[Federal Register Volume 62, Number 238 (Thursday, December 11, 1997)]
[Notices]
[Pages 65289-65293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32366]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22925; File No. 912-10606]


Dreyfus Variable Investment Fund, et al.

December 4, 1997.
AGENCY: Securities and Exchange Commission (``SEC'' or the 
``Commission'').

ACTION: Notice of application for an amended order under Section 6(c) 
of the Investment Company Act of 1940 (the ``1940 Act'') for exemptions 
from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and Rules 
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.

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SUMMARY OF APPLICATION: Applicants seek an amended order to permit 
shares of the Dreyfus Variable Investment Fund and the Dreyfus Life and 
Annuity Index Funds, Inc. (d\b\a Dreyfus Stock Index Fund) to be sold 
to and held by qualified pension and retirement plans outside the 
separate account context.

APPLICANTS: Dreyfus Variable Investment Fund (``DVIF''), Dreyfus Life 
and Annuity Index Fund, Inc. (d\b\a Dreyfus Stock Index Fund) 
(``DSIF'') (together, the ``Funds'') and The Dreyfus Corporation 
(``Dreyfus'').

FILING DATE: The application was filed on April 4, 1997, and amended 
and restated on October 10, 1997.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing on this application by writing to the 
Secretary of the SEC and serving Applicants with a copy of the request, 
in person or by mail. Hearing requests must be received by the 
Commission by 5:30 p.m., on December 29, 1997, and accompanied by proof 
of service on the Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the interest, the reason for the request and the issues 
contested. Persons may request notification of the date of a hearing by 
writing to the Secretary of the SEC.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants, 200 Park Avenue, New York, NY 10166.

FOR FURTHER INFORMATION CONTACT:
Zandra Y. Bailes, Senior Counsel, or Mark C. Amorosi, Branch Chief, 
Division of Investment Management, Office of Insurance Products, at 
(202) 942-0670.

SUPPLEMENTARY INFORMATION: Following is a summary of the application. 
The complete application is available for a fee from the Public 
Reference Branch of the SEC, 450 Fifth Street, NW., Washington, DC 
20549 (tel. (202) 942-8090).

Applicants' Representations

    1. DVIF is a Massachusetts business trust registered under the 1940 
Act as an open-end diversified management investment company. It 
presently consists of eleven classes of stock and may in the future add 
one or more additional classes of stock.
    2. DSIF is a Maryland corporation registered under the 1940 Act as 
an open-end non-diversified management investment company. DSIF is a 
single portfolio mutual fund that offers only one class of stock for 
investment.
    3. Dreyfus, an investment adviser registered under the Investment 
Advisers Act of 1940, serves as the investment adviser for each Fund. 
Fayez Sarofim & Co. is the subinvestment adviser for DVIF's Capital 
Appreciation Portfolio. Mellon Equity Associates is DSIF's index fund 
manager.
    4. On December 23, 1987, an order was issued granting exemptive 
relief to permit shares of DVIF to be sold to and held by variable 
annuity and variable life insurance separate accounts of both 
affiliated and unaffiliated life insurance companies (Release No. IC-
16188, File No. 812-6698) (the ``DVIF Order''). Similarly, on August 
23, 1989, an order was issued to DSIF granting identical exemptive 
relief (Release No. IC-17118, File No. 812-7253) (the ``DESIF Order'') 
(together, the DVIF Order and the DSIF Order, the ``Original Orders'').
    5. The Original Orders allow DVIF and DSIF to offer their shares to 
insurance companies as the investment vehicle for their separate 
accounts supporting variable annuity contracts, schedule premium 
variable life insurance contracts and flexible premium variable life 
insurance contracts (collectively, ``Variable Contracts''). Separate 
accounts owning shares of a Fund and their insurance company depositors 
are referred to herein as ``Participating Separate Accounts'' and 
``Participating Insurance Companies,'' respectively.
    6. The Original orders do not expressly address the sale of shares 
of the Funds to qualified pension and retirement plans outside of the 
separate account context (``Qualified Plan''). Applicants propose that 
the Funds be permitted to offer and sell shares of the Funds to 
Qualified Plans.

Applicants' Legal Analysis

    1. Applicants request that the Commission issue an amended order

[[Page 65290]]

pursuant to Section 6(c) of the 1940 Act, exempting scheduled premium 
variable life insurance separate accounts and flexible premium variable 
life insurance separate accounts of Participating Insurance Companies 
(and, to the extent necessary, any principal underwriter and depositor 
of such an account) and the Applicants from Sections 9(a), 13(a), 15(a) 
and 15(b) of the 1940 Act, and rules 6e-2(b)(15) and 6e-3(T)(b)(15) 
(and any comparable rule) thereunder, respectively, to the extent 
necessary to permit shares of the Funds to be sold to and held by 
qualified Plans.
    2. Section 6(c) of the 1940 Act provides in part that the 
Commission, by order upon application, may conditionally or 
unconditionally exempt any person, security or transaction, or any 
class or classes of persons, securities or transactions from any 
provisions of the 1940 Act or the rules or regulations thereunder, if 
and to the extent that such exemption is necessary or appropriate in 
the public interest and consistent with the protection of investors and 
the purposes fairly intended by the policy and provisions of the 1940 
Act.
    3. In connection with the funding of scheduled premium variable 
life insurance contracts issued through a separate account registered 
under the 1940 Act as a unit investment trust, Rule 6e-2(b)(15) 
provides partial exemptions from Section 9(a), 13(a), 15(a) and 15(b) 
of the 1940 Act. These exemptions are available, however, only where 
the management investment company underlying the separate account 
(``underlying fund'') offers its shares ``to variable life insurance 
separate accounts of the life insurer, or of any affiliated life 
insurance company.'' The use of a common management investment company 
as the underlying investment medium for both variable annuity and 
variable life insurance separate accounts of a single insurance company 
(or of two or more affiliated insurance companies) is referred to as 
``mixed funding.'' The use of a common management investment company as 
the underlying investment medium for variable annuity and/or variable 
life insurance separate accounts of unaffiliated insurance companies is 
referred to as ``shared funding/'' Therefore, Rule 6e-2 does not permit 
either mixed funding or shared funding because the relief granted by 
Rule 6e-2(b)(15) is not available with respect to a scheduled premium 
variable life insurance separate account that owns shares of an 
underlying fund that also offers its shares to a variable annuity or a 
flexible premium variable life insurance separate account of the same 
company or of any affiliated life insurance company. Rule 6e-2(b)(15) 
also does not permit the sale of shares of the underlying fund to 
Qualified Plans.
    4. In connection with flexible premium variable life insurance 
contracts issued through a separate account registered under the 1940 
Act as a unit investment trust, Rule 6e-3(T)(b)(15) also provides 
partial exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 
1940 Act. These exemptions, however, are available only where the 
separate account's underlying fund offers its shares ``exclusively to 
separate accounts of the life insurer, or of any affiliated life 
insurance company, offering either scheduled contracts or flexible 
contracts, or both; or which also offer their shares to variable 
annuity separate accounts of the life insurer or of an affiliated life 
insurance company.'' Therefore, Rule 6e-3(T) permits mixed funding but 
does not permit shared funding and also does not permit the sale of 
shares of the underlying fund to Qualified Plans. As noted above, the 
Original Orders granted the Funds exemptive relief to permit mixed and 
shared funding, but did not expressly address the sale of shares of the 
Funds to Qualified Plans.
    5. Applicants note that if the Funds were to sell their shares only 
to Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) 
would not be necessary. The relief provided for under Rule 6e-2(b)(15) 
and Rule 6e-3(T)(b)(15) does not relate to qualified pension and 
retirement plans or to a registered investment company's ability to 
sell its shares to such plans.
    6. Applicants state that changes in the federal tax law have 
created the opportunity for each Fund to increase its asset base 
through the sale of shares of each Fund Qualified Plans. Section 817(h) 
of the Internal Revenue Code of 1986, as amended (the ``Code''), 
imposes certain diversification standards on the assets underlying 
Variable Contracts. Treasury Regulations provide that, to meet the 
diversification requirements, all of the beneficial interests in the 
underlying investment company must be held by the segregated asset 
accounts of one or more life insurance companies. Notwithstanding this, 
the Treasury Regulations also contain an exception to this requirement 
that permits trustees of a Qualified Plan to hold shares of an 
investment company, the shares of which are also held by insurance 
company segregated asset accounts, without adversely affecting the 
status of the investment company as an adequately diversified 
underlying investment of Variable Contracts issued through such 
segregated asset accounts (Treas. Reg. 1.817-5(f)(3)(iii)).
    7. Applicants state that the promulgation Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) under the 1940 Act preceded the issuance of these Treasury 
Regulations. Thus, the sale of shares of the same investment company to 
both separate accounts and Qualified Plans was not contemplated at the 
time of the adoption of Rules 6e-2(b)(15) and 6e-3(T)(b)(15).
    8. Section 9(a) provides that it is unlawful for any company to 
serve as investment adviser or principal underwriter of any registered 
open-end investment company if an affiliated person of that company is 
subject to a disqualification enumerated in Section 9(a) (1) or (2). 
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) provide exemptions from Section 
9(a) under certain circumstances, subject to the limitations on mixed 
and shared funding. These exemptions limit the application of the 
eligibility restrictions to affiliated individuals or companies that 
directly participate in the management of the underlying portfolio 
investment company.
    9. Applicants state that the relief granted in Rules 6e-2(b)(15) 
and 6e-3(T)(b)(15) from the requirements of Section 9 limits, in 
effect, the amount of monitoring of an insurer's personnel that would 
otherwise be necessary to ensure compliance with Section 9 to that 
which is appropriate in light of the policy and purposes of Section 9. 
Applicants state that those Rules recognize that it is not necessary 
for the protection of investors or the purposes fairly intended by the 
policy and provisions of the 1940 Act to apply the provisions of 
Section 9(a) to the many individuals involved in an insurance company 
complex, most of whom typically will have no involvement in matters 
pertaining to investment companies funding the separate accounts.
    10. Applicants previously requested and received relief from 
Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent 
necessary to permit mixed and shared funding. Applicants maintain that 
the relief previously granted from Section 9(a) will in no way be 
affected by the proposed sale of shares of the Funds to Qualified 
Plans. Those individuals who participate in the management or 
administration of the Funds will remain the same regardless of which 
Qualified Plans use such Funds. Applicants maintain that the 
requirements of Section 9(a) because of investment by Qualified Plans 
would not serve any regulatory purpose. Moreover, Qualified

[[Page 65291]]

Plans, unlike separate accounts, are not themselves investment 
companies, and therefore are not subject to Section 9 of the 1940 Act. 
Furthermore, it is not anticipated that a Qualified Plan would be an 
affiliated person of either Fund by virtue of its shareholders.
    11. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-
3(T)(b)(15)(iii) provide exemptions from the pass-through voting 
requirement with respect to several significant matters, assuming the 
limitations on mixed and shared funding are observed. Rules 6e-
2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A) provide that the insurance 
company may disregard the voting instructions of its contractowners 
with respect to the investments of an underlying fund or any contract 
between a fund and its investment adviser, when required to do so by an 
insurance regulatory authority (subject to the provisions of paragraphs 
(b)(5)(i) and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) 
and 6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may 
disregard contractowner's voting instructions if the contractowners 
initiate any change in such company's investment policies, principal 
underwriter or any investment adviser (provided that disregarding such 
voting instructions is reasonable and subject to the other provisions 
of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and (C) of the Rules).
    12. Applicants assert that Qualified Plans, which are not 
registered as investment companies under the 1940 Act, have no 
requirement to pass through the voting rights to plan participants. 
Applicable law expressly reserves voting rights to certain specified 
persons. Under Section 403(a) of the Employment Retirement Income 
Security Act (``ERISA''), shares of a fund sold to a Qualified Plan 
must be held by the trustees of the Qualified Plan. Section 403(a) also 
provides that the trustee(s) must have exclusive authority and 
discretion to manage and control the Qualified Plan with two 
exceptions. (1) When the Qualified Plan expressly provides that the 
trustee(s) are subject to the direction of a named fiduciary who is not 
a trustee, in which case the trustees are subject to proper directions 
made in accordance with the terms of the Qualified Plan and not 
contrary to ERISA, and (2) when the authority to manage, acquire or 
dispose of assets of the Qualified Plan is delegated to one or more 
investment managers pursuant to Section 402(c)(3) of ERISA. Unless one 
of the two above exceptions stated in Section 403(a) applies, Qualified 
Plan trustees have the exclusive authority and responsibility for 
voting proxies. Where a named fiduciary to a Qualified Plan appoints an 
investment manager, the investment manager has the responsibility to 
vote the share held unless the right to vote such shares is reserved to 
the trustees or the named fiduciary. Where a Qualified Plan does not 
provide participants with the right to give voting instructions, the 
Applicants do not see any potential for material irreconcilable 
conflicts of interest between or among variable contract holders and 
Qualified Plan investors with respect to voting of the respective 
Fund's shares. Accordingly, Applicants state that unlike the case with 
insurance company separate accounts, the issue of the resolution of 
material irreconcilable conflicts with respect to voting is not present 
with respect to such Qualified Plans since the Qualified Plans are not 
entitled to pass through voting privileges.
    13. Even if a Qualified Plan were to hold a controlling interest in 
a Fund, the Applicants argue that such control would not disadvantage 
other investors in such Fund to any greater extent than is the case 
when any institutional shareholder holds a majority of the voting 
securities of any open-end management investment company. In this 
regard, the Applicants submit that investment in a Fund by a Qualified 
Plan will not create any of the voting complications occasioned by 
mixed funding or shared funding. Unlike mixed or shared funding, 
Qualified Plan investor voting rights cannot be frustrated by veto 
rights of insurers or state regulators.
    14. Applicants state that some of the Qualified Plans, however, may 
provide for the trustee(s), an investment adviser (or advisers) or 
another named fiduciary to exercise voting rights in accordance with 
instructions from participants. Where a Qualified Plan provides 
participants with the right to give voting instructions, the Applicants 
see no reason to believe that participants in Qualified Plans generally 
or those in a particular Qualified Plan, either as a single group or in 
combination with participants in other Qualified Plans, would vote in a 
manner that would disadvantage Variable Contract holders. The purchase 
of shares of the Funds by Qualified Plans that provide voting rights 
does not present any complications not otherwise occasioned by mixed or 
shared funding.
    15. Applicants state that they do not believe that the sale of the 
shares of the Funds to Qualified Plans will increase the potential for 
material irreconcilable conflicts of interest between or among 
different types of investors. In particular, Applicants see very little 
potential for such conflicts beyond that which would otherwise exist 
between variable annuity and variable life insurance contractowners.
    16. As noted above, Section 817(h) of the Code imposes certain 
diversification standards on the underlying assets of variable 
contracts held in an underlying mutual fund. The Code provides that a 
variable contract shall not be treated as an annuity contract or life 
insurance, as applicable, for any period (and any subsequent period) 
for which the investments are not, in accordance with regulations 
prescribed by the Treasury Department, adequately diversified.
    17. Treasury Department Regulations issued under Section 817(h) 
provide that, in order to meet the statutory diversification 
requirements, all of the beneficial interests in the investment company 
must be held by the segregated asset accounts of one or more insurance 
companies. However, the Regulations contain certain exceptions to this 
requirement, one of which allows shares in an underlying mutual fund to 
be held by the trustees of a qualified pension or retirement plan 
without adversely affecting the ability of shares in the underlying 
fund also to be held by separate accounts of insurance companies in 
connection with their variable contracts (Treas. Reg. 1.817-
5(f)(3)(iii)). Thus, Treasury Regulations specifically permit 
``qualified pension or retirement plans'' and separate accounts to 
invest in the same underlying fund. For this reason, Applicants have 
concluded that neither the Code, nor the Treasury Regulations or 
revenue rulings thereunder, present any inherent conflicts of interest.
    18. Applicants note that while there are differences in the manner 
in which distributions from Variable Contracts and Qualified Plans are 
taxed, these differences will have no impact on the Funds. When 
distributions are to be made, and a Separate Account or Qualified Plan 
is unable to net purchase payments to made the distributions, the 
Separate Account and Qualified Plan will redeem shares of the Funds at 
their respective net asset value in conformity with Rule 22c-1 under 
the 1940 Act (without the imposition of any sales charge) to provide 
proceeds to meet distribution needs. A Qualified Plan will make 
distributions in accordance with the terms of the Qualified Plan.
    19. Applicants state that it is possible to provide an equitable 
means of giving voting rights to Participating Separate Account 
contractowners and to Qualified Plans. In connection with any meeting 
of shareholders, the Funds will inform each shareholder, including each 
Participating Insurance Company and Qualified Plan, of information 
necessary

[[Page 65292]]

for the meeting, including their respective share of ownership in the 
relevant Fund. Each Participating Insurance Company will then solicit 
voting instructions in accordance with Rules 6e-2 and 6e-3(T), as 
applicable, and its participation agreement with the relevant Fund. 
Shares held by Qualified Plans will be voted in accordance with 
applicable law. The voting rights provided to Qualified Plans with 
respect to share of the Funds would be no different from the voting 
rights that are provided to Qualified Plans with respect to share of 
funds sold to the general public.
    20. Applicants have concluded that even if there should arise 
issues with respect to a state insurance commissioner's veto powers 
over investment objectives where the interests of contractowners and 
the interests of Qualified Plans are in conflict, the issues can be 
almost immediately resolved since the trustees of (or participants in) 
the Qualified Plans can, on their own, redeem the shares out of the 
Funds. Applicants note that state insurance commissioners have been 
given the veto power in recognition of the fact that insurance 
companies usually cannot simply redeem their separate accounts out of 
one fund and invest in another. Generally, time-consuming, complex 
transactions must be undertaken to accomplish such redemptions and 
transfers. Conversely, the trustees of Qualified Plans or the 
participants in participant-directed Qualified Plans can make the 
decision quickly and redeem their interest in the Funds and reinvest in 
another funding vehicle without the same regulatory impediments faced 
by separate accounts or, as is the case with most Qualified Plans, even 
hold cash pending suitable investment.
    21. Applicants also state that they do not see any greater 
potential for material irreconcilable conflicts arising between the 
interests of participants under Qualified Plans and contractowners of 
Participating Separate Accounts from possible future changes in the 
federal tax laws than that which already exist between variable annuity 
contractowners and variable life insurance contractowners.
    22. Applicants state that the sale of shares of the Funds to 
Qualified Plans in addition to separate accounts of Participating 
Insurance Companies will result in an increased amount of assets 
available for investment by the Funds. This may benefit variable 
contractowners by promoting economies of scale, by permitting increased 
safety of investments through greater diversification, and by making 
the addition of new portfolios more feasible.
    23. Applicants assert that, regardless of the type of shareholders 
in each Fund, Dreyfus is or would be contractually and otherwise 
obligated to manage each Fund solely and exclusively in accordance with 
that Fund's investment objectives, policies and restrictions as well as 
any guidelines established by the Board of Directors of such Fund (the 
``Board''). Dreyfus works with a pool of money and does not take into 
account the identify of the shareholders. Thus, each Fund will be 
managed in the same manner as any other mutual fund. Applicants 
therefore see no significant legal impediment to permitting the sale of 
shares of the Funds to Qualified Plans.

Conditions for Relief

    Applicants consent to the following condition:
    1. Any Qualified Plan that executes a fund participation agreement 
upon becoming an owner of 10% or more of the assets of a Fund (a 
``Participant'') shall report any potential or existing conflicts to 
the applicable Board. A Participant will be responsible for assisting 
the Board in carrying out its responsibilities under these conditions 
by providing the Board with all information reasonably necessary for 
the Board to consider any issues raised. If pass-through voting is 
applicable, this includes, but is not limited to, an obligation by each 
Participant to inform the Board whenever it has determined to disregard 
the voting instructions of its participants. The responsibility to 
report such conflicts and information, and to assist the Board will be 
the contractual obligations of the Participant under its agreement 
governing participation in the Fund and such agreement shall provide 
that such responsibilities will be carried out with a view only to the 
interests of participants in such Qualified Plan.
    2. Each Board will monitor its respective Fund for the existence of 
any material irreconcilable conflict among the interests of the 
contractowners of all the separate accounts investing in the Fund and 
participants in Qualified Plans investing in the Funds. A material 
irreconcilable conflict may arise for a variety of reasons, including: 
(a) An action by any state insurance regulatory authority; (b) a change 
in applicable federal or state insurance, tax or securities laws or 
regulations, or a public ruling, private letter ruling, no-action or 
interpretive letter, or any similar action by insurance, tax or 
securities regulatory authorities; (c) an administrative or judicial 
decision in any relevant proceeding; (d) the manner in which the 
investments of the Fund are being managed; (e) a difference in voting 
instructions given by variable life insurance contract-owners; (f) a 
decision by a Participating Insurance Company to disregard the voting 
instructions of contractowners; or (g) if applicable, a decision by a 
Qualified Plan to disregard the voting instructions of its 
participants.
    3. If it is determined by a majority of a Board of a Fund, or by a 
majority of its disinterested trustees or directors, that a material 
irreconcilable conflict exists, the relevant Qualified Plans shall, at 
their expense and to the extent reasonably practicable (as determined 
by a majority of a the disinterested trustees or directors), take 
whatever steps are necessary to remedy or eliminate the material 
irreconcilable conflict. Such steps could include: (a) Withdrawing the 
assets allocable to some or all of the Qualified Plans from the Fund or 
any portfolio thereof and reinvesting such assets in a different 
investment medium, which may include another portfolio of a Fund; and 
(b) establishing a new registered management investment company or 
managed separate account.
    4. If a material irreconcilable conflict arises because of a 
Qualified Plan's decision to disregard its participants' voting 
instructions, if applicable, and that decision represents a minority 
position or would preclude a majority vote, the Qualified Plan many be 
required, at the election of the Funds, to withdraw its investment in 
such Fund, and no charge or penalty will be imposed as a result of such 
withdrawal. To the extent permitted by applicable law, the 
responsibility of taking remedial action in the event of a Board 
determination of a material irreconcilable conflict and bearing the 
cost of such remedial action, will be a contractual obligation of all 
Participants under their agreements governing participation in the 
Fund, and these responsibilities, will be carried out with a view only 
to the interests of participants in such Qualified Plans. For purposes 
of this condition, a majority of the disinterested members of the 
applicable Board will determine whether or not any proposed action 
adequately remedies any material irreconcilable conflict, but in no 
event will the relevant Fund, or Dreyfus be required to establish a new 
funding medium for any Variable Contract. Further, no Qualified Plan 
shall be required by this condition to establish a new funding medium 
for any Qualified Plan if: (a) A majority of its participants 
materially and adversely affected by the

[[Page 65293]]

irreconcilable material conflict vote to decline such offer or (b) 
pursuant to governing Qualified Plan documents and applicable law, the 
Qualified Plan makes such decision without a vote of its participants.
    5. Any Board's determination of the existence of a material 
irreconcilable conflict and its implications will be made known 
promptly and in writing to all Qualified Plans.
    6. Each Qualified Plan will vote as required by applicable law 
governing Qualified Plan documents.
    7. All reports of potential or existing conflicts received by a 
Board and all Board actions with regard or determining the existence of 
a conflict of interest, notifying Qualified Plans of a conflict, and 
determining whether any proposed action adequately remedies a conflict, 
will be properly recorded in the minutes of the appropriate Board or 
other appropriate records, and such minutes or other records shall be 
made available to the Commission upon request.
    8. Each Fund will disclose in its prospectus that: (a) Shares of 
the Fund may be offered to insurance company separate accounts on a 
mixed and shared basis and to Qualified Plans; (b) materials 
irreconcilable conflicts may arise between the interests of various 
contractowners participating in the Fund and the interests of Qualified 
Plans investing in the Fund; and (c) the Board of such Fund will 
monitor events in order to identify the existence of any material 
conflict and determine what action, if any, should be taken in response 
to such material irreconcilable conflict.
    9. No less than annually, the Participants shall submit to each 
Board such reports, materials or data as the Board may reasonably 
request so that the Board may carry out fully the obligations imposed 
upon it by the conditions contained in the application. Such reports, 
materials and data shall be submitted more frequently if deemed 
appropriate by the Board. The obligations of the Participants to 
provide these reports, material and data shall be a contractual 
obligation of all Participants under the agreements governing their 
participation in the Funds.
    10. Neither Fund will accept a purchase order from a Qualified Plan 
if such purchase would make the Qualified Plan shareholder an owner of 
10% or more of the assets of such Fund unless such Qualified Plan 
executes a fund participation agreement with the relevant Fund 
including the conditions set forth herein to the extent applicable. A 
Qualified plan will execute a shareholder application containing an 
acknowledge of this condition at the time of its initial purchase of 
shares of such Fund.

Conclusion

    For the reasons summarized above, Applicants assert that the 
requested exemptions are appropriate in the public interest and 
consistent with the protection of investors of the purposes fairly 
intended by the policy and provisions of the 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32366 Filed 12-10-97; 8:45 am]
BILLING CODE 8010-01-M