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)Sale of MaxicareBDO Unibank is a defendant/respondent in legal proceedings arising from the sale of its 60%stake in Maxicare in 2007. In January 2008, claimants filed a petition in the RTC Makati forthe issuance of a writ of preliminary Injunction and that “with respect to respondents Pin-AnHoldings Corporation and Antonio L. Go, in the remote event that a Deed ofAssignment/Sale has been executed, to declare such Deed null and void and to direct saidrespondents to deliver the aforementioned stock certificates representing the 120,000 sharesin Maxicare to Petitioners [Claimants].”The RTC Makati denied the TRO and writ of replevin on the ground that the Claimants haveno clear and unmistakable right over the shares, as there was no perfected contract of salebetween the Bank and the claimants. In April 2008, the RTC Makati also ruled that theBank’s sale of the shares to Pin-An Holdings is valid and its order declaring the validity of thesale of Maxicare shares has become final under said Interim Rules. The claimants did notappeal the dismissal. Their petition for certiorari with the CA was also dismissed and the CAheld that there was no grave abuse of discretion in the issuance of the RTC Makati ruling.The claimants filed their petition for review with the Supreme Court in July 2010. LastDecember 7, 2011, claimants withdrew this petition.After an unfavourable decision had been rendered against them in April 2008, the Claimantsfiled a Request for Arbitration with the ICC – International Court of Arbitration in Singaporein May 2008 on the same issue of the petitioners’ right to buy the shares. As of November 25,2009, the Singapore arbitration hearing has been suspended by virtue of a writ of injunctionissued by the RTC Makati restraining the parties, and their respective representatives fromparticipating and performing any act in connection with the arbitration case. The injunctionhas been issued in connection with the petition filed by Maxicare for a declaration as to therightful shareholder of its 60% outstanding shares. Claimants have questioned the issuance ofthe writ of preliminary injunction in the CA where their case remains pending.Last December 2011, a Second Request for Arbitration was filed by claimants against BDO,Maxicare, Pin An Go Holdings and several other individual respondents before the ICCinvolving the same sale of 120,000 shares. Claimants sought to nullify a series of purportedtransfers of shares in Maxicare Healthcare Corporation (“Maxicare”) that were made between2007 and 2009 by BDO and other Original Stockholders to Pin-An Holdings Corporation(“Pin-An”) which are null and void because they contravene provisions of the StockholdersAgreement dated 13 February 1998 (“SA”). Claimants also argued that in November 2011,Maxicare directors approved illegitimate amendments to Maxicare’s Articles of Incorporationand By-laws so as to indirectly circumvent Claimants’ rights under the stockholders’agreement.BDO has written the ICC raising its objections on jurisdiction, forum shopping and theexistence of a Philippine ruling on the validity of the sale of shares. The RTC also recentlyissued an order extending the injunction to the second request for arbitration. To date theICC has not yet directed the constitution of an arbitral tribunal.Management continues to believe that the above claim is baseless and without merit or thatthe resulting liability, if any, from such a claim, will not have a material adverse effect on theBDO Unibank Group’s financial position and financial performance.