UnionBank - TIER II 2014 - Final Offering Circular_11 20 2014

8/10/2019 UnionBank - TIER II 2014 - Final Offering Circular_11 20 2014

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IMPORTANT: You must read the following disclaimer before continuing.The following disclaimer applies to theattached offering circular. You are therefore advised to read this disclaimer carefully before reading, accessing ormaking any other use of the attached offering circular. In accessing the attached offering circular, you agree to be

bound by the following terms and conditions, including any modifications to them from time to time, each time youreceive any information from us.

Confirmation of your representation: You have accessed the attached document on the basis that you have confirmed toBDO Capital and Investment Corp. (BDO Capital) that (1) you are not a resident in a country where delivery of this

document by electronic transmission may not be lawfully delivered in accordance with the laws of the jurisdiction inwhich you are located, AND (2) that you consent to delivery of this document by electronic transmission.

This document has been made available to you in electronic form. You are reminded that documents transmitted viathis medium may be altered or changed during the process of transmission and consequently BDO Capital and itsaffiliates accept no liability or responsibility whatsoever in respect of any difference between the document distributedto you in electronic format and the hard copy version.

You understand that:The information in the offering circular has been provided by Union Bank of the Philippines(the Issuer) for a proposed issue of Fixed Rate Unsecured Subordinated Notes eligible as Tier II Capital due 2025(the Notes). None of the information contained in the offering circular or on which the offering circular is based has

been independently verified by BDO Capital. BDO Capital accepts no liability or responsibility for the accuracy orcompleteness of, nor makes any representation or warranty, express or implied, with respect to, the information

contained in the offering circular or on which the offering circular is based.

This offering circular should not be considered as a recommendation by BDO Capital or any of its affiliates to anyrecipient of the offering circular in relation to the Notes. Each person to whom the offering circular is made available byBDO Capital must make its own independent assessment of the Notes after making such investigation as it deemsnecessary.

If you have gained access to this transmission contrary to the foregoing restrictions, you will be unable to purchase anyof the securities described herein.

You are reminded that you have accessed the attached offering circular on the basis that you are a person into whosepossession this offering circular may be lawfully delivered in accordance with the laws of the jurisdiction in which youare located. THE FOLLOWING OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO

ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANYFORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART ISUNAUTHORIZED.

You are responsible for protecting against viruses and other destructive items. Your use of this soft copy of the offeringcircular is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses andother items of a destructive nature.


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FINAL OFFERING CIRCULAR November 20, 2014

UNION BANK OF THE PHILIPPINES(A BANKING CORPORATION ORGANIZED AND EXISTING UNDER PHILIPPINE LAWS)

P7.2 BILLION 5.375% UNSECURED SUBORDINATED NOTES DUE 2025 CALLLABLE IN 2020

OFFER PRICE - 100.0% OF FACE VALUE

Union Bank of the Philippines, (UnionBank,the Issuer,or the Bank) is offering Unsecured Subordinated Notes (the Notes)that qualify as Tier II Capital with an aggregate principal amount of Seven Billion and Two Hundred Million Pesos(P7,200,000,000), pursuant to the provisions of Section X119 of the Manual of Regulations for Banks ( MORB) amended as of2012, Bangko Sentral ng Pilipinas (BSP) Circular Nos. 503 (2005), 778 (2013), 781 (2013), 786 (2013), 826 (2014), and 834(2014), BSP Memorandum dated 17 February 2003, and other related issuances of the BSP governing the issuance of the Notes, asthe same may be amended from time to time.

The Notes will bear interest on its principal at the rate of 5.375% per annum (the Initial Interest Rate) from and includingNovember 20, 2014 up to but excluding February 20, 2020. Unless the Notes are previously redeemed, the Initial Interest Rate willbe reset at the equivalent of 1.96% per annum (the Initial Spread) plus the Benchmark as of Reset Date (as defined in the Termsand Conditions of the Notes), and such interest will be payable on the Interest Payment Dates commencing on February 20, 2020 upto and excluding February 20, 2025 (Maturity Date). Interest will be payable quarterly in arrears everyNovember 20, February 20,May 20, and August 20 of each year (Interest Payment Dates), beginning on February 20, 2015.

Unless the Notes have been redeemed earlier, pursuant to the Voluntary Redemption Option, Tax Redemption Option, andRegulatory Redemption Option (collectively, the Call Option), the Notes will be redeemed at 100.0% of its face value on MaturityDate. Subject to certain conditions, the BSP Guidelines, and the Terms and Conditions, the Bank may redeem the Notes in wholeand not only in part on the Redemption Option Date at 100.0% of the face value of the Notes, plus accrued and unpaid interest as ofbut excluding the Redemption Option Date. Nothing herein shall be construed as an indication that the Issuer will exercise itsVoluntary Redemption Option and the Noteholders should not expect that such Voluntary Redemption Option will be exercised. SeeTerms and Conditions of the NotesVoluntary Redemption Option.

The Notes have a loss absorption feature which means the Notes are subject to a Non-Viability Write-Down in case of a Non-

Viability Trigger Event. A Non-Viability Trigger Event is deemed to have occurred when the Issuer is considered non-viable

as determined by the BSP. Upon the occurrence of a Non-Viability Trigger Event, the full principal amount of the Notes may

be permanently written down to the extent required by the BSP, which could go to as low as zero, and the Notes may be

cancelled. A Non-Viability Write-Down shall have the following effects: (a) reduce the claim on the Notes in liquidation; (b)

reduce the amount re-paid when a redemption is properly exercised, and (c) partially or fully reduce the interest payments

on the Notes. Any such Non-Viability Write-Down will be irrevocable and the Noteholders will, upon the occurrence of a

Non-Viability Write-Down, not (a) receive any shares or other participation rights in the Issuer or be entitled to any other

participation in the upside potential of any equity or debt securities issued by the Issuer or any of its subsidiaries or affiliates,

or (b) be entitled to any subsequent write-up or any other compensation in the event of a potential recovery of the Issuer or

its subsidiaries. See Terms and Conditions of the Notes Non-Viability Trigger Event; Loss Absorption Feature; and Non-

Viability Write-Down.

The Notes constitute a direct, unconditional, unsecured, and subordinated obligation of the Issuer. The Notes will rank pari passuwith obligations of the Issuer that are, expressly or by applicable laws, subordinated so as to rank pari passu with claims in respect ofsecurities of the Issuer constituting Tier 2 capital, as defined in BSP Rules from time to time. See Terms and Conditions of theNotesStatus and Subordination.

THE NOTES ARE (A) NOT A DEPOSIT AND ARE NOT INSURED BY THE PHILIPPINE DEPOSIT INSURANCE

CORPORATION (PDIC), (B) SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND ORDINARY GENERAL

CREDITORS OF THE ISSUER, (C) UNSECURED AND NOT COVERED BY THE GUARANTY OF THE ISSUER, THE

ISSUE MANAGER AND LEAD UNDERWRITER, THE SELLING AGENTS OR ANY OF THEIR SUBSIDIARIES AND

AFFILIATES, OR ANY OTHER ARRANGEMENT THAT LEGALLY OR ECONOMICALLY ENHANCES THE

PRIORITY OF THE CLAIM OF THE NOTEHOLDER AS AGAINST DEPOSITORS OR OTHER CREDITORS OF THE

ISSUER AND (D) ARE NOT GUARANTEED BY THE NATIONAL GOVERNMENT , AND (E) INELIGIBLE ASCOLLATERAL FOR A LOAN GRANTED BY THE ISSUER, ITS SUBSIDIARIES, AND AFFILIATES. SEE TERMS

AND CONDITIONS OF THE NOTES STATUS AND SUBORDINATION.


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The Notes will be represented by a Master Note. The Master Note, without coupons, shall be deposited with the Public Trustee. TheNotes will be scripless and registered and lodged with the Registrar in the name of the Noteholders. Serially numbered RegistryConfirmations will be issued by the Registrar in favor of the Noteholders in accordance with the Registry and Paying AgencyAgreement. The Notes will be eligible for electronic book-entry transfers in the Registry without the issuance of other evidence ofthe Notes.

The Issuer has a rating of PRS Aaa (corp.) from PhilRatings as of September 2, 2014. This rating indicates that the Issuer has a very

strong capacity to meet its financial commitments relative to that of other Philippine corporates. A PRS Aaa is the highestcorporate credit rating assigned on the PRS scale. PhilRatings considered the following key strengths of UnionBank: (i) ability tomaintain its status as one of the countrys top-tier banks amidst keen competition; (ii) strong corporate shareholders; (iii) very goodquality of management; (iv) more stable and diversified revenue base outlook; and (v) positive prospects for the Philippine economyand the domestic banking industry. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision,suspension or withdrawal at any time by the assigning rating agency. The Notes are securities exempt from registration with thePhilippine Securities and Exchange Commission.

To the fullest extent permitted by law, the Issue Manager and Lead Underwriter does not accept any responsibility for the contents ofthis Final Offering Circular or for any other statement, made or purported to be made by the Issue Manager and Lead Underwriter oron its behalf in connection with the Issuer or the issue and offering of the Notes. Furthermore, the Issue Manager and LeadUnderwriter accordingly disclaims all and any liability whether arising in tort or contract or otherwise which it might otherwise havein respect of this Final Offering Circular or any such statement.

Investing in the Notes involves certain risks. Prospective Noteholders should carefully study the matters set out in this Final OfferingCircular, and in particular, the section Investment Considerations, for a discussion of certain factors that must be consid ered inconnection with an investment in the Notes.

Issue Manager, Lead Underwriter, and Selling Agent

Underwriter and Selling Agent

Limited Selling Agent Market Maker and Selling Agent


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The date of this Final Offering Circular is November 20, 2014.

The BSP has, on September 30, 2014, approved the issuance and sale of the Notes in one or moretranches for a period of one year from the date of the BSP Approval.

This Final Offering Circular has been prepared solely for the information of persons to whom it istransmitted by BDO Capital and Investment Corporation (BDO Capital) as Issue Manager and LeadUnderwriter, China Banking Corporation (CBC) as Underwriter (BDO Capital and CBCcollectively as Underwriters), as well as BDO Capital, and CBC, together with MultinationalInvestment Bancorporation (MIB) as Selling Agents, and Union Bank of the Philippines as LimitedSelling Agent with respect to the Notes. This Final Offering Circular shall not be reproduced in anyform, in whole or part, for any purpose whatsoever nor shall it be transmitted to any other person.

The Bank confirms that this Final Offering Circular contains all information with respect toUnionBank and its subsidiaries and its operations and the Notes which is material in the context of the

issue and offering of the Notes. The Bank also confirms that the information contained herein is trueand accurate in all material respects and is not misleading, that the opinions and intentions expressedherein are honestly held and have been reached after considering all relevant circumstances and arebased on reasonable assumptions, that there are no other facts, the omission of which would, in thecontext of the issue and offering of the Notes, make this document as a whole or any such informationor the expression of any such opinions or intentions misleading in any material respect, and that allreasonable enquiries have been made by the Bank to verify the accuracy of such information. TheIssue Manager, the Underwriters, Selling Agents, and Market Maker assume no liability for anyinformation supplied herein by the Bank. The Bank accepts responsibility accordingly.

In making an investment decision, the prospective Noteholders must rely on its own examination of

the Bank and the terms of the offering of the Notes, including the merits and risks involved. Byreceiving this Final Offering Circular, the prospective Noteholders acknowledges that (i) it has notrelied on the Issue Manager, Underwriters or any of the Selling Agents or any person affiliated withthem in connection with its investigation of the accuracy of any information in this Final OfferingCircular or its investment decision, and (ii) no person has been authorized to give any information orto make any representation concerning the Bank or the Notes other than as contained in this FinalOffering Circular and, if given or made, any such other information or representation should not berelied upon as having been authorized by the Bank, the Issue Manager, the Underwriters or the SellingAgents.

No representation or warranty, express or implied, is made by the Issue Manager, Underwriters and

the Selling Agents as to the accuracy or completeness of the information contained in this FinalOffering Circular. The Issue Manager, Underwriters, and the Selling Agents assume no responsibilityfor the accuracy of the information contained in this Final Offering Circular. Neither the delivery ofthis Final Offering Circular nor the offer of the Notes shall, under any circumstances, constitute arepresentation or create any implication that there has been no change in the affairs of the Bank sincethe date of this Final Offering Circular or that any information contained herein is correct as at anydate subsequent to the date hereof.

None of the Bank, the Issue Manager, the Underwriters, or the Selling Agents or any of theirrespective affiliates or representatives is making any representation to any prospective Noteholderregarding the legality of an investment by such Noteholder in the Notes under applicable laws. In

addition, the Noteholder should not construe the contents of this Final Offering Circular as legal,business or tax advice. The Noteholder should be aware that it may be required to bear the financial


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risks of an investment in the Notes for an indefinite period. The Noteholder should consult with itsown advisers as to the legal, tax, business, financial and related aspects of a purchase of the Notes.

This Final Offering Circular does not constitute an offer to sell, or an invitation by or on behalf of theBank, the Issue Manager, Underwriters, or Selling Agents or any of their respective affiliates or

representatives to purchase any of the Notes, and may not be used for the purpose of an offer to, or asolicitation by, anyone, in each case, in any jurisdiction or in any circumstances in which such offer orsolicitation is not authorized or is unlawful. Recipients of this Final Offering Circular are required toinform themselves about and observe any applicable restrictions.

Each Noteholder must comply with all applicable laws and regulations in force in each jurisdiction inwhich it purchases, offers or sells such Notes or possesses or distributes this Final Offering Circularand must obtain any consent, approval or permission required by it for the purchase, offer or sale by itof such Notes under the laws and regulations in force in any jurisdictions to which it is subject or inwhich it makes such purchases, offers or sales and the Bank, Issue Manager, the Underwriters, or theSelling Agents shall have no responsibility thereof.

Conventions

In this Final Offering Circular, unless otherwise specified or the context otherwise requires, allreferences to the Philippines are references to the Republic of the Philippines. All references hereinto the Government are references to the Government of the Philippines. All references herein toUnited States or U.S. are to the United States of America. Unless otherwise specified or thecontext otherwise requires, references herein to U.S. dollars and US$ are to the lawful currencyof the United States of America and references herein to Pesos and P are to the lawful currencyofthe Republic of the Philippines. No representation is made that the Peso or U.S. dollar amounts

referred to in this document could have been or could be converted into U.S. dollars or Pesos, as thecase may be, at any particular rate or at all. Certain monetary amounts and currency translationsincluded in this document have been subject to rounding adjustments; accordingly, figures shown astotals in certain tables may not be an arithmetic aggregation of the figures, which precede them. Allamounts and ratios included in this document are based on consolidated balances of the Bank and itssubsidiaries unless otherwise stated. References in this document to ownership interests are, save asotherwise disclosed, as at the date of this document.

Forward-looking Statements

All statements contained in this Final Offering Circular that are not statements of historical fact

constitute forward-looking statements. Some of these statements can be identified by forward-looking terms, such as anticipate, believe, can, could, estimate, expect, intend, may,plan, will, and would or similar words. However, these words are not the exclusive means ofidentifying forward-looking statements. All statements regarding the Banks expected financialcondition and results of operations, business, plans and prospects are forward-looking statements.These forward-looking statements include statements as to the Banks business strategy, revenue andprofitability, planned projects and other matters discussed in this Final Offering Circular regardingmatters that are not historical facts. These forward-looking statements and any other projectionscontained in this Final Offering Circular (whether made by the Bank or any third party) involveknown and unknown risks, uncertainties and other factors that may cause the Banks actual results,performance or achievements to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements or other projections.


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TABLE OF CONTENTS

GLOSSARY OF TERMS ................................................................................................................1OFFERING CIRCULAR SUMMARY ...........................................................................................6

SUMMARY OF THE OFFERING ...............................................................................................10SUMMARY CONSOLIDATED FINANCIAL INFORMATION ...............................................23

INVESTMENT CONSIDERATIONS ..........................................................................................26

TERMS AND CONDITIONS OF THE NOTES ..........................................................................45

PURPOSE OF ISSUANCE ...........................................................................................................70

DESCRIPTION OF THE BANK ..................................................................................................72ASSETS AND LIABILITIES........................................................................................................97

RISK MANAGEMENT...............................................................................................................113RELATED PARTY TRANSACTIONS ......................................................................................129

MANAGEMENT, PRINCIPAL SHAREHOLDERS AND EMPLOYEES ...............................131

PHILIPPINE TAXATION...........................................................................................................143

THE PHILIPPINE BANKING INDUSTRY ...............................................................................148

BANKING REGULATION AND SUPERVISION ....................................................................150PROCEDURE .............................................................................................................................. F-1


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GLOSSARY OF TERMS

In this Final Offering Circular, unless the context otherwise requires, the following terms shall havethe meanings set out below:

Aboitiz Group .................................. Aboitiz Equity Ventures, Inc., including its subsidiaries

and affiliates

Affiliate.a related entity linked by means of ownership of at least

twenty (20%) to not more than fifty percent (50%) of its

outstanding voting stock

Allocation Plan the procedure for application, acceptance, or rejection of

the ATPs, whether in whole or in part, the manner and

time of payment, refunds, and other terms and conditions

of the Offer

Allocation Report. the report to be prepared by the Issue Manager and sent

to the Issuer and Selling Agents, allocating the Notes to

be issued by the Issuer through the Selling Agents among

the prospective investors on the Issue Date

AMLC .............................................. Anti-Money Laundering Council

Anti-Money Laundering Act or

AMLA ...........................................the Anti-Money Laundering Act 2001 of the Philippines

APDS ............................................... Automatic Payroll Deduction System

ATM ................................................. Automated Teller Machine

Banking Day .................................... any day of the week, other than Saturday or Sunday,

when banks are not required or authorized to close in

Metro Manila

BAP .................................................. Bankers Association of the Philippines

BDO Capital..................................... BDO Capital & Investment Corporation

BIR ................................................... Philippine Bureau of Internal Revenue

BMBEs ............................................. Barangay Micro Business Enterprises


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BoC .................................................. Bureau of Customs

BSP .................................................. Bangko Sentral ng Pilipinas, the Philippine Central Bank

Board or BOD .................................. Board of Directors

China Bank... China Banking Corporation

CitySavings. ..................................... City Savings Bank, Inc.

CPS .................................................. central processing services

Cross-Sells ....................................... practice of selling other bank products to an existing

customer of the bank

DBP .................................................. Development Bank of the Philippines

DepEd .............................................. Philippine Department of Education

Director ............................................ a director of the Bank

DOSRI ............................................. Directors, Officers, Stockholders and Related Interests

FATCA ............................................ Foreign Account Tax Compliance Act

FCDU ............................................... Foreign Currency Deposit Unit

FCPA ............................................... Foreign Corrupt Practices Act of 1977

Financial Statements ........................the Bank's consolidated financial statements and related

notes

FUIFAI ............................................. First Union Insurance and Financial Agencies, Inc.

General Banking Law ...................... General Banking Law of 2000 (Republic Act No. 8791)

GDP ................................................. Gross Domestic Product

Government...................................... the government of the Republic of the Philippines

GRT ................................................. Gross Receipts Tax

Guava ............................................... an integrated system that performs front, middle and

back office functions, including deal entry, accounting,

risk management and information reporting

GSIS ................................................. Government Service Insurance System

HGC ................................................. Home Guaranty Corporation

IAS ................................................... International Accounting Standards


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iBank ................................................ International Exchange Bank

IBCL ................................................ Interbank call loan

KYC ................................................. Know Your Customer

LBP .................................................. Land Bank of the Philippines

LTNCD ............................................ Long-Term Negotiable Certificates of Deposits

Metro Manila ................................... the metropolitan area comprising the cities of Kalookan,

Las Pias, Makati, Malabon, Mandaluyong, Manila,

Marikina, Muntinlupa, Navotas, Paraaque, Pasay, Pasig,

Quezon, Valenzuela and Taguig and the municipality of

San Juan, which together comprise the National Capital

Region and are commonly referred to as Metro

Manila

MIB .................................................. Multinational Investment Bancorporation

MOA ................................................ Memorandum of Agreement

Monetary Board ............................... Monetary Board of the BSP

Moodys .......................................... Moodys Investors Services, Inc.

MORB .............................................. the BSP Manual of Regulations for Banks

New Central Bank Act ..................... New Central Bank Act (Republic Act No. 7653)

NPAs ............................................... Non-performing Assets

NPLs ................................................ Non-performing Loans

OBUs ............................................... Offshore Banking Units

Open Source ..................................... an approach to the design, development, and distribution

of software, offering practical accessibility to a

software'ssource code

P&A ................................................. Punongbayan & Araullo, member firm within Grant

Thornton International Ltd.

PAS .................................................. Philippine Accounting Standards

Parent Company ...............................Union Bank of the Philippines only (excluding its

subsidiaries)

PCD .................................................. Philippine Central Depository
http://en.wikipedia.org/wiki/Softwarehttp://en.wikipedia.org/wiki/Source_codehttp://en.wikipedia.org/wiki/Source_codehttp://en.wikipedia.org/wiki/Source_codehttp://en.wikipedia.org/wiki/Software


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PCD Nominee .................................. PCD Nominee Corporation, a corporation wholly-owned

by the PDTC

PDIC ................................................ Philippine Deposit Insurance Corporation

PDTC ............................................... the Philippine Depository and Trust Corporation, thecentral securities depositary of, among others, securities

listed and traded on the PSE

Pesos, Php , or P ............................... the lawful currency of the Philippines

PFRS ................................................ Philippine Financial Reporting Standards

Philippines ....................................... Republic of the Philippines

PSE ................................................... Philippine Stock Exchange

QMS ................................................. quality management system

RMs .................................................. relationship managers

ROPA ............................................... real and other properties acquired

RTGS ............................................... Real-time gross settlement system

SEC The Philippine Securities and Exchange Commission

SCR sales contract receivables

SBL .................................................. single borrower limit

Shares ............................................... shares of common stock of the Bank

SMEs ................................................ small- to medium-sized enterprises

SSS ................................................... Social Security System

Subordinated Notes .......................... unsecured subordinated amounting to P3.7 billion issued

by the Bank in October 2009; and P1.3 billion issued by

the former iBank in March 2006

Subsidiary.in relation to the relevant company, any corporation,

partnership or other entity: (a) more than 50% of whose

outstanding capital stock is owned by the Issuer; or (b) of

which the Issuer has the ordinary voting power to elect a

majority of the board of directors or other persons

performing similar functions of such corporation,

partnership or other entity; or (c) is at the time directly or

indirectly controlled by the Issuer or one or more

Subsidiaries of the Issuer


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Tax Code .......................................... National Internal Revenue Code

TISG ................................................. Trust and Investment Services

TPFM ............................................... Trading, Positioning and Funds Management

TMS ................................................. Technology Management Services

U.S.$ or U.S. dollar .......................... the lawful currency of the United States of America

UnionBank Group ............................ the Issuer and the Issuers Affiliates and Subsidiaries

such as Union Properties, Inc., First Union Direct, First

Union Plans, Inc., First Union Insurance & Financial

Agencies, Inc., Union Data Corp., UnionBank Currency

Brokers, Inc. UBP Insurance Brokers, Inc., UBP

Securities, Inc., City Savings Bank and Interventure

Capital Corp.

UITF ................................................. unit investment trust funds

UPI ................................................... Union Properties, Inc.


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OFFERING CIRCULAR SUMMARY

This summary highlights information contained elsewhere in this Final Offering Circular. This summary is qualified by, and

must be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this Final

Offering Circular. Each prospective Noteholder is recommended to read this entire Final Offering Circular carefully,

including the Financial Statements and Investment Considerations.

Description of the Bank

Union Bank of the Philippines (UnionBank or the Bank) is a publicly-listed universal bank. The

Bank distinguishes itself through superior technology, unique branch sales and service culture, and

centralized backroom operations. UnionBanks superior technology allows delivery of online, real

time business solutions to meet the customers changing and diverse needs through innovative and

customized cash management products and service offerings. The Banks unique branch sales and

service culture ensures efficient and quality service as well as mitigates operational risk. Its distinct

centralized backroom operations enables the Bank to provide responsive, scalable, and secure

transaction processing.

Aligned with its thrust of being at the forefront of technology-based banking in the Philippines, the

Bank endeavors to elevate its systems and processes to be at par with international standards and best

practices. It obtained ISO 9001:2000 Quality Management System (QMS) certification for its

Central Processing Services (CPS)in 2008, making it then the FIRST and ONLY bank awarded for

its entire centralized backroom operations. In 2010, the Bank received ISO 9001:2008 certification, an

upgrade from the previous. Thereafter, UnionBank was certified for ISO 27001:2005 Information

Security Management System (ISMS), attesting to the Banks unwavering commitment to become

an acknowledged leader and benchmark for service quality, technological advancement, and

operational excellence. The Bank also achieved ISO 9001:2008 certifications for its Customer ServiceGroup in 2012 and Branch Operations Management in 2013, and has consistently been certified as

having zero non-conformance every year from date of certification during quality audits,

demonstrating the Banks dedication to uphold quality in its business processes. In March 2014,

UnionBank was certified for ISO 22301:2012 Business Continuity Management System (BCMS,

underscoring preparedness for and responsiveness to business disruptions.

Notwithstanding volatility in trading-related earnings, the Bank has a proven track record for

delivering consistent and strong performance from treasury businesses. Gains from the Banks

treasury businesses have historically accounted for a significant and consistent portion of the Banks

operating income.

UnionBanks clientele encompasses retail, middle-market and corporate customers, as well as major

government institutions. The Bank believes that its use of technology, and marketing and operational

structure has enabled it to capture and secure a loyal customer base, and to achieve high levels of

efficiency and productivity.

The Banks consolidated total assets amounted to P396.1 billion and P373.2 billion as of December

31, 2013 and June 30, 2014, respectively. Net income was P9.0 billion for the year ended

December 31, 2013 and P3.2 billion for the six months ended June 30, 2014. The Bank ended the

year 2013 with Tier 1 and Total Capital Adequacy Ratios at 16.0% and 18.5%, respectively. With

Basel III implementation beginning 2014, the ratios as of June 30, 2014 stood at 12.4% and 13.0%,respectively. UnionBank continued to exhibit above industry performance on key financial ratios,


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with return on shareholders equity, return on assets and cost-to-income ratios for the six months

ended June 30, 2014 at 13.7%, 1.6% and 53.4%, respectively. Based on consolidated quarterly reports

filed with the Philippine Securities and Exchange Commission (SEC), the Banks return on assets

and return on shareholders equity ranked second while its cost-to-income ratio was the second most

efficient among private domestic commercial banks in the Philippines.

The Banks authorized capital stock is 1.3 billion common shares with a par value of P10 each, and

100 million preferred shares at P100 each. As of June 30, 2014, there were 641.4 million issued and

outstanding common shares, fully paid. Based on the closing price of its shares on the Philippine

Stock Exchange (PSE) on June 30, 2014, the Bank had a market capitalization of approximately

P77.0 billion. The Banks Board of Directors (BOD) on April 28, 2014 and stockholders on May 23,

2014 approved the amendment of the Articles of Incorporation to increase the authorized capital stock

from P6.7 billion to P23.1 billion. The BSP approved the increase in authorized capital stock on

October 14, 2014. Subsequently, the SEC approved the same on November 4, 2014.

The Bank provides its relevant target customers information and transaction needs through itsconsolidated network of 243 strategically located branches and 277 automated teller machines

(ATMs) nationwide as of June 30, 2014, supplemented by a call center under the Banks ISO-

certified Customer Service Group. To complement its brick and mortar presence and strengthen its

digital footprint, UnionBank has a Web site, www.unionbankph.com.

Competitive Strengths

The Bank considers the following to be its principal competitive strengths:

Superior technology,

Unique branch sales and service culture,

Centralized backroom operations; and

Consistent and strong performance from Treasury businesses.

Business Strategy

The Banks corporate vision is to become one of the top three (3) universal banks in the Philippines in

respect to market capitalization, profits and customer coverage, grounded on its purpose of Making

the Diff by connecting and enabling communities through Smart Banking in the spirit of UBUNTU,

which means community building. To achieve this vision, UnionBank has adopted five (5) keystrategic imperatives, referred to as FOCUS, which is an acronym for the following:

Financial Value: Enhance the financial value of the Bank;

Operational Excellence: Increase productivity and quality;

Customer Franchise: Increase customer base and deepen strategic relationships;

UnionBank Brand/Experience: Create a unique UnionBank experience in strategic markets;

and

Superior Innovation: Continue to offer innovative products and services.


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The Bank will continue to selectively consider opportunities for acquisitions as they arise in order to

support growth under its FOCUS strategy.

Bank Information

The Banks registered office is located at UnionBank Plaza, Meralco Avenue cornerOnyx & Sapphire

Roads, Ortigas Center, Pasig City 1605, Philippines. The Banks telephone number is +(632) 667-

6388 and its corporate Web site is www.unionbankph.com. The information on the Banks Web site is

not incorporated by reference into, and does not constitute part of, this Final Offering Circular.

Recent Events

Purchase by Union Properties Inc. (UPI) of First Union Insurance and Financial Agencies, Inc.

(FUIFAI)

On May 23, 2013, the Board of Directors of UPI approved the purchase of FUIFAI. UPI bought 100%

outstanding capital stock of FUIFAI at total purchase price of P375,000, which was settled on August

23, 2013. FUIFAI was organized primarily to engage in the business of a general agent for life and

non-life insurance and other allied financial services. UPI is 100% owned by the Bank.

Issuance of P3.0 billion Long-Term Negotiable Certificates of Deposits

The Bank raised a total of P3.0 billion in its debut offering of Long-Term Negotiable Certificates of

Deposits (LTNCD)on October 20, 2013. The LTNCDs carry a coupon of 3.5% per annum, which

is payable quarterly beginning January 18, 2014 maturing on April 17, 2019. Proceeds of the

LTNCDs were utilized to improve the Banks deposit maturity profile and support business expansion

plans.

Redemption other than Call Option on P3.75 billion Unsecured Subordinated Debt

In a letter dated November 22, 2013, the BSP approved the Banks request to exercise the redemption

other than call option on the P3.75 billion worth of Unsecured Subordinated Debt on January 14, 2014,

with its non-eligibility as qualifying capital under Basel III regulations starting January 1, 2014. The

Bank issued the debt instrument on October 14, 2009, with an interest rate of 7.375% per annum.

Acquisition of Additional Shares of City Savings Bank, Inc. (CitySavings)

On February 28, 2014, the BOD approved the additional subscription of 62,976 common shares of

CitySavings at P15,879.15 per share, thus increasing UnionBanks percentage ownership to 99.64%.

On June 30, 2014, the Bank purchased 15 common shares from the minority shareholders of

CitySavings at P29,469.93 per share, thus increasing UnionBanks percentage ownership to 99.65%.

Increase in the Banks authorized capital stock

On April 28, 2014, the BOD approved, subject to ratification by stockholders, the amendment of its

Articles of Incorporation to increase the authorized capital stock from P6.7 billion to P23.1 billion.

The increase is divided into 641.4 million common shares and 100 million preferred shares, each with

a par value of P10 and P100, respectively. The BSP approved the increase in authorized capital stock

on October 14, 2014. Subsequently, the SEC approved the same on November 4, 2014.


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The BOD, likewise, approved the declaration of 65% stock dividend, equivalent to P4.2 billion, to

fund the required 25% of the P16.4 billion increase in authorized capital stock. Subsequently, the BSP

approved the stock dividends in its letter dated September 1, 2014.

Hiring of Mr. Ronaldo Francisco B. Peralta

On October 3, 2014, Mr. Ronaldo Francisco B. Peralta was hired as Chief Risk Officer of the Bank

with the rank of Senior Vice President, effective November 3, 2014.

Hiring of Mr. Paolo Eugenio J. Baltao

On November 6, 2014, the BOD approved via referendum the hiring of Mr. Paolo Eugenio J. Baltao

as Business and Product Development Head of the Bank with the rank of Senior Vice President,

effective December 1, 2014.

Early adoption of PFRS 9, Financial Instruments: Classification and Measurement

In a special meeting held on November 13, 2014, the BOD approved the early adoption of PhilippineFinancial Reporting Standard (PFRS) 9 Financial Instruments (2009 and 2010 versions) for the

Bank's financial statements for 2014. The Bank's subsidiaries, including CitySavings, also plan to

early adopt the standard in 2014. (See INVESTMENT CONSIDERATIONS Considerations

Relating to the Bank)


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SUMMARY OF THE OFFERING

The Underwriters and Selling Agents have agreed with the Bank, subject to the satisfaction of certainconditions, to distribute and sell the Notes at the Issue Price (defined below) in consideration forcertain fees and expenses. The Underwriters and Selling Agents will offer the Notes to selected

prospective Noteholders.

The distribution and sale of the Notes to prospective Noteholders shall be undertaken by theUnderwriters and the Selling Agents for the issue. Nothing herein shall limit the right of the IssueManager and Lead Underwriter to purchase the Notes for its own account. The Issue Manager and theUnderwriters may, from time to time, engage in transactions with and perform services for the Bankor its shareholders or affiliates in the ordinary course of its business.

The following is a general summary of the terms of the Notes. This summary is derived from andshould be read in conjunction with the full text of the Terms and Conditions of the Notes (the Termsand Conditions). The Terms and Conditions shall prevail in the event of any inconsistency with theterms set out in this section.

ISSUER Union Bank of the Philippines (the Issuer or the Bank)

INSTRUMENT Unsecured Subordinated Notes (the Notes) eligible as Tier 2 capitalof the Issuer

ISSUE SIZE Seven Billion Two Hundred Million Pesos (P7,200,000,000.00)

PURPOSE The net proceeds of the Notes are intended to: (i) increase and

strengthen the Banks capital base to mitigate the impact of itsexpanding lending and investment activities; and (ii) ensurecontinuing compliance with capital adequacy regulations of the BSP.

ISSUE PRICE 100% of the face value of the Notes

ISSUE DATE November 20, 2014

MATURITY DATE February 20, 2025

FORM The Notes will be represented by a Master Note. The Master Note,without coupons, shall be deposited with the Public Trustee. TheNotes shall be maintained in scripless and electronic form with theRegistrar through the Registry and shall be registered in the name ofthe Noteholders, subject to the payment of fees to Registrar. Seriallynumbered Registry Confirmations will be issued in favor of theNoteholders of the Notes in accordance with the Regulations and theRegistry and Paying Agency Agreement. The Notes will be eligiblefor electronic book-entry transfers in the Registry without theissuance of other evidences of the Notes.


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DENOMINATION Minimum denomination of P500,000.00, in increments ofP100,000.00 thereafter

OFFER PERIOD November 5 to November 13, 2014

INTEREST RATE The Notes will bear interest on its principal from and including eachIssue Date, up to, but excluding, Maturity Date, VoluntaryRedemption Option Date, Regulatory Redemption Date, or TaxRedemption Date, as the case may be, at the Interest Rate.

For the 1st to the 21st Interest Period, the applicable Initial InterestRate, and for the 22nd up to the last Interest Period, the applicableReset Interest Rate, subject to the Issuers exercise of the VoluntaryRedemption Option, Regulatory Redemption, or Tax Redemption.

INITIAL INTERESTRATE

5.375% per annum, payable to the Noteholders from the 1st to the21st Interest Period, subject to the Issuers exercise of the VoluntaryRedemption Option, Regulatory Redemption, or Tax Redemption

INITIAL SPREAD 1.96% per annum

BENCHMARK Prevailing Philippine Dealing System Treasury Reference Rate PM(PDST-R2) 5-year treasury securities benchmark rate displayed underthe heading Bid Yieldas published on the Philippine Dealing andExchange Corporation (PDEx) Page (or such successor page) ofBloomberg (or such successor electronic service provider) atapproximately 4:30 p.m., Manila time.

INITIAL BENCHMARK The three (3) day simple average of the Benchmark preceding andinclusive of the Benchmark on Pricing Date.

RESET INTERESTRATE The Initial Spread plus the Benchmark as of Reset Date, payable tothe Noteholders in lieu of the Initial Interest Rate beginning on the22nd Interest Period up to the last Interest Period, subject to theIssuers exercise of the Voluntary Redemption Option, RegulatoryRedemption, or Tax Redemption.

BENCHMARK AS OFRESET DATE

The three (3) day simple average of the Benchmark preceding andinclusive of the Benchmark on Reset Date.

RESET DATE Unless otherwise redeemed, the Notes shall be repriced on the last

Business Day of the 21st

Interest Period.


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INTEREST PAYMENT Each Interest Payment to be paid on the Notes, calculated on a30/360-day year basis, payable quarterly in arrears on the last day ofeach three-month Interest Period (each an Interest Payment Date).

The 1st Interest Payment will be for interest that accrues from, andincluding, the Issue Date, up to, but excluding, the last day of 1stInterest Period, which is the Interest Payment Date falling threemonths after the Issue Date. The Subsequent Interest Payments willbe for interest that accrues from, and including, the immediatelypreceding Interest Payment Date, up to, but excluding, theimmediately succeeding Interest Payment Date. The last InterestPayment will be for interest that accrues from, and including theimmediately preceding Interest Payment Date, up to, but excluding,the Maturity Date, Voluntary Redemption Option Date, RegulatoryRedemption Date, or Tax Redemption Date, as the case may be.

Any payment of principal or interest under the Notes shall be made tothe Noteholders in accordance with the records of the Registrar.Payments shall be made in proper amounts, net of taxes and fees, ifany, through the Paying Agent, in the mode elected by the Noteholderin the ATP by way of: (a) in the case of Noteholders who maintain acash account with the Payment Bank, through a direct credit to theirpeso current or savings account as indicated in the ATP; or (b) in thecase of Noteholders who do not maintain an account with the Issuer,through Real Time Gross Settlement System (RTGS) to the BSPDemand Deposit Account (BSP DDA) of the cash settlement banknominated by the Noteholders as indicated in the ATP.

INTEREST PERIOD Consecutive three (3) calendar month period reckoned from the IssueDate up to the numerically same day of the third (3rd) month fromIssue Date, and every succeeding three (3) calendar month periodbeginning on the last day of the prior period up to the numericallysame day of the third month thereafter, until the Maturity Date,Voluntary Redemption Date, Tax Redemption Date, RegulatoryRedemption Date, as the case may be.

INTEREST PAYMENTDATE

The last day of an Interest Period when an Interest Payment in respectof the Notes becomes due. If an Interest Payment Date falls on a day

which is not a Banking Day, the Interest Payment Date shall be theimmediately succeeding Banking Day. If such succeeding BankingDay falls into the next calendar month, the Interest Payment Dateshall be the immediately preceding Banking Day. In either case, thereshall be no adjustment to the amount of interest to be paid.

PRINCIPALREPAYMENT

Unless the Notes have been redeemed earlier by the Issuer pursuantto the Voluntary Redemption Option, Regulatory Redemption, or TaxRedemption, the Notes will be redeemed at its nominal principal

amount on the Maturity Date. If the Maturity Date falls on a date thatis not a Banking Day, the Maturity Date shall fall on the immediately


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succeeding Banking Day without adjustment to the amount payablein respect of the Notes.

STATUS ANDSUBORDINATION

The Notes constitute a direct, unconditional, unsecured andsubordinated obligation of the Bank.

Claims in respect of the Notes will rank:

(a) junior to the claims of holders of all deposits and general creditorsof the Bank;

(b) pari passuwith obligations of the Bank that are, expressly or byapplicable laws, subordinated so as to rankpari passuwith claims inrespect of securities constituting Tier 2 capital of the Bank asdefined under BSP Guidelines from time to time; and

(c) senior to [i] the claims for payment of any obligation that,expressly or by applicable law, is subordinated to the Notes, [ii] theclaims in respect of securities constituting Additional Tier 1capitalof the Bank as defined under BSP Guidelines from time to time, and[iii] the rights and claims of holders of equity shares of the Bank.

The Notes are (a) not a deposit and are not insured by the PhilippineDeposit Insurance Corporation (PDIC), (b) subordinated to the claimsof depositors and ordinary general creditors of the Bank, (c)unsecured and not covered by the guaranty of the Bank, the IssueManager and Lead Underwriter, the Selling Agents or any of theirSubsidiaries and Affiliates, or any other arrangement that legally or

economically enhances the priority of the claim of the Noteholder asagainst to depositors or creditors of the Issuer, (d) are not guaranteedby the national government, (e) ineligible as collateral for a loangranted by the Bank, its Subsidiaries and Affiliates, and (f) do nothave a priority claim in respect of principal and coupon payments inthe event of winding up of the Bank, which is higher than or equalwith that of depositors or other creditors.

SECONDARYTRADING

All secondary transfers or assignments of the Notes shall be coursedthrough the Market Maker or other institutions authorized by the BSPin accordance with the Regulations.

TRANSFERABILITY The Notes may be transferred by a Noteholder at any time to aprospective Noteholder who is not a Prohibited Noteholder, providedthat transfers from a Noteholder to any person whose interest incomederived from the Notes is subject to a different tax treatmentcompared to that of the transferor can only be effected on an InterestPayment Date.

Transfers of the Notes by a Qualified Individual Noteholder to anyperson before such transferor Qualified Individual Noteholder hasheld the transferred Notes for at least five years shall subject the

transferor Qualified Noteholders interest income on the Notes to


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Final Withholding Tax (FWT) at the following graduated rates:

(a) if the Qualified Individual Noteholder has held the redeemed ortransferred Notes for less than three years20%

(b) if the Qualified Individual Noteholder has held the redeemed ortransferred Notes for three years to less than four years12%

(c) if the Qualified Individual Noteholder has held the redeemed ortransferred Notes for four years to less than five years5%

A Qualified Individual Noteholderis an individual citizen (residentor non-resident), resident alien, or non-resident alien engaged in tradeor business in the Philippines.

Transfers of the Notes by a Non-Resident Alien Not Engaged inTrade or Business in the Philippines, a Non-Resident ForeignCorporation, or a Domestic or Resident Foreign Corporation, to anyperson, at any time, shall subject the transferorsinterest income fromthe Notes to FWT at the rate of 25%, 30%, or 20%, respectively.

Any FWT due on a transfer of the Notes voluntarily done by aNoteholder shall be shouldered by such Noteholder and deducted andwithheld from the proceeds of the Notes by the Paying Agent onbehalf of the Issuer as withholding agent.

Transfers shall be subject to:

(a) payment by the Noteholders of all applicable fees to all the

relevant parties; and

(b) procedures for transfers outlined in the Offering Circular.

Transfers from one Noteholder to another do not constitute pre-termination.

For tax purposes, transfers from one holder to another shall be subjectto the pertinent provisions of the National Internal Revenue Code of1997 (NIRC), as amended, and Bureau of Internal Revenueregulations.

TAXATION Qualified Individual Noteholders

All payments of interest with respect to the Notes to QualifiedIndividual Noteholders shall be exempt from income tax, providedthe following characteristics and conditions are present:

(a) the Noteholder is an individual citizen (resident or non-resident),a resident alien, or a non-resident alien engaged in trade orbusiness in the Philippines (Qualified IndividualNoteholders);

(b) the Notes are under the name of the individual Noteholder and

not under the name of a corporation or a bank or a trust


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department/unit of the bank;

(c) the Issuer does not redeem the Notes prior to the Noteholderhaving held the redeemed Notes for at least five years;

(d) the BSP has approved the denomination of the Notes; and

(e) the Notes have not been transferred by the Noteholder until afterthe Noteholder has held the Notes for at least five years.

In the absence of condition (a), interest income from the Notesreceived by a Non-Resident Alien Not Engaged in Trade or Businessin the Philippines, a Non-Resident Foreign Corporation, or aDomestic or Resident Foreign Corporation, shall be subject to FWTat the rate of 25%, 30%, or 20%, respectively.

In the absence of conditions (b) and/or (d), interest income from theNotes received by a Qualified Individual Noteholder shall be subjectto FWT at the rate of 20%.

In the absence of conditions (c) or (d), interest income from the Notesreceived by a Qualified Individual Noteholder shall be subject toFWT at the following graduated rates:

(a) if the Qualified Individual Noteholder has held the redeemed ortransferred Notes for less than three years20%

(b) if the Qualified Individual Noteholder has held the redeemed ortransferred Notes for three years to less than four years12%

(c) if the Qualified Individual Noteholder has held the redeemed ortransferred Notes for four years to less than five years5%

Non-Resident Aliens Not Engaged in Trade or Business in the

Philippines

Interest income from the Notes shall be subject to FWT at the rate of25% if received by a non-resident alien not engaged in trade orbusiness in the Philippines.

Non-Resident Foreign Corporations

Interest income from the Notes shall be subject to FWT at the rate of30% if received by a non-resident foreign corporation.

Domestic and Resident Foreign Corporations

Interest income from the Notes shall be subject to FWT at the rate of20% if received by a domestic or resident foreign corporation.

Tax-Exempt Entities

All payments of interest with respect to the Notes to an entity that

enjoys tax-exempt status (upon presentation of acceptable proof oftax exemption) shall be exempt from income tax.


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Liability and Withholding of FWT

Any FWT due on a transfer of the Notes voluntarily done by aNoteholder shall be shouldered by such Noteholder and deducted andwithheld from the proceeds of the Notes by the Paying Agent onbehalf of the Issuer as withholding agent. The Issuer shall, uponrequest of the relevant Noteholder, provide the necessary proof ofsuch withholding and corresponding payment to the Philippinerevenue authorities.

Any FWT due in the event of an exercise of the Redemption Option,Regulatory Redemption, or Tax Redemption, shall be shouldered bythe Issuer.

Issuers Non-Liability

In any case, the Issuer shall not be liable for:

(a) except as otherwise provided in these Terms, any FWT or regularincome tax applicable on interest earned on the Notes, includingthose earned by non-resident aliens not engaged in trade orbusiness in the Philippines, non-resident foreign corporations,and domestic and resident foreign corporations;

(b) Gross Receipts Tax under Section 121 of the National InternalRevenue Code, as amended (NIRC);

(c) taxes on overall income of any securities dealer or anyNoteholder, whether or not subject to withholding; and

(d) Value Added Tax (VAT) under Sections 106 to 108 of the NIRC.

New Taxes

In the event there is a change in the tax treatment of the Notes or on aNoteholder because of new, or changes in, tax laws, or interpretationsthereof, as a result of which, any payments of principal and/or interestunder the Notes shall be subject to deductions or withholdings for oron account of any taxes, duties, assessments, or governmental chargesof whatever nature imposed, levied, collected, withheld, or assessedwithin the Philippines by any authority therein or thereof having

power to tax, including but not limited to stamp, issue, registration,documentary, value-added or similar tax, or other taxes, duties,assessments, or government charges, including interest, surcharges,and penalties thereon (the "New Taxes"), then such New Taxesimposed shall be for the account of the Noteholders and the PayingAgent, on behalf of the Issuer, as applicable, shall make the necessarywithholding or deduction for the account of the Noteholdersconcerned. All sums payable by the Issuer to tax-exempt persons(upon presentation of acceptable proof of tax exemption) shall bepaid in full without deductions for taxes, duties, assessments, orgovernment charges.

Documentary Stamp Tax


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Documentary stamp tax for the issuance of the Notes and theexecution of the agreements pursuant thereto, if any, shall be for theIssuers account.

CALL OPTION Provided a Non-Viability Trigger Event is not occurring and subjectto the Regulations, the Issuer shall have the option (but not theobligation), upon securing all required regulatory approvals, toredeem the Notes as a whole, but not in part, in the followingcircumstances:

(a) Voluntary Redemption Option

(b) Tax Redemption Event

(c) Regulatory Redemption Event

VOLUNTARYREDEMPTION OPTION

The Issuer may, at its option, on a Redemption Option Date, at theRedemption Option Price, upon compliance with the noticerequirements and subject to the Redemption Conditions beingsatisfied, redeemall and not less than all of the outstanding Notes bypaying the Noteholder the Voluntary Redemption Amount. .

Voluntary Redemption Date means the last day of the twenty-first(21st) Interest Period and on any Interest Payment Date thereafter.

Voluntary Redemption Amount means 100% of the face value ofthe Note plus unpaid and accrued interest as of but excluding the

Voluntary Redemption Date.

The notice for the Voluntary Redemption shall be sent by the Issuerto the Public Trustee (with copy to the Registrar and Paying Agent)and to each of the registered Noteholders no less than thirty (30)Banking Days nor more than forty five (45) Banking Days prior tothe Voluntary Redemption Date. The Issuer shall likewise publish thenotice of the Voluntary Redemption in two (2) newspapers of generalcirculation in Metro Manila once a week for two (2) consecutiveweeks at any time prior to the Voluntary Redemption Date. Suchnotice shall state the Voluntary Redemption Date, the VoluntaryRedemption Amount and the manner in which the call will be

effected.

In the event of an exercise of the Voluntary Redemption Option, theIssuer shall shoulder the taxes due, if any, on the interest incomealready earned by the Noteholders.

Nothing herein shall be construed as an indication that the Issuer willexercise its Voluntary Redemption Option and the Noteholdersshould not expect that such Voluntary Redemption Option will beexercised.


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REGULATORYREDEMPTION

If a Regulatory Redemption Event has occurred and is continuing, theIssuer may, upon at least a 30-Banking Day prior written notice tothe Noteholders on record and subject to the Redemption Conditionsbeing satisfied, redeem all and not less than all of the outstandingNotes prior to the stated maturity by paying the Noteholder theRegulatory Redemption Amount.

A Regulatory Redemption Eventis deemed to have occurred if theIssuer is notified in writing by the BSP that, as a result of anyamendment to the applicable regulatory capital requirements, theNotes in their entirety may no longer be included in full in theconsolidated Tier 2 Capital of the Issuer. For the avoidance of doubt,a Regulatory Redemption Event shall not include disqualification ofthe Notes (a) by virtue of the Issuer already having outstandingsecurities with an aggregate principal amount of up to or in excess ofthe limit of Tier 2 Capital permitted from time to time by the BSP or(b) as a result of any discounting requirements as to the eligibility of

the Notes for such inclusion pursuant to the relevant requirementsissued by the BSP.

In the event of an exercise of the Regulatory Redemption Option, theIssuer shall shoulder the taxes due, if any, on the interest incomealready earned by the Noteholders.

Regulatory Redemption Amountmeans an amount equal to 100%of the face value of the Note plus accrued and unpaid Interest at theInterest Rate relating to the then current Interest Period up to butexcluding the date of such redemption (the Regulatory RedemptionDate).

TAX REDEMPTION If a Tax Redemption Event has occurred and is continuing, the Issuermay, upon at least a 30-Banking Day prior written notice to theNoteholders on record and subject to the Redemption Conditionsbeing satisfied, redeem all and not less than all of the outstandingNotes prior to the stated maturity by paying the Noteholder the TaxRedemption Amount.

A Tax Redemption Event is deemed to have occurred when: (a) asa result of a change in law, in respect of the Issuers obligation tomake any Interest Payment on the next following Interest Payment

Date, the Issuer would not be entitled to claim a deduction incomputing its tax liabilities in the Philippines; or (b) as a result of achange in law, the Issuer becomes obliged to account for any tax onbehalf of any Noteholder, which obligation did not exist prior to thechange in law; and, in each case, such obligation cannot be avoidedby the Issuer taking reasonable measures available to it.

In the event of an exercise of the Tax Redemption Option, the Issuershall shoulder the taxes due, if any, on the interest income alreadyearned by the Noteholders.

Tax Redemption Amount means an amount equal to 100% of the

face value of the Note plus accrued and unpaid Interest at the InterestRate relating to the then current Interest Period up to but excluding


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the date of such redemption (the Tax Redemption Date).

REDEMPTIONCONDITIONS

Redemption Conditionsmean:

(a) the Issuer has obtained prior written approval and compliedwith the requirements of the BSP prior to the redemption of theNotes;

(b.i) the Notes are simultaneously replaced with issues of newcapital of the same or better quality and the replacement of thiscapital is done at conditions which are sustainable for theincome capacity of the Issuer; or

(b.ii) the Issuer demonstrates that its capital position is well abovethe minimum capital requirements after the redemption isexercised;

(c) the Issuer is not in breach of (and would not, following suchredemption, be in breach) of applicable regulatory capitalrequirements (including required capital buffers); and

(d) the Issuer is solvent at the time of redemption of the Notes andimmediately thereafter.

As the same may be amended from time to time pursuant toRegulations.

LOSS ABSORPTIONFEATURE The Notes have a loss absorption feature which means the Notes aresubject to a Non-Viability Write-Down in case of a Non-ViabilityTrigger Event.

NON-VIABILITYWRITE-DOWN

If a Non-Viability Trigger Event has occurred and is continuing, theIssuer shall, no later than the 12 noon on the Banking Dayimmediately following the occurrence of such Non-Viability TriggerEvent, without need of any approval from the Noteholders or PublicTrustee, give a Non-Viability Notice to the Public Trustee and to the

Registry and Paying Agent and said notice shall be irrevocable.

Upon the occurrence of a Non-Viability Trigger Event, the Issuershall write-down the principal amount of each Note to the extentrequired by the BSP, which could go to as low as zero. AdditionalTier 1 (AT1) capital instruments shall be utilized first before Tier 2capital instruments are written-down, until the viability of the Issueris re-established. In the event the Issuer does not have AT1 capitalinstruments, then the write-down shall automatically apply to Tier 2capital.

A Non-Viability Write-Down shall have the following effects: (a) it

shall reduce the claim on the Notes in liquidation; (b) reduce theamount re-paid when a redemption is properly exercised; and (c)


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partially or fully reduce the interest payments on the Notes.

Upon the occurrence of a Non-Viability Write-Down, the fullprincipal amount of the Notes may be permanently written down tozero and the Notes may be cancelled, and, as a result, the Noteholdersmay lose the entire amount of their investment in the Notes,irrespective of whether the Issuer has sufficient assets available tosettle the claims of the Noteholders under the Notes, in bankruptcyproceedings or otherwise.

Any such Non-Viability Write-down will be irrevocable and theNoteholders will, upon the occurrence of a Non-Viability Write-down, not (a) receive any shares or other participation rights in theIssuer or be entitled to any other participation in the upside potentialof any equity or debt securities issued by the Issuer or any of itssubsidiaries or affiliates, or (b) be entitled to any subsequent write-upor any other compensation in the event of a potential recovery of the

Issuer or its Subsidiaries.

NON-VIABILITYTRIGGER EVENT

A Non-Viability Trigger Event is deemed to have occurred whenthe Issuer is considered non-viable as determined by the BSP. Non-viability is defined as a deviation from a certain level of CommonEquity Tier 1 (CET1) Ratio or inability of the Issuer to continuebusiness, closure, or any other event as determined by the BSP,whichever comes earlier.

Specifically, a Non-Viability Trigger Event shall be deemed to haveoccurred if the BSP notifies the Issuer in writing that it has

determined that a:

(a)Write-Down of the Notes and other capital instruments of theIssuer is necessary because, without such Write-Down, the Issuerwould become non-viable;

(b) public sector injection of capital, or equivalent support, isnecessary because, without such injection or support, the Issuerwould become non-viable; or

(c) Write-Down of the Notes and other capital instruments of theIssuer is necessary because, as a result of the closure of the Issuer,the Issuer would become non-viable.

As the same may be amended from time to time pursuant toRegulations.

NON-VIABILITYNOTICE

The Non-Viability Event Notice means the notice that the PublicTrustee shall give to the Noteholders stating that a Non-ViabilityTrigger Event has occurred, which notice shall be given, no later thanthree (3) Banking Days after the occurrence of a Non-ViabilityTrigger Event.


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NON-PRETERMINABILITY

The Notes shall not be redeemable or terminable at the instance ofany Noteholder before Maturity Date unless otherwise expresslyprovided herein.

Transfers from one Noteholder to another do not constitute pre-termination.

For tax purposes, transfers from one holder to another shall be subjectto the pertinent provisions of the NIRC, as amended, and Bureau ofInternal Revenue regulations.

REGULATIONS AMLA, Securities Regulation Code (Republic Act No. 8799), theRevised Implementing Rules and Regulations to the SecuritiesRegulation Code, General Banking Law of 2000 (Republic Act No.8791), the New Central Bank Act (Republic Act No. 7653), Manualof Regulations for Banks updated as of 2012, , BSP Circular Nos. 503(2005), 778 (2013), 781 (2013), 786 (2013) 826 (2014) and 834(2014), which govern the issuance of unsecured subordinated debt,and other related circulars and issuances, as these may be amendedfrom time to time.

For purposes of this Offering Circular, AMLA shall mean Anti-Money Laundering Act of the Philippines, as amended by RepublicAct No. 9194 (2003), Republic Act No. 10167 (2012), and RepublicAct No. 10365 (2012), its implementing rules and regulations, andrelated laws, rules and regulations including: Republic Act No. 10173(2012); Republic Act No. 10168 (2012); Republic Act No. 9510(2008); Republic Act No. 9372 (2007); Republic Act No. 9165(2002), as these may be amended from time to time. BSP Basel IIICircularshall mean BSP Circular No. 781, Series of 2013, as maybe amended from time to time.

GOVERNING LAWAND JURISDICTION

Laws of the Republic of the Philippines

ISSUE MANAGER ANDLEAD UNDERWRITER

BDO Capital & Investment Corporation

UNDERWRITER China Banking Corporation


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SELLING AGENTSBDO Capital & Investment Corporation

China Banking Corporation

Multinational Investment Bancorporation

LIMITED SELLINGAGENT

Union Bank of the Philippines

MARKET MAKER Multinational Investment Bancorporation

REGISTRAR ANDPAYING AGENT

Deutsche Bank AG, Manila Branch - Investor Services

PUBLIC TRUSTEE Development Bank of the PhilippinesTrust Services


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SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION

The following tables present selected consolidated financial information of the Bank and should be read in conjunction with the consolidated

financial statements and the related notes included elsewhere in this Offering Circular. The selected financial information presented below as of and

for the years ended December 31, 2011, 2012, and 2013 were derived from the consolidated financial statements prepared in accordance withfinancial reporting standards in the Philippines for banks which include Philippine Financial Reporting Standards (PFRS), as discussed in Note 2to the Banks financial statements, and audited by Punongbayan & Araullo ( P&A) in accordance with Philippine Standards on Auditing. The

selected financial information as of and for the six months ended June 30, 2013 and 2014 were derived from the unaudited interim consolidatedfinancial statements of the Bank, prepared in accordance with Philippine Accounting Standards (PAS) PAS 34, Interim Financial Reporting, andreviewed by P&A in accordance with Philippine Standard on Review Engagement 2410, Review of Interim Financial Information Performed by the

Independent Auditor of the Entity(PSRE 2410). The selected financial information set out below does not purport to project the consolidated resultsof operations or financial position of the Bank for any future period or date.

Audited Unaudited

For the years ended December 31For the periods ended

June 30

2011 2012 2013 2013 2014

INTEREST INCOME ON

Loans and other receivables 6,875.6 6,984.1 8,354.1 4,060.4 4,473.2

Trading and investment securities 4,011.1 3,745.2 3,885.8 1,811.6 2,127.6Cash and cash equivalents 831.6 113.8 1,046.6 501.2 768.7

Interbank loans receivable 32.1 24.8 19.2 9.7 7.1

11,750.4 10,867.9 13,305.8 6,382.8 7,376.5

INTEREST EXPENSE ON

Deposit liabilities 4,349.4 3,182.9 3,747.5 1,973.4 1,938.2

Bills payable and other liabilities 453.7 409.3 684.5 346.1 197.5

4,803.1 3,592.2 4,432.0 2,319.5 2,135.7

NET INTEREST INCOME 6,947.3 7,275.6 8,873.8 4,063.3 5,240.8

PROVISION FOR

IMPAIRMENT LOSSES1,549.6 1,559.8 1,044.8 369.6 207.8

NET INTEREST INCOME

AFTER IMPAIRMENT

LOSSES

5,397.8 5,715.8 7,829.0 3,693.7 5,033.0

OTHER INCOME

Trading gain-net 5,401.5 6,472.8 6,129.0 5,613.2 988.4

Premium revenues 1,387.3 1,243.0 1,384.6 1,003.7 300.4

Service charges, fees andcommissions

846.6 861.6 2,445.6 1,001.6 1,615.4

Miscellaneous 1,922.6 2,253.4 2,659.4 1,091.6 820.0

9,558.0 10,830.9 12,618.6 8,710.1 3,724.1

OTHER EXPENSES

Salaries and employee benefits 2,897.8 3,239.6 3,498.2 2,082.6 1,807.1

Trust fund due 1,304.1 1,168.9 1,297.2 937.3 279.4

Taxes and licenses 830.3 998.2 1,487.6 942.9 670.2

Occupancy 545.5 553.7 621.2 302.7 329.0

Depreciation and amortization 357.8 351.5 467.2 225.4 253.7

Miscellaneous 2,185.5 2,293.0 3,049.8 1,239.9 1,450.2

8,120.9 8,604.8 10,421.2 5,730.8 4,789.6

PROFIT BEFORE TAX 6,834.8 7,941.9 10,026.4 6,673.0 3,967.6

TAX EXPENSE 210.9 335.2 997.4 481.2 794.3

NET PROFIT 6,623.9 7,606.6 9,029.1 6,191.8 3,173.3


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Audited Unaudited

As of December 31 As of June 30

2011 2012 2013 2013 2014

Cash and Other Cash Items 3,686.9 4,242.4 5,197.0 3,836.2 5,087.6Due from Bangko Sentral ng Pilipinas 28,771.9 27,450.3 96,200.5 91,927.4 98,884.7

Due from Other Banks 3,213.7 2,999.3 6,421.9 2,919.3 7,367.7

Interbank Loans Receivable 12,989.1 5,503.5 13,829.8 13,062.7 9,247.0

Trading and Investment Securities 90,014.4 88,955.8 95,561.8 92,819.6 93,146.4

At fair value through profit or loss 270.9 397.5 1,420.5 321.0 1,018.4

Availableforsale"#$%$%' %(()*( +net

89,743.5 88,558.3 94,141.3 92,498.6 92,128.0

Loans and Other Receivablesnet 105,011.2 119,716.6 142,117.1 99,751.3 122,216.7

Bank Premises, Furniture, Fixturesand Equipmentnet

2,769.6 3,105.8 2,950.7 3,308.1 2,896.3

Assets Held for Sale 198.1 397.5 490.8 504.7 462.4

Investment Properties 12,167.0 11,555.1 13,198.6 12,047.3 13,173.7

Goodwill 7,886.9 7,886.9 11,258.3 11,258.3 11,258.3

Other Resourcesnet 6,057.5 8,110.3 8,855.5 9,354.9 9,465.4

TOTAL RESOURCES 272,766.3 279,923.4 396,082.1 340,789.7 373,206.2

Deposit Liabilities 206,653.3 189,841.3 298,237.5 259,546.1 297,923.2

Demand 114,752.3 62,811.7 108,683.3 87,824.4 112,869.0

Savings 22,521.9 23,868.7 29,823.7 25,418.6 34,855.5

Time 69,379.2 103,160.9 159,730.5 146,303.1 150,198.8

Bills Payable 5,619.2 18,541.3 23,167.1 15,208.0 5,950.7

Notes Payable 3,750.0 3,750.0 3,750.0 3,750.0 -

Other Liabilities 14,333.3 20,452.7 25,935.3 17,697.1 21,687.6

TOTAL LIABILITIES 230,355.8 232,585.3 351,090.0 296,201.2 325,561.6

TOTAL CAPITAL FUNDS 42,410.4 47,338.1 44,992.1 45,588.5 47,644.7

Common Stock 6,414.2 6,414.2 6,414.2 6,414.2 6,414.2

Additional Paid-in Capital 5,819.9 5,819.9 5,819.9 5,819.9 5,819.9

Surplus 28,043.5 33,710.5 39,405.8 37,655.8 39,753.7

Surplus Reserve for Trust Business 134.2 149.6 1,234.4 149.6 1,224.6

Net Unrealized Fair Value

Gain/(Loss) on AvailableforsaleFinancial Assets

2,459.5 1,806.6 (7,535.3) (4,964.7) (5,116.8)

Remeasurements of defined benefitplan (460.9) (562.7) (361.8) (498.7) (468.7)

Noncontrolling Interest - - 14.9 12.4 17.8

TOTAL LIABILITIES AND

CAPITAL FUNDS272,766.3 279,923.4 396,082.1 340,789.7 373,206.2


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KEY PERFORMANCE INDICATORS1

Audited Unaudited

For the years ended December 31For the periods ended

June 30

2011 2012 2013 2013 2014

Return on Assets 2.6% 3.1% 2.6% 4.0% 1.6%

Return on shareholders equity 17.4% 17.5% 18.3% 26.9% 13.7%

Net interest margin 3.2% 3.9% 3.4% 3.4% 3.4%

Cost-to-income ratio 54.3% 52.0% 51.0% 44.9% 53.4%

Net loans and other receivables-to-deposits

50.8% 63.1% 47.7% 38.4% 41.0%

Tier I capital adequacy ratio 15.3% 18.0% 16.0% 16.7% 12.4%

Total capital adequacy ratio 18.2% 20.7% 18.5% 19.5% 13.0%

Total equity-to-total assets 15.6% 16.9% 11.4% 13.1% 12.8%

Total non-performing loans-to-total

loansexcluding interbankloans 3.2% 3.5% (0.1%) (0.2%) 0.2%

Total non-performing loans-to-totalloansincluding interbank loans

2.8% 3.3% (0.1%) (0.2%) 0.2%

Allowances for probable loanlosses to total loans

10.6% 11.7% 9.3% 10.5% 8.7%

Allowances for probable loanlosses-to-total non-performingloans

100.6% 104.2% 118.0% 112.6% 110.1%

Earnings per share (P) 10.3 11.9 14.1 19.3 9.9

1Return on Average Assets: Annualized net income divided by average total resources for the period indicated

Return on Average Equity: Annualized net income divided by average total capital funds for the period indicated

Net Interest Margin: Annualized net interest income divided by average earning assets for the period indicated

Cost-to-Income Ratio: Total operating expenses divided by the sum of net interest income and other income

Net Non-Performing Loan Ratio: (Total non-performing loans less specific loan loss reserves) divided by (total loansinclusive of interbank loans receivables)

Non-Performing Loan Cover: (Total allowance for loan losses) divided by (total non-performing loans)

Capital Adequacy Ratio: Total qualifying capital divided by total risk-weighted assets (inclusive of credit, market andoperational risk charge)


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INVESTMENT CONSIDERATIONS

An investment in the Notes involves a number of investment considerations. You should carefully consider all the

information contained in this Final Offering Circular including the investment considerations described below, before any

decision is made to invest in the Notes. The Bank's business, financial condition and results of operations could be

materially and adversely affected by any of these investment considerations. The market price of the Notes could decline due

to any one of these risks, and all or part of an investment in the Notes could be lost.

The following discussion is not intended to be a comprehensive description of the risks and other factors and is not in any

way meant to be exhaustive. Prospective Noteholders are encouraged to make their own independent legal, tax, financial,

and business examination of the Bank, the Notes, and the market. Neither the Bank nor the Issue Manager make any

warranty or representation on the marketability or price on any investment in the Notes.

Considerations Relating to the Bank

The Bank may not be successful in implementing its strategies.

The Banks long-term FOCUS strategy is principally about leveraging - leveraging its capital, branchnetwork, corporate relationships, process, DNA, partners and scale. The Bank intends to achieve

retail-based asset build-up and a more cost-effective funding base, anchored on its thrust on

broadening customer base and deepen relationships through innovative product and service offerings.

Growth strategy

The Bank's growth strategy contemplates, among other things, organic growth and growth through

acquisitions. As part of its acquisition strategy, the Bank regularly evaluates potential acquisition

targets, and may in the future seek to acquire other businesses to expand its operations.

It has undertaken two bank mergers with International Corporate Bank (Interbank) in 1993 and

International Exchange Bank (iBank) in 2006, catapulting it to being one of the 10 largest universal

banks in the Philippines based on asset size.

On January 8, 2013, the Banks Board of Directors (BOD) approved the purchase of City Savings

Bank, Inc. (CitySavings), a premier thrift bank specializing in granting teachers loans under the

Department of Educations (DepEd) Automatic Payroll Deduction System (APDS). The

acquisition is in accordance with the Banksbusiness plan and aligned with managements long-term

strategy of building asset businesses based on consumers. It will complement the Banks business

operations, financial condition and performance as this provides the following:

Potential to be one of the Banks highest earning customer business segment;

Potential to apply the current teachers loan business model to other civil servant market

segments;

Opportunity for UnionBank and CitySavings to complement each others management

strengths, augment technological skills, leverage financial capabilities, and, ultimately,

maximize value for all stakeholders; and

Significant impact on industry standing.

As of June 30, 2014, the Bank had consolidated total assets of P373.2 billion, total deposits of P297.9

billion and loan portfolio of P129.3 billion.


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There can be no assurance that the Bank will not experience difficulties integrating acquired

businesses, retaining and integrating key employees of acquired companies, or addressing new

business risks not currently faced by the Bank. If general economic and regulatory conditions or

market and competitive conditions change, or if operations do not generate sufficient funds or other

unexpected events occur, the Bank may decide to delay, modify or forego some aspects of its growth

strategies, and this could have an adverse effect on the Bank's financial condition and results of

operations as well as its future growth prospects.

In addition, completing acquisitions could require use of a significant amount of the Banks available

cash. Acquisitions and investments may also have negative effects on the Bank's reported results of

operations due to acquisition related charges, amortization of acquired technology and other

intangibles, and/or actual or potential liabilities, known and unknown, associated with the acquired

businesses or joint ventures. Any of these acquisition related risks or costs could adversely affect the

Bank's business, financial condition and results of operations.

Business strategy

The Banks business strategy includes expanding the range of its products and services to diversify its

revenue sources and to solidify its strong foothold on its established franchises further widening its

loyal customer base. For example, the Bank has targeted the retail and middle-market banking

segments as key areas for growth. Expanding the Banks business activities to increase the number of

financial products and services that it offers exposes the Bank to a number of risks and challenges

including, among others, the following:

new and expanded business activities may require greater marketing and compliance costs

than the Banks traditional services;

new and expanded business activities may have less growth or profit potential than the Bank

anticipates and there can be no assurance that new business activities will become profitable

at the level the Bank desires or at all;

the Bank may fail to identify and offer attractive new services in a timely fashion, putting it at

a disadvantage to competitors;

the Banks competitors may have substantially greater experience and resources for the new

and expanded business activities and thus the Bank may not be able to attract customers from

its competitors;

the Bank may need to enhance the capability of its information technology systems to support

a broader range of activities; and

economic conditions, such as rising interest rates or inflation, could hinder the Banks

expansion, particularly in the consumer loan industry.

In addition, new business endeavors may require knowledge and expertise which differ from those

used in the current business operations of the Bank, including different management skil

UnionBank - TIER II 2014 - Final Offering Circular_11 20 2014

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