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Prospectus Special_ Markets Asian Americans Introduction The 1980 U.S. Census revealed a fundamental shift in the growth patterns of the U.S. minority population. For the first time, the growth rate among Americans with an Asian heritage was greater than that of all other ethnic/racial groups. This growth resulted from several factors, including: 1. Liberalized immigration laws which removed previously erected barriers to Asian entry into the U.S. 2. Political and economic upheavals in Southeast Asia (Vietnam, Cambodia, Laos, Thailand) 3. Fconomic.and educational advances in the Pacific Rim countries (Japan, Korea, Tawain, China), resulting in increased travel to and contact with the U.S. As a result of the growth engendered by these factors, Asian Americans now rank as the third largest minority group in the U.S. Moreover, the population of this group is expected to expand exponentially over the next several decades. This growth, coupled with a high level of cultural/ethnic identification, has caused increasing interest in the viability of developing specialized campaigns to target the Asian American market. This perspective is being undertaken to provide information usable in determining whether the Asian American market presents such a marketing opportunity for RJR lobacco. a

Prospectus Special Markets - Asian Americans Po~~._ ulation __ _..___..____._.__...._.._.... The 1980 Census estimated that roughly 3.3 million Asian Americans resided in the U.S. at the time of their sampling. According to Dun and Bradstreet, the Asian American population has grown 14 times faster than t6-,e general American population since that time. They estimate that between 1980 and 1985, the number of Asian Americans increased by 55%, exceeding five million in 1985. These five million people consist primarily of 8 nationalities--Chinese, F"ilipino, Japanese, Vietnamese, Korean, Asian Indians, Laotians and Kampucheans. Nationality Population within U.S. % of Total Chinese 1079.4 21.0 Filipino 1051.6 20.4 Japanese 766.3 14.9 Vietnamese 634.2 12.3 Korean 542.4 10.6 Asian Indian 525.6 10.2 laotian 218.4 4.2 Kampuchean 160.8 3.1. Other 169.2 3.3 5147.9 100.0 Source: Population Reference Bureau The majority of these Asian Americans reside in the large metropolitan areas of California, Hawaii, New York, Illinois and Texas. Reflecting intinigration entry points for the majority of Asians, California is home to 36% of all Asian Americans, with almost half this number residing in or around Los Angeles. Unlike the two largest minority groups, Blacks and Hispanics, the Asian American population growth is being fueled by immigration rather than fertility rates. In 1980, just over 400,000 Asians immigrated to the U.S. E3v 1983, annual Asian immigration into the U.S. reached 700,000, a level representing well over half the legal immigration into the U.S. and exceeding total Asian immigration into the U.S. during the three decades spanning 1931 to 1960. This trend is expected to continue over the next several decades, with the heaviest concentration of new immigrants expected to arrive from Korea, The Philipines and Southeast Asia. By 1990, the Asian American population is expected to grow to 5.9 million people and to exceed 8 million by the year 2000.

Pros.L_'ectus _______. ____.----- Special_Markets - Asian Americans Uemo .9 _. _ _. ra h.i. . _c_s _ T'_....___ In general, Asian Americans tend to be better educated, with higher family incomes than the general U.S. population. Age % 18-2.4 20 25-34 32 35-49 28 50-f 20 Income ($) Less than 15,000 30 Mean 26.4% 15,000 - 24,999 25 Median 22.7% 25,000 - 49,999 36 50,0004 9 Educati on l.ess_than High School 25 HS Grad/1-3 Yrs. Coll. 38 College Grad. 37 Source: 1980 U.S. Census While the 1980 Census figures can be used to provide a snapshot view of the Asian American population, difficulties do exist in interpreting and using this data. These difficulties exist for three reasons. First, differences exist between the various nationalities/ethnic groups comprising this market. For example, while the median income for Japanese Americans exceeds $27,000, that of the Vietnamese is less than $13,000. Similarly, older Asian Americans tend to be less well-.educated than younger Asian Americans. Second, the fluid nature of the Asian American market impacts one's ability to accurately read it. Most importantly, the differences in education between the various subgroups of Asian Americans will continue to grow as the Asian immigrant population continues to be comprised more of Southeast Asians (who tend to be less educated) and less of Japanese, Indians and Chinese. This expected shift in education levels has important ramifications for any marketing effort air;ied at the Asian American market in that less education generally translates into lower incidences of English usage. For example, American bemoqra_phics esti- mates that 93% of all Southeast Asian immigrants~ to the U.S. speak a language other than English at home, compared to 44% of Japanese Americans. As the Asian immigrant population increasingly consists of less-educated Vietnamese, Thais, Laotians and other Southeast Asians, this language barrier will become increasingly significant.

Prospectus Special Markets __yAsian Americans Demoqraphi_cs (cont'd) Third, correlations which often exist between demographic traits in other market segments, do not exist in the Asian American market. For example, the Asian American population contains a large number of well-educated professionals who are not licensed in the U.S. As a result, they are forced to work in menial jobs at low pay. Because of this circumstance, the correlation between education/income which exists among most market segments does not necessarily exist in the Asian American market. Psychoqraj hics In light of the difficulties in reading and interpreting Asian American demographic data, psychographics must necessarily be of paramount importance to the marketer attempting to reach this growing segment. While slight differences do exist between the various nationalities comprising the Asian American population, research indicates that three common threads run throughout the population segment. First, the Asian American typically holds a strong belief in the value of the family. This sense of the importance of the family reaches beyond the nuclear family to the extended family and often translates into a strong identification with the commur,ity. As a result, Asian Americans have traditionally centered their lives close to hemo in enclaves of other Asian Americans. Additionally, this identification with family/community tends to enhance their receptivity to ads using Asian models. Second, the Asian American generally believes that education is the key to successful intergration into the American society. This emphasis on education is evidenced by the high percentage of Asian Americans with college degrees (37%). In addition, the Asian American's commitment to education can be seen in the disproportionate number of educational attainments/awards achieved by them. As example, although only 2% of the U.S. population, Asian Americans represented 18% of last year's Westinghouse Science Talent Search Finalists, 10% of the Julliard School's enrollment and 11% of Harvard's Freshmen class. Third, Asian American's mainta in u hel ief in the value and benefit. of work which is often compared to the Protestant Work Ethic. This belief translates into a high number of self-employed Asian Americans (as example, I in 8 Koreans own their own business) relatively low levels of unemployment and high degrees of success among Asian Americans who have resided in the U.S. for substantial periods of time.

r. . Pros ~e_ ..s --._._._.....I_...c_......tu... _ Special Markets - Asian Americans Psycho~ raphics (cont'd) These three values/beliefs are important to Asian Americans because they believe they will ultimately result in the achievement of their main objective--to effectively assimilate into U.S. culture/lifestyles. This desire to assimilate leads, in turn, to a high level of identification with those products and symbols which they view as "American." Importantly, this identification leads to brand name purchasing patterns and a highly developed sense of brand loyalty. Other Considerations In addition to the demographic/psychographic make-up of the Asian American, other factors impact a marketer's ability to effectively reach this segment. Among these factors are: The inability of many Asian Americans to read/speak English. Many older Asiarl Americans do not read English Language print, watch television or listen to the radio. Therefore, advertising efforts may have to be placed in Asian Language publications, with copy varying with language used by each publication (See Exhibit I and II for list of available media). Cultural and language differences between many nationalities/ethnic groups. These differences may prevent using a single marketing campaign to reach all Asian Americans. Many Asians, especially Southeast Asians, are even unfamiliar with the concept of advertising. Imagery has not been used by Asian marketers. It is, therefore, often not accepted well by newly arrived Asian Americans. Conclusion Given the size, growth and psychographic homogeneity of the Asian American population, this market segment would appear to be a candidate for further study by MDD and other research groups to determine whether the benefits to be derived from targeting them outweigh the potential problems and pitfalls mentioned above. Keeping in niind the high degree of brand loyalty shown by this market segment, if this target group were deemed an opportunity, actions should be taklen to ensure that RJR is the first tobacco company to specifically target this group. .

EXHIBIT I Page 1 of 2 ASIAN AMERICAN NFWSPAPERS KORE:AN AMERICAN __.._._ _a ime . 7 .- :- - s- Kore - Circulation Cir30,000._... Frequenc;/ daiT Y _ _..-. Markets L.os. Angeles orea Street Journal 0,000 aily San Francisco New York Chicago Houston Seattle/Vancouver Los Angel es Don-A-Ilbo 10,000 daily New York San Francisco West U.S./East•U.S. Chosun Ilbo 8,000 daily New York Korea Street Journal 30,000 weekly L.os Angeles ADI Korea Business News 10,000 weekly Los Anaeles CHINESE AMERICAN World Journal _.__._. 35,000 daily l.os Angeles nternational Daily 0,000 aily New York San Francisco Seattle/Vancouver Houston Honolulu L os lingel es entre Daily News 0,000 aily San Francisco Seattle/Vancouver Houston l.os Anqeles Chi na ? ;,mes Weekly New Kwong Tai Press Seattle Chinese Post PHIL.IPPINE AMERICAN 30,000 25,000 35,000 125,000 weekly weekly weekly weekly New York San Francisco West U.S./East U.S. California Seattle L.os Angeles Honolu San Francisco San Jose New York New Jersey Chicago Seattle Uanc;luVc.r Philippine American Herald Philippine American News 10,000 35,000 weekly biweekly Seattle West Coast California Examiner Philippine American Medical 25,000 biweekly L.os Angeles San Francisco Journal 1 1 20,000 monthly National

EXHIBIT I - Page 2 of 2 ASIAN AMERICAN NEWSPAPERS VIETNAMESE Circulation Frequenc y Markets Niquoi Viet 12,000 , --. c~aiTy . _. __._ .. ._ . . _ __ Los l~ng6! 1 es Vietnamese Chinese News 10,000 weekly South Dokota. Orange County l_os Angeles Viet Press 20,000 weekly Southerr California JAPANESE AMERICAN R__a..___uSh.._.._...___i___.mpo_____,_..-_____.._._.. f 40,000 daily L_os Angeles Kashu Msinichi 18,000 daily Los Angeles Hokobei Mainichi 25,000 daily San Francisco Bay Area Nichi Bei Times 25,000 daily San Francisco Bay Area U.S. Japanese Business 30,000 weekly National OCS News 25,000 weekly New York New York Journal Japan 25,000 weekly East Coast GENERAI. MARKE:T E:ast-West 25,000 weekly San Francisco Asian Week 25,000 weekly Los Angeles ereechon (lhai) 0,000 eekly San Francisco San Jose South Dakota West Coast Indochinese News 1.0,000 weekly West Coast Pacific Citizen 20,000 weekly West Coast • i

E:XHIE3IT II Page 1 ASIAN AMERICAN Mf1GA7.INES AND PERIODICAE S Circulation Erecuency Markets Korean People 35,000 monthly National Jade 50,000 quarterly national Asian Entrepreneur 100,000 monthly National Japanese Travel Guide 125,000 annually Japan Business Directories ....................................... Korean Japanese Chinese Yellow Pages ............................................... Filipino Japanese Thai