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BRIT[SH-ANIERICAN TOBACCO COMPANY LIMITED
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MANAGEMENT BOARDMEETING
19th Se2tember 1994 R.
Present: Mr B D Brarnley (Chairm T 1994
Mr P N Adams
Mr N Davis
Mr K S Dunt
Mr A C Johnston
Mr R 14 Pilbeam
Mr J Rembiszewski
Mr D S Watterton
In attendance: Mr P L Clarke
to"11"Also, attended: Mr S P Chalfen (BAT Industries) (Items BBJ.81 - BBJ.84)
Mr D E Salt (Itern BBJ.87)
Mr D I Bacon (Items BBJ.90 - BBJ.91)
Mr M Magnacca (Items BBJ.92 - BBI.94)
Mr T Every-Burns (Items BB1.92 - BBJ.94)
Mr D J Stinison (Item BBJ.96)
Previous MinM= The minutes of the meetin- held on 25th Julv 1994 were agreed.
Matters Arisin@: BBJ.56.1 Mr Watterton reported that the review of the
operation of the telephone systern is in progress. He would
consider extending the hours ot:operation to 8am 0to 6prn.
BBJ.74 It was noted that there is no fixed policy to separate
the trade and consumer marketing functions in the operating
companies. The desirability of doing so should be considered on a
case by case basis.
(Action: Re-ional Directors)
BBJ.79.1 With regard to the TSG. the Chairman said that the
question of the distribution of minutes was still outstanding. It was
also noted that the TSG had not reached a conclusion on a suitable
procedure for the intra-roup disclosure of additives. The meeting
considered that this should be urgently addressed in view of
regulatory requirements being introduced in BATCo markets.
(Action: Mr B D Bramlev)
BBJ. 81 STANDARDS OF BUSINESS CONDUCT
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The Board approved the draft statement on legal compliance and standards of C)
business conduct subject to various amendments. It was agreed that when the new a)
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policy is distributed the Chairman will write to all &!rectors, UK He-ids of C)
BATCo document for Province. of BritiSh Columbia 23 April 1999

Functions and o%erseas No. Is dmqn attention to the consequences of an'. fai I, Lre
to comply.
(Action: NIr B D Bramlev)
B 131. 82 AMERICAN- TOBACCO
Mr Chalfen reported that completion of the purchase of American Tobacco and the
associated acquisition of the Silk Cut brands outside Europe is expected to be
completed in the last quarter of the year.
BBJ.83 SCIENTIFIC-RF-SEARCH GROUP
Mr Clialfen a to report back to the Chairman on the subiect of Brown &
Williamson's future participation in the SRG.
BBJ. 84 SMOKING ISSUES MANAGEMENT
Mr Chalfen reported that the TSG had agreed to the fonnation of a "Key Issues
Council" to ensure that there is an adequate framework in place to facilitate the
sharinc, of knowledee and experience and to meet a number of identified objectives
in relation to topical smoking issues. In discussion later in the meeting, it was
azreed that BATCo should become more pro-active in its approach to the
communications and public relations aspects of smoking issues. A plan of action
for BATCo in this respect should be urgently drawn up for approval at the
November Board Nteet;nlo.
(Action: W, D S Watterion)
Mr Clarke reported that in anticipation of BATCo becoming involved in US
litiamion, Leval Department's resources would be strengthened by retainin- an
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experienced litizator full-time for a year. In addition. Project Discovery would be
reactivated and all BATCo's documents would be subjected to a legal review.
BBJ.85 BATCO OPERATING BOARD REPORT - August 1994
The Board considered the draft report for August 1993 and discussed various
issues arising out of it, In relation to Taiwan, it was agreed that the Board would
review activities for combating counterfeit prodUCtS at the next Board meeting
(Action: Mr P IN Adams)
With regard to planned capital expenditure in Uzbekistan and other NBD
territories taken over bv BATCo, it was a-reed that all proposals should be
subjected to BEC re,, iew in the nor way.
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BBJ.86 E\:D MARKET RESPONSIBILITY ' PROJECT STEM
.Mr Pilbeam reported that agreement had been reached on inter-Group ConripanN
prizing following the chans:es recentiv made to end inarket responsibilities. In
p.-;nciple. the produc.ing companN
..wi c@arge cost plus 10% in respect of variable
costs to2ether with cerzain identified production direct costs. NIr Pilbeam
considered that this formula would be acceptable to relevant tax authorities. In
order to implement the formula a common definition of costs is in preparation.
From BATCo's point of view consideration will be given to using the same
formula for tradino between BATCo companies and in relation to trading between
Southampton and the RBLrs.
BBJ.871 HEAD OFFTCE BUDGET
Mr Salt dre,,k attention to the increase in staff numbers projected for 1995 and the
associated increase in sala,-N. costs. It was noted that the establishment fioures did
no, give a totallv cornprenensi%e picture as they excluded secondees. project staff,
consultants. contractors and temporary staff. A redefinition of establishment
nLmbers %ould be devised to enable the costs of these categories of staff to be
a A Head Office
monitored. After discussion of the floures, it was agreed that a,
deoartments should be se,' a tareet of reducina their costs by 3-5% in nominal
tells in 1995 compared to 199.4 ;stiniated actuals.
In the longer term, the ineeting considered that there was a need for a re-
evaluation of the role of all Head Office departments and that it would be
advantaL,eous to retain an external consultant for this purpose. It was agreed that
the Chairman %kould discuss this proposal with the CEC with a view to
cornmencin2 the exercise in the New Year. The meeting emphasised that the
purpose of this exercise should not necessarily be to effect cost reductions but to
confirm that the Head Office continues to perform the right role for BATCo
foliowing Project Rubicon, the changes to end market responsibilities and the new
investments in Russia and Central Asia.
BBJ.88 HILTQN MANUFACTURE
It was confirmed that future production of the Hilton brand WOUld be based in the
Far East rather than in SOLIthampton.
(Action: Mr P Adams)
BBJ.89 PROJECT SPRING FIRD MINE
The meetinc, discussed a paper froin Mr D Stinison on fUtUre production
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rationalisation. In discussion it was a!!reed that BATCo should be more willinc, to
license its brands to third parties than has been the case in the past. The Url
possibility of establishing joint manufacturing operations with competitors should C)
also be considered as a n ssible option in appropriate cases and ;n this,, connection
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it was noted Iha.: the CEC had already approved a set of guidelines on joint
ventures dra%kn L.;) Oil 13th December 1943. With regard to the fu,,.ir-. of the
Sinc-apore and Hone Kong facilities. It was anreed that Mr Stimson should work
with me ASia Pac;tic RBU in reviewing the possibility of using the Hong Kong
and Singapore -'stories in a potential bid for a joint venture in China and
opportunities for rationahsation should no joint venture be possible. A report
should be made to the Board in Februarv 1995.
Additionally, Nlr Stimson and the Asia Pacific RBU should review Opportunities to
rationalise production of cigarettes and/or RYO in Australia and New Zealand.
(Action: Mdssrs N Davis and P N Adams)
With regard to the Cyprus factory, the meeting recommended that decisions on its
fUtUre should be deferred until Mr J Lo-.d is in a position to recommend an overall
European prodt.16011 strategy. Mr Dunt reported that the Latin American and
Caribbean RBIJ is in the process of commissioning a fUll production sourcin.-
revie%k for the continent lookinc, towards the Year 1-000 and bevond. This is beina
carried Out in liaison with both Mr Stimson and also senior management of Souza
Cruz. Final)\. the Board noted the possible factory closures referred to in
MrSfirnson's paper which. if fully implemented, would reduce the present
factories from 63 to 47 or possibly 40 by the Year 2000.
BB1.90 UZBEKISTA@t
Mr Bacon reported that an anti-smoking decree which had been issued recently is
like1v to be amended in such a way as to enable BAT to complete its proposed
investment in Uzbekistan.
BBJ.91 INFORMATION PROJECT
Mr Bacon oave the Board a presentation on information flows within BATCo and
made a number of recommendations. In particular. it was noted that the adoption
of worldwide information definitions is desirable. that the usage of Lotus Notes
should be reviewed, that the Executive Information Systern should be replaced,
that new methods of document presentation should be adopted. that General
NlanaE!ers' monmN reviews should be prepared in electronic format and that a
revie%k of desktop PC svsterns should take place.
(Action: Messrs D S Watterton and R H Pilbeam)
BBJ.92 5,15 SUBARUNVORLD RALLY SPONSORSHIP
Mr Nlaznacca reoorted on.the conclusion.Qf the new sponsorship agreement with
Prodrive, the objective of which is toenc&Tage Subaru and their drivers to secure
the drivers' and manufacturers' tifles'in 1995 and to retain them thereafter. The
arran2ements will produce significant incremental rnedia coverage for the 555
brand. Mr Mauna= reported that the minimum base fee payable by BATCo is
f4.56in per annuin and that Prodrive can earn bonuses of up to f0.9rn per annurn. C)
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13131.93 PR OJ ECT TYPH 00 N
Mr Niagnacca explained that Japan is the third '.araest cigarette market and that
there is a sionificant market opportunity for Staie Express 5i5. Since end market
responsibility for Japan is alio,,ated to Brown &, Williamson, B&AV will be
responsible for the stic-cess of the project and it will necessary for BATCo to
persuade B&W to commit [he nece"sary financial resources to ensure a successful
launch (Action: Mr B D Bramle, ). Th e meetine considered the proposed product
blend and packaging. Market research shom s it %kill be necessary to moderrilse the
packnino design and that this could have serious effects on the integrity of the
brand packaging in other markets. It was ag-eed that the detailed proposals for the
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produc, launch should be discussed with BAT Industries.
(Action: Mr B D Brarrilev)
BBJ.9-1 PROJECT REGAL
Mr Everv-Burns described the preparations for linking the crest chance to the
centenary celebrations for State Express 555. The Board approved the proposals
subject to. confirmation that the required production capacity with a suitable
continc,-nc\- would be available in Southampton.
(Action: Messrs N Davis and J Rernb; sze%% ski).
The meeting noted that the ne% packaging would include a bar-code and it was
aoreed that the introduction of bar-codes on all export products should be
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considered.
(Action: Mr I Rernbiszewski i
B131.95 DISTRIBUTION AGREEMENTS
The Board approved in principle the guidelines on distribution agreements and
requested any detailed contents on them to be submitted direct to Mr H
Niedermann. It was agreed that each RBU should set up a process to
communicate the new guidelines internally and to monitor progress in securing
agreement to the new arranvernents from BATCo existing distributors.
B81.96 PRODUCTION PLANNING AND DEVELOPMENT REVIEW
Mr Sthnson gave the meeting a presentation on the status of the HTD project for a
high-pressure air drier for drying lamina and Project Cliff. the process for
convertina redried A-hole leaf into cut tobacco in a single operation. avoiding the
need for a GLT and stern line. It was noted that the HTD machine installed in
Singapore is fully operational but that the trials of Project Cliff in Bangladesh
were producing Some unexpel-Led results. In discussion. it A-as agreed that
BATCo's strategy on Diet production should be reviewed and that Imperial (UK)'s
request for a licence for the HTD process shOL11d be refused until various other Ln
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(Action: NI r N Dav 1%) CD
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BBJ.9-, SMOKING QUALITY
Mr Adams reported on steps whicn, have bten taken to improve the smoking
quality of Lucky Strike in Indones'a. Singapore and of State Express 555 in
Indonesia. Mr Dunt reported on the smoking quality of Lucky Strike in Central
America.
B81.98 LEGAL REPORT - August 1994
The ineetina diSCLIssed various items referred to in the Legal Report for August
1994.
BBJ.99 TOUR REPORTS
Tour reports for Kenva, South Affica and Zimbab%ke were noted.
BBJ. 100 OTHER BUSINESS
B131. 100, I Travel Pniic%-
The Board approved a proposed new travel policy relating to all personnel
travellina on authorised company business.
BBJ.!00.2 Generil Nlana=r@
The meeting discussed proposed nominations for new General Managers in Kenya,
Niceria. Singapore. Sri Lank-a. Mauritius and Russia.
Bai. I o I DATE OF NEXT MEETING
The next meeting of the Management Board will take place on Thursday 3rd
November 1994.
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