AGM Statement

British American Tobacco PLC
16 April 2002


                      Speech by Martin Broughton, Chairman
             at the British American Tobacco Annual General Meeting

                           16 April 2002 at 11.30am.


Good morning, ladies and gentlemen, and welcome to your Annual General Meeting,
held this year at a new venue.  We have brought the date forward to reflect our
faster reporting schedule, and the Queen Elizabeth II Conference Centre was
unable to accommodate the change.  I hope you enjoy this new venue, where it's
likely we will also be next year.

As many of you will know, this is our Centenary year, when I believe we can look
back not only on 100 years of enterprise, endeavour and, indeed, excellence but
also on recent results that truly highlight the qualities of your company.  2001
was another year of growth - in profits, earnings, dividend, and brand strength.
It was a year which I believe has proved the wisdom of listing British
American Tobacco as a 'stand alone' tobacco company in 1998; has demonstrated
that our strategy for building shareholder value is working; and has affirmed
our commitment to corporate social responsibility, openness and accountability.

Before reviewing performance, however, let me welcome your new Directors, and
pay tribute to those who have left us.

Paul Adams is now Managing Director, following Ulrich Herter's retirement at the
end of last year.  Already, Paul is demonstrating the skills, vision and energy
that I am confident will drive the business forward.

Paul Rayner is now Finance Director, following Keith Dunt's retirement at the
year end.  Paul was previously Chief Operating Officer for Australasia.  We
welcome his skills and insights.

I also welcome Antonio Monteiro de Castro, who joined your Board last month.
Antonio remains Regional Director, Latin America and the Caribbean, which he has
been for six years, and brings valued experience to your Board of a Region that
is a vital part of the Group's success.

I sincerely thank Keith Dunt, Bill Ryan, who retired last year as Deputy
Managing Director, and of course Ulrich Herter for their superb contributions
over many years.  All three have given your business outstanding leadership and
I am sure you will join me in wishing them well in their retirement.


Centenary

Your business has come a long way since that extraordinary US entrepreneur, Buck
Duke, arrived in the UK just over a century ago, with the technology that would
enable mass cigarette production, with the all-powerful American Tobacco Company
in his control and a plan to corner the UK market. With the immortal words:
"Hello boys, I'm Duke from New York, come to buy your business", he triggered
the trade war with Imperial Tobacco that was settled in 1902 with the birth of a
new joint venture - British-American Tobacco - that has today grown to be bigger
than both its parents.

As we celebrate our Centenary, it is fascinating to note the total shareholder
value returned by your business since it first listed on the London stockmarket
in 1912, a decade after operations began.

Measured against the only equity fund with durability as long as our own, since
1912 the average annual total return from British American Tobacco has been 12.6
per cent a year, compared to 11.4 per cent from the overall UK market. Our
out-performance has been most notable in the last four decades.

Now, I don't know if any of you have personally held your shares that long but I
believe it demonstrates the inherent strengths of your company.


Business Review

Since we listed as a 'stand alone' tobacco company in 1998, we have had a
remarkable three years.

In 2001, operating profit was up by 8 per cent to almost £2.8 billion.  In the
three years, we have taken operating profits up by a powerful 79 per cent.

Earnings per share last year were up 9 per cent - an increase in the three years
of 34 per cent.

In terms of total shareholder return, we have not only performed in those three
years in the top quartile of the FTSE 100, but we are 6th of the 28 leading
global consumer goods companies against whom we benchmark ourselves. This peer
group includes many major household names, such as Coca Cola, Diageo, Gillette,
Heinz, Nestle and, of course, Philip Morris.

At a time when stock markets reflect many uncertainties, your Board is proposing
a final dividend of 22.3p per share, making a total for the year of 32p per
share.  That is an increase of 10 per cent on last year, and of 33 per cent over
the past three years.  Despite the rise in our share price, I still ask myself
where else can you get an almost 5 per cent yield, and a confident expectation
of good dividend growth?

In 2001, our global drive brands together grew by over 10 per cent. They all
posted record volumes, and the highest ever market shares in most key markets.

Lucky Strike had another record year, with volumes up a further 4 per cent.
Kent's global volume was up 5 per cent, with much faster growth in several
markets, of which Russia was the most striking success.

Dunhill grew 14 per cent last year to the highest volume in its history, with
South Korea deserving particular mention, while Pall Mall grew by 21 per cent.
Brown & Williamson achieved one of the most successful US cigarette brand
launches of the past decade with their launch of Pall Mall Filter.

Overall, our shift of the brand mix towards the growing, more profitable parts
of the business - International and Premium Brands, Lights, and the Adult
Smokers Under 30 segment - has helped to enhance Group margins by almost 60 per
cent in three years - a transformation in the quality of our business.

It has been a year of excellence on other fronts too.  Our corporate web site
bat.com has gone from strength to strength, offering new share price charting
and webcasting of our quarterly Results, so that all shareholders can
effectively attend our Quarterly Results presentations. It has been ranked in
the top three FTSE 100 sites in one of the most detailed and comprehensive
surveys yet, published in the Financial Times.

We have also continued to focus on e-commerce, developing projects that take
advantage of the opportunities afforded by web technology.  During 2001, we
pulled them all together under one banner, Wired for # 1 - a web-enabled British
American Tobacco.

In September, we and the other major tobacco companies launched the first
industry-wide International Tobacco Marketing Standards, covering all aspects of
marketing from print, billboards and electronic media, to promotions, packaging
and sponsorship.  In many parts of the world, the Standards 'raise the bar'
above current laws or industry codes.


Pensions

I should also mention the successful merger last year of the British American
Tobacco and Rothmans International UK pension funds, following great care and
consultation by the Trustees to satisfy themselves that it is in the interests
of all members.

You will have seen the recent reports of pension schemes in difficulties.  Many
companies are abandoning final salary schemes, others face concerns about their
future liabilities, and there is debate on whether the new FRS 17 accounting
standard has contributed to the woes.

Our combined scheme remains one of the best in the UK, and quite possibly the
best.  It is non-contributory for employees, the fund is in surplus, the merger
has enhanced many of the already high level of benefits, and the company has no
present intention of changing its UK arrangements.

FRS 17 is not mandatory until next year, but there is preliminary information in
your Report and Accounts, which shows that on a global basis we have a tiny
deficit.  The key point is that while this new accounting standard provides an
interesting snapshot, it does not accurately reflect the true funding position
of Group retirement schemes. These of course continue to be scrupulously
monitored by the Trustees and their advisors.

Last month we featured amongst the '100 Best Companies to Work For' in the
annual Sunday Times survey of UK companies.  The results bore out our own global
staff surveys last year, where our people showed much more satisfaction than
employees of other high performing companies, especially on the ways that we
live our Guiding Principles - open mindedness, strength from diversity, freedom
through responsibility, and enterprising spirit.

This is a fitting point to give sincere thanks to all our people for their
tremendous commitment and effort.  As we look to the future, I see a Group with
talent, a strong and cohesive culture, and still buzzing with the great spirit
of enterprise so evident in our origins, that has brought us successfully
through 100 years.


Regulation

Last year we again emphasised our commitment to working with governments for
sound and fair regulation of our industry - regulation that can help to reduce
the impact of tobacco on public health, while ensuring that adult consumers can
continue making informed choices about a legal product, and that under age
smoking is prevented.

Our message is that constructive dialogue and co-operation between governments
and the legitimate tobacco industry can bring a 'win-win' scenario - one of
gradually declining total consumption for health ministries, higher tax
collection for finance ministries, potentially reduced exposure products for
consumers and less tobacco smuggling and counterfeiting, with improved law and
order for us all.

But governments and regulators must ask themselves a key question. Essentially,
it is:  With prohibition not an option, who would you prefer to manage the
tobacco industry?  Is it well run, tax-paying companies who work hard to manage
a risky product responsibly, or is it counterfeiters, organised criminals
trafficking in 'illegal' cigarettes and back-door salesmen supplying children?




It's a simple question, and one you might think has an obvious answer, but if
governments attack and exclude the legitimate industry - as the World Health
Organisation continues to do - tobacco will increasingly be pushed into the
hands of rogue producers and criminals.  This brings the 'lose-lose' scenario -
one of chaotic markets with counterfeiting and smuggling, falling tax revenues,
adulterated products, rising youth smoking and far less ability for governments
to address the public health impacts.

We are not out to increase the number of smokers, but to compete fairly for a
valuable share of the existing market.  We can indeed foresee health authorities
achieving gradually decreasing world volumes, while well-run tobacco companies
continue to build sustainable value.

We aspire to be the first to launch successfully a new generation of tobacco
products with critical mass appeal, that over time will be recognised by
scientific and regulatory authorities as posing substantially reduced risks to
health.  There would be very little point in developing a product that does not
appeal to consumers just to be able to claim a technological success.  But
equally there may be little merit in developing a product that might appeal to
consumers without a consensus about what changes to the product regulators might
accept as reducing risks.  Co-operation with governments and regulators can pave
the way.

The real progress that's possible in the 'win-win' scenario will not come out of
suspicion and conflict but from dialogue with companies such as ours who are
well placed to help deliver real solutions.

A fundamental tenet of good regulation is that the regulated are part of the
process.  The World Health Organisation continues to exclude our industry from
meaningful dialogue on its proposed Framework Convention on Tobacco Control.
But much of the negotiation is now focusing on what individual governments want.
We hope that governments will acknowledge that consultation is part of good
regulatory practice and that, over time, we will be able to put our commitment
and knowledge of the product and its consumers towards shared regulatory goals
wherever we operate.


Reporting to Society

Last year, I announced that your Board had committed the Group to social
reporting, perhaps better described as reporting to society.

The aim is to help companies to listen and respond to their stakeholders'
reasonable expectations of corporate social responsibility, and to demonstrate
progress over time against objective standards of accountability.  Managing the
many issues and discussing them with stakeholders is not new to us.  What is new
for us is to adopt such a systematic, independently-run and externally verified
process for stakeholder dialogue and reporting.

We embarked on the process last year and, by June, will be publishing the first
British American Tobacco Report to Society, to be followed by local reports from
the first 13 participating Group companies.

We will be amongst the 15 per cent or so of FTSE 100 companies reporting on
social performance, of whom fewer than half say they follow global benchmarks.
We are working to demanding standards including AA1000, a process standard
established by the Institute of Social and Ethical Accounting covering the way
that social reporting is carried out; we are being guided by the Global
Reporting Initiative recently endorsed by the United Nations; and we are
requiring external verification across all participating companies by Bureau
Veritas Quality International.

Our external advisors say it is unusual for a company to embed reporting to
society quite so thoroughly.  I believe this indicates our commitment and
seriousness. We have also established a Governance structure at all levels,
including a Corporate Social Responsibility Committee of the Board, chaired by
Ken Clarke, which now sits alongside the Audit, Remuneration and Nominations
Committees.

The stakeholder dialogue aims to enable listening, learning, more mutual
understanding and solution-seeking.  The Reports to Society aim to be candid and
inclusive.  And although to some extent it is an experiment, it is not a
'one-off' exercise.  We will hold dialogue and report again next year, and more
of our companies will join the continuous reporting cycles over time.

I cannot predict whether reporting to society will indeed reduce conflict, or
encourage the industry's strongest critics to engage with us in seeking real
solutions. But I know that we are sincere and genuine in seeking to build
bridges.  This is not about 'window dressing'.  It is about building acceptance
and trust, as well as ensuring best practice in every way that we do business.

I hope and believe that over time it will help us to balance the very different
expectations of our many stakeholders and to balance those expectations with our
proper commercial goals.   As part of the continuing dialogue, we will very much
welcome your comments on the first Report, which will be sent to you in June.


Current trading and prospects

I usually try at the AGM to give shareholders some information about the Board's
view of the Group's likely performance for the year ahead.

We announced in December that we expect Group volumes to be some 2-3 per cent
lower this year, although we remain confident of delivering earnings growth in
high single figures.  This year our AGM comes a little before our first quarter
results. However, I can say at this stage that volumes are running a little
below expectations, but that, at current rates of exchange, we see no reason to
change our earnings expectation.



Enquiries:

British American Tobacco Press Office
Dave Betteridge, Scott Hailstone, Ann Tradigo
Tel:  [phone]



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