PSB Holdings, Inc. - Page 4




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          or lending powers, and, as relevant here, does not qualify as               
          either a “bank” or a “financial institution” for Federal income             
          tax purposes.  For other purposes, Investments is considered to             
          be a financial institution subject to Federal and State                     
          supervision.                                                                
               Peoples organized Investments to consolidate and improve the           
          efficiency of managing, safekeeping, and operating the securities           
          investment portfolio then held by Peoples and to reduce Peoples’            
          State tax liability.  Nevada has neither a corporate income tax             
          nor a corporate franchise tax.  Wisconsin has a corporate                   
          franchise tax of 7.9 percent of a corporation’s net income.  For            
          purposes of the Wisconsin tax, Wisconsin considers “income” to              
          include interest income from federally tax-exempt obligations.  A           
          wholly owned subsidiary of a Wisconsin corporation with no nexus            
          to the State is not subject to Wisconsin’s corporate franchise              
          tax.  Investments was organized without a nexus to Wisconsin so             
          as not to be subject to Wisconsin’s corporate franchise tax.                
               From on or about April 23, 1992, through December 1, 2002,             
          Peoples transferred to Investments cash, tax-exempt obligations,            
          taxable securities, and loan participations (fractional interests           
          in loans originated by Peoples), including substantially all of             
          Peoples’ long-term investments.  The cash totaled $18,460 and was           
          transferred to Investments upon its organization in exchange for            
          all of its common stock.  The tax-exempt obligations and taxable            







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Last modified: March 27, 2008