We have not included any tobacco brand advertising in this online version of the 2007 Annual Report. We do not intend to market, advertise or promote the brands of Altria Group’s tobacco subsidiaries on this Web site.

Revenues, net of excise taxes, increased 1.2% to $15.0 billion for Altria’s U.S. tobacco segment, which includes both PM USA and John Middleton, Inc. (Middleton). Operating companies income for the U.S. tobacco segment decreased 6.1% to $4.5 billion. The decrease was primarily driven by lower volume, increased resolution expenses, investments in support of PM USA’s smokeless products, $371 million of pre-tax charges in 2007 related to asset impairment, exit and implementation costs for the previously announced closure of the Cabarrus cigarette manufacturing facility and a $26 million provision for the Scott case in Louisiana. Those factors were partially offset by lower wholesale promotional allowance rates and lower selling, general and administrative costs.

Operating companies income increased by 1.9% for the U.S. tobacco segment in 2007 when adjusted for the items shown in the table below.

PM USA’s 2007 cigarette shipment volume of 175.1 billion units was 4.6% lower than the previous year, but was estimated to be down approximately 3.6% when adjusted for changes in trade inventories and calendar differences. PM USA estimates a decline of about 4% in total cigarette industry volume for the full year 2007.

Retail share gains for Marlboro and Parliament of 0.5 points and 0.1 point, respectively, were partially offset by losses of 0.1 share point each for Virginia Slims, Basic and the non-focus brands in 2007. In the fourth quarter of 2007, share gains for Marlboro of 0.8 points were partially offset by losses of 0.1 share point each for Virginia Slims and Basic.

PM USA is focused on developing new and innovative products that are based on a thorough understanding of adult tobacco consumers. During 2007, PM USA launched Marlboro Smooth, Marlboro Virginia Blend and several other new cigarette line extensions. These new products contributed to PM USA’s retail share growth for the year, and in the fourth quarter of 2007 generated more than one share point of business.