Worldwide Security Services

Unit Trust Reconciliation

The role of the asset reconciliation department is: The reconciliation of our clients’ holdings to the agents’ asset

statements.

To identify all discrepancies and facilitate their correction.

To comply with regulatory requirements & FSA reconciliation regulations (25 day frequency - maximum lapse).

Our Role

Section 1 – Custody Overview Section 2 – Overview of Unit Tust Section 3- Terms & Definitions Section 4 – Overview of Cosmic Functions Section 5 – Chasing Section 6 – Tick up Section 7 – ARD Section 8 – Discrepant Section 9 – Manual Input Section 10 - Matching

Contents

Section 1

Overview of Custody

Global Custody is a service that provides clients with a "single window" into international investing. It allows for consolidated reporting of all assets & cash held in locations around the world.

A Global Custodian is a financial institution, such as JPMorgan, that provides clients with multicurrency custody, settlement, & reporting services, which extend beyond a Global Custodian's & client's base region & currency.

What is a Global Custody?

1.Facilitates government approval of investors prior to their investment in select countries

2.Settles international trades/currencies from both the cash & the securities perspectives

3.Safe-keeps assets

4.Collects income & facilitates withholding tax reclaims

5.Processes additional entitlements as a result of corporate actions

6.Votes proxy where appropriate

7.Provides a consolidated list of assets held & transactions processed

Role:

Life Cycle of a Global Trade

Overview of Unit Trust

Section 2

A Unit Trust is a vehicle for

investing money on the behalf of another party.

When money is put into a life insurance or pension plan most of this will then be invested in the stock market.

What is a Unit trust?

Client - A pension, fund or similar institution from whom JP Morgan holds shares, stocks with our agents.

Global Custodian (JP Morgan) - provides clients with multi-currency custody, settlement and reporting services which extend beyond the global custodian's and client's base region and currency; and encompasses all classes of financial instruments.

Sub Custodian (Agent Bank) A bank which provides clearance and safekeeping services in its domestic market on behalf of a global custodian based overseas.

Registrar / Administrator/ Transfer Agency - A company charged with the responsibility of keeping a record of the owners of a corporation's securities and preventing the issue of more than the authorized amount.

UNIT TRUST GLOSSARY

Owning straight equities can be risky as the price can fluctuate and whole stocks can go into liquidation. Therefore, it is much safer to invest in a variety of shares in a trust. This vehicle is perfect for smaller investors who wish to diversify their holdings without incurring high dealing costs.

As with all stocks market activities there are risks involved with investments. Careful considerations should be given to the type of fund to be held, dictating which market segment you are investing in. General market conditions will also effect the fund as prices rise and fall across the board.

Why to invest in Unit Trust?

Global TradingOur Client

Instruction to the Fund Manager Instruction to JPM TIGS

Trade entered into system

UKRS receive trade

Stock transfer form sent to Fund Manager and trade completedon GTI

Trade completed on GTI only as a book entry to reflect Fund Manager movements

All Unit Trust holdings must be reconciled as at every 25 working days.

1 - 2 months are allowed for the reconciliation process

Holdings from the Fund managers can be accepted up to the 6 months past the statement date as long as they are ticked up to GTI holdings as at the same date.

Departmental Standards - UT

A supervisor / team leader set up the statements

RD671 via Monarch Class download via MSE

600 610 620 643

700 720 743

002 800

Nominee - Names established by the bank to register certificates held in custody for its customers (i.e. Chase Nominees, Littledown Nominees, MSTC Nominees LTD ). Globally it is the terminology on COSMIC that identifies the sub-custodian used to safe keep the assets.

Statements are merged and sorted by Fund Managers

UNIT TRUST

Statement 1 Statements 2 Statements 3

A B A BA CB

Reconciler Task FlowNew excel Statement is ready

Identify items to be chased Identify confirms received

Contact Fund Manager Action (Tick Up)

Chase Fund managerConfirm received Filing Identify TBRs

Confirm Received Action on SSR

Contact Fund Manager for more info (transaction history)

FilingAction on SSR

Filing

Terms and Definitions

Section 3

COSMIC - Chase On-Line System for the Management of International Custody - A mainframe application that supports the various Global Custody sub-systems.

ASSET - Is used is to describe anything owned by an individual or business which has a monetary value, for example it can be shares, property, bonds. Asset Identifier = SEDOL

  SEDOL - Securities Exchange Daily Official List - A number, created by the Securities

Exchange Daily Official List in London, used to identify a security.

CHASE ID - An in-house number allocated to a security where a SEDOL number is unavailable.

ISIN - International Securities Identification Number. It is also a kind of Asset Identifier. This is the code which is usually recognized by the Agent Bank

  CUSIP - Committee on Uniform Security Identification Procedures - A uniform

identification process chaired by Standard & Poors in concert with the America Banking Association. It is a method for the market to identify both the issuers & their instruments in a trade. All CUSIP numbers are 9 digits of alpha & numeric characters with the first 6 identifying the issuer & the last 2 the instrument they have issued. The last digit is a check digit that is used for audit & validation purposes. 

TITAN - Trust Information Transaction Accounting Network

SWIFT – Society for Worldwide Inter-bank Financial Telecommunications. The standardized electronic messaging utility in the financial services industry.

Nominee – Nominees are the agent banks of JPMC in various countries. Each agent is given a code called the nominee code which identifies a particular agent bank in a particular country. Every agent is given a 3 digit code. For Example, an agent bank HSBC India will have a unique code & HSBC USA will have a different / unique code, though it is the same global bank.

UT NOM (720, 710, 743, 643, 610, 620, 600) RESIDUAL NOM (800, 700 & 002)  Sub A/c – They are the categories based on various

parameters like tax slab, interest rate, etc. under which various clients are classified.

Safe-keep A/c – A nominee & sub A/c combination is what we at JPMorgan refer to an account with the agent bank. This same account is recognized by the agent bank by the safe Keep A/c.

Intl. Asset Type: This indicated whether the asset is to be reconciled under as Residual reconciliation or Unit Trust Reconciliation. If the Intl Asset Type is Equity then the same would be reconciled as Residual. If the Intl Asset Type is Equity 6E Other Fund then the same would be reconciled as Unit Trust

Purchase- This would indicate a receipt or a credit of security.

Sale – This would indicate a payment or debit of security.  Awaiting Receipts – It refers to those Securities that are still to be

received into the clients A/c. i.e. those transactions which are still not settled. It is considered from the buyer’s point of view. For example, if a client has 1000 shares & he buys 100 shares more, & then sells 1100 shares before the 100 shares have actually come into his A/c, the transaction will not be processed as we are AWAITING RECIEPT of the 100 shares.

Awaiting Delivery – It refers to those Securities that are waiting to be delivered. It is considered from the seller’s point of view

COSMIC FUNCTION

Section 4.

Unit Trust Csmic Functions

1. Asset Enquiry 2. Nominee Sub A/C no/REF Enquiry 3. Nominee Sub Account Enquiry 4. GTI Trade Enquiry 5. Securities Trade/Holding Enquiry 6. Securities Customer Enquiry

Functions

Residual Functions

1.Customer Holding Enquiry 2. Trade Search 3. Certificate Search

CLASS

Chasing

Section 5.

We contact the fund managers to obtain confirmation of holdings for every single line of the spreadsheet.

In order for us to comply with our regulations, we require hard copy evidence from the Fund managers – statement of holdings as at the last working day of each month. This includes any nil balances.

Why do we need to contact fund managers?

Fund Managers can be contacted in a number of ways:

By Fax By E-mail By Telephone By Post

In all of these cases we must remain professionals and remember that we are representing the Firm

How to contact Fund Managers?

Please use the following tools when you have to contact the fund manager:

Fund managers Directory (I drive: Globcust/ Asset Management/ UK/ UK Unit Trust/Fund Manager Contact Directory )

Fax templates (I drive: Globcust/ Asset Management/ UK/ Unit Trust faxes/ unit Trust Faxs Templates )

E-mail templates (Lotus Notes: UK Asset Reconciliation group e-mail box/ Stationary)

Chasing log template

How to contact Fund Managers?

Keeping a record of all contacts with the fund managers is important

if another reconciler needs to help on your statement

to ensure a full audit trail Every time when you contact the fund

manager by fax, e-mail or telephone, chasing log form must be completed and filed in a special folder.

Chasing Log

The most important fact to remember is that every confirmation we use to tick up the statement must be an authenticated notification direct from the Fund Manager or their allocated outsourcing company.

Authentication

Ticking up

Section 6.

The confirm has been received and the correct statement has been identified

You now need to ensure that the following all agree:

◦ Holding date

◦ Nominee name and designation

◦ Stock Name and Description (e.g. Share class)

◦ Sedol number (if required)

How to tick up

On the find manager statement: write down the following information (copy from the spreadsheet):◦ the nominee / sub account next to the designation

number (e.g. 610/845) ◦ sedol number next to the fund name◦ Fund manager name in the right hand top corner

On excel spreadsheet: input the fund manager holdings in the appropriate column. If the Fund Manager holdings match with the GTI holdings, line on the spreadsheet will turn in yellow automatically

Tick Up

On the find manager statement: put ‘a tick’ next to the FM holding and highlight the following information in yellow:

Designation and registered name, nominee/sub account, sedol, fund name, holding date, fund manager name, amount of holding

On the excel spreadsheet: enter your initials, type of the statement delivery and statement date in the appropriate columns

File away the Fund Manager statement in alphabetical order in your statement file

Tick up

The majority of the information on the spreadsheet is drawn from the 671s or Class download, however the following columns need to be updated by the reconciler:

T/D (Action) column shows the stage of reconciliation : H=awaiting holding, M=awaiting movements, R=TBR identified, T=asset

ticks up, D=discrepancy investigated, N=nil permanent holding on GTI Comment column to be updated as and when required Initials column to be updated with the most recent reconciler to action

line Fax column (method of receipt) to be updated to include whether confirm

is sent by fax, post or via e-mail and automatically or not Fund manager holdings to be updated to include whether confirm is sent

automatically or not Fund manager holdings to be input in the appropriate column Statement date to be updated in the appropriate column

How to update the spreadsheet

If the difference between GTI and the Fund Manager holdings is less than 0.5 shares, the asset can still be ticked up

If the last working day of the month is Friday, then holdings as at the Saturday or Sunday can be accepted (as there are no trade activities on weekends)

If the Fund Manager reflects more than 2 decimal places on their holdings, then the 3rd and the 4th digits can be ignored. Do not round up or down.

Exceptions

You may use confirmation of holdings dated up to 6 months after the statement date. If you are using a confirm as at any date after the statement date you must take the following steps:

Print confirmation of GTI holdings as at the same date from Cosmic (GTI Trade / Holding enquiry) and attach to the FM statement

If holdings as at the same date match, enter the FM holdings on the Excel spreadsheet and manually change holdings status to ‘T’ in the first column to turn line in yellow

In the comments column type ‘ticked up as at [date]’ Amend statement date in the last column to the actual date of the

statement

Post dated confirmation

ARDAfter Run Date

After Run Date (ARD) Trade is completed after the statement date

◦ i.e. July month end cycle currently being reconciled. If trade date is prior or on July month end and trade settled after July 31, then this is considered an ARD.

743/09S

16239BS

New Trade Search

•Enter Asset ID, Nominee and Sub-account•Press F12

•Copy Reference•Press Alt+Home twice

GTI Trade Enquiry

•Paste or type trade reference•Press Enter

743/11R

21730BS

Discrepant

Discrepant Asset breaks that require referral to either

Corporate Action, Client Services or Settlements teams.

GTI completed a trade while FM did not FM completed a trade while GTI did not

107,555.02- 73,555.02 34,000.00

Manual Inputs

Manual Inputs (Flat File Upload) Create spreadsheet Save as .txt Send e-mail to Claire requesting approval

for flat file upload and attach .txt file Claire will approve this then send to DAV

team

Matching

Matching 1:1 Many:1 and vice versa Criteria for matching

◦ Set ID◦ Asset ID◦ 0 Net Value of Shares or Units◦ Must have a Mastercode