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March 21, 2013


SEC Action Puts Caterpillar Resolution
on Sudan Up for Shareholder Vote

The New York State Common Retirement Fund's shareholder resolution calling upon Caterpillar Inc. to take steps to ensure that the company's foreign subsidiaries are not doing business with the government of Sudan will go before shareholders on June 12, New York State Comptroller Thomas P. DiNapoli announced today. Caterpillar had attempted to block the resolution from appearing on its shareholder proxy statement to be voted upon at its annual meeting by petitioning the Securities and Exchange Commission (SEC) to allow its exclusion from the meeting agenda.

"Caterpillar's shareholders have a right to know that the company is taking all necessary steps to ensure that its products have not been sold to the Sudanese government, a state sponsor of international terrorism, through its foreign subsidiaries," DiNapoli said. "Caterpillar hasn't adequately addressed this issue, which presents significant risk to the Fund's investment and Caterpillar's reputation. Caterpillar must become more transparent in how it intends to monitor its relationships with its buyers and distributors. "

As a member of the Conflict Risk Network, over the past six months DiNapoli engaged with Caterpillar to determine if the company had met the conditions of the resolution. The Network is a group of over 80 governmental entities, institutional investors and asset management firms that tracks the impact of investment on human rights in countries affected by genocide and mass atrocities, including Sudan.

"Conflict Risk Network and several of our investor members have made repeated attempts to engage with Caterpillar about its 'Scrutinized' classification and steps the company can take to fulfill its responsibility to respect human rights in Sudan," said Network Director Kathy Mulvey. "Caterpillar has failed to respond meaningfully to our inquiries and we are concerned that its potential association with violence and human rights violations poses risks to civilians, and to Caterpillar's business and reputation."

The resolution, which will be voted upon at the company's annual shareholder meeting, cites several risk factors:

  • Human rights abuses by the Sudanese government in the country's Darfur region and state sponsorship of international terrorism which have led the U.S. government and other entities to impose sanctions and enact divestment legislation to limit trade and corporate business with the country;
  • Caterpillar admitting to sales in Sudan by its foreign subsidiaries totaling more than $265.5 million from fiscal year 2008 through the first quarter of fiscal year 2011;
  • The company's acknowledgement in filings with the SEC that 'dealers and distributors of Caterpillar's non-U.S. subsidiaries have in some cases sold products to the government of Sudan or entities controlled by it';
  • Caterpillar's acknowledgement that such sales would be in violation of U.S. sanctions if conducted directly by the U.S.-based parent company;
  • The Conflict Risk Network's adding of the company to its list of 'Scrutinized' companies which may subject it to divestment or a prohibition on investment under Sudan divestment legislation enacted by a number of U.S. states and cities.

The SEC, in a ruling dated March 7, 2013, denied Caterpillar's request to exclude the proposal from its proxy materials because they:

…are unable to concur in your view that Caterpillar may exclude the proposal…Based on the information you have presented, it does not appear that Caterpillar's public disclosures compare favorably with the guidelines of the proposal.

Accordingly, we do not believe that Caterpillar may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(10).

In 2009, DiNapoli announced that the pension fund had divested $86 million in investments from nine companies and froze investments in seven companies doing business in Iran and Sudan.

As of March 15, 2013 the Fund owned 1,991,699 shares of Caterpillar Inc valued at approximately $176.9 million.

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