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April 23rd, 2012:

Pack Of Cigarettes ‘May Rise To $100′ In NZ

Instead Donald Tsang chose the comfort of Charles HO Tsu Kwok tobacco tycoon’s yacht in Macau 16 days after our 2012 (no tobacco tax increase) budget.

The New Zealand government says the $100 a pack suggestion is "probably unlikely".

The price of a packet of cigarettes is set to rise significantly as New Zealand looks to stamp out smoking

11:14am UK, Monday April 23, 2012

The cost of a packet of cigarettes in New Zealand could rise to as much as $100 dollars – around £50 – by 2020 amid moves to stamp out smoking.

The Ministry of Health wants New Zealand to be smoke free by 2025 and the suggested increase gives the first hint of the drastic measures being discussed.

A document released under the Official Information Act to the country’s 3 News website features a number of pricing scenarios – with the most extreme showing a single cigarette costing the equivalent of £2.50.

One option being considered is a 10% increase on a pack of 20 cigarettes year-on-year from 2013 to 2025, meaning it would cost $40 (£20) a pack by 2024.

But a second scenario would see packs at $100 each by 2020, achieved by an immediate shock rise of 30% to 60%, with on-going increases of 30% each year after that.

New Zealand aims to be smoke free by 2025

This model would reach the 2025 target to stamp out smoking completely, but is described in the paper as “probably unrealistic”.

The most likely model would see a shock tax increase next year, and then a 10%-a-year rise, which would mean a packet of cigarettes costs around $60 (£30) by 2025.

Other ideas discussed in the document include regulating tobacco as a highly toxic substance, a ban on smoking in cars with children, a doubling of anti-smoking media campaigns and removing tobacco from duty-free sale.

The briefing paper said: “If we are to continue to lower smoking prevalence we need to both increase the numbers who successfully quit smoking, and reduce smoking initiation among young people.

“Tobacco taxation is the single most effective intervention available to drive down smoking prevalence figures.”

The Ministry of Health has said that the paper is an internal policy discussion and does not represent Government policy.

Global ignorance of tobacco’s harm to cardiovascular health costing lives

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From Tootsie Rolls to tobacco: What’s in your CPP fund

H. J. Heinz  is just one of hundreds of companies the Canadian Pension Plan fund has investments in.

H. J. Heinz is just one of hundreds of companies the Canadian Pension Plan fund has investments in. (Gene J. Puskar/Associated Press)



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Next time you’re sucking on a Tootsie Roll, just think — you’re sucking on your financial future.

You may also be sipping on it during your morning coffee or slowly squirting it out on your favourite hotdog.

That’s because Tootsie Roll Industries, Tim Hortons Inc. and H.J. Heinz Company are just a few of the hundreds of companies Canadians have a stake in as part of their Canada Pension Plan fund.

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The fund, managed by the Toronto-based CPP Investment Board (CPPIB), was set up in 1997 by the federal government and provinces to invest the contributions not needed to pay for current benefits to the CPP.

The investment philosophy is simple – “maximize investment returns without undue risk of loss.”

“It was set up to build a diversified global portfolio, to help contribute to the sustainability of the CPP,” said Don Raymond, senior vice-president and chief investment strategist for the CPPIB.

And those investments are diversified among different assets, like real estate holdings, bonds and public equity investments that include 2,600 international and 500 Canadian public companies.

A list of some of the companies in the CPP fund portfolio

Air Canada, Athabasca Oil Sand Corp, B2 Gold Corp

Bank of Montreal, Bombardier, Canadian Imperial Bank of Commerce, Canadian Tire

Haliburton, Heniken, H.J. Heinz Company, Home Depot, Johnson and Johnson, Kraft Foods,Lockheed Martin

Imperial Tobacco Group, Lululemon Athletica, Lockheed Martin

MasterCard, Mitsubishi Corp, Nintendo, Nissan Motor Co.,

Pepsi, Philip Morris International, Procter and Gamble, Rogers, Qantas, Quebecor,

Rolls Royce Group, Shoppers Drug Mart, Telus, Tim Hortons Inc., Time Warner

Toshiba, Toyota Motor Corp., Tootsie Roll Industries Inc, Wal-Mart

(As of March 31, 2011)

For example, take the Rockefeller Center and the McGraw-Hill Building shown in the opening credits of Saturday Night Live – Canadians own a part of them.

Complaining about the profits of banks and oil companies? Canadians may think twice, since they’re invested in those, too.

And next time Ontario motorists are driving along Highway 407, they may be surprised to learn that they own a 29 per cent chunk of that roadway as well. (In fact, it’s CPPIB’s biggest direct investment in a private asset.)

Fund more than triples

Canadians used to own a $300-million stake in Skype, until it was purchased by Microsoft. But that purchase more than tripled the CPPIB’s initial investment.

Air Canada, Apple, LuluLemon, Best Buy, KraftFoods, Heinken, Wal-Mart — all make up part of the largest single-purpose pension in Canada and one of the largest in the world.

According to the CPPIB website, over the last 10 years, the fund has grown from nearly $49 billion in assets to almost $153 billion. During that time period, the annualized rate of return was 5.7 per cent.

Raymond said the fund needs to earn a 4.2 per cent rate of return above inflation to make the whole plan sustainable.

But Raymond readily admits you can’t earn that kind of return “without taking some investment risk.” (He says as a comparison, the yield of a 10-year bond in Canada is two per cent, but with inflation at two per cent, the real yield is zero.)

When looking for assets, the board tries to find those that will outperform the stocks and bonds already in the portfolio.

“We go and buy a significant chunk of the 407. We have to decide which of those stocks and bonds that we would otherwise own that we’re now going to sell in order to buy that part of the 407,” Raymond said. “If the 407 outperforms over a long period of time those stocks and bonds that we’ve sold, then we’ve added value relative to the reference portfolio.”

In 2006, the fund’s board decided to become “active managers,” Raymond said, meaning the board would choose individual stocks, bonds, buildings and infrastructure assets they thought would outperform the global portfolio that consists of of 65 per cent stocks and 35 per cent bonds.

“By definition, diversification, you expect some investments to perform well and some investments not to perform well. The more diversified you are, the more likely that will happen.”

Not every year has seen growth. In 2009, during the global financial crisis, the fund, like many, took a big hit, plummeting 18.6 per cent and losing $24 billion.

‘It’s more difficult to change the CPP investment board act than it is to change the Canadian Constitution.’—Don Raymond, CPPIB

This sparked a backlash from some critics who complained the top executives of the board received $7 million in bonuses despite the losses.

The fund has also been criticized for some of its holdings, which include oil companies like Haliburton, tobacco companies like Imperial Tobacco and Philip Morris and munitions manufacturers like Lockheed Martin and BAE Systems.

But the fund has a strict “investment only” mandate and, by law, cannot take political or moral considerations into account when choosing investments.

“We have essentially said we will invest in anything that would be legal or a business that would be legal if carried on in Canada,” Raymond said.

Changing that mandate would require the federal government and two-thirds of the provinces representing two-thirds of the population to agree.

“It’s more difficult to change the CPP investment board act than it is to change the Canadian constitution,” Raymond said.

Bigger deals ‘can come back to haunt you’

Leo Kolivakis, publisher of the Pension Plus blog and a former senior investment analyst at the Caisse de dépôt et placement du Québec and the Public Sector Pension Investment Board, offered praise for the board, saying it has one of the best governance structures in the world.

“I think they’re doing a great job. They’re very good at what they do,” he said, adding that the 5.7 per cent rate of return over 10 years is “decent.”

But Kolivakis said he does have some concerns.

“My biggest concern with any fund of that size is that economies of scale catch up to them, meaning once you’re managing assets they’re managing, you become too big, too lethargic.”

Kolivakis said the size of the fund forces the board to invest in bigger and bigger deals.

“That works well when the economy is doing well and the markets are doing well, but it can come back to haunt you,” he said.

“What I ‘m afraid of is because of their size they’re going to be forced to deploy their capital and possibly make investments that have a lot more risk. But I don’t want to overemphasize that point, because right now they are able to manage their size.”

3rd UPDATE: Ex-Bureaucrats Exit Japan Tobacco Management Duo As Govt Share Sale Looms –
JT taps Executive Deputy President Koizumi as new president, with current
president Kimura to become chairman

— New management team will be the first not to have a former finance
ministry official as chairman or president

— Kimura suggests JT won’t return any short-term gains to shareholders

(Recasts, adds details of value of potential government share sale in 6th

By Hiroyuki Kachi

TOKYO (Dow Jones)–As Japan’s government lines up a multi-billion-dollar
share sale to slash its 50% holding in Japan Tobacco Inc. (2914.TO), the
cigarette giant Monday unveiled a new lead management pairing that for
the first time in 27 years doesn’t feature at least one former

The move comes as the world’s third-largest tobacco company by sales
volume, known as JT, continues to prepare and press the case for the full
privatization it says it needs to better compete with global rivals like
Morris International Inc. (PM) and British American Tobacco PLC (BTI).

JT says it wants to compete on an “equal footing” with its fully
privately owned rivals, and has stepped up efforts to obtain a bigger
slice of growing overseas markets with its global flagship brands, such
as Winston and Camel.

Its $15 billion acquisition of the U.K.’s Gallaher Group PLC in 2007–the
biggest-ever foreign acquisition by a Japanese company–helped it gain
ground in overseas markets such as Russia and the Middle East.

Meanwhile the government is working on plans to sell about 16.6% of the
outstanding shares in JT to raise funds for reconstruction after last
year’s earthquake and tsunami disasters.

At Monday’s closing share price of Y451,000, a 16.6% stake in JT is worth
about Y749 billion, or $9.2 billion. JT said earlier this year it will
consider buying back some of its own shares that the government is
planning to sell.

In a statement Monday, JT said Executive Deputy President Mitsuomi
Koizumi will become its new president and chief executive, while current
president and CEO Hiroshi Kimura will become chairman. Current chairman
and former finance ministry official Yoji Wakui will step down.

Neither of the new management duo previously worked in Japan’s Ministry
of Finance. But ever since the former national tobacco monopoly was
partially privatized in 1985, at least one of these posts — the top two
in the company’s hierarchy — has been occupied by a former finance
ministry official.

However, incoming chairman Kimura said there was no deliberate intention
to rid management of ex-MOF officials.

“We haven’t decided on the latest personnel matters with the firm
intention of removing ex-ministry officials,” he said, stressing that
managers would be chosen based on qualifications, regardless of any
former position in the public or private sectors.

The changes will take effect upon approval at a board meeting to follow a
general shareholders meeting in late June.

As well as seeking investor clearance at the meeting, JT will also field
proposals from minority shareholder The Children’s Investment Fund, a
U.K.-based activist hedge fund, which is seeking a shift in dividend
policy among other things.

Kimura said management had no major differences with the hedge fund,
other than on how soon the company would return profits to shareholders.

Earlier this year, TCI requested that JT management include three
proposals on the agenda for the annual shareholders meeting in June,
people familiar with the matter said. The proposals were a hike in the
dividend payout for this fiscal year through March to Y20,000 per share
from the planned Y4,000; a buyback of 1.6 million common shares by June
2013; and the cancellation of JT’s holdings of its own shares.

Kimura said JT won’t be returning any short-term benefits to
shareholders, and that the company would disclose full details Thursday
along with earnings results for the year ended March.

Earlier this year JT raised its net profit outlook for the 12 months by
17%, citing a steady recovery in its domestic tobacco business in the
wake of last year’s March 11 disasters.

-By Hiroyuki Kachi, Dow Jones Newswires; 813-6269-2789;