XBRL and Corporate ActionsPresentation to Financial Executives International (FEI)

December 8, 2009

1

SEC’s US GAAP Rollout

• Average 7% of elements are extensions• Range from 0 to 52%• Reasons for extensions:

– Aggregate elements not available in the taxonomy – creating a new element that captures several elements added together

– Develop new elements that were more specific than what was available– Reflect accounting changes if the 2008 taxonomy was used, which did not

include new FASB pronouncements– Use new FASB pronouncements that came out in the last few months, even

since the 2009 taxonomy release was published– Depict elements excluded from the taxonomy as not allowed in US GAAP– Provide extensions for the same element in Cash Flow and Income statement– Reflect industry specific extensions not yet covered in the taxonomy– Development of dimensional equivalents (i.e. Trade Receivables)

What is a corporate action?

• A mandatory corporate action is an event initiated by the corporation by the board of directors that affects all shareholders. Participation of shareholders is mandatory for these corporate actions. An example of a mandatory corporate action is cash dividend. Other examples of mandatory corporate actions include stock splits, mergers, pre-refunding, return of capital, bonus issue and spinoffs.

• A voluntary corporate action is where the share holders elect to participate in the action. A response is required by the corporation to process the action. Examples include a tender offer, rights issue, making buyback offers to the share holders while delisting the company from the stock exchange.

• Mandatory with choice is a mandatory corporate action where share holders are given a chance to choose among several options. An example is cash/stock dividend option with one of the options as default. Share holders may or may not submit their elections.

Corporate Action information flows between many parties in a more complicated chain than GAAP

Issuer driven Corporate Action information is passed between many parties in the flow and often results in

changes to the corporation structure or entitlements to the investor which need to be correctly communicated

and accounted for.

Due to the transactional nature of the information ISO messaging has grown to support communication within

the Financial Services Industry

Background: Multiple versions, of what should be the same information, travels from the issuer to intermediaries before reaching investors

6Corporate Actions: Improving Issuer-Investor Communication DTCC Non Confidential

Issuer / Agent

Sub-Custodian A

Sub-Custodian B

Data Provider X

Data Provider Y

IM / AM

CSD

Global Custodian J

Global Custodian K

Exchange

Prospectus

Portal

1 Tender Offer on 250 securities required the manual creation of 250 ISO electronic announcements

Eg Event Type, Issuer Name, Security name and ID

Eg Dates, Times

Cash Option and Rate

Terms

Proposed process flow for XBRL tagging a U.S. event based upon ISO 20022 plus other market data

9

Perfect Storm

With the economic down turn, there is an increased focus to reduce the risks and improve transparency through any means possible, including increased regulation

SWIFT is driving the next generation standard, ISO 20022 building on the success of ISO 15022, and DTCC’s ‘CA Re-engineering’ project will service the entire US market, using new ISO 20022 messages in favor of existing legacy files

With the need to do ‘more with less’, there is customer demand for solutions that offer high STP, that align with standards and that use a universal ‘unique ID’

XBRL has been institutionalized with the SEC mandate for the GAAP quarterly financial reporting, and with the replacement of EDGAR with XBRL-based IDEA system. XBRL for CAs, based upon ISO20022, is a solution for issuers to electronically tag data within reports directly at the source. Enforcement may be garnered via regulatory mandate

Why Now?

Financial MarketTurmoil

Industry Initiatives Converging on ISO 20022

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Proposed Solution

• Straight through Processing of Corporate Actions from Issuer to Investor• Strategy

– Build out taxonomy for corporate actions– Establish ISO 20022 standard for financial transactions– Establish Stakeholder group and develop the business case

• Issuer stakeholders: – AGL Resources, Duke Energy, ENGlobal, Pfizer, Inc., United Technologies, Microsoft – issuer agents including Merrill Corporation, Wells Fargo Shareholder Services, NYSE

Euronext and PR Newswire• Intermediary stakeholders: DTCC, custodians • Investor stakeholders: AllianceBernstein, Citi, Goldman Sachs Asset Management, State Street

Global Advisors, T. Rowe Price, Vanguard, AMF (Asset Managers Forum), ICI, CII

Business Case – Survey

• Survey Process– Each stakeholder Group received a tailored survey but containing common questions

– The specific results and responders will remain confidential

• Questions Asked– Demographics

• Markets covered,• Markets of interest

– Volumes• How many U.S. vs Non U.S events are processed by Mandatory, Voluntary and Choice• How many updates received per event

– Cost (Current and estimation post XBRL)• Estimation of losses (Actual/Near misses)• FTE to announce and process evetns

– STP Rates (Current and estimation post XBRL)

Stakeholder group members completed a survey

• Investment Managers serve about 30 clients • Investment Managers receive information from about 25 Intermediaries• Investment Managers had a average of 7 staff focusing on corporate action announcements while

Custodial Banks had an average of 52• The survey included expect increases in STP and $$ Savings

Background Numbers "Typical"Investment Manager

"Typical"Custodian/BrokerDealer

US 55% 58%Canada 23% 32%Europe 18% 33%Asia 18% 8%

Mandatory 9,750 227,250Choice 880 3,000Voluntary 430 13,100

Mandatory 8,500 48,000Choice 1,025 7,875Voluntary 830 12,250

Mandatory 32Choice 21Voluntary 18

Mandatory 3 3Choice 4 3Voluntary 5 3

Market Served

US Event Type Volume

Non-US Event Type Volume

Number of Internediary Firms Providing Information

Update Frequency

Over 50% of assets held in the U.S. with the U.K identified as the next market to

address

Over 3 updates per event from many

intermediaries results in a great

detail of redundant work

Business Case – Issuer results

• 50% of mandatory and choice actions require updates (from 1-20)• Creating corporate action messages is labor-intensive

– At minimum, a release is managed by IR, reviewed by Finance, with minimum 3-5 FTEs, working 6-12 hours

– More complex regulatory filing, handled by Legal, reviewed by Finance, can require as many as 10+ FTEs

• Messages are delivered to multiple outlets: newswire, corporate web site, EDGAR/SEDAR, data vendors, depending on message type

• Volume of questions can be significant– Mandatory and choice get 0-100 questions and require 1-5 FTEs, often with call center

support– One company saw 86% spike in average daily call with merger, 122% spike with spinoff– One company receives approximately 5,000 questions on dividends

• Extensions are seldom granted• Estimated time to tag a corporate action ranged from < 1 hour (release) to 1-3

hours for a regulatory filing• Issuers expect no reduction in inquiries

The Arguments

PLUSES CONCERNS

Net savings Change in liability (mitigate by: initially introduce limited number of tags, most logical tags)

Improved clarity of content and intent of corporate action, increased certainty

Ease of use (mitigate by: ensure tools are available, structure taxonomy to make process easy as possible)

Improved quality in asset servicing to investor

Cost (mitigate by: leverage existing tools, existing knowledge base about XBRL among issuers)

More control in hands of issuer Primary benefit to investor and intermediary; less benefit to issuer

Reduced cost = more funds in the marketplace for investment

Issuer learning curve – corporate actions infrequent, does not become “core competency”

Taxonomy Design Principles

• All meta-data is in the taxonomy– Issuer Taxonomy– ISO 20022 Corporate Actions Notification Message Schema– Mapping Logic

• Issuers will only see a subset of the Taxonomy– Only present what is relevant to the Issuer

• Create concise definitions that allows any issuer to tag a document.

XBRL & CA synergy - opportunity

Committed toXBRL for CA

XBRL financial reporting countries

Interest or planningXBRL for CA

SMPG membersActive in CA Stds

The Way Forward & Next Steps