Tobacco Documents Online

TOBQCCO INSTITUTE ID:518-462-6~61 HQE 20"96 ~:41No.O01P.O~ NEWS h'om the Office of the New York State Comptroller H. Carl McCall CO]~%&C,]]Steve Greenberg (518) 474-4015 Linda Scott (212) 417-5010 FOR RELEASE: IMMEDIATELY March 19, 1996 McCALL PLANS NEW FUTURE OF PENSION FUND'S TOBACCO HOLDINGS Comptroller to Become More Active Shareholder New York State Comptroller H. Carl McCall today announced his plans regarding the future of the Common Retirement Fund's (CRF) tobacco holdings. His announcement reflected the results of a months-long study of tobacco stocks. "-[he results of our review indicate that tobacco stocks have been historically a good investment for the Fund. However, pending litigation and the current regulatory climate, we believe, are creating a volatile market. And, obviously, events of tl~e past week have demonstrated that uncertainty." McCall said. Based on the results of lhe study, McCall developed a three-fold plan regarding the future course of the CRF's equity holdings in the tobacco industry: 1. The Fund will implement a more active shareholder program to help persuade company officials to address the non-economic factors and concerns that create economic risk. "As a major institutional investor, I will encourage management to take responsible actions to address the underlying causes of the industry's problems," McCall explained. McCall added that the nature of his concern would focus, in part, on the distribution and marketing of tobacco products to young people. "1 will urge support for initiatives to reduce youlh access to tobacco, and I will support shareholder resolutions aimed at that goal," he said. 2. McCall will direct the Fund's asset managers not to increase holdings in tobacco companies. "~ he CRF currently has about $160 million of tobacco company stocks invested in actively managed funds. -- more- Alba,,y Ph~mw. (518) 474-4015 Fax: [51~) 47,'?,-8940 Ny( Phone; (212) ~ 17- 5010 F~x: (212) 6t7-5344 T!05642062

TOBACCO INSTITUTE ID:518-462-6361 MAR 20'96 9:a5 No.O01P.04 "While our advisors tell us that tobacco stocks' current valuations are already discounted for litigation risk, the uncerlainty of these risks makes these stocks more volatile. As a long-term investor, ! believe it is appropriate now to begin to limit the Fund's e×posure to that volatility," McCall said. "Given the current uncertainty, this is a prudent step to protect the beneficiaries of the pension system." McCall indicated lhat in the coming months his staff will closely monitor the legal developments, as well as, economics of tobacco investments, and will periodically re- evaluate the Fund's position. 3. ]'he Cornmon Retirernent Fund will maintain its current investments in the tobacco industry which are held through passively managed index funds. McCall's review found that in the ten years from 1985 to 1994, a tobacco-free constraint in the CRF's index strategy would have cost the Fund more than $624 million. "Based on the current status of litigation and the investment goals of the Fund's index st[ategy, compelling circumstances are not present to support any changes in our index strategy which has proven most successful for the Fund," he said. McCall noted that tMs threefold plan is consistent with his fiduciary responsibilities- as the sole Trustee of the $75 billion CRF and with the established investment strategy of the Fund. "My actions today are not meant to conduct public policy through the investment process," he said. "Despite the past economic performance of the tobacco industry, what lies ahead is unknown. My actior~s are intended to prudently limit the Fund's exposure to risk for the nearly one million retirees and members of the Fund." McCall's review was initiated in response to growing concern about the Fund's equity holdings in companies whicl~ produce and sell tobacco products. Staff conducted a thorough and balanced ~Jue diligence review which employed the services of outside legal and investment professionals and included meetings with industry representatives and anti--smoking leaders. McCall indicated that he will continue to address the issues related to the Fund's investment in the tobacco industry and will continue to monitor the economic, legal and regulatory actions affecting the tobacco industry. "As I do so, I look forward to a cooperative working relationship with industry executives and with all those concerned with the futu[e strenglh of the Common Retirernen! i:-und." TI05£~20~3

Equity ttoldings in Tobacco Indexed vs. Actively Traded Shares as of January 31, 1996 Number of Shares 4,OO0,OO0 3,00O,00O 2,0OO,OO0 !,000,000

£90~'P9£Ol_L TO~RCCO INSTITUTE ID:S18-462-6561 MQR 20'96 9:45 No.O01P.06

Net Loss of a Tobacco-Free Portfolio Last Ten Years ~ Cumulative 0 rv Millions 5200 -$200 -S400 -S600 $33 -$201 !985 !986 !987 !988 1989 1990 -$753 -$769 -$624 !99~ 1992 1993 l~;e

The New york Times 3120/96 -New York Plans to top Investing In Tobacco By RAYMOND HEP, NANDEZ ALBANY, Ma~.h. 19 -- Sta~e ........ l~mptr~er-'~q~.. C.~ri McCall an- nommed today that he would stop mve~dns state ..pem+oo funds In to- bacco stocks. But to the dismay of ant/smoking gmul~ Mr. McCall said he would no~ completely setl off tobacco company slodm from I~e $74.5 bflllml fund's portfolio. Mr. McCall said his concerns were eco~mic rather than moral or so- ~ .He roaintalned tlmit Increasing legal and potit~i attac~ on the • "My actions I~lay ar~. not meant • to conduct public lmlicy through the investment process," said Mr. McCall;who is the state fund's sole ~ "My a~ are intended to prudently limit the fund's exposure to risk for the nearly o~e mellon retirees and members of the fund." New York's pensio~ fund is the California's, covering 850,000 cur- rent and retired workers. Ithu $636 million invested in Phtlip Morris, R JR Nabisco and Amerlc~m Brawls, among others. Mr. McCaU's decision highlights the broad, pressures that tobacco compan/es are coming trader, from Co~gressiomd scrutiny of Industry practices to government ban~ ~ smoking in public places. It is also an attempt by Mr. McCall. groups, which h~ve been pressuring the state to divest itself of tobacco Still, Mr. McCall can hardly afford to give up all the fund's tobacco ~tock.s because they h~ve been ex- tremely profitable in recent years. Betwee~ 1915 and 1994, the fund earned $824 million from its tobacco L,~vestments, according to the Comp- tro||er's Mr. McCall said he would continue to monitor the impact that regtda- A move is made on econonu'c grounds, not moral Or social tobacco industr7 have ~. s~ p~. "GI~ my ~ ~~- I~," ~ ~ "my ~m "~ ~ ~ ~t ~ w~r i~ w~ ~ for ~'s ~ ~t ~ or ~ ~ ~ ~ • p~l~b~ ~ve~- ~e ~ ~ a m~ ~ ~ f~ ~ ~ h~ h~ he ~I~ ~r of ~e N~ Yo~ S~ Pubic In~t G~, s ~m~nt-~ fo~ I~, ~ ~ s~'s p~fi~ f~m ~ ~v~m~ ~le ~ ~m~ ~ ~ ~6 b~n ~ ~r, em~ma ~ o~r smok- in8-~at~ il~ "We a~l~ ~ fact ~ ~e ~mp~ller ~ t~g m ~al wi~ ~ p~blem," Mn Homer sa~ "But he ~d ~ve ~ a step ~r. ~e fact Is ~t ~ sm~e ~II ~n~ m ~ h~ of m~ll~ of do~ ~ ~ ~ ~ ~ ~ year." But Mn M~ m~ ~t • e ~ ~ a major ~l~r of ~ ~m~ m ~ge ~ p~c- U~, like m~et~g ciga~tt~ to ~sge~ • '~.a maj~ ~U~I ~v~t- or,'" Mr. M~.~ ~ a ~m~ "I ~1 ~ m~agement to a~s ~ ~er~g ~ of ~e Page B-7 Ti05642067

WEDNF~DAY,, MARCH 20, 1996 Some big investors weed out stocks NEW YORK (Bloomb~rg) ~ Some major a~l~cco company investors are con~deri~ puning r~eir money else- where as s~ks such a~ Philip Morris Cos. and ~ NabL~co Holdings Corp. conthnm a ~clong plunge. New York state's ~/~ billion pension fund ye~erday said it wont buy any repzea~ that the Fidelity mutual ~und hie& ¢fined to comment; Philip Morris and Share~ of Philip Morris, the New York-hazed maker of Marlboro and Merit cigarettes, dropped another $5.12, or~.6 percen~ m close at ~86.12 ye~er&ay, the lowe~ since Novembe,- The ~ ts down 16 percent in week; ~t closed "lh~ at $10Z37. cally a goodin~e~ne~t t~r the ~und," said New York Comptroller H. Carl be~,w, are creatinga v~latile marke~" "Brooke Group Ltd. a~reed ~o the first swo~n statomeflt~ from three ~ormer Philip Mo~ ~p~ . ~ ~ ~ ~r~ ~e~ p~t ~ ~ ~~ ~er liam Campbell's testimony to Con- gress in 1994. A former company scientist who gave a statement about otine research, Ian Uydess, Ires al- readF been subpoenaed to test~y i~ one of six pending suits by sta~ seeking to recover taxpayer money spent tYeating victims of ~ .Uydess will also appear on : tl~e~ News show "~0 Minutes" 'Susfls~, sa/~ his atCorner, Bruce • :t~mnussen,. who also represents ~My "client Ires been aske~ by government authorities ~o tell the trutlh". Mr. Rasmussen said of Mr. • Uydes& "They are going t~tel~ ~e - -Ph~iI~ Morris hasn't responded .~ th~ three former employees' In the company's annual report Executive Geoffrey Bible sa/d: "We continue ~o face many legal and regulatory challenges, but we are opthn~tic about the t'mnl re- sults because of the h~herert~ ~re~ o~ our positions on these In addition In the civil c~es, ~our federal grand ~uriea are in- vestigating allegations of wrong- doing bV the industr~ and its ex- ecutive~ including a Washington pr~e tntn whether Mr. Campbell and s~x other tobacco industcy tenors Ited m Congress. Ti05642068