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Federal tax law requires that the tax basis in your GM $1-2/3 Par Value 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 GM $1-2/3 Par Value Common Stock and your Class A Common Stock.

Federal tax law does not specifically identify how one determines the fair market value of the $1-2/3 Par Value 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 19 (the day on which both stocks first traded separately); (ii) the opening trading price on December 19; and (iii) the closing trading price on December 19. (These three methods all use trading prices as of December 19, because the $1-2/3 Par Value Common Stock did not begin trading separately from the Class A Common Stock until two days after the Hughes Defense Spin-Off was completed). 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 GM $1-2/3 Par Value Common Stock that were purchased for $50 per share, for a total basis of $50,000. Pursuant to the distribution ratio of 0.06377 shares of Class A Common Stock for each share of $1-2/3 Par Value Common Stock, this shareholder would have received 63.77 shares of Class A Common Stock in the Hughes Defense Spin-Off. Of these shares, the fractional .77 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.

These examples also show how tax basis can be allocated between shares of $1-2/3 Par Value Common Stock and Class A Common Stock, including fractional shares that were 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 19, 1997

(ii) Opening Price for December 19, 1997

(iii) Closing Price for December 19, 1997