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saleof non-coreassets.Moving forward, AOI is citing a ded-

ication to Total Product Integrity. This isintended o be a "cornerstone"of thecompany as t aims to become a leadingstrategicsupplier to cigaretteproducesacrosshe globe. t will include global-re-sponsibility programs, good agriculturalpractices, gricultural esidue esting,and farmer traceabil ity programs inconjunction with its seed-developmentscience ndmodern processing tandards.ON HE OVEAlliance One hasdevelopedan extensiveinternational network through which itpurchases, rocesses nd sells obacco.It owns and has an interest n process-ing facilities in Argentina, Brazil, India,Tanzania, the United States,Germany,Indonesia, Malawi, Kyrgyzstan,Macedonia, Bulgar ia and Turkey.Historically, the company contractswith third-party processors inArgentina, Canada,China, Guatemala,India, Thailand, an d certain formerSovietUnion countries.New contractsfor export-quality, flue-cured, and bur-ley tobacco have been entered inArgent ina, Canada, China, India,Indonesia,and Thailanc.

All iance purchases obacco in 45countries, primarily directly from grow-ers n a process nown as "direct con-tract buying" often buying a farmer'sentire crop. Alliance is responsible ormatching quantities and grades equiredby its customers n advanceof the crop.Theseestimates re usedas he basis ocontract tobacco directly from farmers.Direct purchasing akes place n manycountries,such as Argentina, Greece,Bulgaria, BrazTl,Tanzania,and Turkey,Tobacco s bought at auctions argely nCanada, ndia and Malawi after receiv-ing customers'orders as Alliance repre-sentatives ttend major auctionsaroundthe world. It operates 3 processinga-

cilities n 13countries,most of them 1o-cated near the major growing regionsand then ships to customers n some 90countries, making Alliance One a trulyworldwide concern.

In2007 190lo f its tobaccowas pur-chasedby companies connected tofapan Tobacco Inc. and 34o/o o AltriaGroup. Some 17%o f salesar e in theUS and 500/on Europe.Cigaretteman-ufacturers are also increasingly buyingleaf directly from growers as well asfrom independent eaf merchantsscat-tered across the globe. However,Alliance One's network, management,distribution, and financial resourcespromise to inake it a seriousplayer onthe international tobaccostagedespitethese recent changes o the interna-tional leaf-buyingprocesses.

Alliance,while reducing its scopebyremoving tself from other businessines,hasupped the ante on its risk levelby de-pending almost entirely on tobacco orits revenue.However, the company hassomewhat alleviatedthis risk as t con-tracts from growers around the worldand counts nearly every arge-scale iga-ret te manufacturer as a customer.Increasedefficienciesand a sharper eyeon fiscal responsibilityalso alleviate iskwhile making the companybetterable ocompeteon nearlyeach evel.

As it is impacting the entire indus-try, growing smoking bans, largely inth e developedworld combinedwith agreaterawareness f health matters byboth governmentsand individuals, areforcing cigarettecompanies,All ianceOne's primary customers, o look fur-ther out on the globefor favorablemar,kets.Governments'desire o increasing-Iy close budget gapsby raising cigarettetaxes also force smokers o considerquit t ing or reducing consumption.All iance One will always be pressedupon to del iver quality leaf to its cus-tomers n a timely manner at a competi-

tive price-this is the core of its busi-nessas tobaccocompaniesare steadilyunder pressure to find ne w ways inwhich to become more eff icient.Alliance One management'sdecisiontoremoveor reduceexposuren non-coreassetswhile reducing debt should paydividends n this area.

"The asset ales re part of the com-pany's strategic focus to right-size itsglobal ootprint and recognize ostsav-ings," notes Bryan Hunt, CFA, an ana-lyst at Wachovia Securitieswho followsthe company.

Ativo Research, n independent e-search irm, projects AO I will "growwith averagepersistenceand at a long-term rate of 4o/o."On the negativeside,it notes it s "financial quality is low"when compared with that of otherfirms. However, the worldwide tobaccoindustry, in which AOI competes,en-joys a relatively stablebusinessenviron-ment which should work to AOI's long-term benefit as managementcontinuesto discard non-performing and non-core business nits, using the proceedsto reduce debt and create greaterefficiencieswithin the company.

For the nine months endedDec. 31,2007,AllianceOne reported net incomeof $33.1mn compared o a net lossof15.4 mn fo r the same quarter of theprior fiscal year. Grossprofit increased22.4o/orom $60.7mn in 2006 o $74.3mn in 2007 The improvement reflectedmore sales nd highersellingpricesplusthe benefitsofthe anticipatedsynergies.

"Our positive resultswere achieveddespite hallengingmarketconditionsdueto tightening world tobacco supplies,global capitalmarketsconcernsand fur-ther US dollar value erosion,all of whichareplacingpressures n costs.To counterthesepressures oing forward,we remainfocused on further operating efficiencyimprovements,additionaldebt reduction,currency risk-management trategies nd

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closer monitoring of bad farmer debt. sizingour strategic lobal ootprint."While the capitalmarketsremain turbu- Also in March it completed he saleoflent, we will continueto reducedebt in a propefty ownedby its wholly ownedsub-controlledmanner consideringour strong sidiaryAllianceOne ESS AOI Greece)ocash lows rom operationsand the saleof PasalDevelopmentSA.The cashproceedsnon-core assets." from the transactionweresome$7.6mn.

In fanuary, Alliance One ciosed a "We are very pleasedwith the upsizeof

-Peter Gore,

Chief Financia l Off icer, replacingJamesA. Cooley, who resigned hepr ior month. I t a lso named Hil tonKappaun ExecutiveVice President-GlobaiOperations.

Sheetspreviously served as theExecut iveVice Presidentof F inanceand Chief F inancia l Off icer ofStandardCommercialCorporation,anAl l iance One predecessor,when i tmergedwith DIMON Inc., and servedon its Board of Directors. Previouslyhe held various finance positions withR I Reynolds nternationai."Robert brings to us a wealth of fi -nance and industry experience, avingservedas Chief Financial Officer and amember of the board of directorsofStandard Commercial Corporat ionand previously in var ious f inanceposi t ions within RI ReynoldsInternational,"saidHarrison. "W e ar efortunate o havesomeone f Robert'sbackgroundand abilities o help us po-sition Alliance One to meet our futurechallenges nd opportunities.

"lim Cooieyhasservedhe companyand its predecessorsn a number of se-nior finance positions and was a keymember of the team which effectuatedthe merger betweenDIMON Inc., andStandardCommercial Corporat ion, "saidHarrison."The company s gratefulto Mr. Cooley or h is many yearsofdedicated ervice."

While having made not iceableprogress n 2007, the Al l iance Oneteam still has significantwork aheadofi t as t prepares o competeagainstafirmly established,well financed com-petitor in Universal Leaf in a marketthat is in a rapid stateof flux on nu -merous fronts. In spite of this, the in-ternational obaccobusiness owever,remains a relativelystableon e in theconsumerstaples ector.Peoplewant

roolp"All iancehas some bigcompetition,uthascarveda nicheor tselfwithspecialtYproducts.fh.-I'removing.aggressively.anagementsdolng lotof theright hingsandmaking lotof sense."

Certified inancialAnalyst,Gore& GalubBrazilian actory,making an additional$18mn available or debt reduction.Atquarter end December 31, 2007,Alliance One had permanently educedtotal debt by $233mn when comparedto the sameperiod one-year rior.

Last March All iance On e Tobacco(Malawi) Limited (AOI Malawi) com-pleted the saleof its Liiongwe NorthFactory facility, including one threshingline and otherrelatedassets,o AfricaleafProcessors imited. The grossproceedsto AOI Malawi are approximately$14.8mn. AOI Malawi separately adean ad-ditional investment o enhance he ca-pacity of its LilongweSouthFactory, e-flecting he company'scontinued com-mitment to and conf idence in theMalawi tobacco ndustrv. In a statement,

the program,which is in line with AOI'sstrategic nit iatives," noted Harrison."This transactionputs to use meaningfulAOI assets,urther de- leverages urbalancesheet, mproves iquidity an denhances ur financial lexibility."

It alsocompletedthe saleof the twoproperliesownedby its discontinuedwooloperations.TheseFrenchpropertieswerethe subjects f separate ales greementsthat had beenpending governmentap-proval. The net cashproceedsrom thesesales ereapproximately 11.6mn.

"The saleof the Greekand wool as-setsare consistentwith our committedfocus on strategically dentifying an dpursuingcostsavings," aidHarrison.ROSTER OVES

CE O Harrison said, "The sale of th e In April All iance One addeddepth at cigarettes nd as ong as they remainMalawiassetss consistent ith our con- the top of its corporate ineup when it willing to pay for them, AOI should betinued strategicocusof identif i. ing nd announced th e naming of Robert A. able to deliver the materiai to make

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