PERAC Memo #27 - 2004: Tobacco Company List
Tobacco Company List
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This memo transmits an updated Tobacco Company List (dated July 1, 2004), which supersedes all prior lists and is effective immediately, identifying companies deriving more than 15% of revenue from tobacco sales in which retirement boards are prohibited from making new investments under Chapter 119 of the Acts of 1997. Boards must share this list with their investment advisors, and PERAC will review portfolios during audits for compliance—if a board is found non-compliant, it must divest in a prudent manner after consulting with PERAC beforehand. Note that the 15% rule applies to pooled funds in the aggregate, so a pooled fund exceeding the threshold will appear on the list even if individual holdings within it do not.
Full Text
Memorandum # 27/2004
M E M O R A N D U M TO: All Retirement Boards FROM: Joseph I. Martin, Deputy Executive Director RE: Tobacco Company List
DATE: July 13, 2004
On October 22, 1997 PERAC Memo #37/1997 informed you of the adoption of Chapter 119 of the Acts of 1997. That statute prohibits retirement systems from making any new investments in stocks, securities, or other obligations of any company which derives more than 15% of its revenue from the sale of tobacco products. On December 18, 1997 PERAC sent Memo #48 regarding the implementation of Chapter 119 and the first Tobacco Company List.
Enclosed please find a Tobacco Company List dated July 1, 2004. This list replaces any other Tobacco Company List previously sent to your board and is effective upon receipt by the retirement boards. Most of these companies appeared on previous lists and such investments were prohibited from the time the companies first appeared on the list. Please forward a copy to your investment advisors or inform them that this list is available on the PERAC Home Page under the Investment Unit’s 2004 Memo Index.
As part of its audit process, PERAC will assess the portfolio of each board to determine compliance. That review will determine if the board, after January 13, 1998, has purchased stock, securities, or other obligations of any company which derives more than 15% of its revenue from the sale of tobacco products. In the event a portfolio is not in compliance, the board must bring the portfolio into compliance by divesting in a prudent manner. Prior to taking any action, the board shall consult with PERAC.
In applying the statute to pooled funds, PERAC will assess the 15% rule against the entire pool as the board is purchasing shares in the pool not the individual holdings of the pool. Thus a pooled fund, if in violation of this standard, will be included on the list.
If you have any questions, please call Robert Dennis, Investment Director at 617-666-4446 ext. 922.