O 1·2


             CORPORATE
                   PLAN


                        Lawrence Philp                 Co
                        AVe, Management Financial Reporting
                        November 26, 1991


BAT Industries document for Legal Services : Health Canada 21 May 1999

    Imne~al Tobacco

                                     Ed RAN CCB
                    1989 ~w 1991 1991 1992 1993 1996 119~3·9~ U191·96
                    2,386 2,108W2,n6 3,019 13,063 3,119 3J81 5.1 13
      nelo[Fed#rl
    ExeisPTu        896 963 1Mn 1043 1062 1010 1151 3,2 21
      iq Euoiogs    334,0 361.1 404 395·0 415.0 455.0 536.9 1,O 6,3
        &fPm
    Dividends and Pinaocingl 118l3 168.0 232,0 303,8 219,9 294,4 330.1
      Etprmdintra   24,6 14d 11.0 33.4 33.4 29.5 NIA

      Employed      652 211 181      699 231 ~65
                    56,0  53,9 51.6  59.4  63.4 NIA NIA
      YPIPme @)     313   31.8       30,9  30.3 NIA NIA
      ifMdtdSbus~( 55.5   56.?       51.7  59,0 60,0 NIA


    ~TPtE~
    (a) Revenues which had been forecast to dedine in 1991 as;l result of elimi~ing Federal Sales
      Tax have been increased by the lubslrntial increase in Federal Excix Dutin early in 1991.

    ~ Volumes now include duty free and export sales,

    Imperial continues to increase its IFa~ Sare in the Face of an a~clc~itp ednt~ctian in industry
    volumes caused by the swingeing increases in tobacco taxes in 1991, 'Ihe increase in the cost to
    the Canadian consumer, over S096 in the last two years, has led to f~ndamental changes in the
    indwtrl, notably a subsmnlial increase in cros~ border shopping and smuggling and a switch to
    productr such as tobacco stie~ which enjoy a more favourable tax Peatmmt · thwgh tax change
    in 1991 have diminished the price advantage mjoyed by sticlrs.

    The forecast assumes that tobacco ~dxw continue to be increased steeply about evay two years,
    As the Irarlrct becomes more price sensitive, the advantage Imperial derives from its strong brands
    and powaful sarkd position will be diminirbed, raluiring a f~ribiliry in rerponsc. Olh#
    important issues indude:·

    (a) ~I~e outcome of the appeal against the injundon granted to Rotbmars Be~ron k Hedge in
      1991 restraining Imperial from selling pre-portioned tobacco sticks - though the growth of
      this segment will be diminished by the imposition of excise taxes,

    (b) E~at resolution of the legal challenge by Imperial and RJR to Bill CS1 which purports to
      outlaw tobacco advertising and promotion, The appeal process could tabe up to 5 years and
      for the time being the industry is not initiating new activities, though current levels of
      advertising are bring main~dined,

    (C) The po~ibility of action by the Govrmment to reduce duty free and cross border shopping.    O
      Since the lax inueasn, Impcri~i's cxpon sates have gmwn subsgnnslly,                          m

    Il the long ten Imperial believe that profits are likely to cease to grow at some point during the
    nrxtdceadr \o


BAT Industries document for legal Services : Health Canada 21 May 1999