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Financial Highlights Results of the year 1982 1981 Trading External sales £3,848.5m £3,221.2m Trading profit £354.8m £276.6m Profit before tax £220.2m £186.6m Ordinary shareholders Earnings per share 27.3p 25.5p Dividends per share 8.375p 7.425p Dividend cover 3.0 times 3.5 times Net tangible assets per share 237p 233p The SirMaxwell Joseph Memorial Fund Shareholders wishing to contribute to the Fund, details of which are set out on the page opposite, should do so by sending a cheque (or other remittance) in~avour of 'The Sir Maxwell Joseph Memorial Fund' to The Royal Bank of Scotland plc, 7 Burlington Gardens, London W1X 2AT so as to arrive before 31st March, 1983. TIWA 003659

Contents Notice of Meeting Grand Metropolitan at Work 2 Financial Highlights 4 Chairman's Statement 5 Directors' Report 8 Report of the Auditors 26 Accounting Policies 26 Financial Statements 28 Current Cost Accounts 40 Source and Disposal of Value Added 43 Principal Subsidiary Companies 44 Five Year Record 46 Proxy Form 47 Notice is hereby given that the Fort - seventh Annual General Meeting ofy Grand Metropolitan Public Limited Company will be held at The Lyceum, Wellington Street, Strand, London WC2, on Thursday, 3rd March, 1983 at 11.30 am to transact the following business: 1 To receive the accounts for the year ended 30th September, 1982, and the directors' and auditors' reports thereon. 2 To declare a final dividend on the ordinary shares. 3 To re-elect directors. 4 To re-appoint the auditors. 5 To fix the auditors' remuneration. By Order of the Board, Dennis J Dickinson Secretary 31st January, 1983 Notes: (i) Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, to vote on his behalf. A proxy need not be a member of the company. (ii) Copies of directors' service contracts of more than one year's duration with the company or any of its subsidiaries will be available for inspection at the registered office of the company during the usual business hours on any weekday (Saturdays and Public Holidays excluded) from the date of this notice until the date of the Annual General Meeting and at the place of the Annual General Meeting from at least 15 minutes prior to and until the conclusion of the Annual General Meeting. Registered Office 11-12 Hanover Square, London W1A 1DP Registrars and Transfer Office Barclays Bank PLC, Registration Department, Radbroke Hall, Knutsford, Cheshire WA16 9EU Telephone: Knutsford (0565) 3888 1 TIWA 003656 _

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United Kingdom Consumer Services Managed Pubs Our managed pubs, operated by Chef & Brewer, have achieved a significant profit increase, despite a highly competitive market. All-round standards have been improved, not only in food and drink, but also in service to customers. Thirteen new pubs have been opened in the past year. Amongst them, the 'Tattershall Castle', a converted Humber addle steamer moored near the Houses of ~arliament, is open for trading all day and has been a great success. The RV Goodhew group of pubs, acquired during the year, is already proving its worth. We have introduced family facilities, both in pub gardens and inside pubs, in order to widen the attractions of pub visiting. This innovation has proved popular and we are planning to take it further. On the same theme, we have continued to keep more of our pubs open outside permitted licensing hours, serving food and non-alcoholic drinks. We have no doubt that there is still considerable scope to improve and extend the facilities of the traditional British pub, and thus create an increasingly attractive and entertaining social forum. We have fully supported the formation of the British Institute of Innkeeping and continue our training and recruitment schemes for management and staff in order to ensure the highest professional standards in all our operations. Fast Food The purchase of five Trumps stores doubled the size of Huckleberry's and diluted its management resources. Time was needed to recruit additional staff of sufficient calibre and also to improve the new stores to the required standards. This has been successfully accomplished and the company is now in a position to move forward again. 1 'The Store', in London's West End. A new venture by Chef & Brewer, combining a price-conscious menu with a range of international cocktails and other drinks. 2 Special facilities for children are provided at Chef & Brewer's 'Horse and Jockev' near Coventry, so that the familv, as a whole, can enjo}' an outing to the pub. 3 The busv service counter at Huckleberr_v's, in Oxford Street, London. 4 The band of the Rova1 Marines, on the foredeck of PS Tattershall Castle, celebrates the opening of Chef & Brewer's new floating pub, moored close by the Houses of Parliament in London. Trading Review TIWA 003666 I1

United Kingdom Brewing Europe Both our operations on the Continent of Europe improved their profitability in difficult trading conditions. Maes in Belgium registered record profits and improved its market share, despite price controls and over-capacity within the industry. Tough competition continues for Stern in Germany. However, beer sales increased in a stagnant market, notwithstanding the trend away from the on-trade to the less profitable off-trade. Soft Drinks The turn-round of the UK soft drinks operations maintained its momentum. Record profits were achieved, due both to improved sales and to greater productivity. Our soft drinks strategy calls for further brand building and the development of our sales force. We will aim for long-term market strength and avoid short-term discounting, which never achieves more than a fragile retailer loyalty. I The sparkling range of 'Club' soft drinks. 2 Coca-Cola, against the background of one of the new deliverv vehicles. 3 Competitors in the Foster's Draught Lager Boardsailing Festival at Poole, Dorset. 9 10 TIWA 003665 -

Chairman's Statement In 1981 /82 the group once again appropriate method of achieving this increased its profit before taxation, from objective would be the endowment, in £186.6m to £220.2m. Earnings per share perpetuity of a Readership or Personal rose from 25.5p to 27.3p and an increase Chair at The London Hospital Medical in total dividends of some 12.8% is College. This would seem particularly Sadly, the year was marked by the death of Sir Maxwell Joseph who was Chairman of Grand Metropolitan for more than twenty years. He brought his own individual style to the conduct of our affairs, never losing faith in his own judgement or allowing himself to focus on unnecessary detail. From modest beginnings in the London hotels business, he created a major international company. His was a remarkable achievement, and I am sure that shareholders and employees alike will wish to be associated with this brief tribute to him. His decision, announced last year, to retire as Chairman at the forthcoming Annual General Meeting was typical of his thoroughness. In deciding to retire at a time when his health was beginning to fail, he faced up to the task-which others seem to have found so difficult-of providing for succession and continuity. He put the company first, and the Boardroom is the poorer without him. The Board has decided that it would be fitting that a permanent memorial to the achievements of Sir Maxwell be established. As a result of discussions and advice it would appear that an recommended. suitable because not onlv was Sir Maxwell an in-patient at the hospital during his illness, but he also supported it by donating certain research equipment. Furthermore the hospital is located in a part of London where the group has important interests and where it is a substantial employer. The cost of the endowment would be £400,000 and Lady Joseph has informed me that both she and her family would have much sympathy with our proposal, and that she would wish to be associated with it by donating £50,000 to our fund. Many shareholders have expressed a desire to contribute, and arrangements have been made to open an account to which any shareholder so wishing can send a donation. The company intends to open the account with a payment of £250,000 and, if required, to make up that sum to an amount not exceeding £350,000. We intend that the Deed of Endowment will state that the funds to establish the memorial have been subscribed bv the Members of Grand Metropolitan PLC to honour the memory and mark the achievements of Sir Maxwell Joseph, first Chairman of the Company, and that the Readership will be appropriately entitled. Earnings per share adjusted )or the effect oj rights tssues [ 22.7p 21.2p 17.7p +41% +20% +7% 1978 1979 1980 Ordinary dividends per share 1979 1980 1978 iss~ 1981 1981 1982 1982 TIWA 003660 ~

Chairman's Statement continued 6 Since July, when Sir Maxwell announced his decision to retire as Chairman, I have, with my colleagues, been giving careful thought to the type of management organisation which would accommodate both the much broader geographic spread of our activities and the considerable increase in our size as a result of the acquisitions of Liggett and Inter-Continental. The mainstay of the group continues to be a strong consumer-oriented business in the United Kingdom. The purchase of Liggett in 1980 gave us a significant presence in the US domestic market for branded consumer products and also rounded off our wines and spirits business by adding US distribution to our existing operations in the rest of the world. The acquisition of Inter- Continental a vear or so later, and its subsequent integration and rationalisation with our original hotels portfolio, took us into a second worldwide business-again with a strong brand identification. These major moves have created fresh opportunities for the development of our interests. In order to take full advantage of them, a new management structure is required. Accordingly we have decided to recognise our enlarged overseas commitment by reorganising the group along geographic lines and establishing three major sectors-UK activities, US activities and International activities. Analysis of Group Activities The main purpose will be to improve the development of business strategy and to increase intra-group liaison in growth areas. The reorganisation will also be designed to accelerate management development and to increase the degree of decentralisation at operating levels, while maintaining strong central control of essentials. Four Group Managing Directors have been appointed, and all have been charged with the task of devolving operating responsibility to our supporting management. This will enable the Board to give greater attention to the strategic direction of the group, using each of the three geographic sectors as a springboard for further controlled expansion. In order to extend the range of knowledge and experience at our disposal and to emphasise the increasing strategic role of the Board, we decided that it would be appropriate to appoint another non-executive director. I am pleased to report that Mr F J Pizzitola, a General Partner of Lazard Freres & Co, has accepted my invitation to join us. I have no doubt that he will make a major contribution to our progress, particularly where United States and other overseas matters are under consideration. We have changed the pattern of financial reporting to reflect the reorganisation of management responsibilities. For instance, we have now brought together most of the UK retailing interests of the Key rew United Consumer Kin dom ServiCes' Foods United States Consmer ' Products H l ote s International :.r . ~ .. ~ ~ . R. .•_' *Adjusted for Oil & Gas TIWA 003661 -

United Kingdom Consumer Services 0 Retail Catering Berni Inns has had a difficult year because of UK economic factors. We have taken the opportunity to continue with our programme of redecoration and redesign, which is having encouraging results. Marketing thrust has been strengthened; below standard branches have been sold; and new investments have been made. In addition to the new Berni menu, experiments are taking place in alternative forms of retail catering. We are confident of building a sound base for the future, in line with family eating out expectations. Contract Services For some years we have been in the process of creating a British-based international service business through Grandmet Catering Services and Grandmet International Services. Both companies had a successful year in 1981/82. Originally these services were concentrated in the industrial catering business, but they have now been extended to include security, maintenance and other site services and, more recently, waste management and pollution control. Our staff numbers some 17,000 in the UK and some 5,000 overseas. Contracts have been obtained in the Americas, Europe, Africa, Middle East and Far East. The main emphasis for the further development of this business is an upgrading of our technical, technological and value added capability and there are undoubted opportunities for such expansion. In a period when employment in manufacturing industry is declining throughout the Western World, it is often said that new opportunities need to be found for employment in the service industries. Contract services provide an opportunity to do this profitably without great capital expenditure. Healthcare ' Healthcare is another development area. The West Sussex Clinic, which was purchased in 1981, has been completely refurbished and the newly constructed Bath Clinic was opened in November 1982 ahead of schedule. There are likely to be other opportunities in this field, both at home and abroad, but each possibility requires careful appraisal. 0 ra I 0 RITZ_ ~ CAs 1N TL fi , ._ -.. ~ 1<i°rZ -CASLNQ - © ~ d s ', TIWA 003667 '

0 B > s. 0 0 Q © © e ® ,,. : . a ., I ® FIRST J 72(J Grand Metropolitan at work, around the world. Our companies employ a wide range of skills, as evidenced by this cross-section of our staff, pictured in their working roles. ~ 0 ® d ® e f AE C © a t,. ~~ ~ ;:~' k~';~~~ ._~ ~... ~ ; ,~.;. 0 ~r..~. ~ ~ A rru ® r aic 4 ® r "TWA 003657 )

Trading Revie~N through the distributive function to production scheduling. As leaders in the systems field, we should be well placed to meet the changing requirements of our customers. The overall market for chilled dairy products has continued to expand, but our branded products have been subject to intense pressure from an increasing number of retailers' own labels. Our present investment in modern automated plants ensures low cost production and thus satisfactory profits, despite these pressures. Cheese, Butter and Milk Powders Express Creameries has continued to invest in new equipment and has achieved substantial improvements in productivity and quality over the years. Our cheese, butter and milk powder plants are the most efficient in the country. Agreement has been reached with the Milk Marketing Board for the supply of liquid milk to a large new drying installation in Wiltshire, built to replace a smaller plant. The equipment to be installed places a heavy emphasis on energy efficiency, since the drying process is of necessity an energy-intensive operation. Margins in the cheese market have been under pressure, particularly in the second half of the year; but there are now signs that these may improve in the early part of 1983. We have developed a number of new cheese products which we will package ourselves, and this will make us less dependent upon the sale of cheese as a commodity. Catering Supplies Express Catering Foods has converted from van selling to a tele-sales and delivery system, and expects increased productivity in the current year from the use of the integrated distribution system. A range of specialised fine foods, under the 'Cuisine' brand, has been launched to meet the growing supply needs of caterers and retailers for delicatessen products. Ireland Milk supplies in Ireland have been sufficient, but profits from milk-based commodities have been unacceptably low. Progress is being made in diversifying the product range into areas with higher added value. Research and Development Maintained investment in research and development continues to prove its worth. A new range of technically based products with high added value is now being test marketed and shows great promise. TIWA 003670 15