togetherwith adjustments for unrecognized actuarial gains or losses and past service costs.The DBO is calculated by independent actuaries using the projected unit creditmethod. The present value of the DBO is determined by discounting theestimated future cash outflows using interest rates of high quality corporate bondsthat are denominated in the currency in which the benefits will be paid and thathave terms to maturity approximating to the terms of the related post-employmentliability.Actuarial gains and losses are not recognized as an expense unless the totalunrecognized gain or loss exceeds 10% of the greater of the obligation and relatedplan assets. The amount exceeding this 10% corridor is charged or credited toprofit or loss over the employees’ expected average remaining working lives.Actuarial gains and losses within the 10% corridor are disclosed separately. Pastservice costs are recognized immediately in profit or loss, unless the changes to thepost-employment plan are conditional on the employees remaining in service for aspecified period of time (the vesting period). In this case, the past service costs areamortized on a straight-line basis over the vesting period.(b) Defined Contribution PlanA defined contribution plan is a post-employment plan under which BDOUnibank Group pays fixed contributions into an independent entity, such as theSocial Security System (SSS). BDO Unibank Group has no legal or constructiveobligations to pay further contributions after payment of the fixed contribution.The contributions recognized in respect of defined contribution plans areexpensed as they fall due. Liabilities and assets may be recognized ifunderpayment or prepayment has occurred.(c)Termination BenefitsTermination benefits are payable when employment is terminated by BDOUnibank Group before the normal retirement date, or whenever an employeeaccepts voluntary redundancy in exchange for these benefits. BDO UnibankGroup recognizes termination benefits when it is demonstrably committed toeither: (i) terminating the employment of current employees according to a detailedformal plan without possibility of withdrawal; or, (ii) providing terminationbenefits as a result of an offer made to encourage voluntary redundancy. Benefitsfalling due more than 12 months after the end of reporting period are discountedto present value.(d) Bonus PlansBDO Unibank Group recognizes a liability and an expense for bonuses based onthe Group’s bonus policy. BDO Unibank Group recognizes a provision where itis contractually obliged to pay the benefits.

- 32 -(e)Executive Stock Option PlanBDO Unibank Group grants stock option plan to its senior officers (fromvice-president up) for their contribution to BDO Unibank Group’s performanceand attainment of team goals. The amount of stock option allocated to thequalified officers is based on the performance of the individual officers asdetermined by the management and is determined based on BDO UnibankGroup’s performance in the preceding year and amortized over five years startingfrom the date of the approval of the BOD. The number of officers qualified at thegrant date is regularly evaluated during the vesting period (at least annually) and theamount of stock option is decreased in case there are changes in the number ofqualified employees arising from resignation or disqualification. The annualamortization of stock option is included as part of Employee Benefits in profit orloss and the cumulative balance is shown as Common Stock Options in thestatement of changes in equity (nil in 2011 and 2010).(f)Compensated AbsencesCompensated absences are recognized for the number of paid leave days(including holiday entitlement) remaining at the end of reporting period. These areincluded in Other Liabilities account at the undiscounted amount that BDOUnibank Group expects to pay as a result of the unused entitlement.2.27 Income TaxesTax expense recognized in profit or loss comprise the sum of deferred tax and currenttax not recognized in other comprehensive income or directly in equity, if any.Current tax assets or liabilities comprise those claims from, or obligations to, fiscalauthorities relating to the current or prior reporting period, that are uncollected orunpaid at the end of the reporting period. They are calculated according to the tax ratesand tax laws applicable to the fiscal periods to which they relate, based on the taxableprofit for the period. All changes to current tax assets or liabilities are recognized as acomponent of tax expense in profit or loss.Deferred tax is provided, using the liability method, on temporary differences at the endof the reporting period between the tax base of assets and liabilities and their carryingamounts for financial reporting purposes. Under the liability method, with certainexceptions, deferred tax liabilities are recognized for all taxable temporary differencesand deferred tax assets are recognized for all deductible temporary differences and thecarryforward of unused tax losses and unused tax credits to the extent that it is probablethat taxable profit will be available against which the deferred tax asset can be utilized.The carrying amount of deferred tax assets is reviewed at the end of each reportingperiod and reduced to the extent that it is probable that sufficient taxable profit will beavailable to allow all or part of the deferred tax asset to be utilized.Deferred tax assets and liabilities are measured at the tax rates that are expected to applyto the period when the asset is realized or the liability is settled, based on tax rates andtax laws that have been enacted or substantively enacted at the end of each reportingperiod.

- 33 -Most changes in deferred tax assets or liabilities are recognized as a component of taxexpense in the statement of income. Only changes in deferred tax assets or liabilitiesthat relate to a change in value of resources or liabilities relate to items recognized inother comprehensive income or directly in equity are recognized in othercomprehensive income or directly in equity.2.28 Earnings Per Share (EPS)Basic earnings per common share is determined by dividing net profit by the weightedaverage number of common shares subscribed and issued during the period, afterretroactive adjustment for any stock dividend declared in the current period.The diluted earnings per common share is also computed by dividing net profit by theweighted average number of common shares subscribed and issued during the period.However, net profit attributable to common shares and the weighted average numberof common shares outstanding are adjusted to reflect the effects of potentially dilutiveconvertible preferred shares and stock option plan granted by BDO Unibank Group tothe qualified officers. Convertible preferred shares are deemed to have been convertedto common shares at the issuance of preferred shares. The stock option plan is deemedto have been converted into common stock in the year the stock option is granted.2.29 Trust ActivitiesBDO Unibank Group commonly acts as trustee and in other fiduciary capacities thatresult in the holding or placing of assets on behalf of individuals, trusts, retirementbenefit plans and other institutions. Assets and income arising thereon are excludedfrom these financial statements, as these are neither assets nor income of BDOUnibank Group.2.30 Event After the Reporting PeriodAny post-year-end event that provides additional information about BDO UnibankGroup’s position at the end of reporting period (adjusting event) is reflected in thefinancial statements. Post-year-end events that are not adjusting events, if any, aredisclosed when material to the financial statements.3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATESBDO Unibank Group’s financial statements prepared in accordance with FRSP forbanks require management to make judgments and estimates that affect the amountsreported in the financial statements and related notes. Judgments and estimates arecontinually evaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under thecircumstances. Actual results may ultimately differ from these estimates and thedifferences could be significant.

- 34 -3.01 Critical Management Judgments in Applying Accounting PoliciesIn the process of applying BDO Unibank Group’s accounting policies, management hasmade the following judgments, apart from those involving estimation, which have themost significant effect on the amounts recognized in the financial statements:(a) HTM InvestmentsBDO Unibank Group follows the guidance of PAS 39 in classifying non-derivativefinancial assets with fixed or determinable payments and fixed maturity as HTM.This classification requires significant judgment. In making this judgment, BDOUnibank Group considers its intention and ability to hold such investments tomaturity. Management has confirmed its intention and determined its ability to holdthe investments up to maturity.If BDO Unibank Group fails to keep these investments at maturity (other than forthe allowed specific circumstances, e.g., selling more than an insignificant amountclose to maturity), it will be required to reclassify the entire class to AFS securities.The investments would therefore be measured at fair value and not at amortizedcost.However, the tainting provision will not apply if the sales or reclassifications ofHTM investments: (i) are so close to maturity or the financial asset’s call date thatchanges in the market rate of interest would not have a significant effect on thefinancial asset’s fair value; (ii) occur after BDO Unibank Group has collectedsubstantially all of the financial asset’s original principal through scheduledpayments or prepayments; or, (iii) are attributable to an isolated event that is beyondthe control of BDO Unibank Group, is nonrecurring and could not have beenreasonably anticipated by BDO Unibank Group.(b) Impairment of AFS SecuritiesBDO Unibank Group follows the guidance of PAS 39 in determining when aninvestment is permanently impaired. This determination requires significantjudgment. In making this judgment, BDO Unibank Group evaluates, among otherfactors, the duration and extent to which the fair value of an investment is less thanits cost; and the financial health of and near-term business outlook for the investee,including factors such as industry and sector performance, changes in technologyand operational and financing cash flow. For investments issued by counterpartyunder bankruptcy, BDO Unibank Group determines permanent impairment basedon the price of the most recent transaction and on latest indications obtained fromreputable counterparties (which regularly quote prices for distressed securities) sincecurrent bid prices are no longer available.(c) Distinction Between Investment Properties and Owner-occupied PropertiesBDO Unibank Group determines whether a property qualifies as investmentproperty. In making its judgment, BDO Unibank Group considers whether theproperty generates cash flows largely independent of the other assets held by BDOUnibank Group. Owner-occupied properties generate cash flows that areattributable not only to other assets used in the production or supply process.

- 35 -Some properties comprise a portion that is held to earn rental or for capitalappreciation and another portion that is held for use in the production and supplyof goods and services or for administrative purposes. If these portions can be soldseparately (or leased out separately under finance lease), BDO Unibank Groupaccounts for those portions separately. If the portion cannot be sold separately, theproperty is accounted for as investment property only if an insignificant portion isheld for use in the production or supply of goods or services for administrativepurposes. Judgment is applied in determining whether ancillary services are sosignificant that a property does not qualify as investment property. BDO UnibankGroup considers each property separately in making its judgment.(d) Operating and Finance LeasesBDO Unibank Group has entered into various lease agreements either as a lessor orlessee. Critical judgment was exercised by management to distinguish each leaseagreement as either an operating or finance lease by looking at the transfer orretention of significant risks and rewards of ownership of the properties covered bythe agreements. Failure to make the right judgment will result in eitheroverstatement or understatement of resources and liabilities.(e) Classification of Acquired Properties and Fair Value Determination of Non-current Assets Heldfor Sale and Investment PropertiesBDO Unibank Group classifies its acquired properties as Premises, Furniture,Fixtures and Equipment if used in operations, as Non-current Assets Held for Saleif expected that the properties will be recovered through sale rather than use, asInvestment Properties if intended to be held for capital appreciation or as FinancialAssets if qualified as such in accordance with PAS 39. At initial recognition, BDOUnibank Group determines the fair value of the acquired properties throughinternally or externally generated appraisal. The appraised value is determined basedon the current economic and market conditions as well as the physical condition ofthe properties.(f) Provisions and ContingenciesJudgment is exercised by management to distinguish between provisions andcontingencies. Policies on recognition and disclosure of provisions andcontingencies are discussed in Note 2.21 and relevant disclosures are presented inNote 31.

- 36 -3.02 Key Sources of Estimation UncertaintyThe following are the key assumptions concerning the future, and other key sources ofestimation uncertainty at the end of the reporting period, that have a significant risk ofcausing a material adjustment to the carrying amounts of resources and liabilities withinthe next financial year:(a) Impairment Losses on Financial Assets (AFS Securities, HTM Investments and Loans andReceivables)BDO Unibank Group reviews its AFS, HTM and loans and receivables portfoliosto assess impairment at least on a quarterly basis. In determining whether animpairment loss should be recorded in profit or loss, BDO Unibank Group makesjudgments as to whether there is any observable data indicating that there is ameasurable decrease in the estimated future cash flows from the financial asset or aportfolio of similar financial assets. This evidence may include observable dataindicating that there has been an adverse change in the payment status of borrowersor issuers in a group, or national or local economic conditions that correlate withdefaults on assets in the group. Management uses estimates based on historical lossexperience for assets with credit risk characteristics and objective evidence ofimpairment similar to those in the portfolio when scheduling its future cash flows.The methodology and assumptions used for estimating both the amount and timingof future cash flows are reviewed regularly to reduce any differences between lossestimates and actual loss experience.BDO Unibank Group carries certain financial assets at fair value, which requires theextensive use of accounting estimates and judgment. Significant components of fairvalue measurement are determined using verifiable objective evidence such asforeign exchange rates, interest rates and volatility rates. However, the amount ofchanges in fair value would differ if BDO Unibank Group had utilized differentvaluation methods and assumptions. Any change in fair value of these financialassets and liabilities would affect profit or loss and other comprehensive income.For the total impairment losses on financial assets recognized in profit or loss, seeNote 14.(b) Fair Value of Financial Assets and LiabilitiesAs at December 31, the following table summarizes the carrying amounts and fairvalues of those financial resources and liabilities not presented in the statements offinancial position at their fair value.December 31, 2011BDO Unibank Group Parent BankCost Fair Value Cost Fair ValueFinancial Assets:Due from other banks and BSP P 149,613 P 149,655 P 138,769 P 138,811AFS securities – unquoted 570 * 310 *HTM investments 93,670 106,032 85,742 97,761Loans and other receivables 673,927 680,546 653,857 663,057Other resources 2,427 2,427 2,318 2,318

- 37 -BDO Unibank Group Parent BankCost Fair Value Cost Fair ValueFinancial Liabilities:Deposit liabilities 858,569 861,289 838,748 841,447Bills payable 59,474 59,495 51,378 51,460Subordinated notes payable 38,255 41,549 38,255 41,549Other liabilities 41,494 41,494 34,930 34,930December 31, 2010Financial Assets:Due from other banks and BSP P 160,259 P 160,260 P 150,151 P 150,152AFS securities – unquoted 927 * 662 *HTM investments 104,241 115,245 95,569 106,175Loans and other receivables 566,021 567,808 548,618 554,063Other resources 2,552 2,552 2,886 2,886Financial Liabilities:Deposit liabilities 782,635 784,917 762,634 765,289Bills payable 65,861 65,378 56,081 55,679Subordinated notes payable 23,152 25,120 23,152 25,120Other liabilities 37,898 37,898 32,403 32,403* Data not available(i) Due from Other Banks and BSPDue from BSP pertains to deposits made by BDO Unibank Group to BSP forclearing and reserve requirements. Due from other banks includes interbankplacements and items in the course of collection. The fair value of floating rateplacements and overnight deposits is their carrying amount. The estimated fairvalue of fixed interest-bearing deposits is based on discounted cash flows usingprevailing money market interest rates for debts with similar credit risk andremaining maturity, which for short-term deposits approximate the nominal value.(ii) AFS SecuritiesThe fair value of AFS securities is determined by direct reference to publishedprice quoted in an active market for traded securities. On the other hand,unquoted AFS securities are carried at cost because the fair value cannot bereliably determined either by reference to similar financial instruments orthrough valuation technique.Currently, there is no available market to sell the unquoted equity AFSsecurities. The Bank will hold into the investments until management decides tosell them when there will be offers to buy out such investments on theappearance of an available market where the investments can be sold.(iii) HTM InvestmentsThe fair value for held-to-maturity assets is based on market prices. Where thisinformation is not available, fair value has been estimated using quoted marketprices for securities with similar credit, maturity and yield characteristics orthrough valuation techniques using discounted cash flow analysis.

- 38 -(iv) Loans and Other ReceivablesLoans and other receivables are net of provisions for impairment. Theestimated fair value of loans and receivables represents the discounted amountof estimated future cash flows expected to be received. Expected cash flows arediscounted at current market rates to determine fair value.(v) Deposits and BorrowingsThe estimated fair value of demand deposits with no stated maturity, whichincludes non-interest-bearing deposits, is the amount repayable on demand.The estimated fair value of long-term fixed interest-bearing deposits and otherborrowings without quoted market price is based on discounted cash flowsusing interest rates for new debts with similar remaining maturity.(c) Fair Value of DerivativesThe fair value of derivative financial instruments that are not quoted in an activemarket is determined through valuation techniques using the net present valuecomputation.Valuation techniques are used to determine fair values which are validated andperiodically reviewed. To the extent practicable, models use observable data,however, areas such as counterparty credit risk, volatilities and correlations requiremanagement to make estimates. Changes in assumptions could affect the reportedfair value of financial instruments. BDO Unibank Group uses judgment to select avariety of methods and make assumptions that are mainly based on marketconditions existing at the end of each reporting period.(d) Financial Instruments Measured at Fair ValueFinancial assets and liabilities measured at fair value are categorized in accordancewith the fair value hierarchy. This hierarchy groups financial assets and liabilities intothree levels based on the significance of inputs used in measuring the fair value ofthe financial assets and liabilities. The fair value hierarchy has the following levels:• Level 1: quoted prices (unadjusted) in active markets for identical assetsor liabilities;• Level 2: inputs other than quoted prices included within Level 1 that areobservable for the asset or liability, either directly (i.e., as prices) or indirectly(i.e., derived from prices); and,• Level 3: inputs for the asset or liability that are not based on observablemarket data (unobservable inputs).The level within which the financial asset or liability is classified is determined basedon the lowest level of significant input to the fair value measurement.

- 39 -The financial assets and liabilities measured at fair value in the statements of financialposition as of December 31, 2011 and 2010 are grouped into the fair value hierarchyas presented in the following table. For the purpose of this disclosure, theinvestments in unquoted equity securities classified as AFS amounting to P570 andP927 in 2011 and 2010, respectively, in the BDO Unibank Group financial statementsand P310 and P662 in 2011 and 2010, respectively in the Parent Bank financialstatements are measured at cost less impairment charges because the fair value cannotbe reliably measured and therefore are not included. Unquoted equity securitiesconsist of preferred shares and common shares of various unlisted local companies.BDO Unibank GroupDecember 31, 2011Notes Level 1 Level 2 TotalResourcesFinancial assets at FVTPL 9.01Derivative financial assets P 1,890 P 1,849 P 3,739Government bonds 949 - 949Other debt securities 58 - 58Equity securities - quoted 77 - 772,974 1,849 4,823AFS securities 9.02Government debt securities 55,065 56 55,121Other debt securities-quoted 28,279 - 28,279Equity securities 5,516 439 5,95588,860 495 89,355P 91,834 P 2,344 P 94,178LiabilitiesDerivatives with negativefair values 18 P 1,877 P 1,443 P 3,320December 31, 2010ResourcesFinancial assets at FVTPL 9.01Derivative financial assets P 3,380 P 1,730 P 5,110Government bonds 1,640 - 1,640Other debt securities 610 - 610Equity securities 12 - 125,642 1,730 7,372AFS securities 9.02Government debt securities 52,299 78 52,377Other debt securities-quoted 26,211 - 26,211Equity securities 6,140 19 6,15984,650 97 84,747P 90,292 P 1,827 P 92,119LiabilitiesDerivatives with negativefair values 18 P 3,168 P 1,547 P 4,715

- 40 -Parent BankNotes Level 1 Level 2 TotalDecember 31, 2011ResourcesFinancial assets at FVTPL 9.01Derivative financial assets P 1,890 P - P 1,890Government bonds 518 - 5182,408 - 2,408AFS securities 9.02Government debt securities 52,527 56 52,583Other debt securities - quoted 27,722 - 27,722Equity securities 1,877 439 2,31682,126 495 82,621P 84,534 P 495 P 85,029LiabilitiesDerivatives with negativefair values 18 P 1,877 P - P 1,877December 31, 2010ResourcesFinancial assets at FVTPL 9.01Derivative financial assets P 3,379 P - P 3,379Government bonds 866 - 866Other debt securities 102 - 1024,347 - 4,347AFS securities 9.02Government debt securities 49,677 78 49,755Other debt securities - quoted 24,348 - 24,348Equity securities 2,940 20 2,96076,965 98 77,063P 81,312 P 98 P 81,410LiabilitiesDerivatives with negativefair values 18 P 3,168 P - P 3,168The BDO Unibank Group and Parent Bank have no financial instrument as ofDecember 31, 2011 and 2010 whose fair value was measured under level 3. Themethods and valuation techniques used for the purpose of measuring fair values areunchanged compared to the previous reporting periods.There have been no significant transfers among levels 1 and 2 in the reportingperiods.

- 41 -(e) Useful Lives of Premises, Furniture, Fixtures and Equipment and Investment PropertiesBDO Unibank Group estimates the useful lives of premises, furniture, fixtures andequipment and investment properties based on the period over which the assets areexpected to be available for use. The estimated useful lives of premises, furniture,fixtures and equipment and investment properties are reviewed periodically and areupdated if expectations differ from previous estimates due to physical wear and tear,technical or commercial obsolescence and legal or other limits on the use of theassets. The carrying amounts of premises, furniture, fixtures and equipment areanalyzed in Note 11. On the other hand, the carrying amounts of investmentproperties are analyzed in Note 12. Based on management’s assessment as atDecember 31, 2011 and 2010, there is no change in estimated useful lives ofpremises, furniture, fixtures and equipment and investment properties during theyear. Actual results, however, may vary due to changes in estimates brought aboutby changes in factors mentioned above.(f) Realizable Amount of Deferred Tax AssetsBDO Unibank Group reviews its deferred tax assets at the end of each reportingperiod and reduces the carrying amount to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the deferred tax assetsto be utilized. The carrying value of deferred tax assets, which management assessedto be fully utilized within the next two to three years, as of December 31, 2011 and2010 is disclosed in Note 27.01.(g) Impairment of Non-financial AssetsExcept for intangible assets with indefinite useful lives, PFRS requires that animpairment review be performed when certain impairment indicators are present.BDO Unibank Group’s policy on estimating the impairment of non-financial assetsis discussed in detail in Note 2.24. Though management believes that theassumptions used in the estimation of fair values reflected in the financialstatements are appropriate and reasonable, significant changes in these assumptionsmay materially affect the assessment of recoverable values and any resultingimpairment loss could have a material adverse effect on the results of operations.Impairment losses recognized in profit or loss are disclosed in Note 14.(h) Retirement BenefitsThe determination of BDO Unibank Group’s obligation and cost of postemploymentand other retirement benefits is dependent on the selection of certainassumptions used by actuaries in calculating such amounts. Those assumptions aredescribed in Note 23 and include, among others, discount rates, expected rate ofreturn on plan assets and salary increase rates. In accordance with PFRS, actualresults that differ from the assumptions are accumulated and amortized over futureperiods and therefore, generally affect the recognized expense and recordedobligation in such future periods.

- 42 -The retirement benefit asset and net unrecognized actuarial losses of BDO UnibankGroup amounted to P1,494 and P4,520, respectively, in 2011 while the retirementbenefit asset and net unrecognized actuarial losses of BDO Unibank Groupamounted to P998 and P3,821, respectively, in 2010. On the other hand, theretirement benefit asset and net unrecognized actuarial losses of the Parent Bankamounted to P1,519 and P4,252, respectively, in 2011 while the retirement benefitasset and net unrecognized actuarial losses amounted to P1,026 and P3,650,respectively, in 2010 (see Note 23.02).(i) Reward pointsThe BDO Unibank Group provides rewards points to its banking clients andcustomers each time they avail of the pre-identified products and services of theBank and the companies which the Bank has identified as partners in the rewardsprogram. Reward points are redeemable in a wide selection of reward categories,including travel, merchandise of third parties, reward credits and gift certificates.Certain loyalty points for credit card have no expiration date unless the credit card iscancelled but for other rewards program, unredeemed points may expire at somefuture date.The BDO Unibank Group establishes reserves to cover the cost of future rewardredemptions for points earned to date. The provision for the cost of rewards isbased upon points earned by bank clients and the current cost per point ofredemption. The estimated points to be redeemed are measured and adjusted basedon many factors including but not limited to past redemption behavior of bankclients, product type on which the points are earned and their ultimate redemptionrate on the points earned to date but not yet redeemed.The BDO Unibank Group continually evaluates its reserve methodology forrewards based on developments in redemption patterns, cost per point redeemedand other factors. The reserve for unredeemed points is impacted over time byenrollment levels, amount of points earned and redeemed, weighted-average costper point, redemption choices made by bank clients and other membership rewardsprogram changes. The calculation is most sensitive to changes in the estimatedultimate redemption rate. This rate is based on the expectation that a large majorityof all points earned will eventually be redeemed and the awards will be redeemedthrough goods or services supplied by a third party based on BDO UnibankGroup’s past experience.The carrying value of the rewards points accrued by the BDO Unibank Group andthe Parent Bank is presented as part of Accrued expenses under Other Liabilities inthe statements of financial position as disclosed in Note 18.

- 43 -4. RISK MANAGEMENTBy their nature, BDO Unibank Group’s activities are principally related to the use offinancial instruments including derivatives. BDO Unibank Group accepts depositsfrom customers at fixed and floating rates for various periods and seeks to earnabove-average interest margins by investing these funds in high-quality assets. BDOUnibank Group seeks to increase these margins by consolidating short-term funds andlending for longer periods at higher rates, while maintaining sufficient liquidity to meetall claims that might fall due. BDO Unibank Group also trades in financial instrumentswhere it takes positions in traded and over-the-counter instruments, includingderivatives, to take advantage of short-term market movements in equities and bondsand in currency and interest rate prices.To manage the risk for holding financial assets and liabilities, BDO Unibank Groupoperates an integrated risk management system to address the risks it faces in itsbanking activities, including liquidity, interest rate, credit and market risks. BDOUnibank Group’s risk management objective is to adequately and consistently evaluate,manage, control, and monitor the risk profile of BDO Unibank Group’s statements offinancial position to optimize the risk-reward balance and maximize return on BDOUnibank Group’s capital. BDO Unibank Group’s Risk Management Committee (RMC)has overall responsibility for BDO Unibank Group’s risk management systems and setsrisk management policies across the full range of risks to which BDO Unibank Group isexposed. Specifically, BDO Unibank Group’s RMC places trading limits on the level ofexposure that can be taken in relation to both overnight and intra-day market positions.With the exception of specific hedging arrangements, foreign exchange and interest rateexposures associated with these derivatives are normally offset by entering intocounterbalancing positions, thereby controlling the variability in the net cash amountsrequired to liquidate market positions.Within BDO Unibank Group’s overall risk management system, the Assets andLiabilities Committee (ALCO) is responsible for managing the Group’s statement offinancial position, including BDO Unibank Group’s liquidity, interest rate and foreignexchange related risks. In addition, ALCO formulates investment and financial policiesby determining the asset allocation and funding mix strategies that are likely to yield thetargeted financial results.Separately, the Risk Management Group (RMG) is mandated to adequately andconsistently evaluate, manage, control, and monitor the over-all risk profile of theBank’s activities across the different risk areas (i.e., credit, market, liquidity, andoperational) to optimize the risk-reward balance and maximize return on capital.RMG has responsibility for the setting of risk policies across the full range of risks towhich BDO Unibank Group is exposed to.In the performance of its function, RMG observes the following framework:• It is responsible for policy formulation in coordination with the relevantbusinesses/functions and ensures that proper approval for the manuals/policiesis obtained from the appropriate body.

- 44 -• It then disseminates the approved policies to the relevant businesses/functionsafter which, pertinent authorities are delegated down to the businesses/functionsto guide them in the conduct of their businesses/functions. RMG thenperforms compliance monitoring and review to ensure approved policies areadhered to.• It is responsible for clarifying interpretations of risk policies/guidelines raised bythe Business Heads/Units.• When adverse trends are observed in the account/portfolio, RMG isresponsible for flagging these trends and ensuring relevant policies for problemaccounts/portfolio management are properly applied.• RMG is responsible for the direct management of accounts in BDO UnibankGroup’s Non-Performing Loan (NPL)/property-related items in litigationsportfolio and ensures that appropriate strategies are formulated to maximizecollection and/or recovery of these assets.• It is also responsible for regular review and monitoring of accounts under itssupervision and ensuring that the account’s loan classification is assessed timelyand accurately.4.01 Liquidity RiskLiquidity risk is the risk that there could be insufficient funds available to adequatelymeet the credit demands of BDO Unibank Group’s customers and repay deposits onmaturity. BDO Unibank Group manages liquidity risk by holding sufficient liquidassets of appropriate quality to ensure short-term funding requirements are met and bymaintaining a balanced loan portfolio which is repriced on a regular basis. In addition,BDO Unibank Group seeks to maintain sufficient liquidity to take advantage of interestrate and exchange rate opportunities when they arise.

- 45 -The analysis of the maturity groupings of resources, liabilities and off-book items as ofDecember 31, 2011 and 2010 in accordance with account classification of the BSP, arepresented below. The amounts disclosed in the maturity analysis are the contractualundiscounted cash flows using the primary contractual maturities or behavioralassumptions on core levels (e.g., core deposit liabilities and core deposit substitutes withmaturities within one year have been classified in the more than three years category), ifthe latter is more relevant for purposes of profiling the liquidity gap. Suchundiscounted cash flows may differ from the amounts included in the statement offinancial position because the statement of financial position amounts are based ondiscounted cash flows.BDO Unibank Group2011MoreOne to than three More than Morethree months to one year to than threemonths one year three years years TotalResources:Cash and othercash items P 33,129 P - P - P - P 33,129Due from BSP/other banks 149,613 - - - 149,613Loans and otherreceivables 196,509 79,198 110,138 288,082 673,927Trading and investmentsecurities 6,248 9,576 25,382 147,212 188,418Other resources - 6,772 - 45,490 52,262Total Resources 385,499 95,546 135,520 480,784 1,097,349Liabilities and Equity:Deposit liabilities 247,847 7,954 5,957 596,811 858,569Bills and subordinatednotes payable 31,613 16,983 20,309 28,824 97,729Other liabilities 6,793 29,158 2,951 5,187 44,089Total Liabilities 286,253 54,095 29,217 630,822 1,000,387Equity - - - 96,962 96,962Total Liabilities and Equity 286,253 54,095 29,217 727,784 1,097,349On-book gap 99,246 41,451 106,303 ( 247,000 ) -Cumulative on-book gap 99,246 140,697 247,000 - -Contingent assets 236,326 38,544 23,717 15,321 313,908Contingent liabilities 251,414 38,495 23,627 15,232 328,768Off-book gap ( 15,088 ) 49 90 89 ( 14,860 )Net Periodic Gap 84,158 41,500 106,393 ( 246,911 ) ( 14,860 )Cumulative Total Gap P 84,158 P 125,658 P 232,051 (P 14,860 ) P -

- 46 -2010MoreOne to than three More than Morethree months to one year to than threemonths one year three years years TotalResources:Cash and othercash items P 26,673 P - P - P - P 26,673Due from BSP/other banks ` 160,056 - 203 - 160,259Loans and otherreceivables 194,732 47,730 85,579 237,980 566,021Trading and investmentsecurities 11,995 13,939 29,484 141,869 197,287Other resources - 10,142 - 40,487 50,629Total Resources 393,456 71,811 115,266 420,336 1,000,869Liabilities and Equity:Deposit liabilities 178,826 3,781 10,138 589,890 782,635Bills and subordinatednotes payable 37,694 277 30,861 20,181 89,013Other liabilities 5,245 22,857 6,316 6,071 40,489Total Liabilities 221,765 26,915 47,315 616,142 912,137Equity - - - 88,732 88,732Total Liabilities and Equity 221,765 26,915 47,315 704,874 1,000,869On-book gap 171,691 44,896 67,951 ( 284,538 ) -Cumulative on-book gap 171,691 216,587 284,538 - -Contingent assets 186,900 60,742 7,634 13,791 269,067Contingent liabilities 189,913 61,050 7,715 13,737 272,415Off-book gap ( 3,013 ) ( 308) ( 81 ) 54 ( 3,348 )Net Periodic Gap 168,678 44,588 67,870 ( 284,484 ) ( 3,348 )Cumulative Total Gap P 168,678 P 213,266 P 281,136 (P 3,348 ) P -

- 47 -Parent Bank2011MoreOne to than three More than Morethree months to one year to than threemonths one year three years years TotalResources:Cash and othercash items P 33,102 P - P - P - P 33,102Due from BSP/other banks ` 138,769 - - - 138,769Loans and otherreceivables 186,687 78,505 106,294 282,371 653,857Trading and investmentsecurities 4,079 5,984 18,766 142,252 171,081Other resources 8 6,832 368 51,241 58,449Total Resources 362,645 91,321 125,428 475,864 1,055,258Liabilities and Equity:Deposit liabilities 239,038 6,518 3,970 589,222 838,748Bills and subordinatednotes payable 31,274 16,200 13,335 28,824 89,633Other liabilities 6,470 29,505 1,153 166 37,294Total Liabilities 276,782 52,223 18,458 618,212 965,675Equity - - - 89,583 89,583Total Liabilities and Equity 276,782 52,223 18,458 707,795 1,055,258On-book gap 85,863 39,098 106,970 ( 231,931 ) -Cumulative on-book gap 85,863 124,961 231,931 - -Contingent assets 231,635 37,542 7,562 5,248 281,987Contingent liabilities 246,799 37,561 7,672 5,242 297,274Off-book gap ( 15,164 ) ( 19) ( 110 ) 6 ( 15,287 )Net Periodic Gap 70,699 39,079 106,860 ( 231,925 ) ( 15,287 )Cumulative Total Gap P 70,699 P 109,778 P 216,638 (P 15,287 ) P -

- 48 -2010MoreOne to than three More than Morethree months to one year to than threemonths one year three years years TotalResources:Cash and othercash items P 26,660 P - P - P - P 26,660Due from BSP/other banks 150,151 - - - 150,151Loans and otherreceivables 189,156 44,487 80,805 234,170 548,618Trading and investmentsecurities 8,853 12,356 27,874 128,558 177,641Other resources - 10,142 - 45,991 56,133Total Resources 374,820 66,985 108,679 408,719 959,203Liabilities and Equity:Deposit liabilities 178,184 3,636 9,550 571,264 762,634Bills and subordinatednotes payable 35,333 252 25,916 17,732 79,233Other liabilities 4,583 24,671 5,397 136 34,787Total Liabilities 218,100 28,559 40,863 589,132 876,654Equity - - - 82,549 82,549Total Liabilities and Equity 218,100 28,559 40,863 671,681 959,203On-book gap 156,720 38,426 67,816 ( 262,962 ) -Cumulative on-book gap 156,720 195,146 262,962 - -Contingent assets 173,035 55,056 5,347 4,858 238,296Contingent liabilities 176,103 55,347 5,480 4,854 241,784Off-book gap ( 3,068 ) ( 291) ( 133 ) 4 ( 3,488 )Net Periodic Gap 153,652 38,135 67,683 ( 262,958 ) ( 3,488 )Cumulative Total Gap P 153,652 P 191,787 P 259,470 (P 3,488 ) P -4.02 Market RiskBDO Unibank Group’s exposure to market risk, the risk of future loss from changes inthe price of a financial instrument, relates primarily to its holdings in foreign exchangeinstruments, debt securities, equity securities and derivatives. BDO Unibank Groupmanages its risk by identifying, analyzing and measuring relevant or likely market risks.Market Risk Management recommends market risk limits based on relevant activityindicators for approval by BDO Unibank Group’s RMC and BOD.

- 49 -4.02.01 Foreign Exchange RiskBDO Unibank Group manages its exposure to effects of fluctuations in the foreigncurrency exchange rates by maintaining foreign currency exposure within the existingregulatory guidelines and at a level that it believes to be relatively conservative for afinancial institution engaged in that type of business.BDO Unibank Group’s net foreign exchange exposure is computed as its foreigncurrency assets less foreign currency liabilities. BSP regulations impose a cap of 20% ofunimpaired capital or US$50 million, whichever is lower, on the group excess foreignexchange holding of banks in the Philippines. BDO Unibank Group’s foreign exchangeexposure is primarily limited to the day-to-day, over-the-counter buying and selling offoreign exchange in BDO Unibank Group’s branches as well as foreign exchangetrading with corporate accounts and other financial institutions. BDO Unibank Group,being a major market participant in the Philippine Dealing System, may engage inproprietary trading to take advantage of foreign exchange fluctuations.BDO Unibank Group’s foreign exchange exposure during the day is guided by thelimits set forth in BDO Unibank Group’s Risk Management Manual. These limits arewithin the prescribed ceilings mandated by the BSP. At the end of each day, BDOUnibank Group reports to the BSP on its compliance with the mandated foreigncurrency exposure limits. In addition, it also reports to the BSP on the respectiveforeign currency positions of its subsidiaries.The breakdown of the financial assets and liabilities as to foreign and peso-denominatedbalances as of December 31, 2011 and 2010 follows:BDO Unibank Group2011 2010ForeignForeignCurrency Peso Total Currency Peso TotalResources:Cash and other cash itemsand due from BSP P 24 P 157,999 P 158,023 P 12 P 165,143 P 165,155Due from other banks 24,137 582 24,719 21,738 39 21,777Trading and investmentsecurities:At FVTPL 2,071 2,752 4,823 3,743 3,629 7,372AFS securities 66,152 23,773 89,925 48,040 37,634 85,674HTM 77,940 15,730 93,670 84,361 19,880 104,241Loans and other receivables 124,178 549,749 673,927 133,032 432,989 566,021Other resources 2,002 425 2,427 2,194 358 2,552P 296,504 P 751,010 P 1,047,514 P 293,120 P 659,672 P 952,792Liabilities:Deposit liabilities P 206,618 P 651,951 P 858,569 P 217,049 P 565,586 P 782,635Bills payable 44,565 14,909 59,474 39,825 26,036 65,861Subordinated notes payable - 38,255 38,255 - 23,152 23,152Other liabilities 2,455 39,039 41,494 5,080 32,818 37,898P 253,638 P 744,154 P 997,792 P 261,954 P 647,592 P 909,546

- 50 -Parent Bank2011 2010ForeignForeignCurrency Peso Total Currency Peso TotalResources:Cash and other cash itemsand due from BSP P - P 149,094 P 149,094 P - P 156,378 P 156,378Due from other banks 22,741 36 22,777 20,396 37 20,433Trading and investmentsecurities:At FVTPL 1,864 544 2,408 3,203 1,144 4,347AFS securities 63,023 19,908 82,931 44,791 32,934 77,725HTM 73,092 12,650 85,742 79,168 16,401 95,569Loans and other receivables 123,685 530,172 653,857 131,914 416,704 548,618Other resources 2,002 316 2,318 2,194 692 2,886P 286,407 P 712,720 P 999,127 P 281,666 P 624,290 P 905,956Liabilities:Deposit liabilities P 200,000 P 638,748 P 838,748 P 209,524 P 553,110 P 762,634Bills payable 44,565 6,813 51,378 39,605 16,476 56,081Subordinated notes payable - 38,255 38,255 - 23,152 23,152Other liabilities 2,017 32,913 34,930 4,842 27,561 32,4034.02.02 Interest Rate RiskP 246,582 P 716,729 P 963,311 P 253,971 P 620,299 P 874,270BDO Unibank Group prepares gap analysis to measure the sensitivity of its resources,liabilities and off-book items to interest rate fluctuations. The focus of analysis is theimpact of changes in interest rates on accrual or reported earnings. This analysis wouldgive management a glimpse of maturity and re-pricing profile of its interest sensitiveresources and liabilities. An interest rate gap report is prepared by classifying all assetsand liabilities into various time buckets according to contracted maturities or anticipatedrepricing dates, and other applicable behavioral assumptions. The difference in theamount of resources and liabilities maturing or being repriced in any time periodcategory would then give BDO Unibank Group an indication of the extent to which itis exposed to the risk of potential changes in net interest income.

- 51 -The analyses of the groupings of resources, liabilities and off-book items as ofDecember 31, 2011 and 2010 based on the expected interest realization or recognitionare presented below.BDO Unibank Group2011More MoreOne to than three than one Morethree months to year to than five Non-ratemonths one year five years years sensitive TotalResources:Cash and othercash items P - P - P - P - P 33,129 P 33,129Due from BSP/other banks 33,313 - - - 116,300 149,613Loans and otherreceivables 422,094 55,037 66,314 130,482 - 673,927Trading and investmentsecurities 3,979 6,947 21,593 151,071 4,828 188,418Other resources 3 1 9 38 52,211 52,262Total Resources 459,389 61,985 87,916 281,591 206,468 1,097,349Liabilities and Equity:Deposit liabilities 276,466 25,253 22,025 34,437 500,388 858,569Bills and subordinatednotes payable 37,822 16,996 14,086 28,825 - 97,729Other liabilities 674 1,347 701 99 41,268 44,089Total Liabilities 314,962 43,596 36,812 63,361 541,656 1,000,387Equity - - - - 96,962 96,962Total Liabilities and Equity 314,962 43,596 36,812 63,361 638,618 1,097,349On-book gap 144,427 18,389 51,104 218,230 ( 432,150 ) -Cumulative on-book gap 144,427 162,816 213,920 432,150 - -Contingent assets 36,142 1,843 23,273 15,322 - 76,580Contingent liabilities 4,791 1,094 15,955 12,601 - 34,441Off-book gap 31,351 749 7,318 2,720 - 42,139Net Periodic Gap 175,778 19,138 58,422 220,951 ( 432,150 ) 42,139Cumulative Total Gap P 175,778 P 194,916 P 253,338 P 474,289 P 42,139 P -

- 52 -BDO Unibank Group2010More MoreOne to than three than one Morethree months to year to than five Non-ratemonths one year five years years sensitive TotalResources:Cash and othercash items P 26,673 P - P - P - P - P 26,673Due from BSP/other banks 85,204 135 - - 74,920 160,259Loans and otherreceivables 332,314 44,523 83,456 100,169 5,559 566,021Trading and investmentsecurities 11,926 16,911 44,184 122,730 1,536 197,287Other resources 4,152 3,798 1,154 - 41,525 50,629Total Resources 460,269 65,367 128,794 222,899 123,540 1,000,869Liabilities and Equity:Deposit liabilities 246,928 20,272 89,072 2,281 424,082 782,635Bills and subordinatednotes payable 55,492 2,816 29,237 1,468 - 89,013Other liabilities 1,365 3,053 1,385 56 34,630 40,489Total Liabilities 303,785 26,141 119,694 3,805 458,712 912,137Equity - - - - 88,732 88,732Total Liabilities and Equity 303,785 26,141 119,694 3,805 547,444 1,000,869On-book gap 156,484 39,226 9,100 219,094 ( 423,904 ) -Cumulative on-book gap 156,484 195,710 204,810 423,904 - -Contingent assets 35,448 20,471 15,047 6,377 2,420 79,763Contingent liabilities 35,238 20,206 15,228 6,371 1,207 78,250Off-book gap 210 265 ( 181 ) 6 1,213 1,513Net Periodic Gap 156,694 39,491 8,919 219,100 ( 422,691 ) 1,513Cumulative Total Gap P 156,694 P 196,185 P 205,104 P 424,204 P 1,513 P -Parent Bank2011More MoreOne to than three than one Morethree months to year to than five Non-ratemonths one year five years years sensitive TotalResources:Cash and othercash items P - P - P - P - P 33,102 P 33,102Due from BSP/other banks 25,431 - - - 113,338 138,769Loans and otherreceivables 418,656 51,715 58,681 124,805 - 653,857Trading and investmentsecurities 3,565 5,984 18,766 140,452 2,314 171,081Other resources - - - - 58,449 58,449Total Resources(balance carried forward) P 447,652 P 57,699 P 77,447 P 265,257 P 207,203 P 1,055,258

- 53 -Parent Bank2011More MoreOne to than three than one Morethree months to year to than five Non-ratemonths one year five years years sensitive TotalTotal Resources(balance brought forward) P 447,652 P 57,699 P 77,447 P 265,257 P 207,203 P 1,055,258Liabilities and Equity:Deposit liabilities 267,086 21,648 19,321 34,437 496,256 838,748Bills and subordinatednotes payable 31,625 15,849 13,335 28,824 - 89,633Other liabilities 351 685 - - 36,258 37,294Total Liabilities 299,062 38,182 32,656 63,261 532,514 965,675Equity - - - - 89,583 89,583Total Liabilities and Equity 299,062 38,182 32,656 63,261 622,097 1,055,258On-book gap 148,590 19,517 44,791 201,996 ( 414,894 ) -Cumulative on-book gap 148,590 168,107 212,898 414,894 - -Contingent assets 31,451 841 7,119 5,248 - 44,659Contingent liabilities 175 160 - 2,612 - 2,947Off-book gap 31,276 681 7,119 2,636 - 41,712Net Periodic Gap 179,866 20,198 51,910 204,632 ( 414,894 ) 41,712Cumulative Total Gap P 179,866 P 200,064 P 251,974 P 456,606 P 41,712 P -2010More MoreOne to than three than one Morethree months to year to than five Non-ratemonths one year five years years sensitive TotalResources:Cash and othercash items P 26,660 P - P - P - P - P 26,660Due from BSP/other banks 82,323 135 - - 67,693 150,151Loans and otherreceivables 326,196 41,280 76,583 98,910 5,649 548,618Trading and investmentsecurities 8,817 15,576 39,213 114,035 - 177,641Other resources 4,152 3,798 1,154 - 47,029 56,133Total Resources 448,148 60,789 116,950 212,945 120,371 959,203Liabilities and Equity:Deposit liabilities 236,309 18,827 83,176 1,973 422,349 762,634Bills and subordinatednotes payable 46,051 2,790 28,923 1,469 - 79,233Other liabilities 702 2,538 - - 31,547 34,787Total Liabilities 283,062 24,155 112,099 3,442 453,896 876,654Equity - - - - 82,549 82,549Total Liabilities and Equity(balance carried forward) P 283,062 P 24,155 P 112,099 P 3,442 P 536,445 P 959,203

- 54 -Parent Bank2010More MoreOne to than three than one Morethree months to year to than five Non-ratemonths one year five years years sensitive TotalTotal Liabilities and Equity(balance brought forward) P 283,062 P 24,155 P 112,099 P 3,442 P 536,445 P 959,203On-book gap 165,086 36,634 4,851 209,503 ( 416,074 ) -Cumulative on-book gap 165,086 201,720 206,571 416,074 - -Contingent assets 21,587 14,789 6,248 3,957 - 46,581Contingent liabilities 21,428 14,527 6,540 3,954 - 46,449Off-book gap 159 262 ( 292 ) 3 - 132Net Periodic Gap 165,245 36,896 4,559 209,506 ( 416,074 ) 132Cumulative Total Gap P 165,245 P 202,141 P 206,700 P 416,206 P 132 P -BDO Unibank Group’s market risk management limits are generally categorized aslimits on:• Value-at-risk – The RMG computes the value-at-risk benchmarked at a levelwhich is a percentage of projected earnings. BDO Unibank Group uses thevalue at risk (VaR) model to estimate the daily potential loss that BDO UnibankGroup can incur from its trading book, based on a number of assumptions witha confidence level of 99%. The measurement is designed such that exceptionsover dealing limits should only arise in very exceptional circumstances.• Stop loss – The RMG sets the amount of each risk-bearing activity at apercentage of the budgeted annual income for such activity.• Nominal position – The RMG sets the nominal amount to prevent over-trading,excessive concentration, and to limit financial loss supplementing other alreadyestablished limits.• Trading volume – The RMG sets the volume of transactions that any employeemay execute at various levels based on the rank of the personnel making therisk-bearing decision.• Earnings-at-risk – The RMG computes the earnings-at-risk based on apercentage of projected annual net interest income.

- 55 -VaR is one of the key measures in BDO Unibank Group’s management of market risk.VaR is defined as a statistical estimate of the maximum possible loss on a given positionduring a time horizon within a given confidence interval. BDO Unibank Group uses a99% confidence level and a 260-day observation period in VaR calculation. BDOUnibank Group’s VaR limit is established as a percentage of projected earnings and isused to alert senior management whenever the potential losses in BDO UnibankGroup’s portfolios exceed tolerable levels. Because the VaR measure is tied to marketvolatility, it therefore allows management to react quickly and adjust its portfoliostrategies in different market conditions in accordance with its risk philosophy andappetite. The VaR model is validated through back-testing.Although VaR is an important tool for measuring market risk, the assumptions onwhich the model is based do give rise to some limitations, including the following:• A 1-day holding period assumes that it is possible to hedge or dispose ofpositions within that period. This is considered to be a realistic assumption inalmost all cases but may not be the case in situations in which there is severemarket illiquidity for a prolonged period;• A 99% confidence level does not reflect losses that may occur beyond this level.Even within the model used, there is a one percent probability that losses couldexceed the VaR;• VaR is calculated on an end-of-day basis and does not reflect exposures thatmay arise on positions during the trading day;• The use of historical data as a basis for determining the possible range of futureoutcomes may not always cover all possible scenarios, especially those of anexceptional nature; and,• The VaR measure is dependent upon BDO Unibank Group’s position and thevolatility of market prices. The VaR of an unchanged position reduces if themarket price volatility declines and vice-versa.The limitations of the VaR methodology are recognized by supplementing VaR limitswith other position and sensitivity limit structures, including limits to address potentialconcentration risks within each trading portfolio. In addition, the Bank uses a widerange of stress tests to model the financial impact of a variety of exceptional marketscenarios on individual trading portfolios and the Bank’s overall position. Stress VaR isalso performed on all portfolios as a complementary measure of risk. While VaR dealswith risk during times of normality, stress testing is used to measure the potential effectof a crisis or low probability event.

- 56 -A summary of the VaR position of the trading portfolios at December 31 follows:BDO Unibank Group2011 2010VaR Stress VaR VaR Stress VaRForeign currency risk (P 8) (P 80) (P 12) (P 108)Interest rate risk – Peso ( 17) ( 73) ( 136) ( 969)Interest rate risk – USD ( 6) ( 132) ( 14) ( 206)Parent Bank(P 31) (P 285) (P 162) (P 1,283)2011 2010VaR Stress VaR VaR Stress VaRForeign currency risk (P 8) (P 80) (P 11) (P 102)Interest rate risk – Peso ( 8) ( 17) ( 115) ( 779)Interest rate risk – USD ( 2) ( 34) ( 2) ( 42)(P 18) (P 131) (P 128) (P 923)The earnings-at-risk before tax in a rising and declining interest rate scenario forfinancial assets and liabilities repriced during 2011 and 2010 is shown below.BDO Unibank Group2011Change in interest rates (in basis points)-100 +100 -50 +50Change on annualizednet interest income (P 1,515) P 1,515 (P 758) P 758As a percentage of BDOUnibank Group’s netinterest income for 2011 ( 4.5%) 4.5% ( 2.2%) 2.2%Earnings-at-risk P 1,9182010Change in interest rates (in basis points)-100 +100 -50 +50Change on annualizednet interest income (P 1,090) P 1,090 (P 545) P 545As a percentage of BDOUnibank Group’s netinterest income for 2010 ( 3.2%) 3.2% ( 1.6%) 1.6%Earnings-at-risk P 386

- 57 -Parent Bank2011Change in interest rates (in basis points)-100 +100 -50 +50Change on annualizednet interest income (P 1,633) P 1,633 (P 816) P 816As a percentage of ParentBank’s net interestincome for 2011 ( 5.1%) 5.1% ( 2.6%) 2.6%Earnings-at-risk P 1,9182010Change in interest rates (in basis points)-100 +100 -50 +50Change on annualizednet interest income (P 1,365) P 1,365 (P 683) P 683As a percentage of ParentBank’s net interestincome for 2010 ( 4.3%) 4.3% ( 2.2%) 2.2%Earnings-at-risk P 4194.02.03 Price RiskBDO Unibank Group is exposed to equity securities price risk because of investmentsheld by BDO Unibank Group and classified on the statement of financial positioneither as AFS or at FVTPL. BDO Unibank Group is not exposed to commodity pricerisk. To manage its price risk arising from investments in equity securities, BDOUnibank Group diversifies its portfolio. Diversification of the portfolio is done inaccordance with the limits set by BDO Unibank Group.The table below summarizes the impact of increases of the financial assets at FVTPLand AFS securities on BDO Unibank Group’s net profit after tax and equity as ofDecember 31. The analysis is based on the assumption that the correlated equityindices have increased by 3.04% in 2011 and increased by 17.2% in 2010 for securitiesclassified as FVTPL and AFS securities with all other variables held constant and allBDO Unibank Group’s equity instruments moved according to the historicalcorrelation with the index.BDO Unibank GroupImpact onImpact on othernet profit after tax comprehensive incomeincrease (decrease) increase (decrease)2011 2010 2011 2010Financial assets at FVTPL P 2 P 1 P - P -AFS securities - - 115 540P 2 P 1 P 115 P 540

- 58 -Parent BankImpact onImpact on othernet profit after tax comprehensive incomeincrease (decrease) increase (decrease)2011 2010 2011 2010AFS securities P - P - P 38 P 1504.02.04 Credit RiskCredit risk is the risk that the counterparty in a transaction may default and arises fromlending, trade finance, treasury, derivatives and other activities undertaken by theBDO Unibank Group. BDO Unibank Group manages its credit risk and loan portfoliothrough the RMG, which undertakes several functions with respect to credit riskmanagement.The RMG undertakes credit analysis and review to ensure consistency in BDO UnibankGroup’s risk assessment process. The RMG performs risk ratings for corporateaccounts and assists the design and development of scorecards for consumer accounts.It also ensures that BDO Unibank Group’s credit policies and procedures are adequateto meet the demands of the business. The RMG is also responsible for developingprocedures to streamline and expedite the processing of credit applications.The RMG also undertakes portfolio management by reviewing BDO Unibank Group’sloan portfolio, including the portfolio risks associated with particular industry sectors,loan size and maturity, and development of a strategy for BDO Unibank Group toachieve its desired portfolio mix and risk profile.BDO Unibank Group structures the levels of credit risk it undertakes by placing limitson the amount of risk accepted in relation to one borrower, or groups of borrowers,and to industry segments. Such risks are monitored on a revolving basis and subject toan annual or more frequent review.Exposure to credit risk is managed through regular analysis of the ability of borrowersand potential borrowers to meet interest and capital repayment obligations and bychanging these lending limits when appropriate. Exposure to credit risk is also managedin part by obtaining collateral and corporate and personal guarantees.4.02.04.01 Exposure to Credit RiskLoan classification and credit risk rating are an integral part of the BDO UnibankGroup’s management of credit risk. On an annual basis, loans are reviewed, classifiedand rated based on internal and external factors that affect its performance. On aquarterly basis, loan classifications of impaired accounts are assessed and the results areused as basis for the review of loan loss provisions.

- 59 -The BDO Unibank Group’s definition of its loan classification and correspondingcredit risk ratings are as follows:• Current/Unclassified : Grades AAA to B• Watchlisted : Grade B• Loans Especially Mentioned : Grade C• Substandard : Grade D• Doubtful : Grade E• Loss : Grade FOnce an account is Watchlisted or Adversely Classified, the resulting risk rating grade isaligned based on the above classification.(i) UnclassifiedThese are individual credits that do not have a greater-than-normal risk and do notpossess the characteristics of adversely classified loans as to be defined below.These are credits that have the apparent ability to satisfy their obligations in full andtherefore no loss in ultimate collection is anticipated. These are adequately securedby readily marketable collateral or other forms of support security or are supportedby sufficient credit and financial information of favorable nature to assurerepayment as agreed.(ii) WatchlistedSince early identification of troublesome or potential accounts is vital in portfoliomanagement, a “Watchlisted” classification of credit accounts is maintained. Theseaccounts are not adversely classified but they require more than normal attention toprevent these accounts from deteriorating to said category.Past due or individually impaired comprise accounts under the following risk ratings:(iii) Adversely Classifieda. Loans Especially Mentioned (LEM)Accounts classified as “Loans Especially Mentioned” (LEM) are individualcredits that have potential weaknesses particularly on documentation or creditadministration that deserve management’s close attention. These potentialweaknesses, if left uncorrected, may affect the repayment prospects of the loanand thus heighten the credit risk to the BDO Unibank Group.A credit may also be classified as “Loans Especially Mentioned” if there isevidence of weakness in the borrower’s financial condition or credit worthiness,or the credit is subject to an unrealistic repayment program or inadequatesource of funds.

- 60 -b. SubstandardAccounts classified as “Substandard” are individual credits or portions thereof,which appear to involve a substantial and unreasonable degree of risk to theBank because of unfavorable record or unsatisfactory characteristics. Thereexists in such accounts the possibility of future loss to the BDO UnibankGroup unless given closer supervision. Those classified as “Substandard” musthave a well-defined weakness or weaknesses that jeopardize their liquidation.Such well-defined weaknesses may include adverse trends or development offinancial, managerial, economic or political nature, or a significant weakness incollateral.c. DoubtfulAccounts classified as “Doubtful” are individual credits or portions thereofwhich have the weaknesses inherent in those classified as “Substandard”, withthe addedcharacteristics that existing facts, conditions and values make collection orliquidation in full highly improbable and in which substantial loss is probable.Positive and vigorous action is required to avert or minimize losses.d. LossAccounts classified as “Loss” are individual credits or portions thereof whichare considered uncollectible or worthless and of such little value that theircontinuance as bankable assets is not warranted although the loans may havesome recovery or salvage value. The amount of loss is difficult to measure andit is not practical or desirable to defer writing off these basically worthlessassets even though partial recovery may be obtained in the future.In addition to the above, credit portfolio review is another integral part of the BDOUnibank Group’s management of credit risk. This exercise involves the conduct ofperiodical post approval review of individual credits whose main objective is to helpmonitor and maintain sound and healthy risk asset portfolio. Parameters of the creditportfolio review are structured so as to reflect both sides of the risk managementequation such as credit quality and process. This function actuates the philosophy thatcredit quality is derived from sound risk management process. The credit quality offinancial assets is managed by the BDO Unibank Group using internal credit ratings.

- 61 -The following table shows the exposure to credit risk as of December 31, 2011 and2010 for each internal risk grade and the related allowance for impairment:BDO Unibank Group2011Loans andTrading andOther Due from InvestmentReceivables Other Banks SecuritiesCarrying Amount P 673,927 P 24,719 P 181,816Individually ImpairedGrade C: LEM P 10,715 P - P -Grade D: Substandard 3,538 - -Grade E: Doubtful 5,168 - 1,006Grade F: Loss 6,390 - 888Gross amount 25,811 1,894Allowance for impairment ( 12,385 ) - ( 1,894 )Carrying amount 13,426 - -Collectively ImpairedUnclassified 28 - 11,104Grade C: LEM 3,622 - -Grade D: Substandard 2,333 - -Grade E: Doubtful 535 - -Grade F: Loss 6,174 - -Gross amount 12,692 - 11,104Allowance for impairment ( 7,268 ) - ( 147 )Carrying amount 5,424 - 10,957Past Due But Not ImpairedUnclassified 6,187 - -Neither Past Due Nor ImpairedUnclassified 648,890 24,719 170,859Accounts with Negotiated Terms - - -Total Carrying Amount P 673,927 P 24,719 P 181,816

- 62 -BDO Unibank Group2010Loans andTrading andOther Due from InvestmentReceivables Other Banks SecuritiesCarrying Amount P 566,021 P 21,777 P 190,310Individually ImpairedUnclassified P - P - P 2,439Grade C: LEM 2,386 - 219Grade D: Substandard 7,090 - -Grade E: Doubtful 2,412 - 3,314Grade F: Loss 7,852 - 1,253Gross amount 19,740 7,225Allowance for impairment ( 13,622 ) - ( 4,932 )Carrying amount 6,118 - 2,293Collectively ImpairedUnclassified 18 - -Grade C: LEM 3,208 - -Grade D: Substandard 1,993 - -Grade E: Doubtful 638 - -Grade F: Loss 6,509 - -Gross amount 12,366 - -Allowance for impairment ( 7,419 ) - -Carrying amount 4,947 - -Past Due But Not ImpairedUnclassified 5,183 - -Neither Past Due Nor ImpairedUnclassified 549,773 21,777 188,017Accounts with Negotiated Terms - - -Total Carrying Amount P 566,021 P 21,777 P 190,310

- 63 -An aging of past due but not impaired accounts of BDO Unibank Group follows:Loans andOther Receivables2011 2010Below 30 days P 6,107 P 4,96330 to 60 days 17 2361 to 90 days 3 2091 to 180 days 29 10More than 180 days 31 167Parent BankP 6,187 P 5,1832011Loans andTrading andOther Due from InvestmentReceivables Other Banks SecuritiesCarrying Amount P 653,857 P 22,777 P 168,455Individually ImpairedGrade C: LEM P 10,676 - P -Grade D: Substandard 3,433 - -Grade E: Doubtful 4,936 - 1,006Grade F: Loss 6,330 - 888Gross amount 25,375 - 1,894Allowance for impairment ( 12,079 ) - ( 1,894 )Carrying amount 13,296 - -Collectively ImpairedGrade C: LEM 3,622 - -Grade D: Substandard 2,333 - -Grade E: Doubtful 535 - -Grade F: Loss 6,174 - -Gross amount 12,664 - -Allowance for impairment ( 7,264 ) - -Carrying amount 5,400 - -Past Due But Not ImpairedUnclassified 6,176 - -Neither Past Due Nor ImpairedUnclassified 628,985 22,777 168,455Total Carrying Amount P 653,857 P 22,777 P 168,455

- 64 -Parent Bank2010Loans andTrading andOther Due from InvestmentReceivables Other Banks SecuritiesCarrying Amount P 548,618 P 20,433 P 174,141Individually ImpairedUnclassified P - P - P 2,439Grade C: LEM 1,443 - -Grade D: Substandard 6,848 - -Grade E: Doubtful 2,303 - 3,314Grade F: Loss 7,704 - 1,114Gross amount 18,298 - 6,867Allowance for impairment ( 13,286 ) - ( 4,752 )Carrying amount 5,012 - 2,115Collectively ImpairedGrade C: LEM 3,208 - -Grade D: Substandard 1,993 - -Grade E: Doubtful 638 - -Grade F: Loss 6,508 - -Gross amount 12,347 - -Allowance for impairment ( 7,418 ) - -Carrying amount 4,929 - -Past Due But Not ImpairedUnclassified 5,122 - -Neither Past Due Nor ImpairedUnclassified 533,555 20,433 172,026Total Carrying Amount P 548,618 P 20,433 P 174,141An aging of past due but not impaired accounts of the Parent Bank follows:Loans andOther Receivables2011 2010Below 30 days P 6,107 P 4,95330 to 60 days 17 2061 to 90 days 3 1591 to 180 days 18 9More than 180 days 31 125P 6,176 P 5,122

- 65 -Exposure to credit risk also includes unused commercial letters of credits andcommitted credit lines amounting to P33,391 and P111,469, respectively, for 2011 andP30,991 and P89,694, respectively, for 2010 in the BDO Unibank Group financialstatements and P33,391 and P110,148, respectively, for 2011 and P30,991 and P89,618,respectively, for 2011 in the Parent Bank financial statements (see Note 31.03).4.02.04.02 Collateral Held as Security and Other Credit EnhancementsBDO Unibank Group holds collateral against loans and receivables from customers inthe form of mortgage interests over property, other registered securities over assets, andguarantees. Estimates of fair value are based on the value of collateral assessed at thetime of borrowing and are updated periodically, e.g., annually for real estate properties,as provided in the Parent Bank’s Credit Policy Manual. Collateral generally is not heldover due from other banks, interbank loans and investment securities, except whensecurities are held as part of reverse repurchase and securities borrowing activity. BDOUnibank Group holds collateral against loans and other receivables in the form ofproperty, debt securities, equities and others.Estimate of the fair value of collateral and other security enhancements held against thefollowing loans and other receivables risk groupings as of December 31 follows:BDO Unibank Group Parent Bank2011 2010 2011 2010Individually impairedProperty P 16,358 P 20,821 P 16,290 P 20,678Equity 709 118 398 -Others 19,968 6,776 19,894 6,37237,035 27,715 36,582 27,050Collectively impairedProperty 5,069 4,636 5,069 4,636Others 1,262 200 1,262 2006,331 4,836 6,331 4,836Past due but not impairedProperty 5,300 6,574 5,299 6,573Equity 1 1 - -Others 2,755 863 2,746 8548,056 7,438 8,045 7,427Neither past due nor impairedProperty 264,652 267,958 264,161 267,148Debt security 1,314 1,027 1,203 899Equity 96,380 5,472 87,458 -Others 397,615 130,754 391,625 123,002759,961 405,211 744,447 391,049P 811,383 P 445,200 P 795,405 P 430,362

- 66 -4.02.04.03 Concentrations of Credit RiskThe BDO Unibank Group monitors concentrations of credit risk by sector and bygeographic location. An analysis of concentrations of credit risk (gross of allowance) atthe reporting date is shown below.BDO Unibank Group2011 2010ReceivablesReceivablesCash and Cash from Investment Cash and Cash from InvestmentEquivalents Customers Securities Equivalents Customers SecuritiesConcentration by sector:Financial intermediaries P 182,742 P 84,668 P 124,158 P 186,932 P 79,058 P 137,745Wholesale and retail trade - 105,905 1 - 76,592 541Manufacturing - 101,468 15,753 - 90,555 17,151Real estate, renting andother related activities - 77,624 5,388 - 55,842 4,320Other community, socialand personal activities - 58,315 - - 39,474 -Transportation andcommunication - 51,378 7,671 - 36,295 6,946Agriculture, fishing andforestry - 8,037 - 9,592 717Others - 182,751 30,886 154,104 27,822P 182,742 P 670,146 P 183,857 P 186,932 P 541,512 P 195,242Concentration by location:Philippines P 159,982 P 650,516 P 150,939 P 166,404 P 535,335 P 158,756Others 22,760 19,630 32,918 20,528 6,177 36,486P 182,742 P 670,146 P 183,857 P 186,932 P 541,512 P 195,242Parent Bank2011 2010ReceivablesReceivablesCash and Cash from Investment Cash and Cash from InvestmentEquivalents Customers Securities Equivalents Customers SecuritiesConcentration by sector:Financial intermediaries P 171,871 P 86,169 P 110,700 P 176,811 P 78,142 P 123,773Wholesale and retail trade - 104,115 1 - 75,211 541Manufacturing - 97,730 15,746 - 86,861 15,546Real estate, renting andother related activities - 75,364 5,370 - 53,887 4,113Other community, socialand personal activities - 55,560 - - 39,291 -Transportation andcommunication - 48,203 7,671 - 33,845 6,946Agriculture, fishing andforestry - 7,536 - 8,254 717Others - 181,690 30,861 - 151,462 27,257P 171,871 P 656,367 P 170,349 P 176,811 P 526,953 P 178,893Concentration by location:Philippines P 150,543 P 636,737 P 138,891 P 157,949 P 520,776 P 143,680Others 21,328 19,630 31,458 18,862 6,177 35,213P 171,871 P 656,367 P 170,349 P 176,811 P 526,953 P 178,893

- 67 -4.03 Operational RiskOperational risk is the risk of loss due to BDO Unibank Group’s:• Failure to comply with defined operational procedures;• Inability to address fraud committed internally or externally;• Inability to handle system failures; and,• Inability to cope with the impact of external events.BDO Unibank Group manages its operational risks by instituting policies to minimizeits expected losses, allocating capital for the unexpected losses, and having insuranceand/or a business continuity plan to prepare for catastrophic losses.FrameworkTrue to its commitment to sound management and corporate governance, BDOUnibank Group considers operational risk management as a critical element in theconduct of its business. Under BDO Unibank Group’s Operational RiskManagement (ORM) framework, the BOD has the ultimate responsibility forproviding leadership in the management of risk in BDO Unibank Group. In 2011,the Group adopted a process-driven approach whereby it focuses on mappingoperational risks along critical/key business processes. The business process owners,as risk owners, are responsible for identifying, assessing and limiting the impact of riskin their businesses/operations. The RMG provides the common risk language andmanagement tools across BDO Unibank Group as well as monitors theimplementation of the ORM framework and policies.Alongside the shift to the process-driven ORM approach in 2011, the Group alsoadopted the periodic Risk and Control Self-Assessment (RCSA) process so thatbusiness process owners could document both their operational risks and controlmechanisms they have put in place to manage those risks. This ORM tool allows theGroup to identify risks the business/operation faces, assess the severity of those risks,evaluate the adequacy of key controls associated to the identified risks, and takeproactive action to address any deficiencies identified.The BDO Unibank Group also continues to use Key Risk Indicators (KRI) as alertsfor operational risk vulnerabilities.The BDO Unibank Group continues to expand its operational loss database to covermore loss event categories as defined by Basel II.Operational risks arising from health, safety and environmental issues areappropriately managed through policies and measures that are integrated into theBDO Unibank Group’s day-to-day operations. These include EnvironmentalConsciousness, Occupational Health and Safety, and Community Health and Safety.

- 68 -5. SEGMENT REPORTINGThe BDO Unibank Group’s main operating businesses are organized and managedseparately according to the nature of services provided and the different markets served,with each segment representing a strategic business unit. These are also the basis ofBDO Unibank Group in reporting to its chief operating decision-maker for its strategicdecision-making activities.Management currently identifies the BDO Unibank Group’s three service lines asprimary operating segments. In addition, minor operating segments, for whichquantitative thresholds have not been met, as described in PFRS 8, Operating Segments,are combined below as Others.(a) Commercial banking – handles the entire lending (corporate and consumer), tradefinancing and cash management services for corporate and retail customers;(b) Investment banking – provides services to corporate clients outside the traditionalloan and deposit products. These services include loan syndications, underwritingand placing of debt and equity securities, and financial advisory services;(c) Private banking – provides traditional and non-traditional investment andstructured products to high net worth individuals and institutional accounts; and,(d) Others – includes asset management, insurance brokerage, realty management,leasing, financing, remittance, accounting service, credit card service and computerservice, none of which individually constitutes a separate reportable segment.These segments are the basis on which BDO Unibank Group reports its segmentinformation. Transactions between the segments are on normal commercial terms andconditions. Inter-segment transactions are eliminated in consolidation.Funds are ordinarily allocated between segments, resulting in funding cost transfersdisclosed in operating income. Interest charged for these funds is based on BDOUnibank Group’s cost of capital. There are no other material items of income orexpense between the segments.Segment assets and liabilities comprise operating assets and liabilities including itemssuch as taxation and borrowings.Segment revenues and expenses that are directly attributable to primary operatingsegment and the relevant portions of BDO Unibank Group’s revenues and expensesthat can be allocated to that operating segment are accordingly reflected as revenues andexpenses of that operating segment. Revenue sharing agreements are used to allocateexternal customer revenues to a segment on a reasonable basis.

- 69 -Segment information (by service lines) as of and for the years ended December 31, 2011and 2010 follows:December 31, 2011Statements of IncomeCommercial Investment PrivateBanking Banking Banking Others Eliminations GroupTotal interest incomeExternal P 47,972 P 56 P 1,006 P 1,433 P - P 50,467Inter-segment 115 9 51 18 ( 193 ) -48,087 65 1,057 1,451 ( 193 ) 50,467Total interest expenseExternal 16,013 - 385 290 - 16,688Inter-segment 26 29 1 87 ( 143 ) -16,039 29 386 377 ( 143 ) 16,688Net interest income 32,048 36 671 1,074 ( 50) 33,779Other operating incomeInvestment banking fees - 730 - - - 730Others 17,976 172 650 2,034 ( 663 ) 20,16917,976 902 650 2,034 ( 663 ) 20,899Other operating expensesDepreciation andamortization 2,502 4 22 322 - 2,850Impairment losses 5,945 - 30 169 - 6,144Others 31,375 320 650 1,197 ( 76 ) 33,46639,822 324 702 1,688 ( 76 ) 42,460Profit before tax 10,202 614 619 1,420 ( 637 ) 12,218Tax expense 1,212 176 73 169 - 1,630Net profit P 8,990 P 438 P 546 P 1,251 ( P 637 ) P 10,588Statements of Financial PositionTotal resourcesSegment assets P 1,050,750 P 4,091 P 28,160 P 25,377 ( P 16,958 ) P 1,091,420Intangible assets 433 10 - 1 - 444Deferred tax assets(liabilities) 5,586 ( 30 ) 37 ( 108 ) - 5,485P 1,056,769 P 4,071 P 28,197 P 25,270 ( P 16,958 ) P 1,097,349Total liabilities P 965,678 P 2,462 P 23,153 P 14,440 ( P 5,346 ) P 1,000,387Other segment informationCapital expenditures P 2,915 P 1 P 53 P 409 P - P 3,378Investment in associatesunder equity method 4,678 68 - - - 4,746Share in the profitof associates 681 - - - - 681

- 70 -Commercial Investment PrivateBanking Banking Banking Others Eliminations GroupDecember 31, 2010Statements of IncomeTotal interest incomeExternal P 46,764 P 22 P 1,267 P 1,877 P - P 49,930Inter-segment 1 13 - 20 ( 34 ) -46,765 35 1,267 1,897 ( 34 ) 49,930Total interest expenseExternal 14,998 - 480 294 - 15,772Inter-segment 32 1 1 - ( 34 ) -15,030 1 481 294 ( 34 ) 15,772Net interest income 31,735 34 786 1,603 - 34,158Other operating incomeInvestment banking fees - 392 - - - 392Others 16,429 188 681 1,130 ( 979 ) 17,44916,429 580 681 1,130 ( 979 ) 17,841Other operating expensesDepreciation andamortization 2,004 4 24 848 - 2,880Impairment losses 6,376 - 58 316 ( 52 ) 6,698Others 30,036 237 653 1,066 ( 83 ) 31,90938,416 241 735 2,230 ( 135 ) 41,487Profit before tax 9,748 373 732 503 ( 844 ) 10,512Tax expense 1,310 82 84 162 ( 7 ) 1,631Net profit P 8,438 P 291 P 648 P 341 ( P 837 ) P 8,881Statements of Financial PositionTotal resourcesSegment assets P 954,185 P 2,148 P 30,590 P 22,701 ( P 15,155 ) P 994,469Intangible assets 805 10 1 - - 816Deferred tax assets(liabilities) 5,687 ( 32 ) 29 ( 100 ) - 5,584P 960,677 P 2,126 P 30,620 P 22,601 ( P 15,155 ) P 1,000,869Total liabilities P 876,657 P 934 P 26,149 P 15,973 ( P 7,576 ) P 912,137Other segment informationCapital expenditures P 2,493 P 2 P 8 P 285 P - P 2,788Investment in associatesunder equity method 3,858 68 - - - 3,926Share in the profitof associates 16 - - - - 16

- 71 -6. FINANCIAL ASSETS AND LIABILITIESThese consist of the following:BDO Unibank Group2011ClassesAt Amortized At Fair Carrying FairCost Value Amount ValueFinancial AssetsCash and other cash items P - P 33,129 P 33,129 P 33,129Due from BSP 124,894 - 124,894 124,936Due from other banks 24,719 - 24,719 24,719Financial assets at FVTPL - 4,823 4,823 4,823AFS securities - 89,925 89,925 89,925HTM investments 93,670 - 93,670 106,032Loans and other receivables 673,927 - 673,927 680,546Other resources 2,427 - 2,427 2,427P 919,637 P 127,877 P 1,047,514 P 1,066,537At Amortized Carrying FairCost Amount ValueFinancial LiabilitiesDeposit liabilities P 858,569 P 858,569 P 861,289Bills payable 59,474 59,474 59,495Subordinated notes payable 38,255 38,255 41,549Other liabilities 41,494 41,494 41,494P 997,792 P 997,792 P 1,003,8272010ClassesAt Amortized At Fair Carrying FairCost Value Amount ValueFinancial AssetsCash and other cash items P - P 26,673 P 26,673 P 26,673Due from BSP 138,482 - 138,482 138,483Due from other banks 21,777 - 21,777 21,777Financial assets at FVTPL - 7,372 7,372 7,372AFS securities - 85,674 85,674 85,674HTM investments 104,241 - 104,241 115,245Loans and other receivables 566,021 - 566,021 567,808Other resources 2,552 - 2,552 2,552P 833,073 P 119,719 P 952,792 P 965,584

- 72 -At Amortized Carrying FairCost Amount ValueFinancial LiabilitiesDeposit liabilities P 782,635 P 782,635 P 784,917Bills payable 65,861 65,861 65,378Subordinated notes payable 23,152 23,152 25,120Other liabilities 37,898 37,898 37,898Parent BankP 909,546 P 909,546 P 913,3132011ClassesAt Amortized At Fair Carrying FairCost Value Amount ValueFinancial AssetsCash and other cash items P - P 33,102 P 33,102 P 33,102Due from BSP 115,992 - 115,992 116,034Due from other banks 22,777 - 22,777 22,777Financial assets at FVTPL - 2,408 2,408 2,408AFS securities - 82,931 82,931 82,931HTM investments 85,742 - 85,742 97,761Loans and other receivables 653,857 - 653,857 663,057Other resources 2,318 - 2,318 2,318P 880,686 P 118,441 P 999,127 P 1,020,388At Amortized Carrying FairCost Amount ValueFinancial LiabilitiesDeposit liabilities P 838,748 P 838,748 P 841,447Bills payable 51,378 51,378 51,460Subordinated notes payable 38,255 38,255 41,549Other liabilities 34,930 34,930 34,930P 963,311 P 963,311 P 969,3862010ClassesAt Amortized At Fair Carrying FairCost Value Amount ValueFinancial AssetsCash and other cash items P - P 26,660 P 26,660 P 26,660Due from BSP 129,718 - 129,718 129,719Due from other banks 20,433 - 20,433 20,433Financial assets at FVTPL - 4,347 4,347 4,347AFS securities - 77,725 77,725 77,725HTM investments 95,569 - 95,569 106,175Loans and other receivables 548,618 - 548,618 554,063Other resources 2,886 - 2,886 2,886P 797,224 P 108,732 P 905,956 P 922,008

- 73 -At Amortized Carrying FairCost Amount ValueFinancial LiabilitiesDeposit liabilities P 762,634 P 762,634 P 765,289Bills payable 56,081 56,081 55,679Subordinated notes payable 23,152 23,152 25,120Other liabilities 32,403 32,403 32,403P 874,270 P 874,270 P 878,4917. CASH AND BALANCES WITH THE BSPThese accounts are composed of the following:BDO Unibank Group Parent Bank2011 2010 2011 2010Cash and other cash items P 33,129 P 26,673 P 33,102 P 26,660Due from BSP:Mandatory reserves 30,566 70,237 28,006 68,166Other than mandatoryreserves 94,328 68,245 87,986 61,552124,894 138,482 115,992 129,718P 158,023 P 165,155 P 149,094 P 156,378Mandatory reserves represent the balance of the deposit account maintained with theBSP to meet reserve requirements and to serve as clearing account for interbank claims.Due from BSP bears annual interest rates of 0.1% to 4.8% in 2011 and 3.2% to 4.2% in2010, except for the amounts within the required reserve as determined by BSP. Totalinterest income earned amounted to P2,025, P2,714 and P1,988 in 2011, 2010 and 2009,respectively, in the BDO Unibank Group financial statements and P1,866, P2,631 andP1,941 in 2011, 2010 and 2009, respectively, in the Parent Bank’s financial statements(see Note 20).Cash and other cash items and balances with the BSP are included in cash and cashequivalents for statements of cash flows purposes.Under Section 254 of the Manual of Regulations for Banks (MORB), a bank is requiredto maintain at least 25 percent of its statutory reserve requirements in the form ofdeposit with the BSP as among the allowable instruments for reserve cover. Section254.1 of the MORB further provides that such deposit account with the BSP is notconsidered as a regular current account as BSP checks for drawings against such depositshall be limited to: (i) settlement of obligations with the BSP; and, (ii) withdrawals tomeet cash requirements.

- 74 -8. DUE FROM OTHER BANKSThe balance of this account represents deposits with the following:BDO Unibank Group Parent Bank2011 2010 2011 2010Foreign banks P 22,601 P 20,144 P 21,311 P 18,848Local banks 2,118 1,633 1,466 1,585The breakdown of this account as to currency follows:P 24,719 P 21,777 P 22,777 P 20,433BDO Unibank Group Parent Bank2011 2010 2011 2010US dollar P 20,875 P 18,051 P 19,775 P 17,582Other currencies 3,262 3,687 2,966 2,814Peso 582 39 36 37P 24,719 P 21,777 P 22,777 P 20,433Annual interest rates on these deposits range from 0% to 4.6% in 2011, 0% to 4.1% in2010, and 0% to 10% in 2009 in the BDO Unibank Group financial statements and 0%to 2.6% in 2011, 0% to 2.6% in 2010, and 0% to 5% in 2009 in the Parent Bank’sfinancial statements.Due from other banks are included in cash and cash equivalents for statements of cashflows purposes.9. TRADING AND INVESTMENT SECURITIESThe components of this account are shown below.BDO Unibank GroupParent Bank2011 2010 2011 2010Financial assets at FVTPL P 4,823 P 7,372 P 2,408 P 4,347AFS securities 89,925 85,674 82,931 77,725HTM investments 93,670 104,241 85,742 95,569P 188,418 P 197,287 P 171,081 P 177,641

- 75 -9.01 Financial Assets at FVTPLThis account is composed of the following:BDO Unibank Group Parent Bank2011 2010 2011 2010Derivative financial assets P 3,739 P 5,110 P 1,890 P 3,379Government bonds 949 1,640 518 866Other debt securities 58 610 - 1024,746 7,360 2,408 4,347Equity securities - quoted 77 12 - -P 4,823 P 7,372 P 2,408 P 4,347All financial assets at FVTPL are held for trading. For government bonds and otherdebt securities, the amounts presented have been determined directly by reference topublished prices quoted in an active market. On the other hand, the fair value ofderivative financial assets is determined through valuation technique using net presentvalue of future cash flows method. BDO Unibank Group recognized total fair valuegain (loss) on financial assets at FVTPL amounting to P378, (P131) and P1,814 in 2011,2010 and 2009, respectively, in the BDO Unibank Group financial statements andP359, (P270) and P1,778 in 2011, 2010 and 2009, respectively, in the Parent Bankfinancial statements. These are included as part of Trading gain – net under OtherOperating Income in the statements of income (see Note 22).Foreign currency-denominated securities amounted to P2,071 and P3,743 as ofDecember 31, 2011 and 2010, respectively, in the BDO Unibank Group financialstatements and P1,864 and P3,203 as of December 31, 2011 and 2010, respectively, inthe Parent Bank financial statements.Derivative instruments used by BDO Unibank Group include foreign currency andinterest rate forwards/futures, foreign currency and interest rate swaps. Also in 2007,derivatives included embedded credit default swaps bifurcated from CLNs or creditlinkeddeposits (CLDs) (which were reclassified to Loans and Other Receivablestogether with their host contracts in 2008). Foreign currency and interest rateforwards/futures represent commitments to purchase/sell or are contractual obligationsto receive or pay a new amount based on changes in currency rates or interest rates on afuture date at a specified price. Foreign currency and interest rate swaps arecommitments to exchange one set of cash flows for another. The credit default swapsrepresent commitment of the counterparty to swap the note and deposit with highyielding securities upon the occurrence of the reference event by the reference entity.

- 76 -The aggregate contractual or notional amount of derivative financial instruments andthe total fair values of derivative financial assets and liabilities are shown below.BDO Unibank Group2011 2010Notional Fair Values Notional Fair ValuesAmount Assets Liabilities Amount Assets LiabilitiesCurrency forwards/futures P 262,018 P 1,617 P 1,765 P 272,670 P 2,110 P 2,200Currency swaps 78,474 1,899 1,320 70,016 2,474 1,899Interest rate swaps 17,415 183 229 15,490 475 575Credit default swaps 2,195 14 5 2,077 1 2Others - 26 1 1,320 50 39Parent BankP 360,102 P 3,739 P 3,320 P 361,573 P 5,110 P 4,7152011 2010Notional Fair Values Notional Fair ValuesAmount Assets Liabilities Amount Assets LiabilitiesCurrency forwards/futures P 261,585 P 1,020 P 1,165 P 217,077 P 1,509 P 1,564Currency swaps 26,417 649 496 33,565 1,373 1,059Interest rate swaps 16,088 181 210 10,961 448 504Credit default swaps 2,195 14 5 440 - 2Others - 26 1 1,320 49 39P 306,285 P 1,890 P 1,877 P 263,363 P 3,379 P 3,168In 2008, BDO Unibank Group reclassified certain equity securities from FVTPL toAFS and debt securities and embedded derivatives of CLNs from FVTPL to HTM andLoans and Other Receivables, respectively (see Note 9.04).Derivatives embedded in CLNs and CLDs amounting to P183 and P70 in BDOUnibank Group and Parent Bank financial statements, respectively, as of reclassificationdate, were reclassified to Loans and Other Receivables together with their related hostcontracts (see Note 9.04).A CLN is an instrument under which the issuer issues a note to the investor wherebyboth parties agree that upon the occurrence of a credit event in relation to the referenceentity, the CLN accelerates and the investor is delivered the defaulted asset of thereference entity, or paid a net settlement amount equal to the market price of thedefaulted asset or reference obligation adjusted for any transaction unwind costs.

- 77 -9.02 AFS SecuritiesAFS securities consist of the following:BDO Unibank Group Parent BankNote 2011 2010 2011 2010Government debtsecurities P 55,267 P 52,580 P 52,583 P 49,958Other debt securities:Quoted 29,508 30,366 28,951 28,364Not quoted 253 243 253 243Equity securities:Quoted 5,555 6,197 1,877 2,960Not quoted 2,292 2,099 925 72692,875 91,485 84,589 82,251Allowance forimpairment 14 ( 2,950) ( 5,811) ( 1,658) ( 4,526 )As to currency, this account is composed of the following:P 89,925 P 85,674 P 82,931 P 77,725BDO Unibank Group Parent Bank2011 2010 2011 2010Foreign currencies P 66,152 P 48,040 P 63,023 P 44,791Peso 23,773 37,634 19,908 32,934P 89,925 P 85,674 P 82,931 P 77,725Government debt securities issued by the ROP and foreign sovereigns and other debtsecurities issued by resident and non-resident corporations earn interest at annual ratesranging from 0% to 13% in 2011, 0% to 12% in 2010, and 0% to 13% in 2009 both inthe BDO Unibank Group and Parent Bank financial statements.As of December 31, 2011 and 2010, other debt securities also include investments inforeign financial institutions under bankruptcy amounting to P1,229 and P4,016,respectively, with allowance for impairment on such investments amounting to P1,229and P4,016, respectively, in the Parent Bank financial statements (see Note 10 for therelated interbank loan receivables from these financial institutions). In 2011, the ParentBank disposed fully impaired debt securities issued by a foreign financial institutionunder bankruptcy amounting to P2,295. The sale resulted to a gain of P640 and ispresented as part of Trading gain – net under Other Operating Income and Expenses(see Note 22). Also, in 2011, collateralized debt obligations amounting to P477, withfull allowance for impairment losses, in the Parent bank financial statements wereredeemed at zero.Unquoted equity securities consist of preferred shares and common shares of variousunlisted local companies.

- 78 -The fair values of government debt and quoted AFS securities (other debt securities andequity shares) have been determined directly by reference to published prices generatedin an active market. For unquoted AFS securities, the fair value is not reliablydeterminable either by reference to similar financial instruments or through valuationtechnique using the net present value of the future cash flows. Accordingly, unquotedAFS securities are carried at cost.Changes in AFS securities are presented below.BDO Unibank GroupParent Bank2011 2010 2011 2010Balance at beginning of year P 85,674 P 47,033 P 77,725 P 39,327Additions 400,320 487,648 397,304 485,044Disposals ( 399,954) ( 450,925) ( 396,247 ) ( 447,710 )Foreign currency revaluation 178 ( 1,803) 185 ( 1,793 )Unrealized fair value gains 846 3,020 1,096 1,951Impairment recovery - net 2,861 701 2,868 9069.03 Held-to-Maturity InvestmentsThe balance of this account is composed of the following:P 89,925 P 85,674 P 82,931 P 77,725BDO Unibank Group Parent BankNote 2011 2010 2011 2010Government debtsecurities P 83,240 P 90,514 P 75,312 P 82,202Other debt securities:Listed 9,625 13,035 9,625 12,681Not quoted 1,217 1,145 1,217 1,09894,082 104,694 86,154 95,981Allowance forimpairment 14 ( 412) ( 453) ( 412) ( 412 )P 93,670 P 104,241 P 85,742 P 95,569On October 6, 2010, the BDO Unibank Group participated in the Global BondExchange offered by the ROP wherein certain U.S. dollar denominated governmentbonds due between 2011 to 2016 were exchanged by the Parent Bank for newly issuedU.S. dollar denominated global bonds due 2021. The BDO Unibank Group and ParentBank exchanged Republic of Philippine (ROP) bonds with face value ofUS$111.5 million and US$75.4 million, respectively. The fair value of the Benchmarkbonds received by BDO Unibank Group and Parent Bank amounted to US$134.6million and US$94.1 million, respectively, resulting to a gain of US$18.8 million or P824and US$16.6 million or P728, respectively, to be deferred and amortized over theremaining life of the Benchmark bonds. The total amount of gain amortized by BDOUnibank Group and Parent Bank amounted to US$1.73 million or P73 and US$1.47million or P64 in 2011, respectively, and US$0.41 million or P18 and US$0.36 million orP16 in 2010, respectively, shown as part of Trading Gains – net presented under OtherOperating Income in the statements of income.

- 79 -Unamortized deferred gain from the transaction, which is included as part of UnearnedIncome under Other Liabilities account, amounted to P733 and P806 as ofDecember 31, 2011 and 2010, respectively, in the BDO Unibank Group financialstatements and P648 and P712 as of December 31, 2011 and 2010, respectively, in theParent Bank statements of financial position (see Note 18). As of December 31, 2011and 2010, outstanding balance of the Benchmark bonds of BDO Unibank Groupamounted to P5,863 and P5,860, respectively, and of the Parent Bank amounted toP4,128 and P4,125, respectively.As mentioned in Note 25, certain government debt securities are deposited with the BSP.As to currency, HTM investments consist of the following:BDO Unibank GroupParent Bank2011 2010 2011 2010Foreign currencies P 77,940 P 84,361 P 73,092 P 79,168Peso 15,730 19,880 12,650 16,401P 93,670 P 104,241 P 85,742 P 95,569The maturity profile of HTM investments is presented below.BDO Unibank GroupParent Bank2011 2010 2011 2010Less than one year P 10,946 P 16,334 P 9,809 P 14,320One to five years 32,080 25,206 27,075 22,397Beyond five years 50,644 62,701 48,858 58,852Changes in the HTM account are summarized below.P 93,670 P 104,241 P 85,742 P 95,569BDO Unibank Group Parent Bank2011 2010 2011 2010Balance at beginning of year P 104,241 P 116,177 P 95,569 P 107,440Additions 12,205 25,446 10,589 22,632Maturities ( 22,746) ( 32,656) ( 20,344) ( 30,171 )Foreign currency revaluation ( 72) ( 4,653) ( 72) ( 4,300 )Impairment loss (recovery) - net 42 ( 73) - ( 32)The fair values of the HTM investments follow:P 93,670 P 104,241 P 85,742 P 95,569BDO Unibank GroupParent Bank2011 2010 2011 2010Government debt securities P 94,799 P 100,405 P 86,528 P 91,667Other debt securities 11,233 14,840 11,233 14,508P 106,032 P 115,245 P 97,761 P 106,175

- 80 -The fair values are determined through valuation techniques by determining the netpresent value of estimated future cash flows. Annual interest rates on these investmentsrange from 0% to 14% in 2011, 0% to 14% in 2010 and 0% to 11.4% in 2009 both inthe BDO Unibank Group and the Parent Bank financial statements.9.04 Reclassification of Investment SecuritiesBDO Unibank Group recognized the deterioration of the world’s financial markets thatoccurred in the third quarter of 2008. The enormity and extent of the global creditcrisis was crystallized by the substantial government programs instituted by majoreconomies in response to the crisis, including temporary liquidity facilities, outrightpurchase of commercial papers and mortgaged-backed securities, guarantee of newunsecured debt issued by banks and purchase of equity stakes in financial institutions.In 2008, BDO Unibank Group chose to avail of the regulatory relief on specificfinancial assets granted by the BSP under the governing provisions of Circular No. 628,which permitted the reclassification of certain financial assets to help banks cope withthe adverse impact of the global financial crisis.Presented below are the details of the reclassifications made by BDO Unibank Groupin 2008 and the related details at the end of 2011 and 2010.BDO Unibank GroupAtReclassification DateCarrying FairValue ValueReclassification from FVTPL to HTM P 6,297 P 6,297Reclassification of debt securities from AFS to HTM 25,540 25,540Reclassification of embedded derivatives of CLNsfrom FVTPL to Loans and Other Receivables ( 183 ) ( 183 )Reclassification of CLNs from AFS to Loans and Other Receivables 18,520 18,520Balances atDecember 31, 2011 December 31, 2010Carrying Fair Carrying FairValue Value Value ValueReclassification from FVTPL to HTM P 1,547 P 1,960 P 1,635 P 1,885Reclassification of debt securitiesfrom AFS to HTM 17,960 20,768 20,184 22,696Reclassification of CLNs from AFSto Loans and Other Receivables 7,287 7,959 13,037 14,224Parent BankAtReclassification DateCarrying FairValue ValueReclassification from FVTPL to HTM P 6,297 P 6,297Reclassification of debt securities from AFS to HTM 22,474 22,474Reclassification of embedded derivatives of CLNsfrom FVTPL to Loans and Other Receivables ( 70 ) ( 70 )Reclassification of CLNs from AFS to Loans and Other Receivables 14,096 14,096

- 81 -Balances atDecember 31, 2011 December 31, 2010Carrying Fair Carrying FairValue Value Value ValueReclassification from FVTPL to HTM P 1,547 P 1,960 P 1,635 P 1,885Reclassification of debt securitiesfrom AFS to HTM 16,107 18,743 18,248 20,539Reclassification of CLNs from AFSto Loans and Other Receivables 7,287 7,959 12,159 13,351Estimated cash flows on instruments reclassified from FVTPL to HTM at the date ofreclassification amounted to P9,174 both for BDO Unibank Group and Parent Bank.On the other hand, estimated cash flows on CLNs reclassified from AFS to Loans andOther Receivables at the date of reclassification amounted to P22,591 and P18,728 forBDO Unibank Group and Parent Bank, respectively.Reclassification from FVTPL to HTMTotal trading losses on FVTPL reclassified to HTM both in the BDO Unibank Groupand Parent Bank financial statements which were recognized in profit or loss amountedtoP199 in 2008. On the other hand, the net trading gain (loss) that would have beenrecognized in the period following the reclassification during 2011, 2010 and 2009 if thereclassifications had not been made would have amounted to P151, P84 and P396,respectively, for both BDO Unibank Group and Parent Bank. Effective interest ratesof FVTPL reclassified to HTM range from 7.0% to 8.6% in 2011, 2010 and 2009 in theBDO Unibank Group and Parent Bank financial statements. Amortization of premiumdue to change in effective interest rates recognized as part of interest income in profitor loss on reclassified securities amounted to (P9) in both the BDO Unibank Groupand Parent Bank financial statements in 2011 and 2010. No impairment recovery orloss was booked on reclassified instruments in both the BDO Unibank Group andParent Bank financial statements in 2011 and 2010.Reclassification of Debt Securities from AFS to HTMUnrealized fair value losses in equity of debt securities reclassified from AFS to HTM atreclassification dates amounted to P102 and P46 in the BDO Unibank Group andParent Bank financial statements, respectively, in 2008. The net trading gain (loss) thatwould have been recognized in other comprehensive income during the periodfollowing the reclassification if the reclassifications had not been made would haveamounted to P635, P1,395, and 3,395 in 2011, 2010 and 2009, respectively, in the BDOUnibank Group financial statement and P463, P1,175 and P3,190 in 2011, 2010 and2009, respectively, in the Parent Bank financial statement. Trading gain (loss) bookedon the redemption of the reclassified securities both in BDO Unibank Group andParent Bank financial statements are (P5) in 2011 and P98 in 2010. On the other hand,amortization of fair value loss previously recognized in other comprehensive income toprofit or loss due to reclassification amounted to P71 and P30 in the BDO UnibankGroup financial statement and P62 and P20 in the Parent Bank financial statements in2011 and 2010, respectively.

- 82 -Reclassification of CLNs from AFS to Loans and Other ReceivablesUnrealized fair value losses in equity of CLNs linked to ROP bonds reclassified fromAFS to Loans and Other Receivables at reclassification dates amounted to P627 andP624 in the BDO Unibank Group and Parent Bank financial statements, respectively, in2008. The effective interest rates on reclassified investments range from 5.44% to12.54%, 1.64% to 12.55%, and 4.3% to 12.55% in the BDO Unibank Group financialstatements, in 2011, 2010 and 2009, respectively, and 5.44% to 12.54% in 2011 and2.78% to 12.55% in 2010 and 1.1% to 12.55% in 2009 in the Parent Bank financialstatements. Interest income recognized in profit or loss on reclassified securitiesamounted to P178 and P254 in 2011 and 2010, respectively, in the BDO UnibankGroup financial statements and P167 and P125 in 2011 and 2010, respectively, in theParent Bank financial statements.Additional unrealized fair value gain (losses) recognized in other comprehensive incomein the period following the reclassification had the CLNs not been reclassified to Loansand Other Receivables would have amounted to (P371), P444 and P643 in 2011, 2010and 2009, respectively, in the BDO Unibank Group financial statements and (P371),P469 and P623 in 2011, 2010 and 2009, respectively, in the Parent Bank financialstatements. Additional trading gain (loss) to be recognized in profit or loss had theembedded derivatives not been reclassified totaled to (P208), P152 and P1,597 in 2011,2010 and 2009, respectively, in the BDO Unibank Group financial statements and(P202), P148 and P1,274 in 2011, 2010 and 2009, respectively, in the Parent Bankfinancial statements.In 2011, the BDO Unibank Group unwound the outstanding CLDs and CLNs withcertain financial institutions amounting to P437 and P5,454, respectively. On the otherhand, the Parent Bank unwound the outstanding CLNs with certain financialinstitutions amounting to P5,009. The BDO Unibank Group and Parent Bankrecognized loss amounting to P13 and P7, respectively, in the unwinding of CLNs andis presented as part of the Trading gain – net under Other Operating Income in the2011 statement of income. Also, the unwinding of CLN by the Parent Bank resulted toreversal of net unrealized loss amounting to (P25) and is presented as part of Tradingnet under Other Operating Income in the 2011 statement of income.After the reclassification, amortization of unrealized fair value losses on outstandingCLDs and CLNs previously recognized directly in the statements of comprehensiveincome amounted to P157 and P82 in 2011 and 2010, respectively, for the BDOUnibank Group and P157 and P98 in 2011 and 2010, respectively, for the Parent Bank.

- 83 -10. LOANS AND OTHER RECEIVABLESThis account consists of the following:BDO Unibank GroupParent BankNotes 2011 2010 2011 2010Receivables from customers:Loans and discounts 24 P 591,323 P 470,461 P 577,544 P 455,902Customers’ liabilitiesunder letters of creditand trust receipts 38,085 34,104 38,085 34,104Bills purchased 10,697 9,356 10,697 9,356Others 30,041 27,591 30,041 27,591670,146 541,512 656,367 526,953Allowance for impairment 14 ( 24,358 ) ( 23,507 ) ( 24,077 ) ( 23,276 )645,788 518,005 632,290 503,677Other receivables:Interbank loans receivables 7,325 26,151 7,325 26,151UDSCL 9.04 8,452 13,386 8,452 12,505Accounts receivable 13, 24 7,628 6,002 6,171 6,861SPURRA 4,989 2,912 - -Sales contract receivables 2,347 2,107 2,259 1,954Others 67 95 - -30,808 50,653 24,207 47,471Allowance for impairment 14 ( 2,669 ) ( 2,637 ) ( 2,640 ) ( 2,530 )28,139 48,016 21,567 44,941P 673,927 P 566,021 P 653,857 P 548,618In 2011, to execute the deed of assignment made on January 13, 2008, the Parent Bankagreed to transfer, cede and convey absolutely to SM Keppel Land, Inc. (SM Keppel)the outstanding advances totaling P364 recognized as part of Accounts receivable underLoans and Other Receivables in exchange for 36,401,500 preferred shares of SMKeppel for a subscription price of P364 (see Note 13.01).Included in the total loan portfolio are non-performing loans, net of accounts in the losscategory and fully provided with allowance (excluded under BSP Circular 351), as follows:BDO Unibank Group Parent Bank2011 2010 2011 2010Non–performing loans P 25,332 P 24,937 P 24,909 P 24,400Loss category loans,fully provided with allowance* ( 11,919) ( 6,087) ( 11,839) ( 5,973 )P 13,413 P 18,850 P 13,070 P 18,427* Loans classified as loss and fully provided with allowance as per latest applicable BSP Resultsof Examination as of December 31, 2011 and 2010. The 2011 loans classified as loss isinclusive of the Receivable from SPV presented under Other Resources in the 2011statement offinancial position.

- 84 -Per MORB, non-performing loans shall, as a general rule, refer to loan accounts whoseprincipal and/or interest is unpaid for 30 days or more after due date or after they havebecome past due in accordance with existing rules and regulations. This shall apply toloans payable in lump sum and loans payable in quarterly, semi-annual or annualinstallments, in which case, the total outstanding balance thereof shall be considerednon-performing. In the case of loans payable in monthly installments, the totaloutstanding balance thereof shall be considered nonperforming when three or moreinstallments are in arrears. In the case of loans payable in daily, weekly or semi-monthlyinstallments, the entire outstanding balance of the loan/receivable shall be considered aspast due when the total amount of arrearages reaches 10% of the total loan/receivablebalance. Restructured loans shall be considered non-performing except when as ofrestructuring date, it has an updated principal and interest payments and it is fullysecured by real estate with loan value of up to 60% of the appraised value of real estatesecurity and the insured improvements and such other first class collaterals.As of December 31, 2010, interbank loans receivables include loans to a foreign financialinstitution under bankruptcy amounting to P19 with related allowance for impairment ofP19 (see Note 9.02 for the investment in other debt securities in that foreign financialinstitution). In 2011, the Parent Bank disposed the loan through a sale at a gain of P0.2and is presented as part of Trading gain – net in the statement of income.The concentration credit of the total loan portfolio as to industry follows:BDO Unibank Group Parent Bank2011 2010 2011 2010Wholesale and retail trade P 105,905 P 76,592 P 104,115 P 75,211Manufacturing (various industries) 101,468 90,555 97,730 86,861Financial intermediaries 84,668 79,058 86,169 78,142Real estate, renting and otherrelated activities 77,624 55,842 75,364 53,887Other community, social andpersonal activities 58,315 39,474 55,560 39,291Transportation and communication 51,378 36,295 48,203 33,845Agriculture, fishing and forestry 8,037 9,592 7,536 8,254Others 182,751 154,104 181,690 151,462P 670,146 P 541,512 P 656,367 P 526,953The breakdown of total loan portfolio as to secured and unsecured follows:BDO Unibank GroupParent Bank2011 2010 2011 2010Secured:Real estate mortgage P 115,833 P 93,722 P 115,296 P 93,309Chattel mortgage 61,452 42,566 53,100 34,738Other securities 137,259 104,142 131,166 103,961314,544 240,430 299,562 232,008Unsecured 355,602 301,082 356,805 294,945P 670,146 P 541,512 P 656,367 P 526,953

- 85 -The breakdown of total loans as to type of interest rate follows:BDO Unibank GroupParent Bank2011 2010 2011 2010Variable interest rates P 483,438 P 364,479 P 469,209 P 355,991Fixed interest rates 186,708 177,033 187,158 170,962P 670,146 P 541,512 P 656,367 P 526,953Loans and other receivables bear annual interest rates of 0% (primarily non-performingloans) to 43.7% (for credit card installment receivables) per annum in 2011, 2010 and2009 in both the BDO Unibank Group and Parent Bank financial statements.The BDO Unibank Group’s receivables from customers amounting to P960 and P1,448as of December 31, 2011 and 2010, respectively, are pledged as collaterals with the BSPto secure borrowings under rediscounting privileges (see Note 16).11. PREMISES, FURNITURE, FIXTURES AND EQUIPMENTThe gross carrying amounts and accumulated depreciation and amortization ofpremises, furniture, fixtures and equipment at the beginning and end of 2011 and 2010are shown below.BDO Unibank GroupLeasehold Furniture,Rights and Fixtures andLand Buildings Improvements Equipment TotalDecember 31, 2011Cost P 5,130 P 7,701 P 2,858 P 12,750 P 28,439Accumulateddepreciation andamortization - ( 2,498) ( 1,635 ) ( 8,616 ) ( 12,749)Net carrying amount P 5,130 P 5,203 P 1,223 P 4,134 P 15,690December 31, 2010Cost P 5,079 P 6,620 P 2,673 P 15,185 P 29,557Accumulateddepreciation andamortization - ( 2,167) ( 1,268 ) ( 11,065 ) ( 14,500 )Net carrying amount P 5,079 P 4,453 P 1,405 P 4,120 P 15,057January 1, 2010Cost P 4,780 P 5,568 P 2,293 P 16,475 P 29,116Accumulateddepreciation andamortization - ( 1,685 ) ( 880 ) ( 11,811 ) ( 14,376 )Allowancefor impairment - - ( 4 ) ( 4 ) ( 8 )Net carrying amount P 4,780 P 3,883 P 1,409 P 4,660 P 14,732Parent BankDecember 31, 2011Cost P 5,130 P 7,642 P 2,715 P 11,713 P 27,200Accumulateddepreciation andamortization - ( 2,459) ( 1,558 ) ( 8,109 ) ( 12,126 )Net carrying amount P 5,130 P 5,183 P 1,157 P 3,604 P 15,074

- 86 -Leasehold Furniture,Rights and Fixtures andLand Buildings Improvements Equipment TotalDecember 31, 2010Cost P 5,079 P 6,561 P 2,611 P 12,170 P 26,421Accumulateddepreciation andamortization - ( 2,131) ( 1,255 ) ( 8,920 ) ( 12,306 )Net carrying amount P 5,079 P 4,430 P 1,356 P 3,250 P 14,115January 1, 2010Cost P 4,780 P 5,509 P 2,125 P 13,487 P 25,901Accumulateddepreciation andamortization - ( 1,651 ) ( 803 ) ( 10,389 ) ( 12,843 )Net carrying amount P 4,780 P 3,858 P 1,322 P 3,098 P 13,058A reconciliation of the carrying amounts, at the beginning and end of 2011 and 2010, ofpremises, furniture, fixtures and equipment is shown below.BDO Unibank GroupLeasehold Furniture,Rights and Fixtures andLand Buildings Improvements Equipment TotalBalance at January 1, 2011,net of accumulateddepreciation andamortization P 5,079 P 4,453 P 1,405 P 4,120 P 15,057Additions 76 994 247 1,772 3,089Disposals ( 79 ) ( 3 ) - ( 449 ) ( 531 )Reclassifications 54 67 ( 1) - 120Depreciation and amortizationcharges for the year - ( 308 ) ( 428 ) ( 1,309 ) ( 2,045 )Balance at December 31,2011, net of accumulateddepreciation andamortization P 5,130 P 5,203 P 1,223 P 4,134 P 15,690Balance at January 1, 2010,net of accumulateddepreciation andamortization P 4,780 P 3,883 P 1,409 P 4,660 P 14,732Additions 89 564 474 1,334 2,461Disposals ( 15 ) ( 15 ) ( 37 ) ( 155 ) ( 222 )Reclassifications 225 253 5 - 483Depreciation and amortizationcharges for the year - ( 232 ) ( 446 ) ( 1,719 ) ( 2,397 )Balance at December 31,2010, net of accumulateddepreciation andamortization P 5,079 P 4,453 P 1,405 P 4,120 P 15,057Parent BankBalance at January 1, 2011,net of accumulateddepreciation andamortization P 5,079 P 4,430 P 1,356 P 3,250 P 14,115Additions 76 994 205 1,474 2,749Disposals ( 79 ) ( 3 ) - ( 69 ) ( 151 )Reclassifications 54 67 ( 1 ) - 120Depreciation and amortizationcharges for the year - ( 305 ) ( 403 ) ( 1,051 ) ( 1,759 )Balance at December 31,2011, net of accumulateddepreciation andamortization P 5,130 P 5,183 P 1,157 P 3,604 P 15,074

- 87 -Leasehold Furniture,Rights and Fixtures andLand Buildings Improvements Equipment TotalParent BankBalance at January 1, 2010,net of accumulateddepreciation andamortization P 4,780 P 3,858 P 1,322 P 3,098 P 13,058Additions 89 564 447 1,100 2,200Disposals ( 15 ) ( 15 ) ( 6 ) ( 59 ) ( 95 )Reclassifications 225 252 5 - 482Depreciation and amortizationcharges for the year - ( 229 ) ( 412 ) ( 889 ) ( 1,530 )Balance at December 31,2010, net of accumulateddepreciation andamortization P 5,079 P 4,430 P 1,356 P 3,250 P 14,115Under BSP rules, investments in premises, furniture, fixtures and equipment should notexceed 50% of a bank’s unimpaired capital. As of December 31, 2011 and 2010, theBDO Unibank Group has complied with this requirement.12. INVESTMENT PROPERTIESInvestment properties include land and buildings held for capital appreciation and forrental. Income earned from investment properties under rental arrangements amountedto P68 and P62 in 2011 and P81 and P78 in 2010 and are presented as part of Incomefrom assets acquired under Other Operating Income in the BDO Unibank Group andParent Bank financial statements, respectively (see Note 22). Direct expenses incurredfrom these properties amounted to P45 and P17 in 2011 and P32 and P22 in 2010 inthe BDO Unibank Group and Parent Bank financial statements, respectively.The gross carrying amounts and accumulated depreciation and impairment at thebeginning and end of 2011 and 2010 are shown below.BDO Unibank GroupLand Buildings TotalDecember 31, 2011Cost P 10,231 P 3,839 P 14,070Accumulated depreciation - ( 1,658 ) ( 1,658)Allowance for impairment(see Note 14) ( 2,206) ( 69 ) ( 2,275)Net carrying amount P 8,025 P 2,112 P 10,137December 31, 2010Cost P 11,342 P 4,077 P 15,419Accumulated depreciation - ( 1,500 ) ( 1,500)Allowance for impairment(see Note 14) ( 1,765) ( 175 ) ( 1,940)Net carrying amount P 9,577 P 2,402 P 11,979

- 88 -Land Buildings TotalJanuary 1, 2010Cost P 12,123 P 4,537 P 16,660Accumulated depreciation - ( 1,555 ) ( 1,555)Allowance for impairment(see Note 14) ( 1,251) ( 20 ) ( 1,271)Net carrying amount P 10,872 P 2,962 P 13,834Parent BankDecember 31, 2011Cost P 9,694 P 3,611 P 13,305Accumulated depreciation - ( 1,566 ) ( 1,566)Allowance for impairment(see Note 14) ( 2,143) ( 25 ) ( 2,168)Net carrying amount P 7,551 P 2,020 P 9,571December 31, 2010Cost P 10,566 P 3,840 P 14,406Accumulated depreciation - ( 1,417 ) ( 1,417)Allowance for impairment(see Note 14) ( 1,719) ( 118 ) ( 1,837)Net carrying amount P 8,847 P 2,305 P 11,152January 1, 2009Cost P 11,312 P 4,225 P 15,537Accumulated depreciation - ( 1,479 ) ( 1,479)Allowance for impairment ( 1,233) ( 20 ) ( 1,253)Net carrying amount P 10,079 P 2,726 P 12,805A reconciliation of the carrying amounts, at the beginning and end of 2011 and 2010, ofinvestment properties is shown below.BDO Unibank GroupLand Buildings TotalBalance at January 1, 2011,net of accumulateddepreciation and impairment P 9,577 P 2,402 P 11,979Additions 209 80 289Disposals ( 1,531 ) ( 256 ) ( 1,787 )Reclassifications ( 73 ) 320 247Depreciation for the year - ( 397 ) ( 397 )Impairment ( 157 ) ( 37 ) ( 194 )Balance at December 31, 2011,net of accumulateddepreciation and impairment P 8,025 P 2,112 P 10,137

- 89 -Land Buildings TotalBDO Unibank GroupBalance at January 1, 2010,net of accumulateddepreciation and impairment P 10,872 P 2,962 P 13,834Additions 165 162 327Disposals ( 1,385 ) ( 177 ) ( 1,562 )Reclassifications 25 ( 186 ) ( 161 )Depreciation for the year - ( 302 ) ( 302 )Impairment ( 100 ) ( 57 ) ( 157 )Balance at December 31, 2010,net of accumulateddepreciation and impairment P 9,577 P 2,402 P 11,979Parent BankBalance at January 1, 2011,net of accumulateddepreciation and impairment P 8,847 P 2,305 P 11,152Additions 104 62 166Disposals ( 1,208 ) ( 224 ) ( 1,432 )Reclassification ( 35 ) 250 215Impairment ( 157 ) - ( 157 )Depreciation for the year - ( 373 ) ( 373 )Balance at December 31, 2011,net of accumulateddepreciation and impairment P 7,551 P 2,020 P 9,571Balance at January 1, 2010,net of accumulateddepreciation and impairment P 10,079 P 2,726 P 12,805Additions 145 148 293Disposals ( 1,346 ) ( 100 ) ( 1,446 )Reclassification 54 ( 186 ) ( 132 )Impairment ( 85 ) - ( 85 )Depreciation for the year - ( 283 ) ( 283 )Balance at December 31, 2010,net of accumulateddepreciation and impairment P 8,847 P 2,305 P 11,152The fair value of investment properties as of December 31, 2011 and 2010, determinedbased on the present value of the estimated future cash flows discounted at the currentmarket rate, amounted to P16,414 and P17,393, respectively, for BDO Unibank Groupaccounts and P15,494 and P16,225, respectively, for the Parent Bank accounts.The BDO Unibank Group has no contractual obligations to purchase, construct ordevelop investment properties, or to repair, maintain or enhance the same nor are thereany restrictions on the future use or realizability of the investment properties.

- 90 -Real and other properties acquired (ROPA) in settlement of loans through foreclosure ordacion in payment are significantly accounted for as either: financial assets, investmentproperties, non-current assets held for sale or AFS. As of December 31, 2011 and 2010,ROPA, gross of allowance, comprise of the following:BDO Unibank GroupParent Bank2011 2010 2011 2010Investment properties P 11,421 P 12,796 P 10,918 P 12,044Non-current assets held for sale 2,612 2,295 2,612 2,295AFS securities 1,584 3,731 1,468 3,731Other resources - others 122 66 - -P 15,739 P 18,888 P 14,998 P 18,07013. OTHER RESOURCESThe components of this account are shown below.BDO Unibank GroupParent BankNotes 2011 2010 2011 2010Deferred tax assets - net 27.01 P 5,485 P 5,584 P 5,586 P 5,687Equity investments 13.01 4,746 3,926 19,277 14,548Receivables from specialpurpose vehicles (SPVs) 13.02 3,440 3,440 3,440 3,440Real properties fordevelopment and sale 3,384 3,453 - -Deposits under escrow 13.03 2,931 2,931 2,931 2,931Non-current assetsheld for sale 13.04 2,612 2,328 2,612 2,295Foreign currency notes andcoins on hand 1,989 2,182 1,989 2,182Interoffice float items – net 1,617 716 1,517 1,084Retirement asset 23.02 1,494 998 1,519 1,026Goodwill 13.05, 26 1,247 1,247 1,247 1,247Returned checks andother cash items 348 341 348 341Prepaid documentary stamps 314 210 295 197Dividend receivable 168 96 316 691Computer software – net 13.06 144 367 144 366Advances to subsidiaries 24 - - - 3,183Others 13.06 5,487 4,314 4,502 3,16035,406 32,133 45,723 42,378Allowance for impairment 14 ( 8,971) ( 8,540) ( 11,919) ( 11,512)P 26,435 P 23,593 P 33,804 P 30,866

- 91 -13.01 Equity InvestmentsEquity investments consist of the following:BDO Unibank Group Parent Bank%InterestHeld 2011 2010 2011 2010Philippine SubsidiariesBDO Private Bank, Inc. (BDO Private) 100% P - P - P 2,579 P 2,579BDO Strategic Holdings, Inc. (BDOSHI) 100% - - 8,184 2,135BDO Leasing and Finance, Inc. (BDO Leasing) 87% - - 1,878 1,878BDO Elite Savings Bank, Inc.(formerly GE Money Bank, Inc. or GEMB) 99% - - 1,500 1,500EBC Strategic Holdings Corporation (ESHC) 100% - - - 1,421BDO Capital & Investment Corporation(BDO Capital) 100% - - 300 300BDO Technology Center, Inc. (BDO Technology) 100% - - - 47Equimark - NFC Development Corp. 60% - - 45 45PCIB Securities, Inc. 100% - - 39 39PCI Realty Corporation 100% - - 34 34BDO Insurance Brokers, Inc. (BDOI) 100% - - 11 11PCI Insurance Brokers, Inc. (PCI Insurance) 100% - - 8 8Equitable Card Network, Inc. 100% - - - -Total subsidiaries - - 14,578 9,997Foreign SubsidiariesPCI Express Padala (HK) Ltd. 100% - - - 215Express Padala HK Ltd. 100% - - 28 28BDO Remittance (USA), Inc 100% - - 26 26PCIB Europe, S.P.A. 100% - - 1 1Express Padala Frankfurt GmbH 100% - - 1 1Equitable PCI Express Padala (Nederland) B.V. 100% - - - 1- - 56 272AssociatesManila North Tollways Corporation (MNTC) 12% 1,405 1,405 1,405 1,405SM Keppel Land, Inc. 50% 1,658 1,294 1,658 1,294Generali Pilipinas Holdings, Inc. (Generali) 40% 1,235 1,235 1,168 1,168Northpine Land Incorporated 20% 232 232 232 232Taal Land 33% 170 170 170 170Others * 10 10 10 104,710 4,346 4,643 4,279Accumulated equity in net losses:Balance at beginning of year ( 420 ) ( 436 ) - -Equity in net profit during the year 681 16 - -261 ( 420 ) - -Dividends received ( 225) - - -Net investments in associates 4,746 3,926 4,643 4,279Gross 4,746 3,926 19,277 14,548Allowance for impairment ( 559 ) ( 539 ) ( 4,375 ) ( 4,355 )Net P 4,187 P 3,387 P 14,902 P 10,193* This consists of various insignificant investments in associates, thus, percentage held is no longer disclosed.The BDO Unibank Group’s percentage of interest held in each subsidiary and associateis the same as that of the Parent Bank, except for Generali which is at 40% at the BDOUnibank Group and 37.5% at the Parent Bank.

- 92 -The BDO Unibank Group’s subsidiaries and associates are all incorporated in thePhilippines, except for the following:SubsidiariesPCI Express Padala (HK) Ltd.Express Padala HK Ltd.BDO Remittance (USA), Inc.Express Padala Frankfurt GmbHPCIB Europe, S.P.AEquitable PCI Express Padala (Nederland) B.V.Country of IncorporationHong KongHong KongUnited States of AmericaGermanyItalythe NetherlandsThe following table presents the aggregated unaudited financial information of BDOUnibank Group’s associates as of and for the years ended December 31, 2011, 2010 and2009:2011 2010 2009Assets P 23,932 P 22,819 P 3,941Liabilities 12.313 11,890 799Equity 11,619 10,929 3,142Revenues 7,138 8,101 ( 9)Net profit (loss) 2,329 1,750 ( 352 )13.01.01 Dividend DeclarationsIn 2011 and 2010, the Parent Bank’s share in the cash dividends declared by BDOUnibank Group's subsidiaries amounted to P411 and P791, respectively. These arepresented as part of Dividend income under Other Operating Income in the ParentBank statements of income (see Note 22). Out of the total dividends declared, theParent Bank received P95 and P102 in 2011 and 2010, respectively.13.01.02 Mergers Among SubsidiariesOn April 30, 2011, the Parent Bank’s BOD approved the five-way merger (the Merger)of wholly-owned subsidiaries: BDOSHI, Equitable Card Network (ECN), Inc., ESHC,BDO Technology, and Strategic Property Holdings, Inc. (SPHI), with BDOSHI as thesurviving corporation. The Merger has been undertaken as part of the streamlining ofthe BDO Unibank Group’s organizational structure. The Merger was approved by theBSP and the SEC on November 29, 2011 and December 29, 2011, respectively, and wasaccounted for using the pooling-of-interests method. The Parent Bank’s investment inits subsidiaries did not increase as a result of this exercise except for the following:(a) dacion en pago of 3,621,159 preferred shares and 2,000,001 common shares ofBDOSHI held by ESHC for the P557 advances from the Parent Bank (presented aspart of Advances to subsidiaries under Other Resources in the 2010 statement offinancial position), and (b) subscription of additional 40,231,915 preferred shares ofBDOSHI through conversion of advances to BDOSHI and ESHC totalingP2,626 (recognized as part of Advances to subsidiaries under Other Resources in the2010 statement of financial position) and advances to SPHI amounting toP1,397 (recognized as part of Accounts receivable under Loans and Receivables in the2010 statement of financial position) (see Notes 10 and 26).

- 93 -13.01.03 AcquisitionsIn 2011, to execute the deed of assignment made on January 13, 2008, the Parent Bankagreed to transfer, cede and convey absolutely to SM Keppel the outstanding advancestotaling P364 recognized as part of Others under Loans and Other Receivables inexchange for 36,401,500 preferred shares of SM Keppel for a subscription price ofP364 (see Note 10). As a result, the investment in SM Keppel as of December 31, 2011increased to P1,658.On February 11, 2010, BSP approved the acquisition by BDO of the 12.4% equityinterest in MNTC equivalent to 2,197,800 common shares held by Global FundHoldings, Inc. (Global Fund) in MNTC for a purchase price of P1,405. The purchaseof 12.4% was previously approved by the BOD on July 25, 2009. Investment in MNTCis recognized as Equity Investments and is presented as part of Other Resources in thestatements of financial position. The Parent Bank is properly represented in the boardof directors of MNTC.In response to the capital infusion call of Generali to cover its 2007 and 2008 capitaldeficiency, BDO Unibank Group’s BOD separately approved on January 9, 2010 andJuly 31, 2010 additional investment of P114 and P156, respectively. The approval ofthe BSP was made on March 5, 2010 and September 21, 2010, respectively. Investmentin Generali has a carrying value of P1,168 and allowance for impairment loss amountingto P898 as of December 31, 2011 and 2010. The investment is recognized as EquityInvestments and is presented as part of Other Resources account.13.01.04 Dissolution of SubsidiariesOn September 30, 2011, the Parent Bank approved the dissolution of PCI ExpressPadala (Hong Kong) Limited effective September 20, 2011. Capital amounting toP248 was fully returned to the Parent Bank on December 5, 2011.On April 30, 2010 by virtue of a proxy letter, the Parent Bank approved the liquidationof PCIB Europe S.P.A with cut-off financial statement date of December 31, 2009.PCIB Europe S.P.A made partial returns of capital amounting to P23 and P1 onJuly 16, 2010 and October 6, 2010, respectively. As of December 31, 2011, total equityof PCIB Europe S.P.A. amounted to P0.5.13.02 Receivables from SPVsReceivables from SPVs represent the amount due from sale of certain non-performingassets to SPVs. In 2005, the former EPCIB (now part of BDO Unibank Group) soldcertain nonperforming assets with book value of P15,069 to Philippine InvestmentOne, Philippine Investment Two and Cameron Granville Asset Management, Inc.(CGAM) for a consideration of P4,134. Cash received from the SPVs amounted toP98 in 2005 and the balance of P3,336, through issuance of SPV Notes, shall be paidbased on a cash flow waterfall arrangement and interest rate of 20% and 50% perannum on the P2,776 and P560, respectively. Also, in 2005, the former EquitableSavings Bank, Inc. (ESB) entered into sale and purchase agreements with CGAM andLNC (SPV-AMC) Corporation (LNC) for the sale of the former ESB’s loans to CGAMfor P621 and for the sale of its investment properties to LNC for P98. The formerESB received SPV Notes amounting to P60 for loans from CGAM and P39 forinvestment properties from LNC, in addition to cash received amounting to P23 fromCGAM and P4 from LNC.

- 94 -Full allowance for impairment on the receivables from SPVs amounted to P3,440 as ofDecember 31, 2011 and 2010.13.03 Deposits Under EscrowDeposits under escrow pertain to the portion of the cash received by BDO UnibankGroup in consideration for its assumption of First e-Bank Corporation’s deposits andother liabilities in October 2002. This amount is held in escrow pending compliance byBDO Unibank Group with certain terms and conditions, particularly the transfer oftitles, as stipulated in the Memorandum of Agreement (MOA). Deposits under escrowearn an annual effective interest of 5.8% and 5.7% in 2011 and 2010, respectively.13.04 Non-current Assets Held for saleNon-current assets held for sale consist of real and other properties acquired throughrepossession or foreclosure that BDO Unibank Group intends to sell within one yearfrom the date of classification as held for sale. Impairment loss recognized by the BDOUnibank Group and the Parent Bank on non-current assets held for sale in 2011, 2010and 2009 amounted to P131, P128 and P5, respectively (see Note 14).13.05 GoodwillGoodwill represents the excess of the cost of acquisition of the Parent Bank over thefair value of the net assets acquired and branch licenses at the date of acquisition.This is significantly from the acquisition of BDO Card Corporation, United OverseasBank Philippines (UOBP), American Express Bank, Ltd. and GE Money Bank(see Note 26.02), which were acquired in 2005, 2006, 2007 and 2009, respectively. TheBDO Unibank Group and the Parent Bank recognized impairment loss of P150, P271and P171 in 2011, 2010 and 2009, respectively (see Note 14).13.06 OthersAmortization expense on computer software licenses amounted to P373, P170, andP125 in 2011, 2010 and 2009, respectively, in the BDO Unibank Group financialstatements and P371, P173, and P134 in 2011, 2010 and 2009, respectively, in theParent Bank financial statements. These are included as part of Miscellaneous underOther Operating Expenses account in the statements of income (see Note 22).Depreciation expense on certain assets amounting to P35, P11 and P11 in 2011,2010 and 2009, respectively, in the BDO Unibank Group financial statements, and arepresented as part of Occupancy under Other Operating Expenses account in thestatements of income (see Note 22).

14. ALLOWANCE FOR IMPAIRMENT- 95 -Changes in the allowance for impairment are summarized below.BDO Unibank GroupParent Bank2011 2010 2011 2010Balance at beginning of year:AFS securities P 5,811 P 6,526 P 4,526 P 5,432HTM investments 453 737 412 737Loans and other receivables 26,144 22,496 25,806 21,364Investment properties 1,940 1,271 1,837 1,253Other resources 8,540 8,111 11,512 10,89542,888 39,141 44,093 39,681Impairment losses - net 6,144 6,698 5,945 6,374Reclassification/write-off/foreigncurrency revaluation ( 7,397) ( 2,951 ) ( 7,164) ( 1,962 )Balance at end of year:AFS securities 2,950 5,811 1,658 4,526HTM investments 412 453 412 412Loans and other receivables 27,027 26,144 26,717 25,806Investment properties 2,275 1,940 2,168 1,837Other resources 8,971 8,540 11,919 11,512P 41,635 P 42,888 P 42,874 P 44,093Total impairment losses on financial assets amounted to P5,372, P6,141, and P5,261 in2011, 2010 and 2009, respectively, in the BDO Unibank Group financial statements andP5,225, P5,777, and P4,892 in 2011, 2010 and 2009, respectively, in the Parent Bankfinancial statements.Total impairment losses on non-financial assets amounted to P772, P557, and P892 in2011, 2010 and 2009, respectively, in the BDO Unibank Group financial statements andP720, P597, and P883 in 2011, 2010 and 2009, respectively, in the Parent Bank financialstatements.15. DEPOSIT LIABILITIESThe breakdown of this account follows:BDO Unibank Group Parent Bank2011 2010 2011 2010Demand P 48,499 P 45,445 P 36,059 P 33,489Savings 482,517 426,024 483,147 426,687Time 327,553 311,166 319,542 302,458P 858,569 P 782,635 P 838,748 P 762,634

- 96 -This account is composed of the following (by counterparties):BDO Unibank GroupParent Bank2011 2010 2011 2010Due to other banksDemand P 841 P 714 P 788 P 702Savings 1,959 2,874 1,959 2,874Time 1,796 4,334 1,796 1,9504,596 7,922 4,543 5,526Due to customersDemand 47,658 44,731 35,271 32,787Savings 480,558 423,150 481,188 423,813Time 325,757 306,832 317,746 300,508853,973 774,713 834,205 757,108P 858,569 P 782,635 P 838,748 P 762,634The breakdown of deposit liabilities, as to currency, follows:BDO Unibank GroupParent Bank2011 2010 2011 2010Foreign currencies P 206,618 P 217,049 P 200,000 P 209,524Peso 651,951 565,586 638,748 553,110The maturity profile of this account is presented below.P 858,569 P 782,635 P 838,748 P 762,634BDO Unibank GroupParent Bank2011 2010 2011 2010Less than one year P 792,225 P 708,223 P 774,462 P 693,130One to five years 55,100 59,469 53,042 54,561Beyond five years 11,244 14,943 11,244 14,943P 858,569 P 782,635 P 838,748 P 762,634The BDO Unibank Group’s and Parent Bank’s deposit liabilities are in the form ofdemand, savings and time deposit accounts both bearing annual interest rates of 0% to8.3% in 2011 and 0% to 9.7% in 2010. Demand and savings deposits usually have bothfixed and variable interest rates while time deposit has fixed interest rate except for onetranche of the peso-denominated long-term negotiable certificates of deposits(LTNCDs) which are repriced every quarter.

- 97 -On December 23, 2004, the BSP approved the Parent Bank’s application to issue intwo or more tranches of up to P5,000 worth of peso-denominated LTNCDs within oneyear from date of approval. The first tranche amounting to P2,100 was issued onJune 1, 2005 and matured on June 2, 2010 and the second tranche amounting to P2,900was issued on November 23, 2005 and matured on November 24, 2010. The firsttranche paid a variable interest based on 3M PDST-F (formerly MART 1) plus 0.25%spread while the second tranche paid a fixed rate of 9.73%. Also, on September 25,2006, the BSP approved the Parent Bank’s application to issue another P5,000 LTNCDsin one tranche. The P5,000 LTNCDs, with a fixed interest rate of 8.25% per annum,were issued on October 4, 2006 and matured on November 3, 2011. These are presentedas part of Time Deposits under Deposit Liabilities account in the 2010 statement offinancial position.Also on April 26, 2007, the Monetary Board (MB) of the BSP authorized BDO Privateto issue up to P5,000 worth of fixed rate or zero coupon LTNCDs in one or moretranches. The first tranche, consisting of P2,191 in zero coupon LTNCDs, was issuedon June 18, 2007 and will mature on December 18, 2012. These LTNCDs arepresented, net of discount and included P17 in capitalized transaction costs, as part ofthe Time Deposit Liabilities account in the statements of financial position.Under existing BSP regulations, non-FCDU deposit liabilities of the BDO UnibankGroup are subject to liquidity reserve requirement equivalent to 11.0% both in 2011and 2010 and statutory reserve equivalent to 10.0% and 8.0% in 2011 and 2010,respectively. As of December 31, 2011, the BDO Unibank Group is in compliant withthese regulations.16. BILLS PAYABLEThis account is composed of the following:BDO Unibank GroupParent Bank2011 2010 2011 2010Deposit substitutes P 17,152 P 8,304 P 17,149 P 8,031Foreign banks 13,694 26,096 13,694 25,876Senior notes 13,210 13,202 13,210 13,202PDIC 4,472 4,483 4,472 4,483BSP 968 1,445 968 1,445Local banks 132 131 132 131Others 9,846 12,200 1,753 2,913P 59,474 P 65,861 P 51,378 P 56,081

- 98 -The breakdown of this account as to currency follows:BDO Unibank GroupParent Bank2011 2010 2011 2010Peso P 14,909 P 26,036 P 6,813 P 16,476Foreign currencies 44,565 39,825 44,565 39,605The maturity profile of this account is presented below.P 59,474 P 65,861 P 51,378 P 56,081BDO Unibank Group Parent Bank2011 2010 2011 2010Less than one year P 42,767 P 43,976 P 35,430 P 34,477One to five years 15,718 6,788 14,959 6,514Beyond five years 989 15,097 989 15,090P 59,474 P 65,861 P 51,378 P 56,081Bills payable bear annual interest rates of 0.2% to 12.0% in 2011 and 0.3% to 12.0% in2010. Certain bills payable to local banks and the BSP are collateralized by certainreceivables from customers (see Note 10).The following comprise the interest expense included as part of Interest Expense onbills payable and other liabilities in the statements of income (see Note 21):BDO Unibank Group2011 2010 2009Senior notes P 511 P 98 P -Deposit substitutes 277 312 635Foreign banks 182 69 112PDIC 175 175 175Local banks 29 1 29BSP 27 121 254SMPHI - - 126Others 322 575 459P 1,523 P 1,351 P 1,790

- 99 -Parent Bank2011 2010 2009Senior notes P 511 P 98 P -PDIC 175 175 175Foreign banks 182 69 112Deposit substitutes 172 285 422BSP 27 121 254SMPHI - - 127Local banks - - 27Others 158 243 303Senior NotesP 1,225 P 991 P 1,420On October 22, 2010, BDO Unibank Group issued Senior Notes with a face value ofUS$300 million at a price of 99.632 or a total price of US$299 million. The SeniorNotes, which will mature on April 22, 2016, bear a fixed interest rate of 3.875% perannum, with an effective rate of 3.95% per annum, and will be payable semi-annuallyevery April 22 and October 22 starting in 2011. The net proceeds from the issuance areintended to support business expansion plans, and general banking and relendingactivities. As of December 31, 2011 and 2010, the Senior Notes have a carrying amountof P13,210 and P13,202, respectively, and are presented as part of Bills Payable in thestatements of financial position. Interest on Senior Notes incurred amounted toP511 in 2011 and P98 in 2010 recognized in profit or loss and included as part ofInterest Expense on Bills Payable and Other Liabilities account on an amortized costbasis using the effective interest method (see Note 21).PDICThis represents the financial assistance to United Overseas Bank Philippines (UOBP)from PDIC amounting to P4,420 which was transferred by UOBP to the Parent Bank.The transfer was covered by the MOA relative to the Parent Bank's acquisition ofUOBP branches in 2005. The financial assistance, which is recorded as part of BillsPayable in the statements of financial position will mature on December 19, 2012 andbears annual interest rate of 3.9%. The proceeds of the financial assistance from PDICare invested in government securities as provided for in the MOA.SMPHI (Preferred Shares)As required under PAS 32, Financial Instruments: Presentation and Disclosure, the ParentBank recognized as financial liability 25,000,000 shares of redeemable, cumulative andnon-participating preferred shares with a par value of P10 per share issued to SMPHIon October 18, 2004. The preferred shares were issued at US$2 per share or anaggregate subscription price of US$50 million. The preferred shares entitled SMPHI tocumulative dividends, payable in US dollars semi-annually in arrears, equal to 6.5% ofthe issue price per annum.As required by BSP, the Parent Bank set up a sinking fund on October 17, 2005 forthe redemption of the preferred shares. The balance of the sinking fund as ofDecember 31, 2008 amounted to P2,110 and was invested in debt securities, shown aspart of HTM investments.

- 100 -On October 19, 2009, the preferred shares were redeemed in full by the Parent Bank atP2,446 inclusive of remaining dividends in arrears of P77.17. SUBORDINATED NOTES PAYABLEOn June 27, 2011, the Parent Bank issued P8,500 unsecured subordinated notes eligibleas Lower Tier 2 Capital due on September 27, 2021, callable on 2016 (the Series 4Notes) bearing an interest rate of 6.50% per annum, pursuant to the authority grantedby the BSP to the Bank on April 7, 2011 and BSP Circular No. 280 Series of 2001, asamended, and BSP Circular No. 709 Series of 2011. The issuance was approved by theBOD onAugust 28, 2010.On October 7, 2011, the Parent Bank issued another P6,500 unsecured subordinatednotes eligible as Lower Tier 2 Capital due on January 7, 2022, callable on 2016(the Series 5 Notes) bearing an interest rate of 6.375% per annum, pursuant to theauthority granted by the BSP to the Bank on April 7, 2011 and BSP Circular No. 280Series of 2001, as amended, and BSP Circular No. 709 Series of 2011. The issuance wasapproved by the BOD on August 28, 2010.On November 21, 2007, the Parent Bank issued P10,000 unsecured subordinated noteseligible as Lower Tier 2 Capital due on November 21, 2017 bearing an interest of 7.0%per annum, callable with step-up in 2012 (the Series 1 Notes) pursuant to the authoritygranted by the BSP to the Parent Bank on October 8, 2007 and BSP Circular No. 280Series of 2001, as amended. The issuance was approved by the BOD, in its specialmeeting held on June 1, 2007.On May 30, 2008, the Parent Bank issued the second tranche of P10,000 unsecuredsubordinated notes eligible as Lower Tier 2 Capital due on May 30, 2018 bearing aninterest of 8.5% per annum, callable with step-up in 2013 (the Series 2 Notes) pursuantto the authority granted by the BSP to the Parent Bank on April 3, 2008 and BSPCircular No. 280 Series of 2001, as amended. This issuance was approved by the BOD,in its regular meeting held on February 23, 2008.On March 20, 2009, the Parent Bank issued the third tranche of unsecured subordinateddebt qualifying as Tier 2 Capital of the Parent Bank with face of P3,000 due March 20, 2019with coupon interest of 7.5% per annum callable with step-up in 2014 (the Series 3 Notes).This issuance was approved by the BOD on January 31, 2009.The Notes represent direct, unconditional unsecured and subordinated pesodenominatedobligations of the Parent Bank, issued in accordance with the Terms andConditions under the Master Note. The Notes, like other subordinated indebtedness ofthe Parent Bank, are subordinated to the claims of depositors and ordinary creditors, arenot a deposit, and are not guaranteed nor insured by the Parent Bank or any partyrelated to the Parent Bank, such as its subsidiaries and affiliates, or the PDIC, or anyother person. The Notes shall not be used as collateral for any loan made by the ParentBank or any of its subsidiaries or affiliates. The Notes carry interest rates based onprevailing market rates, with a step-up provision if not called on the fifth year fromissue date. The Parent Bank has the option to call the Notes on the fifth year, subjectto prior notice to Noteholders. The Notes were used further to expand the ParentBank’s consumer loan portfolio and to refinance an existing issue of Lower Tier 2 debt.

- 101 -The Notes also increased and strengthened the Parent Bank’s capital base, inanticipation of continued growth in the coming years.The outstanding balance of the Notes amounted to P38,255 and P23,152 as ofDecember 31, 2011 and 2010, respectively.Total interest expense on subordinated notes payable included as part of InterestExpenses on bills payable and other liabilities in the statements of income amounted toP2,154, P1,775, and P1,725 in 2011, 2010 and 2009, respectively, both in the BDOUnibank Group and Parent Bank statements of income (see Note 21).18. OTHER LIABILITIESOther liabilities consist of the following:BDO Unibank GroupParent BankNote 2011 2010 2011 2010Bills purchased-contra P 10,287 P 9,162 P 10,287 P 9,162Accounts payable 7,436 5,125 5,504 4,481Manager’s checks 6,558 4,609 6,473 4,586Accrued expenses 5,088 4,222 4,790 3,985Derivatives with negativefair values 3,320 4,715 1,877 3,168Outstanding acceptancespayable 1,569 1,214 1,569 1,214Unearned income 9.03 989 1,083 893 976Withholding taxes payable 899 760 859 729Capitalized interest andother charges 602 677 602 677Payment order payable 252 266 252 266Due to principal 230 236 - -Due to BSP and Treasurerof the Philippines 166 357 163 354Others 6,693 8,063 4,025 5,189P 44,089 P 40,489 P 37,294 P 34,787The liability for unredeemed reward points amounting to P1,176 and P800 as ofDecember 31, 2011 and 2010, respectively, presented under Accrued Expensesrepresents the fair value of points earned which are redeemable significantly for goodsor services provided by third parties, which the Parent Bank identified as partners in therewards program (see Note 2.20).19. EQUITY19.01 Capital Management and Regulatory CapitalOn January 15, 2009, the BSP issued Circular No. 639 articulating the need for Banks toadopt and document an Internal Capital Adequacy Assessment Process (ICAAP). Alluniversal and commercial banks are expected to perform a thorough assessment of alltheir material risks and maintain adequate capital to support these risks. This isintended to complement the current regulatory capital requirement of at least 10% ofrisk assets, which covered only credit, market and operational risks.

- 102 -On December 29, 2009, BSP issued Circular No. 677 effectively extending theimplemention of ICAAP from January 2010 to January 2011.In October 2009, the BDO Unibank Group presented its ICAAP and submitted theinitial draft of its ICAAP document to the BSP. Based on comments from the BSP,BDO Unibank Group subsequently revised its ICAAP document and secured approvalfrom its BOD in January 8, 2011.The ICAAP document articulates the BDO Unibank Group’s capital planning strategyand discusses governance, risk assessment, capital assessment and planning, capitaladequacy monitoring and reporting, as well as internal control reviews.The lead regulator of the banking industry, the BSP, sets and monitors capitalrequirements for the BDO Unibank Group. In implementing current capitalrequirements, the BSP requires BDO Unibank Group to maintain a prescribed ratio ofqualifying capital to risk-weighted assets.Under current banking regulations, the combined capital accounts of a bank should notbe less than an amount equal to ten percent of its risk assets. The qualifying capital ofthe BDO Unibank Group for purposes of determining the capital-to-risk assets ratio istotal equity excluding:(a) Unbooked valuation reserves and other capital adjustments as may be required bythe BSP;(b) Total outstanding unsecured credit accommodations to directors, officers,stockholders and related interests (DOSRI);(c) Deferred tax asset or liability;(d) Goodwill;(e) Sinking fund for redemption of redeemable preferred shares; and,(f) Other regulatory deductions.Risk assets consist of total assets after exclusion of cash on hand, due from BSP, loanscovered by hold-out on or assignment of deposits, loans or acceptances under letters ofcredit to the extent covered by margin deposits, and other non-risk items as determinedby the MB of the BSP.The amount of surplus funds available for dividend declaration is determined also onthe basis of regulatory net worth after considering certain adjustments.The BDO Unibank Group’s policy is to maintain a strong capital base to promoteinvestor, creditor and market confidence and to sustain future development of thebusiness. The impact of the level of capital on shareholder’s return is also recognizedand BDO Unibank Group recognizes the need to maintain a balance between thehigher returns that might be possible with greater gearing and the advantages andsecurity afforded by a sound capital position.The regulatory capital is analyzed into two tiers, which are Tier 1 Capital plus Tier 2Capital less deductions from the total of Tier 1 and Tier 2 capital for the following:(a) Investments in equity of unconsolidated subsidiary banks and other financial alliedundertakings, but excluding insurance companies;(b) Investments in debt capital instruments of unconsolidated subsidiary banks;(c) Investments in equity of subsidiary insurance companies and non-financial alliedundertakings;

- 103 -(d) Reciprocal investments in equity of other banks/enterprises; and,(e) Reciprocal investments in unsecured subordinated term debt instruments of otherbanks/quasi-banks qualifying as Hybrid Tier 1, Upper Tier 2 and Lower Tier 2, inexcess of the lower of: (i) an aggregate ceiling of 5% of total Tier 1 capital of thebank excluding Hybrid Tier 1; or, (ii) 10% of the total outstanding unsecuredsubordinated term debt issuance of the other bank/quasi-banks.Provided that any asset deducted from the qualifying capital in computing thenumerator of the risk-based capital ratio shall not be included in the risk-weightedassets in computing the denominator of the ratio.At the end of each reporting period, BDO Unibank Group has complied with theprescribed ratio of qualifying capital to risk-weighted assets.Under an existing BSP circular, expanded commercial banks are required to complywith the minimum capital requirement of P4,950. At the end of each reporting period,the Parent Bank has complied with the above capitalization requirement.There have been no material changes in BDO Unibank Group’s management of capitalduring the period.The Bank’s regulatory capital position (computed using balances prepared under FRSPfor banks) as of December 31, 2011 and 2010 follows:BDO Unibank Group Parent Bank2011 2010 2011 2010Tier 1 Capital P 90,978 P 83,474 P 84,619 P 78,201Tier 2 Capital 46,004 28,967 43,929 28,823Total Regulatory Capital 136,982 112,441 128,548 107,024Deductions ( 10,771) ( 10,229) ( 25,554) ( 21,957 )Total Qualifying Capital P 126,211 P 102,212 P 102,994 P 85,067Total Risk Weighted Assets P 798,867 P 738,416 P 756,567 P 700,510Capital ratiosTotal regulatory capital expressedas percentage of total riskweighted assets 15.8% 13.8% 13.6% 12.1%Total Tier 1 expressedas percentage of total riskweighted assets 10.2% 10.0% 8.7% 8.6%Tier 1 Capital P 9,777 P 83,474 P 84,619 P 78,201Tier 1 Capital Deductions ( 9,827) ( 9,394) ( 18,931) ( 17,698 )Net Tier 1 Capital P 81,201 P 74,080 P 65,688 P 60,503

- 104 -19.02 Capital AllocationThe allocation of capital between specific operations and activities is, to a large extent,driven by optimization of the return achieved on the capital allocated. The amount ofcapital allocated to each operation or activity is based primarily upon the regulatorycapital, but in some cases the regulatory requirements do not reflect fully the varyingdegree of risk associated with different activities. In such cases the capital requirementsmay be flexed to reflect differing risk profiles subject to the overall level of capital tosupport a particular operation or activity not falling below the minimum required forregulatory purposes. The process of allocating capital to specific operations andactivities is undertaken independently of those responsible of the operation and issubject to review by the ALCO.Although maximization of the return on risk-adjusted capital is the principal basis used indetermining how capital is allocated within BDO Unibank Group to particular operationsor activities, it is not the sole basis used for decision making. Account also is taken ofsynergies with other operations and activities, the availability of management and otherresources and the fit of the activity with the longer term strategic objectives. The policiesin respect of capital management and allocation are reviewed regularly by the BOD.19.03 Capital StockCapital stock consists of the following:Number of Shares2011 2010Common shares – P10 par valueAuthorized – 4,500,000,000 sharesIssued, fully paid and outstandingBalance at beginning of year 2,607,437,907 2,339,768,510Issued during the year - 267,669,397Balance at end of year 2,607,437,907 2,607,437,907Preferred shares – P10 par valueAuthorized – 2,000,000,000 sharesIssued, fully paid and outstanding 500,000,000 500,000,000Amount2011 2010Common sharesBalance at beginning of year P 26,074 P 23,397Issued during the year - 2,677Balance at end of year P 26,074 P 26,074Preferred shares – Issued, fully paid and outstanding P 5,000 P 5,000

- 105 -The Parent Bank’s application for listing of its common stock was approved by the PSEon April 24, 2002. The application is for the initial listing of up to 952,708,650 commonshares, with par value of P10 per share, at an offer price range of P17.80 to P23.80 pershare. The proceeds from the sale of the Bank’s listed shares amounted to about P2,200.The history of shares issuances from the initial public offering (IPO) and subsequently,private placements exempt from registration pursuant to Section 10.1 of the SecuritiesRegulation Code, is as follows:Number ofTransaction Subscriber Issue Date Shares IssuedIPO Various May 21, 2002 908,189,550Private placement International FinanceCorporation (IFC) June 21, 2005 31,403,592Private placement UOBP February 8, 2006 22,429,906BDO-EPCIB Merger BDO-EBCIB Merger May 31, 2007 1,308,606,021Private placement IFC August 23, 2007 31,403,592Private placement GE Capital InternationalHoldings Corporation(GE Capital) August 20, 2009 37,735,849Private placement Multi Realty DevelopmentCorporation April 23, 2010 107,320,482Private placement IFC April 26, 2010 24,033,253Private placement IFC Capitalization(Equity) Fund, L.P.(IFC Equity Fund) April 26, 2010 136,315,662As of December 31, 2011, there are 13,517 holders of the listed shares equivalent to100% of the Parent Bank’s total outstanding shares. Such listed shares closed at P59per share as of December 29, 2011.2,607,437,907On March 19, 2010, the Bank’s BOD approved a capital raising program that would allowthe Bank to raise between US$250 million to US$300 million worth of common shares,with the IFC and the IFC Equity Fund as anchor investors. Subsequently, on April 26,2010, the Bank issued 24,033,253 shares to the IFC and 136,315,662 shares to the IFCCapitalization Fund at P41.50 per share for a total subscription price of P997 andP5,657, respectively. Foreign institutional investors participated in this capital raisingthrough a top-up offering, resulting in the issuance of an additional 107,320,482 commonshares at the same offer price. The Bank was able to raise a total of P10,994 from thiscapital raising exercise.In 2009, the Parent Bank issued to GE Capital 37,735,849 common shares worth P377in line with the latter’s strategic investment in the Parent Bank (see Note 26.02).On August 30, 2008, the BOD approved the issuance of up to 500,000,000 perpetual,voting, non-cumulative, convertible, non-participating, peso-denominated Series Apreferred shares qualifying as Tier 1 capital of BDO Unibank Group. The conversionright is at the option of the holder after three years from the issue date or at the optionof BDO Unibank Group at any time after issue date upon the occurrence of certaintrigger events such as: (i) a change in tax status of the preferred shares; or, (ii) thepreferred shares do not qualify as Tier 1 capital of BDO Unibank Group as determinedby the BSP or other applicable laws and regulations. Dividend rate is at 6.5% per

- 106 -annum of the par value. Subsequently, on September 30, 2008, the Parent Bank issued500,000,000 preferred shares at P10 per share or a total value of P5,000.19.04 Issuance of Global Depositary Receipts by PrimebridgeOn various dates in 2006, Primebridge Holdings, Inc. (Primebridge), a stockholderowning 22.1% of the Parent Bank’s total outstanding shares as of December 31, 2005,offered and sold in aggregate 9,399,700 global depositary receipts (GDRs) with eachGDR representing 20 shares of the Parent Bank’s common stock.The GDRs constitute an offering in the United States only to qualified institutionalbuyers in reliance on Rule 144A under the US Securities Act of 1993 (the Securities Act)and an offering outside the United States in reliance on Regulation under the SecuritiesAct. The offered price for each GDR was US$12.70 on January 25, 2006 and February14, 2006; and US$14.55 on May 15, 2006. The GDRs are listed and are being traded atthe London Stock Exchange.As part of the offering, Primebridge, while remaining as the registered holder of theBDO Unibank Group shares underlying the GDRs, transferred all rights and interestsin the Bank’s shares underlying the GDRs to the depository on behalf of the holders ofthe GDRs and the latter are entitled to receive dividends paid on the shares. However,GDR holders have no voting rights or other direct rights of a shareholder with respectto the Parent Bank’s shares.As of December 31, 2006, 4,724,214 GDRs issued, covering shares originally held byPrimebridge, were converted into 94,484,280 shares of the Parent Bank. As ofDecember 31, 2011 and 2010, 9,600 GDRs equivalent to 192,000 shares of the ParentBank remained unconverted.19.05 Reclassification of Authorized Capital StockOn April 25, 2009 and May 29, 2009, the BOD and stockholders approved thereclassification in the Parent Bank’s authorized capital stock of 1,000,000,000 unissuedcommon shares into 1,000,000,000 Series A preferred shares without affecting thefeatures of unissued shares of the Parent Bank, both common and preferred, andwithout modifying the rights of current stockholders. On March 8, 2010, the SECapproved the Parent Bank's Amended Articles of Incorporation to implement thereclassification.19.06 Surplus FreeOn May 27, 2011, the BOD of the Parent Bank approved the declaration of annual cashdividends amounting to P1.00 per common share or a total of P2,607 payable tostockholders of record as of August 16, 2011. The cash dividends were approved bythe BSP on June 23, 2011 and were paid to the stockholders on August 26, 2011.On January 29, 2011, the BOD of the Parent Bank approved the declaration of annualdividends on peso denominated preferred shares at the rate of 6.5% per annum for atotal dividend of P330. The declaration was approved by BSP on March 3, 2011 andwas paid on March 15, 2011.

- 107 -On May 28, 2010, the BOD of the Parent Bank approved the declaration of annual ofcash dividends amounting to P0.80 per common share or a total of P2,085 payable tostockholders of record as of August 17, 2010. The cash dividends were approved byBSP on July 1, 2010 and were paid to the stockholders on August 27, 2010.On January 9, 2010, the BOD approved the declaration of annual cash dividends on pesodenominated preferred shares at the rate of 6.5% per annum amounting to P330. Thedeclaration was approved by BSP on February 19, 2010 and was paid on March 19, 2010.On May 23, 2009, the BOD approved the declaration of cash dividends amounting toP0.28 per common share or a total of P645 payable to stockholders of record as ofAugust 11, 2009. The cash dividends were approved by the BSP on July 17, 2009 andwere paid to the stockholders on August 28, 2009.On February 28, 2009, the BOD approved the declaration of annual dividend on pesodenominated and semi-annual dividend on U.S. dollar denominated preferred shares atthe rate of 6.5% per annum each for a total dividend of P84 for the peso denominatedpreferred shares and US$1,625 thousand for the U.S. dollar denominated preferredshares. The dividends were approved by the BSP on July 17, 2009 and were paid to thestockholders on July 23, 2009.On December 7, 2011, the BOD of Equimark-NFC Development Corp., a subsidiaryof BDO Unibank Group, approved the declaration of cash dividends at P160.00 pershare on the 750,000 shares outstanding at the date of declaration or for P120. Thedividends were declared to stockholders on record as of December 29, 2011 andpayable on January 2, 2012. Total dividends paid to stockholders not within BDOUnibank Group amounted to P48.On December 7, 2011, the BOD of BDO Leasing, a subsidiary of BDO UnibankGroup, approved the declaration of cash dividends at P0.10 per share on the2,162,475,312 shares outstanding at the date of declaration or for P216. The dividendswere declared to stockholders on record as of December 26, 2011 and payable onJanuary 18, 2012, of which, total dividends paid to non-controlling interests amountedto P27.On June 29, 2011, the BOD of BDO Leasing approved the declaration of cashdividends at P0.05 per share on the 2,162,475,312 shares outstanding at the date ofdeclaration or for a total of P108. The dividends were declared to stockholders onrecord as of July 14, 2011 and payable on July 29, 2011. Total dividends paid tonon-controlling interests amounted to P13.On December 8, 2010, the BOD of BDO Leasing, a subsidiary of BDO UnibankGroup, approved the declaration of cash dividends at P0.10 per share on the2,162,475,312 shares outstanding at the date of declaration or for P216. The dividendswere declared to stockholders on record as of December 22, 2010 and payable onJanuary 18, 2011. Total dividends paid to non-controlling interests amounted to P27.On May 31, 2010, the BOD of BDO Leasing approved the declaration of cashdividends at P0.05 per share on the 2,162,475,312 shares outstanding at the date ofdeclaration or for a total of P108. The dividends were declared to stockholders onrecord as of June 30, 2010 and payable on July 26, 2010. Total dividends paid to noncontrollinginterests amounted to P13.

- 108 -20. INTEREST INCOMEInterest income consists of the following:BDO Unibank GroupNotes 2011 2010 2009Loans and other receivables 10 P 37,354 P 35,923 P 33,561Trading and investmentsecurities 9 10,588 10,203 11,345Due from other banks 7, 8 2,049 2,739 2,531Others 476 1,065 1,373P 50,467 P 49,930 P 48,810Parent Bank2011 2010 2009Loans and other receivables 10 P 36,128 P 34,389 P 32,238Trading and investmentsecurities 9 9,848 9,379 10,123Due from other banks 7, 8 1,884 2,646 2,473Others 164 130 177P 48,024 P 46,544 P 45,01121. INTEREST EXPENSEInterest expense is composed of the following:BDO Unibank GroupNotes 2011 2010 2009Deposit liabilities 15 P 13,006 P 12,645 P 14,735Bills payable and otherliabilities 16, 17, 18 3,682 3,127 3,516P 16,688 P 15,772 P 18,251Parent Bank2011 2010 2009Deposit liabilities 15 P 12,659 P 12,224 P 14,034Bills payable and otherliabilities 16, 17, 18 3,380 2,766 3,147P 16,039 P 14,990 P 17,181

- 109 -22. OTHER OPERATING INCOME AND EXPENSESOther operating income is composed of the following:BDO Unibank GroupNotes 2011 2010 2009Service charges, fees andcommissions 24 P 10,528 P 8,930 P 8,351Trading gain - net 9 3,907 5,585 3,340Trust fees 25 1,727 1,474 1,218Foreign exchange gains - net 1,714 261 294Income from assets acquired 12 947 140 512Dividend 13 256 239 71Miscellaneous - net 1,820 1,212 1,697P 20,899 P 17,841 P 15,483Parent BankNotes 2011 2010 2009Service charges, fees andcommissions 24 P 9,063 P 7,952 P 7,155Trading gain - net 9 3,400 5,185 3,041Foreign exchange gains(losses) - net 1,572 31 ( 71 )Trust fees 25 1,489 1,273 1,089Income from assets acquired 12 879 118 491Dividend income 13 653 820 1,286Miscellaneous – net 24 920 1,025 1,384P 17,976 P 16,404 P 14,375

- 110 -Other operating expenses consist of the following:BDO Unibank GroupNotes 2011 2010 2009Employee benefits 23 P 14,002 P 13,619 P 12,399Occupancy 31 4,365 4,467 4,334Taxes and licenses 3,662 3,510 3,424Advertising 2,172 2,022 1,278Security, clerical, messengerialand janitorial 1,952 1,894 1,881Insurance 1,694 1,515 1,367Fees and commissions 1,537 1,335 1,110Representation and entertainment 872 859 730Power, light and water 803 740 601Litigation/assets acquired 754 607 557Repairs and maintenance 737 671 638Travelling 602 537 583Information technology 460 621 585Supplies 442 413 351Amortization of intangibles 375 176 136Miscellaneous 13.06 1,887 1,803 2,155P 36,316 P 34,789 P 32,129Parent BankNotes 2011 2010 2009Employee benefits 23 P 13,107 P 12,776 P 11,520Occupancy 31 3,944 3,473 3,081Taxes and licenses 3,399 3,243 3,106Advertising 2,082 1,954 1,209Security, clerical, messengerialand janitorial 1,909 1,845 1,832Insurance 1,647 1,467 1,313Fees and commissions 1,321 1,172 968Power, light and water 766 702 573Representation and entertainment 763 755 666Litigation/assets acquired 729 577 533Repairs and maintenance 721 644 620Travelling 545 492 534Information technology 439 610 570Supplies 414 385 326Amortization of intangibles 371 174 134Miscellaneous 13.06 1,706 1,585 1,826P 33,863 P 31,854 P 28,811

- 111 -23. EMPLOYEE BENEFITS23.01 Employee Benefits ExpenseExpenses recognized for employee benefits are presented below.BDO Unibank Group2011 2010 2009Salaries and wages P 8,154 P 7,415 P 6,977Bonuses 2,734 2,367 2,217Retirement – defined benefit plan 1,319 1,336 1,309Social security costs 357 325 309Other benefits 1,438 2,176 1,587P 14,002 P 13,619 P 12,399Parent Bank2011 2010 2009Salaries and wages P 7,616 P 6,895 P 6,385Bonuses 2,557 2,201 2,079Retirement – defined benefit plan 1,237 1,264 1,239Social security costs 340 307 291Other benefits 1,357 2,109 1,52623.02 Post-employment BenefitsP 13,107 P 12,776 P 11,520The BDO Unibank Group maintains a partially funded, tax-qualified noncontributoryretirement plan that is being administered by the Parent Bank’s trust and investmentgroup covering all regular full-time employees. Actuarial valuations are made annuallyto update the post-employment benefit costs and the amount of contributions.The amounts of retirement benefit asset recognized as part of Retirement asset underOther Resources (see Note 13) are determined as follows:BDO Unibank GroupParent Bank2011 2010 2011 2010Present value of the obligation (P 12,070 ) (P 10,130 ) (P 11,422) (P 9,658 )Fair value of plan assets 9,044 7,390 8,689 7,106Deficiency of plan assets ( 3,026 ) ( 2,740 ) ( 2,733) ( 2,552 )Unrecognized actuarial losses 4,520 3,821 4,252 3,650Transfer from the plan assets - ( 72 ) - ( 72 )Unrecognized net transition obligation - ( 11 ) - -P 1,494 P 998 P 1,519 P 1,026

- 112 -The movements in the present value of the retirement benefit obligation recognized inthe books follows:BDO Unibank GroupParent Bank2011 2010 2011 2010Balance at beginning of year P 10,130 P 8,459 P 9,658 P 7,913Current service and interest costs 1,609 1,490 1,524 1,413Actuarial losses 959 856 838 837Transfer to (from) plan assets 5 ( 141 ) 5 4Benefits paid by the plan ( 633) ( 534 ) ( 603 ) ( 509 )Balance at end of year P 12,070 P 10,130 P 11,422 P 9,658The movements in the fair value of plan assets are presented below.BDO Unibank GroupParent Bank2011 2010 2011 2010Balance at beginning of year P 7,390 P 4,357 P 7,106 P 4,114Contributions paid into the plan 1,815 2,435 1,730 2,357Benefits paid by the plan ( 633) ( 534 ) ( 603 ) ( 509 )Actuarial gains 69 857 67 813Transfer to plan assets 5 11 5 77Expected return on plan assets 398 264 384 254Balance at end of year P 9,044 P 7,390 P 8,689 P 7,106As at December 31, the composition (in percentages) of plan assets is presented below.BDO Unibank GroupParent Bank2011 2010 2011 2010Placements in debt instruments 65.4% 55.4% 65.5% 55.1%Deposits in other banks 8.2% 11.8% 8.2% 11.2%Loans and other receivables 8.4% 5.4% 8.4% 5.4%Other properties 18.0% 27.4% 17.9% 28.3%100.0% 100.0% 100.0% 100.0%Actual returns on plan assets were P477 and P451 in 2011 and P1,087 and P1,067 in 2010in the BDO Unibank Group and the Parent Bank financial statements, respectively.The amounts of retirement benefits recognized in profit or loss are as follows:BDO Unibank Group2011 2010 2009Current service costs P 774 P 725 P 515Interest costs 835 771 818Expected return on plan assets ( 399) ( 264 ) ( 259 )Net actuarial losses recognized 109 112 111Net transition obligation (asset) recognized - ( 8) 124P 1,319 P 1,336 P 1,309

- 113 -Parent Bank2011 2010 2009Current service costs P 727 P 679 P 480Interest costs 797 734 761Expected return on plan assets ( 384) ( 254 ) ( 245)Net actuarial gain recognized 97 105 104Net transition obligation recognized - - 139P 1,237 P 1,264 P 1,239The movements in the retirement benefit asset (liability) recognized in the books follows:BDO Unibank Group Parent Bank2011 2010 2011 2010Balance at beginning of year P 998 ( P 97 ) P 1,026 (P 67 )Expense recognized ( 1,319 ) ( 1,336 )( 1,237) ( 1,264 )Retirement benefit liability ofacquired subsidiaries - ( 4 ) - -Contributions paid 1,815 2,435 1,730 2,357Balance at end of year P 1,494 P 998 P 1,519 P 1,026Presented below are the historical information related to the present value of theretirement benefit obligation, fair value of plan assets and deficit in the plan as well asexperienced adjustments arising on plan assets and liabilities.BDO Unibank Group2011 2010 2009 2008Present value of the obligation P 12,070 P 10,130 P 8,459 P 7,086Fair value of the plan assets 9,044 7,390 4,357 3,460Deficit in the plan P 3,026 P 2,740 P 4,102 P 3,626BDO Unibank Group2011 2010 2009 2008Experience adjustmentsarising on plan liabilities P 417 P 316 P 985 P 967Experience adjustmentsarising on plan assets P 78 P 845 P 148 (P 179 )

- 114 -Parent Bank2011 2010 2009 2008Present value of the obligation P 11,422 P 9,658 P 7,913 P 6,684Fair value of the plan assets 8,689 7,106 4,114 3,277Deficit in the plan P 2,733 P 2,552 P 3,799 P 3,407Experience adjustmentsarising on plan liabilities P 337 P 351 P 930 P 919Experience adjustmentsarising on plan assets P 67 P 813 P 137 (P 170 )The BDO Unibank Group expect to pay P81 as contributions to retirement benefitplans in 2012.In determining the amounts of retirement benefits, the following actuarial assumptionswere used:BDO Unibank Group Parent Bank2011 2010 2011 2010Discount rates 6.33% 8.25% 6.33% 8.3%Expected rate of returnon plan assets 5.0% 5.0% 5.0% 5.0%Expected rate of salary increases 10.0% 10.0% 10.0% 10.0%Assumptions regarding future mortality experience are based on published statistics andmortality tables. The average remaining working lives of an individual retiring at the ageof 60 is 27.The overall expected long-term rate of return on assets is 5%. The expected long-termrate of return is based on the portfolio as a whole and not on the sum of the returns onindividual asset categories. The return is based exclusively on historical returns, withoutadjustments.

24. RELATED PARTY TRANSACTIONS- 115 -In the ordinary course of business, BDO Unibank Group has loans, deposits and othertransactions with its related parties and with certain directors, officers, stockholders andrelated interest (DOSRI) as described below.Transactions with and between subsidiaries have been eliminated in the consolidatedfinancial statements.(a) Loans to Related PartiesUnder existing policies of BDO Unibank Group, these loans are made onsubstantially the same terms as loans granted to other individuals and businesses ofcomparable risks. The General Banking Act and BSP regulations limit the amountof the loans granted by a bank to a single borrower to 25% of equity. The amountof individual loans to DOSRI, of which 70% must be secured, should not exceedthe amount of the unencumbered deposit and book value of the investment in theBDO Unibank Group. In the aggregate, loans to DOSRI generally should notexceed the total equity or 15% of the total loan portfolio of BDO Unibank Group,whichever is lower.The following additional information relates to the DOSRI loans:BDO Unibank GroupParent Bank2011 2010 2011 2010Total DOSRI loans P 42,814 P 35,453 P 42,814 P 35,413Unsecured DOSRI loans 2,601 2,146 2,601 2,126% of DOSRI loans to totalloan portfolio 6.4% 6.6% 6.5% 6.7%% of unsecured DOSRI loans tototal DOSRI loans 6.0% 6.1% 6.1% 6.0%% of past due DOSRI loans tototal DOSRI loans 0.0% 0.0% 0.0% 0.0%% of non-performing DOSRI loansto total DOSRI loans 0.0% 0.0% 0.0% 0.0%DOSRI loans bear interest rates of 0% (Standby Letters of Credits or LCs) to 9.1%in 2011 and 0% (Standby LCs) to 11.0% for both 2010 and 2009 for both BDOUnibank Group and Parent Bank financial statements.(b) Deposits from Related PartiesAs of December 31, 2011 and 2010, total deposits made by the related parties toBDO Unibank Group amounted to P415,744 and P194,625, respectively. Therelated interest expense from deposits amounted to P38, P10, and P6 in 2011, 2010and 2009, respectively.

- 116 -(c) Other Transactions with Related PartiesA summary of other transactions of the Parent Bank with subsidiaries andassociates is shown below.(i) Loans and Advances to SubsidiariesThe Parent Bank grants non interest-bearing advances to subsidiaries forworking capital requirements, which are unsecured and without fixed repaymentterms. Outstanding advances to subsidiaries recognized as part Advances tosubsidiaries under Other Resources in the Parent Bank statements of financialposition amounted to P3,183 as of December 31, 2010 (nil in 2011) (see Note13). On the other hand, outstanding advances to subsidiaries recognized as partof Accounts receivable under Loans and Other Receivables amounted to P198and P1,397 as of December 31, 2011 and 2010, respectively.The Parent Bank also grants interest-bearing loans to subsidiaries withoutstanding balance of P3,238 and P351 as of December 31, 2011 and 2010,respectively, and are presented as part of Loans and discounts under Loans andOther Receivables in the Parent Bank’s statements of financial position.Interest income recognized on the loans amounted to P115 in 2011, P1 in 2010and P16 in 2009 and is presented as part of Net Interest Income in the ParentBank’s statements of income.(ii) Loans and Advances to AssociatesAs of December 31, 2011 and 2010, outstanding loans and advances toassociates amounted to P814 and 421, respectively, in the BDO Unibank Groupfinancial statements and P44 and P414, respectively, in the Parent Bankfinancial statements, presented as part of Loans and discount and Accountsreceivable under Loans and Other Receivables in the statements of financialposition (see Note 10). The BDO Unibank Group recognized P41 interestincome on the loans in 2011 (nil in 2010 and 2009).(iii) Income to the Parent Banki. BDOSHI engaged the Parent Bank to provide various support such ashuman resources management, audit, preparation and issuance of checks forand in behalf of BDOSHI, documentation and safekeeping/custodianship ofsecurities and collateral documents, accounting functions and review offinancial statements for BDOSHI. The service agreement shall continue tobe in force unless terminated by either party through a written notice ofeither party at least 60 days prior to date intended for termination. In 2011and 2010, total service fees both amounted to P692 thousand and ispresented as part of Service charges, fees and commissions under OtherOperating Income in the Parent Bank’s statements of income(see Note 22).BDOSHI also leases its office space from Parent Bank at P1.6 per year,shown as part of Miscellaneous - net under Other Operating Income in theParent Bank’s statements of income (see Note 22).

- 117 -ii. Generali has an existing Investment Management Agreement with the BDOUnibank Group. For services rendered, Generali shall pay BDO UnibankGroup management fees equivalent to 0.25% of managed funds and 0.10%of directed investments and custodianship which shall be based on theaverage daily balance of the fund type and shall be deducted quarterly fromthe fund. In 2011 and 2010, total service fees amounted to P24 and P22,respectively.There are no outstanding balances arising from these transactions as ofDecember 31, 2011 and 2010.(iv) Expenses of the Parent Banki. On May 30, 2007, ECN, merged with BDOSHI in 2011 (see Note 26.01),entered into a service agreement with the Parent Bank. Under thisagreement, ECN agreed to provide marketing, central operations, systemscredit and collection support and finance services to the Parent Bank inconnection with the operations of the credit card business. This agreement ispursuant to the terms and conditions of the MOA where ECN agreed to sellits rights, interests and obligations on its receivables and liabilities to theParent Bank.ii. BDO Technology, merged with BDOSHI in 2011 (see Note 26.01), renderstechnical services and/or management consultation to the Parent Bank andaffiliates at substantially the same terms as transactions with third parties.The transactions amounted to P5 each in 2011 and 2010.iii. BDO Unibank Group leases space from related parties for its branchoperations. For the years ended December 31, 2011, 2010 and 2009, totalrent expense paid to related parties amounted to P426, P349 and P315,respectively, and is included as part of Occupancy account (see Note 22).(v) OthersThe Parent Bank has cost sharing agreements with subsidiaries as follows:i. The Parent Bank shall provide BDO Capital with various support servicesconsisting of the following:1) Traditional bank transaction processing functions;2) Preparation and maintenance of BDO Capital's books of accounts;3) Generation of required external regulatory reports and internalmanagementinformation;4) General and periodic examination of the books of BDO Capital'saccounts;5) Advertising and marketing services;6) Information technology support services;7) Recruitment and selection of personnel;8) Preparation of payroll and benefit administration; and,9) Other administrative and general services.

- 118 -ii. On January 31, 2008, BDO Securities entered into a service agreement withthe Parent Bank. Under this agreement, the Parent Bank shall provide varioussupport services such as general accounting, internal audit, human resourcesmanagement, advertising and marketing services, information technologysystems/processing, legal support and administrative and general services.Outstanding balances arising from these transactions as of December 31, 2011and 2010 both amounted to P6.(vi) The salaries and other compensation given to BDO Unibank Group’s keymanagement are as follows:BDO Unibank Group2011 2010 2009Salaries and wages P 533 P 513 P 504Bonuses 262 255 239Social security costs andother benefits 28 33 34P 823 P 801 P 777Parent Bank2011 2010 2009Salaries and wages P 376 P 349 P 326Bonuses 189 178 165Social security costs andother benefits 20 25 19P 585 P 552 P 51025. TRUST OPERATIONSThe following securities and other properties held by BDO Unibank Group in fiduciaryor agency capacity (for a fee) for its customers are not included in the accompanyingBDO Unibank Group statements of financial position since these are not properties ofBDO Unibank Group (see Note 31.03).BDO Unibank Group Parent Bank2011 2010 2011 2010Investments P 692,480 P 531,025 P 584,740 P 464,093Others 18,931 38,932 17,609 3,552P 711,411 P 569,957 P 602,349 P 467,645

- 119 -In compliance with the requirements of the General Banking Act relative to the Bank'strust functions:(a) Investment in government securities (shown as part of Held-to-maturity Investments)with a total face value of P7,043 and P5,887 as of December 31, 2011 and 2010,respectively, in BDO Unibank Group and P5,939 and P4,791 as of December 31, 2011and 2010, respectively, in the Parent Bank are deposited with the BSP as security for theBank's faithful compliance with its fiduciary obligations; and, A certain percentage ofthe trust income is transferred to surplus reserve. This yearly transfer is required untilthe surplus reserve for trust function is equivalent to 20% of the BDO UnibankGroup’s authorized capital stock. As of December 31, 2011 and 2010, the reserve fortrust functions amounted to P106 and P89, respectively, and is included as part ofSurplus Reserves in BDO Unibank Group equity.Income from trust operations, shown as Trust Fees under Other Operating Income,amounted to P1,727, P1,474, and P1,218, for the years ended December 31, 2011, 2010and 2009, respectively, in the BDO Unibank Group statements of income and P1,489,P1,273 and P1,089 for the years ended December 31, 2011, 2010 and 2009, respectively,in the Parent Bank statements of income.26. MERGERS AND ACQUISITIONS26.01 Mergers Among SubsidiariesAs discussed in Note 13.01, the Parent Bank approved the five-way merger ofwholly-owned subsidiaries: BDOSHI, ECN, ESHC, BDO Technology, and SPHI, withBDOSHI as the surviving corporation. The Merger was accounted for using thepooling-of-interests method since the merging entities are under the common control ofthe BDO Unibank Group (see Note 13.01.02).26.02 Acquisition of GE Money BankIn May 2009, the Parent Bank and GE Capital, a financial services unit of the GeneralElectric Company, announced the signing of a definitive agreement to transfer GEMBin the Philippines into the Parent Bank. As part of the agreement, GE Capital will alsomake an investment in the Parent Bank by acquiring a stake of approximately 1.5%.The transaction consolidated GEMB’s business into the Parent Bank, including 30,000customers, 350 employees, a network of 31 branch licenses and 38 ATMs nationwide.On August 24, 2009, the Parent Bank completed the purchase of 98.81% of the issuedand outstanding common stock and 100% of the preferred stock of GEMB for aconsideration of P2,000.The agreed price for the net assets of GEMB at the closing date amounted to P1,500.Hence, the Parent Bank recognized goodwill of P500 representing the excess ofpurchase price over the fair value of GEMB’s net assets. The goodwill is included inthe Other Resources account in the statement of financial position. The acquisition wasapproved by the BOD and by the BSP on May 27, 2009 and July 30, 2009, respectively.On August 12, 2010, GEMB amended its Articles of Incorporation and adopted thename BDO Elite Savings Bank, Inc.

- 120 -27. TAXES27.01 Current and Deferred TaxesThe components of tax expense for the years ended December 31 follow:BDO Unibank Group2011 2010 2009Reported in profit or lossCurrent tax expense:Regular corporate income tax (RCIT) at 30% P 337 P 203 P 231Minimum corporate income tax (MCIT) at 2% 417 384 297Final taxes at 20%, 15%, 10% and 7.5% 759 965 9801,513 1,552 1,508Deferred tax expense relating toorigination and reversalof temporary differences 117 79 151P 1,630 P 1,631 P 1,659Reported in other comprehensive incomeMovements in fair value of AFS securities P 2 P 29 P 2Movements in revaluation increment ( 20) ( 6) ( 59)(P 18) P 23 ( P 57)Parent Bank2011 2010 2009Reported in profit or lossCurrent tax expense – MCIT at 2% P 369 P 359 P 273Current tax expense – RCIT at 30% 57 - -Final taxes at 20%, 15%, 10% and 7.5% 652 879 9031,078 1,238 1,176Deferred tax expense relating toorigination and reversal oftemporary differences 121 59 87P 1,199 P 1,297 P 1,263Reported in other comprehensive incomeMovements in revaluation increment ( P 20 )( P 6) (P 54)Movements in fair value of AFS securities - - ( 26)( P 20) (P 6) ( 80)

- 121 -The reconciliation of the tax on pretax profit computed at the statutory tax rates to taxexpense is shown below.BDO Unibank Group2011 2010 2009Tax on pretax profit at 30% P 3,665 P 3,154 P 2,328Adjustment for income subjected to lowerincome tax rates ( 191) ( 444) ( 633 )Tax effects of:Income exempt from tax ( 3,253) ( 3,037) ( 1,010 )Non-deductible expenses 2,208 2,439 585Deductible temporary differences not recognized ( 1,043 ) 489 51Net operating loss carryover (NOLCO)not recognized ( 114 ) ( 1,374 ) 14Tax-exempt income of FCDU - - ( 1,314)Others 358 404 1,638Tax expense reported in profit or loss P 1,630 P 1,631 P 1,659Parent Bank2011 2010 2009Tax on pretax profit at 30% P 3,046 P 2,919 P 2,286Adjustment for income subjected to lowerincome tax rates ( 133) ( 404) ( 531)Tax effects of:Deductible temporary differences not recognized ( 995) 477 1,439Income exempt from tax ( 2,966 ) ( 2,960) ( 1,015 )Non-deductible expenses 1,993 2,266 542NOLCO not recognized (applied) ( 115) ( 1,360) ( 458 )Tax-exempt income of FCDU - - ( 1,314 )Others 369 359 314Tax expense reported in profit or loss P 1,199 P 1,297 P 1,263The components of the net deferred tax assets (see Note 13) as of December 31 follow:Statements of Financial PositionBDO Unibank GroupParent Bank2011 2010 2011 2010Deferred tax assets:Allowance for impairment P 6,024 P 6,012 P 5,916 P 5,916Unamortized past service cost 577 564 576 560Lease income differential 82 74 82 74NOLCO 43 9 - -Others 13 36 - -6,739 6,695 6,574 6,550Deferred tax liabilities:Revaluation increment 480 499 477 497Lease income differential 189 180 - -Changes in fair values of AFS 63 62 - -Capitalized interest 56 58 56 58Others 466 312 455 3081,254 1,111 988 863Net Deferred Tax Assets P 5,485 P 5,584 P 5,586 P 5,687

- 122 -Movements in net deferred tax assets for the year ended December 31 follow:BDO Unibank GroupStatements of Income2011 2010 2009Lease income differential P 1 P 31 P 169Allowance for impairment ( 12) ( 24 ) 34Capitalized interest ( 2) ( 2 ) ( 2 )Unamortized past service costs ( 13) ( 240 ) 56NOLCO ( 34) - 50Others 177 314 ( 156 )Deferred Tax Expense P 117 P 79 P 151Parent BankUnamortized past service costs ( P 16) ( P 241 ) P 56Allowance for impairment - 1 22Capitalized interest ( 2) ( 2 ) ( 2 )NOLCO - - 11Others 139 301 -Deferred Tax Expense P 121 P 59 P 87Statements of Comprehensive IncomeBDO Unibank GroupParent Bank2011 2010 2011 2010Movements in fair valueof AFS securities P 2 P 29 P - P -Movements in revaluationincrement ( 20) ( 6) ( 20 ) ( 6 )Deferred Tax Expense (Income) ( P 18) P 23 ( P 20 ) ( P 6 )BDO Unibank Group is subject to MCIT, which is computed at 2% of gross income,as defined under tax regulations or RCIT, whichever is higher.The breakdown of NOLCO with the corresponding validity periods follows:BDO UnibankYear Group Parent Bank Valid Until2011 P 301 P - 20142010 6 - 20132009 39 - 2012In 2011 and 2010, NOLCO amounting to P383 and P4,534, respectively, were appliedby the Parent Bank.

- 123 -The breakdown of MCIT with the corresponding validity periods follows:BDO UnibankYear Group Parent Bank Valid Until2011 P 369 P 369 20142010 367 359 20132009 283 273 2012P 1,019 P 1,001The amounts of unrecognized deferred tax assets arising from NOLCO and othertemporary differences as of December 31, 2011 and 2010 are as follows:BDO Unibank Group2011 2010Tax Base Tax Effect Tax Base Tax EffectAllowance for impairment P 25,160 P 7,548 P 26,033 P 7,810NOLCO 203 61 1,793 538MCIT 1,019 1,019 713 713Others 3,782 1,134 677 203P 30,164 P 9,762 P 29,216 P 9,264Parent Bank2011 2010Tax Base Tax Effect Tax Base Tax EffectAllowance for impairment P 23,153 P 6,946 P 24,373 P 7,312NOLCO - - 1,711 513MCIT 1,001 1,001 710 710Others 3,781 1,134 599 18027.02 Optional Standard DeductionsP 27,935 P 9,081 P 27,393 P 8,715Effective July 2008, RA No. 9504 was approved giving corporate tax payers an optionto claim itemized deduction or optional standard deduction (OSD) equivalent to 40%of gross sales. Once the option is made at the beginning of the taxable year, it shall beirrevocable for the taxable year for which the option was made. BDO Unibank Groupclaims itemized deduction for tax purposes.27.03 Change in Applicable Tax RateEffective January 1, 2009, in accordance with RA No. 9337, RCIT rate was reducedfrom 35% to 30% and non-allowable deductions for interest expense from 42% to 33%of interest income subjected to final tax.

- 124 -27.04 Gross Receipts Tax (GRT)/ Value-added Tax (VAT)Beginning January 1, 2003, the imposition of VAT on banks and financial institutionsbecame effective pursuant to the provisions of RA No. 9010. The Parent Bank andBDO Private became subject to VAT based on their gross receipts, in lieu of the GRTunder Sections 121 and 122 of the Tax Code which was imposed on banks, non-bankfinancial intermediaries and finance companies in prior years.However, on January 29, 2004, RA No. 9238 reverted the imposition of GRT on banksand financial institutions.On May 24, 2005, the amendments on RA No. 9337 was approved amending, amongothers, the gross GRT on royalties, rentals of property, real or personal, profits fromexchange and on net trading gains within the taxable year on foreign currency, debtsecurities, derivatives and other similar financial instruments from 5% to 7% effectiveNovember 1, 2005.27.05 Documentary Stamp Tax (DST)Documentary stamp taxes (at varying rates) are imposed on the following:(a) Bank checks, drafts, or certificate of deposit not bearing interest, and otherinstruments;(b) Bonds, loan agreements, promissory notes, bills of exchange, drafts, instrumentsand securities issued by the Government or any of its instrumentalities, depositsubstitute debt instruments, certificates of deposits bearing interest and other notpayable on sight or demand;(c) Acceptance of bills of exchange and letters of credit; and,(d) Bills of lading or receipt.On February 7, 2004, RA No. 9243 was passed amending the rates of DST, thesignificant provisions of which are summarized below.(a) On every issue of debt instruments, there shall be collected a DST of one peso oneach two hundred pesos or fractional part thereof of the issue price of any suchdebt instrument. Provided, that for such debt instruments with terms of less thanone year, the DST to be collected shall be of a proportional amount in accordancewith the ratio of its term in number of days to 365 days. Provided further that onlyone DST shall be imposed on either loan agreement or promissory notes to securesuch loan.(b) On all sales or transfer of shares or certificates of stock in any corporation, thereshall be collected a DST of 75 centavos on each two hundred pesos, or fractionalpart thereof, of the par value of such stock.(c) On all bills of exchange or drafts, there shall be collected a DST of 30 centavos oneach two hundred pesos, or fractional part thereof, of the face value of any such billof exchange or draft.

- 125 -(d) The following instruments, documents and papers shall be exempt from DST:• Borrowings and lending of securities executed under the Securities Borrowingand Lending Program of a registered exchange, or in accordance withregulations prescribed by the appropriate regulatory authority;• Loan agreements or promissory notes, the aggregate of which does not exceedP250 thousand or any such amount as may be determined by the Secretary ofFinance, executed by an individual for his purchase on installment for hispersonal use;• Sale, barter or exchange of shares of stock listed and traded through the localstock exchange for a period of five years from the affectivity of RA No. 9243;• Fixed income and other securities traded in the secondary market or through anexchange;• Derivatives including repurchase agreements and reverse repurchaseagreements;• Bank deposit accounts without a fixed term or maturity; and,• Interbank call loans with maturity of not more than seven days to coverdeficiency in reserve against deposit liabilities.27.06 Supplementary Information Required by the Bureau of Internal RevenueOn December 9, 2011, the Bureau of Internal Revenue (BIR) issued RR 19-2011 whichprescribes the new form that will be used for income tax filing covering and startingwith periods ending December 31, 2011 and onwards. This recent RR requiresschedules of taxable revenues and other non-operating income, costs of sales andservices, and itemized deductions, to be disclosed in the notes to financial statements.On November 25, 2010, the BIR issued RR No. 15-2010, which requires certaininformation on taxes, duties and license fees paid or accrued during the taxable year tobe disclosed as part of the notes to financial statements.The Parent Bank, however, presented this tax information required by the BIR as asupplementary schedule filed separately from the basic financial statements.

- 126 -28. EARNINGS PER SHAREBasic earnings per share were computed as follows:BDO Unibank Group2011 2010 2009Net profit attributable to shareholdersof the Parent Bank P 10,531 P 8,825 P 6,035Dividends on preferred shares ( 330) ( 330) ( 84 )Net profit available to common shares 10,201 8,495 5,951Divided by the weighted average numberof outstanding common shares (in millions) 2,607 2,522 2,315Basic earnings per share P 3.91 P 3.37 P 2.57Diluted earnings per share were computed as follows:BDO Unibank Group2011 2010 2009Net profit attributable to shareholdersof the Parent Bank P 10,201* P 8,495* P 6,035Divided by the weighted average numberof outstanding common shares (in millions):Outstanding common shares 2,607 2,522 2,315Potential common shares from assumedconversion of preferred shares * * 128Potential common shares from assumedconversion of stock option plan - - 1Total weighted average numberof common shares after assumedconversion of convertible preferred shares 2,607 2,522 2,444Diluted earnings per share P 3.91 P 3.37 P 2.47* Net profit attributable to shareholders of the Parent Bank is reduced by dividends on preferred shares asthese were not assumed to be converted. Potential common shares from assumed conversion of these preferredshares are anti-dilutive in 2011 and 2010.

- 127 -Basic earnings per share were computed as follows:Parent Bank2011 2010 2009Net profit P 8,954 P 8,433 P 6,356Dividends on preferred shares ( 330) ( 330) ( 84 )Net profit available to common shares 8,624 8,103 6,272Divided by the weighted average numberof outstanding common shares (in millions) 2,607 2,522 2,315Basic earnings per share P 3.31 P 3.21 P 2.71Diluted earnings per share were computed as follows:Parent Bank2011 2010 2009Net profit P 8,624* P 8,103 * P 6,356Divided by the weighted average numberof outstanding common shares (in millions):Outstanding common shares 2,607 2,522 2,315Potential common shares from assumedconversion of convertible preferred shares * * 128Potential common shares from assumedconversion of stock option plan - - 1Total weighted average number ofcommon shares after assumed conversionof convertible preferred shares 2,607 2,522 2,444Diluted earnings per share P 3.31 P 3.21 P 2.60* Net profit attributable to shareholders of the Parent Bank is reduced by dividends on preferred sharesas these were not assumed to be converted. Potential common shares from assumed conversion of thesepreferred shares are anti-dilutive in 2011 and 2010.

- 128 -29. SELECTED FINANCIAL PERFORMANCE INDICATORS(a) The following are some measures of the BDO Unibank Group and Parent Bank’sfinancial performance:BDO Unibank GroupReturn on average equity:2011 2010 2009Net profit 11.4% 11.3% 9.7%Average total capital accountsReturn on average resources:Net profit 1.0% 1.0% 0.7%Average total resourcesNet interest margin:Net interest income 3.5% 4.1% 4.1%Average interest earning resourcesReturn on common equity:Net profit 11.7% 11.7% 10.4%Average common equityCapital to risk assets ratio*:Combined credit, market andoperational risks 15.8% 13.8% 12.2%* Computed using balances prepared under FRSP for banksParent BankReturn on average equity:Net profit 10.4% 11.6% 11.0%Average total capital accountsReturn on average resources:Net profit 0.9% 1.0% 0.8%Average total resourcesNet interest margin:Net interest income 3.5% 4.0% 4.0%Average interest earning resources

- 129 -2011 2010 2009Parent BankReturn on common equity:Net profit 10.6% 12.0% 11.9%Average common equityCapital to risk assets ratio*:Combined credit, market andoperational risk 13.6% 12.1% 10.4%* Computed using balances prepared under FRSP for banks(b) Secured liabilities and resources pledged as security are shown below.BDO Unibank GroupParent Bank2011 2010 2011 2010Aggregate amountof secured liabilities P 14,939 P 23,997 P 14,939 P 23,997Aggregate amount of resourcespledged as security P 17,336 P 26,988 P 17,336 P 26,98830. EVENTS AFTER THE REPORTING PERIODOn February 16, 2012, BDO Unibank Group issued Senior Notes with a face value ofUS$300 million at a price of 99.448 or a total price of US$298 million. The SeniorNotes, which will mature in February 16, 2017, bear a coupon rate of 4.5% per annum,with effective yield of 4.625% per annum, and will be payable semi-annually everyFebruary 16 and August 16 starting on August 16, 2012. The net proceeds from theissuance of Senior Notes are intended for general funding and re-lending purposes.On January 28, 2012, the Parent Bank's BOD approved the declaration of annual cashdividends on peso denominated preferred shares at the rate of 6.5% per annum for atotal dividend of P330 which was approved by BSP on February 20, 2012.31. COMMITMENTS AND CONTINGENCIES31.01 LitigationsBDO Unibank Group has pending claims and/or is a defendant in various legal actionsarising from the ordinary course of business operations. As of December 31, 2011,management believes that no such legal proceedings are expected to have materialadverse effect on the BDO Unibank Group’s financial position. The Parent Bank is arespondent in two arbitration proceedings under the International Chamber ofCommerce (ICC) arising from isolated transactions, i.e., the sale of its equityinvestments.

- 130 -Sale of BankardBDO (as successor in interest of EPCIB), as respondent, and RCBC CapitalCorporation (“RCBC Capital”), as claimant, were involved in international arbitrationproceedings.The arbitration proceedings arose from the Sale and Purchase Agreement (“SPA”)executed between RCBC Capital and EPCIB in May 2000, whereby EPCIB sold toRCBC Capital its 67% stake in the outstanding capital stock of Bankard, Inc.(“Bankard”). RCBC Capital claims an alleged breach of the BDO’s warranty onBankard’s financial statements and asked for rescission of its purchase and restitution ofall amounts paid to EPCIB with damages or, if rescission cannot be granted, damagesof at least P586. EPCIB was of the position that RCBC Capital’s claim is one foroverpayment or price reduction that is time-barred since the SPA requires that demandfor price reduction be presented in writing on or before December 31, 2000. Despiteactual due diligence, no such demand had been submitted.With one of the three arbitrators dissenting, the Arbitral Tribunal issued two partial awards(dated September 27, 2007 and May 28, 2008) and a Final Award dated June 16, 2010awarding to RCBC P349 and reimbursement of arbitration costs.In December 2010, the Court of Appeals (CA) reversed and set aside the confirmationof the Second Partial Award, which ordered BDO to reimburse the costs advanced byRCBC and deemed BDO’s counterclaim waived due to alleged non-payment of costs.RCBC Capital has appealed this reversal to the Supreme Court where the matterremains pending.On July 1, 2010, BDO filed a petition to vacate the Final Award in accordance with lawand the rules of court applicable to arbitration. The Final Award was vacated or setaside by the Regional Trial Court of Makati (RTC Makati) in February 2011. RCBCCapital has appealed this to the Court of Appeals where the case remains pending.RCBC Capital sought to confirm the same Final Award in a separate proceeding in RTCMakati on July 28, 2010. Despite questions on jurisdiction, RTC Makati (Branch 148)confirmed the final award last November 10, 2010. It also denied BDO’s motion forreconsideration in August 2011 and added interest charges not awarded by theArbitration Tribunal. Execution pending appeal was also swiftly awarded andimplemented last September 2011 in highly questionable and irregular procedure. BDOappealed the confirmation and questioned the execution of the Final Award before theCA. In order to stop the implementation of the said writ of execution, BDO opted totender on September 13, 2011 the amount of P638, presented as part of Accountsreceivable under Loans and Other Receivables (see Note 10), without prejudice to theoutcome of the pending appeals and cases.Management believes that RCBC Capital’s claim is baseless and without merit and thatBDO’s position will be sustained in the final resolution of the cases pending with theCA. In any case, the resulting liability, if any, from such a claim, will not have a materialadverse effect on the financial position and performance of the BDO Unibank Group.

- 131 -Sale of MaxicareBDO Unibank is a defendant/respondent in legal proceedings arising from the sale ofits 60% stake in Maxicare in 2007. In January 2008, claimants filed a petition in theRTC Makati for the issuance of a writ of preliminary Injunction and that “with respectto respondents Pin-An Holdings Corporation and Antonio L. Go, in the remote eventthat a Deed of Assignment/Sale has been executed, to declare such Deed null and voidand to direct said respondents to deliver the aforementioned stock certificatesrepresenting the 120,000 shares in Maxicare to Petitioners [Claimants].”The RTC Makati denied the TRO and writ of replevin on the ground that the Claimantshave no clear and unmistakable right over the shares, as there was no perfected contractof sale between the Bank and the claimants. In April 2008, the RTC Makati also ruledthat the Bank’s sale of the shares to Pin-An Holdings is valid and its order declaring thevalidity of the sale of Maxicare shares has become final under said Interim Rules. Theclaimants did not appeal the dismissal. Their petition for certiorari with the CA was alsodismissed and the CA held that there was no grave abuse of discretion in the issuance ofthe RTC Makati ruling. The claimants filed their petition for review with the SupremeCourt in July 2010. Last December 7, 2011, claimants withdrew this petition.After an unfavourable decision had been rendered against them in April 2008, theClaimants filed a Request for Arbitration with the ICC – International Court ofArbitration in Singapore in May 2008 on the same issue of the petitioners’ right to buythe shares. As of November 25, 2009, the Singapore arbitration hearing has beensuspended by virtue of a writ of injunction issued by the RTC Makati restraining theparties, and their respective representatives from participating and performing any act inconnection with the arbitration case. The injunction has been issued in connection withthe petition filed by Maxicare for a declaration as to the rightful shareholder of its 60%outstanding shares. Claimants have questioned the issuance of the writ of preliminaryinjunction in the CA where their case remains pending.Last December 2011, a Second Request for Arbitration was filed by claimants againstBDO, Maxicare, Pin An Go Holdings and several other individual respondents beforethe ICC involving the same sale of 120,000 shares. Claimants sought to nullify a seriesof purported transfers of shares in Maxicare Healthcare Corporation (“Maxicare”) thatwere made between 2007 and 2009 by BDO and other Original Stockholders to Pin-AnHoldings Corporation (“Pin-An”) which are null and void because they contraveneprovisions of the Stockholders Agreement dated 13 February 1998 (“SA”). Claimantsalso argued that in November 2011, Maxicare directors approved illegitimateamendments to Maxicare’s Articles of Incorporation and By-laws so as to indirectlycircumvent Claimants’ rights under the stockholders’ agreement.BDO has written the ICC raising its objections on jurisdiction, forum shopping and theexistence of a Philippine ruling on the validity of the sale of shares. The RTC alsorecently issued an order extending the injunction to the second request for arbitration.To date the ICC has not yet directed the constitution of an arbitral tribunal.Management continues to believe that the above claim is baseless and without merit orthat the resulting liability, if any, from such a claim, will not have a material adverseeffect on the BDO Unibank Group’s financial position and financial performance.

- 132 -PEACe bondsOn October 18, 2001, the Bureau of Treasury (BTr), through an auction, offeredten-year zero coupon treasury bonds, called the Poverty Eradication and AlleviationCertificates Bonds (PEACe Bonds), to Government Securities Eligible Dealers.Rizal Commercial Banking Corporation (RCBC) won the bid in the same year and wasawarded approximately P35,000 worth of government bonds. The PEACe Bonds weresubsequently purchased by investors, including the BDO Unibank, who relied in goodfaith on representations that the same are not subject to 20% Final Withholding Tax(20% FWT).On July 16, 2004, the Commissioner of Internal Revenue ruled that the mere issuanceof government debt instruments and securities is deemed as falling within the coverageof deposit substitute irrespective of the number of lenders at the time of origination.Accordingly, government debt instruments and securities are not exempt from taxes.On October 7, 2011, or nearly ten years after the auction, the Commissioner of InternalRevenue, upon the request of the Secretary of Finance, issued a ruling stating that thePEACe Bonds are not exempt from the 20% FWT.October 16, 2011, Eight Banks that purchased the PEACe Bonds filed a case in theSupreme Court to enjoin the BTr and BIR from withholding or collecting the 20% finalwithholding tax, upon payment at maturity, as well as from enforcing the 2011 ruling.On October 17, 2011, the BIR issued a second ruling stating that the 20% FWT shouldbe imposed upon all subsequent holders of the PEACe Bonds.On October 18, 2011, the Supreme Court unanimously resolved, and issued aTemporary Restraining Order (TRO) which enjoined the government fromimplementing 2011 rulings that the Peace Bonds were subject to 20% final withholdingtax. The Supreme Court instructed that the disputed amount should be placed inescrow by the petitioning banks.On October 27, 2011, RCBC and RCBC Capital, as the original purchasers of thePEACe Bonds filed a Motion for Leave of Court to Intervene, which was granted bythe Supreme Court on November 15, 2011On November 15, 2011, the Supreme Court required the Government to show causewhy they failed to comply with the October 18, 2011 TRO and, required them tocomply with said TRO within 10 days from notice, which would cause the return of thefunds to the petitioning banks, for the latter to place in escrow.The Government has requested additional time within which to file their Comment onthe Petitions-in-intervention.Management believes that the petitioning banks have a strong case, and that theprobability of recovery is high.

- 133 -OthersThe BDO Unibank Group is also a defendant in various cases pending in courts foralleged claims against the BDO Unibank Group, the outcomes of which are not fullydeterminable at present. As of December 31, 2011, management believes that, liabilitiesor losses, if any, arising from these claims would not have a material effect on thefinancial position and results of operations of BDO Unibank Group and will berecognized if and when a final resolution by the courts is made on each claim.31.02 LeasesBDO Unibank Group leases the premises of its head office and most of its branchoffices for periods ranging from one to 15 years from the date of the contracts; termsare renewable upon the mutual agreement of the parties. Rent expense, reported as partof Occupancy under Other Operating Expenses account in the statements of income,amounted to P1,889 in 2011, P1,759 in 2010, and P1,651 in 2009 in the BDO UnibankGroup financial statements and P1,812 in 2011, P1,659 in 2010, and P1,531 in 2009 inthe Parent Bank financial statements (see Note 22).The estimated minimum future annual rentals for the next five years follow:31.03 OthersBDOYear Unibank Group Parent Bank2012 P 1,475 P 1,4122013 1,675 1,6062014 1,900 1,8282015 2,158 2,0842016 2,456 2,379P 9,664 P 9,309In the normal course of BDO Unibank Group’s operations, there are variousoutstanding commitments and contingent liabilities such as guarantees, commitments toextend credit, etc., which are not reflected in the BDO Unibank Group financialstatements. BDO Unibank Group recognizes in its books any losses and liabilitiesincurred in the course of its operations as soon as these become determinable andquantifiable. Management believes that, as of December 31, 2011 and 2010, noadditional material losses or liabilities are required to be recognized in theaccompanying financial statements of BDO Unibank Group as a result of the abovecommitments and contingencies.

- 134 -Following is a summary of BDO Unibank Group’s commitments and contingentaccounts:BDO Unibank Group Parent BankNote 2011 2010 2011 2010Trust department accounts 25 P 711,411 P 569,957 P 602,349 P 467,645Forward exchange sold 188,610 162,503 162,359 134,715Forward exchange bought 151,892 143,723 125,642 115,927Committed credit lines 111,469 89,694 110,148 89,618Unused commercialletters of credit 33,391 30,991 33,391 30,991Republic of the Philippineswarrants 15,021 15,021 15,021 15,021Interest rate swap receivable 8,832 25,971 8,044 5,481Interest rate swap payable 8,582 25,923 8,044 5,481Bills for collection 6,029 5,523 6,029 5,523Spot exchange sold 4,457 4,162 4,418 4,123Spot exchange bought 7,828 3,617 7,828 3,617Late deposits/paymentsreceived 2,208 1,538 2,208 1,538Credit default swap 2,195 1708 2,195 889Outstanding guaranteesissued 1,220 862 1,220 862Export letters of creditconfirmed 97 130 97 130Financial options sold - 1,320 - 1,320Other contingent accounts 5,775 5,123 5,773 5,123--- o ---