1 basis of consolidation—Included in the Consolidated Balance Sheet are the wholly owned subsidiaries State-Monroe Equipment
Corporation, a non-operating unit which holds title to the furnishings and equipment of the Palmer House, Chicago; the Beverly
Hilton Development Corporation which holds title to 8.97 acres of land in Beverly Hills, California, and Hilton Hotels International,
Inc., which holds amongst its assets 7,310 shares, representing approximately 7% of the capital common stock of Bermuda Development Company, Ltd., which is carried as an investment in the consolidation. The Corporation has adopted the policy of non-
consolidation of companies which are not wholly owned subsidiaries. These holdings are carried in the accompanying Consolidated
Balance Sheet as investments, at cost, such cost being $2,226,378.63 greater than book value at dates of acquisition and $641,388.74
greater than book value at December 31, 1950.
2 fixed assets—The properties included under Fixed Assets in the Consolidated Balance Sheet at December 31, 1950 are the same as
those included in the Consolidated Balance Sheet at December 31, 1949 except for land owned by the Beverly Hilton Development
Corporation, wholly owned subsidiary. In this connection, the purchase by Hilton Hotels Corporation of the entire capital stock of
Crummer Development Corporation (Name changed to Beverly Hilton Development Corporation) represented the acquisition of a
substantial tract of land being the sole asset of the Corporation other than nominal working funds and miscellaneous assets. Land is
entered in the Consolidated accounts of Hilton Hotels Corporation on the basis of total acquisition cost of the capital stock of the
wholly owned subsidiary less other net assets reflecting the liquidation of Beverly Hilton Development Corporation as instituted on
December 29, 1950 by order of the Board of Directors.
Other Fixed Asset values and depreciation reserves have been carried over from the predecessor companies, plus additions at cost.
3 federal taxes on income—As of December 31, 1950 this amount consisted of a provision for Federal taxes on income for the year
1950 of which $3,280,000.00 was applicable to Hilton Hotels Corporation and $310.74 was for State-Monroe Equipment Corporation,
wholly owned subsidiary.
The Bureau of Internal Revenue has asserted claims for income and excess profits taxes against Hilton Hotels Corporation for
prior years in the total amount of $2,240,895.67. Of this amount, $2,042,644.16 was based on an examination of the tax returns filed
by the Stevens Hotel Corporation, predecessor, for the year 1945 and to May 31, 1946, date of consolidation, the main point of issue
being the government's proposed disallowance of Stevens Hotel Corporation loss in 1943 (Resulting from the sale of the Hotel to
the United States Government for Military use) as a carry-over in offset to income of the year 1945. The remainder of the total
claim, amounting to $198,251.51, represents proposed deficiency against Hilton Hotels Corporation covering the period from date
of consolidation, June 1, 1946, through the year 1948, involving in the main, questions of property basis and depreciation carried
over from the predecessor Stevens Hotel Corporation.
Protests to the proposed deficiency assessments have been filed by the Corporation, the matters therefore, now being pending
before the conference division of the Bureau of Internal Revenue. (See Note 8).
4 first mortgage bonds and notes—The Equitable Life Assurance Society of the United States has authorized a first mortgage loan
on the Stevens in the total amount of $7,000,000.00. As of December 31, 1950 there had been advanced against this authorization a
total of $4,500,000.00.
5 installment purchase agreements payable—These agreements, dated November 22, 1950, which mature November 15, 1970
were entered into with former stockholders of Crummer Development Corporation in connection with the purchase of the entire
outstanding capital stock of that Corporation. Minimum payments are at the rate of $100,000.00 per year, commencing six years
after the date of closing, with interest on the unpaid balance ranging from one per cent to four per cent per annum. Since acquiring