11-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________

FORM 11-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

OR

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 1-6388
___________

A. Full title of the plans and the address of the plans, if different from that of the issuer named below:

R. J. Reynolds Capital Investment Plan

Savings and Investment Plan for Employees of
R. J. Reynolds Tobacco in Puerto Rico

B. Name of issuer of the securities held pursuant to the plans and the address of its principal executive office:

R.J. Reynolds Tobacco Holdings, Inc.
401 North Main Street
Winston-Salem, NC 27102-2866

REQUIRED INFORMATION

1.	Not applicable.
2.	Not applicable.
3.	Not applicable.
4.	The R. J. Reynolds Capital Investment Plan, referred to as the Capital Investment Plan, and the Savings and Investment Plan for Employees of R. J. Reynolds Tobacco in Puerto Rico, referred to as the Savings and Investment Plan, are subject to the requirements of the Employee Retirement Income Security Act of 1974, referred to as ERISA. A copy of the most recent audited financial statements and supplemental schedules, as required, of the Capital Investment Plan and the Savings and Investment Plan, prepared in accordance with the financial reporting requirements of ERISA, is attached as Exhibit 99.1 and Exhibit 99.2, respectively, to this report.

Exhibits:

23.1	Consent of KPMG LLP.
99.1	Audited financial statements and supplemental schedule of the Capital Investment Plan for the periods ended December 31, 2003 and 2002.
99.2	Audited financial statements and supplemental schedule of the Savings and Investment Plan for the periods ended December 31, 2003 and 2002.

SIGNATURE

     The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plans) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

	R. J. REYNOLDS CAPITAL INVESTMENT PLAN
Date: June 16, 2004	/s/ McDara P. Folan, III
	McDara P. Folan, III
	Secretary, RJR Employee Benefits Committee
	SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF R. J. REYNOLDS TOBACCO IN PUERTO RICO
Date: June 16, 2004	/s/ McDara P. Folan, III
	McDara P. Folan, III
	Secretary, RJR Employee Benefits Committee

EXHIBIT INDEX

Exhibits

23.1	Consent of KPMG LLP.
99.1	Audited financial statements and supplemental schedule of the Capital Investment Plan for the periods ended December 31, 2003 and 2002.
99.2	Audited financial statements and supplemental schedule of the Savings and Investment Plan for the periods ended December 31, 2003 and 2002.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
R. J. Reynolds Tobacco Holdings, Inc.

We consent to the incorporation by reference in the registration statements (Nos. 333-80595 and 333-59690) on Form S-8 of R.J. Reynolds Tobacco Holdings, Inc. of our reports dated May 21, 2004, with respect to the statements of net assets available for benefits as of December 31, 2003 and 2002 and the related statements of changes in net assets available for benefits for the periods then ended, and supplemental schedules, which reports appear in the December 31, 2003, annual report on Form 11-K of the R. J. Reynolds Capital Investment Plan and the Savings and Investment Plan for Employees of R. J. Reynolds Tobacco in Puerto Rico.

/s/ KPMG LLP

Greensboro, North Carolina
June 11, 2004

EX-99.1

Exhibit 99.1

R. J. Reynolds Capital Investment Plan

Financial Statements and Supplemental Schedule

December 31, 2003 and 2002

(with Report of Independent Registered Public Accounting Firm Thereon)

R. J. Reynolds Capital Investment Plan

Table of Contents

	Page
Report of Independent Registered Public Accounting Firm		1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 2003 and 2002		2
Statements of Changes in Net Assets Available for Benefits for the Periods Ended December 31, 2003 and 2002		3
Notes to Financial Statements		4-9
Supplemental Schedule — Form 5500, Schedule H, Line 4i -
Schedule of Assets (Held at End of Year) as of December 31, 2003		10

Note: Supplemental schedules, other than the one listed above, are omitted because of the absence of conditions under which they are required by Department of Labor Rules and Regulations for Reporting and Disclosures under the Employee Retirement Income Security Act of 1974.

Report of Independent Registered Public Accounting Firm

RJR Employee Benefits Committee of R. J. Reynolds Capital Investment Plan:

We have audited the accompanying statements of net assets available for benefits of the R. J. Reynolds Capital Investment Plan, referred to as the Plan, as of December 31, 2003 and 2002, and the related statements of changes in net assets available for benefits for the periods then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2003 and 2002, and the changes in net assets available for benefits for the periods then ended in conformity with U.S. generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ KPMG LLP

Greensboro, North Carolina
May 21, 2004

R. J. Reynolds Capital Investment Plan

Statements of Net Assets Available For Benefits

December 31, 2003 and 2002

	2003		2002
Assets:
Investments, at fair value — plan interest in Master Trust (notes 1, 2, 3 and 4)	$	1,079,446,909	$	931,506,623
Loans to participants		15,149,526		16,359,335
Receivables:
Investment income		1,136,538		1,140,139
Due from broker for sale of investments		1,131,297		71,405
Total receivables		2,267,835		1,211,544
Total assets		1,096,864,270		949,077,502
Liabilities:
Accrued administrative expenses		282,171		351,695
Due to broker for purchase of investments		—		315,198
Total liabilities		282,171		666,893
Net assets available for benefits	$	1,096,582,099	$	948,410,609

See accompanying notes to financial statements.

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R. J. Reynolds Capital Investment Plan

Statements of Changes in Net Assets Available for Benefits

Periods Ended December 31, 2003 and 2002

	2003			2002
Additions:
Investment income (loss) – plan interest in Master Trust (notes 1, 2, 3 and 4)	$	165,530,243		$	(105,779	)
Interest income on participant loans		1,069,009			—
Contributions:
Employer contributions		11,618,075			47
Participant contributions		34,951,129			168,647
Total contributions		46,569,204			168,694
Total additions, net		213,168,456			62,915
Deductions:
Benefits paid to participants		61,488,953			75,661
Administrative expenses		1,537,875			—
Total deductions		63,026,828			75,661
Net increase (decrease) in assets available for benefits prior to transfers to other plans		150,141,628			(12,746	)
Net transfers to other plans (note 1)		(1,970,138	)		—
Net increase (decrease) in assets available for benefits		148,171,490			(12,746	)
Net assets available for benefits at beginning of period		948,410,609			948,423,355
Net assets available for benefits at end of period	$	1,096,582,099		$	948,410,609

See accompanying notes to financial statements.

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R. J. Reynolds Capital Investment Plan

Notes to Financial Statements

(1)	Plan Description
	The following brief description of the R. J. Reynolds Capital Investment Plan, referred to as the Plan, is provided for general information purposes only. Participants should refer to the Plan document for more complete information.

(a) General

The Plan is a voluntary defined contribution plan for eligible employees of R.J. Reynolds Tobacco Holdings, Inc., referred to as RJR or the Company, and participating subsidiaries. All eligible employees become participants unless they elect not to participate. The RJR Employee Benefits Committee controls and manages the operation and administration of the Plan. Citibank, N.A., referred to as Citibank, serves as the trustee of the Plan. Mellon HR and Investor Solutions serves as the recordkeeper for the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, referred to as ERISA.

On February 6, 2004, the Company registered with the Securities and Exchange Commission an additional two million shares of RJR common stock for issuance pursuant to the Plan and one other plan sponsored by a subsidiary of the Company.

In the second quarter of 2003, R. J. Reynolds Tobacco Company completed the sale of its Avoca business. In connection with the sale, assets of $1,970,138 attributable to certain former Plan participants were transferred from the Plan to the Pharmachem Laboratories, Inc. Retirement Savings Plan.

On December 31, 2002, an amendment was made to the Plan changing the Plan year from December 30 to a calendar year effective January 1, 2003. As a result, the period ended December 31, 2002 represents a one day Plan year.

(b) Interest in Master Trust

The Plan’s investments are in the R. J. Reynolds Defined Contribution Master Trust, referred to as the Master Trust, which was established for the investment of assets of the Plan and several other Company-sponsored plans. Since May 2000, the Plan has been the only plan with assets in the Master Trust. Citibank has held the assets of the Master Trust since May 1, 2000. Investment income and administrative expenses relating to the Master Trust are allocated to the individual plan(s) based upon average monthly balances invested by each plan.

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(c) Contributions

Each year, participants may make basic contributions of up to 6% of pre-tax annual compensation, as defined in the Plan document. In addition, participants may make supplemental contributions on a pre-tax or after-tax basis of up to 50% of compensation, including the basic contribution. Participants who have attained age 50 before the end of a calendar year may make additional catch-up contributions of 1% to 25% of compensation. The Company or participating subsidiaries contribute an amount equal to 50% of basic contributions. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans. Contributions are subject to certain Internal Revenue Code limitations.

The Committee approved an amendment to the Plan, effective January 1, 2004, that for participants hired on or after January 1, 2004, the Company or participating subsidiaries will contribute an amount equal to 100% of basic contributions.

(d) Participant Accounts

Each participant’s account is credited with the participant’s contributions and allocations of the Company or participating subsidiaries’ contributions and Plan earnings, and debited with the participant’s withdrawals, Plan losses and an allocation of administrative expenses. Allocations are based on participant contributions or account balances, as defined in the Plan document. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

(e) Vesting

Participants are immediately vested in their contributions and actual earnings thereon. Vesting in Company or participating subsidiaries’ contributions occurs upon the earlier of completion of 24 months of Plan participation, 36 months of service with the Company or affiliated companies or upon the occurrence of certain events as defined in the Plan document.

(f) Investment Options

Plan investments are participant directed. Upon enrollment in the Plan, a participant may direct his or her employee contributions in 1% increments in any of twelve investment fund options, including a self-directed brokerage account managed by Charles Schwab & Co., Inc. Participants may change or transfer their investment options at any time via telephone or a secured Internet website.

(g) Loans to Participants

Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of the lesser of $50,000, or 50% of their vested account balance, reduced by the highest outstanding loan balance during the preceding 12 months and limited by certain restrictions in the Plan document. A fee of $50 is charged to a participant’s account when a loan is initiated. Loan transactions are treated as a transfer between the investment fund and the loan fund. Loan terms shall not be for more than five years. The loans are secured by the balance in the participant’s account and bear interest at a rate commensurate with local prevailing rates as determined by the Plan administrator. Principal and interest are paid ratably through payroll deductions.

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(h) Payment of Benefits

Upon termination of service, a participant is entitled to receive a lump-sum amount equal to the value of the participant’s vested interest in his or her account, or, if elected by the participant, monthly installments calculated annually over a period not to exceed the lesser of 15 years or the participant’s life expectancy. Partial lump-sum distributions are also available after termination of service.

(i) Expenses

Expenses relating to the purchase or sale of investments are included in the cost or deducted from the proceeds, respectively. Direct charges and expenses, including investment manager fees attributable to specific investment funds, may be charged against that investment fund. Administrative expenses such as trustee, auditor, general plan recordkeeping and Internal Revenue Service user fees may be paid directly from the Master Trust.

(j) Forfeitures

Forfeitures are used to reduce future employer contributions. Certain forfeitures may be restored if the participant is reemployed before accruing five consecutive break in service years, as defined in the Plan document. For the periods ended December 31, 2003 and 2002, employer contributions were reduced by $140,997 and $0, respectively, by forfeited nonvested accounts. At December 31, 2003 and 2002, forfeited nonvested accounts totaled $8,085 and $3,911, respectively.

(2) Summary of Significant Accounting Policies

(a) Basis of Accounting

The accompanying financial statements of the Plan have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Certain reclassifications were made to conform the prior year financial statements to the current presentation.

(b) Investment Valuation and Income Recognition

The Plan’s interest in the Master Trust, except for the guaranteed investment contracts and pooled separate account, is valued at fair value based on quoted market prices of the underlying investments. Loans to participants are valued at cost plus accrued interest, which approximates fair value.

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The Plan has entered into a pooled separate account and various benefit-responsive investment contracts with investment and insurance companies, which maintain the contributions in a general account. The accounts are credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The contracts are included in the financial statements at contract value, which approximates fair value, as reported to the Plan by the investment and insurance companies. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may direct the withdrawal or transfer of all or a portion of their investment at contract value. There are no reserves against contract value for credit risk of the contract issuer or otherwise. The average yield was approximately 5.56% and 6.29% for the periods ended December 31, 2003 and 2002, respectively. The contract rates ranged from 3.08% to 9.80% and 2.08% to 8.16% at December 31, 2003 and 2002, respectively. The crediting interest rate is based on a formula agreed upon with the issuer, but may not be less than certain percentages.

Within the Master Trust, purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

(c) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The Master Trust utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.

(d) Payment of Benefits

Benefits are recorded when paid.

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(3)	Master Trust
	Investments and investment income (loss) for the Master Trust were:

	December 31,
	2003		2002
Investments:
At fair value:
C.E.B.T. Liquid Reserve Fund	$	10,882,997	$	8,947,597
R.J. Reynolds Tobacco Holdings, Inc. Common Stock Fund		64,802,534		50,544,591
Charles Schwab Personal Choice Retirement Account		18,873,671		13,184,722
Mutual funds		512,676,577		378,787,408
		607,235,779		451,464,318
At contract value:
Guaranteed investment contracts		436,559,465		434,584,184
Pooled separate account		35,651,665		45,458,121
		472,211,130		480,042,305
Total investments	$	1,079,446,909	$	931,506,623

	Period Ended December 31, 2003		Period Ended December 31, 2002
Investment income (loss):
Net appreciation (depreciation) in fair value of investments:
R.J. Reynolds Tobacco Holdings, Inc. Common Stock Fund	$	17,149,467	$	(758,078	)
Charles Schwab Personal Choice Retirement Account		4,228,907		38,584
Mutual funds		106,297,728		533,078
		127,676,102		(186,416	)
Interest and dividend income		37,854,141		80,637
Total investment income (loss)	$	165,530,243	$	(105,779	)

	The Plan’s interest in the net assets of the Master Trust was 100% at December 31, 2003 and 2002. The Plan’s interest in investment income or loss of the Master Trust was 100% for the periods ended December 31, 2003 and 2002.
(4)	Related Party Transactions
	Certain Master Trust investments are shares of funds managed by Citibank, the trustee of the Plan; therefore, these transactions qualify as party-in-interest transactions. Administrative fees paid to Citibank for the periods ended December 31, 2003 and 2002 were $262,063 and $0, respectively.

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	The RJR common stock fund is provided as an investment option for participants in the Plan. As RJR is the Plan sponsor, these transactions qualify as party-in-interest transactions. See note 3 for a description of the amounts of RJR common stock included in Master Trust assets.
(5)	Income Tax Status
	The Plan obtained its latest determination letter dated June 11, 2003, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended since receiving this determination letter. The Company believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code, and the Plan and related trust continue to be tax-exempt. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
(6)	Plan Termination
	Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of the Plan’s termination, participants will become 100% vested in their employer contributions.
(7)	Contingency
	On May 13, 2002, a participant in the Plan filed a lawsuit in United States District Court, Middle District of North Carolina, naming the Company, R. J. Reynolds Tobacco Company, the RJR Employee Benefits Committee, and the RJR Pension Investment Committee as defendants in the lawsuit, alleging that each acted as a fiduciary of the Plan. The lawsuit claims that, following the spin-off of the Company by RJR Nabisco Holdings Corp. in June 1999, each defendant breached its fiduciary duty to Plan participants under ERISA by (i) eliminating the NGH and Nabisco, referred to as NA, common stock funds as investment options under the Plan and (ii) directing the Plan to sell all NGH and NA stock by January 31, 2000. The lawsuit is filed on behalf of a purported class of Plan participants similarly situated to the plaintiff, but no class has been certified by the court. On July 29, 2002, defendants filed a motion to dismiss, which the court granted on December 10, 2003. On January 7, 2004, the plaintiff appealed to the United States Court of Appeals for the Fourth Circuit. The expenses incurred in defending the case and the outcome of the lawsuit will be paid by the Company and will not impact the Plan.

**********

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R. J. Reynolds Capital Investment Plan

Form 5500, Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

December 31, 2003

	Description of Investment,
	Including Maturity Date,
Identity of Issue, Borrower,	Rate of Interest, Collateral,	Number of shares		Current
Lessor or Similar Party	Par or Maturity Value	or units	Cost	Value
Loan Fund	Participant loans, (1,826 loans with interest rates ranging from 5.0% to 10.5% and maturity dates ranging from 1/30/04 – 1/30/09)	—	—	$	15,149,526
				$	15,149,526

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EX-99.2

Exhibit 99.2

Savings and Investment Plan for Employees
of R. J. Reynolds Tobacco in Puerto Rico

Financial Statements and Supplemental Schedule

December 31, 2003 and 2002

(with Report of Independent Registered Public Accounting Firm Thereon)

Savings and Investment Plan for Employees of
R. J. Reynolds Tobacco in Puerto Rico

Table of Contents

	Page
Report of Independent Registered Public Accounting Firm		1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 2003 and 2002		2
Statements of Changes in Net Assets Available for Benefits for the Periods Ended December 31, 2003 and 2002		3
Notes to Financial Statements		4-8
Supplemental Schedule — Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2003		9

Note: Supplemental schedules, other than the one listed above, are omitted because of the absence of conditions under which they are required by Department of Labor Rules and Regulations for Reporting and Disclosures under the Employee Retirement Income Security Act of 1974.

Report of Independent Registered Public Accounting Firm

RJR Employee Benefits Committee of Savings and Investment Plan for Employees of R. J. Reynolds Tobacco in Puerto Rico:

We have audited the accompanying statements of net assets available for benefits of the Savings and Investment Plan for Employees of R. J. Reynolds Tobacco in Puerto Rico, referred to as the Plan, as of December 31, 2003 and 2002, and the related statements of changes in net assets available for benefits for the periods then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2003 and 2002, and the changes in net assets available for benefits for the periods then ended in conformity with U.S. generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ KPMG LLP

Greensboro, North Carolina
May 21, 2004

Savings and Investment Plan for Employees of
R. J. Reynolds Tobacco in Puerto Rico

Statements of Net Assets Available for Benefits

December 31, 2003 and 2002

	2003		2002
Assets:
Investments, at fair value (notes 1, 2, 3 and 4):
Vanguard LifeStrategy Conservative Growth Fund	$	478,080	$	355,126
Vanguard LifeStrategy Growth Fund		625,058		595,894
Vanguard LifeStrategy Moderate Growth Fund		455,126		538,449
Vanguard Total International Stock Index Fund.		61,528		37,813
Vanguard Total Stock Market Index Fund		2,524,790		2,038,952
Vanguard Retirement Savings Trust		2,672,558		2,180,204
RJR Common Stock Fund		68,486		47,065
Participant loans		164,043		153,801
Total investments		7,049,669		5,947,304
Receivable – investment income		15,754		—
Net assets available for benefits	$	7,065,423	$	5,947,304

See accompanying notes to financial statements.

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Savings and Investment Plan for Employees of
R. J. Reynolds Tobacco in Puerto Rico

Statements of Changes in Net Assets Available for Benefits

Periods Ended December 31, 2003 and 2002

	2003		2002
Additions:
Investment income (notes 1, 2, 3 and 4):
Net appreciation in fair value of investments	$	902,143	$	3,599
Interest and dividend income		196,606		1,305
Total investment income		1,098,749		4,904
Contributions:
Employer contributions		126,102		—
Participant contributions		415,329		—
Total contributions		541,431		—
Total additions		1,640,180		4,904
Deductions — benefits paid to participants		522,061		—
Net increase in assets available for benefits		1,118,119		4,904
Net assets available for benefits at beginning of period		5,947,304		5,942,400
Net assets available for benefits at end of period	$	7,065,423	$	5,947,304

See accompanying notes to financial statements.

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Savings and Investment Plan for Employees of
R. J. Reynolds Tobacco in Puerto Rico

Notes to Financial Statements

(1)	Plan Description
	The following brief description of the Savings and Investment Plan for Employees of R. J. Reynolds Tobacco in Puerto Rico, referred to as the Plan, is provided for general information purposes only. Participants should refer to the Plan document for more complete information.
	(a) General
	The Plan is a voluntary defined contribution plan covering all regular, full-time employees, and certain non-regular employees who have accumulated 1,000 or more hours of service as defined in the Plan document, of R. J. Reynolds Tobacco (CI), Co., a Cayman Islands corporation, referred to as the Company, in Puerto Rico. The RJR Employee Benefits Committee, referred to as the Committee, controls and manages the operation and administration of the Plan. Banco Popular de Puerto Rico serves as the trustee of the Plan, and The Vanguard Group, referred to as Vanguard, serves as the recordkeeper for the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, referred to as ERISA.
	On February 6, 2004, R.J. Reynolds Tobacco Holdings, Inc., referred to as RJR, registered with the Securities and Exchange Commission an additional two million shares of RJR common stock for issuance pursuant to the Plan and one other plan sponsored by RJR.
	On December 31, 2002, an amendment was made to the Plan changing the Plan year from December 30 to a calendar year effective January 1, 2003. As a result, the period ended December 31, 2002 represents a one day Plan year.
	Prior to April 2002, the participants in the Plan were employed by R. J. Reynolds Tobacco Co., a Delaware corporation. Effective April 1, 2002, certain employees of R. J. Reynolds Tobacco Co. were transferred to the Company and the Plan was amended to include the Company as a participating company in the Plan.
	(b) Contributions
	Each year, participants may make basic contributions of up to 6% of compensation, as defined in the Plan document, on a pre-tax or after-tax basis. In addition, participants may make supplemental contributions on a pre-tax or after-tax basis of up to 16% of compensation, including the basic contributions. Pre-tax supplemental contributions may only be made by participants making the maximum basic contribution on a pre-tax basis, and total pre-tax contributions are limited to the lesser of $8,000 or 10% of compensation. For participants hired prior to January 1, 2004, the Company contributes an amount equal to 50% of the basic contributions that a participant contributes to the Plan. On May 21, 2004, the Committee approved an amendment to the Plan, effective January 1, 2004, that for participants hired on or after January 1, 2004, the Company will contribute an amount equal to 100% of the basic contributions that a participant contributes to the Plan. Contributions are subject to certain Puerto Rico Internal Revenue Code limitations.

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(c) Participant Accounts

Each participant’s account is credited with the participant’s contributions and allocations of the Company’s contributions and Plan earnings, and debited with the participant’s withdrawals, Plan losses and an allocation of administrative expenses. Allocations are based on participant contributions or account balances, as defined in the Plan document. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

(d) Vesting

Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in Company contributions occurs upon the earlier of completion of 24 months of Plan participation, 36 months of service with the Company or affiliated companies or upon the occurrence of certain events as defined in the Plan document.

(e) Investment Options

Plan investments are participant directed. Upon enrollment in the Plan, a participant may direct contributions in 1% increments to any of seven investment fund options. Participants may change or transfer their investment options at any time via telephone.

(f) Loans to Participants

Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of the lesser of $50,000, or 50% of their vested account balance, reduced by the highest outstanding loan balance during the preceding 12 months and limited by certain restrictions in the Plan document. Loan transactions are treated as a transfer between the investment fund and the loan fund. Loan terms shall not be for more than five years, except for the purchase of a primary residence, which shall not exceed ten years. The loans are secured by the balance in the participant’s account and bear interest at a rate commensurate with local prevailing rates as determined by the Plan administrator. Principal and interest is paid ratably through payroll deductions.

(g) Payment of Benefits

Upon termination of service, a participant is entitled to receive a lump-sum amount equal to the value of the participant’s vested interest in his or her account, or for certain participants, monthly installments calculated annually over a period not to exceed the lesser of 15 years or the participant’s life expectancy, if certain requirements set forth in the Plan document are met.

(h) Expenses

Expenses relating to the purchase or sale of investments are included in the cost or deducted from the proceeds, respectively. Direct charges and expenses, including investment manager fees attributable to specific investment funds, may be charged against that investment fund. Administrative expenses such as trustee, auditor, general plan recordkeeping and Internal Revenue Service user fees may be paid directly from the Plan; however, for the Plan periods ended December 31, 2003 and December 31, 2002, these administrative expenses were paid by the Company. Administrative expense paid by the Company for the periods ended December 31, 2003 and 2002 were $51,770 and $0, respectively.

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	(i) Forfeitures
	Forfeitures are used to reduce future employer contributions. Certain forfeitures may be restored if the participant is reemployed before accruing five consecutive break-in-service years, as defined in the Plan document. Employer contributions were not reduced by forfeited nonvested accounts for the periods ended December 31, 2003 and December 31, 2002. At December 31, 2003 and 2002, forfeited nonvested accounts totaled $2,847 and $5, respectively.
(2)	Summary of Significant Accounting Policies
	(a) Basis of Accounting
	The accompanying financial statements of the Plan have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
	(b) Investment Valuation and Income Recognition
	The Plan’s investment in the RJR Common Stock Fund is stated at fair value as determined by quoted market prices. Shares of mutual funds are valued at the net asset value of shares held by the Plan at year-end. Investments in common trust funds, referred to as the funds, are stated at estimated fair values, which have been determined based on the unit values of the funds. Unit values are determined by the organization sponsoring such funds by dividing the fund’s net assets at fair value by its units outstanding at each valuation date. Loans to participants are valued at cost plus accrued interest, which approximates fair value.
	Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
	(c) Use of Estimates
	The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those estimates. The Plan utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
	(d) Payment of Benefits
	Benefits are recorded when paid.

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(3)	Investments
	Investments that represent 5% or more of the Plan’s net assets were:

	December 31, 2003		December 31, 2002
Vanguard LifeStrategy Conservative Growth Fund, 32,880 and 27,701 shares, respectively	$	478,080	$	355,126
Vanguard LifeStrategy Growth Fund, 34,420 and 41,497 shares, respectively		625,058		595,894
Vanguard LifeStrategy Moderate Growth Fund, 27,401 and 38,821 shares, respectively		455,126		538,449
Vanguard Total Stock Market Index Fund, 97,145 and 101,592 shares, respectively		2,524,790		2,038,952
Vanguard Retirement Savings Trust, 2,672,558 and 2,180,204 shares, respectively		2,672,558		2,180,204

The Plan’s investments, including gains and losses on investments bought and sold, and those held during the period, appreciated (depreciated) in value as follows:

	Period ended		Period ended
	December 31, 2003		December 31, 2002
Mutual funds	$	883,999	$	5,313
RJR Common Stock Fund		18,144		(1,714	)
	$	902,143	$	3,599

(4)	Related Party Transactions
	Certain Plan investments are shares of mutual funds and units of participation in the Retirement Savings Trust, a common trust fund, both of which are managed by Vanguard. Vanguard is the recordkeeper as defined by the Plan; therefore, these transactions qualify as party-in-interest transactions.
	The RJR Common Stock Fund is provided as an investment option for participants in the Plan. As RJR is the parent of the Plan sponsor, these transactions qualify as party-in-interest transactions. See note 3 for a description of the amounts of RJR common stock included in Plan assets.

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(5)	Income Tax Status
	The Plan’s latest determination letter issued by the Puerto Rico Treasury Department is dated February 27, 1992. The Plan has been amended since receiving this determination letter. The Plan is intended to comply with Section 1165(a) of the Puerto Rico Income Tax Act of 1954, referred to as ITA. The Plan is required to operate in conformity with the ITA to maintain its qualification. The United States qualification of the Plan was dropped, effective with the 1995 plan year. The Committee is not aware of any course of action or series of events that have occurred that might adversely affect the Plan’s qualified status. The Committee believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the ITA, and the Plan and related trust continue to be tax-exempt. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
(6)	Plan Termination
	Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of the Plan’s termination, participants will become 100% vested in their employer contributions.

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Savings and Investment Plan for Employees of
R. J. Reynolds Tobacco in Puerto Rico

Form 5500, Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

December 31, 2003

		Description of Investment,
		Including Maturity Date,
		Rate of Interest,	Number of
Identity of Issue, Borrower,		Collateral,	shares			Current
Lessor or Similar Party		Par or Maturity Value	or units		Cost	Value
*	Vanguard LifeStrategy Conservative Growth Fund	Mutual Fund		32,880	**	$	478,080
*	Vanguard LifeStrategy Growth Fund	Mutual Fund		34,420	**		625,058
*	Vanguard LifeStrategy Moderate Growth Fund	Mutual Fund		27,401	**		455,126
*	Vanguard Total International Stock Index Fund	Mutual Fund		5,783	**		61,528
*	Vanguard Total Stock Market Index Fund	Mutual Fund		97,145	**		2,524,790
*	Vanguard Retirement Savings Trust	Common/Collective Trust Fund		2,672,558	**		2,672,558
*	RJR Common Stock Fund	Company Stock Fund		3,767	**		68,486
	Loan Fund	Participant loans, (27 loans with interest rates ranging from 5.25% to 9.25% and maturity dates ranging from 01/01/04 – 10/01/08)		—	—		164,043
						$	7,049,669

*	Denotes a party-in-interest.
**	Cost information is not required for participant-directed investments and, therefore, is not included.

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