1. DEMATERIALIZATION J. Trezza October 2007 ACSDA Leadership Forum

2. Agenda: Cost/risk of paper certificates Why are certificates still around? U.S. dematerialization efforts Questions Cost/risk of paper certificates Why are certificates still around? U.S. dematerialization efforts Questions

3. Cost/risk of paper certificates Cost : $300 million a year! - Printing, storing, insuring, auditing, shipping, replacing, etc. Lost opportunities Investors pay $50 million to replace lost ctfs - 1.2 million ctfs reported lost, stolen each year Fraud: Stock loans and margin accounts Dramatically increase the cost of corporate actions Certificates outstanding: 400 million? Cost : $300 million a year! - Printing, storing, insuring, auditing, shipping, replacing, etc. Lost opportunities Investors pay $50 million to replace lost ctfs - 1.2 million ctfs reported lost, stolen each year Fraud: Stock loans and margin accounts Dramatically increase the cost of corporate actions Certificates outstanding: 400 million?

4. Why do we still have certificates? U.S. icon – a 250 year heritage U.S. Depression survivors Company pride Industry flow Mindset Government regulations Collector value Disney: 480,000 holders with less than 5 shares U.S. icon – a 250 year heritage U.S. Depression survivors Company pride Industry flow Mindset Government regulations Collector value Disney: 480,000 holders with less than 5 shares

5. My Advice - Go Paperless!

6. Dematerialization Efforts Not a new concept: Mutual Funds1970s US Government Agency & Treasuries 1980s Municipal Bonds1980s Options & Futures1990s FNMA, GNMAThis decade Equities The Target Not a new concept: Mutual Funds1970s US Government Agency & Treasuries 1980s Municipal Bonds1980s Options & Futures1990s FNMA, GNMAThis decade Equities The Target

7. Dematerialization Efforts Book-Entry Only Securities Destruction of Non-Transferable Securities Certificates Direct Registration System (DRS) Book-Entry Only Securities Destruction of Non-Transferable Securities Certificates Direct Registration System (DRS) Three major initiatives:

8. Dematerialization Efforts Over 99% of new debt issues coming to market are in book entry form All of the asset is held at DTCC Investors can only hold through their broker No physical certificates = less risk! Over 99% of new debt issues coming to market are in book entry form All of the asset is held at DTCC Investors can only hold through their broker No physical certificates = less risk! Book-Entry Only securities

9. Dematerialization Efforts 25,000 issues/1.2 million certificates Not transferable for 6 years or more Participants relinquish their positions > 520,000 certificates destroyed 40,000 scheduled to be destroyed 25,000 issues/1.2 million certificates Not transferable for 6 years or more Participants relinquish their positions > 520,000 certificates destroyed 40,000 scheduled to be destroyed Destruction of Non-Transferable Securities

10. Dematerialization Efforts Third form of securities ownership: Brokerage account Certificate form Registered directly of the books of the issuer Investor mobility of assets Electronic means to move asset Implemented in 1995 Less cost and risk then certificates Third form of securities ownership: Brokerage account Certificate form Registered directly of the books of the issuer Investor mobility of assets Electronic means to move asset Implemented in 1995 Less cost and risk then certificates Direct Registration System

11. Dematerialization Efforts Exchange listing requirement: - After 1/1/07: all newly listed issues coming to market must be DRS eligible - Prior to 1/1/08: all existing listed issues must be DRS eligible Over 6,000 listed issuers State rules allow statement ownership DTC to consider defaulting all transfers to statement Exchange listing requirement: - After 1/1/07: all newly listed issues coming to market must be DRS eligible - Prior to 1/1/08: all existing listed issues must be DRS eligible Over 6,000 listed issuers State rules allow statement ownership DTC to consider defaulting all transfers to statement Direct Registration System (DRS)

12. Dematerialization Efforts 20 years ago: 32 million certificates in DTCC Vault Today: 2.3 million certificates in DTCC Vault > 40 million shareholders hold assets in direct registration Request for physical certificates diminishing Brokers voluntarily defaulting their transfer request to direct registration statements Investors that receive a statement stay in statement form 20 years ago: 32 million certificates in DTCC Vault Today: 2.3 million certificates in DTCC Vault > 40 million shareholders hold assets in direct registration Request for physical certificates diminishing Brokers voluntarily defaulting their transfer request to direct registration statements Investors that receive a statement stay in statement form Success To Date

13. Dematerialization Efforts DRS continues to flourish > 65,000 transactions a month Up 100% from last year at this time >520,000 certificates destroyed Less physical transfers through the depository DRS continues to flourish > 65,000 transactions a month Up 100% from last year at this time >520,000 certificates destroyed Less physical transfers through the depository Success To Date

14. Dematerialization - Resources www.sifma.org WWW.dtcc.com/leadership/issue/nomorepaper

15. Questions/Comments? Q&A