DC Plan Programs

05/20/03

BISYSSingle Source Program

DC Plan Programs BISYS Alliance Programs:

Link TPA Program:

Single Source Program: Bundled, Record/Adm In-House, Non-Proprietary WySTAR System, Registered, NAV, Off-The-Shelf Pricing, Open Architecture, Large Menu Of “A” & “R” Shares, Prospectus Commissions Paid Direct.

The BISYS proprietary Single Source Program is a fully bundled product administered internally on the WySTAR system.

The registered product is available without minimum program requirements and the NAV program is also available without proprietary fund requirements.

The open architecture program offers a Preferred Funds List of over 1,000 funds from 50 plus families, but prospectus NAV requirements and CDSCs have not been negotiated.

Most of the funds are “A” and “R” type shares and up to 23 funds are included in base pricing. Specialists may also customize up to five asset allocation portfolios without additional cost, but participants must be 100% in or out of the asset allocation portfolios.

An Ameritrade brokerage option is also available without threshold requirements and BISYS may also be willing to accommodate additional investment flexibility on a negotiated basis.

Billable pricing is competitive, but discount pricing is not currently available. Base pricing does, however, include up to 23 funds, customized asset allocation portfolios, document, quarterly testing, communications/enrollment material with limited fund information, on line enrollment, on line/VRU transaction initiation, trustee services and bi-weekly allocations.

Service guarantees are also available and the program offers prospectus commissions that are paid direct to the broker-dealer.

Center for Due Diligence

BISYS Single Source ProgramMay 20, 2003

Upgraded Newkirk enrollment material with more fund information and Morningstar’s ClearFuture service are also in the pipeline, but both features are optional and teamed with additional costs.

The Single Source Program offers a high price-to-value ratio, but local presence, sales assistance and on-site enrollment assistance is currently limited. The sales, marketing and proposal material is also less than developed.

Share Class Availability Generally Teamed With "A" Or "R" Type Shares, But Other Share Classes May Be Available.

NAV Requirements Prospectus NAV Requirements Apply, But Vary By Fund Family & Share Class.

CDSCs Applicable To NAV & Other Purchases

Prospectus CDSCs Apply, But Vary By Fund Family & Share Class.

Program Requirements No Minimum Requirement.

Wrap Fee/Asset Charge None.



Funds Available At Plan Level 23 Funds, Including Up To 5 Customized Asset Allocation Portfolios.

Proprietary Funds Available To QP Sponsors

NA/Open Architecture.

Proprietary Fund Requirements NA/Open Architecture.

Fixed Income (GIC Type) Option Limited Menu Of Stable Value Options.

Non-Proprietary Investment Flexibility

NA/Open Architecture.

Preferred Funds List Includes 1,000+ Funds From 50+ Families:

Accessor (Investor)AIM (A, R)Alger (A, B, I, R)Alliance (A)American (R-2)AmSouth (A, I)American Century (Advisor, Investor)Ameristock (A)Artisan (Investor)Barclays (R, Lifepath, I)Barron BB&T (A)Bear Stearns (A)Calvert (A)Chase Vista (A)Citizen Funds (Administrative, Standard)Cohen & Steers (A)



Colonial (Z)Columbia (Z)Commerce (Inst’l)Credit Suisse (Advisor)Davis New York (A)Delaware (A, R)Dreyfus (A, Inst’l, Investor, R, T)Dreyfus Founders (A, F, R, T)Eaton Vance (A)Enterprise (A, B, Y)Evergreen (A, B)Excelsior (No Load, I)First American (Y, A, S, Inst’l)First Eagle (A)Fund Manager Gabelli (A, AAA)Hartford (A)HSBC (A)IDEX (A)Invesco (A, Investor, K)Janus Janus Advisor (Advisor, C)John Hancock (R, A)JP Morgan (Select)Keeley (A)Lazard (Open)Leader (Inst’l, Investor)Liberty Funds (A)Acom/Liberty (Z)Loomis (Retail)Mainstay (A, Service)Managers Munder (A, K, Y)Neuberger & Berman (Advisor, Investor)Nvest (A)Oppenheimer (N)Orbitex (A)Phoenix (A)Pioneer (A, Y)Putnam (A, M, R)RBC (A, C)Robertson Stephens



Royce Funds (Financial Intermediary, Investment)Safeco (A)SEI (I)Seligman (A, R)Smith Barney (A)State Street Research (A, E, R)Stein Roe - LibertyStrong (Investor, Z)TCW-Galileo (N)Thornburg (A)Touchstone (A)Turner (No Load)Victory Funds (A, R)Westcore (all share classes)Williamette (A)WM Funds (A)

Preferred Funds List Mostly “A” & “R” Type Shares, But Other Share Classes May Be Available.

Additional Investment Flexibility May Be Available On A Negotiated Basis.

No Threshold Requirements.

No Proprietary Fund Requirements.

No Overt Costs/Wrap Fees.

Prospectus NAV Requirements & CDSCs Apply, But Vary By Fund & Share Class.

Prospectus Commissions Paid Direct, But Vary By Fund & Share Class.

Limited Fund Enrollment Material In Base Pricing.

Flexibility To Customize Up To 5 Asset Allocation Portfolios.



Self-Directed Brokerage No Threshold.

Ameritrade Brokerage Option.

No Money Source Restrictions.

No Asset Transfer Restrictions.

No Transfer Frequency Restrictions.

GIC Equity Wash Not Currently Applicable.

$10,000 Minimum Initial Account Balance Requirement.

$2,500 Minimum Initial Transfer.

$500 Minimum Subsequent Transfer.

$250 Annual Sponsor Cost.

$125 Annual Participant Cost.No Wrap Fees.

Discount Commissions/Trading Costs.

Internet, VRU & Brokerage Assisted Transaction Initiation.

Equities, Fixed, Mutual Funds & No-Load/NTF Menu.

Menu May Be Tailored.

No Multiple Source Brokerage.

No Broker Commissions.



Company Stock & Outside GICs Yes, Case Specific.

Integrated NQDC Augment NA.

VRU & Live Operator Services Yes, BISYS has their own call center, but reps are not licensed and do not give investment advice.

Participants in the Single Source Program are referred back to the broker. Other alliance programs may refer participants back to the sponsor, alliance partner site or alliance partner call center.

Demo at (888) 652-8086, SS#: 777-79-1234, PIN#: 1234.

Internet Services Sponsor Site:

(https://www.sponsorinsight.com)

Sponsor demo via clients#: 999999 & master pin: 123456.

Participant Site:(https://www.planservices.com/rplink)

Participant demo via SS#: 777-79-1234 & password: af0798.

Non-Transactional Mirror Site Available To Brokers.


https://www.planservices.com/rplink

https://www.sponsorinsight.com/


Most Commonly Used “A” & “R” Share Proprietary Funds In Participant-Directed DC Type Plans

Fund Name CategoryObjective

Expense Ratio

NA/Open Architecture

Fee waivers and reimbursements may apply.

See Core Fund Analysis for a list of the 50+ fund families on the Preferred Funds List.



Broker Commissions/Reallowances(“A” & “R” Shares @ NAV)

Finders’ Fee Trail Asset Class Amount/Breakpoints Reset Immediate 13th Month

Equities

PROSPECTUS COMMISSIONS

Fixed

Money Mkt

GIC

Index

Alliance Funds

Commission Give-Up Flexibility NA.

Repeat Producer Program NA.



Billable Recordkeeping/Administrative Pricing

Base Fee Per Employee/Eligible/Participant Trustee Fee$1,500$1,500$3,000$9,000

BF + $ 0 for 1- 50 EEs BF + $30 for 51 - 100 BF + $15 for 101 - 500BF + $10 for 501- 1,000

Included.“““

Base pricing includes document, quarterly testing, form 5500, bi-weekly allocations, trustee services, on-line enrollment and communications/enrollment material that includes limited fund information. Base pricing also includes up to 23 funds and the flexibility to customize up to five asset allocation portfolios without extra cost. The asset allocation portfolios may include up to ten funds from the plan level menu, but participants must be 100% in or out of the portfolios. Upgraded Newkirk enrollment material with expanded fund information and Morningstar's ClearFuture are also available for additional cost.

Price Discounts

Discounts Apply To Average Balance % DiscountNA. NA. NA.



Service Guarantees Installation Guarantee.Conversion Guarantee.Statement Processing Guarantee.Distribution Processing Guarantee.Overall Client Service Guarantee.

Total credits processed may not exceed 20% of the quarter's total recordkeeping fees.

On-Site Enrollment Not Generally Available.

Outside QP Wholesalers 9 Inside Wholesalers & 4 Outside Wholesalers Currently Support All Alliance Programs & Single Source.



STRENGTHS

Public Company

Diversified Product Line

Stable, Profitable & Growing

Capable Management

Scale (One of the largest independent recordkeepers)

Participating In Consolidation

Premier Outsourced Alliance Partner In $1-10 Million Market

Ability To Manage Block Conversions

Doesn’t Sell Direct

Broker Friendly

Positive Re-Branding In Process

Converted To WySTAR (Bought the code)

Developed Proprietary Software To Enhance WySTAR System

Vastly Improved Recordkeeping & Client Service

Fully Bundled Program (Single Source)

No Minimum Program Requirements (Minimum pricing applies)

Competitive Off-The-Shelf Billable Pricing

High Price-To-Value Ratio

Communication & Enrollment Material, Including Limited Fund Information, In Base Pricing

On-Line Enrollment



Newkirk Enrollment Material, Including Expanded Fund Information, Under Development (Additional cost)

Morningstar ClearFuture Available (Additional cost)

Registered NAV Program

Open Architecture

No Proprietary Fund Requirements (BISYS is not an investment manager)

Large Investment Menu Of Preferred Funds (Mostly “A” & “R” shares)

Willing To Negotiate Additional Investment Flexibility

Ability To Customize Asset Allocation Portfolios With Re-Balancing Flexibility (No additional cost)

Ameritrade Brokerage Option (No threshold)

Prospectus Commissions (No haircut)

Commissions Paid Direct To Broker-Dealer

Service Guarantees

WEAKNESSES

Re-Branding Not Yet Complete

Little/No Marketing

Single Source Lacks Broker Awareness

Limited Sales Support (9 inside & 4 outside wholesalers for entire product line)

Internal Sales Support Team Needs More Training

Inadequate Sales, Marketing & Proposal Material



Little/No Local Presence

Little/No Enrollment Assistance

“Team” Service Model Not Well Communicated

Heavy Case Load

High Value To Price Provider, But Best Suited To Small/Box Type Plans

Recordkeeping Has Improved, But Administrative Services Could Be Further Improved

Current Pricing Based On EEs Rather Than Participants

Discount Pricing Not Yet Available

Fund Enrollment Material Currently Limited

Limited Stable Value Fund Menu

Prospectus NAV Requirements & CDSCs Apply

Willingness To Accommodate Specialists Beyond Basic Services Not Yet Developed At The Operational Level

No Repeat Producer Program



SUMMARY

BISYS is a public company with a diversified product line, scale, stability and solid margins across product lines.

The new retirement plans management team is also more than capable and they have done an admirable job turning the ship around, i.e., recordkeeping, administration and client service has improved significantly in recent years.

BISYS has converted to WySTAR (bought the code), developed sought after software to enhance the WySTAR system for small plan applications and is now viewed as a premier alliance partner in the $1-10 million market.

BISYS is also accomplished at block conversions and they service almost forty alliance partners, but they are also about to launch a proprietary TPA Link Program and the fully bundled Single Source Program.

BISYS is also broker friendly and they do not sell direct, but they have not done a good job communicating their “team” approach to service.

The Single Source Program has not yet been launched, but it currently lacks sales, marketing and proposal material. BISYS also lacks local presence, sales support and on-site enrollment assistance.

BISYS is competing with Ceridian for open architecture business and while BISYS has more scale and a better reputation for service, Ceridian offers more flexibility, more sales support and transparent pricing.

Ceridian’s service also appears to have improved, they target larger plans and while neither firm has distinguished themselves outside the box, specialists must analyze the two programs on a pre sale and post sale basis.

Investment neutral programs could gain significant market share in the years ahead and from a structural standpoint, the NAV programs offered by BISYS and Ceridian are unmatched as multifund solutions for the small plan market.



As noted, the fully bundled Single Source Program is marketed at NAV and the program is available without minimum requirements.

The program is offered with open architecture program, a large Preferred Funds List and proprietary fund requirements do not apply.

Specialists may also customize up to five asset allocation portfolios without additional cost and an Ameritrade brokerage option is also available without threshold requirements.

The Single Source Program also offers prospectus commissions that are paid direct to the broker-dealer, but prospectus NAV requirements and CDSCs have not been negotiated.

The Single Source Program also offers a high price-to-value ratio and billable pricing is quite competitive. Billable pricing also includes communication/enrollment material with limited fund information, on line-enrollment, VRU/on-line transaction initiation, up to 23 funds, quarterly testing, document, form 5500, trustee services and bi-weekly allocations.

BISYS also offers service guarantees and while discount pricing is not yet officially available, asset based pricing appears to be in the pipeline.

CONCLUSION

BISYS, Wachovia (PFPC), Ceridian, ADP and a few other providers may have slightly different business models, but they are destined to play an increasing role in consolidation.

BISYS will obviously play a major role in the market for outsourced solutions, but like Ceridian, their proprietary products could also increase market share if marketed properly.

BISYS may already be the largest alliance partner in the $1-10 million market for outsourced solutions and the Link TPA Program could also increase market share as a TPA solution.

BISYS has already committed resources to developing/marketing the Link TPA Program and while it has been around for a few years as a private labeled solution, BISYS has not yet promoted or marketed the Single Source Program.



BISYS does, however, seem ready to launch the Single Source Program and if so, they should remain cognizant of their alliance partners’ needs and concerns. By marketing a proprietary product, BISYS could be perceived as a competitor and this could undermine existing relationships.

Marketing remains a weak link in the financial services industry and the execution of well thought out plans is always a challenge. As a result, BISYS must skillfully position and market the Single Source Program to capture meaningful broker-sold business and avoid alienating alliance partners.

BISYS must also remain focused on their margins because offering more will cost more and that’s why providers need repeat business from the top producing specialists.

Marketing to rookies has always been a waste of resources and BISYS would be wise to note the differences between marketing a commoditized program to rookies and private labeling with the top producing retirement plans specialists.

If we were in BISYS’ shoes, we would market the Single Source Program exclusively to the top specialists and focus on plans over $3 million.

We would also develop new sales, marketing and proposal material, increase internal product training and expand the outside wholesaler force.

Perhaps most important of all, we would cultivate a culture of accommodating specialists beyond basic services and carve out a dedicated support group for the top producing specialists.

We would also expand the commissionable stable value menu, limit non preferred fund flexibility to specialists and market fund groups based on revenue sharing, i.e., tier one, tier two, etc.

BISYS should also develop a commissionable database for specialists, a Morningstar export file of all preferred funds and “consider” discount pricing.

Like the rest of the industry, BISYS should also develop a meaningful repeat producer program for the top producing specialists and use specialists as a referral source for wholesaler recruitment.



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Copyright 1999-2003 Center for Due Diligence. All rights reserved. This information has been taken from sources believed reliable, but accuracy and completeness cannot be guaranteed. The information is for broker-dealer use only and should not be construed as an offer to buy or

sell securities or any other investment.

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- Gandhi -


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