Document 9azR1E29NDDwd30ORMDM3Nwp

MAFCO CONSOLIDATED GROUP INC (Form- 10-K, Received: 03/28/1997 00 00.0. Page 30 of 116 December 31,2005, the possessions tax credit would be eliminated. The repeal of the possessions tax credit could have a material adverse effect on the Company for taxable years beginning after December 31, 2001 and before January 1, 2006, to the 28 extent that the Company's annual income from its Puerto Rico operations exceeds its average annual income from its Puerto Rico operations (as computed in the manner described in the precedmg sentence), and for taxable years after December 31, 2005. Although it does not currently have any definitive plans with respect thereto, the Company expects to evaluate alternatives that may be available to it in order to mitigate the effects of the SBJPA. On February 6,1997, President Clinton proposed certain tax law changes which, if enacted, would eliminate the Income Limitation, extend the possession tax credit indefinitely and make the credit available to newly established business operations Puerto Rico Tax Exemption Pursuant to a grant of industrial tax exemption which expires in 2002, income earned by Congar International Corporation from the manufacture of cigars m Puerto Rico enjoys a 90% income tax exemption from Puerto Rican mcome taxes. The remaining 10% of such mcome is taxed at a maximum surtax rate of 45%, resulting m an effective mcome tax rate for such income of approximately 4.5% under current tax rates Funds repatriated to the Company are subject to a maximum Puerto Rican tollgate tax of 10%. Legislation enacted m Puerto Rico in 1993 included a provision for prepaying a portion of these tollgate taxes effective for the 1993 fiscal year and subsequent periods. There can be no assurance that the Puerto Rico tax exemption will not be limited or eliminated in the future Any significant limitation on or elimination of the Puerto Rico tax exemption would have a material adverse effect on the Company See Note H of the Notes to Consolidated Financial Statements of the Company included elsewhere in this Report. Regulation Cigar manufacturers, like other producers of tobacco products, are subject to regulation m the Umted States at the federal, state and local levels. The recent trend is toward mcreasing regulation of the tobacco industry. There can be no assurance as to the ultimate content, timmg or effect of any additional regulation of tobacco products by any federal, state, local or regulatory body, and there can be no assurance that any such legislation or regulation would not have a material adverse effect on the Company's business. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forwardlooking statements The forward-looking statements contamed m this Form 10-K are subject to certain risks and uncertainties Actual results could differ materially from current expectations Among the factors that could affect the Company's actual results and could cause results to differ from those contamed in the forward-looking statements contained herem is the Company's ability to implement its business strategy successfully, which will be dependent on business, financial, and other factors beyond the Company's control, including, among others, prevailing changes in consumer preferences, access to sufficient quantities of raw materials, availability of trained laborers and changes in tobacco products regulation. There can be no assurance that the Company will continue to be successful in implementing its business strategy. Other factors could also cause actual results to vary materially from the future results covered in such forward-looking statements. http://www.edgarpro com/EFX_dll/EDGARpro dlPFetchFilmgHTMLl?ID=969943&Ses.. 10/19/2003