2nd Quarter & Interims-Part 2

British American Tobacco PLC
1 August 2000

Part 2

ACCOUNTING POLICIES AND BASIS OF PREPARATION             16.

The financial statements comprise the unaudited results for
the six months ended 30 June 2000 and 30 June 1999 and the
audited results for the twelve months ended 31 December 1999.

The unaudited Group results have been prepared under the
historical cost convention and in accordance with applicable
accounting standards using the accounting policies set out in
the Report and Accounts for the year ended 31 December 1999.

As described below, during the six months a transaction was
completed whereby the holding in Imasco, an associated
company in Canada, was effectively replaced by shares in a
wholly-owned subsidiary comprising only the tobacco interests
of Imasco.  When an associate becomes a subsidiary the method
for calculating goodwill differs between the Companies Act
1985 and FRS2.  In order to give a 'true and fair' view, the
Group has complied with FRS2 in arriving at the figures shown
below.  If the Act had been followed the goodwill arising on
acquisition would have been some £1.65 billion lower, as it
would have been net of the revaluation surpluses on the
disposed businesses and the share of accumulated profits
while Imasco had been an associated company.

Following this change the results of the Canadian operations
are included within the America-Pacific region in the
segmental analyses and the comparative information has been
restated accordingly.  Previously the results of Imasco as an
associate were shown as a separate segment.

The acquisition of Rothmans was completed on 7 June 1999 and
the results for the year ended 31 December 1999 included a
contribution reflecting their consolidation for seven months.
As described in the interim report to 30 June 1999, the
comparative six months ended 30 June 1999 did not include any
contribution from the Rothmans businesses.  However, the
shares issued for the acquisition were included in
shareholders equity and, together with associated costs,
Rothmans was shown as a separate asset in the balance sheet
as at 30 June 1999.

As a result of a reorganisation following the acquisition of
Rothmans, profit from the manufacturing operations located in
Southampton in the UK is included within the Europe region with
effect from 1 January 2000.  Previously it was included in Asia-
Pacific and the comparative information in the segmental analyses
has been restated accordingly.

CHANGES IN THE GROUP                                      17.

Following the agreement with Imasco, the acquisition of the
shares of that company not already owned by the Group,
representing approximately 58 per cent of its shares, was
completed on 1 February 2000.  This was followed immediately
by the completion of the sale of Imasco's CT Financial
Services Inc. business and Imasco's retailing business,
Shopper's Drug Mart.  The results of Genstar, Imasco's land
development company, have not been consolidated given the
intended disposal.  In June 2000 the US operations of Genstar
were sold for US$223 million, while the sale process for the
Canadian operations continues.

Consequently, the results from Canada for the 6 months ended
30 June 2000 comprise the Group's share of the results of its
associate for January and the consolidated results of
Imperial Tobacco for the five months to 30 June 2000.  The
results in the comparative periods represent the Group's
share of the results of its associate company Imasco over
those periods.

During the six months, Imasco's discontinued non-tobacco
operations contributed £110 million of turnover and
£16 million of profit, while for the period the tobacco
operations were a wholly-owned subsidiary they contributed
£329 million of turnover and £142 million of profit before
goodwill amortisation.  In 1999 the discontinued non-tobacco
operations contributed £600 million of turnover and
£68 million of profit for the six months and £1,286 million
of turnover and £155 million of profit for the year.

For the purpose of these results provisional figures have
been included in respect of this transaction.  The goodwill
arising of £2,114 million will be amortised over a period of
20 years.  The statement of total recognised gains and losses
for the period includes £1,269 million principally in respect
of the Group share of the surplus on revaluing Imasco's non-
tobacco businesses prior to their disposal.  As a result of
this revaluation, the profit and loss account does not
include any gain on these disposals.

On 3 February 2000 the Group sold its entire shareholding in
Rothmans Inc., Canada.  As the intention to dispose of these
operations was announced at the outset of the merger, the
results and assets of that business were not consolidated.
The investment was included as a current asset at net
realisable value and therefore the sale did not generate a
gain or loss in these results.

Changes in the Group cont.                                18.

On 31 March 2000 the Group completed the purchase of S.C.A.
Tobacco Corporation (SCAT), which distributes the Group's
products in Japan.  Consequently, its results are
consolidated from 1 April 2000 and the amortisation relating
to the provisional goodwill of £62 million commenced from
that date.

In accordance with the terms of the convertible redeemable
preference shares, the holders of such shares gave notice of
the redemption of 50 per cent of the preference shares, at a
price of 575p per share.  An amount of £695 million was paid on
7 June 2000 to the preference shareholders.

FOREIGN CURRENCIES

The results of overseas subsidiaries and associated
undertakings have been translated to sterling as follows:

Profit and loss and cash flow for the six months to 30 June
2000 at the average rates for that period.  The comparatives
for the six months to 30 June 1999 and the year to
31 December 1999 at the average rates for the year to
31 December 1999.

Balance sheets have been translated at the relevant period
end rate.

For high inflation countries, the translation from local
currencies to sterling makes allowance for the impact of
inflation on the local currency results.

The principal exchange rates used were as follows:

                     Average          Closing       
                  2000   1999    30.6.00  30.6.99   31.12.99
                                                    
US dollar         1.569  1.618    1.514    1.576     1.612
Canadian dollar   2.300  2.405    2.243    2.333     2.339
Deutschmark       3.196  2.971    3.089    2.990     3.145
Euro              1.634  1.519    1.580    1.529     1.608

EXCEPTIONAL ITEMS                                         19.

As part of the SCAT acquisition, the Group reacquired
cigarette stocks which had previously been sold to that
business.  A one-off accounting adjustment of £80 million is
charged against Group operating profit for the six months to
remove the gross contribution previously recognised by the
Group on those cigarette sales.

Integration costs are the costs incurred in integrating
Rothmans into the British American Tobacco Group and the
consequential restructuring of the enlarged Group.

The Imasco restructuring costs relate to the Group's share of
pre-tax cost to Imasco of buying out share options together
with other employee deferred compensation and severance
arrangements consequent upon a fundamental change of control.

US tobacco settlement costs in 1999 are one-off settlement
compliance costs and liquidated legal fees relating to the US
cigarette companies' 1998 agreement with the Attorneys
General in 46 US States to settle outstanding Medicaid
recovery suits.  Other settlement costs are charged as
ongoing costs.

GOODWILL AMORTISATION

The goodwill amortisation charge has arisen from the Imasco
transaction and the SCAT acquisition described above,
together with the initial acquisition of Rothmans and
subsequent local restructurings during the second half of
1999.

SALE OF BRANDS

This comprised the profit on the sale in 1999 of certain of
British American Tobacco's brands in Australasia.  The sale
was required by regulatory authorities as a consequence of
the restructuring of the businesses in those countries.

NET INTEREST

The net interest charge for the 6 months ended 30 June 1999
and the year ended 31 December 1999 included a benefit of
£25 million, as the Group was able to recover interest on the
amounts which formed the basis for the recovery of sales tax
in Brazil in 1998, together with a gain of £9 million on the
sale of investments.

Net interest now includes Imperial Tobacco Canada Limited as
a wholly-owned subsidiary for the five months to 30 June
2000, during which period it incurred a net interest charge
of £20 million.  However, the net interest charge for the
half year has benefited from a £25 million gain on the
cancellation of swap contracts.

TAXATION                                                  20.

                                             6 months to
                                        30.6.00    30.6.99
                                           £m         £m

   UK                                      12         21
   Overseas                               305        248
                                         ----       ----
   British American Tobacco and
    subsidiary undertakings               317        269
   Share of associates and joint
    venture                                 4         61
                                         ----       ----
                                          321        330
                                         ====       ====
   Effective tax rate                    46.0%      50.1%
                                         ====       ====

The effective tax rate for the first half of 2000 was
adversely affected by the goodwill amortisation arising
mainly from the Rothmans and Imasco transactions, neither of
which were in the comparable figures for 1999.  It was also
affected by the profit adjustment arising from the
acquisition of SCAT.

However, the effective tax rate in 1999 was affected by
charges accrued in 1999 for certain of the US tobacco
settlements not being relieved for tax until the following
year.  As future years were expected to show the same pattern
for such payments and tax relief, under UK accounting
standards there was a distortion to the tax rate shown in
1999.

EARNINGS PER SHARE

Basic earnings per share are based on the profit for the
period attributable to ordinary shareholders and the average
number of ordinary shares in issue during the period
(excluding shares held by the Group's two Employee Share
Ownership Trusts).

For the calculation of diluted earnings per share the average
number of shares reflects the potential dilution effect of
the exercise of employee share options and from June 1999 the
convertible redeemable preference shares.  The earnings are
correspondingly adjusted to the amount of earnings prior to
charging dividends and the amortisation of discount on the
convertible redeemable preference shares.

Earnings per share cont.                                  21.

The earnings have been affected by a number of exceptional
items.  To illustrate the impact of the principal
distortions, as well as the effect of goodwill amortisation,
adjusted diluted earnings per share are shown below:

                                      Diluted earnings per share
                                         6 months to     Year to
                                      30.6.00   30.6.99  31.12.99
                                      (pence)   (pence)  (pence)
Unadjusted earnings per share          12.44     17.79    27.02
Effect of acquired stock                3.35             
Effect of goodwill amortisation         7.54               7.82
Effect of US tobacco settlements                  0.83     0.73
Effect of integration costs             1.17              11.27
Effect of Imasco restructuring costs    1.88             
Effect of sales tax recovery                     (0.83)   (0.63)
Effect of sale of brands                                  (2.53)
Effect of US tobacco settlements on                      
 effective tax rate                               7.05     8.65
                                      ------    ------   ------
Adjusted earnings per share            26.38     24.84    52.33
                                      ======    ======   ======

Similar types of adjustments would apply to basic earnings
per share.  For the six months to June 2000 basic earnings
per share on an adjusted basis would be 27.83p (1999 25.08p)
compared to unadjusted amounts of 12.36p (1999 17.96p).

DIVIDENDS

The Directors have declared an interim dividend out of the
profit for the six months to 30 June 2000, for payment on
18 September, at the rate of 9p per share on both the
ordinary and preference shares.  This interim dividend
amounts to £207 million.  The comparative dividend for the
six months to 30 June 1999 comprised a special interim
dividend of 4p per share and an interim dividend of 4.3p per
share.

Valid transfers received by the Registrar of the Company up
to 11 August 2000 will be in time to rank for payment of the
interim dividend.

The amortisation of discount on preference shares referred to
on page 12 reflects the difference between the share price at
the date of the Rothmans transaction and the redemption price,
which is being amortised over the period to the redemption
date.

SEGMENTAL ANALYSES:  ASSOCIATED COMPANIES AND JOINT VENTURE      22.

  3 months to                               6 months to     Year to
30.6.00 30.6.99                           30.6.00  30.6.99  31.12.99
  £m      £m                                £m       £m       £m
                 Turnover excluding duty,                   
                 excise and other taxes
   68     125    Tobacco                     286      386      824
          186    Financial services           68      366      761
          125    Other trading activities     42      234      525
-----   -----                             ------   ------   ------
   68     436                                396      986    2,110
=====   =====                             ======   ======   ======
                                                            
                 Operating profit                           
   15      39    Tobacco                      52      101      225
           25    Financial services           12       49      103
            9    Other trading activities      4       19       52
-----   -----                             ------   ------   ------
   15      73                                 68      169      380
                 Imasco restructuring                       
                  costs                      (67)
-----   -----                             ------   ------   ------
   15      73                                  1      169      380
=====   =====                             ======   ======   ======

SHAREHOLDERS' FUNDS

                                                   30.6.00  31.12.99
                                                      £m       £m
                                                            
Share capital                                         575      605
Share premium account                                   6        4
Merger reserves                                     4,600    4,726
Capital redemption reserve                             30   
Other reserves                                        502      503
Profit and loss account                              (187)  (1,017)
                                                   ------   ------
Total shareholders' funds                           5,526    4,821
                                                   ======   ======

The reduction in the non-equity interest shown on page 13
reflects the redemption of 50 per cent of the convertible
redeemable preference shares in June 2000.

                            ******

Copies of this Report will be posted to shareholders and may
also be obtained during normal business hours from the
Company's Registered Office at Globe House, 4 Temple Place,
London WC2R 2PG.


                          Philip Cook
                           Secretary