1. Legal Cigarette volumes 1981 - 2006 198119912006 Source – Industry sales figures 40 000 mn 30 000 mn 20 000 mn 1991 - 38 billion 2006 - 23 billion

2. Fewer people are smoking Source – General Consumer Survey, 2001 - 2006

3. Total tobacco not declining since 2001, but illicit trade is growing Pipe/RYO Legal Cigarette Illicit Trade 70.7%72.8%73.6%68.3%63.7%63.5% Source - Illicit Trade Research – Research International

4. Impact on farmers and farm workers 1990 – 1016 farmers 2006 – 200 farmers 1990 – 60 810 farm workers 2006 – 21 000 farm workers Source – Tobacco Institute of South Africa

5. Smoke Aerosol Tobacco Leaf Combustion of Tobacco Burnt in a cigarette 100s of substances Particles Gas / Vapour 1000s of substances Nicotine (1%-4%) no TAR TAR max 12mg/cig Nicotine max 1.2mg/cig in smoke as per machine measure TAR: Total Aerosol Residue +=

6. Snus-use and consequences Snus with tobacco in it No burning of Snus 1000s of substances No tar TAR: Total Aerosol Residue +=

7. 8 ingredients 33 ingredients 1 ingredient 6 ingredients 4 ingredients 13 ingredients http://www.bat-ingredients.comhttp://www.bat-ingredients.com or batsa.com Non-tobacco ingredients for TOTAL BATSA portfolio

8. Illicit Trade Research Methodology

9. Background This project is designed to track the incidence of illicit trade in tobacco products in SA Monthly waves of interviews and pack retrievals with respondents around the country. Because all outlet types are representatively covered in a three month period of fieldwork, the total sample is a good, representative sample of cigarette purchases.

10. Definition of illicit Compliant SA Stock – packs Counterfeit – packs Non-compliant (duty not paid, no H/W, etc) – packs – tar for all above 12mg Suspect Priced – packs (local manufactured) Suspect Priced – packs (SADC manufactured) Suspect Priced – packs (EU manufactured) Legal Illicit Definitely illicit Suspect Below R8.50

11. Methodology Representative coverage (time/ day/ area/ store type) One wave per year we have 2 interviewers per oultet Interviewer 1: cigarette purchase incidence Interviewer 2: exit interviews & product swap Interview structure: Masked as Quality Control Demographic and pricing questions Product swap (incentive: R20/pack) Collected product analysed by BATSA internal experts Quality control: 100% questionnaire check, Spot checks on outlets Back checks per interviewer: Average 30%

12. Methodology: Sample breakdown Q5 2005 / Q1 2006 n=2825 Jan 06Feb 06March 06 Packs only Gauteng n=575 Gauteng n=484 Gauteng n=577 Rest of RSA n=472 Rest of RSA n=346 Rest of RSA n=371 *margin of error = 1.3% Q2 2006 n=2768 Apr 06May 06Jun 06 Packs only Gauteng n=481 Gauteng n=493 Gauteng n=533 Rest of RSA n=395 Rest of RSA n=455 Rest of RSA n=411

13. Internal verification Due to the serious nature of the research certain key checks and balances undertaken Methodology Audited by BAT International Auditors against Global Protocol Currently being audited by BATSA internal audit against independent research standards – SAMRA (South African Market Research Association) Results then cross referenced against other BAT research