Regulation S-X
Rule 3-10 - Appendix A

What Does "100% Owned" Mean Under Rule 3-10?

Example No. 1: Parent company owns 100% of the voting shares of SubA. SubA owns 100% of the voting shares of Sub1.

Is SubA a 100%-owned subsidiary of the parent company? Yes.

Is Sub1 a 100%-owned subsidiary of SubA? Yes.

Is Sub1 an indirect, 100%-owned subsidiary of the parent company? Yes.

Example No. 2: Parent company owns 100% of the voting shares of SubA. SubA owns 99% of the voting shares of Sub1. The remaining 1% of the voting shares of Sub1 is owned by a party that is not a 100%-owned subsidiary of the parent company.

Is SubA a 100%-owned subsidiary of the parent company? Yes.

Is Sub1 a 100%-owned subsidiary of SubA? No.

Is Sub1 an indirect, 100%-owned subsidiary of the parent company? No.

Example No. 3: Parent company owns 99% of the voting shares of SubA. The remaining 1% of the voting shares of SubA are owned by a party that is not a 100%-owned subsidiary of the parent company. SubA owns 100% of the voting shares of Sub1.

Is SubA a 100%-owned subsidiary of the parent company? No.

Is Sub1 a 100%-owned subsidiary of SubA? Yes.

Is Sub1 an indirect, 100%-owned subsidiary of the parent company? No.

Example No. 4: Parent company owns 100% of the voting shares of SubA and 100% of the voting shares of SubB. SubA owns 60% of the voting shares of Sub1 and SubB owns 40% of the voting shares of Sub1.

Is SubA a 100%-owned subsidiary of the parent company? Yes.

Is SubB a 100%-owned subsidiary of the parent company? Yes.

Is Sub1 a 100%-owned subsidiary of SubA? No.

Is Sub1 a 100%-owned subsidiary of SubB? No.

Is Sub1 an indirect, 100%-owned subsidiary of the parent company? Yes.

Example No. 5: Parent company owns 100% of the voting shares of SubA. Parent company also owns 60% of the voting shares of Sub1. SubA owns 40% of the voting shares of Sub1.

Is SubA a 100%-owned subsidiary of the parent company? Yes.

Is Sub1 a 100%-owned subsidiary of SubA? No.

Is Sub1 an indirect, 100%-owned subsidiary of the parent company? Yes.

Example No. 6: Parent company owns 99% of the voting shares of SubA. As required by the law in its home country, a director of SubA owns the remaining 1% of the voting shares of SubA. SubA owns 100% of the voting shares of Sub1.

Is SubA a 100%-owned subsidiary of the parent company? No.

Is Sub1 a 100%-owned subsidiary of SubA? Yes.

Is Sub1 an indirect, 100%-owned subsidiary of the parent company? No.

Note: This situation is discussed in the release. Under these facts, you may wish to request a no-action letter from the Division of Corporation Finance.

Example No. 7: Parent company owns 100% of the voting shares of SubA. SubA has outstanding securities convertible into its voting shares. These convertible securities are held by a party that is not a 100%-owned subsidiary of the parent.

Is SubA a 100%-owned subsidiary of the parent company? No.

Example No. 8: Parent company owns 100% of the voting shares of SubA. SubA has outstanding securities convertible into the parent company's voting shares. These convertible securities are held by a party that is not a 100%-owned subsidiary of the parent.

Is SubA a 100%-owned subsidiary of the parent company? Yes.

Example No. 9: Parent company owns 100% of the voting shares of SubA. SubA has outstanding options exercisable into its voting shares. These options are held by a party that is not a 100%-owned subsidiary of the parent.

Is SubA a 100%-owned subsidiary of the parent company? No.

Example No. 10: Parent company owns 100% of the voting shares of SubA. SubA has outstanding options exercisable into the parent company's voting shares. These options are held by a party that is not a 100%-owned subsidiary of the parent.

Is SubA a 100%-owned subsidiary of the parent company? Yes.

Example No. 11: Parent company owns 100% of the common stock of SubA. SubA has a class of preferred stock outstanding.

That preferred stock is 100% owned by a party that is not a 100%-owned subsidiary of the parent company. The common equity has full voting rights. The preferred stock is non-voting.

Is SubA a 100%-owned subsidiary of the parent company? Yes.