American depositary receipts
Standard Bank has a Level 1 ADR programme in the US and the depositary receipts trade in the OTC market
What is an American depository receipt (ADR)?
An ADR is a negotiable United States (US) certificate representing ownership of shares in a non-US corporation. ADRs are quoted and traded in US dollars in the US securities market. Also, the dividends are paid to investor in US dollars. ADRs were specifically designed to facilitate the purchase, holding and sale of non-US securities by US investor, and to provide a corporate finance vehicle for non-US companies.
US investors generally prefer to purchase ADRs rather than ordinary shares in the issuer’s home market because ADRs trade, clear, and settle according to US market conventions. One of ADRs’ main advantages is the facilitation of diversification into foreign securities. ADRs also allow easy comparison to securities of similar companies as well as access to price and trading information, if listed. ADR holders also appreciate dollar dividend payments and receiving corporate action notifications.
ADR issuers are typically large multinational corporations. Any non-US company seeking to raise capital in the US or increase theirits base of US investors can issue ADRs.
Investors receive annual reports and proxy materials in English. ADR issuers generally have full information in English about themselves on their websites, as well as on the main depositary bank websites, and are better tracked by the main US financial websites. ADRs listed on US exchanges provide holders with the same level of information as any other US security. Trading information is readily available; financials are reconciled to US Generally Accepted Accounting Principles (GAAP), and the SEC regulates the company’s disclosure to investors. Standard Bank ADRs are not listed on a US exchange, and Standard Bank does not provide US GAAP financial statements.
The ADRs are traded over the counter (OTC). The trading code is SGBLY. The CUSIP number is 853118206. The ratio between the ADR and the ordinary share is 1:1.
A registered holder is one whose name appears on the books of the depositary. The registered holder is considered the owner of record. A beneficial holder is one whose holdings are registered in a name other than their own, such as in the name of a broker, bank, or nominee.
Dividends are paid in US dollars and are generally taxable, just like dividends on US shares. In addition, taxes may be withheld by the ADR company’s local government. Depending on individual circumstances, foreign taxes withheld might be applied as a credit against US taxes, or tax reclaim opportunities may be offered.
For dividend and corporate action information, please visit www.adrbnymellon.com. Go to ‘Directory’ on the top left side of the screen, then choose ‘Corporate Actions’ or ‘DR Dividends & Distribution’ on the vertical scroll bar on the left and then enter company name, CUSIP or symbol.
Investors can purchase depositary receipts through Global BuyDIRECT, a BNY Mellon–sponsored dividend reinvestment and direct purchase programme for depositary receipts of certain non-US companies. Each participating company’s plan allows its existing shareholders to use dividends paid by the company to automatically purchase depositary receipts. The plans also allow first-time and existing investors to purchase depositary receipts of participating companies. All such investments are made through BNY Mellon as transfer agent.
As a participant in Global BuyDIRECT, investors benefit from the direct ownership of their depositary receipts, the efficiency of receiving corporate communications directly from the depositary receipt issuer, and the savings resulting from reduced brokerage and transaction costs.
Global BuyDIRECT is a BNY Mellon–sponsored dividend reinvestment and direct purchase programme for depositary receipts of certain non-US companies. Each participating company’s plan allows its existing shareholders to use dividends paid by the company to automatically purchase depositary receipts. The plans also allow first-time and existing investors to purchase depositary receipts of participating companies. All such investments are made through BNY Mellon as transfer agent.
As a participant in Global BuyDIRECT, investors benefit from the direct ownership of their depositary receipts, the efficiency of receiving corporate communications directly from the depositary receipt issuer and the savings resulting from reduced brokerage and transaction costs.
Investors can always purchase depositary receipts through their own full-service, discount, and on-line brokerage firms throughout the US.
A shareholder wishing to convert JSE-listed ordinary shares into ADRs should, in the first instance, request that their broker contact the BNY Mellon ADR Broker Desk at [email protected]
Standard Bank has a Level 1 ADR programme in the US. BNY Mellon is the sponsoring bank, and the depositary receipts trade in the over the counter (OTC) market.
Country: South Africa
Depositary: BNY Mellon (Sponsored)
Effective date: 28 September 2012
Underlying ISIN: ZAE000109815
US ISIN: US8531182066
QUICK ADR FACTS
- ADRs are negotiable US securities that generally represent a company’s publicly traded equity or debt.
- They are publicly available to investors on a national stock exchange or in the OTC market.
- They facilitate US investor purchases of non-US securities and allow non-US companies to have their stock trade in the US by reducing or eliminating settlement delays, high transaction costs and other potential inconveniences associated with international securities trading.
- They are treated in the same manner as other US securities for clearance, settlement, transfer and ownership purposes. Depositary receipts can also represent debt securities or preferred stock.
- They can be either sold to another US investor or cancelled, and the underlying shares can be sold to a non-US investor when the depositary receipt holder sells.
- ADRs facilitate portfolio diversification, risk reduction and international investment, overcoming many of the inherent operational and custodial hurdles of international investing.
THERE ARE 3 LEVELS OF ADR PROGRAMMES:
- Sponsored Level I Depositary Receipts
This is the simplest method for companies to access the US and non-US capital markets, and they are traded in the US OTC market. Level I is the fastest-growing segment of the depositary receipt business.
- Sponsored Level II and Sponsored Level III Depositary Receipts
Companies that wish to list their depositary receipts on a US stock exchange (NASDAQ, American or New York), raise capital, or make an acquisition using securities use Sponsored Level II or Sponsored Level III Depositary Receipts. These are exchange-listed securities but do not involve raising new capital. Level III programmes typically generate the most US investor interest because capital is being raised.