Product Guide. November Asset Services / Dividends

Transcription

1 Product Guide Foreign Currency Payment Service (FCP) November 2007 Asset Services / Dividends

2 Contents Introduction...1 About the Foreign Currency Payment (FCP) Service... 1 The Problem - Time/Cost/Risk Factors... 1 The Solution... 1 How it Works...2 FCP Flow Process...3 Payout Date... 4 Setup... 4 When to Use... 4 Issue Notification... 4 Time frame... 5 Benefits of Using The Foreign Currency Payment Service... 5 FCP VARIATIONS...6 Direct Payment Service... 6 Using PTS to Make Elections for Foreign Currency Payment...7 Using PBS to Make Elections for Foreign Currency Payments...11 Associated PTS/PBS Functions...15 Procedures and Field Definitions...16 The Depository Trust & Clearing Corporation Page i November 2007

3 FCP Product Guide Document History May 2007 November 2007 Document created by Eileen Ledford, DTCC Learning Document modified by Terry Dunne, DTCC Learning The primary purpose of this product guide (the Guide ) is to familiarize customers with the Foreign Currency Payment product. For more detailed descriptions of the product, please see the Dividend Services Guide, accessible by Participants through DTCC Learning s Electronic Document Library of Services, Products, and Functions. You can access the Electronic Document Library at Important Legal Information: DTCC and its affiliates ( the Companies ) do not represent or warrant the accuracy, adequacy, timeliness, completeness, or fitness for any particular purpose of the information contained in this Guide which is provided as is. The Depository Trust & Clearing Corporation Page ii November 2007

4 Introduction ABOUT THE FOREIGN CURRENCY PAYMENT (FCP) SERVICE DTC s FCP service, part of DTC s Elective Dividend Service, allows Participants to receive dividend, interest, redemption, and maturity payouts in foreign currency on FCP eligible securities. Payouts can be made either in all foreign currency, all U.S. Dollars, or in part foreign currency and part U.S. Dollars. Note that the currencies available on each issue are limited to those that are offered by the paying agent. DTC s Elective Dividend Service (EDS) is the vehicle that allows Participants to process income election instructions for foreign currency payments. You can use the Elective Dividend Service (EDS) to enter election instructions for any active election announcement in which you have position. THE PROBLEM - TIME/COST/RISK FACTORS Cross border investors incur costs when repatriating payments to their home currencies. For example, a non-us investor receiving a dividend payment for a Canadian security or non-us bond that is paid in U.S. Dollars may wish to convert the dollars to non-u.s. currency. But the conversion process can mean lost time, increased cost, and additional risk. Partial payments, where payout is desired in both U.S. Dollars and foreign currency, add an additional layer of complexity to the conversion process. The result is increased chance for errors, more time to complete payout, additional risk regarding exchange rate movement, and, ultimately, less net payout. THE SOLUTION DTC s Foreign Currency Payment (FCP) service permits Participants to receive payouts, either fully or partially, in foreign currency on the designated pay date at the prevailing exchange rate. No currency exchange fees are charged by DTC. Note: In order for Participants to receive payouts in foreign currency, the securities must be eligible for the FCP service. Participants should contact their DTC Relationship Manager for more information regarding securities that are eligible for payouts in foreign currency. The Depository Trust & Clearing Corporation Page 1 November 2007

5 How it Works Participants instruct DTC to submit instructions to the paying agent regarding payout for FCP-eligible securities. The instructions specify the number of shares or bonds to be paid in a foreign currency. Once the instructions are set up, Participants can view, modify, or delete the instructions prior to the payment cutoff date. Instructions include the wire transfer destination and associated beneficiary account information. Note: If Participants wish to be paid the dividend, interest, maturity, or redemption proceeds on their entire position in U.S. currency, Participants need not take any action as payment in US Dollars is the default payment currency. The Depository Trust & Clearing Corporation Page 2 November 2007

6 FCP Flow Process 1 DTC requests instructions from Participant 2 DTC requests that the Participant issue instructions regarding foreign currency payments for full or partial foreign currency payouts of selected issues. Instructions to DTC from Participant The Participant, as requested, sends instructions to DTC regarding the quantity of a selected issue to be paid in foreign currency, the tax withholding rate where applicable, and the beneficiary account number and wire instructions. If instructions are not sent, payment will be made in U.S. Dollars. 3 Payment instructions to Paying Agent from 4 Foreign Currency payment from Paying Agent DTC to Participant DTC provides the Paying Agent with detailed instructions regarding the quantity of a selected issue to be paid in foreign currency, the quantity to be paid in U.S. Dollars, the tax withholding rate where applicable, and the beneficiary account number and wire instructions for direct foreign currency payment from the Paying Agent to the Participant. On the payout date, the Paying Agent makes a payment directly to the Participant in the designated foreign currency for the amount instructed by the Participant through DTC. 5 U.S. Dollar payment from Paying Agent to 6 U.S. Dollar payment from DTC to Participant DTC The Paying Agent pays to DTC the U.S. Dollar payment (and DTC pays the Participant see #6). DTC distributes the U.S. Dollar payment to the Participant. The Depository Trust & Clearing Corporation Page 3 November 2007

7 PAYOUT DATE When payment is due, DTC forwards payment instructions to the Paying Agent. For foreign currency payments, the Paying Agent sends the payout directly to the Participant outside of DTC. If the instructions call for payments in both foreign currency and U.S. Dollars, the Paying Agent makes a payment to the Participant in foreign currency outside of DTC and sends the U.S. Dollar portion of the payment to DTC. DTC distributes that portion of the payment directly to the Participant. See the FCP Flow Process chart, steps 5 and 6. SETUP To participate in the FCP service, Participants must have access to the FCP function via DTC s mainframe Participant Terminal System (PTS) or its Web-based Participant Browser Service (PBS). To receive payouts in foreign currency, the securities from which the payouts originate must be designated as eligible for foreign currency payments. Please contact your DTC Relationship Manager to set up FCP and for more information regarding securities that are eligible for foreign currency payouts. WHEN TO USE Participants can use FCP to: View active elections (elections that are currently open to allow input of instructions) in which they hold position on the record date, up to and including the instruction cutoff date. Elections are listed in cutoff-date order. View inactive elections (elections that are closed and no further input of instructions is allowed) in which they hold position past the cutoff date but before the allocation date. View FCP transaction history. Note that all history is saved indefinitely. Enter foreign currency election instructions for any active election announcement. As previously mentioned, FCP is part of EDS. EDS is available on business days from 6:00 a.m. to 8:00 p.m. eastern time. To participate in the EDS service, you must have access to the EDS function via DTC s mainframe Participant Terminal System (PTS) or its Web-based Participant Browser Service (PBS). Participants can contact their DTC Relationship Manager to obtain access to EDS. ISSUE NOTIFICATION Participants can view a list of issues for which there is a foreign currency payment opportunity that day when they log on to the FCP application in PTS or PBS. Participants can also view forecast, active, and inactive FCP-eligible announcements via the EDS system and can subscribe to the electronic DTFEDS CCF file, which reports on upcoming elections, late announcements, and updated announcements for EDS-eligible issues. Additionally, DTC Participants should request information about eligible FCP securities from their DTC Relationship Managers. The Depository Trust & Clearing Corporation Page 4 November 2007

8 Time frame The FCP eligible announcements can be viewed in EDS until the announcement allocates. Customers can view past elections in EDS after allocation by viewing their transaction history. BENEFITS OF USING THE FOREIGN CURRENCY PAYMENT SERVICE DTC s FCP service: Reduces foreign exchange risk as a result of receiving foreign currency payments in a shorter time frame Minimizes currency exchange fees Reduces transaction errors due to automation of foreign currency instruction processing Creates a streamlined and efficient means to obtain foreign currency on income payments. The Depository Trust & Clearing Corporation Page 5 November 2007

9 FCP VARIATIONS In addition to the standard FCP Service, DTC offers variations of the FCP product specifically for Canadian issues as well as for special foreign currency circumstances. For Canadian Issues, Participants holding Canadian positions can elect to receive income and other entitlement payments in Canadian Dollars, if the entitlements are declared in Canadian currency. Simultaneous with the FCP elections for Canadian securities, Participants can also elect to receive income payments with the appropriate rate of Canadian withholding tax withheld at source. Depending upon the tax status of the ultimate beneficial owner, Canadian income payments can be elected to be paid exempt from Canadian withholding tax (exempt rate), at a reduced rate of withholding (favorable rate) or at the statutory tax rate (unfavorable rate) on DTC- eligible securities through EDS on PTS and TaxRelief on PBS. Historically, Participants using the Canadian-Payment Service for Canadian securities have supplied standing settling bank instructions to DTC and received income and entitlement payments in their own settlement account at the Canadian Depository for Securities (CDS), or at an appointed CDS settling agent outside of DTC. With the introduction of the Canadian-Link Service in 2005, these payments can now be paid to their account at a settling bank of their choice and posted to Participants DTC settlement balances. Whether Participants utilize the Canadian-Payment Service or the Canadian-Link Service, Participants will be prompted via EDS/FCP to provide DTC with instructions that specify the number of shares or bonds to be paid in U.S. and/or Canadian currency as well as the appropriate tax withholding rates for each elected currency amounts. Note: Participants wishing to use the FCP service for Canadian securities must sign a Canadian Currency Eligibility Form. Participants wishing to use the Canadian-Link Service must sign. DIRECT PAYMENT SERVICE The Direct Payment Service (DPS) is available on select DTC-eligible securities where certain Participants arrange directly with the issuer and transfer agent to receive income payments in the home currency outside of DTC. Such an arrangement is generally made for tax reasons. Participant eligibility is based upon the execution of a Dividend Agreement by DTC, the Participant, agent, and issuer. The Dividend Agreement allows participants to establish standing instructions for direct payment at the CUSIP level. Once established, these instructions can be adjusted through the EDS function. The Depository Trust & Clearing Corporation Page 6 November 2007

10 Using PTS to Make Elections for Foreign Currency Payment DTC s mainframe Participant Terminal System can set up foreign currency payments using the following procedure: 1. Select 1, Foreign Currency Payments, or A - All EDS Services on the EDS Main Menu and press ENTER. The Active Foreign Currency Payments screen or the Active All EDS Services screen appears. FCP indicator field 2. Tab the cursor to the left of an active election that has an F in the FCP indicator, type X in the CMD field, and press ENTER. The Depository Trust & Clearing Corporation Page 7 November 2007

11 The Foreign Currency Payments screen appears. Record date position 3. Type the quantity to be paid in the For Currency Election Qty field and press ENTER. You cannot exceed the record date position. If you previously moved a portion of your record date position into the For Currency Election Qty field, this field will contain the quantity that you moved. The Wire Instructions List screen appears if you are replacing a previous FCP instruction Type X in the CMD field to the left of the wire instruction you select and press ENTER. The EDS - Wire Instructions screen appears. The Depository Trust & Clearing Corporation Page 8 November 2007

12 5. Type the required information in all applicable fields and press PF3/15. The EDS - Wire Instructions Disclaimer screen appears. The Depository Trust & Clearing Corporation Page 9 November 2007

13 6. Press PF3/15. The EDS - Preparer s Information screen appears. 7. Type your name and telephone number and press ENTER. The message Press PF1/13 To Confirm appears. 8. Press PF1/13 to obtain the Foreign Currency Payment screen containing the updated information. The Depository Trust & Clearing Corporation Page 10 November 2007

14 Using PBS to Make Elections for Foreign Currency Payments DTC s Web-based Participant Browser System (PBS) can set up foreign currency payments using the procedure described below. 1. To access the FCP application, on the Corporate Action Services homepage point to Elective Dividends and click Foreign Currency Payment. The FCP application opens and the Eligible Announcement List page appears with a list of active announcements that are eligible for foreign currency elections. The list is in cutoff date order and displays the services for which each event is eligible. The Depository Trust & Clearing Corporation Page 11 November 2007

15 To search for a specific CUSIP, type the CUSIP in the CUSIP field and click Search. 2. To search for a CUSIP, type a CUSIP number in the CUSIP field or use the Security Finder magnifying glass icon to find the CUSIP you want. If you are a group user, type a Participant number in the Participant ID field to view announcements for a specific Participant. (Group users can view the account information of other members of their group. If you are not a group user, you cannot type a Participant ID in the Participant ID field.) 3. Click Search. Your search results are displayed. 4. Click the CUSIP number to access one of the following pages: Participant Selection List Page (if you didn t type a Participant number in the Participant ID field). Go to step 5. Special Instructions page (if you didn t type a Participant number in the Participant ID field and there are special instructions). Go to step 6. Election Instructions page (if you typed a Participant number in the Participant ID field). Go to step On the Participant Selection List page, click the Participant election information you want to view. One of the following pages appears: The Depository Trust & Clearing Corporation Page 12 November 2007

16 The Special Instructions page (if there are special instructions to view) Go to Step 6. The Election Instructions page Go to Step On the Special Instructions page, click Continue. The Election Instructions page appears. Type your election here. 7. In the Foreign Currency Election Quantity field, type the amount of your foreign currency election quantity and click Continue. One of the following pages appears: Wire Instruction List page (If you previously entered instructions for this announcement). Go to step 8. Wire Instruction Add page (If you did not enter instructions for this announcement). Go to step On the Wire Instructions List page, click one of the following buttons or links and click Continue: Withholding Rate (to view or update a wire instruction) Delete (to delete a wire instruction) Add (to access the Wire Instruction Add page). The Depository Trust & Clearing Corporation Page 13 November 2007

17 If you clicked the Add button, the Wire Instruction Add page appears. 9. Type all applicable information and click Continue. The Wire Instruction List page appears containing the instructions you added or changed. 10. Click Continue. The Wire Instruction Disclaimer page appears. 11. Click Continue. The Preparer s Information page appears. Type your name and phone number and click Submit. The Depository Trust & Clearing Corporation Page 14 November 2007

18 Associated PTS/PBS Functions Use EDS (PTS) To View and process foreign currency elections. Elective Dividend System (PBS) RCUR (PTS) Process Redemptions foreign currency elections. Redemptions Foreign Currency (PBS) ADJI (PTS) View cash and stock adjustments related to DTC activities. Fail Adjustments (PBS) DIVA/DPAL (PTS) View allocations and announcement instructions. Dividend& Income Announcement (PBS) Dividend Position Allocation Ledger (PBS) The Depository Trust & Clearing Corporation Page 15 November 2007

19 Procedures and Field Definitions Accessing PBS Procedures and Field Definitions Instructions, including detailed field definitions and business terms and topics, can be found by clicking the Help button located at the top of the screen of the selected PBS application. Accessing PTS Procedures and Field Definitions Instructions and field definitions for PTS are found in the DTC Services Guides located in DTCC Learning s Electronic Document Library of Services, Products, and Functions. You can access the Electronic Document Library at DTCC Learning s Electronic Document Library of Services, Products, and Functions The Depository Trust & Clearing Corporation Page 16 November 2007