2011 Annual Report Financial Supplements - BDO

NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)Senior NotesOn October 22, 2010, BDO Unibank Group issued Senior Notes with a face value of US$300million at a price of 99.632 or a total price of US$299 million. The Senior Notes, which willmature on April 22, 2016, bear a fixed interest rate of 3.875% per annum,with an effective rate of 3.95% per annum, and will be payable semi-annually everyApril 22 and October 22 starting in 2011. The net proceeds from the issuance are intended tosupport business expansion plans, and general banking and relending activities. As ofDecember 31, 2011 and 2010, the Senior Notes have a carrying amount of P13,210 andP13,202, respectively, and are presented as part of Bills Payable in the statements of financialposition. Interest on Senior Notes incurred amounted to P511 in 2011 and P98 in 2010recognized in profit or loss and included as part of Interest Expense on Bills Payable andOther Liabilities account on an amortized cost basis using the effective interest method(see Note 21).PDICThis represents the financial assistance to United Overseas Bank Philippines (UOBP) fromPDIC amounting to P4,420 which was transferred by UOBP to the Parent Bank. Thetransfer was covered by the MOA relative to the Parent Bank's acquisition of UOBP branchesin 2005. The financial assistance, which is recorded as part of Bills Payable in the statementsof financial position will mature on December 19, 2012 and bears annual interest rate of3.9%. The proceeds of the financial assistance from PDIC are invested in governmentsecurities as provided for in the MOA.SMPHI (Preferred Shares)As required under PAS 32, Financial Instruments: Presentation and Disclosure, the Parent Bankrecognized as financial liability 25,000,000 shares of redeemable, cumulative andnon-participating preferred shares with a par value of P10 per share issued to SMPHI onOctober 18, 2004. The preferred shares were issued at US$2 per share or an aggregatesubscription price of US$50 million. The preferred shares entitled SMPHI to cumulativedividends, payable in US dollars semi-annually in arrears, equal to 6.5% of the issue price perannum.As required by BSP, the Parent Bank set up a sinking fund on October 17, 2005 for theredemption of the preferred shares. The balance of the sinking fund as ofDecember 31, 2008 amounted to P2,110 and was invested in debt securities, shown as part ofHTM investments.On October 19, 2009, the preferred shares were redeemed in full by the Parent Bank atP2,446 inclusive of remaining dividends in arrears of P77.17. SUBORDINATED NOTES PAYABLEOn June 27, 2011, the Parent Bank issued P8,500 unsecured subordinated notes eligible asLower Tier 2 Capital due on September 27, 2021, callable on 2016 (the Series 4 Notes) bearingan interest rate of 6.50% per annum, pursuant to the authority granted by the BSP to the Bankon April 7, 2011 and BSP Circular No. 280 Series of 2001, as amended, and BSP Circular No.709 Series of 2011. The issuance was approved by the BOD on August 28, 2010.