FILS NOTE X 7 2
us DTVDM P GFICO
ncr n rr
Points ar:s@ng from m te@rphone confern
involving t@e fol.10-14ng:'
C Francesconi
j Csud@-'l
L Ste,;berg
L Spence
9 Ether;ngton
T D ailton
1. The dividend that cam be paid from the jS without the need t@a
borrow externally is $I-Sbn. This will be paid from the
following:
a) BMI c3650m, being part. of the after tax gain on t.ho.-
retail sales
b) BTSI c.8950m being dividends t':-:= MW,
2. CF is to examine the balance shapt valuation of the investment in
SO to ensure that BTSI. which has a negative net worth, will
have a surplus *fter the dividend to paid for Delaware low
purposes le the remaining not assets of STSI will exceed ita
capital following this dividend. This will be a current market
valuation.
3. The sazw principlb will. also have. to be applied to SATUS Holdings
Inc.
4. DATIF will effectively take on the debt for tle dividends, Je:
(i) RATIF will horrow the-amount of the divLdend from
Industries Oiote: in sterling converted ftt the apat
rate).
(ii) DATIF will repay 61.6ba of borrowtrp from JiAWAP.
(iii) BATCAP will lend the S1.6br down to Mr and ITSI/MW tn
enable them: to poky the dividends up.
(Mote: a novatioc agre@t will be entered into wiwraby
DAM's liability to UTCAP In assumed by the d1vidand
payinc coop"kes.)
5. This must all happen before 31 DorAmber 12W so that the 5X
dividend withholding tax suffered oan be refwmW early in lgql.
(Note: To a telephone co:nver"tion of 10 Deomber IM CY said
that 26 - 28 December I M in the estimated payment datt.,
--4
U11
B.A.T INDUSTRIES P.L.C. - MImNFsoj'A DEPOSMORY COPY - PRODUCED PURSUANT To VILD. OF
coNsEmT JUDGMENT DATED 518M IN STATE OF MINNESOTA, ET AL. V. LIP ANORRIS, ET AL., CAsE No. C 1 -9"565
- 2 -
6. Fr= a US po2nt of vtew debt '.a better placced in H&W bacmudip they
alone will get a Lt@te tax deduction beside% federal tax, Cr
will work on this.
C.Note: Debt must not ar:ge ;n 4ATUS Foleangs Inc wnich is dual
rpsident and will therefure not obta-ii a tpLx deduction for
intereST.1
7. UK tax isplinations ol the obove !nut sperificully covered during
the conference call).
a) Di-videng from EMLI
We have hud verbal confirmution from the Inspector of
foreign Dividends that Doublit Tax Relief will oe available.
Tho amount will bu sufficient relief to cov*-r tit net
mainstream Corporation Tax liability.
b) Dividenc from BTS1 ex 110
The latest figurer. we hmve in Lax departxent show that there
is sufficient underlying tax to eliminate a UK tax liability
on the. dividend and Rlso the need for wny ACT. CF will send
TDR an updated estimate of SO retained earnings which cr
says should confirm this.
c) BATIF gain on exchang
RATIF will he repaying at current dollar rates borrowings
fr= BATCAF which were taken out at rates aro=d 6L.601EI
etc. A gain will therefore arise in BATIF. The tZ tax
treatment of this will depend an negotiations with INIT on
the trentant of currcmt locas betwea. BAT If and BATCAP. We
have treated these as being short term in naturs.(to enable
Interest to be paid "s to BATCAP). If we successfully
conclude this arguIteat then the subsequent gain surizing will
be short term and taxAl , although effectively offset by
Imses on dollar lending to RATUS. On the other hand, If we
are not sucoessful awd the borrowing free SAICAP is doomed
to be long-term, then the gain now aris-ang should be
non-taxable.
d) NATIF S mt2kin
following the repaymot of the BATCAP * loan, ZATIF will no
lcncer be 3 astchad. Me would mean that,' for tax
purpoeii, n6ioifef would"bo obtaized for any foreign
axcbange losses arising on the loam to BATUS.
S. In 1991 CIF will put forward n propoonl to wrge SRSI and BTST =d
possibly BTSI and 50.
r1i
ri, C:)
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TDB:ar:usdp1sn Coples to: Xr R L Des=d
13 December I Hr G J Smith
B.A.T INDUSTRIES P.L.C. - MINNESOTA DEPOSITORY Copy - PRODUCED PURSUANT To $ VILD. OF
CONSENT JuDGuENT DATED 5/81M IN STATE OF ONNESOTA, ET AL. V. PH&V MORRS, ET AL. CASE No. Cl-94-856S