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A CONFIDENTIAL LE'i-EER TO CHIEF EXECUTIVES 230 PARK AVENUE, NEY," YORK 10017 21:2 MU 9-9000 Dear Sir: York. July 24, 1968 BIG NUSINESS RETARDS NATION'S ECONC~IC GROWTH. Through protection of self- interests. Perpetuation of status quo. Oil~ steel, auto industries fo]_lowers not lead~rs. Major innovations initiated outside industry. Economic retardation eause~ - by "Detroit ments.lity." E.g., top m~lagement inbred. Thinks in terms of industry instead of national welfare. Executives company career men. Average tenure of General Motors' six top executives 33 ymars. Corporate size, economic concentration of l~wer major assets of Big Business. 0il $~0 billion industry. Top i0 companies account for 80% total industry sales. Defensive research & develol~ent. Air pollution, traffic congestion leading domestic problems. Much talk. Little action. Car c~panies study feasibility of electric auto. 011, auto industry officials a~ree production i0 yeses away. GM, Ford have pro- totype models. United Aircraft> Gulton, Leesona leaders in research. Ford~ Mobil 0il enter joint research venture to develop ~ollution-free ~utc~obile. Govermnent, l~rivate industry launch $I0 million, three-year study on air l~Xllutlon. (Private industry counc~l recommended GPR, M~7 17, 1967. ) One-third of cost underwritten by Federal gov- ernment. One-thiTd b7 auto industry. One-third b~.oil cc~panies. Outsiders threaten Big Business leadership. Liug-Temco-Vought's "Ting-a-ling Jim" Ling Joins financier Norton Simon as new force in steel industry. Penn-Dixie Cement Corp. president Jerome Castle seeks Continental Steel Corp. in special bid. New- comers recognize steel company managements outdated, make major mistakes. Fall to think in terms of markets, end uses for products. Former Cities Service chairman John Burns first outsider to head billion dollar oil company. Concentrated on dl- verslfication.. Built "natural resources" image fo~ company. Late Henry Kaiser responsible for major innovations in aluminum industry. Opportunity for Big Busi- ness to face reality. Protectionism outdated. Change inevitable. ~A~A I~ROCESSI~G FINANCIAL TO ACQUIRE RELIANCE INSUq~ANCE. Data Processing ]~resident Hex~rey Goodman to beat out Leasco Data Processing chairman Se~-I Steinberg in bid for life and casualty company. Reliance net worth $230 m~Q_llon. Portfolio holds $i00 million in unrealized gains. Long-term source of capital for Data Processing. Merger t~iks with Reliance chairman Addison Roberts cordial. Goodman's refusal to make tender offer without concurrence of management impresses Reliance board. Di- rectors own 20% of 4.7 million shares outstanding. ~PLOYEE LAYOFFS MAJOR CONCERN. In proposed Federal Trade Commission study of conglomerates. Among companies to drop personnel of acquired firms: Perfect Film & Chemical's "Mortician Marry" Ackerman drops 450 Curtis Publishing em~loyees; White Consolidated Industries~ Ed Reddig cuts estimated ~7~ from Kelvinator payrolls; Glen Alden's Meshttlam "Reckless" Riklis expected to halt production for six months after takeover of Schenley Industries. Sell off inventory. Idle 50% of distLller's 5,500 employees. © 1968, Th• GIIl.ih.r Presidents' Report, Inc. Materla! miy not be r~produced or photocopied In any form without perrnls~on. TI04850306

VIC ~OSRER DELAYS PLANS. To merge ~WG Corp., Fe~nsylvani~ EmEineerin~, ~ ~dsboro Co~., S~thea~ ~bllc Se~ce ~o., W~son ~othe~s. Fo~ $3~ ~on e~ s~ %o ~o~ S~ ~c. ~se~ ~ ~ro~sed Feder~ ~e C~ssion ~c%ed to 0ff~ ~ & Weste~ Indulges ~ ~lie "~. Wonder" cash for ~ ~ hol~gs. Give Ch~lle s~ght profit (~orn ~Id ~6 ~er shoe for Sindona interests). Vie bu~s ~o b~d. Sec~ity ~ent Co~. Vic's pri~te imves~eut c~p~y. ~5~ ~e~sylv~ia ~neeri~, l~ ~ Co~., l~ ~G Co~. Posner b~ ~blic c~- p~es. Se~ 9~ of s~ck to co, so,date e~i~s. C~les delist~d fr~ stock ~ch~es. ~G delisted fr~ N~ York 8~ck ~cha~e last ye~ due to ius~ficient e~i~s -- $~.8 ~ion loss om $9-7 ~on s~es. ($1.~ ~i~ of loss fr~ of D~'s cig~ business.) Nation~ ~op~e Gas (~ ~ed by ~G Co~.) d~llsted from Big ~d ~ Janu~y. Mere ~,~0 sh~es outst~di~. G~bling Casino req~es ~ one ~ion sh~es for llsti~. Southeaste~ ~blic Service Co. im registration with Sec~ities & ~ch~e C~ssion. Vic ~s l~ of 1.~ ~ion sh~es. Coatrols addlti~ 7~,~ sh~es. Seeks 9~ t~ou~ tender o~er ($e5, 5-5% convertible s~- ord~ated deben~e). Ne~ ~ve: S~theast4~ Mortg~e InVestors ~st. Vie n~ed bo~d of $69 ~ion ~rtg~e t~t. ~S~ ~S R~K OF ~ ~OT ~0~OTION. Just~ies ~ist~ee for proauct. ~te~ues need. Fl~it Go. le~ ~t~er f~datiom g~e~ts. Re- t~ms ~ket rese~ch f~ ~oby-~th to dete~ comer "~~ logic." ides% ~. Jos~h ~th c~c~ pa~chologlst. ~mcte~: ~-~th stu~ on g~e ~- ket. ~o~a ~ority of Fl~t c~etlti~ f~hi~-~iemtea. (8~ of f~dati~ ~mt ~act~ers c~cemtrate ~ i~ of ~ket. ) F~it ~ducts atresa Baakel up by sci~ti~e rese~ch. Fl~It cha~ ~.We~tr~b ~nso~s ~rese~eh p~ at N~ York's St. V~cemt's ~os~It~ ~ s~~b~, "c~atory ~bl~-~ ~. C~'s a~es ~ipled ~ ~t s~ ~s ~"est~ted $~ ~om. W6~traub seeks ~5 ~i~ s~es by l~e. Studies ~s~ieati~ ~itles. CITI~ C~'S ~UIS B~ S~ ~. For ~ Jefferson L~e, Citizens Life ~s~a6 Go. Cit~zen~ C~n~t~- co~rston~ of ~ryl's fin~ci~ ~pire (~sonia Wire and Cable Co., S~s~nm ~ni~ Co.). ~uie c~reutly w~es fight in a~e~ co~t ~a~st t~eover of Citizens C~u~ty by N.Y. State ~s~ce ~pt. for ~e~ed i~sol- vency. S~e of Citizens L~e c~c~ated to bring ~ needed caplt~. ~uie see~ ~rted $e5 per shoe. ~rent ~ket 9rice 16 ~~ ~C. 8~8 ~IC O~G. World's l~gest ~rivately ~ed w~em's fo~ti~ ~ "li~erie ~ac~er.,: ~oys'5;~." ~ratea ~a ~ehouses. ~oducts e~rted to lhO co, tries. C~ has liceusi~ ~e~mnts ~2 n~tlons. E.g., Austr~ia, N~ ~d, ~g~ntina, It~y, Indi~. Products sold t~0~ ~0,~0 ret~l outlets. ~esident ~atrice Col~ da~hter of fo~der Ida Rosenth~. ~s. Rosen%h~ honor~y bo~ chain & ~eas~er. Brother ~s v-p ~act~i~. C~'s ~e~ th~ ~ve~ising ~ng ~st ~ccess~ c~p~s i~ industry. ~~ ~. C~y president fosters c~t~er g~d w~. Desi~ates v-p to ~rk with ~or accosts. ~t trouble before develo~eut into crisis situation. ~li~on ~dustries ~ecutive v-p ~ ~slim ~ts ~t f~es for chai~n Ch~lie ~ers .... ~esident ~ert to ne~otic executive. Notes ~ab~ity ~ m~e decisions, lack of obJectivlty~ dis~ent of ~ssociates, defensiveness. ~ansfers execu%iv~ to advisory Job ~th less stress, f~ subord~ates .... Fact sheet, descriptive broch~e of c~'s his~ry ~d products help~ ~ prel~u~y merger~ acquisition dis~ssi~s. P~tic~ly ~rt~t for ~riv~te c~ h~capped by l~k of re~. T!04850307

CON~ESSIONA~ INVESTIGATION OF TAKEOVER BIDS. Urgently needed. Use of deben- tures i~ exchang~ fo~ c~ s~oek ~ows. ~ Co~. eh~ & ~esi~t ~ ~a~ "" fo~s lea~ of Yo~g ~esi~e~ts' Org~i~tlo~ fe~ Mesh~ "ReCess" R~s. O~s $30, 6.7~% su~r~uate~ ~e~e~e plus w~r~ and one-h~ share ~ c~n for each shoe Great ~ric~ Hol~ng Co~. W~paper orris e~e~ted 5o accelerate. GI~ ~den i~ re~s~ation with Se~i%les & Exc~Ee C~ssi~ s~ce ance. Seeks additlon~ info~tlon. E~eete~ Corporate wheeler-dsslers create paper values. Small stockholders given secondary consideration. Exchange of debentures for common stock not illeg~l. Ethics ques- tionable. Gulf & Western Ind~Astrles chairman Charlie "Mr. Wonderful" Bluhdorn re- portedly has three, billion dollar companies lined up for nex~ triple takeover (after ": Brown, .Allis-Cha~ers Associates Investment acquisitions reported GPR, July I0> 1968). Expected to offer C~gg IOUs for co~on stock. Opportunity for Sen. John Williams (Dem. Del.) to call for investigation. (Williams sponsor of recent tender offer disclosure bill. ) Require SEC chairman Manny Cohen to testify. Manny good public servant.. Too cautious. Fears power. Stands in awe of Wall Streek Establishment. E.g., New York Stock Exchange chairman "Wallpaper Gus" Y~vy, Adler & Coleman partner "Holy-John~-~':m Coleman. Manny should recommend legislation to curb abusive practices. 20TH CENTURY-FOX TAKEOVER IMMYNENT. Brand, Grumet & 8eigel !,resident Stan Seigel, Colonial Corp. of America president Sol Eerger control estimated million-plus shares. Keep tabs on remainder of control (six million shares). On lookout for buyers. Few takers. I~e to lack of product. Reportedly seek $50 per share. Current market price 36. CAPITAL ~ TAX P~RM ~HDER STUDY. Treasury Department's proposal to require" ;~... mand~t~ry alternate tax payment (based on 50~-total incc, ne wlthout'preferential ~Isions or regular income at existing.rates, wblchever is higher) harmful to ccm~any -'; president. Stock options, incentive awards good ~ for chief executive to build equi- • "'; ty in company. Treasury plan expected to curb stock market activity. Dilute sffec- " ti-veness of stock option, incentive plans. Expose key:executlves to raids by 'out- siders. NL~fUAL ~[ND COMI~TITION TO INTENSIFY. Due to entry into'field by insurance com- panies, banks; trend toward small (net assets under $i00 million) funds. Estimated a00 new funds in registration with Securities & Exchange Commission. Majority spon- sored by present fund owners. Requirements for new fund: lawyer plus $i00,000 capi- tal; broker. Bachs & Co; Walston; White, Weld leaders in mutual fund brokerage. . Congre~ional. Investigation of sales -charE~s', lack"oi~-s~'les'-forcew~m~'Jor"reas~ns" for gro~ch of small funds. Multiple funds entitle sponsors' to double revenue source. As fund managers, advisers. Hsrtwell & Campbell Fund presidenat John H~rtwell recognizes need for salesmen. Changed from "no load" to "load" ~d in April. Seeks $7~ million in capital (five million shares at $I~ each with minimum $15,000 participation) for proposed Hartwell & Campbell Leverage Fund. SEC witholds clearance. ~ ~x~an.ded stock exchange 'membership essential, i~ioo~I of~ new mutual ftulds to generate a~l~Itio~al securities business.' Aggravate i~du~try's~gerwork problems;~:Look'.for insurance companies to apply to na%io~al s~ock"exchang~.s for'membership. "Assume role as brokers. Similar to Dreyi~s Corp. for. D~eyfus Fun~. l~recedent established by brokerage firms with house-sponsored f~ds. E. ~., Dom~ick & Domlnick's Domlnick Fund, Oppenheimer & Co, 's Oppenheimer Fund. Merrill L~nch, other major brokerage firms to be affected by mutual fund growth. Expected to lose re~ail business. CORPORATE. General Time president Bart Wickstrum buys~ 10,750 shares through ~ exercise of stock option. Talley Industries president ~ranz Talley sells 13,000 T!04850308

Ta!ley shares. Reduces holdlugs to 71~659 shares...-. ~G~ stock hits new ~36 3/4). ~akeover expected withlu next 12 months.. "~ . Rhein~Id Corp. president "Flapjack" Halgney finds law background[ alien to mmlageme~t of sof~ drink ]~usiness. Creates new d/vision presidency. Appoints former Pepsi-Cole In~ianspolis manager Bob Reeler. Net income first six months down 18~ to "$1.3 million .... SYSTEMS ENGINEERING FINDS NEW APPLICATIONS. Analysis of urban problems. Tech- nique maximizes efficiency. Increases output. Perfected by aerospace industry to coordinate complex missile systems. Cities laE 30 years behind industry, military in use of systems technology. Rand Corp. study in progress to improve efficiency of New York City government. Los Angeles Mayor Sam Yorty establishes non-profit Techni- c~l Services Corp. to apply systems engineering concepts to streamline city adminis- tration. Technical Services president Ed Erath modernizes 4,000-man L.A. police de- partment through computerization of crime data file, communications, traffic control. Plans similar overhaul of sanitation, education, hospital operations. APPAREL MANUFACTURERS PRIME ACQUISITION PROSPECTS. Annual consumer expenditures for apparel $40 billion. Estimated 26,000 manufacturers. Period of attrition in- evitable. Companies dominated by family, first-generation management. Chief execu- tives near or past retirement age. E.g., Palm Beach Co.'s Elmer Ward (70), Botany Industries' Mike Daroff (64), McGregor-Doniger's Bill Doniger (61). Apparel major consumer necessity. Industry relatively stable despite fashion unpredictability. Good diversification for companies in cyclical industries. Ripe for takeover. Munsiu~wear Inc. Leading manufacturer undergarments, men's and boy's apparel. Ratio of assets to liabilities 6.5-to-i. Highest in decade. Long- term debt $7.2 million. 916,000 shares common stock outstanding. Net income doubles to $1.5 million iu first half. Puritan Fashions. Manufacturer of women's, children's dresses, sportswear. Big Yank brand n~me men's work clothes. Estimated $600,000 available in tax loss carryforwards. Chairman Miles Rubin, president Carl Rosen con- trol 28% of 1.4 million shares. Phillips-Van Heusen. Diversification expected to llf~ earnings potential of men's shirt manufacturer. Kennedy's Inc. (New England apparel store chain) accounts for estimated 20% of $I~7 million sales. Company mar- kets line of men's toiletries under Passport 360 name. 19% co~mon stock outstanding held by chairman Seymour Phillips, family. POLITICS. LBJ requests wage, price restraints three months before elections. As predicted G~, Feb. 7, 1968) .... Pentagon announces lowest monthly draft quota (12,200) since April, 1967. Helps bolster LBJ's peacemaker image .... Former Kennedy aide Ted Sorenson eyes N.Y. 's vacant Senate seat. Comsiders active entry into New York political arena in 1970 ...... Look for C~ngreas to ..W~thh~l. d confirmation of_Supr~_m~ Court Justice Abe Fortas as successor to Chief Just!~Ear! Warren. ACTIWITY. Market price of 255 mutual funds increase average 16% first six months. Compared to Dow Jones Industrial Average (dowa 0.8%), Standard & Poor's 500. Index (up 3.2%), New York Stock Exchange Average (up 4.3%) .... Federal Reserve Board's proposed reform of discount rate expected to help banks, hurt business. Fre- quent changes in discount rate to ha~per corporate long-range planning. Harmf~l to small business .... Roma~ Catholic Archdiocese of Santa Fe publishes financial re- port (recommended GPR, June 5~ i~68). Very truly yours, The Gallagher Presidents ' Report, Inc. TI04850309