Dear Shareholder

I am pleased to report that Altria Group, Inc. performed well from a financial perspective and made excellent progress toward its major strategic objectives during 2004. We entered 2005 in a better competitive position than we have enjoyed in several years, and our operating companies are well positioned for future growth.

Over the past several years, we have steadfastly stuck to our strategic plan to secure organic growth, supported by effective marketing and innovation, and complemented by meaningful acquisitions. Marketing expenditures have been restored to competitive levels at our operating companies, price gaps have been addressed with rigor, and the quality of products and programs has been enhanced. We are witnessing more innovation and more activity on the business development front. And very importantly, societal alignment initiatives are placing our operating companies at the forefront of the tobacco and food industries.

Total shareholder return for our stock was 18.4% for 2004, exceeding that of the Standard & Poor’s 500 by a considerable margin. We are determined to build on these results by continuing to improve each of our operating companies and by taking action to maximize returns to shareholders over the long term, in a manner consistent with the interests of all stakeholders.

In November 2004, I announced that, for significant business reasons, the Board of Directors is looking at a number of restructuring alternatives, including the possibility of separating the organization into two, or potentially three, strong and independent entities. Continuing improvement in the entire litigation environment is a prerequisite to such action by the Board, and the timing and chronology of events are uncertain. However, we are preparing for a separation at the appropriate time, should that decision be made.

2004 Results

Our operating companies responded to a challenging environment in 2004 with effective strategies that focused on developing breakthrough innovation; building brand equity and superior product quality to justify a premium price; reducing costs; investing in marketing infrastructure and research & development; increasing speed-to-market and geographic expansion; effectively managing price gaps; and securing fair tobacco excise taxes. These strategies are designed to secure both top- and bottom-line growth, and were effectively implemented.

Philip Morris USA (PM USA) and Philip Morris International (PMI) both delivered very good results, with strong income growth and retail share increases at PM USA, driven by Marlboro, and solid volume and share growth at PMI in many key international markets, with the notable exception of Germany. Kraft’s results reflected higher commodity costs and the significant investments it is making as part of its Sustainable Growth Plan.

For the full year 2004, Altria’s net revenues increased 10.2% to $89.6 billion, while earnings from continuing operations increased 3.3% to $9.4 billion. Diluted earnings per share from continuing operations rose 2% to $4.57, including net charges of $0.10 per share in 2004.

Our robust cash flow allowed the Board to raise the dividend 7.4%, to an annual rate of $2.92 per common share, marking the 37th time in 35 years that the dividend has been increased.

Altria’s financial results were buoyed by a number of favorable developments, including gains from currency, tax accrual reversals and our investment in SABMiller. However, these gains were largely offset by a number of unanticipated costs during the year, including a surge in commodity costs at Kraft and the landmark agreement at PMI with the European Community (E.C.) to combat contraband and counterfeit products. I am particularly pleased that as the year unfolded, our business momentum improved, primarily as a result of investments made during the past several years.