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BAT Co LTD - MINNESOTA TOBACCO LITIGATION

-. SALLY ~ Please note that three further copies of RD. 1618 Restrlcted have been sent 1=o Dr. S.J. ~n, namely copies: 29, 30 ~nd 31. These repoz~s were sent ~er cover of D=. K.D. lg~bux~'s memo to D=. Green dated irt March, File 38D. PAEY.LA '.°. ~.~ e~.~,~ "~ 0 ~,#,~.~.~ c-~r-~ ¢~. ~,,.~ c,,~. "~, ~ ~c,,~. "/.~'. ~'~u.~.~.. 0 Co 0",, BAT Co LTD - MINNESOTA TOBACCO LITIGATION

~T l~O., I;,.'~ .~.'.,V~ CATE0Um:: C~,..,~,../..k.~,l PROJECT JOB NO. : AUTEOR : K -~ ~.. GROUP ~AD~L: FILE NO. • '~'~ ( t.~,e,..k: List Cover: m Iindlncs : Fims/Gm%Dh. No. : Pho~o~=apM So. : R ednctions-. Total l~A~s: ISSUER: DIS'l"1~IOti; SJG ( ) : IW'a (t) : RAS (2) : RMG (1) : ESW (3) : :4hEr., r.. & D.D. Asst. FS (1) : AJK (1) : CJP de S (1) : DGF (t) : L£brsry (2) : File w t# "~E__REP: 4 ,~ • " ~ ~-.~..- .- , (2) : HS (I) Dz~ft for Crpi~ (1) (2) (3) (4) (5) Prepare master: COXTeCtions (I) (2) Ds%e Date l~te Sent Recd Re%u:nsd ... t i t | £utho= C~ecklm~ Date Issue= ]~te T~JLI pt'o fOrlt is intended %0 fs~eil£~s~s and de£a/1 ~be l~'ol:~lll of G.R, & D,Ce RlrpOl-tl fx~m the ~,~8~x-Ip~ ll;at~e until %he z-epoz~ IS £J.t%IL]L]~r Ip~ ~&~ 4IERLId. The pl'O ~O~ ~hould ~o cca~arAced at the tame o~ the £ni%ial ~A~g 8nd acc~l~uz~ ~he %'~elcrlpt (S~ m~ster a~¢e¢ l~'~¢ion) at &ll subsequent 8%8q~s. I% must be Bent %~ =entm-al £iling wlth %he master when ~he np~x~ is issued. }~c%....~: 1. ~heEevem possible, dA'8/ts £oz '~"P:£n4J II~uld be v:4tten in inM. 2. A/re= typing, %he ~-pescript ~hould no=mall.7 be ze%u~ned to the Author, who wall anAblequontXy ob%a.ln ~ ~w~up ~-'l ~ Xel~sr,8 [p~'~V~, CAz~JLlat£on ~tould be detezmAne4 by the Iesmez'. 4. The t~pe, ncrip¢ tit not be p~elente,! £oz printing until the IINE ]3&8 tXLltlB.Ild the pro £crma ~t '~epa~s Ksster". A/to: p=Inting, ons bound espy m~ASt be :etu.-ned t¢ t~o Xssue= £oz £JJml al~'~a~L and the Issuer will ensuz~ %~% one ¢op~ i8 seen b~' ths Mmsa4~:. BAT Co LTD - MINNESOTA TOBACCO LITIGATION

-106- OP~ATZ~O COST Or a PB~Y _-~P_J~_ _,~X,~T R~D ZTS TOBACC9 STOn B.A.T. CZC, A~TTIS-FAmRZK~.. G.H.B.H. • PEOPLE COSTS (including Social Costs) Direct and Indirect MACHINERY COSTS Replacement Depreciation Interest b, OPERATING COSTS Energy Travel and Transport Care and Maintenance Production Expenses Wastage Recovery by a Sheet Process Sub-total LAND AND BUILDINGS Replacement Depreciation Interest b. TAXATION Total Cost Weight of Cut Tobacco Supplied to Fabrication Department (Tonnes) NOTE : a. b. Ahrensburg 1977 a DM. OOO ' a I £ Sterllng/Ton I | Bl 2870 350O NA 850 760 49O 1OO 980 (250) 293O 229 NA Nil 9529 c. 3.3OOO C • Conversion rate £I m DM 4.039 Finance Dept. have no Eigures on calculator¥ interest charges, 54.66 66.66 NA 16.19 14.47 9.33 1.90 18.66 (4.76) 55.79 4.36 NA O. OO 151.48 c. The author estimates that interest charges would not increase these totals by more than about 7%, BAT Co LTD - MINNESOTA TOBACCO LITIGATION

-107- TABLE 17 OPRm_%T_7~G COSTS OF ~JAX R~CONSTITUTI0~ PLANT IMPEPT~L TORACCO LIMITED -- CANADA (1977) PEOPLE COSTS ( including Social Costs ) Salaries direct indirect Wages direct Indlrect Sub-total MACHINERY COSTS Replacement Depre¢iatlon Znterest Sub-total OPERATING COSTS Energy Travel & Transport Care & Maintenance Production Expenses Sub-tota/ LAND & BUILDINGS Replacement Depreciation Interest Sub-total Can I OOO's 90 90 343 80 603 369 336 705 TAXATION Total Comt 624 73 175 360 Weight of Reconstituted Toblcco Produced (Pounds) NOTE: a. Conversion rate £I m ~ 1.876 1232 149 86 235 74 2849 9,050,000 11.87 11.87 45.25 10.55 79.56 48.68 44.33 93.02 82.33 9.63 23.09 47.50 162.55 19.66 11.34 31.O1 9.76 375.89 CD CC ~3 CC BAT Co LTD - MINNESOTA TOBACCO LITIGATION

CGNTR.OL OPTIONS .-_Jr Tr. Of S~_art Predetermined Conditional on Preceding Events Combination None (i.e. Rand~n) In~arlant Adaptive by Material Predetermined Random Combination GUANTITY ,At Start Invarl ant Predetermined Adaptive to Supply Adaptive to Demand Adaptive to Process Rate Adaptive to Wastage Adaptive to Material State Uncontrolled Combination STATE At In_put Invarlant (mean ÷ s.d.) Predetermined by Materi~l Predetermined by Precedi~ Events Constant Mean, and Variable s.d. Variable Mean, and Varl able •. d. Partial Cont=ol No Control Of Duration Predetermined Adaptlve ~0 Puate Adaptive to B~terior Events Canbination Of Stop Invariant Adaptive by Material Predetermined Random Combination At Finish Invariant Predetermined Adaptive to Supply Adaptive to Demand Adaptive to Pro~esa RAte Adaptive to Wastage Adaptive to Material State Uncontrollod Combination Invariant (mean + I.d.) Predetermined Constant Mean Vari~ble e.d. Variable by Materlal Partial Control Variable by External Events BAT Co LTD - MINNESOTA TOBACCO LITIGATION Oo

TABLE ~.9 CRITERIA FOR JUDGING A PRODUCTION PROCESS CRITERIA ~SSOCIATED FACTORS i. o . m o o Will it work? Will it be reliable? Will it k.e economic? Will it be safe? What external factors affect success? Can it co-exist with existing system%s? 7. Can it be controlled? 8. Can output be changed? a) b) a) b) c) d) a) b) c) d) a) b) c) a) b) c) d) e) f) g) a) b) c) a) b) c) d) a) b) c) d) e) f) g) Technical feasibility of process: Suitable supply of materials. Sensitivity of process to input quality variations: Sensitivity of process to throughput fluctuations: Rate of wearing of machinery: Frequency of cleaning/adjusting. Tax rates On new process and inputs versus old process and inputs: Labour intensity: Capital intensity: Non-recoverable wastage rates. Hazards to operators: Consequences of malfunctioning of process~ Probability of detecting mlfunctions. Government licences: Social acceptability: Goodwill of employees: Availability of services (transport, utilities): Availability of skills: Availability of spare parts: Pricing policies. Leaf plants: Conventional primaries: Conventional fabrication. Measurement technology (quality, flow, speed of response): Dynamic range of controllers: Specifications and tolerances: System design. Delay to production {single or multiple stream): Change to inputs (number, quality, flow) : Change to outputs (number, quality, flow) : Extent of change: __ Minimum and maximum number of simultaneous input and output t.~ channels: u~ Minimum and maximum flow rates by t.~ channel: "~ Maximum sources and sinks per channel (simultaneous, time sliced). CZD BAT Co LTD - MINNESOTA TOBACCO LITIGATION

-IIO- TABLE 19 (contd.) 1 I0 • WAil At reduce entrF cost for n~br~s? WAll it simplify disposal of redundant materials? a} b} a} b) Within existing characteristiQs of process: Mxtendlngprocemm. Pacing ~t~i~s: BAT Co LTD - MINNESOTA TOBACCO LITIGATION C

-Ill- TABLE 20 ACTUAL OR POTENTIAL PHOCESS COSTS PROCES S 1. Farming 2. Solvent Extraction of Tobacco ConoentEet~on Separation 3. PCL Manufacture 4. PRT Manufacture 5 • DIET 6. G 13 7. G 13C NOTE: (a) (b) (c) PRODUCT Tobacco Extracted Tobacco + Extract • Desirables + Undesirables PCL PRT Puffed Lamina Cost of Royalty Puffed Lamina Cost of Royalty Puffed Lamina Cost of Royalty Solvent used was hexane° COST £ sterllng/ton 800-2000 140 (a) 370 (b) Dependent on process, solvents and materials 376 227-648 (c) 396 103 226 133 434 81-162 YEAR 1977 1975 1970 1977 1978 1977 REFERENCE RD. 1257 Restricted Table 17 RD.1522 Restricted 1976 1976 RD. 1407 Restricted RD.1407 Restricted Solvent used was aqueous ethanol, which extracted much of the weight of material present in the original tobacco. The higher flgure was calculated using s io~ interest rate and a 5%depreciation rate. mmm i ~U BAT Co LTD - MINNESOTA TOBACCO LITIGATION

-112- TABLE 21 Z ACTZOU MATRIX 1 • S 6 • • • • • 10 PLanT LOCATIOU | 0.oeo eogOO .&TR ~e0O0 . 00000 Z.&Y0 !.330 1o6,0 1.670 0.0oe Ih~TQUw(NTaT|ON 0 0*010 0*000 3*000 *'~0 I°'T0 DQ~O 00000 e~r0 ]°330 2.,~tD ~gfmOk ) |oOeO 3.000 |.001 I0330 Z.000 1.000 .2.330 i.330 $*330 ~e~TO Tma~rSP0JV • Zo~TO .&To 11330 O~I00 ~070 I.&T0 !.330 !o330 J.~70 ~?0 L(AF 6Nile[ • 0330 |.&TO ~.~O e210 00000 Je'~O m0330 |*&?O ~*000 10010 LfAf P~IC~AS£ • I.000 0°D00 ~.330 lJbYD I.~0 0.000 ~0,90 Je3)D 3.0OI Z°~'e kEA¢ ST~e~£ Y ~.e~e ooeog 10330 8oD~o .330 ~033@ 00000 ~e&70 0.000 .~Te PACP/G~ S|~[ • IoUU0 |0~30 I*~0 lenTO l.~T0 |e&?0 ~*•T• go0|* 10J00 10000 N~TUU[ w&u ~KTltt. 0 R°00# 0.330 t.330 ~o330 !e0~0 J°'?O 80330 80330 ••BOO 30GOe NJ?Q~( ~SN N&TNL 10 e'~O 8*040 ~*330 Ie&TO 0~30 ~.000 10~130 I*060 3.000 O*OOe OU~t|TY C#|7[W~&. I1 1*000 •oBOe 3*000 1*000 3.000 I*'?@ |.678 e&T0 30000 30000 CGI.v(IS|ON PeU¢ |Z i.&Fg .~0100 3.i@i 1°3]@ L.OO0 1.000 teOiO 1.900 106T0 20~90 ¢0ST OJ~A |3 Io330 f*•i0 t.&V• 10330 003~0 l.'T0 1o000 1.000 ~.3)0 ~.~0~ ~G ~TI~sTIO~ lS O.0GO OoO0e 0.000 00000 I.330 . &,,TO 10000 OoOO0 ~.330 3**go -~ Y l& 1.330 l*OOO i.ere 10~30 .0TO .iT0 0330 " .•YO 10470 .070 1~ .Y~T |k~OV. |7 .3J0 ~.&70 I.&T| loll0 .&T0 .•T4 J.•lO 1.330 30000 ~.3~u ~1 I~.T[Ww[~TN |3 1*if• 1.]30 t.3)l 1*130 |.3)0 |B&T0 Jeli0 O.it~ ~,,?0 ~°~?~ ~K(TI~G 19 |DO~O 0o~40 i.330 19~00 .&YO |*t?0 ,330 *330 ~*000 Zo~7~ SCCIO-~ITI¢ Z0 003~0 1.D00 1.070 1-130 .'TO Je&T• .~0 O.0&0 " lo330 00~70 ~0lS*~A~Oue 01 1.3~0 1.000 t.OOl 1.130 lo~O le000 ,670 0~0 0,~0 .~Te .P~A~T ~OCAT%0~ 1 ~.000 .6TO Itl2Tm~'|~T&T|ON ~ |.~ II |.&Te C~~l~eO~ ] |.& 1• i.&TB TBMJSPQIT • .330 1.3)0 ~(AT. GL,~D~ • I03J0 0.000 L[•¥ ~O~L*~ T |.,?• 1.i00 PACX~O[ S1£( | 1.330 |.330 ~sr~T P&u p~V~ S ~0330 3.000 N&rUe~ FIFa ~&$J~ 1O 1.~• ~0330 OUA~T CPlT[Ul• II e.ooo 3.000 ¢~4~S10~ P~O¢ 10 10330 00000 C0ST C~YA 13 I.000 1e07e T~&CCU ~¢IO~CT 16 00010. 10000 S~G .~0TtvaTI0~ 1• ~.&w0 0.000 '~Y 10 .330 10"~0 GO.. /~*TENvENTN 11 ~.&ee 1.&70 MJ~[T[kO 11 ~*ii0 |0400 Sc¢10-~0~tll¢ tO 1*'10 1.330 13 16 lS 1~ l? l0 10 J03~0 *&?O 0*000 10000 *&~O J*~TO Joi~O ° 8.010 1o330 ,&TO 1.000 I*000 0330 0.000 t.krO 1.6T0 0330 I.kT0 t.iT0 1.000 3.oo0 1.000 1-000 •,•OO 1.3)0 10330 0.000 ~.330 3.O00 3.&T0 .~70 .330 °6T0 .m?e 10000 ~.•00 1*330 .'TO .3B0 .330 J.liO 1.000 |,6Y0 1.670 •00gO .6~0 .4~0 .,F• 0*DO0 I.JYO *331 O.D0• *'?0 10000 *~0 80000 0.iT0 ~.i?l 0.000 1.0~0 1.130 I04~0 10410 10,~0 •ciTe $.4•0 l.eeo 1.330 |.BOe ~.•eO ~.oee 1.330 0.330 1.000 Z.iTe B.339 3.000 R.'TO *]30 .•Yi J.'TO !.330 w'~0 0*000 e.oee 1.~70 e0e0e J.,~o 1.670 0330 1.330 ~o170 0*008 1.000 ~330 1.000 E.O00 10330 1.&TO 1.130 o.eo0 e330 hk/O |.330 3.000 1.000 1.6?0 0.000 0.000 1.330 °1.000 *&To ~*O$O 1-3)0 1.330 |,OT0 O.OOO 10000 8.6~• Z.&IO 1.6To 1.330 1.330 10000 I.i0O ~.410 J.3)o ~.000 ~.&?i .310 1.&TO 1.,To o.ee0 1.330 I*~TO ~.330 ,&TO 3.000 I.,70 I.,T0 1.000 1.000 •,OO• e'T• 103~0 NoO0• .~0 00 !.000 1.3~0 .~3u .33~ .~70 |°310 1.37n ,3~0 ~.OOO I.~TO 1.33o . 1.OOU Ro000 3.000 1.330 1*330 1o~30 00000 IoOO• El TPA°,SPOvT 4 LCm¢ ST~R&~ T 1.Oil k~V~eE PIN ~GTIH. |0 R.&~O OUt, STY ¢nl~[~lA 11 1e33~ co*.v(PSlCne pn~¢ 1~ •03J0 COSt O&f6 13 ~6004 S~-'*G ~TEV~TJO~q IS 10000 [k~.eGY |i 1.000 I~v~ST~*,Y |~GV. 1? 10330 ~0VY. Ie.I(~¥L~TN 10 i0~70 P~(TI'.G 10 10330 S0C|O-P~|T|C 00 1.6~0 ~0~S.~s¢OUn 01 o.eee mmme~ O BAT Co LTD - MINNESOTA TOBACCO LITIGATION