CHANGING GROUP COMPANY BOOKS TO REFLECT BOOK VALUE PER SHARE

(1) Group Co. does not own all of shares of unit banks. Directors' qualifying shares and minority holdings must be excluded. Consequently, it becomes necessary to figure the exact portion of capital funds of each unit which belong to Group Co.

(2) Loans to subsidiaries other than banks and trust companies must be appraised on a basis of the liquidating value of collateral held by Group Co., no allowance being made for liabilities of subsidiaries direct or contingent, other than those to the Group Co.

(3) Stock of subsidiaries other than banks and trust companies to be carried on Group Co. books at book value of such subsidiaries. Each subsidiary to carry assets on its respective books at market value in case of securities and appraised value in case of other assets.

(4) Group Co. stock as well as other securities owned by Group Co. should be carried on its books at market value.

(5) In order that the books of the Group Co. reflect the condition outlined in the above four paragraphs, the carrying value of such assets must be adjusted at the end of each month by increasing or decreasing the reserve account with offsetting entry in the surplus or undivided profits account to reflect changes which took place during the month in each subsidiary.

(6) Operating under such a plan of accounting, it becomes necessary to write off against the Group Co. surplus account in similar amounts any sums written off against capital, surplus or undivided profits accounts at unit banks and trust companies.

(7) If such a method of operating the Group Co. books is adopted, it will result in present capital arrangement as follows at this time:

NOTE. Investment in Stocks of Unit Banks and Trust Companies shown above as $42,197,000 is carried at and is equal to the total Capital Surplus and Undivided Profits of such Banks and Trust Companies, but not including Reserves, and includes minority holdings and directors qualifying shares.