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(Nigel Northridge) Thank you. Thank you for joining us to discuss our 2002 results which show another strong year of progress.

Our acquisitions have been successfully integrated, and Gallaher is showing its growth potential.

We grew our businesses across Europe, the CIS and Asia, increasing pro-forma volumes by 18% to 153 billion cigarettes.

Group EBITA increased by 23%, PBTA by 16%, and earnings per share grew by 9%.

Gallaher is in an excellent position to generate further growth, and we are excited about the Group's future.

Now, I'll hand over to Mark.

(Mark Rolfe) Thank you Nigel.

These results include the first full year contribution from Austria Tabak, and adjustments to last year's results for some accounting policy changes.

The only change that impacted reported profits, is the adoption of FRS 17. Full details of the effects of this, and the other changes, are provided in our statement and on our website.

Returning to our 2002 performance.

At the end of October, the UK government announced an increase to 3,200 cigarettes, from 800, as a new guide level for personal travellers returning from the EU.

This had a negative impact on the UK duty-paid market at the end of the year.

However, our growing market share during the second half meant that overall volumes declined only marginally.

Incremental marketing investment ahead of the advertising ban implemented last month impacted both turnover and EBITA.

The results of our continental European division reflect a strong organic performance, plus the first 12-month contribution from AT, which delivered integration benefits, and fully met our acquisition assumptions.

The integration of Austria Tabak and Gallaher's organic businesses has driven incremental benefits for the tobacco business. Revenue growth across the region more than compensated for the decline in margin, which was largely attributable to the higher proportion of lower-margin volumes.

We are, today, announcing that we have signed a purchase agreement to acquire KT Merkury, a Polish cigarette manufacturer. We expect good returns from this new opportunity in the medium-term.

The distribution businesses performed well, reflecting increased non-tobacco product offering, and improved efficiency in Austria, the stabilisation of the cigarette vending market in Germany, and our post-acquisition restructuring of ATG, and, stable tobacco sales, and increased pre-paid phone card volume, along with efficiency improvements, at Lekkerland-Tobaccoland.

Our performance in the CIS saw net turnover increase by 25%, largely driven by volume growth of 26% to 74 billion sticks.

EBITA grew 40%, to £42mn, despite the adverse currency impact from the weakening US dollar, which negatively impacted this division.

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In Russia, the market continues to move up towards the higher-price sector, driving top-line growth and margin improvement.

Our growth in Russian EBITA and margin was achieved after substantial incremental sales and marketing investment behind our higher-priced brands, as well as investing in ST Dupont through our joint arrangement with Sampoerna.

Kazakhstan's turnover and EBITA continue to benefit from its integration into the CIS division, the move on-shore of primary production, the expansion of the product portfolio, with the introduction of LD in 2001, and the launch of Sobranie Classic in 2002, and, the continued growth of Sovereign.

We expect that enhanced growth in the CIS division will largely offset the incremental marketing and sales investment in Russia.

The integration of the CIS operations will continue to provide revenue and efficiency benefits, leading to strong long-term growth prospects.

Gallaher's remaining overseas operations increased net turnover by 19%, with volumes increasing to 11.3 billion cigarettes.

Ireland had another good year. Although the market softened, we held our volumes, and now have a market share of over 50%.

We expect steady growth in Ireland, and that increased returns from our current investment in Asia will enhance the performance of this division.

Our manufacturing operations performed impressively in 2002.

Cigarette productivity at Lisnafillan increased by 9% during the year, and cigarette unit costs were reduced modestly in real terms, despite short-term increases in tobacco and non-tobacco material costs.

In our UK cigar business, overall productivity increased by 14%, and unit costs were reduced by 4%.

The Lisnafillan tobacco factory performed strongly, achieving a 4% improvement in productivity, and reducing unit costs by 3.5%.

Our Austrian cigarette factories achieved an underlying productivity increase of 3%.

We increased production considerably in the CIS to meet the growing demand for our brands across the region.

Our Moscow factory increased volumes and enhanced efficiency, while remaining highly flexible. Overall productivity grew by 44%.

And, our Kazakhstan factory more than doubled volume output, and increased productivity by 46%.

We began production in Ukraine in February 2002. Our Cherkassy factory has continuously increased volume, productivity and flexibility throughout the year.

The Group's net interest charge was £127mn, after a credit of £7mn relating to FRS 17.

EBITA interest cover was 4.4 times, close to our target range of between 4.5 and 5.5 times.

Our year-end net debt increased slightly to £2.5bn. However, this increase in year-end balances masks the continued high cash generation of our business.

The weighted average net debt position during 2002 was £2.3bn.

We continue to benefit from efficient finance structures, after removing intangible amortisation charges, our effective tax rate was 26.2%.

Over the medium-term, the adjusted effective rate is expected to increase slightly to 26.5%.

After deducting minority interests of £4mn, basic earnings per share increased by 3%. This reflects a 6.4% increase in earnings, offset by a 3.2% increase in the weighted average number of shares in issue, following the share issue in July 2001.

Before amortisation charges, and the exceptional charges in 2001, adjusted EPS grew by 9.2%.

We are proposing a final dividend of 75p per ADS, or 18.75p per ordinary share, which would bring the total dividend payment to 102p per ADS, or 27.55p per ordinary share, an increase of 8.3% over 2001.

Turning to cash flows.

Excluding JVs and associates, EBITDA grew by 24%.

After adjusting for working capital fluctuations, the cash conversion rate was 81%.

The increase in working capital was largely attributable to short-term factors, and has already been largely reversed this year.

Total capital expenditure was £130mn, although this was partly financed by proceeds of £29mn, largely from the disposal of non-core assets by Austria Tabak, including the sale of the Malmo factory site.

In the UK we continued to invest in our production facilities, kiosks and gantries, and in the SAP information systems.

Continental Europe saw continued investment in the vending business of ATG, ahead of the German regulatory requirements impacting in 2007.

And across the CIS we continued investment in production facilities and distribution networks.

It is anticipated that this level of total capital expenditure will continue in the short-term.

And now back to Nigel.

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(Nigel Northridge) Thanks Mark.

The Group's international expansion was underpinned by its strong position in the UK market. Full year cigarette sales totalled 153 billion sticks, representing a pro-forma increase of 18%.

Sales of Gallaher's strategic brands increased 10% to over 61 billion cigarettes, and sales of the Group's regional brands grew by 70% to 37 billion sticks.

Our acquisitions are providing new opportunities.

The integration of Austria Tabak has created an exciting platform for growth in continental Europe, enabling us to access new opportunities.

We would not have formed the joint venture with RJR, or been in a position to develop the potential of Gustavus, if AT was not part of the Group.

Founded on our strengthening position in western Europe, we have made swift progress in central Europe, increasing volumes by over 56%, and today we have announced that we are acquiring a business in Poland.

Further east in the CIS, we have had an equally successful year. Gallaher has increased its presence in the higher-price sector in Russia, consolidated its position in the higher-price sector in Kazakhstan, and established substantial market share in Ukraine.

Our rest of world operations have made solid progress too.

We have extended Gallaher's market-leading position in Ireland, strengthened our network of relationships in Asia Pacific, and increased exports to Africa and the Middle East.

The strength of our positions in the UK market underpin our international growth.

Our UK cigarette market share grew consistently throughout the second half of 2002. We lead the cigar and pipe markets, and have a solid position in the handrolling tobacco market.

We placed incremental investment behind our key brands throughout 2002, and into early 2003.

Existing evidence demonstrates that marketing restrictions alone do not reduce overall consumption.

Gallaher is very well-positioned at the point of sale in the UK. Currently, 56% of consumer cigarette purchases made through merchandising units are made through Gallaher units.

Our market share growth in the second half went some way towards mitigating the effect of the overall market decline on our volumes last year.

In particular, we grew volume sales of value brands by over 10%, with volumes of our leading value brand Mayfair increasing by some 18%.

The launch of Mayfair Superkings in June assisted the brand's solid market share growth. By December, Mayfair's market share was approaching a record 10%.

Our brand innovation continued this year, with the launch of a new brand, Benson & Hedges Silver, at the end of last month.

Distribution targets have been achieved in record time.

And, in the cigar market, the Hamlet house was strengthened further in December by the launch of two new products, Hamlet Miniatures Filter and Hamlet Aromatic.

And, we launched a new handrolling tobacco brand, Mayfair, last month, to build on the success of the Amber Leaf flip top pack, and to leverage the equity of the Mayfair cigarette brand.

In continental Europe, the integration of Gallaher's existing operations with those of Austria Tabak is already producing benefits, establishing a strong platform for future growth.

We grew pro-forma cigarette volume sales 10.5% to 46 billion sticks, conducting numerous brand launches, improved the performance of our distribution businesses, and continued our expansion in the central European countries between our strong positions in the EU and the CIS.

In Austria, Gallaher maintained its lead of the cigarette market with a share of some 49%.

The Group's strategic brands, notably Memphis Blue and B & H, performed strongly.

Memphis Blue increased volumes by 15%, and grew market share to some 6%. Bensons' growing presence in the Austrian market was supported by the launch of Benson & Hedges Red 25s.

In Sweden, Gallaher increased its lead in the cigarette market, achieving a share of over 41%.

This strong performance was led by the growth of Level, which obtained a 6% market share in 2002, despite having only been launched the previous year.

Level was introduced into the Danish market, and has been launched into Norway this month.

Acquiring Gustavus gave us the manufacturing capability to enter the growing Swedish snuff market in 2002.

We've had a good year in Germany. Sales of our own brands, principally B & H, and Nil, grew by over 3%, and we maintained our leading position in the generic sector, with a volume increase of more than 14%.

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In Greece, our cigarette market share stood at over 5%, and our share of the handrolling tobacco market increased to some 37%.

There is evidence that consumers throughout Europe and Asia are increasingly relating to local brands, so we launched Odyssey, a new cigarette formulated specifically to appeal to local Greek smokers, in January 2003.

I'm really pleased with the progress that RGI is making. Following the formation of this joint venture last summer, and the transfer of American blend production to Austria, sales of B & H American blended cigarettes have gained momentum in France, Spain and Italy, complimenting our virginia blend market positions.

In France, Gallaher's total market share grew to nearly 3%, assisted by an increase in Bensons' American blend volumes of some 14.5%.

We performed well in Spain, growing total volume sales by 6%, and increasing sales of B & H Red by over 20%.

And, in Italy, the EU's second largest market, our total cigarette volumes more than doubled, spearheaded by sales of B & H American Blend, which increased nearly eightfold when compared to 2001. By the end of the year the brand had a market share approaching 2%.

Reynolds was launched in October last year, and introduced into the French, Italian and Spanish markets in early 2003.

We achieved strong growth in central and eastern Europe in 2002, aided greatly by the Group's enlarged brand portfolio, and by the knowledge and expertise that has been shared between our original and acquired businesses.

Export sales to EU accession states in the Baltics and central Europe, and Balkan markets, increased by over 56% to nearly six billion sticks.

We grew volumes in the Baltic accession states by 36% and this growth was driven by the launch, in early 2002, of Vermont.

We also strengthened our positions in the central European accession states by opening offices in the Czech Republic and Hungary, and, by launching the B & H metal range, that's Gold, Silver and Platinum, throughout the region.

Further south, sales to Balkan states increased sharply, driven by the success of Memphis and Ronson. By the end of 2002, the Group held a market share across the Balkans of some 4%.

Gallaher has entered into a purchase agreement to acquire KT Merkury, a domestic Polish cigarette manufacturer.

We intend to develop a solid position in the large Polish market, building on the existing 2% share currently held by Merkury's brands.

We will expand production capacity in the Gostkof factory, and launch one or more of our major brands.

Our distribution businesses performed well in 2002.

They have benefited from the additional focused management brought to them by Gallaher, and the rationalisation and improvement of their physical infrastructures and employee base.

In Austria, Tobaccoland's sales of both tobacco and non-tobacco products increased, and improvements were made to its infrastructure and working practices.

The benefit of being a vertically integrated tobacco company in Austria was illustrated by the signing of a three-year distribution contract with Philip Morris, through to the end of 2005. This contract complements our manufacturing agreement with that company.

The performance of our cigarette vending operation in Germany, ATG, started to stabilise in 2002. ATG benefited from improvements in vending market conditions and operational efficiency.

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CIS volume sales increased by over 26% to total 74 billion sticks, and we grew share in each of our three key markets. Gallaher is now the joint second largest tobacco company in the entire region.

In Russia, the Group increased total volume sales by 13% to 63 billion sticks.

Our full year retail market share grew to 13.3%, driven by the strength of our brands and increased national distribution coverage.

Within the Russian cigarette market, the higher-price sector continues to grow its share of sales. Within this sector, the premium sub-sector is becoming increasingly significant.

We are addressing this growing consumer preference through the introduction of higher-price brands.

Within our sales mix, we have continued to increase the growth of our brands in the intermediate- and higher-price market sectors.

When we acquired Liggett-Ducat in 2000, 55% of volumes were in the oval sector. This figure fell to just 18% last year. Oval volumes have fallen sharply each year in absolute terms, while our volumes in the intermediate- and higher-price sectors have more than doubled.

In 2002, LD's established market share underpinned sharp volume growth for Troika, Saint George and Novost in the intermediate-price sector, and, from Sovereign and Sobranie in the higher-price sector.

Our share of that higher-price sector increased to 3.5%. This growth was driven by our strong share gain in the premium sector.

Gallaher's growth in the premium sector has been supported by increased marketing activity. We intend to increase this incremental investment behind our brands in the medium-term, so as to improve our long-term growth prospects in Russia.

In Kazakhstan, volume sales more than doubled to some six billion sticks, and our full year market share reached over 20%.

More than 90% of our sales were in the higher- and intermediate-price sectors.

Sovereign became the leading brand in Kazakhstan, LD gained a market share in excess of 5%, despite only having been launched in 2001, and Sobranie Classic, which was only launched earlier last year, gained a 1% share by December.

Gallaher also gained market share swiftly in Ukraine.

Our brands accounted for 7.5% of sales to consumers for the full year, and volumes totalled 5.5 billion sticks, with some 70% of our sales in the intermediate- and higher-sectors.

In Ireland, Gallaher's cigarette brands maintained volume sales despite a modest decline in the overall market.

Our market share grew to some 51%. This solid performance was led by Benson & Hedges, which widened its number one brand-leading position.

Our AMELA division's volume sales were significantly ahead.

This strong performance was driven by impressive growth from Sovereign and Dorchester International, which increased combined sales volumes by more than four times, and strong growth from Ronson in west Africa.

We made good progress with our growth in Asia Pacific. In-market sales increased by over 11%.

We've significantly strengthened our network of relationships in the region during the year.

The principles of our agreement with the CNTC are progressing well. We now have formed a formal project team with Shanghai Tobacco. And, following a number of successful meetings, we have now jointly signed a formal heads of agreement.

The team is developing the plans for the commencement of the on-shore manufacture and distribution of a Gallaher brand in China, and of a Shanghai Tobacco brand in Russia, and we are all working towards the original timetable set out in our letter of intent signed in September.

Additionally, we have strengthened Gallaher's position in China through the acquisition of our representative agent Gold Bond. We have subsequently established offices in Beijing, Shanghai and Guangzhou.

In conclusion, 2002 has been another year of good progress for Gallaher.

The successful integration of our acquisitions has given us wider geographic coverage, enhanced expertise and a more comprehensive brand portfolio.

The creation of our new international operating divisions has realised tangible benefits.

Solid volume growth was delivered across the business, and the foundations for future growth were laid through brand launches, the opening of new offices, the acquisition of Gustavus, and the successful cementing of joint ventures and relationships across our geographic reach.

Since demerger, we have transformed Gallaher from a predominantly UK and Irish company into a leading eurasian Group.

International volumes have increased eight-fold to account for 86% of sales.

We have grown EBITA from £385mn to £582mn, while operating cash, as measured by EBITA before depreciation and excluding JVs and associates, has increased 55% to £644mn.

And adjusted EPS has increased by a compound annual growth rate of 12.3%.

We are excited about Gallaher's future. I believe that we have got the infrastructure, brands, expertise, and above all, the determination, to achieve continued expansion right throughout eurasia.

Thanks for your attention.