[Federal Register Volume 63, Number 11 (Friday, January 16, 1998)]
[Notices]
[Pages 2702-2708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1113]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22996; File No. 812-10604]


The Dreyfus Socially Responsible Growth Fund, Inc., and The 
Dreyfus Corporation

January 9, 1998.
AGENCY: Securities and Exchange Commission (the ``SEC'' or the 
``Commission'').

ACTION: Notice of application for an order under Section 6(c) of the 
Investment Company Act of 1940 (the ``1940 Act'') for exemptions from 
the provisions of 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.

-----------------------------------------------------------------------

SUMMARY OF APPLICATION: Applicants seek an order to permit shares of 
The Dreyfus Socially Responsible Growth Fund and shares of any other 
investment company or portfolio thereof that is designed to fund 
insurance products and for which The Dreyfus Corporation or any of its 
affiliates may serve in the future, as investment adviser, 
administrator, manager, principal underwriter, or sponsor (such other 
investment companies or investment portfolios thereof being hereinafter 
referred to, individually, as a ``Future Fund'' and collectively, as 
the ``Future Funds'') to be sold to and held by: (1) Separate accounts 
funding variable annuity and variable life insurance contracts issued 
by both affiliated and unaffiliated life insurance companies; and (2) 
qualified pension and retirement plans outside of the separate account 
context.

APPLICANTS: The Dreyfus Socially Responsible Growth Fund, Inc. (the 
``Fund'') and The Dreyfus Corporation (``Dreyfus'').

FILING DATE: The application was filed on April 4, 1997, amended and 
restated on October 20, 1997, and amended on December 16, 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 February 3, 1998, 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, N.W., Washington, D.C. 
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

[[Page 2703]]

complete application is available for a fee from the Public Reference 
Branch of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 (tel. 
(202) 942-8090).

Applicants' Representations

    1. The Fund is a Maryland corporation and is registered under the 
1940 Act as an open-end diversified management investment company. Its 
authorized capital stock presently consists of one class of stock, but 
in the future the Fund may create one or more additional classes of 
stock, each corresponding to a portfolio of securities.
    2. Dreyfus, an investment adviser registered under the Investment 
Advisers Act of 1940, is the investment adviser for the Fund. NCM 
Capital Management Group, Inc. is the sub-investment adviser for the 
Fund and provides day-to-day management of the Fund's portfolio.
    3. The Fund currently offers its shares to insurance companies as 
the investment vehicle for their separate accounts that fund variable 
annuity contracts and intends to offer its shares to affiliated and 
unaffiliated insurance companies as the investment vehicle for their 
separate accounts that fund variable life insurance contracts 
(together, variable annuity contracts and variable life insurance 
contracts are referred to herein as ``Variable Contracts''). Separate 
accounts owning shares of the Fund and their insurance company 
depositors are referred to herein as ``Participating Separate 
Accounts'' and ``Participating Insurance Companies,'' respectively.
    4. Each Participating Insurance Company will enter into a 
participation agreement with the Fund on behalf of its Participating 
Separate Account. The role of the Fund under this agreement, insofar as 
the federal securities laws are applicable, will consist of offering 
shares to the Participating Separate Accounts and complying with any 
conditions that the Commission may impose upon granting the order 
requested in the application.
    5. Applicants also propose that the Fund offer and sell its shares 
directly to qualified pension and retirement plans (``Qualified Plans'' 
or ``Plans'') outside of the separate account context.

Applicants' Legal Analysis

    1. Section 6(c) of the 1940 Act authorizes the Commission, by order 
upon application, to 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.
    2. 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) under 
the 1940 Act provides partial exemptions from Sections 9(a), 13(a), 
15(a) and 15(b) of the 1940 Act. The exemptions granted by Rule 6e-
2(b)(15) are available, however, only where the management investment 
company underlying the separate account (``underlying fund'') offers 
its shares ``exclusively to variable life insurance separate accounts 
of the life insurer, or of any affiliated life insurance company'' 
(emphasis supplied).\1\ Therefore, 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. The use of a common management 
investment company as the underlying investment medium for both 
variable annuity and variable life insurance separate accounts of the 
same insurance company or of any affiliated life insurance company is 
referred to herein as ``mixed funding.'' In addition, the relief 
granted by Rule 6e-2(b)(15) is not available if shares of the 
underlying management investment company are offered to variable 
annuity or variable life insurance separate accounts of unaffiliated 
life insurance companies. The use of a common management investment 
company as the underlying investment medium for separate accounts of 
unaffiliated life insurance companies is referred to herein as ``shared 
funding.'' Furthermore, Rule 6e-2(b)(15) does not contemplate that 
shares of the underlying fund might also be sold to Qualified Plans.
---------------------------------------------------------------------------

    \1\ The exemptions provided by Rule 6e-2 also are available to 
the investment adviser, principal underwriter, and sponsor or 
depositor of the separate account.
---------------------------------------------------------------------------

    3. In connection with the funding of flexible premium variable life 
insurance contracts issues through a separate account registered under 
the 1940 Act as a unit investment trust, Rule 6e-3(T)(b)(15) 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'' (emphasis supplied).\2\ Therefore, Rule 6e-3(T) 
permits mixed funding with respect to a flexible premium variable life 
insurance separate account but does not permit shared funding. Also, 
Rule 6e-3(T) does not contemplate the sale of shares of the underlying 
fund to Qualified Plans.
---------------------------------------------------------------------------

    \2\ The exemptions provided by Rule 6e-3(T) also are available 
to the investment adviser, principal underwriter, and sponsor or 
depositor of the separate account.
---------------------------------------------------------------------------

    4. Applicants state that changes in the federal tax law have 
created the opportunity for the Fund to substantially increase its net 
assets by selling shares to 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. The Code provides that Variable Contracts will not be 
treated as annuity contracts or life insurance contracts, as the case 
may be, for any period (or any subsequent period) for which the 
underlying assets are not, in accordance with regulations issued by the 
Treasury Department (the ``Regulations''), adequately diversified. On 
March 2, 1989, the Treasury Department issued regulations (Treas. Reg. 
1.817-5) which established specific diversification requirements for 
investment portfolios underlying Variable Contracts. The regulations 
generally provide that, in order to meet these 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 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 for Variable Contracts 
issued through such segregated asset accounts (Treas. Reg. 1.817-
5(f)(3)(iii)).

[[Page 2704]]

    5. Applicants note that if the Fund and Future 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 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 also note that the promulgation of Rules 6e-2(b)(15) 
and 6e-3(T)(b)(15) preceded the issuance of the Regulations. Thus, the 
sale of shares 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).
    7. Section 9(a)(3) of the 1940 Act 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) of the 1940 Act. Rules 6e-2(b)(15)(i) and (ii) and 6e-
3(T)(b)(15)(i) and (ii) 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 fund.
    8. Applicants state that the partial relief granted in Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) from the requirements of Section 9 of the 
1940 Act 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.
    9. Applicants state that neither the Participating Insurance 
Companies nor the Qualified Plans are expected to play any role in the 
management or administration of the Fund or Future Funds. Those 
individuals who participate in the management or administration of the 
Fund and Future Funds will remain the same regardless of which separate 
accounts, insurance companies or Qualified Plans use such Funds. 
Applicants maintain that applying the requirements of Section 9(a) 
because of investment by other insurers' separate accounts and 
Qualified Plans would be unjustified and would not serve any regulatory 
purpose. Moreover, Qualified 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 deemed to be an affiliated person of the Fund 
or any Future Fund by virtue of its shareholders.
    10. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-
3(T)(b)(15)(iii) under the 1940 Act provide exemptions from the pass-
through voting requirement with respect to several significant matters, 
assuming the limitations on mixed and shared funding are observed. More 
specifically, 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 
and subject to the provisions of paragraphs (b)(5)(i) and (b)(7)(ii)(A) 
of the Rules. In addition, 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).
    11. Applicants assert that Qualified Plans, which are not 
registered as investment companies under the 1940 Act, have no 
requirement to pass through voting rights to plan participants. Indeed, 
to the contrary, applicable law expressly reserves voting rights 
associated with Plan assets to certain specified persons. Under Section 
403(a) of the Employee Retirement Income Security Act (``ERISA''), 
shares of a fund sold to a Qualified Plan must be held by the trustees 
of the Plan. Section 403(a) also provides that the trustee(s) must have 
exclusive authority and discretion to manage and control the Plan with 
two exceptions: (a) When the Plan expressly provides that the trustees 
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 Plan and not contrary to ERISA, and 
(b) when the authority to manage, acquire or dispose of assets of the 
Plan is delegated to one or more investment managers pursuant to 
Section 402(c)(3) of ERISA. Unless one of the above two exceptions 
stated in Section 403(a) applies, Plan trustees have the exclusive 
authority and responsibility for voting proxies.
    12. Where a named fiduciary to a Qualified Plan appoints an 
investment manager, the investment manager has the responsibility to 
vote the shares held unless the right to vote such shares is reserved 
to the trustees or the named fiduciary. The Qualified Plans may have 
their trustee(s) or other fiduciaries exercise voting rights 
attributable to investment securities held by the Qualified Plans in 
their discretion. 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.
    13. Where a Qualified Plan does not provide participants with the 
right to give voting instructions, Applicants submit that there is no 
potential for material irreconcilable conflicts of interest between or 
among variable contract holders and Plan investors with respect to 
voting of the respective Fund's shares. Accordingly, 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.
    14. Even if a Qualified Plan were to hold a controlling interest in 
the Fund or a Future Fund, 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, Applicants submit that investment in the Fund or a Future 
Fund by a Plan will not create any of the voting complications 
occasioned by mixed funding or shared funding. Unlike mixed or shared 
funding, Plan investor voting rights cannot be frustrated by veto 
rights of insurers or state regulators.
    15. Where a Plan provides participants with the right to give 
voting instructions, Applicants see no reason to believe that 
participants in Qualified Plans generally or those in a particular 
Plan, either as a single group or in combination with participants in 
other Qualified Plans, would vote in a manner that would disadvantage 
variable

[[Page 2705]]

contract holders. The purchase of shares of the Fund or Future Funds by 
Qualified Plans that provide voting rights does not present any 
complications not otherwise occasioned by mixed or shared funding.
    16. Applicants submit that the prohibitions on mixed and shared 
funding might reflect some concern with possible divergent interests 
among different classes of investors. Applicants assert that shared 
funding does not present any issues that do not already exist where a 
single insurance company is licensed to do business in several or all 
states. Where insurers are domiciled in different states, it is 
possible that the particular state insurance regulatory body in a state 
which one insurance company is domiciled could require action that is 
inconsistent with the requirements of insurance regulators of other 
states in which other insurance companies are domiciled. The fact that 
a single insurer and its affiliates offer their insurance products in 
different states does not create a significantly different or enlarged 
problem.
    17. Applicants submit that shared funding is, in this respect, no 
different than the use of the same investment company as the funding 
vehicle for affiliated insurers, which Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) permit under various circumstances. Affiliated insurers may 
be domiciled in different states and be subject to differing state law 
requirements. Affiliation does not reduce the potential, if any exists, 
for differences in state regulatory requirements. In any event, 
Applicants submit that the conditions set forth in the application and 
included in this notice are designed to safeguard against and provide 
procedures for resolving any adverse effects that differences among 
state regulatory requirements may produce. For instance, if a 
particular state insurance regulator's decision conflicts with the 
majority of other state regulators, the affected insurer may be 
required to withdraw its Participating Separate Account's investment in 
the relevant Fund.
    18. Applicants assert that the right of an insurance company under 
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to disregard contractowners' 
voting instructions does not raise any issues different from those 
raised by the authority of state insurance administrators over separate 
accounts. Under Rules 6e-2(b)(15) and 6e-3(T)(b)(15), an insurer can 
disregard contractowner voting instructions only with respect to 
certain specified items and under certain specified conditions. 
Affiliation does not eliminate the potential, if any exits, for 
divergent judgments as to the advisability or legality of a change in 
investment policies, principal underwriter, or investment adviser 
initiated by contractowners. The potential for disagreement is limited 
by the requirements in Rules 6e-2 and 6e-3(T) that an insurance 
company's disregard of voting instructions be reasonable and based on 
specific good faith determinations.
    19. A particular insurer's disregard of voting instructions 
nevertheless could conflict with the majority of contractowner voting 
instructions. The insurer's action could arguably be different from the 
determination of all or some of the other insurers (including 
affiliated insurers) that the contractowners' voting instructions 
should prevail, and could either preclude a majority vote approving the 
change or could represent a minority view. If the insurer's judgment 
represents a minority position or would preclude a majority vote, the 
insurer may be required, at the election of the relevant Fund to 
withdraw its Participating Separate Account's investment in such Fund, 
and no charge or penalty would be imposed as a result of such 
withdrawal.
    20. Applicants submit that there is no reason why the investment 
policies of the Fund or any Future Fund would or should be materially 
different from what those policies would or should be if the Funds 
funded only annuity contracts or only scheduled or flexible premium 
life contracts. In this regard, Applicants note that each type of 
insurance product is designed as a long-term investment program. In 
addition, Applicants represent that neither the Fund or any Future Fund 
will be managed to favor or disfavor any particular insurer or type of 
insurance product.
    21. Furthermore, applicants submit that no one investment strategy 
can be identified as appropriate to a particular insurance product. 
Each pool of variable annuity and variable life insurance 
contractowners is composed of individuals of diverse financial status, 
age, insurance and investment goals. A fund supporting even one type of 
insurance product must accommodate those factors in order to attract 
and retain purchasers.
    22. Applicants do not believe that the sale of shares of the Fund 
and Future 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. 
Applicants note that Section 817(h) of the Code requires that the 
investments made by variable annuity and variable life insurance 
separate accounts be ``adequately diversified.'' 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 
Regulation specifically permits ``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 if Qualified Plans, variable annuity 
separate accounts, and variable life insurance separate accounts all 
invest in the same underlying fund.
    23. 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 Fund and Future 
Funds. When distributions are to be made, and a Separate Account or 
Qualified Plan is unable to net purchase payments to make the 
distributions, the Separate Account and Qualified Plan will redeem 
shares of the Fund and the Future Funds at their respective net asset 
value. A Qualified Plan will make distributions in accordance with the 
terms of the Plan.
    24. Applicants 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.
    25. With respect to voting rights, Applicants state that it is 
possible to provide an equitable means of giving voting rights to 
Participating Separate Account contractowners and to Qualified Plans. 
Applicants represent that the Fund and Future Funds will inform each 
shareholder, including each Participating Insurance Company and 
Qualified Plan, of information necessary for the shareholder 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

[[Page 2706]]

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 shares of the Fund and Future Funds would be no 
different from the voting rights that are provided to Qualified Plans 
with respect to shares of funds sold to the general public.
    26. Applicants submit that there are no conflicts between the 
contractowners of the Participating Separate Accounts and Qualified 
Plan participants with respect to the state insurance commissioners' 
veto powers over investment objectives. 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 Fund and Future 
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. 
Based on the foregoing, Applicants have concluded that even if there 
should arise issues 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 Fund 
and Future Funds.
    27. Applicants assert that various factors have limited the number 
of insurance companies that offer variable annuities and variable life 
insurance contracts. These factors include the costs of organizing and 
operating a funding medium, the lack of expertise with respect to 
investment management (principally with respect to stock and money 
market investments) and the lack of name recognition by the public of 
certain insurers as investment experts. In particular, some smaller 
life insurance companies may not find it economically feasible, or 
within their investment or administrative expertise, to enter the 
Variable Contract business on their own.
    28. Applicants contend that the use of the Fund and Future Funds as 
common investment vehicles for Variable Contracts would reduce or 
alleviate these concerns. Participating Insurance Companies will 
benefit not only from the investment and administrative expertise of 
the Fund's and Future Funds' investment adviser, but also from the cost 
efficiencies and investment flexibility afforded by a large pool of 
funds. Therefore, making the Fund and Future Funds available for mixed 
and shared funding may encourage more insurance companies to offer 
Variable Contracts, and accordingly could result in increased 
competition with respect to both Variable Contract design and pricing, 
which can be expected to result in more product variation and lower 
charges. Applicants state that mixed and shared funding would benefit 
variable contractowners by eliminating a significant portion of the 
costs of establishing and administering separate funds. Applicants also 
assert that the sale of shares of the Fund and Future 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 such 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.

Applicants' Conditions

    Applicants have consented to the following conditions:
    1. A majority of the Board of each Fund shall consist of persons 
who are not ``interested persons'' of such Fund, as defined by Section 
2(a)(19) of the 1940 Act, and the Rules thereunder, as modified by any 
applicable orders of the Commission, except that if this condition is 
not met by reason of the death, disqualification or bona fide 
resignation of any Trustee or Director, then the operation of this 
condition shall be suspended (a) for a period of 45 days if the vacancy 
or vacancies may be filled by the Board; (b) for a period of 60 days if 
a vote of shareholders is required to fill the vacancy or vacancies; or 
(c) for such longer period as the Commission may prescribe by order 
upon application.
    2. Each Board will monitor its Fund for the existence of any 
material irreconcilable conflict among the interests of the contract 
holders of all Participating Separate Accounts and of participants of 
Qualified Plans investing in such Fund and determine what action, if 
any, should be taken in response to such conflicts. 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 such Fund are being managed; (e) a difference in voting 
instructions given by variable annuity contractowners and variable life 
insurance contractowners; (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 plan participants.
    3. The Participating Insurance Companies, Dreyfus, and any 
Qualified Plan that executes a fund participation agreement upon 
becoming an owner of 10% or more of the assets of the Fund or a Future 
Fund (the ``Participants'') shall report any potential or existing 
conflicts to the applicable Board. Participants 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. This 
responsibility includes, but is not limited to, an obligation by each 
Participating Insurance Company to inform the Board whenever it has 
determined to disregard contractowners voting instructions, and, if 
pass-through voting is applicable, an obligation by each Participant to 
inform the Board whenever it has determined to disregard plan 
participant voting instructions. The responsibility to report such 
conflicts and information, and to assist the Board will be contractual 
obligations of all Participants under their agreements governing 
participation in the Fund and Future Funds, and such agreements, in the 
case of Participating Insurance Companies, shall provide that such 
responsibilities will be carried out with a view only to the interests 
of the contractowners. The responsibility to report such information 
and conflicts, and to assist the Board, also will be contractual 
obligations of all Participants, and such agreements will provide that 
their responsibilities will be carried out with a view only to the 
interests of plan participants.
    4. If it is determined by a majority of a Board, or a majority of 
its disinterested members, that a material irreconcilable conflict 
exists, the relevant Participants shall, at their expense and to the 
extent reasonably practicable (as determined by a majority of the 
disinterested members of the Board), take whatever

[[Page 2707]]

steps are necessary to eliminate the material irreconcilable conflict, 
including: (1) Withdrawing the assets allocable to some or all of the 
Participating Separate Accounts from the relevant Fund and reinvesting 
such assets in a different investment medium, which may include another 
portfolio of such Fund, if any, or, in the case of Participating 
Insurance Companies, submitting the question whether such segregation 
should be implemented to a vote of all affected contractowners and, as 
appropriate, segregating the assets of any appropriate group (i.e., 
annuity contractowners, life insurance contractowners or Variable 
Contractowners of one or more Participant) that votes in favor of such 
segregation, or offering to the affected contractowners the option of 
making such a charge; and (2) establishing a new registered management 
investment company or managed separate account. If a material 
irreconcilable conflict arises because of a Participating Insurance 
Company's decision to disregard contractowners' voting instructions and 
that decision represents a minority position or would preclude a 
majority vote, such Participant may be required, at the relevant Fund's 
election, to withdraw its separate account's investment in such Fund 
and no charge or penalty will be imposed as a result of such 
withdrawal. If a material irreconcilable conflict arises because of a 
Qualified Plan's decision to disregard Plan participant voting 
instructions, if applicable, and that decision represent a minority 
position or would preclude a majority vote, the Plan may be required, 
at the election of the Fund, to withdraw its investment in such Fund, 
and no charge or penalty will be imposed as a result of such 
withdrawal.
    The responsibility to take remedial action in the event of a 
determination by a Board of a material irreconcilable conflict, and to 
bear the cost of such remedial action, will be a contractual obligation 
of all Participants under their agreements governing participation in 
the relevant Fund and this responsibility, in the case of Participating 
Insurance Companies, will be carried out with a view only to the 
interest of contractowners and, in the case of Qualified Plans, will be 
carried out with a view only to the interests of plan participants. A 
majority of the disinterested members of the Board shall determine 
whether any proposed action adequately remedies any material 
irreconcilable conflict, but in no event will the Fund, any Future Fund 
or Dreyfus be required to establish a new funding medium for any 
Variable Contract. No Participating Insurance Company will be required 
to establish a new funding medium for any Variable Contracts if an 
offer to do so has been declined by the vote of a majority of 
contractowners materially and adversely affected by the irreconcilable 
material conflict. Further, no Qualified Plan will be required by this 
condition to establish a new funding medium for the Plan if: (a) A 
majority of the plan participants materially and adversely affected by 
the irreconcilable material conflict vote to decline such offer, or (b) 
pursuant to documents governing the Qualified Plan, the Plan makes each 
decision without a plan participant vote.
    5. The determination by a Board of the existence of a material 
irreconcilable conflict and its implications shall be promptly made 
known in writing to all Participants.
    6. Participating Insurance Companies will provide pass-through 
voting privileges to all contractowners to the extent that the 
Commission continues to interpret the 1940 Act to require pass-through 
voting for contractowners. Accordingly, such Participants, where 
applicable, will vote shares of the applicable Fund held in its 
Participating Separate Accounts in a manner consistent with voting 
instructions timely received from contractowners. Participating 
Insurance Companies shall be responsible for assuring that each 
Participating Separate Account investing in a Fund calculates voting 
privileges in a manner consistent with other Participants. The 
obligation to calculate voting privileges as provided in the 
application shall be a contractual obligation of all Participating 
Insurance Companies under their agreement governing participation in a 
Fund. Each Participating Insurance Company will vote shares for which 
it has not received timely voting instructions as well as shares it 
owns in the same proportion as it votes those shares for which it has 
received voting instructions. Each Qualified Plan will vote as required 
by applicable law government Plan documents.
    7. All reports received by a Board with respect to potential or 
existing conflicts and all Board action with regard to (a) 
determination of the existence of a conflict, (b) notification of 
Participants of the existence of a conflict and (c) determination of 
whether any proposed action adequately remedies a conflict, will be 
properly recorded in the minutes of the meetings of the Board or other 
appropriate records, and such minutes or other records will be made 
available to the Commission upon request.
    8. The Fund and each Future Fund will notify all Participants that 
separate account prospectus disclosure regarding potential risks of 
mixed and shared funding may be appropriate. Each Fund shall disclose 
in its prospectus that: (a) Shares of such Fund may be offered to 
insurance company separate accounts of both annuity and life insurance 
variable contracts, and to Qualified Plans; (b) due to differences of 
tax treatment and other considerations, the interest of various 
contractowners participating in such Fund and the interest of Qualified 
Plans investing in such Fund may conflict; and (c) the Board will 
monitor such Fund for any material conflicts and determine what action, 
if any, should be taken.
    9. The Fund and each Future Fund will comply with all provisions of 
the 1940 Act requiring voting by shareholders (which, for these 
purposes, shall be the persons having a voting interest in the shares 
of such Fund), and, in particular, each Fund will either provide for 
annual meetings (except to the extent that the Commission may interpret 
Section 16 of the 1940 Act not to require such meetings) or comply with 
Section 16(c) of the 1940 Act (although the Fund and Future Funds are 
or will not be the type of trust described in Section 16(c) of the 1940 
Act), as well as with Section 16(a), and, if applicable, Section 16(b) 
of the 1940 Act. Further, each Fund will act in accordance with the 
Commission's interpretation of the requirements of Section 16(a) with 
respect to periodic elections of directors (or trustees) and with 
whatever rules the Commission may promulgate with respect thereto.
    10. If and to the extent Rule 6e-2 or 6e-3(T) is amended, or 
proposed Rule 6e-3 is adopted, to provide exemptive relief from any 
provision of the 1940 Act or the rules promulgated under the 1940 Act 
with respect to mixed and shared funding on terms and conditions 
materially different from any exemptions granted in the order requested 
in the application, then the Fund and each Future Fund and/or the 
Participants, as appropriate, shall take such steps as may be necessary 
to comply with Rule 6e-2 or 6e-3(T), as amended, or Rule 6e-3, as 
adopted, to the extent such rules are applicable.
    11. The Participants shall at least annually submit to the Board of 
each Fund such reports, materials or data as a Board may reasonably 
request so that the Board may fully carry out obligations imposed upon 
them by the conditions contained in the application. Such reports, 
materials and data shall be

[[Page 2708]]

submitted more frequently if deemed appropriate by the applicable 
Board. The obligations of the Participants to provide these reports, 
materials and data to a Board when it so reasonably requests, shall be 
a contractual obligation of all Participants under their agreement 
governing participation in the Fund and Future Funds.
    12. Neither the Fund nor any Future Fund will accept a purchase 
order from a Plan if such purchase would make the Plan shareholder or 
owner of 10% or more of the assets of such Fund unless such Plan 
executes a fund participation agreement with the relevant Fund, 
including the conditions set forth herein to the extent applicable. A 
Plan shareholder will execute an application containing an 
acknowledgment 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 and 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.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-1113 Filed 1-15-98; 8:45 am]
BILLING CODE 8010-01-M