RJR Nabisco Inc. (Formerly R.J. Reynolds Industries, Inc.) and Consolidated Subsidiaries - Page 46

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          II.  Expropriation Issue                                                    
               A.  Description of the Issue                                           
               On September 19, 1977, Kuwait terminated the concession                
          enjoyed by Aminoil to explore for and exploit certain natural               
          resources in a Kuwaiti frontier area known as the Neutral Zone              
          and expropriated certain of Aminoil’s assets in Kuwait.  Aminoil            
          protested the termination of the concession and the                         
          expropriation, and Aminoil and Kuwait entered into an agreement             
          to arbitrate the resulting dispute.  A tribunal was established             
          to carry out that arbitration, and, on March 24, 1982, the                  
          tribunal made an award to Aminoil in the amount of $179,750,764.            
          Kuwait honored the decision of the tribunal and paid Aminoil the            
          award on July 1, 1982 (the $179 million payment).  The reasoning            
          of the tribunal precedes its statement of the amount of the award           
          and indicates that the tribunal reached that amount by steps.               
          First, the tribunal determined the sum of Aminoil’s debts to                
          Kuwait and the sum of certain amounts due Aminoil from Kuwait.              
          The difference of those two sums was a net amount in Aminoil’s              
          favor.  The tribunal then determined the total amount due Aminoil           
          by adding to the subtotal it had determined (1) an interest                 
          amount and (2) an amount described as a “level of inflation”                
          amount (10 percent of the amount due compounded from the                    
          expropriation date to the date of the award).  For purposes of              
          taking the award into account for Federal income tax purposes,              





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