His Majesty King Abdullah II Bin Al-Hussein the Regent 16th Annual Report 2007_english.pdfSubsidiary Companies Owned by ITC 1: The Arab Cigarette Distribution Company • Limited Liabilities

His Majesty King Abdullah II Bin Al-Hussein the Regent

VisionTo build the Tobacco and Cigarette Company into a premier institution and leading manufacturing enterprise working across the region through efforts of its team of qualified managerial and technical experts.

MissionTo use our advanced technologies to develop premium products at reasonable prices while maintaining our competitive advantage through the development of alliances and long term partnerships with strategic parties working across regional and International markets. Working to foster the total commitment of our employees and our management, we strive to observe a continued growth in sales and an ongoing development in the scope of our operations.

Mr. Tawfiq Fakhouri, Chairman of the Board of Directors

Table of Contents

Board of Directors Report

Auditors Report

Consolidated balance sheet as of December 31st, 2007 & 2006 (Exhibit A)

Consolidated statement of income & its appropriation for the year ended December 31st, 2007 & 2006 (Exhibit B)

Consolidated statement of changes in shareholders equity for the year ended December 31st, 2007 & 2006 (Exhibit C)

Consolidated statement of cash flow for the year ended December 31,2007 (Exhibit D)

Notes to the consolidated financial statements

1 to 26

27 & 28

29

30

31

32

33 to 44

Board of Directors

Tawfiq Shaker Fakhouri Board Chairman

Samer Tawfiq Fakhouri Vice Chairman

Walid Tawfiq Fakhouri Director

Ibrahim Rashid Al Juba Director

Adel Ahmad Irshiad Director

Rep-of the Bank of Jordan

Yahya Zakariya Qadamani Director

Rep-of the Ekbal for General Trade

Abdul Rahman Talal Dakhmash Director

Rep. Pearl Comercial company for Construction & Investment

Hussein Mohammad Hanafiyeh Director

Rep-of the Al Khaleej for Investment and Transportation

Adel Ramez Abu Durgham Director

Rep-of the Zahra Al Urdun for Real-Estate Investment

Haitham Mahmoud Qtaishat Director

Rep-of the Al Yamama Investment

Yousef Mohamad Omer Director

Representing Farah for Electrical & Sanitary Instruments Company

�

The Board of Directors Report

Company’s Achievements during the Financial Year of 2007 and Plans for 2008

Dear Shareholders , On behalf of all the board members of the International Tobacco and Cigarette Company (ITC), it gives me great pleasure to present to you ITC’s 16th comprehensive annual report. It is in this report that we highlight our achievements during the financial year of 2007, and present to you the operational strategy for ITC, a public shareholding limited liabilities company, for the coming business year of 2008.

As a pioneering national company we have based our strategy for success on several key factors including;

- Implementing cutting edge technological advancements in all our operations, to manufacture high quality products that meet today’s economic and social advancement.

- Building a team that recognizes and captures opportunities and rises to the challenges to overcome all obstacles. Providing reasonably priced products that meet the different needs of our customers.

- Creating alliances with international suppliers to strengthen our competitive advantage.

- Supporting the National Economy through the payment of fees and taxes. ITC has paid in the year 2007 around $ 51,000,000, and the total amount of fees and taxes paid since its inception has exceeded 604 million US dollars.

- Supporting the state treasury with foreign currencies from the export of the companies products. ITC’s exports since the start of production have exceeded 179 million US dollars.

- Participating actively in the development of the local community through a wide range of programs, the total amount spend on such program during the year 2007 was JD 50,238 and has amounted to JD 539,611 since the inception of ITC

�


Subsidiary Companies Owned by ITC

1: The Arab Cigarette Distribution Company • Limited Liabilities Company• Specialized in distribution of cigarette and tobacco products• Capital investment worth JD 30,000.00• 100% ownership• Headquarters in Amman Na’ur, Hashemite Kingdom of Jordan• A team of 3 employees appointed by ITC• The company has no other branches• Registered by the Ministry of Industry and Trade, trade number (6321) on 4/9/2000

2: Al Fakher Tobacco for Trading and Agencies • Limited Liabilities Company• Specialized in the distribution of flavored tobacco within the Jordanian market• Capital investment worth JD 30,000.00• 100% ownership• Headquarters in Amman Na’ur,Hashemite Kingdom of Jordan• A team consisting of 32 employees appointed by ITC• The company has no other branches• Owns Al Fakher Tobacco Trading in Ajman UAE . The Capital investment of the company is JD 12 million.• Registered at the Ministry of Industry and Trade, trade number (12208) on 30/5/2006 and national ID issuing number (200010064)

�


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9401

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58

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Date

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20.05

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25.2.

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1964

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., and

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Name

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a Zak

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d Al-Q

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ani

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mar O

mar

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d Mah

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nal N

o.

9571

0276

81

9491

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68

9501

0062

10

9641

0288

19

1176

6678

80

Date

of Bir

th

18.12

.1957

04.12

.1949

24.09

.1950

04.01

.1964

05.11

.1962

Natio

nality

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anian

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anian

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f Bus

iness

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nistra

tion

Bach

elor o

f Eng

ineeri

ng

Grad

uatio

n Date

1979

1975

1976

1986

1984

From

1979

1979

1982

1994

2005

1995

1999

2001

2005

1975

1984

1987

1987

1996

2003

2001

2001

1991

25.3.

07

1995

1984

1985

1991

1.5.01

2002

2003

7.10.0

7

To 1988

2004

1997

2005

Until

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nt D

ate

Until

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nt D

ate

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7

2005

Until

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1984

1986

1987

1995

2000

7.11.0

7

Until

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nt D

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Until

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Until

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nt D

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Until

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1990

2001

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Posit

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mber

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f Direct

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ranspor

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of D

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mber

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of D

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mber

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f Direc

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eprese

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bal Jor

danian

Co. for

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al Trad

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untan

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Finan

cial M

anag

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Board o

f Direc

tors Me

mber R

eprese

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- Farah

Sanitar

y & Ele

ctrical

Installa

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.

Head

of Bo

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anag

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Board o

f Direc

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Posit

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Inter

natio

nal To

bacco

& Cig

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s Co.,

and P

rofess

ional

Expe

rienc

es

Corp

oratio

n

Intern

ational

Tobac

co & C

igaret

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./Amm

an

Al-Ba

tel Sw

atche

s & Je

wels C

o./Ku

wait

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co & C

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./Amm

an

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co & C

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an

Sanad

Impo

rtatio

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porta

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o./Po

land

Trio C

o. for

Busin

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ojects

Intern

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co & C

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./Amm

an

minis

try of

Inter

ior

Al-Eq

bal F

inanc

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vestm

ents

Co.

Intern

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Tobac

co & C

igaret

tes Co

./Amm

an

Publi

c Sec

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Direc

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n

Intern

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Tobac

co & C

igaret

tes Co

./Amm

an

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Hosti

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Deran

Contr

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Intern

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co & C

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tes Co

./Amm

an

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c Asso

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rity/Li

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s Co./

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n

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r San

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man

Al-Eq

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./Amm

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Name

Samer

Moha

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Taleb

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Mahm

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li Mah

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Al-Th

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Al-H

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Al-Bo

Moha

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Khale

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Al-Sh

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Ghale

b Hasa

n

Natio

nal N

o.

9661

0216

58

9501

0083

08

9601

0251

26

9401

0087

38

9391

0009

76

9642

0028

24

9692

0253

86

9451

0066

95

9652

0147

77

Date

of Bir

th

12.08

.1966

20.07

.1950

04.09

.1960

15.09

.1940

03.03

.1939

21.03

.1964

28.02

.1969

01.01

.1945

07.07

.1965

Natio

nality

Jorda

nian

Jorda

nian

Jorda

nian

Jorda

nian

Jorda

nian

Jorda

nian

Jorda

nian

Jorda

nian

Jorda

nian

Certi

cate

Bach

elor o

f Mec

hanic

Engin

eerin

g

Seco

ndary

Scho

ol

Maste

r of E

ngine

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Bach

elor o

f Law

s

Seco

ndary

Scho

ol

Bach

elor o

f Bus

iness

Admi

nistra

tion

Comp

uter P

rogram

ming

Diplo

ma

Exec

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tariat

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ma

Bach

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ness

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nistra

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untin

g

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n Cert

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of Pu

blic

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PA)

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f Com

puter

Grad

uatio

n Date

1989

1967

1989

1973

1981

1985

1990

1994

1998

1969

2007

1988

From

1993

1972

1994

2001

1989

1994

6.2.99

1963

1999

2001

1961

11.93

1985

1991

2004

11.99

11.95

01.96

02.99

10.02

3.03

6.04

9.04

9.05

1971

1980

1999

2000

1.12.0

5

1988

6.06

To Until

Presen

t Date

1991

2000

Until

Presen

t Date

1994

1999

Until

Presen

t Date

1994

2001

Until

Presen

t Date

1993

Until

Presen

t Date

1991

2004

Until

Presen

t Date

11.95

1.96

1.99

10.02

3.03

6.04

9.04

7.09.0

5

Until

Presen

t Date

1980

1999

2000

2005

Until

Presen

t Date

2006

Until

Presen

t Date

Posit

ion

Facto

ry Ma

nage

r

Sales

& Ma

rketin

g Man

ager

Sales

& Ma

rketin

g Man

ager

Sales

& Ma

rketin

g Man

ager

by Ag

ency

Gene

ral M

anag

er

Gene

ral M

anag

er

Expo

rtatio

n Man

ager

Traffic

& Lic

ensin

g Affa

irs M

anag

er

Coun

selor

Head

of Boar

d of D

irector

s Offic

e Mana

ger/Bo

ard of

Direct

ors Se

cretar

iat

Head

of Ad

minis

tratio

n Dep

artme

nt – T

raffic

Depa

rtmen

t

Admi

nistra

tive A

ffairs

Man

ager

Exec

utive

Secre

tary

Gene

ral M

anag

er As

sistan

t

Trade

Man

ager

Offic

e Man

ager

Exec

utive

Secre

tary

Emplo

yees

Offic

er-Em

ploym

ent

Huma

n Reso

urces

Mana

ger-E

mploy

ment

Huma

n Reso

urces

Mana

ger

Huma

n Reso

urces

Cons

ultan

t

Huma

n Reso

urces

Mana

ger

Emplo

ymen

t Dep

artme

nt Of

ficer

Huma

n Reso

urces

Mana

ger

Interi

or Au

ditor

Finan

cial &

Admi

nistra

tive M

anag

er

Finan

cial &

Admi

nistra

tive M

anag

er

Gene

ral M

anag

er As

sistan

t for F

inanc

ial &

Admi

nistra

tive A

ffairs

Finan

cial M

anag

er

IT Ce

nter D

eputy

Man

ager

IT Ma

nage

r

Highe

r Adm

inistr

ation

�


The Company’s Market Position

ITC at present owns 50% of the local market share. It has been successfully able to maintain this strong market presence due to the high sales volumes it records from both its own brands and brands owned by Philip Morris. With aims to increase its market share in both Jordan and the region, ITC’s management continuously research both local market and export market trends.

Despite the strong competition and increase in smuggled tobacco products and black market trade, ITC continues to produce products from the finest Tobacco that adhere to international standards of excellence and quality.

ITC creates sales and marketing strategies that adhere to the laws and regulations applicable to the field, producing tobacco products based on this commitment.

a) The company’s local market reach includes all Jordanian governorates and citiesb) The company’s regional market reach includes the markets of Iraq, Iran, Yemen and Libyac) The company’s local market share is approximately 50%.

Statement of Shareholders Who Own 5% or more of the Capital as of 31/12/2007, compared to the previous year

Number of Shareholder

3150

10003

10002

10003

Name of Shareholder

The United Arab Investors Co

Tawfiq Shaker Khader Fakhouri

Bank of Jordan

Al-Iqbal for General Trading

Number of Shares as of 31 Dec.

2007 2006

3,416,048

3,255,948

2,848,425

1,932,915

5,272,407

605,413

2,848,425

1,876,215

Percentage

17%

16%

14%

9%

Percentage

26%

3%

14%

9%

�


Government Protection

ITC enjoys no government protection other than what is provided by intellectual property right and branding laws practiced in the Kingdom.

Laws Affecting Company Performancea) Tax laws were amended to stipulate that a 100fls tax be collected for each cigarette pack sold.b) The company complies with production standards stipulated by law by including all necessary health warnings on each cigarette pack it produces.

Statement of Names of the Exporters and Main Clients for 2007

The ExportersNumber

1

Name of Client

PHILLIP MORRIS

Percentage of Transaction out of Total Purchases

56,76%

Number

1

2

3

Name of Client

Al-Masbah Company

Mohammad Karim Abu Rashid

Erad Trading Company

Percentage of Transactions out of the Company’s Total Purchases/Revenues

39,10%

35,30%

10,40%

Clients

�


The Development of Human ResourcesThe company continuous to implement its strategy of developing its human resources , providing the most experienced management staff and enhancing the relations between all its employees in order to build team spirit and enhance the standards of living through a wide range of programs. These programs include but are not limited to:1) Social Programs: ITC creates many social programs , to foster a stronger sense of loyalty amongst its employees.2) Occupational Safety: The company creates many awareness and educational programs that instill in its team members the importance of occupational safety pratices while they are on the job.3) Healthcare Services: The company has an in-house doctor who is specialized in providing periodical check-ups and emergency treatment for its team members. Employees are also provided with the necessary vaccinations they need to ensure that they are healthy at all times while on the job. 4) Health Insurance: The company has a comprehensive health insurance program for all its team members and their families. 5) Meal Plans: The company has formed an agreement with a company specialized in providing meals for all employees at minimal cost.6) Transportation: The company provides modern transportation services for all its employees.7) Education: The company covers the educational expenses of all distinguished offsprings of its team members in universities and schools.8) Social Committee: The social committee organizes events for the company’s employees and provides support for members of low and medium income earning households.9) Model Team Members: The company elects the model employee of the month and the year and also awards people who demonstrate good leadership skills.10) Periodical Report: The PR department provides a newsletter reflecting the companies latest news and developments

Al-Fakher for Tobacco Trading

and Agencies (Associate)

0

0

0

11

5

9

7

32

The Arab Company for

Distributing Cigarettes (Associate)

0

0

0

0

0

0

0

0

The Scientific

Qualification

PhD

Master

High Diploma

BA

Junior Diploma

Higher School Diploma

Less than High School Diploma

Total

The International Tobacco

and Cigarettes Co

0

7

0

87

68

61

283

506

�


Training Courses Offered in 2007and the Number of participating Employees

Certified operational risk executives accreditation training course

Effective strategic planning with balanced score card

Excel core and Excel expert

Integrated skills beginner

Modern concepts in risks and controls

Simatic’s 7 Tia

Custom Regulations

Electronic archiving system

H.R Investment

Electronic customs clearance

Integral Customs procedures

International diploma in H.R management

P.R logistics and protocol

ICDL

Preparation of administrative reports

Planning and implementing training needs

Engineer and practical training for water purification stations

Energy conservation

First aid

Radiation prevention workshop

Microsoft Excel 2003

Skills for Job Interviewing

English course

Total

1

1

31

1

18

3

3

1

1

3

1

1

1

2

1

2

3

2

1

12

2

2

2

95

�0


Bo

ard

of D

irec

tors

Shar

eho

lder

sD

epar

tmen

tEx

tern

alA

ud

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gal

Co

nsu

ltan

tA

ud

itin

gC

om

mit

tee

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Ara

b C

igar

ette

sD

istr

ibu

tio

n C

om

pan

yInte

rnal

Aud

itin

gD

epar

tmen

t

GM

Exe

cuti

veSe

cret

ary

Al F

akh

er T

ob

acco

Trad

ing

an

d A

gen

cies

Gen

eral

Man

ager

Qu

alit

yD

epar

tmen

t

Pu

plic

Rel

atio

ns

Dep

artm

ent

Ad

min

istr

ativ

eA

ffai

rsD

epar

tmen

t

Exp

ort

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artm

ent

Hu

man

Res

ou

rces

Dep

artm

ent

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earc

h &

Dev

elo

pm

ent

Dep

artm

ent

Fact

ory

Dep

artm

ent

Info

rmat

ion

Tech

no

log

yD

epar

tmen

t

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anci

alD

epar

tmen

tC

om

mer

cial

Dep

artm

ent

Tech

nic

al

Ad

min

stra

tive

��


General Manager

Secretary

Financial Department

Accounts Division (1)

Marketing & Sales Department

Local Marketing Division (1)

Sales Division (1)

Organization Chart for The Arab Cigarettes Distribution Company

Organization Chart for Al Fakher Tobacco Trading and Agencies

General Manager

Secretary

Financial Department

Accounts Division (1)

Marketing & Sales Department

Marketing & Sales Division

Alo Argeleh Division

Promoting Division

��


The risks incurred by the Company1: The rise in tax rates results in an increase in the number of smuggled goods into the country2: The production of low quality imitated products by unknown parties who sell them for lower prices3: The change in governmental laws and the resulting effect on company strategies

The company’s achievements during the last financial year1: The company was able to maintain its 50% market share and strengthen its market presence2: The building of a modern primary production plant in collaboration with Philip Morris3: The completion of the first phase of Al Fakher Production plant in the UAE to match the increasing demand of Alfakher Molasses 4: The securing of a complete supply of ITC manufactured brands for the local market 5: Strengthening of ITC brands in the Iranian market

The financial effect of extraordinary operations of the last financial year which are not part of the company’s main activities. The past year did not witness such activaties

The Financial Analysis of the company’s operations and results for the last financial yearPrior to embarking on this analysis we should shed light on several important points that should be taken into consideration for any financial analyst when comparing results.

The financial records and their amendments were recorded within a unified system and form. They include the records and transactions made by the mother company ITC and its subsidiaries.

Subsidiary Companies

1- The Arab Cigarette Distribution Company • Limited Liabilities Company• Specialized in the distribution of cigarette and tobacco products in Aqaba Special Economic zone• Capital investment worth JD 30,000.00• 100% ownership

2- Al Fakher Tobacco for Trading and Agencies• Limited Liabilities Company• Specialized in the distribution of flavored tobacco within the Jordanian market and

��


it has investments in its own subsidiary company• Capital investment worth JD 30,000.00• 100% ownership

3- Al Fakher Tobacco Trading in Ajman UAEWith a capital of 40 million UAE Dirham which equals JD7, 720,000. AlFakher Tobacco Trading specializes in the trade and production of flavored tobacco in the UAE, GCC region and the globe.

The comparative figures for 2006The figures include numbers for the Ekbal for Printing and Packaging Company which was then a partner company of ITC with ownership of 52.4% before it was sold to an international company.

��


Local Sales

Export Sales

The (unified) company sales during the financial year of 2007 amounted do 52.148.233 Dinars, against the sales of 2006 were 51.102.637 Dinars with an increase of 1.045.596 Dinars without excluding Al-Eqbal press & enveloping Co. for 2006 which amounted 5.518.799 Dinars.

��


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8,3

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2,8

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07

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1,9

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tain

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19

7,7

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73

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1,6

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6,0

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95

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4,4

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24

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1,9

92

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To

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16

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4,7

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4,2

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5,5

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28

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3,4

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05

��


Inco

me

Stat

emen

t

Des

crip

tion

1998

1999

30/1

1/00

2001

2002

2003

2004

2005

2006

2007

This

Des

crip

tion

Con

sist

s of

:

Net

sal

es19

,311

,885

21,0

40,0

5727

,512

,168

44,0

05,1

0549

,258

,508

41,7

24,2

5641

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,188

36,4

36,2

1251

,102

,637

52,1

48,2

33

Cos

t of g

oo

ds

sold

(14,

400,

595)

(16,

816,

509)

(20,

686,

770)

(32,

694,

168)

(37,

583,

991)

(34,

302,

174)

(34,

388,

018)

(30,

587,

571)

(42,

405,

392)

(43,

941,

233)

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4,91

1,29

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223,

548

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5,39

811

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11,6

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7,24

58,

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dm

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trat

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(1,2

60,1

46)

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,141

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,432

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)(2

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554)

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266)

00

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inve

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ry0

00

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(127

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69,0

19)

(199

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)(7

35,4

89)

(231

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,328

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,614

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,858

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,629

,269

)(4

,058

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,928

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Profi

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f sal

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sec

uri

ties

00

00

2,17

8,42

72,

678,

961

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403,

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0

Net

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2,50

6,32

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351,

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8,89

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201,

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1

��


Net Income Trend

The net profits of the Company before allocations of taxes and subsidiary amounted 5.689.003 Dinars against 651.232 Dinars for the previous year. The profits of stock and investment land was 4.654.742 Dinars; and the net profit of Al-Fakher Company for Tobacco Trade and Agencies with its subsidiary amounted 2.804.836 Dinars; therefore, there is an operation loss for both the mother company and subsidiary (Arab Company for Tobacco Distribution) amounting 1.770.575 Dinars including the bank interests amounting 1.398.899 Dinars mainly used to finance Al-Fakher Company purchase, operation and development in Ajman in addition to the cost increase of exportation sales especially to Iran whereas the Company began on the end of 2007 to double its prices and increase them on the beginning of 2008 till they reached the limit of which the previous losses are compensated.

Distribution year

Profits distributed as stocks

Percentage of distributed stocks

Profits distributed as funds

Percentage of distributed funds

Total profits

Profits percentage/Capital

2002

0

0

4.125.000

28%

4.125.000

28%

2003

0

0

4.500.000

30%

4.500.000

30%

2004

1.500.000

10%

4.50.000

30%

6.000.000

40%

2005

3.500.000

21%

4.125.000

25%

7.625.000

46%

2006

0

0

0

0

0%

Total

5.000.000

17.250.000

22.250.000

Profits distributed by the Company

��


Net Sales VS Operational Expenses

Shareholders Equity

The operating capital increased to reach 6.521.077 Dinars during the current year after being negative 1.269.676 Dinars in 2006. This is an indication that the company is strong and able to meet its commitments, and it is noticeable that stock exchange has increased to 123% from 96% in 2006.The gross profit against net sales was about 16%, at the same time the administration and general expenses and selling and distribution expenses were reduced against bank interest expenses which increased because of bank facilitations for the Company’s expansion projects.

The shareholder’s net rights amounted 39.348.475 Dinars against 35.819.689 Dinars with an increase of 3.528.786 Dinars with percentage of approximately 10% which represents the net of profits realized after allocations and changing the just value.

��


Share Net Book Value VS Market Price

No.

1

2

3

4

5

6

7

8

Financial Percentage

Net profit after allocations/sales

Revenue/investment percentage

Revenue/property rights

Property rights/assets

Administrative expenses/sales

Sales & distribution expenses

Banking/sales expenses

Basic stock share of profits

9.95%

7.00%

13.20%

140.00%

3.80%

6.44%

2.68%

0.258 dinar/stock

0.73%

0.51%

1.06%

160.00%

4.40%

7.92%

1.82%

0.012 dinar/stock

Some financial percentages of the Companyare as follows:

2007 2006

�0


Future Plans for the Company

Stemming from our belief in the local market as the leading supporter of our strategic growth, both locally and regionally, we are planning to perform the following:1: To conduct market studies geared towards developing new product offerings designed to respond to local market needs2: To empower our marketing team and provide them with the skills needed to find non-traditional new markets.3: To Complete the second phase of the UAE Fakher factory4: To strengthen the positioning of the existing Alfakher Tobacco brands and to create new markets. 5: To continue with our strategy of developing Human resources with regards to skills, know-how and values.6: To strengthen the companies legal position and compliance with laws and regulations.

The amount of audit fees of the Company and subsidiaries, and the amount of fees for other services received by and/or due to the auditor.

Statement

Tobacco International Company

Arab Company for Tobacco Distribution

Al-Fakher Company for Tobacco Trade & Agencies

Total

Amount in dinar

7.500

1.250

1.250

10.000

Fees of auditors of the Company and subsidiaries

��


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--

-

��


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��


1- Privileges and Bonuses Paid to Members of the Board of Directors and Senior Management

Board Chairman and Board Members

Board of Directors Position Auditing Remuneration

Transportation Allowances

Bonuses& Benefits

Net Incentives Remarks

Mr. Tawfiq Fakhouri Board Chairman

0 12,000 2,000 14,000

Mr. Samer Fakhouri Vice Chairman 0 12,000 2,000 14,000

Mr. Walid Fakhouri Member 333 12,000 2,000 14,333

Mr. Yehia Qamani Member 0 12,000 2,000 14,000

Mr. Shaker Fakhouri Member 0 1,464 2,000 3,464 Resigned on 13/2/2007

Mr. Ibrahim Al Ju’ba Member 0 12,000 2,000 14,000

Mr. Amer Al Bashir Member 0 0 2,000 2,000 Resigned on 31/12/2006

Mr. Muhyi Al Din Al Husainy Member 167 3,000 2,000 5,167 Resigned on 25/3/2007

Mr. Yusif Mahammed Omar Member 2,000 12,000 2,000 16,000

Hasan Mohammed Hanafieh member 0 12,000 2,000 14,000

Mr. Haitham Qutaishat Member 0 12,000 2,000 16,000

Mr. Talal Dagmash Member 1,428 9,000 0 10,428 Hired on 13/3/2007

Mr, Bassam Adib Member 0 7,000 0 7,000 Hired on 3/3/2007 and resigned on 7/10/2007

Mr. Adel Ershed Member 0 9,000 0 9,000 Resigned on 20/3/2007

Mr. Adel Abu Dhergam Member 0 2,806 10,000 12,806 Hired on 7/10/2007

Total 5,928 128,270 32,000

Total 166,198

Note that Mr. Tawfiq Fakhouri, Mr. Samer Fakhouri and Mr. Ibrahim Al Ju’ba’ are provided with cars from the company.

2- Senior Management

Name Position Amount Travel Expenses Net Incentives

Mr. Samer Fakhouri General Manager 104,380 14,686 119,066

Mr. Samer Masoud Factory Manager 41,795 5,751 47,546

Mr. Taleb Barqawi Exporting Manager 34,502 14,419 48,921

Mr. Mohammed Shabiat Financial Manager 48,758 0 48,758

Mr. Ibrahim Issa Sales Manager 44,777 0 44,777

Ms. Sirin Hasan IT Manager 32,592 0 32,592

Ms. Martha Al Hourani Trade Manager 33,923 0 33,923

Ms. Najat Al Baw HR Investor 32,003 0 32,003

Mr. Mahmoud Al Thabtah Administrative Manager 29,225 0 29,225

Mr. Issa MahmoudOffice Manager of the Board of Directors

10,143 0 10,143

Total 412,098 34,856

Total 446,954

Note that Mr. Taleb Barqawi and Mr. Ibrahim Issa are provided with cars from the company.

Donations Made by ITC and Its Partner Companies During 2007

Entity Amount of the Donation (JD)

Educational donations made for schools and university students 13,537

Donations made to the local community 7,372

Donations made for the benefit of charity organizations 19,592

Donations to treat patients 3,056

Al Fakher Tobacco for Trade and Agencies donations 6,880

Total 50,437

��


Contracts, Projects and Alliances Formed by the Firm:ITC has no alliances or contracts made with any member of the Board of Directors, his or her relatives or partner companies. Alliances are only formed with the Arab Company for Distribution whereby this company sells the former party’s products offered at the ASEZA in Aqaba. Alliances are also formed with Al Fakher, which distributes tobacco and flavored tobacco products throughout the Kingdom.The Company contribution to environment protection:The Company established a waste water purification station with international specifications to process the water and reuse it for trees irrigation.The Company damages the unusable tobacco weekly in the places specified by the Government.The Company isolates the burned oils from drainages, and accumulates the same in specific places; and then uses them in other fields.Upon building the new factory, the Company installed filters for preventing tobacco smell or dust from spreading.The Company contribution to national society service:The Company provides in kind and material support to various institutions, commissions and departments of the national society in addition to municipalities, charities, social associations, mosques, alms and poor families. It also made charitable programs aiming at fulfilling the social responsibility through a set of good contacts and relations established by the Company through the Public Relations Department with its local community in order to provide the area population with social welfare.Through the Public Relations Department, the Company established a contact system with its local community to strongly and clearly protrude its positive image, and to show its effective participation in the national society development by social responsibility programs executed by the Company.The Company continuous implementing the International Tobacco Company Grants Fund in order to develop national human resources in cooperation with Ministry of Higher Education, whereas 12 students, one of each Governorate, joined their fellow students at the cost of the Program; as a result, the beneficiaries from the Program are now 24 students, two of each Governorate of the Kingdom, to provide the national economy with qualified human resources. This Program is part of the Company’s concern for Jordanian talented and educated youth; the total amount spent for serving the national society during 2007 was 50.437 dinars, and since foundation 539.611 dinars.Finally,It is the pleasure of the Tobacco International Company represented by the Chairman and Members of Board of Directors, the General Manager and all its workers to thank King Abdullah the II Bin Al-Hussein for his wise administration, percipient vision and appropriate directions which provide an economic and social environment that enables Jordan to occupy an honorable position in the international economy. We also thank the Government with all its relevant ministries and institutions, and thank the International Tobacco Company’s shareholders and clients for their precious trust and continual support of the Company’s progress.

��


At last, for and on behalf of my partners the Members of Board of Directors, we thank the General Manager, Executive Management and the Tobacco International Company personnel for their devotion for serving the Company purposes in addition to their loyalty and professional teamwork performance which made the Company reach this advanced position.

Declarations:(1) The Company Board of Directors declares that there are no core effects on the Company’s continuity during the next financial year. (2) The Company Board of Directors declares its responsibility for preparing the financial statements and providing the Company with an effective monitoring system.

(3) With an effective control system. We, hereunder signed, declare the authentication, accuracy and completion of the information data stated in the annual statement.

��

Auditors Report

��

Auditors Report

��

Consolidated Balance Sheet as of December 31, 2007 Exhibit A

For the Year Ending on December 31st

Assets Note

2007(JD)

2006(JD)

Cash on hand and in banks 1,545,059 1,644,360

Cheques under collection 78,737 932,014

Accounts Receivable - Net 4 10,794,240 6,791,051

Inventory - Net 5,a3 16,769,428 17,017,608

Spare part inventory -net 6,a3 3,267,318 3,937,399

Goods in transit 37,023 308,772

Margins and expenses on letters of credit 7,112 26,922

Other receivables 7 1,913,974 1,662,543

Total current assets 35,114,891 32,320,669

Available for sale securities 8,b3 3,138,834 9,389,433

Investment in associate companies 9,c3 856,474 916,145

Investment in land 10,d3 281,682 622,232

fixed assets net of accumulated depreciation 11,e3 20,491,686 24,016,460

Equipment & machinery under installation 6,205,670 157,736

Constructions process 1,413,382 12,250

Goodwill F3 6,602,986 6,602,986

Total assets 74,105,605 74,037,911

Liabilities and share holders equities

Current liabilities

Bank overdrafts 12 8,342,816 12,667,694

Short term loans 13 7,626,036 8,400,000

Accounts payable and notes payables 14 6,724,202 6,445,340

Other payables 15 5,900,760 6,077,311

Total Current Liabilities 28,593,814 33,590,345

Long term loans 13 5,625,000 1,433,333

End of service indemnities E13 538,316 244,006

Shareholder equities

Capital 20,000,000 20,000,000

Shares owned by subsidiary companies 0 (97,492)

Statutory reserve 4,687,387 4,150,838

Voluntary reserves 4,306,191 4,306,191

Accumulated changes in fair value 1,482,785 3,208,160

Retained earnings at end of year 8,872,112 4,251,992

Total 39,348,475 35,819,689

Minority interest 0 2,950,538

Total shareholder equities 39,348,475 38,770,227

Total Liabilities and Shareholders’ Equity 74,105,605 74,037,911

The accompanying notes form an integral part of this statement.

Consolidated Financial Statements

�0

Consolidated Statement of income For the Year Ended December 31st 2007 & December 31st 2006 Exhibit B

For the Year Ending onDecember 31st

Note2007 (JD)

2006 (JD)

Net sales F3 52,148,233 51,102,637

Cost of sold goods 16 (43,941,333) (42,405,392)

gross profit 8,206,900 8,697,245

Administrative and general expenses 17 (1,982,459) (2,239,779)

Sales and distribution expenses 18 (3,358,312) (4,044,847)

Interest on debentures 0 (154,384)

Bank interest (1,398,899) (929,516)

Storage expenses 0 (21,443)

Provision for Obsolete inventory (227,431) (735,489)

Provision for Doubtful debts (3,730) (91,294)

Damaged goods 0 (27,673)

Adjustment in investments profits for associated companies 0 214,703

Profits from securities sales 4,361,732 0

Profits from land sale 293,010 0

Other expenses 19 (201,808) (16,291)

Net income before minority and provisions 5,689,003 651,232

Minority interest 0 (112,783)

Provision for subsidiary companies (338,905) (128,211)

Income after minority and before provisions 5,350,098 410,238

Jordanian Universities fees provision (53,655) (4,102)

Provision for scientific research and vocational training (53,655) (4,102)

Board of directors remuneration (55,000) (22,000)

Provision of training and educational fund (41) (1,976)

Net income after provisions 5,187,747 378,058

Retained profit at year beginning 4,251,992 8,181,342

Paid out dividents 0 (4,125,000)

Adjustments made to the profit earning records of associate companies (59,670) (114,604)

Expenditures / earnings from prior years 28,592 (26,780)

Total retained profit and appropriation 9,408,661 4,293,016

Transfer to statutory Reserve 536,549 41,024

Retained earnings at the end of the financial year (figure C) 8,872,112 4,251,992

Total 9,408,661 4,293,016

JD/Share JD/Share

Earning per share 0,258 0,012

JD/Share JD/Share

Number of shares weighted average 20,000,000 20,000,000



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75


��

Consolidated Statement of Cash Flows Exhibit D

For the Year Ended inDecember 31st 2007

2007(JD)

2006(JD)

Cash flows From Operating Activities

Net income after provisions and tax 5,187,747 378,058

Prior years expenses 28,592 (26,780)

Amendments on profit from investment in associated company (59,670) (114,604)

Slow moving inventory provision 227,431 735,489

Doubtful debts provision 3,730 91,294

Depreciation &Amortization 3,041,715 3,557,377

Operating profit before changes in working capital 8,429,545 4,620,834

(Increase) decrease in current assets

Accounts receivable (4,006,919) (2,703,877)

Cheques under collection 151,277 (691,618)

Inventory 68,180 1,124,938

Spare parts inventory 622,650 (641,287)

Goods in transit 271,749 (86,097)

Margins& expenses on letters of credit 19,810 (26,922)

Other receivables (251,431) (1,311,250)

Increase (decrease) in current liabilities

Accounts& notes payable 278,862 3,354,051

Other payables 117,759 3,097,146

Net cash provided from operating activities 5,701,482 6,735,918

Cash flow from investing activities

Changes in fixed assets 483,059 (8,996,889)

Goodwill - (6,602,986)

Changes on land investments 340,550 -

Changes on constructions under process (1,401,132) -

Changes on machines under installation (6,047,934) -

Changes in investment in associated companies 59,671 3,931,479

Changes in investments available for sale 4,525,224 (2,101,389)

Shares owned by subsidiary co. 97,492 (97,492)

Minority interest (2,950,538) 2,950,538

Net cash (used in) investing activities (4,893,608) (10,916,739)

Cash flow from financing activities

Bank overdrafts (4,324,878) 4,565,248

Loans 3,417,703 9,833,333

Proposed dividends to shareholders - (4,125,000)

Debenture - (5,000,000)

Net cash provided from (used in) financing activities (907,175) 5,273,581

Net increase (decrease) in cash (99,301) 1,092,760

Cash on hand and at banks at the beginning of the year (exhibit a) 1,644,360 551,600

Cash on hand and at banks at the end of the year (exhibit a) 1,545,059 1,644,360

Non-Cash flow items

Transfer to capital from retained earnings and statutory reserve - 3,500,000



��

1 Company’s Registration and ObjectivesInternational Tobacco & Cigarettes Co. Ltd. (P.S.C) was established by virtue of the temporary Companies Law No (1) of 1989 and was registered in the public shareholding companies’ record at the Ministry of Industry and Trade in the Hashemite Kingdom of Jordan under number (218) on 1/6/1992. The company’s operational purpose is to manufacture tobacco and cigarettes of international and locally developed brands and trademarks. The company has established a full-owned company called (Arab Cigarettes Distribution Co. Ltd.) with a capital of JD 30,000; the company has also established a fully-owned company called Al Fakher Tobacco for Trading & Agencies Co. Ltd. with a capital of 30,000.

2 Basis of Consolidation of the Financial Statements

The unified financial statements include assets, dues, sales and expenses of the following subsidiaries.

There is no over draft value for it is a limited liabilities company with no closing price.A summary of the transactions, profits, losses and existing assets for the subsidiary companies.

3 Significant Accounting Policiesa. Inventory1. Raw Materials and Spare Parts

Raw materials and spare parts inventory are stated at cost. Cost is determined by using the moving average method.

2. Finished GoodsFinished goods inventory are stated at the lower cost or net realizable value. Cost is determined by using the moving average method. b. Available for sale securities


Subsidiary Companies

Company Name Company Status Capital (JD) Investment %The Mother Company’s share of sub. profit

Invistment

Arab Cigarettes Distribution Co. Ltd.

Limited liabilities 30,000 100% 1,811,207 4,568,391

Al Fakher Tobacco for Trading & Agencies Co. Ltd.

Limited liabilities 30,000 100% 2,804,833 4,993,470

Company name Assets (JD) ............... (JD) Revenues (JD) Profits (JD)

Arab Cigarettes Distribution Co. Ltd.

4,670,373 101,981 2,546,702 1,811,207

Al Fakher Tobacco for Trading & Agencies Co. Ltd.

1,983,433 14,840,863 14,064,145 2,804,833

��

Available for sale securities are stated at fair market value. The change in the securities fair market value from the book value is recorded as a component of shareholders’ equity.

c. Investments in Associate CompaniesInvestments over 20% in associated companies are stated as net equity.

d. Land InvestmentsInvestments in land are stated at cost and they appeared at fair value on attachments.

e. Fixed Assets and DepreciationFixed assets are recorded at cost and depreciation is estimated by using the straight-line method at annual depreciation rates between 2-50 percent.

f. SalesSales represent the value of invoices issued against goods delivered to the company’s customers during the current year.

g. Foreign currency conversionForeign currency conversions are converted into Jordanian Dinars at exchange rates prevailing at the date of transaction. Assets and liabilities expressed in foreign currencies are converted into Jordanian Dinars at exchange rates prevailing at the balance sheet date. Exchange differences arising from these translations are included in the income statement of the year.

h. End of service remunerationEnd of service remuneration is taken from the company’s financial internal system.

Accounts Receivable - Net

This item consists of:

For the year ending

December 31, 2007

2007

(JD)

2006

(JD)

Advance payments to farmers for previous years 101,230 101,230

Account receivables 4,109,457 3,558,698

Other receivables 6,763,692 3,308,620

Total 10,974,379 6,968,548

Less: provisions for doubtful debts (180,139) (177,497)

Net 10,794,204 6,791,051

4



��

Spare parts inventory net


For the year ending

December 31, 2007

2007

(JD)

2006

(JD)

Spare parts inventory 3,551,065 4,172,884

Spare parts- Vehicles 11,114 11,945

Total 3,562,179 4,184,829

Less: proving for slow moving items (294,861) (247,430)

Net 3,267,318 3,937,399

Inventory- Net

This Item Consists of:

For the Year Ended December 31st

2007(JD)

2006(JD)

Inventory& materials under process 973,099 899,634Promotional materials 538,281 429,110Manufactured tobacco 834,698 1,203,594Raw materials 12,470,141 12,655,123Finished goods at end of period – note 16 2,317,152 1,656,742Consumables warehouse 8,325 9,528Minor materials 0 477,140Fuel tanks 27,362 24,750Total 17,169,058 17,355,621Less: Provision for slow moving items (399,630) (338,013)Net 16,769,428 17,017,608

5

6




��

Avilable for Sale securities

No. of Shares 2007(JD)

2006(JD)

Available for Sale Securities

Bank of Jordan - 0 1,255,619

Danish Food Industries Co. 20,734 20,734 20,734

Jordan Express Tourist Transportation 27,650 31,532 31,532

National Industries Co. 3,000 1,335 1,335

Al Shamal International Ind. Co./ Foreign 424,578 301,026 301,026

Iqbal for Printing and Packaging 5,000 4,556 0

Arab Islamic Bank 1,946,515 1,296,866 4,560,602

Total cost 1,656,049 6,170,848

Amendments to the amounts of fair value 1,482,785 3,218,585

Fair Market Value Adjustment 3,138,834 9,389,433

Other Receivables

For the year ending

December 31, 2007

2007

(JD)

2006

(JD)

Advanced payments on fixed assets purchases 0 396,140

Raw material warehouse deposits 324 324

Customs deposits 1,052 4,523

Warrantees deposits 0 174,018

Prepaid expenses 809,420 743,372

Refundable custom deposits 73,799 48,766

Others 80,771 113,671

Employees advances 143,771 122,762

Withholding sales tax 53,993 37,269

Prepaid installments 0 10,272

Prepaid on works under construction 750,844 11,426

Total 1,913,974 1,662,543

7

8




��

Investment in Associated Companies


Share of Owners

For the year ended inDecember 31st 2007

2007(JD)

2006(JD)

Trust for International Transportation Co.-P.S.C 40,647% 856,474 916,145

total 856,474 916,145

The financial statement as of 31 December 2006 was approved in evaluating the investments in the associated companies above due to the availability of audited financial statement for those companies at the date of preparation of financial statements.

The fair value in Investments in lands at the date of preparing the financial statements amounted to JD 900,000.

Lands Investments

Investments in Lands

For the Year EndingDecember 31st 2007

2007(JD)

2006(JD)

281,682 622,232

Total 281,682 622,232

9

10




��


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ecia

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rate

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ook

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e

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item

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ists o

f:JD

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JDJD

JDJD

JD

Land

s4,

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--

4,29

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653,

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16,8

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11

��

12 Banks Overdrafts

The company obtained overdraft credit facilities from several local banks with a total value of JD 14,715,964 and a ceiling of bank guarantees valued at JD 5,543,422, which are secured on the company’s guarantee.

b- The company obtained a loan from the Bank of Jordan that amounts to JD 7,500,000 with an interest rate of 7,875%, the loan is guaranteed by the company guarantee.

c- The company obtained a loan on 30/9/2007, from Standard Charted Bank that amounted to JD 2,000,000 with interest price 7,5%, the loan will be paid in 6 months installments. The loan was renewed and guaranteed by the company.

d- The company has a loan from City Bank that amounts to USD 1,000,000, the loan is guaranteed by the company.

e- The company has a loan from City Bank that amounts to JD 4,000,000, the loan is guaranteed by the company.

Loans

a. This item consists of:

For the Year Ended 31st December 2007

2007 2006

Short term (JD) Long term (JD) Total (JD) Total (JD)

Bank of Jordan loan (note13b) 1,875,000 5,625,000 7,500,000 5,000,000

Standard Charted Bank loan (note 13c) 2,000,000 0 2,000,000 0

City Bank loan/ US$ (note 13d) 709,000 0 709,000 0

City Bank loan/ JD (note 13e) 3,042,036 0 3,042,036 3,000,000

Bank of Jordan loan- subsidiary company Ekbal for printing and packaging 0 0 0 900,000

Societe General Bank loan- subsidiary company Ekbal for printing and packaging 0 0 0 933,333

Total 7,626,036 5,625,000 13,251,036 9,833,333

a. This item consists of:

13

Accounts& Notes Payable

Accounts payable

For the Year EndingDecember 31st 2007

2007(JD)

2006(JD)

6,600,390 5,276,901

Notes payable 123,812 1,168,439

Total 6,724,202 6,445,340

14



�0

Other Payables


For the Year Ended31st December 2007

2007 (JD)

2006 (JD)

Board of Directors remuneration 55,000 58,000

Provisions for income tax 451,739 330,601

Withholding sales tax 3,694,527 4,917,775

Jordan universities fees provisions 57,757 7,151

Provisions for scientific research& Prof. training 53,398 16,619

Accrued expenses 10,248 69,997

Due to income& social security 44,108 46,524

Other payables 34,609 23,886

Transactions received for product export account 1,283,743 -

Due to shareholders 56,637 202,399

Youth funds 108,645 154,481

Educational& Professional training funds 27,770 35,840

Remuneration reserve 21,756 63,240

Employees receivables 823 798

Due to shareholders 0 150,000

Total 5,900,760 6,077,311

Cost of Goods Sold


For the Year Ended31st December 2007

2007(JD)

2006 (JD)

Raw materials used in production 36,222,062 31,159,490

Manufacturing costs

Depreciation 2,653,931 3,254,886

Salaries& wages& related costs 2,948,332 2,996,834

Maintenance& Spare parts 847,357 1,329,540

Other manufacturing expenses 1,690,690 1,019,774

Electricity, water and fuel 504,370 542,920

Total manufacturing costs 8,644,680 9,113,954

Total production cost 44,866,742 40,273,444

Finished products at the beginning of the year 1,520,103 4,001,083

Promotional material (128,360) (212,393)

Finished goods at the end of the year – note5 (2,317,152) (1,656,742)

Cost of goods sold 43,941,333 42,405,392

15


16



��

General and Administrative Expenses

Salaries& wages

For the Year Ended31st December

2007 (JD)

2006 (JD)

741,227 854,132

Fees& subscriptions 86,366 148,332

Depreciation 185,739 212,408

Stationary& printing 27,228 53,455

Advertising expenses 41,027 45,894

Professional fees 60,381 90,105

Board of directors transportation 128,271 175,400

Company’s share in social security 43,501 58,959

Assets insurance 23,875 28,358

Fuel 14,251 16,511

Staff in-kind privilege 12,090 10,061

Postage, telephone& fax 55,392 44,894

Hospitality 25,059 21,127

Water, electricity& heating 12,025 19,701

Donations& supports 50,437 76,659

Miscellaneous expenses 31,832 36,834

Transportation 568 1,869

Medical expenses& health insurance 19,634 24,498

Studies expenses 1,986 4,579

Vehicles expenses 28,757 19,050

Building taxes 16,827 6,507

Maintenance& repair 35,041 49,417

Legal fees 5,817 6,458

Annual vacancies expenses 466 14,484

End of service remuneration 57,130 51,270

Computer expenses 29,375 18,531

Rents 41,661 10,622

Traveling expenses 136,477 95,778

Technical support expenses 61,491 32,335

Bank’s expenses& interest 8,528 8,046

Guarantees 0 1,897

Specialized fairs expenses 0 1,608

Total 1,982,459 2,239,779


17


��

Selling& Distribution Expenses



2007 (JD) 2006 (JD)

Salaries, wages and related costs 673,525 628,220

Insurance 9,521 22,929


Advertising expenses 1,328,661 1,979,359


Transportation 35,818 29,760

Staff in-kind expenses 17,074 12,495

Export& freight expenses 370,139 299,093

Subscription& fees 2,594 4,831

Company share of social security 58,462 38,838




Studies& consultants expenses 1,693 1,295

Miscellaneous 41,249 38,794


Health insurance 31,671 32,795

Material& supplies 8,500 2,269


Yearly expenses vacancies 89 253

Fuel 126,534 86,734

Rents 43,495 34,840


Egypt expenses 34,654 66,884

Professional expenses 10,563 -

Allowed discount 15,793 -

Fire extinguishing expenses 9,650 -

Upload& download expenses 9,692 -

Trade mark registration 32,929 386,197

Banks expenses 54,444 4,280

Letters of approval expenses - 3,763

Commissions& agencies 52,979 -

Total 3,358,312 4,044,847

Selling& Distribution Expenses



2007(JD)

2006 (JD)

Salaries, wages and related costs 673,525 628,220

Insurance 9,521 22,929


Advertising expenses 1,328,661 1,979,359


Transportation 35,818 29,760

Staff in-kind expenses 17,074 12,495

Export& freight expenses 370,139 299,093

Subscription& fees 2,594 4,831

Company share of social security 58,462 38,838




Studies& consultants expenses 1,693 1,295

Miscellaneous 41,249 38,794


Health insurance 31,671 32,795

Material& supplies 8,500 2,269


Yearly expenses vacancies 89 253

Fuel 126,534 86,734

Rents 43,495 34,840


Egypt expenses 34,654 66,884

Professional expenses 10,563 -

Allowed discount 15,793 -

Fire extinguishing expenses 9,650 -

Upload& download expenses 9,692 -

Trade mark registration 32,929 386,197

Banks expenses 54,444 4,280

Letters of approval expenses - 3,763

Commissions& agencies 52,979 -

Total 3,358,312 4,044,847

18



��

Other expenditures/ revenues


For the year ending

December 31, 2007

2007

(JD)

2006

(JD)

Profits distribution of investment in companies 3.318 12.779

Bank interests 3.304 14.383

Currency fluctuations (45.633) (150820)

Property and equipment sale profits (184.497) 24.154

Other revenues 21.700 65.174

Raw material sale revenue 0 18.039

Net (201.808) (16.291)

19


Income Tax- Income tax for the mother company has been reviewed for the year 2005 and received a final settlement on 16/5/2007. - Income tax for the (Arab Co. for Cigarette Distribution) subsidiary company for 2006 has not yet been settled.

Contingent LiabilitiesLoans incurred by the mother company were recorded at JD 5,453,422.

Financial Instruments1- Price RisksPrice Risks Consist of the Following:Risks of Currency Price FluctuationsMost trading transactions made by the company were recorded in Jordanian Dinar /U.S Dollar, the exchange of the Dinar has been fixed at U.S Dollar (1 U.S Dollar = 0,71 Jordan Dinar) as determined by the Central Bank of Jordan.

2- Risks of Interest Most of the financial instruments listed in the balance sheet are not subject to interest rate risks as all of the company’s cash is deposited in Banks with high solvency.

3-Credit, Liquidity and Cash Flow RisksThe company maintains cash balances at highly solvent financial institutions. Accounts receivable were listed at fair value representing the cash flow to be received during the year to face the obligations due for the same year.

Lawsuitsa- Lawsuits against the CompanyThe British and American Tobacco Company (BAT) and the Union Manufacturing

20

21

22

23


��

Company have filed a lawsuit against the International Tobacco and Cigarettes Company (ITC) on December 30th 2001 for halting the production of the one of the manufactured brands of cigarettes by ITC on grounds of the unlawful competition law.ITC has returned the appeal, which resulted in dismissing the procedure won by the British and American Company and the Union Manufacturing Company by the Judge of rushed matters. The verdict was in favor of ITC and the Supreme Court supported the decision. Accordingly, ITC has filed a counter lawsuit for compensation (Damage and Disorder) against both the British American Tobacco Company (BAT) and the Union Manufacturing Company. This lawsuit is still pending.

b- Lawsuits against Public Sales Taxation Department Filed by the Company Sales Taxation Department has submitted a financial claim in addition to penalties on the sales of cigarettes brand (L&M) alleging that sales tax was unpaid on a margin of profit of the Distribution Company.As a result of this unjustified claim the company has decided to file a lawsuit against the Sales Taxation Department to drop the claim on the ground of Sales Laws and the instructions issued by its General Manager since the Distribution Company of the brand (L&M) is not affiliated with ITC, as it is an independent entity.All procedures were taken in calculating the sales tax on the cigarette brand (L&M) were supported by official letters from the company to the Sales Taxation Department and the Company has also kept the written approvals issued by the Sales Taxation Department concerning this issue. This lawsuit is still pending in the specialized courts.

Comparative Figures Certain comparative figures were reclassified to conform to the presentation of the current year.Numbers of the compared year include financial statements for subsidiary company (Ekbal for Printing and Packaging) while the standard financial statements for the year 2007 does not include the financial statements of Ekbal for Printing and Packaging. This is due to the fact that the company sold its shares except 5,000 shares that were classified under the category of available for sales securities.

24


Documents

His Majesty King Abdullah II Bin Al-Hussein the Regent 16th Annual Report 2007_english.pdfSubsidiary Companies Owned by ITC 1: The Arab Cigarette Distribution Company • Limited Liabilities