Wealth Management Services Ann Bergin General Manager & Managing Director

Wealth Management Services Broker/Dealers Banks/Trusts Administrators Insurance Carriers Program Sponsors Mutual Funds Offshore Funds Hedge Funds REIs Managed Futures Commodity Pools Separate Accounts Mutual Fund Services Managed Accounts Service Alternative Investment Products Graphic changes: Re-arrange order of services in blue box: Managed Accounts Service listed first Then Alternative Investment Products Then Mutual Fund Services Delete Insurance Processing Service 3

Wealth Management Services Mutual Fund Services

Mutual Fund Services Mutual Fund Services Managed Accounts Service Offshore Funds Hedge Funds REITs Managed Futures Commodity Pools Investment Mgrs. Broker/Dealers Banks/Trusts Administrators Insurance Carriers Program Sponsors Mutual Fund Services Managed Accounts Service Alternative Investment Products 5

Mutual Funds at a Crossroad 1980s – Mutual fund industry experiences surging growth Millions of Americans begin investing in funds Broker/dealers identify processing challenges – Traditional methods inadequate to handle increased transaction volumes Business becoming non-scalable NSCC’s experience with equities positions the company as the logical solutions provider for the funds industry Ann: I did not have clear notes – did you ask that this page be deleted? 6

1986 – Fund/SERV Introduced ® An automated, centralized order-entry solution to drive greater scale, lower cost and reduce risk Assets in U.S. Mutual Funds $716 billion Fund/SERV transactions 15 orders a day Fund/SERV users 6 Fund/SERV fee $0.50 7

1997 – Growth of the Industry Assets in U.S. Mutual Funds $4.5 trillion Fund/SERV transactions 111,000 orders a day Fund/SERV users 679 Fund/SERV fee $0.40 8

2007 – The Industry Today Assets in U.S. Mutual Funds $11.4 trillion Fund/SERV transactions 690,000 orders a day Fund/SERV users 1,100 Fund/SERV fee $0.11 9

Fund/SERV Expansion 1986 1940 Act Funds 1992 No-Load, Money Market Funds 1997 Defined contribution and other retirement plans (now 35% of total volume) 2000 Independent Broker/Dealers 2001 Nontraditional markets – Stable value fund – 529 state college savings – Bank collective investment trusts – Guaranteed investment contracts – Offshore 10

Fund/SERV – Historical Perspective 0.50 0.40 Average Daily Volume 0.30 0.25 0.175 0.11 646 439

Creating a “Family” of Fund Services NSCC introduces other automated services, including: Networking – exchanges and reconciles account-level information between funds and distribution firms Defined Contribution Clearing & Settlement – facilitates the processing and information exchange of retirement plans Mutual Fund Profile Service – provides a central source for funds’ prospectus information Asset Transfer Services – automate the transfer of mutual funds from one firm to another and of IRAs from one fund to another Commission Settlement – simplifies payment reconciliation between funds and third-party distribution firms 12

Responding to Regulatory Compliance Issues NSCC has proposed and made changes to services to address: Late-trading – After-hours fund trading exposed Market-timing – Frequent trading in mutual funds potentially impacts long-term shareholders Breakpoints – Sales discounts based on aggregate investment not consistently delivered to customers 13

Wealth Management Services Managed Accounts Service

Managed Accounts Service Mutual Funds Offshore Funds Hedge Funds REITs Managed Futures Commodity Pools Investment Mgrs. Broker/Dealers Banks/Trusts Administrators Insurance Carriers Program Sponsors Mutual Fund Services Managed Accounts Service Alternative Investment Products 15

Managed Accounts – Defined Professionally managed investment accounts designed for high-net-worth investors Most commonly known as “separately managed accounts” (SMAs) Broker/dealer sponsors create client-specific investment profiles Investment managers develop strategies tailored to investor’s goals and risk tolerance 16

Managed Accounts – Market Snapshot $860 billion in industry assets 25% growth in assets in 2006, outpacing mutual funds and variable annuities Assets forecasted to reach $1.5 trillion by 2011 Growth is consumer driven for individual customization and tax-lot control Minimum account requirements dropping – opening doors to $2.7 trillion 401(k) market 17

Current Operating Environment 18

DTCC MANAGED ACCOUNTS SERVICE AIP -- Opportunities MAS – Process Flow SPONSOR Originates New Account Message INVESTMENT MANAGER Receives New Account Message New Account Set-Up Account Profile Account Funding Authorization to Trade Technical Acknowledgement Business Acknowledgement Accept/Reject Messages DTCC MANAGED ACCOUNTS SERVICE ANN: Would you rather use this one than the chart on previous page? In the right hand box, there are too many bullets. The text, even though each item will break onto two lines, should read: -- Technical acknowledgement -- Business acknowledgement -- Accept/Reject messages Three thoughts, three bullets 19 19

Managed Accounts Service – Benefits Streamlines redundant operating systems Reduces processing risk and errors Removes barriers to entry – 2,000 emerging investment managers Assures business continuity, information privacy Supports regulatory compliance Increases operating margins for sponsors, investment managers Supports industry growth, need for scale 20

Wealth Management Services Alternative Investment Products

AIP Service Mutual Fund Services Managed Accounts Service Offshore Funds Hedge Funds Funds of Hedge Funds REITs Managed Futures Commodity Pools Broker/Dealers Banks/Trusts Administrators Insurance Carriers Program Sponsors Mutual Fund Services Managed Accounts Service Alternative Investment Products 22

AIPs – Defined Alternative investment products include: Hedge Funds Funds of Hedge Funds REITs Managed Futures Commodity Pools Low transaction volumes High transaction values Unique processing requirements 23

AIP – Market Snapshot Global hedge fund assets now over $2.4 trillion and forecasted to grow to $4 trillion over next 5 years U.S. REITs have $475 billion in assets Retailization, lower investment minimums Key issues Scalability Regulatory scrutiny Privacy Business continuity 24

The Current Environment Alternative Investment Products The Current Environment 25

AIP Service – Process Flow Broker/Dealers Banks Third Party Administrators Insurance Companies Hedge Funds Funds of Funds REITs Managed Futures Commodity Pools Trade Orders/ Document Workflow Post Trade Reporting Commission Payments US $ Settlement Reference Data Ann: I did this one myself, so it will be “cleaned up” in the final version, but wanted to give you an idea…. 26

AIP Service – Benefits Increased efficiency and reduced costs Reduced risk of operational error Streamlined money settlement through a centralized process Improved client service and communication Increased industry profitability 27

Questions?