The Enhanced Business Reporting Consortium 1201 Connecticut Avenue, NW Suite 300

1. Developing Voluntary, International Guidelines for Enhanced Business ReportingA market-driven approach to improving the business reporting modelhttp://www.ebr360.com The Enhanced Business Reporting Consortium 1201 Connecticut Avenue, NW Suite 300 Washington, DC 20036 866-459-2600 www.ebrconsortium.org March 2005

2. Wait a minute… enhanced business reporting, improving the reporting model… • Didn't Sarbanes-Oxley § 404 lead to improved internal controls and result in better information? • There is little doubt that S-Ox § 404 has resulted in improved internal controls over financial reporting, however… • Investors, creditors and business executives do not use the financial statements as their primary tool when making decisions about the allocation of capital • Then, what information is important?

3. Research tells us what is important • Provide shareholders and others with information needed to make decisions • Financial and nonfinancial value drivers • Tangible and intangibles assets • In general, many measures require information from outside the Company's financial or business systems • Vast majority of measures are not subject to standards or reporting frameworks of any kind Enhanced Business Reporting = Better Information

4. Everyone needs better information • Management… to optimize allocation of capital and people resources • Boards of directors… to provide the level of oversight that shareholders demand • Investors… to more efficiently and effectively allocate and price capital • Regulators… to ensure that the capital markets are functioning as efficiently and effectively as possible The net result is a higher return on capital for society as a whole

5. What makes information better? • Value = Reduction of uncertainty times $$$ at risk, in other words… • Knowledge reduces uncertainty and because they know more, investors believe they take less risk for the given level of return • Knowledge will be gained from content not currently disclosed, e.g. financial and nonfinancial value drivers • Cost = Produce + Structure + Distribute + Consume • Standard formats allow for more efficient and effective preparation, dissemination, exchange and analysis of business information • Standard formats add value by lowering the cost of accessing information, therefore lower costs can increase transparency Both content and format of information enhance transparency

6. What do you mean… content and format? • Enhanced Business Reporting is about content • Provides information that is actually used for decision-making • It is information not currently disclosed • XBRL (eXtensible Business Reporting Language) is about format • It is an Internet-centric platform for EBR that delivers a powerful Return-On-Investment • Note: Documents published in electronic formats, e.g., MS Word and Adobe PDF are paper-centric and have to be processed manually • XBRL puts information in the hands of consumers at lower costs (both production and consumption)

7. What is Enhanced Business Reporting? • Enhanced information for consumers • Internationally recognized, voluntary guidelines for industry-specific value drivers and key performance indicators (KPIs) • A framework for disclosure of non-financial information, e.g., opportunities, risks, strategies and plans and about the quality, sustainability and variability of cash flows and earnings • Simplified report preparation • Stronger focus on quality of information, not quantity • Prepare and disseminate information using efficient and effective business processes

8. The need for enhancement • Investors and creditors need better information… • Each company and each industry has a set of metrics that provides great predictive capability with respect to future earnings power and cash flows of a business • The current model has value but … • Little progress has been made in moving toward a reporting model that would include both financial information and nonfinancial information about, for example, opportunities, risks and management’s strategies and plans

9. The need for simplification • Decades of ever-increasing and more complex disclosure requirements • Some older disclosure requirements may no longer be useful and actually get in the way of focus on relevant information • Complex disclosures are often hard to understand • Multiple reporting jurisdictions (Country GAAP, IFRS, securities regulators, industry regulators) • Disclosure requirements that are redundant are unnecessary, create confusion and waste effort • Reporting processes are error-prone and ineffective

10. What is XBRL? • eXtensible Business Reporting Language • XML designed specifically for business information • An open, free, global standard for business reporting information (e.g. narrative text, numbers, dates, graphs, and other facts) • Each piece of information is assigned a unique, predefined tag (like a barcode), which uniquely identifies its content and structure • Tags give data an identity and context that can be understood by various software applications • Reporting concepts can be linked to other relevant materials, information to facilitate preparation, reuse and analysis

11. Standardization Presentation Cash & Cash Equivalents References GAAP I.2.(a) Instructions Ad Hoc disclosures Label cashCashEquivalentsAndShortTermInvestments Calculation Cash = Currency + Deposits FormulasCash ≥ 0 Contexts US $ FY2004 Budgeted Validation XBRL – More Than Just Definitions Presentation Comptant et Comptant Equivalents Presentation 現金及び現金等価物 Presentation Гроші та їх еквіваленти Presentation Деньги и их эквиваленты Presentation Kas en Geldmiddelen Presentation 现金与现金等价物 Presentation Geld & Geld nahe Mittel XMLItem XBRL Item XBRL Item

12. A standardized format matters if information is to be more useful • Management… to quickly populate a wide range of analytical and reporting tools with relevant information • Boards of directors… to access and analysis of information buried deep within the enterprise • Investors… to more efficiently and effectively access and analyze information in business reports • Regulators… to more effectively analyze information in business reports The net result is greater transparency of business information

13. Tying it together… • S-Ox § 404 provides a foundation for integrity in business reporting, i.e., a basis for the credibility of systems and processes • Enhanced Business Reporting provides shareholders and other stakeholders with information needed to make decisions, i.e., value drivers, key performance indicators information about opportunities, risks and management's strategies and plans • XBRL provides an open, global standard for defining information, i.e., standard formats allow for more efficient and effective preparation, dissemination, exchange and analysis of business information This is a three-legged stool; the stool collapses if any leg is missing

14. The challenge • CEOs and management must resolve to report externally the same information that is used to manage the business • Boards of directors must determine the optimal level of transparency required to ensure that all stakeholders have the information needed to make decisions • Investors must demand and use qualitative, non-financial information and key performance indicators • Regulators must be willing to trade long-time requirements for more relevant and useful information

15. The benefits are worth the effort • Better Management • Improving the ability of companies to benchmark performance against all key performance indicators • This level of benchmarking is impracticable in a paper-centric world • Better Governance • Directors can better fulfill their fiduciary responsibilities to shareholders, e.g., more appropriate executive compensation through benchmarking • Better Markets • The over-emphasis of quarterly earnings will decline, as companies provide richer information that enables to investors take a longer term view • More efficient and cost-effective regulation

16. What does the SEC think of the Enhanced Business Reporting Consortium? “I am encouraged by the Enhanced Business Reporting Consortium's efforts to develop a voluntary, internationally recognized framework for presentation of industry-specific key performance indicators and disclosure of non-financial information about opportunities, risks and management's strategies and plans. This effort represents the type of discussion and action that should be occurring in the marketplace as we all seek to continually improve the value of information for the sake of investors.” Don NicolaisenChief AccountantSecurities and Exchange Commission

17. Tier Three Company-Specific Information Tier Two Industry-Based Standards Tier One Global Generally Accepted Accounting Principles One possible model for business reporting… Source: PwC ValueReporting

18. One possible framework Enhanced Business Reporting… • The Market • Competition • Regulatory • Macro-economic • Strategy • Overview • Strategic priorities • Operational goals • Risks and risk management • Opportunities • Value drivers • Financial • Financial statements • Segment analysis • Performance • Summary • Supply chain • Customers • Acquisitions • Innovation • People • Sensitivity analysis • Estimates • Projections Source: Report of the Public Company Task Force to the AICPA Special Committee on Enhanced Business Reporting June 2004

19. Performance measures and the High Tech sector Communication gaps prevent market value from reflecting underlying value Management’s Valuation Value gap Investors/Analysts Market Value Quality of Information Quality Gap Understanding Gap Importance of a Measure Importance of a Measure InformationGap Reporting Gap How Adequately a Measure is Communicated Perception Gap How Actively a Measure is Communicated

20. Performance measures and the High Tech sector High Tech CFOs recognize that a broad range of financial and nonfinancial measures are useful for managing their companies CFOs Perceptions of the Relative Importance of Performance Measures* Low Importance High Importance Medium Importance 1. Strategic direction 1. Employee acquisition costs 1. Revenues from new products 2.Intellectual capital 2. Brand development costs 2. Cash flow 3. Sales and Marketing costs 3. Customer acquisition cost 3. Market growth 4. New product success rate 4. Licensing revenues 4. Gross margins 5. Employee retention rates 5. Order fulfillment rate 5. Quality/experience of management team 6. R&D expenditures 6. Utilization of manufacturing 7. Product development cycle 7. Reject rates 6. Market size 8. Distribution channels 8. Traffic growth 7. Competitive landscape 9. Cash burn-rate 9. Royalty revenue 10. Brand equity/visibility 8. Earnings 11. Revenue per employee 10. Warranty costs 9. Speed to market (first to market) 11. Inventory write-downs 12. Customer turnover rates 13.Capital expenditures 10. Market share 12. Traffic patterns 14. Segment performance 13. Bartering agreements *Respondents were asked to evaluate measures on a five-point scale with 1=Very Valuable and 5=Not At All Valuable. Measures of High Importance had scores between 1.00 and 1.99 or less, measures of Medium Importance had scores between 2.00 and 2.99, and measures of Low Importance had scores of 3.00 or higher. The least important score had a numerical value of 4.21 and all the rest were between 3.00 and 3.99. Source: 2000 PricewaterhouseCoopers High Tech Survey

21. Companies are trying to explain why they did not make a target that they didn’t set in the first place “Enhanced Business Reporting will help companies move beyond the earnings game; placing more emphasis on measures that give a better picture of their value, their risks, and their opportunities.” Bob Herz Chairman Financial Accounting Standards Board

22. What do we need to do? • Work together along industry lines to create thoughtful proposals for greater transparency involving both simplification and enhancement • Lead positive change, through a collaborative solution, by establishing an Enhanced Business Reporting Consortium of diverse stakeholders of international prominence to improve the quality and transparency of information used in decision-making Market collaboration is the best solution for all participants

23. What do we need to do? Initially targeting sectors with high profile social contracts: • Pharma • Oil & Gas • Banking If you are part of one of these sectors and are interested in more information, please contact us at http://www.ebr360.com/ Market collaboration is the best solution for all participants

24. What is the EBR Consortium? • An independent, market-driven, international collaboration of investors, creditors, analysts, management, directors, regulatory agencies, standards setters, members of academia, and all other stakeholders • Incorporated as a Delaware not-for-profit organization • An opportunity for the users and providers of market capital to • Demonstrate a commitment to hold themselves responsible and accountable for the quality of the information provided to the capital markets • Develop and present constructive proposals as a viable alternative to further regulation

25. Hypothetical EBR working groups EBR Consortium will host a number of “Working Groups” to develop guidelines for particular industries, functions and geographic regions. These working groups will include appropriate companies and other relevant stakeholders. Working Groups may build on and extend the guidelines of each other. Geographic Guidelines Industry Guidelines Functional Guidelines

26. Advisors • Norm Augustine • Maria Livanos Cattaui • Roderick Hills • Ned Regan • Don Tapscott • Paul Volcker • David Walker • Peter Wallison

27. Strategic partners

28. Strategic partner targets • Financial Executives International • Investment Company Institute • Council of Institutional Investors • CFA Institute (formerly AIMR) • New York Stock Exchange • Securities Industry Association

29. Are there any alternatives to the EBR Consortium? • Do nothing and… • Live with uncertainty in the markets about strategic intent and future performance, but remember, uncertainty breeds market volatility • Fail to demonstrate that users and providers of market capital are committed to hold themselves accountable for the quality of the information provided to the capital markets • Fumble an opportunity to build upon the SEC's interest in a market-led effort • One thing is certain… • Failure of the business community to develop and present constructive proposals will result in future regulatory mandates

30. If you're still not convinced that EBR is a critical component of modern business reporting… • Almost 100 million Americans are invested in equities • Individual investors have a growing responsibility for their financial security during retirement • Defined contribution pension plans; 401(k) plans; individual retirement accounts • Today's financial statements, notes and regulatory filings are virtually unintelligible to the vast majority of individual investors

31. A stronger economy and investor protection… “Greater transparency in business reporting is needed to help strengthen our economy and protect investors. The Enhanced Business Reporting Consortium is working to develop the tools that companies can use to communicate the information that is most important to their stakeholders.” David Walker Comptroller General of the United States

32. We are on the verge of a fundamental transformation of business reporting practices Join us in providing leadership for change! www.ebr360.com

33. Developing Voluntary, International Guidelines for Enhanced Business ReportingA market-driven approach to improving the business reporting modelhttp://www.ebr360.com The Enhanced Business Reporting Consortium 1201 Connecticut Avenue, NW Suite 300 Washington, DC 20036 866-459-2600 www.ebrconsortium.org March 2005