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Federal tax law requires that the tax basis in your old GM Class H Common Stock be allocated between your GM stock and the Class A Common Stock that you received in the Hughes Defense Spin-Off. This allocation is based on the relative fair market value immediately after the Hughes Defense Spin-Off of your new GM Class H Common Stock and your Class A Common Stock.

Federal tax law does not specifically identify how one determines the fair market value of the new Class H Common Stock and the Class A Common Stock that you received. There are arguably three alternative methods to determine the fair market value:

(i)the average of the high and low trading prices of such stocks on December 18 (the day on which both stocks first traded); (ii) the opening trading price on December 18; and (iii) the closing trading price on December 18. In certain IRS private rulings, the IRS has recognized the use of the average of the high and low trading prices as an acceptable measure of fair market value. The following examples provide the basis allocation percentages under each of these alternative methods. You may wish to adopt one of these methods for allocating your tax basis.

Each of these examples assumes that a shareholder owns 1,000 shares of old Class H Common Stock that were purchased for $30 per share, for a total basis of $30,000. Pursuant to the distribution ratio of 0.56240 shares of Class A Common Stock for each share of Class H Common Stock, this shareholder would have received 562.4 shares of Class A Common Stock in the Hughes Defense Spin-Off. Of these shares, the fractional .4 share was converted into Class B Common Stock and sold at a price of $56.149 (per whole share) shortly after Hughes Defense merged with Raytheon. The 1,000 shares of old Class H Common Stock were recapitalized and exchanged for 1,000 shares of new Class H Common Stock.

These examples also show how tax basis can be allocated between new Class H Common Stock and Class A Common Stock, including fractional shares sold for cash. Stockholders should recognize gain or loss in an amount equal to the difference between the tax basis allocated to these fractional shares and the amount of cash received.

(i) Average of High and Low for December 18, 1997

(ii) Opening Price for December 18, 1997

(iii) Closing Price for December 18, 1997