Mutual Fund Services: Sharing Our Solution Cecilia Humphrey Americas Representative ceciliahumphrey@dtcc.com

25 Years’ Collaboration with the Funds Industry Supporting the Mutual Fund industry’s explosive growth since the early 1980’s Introduced automation, replacing the paper-intensive processes that were impeding industry expansion and causing serious risk Evolved communication from fax, phone and “snail mail” to internet and other communication networks Developed an industry-led product – working groups (Firms and Funds) created an industry standard Now in its 25th year supporting the Mutual Fund industry 2

Recently Renamed: Wealth Management Services Continuing catalyst for dramatic expansion of the business relationships that exist in the mutual fund world Our sole focus as a neutral processing hub is to serve the needs of customers and safeguard the integrity of the financial markets Connecting a vast network of fund companies, transfer agents, broker/dealers, banks, trusts and other financial services firms that offer mutual fund investments to the market, including 300+ dealers to 45,000 funds: 40,000 US funds + 5,000 are European UCITS. We work in partnership with the industry to develop cutting edge solutions in automated, standardized, centralized services via a single interface to market participants.

Fund/SERV Replaced the past fax-intensive, ad hoc steps, expensive….. Firm “A” Firm “B” Firm “C” Firm “D” Replaced the past fax-intensive, ad hoc steps, expensive….. Fund “A” Fund “B” Fund “C” Fund “D” Firm “A” Firm “B” Firm “C” Firm “D” …with DTCC Fund/SERV: standard, comprehensive, automated, safe, low-cost DTCC Fund/SERV Fund “A” Fund “B” Fund “C” Fund “D”

Fund/SERV 2011 40,000 US Funds 5,000 UCITS Funds Note: Fund/SERV® is a registered trademark. Daily Average Transaction Volume 737 Fund Families: 327 Firms Price 40,000 US Funds 5,000 UCITS Funds U.S. Mutual Fund Industry Total Net Assets (Trillions of dollars) 5

DTCC’s Settlement Bank in UK DCV – DTCC Partnership DCV Participant A DTCC Fund/SERV US Funds Offshore Funds (European) DTCC Settlement DCV Participant B Planned for 2011 DCV Participant C DCV’s Settlement Bank for NSCC/DTC In USA DTCC’s Settlement Bank in UK DCV Settlement Bank

DCV -DTCC Mutual Fund Services Order entry, Cancellations, Confirmations 22 Hours a Day available via PC Web Networking Updates events that affect positions Dividends Commission Settlement Commission & Rebates Settlement Details, Summary and Reports Profile (Price & Rates) Mutual Funds price and rates information

Core Mutual Fund Services Networking Commission Settlement Mutual Fund Profile Service An industry standard for automating and streamlining all aspects of mutual fund processing via a centralized infrastructure Increased operational efficiency resulting in risk reduction Cost per Fund/SERV transaction in 2011= USD 0.06.

Fund/SERV Orders Mutual Fund Fund/SERV® Input, confirmation, settlement, registration Mutual Fund Order Order Confirmation Confirmation Correction Correction Fund/SERV® Settlement Detail Settlement Detail Settlement Summary Settlement Summary Registration Registration Registration Acknowledgement Registration Acknowledgement

Fund/SERV’s Service in US Fund/SERV Service Flow Brokers and Banks 40,000 US Funds DTCC Fund/SERV 5,000 Offshore Funds e.g., Luxembourg, Dublin DTCC Settlement Pending regulatory approval: UK and Euro Settlement US Brokers’ and Banks’ Settlement Banks for NSCC/DTC In USA DTCC’s UK/Euro Settlement Bank US Brokers’ and Banks’ UK/Euro Settlement Banks

Networking (updates, balances client records between broker and fund) Extends the power of Fund/SERV from transaction processing to asset servicing. Allows mutual funds and brokers to exchange all other account information including: Account Position Information Dividend Processing Account Maintenance Reconciliation Transfers Year-end Reporting Activity Reporting

Networking Mutual Fund Networking Benefits both firms and funds Single connection for information exchange Standardized information Eliminates duplicate systems Information flow from Funds Mutual Fund Activity Activity Dividends Dividends Settlement Settlement Networking Account Maintenance Account Maintenance Positions Positions Year-End Processing Year-End Processing

Commission Settlement A centralized hub for processing and paying/receiving commission payments Multiple types of mutual fund commissions Simplified, automated reconciliation Centralized money settlement into a single daily settlement figure Payment flexibility (daily, weekly, monthly)

Commission Settlement (Sometimes Known as Rebate Settlement) Commission Settlement Mutual Fund Commission Detail Commission Detail Commission Settlement Commission Summary Commission Summary Networking Features Conversion Processing Activity Reporting Position Reporting Account Maintenance/Reconciliation Dividend Processing Year End Processing Settlement Settlement

Commission Settlement The Standard Process Commission Settlement (Monday – Saturday) from 12 a.m. to 2 p.m. Fund companies electronically transmit commission data for processing and forwarding to firms Distributors receive automated and standardized files containing detail and summary commission data At 3 p.m. the day before settlement, NSCC notifies both fund companies and distributors of their commission settlement obligations Commission settlement obligations are netted with other Mutual Fund Services

Mutual Fund Profile Security Database Approximately 140 Fund Companies have populated Mutual Fund Profile Over 21,000 CUSIPs are available Over 250 Data Points for each CUSIP is available to Firms. Data includes information such as: Breakpoints Linkage Rules Characteristics and Investment Objectives Share-class Definitions Minimum and Maximum Restrictions on Purchases and Redemptions Additional data elements have been identified by Fund and Firms. Expansion of Profile to support Retirement business needs (401k market) Comparison Tool

DCV Membership and Sponsorship Individual NSCC Accounts under DCV’s sponsorship NSCC Member/ #2735 DCV DCV Participant A DCV Participant B DCV first became an NSCC Member – Participant # 2735. DCV is working with a pilot group of Chilean firms seeking to trade UCIT funds via Fund/SERV. NSCC will assign DCV individual account numbers for each member using the service, in the members’ names.

DCV’s Fund/SERV Process Flow U.S. Funds, European Funds (UCITS) Orders Orders DCV Participant A Confirms Confirms Settlement file info Orders DCV Participant B Settlement obligation Confirms Settlement file info Net Settlement- Obligation DCV NSCC Acc DCV Participant will submit orders using ‘PC Web Direct’ and will see only its own reports and activities including settlement information, and DCV can monitor and support. Funds confirm orders back. DCV’s sponsored members will access these confirms via PCWeb Direct HTML report facility. DCV will settle the cash obligations with NSCC across all its sponsored members’ accounts. To DCV, this will be a net settlement with NSCC.

DCV Fund/SERV Money Settlement Flow Net

Another Model: Third Party Provider (TPP) The TPP will act as a routing platform that will link the TPP’s customers to Fund/SERV. This will allow the TPP’s customers to gain automated access to US and offshore funds eligible for Fund/SERV. The TPP sub-contracts with another NSCC participant to take settlement responsibility. Member #1 DTCC Fund/SERV NSCC Fund/SERV TPP (e.g., Market Infrastructure / CSD as TPP) Member #2 DTCC Settlement Member#3 NSCC Member Member’s Settlement Bank

Questions Does your organization provide services to Mutual Funds? Are there any current Mutual Fund Services initiatives in your market? Locally? Off-shore?