Annual Report and Financial Statements

2012 Annual Report and Financial Statements BRITISH AMERICAN TOBACCO UGANDA 2012 1 Table of Contents Leaf Operations Sustainable Growth Notice of Annual General Meeting 2 2012 Highlights 4 Uganda has suitable climatic conditions British American Tobacco Uganda is a Board of Directors 6 that support the growth of the highest member of British American Tobacco Group, Directors’ Statement 9 quality leaf. the world’s second largest quoted tobacco group by global market share, with brands Tribute to Dr. James Mulwana 10 sold in more than 180 markets. Managing Director’s Review 12 Working with close to 20,000 farmers, BAT Uganda is the market leader in the tobacco industry in Uganda, with over 80% share of the Statement of Corporate Governance 14 we provide direct agronomy support, cigarette market and sponsoring 70% of national Shareholding Structure 16 covering all aspects of crop production tobacco production. We have sustained a significant presence in Uganda since 1927 when commercial Corporate Information 18 and environmental best practice. tobacco varieties were introduced. Our business has grown to become one of the country’s top Financial Statements 21 tax payers and foreign exchange earners, and we Proxy Form 55 have been listed on the Uganda Securities Exchange Purchasing the crop from farmers since 2000. We are one of the significant sources of through a highly efficient and automated quality tobacco for the BAT Group. buying system at our centres in Hoima, Cigarette Business We market quality cigarette brands that meet the Kihihi, Lira and Arua, ensures prompt preferences of adults who have chosen to consume and secure payments. tobacco. Dunhill, Rex, Sportsman and Safari constitute our brand portfolio, supplied through a network of independent distribution enterprises. We deal with six regional distributors, about 2,000 wholesalers and over 20,000 retailers country wide in the cigarettes’ supply chain. Operating Responsibly We believe that because our products pose risks to health, it is all the more important that our business is managed responsibly. Responsibility is integral to our strategy and through dialogue with our stakeholders, we work to pursue our commercial objectives in ways consistent with changing expectations of a modern tobacco business. We support tobacco regulation that is pragmatic, sustainable and enforceable. We endeavour to work closely with other industry players and regulators, sharing information that is required to help policy formulators understand our operating environment and develop appropriate policy and regulatory frameworks. 2 BRITISH AMERICAN TOBACCO UGANDA 2012 BRITISH AMERICAN TOBACCO UGANDA 2012 1 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the 13th Annual General Meeting (AGM) of British American Tobacco Uganda Limited after the Initial Public Offer will be held at the Kampala Sheraton Hotel, Rwenzori Ballroom on the 24th day of May 2013 starting at 9:00 a.m. to conduct the following ordinary business of the Company. 1. To receive, consider and if approved adopt the Company’s audited Accounts for the year ended 31st December 2012, together with the reports of the Directors and the external Auditor thereon. 2. To note the declaration on Dividends for the year ended 31st December 2012. 3. To authorise the Directors to fix the Auditors’ remuneration for the year ending 31st December 2013. 4. Retirement and election of Directors. a) Mr. Philip Lopokoiyit who was appointed to the Board on 17th August 2012, retires in accordance with Article 94 of the Articles of Association and being eligible, offers himself for re-election. b) Mr. Fred Tumwesigye (66) retires in accordance with Article 90 of the Articles of Association and being eligible, offers himself for re-election. By order of the Board BRITISH AMERICAN TOBACCO UGANDA LIMITED Isaac Ampeire COMPANY SECRETARY 25th February 2013 NOTES: 1. A member entitled to attend and vote at the AGM is entitled to appoint a Proxy to attend and vote instead of him/ her. Such Proxy need not be a member of the Company. 2. A Proxy Form is provided with this Report on Page 55. 3. Shareholders are requested to carry some personal identification and proof of their shareholding to the meeting. 4. All shareholders are advised to notify the Company Secretary in writing of any changes in their postal addresses and bank account details and provide their email addresses for ease of communication. BAT Uganda reaches out to communities through various initiatives that encourage elimination of child labour, environmental protection and sustainability. We support our farmers’ food security by teaching them about proper crop rotation, providing them with food crops for planting after the tobacco growing season is over and offering free extension services. 2 BRITISH AMERICAN TOBACCO UGANDA 2012 3 2012 Highlights “Responsibility is integral to our 2012 Results at a glance Shs millions Revenue 242,511 Our Sustainability Agenda business strategy and it is important Profit from operations 29,824 Sustainable business practice is at the heart of the BAT Group strategy. By addressing our social, environmental to us that our business is managed in Profit before tax 17,074 and economic impacts, we build value for the business, Profit after tax 12,196 for our shareholders and for other stakeholders. a way that benefits all involved.” Basic & diluted earnings Shs Our vision of a sustainable tobacco business is one that per share 248 manages the impact of its operations and products responsibly today and prepares for a future in which it continues to create value for shareholders as well as 5 Year Contribution to Government Revenue being in the best interest of other stakeholders. (Excise, Value Added Tax and Corporation Tax – Shs Billions) Our sustainability agenda comprises five goals across our key impact areas: 72 67 1. Marketplace: We will take a lead in upholding 53 53 52 high standards of corporate conduct within our marketplace; given the health risks associated with tobacco, we agree that the industry should be regulated appropriately. Like any business we want to grow our market share. But we do this responsibly, not by trying to increase the number of smokers or how much they New Photo smoke, but by encouraging existing adult smokers to choose our products over our competitors. 2008 2009 2010 2011 2012 2. Environment: We will actively address the impact of our business on the natural environment; the 2012 Sustainability Highlights success of our business now and in the future also Our 5 Year Tax Contributions to Government • Towards addressing (Excise, sustainableValue Added Tax and Corporation management Tax – Shs Billions) of biodiversity and depends on biodiversity as it provides resources ecosystem services in tobacco growing regions of Uganda, the like clean water, healthy soils and timber. Company, under the auspices of British American Tobacco 3. People and culture: We will work to ensure we Biodiversity Partnership (BATBP), launched a project in the Middle have the right people and culture to meet our North. The Project’s mission is to bring together the knowledge, goals. To achieve the goals we set for our business skills and resources of the Partners, to catalyse change in under- we need a strong workforce – from securing our standing and behavior amongst stakeholders so as to maintain supply of tobacco leaf to delivering high quality and enhance biodiversity and ecosystem services in agricultural products to our consumers. landscapes and the wider ecosystems on which they depend. 4. Supply chain: We will work for positive social, • Arising from tree census findings of 2011, strategies were put in place environmental and economic impacts in our to ensure that the Company is back on the right path towards wood- supply chain; our approach is focused on ensuring fuel self-sufficiency by 2016. The Company managed to establish a that our supply chain is fit for purpose for the long total of 503 hectares (244 ha re-planting and 259 ha new planting) of term. We have a supply chain sustainability strategy Company plantations with an average stocking level of more than 70%. that covers both our own direct operations, including manufacturing, logistics and trade marketing, as • The Company objective of contributing to biodiversity conservation well as our wider supply chain – the most significant and environmental protection was well achieved in 2012. A total part of which relates to tobacco growing. of 350 ha of indigenous trees were planted in West Nile (92 ha), Middle North (198 ha) and BunyoroMubende (60 ha) against 5. Harm reduction: We will strive to bring In line with the goal of reducing pressure on trees for 40 ha inherited from past years. commercially viable, consumer acceptable reduced- risk products to market; there are many challenges barn construction, a total of 5,144 live barns were • With the realisation that a sustainable freshwater supply is essential in this: the science is complex; collaboration is for ecosystem services upon which many agricultural businesses needed between scientists, tobacco companies established in the burley growing area in 2012. This and local communities depend, the Company commissioned a and regulators; products need to meet consumer fresh water quality and river bank conservation baseline survey in expectations; and we need a regulatory framework builds on the 100 barns already planted over the last the leaf growing areas of Uganda. The objectives were to assess that supports tobacco harm reduction. We are the fresh water quality and verify compliance of BAT Uganda’s leaf committed to meeting these challenges. couple of years. Plans are in place to continue with operations to the National Environment (Wetland, Riverbanks and Lake Shores Management) Regulations 2000. The study gave the planting in 2013 so that all burley tobacco farmers positive verdict on both accounts. have functional live barns by 2015. 4 BRITISH AMERICAN TOBACCO UGANDA 2012 BRITISH AMERICAN TOBACCO UGANDA 2012 5 Board of Directors 1 Mr.

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