THIRD WORLD NETWORK BIOSAFETY INFORMATION SERVICE

22 August 2004

Dear Friends and colleagues,

RE: MOST COMPANIES LEAVE SHAREHOLDERS IN THE DARK OVER GE RISKS

A report by the US Public Interest Research Group shows that except for two companies, most food companies in the US fail to properly inform shareholders about the risks posed by genetically engineered (GE) ingredients that could have a substantial financial impact on the food companies buying and selling GE crops.

It describes the risks posed to food companies from GE ingredients, including product liability lawsuits, loss of insurance coverage, damage to reputation, consumer rejection, international renunciation, cross contamination, and economic loss due to sudden regulatory changes.

Under the US law, companies are obliged to provide to investors full disclosure of any material facts about the companies in which they own shares.

Attached below  are the press release and executive summary of the report.

With best wishes,

Lim Li Lin and Chee Yoke Heong

Third World Network

121-S Jalan Utama

10450 Penang

Malaysia

Email: twnet@po.jaring.my

Website: www.twnside.org.sg

REF: Doc.TWN/Biosafety/2004/J

Item 1

For Release:     August 19, 2004                                               

For More Information: Liz Hitchcock or Richard Caplan 202-546-9707          

http://www.uspirg.org/reports/dutytodisclose8_04.pdf                                                                   

FOOD COMPANIES FAIL TO DISCLOSE SHAREHOLDER RISK OF GENETICALLY ENGINEERED CROPS

Despite Requirements, Most Companies Not Following Letter or Spirit of The Law

Ninety-five percent of the top food companies in the United States fail to properly inform shareholders about the risks posed by genetically engineered (GE) ingredients, according to Duty to Disclose: The Failure of Food Companies to Disclose Risks of Genetically Engineered Crops to Shareholders, a new report released today by the U.S. Public Interest Research Group (U.S. PIRG).

While one mistake involving genetically engineered crops is estimated to have already cost the food industry over one billion dollars, and more shareholder resolutions have been filed regarding GE issues than any issue since apartheid-era South Africa, only two of the top 35 publicly traded food companies mention GE ingredients in their Annual Reports as required, according to Duty to Disclose.

“Shareholders need to know about the products their company makes,” said U.S. PIRG Safe Food Advocate Richard Caplan. “By not disclosing the many risks posed by genetically engineered crops, food companies are failing to meet their legal duty to be fully honest with shareholders.”

Duty to Disclose describes the risks posed to food companies from genetically engineered ingredients, including product liability lawsuits, loss of insurance coverage, damage to reputation, consumer rejection, international renunciation, cross contamination, and economic loss due to sudden regulatory changes. While federal regulations require that investors receive full disclosure of any material facts about the companies in which they own shares, only Kraft Foods Inc. (KFT-NYSE) and Interstate Bakeries (IBC-NYSE), makers of Hostess Cupcakes and Wonderbread, disclosed to shareholders that genetically engineered ingredients might pose a material risk to shareholders.

“Just as crops require sunlight to grow, investors need the ‘sunlight’ provided by full disclosure of material risks in order to grow their portfolios,” said Michael Leone of Green Century Capital Management, a mutual fund company.  “The risks of genetically engineered foods should be disclosed so that investors can make informed decisions,” he concluded. 

Industry estimates maintain that 60 to 70 percent of all processed foods on American grocery store shelves contain GE ingredients. Human safety testing by the Food and Drug Administration is not mandatory, nor are companies required to label GE products. A recent poll by the Food Policy Institute found that 78 percent of respondents thought it “very important” that the food they purchase does not contain GE ingredients, and 94 percent believe that GE foods should be labeled as such.

Duty to Disclose makes several recommendations, including a call for food companies to remove the financial risks associated with genetically engineered ingredients by removing genetically engineered ingredients from their products.

U.S. PIRG is the national advocacy office for the state Public Interest Research Groups.  State PIRGs are non-profit, non-partisan public interest advocacy organizations.

Green Century Capital Management, Inc. is the investment adviser to the Green Century Balanced Fund and the administrator of the Green Century Funds.  The Green Century Funds are the first family of no-load, environmentally responsible mutual funds and were founded by a partnership of non-profit environmental advocacy organizations.

Item 2

DUTY TO DISCLOSE:

The Failure of Food Companies to Disclose Risks of Genetically Engineered Crops to Shareholders

EXECUTIVE SUMMARY

Scientists in the United States and abroad continue to raise serious concerns about the environmental and human health risks associated with growing and consuming

genetically engineered crops. As a result, genetically engineered foods may pose

financial risks to the food companies buying and selling genetically engineered crops.

Even though the Securities and Exchange Commission (“SEC”) requires companies to

disclose to shareholders any “material” facts that might affect business operations, most

food companies have failed to alert their shareholders to the liabilities associated with

genetically engineered ingredients.

Genetically engineered crops pose largely unexplored threats to human health and the environment. On the food safety side, scientists have sounded the alarm about potential allergenicity of some genetically engineered ingredients. Scientists are also concerned with the possibility of heightened toxicity levels, increasing antibiotic resistance, immune suppression, elevated cancer risks, and nutritional loss. Yet the Food and Drug Administration still refuses to make human safety testing of genetically engineered foods mandatory. In addition, environmental risks include the creation of “superweeds,” genetic cross contamination, adverse effects on non-target and beneficial species, increased pesticide use, and harmful soil contamination.

The risks inherent in genetically engineering the food supply have already cost the food

industry financially. In 2000, Kraftmanufactured Taco Bell taco shells were discovered to contain StarLink corn, a variety of genetically engineered corn not approved for human consumption. The Food and Drug Administration officially recalled the Taco Bell taco shells; in response, Kraft recalled 636,000 cases of contaminated product, at an estimated cost of $10 million dollars in lost revenue. The StarLink contamination episode ultimately will cost the food industry billions of dollars.

In the wake of Enron and other catastrophic financial market failures, shareholders are

demanding greater transparency and enforcement of SEC regulations. One area that is of particular concern is whether companies are disclosing to their shareholders and the public all information that will have a material impact on business operations. Despite the StarLink debacle and scientific evidence raising real concerns about the human and environmental safety of genetically engineered crops, the food industry has done little to alert its shareholders to potential liabilities.

In the United States, any publicly traded company registered with the Securities and

Exchange Commission must disclose information that is “reasonably likely” to have an impact on business operations. To determine the extent to which food companies are disclosing the risks associated with genetically engineered foods, U.S. PIRG Education Fund examined the financial reporting documents of the 35 largest publicly traded food companies in the United States and found:

·        Ninety-five (95) percent of the top publicly traded processed food companies completely ignore the genetically engineered foods issue in their annual reports to shareholders.

·        Only two companies-Kraft Foods and Interstate Bakeries-mention genetically engineered food as a potential liability in their annual reports to shareholders.

·        Not one company elaborated on or gave an analysis of the risks involved with genetically engineered ingredients in their annual reports to shareholders. While

Kraft and Interstate Bakeries’ declarations are a good beginning, these financial documents do not discuss ways to mitigate harm, avoid future liabilities, and address future profitability.

The U.S. food industry is at a crossroads. Currently, genetically engineered ingredients offer no financial or commercial benefits to the food industry, nor are consumers clamoring for genetically modified products. In fact, surveys and polls show just the opposite.

U.S. PIRG Education Fund recommends that companies in the processed food industry:

·        Remove the risk of liability related to genetically engineered food by demanding that their suppliers, manufacturers, raw goods producers, and farmers not use genetically engineered materials.

·        Fully disclose to shareholders the use of and potential liabilities associated with genetically engineered ingredients.

·        Label all products that contain genetically engineered ingredients so that consumers are fully informed of what they are purchasing.

U.S. PIRG Education Fund recommends that the SEC:

·        Enforce the duty of public companies to disclose to shareholders the potential liability from using genetically engineered ingredients.

·        Hold CEOs and CFOs responsible for material omissions in companies’ annual reports, in compliance with the Sarbanes-Oxley Act of 2002.