Market Capitalization $94.6 Billion. Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years

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1 BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION Reynolds American Inc., through its subsidiaries, manufactures, and sells cigarettes and other tobacco products in the United States. It operates through RJR Tobacco, Santa Fe, and American Snuff segments. BUY Sector: Consumer Non-Discretionary Sub-Industry: Tobacco Source: S&P BUY RATING SINCE 07/20/2010 TARGET PRICE $87.02 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years TARGET PRICE $ STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues Net Income EPS Rating History BUY RETURN ON EQUITY (%) Ind Avg S&P 500 Q Q Q P/E COMPARISON Volume in Millions COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History RECOMMENDATION We rate () a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income EPS ANALYSIS¹ ($) Ind Avg S&P 500 HIGHLIGHTS 's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 1.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. Net operating cash flow has significantly increased by 64.25% to $1, million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 30.56%. Q Q Q Q Q Q Q NA = not available NM = not meaningful Q Q Compustat fiscal year convention is used for all fundamental data items. The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that 's debt-to-equity ratio is low, the quick ratio, which is currently 0.55, displays a potential problem in covering short-term cash needs. Compared to its closing price of one year ago, 's share price has jumped by 26.62%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels. The gross profit margin for is rather high; currently it is at 60.22%. Regardless of 's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, 's net profit margin of 26.44% compares favorably to the industry average. Report Date: PAGE 1

2 PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -20% 140% UNFAVORABLE XXII -140% EBITDA Margin (TTM) TPB FAVORABLE VGR PM UVV MO AOI 60% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $146.1 Million and $186.2 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -20% 140% UNFAVORABLE AOI -50% Earnings Yield (TTM) XXII FAVORABLE TPB PM VGR MO UVV 20% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -10% and 133.7%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The US tobacco industry is comprised of companies that manufacture cigarettes, cigars, snuff, pipe tobacco, and chewing tobacco. The industry has more than 100 companies with combined annual revenue of around $40 billion. Major players include Philip Morris International (PM), Altria Group (MO), and Reynolds America (). The industry is highly concentrated with the largest 50 companies holding close to 100% of market share. Cigarettes account for 90% of all production, chewing tobacco and snuff account for 6% of production, and cigars account for 2% of production. The industry has undergone radical changes over the last decade. It has experienced a significant demand downturn due to growing awareness of health hazards. Significant legislative changes have led to elimination of price supports and a quota buyout, thus removing quota and associated acreage and geographic planting restrictions. The Federal Government removed the price support and marketing quota systems in 2005, exacerbating the decline of the industry, which was already under pressure from reduced smoking rates and increased competition from foreign farmers. After China, the US is the second largest producer of tobacco. However, cigarette sales volume has been declining in recent years. High prices, growing health concerns, restrictions on public advertising, and an increasingly negative attitude towards smoking have been major impediments to attracting new smokers. Cigarette consumption has decreased rapidly since 1981, with consumption falling to less than 360 billion pieces. Consumption has also decreased as a result of higher prices resulting from additional taxes. However, international sales increased rapidly during this period, indicating that firms are giving high priority to increasing cigarette sales abroad, given the diminished growth potential of the US market. The increasing number of states passing smoking bans covering restaurants, as well as other public and private buildings, has increased the product attractiveness for smokeless tobacco products like snus. Snus is a powdered tobacco product where small packets are placed under the lip and generally do not require spitting. This makes Snus perfect for satisfying the nicotine addiction without violating smoking bans. Over recent years, the share of foreign tobacco in US cigarettes has steadily increased and continues to do so. Price variation and the high quality of foreign-grown leaf has led to erosion in US tobacco exports, causing a reduced US share of total world tobacco exports. The 1998 Master Settlement Agreement (MSA) paid $250 billion, limiting the marketing and advertising options for Big Tobacco (Altria, R.J. Reynolds, Brown & Williamson Tobacco, Lorillard Tobacco, and Liggett). According to the agreement s provisions, $250 billion was to be paid to states over 25 years with an additional $1.5 billion dedicated to anti-smoking measures and research towards reducing under-aged smoking. An expanded role for the Food and Drug Administration is expected to result in a more stringent regulatory environment for the industry. The US tobacco industry faces an uncertain future and is likely to encounter additional regulation in addition to intense competition. PEER GROUP: Tobacco Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) , , , TPB TURNING POINT BRANDS INC VGR VECTOR GROUP LTD , , PM PHILIP MORRIS INTERNATIONAL , , , UVV UNIVERSAL CORP/VA , , XXII 22ND CENTURY GROUP INC NM AOI ALLIANCE ONE INTL INC NM 1, MO ALTRIA GROUP INC , , , The peer group comparison is based on Major Tobacco companies of comparable size. Report Date: PAGE 2

3 Annual Dividend Rate COMPANY DESCRIPTION Reynolds American Inc., through its subsidiaries, manufactures, and sells cigarettes and other tobacco products in the United States. It operates through RJR Tobacco, Santa Fe, and American Snuff segments. The RJR Tobacco segment offers cigarettes under the NEWPORT, CAMEL, PALL MALL, DORAL, MISTY, and CAPRI brands; and CAMEL Snus, a smoke-free tobacco product, as well as manages various licensed brands, including DUNHILL and STATE EXPRESS 555. The Santa Fe segment manufactures and markets cigarettes and other tobacco products under the NATURAL AMERICAN SPIRIT brand. The American Snuff segment provides smokeless tobacco products, such as moist snuff under GRIZZLY and KODIAK brand names. The company also manufactures and markets digital vapor cigarettes under the VUSE brand name; and markets nicotine replacement therapy products under the ZONNIC brand. It distributes its products primarily through direct wholesale deliveries from a local distribution center and public warehouses. Reynolds American Inc. was founded in 2004 and is headquartered in Winston-Salem, North Carolina. 401 North Main Street Winston-Salem, NC USA Phone: STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 4.5 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 80% of the stocks we rate. Total Return 3.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 60% of the companies we cover. Efficiency 4.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 80% of the companies we review. Price volatility 5.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 90% of the stocks we monitor. Solvency 5.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 90% of the companies we analyze. Income 4.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 80% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. Report Date: PAGE 3

4 Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.64 Q2 FY E 2017(E) 2.73 E 2018(E) INCOME STATEMENT Net Sales ($mil) 2, , EBITDA ($mil) 1, , EBIT ($mil) 1, , Net Income ($mil) , FINANCIAL ANALYSIS 's gross profit margin for the first quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. Even though sales increased, the net income has decreased. has liquidity. Currently, the Quick Ratio is 0.55 which shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year. At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by 2.56% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit BALANCE SHEET Cash & Equiv. ($mil) 3, , Total Assets ($mil) 51, , Total Debt ($mil) 13, , Equity ($mil) 21, , PROFITABILITY Gross Profit Margin 60.22% 60.88% EBITDA Margin 46.04% 44.94% Operating Margin 44.96% 43.91% Sales Turnover Return on Assets 6.32% 11.81% Return on Equity 15.14% 30.37% DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) 1,427 1,427 Div / share EPS Book value / share Institutional Own % NA NA Avg Daily Volume 5,172,625 6,278,821 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. Report Date: PAGE 4

5 RATINGS HISTORY Our rating for has not changed since 8/21/2009. As of 7/20/2017, the stock was trading at a price of which is 2.2% below its 52-week high of $67.81 and 52.8% above its 52-week low of $ Year Chart BUY: $ $70 $60 $50 $40 MOST RECENT RATINGS CHANGES Date Price Action From To 7/20/15 $39.90 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 7/20/2017) 43.91% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months % Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss % Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY Research Contact: Sales Contact: VALUATION BUY. 's P/E ratio indicates a premium compared to an average of for the Tobacco industry and a premium compared to the S&P 500 average of Conducting a second comparison, its price-to-book ratio of 4.36 indicates a premium versus the S&P 500 average of 3.07 and a significant discount versus the industry average of The current price-to-sales ratio is well above the S&P 500 average and above the industry average, indicating a premium. The valuation analysis reveals that, seems to be trading at a premium to investment alternatives within the industry. Price/Earnings Peers Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. is trading at a significant premium to its peers. Price/Projected Earnings Peers Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. is trading at a significant premium to its peers. Price/Book 4.36 Peers Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 7.55 Peers 7.15 Average. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a valuation on par with its industry on this measurement. DISCLAIMER: Price/CashFlow Peers Premium. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant premium to its peers. Price to Earnings/Growth NM Peers 1.26 Neutral. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. 's negative PEG ratio makes this valuation measure meaningless. Earnings Growth lower higher Peers Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 8.66 Peers 0.26 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that significantly exceeds its peers. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at Report Date: PAGE 5