OuLAalla" for LuwA i July 1997
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General
1. Imscols central objective should be the achievwwat of returns and
sustained rates of growth In dividends and earnings per share which
compare favonckrably with other leading businesses La Canada.
2. To support this growth, It is ougguted that, In addition to Tobacco,
Isasco should develop a portfolio at businesses In leadership
positions in growth markets or market segments capable of providing
sustained organic growth In *slow and profits. B.A.T Industries would
prefer the main emphasis to be an developments In Canada rather than
the USA and for these to be contrad an the Group"@ =In activities of
Tobacco, Retailing, Tinaucial Services and Pulp/Paper.
3. In evaluating Imacols strategist and plans. B.A.T Industries will
apply the same criteria as arm applied to the other businesses within
the Group. In particular, It will be Important to ensure that each of
the businesses within Imasco is operating efficiently and is producing
a cash flow which, after covering central overhead*, dividends and
interest payments, La sufficient either to fund sales growth at real
rates of at least 6 per cant per annum or to produce an equivalent
cash surplus for Investment In other activities.
Financial Guidelines
4. Dividends : Based on the current B.A.T Industries Group sharshol
the -4-4immi dividends expected from Imasco (gross of Withholding Tax)
are as follows:-
Tears to 31st December
1987 1998 1989 1990 1991 1992
C$z 46 56 63 73 M 94
For 1983 onwards, the proposed dividends am based an a payout ratio
of 40 per cent which is considered an appropriate long-term payout
ratio for a company such as Imasco.
S. Returns : It is rec. - -Aed that Imesco seek to achieve an historic
'cost return on net assets (an a B.A.T Industries' basis) of 26 per
cant for its commercial activities, with a priority being to produce a
satisfactory return for People's Drug. The target for Canada TrustCo.
should be to achieve a sust-4-ed Increase in after-tsz profits of 15%
per
SpIcific Priorities
6. The first priority for Imasco should be to complete the programme to
re-build the strength of the balance @best and to Omura that each. of
the individual businessas makes an appropriate contribution to
In"cals profits, cash flow and dividends.
7. For Tobacco, the priority sbould be to re-build and consolidate
profitability both through price increases and through further N-1
improvements in efficiency which will anoure that the position of
lowest-cost producer of quality cigarettes in maintained.
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BAT Industries document for Province of British Columbia 23 April 1999

S. In addition, Leasco should continue to pursue improvements in market
share, both in existing brands and by developing and marketing
innovative mm products, making full use of developmnts available
from elsewhere within the B.A.T Industries Group.
9. Imasco should continue to support Industry representations to both
Federal mid State Governments on taxation and smoking issues and to
play an active role In opposing the anti-@kivg lobby.
10. ?or Financial Services, the priority should be to develop plans
for the expansion of Canada TrustCo. In particular, consideration
should be Xi-van to ensuring that the projected abort-torn levels of
performance are met and to identifying how growth in after-tax
earnings of at least 15 per cant a year will be achieved aver the
longer term.
11. Imasco should also develop plans for the addition of complementary
activities to extend the Group's operations in financial services in
Canada, taking into account the difficulties inherent In the
regulation of the market.
12. Imasco should continue to play an active part in Influencing the
regulations covering fi*sucw services' activities in Canada
particularly in respect of the limitations applied to non-financial
parent companies.
13. In the meantime, plans should be established for the reduction of
Inasco's shareholding In Canada TruistCo. to 65 per cent.
14. For the Retaf II "Mr businesses, the first priority must be to
improve the performance in People's Drug. after which it will be
necessary to review all the retail operations to ensure that they meet
the Group's criteria for being self-supporting in tarms of cash at
appropriate real rates of growth.
15. In addition to resolving the problem in tbose businesses which or*
not performing satisfactorily at present, Imasco should Identify
opportunities for profitable growth once satisfactory bases have been
established.
16. For lardeals, the prImmury emphasis should be an improving profit
growth and ensuring that the business makes a suitable contribution to
Imascals shareholders before pursuing opportunities to extend and
consolidate Hardee's geographic coverage and product range.
17. For People's Drug, the Immediate priority should be to concentrate
on improving the performance of the core business.
18. Izasco should continue to seek opportunities for the development of
"pars Drug, both through organic growth and, where appropriate,
acquisition. The business should, however, ain to fund its own
growth, after making an appropriate contribution to Lasoco for
overboads, etc. r%j
C:)
19. It Ls suggested that Inasco should consider the divestment of the
VC3 Group. co
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IS/DJA
29th July 1987
BAT Industries document for Province of British Columbia 23 April 1999