Efficiency of Corporate Actions Where are we now and where are we headed? Adam Wilson Director, Securities Markets, Asia Pacific

Agenda What is a Corporate Action? Why do inefficiencies occur? The case for change Why XBRL? A new solution?

What is a Corporate Action? The primary reasons for companies to use corporate actions are: Return profits to shareholders Influence the share price Corporate Restructuring

interest interest payments cash dividend final maturity “put” redemption conversion stock dividend stock split tender offer merger partial call rights distribution reverse stock split rights issue bonus issue decrease in value dividend reinvestment exchange offer maturity extension spin-off name change priority issue What is a Corporate Action?

SWIFT’s future strategy for Asset Servicing ISITC Corporate Actions Diamond - the lifecycle of corporate actions INVESTOR ISSUER Co-/Lead-Manager/ Exchange Agent/ Conversion Agent FUND MANAGER Appointed by investor CUSTODIAN Appointed by investor REGISTRAR/AGENT Appointed by issuer to maintain register BROKER/DEALER Execution of trades where necessary CSD Where shares are Ultimately held CUSTODIAN’S NOMINEE Name on register Corporate Actions automation inconsistency – lack of end-to-end data impacts quality Almost no use of data standards for announcements Strong automation, weak market practice compliance Buy-side limited by poor message quality, STP rate ~ 0%

The flow of data Issuer / Agent Sub-Custodian A Sub-Custodian B Data Provider X Data Provider Y Investment / Asset Manager Central Securities Depository Global Custodian J Global Custodian K Exchange Prospectus Portal

The data explosion 7 Multiple paper-oriented documents per action Press releases Regulatory filings Prospectuses Letters of transmittal Asset servicers, custodians, broker/dealers CSD, data vendors Affected investors Investment managers, fund managers  Globally ~3 billion exchanges of data (messages) each year  Servicing millions of securities accounts  Multiple changes for life of each event (weeks to months)

One Example 300+ pages to describe an ‘Exchange Offer’ 38 separate updates were published from Dec 08 to May 09, as new information was made available Validation took 12 separate sources of data Five people worked on it extracting 63 data elements, amassing 44 pages of audit trail changes The paper-based nightmare of corporate actions… The challenge is to find the right data, in the right pages, buried somewhere in the free-text document

Impact is on the entire market, especially the Investors Risk Costs Issuers “first link in the chain” are generally unaware of the problem Timing Interpretation Accuracy Ultimately, we cannot forget that it is the investors’ money that funds the industry… …so the investors are paying for the inefficiency, delay, failures and waste 17 June 2010 Findings

10 Recommendations 1.All parties adopt a single set of global information and technology standards 2.Issuers “tag” the corporate actions documents with XBRL 3.Intermediaries seamlessly disseminate the electronic version of the tagged data Big Benefits 1.Investors get key details faster with higher accuracy 2.Institutional investors improve decision making 3.Issuer confidence in accuracy, timeliness, and transparency 4.Regulators recognize efficiency and responsiveness to implement rule changes due to a standards driven process 5.Intermediaries experience reduced risk and streamlining 17 June 2010

XBRL CA Initiative in the US Started in 2008 –DTCC, SWIFT and XBRL US adressed the issues involving CA announcements by initiating development of an XBRL taxonomy for CA –DTCC and XBRL US developed the taxonomy utilizing existing taxonomy data types SWIFT supported the development of the US taxonomy and the ISO subset messages for DTCC –Alignment with international standards (ISO 20022) –US market specific requirements (market practice) –ISO subset messages

XBRL CA piloting in the US – current status ADR (American Depositary Receipts) –Foreign stock listed on US exchange via a Depositary Bank –Citi piloting XBRL for ADR announcements with support from DTCC, XBRL US and SWIFT Piloting with corporate issuers –Taxonomy being completed, applying responses from the open comment period –Working with vendors for tagging tools –Targeting early adopters of the GAAP taxonomy, supporters of technology & standards to improve data disclosure –Most of rest of 2011 focusing on this

Future Opportunities CA taxonomy for US, with alignment to ISO –Building block for adaptation in other markets –Reverse engineering of ISO means compatibility with ISO markets –SWIFT supports ongoing alignment to ISO standards Issuer and Investor interest in Proxy Voting –Similar alignment to ISO Proxy Voting messages –Similar workflow to Corporate Actions, different data elements Other areas: funds, issuance of securities, more

The issuer will ‘drag and tag’ and associate free text to structured data, via XBRL tool

Modelling & development -Data model -Taxonomy -ISO alignment -Pilot & implementation Harmonisation: - downstream market to ISO / SWIFT messages Business drivers -Stakeholders -Communication -Business rationale Year 1Year 2 Adoption Issuers to Investors : Corporate Actions – a global template for new markets

Thank you