SECTION 778-7

When the extraordinary general meeting has to decide on the conversion of preferred shares, the report of the board of directors or the general director, as the case may be, shall state the terms therefor, the methods for calculating the conversion ratio and procedures for its completion. It shall also specify the impact of the transaction on the situation of holders of capital securities and securities giving access to capital. If applicable, the report shall indicate the characteristics of preferred shares resulting from the conversion. The auditor shall give his opinion on the conversion as well as the impact of the transaction on the situation of holders of capital securities and securities giving access to capital. He shall also state whether the methods used for calculating the conversion ratio are accurate and true. In the event the conversion leads to an increase of capital, the payment of the nominal value of shares corresponding to such increase may take place by incorporation of reserves, profits or share, issue or merger premiums.