Accountants' Opinion

ARTHUR ANDERSEN & Co.

120 SOUTH LA SALLE STREET
CHICAGO 3

Associates Investment Company:

We have examined the consolidated balance sheet of
Associates Investment Company (an Indiana corporation)
and subsidiaries as of December 31, 1960, and the related
statements of income and earned surplus for the year
then ended. We have also examined the consolidated balance
sheet of Emmco Insurance Company and its insurance
subsidiary and the combined balance sheet of the Life
Insurance subsidiaries of Associates Investment Company
as of December 31, 1960, and the related statements of
income and earned surplus for the year then ended. Our
examinations were made in accordance with generally
accepted auditing standards, and accordingly included
such tests of the accounting records and such other
auditing procedures as we considered necessary in the
circumstances. We had made similar examinations for the
year ended December 31, 1959.

In our opinion, subject to the effect, if any,

of the income tax matter referred to in Note 1 to financial
statements, the accompanying financial statements referred
to above present fairly the financial position of the
companies at December 31, 1960, and the results of their
operations for the year then ended, and were prepared in
conformity with generally accepted accounting principles
applied on a basis consistent with that of the preceding year.

Chicago, Illinois

February 6, 1961

NOTE TO FINANCIAL STATEMENTS
Note 1-

Alinco Life Insurance Company (a subsidiary in voluntary liquidation since December, 1959) limited its operation to the reinsuring of credit life risks relating to installment receivables held by nonaffiliated companies. Income taxes have been paid or provided at rates applicable to life insurance companies. During the examination of Federal income tax returns for the years 1954, 1955 and 1956, the revenue agent proposed that the entire income of Alinco for these years be taxed, either to Associates or to Alinco, at the general cor

poration rates. This would result in additional taxes and interest of $1,200,000 for 1954, $2,500,000 for 1955, and $2,900,000 for 1956. If the same theory were applied to subsequent years, it would result in additional taxes and interest of $3,100,000 for 1957, $1,200,000 for 1958, and $1,000,000 for 1959. In the opinion of the General Counsel of the companies, such additional tax, if assessed, would not be lawful and neither company would be liable therefor.

These companies insure automobile risks arising in the ordinary course of business of Associates
Investment Company and its finance subsidiaries.

The voluntary reserve for market fluctuations is applied to reduce the investment in stocks to cost in the
consolidated balance sheet on page 10.