2011 Annual Report - BDO

6.01 Collateralized Debt ObligationPrior to December 23, 2011, the Bank has an investment in a CDO with principal amount(face value) of US$5,000,000 maturing in 2017. Details of the investment in CDO arepresented below.2010Note In USD In PhpBook value 2.04 $ 3,161,220 P 138,587,869Market value 25,000 1,096,000Accumulated impairment losses 3,161,220 138,587,869On December 23, 2011, the issuer, Merill Lynch International, redeemed the CDO at a priceof zero. Outstanding book value of the Bank’s investment in CDO as of said date amountedto P204,531,267. No gain or loss is recognized since the CDO is fully provided with allowancefor impairment since 2009.6.02 Reclassification of AFS to UDSCLIn 2008, relative to the amendments to PAS 39 and guidelines from BSP Circular 628, theBank reclassified certain AFS to HTM and UDSCL. Total value of embedded derivativesreclassified as part of UDSCL amounted to P113,628,498 as of December 31, 2008. TheBank identified certain financial assets that would have met the definition of loans andreceivable for which at August 29, 2008, the Bank had the intention and ability to hold for theforeseeable future or until maturity (see Notes 7 and 8).On May 24, 2011 and July 25, 2011, the Bank unwound the outstanding CLDs and CLNs withcertain financial institutions amounting to P437,342,716 and P445,054,240, respectively. The Bankreceived cash amounting to P438,760,761 and P442,510,276, respectively, which are inclusive ofaccrued interest amounting to P1,107,927 and P3,320,276, respectively. The Bank recognized gainamounting to P310,118 and loss amounting to P5,864,240, respectively, and these are presented aspart of the Trading and securities gain-net in the 2011 statement of income.Presented below is the analysis of the fair value of the financial assets reclassified from AFS toUDSCL and the impact to profit or loss and equity had the Bank not made the reclassificationin 2008.At Reclassification Date (August 29, 2008)EffectiveCarrying/ Unrealized Gain/ Interest EstimatedFair Value Loss in Equity Range Cash FlowsGovernment securities P 1,467,912,454 P 33,425,901 6.7% P 1,615,842,422Credit-linked notes 2,841,909,223 ( 36,586,301) 4.7% - 11.4% 3,863,783,317P 4,309,821,677 ( P 3,160,400 ) P5,479,625,739www.bdo.com.ph 83