British American Tobacco p l c : B.A.T CAPITAL CORPORATION FY2024 Accounts

B.A.T CAPITAL CORPORATION

Financial Statements

December 31, 2024 and 2023

(With Independent Auditors' Report Thereon)

B.A.T CAPITAL CORPORATION
Table of Contents
	Page(s)
Independent Auditors' Report	1
Financial Statements:
Balance Sheets	3
Statements of Operations	4
Statements of Shareholder's Equity (Deficit)	5
Statements of Cash Flows	6
Notes to Financial Statements	7

KPMG LLP

4242 Six Forks Road

Suite 850

Raleigh, NC 27609

Independent Auditors' Report

The Board of Directors

B. A. T Capital Corporation:

Opinion

We have audited the financial statements of B. A. T Capital Corporation (the Company), which comprise the balance sheets as of December 31, 2024 and 2023, and the related statements of operations, shareholder's equity (deficit), and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements are issued.

Auditors' Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Raleigh, North Carolina

February 12, 2025

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B.A.T CAPITAL CORPORATION

BALANCE SHEETS (Dollars in thousands)

			As of December 31,
Assets			2024						2023
Current assets:
Cash and cash equivalents	$	110,159				$		221,000
Due from affiliates			4,111,889						3,386,696
Guarantee fee receivable from affiliates			33,302						44,773
Accrued interest receivable from affiliates			3,140						588,528
Loan receivable from affiliates			393,447						2,865,000
Other amounts due from affiliates			10,460						24,000
Derivative financial instruments			9,400						7,029
Income taxes receivable			25,597						32,347
Total current assets			4,697,394						7,169,373
Long-term assets:
Loan receivable from affiliates			23,189,038						23,313,372
Derivative financial instruments			48						-
Deferred income tax assets, net			106,855						128,798
Total assets		$	27,993,335				$		30,611,543
Liabilities and shareholder's deficit
Current liabilities:
Due to affiliates	$	4,117,656				$		4,117,879
Guarantee fee payable to affiliate			33,370						44,299
Other amounts due to affiliates			10,402						-
Accounts payable and accrued liabilities			7						993
Accrued interest payable			377,399						389,804
Derivative financial instruments			19,719						2,022
Current portion of long-term debt			374,974						2,863,527
Total current liabilities			4,933,527						7,418,524
Long-term liabilities:
Derivative financial instruments			307,522						210,900
Long-term debt			22,865,270						23,081,357
Total liabilities			28,106,319						30,710,781
Shareholder's deficit:
Common shares, $1 par value (2,000 shares authorized, issued and outstanding)			2						2
Paid-in capital			29,499						29,499
Accumulated other comprehensive loss			(234,871)				(295,037)
Retained earnings			92,386						166,298
Total shareholder's deficit			(112,984	)				(99,328	)
Total liabilities and shareholder's deficit		$	27,993,335				$		30,611,543

See accompanying notes to financial statements

3

B.A.T CAPITAL CORPORATION

STATEMENTS OF OPERATIONS

(Dollars in thousands)

		For the Years Ended December 31,
			2024					2023
Interest income	$	9,658				$	2,304
Interest income from affiliates			1,312,045					1,224,227
Guarantee fee reimbursement from affiliates			224,533					250,135
Other reimbursement income from affiliates			67,229					6,217
Gain on early extinguishment of debt			382,923					105,248
Total income			1,996,388					1,588,131
Interest expense			1,254,110					1,131,687
Interest expense to affiliates			241,581					297,846
Other reimbursement expense to affiliates			371,092					-
Guarantee fee to affiliates			224,533					250,135
Net (gain) loss on derivatives			(3,897)			86,128
Foreign exchange losses			1,071					44,085
General and administrative and other expenses			1,458					2,096
Total expenses			2,089,948					1,811,977
Loss before income taxes			(93,560)			(223,846)
Income tax benefit			(19,648)			(15,060)
Net loss		$	(73,912	)		$	(208,786	)
Other comprehensive income (loss):
Income on interest rate swaps, net of tax
(2024 - $15,994 expense; 2023 - $15,629 expense)			60,166					58,795
Comprehensive loss	$	(13,746)		$	(149,991	)

See accompanying notes to financial statements

4

B.A.T CAPITAL CORPORATION

STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)

(Dollars in thousands)

									Accumulated
	Common shares							other
				Paid-in		comprehensive		Retained
Balance at December 31, 2022	Shares		Amount				capital			loss			earnings			Total
2,000	$	2	$	29,499	$	(353,832)	$	375,084		$	50,753
Net loss	-			-			-			-		(208,786)		(208,786)
Derivative, net of $15,629 tax expense	-			-			-			58,795			-			58,795
Balance at December 31, 2023	2,000			2			29,499			(295,037)		166,298			(99,238)
Net loss	-			-			-			-		(73,912)		(73,912)
Derivative, net of $15,994 tax expense	-			-			-			60,166			-			60,166
Balance at December 31, 2024	2,000		$	2		$	29,499		$	(234,871)	$	92,386		$	(112,984))

See accompanying notes to financial statements

5

B.A.T CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS

(Dollars in thousands)

		For the Years Ended December 31,
Cash flows provided by (used in) operating activities:		2024				2023
Net loss	$	(73,912)	$	(208,786)
Adjustments to reconcile to net cash flows provided by (used in) operating
activities:
Amortization of loan fees received from affiliate		(8,341)		(6,282)
Amortization of debt issuance costs and discounts and termination of
derivatives and long-term debt		(292,756)		(18,066)
Foreign exchanges losses		1,071				44,085
Derivative (gains) losses, net		(3,897)		86,128
Deferred income tax expenses		5,949				17,287
Other changes that provided (used) cash:
Accrued interest receivable from affiliate		585,388				(585,727)
Other amounts due to / from affiliate		24,484				(10,506)
Accounts payable and accrued liabilities		(986)		(1,351)
Accrued interest payable		(12,405)		84,109
Income taxes receivable		6,750				(54,820)
Interest payable on derivative financial instruments		(2,325)		6,256
Other, net		(7,521)		(7,040)
Net cash flows provided by (used in) operating activities		221,499				(654,713	)
Cash flows provided by (used in) investing activities:
Net proceeds (to) from cash agreements with affiliates		-		185,860
Loans issuance to affiliates		(1,700,000)		(4,000,000)
Loans receipts from affiliates		4,282,665				2,934,042
Loan fees received from affiliates		11,161				24,000
Net cash flows provided by (used in) investing activities		2,593,826				(856,098	)
Cash flows (used in) provided by financing activities:
Net proceeds from cash agreements with affiliates		(725,416)		731,183
Proceeds from issuance of notes, net of discount		1,695,215				4,000,000
Repayments of long-term debt		(3,890,257)		(2,758,475)
Payment on termination of derivative contracts		667				(216,897 )
Payment of debt issuance costs		(6,375)		(24,000)
Net cash flows (used in) provided by financing activities		(2,926,166	)		1,731,811
Net (decrease) increase in cash and cash equivalents		(110,841	)		221,000
Cash and cash equivalents - beginning of year		221,000				-
Cash and cash equivalents - end of year	$	110,159			$	221,000
Supplemental cash flow information:
Interest paid	$	1,168,623			$	956,801
Interest paid to affiliates	$	241,581			$	297,846
Income taxes (received) paid	$	(32,310)	$	22,473

See accompanying notes to financial statements

6

B.A.T CAPITAL CORPORATION

Notes to Financial Statements

December 31, 2024 and 2023

1. Summary of Significant Accounting Policies
2. 1. Basis of Presentation
      The accompanying financial statements present the financial position, results of operations and cash flows of B.A.T Capital Corporation, referred to as the Company or BATCAP, an indirect wholly owned subsidiary of British American Tobacco p.l.c., referred to as BAT, a company incorporated under the laws of England and Wales. Until December 7, 2016, the Company was a direct subsidiary of BAT. On December 7, 2016, following a sale of the Company by BAT to Louisville Securities Limited, referred to as LSL, the Company was purchased by BATUS Holdings Inc., referred to as BHI, from LSL pursuant to a stock purchase agreement and BHI became the sole stockholder and parent of the Company. Both LSL and BHI are indirect wholly owned subsidiaries of BAT. The sale and purchase were at carrying value as the entities were under common control. The Company, incorporated in Delaware, has 2,000 common shares authorized, issued and outstanding with a par value of one dollar per share. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain reclassifications were made to conform the prior year's financial statements to the current presentation.
   2. Nature of Business
      The Company is a U.S. finance company that has historically been an issuer and a guarantor under the BAT Euro Medium Term Note Programme, referred to as the EMTN Program, (see note 2 and note 7) and has provided financing and cash management services to BAT companies in the U.S. Other than its role as a guarantor, the Company had been inactive for several years prior to 2017. On July 24, 2017, the Company borrowed $20 billion from a syndicate of third party banks under a bridge facility agreement and loaned the proceeds to BHI to fund a portion of the acquisition price paid to purchase the remaining 58% of Reynolds American Inc., referred to as RAI, not already owned by the BAT group, referred to as the RAI merger. On August 15 and August 16, 2017, the Company repaid the borrowings under the bridge facility agreement and issued approximately $20 billion of notes denominated in US dollars (USD), British pounds sterling (GBP) and euros (EUR) with tenors ranging from 3 years to 30 years.
      Subsequent to the merger, the Company has been active in the capital markets with several new debt issuances. In addition to the financing provided to BHI, the Company is also providing financing and cash management services to RAI and its subsidiaries and guarantees certain debt of B.A.T. International Finance p.l.c., referred to as BATIF, an affiliated subsidiary of BAT. BATIF serves as the primary financing and cash management company for the BAT group.
   3. Cash and Cash Equivalents
      Cash and cash equivalents may include investments in money market funds, commercial paper and time deposits in major institutions made to minimize investment risk. As short-term, highly liquid investments readily convertible to known amounts of cash, with remaining maturities of three months or less at the time of purchase, cash equivalents have carrying values that approximate fair values.
      The Company's cash is swept into an In-House Cash, or IHC, pooling structure managed by BATIF. The Company has an account which represents its interest in the IHC pooling structure. Amounts in the Company's IHC account are due on demand and earn interest. As further discussed below in note 4, the IHC agreement provides the Company with a $2.1 billion overdraft facility.
   4. Fair Value Measurement
      The Company determines the fair value of assets and liabilities using a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity, and the reporting entity's own assumptions about market participant assumptions based on the best information available in the circumstances.

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B.A.T CAPITAL CORPORATION

Notes to Financial Statements

December 31, 2024 and 2023

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price.

The levels of the fair value hierarchy are:

Level 1: inputs are quoted prices, unadjusted, in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2: inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. A Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3: inputs are unobservable and reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The fair value of long-term debt and derivatives are discussed in notes 2 and 4, respectively.

1. Derivative Financial Instruments
   The Company uses derivative instruments to manage certain interest rate and foreign currency risks. All derivative contracts entered into by the Company are with BATIF as the counterparty.
   Derivatives are recognized on the Company's Balance Sheets at fair value and are classified according to their asset or liability position and the expected timing of settlement. Changes in the fair values of derivatives are recorded in net income (loss) or other comprehensive income (loss) based on whether the instrument is designated and effective as a hedge transaction and, if so, the type of hedge transaction. The Company classifies cash flows from terminating its interest rate swaps in financing activities in the Company's Statements of Cash Flows.
2. Income Recognition
   Substantially all of the Company's income is from transactions with BHI and RAI and consist of interest income and reimbursements of guarantee fees and other related financing expenses incurred by the Company. Loan and reimbursement agreements provide the terms and conditions for these transactions. Interest income is recognized as earned in accordance with the interest provisions in the underlying loan agreements. Guarantee fees and other reimbursement income is recognized when qualified expenses under the reimbursement agreements are incurred by the Company.
3. Income Taxes
   Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and other tax attribute carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Interest and penalties related to uncertain tax positions are accounted for as tax expense.
   For federal income tax purposes, the Company's results are included in the consolidated United States federal income tax return of BHI. For state and local income tax purposes, the Company's results are included in 29 combined state and local income tax returns that include members of the consolidated United States federal income tax return of BHI. For financial reporting purposes, the Company's current and deferred income taxes are calculated using the modified separate return method (with benefits for losses). All current and deferred tax expense and current and deferred tax liabilities are calculated as if the Company files separate federal and state income tax returns that exclude the income, deductions and tax attributes of BHI. In addition, under the benefits for losses method the consolidated group's ability to utilize net operating and capital losses generated by the Company is considered when assessing the realizability of its deferred tax assets.

8