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Delaware Law Change Will Save Investors Millions of Dollars

DTCC Says National Drive to Eliminate Paper Certificates Picking up Steam

New York, NY, May 24, 2005 - By eliminating its legal requirement that companies issue paper stock certificates, Delaware's state legislature will save investors and companies millions of dollars a year, said Jill M. Considine, chairman and CEO of The Depository Trust & Clearing Corporation (DTCC), which handles the post-trade processing and settlement of securities transactions for most U.S. markets.

Delaware was one of five states still requiring public companies incorporated in the state to issue paper certificates for equities, which are the last financial instruments still using physical ownership records. Many securities today - including corporate and municipal bonds, U.S. government securities, money-market instruments, futures, options and mutual funds - are issued and traded in a paperless, electronic format that allows for automated processing and safekeeping.

"This is a significant step in the national drive to eliminate paper stock certificates," Considine said, "because more than half of all publicly traded companies in the United States and almost three-fifths of Fortune 500 companies are incorporated in Delaware."

Paper stock certificates cost companies, investors, banks and brokers hundreds of millions of dollars each year to print, register, ship, examine, file and keep safe, even though they're involved in only about one-tenth of one percent of all trades daily on U.S. markets. One study, released by the Securities Industry Association (SIA) last year, puts the annual cost of handling paper stock certificates at $250 million or more.

"We believe Gov. Ruth Ann Minner's signing into law the amendments approved by Delaware's legislature earlier this month will have an effect nationwide," Considine said. "DTCC will continue to work with the SIA to help eliminate paper certificates in the other states that still require them."

Electronic ownership of securities is not only more economical, Considine noted, but much safer. Well over a million paper securities are reported lost, stolen or counterfeit each year, according to the Securities Information Center, which helps investors replace missing stock certificates. On 9/11, some $16 billion worth of certificates disappeared in the collapse of the World Trade Center towers, and it took many months of record-checking and millions of dollars to replace them. Electronic shares, in contrast, were not affected at all.

The SIA has been leading the securities industry's effort on "dematerialization"-the elimination of paper certificates. "Since DTCC's subsidiary is the world's largest securities depository and holds in custody securities valued at more than $28 trillion, we are actively supporting the SIA in achieving this shared objective," Considine said.

The two states and one territory that still require companies to issue paper certificates are Arizona, Louisiana, and Puerto Rico.

About DTCC
Through its subsidiaries, DTCC provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities and over-the-counter derivatives. DTCC's depository also provides custody and asset servicing for more than two million securities issues from the United States and 100 other countries and territories. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit www.dtcc.com.

Editor's note: For more information on eliminating paper certificates, please see DTCC Key Issues - Dematerialization