Financial Report An annual report was done last 2009 and this was the statement of the executives.

The statements below was made by WILLY S. CO, the Vice Chairman and Reynaldo A. Maclang, the President Letter to Stockholders and Friends, The Philippine economy in 2008 bucked the ongoing global crisis registering a Gross Domestic Product (GDP) growth of 4.6% compared with 7.2% last year. Manufacturing, Construction and Mining & Quarrying sub-sectors contributed to the growth of the Industry sector, sharing 1.6% to the total GDP growth. Services sector contributed the most to GDP growth with 2.4%, supported by the growth in Trade, Private Services and Transportation, Communication & Storage sub-sectors. Financial Services continued to grow albeit at a slower pace of 4.6% from 10.7% in the previous year. The banking sector accelerated to 11.5% from 6.1% with sustained bank lending supported by low interest rates. Outstanding loans of commercial banks including reverse repurchase agreements or RRPs increased in December by 17.5% year-on-year. Loans for production activities drove the expansion in bank lending. Agriculture and forestry; real estate, renting, and business services; wholesale and retail trade; and transportation, storage and communication contributed significantly to the lending growth. Consumption loans also grew, mostly by way of credit card receivables and auto loans. Non-Performing Loans (NPL) ratio of the banking industry improved by 0.93% to 3.52% from last years 4.45%. Moreover, reforms of Bangko Sentral ng Pilipinas such as the clean-up of bad assets, capital build-up and enhanced risk management helped the banking system discharge its role to intermediate funds and manage risks, making banks fundamentally strong. Deposits increased, fueled mainly by the rise in demand and time deposits. As savings and loan accounts grew, the resources of the banking system rose by 6.66%. Remittances increased by 13.7% to US$16.4 billion for the whole year. Higher remittances gave an opportunity for banks to continue their expansion of international tie-ups with placement agencies and remittance companies abroad to market remittance products and services to Filipino communities overseas. Amidst this challenging economic environment, Allied Bank focused on key directions that have been its core strategies, and accordingly executed and implemented the same. These are in the areas of steady expansion in growth markets, continued improvement in financial strength, and sustained profitability. Steady Expansion Despite the ongoing economic slowdown, Allied Bank expanded its existing franchises and launched into new markets. Total deposits increased by 20% or P24.1 billion from P117.7 billion in 2007 to P141.8 billion in 2008. This was accomplished by leveraging on the Banks wide network of 285 branches. Additionally, 23 new ATMs were installed in 2008, giving a total of 265 ATMs nationwide, 41 of which are in malls and high pedestrian traffic locations. To augment deposit generation, the Banks new cash card product named ABC Cash Card added 85,000 new customers. Allied Bank is second in total number of cards among 40 Bancnet (ATM switch)

member banks and fourth as to the total number of ATMs. Among the 70 banks belonging to the three ATM networks in the country, Allied Bank is sixth both in the total number of cards and in total number of ATMs. In addition, an incentive program for deposits was vigorously pursued that brought in P5.3 billion average daily balance and 60,000 more customers. Loan portfolio steadily grew to P11.7 billion from P62.8 billion in 2007 to P74.5 billion in 2008 or up by 18%. By product segment, commercial loans increased by 22%, consumer loans by 34% and credit card receivables by 656%. The Bank launched the Mabuhay Miles World and Platinum MasterCard which offer the lowest point-to-mile conversion of P38 allowing cardholders to earn free flights fast. By year-end, the Credit Card Department had more than 54,000 cardholder base an approximate increase of 1,666% from the previous year. Significantly, card retail volume reached a high of P2.9 billion. Early in October, Allied Bank won an APMEA award for Best Premium CoBrand Program during the annual Asia-Pacific, Middle East and Africa (APMEA) Product Conference and Technology Fair held to honor MasterCard Worldwide customer financial institutions for their excellence in promoting growth, technology and innovation in the payments industry, besting other players in Asia-Pacific, Middle East and Africa. Even with such acclaim, Allied Bank MasterCard refuses to rest on its laurels; it pushes on to building up its market base and enhancing its World and Platinum products further with attractive incentives. All told, the Banks total assets increased by 18.48% or P27.3 billion from P147.8 billion in 2007 to P175.1 billion in 2008. More importantly existing product lines were enhanced, new markets were penetrated and customer base has been expanded. Financial Strength The Bank continued to undertake numerous measures to further strengthen its balance sheet. Non-Performing Loans (NPL) ratio further decreased to 2.04% in 2008. This was accomplished by aggressive collection efforts as well as the sale of Non-Performing Assets (NPA) to a Special Purpose Vehicle (SPV) totaling P2.5 billion. NPA ratio decreased to 4.56% from 5.42% in 2007 owing to the abovementioned sale to SPV and aggressive disposal of Real and Other Properties Acquired (ROPA). Capital Adequacy Ratio (CAR) improved to 17.12% (among the highest in the industry) versus 14.19% in 2007 with the issuance of Tier 2 Capital of P4.5 billion. The original target for the Tier 2 of P2.5 billion was raised to P4.5 billion due to strong demand in the market. Additionally, conversion of USD 50 million Tier 2 debt to equity strengthened the capital quality of the Bank. Provision for loan losses was built up by P385 million to P2.6 billion, resulting in an NPA coverage ratio of 28.36%. The Bank maintains a strong liquidity ratio of 57.33%. It is worthy to note that the Banks Audited Financial Statement (AFS) has unqualified opinion. The P5.5

billion losses on sale of NPAs to SPV in the years 2005 and 2007 were charged against provisions and surplus. New and advanced risk models, measurement mechanics/metrics and riskreporting infrastructures were implemented to capture risks across all bank exposures. The Kamakura Risk Manager (KRM), an automated asset-liability management system remains to be a technological edge for the Bank. Trust and Investments Division likewise went through risks assessment to ensure that all possible risks are adequately covered. Credit and risk stress testing was also developed and implemented. Stress testing isused to assess the impact of adverse scenarios on the Banks CAR, revenues, and loan loss provisioning. In effect, these initiatives resulted in a stronger and more pro-active credit risk management and monitoring which is essential especially now that economic and financial stress continues to be a global threat. Sustained Profitability The Bank earned P500.9 million for 2008 compared with P1.88 billion in 2007. The variance is mainly due to the required mark-to-market variance valuation on investment securities. Loans to investment mix increased to 61%: 39% by way of additional loans thereby securing the formers better yield returns. Corollarily, as mentioned in Financial Strength measures, credit risk management has been reinforced. Low cost to high cost deposit mix improved to 46%: 54% providing better spreads on net interest margin. Total operating or over head expenses were controlled and even reduced by P89.7 million or 1.3%. In sum, Allied Bank met the challenging environment of the year with conservatism and prudence on one hand, vigor and dynamism on the other. We are happy to state that the Bank is stronger and ready to move ahead in the coming years for greater accomplishments. The Bank too, has undertaken integration activities in preparation for its merger with Philippine National Bank (PNB) on all aspects such as Human Resources, Technology, Products, Methods/Policies/Processes, and Culture. The combined bank will have the widest International footprint and become the fourth largest private domestic bank in terms of total assets, deposits, loans and branch network.