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February 19th, 2012:

Smoking concerns may prompt ban on SIC investment in tobacco firms

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Concern about the number of Shetlanders still smoking themselves to death may prompt Shetland Islands Council to stop investing funds in tobacco companies. The move could cost around £390,000 a year in lost income but some councillors believe it is a price worth paying.

An attempt to boycott Imperial Tobacco and British Allied Tobacco was made at yesterday’s meeting of the executive committee, led by Betty Fullerton, the former NHS Shetland chairwoman. But the committee was told that the decision was one which only the whole council can make.

However, the chance to act will arise in the next few weeks when the council sits down to review its investment policies. It will not be an easy decision to make, given that spending plans have already been agreed for using the £390,000 tobacco gains and any political decision to wilfully cut council income during financial hard times may anger many in the community.

Councillor Jonathan Wills was concerned about how much the “tobacco epidemic” was costing the council in lost working time. And, with one Shetlander a week dying from tobacco-related illness, according to his figures, he wondered how making money from tobacco sat with the council’s corporate policy on a healthier and fairer Shetland.

He said if the local authority continues profiting from what is essentially the sale of drugs it should perhaps also turn the empty Craigielea home into a brothel because that would be a money-spinner too.

Mrs Fullerton said there was no safe level of tobacco consumption and it bore a cost for the council in sickness and time for employees to smoke.

A loss of £390,000 would be acceptable, she said, because it would help save the country money and the council. Alternative ways of investing council funds might even perform as well as tobacco shares, she said.

She won support from councillor Caroline Miller who said the effect of tobacco use on families was “absolutely horrendous”.

But councillor Alastair Cooper felt he had to point out that disinvesting itself of tobacco shares did not mean people in Shetland would smoke any less. “We’re kidding ourselves if we’re saying that,” he told the meeting. It would be more effective to put some of the profits into persuading council staff to give up.

Councillor Gary Robinson had his doubts too, predicting that in a few years’ time there will be a pronouncement that people should stop drinking alcohol too. What would the council invest in, he asked, if everyone got to ban their pet dislikes?

Councillor Robert Henderson said ceasing tobacco investments was “not going to make the slightest difference in Shetland whatsoever”.

The issue of ethical investment of funds for profit has cropped up many times over the years, usually at meetings of Shetland Charitable Trust. Despite hours of passionate debate absolutely nothing has changed.

Yesterday’s debate was prompted by a report into three different scenarios which would help the council avoid its funds being used for dodgy purposes, such as the manufacture of arms and torture implements, nuclear weapons and exploitative mining.

The first scenario looked at the example set in Norway where the £370 billion government pension fund – one of the biggest retirement funds in the world – ensures that funds are not invested in 54 excluded companies. Interestingly one of them, Serco, is a bidder to take over the NorthLink shipping contract for Shetland and Orkney.

Only six of the companies feature on the UK Stock Market and boycotting them over the past 10 years would have cost the council around £1.4 million a year in lost income, according to council treasury accountant Colin Bain.

The second scenario involved boycotting the two UK Stock Market-listed tobacco companies, resulting in around £390,000 a year less to the council. Shares in tobacco often do better than general shares in the Stock Market, despite the decline of smoking in the West.

The third scenario featured the FTSE for Good index, which measures the performance of UK companies which have globally recognised high standards of corporate responsibility. It excludes tobacco, nuclear power and the arms industries.

If the council had been adhering to that investment system it could have cost it around £1.28 million a year in lost income.

Acting head of finance Hazel Sutherland warned that the council had set a budget based on achieving a 4.5 per cent return on its investments so any changes to the policy could result in a shortfall and therefore a budgeting problem for the local authority.

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2012 Report on the future of Philip Morris in Asia

2012 Report on the future of Philip Morris in Asia

Translation: Growth = Death and Suffering inflicted for profit – Never mind the kids they are our future.

  • Asia Remains PM’s Key Growth Driver In 2012 And BeyondBased on an in-depth, bottom up analysis that we performed late last year, we continue to believe PM’s business in Asia is the company’s most valuable asset and is potentially worth $75B or $42 per share. We continue to expect PM’s profits in Asia could double to $10B by 2020. We maintain our Outperform rating on PM shares and it remains our top stock pick for 2012. Please see our original, detailed report on Asia published on 12/16/11 which includes an analysis of key fundamental drivers for each market in Asia, including demographics, economic growth, regulatory trends, cigarette price and consumption trends, and social attitudes toward cigarette consumption.
  • Individual Country Models Suggest Significant Growth Opportunity – We’ve updated our initial country P&L’s for PM’s top 5 markets in Asia and have included them in this report.
  • Indonesia Will Likely Drive The Majority Of PM’s Asian Growth – Our analysis suggests Indonesia is PM’s top market opportunity, as a combination of favorable demographics, economic fundamentals and competitive dynamics should allow PM’s profits in Indonesia to almost quadruple to $5.2 billion by 2020, at that point representing more than 50% of PM’s total Asia segment OCI. We feel Indonesia’s potential earnings power is misunderstood by the market.
  • Japan Is Highly Profitable, But Has Limited Growth Prospects – Japan has long been among the most profitable cigarette markets in the world. We estimate that Japan represented about 46% of PM’s Asia segment profit in 2011, with approximately 57% margin. Although comps will likely be challenging in 2012, we expect OCI to modestly increase, aided by a stronger yen.
  • China Could Be A Game Changer For PM – The real upside potential for PM in China lies in the company’s opportunity to exploit potential strategic alternatives for CNTC. We think of China as a call option on the stock.
  • The Philippines, Korea, And Australia Are Important Markets – Opportunity in the Philippines’ and Korea stems from the movement toward premium products. Australia is likely a challenging, but profitable market.

Download PDF : 2012 PM Asia Business – A Land of Opportunity

Download PDF : 2012 PM Asia In-Depth Analysis Detailed Report