Attendance at meetings in 2011

Notes:

1. Ann Godbehere became a member with effect from 24 October 2011.

2. Dr Ana Maria Llopis ceased to be a member of the Committee following her retirement as a Non-Executive Director at the conclusion of the Annual General Meeting on 28 April 2011.

The Chairman, Chief Executive and the Management Board members responsible for Corporate and Regulatory Affairs and Global Operations regularly attend meetings by invitation but are not members.

The CSR Committee is authorised by the Board to review CSR and sustainability activity within the business. It is authorised to seek the information it requires from, and require the attendance at any of its meetings of, any Director or member of management, and all employees are expected to cooperate with any request made by the Committee. It is authorised by the Board to obtain, at the Company’s expense, independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

The Chairman of the Committee reports to the subsequent meeting of the Board on the Committee’s work and the Board receives a copy of the minutes of each meeting. The papers considered by the Committee are available to any Director who is not a member, should they wish to receive them.

During 2011, the Committee considered the feedback from the external Board evaluation exercise which took place in 2010, including a review of its standard agenda items, and reviewed and agreed its programme for 2012.

CSR governance

The CSR Committee is supported at regional and local levels through combined audit and CSR committees. The structure supports the embedding of CSR and sustainability principles across the Group and allows performance against those principles to be monitored. The regional audit and CSR committees meet three times annually, and they follow a standard agenda, in order that materials and issues which are presented and raised at local and regional level may feed into Board level discussions, and vice versa.

Statement of Business Principles

Our Statement of Business Principles sets out our expectations for the responsible management of the Group’s business. It was developed in 2002 in consultation with stakeholders, supported by the Institute of Business Ethics. The Statement comprises three principles – Mutual Benefit, Responsible Product Stewardship and Good Corporate Conduct – and 18 Core Beliefs which explain in more detail what each principle means for the Group. It is available on www.bat.com.

Sustainability reporting

The Company’s Sustainability Reports and, prior to 2008, its Social Reports have detailed its social, ethical and environmental performance and performance against its commitments each year since the Company’s first Social Report in 2002. Sustainability reporting, like the social reporting that preceded it, is conducted using a robust methodology, including independent assurance conducted by Ernst & Young LLP, in line with the AA1000 Assurance Standard (2008). Engagement with key stakeholders is a major requirement of the Standard and we have continued to hold independently facilitated and assured dialogue with those stakeholders throughout the year.

The Company’s sustainability reporting is based on its sustainability agenda, which was developed in 2007 and focuses on five pillars: harm reduction, marketplace, environment, supply chain and people and culture. Its aim is to create value for the Company’s shareholders and wider society by addressing the Group’s social, environmental and economic impacts.

Starting with the 2009 Report, produced in 2010, a single Sustainability Report has been produced for the Group, including balanced scorecards and case studies from some of the Group’s largest markets. This approach, together with the information provided on www.bat.com, aims to provide comprehensive coverage of the Group’s sustainability efforts globally.

In March 2011, the Company published its fourth Sustainability Report outlining progress in each of the five key elements of its sustainability agenda. In March 2012, it is publishing its fifth Sustainability Report, to coincide with publication of this Annual Report.

The Company has taken into account the increasing emphasis that is being placed on integrated financial and non-financial reporting. We believe that it is important to address sustainability issues in the Annual Report, but we also acknowledge that different audiences have differing expectations and requirements. As a result, we intend to continue publishing a separate Sustainability Report which covers in more detail progress against our sustainability agenda, including monitoring performance against targets. In addition to the Sustainability Report and the information provided in this Annual Report, the Company will continue to publish more detailed sustainability information on www.bat.com.

The Company has been included in both the Dow Jones Sustainability World Index (DJSI World) and the Dow Jones Sustainability Europe Index (DJSI Europe) for the tenth year running. These indices track the economic, environmental and social performance of companies that have demonstrated that they integrate sustainability into their business. In 2011, the Company received a gold rating in the UK’s Business in the Community Corporate Responsibility Index, with a score of 94 per cent. The Company was also included in the STOXX^® Global ESG Leaders Index, an innovative index that uses a transparent selection process to enable investors to fully understand which environmental, social and governance factors determine a company’s rating. In addition, it won the top award for People Reporting in PricewaterhouseCooper’s Building Public Trust Awards, the judges referring to the quality of people reporting in both the Annual Report, in the context of the Company’s business strategy, and the Sustainability Report.

Corporate social investment

The Company recognises the role of business as a corporate citizen and Group companies have long supported local community and charitable projects. The Group’s approach to corporate social investment (CSI) is to regard it as an end in itself, rather than as a means of promotion, and Group companies have always been closely identified with the communities where they operate.

Group companies are encouraged to focus their CSI activities around three themes:

• Sustainable agriculture and the environment: This includes activities such as efforts to improve biodiversity and access to water, afforestation, programmes to prevent child labour, grants for agricultural research and training to help farmers optimise land yields by growing additional (non-tobacco) crops. These initiatives are expected to complement the Group’s own agricultural, environmental and biodiversity conservation practices.
• Civic life: This encompasses activities that aim to enrich public and community life, including supporting the arts and educational institutions, conserving indigenous cultures and restoring public spaces.
• Empowerment: This focuses on communities where we operate, providing people with educational opportunities to help them develop, for example through scholarships and information technology training or programmes supporting small businesses and promoting entrepreneurship. Group companies also continue to make other important contributions to meet local needs, such as relief efforts after natural disasters or programmes focused on HIV/AIDS.

The major activities currently supported by the Company are the British American Tobacco Biodiversity Partnership and the Eliminating Child Labour in Tobacco Growing Foundation.

Charitable contributions

Payments for charitable purposes in 2011 amounted to £13.7 million (2010: £15.5 million), £1.9 million of which was paid in the UK (2010: £2 million).

OECD Guidelines

The Group recognises its responsibilities to the countries in which it operates and in this context, notes the OECD Guidelines for Multinational Enterprises in their current form. Our approach to human rights draws on the OECD Guidelines, in addition to the UN Declaration of Human Rights, and further information in this respect is provided in our Sustainability Report. Full details of a specific finding against our company in Malaysia under the Guidelines are provided in the full online report on www.bat.com.