r/i '72
SEC R
CAC XXX LENDS CASTLE
CONFZ"NCF NOrzS
Chairman's Opening Address
Zz3 his openlng address, the chairman described the history and evolution
of CACS from their original Snaking a Health beginnings. He particularly
welcomed the members of the B.A.T industries Board who had not previously
attended CAC*. Be urged that the undoubted strength of the Group must
be put together effectively and that total commitment at the Centre and
Its periphery Is necessary to ensure the future strength of the Group.
S a N 1. Jkwlov of 5 & a Positions
zCO$.r
Kr Sheehy described the origins of MOST and reported on meetings hold
in November 1977 and March 1978. He also reported on current XC05X
issues and activities and its relationship with National Trade Associations.
Xt was agreed that A.A.7 companies represented at CAC need to be kept
regularly Warned of XCO5Z activities.
Germany
Mr van Specht reported on Snaking a Health In general, passive socking
scientific Opinions labelling and the affect an sales. rho main
Smoking 8 AmIth pressure is coning from neighbouring countries (Sweden,
Franc*,, XWv) In areas such as Wm notices.
next of SUP
Xr Stewart Lockhart outlined the position In the rest of Europe. Restrict-
low are Increasing and this trend Is likely to continue. The extent of
restrictlow varies from country to country, being most savors In Norway
and Finland. Xn particular, governments are taking action designed to
result In a lomrIng of tar levels.
rt was agreed that MIllbank would provide companies with Information on
clommeto conotoWtion trends In countries where restrictions are savors.
USA
Xr XaCarty reported on action being taken by anti-smaking groups In
Particular,, the American Cancer Society Target 5 Program*. No also
"Ported an the latest Roper Report. r4,j
Canada
Mr Picard reported on the current position, with particular reference to OD
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BAT Industries document for Province of British Columbia 22 April 1999

2
widespread Increases in rates of -provincial tobacco taxes; Increasing
demands by govornm&nts am action being taken by anti-smakingr groups.
Australia
mr viddup reported on the current position on the Report on Drug Abuse,
Code of Advertising; and passive smoking. vo major changes in legisla-
tion &re expected for at least five years, but the Industry will be
under continuing pressure for further voluntary concessions.
Brasil
xr Bruell advised that while the S & 8 issue In Brazil la much loss
Important than In other countries, there are new signs of Increasing
activity such as (vom mild) restrictions on rV advertising and forth-
coming discussions In a symposium by a committoo of Congress.
Summary
rho Chairman summed up. The smoking & Health Issue is Increasing In
Importance and restrictions are also InazeasIng. Wm should continue to
pursue our existing strategies and, in particular, continue talking to
and co-operating with governments and competitors on this Issue.
S 4 H 2. E!!Epralsal of Principal Assumptions and Attitudes
Dr Gram reported on the findings of recent research projects undertaken
by outside organisations on smoking and diseases. Zt Is Interesting
that the National Cancer Znstitut& Is developing a programme very
similar to work already undertaken by the Zadustry, particularly related
to what the XCX call a ,less hazardous cigarette'.
MTMs were discussed. Zt was concluded that there could have been an
over-reactlon to recent failures and that Me could have a future,
although strict liability legislation could present difficulties In AP
Surope. 22w-current trend la towards hybrid& rather than second genera-.
tlan Am.
other points raised in discussion were
fl) Over the last two years, B.A.T had changed Its attitude to
the S & H Issue and the thinking Is now more realistic.
(2) Governments' Influence In conditioning mmokers" attitudes is
vary zeal.
(3) rho Zndustry Is currently responding to governments and, at
the mm tIM, attew1w to secure Its. zuture, b
Y I tj Mn research
WA Is undoubtedly the right appaosch and should be pursued.
(4) Moderation campaigns had been tried, but without success. B.A.T
should continue to pursue the concept of "safer cigarettes through
third pax-tles No/Or government endorsement. Bach company should
take action appropriate to Its own circumstances.
00
C)
S a 8 3. Appointment of Outside ModicallSolontific Adviser(s)
"M Chairman opened the discussion. Xt was noted that it max Counsel's
M)
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BAT Industries document for Province of British Columbia 22 April 1999

3
opinion that B.A.r should appoint an Independent medical advisor and
that this opinion would not be changed In a situation of strict lia-
bIlItV. Xt was also noted that some Zndustry Znstitutax aM Associa-
tIons already have links with authorities in the medical field.
Xt was 4solded that an outside medical adviser should not be appointed
either by the Tobacco Division In the UK or by any B.A.T company. The
Issue will be raised again at CAC XV In 1979.
S i S 4. ConfirmationlAmendment to Tobacco Board S 6 R Assumptions;
Strategies and Constrainest and Questions and Answers
Mr Stewart Lockhart explained changes which had been made to the three
papers since last year. All the changes were comparatively minor.
rho guestlom and Answers paper will be discontinued and will be replaced
by a *Points to Aake a paper before the end of this year.
The Chairman led a discussion on which of the Basic Assumptions were of
the greatest significance. Although few of these Assumptions had changed
markedly over the years, It is evident that some have become more realistic
&ad the degree or probability of some Assumptions has changed. The only
major change has been a significant Increase in concoxn on the social
acceptability of smoking.
S 6 8 S. lo-rear StratM for Research
(1) Matters Referred by the R S D Conference
Dr Green reported an the Hunter Committee's recent disallowance
of the application for coco& am an additive.
Xt was agreed that B.A.T should continue biological tests on
cocoa In a form which would be acceptable to the Hunter Committee.
Men the results of these tests are available, B.A.T will decide
whether to reapply to the CoWtittl
(11) Flavour Development
Dr Green reported on Progress. Xt was noted that the" Is a
world-wide problem In finding the right sort of flavour experts,
particularly In the US and UK. Zt wax agreed that the search
for the right people, &ad the policy, should be continued.
(Ill) Outline of a lo-rear strategy for Research
Dr Green presented a paper, dated 29th March 1978, headed
"Notes an a 10-rear Strategy for Research,.
Zt was agread that research should be pursued for the projects
and along the lines described in the Paper. The Zndustry should
try to obtain government Involvement whenever studies on Concepts
forwaon-ha=rdaut cigarettes or* undertaken and particularly for
epidemiological studios on smokers of low tar cigarettes. C)
E
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CAC XXX UNDS CASnK
CONFMMWE NOTES
Ztew A. Further Tobacco Acquisitions
Mr Sheehy explained the current position regarding negotiations and
tentative discussions relating to possible future acquisitions by
70bACCO Division. There are four Opportunities In which B.A.T Is
pursuing negotiations and one In which B.A.T Is not Interested. These
five are oomy@aratlvely small. The advantages and disadvantages of two
other possible major opportunities were outlined.
item B. Productivity
Mr Sheehy reviewed the current position and future intents of the
Tobacco Division. Although the facts and figures referred to the
Tobacco Zndustry,, the principles are applicable to all Divisions.
Zn the Tobacco Division, the need for productivity Improvement Is now
fully understood and the commitment of operating managements is very
high. rt was noted that the cost of people In the Industxy Is still
expected to Increase at a rate higher then the rate of Inflation.
Possible repercussions &rising from the implementation of productivity
Improvement plans were discussed. Xt was agreed that B.A.T policy
should be that any reduction In people should be brought about by normal
Wastage. This necessitates planning ahead and B.A.T accepts that in some
cases a reduction to optimal manning Levels my take longer than would
be economically desirable.
Item C. Employeelindustrial Relations
Mr Dennis grave a presentation of wWloV" relations In South Africa. The
presentation covered :
(1) rho significance of the Issue.
(2) B.A.T's stake in South Africa.
(3) ZodustrIal relations developments.
(4) B.A.T's people In South Africa.
(3) rbe XW Code and our Companlos' response.
(6) rho wages issue.
(7) Black advancement - Ur= examples.
(8) The fox=" Involved - against us and For us. V
(9), The nic canwaign.
(10) stacal JAvestors.
(11) Some problems.
(12) ftsitive approacbex.
(13) Zssues.
E
rt" D. 3-roar Forecast 00
C)
Mr Spam presented profit and cash forecasts for three years and ton rQ
yearsi be explained their purpose and conts@t. ON
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BAT Industries document for Province of British Columbia 22 April 1999

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Four points which &rose during discussion were
(1) There Is a likelihood of increasing pressure on margins in
the Tobacco business. The purpose of most of the planned
Investments Is to maintain market share or volume. Xn the
long term, there appears to be an Increasing dependence for
growth on Brazil and B.A.T (UK & Export).
(2) The Paper Industry Is cyclical and the Paper Division is
expected to provide an Increasing proportion of Group profit.
Zn addition, temporary setbacks due to Intense competitive
marketing activities most be expected in Retailing. These
two factors could result In the Group's profit performance
becoming mare, volatile in future, compared with the historic
record of steady growth.
(3) There has been an easing of the Implementation of Exchange
Control Regulations In UK, as evidenced by agreement to the
Group's proposals for the financing of Appleton. This trend
could be reversed, but If It Is not, there will be greater
flexibility In providing finance for now Investments.
(4) Although unutillsed financial resources are expected to be
less than were foroseen last year (especially in the early
years) because of Investments since planned, they are still
substantial.
Ztem P. Acquisition Strategy
Xx liongland presented a paper. Ze was agreed that the Group did not
Intend to become a conglomerate. The Group Is also looking for
opportunities In Industries with good growth prospects to and beyond
the 19906. Theme policies Indicate that it Is not the Intention to
Invest In, diversified projects on an "in and out, basis and that any
now division should be capable of contributing flOO million or more
(In 1977 money term) of operating profits, world-wide, In the longer
term (10 years +) .
On the other hand, any such Investment should not exceed MO million
in view of the risks Involved in entering a now industry.
itr Zongland explained the advantages and disadvantages of each of the
seven Industry sectors which bad matched certain criteria from the
point of r1ev of Investment In Mr.
Xt me decided that s
(1) so further action will be taken on Ba Security and
ftf@tyl Life ZnSura=; CoWsIto Znsurence, and Hotels.
(2) rho Retail vIvision will further consider Multiple Store
opportunities.
(3) The Paper Division will further consider Packaging. C)
(4) Group Headquarters will establish the best course of co- OD
ordinatod action with USA, Canada, Germany and Australia, O
whereby further Investigations are undertaken on NJ
CY%
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BAT Industries document for Province of British Columbia 22 April 1999

(a) DXYIHome Zoprovements;
(b; Tasuranc& Brokingj
(c) Catering Services in their various forms.
(S) Brazil will take note of the decision and take action if and
when the time and circumstances In Brazil are right.
Ztem G. Corporate Rolations Z
rho Chairman introduced the topic.
rho a.A.r Xndustrlex Board Policy on Political and Commercial Corruption
was fully endorsed and will be implemented.
nem M. Attitudes Tc,wards and Constraints on MNCs
The Chairman introduced the topic and or Stdtzer spoke an attitudes of
consumers and of the public, as opposed to those of governments and unions.
Legislation exists In Canada and Australia which can Inhibit foreign-owned
companies In various ways, but there is no problem in any country rep-
resented at CAC on government or public attitudes to companies due to
the B.A.T shareholding. This Is du* partly to the low profile which
B.A.T has adopted In the past and partly to the relationship between the
centro and companies, which provides a proper and real degree of autonomy
to operating companies.
Xt was, however, noted that there Is likely to be mounting anti-XNC
pressure from governments and unions In Surope and that an attitude
rosearch In Germany had shown that young people felt that US and Japan-
based Wo exert a negative influence on the economy; this -attitude did
not apply to BBC-based XNCS. Attitudes also differ depending an the typo
of Industry.
Xt was concluded that B.A.T's low profile Is an advantage In the context
of attitudes and constraints on Mm
Ztem Z. corporate Relations ZZ
rho Chainm Introduced the topic and explained the role of the Public
Affairs Committee.
Mr Bdons spoke an the relationship of the Corporate Relations function
at: the parantlaubsIdlazy level and at the subsIdUrjv/*p*r&thV company
level.
Over the last few years, B.A.T had become bettor knom In UK. This had
been achieved through talking quietly to appropriate people rather than
by a deliberate attempt to create a high profile. This approach In UK
Is helpful to companies.
Xt was agreed thAt NJ
CD
(1) Only when there Is a sound reason will the cont.re establish
OD
M.)
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BAT Industries document for Province of British Columbia 22 April 1999

7
the corporate profile In a country where there Is an associated
or subsidiary mapany.and then only after cansultatIon with the
Company.
(2) More definition and refinement Is needed on the controls role
as a clearing house for Corporate Relations. Companies need
policies and guidelines from the contra.
Item J. Organisation
rho Chairman reported on and explained the reasons for the move of the Group
Headquarters. Onio of the first requiromentar af tor the move Is completed Is
to ensure that communication flows throughout the Group are right.
A discussion ensued an the advantages and disadvantages of locating & Group
Headquarters separately from Divisions. Views differed. some thought It
best for the Group Headquarters to be separated. Others found advantages
In locating Group and Divisions in one building. No one advocated a Group
fisadquartars and a TaiMcco Division (only) being located In the same building
as being the boat arrangazwnt.
Mr Symons explained charts showing the existing Organisation In US and the
Intended Organisation after the acquisition of Appleton and the formation
of JkATVS. rho discussion which followed Included descriptions of similar
organizational arrangements In other countries.
Xt was agreed that -
(1) Apart from taxation advantages, there Is a distinct benefit In
having umbrella companies In certain countries, such as Brazil
and US, In that this will provido financial flexibility in the
future.
(2) Good managerial organization can be bedevilled by a sensible
tax/legal organl=tlon. An effective and uncomplicated manage-
maent and reporting structure must be maintained aven It the financial
and Income flow structure Is different and complicated.
Xr Paz4 suggested some basic prIncipolas for the role and Organisation of a
Group X"dquarters. me reported that In Canada It had been established,
by Wa and wror, thm e the appropriate functions which are needed to form
a Ginn, Aloadquarters are t
- secretarial
- Legal
hwee
T&XA tIon
Insurance
Controllership (Accounting)
Pension Fund Znvestment
Corporate Public Relations C@
Xr Pard suggested, and It was agreed that 00
CO
(1) Part of the role of the main board at a Group Headquarters Is
0%
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BAT Industries document for Province of British Columbia 22 April 1999

8
to formulate expansion plans and to monitor Divisional Plans.
Divisions should execute plans and formulate their operational
plans.
(2) Divisions need the mandate and authority to run their businesses.
Ztew K. Group Management Resources
Mr Viddup spoke on the role of Chelwood. H& said that Australia was
very happy with the real contribution being made by Chelwood to mnage-
=Mt development in the Group and that perhaps the most valuable part of
this contribution Is the fostering of Group cohesion and Interaction.
The Chairman said that Chelwood has adapted the content of Courses to meet
changed needs and will continue to do so. Mr widdup suggested that during
this process of change, opportunities for maintenance of standards or for
Improvenant could II* In the following areas :
(1) Regular surveys of all companies to ensure that the required
role of Chalwood Is being fulfilled.
(2) Another course at a level between the MbP and the SMP.
f3) More *aphasia an the practice of management, as opposed to the
theories.
(4) More practical, as opposed to theoretical, case studies.
(5) Continuing evidence that conclusions reached at SAft are care-
.fully considered by Group Headquarters and, where appropriate.
action taken.
f6) Continuing the participation of Directors and other Group
M"dquarters Xanagers.
(7) Improvement in the calibre of lecturers.
(8) Understanding and commiltment of companies to the need for
thorough pro-cours* preparation of delegates. (Delegates
from Australia have a five or six weak pro-preparation course,
debriefing sessions an their return and are required to write
a report.)
(9) Confining STC& to delegates from one Division only, or arranging
for Divisions themselves to provide courses at MW level.
(10) Improve men t In selection andlor criteria for selection, whereby
all delegates are of an equal and sufficient calibre.
These suggestions veto agreed with the reservation that Chelwood courses
should not be confined to one Division only (No 9 above), although Divisions
could pcovide their own courses at junior management level. C)
Mr bou3is advised that a Xanager Education Council, with representation
from all Divisions, had been formed. ur Widdup's most helpful suggestions C)
would be considered and discussed at the next meeting of the Council. N)
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BAT Industries document for Province of British Columbia 22 April 1999

Mr Stewart Lockhart spoke on Exchange of Managers.
Since 1974, there has been an Increase every year in the number of
managers being exchanged within Divisions (mostly within the Tobacco
Division). Zt was agreed that these exchanges are of great benefit
to the managers themselves and to the companies Involved; the trend
should be continued.
There was relatively little exchange of managers between Divisions. Zn
many Instances, this had been tried and had failed. rho difficulty Is
that wide experience Is desirable at very senior level so that Boards
of Directors can be properly staffed, but inter-Divisional exchanges
of managers had proved more successful at junior and middle manager
levell moreover, at the less senior level, there are likely to be
more constraints, such as Interruption of children's education.
Zt was agreed that the Group must persist In trying to ensure that people
with experience of more than one Division should be available to fill
Board apgointments; the Group my have to be bolder and more experimental.
Zt mm noted that :
(lj' Selection of the right man Is essential for success of an inter-
Divisional exchange at Mo I level - a man who can take a broad
and controJ-oriented view. Successful appointment& from outside
the relevant industry support this view.
(2) Za certain cases, On functional route can be the best method of
obtaining wide industrial experience and there Is less risk of
failure. However, this route is more likely to be successful
In function& such as finance and log" and loss so In marketing
and manufacturing.
Ztem L. Outline of Present Activities A Sumeary of Futuro Plans
Mr None, Mr lare", De Stdtsar, Mr Bruell and Mr Widdup, each gave presents-
time on their respective companies. They described the current situation,
plans for the future and where they saw the main opportunities and threats.
TWO points i;6is- from the discussions r
(1) rho Chairman stressed the need for realize In facing up to loss-
making operations and In takinir appropriate and tImelV action.
(2) Although there my an occasion be exceptions, It Is Group Policy
whan Investing In now companies to do so In a controlling and not
In a minority position.
Ztm M. Security
A film of a comes "TonIghtO Program shown on British television was
shown. The Chairman sold It asked many questions, but gave few answers; PO
nevertheless, It was Interesting.
/cant ..... lo 00
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BAT Industries document for Province of British Columbia 22 April 1999

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XrOeviss spoke an the security of senior personnel and their protection
Against abduction. lie recomanded that :
(1) Companies should decide which employees are most likely to be
at risk. These should undergo a brief period of training, which
can be arranged by Security Department at Group Head Quarters.
(2) Personal data on those at risk should be compiled. Naze again,
Security Department can advise.
(3) As little advance warning as possible should be given of visits
to territories where the risk of abduction Is most lik4gl if.
(4) Chauffeurs should be trained in avoidance procedures. More again,
Security Department can assist.
f5) Security should be the responsibility of a senior member of manage-
sent.
The CbsIzzan said that It Is easy to over-coact or to under-react to the
threat of abduction. Common sense should be shown and local circumstances
taken Into account.
Extra Ztem. The UK Market
Mr Stewart Loakhare described the actions taken by B.A.T for entry Into the
VX markot and summarized the present position and plans for the future.
Item R. Cotermincus rear Ws
Mr Stewart Lockhart reported on a review In 1976 and a more recent Investiga-
tion into the possibility of companies and B.A.21 Xn4ustries having the same
year ends. The min problem Is the WFO position In the US.
Xr Mans suggested that the question should continue to be Investigated as
the present diversity of year ends hampered effective planning throughout
the Group at a time when planning is becoming more structured and more
Impwtant.
Xt was agreed that S
11) Group S@dqmrtors will keep the matter under Investigation with
a view to at least the major companies and B.A.T Zndustries
moving towards having tho San* year ands when the ZZFO problem
la resolved.
(2) rho Investigation should cover the relative advantages of end-
mulch and and-June (the only practical date for RW) as well as
md-Septeabor and ond-Becamber.
Poture CWs N)
CD
The Chalzman "id due CAC ZXT max the first Chairman's Advisory Conference
at which all mmobers of the B.A.T industries Board wax* present. Ze was, 00
thwWome something of an experlsent. rho enlarged Conference had, In C)
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BAT Industries document for Province of British Columbia 22 April 1999

his view, proved successful and will be repeated every three or four
years In UX, subject to later comments of those concerned.
?he Chairman explained the reasons for his recommendation that, for
next year :
(1) CAC XV should be In Brazil In May 1979.
(2) The composition of delegates should be such that
(a) at least the larger Divisions would be represented
by the Divisional Chairman.
(b) Countries other than UK would be represented only by
their respective Chief Ogeraping Officers - la, by one
delegate from each. ovezsoas Gz@_)Up. At some time in the
fUtUFp., It may be decided to widen the representation
a little further.
(c) B.A.T Zndustrles would not be represented In full.
(3) Ylves should not be Invited.
After discussion It was agreed that .
(1) CW ZV will be in Brazil. The proposed dates will shortly be
decided by the Chairman and Mr Bruell and advised to CAC xv
delegates.
(2) Annual Smoking & Health Conferences will be organised by Lb*
Tobacco Division and hold before CACx. Subjects for discussion
could Include those of particular concern to the Tobacco Division
outside the purely S a R area, such as machinery development.
Important conclusions will be submitted to CAC.
(3) The S a N Issue will continua to form part of the agenda for
CACA.
(4) The Chairman will have further discussions before rating a final
decision an the composition of delegates for CAC XV.
Zn soooming up -the Conference, the Chalzman said that It had bean a good
X1@&tJM MW he hoped that the B.A.T Industries Directors who had not
JWwv1~1V attended CACS had appreciated It and felt their attendance
to b* worthwhile.
rho Malman reviewed the main issues raised for each agenda Item. Zn
particular, he made three points :
(1) fte most Important and positive single set of decisions md*
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BAT Industries document for Province of British Columbia 22 April 1999

was In the area of Acquisition Strategy. Xt Is now clear
that every effort haz'bean made at the Contra, and will continue
to be made there and at the selected Territorial Areas, to
dot*rmLine a now business or businesses with as wide an Interest
and appeal as possible for the major companies. ro this and,
Mr Longland will co-ordinate the Investigations to be undertaken
In the areas of .
(1) Packaging
(2) Multiple Stores
(3) Now Ventures :
(a) M/Hoom x0provowents
(b) Insuranco BrokIng
(c) Catering Services
(2) The Individual company reports (Itain Z) were very weU presented.
They were frank, clear and very useful to all delegates In that
they Indicated present position, future plans and lesson* to be
learned.
(3) A greater door*& of realism In thinking and approach has become
apparent. This attitude was evident In discussions an many Items,
.including Smoking r. Health; Corporate Relations; and Disinvestment,
where a bolder as well as a more realistic approach Is needed.
Although it Is difficult to mks a decision to Invest In diversifica-
tion, It is perhaps more difficult to decide to disinvest.
Zn conclusion, the Chairman thanked delegates for coming to Leeds Castle
and expressed his appreciation for the careful preparation by those who
had presented papers and talks; this had greatly contributed to the over-
all swasw& of the Conference.
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BAT Industries document for Province of British Columbia 22 April 1999