2. Wealth Management Services
Ann Bergin
General Manager &
Managing Director

3. 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

4. Wealth Management Services
Mutual Fund Services

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

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

12. 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

13. 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

14. Wealth Management Services
Managed Accounts Service

15. 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

16. 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

17. 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

18. Current Operating Environment18

19. 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

20. 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

21. Wealth Management Services
Alternative Investment
Products

22. 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

23. 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

24. 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

25. The Current Environment
Alternative Investment Products
The Current Environment 25

26. 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

27. 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

28. Questions?