Dear Shareholder

2006 was an exciting year in all respects and, as I write this letter, 2007 is poised to be an important milestone in the history of our company.

We are on the threshold of creating significant and enduring shareholder value by implementing the corporate restructuring objectives that were first voiced more than two years ago.

Key Accomplishments and Developments

We made progress on numerous strategic initiatives since my last letter. Let me share a few of the highlights:

• The announcement of the Kraft spin-off on January 31, 2007;
• Major improvement in the litigation environment;
• Reorganization of PMI's business in the Dominican Republic in late 2006 and an increase in our stake in Lakson Tobacco in Pakistan in early 2007, complemented by excellent results from PMI's 2005 acquisitions in Indonesia and Colombia;
• Significant cost-reduction initiatives across all businesses and the Altria corporate headquarters;
• Continued advances on societal alignment initiatives and compliance and integrity initiatives;
• Enhanced financial flexibility, supported by the consistent strengthening of our balance sheet and upgraded ratings by major credit rating agencies, made with the full knowledge of the Kraft spin-off;
• Strong performance of our 28.6% ownership stake in SABMiller, which at this writing has a market value on a pre-tax basis of approximately $9.3 billion; and
• A 7.5% increase in the quarterly dividend on our common stock, to an annualized rate of $3.44 per share.

Total shareholder return as of December 31, 2006, was 19.9%, exceeding that of the S&P 500 for the fifth consecutive year. While this is certainly a commendable achievement, our performance continued to trail that of several pure play tobacco competitors.

Looking at a longer period, total shareholder return from year-end 2001 through 2006 was simply stellar. Altria's five-year total return was 142.6% with dividends reinvested quarterly over that period, significantly ahead of the five-year total return of the S&P 500 at 35.0%. (See chart on page 6.) Indeed, we were second best in terms of total return within the top 25 companies by market capitalization in the S&P 500 from year-end 2001 through 2006. Over the same five-year period, our market capitalization increased by more than $80 billion, reaching a level of nearly $180 billion at year-end 2006.

Kraft Spin-Off

Preparations for the distribution of Kraft shares to Altria shareholders continued apace throughout 2006. In January 2007, we announced that Altria shareholders of record on March 16, 2007, would receive on March 30, 2007, approximately 0.7 of a Kraft share for each Altria share they own. Highlights of the Kraft spin-off are listed on page 2 of this report, and additional details will be available in an Information Statement to be mailed to shareholders on or about March 20, 2007.

The spin-off will benefit both Altria and Kraft. The tobacco and food businesses are fundamentally different, and investors today generally prefer pure plays versus conglomerates. I believe that the spin-off will enhance Kraft's ability to make acquisitions in order to compete more effectively in the food industry. It will also permit Altria and Kraft to target their respective shareholder bases more effectively and improve capital allocation within each company, and it will allow both Altria and Kraft to focus more effectively on their respective businesses and strategic plans. As a result, I believe the spin-off will build long-term shareholder value.

Shortly after the distribution of Kraft shares, Altria will issue 2006 pro forma financial statements, which will underscore Altria's robust income statement and balance sheet ex-Kraft, including 2006 net revenues of $67 billion; operating companies income of $13 billion; net income of $9.3 billion and adjusted earnings per share of $4.05. On the balance sheet, Altria ex-Kraft had total assets of $48 billion on December 31, 2006; consumer products debt of $7.4 billion and cash of $4.8 billion, resulting in net debt of $2.6 billion; and shareholders' equity of $12.7 billion.

Importantly, it is our intention to adjust Altria's dividend immediately following the distribution of Kraft shares so that Altria shareholders who retain their Kraft shares will receive, in the aggregate, the same cash dividend amount of $3.44 per share that existed before the spin-off.

2006 Results

From a financial perspective, Altria had a solid year in 2006. Net revenues increased 3.6% to $101.4 billion. The comparison with 2005 includes a favorable impact from acquisitions of $1.3 billion and an increase from tobacco and international food, partially offset by unfavorable currency of $506 million, divestitures and one less shipping week at Kraft in 2006.

Operating income increased 4.9% to $17.4 billion, reflecting a $488 million gain on PMI's Dominican Republic transaction, Kraft's $251 million gain on the redemption of its interest in United Biscuits, Kraft's gain on the sale of Minute Rice, acquisitions and higher operating results from all businesses of $511 million.

Earnings from continuing operations increased 12.7% to $12.0 billion, primarily reflecting the items mentioned above and a lower effective tax rate in 2006. Net earnings, including discontinued operations, increased 15.2% to $12.0 billion. This performance was enhanced by a number of one-time net favorabilities, primarily reflecting the gains already mentioned at both Kraft and PMI, and the reversal of tax accruals following the conclusion of an IRS tax audit.

Reported diluted earnings per share from continuing operations were up 12.0% to $5.71 for the full year. Adjusted for items identified in our year-end news release, diluted earnings per share from continuing operations increased 4.9% to $5.35.