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2005 ANNUAL REPORT7122. TRUST OPERATIONSThe following securities and other properties held by the Bank in fiduciary or agency capacity (for a fee) for its customers are not includedin the accompanying statements of condition since these are not properties of the Bank (see Note 27).ConsolidatedParent2005 2004 2005 2004Investments P 89,485,077 P 69,380,206 P 89,485,077 P 69,380,206Others 22,298,065 19,085,798 22,297,995 19,085,798P 111,783,142 P 88,466,004 P 111,783,072 P 88,466,004In compliance with the requirements of the General Banking Act relative to the Bank’s trust functions:a. Investment in government securities (shown as part of Held-to-Maturity Investments) with a total face value of P889,400 as ofDecember 31, 2005 and P837,310 as of December 31, 2004 are deposited with BSP as security for the Bank’s faithful compliance withits fiduciary obligations (see Note 9); andb. A certain percentage of the Bank’s trust income is transferred to surplus reserve. This yearly transfer is required until the surplusreserve for trust function is equivalent to 20% of the Bank’s authorized capital stock. As of December 31, 2005, the reserve for trustfunctions amounted to P135,725 and is shown as Surplus Reserves in the statements of changes in capital funds.Income from trust operations is reported net of the related expenses and amounted to P422,777 and P375,516 for the years endedDecember 31, 2005 and 2004, respectively, and shown under Trust Fees in the statements of income.23. MERGERS AND ACQUISITIONS23.1 United Overseas Bank PhilippinesOn May 6, 2005, the Bank and United Overseas Bank Philippines (UOBP) and United Overseas Bank Limited (UOBL) signed a Memorandumof Agreement (MOA) whereby the Bank acquired the 66 branches of UOBP for a total cash consideration of P600,000. As part of theMOA, the Bank assumed the deposit liabilities of UOBP in consideration of an equivalent amount of related assets of UOBP, includingcash payment in case the assets would be lower than the assumed liabilities. Also under the MOA, the P600,000 payment of the Bankwill be used by UOBL to subscribe for the Bank’s shares of common stock valued at P26.75 per share, or equivalent to 22,429,906 shares.On December 19, 2005, the transfer of the assets including cash payment made by UOBP to fully offset the assumed liabilities by the Bankwas carried out.The accounts assumed by the Bank and the resulting goodwill are determined as follows:Cash consideration P 600,000Assets acquired and liabilities assumed:Assets acquired:Cash 279,960Due from other banks 10,649Held-to-maturity investments 693,768Loans and receivables 5,418,411Bank premises, furniture, fixtures and equipment 209,400Other resources 1,857,222Total assets acquired 8,469,410Liabilities assumed:Deposit liabilities 8,414,278Other liabilities 55,132Total liabilities assumed 8,469,410Net assets acquired over liabilities assumed -Goodwill P 600,000The goodwill amounting to P600,000 is presented as part of Other Resources in the 2005 statement of condition (see Note 14) while theBank’s liability to UOBL relating to the acquisition amounting to P600,000 is presented as part of Other Liabilities in the 2005 statementof condition (see Note 17).The UOBP acquisition was approved by the BSP on September 8, 2005 while the shares to be subscribed by UOBL were subsequently issuedin February 2006.