Carnival Cruises 2008 Annual Report Download - page 36

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• The DLC structure involves risks not associated with the more common ways of
combining the operations of two companies, and these risks may have an adverse
effect on the economic performance of the companies and/or their respective share
prices.
The DLC structure is a relatively uncommon way of combining the management and
operations of two companies and it involves different issues and risks from those associated
with the other more common ways of effecting a business combination, such as a merger or
exchange offer to create a wholly owned subsidiary. In our DLC structure, the combination
is effected primarily by means of contracts between Carnival Corporation and Carnival plc
and not by operation of a statute or court order. The legal effect of these contractual
rights may be different from the legal effect of a merger or amalgamation under statute or
court order, and there may be difficulties in enforcing these contractual rights.
Shareholders and creditors of either company might challenge the validity of the contracts
or their lack of standing to enforce rights under these contracts, and courts may interpret
or enforce these contracts in a manner inconsistent with the express provisions and
intentions we included in such contracts. In addition, shareholders and creditors of other
companies might successfully challenge other DLC structures and establish legal precedents
that could increase the risk of a successful challenge to our DLC structure.
We maintain two separate public companies and comply with both Panamanian corporate law
and English company laws and different securities and other regulatory and stock exchange
requirements in the UK and the U.S. This structure requires more administrative time and
cost than was the case for each company individually, which has an adverse effect on our
operating efficiency.
• Changes under the U.S. Internal Revenue Code, applicable U.S. income tax treaties,
and the uncertainty of the DLC structure under the Internal Revenue Code may
adversely affect the U.S. federal income taxation of our U.S. source shipping
income. In addition, changes in the UK, Italian, German, Australian, Spanish
and other countries' or states' income or other tax laws, regulations or treaties
could also adversely affect our net income.
We believe that substantially all of the U.S. source shipping income of each of
Carnival Corporation and Carnival plc qualifies for exemption from U.S. federal income tax,
either under (1) Section 883 of the Internal Revenue Code; or (2) applicable U.S. income tax
treaties, and should continue to so qualify under the DLC structure. There is, however, no
existing U.S. federal income tax authority that directly addresses the tax consequences of
implementation of a DLC structure for purposes of Section 883 or any other provision of the
Internal Revenue Code or any income tax treaty and, consequently, these matters are not free
from doubt.
If we did not qualify for exemption from substantially all U.S. federal income taxes or
if such exemptions or laws were changed, we would have significantly higher U.S. income tax
expenses. In addition, changes in the income or other tax laws affecting our cruise
businesses in the UK, Italy, Germany, Australia, Spain and elsewhere could result in higher
income and/or other taxes, such as value added taxes, being levied on our cruise operations,
thus resulting in lower net income.
See Part I, Item 1. Business. G. "Taxation" for additional information.
• A small group of shareholders collectively owned, as of January 22, 2009,
approximately 28% of the total combined voting power of our outstanding shares
and may be able to effectively control the outcome of shareholder voting.
As of January 22, 2009 a group of shareholders, consisting of some members of the
Arison family, including Micky Arison, and trusts established for their benefit,
beneficially owned approximately 36% of the outstanding common stock of Carnival
Corporation, which shares represent sufficient shares entitled to constitute a quorum at
shareholder meetings and to cast approximately 28% of the total combined voting power of
Carnival Corporation & plc. Depending upon the nature and extent of the shareholder vote,
this group of shareholders may have the power to effectively control, or at least to
influence substantially, the outcome of certain shareholder votes and, therefore, the
corporate actions requiring such votes.
• Carnival Corporation and Carnival plc are not U.S. corporations, and our
shareholders may be subject to the uncertainties of a foreign legal system in
protecting their interests.