HEART CHARITY INVESTS IN TOBACCO INDUSTRY

ONE of Britain's leading health charities, which has spent years campaigning
to help people give up smoking, is investing in tobacco shares.

The British Heart Foundation, which researches links between smoking and
heart attacks, has invested its employees' pension contributions in a fund
that makes money from tobacco stocks.

An investigation by The Independent on Sunday has found that the foundation
has placed over UKP6m of its pension assets in a fund that buys and sells
shares in companies such as British American Tobacco, Gallaher and Imperial
Tobacco.

BAT, one of the world's leading tobacco firms, makes Lucky Strike, while
Gallaher produces Silk Cut and Benson & Hedges.

When the chairman of the council of the BHF was told that his charity's
pension fund traded in tobacco shares he was shocked and pledged to launch
an immediate inquiry.

"I assumed that we steered clear of any direct investment in tobacco
shares," said Professor Sir Keith Peters, a Cambridge academic. "As a rule
the medical charities have tried to avoid any investment in the tobacco
industry. This is something that I will take up with the council on Monday
morning."

The news comes as the Government prepares this week to publish its
long-awaited White Paper on tobacco which will lead to new controls on
smoking.

The BHF has run education campaigns about the dangers of tobacco for years.
Until recently it funded awards for good anti-smoking practice in the
workplace, and it funds a quit smoking line which has received more than
12,000 calls.

The charity invests its UKP6,223,768 savings in a high-yielding pension fund
managed by Scottish Widows. Unlike ethical pension funds, which screen out
shares linked to cigarette production, the Scottish Widows Managed Fund
invests in tobacco firms quoted on the London Stock Exchange.

A spokesman for Scottish Widows said the fund used by the BHF "does have
tobacco stocks" and had "no ethical criteria". He said the aim of the fund's
managers was to gain the best profits they can for customers and to keep
investments safe.

The company refused to disclose the value of tobacco holdings but said they
fluctuated. "There are tobacco stocks in this fund. They will be featured in
this portfolio. They are quite highly traded stocks," said a spokesman.
"They [the pension fund managers] buy and trade them as they see fit. It is
an actively managed fund. The percentages vary from week to week."

The BHF does not invest its ordinary donation income, spent on campaigning
and research, in tobacco stocks. But it claimed it "was very difficult" for
a small pension fund to avoid tobacco.

"The pension fund is in the power of the trustees investing through the
Scottish Widows fund," said Michael Livingstone, finance director of the
BHF. "I would have thought it was very difficult for a trust to manage its
own investment policy and dictate where it invests."

But several other charities, including the Cancer Research Campaign, have
specifically asked their pension fund managers not to invest in tobacco. And
financial advisers say that, with the upsurge in ethical pension funds, it
is easy to avoid buying shares in tobacco or arms.

"Tobacco stocks are commonly used by pension funds. They historically make
profits. But they are possible to avoid if you want to," said Richard Hunter
of Holden Meehan. "There are lots of ethical funds that screen them out."

The BHF has campaigned for years to help people stop smoking and funds a
great deal of research into the effects of smoking on heart disease.

The British Medical Association said charities promoting health should as a
matter of principle avoid tobacco investments. "Charities campaigning
against tobacco should certainly not invest in tobacco stocks," said a
spokesman.

Checked-by: Don Beck