Letter to ordinary shareholders / ADS holders (18 December 2006)

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, solicitor, accountant or independent financial adviser who, if you are taking advice in the United Kingdom, is authorised under the Financial Services and Markets Act 2000, or from another appropriately authorised independent financial adviser if you are taking advice in a territory outside the United Kingdom.

If you have sold or otherwise transferred all of your Gallaher shares or ADSs, please send this document together with the accompanying documents as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.

18 December 2006

Dear Shareholder,

Recommended cash offer from JTI (UK) Management Ltd

You will find attached the formal announcement of a cash offer by JTI (UK) Management Ltd for Gallaher Group Plc which was released on 15 December 2006. The offer has been recommended by the Gallaher Group Plc board.

You are not required to take any action in connection with the offer at this time and a detailed document will be sent to you in due course.

Yours faithfully,

John Gildersleeve
Chairman

The directors of Gallaher accept responsibility for the information contained in this letter and in the attached announcement other than the information for which responsibility is taken by the directors of JT pursuant to the paragraph below. To the best of the knowledge and belief of the directors of Gallaher (who have taken all reasonable care to ensure that such is the case) such information is in accordance with the facts and does not omit anything likely to affect the import of such information.

The directors of JT accept responsibility for the information contained in this letter and in the attached announcement relating to JT, JTI (UK), the JT group, the directors of JT and JTI (UK) (and, in each case, members of their immediate families, related trusts and person connected with them), information on JT’s future plans for the Gallaher group, its management and employees and any acquisition financing relating to JT or JTI (UK). To the best of the knowledge and belief of the directors of JT (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.

Unless otherwise determined by Gallaher and JT, the offer will not be made, directly or indirectly, in or into, Australia, Canada or any other jurisdiction where to do so would constitute a breach of securities laws in that jurisdiction, and the offer is not capable of acceptance from or within Australia, Canada or any such jurisdiction. Accordingly, copies of this letter and the attached announcement are not being, and must not be, mailed or otherwise forwarded, distributed or sent in or into Australia, Canada or any other jurisdiction where to do so would constitute a breach of securities laws in that jurisdiction.

This letter and the attached announcement do not constitute or form any part of an offer or invitation to sell or purchase any securities or solicitation of an offer to buy any securities pursuant to the offer or otherwise. The offer will be made solely by means of the scheme document and the acceptance forms accompanying the scheme documentation, which will contain the full terms and conditions of the offer.

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