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| Notice to Vector Group Ltd. Stockholders |
Vector Group Ltd. (NYSE: VGR) anticipates all distributions paid in 2004 on its common stock were not taxable as dividend income for federal income tax purposes but instead will be considered a nontaxable return of capital.
These distributions consisted of four quarterly cash distributions paid in 2004. Based on tax calculations, Vector Group has determined that it had neither current nor accumulated earnings and profits for federal income tax purposes for the year ended December 31, 2004. Vector Group’s determination of its earnings and profits for 2004 and prior years has been filed with the Internal Revenue Service (“IRS”). Stockholders will be advised if there is any material change to the status of the 2004 distributions as a result of IRS review or audits.
Distributions that are not taxable as dividend income must be applied to reduce the adjusted tax basis of the shares on which the distributions are paid. If the nontaxable distributions exceed the stockholder’s basis in the Vector Group stock, a capital gain will result. Stockholders should secure their own tax advice regarding the status of cash and property distributions under applicable federal, state and local tax laws.
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