Vector Group Ltd. (NYSE: VGR) anticipates all distributions paid in 2005 on its common stock were partially taxable at a rate of 53.67% for federal income tax purposes.  The remaining portion (46.33%) will be considered a nontaxable return of capital.

These distributions consisted of four quarterly cash distributions paid in 2005 and a distribution of 0.24 shares of Ladenburg Thalmann Financial Services (AMEX: LTS). Vector determined that each LTS share received had a fair value of $0.67 per share.

Vector Group’s determination of its earnings and profits for 2005 and prior years has been filed with the Internal Revenue Service (“IRS”). Stockholders will be advised if there is any material change to the status of the 2005 distributions as a result of IRS review or audits.

Distributions that are not taxable as dividend income must be applied to reduce the adjusted tax basis of the shares on which the distributions are paid. If the nontaxable distributions exceed the stockholder’s basis in the Vector Group stock, a capital gain will result.

Stockholders should secure their own tax advice regarding the status of cash and property distributions under applicable federal, state and local tax laws.