Notes to Financial Statements - BDO

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Notes to Financial StatementsDECEMBER 31, 2008, 2007 AND 2006(Amounts in Millions Except Per Share Data)The Group’s subsidiaries and associates are all incorporated in the Philippines, except for the following:SubsidiariesPCI Express Padala (HK) Ltd.Express Padala HK Ltd.BDO Remittance (USA), Inc.Express Padala Frankfurt GmbHEquitable PCI Express Padala (Nederland) BVPCIB Europe, S.P.A.Country of IncorporationHong KongHong KongUnited States of AmericaGermanyNetherlandsItalyThe following table presents financial information on the Group’s associates as of and for the years ended December 31, 2008 and 2007:Net Income2008 Assets Liabilities Revenue (Loss)SM Keppel Land, Inc. P 1,765 P 234 P 254 P 63Generali Pilipinas Holdings, Inc. ( 253 ) 347 ( 456 ) ( 468 )Northpine Land Incorporated 1,661 464 82 36Taal Land 141 - 1 12007SM Keppel Land, Inc. P 1,724 P 256 P 251 P 60Generali Pilipinas Holdings, Inc. 730 336 8 ( 514 )Northpine Land Incorporated 1,423 500 102 57Taal Land 159 200 1 -13.5.1 Dividend DeclarationsIn 2008 and 2007, the Group’s wholly-owned subsidiaries declared and paid cash dividends amounting to P109 and P2,384, respectively,and are presented as Dividend Income under Other Operating Income in the Parent Bank income statements.13.5.2 Mergers Among SubsidiariesIn 2008, the following mergers among subsidiaries of the Group have taken place:(a)(b)(c)On April 23, 2008, the respective Board of Directors of EBCII, Jardine Equitable Finance Corporation, EBC Capital Corporation, EquitableExchange, Inc. and Express Padala International, Inc., approved the plan of Merger with EBCII as the surviving entity. The merger wasapproved by the SEC on October 6, 2008.On April 7, 2008, the respective Board of Directors of BDO Technology (formerly Equitable Data Center, Inc.) and PCI Automation Center,Inc, approved the Plan of Merger with BDO Technology as the surviving entity. The merger was approved by the SEC on September 5,2008.On April 7, 2008, the respective Board of Directors of BDOI and EBC Insurance Brokerage, Inc. approved a Plan of Merger with BDOIas the surviving entity. The merger was approved by the SEC on August 21, 2008.The above mergers were accounted for under the pooling-of-interests method since the merging entities are under the common control ofthe Group.13.5.3 Decrease in Authorized Capital StockOn July 30, 2007, the BOD and stockholders of ECN approved the decrease in authorized capital stock of ECN from P2,000 divided into20.0 million shares to P675 divided into 6.75 million shares. The Board of Directors also approved the return to stockholders of P1,336 to besourced from the funds of ECN representing surplus capital. On September 28, 2007, the SEC approved the decrease in authorized capitalstock and P1,300 was returned by ECN on the same day. The remaining P36 was returned to stockholders on October 1, 2007.13.5.4 Acquisitions/DisposalsOn a special meeting dated August 17, 2007, the Board of Directors approved the purchase of BDO Elite Savings Bank, Inc. (see Note 26) andthe American Express Philippine Dollar Charge Card Portfolio in the amount of P763.On May 30, 2007, the then EPCIB entered into a MOA with ECN to purchase its outstanding credit card receivables and related liabilities as ofMarch 31, 2007 for the amount of P3,650. ECN has also agreed to continue to provide the technical, marketing, collection and other credit cardservices with respect to the receivables and liabilities. On December 1, 2007, an addendum to the above-mentioned MOA was entered into withthe Parent Bank for the assignment and transfer of ECN’s assets and assumption of ECN’s liabilities amounting to P403 and P490, respectively.The parties understand and agree that the liabilities assumed by the Parent Bank are more than the assets assigned and transferred to theParent Bank. ECN undertakes and agrees to pay the net liability to the Parent Bank.56Thinking Ahead To Get You Ahead • Annual Report 2008
Notes to Financial StatementsDECEMBER 31, 2008, 2007 AND 2006(Amounts in Millions Except Per Share Data)On February 22, 2007, the Group granted the management the authority and discretion to determine the manner and time of the implementationof the following corporate actions, taking into consideration the best interest of the Group and subject to applicable statutory and regulatoryrequirements:(a)(b)The sale or disposal of the Group’s equity investments in certain publicly listed and non-listed corporations, the engagement of theservices of a broker to handle the equity placement of the listed shares, and the engagement of the services of an investment/portfoliomanager to implement the sale and disposition of the non-listed shares; andThe sale or dissolution of certain non-operating non-stock companies. As of December 31, 2008, one of the subsidiaries is planned fordissolution, two subsidiaries are undergoing merger or planned to be merged with another subsidiary and two other subsidiaries weredissolved awaiting clearance from the Bureau of Internal Revenue or approval of license cancellation from SEC.14. ALLOWANCE FOR IMPAIRMENT LOSSESChanges in the allowance for impairment losses are summarized as follows:GroupParent Bank2008 2007 2008 2007Balance at beginning of year:Available-for-sale securities P 608 P 1,146 P 258 P 102Held-to-maturity investments 844 1,125 844 1,128Loans and other receivables 18,545 16,654 18,165 16,262Investment properties 1,079 366 1,051 360Other resources 6,956 3,137 10,064 7,55328,032 22,427 30,382 25,405Provisions during the year - net 5,232 4,118 5,171 3,802Reclassification/write-off 512 1,487 ( 713 ) 1,176Balance at end of year:Available-for-sale securities 5,645 608 4,714 258Held-to-maturity investments 673 844 673 844Loans and other receivables 19,131 18,545 18,858 18,165Investment properties 1,028 1,080 1,009 1,051Other resources 7,299 6,956 9,586 10,065P 33,776 P 28,033 P 34,841 P 30,383Total provisions for impairment losses on financial assets amounted to P4,737, P3,292 and P1,259 in 2008, 2007 and 2006, respectively, in theGroup financial statements and P4,575, P3,117 and P1,083 in 2008, 2007 and 2006, respectively in the Parent Bank financial statements.Total provision for impairment losses on non-financial assets amounted to P495, P826 and P754 in 2008, 2007 and 2006, respectively, in theGroup financial statements and P596, P685 and P909 in 2008, 2007 and 2006, respectively, in the Parent Bank financial statements.In 2008, the Bank reversed excess allowance on Loans amounting to P1,506 reported as part of Impairment Losses account in the Group andParent Bank income statements.15. DEPOSIT LIABILITIESThe breakdown of this account as to type follows:GroupParent Bank2008 2007 2008 2007Demand P 36,321 P 25,165 P 22,814 P 23,202Savings 263,248 318,670 264,803 319,864Time 337,185 101,562 325,350 91,229P 636,754 P 445,397 P 612,967 P 434,295Thinking Ahead To Get You Ahead • Annual Report 2008 57
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ATTUNED TO THE TIMES, WE AREALWAYS
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Financial HighlightsIn Billion Peso
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Report of Independent AuditorsTo th
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Page 84: BDO Corporate Center7899 Makati Ave
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