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National Securities Clearing CorporationMutual Fund Services

A Presentation forBank Depository User Group

Mutual Funds UpdateOctober 25, 2005

Denise GrantDirector

Distribution Services

National Securities Clearing CorporationMutual Fund Services

A Presentation forBank Depository User Group

Mutual Funds UpdateOctober 25, 2005

Denise GrantDirector

Distribution ServicesNational Securities Clearing Corporation is a

subsidiary ofThe Depository Trust & Clearing Corporation

Mutual Fund Services5939-2

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•Enhancements Overview

•2005 Enhancements

•2006 Potential Enhancements

•New Initiatives

•Statistics

•Enhancements Overview

•2005 Enhancements

•2006 Potential Enhancements

•New Initiatives

•Statistics

Mutual Fund Services

Today’s Agenda

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•NSCC works with various industry groups and special task forces to discuss the need for enhancements

• Investment Company Institute (ICI)

• Broker Dealer Advisory Committee (BDAC)

• Bank and Trust Advisory Committee (BTAC)

• Transfer Agent Advisory Committee (TAAC)

• International Operations Advisory Committee (IOAC)

Mutual Fund Services Enhancements

Enhancements Overview

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•NSCC works with various industry groups and special task forces to discuss the need for enhancements

• National Association of Securities Dealers (NASD)

• Joint NASD/Industry Task Force on Breakpoints

• Securities Industry Association (SIA)

• SIA Operations Committee

Mutual Fund Services Enhancements

Enhancements Overview

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2005 Enhancements

Mutual Fund Services

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•Direct Accounts Through Networking• Important Notice A#5948

•Enhancements to Mutual Fund Profile Service II (MFPSII) for PCWeb Direct

2005 Enhancements

March Release

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•Enhancements to Mutual Fund Profile Service II (MFPSII) for PCWeb Direct• Important Notice A#6005

2005 Enhancements

May Release

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•Enhancements To Mutual Fund Profile Service II (MFPSII) for PCWeb Direct and Mainframe• Important Notice A#6062

2005 Enhancements

August Release

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•Short-Term Redemption Fees• Important Notice A#6035, A#6056, A#6064, A#6080

• New sequential record Fund/SERV records

• Allows for collection of short-term redemption fees at time of trade

• Networking Activity file modified

2005 Enhancements

September Release

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•Mutual Fund Profile Service – Daily Price & Rate• Important Notice A#6051

•Fund/SERV reject Codes• Important Notice A#6035 and A#6056

2005 Enhancements

September Release

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•Enhancements to Mutual Fund Profile Service II (MFPSII) For Mainframe and PCWeb Direct•Important Notice A#6084

•Enhancements to Mutual Fund Profile Service II (MFPSII) For Mainframe and PCWeb Direct

2005 Enhancements

November Release

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•Additional Social Security & Tax Identification Numbers• Important Notice A#6076

•Modifications To Social Codes On Mutual Fund Services• Important Notice A#6082

•Mutual Fund Commission Settlement Service Enhancements• Important Notice A#6092

2005 Enhancements

December Release

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•New Codes for Defined Contribution Clearance & Settlement (DCC&S) on Fund/SERV• Important Notice A#6081

• IRA/DCP/529 Indicator renamed Asset Type Indicator

• Ten new codes added

2005 Enhancements

December Release

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•New Codes for Defined Contribution Clearance & Settlement (DCC&S) on Fund/SERV• Settlement Override Reason Code Field

• 07 = Refer to Asset Type Indicator

• NAV Reason Code Field

• C = Refer to Asset Type Indicator

2005 Enhancements

December Release

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•New Codes for Defined Contribution Clearance & Settlement (DCC&S) on Fund/SERV• TPA Number Field

• Allowed only if Asset Type Indicator = B, F-O

• Short Registration Exception

2005 Enhancements

December Release

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2006 Enhancements

Mutual Fund Services

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•Networking SCRUB (Full & Partial) and Fund Acknowledgement Modifications• Reconcile static data discrepancies for client accounts

• Fund and firms should reflect identical account information

• Assist in resolving breaks of non-financial information

• Identify breaks as they occur

Potential 2006 Releases

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•Breakpoint Task Force – Client Data Share items• Allows a firm to provide customer related information in a standardized format on an account set-up

• “Reverse” Position files for Omnibus accounts

Potential 2006 Releases

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•Omnibus Task force Recommendations• Share Aging file modifications

• CDSC file name changed to Share Aging

• Broadens use of information on the file to include Short-Term Redemption Fee, Cost-basis, 12b-1 and other calculations based on holding period

• Five new fields and indicators will be added

Potential 2006 Releases

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•Mutual Fund Profile Service II (MFPSII) Task Force• Subcommittee of the Investment Company Institute (ICI) Broker/Dealer Advisory Committee (BDAC)

• Continued modifications of MFPSII to create consistency and clarify ambiguity of fields

Potential 2006 Releases

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•Tax Law – American Job Act Changes• Provide fields needed to accurately report the portion of the fund’s distribution subject to: American Jobs Creation Act of 2004 (AJCA) and Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)

• Non-resident alien shareholders are subjected to the new tax laws with QII, short-term capital gains and withholding amounts affected

Potential 2006 Releases

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•Tax Law – American Job Act Changes• Information needs to be passed from fund to firm at time of distribution/declaration

• An automated process to allow firms to know the portion of the distribution that is attributable to gains as a result of U.S. real property interests

• Proposed system changes

• Networking Dividends

• Profile Distribution

Potential 2006 Releases

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•Standard Data Reporting• SEC Rule 22c-2

• Standard, automated facility for funds to request and retrieve shareholder trading information from intermediaries

• SEC Compliance date October 16, 2006

• NSCC Pilot date 3Q 2006

Potential 2006 Releases

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New Initiatives

Mutual Fund Services

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Alternative Investment Products

•Automate and standardize information for:• Hedge Funds

• Fund of Hedge Funds

• Managed Futures

• Commodity Pools

• REITs

•Advisory committee of more than 30 firms, funds, and service providers

•Centralized USD settlement

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Pilot launch (target June 2006) to include:

• Subscriptions

• Redemptions

• Tender Offers

• Account Maintenance

• Commission Settlement

• Account Maintenance

• Valuation Reporting

• Position Reporting

• Distribution Reporting

Alternative Investment Products

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•Support SMA industry defined information message and processing standards • Sponsors• Investment Managers• Custodians

•Provide a single conduit for data and message flows• Directly or via service provider• Utilize existing connectivity into DTCC

•Provide central Infrastructure• Insure integrity standards• Development• Operations

Separately Managed Accounts

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Separately Managed Accounts

•Progress to date• Data Standards Committee

• MMI Standards Version 1.1 complete

• Version 2 in progress

•Prototype HUB• Standard Message Flow

• XML Schemas

• Data repository and processing system

•DTCC Advisory Group being established

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Statistics

Mutual Fund Services

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Lower Costs as Volume Increases

Fund/SERV Statistics

666

442

652

437

-

200

400

600

800

1,000

1,200

Participants

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Funds Firms

341,434

412,000

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Average Daily Volume

Volume

$0.175

$0.25

$0.30

$0.35

$0.40

$0.50

$0.50

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Networking Statistics

1988 2004

Sub-Accounts 67,077 65,045,679 Users 15 979

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•Your Relationship Manager

• Mutual Fund Marketing 212-855-8877

• http://funds.dtcc.com• Important Notices

• Manuals

• User Guides

• Record Layouts

Resources

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Questions?

Mutual Fund Services