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Norway Excludes 17 Tobacco Companies From Oil Fund (Update4)  

Norway excluded 17 tobacco companies, including British American Tobacco Plc and Philip Morris International Inc., from its sovereign wealth fund based on ethical guidelines.

Altria Group Inc., Japan Tobacco Inc., Reynolds American Inc., Swedish Match AB and Imperial Tobacco Group Plc also were excluded and the shares have been sold, the Finance Ministry said today. The 2.6 trillion krone ($456 billion) fund bases its investment on ethical rules encompassing human rights, weapons manufacturing and the environment. The tobacco exclusion was proposed in April as part of an overhaul of the guidelines.

“It’s timely to exclude tobacco,” Finance Minister Sigbjoern Johnsen said in a statement. “It’s important that the ethical guidelines reflect at all times what can be considered

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Tobacco producers excluded from Pension Fund 

"When the Graver Committee proposed the current ethical guidelines, there was debate on whether to exclude tobacco producers from the Fund. Under some doubt, it was decided that tobacco should not be excluded. After the Graver Committee submitted its recommendation, there have been international and national developments through the entry into force of the WHO Framework Convention on Tobacco Control and the tightening of the Norwegian Tobacco Act. We have taken these changes on board and believe - amongst others in light of the consultative input in connection with the evaluation of the ethical guidelines - that it is timely to exclude tobacco from the Fund. It is important that the ethical guidelines reflect at all times what can be considered to be commonly held values of the owners of the Fund," says Minister of Finance Sigbjorn Johnsen.

In Report No. 20 to the Storting (Paarliament) on the Management of the GPFG, the Ministry proposed excluding tobacco producers from the Fund. The move was supported by the Storting. The specific delimitation of the tobacco criterion was described in the National Budget for 2010. The recommendation was made in line with this.

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Norway-Global gives up tobacco 

The Ministry of Finance has excluded 17 tobacco-producing companies from the investment universe of the Government Pension Fund – Global, and there is the possibility that still more could be removed.

The decision to begin excluding tobacco producers from the fund was first announced in April 2009, following a review of the existing ethical guidelines to the fund. The ministry claimed an international convention on tobacco control and a tightening of the Norwegian Tobacco Act meant earlier doubts about removing these companies had been resolved. (See earlier IPE article: Norway global to exclude tobacco and target environment)

Sigbjørn Johnsen, minister of finance, said: “We have taken these changes on board and believe – in light of the consultative input in connection with the evaluation of the ethical guidelines – that it is timely to exclude tobacco from the fund. It is important that the ethical guidelines reflect at all times what can be considered to be commonly held values of the owners of the fund.”

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Norway Excludes 17 Tobacco Companies From Oil Fund (Update4)  

Norway excluded 17 tobacco companies, including British American Tobacco Plc and Philip Morris International Inc., from its sovereign wealth fund based on ethical guidelines.

Altria Group Inc., Japan Tobacco Inc., Reynolds American Inc., Swedish Match AB and Imperial Tobacco Group Plc also were excluded and the shares have been sold, the Finance Ministry said today. The 2.6 trillion krone ($456 billion) fund bases its investment on ethical rules encompassing human rights, weapons manufacturing and the environment. The tobacco exclusion was proposed in April as part of an overhaul of the guidelines.

“It’s timely to exclude tobacco,” Finance Minister Sigbjoern Johnsen said in a statement. “It’s important that the ethical guidelines reflect at all times what can be considered to be commonly held values of the owners of the fund.”

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Norway fund shuns tobacco companies 

Norway has dropped 17 tobacco companies, including Philip Morris and British American Tobacco, from its sovereign wealth fund, adding to a growing list of stocks blacklisted by Europe’s biggest equity investor.

Imperial Tobacco, Altria, Reynolds American and Japan Tobacco were among others barred from the $455bn fund – which owns more than 1 per cent of all global stocks – after the Norwegian finance ministry ruled that the companies were in breach of the fund’s ethical guidelines.

The tobacco companies join a list of about 50 stocks excluded from the Norwegian fund on ethical grounds, ranging from arms manufacturers, such as Boeing and BAE Systems, to companies accused of environmental and labour rights violations, including Rio Tinto and Wal-Mart.

Norway has sought to make its sovereign wealth fund a role model for socially responsible investment since introducing ethical guidelines in 2003.

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Norway Excludes 17 Tobacco Companies From Oil Fund (Update3) 

Norway excluded 17 tobacco companies, including British American Tobacco Plc and Philip Morris International Inc., from its sovereign wealth fund based on ethical guidelines.

Altria Group Inc., Japan Tobacco Inc., Reynolds American Inc., Swedish Match AB and Imperial Tobacco Group Plc, were also excluded and the shares have been sold, the Finance Ministry said today. The 2.6 trillion-krone ($456 billion) fund bases its investment on ethical rules encompassing human rights, weapons manufacturing and the environment. The tobacco exclusion was proposed in April as part of an overhaul of the guidelines.

“It’s timely to exclude tobacco,” Finance Minister Sigbjoern Johnsen said in a statement. “It’s important that the ethical guidelines reflect at all times what can be considered to be commonly held values of the owners of the fund.” . . .

Cultivation of tobacco takes place mainly in the U.S., India, Brazil and China as well as in several African countries, the council said. The “extent of health hazardous child labor in tobacco cultivation in some countries can be large.” The Bill and Melinda Gates foundation also doesn’t invest in tobacco companies because they engage in “egregious” activities.

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RESEARCH ALERT-UPDATE 1-Credit Suisse cuts US tobacco sector 

Credit Suisse downgraded the U.S. tobacco sector to "market weight" from "overweight" citing concerns about a more promotional environment and the impact of federal regulation on Newport menthol cigarette maker Lorillard Inc's (LO.N) valuation.

The brokerage, which also cut Lorillard shares to "neutral," said the uncertainty about the U.S. Food and Drug Administration regulation this year reduces the ability of U.S. tobacco companies to improve valuations relative to the market.

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Tobacco producers excluded from Government Pension Fund Global  

The Ministry of Finance has decided to exclude 17 companies that produce tobacco from the Government Pension Fund Global (GPFG), based on a recommendation from the Fund’s Council on Ethics. The divestment of shares in these companies has now been completed.

“When the Graver Committee proposed the current ethical guidelines, there was debate on whether to exclude tobacco producers from the Fund. Under some doubt, it was decided that tobacco should not be excluded. After the Graver Committee submitted its recommendation, there have been international and national developments through the entry into force of the WHO Framework Convention on Tobacco Control and the tightening of the Norwegian Tobacco Act. We have taken these changes on board and believe – amongst others in light of the consultative input in connection with the evaluation of the ethical guidelines – that it is timely to exclude tobacco from the Fund. It is important that the ethical guidelines reflect at all times what can be considered to be commonly held values of the owners of the Fund,” says Minister of Finance Sigbjørn Johnsen.

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Recommendation of the Council on Ethics (PDF) 

In its Government Whitepaper no. 20 (2008-2009), the Ministry of Finance proposed that tobacco companies should be excluded from the investment universe of the Government Pension Fund Global. The proposition was supported by Stortinget (the Parliament).

In line with this, the Ministry has changed the Fund’s ethical guidelines to the effect that companies which produce tobacco are to be excluded from the Fund.

The Council on Ethics has reviewed the companies in the Fund which are classified as tobacco producers and thus subject to exclusion based on the new criterion. . . .

In its letter, the Ministry writes that, as stated in the Government Whitepaper no. 20 (2008- 2009), this new criterion for exclusion is based on the production of tobacco, not on the sale of tobacco products. Also, the criterion is limited to the production of tobacco products themselves, not to additives or ingredients used in the production of tobacco products.

The Council will therefore issue recommendations on companies which cultivate and process tobacco, and exclusion from the Fund will be recommended for all companies which manufacture products made from tobacco. Production of any form of tobacco product, regardless of its intended use, will form the basis for exclusion. . . .

2 “Altria Group's operating companies include Philip Morris USA, U.S. Smokeless Tobacco Company, John Middleton and Ste. Michelle Wine Estates. Our tobacco company brand portfolios consist of successful and well-known brand names such as Marlboro, Copenhagen, Skoal and Black & Mild. . . .

5 Recommendation

Based on the above, the Council on Ethics recommends that the companies

Alliance One International Inc., Altria Group Inc., British American Tobacco BHD, British American Tobacco Plc., Gudang Garam tbk pt., Imperial Tobacco Group Plc., ITC Ltd., Japan Tobacco Inc., KT&G Corp, Lorillard Inc., Philip Morris International Inc., Philip Morris Cr AS., Reynolds American Inc., Souza Cruz SA, Swedish Match AB, Universal Corp VA, and Vector Group Ltd.

be excluded from the Government Pension Fund Global.

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Norway kicks out Swedish Match 

Norway sovereign wealth fund has kicks out 17 tobacco producers -- including Swedish Match -- from its 450 billion dollar portfolio for ethical reasons, the government said in a statement Tuesday.

'It is important that the ethical guidelines reflect at all times what can be considered to be commonly held values of the owners of the fund,' Finance Minister Sigbjorn Johnsen said. "The divestment of shares in these companies has now been completed".

Also British groups British American Tobacco and Imperial Tobacco, US groups Altria, Philip Morris and Reynolds American and Japanese company Japan Tobacco were expelled.

The Norwegian sovereign wealth fund -- which contains nearly all of the state revenues from the oil industry in Norway, one of the world's largest oil and gas exporters -- holds 1.0 percent of the world's total stock market capitalisation.

Shares in Swedish Match, tobacco producer founded in 1917 by the “Match-king” Ivar Kreuger and today specializing in snuff, cigars and lights products, dropped 0.80 percent in Stockholm.

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• UPDATE 1-Norway drops tobacco producers from wealth fund 

Norway has dropped 17 tobacco companies, including top cigarette makers like Altria, Lorillard, Philip Morris and British American Tobacco (BAT), from its $450 billion wealth fund for ethical reasons.

The fund, which invests the Nordic nation's oil and gas wealth in foreign stocks and bonds to save for future generations, holds more than 1 percent of all global stocks.

The central bank-managed fund follows ethical guidelines set by the government and, in the past, has excluded companies that produce nuclear arms or cluster munitions, damage the environment or abuse human or workers' rights. . . .

"A rule has been adopted that in principle will exclude all production of tobacco, regardless of the percentage of business represented by tobacco production," the finance ministry said on Tuesday, adding more companies not classified in tobacco-maker indexes .TOB but which make smoking products may be excluded.

"The divestment of shares in these companies has now been completed," the finance ministry said.

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Magic Formula Stock Review: Vector Group (VGR) 

Vector Group is structured as a holding company, but the company's business is selling discount cigarette brands in the United States. Their two largest brands are Grand Prix (29% of volume) and Liggett Select (23%), and the company also sells Pyramid, Eve, and USA. Vector Group also owns a 50% stake in Douglas Elliman, a realtor in the New York metropolitan area, but real estate is such a small contributor to operating earnings that it can basically be ignored for the purposes of analysis here.

There are few bullish arguments on the stock . . .

So that's the case for the stock... now let's get to the negatives, which dwarf the positives, keep Vector Group far out of the MagicDiligence Top Buys portfolio, and in fact should keep MFI investors out of the stock. First and foremost is the government's shadow war on smoking.

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Big Tobacco Is Back to Business (MO) 

I've got to say that I'm not sure how much benefit Altria or Reynolds would see in labeling smokeless tobacco as less harmful than cigarettes. In the U.S., male smokers outnumber female smokers, but it's hard to think that the 18.3% of American women who do smoke would consider moving to the messier smokeless product. Men who have a tough time quitting smoking may consider the switch to improve their health, but I'm not sure that these would be huge numbers. Instead, I'd think that the Vector Group (NYSE: VGR) would have a better shot at converting customers to its lower-risk cigarette products.

As an aside, Reynolds American and Lorillard (NYSE: LO) did recently receive some good news this week when a federal district-court judge ruled that tobacco companies can use color and graphics in advertising. . . .

things aren't getting easier for global tobacco producers. British American Tobacco (NYSE: BTI) and Philip Morris International (NYSE: PM) have recently been hit with the news that Japan is raising its tobacco taxes, a move that will boost prices by about 33% this year.

All in all, it should be an interesting year for both American and international tobacco companies looking to navigate through increased government intervention and taxes. For 2010, investors can resolve themselves to watch the economy and dynamic regulatory framework for points to enter this high-dividend industry.

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Latest Non-Smoking Fad Has Investors Scrambling For Shares 

Smokers aren't the only ones who seem to have a pent up demand for the latest "non-smoking" fad.

If you haven't noticed, new E-cigarette products that are popping up on websites and on vending carts at local malls across America.

By most accounts, retailers who carry them have trouble keeping them in stock, but it's not a phenomenon exclusive to the U.S. In China, the U.K. and Australia these E-Cigarettes are off the charts hits that offer users the chance to enjoy a puff without the 4,000 chemicals and toxins found in your typical death stick. . . .

Meanwhile, the FDA, big tobacco and pharmaceutical companies all seem to have taken aim at the technology, but none of them have presented solid evidence that the second hand vapor is harmful to bystanders. At least not yet.

Investors and speculators on Wall Street are obviously jonesing for a piece of the E-cigarette action too.

During the last few sessions, shares of Mobile Media Unlimited Holdings Inc. (OTC: MMUH.PK) have shot up from sub-penny level to nearly a nickle. All this after the London based company announced the acquisition of TzuFuma Inc.- a wholesale distributor business of Electronic Cigarettes.

Suddenly, Mobil Media Unlimited Holdings, formerly Veridigm, Inc., a development-stage company which has focused mostly on providing merchant banking type services to small, private and micro cap public companies has become the only profitable and publicly traded E-cigarette play in the market. . . .

The American Cancer Society has also joined the debate against the electronic devices, but as one anonymous supporter of electronic cigarettes points out on a popular website, "In criticizing e-cigarettes, the American Cancer Society has a blatant conflict of interest that it fails to acknowledge: a secretive multimillion dollar exclusive endorsement contract with GlaxoSmithKline (NYSE:GSK) to promote Nicoderm, Nicorette and Commit (which is why the ACS name and logo appear on all of these GSK products sold in the US), which almost certainly contains a non compete clause prohibiting the ACS from endorsing any competitor nicotine or tobacco product."

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Philip Morris Int'l (PM): Bad Habit, Good Stock 

"Investors should Philip Morris International (NYSE: PM) to light up your returns and cash in on the growth of the global tobacco market," says Gregory Dorsey.

In Leeb's Performance Income Letter, he explains, "The stock, a new addition to our Growth & Income portfolio, is well positioned to provide solid results over the long haul." . . .

"Cigarettes are addictive: Smokers aren't particularly price sensitive and will continue to buy their favorite brand even as the cost rises or they're trying to cut back on expenses.

"So while many consumer companies have struggled during the economic turmoil, it's been just a bump in the road for Philip Morris International.

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