DTCC Update Securities Transfer Association

• DTCC Update • Securities Transfer Association Conference • October 20 th 2006

“Change is coming” to DTCC Asset Services • Reengineering Asset Servicing Platforms • Dematerialization Initiatives • Partnership Strategies 2 • Globalization

Platform Reengineering SOURCE 3 Securities Origination Underwriting Reliable Corporate action Environment

The Renaissance of DTCC’s Infrastructure We continue to proactively modernize core depository processing Established RDC 2002 2003 “Transform CA Processing” 4 Identified CA Challenges Completed CNS Re-Write 2004 Established SBC 2005 Completed UW/CA BRD Evaluated CDS - NCS Platform 2006 2007 2008 UW UAT & Roll-out Begins Launched UW/CA Funct. Design CA UAT Roll-out Begins

Current CA Platform • Presents barriers in servicing evolving securities types and events: • Relies upon single security identifier • Communicates with proprietary formats • Processes mostly end-of-day batch • Leverages unique procedures (e. g. contra-CUSIP, envelopes) • Uses hard-coded processing rules 5 • Comprises over sixty distinct, customized sub-systems - many implemented over twenty years ago (Cobol)

Pieces of the solution A unified end-to-end platform from issuance through the entire asset servicing life cycle: Underwriting – Corporate Actions – integrated with Master files and other Core Depository functions Corporate Actions 6 Underwriting * NIIDS Security Master Files Shared Interfaces

Reengineering Objectives • Provide more accurate and timely servicing information • Replace legacy sub-systems with newly architected platform • Automate and streamline redundant processes • Increase flexibility with rules-based system • Enhance functionality: ISO 15022, multi-currency, international numbering systems • Reduce ongoing technology support costs • Eliminate redundant data stores 7 • NIIDS - Allow firms to meet MSRB G-14 15 minute new issue information dissemination rules

Changes to Current • Eliminate Contra CUSIPs • Changes to event structures, naming conventions, and event identifications • One announcement with multiple options • Fewer claims for same day events (e. g calls) • Expanded rate fields to 8 x 6 floating decimal (structured products) 8 • Ability to process pro-rata calls

Benefits Summarized Stakeholder Service Benefits • Mitigate risk with elimination of manual processes and improved operational controls • Enhanced processes incorporating international standards and best practices • Corporate Action “dashboard” presents actionable information that intuitively supports client’s operations DTCC Enhancements • Common platform designed with improved workflow 9 • 63 subsystems replaced reducing maintenance • Enhanced Security Master File that works in unison with Underwriting • Cobol and Assembler upgraded to Java and C++ .

DTCC 2007 – 2008 Dematerialization 10 Initiatives

Anticipating and measuring change • Vigilantly monitor transaction volumes • Manage Securities Processing operations expenses against the backdrop of decreasing volumes / revenues. • Shift revenue flow to new product lines from traditional paper processing based existing products (full cost revenue). 11 • Deliver world class customer satisfaction

Dematerialization Initiatives • Dematerialization Update – Direct Registration System (DRS) – Withdrawals-by-Transfer (WTs) – Paperless Legal Deposit Processing 12 – FAST

Direct Registration System (DRS) • Nasdaq, Amex and NYSE and ARCA drafted SEC rule filings: • All listed issues coming to market on or after January 1, 2007 must be DRS eligible • All listed issues must be DRS eligible by January 1, 2008 13 • SIA approaching regional exchanges

Progress on DRS (a/o Q 3 2006) - 1, 270 issues are DRS eligible vs. 960 one year ago - 23% Avg. of withdrawals (for DRS eligible securities ) vs 4% one year ago - Average Daily DRS Txns 38, 500 vs 31, 000 one year ago - More BDs are programming WT statement as “default” and conducting front office and investor awareness programs. 14 − BDs are joining DRS as DRS issuers

The 2006 - 2007 DRS Strategy • 2 H 2006 Promote Underwriter Awareness • Information flow to Syndicate Operations Division • Letters to Underwriters • Communication via @DTCC • 3 Q 2006 DTCC files new TA FAST and DRS requirements • 3 Q 2006 DTCC drafts new TA FAST on-boarding workflows • 1 Q 2007 Continue to raise WT disincentive fees to change behavior 15 • 2006 -2007 Continue Participant outreach to raise awareness of DRS

Other Items under consideration for 2007 • Q 2: Evaluate limited days for physical processing (WTs and Deposits) • Q 3: Implement various DRS processing enhancements. – Move “all” shares, sell fractions; move “all” shares, terminate account, sell fractions and move “all” full shares • Mid 2007 Rule filing for defaulting all WT transfers to statement in mid-2008 16 • 2008 become the “Roach Motel” All withdrawals will be done via full DRS – No more physical WT’s

Withdrawals by Transfer • 2 Q 2007: • Explore limiting WT processing to one or two days each week • 1 H 2008: • Implement limited WT processing (following elimination of “certificate request” option on DRS-eligible issues) • Prepare to eliminate DMD processing • 4 Q 2008: 17 • Eliminate DMD processing

The 2007 Non-Transferable Securities Strategy • Aggressively manage downward our vault inventory of Non. Transferable securities (no TA, for over 6 years) • Current Vault Inventory = 3. 0 MM certificates, 1. 0 MM NT Vault Inventory 12/2001 = 6. 8 MM certificates, 1. 2 MM NT 18 • Will destroy a minimum of 342, 000 certificates in 2006

Paperless legal deposits • Medallion signature guaranty: • signature is genuine • signer is the appropriate person • signer has legal authority • Broker responsible for verifying and maintaining all paper documents • Investor benefits/cuts costs • 95% of all DTC transfers are eligible 19 • More issuers and small/mid size agents

Legal Deposits • 2 Q 2006: Continue cooperative effort with brokers, agents, and regulators to expand Paperless Legal program • Letters and flyers to agents • @DTCC articles • One-on-one contacts with non-participating agents and participants • January 2007: • Goal: “No paper” processed for legals 20 • Six month compliance period

Legal Deposits • July 2007: • Implement measures for compliance of all-in approach for DAM deposit: • Participant submits paper for a PLA agent • Participant submits paper for a non-PLA agent • Participant does not submit paper for non-PLA • Presentations outside of DTC for non-participating agents • September 2007: 21 • DTC begins to charge for paper legal transaction rejects

Regular Deposits • 4 Q 2007: • Explore limited processing days each week for regular deposits • Implement 1 st phase of CASS • Certificate verification process • Explore agent capacity and willingness to pursue CASS Phase II • Truncate certificates at DTC • 2 Q 2008: 22 • Limit regular deposit processing to 2 X each week

FAST Requirements • Agents must be FAST agent to participate in DRS • DTCC filed new FAST requirements with SEC in Sept 2006 • Standardize insurance requirements • Safeguarding DTC assets (BCP, security) • Regulatory and compliance (OFAC) • Others… 23 • Established on-boarding procedures, timelines, and workflow

24 DTCC “Partnerships” Strategy

DTCC’s 2005 – 2010 New Mission Statement 25 To be the acknowledged world-class provider of servicing solutions to financial markets through leadership, innovation, technology, risk management and strategic alliances. ”

DTCC Partnership Objectives • Without compromising our reputation for certainty and reliability we strive to: 26 § Leverage partner skills and attributes to create competitive advantages for our participants § Increase “speed to solution” § Repurpose our technology and leverage other’s platforms to minimize start-up investment § Broaden our market reach § Better serve the entire industry § Reach our 2010 mission

DTCC Partnership Objectives • To create “ 3 Win” relationships benefiting the industry, DTCC, our Partners • To align with “best of breed” partners within the boundaries of competitive free markets and our charter as the register clearing agency. 27 • Operate with a for-profit mindset when establishing partnership business relationships.

DTCC is a desirable partner • The DTCC name § Unblemished reputation for integrity and trust § Highest standards of governance and compliance § The accuracy of high volume throughput processing • Our position in the industry § Networked community links virtually all trading parties in the US § Offer economies of scale – distribution channels 28 § Established relationships with all industry constituents § Broad industry involvement and representation

DTCC is a desirable partner (Cont. ) • Financial Strength – AAA credit rating • Reputation for creating pragmatic solutions and greater customer processing efficiencies • Objectivity that comes from being industry owned with a charter to serve both large to small participants of varying business charter. § Domain expertise applied to establishing and driving lasting industry standards 29 § Quality Culture: 6 Sigma, CMMI 3, ITIL § Reliability and resiliency of our systems

Cost Basis - The Problem: • Investors require an efficient, cost effective and proven tool to accurately calculate cost basis for securities that are sold, gifted, etc. • They seek one source for historical and current pricing as well as corporate action transactional history. 30 • Issuers and agents find this task unwieldy, causing investor dissatisfaction.

Cost Basis - The Solution: • DTCC, together with Net. Worth Services, offers a solution, customized for you and your investors: • Equity and mutual fund adjusted cost basis calculations back to 1925 • Historical data on: • Pricing • C/A and entitlement 31 • Reinvestments

Cost Basis -- Potential Business Models • Link from site-to-site • Enterprise solution • Call center – cumbersome but a start 32 • Combination of all of the above

Cost Basis - The Benefits • Enhanced customer service • Move shareholders to web • Generate new business • Reduction in costs • Call center 33 • Research

Cost Basis - The Benefits: • Customized for your needs • Outsource capabilities • New product offerings 34 • Portfolio management for investors

Cost – Basis – For more information • To see a demo of the newest DTCC Issuer Services Product, please contact: 35 Joyce Rosen, Product Manager, 212 -8553935, or jrosen@dtcc. com

36 Globalization of the Exchanges

Changes brought on by a global exchange? • Canadian Dollar Settlement went live in 2006 • More questions then answers at this time • Will DTCC be asked to support clearance and settlement? • Will DTCC be asked to support full asset servicing? • What will happen to global listings, ADRs, GDRs? • Will we see growth in 144 a security issuances? 37 • More…

38 Questions