Tax Cost Basis Reporting Proposed Legislation Impact to Issuers/Agents

1. Tax Cost Basis Reporting Proposed Legislation Impact to Issuers/Agents Presented to Shareholder Services Association Katie Sevcik February 21, 2008

2. Tax Cost Basis Reporting Legislation • Impact to Issuer/Transfer Agent • New fields required • Lot Accounting • Transfers • DTC Transfers • Corporate Actions • Other Challenges

3. Cost Basis Reporting • Systems will need to accommodate 4 fields: • Original acquisition date • Transfer-in date • The last “as of” basis adjustment date • Sale date • Reporting of Long term vs. Short term

4. Cost Basis Reporting • Lot Accounting: • Dividend Reinvestment shares • Certificates issued at lot level vs. certificates representing multiple lots • Corporate Action Distributions

5. Cost Basis Reporting • Impact to registered transfers: • LIFO • Specific Share Identification • Dividend Reinvestment • DRS shares

6. Cost Basis Reporting • Impact to DTC transfers: • W/T process • DRS Profile Moves • DWAC (bulk moves versus individual account moves) • DTC Deposits (SCL at the broker level versus account level or account lot level)

7. Cost Basis Reporting • Cost basis to follow • Earlier of 45 days after transfer or Jan 31st of following year • How do we identify which shares are covered? • How do we match tax cost information to transfer? • How do we pass liability notices? • Do we reject transfer if shares are still available?

8. Cost Basis Reporting • Corporate Action Processing • Description of organizational action and how it affects the basis • Quantitative effect on the basis of such specified security resulting from the action • Include name, address, phone number of information contact • Other information as the Secretary of the Treasury may prescribe

9. Cost Basis Reporting • Corporate Action Processing • Possibility that Secretary may waive requirements if information is made publicly available • Reporting – earlier of 45 days after action date or Jan 31st of following year

10. Cost Basis Reporting • Split Processing – Certificate Environment Shares Cost 100 $100.00 100 $125.00 100 $150.00 300 $0.00 600 $375.00 Shares Cost 200 $100.00 200 $125.00 200 $150.00 $100.00 600 $375.00

11. Cost Basis Reporting • Other Challenges: • Conversion files • Identifying pre and post Dec 31, 2009 shares • Contact – Call Center • Calls for FIFO and Specific Lots • Increased call volumes and need for research • Level of expertise for Customer Service Reps

12. Cost Basis Reporting • 1099 Reporting Challenges: • Sells and Dividend Reinvestment share purchases could evoke Wash Sale rule • Reporting both short term and long term information • Reporting of pre and post Dec 31, 2009 shares • Liability issues if cost information is not received

13. Questions?