AGM Statement

British American Tobacco PLC
27 April 2006

                       Speech by Jan du Plessis, Chairman
             at the British American Tobacco Annual General Meeting
                             held on 27 April 2006



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

2005 was an excellent year, in my view our best since British American Tobacco
listed as a stand-alone tobacco company on the London Stock Exchange in 1998.

We built on each element of our strategy - growth, productivity and
responsibility, delivered by a winning organisation - making progress on all
fronts.  Trading was strong and volumes, profits and earnings were up.  These
achievements and the success of our strategies have been acknowledged by
investors with a notable rise in the share price.

In my address today, I will touch particularly on our commitment to manage our
business responsibly, a commitment that I strongly believe is fundamental to our
ability to deliver sustainable shareholder value.  But before doing so, I would
like to comment briefly on last year's performance.

2005 business review

When we announced our results in February, we described 2005 as a vintage year.
It certainly was.  On a like for like basis, profit from Group operations was up
9 per cent at over £2.6 billion, underlying volumes grew by 2 per cent, our
global drive brands grew by 9 per cent and earnings per share rose by 17 per
cent.  Your Board is recommending a final dividend of 33 pence, increasing the
year's total dividend by 12 per cent to 47 pence per share.

Investors who remained confident in our strategy and the quality of our business
through the ups and downs of volatile markets have been well rewarded.  If you
have held your shares for five years, you will have seen your dividends grow at
a compound rate of 10 per cent per year, alongside a very substantial rise in
the share price.  Total shareholder return in the last five years has been
almost 27 per cent a year, compared to 1.4 per cent for the FTSE 100 as a whole.
  An investment of £100 in British American Tobacco would have increased in
value by £226, while £100 invested in an index tracker would have grown by £7.

Last year we grew market share in several key markets, such as Russia, South
Korea, Australia, Germany and Japan.  Of course, not everything went our way.
High excise increases continued to cause down-trading in Canada and the sudden
excise hike in Malaysia in late 2004 continued to impact volume and profit.

However, the strong performance of our global drive brands, Dunhill, Kent, Lucky
Strike and Pall Mall, was very good news.  Kent grew by 18 per cent to reach a
new record volume of almost 39 billion.  Pall Mall delivered further exceptional
growth of 25 per cent to reach almost 33 billion.  While Dunhill and Luckies
suffered small declines, affected by circumstances in particular markets, they
turned in volumes of over 30 billion and 22 billion respectively, bringing
overall drive brands growth to an impressive 9 per cent.

We have continued to make progress in reducing costs, substantially pruning our
overheads and indirect costs and finding savings in the supply chain.  Since
2003, cumulative savings have reached £482 million a year, of which over £200
million was achieved last year.

Our associate companies are also contributing substantially to shareholder
value.  2005 was the first full financial year after completion of the Reynolds
American transaction in the United States, combining R.J. Reynolds with the US
business of Brown & Williamson.  The stock market now values Reynolds American
at over $16 billion, making our 42 per cent shareholding worth well over £3.5
billion.  We are also very proud of the performance of our associate company in
India, ITC, which is continuing to achieve excellent earnings growth.  ITC's
market value of over $16 billion means that our 32 per cent shareholding is
worth almost £3 billion.  Together, the value of our holdings in these two
associates represents over 20 per cent of British American Tobacco's market
capitalisation.

The AGM has on occasions been an opportunity for comment on our prospects for
the year ahead.  However, as the AGM is now held in the week before we announce
our first quarter's results, it would not be appropriate for me to comment on
this year's prospects today.  Nonetheless, we are pleased with the progress we
are making and your Board is confident that we can continue to deliver quality
earnings growth and good cash flow over the long term.

Responsibility

For the fourth year running, we are the only tobacco business selected for the
Dow Jones Sustainability Indices.  We have also again been selected as one of
the top companies in the UK Business in the Community Corporate Responsibility
Index.

While these objective assessments are very encouraging, I want to stress that
for us, corporate responsibility is not just a buzzword or a cosmetic exercise.
We strongly believe that our business must demonstrate responsibility in
everything it does, especially given that we manage a product that poses real
risks to health.  That is why responsibility is a fundamental part of our
business strategy.  But of course, a strategy must be a blueprint for actions.
Let me offer you a few examples of how we work to translate responsibility into
actions.

Restructuring

Just over half of the cost savings we made last year were in the supply chain,
including the ongoing review of our factory footprint.

As shareholders, you will appreciate how important these savings are.  We must
square up to manufacturing overcapacity and, as a global business, we must
ensure that our costs are globally competitive.  The savings enable us to keep
investing for a robust and sustainable business in the future, and they help us
to weather the rough waters we will inevitably encounter from time to time, such
as sudden hikes in excise duties or price wars in certain countries.

But balancing our responsibilities to all our stakeholders, including employees
and shareholders, is not always easy.  We also give considerable thought to
addressing the more difficult and painful aspects of cost cutting.

It is one thing to analyse figures to find major savings a business can make,
but quite another to have to tell a colleague, perhaps someone you have worked
with for years, that they no longer have a job.  Cost cutting initiatives often
have very real human impacts, and we try to mitigate these as much as we can.

Our Employment Principles, which you can read on our website, make clear that we
expect restructurings to be carried out responsibly and in a manner that is
sensitive to the human consequences.  For example, jobs must only be terminated
after a comprehensive review of all the alternatives.  The reasons must be
explained to all employees and other relevant stakeholders.  We expect our
companies to be as considerate as possible with severance pay and resettlement
support.  Where there are trades unions, as in many of our companies,
redundancies must of course involve union negotiations.  Our aim is to reach
agreements with all parties.

In 2005 alone, we set aside £165 million for redundancy packages, including
pension enhancements.

Factory closures may also impact a wider community.  We therefore also encourage
our companies to make a social assessment and to consider ways of mitigating the
impact of rationalisation decisions on the communities in which they operate.

Restructuring means balancing competing tensions, but we try hard to get the
balance right.  Our shareholders rightly expect an efficient business building
value for the long term.  In today's highly competitive world, employees have
had to recognise that no business can guarantee a job for life.  But in managing
the impacts of restructuring, we will continue to be vigilant in ensuring that
our managers continue to honour our commitment to act responsibly.

Public place smoking

I recently criticised the House of Commons decision to ban smoking in every bar,
pub, restaurant and private club in England, despite the Government's manifesto
pledge for more limited restrictions and its own opinion polls showing that most
people do not want an outright ban.

In a thought provoking leading article, The Economist recently cited public
smoking bans as an example of what it called "hard paternalism".  In essence,
this may be described as a determination by governments, through legislation, to
force individuals towards behaviours - in their own interests of course - which
they are judged incapable of choosing for themselves.  Public smoking bans are,
in reality, an ill-disguised attempt to force smokers to quit, rather than
allowing people to make their own choices.

However, despite my criticism, let me be clear.  We do not think people should
be free to light up just wherever they like.  Regardless of the debate about
environmental tobacco smoke and risks to public health - which remains
contentious - many people do want to be able to eat and drink amidst comfortably
clean air.

This is the key point.  There are better, and fairer, solutions based on
providing separate smoking and non-smoking areas, and proven ventilation systems
that deliver widely recognised air quality comfort levels, even in busy pubs
with smoking.  That is why our companies are now working proactively with the
hospitality industry to champion these types of practical solutions around the
world.

Most governments, including twelve countries in Europe alone, have so far
adopted more balanced solutions and many are open to considering them.

It seems wise indeed for governments to recognise that comfortably clean indoor
air can be achieved for everyone, without driving a quarter of a country's adult
citizens - all of them voters - out of their favourite pubs or even
neighbourhood social clubs.

Anti-illicit trade

Today, trade in contraband and counterfeit products is reaching alarming
proportions in many countries, as more smokers switch to cheaper illegal
cigarettes because excessive tax increases have made tax-paid product
unaffordable.  We are taking real and concerted actions to help crack down on
illicit activities that cheat consumers with adulterated products, that cheat
governments and the legitimate industry of revenues, and that in recent years
have been penetrated to a worrying extent by organised crime.

To reduce the risks of our own products entering illegal channels, our companies
apply stringent 'know your customer' controls and ensure that the quantities
they supply are consistent with legitimate demand.  Tight controls like these
are one reason why smugglers are turning to counterfeiters for their supplies.
In response to this, we have introduced a covert security device on our products
so that counterfeits can immediately be identified, for enforcement agencies to
confiscate them.

To gain a better understanding of the scale, type and causes of illicit trade in
their markets, our companies are investing in research and sharing their
findings with governments, while our Brand Enforcement Group provides
intelligence to enforcement agencies to help them take action against smugglers
and counterfeiters.  All this information is proving increasingly useful to
governments in understanding the size of their revenue losses and the actions
they need to take.

Around the world, including in the UK, we have pioneered formal agreements with
customs authorities to enhance intelligence sharing and joint actions.  The
number of these agreements is increasing as more governments recognise our
efforts and see us as a valuable partner in the battle against illicit trade.

Supplier responsibility

Last year, we committed a further £7.5 million to the British American Tobacco
Biodiversity Partnership with four environmental NGOs.  I am delighted that half
the activity over the next five years will focus on internal management of
biodiversity conservation across the Group, supported by our NGO partners, with
half continuing to support external projects.

Our NGO partners have already helped us to develop new requirements for our
suppliers covering raw materials sustainability, including wood pulp and its
impacts on forestry.  Our partners are also helping us to enhance the
biodiversity potential of the 600 million trees that our companies sponsor or
manage to provide wood for those farmers who need it for curing tobacco leaf.

Our Social Responsibility in Tobacco Production programme for leaf suppliers
includes conserving soil and water, using agrochemicals properly, setting safety
standards, promoting afforestation and eliminating exploitative child labour.
The programme has been further enhanced with biodiversity elements, and I am
pleased to tell you that it now goes beyond the farmers from whom we buy leaf
directly, to cover 100 per cent of the Group's commercial suppliers of leaf.

Product responsibility

Turning to our product, I wish to make very clear again that British American
Tobacco does not want children to smoke.  That is why our companies have for
many years supported programmes to tackle underage smoking around the world -
currently 120 programmes - and why youth smoking prevention is at the heart of
our voluntary International Marketing Standards.

Unfortunately, not all our competitors market to such standards.  But despite
that, we do, even where it may put us at a commercial disadvantage.  To help
promote good standards more widely - and a level competitive playing field - our
companies therefore engage with governments with a view to similar standards
being embodied into local law.

We also lobby governments to raise the minimum age for tobacco sales to 18.  The
UK Government is amongst these, and although for several years it did not
respond, I welcome the recent announcement that it is now looking to raise the
minimum age for sales of tobacco in this country from 16 to 18.

Finally, let me touch on harm reduction.  While of course the proportion of
adults who smoke has been reducing for many years, it is clear that in future
there will continue to be many millions of informed adults who do choose to
smoke.  Our goal is eventually to give smokers the option of reduced harm
products, if they can be developed and accepted.

Harm reduction is very challenging scientifically and in terms of gaining
acceptance from regulators, public health experts and the scientific community.
Any reduced harm products would also have to be acceptable to consumers.
Despite the challenges, however, we continue to invest in efforts to reduce
human exposure to toxins in tobacco smoke, including work to identify accepted
and accurate measures of exposure and to explore novel technologies.  We also
continue to seek constructive engagement towards scientific acceptance that some
of these approaches may significantly reduce exposure, and thus may reduce risk.

One of the few tobacco products reported by several independent researchers to
be significantly harm-reducing is Swedish-style smokeless snus.  Last year we
launched it in test markets in Sweden and South Africa, backed by two of our
biggest brands, Lucky Strike and Peter Stuyvesant.  We are encouraged by a
number of positive reactions from within the public health community.
Regrettably, sales of snus are currently banned in some countries, including in
the European Union, except for Sweden.  In view of the role it could potentially
play in harm reduction, we and other supporters of snus have begun engaging with
regulators in the hope that they will reconsider the bans.

Industry leadership

In conclusion, I hope I have been able to give you a broader picture of our
efforts and achievements, not only in terms of financial results, but in terms
of the ways in which we are managing our business.  I believe we are
increasingly being seen as the company that is providing industry leadership in
setting standards for a responsible tobacco business in the 21st century.

I am sure that we have room to improve.  However, we continue to learn and make
progress, and we welcome opportunities for constructive engagement with our
stakeholders on issues that concern them.

I cannot outline today everything your company is doing to meet the challenges
of its trading environment, to innovate for the future, to respond to its many
stakeholders and to pursue its commitment to responsibility.  You will find much
more in your Annual Review, our Social Reports and on our website, bat.com.

But what I can say is that after two years as Chairman, I find your business in
tremendous shape.  I should particularly like to thank all our employees
worldwide for the hard work, dedication and commitment that is giving the
business such momentum.

As well as our work in demonstrating corporate responsibility, our financial
results show that our strategy is working, and the quality of your business
gives me confidence that we can continue to deliver, on average, high single
digit earnings growth for many years to come.

Thank you for your attention, and let us now move to the formal business of
today's meeting.




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