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What is inline annotation?
Most annotation references a symbol ID in the symbol collection which governs how that piece of annotation will be symbolized. Inline annotation store their symbol properties within the record of the attribute table for that feature, independent of the symbol collection.
The symbol collection is composed of all the symbols created for that feature class and each symbol will contain a unique number or symbol ID with values of 0 or greater. Inline annotation however, has a value of '-1' in the symbol ID field of the attribute table.
It is not possible to convert annotation's symbology to be stored inline and is not recommended that existing annotation be stored inline. Inline annotation will take longer to draw, increases storage size and does not provided all the editing and symbolizing options available for annotation that references a symbol ID.
For example, all edits made to inline annotation are stored within that particular record in the attribute table and provide no insight into what may have been changed. All edits made to a piece of annotation referencing a symbol ID are stored within the override field of the annotation feature class. This value provides information on what changes have been made to that piece of annotation.
Inline Annotation is often created when importing or appending older versions of geodatabase annotation. It can also be created by importing annotation from other formats, i.e. CAD or coverage or when making edits to annotation that can not be stored in the override field.
It is recommended that if the annotation feature class contains many features stored inline that a new symbol class be created for those pieces of annotation with similar symbologies. This can be done from within ArcCatalog.