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Auqust 9, 1990
HONORABLE CIT~ COUNCIL
Palo Alto, California
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SECURITY PACIFIC'S I!VOLVEMEN7 .IrK SOOTH ~C •• ~MP~IEo
.Members .of the council:
This is an information report and no Council action is necessary.
Backqrpund
On December 2, 1985 ... City council directed staff to add to the
City's Investment Policy a statement p:rohibiting the "deposit.,.
investment, or use of City funds with banks" financial institu
tions. investment firms, or other investment-type organizations who
do business with either the public or private sector of South
Africa or Namibia, so long as aparL~eid is the official policy of
these oountries~·
on August 3, 1990, staff received a letter (Attachment AJ from Mr.
Jack Sheinkman, President of Amalgamated Clothing and Textile
Workers Union, AFL-CIO ... CLC regarding the City's current bank,
Security Pacific~ Aocording to the Union's Research Department,
Security Pacific 6 through several of its subsidiaries, has since
January l, 1989 become a depositary for American Depositary
Receipts of a lar-qe number of South African companies~ An American
Oepositary Receipt (AOR) is a docume~t issued by a bank in ~hicb
shares in a foreiqn company have been deposited~ These receipts
are then traded on stock markets in the united States. The bank
issuing the ADR must file with the Securities and Exchange
Commission.
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American Depositary Receipts trade p-rimarlly on the over-the
counter and National Association of security Dealers Automated
Quotation SysteD (KASDAQ) e¥chang:es. Thel are often issued as
fractior.s of, or combinations of, the orlqinal shares on deposit
with t.he bank. Tbey are an easy yay for American investors to
invest in foreiqn-based companies directly, without immediate legal
and exchall9'e rate problems. Co.panies benefit from the access to
u. S. capital. Companies such as Toyota., Nissan, and Mexican
Telephone trade on ADR/s.
~e union believes that security Pacific's dealinqs in ADR's may
.ake it eligible for sanctions under the City"s South Africa
policy.
pi·cu·,ioA
On August 6, 1990, staff contacted Hr. William Patterson, Director
of the Onion's Corporate and Financial Affairs Office, to discuss
the l~tter sent to the city. Mr. Patterson explained that their
union has trade union rela.tions in soutb Africa; and in their
meeting with Mr. Nalson Kandela in June of this year, they pledged
to hill their support to help end apartheid. While the Union's
Research Departlllent vas analyzing leveraged buyouts (LBO's), it
found a CUstodian Agreement for American Depositary Receipts, filed
by Security Pacific with the Securities and Exchange commission.
Kr. Sbeinkllan proceeded. to send a letter (Attachment .8) on July JO,
1990 to Mr. Richard J. Flamson III, Chairman of the Board tor
security Pacific Corporation, requesting the bank end their
activities as a depositary of South African equities.
On August 7. 1990, Hr. Russell A. Freeman, EXecutive Vice President
and General Counse.l, responded with a letter {Attachment C)
disputl~ t.be statements in Mr .. Sheinban's letter. According to
Mr. Freeman, Security Pacific has a lonq-standinq policy aqainst
apartheid, regularly monitored and enforced throughout the
orqanization. Security Pacific issues AOR's at the request of
united States and European brokers and dealers as secondary market
issues, benefitting only those brokers and dealers and not the
SOUth African companies~ All underlyinq securitj es were issued
prior to October 2, 1986, as authorized by the comprehensive Anti
Apartheid Act of 1986. Be explained that Security Pacific is a
relat:ively 6mal1 issuer of ADR's. However, to avoid any appearance
that the bank .iqht be indirectly supporting apartheid, Security
pacific will be taking steps t.o withdraw from existinq ADR oosi:'less
involving SOuth African securities, and no new d~positary agree
.ants will be accepted for ADR's involving South African securi
ties.
staff is monitoring Security Pacific's withdrawal from AOR's
involvifa9 SOuth African securities and will continue to monitor
coapliance with the City's South African policy.
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AMALGAMATED ClOTMNG AND TEXTIL£ WORKERS IJNIOt<, .... c.cOO. ClC
15 UNION SQUARE WEST. Nf\IVYORK. N...'( 10003-3377. TEL (212) 242·0100. FA)( (212) 255-7230
EJIily Harrison
Oirector of Finance
2~O Hamilton Ave
Palo Alto, CA 94301
Dear Ms. Harrison~
August 2, 1990
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I am writi~9 reqardlnq informatIon our union's research
department recently ~arne~ relating to Security pacific
Corporation and South Africa. security Pacific through several
of its subsi~iaries has since January l~ 1969 become an American
depositary for the American Depositary Receipt.s (ADR's) of a
larqe number of South African companies. We believe this action
may make Security Pacific eligible for sanctions under Palo
Alto's city Council Resolution dated December 2, 1985 regarding
banks doing business with SOuth Africa.
A1aerican Depositary Receipts are dollar-denominated securities
issuec3 with tile backing: of foreiqn company stock held in the
vault of the bank actiDgi as depositary. ADR's facilitate the
flow of American capital to for-eiqn companies. Specifically ..
Security Pacific has bequn actinq as depositl!!lry for a n·umber of
SOuth African gold, diamond and platinum mining companies,
inclUding Anglo-American. South Africa's single largest company.
I have enclosed copies of a letter our union bas sent to Security
Pacific regarding their South African activities,. as 'Well as
excerpts frca Security Pacific's SEC filings. We are urging
Securit.y Pacific in the strongest possible terms to end this
direct financial support of apartheid.
JOo.oOI. JOoJ..",,-,z:.ro
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Augus~ :. 1990
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s111 Patt.rso~# Director of our unl~n'5 Office of Corporate and
FinaneIal Affairs will contact y~~ t~ further delineate our
union'. <:<><>Cern r'O'Jardi»g' thb infonaUon. We hop<> you find
this useful in your efforts to support the cause of democracy in
Scuth Atrica. Than)< you •
. ~~~ C SheinkirNln
PresIdent
CC~ Richard J.. Flamson Ill, Chairman, Security Pacific
corporat lOll
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ASNTON MINING LIMITED
!!ORAL LIMITED
A
~GAIHVI~ COPPER LI~ITEn ~I"ING
CRA LIMITE[)
CSR LIMITED
GOLD MIlIES or XALGOORLlE LIMITED
M.I.M. HoLDINGS LIMITIo
TIlT LIMITED
nSTERH KIllING CORPOItA'flOH' HOu)INCS LIMITED
Al<GLO AHElUCAI< CORPORATIOS OF SO\ITH AFllICA LIMITED
ANGLO »t:ERlCAlf GOLO .IN'\'"ESTMlJiT' CO., LTO.
BLYVOORUIT%XCK7 GOLD HI_ING COMPANY, LI~ITEO
8UFFELSFO~IH GOLD BIKING COMPANY, LIMITED
OE BEEBS CO~SOLIOATED HINES, LIMITED
OEELKRAAL GOLD,MIWING COMPANY LIMITEP
OOORNFON'I'£IJf GO.LO MINING COMPANY, LIKI'tEO
ORI!FONTEDI' GOLD JUlC.IJrlG -COMPANY, LIMITED
EASt' tlACCAl'OIfTEIlC KINES, LIKI'tEC
EAST RAND GOLI) AND UlWIIUM CO>IPAlIY LIMITED
£AS~ ~D PROPRItTAR~ MINES, LIMITED
tLA11iiiSRAND cotJ) MINING COMPANY LIKITtD
FREE STATE CONSOLI OATE I) GOLO KIHES LIMITE 0-
GOLD fIELDS OF SOUTH AF~ICA LIMITED
(iROO'I'VlZI PROPRliTARY }lINES LIMITED
HARMONY GOLD HIKING CO"P~ LIMITED
XARTEBEESTFONTEIX GOto HIKING COMPANY, LIMITED
IMPALA PLATI~ HOLDINCS LIMITED
XINROSS KINES LIMITEP
noor COLD HIllING COMPANY LIMIT£O
LESLIE GOLD HINES LIMI-rEi)
LIB~OH COLO MINING COHPANi LIMITED
LORAINE GOL~ }lINES LIMITED
LYD£NBURG PLATINUM LIMITED
ORANCE FREE STATE INVESTMENTS LIMITEO
RANDFoNTEr~ ESTAT,S GOLD MI~r~& COMP~~Y,
WITSW'ATERSRAND, 1.2'0". THE
~OSTEH8ERG PLATINUK HOLDINGS LIMITEO
SOUTHVAAL gQLDINGS LIMITED
STILFONXEI~ COLD MININC COMPANY, LIMITED
ST. HELENA COLD ~INES LIMlTEO
UNISEL GoLD }lINES L~~IT,D
VAAL RESFS EXPLO~'TIOK , MI~ING COMP~vY, LIMITED
V£~TtRSPOS~ ~ MINING COMPANY, LIMITED
VLAXfONTEI~ GOLD MINING COMPANY, LIMITED
WELROM GOLD HOLDINGS LIMIT£~
wtST RAND CONSOLIOATEO MI~ES LIMITED
WESTERN AREAS GOLD MINING ~OHP~¥Y LIMITEP
WESTERN DEEP LEVELS LIMITED
W!NXE~_~ MI~ES LIMITEG
soc GROUP p.l.~. (THE) BAr INDUSTRIES P.L.c,
CHARTER CONSOLIDATEO p.l.c.
COV~ STRATECIC I»VESTM~HT TRUST p.l.c.
HAWKER SIDO£LEV GROUP p.l.c.
LADBROKE ~ROUP p.l.e.
LoNRHG p.l.c.
RACAL ELECTRONICS p.l.c.
ROTHHANS I~TERNATIONAL p.l.c.
SAINSBURY-.1. p,Le:.
TJoT-E: t. LYLE p. 1. c-,
MIJlEAALS AN[) RESOOC.t:S CORPORATION
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SECURITY PACIFIC NATIONAL TRUST
COIIPAlIY (NEW TO"'"
Corpor~t. Trult Ciyisiou
ADa. G:O\l.P
I Rector Stre.t -9tb Floor
Nev York, Pev York 10C06
flUI nl-12QO
Custodian A9reement For
Amerle.n Depositary Receipts
Janoary )1, 1999
Security Pa~ific ~ational !an~
Secu~!ty r~~if!~'Bouse
4: BroaC!.gilt.e
Loo~oo EC2M 7LE
:&NGI.AJ.'D
CeiLr Sirs:
We bereby appoint ro~ as cur CustQdian Yith re~pect to certain
issoes of seeuritie' against vbtch the legal e~tity cr~at~d b] cs
as Depositary plans to il5~e American Depositacy P.~ceipts_ T~ere
is attae~e~ 'hereto as Aru'lex: A a list. of the iS$ .. es of securities
for which you will act as C~stodian. co~~encinq with the date
bereo~ .. and 'We s11a11 no-tily you rstlbject to yout'" 4gl':eementJ "f
each additional issue of seccrities for ~bicb you are he~~afte~
to act as C'Qst¢t!ian. Tbis ".lit'"ee.~er;t _"ill g-Qvertl ~o\,;r duti-es ,uJd
responsibilities as ~ostodia~ a~d viiI supe~5ede any e~i5ti~g
agreemects between 'Q$ with respect t, s~cb euties and res?o~
sibilities.
For the purpo.se -of this l!"tter. the follo .... i:'l.g \.lords and p!lrases
~ll have t~e respective meanings indic4ted:
Company
"-gree.ment
Costodian
De"o~ita.r'(
~y co~poration vbicb issues one or more
c13sses of sec~rities for w~ich yo~ act
bereunder a5 our Costodiao.
~his instrument.
you. as o~r Ccstodian~ at ~o~r address steted
above.
We. as DEpositary. at our address stated
above.
A .... ritten instrument. telex~ SYift Ke5saSe or
any otber ~ean5 of eommu~ieation as agreed or
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JACK SHEnoIKMAN -
AMALGAMATED ClOTHlNG AND J'E)(T]U: WORKERS UNION, AFL-CIO, ClC
1S l..JN1Of'\I SQUARE WEST • ~ YORK;. N.. 't 10003-3371-TEt. {212} 242.~700 • F~ (2121 255-7230
Richard J. Flamson III
Cbair-.an of the Board
Security Pacific Corporati~n
333 South Bope Street
Los Angeles ... CA 90071
Dear Hr. Flamson,
July 30, 1990
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I am writing as President of the Amalgamated Clothing and Textile
Workers Onion and as a Vice-President of the AFL-CIO. Both
institutions have .a longstanding commitment to ... 'orkinq to end
apartheid. I therefore view with concern the possible
involveme.nt of Security Pacific in facilitating the trading of
South A~rica equities.
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Research perfonned by my union indicates that security Pacific.,.
throu~h several of its subsidiaries, is a depositary institutions
for SOuth African companies seeking to have their stocks trade in
the United states through American Depositary Receipts (ADR's} ~
ADR'S facilitate the investment of U~S.. dollars in such
activities as SOUth African gold .. diamond ... and platinum. zr.ining,
and the strategic Sasol coal qasification plants.. As I am sure
you are aware.. 901d aininq is both the. heart of the apartheid
economy and ar. industry that badly exploits its black .... ·orkers.
I am particularly disturbed that filings vith the Securities and
Exchange Commission indicate that Security Pacific has entered
into new ADR relationships with South African companies since
1988 ... after the passage ot the Cornprebensive Anti-Apartheid Act.
When the Executive Board of the AFL-CIO ~et ~ith Nelsen Mandela
last month ... -we pledged to him our support in his effort to win
freedom and democracy tor all South Africans. He asked
specifically tor our belp in malntaininq economic pressure on
apartheid~ That effort must begin -with those American c~panies
that are so blind as to have increased their South African
involvement in the last several years.
~~COS"61Ij2J\
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:Richard J. T1a:ason III
Ju1y 30, 1990
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Therefore, I call upon security Pacific and its subsidiaries to
ilomediately end their activity as " depositary of south Urican
equities. I await your response.
SincerelYr
O....A:.. £1.A-Go.,.....L -
/ J acl< Sh"inlaoan
President
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SECURITY PACIfIC COI'IPOFIATfON
~oe ANGEl.ES
Augu.t 7, UiO
Dear fIIr. S~I~"wn:
Rlclnt .tlt .... t. e,ntll.ld I. r'u, llttl" oDd p ••••
... 101S1 Ire hlsl, ~I.l .. dlny. Ind g"ss11 olsrep.esent thl
rile of Sicurltl '.c~flc Ind It. subsld!arles II thl fSSUlnCI
.f AORs involving Sout~ African ncu.1t les. Contrarl to
lour 1111gotlonl, Secu.lll 'aclflc Co.p.rltl.n has I 1.ng
,tlndlng ,.1!el Ig.ln.t Ip'rtheld. Thlt p.llcl I' tn'.rctd
throughout the .rg.nlzltl •• Ind •• c~ buslnel' unIt certlflt •
• n I perIodIc ~ .. " th.oullhout thl , .. r thlt It I. f.
e0l9111nci with the ,.lle,.
'our stat_nh tht Sec.rlty foci fic has crnted I
cf_stle ... riot. " underwr; Ifnll c.mp.nlts. hIS purchue"
larg. bloc". of South Afrfeon •• c.rllll' Ind hi. Inc~ls.d
Its flnlnchl f.v.h ..... t I. South Af.lel arl Ib •• lutol,
lacorr.et.
No subsldllry of Stcurltl '"clflc Corporotlon ICtS I. 0
depo.ltlry for 1"1 South Africi. coopan,. ~.ltht,T Securltl
P.eI fie nor ft. subsldllrhs Ire IOVD""d II hell 1 tltlnv
t~e flo .. of o.s. Invutme.1 doll.rs to SDut_ Af.ICI'
COlllp&.I... S.cw,ltl ,"clflo 6.es not purchu. or trloe
South Afrlel. secur!tfts or eng'il fa '", bUSiness
Ictlyltles II So.n Africi. Hnlll,. Slcurlt, heiflc hs
not vlotlttd the Compr.h.nll.1 Antf-Aparthl!c! Act or 1.1
ather Intl-Iporth.ld jaw or Drdinloc. to wII!c~ It Is
,ubJlct.
ThrDugfl I t"Nst cOI'rplny lubs1dflry fill lew York ..
s.eurlt, hclflc ISlulS Amerlcln Doposl tlry R.cllph It tho
reque.t of U.S. Inc! [.rope.n bro.lr, Ind deo'"rl wilD deposIt
the shires purlulnt to e.ltodl Irrl.g.,..nt •• The AOR' •• re
regllterld with t~. Securltl •• Ind rlchlnYI Commlll'on for
ult to the United Slltes. All """.rll!n~ lecurltles of
$ouU Afrlcln eomplnln wor. Issued ~rior t. October 2.
1m. IS luthorlzed by the C"'I'T.hnslve AnU·Aplrth.~d Act
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Mr. Jlet Sh.I.kaa.
AI.l,aaat&d Clot~lng .nd T,xtlle Vortlrs Un!on
Ausust 1, 1990 '"g. t
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'_ls!cal cu.tody I. provIded by • nonaffillat.d bint I.
londen. Beca ••• t~ ... e,rltlu lo,.lv.d ,N! ."ondory
•• rkot ;ss .... t~. I(thlty ~n.flh t~1 broke ... nd du"r.
Ind t~!'r custODOr •• not the Sout~ Afrleln companl... T~u ••
your st.t ... nts II thlt r.glrd ar. fal.l.
'.u hI •• Ilia Itated th.! sec"rltf P'elflc ;s ••• rtet
'elder ,. ADRI. I. '"ct, Securlt, P,e ftc IC!S •• Is,u,r of
I relltlvel, ••• 11 nlllllbtr If ADRs. The slgnlflc,nt lI.rht
shart. I. excUl 0' oln.t, p.rcent, .rt Issued by other
~.nlJ 10 W ... fort City. Including 81nlcers iruH, Cit Ib,.Ie,
Morg.n 6,.rlntl Jru.t Company ••• nk 0' W.w 'erk Ind Ch,sl
".nhlttan lank.
Notwlthshndlng that the IllIgllfons IOU hI •••• de art
tot.ll, f.l •• , t. a,old the appe.r.nce thlt Securftl '"elflc
.'ght ~ "'tn lodirectl, lupporting Ip.rt~.ld, ~e .r. tatlng
st.ps tI wIthdraw frOll our uhtlng ADR b~Slneu invohlng
Sout~ Afrl~.n s,curlli,., Ind ne naw 6eposltar¥ agreements
wIll ~ Iccepted ~or AOR. Invol.lng SoutA Afr;c.n
securitIes.
rour actIons appe.r 10 be .. tl,.t.6 .. rl bl a d,.lrl t.
stel rotrlbvl!on .glIASl StcYrlt} Paelflc for Its pirtlelp'tlo"
!"-t~. Hulth-rex .Ittor, rather th.n • cOIIIIOltMnt to
.H.ln.tl lj>lrthofd. lour ... of apartheId IssulS U
further the c_rthl 'eUrestl .f lour union Is I""roper
In<! ""ethicil.
Beeeu .. lOur sht_nh Dn th ... Issu •• hOY. ~ ••
9roul, inaccurale, WI or. hlclng st.p. to ' .... unleet.
dlrtctl, to III partl,s 10,.1 •• 6.
1Ir. Jlck Sh.'n~"
Preslelent
S~rA. -to .-.
Alalga-.ted (l.thl.g Incl Texlill VorllrS Union
15 Un Ion $q<Iar.
'ew lork. MY 10001·3371
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