TOBACCO

COMPANY JSC
PRILEP
 CONTENTS
Overview................................................................................................ 1
Tobacco Company Prilep .................................................................... 3
Countries that export oriental tobacco "Prilep" .................................. 7
All our benefits ....................................................................................... 9
Structure ............................................................................................... 10
Organizational Structure .................................................................... 10
Cigarettes Ltd. ..........................................................................................
All our visions ....................................................................................... 15
All our successes ................................................................................. 15
All our perspectives ............................................................................ 15
Tobacco Ltd. ............................................................................................
Our range of products ........................................................................ 18
 OVERVIEW OF PRILEP

Prilep is a city located in northern Pelagonian valley, in southern Macedonia.

There are 73,925 inhabitans and an area of 1.675 km2. It is located 128 km
(airline) from the capital town - Skopje.

Prilep is known as "the city under Marko's Towers" because of its proximity to the
towers of the legendary hero King Marko (in Prilep referred to as Prince Marko).
Prilep is the center of production of high quality tobacco and cigarettes, metal
proccessing, electronic, wood, textile, food and marble industry.

The tobacco is one of Prilep's traditional cultures that thrives in the Macedonian
climate. Many of the world's largest cigarette manufacturers use Prilep tobacco
after being processed in their local factories. When the Tobacco Institute
for creating new types of tobacco was founded in Prilep, that was the first

1
 example of the application of genetics in agriculture in the Balkans. Most of
the inhabitans in Prilep are engaged with tobacco production, which is then
purchased from Tutunski Kombinat AD Prilep in Prilep. In 2011 in Prilep field were
produced 7321 tons of tobacco which represents 28% of the total quantity of
tobacco produced in Macedonia.

Besides tobacco production in Prilep, there are also Prilepska Pivarnica AD,
Mermeren Kombinat AD as large industrial enterprises , then there is also the high
tech industry "Mikrosam" which is known for its large number of produced robots
and various technological inventions, many furniture factories, construction
materials and military equipment.

Prilep is known for its "Beer Fest" - beer festival with a great attendance and a
variety of domestic and foreign stage guests. There were 300,000 visitors in 2012
counted during the three days of the festival.

Some of the renowned Prilep citizens are :

(1335 - 1395), King Marko, a medieval ruler;

(1864 - 1921), Gjorche Petrov, a Macedonian revolutionary, one of the leaders
of The Central Committee of VMRO;
(1902 - 1957), Metodi Andonov - Chento, first president of the ASNOM;
(1915 - 1943), Mirche Acev, National Hero of Yugoslavia;
(1921 - 1993), Blaze Koneski Macedonian renaissance poet and the father of
the Macedonian language and literature;

Prilep is twinned with: Asenovgrad, Bulgaria; Radom, Poland; Garfield, USA;

Topolcani, Slovakia; Vincent, Australia; Tyre, Turkey and Chernigov, Ukraine.

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S ince the 16th century, tobacco seed has travelled all the world’s continents,
selecting those regions whose warm climate, sun and hard-working people
would enable it to yield its secret. Those to whom the tobacco company re-
vealed this secret have found in it the reason for their continuing labour. Such
is the case in Prilep – the aim is always to improve, be more successful, achieve
better quality, be more unique and so for the last 400 years, the history of Prilep
and its surrounding area has been linked to tobacco.

TOBACCO COMPANY PRILEP

For 140 years the Tobacco Company from Prilep has been an international syn-
onym for quality for oriental tobacco and different types of cigarettes. Since its
founding back in 1873, this Company has marked continuous and impressive
development, especially over the past decades.

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4
5
 THE ORIENTAL TOBACCO “PRILEP” IS EXPORTED TO
THE FOLLOWING COUNTRIES

Germany, France, The Netherlands, Sweden, Bosnia and Herzegovina, Spain,

Ukraine, Russia, Japan, Hungary, Poland, Belarus, Slovakia, The Czech Repub-
lic, Serbia, Montenegro, Slovenia, The United Kingdom, Switzerland, Egypt, USA,
Iraq, United Arab Emirates, Lithuania, Cyprus, Bulgaria, Mauritius and Albania.

Our oriental tobacco which is intended for purchase is an integral part of Phillip
Morris, Imperial Tobacco and British American Tobacco cigarettes.

7
 ALL OUR ADVANTAGES

The warm Prilep region, with its high intensity of solar radiation, clean surround-
ings free of industrial pollution and favorable soil composition enables the To-
bacco Company to cultivate and process the world-famous “Prilep” tobacco,
named after the town back in 1930. The type of tobacco has a color rang-
ing from golden yellow to orange, an elastic fibre, slightly emphasized middle
rib and stems, a specific, very strong aroma, and a pleasant mild taste when
smoked.

Tobacco Ltd. organizes production of this tobacco with almost 10.000 of its
individual tobacco growers based on a cooperation contract. In this way, well-
nigh 40.000 inhabitants of Prilep and its neighbouring villages are involved in
the production of 6 to 8 million kilograms of tobacco a year, all of which is pur-
chased by the Prilep Tobacco Company and the Company offers strong sup-
port to its tobacco growers. The purchased tobacco is then handled, packed,
fermented and carefully stored at Tobacco Ltd. until its export to all corners of
the world. The Company exports over 90 % of its fermented “Prilep” type. The
biggest buyers are the world’s major cigarette manufacturers in the USA, Ja-
pan and the European Union.

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 Tobacco Prilep is the largest processor of tobacco (Tobacco Ltd) and cigarette
manufacturer (LLC Smoking) in Macedonia in terms of capacity. Key brands of
cigarettes currently produced in Prilep are "Brand", "Sun" and "Rondo".

All manufactured brands are the property of Tobacco Inc. The only brand of
cigarettes which is licensed is Ta2. The company is equipped with 10 production
lines for basic cigarettes (Virginia, Burley, Oriental and Stem Expanding) with an
annual capacity of 3,672 tons and 9 secondary production lines for cigarettes
(hard packing 4, 5 soft packing) ready for production. It has a production line
for mono acetate filter rods with 3 KDF-2 machines (132 mm 120mm) with a
production capacity of 3005 million filter rods per day and 2 KDF-2 machines
(108 mm, 100 m) with a production capacity of 1.83 million filter rods per day.

Tobacco Prilep has a processing capacity of 5520 tons per year and fermented
tobacco production in 3672 to 4.032 billion cigarettes per year.

The company currently employs 1040 workers. The large capacity of production
and semi-closed cycle of production processes allow the Company a delivery
of big range of products and services needed by their clients.

Tutunski Kombinat carries out strict quality control in its procedures in order to
ensure that the production of cigarettes is in line with the international standards.
In 2009, the Company started with the ISO certification.

STRUCTURE

Tobacco Inc. owns 100% of the equity in both companies (LLC).

From a historical standpoint, Tobacco engaged in manufacturing cigarettes

(Cigarettes Ltd) and the processing and sale of processed fermented tobacco
(Tobacco Ltd) as well as small quantities of filter rods, cut tobacco and adhesives.
However, these activities always occupied a smaller part of the trade.

ORGANIZATIONAL STRUCTURE

Corporate governance structure: General Meeting of Shareholders and Board

of Directors of 6 members (1 CEO, 2 executive directors and three non-executive
directors) with a 4 year term.

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In recent years there is a significant trend towards cigarettes with low and high levels
of tar. This variant already takes 83% of sales in volume and quality. Health awareness
in Macedonia rapidly expanding and growing so the percentage of these cigarettes
presents possible option.

Macedonian law prohibits the sale of tobacco products on self-service, including online
retail and vending machines for cigarettes. Independent small shops remained the
leading distribution channel for cigarettes in 2012. These stores are most comfortable
market for day-to-day distribution due to their locations and extended time.

The volume of retail trade fell by 11% in 2010 compared with a CAGR decline of only
1% over the period under consideration as a whole. Recognizing that the global
financial crisis, along with the latest antismoking regulations affect consumers, majority
of manufacturers of cigarettes did not increase prices in 2010 in order to prevent a
larger decline. One of the important measures which were implemented by some
manufacturers is that packs with 20 cigarettes become packs with 19 cigarettes in
2010.

Oriental tobaccos have an average share of 86.72%, semi-Oriental 5.61%, 7.27%

and Virginia Burley share of 0.40%. Type "Prilep" is the leading type of tobacco in the
production structure of Macedonia. Along with Collar, occupy more than 81% of the
total production of raw tobacco in Macedonia. Oriental is the third largest type of
tobacco worldwide, behind Virginia and Burley.

Macedonia is the fourth largest producer in the

world of Oriental tobacco in the last three years.

Macedonian tobacco sector has produced 14,858 tons in 2009, 19,944 tons in 2010,
26,500 tons in 2011 and 27,500 tons in 2012.

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 CIGARETTES LTD.

The tradition of cigarette production is present in Prilep starting from early 20th
century. But the contemporary industrial cigarette production began after the
World War II. In 1955 the new facilities for cigarette production have been built
with the equipment for top-quality cigarette production following the produc-
tion stages.

During the sixties the new plant has been built incorporating the high level inter-
national technical-technological solutions. Furthermore, following up the most
recent international developments, in technique and technology of cigarette
production, the expert teams of the Company performed further update of the
plant. Today it is capable to produce 8 billion cigarettes per annum. The plant
possesses contemporary primary processing; high-speed cigarette making ma-
chines with modern cigarette design and the possibility of up-to-date design of
different packs and packages.

For the impressive developments on this part the most meritorious are our de-
signers of great number of brands, who are exceptionally accustomed to fol-
low the consumer’s preferences. Many brands produced here became ex-
tremely popular among the consumers and in fact, remain as special mark not
only within Macedonia but also beyond.

The high level of technique and technology in our cigarette factory, as well as
the experienced teams of experts enable the Company to establish licensing
and other forms of cooperation with the leading cigarette manufacturer PHILIP
MORRIS and present cooperation with the Chinese monopoly in the cigarette
industry – Hongyunhonghe Tobacco Group.

The total production in the factory is controlled on several levels. The quality
control is conducted on daily basis not only in the factory labs, on site or in spe-
cialized labs with highly sophisticated equipment and instruments for complete
analyzes of chemical and visual parameters of non-tobacco materials, raw
materials, and especially of finished products – cigarettes; but also the quality
is confirmed by two respectable scientific and research institutions.

While creating new and maintaining the existing brands, much attention is paid
on the care for consumer’s health. That is the highest priority, starting point in
the production of cigarettes, and it begins from suitable choice of tobacco
with less harmful components, via non-tobacco materials bought from emi-
nent international manufacturers, to the application of the international stand-
ards in diminishing the harmfulness of smoking, especially regarding the tar and
nicotine content.

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 ALL OUR VISIONS

The Tobacco Company’s rising development curve is the logical path followed
by the successful and a clear confirmation of wise business moves.

ALL OUR ACHIEVEMENTS

The Company has moved from 100 tons of purchased and processed tobacco
at its inception to today’s figure of over 3 million kilograms. The existing storage
facilities of Tobacco Ltd. have stored up to 8 million kilograms purchased to-
bacco and hopefully these quantities will be maintained in the years to come.

ALL OUR PERSPECTIVES

The present-day Company is a holding company, with up-to-date facilities and

the latest technology for producing tobacco and cigarettes, divided in two
companies with about 1.043 full-time employees, with an extra 80 seasonal
workers. Entering the computerization epoch today the entire performance
of the Company is subordinated to the marketing principles, as the business
strategy aiming to the consumer’s requirements and needs. Our goal is attract-
ing new costumers, manufacturing cigarettes under licensed production, ex-
panding and conquering new markets, increasing the share in domestic as
well as in export markets, orienting and following up the global trends in pack-
aging and cigarette manufacture, expanding the portfolio with new product
range, increasing the production capacity of the cigarette factory, intensify-
ing and enhancing the placement of the products from the filter rods plant
and also enhancing the placement of the products from adhesives plant.

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 TOBACCO LTD.

Tobacco Ltd. manages production of world famous oriental types of tobacco

“PRILEP” and “YAKA”.

Type “Prilep”, on the international markets, is highly valued oriental tobacco,

being cultivated in ecological regions where heavy industries, the major pollut-
ant, are not present.

Type “Prilep” is distinguished by its small aromatic leafs, smooth lamina with or-
ange and red colour, with specific highly distinctive and intensive aroma.

The specific aroma, high contents of ether resins and oils, sweet taste, and
excellent flammability, are only few of the qualities that make this type of to-
bacco be treated as the top flavor essence in the best cigarette brands. In
fabrication is used for aromatization and production of best quality tobacco
products. The tobacco supplied by the farmers is being processed, packaged,
fermented and carefully warehoused in the industrial facilities of Tobacco Ltd.,
until delivered to the world-wide customers and destinations.

Over 90 % of fermented tobacco is exported. Sales grades of oriental tobacco,

type “Prilep”:

AG (N)
AB (N)
AB (A)
BG
KP
DKP
KK

The grades according to the specific requirements from the buyer (such as
ABC) are also available.

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18
 TOBACCO
COMPANY JSC
PRILEP
PRODUCT PALETTE 2013
This cigarette is a result of a long-range development of the company in the framework of
permanent follow up of the contemporary international trends of cigarette production. In fact
it is the first cigarette member of the high quality group, ever developed in Macedonia. The
choice of high quality tobacco and non-tobacco materials acquired from reputable pro-
ducers, with exceptionally attractive design, special care taken during the production and
excellent smoking properties, make the cigarette an equal competitor to the best known in-
ternational brands. This cigarette provokes an exceptional interest on each tasting event and
presentation, on each exhibition or commercial event, in the country and abroad. BRAND
BLUE BOX, BRAND WHITE BOX, BRAND SKY BLUE BOX are part of the BRAND family in hard pack
with round corners, known as round corner flip top box. BRAND BLUE SOFT and BRAND BLUE
LONG complete the BRAND family with soft version and therefore completing the portfolio of
the strategic cigarette of TKP, showing the quality and popularity of the brand.

BRAND BLUE, BRAND SKY BLUE, BRAND WHITE - FLIP TOP ROUND CORNER BOX

84 mm 22 mm 7.85 mm 10 packs ; 190 cigarettes 50 outers ; 9500 cigarettes

 BRAND BLUE, BRAND BLUE LONG - SOFT PACK

10 cigarettes ; 190 cigarettes 50 outers; 9500 cigarettes

84 mm; 100 mm 22 mm; 27 mm 7.85 mm 200 cigarettes 10000 cigarettes
History and common sense have taught us that we cannot debate individual tastes. Hence
the demands of smokers are various and many and we try to cater for all of them. It is impos-
sible to please every individual, but if you like tobacco and are devoted to it, each day you
will discover some new secret in what is offered to you at the end of your fingertips. To remain
one step ahead, to provide smokers with subtle new nuances, to reveal fresh secrets- that is
the challenge constantly present in our Company. The design and smoking comfort which are
easily recognizable by the smokers contributed for San Slims to become regional leader in
slims segment.

SAN SLIMS; SAN SLIMS SMOOTH - FLIP TOP SLIM BOX

97 mm 27 mm 6.05 mm 10 packs ; 200 cigarettes 50 outers; 10000 cigarettes

Its appearance was a result of the development program of TKP and also the systematic follow up of the
international trends in cigarette production, taking direction towards the production of the so-called “soft”
cigarettes, meaning less tar and nicotine content. It was launched at the beginning of nineties of the last
century and immediately became real challenge for a huge number of consumers. It is distinct by the
excellent design, carefully chosen tobaccos and non-tobacco materials with top quality, as well as the
permanent improvement.

RONDO BLUE , RONDO BLUE LONG - SOFT PACK

10 packs ; 190 cigarettes 50 outers; 9500 cigarettes

84 mm; 100 mm 22 mm; 27 mm 7.85 mm 200 cigarettes 10000 cigarettes
The oriental tobacco production lasting with centuries in Prilep region has been overflowed into the qual-
ity of this oriental brand. For a long time, in the sixties and seventies of the last century it had been the
bestseller on the large former Yugoslavian market, Even today the cigarette has a great number of fol-
lowers. In 1999 in accordance with the request of the consumers, without any changes in the design and
quality, the cigarette was renamed into Filter Oriental.

FILTER ORIENTAL- SOFT PACK

84 mm 22 mm 7.85 mm 10 packs ; 190 cigarettes 50 outers; 9500 cigarettes

Each determined consumer wishing to spend his precious time with a cigarette, regardless the price seg-
ment, has Filter 19 to serve him as a measure of prestige. Bearing in mind the foundation and history of
TKP, this cigarette may be considered as a newer brand. Filter 19 is a cigarette with lowest sales price.

FILTER 19 - SOFT PACK

84 mm 22 mm 7.85 mm 10 packs ; 190 cigarettes 50 outers; 9500 cigarettes

Specific, basically new oriental type of cigarette, still the taste of blend cigarette can be felt. As it is a
unique cigarette with exceptionally durable standard smoking parameters, it has a significant number of
faithful consumers.

EUROPA - SOFT PACK

84 mm 22 mm 7.85 mm 10 packs ; 190 cigarettes 50 outers; 9500 cigarettes

Ta2 is a brand that reflects the modern lifestyle. It is recognizable to those with sophisticated style and
behavior. The exclusivity of Ta2 arises not only from its features, but also from the category of consumers
which are loyal to this brand.

This product is characterized by its high quality and its very affordable price.

Ta2 BALCK; Ta2 WHITE - FLIP TOP BOX

84 mm 22 mm 7.85 mm 10 packs ; 190 cigarettes 50 outers; 9500 cigarettes

TOBACCO CMPANY JSC PRILEP
MARKSOVA STR. 101, 7500 PRILEP
R. MACEDONIA
WWW.TKPRILEP.COM.MK

2013