COSTCO JUNE 11TH, 2014

Yesterday USA Today reported a story that the shrimp purchased by Walmart and Costco are farmed using slave labor. A 6-month investigation had taken place regarding the shrimp suppliers and what was found was that ‘workers compelled to toil for years in Asia at no pay and under threat of violence are being used in the production of seafood..’ This article goes on to link these companies with boats that are ‘manned with slaves.’

The full context of the article can be found at the following link:

http://www.usatoday.com/story/money/business/2014/06/10/costco-walmart-slave-labor/10274641/

We contacted Costco because it is a company that we hold in our Sustainable portfolios and their response is as follows.

FROM COSTCO

“We have reviewed recent media reports concerning labor abuses in the Thai fishing industry. The agreements that Costco Wholesale has with its suppliers prohibit, among other things, use of slave labor and other violations of labor law. We are committed to working with our suppliers of Thai shrimp to require them to take corrective action to police their feedstock sources with respect to poor labor practices. This commitment so far has involved visits by our buying staff to Thailand and discussions with the Thai government, our suppliers, and other industry participants. We are continuing those discussions, which are impacted by the state of domestic affairs in Thailand.”

The following is our response to Costco.

TO COSTCO

To whom it may concern at Costco-
Thank you very much for your response, we appreciate you taking an immediate stance on the recently broken news story regarding your Thai shrimp suppliers and the labor issues involved. As investors we have zero tolerance for this treatment of people and will in no way support this supply chain.

About 80% of the money we manage is in our Sustainable Investment program. This program invests only in companies that have been carefully screened for Environmental, Social, and Governance issues. Costco has proven itself over and over as a company that we have trusted with our client’s money. However, an issue of this magnitude effecting human beings cannot be overlooked.

We feel that the continued relationship with a company that engages in human trafficking or slavery clearly violates everything we believe in and only encourages more of this behavior. This is a human rights issue and is non-negotiable. We would hope that Costco sees this the same way that we do and will discontinue its relationship with this supplier. With this in mind, we are selling our position in Costco today. We will continue to monitor the situation and if and when Costco decides to terminate their relationship with this supplier or is able to change the policies of those involved in slave labor, we will reinvest at that point.

We cannot be involved with any company that is directly or indirectly involved in an issue of this seriousness. Our client’s trust that their money will be put to use for good when invested in sustainable companies that support fair trade and uphold ESG standards. Costco has always made our list of Sustainable companies and we sincerely hope to place it back on the list very soon.

As of today, we placed Costco on our watch list and we no longer hold any shares.

Neither the Touchstone Premium Yield Fund, nor the Dreyfus Third Century Fund, which we hold positions in, hold any Costco positions.

Best wishes,

Andrew Friedman, CFP®
AJF Financial Services, Inc.
708 Third Ave., Suite 2011
New York, NY 10017

212-779-0789
212-686-4590 (fax)

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