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Muhammad Tanvir Hossain : 13164042Sayed Mohammad Amin Faysal : 13164083

Md. Rajibul Haque : 13164096 Rossi Norman Dias : 13164082 Kazi Mitul Mahmud : 12264047

Financial Accounting : 501 [ ]

Introduction: This is a financial report based on British American Tobacco Bangladesh, which is a well-known tobacco company in the world. In this report the substance below will be analysed the financial performance in the year ending 2013.

"British American Tobacco Bangladesh strongly believes that success and responsibility go hand in hand. As the largest private sector tax payer of the country, we are playing our part as a responsible corporate citizen" Arun Kaul, Managing Director.

The Company:The presence of British American Tobacco in this part of the world can be traced back to 1910. Beginning the journey as Imperial Tobacco 101 years ago, the Company set up its first sales depot at Armanitola in Dhaka. After the partition of India in 1947, Pakistan Tobacco Company was established in 1949. The first factory in Bangladesh (the then East Pakistan) was setup in 1949 at Fauzdarhat inChittagong. In 1965, the second factory of Pakistan Tobacco Company went into production in Mohakhali, Dhaka. Thereafter it became Bangladesh Tobacco Company Limited in 1972 immediately after Bangladesh's independence. In 1998, the Company changed its name and identity to British American Tobacco Bangladesh ("BAT Bangladesh") aligning the corporate identity with other operating companies in the British American Tobacco Group.

BAT Bangladesh is a part of BAT plc, the world's most international tobacco group, with brands sold in 180 markets around the world. We make high quality tobacco products for the diverse preferences of consumers, spanning the business 'from crop to consumer' and we are committed to embedding the principles of corporate social responsibility Groupwide.

Our ShareholdersWe were among the first companies to be listed on the Dhaka and Chittagong Stock Exchanges and currently ranked amongst the top 10 companies in terms of market capitalisation. British American Tobacco Group holds 65.91% of our shares; 17.52% is owned by Investment Corporation of Bangladesh; Shadharan Bima Corporation, Bangladesh Development Bank Limited, Government of People's Republic of Bangladesh, Sena Kallyan Sangstha own 4.71% and a further 11.86% is owned by other shareholders.

Our Portfolio of ProductsOur success comes from satisfying informed adult smokers. We manufacture and market high quality and well established international cigarette brands as well as local brands. The brand portfolio of BAT Bangladesh currently consists of Benson & Hedges, John Player Gold Leaf, Pall Mall, Capstan, Star, Scissors, Bristol, Pilot and Hollywood .

Our OperationsWe grow our tobacco leaves through our registered farmers in Kushtia, Chittagong, Manikganj and Rangpur zones. Both our Head Office and Cigarette Manufacturing Plant are located in Mohakhali, Dhaka. We have one Green Leaf Threshing Plant in Kushtia and a Redrying Plant in Manikganj.

Our People – Our StrengthBAT Bangladesh employs more than 1,200 people directly and about 50,000 people indirectly as farmers, distributors and local suppliers. We take great pride in saying that BAT Bangladesh is one of the most preferred employers in the country. It is our pool of talented people who bring their difference everyday and make BAT Bangladesh a great place to work for all of us.

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Our ContributionBAT Bangladesh is one of the largest multinational companies in Bangladesh. Consequently, we are also one of the largest private sector tax payers in the form of Supplementary Duty and Value Added Tax. Over time, we have successfully established ourselves as the company contributing to economic, social and human resource development. Financial Report 2013: It is a pleasure and privilege on the part of the Board of Directors to place herewith the Directors' Report and Auditors' Report together with the audited financial statements of British American Tobacco Bangladesh Company Limited for the year ended 31 December 2013 before the Shareholders of the Company.

Key Strategic PillarsThroughout 2013 your Company continued to focus on the key strategic pillars of Growth, Productivity, Responsibility and Winning Organisation as enablers to deliver the desired business results for the financial year. This report presents discussions on the salient features and activities of the business under each pillar and then highlights the financial performance of your Company.

Growth

Industry OutlookDespite considerable macroeconomic challenges in 2013, the cigarette industry witnessed a moderate growth of around 20% in the year. But the volume growth is expected to decline in future due to year on year price increase over inflation with the tax on biri remaining at the same level in the last few years' budget. Low Segment growth continued and Medium Segment declined steadily. The High segment showed some signs of recovery, but post mid-year tax-led price increase, the Premium segment came under heavy pressure and no sign of growth momentum was visible in the segment. Going forward, the different segments in the industry will continue this trend under the prevailing market conditions.

2009 2010 2011 2012 20130

5

10

15

20

25

30

35

40

45

Leaf Export Earnings in million USD

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Financial Statement For The Year 2013:The key operating and financial data for the year 2013 along with immediate preceding two years are presented below:

British American Tobacco Bangladesh Company LimitedStatement of Financial Position as 31 December 2013

Description 2011 2012 2013 Taka '000s Taka '000s Taka '000s ASSETS Non-Current Assets:

Property, Plant and equipment 5,376,634.00 5,861,627.00 5,619,130.50 Current Assets:

Inventories 5,373,033.00 4,956,887.00 5,164,960.00 Trade & Other receivables 973,825.00 937,873.00 955,849.00 Advance, Deposit and prepayments 590,164.00 1,007,539.00 798,851.50 Cash and Cash equivalents 837,393.00 2,270,567.00 1,553,980.00 Total currents assets 7,774,415.00 9,172,866.00 8,473,640.50 Total assets 13,151,049.00 15,034,493.00 14,092,771.00

EQUITY AND LIABILITIES Shareholder's equity:

Share capital 600,000.00 600,000.00 600,000.00 Capital reserve 64,896.00 64,896.00 64,896.00 Revenue reserve 5,246,404.00 6,368,044.00 5,807,224.00 Total equity 5,911,300.00 7,032,940.00 6,472,120.00

Non-current liabilities:

Gratuity 252,089.00 240,592.00 246,340.50 Deferred tax liability 669,079.00 723,643.00 696,361.00 Obligation under finance lease 17,876.00 7,541.00 12,708.50

(due after one year) Total non-current liabilities 939,044.00 971,776.00 955,410.00

Current liabilities:

Provision for expenses 1,838,021.00 2,188,035.00 2,013,028.00 Trade and other payables 3,467,716.00 3,245,676.00 3,356,696.00 Provision for corporate Tax 977,943.00 1,585,731.00 1,281,837.00 Obligation under finance lease 17,025.00 10,335.00 13,680.00 (due after one year) Total current liabilities 6,300,705.00 7,029,777.00 6,665,241.00 Total equity and liabilities 13,151,049.00 15,034,493.00 14,092,771.00

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British American Tobacco Bangladesh Company Limited Statement of Comprehensive Income For the year ended 31 December 2013

Description 2011 2012 2013 Taka '000s Taka '000s Taka '000s Gross Turnover 75,357,351.00 90,174,080.00 95,180,572.83 Supplementary duty & VAT 52,088,490.00 62,702,736.00 57,395,613.00 Net turnover 23,268,861.00 27,471,344.00 37,784,959.83 Cost of Sales 13,455,535.00 15,946,224.00 14,700,879.50 Gross Profit 9,813,326.00 11,525,120.00 23,084,080.33 Operating expenses 4,567,237.00 4,612,418.00 4,589,827.50 Operating profit 5,246,089.00 6,912,702.00 18,494,252.83 Other income 36,868.00 50,820.00 43,844.00 Net Financial income /(expense) (110,687.00) (119,878.00) (115,283.00) 5,172,270.00 6,843,644.00 18,422,813.83 Workers' profit participation fund 258,614.00 342,182.00 300,398.00 Profit before income tax 4,913,656.00 6,501,462.00 18,122,415.83 Income tax expense

Current tax 2,211,975.00 2,505,258.00 2,340,099.19 Deferred tax 151,090.00 54,564.00 102,827.00

2,363,065.00 2,559,822.00 2,442,926.19 Profit for the year 2,550,591.00 3,941,640.00 15,679,489.64 Other comprehensive income - - - Total comprehensive income for the year 2,550,591.00 3,941,640.00 15,679,489.64 Taka Taka Taka Earnings Per Share 42.51 65.69 261.32

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An interim cash dividend of 100% i.e. Tk. 10 (ten) per share amounting to Tk 600,000,000 was paid in November 2013. In view of the performance of the Company and the current cash position, the Board now recommends a final cash Dividend of 400% i.e Tk. 40 (forty) per share amounting to Tk. 2,400,000,000 for the year 2013, to be approved in the 41th Annual General Meeting of the Company. Inclusive of the 100% interim dividend paid already, the total Cash Dividend of the Company, accordingly, would stand at 500% for the year 2013. After approval of the above mentioned proposed final dividend, the summary of the total dividend paid in 2013 is represented below:

British American Tobacco Bangladesh Company LimitedStatement of changes in Equity for the year ended 31 December 2013

Description Share Revenue Capital

Capital reserve reserve Total

Taka

'000s Taka '000s Taka '000s Taka '000s

Balance at 1 January 2011 600,000 5,575,813 64,896 6,240,709

Dividend paid in 2011 2,880,000 2,880,000

Final Dividend for 2010 2,580,000 2,580,000

Interim Dividend for 2011 300,000 300,000

Total comprehensive income for the year 2,550,591 2,550,591

Balance as at 31 December 2011 600,000 5,246,404 64,896 5,911,300


Dividend paid in 2012 2,820,000 2,820,000


Interim Dividend for 2012 600,000 600,000Total comprehensive income for the year 3,941,640 3,941,640

Balance as at 31 December 2012 600,000 6,368,044 64,896 7,032,940


Dividend paid in 2013 2850000 2850000



British American Tobacco Bangladesh Company Limited

Statement of cash flow for the year ended 31 December 2013

2011 2012 2013Cash flows from Operating activities; Collection from distributors, leaf export & others 90,283,106.00 74,950,453.00

82,616,779.50

Payment for cost & expense (21,590,921.00) (17,794,614.00) (19,692,767.50)

Supplementary duty & Vat paid (61,324,848.00) (52,099,969.00) (56,712,408.50)

Cash generated from operation 7,367,337.00 5,055,870.00

6,211,603.50

Income tax paid (1,897,470.00) (1,880,970.00) (1,889,220.00)

Interest paid (119,878.00) (110,687.00) (115,282.50)

Net cash flows from operating activities 5,349,989.00 3,064,213.00

4,207,101.00

Cash flows from Investing activities; Acquisition of plant, property & equipment (1,116,245.00) (707,823.00)

(912,034.00)

Proceeds from sales of plant, property & equipment 30,145.00 27,686.00

28,915.50

Net cash used in investing activities (1,086,100.00) (680,137.00)

(883,118.50)

Cash flows from Financing activities;

Finance lease obligation (17,025.00) (17,085.00) (17,055.00)

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Dividend paid (2,813,690.00) (2,873,451.00) (2,843,570.50)

Net cash used in financing activities (2,830,715.00) (2,890,536.00)

(2,860,625.50)

Net increase / (decrease) in cash & cash equivalent for the year 1,433,174.00 (506,460.00)

463,357.00

Cash & cash equivalent at the beginning of the year 837,393.00 1,343,853.00

1,090,623.00

Cash & cash equivalents at the end of the year 2,270,567.00 837,393.00

1,553,980.00

British American Tobacco Bangladesh has cash and cash equivalents at the end of the year 2013 Tk. 155 corers, which is 93% more than year 2012.

Gross turnover for the year 2013:

Gross Turnover average of (2011+2012) 82,765,715.50

20% increase 12,414,857.33 95,180,572.83

Profit after income tax:

2011 2012 2,013.

00

Profit before income tax 4,913,656

6,501,462

5,707,559.00

Percentage of Tax 45% 38% 0.41

Current Tax 2,211,975

2,505,258

2,340,099.19

Profit after income tax 2,701,681

3,996,204

3,367,459.81

British American Tobacco Bangladesh continues to contribute 2/3rd of the total tax collections from the cigarette industry. In 2013, the Company contributed BDT 6,698 corers as supplementary duty, value added tax and other taxes. This represents an increase of BDT 1,107 corers. The Company will continue to support Government proposals that establish a sustainable level of tax contribution to the National Exchequer while ensuring a sustainable growth for the industry.

In the National Budget for 2012-2013, the Corporate Tax rate for a cigarette manufacturer listed in Stock Exchange was increased from 27.5% to 35%. Along with this increase, 10% rebate for paying more than 20% dividends was withdrawn. As a result, applicable Corporate Tax rate for the Company

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has increased from 24.75% to 35%. The Company acknowledges the Government ’s revenue growth targets to support the momentum of a growing and expanding economy and it has been workingwith National Board of Revenue (NBR) over the years to ensure sustainable revenue growth from cigarette industry in the form of indirect tax. However, the Company strongly feels that by targeting the Corporate Tax structure of cigarette manufacturer listed in the Stock Exchange, Government’s gain is minimal. Rather, it significantly impacts the shareholders’ return (which includes the Government of Bangladesh), discourages the Company to declare high dividends, and takes away the incentive for other tobacco companies to be listed in the stock exchange. The Company strongly hopes that the Government will reinstate the 10% tax rebate for paying more than 20% dividends when considering the upcoming National Budget.

Conclusion:The Company grew its gross turnover to BDT 9,518 corers, up by BDT 501 corers from the previous year. This increase was driven by volume growth and tax-led price increases. Profit before tax decreased by 38% from BDT 650 corers last year to BDT 570 corers in 2013. The higher profit before tax reflects higher volumes, better brand mix and increased price, as well as cost savings and productivity initiatives driven across the Company. There is no significant variance between the quarterly and the annual financial performance of your Company for the year 2013. Furthermore, there is no extra-ordinary gain or loss in 2013. The notes to the annual financial statements explain the variations against the previous year.

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