AGM Statement

British American Tobacco PLC
21 April 2004




                      Speech by Martin Broughton, Chairman
             at the British American Tobacco Annual General Meeting
                             held on 21 April 2004

Good morning, ladies and gentlemen, and welcome to your Annual General Meeting.

This is my last AGM as Chairman of your company before retiring in June.  So for
me, it is a somewhat poignant occasion.  I hope you will allow me to use the
occasion for a brief look back with pride at your company's very real
achievements.  For me, it has been a remarkable experience and a privilege to
have been able to serve this outstanding business for 33 years and to lead it
through the past decade of change and progress.

2003 was another year when your company continued to deliver shareholder value
through its strategy of growth, productivity and responsibility.  We won the bid
for ETI in Italy, our drive brands achieved double digit growth and we announced
an excellent potential deal for the business in the USA.  Improved productivity
helped us to grow profit margins for the fifth year running and we achieved
further recognition for our approach to corporate responsibility.

I am sure you will wish to join me in welcoming Jan du Plessis to the new role
he will take up as Non-Executive Chairman from 1st July.  With Jan as Chairman
of your Board, with Paul Adams as Chief Executive, with Antonio Monteiro de
Castro as Chief Operating Officer and with Paul Rayner as Finance Director, I
have every confidence that your company will make yet more progress in the hands
of an outstanding team.

I should also like to thank Harald Einsmann, who retires at this AGM, for his
support and wisdom as a Non-Executive Director for the past 5 years.  He has
brought us valued insights from his wide experience in the FMCG sector.

Corporate governance

Before reviewing performance, I feel obliged to touch on the subject of
corporate governance, which some parties seem at risk of turning into a major
industry in its own right.

You may remember that last year I expressed concerns about some of the Higgs
proposals on corporate governance.  It is good to report that after further
consultation with the investor and corporate community, the resulting Combined
Code, published in the autumn, was sensible and addressed many of industry's
concerns.  Much time and thought was given to developing the new Code, which now
establishes best practice, while not imposing restrictive practices - and I'm
pleased to be able to report that your company complies with it.

But it now seems that some views that were ultimately rejected in the
discussions may be resurfacing, as if unwilling to accept that two years of
careful review have indeed produced a good outcome.  A great benefit of the new
Combined Code, for both investors and companies, is that it solves the problem
of a plethora of separate, often conflicting codes.  But just as the new Code is
starting to bed in, the National Association of Pension Funds - which fully
signed up to it - has published a 72-page Corporate Governance Policy that takes
us off down the 'plethora' path again.

The NAPF says its policy would only add 'minimal' further requirements beyond
the Code.  We find this suggestion astonishing.  Why would you need 72 pages to
cover 'minimal' further requirements?   Anyway, daft as some of those further
requirements are, that's not the point - the point is that the new Combined Code
should be given a chance to work, as Sir Bryan Nicholson and others have
recently made clear.

In our view, the NAPF would do itself and the whole investment community a great
service by withdrawing its Corporate Governance Policy and allowing the new and
agreed Combined Code a proper chance to do just that.

Electronic voting

I would also like to highlight a significant change in the way we are conducting
today's meeting.  As you will have seen in the Notice of Meeting, voting this
year will be by a poll rather than the traditional show of hands.  This is in
line with the recently published Myners Report and is now recommended best
practice.

Your Board has adopted this approach as we believe that attendance at meetings
can be unrepresentative and that the voting instructions of all shareholders
should be taken into account, not just those of shareholders able to attend the
meeting.  Voting on a poll is more equitable but until now, poll voting was
cumbersome and could lead to a delayed result.  However, the introduction of
electronic voting enables results to be obtained almost at once and this can be
achieved with the 'VoteNow' electronic voting system developed by our
Registrars, Lloyds TSB.  I will explain more later about 'VoteNow' and how we
can all make it work for us today.

2003 business review

Let me turn now to your company's performance.

In 2003, operating profit was up by 4 per cent at over £2.7 billion and net cash
generation rose by nearly 30 per cent to over £1.5 billion.  Earnings per share
were up by 4 per cent, making a total increase of 51 per cent since your company
listed as a stand alone tobacco business in 1998.

Your Board is recommending a final dividend of 27p, taking the year's total to
38.8p per share.  This 10 per cent increase takes total dividend growth to over
61 per cent since 1998.

In terms of total shareholder return, we have delivered just under 30 per cent
per annum on average over the last three years, placing us amongst the very
highest performers of both the FTSE 100 and our international peer group of
leading fast moving consumer goods companies.

In 2003, we increased Group volumes by almost 15 billion cigarettes, about half
of this from organic growth.  Our international brands are now bringing in over
a third of our volume.  Both local and international brands grew last year, with
our global drive brands delivering 13 per cent.

The star was Pall Mall, now powering ahead as a truly global brand.  It doubled
its growth of the previous year with a leap of 32 per cent, breaking the 30
billion volume barrier with a particularly sparkling performance in Italy.  Kent
delivered organic growth for the fourth year running with 14 per cent, building
on innovations like the new menthol range in Japan.  Lucky Strike had a
difficult year, hit by lower industry volumes in Germany and France, but it grew
share in several countries and looks better placed for this year.  Dunhill had
another record year, growing 8 per cent to almost 33 billion.  Its popularity
continued to surge in South Korea and it built on brand rejuvenations in
Australia, Malaysia, South Africa and Taiwan.

It was another successful year for acquisitions.  We bought operations in Peru
and won a large holding in the Serbian privatisation.  But the big acquisition
news was Italy, where we won the keenly contested bidding for the privatisation
of Ente Tabacchi Italiani, giving us number two position in the second largest
tobacco market in the European Union.

I know some have questioned whether we overpaid for ETI.  We said at the time
that we had looked carefully at the numbers, at synergies we can achieve and
importantly, at the long term prospects.  ETI has over a quarter of Italy's
cigarette market and 40 per cent in cigars.  We were bidding for a revitalising
company with rising profits.  Now, four months in, everything we have seen gives
us yet more confidence that our price was right.  I am convinced you will see
that this is a great investment for shareholders.

In the USA, the proposal to combine Brown &Williamson's US businesses with RJR
in a new listed company, Reynolds American, offers an excellent prospect for a
more competitive foothold in the world's most profitable cigarette market.  We
will have 42 per cent of a stronger and more sustainable business with an
enhanced brand portfolio.  Investors will be able to value our US interests more
transparently and have welcomed the fact that B&W will be indemnified for all
existing and future US tobacco litigation.  Of course, the deal is subject to
regulatory and competition authority clearances, but we are optimistic that
these will be achieved and it is on track for completion this summer.

Responsibility and transparency

Last year, following stakeholder dialogue supported by the Institute for
Business Ethics, we developed and published our Group-wide Statement of Business
Principles.  Our three overarching Principles, Mutual Benefit, Responsible
Product Stewardship and Good Corporate Conduct, are supported by 18 Core Beliefs
and form the basis on which we expect our businesses to be run in terms of
responsibility.

We also published our long-held Standards of Business Conduct, which require
high standards of business integrity from our employees worldwide across many
important areas such as conflicts of interest, bribery and corruption, political
contributions and contraband.  No manager has the authority to order or approve
any action contrary to the Standards and we make it clear that they must never
be compromised for the sake of results.

In this context, it was pleasing to see the DTI conclude its 3-year
investigation into allegations of the Group's involvement in tobacco smuggling,
with the announcement that it had found no evidence of illegal activity and that
no further action would be taken.  We work actively with governments and customs
authorities to help them eliminate smuggling and we have always maintained that
our companies acted legally.

In the Business in the Environment Index of Corporate Environmental Engagement,
we are once more in the 'Premier League' of companies scoring more than 95 per
cent.

We were again selected for the 2004 Dow Jones Sustainability Indices.  We won
the Stakeholder Communication Award in the new PricewaterhouseCoopers Building
Public Trust Awards and our web-based Social Report won the Electronic Media
category in the UK Sustainability Reporting Awards run by the Association of
Chartered Certified Accountants.

If you have not yet had a chance to visit our website, this seems a good time to
do so.  It has again been ranked best of the FTSE 100 in the Webranking survey
published in the Financial Times and only this month, won top prize for
communications with private investors against stiff competition in the annual
Best Practice Website Awards of the UK Investor Relations Society.

Regulation

But as I leave the Group, I have one area of regret for 'unfinished business'.
British American Tobacco genuinely seeks to work with governments to achieve
sound and fair regulation that can help to reduce the impact of tobacco on
public health, can tackle under age smoking and can also ensure that adult
consumers are allowed to continue making informed choices about a legal product.

Yet in some countries, our companies are denied even the fair hearing from
regulators that this constructive position merits.  I believe that this Group,
which is working to define and live by corporate responsibility in more
meaningful ways than many other businesses have so far attempted, deserves a
great deal better.

Some health policy makers show signs of having been 'captured' by
narrowly-based, vociferous anti-tobacco activists, who are sometimes even funded
by the regulators they are lobbying.  I would ask a single-interest pressure
group that operates in this peculiar mode:  whom exactly do you represent, and
to whom are you accountable?

Any regulator can see openly whom we represent.  We stand for our consumers, who
should not be criminalised or made to suffer social exclusion; for this
industry's commercial partners, accounting for millions of jobs; for our
shareholders, who have a right to expect that we will be granted the
representation available to other industries; for our employees, who work hard
to manage our business responsibly; and for concepts that matter in making laws,
such as justice, balance and avoiding perverse outcomes.

Yet for tobacco, policy making can flout accepted good regulatory practice.
Laws can go far beyond what is reasonable and can seem to be 'cut and pasted'
from pressure group proposals with little basis in sound science, cost / benefit
or even basic notions of a fair society.  An example is the growing use of '
graphic image' health warnings, which threaten our intellectual property rights
on the pack and can offend and harass consumers - yet in fact give them no more
information than the print warnings.

If regulators are 'captured' by lobbies driven by narrow and unrepresentative
interests, consumers who choose to smoke - and pay ever-increasing taxes to do
so - will have every right to ask if their governments have let them down.

Our Core Beliefs, strongly endorsed by stakeholders in dialogue, are these:  we
believe in regulation that balances the interests of all sections of society,
including tobacco consumers and the tobacco industry, and we believe that our
industry should have a voice in the formation of government policies affecting
it.

And I do see some growing understanding that tobacco - this challenging, risky,
yet legal and enduringly enjoyable product for its consumers - is simply not
going to vanish.  Many governments welcome support from our companies in
achieving more appropriate tobacco marketing, in tackling under age smoking,
accommodating non-smokers and smokers alike and in appropriately reinforcing the
message that smoking poses risk to health.

If this constructive approach is allowed to replace suspicion and conflict, I
have no doubt that, over time, we will be able to put our commitment and
knowledge more widely into achieving successful outcomes for governments, for
consumers and for this responsible business.

Decade of transformation

Last year's successes for the business are, I believe, the latest steps on a
remarkable journey to growth and transformation that is by no means over.

Reflecting on the past decade gives me enormous pride in what our people have
achieved, since we took the first steps towards becoming a newly revitalised
tobacco business, determined to take the international opportunities presented
to us by a changing world.  Indeed, in that decade, we have grown our world wide
market share by 50 per cent and have more than doubled our operating profit.

In 1994 American Tobacco was acquired, completing our global ownership of Lucky
Strike and Pall Mall.  We described this as "confirming our commitment to
tobacco" and the move coincided with our investment drive into the newly-opening
markets of Eastern Europe.  You need only look today at the expansion of our
businesses in Russia, Hungary or Romania and at the string of successful market
entries that followed, to see that we were right in foreseeing growth from
economic liberalisation, falling trade barriers and growing consumer choice, for
those with the enterprise and experience to pursue it.

In 1995 we set a challenging vision of regaining leadership of the global
tobacco industry within ten years - a goal now within our reach, both
quantitatively and qualitatively through leadership in corporate responsibility
and innovation.

In 1996 we re-shaped the business internally to forge one unified global
business out of four separate companies, enabling us to focus more strongly on
the competition.

In 1997 we heralded more market entries and acquisitions by acquiring Cigarerra
La Moderna, in the largest foreign investment yet made in Mexico.

In 1998 the financial services businesses were demerged and we listed on the
London stockmarket again, for the first time in decades, as a stand-alone
tobacco business.

This was rapidly followed in 1999 by the hugely successful Rothmans merger,
bringing us stronger positions in strategically important markets and enhancing
our brand portfolio.  We said the merger was a major step towards our leadership
vision and would play to our proven strengths.  I think you will agree today
that it has done just that.

In 2000, we restructured our Canadian investment, effectively swapping the
non-tobacco interests for full ownership of Imperial Tobacco Canada.

In 2001 we launched the first industry-wide International Tobacco Marketing
Standards, 'raising the bar' above existing laws or codes in many parts of the
world.  We also began new ventures in Turkey, Vietnam, Egypt, South Korea and
Nigeria - where today our business is a particularly outstanding success.

In 2002, we celebrated our Centenary and today we are able to report total
shareholder return of 13.3 per cent per annum over the last decade, compared to
6 per cent for the FTSE 100 as a whole.  That decade of transformation has
worked well for shareholders.  It has also been a great ten years for our
consumers, in terms of enhanced choice of high quality brands, and for our
employees in terms of growth and morale.

Back in the early 1990s, we were seen as a 'cash cow' for a diversified
conglomerate.  We had no global drive brands and were not well structured to
take on the competition.  Many believed the tobacco business was in terminal
decline.

What a change I see today!  There is a buzz of purpose and energy everywhere I
go in the Group.  Our people, as well as investors, have ample evidence that our
business is sustainable and that through growth, productivity and
responsibility, it can go from strength to strength.



Current trading and prospects

Looking ahead, we expect our real momentum to continue, although exchange rates
this year could have an adverse effect on profit growth when translated into
sterling.  We can, of course, be affected by particular circumstances in
individual countries.  This year, one example will be Canada, where market
factors are likely to impact profitability.  However, taking the global view, we
remain confident in our ability to build our brands, to generate growth and to
demonstrate how a responsible tobacco business should be run in the 21st
century.

Our people

At AGMs, I always like to thank our people for their hard work and dedication.
This year it is a special thank you, offered with my pride and affection for
this outstanding international family.  Our employee surveys tell us that our
people have high levels of satisfaction compared to employees of other high
performing companies.  I too have gained tremendous satisfaction from working
amongst such talent and energy.  I will always remember the special culture that
makes us what we are.  As a colleague once said, if BAT was a club, you would be
willing to pay good money to join it.  I shall certainly miss it.

My sincere thanks to all our people, everywhere, and may their endeavours long
be rewarded by the further achievements that they undoubtedly deserve.

Let us now move to the formal business of today's meeting.



                                   ENQUIRIES

                     British American Tobacco Press Office

                 David Betteridge/Ann Tradigo/Teresa La Thangue

                              [phone]




                      This information is provided by RNS
            The company news service from the London Stock Exchange