SECURITIES AND EXCHANGE COMMISSION SEC FORM 17 ...

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SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A, AS AMENDED

ANNUAL REPORT PURSUANT TO SECTION 17

OF THE SECURITIES REGULATION CODE AND SECTION 141

OF THE CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended December 31, 2015

2. SEC Identification Number ASO94-002733

3. BIR Tax Identification No. 003-921-057

4. Exact name of issuer as specified in its charter EAST WEST BANKING CORPORATION

5. Metro Manila, Philippines . 6. (SEC Use Only)

Province, Country or other jurisdiction of

incorporation or organization

Industry Classification Code:

7. The Beaufort, 5th Avenue, corner 23rd Street, Fort Bonifacio Global City, Taguig City

Address of principal office

8. +632 575-3888

Issuer's telephone number, including area code

9. Former name, former address, and former fiscal year, if changed since last report.

10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA

Title of Each Class Number of Shares of Common Stock

Outstanding and Amount of Debt Outstanding

Common shares 1,499,983,610 shares

11. Are any or all of these securities listed on a Stock Exchange.

Yes [ X ] No [ ]

If yes, state the name of such stock exchange and the classes of securities listed therein:

The above common shares are listed in the Philippine Stock Exchange (PSE)

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12. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder or

Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 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. State the aggregate market value of the voting stock held by non-affiliates of the registrant. The

aggregate market value shall be computed by reference to the price at which the stock was sold, or the

average bid and asked prices of such stock, as of a specified date within sixty (60) days prior to the date

of filing. If a determination as to whether a particular person or entity is an affiliate cannot be made

without involving unreasonable effort and expense, the aggregate market value of the common stock

held by non-affiliates may be calculated on the basis of assumptions reasonable under the

circumstances, provided the assumptions are set forth in this Form. (See definition of "affiliate" in

“Annex B”).

Shares Held by Non-Affiliates

as of March 31, 2016

Market Value per Share as of

March 31, 2016

Total Market Value

as of March 31, 2016

316,897,522 shares P=15.38 P=4,873,883,888.36

APPLICABLE ONLY TO ISSUERS INVOLVED IN

INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS

DURING THE PRECEDING FIVE YEARS:

14. Check whether the issuer has filed all documents and reports required to be filed by Section 17 of the

Code subsequent to the distribution of securities under a plan confirmed by a court or the Commission.

Not Applicable

DOCUMENTS INCORPORATED BY REFERENCE

15. If any of the following documents are incorporated by reference, briefly describe them and identify part

of SEC Form 17-A into which the document is incorporated:

(a) Any annual report to security holders;

(b) Any information statement filed pursuant to SRC Rule 20;

(c) Any prospectus filed pursuant to SRC Rule 8.1.

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EAST WEST BANKING CORPORATION

TABLE OF CONTENTS

SEC FORM 17-A

Page

PART I – BUSINESS AND GENERAL INFORMATION

Item 1. Business 1

Item 2. Properties 41

Item 3. Legal Proceedings 41

Item 4. Submission of Matters to a Vote of Security Holders 42

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer's Common Equity and Related Stockholder Matters 42

Item 6. Management's Discussion and Analysis or Plan of Operation 44

Item 7. Financial Statements 57

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

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PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer 58

Item 10. Executive Compensation 65

Item 11. Security Ownership of Certain Beneficial Owners and Management 66

Item 12. Certain Relationships and Related Transactions 68

PART IV – CORPORATE GOVERNANCE

Item 13. Corporate Governance 69

PART V - EXHIBITS AND SCHEDULES

ANNEX A – Certification on Qualification of Independent Directors

ANNEX B – Certification that None of the Directors and Officers work with the Government

ANNEX C – List of Owned and Leased Branches

ANNEX D – Annual Corporate Governance Report

ANNEX E – 2015 Audited Consolidated Financial Statements

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PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business

Overview of the Bank

East West Banking Corporation (“EW”, “EastWest”) was granted authority by the Bangko Sentral ng Pilipinas

(BSP) to operate as a commercial bank under Monetary Board (MB) Resolution. No. 101 dated July 6, 1994,

and commenced operations on July 8, 1994. EastWest was also granted authority by the BSP to operate an

expanded foreign currency deposit unit under MB Resolution No. 832 dated August 31, 1994. As of

December 31, 2015 EastWest is effectively 78% owned by Filinvest Development Corporation (“FDC”).

EastWest’s ultimate parent company is A.L. Gotianun, Inc..

On February 17, 2014, the SEC approved the application of EW to change its registration from a “Government

Securities Eligible Dealer” (with broker-dealer of securities functions) to an “Underwriter of Securities

Engaged in Dealing Government Securities” (with broker-dealer of securities functions), in accordance with

the SRC and other applicable laws, rules and regulations. EW’s registration as an “Underwriter of Securities

Engaged in Dealing Government Securities” had an initial validity of up to December 31, 2014, and has been

extended until the end 2016.

EW has been listed on the PSE since May 7, 2012.

Mergers and Acquisitions

In 2003, EW acquired Ecology Savings Bank, Inc., while in 2009, EW acquired AIG PhilAm. In 2011, EW

acquired Green Bank (A Rural Bank), Inc. (GBI). It’s most recent acquisition was in 2012, when it acquired

Finman Rural Bank, Inc. (FRBI).

On August 19, 2011, EW entered into a deed of assignment for the purchase of a majority of the outstanding

shares and control of GBI. Consequently, GBI became a subsidiary of EW. On July 11, 2012, EW acquired an

83.17% interest in FRBI, a rural bank engaged in the business of extending credit to farmers, tenants, and

rural enterprises. EW subsequently increased its ownership in FRBI to 100.00% through additional share

acquisitions and capital contributions in 2012 and 2013. In May 2013, FRBI changed its name to East West

Rural Bank, Inc. (“EWRB”) and entered into an asset purchase agreement with GBI, effectively consolidating

all of the Bank’s rural banking business in EWRB.

On March 28 and June 5, 2014, the BSP and the SEC respectively, approved the proposed merger between

EW and GBI. On July 31, 2014, the merger between EW and GBI was completed.

Securities Issuances

On July 2, 2010, the Bank issued Lower Tier 2 unsecured subordinated notes with par value of P1.50 billion

and a coupon rate of 7.50% , maturing on January 2, 2021 with a call option date of January 2, 2016. On

July 25, 2008, the Bank issued Lower Tier 2 unsecured subordinated notes with par value of P1.25 billion

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and a coupon rate of 8.63%, maturing on January 26, 2019 with an optional redemption date on January 25,

2014.

On January 25, 2014, the Bank exercised its call option on the said notes. The redemption was approved by

EW’s Board on August 29, 2013 and by the BSP on November 7, 2013. On July 4, 2014, the Bank completed

its issuance of Basel III-compliant Tier 2 unsecured subordinated notes with a total face value of P5 billion

with a coupon rate of 5.5% and maturing in January 2025.

In February 2014, the Bank issued the fourth tranche of its 3.25% fixed coupon rate unsecured LTNCDs

(“Series 2 LTNCDs”) maturing on September 9, 2019 amounting to P0.83 billion. Subsequently, in April 2014,

the Bank issued the fifth tranche of the Series 2 LTNCDs with a face value of P0.91 billion.

On July 4, 2014, the Bank issued Basel III-compliant Tier 2 unsecured subordinated notes with a total face

value of P5 billion at a coupon rate of 5.5% maturing in January 2025.

On January 29, 2015, the BOD approved the common shares rights offering. In March 2015, the BOD

approved the application of the Bank to list up to 371,574,000 common shares with par value of P=10 per

share to cover its stock rights offering. Details of the offer are as follows:

Entitlement Ratio 32.929 right shares for every 100 shares

Offer Price P=21.53

Number of shares to be offered 371,574,000 shares

Ex-rights date April 16, 2015

Record date April 21, 2015

Start of offer period April 24, 2015

End of Offer Period April 30, 2015

The offer price was computed based on the volume-weighted average price of the Bank’s common shares

traded in the PSE for each of the 15 consecutive trading days immediately prior to (and excluding) the pricing

date, subject to a discount rate of 12.80%.

On May 8, 2015, a total of 371,574,000 common shares were listed at the PSE with P=10.00 par value per

share. The total proceeds raised by the Bank from the sale of the said shares amounted to P=8.00 billion

while the net proceeds (after deduction of direct costs related to equity issuance) amounted to P=7.95 billion.

The net proceeds were used to invest in securities allowed under BSP regulation and to fuel growth in loans.

Subsidiaries

East West Rural Bank, Inc.

EWRB (formerly FRBI) consolidated, through an asset acquisition effective November 1, 2013, the rural

banking business of GBI and FRBI, the two rural banks that EW earlier acquired in 2011 and 2012,

respectively. FRBI was incorporated and registered with the SEC on November 5, 1997, with the purpose of

accumulating deposits and granting loans to various individuals and corporate entities as well as

government and private employees. In May 2013, its name was changed to EWRB. GBI was founded on June

20, 1974 as Rural Bank of Nasipit (Agusan Del Norte), Inc., primarily to engage in the business of extending

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credit to small farmers, tenants and deserving rural industries or enterprises and to transact business which

may be legally done by rural banks organized in accordance with R.A. No. 7353, Rural Bank Act of 1992. As

of December 31, 2015, EWRB had 55 branches.

East West Insurance Brokerage, Inc.

East West Insurance Brokerage, Inc. (EWIB) was incorporated and registered with the Philippine Securities

and Exchange Commission on July 6, 2015 with the primary purpose to act as an insurance broker. On

September 23, 2015, the Insurance Commission (“IC”) authorized EWIB to act as an insurance broker. It

started its commercial operations in September 24, 2015. Its place of business is located at 5th avenue

corner 23rd street, Bonifacio Global City, Taguig City.

Investment in a Joint Venture

On May 28, 2015, the Bank and Ageas Insurance International N.V. (Ageas) entered into a joint venture

agreement to form East West Ageas Life Insurance Corporation (EWAL) for an ownership interest of 75.00%

less one share and 25.00% plus one share, respectively. EWAL shall be engaged primarily in the life insurance

business. As of December 31, 2015, the stockholders are in the process of satisfying the conditions of the

joint venture agreement after which the Bank shall transfer an additional 25.00% of the issued shares of

EWAL to Ageas. This will result in a shareholder structure of 50.00% less one share and 50.00% plus one

share for the Bank and Ageas, respectively.

On September 21, 2015, the BSP approved the Bank’s initial equity investment amounting to P500.00 million

in EWAL. Subsequently, on October 20, 2015, the SEC approved the registration of EWAL. On December

22, 2015, EWAL obtained from the Insurance Commission a license to operate a life insurance business. As

at December 31, 2015, EWAL has not yet started commercial operations, pending approval of the Insurance

Commission on the life insurance products.

EWAL’s registered office is at One World Place, 32nd Street, Bonifacio Global City, Taguig City.

Principal Business Activities

Retail Banking

The retail banking segment mainly covers traditional branch banking products and services such as

deposits, back-to-back/emerging market loans and other over-the-counter (“OTC”) transactions. It also

caters to the needs of high net-worth clients for alternative investment channels and cash management

requirements of mid-market corporates. It includes entire transaction processing, service delivery and

infrastructure consisting of the Bank’s network of branch stores, ATMs, as well as its internet banking

platform.

Principal Products and Services

The Bank offers a comprehensive range of deposit products, consisting primarily of Peso demand, savings

and time deposits. Offered also are US Dollar & RMB savings and time deposits. Also offered are consumer

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loans – auto, mortgage and personal as well as corporate loans. Payment facilities such as debit, prepaid

and credit cards are also available.

EastWest also offers a suite of electronic channels such as internet banking for individuals and corporates,

mobile banking, phone banking and ATMs.

The table below lists out and describes the various products and services of EastWest:

Branch Products / Services

Description

DEPOSIT PRODUCTS

Regular Checking Account The Regular Checking Account is a non-interest bearing Peso-

denominated checking account wherein funds can be

withdrawn through the issuance of checks.

ATM Access Savings The ATM Access Savings Account is savings account evidence

by a Visa Debit Card. In lieu of the passbook, a statement of

account is given to the depositors. This account earns interest

at 0.25% per annum.

Cool Savers Kiddie Account Cool Savers is an interest-earning Peso savings deposit

account for children that is evidenced by a passbook

Passbook Savings Account The Passbook Savings Account is an interest-bearing Peso-

denominated deposit account. This account allows a client to

deposit and withdraw their funds anytime by presenting a

passbook

Passbook Savings with Debit Card An interest bearing savings deposit account that has both

passbook and Visa debit card having their transactions

documented in a passbook while enjoying the advantages and

convenience of modern banking.

Basic Savings Account

Super Saver

The most affordable interest earning savings account offered

by EastWest Bank. With only P100 initial deposit and P500

required balance to earn interest. Evidenced by a Visa Debit

Card.

A savings deposit account that pays interest in increasingly

higher amounts as the account balance increases. This savings

account also gives bonus interest within the calendar month if

there are no client initiated debit transaction.

Renminbi Savings Account

Third Currency savings account evidenced by a passbook for

Renminbi.

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Euro Savings Account

Japanese Yen Savings Account

Singapore Dollar Savings Account


Euro.

Interest-bearing Japanese Yen denominated savings account

with a passbook.


Singapore Dollar.

Dollar Savings Account Interest-bearing U.S. dollar-denominated savings account with

passbook.

Peso Time Deposit Account Interest-bearing, term deposit evidenced by a certificate

issued in favor of the depositor with a specific maturity period.

It allows a client to earn higher yields compared to a regular

savings deposit rate. Interest rate on the time deposit account

varies based on the term and the amount of the deposit.

Dollar Time Deposit Account Interest-bearing, U.S. dollar denominated deposit account

evidenced by a certificate issued in favor of the depositor with

a term ranging from 30 days to as long as 5 years. Interest

rate on the time deposit account varies based on the term and

the amount of the deposit.

Renminbi Time Deposit Account

Euro Time Deposit Account

Japanese Yen Time Deposit Account

Singapore Dollar Time Deposit

Account

Interest-bearing, Chinese Yuan denominated deposit account


a term ranging from 30 days to as long as 180 days. Interest



Interest-bearing, Euro denominated deposit account





Interest-bearing, Japanese Yen denominated deposit account





Interest-bearing, Singapore Dollar denominated deposit

account evidenced by a certificate issued in favor of the

depositor with a term ranging from 30 days to as long as 180

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days. Interest rate on the time deposit account varies based

on the term and the amount of the deposit.

Basic Checking Account The affordable Checking account requring only P1,000 as

initial deposit and maintaining balance. It comes with a

Checkbook and a Visa Debit Card.

ChequeMax Interest-bearing Peso-denominated account that offers

superior convenience to both personal and corporate account

holders in accessing funds.

ChequeMax Rewards Interest-bearing checking account that comes with a record

book, a debit card and a checkbook. An account holder earns

reward points for every P5,000 increment above the required

ADB, which can then be used to redeem gift certificates.

VISA Debit Card EastWest Debit Card is Visa branded that allows customers

cashless shopping, dining or online payments. The Debit Card

can be used to pay for purchases both locally and abroad; and

are accepted in over one million Visa ATMs worldwide.

Visa Prepaid Card EastWest Prepaid Card is a Visa branded reloadable card used

for cashless shopping, dining or online payments. Since the

EastWest Prepaid Card is Visa branded, it card can be used to

pay for purchases both locally and abroad; and are accepted in

over one million Visa ATMs worldwide.

Visa Travel Card EastWest Travel Card is a multi-currency card that may be

loaded with multiple currencies for convenience and easy

access to funds when traveling in different countries without

the worry on fluctuating exchange rates.

CONSUMER LOANS

Home Loan The EastWest Bank Home Loan is a loan tailor-fit to clients’

unique house financing needs for acquisition of vacant lot,

house and lot or condominium units; construction and

renovation; as well as multi-purpose for home equity or

refinancing of an existing mortgage loan. Loan terms are

flexible with various fixing options and with tenor as long as

30 years.

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Auto Loan The EastWest Bank Auto Loan is a loan that allows clients to

acquire brand new or pre-owned vehicles.

Salary Loan The EastWest Bank Salary Loan is a multi-purpose loan that

can be availed by qualified employees of accredited companies

to finance their personal needs.

Personal Loan EastWest Bank Personal Loan is a no collateral multi-purpose

loan that caters to the client’s personal financial requirements.

EASTWEST BANK CREDIT CARDS

Visa and MasterCard EastWest Visa/MasterCard Classic/Gold allows Cardholders to

experience shopping privileges while providing Perks &

Limitless Rewards programs. Cardholders may convert their

Limitless Rewards points into Rewards Vouchers which can be

used to purchase merchandise or exchange for gift certificates

at partner merchants. Cardholders may also enjoy free

Comprehensive Travel Accident and Inconvenience Insurance

of up to P20 million when they purchase travel tickets using

their EastWest Gold Visa/MasterCard.

EveryDay MasterCard

EastWest EveryDay MasterCard is the all-in-one cash rebate

card. Designed to be part of the Cardholder's daily activity. It

converts everyday spending into smart spending with its cash

rebate feature. It is the only credit card in the market that gives

cardholders up to 5% rebate on supermarket, gas and

drugstore purchases for a minimum spend amount of P10,000

on non-essential items each month. They may earn either 3%

or 0.5% on non-essential purchases of P5,000 to below

P10,000, or below P5,000, respectively.

Platinum MasterCard

EastWest Platinum MasterCard allows Cardholders to enjoy the

following exclusive features and benefits that suit their

premium lifestyle and discerning taste: Free Lifetime Annual

Membership Fee, Free EastWest Platinum Virtual Card, Free

Priority Pass Membership, Free Comprehensive Travel

Accident and Inconvenience Insurance of up to P20 million and

access to exclusive Premium Perks.

Dolce Vita MasterCard EastWest Dolce Vita MasterCard is the credit card specifically

designed for women. Through the Dolce Vita Charms Loyalty

Program, every P100 charged to their EastWest Dolce Vita

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MasterCard will earn 1 Charm which can be redeemed as

Charms Vouchers used to purchase merchandise or exchange

for gift certificates at partner merchants.

Practical MasterCard

EastWest Practical MasterCard provides Cardholders with an

affordable line of credit for their basic needs. It offers a low

monthly interest rate of 3.0% for the basic necessities

(groceries, gas and drugstore purchases) and 3.5% for all other

transactions.

LausAutoGroup Visa

With the LausAutoGroup Visa, Cardholders may earn a 7%

rebate on fuel purchases from any gas station. Rebates may

be used to redeem spending vouchers to purchase

merchandise or avail of services at LausAutoGroup

establishments. Cardholders can also get an exclusive 10%

discount on parts and labor from any LausAutoGroup

dealership and 0% installment for insurance premiums from

Corporate Guarantee and Insurance Company (CGIC).

CORPORATE SUITE

Payroll Credit System (PCS) PCS is a deposit account processing system for crediting

payroll transactions.

eCredit An online internet banking service enabling Corporate clients

to submit payroll instructions, schedule pay dates & even view

payroll Status.

Payroll Timekeeping A stand alone daily time recording system developed

exclusively for EastWest clients to provide solutions for

timekeeping computation and Human Resource Management.

Payroll Assist Payroll Assist is a stand-alone electronic payroll system service

that comes with proprietary software developed exclusively for

EastWest’s clients to provide an electronic solution for human

resource management and payroll processing.

Payroll Assist Plus Payroll Assist Plus is an expanded payroll outsourcing service

for clients who want to eliminate the inconvenience and the

cost of in-house payroll processing.

Bizcheque Plus Bizcheque Plus is a unique interest-bearing Peso checking

account that comes with a customized stand-alone check

writing facility and a comprehensive accounts payable system

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for hassle- free monitoring of account payables and check

payment preparation.

Cheque Prepare

Cheque Prepare is an outsourcing service for check preparation

and disbursement intended for corporate clients with high

volume of disbursements to completely outsource the

administrative task of processing, printing and cutting of

Manager’s, Corporate Checks and status monitoring.

eSettle A web-based electronic fund transfer facility that enables

clients to pay their suppliers by crediting their EastWest

deposit accounts.

Deposit Management System

A stand alone network-ready tool that automates the deposit

slip creation process, trace deposit records, generate historical

reports and re-print deposit transactions.

Bills Collect Bills Collect is a collections facility wherein the Bank acts as the

collecting agent to accept payments via the Bank’s internet

banking, Automated Teller Machine (ATM) and over-the-

counter.

Cheque Depot Cheque Depot is a facility designed for corporate customers,

allowing the Bank to undertake the safekeeping or

warehousing of post-dated checks for deposit to their account

on due dates.

Cheque Collect A check collection service for the Bank’s corporate customers

where the checks are picked-up at their customer’s premises

for deposit to their account.

Web Remittance Web Remittance is a 24-hour online banking service that

enables corporate clients to transfer funds real time to any

EastWest account from their savings or demand deposit

accounts.

OTHER SERVICES

Net Access Net Access is a 24-hour online banking facility which enables

both individual and corporate clients to access their accounts

by logging on to www.eastwestbanker.com.

Pay@Store Pay@Store is a facility that allows debit cardholders to use

their ATM cards to pay for merchandise and services rendered

by the merchant via Point of Sale (POS) terminals installed in

accredited establishments.

http://www.eastwestbanker.com/

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Bills Pay Bills Pay is a facility which allows settlement of various bills

over the counter, internet banking and ATMs.

TRUST PRODUCTS

Unit Investment Trust Fund The Trust Department manages Peso and U.S. Dollar

denominated Unit Investment Trust Funds (UITF) with

investment parameters ranging from very short-term to long-

term investment products.

The UITF is an investment portfolio product that pools funds

of various investors and collectively invests these in a

diversified portfolio of high-yielding fixed income

investments or equities.

The latest offering is PhilEquity Feeder Fund.

TREASURY PRODUCTS

Peso or U.S. Dollar denominated

Fixed Income Securities

These are Peso or U.S. dollar-denominated fixed income

securities in the form of Treasury Bills or Bonds which are

distributed or sold to client and qualified investors or other

professional counterparties of the Bank to whom the Bank

makes a market price for.

Issuers of the securities are usually the Republic of the

Philippines, Bangko Sentral ng Pilipinas, Government-Owned

or Controlled Corporations and Philippine corporations. The

tenor of the bills or bonds ranges from as short as 7 days to

as long as 30 years.

Foreign Exchange Products The bank also buys and sells US dollars and other foreign

currencies versus the Philippine Peso from their retail and

corporate accounts in accordance with regulatory

requirements in the buying and selling of foreign exchange.

The bank also makes markets in USD/P foreign exchange for

professional counterparties.

Access to Investment Products

The Bank also offers investors access to investment products such as including treasury bills and bonds,

fixed rate treasury notes and retail treasury bonds. Customers can also invest in long-term fixed income

debt instruments issued by public and private entities.

Cash Management Services

The Bank offers a wide range of cash management solutions to assist mid-market corporates, composed

primarily of entrepreneurial and family-owned businesses, including (i) a facility for payroll preparation and

crediting, (ii) an interest-earning checking account that provides a customized standalone check-writing

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facility and a comprehensive accounts payable system, (iii) an end-to-end automated solution for the

creation, disbursement and monitoring of checks, (iv) a check depot service whereby the Bank retains a

corporate customer’s post-dated checks for immediate deposit to the customer’s account on the same date

indicated on the checks, (v) a bill collection service whereby the Bank acts as a collecting agent and transmits

consolidated payments to the customer online or via electronic file transfer and (vi) deposit pickup services,

in which the Bank sends an armored vehicle to pick up cash and check deposits at the customer’s premises.

Consumer Lending

The Bank offers various types of consumer lending products to individuals, which consist principally of credit

cards, auto loans, residential mortgage loans and personal loans. The Bank considers various factors in

pricing its loan products, including the capacity of the borrower to repay the loan, estimated delinquency

rates, funding costs, expenses related to making loans and a target spread. Loan terms are differentiated

according to factors such as a customer’s financial condition, age, loan purpose, collateral and the quality

of relationship with the Bank.

Credit Cards

In 2004, the Bank began issuing MasterCard credit cards under the name “East West Bank MasterCard” in

partnership with AIG. In 2009, the Bank acquired the Philam Savings Bank, which issues Visa credit cards.

After the acquisition, the Bank integrated its Visa and MasterCard businesses into a single business unit.

From an initial base of 10,000 credit cards issued during 2004, the Bank has since grown to have issued

1,021,000 credit cards, comprising 14.9% of the total market share for credit cards in the Philippines

(excluding Banco de Oro Unibank, Inc. which ceased to be member of the Credit Cards Association of the

Philippines since 2013), as of December 31, 2015. Revenues from the credit card operations consist

principally of annual fees paid by cardholders, interest on deferred and installment payments, cash advance

fees, interchange fees paid by service establishments and late payment charges. Annual cardholder fees

range from P1,500 to P2,800. As of December 31, 2015, the interest rate on deferred payments range from

2.75% to 3.50% per month and the interest rate on installment payments range from zero to 2% per month.

One-time fees for cash advances are approximately 3.0% of the total cash advance amount or P600

whichever is higher, and interchange fees range from 0.25% to 2.33% of the purchased amount. Revenues

relating to the credit card business are reflected in the Bank’s financial statements as interest income and

other operating income from service charges, fees and commissions.

The Bank seeks to diversify its distribution channels, form alliances with merchants and manage its product

portfolio in order continue to grow its credit card business. The Bank currently markets and sells its credit

cards directly to customers, as well as through third party telemarketing agencies. Credit Card customers

may participate in a variety of instant and loyalty based rewards programs that allow them to redeem

merchandise or gift certificates at partner establishments. The Bank attempts to identify and capitalize on

gaps in the market by offering products tailored to meet the needs of underserved markets. The Bank’s

credit card products come in different grades, from regular cards to premium class cards at different annual

membership fees.

Auto Loans

The Bank’s auto loans are offered through car dealerships (including second-hand car dealers), independent

sales agents and the Bank’s branches. The Bank provides economic incentives to car dealerships and

independent sales agents based on each approved auto loan amount. A key competitive factor in the

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automotive loan business is the speed by which a bank can process an automotive loan, as dealers will offer

a loan to multiple banks and the Bank offers a three-hour auto loan approval process, which the Bank

believes is an important aspect to its success in growing its auto loan portfolio. The Bank’s auto loan

business also engages in strategic partnerships with major car brands to develop exclusive programs.

Additionally, the Bank cross-sells its auto loans with the products of other units and offers special plans for

existing and repeat customers.

All of the Bank’s auto loans are secured by a chattel mortgage over the car being purchased. In addition to

being subject to the Bank’s internal credit checks, the Bank generally requires the borrower to make a

minimum down payment of 20.0% (or a minimum down payment of 15.0% for long-term customers with

verifiable good credit) of the purchase price. Depending on whether the car being purchased is a new car or

a second-hand car, the interest rate of the Bank’s auto loans can range from 8.5% to 18.0%, with an average

maturity of 55 months. Generally, when an installment payment falls 90 days past due, the Bank may

commence foreclosure proceedings. Foreclosed cars are generally sold by the Bank through public auction.

Residential Home Mortgage Loans

The large majority of EW’s residential mortgage loans are extended to property buyers in the Philippines

who intend to occupy residential units in the form of house and lot, townhouse or condominiums, with a

small proportion being extended to individuals purchasing lots for investment purposes or for future

dwelling via house construction loans. All of EW’s home mortgage loans are secured by a first mortgage on

the property and each applicant undergoes a stringent credit evaluation process. EW requires its borrowers

to make a minimum down payment of 10% of the total appraised value for the various loan purposes. EW

also refinances existing housing loans. EW offers loans at adjustable and fixed interest rates. EW uses its

branch store network as a key distribution channel and maintains marketing campaigns to attract property

buyers independently from real estate developers, which serve as distribution channels for mortgage loan

providers. The average maturity of EW’s home mortgage loans is ten years. In line with industry practice in

the Philippines, interest rate on EW’s home mortgage loan portfolio is set at a fixed rate applicable for an

initial period of between one and five years, depending on the maturity of the loan. Upon expiry of the initial

period, the interest rate is reset at a fixed rate applicable for succeeding periods.

When a borrower falls in arrears with its mortgage payments, the buyer can either agree to a voluntary

disposition of the property to EW, or EW may commence foreclosure proceedings. EW sells mortgaged

collateral that has been foreclosed, primarily in public auctions or by brokers on behalf of EW. Foreclosure

of the mortgaged collateral generally takes between six and 24 months.

EW currently offers various home financing products with differentiating features, which included a mix of

competitive interest rates and what the Bank believes to be the longest payment term in the market of up

to 30 years. As most residential mortgage loans available in the market only allow up to a maximum payment

term of 20 years, EW’s longer payment term means lower and consequently lighter amortization payments

for the borrower. EW also gives the borrowers the option to adopt a fixed-term pricing scheme to protect

borrowers against the risk of fluctuating interest rates.

EW’s home loans are available in different loan packages, tailored to fit the needs of specific markets.

LotAcquire is a loan specifically designed for the acquisition of a vacant lot. Other products offered by EW

include HomeAcquire, HomeConstruct and HomeImprove.

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Personal Loans

The Bank’s personal loans business provides unsecured, uncollateralized consumer loans to qualified

individuals for multi-purpose personal use. The primary distribution channel for personal loans are the

Bank’s branches and third party sales agencies. The Bank offers personal loans to employed and self-

employed individuals with annual income of not less than P180,000. The monthly nominal interest rates for

a personal loan ranges from 1.39% to 1.89% and is payable in fixed equal monthly installments from six to

36 months.

Corporate Banking

The Bank’s corporate banking activities are primarily focused on offering loans to mid-market corporate

customers, which are predominantly entrepreneurial or family-owned businesses. The Bank also offers cash

management services to its corporate customers through its retail banking group. See “—Retail Banking—

Cash Management Services”. The Bank’s corporate banking activities focus on developing and managing

relationships with its corporate clients, providing an opportunity for the Bank to offer products and services

from other business segments to such clients. The Bank believes that the development and expansion of its

mid-market customer base is essential to the growth and success of the Bank and intends to concentrate

on growing its mid-market portfolio as its core target customer group.

Loan Products

The Bank provides a wide range of loan products and services to its corporate customers, including revolving

credit lines, bills purchased, acceptances, trade finance facilities and term loans. In line with its strategy to

create a balanced and diversified portfolio, the Bank’s corporate customers are engaged in various industries

in the Philippines. Facilities offered to corporate customers include both secured and unsecured loan

products, depending on the credit risks associated with the customer and its business.

The Bank intends to continue to expand its corporate banking portfolio by increasing loan product marketing

activities to its existing customers as well as targeting new corporate customers through its expanded

combined customer network.

Rural Banking

To extend its reach to underserved segments of the market that have the potential for growth, the Bank has

established a rural bank arm. Backed by the strong track record of its predecessor entities, EWRB is capable

of catering to the banking needs of customers outside the urban areas in the country and provide wider

access to innovative products and delivery channels. EWRB currently offers the following products:

- DepEd Teacher Loan – Allows public school teachers (permanent personnel of the Philippine

Department of Education) to borrow a maximum of P450,000 up to a maximum term of 3 years.

- Small Business Loan – Intended for all Small-Medium Enterprises (SMEs), with a maximum loan limit

of P5.0 million.

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- Social Security System (“SSS”) Pensioners’ Loan – Intended for all SSS retirees, survivorship and total

disability pensioners whose SSS pension is directly credited to savings accounts with EWRB.

As of December 31, 2015, EWRB has a network of 55 branches, most of which are located in the Visayas and

Mindanao.

Treasury and Trust

Treasury

The Bank’s treasury has primary responsibility for managing the Bank’s liquidity, interest rate and foreign

exchange exposures. The Bank manages its liquidity position by regularly reviewing its cash flow position,

debt maturity profiles, availability of credit facilities and overall liquidity position to mitigate the effects of

fluctuations in cash flow. The Bank’s treasury actively engages in trading for its own proprietary account. It

trades local treasury bills and bonds, foreign-currency denominated bonds and foreign exchange. The Bank

is an accredited Government Securities Eligible Dealer.

As of December 31, 2015, the Bank had P15,165.0 million of trading and investment securities, which

accounted for 6.5% of the Bank’s total assets. As of December 31, 2015, 55.3% of the Bank’s trading and

investment securities portfolio was invested in government securities.

Trust

The Bank offers a wide range of trust products and services, including fund management, investment

management services, custodianship, administration and collateral agency services and stock and transfer

agency services. In addition to offering trust services to corporate and high net-worth individual customers

(customers with a total relationship balance of P2.5 million), the Bank provides retail customers with

alternative investment opportunities through its unit investment trust funds (UITFs), which are available in

Peso and U.S. dollar-denominated UITFs. In a UITF, funds of various investors are pooled and invested in a

diversified portfolio of liquid securities, term deposits, money market instruments or stocks in accordance

with the investment objectives and restrictions stated in the Declaration of Trust. For the year ended

December 31, 2015, total assets held in trust amounted to P6,550.3 million and total revenue from the

Bank’s trust products amounted to P17.0 million.

Percentage of Sales or Revenues and Net Income Contributed by Foreign Sales

This is not relevant to the operations of the Bank.

Distribution Networks

Branch Network

The branch network is focused more on the Philippines’ major industrial and commercial regions in Metro

Manila and has key locations outside of Metro Manila such as Metro Cebu, Metro Davao, Northern Luzon,

South Luzon Industrial Zone, Iloilo, Bacolod and Mindanao. Within these regions, EW has strategically

positioned its branches in key business and commercial centers, which are areas that generally boast of

higher per capita incomes, and have higher growth and traffic, thereby maximizing the number of

transactions and deposits per branch.

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Each branch is managed by a branch head responsible for both the sales and operational functions of the

branch. Each branch head reports to a division head, which supervises 15 to 18 branches. Branches are

grouped geographically and such groups include North Luzon, South Luzon, Southern Metro Manila, Eastern

Metro Manila, Northern Metro Manila, Downtown Manila, Visayas and Mindanao.

As of December 31, 2015, the Parent Bank has 378 branches in various parts of the country, majority of

which are located within Metro Manila.

The following table sets out the distribution of the Parent Bank’s branches for each region as of December

31, 2015.

December 31,

2013 2014 2015

Metro Manila ...................................... 174 204 207

Other areas of Luzon .......................... 64 84 96

Visayas .............................................. 34 36 39

Mindanao .......................................... 28 34 36

Total Branches .................................. 300 358 378

ATMs ................................................ 427 533 579

EWRB Branch Store Network

As of December 31, 2015, EWRB, a wholly owned subsidiary of EWBC, has a network of 55 branches mostly

located in Visayas and Mindanao. The table below sets out the details of EWRB’s branches and ATMs in the

Philippines in operation as of the specified dates.

As of December 31,

2013 2014 2015

Metro Manila 1 1 1

Other areas of Luzon 7 7 16

Visayas 15 15 16

Mindanao 24 24 22

Total Branches 47 47 55

ATMs 45 5 -

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ATM Network

EW provides 24-hour banking services through its network of 579 ATMs as of December 31, 2015,

compared with 533 ATMs as of December 31, 2014. Of these 579 ATMs, 366 are located at EW’s branches

while 213 are located off-site. Customers are given access to the ATM facilities through ATM cards and

debit cards, which are available to checking and savings account holders.

The Bank also is a member of Bancnet, which is an ATM network that allows its member banks customers

to use ATM terminals operated by other Bancnet member banks. Furthermore, Bancnet has agreements with

other ATM networks in the Philippines, namely Expressnet and Megalink, which gives its customers access

to all ATMs in the Philippines. Customers of the Bank that use ATMs operated by other banks must pay a

service charge for accessing these networks.

Listed below are the branches of the Parent Bank as of December 31, 2015:

1) GIL PUYAT AVENUE - G/F Metro House Bldg., 345 Sen. Gil Puyat Ave., Makati City

2) CUBAO - P. TUAZON AVENUE - G/F Prince John Condominium 291 P. Tuazon Avenue, near cor 18th Ave., Cubao Q.C.

3) EMERALD - GARNET - G/F Unit 103 AIC Gold Tower Condominium corner Emerald & Garnet Aves., Ortigas Center, Pasig City

4) LAS PIÑAS - Alabang-Zapote Road corner Crispina Ave Pamplona III, Las Pinas City 1740

5) EDSA - KALOOKAN - 490 EDSA, Kalookan City

6) ROOSEVELT - FRISCO - 184 Roosevelt Avenue San Francisco Del Monte Quezon City

7) PASIG - SHAW BLVD - #27 Shaw Blvd, Pasig City

8) PASIG - KAPASIGAN - A.Mabini corner Blumentrit Street, Brgy. Kapasigan, Pasig City

9) AYALA AVENUE - HERRERA - G/F PBCom Tower, 6795 Ayala Ave. cor. V. Rufino St., (formerly Herrera St.), Salcedo Village, Makati City 1226

10) TAYTAY - Ground Floor, Valley Fair Town Center Bldg.Ortigas Avenue Ext. Taytay, Rizal 1920

11) IMUS - G/F, LDB Bldg., 552 Gen. Aguinaldo Highway, Imus City, Cavite

12) CONGRESSIONAL AVE. - Blk.7 Lot 4A Congressional Ave. Project 8 Quezon City

13) BETTER LIVING - DOÑA SOLEDAD AVENUE - 100 Dona Soledad Avenue, Betterliving Subd.Barangay Don Bosco, Paranaque City 1711

14) ANONAS - 94 Anonas St. Cor K-6TH Sts. Kamias Quezon City

15) ANTIPOLO - MARCOS HIGHWAY - G/F Ciannat Complex, Marcos Highway, Brgy. Mayamot, Antipolo City

16) PRESIDENT'S AVENUE - # 35 President's Avenue BF Homes Paranaque City 1700

17) REGALADO - Regalado Ave. Cor. Archer St., North Fairview Subd. Quezon City

18) BAGUMBAYAN - 184-B E. Rodriguez Jr. Avenue, Brgy. Bagumbayan,Libis, Quezon City

19) BACOOR - AGUINALDO HIGHWAY - General E. Aguinaldo Highway Talaba Bacoor City Cavite

20) TANDANG SORA - Lot 80 - A Kalaw Hills Subd. Brgy. Culiat Tandang Sora Quezon City

21) STO. CRISTO - G/F, Sto. Cristo Po Taw Building, 107-108 Sto Cristo corner Foderama Sts., Binondo, Manila

22) "PADRE FAURA - G/F, Esperanza Osmeña Bldg., 1991 A. Mabini St., Malate, Manila

23) (Unit D, G/F, Metrosquare Bldg 2, M.H. del Pilar St. Corner Padre Faura St., Ermita , Manila)"

24) PASONG TAMO EXT. - G/F Dacon Bldg., 2281 Pasong Tamo Extension, Makati City

25) QUEZON AVENUE - SCOUT SANTIAGO - G/F, Sunshine Blvd. Plaza, Quezon Avenue corner Scout Santiago, Quezon City

26) MANDALUYONG - SHAW BLVD - G/F Sunshine Square 312, Shaw blvd. Mandaluyong city

27) ESCOLTA - G/F, First United Bldg., 413 Escolta corner Banquero St., Binondo, Manila

28) KATIPUNAN - 132 Katipunan Road, Brgy.Ignatius Village, Katipunan, Quezon City

29) QUEZON AVENUE - BANAWE - G/F PPSTA 1 Building Quezon Avenue corner Banawe St. Quezon City

30) FESTIVAL MALL 1 - 2nd Level, Festival Supermall Filinvest Corporate City, Alabang Muntinlupa City 1781

31) ANNAPOLIS - G/F, The Meriden Condominium Building Unit 1A, Annapolis St. NorthEast, Greenhills San Juan City

32) BATANGAS CITY - 54-A D. Silang St., Batangas City

33) CEBU - BANILAD - Archbishop Reyes Ave.,cor J. Panis St. Banilad, Cebu City

34) CEBU - MAGALLANES - 60 Quiaco Bldg., Magallanes cor Gonzales Sts, Cebu City

35) DAVAO - LANANG - Lot 6, Blk 5, Insular Village, Bo. Pampanga, Buhangin, Lanang, Davao City

36) ILOILO - LEDESMA - Sta Cruz Arancillo Bldg., Ledesma corner Fuentes Sts.,Iloilo City

37) DAVAO - STA. ANA - Ground Floor, GH Depot Building, Governor Sales St., Sta. Ana, Davao City

38) BACOLOD - LACSON - Lacson corner Luzuriaga Sts, Bacolod City

39) SAN FERNANDO - DOLORES - 2nd floor Felix S. David Bdg., MacArthur Hi-way, Dolores City of San Fernando, Pampanga

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40) CABANATUAN - MELENCIO - Melencio St. corner Gen. Luna ST, Cabanatuan City

41) LUCENA CITY - 152 Quezon Avenue, Lucena City, Quezon

42) CALAMBA - G/F, SQA Bldg, Brgy. Uno, Crossing, Calamba City, Laguna

43) WESTGATE - Westgate, Filinvest Corporate City, Alabang Muntinlupa City 1770

44) DAGUPAN - PEREZ - Maria P. Lee Bldg, Perez Blvd, Dagupan City

45) CAGAYAN DE ORO CITY - VELEZ - No. 50 Juan Sia Building, Don Apolinar Velez St., Cagayan de Oro City

46) ZAMBOANGA CITY - N.S. VALDERROSA - N.S. Valderrosa St. corner Corcuerra Street, Zamboanga City

47) BAGUIO CITY - ABANAO AVE. - 77 Abanao Ave., Baguio City

48) CEBU - N. ESCARIO - Cebu Capitol Commercial Complex Bldg., N. Escario Street, Cebu City

49) TOMAS MORATO - 257 Tomas Morato St. near corner Scout Fuentabella, Quezon City

50) NINOY AQUINO AVE. - MIESCOR DRIVE - Unit 707-6 Columbia AirFreight Comp Miescor Drive, Ninoy Aquino Ave. Brgy. Sto. Niño Paranaque City

51) PAMPANGA - ANGELES CITY - 2014 Sto. Rosario St., Brgy San Jose, Angeles City

52) VALENZUELA - MARULAS - KM 12 JLB Enterprises Bldg. McArthur Highway Marulas Valenzuela City

53) GREENHILLS - WEST - G/F ALCCO Bldg. Ortigas Avenue Greenhills-West, San Juan City

54) VALERO - G/F Retail 1B Area, Paseo Park View Tower, 140 Valero St., Salcedo Village, Makati City

55) SALCEDO - G/F First Life Center, 174 Salcedo St.,Legaspi Village Makati City

56) MARIKINA - J.P. RIZAL - No. 367 J.P. Rizal Street, Sta. Elena, Marikina City

57) TEKTITE - East Tower, Phil. Stock Exchange Ctr Exchange Drive, Ortigas Center, Pasig City

58) FESTIVAL MALL 2 - Level 1, Festival Supermall, Filinvest Corp. City, Alabang Muntinlupa City 1781

59) TARLAC - F. TAÑEDO - Mariposa Bldg.,F. Tanedo St., Tarlac City

60) T. ALONZO - G/F 623 T. Alonso St., Sta. Cruz, Manila

61) WEST AVENUE - 108 West Avenue corner West Lawin St., Quezon City

62) CEBU - MANDAUE BRIONES HIGHWAY - G/F Ramcar Bldg., M.C. Briones Highway, Mandaue City

63) NAGA CITY - G/F, LAM Bldg., 19 Peñafrancia Avenue, Naga City, Camarines Sur

64) LAOAG CITY - Ablan Bldg., J.P. Rizal Ave. corner Don Severo Hernando Ave., Laoag City

65) LA UNION - SAN FERNANDO CITY - Quezon Ave., cor Ancheta St. San Fernando, La Union

66) COTABATO CITY - No. 31 Quezon Avenue, Cotabato City

67) ISABELA - SANTIAGO - 74 National Highway, Brgy. Victory Norte, Santiago City, Isabela

68) NEW MANILA - Aurora Blvd. cor Doña Juana Rodriguez Ave., New Manila, Quezon City

69) MALABON - RIZAL AVENUE - Malabon - Rizal Avenue No. 726 Rizal Avenue, Brgy. Tañong, Malabon City

70) INTRAMUROS - G/F, BF Condominium, 104 A. Soriano Avenue corner Solano St., Intramuros, Manila

71) BINONDO - G/F, Uy Su Bin Bldg., 535-537 Quintin Paredes St., Binondo, Manila

72) GRACE PARK - 8TH AVE. - 896 8th Avenue cor. J. Teodoro Grace Park, Caloocan City

73) DEL MONTE - 271 Del Monte, cor. Biak na Bato Quezon City

74) PASEO DE ROXAS - LEGASPI - G/F Paseo De Roxas Bldg.,111 Paseo de Roxas St. corner Legaspi St.,Legaspi Village, Makati City

75) DAVAO - MATINA - Lot 16, Blk 3, McArthur Highway, Matina, Davao City

76) BALIUAG - Benigno S. Aquino Ave., Poblacion Baliuag, Bulacan

77) LIPA CITY - No. 18, Lot 712 ABC, B. Morada Avenue, Lipa City, Batangas

78) PASEO DE ROXAS - PHILAM TOWER - G/F Philamlife Tower, 8767 Paseo de Roxas St., Makati City

79) UN AVENUE - G/F, Philam Bldg., U.N. Ave. corner Ma. Orosa St., Ermita, Manila

80) SAN MIGUEL AVE. - Medical Plaza Building San Miguel Avenue, Ortigas, Pasig City

81) ALABANG - MADRIGAL BUSINESS PARK - Ground Floor, Philamlife Bldg. Madrigal Business Park, Acacia Avenue, Muntinlupa City 1780

82) CEBU - GRAND CENIA - G/F Grand Cenia Bldg., Archbishop Reyes Avenue, Cebu City

83) THE FORT - MARAJO TOWER - G/F Unit 3A Marajo Tower, 26th St. corner 4th Ave., Fort Bonifacio, Global City Taguig

84) PASO DE BLAS - NO. 191, Paso De Blas Valenzuela City

85) DIVISORIA - 802 Ilaya St., Binondo Manila

86) CHINO ROCES - DELA ROSA - G/F King’s Court II Bldg 2129 Don Chino Roces ave., cor Dela Rosa St., Makati City

87) URDANETA CITY - S&P Bldg Nancayasan Urdaneta City

88) MALABON - GOV. PASCUAL - 3315 Gov. Pascual Ave. Cor. Maria Clara St., Malabon City

89) ISABELA - CAUAYAN - Maharlika Highway Cauayan City, Isabela

90) A. BONIFACIO - BALINTAWAK - 659 A. Bonifacio Ave. Balintawak, Quezon City

91) BACLARAN - 2/F, New Galleria Baclaran Shopping Mall, LRT South Terminal, Taft Ave. Extension, Pasay City

92) SOLER - G/F, R & S Tower, 941 Soler St., Binondo, Manila

93) PACO - 1050 Pedro Gil St., Paco, Manila

94) LEGASPI - RUFINO - G/F - Libran Bldg., Legaspi St. Cor. V.A. Rufino Ave., Legaspi Village, Makati City

95) SAN JUAN - F. Blumentritt St. cor. M. Salvador St. San Juan City

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96) OLONGAPO CITY - G/F 1215 Rizal Ave., West Tapinac, Olongapo City

97) AYALA AVENUE - MSE - G/F - Makati Stock Exchange Building, Ayala Triangle, Ayala Ave., Makati City

98) AMORSOLO - AEGIS PEOPLE SUPPORT - G/F Unit C, Aegis People's Support Building, Amorsolo St., Makati City

99) CARMONA - Lot 1947-B, Paseo de Carmona Compound, Governor’s Drive, Brgy. Maduya, Carmona, Cavite

100) CEBU - LAPU-LAPU - G/F Bldg. II, M. L. Quezon National Highway, Pusok, Lapu-lapu City

101) C. RAYMUNDO AVENUE - #172 C. Raymundo Ave., Brgy. Maybunga, Pasig City 1607

102) EMERALD - Unit 103 Hanston Bldg, F. Ortigas Jr. Rd. Ortigas Center, Pasig City

103) PIONEER - UG-09 Pioneer Pointe Condominium,128 C. Pioneer St. Mandaluyong City

104) EVANGELISTA - Evangelista cor. Mojica St. Bangkal, Makati City

105) ILIGAN CITY - Ground Floor, Party Plaza Building, Quezon Avenue Extension, Rabago, Iligan City

106) MALABON - POTRERO - Bldg. 1 & 2 Mary Grace Bldg. Mc Arthur H-way del monte St. Potrero Malabon

107) NOVALICHES - GULOD - Lot 489-B2 Quirino Hiway Novaliches Quezon City

108) QUEZON AVENUE - SCOUT ALBANO - 1604 Quezon Avenue, Brgy. South Triangle, Quezon City

109) MANDALUYONG - LIBERTAD - G/F Unit A,B &C, Dr. Aguilar Bldg., No. 46 D.M. Guevarra St. cor. Esteban St. Mandaluyong City

110) ROXAS BOULEVARD - G/F, DENR Building, 1515 Roxas Boulevard, Ermita, Manila

111) NAVOTAS - NORTH BAY - G/F Melandria III Building No. 1090 Northbay Blvd. (South) Navotas City

112) MUNTINLUPA - G/F Remenes Center Building, # 22 National Hi-way Putatan, Muntinlupa City 1772

113) BATAAN - BALANGA - Don Manuel Banzon Ave. Cor. Cuaderno St. Dona Fransica Balanga City, Bataan

114) GENERAL SANTOS CITY - Ireneo Santiago Boulevard, General Santos City

115) BUTUAN CITY - Ground Floor Deofevente Building, Lot No. 7,Governor J. Rosales Avenue, Brgy. Imadejas, Butuan City

116) 168 MALL - 4/F Unit 4H 09-11, 168 Mall Building 5, Soler St., Binondo, Manila

117) OZAMIZ CITY - Ground Floor, Casa Esperanza, Don Anselmo Bernad Avenue, Ozamiz City

118) GENERAL TRIAS - G/F, Unit 102 VCentral Gentri Bldg., Governor’s Drive, Manggahan, General Trias, Cavite

119) PASEO DE MAGALLANES - G/F Unit 102, Tritan Plaza Building, San Antonio St., Paseo De Magallanes, Makati City Philippines, 1232

120) SAN PABLO - 9022 J. P. Rizal Avenue, San Pablo City, Laguna

121) ILOILO - IZNART - G/F, B&C Square Bldg., Iznart St. cor. Solis St.,Iloilo City

122) THE FORT - BURGOS CIRCLE - G/F Unit H & I, Crescent Park Residences, Burgos Circle cor. 2nd Ave., Bonifacio Global City, Taguig City.

123) CHINO ROCES - BAGTIKAN - G/F High Pointe Bldg. No. 1184 Chino Roces Ave. near cor. Bagtikan, Brgy. San Antonio, Makati City

124) ANTIPOLO - M.L. QUEZON AVE. - #146 ML Quezon St., cor. Dimanlig St. Brgy. San Roque Antipolo City

125) DON ANTONIO HEIGHTS - Lot 24 Block 7, Holy Spirit Drive, Don Antonio Heights Brgy. Holy Spirit Quezon City

126) MARIKINA - GIL FERNANDO AVE. - Gil-Fernando Ave. Cor. Estrador St.,Midtown Subdivision, Brgy. San Roque, Marikina City

127) BANAWE - N. ROXAS - #42 Banawe Ave corner Nicanor Roxas QC

128) BANAWE - SCT. ALCARAZ - Unit ABC G/F #740 Banawe Ave. near corner Sct Alcaraz QC

129) EDSA - HOWMART - 1264 EDSA near corner Howmart Road brgy. A. Samson Q.C.

130) MAYON - 170 Mayon Ave. Quezon City

131) BAESA TOWN CENTER - Baesa Town Center Retail Store#4 #232 Quirino Highway Baesa Quezon City

132) E. RODRIGUEZ AVE. - G/F M. C. Rillo Bldg. #1668 E. Rodriguez Ave. Bgy. Mariana QC

133) TIMOG AVENUE - G/F, Timog Arcade, 67 Timog Avenue, Quezon City

134) PASIG - PASIG BLVD. - #2 Lakeview Drive corner Pasig Blvd, Brgy Bagong Ilog,Pasig City

135) GREENHILLS SHOPPING CENTER - G/F Annapolis Carpark Unit AC-14 Greenhills Shopping Ctr

136) WILSON - 220B Wilson St. San Juan City

137) SUCAT - EVACOM - 8208 Dr. A. Santos Avenue Barangay San Isidro, Paranaque City 1700

138) WEST SERVICE ROAD - West Service Road corner Sampaguita Avenue UPS IV Subd., Paranaque City 1700

139) LAS PIÑAS - BF RESORT - #10 BF Resort Drive, BF Resort Village. Las Pinas City 1740

140) SAN PEDRO - Old National Highway, Brgy. Nueva, San Pedro, Laguna

141) TUGUEGARAO CITY - College Ave. cor Rizal and Bonifacio St. Tuguegarao City

142) BAGUIO CITY - SESSION ROAD - Unit B 101 Lopez Bldg Baguio Session

143) CEBU - MANDAUE NORTH ROAD - Block 01, 02 & 03, Upper Floor, ALDO Bldg.,North Road, Basak, Mandaue City, Cebu

144) DAVAO - TAGUM - Gaisano Grand Arcade, Apokon Road, Lapu-Lapu Extension, Brgy. Visayan Village, Tagum City

145) DAVAO - TORIL - Saavedra Street, Toril, Davao City

146) BENAVIDEZ - Unit 103, One Corporate Plaza, Benavidez St. Legaspi Village, San Lorenzo, Makati City Makati City

147) CITY PLACE SQUARE - 3/F C-P2-3, Cityplace Square, Reina Regente near corner Felipe II St., Binondo, Manila

148) QUIAPO - G/F, E & L Haw Building, 502 Evangelista St., Quiapo, Manila

149) G. ARANETA AVENUE - #195 Araneta Ave Bgy Santol QC

150) EASTWOOD CITY - Unit D,Techno plaza 1, Eastwood City, Cyber Park, E. Rodriguez Jr., Avenue (C-5), Brgy Bagumbayan, Quezon City

151) MAKATI AVENUE - JUNO - Unit No.2 A and W Building, Juno St. cor. Makati Avenue, Brgy. Bel-air, Makati City

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152) QUEZON AVENUE - DR. GARCIA SR. - 940 Quezon Avenue near corner Dr. Garcia St., Brgy. Paligsahan, Quezon City

153) PASAY - LIBERTAD - Unit 265-E Nemar Building , Libertad St. Pasay City

154) GRACE PARK - 7TH AVE. - G/F Units 1,2 &3, No. 330 Rizal Ave. Ext, near cor. 7th Avenue., East Grace Park, Caloocan City

155) RADA - Unit No. 102, G/F La Maision Condominium Bldg., Rada St., Legaspi Village, Makati City

156) KAMIAS - No. 10 Kamias Road corner Col. Salgado St., Brgy. West Kamias, Quezon City

157) BACOOR - MOLINO - G/F Units 101, 102 & 103 VCENTRAL Mall Molino Bldg., Molino Blvd., Bacoor, Cavite City

158) CEBU - PARK MALL - Alfresco 4, Units 39, 40 & 40a Parkmall, Mandaue City, Cebu

159) KORONADAL CITY - G/F RCA Building, Gen. Santos Drive, Koronadal City, South Cotabato

160) PAGADIAN CITY - BMD Estate Bldg., F. Pajares cor. Sanson St., Pagadian City,Zamboanga del Sur

161) AYALA AVENUE - SGV1 - SGV 1 Bldg.,6760 Ayala Avenue, Makati City

162) MARIKINA - CONCEPCION - Bayan- Bayanan Avenue, Marikina City

163) UP VILLAGE - No. 65 Maginhawa St., U.P. Village, Diliman, Quezon City

164) BETTER LIVING - PERU - Blk 9, Lot 3 Dona Soledad Ave. cor. Peru St., BetterLiving, Paranaque City

165) LAS PIÑAS - MARCOS ALVAREZ AVENUE - G/F & 2/F, 575 Marcos Alvarez Ave., Talon V, Las Pinas

166) ILOCOS SUR - CANDON - G/F KAMSU Building Brgy San Jose, Candon City, Ilocos Sur

167) BACOLOD - MANDALAGAN - Lopue's Mandalagan Corp. Bldg., Brgy. Mandalagan,Bacolod City

168) J.P. RIZAL - No. 805 J.P. Rizal cor. F. Zobel St., San Miguel Village, Makati City

169) MASANGKAY - 1411-1413 Masangkay St., Tondo, Manila

170) CEBU - A.S. FORTUNA - 151 M. Velez St., Guadalupe, Cebu City

171) CEBU - M. VELEZ - AYS Building A. S. Fortuna Street Banilad, Mandaue City

172) DAVAO - BAJADA - J.P. Laurel Avenue, corner Iñigo St., Davao City

173) DAVAO - C.M. RECTO - P&E Building, Poblacion Brgy. 035 CM Recto Avenue, Davao City

174) EDSA - MUÑOZ - Lemon Square Bldg. 1199 EDSA Muñoz Brgy. Katipunan, Quezon City

175) NORTH EDSA - UGF units 4,5,6&7 EDSA Grand Residences, EDSA cor. Corregidor St., Quezon City

176) THE FORT - BEAUFORT - G/F 23rd Avenue corner 5th Avenue Fort Bonifacio, Global City, Taguig City

177) ELCANO - Elcano Building, 622 El Cano Street, Binondo, Manila

178) JOSE ABAD SANTOS - TAYUMAN - G/F & 2/F Cada Bldg., 1200 Tayuman St., cor. Jose Abad Santos Ave.Tondo, Manila

179) TOMAS MAPUA - LOPE DE VEGA - G/F & 2/F, Valqua Building., 1003 Tomas Mapua St. cor. Lope de Vega St., Sta. Cruz, Manila

180) PASAY - D. MACAPAGAL BLVD. - No. 8 President Diosdado Macapagal Blvd., Pasay City

181) TAFT AVENUE - Philippine Academy of Family Physicians (PAFP) Bldg. 2244 Taft Avenue, Manila

182) FAIRVIEW - #72 Commonwealth Ave. Corner Camaro St., East Fairview. Quezon City

183) GREENHILLS - CONNECTICUT - Unit B, G/F Fox Square Building, No. 53 Connecticut Street, Northeast Greenhills, San Juan City

184) SUCAT - KINGSLAND - No. 5 & 6, G/F & 2/F Kingsland Building, Dr. A. Santos Avenue, Sucat, Paranaque City

185) PALAWAN - Rizal Avenue, Brgy. Manggahan, Puerto Princesa City, Palawan

186) PASIG - SANTOLAN - G/F Santolan Bldg., 344 A. Rodriguez Avenue, Santolan, Pasig City

187) BONI AVENUE - G/F Lourdes Bldg. II, 667 Boni Ave., Bgy. PlainView, Mandaluyong City

188) ANGELES - BALIBAGO - Saver's Mall Bldg. Mac Arthur Highway, Balibago Angeles City

189) MASAMBONG - Annexes B & C, L.G. Atkimson Building, No. 627 Del Monte Avenue, Brgy. Masambong Quezon City

190) BATANGAS - BAUAN - J.P. Rizal Street corner San Agustin Street, Bauan Batangas

191) MEYCAUAYAN - MALHACAN - Malhacan Tollgate, Meycauayan City Bulacan

192) CEBU - A. C. CORTES - Carlos Perez Building, A.C. Cortes Avenue, Ibabao, Mandaue City Cebu

193) PASIG - ROSARIO - Unit 3, 1866 Ortigas Avenue Extension, Rosario Pasig City

194) PASIG - VALLE VERDE - 102 E. Rodriguez Jr. Avenue, Ugong, Pasig City

195) CEBU - BASAK PARDO - South Point Place Building, N. Bacalso Avenue, South Road, Basak Pardo, Cebu City

196) DAVAO - PANABO CITY - Quezon Street, Sto. Nino Panabo City, Davao del Norte

197) CAGAYAN DE ORO CITY - COGON - De Oro Construction Supply, Inc. Bldg. Don Sergio Osmena Street corner Limketkai Drive CDO City

198) H.V. DELA COSTA - Unit GFC-2 Classica 1 Condominium, 112 H.V. Dela Costa St. Salcedo Village Makati City

199) NOVALICHES - TALIPAPA - Units C,D,E,F & G, No. 526 Quirino Highway, Brgy. Talipapa, Novaliches Quezon City

200) DASMARIÑAS - Km. 31 Gen. Emilio Aguinaldo Highway, Brgy. Zone 4 Dasmarinas City Cavite

201) NUEVA ECIJA - SAN JOSE - Paulino Building, Brgy. Abar 1st Maharlika Road, San Jose Nueva Ecija

202) VIGAN - Quezon Ave., Vigan City Ilocos Sur

203) CEBU - JUAN LUNA - Stephen Jo Building, Juan Luna Cebu City

204) DUMAGUETE CITY - Don Joaquin T. Villegas Building, Colon Street Dumaguete City

205) ILOILO - JARO - Jaro Townsquare, Mandaue Foam Building, Quintin Salas, Jaro Iloilo City

206) SAN LORENZO VILLAGE - A. ARNAIZ AVENUE - The E. Hotels Makati Bldg., No. 906 A. Arnaiz Ave.,San Lorenzo Village, Makati City

207) LAS PIÑAS - ALMANZA - Aurora Arcade Building, Alabang - Zapote Road, Almanza Uno, Las Pinas City

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208) SAN FERNANDO - SINDALAN - G/F T & M Building, Brgy. Sindalan, Mac Arthur Highway, San Fernand Pampanga

209) BENGUET - LA TRINIDAD - KM 5, Central Pico, La Trinidad, Benguet

210) CEBU - FUENTE OSMEÑA - G/F Cebu Women's Club Building, Fuente Osmena, Cebu City

211) CEBU - MINGLANILLA - La Nueva - Minglanilla Center, Minglanilla, Cebu

212) BACOLOD - HILADO - Hilado Street, Bacolod City

213) ZAMBOANGA CITY - CANELAR - Printex Building, M.D. Jaldon Street, Zamboanga City

214) MCKINLEY HILL - Unit 1 - Cp-1, Commerce and Industry Plaza, McKinley Hill, Bonifacio Global City, Taguig City

215) LOYOLA HEIGHTS - KATIPUNAN - Unit 13, Elizabeth Hall Building, Lot 1 Blk. 41 Katipunan Avenue, Loyola Heights, Quezon City

216) SURIGAO CITY - G/F, EGC Building, Rizal Street Washington, Surigao City, Surigao del Norte

217) AYALA AVENUE - RUFINO TOWER - Unit 1, G/F Rufino Building, 6784 Ayala Avenue corner V.A. Rufino Street, Makati City

218) 999 SHOPPING MALL - Unit 10 & 3C-2, 3/F, 999 Shopping Mall 2, C.M. Recto Street, Tondo Manila

219) T.M. KALAW - Annexes A, A -1,A-2,A-3 &A- 4 Ditz Building, 444 T.M. Kalaw Street, Ermita, Manila

220) COMMONWEALTH - No. 272 Commonwealth Avenue, Bgy. Old Balara, Quezon City

221) ROOSEVELT - STO. NIÑO - 187 Roosevelt Avenue, Brgy. Sto. Niño, San Francisco Del Monte, Quezon City

222) LAGRO - Lot 2, Blk. 6, Quirino Highway, Lagro, Novaliches, Quezon City

223) GARNET - Unit 102 Prestige Tower, Emerald Avenue, Ortigas Center, Pasig City

224) JULIA VARGAS - G/F, Unit 101, One Corporate Center, Julia Vargas Avenue corner Meralco Avenue, Ortigas Center, Pasig City

225) PAMPANGA - APALIT - RH7, Mac Arthur Highway, Apalit, Pampanga

226) PAMPANGA - GUAGUA - Good Luck Building, No. 303 Guagua- Sta. Rita Arterial Road, Bgy. San Roque, Guagua, Pampanga

227) CEBU - FREEDOM PARK - CLC Building, 280 Magallanes St. near cor. Noli Me Tangere, Cebu City

228) MANDALUYONG – WACK-WACK - G/F, GDC Building, 710 Shaw Blvd., Bgy. Wack-Wack, Mandaluyong City

229) BATANGAS - TANAUAN - Brgy. Darasa, Tanauan , Batangas City

230) MINDORO - CALAPAN - G/F Paras Building, J.P. Rizal Street, Bgy. San Vicente South, Calapan City, Oriental Mindoro

231) MAKATI AVENUE - PACIFIC STAR - G/F- High Rise, Pacific Star Building Sen. Gil Puyat Ave. cor. Makati Ave.,

232) LEGASPI - DELA ROSA - G/F I – Care Building, Dela Rosa Street corner Legaspi Village, Makati City

233) DAGUPAN - A.B. FERNANDEZ AVENUE - New Star Building, A. B. Fernandez Avenue, Dagupan City

234) PANGASINAN - ROSALES - Estrella Compound, Carmen Eat Rosales, Mac Arthur Highway, Pangasinan

235) BORACAY - Alexandrea Building, Main Road, Bgy. Balabag, Boracay Island, Malay, Aklan

236) CEBU - TALISAY - Tabunok Highway, Talisay City, Cebu

237) ORMOC CITY - G/F, Don Felipe Hotel Building, Aviles Street, Ormoc City

238) CAVITE - NAIC - Corner Daang Sabang and Ibayo Silangan Road, Naic, Cavite

239) BATAAN - DINALUPIHAN - Bgy. San Ramon, Dinalupihan, Bataan

240) TARLAC - PANIQUI - No. 130 M.H. Del Pilar Street corner Mac Arthur Highway, Paniqui, Tarlac City

241) NUEVA VIZCAYA - SOLANO - Maharlika Road, Poblacion, Solano, Nueva Vizcaya

242) TAGBILARAN CITY - CPG Avenue, 2nd District, Tagbilaran City

243) DAVAO - J.P. LAUREL - JP Laurel Avenue, Davao City

244) THE FORT - F1 - Unit F , G/F, F1 Center Building, 32nd Street corner 5th Avenue, Bonifacio Global City, Taguig

245) AMORSOLO - QUEENSWAY - G/F Queensway Building, No.118 Amorsolo St., Legaspi Village, Makati City

246) JUAN LUNA - PRITIL - G/F 1953-1955 Juan Luna St., Tondo, Manila

247) CUBAO - ARANETA CENTER - G/F, Philamlife Building, Aurora Blvd. corner General Araneta Street, Cubao, Quezon City

248) KALENTONG - G/F No. 908 Unit 1&2 Ground Floor Kalentong Street, Mandaluyong City

249) ALABANG - ENTRATA - Unit G3 & G4 Entrata, Filinvest Corporate City, Alabang, Muntinlupa City

250) BF HOMES - AGUIRRE - 327 Aguirre Avenue, BF Homes, Paranaque City

251) SUCAT - KABIHASNAN - G/F Unit 3 & 4 Perry Logistics Center Building, Ninoy Aquino Avenue, Paranaque City

252) CAVITE - TANZA - Antero Soriano Avenue, Daang Amaya 2 Tanza, Cavite

253) CEBU - ASIA TOWN IT PARK - G/F, Calyx Center, W. Ginonzon Street corner Abad Street, Asia Town, IT Park, Cebu City

254) GIL PUYAT - DIAN - G/F, Wisma Cyberhub Bldg., No 45 Sen. Gil Puyat Ave., Makati City

255) A. BONIFACIO - BALINGASA - G/F, 2/F & 3/F, Units D & E, Winston Plaza 1 Building, No. 880 A. Bonifacio Avenue, Brgy. Balingasa, Quezon City

256) VISAYAS AVENUE - G/F unit B,C & D No. 15 Visayas Ave. Brgy. Vasra Quezon City

257) GRACE PARK - 11TH AVE. - G/F, Remcor V Building, Block 172, Lot 5, Rizal Avenue Ext., Caloocan City

258) VALENZUELA - DALANDANAN - 212 Km. 15 Mac Arthur Hiway Dalandanan Valenzuela City

259) GREENHILLS - NORTH - G/F BTTC Bldg., Ortigas Ave. cor. Roosevelt St., Greenhills, San Juan City

260) ALABANG HILLS - Don Gesu Bldg., Don Jesus Blvd., Brgy. Cupang, Muntinlupa City

261) NUEVA ECIJA - GAPAN - G/F, Units 105,106 & 2/F, Unit 205, TSI Building, Jose Abad Santos Avenue, Sto. Niño, Gapan, Nueva Ecija

262) DAVAO - BUHANGIN - Km. 5 Buhangin Road, corner Gladiola Street, Buhangin, Davao City

263) BICUTAN - EAST SERVICE ROAD - Ground Floor, Waltermart Bicutan, East Service Rd. cor. Mañalac Ave. Brgy. San Martin de Porres, Parañaque City

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264) BULACAN - PLARIDEL - Lot 1071-A Daang Maharlika Road, (prev. Cagayan Valley Road) Banga First, Plaridel Bulacan

265) BUKIDNON - VALENCIA - Tamay Lang, Parklane, G. Laviña Ave., Poblacion, Valencia City, Bukidnon

266) "MARIKINA - PARANG - 90 JP Rizal St, Brgy Calumpang, Marikina City.

267) (JNJ Bldg. # 108 BG Molina St., Parang Marikina)"

268) ONGPIN - G/F, Commercial Unit G1, Strata Gold Condominium Bldg. 738 Ongpin St. Binondo Manila

269) CAVITE CITY - P. Burgos Ave., Brgy. Caridad, Cavite City

270) YLAYA - PADRE RADA - Ground Floor, Josefa Building, No. 981, Ylaya Street corner Padre Rada Street, Tondo, Manila

271) BATANGAS - LEMERY - G/F LDMC Building, Ilustre Ave. Dist III, Lemery, Batangas

272) LAGUNA - BIÑAN - G/F, Units 1,2,3 & 4, Simrey's Commercial Bldg., Nat’l Highway corner Alma Manzo Road, Brgy. San Antonio, Biñan City, Laguna

273) KALIBO - Roxas Avenue Extension, Buswang New, Kalibo, Aklan

274) DAVAO - DIGOS - Commercial Space-4, Davao RJ and Sons Realty & Trading Corp. Bldg., V. Sotto Street, Brgy. Zone-1, Digos City, Davao del Sur

275) PEREA - G/F Greenbelt Mansion, 106 Perea Street, Legaspi Village, Makati City

276) BANAWE - KALIRAYA - Titan 168 Building, 126 Banawe Street near cor. Kaliraya St., Quezon City

277) CAVITE - TRECE MARTIRES - G/F Dionets Commercial Place Building, San Agustin Road/Trece Martires - Indang Road, Trece Martires City, Cavite

278) ROXAS CITY - Corner Roxas Avenue and Osmeña St., (formerly Pavia St.) Roxas City, Capiz

279) TACLOBAN CITY - MARASBARAS - JGC Building, Ground Floor, National Road, Brgy. 77 Marasbaras, Tacloban City

280) PROJECT 8 - SHORTHORN - Ground Flr. West Star Business Ctr., Bldg. # 31, Shorthorn St., Brgy. Bahay Toro Proj.8, Quezon City

281) BULACAN - BALAGTAS - Burol 1st, MacArthur Highway, Balagtas, Bulacan

282) DAVAO - MAC ARTHUR MATINA - BGP Commercial Complex II Bldg., McArthur Highway, Matina, Davao City

283) GRACE PARK - 3RD AVE. - No. 215 Rizal Ave. Ext, Brgy. 45, Grace Park West, Caloocan City

284) SAN FERNANDO - JA SANTOS - Kingsborough Commercial Center Bldg., GF Units 1A &1B Jose Abad Santos Avenue, San Fernando, Pampanga

285) ILOCOS NORTE - SAN NICOLAS - Barangay 2, San Nicolas, Ilocos Norte

286) PANGASINAN - LINGAYEN - J.S. Molano Real State Lessor Building, Avenida Rizal East Lingayen, Pangasinan

287) BACOLOD - ARANETA - Unit 1A and 1B Metrodome Building, Araneta corner Alunan Street, Singcang Barangay 39, Bacolod City

288) GENERAL LUIS - KAYBIGA - No. 4 Gen. Luis St., Barangay Kaybiga, Caloocan City

289) NAVOTAS - M. NAVAL - No. 895 M. Naval Street, Brgy. Sipac-Almasen, Navotas City

290) CAVITE - SILANG - J. Rizal Street, Silang, Cavite

291) BATANGAS - ROSARIO - Rosario-Padre Garcia-Lipa Road, Poblacion Rosario, Batangas

292) JUPITER - PASEO DE ROXAS - No. 30 Jupiter cor. Paseo De Roxas Sts., Brgy. Bel-Air, Makati City

293) DIPOLOG CITY - G/F Felicidad II Bldg., Quezon Ave., Miputak, Dipolog City

294) GENERAL SANTOS CITY - PIONEER - Laiz Bldg., Pioneer cor. Magsaysay Ave., Gen. Santos City

295) GIL PUYAT - SALCEDO VILLAGE - Unit 1C, G/F Country Space 1 Building, Gil Puyat Avenue, Salcedo Village, Makati City

296) BLUMENTRITT - RIZAL AVENUE - No. 2412 Rizal Avenue, Sta. Cruz, Manila

297) JUAN LUNA - BINONDO - No. 580 Juan Luna Street, Binondo, Manila

298) E. RODRIGUEZ AVE. - CUBAO - No. 1731 E. Rodriguez Sr. Avenue, Brgy. Pinagkaisahan, Cubao, Quezon City

299) GREENHILLS - PROMENADE - Unit 3, G/F & 2/F Promenade Building, Missouri Street, Greenhills, San Juan City

300) ANTIQUE - SAN JOSE - St. Nicholas Commercial Building, T.A. Fornier Street, San Jose, Antique

301) DAVAO - AGDAO - Door 2 and 3, Cabaguio Building, J.P. Cabaguio Avenue, Davao City

302) LEVISTE - Unit Ground B, LPL Mansions Building, 122 L.P. Leviste Street, Salcedo Village Makati City

303) CHINO ROCES - LA FUERZA - Unit/s 10 & 11 La Fuerza Plaza 1, 2241 Don Chino Roces Avenue, Makati City

304) PAZ M. GUAZON - Units 5 & 6 Topmark Bldg., 1763 Paz M. Guazon Street, Paco, Manila

305) MIA ROAD - Salud-Dizon Building 1, No. 5 MIA Road, Tambo, Parañaque City

306) BATANGAS - NASUGBU - J. P. Laurel Street, Poblacion, Nasugbu, Batangas

307) SORSOGON - Ma. Bensuat T. Dogillo Bldg., Magsaysay St., Poblacion, Sorsogon City

308) MALOLOS - No. 1197 G/F BUFECO Bldg., Brgy. Sumapang Matanda, Mac Arthur Highway Malolos, Bulacan

309) SUBIC BAY - G/F Bldg., 1109 Rizal Highway, Subic Bay Freeport Zone, Olongapo City

310) ISABELA - ILAGAN - Maharlika Highway corner Florencio Apostol Street, Calamagui 1, Ilagan, Isabela

311) LA UNION - AGOO - Mac Arthur Highway, Barangay San Antonio, Agoo, La Union

312) CATBALOGAN - Curry Avenue corner San Bartolome Street, Catbalogan City, Samar

313) DAVAO - QUIRINO - Centron Building, Quirino Avenue corner General Luna Street, Davao City

314) KIDAPAWAN - Doña Leonila Complex, National Highway, Poblacion, Kidapawan City North Cotabato

315) VALENZUELA - GEN. T. DE LEON - Units 4 & 5, G/F, Liu Shuang Yu Bldg., No. 3026 Gen. T. De Leon St. Brgy. Gen. T. De Leon, Valenzuela City

316) ILOILO - MOLO - GT Plaza Mall, MH del Pilar St., Molo, Iloilo City

317) ALABANG - COMMERCE AVE. - Spectrum Center – Block 28 Commerce Avenue corner Filinvest Avenue, Filinvest City, Alabang, Muntinlupa City

318) NUEVA ECIJA - TALAVERA - Lot No. 269–A Maharlika Road, Poblacion, Talavera, Nueva Ecija

319) SILAY - Rizal Street, Silay City, Negros Occidental

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320) DEL MONTE - D. TUAZON - 155 Del Monte Ave., Barangay Manresa, Quezon City

321) PANGASINAN - SAN CARLOS - Palaris Street , San Carlos City, Pangasinan

322) DAVAO - MAGSAYSAY - Lot 100-C Brgy. 030 Poblacion, R. Magsaysay Ave., Davao City

323) ZAMBALES - IBA - Lot No. 1-A, Zambales - Pangasinan Provincial Road, Brgy. Sagapan, Iba, Zambales

324) CAGAYAN DE ORO - CARMEN - RTS Building, Vamenta Boulevard, Carmen, Cagayan De Oro City

325) CAGAYAN DE ORO - LAPASAN - Lapasan Highway, Cagayan De Oro City

326) CALOOCAN - A. MABINI - G/F Gee Bee Bldg., No. 428, A. Mabini St., Brgy. 15, Zone 2, Caloocan City

327) TORDESILLAS - U105, Le Metropole Condo, H.V. Dela Costa St., corners Tordesillas St., and Sen. Gil Puyat Avenue, Salcedo Village, Makati City

328) TAFT - NAKPIL - RLR Building, 1820 Taft Avenue near corner Nakpil Street, Malate, Manila

329) ORTIGAS - ROCKWELL - Unit No. W-01 Tower 1, The Rockwell Business Center, Ortigas Avenue, Pasig

330) GENERAL SANTOS CITY - CALUMPANG - Calumpang Medical Specialist Bldg.,National Highway, Calumpang, General Santos City

331) BATANGAS - STO. TOMAS - Sto. Tomas - Km. 67 Maharlika Highway, Poblacion, Sto. Tomas, Batangas

332) PATEROS - M. Almeda corner G. De Borja Street, San Roque, Pateros

333) LAGUNA - CABUYAO - No. 26 J. P. Rizal Street, Poblacion, Cabuyao City, Laguna

334) BULACAN - SAN JOSE DEL MONTE - Dalisay Resort, Gov. F. Halili Avenue, Tungkong Mangga, San Jose del Monte, Bulacan

335) METROPOLITAN AVENUE - Savana Building 3, Metropolitan Avenue corner Venecia Street, Barangay Sta. Cruz, Makati City

336) THE FORT - ACTIVE FUN - Active Fun Building, 9th Avenue corner 28th Street, City Center, Bonifacio Global City, Taguig City

337) STA. ROSA - Unit No. 6, G/F Paseo 5 - Paseo de Sta Rosa, Greenfield City, Don Jose, Santa Rosa City, Laguna

338) LAS PIÑAS - J. AGUILAR AVE. - J.Aguilar Avenue corner Casimiro Drive, Brgy. BF International, Las Piñas City, Metro Manila

339) PEDRO GIL - No. 574 Pedro Gil Street, Manila

340) KAWIT - CENTENNIAL - Centennial Road, Tabon, Kawit, Cavite

341) SAMPALOC - J. FIGUERAS - No. 427-433 J. Figueras Street, Sampaloc, Manila

342) BATANGAS - BALAYAN - Corner Paz Street and Union Street, Poblacion, Balayan, Batangas

343) KAMUNING - JPY Building, No. 52 Kamuning Road, Kamuning, Quezon City

344) E.ROD. - WELCOME ROTONDA - G/F AEK Building, No. 40 E. Rodriguez Sr. Avenue, Brgy. Don Manuel, Quezon City

345) XAVIERVILLE - No. 60 Xavierville Avenue, Xavierville Subdivision, Brgy. Loyola Heights, Quezon City

346) TABACO CITY - Manuel Cea Bldg. I, Santillan Street, Poblacion, Tabaco City, Albay

347) BATAAN - MARIVELES - 8th Avenue, Freeport Area of Bataan (FAB), Mariveles, Bataan

348) LEGAZPI CITY - Block 2 Lot 3-B, Landco Business Park, Legazpi City, Albay

349) TIMOG - MOTHER IGNACIA - No. 21 Timog Ave., Brgy. South Triangle, 1103 Quezon City

350) AURORA BLVD. - ANONAS - Rosario Building, No. 999 Aurora Blvd., near corner Lauan and Anonas Sts., Bgy. Duyan-duyan, Project 3, Quezon City

351) P. OCAMPO AVENUE - 245 P. Ocampo Ave. corner Flordeliz St., Barangay La Paz, Makati City

352) MONTALBAN - RIZAL - 240 E. Rodriguez Hi-way, Manggahan, Rodriguez, Rizal

353) THE FORT 26TH ST - 11TH AVE - U25 & 26, North Tower, South of Market Bldg., 26th St., corner 11th Avenue, Bonifacio Global City, Taguig City

354) ORTIGAS - ADB AVENUE - Units G1 & G2, g/f ADB Avenue Tower, Ortigas Center, Pasig City

355) BONI SERRANO AVE. - No.107 Boni Serrano Ave., Brgy. Lipunan ng Crame, Quezon City

356) TAYTAY - MANILA EAST - Manila East Road, Brgy.San Juan, Taytay, Rizal

357) PASAY - OCEANAIRE - U108 & 109, Podium Commercial Area, Oceanaire Condo, Sunrise Drive corner Rd. 23, SM Mall of Asia Complex, Pasay City

358) A.MABINI - R.SALAS - G/F & 2/F Jesselton Tower No. 1453 A. Mabini St., corner R. Salas St., Brgy. 668, Zone 72, Ermita, Manila

359) GIL PUYAT - F.B. HARRISON - No. 131 Gil Puyat Avenue Extension, Brgy. 24, Zone 4, Pasay City

360) MAYON - DAPITAN - 181 Mayon Street near corner Dapitan Street Brgy. Sta. Teresita Quezon City

361) KALAYAAN - MATALINO - No. 123 Kalayaan Avenue corner Matalino Street, Brgy. Central Diliman, Quezon City

362) CABANATUAN - MAHARLIKA - Maharlika Highway, Brgy. Dicarma, Cabanatuan City, Nueva ecija

363) ACROPOLIS - Unit 1B G/F Richmond Centre Building, Lot 46 Block 11, E. Rodriguez Ave. Jr. Avenue, Brgy. Bagumbayan, Acroplis, Quezon City

364) LEGASPI - AGUIRRE - Ground Floor, Unit 1B, The Biltmore, 102 Aguirre Street, Legaspi Village, Makati City

365) TARLAC - CONCEPCION - Lot 1889 B1, B2 and B3, L. Cortes St., San nicholas, Concepcion, Tarlac

366) BULACAN - STA. MARIA - No. 115 M. De Leon St., Brgy. Poblacion, Sta. Maria, Bulacan

367) TARLAC - MCARTHUR HIGHWAY - Lot No. 27 Lot 17, McArthur Highway corner Calle Manuel, San Sebastian Village, Tarlca, Tarlac

368) PANGASINAN - MANGALDAN - Cadastral Lot No. 335 Rizal Avenue, Brgy. Poblacion, Magaldan, Pangasinan

369) BATANGAS CITY - PALLOCAN - Units 6, 7 and 8 Mayvel Center Bldg., Manuela Pastopr Avenue, Brgy. Pallocan West, Batangas City

370) DAVAO - DIVERSION ROAD - Unit No. 4 &5, GF D3G Y10 Bldg., C.P. Garcia National Highway, Brgy Cabantian, Davao City

371) PANGASINAN - ALAMINOS - BHF Blue Harrison Bldg., Quezon Avenue, Poblacion, Alaminos City, Pangasinan

372) CALAMBA - NATIONAL ROAD - 1425 National Road, Brgy. Uno Crossing, Calamba City

373) BACOLOD - EAST - East Two Corporate Center Bldg., Circumferential Road, Brgy. Villamonte, Bacolod City

374) BAGUIO - LEGARDA - Ground Floor Lindi Hotel Building, No. 12 Legarda Road, Baguio City

375) LAGUNA - STA. CRUZ - Sun Moon Arcade Building, No. 129 P. Guevarra St., Brgy. Poblacion 2, Sta. Cruz, Laguna

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376) QUEZON - CANDELARIA - Corner National Highway and Ona Street, Candelaria, Quezon

377) ILOILO - DIVERSION ROAD - The 21 Avenue Building, Benigno Aquino Avenue, Mandurriao, Iloilo City

378) TACLOBAN CITY - J. ROMUALDEZ - RUL Building, Justice Romualdez Street, Brgy. 15, Tacloban City

Listed below are the branches of EWRB as of December 31, 2015:

1) PASIG - 360 Dr. Sixto Antonio Avenue, Caniogan, Pasig City 1606

2) DAGUPAN - Abarabar Bldg., Perez Boulevard, Dagupan City 2400

3) SAN FERNANDO, LA UNION - Diversion Road, Brgy. Pagdaraoan, San Fernando City, La Union

4) BAGUIO - 2F Jose Miguel Building II, Yandoc Street corner Naguilian Road, Baguio City

5) TARLAC - Silayan Business Center, Brgy. Santo Cristo, Tarlac City

6) TUGUEGARAO - Don Domingo Street, Brgy. Balzain East, Tuguegarao City, Cagayan Valley

7) SAN FERNANDO, PAMPANGA - Suburbia North Subdivision, Mac Arthur Highway, City of San Fernando, Pampanga

8) MEYCAUAYAN, BULACAN - #2602 Malhacan National Road, Brgy. Malhacan, Meycauayan City, Bulacan, 3020

9) CABANATUAN - Bulanadi Bldg., Maharlika Highway, Brgy. H. Concepcion, Cabanatuan City, Nueva Ecija

10) LUCENA - Land Co Building, M.L. Tagarao Street, Brgy. 3 Lucena City

11) STA. ROSA - FLC Business Center, National Highway, Brgy. Macabling, Sta. Rosa, Laguna

12) CAINTA - Unit 101, East 1900 Building, Gate 3 Vista Verde Executive Village, Felix Avenue Cainta, Rizal

13) DASMARINAS - Lot 4, Aguinaldo Highway, Brgy. Salitran, Dasmarinas City

14) BATANGAS - Ground Floor, Epicenter, National Highway, Brgy. Balagtas, Batangas City

15) PALAWAN - Daniel's Alley II Bldg., Km. 2, National Highway, Brgy. San Pedro, Puerto Princesa City, Palawan 5300

16) LEGAZPI - Door 2&3, Bicol Wei Due Fraternity Bldg., Quezon Avenue, Oro Site, Legazpi City, 4500

17) NAGA - CBD 2 Triangulo, Naga City, 4400

18) BACOLOD - R.S. Bldg., Corner Hilado Extension & 6th Sts., Capitol Shopping Center, Lacson, Bacolod City, Negros Occidental, 6100

19) ILOILO - Milmar Bldg., Bonifacio Drive, Iloilo City, 5000

20) ROXAS - Unit 2 Cler Grand Hotel, Brgy. Lawaan, Roxas City, 5800

21) KABANKALAN - The Crossing, Guazon Street, Brgy. 2, Kabankalan City

22) SAN CARLOS - F.C. Ledesma Avenue, Center Mall, San Carlos City, Negros Occidental

23) DUMAGUETE - D & J Bldg., Dr. V. Locsin Street, Poblacion 7, Dumaguete City, 6200

24) MANDAUE - Northside Business Hub, G. Lopez Jaena Street, Tipolo Highway, Mandaue City

25) TAGBILARAN - G/F Sum Bldg., 29 San Jose St., Brgy. Cogon District, Tagbilaran City, Bohol 6300

26) RAMOS - V.Yap Bldg., #29 F. Ramos St., Cogon, Cebu City

27) TOLEDO - Ma. Theresa Isabel Bldg. #4, Peňalosa Street, Luray I, Toledo City, Cebu

28) BOGO - CPN Building, M.H. Del Pilar Street, Brgy. Lourdes, Bogo City, Cebu

29) CALBAYOG - Irigon Building, Pajarito Street, Calbayog City, Western Samar 6710

30) MAASIN - R. Kangleon Cor., Rafols Sts., Brgy. Tunga-tunga Maasin City, Southern Leyte 6600

31) TACLOBAN - G/F Insular Bldg., Avenida-Veteranos Avenue, Brgy. 34, Tacloban City, Leyte, 6500

32) BAYBAY - Oppura Bldg., M.L. Quezon corner D. Veloso Sts., Baybay Leyte 6521

33) ORMOC - Real corner San Vidal, Ormoc City

34) PAGADIAN - Vicente Araneta Tolibas Bldg., Jamisola Cor. Ariosa Sts., Santiago Dist., Pagadian City7016

35) DIPOLOG - General Luna corner Calibo Sts., Dipolog City, Zamboanga del Sur

36) CAGAYAN DE ORO - Silverdale Building, Capistrano corner Mabini Streets, Brgy. 14, Cagayan de Oro City

37) VALENCIA - Alkuino Bldg., Purok 2, Sayre Highway, Poblacion, Valencia City, Bukidnon, 8709

38) TAGOLOAN - National Highway, Poblacion Tagoloan, Misamis Oriental, 9001

39) GINGOOG - Dupoint Arcade, National Highway, Brgy. 17, Gingoog City 9014

40) MATI - Magricom Bldg. II, Limatoc St., Central, Mati, Davao Oriental, 8200

41) DAVAO - Uyanguren Street, Ramon Magsaysay Avenue, Davao City

42) STO. TOMAS - Feeder Road 2, Tibal-og, Sto Tomas, Davao del Norte, 8112

43) NABUNTURAN - Purok 11, Brgy. Poblacion, Nabunturan, Compostela Valley

44) GENERAL SANTOS - UTD Bldg., J. Catolico Avenue, Lagao, General Santos City, 9500

45) KORONADAL - Purok Mabuhay, Brgy. Zone IV, Koronadal City

46) KABACAN - National Road, Rizal St., Poblacion, Kabacan, North Cotabato

47) ISULAN - Valdez Bldg., Arcade, National Highway, Bgry. Kalawag II, Isulan, Sultan Kudarat

48) BUTUAN - Montilla Boulevard, Butuan City, Agusan del Norte 8600

49) SAN FRANCISCO - Quezon St., Brgy. 2, San Francisco, Agusan del Sur, 8501

50) BAYUGAN - Libres St., Taglatawan, Bayugan City,Agusan del Sur 8502

51) SURIGAO - Parkway, Km.3 Brgy. Luna, Surigao City

24

52) KITCHARAO - Brgy. Songkoy, National Highway, Kitcharao,Agusan del Norte

53) TANDAG - Pimentel Bldg., Donasco Street, Bag-ong Lungsod, Tandag City, Surigao del Sur 8505

54) MANGAGOY - GBC Building, Espiritu St., Brgy. Mangagoy, Bislig City, Surigao del Sur 8311

55) DAPA - Brgy. 11, Mabini St., Dapa, Surigao del Norte 8417

Status of Publicly-Announced New Product or Service

All publicly-announced new products or services of the Bank are in commercial distribution.

Competition

The banking industry in the Philippines is composed of universal banks, commercial banks, savings banks,

savings and mortgage banks, private development banks, stock savings and loan associations, rural banks

and cooperative banks.

As of December 31, 2015, the universal and commercial banking sector consisted of 40 banks, of which 21

were universal banks and 19 were commercial banks. Of the 21 universal banks, 12 were private domestic

banks, 3 were government banks and 6 were branches of foreign banks. Of the 19 commercial banks, 5

were private domestic banks, 2 were subsidiaries of foreign banks and 12 were branches of foreign banks.

Commercial banks have all the general powers incident to corporations and all powers that may be necessary

to carry on the business of commercial banking, such as the power to accept drafts and to issue letters of

credit, discount and negotiate promissory notes, drafts, bills of exchange and other evidences of

indebtedness, accept or create demand deposits, receive other types of deposits and deposit substitutes,

buy and sell foreign exchange and gold and silver bullion, and lend money on a secured or unsecured basis.

Universal banks are banks that have authority, in addition to commercial banking powers, to exercise the

powers of investment houses, to invest in the equity of business not related to banking, and to own up to

100% of the equity in a thrift bank, a rural bank, or a financial allied or non-allied enterprise. A publicly-

listed universal or commercial bank may own up to 100% of the voting stock of only one other universal or

commercial bank.

Thrift banks primarily accumulate the savings of depositors and invest them, together with capital loans

secured by bonds, mortgages in real estate and insured improvements thereon, chattel mortgage, bonds

and other forms of security or in loans for personal and household finance, secured or unsecured, or in

financing for home building and home development; in readily marketable debt securities; in commercial

papers and accounts receivables, drafts, bills of exchange, acceptances or notes arising out of commercial

transactions. Thrift banks also provide short-term working capital and medium- and long-term financing

for businesses engaged in agriculture, services, industry, and housing as well as other financial and allied

services for its chosen market and constituencies, especially for small and medium-sized enterprises and

individuals. As at December 31, 2015, there were 68 thrift banks.

Rural banks are organized primarily to make credit available and readily accessible in the rural areas on

reasonable terms. Loans and advances extended by rural banks are primarily for the purpose of meeting the

normal credit needs of farmers and fishermen, as well as the normal credit needs of cooperatives and

merchants. As of December 31, 2015, there were 524 rural and cooperative banks.

25

Specialized government banks are organized to serve a particular purpose. The existing specialized banks

are the Development Bank of the Philippines (“DBP”), Land Bank of the Philippines (“LBP”), and Al-Amanah

Islamic Investment Bank of the Philippines (“AAIIB”). DBP was organized primarily to provide banking services

catering to the medium- and long-term needs of agricultural and industrial enterprises, particularly in rural

areas and preferably for small- and medium-sized enterprises. LBP primarily provides financial support in

all phases of the Philippines’ agrarian reform program. In addition to their special functions, DBP and LBP

are allowed to operate as universal banks. AAIIB was organized to promote and accelerate the socio-

economic development of the Autonomous Region of Muslim Mindanao through banking, financing and

investment operations and to establish and participate in agricultural, commercial and industrial ventures

based on Islamic banking principles and rulings.

During the past decade, the Philippine banking industry has been marked by two major trends — the

liberalization of the industry, and mergers and consolidation.

Foreign bank entry was liberalized in 1994, enabling foreign banks to invest in up to 60% of the voting stock

of an existing bank or a new banking subsidiary, or to establish branches with full banking authority. This

led to the establishment of ten new foreign bank branches in 1995. The General Banking Law further

liberalized the industry by providing that the Monetary Board may authorize foreign banks to acquire up to

100% of the voting stock of one domestic bank. Under the General Banking Law, any foreign bank, which

prior to the effectiveness of the said law availed itself of the privilege to acquire up to 60% of the voting

stock of a domestic bank, may further acquire voting shares of such bank to the extent necessary for it to

own 100% of the voting stock thereof.

The Bank faces competition from both domestic and foreign banks, in part, as a result of the liberalization

of the banking industry by the Government. Since 1994, a number of foreign banks, which have greater

financial resources than the Bank, have been granted licenses to operate in the Philippines. Such foreign

banks have generally focused their operations on the larger corporations and selected consumer finance

products, such as credit cards. The foreign banks have not only increased competition in the corporate

market, but have as a result caused more domestic banks to focus on the commercial middle-market,

placing pressure on margins in both markets.

Since September 1998, the BSP has been encouraging consolidation among banks in order to strengthen

the Philippine banking system. Mergers and consolidation result in greater competition, as a smaller group

of “top tier” banks compete for business.

As of December 31, 2015, the ten largest commercial banks account for approximately 83.7% of total assets

and 85.0% of total deposits of the commercial banking system based on published statements of condition.

Certain factors arising from the 1997 Asian crisis and the 2008 global financial crisis also resulted in greater

competition and exert downward pressure on margins. Banks instituted more restrictive lending policies as

they focused on asset quality and reduction of their NPLs, which resulted in increasing liquidity. As Philippine

economic growth further accelerates and banks apply such liquidity in the lending market, greater

competition for corporate, commercial and consumer loans is expected. As of December 31, 2015, the ten

largest commercial banks account for approximately 87.5% of the net customer loan portfolio of the

commercial banking system, based on published statements of condition.

26

Sources and Availability of Raw Materials and Names of Principal Suppliers


Customer Concentration

The Bank has a diversified customer base and there is no concentration of business in major customer

groups. As such, the Bank is not dependent upon a single customer or a few customers

Transactions with and/or Dependence on Related Parties

In the ordinary course of business, the Bank has loan transactions with some subsidiaries and with certain

directors, officers, stockholders and related interests. Under the Bank’s policies, these loans are made

substantially on the same terms as loans to other individuals and businesses of comparable risks. Refer to

Note 26 of the attached 2015 Audited Financial Statements of EastWest for the details of related party

transactions.

Patents, Trademarks, Copyrights, Licenses, Franchises, Concessions and Royalty Agreements Held

In 1994, EW obtained a Certificate of Registration and bank license from the Philippine SEC to operate under

the corporate name “East West Banking Corporation.”

EW uses a variety of names and marks, including the name “East West Banking Corporation” and EW’s logo,

in connection with its business. The Bank has registered such names and marks with the Intellectual Property

Office of the Philippines.

On January 25, 2012, the Bank obtained a certification from the BSP on a US-based bank using a similar

name. As certified by BSP, the US-based bank has not been issued a license to operate as a banking

institution in the Philippines. The BSP also certified that the Bank is among the commercial banks it

supervises. On October 10, 2013, the Intellectual Property Office of the Philippines issued a decision in favor

of the Bank, cancelling the mark “EAST WEST BANK & COMPASS LOGO” previously registered in the name of

a US-based bank.

Need for Government Approval of Principal Products or Services

The Bank’s principal products and services are offered to customers only upon receipt of the necessary

regulatory approvals or clearances. The Bank strictly complies with the related regulatory requirements such

as reserves, liquidity position, loan exposure limits, cap on foreign exchange holdings, provision for losses,

anti-money laundering provisions and other reportorial requirements.

Effect of Existing or Probable Governmental Regulations on the Business

The Bank strictly complies with the Bangko Sentral ng Pilipinas (BSP) requirements in terms of capitalization

reserves, liquidity position, limits on loan exposure, cap on foreign exchange holdings, provision for losses,

anti-money laundering provisions and other reportorial requirements as well as other regulatory agencies

27

such as the Securities and Exchange Commission, Philippine Stock Exchange, Philippine Deposit Insurance

Corporation and the Bureau of Internal Revenues, among others.

Amount Spent on Research and Development Activities

The Bank’s research and development activities are mainly driven market research and process

improvements. EastWest’s businesses are heavily dependent on the ability to timely and accurately collect

and process a large amount of financial and other information across numerous and diverse markets and

products at its various branches, at a time when transaction processes have become increasingly complex

with increasing volume.

The amount spent on research and development activities (in million pesos) and its percentage to

revenues for the last three years has been as follows:

Year Amount % of Revenue

2015 P=1.12 0.01%

2014 P=1.58 0.01%

2013 P=2.23 0.02%

Costs and Effects of Compliance with Environmental Laws


Employees

As at December 31, 2015, EastWest had 5,168 full-time employees compared to 4,714 in 2014. The

following table categorizes EastWest’s full-time employees rank, as of December 31, 2015 and 2014:

The Bank’s subsidiaries have 908 officers/staff, bringing the combined manpower of 6,076.

EastWest anticipates it will have approximately 6,500 employees by the end of 2016. This anticipated

significant increase in the number of employees is related to the hiring of branch personnel to compliment

the branches opened in the last three years.

There is no existing collective bargaining agreement between EastWest and any of its employees, and

EastWest’s employees are not part of any labor union.

Rank 2015 2014

Executives 204 184

Managers 2,037 1,885

Rank and File 2,927 2,645

Total 5,168 4,714

28

Financial Risk Management Objectives and Policies

Risk Management

To ensure that corporate goals and objectives, and business and risk strategies are achieved, the Bank

utilizes a risk management process that is applied throughout the organization in executing all business

activities. Employees’ functions and roles fall into one of the three categories where risk must be managed

in the business units, operating units and governance units.

The Bank’s activities are principally related to the use of financial instruments and are exposed to credit

risk, liquidity risk, operational risk and market risk, the latter being subdivided into trading and non-trading

risks. Forming part of a coherent risk management system are the risk concepts, control tools, analytical

models, statistical methodologies, historical researches and market analysis, which are being employed by

the Bank. These tools support the key risk process that involves identifying, measuring, controlling and

monitoring risks.

Risk Management Structure

a. Board of Directors (the Board or BOD)

The Bank’s risk culture is practiced and observed across the Group putting the prime responsibility on

the BOD. It establishes the risk culture and the risk management organization and incorporates the risk

process as an essential part of the strategic plan of the Group. The BOD approves the Bank’s articulation

of risk appetite which is used internally to help management understand the tolerance for risk in each

of the major risk categories, its measurement and key controls available that influence the Bank’s level

of risk taking. All risk management policies and policy amendments, risk-taking limits such as but not

limited to credit and trade transactions, market risk limits, counterparty limits, trader’s limits and

activities are based on the Bank’s established approving authorities which are approved by the Bank’s

BOD. At a high level, the BOD also approves the Bank’s framework for managing risk.

b. Executive Committee

This is a board level committee, which reviews the bank-wide credit strategy, profile and performance.

It approves the credit risk-taking activities based on the Bank’s established approving authorities and

likewise reviews and endorses credit-granting activities, including the Internal Credit Risk Rating

System. All credit proposals beyond the credit approving limit of the Loan and Investments Committee

passes through this committee for final approval.

c. Loan and Investments Committee

This committee is headed by the Chairman of the Bank whose primary responsibility is to oversee the

Bank’s credit risk-taking activities and overall adherence to the credit risk management framework,

review business/credit risk strategies, quality and profitability of the Bank’s credit portfolio and

recommend changes to the credit evaluation process, credit risk acceptance criteria and the minimum

and target return per credit or investment transaction. All credit risk-taking activities based on the

Bank’s established approving authorities are evaluated and approved by this committee. It establishes

infrastructure by ensuring business units have the right systems and adequate and competent

manpower support to effectively manage its credit risk.

29

d. Asset-Liability Management Committee (ALCO)

ALCO, a management level committee, meets on a weekly basis and is responsible for the over-all

management of the Bank’s market, liquidity, and financial position related risks. It monitors the Bank’s

liquidity position and reviews the impact of strategic decisions on liquidity. It is responsible for

managing liquidity risks and ensuring exposures remain within established tolerance levels. The ALCO’s

primary responsibilities include, among others, (a) ensuring that the Bank and each business unit holds

sufficient liquid assets of appropriate quality and in appropriate currencies to meet short-term funding

and regulatory requirements, (b) managing financial position and ensuring that business strategies are

consistent with its liquidity, capital and funding strategies, (c) establishing asset and/or liability pricing

policies that are consistent with the financial position objectives, (d) recommending market and liquidity

risk limits to the Risk Management Committee and BOD and (e) approving the assumptions used in

contingency and funding plans. It also reviews cash flow forecasts, stress testing scenarios and results,

and implements liquidity limits and guidelines.

e. Risk Management Committee (RMC)

RMC is a board level committee who convenes monthly and is primarily responsible to assist the Board

in managing the Bank's risk taking activities. This is performed by the committee by institutionalizing

risk policies and overseeing the Bank's risk management system. It develops and recommends risk

appetite and tolerances for the Bank's major risk exposures to the Board. Risk management principles,

strategies, framework, policies, processes, and initiatives and any modifications and amendments

thereto are reviewed and approved by RMC. It oversees and reports to the Board the effectiveness of

the risk management system, overall risk profile, and compliance with the risk appetite and tolerances

that the Board approved.

f. Risk Management Subcommittee (RMSC)

RMSC is a management level committee who convenes monthly and is responsible to assist RMC in

fulfilling its responsibilities in managing the Bank's risk taking activities. This is performed by the

committee by implementing the risk management principles, strategies, framework, policies, processes,

and initiatives across the Bank. It leads the effective conduct of risk and capital management. It

oversees and directs the management of the Bank's overall risk profile. The committee likewise oversees

risk incidents, control gaps, and control deficiencies and management actions in implementing the

corresponding corrective actions.

g. Audit Committee (Audit Com)

The Audit Com assists the BOD in fulfilling its oversight responsibilities for the financial reporting

process, the system of internal control, the audit process, and the Bank’s process for monitoring

compliance with laws and regulation and the code of conduct. It retains oversight responsibilities for

operational risk, the integrity of the Bank’s financial statements, compliance, legal risk and overall

policies and practices relating to risk management. It is tasked to discuss with management the Bank’s

major risk exposures and ensures accountability on the part of management to monitor and control

such exposures including the Bank’s risk assessment and risk management policies. The Audit Com

discusses with management and the independent auditor the major issues regarding accounting

principles and financial statement presentation, including any significant changes in the Bank’s selection

or application of accounting principles; and major issues as to the adequacy of the Bank’s internal

controls; and the effect of regulatory and accounting initiatives, as well as off-balance sheet structures,

on the financial statements of the Bank.

30

h. Corporate Governance and Compliance Committee (CGCC)

The CGCC is responsible for ensuring the BOD’s effectiveness and due observance of corporate

governance principles and guidelines. It reviews and assesses the adequacy of the CGCC’s charter and

Corporate Governance Manual and recommends changes as necessary. It oversees the implementation

of the Bank’s compliance program and ensures compliance issues are resolved expeditiously. It assists

Board members in assessing whether the Bank is managing its compliance risk effectively and ensures

regular review of the compliance program.

i. Risk Management Division (RMD)

RMD performs an independent risk governance function within the Bank. RMD is tasked with identifying,

measuring, controlling and monitoring existing and emerging risks inherent in the Bank’s overall

portfolio (on- or off-balance sheet). RMD develops and employs risk assessment tools to facilitate risk

identification, analysis and measurement. It is responsible for developing and implementing the

framework for policies and practices to assess and manage enterprise-wide market, credit, operational,

and all other risks of the Bank.

It also develops and endorses risk tolerance limits for BOD approval, as endorsed by the RMC, and

monitors compliance with approved risk tolerance limits. Finally, it regularly apprises the BOD, through

the RMC, the results of its risk monitoring.

j. Internal Audit Division (IAD)

IAD provides an independent assessment of the Bank’s management and effectiveness of existing

internal control systems through adherence testing of processes and controls across the organization.

The IAD audits risk management processes throughout the Bank annually or in a cycle depending on

the latest audit rating. It employs a risk-based audit approach that examines both the adequacy of the

procedures and the Bank’s compliance with the procedures. It discusses the results of all assessments

with management, and reports its findings and recommendations to the Audit Committee which in turn,

conducts the detailed discussion of the findings and recommendations during its regular meetings.

IAD’s activities are suitably designed to provide the BOD with reasonable assurance that significant

financial and operating information is materially complete, reliable and accurate; internal resources are

adequately protected; and employee performance is in compliance with the Bank’s policies, standards,

procedures and applicable laws and regulations.

k. Compliance Division

Compliance Division is responsible for reviewing any legal or regulatory matters that could have a

significant impact on the Bank’s financial statements, the Bank’s compliance with applicable laws and

regulations, and inquiries received from regulators or governmental agencies. It reviews the

effectiveness and adequacy of the system for monitoring compliance with laws and regulations and the

results of management's investigation and follow-up (including disciplinary action) for any instances of

noncompliance.

Credit Risk

Credit risk refers to the potential loss of earnings or capital arising from an obligor/s, customer/s or

counterparty’s failure to perform and/or to meet the terms of any contract with the Group. Credit risks may

last for the entire tenor and set at the full amount of a transaction and in some cases may exceed the original

31

principal exposures. The risk may arise from lending, trade financing, trading, investments and other

activities undertaken by the Group. To identify and assess this risk, the Group has a structured and

standardized credit rating, and approval process according to the borrower or business and/or product

segment. For large corporate credit transactions, the Bank has a comprehensive procedure for credit

evaluation, risk assessment and well-defined concentration limits, which are established for each type of

borrower. At the portfolio level, which may be on an overall or by product perspective, RMD manages the

Group’s credit risk.

Credit concentration

Excessive concentration of lending plays a significant role in the weakening of asset quality. The Group

reduces this risk by diversifying its loan portfolio across various sectors and borrowers. The Group believes

that good diversification across economic sectors and geographic areas, among others, will enable it to ride

through business cycles without causing undue harm to its asset quality.

RMD reviews the Group’s loan portfolio in line with the Group’s policy of not having significant

concentrations of exposure to specific industries or group of borrowers. Management of concentration of

risk is by client/counterparty and by industry sector. For risk concentration monitoring purposes, the

financial assets are broadly categorized into loans and receivables, loans and advances to banks, and

investment securities. RMD ensures compliance with BSP’s limit on exposure to any single person or group

of connected persons by closely monitoring large exposures and top 20 borrowers for both single and group

accounts.

Aside from ensuring compliance with BSP’s limit on exposures to any single person or group of connected

persons, it is the Bank’s policy to keep the expected loss (determined based on the credit risk rating of the

account) of large exposure accounts to, at most, one and a half percent (1.50%) of their aggregate

outstanding balance. This is to maintain the quality of the Group’s large exposures. With this, accounts

with better risk grades are given priority in terms of being granted a bigger share in the Group’s loan

facilities.

Aligned with the Manual of Regulations for Banks definition, the Group considers its loan portfolio

concentrated if it has exposures of more than thirty percent (30.00%) to a particular industry.

Collateral and other credit enhancements

Collaterals are taken into consideration during the loan application process as they offer an alternative way

of collecting from the client should a default occur. The percentage of loan value attached to the collateral

offered is part of the Group’s lending guidelines. Such percentages take into account safety margins for

foreign exchange rate exposure/fluctuations, interest rate exposure, and price volatility.

Collaterals are valued according to existing credit policy standards and, following the latest appraisal report,

serve as the basis for the amount of the secured loan facility.

Premium security items are collaterals that have the effect of reducing the estimated credit risk for a facility.

The primary consideration for enhancements falling under such category is the ease of converting them to

cash.

32

The Group is not permitted to sell or re-pledge the collateral in the absence of default by the owner of the

collateral. It is the Group’s policy to dispose foreclosed assets in an orderly fashion. The proceeds of the

sale of the foreclosed assets, included under Investment Properties, are used to reduce or repay the

outstanding claim. In general, the Group does not occupy repossessed properties for business use.

As part of the Group’s risk control on security/collateral documentation, standard documents are made for

each security type and deviation from the pro-forma documents are subject to Legal Services Division’s

approval prior to acceptance.

As for the computation of credit risk weights, collaterals of the back-to-back and Home Guaranty covered

loans, and Philippine sovereign guarantees are the only credit risk mitigants considered as eligible.

Internal Credit Risk Rating System

The Bank employs a credit scoring system for all corporate borrowers to assess risks relating to the borrower

and the loan exposure. Borrower risk is evaluated by considering (a) quantitative factors under financial

condition and (b) qualitative factors, such as management quality and industry outlook.

Financial condition assessment focuses on profitability, liquidity, capital adequacy, sales growth, production

efficiency and leverage. Management quality determination is based on the Bank’s strategies, management

competence and skills and management of banking relationship. On the other hand, industry prospect is

evaluated based on its importance to the economy, growth, industry structure and relevant government

policies. Based on these factors, each borrower is assigned a Borrower Risk Rating (BRR), an 11-scale scoring

system that ranges from 1 to 10, including SBL. In addition to the BRR, the Bank assigns a Facility Risk

Rating (FRR) to determine the risk of the prospective (or existing) exposure with respect to each credit facility

that it applied for (or under which the exposure is accommodated). The FRR focuses on the quality and

quantity of the collateral applicable to the underlying facility, independent of borrower quality.

Consideration is given to the availability and amount of any collateral and the degree of control, which the

lender has over the collateral. FRR applies both to balance sheet facilities and contingent liabilities. One

FRR is determined for each individual facility taking into account the different security arrangements or risk

influencing factors to allow a more precise presentation of risk. A borrower with multiple facilities will have

one BRR and multiple FRRs. The combination of the BRR and the FRR results to the Adjusted Borrower Risk

Rating (ABRR).

The credit rating for each borrower is reviewed annually. A more frequent review is warranted in cases

where the borrower has a higher risk profile or when there are extraordinary or adverse developments

affecting the borrower, the industry and/or the Philippine economy.

The following is a brief explanation of the Bank’s risk grades:

Rating Description Account/Borrower Characteristics

1 Excellent low probability of going into default within the coming year; very

high debt service capacity and balance sheets show no sign of any

weakness

has ready access to adequate funding sources

high degree of stability, substance and diversity

of the highest quality under virtual economic conditions

33


2 Strong low probability of going into default in the coming year

access to money markets is relatively good

business remains viable under normal market conditions

strong market position with a history of successful financial

performance

financials show adequate cash flows for debt servicing and

generally conservative balance sheets

3 Good sound but may be susceptible, to a limited extent, to cyclical

changes in the markets in which they operate

financial performance is good and capacity to service debt remains

comfortable

cash flows remain healthy and critical balance sheet ratios are at

par with industry norms

reported profits in the past three years and expected to sustain

profitability in the coming year

4 Satisfactory clear risk elements exist and probability of going into default is

somewhat greater, as reflected in the volatility of earnings and

overall performance

normally have limited access to public financial markets

able to withstand normal business cycles, but expected to

deteriorate beyond acceptable levels under prolonged unfavorable

economic period

combination of reasonably sound asset and cash flow protection

5 Acceptable risk elements for the Bank are sufficiently pronounced, but would

still be able to withstand normal business cycles

immediate deterioration beyond acceptable levels is expected

given prolonged unfavorable economic period

there is sufficient cash flow either historically or expected in the

future in spite of economic downturn combined with asset

protection

5B Acceptable financial condition hard to ascertain due to weak validation of

financial statements coupled by funding leakages to other business

interests whose financial condition is generally unknown

continuous decline in revenues and margins due to competition;

increasing debt levels not commensurate to growth in revenues and

funding requirements

thin margin business with banks financing bulk of working capital

and capex requirements coupled by substantial dividend pay-outs

chronically tight cashflows with operating income negative or

barely enough for debt servicing

lines with banks maxed out and availments evergreen with minimal

payments made over time or with past record of past due loans with

other banks, cancelled credit cards and court cases

34


6 Watchlist affected by unfavorable industry or company-specific risk factors

operating performance and financial strength may be marginal and

ability to attract alternative sources of finance is uncertain

difficulty in coping with any significant economic downturn; some

payment defaults encountered

net losses for at least two consecutive years

7 Special

Mention

ability or willingness to service debt are in doubt

weakened creditworthiness

expected to experience financial difficulties, putting the Bank’s

exposure at risk

8 Substandard collectability of principal or interest becomes questionable by

reason of adverse developments or important weaknesses in

financial cover

negative cash flows from operations and negative interest coverage

past due for more than 90 days

there exists the possibility of future loss to the Bank unless given

closer supervision

9 Doubtful unable or unwilling to service debt over an extended period of time

and near future prospects of orderly debt service are doubtful

with non-performing loan (NPL) status

previously rated ‘Substandard’ by the BSP

loss on credit exposure unavoidable

10 Loss totally uncollectible

prospect of re-establishment of creditworthiness and debt service

is remote

lender shall take or has taken title to the assets and is preparing

foreclosure and/or liquidation although partial recovery may be

obtained in the future

considered uncollectible or worthless and of such little value that

continuance as bankable assets is not warranted although the loans

may have some recovery or salvage value

It is the Bank’s policy to maintain accurate and consistent risk ratings across the credit portfolio. This

facilitates a focused management of the applicable risk and the comparison of credit exposures across all

lines of business, geographic regions and products. The rating system is supported by a variety of financial

analytics, combined with processed market information to provide the main inputs for the measurement of

counterparty risk. All internal risk ratings are tailored to the various categories and are derived in

accordance with the Bank’s rating policy. The risk ratings are assessed and updated regularly.

Borrowers with unquestionable repaying capacity and to whom the Group is prepared to lend on an

unsecured basis, either partially or totally, are generally rated as High Grade borrowers. Included in the

High Grade category are those accounts that fall under ‘Excellent’, ‘Strong’, ‘Good’ and ‘Satisfactory’

categories under ICRRS (with rating of 1-4).

Standard rated borrowers normally require tangible collateral, such as real estate mortgage (REM), to either

35

fully or partially secure the credit facilities as such accounts indicate a relatively higher credit risk than those

considered as High Grade. Included in Standard Grade category are those accounts that fall under

‘Acceptable’, ‘Watchlist’ and ‘Special mention’ categories under ICRRS (with rating of 5-7).

Substandard Grade accounts pertain to corporate accounts falling under the ‘Substandard,’ ‘Doubtful’ and

‘Loss’ categories under ICRRS (with rating of 8-10) and unsecured revolving credit facilities.

Those accounts that are classified as unrated includes unquoted debt securities, accounts receivable,

accrued interest receivable and sales contract receivable for which the Group has not yet established a credit

rating system.

Impairment Assessment

On a regular basis, the Group conducts an impairment assessment exercise to determine expected losses

on its loans portfolio.

The main considerations for the loan impairment assessment include whether any payments of principal or

interest are overdue by more than 30 to 90 days as applicable, or if there are any known difficulties in the

cash flows of counterparties, credit rating downgrades, or infringement of the original terms of the contract.

The Group addresses impairment assessment in two areas: specific or individually assessed allowances and

collectively assessed allowances.

a. Specific Impairment Testing

Specific impairment testing is the process whereby classified accounts are individually significant

subject to impairment testing. Classified accounts are past due accounts and accounts whose credit

standing and/or collateral has weakened due to varying circumstances. This present status of the

account may adversely affect the collection of both principal and interest payments.

Indicators of impairment testing are past due accounts, decline in credit rating from independent

rating agencies and recurring net losses.

The net recoverable amount is computed using the present value approach. The discount rate used

for loans with fixed and floating interest rate is the original effective interest rate and last repriced

interest rate, respectively. Net recoverable amount is the total cash inflows to be collected over the

entire term of the loan or the expected proceeds from the sale of collateral. Specific impairment

testing parameters include the account information (original and outstanding loan amount), interest

rate (nominal and historical effective) and the business plan. Also included are the expected date

of recovery, expected cash flows, probability of collection, and the carrying value of loan and net

recoverable amount.

The Group conducts specific impairment testing on significant classified and restructured corporate

accounts.

b. Collective Impairment Testing

All other accounts which were not individually assessed are grouped based on similar credit

characteristics and are collectively assessed for impairment under the Collective Impairment

Testing. This is also in accordance with PAS 39, which provides that all loan accounts not included

36

in the specific impairment test shall be subjected to collective testing.

Collective impairment testing of corporate accounts

Corporate accounts, which are unclassified and with current status are grouped in accordance with

the Bank’s internal credit risk rating. Each internal credit risk rating would fetch an equivalent loss

impairment where the estimated loss is determined in consideration of the Bank’s historical loss

experience. Impairment loss is derived by multiplying the outstanding loan balance on a per internal

credit risk rating basis against a factor rate. The factor rate, which estimates the expected loss

from the credit exposure, is the product of the Default Rate (DR) and the Loss Given Default Rate

(LGDR). DR is estimated based on the 3-year historical average default experience by internal credit

risk rating of the Bank, while, LGDR is estimated based on loss experience (net of recoveries from

collateral) for the same reference period.

Collective impairment testing of consumer accounts

Consumer accounts, both in current and past due status are collectively tested for impairment as

required under PAS 39. Accounts are grouped by type of product - personal loans, salary loans,

housing loans, auto loans and credit cards.

The estimation of the impaired consumer products’ estimated loss is based on three major concepts:

age buckets, probability of default and recoverability. Per product, exposures are categorized

according to their state of delinquency - (1) current and (2) past due (which is subdivided into 30,

60, 90, 120, 150, 180 and more than 180 days past due). Auto, housing and salary loans have an

additional bucket for its items in litigation accounts. The Group partitions its exposures as it

recognizes that the age buckets have different rates and/ or probabilities of default. The initial

estimates of losses per product due to default are then adjusted based on the recoverability of cash

flows, to calculate the expected loss of the Group. Auto and housing loans consider the proceeds

from the eventual sale of foreclosed collaterals in approximating its recovery rate; while credit cards,

salary loans and personal loans depend on the collection experience of its receivables. Further for

housing loans, due to the nature of the assets offered as security, and as the exposures are limited

to a certain percentage of the same, this product possess the unique quality of obtaining full

recoverability. These default and recovery rates are based on the Group’s historical experience,

which covers a minimum of two to three (2-3) years cycle, depending on the availability and

relevance of data.

Collaterals of past due but not impaired loans mostly consist of real estate mortgage (REM) of industrial,

commercial, residential and developed agricultural real estate properties.

Liquidity Risk

Liquidity risk is the risk that sufficient funds are unavailable to adequately meet all maturing liabilities,

including demand deposits and off-balance sheet commitments. The main responsibility of daily asset

liability management lies with the Bank’s Treasury Group, specifically the Liquidity Desk, and the

Subsidiary’s Fund Management Department which are tasked to manage the balance sheet and have

thorough understanding of the risk elements involved in the respective businesses. Both the Bank and the

Subsidiary’s liquidity risk management are then monitored through each entity’s ALCO. Resulting analysis

of the balance sheet along with the recommendation is presented during the weekly ALCO meeting where

deliberations, formulation of actions and decisions are made to minimize risk and maximize returns.

37

Discussions include actions taken in the previous ALCO meeting, economic and market status and outlook,

liquidity risk, pricing and interest rate structure, limit status and utilization. To ensure that both the Bank

and Subsidiary has sufficient liquidity at all times, the respective ALCO formulates a contingency funding

plan which sets out the amount and the sources of funds (such as unutilized credit facilities) available to

both entities and the circumstances under which such funds will be used.

By way of the Maximum Cumulative Outflow (MCO) limit, the Group is able to manage its long-term liquidity

risks by placing a cap on the outflow of cash on a per tenor and on a cumulative basis. The Group takes a

multi-tiered approach to maintaining liquid assets. The Group’s principal source of liquidity is comprised

of COCI, Due from BSP, Due from other banks and IBLR with maturities of less than one year. In addition to

regulatory reserves, the Bank maintains a sufficient level of secondary reserves in the form of liquid assets

such as short-term trading and investment securities that can be realized quickly.

The Bank manages liquidity by maintaining sufficient liquid assets in the form of

cash and cash equivalents, investment securities and loan receivables. As of December 31, 2015 and 2014,

P=69.85 billion and P=49.34 billion, respectively, or 42.10% and 39.28%, respectively, of the Bank’s total gross

loans and receivables had remaining maturities of less than one (1) year. The total portfolio of trading and

investment securities is comprised mostly of sovereign-issued securities that have high market liquidity.

The Bank was fully compliant with BSP’s limits on FCDU Asset Cover and FCDU Liquid Assets Cover, having

reported ratios above 100.00% as of December 31, 2015 and 2014. With the above presented liquidity

profile, the Group remains to be inhibited from liquidity risk that it can’t adequately manage.

Market Risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to

changes in market variables such as interest rates, foreign exchange rates, and equity prices. The Bank

treats exposures to market risk as either for trading or accrual/balance sheet exposure. The market risk for

the trading portfolio is measured using Value at Risk (VaR). Interest rate risk of accrual portfolios in the

Banking Book are measured using Earnings at Risk (EaR).

Market risk in the trading book

The Board has set limits on the level of market risk that may be accepted. VaR limits are applied at the

business unit level and approved by the BOD based on, among other things, a business unit’s capacity to

manage price risks, the size and distribution of the aggregate exposure to price risks and the expected

return relative to price risks.

The Bank applies the VaR methodology to assess the market sensitive positions held for trading and to

estimate the potential economic loss based on parameters and assumptions. VaR is a method used in

measuring market risk by estimating the potential negative change in the market value of a portfolio at a

given confidence level and over a specified time horizon.

Objectives and limitations of the VaR Methodology

The Bank uses the VaR model of Bloomberg Portfolio Analytics using one-year historical data set to assess

possible changes in the market value of the Fixed Income, Equities, and Foreign Exchange trading portfolio.

VaR for the US Treasury Futures is measured using Historical Simulation using the Bloomberg Multi Asset

Risk System. The Interest Rate Swaps (IRS) and FX Forwards (Outright and forward leg of FX Swaps) trading

portfolio’s interest rate risk is measured using Monte Carlo VaR. The VaR models are designed to measure

38

market risk in a normal market environment. The use of VaR has limitations because correlations and

volatilities in market prices are based on historical data and VaR assumes that future price movements will

follow a statistical distribution. Due to the fact that VaR relies heavily on historical data to provide

information and may not clearly predict the future changes and modifications of the risk factors, the

probability of large market moves may be underestimated.

VaR may also be under or over estimated due to assumptions placed on risk factors and the relationship

between such factors for specific instruments. Even though positions may change throughout the day, VaR

only represents the risk of the portfolio at the close of each business day, and it does not account for any

losses that may occur beyond the specified confidence level.

In practice, actual trading results will differ from the VaR calculation and, in particular, the calculation does

not provide a meaningful indication of profits and losses in stressed market conditions. To determine the

reliability of the VaR model, actual outcomes are monitored through hypothetical and actual backtesting to

test the accuracy of the VaR model.

Stress testing provides a means of complementing VaR by simulating the potential loss impact on market

risk positions from extreme market conditions, such as risk factor movements based on historical financial

market stress conditions and scenarios adopted from the uniform stress testing framework of the BSP.

VaR assumptions

The VaR that the Bank use is premised on a 99% confidence level that this potential loss estimate is not

expected to be exceeded if the current market risk positions were to be held unchanged for a given holding

period. Foreign exchange and US Treasury Futures VaR is measured using one (1) day holding period while

fixed income VaR has holding period of five (5) days. Furthermore, the Bank’s equity and interest rate swap

(IRS) trading positions are assumed to be closed out in ten (10) days. The use of a 99% confidence level

means that within the set time horizon, losses exceeding the VaR figure should occur, on average, not more

than once every hundred days.

VaR is an integral part of the Bank’s market risk management and encompasses investment positions held

for trading. VaR exposures form part of the market risk monitoring which is reviewed daily against the limit

approved by the Board. The trading activities are controlled through the Market Risk Limit (MRL), which is a

dynamic risk limit anchored on the principle of risk and return which is adjusted for any trading income that

would exceed targets throughout the year. RMD reports compliance to the MRL and trader’s VaR limits on a

daily basis. If the MRL or individual trader’s limit is exceeded, such occurrence is promptly reported to the

Treasurer, Chief Operating Officer, Chief Risk Officer and the President, and further to the Board through

the RMC.

Foreign Currency Risk

The Bank holds foreign currency denominated assets and liabilities, thus, fluctuations on the foreign

exchange rates can affect the financials and cash flows of the Bank. Managing the foreign exchange

exposure is important for banks with exposures in foreign currencies. It includes purchase or sell of foreign

currency in order to control the impact of changes in exchange rates on the financial position of the Bank.

The Bank’s foreign currency exposures emanate from its net open spot and forward FX purchase and sell

transactions, and net foreign currency income accumulated over the years of its operations. Foreign

39

currency-denominated deposits are generally used to fund the Bank’s foreign currency-denominated loan

and investment portfolio in the FCDU. In the FCDU books, BSP requires banks to match the foreign currency

assets with the foreign currency liabilities. Thus, banks are required to maintain at all times a 100.00%

cover for their currency liabilities held through FCDU. The Bank is in compliance with said regulation as of

December 31, 2015 and 2014.

Total foreign currency position is monitored through the daily BSP FX position reports, which are subject to

the overbought and oversold limits set by the BSP at 20.00% of unimpaired capital or $50.00 million,

whichever is lower. Internal limits regarding the intraday trading and end-of-day trading positions in FX,

which take into account the trading desk and the branch FX transactions, are also monitored.

The analysis calculates the effect of a reasonably possible movement of the currency rate against the Peso,

with all other variables held constant, on the statement of income. A negative amount reflects a potential

net reduction in net income while a positive amount reflects a net potential increase. There is no other

impact on the Bank’s equity other than those already affecting the statements of income.

Market Risk in the Banking Book

Interest rate risk

A critical element of risk management program consists of measuring and monitoring the risks associated

with fluctuations in market interest rates on the Group’s net interest income. The short-term nature of its

assets and liabilities reduces the exposure of its net interest income to such risks.

The Bank employs re-pricing gap analysis on a monthly basis to measure the interest rate sensitivity of its

assets and liabilities. The re-pricing gap analysis measures, for any given period, any mismatches between

the amounts of interest-earning assets and interest-bearing liabilities that would re-price, or mature (for

contracts that do not re-price), during that period. The re-pricing gap is calculated by first distributing the

assets and liabilities contained in the Group’s statement of financial position into tenor buckets according

to the time remaining to the next re-pricing date (or the time remaining to maturity if there is no re-pricing),

and then obtaining the difference between the total of the re-pricing (interest rate sensitive) assets and re-

pricing (interest rate sensitive) liabilities. If there is a positive gap, there is asset sensitivity which generally

means that an increase in interest rates would have a positive effect on the Group’s net interest income. If

there is a negative gap, this generally means that an increase in interest rates would have a negative effect

on net interest income.

The Group also monitors its exposure to fluctuations in interest rates by using scenario analysis to estimate

the impact of interest rate movements on its interest income. This is done by modeling the impact to the

Group’s interest income and interest expenses of different parallel changes in the interest rate curve,

assuming the parallel change only occurs once and the interest rate curve after the parallel change does not

change again for the next twelve months.

Operational Risk

Operational risk is the loss resulting from inadequate or failed internal processes, people and systems or

from external events. It includes legal, compliance and reputational risks but excludes strategic risk.

40

Other Risk Exposures

Group risk exposures other than credit, market, liquidity and operational, while existent, are deemed

insignificant relative to the mentioned risks and if taken in isolation. Hence, management of these risks are

instead collectively performed and made an integral part of the Group’s internal capital adequacy

assessment process (ICAAP) and enterprise risk management initiatives.

The last internal capital adequacy assessment results of the Group show that these other risks remain

insignificant to pose a threat on the Group’s capacity to comply with the minimum capital adequacy ratio of

10% as prescribed by BSP.

41

Item 2. Properties

EastWest’s head office is located at East West Corporate Center, The Beaufort, 5th Avenue corner 23rd Street,

Fort Bonifacio Global City, Taguig City, Philippines.

The list of branch premises owned and leased, including the name of lessors, is filed as part of this Form

17-A as Annex C.

The Bank believes all its facilities and properties are currently in good condition. As of date of this report,

there are no liens or encumbrances on any of the properties of EastWest. The Bank may consider

encumbering some of its properties as part of its normal supplementary funding operations. The Bank will

continue to reconfigure the mix of its branches and adjusts to the needs of its customers.

For the years ended December 31, 2015 and 2014, the total rentals of the Group charged to operations

amounted to P=738.1million and P=629.3 million, respectively.

Item 3. Legal Proceedings

To the best of the Bank’s knowledge and belief and after due inquiry, none of the Bank’s directors, nominees

for election as director, or executive officer have in the five year period prior to the date of this Report:

1) had any petition filed by or against any business of which such person was a general partner or

executive officer either at the time of the bankruptcy or within a two-year period of that time;

2) convicted by final judgment in a criminal proceeding, domestic or foreign, or have been subjected

to a pending judicial proceeding of a criminal nature, domestic or foreign, excluding traffic

violations and other minor offenses;

3) subjected to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of

any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining,

barring, suspending or otherwise limiting their involvement in any type of business, securities,

commodities or banking activities; or

4) found by a domestic or foreign court of competent jurisdiction (in a civil action), the SEC or

comparable foreign body, or a domestic or foreign exchange or other organized trading market or

self-regulatory organization, to have violated a securities or commodities law or regulation and the

judgment has not been reversed, suspended, or vacated.

The Bank has been, and may in the future be, implicated in lawsuits in connection with the ordinary course

of its business. However, neither the Bank nor any of its subsidiaries have been subject to any order,

judgment, or decree, or violated any securities or commodities law for the last five years, or are involved in

any litigation or arbitration proceedings that may have, or have had, a material adverse effect on it or its

subsidiaries’ financial condition, nor, so far as any of them is aware, is any such proceeding pending or

threatened.

All legal proceedings involving the Bank are efficiently and competently attended to and managed by a group

of eleven (11) in-house counsels who are graduates of reputable law schools in the country. As its external

counsels, the Bank retains or engages the services on case to case basis the following respected law firms,

Sycip, Salazar Hernandez & Gatmaitan Law Office, Angara Abello Concepcion Regala & Cruz, Sobreviñas

42

Hayudini Navarro and San Juan Law Offices; Diaz Del Rosario and Associates; Law Offices of Alvarez, Vera

Law Office, Anover Anover San Diego & Primavera, Nuez, Galang and Espina Lopez and Quitain Law Office,

and Divina Law Offices, among others.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted during 2015 to a vote of security holders, through the solicitation of

proxies or otherwise.

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer's Common Equity and Related Stockholder Matters

Market Information

The common shares of EW have been listed on the PSE on May 7, 2012. The table below shows the high and

low prices of EW shares transacted at the PSE since its listing:

Year Ended December 31, 2012 High Low

2nd Quarter – 2012 P=20.70 P=18.50

3rd Quarter – 2012 P=23.50 P=18.50

4th Quarter – 2012 P=29.25 P=22.55


1st Quarter – 2013 P=36.20 P=29.00

2nd Quarter – 2013 P=37.85 P=27.50

3rd Quarter – 2013 P=30.70 P=22.80

4th Quarter – 2013 P=26.95 P=23.20


1st Quarter – 2014 P=29.00 P=24.05

2nd Quarter – 2014 P=31.60 P=28.10

3rd Quarter – 2014 P=30.45 P=26.90

4th Quarter – 2014 P=27.10 P=23.55


1st Quarter – 2015 P=27.50 P=23.60

2nd Quarter – 2015 P=25.15 P=19.44

3rd Quarter – 2015 P=21.85 P=18.02

4th Quarter – 2015 P=20.10 P=18.00

High and Low price of the Registrant’s shares as of April 13, 2016 (last practicable trading day) were

P=15.88 and P=15.76, respectively.

43

Holders

The Bank had 76 shareholders of record as of January 31, 2016. Common shares outstanding as of said

date stood at 1,499,983,610 shares.

EastWest top 20 shareholders as of January 31, 2016 are as follows:

Name of Stockholder Number of Shares Percent

1. PCD Nominee Corporation (Filipino) 488,204,054 32.55%

2. Filinvest Development Corporation 451,464,027 30.10%

3. Filinvest Development Corporation Forex 394,941,030 26.33%

4. PCD Nominee Corporation (Non-Filipino) 160,795,994 10.72%

5. F. Yap Securities, Inc. 2,060,089 00.14%

6. Alfonso S. The 450,000 00.03%

7. Philippine Air Force Educational Fund, Inc. 390,000 00.03%

8. Washington Sycip 322,000 00.02%

9. Gerardo Susmerano 320,000 00.02%

10. Manuel A. Santiago or Ella C. Santiago 220,400 00.01%

11. Joshua Cheng 100,000 00.01%

12. Miriam Cheng Bona 100,000 00.01%

13. Ivy B. Uy 75,000 00.01%

14. Ching Bun Teng 64,000 00.00%

15. Catherine L. Tan 60,000 00.00%

16. Miguel T. Tan 60,000 00.00%

17. Asuncion T. Go 50,000 00.00%

18. Quirino Cheong Gotauco 46,000 00.00%

19. Edwin U. Lim 40,500 00.00%

20. Dennis Granada Baguyo 30,000 00.00%

TOTAL 1,499,793,094 99.98%

Based on the Public Ownership Report of the Bank as of December 31, 2015, 21.15% of the total outstanding

shares are owned by the public.

Equity Ownership of Foreigners on Common Shares as of January 31, 2016 is as follows:

Nationality Number of Stockholders Number of Shares %

Filipino 73 1,338,809,715 89.25%

Non-Filipino 2 160,795,995 10.72%

American 2 327,900 0.02%

Chinese 1 50,000 00.00%

Total 78 1,499,983,610 100.00%

Declaration of Dividends

No dividends were declared and paid by the Bank in 2015 and 2014.

44

There were no recent sales of unregistered or exempt securities, including issuance of securities

constituting an exempt transaction.

Item 6. Management's Discussion and Analysis or Plan of Operation.

ANNEX D - Management's Discussion and Analysis

Economy

The country’s Gross Domestic Product (GDP) grew by 6.3% in the last quarter of 2015 and 5.8% for the full

year, the fastest among the ASEAN-5. Services are the biggest sector of the Filipino economy and account

for 57% of total GDP. Economic performance remains resilient and robust amid a global slowdown, buoyed

by consistently vibrant domestic demand and ample fiscal space. Household consumption grew 5.4% in Q4

2015 compared to 5.0% in the same period last year, while government consumption caught up and

accelerated by double-digits to 17.4% from the 9.4% posted in Q4 2014. Public construction leapt 51.0%

from 3.3% same period last year, reflecting sustained acceleration as solutions to improve spending are

institutionalized.

Headline inflation, the overall price increase of goods and service, slightly picked up in December at 1.5%,

compared to November's 2.7%. However, the figure is notably lower than the 2.7% rate registered in

December 2014. Full year inflation of 1.4% is the lowest in nearly three decades. Forecasts for 2016-2017

show an inflation path consistent with the national government target of 2.0%-4.0%.

Fresh from another credit rating upgrade, the Philippine economy is expected to grow above 6.0% over 3

years, with the economy projected to expand by 6.2% in 2017 and 2018.

December 31, 2015 vs. December 31, 2014

Financial Performance Highlights

The Bank continues to post healthy growth in its core revenues (net revenues ex-trading) driven mainly by

Net Interest Income (NII) growing by 23%. The growth in NII was driven by the expansion of the loan

portfolio. Net Income as of December 31, 2015 is P=2.0 billion, 3% lower vs. last year due to lower trading

gains, higher credit provisions, and higher tax expense.

Total assets stood at P=232.9 billion or 24% higher than end-2014. The growth is starting to benefit from

its expansion program. In the last 3 years, the Bank put up 141 branch stores and likewise expanded its

lending organization to deploy the expected increase in deposits from its expanding customer base. Total

loans grew by 29% while deposits increased by 25%.

Consumer loans grew by 38% to P=90.8 billion led by Auto loans and Personal loans. Corporate loans grew

by 18% to P=66.4 billion. Consumer loans accounted for 58% of total customer loans making EastWest still

the most consumer loan focused universal bank.

45

The Bank’s Operating Income grew by 10% to P=16.3 billion as the P=2.3 billion increase in NII was partially

offset by P=587.7 million higher credit provisions and P=616.7 million lower trading gains.

The Bank’s Net Interest Income, driven by its above industry net interest margin (NIM) of 8.0%, grew by 23%

to P=12.3 billion from P=10.0 billion last year. NII net of provisions for loan losses, grew by 26% to P=8.4

billion. NIM, net of loan loss provisions was at 5.3%, still higher than industry average.

Fee-based Income, mainly from transactional and service fees of consumer lending and the branch stores

is flat at P=3.3 billion. This was due to accounting adjustments during the period totaling P=695.6 million:

(i) change in revenue recognition of salary loan related processing fees previously accounted for as an

outright revenue to deferred revenues over the actuarial life of the loan. P=309.2 million in fees were deferred

during the period while P=274.4 million were reclassified as interest income. The adjustments were the

results of review and consultation with the external auditors (ii) reversal of over-accrued late fees from 4Q

last year for P=112.0 million. On a like for like basis, considering the impact of these one-off adjustments,

fee income in 2015 grew by 21% vs. last year driven by branch store transaction and consumer loan-related

fees.

After adjusting for above-mentioned one-offs, NII net provisions for loan losses, grew by 22% to P=8.2


The rest of the Operating Income declined by 56% to P=690.0 million due to lower trading income. Total

Operating Expenses including Provision for Credit Losses increased by 11% to P=13.7 billion. The increase

in expenses was driven mainly by manpower and infrastructure related expenses associated with the

expansion in branch store network. The increase in provisions for credit losses was driven mainly by credit

cards and auto loans. Provision for Income Taxes was higher at P=659.3 million due to higher taxable income

vs. the previous year.

Financial Position

Loans

Customer loans grew by 29% year-on-year to end at P=157.2 billion. The Bank remains focused in growing

its consumer and mid-market corporate loans, with consumer loans still taking up more than half of total

customer loans at 58%.

Consumer loans grew by 38% to P=90.8 billion driven mainly by Auto loans. Corporate loans, which are

mostly in the middle market sector, grew by 18% to P=66.4 billion. The loan portfolio mix was relatively

unchanged with consumer loans still accounted for more than half of the loan portfolio at 58%. The Bank

continues to maintain its prudent credit risk underwriting and management standards.

Deposits

Deposits stood at P=184.1 billion as of December 31, 2015, up by 25% from 2014. The growth is largely

attributable to the expanded branch store network as reflected in the growth of low cost deposits (CASA)

which ended at P=97.6 billion for an increase of 38% from the previous year. High cost deposits (inclusive

of LTNCDs) on the other hand increased by 12% to end at P=86.6 billion.

46

The strong growth in high yielding consumer loans and sustained funding costs resulted to Net Interest

Margin (NIM) and NIM after provisions of 8.0% and 5.3% respectively as of December 31, 2015, while industry

average NIM is at around 3.0%.

Capital

The Bank’s Capital Adequacy Ratio (CAR) under Basel 3, remain more than adequate at 15.6% as of end 2015

while Tier-1 ratio stood at 12.4%. The Bank’s Tier 1 capital is composed entirely of common equity.

On January 29, 2015, the BOD approved the common shares rights offering, subsequently, the BOD

approved the application of the bank to list up to 371,574,000 common shares with par value of P=10 per

share to cover its stock rights offering.

On May 8, 2015, a total of 371,574,000 common shares were listed at the PSE with P=10.00 par value per

share. The total proceeds raised by the Parent Company from the sale of the said shares amounted to P=8.0

billion while the net proceeds (after deduction of direct costs related to equity issuance) amounted to P=7.9

billion.

Credit Quality

Overall NPL ratios improved at the Bank’s NPL to Total Customer Loans, net of fully provided NPLs, declined

to 3.6%1 in December 31, 2015 from 4.2%1 as of December 31, 2014.

1 Total NPLs less: 100% covered NPLs divided by Total Customer Loans less: 100% covered NPLs (at Group level)

Result of Operations

Revenues

Net Revenues grew by 10% to P=16.3 billion despite lower Trading Income. Trading Income was at P=382.3

million or 62% lower than the P=999.0 million gains booked last year. Service charges, fees and commissions

was flat at P=3.3 billion. The decline in Securities Trading was offset by strong growth in Net Interest Income.

Core Revenues (ex-trading and after loan loss provisions) was at P=12.0 billion.

Net Interest Income stood at P=12.3 billion, 23% or P=2.3 billion higher than the P=10.0 billion posted last

year. The higher Net Interest Income was a result of the double-digit growth in lending which allowed the

Bank to continue to enjoy its industry leading net interest margin (NIM) of 8.0%, which is about more than

two times higher than industry average of around 3.0%. NIM after provisions was at 5.3%.

Fee Income

Fee-based Income, largely coming from transactional and service fees of consumer lending and the branch

stores is flat at P=3.3 billion. This was due to accounting adjustments during the period totaling P=695.6

million: (i) change in revenue recognition of salary loan related processing fees previously accounted for as

47

an outright revenue to deferred revenues over the actuarial life of the loan. P=309.2 million in fees were

deferred during the period while P=274.4 million were reclassified as interest income. The adjustments were

the results of review and consultation with the external auditors (ii) reversal of over-accrued late fees from

4Q 2014 for P=112.0 million. On a like for like basis, considering the impact of these one-off adjustments,

fee income in 2015 grew by 21% vs. 2014 driven by branch store transaction and consumer loan-related

fees.

After adjusting for above-mentioned one-offs, NII net provisions for loan losses, grew by 22% to P=8.2


Trading Income

Securities Trading and Foreign Exchange Gains was at P=382.3 million as compared to the P=999.0 million

gains posted in same period last year, which was in line with industry performance due to market volatility.

Operating Costs

Total Operating Expenses, including Provision for loan losses, increased by 11% to P=13.7 billion during the

period. Compensation related expenses increased by 10% to P=3.3 billion, while Provision for loan losses

grew by 18% to P=3.9 billion on account of aggressive loan portfolio growth particularly in consumer loans.

Other Expenses related to business expansion has increased as follows: (i) Taxes and licenses grew by 16%

to P=1.1 billion as a result of growth in revenue base; (ii) Depreciation and Amortization grew by 11% to P=

957.4 million coming from expansion in business and infrastructure; (iii) Rent grew by 17% to P=738.3 million

coming from branch store expansion; and (iv) Miscellaneous Expenses grew by 5% to P=3.6 billion with the

growth largely coming from higher Consumer business and branch store expansion.

48

Summary of Key Financials and Ratios

Balance Sheet

(in PHP billions)

December 31,

2015

December 31,

2014

y/y Growth %

Assets 232.9 188.3 24%

Consumer Loans 90.8 65.8 38%

Corporate Loans 66.4 56.4 18%

Low Cost Deposits (CASA) 97.6 70.6 38%

High Cost Deposits 86.6 77.1 12%

Capital 31.4 21.4 46%

Profitability

(in PHP billions)

December 31,

2015

December 31,

2014

y/y Growth %

Net Interest Income 12.3 10.0 23%

Other Income 4.0 4.9 (18%)

Operating Expenses 9.8 8.9 9%

Provision for Losses 3.9 3.3 18%

Net Income After Tax 2.0 2.1 (3%)

Key Financial Ratios December 31,

2015

December 31,

2014

Variance

b/(w)

Return on Equity 7.0% 10.2% (3.2%)

Return on Assets 1.0% 1.3% (0.3%)

Net Interest Margin 8.0% 8.1% (0.1%)

Cost-to-Income Ratio 59.8 60.0 0.2%

Capital Adequacy Ratio 15.6% 13.1% 2.5%

December 31, 2014 vs. December 31, 2013

Financial Performance Highlights

The Bank’s core revenues (net revenues excluding trading), driven by growth in core loans and deposits,

continue to post strong growth, with Net Interest Income and Fee-based income growing by 19% and 30%,

respectively. However, the Bank’s net income increased slightly by 1% at P=2.1 billion, largely as a result of

lower trading gains. The Return on Equity (ROE) and Return on Assets (ROA) remain healthy at 10.2% and

1.3%, respectively at the heels of an aggressive branch store expansion program.

Total assets stood at P=188.3 billion or 32% higher than end-2013. The growth in assets was driven mainly

by the growth in customer loans which grew by 28% y/y, in line with the Bank’s expectation and strategy of

growing consumer and middle market corporate loans. Consumer loans grew by 34% to

P=65.8 billion led by auto loans, salary loans and credit cards. Corporate loans, which are mostly in the

middle market sector, grew by 21% to P=56.4 billion. The loan portfolio mix was relatively unchanged with

consumer loans still accounted for more than half of the loan portfolio at 54%.

Operating expenses, excluding provision for losses, increased by 15% to P=8.9 billion from P=7.8 billion in

the same period last year, mainly due to the full year effect in expenses of the 55 branch stores opened in

49

various periods of 2012 and the 58 new branch stores which opened in 2013. Provision for losses increased

by 7% to P=3.3 billion y/y as a result of the growth in the Bank’s customer loan portfolio. The Bank’s

operating income posted a growth of 13% to P=14.9 billion from P=13.2 billion in the same period last year.

Solid growth in core earnings was anchored on the bank’s industry leading net interest margin (NIM) of 8.1%.

Core income (net interest income and other income, excluding trading gains) increased by 21%.

Financial Position

Loans

Customer loans grew by 28% as against year-end 2013 and stood at P=122.1 billion. The Bank remains

focused in growing its consumer and mid-market corporate loans, with consumer loans still taking up more

than half of total customer loans at 54%.

Corporate loans, which are largely in the middle market sector, stood at P=56.4 billion or 21% better than

2013. The growth resulted mainly from the expansion of its account officer pool, as the Bank continues to

maintain its prudent credit risk underwriting and management standards.

Credit cards receivables ended 2014 at P=21.5 billion, which is 11% higher than the same period last year.

The credit cards growth was in line with the Bank’s strategy to increase market share. Based on the Credit

Cards Association of the Philippines (CCAP), EastWest’s 12% growth is almost twice that of the cards

industry’s single digit growth rate, solidifying its position as the 5th largest in the industry in terms of

receivables.

Auto loans stood at P=22.3 billion or 54% higher than last year, which is higher than the 29% recorded car

industry sales for the year. Mortgage loans grew by 21% to P=9.2 billion, while other consumer loans

increased by 70% to P=12.8 billion. -

Deposits

Deposits stood at P=147.7 billion as of December 31, 2014, up by 33% from last year. The growth is largely

attributable to the expanded branch store network as reflected in the growth of low cost deposits (CASA)

which ended at P=70.6 billion for an increase of 10% from last year. High cost deposits (inclusive of LTNCDs)

on the other hand increased by 65% to end at P=77.1 billion.

The strong growth in high yielding consumer loans and declining funding costs resulted to Net Interest

Margin (NIM) of 8.1% as of December 31, 2014, while industry average NIM is at 3.0%. NIM after provisions

was 5.2%.

Capital

The Bank’s Capital Adequacy Ratio (CAR) under Basel 3, remain more than adequate at 13.11% as of end

2014 despite the increase in risk weighted assets, particularly customer loans which increased by 28%. The

Bank’s Tier 1 ratio stood at 9.34%. The Bank’s Tier 1 capital is composed entirely of common equity.

50

The Bank’s Board of Director has approved a program to raise additional common equity tier-1 capital by

as much as P=8 billion through a rights offer. The additional capital will pre-fund the Bank’s anticipated

growth in earning assets.

Credit Quality

The Bank’s overall NPL ratios increased as the Bank continue to gain market share in the credit cards space.

The Bank’s NPL to Total Customer Loans, net of fully provided NPLs, inched up higher to 4.2%1 in December

31, 2014 from 4.1%1 as of December 31, 2013. The increase in NPL was expected in line with the build-up

of revenue base for the consumer loan business.

1 Total NPLs less: 100% covered NPLs divided by Total Customer Loans less: 100% covered NPLs (at Group level)

Result of Operations

Revenues

Net Revenues for 2014 grew by 13% to P=14.9 billion from P=13.2 billion in 2013 on account of strong core

earning income (net interest income and other income, excluding trading gains) which grew by 21%.

Securities trading gains was at P=805.5 million, or 49% lower as compared to P=1.6 billion gains posted in

2013. Foreign exchange trading gains was 60% higher at P=193.5 million compared to the P=121.2 million

gains posted last year.

Net Interest Income

Net Interest Income stood at P=10.0 billion, 19% or P=1.6 billion higher than the P=8.4 billion registered in

2013. The higher net interest income was a result of the double digit growth in lending coupled by the

decline in funding costs due to healthy growth in low cost funds (CASA). Interest income in 2014 increased

by 18%, while interest expense increased only by 12%, compared to last year.

Fee Income

Other income (excluding Trading gains) in 2014 was at P=3.9 billion, or 26% higher than the P=3.1 billion

registered last year. The increase primarily came from P=3.3 billion of service charges, fees, commissions

and other charges, which is 30% higher than last year on account of increasing CASA base and consumer

loan portfolio which are rich in transactional service fees.

The Bank also posted one-time income from gains on sale of investment property in 2014, which resulted

for gain on sale of assets to go up by P=286.6 million.

Trading Income

Securities trading gains was at P=805.5 million, or 49% lower as compared to P=1.6 billion gains posted in

2013, as the Bank took a conservative position until end of 2014 on account of market volatility. Foreign

exchange trading gains went up to P=193.5 million compared to the P=121.2 million gains posted last year.

51

Operating Costs

Total operating expenses increased by 15% to P=8.9 billion from P=7.8 billion in the same period last year as

the full effect of the branch store expansion in 2013 and the branch stores opened in 2014 have reflected

on expenses. Compensation and fringe benefits of P=3.0 billion was P=291.7 million or 11% higher than the

same period last year on account of the higher manpower headcount for the new branch stores and business

expansion particularly in the areas of consumer and corporate lending groups. Total headcount have

increased by 497 year on year, to end at 5,251 for both the parent Bank and its rural bank. Taxes and

licenses increased by 13% to P=974.9 million as a direct result of higher operating income. Depreciation and

amortization of P=862.0 million was 20% higher while Rent expense of P=629.3 million was 16% higher both

on account of the new branch stores that were opened throughout 2013 and 2014.

Miscellaneous expenses increased by 17% to P=3.5 billion due to the following: (i) Service charges and

commissions increased by P=162.6 million on account of expansion in consumer loans, especially in credit

cards application processing; (ii) Postage related expenses increased by P=40.5 million on account of higher

courier services on credit cards and SOA delivery as a result of larger client base; (ii) Securities, messengerial

and janitorial expenses, as well as utilities cost increased by P=85.5 million on account of new corporate

headquarters and branch stores; (iv) Technological fees increased by P=63.3 million as the Bank recently

implemented a new core banking system to complement its existing businesses. The rest were spread out

across various variable expenses such as PDIC insurance (i.e. o/a of higher deposit level), repairs and

maintenance, transportation & travel, among others which are all related to growth in loans and deposit

businesses.

Cost-Income ratio increased slightly to 60.0% in 2014 from 59.2% last year largely due lower trading gains.

Provisions

Provisions for loan losses grew by 7% to P=3.3 billion in 2014 from P=3.1 billion in 2013, on account of the

growth in consumer loans, particularly credit cards and personal loans.

52

Summary of Key Financials and Ratios

Balance Sheet

(in PHP billions)

December 31,

2014

December 31,

2013

y/y Growth %

Assets 188.3 142.3 32%

Consumer Loans 65.8 48.9 34%

Corporate Loans 56.4 46.7 21%

Low Cost Deposits (CASA) 70.6 64.4 10%

High Cost Deposits 77.1 46.7 65%

Capital 21.4 19.4 11%

Profitability

(in PHP billions)

December 31,

2014

December 31,

2013

y/y Growth %

Net Interest Income 10.0 8.4 19%

Other Income 4.9 4.8 2%

Operating Expenses 8.9 7.8 15%

Provision for Losses 3.3 3.1 7%

Net Income After Tax 2.1 2.1 1%

Key Financial Ratios December 31,

2014

December 31,

2013

Variance

b/(w)

Return on Equity 10.2% 11.1% (0.9%)

Return on Assets 1.3% 1.6% (0.3%)

Net Interest Margin 8.1% 8.4% (0.3%)

Cost-to-Income Ratio 60.0 59.2% (0.8%)

Capital Adequacy Ratio 13.1 17.0% (3.9%)

Other Information:

As of December 31, 2015, EastWest has a total of 378 branches, with 166 of these branch stores in the

restricted areas and a total of 207 of these branch stores in all of Metro Manila. For the rest of the country,

the Bank has 96 branches in other parts of Luzon, 39 branches in Visayas, and 36 branch stores in Mindanao.

The total ATM network is 579, composed of 366 onsite ATMs and 213 off-site ATMs. Total headcount of

EastWest is 5,168.

The Bank’s subsidiaries has a total of 55 branches and 908 officers/staff, bringing the group store network

total to 433 with 579 ATMs and combined manpower of 6,076.

Known trends, demands, commitments, events or uncertainties

There are no known demands, commitments, events or uncertainties that will have a material impact on the

Bank’s liquidity within the next twelve (12) months.

Events that will trigger direct or contingent financial obligation

There are no events that will trigger direct or contingent financial obligation that is material to the Bank,

including any default or acceleration of an obligation.

53

Material off-balance sheet transactions, arrangements or obligations

There are no material off-balance sheet transactions, arrangements, obligations (including contingent

obligations), and other relationships of the Bank with unsolicited entities or other persons created during

the reporting period other than those disclosed in the financial statements.

Capital Expenditures

The Bank has commitments for capital expenditures mainly for bank’s branch expansion and

implementation of IT projects.

Significant Elements of Income or Loss

Significant elements of the consolidated net income of the Group for the 12 months ended December 31,

2015 and 2014 came from its continuing operations.

Seasonal Aspects

There are no seasonal aspects that had a material effect on the Bank’s financial condition and results of

operations.

Vertical and Horizontal Analysis of Material Changes for the Period

The term “material” in this section shall refer to changes or items amounting to five percent (5%) of the

relevant accounts or such lower amount, which the Bank deems material on the basis of other factors.

I. Balance Sheet – December 31, 2015 vs. December 31, 2014

- Due from BSP increased by 34% to P=30.9 billion mainly on higher deposit reserves and

liquid funds placed with BSP.

- Due from other banks increased by 50% to P=5.4 billion due to increased levels of

placements and working balances with counterparty banks.

- Interbank loans receivable and Securities Purchased Under Resale Agreements (SPURA)

increased by 167% to P=7.7 billion from higher overnight placements with the BSP.

- Financial Assets at Fair Value through Other Comprehensive Income decreased by 57% to P=

6.3 million as a result of the decline in market prices of its equity security.

- Investment Securities at Amortized Cost decreased by 47% to P=4.6 billion due to the

maturity and sale of various government securities in line with the Bank’s balance sheet

strategy.

- Loans and Receivables-Net grew by 28% to P=155.3 billion driven by high growth in

consumer and corporate loans.

- Investment properties decreased by 20% to P=727.3 million due to the disposals of the

Bank’s repossessed assets.

- Deferred tax asset increased by 35% to P=1.3 billion on account of higher provisioning set-

up, net of write-off, during the period.

- Other assets decreased by 17% to P=2.0 billion as returned cash and other cash items

decreased by 80% in 2015.

- Deposit liabilities increased by 25% toP=184.1 billion mainly due to increase in deposit

taking activities coming from branch expansion.

- Bills and acceptance payables decreased by 42% to P=3.1 billion mainly from lower volume

of interbank and other borrowings as funding were obtained from other sources.

54

- Income tax payable inched up by 164% to P=486.4 million due to higher taxable income

during the year.

II. Balance Sheet – December 31, 2014 vs. December 31, 2013

- Cash and cash equivalents increased by 54% to P=6.0 billion due to due to higher year-end

cash requirements and increase in the number of branch stores.

- Due from BSP increased by 25% to P=23.1 billion mainly on higher deposit reserves and

liquid funds placed with BSP.

- Due from other banks increased by 104% to P=3.6 billion due to increased levels of

placements and working balances with counterparty banks.

- Interbank loans receivable and Securities Purchased Under Resale Agreements (SPURA)

decreased by 7% to P=2.9 billion as more funds were placed to other liquid assets.

- Financial Assets at Fair Value through Profit and Loss increased by 423% to P=10.2 billion

due to movements in the Bank’s proprietary trading portfolio.

- Financial Assets at Fair Value through Other Comprehensive Income increased by 34% to P=

14.4 million as a result of the improvement in market prices of its equity security.

- Loans and Receivables-Net accelerated by 29% to P=121.4 billion driven by high growth in

consumer and corporate loans.

- Investment properties decreased by 9% to P=912.7 million due to the disposal of a portion

of the Bank’s repossessed assets.

- Goodwill and Other Intangible Assets increased by 21% due to increase in branch stores in

the restricted areas.

- Other assets increased by 170% to P=2,423.1 million as a result of the branch expansion.

- Deposit liabilities increased by 33% to P=147.7 billion mainly due to increase in deposit

taking activities coming from branch expansion.

- Bills and acceptance payables increased by 62% to P=5.3 billion mainly from higher volume

of interbank and other short term borrowings.

- Accrued Taxes, Interest and Other Expenses and Cashier’s Checks and Demand Draft

Payable inched up by 29% and 45%, respectively, due to higher transaction volumes during

the period.

- Unsecured subordinated debt (UnSD) increased by 126% as the Bank issued P=5.0 billion

BASEL III compliant Tier 2 notes last July 2014.

- Income tax payable inched up by 140% to P=184.6 million due to higher taxable income

during the year.

- Other liabilities jumped by 26% to P=4.5 billion. The increase was due to higher balances of

bills purchased (with contra-account classified under Loans and Receivables).

III. Income Statement – December 31, 2015 vs. December 31, 2014

- Interest income increased by 25% to P=14.6 billion in 2014 from P=11.7 billion in 2014

primarily due to an increase in lending activities, largely driven by growth in auto loans,

corporate loan and salary loans to public school teachers.

- Interest expense increased by 38% to P=2.3 billion in 2015 from P=1.6 billion in 2014

primarily due to strong growth in deposits and other borrowings.

- Trading and securities gain decreased by 76% as the Bank took advantage of the favorable

market conditions during the 1st half of last year. Foreign exchange gains decreased by 1%

at the back of volatile currency exchange rates in 2015.

55

- Gain on sale of assets decreased by 96% in 2015 as the Bank was able to disposed sizable

portion of its repossessed assets at premium in 2014.

- Trust income dropped by 17% to P=17.0 million due to the decline in assets under

management account.

- Miscellaneous income also increased by 38% to P=306.4 million due to higher recovery of

asset written-off during the year.

- Manpower costs continue to rise from P=3.0 billion last year to P=3.3 billion this year on

account of business and branch expansion program.

- The Bank continued its conservative provisioning on account of its credit expansion, by

setting aside P=3.9 billion in provision for probable losses, an increase of 18% from what

was booked last year.

- Taxes and licenses, Depreciation and amortization, Rent and Miscellaneous expenses

increased by 16%, 11%, 17% and 5%, respectively, on account of business expansion.

IV. Income Statement – December 31, 2014 vs. December 31, 2013

- Interest income increased by 18% to P=11.7 billion in 2014 from P=9.9 billion in 2013

primarily due to an increase in lending activities, largely driven by growth in credit cards,

auto loans, corporate loan and salary loans to public school teachers.

- Interest expense increased by 12% to P=1.6 billion in 2014 from P=1.5 billion in 2013

primarily due to strong growth in deposits and other borrowings.

- Service charges, fees and commissions increased 30% to P=3.3 billion from P=2.5 billion in

2013, resulting from the expansion of business lines, particularly with respect to fees

generated by retail banking and consumer lending.

- Trading and securities gain decreased by 49% as the Bank took advantage of the favorable

market conditions during the 1st half of last year. Foreign exchange gains, on the other

hand, increased by 60% at the back of volatile currency exchange rates in the last half of

2013.

- Gain on sale of assets increased by 1890% in 2014 as the Bank was able to disposed sizable

portion of its repossessed assets at premium.

- Trust income dropped by 30% to P=20.4 million due to the decline in assets under

management account.

- Miscellaneous income also decreased by 45% to P=222.0 million as the Bank had one-time

gains last year on the sale of its written-off credit card portfolio.

- Manpower costs continue to rise from P=2.7 billion last year to P=3.0 billion this year on

account of business and branch expansion program.

- The Bank continued its conservative provisioning on account of its credit expansion, by

setting aside P=3.3 billion in provision for probable losses, an increase of 7% from what was

booked in 2013.

- Taxes and licenses, Depreciation and amortization, Rent and Miscellaneous expenses

increased by 13%, 20%, 16% and 17%, respectively, on account of business expansion.

56

Below are the financial ratios that are relevant to the Group for the year ended December 31, 2015 and

2014:

2015 2014

Current ratio(1) 71.93% 86.05%

Solvency ratio(2) 115.59% 112.86%

Debt-to-equity(3) 6.42 7.78

Asset-to-equity(4) 7.42 8.78

Interest rate coverage ratio(5) 217.49% 260.70%

Profitability ratio

Return on asset (6) 0.99% 1.28%

Return on equity (7) 7.24% 10.17%

Net profit margin(8) 18.23% 22.61%

Gross profit margin(9) 84.48% 85.93%

- 1 Current assets divided by current liabilities

2 Total assets divided by total liabilities

3 Total liabilities divided by total equity

4 Total assets divided by total equity

5 Income before interest and taxes divided by interest expense

6 Net income divided by average total assets. Average total assets is based on average monthly balances

7 Net income attributable to equity holders of the Bank divided by average total equity attributable to equity holders of the Bank.

Average total equity is based on average monthly balances

8 Income before income tax over total interest income

9 Net interest income over total interest income

57

Item 7. Financial Statements

The consolidated financial statements of the Bank are filed as part of this Form 17-A as Annex E.

Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Sycip Gorres Velayo & Co. (SGV & Co.), a member firm of Ernst & Young Global Limited has been the Bank's

independent accountant for 19 years and is again recommended for appointment at the scheduled annual

stockholders' meeting.

None of the Bank's external auditors have resigned during the two most recent fiscal years (2015 and 2014)

or any interim period. In compliance with SEC Memorandum Circular No. 8, Series of 2003, and Amendments

to SRC Rule 68 on the rotation of external auditors or signing partners of a firm every after five (5) years of

engagement, Ms. Josephine Adrienne Abarca was assigned as the signing partner in 2013, replacing Ms.

Janet A. Paraiso who was assigned since 2009. Representatives of SGV & Co. are expected to be present at

the meeting to respond to matters relating to the auditors’ report on the 2015 financial statements of the

Bank that may be pertinently raised during the meeting. Their representative will be given the opportunity

to make a statement if they so desire.

The Bank has paid the following fees to SGV & Co relative to the regular and special engagements rendered

by the latter that are reasonably related to the performance of the audit or review of the Bank’s financial

statements:

Fiscal Year Audit Fees and Other Related Fees Tax Fees

2015 P=8,675,000 -

2014 P=3,500,000 -

2013 P=3,750,000 -

No other services were rendered by SGV & Co. that were not related to the audit or review of the Bank’s

financial statements.

The Bank's Audit Committee, which is composed of Messrs. Carlos Alindada (Chairman), Paul Aquino, Jose

Sandejas and Ms. Josephine Yap, approves the audit fees and fees for non-audit services, if any, of external

auditors, as emphasized in the Audit Charter.

Per SGV & Co.'s representation during the Audit Committee meeting on February 18, 2016, they confirm

that they did not have any disagreement with Management that could be significant to the Bank’s financial

statements or their auditor’s report. Further, there are no matters that in their professional judgment may

reasonably be thought to bear on their independence or that they gave consideration to in reaching the

conclusion that independence has not been impaired.

There were no disagreements with SGV & Co. on accounting and financial disclosures.

58

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer

The Nomination Committee of the Board of Directors of EW has determined that the following, all of whom

are incumbent directors, possess all the qualifications and none of the disqualifications for directorship set

out in EW’s Manual on Corporate Governance, duly adopted by the Board pursuant to SRC Rule 38.1 and SEC

Memorandum Circular No. 16, Series of 2002. Below is the list of candidates prepared by the Nomination

Committee:

Name Citizenship Nominated as Nominated by Relationship with

Nominees

Jonathan T. Gotianun Filipino Director FDC Beneficial Owner

Antonio C. Moncupa, Jr. Filipino Director FDC FOREX CORP Not Related

Wilson L. Sy Filipino Director FDC Not Related

Mercedes T. Gotianun Filipino Director FDC Beneficial Owner

L. Josephine G. Yap Filipino Director FDC FOREX CORP Beneficial Owner

Benedicto M. Valerio, Jr. Filipino Director FDC FOREX CORP Not Related

Jose S. Sandejas Filipino Independent Director FDC Not Related

Carlos R. Alindada Filipino Independent Director FDC Not Related

Paul A. Aquino Filipino Independent Director FDC FOREX CORP Not Related

Mr. Wilson L. Sy was nominated for election as Director on March 17, 2016. He replaced Mr. Andrew L.

Gotianun, Sr. (deceased), who was originally nominated on March 3, 2016. Mr. Sy is the Vice Chairman of

Asian Alliance Holdings, Corp. and Director of Vantage Equities, Inc.; eBusiness Services, Inc., Philequity

Management, Inc., Xcell Property Ventures, Inc. (2005 to present), and Monte Oro Resources & Energy, Inc.

(2005 to present) Mr. Sy is also an Independent Director of the reporting corporations: The Country Club at

Tagaytay Highlands, Inc. (2011 to present), Tagaytay Highlands International Golf Club, Inc. (2011 to

present), Tagaytay Midlands Golf Club, Inc. (2011 to present), and The Spa and Lodge at Tagaytay Highlands

(2011 to present). He was a former Chairman of the Philippine Stock Exchange, Inc. (1994 to 1995). He

holds a degree in Management Engineering from the Ateneo de Manila University (1975).

The Nomination Committee has determined that the nominees for independent directors possess all the

qualifications and have none of the disqualifications for independent directors as set forth in the Revised

Manual on Corporate Governance. The nominees for the independent directors have no relationship /

affiliation with FDC and FFC.

A certification on the qualifications of the Independent Directors and that none of the above named directors

and officers work with the government is attached herewith as Annex A and B, respectively.

The Nominations Committee is composed of Paul A. Aquino as Chairman, Jose S. Sandejas, Jonathan T.

Gotianun, Carlos R. Alindada and Benedicto M. Valerio, Jr. as members.

59

The current list of the Bank’s members of the Board is as follows:

Name Age (as of last birthday) Citizenship

1. Andrew L. Gotianun, Sr.* 88 Filipino

2. Jonathan T. Gotianun 62 Filipino

3. Antonio C. Moncupa, Jr. 57 Filipino

4. Mercedes T. Gotianun 87 Filipino

5. Lourdes Josephine Gotianun-Yap 60 Filipino

6. Carlos R. Alindada 79 Filipino

7. Paul A. Aquino 73 Filipino

8. Jose S. Sandejas 75 Filipino

9. Benedicto M. Valerio, Jr. 57 Filipino

*Mr. Andrew L. Gotianun, Sr. passed away on March 10, 2016

ANDREW L. GOTIANUN, SR., 88 years old, Filipino

Chairman Emeritus

Mr. Andrew Gotianun, Sr. is the Founder of Filinvest Development Corporation and Chairman Emeritus of

EastWest Bank since April 2007. Concurrently, he is the Chairman Emeritus of the Board of Filinvest

Development Corporation and Filinvest Land Inc. He is also a Chairman of of Andremerc Holdings Corp.,

Filinvest Land Inc., Pacific Sugar Holdings and A.L Gotianun Inc. (formerly ALG Holdings Inc.). He worked for

the Insular Bank of Asia and America from 1980 to 1985 and for Filinvest Credit Corporation from 1970 to

1985. He is a graduate of San Beda College with an Associate Degree in Commercial Science.

JONATHAN T. GOTIANUN, 62 years old, Filipino

Chairman

Mr. Jonathan Gotianun is concurrently the Chairman of Filinvest Development Corporation, Filinvest Land,

Inc., East West Banking Corporation, EastWest Rural Bank, East West Ageas Life Insurance Corporation and

Country Water Services, Inc. prior to his election as Chairman of the Board of EastWest Bank, he was Vice-

Chairman and Director since 1994. He is also a Director of FDC Utilities, Inc., FDC Misamis Power Corporation

and FDC Hotels Corporation. Mr. Gotianun sits as Chairman of EastWest Bank since April 2007. He holds a

degree in Commerce from the Santa Clara University in California and a Masters in Management from

Northwestern University in Illinois.

ANTONIO C. MONCUPA, JR., 57 years old, Filipino

President, CEO and Director

Mr. Antonio Moncupa, Jr. has been the President and CEO of EastWest since January 1, 2007. Mr. Moncupa

also sits as Board Member of Pasberfund Realty Holdings, Inc, Bancnet, Inc., Philippine Rural Reconstruction

Movement, East West Rural Bank and East West Ageas Life Insurance Corporation. Mr. Moncupa holds a

double degree in Economics and Accounting from the De La Salle University, and a Masters in Business

Administration from the University of Chicago. Before joining EastWest, he was EVP and Chief Financial

Officer of the International Exchange Bank.

MERCEDES T. GOTIANUN, 87 years old, Filipino

Director

Mrs. Mercedes Gotianun is a Director of Filinvest Development Corporation, Davao Sugar Central

Corporation, Filinvest Land, Inc., and Vice-Chairman of Filinvest Alabang, Inc. Mrs. Gotianun holds a degree

60

in BS Pharmacy (magna cum laude) from the University of the Philippines. She has been serving as a Director

of EastWest Bank since 1995.

LOURDES JOSEPHINE GOTIANUN YAP, 60 years old, Filipino

Director

Mrs. Lourdes Josephine Gotianun Yap is the President and Chief Executive Officer of Filinvest Development

Corporation and Chairman of Filinvest Asia Corporation, Cyberzone Properties, Inc. and The Palms Country

Club. She is also the President of Filinvest Land, Inc., Filinvest Alabang, Inc. and Festival Supermall, Inc. Mrs.

Yap holds a degree in Business Management from the Ateneo de Manila University and a Masters in Business

Administration major in Finance from the University of Chicago. She has been a Director of EastWest Bank

since August 2000.

CARLOS R. ALINDADA, 79 years old, Filipino

Independent Director

Mr. Carlos Alindada is formerly Chairman and Managing Partner of SGV & Co., Director of the National Power

Corporation and Commissioner of the Energy Regulation Commission. He graduated with a degree in

Accounting from the University of the East, and a Masters in Business Administration in Corporate Finance

from New York University. He also pursued an Advance Management Program at Harvard University. Mr.

Alindada has been a Director of EastWest Bank since April 2002.

PAUL A. AQUINO, 73 years old, Filipino


Mr. Paul Aquino is an Adviser of the EDC (Energy Development Corporation), President of President of Keitech

(Kananga EDC Institute of Technology) and the Honorary Consul of the Government of Malta. Mr. Aquino is

also a Director of Skycable, Inc. and Independent Director of East West Ageas Life Insurance Corporation.

He is a graduate of BS in Electrical Engineering and holds a Masters in Business Administration from Santa

Clara University in California. He was conferred Doctor of Management Science (Honoris Causa) by the

Philippine School of Business Administration. He has been a Director of the Bank since October 2009.

JOSE S. SANDEJAS, 75 years old, Filipino


Mr. Jose Sandejas is formerly a Director of Benguet Consolidated Corporation, Petron Corporation, and the

Board of Investments. He graduated with a degree in Chemical Engineering from the De La Salle University

and pursued a doctorate degree in Materials Engineering from Rensselaer Polytechnic Institute. He has been

serving as Director of EastWest Bank since April 2002.

BENEDICTO M .VALERIO, JR., 57 years old, Filipino

Director /Corporate Secretary

Atty. Benedicto M. Valerio, Jr. is actively engaged in the practice of law and specializes in litigation and

corporate work. He was Assistant Corporate Secretary of International Exchange Bank from 2001-2006 and

also served as its General Counsel. He holds a BS Commerce degree from the De La Salle University and

Bachelor of Laws from the Ateneo de Manila University. He finished his Masters in Business Administration

at the Ateneo Graduate School of Business. Atty. Valerio has been a Director since July 2012 and a Corporate

Secretary of EastWest Bank since April 2007.

The Bank held its Annual Stockholders Meeting on April 17, 2015.

61

The Bank held twelve (12) Regular Board Meetings from January to December 2015; One (1) Special Board

Meeting held on March 06, 2015; and one (1) Organizational Meeting of the Board held on April 17, 2015

or a total of Fourteen (14) Board Meetings.

Board of Directors No. of Meetings

Attended/Held Percent Present

Jonathan T. Gotianun 14/14 100%

Antonio C. Moncupa, Jr. 14/14 100%

Andrew L. Gotianun, Sr. 10/14 71%

Mercedes T. Gotianun 10/14 71%

L. Josephine G. Yap 12/14 86%

Jose S. Sandejas 14/14 100%

Carlos R. Alindada 14/14 100%

Paul A. Aquino 14/14 100%

Benedicto M. Valerio, Jr. 14/14 100%

A certification on the qualifications of the Independent Directors is attached herewith as Annex A.

The following is the list of Key Executive Officers of the Bank as of January 31, 2016:

Name Rank Age (as of last

birthday) Citizenship

Antonio C. Moncupa, Jr. President & CEO 57 Filipino

Jose Emmanuel U. Hilado Senior Executive Vice President, COO & Treasurer 52 Filipino

Gerardo Susmerano Senior Executive Vice President 51 Filipino

Jacqueline S. Fernandez Executive Vice President 53 Filipino

Arturo L. Kimseng Executive Vice President 65 Filipino

Renato K. De Borja, Jr. Senior Vice President & CFO 44 Filipino

Ernesto T. Uy Senior Vice President 55 Filipino

Ivy B. Uy Senior Vice President 43 Filipino

Eloida F. Oquialda Senior Vice President 53 Filipino

Angel Marie L. Pacis First Vice President 47 Filipino

Virgilio L. Camilo First Vice President 53 Filipino

Grace N. Ang First Vice President 40 Filipino

Ma. Bernadette T. Ratcliffe First Vice President 55 Filipino

Renato P. Peralta First Vice President 56 Filipino

ANTONIO C. MONCUPA, JR., 57 years old, Filipino

President and Chief Executive Officer and Director

Mr. Antonio Moncupa, Jr. has been the President and CEO of EastWest since January 1, 2007. Mr. Moncupa

also sits as Board Member of Pasberfund Realty Holdings, Inc, Bancnet, Inc., Philippine Rural Reconstruction

Movement, East West Rural Bank and East West Ageas Life Insurance Corporation. Mr. Moncupa holds a

double degree in Economics and Accounting from the De La Salle University, and a Mastersin Business

Administration from the University of Chicago. Before joining EastWest, he was EVP and Chief Financial

Officer of the International Exchange Bank.

62

JOSE EMMANUEL U. HILADO, 52 years old, Filipino

Senior Executive Vice President, Chief Operating Officer and Treasurer

Mr. Jose Emmanuel U. Hilado has 29 years of solid banking experience from various major banks, occupying

senior management roles involving International Banking and Treasury which includes Asset and Liability

Management, Trading, Portfolio Management, Global Distribution and Advisory and Financial Institutions

Management. He is a Chairman of East West Insurance Brokerage and Director of East West Ageas Life

Insuarance Corporation. He completed his degree in BS Business Economics from the University of the

Philippines, Diliman as a Dean’s List Medalist. He earned his Executive MBA degree from Kellogg-Hongkong

University of Science and Technology. He is a Certified Treasury Professional from the BAP-Ateneo Graduate

School. Prior to joining East West Bank, Mr. Hilado was the Senior Executive Vice President and Treasurer of

RCBC.

GERARDO SUSMERANO, 51 years old, Filipino

Senior Executive Vice President and Head – Retail Banking and Operations

Mr. Gerardo Susmerano has served as Senior Executive Vice President and Head of Retail Banking and

Operations since September 2006. He is also re-elected as a Director of BANCNET for 2012-2013. Mr.

Susmerano obtained his Bachelor’s Degree in Accounting from the University of Santo Tomas and Master’s

Degree in Business Administration from the Asian Institute of Management.

JACQUELINE S. FERNANDEZ, 53 years old, Filipino

Executive Vice President and Head – Consumer Lending

Ms. Jacqueline S. Fernandez is Executive Vice President and Head of EastWest’s Consumer Lending Cluster.

She has been with the Bank since March 16, 2006. Before joining EastWest, she was Vice President and Head

of the Management and Performance Standards Group of the Standard Chartered Bank. Ms. Fernandez

earned her degree in Economics from the University of the Philippines and holds a Masters degree in

Business Administration from the same university.

ARTURO L. KIMSENG, 65 years old, Filipino

Executive Vice President

Mr. Arturo L. Kimseng has more than 45 years professional experience, 35 years of which he spends in the

banking industry. He started his banking career at Cebu City Savings and later joined SyCip Gorres Velayo

& Co. as staff auditor. He joined Family Bank in 1977 and progressed as Head of Audit. He joined BPI upon

the acquisition of Family Bank by the Ayala Group and retired as Chief Audit Executive in 2011. He earned

his degree in BS in Commerce from the University of San Carlos in 1970.

RENATO K. DE BORJA, JR., 44 years old, Filipino

Senior Vice President and Chief Finance Officer

Mr. Renato K. De Borja, Jr. is the Chief Finance Officer of EastWest and has been with the Bank since

September 1, 2009. His position as CFO is concurrent to his position as one of the Directors in East West

Rural Bank. He was the Chief Finance Officer of Citigroup Business Process Solutions (CBPS) and at Metrobank

Card Corporation prior to his joining EastWest. Mr. De Borja graduated with a degree in Accountancy from

the University of Santo Tomas and is a Certified Public Accountant.

63

ERNESTO T. UY, 55 years old, Filipino

Senior Vice President and Head – Corporate Banking Group

Mr. Ernesto T. Uy is Senior Vice President and Head of the Corporate Banking Group. He has been with the

Bank since September 2008. Before joining EastWest, he was Senior Vice President and Unit Head at Banco

De Oro Universal Bank. Mr. Uy obtained his Bachelor’s Degree in Industrial Management Engineering from

De La Salle University and his Master’s Degree in Industrial Engineering and Management from the Asian

Institute of Technology.

IVY B. UY, 43 years old, Filipino

Senior Vice President and Deputy Head for Retail Banking Group

Ms. Ivy B. Uy has joined the bank in Sept 2006 as FVP/Division Head for Central MM Division, and in 2008

as Deputy Group Head of Branch Banking. Before joining EastWest, she was a Center Head - Manila Area of

International Exchange Bank. Ms. Uy holds a degree in Hotel and restaurant management from the University

of Sto. Tomas and finished a Management development Program in Asian Institute of Management.

ELOIDA F. OQUIALDA, 53 years old, Filipino

Senior Vice President and Chief Audit Executive

Ms. Eloida F. Oquialda has more than 25 years of experience in the audit of universal banks, having been

employed previously at Bank of the Philippine Islands and Rizal Commercial Banking Corporation. She earned

her degree in BS Accountancy from Polytechnic University of the Philippines. She is a Certified Public

Accountant (CPA), Certified Information Systems Auditor (CISA), Certified Internal Auditor (CIA) and Certified

Risk and Information Systems Control (CRISC).

ANGEL MARIE L. PACIS, 47 years old, Filipino

First Vice President and Trust Officer – Investments Cluster

Ms. Angel Marie L. Pacis graduated cum laude with a degree in BS Economics from the University of the

Philippines in Diliman and has completed the units of her master’s degree in business administration also

from the University of the Philippines. She also graduated with distinction from the Trust Institute

Foundation of the Philippines One-year Course on Trust Operations and passed the Level 2 Chartered

Financial Analyst Exam. She is currently an adviser to the Board of Directors – Trust Officers Association of

the Philippines and is a lecturer at the Trust Institute Foundation of the Philippines. Prior to joining East

West Bank, she was the Vice President and Head of Institutional Asset Management 2 at the Bank of the

Philippine Islands.

VIRGILIO L. CAMILO, 53 years old, Filipino

First Vice President and Head – Bank Operations

Mr. Virgilio L. Camilo has been the Head of Bank Operations since August 2013. Before joining EastWest, he

was the Head of Operations Group of Planters Development Bank. He earned his degree in BS in Accountancy

from San Sebastian College-Manila.

GRACE N. ANG, 40 years old, Filipino

Vice President & Chief Risk Officer

Ms. Grace N. Ang has been the Chief Risk Officer of EastWest since August 1, 2008. Before joining EastWest,

she was with International Exchange Bank as Senior Manager. She was also appointed as Director of AIG

Philam Savings Bank, Inc. from March 12 to September 03, 2009. Ms. Ang holds a degree in Accounting

from the De La Salle University and is a Certified Public Accountant.

64

MA. BERNADETTE T. RATCLIFFE, 55 years old, Filipino

First Vice President and Chief Compliance Officer

Ms. Ma. Bernadette T. Ratcliffe has more than 20 years experience in various senior management roles

involving controllership, treasury, financial planning and compliance. Prior to her appointment as

Compliance Officer, she was the Chief of Staff of the President of East West Bank. She completed her BS

Business Administration and Accountancy Degree and Masters in Business Administration from the

University of the Philippines – Diliman and is a Certified Public Accountant.

RENATO P. PERALTA, 56 years old, Filipino

Vice President and Head – Credit Policy & Review

Mr. Renato P. Peralta joined EastWest as Head of Credit Policy & Review in June of 2009. Prior to joining

EastWest, he was Head of UCPB Securities, Inc. Mr. Peralta graduated from the Ateneo de Manila University

with a Bachelor of Arts degree in Economics.

There is no person, not being an executive officer of the Company, who is expected to make a significant

contribution to its business. The Company, however, occasionally engages the services of consultants

Family Relationships

Mr. Andrew L. Gotianun, Sr. is married to Mrs. Mercedes T. Gotianun. They are the parents of Jonathan T.

Gotianun and Mrs. Josephine G. Yap.

Involvement in Certain Legal Proceedings

To the best of the Bank’s knowledge and belief and after due inquiry, none of the Bank’s directors, nominees

for election as director, or executive officer have in the five year period prior to the date of this Report:

1) had any petition filed by or against any business of which such person was a general partner or

executive officer either at the time of the bankruptcy or within a two-year period of that time;

2) convicted by final judgment in a criminal proceeding, domestic or foreign, or have been subjected

to a pending judicial proceeding of a criminal nature, domestic or foreign, excluding traffic

violations and other minor offenses;

3) subjected to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of

any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining,

barring, suspending or otherwise limiting their involvement in any type of business, securities,

commodities or banking activities; or

4) found by a domestic or foreign court of competent jurisdiction (in a civil action), the SEC or

comparable foreign body, or a domestic or foreign exchange or other organized trading market or

self-regulatory organization, to have violated a securities or commodities law or regulation and the

judgment has not been reversed, suspended, or vacated.

The Bank has been, and may in the future be, implicated in lawsuits in connection with the ordinary course

of its business. However, neither the Bank nor any of its subsidiaries have been subject to any order,

judgment, or decree, or violated any securities or commodities law for the last five years, or are involved in

any litigation or arbitration proceedings that may have, or have had, a material adverse effect on it or its

65

subsidiaries’ financial condition, nor, so far as any of them is aware, is any such proceeding pending or

threatened.

All legal proceedings involving the Bank are efficiently and competently attended to and managed by a group

of eleven (11) in-house counsels who are graduates of reputable law schools in the country. As its external

counsels, the Bank retains or engages the services on case to case basis the following respected law firms,

Sycip, Salazar Hernandez & Gatmaitan Law Office, Angara Abello Concepcion Regala & Cruz, Sobreviñas

Hayudini Navarro and San Juan Law Offices;Diaz Del Rosario and Associates; Law Offices of Alvarez, Vera

Law Office, Anover Anover San Diego & Primavera, Nuez, Galang and Espina Lopez and Quitain Law Office,

and Divina Law Offices, among others.

Item 10. Executive Compensation

The following are the Bank’s CEO and four most highly compensated executive officers for the year ended

2014:

Name Position

Antonio C. Moncupa, Jr. Chief Executive Officer

Jose Emmanuel U. Hilado Chief Operating Officer and Treasurer

Gerardo Susmerano Head of Retail Banking

Jacqueline S. Fernandez Head of Consumer Lending

Renato K. De Borja, Jr. Chief Finance Officer

The following table identifies and summarizes the aggregate compensation of the Bank’s CEO and the four

most highly compensated executive officers of the Bank in 2013, 2014 and 2015:

Year Total(1)

(P in millions)

CEO and the most highly compensated officers named above 2013 66.8

2014 77.8

2015 92.8

Aggregate compensation paid to all officers and Directors as a

group unnamed 2013 449.1

2014 524.3

2015 627.3

________________

Notes:

(1) Includes salary, bonuses and other income.

The growth in aggregate compensation of the CEO and the four most highly compensated executive officers

of the Bank for 2016 is estimated to be the same as that of the prior year.

66

There are no actions to be taken as regards any bonus, profit sharing, pension or retirement plan, granting

of extension of any option warrant or right to purchase any securities between the Bank and its directors

and officers.

Remunerations given to directors which were approved by the Board Remuneration Committee amounted to

P=13.4 million in 2015, P=13.1 million in 2014 and P=10.2 million in 2013.

Standard Arrangement

Non-executive directors receive per diem of P=60,000 per committee and special board meeting and

P=120,000 per regular board meeting.

Executive directors do not receive per diem as the same has been considered in their compensation.

Other Arrangement

The Bank has no other arrangement with regard to the remuneration of its existing directors and executive

officers aside from the compensation received as stated above.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Record and beneficial owners holding 5% or more of voting securities as of January 31, 2016:

Title of

Class

Name, Address of Record Owner &

Relationship with Issuer

Name of Beneficial

Owner

& Relationship with

Record

Owner Citizenship

No. of

Shares Held %

Common PCD Nominee Corporation

37th Floor, Tower I, The Enterprise Center,6766

Ayala Ave. corner Paseo de Roxas, Makati City

Various

stockholders/clien

ts

Filipino 488,204,054 32.55%

Common Filinvest Development Corporation

6/F The Beaufort, 5th Ave. cor, 23rd St., Fort

Bonifacio Global City, Taguig City

(Stockholder)

ALG Holdings

Corporation

(Parent Company

of FDC)

Filipino 451,464,027 30.10%

Common Filinvest Development Corporation Forex

Corporation

6/F The Beaufort, 5th Ave. cor, 23rd St., Fort

Bonifacio Global City, Taguig City

(Stockholder)

Filinvest

Development

Corporation

(Parent Company

of EW)

Filipino 394,941,030 26.33%

Common PCD Nominee Corporation

37th Floor, Tower I, The Enterprise Center,

6766 Ayala Ave. corner Paseo de Roxas, Makati

City

Various

stockholders/clien

ts

Non-Filipino 160,795,994 10.72%

Based on the list provided by the Philippine Depository and Trust Corp. to the Bank’s transfer agent, Stock Transfer Service, Inc., as of

January 31, 2016 none among the stockholders under the PCD Nominee Corporation holds 5% or more of the Bank’s securities.

Filinvest Development Corporation (FDC) is the record and beneficial owner of 40.0% of the outstanding

capital stock of the Bank. It is also the beneficial owner – through registered owner FDC Forex Corporation

of 37.2% of the shares of the Bank. FDC is majority owned by A.L. Gotianun, Inc. The Bank and FDC’s

ultimate parent company is A.L. Gotianun, Inc.

67

Mr. Andrew L. Gotianun, Sr.’s family is known to have substantial holdings in the companies that own the

shares of ALG Holdings, Inc. and, as such, could direct the voting or disposition of the shares of said

companies.

Except as stated above, the Bank has no knowledge of any person holding more than 5% of the Bank’s

outstanding shares under a voting trust or similar agreement. The Bank is likewise not aware of any

arrangement which may result in a change in control of the Bank, or of any additional shares which the

above-listed beneficial or record owners have the right to acquire within thirty (30) days, from options,

warrants, rights, conversion privilege or similar obligation, or otherwise.

Security Ownership of Management

Security Ownership of Directors and Executive Officers as of January 31, 2016 are as follows:

Title of Class Name Position

Citizenship

Beneficial/

Record

Percent of

Ownership

Common Andrew L. Gotianun, Sr.* Director, Chairman Emeritus Filipino 880,665 0.0587%

Common Jonathan T. Gotianun Director, Chairman of the Board Filipino 9,403,010 0.6269%

Common Antonio C. Moncupa, Jr. Director, President & CEO Filipino 1,266,336 0.0844%

Common Mercedes T. Gotianun Director Filipino 880,664 0.0587%

Common L. Josephine Gotianun-Yap Director Filipino 11,506,151 0.7671%

Common Paul A. Aquino Director Filipino 40,010 0.0027%

Common Carlos A. Alindada Director Filipino 10 0.0000%

Common Jose Sandejas Director Filipino 31,760 0.0021%

Common Benedicto M. Valerio, Jr. Director/Corporate Secretary Filipino 510 0.0000%

Subtotal 24,009,116 1.6006%

Common Jose Emmanuel U. Hilado Senior Executive Vice President Filipino 227,665 0.0152%

Common Gerardo Susmerano Senior Executive Vice President Filipino 425,372 0.0284%

Common Jacqueline S. Fernandez Executive Vice President Filipino 31,637 0.0021%

Common Arturo L. Kimseng Executive Vice President Filipino 39,879 0.0027%

Common Ernesto T. Uy Senior Vice President Filipino 40,000 0.0027%

Common Ivy B. Uy Senior Vice President Filipino 199,392 0.0133%

Common Renato K. De Borja, Jr. Senior Vice President Filipino 99,964 0.0067%

Common Bernadette T. Ratcliffe First Vice President Filipino 13,292 0.0009%

Common Renato P. Peralta Vice President Filipino 61,546 0.0041%

Common Grace N. Ang Vice President Filipino 68,171 0.0045%

Subtotal 1,206,918 0.0805%

Total 25,216,034 1.6811%

The aggregate shareholdings of all directors and officers as a group is 1.6811%.

Voting trust holders of 5% or more

To the extent known to the Bank, there is no person or group of persons holding more than 5 % of the

common shares by virtue of a voting trust or similar agreement as there has been no voting trust which has

been filed with the Bank and the Securities and Exchange Commission.

68

Change in Control

There have been no arrangements that have resulted in a change of control of the Bank during the period

covered by this report.

Item 12. Certain Relationships and Related Transactions

The Bank and its subsidiaries and affiliates in their normal course of business, have certain related party

transactions. Kindly refer to Note 26 of the Notes to the Audited Consolidated Financial Statements for the

summary of related-party transactions among members of the Filinvest Group.

There were no other transactions during the last two years, or any proposed transactions, to which the Bank

was or is to be a party, in which any director or executive officer, any nominee for election as a director, any

security holder or any member of the immediate family of any of the foregoing persons, had or is to have a

direct or indirect material interest.

69

PART IV – CORPORATE GOVERNANCE

Item 13. Corporate Governance

COMPLIANCE WITH CORPORATE GOVERNANCE PRACTICES

The Board approved the Bank’s revised Corporate Governance Manual on August 27, 2015 in order to

monitor and assess the level of the Bank’s compliance with leading practices on good corporate governance

as specified in pertinent SEC circulars. Aside from establishing specialized committees to aid in complying

with the principles of good corporate governance, the Corporate Governance Manual also outlines specific

investor’s rights and protections and enumerates particular duties expected from the Board members,

officers and employees. It also features a disclosure system which highlights adherence to the principles of

transparency, accountability and fairness. The Chief Compliance Officer is tasked with the formulation of

specific measures to determine the level of compliance with the Corporate Governance Manual by the Board

members, officers and employees. There has been no deviation from the Corporate Governance Manual’s

standards as of the date of this Report.

Evaluation System and Compliance

As part of its system for monitoring and assessing compliance with the Corporate Governance Manual and

the SEC Code of Corporate Governance, each committee is required to report regularly to the Board of

Directors and the Corporate Governance Manual is subject to annual review or when necessary as mandated

by law or regulation. The Chief Compliance Officer is responsible for determining and measuring compliance

with the Corporate Governance Manual and the SEC Code of Corporate Governance. Any violation of the

Bank’s Corporate Governance Manual shall subject the responsible officer or employee to the following

penalties:

• For a first violation, the responsible officer or employee shall be reprimanded.

• For a second violation, suspension from office shall be imposed. The duration of the suspension

shall depend on the gravity of the violation.

• For a third violation, the maximum penalty of removal from office shall be imposed.

Pursuant to EastWest’s Corporate Governance Manual, its Board created each of the following committees

and appointed Board members thereto. Each member of the respective committees named below has been

holding office as of the date of this Offering Circular and will serve until his successor shall have been

elected and qualified.

Executive Committee

The Executive Committee is empowered to approve and/or implement any or all corporate acts within the

competence of the Board except those acts expressly reserved by the Corporation Code to the Board of

Directors. The Executive Committee also assumes the review and approval of bank-wide credit strategy,

profile and performance. It approves the credit risk-taking activities of EastWest based on the established

approving authorities as well as reviews and endorses credit-granting activities.

70

The Executive Committee meets weekly or as often as it may be necessary to address all matters referred to

it. In 2015, thirty six (36) regular and special meetings were conducted and attended by at least a majority

of the Committee members.

Corporate Governance and Compliance Committee (CGCC)

The Corporate Governance and Compliance Committee leads EastWest in defining corporate governance

policies and attaining best practices while overseeing the implementation of EastWest’s compliance

program, money laundering prevention program and ensuring that regulatory compliance issues are

resolved expeditiously. In addition to its governance role, the CGCC also assumes the nomination function

whereby it reviews and evaluates the qualification of individuals being nominated to the Board as well as

those nominated to other positions requiring appointment by the Board. The Committee is also responsible

for the periodic administration of performance evaluation of the Board and its committees. It conducts an

annual self-evaluation of its performance in accordance with the criteria provided in the 2009 SEC Code of

Corporate Governance. At the forefront of the implementation of its mandates is the Compliance Division

led by the Chief Compliance Officer.

The Committee, composed of five members, three of whom are independent directors, meets every other

month. In 2015, nine (9) meetings were conducted and attended by at least a majority of the Committee

members.

Audit Committee

The Audit Committee oversees the institution’s financial reporting and internal and external audit functions.

It is responsible for setting up the Internal Audit Division, and for appointing the Chief Audit Executive and

an independent external auditor who both directly report to the Audit Committee. It monitors and evaluates

the effectiveness and accuracy of the internal control system established throughout the Bank, through the

Internal Audit Division. The Internal Audit Division is independent of all of the Bank’s other organizational

units of as well as of the personnel and work it audits. It functionally reports to the Audit Committee and

administratively to the President/CEO as it provides independent, objective assurance and consulting

services designed to add value and improve EastWest’s operations. It helps the organization accomplish its

objectives by bringing a systematic, disciplined approach in evaluating and improving the effectiveness of

risk management, control, and governance processes.

The Audit Committee, which consists of four members, three of whom are independent directors, meets

once a month. In 2015, Fourteen (14) meetings were conducted and attended by at least a majority of the

Committee members.

Risk Management Committee

The Risk Management Committee (RMC) assists the Board in managing EastWest’s risk-taking activities

through policy institution and oversight. The RMC reviews and approves principles, policies, strategies,

processes and control frameworks pertaining to risk management. It also recommends to the Board any

necessary modifications or amendments to strategies and policies relative to risk management. Its functions

include identifying and evaluating EastWest’s risk exposures, estimating its impact to the organization and

assessing the magnitude, direction and distribution of risks across EastWest, which it uses as basis in

determining risk tolerances that it subsequently recommends to the Board for approval. RMC reports to the

Board the overall risk exposures as well as the effectiveness of its risk management practices and processes

while recommending further policy revisions when necessary.

71

The Risk Management Committee, which meets every month, is composed of four Board members, all of

whom are non-executive directors and three of whom are independent directors. Members must possess

adequate knowledge and understanding of the institution’s risk exposures and expertise in developing

appropriate risk policies and strategies. In 2015, twelve (12) meetings were conducted and attended by at

least a majority of the Committee members.

Compensation Committee

The Compensation Committee is composed of five members including the Bank’s President and one

independent director. It ensures that the compensation policies and practices are consistent with the

corporate culture, strategy and the business environment under which it operates. It evaluates and

recommends to the Board incentives and other equity-based plans designed to attract and retain qualified

and competent individuals.

The Committee meets at least once a year and provides overall direction on the compensation and benefits

strategy of EastWest. In 2015, one (1) meeting was conducted and attended by all of the Committee

members.

Trust Committee

The Trust Committee assists the Board in fulfilling its responsibilities to oversee the proper management

and administration of trust and other fiduciary business. Duly constituted and authorized by the Board, the

Committee acts within the sphere of authority as provided in EastWest’s by-laws and/or as may be delegated

by the Board. It undertakes such responsibilities but not limited to the following:

1) acceptance and closing of trust and other fiduciary accounts;

2) initial review of assets placed under the trustee’s fiduciary custody;

3) investment, reinvestment and disposition of funds or property;

4) review and approval of transactions between trust and/or fiduciary accounts; and

5) review of trust and other fiduciary accounts to determine the advisability of retaining or disposing

of the trust or fiduciary assets and/or whether the account is being managed in accordance with

the instrument creating the trust or other fiduciary relationship.

The Trust Committee also presides over the proper conduct of the Bank’s Trust business, periodically

reviewing the business development initiatives such as staffing and delineation of

responsibility/accountability, proactive development and implementation of strategies for cultivating of

revenue streams and cost management, and application and monitoring of the proper performance

benchmarks.

The Trust Committee is composed of five members, namely the President & CEO, Trust Officer and three

directors. It meets once every quarter or more frequently as circumstances may warrant. In 2015, Four (4)

meetings were conducted and attended by at least a majority of the Committee members.

See Annex D for the Bank’s 2015 Annual Corporate Governance Report.

72

PART V - EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C

(a) Exhibits

ANNEX A – Certification on Qualification of Independent Directors

ANNEX B – Certification that None of the Directors and Officers work with the Government

ANNEX C – List of Owned and Leased Branches

ANNEX D – Annual Corporate Governance Report

ANNEX E – Consolidated Audited Financial Statements

(b) Reports on SEC Form 17-C

The following reports have been submitted by the Bank during the year 2014 through official disclosure

letters:

REPORT DATE REPORTED

Results of Board Meeting - Holding of Annual Stockholders’ Meeting and approval of Record Date.

Approval of the Stock Rights Offering (SRO).

February 3, 2015

Re-assigment of Mr. Noli De Pala as new FI Sales Head February 17, 2015

Results of Board Meeting: Amendment in Articles of Incorporation to increase the authoried capital

stock.

March 9, 2015

SEC order on conversion of Convertible Notes into Common Stocks of Victorias Milling Corporation

(VMC)

March 26, 2015

PSE approval on the Bank's SRO application March 27, 2015

Determinantion of SRO Price April 15, 2015

Results of the Annual Stockholder's Meeting held on April 17, 2015 with Certification of Independent

Directors

April 22, 2015

Appointment of Ms. Eloida Oquialda as New Chief Audit Executive May 5, 2015

Disclosure of SRO results May 11, 2015

Joint Venture Agreement with Ageas Insurance International N.V. May 29, 2015

BSP approval on the initial equity investment of the Bank in the proposed wholly-owned life insurance

company

June 11, 2015

Promotion of the Chief Audit Executive Ms. Eloida Oquialda from First VP to Senior VP July 3, 2015

SEC approval of the Articles of Incorporation and ByLaws of EW Insurance Brokerage July 13, 2015

Press Release - Eastwest's Assets up by 31% reached the P=200 Billion milestone. August 7, 2015

Board approval to authorize the Bank to exercise the call option on its P=1.5 Billion non basel 3

compliant lower tier 2

August 28, 2015

Updates on the SEC decisions in relation to VMC September 7, 2015

BSP approval on EastWest Ageas Life Insurance Business subject to regulatory requirement October 8, 2015

BSP approval call option exercise P=1.5 Billion unsecured subordinated debt. October 15, 2015

BSP approval on the AOI and BL of EWAL October 26, 2015

Resignation of Ms. Denise Tambuatco and Press Release - EastWest posts 21% lower 9M results, still

expect to end the year higher

November 16, 2015

Resignation of Ms. Manuel D. Goseco & Stephen Santos and appointment of Mr. Jose Emmanuel U.

Hilado as new Treasurer,

December 21, 2015

Press Release: Insurance Commission grants license to EWAL January 15, 2016

Update on case against VMC February 2, 2016

73

Approval of the Board on Holding ASM on April 15, 2016 with record date of February 29, 2016 and

the appointment of Ms. Ma. Alicia Arnaldo as Head of Operations & Technology Cluster

February 2, 2016

BSP approval on cross-selling EWAL products subject to regulatory conditions February 15, 2016

Demise of a Director – Mr. Andrew L. Gotianun, Sr. March 14, 2016

SEC Form 17-IS

December 2003 24

ANNEX A – CERTIFICATION ON QUALIFICATION OF INDEPENDENT DIRECTORS

SEC Form 17-IS

December 2003 25

ANNEX B – CERTIFICATION THAT NONE OF THE DIRECTORS AND OFFICERS WORK WITH THE GOVERNMENT

ANNEX C

Branches Owned as of December 31, 2015

Branch Location

1. The Fort - Beaufort The Beaufort, 5th ave. corner 23rd St., Bonifacio Global City, Taguig City

2. Betterliving 100 Doña Soledad Ave., Betterliving Subd., Brgy. Don Bosco,

3. Davao - Lanang Lot 6 Blk 5, Insular Village, Pampanga Buhangin, Lanang Davao City

4. Pioneer UG-09 Pioneer Pointe Condominium, Pioneer St., Mandaluyong City

5. Tandang Sora Lot 80-A Kalaw Hills Subd., Brgy. Culiat, Tandang Sora

Branches and Buildings Leased as of December 31, 2015

Branch/Building Commencement Date Expiration Date Monthly Rent

Gil Puyat January 1, 2010 January 1, 2020 96,102.65

Cubao January 1, 2011 December 29, 2020 82,880.00

Ortigas July 1, 2010 June 30, 2015 153,464.00

Las Piñas January 3, 2013 January 1, 2023 118,720.00

Edsa-Kalookan June 16, 2007 June 13, 2017 73,271.03

Roosevelt March 1, 2010 February 27, 2020 87,073.07

Pasig Shaw March 12, 1995 March 12, 2015 36,456.00

Pasig - Poblacion October 22, 2010 October 19, 2020 89,600.00

Ayala Avenue - Herrera October 1, 2012 September 29, 2022 173,708.64

Imus November 5, 2010 November 2, 2020 90,160.00

Taytay February 16, 2011 February 15, 2016 41,834.36

Congressional July 1, 2012 June 28, 2027 100,800.00

Anonas April 15, 2012 April 16, 2027 90,000.00

President'S Avenue September 1, 2010 August 29, 2020 134,400.00

Antipolo-Marcos Highway September 12, 2014 September 12, 2015 54,962.28

Regalado September 28, 2010 September 25, 2020 101,105.03

Bagumbayan April 1, 2008 March 31, 2015 108,864.00

Bacoor - Aguinaldo Highway March 21, 2011 March 20, 2021 80,556.00

Padre Faura March 1, 2013 February 27, 2023 156,800.00

Sto. Cristo January 1, 2011 December 31, 2015 113,817.31

Pasong Tamo June 30, 2014 June 30, 2019 80,438.40

Mandaluyong Shaw June 1, 2012 May 31, 2019 106,943.76

Quezon Avenue August 21, 2014 August 21, 2015 56,442.29

Katipunan October 1, 2012 September 29, 2022 197,232.00

Escolta April 1, 2007 March 29, 2017 107,000.00

Banawe April 1, 2009 March 30, 2019 98,560.00

Festival Supermall April 30, 2014 April 30, 2024 146,424.32

Annapolis April 1, 2008 March 30, 2018 161,280.00

San Fernando - Dolores February 16, 2012 February 15, 2022 133,452.48

Cabanatuan January 16, 2012 January 12, 2027 60,000.00

Lucena January 1, 2012 December 30, 2016 140,000.00

Calamba February 1, 2010 January 30, 2020 77,040.00


Westgate June 15, 2012 July 31, 2017 279,328.00

Dagupan July 16, 2013 July 12, 2028 40,000.00

Cagayan De Oro April 12, 2012 April 10, 2022 78,400.00

Zamboanga November 1, 2013 October 30, 2023 120,000.00

Baguio City May 15, 2014 May 15, 2024 176,960.00

Cebu - N. Escario Cash Center June 1, 2010 May 31, 2020 125,664.00

Tomas Morato July 16, 2013 July 16, 2023 120,750.00

Sucat November 16, 2013 November 16, 2023 110,250.00

Angeles, Pampanga November 1, 2013 October 31, 2028 100,800.00

Valenzuela November 1, 2006 October 29, 2016 53,760.00

Greenhills - West September 1, 2013 August 31, 2023 134,366.76

Valero November 1, 2013 November 1, 2018 187,473.44

Salcedo August 16, 2011 August 13, 2021 105,897.17

Tektite (Renewal) October 1, 2013 September 29, 2023 319,200.00

Festival Mall Level 1 January 31, 2014 January 31, 2024 146,424.32

Tarlac February 19, 2013 February 17, 2023 84,000.00

T. Alonzo September 16, 2009 September 14, 2017 177,800.00

Batangas May 1, 2012 April 29, 2022 95,200.00

West Avenue February 26, 2010 February 24, 2020 95,295.69

Cebu - Mandaue Briones Highway September 14, 2013 September 12, 2023 90,881.56

Naga April 26, 2014 April 25, 2019 112,000.00

Laoag September 3, 2014 September 3, 2024 30,000.00

Cebu-Banilad June 1, 2012 May 31, 2022 62,720.00

Cebu - Magallanes January 1, 2013 December 31, 2017 123,131.75

La Union October 1, 2012 September 29, 2022 93,912.00

Cotabato October 5, 2011 October 2, 2021 50,400.00

Tacloban July 1, 2012 June 29, 2022 98,560.00

Isabela August 21, 2010 August 18, 2020 61,600.00

New Manila January 1, 2006 December 30, 2015 67,200.00

Intramuros January 1, 2012 December 31, 2017 76,032.00

Davao - Sta. Ana May 15, 2008 January 14, 2023 125,395.20

Del Monte February 1, 2007 January 29, 2017 148,332.80

Grace Park October 1, 2012 September 29, 2022 179,200.00

Binondo November 1, 2011 October 31, 2018 500,000.00

Paseo De Roxas November 1, 2012 October 31, 2017 340,234.09

Baliuag Bulacan March 1, 2008 February 27, 2018 60,000.00

Davao-Matina July 1, 2008 June 29, 2018 74,900.00

Lipa City July 1, 2008 June 30, 2020 89,364.21

The Fort September 1, 2013 August 31, 2018 108,715.50

Iloilo November 1, 2008 October 30, 2018 82,800.00

Urdaneta Pangasinan December 1, 2008 November 29, 2018 85,600.00

Paso De Blas May 1, 2009 April 28, 2021 37,500.00

Isabela - Cauayan May 1, 2009 April 27, 2024 73,864.00


Governor Pascual Malabon September 1, 2009 August 28, 2024 36,000.00

Bacolod May 1, 2011 April 28, 2021 95,200.00

Divisoria April 1, 2009 March 30, 2019 67,200.00

Paseo De Roxas - Philam Tower October 1, 2010 September 30, 2020 263,105.92

San Miguel Avenue-Ortigas May 1, 2011 April 29, 2018 130,000.00

Alabang Madrigal June 15, 2014 June 15, 2024 186,278.40

Un Avenue August 1, 2009 July 30, 2019 195,096.83

Dela Rosa Pasong Tamo August 1, 2009 July 30, 2019 108,799.60

Baclaran June 17, 2010 June 16, 2015 139,958.00

A. Bonifacio April 20, 2010 April 17, 2020 63,999.94

Paco June 23, 2010 June 20, 2020 89,600.00

Soler May 15, 2010 May 14, 2015 89,600.00

San Juan July 6, 2010 July 3, 2020 84,000.00

Legaspi Village April 27, 2010 April 24, 2020 149,721.60

Amorsolo August 1, 2010 July 31, 2015 165,515.84

Makati Stock Exchange June 1, 2010 May 29, 2020 213,027.25

Carmona May 1, 2010 April 27, 2025 55,640.00

Olongapo June 1, 2010 May 28, 2025 100,000.00

South Triangle September 1, 2010 August 29, 2022 60,480.00

Novaliches July 28, 2010 July 25, 2022 57,569.76

Iligan City July 22, 2010 July 18, 2025 56,000.00

Emerald July 1, 2010 June 30, 2015 127,647.74

C. Raymundo September 1, 2010 August 29, 2020 83,524.00

Roxas Blvd. August 1, 2010 July 30, 2017 75,000.00

Cebu Mactan August 1, 2010 July 29, 2020 73,271.03

Malabon - Potrero October 1, 2010 September 30, 2020 61,600.00

General Santos City September 15, 2010 September 11, 2025 47,368.42

Evangelista October 1, 2010 September 28, 2020 84,000.00

Mandaluyong Libertas December 1, 2010 November 28, 2020 125,664.00

Balanga Bataan October 1, 2010 September 27, 2025 67,200.00

Northbay Navotas August 15, 2010 August 12, 2020 50,400.00

Muntinlupa November 15, 2010 November 12, 2020 67,200.00

Butuan January 1, 2011 December 29, 2020 81,241.60

General Trias-Cavite February 2, 2011 January 30, 2021 83,640.00

Burgos Circle April 1, 2011 March 29, 2021 342,552.00

Ozamiz April 1, 2011 March 28, 2021 67,620.00

San Pablo March 3, 2011 February 27, 2026 69,160.00

San Pedro August 17, 2011 August 14, 2021 65,000.00

B.F. Resort April 4, 2011 March 31, 2026 55,000.00

168 Mall February 1, 2011 January 31, 2016 120,601.60

Iloilo - Iznart June 1, 2011 May 29, 2021 89,600.00

Magallanes April 1, 2011 March 29, 2021 68,750.00

Cebu - Mandaue North Road October 7, 2011 October 4, 2021 84,000.00


Davao Toril May 26, 2011 May 22, 2026 35,000.00

Antipolo July 4, 2011 June 30, 2026 52,631.58

Tuguegarao June 1, 2011 May 29, 2021 89,600.00

Marikina - Gil Fernando Ave December 1, 2011 November 28, 2021 82,500.00

Greenhills Shopping Center September 1, 2014 September 1, 2017 304,945.30

Cebu - Grand Cenia January 1, 2012 January 1, 2022 220,071.60

Gil Puyat - F. B. Harrison April 11, 2014 April 10, 2029 22,400.00

Taft - Nakpil March 31, 2014 March 31, 2024 140,000.00

Acropolis August 1, 2015 July 31, 2025 224,000.00

Taytay - Manila East December 26, 2014 November 26, 2023 108,000.00

Caloocan - A. Mabini March 31, 2014 March 31, 2024 136,528.00

Iloilo - Molo November 1, 2013 October 31, 2023 109,930.24

Alabang Commerce October 1, 2013 October 1, 2023 144,569.60

Metropolitan Avenue February 1, 2014 February 1, 2021 138,542.88

Ortigas - Rockwell March 31, 2014 March 31, 2019 126,120.96

Pangasinan - San Carlos October 1, 2013 September 30, 2023 70,560.00

Pasig Blvd. September 6, 2011 September 2, 2026 44,800.00

Mayon November 5, 2011 November 2, 2021 150,414.88

Davao - Tagum December 2, 2011 November 30, 2021 58,800.00

Don Antonio Heights December 17, 2011 December 16, 2026 108,695.65

City Place Square October 21, 2011 October 19, 2016 144,883.20

Baesa September 7, 2011 September 4, 2021 40,000.00

Banawe - Sct. Alcaraz December 17, 2011 December 14, 2021 100,800.00

Timog Avenue August 4, 2011 August 1, 2021 97,519.00

West Service Road Branch August 22, 2011 August 18, 2026 65,000.00

Wilson Branch November 16, 2011 November 13, 2021 121,495.33

Pasong Tamo - Bagtikan October 1, 2011 September 29, 2019 66,400.00

Sucat - Evacom December 1, 2011 November 28, 2021 80,514.00

Banawe - N. Roxas August 31, 2011 August 31, 2019 140,000.00

Baguio Session Road January 16, 2012 January 13, 2022 151,200.00

Edsa Howmart October 5, 2011 October 2, 2021 90,950.00

E. Rodriguez January 12, 2012 January 9, 2022 123,200.00

Jose Abad Santos - Tayuman September 1, 2012 August 30, 2022 123,200.00

Pampanga - Apalit July 16, 2012 July 13, 2027 70,736.85

Ayala Ave. - Sgv 1 June 1, 2012 May 31, 2017 205,667.84

Marikina - Concepcion July 1, 2012 June 29, 2022 109,579.68

Balibago - Angeles August 7, 2012 August 5, 2022 159,600.00

Betterliving - Doña Soledad Ave. July 9, 2012 July 7, 2022 140,000.00

Ilocos Sur - Candon March 22, 2011 March 19, 2021 117,600.00

Cebu - A.S. Fortuna September 1, 2012 August 30, 2022 100,800.00

Cebu - M. Velez August 1, 2012 July 30, 2022 93,184.00

Connecticut May 5, 2012 December 30, 2018 168,000.00

Davao - C.M. Recto September 1, 2012 August 30, 2022 39,200.00


Edsa - Muñoz March 13, 2012 March 11, 2022 96,600.00

Kamias January 5, 2012 January 1, 2027 100,800.00

Koronadal City August 1, 2012 July 30, 2022 94,315.79

Pasay - D. Macapagal Blvd. May 15, 2012 May 14, 2017 123,200.00

Bacolod - Mandalagan April 1, 2012 March 31, 2022 78,400.00

Las Piñas - Marcos Alvarez July 1, 2012 June 29, 2022 60,000.00

Masambong October 1, 2012 September 29, 2022 112,000.00

Masangkay July 15, 2012 July 13, 2022 106,400.00

Makati Ave - Pacific Star July 16, 2012 July 15, 2017 77,311.92

Pagadian - Fs Fajares Ave. August 1, 2012 July 29, 2027 78,704.64

Puerto Prinsesa - Rizal Ave July 15, 2012 July 12, 2027 112,660.80

Cebu - Park Mall August 1, 2012 July 31, 2019 78,500.80

Rada May 23, 2012 May 21, 2022 173,261.20

Roosevelt - Sto. Nino July 1, 2012 June 28, 2027 84,000.00

Pampanga - San Fernando Sindalan July 15, 2012 July 12, 2027 168,000.00

Sucat - Kingsland September 1, 2012 August 30, 2022 118,720.00

Taft Avenue September 16, 2012 September 14, 2022 168,000.00

Tomas Mapua - Lope De Vega July 1, 2012 June 29, 2022 61,600.00

T.M. Kalaw July 1, 2012 July 1, 2022 224,000.00

Up Village July 15, 2012 July 13, 2022 84,210.53

Benavidez December 1, 2011 November 28, 2021 107,520.00

Araneta Avenue March 1, 2012 February 27, 2022 118,104.00

Quiapo January 2, 2012 December 30, 2021 82,526.32

999 Shopping Mall November 21, 2012 November 20, 2017 160,656.00

Amorsolo - Queensway December 10, 2012 December 8, 2022 98,784.00

Makati Avenue April 1, 2012 March 31, 2019 201,600.00

Eastwood City March 5, 2012 March 4, 2017 214,133.92

North Edsa May 16, 2012 May 14, 2022 147,980.00

Bf Homes - Aguirre Ave September 1, 2012 August 29, 2027 49,000.00

Quezon Avenue - Dr. Garcia Sr. April 16, 2012 April 15, 2022 170,755.20

J. P. Rizal May 1, 2012 April 29, 2022 89,672.80

Grace Park - 7Th Ave May 21, 2012 May 19, 2022 134,400.00

Bacoor - Molino September 1, 2010 August 29, 2020 80,556.00

Davao - Bajada May 1, 2012 April 30, 2027 450,037.50

Pasay - Libertad October 8, 2012 October 6, 2022 313,600.00

Ayala Avenue - Rufino Building September 1, 2012 August 30, 2022 153,260.80

Batangas - Bauan September 1, 2012 August 30, 2022 89,600.00

Alabang Entrata February 11, 2013 February 10, 2018 203,956.48

Boni Avenue August 16, 2012 August 14, 2022 105,000.00

Boracay September 16, 2012 September 14, 2022 156,800.00

Pangasinan - Rosales October 1, 2012 September 29, 2022 95,200.00

Cagayan De Oro City - Cogon August 4, 2012 August 2, 2022 112,000.00

Mindoro - Calapan August 1, 2012 July 30, 2022 83,104.00


Cavite - Naic August 1, 2012 July 29, 2024 40,000.00

Cavite - Tanza August 1, 2012 July 29, 2027 20,000.00

Cebu - Fuente Osmeña November 1, 2012 October 30, 2022 174,193.82

Cebu - Asia Town It Park July 31, 2012 July 29, 2022 81,865.28

Cebu - Juan Luna October 1, 2012 September 29, 2022 84,000.00

Cebu - Minglanilla September 16, 2012 September 14, 2022 80,874.64

Cebu Talisay October 1, 2012 September 29, 2022 67,200.00

Cebu - A.C Cortes August 16, 2012 August 14, 2022 92,000.00

Cebu - Basak Pardo October 1, 2012 September 29, 2022 76,496.00

Cebu Magallanes - Nilo Me Tangere October 1, 2012 September 29, 2022 95,200.00

Commonwealth November 1, 2012 October 30, 2022 90,820.80

Cubao - Araneta Center September 2, 2012 August 31, 2022 181,680.80

Dagupan - A.B. Fernandez Avenue November 1, 2012 October 31, 2027 100,210.52

Dasmariñas August 1, 2012 July 30, 2022 116,978.40

Davao - Jp Laurel November 1, 2012 October 29, 2027 54,900.00

Davao - Panabo June 8, 2012 June 6, 2022 62,720.00

H.V. Dela Costa September 15, 2012 September 14, 2017 93,993.76

Legaspi - Dela Rosa December 1, 2012 November 29, 2022 205,200.00

Bataan - Dinalupihan November 1, 2012 October 29, 2027 50,000.00

Dumaguete City August 16, 2012 August 14, 2022 168,000.00

El Cano September 1, 2012 August 30, 2022 138,000.00

Fairview August 15, 2012 August 13, 2022 84,210.53

Pampanga - Guagua November 1, 2012 October 30, 2022 90,000.00

Bacolod - Hilado August 1, 2012 July 30, 2022 33,600.00

Iloilo - Jaro October 16, 2012 October 14, 2022 57,120.00

Julia Vargas September 1, 2012 August 30, 2022 217,557.76

Benguet - La Trinidad October 1, 2012 September 29, 2022 100,000.00

Lagro November 1, 2012 October 29, 2027 64,842.11

Loyola Heights - Katipunan November 1, 2012 October 30, 2022 112,000.18

Malabon - Rizal Ave. September 1, 2012 August 29, 2027 45,000.00

Marikina - J.P. Rizal June 16, 2012 June 16, 2022 112,000.00

Mckinley Hill September 16, 2012 September 15, 2017 323,814.40

Meycauyan - Malhacan September 1, 2012 August 30, 2022 156,368.80

Ormoc City November 1, 2012 October 30, 2022 97,412.00

Garnet September 15, 2012 September 13, 2022 152,633.60

Tarlac Paniqui November 1, 2012 October 27, 2032 31,705.33

San Lorenzo - A. Arnaiz Avenue October 8, 2012 October 6, 2022 313,600.00

Pasig - Valle Verde October 1, 2012 September 29, 2022 119,168.00

Pasig - Rosario October 15, 2012 October 13, 2022 89,600.00

Pasig - Santolan September 1, 2012 August 30, 2022 59,505.60

The Fort 26Th St-11Th Ave September 16, 2014 September 15, 2024 128,400.00

Nueva Ecija - San Jose October 1, 2012 September 29, 2022 50,400.00

Nueva Vizcaya - Solano November 1, 2012 October 29, 2027 50,400.00


Surigao City November 1, 2012 October 30, 2022 72,080.96

Tagbilaran September 16, 2012 September 14, 2022 111,699.91

Novaliches - Talipapa October 1, 2012 September 29, 2022 142,800.00

Batangas - Tanauan September 1, 2012 August 29, 2027 32,256.00

The Fort - F1 September 1, 2012 August 31, 2022 232,100.00

Vigan November 1, 2012 October 30, 2022 88,421.05

Zamboanga City - Canelar July 16, 2012 July 14, 2022 81,347.37

Las Pinas - Almanza October 1, 2012 September 28, 2027 112,000.00

Greenhills - North February 15, 2013 February 13, 2023 219,192.96

Mandaluyong Wack - Wack November 1, 2012 October 31, 2017 112,465.92

Sucat - Kabihasnan December 1, 2012 November 29, 2022 103,040.00

Gil Puyat - Dian March 28, 2013 March 26, 2023 122,169.60

A. Bonifacio - Balingasa February 1, 2013 January 30, 2023 70,000.00

Bicutan - East Service Road February 27, 2013 February 25, 2023 82,986.40

Kalentong January 1, 2013 December 30, 2022 100,800.00

Juan Luna - Pritil January 1, 2013 December 30, 2022 67,200.00

Visayas Avenue February 15, 2013 February 13, 2023 156,800.00

Bukidnon Valencia May 5, 2013 May 3, 2023 84,040.32

Plaridel Bulacan March 1, 2013 February 26, 2028 56,560.00

Laguna - Cabuyao May 30, 2014 February 1, 2024 120,000.32

Cavite City June 19, 2013 June 15, 2028 44,800.00

Davao - Buhangin March 25, 2013 March 23, 2023 100,800.00

Grace Park - 11Th Ave November 1, 2012 October 30, 2022 179,200.00

Legazpi City April 15, 2015 April 28, 2025 264,320.00

Nueva Ecija - Gapan February 1, 2013 January 29, 2028 72,800.00

Valenzuela - Dalandanan January 1, 2013 December 30, 2022 112,000.00

Alabang Hills July 11, 2012 July 9, 2022 119,966.00

Marikina - Parang May 25, 2013 May 23, 2023 85,000.00

Navotas - M. Naval August 1, 2013 July 27, 2033 48,605.00

Ongpin June 1, 2013 May 30, 2023 230,958.00

Ylaya Padre Rada June 1, 2013 May 30, 2023 117,600.00

Banawe - Kaliraya August 17, 2013 August 15, 2023 168,000.00

Pangasinan - Lingayen October 1, 2013 September 29, 2023 59,500.00

Balagtas - Bulacan June 1, 2013 May 28, 2028 52,631.58

Subic Bay August 1, 2013 July 30, 2023 120,000.00

Cavite - Trece Martires April 1, 2013 March 30, 2023 128,800.00

Information Technology Group December 1, 2013 December 1, 2018 1,603,474.19

Cbd Luzon March 1, 2012 March 1, 2017 33,600.00

Call Center Division June 28, 2014 June 27, 2017 2,045,286.32

Laguna - Biñan March 7, 2013 March 5, 2023 99,357.89

Batangas - Lemery March 25, 2013 March 23, 2023 112,000.00

Bacolod - Araneta June 10, 2013 June 8, 2023 40,499.20

Roxas - City August 1, 2013 July 30, 2023 39,200.00


Kalibo June 19, 2013 June 17, 2023 67,200.00

Tacloban City - Marasbaras May 22, 2013 May 20, 2023 78,942.08

Davao - Digos April 18, 2013 April 16, 2023 68,349.12

Perea June 16, 2013 June 14, 2023 173,600.00

General Luis - Kaybiga August 11, 2013 August 7, 2028 33,600.00

San Jose - Antique July 4, 2013 July 2, 2023 56,000.00

Batangas Rosario May 22, 2013 May 20, 2023 89,600.00

Grace Park - 3Rd Ave October 1, 2013 September 29, 2023 78,400.00

Isabela - Ilagan June 11, 2013 June 11, 2033 54,000.00

La Union - Agoo December 1, 2013 November 30, 2028 52,631.58

Ilocos Norte - San Nicolas September 16, 2013 September 14, 2023 86,400.00

San Fernando Pampanga - Jose Abad Ave. October 20, 2013 October 16, 2028 99,750.00

Cavite - Silang June 24, 2013 June 22, 2023 78,579.20

Davao Agdao October 7, 2013 October 5, 2023 56,000.00

Davao - Mac Arthur Matina June 30, 2013 June 28, 2023 67,008.82

Project 8 - Shorthorn October 1, 2013 September 29, 2023 93,114.00

Jupiter July 15, 2013 July 13, 2023 224,000.00

Dipolog City September 20, 2013 September 18, 2023 100,800.00

General Santos - Pioneer Avenue July 2, 2013 June 30, 2023 100,800.00

Tordesillas July 11, 2013 July 10, 2023 89,062.40

Bluementritt - Rizal Avenue August 1, 2013 July 30, 2023 95,200.00

Greenhills Promenade October 1, 2013 September 30, 2018 245,217.73

Chino Roces - La Fuerza October 31, 2013 October 30, 2023 171,600.00

Gil Puyat - Salcedo Village September 16, 2013 September 14, 2023 108,736.32

Catbalogan City August 27, 2013 August 27, 2023 60,000.00

Batangas - Nasugbu August 22, 2013 August 21, 2023 62,308.65

Juan Luna - Binondo November 16, 2013 November 14, 2023 123,200.00

Leviste November 1, 2013 October 31, 2023 216,715.46

Paz M. Guazon December 1, 2013 November 30, 2023 128,800.00

Sampaloc - J. Figueras July 31, 2014 July 31, 2024 114,000.00

Del Monte - D. Tuazon February 14, 2014 February 14, 2024 140,000.00

Valenzuela - Gen. T. De Leon December 31, 2013 December 31, 2024 50,400.00

E. Rodriguez Sr. Ave. - Cubao November 15, 2013 November 13, 2023 85,680.00

Mia Road October 11, 2013 October 11, 2023 103,073.04

Las Piñas - J. Aguilar Ave. October 17, 2013 October 17, 2023 129,381.73

Malolos December 25, 2013 December 24, 2023 40,000.00

Nueva Ecija - Talavera December 31, 2013 December 31, 2028 33,641.50

Zambales - Iba December 25, 2013 December 25, 2028 40,000.00

Kawit - Centennial August 28, 2013 August 28, 2023 68,052.00

Batanggas- Sto. Tomas July 31, 2014 November 5, 2029 42,000.00

Sorsogon City August 13, 2013 August 13, 2023 100,800.00

Silay October 15, 2013 September 16, 2028 40,000.00

Davao - Quirino November 16, 2013 November 17, 2023 84,000.00


Davao - Magsaysay September 4, 2013 September 4, 2028 30,000.00

Cagayan - Carmen January 29, 2014 January 28, 2024 100,000.00

Cagayan De Oro - Lapasan November 5, 2013 November 18, 2023 75,000.00

Kidapawan November 12, 2013 November 11, 2023 60,000.00

Batangas - Balayan July 5, 2015 March 6, 2029 47,157.89

Gen Santos - Calumpang January 31, 2014 January 31, 2024 78,052.18

The Fort - Active Fun March 23, 2014 March 23, 2024 226,593.00

Pasay - Oceanaire August 1, 2014 September 30, 2024 187,250.00

Pateros May 16, 2014 March 16, 2024 98,052.92

Bulacan San Jose - Del Monte May 31, 2014 May 31, 2029 92,736.00

Sta. Rosa April 16, 2014 April 15, 2019 137,700.00

Pedro Gil June 15, 2014 June 15, 2022 224,000.00

Mayon - Dapitan September 1, 2014 August 31, 2024 85,500.00

Bataan - Mariveles May 1, 2014 April 30, 2029 8,808.24

Kamuning May 1, 2014 May 1, 2024 80,838.22

E. Rod. - Welcome Rotonda May 15, 2014 May 15, 2024 89,600.00

Xavierville May 6, 2014 May 6, 2024 133,883.75

Tabaco City April 23, 2014 April 23, 2024 96,300.00

Ortigas - Adb Avenue October 1, 2014 October 1, 2024 224,986.61

A. Mabini - R. Salas August 15, 2014 August 14, 2024 160,500.00

P. Ocampo Avenue September 1, 2014 September 1, 2024 101,650.00

Montalban - Rizal September 1, 2014 September 1, 2024 71,824.29

Timog - Mother Ignacia October 1, 2014 September 30, 2024 160,500.00

Aurora Blvd. - Anonas September 4, 2014 September 3, 2024 101,650.00

Boni Serrano Ave. November 10, 2014 November 9, 2024 94,543.01

Cabanatuan - Maharlika March 15, 2015 April 15, 2030 58,571.27

Kalayaan - Matalino March 1, 2015 February 28, 2035 160,500.00

Legaspi - Aguirre April 15, 2015 April 28, 2025 264,320.00

Tarlac – Concepcion May 1, 2015 April 30, 2030 53,052.63

Bulacan - Sta. Maria May 1, 2015 April 30, 2025 112,000.00

Tarlac - MacArthur May 1, 2015 April 30, 2030 53,052.63

Pangasinan - Mangaldan June 1, 2015 May 31, 2025 119,263.15

Batangas City - Pallocan June 1, 2015 May 31, 2025 73,500.00

Davao-Diversion Road August 16, 2015 August 15, 2025 50,176.00

Pangasinan - Alaminos July 1, 2015 June 30, 2025 101,701.60

Tacloban - J. Romualdez December 18, 2015 October 18, 2025 112,841.34

1


SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

GENERAL INSTRUCTIONS

(A) Use of Form ACGR

This SEC Form shall be used to meet the requirements of the Revised Code of Corporate Governance. (B) Preparation of Report

These general instructions are not to be filed with the report. The instructions to the various captions of the form shall not be omitted from the report as filed. The report shall contain the numbers and captions of all items. If any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made. Provide an explanation on why the item does not apply to the company or on how the company’s practice differs from the Code.

(C) Signature and Filing of the Report

A. Three (3) complete set of the report shall be filed with the Main Office of the Commission.

B. At least one complete copy of the report filed with the Commission shall be manually signed.

C. All reports shall comply with the full disclosure requirements of the Securities Regulation Code.

D. This report is required to be filed annually together with the company’s annual report. (D) Filing an Amendment

Any material change in the facts set forth in the report occurring within the year shall be reported through SEC Form 17-C. The cover page for the SEC Form 17-C shall indicate “Amendment to the ACGR”.

2


SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

1. Report is Filed for the Year: 2015 2. Exact Name of Registrant as Specified in its Charter: EAST WEST BANKING CORPORATION 3. The Beaufort, 5th Avenue Cor. 23rd Sts., Bonifacio Global City, Taguig Address of Principal Office Postal Code 1634

4. SEC Identification Number: ASO94-002733 5. (SEC Use Only)

Industry Classification Code

6. BIR Tax Identification Number: 003-921-057

7. (632) 575-3888 Issuer’s Telephone number, including area code

8. ............................................................................................ Former name or former address, if changed from the last report

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TABLE OF CONTENTS

A. BOARD MATTERS………………………………………………………………………………………………………………………….…….5 1) BOARD OF DIRECTORS

(a) Composition of the Board (b) Corporate Governance Policy (c) Review and Approval of Vision and Mission (d) Directorship in Other Companies (e) Shareholding in the Company

2) CHAIRMAN AND CEO 3) SUCCESSION PLAN FOR CEO/PRESIDENT AND TOP MANAGEMENT POSITION 4) OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS 5) CHANGES IN THE BOARD OF DIRECTORS 6) ORIENTATION AND EDUCATION PROGRAM

B. CODE OF BUSINESS CONDUCT & ETHICS…………………………………………………………………………………………..13

1) POLICIES 2) DISSEMINATION OF CODE 3) COMPLIANCE WITH CODE 4) RELATED PARTY TRANSACTIONS

(a) Policies and Procedures (b) Conflict of Interest

5) FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS 6) ALTERNATIVE DISPUTE RESOLUTION

C. BOARD MEETINGS & ATTENDANCE……………………………………………………………………………………………….…21

1) SCHEDULE OF MEETINGS 2) DETAILS OF ATTENDANCE OF DIRECTORS 3) SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS 4) MINIMUM QUORUM REQUIREMENT 5) ACCESS TO INFORMATION 6) EXTERNAL ADVICE 7) CHANGES IN EXISTING POLICIES

D. REMUNERATION MATTERS………………………………………………………………………………………………………24

1) REMUNERATION PROCESS 2) REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS 3) AGGREGATE REMUNERATION 4) STOCK RIGHTS, OPTIONS AND WARRANTS 5) REMUNERATION OF MANAGEMENT

E. BOARD COMMITTEES………………………………………………………………………………………………………………26

1) NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES 2) COMMITTEE MEMBERS 3) CHANGES IN COMMITTEE MEMBERS 4) WORK DONE AND ISSUES ADDRESSED 5) COMMITTEE PROGRAM

F. RISK MANAGEMENT SYSTEM……………………………………………………………………………………………………33

1) STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM 2) RISK POLICY 3) CONTROL SYSTEM SET UP

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G. INTERNAL AUDIT AND CONTROL………………………………………………………………………………………………41 1) STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM 2) INTERNAL AUDIT

(a) Role, Scope and Internal Audit Function (b) Appointment/Removal of Internal Auditor (c) Reporting Relationship with the Audit Committee (d) Resignation, Re-assignment and Reasons (e) Progress against Plans, Issues, Findings and Examination Trends (f) Audit Control Policies and Procedures (g) Mechanisms and Safeguards

H. ROLE OF STAKEHOLDERS………………………………………………………………………………………………………….44

1) POLICY AND ACTIVITIES 2) CORPORATE RESPONSIBILITY REPORT 3) MECHANISMS FOR EMPLOYEE PARTICIPATION 4) PROCEDURES FOR HANDLING COMPLAINTS

I. DISCLOSURE AND TRANSPARENCY……………………………………………………………………………………………48

1) OWNERSHIP STRUCTURE 2) ANNUAL REPORT DISCLOSURE 3) EXTERNAL AUDITOR’S FEE 4) MEDIUM OF COMMUNICATION 5) DATE OF RELEASE OF AUDITED FINANCIAL REPORT 6) COMPANY WEBSITE 7) DISCLOSURE OF RPT

J. RIGHTS OF STOCKHOLDERS………………………………………………………………………………………………………52

1) RIGHT TO PARTICIPATE EFFECTIVELY IN STOCKHOLDERS’ MEETINGS 2) TREATMENT OF MINORITY STOCKHOLDERS

K. INVESTORS RELATIONS PROGRAM…………………………………………………………………………………………..57

1) COMMUNICATION POLICIES 2) INVESTOR RELATIONS PROGRAM 3) ACQUISITION OF CORPORATE CONTROL

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES……………………………………………………………………59

M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL…………………………………………………………….59

N. INTERNAL BREACHES AND SANCTIONS…………………………………………………………………………………….60

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A. BOARD MATTERS

1) Board of Directors

Number of Directors per Articles of Incorporation 9

Actual number of Directors for the year 9

(a) Composition of the Board

Complete the table with information on the Board of Directors:

Director’s Name

Type [Executive (ED), Non-

Executive (NED) or Independent

Director (ID)]

If

nominee, identify

the principal

Nominator in

the last election (if ID, state the

relationship with the nominator)

Date first

elected

Date last elected (if ID, state the

number of years served as ID)1

Elected when (Annual /Special Meeting)

No. of years

served as director

1. GOTIANUN, SR. ANDREW L.

NED FDC SINCE INCEPTION 1994

April 17, 2015 ASM April 17, 2015 21

2.GOTIANUN, MERCEDES T.


April 17, 2015 ASM April 17, 2015 21

3.GOTIANUN , JONATHAN T.


April 17, 2015 ASM April 17, 2015 21

4.GOTIANUN-YAP, LOURDES JOSEPHINE

NED NA FDC FOREX AUG. 15, 2000

April 17, 2015 ASM April 17, 2015 15

5.MONCUPA, JR. ANTONIO C.

ED FDC FOREX SEPT. 16, 2006

April 17, 2015 ASM April 17, 2015 8

6. VALERIO, JR. BENEDICTO M.

NED FDC FOREX JULY 26, 2012

April 17, 2015 ASM April 17, 2015 3 years and 6 months

7. SANDEJAS, JOSE S.

ID FDC (Rel. None)

APRIL 2012


8. ALINDADA, CARLOS R.

ID FDC (Rel. None)

APRIL 2012


9. AQUINO, PAUL A.

ID FDC FOREX (Rel. None)

OCT 10, 2012


(b) Provide a brief summary of the corporate governance policy that the board of directors has adopted. Please

emphasis the policy/ies relative to the treatment of all shareholders, respect for the rights of minority shareholders and of other stakeholders, disclosure duties, and board responsibilities.

The Corporate Governance Manual is the framework of rules, systems and processes in the corporation that governs the performance of the Board of Directors and Management. It establishes the structure by which the Bank executes and carries out its Corporate Governance.

1 Reckoned from the election immediately following January 2, 2012.

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The Bank’s Board conducts its functions as a full board and through its committees. The Board established committees to assist it in discharging its responsibilities. Each committee has a mandate outlining the authority delegated to it by the board. It shall be the Board’s responsibility to foster the long-term success of the Bank and secure its sustained competitiveness in a manner consistent with its fiduciary responsibility, which it shall exercise in the best interest of the Bank, its shareholders and other stakeholders, namely, its depositors and other creditors, its management and employees, the regulators and government, the community where it operates and the public in general. The Board shall conduct itself with utmost honesty, integrity and transparency in the discharge of its duties, functions and responsibilities. The Board is committed to respect the rights of the stockholders such as but not limited to: a. Voting rights - Shareholders shall have the right to elect, remove and replace directors and vote on

certain corporate acts in accordance with the Bank Code b. Pre-emptive right - All stockholders shall have pre-emptive rights, unless the same is denied in the

articles of incorporation or an amendment thereto. They shall have the right to subscribe to the capital stock of the Bank.

c. Powers of inspection - All shareholders shall be allowed to inspect corporate books and records including minutes of Board meetings and stock registries in accordance with the Corporation Code and shall be furnished with annual reports, including financial statements, without cost or restrictions

a. Right to information - All shareholders shall have access to any and all information relating to matters

for which the management is accountable for and to those relating to matters for which the management

shall include such information and, if not included, then the minority shareholders shall be allowed to

propose to include such matters in the agenda of stockholders’ meeting, being within the definition of

“legitimate purposes”.

a. Rights to dividends - Shareholders shall have the right to receive dividends subject to the discretion of

the Board. d. Appraisal right. - The shareholder shall have appraisal rights or the right to dissent and demand payment

of the fair value of their shares in the manner provided for under Section 82 of the Corporation Code of the Philippines

How often does the Board review and approve the vision and mission? This depends on the numbers of strategic meetings which are normally held at the beginning of the year during planning sessions and as often as needed to accommodate any revision.

(c) Directorship in Other Companies

(i) Directorship in the Company’s Group2

Identify, as and if applicable, the members of the company’s Board of Directors who hold the office of director in other companies within its Group:

Director’s Name Corporate Name of the Group Company

Type of Directorship (Executive, Non-Executive, Independent). Indicate if director is also the Chairman.

Andrew T. Gotianun Sr.

Filinvest Development Corporation

Chairman Emeritus

Filinvest Land, Inc Honorary Chairman

Davao Sugar Central Corporation

Chairman

Filinvest Farm Corp. Chairman

Pacific Sugar Holdings Chairman

ALG Holdings , Inc Chairman

2 The Group is composed of the parent, subsidiaries, associates and joint ventures of the company.

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Director’s Name Corporate Name of the Group Company

Type of Directorship (Executive, Non-Executive, Independent). Indicate if director is also the Chairman.

Jonathan T. Gotianun Filinvest Development Corp. Chairman

Davao Sugar Central co., Inc Executive Director (ED) / President

Filinvest Alabang, Inc.

Filinvest Land, Inc. Chairman

Pacific Sugar Holdings Executive Director (ED) Vice President

EW Rural Bank Chairman

EW Ageas Life Insurance Corp. Chairman

Mercedes T. Gotianun Filinvest Development Corp.

Filinvest Land, Inc

Davao Sugar Central Corporation

Filinvest Alabang, Inc.

Lourdes Josephine Gotianun Yap

Filinvest Land Inc. Executive Director/ President and CEO

Filinvest Alabang, Inc. Executive Director/ President

Filinvest Asia Corp. Chairman

Cyberzone Properties, Inc. Chairman

The Palms Country Club Chairman / President

Filinvest Development Corp. President

Festival Supermall, Inc President

Jose S. Sandejas The Palms Country Club

Paul A. Aquino EW Ageas Life Insurance Corp. Independent Director

(ii) Directorship in Other Listed Companies

Identify, as and if applicable, the members of the company’s Board of Directors who are also directors of publicly-listed companies outside of its Group:

Director’s Name Name of Listed Company

Type of Directorship (Executive, Non-Executive, Independent). Indicate if

director is also the Chairman.

None

(iii) Relationship within the Company and its Group

Provide details, as and if applicable, of any relation among the members of the Board of Directors, which links them to significant shareholders in the company and/or in its group:

Director’s Name Name of the

Significant Shareholder Description of the relationship

ANDREW L. GOTIANUN SR. FDC SHAREHOLDER/DIRECTOR

MERCEDES T. GOTIANUN FDC SHAREHOLDER/DIRECTOR

L. JOSEPHINE GOTIANUN YAP FDC AND FDC FOREX SHAREHOLDER/DIRECTOR

JONATHAN T. GOTIANUN FDC AND FDC FOREX SHAREHOLDER/DIRECTOR

(iv) Has the company set a limit on the number of board seats in other companies (publicly listed, ordinary and

companies with secondary license) that an individual director or CEO may hold simultaneously? In particular, is the limit of five board seats in other publicly listed companies imposed and observed? If yes, briefly describe other guidelines: The Bank follows the rule provided by the BSP on interlocking directorships in order to protect the Bank

8

against the excessive concentration of economic power, unfair competitive advantage or conflict of interest.

(d) Shareholding in the Company

Complete the following table on the members of the company’s Board of Directors who directly and indirectly own shares in the company:

Record date as of December 31, 2015

Name of Director Number of Direct shares Number of

Indirect shares / Through (name of record owner)

% of Capital Stock

JONATHAN T. GOTIANUN

13 9,402,997 Team

Gladiola/ Berit holdings Inc

0.6269

ANDREW L. GOTIANUN SR.

10 880,655 /Andremerc

Holdings Corp. 0.0587

MERCEDES T. GOTIANUN

10 880,654 /Andremerc

Holdings Corp. 0.0587

JOSEPHINE L. GOTIANUN YAP

359,753

11,046,398 /share in EW Trust Account &

shares held by immediate family

0.7604

ANTONIO C. MONCUPA JR.

1,155,736 0 0.0770

BENEDICTO M. VALERIO JR.

510

0 0.00

CARLOS R. ALINDADA 10 0 0.00

JOSE S. SANDEJAS 31,760 0 0.0021

PAUL A. AQUINO 40,010 0 0.0027

TOTAL 1,587,812 22,210,704 1.5866

2) Chairman and CEO

(a) Do different persons assume the role of Chairman of the Board of Directors and CEO? If no, describe the checks and balances laid down to ensure that the Board gets the benefit of independent views.

Yes X No (e)

Identify the Chair and CEO:

Chairman of the Board JONATHAN T. GOTIANUN

CEO/President ANTONIO C. MONCUPA JR.

(b) Roles, Accountabilities and Deliverables

Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO.

Chairman Chief Executive Officer

Roles, Accountabilities, Deliverables

The function of the Chairman is to preside at all meetings of the stockholders and the Board of Directors. He may also call special meetings of the stockholders and the Board of Directors pursuant to Section 3 of Article II and Section 4 of Article III of the Bank’s By-laws.

The President, who shall be elected by the Board from among its members, shall be the Chief Executive Officer of the corporation. He shall, subject to the control of the Board, have direct and immediate supervision over the long term and daily operations and

9

Chairman Chief Executive Officer

management of the Bank and shall execute and administer the administrative and operational policies approved by the Board. He shall also exercise such powers as may be vested upon him by the Board not incompatible with law or these By-Laws. He may, at his discretion, delegate to a Chief Operating Officer some of his responsibilities subject to such rules and limitations as the Board may prescribe. The President shall ensure that the strategic goals set by the Bank’s Board of Directors are achieved. He is also requested to attend all committee meetings.

1. To provide leadership in the Board of Directors.

2. To ensure that the Board takes an informed decision.

3. To attend all committee meetings.

3) Explain how the Board of Directors plans for the succession of the CEO/Managing Director/President and the top

key management positions?

I. EastWest Bank’s Succession Planning Program is designed to identify and assess next-in-line individuals who can fill in critical positions, and to provide the necessary development plans to ensure readiness. The program initially covers Senior Officer positions. Succession Planning in EastWest is limited to the most critical positions in the Bank such as the President / Chief Executive Officer (CEO), and the Heads who drive the various business units, whether operations, support or governance. It also tries to put in place a talent pool for other secondary yet equally important positions such as the department heads and area heads in the branches.

II. Methods used to Support Succession Planning

1. Job Evaluation 2. Career Planning and Development – preparation of career plan for identified High Potential

Individuals (HiPos) to prepare them for bigger responsibilities in the future 3. Talent Management – identification of top talent and designing development plan for these key

talents 4. Officer Development Programs

III. EastWest Succession Planning - The Succession Plan for key positions in EastWest is as follows:

1. The President – May be chosen from the Business Heads of critical units who are all members of the Senior Management Committee (MANCOM) and other operating committees. If, in the opinion of the Chairman of the Board, none of the present crop qualifies, external hires will be considered.

2. The Group Heads of key business units may be chosen from the Division Heads or external hires; The Division / Department Heads may be chosen from the Department / Section Heads, or external hires.

IV. The Corporate Governance and Compliance Committee vets the candidates for the Bank’s critical positions.

4) Other Executive, Non-Executive and Independent Directors

Does the company have a policy of ensuring diversity of experience and background of directors in the Board? Please explain. It is the policy of the Bank that in selecting the members of the Board, it considers each director’s professional

10

background, business or banking experience, competency, independence and critical thinking and moral standing in the community. Does it ensure that at least one non-executive director has an experience in the sector or industry the company belongs to? Please explain. The Bank thru Corporate Governance and Compliance Committee ensures that the directors are qualified prior to their election /appointment taking into account their integrity, physical fitness, competence, education, moral standing and relevant experience among others. Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and Independent Directors:

Executive Non-Executive Independent Director

Role

The President and CEO is the only Executive Director of the Bank. He shall, subject to the control of the Board, have direct and immediate supervision over the long-term and daily operations and management of the Bank.

The Non-executive Director is one who is not involved in the day to day management of the Bank and is generally free from any business relationship that could hamper their objectivity or judgment on the business and activities of the Bank.

An Independent Director is one who has no business or relationship with the Bank which could or could reasonably be perceived to materially interfere with the exercise of his independent judgment in carrying out his responsibilities as a Director.

11

Accountabilities, Deliverables

To ensure a high standard of best practice for the Bank, its stockholders and other stakeholders, the Board shall: a. Approve and monitor the implementation of strategic objectives; b. Approve and oversee the implementation of policies governing major areas of banking operations; c. Approve and oversee the implementation of risk management policies; d. Oversee selection and performance of Directors and Senior Management and adopt an effective succession planning program; e. Consistently conduct the affairs of the institution with a high degree of integrity; f. Define appropriate governance policies and practices for the Bank and for its own work and establish means to ensure that such are followed and periodically reviewed for ongoing improvement; g. Constitute committees to increase efficiency and allow deeper focus in specific areas. h. Effectively utilize the work conducted by the internal audit, risk management and compliance functions and the external auditors; i. Establish and maintain an alternative dispute resolution system in the Bank that can amicably settle conflicts or differences between the Bank and its stockholders, and the Bank and third parties, including the regulatory authorities; j. Establish and maintain an investor relations program that will keep the stockholders informed of important developments in the Bank. k. Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the Bank and its parent company. l. Ensure the consistent adoption of corporate governance policies and systems across the group. m. Identify the Bank’s stakeholders in the community in which it operates or are directly affected by its operations and formulate a clear policy of accurate, timely and effective communication with them.

Provide the company’s definition of "independence" and describe the company’s compliance to the definition.

The Bank defines independence as having no business relationship with the Bank which could or could reasonably be perceived to materially interfere with the exercise of his independent judgment in carrying out his responsibilities as a Director.

Does the company have a term limit of five consecutive years for independent directors? If after two years, the company wishes to bring back an independent director who had served for five years, does it limit the term for no more than four additional years? Please explain. In accordance with BSP Circular No. 749 series of 2012 and SEC Circular No. 9 series of 2011, the Bank’s independent directors have a term limit of five (5) consecutive years. If after two years, the Bank decides to bring back an independent director who had served for five years, it shall limit the term for no more than four (4) additional years.

5) Changes in the Board of Directors (Executive, Non-Executive and Independent Directors)

(a) Resignation/Death/Removal

Indicate any changes in the composition of the Board of Directors that happened during the period:

Name Position Date of Cessation Reason

None

12

(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension

Describe the procedures for the selection/appointment, re-election, disqualification, removal, reinstatement and suspension of the members of the Board of Directors. Provide details of th processes adopted (including the frequency of election) and the criteria employed in each procedure:

Procedure Process Adopted Criteria

a. Selection/Appointment

(i) Executive Directors - The Board’s Corporate Governance and Compliance Committee accepts nomination and vets qualified nominees based on the criteria provided in the By-laws for election/re-election at the Annual Stockholders Meeting.

(ii) Non-Executive Directors

(iii) Independent Directors

b. Re-appointment

(i) Executive Directors

See response to “a” (ii) Non-Executive Directors


c. Permanent Disqualification

(i) Executive Directors - The Bank follows the rules on permanent disqualification outlined in its By-laws, MORB Section X143 of the Bangko Sentral ng Pilipinas, the Corporation Code and SEC issuances.



d. Temporary Disqualification

(i) Executive Directors - The Bank follows the rules on temporary disqualification outlined in its By-laws, MORB Section X143 of the Bangko Sentral ng Pilipinas, the Corporation Code and SEC issuances.



e. Removal

(i) Executive Directors - The Bank follows the rules and procedures prescribed by the Bangko Sentral ng Pilipinas under MORB Section X143 for removal of its directors.



f. Re-instatement

(i) Executive Directors - The Bank follows the rules and procedures prescribed by the Bangko Sentral ng Pilipinas under MORB Section X143 for reinstatement of its directors.



g. Suspension

(i) Executive Directors - The Bank follows the rules and procedures prescribed by the Bangko Sentral ng Pilipinas under MORB Section X143 for suspension of its directors.



Voting Results of the last Annual General Meeting: East West Bank Stockholder’s Meeting was held on April 17, 2015.

Name of Director Votes Received

JONATHAN T. GOTIANUN The total votes received for the election of the Board of Directors were 86.41% or 975,062,821 ANDREW L. GOTIANUN SR.

13

MERCEDES T. GOTIANUN voting shares of the total outstanding subscribed capital stock of the bank. LOURDES JOSEPHINE GOTIANUN YAP

ANTONIO C. MONCUPA JR.

ATTY. BENEDICTO M. VALERIO JR.

JOSE S. SANDEJAS

CARLOS R. ALINDADA

PAUL A. AQUINO

6) Orientation and Education Program

a. Disclose details of the company’s orientation program for new directors, if any.

The Bank provides a seminar / training in corporate governance for new Directors in compliance with BSP regulation under MORB Section 141.2.

b. State any in-house training and external courses attended by Directors and Senior Management3 for the

past three (3) years:

In September 2012, the Bank had a Board Retreat where members of the Board and Senior Management had sessions on Corporate Governance with compliance, risk management and internal audit as focus of discussion. In December 2014 and November 2015, the Institute of Corporate Directors (ICD), a SEC-accredited training provider, conducted an exclusive Corporate Governance Training Seminar for the Board and Senior Management of the Bank at Crimson Hotel, Alabang. EWB Academy, the Bank’s training arm provides, in coordination with an accredited SEC training provider, offered Corporate Governance Courses for senior officers of the Bank with the rank of Assistant Vice President and up. There were a total of four runs of this seminar in 2013, two in 2014 and three in 2015.

c. Continuing education programs for directors: programs and seminars and roundtables attended during the year.

Name of Director/Officer Date of Training Program Name of Training

Institution

Board of Directors: 1. Jonathan T. Gotianun 2. Josephine L. Gotianun-Yap 3. Carlos R. Alindada 4. Paul A. Aquino 5. Jose S. Sandejas 6. Atty. Benedicto M. Valerio 7. Antonio C. Moncupa, Jr.

Senior Management: 1. Jose Emmanuel U. Hilado 2. Jacqueline S. Fernandez 3. Rene K. De Borja Jr. 4. Eloida F. Oquialda 5. Manuel Andres D. Goseco 6. Ernesto T. Uy 7. Grace N. Ang

November 24, 2015

1. Shared Responsibility: Policy and Strategy Execution 2. Governance Outreach and Strategic IT Governance Concerns

Institute of Corporate Directors (ICD)

3 Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the company.

14

8. Virgilio L. Camilo 9. Consuelo V. Dantes 10. Randall A. Evangelista 11. Gina Marie C. Galita 12. Renato P. Peralta 13. Ma. Bernadette T. Ratcliffe 14. Gerone G. Jimenez 15. Clarissa Maria A. Villalon 16. Lourdes A. Ona 17. Allan John M. Tumbaga

B. CODE OF BUSINESS CONDUCT & ETHICS

1) Discuss briefly the company’s policies on the following business conduct or ethics affecting directors, senior management and employees:

Business Conduct & Ethics

Directors Senior Management Employees

(a) Conflict of Interest

The 2015 Corporate Governance Manual provides that Directors must never allow themselves to be placed in a position where their personal interests are in conflict (or could be in conflict) with the interests or business of the Bank. They must avoid any situation or activity that compromises, or may compromise, their judgment or ability to act in the best interest of the Company. The Bank’s policy on Conflict of Interest is stated in PPM COMP2013-003 on Related Party Transactions and Conflict of Interest Policy Manual.

It is the duty of a Director to fully disclose to the Board of any conflict of interest or presumption thereof involving him/her which could materially impair his/her judgment, exercise of duties and responsibilities and loyalty to the Bank.

It is the duty of a Director to report to the Board any conflict of interest or presumption thereof

The Bank’s Code of Ethics and Discipline provides that no employee may engage in any business or activity that, directly or indirectly, is in competition with that of the Bank or to the performance of his respective job or work assignments. The Bank also maintains a policy on Related Party Transactions and Conflict of Interest which provides guidance in – 1. Identification of related party transactions, and actual and potential conflicts of interest that may arise in the course of the Bank’s business. 2. Establishment of transparency in related party transactions and personal dealings to promote operational integrity in the business. 3. The proper and restricted use of confidential, sensitive and/or material information not available to the public. 4. The establishment and maintenance of Chinese Walls.

15



involving a Director which could materially impair the latter’s judgment, exercise of duties and responsibilities and loyalty to the Bank. The director, who is in conflict of interest, should not be counted in determining the existence of a quorum at the Board of Directors’ meeting at which the matter is voted upon.

If the conflict of interest is significant, ongoing and competing with the Bank’s interest and if it impedes the ability of the director to carry out his/her duties, the Bank has the right to remove the director from his/her position.

The Board of Directors shall be governed by the Bank’s policy on acceptance of gifts to avoid conflict of interest contained in OMS Personnel-10-000 Policy Manual.

Any transaction with conflict of interest requires prior approval of the members of the Board.

(b) Conduct of Business and Fair Dealings

The Bank’s Code of Ethics and Discipline describes the policies on Trust and Confidence / Honesty and Integrity. It is the obligation of every director, officer and employee to preserve an maintain the trust and confidence bestowed on him/her by the Bank when it entrusts to him/her records, documents, cash and other restricted and confidential matters pertinent to bank operations and business. 1.1. Confidentiality of Bank Transactions – Bank transactions are confidential. Any

information and /or data relative thereto should not be divulged. 1.2. Accuracy and Completeness of Data and Records – The records, data and

information owned, used and managed by the Bank should be accurate, updated

16



and complete at all times. Every employee is responsible for the integrity of information, records and reports under his/her control. Financial information provided to the Bank’s shareholders, regulatory bodies and other must embody the highest standards of fairness and accuracy.

1.3. Confidentiality of Bank Records – The Bank prohibits the unauthorized disclosure or reproduction of classified an confidential records, documents, correspondences and information pertaining to the Bank’s business or affairs.

1.4. Integrity of Bank Records – The integrity of the records of the Bank must be maintained at all times. Any willful action, which would affect the integrity of the said records, including falsification, misrepresentation or concealment of material and/or relevant facts, will not be tolerated and will be subjected to appropriate disciplinary action.

1.5. Turnover of Bank Records and Documents upon Resignation/Separation – All Bank records and documents in the custody of an employee must be surrendered to the Bank upon the employee’s resignation/separation from the Bank.

1.6. Confidential Relationship between Employee and Customers – Employee must maintain the confidential relationship between the Bank and each of its customers. Likewise, those by virtue of their responsibilities are privy to employees’ personal data should keep in strictest confidence such information unless required by Management or by court of law.

1.7. Confidential Information – Confidential information is considered to be privileged and must be held in strictest confidence and must never be discussed outside the normal and necessary course of employment with the Bank for the purpose of furthering any personal interest or as a means of making any personal gain.

(c) Receipt of gifts from third parties

Code of Ethics and Discipline Section 11. No employee shall accept gifts or lavish entertainment from customers or suppliers either for himself, his family or his dependents. Section 12. Receiving of gifts, percentage and commission in exchange for a favor to a client is strictly prohibited.

(d) Compliance with Laws & Regulations

The Board of Directors shall: a. Oversee the implementation of the Compliance Program and ensure that compliance issues are resolved expeditiously; b. Constitute a Committee that will be responsible in coordinating, monitoring and facilitating compliance with existing laws, rules and regulations; and c. Act as the approver of the Compliance Manual and amendments thereto.

Compliance, which is essential to the Bank’s continued growth and stability, is the responsibility of every East West Banker. The Compliance Division headed by the Chief Compliance Officer is vested with the role of overseeing the design of the Bank’s Compliance Program and coordinating its effective implementation towards the sound management of Business and Compliance Risks. It is the Division’s mandate to ensure that the Bank remains compliant with all rules, regulations and laws in a cost-effective and productive manner while propagating the right compliance culture while avoiding an overly risk-averse environment that inhibits business growth. In coordination with the Compliance Division and corollary to the Bank’s Compliance Program, each Business and Support Unit shall develop and implement policies and procedures consistent with the BOD-approved Compliance Manual embodying the Bank’s Compliance Program.

17



Each employee has the responsibility to have a working knowledge of all relevant laws, rules and regulations applicable to his assignment and is expected to fulfill his duties and responsibilities set forth in the Unit’s/Group’s Compliance Program.

(e) Respect for Trade Secrets/Use of Non-public Information

The Bank’s confidential information shall be adequately protected in its entire lifecycle. Creation, access, and usage of confidential information is on a need-to-know basis while transmission, storage, and disposal shall adopt secured handling. Authorized users must not distribute the Bank’s confidential information to unauthorized internal and external parties. Management approval is required before anyone can distribute the Bank’s confidential information. Any approved material that is to be distributed must contain all proper copyright, trademark and disclaimer notices. Code of Ethics and Discipline Section F 1. It is the obligation of every employee to preserve and maintain the trust and confidence bestowed on him by the Bank when it entrusts to him records, documents, cash and other restricted and confidential matters pertinent to Bank operations and business Section F 2. Bank transactions are confidential and any information and/or data relative thereto may not be divulged. Strict compliance to R.A. 1405, which prohibits the disclosure of deposits of any nature, should be observed at all times. Section F 3. The Bank prohibits the unauthorized disclosure or reproduction of classified and confidential records, documents, correspondence and information pertaining to the Bank business or affairs. Section F 5. All Bank records and documents in the custody of an employee must be surrendered to the Bank upon the employee’s resignation/separation from the Bank. Section F 6. Employees must maintain the confidential relationship between the Bank and each of its customers. Section F 7. Likewise, those by virtue of their responsibilities are privy to employee’s personal data should keep in strictest confidence such information, unless required by the Management or by court of law.

(f) Use of Company Funds, Assets and Information

Code of Ethics and Discipline Section 15. Employees shall not use Bank stationery, office supplies and/or equipment for personal purposes, nor should any employee perform, during working hours or inside Bank premises, any work not related to his job or connected with the Bank’s business. The Bank also has an Information Security Policy, and new hires are required to read it and sign the attached acknowledgment form.

(g) Employment & Labor Laws & Policies

The Employee Handbook, given out during the New Employees’ Orientation Program (NEOP) and the Code of Ethics and Discipline contain Bank policies, and rules and regulations that are in accordance with existing Labor Laws.

(h) Disciplinary action Consistent with the General Banking Act of 2000 and the fiduciary nature of the relationship of banks with its depositors and because the banking business is impressed with public interest, the Bank adopts a policy to promote the highest standards of integrity and the highest degree of diligence and responsibility among its directors, officers and employees. In line with this, the directors, officers and employees must conduct themselves in a manner consistent with the Bank’s core values and be instrumental in the promotion of the Bank’s good name and

18



reputation and in the achievement of its business goals and objectives. The Bank has thus set standards of discipline and work ethics for its officers and employees and shall, when circumstances so warrant, impose appropriate disciplinary action against employees who, by their acts or omissions, commit infractions and breach the work standards, policies and procedures, rules and regulations of the Bank.

(i) Whistle Blower Employees, directors, stakeholders, clients, service providers and other third parties are encouraged to report, in good faith, knowledge of any misconduct, irregularity or act detrimental to the interests of the Bank and its stakeholders.

The reporting party or otherwise referred to as the “whistleblower” has a choice of communication channels to report any knowledge of misconduct or irregularity. The report may be through the normal channel of reporting bank concerns which is through the direct supervisor/manager of the personnel or officer involved in the reportable behavior. However, if the reported misconduct or irregularity is not acted upon by the direct supervisor or in the judgment of the whistleblower, the direct supervisor is not in a position to address his report, the whistleblower may email his/her report to the Whistle Blowing Committee or call any of the following designated officers:

1. Head, Human Resources Division 2. Chief Audit Executive 3. Chief Risk Officer 4. Chief Compliance Officer

If the issue to be reported is serious and sensitive, the whistleblower may directly approach the President and CEO or the Chairman of the Board of Directors. A member of the Board of Directors reporting an activity under this policy may raise his concerns to the Chairman of the Audit Committee, Chairman of the Corporate Governance Committee or the Chairman of the Board of Directors.

The whistleblower may disclose his/her identity or opt to remain anonymous. However, sufficient information must be provided to aid in the investigation of the reported misconduct, irregularity or improper activity. The whistleblower should refrain from obtaining evidence for which he/she does not have right of access but his/her cooperation in the investigation, if needed, is expected.

Ample protection is accorded to a whistleblower which includes, among others: (i) Confidentiality of identity and of the information reported; (ii) Non-retaliation against the whistleblower; (iii) Protection and security of his/her person and his/her family; (iv) Transfer to another unit; and/or, (v) Reinstatement to the same or comparable position and back benefits and pay, if warranted by the circumstances.

On the other hand, any person implicated in the reported act is accorded the right to be informed of the act he/she is alleged to have committed, its penalties or consequences, the right to counsel of his own choice, the right to be heard and present evidence on his/her defense, and the right to be informed of the resolution of the investigation or action taken.

This policy sets forth a reporting process beyond the normal reporting line to provide an alternative venue for reporting any irregularity, misconduct or suspicious activities to the Management but this is without prejudice to established procedures of the Bank in handling disciplinary cases under its Code of Ethics and Discipline.

19



(j) Conflict Resolution A Grievance Committee composed of officers and representatives of the Bank’s Employee Relations Council was created with the following responsibilities.

1. To uphold fairness, justice and cooperation in the investigation of issues involving any employee. 2. To ensure that both parties are given equal opportunities to present their sides. 3. To assist in the mediation of grievances at the earliest possible time. 4. To refer the grievance matter to the Human Resources Division (HRD) pursuant to established procedure of the Bank on handling administrative complaints

Once a complaint is referred to HRD through an incident report, appropriate investigation is conducted. If there is a violation of the Bank’s policies, concerned employees are accorded due process and if sanction is warranted, appropriate sanctions are meted.

2) Has the Code of Ethics or Conduct been disseminated to all directors, senior management and employees? Yes. As soon as they join the organization, directors, senior management and employees are provided a copy of the Code of Ethics and Discipline as well as the Employee Handbook.

3) Discuss how the company implements and monitors compliance with the code of ethics or conduct.

The Code of Ethics aims to enforce the Bank standards and ensure impartiality and fair treatment of all employees when disciplinary action is required. The Management, through its line managers, enforces the code of ethics but all employees are welcome to file reports/complaints when they find that offenses have been committed. Human Resources, along with Legal Department and Internal Audit Group, conduct a preliminary investigation.

If the findings indicate that there is basis, administrative proceedings are then conducted.

Minor offenses would warrant a disciplinary action of oral reprimand, written warning, or suspension of not more than five (5) days, and may be decided on by the Line Manager/Group Head after taking into consideration the employee’s reply and issuing a Notice of Disciplinary Action.

Serious offenses would warrant a disciplinary action of more than five (5) days suspension up to termination and shall be decided on by the President after submitting a written reply and the conduct of a formal hearing with the Committee on Ethics and Discipline.

4) Related Party Transactions

(a) Policies and Procedures

Describe the company’s policies and procedures for the review, approval or ratification, monitoring and recording of related party transactions between and among the company and its parent, joint ventures, subsidiaries, associates, affiliates, substantial stockholders, officers and directors, including their spouses, children and dependent siblings and parents and of interlocking director relationships of members of the Board.

Related Party Transactions Policies and Procedures

(1) Parent Company In line with the Bank’s thrust to promote transparency, any Related Party transaction shall be on an arms-length basis and no favorable or special treatment shall be afforded to such related party unless the same treatment shall be accorded to all parties similarly interested in such dealing.

(2) Joint Ventures

(3) Subsidiaries

(4) Entities Under Common Control

(5) Substantial Stockholders

(6) Officers including spouse/children/siblings/parents

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(7) Directors including spouse/children/siblings/parents

All Related Party Transactions shall be reviewed and vetted by the Corporate Governance and Compliance Committee, which serves as the Board’s Related Party Committee. This Committee is composed of 5 Board members, 3 of whom are independent directors. Furthermore, the Chief Compliance Officer and the Chief Audit Executive sit as non-voting members in the said committee whenever there are Related Party Transactions for vetting. Upon approval, the transactions shall be endorsed and presented to the Board for approval. All approved Related Party Transactions are reported to the Bangko Sentral ng Pilipinas in accordance with the regulatory reporting requirements.

(8) Interlocking director relationship of Board of Directors

(b) Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders

Identify any actual or probable conflict of interest to which directors/officers/5% or more shareholders may be involved.

Details of Conflict

of Interest (Actual or Probable)

Name of Director/s None

Name of Officer/s None

Name of Significant Shareholders None

(ii) Mechanism

Describe the mechanism laid down to detect, determine and resolve any possible conflict of interest between the company and/or its group and their directors, officers and significant shareholders. The Related Party Transactions and Conflict of Interest Policy Manual provides that any Related Party Transaction (RPT) and Personal Dealings by any Relevant Person that includes all directors, officers and employees, regardless of employment status, title, position or duties and Connected Persons which refers to immediate family members, members of the household and legal entities that are majority owned by the Relevant Person with the Bank shall be conducted at arms-length and no favorable or special treatment shall be accorded to such related parties unless the same treatment shall be given to all parties similarly interested in such dealings. All RPT, transactions with directors, officers, stockholders and related interest (DOSRI) and personal dealings of directors, officers and their connected persons shall be vetted by the Corporate Governance and Compliance Committee (CGCC) before these are presented to the Board of Directors for approval. The Bank further issued an inter-office memorandum that provides guidelines on loan-related transactions and purchase of Bank’s Real and Other Properties Acquired (ROPA) by DOSRI and their Related Party that shall require vetting of CGCC.

5) Family, Commercial and Contractual Relations

(a) Indicate, if applicable, any relation of a family,4 commercial, contractual or business nature that exists between the holders of significant equity (5% or more), to the extent that they are known to the company:

Names of Related Significant Shareholders

Type of Relationship Brief Description of the

Relationship

None

4 Family relationship up to the fourth civil degree either by consanguinity or affinity.

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(b) Indicate, if applicable, any relation of a commercial, contractual or business nature that exists between the

holders of significant equity (5% or more) and the company:

Names of Related Significant Shareholders

Type of Relationship Brief Description

FDC Group Borrowing Client

Subject to the rules of the BSP on DOSRI accommodation, shareholder has a credit facility with the company which it may avail from time to time

(c) Indicate any shareholder agreements that may impact on the control, ownership and strategic direction of the

company:

Name of Shareholders % of Capital Stock affected

(Parties) Brief Description of the

Transaction

None

6) Alternative Dispute Resolution

Describe the alternative dispute resolution system adopted by the company for the last three (3) years in amicably settling conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including regulatory authorities.

Alternative Dispute Resolution System

Corporation & Stockholders None

Corporation & Third Parties The Bank, complies with applicable laws, rules and regulations on the matter of alternative dispute resolution and that, whenever circumstances warrant, the Bank expresses or manifests its willingness and openness to reasonable (extra-judicial) resolution of disputes with third parties. Further, the Bank complies with the provisions of Alternative Dispute Resolution whenever incorporated in contracts it enters into.”

Corporation & Regulatory Authorities There has been no dispute between regulatory authorities in the last three years.

C. BOARD MEETINGS & ATTENDANCE

1) Are Board of Directors’ meetings scheduled before or at the beginning of the year? Yes.

2) Attendance of Directors There were twelve (12) regular board meetings from January to December 2015;, one (1) special board meeting held on March 06, 2015 and one (1) organizational meeting of the Board held on April 17, 2015 or a total of seventeen (14) Board Meetings. The following are the attendance of the Directors of the Bank who attended the above-mentioned Board Meetings from January to December 2015;

22

The above-named Directors have complied with the BSP and Corporate Governance requirements of at least 50% attendance in the meetings of the Board of Directors for this given period.

3) Do non-executive directors have a separate meeting during the year without the presence of any executive? If yes, how many times?

None

4) Is the minimum quorum requirement for Board decisions set at two-thirds of board members? Please explain.

No. As prescribed by the Bylaws of the Bank, at least a majority of the members of the Board of Directors shall constitute a quorum to do business, except in those cases where the Corporation Code provides for a greater percentage.

5) Access to Information

(a) How many days in advance are board papers5 for board of directors meetings provided to the board? 3-7 days before the meeting

(b) Do board members have independent access to Management and the Corporate Secretary?

Yes

(c) State the policy of the role of the company secretary. Does such role include assisting the Chairman in preparing the board agenda, facilitating training of directors, keeping directors updated regarding any relevant statutory and regulatory changes, etc?

Pursuant to the 2009 SEC Revised Code of Corporate Governance, Bank’s Corporate Governance Manual and Amended By-laws of the Bank, below are details relative to responsibilities of the Corporate Secretary:

The Corporate Secretary, who is an officer of the Bank, shall be a Filipino citizen and a resident of the

Philippines. He shall: 1. Be responsible for the safekeeping and preservation of the integrity of the minutes of the meeting

of the Board and its committees, as other official records of the Bank; 2. Be loyal to the mission, vision and objectives of the corporation; 3. Work fairly and objectively with the Board, Management and stockholders; 4. Have appropriate administrative and interpersonal skills; 5. Be aware of the laws, rules and regulations necessary in the performance of his duties and

responsibilities; 6. Have a working knowledge of the operations of the corporation.

Duties and Responsibilities

5 Board papers consist of complete and adequate information about the matters to be taken in the board meeting. Information includes the background or explanation on matters brought before the Board, disclosures, budgets, forecasts and internal financial documents.

Directors No. of Meetings attended Jonathan T. Gotianun 14 Andrew L. Gotianun Sr. 10 Mercedes T. Gotianun 10 L. Josephine Gotianun Yap 12 Antonio C. Moncupa Jr. 14 Jose S. Sandejas 14 Carlos R. Alindada 14 Paul A. Aquino 14 Benedicto M. Valerio Jr. 14

23

1. He shall have custody of the Stock certificate Book, Stock and Transfer Book and the corporate Seal. 2. Prepare Ballots for the annual election and keep a complete and up-to-date roll of the stockholders

and their addresses. 3. He shall also perform such duties as are incident to his office and those which may be required of

him by the Board of Directors and of the President. 4. Gathers and analyzes all documents, records and other information essential to the conduct of his

duties and responsibilities to the Bank. 5. Informs the members of the Board, in accordance with the by-laws of the agenda of their meetings

and ensure that the members have before them accurate information that will enable them to arrive at intelligent decisions on matters that require their approval.

6. Attends all Board meetings, except when justifiable causes, such as, illness, death in the immediate family and serious accidents, prevent him from doing so.

7. Ensures that all Board procedures, rules and regulations are strictly followed by the members. 8. Submits to the Securities and Exchange Commission, at the end of every fiscal year, an annual sworn

certification on the directors’ record of attendance in Board meetings. 9. Performs such duties as are incident to his office and those which may be required of him by the

Board of Directors and of the President.

(d) Is the company secretary trained in legal, accountancy or company secretarial practices? Please explain should the answer be in the negative. Yes. The Corporate Secretary is actively engaged in the practice of law and specializes in corporate work and litigation.

(e) Committee Procedures

Disclose whether there is a procedure that Directors can avail of to enable them to get information necessary to be able to prepare in advance for the meetings of different committees:

Yes X No

Committee Details of the procedures

Executive As a matter of policy, materials for the meeting are disseminated to the committee members at least a day before the meeting date. Further information required by the committee member/s, if any, are made available within the meeting day or subsequently as agreed with the concerned committee member/s. All items for Executive Committee approval are sent to and maintained by the Corporate Secretary. All members of the Board have access to these records.

Audit As a matter of policy, materials for the meeting are disseminated to the committee members at least a day before the meeting date. Further information required by the committee member/s, if any, are made available within the meeting day or subsequently as agreed with the concerned committee member/s. All records of the Audit Committee is maintained by the Committee and its Secretary and can be accessed by the members of the Board.

Corporate Governance and Compliance Committee (Nomination)

As a matter of policy, materials for the meeting are disseminated to the committee members at least 2 days before the meeting date. Further information required by the

24

Committee Details of the procedures

committee member/s, if any, are made available within the meeting day or subsequently as agreed with the concerned committee member/s. All records of the Corporate Governance and Compliance Committee is maintained by the Committee and its Secretary and can be accessed by the members of the Board.

Remuneration/Compensation As a matter of policy, materials for the meeting are disseminated to the committee members at least a day before the meeting date. Further information required by the committee member/s, if any, are made available within the meeting day or subsequently as agreed with the concerned committee member/s. All records of the Remuneration Committee is maintained by the Committee and its Secretary and can be accessed by the members of the Board.

Risk As a matter of policy, materials for the meeting are disseminated to the committee members at least a day before the meeting date. Further information required by the committee member/s, if any, are made available within the meeting day or subsequently as agreed with the concerned committee member/s. All records of the Risk Committee is maintained by the Committee and its Secretary and can be accessed by the members of the Board.

Trust Materials for the regular meeting are distributed to the committee members at least 2 days before the meeting date. Additional information that may be required is provided during the meeting or afterward to the concerned Committee member(s). Special meetings may be requested / convened to discuss specific issues. All records of the Trust Committee is maintained by the Committee and its Secretary and can be accessed by the members of the Board.

6) External Advice

Indicate whether or not a procedure exists whereby directors can receive external advice and, if so, provide details:

There is no formal procedure. If the directors see the need, they can seek external advice.

7) Change/s in existing policies

Indicate, if applicable, any change/s introduced by the Board of Directors (during its most recent term) on existing policies that may have an effect on the business of the company and the reason/s for the change:

All major policies and procedures, including revision and modifications thereto, are subject to periodic review and require approval of the Board of Directors. This is to ensure compliance to laws and regulations and alignment to Bank’s strategy.

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D. REMUNERATION MATTERS

1) Remuneration Process

Disclose the process used for determining the remuneration of the CEO and the four (4) most highly compensated management officers: Human Resources Group recommends a proposed compensation package for the CEO and all Senior Management Officers to the Remuneration Committee. This Committee, composed of five members including the President and one independent director, evaluates and recommends to the Board incentives and other equity-based plans designed to attract and retain qualified and competent senior officers. For the Internal Audit Executives, an annual report on the total remuneration is reported to the Board of Directors through the Audit Committee.

2) Remuneration Policy and Structure for Executive and Non-Executive Directors

Disclose the company’s policy on remuneration and the structure of its compensation package. Explain how the compensation of Executive and Non-Executive Directors is calculated.

Remuneration

Policy Structure of

Compensation Packages

How Compensation is

Calculated

Executive Directors For the CEO, please see response to number 1.

Non-Executive Directors Please see response in number 3.

Do stockholders have the opportunity to approve the decision on total remuneration (fees, allowances, benefits-in-kind and other emoluments) of board of directors? Provide details for the last three (3) years. Stockholders do not approve the decision on total remuneration of the Board.

3) Aggregate Remuneration

Complete the following table on the aggregate remuneration accrued during the most recent year: The following are the Bank’s CEO and four most highly compensated executive officers for the year ended 2015:

Name Position

Antonio C. Moncupa, Jr ........................................... Jose Emmanuel U. Hilado ........................................

Chief Executive Officer Chief Operating Officer

Gerardo Susmerano ................................................. Head, Retail Banking Cluster

Jacqueline S. Fernandez ........................................... Head, Consumer Lending Cluster Renato K. De Borja, Jr. ............................................. Chief Finance Officer

The following table identifies and summarizes the aggregate compensation of the Bank’s CEO and the four most highly compensated executive officers of the Bank in 2012, 2013, 2014 and 2015 estimates:

Year Total(1)

(P in millions) CEO and the most highly compensated officers named above ....................................................................................................... 2012 60.8 2013 66.8

2014 2015

77.8 92.9

Aggregate compensation paid to all officers and Directors as a group unnamed 2012 379.4

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Year Total(1)

(P in millions) ....................................................................................................

2013 449.1 2014 524.3 2015 627.3

The growth in aggregate compensation of the CEO and the four most highly compensated executive officers of the Bank for 2016 is estimated to be the same as that of the prior year.

There are no actions to be taken as regards any bonus, profit sharing, pension or retirement plan, granting of extension of any option warrant or right to purchase any securities between the Bank and its directors and officers Remunerations given to directors which were approved by the Board Remuneration Committee amounted to P=13.4 million in 2015, P=13.1 million in 2014 and P=10.2 million in 2013.

4) Stock Rights, Options and Warrants The Board of Directors approved on January 29, 2015 the conduct of a rights issue by way of offering common shares to eligible shareholders of the Bank, subject to approval of regulatory agencies. The additional capital was seen to enable the Bank to pursue growth strategies while ensuring that its capital adequacy levels remain above the new Basel III requirements. The Bank set April 21, 2015 as the record date for shareholders entitled to participate in the rights offer up to 371,574,000 shares of common stock with a par value of P10.00 per share, at the entitlement ratio of 32.929 shares for every 100 shares held by eligible shareholders, and at an offer price of P21.53 per rights share. The stock rights shares were listed at the PSE on May 8, 2015. As of September 30, 2015, the net proceeds amounting to P8.0 Billion have been invested in loans. EW has no stock options and warrants.

(a) Board of Directors

Complete the following table, on the members of the company’s Board of Directors who own or are entitled to stock rights, options or warrants over the company’s shares:

Director’s Name Number of Direct

Option/Rights/ Warrants

Number of Indirect

Option/Rights/ Warrants

Number of Equivalent

Shares

Total % from Capital Stock

Gotianun, Jonathan T.

3 1,493,247 1,493,250 0.100%

Gotianun, Andrew Sr. L.

218,155 218,155 0.015%

Gotianun, Mercedes T.

218,154 218,154 0.015%

Gotianun-Yap, Lourdes Josephine T.

64,343 1,900,348 1,964,691 0.131%

Aquino, Paul 30,000 30,000 0.002%

Sandejas, Jose S. 11,750 11,750 0.001%

Moncupa, Antonio Jr. C.

149,826 149,826 0.010%

(b) Amendments of Incentive Programs

Indicate any amendments and discontinuation of any incentive programs introduced, including the criteria used in the creation of the program. Disclose whether these are subject to approval during the Annual Stockholders’

27

Meeting:

Incentive Program Amendments Date of

Stockholders’ Approval

None

5) Remuneration of Management

Identify the five (5) members of management who are not at the same time executive directors and indicate the total remuneration received during the financial year: The following are the Bank’s CEO and four most highly compensated executive officers for the year ended 2015:

Name Position

Antonio C. Moncupa, Jr ........................................... Jose Emmanuel U. Hilado ........................................

Chief Executive Officer Chief Operating Officer

Gerardo Susmerano ................................................. Head, Retail Banking Cluster

Jacqueline S. Fernandez ........................................... Head, Consumer Lending Cluster Renato K. De Borja, Jr. ............................................. Chief Finance Officer

The total remuneration for the CEO and the most highly compensated officers named above is P=92.9 million

in 2015.

E. BOARD COMMITTEES

1) Number of Members, Functions and Responsibilities

Provide details on the number of members of each committee, its functions, key responsibilities and the power/authority delegated to it by the Board:

Committee

No. of Members

Committee Charter Functions Key

Responsi-bilities

Power Executive Director

(ED)

Non-executive Director

(NED)

Independent

Director (ID)

Executive 1 4 None The Composition and mandate of the Executive Committee (ExCom) is defined in Section 8, Article III of the By-laws of the Bank, to wit: “The Board of Directors may create an Executive Committee, the composition of which shall include not less than three members of the Board to be appointed by the Board. The Executive Committee, by a majority vote of its members , and subject to such limitations as the Board may prescribe, is empowered to approved and/or implement any or all corporate acts within the competence of the Board except those acts expressly reserved by the Corporation Code to the Board of

The Executive Committee shall have the power to direct the business of the Bank vested by law in the Board of Directors insofar as such powers and authority may be lawfully delegated to the Executive Committee, including the power to review and approve proposals and transactions related to credit in amounts within the limits of its delegated authority.

The Executive Committee, by majority vote of all its members, and subject to such limitations as the Board may prescribe, is empowered to perform the following actions: 1. Approve and/or implement

Same with Functions.

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Committee

No. of Members


Responsi-bilities


(ED)


(NED)

Independent

Director (ID)

Directors.” The Executive Committee has six members, five of which are regular members and an alternate member who is appointed by the Board during its Organizational Meeting that is held after the Annual Stockholder’s Meeting of the Bank The Executive Committee established its own rules of procedure consistent with the mandate given to it by the Board. The Committee shall conduct a self-assessment of its performance, at least once a year.

any or all corporate acts within the competence of the board except those acts expressly reserved by the Corporation Code for the board of directors. 2. Review and approve bank-wide credit strategy, profile and performance. 3. Approve the credit risk taking-activities of the bank based on the regulations of established approving authorities and reviews and endorses credit-granting activities.

Audit None 1 3 Please see attached Internal Audit Charter (Annex 1)

Corporate Governance and Compliance (Nomination)

2 3 Corporate Governance and Compliance Committee (Annex 2)

Remuneration 1 3 1 Ensures that remuneration arrangements support the strategic objectives of the institution and enable the recruitment and retention of key talents in accordance with applicable regulations.

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Committee

No. of Members


Responsi-bilities


(ED)


(NED)

Independent

Director (ID)

Others : Trust Committee

2 3 None Please see attached Trust Committee Charter (Annex 3)

Others : Risk Committee

1 3 Please see attached Risk Committee Charter (Annex 4)

2) Committee Members

(a) Executive Committee

*For year ended 2015

Office Name

Date of Appointment Re- election held on April

17, 2015)

No. of Meetings

Held

No. of Meetings Attended

%

Length of Service in

the Committee

Chairman JONATHAN T. GOTIANUN

April 17, 2015 36 34 94.44 21

Member (ED) ANTONIO C. MONCUPA April 17, 2015 36 35 97.22 9

Member (NED)

ANDREW L. GOTIANUN SR.

April 17, 2015 36 28 77.77 21

Member (NED)

MERCEDES T. GOTIANUN

April 17, 2015 36 28 77.77 21

Member (NED)

L.JOSEPHINE GOTIANUN YAP

April 17, 2015 36 33 91.67 15

(b) Audit Committee

Office Name


17, 2015)

No. of Meetings

Held


%


the Committee

Chairman Carlos R. Alindada April 17, 2015

14 14 100% 3 years and 8

months

Member (NED) Josephine Gotianun-Yap April 17, 2015

14 0 0% 15

Member (ID) Jose S. Sandejas April 17, 2015

14 12 86% 3 years and 8

months

Member (ID) Paul A. Aquino April 17, 2015

14 14 100% 3 years and 8

months

Disclose the profile or qualifications of the Audit Committee members.

30

1. Carlos R. Alindada –

Tanduay Holdings, Inc. (Director); Citibank Savings, Inc. (Director); National Power Corporation (Director, 2001); Energy Regulation Commission (Commissioner, 2001-2004); SGV & Co. (Chairman and Managing Partner, (1996-1999)

Education: o BBA Accounting, University of the East, 1954 o Masters in Business Administration in Corporate Finance, New York University, 1959 o Advance Management Program, Harvard University, 1975

2. Jose S. Sandejas

Soloil, Inc. (Chairman & President); Pilipinas Hino, Inc. (Chairman); Pilipinas Transport Ind., Inc. (Chairman); Philworld Travel, Inc. (Chairman); Diversified Holdings, Inc. (Chairman); St. Scholastica's College (Chairman); Insular Investments & Trust Corp. (Director); Home Credit Mutual Bldg. & Loan Assn. (Director); Benguet Consolidated Corporation (Director); Petron Corporation (Director); Board of Investments (Director)

Education: o BS Chemical Engineering (Cum Laude), De La Salle University, 1961 o Ph.D in Materials Engineering, Rensselaer Polytechnic Institute, NY, USA, 1962

3. Paul A. Aquino

East West Ageas Life Insurance Corporation (Independent Director); Skycable Inc. (Director); Tanging Yaman Foundation (Trustee); Energy Development Corporation (Consultant); Government of Malta (Honorary Consul); KEI Tech Educational Foundation, Inc. (President)

Education: o Bachelor of Arts , Ateneo De Manila University, 1963 o BS Electrical Engineering, Santa Clara University, California, USA, 1965 o Masters in Business Administration, Santa Clara University, California, USA, 1967

4. Lourdes Josephine T. Gotianun-Yap

Filinvest Development Corp. (President & CEO); Filinvest Asia Corp. (President); Cyberzone Properties, Inc. (President); The Palms Country Club (President)

Education: o BS Business Management, Ateneo De Manila, 1975 o Masters in Business Administration (major in Finance), University of Chicago, 1977

Describe the Audit Committee’s responsibility relative to the external auditor. As contained in the Audit Committee Charter xxx B. Power and Authority,

Oversee the resolution of disagreement between management and the external auditors, in the event they arise. xxx

Meet with the company officers, external auditors, or outside counsel, as necessary.

E. Responsibilities

The Audit Committee provides oversight of the institution's financial reporting and internal and external audit functions. It is responsible for the appointment of the internal auditor as well as the independent external auditor who shall both report directly to the Audit Committee. xxx

Financial reporting, including disclosures

Review with management and the external auditors, recent accounting, tax and regulatory pronouncements , and understand their impact on the financial statements

Discuss with the external auditor the report that the auditor is required to make to the

31

committee regarding: - All accounting policies and practices to be used that the independent auditor identifies as critical. - All alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed among management and the independent auditor, including the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the auditor. - Other material written communications between the independent auditor and management of the bank, such as any management letter, management representation letter, reports on observations and recommendations on internal controls, independent auditor’s engagement and independence letters, schedule of unadjusted audit differences and any listing of adjustments and reclassifications not recorded.

Review and discuss with management and the external auditor the annual audited financial statements, including the bank's specific disclosures made in management's discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the bank's Annual Report.

Review with management and the independent auditor: (1) major issues regarding accounting principles and financial statement presentation, including any significant changes in the bank's selection or application of accounting principles; and (2) major issues as to the adequacy of the bank's internal controls and any special audit steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting; and (3) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the bank.

Internal Control

Understand the scope of internal and external auditors' review of internal control over financial reporting, and obtain reports on significant findings and recommendation.

External Audit

Approve a set of appropriate objective criteria for approving the external audit firm of the bank;

Approve, or recommend to the board or stockholders for their approval, the appointment, re-appointment and removal of external audit firm;

Approve the remuneration and terms of engagement of the external audit firm;

Review and confirm the independence of the external auditors on relationships by obtaining statements from the auditors on the relationships between the auditors and the bank, including non-audit services, and discussing the relationships with the auditors.

Ensure that senior management is taking necessary corrective actions to address the findings and recommendations of external auditors and regulatory authority in a timely manner.


Prior to publishing the year-end earnings, discuss the results of the audit with the external auditors.

On an annual basis, the audit committee should review and discuss with the external auditors all significant relationships they have with the bank that could impair the auditors’ independence.

On a regular basis, meet separately with the external auditors to discuss any matters that the committee or auditors believe should be discussed privately.

(c) Corporate Governance and Compliance Committee / Nomination Committee

The Board of Directors approved on March 2014, the revised Charter of the Corporate Governance and Compliance Committee which includes its duties and responsibilities as the Nomination Committee. It reviews and evaluates the qualification of individuals nominated to the board as well as those nominated to other positions requiring appointment by the board to ensure alignment with the Bank's strategy.

32

Office Name


17, 2015)

No. of Meetings

Held


%


the Committee

Chairman Paul A. Aquino April 17, 2015 1 – March

3, 2015 1 100%

3 years and 8 months

Member (ED) Jonathan Gotianun April 17, 2015 1 – March

3, 2015 1 100%

21

Member (NED) Carlos Alindada April 17, 2015 1 – March

3, 2015 1 100%


Member (ID) Jose Sandejas April 17, 2015 1 – March

3, 2015 1 100%


Member Atty. Benedicto Valerio April 17, 2015 1 – March

3, 2015 1 100%


(d) Remuneration Committee

Office Name

Date of Appointment (Re- election held on April

17, 2015)

No. of Meetings

Held


%


the Committee

Chairman Lourdes Josephine G. Yap April 17, 2015 1 – June 22, 2015

1 100 15

Member (NED) Mercedes T. Gotianun April 17, 2015 1 – June 22, 2015

1 100 21

Member (NED) Jonathan T. Gotianun April 17, 2015 1 – June 22, 2015

1 100 21

Member (ID) Jose S. Sandejas April 17, 2015 1 – June 22, 2015

1 100 3 years and 8

months

Member (ED) Antonio C. Moncupa April 17, 2015 1 – June 22, 2015

1 100 9

(e) Others (Specify)

Provide the same information on all other committees constituted by the Board of Directors:

Risk Management Committee

Office Name


17, 2015)

No. of Meetings

Held


%


the Committee

Chairman (ID) Jose Sandejas April 17, 2015

12 11 92 3 years and 8

months

Member (NED) Lourdes Josephine Yap April 17, 2015 12 12 100 15 years

Member (ID) Carlos Alindada April 17, 2015

12 12 100 3 years and 8

months

Member (ID) Paul Aquino April 17, 2015

12 12 100 3 years and 8

months

Trust Committee

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Office Name


17, 2015

No. of Meetings

Held


%


the Committee

Chairman Jonathan T. Gotianun April 17, 2015 4 4 100 21

Member (ED) Antonio C. Moncupa, Jr. April 17, 2015 4 4 100 9

Member (NED)

Andrew L. Gotianun, Sr. April 17, 2015

4

1

25

21

Member (NED)

Atty. Benedicto M. Valerio April 17, 2015

4 4 100 3 years and 5

months

Member Angel Marie L. Pacis (Trust Officer)

March 12, 2015

4 4 100 9 months

3) Changes in Committee Members

Indicate any changes in committee membership that occurred during the year and the reason for the changes:

Name of Committee Name Reason

Executive None None

Audit None None

Nomination None None

Remuneration None None

Others (specify):

Risk None None

Trust None None

4) Work Done and Issues Addressed

Describe the work done by each committee and the significant issues addressed during the year.

Name of Committee Work Done Issues Addressed

Executive Oversight on the Bank’s overall credit risk management

NONE

Audit Oversight function over external and internal audit work plan and results. Reviews also BSP report on examination.

Resolutions of significant audit issues noted during the regular audits were monitored monthly.

Corporate Governance and Compliance

Oversight of the implementation of the Bank’s Compliance Program including Anti Money Laundering and Terrorist Financing Deterrence. It also vetted DOSRI and related party transactions prior to Board approval. It reviewed and evaluated the qualification of individuals nominated to the Board as well as those nominated to other positions requiring appointment by the board to ensure alignment with the Bank's strategy. It conducted the annual Board and Committee self-assessment.

Significant issues addressed were those raised in the 2015 BSP Report on Examination of the Bank. Actions taken and planned resolutions were monitored monthly by the Compliance Division and reported to the Committee every other month.

Updated the Corporate Governance Manual to conform with requirements of law and regulations.

34

Name of Committee Work Done Issues Addressed

Remuneration The Compensation Committee, assisted by the Human Resources Division, was responsible for harmonizing the salaries of the employees of the bank in accordance with the performance, responsibility and adherence to the prescribed culture. It was also responsible for the implementation of the reward system thru promotion of deserving employees, grant of bonus and incentives.

No significant issues.

Risk The highlights of the Committee’s accomplishments include:

Enhanced risk management education program

Review and approval of frameworks for loss model development and setting risk limits

Review and approval of the various policies, risk appetite and loss limits

Review and approval of the information security risk assessment initiative

Expanded risk oversight to the Trust business

Review and approval of the Bank’s compliance self-assessment on new regulations

These initiatives aimed to:

Familiarize the Board with the inherent risks and how they are controlled in each of the Bank’s businesses

Keep the Bank’s risk management practices appropriate albeit the changing internal and external environment

Establish the Bank’s information security risk management goals and identify performance gaps that needs to be addressed

Strengthen risk oversight in the Trust business

Ensure the Bank’s readiness with the new rules and regulations

Trust Instituted tighter documentary requirements such as mandatory letters of instructions

Instituted regular monitoring of documentary deficiencies of the branch network

Maintained tight approval control of one-off investment proposals.

Reviewed and approved managed accounts and discussed performance of key managed accounts and UITFs

Reduction of operational risks.

Improve investment discipline.

5) Committee Program

Provide a list of programs that each committee plans to undertake to address relevant issues in the improvement or enforcement of effective governance for the coming year.

Name of Committee Planned Programs Issues to be Addressed

Executive None

Audit Control Appreciation and Fraud To promote and instill control

35


Prevention Program awareness and appreciation among the bank’s store officers to minimize occurrence of fraud and loss exposure due to fraud and other irregularities.

Corporate Governance and Compliance (Nomination)

Enhance the Bank’s Compliance Program, including its Anti-Money Laundering and Terrorist Financing Deterrence, to promote and improve the organization’s culture of compliance.

Raise awareness and understanding of the Bank’s compliance risks and institute the right policies, systems and procedures to ensure strict adherence to rules and regulations.

Remuneration None

Risk The Enterprise Risk Management (ERM) Capability Maturity Model was introduced and adapted that provides clear risk management success attributes and milestones. With this in place, it’s foreseen to realize the following:

Enhanced risk management strategic and tactical planning to improve effectiveness in actual risk management performance.

More effective tracking of risk management progress and maturity.

Taken from the adoption of above model, risk management plans shall revolve around progressing the Bank’s risk management practice maturity to the next higher level year-on-year. Specifically for the coming immediate year or so –

Risk policies are to be shifted from silo-based towards enterprise-wide perspective.

Enhance, if not complete, procedural guidelines to allow efficient execution of risk management practices.

Embed risk management discipline through awareness & training programs, as well as incorporation of risk management mandate in performance appraisal system.

Refine key risk indicators to be periodically monitored and reported.

Refine existing, if not develop new, risk models to improve risk measurement capability.

Automate or upgrade risk management processes, and firm up

The inherent need to adapt to changing demands of doing banking is the compelling reason for the Bank’s risk management discipline to progress higher, and be adaptive to these demands.

36


data infrastructure.

Trust Offer investment solutions and portfolios utilizing a complete array of investment funds necessary for optimal portfolio construction within an operational framework that is in line with regulatory standards.

Increase competitiveness and differentiation of the business in the industry. Improve operational framework to ensure efficiency and internal controls over asset management and account administration.

F. RISK MANAGEMENT SYSTEM

1) Disclose the following: (a) Overall risk management philosophy of the company;

The Bank’s risk philosophy has been defined and outlined by its Board of Directors in order to provide clear directions and mandate in the conduct of risk management at all levels across the Bank. The underlying premise of the Bank’s risk philosophy is that every entity in the Bank exists to provide value for the Bank’s stakeholders, namely, its depositors and other creditors, its management and employees, the regulators and government, the community where it operates and the public in general. All units in the Bank face uncertainty and thus are challenged to determine how much uncertainty to accept in doing business. Uncertainty presents both risk and opportunity, with the potential to erode or enhance value. Value is maximized when management sets strategy and objectives to achieve an optimal balance between growth and return goals and, its related risks, and efficiently and effectively deploys capital in pursuit of the Bank’s objectives. The Bank is broadly directed by the following guidelines:

align risk appetite with its business plan and strategies

proactive risk management

reduce surprises of unexpected losses

identify and manage all material risks

optimize use of capital

(b) A statement that the directors have reviewed the effectiveness of the risk management system and commenting on the adequacy thereof;

The Board, through its Risk Management Committee oversees the effectiveness of the Bank’s risk management system. The Committee convenes monthly and perform reviews of risk management frameworks, manuals, and limit systems. The Committee is likewise apprised about the Bank’s overall risk profile through the regular risk management reports that includes various risk indicators, presented by RMD. This allows the Committee to perform its oversight function over the Bank’s risk taking activities ensuring that aggregate risk exposures are within the Board approved levels at all times and deviations if any are accordingly dealt with. In the course of performing its oversight function, the Committee did not pose any adverse observation on the effectiveness of the Bank’s risk management system.

(c) Period covered by the review; The review covered the Bank’s risk and capital management performance for the year 2013, plus a 5-year forward looking view while the on-going review indicated above covers the year 2014 and similarly prospective 5-year period.

(d) How often the risk management system is reviewed and the directors’ criteria for assessing its effectiveness;

and

37

The Bank’s risk and capital management system, mainly its policies and processes, is constantly challenged and refined as stakeholder reliance on an effective risk management system becomes more pronounced for sound business decision-making purposes. At a minimum, the review is performed on an annual basis through its ICAAP exercise. This is without prejudice to the monthly RMC meetings diligently held to tackle and approve risk and capital management policies and limit structures, and where the results of the monitoring of the Bank’s risk and capital management initiatives are comprehensively reported.

(e) Where no review was conducted during the year, an explanation why not.

N/A

2) Risk Policy

(a) Company Give a general description of the company’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

Risk Exposure Risk Management Policy Objective

Credit risk Well-controlled underwriting process with appropriate levels of authority

To ensure that borrower accounts undergo a rigid credit evaluation process and authority commensurate to the risks the Bank will assume with the approval of said account.

Employment of credit limits (at various levels)

To contain Bank credit exposures within borrowers’ capacity to pay and Bank’s risk tolerance.

Securitization and/or insurance To have credit risk mitigant as an alternative source of collection by the Bank from its clients should a default occur.

Maintain a minimum level of quality for its credit portfolio

To keep the Bank’s credit portfolio quality within acceptable level whereby credit losses are still acceptable and within the Bank’s credit risk appetite.

Diversification To reduce credit concentration risk in terms of industry sectors, and specific borrowers and/or group of related borrowers.

Operational risk

Segregation of duties and responsibilities, and dual control

To prevent unauthorized or invalid activities arising from monopoly of the whole process by one person or unit in the Bank.

Hierarchy of approving authorities To ensure that transactions entered into by the Bank is reviewed and authorized by the appropriate body/ies and level of authority/ies within the Bank.

Four eye policy To ensure that transactions are accurately done through verification or

38

(b) Group Give a general description of the Group’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

The same risk management policies at the Company level applies at the Group level.

(c) Minority Shareholders

Indicate the principal risk of the exercise of controlling shareholders’ voting power.

Risk to Minority Shareholders

The principal risk of the minority shareholders in controlling shareholders’ exercise of its voting power is the risk of share value reduction due to corporate actions by the controlling shareholders that may be detrimental to the minority shareholders. This risk is considered by the Bank to have a remote possibility of happening to the minority shareholders given the Bank’s controlling shareholders track record of prudent management. Since the Bank’s public debut in 2012, there were no cited incidents that caused detrimental damage to the Bank’s share value as a result of unsound corporate action/s by the Bank’s controlling shareholders.

second look by another person.

Independent validation To ensure reliance on reported completeness and accuracy of records and estimates through a review by a party other than the one performing the task.

Market (includes interest rate) risk

Trading of liquid instruments To ensure that price fluctuations are relatively contained (in contrast to price fluctuations in illiquid instruments).

Employment of market risk limits (at various levels) including loss alert system

To cap the Bank’s market risk exposure within its risk tolerance and sufficient leeway is allowed to appropriately dispose limit breaches without unnecessarily increasing the Bank’s risk.

Liquidity risk Maintenance of adequate liquidity reserves

To ensure that the Bank has sufficient liquidity to draw from to settle its obligations as and when it falls due.

Contain cash outflows within acceptable levels, as reflected in the liquidity risk limits

Ensure that there is adequate liquidity to meet expected and unexpected outflows.

Contingency funding planning To ensure that all available sources of funding are identified and procedures are set to address an event of severe liquidity requirement.

39

3) Control System Set Up

(a) Company

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company:

Risk Exposure Risk Assessment

(Monitoring and Measurement Process)

Risk Management and Control (Structures, Procedures, Actions Taken)

Operational risk (i.e. fraud activities)

Results of the Bank’s risk self -assessment performed shows that the Bank is exposed to operational risk such as business disruptions, process errors and failures, and fraudulent activities to which the Bank’s management considers as high risk exposure. The above self-assessment results came on the back of the regular monitoring by each of the Bank’s business and operating units. Collated by the Risk Management Division, the reports are analyzed on a Group-wide perspective and reported monthly to the Risk Management Committee of the Board. Operational risk is measured in both financial and non-financial terms in accordance with the Board approved risk appetite and tolerances. It is performed by assessing the likelihood of an operational risk happening, and estimating the consequential business impact when the event happens having considered the effectiveness of controls in reducing operational risk.

Having established better or tighter control environment in the Bank’s store operations, the Bank further pursued the operationalization of its well-laid Operational Risk Framework with the senior management team at the forefront to perform the same. Overall operational risk management is directed through Board-approved policies as embodied in the Bank’s Operational Risk Management Manual. Self-assessment activities are performed to understand risk exposures and its control environment at point of occurrence to be able to proactively mitigate unacceptable residual exposures. Operational risk events, both near-miss and actual losses, are recorded, tracked, and monitored. The root cause of the operational risk event is determined to evaluate soundness of control design and effective execution of said control that is essential to surface control design issues or execution lapses. This facilitates actions that should prevent the recurrence of said risk event. Key risk indicators are also monitored on a periodic basis to provide early-warnings on potential losses or control breakdowns. Further, to ensure continuity of the Bank’s operations, business continuity and disaster recovery planning is performed in readiness for adverse internal and external disruptions. On the other hand, to mitigate losses, insurance coverage for various purposes is maintained by the Bank. Example, insurance coverage for its employee’s health and safety, and for potential property loss or damage to its physical assets.

40

(b) Group

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company: The same control system set up at the Company level applies at the Group level.

(c) Committee

Identify the committee or any other body of corporate governance in charge of laying down and supervising these control mechanisms, and give details of its functions:

Committee/Unit Control Mechanism Details of its Functions

Executive Committee Oversight on the Bank’s overall credit risk management

The Committee’s function includes:

To review the bank-wide credit strategy, profile and performance.

To approve the credit risk-taking activities based on the established approving authorities and likewise reviews and endorses credit-granting activities, including the Internal Credit Risk Rating System

Corporate Governance and Compliance Committee (CGCC)

Oversight on the Bank’s overall corporate governance and compliance system. It also serves as the Board’s Nomination Committee.


Review and assess the adequacy of the CGCC’s charter and Corporate Governance Manual and recommends changes as necessary.

Oversee the implementation of the compliance program and the Money Laundering Prevention Program and ensure compliance issues are resolved expeditiously.

Assists the Board in assessing the effectiveness of managing compliance risk and ensures regular review of the compliance program.

Review and evaluate the qualifications of all persons nominated to the Board and to other positions requiring appointment by the Board.

Review and vet DOSRI and related party transactions

Risk Management Committee (RMC)

Oversight on the Bank’s overall risk management system


To develop risk appetite and tolerances for the Bank and recommends them to the Board

To review and approve risk management principles, strategies, policies, and initiatives

To oversee the overall risk management, risk profile, and

41


compliance with the Board approved risk appetite and tolerances

Audit Committee (AuditCom)

Independent Examination the Bank’s internal control system


To examine the major risk exposures and ensures accountability on the part of management to monitor and control such exposures including the risk assessment and risk management policies

To examine the major issues regarding accounting principles and financial statement presentation, including any significant changes in selection or application of accounting principles

To examine the major issues as to the adequacy of internal controls; to examine the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements

Trust Committee Oversight on the proper management of trust and other fiduciary business


Acceptance and closing of trust and other fiduciary accounts

Initial review of assets placed under the trustee’s fiduciary custody

Investment, re-investment and disposition of funds or property

Review and approval of transactions between trust and/or fiduciary accounts, and

Review of trust and other fiduciary accounts at least once every twelve (12) months to determine the advisability of retaining or disposing of the trust or fiduciary assets and/or whether the account is being managed in accordance with the instrument creating the trust or other fiduciary relationship.

The TrustCom shall also preside over the proper conduct of the trust’s business, reviewing on a periodic basis, business development initiatives as:

a. Staffing and delineation of responsibility / accountability

42


b. Proactive development and implementation of strategies for cultivating of revenue streams and cost management

c. Application and monitoring of the proper performance benchmarks.

Executive Management Committee

Looks into broad organizational and operational issues, and approves major initiatives. Serves as the IT Steering Committee as well.


Reviews strategies and key execution plans and monitors performance vs plans and historical numbers.

Discusses employee, customer and competitive trends and formulates strategies and action plans in response to trends.

Evaluates, approves, prioritizes and monitors major projects and initiatives

Reviews and monitors broad organizational situation

As IT Steering Committee - Evaluates, approves, monitors and prioritizes IT projects - Monitors progress of IT Strategic Plan, regularly reviews the plan and identify opportunities that will align the plan to the Bank's business strategy. - Identifies business solutions that may leverage technology - Reviews IT policies, procedures and standards, when needed.

Loan and Investments Committee (LoanCom)

Oversight on credit risk control The Committee’s function includes:

To oversee the credit risk-taking activities and overall adherence to the credit risk management framework,

To review business/credit risk strategies, quality and profitability of the credit portfolio and recommend changes to the credit evaluation process, credit risk acceptance criteria and the minimum and target return per credit or investment transaction

Asset-Liability Management Committee (ALCO)

Oversight on market, liquidity, and other financial position related risk


Establish asset and liability pricing policies that are

43


consistent with the strategies of the bank,

Recommend market and liquidity risk limits to the Risk Management Committee and BOD

Review regularly the liquidity position of the bank and implement asset and liability pricing guidelines as a result of the review,

Review regularly asset levels to ensure that income objectives are met,

Review regularly interest rate risk and liquidity risk to ensure that market and liquidity risk limits are complied with.

Risk Management Subcommittee (RMS)

Oversight on the implementation and execution of the Bank’s risk management policies and procedures


To oversee and direct the management of the overall risk profile

To spearhead the implementation of the Bank’s risk management initiatives

To lead the effective conduct of risk management

To oversee the overall risk incidents and control gaps or deficiencies and implementation of corresponding corrective actions

G. INTERNAL AUDIT AND CONTROL

1) Internal Control System Disclose the following information pertaining to the internal control system of the company: (a) Explain how the internal control system is defined for the company;

Internal control is broadly defined as a process, effected by the bank's Board of Directors, Management and other personnel, designed to provide reasonable assurance regarding the achievement of its objectives. The bank’s internal control was designed to: o Safeguard the bank’s assets o Ensure adherence to regulations, particularly those of the BSP, Anti-Money Laundering Council (AMLC),

Philippine Deposit Insurance Corporation (PDIC) and SEC. o Maintain reliability of accounting data o Promote operational efficiency

(b) A statement that the directors have reviewed the effectiveness of the internal control system and whether

they consider them effective and adequate; The Audit Committee prepares annually a self-assessment on their performance and an annual report to the

44

Board of Directors with regards their assessment of the effectiveness and adequacy of the internal controls of the Bank, among others.

(c) Period covered by the review; Latest report was for the calendar year 2015.

(d) How often internal controls are reviewed and the directors’ criteria for assessing the effectiveness of the internal control system; and The Audit Committee reviews the effectiveness and efficiency of internal control every meeting. An assessment will be given to the Board, when appropriate and necessary. Annually, the Audit Committee prepares a formal report to the Board of Directors.

(e) Where no review was conducted during the year, an explanation why not.

Not applicable

2) Internal Audit

(a) Role, Scope and Internal Audit Function

Give a general description of the role, scope of internal audit work and other details of the internal audit function.

Role Scope

Indicate whether In-house or Outsource

Internal Audit Function

Name of Chief Internal

Auditor/Auditing Firm

Reporting process

Refer to the attached Internal Audit Charter


In-house but certain functions may be outsourced, if the need arises.

Eloida F. Oquialda SVP& Chief Audit Executive


(b) Do the appointment and/or removal of the Internal Auditor or the accounting /auditing firm or corporation to which the internal audit function is outsourced require the approval of the audit committee? Yes

(c) Discuss the internal auditor’s reporting relationship with the audit committee. Does the internal auditor have direct and unfettered access to the board of directors and the audit committee and to all records, properties and personnel? Internal Audit is functionally reporting to the Audit Committee. Internal Audit reports to the Audit Committee at least 4 times per year. For 2015, the Audit Committee met 14 times. The Chief Audit Executive (CAE) has direct access and unfettered access to the Board and the Audit Committee. Internal Audit has unrestricted access to all records, properties and personnel.

(d) Resignation, Re-assignment and Reasons

Disclose any resignation/s or re-assignment of the internal audit staff (including those employed by the third-party auditing firm) and the reason/s for them. There were 28 Internal Audit staff who left due to various reasons such as career change, family circumstance, and better compensation offer of other companies / banks.

45

(e) Progress against Plans, Issues, Findings and Examination Trends

State the internal audit’s progress against plans, significant issues, significant findings and examination trends. Internal Audit monitors the accomplishment of the work plan quarterly and reports to the Audit Committee on a semi-annual basis. Also, status of corrective/remedial measures undertaken on high risk issues is reported to the Audit Committee during its regular meeting.

The relationship among progress, plans, issues and findings should be viewed as an internal control review cycle which involves the following step-by-step activities:

1) Preparation of an audit plan inclusive of a timeline and milestones; 2) Conduct of examination based on the plan; 3) Evaluation of the progress in the implementation of the plan; 4) Documentation of issues and findings as a result of the examination; 5) Determination of the pervasive issues and findings (“examination trends”) based on single year

result and/or year-to-year results; 6) Conduct of the foregoing procedures on a regular basis.

3) Audit Control Policies and Procedures

Disclose all internal audit controls, policies and procedures that have been established by the company and the result of an assessment as to whether the established controls, policies and procedures have been implemented under the column “Implementation.”

Policies & Procedures Description Implementation

Internal Audit Manual, which includes the following, among others:

All established controls, policies and procedures have been implemented.

Audit Risk Assessment Model

Provides risk assessment measurement criteria based on key business risk variables to calculate the weighted risk rating and rank the auditable units/ entities. The main purpose of the Risk Assessment Methodology is to enhance the objectivity and transparency and provide for a sound basis for the preparation of the Annual Audit Plan (audit frequency, intensity and timing).

Risk-based Audit Methodology

Audit Rating System Guidelines to promote consistency and objectivity in the formulation of an overall assessment /rating for each audit engagement.

Outsourcing Policies

Covers the process of obtaining external service providers to support or complement the Internal Audit Activity, in conformance with the Institute of Internal Auditor’s Practice Advisory 1210.A1-1 and regulatory requirements of the Bangko Sentral ng Pilipinas, currently under Circular 765, and as may be amended in the future.

Various Audit Program Guides

Audit Program Guides provide the audit steps / procedures for a particular audit engagement. These are reviewed and updated when deemed necessary, i.e. based on the results of walkthrough procedures there are changes in the process brought about by changes in the system, regulations, etc.

4) Mechanism and Safeguards

State the mechanism established by the company to safeguard the independence of the auditors, financial

46

analysts, investment banks and rating agencies (example, restrictions on trading in the company’s shares and imposition of internal approval procedures for these transactions, limitation on the non-audit services that an external auditor may provide to the company):

Auditors (Internal and External)

Financial Analysts

Investment Banks

Rating Agencies

Internal Audit functionally reports to the Audit Committee composed of independent directors Internal Auditors’ Declaration of Independence signed annually. External Auditors issue statement of their independence in compliance with regulation.

Not Applicable Not Applicable

The Bank has a signed agreement where the Rating Agencies commit to express an independent, objective and fair credit opinion, adhering to its credit rating standards and ensuring that the credit rating function shall be performed with utmost professional competence.

(h) State the officers (preferably the Chairman and the CEO) who will have to attest to the company’s full compliance with the SEC Code of Corporate Governance. Such confirmation must state that all directors, officers and employees of the company have been given proper instruction on their respective duties as mandated by the Code and that internal mechanisms are in place to ensure that compliance.

Jonathan T. Gotianun, Chairman

Antonio C. Moncupa, Jr., President and CEO

Ma. Bernadette T. Ratcliffe, Chief Compliance Officer

H. ROLE OF STAKEHOLDERS

1) Disclose the company’s policy and activities relative to the following:

Policy Activities

Customers' welfare Under the vision and mission statement of the bank, customer is treated equally with the shareholders and employees as major stakeholder of the bank.

Directors, senior management and employees are constantly reminded that the bank is the just the custodian of the money of the depositors and all risk taking activities should be taken only if it will not prejudice the depositors.

Supplier/contractor selection practice

Only pre-qualified bidders are allowed to bid and the bid is awarded to the lowest bidder.

1. Notice of bidding; prequalification to bid. 2. Announcement of pre-qualified bidder. 3. Submission of bid documents/bond. 4. Bidding 5. Awarding. 6. Notice to proceed.

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Policy Activities

Environmentally friendly value-chain

Contribute to conservation of trees thru adoption of paperless media transaction.

1. Electronic instead of paper based communication. 2. Adoption of other electronic based banking products and transactions.

Community interaction Promotion of specific cause for improvement of the Community.

Sponsor community and school based social programs.

Anti-corruption programmes and procedures?

Section I (Rules and Regulations) of the Bank’s Code of Ethics and Discipline describes the policies covering the following: F. Trust and Confidence/Honesty

and Integrity G. Preservation of Bank Property I. Business and Personal Conduct J. Outside Activities K. Conflict of Interest

Section II (Employee Discipline) of the Bank’s Code of Ethics and Discipline describes the policies covering the following:

C. Administrative Charges D. Schedule of Penalties

Safeguarding creditors' rights

2) Does the company have a separate corporate responsibility (CR) report/section or sustainability report/section?

There is no separate CSR section in the EastWest Annual Report.

3) Performance-enhancing mechanisms for employee participation.

(a) What are the company’s policy for its employees’ safety, health, and welfare?

Caring for the health and well being, as well as for the safety and security of our employees, EastWest provide HMO and group life insurance coverage. Employees’ financial security extends beyond retirement with a retirement benefit plan that helps them reap the benefits of long years of hard work and allows them to enjoy life after their tenure with EastWest.

As an organization, EastWest believes in providing a learning environment which gives our people all the opportunities for them to accumulate knowledge, continuously hone their skills and sharpen their competencies. EastWest Bank’s Learning Academy mission is to provide the necessary training programs to all employees that will help them increase their level of awareness, improve their skills and develop the right attitude in performing their jobs.

(b) Show data relating to health, safety and welfare of its employees.

HEALTH RELATED FRINGE BENEFITS AVAILED

1. Annual Physical Examination (Head Offices and Branches)

2. Executive Check-up 3. Pre-employment Physical Examination

3,317

83 1,745

4. Medical Retainer onsite clinics Physician Nurses

4 3

48

5. Total Amount for emergency medicines and clinic supplies

P207,796

6. Monthly Medical Specialists Consultation

1207

7. Monthly Health Advisories 12

8. Flu Vaccinations for employees & Dependents

465

9. Wellness Programs 512

Safety & Security Programs:

Training Program

Frequency

Participants

Bank Safety and Security Orientation for New Employees Orientation Program (NEOP) (Covers topics on Bank Emergency Preparedness and Response for fire, earthquake, bomb threat and robbery)

Twice a month

New EWB Employees

Security Customer Service Program Modules: 1. Bank Security Operations 2. EW Customer Service Standards 3. Emergency Preparedness & Response 4. ATM-related Fraud– Identification and Prevention

Annual per Security Guard per Security Agency

All agency-deployed Security Guards

Safety and Security Seminar for Service Managers

As scheduled

Service Managers

Safety and Security Division (SSD) Quarterly In-House/Field Training

As scheduled

Safety and Security Division / Operations Center Officers

Safety and Security Seminar - Store Officers Development Program (SODP)

Semi-annual

Store Officers

(c) State the company’s training and development programmes for its employees. Show the data.

EWB has various training programs such as Foundational Courses, Development Programs, Bank Development, Business Development, Governance, Risk and Compliance, Leadership and Personal Effectiveness. Please refer to Annex 5.

(d) State the company’s reward/compensation policy that accounts for the performance of the company beyond short-term financial measures The Bank’s Compensation programs will reflect the following beliefs and intentions:

We are in the service industry. As such we recognized that the key factor to succeed is to build and retain an employee corps that could compete effectively.

49

Having the right people is the first and most important step in achieving the Bank’s vision of being a “world-class bank anchored on service excellence in our chosen markets”.

We will use compensation to attract and retain top performers, and provide base salary, incentives and rewards that direct behaviour & performance to achieve the Bank’s goals & strategies as well as build and sustain the Bank’s values and culture.

We will keep our competitive positioning at or near the 50th percentile of identified competitor banks for annual base salary and total cash compensation (base plus bonus or incentives). Total cash compensation above the 50th percentile may be attained for core employees who hold critical positions and exceed performance expectations.

The general level of the variable component (bonus) of the compensation will be correlated to the Bank’s performance. If the Bank achieves above average results, the bonus pool will correspondingly increase and possibly push the average total compensation higher than the 50th percentile level. In this way, the fortunes of the Bank and that of its workforce are tied tightly.

We will maintain a salary structure consistent with the aforementioned competitive positioning and at the same time ensures internal consistency whereby the salary is reflective of the employee’s duties and responsibilities; competencies relevant to the job, performance and contributions to the business. The salary structure shall specify ranges (minimum, midpoint, and maximum) which are set to correspond to each of the corporate ranks or levels in the bank’s job classification framework.

Similarly, we will provide a fringe benefits program that is competitive with the target market in terms of benefit mix and amounts. The program will complement our base compensation and pay incentives in attracting and retaining employees who meet or exceed performance standards.

The benefits program will be a mix of benefits that are mandated by law and those commonly given in the industry such as health and life insurances, employee loans, car benefits, retirement, etc. The specific benefit amounts shall be competitively positioned at median or average of the target market.

The Human Resources Group shall review and recommend changes to the compensation and benefits programs in order to maintain its competitiveness and responsiveness to the needs of the organization.

The Compensation Committee shall review and approve proposed changes in the compensation structure and benefits program of the Bank.

4) What are the company’s procedures for handling complaints by employees concerning illegal (including corruption)

and unethical behaviour? Explain how employees are protected from retaliation. Employees, directors, stakeholders, clients, service providers and other third parties are encouraged to report, in good faith, knowledge of any misconduct, irregularity or act detrimental to the interests of the Bank and its stakeholders.

The reporting party or otherwise referred to as the “whistleblower” has a choice of communication channels to report any knowledge of misconduct or irregularity. The report may be through the normal channel of reporting bank concerns which is through the direct supervisor/manager of the personnel or officer involved in the reportable behavior. However, if the reported misconduct or irregularity is not acted upon by the direct supervisor or in the judgment of the whistleblower, the direct supervisor is not in a position to address his report, the whistleblower may email his/her report to the Whistle Blowing Committee or call any of the following designated officers:

1. Head, Human Resources Division 2. Chief Audit Executive 3. Chief Risk Officer 4. Chief Compliance Officer

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If the issue to be reported is serious and sensitive, the whistleblower may directly approach the President and CEO or the Chairman of the Board of Directors. A member of the Board of Directors reporting an activity under this policy may raise his concerns to the Chairman of the Audit Committee, Chairman of the Corporate Governance Committee or the Chairman of the Board of Directors.

The whistleblower may disclose his/her identity or opt to remain anonymous. However, sufficient information must be provided to aid in the investigation of the reported misconduct, irregularity or improper activity. The whistleblower should refrain from obtaining evidence for which he/she does not have right of access but his/her cooperation in the investigation, if needed, is expected.

Ample protection is accorded to a whistleblower which includes, among others: (i) Confidentiality of identity and of the information reported; (ii) Non-retaliation against the whistleblower; (iii) Protection and security of his/her person and his/her family; (iv) Transfer to another unit; and/or, (v) Reinstatement to the same or comparable position and back benefits and pay, if warranted by the circumstances.

On the other hand, any person implicated in the reported act is accorded the right to be informed of the act he/she is alleged to have committed, its penalties or consequences, the right to counsel of his own choice, the right to be heard and present evidence on his/her defense, and the right to be informed of the resolution of the investigation or action taken.

This policy sets forth a reporting process beyond the normal reporting line to provide an alternative venue for reporting any irregularity, misconduct or suspicious activities to the Management but this is without prejudice to established procedures of the Bank in handling disciplinary cases under its Code of Ethics and Discipline.

I. DISCLOSURE AND TRANSPARENCY 1) Ownership Structure

(a) Holding 5% shareholding or more

Shareholder Number of Shares Percent Beneficial Owner

Filinvest Development Corporation

451,354,890 30.09% ALG Holdings Corporation

Filinvest Development Corporation Forex Corporation

394,941,030 26.33% Filinvest Development Corporation

PCD Nominee Corporation -Foreign

160,948,069 10.73% Various stockholders/clients

PCD Nominee Corporation - Filipino

488,161,126 32.54% Various stockholders/clients

Name of Senior Management

Number of Direct shares Number of

Indirect shares / Through (name of record owner)

% of Capital Stock

Antonio C. Moncupa, Jr. 1,155,736 0.0770%

Jose Emmanuel U. Hilado 167,665 0.0112%

Gerardo Susmerano 425,372 0.0284%

Jacqueline S. Fernandez 31,637 0.0021%

Arturo L. Kimseng 39,879 0.0027%

Ernesto T. Uy 40,000 0.0027%

Ivy B. Uy 199,392 0.0133%

Renato K. De Borja, Jr. 99,964 0.0067%

Bernadette T. Ratcliffe 13,292 0.0009%

Renato P. Peralta 61,546 0.0041%

Grace N. Ang 53,171 15,000 0.0045%

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2) Does the Annual Report disclose the following:

Key risks Yes

Corporate objectives Yes

Financial performance indicators Yes

Non-financial performance indicators Yes

Dividend policy No

Details of whistle-blowing policy Yes

Biographical details (at least age, qualifications, date of first appointment, relevant experience, and any other directorships of listed companies) of directors/commissioners

Yes

Training and/or continuing education programme attended by each director/commissioner

Yes

Number of board of directors/commissioners meetings held during the year Yes

Attendance details of each director/commissioner in respect of meetings held Yes

Details of remuneration of the CEO and each member of the board of directors/commissioners

Yes

Should the Annual Report not disclose any of the above, please indicate the reason for the non-disclosure.

Dividend Policy – the Bank has yet to finalize its Dividend Policy. In prior years’ statement, the Bank has disclosed dividends attached to its Preferred Shares. Once the Dividend Policy on its common shares has been finalized, the same shall be included in the annual report.

3) External Auditor’s fee

Name of auditor Audit Fee Non-audit Fee

Sycip, Gorres, Velayo and Co. PHP 3,075,000 PHP 5,100,000

4) Medium of Communication

List down the mode/s of communication that the company is using for disseminating information. 1. Periodic submission of structured reports to the PSE and SEC 2. Immediate submission of unstructured reports to PSE and SEC in the event a material information occurs 3. Annual investor briefing participation locally and abroad 4. Accommodation of queries by various existing and potential investors through personal meetings, email, and

tele-conference 5. Press releases to leading newspapers in circulation pertaining to significant developments happening in the

Bank 6. Continuous update of the Bank’s website (www.eastwestbanker.com) for all of the above information

released to the public

5) Date of release of audited financial report: March 09, 2015

6) Company Website

Does the company have a website disclosing up-to-date information about the following?

Business operations Yes

Financial statements/reports (current and prior years) Yes


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Materials provided in briefings to analysts and media Yes

Shareholding structure Yes

Group corporate structure Yes

Downloadable annual report Yes

Notice of AGM and/or EGM Yes

Company's constitution (company's by-laws, memorandum and articles of association)

Yes

Should any of the foregoing information be not disclosed, please indicate the reason thereto. Not applicable

7) Disclosure of RPT

The amounts and the balances arising from the foregoing significant related party transactions of the Group and of the Parent Company are as follows:

2015

Category

Amount/

Volume

Outstanding

Balance Terms and Conditions/Nature

Significant investors: Loans receivable P=− P=5,621,850 Loans granted with a term of seven years, interest of

4.50%, secured by REM and deposits, no

impairment Deposit liabilities − 1,671,459 Deposit liabilities with interest ranging from 0.50% to

1.00%

Accrued interest receivable − 62,760 Interest income accrued on outstanding loans receivable

Accrued expenses − 20,502 Payable for management and professional fees paid by

FDC (reimbursement for expenses) Guarantees and commitments − 150,097 Unused credit lines

Interest income 228,247 − Interest income on loans receivable

Interest expense 9,458 − Interest expense on deposit liabilities

Key management personnel: Loans receivable − 33,433 Loans granted with terms ranging from two to fifteen

years, interest ranging from 6.00% to 10.27%,

secured at 100% Deposit liabilities − 28,758 Deposit liabilities with interest ranging from 0.50% to

5.88%

Accrued interest receivable − 196 Interest income accrued on outstanding loans receivable

Interest income 3,149 − Interest income on loans receivable

Interest expense 147 − Interest expense on deposit liabilities

Other related parties:

Loans receivable − 4,834,271 Loans granted with terms ranging from three months to

thirteen and a half years, interest ranging from 4.0% to 11.52%, 97% secured by real estate and chattel

mortgage, no impairment

Receivables purchased − 519,481 Receivables purchased by the Parent Company from FLI

Financial assets at FVTPL − - No issuance of FLI debt securities held for trading by

the Parent Company for the year. Deposit liabilities − 9,580,469 Deposit liabilities with interest ranging from 0.50% to

6.0%

Accrued interest receivable − 7,779 Interest income accrued on outstanding loans receivable

Guarantees and commitments − 444,574 Unused credit lines

Accounts receivable 431,529 Receivable from FAI on the sale of land by the Parent Company, payable in 5 years, interest of 6.00% and

other related advances to EWAL that remained

outstanding for the year. (see Note 10) Gain on sale of land - − No sale of the Parent Company’s land to FAI for the

year.

Interest income 310,346 − Interest income on loans receivable and sale of land. Interest expense 23,625 − Interest expense on deposit liabilities

Service fee expense 1,946 − Service fees paid to FLI for account servicing

equivalent to 1.12% of loan amounts collected by FLI on behalf of the Parent Company (see Note 9)

Rent expense 43,178 − Rent expenses paid for lease transactions with other

related parties such as Filinvest Asia Corporation,

53

2015

Category

Amount/

Volume

Outstanding

Balance Terms and Conditions/Nature

FAI and FLI Investment in Joint Venture - 471,287 Equity Share of 50% in EWAL

The Group’s significant investors pertain to FDC, the immediate Parent Company of the Group, and FDC Forex Corporation (a company under common control of FDC). Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. The Group considers the members of the Management Committee to constitute key management personnel for purposes of PAS 24. The Group provides banking services to its key management personnel. Other related parties pertain to the Group’s affiliates (subsidiaries of FDC). The Group and the Parent Company had no outright purchases and outright sale of debt securities with significant shareholders and key management personnel in 2015 and 2014. In 2015, the Parent Company has no purchases of peso-denominated debt securities issued by Filinvest Land, Inc., an affiliate, as of December 31, 2015. No provision and allowance for loan losses was recognized by the Group for loans to significant investors, key management personnel and other related parties in 2015 and 2014. The Parent Company’s subsidiaries have no transactions with related parties outside of the Group. The transactions disclosed above are the same for the Group and the Parent Company. Parent Company Related Party Transactions Transactions between the Parent Company and its subsidiary (EWRB) meet the definition of related party transactions. In addition to the transactions discussed above, the following are the transactions between the Parent Company and its subsidiaries that are recognized in the Parent Company’s statements of financial position and statements of income and eliminated in the consolidated financial statements:

2015

Category

Amount/

Volume

Outstanding

Balance Terms and Conditions/ Nature

Subsidiaries:

Loans receivable P=36,437 Loan Accommodation granted with a term of seven

days. Receivables purchased 12,925,050 8,335,049 Receivables purchased by the Parent Company from

EWRB (see Note 9)

Accrued interest receivable − − Interest on receivables purchased from EWRB and loans granted to EWRB at 4.00% per annum

Accounts receivable − 1,100,957 Amount collected by EWRB from borrowers on behalf

of the Parent Company that remained unremitted by EWRB and other related expenses shouldered by the

Parent Company on behalf of EWRB and EWIB.

Deposit liabilities − 292,135 Deposit liabilities with interest rates of 0.05% to 6.0% Accounts payable − 64,907 Cash reloading transactions between EWRB and the

Parent Company

Interest income 8,044 − Interest income on outstanding loans receivable

Interest expense 366 − Interest expense on deposit liabilities by EWRB and

EWIB

Service fee expense 30,572 − Service fees paid to EWRB for account servicing equivalent to 0.37% of loan amounts collected by

EWRB in behalf of the Parent Company for the receivables purchased.

When RPTs are involved, what processes are in place to address them in the manner that will safeguard the interest of the company and in particular of its minority shareholders and other stakeholders?

54

In line with the Bank’s thrust to promote transparency, any Related Party transaction shall be on an arms-length basis and no favorable or special treatment shall be afforded to such related party unless the same treatment shall be accorded to all parties similarly interested in such dealing.

All Related Party Transactions shall be reviewed and vetted by the Corporate Governance and Compliance Committee, which serves as the Board’s Related Party Committee. This Committee is composed of 5 Board members, 3 of whom are independent directors. Furthermore, the Chief Compliance Officer and the Chief Audit Executive sit as non-voting members in the said committee whenever there are Related Party Transactions for vetting. Upon approval, the transactions shall be endorsed and presented to the Board for approval. All approved Related Party Transactions are reported to the Bangko Sentral ng Pilipinas in accordance with the regulatory reporting requirements.

J. RIGHTS OF STOCKHOLDERS

Except for pre-emptive right, the stockholders of the Bank possess all the rights of a stockholder under the Corporation Code of the Philippines, to wit:

1) Right to attend and vote in person or by proxy at stockholders’ meeting. 2) Right to elect and remove directors. 3) Right to approve certain corporate acts. 4) Right to adopt and amend or repeal the by-laws or adopt new by-laws. 5) Right to compel the calling of meetings when for any cause there is no authorized person to call such a

meeting. 6) Right to issuance of certificate or stocks or other evidence of stock ownership and be registered as a

stockholder. 7) Right to receive dividends when declared. 8) Right to participate in the distribution of corporate assets upon dissolution. 9) Right to transfer of stocks in the corporate books. 10) Right to inspect corporate books and records. 11) Right to be furnished the most recent financial statements upon request and to receive financial report of

the corporation’s operations. 12) Right to bring individual and representative or derivative suits. 13) Right to recover stock unlawfully sold for delinquency. 14) Right to enter into voting trust agreements. 15) Right to demand payment for the value of his shares and withdraw from the corporation in certain cases. 16) Right to have the corporation voluntarily dissolved.

1) Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings

(a) Quorum

Give details on the quorum required to convene the Annual/Special Stockholders’ Meeting as set forth in its By-laws.

Quorum Required

As prescribed in the bylaws of the Bank, the registered owners of at least a majority of the outstanding capital stock present in person or by proxy shall constitute a quorum to do business except in those case whether the corporate Code provides a greater percentage vis-à-vis the total outstanding capital stock.

(b) System Used to Approve Corporate Acts

Explain the system used to approve corporate acts.

System Used There is no specific system used. The bank complies with all laws and

55

Description regulations for the approval of corporate acts.

(c) Stockholders’ Rights

List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting that differ from those laid down in the Corporation Code.

Stockholders’ Rights under The Corporation Code

Stockholders’ Rights not in The Corporation Code

None

Dividends

Declaration Date Record Date Payment Date

Not Applicable

(d) Stockholders’ Participation

1. State, if any, the measures adopted to promote stockholder participation in the Annual/Special Stockholders’ Meeting, including the procedure on how stockholders and other parties interested may communicate directly with the Chairman of the Board, individual directors or board committees. Include in the discussion the steps the Board has taken to solicit and understand the views of the stockholders as well as procedures for putting forward proposals at stockholders’ meetings.

Ensure the participation of the shareholders thru widespread dissemination of the notice of the shareholders’ meeting including the use of newspaper publication and the service to each of the shareholder of the bank thru modes allowed in the By-laws.

Encourage direct participation by providing relevant materials to the entire shareholder regardless o the number of their shares.

Have a Question and Answer period to be participated by stockholders during the ASM.

Measures Adopted Communication Procedure

2. State the company policy of asking shareholders to actively participate in corporate decisions regarding: a. Amendments to the company's constitution b. Authorization of additional shares c. Transfer of all or substantially all assets, which in effect results in the sale of the company

All proposals for amendment of the corporate charters, issuance of additional shares and transfer of assets are sent to all the shareholders of record in order that the same could be considered by the shareholders in a meeting called for that purpose. The Chair will explain the rationale and after, questions are entertained from the floor. The vote required to adopt proposal is based on the number of votes prescribed by law.

3. Does the company observe a minimum of 21 business days for giving out of notices to the AGM where items to be resolved by shareholders are taken up? Yes

a. Date of sending out notices: February 12, 2015 b. Date of the Annual/Special Stockholders’ Meeting: April 17, 2015

4. State, if any, questions and answers during the Annual/Special Stockholders’ Meeting. Refer to the attached minutes of the Annual Stockholder’s Meeting (Annex 10)

5. Result of Annual/Special Stockholders’ Meeting’s Resolutions

56

Refer to the attached Minutes of the Annual Stockholders’ Meeting on April 17, 2015. (Please see Annex 10)

6. Resolution 7. Approving 8. Dissenting 9. Abstaining

10. 11. 12. 13.

14. 15. 16. 17.

18. Date of publishing of the result of the votes taken during the most recent AGM for all resolutions: The Bank published the results of its Annual Stockholder’s Meeting the day after the Annual Stockholder’s meeting held on April 17, 2015.

(e) Modifications

State, if any, the modifications made in the Annual/Special Stockholders’ Meeting regulations during the most recent year and the reason for such modification:

Modifications Reason for Modification

None

(f) Stockholders’ Attendance

(i) Details of Attendance in the Annual/Special Stockholders’ Meeting Held:

Below is the attendance report provided by the bank’s stock transfer agent, Stock Transfer Service Inc for those stockholders who were attended in person or in proxy during the Annual Stockholder’s Meeting on April 17, 2015.

Type of Meeting

Names of Board members / Officers present

Date of Meeting Voting Procedure

(by poll, show of hands, etc.)

% of SH

Attending in

Person

% of SH in Proxy

Total % of SH attendance

Annual

1. Andrew Gotianun Sr. – NED/ Chairman Emeritus 2. Mercedes T. Gotianun – NED 3. L. Josephine T. Gotianun Yap – NED / Chairman of the Compensation Committee 4. Jonathan T. Gotianun – NED/ Chairman 5. Antonio C. Moncupa Jr. – ED/ President and CEO 6. Jose S. Sandejas – NED/ Chairman of Risk Management Committee 7. Carlos R. Alindada – NED/ Chairman of Audit Committee

April 17, 2015

Voting by show of hands

.0 77.96 77.96

57

Type of Meeting

Names of Board members / Officers present

Date of Meeting Voting Procedure

(by poll, show of hands, etc.)

% of SH

Attending in

Person

% of SH in Proxy

Total % of SH attendance

8. Paul Aquino – NED/ Chairman of Corporate Governance and Compliance Committee 9. Benedicto M. Valerio Jr. – NED / Corporate Secretary

(ii) Does the company appoint an independent party (inspectors) to count and/or validate the votes at the ASM/SSMs?

Yes.

(iii) Do the company’s common shares carry one vote for one share? If not, disclose and give reasons for any divergence to this standard. Where the company has more than one class of shares, describe the voting rights attached to each class of shares.

Yes, one vote for one share.

(g) Proxy Voting Policies

State the policies followed by the company regarding proxy voting in the Annual/Special Stockholders’ Meeting.

Company’s Policies

Execution and acceptance of proxies Form for proxy are sent to the stockholders of record as part of ASM with instructions on how to accomplish it, including the instruction of the shareholder on how to vote on specific matters in the agenda.

Notary Proxies are required to be notarized.

Submission of Proxy Proxies may be submitted to the office of the corporate secretary or to the office designated in the principal office of the Bank.

Several Proxies Proxy may cover one or several shares at the option of the shareholder.

Validity of Proxy Valid only for a specific meeting.

Proxies executed abroad Uniform rules for proxies executed in the Philippines and abroad.

Invalidated Proxy Shareholders of invalidated proxies are informed in writing at a date which would give them sufficient time to address noted deficiencies before the ASM.

Validation of Proxy Cut-off date for validation of the proxy is indicated in the notice of meeting. Validation is done by the Corp Sec assisted by the stock and transfer agent.

Violation of Proxy Proxies are voted strictly in accordance with its term.

(h) Sending of Notices

State the company’s policies and procedure on the sending of notices of Annual/Special Stockholders’ Meeting.

58

Policies Procedure

Notices may be sent by registered mail, personal service or by publication.

Notice of ASM is published in a newspaper of general circulation. ASM kit, together with the notice, is also sent to all stockholders of record as of a pre-determined record date.

(i) Definitive Information Statements and Management Report

Number of Stockholders entitled to receive Definitive Information Statements and Management Report and Other Materials

All

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by market participants/certain beneficial owners

21 days before scheduled meeting.

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by stockholders

21 days before scheduled meeting.

State whether CD format or hard copies were distributed

The CD format was distributed at initial distribution and the hard copies at actual stockholders’ meeting.

If yes, indicate whether requesting stockholders were provided hard copies

Yes

(j) Does the Notice of Annual/Special Stockholders’ Meeting include the following:

Each resolution to be taken up deals with only one item. Yes

Profiles of directors (at least age, qualification, date of first appointment, experience, and directorships in other listed companies) nominated for election/re-election.

Yes

The auditors to be appointed or re-appointed. Yes

An explanation of the dividend policy, if any dividend is to be declared. Yes

The amount payable for final dividends. Not applicable

Documents required for proxy vote. Yes

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

2) Treatment of Minority Stockholders

(a) State the company’s policies with respect to the treatment of minority stockholders.

Policies Implementation

No discrimination. All queries during the stockholders meeting are entertained regardless of the number of the shares the shareholder has in the Bank. No preference is given to any of the stockholders by virtue of the number of the shares that they hold.

Observance of right. The rights of a shareholder under its by-laws and the law are respected by the Bank.

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(b) Do minority stockholders have a right to nominate candidates for board of directors?

Yes. Minority shareholders have the right to nominate and elect the members of the board of directors which is impliedly expressed in the rights of the shareholders prescribed in the Corporation Code of the Philippines.

K. INVESTORS RELATIONS PROGRAM

1) Discuss the company’s external and internal communications policies and how frequently they are reviewed. Disclose who reviews and approves major company announcements. Identify the committee with this responsibility, if it has been assigned to a committee.

The Bank’s communication frameworks are centralized through the following units:

a. Strategic Management Department (SMD)

SMD is responsible for the investor relations framework of the Bank. Thus, all structured public disclosure and announcement of material information shall be coursed through SMD. Likewise, all external announcements, i.e. press releases, newspaper ads, etc. that will be released by any of the Bank’s units shall be coursed through SMD for clearance. SMD reviews and ensures the accuracy of all financial and non-financial external announcements prior to providing clearance. Likewise, if the announcement is material in nature, SMD shall ensure that it is properly disclosed to the PSE or SEC prior to release to the press or to external parties. SMD is also responsible in informing all Bank Directors and Principal Officers of the blackout trading period prior to the disclosure of material information.

b. Bank Marketing and Corporate Communications (BMCC)

BMCC is responsible for the release of all external and internal communication to ensure that these comply with the Bank’s communication standards. The approval process would depend on the nature of the announcement, such as: - Product specific announcements (e.g. advertisements, promotions, branch opening, etc.) shall be

endorsed by the project owner and approved by the head of the unit in charge of the product. The approval of the unit head signifies that the information to be released is accurate and has gone through the necessary approval process set forth by the Bank.

- Bank-wide related announcements (e.g. financial performance, branding, etc.) shall be endorsed by the project owner and approved by the President / CEO.

- SMD shall be informed by BMCC prior to release of announcement to ensure that there is no material information to be disclosed. SMD ensures that the public is informed ahead, through appropriate PSE / SEC disclosures, prior to BMCC’s release of the announcement through the press or to other external party.

2) Describe the company’s investor relations program including its communications strategy to promote effective

communication with its stockholders, other stakeholders and the public in general. Disclose the contact details (e.g. telephone, fax and email) of the officer responsible for investor relations.

Details

(1) Objectives The objective of EastWest’s Investor Relations (IR) framework is to ensure that the investing public is fully informed at all times of significant developments and material information pertaining to the Bank, and no investor shall be disadvantaged by lack of access to these information.

(2) Principles The IR principle pertain to the strict adherence on the timely, accurate and credible reporting of all corporate information, business performance, and any material information of the Bank based on the disclosure standards set by the Philippine Stock Exchange (PSE) and the Securities and Exchange

60

Commission (SEC). As a listed company, IR is a critical function of EastWest Bank (EW) in order to ensure that all our clients and investors have access to the same level of information. Likewise, it is important that all officers and employees of EW provide same standard of information to the public to establish credibility to the public on the way we do business. All these are envisaged contribute to achieving fair valuation of our listed shares.

(3) Modes of Communications The following are the modes of communication used in the Investor Relations framework:

a. Periodic submission of structured reports to the PSE and SEC

b. Immediate submission of unstructured reports to PSE and SEC in the event a material information occurs

c. Annual investor briefing participation locally and abroad

d. Accommodation of queries by various existing and potential investors through personal meetings, email, and tele-conference

e. Press releases to leading newspapers in circulation pertaining to significant developments happening in the Bank

f. Continuous update of the Bank’s website (www.eastwestbanker.com) for all of the above information released to the public

(4) Investors Relations Officer The Bank’s Investor Relations is under Strategic Management Department with the following contact information: Address: 5th Fl., The Beaufort, 5th Avenue corner 23rd Street, Bonifacio Global City, Taguig City, Philippines Email: [email protected] Website: http://www.eastwestbanker.com/info/ir_main.asp The following are the official contact persons under EW Investor Relations: Aerol Paul B. Banal Corporate Planning Officer [email protected] Tel. No. (631) 5753888 loc. 3586 Fax No. (632) 5753888 loc. 3623 The following are the other Corporate Information Officers of EW, as submitted to the Philippine Stock Exchange (PSE): Atty. Benedicto M. Valerio, Jr. Corporate Secretary [email protected] Tel. No. (632) 5753871 Fax No. (632) 8150619 / (632) 8184147 Rene K. De Borja, Jr. Chief Finance Officer [email protected]


mailto:[email protected]

http://www.eastwestbanker.com/info/ir_main.asp




61

3) What are the company’s rules and procedures governing the acquisition of corporate control in the capital

markets, and extraordinary transactions such as mergers, and sales of substantial portions of corporate assets? Name of the independent party the board of directors of the company appointed to evaluate the fairness of the transaction price. Once a target company is identified, a memorandum of understanding (MOU) or a letter of intent (including nondisclosure agreement) will be executed prior to commencing preliminary transactions among parties to the acquisition. The Management will then create a Due Diligence Team. At the outset, the Due Diligence Team will have to agree on the scope of the examination/investigation (i.e. Corporate, financial, legal, etc.). Should the Bank decide to continue with the merger and acquisitions (M&A) after due diligence investigations, the legal documentations (i.e. Deed of Assignment, Articles and Plan of Merger) will be drafted. All proposed M&A transactions are presented to the Board for approval. If the transaction received majority vote consent from the boards of directors, such M&A transaction must be approved by the shareholders. The shareholders of all of the involved companies shall be given a notice. This notice should also inform them as to the purpose of the meeting and include a summary of the plan for the M&A. An affirmative vote of stockholders representing at least two-thirds of the outstanding capital stock of the Bank is needed to approve the plan. After approval, any amendment to the plan for the M&A must similarly be approved by a majority vote from the board of directors and an affirmative vote from stockholders representing at least two thirds of the Bank’s outstanding capital stock. Bank acquisition, mergers and consolidations are subject to the approval of the Bangko Sentral ng Pilipinas (BSP). The Bank should consult with the BSP prior to the finalization of any M&A transaction. The price/exchange ratio to be applied in the M&A shall be determined by the Board in consultation with a reputable independent auditor.

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Discuss any initiative undertaken or proposed to be undertaken by the company.

Initiative Beneficiary

The Bank is in the process of drafting a CSR charter. Employees, Community, Regulators, Customers and Shareholders

M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL

Disclose the process followed and used in assessing the annual performance of the board and its committees, individual director, and the CEO/President.

Process Criteria

Board of Directors A self-assessment form is accomplished by the members of the Board at the start of the year to assess its performance and effectiveness as a body, the various committees, the CEO/President and the Individual Directors. The over-

Criteria used in the self-assessment are in accordance with the SEC Memorandum Circular No. 6, Series of 2009 (Revised Code of Corporate Governance) and Subsection X141.3 (Power/Duties and Responsibilities of Directors)

Board Committees

Individual Directors

CEO/President

62

all result of the annual self-assessment is presented to the Board through the Corporate Governance and Compliance Committee (CGCC).

of the Manual of Regulations for Banks (MORB). Each guide question is rated from 1-10, with 10 being the highest (the lowest being not observed and the highest being largely observed).

N. INTERNAL BREACHES AND SANCTIONS

Discuss the internal policies on sanctions imposed for any violation or breach of the corporate governance manual involving directors, officers, management and employees

Violations Sanctions

First violation Reprimand

Second violation Suspension from office. The duration of the suspension shall depend on the gravity of the violation.

Third violation Maximum penalty of removal from office shall be imposed.

Internal Audit Manual

PM IAD – 2013-

Title of Manual

Internal Audit Manual

Policy Expert

Internal Audit Issue Date

Page No.

1 of 3

SECTION DOCUMENT

1000 AUTHORITY, ORGANIZATION AND PROFESSIONAL STANDARDS

1100 AUTHORITY

1102 APPROVED INTERNAL AUDIT CHARTER

A. VISION

To provide excellent service in the performance of our audit functions and consulting activities in the spirit of partnership with objectivity and fairness in accordance with the highest professional and ethical standards. We will be a support unit that provides value-added audit to assist in the achievement of the bank’s goals and performance objectives. To continually improve our auditing programs and strive towards achieving world class auditing practices. We will support the pursuit of professional advancement, sharing of knowledge, best practices and experiences with our colleagues. To assist the bank in instilling a culture of an effective risk management, control, and governance processes.

B. MISSION

The mission of Internal Audit is to provide independent, objective assurance and consulting

services designed to add value and improve the Bank’s operations. It helps the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

C. SCOPE OF WORK

The scope of work of Internal Audit is to determine whether the Bank’s systems of risk management, control, and governance processes are adequate and functioning in a manner to ensure:

Risks are identified and managed.

Quality and continuous improvement are upheld in the Bank’s control process.

Significant financial, managerial, and operating information is accurate, reliable, and timely.

Employees comply with policies, standards, procedures, and applicable laws and regulations.

Resources are acquired economically, used efficiently, and protected adequately.

Programs, plans, and objectives are achieved.

Interaction with the various working committees occurs as needed.

Significant regulatory issues affecting the Bank are recognized and addressed appropriately.

Opportunities for improving management control, profitability, and the organization’s image may be identified during audits. They will be communicated to the appropriate level of management.

D. ACCOUNTABILITY

The Chief Audit Executive, in the discharge of his/her duties, shall be accountable to management and the Audit Committee to:

Issue an annual report summarizing results of audit activities including significant risk exposures and control issues.

Report significant issues related to the processes for controlling the activities of the Bank, including potential improvements to those processes, and provide information concerning such issues.

Periodically provide information on the status and results of the annual audit plan and the sufficiency of division’s resources.

E. INDEPENDENCE

To provide for the independence of Internal Audit, its personnel report to the Internal Auditor, who reports functionally to the Audit Committee and administratively to the Chief Executive Officer in a manner outlined in the above section on Accountability.

Internal Audit is entirely independent of all other organizational units of the Bank as well as of the personnel and work audited. It should not implement nor develop procedures, prepare records or engage in other activities, which it normally reviews or appraise.

Internal Audit review and appraisal should not in any way relieve other persons in the organization of the responsibilities assigned to them. In accepting proposed consulting engagements, Internal Audit shall consider the engagement’s potential to improve management of risks, add value, and improve the organization’s operations. The acceptance of consulting engagement shall have prior approval from the Audit Committee and endorsed by Chief Audit Executive. When performing consulting services, the Internal Auditor should maintain objectivity and not assume management responsibility.

F. RESPONSIBILITY The Internal Auditor and staff of the Internal Audit have responsibility to:

Develop a flexible annual audit plan using a risk-based methodology, including any risks or control concerns identified by management, and submit that plan to the Audit Committee for review and approval as well as periodic updates.

Implement the annual audit plan, as approved, including as appropriate any special tasks or projects requested by management and the Audit Committee.

Maintain a professional audit staff with sufficient knowledge, skills, experience, and professional certifications to meet the requirement of this Charter.

Conduct investigation of significant suspected fraudulent activities within the organization and notify management and the Audit Committee of the results. Gather and analyze relevant facts. Identify control weaknesses. Recommend appropriate control improvements and further course of action.

SECTION DOCUMENT


1100 AUTHORITY


Consider the scope of work of the external auditors and regulators for the purpose of providing optimal audit coverage to the organization at a reasonable overall cost.

Coordinate issues with other control and monitoring functions such as Risk Management, Compliance, Security, Legal, Automated System, Systems and Methods and external audit, as appropriate.

Establish relationship with external auditors and supervisory authorities to facilitate effective communication.

G. AUTHORITY

The Internal Auditor and staff of the Internal Audit are authorized to:

Access all functions, information, documents, property, systems and personnel There is no need to pre-clear with the auditee’s officer to answer queries or present

files or documents for examination of the auditor. Audit may at all times conduct a search of the Bank’s premises and facilities.

Access the reports, working papers or results of work of other auditors and experts engaged by the Bank.

Review agreement between the Bank and any service provider before or post effect. Carry out such audit work as is considered necessary regarding the outsourced function.

Have full and free access to the Audit Committee.

Allocate resources, set priorities/frequencies, select subjects, determine scopes of work, and apply the techniques required to accomplish audit objectives.

Obtain the necessary assistance of personnel in units of the organization where they perform audits, as well as other specialized services from within or outside the Bank.

Give final rating to the unit or function audited based on its assessment and in accordance with its audit rating system.

With the endorsement of the CAE and approval of the Audit Committee, engage the services of appropriately-selected external service provider in any audit activity/ies to support or complement Internal Audit. The decision to outsource must be guided by the needs or demands of the Bank and in accordance with regulatory requirements and industry standards.

H. STANDARDS OF AUDIT PRACTICE

Internal Audit adheres to the standards of best professional practice, such as those published by the Institute of Internal Auditors and the Information Systems Audit and Control Association, and the relevant reports, recommendations and pronouncements of the Bangko Sentral and other regulatory bodies.

SECTION DOCUMENT


1100 AUTHORITY


AUDIT COMMITTEE CHARTER

A . Purpose

To assist the board of directors in fulfilling its oversight responsibilities:

- for the financial reporting process,

- the system of internal control, and

- the bank's process for monitoring compliance with laws and regulations and the code of conduct.

To provide reasonable assurance to the board on the overall management of credit, market, liquidity, operational, legal and other risks of the bank.

B. Power and Authority

The audit committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:

Appoint, compensate, and oversee the work of any registered public accounting firm employed by the organization.

Oversee the resolution of disagreement between management and the external auditors, in the event they arise.

Pre-approve all auditing and permitted non-audit services.

Retain and compensate independent counsel, consultants and other experts and advisors (accounting, financial or otherwise) and also may use the services of the corporation’s regular counsel or other advisors to the bank. The bank will provide appropriate funding, as determined by the committee, for payment of compensation to the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services, for payment of compensation to any experts or advisors retained by the committee and for payment of ordinary administrative expenses of the committee.

Seek any information it requires from employees (all of whom are directed to cooperate with the committee's request) or external parties.

Meet with the company officers, external auditors, or outside counsel, as necessary.

The powers and responsibilities delegated to the committee may be exercised in any manner the committee deems appropriate (including delegation to subcommittees) and without any requirement for board approval except as otherwise specified in this charter or the board’s delegation. Any decision by the committee, including any decision to exercise or refrain from exercising any of its delegated powers, is at the committee’s sole discretion. While acting within the scope of the powers and responsibilities delegated to it, the committee may exercise all the powers and authority of the board and, to the fullest extent permitted by law, has the authority to determine which matters are within the scope of its delegated authority.

C. Membership

The Board of Directors shall determine the number of Audit Committee members in accordance with SEC and BSP regulations. The committee shall consists of members of the board of directors, at least two (2) of whom shall be independent directors, including the chairperson. The committee’s members, including its chair, preferably with accounting, auditing or related financial management expertise or experience, are appointed by the board upon the recommendation of the board’s Corporate Governance Committee. The board, upon such recommendation, also may

appoint one or more additional members of the board as alternate members of the committee to replace any absent member at any committee meeting.

D. Meetings

The Audit Committee shall meet at least four times annually, or more frequently as circumstances dictate. To the extent practicable, each of the Audit Committee members shall attend each of the regularly scheduled meetings in person.

A majority of the Audit Committee members currently holding office constitutes a quorum for the transaction of business. The Audit Committee shall take action by the affirmative vote of a majority of the Audit Committee members present at a duly held meeting.

The Audit Committee shall meet periodically in separate executive sessions with management (including the chief executive officer, chief operating officer and chief finance officer), the internal auditors and the independent auditor, and have such other direct and independent interaction with such persons from time to time as the members of the Audit Committee deem appropriate.

The Audit Committee may request any officer or employee of the bank or the bank's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

E. Responsibilities The committee will carry out the following responsibilities.

1. Financial reporting, including disclosures

Monitor the financial reporting process and its quarterly output;

Oversee the establishment of accounting policies and practices by the bank and review the significant qualitative aspects of the bank’s accounting practices, including accounting estimates and financial disclosures

Monitor the integrity of the bank’s financial statements and any formal announcements relating to the bank’s financial performance;

Review significant financial reporting judgments contained in the financial statements;

Review with management and the external auditors, recent accounting, tax and regulatory pronouncements , and understand their impact on the financial statements

Discuss with the external auditor the report that the auditor is required to make to the committee regarding: - All accounting policies and practices to be used that the independent auditor

identifies as critical. - All alternative treatments within generally accepted accounting principles for policies

and practices related to material items that have been discussed among management and the independent auditor, including the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the auditor.

- Other material written communications between the independent auditor and management of the bank, such as any management letter, management representation letter, reports on observations and recommendations on internal controls, independent auditor’s engagement and independence letters, schedule of unadjusted audit differences and any listing of adjustments and reclassifications not recorded.

Review and discuss with management and the external auditor the annual audited financial statements, including the bank's specific disclosures made in management's discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the bank's Annual Report.

Review with management and the independent auditor: (1) major issues regarding accounting principles and financial statement presentation, including any significant

changes in the bank's selection or application of accounting principles; and (2) major issues as to the adequacy of the bank's internal controls and any special audit steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting; and (3) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the bank.

Discuss with management the bank's major risk exposures and the steps management has taken to monitor and control such exposures including the bank's risk assessment and risk management policies.

Review disclosures made to the Audit Committee by the bank's CEO and CFO about any significant deficiencies in the design or operations of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the bank's internal controls.

Review procedures by which bank employees and other concerned parties may confidentially raise concerns or complaints about possible improprieties in matters of financial reporting.

2. Internal Control

Ensure that senior management establishes and maintains an adequate and effective internal control system and processes. The system and processes should be designed to provide assurance in areas including reporting (financial, operational. Risk), monitoring compliance to laws, regulations and internal policies, efficiency and effectiveness of operations and safeguarding of assets.

Consider the effectiveness of the bank's internal control system, including information technology security and control.

Understand the scope of internal and external auditors' review of internal control over financial reporting, and obtain reports on significant findings and recommendation.

3. Internal Audit

Monitor and review the effectiveness of the internal audit function, including compliance with the Institute of Internal Auditors' Standards for the Professional Practice of Internal Auditing.

Review and approve the charter, plans, activities, staffing, budget and organizational structure of the internal audit function annually.

Report to the board of directors on the status of accomplishments of the outsourced internal audit activities, including significant findings noted during the conduct of the internal audit;

Review significant findings contained in reports prepared by the internal audit together with management’s response and follow-up for corrective action.

Ensure that the internal audit function maintains open communication with senior management, external auditors, the supervisory authority, and the audit committee.

Ensure there are no unjustified restrictions or limitations in the performance of the internal audit function.

On a regular basis, meet separately with the chief executive to discuss any matters that the committee or internal audit believes warrant audit committee attention that should be discussed privately.

Review all reports concerning significant fraud or regulatory noncompliance that occurred at the bank considering internal controls that should be strengthened to reduce the risk of a similar event in the future;

Assess and report to the board the annual performance appraisal of the Chief Audit Executive (CAE);

Approve, or recommend to the board for its approval, the annual remuneration of the Chief Audit Executive (CAE) and personnel of internal audit function;

Review and approve the appointment, reappointment and replacement of the Chief Audit Executive (CAE) and key internal auditors.

4. External Audit

Approve a set of appropriate objective criteria for approving the external audit firm of the bank;

Approve, or recommend to the board or stockholders for their approval, the appointment, re-appointment and removal of external audit firm;

Approve the remuneration and terms of engagement of the external audit firm;

Review the independent auditors audit plan – discuss scope, staffing, reliance upon management and the internal audit, general audit approach, and coverage provided to any significant areas of concern that the Committee may have.

Ensure that senior management is taking necessary corrective actions to address the findings and recommendations of external auditors and regulatory authority in a timely manner.


Prior to publishing the year-end earnings, discuss the results of the audit with the external auditors.

On an annual basis, the audit committee should review and discuss with the external auditors all significant relationships they have with the bank that could impair the auditors’ independence.

On a regular basis, meet separately with the external auditors to discuss any matters that the committee or auditors believe should be discussed privately.

5. Compliance

On at least an annual basis, review with the bank’s counsel, any legal/regulatory matters that could have a significant impact on the bank’s financial statements, compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.

6. Remedial Actions

Ensure the senior management is taking necessary corrective actions to address the findings and recommendations of internal auditors and external auditors in a timely manner.

Addressing control weaknesses, non-compliance with policies, laws and regulations and other problems identified by internal auditors and external auditors, and;

Ensuring the deficiencies identified by supervisory authorities related to the internal audit function are remedied within appropriate time frame and that progress of necessary corrective actions are reported to the board of directors.

F. Reporting Responsibilities

Regularly report to the board of directors about committee activities, issues, and related recommendations.

Provide an open avenue of communication between internal audit, the external auditors, and the board of directors.

Report annually to the shareholders, describing the committee’s composition, responsibilities and how they were discharged, and any other information required by rule, including approval of non-audit services.

Review any other reports the company issues that relate to committee responsibilities.

G. Other Responsibilities

Perform other activities related to this charter as requested by the board of directors.

Institute and oversee special investigations as needed.

Monitor results of internal audit activities provided to EastWest Rural Bank (EWRB) through quarterly reports on completion of internal audit plan and significant audit exceptions.

Maintain minutes of meetings and periodically report to the Board of Directors on significant results of the foregoing activities.

Review and assess the adequacy of the committee charter annually, requesting board approval for proposed changes, and ensure appropriate disclosure as may be required by law or regulation.

Confirm annually that all responsibilities outlined in this charter have been carried out.

Evaluate the committee's and individual members' performance on a regular basis.

H. Functional Support

The Internal Audit of EastWest Bank shall ensure and provide functional support to the Audit Committee in the rendition of its function.

Revised: MARCH 2014 Contains EWB Confidential Information Page 1 of 2

CORPORATE GOVERNANCE AND COMPLIANCE COMMITTEE CHARTER

I. OBJECTIVE

The Corporate Governance and Compliance Committee shall assist the Board of Directors (BOD) in fulfilling its corporate governance responsibilities and in providing oversight in the implementation of the Bank's Compliance system, including the Bank’s Money Laundering and Terrorist Financing Prevention Program (MLPP). It shall review and evaluate the qualifications of all persons nominated to the Board as well as those nominated to other positions requiring appointment by the Board of Directors.

II. MEMBERSHIP

The Corporate Governance and Compliance Committee shall be composed of the Chairman of the Board and at least three (3) members of the Board of Directors, two (2) of whom shall be independent directors.

III. DUTIES AND RESPONSIBILITIES

On Corporate Governance:

1. It shall be responsible for ensuring the Board's effectiveness and due observance of corporate governance principles and guidelines.

2. It shall make recommendations to the Board regarding the continuing education of directors, assignment to Board Committees and succession plan for the Board members and senior officers.

3. It shall decide whether or not a Director is able to and has been adequately carrying out his/her duties as director bearing in mind the director's contribution and performance (e.g. competence, candor, attendance, preparedness and participation).

4. It shall adopt internal guidelines that address the competing time commitments that are faced when directors serve on multiple boards.

5. It shall decide the manner by which the Board's performance may be evaluated and propose an objective performance criteria approved by the Board. Such performance indicators shall address how the Board has enhanced long term shareholders' value.

6. It shall oversee the periodic performance evaluation of the Board and its committees and executive management; and shall also conduct an annual self-evaluation of its performance in accordance with the criteria provided in the 2009 SEC Code of Corporate Governance.

Revised: MARCH 2014 Contains EWB Confidential Information Page 2 of 2

7. It shall oversee the accomplishment of a scorecard on the scope, nature and extent of the actions taken to meet the objectives of the 2009 SEC Code of Corporate Governance which the commission may require annually.

8. It shall review and assess the adequacy of this Charter, the Corporate Governance Manual and recommend changes for the approval of the Board at least annually.

On Compliance:

1. It shall oversee the implementation of the Bank's Compliance Program and ensure that compliance issues are resolved expeditiously.

2. It shall endorse the appointment of a Compliance Officer to the Board of Directors with a rank of at least Vice President and who a) directly reports to the Chairman of the Board and b) be responsible for coordinating, monitoring and facilitating compliance with applicable laws, rules and regulations.

3. It shall vest the Compliance Officer and the Compliance Department with the appropriate authority and provide the necessary support and resources.

4. It shall assist the Board members in making an informed assessment as to whether the Bank is managing its compliance risk effectively.

5. It shall ensure the regular review and updating, at least annually, of the Compliance Program to incorporate changes in laws and regulations for approval by the Board.

6. It shall have oversight on the Bank’s compliance with the anti-money laundering and terrorist financing prevention laws, rules and regulations.

7. It shall ensure the proper and efficient implementation of the MLPP, which includes implementation of the KYC policies and procedures, AML related record retention policies, electronic system of capturing covered and suspicious transactions and AML training program;

8. It shall review and vet all Related Party transactions and Personal Dealings in accordance with the Bank’s policies and procedures.

IV. MEMBERS' DUTIES AND RESPONSIBILITIES

The individual members of the Committee shall have and accordingly observe the specific duties and responsibilities of a director contained in the Manual of Regulations for Banks Subsection X141.3d and Article 3G of the 2009 SEC Code of Corporate Governance.

V. MEETINGS The Corporate Governance and Compliance Committee shall meet bi-monthly/once every 2 months or whenever necessary to discuss, agree and prepare reports on its recommendations. The Committee Secretary shall develop the agenda for each meeting and send out notice at least three (3) days before the meeting date. He shall likewise prepare/distribute minutes of the meetings and make other regular reports to the Board, as needed.

TRUST COMMITTEE CHARTER

A. Objective

The Trust Committee shall assist the Board of Directors (BOD) in fulfilling its

responsibilities to oversee the proper management and administration of trust and

other fiduciary business.

B. Composition of the Trust Committee

1. The Trust Committee (TrustCom) shall be composed of at least five (5) members, to

include the following:

The President

The Trust Officer

At least three (3) Directors appointed by the Board on a regular rotation basis

2. The members of the TrustCom shall be designated as follows:

Director - Chairman of the Committee

President - Member

Trust Officer - Member

Director - Member

Director - Member

3. The TrustCom Chairman shall be appointed by the Board and shall remain as

Chairman until such time the Board appoints another Director to chair the

TrustCom.

4. Members of the TrustCom shall, in addition to meeting the qualification standards

prescribed for directors and officers of financial institutions, possess the necessary

technical expertise in trust and fiduciary business (MORB, Subsections

X406.3/4406Q.3). The Trust Officer, on the other hand, shall have at least two (2)

years of actual experience or training in trust operations (MORB, Subsection 1406.3)

5. Except for the President/CEO, a Director who is also an officer of the Bank shall not

be qualified to be a member of the TrustCom. In case, however, that the TrustCom

shall be composed of more than five (5) members, the appointment therein of an

operating officer may be allowed only if required balance in the membership of at

least (3) members of the Board for every operating officer shall be maintained.

6. In lieu of or in addition to the three Directors, the Board may appoint “independent

professionals” to the Trust Committee subject to confirmation by the Monetary

Board, provided that such independent professionals meet the prescribed minimum

requirements (MORB Subsections X406.3/4406Q.3).

C. Meetings

1. The TrustCom shall meet at least once every quarter (or three months), or more

frequently as circumstances may warrant. Members may participate via electronic

mail, teleconference or videoconference.

2. A simple majority shall constitute a quorum for the TrustCom, provided the

Chairman or his designated alternate, shall always be present. An officer of the

Trust Division, other than the Trust Officer, shall act as Secretary of TrustCom and

shall record the minutes of the meeting.

3. The Committee Secretary shall develop and prepare the agenda for each meeting

and notice will be sent out at least three (3) days before the meeting date.

4. The Committee Secretary shall prepare the Minutes of the meetings and shall

subsequently summarize and present them to the Board of Directors for approval

/notation.

5. The Committee Secretary shall ensure that copies of the Minutes of the TrustCom as

well as all recommendations /proposals approved by the TrustCom are duly filed and

kept within the premises of the office and shall be made available at any time upon

request by any one of the TrustCom members, the Bank’s Compliance Officer, Audit

Division or by any regulatory body.

D. Responsibilities and Administration

The Trust Committee, duly constituted and authorized by the Board, shall act within

the sphere of authority as provided in the Bank’s By-Laws and/or as may be delegated

by the Board. It shall undertake such responsibilities, but not limited to the following:

1. Acceptance and closing of trust and other fiduciary accounts

2. Initial review of assets placed under the trustee’s fiduciary custody

3. Investment, re-investment and disposition of funds or property

4. Review and approval of transactions between trust and/or fiduciary accounts, and

5. Review of trust and other fiduciary accounts at least once every twelve (12) months

to determine the advisability of retaining or disposing of the trust or fiduciary assets

and/or whether the account is being managed in accordance with the instrument

creating the trust or other fiduciary relationship.

6. The TrustCom shall also preside over the proper conduct of the trust’s business,

reviewing on a periodic basis, business development initiatives as:

Staffing and delineation of responsibility / accountability

Proactive development and implementation of strategies for cultivating of

revenue streams and cost management

Application and monitoring of the proper performance benchmarks.

SEC Form 17-IS

December 2003 62

ANNEX E – AUDITED FINANCIAL STATEMENTS

- 2 -

*SGVFS015899*

On July 11, 2012, the Parent Company acquired 83.17% voting shares of FinMan Rural Bank, Inc.(FRBI) for P=34.10 million. FRBI’s primary purpose is to accumulate deposit and grant loans tovarious individuals and small-scale corporate entities as well as government and privateemployees (see Note 7). In 2012, the Parent Company acquired additional shares of FRBI from itsunissued capital stock amounting to P=20.00 million, thereby increasing its ownership to 91.58% asof December 31, 2012. On May 21, 2013, FRBI changed its name to East West Rural Bank, Inc.(EWRB). In 2013, the Parent Company’s deposit for future stock subscription to EWRBamounting to P=120.00 million was applied to the 46,000,000 common shares issued by EWRB tothe Parent Company. In addition, the Parent Company contributed additional capital amounting toP=340.00 million and acquired the remaining non-controlling interest amounting to P=6.90 million,thereby increasing its ownership to 100.00% as of December 31, 2013. The Parent Company’sinvestment in EWRB amounted to P=521.00 million as of December 31, 2015 and 2014.

In May 2013, GBI and EWRB entered into an asset purchase agreement with assumption ofliabilities (the Purchase and Assumption Agreement) for the transfer of certain assets andliabilities of GBI to EWRB. The transfer of the assets and liabilities took effect onOctober 31, 2013 after the receipt of the required approvals from the regulators. The transfer ofthe assets and liabilities of GBI to EWRB was part of the Parent Company’s plan to combine therural banking business of its two subsidiaries into a single entity. After the transfer, EWRB willcontinue the rural banking business of GBI and the remaining assets and liabilities of GBI will bemerged to the Parent Company, with the latter as the surviving entity. On July 31, 2014, GBI wasmerged to the Parent Company (see Note 7). The merger of the Parent Company and GBI willenable the Parent Company to achieve branding leverage and economy in management andoperations.

On May 18, 2015, the BSP approved the Parent Company’s initial equity investment amounting toP=30.00 million in East West Insurance Brokerage, Inc. (EWIB), a proposed wholly-ownedinsurance brokerage insurance company of the Parent Company. On July 6, 2015, EWIB wasregistered with the SEC.

Investment in a Joint VentureOn May 28, 2015, the Parent Company and Ageas Insurance International N.V. (Ageas) enteredinto a joint venture agreement to form East West Ageas Life Insurance Corporation (EWAL) foran ownership interest of 75.00% less one share and 25.00% plus one share, respectively. EWALshall be engaged primarily in the life insurance business. As of December 31, 2015, thestockholders are in the process of satisfying the conditions of the joint venture agreement afterwhich the Parent Company shall transfer an additional 25.00% of the issued shares of EWAL toAgeas. This will result in a shareholder structure of 50.00% less one share and 50.00% plus oneshare for the Parent Company and Ageas, respectively.

On September 21, 2015, the BSP approved the Parent Company’s initial equity investmentamounting to P=500.00 million in EWAL. Subsequently, on October 20, 2015, the SEC approvedthe registration of EWAL. On December 22, 2015, EWAL obtained from the InsuranceCommission a license to operate a life insurance business. As at December 31, 2015, EWAL hasnot yet started commercial operations, pending approval of the Insurance Commission on the lifeinsurance products.

EWAL’s registered office is at One World Place, 32nd Street, Bonifacio Global City, Taguig City.

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The accompanying financial statements of the Group and of the Parent Company were approvedand authorized for issue by the Parent Company’s Board of Directors (the Board or BOD) onFebruary 24, 2016.

2. Summary of Significant Accounting Policies

Basis of PresentationThe accompanying financial statements have been prepared on a historical cost basis except forfinancial assets at fair value through profit or loss (FVTPL), financial assets at fair value throughother comprehensive income (FVTOCI) and derivative financial instruments that have beenmeasured at fair value. The financial statements are presented in Philippine peso and all valuesare rounded to the nearest thousand except when otherwise indicated.

The financial statements of the Parent Company include the accounts maintained in the RegularBanking Unit (RBU) and Foreign Currency Deposit Unit (FCDU). The functional currency of theRBU and the FCDU is the Philippine peso and United States dollar (USD), respectively. Forfinancial reporting purposes, FCDU accounts and foreign currency-denominated accounts in theRBU are translated into their equivalents in Philippine peso, which is the Parent Company’spresentation currency (see accounting policy on Foreign Currency Transactions and Translation).The financial statements individually prepared for these units are combined after eliminatinginter-unit accounts.

Each entity in the Group determines its own functional currency and items included in thefinancial statements of each entity are measured using that functional currency. The functionalcurrency of both subsidiaries is the Philippine peso.

Statement of ComplianceThe accompanying financial statements have been prepared in compliance with PhilippineFinancial Reporting Standards (PFRS).

Presentation of Financial StatementsThe Group presents its statement of financial position broadly in order of liquidity. An analysisregarding recovery or settlement within 12 months after the statement of financial position date(current) and more than 12 months after the statement of financial position date (non-current) ispresented in Note 20.

Basis of ConsolidationThe Subsidiaries are fully consolidated from the date of acquisition, being the date on which theParent Company obtains control and continue to be consolidated until the date when controlceases. The financial statements of the subsidiaries are prepared for the same reporting period asthe Parent Company using consistent accounting policies.

All significant intra-group balances, transactions, income and expenses and profits and lossesresulting from intra-group transactions are eliminated in the consolidation.

Subsidiaries are fully consolidated from the date on which control is transferred to the ParentCompany. Control is achieved where the Parent Company is exposed, or has rights, to variablereturn from its involvement with an entity and has the ability to affect those returns through itspower over the entity. The Parent Company has power over the entity when it has existing rightsthat give it the current ability to direct relevant activities (i.e., activities that signicantly affect theentity’s returns). Consolidation of subsidiaries ceases when control is transferred out of the Parent

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Company. The results of subsidiaries acquired or disposed of during the period are included in theconsolidated statement of income from the date of acquisition or up to the date of disposal, asappropriate.

Non-Controlling InterestNon-controlling interest represents the portion of profit or loss and net assets not owned, directlyor indirectly, by the Parent Company.

Non-controlling interests are presented separately in the consolidated statement of income,consolidated statement of comprehensive income, and within equity in the consolidated statementof financial position, separately from equity attributable to the equity holders of the ParentCompany. Any losses applicable to the non-controlling interests are allocated against the interestsof the non-controlling interest even if this results in the non-controlling interest having a deficitbalance. Acquisitions of non-controlling interests that does not result in a loss of control areaccounted for as equity transaction, whereby the difference between the consideration and the fairvalue of the share of net assets acquired is recognized as an equity transaction and attributed to theowners of the Parent Company.

Changes in Accounting Policies and DisclosuresThe accounting policies adopted are consistent with those of the previous financial year except forthe adoption of the following new and amended standards and interpretations, which becameeffective beginning January 1, 2015. Unless otherwise indicated, adoption of these new andamended standards and interpretations did not have material impact to the Group.

Amendments to PAS 19, Defined Benefit Plans: Employee ContributionsPAS 19 requires an entity to consider contributions from employees or third parties whenaccounting for defined benefit plans. Where the contributions are linked to service, they should beattributed to periods of service as a negative benefit. These amendments clarify that, if the amountof the contributions is independent of the number of years of service, an entity is permitted torecognize such contributions as a reduction in the service cost in the period in which the service isrendered, instead of allocating the contributions to the periods of service.

Annual Improvements to PFRSs (2010-2012 Cycle)The Group has applied these amendments for the first time in these consolidated financialstatements. Unless otherwise stated, these amendments have no impact on the Group’sconsolidated financial statements. They include:

· PFRS 2, Share-based Payment - Definition of Vesting ConditionThis improvement is applied prospectively and clarifies various issues relating to thedefinitions of performance and service conditions which are vesting conditions, including:· A performance condition must contain a service condition· A performance target must be met while the counterparty is rendering service· A performance target may relate to the operations or activities of an entity, or to those of

another entity in the same group· A performance condition may be a market or non-market condition· If the counterparty, regardless of the reason, ceases to provide service during the vesting

period, the service condition is not satisfied.

· PFRS 3, Business Combinations - Accounting for Contingent Consideration in a BusinessCombinationThe amendment is applied prospectively for business combinations for which the acquisition

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date is on or after July 1, 2014. It clarifies that a contingent consideration that is not classifiedas equity is subsequently measured at fair value through profit or loss whether or not it fallswithin the scope of PAS 39, Financial Instruments: Recognition and Measurement(or PFRS 9, Financial Instruments, if early adopted).

· PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of theTotal of the Reportable Segments’ Assets to the Entity’s Assets

The amendments are applied retrospectively and clarify that:

· An entity must disclose the judgments made by management in applying the aggregationcriteria in the standard, including a brief description of operating segments that have beenaggregated and the economic characteristics (e.g., sales and gross margins) used to assesswhether the segments are ‘similar’.

· The reconciliation of segment assets to total assets is only required to be disclosed if thereconciliation is reported to the chief operating decision maker, similar to the requireddisclosure for segment liabilities.

· PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Revaluation Method- Proportionate Restatement of Accumulated Depreciation and AmortizationThe amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the assetmay be revalued by reference to the observable data on either the gross or the net carryingamount. In addition, the accumulated depreciation or amortization is the difference betweenthe gross and carrying amounts of the asset.

· PAS 24, Related Party Disclosures - Key Management PersonnelThe amendment is applied retrospectively and clarifies that a management entity, which is anentity that provides key management personnel services, is a related party subject to therelated party disclosures. In addition, an entity that uses a management entity is required todisclose the expenses incurred for management services.

Annual Improvements to PFRSs (2011-2013 Cycle)The Group has applied these amendments for the first time in these consolidated financialstatements. Unless otherwise stated, these amendments have no impact on the Group’sconsolidated financial statements. They include:

· PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements

The amendment is applied prospectively and clarifies the following regarding the scopeexceptions within PFRS 3:

· Joint arrangements, not just joint ventures, are outside the scope of PFRS 3.· This scope exception applies only to the accounting in the financial statements of the joint

arrangement itself.

· PFRS 13, Fair Value Measurement - Portfolio ExceptionThe amendment is applied prospectively and clarifies that the portfolio exception in PFRS 13can be applied not only to financial assets and financial liabilities, but also to other contractswithin the scope of PAS 39 or PFRS 9.

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· PAS 40, Investment PropertyThe description of ancillary services in PAS 40 differentiates between the investment propertyand owner-occupied property (i.e., property, plant and equipment). The amendment is appliedprospectively and clarifies that PFRS 3, and not the description of ancillary services inPAS 40, is used to determine if the transaction is the purchase of an asset or businesscombination. The description of ancillary services in PAS 40 only differentiates betweeninvestment property and owner-occupied property (i.e., property, plant and equipment).

Investment Entities (Amendments to PFRS 10, Consolidated Financial Statements, PFRS 12,Disclosure of Interests in Other Entities, and PAS 27, Separate Financial Statements)These amendments provide an exception to the consolidation requirement for entities that meet thedefinition of an investment entity under PFRS 10. The exception to consolidation requiresinvestment entities to account for subsidiaries at fair value through profit or loss. Theamendments must be applied retrospectively, subject to certain transition relief.

PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and FinancialLiabilities (Amendments)These amendments clarify the meaning of ‘currently has a legally enforceable right to set-off’ andthe criteria for non-simultaneous settlement mechanisms of clearing houses to qualify foroffsetting and are applied retrospectively.

PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets(Amendments)These amendments remove the unintended consequences of PFRS 13, Fair Value Measurement,on the disclosures required under PAS 36. In addition, these amendments require disclosure of therecoverable amounts for assets or cash-generating units (CGUs) for which impairment loss hasbeen recognized or reversed during the period.

Philippine Interpretation IFRIC 21, Levies (IFRIC 21)IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggerspayment, as identified by the relevant legislation, occurs. For a levy that is triggered uponreaching a minimum threshold, the interpretation clarifies that no liability should be anticipatedbefore the specified minimum threshold is reached. Retrospective application is required forIFRIC 21.

Annual Improvements to PFRSs (2010-2012 cycle)In the 2010-2012 annual improvements cycle, seven amendments to six standards were issued,which included an amendment to PFRS 13, Fair Value Measurement. The amendment toPFRS 13 is effective immediately and it clarifies that short-term receivables and payables with nostated interest rates can be measured at invoice amounts when the effect of discounting isimmaterial.

Cash and Cash EquivalentsFor purposes of reporting cash flows, cash and cash equivalents include cash and other cash items(COCI), amounts due from BSP and other banks, and interbank loans and receivable (IBLR) withoriginal maturities of three months or less from dates of placements and that are subject toinsignificant risks of changes in value.

Foreign Currency Transactions and TranslationTransactions and balancesFor financial reporting purposes, the foreign currency-denominated monetary assets and liabilitiesin the RBU are translated in Philippine peso based on the Philippine Dealing System (PDS)

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closing rate prevailing at the statement of financial position date and foreign currency-denominated income and expenses, at the prevailing exchange rate at the date of transaction.Foreign exchange differences arising from revaluation and translation of foreign currency-denominated assets and liabilities of the RBU are credited to or charged against operations in theperiod in which the rates change.

Non-monetary items that are measured in terms of historical cost are translated using the exchangerates as at the dates of the initial transactions. Non-monetary items measured at fair value in aforeign currency are translated using the exchange rates at the date when the fair value wasdetermined.

FCDUAs at the reporting date, the assets and liabilities of the FCDU of the Parent Company aretranslated into the Parent Company’s presentation currency (the PHP) at PDS closing rateprevailing at the statement of financial position date, and their income and expenses are translatedat PDS weighted average rate (PDSWAR) for the year. Exchange differences arising ontranslation are taken to the statement of comprehensive income under Cumulative translationadjustment. Upon actual remittance of FCDU profits to RBU, the deferred cumulative amountrecognized in the statement of comprehensive income is recognized in the statement of income.

Fair Value MeasurementThe Group measures certain financial instruments such as financial assets at FVTPL, financialassets at FVTOCI and derivative financial instruments, at fair value at each statement of financialposition date. Also, fair values of financial instruments carried at amortized cost and investmentproperties carried at cost are measured for disclosure purposes.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:· In the principal market for the asset or liability, or· In the absence of a principal market, in the most advantageous market for the asset or liability.The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's abilityto generate economic benefits by using the asset in its highest and best use or by selling it toanother market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statementsare categorized within the fair value hierarchy, described as follows, based on the lowest levelinput that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value

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measurement is directly or indirectly observable.Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, theGroup determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

External appraisers are involved for valuation of significant non-financial assets, such asinvestment properties. Selection criteria include market knowledge, reputation, independence andwhether professional standards are maintained.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilitieson the basis of the nature, characteristics and risks of the asset or liability and the level of the fairvalue hierarchy (see Note 5).

Financial Instruments - Initial Recognition and Subsequent MeasurementDate of recognitionThe Group recognizes financial instruments when, and only when, the Group becomes a party tothe contractual terms of the financial instruments.

Purchases or sales of financial assets that require delivery of assets within the time frameestablished by regulation or convention in the marketplace are recognized on the settlement date,the date that an asset is delivered to or by the Group. Settlement date accounting refers to (a) therecognition of an asset on the day it is received by the Group, and (b) the derecognition of an assetand recognition of any gain or loss on disposal on the day that it is delivered by the Group.Securities transactions and related commission income and expense are recorded also on asettlement date basis. Deposits, amounts due to banks and customers, and loans and receivablesare recognized when cash is received by the Group or advanced to the borrowers.

Derivatives are recognized on trade date - the date that the Group becomes a party to thecontractual provisions of the instrument. Trade date accounting refers to (a) the recognition of anasset to be received and the liability to pay for it on the trade date, and (b) derecognition of anasset that is sold, recognition of any gain or loss on disposal and the recognition of a receivablefrom the buyer for payment on the trade date.

‘Day 1’ differenceWhere the transaction price in a non-active market is different from the fair value from otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Group recognizes the differencebetween the transaction price and fair value (a ‘Day 1’ difference) in the statement of income. Incases where transaction price used is made of data which is not observable, the difference betweenthe transaction price and model value is only recognized in the statement of income when theinputs become observable or when the instrument is derecognized. For each transaction, theGroup determines the appropriate method of recognizing the ‘Day 1’ difference amount.

Classification, Reclassification and Measurement of Financial Assets and Financial LiabilitiesFor purposes of classifying financial assets, an instrument is an investment in an ‘equityinstrument’ if it is non-derivative and meets the definition of ‘equity’ for the issuer (under PAS 32,Financial Instruments: Presentation). All other non-derivative financial instruments areinvestments in ‘debt instruments’.

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Financial assets at amortized costFinancial assets are measured at amortized cost if both of the following conditions are met:

· the asset is held within the Group’s business model whose objective is to hold assets in orderto collect contractual cash flows; and

· the contractual terms of the instrument give rise on specified dates to cash flows that are solelypayments of principal and interest on the principal amount outstanding.

Financial assets meeting these criteria are measured initially at fair value plus transaction costs.They are subsequently measured at amortized cost using the effective interest method less anyimpairment in value, with the interest calculated recognized as Interest income in the statement ofincome. The Group classified Cash and other cash items, Due from BSP, Due from other banks,IBLR, Investment securities at amortized cost and Loans and receivables as financial assets atamortized cost.

The Group may irrevocably elect at initial recognition to classify a financial asset that meets theamortized cost criteria above as at FVTPL if that designation eliminates or significantly reducesan accounting mismatch had the financial asset been measured at amortized cost. As ofDecember 31, 2015 and 2014, the Group has not made such designation.

Financial assets at FVTOCIAt initial recognition, the Group can make an irrevocable election (on an instrument-by-instrumentbasis) to designate equity investments as at FVTOCI. Designation at FVTOCI is not permitted ifthe equity investment is held for trading.

A financial asset is held for trading if:

· it has been acquired principally for the purpose of selling it in the near term; or· on initial recognition it is part of a portfolio of identified financial instruments that the Group

manages together and has evidence of a recent actual pattern of short-term profit-taking; or· it is a derivative that is not designated and effective as a hedging instrument or a financial

guarantee.

Financial assets at FVTOCI are initially measured at fair value plus transaction costs.Subsequently, they are measured at fair value, with no deduction for sale or disposal costs. Gainsand losses arising from changes in fair value are recognized in other comprehensive income andaccumulated in Net unrealized gain (loss) on financial assets at FVTOCI in the statement offinancial position. When the asset is disposed of, the cumulative gain or loss previouslyrecognized in Net unrealized gain (loss) on financial assets at FVTOCI is not reclassified to profitor loss, but is reclassified directly to Surplus.

The Group has designated certain equity instruments that are not held for trading as at FVTOCI oninitial application of PFRS 9 (see Note 8).

Dividends earned on holding these equity instruments are recognized in the statement of incomewhen the Group’s right to receive the dividends is established in accordance with PAS 18,Revenue, unless the dividends clearly represent recovery of a part of the cost of the investment.Dividends earned are recognized in the statement of income under Miscellaneous income.

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Financial assets at FVTPLDebt instruments that do not meet the amortized cost criteria, or that meet the criteria but theGroup has chosen to designate as at FVTPL at initial recognition, are measured at fair valuethrough profit or loss.

Equity investments are classified as at FVTPL, unless the Group designates an investment that isnot held for trading as at FVTOCI at initial recognition.

The Group’s financial assets at FVTPL include government securities, private bonds and equitysecurities held for trading purposes.

Financial assets at FVTPL are carried at fair value, and fair value gains and losses on theseinstruments are recognized as Trading and securities gain in the statement of income. Interestearned on these investments is reported in the statement of income under Interest income whiledividend income is reported in the statement of income under Miscellaneous income when theright of payment has been established. Quoted market prices, when available, are used todetermine the fair value of these financial instruments. If quoted market prices are not available,their fair values are estimated based on inputs provided by the BSP, Bureau of Treasury andinvestment bankers. For all other financial instruments not listed in an active market, the fairvalue is determined by using appropriate valuation techniques.

The fair value of financial assets denominated in a foreign currency is determined in that foreigncurrency and translated at the PDS closing rate at the statement of financial position date. Theforeign exchange component forms part of its fair value gain or loss. For financial assetsclassified as at FVTPL, the foreign exchange component is recognized in the statement of income.For financial assets designated as at FVTOCI, any foreign exchange component is recognized inother comprehensive income. For foreign currency denominated debt instruments classified atamortized cost, the foreign exchange gains and losses are determined based on the amortized costof the asset and are recognized in the statement of income.

Reclassification of financial assetsThe Group can reclassify financial assets if the objective of its business model for managing thosefinancial assets changes. The Group is required to reclassify the following financial assets:

· from amortized cost to FVTPL if the objective of the business model changes so that theamortized cost criteria are no longer met; and

· from FVTPL to amortized cost if the objective of the business model changes so that theamortized cost criteria start to be met and the instrument’s contractual cash flows meet theamortized cost criteria.

Reclassification of financial assets designated as at FVTPL at initial recognition is not permitted.

A change in the objective of the Group's business model must be effected before thereclassification date. The reclassification date is the beginning of the next reporting periodfollowing the change in the business model.

Financial liabilities at FVTPLFinancial liabilities are classified as at FVTPL when the financial liability is either held for tradingor is designated as at FVTPL.A financial liability is held for trading if:· it has been incurred principally for the purpose of repurchasing it in the near term; or

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· on initial recognition it is part of a portfolio of identified financial instruments that the Groupmanages together and has evidence of a recent actual pattern of short-term profit-taking; or

· it is a derivative that is not designated and effective as a hedging instrument or a financialguarantee.

Management may designate a financial liability at FVTPL upon initial recognition when thefollowing criteria are met, and designation is determined on an instrument by instrument basis:

· The designation eliminates or significantly reduces the inconsistent treatment that wouldotherwise arise from measuring the liabilities or recognizing gains or losses on them on adifferent basis; or

· The liabilities are part of a group of financial liabilities which are managed and theirperformance evaluated on a fair value basis, in accordance with a documented riskmanagement or investment strategy; or

· The financial instrument contains an embedded derivative, unless the embedded derivativedoes not significantly modify the cash flows or it is clear, with little or no analysis, that itwould not be separately recorded.

Financial liabilities at amortized costFinancial liabilities are measured at amortized cost using the effective interest method, except for:

a. financial liabilities at fair value through profit or loss which are measured at fair value; andb. financial liabilities that arise when a transfer of a financial asset does not qualify for

derecognition or when the continuing involvement approach applies.

Issued financial instruments or their components, which are not designated at FVTPL, areclassified as financial liabilities at amortized cost under Deposit liabilities, Bills and acceptancespayable or other appropriate financial liability accounts, where the substance of the contractualarrangement results in the Group having an obligation either to deliver cash or another financialasset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount ofcash or another financial asset for a fixed number of own equity shares. The components of issuedfinancial instruments that contain both liability and equity elements are accounted for separately,with the equity component being assigned the residual amount after deducting from the instrumentas a whole the amount separately determined as the fair value of the liability component on thedate of issue.

After initial measurement, bills payable and similar financial liabilities not qualified as and notdesignated as FVTPL, are subsequently measured at amortized cost using the effective interestmethod. Amortized cost is calculated by taking into account any discount or premium on theissuance and fees that are an integral part of the effective interest rate (EIR).

Impairment of Financial AssetsThe Group assesses at each statement of financial position date whether there is objectiveevidence that a financial asset or group of financial assets is impaired. A financial asset or a groupof financial assets is deemed to be impaired if, and only if, there is objective evidence ofimpairment as a result of one or more events that has occurred after the initial recognition of theasset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimatedfuture cash flows of the financial asset or the group of financial assets that can be reliablyestimated. Evidence of impairment may include indications that the borrower or a group ofborrowers is experiencing significant financial difficulty, default or delinquency in interest orprincipal payments, the probability that they will enter bankruptcy or other financial

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reorganization and where observable data indicate that there is measurable decrease in theestimated future cash flows, such as changes in arrears or economic conditions that correlate withdefaults.

For financial assets classified and measured at amortized cost such as loans and receivables, duefrom other banks and investment securities at amortized cost, the Group first assesses whetherobjective evidence of impairment exists individually for financial assets that are individuallysignificant, or collectively for financial assets that are not individually significant. Forindividually assessed financial assets, the amount of the loss is measured as the difference betweenthe asset’s carrying amount and the present value of the estimated future cash flows (excludingfuture credit losses that have not been incurred). The present value of the estimated future cashflows is discounted at the financial asset’s original effective interest rate. If a loan has a variableinterest rate, the discount rate for measuring any impairment loss is the current effective interestrate, adjusted for the original credit risk premium. The calculation of the present value of theestimated future cash flows of a collateralized financial asset reflects the cash flows that mayresult from foreclosure less costs for obtaining and selling the collateral, whether or notforeclosure is probable.

Financial assets that are individually assessed for impairment and for which an impairment loss is,or continues to be, recognized are not included in a collective assessment for impairment. Thecarrying amount of the asset is reduced through use of an allowance account and the amount ofloss is charged to Provision for impairment and credit losses in the statement of income. Interestincome continues to be recognized based on the original effective interest rate of the asset. Loans,together with the associated allowance accounts, are written off when there is no realistic prospectof future recovery and all collateral has been realized. If, in a subsequent year, the amount of theestimated impairment loss decreases because of an event occurring after the impairment wasrecognized, the previously recognized impairment loss is reduced by adjusting the allowanceaccount. If a write-off is later recovered, except for credit card receivables, any amounts formerlycharged are credited to the Provision for impairment and credit losses in the statement of income.For credit card receivables, if a write-off is later recovered, any amounts previously charged toProvision for impairment and credit losses are credited to Miscellaneous income in the statementof income.

If the Group determines that no objective evidence of impairment exists for individually assessedfinancial asset, whether significant or not, it includes the asset in a group of financial assets withsimilar credit risk characteristics and collectively assesses for impairment. Those characteristicsare relevant to the estimation of future cash flows for groups of such assets by being indicative ofthe debtors’ ability to pay all amounts due according to the contractual terms of the assets beingevaluated.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basisof credit risk characteristics such as industry, collateral type, past-due status and term. Future cashflows in a group of financial assets that are collectively evaluated for impairment are estimated onthe basis of historical loss experience for assets with similar credit risk characteristics. Historicalloss experience is adjusted on the basis of current observable data to reflect the effects of currentconditions that did not affect the period on which the historical loss experience is based and toremove the effects of conditions in the historical period that do not exist currently. Estimates ofchanges in future cash flows reflect, and are directionally consistent with changes in relatedobservable data from period to period (such as changes in property prices, payment status, or otherfactors that are indicative of incurred losses of the Group and their magnitude). The methodologyand assumptions used for estimating future cash flows are reviewed regularly by the Group toreduce any differences between loss estimates and actual loss experience.

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For consumer loans, the Group is using net flow rate methodology for collective impairment(see Note 4).

Restructured loansLoan restructuring may involve extending the payment arrangements and the agreement of newloan conditions. Once the terms have been renegotiated, the loan is no longer considered past due.Management continuously reviews restructured loans to ensure that all criteria are met and thatfuture payments are likely to occur. The loans continue to be subjected to an individual orcollective impairment assessment, calculated using the loan’s original effective interest rate. Thedifference between the recorded value of the original loan and the present value of the restructuredcash flows, discounted at the original effective interest rate, is recognized in Provision forimpairment and credit losses in the statement of income.

Derecognition of Financial Assets and Financial LiabilitiesFinancial assetsA financial asset (or, where applicable a part of a financial asset or part of a group of financialassets) is derecognized when:

· the rights to receive cash flows from the asset have expired;· the Group retains the right to receive cash flows from the asset, but has assumed an obligation

to pay them in full without material delay to a third party under a ‘pass-through’ arrangement;or

· the Group has transferred its rights to receive cash flows from the asset and either (a) hastransferred substantially all the risks and rewards of the asset, or (b) has neither transferred norretained the risk and rewards of the asset but has transferred the control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset or has entered into apass-through arrangement, and has neither transferred nor retained substantially all the risks andrewards of the asset nor transferred control over the asset, the asset is recognized to the extent ofthe Group’s continuing involvement in the asset. Continuing involvement that takes the form of aguarantee over the transferred asset is measured at the lower of original carrying amount of theasset and the maximum amount of consideration that the Group could be required to repay.

Financial liabilitiesA financial liability is derecognized when the obligation under the liability is discharged,cancelled or has expired. Where an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as a derecognition of the original liabilityand the recognition of a new liability, and the difference in the respective carrying amounts isrecognized in the statement of income.

Repurchase and reverse repurchase agreementsSecurities sold under agreements to repurchase at a specified future date (‘repos’) are notderecognized from the statement of financial position. The corresponding cash received,including accrued interest, is recognized in the statement of financial position as a loan to theGroup, reflecting the economic substance of such transaction.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the statement offinancial position if, and only if, there is a currently enforceable legal right to offset the recognizedamounts and there is an intention to settle on a net basis, or to realize the asset and settle theliability simultaneously. This is not generally the case with master netting agreements, where therelated assets and liabilities are presented gross in the statement of financial position.

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Property and EquipmentLand is stated at cost less any impairment in value and depreciable properties including buildings,leasehold improvements and furniture, fixtures and equipment are stated at cost less accumulateddepreciation and amortization, and any impairment in value.

The initial cost of property and equipment consists of its purchase price, including import duties,taxes and any directly attributable costs of bringing the assets to their working condition andlocation for their intended use. Expenditures incurred after the property and equipment have beenput into operation, such as repairs and maintenance are normally charged against operations in theyear in which the costs are incurred. In situations where it can be clearly demonstrated that theexpenditures have resulted in an increase in the future economic benefits expected to be obtainedfrom the use of an item of property and equipment beyond its originally assessed standard ofperformance, the expenditures are capitalized as additional cost of the assets. When assets areretired or otherwise disposed of, the cost and the related accumulated depreciation andamortization and any accumulated impairment in value are removed from the accounts and anyresulting gain or loss is credited to or charged against current operations.

Depreciation and amortization are computed using the straight-line method over the followingestimated useful lives (EUL) of the property and equipment.

YearsBuildings 30-40Furniture, fixtures and equipment 3-5

The cost of the leasehold improvements is amortized over the shorter of the covering lease term orthe EUL of the improvements of 10 years.

The estimated useful life and the depreciation and amortization method are reviewed periodicallyto ensure that the period and the method of depreciation and amortization are consistent with theexpected pattern of economic benefits from items of property and equipment.

Investment PropertiesInvestment properties are measured initially at cost, including transaction costs. An investmentproperty acquired through an exchange transaction is measured at the fair value of the assetacquired unless the fair value of such an asset cannot be measured in which case the investmentproperty acquired is measured at the carrying amount of the asset given up. Foreclosed propertiesare recorded as Investment properties upon: (a) entry of judgment in case of judicial foreclosure;(b) execution of the Sheriff’s Certificate of Sale in case of extra-judicial foreclosure; or(c) notarization of the Deed of Dacion in case of dation in payment (dacion en pago). Subsequentto initial recognition, depreciable investment properties are carried at cost less accumulateddepreciation and any impairment in value.

Investment properties are derecognized when they have either been disposed of or when theinvestment properties are permanently withdrawn from use and no future benefit is expected fromtheir disposal. Any gains or losses on the retirement or disposal of investment properties arerecognized in the statement of income under Gain on sale of assets in the year of retirement ordisposal.

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Expenditures incurred after the investment properties have been put into operations, such asrepairs and maintenance costs, are normally charged to income in the period in which the costs areincurred.

Depreciation is calculated on a straight-line basis using the remaining useful lives from the time ofacquisition of the investment properties but not to exceed 10 years for both buildings andcondominium units.

Foreclosed properties of land or building are classified under investment properties fromforeclosure date. Other foreclosed properties which do not qualify as land or building areclassified as other repossessed assets included in Other assets in the statement of financialposition.

Transfers are made to investment properties when, and only when, there is a change in useevidenced by ending of owner occupation, commencement of an operating lease to another partyor ending of construction or development. Transfers are made from investment properties when,and only when, there is a change in use evidenced by commencement of owner occupation orcommencement of development with a view to sale.

Business CombinationsBusiness combinations are accounted for using the acquisition method. The cost of an acquisitionis measured as the aggregate of the consideration transferred, measured at acquisition date fairvalue and the amount of any non-controlling interest in the acquiree. For each businesscombination, the acquirer elects whether to measure the non-controlling interest in the acquiree atfair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-relatedcosts incurred are expensed in the statement of income.

When the Group acquires a business, it assesses the financial assets and liabilities assumed forappropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as at the acquisition date. This includes the separation ofembedded derivatives in host contracts by the acquiree. If the business combination is achieved instages, the acquisition date fair value of the acquirer’s previously held equity interest in theacquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value atthe acquisition date. Subsequent changes to the fair value of the contingent consideration, whichis deemed to be an asset or liability, will be recognized in accordance with PFRS 9 either in profitor loss or as a change to other comprehensive income. If the contingent consideration is classifiedas equity, it should not be remeasured until it is finally settled within equity.

Goodwill is initially measured at cost being the excess of the aggregate of the considerationtransferred and the amount recognized for non-controlling interest over the net identifiable assetsacquired and liabilities assumed. If this consideration is lower than the fair value of the net assetsof the subsidiary acquired, the difference is recognized in the statement of income.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.For the purpose of impairment testing, goodwill acquired in a business combination is, from theacquisition date, allocated to each of the Group’s cash-generating units (CGU) that are expected tobenefit from the combination, irrespective of whether other assets or liabilities of the acquiree areassigned to those units.

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Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, thegoodwill associated with the operation disposed of is included in the carrying amount of theoperation when determining the gain or loss on disposal of the operation. Goodwill disposed of inthis circumstance is measured based on the relative values of the operation disposed of and theportion of the CGU retained.

Acquisitions of non-controlling interests are accounted for as transactions with owners in theircapacity as owners and therefore no goodwill is recognized as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on aproportionate amount of the net assets of the subsidiary.

Investment in a Joint VentureA joint venture is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the net assets of the joint venture. Joint control is the contractuallyagreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to thosenecessary to determine control over subsidiaries.

The Group’s investment in joint venture is accounted for using the equity method. Under theequity method, the investment in a joint venture is initially recognized at cost. The carryingamount of the investment is adjusted to recognize changes in the Group’s share of net assets of thejoint venture since the acquisition date. Goodwill relating to the joint venture is included in thecarrying amount of the investment and is not tested for impairment individually. The statement ofprofit or loss reflects the Group’s share of the results of operations of the joint venture. Anychange in OCI of the investee is presented as part of the Group’s OCI. In addition, when there hasbeen a change recognized directly in the equity of the joint venture, the Group recognizes its shareof any changes, when applicable, in the statement of changes in equity. Unrealized gains andlosses resulting from transactions between the Group and the joint venture are eliminated to theextent of the interest in the joint venture. The aggregate of the Group’s share of profit or loss of ajoint venture is shown on the face of the statement of profit and represents profit or loss after tax.

An investment in a joint venture is accounted for using the equity method from the date on whichthe investee becomes a joint venture. On acquisition of the investment in a joint venture, anyexcess of the cost of the investment over the Group's share of the net fair value of the identifiableassets and liabilities of the investee is recognized as goodwill, which is included within thecarrying amount of the investment. Any excess of the Group's share of the net fair value of theidentifiable assets and liabilities over the cost of the investment, after reassessment, is recognizedimmediately in profit or loss in the period in which the investment is acquired.

After application of the equity method, the Group determines whether it is necessary to recognizean impairment loss on its investment in joint venture. At each reporting date, the Groupdetermines whether there is objective evidence that the investment in the joint venture is impaired.If there is such evidence, the Group calculates the amount of impairment as the difference betweenthe recoverable amount of the joint venture and its carrying value, and then recognizes the loss as‘Share of profit of a joint venture’ in the statement of profit or loss.

Upon loss of significant influence or joint control over the joint venture, the Group measures andrecognizes any retained investment at its fair value. Any difference between the carrying amountof the joint venture upon loss of joint control and the fair value of the retained investment andproceeds from disposal is recognized in profit or loss.

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When a group entity transacts with an associate or a joint venture of the Group, profits and lossesresulting from the transactions with the associate or joint venture are recognized in the Group'sconsolidated financial statements only to the extent of interests in the associate or joint venturethat are not related to the Group.

The financial statements of the joint venture are prepared for the same reporting period as theGroup. When necessary, adjustments are made to bring the accounting policies in line with thoseof the Group.

Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. The cost ofintangible assets acquired in a business combination is its fair value at the date of acquisition.Following initial recognition, intangible assets, excluding goodwill and branch licenses, arecarried at cost less any accumulated amortization and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed forimpairment whenever there is an indication that the intangible assets may be impaired. Theamortization period and the amortization method for an intangible asset with a finite useful life arereviewed at least at each financial year-end. Changes in the expected useful life or the expectedpattern of consumption of future economic benefits embodied in the asset is accounted for bychanging the amortization period or method, as appropriate, and treated as changes in accountingestimates. The amortization expense on intangible assets with finite lives is recognized in thestatement of income.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairmentannually or more frequently, either individually or at the CGU level. The assessment of indefinitelife is reviewed annually to determine whether the indefinite life continues to be supportable. Ifnot, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from the derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognized in thestatement of income when the asset is derecognized.

Intangible assets include goodwill, branch licenses, customer relationship, core deposits andcapitalized software (see Note 12).

GoodwillGoodwill acquired in a business combination is initially measured at cost being the excess of thecost of the business combination over the Group’s interest in the net fair value of the acquiree’sidentifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill ismeasured at cost less accumulated impairment losses. Goodwill is reviewed for impairmentannually or more frequently if events or changes in circumstances indicate that the carrying valuemay be impaired.

Branch licensesBranch licenses are determined to have indefinite useful lives. These are tested for impairmentannually either individually or at the CGU level. Such intangible assets are not amortized. Theuseful life is reviewed annually to determine whether indefinite useful life assessment continues tobe supportable. If not, the change in the useful life assessment from indefinite to finite is made ona prospective basis.

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Customer relationship and core depositsCustomer relationship and core deposits are the intangible assets acquired by the Group throughbusiness combination. These intangible assets are initially measured at their fair value at the dateof acquisition. The fair value of these intangible assets reflects expectations about the probabilitythat the expected future economic benefits embodied in the asset will flow to the Group.

Following initial recognition, customer relationship and core deposits are measured at cost lessaccumulated amortization and any accumulated impairment losses. Customer relationship relatedto the credit cards business is amortized on a straight-line basis over its useful life of 40 yearswhile the customer relationship related to the auto loans business and core deposits are amortizedon a straight-line basis over its useful life of 13 and 10 years, respectively (see Note 12).

Capitalized softwareCapitalized software acquired separately is measured at cost on initial recognition. Followinginitial recognition, capitalized software is carried at cost less accumulated amortization and anyaccumulated impairment losses. The capitalized software is amortized on a straight-line basisover its estimated useful life of 5 years.

Impairment of Nonfinancial AssetsAn assessment is made at each statement of financial position date whether there is any indicationof impairment of property and equipment, investment properties, other repossessed assets andintangible assets, or whether there is any indication that an impairment loss previously recognizedfor an asset in prior years may no longer exist or may have decreased. If any such indicationexists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated atthe higher of the asset’s value in use or its fair value less cost to sell. In assessing value in use, theestimated future cash flows are discounted to their present value using pre-tax discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset.An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverableamount. An impairment loss is charged against the statement of income in the period in which itarises, unless the asset is carried at a revalued amount in which case the impairment loss ischarged against the revaluation increment of the said asset.

A previously recognized impairment loss is reversed only if there has been a change in theestimates used to determine the recoverable amount of an asset, but not to an amount higher thanthe carrying amount that would have been determined (net of any depreciation) had no impairmentloss been recognized for the asset in prior years. A reversal of an impairment loss is credited tocurrent operations, unless the asset is carried at a revalued amount in which case the reversal ofthe impairment loss is credited to the revaluation increment of the said asset.

The following criteria are also applied in assessing impairment of specific assets:

Property and equipment, investment properties and other repossessed assetsThe carrying values of the property and equipment and investment properties are reviewed forimpairment when events or changes in circumstances indicate the carrying values may not berecoverable. If any such indication exists and where the carrying values exceed the estimatedrecoverable amounts, the assets or CGUs are written down to their recoverable amounts.

GoodwillGoodwill is reviewed for impairment, annually or more frequently if events or changes incircumstances indicate that the carrying value may be impaired.

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Impairment is determined for goodwill by assessing the recoverable amount of the CGU (or groupof CGUs) to which the goodwill relates. Where the recoverable amount of the CGU (or group ofCGUs) is less than the carrying amount of the CGU (or group of CGUs) to which goodwill hasbeen allocated, an impairment loss is recognized immediately in the statement of income.Impairment losses relating to goodwill cannot be reversed for subsequent increases in itsrecoverable amount in future periods.

Branch licensesBranch licenses are tested for impairment annually at the statement of financial position dateeither individually or at the CGU level, as appropriate.

Other intangible assetsOther intangible assets such as customer relationship, core deposits and capitalized software areassessed for impairment whenever there is an indication that they may be impaired.

Revenue RecognitionRevenue is recognized to the extent that it is probable that economic benefits will flow to theGroup and the revenue can be reliably measured. The following specific recognition criteria mustalso be met before revenue is recognized:

Interest incomeFor all financial instruments measured at amortized cost and interest-bearing financial assets atFVTPL, interest income is recorded at the effective interest rate, which is the rate that exactlydiscounts estimated future cash payments or receipts through the expected life of the financialinstrument or a shorter period, where appropriate, to the net carrying amount of the financial assetor financial liability.

The calculation takes into account all contractual terms of the financial instrument (for example,prepayment options) and includes any fees or incremental costs that are directly attributable to theinstrument and are an integral part of the effective interest rate, but not future credit losses. Theadjusted carrying amount is calculated based on the original effective interest rate. The change inthe carrying amount is recorded as interest income. Once the recorded value of a financial asset orgroup of similar financial assets has been reduced due to an impairment loss, interest incomecontinues to be recognized using the original effective interest rate applied to the new carryingamount.

Service charges and penaltiesService charges and penalties are recognized only upon collection or accrued when there is areasonable degree of certainty as to its collectibility.

Fee and commission incomeThe Group earns fee and commission income from a diverse range of services it provides to itscustomers. Fee income can be divided into the following two categories:

a) Fee income earned from services that are provided over a certain period of timeFees earned for the provision of services over a period of time are accrued over that period.These fees include commission income, fiduciary fees and credit related fees.

b) Fee income from providing transaction servicesFees arising from negotiating or participating in the negotiation of a transaction for a thirdparty are recognized on completion of the underlying transaction. Fees or components of feesthat are linked to a certain performance are recognized after fulfilling the corresponding

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criteria. Loan syndication fees are recognized in the statement of income when thesyndication has been completed and the Group retains no part of the loans for itself or retainspart at the same effective interest rate as for the other participants.

Dividend incomeDividend income is recognized when the Group’s right to receive payment is established.

Trading and securities gainTrading and securities gain represents results arising from trading activities including all gains andlosses from changes in fair value of financial assets and financial liabilities held for trading.

Commissions earned on credit cardsCommissions earned on credit cards are taken up as income upon receipt from memberestablishments of charges arising from credit availments by credit cardholders. Thesecommissions are computed based on certain agreed rates and are deducted from amountsremittable to member establishments.

Purchases by credit cardholders, collectible on an installment basis, are recorded at the cost of theitems purchased plus certain percentage of cost. The excess over cost is credited to Unearneddiscount and is shown as a deduction from Loans and receivables in the statement of financialposition.

The unearned discount is taken to income over the installment terms and is computed using theeffective interest method.

Customer loyalty programmesAward credits under customer loyalty programmes are accounted for as a separately identifiablecomponent of the transaction in which they are granted. The fair value of the considerationreceived in respect of the initial sale is allocated between the award credits and the othercomponents of the sale. Income generated from customer loyalty programmes is recognized aspart of Service charges, fees and commissions in the statement of income.

Other incomeIncome from sale of services is recognized upon rendition of the service. Income from sale ofproperties is recognized upon completion of the earning process and when the collectibility of thesales price is reasonably assured.

Expense RecognitionExpenses are recognized in the statement of income when decrease in future economic benefitrelated to a decrease in an asset or an increase in a liability has arisen that can be measuredreliably. Expenses are recognized in the statement of income:· on the basis of a direct association between the costs incurred and the earning of specific items

of income;· on the basis of systematic and rational allocation procedures when economic benefits are

expected to arise over several accounting periods and the association can only be broadly orindirectly determined; or

· immediately when expenditure produces no future economic benefits or when, and to theextent that, future economic benefits do not qualify or cease to qualify, for recognition in thestatement of financial position as an asset.

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Expenses in the statement of income are presented using the nature of expense method. Generaland administrative expenses are cost attributable to administrative and other business activities ofthe Group.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance ofthe arrangement and requires an assessment of whether the fulfillment of the arrangement isdependent on the use of a specific asset or assets and the arrangement conveys a right to use theasset. A reassessment is made after inception of the lease only if one of the following applies:(a) there is a change in contractual terms, other than a renewal or extension of the arrangement;(b) a renewal option is exercised or extension granted, unless that term of the renewal or

extension was initially included in the lease term;(c) there is a change in the determination of whether fulfillment is dependent on a specified

asset; or(d) there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) above, and at thedate of renewal or extension period for scenario (b).

Group as lesseeLeases where the lessor retains substantially all the risks and benefits of ownership of the asset areclassified as operating leases. Operating lease payments are recognized as an expense in thestatement of income on a straight-line basis over the lease term. Contingent rents are recognizedas an expense in the period in which they are incurred.

Retirement CostDefined benefit planThe net defined benefit liability or asset is the aggregate of the present value of the defined benefitobligation at the end of the reporting period reduced by the fair value of plan assets (if any),adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceilingis the present value of any economic benefits available in the form of refunds from the plan orreductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Defined benefit costs comprise the following:· Service cost· Net interest on the net defined benefit liability or asset· Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in the statement of income. Past service costs arerecognized when plan amendment or curtailment occurs.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on government bonds to the net defined benefit liability or asset.Net interest on the net defined benefit liability or asset is recognized as expense or income in thestatement of income.

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Remeasurements comprising actuarial gains and losses, return on plan assets (excluding netinterest on defined benefit asset) and any change in the effect of the asset ceiling (excluding netinterest on defined benefit liability) are recognized immediately in other comprehensive income inthe period in which they arise. Remeasurements are not reclassified to profit or loss in subsequentperiods. All remeasurements are recognized in other comprehensive income account.Remeasurement gains (losses) on retirement plan are not reclassified to profit or loss insubsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Group, nor can they be paid directlyto the Group. Fair value of plan assets is based on market price information. When no marketprice is available, the fair value of plan assets is estimated by discounting expected future cashflows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expectedperiod until the settlement of the related obligations).

The Group’s right to be reimbursed of some or all of the expenditure required to settle a definedbenefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

Termination benefitTermination benefits are employee benefits provided in exchange for the termination of anemployee’s employment as a result of either an entity’s decision to terminate an employee’semployment before the normal retirement date or an employee’s decision to accept an offer ofbenefits in exchange for the termination of employment.

A liability and expense for a termination benefit is recognized at the earlier of when the entity canno longer withdraw the offer of those benefits and when the entity recognizes the relatedrestructuring costs. Initial recognition and subsequent changes to termination benefits aremeasured in accordance with the nature of the employee benefit, as either post-employmentbenefits, short-term employee benefits, or other long-term employee benefits.

Employee leave entitlementEmployee entitlement to annual leave are recognized as a liability when the employees render theservices that increases their annual leave enititlement. The cost of accumulating annual leave aremeasured as the additional amount that the Group expects to pay as a result of the unusedentitlement that has accumulated at the end of the reporting period.

Provisions and ContingenciesProvisions are recognized when the Group has a present obligation (legal or constructive) as aresult of a past event; it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation; and a reliable estimate can be made of the amount of theobligation. If the effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at pre-tax rate that reflects current market assessmentsof the time value of money and where, appropriate, the risk specific to the liability. Wherediscounting is used, the increase in the provision due to the passage of time is recognized asInterest expense in the statement of income.

Contingent liabilities are not recognized in the financial statements but are disclosed unless thepossibility of an outflow of resources embodying economic benefits is remote. Contingent assetsare not recognized in the financial statements but are disclosed when an inflow of economicbenefits is probable.

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Income TaxesCurrent taxesCurrent tax assets and liabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws usedto compute the amount are those that are enacted or substantively enacted at the statement offinancial position date.

Deferred taxesDeferred tax is provided, using the balance sheet liability method, on all temporary differences atthe statement of financial position date between the tax bases of assets and liabilities and theircarrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, with certainexceptions. Deferred tax assets are recognized for all deductible temporary differences,carryforward of unused tax credits from the excess of Minimum Corporate Income Tax (MCIT)over the regular income tax and unused Net Operating Loss Carryover (NOLCO), to the extentthat it is probable that taxable profit will be available against which the deductible temporarydifferences and the carryforward of unused tax credits from excess MCIT and unused NOLCO canbe utilized. Deferred tax, however, is not recognized on temporary differences that arise from theinitial recognition of an asset or liability in a transaction that is not a business combination and, atthe time of the transaction, affects neither the accounting income nor taxable income or loss.

The carrying amount of deferred tax assets is reviewed at each statement of financial position dateand reduced to the extent that it is no longer probable that sufficient taxable profit will be availableto allow all or part of the deferred tax asset to be utilized.

Current tax and deferred tax relating to items recognized directly in equity is recognized in othercomprehensive income and not in the statement of income.

Deferred tax assets and liabilities are measured at the tax rates that are applicable to the periodwhen the asset is realized or the liability is settled, based on tax rates (and tax laws) that have beenenacted or substantively enacted at the statement of financial position date.

EquityCapital stock is measured at par value for all shares issued. When the Group issues more than oneclass of stock, a separate account is maintained for each class of stock and the number of sharesissued.

When the shares are sold at a premium, the difference between the proceeds and the par value iscredited to Additional paid in capital account. When shares are issued for a consideration otherthan cash, the proceeds are measured by the fair value of the consideration received. In case theshares are issued to extinguish or settle the liability of the Group, the shares shall be measuredeither at the fair value of the shares issued or fair value of the liability settled, whichever is morereliably determinable.

Direct cost incurred related to the equity issuance, such as underwriting, accounting and legal fees,printing costs and taxes are charged to Additional paid in capital account. If additional paid-incapital is not sufficient, the excess is charged against Surplus.

Surplus represents accumulated earnings of the Group less dividends declared.

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Dividends on Common SharesDividends on common shares are recognized as a liability and deducted from equity whendeclared and approved by BOD of the Parent Company and approved by the BSP. Dividends forthe year that are declared and approved after the statement of financial position date, if any, aredealt with as an event after the financial reporting date and disclosed accordingly.

Earnings Per Share (EPS)Basic EPS is determined by dividing the net income for the year attributable to common shares bythe weighted average number of common shares outstanding during the year while diluted EPS iscomputed by dividing net income for the year attributable to common shares by the weightedaverage number of outstanding and dilutive potential common shares. Basic and diluted EPS aregiven retroactive adjustments for any stock dividends declared and stock rights exercised in thecurrent year, if any. The Group does not have dilutive potential common shares.

Segment ReportingA business segment is a group of assets and operations engaged in providing products or servicesthat are subject to risks and returns that are different from those of other business segments. Ageographical segment is one that provides products or services within a particular economicenvironment that is subject to risks and returns that are different from those segments operating inother economic environments.

The Group’s operations are organized according to the nature of products and services provided.Financial information on business segments is presented in Note 6.

Events after the Financial Reporting DatePost year-end events that provide additional information about the Group’s position at thestatement of financial position date (adjusting events) are reflected in the financial statements.Post year-end events that are not adjusting events are disclosed in the notes when material to thefinancial statements.

Fiduciary ActivitiesAssets and income arising from fiduciary activities together with related undertakings to returnsuch assets to customers are excluded from the financial statements where the Parent Companyacts in a fiduciary capacity such as nominee, trustee or agent.

Future Changes in Accounting PoliciesStandards issued but are not yet effective up to the date of issuance of the financial statements arelisted below. This is a listing of standards and interpretations issued, which the Group reasonablyexpects to be applicable at a future date. Except as otherwise indicated, the Group does not expectthe adoption of these new and amended standards to have a significant impact on the financialstatements.

PFRS 9, Financial Instruments - Classification and Measurement (2010 version)PFRS 9 (2010 version) reflects the first phase on the replacement of PAS 39 and applies to theclassification and measurement of financial assets and liabilities as defined in PAS 39, FinancialInstruments: Recognition and Measurement. PFRS 9 requires all financial assets to be measuredat fair value at initial recognition. A debt financial asset may, if the fair value option (FVO) is notinvoked, be subsequently measured at amortized cost if it is held within a business model that hasthe objective to hold the assets to collect the contractual cash flows and its contractual terms giverise, on specified dates, to cash flows that are solely payments of principal and interest on theprincipal outstanding. All other debt instruments are subsequently measured at fair value throughprofit or loss. All equity financial assets are measured at fair value either through other

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comprehensive income (OCI) or profit or loss. Equity financial assets held for trading must bemeasured at fair value through profit or loss. For FVO liabilities, the amount of change in the fairvalue of a liability that is attributable to changes in credit risk must be presented in OCI. Theremainder of the change in fair value is presented in profit or loss, unless presentation of the fairvalue change in respect of the liability’s credit risk in OCI would create or enlarge an accountingmismatch in profit or loss. All other PAS 39 classification and measurement requirements forfinancial liabilities have been carried forward into PFRS 9, including the embedded derivativeseparation rules and the criteria for using the FVO. As the Group had early adopted PFRS 9 (2009version) effective January 1, 2011, adoption of PFRS 9 (2010 version) is not expected to havesignificant impact on the Group’s financial position and performance.

PFRS 9 (2010 version) is effective for annual periods beginning on or after January 1, 2015. Thismandatory adoption date was moved to January 1, 2018 when the final version of PFRS 9 wasadopted by the Philippine Financial Reporting Standards Council (FRSC).

Deferred

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real EstateThis interpretation covers accounting for revenue and associated expenses by entities thatundertake the construction of real estate directly or through subcontractors. The SEC and theFRSC have deferred the effectivity of this interpretation until the final Revenue standard is issuedby the International Accounting Standards Board (IASB) and an evaluation of the requirements ofthe final Revenue standard against the practices of the Philippine real estate industry is completed.

Effective January 1, 2016

PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates and JointVentures - Investment Entities: Applying the Consolidation Exception (Amendments)These amendments clarify that the exemption in PFRS 10 from presenting consolidated financialstatements applies to a parent entity that is a subsidiary of an investment entity that measures all ofits subsidiaries at fair value and that only a subsidiary of an investment entity that is not aninvestment entity itself and that provides support services to the investment entity is consolidated.The amendments also allow the investor (that is not an investment entity and has an investmententity associate or joint venture), when applying the equity method, to retain the fair valuemeasurement applied by the investment entity associate or joint venture to its interests insubsidiaries.

PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements(Amendments)The amendments will allow entities to use the equity method to account for investments insubsidiaries, joint ventures and associates in their separate financial statements. Entities alreadyapplying PFRS and electing to change to the equity method in its separate financial statements willhave to apply that change retrospectively.

PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests (Amendments)The amendments require a joint operator that is accounting for the acquisition of an interest in ajoint operation, in which the activity of the joint operation constitutes a business (as defined byPFRS 3), to apply the relevant PFRS 3 principles for business combination accounting. Theamendments also clarify that a previously held interest in a joint operations is not remeasured onthe acquisition of an additional interest in the same joint operation while joint control is retained.In addition, a scope exclusion has been added to PFRS 11 to specify that the amendments do not

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apply when the parties sharing joint control, including the reporting entity, are under commoncontrol of the same ultimate controlling party.

PAS 1, Presentation of Financial Statements - Disclosure (Amendments)The amendments are intended to assist entites in applying judgment when meeting thepresentation and disclosure requirements in PFRS. They clarify the following:· That entities shall not reduce the understandability of their financial statements by either

obscuring material information with immaterial information; or aggreagatin material itemsthat have different natures or functions

· That specific line items in the statement of income and OCI and the statement of financialposition may be disaggregated

· That entities have flexibility as to the order in which they present the notes to financialstatements

· That the share of OCI of associates and joint ventures accounted for using the equity methodmust be presented in aggregate as a single line item, and classified between those items thatwill or will not be subsequently reclassified to profit or loss

PFRS 14, Regulatory Deferral AccountsPFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferralaccount balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 must presentthe regulatory deferral accounts as separate line items on the statement of financial position andpresent movements in these account balances as separate line items in the statement of profit orloss and other comprehensive income. The standard requires disclosures on the nature of, and risksassociated with, the entity’s rate-regulation and the effects of that rate-regulation on its financialstatements.

PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture: Bearer PlantsThe amendments change the accounting requirements for biological assets that meet the definitionof bearer plants. Under the amendments, biological assets that meet the definition of bearer plantswill no longer be within the scope of PAS 41. Instead, PAS 16 will apply. After initial recognition,bearer plants will be measured under PAS 16 at accumulated cost (before maturity) and usingeither the cost model or revaluation model (after maturity). The amendments also require thatproduce that grows on bearer plants will remain in the scope of PAS 41 measured at fair value lesscosts to sell. For government grants related to bearer plants, PAS 20, Accounting for GovernmentGrants and Disclosure of Government Assistance will apply.

PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets - Clarification ofAcceptable Methods of Depreciation and Amortization (Amendments)The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern ofeconomic benefits that are generated from operating a business (of which the asset is part) ratherthan the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used invery limited circumstances to amortize intangible assets.

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Annual Improvements to PFRSs (2012 - 2014 cycle)The Annual Improvements to PFRSs (2012 - 2014 cycle) are effective for annual periodsbeginning on or after January 1, 2016 and are not expected to have a material impact on theGroup. They include:

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in Methods ofDisposalThe amendment is applied prospectively and clarifies that changing from a disposal through saleto a disposal through distribution to owners and vice-versa should not be considered to be a newplan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruptionof the application of the requirements in PFRS 5. The amendment also clarifies that changing thedisposal method does not change the date of classification.

PFRS 7, Financial Instruments: Disclosures - Servicing ContractsPFRS 7 requires an entity to provide disclosures for any continuing involvement in a transferredasset that is derecognized in its entirety. The amendment clarifies that a servicing contract thatincludes a fee can constitute continuing involvement in a financial asset. An entity must assess thenature of the fee and arrangement against the guidance in PFRS 7 in order to assess whether thedisclosures are required. The amendment is to be applied such that the assessment of whichservicing contracts constitute continuing involvement will need to be done retrospectively.However, comparative disclosures are not required to be provided for any period beginning beforethe annual period in which the entity first applies the amendments.

PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim Financial StatementsThis amendment is applied retrospectively and clarifies that the disclosures on offsetting offinancial assets and financial liabilities are not required in the condensed interim financial reportunless they provide a significant update to the information reported in the most recent annualreport.

PAS 19, Employee Benefits - Regional Market Issue regarding Discount RateThis amendment is applied prospectively and clarifies that market depth of high quality corporatebonds is assessed based on the currency in which the obligation is denominated, rather than thecountry where the obligation is located. When there is no deep market for high quality corporatebonds in that currency, government bond rates must be used.

PAS 34, Interim Financial Reporting - Disclosure of Information ‘Elsewhere in the InterimFinancial Report’The amendment is applied retrospectively and clarifies that the required interim disclosures musteither be in the interim financial statements or incorporated by cross-reference between the interimfinancial statements and wherever they are included within the greater interim financial report(e.g., in the management commentary or risk report).

Effective January 1, 2018

PFRS 9, Financial InstrumentsIn July 2014, the IASB issued the final version of PFRS 9, Financial Instruments which reflectsall phases of the financial instruments project and replaces PAS 39, Financial Instruments:Recognition and Measurement and all previous versions of PFRS 9. The standard introduces newrequirements for classification and measurement, impairment, and hedge accounting. PFRS 9 iseffective for annual periods beginning on or after January 1, 2018, with early applicationpermitted. Retrospective application is required, but comparative information is not compulsory.For hedge accounting, the requirements are generally applied prospectively, with some limited

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exceptions. Early application of previous versions of PFRS 9 (2009, 2010 and 2013) is permittedif the date of initial application is before February 1, 2015.

The adoption of the final version of PFRS 9 will have an effect on the impairment methodologyfor financial assets. The adoption will also have an effect on the Group’s application of hedgeaccounting. The Group is currently assessing the impact of adopting this standard.

IFRS 15, Revenue from Contracts with CustomersIFRS 15 was issued by IASB in May 2014 and establishes a new five-step model that will apply torevenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amountthat reflects the consideration to which an entity expects to be entitled in exchange for transferringgoods or services to a customer. The principles in IFRS 15 provide a more structured approach tomeasuring and recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenuerecognition requirements under IFRS. Either a full or modified retrospective application isrequired for annual periods beginning on or after January 1, 2018 with early adoption permitted.The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on therequired effective date once adopted locally.

IFRS 16, LeasesOn January 13, 2016, the IASB issued its new standard, IFRS 16, Leases, which replacesInternational Accounting Standards (IAS) 17, the current leases standard, and the relatedInterpretations.

Under the new standard, lessees will no longer classify their leases as either operating or financeleases in accordance with IAS 17. Rather, lessees will apply the single-asset model. Under thismodel, lessees will recognize the assets and related liabilities for most lease on their balancesheets, and subsequently, will depreciate the lease assets and recognize interest on the leaseliabilities in their profit or loss. Leases with a term of 12 months or less or for which theunderlying asset is of low value are exempted from these requirements.

The accounting by lessors is substantially unchanged as the new standard carries forward theprinciples of lessor accounting under IAS 17. Lessors, however, will be required to disclose moreinformation in their financial statements, particularly on the risk exposure to residual value.

The new standard is effective for annual period beginning on or after January 1, 2019. Entitiesmay early adopt IFRS 16 but only if they have also adopted, IFRS 15, Revenue from Contractswith Customers. When adopting IFRS 16, an entity is permitted to use whether a full retrospectiveof a modified retrospective approach, with options to use certain transition reliefs. The Group iscurrently assessing the impact of PFRS 16 and plans to adopt the new standard on the requiredeffected date once adopted locally.

3. Significant Accounting Judgments and Estimates

The preparation of the financial statements in compliance with PFRS requires the Group to makejudgments and estimates that affect the reported amounts of assets, liabilities, income andexpenses and disclosure of contingent assets and contingent liabilities. Future events may occurwhich will cause the judgments and assumptions used in arriving at the estimates to change. Theeffects of any change in judgments and estimates are reflected in the financial statements as thesebecome reasonably determinable.

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Judgments and estimates are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be reasonable under thecircumstances.

Judgmentsa) Contingencies

The Group is currently involved in various legal proceedings. The estimate of the probablecosts for the resolution of these claims has been developed in consultation with outsidecounsels handling the Group’s defense in these matters and is based upon an analysis ofpotential results. The Group currently does not believe that these proceedings will have amaterial adverse effect on its financial position. It is possible, however, that future results ofoperations could be materially affected by changes in the estimates or in the effectiveness ofthe strategies relating to these proceedings (see Note 28).

b) Functional currencyPAS 21, The Effects of Changes in Foreign Exchange Rates, requires management to use itsjudgment to determine the entity’s functional currency such that it most faithfully representsthe economic effects of the underlying transactions, events and conditions that are relevant tothe entity. The Parent Company determined that the RBU’s and FCDU’s functional currencyis the Philippine peso and USD, respectively. In addition, GBI and EWRB determined thattheir respective functional currency is in Philippine peso. In making these judgments, theGroup considers the following:

· the currency that mainly influences sales prices for financial instruments and services(this will often be the currency in which sales prices for its financial instruments andservices are denominated and settled)

· the currency in which funds from financing activities are generated; and· the currency in which receipts from operating activities are usually retained.

c) Operating leasesThe Group has entered into lease commitments for its occupied offices and branches. Basedon an evaluation of the terms and conditions of the lease agreements, there will be no transferof ownership of assets to the Group at the end of the lease term. The Group has determinedthat all significant risks and rewards of ownership are retained by the respective lessors. Thus,the leases are classified as operating leases (see Note 25).

d) Business model for managing financial assets

Sale of Investment Securities at Amortized CostThe Parent Company’s business model allows for financial assets to be held to collectcontractual cash flows even when sales of certain financial assets occur. PFRS 9, however,emphasizes that if more than an infrequent sale is made out of a portfolio of financial assetscarried at amortized cost, the entity should assess whether and how such sales are consistentwith the objective of collecting contractual cash flows. In making this judgment, the ParentCompany considers the following:

· sales or derecognition of debt instrument under any of the circumstances spelled out underparagraph 7, Section 2 of BSP Circular No.708, Series of 2011;

· sales in preparation for funding a potential aberrant behavior in the depositors’ withdrawalpattern triggered by news of massive withdrawals or massive withdrawal alreadyexperienced by other systemically important banks in the industry;

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· sales attributable to an anticipated or in reaction to major events in the local and/orinternational arena that may adversely affect the collectability of the debt instrument andseen to prospectively affect adversely the behavior of deposits or creditors;

· sales attributable to a change in the Parent Company’s strategy upon completion of theother phases of PFRS 9; and

· sales that the Asset-Liability Management Committee (ALCO) deems appropriate to beconsistent with managing the Parent Company’s balance sheet based upon but are notlimited to the set risk limits and target ratios that have been approved by the BOD.

In 2015, the Parent Company sold various securities under its hold-to-collect (HTC) portfoliosin anticipation of the effects of the upcoming regulatory requirements on liquidity coverageratio. In 2014, the Parent Company sold various securities from different portfolios in its HTCbusiness model. The sale was primarily driven by the need to improve the Parent Company’scapital position in relation to the change in the regulatory capital requirements caused by theBasel III implementation. In 2013, the Parent Company sold a substantial portion ofgovernment securities from one of the portfolios in its HTC business model. The securitieswere sold to fund the lending requirement for FDC.

After each of the above disposals, the Parent Company assessed whether such sales are stillconsistent with the objective of collecting contractual cash flows. The Parent Companyconcluded that despite these disposals, there is no change in its objective on managing theseportfolios. The disposals were made for specific reasons and do not constitute a change in theParent Company’s business model for the affected portfolios. Thus, the remaining securities inthe affected portfolios will continue to be measured at amortized cost.

e) Cash flow characteristics testWhere the financial assets are classified as at amortized cost, the Group assesses whether thecontractual terms of these financial assets give rise on specified dates to cash flows that aresolely payments of principal and interest on the principal outstanding, with interestrepresenting time value of money and credit risk associated with the principal amountoutstanding. The assessment as to whether the cash flows meet the test is made in thecurrency in which the financial asset is denominated. Any other contractual term that changesthe timing or amount of cash flows (unless it is a variable interest rate that represents timevalue of money and credit risk) does not meet the amortized cost criteria.

f) Determination of control of joint control over EWALControl is presumed to exist when an investor is exposed, or has rights, to variable returnsfrom its involvement with the investee and has the ability to affect those returns through itspower over the investee. On the other hand, joint control is presumed to exist when theinvestors contractually agree sharing of control of an arrangement, which exists only whendecisions about the relevant activities require the unanimous consent of the parties sharingcontrol. Based on the provisions of the joint venture arrangement between the ParentCompany and Ageas, both parties have to agree in order for any resolution to be passedrelating to the joint venture entity’s relevant activities. This joint arrangement is classified as ajoint venture since the parties have rights to the net assets of the joint venture entity.

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Estimatesa) Impairment of financial assets at amortized cost

The Group reviews its loans and receivables at each statement of financial position date toassess whether impairment loss should be recorded in the statement of income. In particular,judgment by management is required in the estimation of the amount and timing of future cashflows when determining the impairment loss. Such estimates are based on assumptions abouta number of factors and actual results may differ, resulting in future changes to the allowance.

In addition to specific allowance against individually significant loans and receivables, theGroup also makes a collective impairment allowance against exposures which, although notspecifically identified as requiring a specific allowance, have a greater risk of default thanwhen originally granted. This collective allowance is based on any deterioration in theinternal rating of the loan or investment since it was granted or acquired. These internalratings take into consideration factors such as any deterioration in country risk, industry andtechnological obsolescence, as well as identified structural weaknesses or deterioration in cashflows.

Factors considered in doing the impairment assessment are discussed further in Note 5.The carrying values of investment securities and loans and receivables and the relatedallowance for credit and impairment losses of the Group and of the Parent Company aredisclosed in Notes 8 and 9, respectively.

b) Fair values of financial instrumentsThe fair values of derivatives that are not quoted in active markets are determined usingvaluation techniques. Where valuation techniques are used to determine fair values, they arevalidated and periodically reviewed by qualified independent personnel. All models arereviewed before they are used, and models are calibrated to ensure that outputs reflect actualdata and comparative market prices. To the extent practical, the models use only observabledata, however areas such as credit risk (both own and counterparty), volatilities andcorrelations require management to make estimates. Changes in assumptions about thesefactors could affect reported fair value of financial instruments.

Fair value measurements of financial instruments are disclosed in Note 5.

c) Recognition of deferred tax assetsDeferred tax assets are recognized for all unused tax losses to the extent that it is probable thattaxable income will be available against which the losses can be utilized. Significantmanagement judgment is required to determine the amount of deferred tax assets that can berecognized, based upon the likely timing and level of future taxable profits together withfuture tax planning strategies.

The recognized and unrecognized net deferred tax assets of the Group and of the ParentCompany are disclosed in Note 23.

d) Impairment of nonfinancial assetsThe Group assesses impairment on assets whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. The factors that theGroup considers important which could trigger an impairment review include the following:· significant underperformance relative to expected historical or projected future operating

results;· significant changes in the manner of use of the acquired assets or the strategy for overall

business; and· significant negative industry or economic trends.

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The carrying values of the Group’s and of the Parent Company’s nonfinancial assets follow:

Consolidated Parent Company2015 2014 2015 2014

Property and equipment (Note 10) P=3,523,169 P=3,513,104 P=3,211,375 P=3,351,442Branch licenses (Note 12) 2,167,600 2,167,396 2,167,600 2,167,396Goodwill (Note 12) 1,316,728 1,316,728 1,293,250 1,293,250Investment properties (Note 11) 727,613 912,687 726,916 911,987Capitalized software (Note 12) 824,324 794,325 785,916 743,272Other repossessed assets (Note 13) 555,836 195,102 555,836 195,102Customer relationship (Note 12) 125,165 129,476 125,165 129,476Core deposits (Note 12) 12,805 16,848 12,805 16,848

e) Impairment of GoodwillThe Group determines whether goodwill is impaired at least on an annual basis. Goodwill iswritten down for impairment where the net present value of the forecasted future cash flowsfrom the CGU is insufficient to support its carrying value. The Group has used the cost ofequity as the discount rate for the value in use (VIU) computation. The Group determined thecost of equity using capital asset pricing model.

Future cash flows from the CGU are estimated based on the theoretical annual income of theCGUs. Average growth rate was derived from the average increase in annual income duringthe last 5 years.

The recoverable amount of the CGU has been determined based on a VIU calculation usingcash flow projections from financial budgets approved by the BOD covering a five-yearperiod. The pre-tax discount rate applied to cash flow projections is 12.25% and 11.68% as ofDecember 31, 2015 and 2014, respectively. Key assumptions in VIU calculation of CGUs aremost sensitive to the following assumptions: a) interest margin; b) discount rates; c) marketshare during the budget period; and d) projected growth rates used to extrapolate cash flowsbeyond the budget period.

The carrying values of goodwill of the Group and of the Parent Company are disclosed inNote 12.

f) Estimated useful lives of property and equipment, investment properties, other repossessedassets and intangible assets (excluding land, goodwill and branch licenses)The Group reviews on an annual basis the estimated useful lives of property and equipment,investment properties, other repossessed assets and intangible assets based on expected assetutilization as anchored on business plans and strategies that also consider expected futuretechnological developments and market behavior. It is possible that future results ofoperations could be materially affected by changes in these estimates brought about bychanges in the factors mentioned. A reduction in the estimated useful lives of property andequipment, investment properties, other repossessed assets and intangible assets woulddecrease their respective balances and increase the recorded depreciation and amortizationexpense.

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As of December 31, 2015 and 2014, the carrying values of property and equipment,investment properties and other repossessed assets and intangible assets (excluding land,goodwill and branch licenses) of the Group and of the Parent Company follow:


Property and equipment (Note 10) P=3,401,802 P=3,391,737 P=3,111,345 P=3,251,412Investment properties (Note 11) 208,952 248,168 210,817 250,030Intangible assets (Note 12) 962,294 940,649 923,886 889,596Other repossessed assets (Note 13) 555,836 195,102 555,836 195,102

g) Retirement obligationThe cost of defined benefit retirement plans and the present value of the defined benefitobligation are determined using actuarial valuations. The actuarial valuation involves makingvarious assumptions. These include the determination of the discount rates, future salaryincreases, and mortality rates. Due to the complexity of the valuation, the underlyingassumptions and its long-term nature, defined benefit obligations are highly sensitive tochanges in these assumptions. All assumptions are reviewed at each reporting date. Indetermining the appropriate discount rate, management considers the interest rates ofgovernment bonds with extrapolated maturities corresponding to the expected duration of thedefined benefit obligation.

The mortality rate is based on publicly available mortality tables for the Philippines and ismodified accordingly with estimates of mortality improvements. Future salary increases arebased on expected future inflation rates.

The present value of the defined benefit obligation of the Group and of the Parent Companyand details about the assumptions used are disclosed in Note 24.

4. Financial Risk Management Objectives and Policies

Risk ManagementTo ensure that corporate goals and objectives, and business and risk strategies are achieved, theParent Company utilizes a risk management process that is applied throughout the organization inexecuting all business activities. Employees’ functions and roles fall into one of the threecategories where risk must be managed in the business units, operating units and governance units.The Parent Company’s activities are principally related to the use of financial instruments and areexposed to credit risk, liquidity risk, operational risk and market risk, the latter being subdividedinto trading and non-trading risks. Forming part of a coherent risk management system are therisk concepts, control tools, analytical models, statistical methodologies, historical researches andmarket analysis, which are being employed by the Parent Company. These tools support the keyrisk process that involves identifying, measuring, controlling and monitoring risks.

Risk Management Structurea. Board of Directors (the Board or BOD)

The Parent Company’s risk culture is practiced and observed across the Group putting theprime responsibility on the BOD. It establishes the risk culture and the risk managementorganization and incorporates the risk process as an essential part of the strategic plan of theGroup. The BOD approves the Parent Company’s articulation of risk appetite which is usedinternally to help management understand the tolerance for risk in each of the major riskcategories, its measurement and key controls available that influence the Parent Company’s

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level of risk taking. All risk management policies and policy amendments, risk-taking limitssuch as but not limited to credit and trade transactions, market risk limits, counterparty limits,trader’s limits and activities are based on the Parent Company’s established approvingauthorities which are approved by the Parent Company’s BOD. At a high level, the BOD alsoapproves the Parent Company’s framework for managing risk.

b. Executive CommitteeThis is a board level committee, which reviews the bank-wide credit strategy, profile andperformance. It approves the credit risk-taking activities based on the Parent Company’sestablished approving authorities and likewise reviews and endorses credit-granting activities,including the Internal Credit Risk Rating System. All credit proposals beyond the creditapproving limit of the Loan and Investments Committee passes through this committee forfinal approval.

c. Loan and Investments CommitteeThis committee is headed by the Chairman of the Parent Company whose primaryresponsibility is to oversee the Parent Company’s credit risk-taking activities and overalladherence to the credit risk management framework, review business/credit risk strategies,quality and profitability of the Parent Company’s credit portfolio and recommend changes tothe credit evaluation process, credit risk acceptance criteria and the minimum and target returnper credit or investment transaction. All credit risk-taking activities based on the ParentCompany’s established approving authorities are evaluated and approved by this committee.It establishes infrastructure by ensuring business units have the right systems and adequateand competent manpower support to effectively manage its credit risk.

d. Asset-Liability Management Committee (ALCO)ALCO, a management level committee, meets on a weekly basis and is responsible for theover-all management of the Parent Company’s market, liquidity, and financial position relatedrisks. It monitors the Parent Company’s liquidity position and reviews the impact of strategicdecisions on liquidity. It is responsible for managing liquidity risks and ensuring exposuresremain within established tolerance levels. The ALCO’s primary responsibilities include,among others, (a) ensuring that the Parent Company and each business unit holds sufficientliquid assets of appropriate quality and in appropriate currencies to meet short-term fundingand regulatory requirements, (b) managing financial position and ensuring that businessstrategies are consistent with its liquidity, capital and funding strategies, (c) establishing assetand/or liability pricing policies that are consistent with the financial position objectives,(d) recommending market and liquidity risk limits to the Risk Management Committee andBOD and (e) approving the assumptions used in contingency and funding plans. It alsoreviews cash flow forecasts, stress testing scenarios and results, and implements liquiditylimits and guidelines.

e. Risk Management Committee (RMC)RMC is a board level committee who convenes monthly and is primarily responsible to assistthe Board in managing the Parent Company's risk taking activities. This is performed by thecommittee by institutionalizing risk policies and overseeing the Parent Company's riskmanagement system. It develops and recommends risk appetite and tolerances for the ParentCompany's major risk exposures to the Board. Risk management principles, strategies,framework, policies, processes, and initiatives and any modifications and amendments theretoare reviewed and approved by RMC. It oversees and reports to the Board the effectiveness ofthe risk management system, overall risk profile, and compliance with the risk appetite andtolerances that the Board approved.

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f. Risk Management Subcommittee (RMSC)RMSC is a management level committee who convenes monthly and is responsible to assistRMC in fulfilling its responsibilities in managing the Parent Company's risk taking activities.This is performed by the committee by implementing the risk management principles,strategies, framework, policies, processes, and initiatives across the Parent Company. Itleads the effective conduct of risk and capital management. It oversees and directs themanagement of the Parent Company's overall risk profile. The committee likewise overseesrisk incidents, control gaps, and control deficiencies and management actions inimplementing the corresponding corrective actions.

g. Audit Committee (Audit Com)The Audit Com assists the BOD in fulfilling its oversight responsibilities for the financialreporting process, the system of internal control, the audit process, and the Parent Company’sprocess for monitoring compliance with laws and regulation and the code of conduct. Itretains oversight responsibilities for operational risk, the integrity of the Parent Company’sfinancial statements, compliance, legal risk and overall policies and practices relating to riskmanagement. It is tasked to discuss with management the Parent Company’s major riskexposures and ensures accountability on the part of management to monitor and control suchexposures including the Parent Company’s risk assessment and risk management policies.The Audit Com discusses with management and the independent auditor the major issuesregarding accounting principles and financial statement presentation, including any significantchanges in the Parent Company’s selection or application of accounting principles; and majorissues as to the adequacy of the Parent Company’s internal controls; and the effect ofregulatory and accounting initiatives, as well as off-balance sheet structures, on the financialstatements of the Parent Company.

h. Corporate Governance and Compliance Committee (CGCC)The CGCC is responsible for ensuring the BOD’s effectiveness and due observance ofcorporate governance principles and guidelines. It reviews and assesses the adequacy of theCGCC’s charter and Corporate Governance Manual and recommends changes as necessary. Itoversees the implementation of the Parent Company’s compliance program and ensurescompliance issues are resolved expeditiously. It assists Board members in assessing whetherthe Parent Company is managing its compliance risk effectively and ensures regular review ofthe compliance program.

i. Risk Management Division (RMD)RMD performs an independent risk governance function within the Parent Company. RMD istasked with identifying, measuring, controlling and monitoring existing and emerging risksinherent in the Parent Company’s overall portfolio (on- or off-balance sheet). RMD developsand employs risk assessment tools to facilitate risk identification, analysis and measurement.It is responsible for developing and implementing the framework for policies and practices toassess and manage enterprise-wide market, credit, operational, and all other risks of the ParentCompany.

It also develops and endorses risk tolerance limits for BOD approval, as endorsed by theRMC, and monitors compliance with approved risk tolerance limits. Finally, it regularlyapprises the BOD, through the RMC, the results of its risk monitoring.

j. Internal Audit Division (IAD)IAD provides an independent assessment of the Parent Company’s management andeffectiveness of existing internal control systems through adherence testing of processes andcontrols across the organization. The IAD audits risk management processes throughout the

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Parent Company annually or in a cycle depending on the latest audit rating. It employs a risk-based audit approach that examines both the adequacy of the procedures and the ParentCompany’s compliance with the procedures. It discusses the results of all assessments withmanagement, and reports its findings and recommendations to the Audit Committee which inturn, conducts the detailed discussion of the findings and recommendations during its regularmeetings. IAD’s activities are suitably designed to provide the BOD with reasonableassurance that significant financial and operating information is materially complete, reliableand accurate; internal resources are adequately protected; and employee performance is incompliance with the Parent Company’s policies, standards, procedures and applicable lawsand regulations.

k. Compliance DivisionCompliance Division is responsible for reviewing any legal or regulatory matters that couldhave a significant impact on the Parent Company’s financial statements, the ParentCompany’s compliance with applicable laws and regulations, and inquiries received fromregulators or governmental agencies. It reviews the effectiveness and adequacy of the systemfor monitoring compliance with laws and regulations and the results of management'sinvestigation and follow-up (including disciplinary action) for any instances ofnoncompliance.

Credit RiskCredit risk refers to the potential loss of earnings or capital arising from an obligor/s, customer/sor counterparty’s failure to perform and/or to meet the terms of any contract with the Group.Credit risks may last for the entire tenor and set at the full amount of a transaction and in somecases may exceed the original principal exposures. The risk may arise from lending, tradefinancing, trading, investments and other activities undertaken by the Group. To identify andassess this risk, the Group has a structured and standardized credit rating, and approval processaccording to the borrower or business and/or product segment. For large corporate credittransactions, the Parent Company has a comprehensive procedure for credit evaluation, riskassessment and well-defined concentration limits, which are established for each type of borrower.At the portfolio level, which may be on an overall or by product perspective, RMD manages theGroup’s credit risk.

Credit concentrationExcessive concentration of lending plays a significant role in the weakening of asset quality. TheGroup reduces this risk by diversifying its loan portfolio across various sectors and borrowers.The Group believes that good diversification across economic sectors and geographic areas,among others, will enable it to ride through business cycles without causing undue harm to itsasset quality.

RMD reviews the Group’s loan portfolio in line with the Group’s policy of not having significantconcentrations of exposure to specific industries or group of borrowers. Management ofconcentration of risk is by client/counterparty and by industry sector. For risk concentrationmonitoring purposes, the financial assets are broadly categorized into loans and receivables, loansand advances to banks, and investment securities. RMD ensures compliance with BSP’s limit onexposure to any single person or group of connected persons by closely monitoring largeexposures and top 20 borrowers for both single and group accounts.

Aside from ensuring compliance with BSP’s limit on exposures to any single person or group ofconnected persons, it is the Parent Company’s policy to keep the expected loss (determined basedon the credit risk rating of the account) of large exposure accounts to, at most, one and a halfpercent (1.50%) of their aggregate outstanding balance. This is to maintain the quality of the

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Group’s large exposures. With this, accounts with better risk grades are given priority in terms ofbeing granted a bigger share in the Group’s loan facilities.

Aligned with the Manual of Regulations for Banks definition, the Group considers its loanportfolio concentrated if it has exposures of more than thirty percent (30.00%) to a particularindustry.

Credit concentration profile as of December 31, 2015 and 2014Maximum credit risk exposuresThe following table shows the Group’s and the Parent Company’s maximum exposure to creditrisk after taking into account any collateral held or other credit enhancements:

Consolidated2015 2014

CarryingAmount

Fair Valueof Collateral

MaximumExposure toCredit Risk

Financial Effectof Collateral

CarryingAmount



FinancialEffect of

CollateralLoans and receivables:

Receivables fromcustomersCorporate lending P=63,181,881 P=20,129,487 P=56,135,135 P=7,046,746 P=55,161,693 P=18,223,252 P=47,713,917 P=7,447,776Consumer lending 86,185,338 40,989,251 58,788,677 27,396,661 62,489,524 29,294,308 38,377,319 24,111,715

P=149,367,219 P=61,118,738 P=114,923,812 P=34,443,407 P=117,651,217 P=47,517,560 P=86,091,236 P=31,559,491

Parent Company2015 2014

CarryingAmount



Financial Effectof Collateral

CarryingAmount



FinancialEffect of

CollateralLoans and receivables:

Receivables fromcustomersCorporate lending P=63,181,881 P=20,129,487 P=56,135,135 P=7,046,746 P=55,461,693 P=18,223,252 P=48,013,917 P=7,447,776Consumer lending 78,925,589 40,885,555 51,632,624 27,292,965 56,621,229 29,172,572 32,631,250 23,989,979

P=142,107,470 P=61,015,042 P=107,767,759 P=34,339,711 P=112,082,922 P=47,395,824 P=80,645,167 P=31,437,755

For off-balance sheet items, the figures presented below summarize the Group’s and the ParentCompany’s maximum exposure to credit risk:

2015 2014Credit

EquivalentAmount

Credit RiskMitigation

Net CreditExposure

CreditEquivalent

AmountCredit RiskMitigation

Net CreditExposure

Off-balance sheet items Direct credit substitutes P=1,006,559 P=− P=1,006,559 P=243,729 P=− P=243,729 Transaction-related contingencies 705,027 − 705,027 619,081 − 619,081 Trade-related contingencies arising

from movement of goods andcommitments with an originalmaturity of up to one (1) year 804,147 − 804,147 372,352 − 372,352

P=2,515,733 P=− P=2,515,733 P=1,235,162 P=− P=1,235,162

Large exposures and top 20 borrowersThe table below summarizes the large exposures and top 20 borrowers of the Group and the ParentCompany:

2015Top 20 Borrowers Large Exposures

SingleBorrowers

GroupBorrowers

SingleBorrowers

GroupBorrowers

Aggregate Exposure (in billions) P=30.76 P=35.74 P=22.41 P=23.20Composite Risk Rating 3.45 3.51 3.40 3.33Total Expected Loss/Aggregate Exposure 0.77% 0.81% 0.71% 0.69%

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2014Top 20 Borrowers Large Exposures

SingleBorrowers

GroupBorrowers

SingleBorrowers

GroupBorrowers

Aggregate Exposure (in billions) P=25.60 P=32.65 P=18.88 P=25.91Composite Risk Rating 3.42 3.56 3.26 3.40Total Expected Loss/Aggregate Exposure 0.73% 0.87% 0.69% 0.72%

The credit exposures, after due consideration of the allowed credit enhancements, of the Group,are all compliant with the regulatory single borrower’s limit and considered to be the maximumcredit exposure to any client or counterparty.

Concentration by industryAn industry sector analysis of the financial assets of the Group follows:

2015

Loans andReceivables*

Loans andAdvances to

Banks**Investment

Securities*** TotalFinancial intermediaries P=11,228,867 P=44,008,152 P=15,164,959 P=70,401,978Real estate, renting and business activity 19,449,098 − − 19,449,098Private households with employed persons 76,050,821 − − 76,050,821Wholesale and retail trade, repair of motor

vehicles 16,233,879 − − 16,233,879Manufacturing 5,717,379 − − 5,717,379Agriculture, fisheries and forestry 3,303,346 − − 3,303,346Transportation, storage and communication 1,465,465 − − 1,465,465Others**** 29,164,993 − − 29,164,993

162,613,848 44,008,152 15,164,959 221,786,959Allowance for credit losses (Note 14) (4,737,049) − − (4,737,049)

P=157,876,799 P=44,008,152 P=15,164,959 P=217,049,910* Includes commitments and contingent accounts.** Comprised of Other cash items, Due from BSP, Due from other banks and IBLR.*** Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost.**** Pertains to unclassified loans and receivables, commitments and contingent accounts.

2014



Banks**Investment





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An industry sector analysis of the financial assets of the Parent Company follows:

2015



Banks**Investment





2014



Banks**Investment

Securities*** TotalFinancial intermediaries P=16,308,481 P=29,819,601 P=18,991,987 P=65,120,069Real estate, renting and business activity 19,176,794 − − 19,176,794Private households with employed persons 78,045,293 − – 78,045,293Wholesale and retail trade, repair of motor




Collateral and other credit enhancementsCollaterals are taken into consideration during the loan application process as they offer analternative way of collecting from the client should a default occur. The percentage of loan valueattached to the collateral offered is part of the Group’s lending guidelines. Such percentages takeinto account safety margins for foreign exchange rate exposure/fluctuations, interest rate exposure,and price volatility.

Collaterals are valued according to existing credit policy standards and, following the latestappraisal report, serve as the basis for the amount of the secured loan facility.

Premium security items are collaterals that have the effect of reducing the estimated credit risk fora facility. The primary consideration for enhancements falling under such category is the ease ofconverting them to cash.

The Group is not permitted to sell or re-pledge the collateral in the absence of default by theowner of the collateral. It is the Group’s policy to dispose foreclosed assets in an orderly fashion.The proceeds of the sale of the foreclosed assets, included under Investment Properties, are used toreduce or repay the outstanding claim. In general, the Group does not occupy repossessedproperties for business use.

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As part of the Group’s risk control on security/collateral documentation, standard documents aremade for each security type and deviation from the pro-forma documents are subject to LegalServices Division’s approval prior to acceptance.

Credit collaterals profileThe table below provides the collateral profile of the outstanding loan portfolio of Group and theParent Company:

ConsolidatedSecurity Corporate Loans Consumer Loans

2015 2014 2015 2014REM* 17.48% 15.33% 9.05% 13.03%Other Collateral** 13.06% 17.86% 37.78% 34.33%Unsecured 69.46% 66.81% 53.17% 52.64%* Real Estate Mortgage** Consists of government securities, stocks and bonds, hold-out on deposits, assignment of receivables etc.

Parent CompanySecurity Corporate Loans Consumer Loans

2015 2014 2015 2014REM* 17.48% 15.33% 9.92% 14.29%Other Collateral** 13.06% 17.86% 41.13% 34.41%Unsecured 69.46% 66.81% 48.95% 51.30%* Real Estate Mortgage** Consists of government securities, stocks and bonds, hold-out on deposits, assignment of receivables etc.

As for the computation of credit risk weights, collaterals of the back-to-back and Home Guarantycovered loans, and Philippine sovereign guarantees are the only credit risk mitigants considered aseligible.

Internal Credit Risk Rating SystemThe Parent Company employs a credit scoring system for all corporate borrowers to assess risksrelating to the borrower and the loan exposure. Borrower risk is evaluated by considering(a) quantitative factors under financial condition and (b) qualitative factors, such as managementquality and industry outlook.

Financial condition assessment focuses on profitability, liquidity, capital adequacy, sales growth,production efficiency and leverage. Management quality determination is based on the ParentCompany’s strategies, management competence and skills and management of bankingrelationship. On the other hand, industry prospect is evaluated based on its importance to theeconomy, growth, industry structure and relevant government policies. Based on these factors,each borrower is assigned a Borrower Risk Rating (BRR), an 11-scale scoring system that rangesfrom 1 to 10, including SBL. In addition to the BRR, the Parent Company assigns a Facility RiskRating (FRR) to determine the risk of the prospective (or existing) exposure with respect to eachcredit facility that it applied for (or under which the exposure is accommodated). The FRRfocuses on the quality and quantity of the collateral applicable to the underlying facility,independent of borrower quality. Consideration is given to the availability and amount of anycollateral and the degree of control, which the lender has over the collateral. FRR applies both tobalance sheet facilities and contingent liabilities. One FRR is determined for each individualfacility taking into account the different security arrangements or risk influencing factors to allowa more precise presentation of risk. A borrower with multiple facilities will have one BRR andmultiple FRRs. The combination of the BRR and the FRR results to the Adjusted Borrower RiskRating (ABRR).

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The credit rating for each borrower is reviewed annually. A more frequent review is warranted incases where the borrower has a higher risk profile or when there are extraordinary or adversedevelopments affecting the borrower, the industry and/or the Philippine economy.

The following is a brief explanation of the Parent Company’s risk grades:

Rating Description Account/Borrower Characteristics1 Excellent · low probability of going into default within the coming year; very high debt

service capacity and balance sheets show no sign of any weakness· has ready access to adequate funding sources· high degree of stability, substance and diversity· of the highest quality under virtual economic conditions

2 Strong · low probability of going into default in the coming year· access to money markets is relatively good· business remains viable under normal market conditions· strong market position with a history of successful financial performance· financials show adequate cash flows for debt servicing and generally

conservative balance sheets3 Good · sound but may be susceptible, to a limited extent, to cyclical changes in the

markets in which they operate· financial performance is good and capacity to service debt remains comfortable· cash flows remain healthy and critical balance sheet ratios are at par with

industry norms· reported profits in the past three years and expected to sustain profitability in the

coming year4 Satisfactory · clear risk elements exist and probability of going into default is somewhat

greater, as reflected in the volatility of earnings and overall performance· normally have limited access to public financial markets· able to withstand normal business cycles, but expected to deteriorate beyond

acceptable levels under prolonged unfavorable economic period· combination of reasonably sound asset and cash flow protection

5 Acceptable · risk elements for the Parent Company are sufficiently pronounced, but wouldstill be able to withstand normal business cycles

· immediate deterioration beyond acceptable levels is expected given prolongedunfavorable economic period

· there is sufficient cash flow either historically or expected in the future in spiteof economic downturn combined with asset protection

5B Acceptable · financial condition hard to ascertain due to weak validation of financialstatements coupled by funding leakages to other business interests whosefinancial condition is generally unknown

· continuous decline in revenues and margins due to competition; increasing debtlevels not commensurate to growth in revenues and funding requirements

· thin margin business with banks financing bulk of working capital and capexrequirements coupled by substantial dividend pay-outs

· chronically tight cashflows with operating income negative or barely enough fordebt servicing

· lines with banks maxed out and availments evergreen with minimal paymentsmade over time or with past record of past due loans with other banks, cancelledcredit cards and court cases

6 Watchlist · affected by unfavorable industry or company-specific risk factors· operating performance and financial strength may be marginal and ability to

attract alternative sources of finance is uncertain· difficulty in coping with any significant economic downturn; some payment

defaults encountered· net losses for at least two consecutive years

7 Special Mention · ability or willingness to service debt are in doubt· weakened creditworthiness· expected to experience financial difficulties, putting the Parent Company’s

exposure at risk

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Rating Description Account/Borrower Characteristics8 Substandard · collectability of principal or interest becomes questionable by reason of adverse

developments or important weaknesses in financial cover· negative cash flows from operations and negative interest coverage· past due for more than 90 days· there exists the possibility of future loss to the Parent Company unless given

closer supervision9 Doubtful · unable or unwilling to service debt over an extended period of time and near

future prospects of orderly debt service are doubtful· with non-performing loan (NPL) status· previously rated ‘Substandard’ by the BSP· loss on credit exposure unavoidable

10 Loss · totally uncollectible· prospect of re-establishment of creditworthiness and debt service is remote· lender shall take or has taken title to the assets and is preparing foreclosure

and/or liquidation although partial recovery may be obtained in the future· considered uncollectible or worthless and of such little value that continuance as

bankable assets is not warranted although the loans may have some recovery orsalvage value

It is the Parent Company’s policy to maintain accurate and consistent risk ratings across the creditportfolio. This facilitates a focused management of the applicable risk and the comparison ofcredit exposures across all lines of business, geographic regions and products. The rating systemis supported by a variety of financial analytics, combined with processed market information toprovide the main inputs for the measurement of counterparty risk. All internal risk ratings aretailored to the various categories and are derived in accordance with the Parent Company’s ratingpolicy. The risk ratings are assessed and updated regularly.

Credit Quality Profile as of December 31, 2015 and 2014External ratingsThe Group also uses external ratings, such as Standard & Poor’s, Moody’s, and Fitch, to evaluateits counterparties and in its assignment of credit risk weights to its banking book exposures.Transactions falling under this category are normally of the following nature: placements withother banks, money market lending, debt security investments, and to some extent, equity securityinvestments.

Investments and financial securitiesThe table below shows credit quality, based on external ratings, per class of financial assets thatare neither past due nor impaired of the Group:

2015AA/A BB/B Unrated Total

Due from BSP P=30,908,680 P=– P=– P=30,908,680Due from other banks 5,348,811 3,110 25,005 5,376,926IBLR 7,722,546 – – 7,722,546Financial assets at FVTPL:

Government securities 4,344,376 – – 4,344,376Private bonds 3,571,730 2,459,078 155,174 6,185,982Equity securities – – 10,448 10,448

7,916,106 2,459,078 165,622 10,540,806Investment securities at amortized cost:

Government securities 4,046,482 – – 4,046,482Private bonds 571,416 – – 571,416

4,617,898 – – 4,617,898Financial assets at FVTOCI:

Quoted equity securities – – 6,255 6,255Unquoted equity securities – – – –

– – 6,255 6,255P=56,514,041 P=2,462,188 P=196,882 P=59,173,111

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Due from BSP P=23,128,678 P=− P=− P=23,128,678Due from other banks 3,379,539 81,062 119,927 3,580,528IBLR 2,893,384 – – 2,893,384Financial assets at FVTPL:

Government securities 7,391,724 – – 7,391,724Private bonds 1,307,094 367,339 890,874 2,565,307Equity securities – – 225,659 225,659

8,698,818 367,339 1,116,533 10,182,690Investment securities at amortized cost:

Government securities 7,536,445 – – 7,536,445Private bonds 1,258,433 – – 1,258,433


Quoted equity securities – – 7,273 7,273Unquoted equity securities 127 – 7,019 7,146

127 – 14,292 14,419P=46,895,424 P=448,401 P=1,250,752 P=48,594,577

The table below shows credit quality, based on external ratings, per class of financial assets thatare neither past due nor impaired of the Parent Company:



Government securities 4,344,376 – – 4,344,376Private bonds 3,571,730 2,459,078 155,174 6,185,982Equity securities – – 10,448 10,448

7,916,106 2,459,078 165,622 10,540,806Investment securities at amortized cost:

Government securities 4,046,482 – – 4,046,482Private bonds 571,416 – – 571,416


Quoted equity securities – – 6,255 6,255Unquoted equity securities – – – –

– – 6,255 6,255P=56,263,903 P=2,462,188 P=196,882 P=58,922,973



Government securities 7,391,724 – – 7,391,724Private bonds 1,307,094 367,339 890,874 2,565,307Equity securities – – 225,659 225,659

8,698,818 367,339 1,116,533 10,182,690Investment securities at amortized cost:

Government securities 7,536,445 – – 7,536,445Private bonds 1,258,433 – – 1,258,433


Quoted equity securities – – 7,273 7,273Unquoted equity securities 127 – 7,019 7,146

127 – 14,292 14,419P=46,650,992 P=448,401 P=1,250,752 P=48,350,145

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The tables below show the credit quality, based on the credit rating system, by class of loans andreceivables that are neither past due nor impaired of the Group:

2015

High GradeStandard

GradeSubstandard

Grade Unrated TotalReceivables from customers:

Corporate lending P=29,510,723 P=33,805,024 P=– P=– P=63,315,747Consumer lending 15,661,611 40,784,769 23,900,929 – 80,347,309

45,172,334 74,589,793 23,900,929 – 143,663,056Unquoted debt securities – – – 311,088 311,088Accounts receivable – – – 908,412 908,412Accrued interest receivable – – – 1,482,532 1,482,532Sales contract receivable – – – 205,841 205,841

– – – 2,907,873 2,907,873P=45,172,334 P=74,589,793 P=23,900,929 P=2,907,873 P=146,570,929

2014

High GradeStandard

GradeSubstandard



34,777,069 58,141,707 22,182,341 – 115,101,117Unquoted debt securities – – – 295,734 295,734Accounts receivable – – – 1,304,002 1,304,002Accrued interest receivable – – – 1,198,722 1,198,722Sales contract receivable – – – 208,328 208,328

– – – 3,006,786 3,006,786P=34,777,069 P=58,141,707 P=22,182,341 P=3,006,786 P=118,107,903

The tables below show the credit quality, based on the credit rating system, by class of loans andreceivables that are neither past due nor impaired of the Parent Company:

2015

High GradeStandard

GradeSubstandard




– – – 3,918,672 3,918,672P=38,048,701 P=74,589,793 P=23,723,191 P=3,918,672 P=140,280,357

2014

High GradeStandard

GradeSubstandard




– – – 3,524,450 3,524,450P=29,361,688 P=58,141,707 P=21,979,009 P=3,524,450 P=113,006,854

Borrowers with unquestionable repaying capacity and to whom the Group is prepared to lend onan unsecured basis, either partially or totally, are generally rated as High Grade borrowers.

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Included in the High Grade category are those accounts that fall under ‘Excellent’, ‘Strong’,‘Good’ and ‘Satisfactory’ categories under ICRRS (with rating of 1-4).

Standard rated borrowers normally require tangible collateral, such as real estate mortgage (REM),to either fully or partially secure the credit facilities as such accounts indicate a relatively highercredit risk than those considered as High Grade. Included in Standard Grade category are thoseaccounts that fall under ‘Acceptable’, ‘Watchlist’ and ‘Special mention’ categories under ICRRS(with rating of 5-7).

Substandard Grade accounts pertain to corporate accounts falling under the ‘Substandard,’‘Doubtful’ and ‘Loss’ categories under ICRRS (with rating of 8-10) and unsecured revolvingcredit facilities.

Those accounts that are classified as unrated includes unquoted debt securities, accountsreceivable, accrued interest receivable and sales contract receivable for which the Group has notyet established a credit rating system.

Impairment AssessmentOn a regular basis, the Group conducts an impairment assessment exercise to determine expectedlosses on its loans portfolio.

The main considerations for the loan impairment assessment include whether any payments ofprincipal or interest are overdue by more than 30 to 90 days as applicable, or if there are anyknown difficulties in the cash flows of counterparties, credit rating downgrades, or infringement ofthe original terms of the contract. The Group addresses impairment assessment in two areas:specific or individually assessed allowances and collectively assessed allowances.

a. Specific Impairment TestingSpecific impairment testing is the process whereby classified accounts are individuallysignificant subject to impairment testing. Classified accounts are past due accounts andaccounts whose credit standing and/or collateral has weakened due to varying circumstances.This present status of the account may adversely affect the collection of both principal andinterest payments.

Indicators of impairment testing are past due accounts, decline in credit rating fromindependent rating agencies and recurring net losses.

The net recoverable amount is computed using the present value approach. The discount rateused for loans with fixed and floating interest rate is the original effective interest rate and lastrepriced interest rate, respectively. Net recoverable amount is the total cash inflows to becollected over the entire term of the loan or the expected proceeds from the sale of collateral.Specific impairment testing parameters include the account information (original andoutstanding loan amount), interest rate (nominal and historical effective) and the businessplan. Also included are the expected date of recovery, expected cash flows, probability ofcollection, and the carrying value of loan and net recoverable amount.

The Group conducts specific impairment testing on significant classified and restructuredcorporate accounts.

b. Collective Impairment TestingAll other accounts which were not individually assessed are grouped based on similar creditcharacteristics and are collectively assessed for impairment under the Collective Impairment

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Testing. This is also in accordance with PAS 39, which provides that all loan accounts notincluded in the specific impairment test shall be subjected to collective testing.

Collective impairment testing of corporate accountsCorporate accounts, which are unclassified and with current status are grouped in accordancewith the Parent Company’s internal credit risk rating. Each internal credit risk rating wouldfetch an equivalent loss impairment where the estimated loss is determined in consideration ofthe Parent Company’s historical loss experience. Impairment loss is derived by multiplyingthe outstanding loan balance on a per internal credit risk rating basis against a factor rate. Thefactor rate, which estimates the expected loss from the credit exposure, is the product of theDefault Rate (DR) and the Loss Given Default Rate (LGDR). DR is estimated based on the3-year historical average default experience by internal credit risk rating of the ParentCompany, while, LGDR is estimated based on loss experience (net of recoveries fromcollateral) for the same reference period.

Collective impairment testing of consumer accountsConsumer accounts, both in current and past due status are collectively tested for impairmentas required under PAS 39. Accounts are grouped by type of product - personal loans, salaryloans, housing loans, auto loans and credit cards.

The estimation of the impaired consumer products’ estimated loss is based on three majorconcepts: age buckets, probability of default and recoverability. Per product, exposures arecategorized according to their state of delinquency - (1) current and (2) past due (which issubdivided into 30, 60, 90, 120, 150, 180 and more than 180 days past due). Auto, housingand salary loans have an additional bucket for its items in litigation accounts. The Grouppartitions its exposures as it recognizes that the age buckets have different rates and/ orprobabilities of default. The initial estimates of losses per product due to default are thenadjusted based on the recoverability of cash flows, to calculate the expected loss of the Group.Auto and housing loans consider the proceeds from the eventual sale of foreclosed collateralsin approximating its recovery rate; while credit cards, salary loans and personal loans dependon the collection experience of its receivables. Further for housing loans, due to the nature ofthe assets offered as security, and as the exposures are limited to a certain percentage of thesame, this product possess the unique quality of obtaining full recoverability. These defaultand recovery rates are based on the Group’s historical experience, which covers a minimum oftwo to three (2-3) years cycle, depending on the availability and relevance of data.

The table below shows the aging analysis of the past due but not impaired loans and receivablesper class of the Group and of the Parent Company. Under PFRS 7, a financial asset is past duewhen a counterparty has failed to make payments when contractually due.

Consolidated2015

Less than30 days

31 to60 days

61 to90 days

91 to180 days

More than180 days Total

Loans and receivables:Corporate lending P=– P=– P=380,359 P=– P=– P=380,359Consumer lending 33,894 1,169,920 955,021 126,177 510,913 2,795,925

P=33,894 P=1,169,920 P=1,335,380 P=126,177 P=510,913 P=3,176,284

Consolidated2014

Less than30 days

31 to60 days

61 to90 days

91 to180 days


Loans and receivables:Corporate lending P=36,746 P=101,720 P=– P=– P=– P=138,466Consumer lending 33,551 878,292 287,458 435,502 669,690 2,304,493

P=70,297 P=980,012 P=287,458 P=435,502 P=669,690 P=2,442,959

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Parent Company2015

Less than30 days

31 to60 days

61 to90 days

91 to180 days


Loans and receivables:Corporate lending P=– P=– P=380,359 P=– P=– P=380,359Consumer lending 7,118 1,156,725 945,643 118,628 500,944 2,729,058

P=7,118 P=1,156,725 P=1,326,002 P=118,628 P=500,944 P=3,109,417

Parent Company2014

Less than30 days

31 to60 days

61 to90 days

91 to180 days


Loans and receivables:Corporate lending P=36,746 P=101,720 P=– P=– P=– P=138,466Consumer lending 21,719 871,770 278,598 423,096 516,037 2,111,220

P=58,465 P=973,490 P=278,598 P=423,096 P=516,037 P=2,249,686

Collaterals of past due but not impaired loans mostly consist of real estate mortgage (REM) ofindustrial, commercial, residential and developed agricultural real estate properties.

Credit risk weighting as of December 31, 2015 and 2014Total credit risk exposure after risk mitigationThe table below shows the different credit risk exposures of the Group and of the Parent Companyafter credit risk mitigation, by risk weight applied in accordance with BSP Circular No. 538(amounts in thousands):

Consolidated2015

CapitalDeduction

Risk BucketsTotal0% 20% 50% 75% 100% 150%

Credit risk exposure after riskmitigation P=6,750,832 P=36,774,559 P=8,283,711 P=5,132,861 P=7,773,482 P=144,195,447 P=6,982,741 P=209,142,801

On-balance sheet assets – – – – – 2,515,734 – 2,515,734Off-balance sheet assets – – – – – – – –Counterparty in the banking book

(derivatives and repo-styletransactions) – – – – – – – –

Counterparty in the trading book(derivatives and repo-styletransactions) – – – – – 203,672 – 203,672

Credit-linked notes in the bankingbook – – – – – – – –

Securitization exposures – – – – – – – –6,750,832 36,774,559 8,283,711 5,132,861 7,773,482 146,914,853 6,982,741 211,862,207

Credit Risk Weighted Assets P=– P=– P=1,656,742 P=2,566,431 P=5,830,112 P=146,914,853 P=10,474,112 P=167,442,250

Consolidated2014

CapitalDeduction


Credit risk exposure after riskmitigation

On-balance sheet assets P=6,264,965 P=28,977,799 P=3,565,001 P=2,363,843 P=2,763,221 P=116,881,268 P=6,010,306 P=160,561,438Off-balance sheet assets – – – – – 1,235,163 – 1,235,163Counterparty in the banking book

(derivatives and repo-styletransactions) – – – – – 2,157,060 – 2,157,060




Credit Risk Weighted Assets P=– P=– P=713,000 P=1,181,922 P=2,072,416 P=120,297,388 P=9,015,459 P=133,280,185

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Parent Company2015

CapitalDeduction


Credit risk exposure after riskmitigation P=7,481,433 P=36,521,551 P=8,283,181 P=5,132,861 P=7,763,824 P=137,544,249 P=6,968,646 P=202,214,312

On-balance sheet assets – – – – – 2,515,734 – 2,515,734Off-balance sheet assets – – – – – – – –Counterparty in the banking book

(derivatives and repo-styletransactions) – – – – – – – –




Credit Risk Weighted Assets P=– P=– P=1,656,636 P=2,566,431 P=5,822,868 P=140,263,655 P=10,452,969 P=160,762,559

Parent Company2014

CapitalDeduction


Credit risk exposure after riskmitigation

On-balance sheet assets P=6,986,899 P=28,759,985 P=3,543,745 P=2,363,843 P=2,763,221 P=111,258,962 P=5,981,826 P=154,671,582Off-balance sheet assets – – – – – 1,235,163 – 1,235,163Counterparty in the banking book

(derivatives and repo-styletransactions) – – – – – 2,157,060 – 2,157,060




Credit Risk Weighted Assets P=– P=– P=708,749 P=1,181,922 P=2,072,416 P=114,675,082 P=8,972,739 P=127,610,908

Liquidity RiskLiquidity risk is the risk that sufficient funds are unavailable to adequately meet all maturingliabilities, including demand deposits and off-balance sheet commitments. The mainresponsibility of daily asset liability management lies with the Parent Company’s Treasury Group,specifically the Liquidity Desk, and the Subsidiary’s Fund Management Department which aretasked to manage the balance sheet and have thorough understanding of the risk elements involvedin the respective businesses. Both the Parent Company and the Subsidiary’s liquidity riskmanagement are then monitored through each entity’s ALCO. Resulting analysis of the balancesheet along with the recommendation is presented during the weekly ALCO meeting wheredeliberations, formulation of actions and decisions are made to minimize risk and maximizereturns. Discussions include actions taken in the previous ALCO meeting, economic and marketstatus and outlook, liquidity risk, pricing and interest rate structure, limit status and utilization. Toensure that both the Parent Company and Subsidiary has sufficient liquidity at all times, therespective ALCO formulates a contingency funding plan which sets out the amount and thesources of funds (such as unutilized credit facilities) available to both entities and thecircumstances under which such funds will be used.

By way of the Maximum Cumulative Outflow (MCO) limit, the Group is able to manage its long-term liquidity risks by placing a cap on the outflow of cash on a per tenor and on a cumulativebasis. The Group takes a multi-tiered approach to maintaining liquid assets. The Group’sprincipal source of liquidity is comprised of COCI, Due from BSP, Due from other banks andIBLR with maturities of less than one year. In addition to regulatory reserves, the ParentCompany maintains a sufficient level of secondary reserves in the form of liquid assets such asshort-term trading and investment securities that can be realized quickly.

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Analysis of financial assets and liabilities by remaining contractual maturitiesThe table below shows the maturity profile of the financial assets and liabilities of the Group andof the Parent Company, based on its internal methodology that manages liquidity based oncontractual undiscounted cash flows (amounts in millions):

Consolidated2015

On demandUp to

1 month>1 to 3

months>3 to 6

months>6 to 12months

Beyond 1year Total

Financial AssetsCash and cash equivalents* P=49,908 P=– P=– P=– P=– P=127 P=50,035Investments and trading

securities** – 6,165 3,398 3,636 5,668 2,368 21,235Loans and receivables*** – 32,433 13,073 11,542 16,031 116,641 189,720

P=49,908 P=38,598 P=16,471 P=15,178 P=21,699 P=119,136 P=260,990Financial LiabilitiesDeposit liabilities**** P=– P=7,703 P=10,556 P=11,442 P=4,143 P=165,517 P=199,361Bills and acceptances payable – 2,951 – – – 123 3,074Subordinated debt – – 1,500 – – 4,967 6,467Other liabilities 1,224 17 16 17 61 8,759 10,094Contingent liabilities – 129 59 204 521 180 1,093

P=1,224 P=10,800 P=12,131 P=11,663 P=4,725 P=179,546 P=220,089*** Consist of cash and cash other items, due from BSP, due from other banks and IBLR*** Consist of financial assets at FVTPL, investment securities at amortized cost, financial assets at FVTOCI and interest receivables

from investment securities at amortized cost.*** Consist of loans and receivables, sales contract receivables, bills purchased, accrued interest receivables, accounts receivables,

unearned discounts, allowance for probable losses, investment properties, other intangible assets and other assets.****Consist of demand and savings deposit, time certificate of deposit, long term negotiable certificates of deposit and interest payable

for these deposit liabilities.

Consolidated2014

On demandUp to

1 month>1 to 3months

>3 to 6months

>6 to 12months

Beyond 1year Total



P=35,510 P=21,480 P=15,870 P=12,481 P=11,512 P=105,512 P=202,365Financial LiabilitiesDeposit liabilities**** P=– P=4,990 P=7,231 P=7,243 P=2,901 P=133,237 P=155,602Bills and acceptances payable – 5,396 – – – 28 5,424Subordinated debt – – – – – 6,500 6,500Other liabilities 1,383 90 9 9 3 5,647 7,141Contingent liabilities – 1,656 65 41 297 (1,336) 723

P=1,383 P=12,132 P=7,305 P=7,293 P=3,201 P=144,076 P=175,390** * Consist of cash and cash other items, due from BSP, due from other banks and IBLR** * Consist of financial assets at FVTPL, investment securities at amortized cost, financial assets at FVTOCI and interest receivables




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Parent Company2015

On demandUp to

1 month>1 to 3

months>3 to 6

months>6 to 12months

Beyond 1year Total



P=49,295 P=38,114 P=16,045 P=14,546 P=20,464 P=113,780 P=252,244Financial LiabilitiesDeposit liabilities**** P=– P=7,365 P=10,105 P=10,897 P=3,888 P=161,534 P=193,789Bills and acceptances payable – 2,951 – – – 123 3,074Subordinated debt – – 1,500 – – 4,967 6,467Other liabilities 1,224 16 15 16 61 7,272 8,604Contingent liabilities – 129 59 204 521 180 1,093




for these deposit liabilities.Parent Company

2014

On demandUp to

1 month>1 to 3months

>3 to 6months

>6 to 12months

Beyond 1year Total



P=35,270 P=21,479 P=15,660 P=12,173 P=10,908 P=100,567 P=196,057Financial LiabilitiesDeposit liabilities**** P=– P=4,775 P=7,015 P=7,132 P=2,824 P=128,847 P=150,593Bills and acceptances payable – 5,182 – – – 28 5,210Subordinated debt – – – – – 6,500 6,500Other liabilities 1,383 90 9 8 3 5,485 6,978Contingent liabilities – 1,656 65 41 297 (1,336) 723





The Parent Company manages liquidity by maintaining sufficient liquid assets in the form ofcash and cash equivalents, investment securities and loan receivables. As of December 31, 2015and 2014, P=69.85 billion and P=49.34 billion, respectively, or 42.10% and 39.28%, respectively, ofthe Parent Company’s total gross loans and receivables had remaining maturities of less than one(1) year. The total portfolio of trading and investment securities is comprised mostly ofsovereign-issued securities that have high market liquidity. The Parent Company was fullycompliant with BSP’s limits on FCDU Asset Cover and FCDU Liquid Assets Cover, havingreported ratios above 100.00% as of December 31, 2015 and 2014. With the above presentedliquidity profile, the Group remains to be inhibited from liquidity risk that it can’t adequatelymanage.

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Market RiskMarket risk is the risk that the fair value or future cash flows of financial instruments will fluctuatedue to changes in market variables such as interest rates, foreign exchange rates, and equity prices.The Parent Company treats exposures to market risk as either for trading or accrual/balance sheetexposure. The market risk for the trading portfolio is measured using Value at Risk (VaR).Interest rate risk of accrual portfolios in the Banking Book are measured using Earnings at Risk(EaR).

Market risk in the trading bookThe Board has set limits on the level of market risk that may be accepted. VaR limits are appliedat the business unit level and approved by the BOD based on, among other things, a businessunit’s capacity to manage price risks, the size and distribution of the aggregate exposure to pricerisks and the expected return relative to price risks.

The Parent Company applies the VaR methodology to assess the market sensitive positions heldfor trading and to estimate the potential economic loss based on parameters and assumptions.VaR is a method used in measuring market risk by estimating the potential negative change in themarket value of a portfolio at a given confidence level and over a specified time horizon.

Objectives and limitations of the VaR MethodologyThe Parent Company uses the VaR model of Bloomberg Portfolio Analytics using one-yearhistorical data set to assess possible changes in the market value of the Fixed Income, Equities,and Foreign Exchange trading portfolio. VaR for the US Treasury Futures is measured usingHistorical Simulation using the Bloomberg Multi Asset Risk System. The Interest Rate Swaps(IRS) and FX Forwards (Outright and forward leg of FX Swaps) trading portfolio’s interest raterisk is measured using Monte Carlo VaR. The VaR models are designed to measure market risk ina normal market environment. The use of VaR has limitations because correlations and volatilitiesin market prices are based on historical data and VaR assumes that future price movements willfollow a statistical distribution. Due to the fact that VaR relies heavily on historical data toprovide information and may not clearly predict the future changes and modifications of the riskfactors, the probability of large market moves may be underestimated.

VaR may also be under or over estimated due to assumptions placed on risk factors and therelationship between such factors for specific instruments. Even though positions may changethroughout the day, VaR only represents the risk of the portfolio at the close of each business day,and it does not account for any losses that may occur beyond the specified confidence level.

In practice, actual trading results will differ from the VaR calculation and, in particular, thecalculation does not provide a meaningful indication of profits and losses in stressed marketconditions. To determine the reliability of the VaR model, actual outcomes are monitored throughhypothetical and actual backtesting to test the accuracy of the VaR model.

Stress testing provides a means of complementing VaR by simulating the potential loss impact onmarket risk positions from extreme market conditions, such as risk factor movements based onhistorical financial market stress conditions and scenarios adopted from the uniform stress testingframework of the BSP.

VaR assumptionsThe VaR that the Parent Company use is premised on a 99% confidence level that this potentialloss estimate is not expected to be exceeded if the current market risk positions were to be heldunchanged for a given holding period. Foreign exchange and US Treasury Futures VaR ismeasured using one (1) day holding period while fixed income VaR has holding period of five (5)

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days. Furthermore, the Parent Company’s equity and interest rate swap (IRS) trading positions areassumed to be closed out in ten (10) days. The use of a 99% confidence level means that withinthe set time horizon, losses exceeding the VaR figure should occur, on average, not more thanonce every hundred days.

VaR is an integral part of the Parent Company’s market risk management and encompassesinvestment positions held for trading. VaR exposures form part of the market risk monitoringwhich is reviewed daily against the limit approved by the Board. The trading activities arecontrolled through the Market Risk Limit (MRL), which is a dynamic risk limit anchored on theprinciple of risk and return which is adjusted for any trading income that would exceed targetsthroughout the year. RMD reports compliance to the MRL and trader’s VaR limits on a dailybasis. If the MRL or individual trader’s limit is exceeded, such occurrence is promptly reported tothe Treasurer, Chief Operating Officer, Chief Risk Officer and the President, and further to theBoard through the RMC.

The table below pertains to interest rate risk of the Parent Company’s fixed income tradingportfolio (amounts in thousands):

2015 2014Year-end VaR P=162,989 P=200,969Average VaR 186,191 107,839Highest VaR 379,820 233,073Lowest VaR 21,620 8,023

The year-end VaR for 2015 was based on the Parent Company’s fixed income trading book valuedat P=8.50 billion with average yields of 3.85% and 3.55% for the Peso and Foreign currencydenominated bonds, respectively. Its average maturities are 4 years and 4 months for the Pesoportfolio and 5 years and 6 months for the foreign currency portfolio.

The year-end VaR for 2014 was based on the Parent Company’s fixed income trading book valuedat P=9.90 billion with average yields of 3.73% and 3.90% for the Peso and Foreign currencydenominated bonds, respectively. Its average maturities are 8 years and 5 months for the Pesoportfolio and 11 years and 2 months for the foreign currency portfolio.

The market risk in the Parent Company’s US Treasury Futures trading positions is shown in thetable below (amounts in thousands):

2015 2014Year-end VaR P=– P=–Average VaR 154 –Highest VaR 581 –Lowest VaR – –

The Parent Company commenced its US Treasury Futures trading in December 2015.

The market risk in the Parent Company’s IRS trading positions is shown in the table below(amounts in thousands):

2015 2014Year-end VaR P=21,842 P=8,674Average VaR 19,965 4,521Highest VaR 25,982 8,674Lowest VaR 7,444 3,789

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As of December 31, 2015, the Parent Company’s IRS positions have a notional amount of$20.00 million where it pays fixed rate and receives floating rate interest.

The Parent Company commenced entering into IRS in December 2014 with a notional amount of$10.00 million where the Parent Company pays fixed rate and receives floating rate interest.

The table below pertains to the market risk of the Parent Company’s equity trading positions(amounts in thousands):

2015 2014Year-end VaR P=– P=664Average VaR 806 13,618Highest VaR 6,753 49,371Lowest VaR – 664

Foreign Currency RiskThe Parent Company holds foreign currency denominated assets and liabilities, thus, fluctuationson the foreign exchange rates can affect the financials and cash flows of the Parent Company.Managing the foreign exchange exposure is important for banks with exposures in foreigncurrencies. It includes purchase or sell of foreign currency in order to control the impact ofchanges in exchange rates on the financial position of the Parent Company.

The table below pertains to the foreign exchange risk of the Parent Company (amounts inthousands):

2015 2014Year-end VaR P=3,161 P=4,369Average VaR 2,329 1,780Highest VaR 6,462 6,571Lowest VaR 33 10

The Parent Company’s foreign currency exposures emanate from its net open spot and forward FXpurchase and sell transactions, and net foreign currency income accumulated over the years of itsoperations. Foreign currency-denominated deposits are generally used to fund the ParentCompany’s foreign currency-denominated loan and investment portfolio in the FCDU. In theFCDU books, BSP requires banks to match the foreign currency assets with the foreign currencyliabilities. Thus, banks are required to maintain at all times a 100.00% cover for their currencyliabilities held through FCDU. The Parent Company is in compliance with said regulation as ofDecember 31, 2015 and 2014.

Total foreign currency position is monitored through the daily BSP FX position reports, which aresubject to the overbought and oversold limits set by the BSP at 20.00% of unimpaired capital or$50.00 million, whichever is lower. Internal limits regarding the intraday trading and end-of-daytrading positions in FX, which take into account the trading desk and the branch FX transactions,are also monitored.

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The table below summarizes the exposure to foreign currencies of the Parent Company as ofDecember 31, 2015 and 2014 (amounts in thousands):

2015

USDOther

Currencies TotalAssetsGross FX assets $695,395 $13,530 $708,925Contingent FX assets 26,000 2,197 28,197

721,395 15,727 737,122LiabilitiesGross FX liabilities 686,129 13,091 699,220Contingent FX liabilities 29,170 – 29,170

715,299 13,091 728,390Net exposure $6,096 $2,636 $8,732

2014

USDOther

Currencies TotalAssetsGross FX assets $624,465 $13,224 $637,689Contingent FX assets 58,080 – 58,080

682,545 13,224 695,769LiabilitiesGross FX liabilities 573,872 11,028 584,900Contingent FX liabilities 98,000 78 98,078

671,872 11,106 682,978Net exposure $10,673 $2,118 $12,791

The table below indicates the sensitivity of the currencies which the Parent Company hadsignificant exposures as of December 31, 2015 and 2014 (amounts in millions):

Foreign currency appreciates 2015 (depreciates) USD EUR CNY+10.00% P=28.69 P=2.10 P=8.07-10.00% (28.69) (2.10) (8.07)

Foreign currency appreciates 2014 (depreciates) USD EUR CNY+10.00% P=47.73 P=3.41 P=3.65-10.00% (47.73) (3.41) (3.65)

The analysis calculates the effect of a reasonably possible movement of the currency rate againstthe Peso, with all other variables held constant, on the statement of income. A negative amountreflects a potential net reduction in net income while a positive amount reflects a net potentialincrease. There is no other impact on the Parent Company’s equity other than those alreadyaffecting the statements of income.

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Market Risk in the Banking Book

Interest rate riskA critical element of risk management program consists of measuring and monitoring the risksassociated with fluctuations in market interest rates on the Group’s net interest income. The short-term nature of its assets and liabilities reduces the exposure of its net interest income to such risks.

The Parent Company employs re-pricing gap analysis on a monthly basis to measure the interestrate sensitivity of its assets and liabilities. The re-pricing gap analysis measures, for any givenperiod, any mismatches between the amounts of interest-earning assets and interest-bearingliabilities that would re-price, or mature (for contracts that do not re-price), during that period.The re-pricing gap is calculated by first distributing the assets and liabilities contained in theGroup’s statement of financial position into tenor buckets according to the time remaining to thenext re-pricing date (or the time remaining to maturity if there is no re-pricing), and then obtainingthe difference between the total of the re-pricing (interest rate sensitive) assets and re-pricing(interest rate sensitive) liabilities. If there is a positive gap, there is asset sensitivity whichgenerally means that an increase in interest rates would have a positive effect on the Group’s netinterest income. If there is a negative gap, this generally means that an increase in interest rateswould have a negative effect on net interest income.

The following table provides for the average interest rates by period of re-pricing (or by period ofmaturity if there is no re-pricing) of the Group as of December 31, 2015 and 2014:

2015Up to

1 month>1 month

to 3 months>3 months


to 12 months >12 monthsRBUFinancial assets:

Cash and cash equivalents − − − − −Loans and receivables 4.55% 4.54% 4.95% 5.38% 7.83%Investment securities − − 2.73% 1.63% 3.61%

Financial liabilities:Deposit liabilities 1.76% 2.04% 2.02% 2.35% 4.19%Bills payable 1.10% – – 0.57% –Subordinated debt 7.50% – – – 5.88%

FCDUFinancial assets:

Cash and cash equivalents – – – – –Loans and receivables 3.28% 2.37% 3.72% – 6.64%Investment securities – – 2.18% 1.79% 3.99%

Financial liabilities:Deposit liabilities 1.40% 1.38% 1.70% 1.94% 2.18%

2014Up to

1 month>1 month




Cash and cash equivalents − − − − −Loans and receivables 2.27% 4.55% 4.86% 6.46% 9.25%Investment securities − 3.63% − − 3.10%

Financial liabilities:Deposit liabilities 1.59% 1.92% 2.43% 4.23% 3.60%Bills payable 1.51% − − − −Subordinated debt − − − − 6.03%


Cash and cash equivalents − − − − −Loans and receivables 3.04% 2.79% 3.78% 4.86% 6.72%Investment securities 0.61% − − − 4.00%


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The following table provides for the average interest rates by period of re-pricing (or by period ofmaturity if there is no re-pricing) of the Parent Company as of December 31, 2015 and 2014:

2015Up to

1 month>1 month




Cash and cash equivalents – – – – –Loans and receivables 4.55% 4.52% 4.80% 5.10% 9.25%Investment securities – – 2.73% 1.63% 3.61%

Financial liabilities:Deposit liabilities 1.78% 2.06% 2.06% 2.36% 4.19%Bills payable 1.10% – – 0.57% –Subordinated debt 7.50% – – – 5.88%


Cash and cash equivalents – – – – –Loans and receivables 3.28% 2.37% 3.72% – 6.64%Investment securities – – 2.18% 1.79% 3.99%


2014Up to

1 month>1 month




Cash and cash equivalents − − − − −Loans and receivables 2.28% 4.54% 4.81% 6.22% 9.41%Investment securities − 3.63% − − 3.10%

Financial liabilities:Deposit liabilities 1.60% 1.95% 2.44% 4.31% 7.62%Bills payable 1.51% − − − -Subordinated debt − − − − 6.03%


Cash and cash equivalents − − − − −Loans and receivables 3.04% 2.79% 3.78% 4.86% 6.72%Investment securities 0.61% − − − 4.00%


The following tables sets forth the interest rate re-pricing gap of the Group as of December 31,2015 and 2014 (amounts in millions):

2015Up to

1 month> 1 to

3 months> 3 to

6 months>6 to

12 months >12 months TotalFinancial assets:

Cash and cash equivalents P=− P=− P=− P=− P=− P=−Loans and receivables 30,884 7,716 4,971 3,542 79,397 126,510Investment securities 2,048 1,955 1,993 5,836 3,235 15,067Contingent assets − 941 − − − 941

Total financial assets 32,932 10,612 6,964 9,378 82,632 142,518Financial liabilities:

Deposit liabilities 55,628 15,737 2,656 1,149 16,748 91,918Bills and acceptances payable 2,199 − 752 − − 2,951Subordinated debt 1,500 − − − 5,000 6,500Contingent liabilities − − − − 941 941Total financial liabilities 59,327 15,737 3,408 1,149 22,689 102,310

Asset-liability gap (P=26,395) (P=5,125) P=3,556 P=8,229 P=59,943 P=40,208

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2014Up to

1 month> 1 to

3 months> 3 to

6 months>6 to

12 months >12 months TotalFinancial assets

Cash and cash equivalents P=− P=− P=− P=− P=− P=−Loans and receivables 29,634 6,030 3,753 2,207 55,609 97,233Investment securities 2,422 2,212 2,201 3,246 7,455 17,536Contingent assets 2 672 − 4 − 678

Total financial assets 32,058 8,914 5,954 5,457 63,064 115,447Financial liabilities

Deposit liabilities 42,730 14,504 2,183 1,285 16,423 77,125Bills and acceptances payable 5,289 − − − − 5,289Other liabilities − − − − − −Subordinated debt − − − − 6,500 6,500Contingent liabilities − − 6 − 669 675

Total financial liabilities 48,019 14,504 2,189 1,285 23,592 89,589Asset-liability gap (P=15,961) (P=5,590) P=3,765 P=4,172 P=39,472 P=25,858

The following tables sets forth the interest rate re-pricing gap of the Parent Company as ofDecember 31, 2015 and 2014 (amounts in millions):

2015Up to

1 month> 1 to

3 months> 3 to

6 months>6 to

12 months >12 months TotalFinancial assets:

Cash and cash equivalents P=− P=− P=− P=− P=− P=−Loans and receivables 30,789 7,696 4,954 3,477 73,578 120,494Investment securities 4,003 1,993 2,663 3,173 3,235 15,067Contingent assets − 941 − − − 941

Total financial assets 34,792 10,630 7,617 6,650 76,813 136,502Financial liabilities:

Deposit liabilities 51,259 14,913 2,546 1,130 16,748 86,596Bills and acceptances payable 2,199 − 752 − − 2,951Subordinated debt 1,500 − − − 5,000 6,500Contingent liabilities − − − − 941 941Total financial liabilities 54,958 14,913 3,298 1,130 22,689 96,988

Asset-liability gap (P=20,166) (P=4,283) P=4,319 P=5,520 P=54,124 P=39,514

2014Up to

1 month> 1 to

3 months> 3 to

6 months>6 to

12 months >12 months TotalFinancial assets

Cash and cash equivalents P=− P=− P=− P=− P=− P=−Loans and receivables 29,928 6,012 3,734 2,134 49,703 91,511Investment securities 2,422 2,212 2,201 3,246 7,455 17,536Contingent assets 2 672 – 4 – 678

Total financial assets 32,352 8,896 5,935 5,384 57,158 109,725Financial liabilities

Deposit liabilities 39,445 13,829 2,165 1,264 16,423 73,126Bills and acceptances payable 5,289 – – – – 5,289Other liabilities – – – – – –Subordinated debt – – – – 6,500 6,500Contingent liabilities – – 6 – 669 675

Total financial liabilities 44,734 13,829 2,171 1,264 23,592 85,590Asset-liability gap (P=12,382) (P=4,933) P=3,764 P=4,120 P=33,566 P=24,135

With the above negative re-pricing profile, the Group could expect positive returns from thefollowing months after the end of 2015 should there be a downward movement in interest rates.

The Group also monitors its exposure to fluctuations in interest rates by using scenario analysis toestimate the impact of interest rate movements on its interest income. This is done by modelingthe impact to the Group’s interest income and interest expenses of different parallel changes in theinterest rate curve, assuming the parallel change only occurs once and the interest rate curve afterthe parallel change does not change again for the next twelve months.

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The following table sets forth, for the period indicated, the impact of changes in interest rates onthe Group’s non-trading net interest income (amounts in millions). There is no other impact onthe Group’s equity other than those already affecting the statements of income.

Change in basis points 2015 2014+100bps (P=252.9) (P=165.5)-100bps 252.9 165.5

The following table sets forth, for the period indicated, the impact of changes in interest rates onthe Parent Company’s non-trading net interest income (amounts in millions). There is no otherimpact on the Parent Company’s equity other than those already affecting the statements ofincome.

Change in basis points 2015 2014+100bps (P=188.2) (P=149.7)-100bps 188.2 149.7

Market Risk Weighting as of December 31, 2015 and 2014The table below shows the different market risk-weighted assets (amounts in millions) of theParent Company using the standardized approach:

Type of Market Risk Exposure 2015 2014Interest Rate Exposures P=5,419 P=7,791Foreign Exchange Exposures 411 572

P=5,830 P=8,363

Only the Parent Company has a trading book portfolio.

Operational RiskOperational risk is the loss resulting from inadequate or failed internal processes, people andsystems or from external events. It includes legal, compliance and reputational risks but excludesstrategic risk.

Adopting the Basic Indicator Approach in computing, below is the total operational risk-weightedassets of the Group and Parent Company (amounts in millions).

2015 2014Group P=22,426 P=18,152Parent Company 21,167 17,419

Other Risk ExposuresGroup risk exposures other than credit, market, liquidity and operational, while existent, aredeemed insignificant relative to the mentioned risks and if taken in isolation. Hence, managementof these risks are instead collectively performed and made an integral part of the Group’s internalcapital adequacy assessment process (ICAAP) and enterprise risk management initiatives.

The last internal capital adequacy assessment results of the Group show that these other risksremain insignificant to pose a threat on the Group’s capacity to comply with the minimum capitaladequacy ratio of 10% as prescribed by BSP.

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5. Fair Value Measurement

The following table provides the fair value hierarchy of the Group’s and of the Parent Company’sassets and liabilities measured at fair value and those for which fair values are required to bedisclosed:

Consolidated2015

Fair Value

CarryingValue Total

Quoted Pricesin active

market(Level 1)

Significantobservable

inputs(Level 2)

Significantunobservable

inputs(Level 3)

Assets measured at fair valueFinancial assets

Financial assets at FVTPL: HFT investments: Government securities P=4,344,376 P=4,344,376 P=4,344,376 P=– P=– Private bonds 6,185,982 6,185,982 6,185,982 – – Equity securities 10,448 10,448 10,448 – –

10,540,806 10,540,806 10,540,806 – –Derivative assets 167,491 167,491 – 167,491 –Financial assets at FVTOCI 6,255 6,255 6,255 – –

Assets for which fair values are disclosedFinancial assets

Investment securities at amortized cost: Government securities 4,046,482 4,184,434 4,184,434 – – Private bonds 571,416 568,725 568,725 – –

4,617,898 4,753,159 4,753,159 – –Loans and receivables Receivable from customers: Corporate lending 63,181,881 63,946,546 – – 63,946,546 Consumer lending 86,185,338 85,167,292 – – 85,167,292 Unquoted debt securities 330,761 443,668 – – 443,668

149,697,980 149,557,506 – – 149,557,506Non-financial assets

Investment properties 727,613 1,177,473 – – 1,177,473Total assets P=165,758,043 P=166,202,690 P=15,300,220 P=167,491 P=150,734,979Liabilities measured at fair valueFinancial liabilities

Derivative liabilities P=183,755 P=183,755 P=– P=183,755 P=–Liabilities for which fair values are disclosedFinancial liabilities

Deposit liabilities Time 82,866,306 82,934,373 – – 82,934,373 LTNCD 8,034,515 8,689,919 – – 8,689,919

90,900,821 91,624,292 – – 91,624,292Subordinated debt 6,466,516 7,412,376 – – 7,412,376

Total liabilities P=97,551,092 P=99,220,423 P=– P=183,755 P=99,036,668

Consolidated2014

Fair Value

CarryingValue Total

Quoted Prices inactive market

(Level 1)


inputs (Level 2)


inputs(Level 3)


Financial assets at FVTPL: HFT investments: Government securities P=7,391,724 P=7,391,724 P=7,255,622 P=136,102 P=– Private bonds 2,565,307 2,565,307 2,565,307 – – Equity securities 225,659 225,659 225,659 – –

10,182,690 10,182,690 10,046,588 136,102 –

(Forward)

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Consolidated2014

Fair Value

CarryingValue Total


(Level 1)


inputs (Level 2)


inputs(Level 3)

Derivative assets P=110,668 P=110,668 P=– P=110,668 P=–Financial assets at FVTOCI 14,419 14,419 14,419 – –


Investment securities at amortized cost: Government securities 7,536,445 7,660,169 7,433,658 226,511 – Private bonds 1,258,433 1,258,656 1,258,656 – –

8,794,878 8,918,825 8,692,314 226,511 –Loans and receivables Receivable from customers: Corporate lending 55,161,693 55,019,062 – – 55,019,062 Consumer lending 62,489,524 58,798,980 – – 58,798,980 Unquoted debt securities 291,836 227,675 – – 227,675







Parent Company2015

Fair Value

CarryingValue Total


market(Level 1)


inputs (Level 2)


inputs(Level 3)


Financial assets at FVTPL: HFT investments: Government securities P=4,344,376 P=4,344,376 P=4,344,376 P=– P=– Private bonds 6,185,982 6,185,982 6,185,982 – – Equity securities 10,448 10,448 10,448 – –

10,540,806 10,540,806 10,540,806 – –Derivative assets 167,491 167,491 – 167,491 –Financial assets at FVTOCI 6,255 6,255 6,255 – –


Investment securities at amortized cost: Government securities 4,046,482 4,184,434 4,184,434 – – Private bonds 571,416 568,725 568,725 – –

4,617,898 4,753,159 4,753,159 – –Loans and receivables Receivable from customers: Corporate lending 63,181,881 63,946,546 – – 63,946,546 Consumer lending 78,925,589 77,770,602 – – 77,770,602 Unquoted debt securities 330,444 443,352 – – 443,352


Investment properties 726,916 1,176,692 – – 1,176,692Total assets P=158,497,280 P=158,804,903 P=15,300,220 P=167,491 P=143,337,192

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Parent Company2015

Fair Value

CarryingValue Total


market(Level 1)


inputs (Level 2)


inputs(Level 3)

Liabilities measured at fair valueFinancial liabilities





Parent Company2014

Fair Value

CarryingValue Total


(Level 1)


inputs (Level 2)


inputs(Level 3)


Financial assets at FVTPL: HFT investments: Government securities P=7,391,724 P=7,391,724 P=7,255,622 P=136,102 P=– Private bonds 2,565,307 2,565,307 2,565,307 – – Equity securities 225,659 225,659 225,659 – –

10,182,690 10,182,690 10,046,588 136,102 –Derivative assets 110,668 110,668 – 110,668 –Financial assets at FVTOCI 14,419 14,419 14,419 – –


Investment securities at amortized cost: Government securities 7,536,445 7,660,169 7,433,658 226,511 – Private bonds 1,258,433 1,258,656 1,258,656 – –

8,794,878 8,918,825 8,692,314 226,511 –Loans and receivables Receivable from customers: Corporate lending 55,461,693 55,019,062 – – 55,019,062 Consumer lending 56,621,229 58,798,980 – – 58,798,980 Unquoted debt securities 209,097 227,258 – – 227,258







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In 2015 and 2014, there were no transfers between Level 1 and Level 2 fair value measurements,and no transfers into and out of Level 3 fair value measurements.

The methods and assumptions used by the Group in estimating the fair value of the financialinstruments are:

COCI, due from BSP and other banks and IBLR - The carrying amounts approximate fair valuesdue to the short-term nature of these accounts. IBLR consist mostly of overnight deposits andfloating rate placements.

Loans and receivables - Fair values of loans and receivables are estimated using the discountedcash flow methodology, using the Parent Company’s current incremental lending rates for similartypes of loans and receivables.

Debt securities - Fair values are generally based on quoted market prices. If the market prices arenot readily available, fair values are estimated using either values obtained from independentparties offering pricing services or adjusted quoted market prices of comparable investments orusing the discounted cash flow methodology.

Equity securities - Fair values of quoted equity securities are based on quoted market prices.Unquoted equity investments are simply carried at cost since there is insufficient informationavailable to determine fair values.

Derivative instruments - Fair values of derivative instruments, mainly forwards and swaps, arevalued using a valuation technique with market observable inputs. The most frequently appliedvaluation technique is forward pricing, which uses present value calculations. The modelincorporates various inputs including the foreign exchange rates and interest rate curves prevailingat the statement of financial position date.

Liabilities - The fair values of liabilities approximate their carrying amounts due to either thedemand nature or the relatively short-term maturities of these liabilities except for time depositliabilities, LTNCD and subordinated debt whose fair value are estimated using the discounted cashflow methodology using the Parent Company’s incremental borrowing rates for similarborrowings with maturities consistent with those remaining for the liability being valued.

Derivative Financial InstrumentsThe Parent Company’s freestanding derivative financial instruments, which mainly consist offoreign currency forwards and swaps, and interest rate swaps, are transactions not designated ashedges. The table below sets out information about the Parent Company’s derivative financialinstruments and the related fair value as of December 31, 2015 and 2014:

Foreign Currency Forwards and Swaps 2015 2014Notional amount $13,113 $40,000Derivative assets P=3,837 P=13,661Derivative liabilities 581 6,450

Interest Rate Swaps 2015 2014Notional amount $20,000 $10,000Derivative assets P=163,654 P=97,007Derivative liabilities 183,174 94,840

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The net movements in fair value changes of all derivative instruments are as follows:

2015 2014Derivative assets (liabilities) - net at beginning

of year P=9,378 (P=21,927)Changes in fair value of derivatives (1,616,224) (827,779)Fair value of settled instruments 1,590,582 859,084Derivative assets (liabilities) - net at end of year (P=16,264) P=9,378

Fair value changes of foreign currency forwards and swaps are recognized as Foreign exchangegain in the statements of income while fair value changes of interest rate swaps are recognized aspart of Trading and securities gain (see Note 8).

6. Segment Reporting

The Group’s main operating businesses are organized and managed primarily, according to thecurrent organizational structure. Each segment represents a strategic business unit that caters tothe bank’s identified markets. The Group’s business segments are:

(a) Retail banking - this segment mainly covers traditional branch banking products and servicessuch as deposits, back-to-back/emerging market loans and other over-the-counter (OTC)transactions. It likewise caters to the needs of high net-worth clients for alternativeinvestment channels. It includes entire transaction processing, service delivery andinfrastructure consisting of the Group’s network of branches, automated teller machines aswell as its internet banking platform;

(b) Corporate banking - this segment handles lending and trade financing for both largecorporations and middle market clients;

(c) Consumer banking - this segment primarily caters to loans for individuals;

(d) Treasury and Trust - this segment consists of Treasury and Trust operations of the Group.Treasury focuses on providing money market, trading and treasury services, as well as themanagement of the Group’s funding operations through debt securities, placements andacceptances with other banks. Trust includes fund management, investment managementservices, custodianship, administration and collateral agency services, and stock and transferagency services. In addition, the Parent Company through Trust, provides retail customerswith alternative investment opportunities through its unit investment fund products;

The ‘Elimination Items’ includes the Group’s executive office and elimination items related to theGroup’s segment reporting framework.

Management monitors the operating results of its business units separately for the purpose ofmaking decisions about resource allocation and performance assessment. Segment assets arethose operating assets employed by a segment in its operating activities and are either directlyattributable to the segment or can be allocated to the segment on a reasonable basis. Segmentliabilities are those operating liabilities that result from the operating activities of a segment andare either directly attributable to the segment or can be allocated to the segment on a reasonablebasis. Interest income is reported net, as management primarily relies on the net interest incomeas performance measure, not the gross income and expense.

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The Group’s revenue-producing assets are located in the Philippines (i.e., one geographicallocation); therefore, geographical segment information is no longer presented. The Group has nosignificant customers which contribute 10.00% or more of the consolidated revenue, net of interestexpense.

The segment results include internal transfer pricing adjustments across business units as deemedappropriate by management. Transactions between segments are conducted at estimated marketrates on an arm’s length basis. Interest is charged/credited to the business units based on a poolrate which approximates the marginal cost of funds.

Segment information of the Group as of and for the years ended December 31, 2015, 2014 and2013 follow (amounts in millions):

2015Retail

BankingCorporate

BankingConsumer

BankingTreasury

and TrustElimination

Items TotalStatement of IncomeNet Interest Income: Third Party P=3,207 P=719 P=7,804 P=52 P=558 P=12,340 Intersegment 3 364 − − (367) −

3,210 1,083 7,804 52 191 12,340Noninterest Income 942 92 2,889 (74) 127 3,976Revenue - Net of Interest Expense 4,152 1,175 10,693 (22) 318 16,316Noninterest Expense (4,903) (734) (7,164) (272) (580) (13,653)Income Before Income Tax (751) 441 3,529 (294) (262) 2,663Provision for Income Tax − − − − (659) (659)Net Income for the Year (P=751) P=441 P=3,529 (P=294) (P=921) P=2,004Statement of Financial PositionTotal Assets P=40,431 P=67,353 P=76,798 P=26,066 P=22,208 P=232,856Total Liabilities 174,295 24,846 2,056 11,796 (11,539) 201,454Statement of IncomeDepreciation and Amortization 570 18 280 12 77 957Provision for Impairment and Credit

Losses 18 258 3,364 4 255 3,899

2014Retail

BankingCorporate

BankingConsumer

BankingTreasury



2,807 1,281 6,263 84 (409) 10,026Noninterest Income 765 214 2,839 810 232 4,860Revenue - Net of Interest Expense 3,572 1,495 9,102 894 (177) 14,886Noninterest Expense (4,180) (746) (6,281) (267) (775) (12,249)Income Before Income Tax (608) 749 2,821 627 (952) 2,637Provision for Income Tax − − − − (564) (564)Net Income for the Year (P=608) P=749 P=2,821 P=627 (P=1,516) P=2,073Statement of Financial PositionTotal Assets P=37,246 P=61,300 P=57,649 P=18,048 P=14,020 P=188,263Total Liabilities 141,846 36,105 2,971 14,360 (28,467) 166,815Statement of IncomeDepreciation and Amortization 574 24 191 15 58 862Provision for Impairment and Credit

Losses 5 251 2,642 − 413 3,311

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2013Retail

BankingCorporate

BankingConsumer

BankingTreasury



2,172 1,023 5,334 5 (141) 8,393Noninterest Income 654 56 2,391 1,474 197 4,772Revenue - Net of Interest Expense 2,826 1,079 7,725 1,479 56 13,165Noninterest Expense (3,440) (761) (5,456) (267) (966) (10,890)Income Before Income Tax (614) 318 2,269 1,212 (910) 2,275Provision for Income Tax − − − − (219) (219)Net Income for the Year (P=614) P=318 P=2,269 P=1,212 (P=1,129) P=2,056

Statement of Financial PositionTotal Assets P=25,539 P=47,192 P=44,414 P=10,124 P=15,030 P=142,299Total Liabilities 109,315 21,556 1,806 10,579 (20,350) 122,906Statement of IncomeDepreciation and Amortization 417 27 191 17 66 718Provision for Impairment and Credit

Losses 3 376 2,191 4 526 3,100

Noninterest income consists of service charges, fees and commissions, gain on sale of assets, gainon asset foreclosure and dacion transactions, trading and securities gain, gain on sale ofinvestment securities at amortized cost, foreign exchange gain, trust income, share in net loss of ajoint venture and miscellaneous income. The share in net loss of a joint venture has been presentedas part of the elimination items in the Group’s segment reporting framework. Noninterest expenseconsists of compensation and fringe benefits, taxes and licenses, depreciation and amortization,rent, amortization of intangible assets, provision for impairment and credit losses, andmiscellaneous expenses.

7. Merger of Green Bank, Inc. with the Parent Company

On June 21, 2013, the Parent Company and GBI entered into a Plan of Merger Agreement. Underthe agreement, GBI will be merged to the Parent Company upon completion of its equityrestructuring and the transfer of certain assets and liabilities to EWRB. GBI’s equity restructuringand the transfer of assets and liabilities to EWRB were completed in 2013.

On March 28, 2014 and June 5, 2014, the BSP and the SEC, respectively, approved the merger ofthe Parent Company and GBI. On July 31, 2014, the Parent Company and GBI concluded itsmerger.

The assets and liabilities of GBI merged to the Parent Company were based on the carryingamounts in the consolidated financial statements of the Parent Company. The following are thecarrying amounts of the assets and liabilities of GBI (including the goodwill, branch licenses andrelated deferred tax liability recognized at the acquisition of GBI in 2011) merged to ParentCompany at the date of merger:

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Carrying valuerecognized ondate of merger

AssetsDue from BSP P=7,269Loans and receivables 141,663Bank premises, furniture, fixtures and equipment (Note 10) 22,870Investment properties (Note 11) 189,146Branch licenses (Note 12) 625,400Goodwill (Note 12) 373,996Other assets 2,661

1,363,005LiabilitiesSubordinated notes 112,500Bills payable 128,200Deferred tax liability of branch licenses 187,620Accounts payable and accrued expenses 32,467Other liabilities 174

460,961Carrying amount of the net assets merged P=902,044

The excess of the carrying amount of the net assets of GBI merged to the Parent Company overthe carrying amount of the Parent Company’s Investment in GBI was recognized as an adjustmentto Surplus, as shown below:

Carrying amount of the net assets merged P=902,044Carrying amount of the Parent Company’s Investment in GBI 888,650Adjustment to Surplus P=13,394

8. Trading and Investment Securities

The Group and the Parent Company have the following trading and investment securities:

2015 2014Financial assets at FVTPL P=10,540,806 P=10,182,690Financial assets at FVTOCI 6,255 14,419Investment securities at amortized cost 4,617,898 8,794,878

P=15,164,959 P=18,991,987

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Financial assets at FVTPLFinancial assets at FVTPL of the Group and of the Parent Company consist of:

2015 2014Held-for-trading:

Government securities P=4,344,376 P=7,391,724Private bonds 6,185,982 2,565,307Equity securities 10,448 225,659

P=10,540,806 P=10,182,690

As of December 31, 2015 and 2014, financial assets at FVTPL include net unrealized loss ofP=27.83 million and net unrealized gain of P=52.65 million, respectively, for the Group and for theParent Company.

Financial assets at FVTOCIFinancial assets at FVTOCI of the Group and of the Parent Company consist of:

2015 2014Quoted equity securities P=6,255 P=7,273Unquoted equity securities − 7,146

P=6,255 P=14,419

The Group has designated the above equity investments as at FVTOCI because they are held forlong-term investments rather than for trading. The unquoted equity securities were deemed tohave no value in 2015.

In 2015 and 2014, no dividends were recognized on these equity investments and no cumulativegain or loss was transferred within equity.

The movements in Net unrealized gain (loss) on financial assets at FVTOCI follow:

2015 2014Balance at beginning P=5,722 P=1,925Unrealized gains (losses) for the year (8,164) 3,797Balance at end (P=2,442) P=5,722

Investment securities at amortized costInvestment securities at amortized cost of the Group and of the Parent Company consist of:

2015 2014Government securities P=4,046,482 P=7,536,445Private bonds 571,416 1,258,433

P=4,617,898 P=8,794,878

Peso-denominated government bonds have effective interest rate of 5.70% in 2015 and effectiveinterest rates ranging from 5.70% to 6.02% in 2014 and 2013. Foreign currency-denominatedbonds have effective interest rates ranging from 2.87% to 7.07% in 2015, 2014, and 2013.

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In 2015, the Parent Company sold securities carried at amortized cost, with aggregate carryingamount of P=4.29 billion, and recognized a gain amounting to P=287.36 million. The gain ispresented as Gain on sale of investment securities at amortized cost in the statement of income.The sale was in anticipation of the effects of the upcoming regulatory requirements on liquiditycoverage ratio. As a result of the sale, subsequent acquisitions of investment securities in theaffected portfolios will be classified as financial assets at FVTPL while the remaining securitieswill remain to be classified as investment securities at amortized cost. As of December 31, 2015,the remaining investment securities in the affected portfolios amounted to P=144.93 million. Therewere no additions to the portfolios subsequent to the sale.

In 2014, the Parent Company sold securities carried at amortized cost, with aggregate carryingamount of P=3.62 billion, and recognized a gain amounting to P=306.00 million. The gain ispresented as Gain on sale of investment securities at amortized cost in the statement of income.The sale was driven by the need to improve the capital position of the Parent Company in relationto the change in the regulatory capital requirements caused by the Basel III implementation. As aresult of the sale, subsequent acquisitions of investment securities in the affected portfolios will beclassified as financial assets at FVTPL while the remaining securities will remain to be classifiedas investment securities at amortized cost. As of December 31, 2015 and 2014, the remaininginvestment securities in the affected portfolios amounted to P=1.01 billion and P=926.73 million,respectively. Additions to the portfolios subsequent to the sale amounted to P=1.82 billion and iscarried at fair value through profit or loss.

In 2013, the Parent Company sold government securities carried at amortized cost, with aggregatecarrying amount of P=1.10 billion, and recognized a gain amounting to P=572.49 million. The gainis presented as Gain on sale of investment securities at amortized cost in the statement of income.The securities were sold to fund the lending requirement for FDC. As a result of the sale,subsequent acquisitions of investment securities in the affected portfolio will be classified asfinancial assets at FVTPL while the remaining securities will remain to be classified as investmentsecurities at amortized cost. As of December 31, 2015 and 2014, the remaining governmentsecurities in the portfolio amounted to P=246.30 million and P=233.57 million, respectively. Therewere no additions to the portfolio subsequent to the sale.

Judgments made related to the sale and derecognition of investment securities at amortized costare disclosed in Note 3.

Interest income on trading and investment securities follows:

Consolidated Parent Company2015 2014 2013 2015 2014 2013

Financial assets at FVTPL P=301,674 P=169,745 P=106,912 P=301,674 P=169,745 P=106,912Investment securities at amortized cost 281,779 391,861 426,454 281,779 391,861 426,447

P=583,453 P=561,606 P=533,366 P=583,453 P=561,606 P=533,359

Trading and securities gain (loss) of the Group and of the Parent Company consists of:

2015 2014 2013Financial assets at FVTPL (P=62,397) P=497,352 P=1,005,237Interest rate swaps (35,027) 2,173 −US Treasury Futures 334 − −

(97,090) 499,525 1,005,237Investment securities at amortized cost 287,361 305,997 572,490

P=190,271 P=805,522 P=1,577,727

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9. Loans and Receivables

Loans and receivables consist of:


Receivables from customers: Corporate lending P=64,611,066 P=56,486,240 P=64,611,066 P=56,786,240 Consumer lending 88,760,108 64,130,757 81,388,683 58,181,205

153,371,174 120,616,997 145,999,749 114,967,445Unamortized premium 3,638,482 1,515,034 3,856,744 1,541,257

157,009,656 122,132,031 149,856,493 116,508,702Unquoted debt securities: Government securities 42,553 39,429 42,553 39,429 Private bonds 364,292 352,062 353,975 341,323

406,845 391,491 396,528 380,752Other receivables: Accrued interest receivable 1,482,532 1,198,722 1,426,646 1,163,810 Accounts receivable 908,412 1,304,002 1,985,414 1,867,317 Sales contracts receivable 205,841 208,328 205,841 208,328

2,596,785 2,711,052 3,617,901 3,239,455160,013,286 125,234,574 153,870,922 120,128,909

Allowance for credit and impairmentlosses (Note 14) (4,737,049) (3,811,163) (4,623,689) (3,728,222)

P=155,276,237 P=121,423,411 P=149,247,233 P=116,400,687

Credit card receivables under consumer lending amounted to P=22.75 billion and P=21.55 billion asof December 31, 2015 and 2014, respectively.

Receivables from customers consist of:Consolidated Parent Company

2015 2014 2015 2014Loans and discounts P=148,981,076 P=116,198,579 P=141,609,651 P=110,549,027Customers’ liabilities under letters of

credit/trust receipts 3,598,793 3,317,693 3,598,793 3,317,693Bills purchased 791,305 1,100,725 791,305 1,100,725

P=153,371,174 P=120,616,997 P=145,999,749 P=114,967,445

In 2013, the Parent Company entered into a purchase of receivables agreement with EWRB,whereby the Parent Company will purchase, on a without recourse basis, certain salary loans ofEWRB. In 2015 and 2014, the total salary loans purchased by the Parent Company amounted toP=12.93 billion and P=5.74 billion, respectively. The Parent Company’s acquisition cost of thesalary loans approximate the fair value at the acquisition date. As of December 31, 2015 and2014, outstanding salary loans purchased from EWRB, included in Loans and discounts of theParent Company, amounted to P=8.34 billion and P=3.89 billion, respectively. In connection withthe purchase of receivables agreement, the Parent Company and EWRB also entered into anaccount servicing and collection agreement whereby the Parent Company agreed to pay servicefees equivalent to 0.37% of the loan amounts collected by EWRB on behalf of the ParentCompany. The service fees paid (included under Miscellaneous expense in the statements ofincome) by the Parent Company to EWRB amounted to P=30.57 million, P=16.48 million andP=1.67 million in 2015, 2014 and 2013, respectively (see Note 26).

The Parent Company has a memorandum of understanding with Filinvest Land, Inc. (FLI), anentity under common control of FDC, whereby the Parent Company will purchase, on a withoutrecourse basis, installment contracts receivable from FLI. On various dates in 2013 and 2012,several deeds of assignment were executed wherein FLI sold, assigned and transferred withoutrecourse to the Parent Company all the rights, titles and interest in various loan accounts and the

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related mortgages. In 2013 and 2012, the total receivables purchased by the Parent Companywithout recourse under the terms of the foregoing assignment agreement amounted toP=0.27 billion and P=1.81 billion. There were no receivables purchased in 2015 and 2014.

Outstanding receivables purchased included in Loans and discounts amounted to P=0.52 billion andP=0.86 billion as of December 31, 2015 and 2014, respectively. The Parent Company’s acquisitioncost of the installment contracts receivable approximate fair value at the acquisition date. TheParent Company and FLI also entered into an account servicing and collection agreement wherethe Parent Company would pay service fees equivalent to 1.12% of loan amounts collected by FLIon behalf of the Parent Company related to its purchase of installment contracts receivable. Thetotal service fees paid by the Parent Company to FLI amounted to P=1.95 million and P=5.43 millionin 2015 and 2014, respectively (see Note 26).

A reconciliation of the allowance for impairment and credit losses per class of loans andreceivables for the Group and the Parent Company as of December 31, 2015 follows:

Consolidated2015

Corporate Lending Consumer Lending Others TotalAt January 1 P=1,324,547 P=1,641,233 P=845,383 P=3,811,163Provision for impairment and

credit losses (Note 14) 142,279 3,493,515 88,977 3,724,771Write-off (Note 14) (30,355) (2,559,978) (201,266) (2,791,599)Interest accrued on impaired loans (7,286) − − (7,286)At December 31 P=1,429,185 P=2,574,770 P=733,094 P=4,737,049Specific impairment P=742,432 P=− P=66,084 P=808,516Collective impairment 686,753 2,574,770 667,010 3,928,533

P=1,429,185 P=2,574,770 P=733,094 P=4,737,049Gross amount of individually impaired loans P=893,047 P=− P=95,757 P=988,804

Parent Company2015

Corporate Lending Consumer Lending Others TotalAt January 1 P=1,324,547 P=1,559,976 P=843,699 P=3,728,222Provision for impairment and


P=1,429,185 P=2,463,094 P=731,410 P=4,623,689Gross amount of individually impaired loans P=893,047 P=− P=95,757 P=988,804

A reconciliation of the allowance for the impairment and credit losses per class of loans andreceivables for the Group and the Parent Company as of December 31, 2014 follows:

Consolidated2014

CorporateLending Consumer Lending Others Total

At January 1 P=1,427,055 P=1,747,911 P=827,389 P=4,002,355Provision for impairment and


P=1,324,547 P=1,641,233 P=845,383 P=3,811,163Gross amount of individually impaired loans P=931,129 P=− P=380,752 P=1,311,881

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Parent Company2014

CorporateLending Consumer Lending Others Total

At January 1 P=1,427,055 P=1,720,893 P=827,389 P=3,975,337Provision for impairment and

credit losses (Note 14) 196,637 2,867,938 147,435 3,212,010Write-off (Note 14) (274,927) (3,028,855) (131,125) (3,434,907)Interest accrued on impaired loans (24,218) − − (24,218)At December 31 P=1,324,547 P=1,559,976 P=843,699 P=3,728,222Specific impairmentCollective impairment

P=558,859 P=− P=171,655 P=730,514765,688 1,559,976 672,044 2,997,708

P=1,324,547 P=1,559,976 P=843,699 P=3,728,222Gross amount of individually impaired loans P=931,129 P=− P=380,752 P=1,311,881

The Parent Company took possession of various properties previously held as collateral with anestimated value of P=967.97 million, P=487.60 million, and P=563.45 million in 2015, 2014, and2013, respectively (see Notes 11 and 13).

The following is a reconciliation of the individual and collective allowances for impairment andcredit losses on loans and receivables of the Group and of the Parent Company:


SpecificImpairment

CollectiveImpairment Total

SpecificImpairment


At January 1 P=730,514 P=3,080,649 P=3,811,163 P=948,461 P=3,053,894 P=4,002,355Provision for impairment and

credit losses 115,643 3,609,128 3,724,771 81,198 3,186,735 3,267,933Write-off (30,355) (2,761,244) (2,791,599) (274,927) (3,159,980) (3,434,907)Interest accrued on impaired loans (7,286) − (7,286) (24,218) − (24,218)At December 31 P=808,516 P=3,928,533 P=4,737,049 P=730,514 P=3,080,649 P=3,811,163


SpecificImpairment


SpecificImpairment


At January 1 P=730,514 P=2,997,708 P=3,728,222 P=948,461 P=3,026,876 P=3,975,337Provision for impairment and

credit losses 115,643 3,578,709 3,694,352 81,198 3,130,812 3,212,010Write-off (30,355) (2,761,244) (2,791,599) (274,927) (3,159,980) (3,434,907)Interest accrued on impaired loans (7,286) − (7,286) (24,218) − (24,218)At December 31 P=808,516 P=3,815,173 P=4,623,689 P=730,514 P=2,997,708 P=3,728,222

Interest income on loans and receivables consist of:


Receivables from customers P=13,784,421 P=11,019,641 P=9,106,302 P=12,947,424 P=10,520,104 P=8,706,551Unquoted debt securities 128,478 6,403 7,237 128,478 6,402 7,237Interest accrued on impaired loans 7,286 24,218 47,341 7,286 24,218 47,341

P=13,920,185 P=11,050,262 P=9,160,880 P=13,083,188 P=10,550,724 P=8,761,129

BSP ReportingOf the total receivables from customers of the Parent Company as of December 31, 2015, 2014and 2013, 21.00%, 33.43%, and 33.27%, respectively, are subject to periodic interest repricing.The remaining peso receivables from customers earn annual fixed interest rates ranging from0.50% to 52.16 %, 1.13% to 23.68% , and 1.50% to 16.96% in 2015, 2014 and 2013, respectively,while foreign currency-denominated receivables from customers earn annual fixed interest ratesranging from 1.40% to 7.56%, 3.08% to 7.56% and 1.56% to 7.56% in 2015, 2014 and 2013,respectively.

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The details of the secured and unsecured receivables from customers of the Group and of theParent Company follow:


GrossAmount %

GrossAmount %

GrossAmount %

GrossAmount %

Loans secured by:Chattel P=36,921,286 23.52 P=21,509,682 17.61 P=36,921,286 24.64 P=21,509,682 18.46Real estate 19,111,824 12.17 18,275,599 14.96 19,008,128 12.68 16,974,840 14.57Hold-out on deposit 5,623,055 3.58 6,129,665 5.02 5,621,850 3.75 6,129,665 5.26Others 2,869,628 1.83 2,266,396 1.86 3,001,867 2.00 5,062,078 4.34

64,525,793 41.10 48,181,342 39.45 64,553,131 43.07 49,676,265 42.63Unsecured 92,483,863 58.90 73,950,689 60.55 85,303,362 56.93 66,832,437 57.37

P=157,009,656 100.00 P=122,132,031 100.00 P=149,856,493 100.00 P=116,508,702 100.00

Information on the concentration of credit as to industry follows (in millions):


GrossAmount %

GrossAmount %

GrossAmount %

GrossAmount %

Personal consumption P=72,552 46.21 P=51,501 42.17 P=72,552 48.41 P=47,523 40.79Real estate, renting and

business activity 18,746 11.94 19,132 15.67 18,728 12.50 19,102 16.40Wholesale and retail trade 15,219 9.69 14,245 11.66 15,199 10.14 14,213 12.20Financial intermediaries 9,988 6.36 5,697 4.66 9,918 6.62 4,944 4.24Manufacturing 5,291 3.37 6,800 5.57 5,286 3.53 6,795 5.83Agriculture, fisheries and

forestry 1,690 1.08 2,347 1.92 1,566 1.05 1,657 1.42Transportation, storage and

communications 1,157 0.74 955 0.78 1,156 0.77 954 0.82Others 32,367 20.61 21,455 17.57 25,451 16.98 21,321 18.30

P=157,010 100.00 P=122,132 100.00 P=149,856 100.00 P=116,509 100.00

BSP Circular No. 351 allows banks to exclude from nonperforming classification receivablesclassified as ‘Loss’ in the latest examination of the BSP which are fully covered by allowance forcredit losses, provided that interest on said receivables shall not be accrued and that suchreceivables shall be deducted from the total receivable portfolio for purposes of computing NPLs.Subsequently, the BSP issued BSP Circular No. 772, which requires banks to compute their netNPLs by deducting the specific allowance for credit losses on the total loan portfolio from thegross NPLs. The specific allowance for credit losses shall not be deducted from the total loanportfolio in computing the NPL ratio.

As of December 31, 2015 and 2014, NPLs of the Group and of the Parent Company as reported tothe BSP follow:


Gross NPLs P=7,363,663 P=5,769,505 P=7,131,527 P=5,576,281Deductions as required by the BSP (2,728,927) (2,112,161) (2,728,927) (1,947,018)

P=4,634,736 P=3,657,344 P=4,402,600 P=3,629,263

As of December 31, 2015 and 2014, secured and unsecured NPLs of the Group and of the ParentCompany as reported to the BSP follow:


Secured P=3,142,388 P=3,214,825 P=3,050,180 P=3,214,825Unsecured 4,221,275 2,554,680 4,081,347 2,361,456

P=7,363,663 P=5,769,505 P=7,131,527 P=5,576,281

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10. Property and Equipment

The composition of and movements in the Group’s property and equipment follow:

2015

Land Buildings

Furniture,Fixtures and

EquipmentLeasehold

Improvements TotalCostAs of January 1 P=121,367 P=970,442 P=1,661,331 P=2,858,543 P=5,611,683Additions − 26,831 304,434 299,864 631,129Disposals − − (49,850) − (49,850)As of December 31 121,367 997,273 1,915,915 3,158,407 6,192,962Accumulated Depreciation and AmortizationAs of January 1 − 97,937 1,081,858 918,784 2,098,579Depreciation and amortization − 29,461 304,337 285,774 619,572Disposals − − (48,358) − (48,358)As of December 31 − 127,398 1,337,837 1,204,558 2,669,793Net Book Value P=121,367 P=869,875 P=578,078 P=1,953,849 P=3,523,169

2014

Land Buildings


EquipmentLeasehold

Improvements TotalCostAs of January 1 P=290,493 P=959,298 P=1,862,956 P=2,312,119 P=5,424,866Additions − 21,438 237,747 546,618 805,803Disposals (169,126) (10,294) (439,372) (194) (618,986)As of December 31 121,367 970,442 1,661,331 2,858,543 5,611,683Accumulated Depreciation and AmortizationAs of January 1 − 77,467 1,221,114 672,120 1,970,701Depreciation and amortization − 28,741 293,640 246,726 569,107Disposals − (8,271) (432,896) (62) (441,229)As of December 31 − 97,937 1,081,858 918,784 2,098,579Allowance for Impairment Losses (Note 14)Provision during the year − 1,424 − − 1,424Disposals (1,424) − − (1,424)As of December 31 − − − − −Net Book Value P=121,367 P=872,505 P=579,473 P=1,939,759 P=3,513,104

As of December 31, 2015 and 2014, the cost of fully depreciated property and equipment still inuse by the Group amounted to P=989.03 million and P=845.45 million, respectively.

The composition of and movements in the Parent Company’s property and equipment follow:

2015

Land Buildings


EquipmentLeasehold

Improvements TotalCostAs of January 1 P=100,030 P=921,492 P=1,623,717 P=2,830,977 P=5,476,216Additions − 16,351 197,264 223,193 436,808Disposals − − (31,223) − (31,223)As of December 31 100,030 937,843 1,789,758 3,054,170 5,881,801Accumulated Depreciation and AmortizationAs of January 1 − 95,289 1,090,428 939,057 2,124,774Depreciation and amortization − 26,492 273,649 275,456 575,597Disposals − − (29,945) − (29,945)As of December 31 − 121,781 1,334,132 1,214,513 2,670,426Net Book Value P=100,030 P=816,062 P=455,626 P=1,839,657 P=3,211,375

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2014

Land Buildings


EquipmentLeasehold

Improvements TotalCostAs of January 1 P=263,804 P=868,799 P=1,856,651 P=2,324,974 P=5,314,228Additions − 21,043 202,700 506,003 729,746Acquired from merger (Note 7) 5,353 31,650 − − 37,003Disposals (169,127) − (435,634) − (604,761)As of December 31 100,030 921,492 1,623,717 2,830,977 5,476,216Accumulated Depreciation and AmortizationAs of January 1 − 54,562 1,242,027 697,008 1,993,597Depreciation and amortization − 26,594 277,731 242,049 546,374Acquired from merger (Note 7) − 14,133 − − 14,133Disposals − − (429,330) − (429,330)As of December 31 − 95,289 1,090,428 939,057 2,124,774Net Book Value P=100,030 P=826,203 P=533,289 P=1,891,920 P=3,351,442

The gain on sale recognized by the Group for the disposal of its property and equipment amountedto P=5.93 million, P=265.82 million and P=4.93 million in 2015, 2014 and 2013, respectively. Thegain on sale recognized by the Parent Company for the disposal of its property and equipmentamounted to P=0.90 million, P=265.82 million in 2015 and 2014, respectively, and loss on saleamounted to P=0.28 million in 2013.

In 2014, the Parent Company sold a parcel of land previously intended for an office site with acarrying value of P=169.13 million to Filinvest Alabang, Inc. (FAI), an entity under commoncontrol of FDC, that resulted in a gain amounting to P=264.13 million. Under the terms of the sale,the selling price of P=433.26 million is payable annually for five (5) years until 2019 with a fixedinterest rate of 6.00% per annum. As of December 31, 2015 and 2014, the accounts receivable(included under Loans and receivable in the statements of financial position) recognized by theParent Company for this sale transaction amounted to P=368.27 million and P=411.60 million,respectively (see Note 26).

As of December 31, 2015 and 2014, the cost of fully depreciated property and equipment still inuse by the Parent Company amounted to P=870.94 million and P=704.70 million, respectively.

11. Investment Properties

The composition of and movements in the Group’s investment properties follow:

2015

LandBuildings and

Improvements TotalCostAt January 1 P=749,778 P=521,380 P=1,271,158Additions 32,516 36,569 69,085Disposals (252,959) (82,283) (335,242)At December 31 529,335 475,666 1,005,001Accumulated Depreciation and AmortizationAt January 1 − 258,730 258,730Depreciation and amortization − 39,815 39,815Disposals − (40,948) (40,948)At December 31 − 257,597 257,597Accumulated Impairment Losses (Note 14)At January 1 85,259 14,482 99,741Provision during the year 7,903 6,357 14,260Disposals (82,488) (11,722) (94,210)At December 31 10,674 9,117 19,791Net Book Value P=518,661 P=208,952 P=727,613

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2014

LandBuildings andImprovements Total

CostAt January 1 P=847,004 P=571,672 P=1,418,676Additions 51,952 44,171 96,123Disposals (149,178) (94,463) (243,641)At December 31 749,778 521,380 1,271,158Accumulated Depreciation and AmortizationAt January 1 − 248,231 248,231Depreciation and amortization − 46,849 46,849Disposals − (36,350) (36,350)At December 31 − 258,730 258,730Accumulated Impairment Losses (Note 14)At January 1 142,662 21,067 163,729Disposals (57,403) (6,585) (63,988)At December 31 85,259 14,482 99,741Net Book Value P=664,519 P=248,168 P=912,687

The composition of and movements in the Parent Company’s investment properties follow:

2015

LandBuildings and

Improvements TotalCostAt January 1 P=747,216 P=517,895 P=1,265,111Additions 32,516 36,569 69,085Disposals (252,959) (82,283) (335,242)At December 31 526,773 472,181 998,954Accumulated Depreciation and

AmortizationAt January 1 − 253,383 253,383Depreciation and amortization − 39,812 39,812Disposals − (40,948) (40,948)At December 31 − 252,247 252,247Accumulated Impairment Losses (Note 14)At January 1 85,259 14,482 99,741Provision during the year 7,903 6,357 14,260Disposals (82,488) (11,722) (94,210)At December 31 10,674 9,117 19,791Net Book Value P=516,099 P=210,817 P=726,916

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2014

LandBuildings andImprovements Total

CostAt January 1 P=698,634 P=508,412 P=1,207,046Additions 42,566 52,771 95,337Acquired from merger (Note 7) 148,953 51,186 200,139Disposals (142,937) (94,474) (237,411)At December 31 747,216 517,895 1,265,111Accumulated Depreciation and

AmortizationAt January 1 − 231,894 231,894Depreciation and amortization − 46,845 46,845Acquired from merger (Note 7) − 10,993 10,993Disposals − (36,349) (36,349)At December 31 − 253,383 253,383Accumulated Impairment Losses (Note 14)At January 1 142,662 21,067 163,729Disposals (57,403) (6,585) (63,988)At December 31 85,259 14,482 99,741Net Book Value P=661,957 P=250,030 P=911,987

The Group’s and the Parent Company’s investment properties consist entirely of real estateproperties and land improvements acquired in settlement of loans and receivables.

The aggregate fair value of the investment properties of the Group and the Parent Companyamounted to P=1.18 billion and P=1.29 billion as of December 31, 2015 and 2014, respectively.Fair value has been determined based on valuations made by independent and/or in-houseappraisers. Valuations were derived on the basis of recent sales of similar properties in the samearea as the investment properties taking into account the economic conditions prevailing at thetime the valuations were made.

As of December 31, 2015 and 2014, the carrying values of foreclosed investment properties of theGroup and of the Parent Company still subject to redemption period by the borrower amounted toP=60.46 million and P=58.79 million, respectively.

Gain on sale recognized by the Group for the disposal of its foreclosed assets amounted toP=55.34 million, P=60.77 million, and P=13.67 million in 2015, 2014 and 2013, respectively. Gain onsale recognized by the Parent Company for the disposal of its foreclosed assets amounted toP=55.34 million, P=60.77 million, and P=11.94 million in 2015, 2014 and 2013, respectively.

Direct operating expenses from investment properties not generating rent income amounted toP=44.01 million, P=47.83 million and P=49.33 million for the Group in 2015, 2014 and 2013,respectively, and P=44.01 million, P=47.83 million and P=43.57 million for the Parent Company in2015, 2014 and 2013, respectively.

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12. Goodwill and Other Intangible Assets

As of December 31, 2015 and 2014, the intangible assets of the Group consist of:

2015

GoodwillBranch

LicensesCustomer

RelationshipCore

DepositsCapitalized

Software TotalCostAs of January 1 P=1,316,728 P=2,167,396 P=154,626 P=40,433 P=1,430,745 P=5,109,928Acquisitions − 204 − − 202,550 202,754As of December 31 1,316,728 2,167,600 154,626 40,433 1,633,295 5,312,682Accumulated AmortizationAs of January 1 − − 25,150 23,585 636,420 685,155Amortization − − 4,311 4,043 172,551 180,905As of December 31 − − 29,461 27,628 808,971 866,060Net Book Value P=1,316,728 P=2,167,600 P=125,165 P=12,805 P=824,324 P=4,446,622

2014

GoodwillBranch

LicensesCustomer

RelationshipCore

DepositsCapitalized

Software TotalCostAs of January 1 P=1,316,728 P=1,662,200 P=154,626 P=40,433 P=977,873 P=4,151,860Acquisitions − 505,196 − − 455,523 960,719Write-off − − − − (2,651) (2,651)As of December 31 1,316,728 2,167,396 154,626 40,433 1,430,745 5,109,928Accumulated AmortizationAs of January 1 − − 20,838 19,542 455,745 496,125Amortization − − 4,312 4,043 183,326 191,681Write-off − − − − (2,651) (2,651)As of December 31 − − 25,150 23,585 636,420 685,155Net Book Value P=1,316,728 P=2,167,396 P=129,476 P=16,848 P=794,325 P=4,424,773

As of December 31, 2015 and 2014, the intangible assets of the Parent Company consist of:

2015

GoodwillBranch

LicensesCustomer

RelationshipCore

DepositsCapitalized

Software TotalCostAs of January 1 P=1,293,250 P=2,167,396 P=154,626 P=40,433 P=1,364,144 P=5,019,849Acquisitions − 204 − − 202,991 203,195As of December 31, 2013 1,293,250 2,167,600 154,626 40,433 1,567,135 5,223,044Accumulated AmortizationAs of January 1 − − 25,150 23,585 620,872 669,607Amortization − − 4,311 4,043 160,347 168,701As of December 31 − − 29,461 27,628 781,219 838,308Net Book Value P=1,293,250 P=2,167,600 P=125,165 P=12,805 P=785,916 P=4,384,736

2014

GoodwillBranch

LicensesCustomer

RelationshipCore

DepositsCapitalized

Software TotalCostAs of January 1 P=919,254 P=1,036,800 P=154,626 P=40,433 P=963,136 P=3,114,249Acquisitions − 505,196 − − 401,008 906,204Acquired from merger (Note 7) 373,996 625,400 − − − 999,396As of December 31 1,293,250 2,167,396 154,626 40,433 1,364,144 5,019,849Accumulated AmortizationAs of January 1 − − 20,838 19,542 446,839 487,219Amortization − − 4,312 4,043 174,033 182,388As of December 31 − − 25,150 23,585 620,872 669,607Net Book Value P=1,293,250 P=2,167,396 P=129,476 P=16,848 P=743,272 P=4,350,242

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GoodwillThe acquisition of EWRB in 2012 resulted in goodwill amounting P=23.48 million, which has beenallocated to EWRB. The acquisition of GBI in 2011 resulted in goodwill amounting toP=374.00 million. The goodwill has been allocated to branch operations of GBI.

As discussed in Note 1, on October 31, 2013, GBI transferred certain assets and liabilities toEWRB. The assets and liabilities transferred include the branches where the goodwill from theacquisition of GBI had been allocated. The branches coming from GBI were combined with thebranch operations of EWRB after the transfer. Consequently, the goodwill from the acquisition ofEWRB and GBI amounting to P=23.48 million and P=374.00 million, respectively, are nowallocated to the branch operations of EWRB, which is now considered as a single CGU forpurposes of impairment testing.

The business combination between the Parent Company and AIG Philam Savings Bank(AIGPASB) Group in 2009 resulted in goodwill amounting to P=769.04 million, which has beenallocated to the auto and credit cards lending unit acquired from the AIGPASB Group.

The business combination between the Parent Company and Ecology Savings Bank (ESBI) in2003 resulted in goodwill amounting to P=172.80 million, which has been allocated to variousbranches acquired from ESBI. As of December 31, 2015 and 2014, the carrying amount ofgoodwill, after impairment recognized in prior years, amounted to P=150.21 million.

Key assumptions used in value in use calculationsThe recoverable amount of the consumer business lending and branch units have been determinedbased on value in use calculations using cash flow projections based on financial budgetsapproved by the management covering a five-year period. The discount rate applied to the cashflow projections is 12.25% and 11.68% in 2015 and 2014, respectively.

Discount ratesDiscount rates reflect the current market assessment of the risk specific to each CGU.

Sensitivity to changes in assumptionsManagement believes that no reasonably possible change in any of the above key assumptionswould cause the carrying value of the units to exceed their recoverable amount.

Customer Relationship and Core DepositsThe business combination between the Parent Company and AIG Philam Savings Bank(AIGPASB) Group in 2009 resulted in acquisition of customer relationship and core depositsamounting to P=154.63 million and P=40.43 million, respectively.

Branch LicensesBranch licenses of the Group amounting to P=2.17 billion as of December 31, 2015 represents:one branch license acquired by the Parent Company from the BSP amounting to P=0.20 million in2015, 25 branch licenses acquired by the Parent Company from the BSP amounting toP=505.20 million in 2014, 10 branch licenses acquired by the Parent Company from the BSPamounting to P=214.80 million in 2013, 42 branch licenses acquired by the Parent Company fromthe BSP amounting to P=822.00 million in 2012, and 46 branch licenses acquired by the ParentCompany from the acquisition of GBI amounting to P=625.40 million in 2011.

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Branch licenses of the Parent Company amounting to P=2.17 billion as of December 31, 2015represents: one branch license acquired by the Parent Company from the BSP amounting toP=0.20 million in 2015, 25 branch licenses acquired by Parent Company from the BSP amountingto P=505.20 million and 46 branch licenses merged to the Parent Company from GBI amounting toP=625.40 million in 2014, 10 branch licenses acquired by the Parent Company from the BSPamounting to P=214.80 million in 2013, and 42 branch licenses acquired by the Parent Companyfrom the BSP amounting to P=822.00 million in 2012.

Capitalized SoftwareCapitalized software pertains to computer software licenses and programs acquired by the Groupand the Parent Company for its banking operations. Included in the 2015 and 2014 acquisitionsare software licenses acquired by the Group for the upgrade of its core banking systems amountingto P=6.62 million and P=289.09 million, respectively.

13. Other Assets

This account consists of:


Other repossessed assets P=577,214 P=204,546 P=577,214 P=204,546Security deposits 211,280 197,488 211,280 189,413Derivative assets (Note 5) 167,491 110,668 167,491 110,668Card acquisition costs 161,422 145,479 161,422 145,479Prepaid expenses 156,677 115,519 151,882 109,420Returned cash and other cash items 127,021 632,970 127,021 632,970Documentary stamps 7,732 54,020 7,732 54,020Miscellaneous 798,808 1,048,039 777,235 1,045,119

2,207,645 2,508,729 2,181,277 2,491,635Allowance for impairment losses (Note 14) (190,735) (85,623) (190,735) (85,623)

P=2,016,910 P=2,423,106 P=1,990,542 P=2,406,012

As of December 31, 2015 and 2014, miscellaneous assets of the Group and Parent Companyinclude sundry debits and interoffice floats amounting to P=286.97 million and P=805.67 million,respectively.

The movements in the allowance for impairment losses on other assets of the Group and theParent Company follow:

2015 2014As of January 1 P=85,623 P=67,656Provision during the year 159,971 43,416Reversal of allowance from disposals (54,859) (11,304)Write-off − (14,145)As of December 31 P=190,735 P=85,623

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The movements in other repossessed assets of the Group and the Parent Company follow:

2015 2014CostAs of January 1 P=234,303 P=206,246Additions 898,888 392,267Disposals (468,858) (364,210)As of December 31 664,333 234,303Accumulated DepreciationAs of January 1 29,757 33,600Depreciation and amortization 117,080 54,335Disposals (59,718) (58,178)As of December 31 87,119 29,757Net Book Value, gross of impairment 577,214 204,546Accumulated Impairment LossesAs of January 1 9,444 10,452Provision during the year 66,793 10,296Disposals (54,859) (11,304)As of December 31 21,378 9,444Net Book Value, net of impairment P=555,836 P=195,102

In 2015, gain on sale recognized by the Group and the Parent Company for the disposal of itsrepossessed assets amounted to P=18.77 million. In 2014, loss on sale recognized by the Group andParent Company amounted to P=24.83 million and P=25.70 million, respectively. In 2013, loss onsale recognized by the Group and Parent Company amounted to P=3.44 million.

14. Allowance for Impairment and Credit Losses

Details of and changes in the allowance for impairment and credit losses follow:


Balances at the beginning of year: Loans and receivables (Note 9) P=3,811,163 P=4,002,355 P=3,728,222 P=3,975,337 Investment properties (Note 11) 99,741 163,729 99,741 163,729 Property and equipment (Note 10) − 1,424 − − Other assets (Note 13) 85,623 67,656 85,623 67,656

3,996,527 4,235,164 3,913,586 4,206,722Provisions charged to current operations (Notes 9, 10, 11 and 13) 3,899,002 3,311,349 3,868,583 3,255,426Interest accrued on impaired loans (7,286) (24,218) (7,286) (24,218)Write-off of loans and receivables (2,791,599) (3,434,907) (2,791,599) (3,434,907)Reversal of allowance on disposals of property

and equipment, investment properties andother repossessed assets(Notes 10, 11 and 13) (149,069) (76,716) (149,069) (75,292)

Write-off of other assets − (14,145) − (14,145)Balances at the end of year: Loans and receivables (Note 9) 4,737,049 3,811,163 4,623,689 3,728,222 Investment properties (Note 11) 19,791 99,741 19,791 99,741 Other assets (Note 13) 190,735 85,623 190,735 85,623

P=4,947,575 P=3,996,527 P=4,834,215 P=3,913,586

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15. Deposit Liabilities

BSP Circular No. 753, which took effect April 6, 2012, promulgated the unification of thestatutory/ legal and liquidity reserve requirement effective on non-FCDU deposit liabilities to18.00% and reserve requirement on long-term negotiable certificates of deposits from to 3.00%.With the new regulations, only demand deposit accounts maintained by banks with the BSP areeligible for compliance with reserve requirements. This was tantamount to the exclusion ofgovernment securities and cash in vault as eligible reserves. On April 11, 2014, BSP Circular 830took effect which increased the reserve requirements on non-FCDU deposit liabilitiesby 1-percentage-point to 19.00%. BSP Circular 832 further increased the reserve requirements ofnon-FCDU deposit liabilities to 20.00% starting on the reserve week of May 30, 2014. On theother hand, EWRB is required to maintain regular reserves equivalent to 5.00% against demanddeposits and 3.00% against savings and time deposits.

As of December 31, 2015 and 2014, the Parent Company and EWRB are in compliance with suchregulations.

As of December 31, 2015 and 2014, Due from BSP of the Parent Company amounting toP=28.31 billion and P=23.06 billion, respectively, were set aside as reserves for deposit liabilities, asreported to the BSP.

Of the total deposit liabilities of the Parent Company as of December 31, 2015, 2014 and 2013,about 44.60%, 52.19% and 42.93%, respectively, are subject to periodic interest repricing. Theremaining deposit liabilities earn annual fixed interest rates ranging from 0.50% to 6.25% in 2015and 2014, and 3.25% to 9.50% in 2013.

The Group’s interest expense on deposit liabilities amounted to P=1.84 billion, P=1.33 billion andP=1.17 billion in 2015, 2014, and 2013, respectively. The Parent Company’s interest expense ondeposit liabilities amounted to P=1.74 billion in 2015, P=1.26 billion in 2014 and P=1.04 billion in2013.

Long-term Negotiable Certificates of Deposits due 2018 (LTNCD Series 1)In 2013 and 2012, the Parent Company issued 5.00% fixed coupon rate (average EIR of 4.37%)unsecured LTNCD maturing on May 18, 2018. The first tranche of the LTNCD Series 1amounting to P=1.53 billion was issued at a discount on November 23, 2012, and the second toseventh tranches aggregating to P=3.12 billion were issued at a premium in February to May 2013.The net premium, net of debt issue costs, related to the issuance of the LTNCD Series 1 in 2013and 2012 amounted to P=107.91 million and P=10.64 million, respectively.

Long-term Negotiable Certificates of Deposits due 2019 (LTNCD Series 2)In 2013, the Parent Company issued 3.25% fixed coupon rate (average EIR of 3.48%) unsecuredLTNCD maturing on June 9, 2019. The first to third tranches of the LTNCD Series 2 aggregatingto P=0.74 billion were issued in December 2013. The discount, net of debt issue costs, related tothe issuance of the LTNCD Series 2 in 2013 amounted to P=8.42 million. The fourth and fifthtranches of the LTNCD Series 2 aggregating to P=1.74 billion were issued in February and April2014, respectively. The discount, net of debt issue costs, related to the issuance of the LTNCDSeries 2 in 2014 amounted to P=85.05 million.

Long-term Negotiable Certificates of Deposits due 2020 (LTNCD Series 3)In 2014, the Parent Company issued 4.50% fixed coupon rate (average EIR of 4.42%) unsecuredLTNCD maturing on April 24, 2020. The first tranche of the LTNCD Series 3 amounting toP=0.93 billion was issued in October 2014. The discount, net of debt issue costs, related to theissuance of the LTNCD Series 3 in 2014 amounted to P=4.63 million.

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The movements in unamortized net premium (discount) as of December 31, 2015 and 2014follow:

2015 2014Beginning balance (P=25,518) P=67,565Premium (discount) of issuances during the year − (89,675)Amortization during the year 892 (3,408)Ending balance (P=24,626) (P=25,518)

16. Bills and Acceptances Payable


2015 2014Banks and other financial institutions P=2,950,991 P=5,289,389Outstanding acceptances 122,532 28,263

P=3,073,523 P=5,317,652

As of December 31, 2015 and 2014, investments in government securities of the Parent Company(included in Investment securities at amortized cost in the statements of financial position) withface value of P=2.56 billion and P=3.32 billion, respectively, and fair value of P=2.69 billion andP=4.01 billion, respectively, were pledged with other banks as collateral for borrowings amountingto P=2.20 billion and P=3.27 billion, respectively.

Bills payable to the BSP, other banks and other financial institutions are subject to annual interestrates ranging from 0.55% to 1.20% in 2015, 0.50% to 3.22% in 2014, and 0.60% to 3.50% in2013.

The Group’s interest expense on bills and acceptances payable amounted to P=17.26 million in2015, P=39.90 million in 2014 and P=40.23 million in 2013. The Parent Company’s interest expenseon bills and acceptances payable amounted to P=17.26 million in 2015 and P=39.90 million in 2014and P=38.85 million in 2013.

17. Accrued Taxes, Interest and Other Expenses



Accrued other expenses P=768,098 P=862,748 P=733,823 P=842,525Accrued interest payable 398,104 348,356 392,914 343,435Accrued taxes 150,961 130,171 100,041 83,493

P=1,317,163 P=1,341,275 P=1,226,778 P=1,269,453

Accrued other expenses pertain to accruals of various operating expenses such as rent, utilities,management and professional fees, employee bonus and other expenses.

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18. Subordinated Debt

The Group’s and the Parent Company’s subordinated debt consists of (in millions):

Carrying ValueFace Value 2015 2014

Lower Tier 2 unsecured subordinated notes due 2025 P=5,000 P=4,967 P=4,964Lower Tier 2 unsecured subordinated notes due 2021 1,500 1,500 1,500

P=6,500 P=6,467 P=6,464

Lower Tier 2 unsecured subordinated notes due 2025On July 4, 2014, the Parent Company issued 5.50% coupon rate Lower Tier 2 unsecuredsubordinated note (the 2025 Notes) with par value of P=5.00 billion, maturing on January 4, 2025,but callable on January 4, 2020. The 2025 Notes qualify as Tier 2 capital pursuant to BSPCircular No. 781 (Basel III), BSP Circular No. 826 on risk disclosure requirements for the lossabsorption features of capital instruments, and other related circulars and issuances of the BSP.

Unless the 2025 Notes are previously redeemed, the 2025 Notes are repayable to the Noteholdersat 100.00% of their face value or at par on the maturity date of January 4, 2025.

From and including the issue date to, but excluding the optional redemption date of January 4,2020, the 2025 Notes bear interest at the rate of 5.50% per annum and shall be payable quarterlyin arrears on January 4, April 4, July 4, and October 4 of each year, which commenced on October4, 2014. Unless the 2025 Notes are previously redeemed, the interest rate will be reset at theequivalent of the prevailing 5-year PDST-R2 at reset date plus initial spread (i.e. the differencebetween the Initial interest rate and the prevailing 5-year PDST R2 at the pricing date of the initialtranche).

The 2025 Notes are redeemable at the option of the Parent Company in whole but not in part onthe call option date at 100.00% of the face value plus accrued but unpaid interest, subject to thefollowing conditions:

a. the Parent Company has obtained prior written approval and complied with the requirementsof the BSP prior to redemption of the 2025 Notes

b. the 2025 Notes are replaced with capital of the same or better quality and the replacement ofthis capital is done at conditions which are sustainable for the income capacity of the ParentCompany, or

c. the Parent Company demonstrates that its capital position is above the minimum capitalrequirements after redemption is exercised

d. the Parent Company is not in breach of (and would not, following such redemption, be inbreach) of applicable regulatory capital requirements (including regulatory capital buffers)

e. the Parent Company is solvent at the time of redemption of the 2025 Notes and immediatelythereafter.

Furthermore, upon the occurrence of a Tax Redemption Event or a Regulatory Redemption Event,the Parent Company may, subject to compliance with BSP rules and BSP approval, and upon priorapproval of the BSP and with prior written notice to the Noteholders on record, redeem all and notless than all of the outstanding 2025 Notes prior to the stated maturity by paying the Noteholderthe Redemption Option Amount which, (a) in the case of a Tax Redemption Event is an amountequal to 100.00% of the face value of the 2025 Notes plus accrued interest at the interest raterelating to the then current interest period up to but excluding the date of such redemption, and (b)in the case of a Regulatory Redemption Event is an amount equal to 100.00% of the face value of

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the 2025 Notes plus accrued interest at the interest rate relating to the then current Interest Periodup to but excluding the date of such redemption (the “Redemption Option Date”).

The 2025 Notes have a loss absorption feature which means that the 2025 Notes are subject to aNon-Viability Write-Down in case of a Non-Viability Event. Non-viability is defined as adeviation from a certain level of Common Equity Tier 1 (CET1) Ratio or inability of the ParentCompany to continue business (closure) or any other event as determined by the BSP, whichevercomes earlier. A Non-Viability Event is deemed to have occurred when the Parent Company isconsidered non-viable as determined by the BSP.

Upon the occurrence of a Non-Viability Event, the Parent Company shall write-down the principalamount of the 2025 Notes to the extent required by the BSP, which could go to as low as zero.Additional Tier 1 (AT1) capital instruments shall be utilized first before Tier 2 capital instrumentsare written-down, until the viability of the Issuer is re-established. In the event the ParentCompany does not have AT1 capital instruments, then the write-down shall automatically apply toTier 2 capital.

Loss absorption measure is subject to the following conditions:

a. the principal amount of all series of Tier 1 Loss Absorbing Instruments outstanding havingbeen Written-Down to zero or converted into common equity of the Parent Company (wherepossible) irrevocably, in accordance with, and to the extent possible pursuant to, their terms(the “Tier 1 Write-Down”)

b. the Tier 1 Write-Down having been insufficient to cure the Non-Viability Eventc. the Parent Company giving the relevant Non-Viability Notice to the Public Trustee and the

Registrar and Paying Agent

Each Noteholder irrevocably agrees and acknowledges that it may not exercise or claim any rightof set-off in respect of any amount owed to it by the Parent Company arising under or inconnection with the 2025 Notes and it shall, to the fullest extent permitted by applicable law,waive and be deemed to have waived all such rights of set-off.

Lower Tier 2 unsecured subordinated notes due 2021On July 2, 2010, the Parent Company issued 7.50% coupon rate Lower Tier 2 unsecuredsubordinated note (the 2021 Notes) with par value of P=1.50 billion, maturing on January 2, 2021but callable on January 2, 2016, and with step-up in interest if not called.

Unless the 2021 Notes are previously redeemed, the 2021 Notes are repayable to the Noteholdersat 100.00% of their face value or at par on the maturity date of January 2, 2021.

From and including the issue date to, but excluding the optional redemption date ofJanuary 2, 2016, the 2021 Notes bear interest at the rate of 7.50% per annum and shall be payablesemi-annually in arrears on January 2 and July 2 of each year, commencing on January 2, 2011.Unless the 2021 Notes are previously redeemed, the interest rate from and includingJanuary 2, 2016 to, but excluding January 2, 2021, will be reset and such Step-Up interest shall bepayable semi-annually in arrears on January 2 and July 2 of each year, commencing onJuly 2, 2016.

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The Step-Up interest rate shall be computed as the higher of:

a. 80.00% of the 5-year on-the-run Philippine Treasury benchmark bid yield (PDST-F) onoptional redemption date plus the Step-Up spread of 3.44% per annum. The Step-Up spread isdefined as follows:

Step-Up spread = 150.00% of the difference between the Interest Rate and 80.00% of the5-year PDST-F on the Pricing Date, preceding the initial Issue Date, equivalent to 3.44% perannum.

b. 150.00% of the difference between the interest rate and the 5-year PDST-F on the pricing datepreceding the initial issue date plus the 5-year PDST-F on the optional redemption date.

The Group’s interest expense on subordinated debt amounted to P=390.70 million, P=258.71 million,and P=232.16 million in 2015, 2014, and 2013, respectively. The Parent Company’s interestexpense on subordinated debt amounted to P=390.70 million, P=258.71 million, and P=220.31 millionin 2015, 2014, and 2013, respectively.

19. Other Liabilities



Accounts payable P=2,574,717 P=2,082,995 P=2,433,803 P=2,052,446Bills purchased-contra 688,852 993,784 688,852 993,784Deferred revenue 519,613 463,510 519,613 463,510Derivative liabilities (Note 5) 183,755 101,290 183,755 101,290Retention payable 120,812 183,305 120,812 183,305Withholding tax payable 110,628 66,790 106,019 64,670Net retirement obligation (Note 24) 48,784 26,925 46,626 25,927Payment orders payable 6,207 12,145 6,207 12,145Marginal deposits and letters of credit 4,737 115,369 4,737 115,369Miscellaneous 490,170 516,967 489,408 516,017

P=4,748,275 P=4,563,080 P=4,599,832 P=4,528,463

Deferred revenue pertains to deferral and release of loyalty points program transactions andmembership fees and dues. As of December 31, 2015 and 2014, miscellaneous liabilities of theGroup and the Parent Company include sundry credits and interoffice floats amounting toP=243.40 million and P=253.50 million, respectively.

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20. Maturity Analysis of Assets and Liabilities

The following tables show an analysis of assets and liabilities analyzed according to whether theyare expected to be recovered or settled within one year and beyond one year from the statement offinancial position date:


Less than12 months

Over12 months Total

Less than12 months

Over12 months Total

Financial assets: Cash and other cash items P=5,899,131 P=− P=5,899,131 P=5,993,499 P=− P= 5,993,499 Due from BSP 30,908,680 − 30,908,680 23,128,678 − 23,128,678 Due from other banks 5,376,926 − 5,376,926 3,580,528 − 3,580,528 IBLR 7,722,546 − 7,722,546 2,893,384 − 2,893,384 Financial assets at FVTPL

(Note 8) 10,540,806 − 10,540,806 10,182,690 − 10,182,690 Investments at FVTOCI

(Note 8) − 6,255 6,255 − 14,419 14,419 Investment securities at

amortized cost (Note 8) − 4,617,898 4,617,898 − 8,794,878 8,794,878 Loans and receivables - gross

(Note 9) 58,197,712 98,177,092 156,374,804 60,968,220 62,751,320 123,719,540Other assets (Note 13) 299,441 211,279 510,720 792,503 197,489 989,992

118,945,242 103,012,524 221,957,766 107,539,502 71,758,106 179,297,608Nonfinancial assets: Investment in Subsidiaries

(Note 7) − 471,287 471,287 − − − Property and equipment

(Note 10) − 3,523,169 3,523,169 − 3,513,104 3,513,104 Investment properties

(Note 11) − 727,613 727,613 − 912,687 912,687 Deferred tax assets (Note 23) − 1,322,271 1,322,271 − 977,426 977,426 Goodwill and other intangible

assets (Note 12) − 4,446,622 4,446,622 − 4,424,773 4,424,773 Other assets (Note 13) 823,351 682,839 1,506,190 1,068,302 364,812 1,433,114

823,351 11,173,801 11,997,152 1,068,302 10,192,802 11,261,104119,768,593 114,186,325 233,954,918 108,607,804 81,950,908 190,558,712

Allowances for impairment andcredit losses on loans andreceivables (Note 14) − (4,737,049) (4,737,049) − (3,811,163) (3,811,163)

Unearned premium (Note 9) − 3,638,482 3,638,482 − 1,515,034 1,515,034P=119,768,593 P=113,087,758 P=232,856,351 P=108,607,804 P=79,654,779 P=188,262,583

Financial liabilities: Deposit liabilities P=156,332,129 P=27,811,867 P=184,143,996 P=114,474,883 P=33,212,596 P=147,687,479 Bills and acceptances payable

(Note 16) 3,073,523 − 3,073,523 5,317,652 − 5,317,652 Cashiers’ checks and demand

drafts payable 1,217,741 − 1,217,741 1,256,982 − 1,256,982 Subordinated debt (Note 18) − 6,466,516 6,466,516 − 6,463,731 6,463,731 Accrued interest, taxes and

other expenses (Note 17) 1,166,202 − 1,166,202 1,252,060 − 1,252,060 Other liabilities (Note 19) 2,661,743 136,940 2,798,683 2,397,713 183,305 2,581,018

164,451,338 34,415,323 198,866,661 124,699,290 39,859,632 164,558,922Nonfinancial liabilities: Income tax payable 486,390 − 486,390 184,577 − 184,577 Accrued interest, taxes and

other expenses (Note 17) 150,961 − 150,961 89,215 − 89,215 Other liabilities (Note 19) 1,429,979 519,613 1,949,592 1,516,171 465,891 1,982,062

2,067,330 519,613 2,586,943 1,789,963 465,891 2,255,854P=166,518,668 P=34,934,936 P=201,453,604 P=126,489,253 P=40,325,523 P=166,814,776

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Less than12 months

Over12 months Total

Less than12 months

Over12 months Total

Financial assets: Cash and other cash items P=5,829,104 P=− P=5,829,104 P=5,912,309 P=− P=5,912,309 Due from BSP 30,725,169 − 30,725,169 22,970,798 − 22,970,798 Due from other banks 5,310,299 − 5,310,299 3,493,976 − 3,493,976 IBLR 7,722,546 − 7,722,546 2,893,384 − 2,893,384 Financial assets at FVTPL

(Note 8) 10,540,806 − 10,540,806 10,182,690 − 10,182,690 Investments at FVTOCI

(Note 8) − 6,255 6,255 − 14,419 14,419 Investment securities at

amortized cost (Note 8) − 4,617,898 4,617,898 − 8,794,878 8,794,878 Loans and receivables - gross

(Note 9) 54,549,649 95,464,529 150,014,178 61,485,884 57,101,768 118,587,652 Other assets (Note 13) 298,820 211,279 510,099 792,087 189,412 981,499

114,976,393 100,299,961 215,276,354 107,731,128 66,100,477 173,831,605Nonfinancial assets: Investment in subsidiaries

(Note 7) − 551,000 551,000 − 521,000 521,000 Investment in a joint venture − 471,287 471,287 − − −

Property and equipment(Note 10) − 3,211,375 3,211,375 − 3,351,442 3,351,442

Investment properties(Note 11) − 726,916 726,916 − 911,987 911,987

Deferred tax assets (Note 23) − 1,295,956 1,295,956 − 952,751 952,751 Goodwill and other intangible

assets (Note 12) − 4,384,736 4,384,736 − 4,350,242 4,350,242 Other assets (Note 13) 797,611 682,832 1,480,443 1,071,429 353,084 1,424,513

797,611 11,324,102 12,121,713 1,071,429 10,440,506 11,511,935115,774,004 111,624,063 227,398,067 108,802,557 76,540,983 185,343,540

Allowances for impairment andcredit losses on loans andreceivables (Note 14) − (4,623,689) (4,623,689) − (3,728,222) (3,728,222)

Unamortized premium (Note 9) − 3,856,744 3,856,744 − 1,541,257 1,541,257P=115,774,004 P=110,857,118 P=226,631,122 P=108,802,557 P=74,354,018 P=183,156,575

Financial liabilities: Deposit liabilities P=151,253,687 P=27,811,867 P=179,065,554 P=113,955,417 P=29,214,299 P=143,169,716 Bills and acceptances payable

(Note 16) 3,073,523 − 3,073,523 5,317,652 − 5,317,652 Cashiers’ checks and demand

drafts payable 1,217,741 − 1,217,741 1,256,982 − 1,256,982 Subordinated debt (Note 18) − 6,466,516 6,466,516 − 6,463,731 6,463,731 Accrued interest, taxes and

other expenses (Note 17) 1,126,737 − 1,126,737 1,190,052 − 1,190,052 Other liabilities (Note 19) 2,514,622 136,940 2,651,562 2,364,554 183,305 2,547,859

159,186,310 34,415,323 193,601,633 124,084,657 35,861,335 159,945,992Nonfinancial liabilities: Income tax payable 396,052 − 396,052 127,952 − 127,952 Accrued interest, taxes and

other expenses (Note 17) 100,041 − 100,041 79,401 − 79,401 Other liabilities (Note 19) 1,428,657 519,613 1,948,270 1,514,713 465,891 1,980,604

1,924,750 519,613 2,444,363 1,722,066 465,891 2,187,957P=161,111,060 P=34,934,936 P=196,045,996 P=125,806,723 P=36,327,226 P=162,133,949

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21. Equity

Capital ManagementThe Parent Company actively manages its capital to comply with regulatory requirements, enablegrowth targets, withstand plausible stress events and be at par with the Parent Company’s peers.The primary objective of the Parent Company’s capital management is to ensure that it maintainsadequate capital to cover risks inherent to its banking activities without prejudice to optimizingshareholders’ value.

Regulatory Qualifying CapitalUnder existing BSP regulations, the determination of the Parent Company’s compliance withregulatory requirements and ratios is based on the amount of the Parent Company’s ‘unimpairedcapital’ (regulatory net worth) reported to the BSP, which is determined on the basis of regulatorypolicies. In addition, the risk-based Capital Adequacy Ratio (CAR) of a bank, expressed as apercentage of qualifying capital to risk-weighted assets, should not be less than 10.00% for bothsolo basis (head office and branches) and consolidated basis (Parent Company and subsidiariesengaged in financial allied undertakings). Qualifying capital and risk-weighted assets arecomputed based on BSP regulations.

Effective January 1, 2014, the Group complied with BSP issued Circular No. 781, Basel IIIImplementing Guidelines on Minimum Capital Requirements, which provides the implementingguidelines on the revised risk-based capital adequacy framework particularly on the minimumcapital and disclosure requirements for universal banks and commercial banks, as well as theirsubsidiary banks and quasi-banks, in accordance with the Basel III standards. The Circular setsout a minimum Common Equity Tier 1 (CET1) ratio of 6.00% and Tier 1 capital ratio of 7.50%.It also introduces a capital conservation buffer of 2.50% comprised of CET1 capital. The BSP’sexisting requirement for Total CAR remains unchanged at 10.00% and these ratios shall bemaintained at all times.

Further, existing capital instruments as of December 31, 2010 which do not meet the eligibilitycriteria for capital instruments under the revised capital framework shall no longer be recognizedas capital. Capital instruments issued under BSP Circular Nos. 709 and 716 (the circularsamending the definition of qualifying capital particularly on Hybrid Tier 1 and Lower Tier 2capitals), and before the effectivity of BSP Circular No. 781, shall be recognized as qualifyingcapital only until December 31, 2015. In addition to changes in minimum capital requirements,this Circular also requires various regulatory adjustments in the calculation of qualifying capital.

On June 27, 2014, the BSP issued Circular No. 839, REST Limit for Real Estate Exposures whichprovides the implementing guidelines on the prudential REST limit for universal, commercial, andthrift banks on their aggregate real estate exposures. The Group should maintain CET1 and CARlevels at the regulatory prescribed minimums, on a solo and consolidated basis, even after thesimulated results of a 25.00% write-off to the Group’s real estate exposures. These shall becomplied with at all times.

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Presented below are the composition of qualifying capital and the related deductions as reported tothe BSP (amounts in millions):


Tier 1 capital P=31,035 P=21,209 P=30,297 P=20,784CET1 capital 31,035 21,209 30,297 20,784Less required deductions 6,751 6,264 7,481 6,986Subtotal 24,284 14,945 22,816 13,798Less: deductions from Tier 1 capital – – – –Net Tier 1 Capital 24,284 14,945 22,816 13,798Tier 2 capital 6,232 6,023 6,201 5,961Less deductions from Tier 2 capital – – – –Net Tier 2 Capital 6,232 6,023 6,201 5,961Total Qualifying capital P=30,516 P=20,968 P=29,017 P=19,759

The capital-to-risk assets ratio reported to the BSP as of December 31, 2015 and 2014 are shownin the table below (amounts in millions):


Tier 1 capital: Paid up common stock P=15,000 P=11,284 P=15,000 P=11,284 Additional paid-in capital 5,209 979 5,209 979 Retained earnings 8,857 6,849 8,508 6,861 Undivided profits 1,975 2,084 1,586 1,647 Cumulative foreign currency translation (6) 13 (6) 13Core Tier 1 capital 31,035 21,209 30,297 20,784Deductions from Tier 1 capital:

Total outstanding unsecured creditaccommodation to a DOSRI andsubsidiary 405 583 738 883

Investments in equity securities 518 240 1,039 761 Defined benefit asset 39 26 36 26 Deferred income tax 1,342 990 1,283 966

Goodwill and other intangible assets 4,447 4,425 4,385 4,350Total Deductions 6,751 6,264 7,481 6,986Total Tier 1 Capital 24,284 14,945 22,816 13,798Tier 2 capital: General loan loss provision 1,265 1,060 1,234 998 Unsecured subordinated debt 4,967 4,963 4,967 4,963Total Tier 2 capital 6,232 6,023 6,201 5,961Deductions from Tier 1 and Tier 2 capital – – – –Qualifying capital: Net Tier 1 capital 24,284 14,945 22,816 13,798 Net Tier 2 capital 6,232 6,023 6,201 5,961Total qualifying capital 30,516 20,968 29,017 19,759Capital requirements: Credit risk 167,442 133,495 160,763 127,826 Market risk 5,830 8,363 5,830 8,363 Operational risk 22,426 18,152 21,167 17,419Total capital requirements P=195,698 P=160,010 P=187,760 P=153,608

CET1 capital ratio 12.41% 9.34% 12.15% 8.98%Tier 1 capital ratio 12.41% 9.34% 12.15% 8.98%Total capital ratio 15.59% 13.10% 15.45% 12.86%

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Qualifying capital and risk-weighted assets (RWA) are computed based on BSP regulations.Under Basel III, the regulatory Gross Qualifying Capital of the Parent Company consists of Tier 1(core), composed of Common Equity Tier 1 and Additional Tier 1, and Tier 2 (supplementary)capital. Tier 1 capital comprises share capital, retained earnings (including current year profit)and non-controlling interest less required deductions such as deferred income tax and unsecuredcredit accommodations to DOSRI. Tier 2 capital includes unsecured subordinated debts,revaluation reserves and general loan loss provision. Certain items are deducted from theregulatory Gross Qualifying Capital, such as but not limited to equity investments inunconsolidated subsidiary banks and other financial allied undertakings, but excludinginvestments in debt capital instruments of unconsolidated subsidiary banks (for solo basis) andequity investments in subsidiary and non-financial allied undertakings.

Risk-weighted assets are determined by assigning defined risk weights to the statement offinancial position exposure and to the credit equivalent amounts of off-balance sheet exposures.Certain items are deducted from risk-weighted assets, such as the excess of general loan lossprovision over the amount permitted to be included in Tier 2 capital. The risk weights vary from0.00% to 150.00% depending on the type of exposure, with the risk weights of off-balance sheetexposures being subjected further to credit conversion factors. Below is a summary of riskweights and selected exposure types:

Risk weight Exposure/Asset type*0.00% Cash on hand; claims collateralized by securities issued by the national

government, BSP; loans covered by the Trade and InvestmentDevelopment Corporation of the Philippines; real estate mortgages coveredby the Home Guarantee Corporation

20.00% COCI, claims guaranteed by Philippine incorporated banks/quasi-bankswith the highest credit quality; claims guaranteed by foreign incorporatedbanks with the highest credit quality; loans to exporters to the extentguaranteed by Small Business Guarantee and Finance Corporation

50.00% Housing loans fully secured by first mortgage on residential property;Local Government Unit (LGU) bonds which are covered by Deed ofAssignment of Internal Revenue allotment of the LGU and guaranteed bythe LGU Guarantee Corporation

75.00% Direct loans of defined Small Medium Enterprise (SME) and microfinanceloans portfolio; non-performing housing loans fully secured by firstmortgage

100.00% All other assets (e.g., real estate assets) excluding those deducted fromcapital (e.g., deferred income tax)

150.00% All non-performing loans (except non-performing housing loans fullysecured by first mortgage) and all non-performing debt securities

* Not all inclusive

With respect to off-balance sheet exposures, the exposure amount is multiplied by a creditconversion factor (CCF), ranging from 0.00% to 100.00%, to arrive at the credit equivalentamount, before the risk weight factor is multiplied to arrive at the risk-weighted exposure. Directcredit substitutes (e.g., guarantees) have a CCF of 100.00%, while items not involving credit riskhas a CCF of 0.00%.

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In the case of derivatives, the credit equivalent amount (against which the risk weight factor ismultiplied to arrive at the risk-weighted exposure) is generally the sum of the current creditexposure or replacement cost (the positive fair value or zero if the fair value is negative or zero)and an estimate of the potential future credit exposure or add-on. The add-on ranges from 0.00%to 1.50% (interest rate-related) and from 1.00% to 7.50% (exchange rate-related), depending onthe residual maturity of the contract. For credit-linked notes and similar instruments, the risk-weighted exposure is the higher of the exposure based on the risk weight of the issuer’s collateralor the reference entity or entities.

The risk-weighted CAR is calculated by dividing the sum of its Tier 1 and Tier 2 capital, asdefined under BSP regulations, by its risk-weighted assets. The risk-weighted assets, as definedby the BSP regulations, consist of all of the assets on the balance sheet at their respective bookvalues, together with certain other off-balance sheet items, weighted by certain percentagesdepending on the risks associated with the type of assets. The determination of compliance withregulatory requirements and ratios is based on the amount of the Parent Company’s ‘unimpairedcapital’ (regulatory net worth) as reported to the BSP, which is determined on the basis ofregulatory accounting practices which differ from PFRS in some respects.

In 2015 and 2014, the Parent Company has complied with the required 10.00% capital adequacyratio of the BSP.

The policies and processes guiding the determination of the sufficiency of capital of the ParentCompany have been incorporated in the Parent Company’s Internal Capital Adequacy AssessmentProcess (ICAAP) which supplements the BSP’s risk-based capital adequacy framework underBSP Circular Nos. 538 and 639 to comply with the requirements of the BSP. While the ParentCompany has added the ICAAP to its capital management policies and processes, there were nochanges made on the objectives and policies for the years ended December 31, 2015 and 2014.

The Parent Company has taken into consideration the impact of the foregoing requirements toensure that the appropriate level and quality of capital are maintained on an ongoing basis.

Capital StockCapital stock consist of (amounts in thousands, except for par value and number of shares):

Shares Amount2015 2014 2013 2015 2014 2013

Authorized:Common stock – 10.00 par value 1,500,000,000 1,500,000,000 1,500,000,000Preferred stock – 10.00 par value 500,000,000 500,000,000 500,000,000

Common stock issued and outstanding:Balance at the beginning of the year 1,128,409,610 1,128,409,610 1,128,409,610 P=11,284,096 P=11,284,096 P=11,284,096Issuance of stock rights 371,574,000 − − 3,715,740 − −

Balance at year end 1,499,983,610 1,128,409,610 1,128,409,610 P=14,999,836 P=11,284,096 P=11,284,096

On January 19, 2012 and February 10, 2012, the Parent Company received cash from itsshareholders totaling P=3.00 billion as deposits for future stock subscription for 300 millioncommon shares which were subsequently issued in March 2012. Also in the same period, thepreferred shareholders converted a total of 300 million preferred shares amounting to P=3.00 billionto 300 million common shares.

With the approvals by the PSE of the Parent Company’s application for listing and by the SEC forthe Registration Statement both on March 14, 2012, a total of 245,316,200 common shares, withP=10.00 par value per share, representing 21.70% of outstanding capital stock, were offered andsubscribed through an initial public offering at P=18.50 per share on April 20 to 26, 2012. Thecommon shares comprise of (a) 141,056,800 new shares issued by the Parent Company by way of

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a primary offer, and (b) 104,259,400 existing shares offered by FDC, the selling shareholder,pursuant to a secondary offer. Subsequently, on September 5, 2012, 36,715,300 shares under theover-allotment option were exercised at a price of P=18.50 per share that brought the subscriptionsto 25.00% of the outstanding capital stock. The Parent Company’s common shares were listedand commenced trading in the PSE on May 7, 2012.

The total proceeds raised by the Parent Company from the sale of primary offer shares amountedto P=2.61 billion while the net proceeds (after deduction of direct costs related to equity issuance)amounted to P=2.39 billion.

On January 29, 2015, the BOD approved the common shares rights offering. In March 2015,the BOD approved the application of the Parent Company to list up to 371,574,000 commonshares with par value of P=10 per share to cover its stock rights offering. Details of the offer are asfollows:

Entitlement Ratio 32.929 right shares for every 100 sharesOffer Price P=21.53Number of shares to be offered 371,574,000 sharesEx-rights date April 16, 2015Record date April 21, 2015Start of offer period April 24, 2015End of Offer Period April 30, 2015

The offer price was computed based on the volume-weighted average price of the ParentCompany’s common shares traded in the PSE for each of the 15 consecutive trading daysimmediately prior to (and excluding) the pricing date, subject to a discount rate of 12.80%.

On May 8, 2015, a total of 371,574,000 common shares were listed at the PSE with P=10.00 parvalue per share. The total proceeds raised by the Parent Company from the sale of the said sharesamounted to P=8.00 billion while the net proceeds (after deduction of direct costs related to equityissuance) amounted to P=7.95 billion. The net proceeds were used to invest in securities allowedunder BSP regulation and to fuel growth in loans.

22. Income and Expenses

Service charges, fees and commissions consist of:


Credit Cards P=1,857,903 P=1,790,379 P=1,614,723 P=1,857,903 P=1,790,379 P=1,614,723Loans 831,458 1,021,233 460,944 387,457 393,108 174,234Deposits 552,419 385,523 318,319 510,601 385,523 318,319Remittances 28,704 7,144 1,113 28,704 7,144 1,113Others 15,698 93,560 133,371 15,697 93,560 96,478

P=3,286,182 P=3,297,839 P=2,528,470 P=2,800,362 P=2,669,714 P=2,204,867

Service charges include late payment charges, pre-termination fees on loans and service chargeson deposit taking-related transactions.

Fees and commissions include credit card membership fees, interchange fees, merchant discountsand other commissions.

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Miscellaneous income consists of:


Recovery on written-off assets P=235,558 P=150,192 P=299,399 P=234,675 P=148,344 P=297,781Rental income 5,226 4,546 3,333 5,379 4,546 3,333Dividend income 7,108 22,221 76,946 7,108 22,221 76,946Others 58,547 45,072 27,249 47,086 39,749 22,972

P=306,439 P=222,031 P=406,927 P=294,248 P=214,860 P=401,032

Others include referral income earned on insurance premiums charged through credit cards.

Miscellaneous expenses consist of:


Security, messengerial and janitorialservices P=457,280 P=429,635 P=362,303 P=420,577 P=403,015 P=340,782

Advertising 403,739 407,578 395,164 394,377 401,688 394,513Service charges, fees and commissions 390,087 657,067 494,454 390,170 635,241 485,648Technological fees 352,010 242,537 179,279 352,010 242,519 178,866Insurance 351,853 264,238 211,207 334,907 249,577 197,357Brokerage fees 326,214 206,896 239,503 342,268 223,378 239,503Postage, telephone, cables and telegram 315,743 323,304 282,808 296,584 310,845 274,372Transportation and travel 213,759 194,571 189,705 170,896 167,762 156,789Power, light and water 186,725 183,769 165,633 173,234 171,983 155,079Management and other professional fees 150,243 81,768 57,000 148,309 79,733 53,818Stationery and supplies 78,801 79,992 74,742 70,195 73,088 68,156Repairs and maintenance 77,790 74,303 40,525 70,567 63,836 31,635Entertainment, amusement and

recreation 46,653 48,223 47,970 42,852 45,306 43,838Supervision fees 42,881 42,353 35,431 41,118 41,010 34,270Litigation expenses 33,689 37,099 37,763 33,685 37,072 36,753Others 205,844 190,230 137,845 198,022 184,540 127,160

P=3,633,311 P=3,463,563 P=2,951,332 P=3,479,771 P=3,330,593 P=2,818,539

Others include payments for subscriptions, membership fees, trainings, donations andcontributions, delivery and freight expenses, fines, penalties, other charges and clearing fees.

23. Income and Other Taxes

Under Philippine tax laws, the RBU of the Parent Company and its subsidiaries are subject topercentage and other taxes (presented as Taxes and licenses in the statements of income) as wellas income taxes. Percentage and other taxes paid consist principally of gross receipts tax anddocumentary stamp taxes. Income taxes include corporate income tax, as discussed below, andfinal taxes paid which represents final withholding tax on gross interest income from governmentsecurities and other deposit substitutes and income from FCDU transactions. These income taxes,as well as the deferred tax benefits and provisions, are presented as Provision for income tax in thestatements of income.

Republic Act (RA) No. 9397, An Act Amending National Internal Revenue Code, provides thatthe Regular Corporate Income Tax (RCIT) rate shall be 30.00% and the interest expense allowedas a deductible expense shall be reduced by 33.00% of interest income subjected to final tax.

An MCIT of 2.00% of modified gross income is computed and compared with the RCIT. Anyexcess of MCIT over the RCIT is deferred and can be used as a tax credit against future incometax liability for the next three years. In addition, NOLCO is allowed as a deduction from taxableincome in the next three years from the period of incurrence.

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FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income(income from residents) is generally subject to 10.00% gross income tax. In addition, interestincome on deposit placements with other FCDUs and offshore banking units is subject to a 7.50%final tax. RA No. 9294, which became effective in May 2004, provides that the income derivedby the FCDU from foreign currency transactions with non-residents, Offshore Banking Units(OBUs), local commercial banks including branches of foreign banks is tax-exempt while interestincome on foreign currency loans from residents other than OBUs or other depository banks underthe expanded system is subject to 10.00% income tax.

In 2011, the BIR issued Revenue Regulation 14-2011, which prescribes the proper allocation ofcosts and expenses among the income earnings of financial institutions for income tax reporting.Only costs and expenses attributable to the operations of the RBU can be claimed as deduction toarrive at the taxable income of the RBU subject to the RCIT. All costs and expenses pertaining tothe FCDU/EFCDU are excluded from the RBU’s taxable income. Within the RBU, commoncosts and expenses should be allocated among taxable income, tax-paid income and tax-exemptincome using the specific identification or the allocation method.

Provision for income tax consists of:


Current:Regular corporate income tax P=939,144 P=461,276 P=171,993 P=665,314 P=275,722 P=146,917Final tax 58,765 77,563 68,809 58,654 77,281 66,946

997,909 538,839 240,802 723,968 353,003 213,863Deferred (338,577) 25,206 (22,146) (336,995) 43,411 (30,324)

P=659,332 P=564,045 P=218,656 P=386,973 P=396,414 P=183,539

The components of the Group’s and the Parent Company’s net deferred tax assets as ofDecember 31, 2015 and 2014 follow:


Deferred tax asset on: Allowance for impairment and credit losses P=1,473,378 P=1,082,393 P=1,450,264 P=1,068,408 Accrued expenses 96,574 134,341 93,910 123,841 Accumulated depreciation of assets

foreclosed or dacioned 91,304 94,596 91,302 94,595 Net retirement obligation 14,962 8,062 14,315 7,763 Unrealized trading loss 14,309 144 14,309 144 Unamortized past service cost 3,786 4,889 3,786 4,889

1,694,313 1,324,425 1,667,886 1,299,640Deferred tax liability on: Branch licenses acquired from business

combination (Note 7) 187,620 187,620 187,620 187,620 Gain on asset foreclosure and dacion transactions 107,747 105,380 107,636 105,270 Excess of fair value over carrying value of net

assets acquired from business combinations 43,369 44,939 43,369 44,939 Unrealized foreign exchange gain 33,306 9,060 33,305 9,060

372,042 346,999 371,930 346,889P=1,322,271 P=977,426 P=1,295,956 P=952,751

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As of December 31, 2015 and 2014, the Group and the Parent Company did not recognizedeferred tax assets on the following temporary differences:


Allowance for credit and impairment losses P=36,315 P=388,550 P=− P=352,226

As of December 31, 2015 and 2014, the Group and the Parent Company has no net operating losscarryforwards.

Provision for deferred income tax charged directly to OCI during the year for the Group and theParent Company follows:


Remeasurements on retirement plan P=6,268 P=7,507 P=6,210 P=7,440

The reconciliation of statutory income tax at statutory tax rate to the effective income tax follows:


Statutory income tax P=798,980 P=791,227 P=682,317 P=599,500 P=618,889 P=652,359Additions to (reductions from) income taxes

resulting from the tax effects of: Nondeductible expenses 119,385 233,066 185,303 117,442 232,698 180,061 FCDU income (100,560) (250,539) (73,524) (100,560) (250,539) (73,524) Non taxable and tax-exempt income (50,047) (139,699) (639,005) (50,047) (139,699) (516,165) Interest income subjected to final tax

net of tax paid (73,750) (35,356) (62,767) (73,694) (35,021) (59,192) Change in unrecognized deferred

tax assets and others (34,676) (34,654) 126,332 (105,668) (29,914) −Effective income tax P=659,332 P=564,045 P=218,656 P=386,973 P=396,414 P=183,539

24. Retirement Plan

The existing regulatory framework, RA No. 7641, the Retirement Pay Law requires companieswith at least ten (10) employees to pay retirement benefits to qualified private sector employees inthe absence of any retirement plan in the entity, provided however that the employee’s retirementbenefits under any collective bargaining and other agreements shall not be less than thoseprovided under the law. The law does not require minimum funding of the plan.

Parent CompanyThe Parent Company has a funded, noncontributory defined benefit retirement plan (the Plan)covering substantially all of its officers and regular employees. Under the Plan, all coveredofficers and employees are entitled to cash benefits (equivalent to 125.00% of the final monthlysalary for every year of service depending on the tenure of the employee) after satisfying certainage and service requirements. The Parent Company’s retirement plan is in the form of a trustadministered by the Parent Company’s Trust Division under the supervision of the RetirementCommittee.

EWRBEWRB has a noncontributory defined benefit plan covering substantially all of its officers andregular employees. The benefits are based on years of service and final compensation. Theretirement plan provides retirement benefits equal to 100.00% of the final monthly salary for everyyear of service. As of December 31, 2015 and 2014, the retirement plan of EWRB is unfunded.

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The net retirement obligation included in ‘Other liabilities’ in the statements of financial positionare as follows:


Present value of the defined benefit obligation P=645,344 P=555,340 P=643,186 P=554,342Fair value of plan assets 596,560 528,415 596,560 528,415Net retirement obligation P=48,784 P=26,925 P=46,626 P=25,927

Changes in the present value of the defined benefit obligation as of December 31, 2015 and 2014recognized in the statements of financial position follow:


Balance at beginning of year P=555,340 P=432,948 P=554,342 P=432,782Current service cost 103,027 89,280 102,105 88,678Interest cost 24,436 18,186 24,391 18,177Remeasurement (gains) losses: Actuarial losses arising from deviations of

experience from assumptions 17,613 44,863 17,347 44,777 Actuarial gains arising from changes in

financial assumptions (30,360) (10,849) (30,287) (10,984)Benefits paid (24,712) (19,088) (24,712) (19,088)Balance at end of year P=645,344 P=555,340 P=643,186 P=554,342

Changes in the fair value of plan assets are as follows:


Balance at beginning of year P=528,415 P=431,584 P=528,415 P=431,584Contributions 103,247 88,802 103,247 88,802Interest income 23,250 18,126 23,250 18,126Remeasurements (33,640) 8,991 (33,640) 8,991Benefits paid (24,712) (19,088) (24,712) (19,088)Balance at end of year P=596,560 P=528,415 P=596,560 P=528,415

The fair value of plan assets by class are as follows:


Cash and cash equivalents P=162,572 P=284,756 P=162,572 P=284,756Debt instruments: Government securities 75,777 56,475 75,777 56,475 Private securities 113,259 81,097 113,259 81,097Equity instruments: Financial services 236,704 66,685 236,704 66,685 Real estate 5,446 8,859 5,446 8,859 Retail 104 3,720 104 3,720 Holding 82 9,879 82 9,879 Utilities 62 3,714 62 3,714 Telecommunications − 8,662 − 8,662 Mining − 1,493 − 1,493 Manufacturing − 1,062 − 1,062Others 2,554 2,013 2,554 2,013Fair value of plan assets P=596,560 P=528,415 P=596,560 P=528,415

The Parent Company’s plan assets are carried at fair value. All equity and debt instruments heldhave quoted prices in an active market. The fair value of other assets and liabilities, which include

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deposits in banks, accrued interest and other receivables and trust fee payables, approximate theircarrying amount due to the short-term nature of these accounts.

The plan assets are diversified investments and are not exposed to concentration risk.

Each year, an Asset-Liability Matching Study (ALMS) is performed with the result beinganalyzed in terms of risk-and-return profiles. The Parent Company’s current strategic investmentstrategy consists of 70.00% of debt instruments, 25.00% of equity instruments, and 5.00% cash.

The Parent Company expects to contribute P=88.70 million to the plan in 2016.

The cost of defined benefit retirement plans as well as the present value of the benefit obligationare determined using actuarial valuations. The actuarial valuation involves making variousassumptions. The principal assumptions used are shown below:

Parent Company EWRB2015 2014 2015 2014

Discount rate At January 1 4.40% 4.20% 4.53% 5.20% At December 31 4.88% 4.40% 4.68% 4.53%Future salary increase rate 5.00% 5.00% 5.00% 5.00%Average remaining working life 16 15 16 16

The sensitivity analysis below on the defined benefit obligation as of December 31, 2015 and2014 has been determined based on reasonably possible changes of each significant assumption,assuming all other assumptions were held constant.

Increase in defined benefit obligationConsolidated Parent Company2015 2014 2015 2014

Decrease in discount rate of 1% P=67,207 P=59,734 P=66,673 P=59,485Increase in salary rate increase of 1% 66,039 58,388 65,511 58,142Improvement in employee turnover by 10% 25,687 24,134 25,243 23,925

The amounts included in Compensation and fringe benefits expense in the statements of incomeare as follows:


Current service cost P=103,027 P=89,280 P=76,300 P=102,105 P=88,678 P=74,391Net interest expense 1,186 60 1,211 1,141 51 544Loss on settlement − − 24,647 − − −Expense recognized P=104,213 P=89,340 P=102,158 P=103,246 P=88,729 P=74,935

25. Leases

The Group leases several premises occupied by its head office and branches. Some leases aresubject to annual escalation of 5.00% to 10.00% and for periods ranging from 5 to 15 years,renewable upon mutual agreement of both parties. For the years ended December 31, 2015, 2014and 2013, the total rentals of the Group charged to operations amounted to P=738.15 million,P=629.29 million, and P=542.47 million, respectively. For the years ended December 31, 2015,2014 and 2013, total rentals charged to operations by the Parent Company amounted toP=699.68 million P=607.01 million, and P=518.23 million, respectively.

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Future minimum annual rentals payable under the aforementioned lease agreements follow:


Within one year P=674,597 P=663,588 P=625,635 P=637,067After one year but not more than five years 2,178,171 2,328,911 2,004,968 2,238,372More than five years 1,151,938 1,704,035 1,084,234 1,640,297

P=4,004,706 P=4,696,534 P=3,714,837 P=4,515,736

26. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control theother party or exercise significant influence over the other party in making financial and operatingdecisions. The Group’s related parties include:

· key management personnel, close family members of key management personnel, and entitieswhich are controlled, significantly influenced by or for which significant voting power is heldby key management personnel or their close family members,

· subsidiaries, joint ventures and associates and their respective subsidiaries, and

· post-employment benefit plans for the benefit of the Group’s employees.

The Group has several business relationships with related parties. Transactions with such partiesare made in the ordinary course of business and on substantially the same terms, including interestand collateral, as those prevailing at the time for comparable transactions with other parties.

The amounts and the balances arising from the foregoing significant related party transactions ofthe Group and of the Parent Company are as follows:

2015

CategoryAmount/Volume

OutstandingBalance Terms and Conditions/Nature


4.50%, secured by REM and deposits, noimpairment

Deposit liabilities − 1,671,459 Deposit liabilities with interest ranging from 0.50% to1.00%

Accrued interest receivable − 62,760 Interest income accrued on outstanding loansreceivable

Accrued expenses − 20,502 Payable for management and professional fees paid byFDC (reimbursement for expenses)

Guarantees and commitments − 150,097 Unused credit lines Interest income 228,247 − Interest income on loans receivable Interest expense 9,458 − Interest expense on deposit liabilitiesKey management personnel: Loans receivable − 33,433 Loans granted with terms ranging from two to fifteen

years, interest ranging from 6.00% to 10.27%,secured at 100%

Deposit liabilities − 28,758 Deposit liabilities with interest ranging from 0.50% to5.88%

Accrued interest receivable − 196 Interest income accrued on outstanding loansreceivable

Interest income 3,149 − Interest income on loans receivable Interest expense 147 − Interest expense on deposit liabilities

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2015



Other related parties: Loans receivable P=− P=4,834,271 Loans granted with terms ranging from three months to

thirteen and a half years, interest ranging from 4.0%to 11.52%, 97% secured by real estate and chattelmortgage, no impairment

Receivables purchased − P=519,481 Receivables purchased by the Parent Company fromFLI

Deposit liabilities − 9,580,469 Deposit liabilities with interest ranging from 0.50% to6.0%


Guarantees and commitments − 444,574 Unused credit lines Accounts receivable 431,529 Receivable from FAI on the sale of land by the Parent

Company, payable in 5 years, interest of 6.00%(Note 10) and advances to EWAL

Interest income 310,346 − Interest income on loans receivable Interest expense 23,625 − Interest expense on deposit liabilities Service fee expense 1,946 − Service fees paid to FLI for account servicing

equivalent to 1.12% of loan amounts collected byFLI on behalf of the Parent Company (see Note 9)

Rent expense 43,178 − Rent expenses paid for lease transactions with otherrelated parties such as Filinvest Asia Corporation,FAI and FLI

Investment in a joint venture – 471,287 Equity Share of 50% in East West Ageas Life

2014




4.50%, secured, no impairment Deposit liabilities − 2,864,568 Deposit liabilities with interest ranging from 0.50% to

1.00% Accrued interest receivable − 60,224 Interest income accrued on outstanding loans

receivable Accrued expenses − 13,297 Payable for management and professional fees paid by

FDC (reimbursement for expenses) Guarantees and commitments − 3,500,000 Unused credit lines Interest income 228,219 − Interest income on loans receivable Interest expense 2,954 − Interest expense on deposit liabilitiesKey management personnel: Loans receivable − 37,777 Loans granted with terms ranging from three to twenty

years, interest ranging from 5.59% to 10.42%,secured at 98%

Deposit liabilities − 259,726 Deposit liabilities with interest ranging from 0.50% to5.88%

Accrued interest receivable − 90 Interest income accrued on outstanding loansreceivable

Interest income 3,440 − Interest income on loans receivable Interest expense 846 − Interest expense on deposit liabilitiesOther related parties: Loans receivable − 2,310,222 Loans granted with terms ranging from two months to

thirteen and a half years, interest ranging from3.75% to 6.40%, 76.00% secured by real estate andchattel mortgage, no impairment

Receivables purchased − 857,158 Receivables purchased by the Parent Company fromFLI

Financial assets at FVTPL − 99,680 FLI- issued debt securities held for trading by theParent Company, with interest rates ranging from5.40% to 5.64%, unimpaired

Deposit liabilities − 15,815,423 Deposit liabilities with interest rates ranging from0.50% to 5.88%


Guarantees and commitments − 5,267,068 Unused credit lines

(Forward)

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2014



Accounts receivables P=− P=411,597 Receivable from FAI on the sale of land by the ParentCompany, payable in 5 years, interest of 6.00%(Note 10)

Gain on sale of land 264,132 − Gain recognized on the sale of the Parent Company’sland to FAI (Note 10)

Interest income 21,406 − Interest income on loans receivable Interest expense 220,370 − Interest expense on deposit liabilities Service fee expense 5,434 − Service fees paid to FLI for account servicing

equivalent to 1.12% of loan amounts collected byFLI on behalf of the Parent Company (see Note 9).

Rent expense 37,407 − Rent expenses paid for lease transactions with otherrelated parties such as Filinvest Asia Corporation,FAI and FLI

The Group’s significant investors pertain to FDC, the immediate Parent Company of the Group,and FDC Forex Corporation (a company under common control of FDC).

Key management personnel are those persons having authority and responsibility for planning,directing and controlling the activities of the Group, directly or indirectly. The Group considersthe members of the Management Committee to constitute key management personnel for purposesof PAS 24. The Group provides banking services to its key management personnel.

Other related parties pertain to the Group’s affiliates (subsidiaries of FDC).

The Group and the Parent Company had no outright purchases and outright sale of debt securitieswith significant shareholders and key management personnel in 2015 and 2014. In 2014, theParent Company purchased peso-denominated debt securities issued by Filinvest Land, Inc., anaffiliate, with market value amounting to P=99.68 million as of December 31, 2014.

In November 2015, EWAL and the Parent Company entered into an exclusive distributionagreement for a period of 20 years for which the latter shall earn commission fees. As ofDecember 31 2015, no fees have been earned and accrued pending the start of commercialoperations of EWAL.

No provision and allowance for loan losses was recognized by the Group for loans to significantinvestors, key management personnel and other related parties in 2015, 2014, and 2013.

The Parent Company’s subsidiaries have no transactions with related parties outside of the Group.The transactions disclosed above are the same for the Group and the Parent Company.

Parent Company Related Party TransactionsTransactions between the Parent Company and its subsidiaries (EWRB and EWIB) meet thedefinition of related party transactions. Details of the Parent Company’s subsidiaries are disclosedin Note 1.

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In addition to the transactions discussed above, the following are the transactions between theParent Company and its subsidiaries that are recognized in the Parent Company’s statements offinancial position and statements of income and eliminated in the consolidated financialstatements:

2015


OutstandingBalance Terms and Conditions/ Nature

Subsidiaries: Loans receivable P=− P=36,437 Loan Accommodation granted with a term of seven days. Receivables purchased 12,925,050 8,335,049 Receivables purchased by the Parent Company from

EWRB (see Note 9) Accrued interest receivable − − Interest on receivables purchased from EWRB and loans

granted to EWRB at 4.00% per annum Accounts receivable − 1,100,957 Amount collected by EWRB from borrowers on behalf of

the Parent Company that remained unremitted byEWRB and other related expenses shouldered by theParent Company on behalf of EWRB and EWIB.

Deposit liabilities − 292,135 Deposit liabilities with interest rates of 0.05% to 6.00% Accounts payable − 64,907 Cash reloading transactions between EWRB and the

Parent Company Interest income 8,044 − Interest income on outstanding loans receivable Interest expense 366 − Interest expense on deposits of EWRB and EWIB Service fee expense 30,572 − Service fees paid to EWRB for account servicing

equivalent to 0.37% of loan amounts collected byEWRB on behalf of the Parent Company for thereceivables purchased (see Note 9)

2014


OutstandingBalance Terms and Conditions/ Nature

Subsidiaries: Loans receivable P=300,000 P=300,000 Loans granted with a term of one month or 30 days,

interest rate of 4.00%, unsecured, no impairment Receivables purchased 5,740,168 3,890,662 Receivables purchased by the Parent Company from

EWRB (see Note 9) Accrued interest receivable − 7,887 Interest on receivables purchased from EWRB and

loans granted to EWRB at 4.00% per annum Accounts receivable − 564,845 Amount collected by EWRB from borrowers on

behalf of the Parent Company that remainedunremitted by EWRB

Accounts payable − 72,206 Cash reloading transactions between EWRB and theParent Company

Interest income 2,537 − Interest income on outstanding loans receivable Interest expense 579 − Interest expense on deposit liabilities Service fee expense 16,482 − Service fees paid to EWRB for account servicing

equivalent to 0.37% of loan amounts collected byEWRB on behalf of the Parent Company for thereceivabbles purchased (see Note 9)

Transactions with Retirement PlansUnder PFRS, certain post-employment benefit plans are considered as related parties. The ParentCompany’s retirement plan is in the form of a trust administered by the Parent Company’s TrustDivision under the supervision of the Retirement Committee. The values of the assets of the fundare as follows:

2015 2014Cash and cash equivalents P=162,572 P=284,756Equity instruments 242,398 104,074Debt instruments 189,036 137,572Others 2,554 2,013

P=596,560 P=528,415

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As of December 31, 2015 and 2014, cash and cash equivalents include the savings deposit withthe Parent Company amounting to P=32.59 million and P=3.87 million, respectively, and debtinstruments include investments in the Parent Company’s LTNCD amounting to P=66.55 millionand P=62.10 million, respectively. Equity instruments include investments in the ParentCompany’s PhilEquity Institutional Feeder Fund amounting to P=177.69 million, equivalent to195,467 shares with fair market value of P=909.07 per share as of December 31, 2015, andP=61.36 million, equivalent to 61,273 shares with fair market value of P=1,001.37 per share as ofDecember 31, 2014, the Parent Company’s equity securities amounting to P=48.73 million,equivalent to 2,572,637 common shares with fair market value of P=18.94 per share as ofDecember 31, 2015, and P=0.72 million equivalent to 30,000 common shares with fair market valueof P=23.95 per share as of December 31, 2014, and the Parent Company’s PSEi Tracker Fundamounting to P=9.81 million, equivalent to 100,000 shares with fair market value ofP=98.11 per share as of December 31, 2015.

The following are the amounts recognized by the retirement plan arising from its transactions withthe Parent Company for the years ended December 31, 2015, 2014 and 2013.

2015 2014 2013Trust fees P=2,899 P=2,462 P=2,095Interest income on savings deposit 146 136 4,796Interest income on investments in

LTNCD 2,936 2,942 2,669Gain (loss) on investments in equity

shares (25,892) (30) 1,232

Remunerations of Directors and other Key Management PersonnelTotal remunerations of key management personnel are as follows:


Short-term employee benefits P=177,663 P=160,477 P=197,933 P=164,798 P=146,966 P=187,535Post employment benefits 7,723 8,192 7,448 7,723 8,192 4,160

P=185,386 P=168,669 P=205,381 P=172,521 P=155,158 P=191,695

Remunerations given to directors which were approved by the Board Remuneration Committeeamounted to P=13.40 million in 2015, P=13.08 million in 2014 and P=10.16 million in 2013 for theGroup and the Parent Company.

Regulatory ReportingAs required by BSP, the Group discloses loan transactions with investees and with certaindirectors, officers, stockholders and related interests (DOSRI). Existing banking regulations limitthe amount of individual loans to DOSRI, 70.00% of which must be secured, to the total of theirrespective deposits and book value of their respective investments in the lending company withinthe Group. In the aggregate, loans to DOSRI generally should not exceed total equity or 15.00%of total loan portfolio, whichever is lower.

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BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts. Thefollowing table shows information relating to the loans, other credit accommodations andguarantees classified as DOSRI accounts under regulations existing prior to said Circular, and newDOSRI loans, other credit accommodations granted under said circular:


Total outstanding DOSRI accounts P=10,322,185 P=7,759,327 P=6,394,361 P=10,654,933 P=8,085,550 P=6,394,361Percent of DOSRI accounts granted prior

to effectivity of BSP Circular No.423 to total loans 0.000% 0.000% 0.000% 0.000% 0.000% 0.000%

Percent of DOSRI accounts granted aftereffectivity of BSP Circular No. 423to total loans 6.401% 6.283% 6.494% 6.917% 6.869% 6.738%

Percent of DOSRI accounts to total loans 6.402% 6.283% 6.495% 6.917% 6.869% 6.738%Percent of unsecured DOSRI accounts to

total DOSRI accounts 3.928% 3.315% 2.499% 3.805% 7.216% 2.499%Percent of past due DOSRI accounts to

total DOSRI accounts 0.000% 0.001% 0.067% 0.000% 0.001% 0.067%

The amounts of loans disclosed for related parties above differ with the amounts disclosed for keymanagement personnel since the composition of DOSRI is more expansive than that of keymanagement personnel.

BSP Circular No. 560 provides that the total outstanding loans, other credit accommodation andguarantees to each of the bank’s/quasi-bank’s subsidiaries and affiliates shall not exceed 10.00%of the net worth of the lending bank/quasi-bank, provided that the unsecured portion of whichshall not exceed 5.00% of such net worth. Further, the total outstanding loans, creditaccommodations and guarantees to all subsidiaries and affiliates shall not exceed 20.00% of thenet worth of the lending bank/quasi-bank; and the subsidiaries and affiliates of the lendingbank/quasi-bank are not related interest of any director, officer and/or stockholder of the lendinginstitution, except where such director, officer or stockholder sits in the BOD or is appointedofficer of such corporation as representative of the bank/quasi-bank. As of December 31, 2015and 2014, the Parent Company is in compliance with these requirements.

On May 12, 2009, BSP issued Circular No. 654 allowing a separate individual limit of twenty-five (25.00%) of the net worth of the lending bank/quasi-bank to loans of banks/quasi-banks totheir subsidiaries and affiliates engaged in energy and power generation. As of December 31,2015 and 2014, the Parent Company is in compliance with this requirement.

27. Trust Operations

Securities and other properties held by the Parent Company in fiduciary or agency capacity forclients and beneficiaries are not included in the accompanying statements of financial positionsince these are not assets of the Parent Company. The combined trust and managed funds of theTrust Department of the Parent Company amounted to P=6.74 billion and P=6.91 billion as ofDecember 31, 2015 and 2014, respectively.

Government securities with total face value of P=86.90 million and P=119.82 million as ofDecember 31, 2015 and 2014, respectively, are deposited with the BSP in compliance with currentbanking regulations related to the Parent Company’s trust functions. These government securitiesare recorded as part of investment securities at amortized cost as of December 31, 2015 and 2014.

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In accordance with BSP regulations, 10.00% of the profits realized by the Parent Company fromits trust operations are appropriated to surplus reserves. The yearly appropriation is required untilthe surplus reserves for trust operations amounts to 20.00% of the Parent Company’s authorizedcapital stock.

The Parent Company’s income from its trust operations amounted to P=17.01 million,P=20.37 million and P=29.02 million in 2015, 2014 and 2013, respectively.

28. Commitments and Contingent Liabilities

In the normal course of the Group’s operations, there are various outstanding commitments andcontingent liabilities which are not reflected in the accompanying financial statements. The Groupdoes not anticipate material unreserved losses as a result of these transactions.

The Group has several loan related suits and claims that remain unsettled. It is not practicable toestimate the potential financial impact of these contingencies. However, in the opinion ofmanagement, the suits and claims, if decided adversely, will not involve sums having a materialeffect on the Group’s financial statements.

The following is a summary of commitments and contingencies of the Parent Company at theirpeso-equivalent contractual amounts arising from off-balance sheet items:

2015 2014 2013Unused credit line - credit cards P=29,833,506 P=28,580,201 P=26,932,813Trust department accounts (Note 27) 6,740,656 6,914,400 7,819,270Treasurer/cashier/manager’s checks 4,205,581 2,424,865 4,867,487Unused commercial letters of credit 3,922,980 2,194,609 2,965,080Outstanding guarantees 2,514,371 1,149,045 957,760Inward bills for collection 832,312 240,947 930,110Outward bills for collection 831,419 111,494 37,132Spot exchange bought 47,060 1,703,870 1,711,332Late deposits/payments received 11,706 350,747 12,581Forward exchange sold 5,377 4,516,250 2,308,540Items held for safekeeping 792 756 676Unsold traveler’s check 28 27 27Others 1,032 2,097 27

29. Financial Performance

Earnings per share amounts were computed as follows:

2015 2014 2013a. Net income attributable to equity

holders of the Parent Company P=2,003,935 P=2,073,378 P=2,055,570b. Weighted average number of

outstanding common shares ofthe Parent, as previouslyreported 1,128,410 1,128,410

c. Basic and diluted EPS, aspreviously reported (a/b) 1.84 1.82

(Forward)

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2015 2014 2013d. Weighted average number of

outstanding common shares bythe Parent Company, includingeffect of stock rights issued in2015 (Note 21) 1,387,235 1,161,738 1,161,738

e. Basic and diluted EPS (a/d) P=1.44 P=1.78 P=1.77

The Group’s basic and diluted earnings per share are equal as there are no potential dilutive sharesoutstanding.

The following basic ratios measure the financial performance of the Group and of the ParentCompany:


Return on average equity 7.24% 10.17% 11.11% 5.95% 8.26% 10.65%Return on average assets 0.99% 1.28% 1.60% 0.82% 1.03% 1.59%Net interest margin on average earning

assets 8.00% 8.05% 8.43% 7.84% 6.93% 8.02%

30. Offsetting of Financial Assets and Liabilities

The amendments to PFRS 7 require the Group to disclose information about rights of offset andrelated arrangements (such as collateral posting requirements) for financial instruments subject toenforceable master netting agreements or similar arrangements. The effects of these arrangementsare disclosed in the succeeding tables.

Financial assets

December 31, 2015

Financial assetsrecognized at

end of reportingperiod by type

Gross carryingamounts (before

offsetting)

Gross amountsoffset in

accordance withthe offsetting

criteria

Net amountpresented instatements of

financialposition

[a-b]

Effect of remaining rights of set-off(including rights to set off financialcollateral) that do not meet PAS 32

offsetting criteria

Net exposure[c-d]

FinancialInstruments

Fair value offinancialcollateral

[a] [b] [c] [d] [e]Derivative assets (Note 5) P=167,491 P=– P=167,491 P=– P=– P=167,491Total P=167,491 P=– P=167,491 P=– P=– P=167,491

December 31, 2014

Financial assetsrecognized at



offsetting)



criteria


financialposition

[a-b]


offsetting criteria

Net exposure[c-d]

Financialinstruments


[a] [b] [c] [d] [e]Derivative assets (Note 5) P=110,668 P=– P=110,668 P=– P=– P=110,668Total P=110,668 P=– P=110,668 P=– P=– P=110,668

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Financial liabilities

December 31, 2015

Financial liabilitiesrecognized at



offsetting)



criteria


financialposition

[a-b]


offsetting criteria

Net exposure[c-d]



[a] [b] [c] [d] [e]Derivative liabilities (Note 5) P=183,755 P=– P=183,755 P=– P=– P=183,755Bills payable* (Note 16 ) 2,693,240 – 2,693,240 – 2,693,240 –Total P=2,876,995 P=– P=2,876,995 P=– P=2,693,240 P=183,755

December 31, 2014

Financial liabilitiesrecognized at



offsetting)



criteria


financialposition

[a-b]


offsetting criteria

Net exposure[c-d]



[a] [b] [c] [d] [e]Derivative liabilities (Note 5) P=101,290 P=– P=101,290 P=– P=– P=101,290Bills payable* (Note 16) 3,265,389 – 3,265,389 – 3,265,389 –Total P=3,366,679 P=– P=3,366,679 P=– P=3,265,389 P=101,290

* Included in bills and acceptances payable in the statements of financial position

The amounts disclosed in column (d) include those rights to set-off amounts that are onlyenforceable and exercisable in the event of default, insolvency or bankruptcy. This includesamounts related to financial collateral both received and pledged, whether cash or non-cashcollateral, excluding the extent of over-collateralization.

31. Notes to Statement of Cash Flows

Transfers from loans and receivables to investment properties as a result of foreclosures amountedto P=72.07 million, P=76.71 million and P=249.77 million in 2015, 2014 and 2013 respectively, forthe Group, and P=72.07 million, P=76.29 million and P=125.58 million in 2015, 2014 and 2013respectively, for the Parent Company. Amounts mentioned are exclusive of gain (loss) on assetforeclosure and dacion transactions amounting to (P=67.12 million), P=19.42 million andP=93.78 million in 2015, 2014 and 2013 respectively, for the Group, and (P=67.12 million),P=19.05 million and P=90.55 million in 2015, 2014 and 2013, respectively, for the Parent Company.

In 2015, the Parent Company invested P=500.00 million in EWAL, a joint venture with Ageas,which shall be primarily engaged in life insurance business. Also in 2015, the Parent Companyinvested P=30.00 million in EWIB.

In 2014, the Parent Company sold a land with a carrying value of P=169.13 million to FAI. Theselling price of P=433.26 million is payable annually for 5 years.

In 2013, the Parent Company applied deposits for future stock subscription amounting toP=700.00 million and P=120.00 million as payments for the acquisitions of 441,000,000 commonshares of GBI and 46,000,000 common shares of EWRB, respectively.

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32. Events Subsequent to Reporting Period

On January 4, 2016, the Parent Company exercised its call option on the P=1.50 billion 2021Notes. The redemption was approved by the Parent Company’s BOD on August 27, 2015 and bythe BSP on October 8, 2015. The call option amount was the sum of the face value of the Notes,plus accrued interest amounting to P=1.56 billion, covering the 11th interest period fromJuly 2, 2015 to January 3, 2016 at the interest rate of 7.50%, as of but excluding the call optiondate.

33. Supplementary Information Required Under Revenue Regulations 15-2010

Supplementary Information under RR No. 15-2010On November 25, 2010, the BIR issued RR No. 15-2010, requiring the inclusion of informationon various taxes paid and accrued during the taxable year in the notes to the financial statements.

The Parent Company reported and/or paid the following types of taxes for the year endedDecember 31, 2015:

Gross Receipts Tax (GRT)The Parent Company is subject to GRT on its gross income from Philippine sources. GRT isimposed on interest, commissions and discounts from lending activities at 5.00% or 1.00%,depending on the remaining maturities of instruments from which such receipts are derived, and at7.00% on non-lending fees and commissions, trading and foreign exchange gains and other itemsconstituting gross income.

Details of the Parent Company's income and GRT accounts in 2015 are as follows:

Gross ReceiptsGross

Receipts TaxIncome derived from lending activities P=13,492,689 P=597,725Other income 1,146,790 80,275

P=14,639,479 P=678,000

Exclusive of the above GRT schedule, the Parent Company charged GRT to its clients amountingto P=15.66 million in 2015.

Other Taxes and LicensesFor the year ended December 31, 2015, other taxes and licenses included in ‘Taxes and licenses’consist of:

Documentary stamps taxes P=275,084Local taxes 24,807Fringe benefit taxes 17,476Others 23,272

P=340,639

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Withholding TaxesDetails of withholding taxes remitted and balances as of December 31, 2015 follow:

TotalRemittances Balance

Withholding taxes on compensation and benefits P=458,912 P=38,556Expanded withholding taxes 134,140 15,664Final withholding taxes 217,424 51,799

P=810,476 P=106,019

The Parent Company has no outstanding assessments from the BIR as of December 31, 2015.

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EAST WEST BANKING CORPORATION AND SUBSIDIARIESINDEX TO THE FINANCIAL STATEMENTS AND SUPPLEMENTARYSCHEDULESAS OF DECEMBER 31, 2015

Annex I: Reconciliation of retained earnings available for dividend declaration

Annex II: Schedule of financial ratios

Annex III: Conglomerate map

Annex IV: List of all Philippine Financial Reporting Standards

Annex V: Supplementary Schedules required under SRC Rule 68, As Amended

*SGVFS015899*

ANNEX IEAST WEST BANKING CORPORATIONRECONCILIATION OF RETAINED EARNINGS AVAILABLE FORDIVIDEND DECLARATIONAS OF DECEMBER 31, 2015

Presented is the reconciliation of retained earnings available for dividend declaration of the ParentCompany as of December 31, 2015 with amendments based on SEC Bulletin No. 14, Presentation ofReconciliation of Retained Earnings (amounts in thousands):

Unappropriated retained earnings available for dividenddeclaration, beginning P=8,733,639

Net income per audited financial statements P=1,611,360Less:

Unrealized foreign exchange gain – net (134,549)Deferred tax assets recognized through profit or loss (336,995)

Add:Loss on fair value adjustment of investment properties 46,983Unrealized gain on trading securities 90,749 1,277,548

Net income actually earned/realized during the year 10,011,187

Less appropriation during the period 1,701

Total unappropriated retained earnings available fordividend declaration, ending P=10,009,486

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ANNEX IIEAST WEST BANKING CORPORATION AND SUBSIDIARIESSCHEDULE OF FINANCIAL RATIOSAS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

Below are the financial ratios that are relevant to the Group for the year ended December 31, 2015 and2014:

2015 2014Current ratio(1) 71.93% 86.05%Solvency ratio(2) 115.59% 112.86%Debt-to-equity(3) 6.42 7.78Asset-to-equity(4) 7.42 8.78Interest rate coverage ratio(5) 217.49% 260.70%Profitability ratio

Return on asset (6) 0.99% 1.28%Return on equity (7) 7.24% 10.17%Net profit margin(8) 18.23% 22.61%Gross profit margin(9) 84.48% 85.93%

1 Current assets divided by current liabilities2 Total assets divided by total liabilities3 Total liabilities divided by total equity4 Total assets divided by total equity5 Income before interest and taxes divided by interest expense6. Net income divided by average total assets. Average total assets is based on average monthly balances7. Net income attributable to equity holders of the Parent Company divided by average total equity attributable to equity holders of the

Parent Company. Average total equity is based on average monthly balances8 Income before income tax over total interest income9 Net interest income over total interest income

*SGVFS010664*

ANNEX IIIEAST WEST BANKING CORPORATION AND SUBSIDIARIESCONGLOMERATE MAPAS OF DECEMBER 31, 2015

Below is a map showing the relationship between and among the Group and its ultimate parent company, subsidiaries, and affiliate as ofDecember 31, 2015:

*SGVFS015899*

ANNEX IVEAST WEST BANKING CORPORATIONLIST OF ALL PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS)AS OF DECEMBER 31, 2015

Below is the list of all Philippine Financial Reporting Standards (PFRS), Philippine AccountingStandards (PAS) and Philippine Interpretations of International Financial Reporting InterpretationsCommittee (IFRIC) as of December 31, 2015:

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31, 2015

Adopted NotAdopted

NotApplicable

Framework for the Preparation and Presentation of FinancialStatementsConceptual Framework Phase A: Objectives and qualitativecharacteristics

3

3

PFRSs Practice Statement Management Commentary 3

Philippine Financial Reporting StandardsPFRS 1(Revised)

First-time Adoption of Philippine Financial ReportingStandards

3

Amendments to PFRS 1 and PAS 27: Cost of anInvestment in a Subsidiary, Jointly Controlled Entity orAssociate

3

Amendments to PFRS 1: Additional Exemptions for First-time Adopters

3

Amendment to PFRS 1: Limited Exemption fromComparative PFRS 7 Disclosures for First-time Adopters

3

Amendments to PFRS 1: Severe Hyperinflation andRemoval of Fixed Date for First-time Adopters

3

Amendments to PFRS 1: Government Loans 3

PFRS 2 Share-based Payment 3

Amendments to PFRS 2: Vesting Conditions andCancellations

3

Amendments to PFRS 2: Group Cash-settled Share-basedPayment Transactions

3

PFRS 3(Revised)

Business Combinations 3

PFRS 4 Insurance Contracts 3

Amendments to PAS 39 and PFRS 4: Financial GuaranteeContracts

3

PFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations

3

PFRS 6 Exploration for and Evaluation of Mineral Resources 3

PFRS 7 Financial Instruments: Disclosures 3

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

3

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets - Effective Date and Transition

3

Amendments to PFRS 7: Improving Disclosures aboutFinancial Instruments

3

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Adopted NotAdopted

NotApplicable

Amendments to PFRS 7: Disclosures - Transfers ofFinancial Assets

3

Amendments to PFRS 7: Disclosures - OffsettingFinancial Assets and Financial Liabilities

3

Amendments to PFRS 7: Mandatory Effective Date ofPFRS 9 and Transition Disclosures

3

PFRS 8 Operating Segments 3

PFRS 9 Financial Instruments (2009 version)* 3

Amendments to PFRS 9: Mandatory Effective Date ofPFRS 9 and Transition Disclosures

3

Financial Instruments (2013 version) 3

Financial Instruments (2014 version) 3

PFRS 10 Consolidated Financial Statements 3

Amendments to PFRS 10, PFRS12 and PAS27:Investment Entities

3

Amendments to PFRS 10 and PAS 28: Sale orContribution of Assets between an Investor and itsAssociate or Joint Venture

3

PFRS 11(Amended)

Joint Arrangements 3

Amendments to PFRS 11: Accounting for Acquisitions ofInterests in Joint Operations

3

PFRS 12 Disclosure of Interests in Other Entities 3


3

PFRS 13 Fair Value Measurement 3

PFRS 14 Regulatory Deferral Accounts 3

IFRS 15 Revenue from Contracts with Customers 3

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements 3

Amendment to PAS 1: Capital Disclosures 3

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

3

Amendments to PAS 1: Presentation of Items of OtherComprehensive Income

3

PAS 2 Inventories 3

PAS 7 Statement of Cash Flows 3

PAS 8 Accounting Policies, Changes in Accounting Estimatesand Errors

3

PAS 10 Events after the Reporting Period 3

PAS 11 Construction Contracts 3

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Adopted NotAdopted

NotApplicable

PAS 12 Income Taxes 3

Amendment to PAS 12 - Deferred Tax: Recovery ofUnderlying Assets

3

PAS 16 Property, Plant and Equipment 3

Amendments to PAS 16 and PAS 38: Clarification ofAcceptable Methods of Depreciation and Amortization

3

Amendments to PAS 16 and PAS 41: Bearer Plants 3

PAS 17 Leases 3

PAS 18 Revenue 3

PAS 19(Amended)

Employee Benefits 3

Amendments to PAS 19: Actuarial Gains and Losses,Group Plans and Disclosures

3

Amendments to PAS 19: Defined Benefit Plans:Employee Contributions

3

PAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance

3

PAS 21 The Effects of Changes in Foreign Exchange Rates 3

Amendment: Net Investment in a Foreign Operation 3

PAS 23(Revised)

Borrowing Costs 3

PAS 24(Revised)

Related Party Disclosures 3

PAS 26 Accounting and Reporting by Retirement Benefit Plans 3

PAS 27(Amended)

Separate Financial Statements 3


3

Amendments to PAS 27: Equity Method in SeparateFinancial Statements

3

PAS 28(Amended)

Investments in Associates and Joint Ventures 3

PAS 29 Financial Reporting in Hyperinflationary Economies 3

PAS 31 Interests in Joint Ventures 3

PAS 32 Financial Instruments: Disclosure and Presentation 3

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

3

Amendment to PAS 32: Classification of Rights Issues 3

Amendments to PAS 32: Offsetting Financial Assets andFinancial Liabilities

3

PAS 33 Earnings per Share 3

PAS 34 Interim Financial Reporting 3

Amendment to PAS 34: Interim Financial Reporting andSegment Information for Total Assets and Liabilities

3

- 4 -

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Adopted NotAdopted

NotApplicable

PAS 36 Impairment of Assets 3

Amendments to PAS 36: Recoverable AmountDisclosures for Non-Financial Assets

3

PAS 37 Provisions, Contingent Liabilities and Contingent Assets 3

PAS 38 Intangible Assets 3

Amendments to PAS 16 and PAS 38: Clarification ofAcceptable Methods of Depreciation and Amortization

3

PAS 39 Financial Instruments: Recognition and Measurement 3

Amendments to PAS 39: Transition and InitialRecognition of Financial Assets and Financial Liabilities

3

Amendments to PAS 39: Cash Flow Hedge Accounting ofForecast Intragroup Transactions

3

Amendments to PAS 39: The Fair Value Option 3

Amendments to PAS 39 and PFRS 4: Financial GuaranteeContracts

3

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

3

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets – Effective Date and Transition

3

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

3

Amendment to PAS 39: Eligible Hedged Items 3

Amendment to PAS 39: Novation of Derivatives andContinuation of Hedge Accounting

3

PAS 40 Investment Property 3

Amendment to PAS 40: Investment Property 3

PAS 41 Agriculture 3

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration andSimilar Liabilities

3

IFRIC 2 Members’ Share in Co-operative Entities and SimilarInstruments

3

IFRIC 4 Determining Whether an Arrangement Contains a Lease 3

IFRIC 5 Rights to Interests arising from Decommissioning,Restoration and Environmental Rehabilitation Funds

3

IFRIC 6 Liabilities arising from Participating in a SpecificMarket - Waste Electrical and Electronic Equipment

3

IFRIC 7 Applying the Restatement Approach under PAS 29Financial Reporting in Hyperinflationary Economies

3

IFRIC 8 Scope of PFRS 2 3

IFRIC 9 Reassessment of Embedded Derivatives 3

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

3

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Adopted NotAdopted

NotApplicable

IFRIC 10 Interim Financial Reporting and Impairment 3

IFRIC 11 PFRS 2 - Group and Treasury Share Transactions 3

IFRIC 12 Service Concession Arrangements 3

IFRIC 13 Customer Loyalty Programmes 3

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction

3

Amendments to Philippine Interpretations IFRIC - 14,Prepayments of a Minimum Funding Requirement

3

IFRIC 15 Agreements for the Construction of Real Estate 3

IFRIC 16 Hedges of a Net Investment in a Foreign Operation 3

IFRIC 17 Distributions of Non-cash Assets to Owners 3

IFRIC 18 Transfers of Assets from Customers 3

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments

3

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 3

IFRIC 21 Levies 3

SIC-7 Introduction of the Euro 3

SIC-10 Government Assistance - No Specific Relation toOperating Activities

3

SIC-12 Consolidation - Special Purpose Entities 3

SIC-13 Amendment to SIC - 12: Scope of SIC 12 3

Jointly Controlled Entities - Non-Monetary Contributionsby Venturers

3

SIC-15 Operating Leases - Incentives 3

SIC-25 Income Taxes - Changes in the Tax Status of an Entity orits Shareholders

3

SIC-27 Evaluating the Substance of Transactions Involving theLegal Form of a Lease

3

SIC-29 Service Concession Arrangements: Disclosures. 3

SIC-31 Revenue - Barter Transactions Involving AdvertisingServices

3

SIC-32 Intangible Assets - Web Site Costs 3

*This standard has been early adopted by the Bank.

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ANNEX VEAST WEST BANKING CORPORATION AND SUBSIDIARIESSUPPLEMENTARY SCHEDULES REQUIRED UNDER SRC RULE 68, ASAMENDEDAS OF DECEMBER 31, 2015

Below are the additional information and schedules required by SRC Rule 68, as amended that arerelevant to the Group. This information is presented for purposes of filing with the SEC and is notrequired part of the basic financial statements.

Schedule A. Financial Assets

Below is the detailed schedule of the Group’s financial assets as of December 31, 2015 (amounts inthousands):

Name of issuing entity and association of each issue

Number ofshares/principal

amount ofbonds and notes

Amount shownin the statement

of financial position

Value basedon market

quotation atend of year

Incomereceived and

accruedFinancial assets at Fair Value through Profit or Loss

Debt securitiesBureau of Treasury 3,083,380 P=3,123,293 P=3,123,293 P=74,865Security Bank Corporation 1,766,256 1,807,657 1,807,657 37,123SM Investment Corp 1,386,999 1,420,444 1,420,444 22,790Republic of Indonesia 1,035,320 1,022,168 1,022,168 12,138Rizal Commercial Banking Corp 915,646 934,950 934,950 21,457PSALM 609,286 753,058 753,058 4,803Perusahaan Gas Negara 602,839 607,358 607,358 38Pertamina (Pertij) 438,129 414,398 414,398 –Bharat Petroleum 183,534 189,848 189,848 –FPT Finance Limited 141,745 155,174 155,174 4,047Development Bank of the Philippines 20,330 22,676 22,676 6,278Republic of the Philippines 16,189 20,514 20,514 406Banco de Oro 4,706 4,731 4,731 164

ROP warrantsCitibank Manila 78 32,118 32,118 –Credit Suisse 43 21,971 21,971 –

Equity securitiesLGU Guarantee Corporation 50 10,213 10,213 94Victorias Millings Corporation 50 235 235 –

P=10,540,806 P=10,540,806 P=184,203

Name of issuing entity and association of each issue

Number ofshares/principal

amount ofbonds and notes

Amount shownin the statement

of financial position

Value basedon market

quotation atend of year

Incomereceived and

accruedInvestment Securities at Amortized Cost:

Republic of the Philippines 681,983 P=685,881 P=757,995 P=29,692National Power Corp. 3,046,194 3,115,732 3,179,221 249,354Bank Of China 572,168 571,417 568,725 15,239Power Sector Asset and Liabilities Management

(PSALM) 50,000 51,282 52,873 2,956Philippine Power Trust I 146,962 144,928 145,492 10,361Republic of Indonesia 47,060 48,658 48,853 1,965

4,617,898 4,753,159 309,567Financial Assets at Fair Value Through Other Comprehensive

Income:Roxas Holdings, Inc. 914 shares 4,379 4,379 –Aboitiz Transport System Corporation 242 shares 1,662 1,662 –Asiatrust Development Bank 18 shares – – –Empire East Land Holdings, Inc. 3 shares 214 214 –

6,255 6,255 –Total P=15,164,959 P=15,300,220 P=493,770

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Schedule B. Amounts receivable from directors, officers, employees, related partiesand principal stockholders (other than related parties)

Below is the schedule of advances to employees of the Group with balances above P=100,000 as ofDecember 31, 2015 (amounts in thousands):

Balance atbeginning of

the yearAdditions Collections Write off Current Not current Balance at

end of year

Abad, Virginia O. 223 – (45) – 53 125 178Abalon, Edgar Allan C. 296 – (296) – – – –Abella, Maria Melanie L. 288 – (53) – 61 174 235Abogado, Khristine Paula G. – 233 – – 35 198 233Abrenica, Russel A. – 263 – – 39 224 263Abreu, Raoul Antonio J. 118 – (118) – – – –Absalon, Erwin C. – 257 – – 72 185 257Abulencia, Maria Veronica L. 230 – (44) – 54 132 186Adamos, Jane W. – 116 – – 56 60 116Adlawan, Nina Paz M. – 278 – – 62 216 278Afable, Ruby Charo T. 240 – (43) – 52 145 197Agcaoili, Ana Jean E. 108 – (108) – – – –Agdeppa, Jerwyn Earl F. – 206 – – 31 175 206Agencia, Calin M. – 224 – – 46 178 224Aguilar, Francis Norman T. – 291 – – 60 231 291Aguilar, Vincent Aldwyn E. – 217 – – 31 186 217Aguiluz, James Bradley O. – 257 – – 40 217 257Alcala, Mary Jane D. 230 – (53) – 64 113 177Alcasid, Maria Laarni D. – 106 – – 80 26 106Alcazar, Jose Gerardo D. 277 – (158) – 65 54 119Alcontin II, Jose Pedro N. – 358 – – 134 224 358 Salvador, Francis Alexandre A. 177 – (177) – – – –Alonde, Rizel A. 296 – (156) – 56 84 140Alvarado, Jocelyn P. – 236 – – 35 201 236Amora, Michael Angelo B. 226 – (44) – 54 128 182Amorante, Dancel B. – 233 – – 35 198 233Ancheta, William D. – 206 – – 31 175 206Andal, Reginald R. 159 – (46) – 54 59 113Andrade, Ian Daleo R. 190 132 – – 242 80 322Ang, Allyson Gay G. – 302 – – 74 228 302Ang, Johnny A. – 277 – – 61 216 277Ang, Lester Kenneth T. – 227 – – 35 192 227Miranda, Angeli Rose H. – 260 – – 40 220 260Angga, Emiliana A. 383 – (191) – 50 142 192Anggala, Angela C. – 218 – – 46 172 218Anima, April Angelique L. – 240 – – 35 205 240Anonuevo, Janus C. 221 – (51) – 60 110 170Antonio, Mary Grace M. 146 145 – – 60 231 291Apaliso, Victor F. Jr. 322 – (322) – – – –Apuli, Ranulfo T. Jr. 142 – (142) – – – –Apusaga, Delbe John E. – 233 – – 35 198 233Aquino, Grace V. 121 – (121) – – – –Aquino, Lorna M. 250 – (42) – 52 156 208Aquino, Rachell G. – 138 – – 76 62 138Araojo, Maynardo L. – 270 – – 39 231 270Arcilla, Vina A. – 236 – – 51 185 236Arejola, Cristine P. – 323 – – 68 255 323Arevalo, Juan Christian D. – 350 – – 70 280 350Arevalo, Ma Fatima V. – 259 – – 39 220 259Arevalo, Perla R. 322 – (103) – 120 99 219Arintok, Ariann O. 134 – (134) – – – –Arnaldo, Jennifer A. 125 142 – – 39 228 267Asuncion, Mary Gay T. 188 – (48) – 56 84 140Asuncion, Rodolfo V. 247 – (52) – 62 133 195Atienza, Alan E. 622 – (622) – – – –Atienza, Jason Anthony V. 210 – (64) – 73 73 146Auza, Jonathan L. 251 – (251) – – – –Bajo, Wilbert Aldrin R. 620 – (23) – 48 549 597Balatbat, Maria Jocelyn B. 190 – (53) – 61 76 137

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*SGVFS015899*



end of year

Baldoman, Rogelio A. 111 – (111) – – – –Bales, Joel C. 137 – (137) – – – –Balmelero, Kathleen Joi E. – 252 – – 38 214 252Banal, Aerol Paul B. 114 – (114) – – – –Banal, Conrad Anthony. – 191 – – 85 106 191Bandol, Jessie C. 211 – (71) – 80 60 140Bandong, Angela Juvy C. – 720 – – 298 422 720Banez, Pedro Catalino P. 189 – (47) – 55 87 142Baro, Rexie G. 133 86 – – 31 188 219Bartolay, Joy J. – 390 – – 146 244 390Bartolome, Anna Leah I. – 263 – – 39 224 263Basilio, Jeziel P. 126 – (126) – – – –Basilio, Pelagio III G. 117 – (117) – – – –Bauson, Marissa A. 559 – (243) – 122 194 316Bautista , Jasmine A. – 136 – – 109 27 136Bautista, Alexander Glen E. 447 – (135) – 208 104 312Bautista, Ericson H. 310 – (199) – 63 48 111Bautista, John Rey A. 114 – (114) – – – –Bautista, Maria Regina J. 173 – (173) – – – –Bautista, Meybel L. 261 – (61) – 73 127 200Bayani, Ma Teresa L. 325 232 – – 334 223 557Bayani, Raymond D. – 180 – – 26 154 180Bayot, Emilia B. 101 – (101) – – – –Bechayda, Persiveranda C. – 101 – – 42 59 101Belleza, Ma Celeste C. – 226 – – 35 191 226Belocura, Ryan Neil B. – 174 – – 46 128 174Beltran, Paolo Cecilio B. – 236 – – 35 201 236Benitez, Angelico Israel A. – 283 – – 62 221 283Bermoy, Luisito S. – 235 – – 35 200 235Bermudez, Donnabell C. – 224 – – 35 189 224Bermudez, Marilou A. – 295 – – 161 134 295Bernabe, Imelda F. 174 – (46) – 53 75 128Bernabe, Richie Luciano. – 267 – – 39 228 267Billedo, Ma Christina L. 191 – (191) – – – –Billones, Christian Rey B. – 318 – – 69 249 318Biscocho, Gay A. 197 – (47) – 55 95 150Bisera, Phillip Lawrence L. – 172 – – 80 92 172Bombais, Rosemarie C. 217 – (54) – 65 98 163Bondoc, Priscilla F. 247 – (43) – 53 151 204Borja, Grace M. 169 – (68) – 76 25 101Borres, Kristoffer Alexis N. 168 – (59) – 69 40 109Borromeo, Ray Karlo R. 188 – (50) – 55 83 138Brusas, Connie Jo B. – 250 – – 52 198 250Buco, Jeannie D. – 157 – – 61 96 157Buenagua, Sharon B. – 228 – – 33 195 228Buenaventura, Imelda M. 188 – (31) – 41 116 157Buendia, Angelica S. 316 187 – – 355 148 503Tolentino, Rhea B. – 408 – – 87 321 408Cabahug, Janet C. 111 – (111) – – – –Cabanas, Trudy Jean D. – 211 – – 52 159 211Caberoy, Ginalyn D. 193 – (47) – 56 90 146Cabuhat, Crisanta A. – 240 – – 34 206 240Cabusao, Ma Jerreza D. 247 – (52) – 62 133 195Cadano, Johoanna R. 261 161 – – 203 219 422Cairo, Abigail Joan U. 333 – (72) – 61 200 261Calaguian, Gerald Michael A. – 437 – – 90 347 437Calalo, Marigail B. – 100 – – 80 20 100Calayag, Eric E. – 232 – – 35 197 232Caldozo, Jonathan H. – 159 – – 68 91 159Calixto, Tristan Jorel R. 194 – (33) – 40 121 161Calma, Mary Grace E. – 233 – – 49 184 233Camaya, Marc Ian M. – 229 – – 35 194 229Camba, Martin Marlo C. – 202 – – 47 155 202Camilo, Virgilio L. 447 – (198) – 214 35 249Campanera, Ma Riezl R. 193 – (38) – 48 107 155

- 3 -

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end of year

Canedo, Noemi S. 134 – (134) – – – –Canillas, Emmanuel R. – – – – – – –Capili, Maria Aileen M. 209 130 – – 140 199 339Capino, Joachim T. – 260 – – 76 184 260Capobianco, Anna Marie F. 198 – (63) – 70 65 135Cariaga, Catherine M. 372 – (102) – 130 140 270Cariaga, Eric V. 138 – (138) – – – –Carlos, Violeta A. 211 – (55) – 82 74 156Caro, Rowena R. 181 – (48) – 55 78 133Casaclang, Maribel P. – 226 – – 34 192 226Casambros, Nympha D. 221 – (44) – 54 123 177Casires, Odelon H. – 228 – – 34 194 228Castillo, Honey Lyn A. – 215 – – 31 184 215Castillo, Mara Siena L. 130 – (4) – 49 77 126Castro, Angelene Elvira L. 215 – (45) – 54 116 170Castro, Erlinda R. – 404 – – 151 253 404Castro, John Philip M. 219 – (219) – – – –Castro, Ma Francesca H. 273 – (50) – 61 162 223Castro, Ulysses L. – 215 – – 53 162 215Catane, Roberto Paul D. 174 – (49) – 58 67 125Catapang, Ritchie C. 233 – (44) – 54 135 189Caviles, Kharla Joy A. – 235 – – 35 200 235Cayabyab, Pamela Shiela M. 211 – (45) – 55 111 166Cayubit Jr, Serafin A. – 219 – – 49 170 219Celis, Rosevie H. – 490 – – 184 306 490Ceniza, Minnie P. 126 – (126) – – – –Chan, Mary Jane C. 169 – (169) – – – –Chavez, Rea L. – 206 – – 47 159 206Cheng, Jolly Allan O. 166 – (50) – 56 60 116Ching, Alan John P. 222 – (222) – – – –Ching, Jean Margarette L. 178 – (58) – 65 55 120Ching, Zulaika Jane D. 219 – (41) – 51 127 178Choa, Rachel G. – 234 – – 35 199 234Chua, Catherine Ann H. 219 – (219) – – – –Chua, Henry F. – 236 – – 52 184 236Chua, Jenice D. 479 – (129) – 200 150 350Chua, Paulina L. 153 – (153) – – – –Chua, Tan Guat Dolores L. 222 – (222) – – – –Orcine, III William Cipriano D. 219 – (219) – – – –Clavecillas, Anthony A. – 420 – – 84 336 420Claveria, Leah P. 100 – (100) – – – –Clemente, Cesar Christian B. – 240 – – 35 205 240Cleofe, Michael Herbert A. – 229 – – 35 194 229Clutario, Ma Luisa T. 190 – (66) – 78 46 124Co, Aris G. 296 – (64) – 77 155 232Co, Renato D. 225 – (41) – 50 134 184Co, Ruth G. 289 – (58) – 71 160 231Cobarrubias, Malcolm A. 146 – (146) – – – –Cobarrubias, Maria Cristina S. 208 102 – – 124 186 310Collantes, Jose Maria P. – 235 – – 34 201 235Constantino, Carlo E. – 296 – – 60 236 296Contreras, Yolanda G. 178 – (49) – 55 74 129Cordero, Patricia C. – 215 – – 53 162 215Coronado, Raffy D. – 226 – – 33 193 226Corpuz, Denise S. 193 – (47) – 56 90 146Cotabato Sugar Central

Company Inc. 400,000 – – – 400,000 – 400,000Creus, Corazon T. – 247 – – 61 186 247Cruz, Anne Rachelle R. 239 – (53) – 64 122 186Cruz, Christian C. 208 – (46) – 56 106 162Cruz, Flordeliza M. 129 – (129) – – – –Cruz, Florence G. 154 – (51) – 59 44 103Cruz, Johann Arthur D. – 162 – – 23 139 162Cruz, Napoleon S Jr. 401 – (401) – – – –Cruz, Rowena E. – 268 – – 39 229 268

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*SGVFS015899*



end of year

Cua, Randy Torlao. – 225 – – 35 190 225Cuartero, Rebecca C. – 278 – – 61 217 278Cuaton, Ursulo L Jr II. 411 – (411) – – – –Cueno, Neslie B. – 236 – – 35 201 236Cueto, Emiliano B. – 300 – – 60 240 300Cueto, Rodel G. – 266 – – 58 208 266Dagoy, Divine Grace F. 172 – (172) – – – –Daguio, Ricsan M. – 232 – – 52 180 232Dalistan, Ma Victoria M. – 252 – – 59 193 252Danganan, Florence B. – 101 – – 42 59 101Dantes, Consuelo V. – 593 – – 245 348 593Datuin, Marie Kris C. – 228 – – 35 193 228Davao Sugar Central Co Inc. 200,000 – (200,000) – – – –David, Arnold T. – 181 – – 64 117 181De Gracia, Luis A. – 236 – – 35 201 236De Guzman , Pricilla G. 197 – (197) – – – –De Guzman , Rachelle D. 138 – (138) – – – –De Guzman, Ronald G. – 111 – – 42 69 111De Jesus, Vizhamel C. – 255 – – 40 215 255De La Pena, Allan M. – 222 – – 35 187 222De Leon , Maribeth N. 176 59 – – 157 78 235De Leon, Anna Liza D. 315 126 – – 230 211 441De Leon, Francis Honesto A. – 168 – – 49 119 168De Leon, Ma Katherine S. – 105 – – 42 63 105De Luna , Baltazar Randy B. 291 – (171) – 69 51 120De Luna, Ren-Jennieca S. – 225 – – 35 190 225De Mesa, Michael Anthony C. – 437 – – 90 347 437De Peralta , Margareth M. 388 – (388) – – – –De Peralta, Margareth M. – 173 – – 63 110 173De Silva, Ana Marie A. – 232 – – 35 197 232De Vera, Ray Donald V. – 238 – – 34 204 238Del Rosario , Raquel Y. 174 – (174) – – – –Del Rosario, Raquel Y. – 125 – – 58 67 125Dela Cruz , Adonis S. 393 – (216) – 55 122 177Dela Cruz , Glennmore G. 231 – (63) – 72 96 168Dela Cruz , Marinella A. 173 – (48) – 58 67 125Dela Cruz, Christian A. – 193 – – 29 164 193Dela Cruz, Efren O Jr. 550 – (187) – 218 145 363Dela Cruz, Gilbert S. – 240 – – 35 205 240Dela Cruz, Jesucristina R. – 182 – – 45 137 182Dela Cruz, Melanie B. – 219 – – 52 167 219Dela Rosa, Eric John C. – 308 – – 70 238 308Delgado, Ann Michelle R. – 208 – – 45 163 208Delos Santos, Nova B. 116 – (116) – – – –Deocampo, Joanne B. 138 – (138) – – – –Depusoy, Cherry L. – 270 – – 39 231 270Detubio, Carmen Q. 246 124 – – 139 231 370Deuna Jr, Rodolfo S. – 283 – – 61 222 283Dimaala, Arnold C. – 1,397 – – 578 819 1,397Dimla, Eduardo S Jr. 1,590 – (1,590) – – – –Dmci, Project Developers Inc. 231,054 – (231,054) – – – –Dogillo, Shella A. 120 – (120) – – – –Dolina, Maria Luisa M. 178 – (49) – 55 74 129Dolor, Babylyn I. – 213 – – 34 179 213Dominic L. 261 – (261) – – – –Don, Jennifer A. – 302 – – 65 237 302Ducado, Mary Nell A. 213 – (43) – 52 118 170Dumalaog, Rosemarie R. 183 – (183) – – – –Dumlao, Philip C. 244 – (43) – 52 149 201Duran, Ana Maria Josefina R. – 292 – – 65 227 292Dytuco, Dona Marie R. 223 – (45) – 55 123 178Ebora, Leovelino D. 200 – (46) – 56 98 154Lumbres, Ms. Susana Editha G. 150 – (150) – – – –Elinzano, Levi A. – 211 – – 53 158 211Ellarma, Ma Katherine V. – 212 – – 33 179 212

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*SGVFS015899*



end of year

Enanosa, Carlo I. 206 – (206) – – – –Encarnacion, Maria Esmeralda E. 219 – (45) – 53 121 174Engracia, Rudyard A. – 233 – – 35 198 233Episcope, Henry C. 178 74 – – 216 36 252Erana, Maria Gloria Dulce F. 166 – (56) – 63 47 110Erfe, Raymond L. – 235 – – 51 184 235Escalicas, Ma Isabel G. 208 – (208) – – – –Escoses, Ermelyn D. 205 – (65) – 77 63 140Esguerra, Arnold B. 181 – (181) – – – –Esparagoza, Mariel Andrea P. – 296 – – 60 236 296Espina, Joseph Andrew P. – 234 – – 35 199 234Espinosa, Emmanuel S. – 176 – – 64 112 176Estacio, Geronimo D. – 260 – – 39 221 260Eusores, Willem P. – 232 – – 52 180 232Evangelista, Khristopher A. – 236 – – 35 201 236Fabila, Enrico S. – 225 – – 35 190 225Faigal, Noel B. – 317 – – 46 271 317Fajardo, Annaliza O. 124 168 – – 60 232 292Faustino, Michael M. – 269 – – 59 210 269FDC Misamis Power Corporation. 1,478,302 2,955,570 – – 361,949 4,071,923 4,433,872FDC Utilities, Inc. 602 – (203) – 218 181 399Fernandez, Bruno S. – 278 – – 62 216 278Fernandez, Jacqueline S. 10,782 – (1,486) – 8,581 715 9,296Fernandez, Lyan Mae Ritz S. – 234 – – 35 199 234Fernandez, Maria Deborah B. – 291 – – 60 231 291Fernandez, Roberto N. – 762 – – 538 224 762Ferrer, Imelda C. – 115 – – 63 52 115Ferriols, Mary Jane G. – 215 – – 46 169 215Fiesta, David G. – 137 – – 48 89 137Figueras, Maurice Albert II R. – 353 – – 52 301 353Filarchipelago, Hospitality Inc. 253 – (253) – – – –Filinvest, Development Corporation. 5,621,850 – – – 1,322,788 4,299,062 5,621,850Filomeno, Gay S. 230 117 – – 160 187 347Florendo, Portia Gilda D. 168 206 – – 214 160 374Flores, Elamor C. – 149 – – 112 37 149Flores, Gerald H. 252 253 – – 184 321 505Flores, Russell A. – 215 – – 33 182 215Foja, Jacobo G. 381 – (229) – 91 61 152Francia Jr, Odelon T. – 1,372 – – 433 939 1,372Francia, Odelon T Jr. 1,488 – (1,488) – – – –Francisco, Anacleto D. – 232 – – 35 197 232Franco, Ma Christa Feumeta C. – 271 – – 112 159 271Gaba, Glenda S. 247 161 – – 144 264 408Gabrillo, Rodrigo Jr P. – 255 – – 39 216 255Gacasan, Rosalina C. 207 – (45) – 55 107 162Gaceta, Joe Vincent A. – 194 – – 39 155 194Galicia, Olivia S. 130 – (130) – – – –Galita, Gina Marie C. 600 – (276) – 299 25 324Garcia, Joel B. – 261 – – 101 160 261Garcia, Jonathan P. – 322 – – 73 249 322Gasco, Brian Lesly Hegel S. 116 – (116) – – – –Gatmaitan, Romel B. – 318 – – 69 249 318Gattoc, Jake D. – 255 – – 40 215 255Geronimo, John Gil M. 238 – (68) – 70 100 170Geronimo, Leonardo III J. – 178 – – 44 134 178Gloez, Arthur S Jr. 129 – (129) – – – –Go, Irene Q. 180 – (60) – 63 57 120Gob, Melanie C. – 238 – – 34 204 238Gomez, Maria Cristina M. – 323 – – 69 254 323Gomez, Ramoncito M. – 265 – – 61 204 265Gonzales, Edylene D. 215 116 – – 117 214 331Gonzales, Maria Carina V. – 312 – – 69 243 312Gonzalvo, Christian R. – 387 – – 172 215 387Guerrero, Nilo B. 107 – (107) – – – –Guevarra, Melissa C. – 240 – – 34 206 240

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*SGVFS015899*



end of year

Guillermo, Ma Anna Kamille S. – 287 – – 62 225 287Guino, Frances Lea C. 221 32 – – 253 – 253Gusi, Adelaida B. – 233 – – 35 198 233Gutierrez, Johnell T. 289 134 – – 363 60 423Gutierrez, Windy B. 189 – (189) – – – –Hachero, Cyril R. – 236 – – 52 184 236Hebron, Marinela C. 193 – (193) – – – –Hementera, Jonah M. 317 – (317) – – – –Hermogeno, Marianne B. – 103 – – 36 67 103Hipolito, Jonathan A. – 229 – – 35 194 229Honorico, Tootsie I. 191 – (67) – 79 45 124Honrado, Ma Lourdes A. – 187 – – 28 159 187Honrado, Michael D. – 236 – – 35 201 236Huerta, Jose Arturo E. – 240 – – 34 206 240Hulguin, Joseph A. 181 – (48) – 55 78 133Ibay, Marvin I. – 215 – – 53 162 215Iglesias, Lovelyn L. – 236 – – 35 201 236Ignacio, Alfomine I. – 212 – – 33 179 212Ignacio, Cheryl M. – 108 – – 41 67 108Ignacio, Felipe A. 102 163 – – 167 98 265Ilao, Maria Lolita E. – 236 – – 35 201 236Iremedio, December E. 174 – (174) – – – –Isidro, Rod Louie Jefferson C. 347 175 – – 330 192 522Jacinto, Erica Ivy V. – 309 – – 71 238 309James, Marvin A. 311 – (149) – 55 107 162Jaucian, Eufrocina B. 2,192 – (241) – 334 1,617 1,951Jingco, Alfred Angelo N. – 228 – – 51 177 228Jocson, Avegale L. – 102 – – 68 34 102Jonsay, Jayvee B. 247 – (43) – 53 151 204Jose, Hannah Guitar G. 211 – (45) – 55 111 166Joven, Rhoda T. 168 172 – – 204 136 340Junio, Ma Karen B. 125 – (125) – – – –Kimpo, Cherry Ann Vanessa C. 200 – (56) – 64 80 144Kosca, Reginald Dennis B. 190 – (45) – 53 92 145Labradores, Matilde Diane C. – 260 – – 60 200 260Lacambra, Gemma C. 221 – (64) – 72 85 157Lacambra, Jarrold Janh J. – 238 – – 34 204 238Lacea, Jonne Ann R. 244 – (43) – 52 149 201Lacsamana, Judy Ulysses A. 188 – (50) – 55 83 138Ladaban, Justin Robert G. 572 – (572) – – – –Laguda, Janette S. 392 – (132) – 195 65 260Lama, Mary Ann B. 172 – (58) – 68 46 114Lampano, Moises G. 104 – (104) – – – –Landrito, Ivah Marizol D. 387 90 – – 212 265 477Lanuza, Jude Thaddeus T. – 215 – – 31 184 215Lapira, Cristina B. – 230 – – 49 181 230Laus, Willeth L. 225 – (42) – 47 136 183Layug, Jennifer G. 230 – (44) – 54 132 186Lazaro, Zaida Angelita P. 170 – (49) – 58 63 121Legaspi, Jocelyn C. 4,053 19 – – 1,685 2,387 4,072Legaspina, Joanne Marie R. 237 – (44) – 53 140 193Leoncio, Amabelle S. – 588 – – 214 374 588Lestino, Ayvelyn P. – 221 – – 34 187 221Leuterio, Kristine Karen R. 185 – (48) – 57 80 137Liamzon, Maria Teresita A. – 197 – – 41 156 197Ligayo, Michael H. 192 – (39) – 48 105 153Lim, Arlton Ralph F. – 226 – – 33 193 226Lim, Christopher M. – 250 – – 37 213 250Lim, Jeremy P. – 420 – – 85 335 420Lim, Joan Lorraine F. – 232 – – 34 198 232Lim, Karen D. 234 – (44) – 53 137 190Lim, Stanley Jason G. 244 – (43) – 52 149 201Lima, Ma Barbara V. 208 – (208) – – – –Lim-Marohombsar, Maria Cecilia M. 170 – (51) – 57 62 119Limpin, Jerald C. – 222 – – 33 189 222

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*SGVFS015899*



end of year

Lingad, Alexander F. 237 – (237) – – – –Locsin, Raul Raymund C. 204 – (68) – 71 65 136Lopez, Anna Lyn M. 102 – (102) – – – –Lopez, Maylene R. 280 189 – – 165 304 469Lopez, Paul John B. 247 202 – – 163 286 449Lopez, Rio Bianca D. – 227 – – 35 192 227Lopinto, Laurence T. – 255 – – 40 215 255Lorraine G. 111 – (111) – – – –Lotho, Glenn B. 125 – (125) – – – –Lovete, Adele Maida V. – 231 – – 35 196 231Lumbres, Ma Susana Editha G. – – – – – – –Lumuthang, Rodney A. 244 100 – – 295 49 344Baldon, Ma Lourdes Genevieve A. – 323 – – 69 254 323Liwag, Maria Victoria V. – 279 – – 61 218 279Mabulac, Mary Grace O. – 228 – – 35 193 228Macaballug, Carmina D. 122 148 – – 39 231 270Macapagal, Jahil L. 199 – (72) – 80 47 127Macaraeg, Sally Marie D. 205 – (65) – 73 67 140Magadia, Jizell P. 103 – (103) – – – –Magadia, Marlowe L. 211 – (45) – 55 111 166Magallanes, Carmina S. – 408 – – 258 150 408Magbanua Jr, Mariano M. – 458 – – 100 358 458Magdales, Gerardo C. 154 – (154) – – – –Maglaki, Jeannette D. 571 6 – – 223 354 577Magnaye, Racquel F. 508 – (158) – 210 140 350Maipid, Paolo Juan Miguel D. 146 – (146) – – – –Makilan, Claudette G. 193 – (47) – 56 90 146Malabanan, Lyndona T. – 219 – – 34 185 219Maliwat, Paulo Ceazar F. – 240 – – 34 206 240Mamalayan, Paulino O. 150 – (150) – – – –Mamangun, Catherine M. – 287 – – 60 227 287Manabat, Edgar F. – 248 – – 38 210 248Mancilla, Rose Elizabeth B. 203 – (203) – – – –Manggalo, Debbie T. 250 – (42) – 52 156 208Manguiat, Katherine N. 917 – (917) – – – –Manguinao, Vanessa Elaine G. – 248 – – 61 187 248Maningas, Gisela Michelle S. 210 – (77) – 84 49 133Manuel, Karleen L. 483 – (483) – – – –Maramag, Maria Katrina N. 129 – (129) – – – –Marana, Felino V. Jr – 362 – – 81 281 362Marcelo, Jasmin Mae C. 208 – (46) – 54 108 162Mariano, Bon Art M. – 236 – – 35 201 236Maribojoc, Maria Cristina L. 237 – (237) – – – –Buban Jr, Marino M. – 300 – – 60 240 300Marqueses, Ofelia D. 174 – (174) – – – –Martinez, Mark Anthony M. – 491 – – 196 295 491Mata, Sheryl Anne G. – 145 – – 79 66 145Matela, Mona Liza S. – 111 – – 39 72 111Mateo, Maria Romina M. 147 – (147) – – – –Matias, Mel P. – 378 – – 41 337 378Mayrina, Felina Anne P. – 231 – – 33 198 231Mayuga, April F. – 255 – – 39 216 255Medina, Carlota A. 138 – (138) – – – –Medina, Iv Aristeo N. 251 – (51) – 63 137 200Medina, Lizel N. 247 – (43) – 53 151 204Megrino, Jesusa E. – 104 – – 37 67 104Mendez, Mary Joy C. 201 – (201) – – – –Mendoza, Paul Heather D. – 231 – – 35 196 231Mendoza, Sharon Ester Marie A. – 261 – – 40 221 261Mercado, Joel M. 756 – (202) – 277 277 554Mercado, Mark Carmel M. – 219 – – 35 184 219Mercado, Rolando L. – 161 – – 107 54 161Michael D. 251 – (251) – – – –Mijares, Rochelle M. – 181 – – 28 153 181Mindanao, Jo Carissa O. – 268 – – 39 229 268

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*SGVFS015899*



end of year

Minoza, Eliza Grace C. 225 – (225) – – – –Mirabueno, Jo-Anne G. 206 – (44) – 54 108 162Molina, George T. 455 – (251) – 122 82 204Molo Jr, Eugene B. – 270 – – 39 231 270Moncupa, Antonio Jr C. – 9,800 – – 9,800 – 9,800Monsalud, Risty M. – 283 – – 62 221 283Morales, Cyrus C. 189 – (47) – 55 87 142Morelos, Marie Charlienne N. – 296 – – 61 235 296Mortel, Maria Kristina A. 204 – (56) – 66 82 148Mosqueda, Evangeline A. 398 – (289) – 109 – 109Munoz, Richard Benjamin S. 116 197 – – 68 245 313Narciso, Paolo D. 192 – (192) – – – –Narvacan, Genalyn M. 103 165 – – 39 229 268Nasol, Severino D. 237 – (43) – 53 141 194Natividad, Noel U. 244 – (49) – 60 135 195Natividad, Precious D. – 260 – – 40 220 260Navalta, Charles David C. – 277 – – 62 215 277Navarrete, Marife S. 211 – (45) – 55 111 166Navarro, Michael B. 104 79 – – 71 112 183Navidad, Jose M. 261 – (61) – 71 129 200Nayve, Julie Adelyn A. 116 – (116) – – – –Ng, Estrella B. 189 – (47) – 55 87 142Nicasio, Myra P. 170 – (170) – – – –Nicolas, Erlinda C. – 255 – – 34 191 225Nietes, Raymund Albert C. – 280 – – 69 211 280Noche, Englebert D. – 264 – – 60 204 264Nonato, Herman D. 119 – (119) – – – –Nufable, Emerson B. 107 114 – – 33 188 221Oandasan, Ma Melrose Gemma P. – 287 – – 60 227 287Ocfemia, Arlene V. – 225 – – 35 190 225Ofren, Merrylyn B. – 229 – – 35 194 229Ojales, Kristel D. – 128 – – 90 38 128Olaes, Gilbert S. – 202 – – 29 173 202Olalia, Agnes M. 272 – (50) – 61 161 222Olalia, Anthony M. 162 – (50) – 56 56 112Olarte, Harold T. 201 – (47) – 56 98 154Olivar, Jim Lordon R. – 235 – – 35 200 235Ona, Lourdes A. 547 – (332) – 103 112 215Ong, Abigail U. – 240 – – 35 205 240Ong, Catherine C. 115 – (115) – – – –Ong, Christina J. 158 – (158) – – – –Ong, Ma Noemi S. 146 – (146) – – – –Ong, Michael S. 204 – (38) – 46 120 166Orcine III, William Cipriano D. – 174 – – 55 119 174Orlanda, Jose Jr A. – 267 – – 59 208 267Ortiz, Toni Regina L. 166 – (50) – 56 60 116Padua, Ryan A. – 217 – – 31 186 217Pagaduan, Marieglis O. – 211 – – 44 167 211Pagaduan, Quintin R. – 420 – – 85 335 420Pagtakhan, Marissa L. – 233 – – 35 198 233Pagtakhan, Mark Alvin A. 161 – (52) – 60 49 109Palaganas, Juan Carlos S. – 238 – – 35 203 238Paliza, Rowena B. – 167 – – 53 114 167Palo, Danilo N. 134 – (134) – – – –Palomo, Jesus Enrico L. 128 – (128) – – – –Pama, Cristina O. 293 244 – – 403 134 537Pamfilo, Ma Anna Lourdes D. 280 – (49) – 60 171 231Panadero, Mary Jane R. – 229 – – 34 195 229Pangan, Noel S. 415 176 – – 229 362 591Panganiban, Maricel G. 101 – (101) – – – –Panganiban, Rogel L. 237 – (237) – – – –Pangilinan, Karren M. – 230 – – 53 177 230Panizales, Joy Anne D. – 265 – – 39 226 265Papag, Marita B. 174 – (174) – – – –Paraan, Annie Rose C. – 635 – – 246 389 635

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end of year

Paragas, Lex C. 200 – (200) – – – –Paras, Ana Maria L. 2,499 – (2,374) – 100 25 125Pascual Jr, Conrad Paul D. 310 – (172) – 55 83 138Payawal, Roberto A. 124 – (23) – 29 72 101Pe Benito, Florence Y. – 173 – – 72 101 173Pe, Benito Florence Y. 236 – (236) – – – –Pena, Nova S. – 312 – – 46 266 312Penafiel, Evangeline S. 162 – (50) – 58 54 112Penaloza, Allan M. 162 – (50) – 58 54 112Penarubia, Allan T. 154 – (154) – – – –Peralta, Maureen M. – 173 – – 53 120 173Perez, Emilyn N. – 233 – – 35 198 233Perez, Ma Lourdes R. – 109 – – 40 69 109Perez, Raphael K. – 196 – – 29 167 196Perez, Soraya F. 470 – (203) – 267 – 267Petallano, Homer D. – 288 – – 63 225 288Pilares, Mylene L. 693 – (207) – 265 221 486Pineda, Edgardo B. 121 106 – – 50 177 227Pons, Pedro S. – 260 – – 40 220 260Posadas, Jomar N. 134 – (134) – – – –Presingular, Gerard John C. 163 133 – – 136 160 296Prudente, Sarah Melissa A. 244 – (43) – 52 149 201Puig, Antonette S. – 232 – – 36 196 232Puno, Ma Christina C. 205 – (65) – 76 64 140Purugganan, Francesco Michael D. – – – – – – –Que, Kathryn. 154 – (154) – – – –Que, Sharon D. 204 – (46) – 54 104 158Quismundo, Sheila B. – 270 – – 63 207 270Rabor, Almira D. 206 – (47) – 53 106 159Rafael L. 235 – (235) – – – –Rago, Osias Jr M. – 222 – – 32 190 222Ramirez, Claire L. 260 – (45) – 60 155 215Ramirez, Rico G. – 187 – – 125 62 187Ramirez, Sarah Jane E. – 227 – – 35 192 227Ramiscal, Gerna Joanne G. 273 – (273) – – – –Ramones, Ninia D. – 231 – – 35 196 231Ramos, Clarissa S. – 250 – – 55 195 250Ramos, Harold D. 116 – (116) – – – –Ramos, Karren B. 158 – (50) – 59 49 108Ramos, Manuel W. – 246 – – 50 196 246Ramos, Noel R. – 143 – – 49 94 143Ramos, Romel P. – 255 – – 54 201 255Ramos, Xavier C. 1,079 – (1,079) – – – –Ranola, Benizi R. – 268 – – 39 229 268Raymundo, Redentor E. 234 – (44) – 53 137 190Reboredo, Raymond T. 124 – (124) – – – –Reburiano, Ma Carina L. 244 59 – – 214 89 303Redor, Carlos Carpio M. – 240 – – 34 206 240Regalado, Daphne Xandra Z. 222 – (222) – – – –Resurreccion, Mary Anne L. 174 – (49) – 58 67 125Reyes, Angela I. – 248 – – 38 210 248Reyes, Annabelle M. 241 229 – – 269 201 470Reyes, Crispin A. 260 173 – – 162 271 433Reyes, Eunice Agnes B. – 250 – – 50 200 250Reyes, Frederick D. 384 – (184) – 61 139 200Reyes, Katherine M. – 233 – – 35 198 233Reyes, Lovely M. 240 – (240) – – – –Reyes, Ma Leonora Y. 132 – (132) – – – –Reyes, Peter John D. – 250 – – 37 213 250Reyes, Rosselyn Grace P. 213 – (39) – 49 125 174Reynoso, Nina May Q. 160 – (8) – 102 50 152Ricaforte, Gracia Regina E. 130 – (130) – – – –Ringor, Rowena Y. 195 – (36) – 44 115 159Rito, Irene D. 146 – (146) – – – –Rivano, Lucas Andre A. 115 – (115) – – – –

- 10 -

*SGVFS015899*



end of year

Rivera, Mary Ann I. – 265 – – 62 203 265Rivera, Ravi P., Jr. 124 – (124) – – – –Rivera, Viena Genea T. – 229 – – 35 194 229Rodis, Joanna C. – 125 – – 65 60 125Rodriguez, Paulo Jose L. 394 – (234) – 120 40 160Rogato, Anna Lissette Y. – 250 – – 51 199 250Rojas, Jocelyn D. 223 – (45) – 55 123 178Romero, Andrei Maria O. – 229 – – 35 194 229Ronase, Marvin M. – 191 – – 44 147 191Rosal, Frederick Voltaire J. 114 – (114) – – – –Rosales, Maricel C. – 238 – – 34 204 238Rosario, Suzette C. 275 – (59) – 72 144 216Roxas, Alfredo M. – 240 – – 35 205 240Ruado, Jerry R. – 339 – – 120 219 339Sacayanan, Kim Ceasar L. – 231 – – 35 196 231Saguinsin, Jannet D. 395 – (119) – 151 125 276Salazar, Adrian Wilson E. 398 – (139) – 164 95 259Salazar, Henry D. – 278 – – 62 216 278Salazar, Iza Roselle B. – 210 – – 31 179 210Salvador, Arnold M. – 225 – – 35 190 225Salvador, Dino Antonio A. 196 – (46) – 56 94 150Salvador, Francis Alexandre A. – – – – – – –Salvador, Rommel S. – 338 – – 74 264 338Salvador, Sheila C. 120 – (120) – – – –Saman, Christine R. – 296 – – 61 235 296Sampang, Renato Z. 558 – (343) – 215 – 215Samson, Joy P. 363 – (158) – 52 153 205San Agustin, Annabelle E. – 240 – – 35 205 240San Miguel, Krista Margaret D. – 218 – – 32 186 218San Agustin, Maria Luz R. 223 – (45) – 55 123 178San Jose, Alina F. 215 – (45) – 55 115 170San Jose, Editha N. 287 – (137) – 138 12 150Sancho, Ma Cecile B. – 112 – – 61 51 112Sangalang, Catherine D. 154 – (154) – – – –Sangalang, Mai G. 158 – (158) – – – –Sangkula, Sheena E. 177 – (47) – 56 74 130Santiago, Imelda P. – 229 – – 35 194 229Santiago, Riza H. – 115 – – 98 17 115Santos, Broderick C. 257 – (61) – 71 125 196Santos, Silvino C., Jr. 208 – (43) – 51 114 165Savellano, Roland M. 185 – (185) – – – –See, Evelyn O. 138 – (138) – – – –Seguiza, Marlon C. – 232 – – 51 181 232Sen, Neil Allen A. 240 – (81) – 96 63 159Serrano, Mineleo C. 135 93 – – 34 194 228Sibug, Maria Theresa C. 273 – (273) – – – –Sierra, Abigail G. 1,030 – (1,030) – – – –Sigua, Ann Grace D. 151 – (40) – 43 68 111Silagan, Paulo P. – 318 – – 46 272 318Simora, Levi C. – 194 – – 39 155 194Singui, Maria Francia M. – 263 – – 39 224 263Siochi, Alberto Antonio E. 237 – (44) – 53 140 193Siongco, Ma Liza C. 303 – (57) – 70 176 246Siongco, Yvette Rhodora A. 196 – (196) – – – –Siquian, Esperanza Q. – 270 – – 61 209 270Sisican, Lilibeth R. 154 – (154) – – – –Sison, Cholette M. – 236 – – 51 185 236Sison, John Y. – 232 – – 51 181 232Siy, Jimmy C. – 287 – – 60 227 287Soliongco, Jocelyn V. 195 76 – – 130 141 271Soliven, Erlie G. 145 – (145) – – – –Soller, Amada Ma Laarni C. 142 – (142) – – – –Soriano, Leila V. 125 – (125) – – – –Soriano, Maricel C. 117 233 – – 127 223 350Soriano, Sheryl L. – 312 – – 46 266 312

- 11 -

*SGVFS015899*



end of year

Sta. Maria, Aileen C. – 274 – – 61 213 274Sta. Maria, Esther S. 144 – (144) – – – –Suerte, Felipe Rowen G. 451 – (110) – 178 163 341Sugay, Rachel Joy R. 107 – (107) – – – –Suico, Arnel T. 181 – (48) – 55 78 133Sunga, Benedict Dionnie V. – 236 – – 35 201 236Susmerano, Gerardo 1,219 – (416) – 482 321 803Sy, Bennison L. – 240 – – 35 205 240Sy, Mirasol L. – 228 – – 34 194 228Sy, Rosemarie G. 175 – (60) – 63 52 115Sy, Stephanie May T. – 236 – – 35 201 236Tabladillo, Kristina Grace P. – 222 – – 35 187 222Talingting, Charie Mae J. – 240 – – 35 205 240Tamosa, Randy N. – 236 – – 35 201 236Tan, Catherine T. 148 – (148) – – – –Tandoc, Emmanuel V. – 888 – – 367 521 888Tapia, Jennifer E. – 226 – – 35 191 226Taruc, Diana Grace N. – 275 – – 63 212 275Tayag Jr, Avelino C. – 240 – – 35 205 240Tecson, Aileen V. – 215 – – 53 162 215Tecson, Miguel Carlos P. – 256 – – 37 219 256Tee, Lorita C. 134 – (134) – – – –Teves, Elmer A. 333 – (164) – 48 121 169Teves, Marie Antoinette G. 108 – (108) – – – –Tiburcio, Fredie Ross E. – 223 – – 33 190 223Ticzon, Wilroy V. 239 – (53) – 62 124 186Ting, Mariel Ayna Y. – 116 – – 18 98 116Tinio, Karsten T. 486 – (149) – 193 144 337Tiu, Elena M. – 117 – – 117 – 117Tomas, Desmelyn F. – 540 – – 240 300 540Tomboc, Juancho A. 119 118 – – 86 151 237Topacio, Mary Ann E. 371 – (104) – 153 114 267Torres, Carolyn P. – 216 – – 53 163 216Trangia, Jude Thaddeus T. 223 – (40) – 50 133 183Treyes, Cecilia S. – 244 – – 67 177 244Trinidad, Arlene R. 111 379 – – 178 312 490Trinidad, Edna S. – 231 – – 36 195 231Trinidad, Katrina Mara B. – 237 – – 35 202 237Tuason, Geraldine M. 189 – (47) – 55 87 142Tuason, Yvette Adrienne B. – 228 – – 33 195 228Tuazon, Ma Cecilia P. – 300 – – 61 239 300Tubu, Charisse C. 208 – (46) – 56 106 162Tumao, Maria Leah L. 174 – (49) – 58 67 125Tumbaga, Allan John M. 3,069 – (314) – 719 2,036 2,755Ty, Janice S. – 455 – – 97 358 455Ty, Maria Cristina C. 160 – (44) – 50 66 116Umingan, Juliet S. – 265 – – 39 226 265Uy, Ernesto T. 796 – (161) – 635 – 635Uy, Giovanni N. – 247 – – 61 186 247Uy, Ivy B. 7,702 – (7,702) – – – –Uy, Wennievic Y. 230 – (44) – 54 132 186Valderrama, Liberty B. 436 – (436) – – – –Valencia, Ma Shenie S. 301 – (63) – 75 163 238Valenzuela, Nico B. 189 147 – – 192 144 336Valera, Valerie Mariflor G. 196 – (66) – 74 56 130Valiente, Virgilio S. – 259 – – 55 204 259Vallespin, Lerma Noveline E. – 214 – – 31 183 214Valmonte, Abigail Bernice Y. – 227 – – 35 192 227Valmonte, Ferdinand O. – 212 – – 31 181 212Valoria, Elzon P. 462 – (139) – 298 25 323Vedasto, Gemma C. – 148 – – 55 93 148Velasco, Rufina Anabelle M. 109 – (109) – – – –Venturina, Hazel E. – 234 – – 35 199 234Venus, Ziera Lou R. – 132 – – 51 81 132Vergel, De Dios Anthony V. 324 – (324) – – – –

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end of year

Versoza, Paula Bianca R. – 227 – – 35 192 227Verzosa, Eugenio C. 174 – (49) – 56 69 125Viernes, Jovito M. 159 – (159) – – – –Villa, Archibald V. 209 – (66) – 69 74 143Villa, Gloria M. – 278 – – 61 217 278Villagonzalo, Ramil M. – 233 – – 51 182 233Villano, Robin Melchor Jon V. 146 – (146) – – – –Villano, Robin Melchor V. 190 – (190) – – – –Villar, Rhamil B. 217 – (41) – 50 126 176Villarama, Maria Aileen A. 134 56 – – 69 121 190Villaraza, Alessandro L. 2,724 – (138) – 242 2,344 2,586Villegas, Maria Corazon R. 216 – (58) – 63 95 158Viray, Cecilia P. 239 – (239) – – – –Vismonte, Rommelito G. – 208 – – 52 156 208Vital, Aries Z. – 361 – – 80 281 361Vitalicio, Rusell R. – 232 – – 35 197 232Vives, Jason P. 204 – (46) – 54 104 158Yadao, Israel C., Jr. 373 70 – – 156 287 443Yambao, Ralph Eduardo A. 147 – (41) – 47 59 106Young, Christian Irving B. 189 – (34) – 43 112 155Yuson, Dyan Ann D. 108 – (108) – – – –Yuson, Ephraim Vincent M. 193 – (193) – – – –Zambrano, Ronivi M. – 349 – – 71 278 349Canillas, Emmanuel Ramon

Zamora Itf. 112 – (112) – – – –

Zamora, Jovito N. 523 – (297) – 181 45 226Zepeda, Djhoanna R. 349 – (199) – 55 95 150

*SGVFS015899*

Schedule C. Amounts receivable from related parties which are eliminated duringthe consolidation of financial statements

Below is the schedule of receivables from related parties which are eliminated in the consolidatedfinancial statements as of December 31, 2015 (amounts in thousands):

Balance atbeginning

of year Additions CollectionsBalance at

end of yearEast West Rural Bank, Inc. P=561,018 P=8,822,495 (P=8,286,727) P=1,096,786East West Insurance Brokerage, Inc. – 2,391 – 2,391

P=561,018 P=8,824,886 (P=8,286,727) P=1,099,177

Schedule D. Intangible Assets

As of December 31, 2015, the goodwill and intangible assets in the Group’s consolidated statementsof financial position follow (amounts in thousands):

Balance atbeginning

of year Additions

Charged tocost and

expenses

Balance atend of

yearGoodwill P=1,316,728 P=– P=– P=1,316,728Branch licenses 2,167,396 204 – 2,167,600Capitalized software 794,325 202,550 172,551 824,324Customer relationship 129,476 – 4,311 125,165Core deposits 16,848 – 4,043 12,805

P=4,424,773 P=202,754 P=180,905 P=4,446,622

Schedule E. Long-term Debt

Details of the Group’s long term debt* as of December 31, 2015 follow (amounts in millions):

Amount Current NoncurrentLower Tier 2 unsecured subordinated notes due 2025 P=4,967 P=– P=4,967Lower Tier 2 unsecured subordinated notes due 2021 1,500 – 1,500

P=6,467 P=– P=6,467*Excludes long-term negotiable certificates of deposit, that are classified as deposit liabilities in the statement of financial position.

Schedule F. Indebtedness to Related Parties (long term loan obligations to related parties)

The Group has no outstanding long term loan obligations to its related parties as ofDecember 31, 2015.

Schedule G. Guarantees of Securities of Other Issuers

The Group does not have guarantees of securities of other issuers as of December 31, 2015.

*SGVFS015899*

Schedule H. Capital Stock

Below is the schedule of the Group’s issued and outstanding capital stock as of December 31, 2015(amounts in thousands):

Number of SharesIssued

andoutstanding Reserved for

as shown options,under related warrants, Held bystatement of conversion Directors,

financial and other Related Officers andTitle of issue Authorized position rights parties Employees OthersEast West Banking

Corporation -common shares 1,500,000 1,499,984 – 1,157,813 24,945 317,226

*SGVFS015899*

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsEast West Banking CorporationEast West Corporate CenterThe Beaufort5th Avenue corner 23rd StreetFort Bonifacio Global CityTaguig City

We have audited the accompanying consolidated financial statements of East West BankingCorporation and Subsidiaries (the Group) as at and for the year ended December 31, 2015, on whichwe have rendered the attached report dated February 24, 2016.

In compliance with Securities Regulation Code Rule No. 68 as amended (2011), we are stating thatthe Group has eighty one (81) stockholders owning ten (10) or more shares each.

SYCIP GORRES VELAYO & CO.

Josephine Adrienne A. AbarcaPartnerCPA Certificate No. 92126SEC Accreditation No. 0466-AR-3 (Group A), February 9, 2016, valid until February 8, 2019Tax Identification No. 163-257-145BIR Accreditation No. 08-001998-61-2015, February 27, 2015, valid until February 26, 2018PTR No. 5321601, January 4, 2016, Makati City

February 24, 2016

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018

A member firm of Ernst & Young Global Limited