news release www.bat.com

30 October 2008

QUARTERLY REPORT TO 30 SEPTEMBER 2008

SUMMARY

NINE MONTHS RESULTS - unaudited 2008 2007 Change

Revenue £8,704m £7,312m 19% Profit from operations £2,714m £2,304m 18% Basic earnings per share 95.49p 82.67p 16% Adjusted diluted earnings per share 95.97p 82.00p 17%

• The reported Group revenue increased by 19 per cent to £8,704m as a result of favourable exchange rate movements, improved pricing, better product mix and the acquisitions of and Skandinavisk Tobakskompagni (ST) mid year. Revenue would have increased by 9 per cent at constant rates of exchange.

• The reported Group profit from operations was 18 per cent higher at £2,714 million, up 20 per cent if exceptional items are excluded, with all regions contributing to this strong result. Profit from operations, excluding exceptional items, would have been 10 per cent higher at constant rates of exchange, with Latin America the only region lower.

• Group volumes from subsidiaries were 524 billion, up 4 per cent, a combination of organic volume growth of over 1 per cent and the benefits from the two acquisitions. The four Global Drive Brands continued their strong performance and achieved overall volume growth of 17 per cent with around a quarter of the rise coming from brand migrations.

• Adjusted diluted earnings per share rose by 17 per cent, principally as a result of the strong growth in profit from operations and favourable exchange movements. Basic earnings per share was 16 per cent higher at 95.49p (2007: 82.67p).

• The Chairman, , commented “Although there is general concern about the prospects for the world economy and consumer behaviour over the next couple of years, these results demonstrate that there has been no discernable effect on . Moreover, the impact of any consumer downturn on our business should be mitigated by our balanced and innovative brand portfolio covering all consumer price points. In addition, we continue to benefit from the extent of our geographic diversity, which will also help to protect shareholders from the impact of volatility in the foreign exchange markets.”

ENQUIRIES:

INVESTOR RELATIONS: PRESS OFFICE: Ralph Edmondson/ 020 7845 1180 David Betteridge/Kate Matrunola/ 020 7845 2888 Rachael Brierley 020 7845 1519 Catherine Armstrong

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

BRITISH AMERICAN TOBACCO p.l.c.

QUARTERLY REPORT TO 30 SEPTEMBER 2008

INDEX

PAGE

Chairman's comments 2 Business review 4 Group income statement 9 Group statement of changes in total equity 10 Accounting policies and basis of preparation 11 Segmental analyses of revenue and profit 12 Foreign currencies 14 Exceptional items 14 Other changes in the group 15 Net finance costs 16 Associates 16 Taxation 17 Earnings per share 17 Net debt/financing 18 Dividends 19 Share buy-back programme 19 Contingent liabilities 19 Financial Calendar 19 Disclaimers 20

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

CHAIRMAN’S COMMENTS

British American Tobacco’s adjusted diluted earnings per share rose by 17 per cent as the Group’s very good performance continued.

Revenue was 9 per cent ahead at constant rates of exchange and 19 per cent ahead at current rates. Profit from operations, excluding exceptional items, grew by 10 per cent at constant rates and by 20 per cent to £2,755 million at current rates. This reflects the benefit of the £236 million from foreign exchange and the inclusion, for the first time, of the businesses acquired mid year, Tekel and Skandinavisk Tobakskompagni (ST).

Excluding the acquisitions, the underlying business grew well, with the trends in revenue, volumes and profit from operations being consistent with those described at the half year.

Our volume from subsidiaries was up 1 per cent on an organic basis and by 4 per cent to 524 billion including Tekel and ST. The four Global Drive Brands continued their strong performance, achieving overall volume growth of 17 per cent. Sales of our premium brands grew by 7 per cent.

Our associate companies’ volumes were 159 billion and our share of their post-tax profits, excluding exceptional items, was slightly higher, at £339 million, as a result of improved contributions from and ITC. ST ceased to be an associate at the half year.

Adjusted diluted earnings per share grew by 17 per cent to 95.97p. The substantial improvement in profit from operations, the uplift from foreign exchange and the benefit of the share buyback programme were marginally offset by higher net finance costs, a higher tax rate and an increase in minority interests. Some 17 million shares were bought back during the period at an average cost of £18.59 per share and at a total cost of £312 million.

The inclusion of Tekel and ST into their respective regions is proceeding smoothly. The two businesses are performing in line with expectations and we are confident that they will be earnings enhancing in 2009.

The acquisition of ST has prompted a review of our regional structure because of its impact on Europe, which was already our largest region. We have decided, from 1 January 2009, to separate Europe into two regions, Eastern and Western. In addition, Canada will form part of a new Americas region, which will include the markets of Latin America and the Caribbean, while Japan will become part of the Asia- Pacific region. The new regional structure will represent a balanced distribution of revenue and profit.

From 1 January 2009, to streamline our reporting and in line with other companies, we will be publishing Interim Management Statements (IMS) for the first and third quarters, instead of full quarterly reports. Our IMS will contain information about the performance of the Global Drive Brands, as well as regional volumes and trends in market share. They will also cover the Group’s financing activities and report on any mergers and acquisitions. We will continue to publish income, balance sheet and cash flow information at the full year and interim stages.

Page 2

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Chairman’s comments cont…

The restructuring announced by Compagnie Financière Richemont S.A. and Remgro Limited is progressing and the interest in British American Tobacco previously held by Richemont is now held by Reinet Investments SCA, a Luxembourg investment company. As announced on 28 October, British American Tobacco’s shares are now listed on the JSE in South Africa in preparation for the next stage of the restructuring being carried out by Reinet and Remgro.

This involves the distribution of British American Tobacco shares to investors in Reinet on or around 3 November 2008. Separately, on or around the same date, Remgro will also distribute British American Tobacco shares to its shareholders. Following the distributions, a holding of approximately 3 per cent of British American Tobacco shares will be retained by Reinet. The distributions will be followed by a rights issue by Reinet, which can be subscribed to by using British American Tobacco shares.

Based on information provided by Richemont, Remgro and Reinet in their announcements, we believe that, following the distributions, and the completion of the rights issue in mid December, the residual Reinet shareholding in British American Tobacco is likely to be less than 10 per cent. The dispersal of these major blocks of shares should result in the Group having a more widely distributed range of institutional and private shareholders, as well as an increased FTSE 100 Index weighting from 75 per cent to 100 per cent.

Although there is general concern about the prospects for the world economy and consumer behaviour over the next couple of years, these results demonstrate that there has been no discernable effect on British American Tobacco. Moreover, the impact of any consumer downturn on our business should be mitigated by our balanced and innovative brand portfolio covering all consumer price points. In addition, we continue to benefit from the extent of our geographic diversity, which will also help to protect shareholders from the impact of volatility in the foreign exchange markets.

Jan du Plessis 30 October 2008

Page 3

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

BUSINESS REVIEW

The reported Group revenue was 19 per cent higher at £8,704 million as a result of favourable exchange rate movements, improved pricing, a better product mix and the acquisitions of Tekel and ST mid year. At constant rates of exchange, revenue would have increased by 9 per cent.

The reported Group profit from operations was 18 per cent higher at £2,714 million, up 20 per cent if exceptional items, as explained on pages 14 and 15, are excluded, with all regions contributing to this strong result. Profit from operations, excluding exceptional items, would have been 10 per cent higher at constant rates of exchange, with Latin America the only region lower.

Group volumes from subsidiaries were 524 billion, up 4 per cent, a combination of organic volume growth of over 1 per cent and the benefit of additional volumes from the two acquisitions made earlier this year. Good volume growth in Romania, Pakistan, Bangladesh, Uzbekistan, Poland, Saudi Arabia and Egypt, with additional volumes in Turkey and Denmark, was partly offset by declines in Italy, Germany, Russia, Czech Republic, Canada, South Africa, Vietnam, Mexico and Venezuela.

The four Global Drive Brands continued their strong performance and achieved overall volume growth of 17 per cent. Around a quarter of the growth was contributed by brand migrations.

Kent grew by 21 per cent with excellent volume growth in Russia, Romania, Kazakhstan, Ukraine and Chile and from new markets such as Egypt, Kyrgyzstan, Mongolia and Serbia, while it also benefited from a brand migration in South Africa. Volumes were lower in Japan, although market share increased. rose by 5 per cent, with growth in all its important markets, namely South Korea, Malaysia, Taiwan, Australia, South Africa, Russia, Romania, Italy and Saudi Arabia.

Lucky Strike volumes were up 9 per cent with good growth in Spain, Italy, France and Argentina, partly offset by declines in Japan and Germany, as a result of lower industry volumes. increased volumes by 25 per cent with the geographic roll-out to more markets, such as Pakistan, Australia, Malawi, Zambia, Mexico and Belarus, and the continued growth in Turkey, Romania, Uzbekistan and Malaysia, partly offset by lower volumes in Poland, Russia, Spain and Italy.

In Europe, profit at £896 million was up £246 million, as a result of the ST acquisition and excellent performances in Russia, Romania and Spain. Profit also grew in Germany, France, Switzerland, Italy, the Netherlands, Uzbekistan and Ukraine, but these were partly offset by decreases in Hungary, Czech Republic and Belgium. These results benefited from the more favourable pricing environment, an improved product mix and exchange rates. At constant rates of exchange, profit would have increased by £154 million or 24 per cent. Regional volumes were up 3 per cent at 186 billion, benefiting from the acquisition of ST. Volume increases in Romania, Uzbekistan and Spain, were offset by decreases in Russia, Italy, Germany and Czech Republic.

In Italy, Dunhill and performed very well but overall volumes were adversely impacted by the decline of local brands and the disposal of some brands in 2007. Profit was higher as a result of the lower overheads and a favourable exchange rate, partly offset by reduced volumes.

Volumes in Germany were down in line with industry volumes. Pall Mall performed well, growing volume and market share. Profit rose as a result of exchange movements, as well as improved margins from a combination of price increases and cost reductions. While industry volumes in France were lower after significant price rises in August 2007, total market share grew, led by Lucky Strike and Pall Mall. Profit increased as a result of the higher prices. In Switzerland, and Pall Mall continued to grow market share and profit increased with higher volumes and improved margins.

Page 4

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Business review cont...

In the Netherlands, volumes were slightly higher and profit was up as a result of improved margins after a price increase in July 2008. Industry volumes in Belgium were severely impacted by last year’s excise-driven price rise, resulting in lower profit. Market share improved, assisted by the successful migration of to Pall Mall. In Spain, strong profit growth was achieved due to the excellent volume and share growth of Lucky Strike, coupled with a price increase at the beginning of the year.

In Russia, a strong performance by our premium brands, , Dunhill and , continued to improve the product mix and, with higher prices and a favourable exchange rate, profit increased significantly. Volumes were slightly lower as a result of the decline in local brands.

In Romania, both volume and market share continued to grow, driven by the continued success of our Global Drive Brands. Profit increased significantly, benefiting from higher volumes, price rises and the improved product mix, partly offset by higher marketing investment. Both profit and volumes in the Czech Republic were lower due to the effect of the trade buying at the end of 2007, ahead of an excise increase.

Competitive market conditions in Poland continued and total industry shipment volumes were down as a result of a significant excise driven price increase during 2007. Lower volumes and the weakening of the currency impacted profitability. In Hungary, volumes were slightly down although Dunhill and Pall Mall performed well despite low price competition. This, coupled with higher marketing investment behind the brands, led to lower profit. In Ukraine, Kazakhstan and Uzbekistan, volumes increased due to the continued impressive performance of Kent, as well as Pall Mall in Uzbekistan. The improved volumes and product mix, higher prices and better cost control contributed to improved profit performances in all these markets, although marketing investment has increased.

In Asia-Pacific, profit rose by £104 million to £602 million, mainly attributable to strong performances in Pakistan, Vietnam, Bangladesh, Australia and Malaysia and also benefiting from favourable exchange rates. At constant rates of exchange, profit would have grown by £65 million or 13 per cent. Volumes at 114 billion were 5 per cent higher as good increases in Pakistan and Bangladesh were partly offset by lower volumes in Vietnam.

Profit in Australia was up as a result of higher margins and exchange rate movements, partially offset by the impact of increased competitor discounting activities. Market share was in line with last year, with Dunhill and Pall Mall growing market share. In New Zealand, volumes were similar to last year but profit improved, benefiting from price rises, cost efficiencies and exchange movements.

In Malaysia, market share grew with good performances from Dunhill and Pall Mall and as a result of the successful relaunch of Kent in August 2008. Profit rose due to price increases, a better product mix and continued productivity savings, despite slightly lower volumes due to the overall industry decline and the significant excise rises announced recently.

In Vietnam, strong profit growth was achieved through higher prices and cost savings initiatives. Volumes were down due to lower industry volumes, although market share increased strongly with good performances from Craven ‘A’, Dunhill and .

Volumes in South Korea were higher than last year and market share was up as a result of the good performance from Dunhill. Profit was slightly down as the benefits of higher volumes and an improved product mix were more than offset by the weakening in the currency. In Taiwan, volumes and profit were in line with last year and Dunhill grew market share.

Page 5

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Business review cont...

In Pakistan, the volume and market share growth continued and, coupled with higher prices, resulted in a profit increase, however, this was more than offset by the weakening of the currency. In Bangladesh, good growth in volumes, price rises and a better product mix resulted in an impressive increase in profit. Market share, however, was slightly lower due to the increase in the low-priced segment. Profit in Sri Lanka was well ahead, benefiting from price rises, a better product mix and continued productivity improvements. Volumes were marginally lower, although market shares for Dunhill and Pall Mall grew.

Profit in Latin America increased by £34 million to £584 million, mainly as a result of exchange rate movements. At comparable rates of exchange, profit would have decreased by £39 million or 7 per cent as profit declined in local currency in Brazil, Mexico and Venezuela. Volumes were down 2 per cent at 108 billion with declines in Mexico and Venezuela.

In Brazil, reported profit increased, benefiting from a stronger local currency and higher volumes which resulted in an improved market share. However, at constant rates of exchange, profit was down as margins in the comparative period were higher due to price rises in anticipation of excise increases. Further price rises were not sufficient to offset the impact of increased excise and higher marketing investment.

Volumes in Mexico were lower, resulting in a reduced market share. A price increase in February was not sufficient to fully recover an earlier excise increase and higher marketing investment, resulting in a reduced profit. In Argentina, volumes were slightly up and profit flat as the benefit of an improved product mix, due to the good performance of Lucky Strike, was offset by higher costs.

In Chile, volumes were up with the strong growth of Kent and Lucky Strike, while profit was higher due to price rises and lower costs. Market share in Venezuela grew but volumes declined following high excise driven price increases in the last quarter of 2007 and price rises earlier this year, coupled with higher costs, resulting in a lower profit. Volumes in the Central America and Caribbean area were down as a result of lower industry volumes and the resurgence in illicit trade. However, profit increased as margins improved.

Profit in the Africa and Middle East region grew by £33 million to £387 million as a result of the acquisition of Tekel and a good performance of the Middle East, negatively impacted by the weakening of the South African rand. At comparable rates of exchange, profit would have grown by £39 million or 11 per cent. Volumes were 16 per cent higher at 85 billion, following increases in Nigeria, Egypt and GCC, coupled with the volumes gained with the acquisition of Tekel.

In South Africa, profit was lower as a result of a decline in volumes and the impact of the weaker exchange rate. Profit in local currency was higher with an improved product mix and higher pricing. Volumes and market share were lower following the termination of the Chesterfield trademark license agreement at the end of 2007. Dunhill and Peter Stuyvesant continued to deliver strong share performances, while Kent performed well after its migration from Benson & Hedges.

Profit in Nigeria increased as a result of a good growth in volumes, a favourable exchange rate and an improved product mix and price rises.

In the Middle East, profit and volumes were higher due to the impressive growth of Dunhill in Saudi Arabia. Strong sales across the Caucasus led to volume, market share and profit increases with Kent’s performance being outstanding.

Page 6

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Business review cont...

In Turkey, the acquisition of the cigarette assets of Tekel was completed on 24 June 2008 (see page 15) and the integration of the two businesses is progressing well. Global Drive Brands grew strongly with good performances by Kent and Pall Mall. Results improved with the growth in volumes and the stronger currency, partly offset by marketing investment.

Profit from the America-Pacific region increased by £55 million to £375 million. This was principally due to the improved contribution from Canada and stronger currencies. At comparable rates of exchange, profit would have increased by £21 million or 7 per cent. Volumes at 31 billion were 3 per cent lower than last year.

Profit in Canada rose to £223 million as a result of higher pricing, lower distribution costs and a stronger exchange rate, partly offset by lower volumes and an adverse product mix. At constant rates of exchange, profit was £202 million, up 3 per cent. Overall market share at 52 per cent was down 1.1 per cent as the decline in the Premium segment was not offset by the growth in the value-for-money and the budget segments.

In Japan, volumes were slightly down as a result of the continued decline in total industry volumes and the unfavourable comparison with last year, which was impacted by trade buying ahead of a price increase. Market share was up due to the strong performance of and market share growth of Lucky Strike. Profit was up as a result of a favourable exchange rate, higher pricing and an improved mix, partially offset by increased marketing expenditure and vending machine age verification costs.

Unallocated costs, which are net corporate costs not directly attributable to individual segments, were £89 million compared to £74 million in 2007.

The above regional profits were achieved before accounting for restructuring and integration costs, Canadian settlement, amortisation of brands and gains on disposal of businesses and brands, as explained on pages 14 and 15.

Results of Associates Associates principally comprise Reynolds American and ITC. ST was an associate until 2 July 2008 when the cigarette and snus business of ST was acquired and from that date it is consolidated into the Group results.

The Group’s share of the post-tax results of associates increased by £51 million, or 15 per cent, to £386 million. Excluding the exceptional items, explained on page 16, the Group’s share of the post-tax results of associates increased by £4 million to £339 million, reflecting the impact of the increase in profit from Reynolds American and ITC, partly offset by the impact of the ST transaction (see page 17).

The contribution from Reynolds American to post-tax results was up 18 per cent at £259 million. Excluding the benefit from the termination of a joint venture agreement and costs in respect of the restructuring of organisational structures, both in 2008, the contribution was 2 per cent higher at £225 million and the same as last year at constant rates of exchange. Earnings for the nine month period were up as pricing and productivity improvements more than offset cigarette volume declines and higher settlement expense.

The Group’s associate in India, ITC, continued its strong profit growth and its contribution to the Group rose by £6 million, or 8 per cent, to £83 million. At comparable rates of exchange, the contribution would have been £81 million, or 5 per cent higher than last year.

Page 7

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Business review cont...

Cigarette volumes

The segmental analysis of the volumes of subsidiaries is as follows:

3 months to 9 months to Year to 30.9.08 30.9.07 30.9.08 30.9.07 31.12.07 bns bns bns bns bns

70.0 65.7 Europe 186.5 180.3 245.0 37.2 34.4 Asia-Pacific 113.7 108.8 145.2 36.8 36.6 Latin America 108.2 110.6 150.5 35.9 26.5 Africa and Middle East 85.0 73.1 101.0 10.3 11.3 America-Pacific 30.5 31.4 42.3 190.2 174.5 523.9 504.2 684.0

In addition, associates’ volumes for the nine months were 158.6 billion (2007: 173.2 billion) and, with the inclusion of these, the Group volumes would have been 682.5 billion (2007: 677.4 billion).

Page 8

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

GROUP INCOME STATEMENT – unaudited

3 months to 9 months to Year to 30.9.08 30.9.07 30.9.08 30.9.07 31.12.07 £m £m £m £m £m

Gross turnover (including duty, excise and other taxes of £15,128 million (30.9.07: £11,705 million - 9,293 6,683 31.12.07: £16,216 million)) 23,832 19,017 26,234 3,247 2,587 Revenue 8,704 7,312 10,018

(865) (683) Raw materials and consumables used (2,402) (2,069) (2,802) Changes in inventories of finished 4 (33) goods and work in progress 56 45 30 (541) (385) Employee benefit costs (1,347) (1,096) (1,586) (103) (76) Depreciation and amortisation costs (277) (232) (336) 158 68 Other operating income 212 138 205 (910) (666) Other operating expenses (2,232) (1,794) (2,624) 990 812 Profit from operations 2,714 2,304 2,905 after (charging)/crediting: (34) (10) - restructuring and integration costs (67) (50) (173) (101) - Canadian settlement (101) (12) - amortisation of brands (12) - gains on disposal of businesses and 139 45 brands 139 56 75

26 31 Finance income 147 86 136 (117) (109) Finance costs (417) (290) (405) (91) (78) Net finance costs (270) (204) (269) Share of post-tax results of 93 113 associates and joint ventures 386 335 442 after (charging)/crediting: - brand impairments (7) - additional ST income 13 1 - termination of joint venture 46 (12) - restructuring costs (12)

992 847 Profit before taxation 2,830 2,435 3,078 (281) (209) Taxation on ordinary activities (775) (629) (791) 711 638 Profit for the period 2,055 1,806 2,287

Attributable to: 657 600 Shareholders’ equity 1,906 1,679 2,130

54 38 Minority interests 149 127 157

Earnings per share 33.01p 29.73p Basic 95.49p 82.67p 105.19p

32.79p 29.52p Diluted 94.87p 82.10p 104.46p

See notes on pages 11 to 20.

Page 9

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

GROUP STATEMENT OF CHANGES IN TOTAL EQUITY - unaudited

9 months to Year to 30.9.08 30.9.07 31.12.07 £m £m £m

Differences on exchange 133 152 312 Cash flow hedges - net fair value gains 44 3 15 - reclassified and reported in profit for the period (8) (20) (42) Available-for-sale investments - net fair value gains/(losses) 2 (1) 1 - reclassified and reported in profit for the period (2) 1 1 Net investment hedges - net fair value (losses)/gains (141) 15 (35) Revaluation of existing business 183 Tax on items recognised directly in equity (5) (13) (19) Net gains recognised directly in equity 206 137 233 Profit for the period page 9 2,055 1,806 2,287 Total recognised income for the period 2,261 1,943 2,520 - shareholders’ equity 2,101 1,809 2,348 - minority interests 160 134 172 Employee share options - value of employee services 38 27 37 - proceeds from shares issued 9 24 27 Dividends and other appropriations - ordinary shares (1,394) (1,198) (1,198) - to minority interests (147) (140) (173) Purchase of own shares - held in employee share ownership trusts (116) (29) (41) - share buy-back programme (362) (612) (750) Acquisition of minority interests (4) (5) (9) Other movements 3 (6) (3) 288 4 410 Balance at 1 January 7,098 6,688 6,688 Balance at period end 7,386 6,692 7,098

See notes on pages 11 to 20.

Page 10

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

ACCOUNTING POLICIES AND BASIS OF PREPARATION

The financial information comprises the unaudited interim results for the nine months to 30 September 2008 and 30 September 2007, together with the audited results for the year ended 31 December 2007. The annual consolidated financial statements for 2007, which represent the statutory accounts for that year, have been filed with the Registrar of Companies. The auditors’ report on those statements was unqualified and did not contain any statement concerning accounting records or failure to obtain necessary information and explanations.

These financial statements have been prepared under the historical cost convention, except in respect of certain financial instruments, and on a basis consistent with the IFRS accounting policies as set out in the Annual Report and Accounts for the year ended 31 December 2007, except for an update which extends the Group’s accounting policy on ‘intangible assets other than goodwill’ to cover trademarks acquired by the Group’s subsidiary undertakings. As with other recognised intangible assets, acquired trademarks are carried at cost less accumulated amortisation and impairment. Trademarks with indefinite lives are not amortised but are reviewed annually for impairment. Other trademarks are amortised on a straight-line basis over their useful lives, which do not exceed twenty years. Consistent with the existing policy for associated companies’ acquired brands, impairments are recognised in the income statement but increases in values are not recognised.

As indicated in the 2007 Annual Report and Accounts, IFRIC14 (IAS19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction) will be effective from 1 January 2008, once it has been endorsed by the EU. The interpretation clarifies the conditions under which a surplus in a post-retirement benefit scheme can be recognised in the financial statements, as well as setting out the accounting implications where minimum funding requirements exist. Currently, it is not expected that this change would materially alter the Group’s reported equity and profit at 1 January 2008 or 31 December 2008.

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of these financial statements. Such estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances and constitute management’s best judgement at the date of the financial statements. In the future, actual experience may deviate from these estimates and assumptions, which could affect these financial statements as the original estimates and assumptions are modified, as appropriate, in the period in which the circumstances change.

Page 11

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

SEGMENTAL ANALYSES OF REVENUE AND PROFIT - unaudited

Revenue

The analyses for the nine months are as follows:

30.9.08 30.9.07 Inter Inter External segment Revenue External segment Revenue

£m £m £m £m £m £m

Europe 3,363 190 3,553 2,642 179 2,821 Asia-Pacific 1,561 27 1,588 1,386 16 1,402 Latin America 1,664 453 2,117 1,440 416 1,856 Africa and Middle East 1,065 1,065 876 10 886 America-Pacific 381 381 347 347 Revenue 8,034 670 8,704 6,691 621 7,312

The analyses for the year ended 31 December 2007 are as follows:

Inter External segment Revenue £m £m £m

Europe 3,621 225 3,846 Asia-Pacific 1,874 22 1,896 Latin America 1,979 585 2,564 Africa and Middle East 1,224 15 1,239 America-Pacific 473 473 Revenue 9,171 847 10,018

The segmental analysis of revenue above is based on location of manufacture and figures based on location of sales would be as follows:

30.9.08 30.9.07 31.12.07 £m £m £m

Europe 3,381 2,667 3,655 Asia-Pacific 1,567 1,386 1,876 Latin America 1,672 1,444 1,983 Africa and Middle East 1,231 1,051 1,445 America-Pacific 853 764 1,059 Revenue 8,704 7,312 10,018

Page 12 British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Segmental analyses of revenue and profit cont... - unaudited

Profit from operations

30.9.08 30.9.07 31.12.07 Adjusted Adjusted Adjusted Segment Segment Segment Segment Segment segment result result* result result* result result* £m £m £m £m £m £m

Europe 976 896 666 650 782 842 Asia-Pacific 599 602 502 498 667 672 Latin America 584 584 550 550 680 680 Africa and Middle East 368 387 349 354 447 470 America-Pacific 276 375 311 320 436 446 Segmental results 2,803 2,844 2,378 2,372 3,012 3,110 Unallocated costs (89) (89) (74) (74) (107) (107) Profit from operations 2,714 2,755 2,304 2,298 2,905 3,003

*Excluding restructuring and integration costs, Canadian settlement, amortisation of brands and gains on disposal of businesses and brands as explained on pages 14 and 15.

The segmental analysis of the Group’s share of the post-tax results of associates and joint ventures for the nine months is as follows:

30.9.08 30.9.07 31.12.07 Adjusted Adjusted Adjusted Segment Segment Segment segment Segment segment result result* result result* result result* £m £m £m £m £m £m

Europe 38 25 34 34 48 48 Asia-Pacific 86 86 79 79 110 110 Latin America 2 2 1 1 1 1 Africa and Middle East 1 1 1 1 1 1 America-Pacific 259 225 220 220 282 289 386 339 335 335 442 449

*Excluding gain on termination of joint venture, restructuring costs, additional ST income and charges for brand impairments as explained on pages 16 and 17.

Page 13

British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

FOREIGN CURRENCIES

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

The income statement has been translated at the average rates for the respective periods. The total equity has been translated at the relevant period end rates. For high inflation countries, the local currency results are adjusted for the impact of inflation prior to translation to sterling at closing exchange rates.

The principal exchange rates used were as follows:

Average Closing 30.9.08 30.9.07 31.12.07 30.9.08 30.9.07 31.12.07

US dollar 1.947 1.988 2.001 1.783 2.037 1.991 Canadian dollar 1.982 2.194 2.147 1.895 2.025 1.965 Euro 1.280 1.478 1.462 1.269 1.433 1.362 South African rand 14.984 14.200 14.110 14.760 14.051 13.605 Brazilian real 3.282 3.977 3.894 3.438 3.749 3.543 Australian dollar 2.136 2.421 2.390 2.260 2.302 2.267 Russian rouble 46.797 51.430 51.161 45.778 50.709 48.847

EXCEPTIONAL ITEMS

(a) Restructuring and integration costs

During 2003, the Group commenced a detailed review of its manufacturing operations and organisational structure, including the initiative to reduce overheads and indirect costs. The restructuring continued, with major announcements which covered the cessation of production in the UK, Ireland, Canada and Zevenaar in the Netherlands, with production to be transferred elsewhere.

The results for the twelve months to 31 December 2007 included a charge for restructuring of £173 million, principally in respect of costs associated with restructuring the operations in Italy and with the reorganisation of the business across the Europe and Africa and Middle East regions, as well as further costs related to restructurings announced in prior years. On 18 May 2007, the Group’s Italian subsidiary announced the results of a review of its manufacturing infrastructure, including an intention to consolidate its operations at the plant in Lecce, close its operations at Rovereto and sell its facilities at Chiaravalle together with three national brands. The disposal of Chiaravalle was completed on 12 September 2007.

The nine months to 30 September 2008 include a charge for restructuring and integration of £67 million (2007: £50 million), principally in respect of further costs related to restructurings announced in prior years, the closure of the Bologna factory in Italy and costs in respect of the integration of the Tekel and ST businesses into existing operations.

(b) Canadian settlement

On 31 July 2008, announced that it reached a resolution with the federal and provincial governments with regard to the investigation related to the export to the United States of Imperial Tobacco Canada tobacco products in the late 1980s and early 1990s. The Company entered a plea of guilty to a regulatory violation of a single count of Section 240(i) (a) of the Excise Act and has paid a fine of £101 million which was included in other operating expenses in the profit from operations for the nine months to 30 September 2008.

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British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Exceptional items cont…

The Company has also entered into a 15 year civil agreement with the federal and provincial governments. In order, amongst other things, to assist the governments in their future efforts against illicit trade, Imperial Tobacco Canada has agreed to pay a percentage of annual net sales revenue going forward for 15 years, up to a maximum of Can$350 million, which will be expensed as it is incurred.

(c) Amortisation of brands

The acquisitions of Tekel and ST resulted in the capitalisation of brands which are amortised over their expected useful lives, which do not exceed 20 years. Brands with indefinite lives are not amortised. The amortisation charge was included in depreciation and amortisation costs in the profit from operations for the nine months to September 2008.

(d) Gains on disposal of businesses and brands

On 20 February 2007, the Group announced that it had agreed to sell its pipe tobacco trademarks to the Danish company, Orlik Tobacco Company A/S, for €24 million. The sale was completed during the second quarter in 2007 and resulted in a gain of £11 million included in other operating income in the profit from operations. However, the Group retained the Dunhill and Captain Black pipe tobacco brands.

On 23 May 2007, the Group announced that it had agreed to sell its Belgian cigar factory and associated brands to the cigars division of ST. The sale included a factory in Leuven as well as trademarks including Corps Diplomatique, Schimmelpennick, Don Pablo and Mercator. The transaction was completed on 3 September 2007 and a gain on disposal of £45 million was included in other operating income in the profit from operations for the twelve months to 31 December 2007.

On 1 October 2007, the Group agreed the termination of its license agreement with Philip Morris for the rights to the Chesterfield trademark in a number of countries in Southern Africa. This transaction resulted in a gain of £19 million included in other operating income in the profit from operations for the twelve months to 31 December 2007.

On 2 July 2008, the Group realised an estimated gain of £139 million with the disposal of its 32.35 per cent holding in the non-cigarette and snus business of ST (see other changes in the Group below). This gain, which is subject to finalisation of the purchase price adjustments, was included in other operating income in the profit from operations for the nine months to 30 September 2008.

OTHER CHANGES IN THE GROUP

On 22 February 2008, the Group announced that it had won the public tender to acquire the cigarette assets of Tekel, the Turkish state-owned tobacco company, with a bid of US$1,720 million. Completion of this transaction was subject to regulatory approval which was subsequently received and on 24 June 2008 the Group completed the transaction.

On 27 February 2008, the Group agreed to acquire 100 per cent of ST’s cigarette and snus business in exchange for its existing 32.35 per cent holding in ST and payment of DKK11,598 million in cash, subject to finalisation of completion accounts. Completion of this transaction was subject to regulatory approval which was subsequently received and on 2 July 2008 the Group completed the transaction. The Group agreed to divest a small number of local brands, primarily in Norway. The transaction has been accounted for as an acquisition of 67.65 per cent of the cigarette and snus business’ net assets and a disposal of the Group’s existing 32.35 per cent interest in the non-cigarette and snus businesses of ST. Consequently, the Group’s results for the nine months to 30 September 2008 reflect a gain on disposal of £139 million, noted above, and a revaluation of £183 million on the existing 32.35 per cent holding in the cigarette and snus business which is shown in the statement of changes in total equity on page 10.

Both the Tekel and ST transactions were financed from new facilities and bond issues, as described on page 18.

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British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

NET FINANCE COSTS

Net finance costs comprise:

9 months to 30.9.08 30.9.07 £m £m

Interest payable (359) (277) Interest and dividend income 94 71 Fair value changes - derivatives (202) (76) Exchange differences 197 78 (5) 2 (270) (204)

Net finance costs at £270 million were £66 million higher than last year, principally reflecting the impact of the higher interest cost as a result of increased borrowings.

The net £5 million loss (2007: £2 million gain) of fair value changes and exchange differences reflects a gain of £3 million (2007: £10 million gain) from the net impact of exchange rate movements and a loss of £8 million (2007: £8 million loss) principally due to interest related changes in the fair value of derivatives.

IFRS requires fair value changes for derivatives, which do not meet the tests for hedge accounting under IAS39, to be included in the income statement. In addition, certain exchange differences are required to be included in the income statement under IFRS and, as they are subject to exchange rate movements in a period, they can be a volatile element of net finance costs. These amounts do not always reflect an economic gain or loss for the Group and, accordingly, the Group has decided that, in calculating the adjusted diluted earnings per share, it is appropriate to exclude certain amounts.

The adjusted diluted earnings per share for the period ended 30 September 2008 exclude, in line with previous practice, an £11 million loss (2007: £nil) relating to exchange losses in net finance costs where there is a compensating exchange gain reflected in differences in exchange taken directly to changes in total equity.

ASSOCIATES

The Group’s share of post-tax results of associates was £386 million (2007: £335 million) after tax of £218 million (2007: £190 million). For the year to 31 December 2007, the share of post-tax results was £442 million after tax of £246 million. The share is after exceptional charges and credits.

On 21 February 2008, Reynolds American announced that it would receive a payment from Gallaher Limited resulting from the termination of a joint venture agreement. While the payment will be received over a number of years, in the nine months to 30 September 2008 Reynolds American recognised a pre- tax gain of US$328 million. The Group’s share of this gain included in the results for the nine months, amounts to £46 million and is treated as an exceptional item (net of tax).

On 9 September 2008, Reynolds American further announced planned changes in the organisational structure at Reynolds American Inc. and its largest subsidiary, R. J. Reynolds Tobacco Company. The charge to the third quarter’s results amounts to US$91 million. The Group’s share of this charge included in the results for the nine months, amounts to £12 million and is treated as an exceptional item (net of tax).

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British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Associates cont…

In the year ended 31 December 2007, Reynolds American modified the previously anticipated level of support between certain brands and the projected net sales of certain brands, resulting in a brand impairment charge of which the Group’s share amounted to £7 million (net of tax).

The year end of ST, an associate of the Group to 2 July 2008, was 30 June, and, for practical reasons, the Group had previously equity accounted for its interest based on the information available from ST which was 3 months in arrears to that of the Group. As explained on page 15, the Group acquired 100 per cent of ST’s cigarette and snus business on 2 July 2008. Consequently, in order to account for the Group’s share of the net assets of ST at the date of the acquisition, the estimated results of ST for the period up to 2 July 2008 have been included in the results from associates for 2008, resulting in one additional quarter’s income in 2008. This contributed an additional £13 million to the share of post-tax results of associates and joint ventures, but this has been treated as an exceptional item and excluded from the calculation of the adjusted diluted earnings per share.

TAXATION

The tax rate in the income statement of 27.4 per cent for the nine months to 30 September 2008 (30 September 2007: 25.8 per cent) is affected by the inclusion of the share of associates' post-tax profit in the Group's pre-tax results. The underlying tax rate for subsidiaries reflected in the adjusted earnings per share shown below, was 30.4 per cent and 29.8 per cent in 2007. The increase arises primarily from a change in the mix of profits. The charge relates to taxes payable overseas.

The tax charge for 2008 includes a one-off deferred tax charge of £25 million as a result of the acquisition of the cigarette assets of Tekel. This has been excluded from the adjusted diluted earnings per share and consequently from the underlying tax rate above.

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 treasury shares).

For the calculation of diluted earnings per share the average number of shares reflects the potential dilutive effect of employee share schemes.

The earnings per share are based on:

30.9.08 30.9.07 31.12.07 Earnings Shares Earnings Shares Earnings Shares £m m £m m £m m

Basic 1,906 1,996 1,679 2,031 2,130 2,025 Diluted 1,906 2,009 1,679 2,045 2,130 2,039

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British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

Earnings per share cont…

The earnings have been affected by exceptional items, together with certain distortions to net finance costs under IFRS (see page 16) and to deferred tax (see page 17) in 2008, and to illustrate the impact of these distortions the adjusted diluted earnings per share are shown below:

Diluted earnings per share 9 months to Year to 30.9.08 30.9.07 31.12.07 pence pence Pence

Unadjusted earnings per share 94.87 82.10 104.46 Effect of restructuring and integration costs 2.58 1.66 6.48 Effect of disposals of businesses and brands (6.42) (1.76) (2.75) Amortisation of brands 0.45 Effect of Canadian settlement 5.03 Net finance cost adjustment 0.55 Effect of associates’ brand impairments, restructuring costs and termination of joint ventures (1.68) 0.34 Effect of additional ST income (0.65) Effect of deferred tax adjustment 1.24 Adjusted diluted earnings per share 95.97 82.00 108.53

Adjusted diluted earnings per share are based on: - adjusted earnings (£m) 1,928 1,677 2,213 - shares (m) 2,009 2,045 2,039

Similar types of adjustments would apply to basic earnings per share. For the nine months to 30 September 2008, basic earnings per share on an adjusted basis would be 96.59p (2007: 82.57p) compared to unadjusted amounts of 95.49p (2007: 82.67p).

NET DEBT/FINANCING

The Group remains confident in its ability to access successfully the debt capital markets and reviews its options on an ongoing basis. The financing agreements entered into since the beginning of the financial year, with issue proceeds used to finance certain acquisitions as well as repay maturing debt, were as follows:

In the nine months to 30 September 2008, the €1.8 billion revolving credit facility arranged in December last year was cancelled and replaced with the issue of €1.25 billion and £500 million bonds maturing in 2015 and 2024 respectively. In addition to this, the Group increased its €1 billion 5.375 per cent bond by an additional €250 million, bringing the total size of the bond to €1.25 billion.

On 13 February 2008, the Group entered into an acquisition credit facility whereby lenders agreed to make available an amount of US$2 billion. On 1 May 2008, this facility was syndicated in the market and was redenominated into two euro facilities, one of €420 million and one of €860 million. These facilities expire on 31 October 2009. There was a net draw down on these credit facilities of €1,154 million during the nine months to 30 September 2008 (2007 €nil).

During the nine months to 30 September 2008, the Group also repaid the US$330 million fixed rate bond upon maturity in May 2008.

On 22 September 2008, the Group refinanced its maturing Mexican bond with a floating rate borrowing of MXN1,444 million.

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British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

DIVIDENDS

The Directors declared an interim dividend out of the profit for the six months to 30 June 2008, which was paid on 17 September 2008, at the rate of 22.1p per share. The interim dividend amounted to £440 million. The comparative dividend for the six months to 30 June 2007 of 18.6p per share amounted to £377 million.

In accordance with IFRS, the interim dividend is charged in the Group results for the third quarter. The results for the nine months to 30 September 2008 include the final dividend paid in respect of the year ended 31 December 2007 of 47.6p per share amounting to £954 million (2007: 40.2p amounting to £821 million), as well as the above interim dividend.

SHARE BUY-BACK PROGRAMME

The Group initiated an on-market share buy-back programme at the end of February 2003. During the nine months to 30 September 2008, 17 million shares were bought at a cost of £312 million (30 September 2007: 38 million shares at a cost of £612 million).

‘Purchase of own shares’ in the Group statement of changes in total equity, includes an amount of £50 million provided for the potential buy-back of shares during October 2008 under an irrevocable non- discretionary contract.

CONTINGENT LIABILITIES

As noted in the Report and Accounts for the year ended 31 December 2007, there are contingent liabilities in respect of litigation, overseas taxes and guarantees in various countries.

Group companies, as well as other leading cigarette manufacturers, are defendants in a number of product liability cases. In a number of these cases, the amounts of compensatory and punitive damages sought are significant. At least in the aggregate and despite the quality of defences available to the Group, it is not impossible that the results of operations or cash flows of the Group in particular quarterly or annual periods could be materially affected by this.

Having regard to these matters, the Directors (i) do not consider it appropriate to make any provision in respect of any pending litigation and (ii) do not believe that the ultimate outcome of this litigation will significantly impair the financial condition of the Group.

FINANCIAL CALENDAR 2009

26 February 2009 Preliminary Announcement of results for the year ended 31 December 2008

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British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696

DISCLAIMERS

This Report does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any British American Tobacco p.l.c. shares or other securities.

This Report contains certain forward looking statements which are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries and markets in which the Group operates. It is believed that the expectations reflected in this announcement are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated.

Neither the Company nor the Directors accept any liability to any person in relation to this Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.

Past performance is no guide to future performance and persons needing advice should consult an independent financial advisor.

Copies of this Report may be obtained during normal business hours from the Company's Registered Office at Globe House, 4 Temple Place, London WC2R 2PG and from our website www.bat.com

Nicola Snook Secretary 30 October 2008

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British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG Registered in England and Wales no. 3407696