SUBJECT: ANNUITY PROCESSING SERVICE

On December 16, 1998, the Securities and Exchange Commission (the "Commission") approved National Securities Clearing Corporation's ("NSCC") concerning phase two of NSCC's Annuity Processing Service ("APS").

Phase two provides the multiple insurance product distribution channels (such as insurance agencies, broker-dealers and other trading partners) (the "Distributors") with the ability to transmit to insurance carriers, information in respect of an initial annuity application and premium transfers on the sale of an annuity and subsequent annuity activity, as well as the related money settlement between the distributors and insurance carriers. In addition, insurance carriers can transmit to Distributors a financial activity report ("FAR") providing information relating to events and/or transactions occurring in respect of existing annuity contracts that have been issued by the insurance carriers.

Currently, no fees are being charged to users of these new APS services. On December 28, 1998, NSCC filed a rule change with the Commission pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934, as amended, concerning revisions to NSCC's Fee Schedule. Pursuant to such filing NSCC will charge members who submit or receive information relating to the initial application or premium transfer a fee of $7.50 per each submission and/or receipt; members who submit or receive information on subsequent annuity activity a fee of $0.50 per each SUB transaction; and members who submits or receives a FAR a fee of $0.50 per each FAR transmitted or received. These fees will apply with respect to all such transactions submitted on or after January 1, 1999.

The text of the rule changes may be obtained by contacting the NSCC Legal Department at (212) 412-8634.

Questions regarding the operational aspects of the Annuities Processing Service should be directed to Mark Reiser, Vice President, at (212) 412-8440.

Karen L. Saperstein
Managing Director and Deputy General Counsel