SUBJECT: ANNUITY PROCESSING SERVICE/MUTUAL FUND SERVICES

On July 21, 1998, the Securities and Exchange Commission ("SEC") approved National Securities Clearing Corporation’s ("NSCC") rule change consisting of modifications to NSCC’s Rules and Procedures to (i) give the users of NSCC’s Mutual Fund Services ("MF Services"), whose use of NSCC’s services currently is restricted to MF Services, the ability to also use NSCC’s Annuity Processing Service ("APS"), (ii) give the users of APS, whose use of NSCC’s services currently is restricted to APS, the ability to also use MF Services, and (iii) make additional revisions to Addendum Q (Standards of Financial Responsibility and Operational Capability for Annuities Carrier Members) in order to more accurately reflect insurance industry practices.

NSCC now has a new category of members known as a "Mutual Fund/Annuity Services Members" which combines the old membership categories of Annuities Agency Members and Mutual Fund Services Members. Mutual Fund/Annuity Services Members are permitted to use either MF Services or APS or both. Broker Dealers, Banks, and Trust Companies, as well as Insurance Entities, may apply to become Mutual Fund/Annuity Services Members.

No changes have been made with respect to the clearing fund requirements relating to the use of MF Services and APS. There continues to be no clearing fund requirement relating to the use of APS. A Mutual Fund/Annuity Services Member who uses MF Services is required to deposit the appropriate amount into the clearing fund.

Questions regarding NSCC’s mutual fund services should be directed to NSCC’s mutual fund hotline at (212) 412-8893 and NSCC’s annuity processing service to Thomas Cesare, Participant Services Representative, at (212) 412-9793. The text of the proposed rule change may be obtained by contacting Michelle Stubbs, legal secretary, at (212) 412-8621.

Robert J. Woldow
Managing Director and General Counsel