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====Altadis Group ====

Over the past six years, our Group has not only maintained a very steady upswing in our financial figures, but has also piloted a course of continuous improvement in our rules and institutions of corporate
governance. Our shareholders have seen their confidence rewarded year after year, through our results, our stock-market growth, and our dividend and share-buyback policies—all of which reflect our
commitment to offer shareholders one of the highest returns on investment in our sector.

In the area of corporate governance, we have chosen to adopt each of the recommendations contained in the Olivencia report, as well as the new recommendations in the Aldama and Bouton reports. We believe that the implementation of these best practices helps to ensure long-term corporate solidity and demonstrates the respect that companies owe to their shareholders.

In June 2005 we made sweeping changes in our organization, moving from a system of co-chairmanship to one that establishes a clear
separation of functions between, on the one hand, the Chairman of the Board of Directors, who heads the new Strategy, Ethics and Corporate Governance Committee, and on the other the Chairman of the Executive Committee and Chief Executive Officer, who is in charge of all executive responsibilities. At the same time, the Board of Directors, which has taken on a strong international dimension in the past two years, now includes 13 independent members out of a total of 16 directors. This is a significant step forward, and one that was strongly underlined in the various corporate governance report recommendations.

Altadis, in addition, played an active role in preparing the draft Unified Code of Recommendations for Good Governance of listed companies, developed by a working group under the auspices of Spain’s securities regulator, the CNMV.

As a result, our corporate governance and codes of conduct are now aligned with the highest international standards and constitute a significant asset for the Altadis Group’s long-term durability.

This durability is rooted in our ability, through internal and external growth alike, to maintain and develop our business model based on three strategic activities: cigarettes, cigars and logistics. Today, each of our businesses can point to solid, healthy fundamentals that have contributed to improving our profitability along with all other financial indicators in 2005.

Based on these positive results, we are proposing a dividend payment of EUR 1 per share, representing an 11.1% increase over 2004, to shareholders at the Annual General Meeting, as well as the maintenance
of a buyback program equal to 5% of our share capital. Our stock-market performance during 2005 has reflected the positive growth in our business, with the Altadis share price posting an increase of nearly 14%.

For the future, you may rest assured that we remain committed to pursuing our strategy of business growth in all of our operations, in order to ensure that they continue their past record of ongoing creation of value.

Altadis once again posted an improved financial performance in 2005. Over the course of the year, we concentrated much of our efforts on integrating the companies acquired in 2004: Balkan Star in Russia;
Geopost Logistique, now renamed Logista France; and Etinera in Italy. With the process now successfully completed, these acquisitions have strengthened our Group’s multinational identity, bringing together a range of cultures that have reinforced our business model.

2005 was an especially eventful year, marked by changes in the Group’s organizational structure, intensified competition – notably in Spain, a more stringent regulatory and tax environment, and the
ongoing implementation of our restructuring and cost-cutting initiatives, which were intensified in early 2006. The maturity, strength and reactiveness that Altadis has been able to mobilize in response to a changing environment have demonstrated that our business and management model is a sound one.

The cogency of this response is illustrated by our 2005 results, which registered double-digit growth. Our economic sales rose 15.6% to EUR 4,112 billion, while EBITDA totalled EUR 1,232 billion, representing an increase of 11.6%. These good results reflect the consolidation of our recent acquisitions in Russia and Italy and the contribution of our three businesses, in Cigarettes, Cigars and Logistics.

With regard to Cigarettes, the growth in our brands outside our domestic markets is bringing fresh dividends. Gauloises Blondes continued to capture new ground internationally, with sales increasing
by 10.8%, while Fortuna posted a remarkable performance in Morocco, where it now holds 7.6% of the market for blond cigarettes. Altadis’ brands, and Gauloises Blondes in particular, have also made
very steady gains in Germany, Austria, Belgium, Luxembourg and the Near and Middle East. In late 2005 and early 2006, however, our results in Spain were substantially impacted by disruptions in the
local cigarette market. In response, Altadis took immediate steps to accelerate its cost-cutting programs.

Worldwide, the Cigarette Division reported economic sales that rose by 5.5%, to EUR 1.979 billion.

Our Cigar Division posted excellent results, primarily thanks to sales in the US market and Cuban cigars. In the United States, Altadis is very solidly entrenched, with a presence in every segment, while in other countries the Group has demonstrated its ability to win new ground, principally with Cuban cigars.

Economic sales in the Cigar Division made impressive progress, rising 8.3% to EUR 885 million and underpinned by solid, sustained organic growth.

In the area of Logistics, our acquisitions in Italy and France coupled with organic growth yielded exceptional gains. The Group has successfully
expanded its business model in every country where it is active – Spain, France, Portugal, Italy and Morocco. Our Logista subsidiary has become a major player as a service-provider.

Economic sales in the Logistics Division rose 33.1% to total EUR 1,147 billion.

We should also note our interest in the Aldeasa Group, which operates in the travel retail business sector. This business generates value and is contributing to our international expansion.

Our strategy is paying off, as evidenced by our 2005 results. In the current year, we will continue to pursue our primary objectives: reinforcing our policy of new brand development and our multinational identity, improving efficiency through our ability to cut costs,
and enhancing both our competitiveness and our organic growth.

'''Official site:''' http://www.altadis.com<br>

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