B.A.T INDUSTRIPS p1c
DELEGATED AL-THOR1717Y
The B.A.T Industries Group has evolved an organisation which encourages the exercise of
a high degree of autonomy within the framework approved by the Board. Thus. the
freedom and responsibilities in operations reside in Operating Groups (the companies
shown in 3(b) below) except in respect of matters which affect B.A.T Industries' interest
as a shareholder in Operating Groups. which should be referred to the Main Board and/or
the Chief Executive's Committee. The levels of reference are set so dust matters of the
greatest importance am referwd to the Main Board, other matters am referred to the CEC
or Opemtinj Group as shown below.
The following table indicates examples of the type of reference mqukm&--
SURM UT
TIMATF RV"
RFNCF
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1. POLICY
(a) Objectives and samSies (including
investment in. or divestment from, an existing
business. and investment in a new
business. over M million). Main Board
(b) Allocation oftesoutces. i.e. Five YwPhuts.
Operating Group and Consolidated Budgets.
Quarterly BotTowing Surveys and Succession
Planning. Main Board
(c) Determination of business pwarneters for
each Opemcing Gmup. Le. Guidelines to
Operating Groups. Main Board
(d) Proposals for capital investment in an
exi%tinj; business above the applicable
Operating Group limit set out in section 2.
but below 925 million. CEC
(e) Propouls for investment in any new business
or divestment from any existing business
regardless of amount. CEC
2. Fr..%A-N;C!E
(a) Capital expeaditum/disposd of assets:-
95 million (Eagle Star)
(AUW Dunbar) Openuing Group
L5 million (BATCo) Opemins Group
VSS10million (Brown A WIlliamson)
(Farryters Group) Operating Group
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B.A.T INDUSTRIES P.I-C. - MINNESOTA DEPOSITORY COPY - PRODUCED PURSUANT To I VILD. oF
Comsm JuDGmENT DATED 5/8M IN STATE oF ANNNEsom ET AL. V. PHXP MORM, ET AL CASE NO. C I -944M5
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SVLMCT
MMNIATE REFFRFNCE
USS5 milli-on (Souza Cruz)
Operating Group
DM10milhon (BATCF)
Operating Group
(b)
Exceeding the above but not exceeding
W minion
CEC
(c)
Exceeding E25 million
CEC/Main Board
3. AnN
INNTRATWE
Appointmeots to:-
(a)
Operating Group Boards of Companies
referred to in (b) below, and Imasco.
CEC1,Main Board
(b)
BATCO: Managers in Grade 46 and
above.
CEC
BATCF: Shareholder Representatives
on ft Supervisory Boards of
BATCF/BATIG. Executives
reporting directly to BATCF
Board membem arid
appointments to the BATIG
Management Board.
CEC
B&W Executives reporting
directly to B&W Board
members.
CEC
Farmers Group: Level I executives.
CEC
Allied Dunbar All executives beating the
Assurance: tide of Operations Director.
CEC
Eagle Star Boards of ESICO. ESLACO
Holdings: and ESAM.
CEC
Souza Cruz All appointments to
Industria: the Administrative Council
(ConselbO
CEC
(c)
GHQ positions in Grade 14 and above.
CEC
(d)
Changes in remuneration of individuals in
(a) - (c).
CEC
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B.A.T INDUSTRIES P.L.C. - MINNESOTA DEposrtoRy COPY - PRODUCED PURSUANT To VILD. OF
CONSENT JUDGMENT DATED WS/98 IN SrATE OF AlmasQTA, ET AL V. PHXV MORRIS. ET AL CASE No. C1-944W5
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SL*B.TF ULMIATE P-PITFRENC
(e) Boards and appointments outside (a) and (b), Operating Group
(f) All proposed changes in Operating Group
legal or management structures. regardItss
of size. CEC
4. OTHE
Major marketing and business initiatives. CEC
S. FNANCTAL SERVICES
Investment decisions which involve:-
(a) dw conunitment of funds in excess of 2vt%
of total funds under management to any one
company or to any one project or series of
projects (exclusive of net money book exposures
to UK clearing banks, 1br which a separate
limit of E200 mflliork applies. and of stock issued
or guaranteed by the national governments of the
U& US. Japan. France or Germany) sW be
notified to Group Sectetarial Department for prior
reference to the CEC. 7be value to be used in
calculating the level of commitment should
be market value. 11* notification needs to be in&*
only on the fint occasion when the corntaltment
exceeds 214%;
(b) an intention (i) to acquire an inm t in the sham capital
of any company listed in the UK which is equal to
or gmter than 10% or (ii) to increase an exi i g
interest to LO% or more of the sham capital of any
company lis@ in the UK should in each can be
notified to Group Secretarial Department: for prior
reference to the CEC. The notification should inch
a brief description of the investment. Prior 130tirWatiOn
is not required where the value of the aggregate
investment is less than ES million marketvalue.
In cases where notification cannot be Shen in advance
(e.S. where the acquisition or pan of the acquisition
is by a unit utist or on behalf of a discretionary
investment client or pursuant to the exercise of some
other fiduciary duty or would involve die disclosure to
B.A.T Industries of price sensitive information), dien
notification (includinga brief description of the
investment) should be given immediately upon the
r\3
interest @avinj been acquired;
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B.A.T INDUSTRIES P.1-C. - MINNESOTA DEPOSITORY COPY - ftoouw) PURSUANT To VILD. OF
CONSENT JUDGMENT DATED 518M IN STATE OF A*NNESOTA, ET AL. v. PhXV MORRO, ET AL. CASE No. CI-9441565
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(c) the acquisition of 1% or more of the share
capital of any company listed in the UK which
constitutes a "material" interest for the purposes
of the Disclosure of Interests in Shares (Amendment I
Regulations 1993 shall be notified monthly to Group
Secretarial Department. Acquisitions by unit trusts or
on behalf of discretionary investment management
clients are excluded from the notification requirements
set out in the preceding sentence. Group
SecmmrW Department will inform the CEC of any
Group invesmient which is notifiable for any statutory
or regulatory purposes.
6. CAMAL EXPENDITLW PROPOSALS
(a) Limits apply to any project or group of pmjects which am connected in
purpose with or which arise from implementing a particular strategy.
Litnits apply to total expenditum or commitment of resources. i.e.
including invesmat in associated working capital. Leases to be entered
into are valued at present-day discounted value. The limits are at current
values. but the effects of inflation should be shown Where! MICVAIIL
(b) In addition to the information necessary to describe the project. its
contribution to an impact on the business, and quantification of the
invotment and Im rmm thereon (using DCF analysis). the proposal
should:-
(i) State whether the project was, included in the last approved sbort-
term plan. and state the difference between the original oudlu
figures and ft figum now calculated. If the project was not
included in the List short-term plans. an explanation sbould be
given. If the remn is because of new strategic thinking. a review
of the effect on the Operating GrouVs pt= should be included.
(ii) State the proposed financing arrangements. and the impact of then
on dividends and debt.
(iii) Include a comprehensive sensitivity analysis appropriate to die
nature of the project.
(iv) State the tiramble and arrangements for monitoring and reporting
on the outcome of the project.
7. INCREASES N CAPITAL
The CEC expects a reference to it where any subsidiary or assiociated company
proposes to:-
(a) increase its authorised capital to a level of more than 100c above its
issuedcapital;
B.A.T INDUSTRIES P.L.C. EPOSITOW Copy _ pRWUCE9 pURWANT To VII.D. OF
MINNESMA Dr
ST AL V. pHXp "no Er AL, CASE No. Cl-94 11565
CONSENT JUDGMENT DATED 5/8MI IN STATE OF It so
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(b) increase its issued capital otherwise dtan by capitalisation of flon-
distributable profits/m3erves or of funds permanently invested in the
business.
The CEC would be unwilling to support such a proposal ky a subsidiary or an
associated company unless the GrouVs interests as a major shareholder am
recopised by adequate representation on the board of that company.
Reference to the CEC concerning capital increases should include. amongst other
relevant detafl. the impact on:-
(a) dividends;
(b) debt/equity ratio;
(c) registered forei$n capital. when relevatiL
FAIZLY WAIMMr,"
The CEC wish to be advised before the sun of negotiations with outside parties
on potential acquisitions. disposals, 1, oriciat venmres which will
ultimately require reference to the CEC. Reftwices should indicate dw Likely
parameters within which the negotiations wW take place.
David Wdson
3rd iNovernWr 1993
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BAT INDUSTRIES P.I-C. - MINNESOTA DEPOSITORY COPY PRODUCED PURSUANT To VII.D. OF
CONSENT jUDGMENT DATED 518,98 IN STATE OF A&NAOESOTA, Er AL. v. PHXJP MORRIS, ET AL. CASE No. CI-94-M5