LOUISVILLE, KY., January 15, 1947. To the Holders of Trustees' Certificates Issued Under Trust Agreement With Reference to Stock in First National Bank of Louisville, Ky., and Other Corporations Dated July 1, 1925:

Hopes of economic recovery shared by America with the rest of the world when we made our previous year's report have not been fully realized, but encouraging progress has been made which is reflected in the experience of your companies for the year just ended.

The following stocks and cash were held in trust for you on December 31, 1946:

The consolidated balance sheet of the corporations in which the trust owns stock at December 31, 1946, was:

Dividends payable

LIABILITIES

Accrued interest, taxes, expenses, and unearned discount..
Other liabilities.

Not Worth (capital, surplus, and undivided profits):
Equity applicable to stock held by others than your
trustees

Equity applicable to stock held in trust

Total___.

118, 775, 117. 21

2, 818. 90 734, 998. 36 137, 767. 65

131, 032. 81 10, 697, 657. 91

130, 479, 392. 84

NOTE.-Intercompany deposits of $205,934.06 have been eliminated in the above statement. Of that amount $136,660.78 was on deposit in the First National Bank of Louisville, Ky., which bank had no deposit with any affiliate.

There were outstanding 47,888 trustees' certificates at December 31, 1946, having a consolidated book value of $235.34 per certificate. The consolidated book value is that part of the capital, surplus, and undivided profits of the affiliated companies applicable to the stock of those companies owned by the trust. includes, however, no value for substantial reserves established by those com

It

panies, amounting to $3,322,111.27 or $69.37 per certificate, which reserves, in published statements of the companies, are deducted from the carrying values of the assets to which they apply.

The number of trustees' certificates was reduced during the year from 48,812 to 47,888 by purchase and retirement of 924 certificates.

The 1,557 shares of Madison-Southern National Bank & Trust Co., Richmond, Ky., carried on the books of the trustees for $124,287, were sold for $201,942.90 in July 1946. These funds were used to the extent of $201,814.82 to purchase the 924 certificates above mentioned in accordance with a call for tenders as of October 8, 1946.

At December 31, 1946, the First Kentucky Co., an affiliate, held as an investment, 603 trustees' certificates purchased in the market for $134,717.

In December 1946, 3,600 shares of First-Owensboro Bank & Trust Co., Owensboro, Ky., $50 par common stock carried on the books at $184,192.29, was sold for $590,400. The proceeds of this sale, less tax, repurchase of certain qualifying shares and expenses incident to the transaction, constitutes the major part of the substantial principal cash held by the trustees at the end of the year.

Consolidated net operating earnings in 1946 were $17.23 per certificate. This compares with $16.32 in 1945 and $13.05 in 1944.

Consolidated net operating earnings, as stated, are, after providing for estimated tax requirements, depreciation on bank buildings, vault and equipment, and dividends on preferred stocks. Net operating earnings, as usual, do not include the gain resulting from recoveries on loans or the losses taken on loans, or the profit or loss taken on securities sold. The expense of operating the trust, including income and other taxes of $18,239.09, amounted to $18,918.89, or 39 cents per certificate.

Dividends on trustees' certificates were paid at the rate of $1.50 each quarter, a total for the year of $6.

You as a shareholder in the trust are cordially invited to ask for any additional information you may wish about the trust or any of its operations. We urge you also to know better and use the many facilities which the corporations owned by the trust offer for your banking, trust and insurance needs. You can help us and we can help you.

RALPH C. GIFFORD, Chairman.

The directors of First National Bank of Louisville, the Kentucky Trust Co., First Kentucky Co., and First Kentucky Fire Insurance Co. are: Ralph C. Gifford (chairman of each board), Charles W. Allen, J. McFerran Barr, George R. Bickel, Owsley Brown, Joseph Burge, Ernest S. Clarke, William C. Dabney, Timothy V. Hartnett, Preston P. Joyes, Pope McAdams, Henry Y. Offutt, Otis W. Pickrell, Douglass W. Potter, John W. Price, Jr., Franklin F. Starks, James W. Stites, William A. Stoll, and Elbert Gary Sutcliffe.

Condensed statement of First National Bank of Louisville, Dec. 31, 1946

Officers: Chairman of the board, Ralph C. Gifford; president, J. McFerran Barr; vice president and cashier, Pope McAdams; vice presidents, Stuart H. Mann, J. Van Dyke Norman, Jr., Henry Y. Offutt, Henry D. Ormsby, S. Albert Phillips, Douglass W. Potter, Keith C. Spears; assistant vice president, Robert H. Slater; manager, new business department, Walter M. Ross; assistant cashiers, James C. Irwin, Paul Jagielky, Elmer H. Wedekind.

Condensed statement of the Kentucky Trust Co., Louisville, Dec. 31, 1946

Officers: Chairman of the board, Ralph C. Gifford; president, Henry Y. Offutt. Trust officers, S. Lyman Barber, Joseph R. Gathright, Neville Blakemore, Olin C. Peeler; vice presidents, J. McFerran Barr, J. Van Dyke Norman, Jr., John H. Stockhoff; assistant vice president, E. Rutledge Lilly; cashier, Embry Lee Myers; treasurer, Harold W. Walton; comptroller, Stuart H. Mann; secretary, Anderson C. Dearing, Jr.; assistant secretaries, Carl B. Eastes, C. I. Welker; manager, real estate department, Theodore Tracy.

tions_

Condensed statement of First Kentucky Co., Louisville, Dec. 31, 1946

RESOURCES

Cash and due from banks. $257, 797. 51

U. S. Government obliga

687, 687. 51

LIABILITIES

Capital stock:
Preferred $10 par

6 percent cumu-
lative_.
Common_

Surplus and undivided
profits.

-2, 282, 535. 53 Reserve for income taxes_

Accounts payable...

Total...

NOTE. The market value of investments is substantially more than their book value. The First Kentucky Co., all the common stock of which is held for your beneficial intest, is comparable in its operation to an investment trust. At December 31, 1946, 20 percent of its assets at market value consists of United States Government bonds or cash. The balance of its funds was invested in a diversified list of marketable common stocks or their equivalent. Surplus and undivided profits were reduced $79,666.58 in the year by payment of dividends in excess of net operating profit. Net operating profit does not include substantial capital gain, which, after deducting a reserve for taxes on capital gain, was carried to investment reserve. Investment reserve in the above statement is deducted from the book value of investments.

Officers: Chairman of the board, Ralph C. Gifford; president, Henry Y. Offutt; vice presidents, J. McFerran Barr, J. Van Dyke Norman, Jr.; treasurer, Harold W. Walton; secretary, C. L. A. Johnson; assistant secretary, Kilian L. Seng; comptroller, Stuart H. Mann.

Condensed statement of First Kentucky Fire Insurance Co., Louisville, Dec. 31, 1946

Officers: Chairman of the board, Ralph C. Gifford; president, J. McFerran Barr; manager, Samuel O. English, Jr.; vice presidents, Pope McAdams, Henry Y. Offutt; secretary and treasurer, Douglass W. Potter; comptroller, Stuart H. Mann. Condensed statement of St. Matthews National Bank, St. Matthews, Dec. 31, 1946

Officers: President, H. A. Nelson; cashier, T. H. Cooper; Vice president, Henry D. Ormsby; Assistant cashier, Minnie K. Fust.

Directors: G. T. Dick, chairman of the board; H. A. Nelson, President; Henry D. Ormsby; C. E. Bauer; Fred J. Stutzenberger; John C. Long.

First Kentucky Co., Louisville 1, Ky.-Consolidated operating statement, Jan. 14, 1926, through Dec. 31, 1946

Amount paid in for capital and surplus___.

Income:

Interest, dividends, other income-
Net investment gains..

Total_

Disbursements:

Expense-

Salaries

Pension trust.

Donations__.

Miscellaneous_

Total__

Taxes

$5, 545, 000. 00

Total..

First Kentucky Co., Louisville 1, Ky.-Consolidated operating statement, Jan. 14, 1946, through Dec. 31, 1946—Continued

REPORT OF FIRST KENTUCKY CO., DECEMBER 31, 1946

Directors: Charles W. Allen, J. McFerran Barr, George R. Bickel, Owsley Brown, Joseph Burge, Ernest S. Clarke, William C. Dabney, Ralph C. Gifford, Timothy V. Hartnett, Preston P. Joyes, Pope McAdams, Henry Y. Offutt, Otis W. Pickrell, Douglass W. Potter, John W. Price, Jr., Franklin F. Starks, James W. Stites, William A. Stoll, Elbert Gary Sutcliffe.

Officers: Chairman of the board, Ralph C. Gifford; president, Henry Y. Offutt; vice presidents, J. McFerran Barr, J. Van Dyke Norman, Jr.; treasurer, Harold W. Walton; secretary, C. L. A. Johnson, assistant secretary, Kilian L. Seng; comptroller, Stuart H. Mann.