E7-14028. Delaware VIP Trust et al., Notice of Application

July 16, 2007.

AGENCY:

Securities and Exchange Commission (“SEC” or the “Commission”).

ACTION:

Notice of application (“Application”) for exemption, pursuant to section 6(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.

Applicants: Delaware VIP Trust (the “Fund”) and Delaware Management Company, a series of Delaware Management Business Trust and investment manager to the Fund (“DMC”) (collectively the “Applicants”).

SUMMARY:

Applicants request an order exempting them from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund and shares of any other investment company or portfolio that is designed to fund insurance products and for which DMC or any of its affiliates, may serve in the future as investment adviser, manager, principal underwriter, sponsor, or administrator (“Future Funds”) (the Fund, together with Future Funds, the “Funds”) to be sold to and held by: (a) Separate accounts funding variable annuity contracts and variable life insurance policies (collectively “Variable Contracts”) issued by both affiliated life insurance companies and unaffiliated life insurance companies; (b) trustees of qualified group pension and group retirement plans outside of the separate account context (“Qualified Plans”); (c) separate accounts that are not registered as investment companies under the 1940 Act pursuant to exemptions from registration under section 3(c) of the 1940 Act; (d) DMC or its affiliates who serve or may serve as an investment manager, investment adviser, principal underwriter, sponsor or administrator of a Fund (collectively, “DMC Entities”) for the purpose of providing initial capital to a Fund; and (e) any other account of a Participating Insurance Company permitted to hold shares of the Funds (“General Account”).

DATES:

The Application was filed on September 26, 2006, and amended on July 11, 2007. 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 by writing to the Secretary of the Commission and serving Applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on August 8, 2007, and should be accompanied by proof of service on Applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the requester's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary of the Commission.

ADDRESSES:

The Commission: Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090; Applicants: David P. O'Connor, Esq. c/o Delaware VIP Trust, 2005 Market Street, Philadelphia, Pennsylvania 19103.

FOR FURTHER INFORMATION CONTACT:

Rebecca A. Marquigny, Senior Counsel, or Joyce M. Pickholz, Branch Chief, Office of Insurance Products, Division of Investment Management, at [phone].

SUPPLEMENTARY INFORMATION:

The following is a summary of the Application. The complete Application is available for a fee from the SEC's Public Reference Branch, 100 F Street, NE., Room 1580, Washington, DC 20549 (telephone [phone]).

Applicant's Representations

1. The Fund (File No. 811-05162) is registered under the 1940 Act as an open-end management investment company comprised of and offering shares of beneficial interest (“shares”) in 15 investment portfolios (each a “Portfolio” and, collectively, the “Portfolios”). The Fund or any Future Funds may offer one or more additional investment portfolios in the future (also referred to as “Portfolios”). Applicants state that the Fund's shares are registered under the Securities Act of 1933, as amended (the “1933 Act”) (File No. 033-14363) and the investment manager to the Fund, DMC, is registered with the Commission as an investment adviser under the Investment Advisers Act of 1940, as amended.

2. Applicants represent that there will be no public shareholders of any Portfolio. Applicants state that pursuant to exemptive relief provided in a 1987 SEC order (Rel. IC-16105), Fund shares are being offered to both affiliated and unaffiliated insurance company separate accounts funding variable annuity or variable life insurance products. Applicants state that separate accounts which currently or in the future may hold shares are (or will be) registered as unit investment trusts under the 1940 Act or exempt from such registration (individually, a “Separate Account” and collectively, “Separate Accounts”). Insurance companies whose Separate Account(s) may now or in the future own shares are referred to herein as “Participating Insurance Companies.”

3. Applicants propose that the Funds be permitted to offer and/or sell shares to Separate Accounts funding Variable Contracts issued by Participating Insurance Companies. Applicants represent that the Participating Insurance Companies at the time of their investment in the Funds either have or will establish their own Separate Accounts and design their own Variable Contracts. Each Participating Insurance Company has or will have the legal obligation of satisfying all applicable requirements under both state and federal law. Applicants represent that each Participating Insurance Company, on behalf of its Separate Accounts, has or will enter into an agreement with the Funds concerning such Participating Insurance Company's participation in the relevant Portfolio (a “Participation Agreement”). The role of the Funds under this agreement, insofar as the federal securities laws are applicable, will consist of, among other things, offering shares of the Portfolios to the participating Separate Accounts and complying with any conditions that the Commission may impose.

4. Applicants propose that the Funds be permitted to offer and/or sell 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, such as those in each Portfolio. The Code provides that Variable Contracts will not be treated as annuity contracts or life insurance contracts for any period (or any subsequent period) for which the underlying assets are not, in accordance with regulations issued by the Treasury Department (individually, a “Treasury Regulation” and collectively the “Treasury Regulations”), adequately diversified. section 817(h) of the Code and the Regulations thereunder provide, in general, that the ability to look through to the assets of an underlying fund in applying the diversification test is only available if all of the beneficial interests in the investment company are 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 tax status of Variable Contracts. (Treas. Reg. 1.817-5(f)(3)(iii)). Applicants represent that as a result of this exception to the general diversification requirement, shares of the Portfolios sold to the Qualified Plans would be held by the trustees of such Qualified Plans as required by section 403(a) of the Employee Retirement Income Security Act, as amended (“ERISA”).

5. Applicants also propose that the Funds be permitted to offer and/or sell shares to DMC Entities for the purpose of providing initial capital to a Fund and to General Accounts. The Regulations permit sales of Portfolio shares to General Accounts and DMC Entities so long as the return on shares held by each is computed in the same manner as for shares held by a Separate Account, and the General Accounts and DMC Entities do not intend to sell shares of the Portfolio held by it to the Public. The Regulations impose an additional restriction on sales to investment advisers, who may hold shares only in connection with the creation of the Portfolio. Applicants anticipate that sales in reliance on these provisions of the Regulations will be made to DMC Entities for purposes of providing the initial capital for a Fund and that any Portfolio shares purchased by DMC Entities will be redeemed immediately if and when a DMC Entity no longer serves as an investment adviser to such Portfolio.

Applicants' Legal Analysis

1. In connection with the funding of scheduled premium variable life insurance contracts issued through a Separate Account registered as a unit investment trust (“UIT”) under the 1940 Act, Rule 6e-2(b)(15) provides partial exemptions from sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. Section 9(a)(2) of the 1940 Act makes it unlawful for any company to serve as an investment adviser or principal underwriter of any UIT, if an affiliated person of that company is subject to a disqualification enumerated in section 9(a)(1) or (2) of the 1940 Act. Sections 13(a), 15(a) and 15(b) of the 1940 Act have been deemed by the Commission to require “pass-through” voting with respect to an underlying investment company's shares. Rule 6e-2(b)(15) provides these exemptions apply only where all of the assets of the UIT are shares of management investment companies “which offer their shares exclusively to variable life insurance separate accounts of the life insurer or of any affiliated life insurance company.” Therefore, the relief granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium life insurance Separate Account that owns shares of an underlying fund that also offers its shares to a variable annuity Separate Account or flexible premium variable life insurance Separate Account of the same company or any other affiliated insurance company. The use of a common management investment company as the underlying investment vehicle for both variable annuity and variable life insurance separate accounts of the same life insurance company or of any affiliated life insurance company is referred to herein as “mixed funding.”

2. The relief granted by Rule 6e-2(b)(15) also 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 Separate Accounts funding Variable Contracts of one or more unaffiliated life insurance companies. The use of a common management investment company as the underlying investment vehicle for variable annuity and/or variable life insurance Separate Accounts of unaffiliated life insurance companies is referred to herein as “shared funding.”

3. The relief under Rule 6e-2(b)(15) is available only where shares are offered exclusively to variable life insurance Separate Accounts of a life insurer or any affiliated life insurance company; additional exemptive relief is necessary if the shares of the Portfolios are also to be sold to Qualified Plans, DMC Entities and General Accounts (collectively “Eligible Purchasers”). Applicants note that if shares of the Portfolios are sold only to Qualified Plans, exemptive relief under Rule 6e-2 would not be necessary. The relief provided for under this section does not relate to Qualified Plans or to a registered investment company's ability to sell its shares to Qualified Plans. The use of a common management investment company as the underlying investment vehicle for variable annuity and variable life Separate Accounts of affiliated and unaffiliated insurance companies, and for Qualified Plans, is referred to herein as “extended mixed and shared funding.”

4. In connection with flexible premium variable life insurance contracts issued through a separate account registered under the 1940 Act as a UIT, Rule 6e-3(T)(b)(15) provides partial exemptions from sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. The exemptions granted by Rule 6e-3(T)(b)(15) are available only where all the assets of the Separate Account consist of the shares of one or more registered management investment companies that offer to sell their shares “exclusively to separate accounts of the life insurer, or of any affiliated life insurance companies, 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 or which offer their shares to any such life insurance company in consideration solely for advances made by the life insurer in connection with the operation of the separate account.” Therefore, Rule 6e-3(T)(b)(15) permits mixed funding but does not permit shared funding.

5. Because the relief under Rule 6e-3(T) is available only where shares are offered exclusively to variable life insurance separate accounts of a life insurer or any affiliated life insurance company, additional exemptive relief is necessary if the shares of the Portfolios are also to be sold to Eligible Purchasers, as described above. Applicants note that if shares of the Portfolios were sold only to Qualified Plans, exemptive relief under Rule 6e-3(T)(b)(15) would not be necessary. The relief provided for under this section does not relate to Qualified Plans or to a registered investment company's ability to sell its shares to Qualified Plans.

6. Applicants maintain, as discussed below, that there is no policy reason for the sale of the Portfolios' shares to Eligible Purchasers to result in a prohibition against, or otherwise limit a Participating Insurance Company from relying on the relief provided by Rules 6e-2(b)(15) and 6e-3(T)(b)(15). However, because the relief under Rules 6e-2(b)(15) and 6e-3(T)(b)(15) is available only when shares are offered exclusively to Separate Accounts, additional exemptive relief may be necessary if the shares of the Portfolios are also to be sold to Eligible Purchasers. Applicants therefore request relief in order to have the Participating Insurance Companies enjoy the benefits of the relief granted in Rules 6e-2(b)(15) and 6e-3(T)(b)(15). Applicants note that if the Portfolios' shares were to be sold only to Eligible Purchasers and/or Separate Accounts funding variable annuity contracts, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would be unnecessary. The relief provided for under Rules 6e-2(b)(15) and 6e-3(T)(b)(15) does not relate to Qualified Plans, DMC Entities, or General Accounts, or to a registered investment company's ability to sell its shares to such purchasers.

7. Consistent with the Commission's authority under section 6(c) of the 1940 Act to grant exemptive orders to a class or classes of persons and transactions, the Application requests relief for the class consisting of Participating Insurance Companies and their Separate Accounts that will invest in the Portfolios, and, to the extent necessary, Qualified Plans, investment advisers, principal underwriters and depositors of such Separate Accounts.

8. In effect, the partial relief granted in Rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the 1940 Act from the requirements of section 9 of the 1940 Act limits the amount of monitoring necessary to ensure compliance with section 9 to that which is appropriate in light of the policy and purposes of section 9. 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 individuals in a large insurance company complex, most of whom will have no involvement in matters pertaining to investment companies in that organization. Applicants assert that the Participating Insurance Companies and Qualified Plans are not expected to play any role in the management of the Funds and that those individuals who participate in the management of the Funds will remain the same regardless of which Separate Accounts or Qualified Plans invest in the Funds. Applicants argue that applying the monitoring requirements of section 9(a) of the 1940 Act because of investment by separate accounts of other insurers or Qualified Plans would be unjustified, would not serve any regulatory purpose and monitoring costs could reduce the net rates of return realized by contract owners due to the increased monitoring costs.

9. 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. 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 contract owners with respect to the investments of an underlying fund, or any contract between such 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 Rules 6e-2 and 6e-3(T), respectively, under the 1940 Act). Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard the voting instructions of its contract owners if the contract owners initiate any change in an underlying fund'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), (b)(7)(ii)(B), and (b)(7)(ii)(C), respectively, of Rules 6e-2 and 6e-3(T) under the 1940 Act).

10. Rule 6e-2 under the 1940 Act recognizes that a variable life insurance contract, as an insurance contract, has important elements unique to insurance contracts and is subject to extensive state regulation of insurance. In adopting Rule 6e-2(b)(15)(iii), the Commission expressly recognized that state insurance regulators have authority, pursuant to state insurance laws or regulations, to disapprove or require changes in investment policies, investment advisers, or principal underwriters. The Commission also expressly recognized that state insurance regulators have authority to require an insurer to draw from its general account to cover costs imposed upon the insurer by a change approved by contract owners over the insurer's objection. The Commission, therefore, deemed such exemptions necessary “to assure the solvency of the life insurer and performance of its contractual obligations by enabling an insurance regulatory authority or the life insurer to act when certain proposals reasonably could be expected to increase the risks undertaken by the life insurer.” In this respect, flexible premium variable life insurance contracts are identical to scheduled premium variable life insurance contracts. Applicants, therefore, assert that the corresponding provisions of Rule 6e-3(T) under the 1940 Act undoubtedly were adopted in recognition of the same factors.

11. Applicants also assert that the sale of Shares to Qualified Plans, the Investment Manager and General Accounts will not have any impact on the relief requested. With respect to the Qualified Plans, which are not registered as investment companies under the 1940 Act, shares of a portfolio of a fund sold to a Qualified Plan must be held by the trustees of the Qualified Plan pursuant to section 403(a) of the Employee Retirement Income Security Act, as amended (“ERISA”). Applicants note that (1) section 403(a) of ERISA endows Qualified Plan trustees with the exclusive authority and responsibility for voting proxies provided neither of two enumerated exceptions to that provision applies; (2) some of the Qualified Plans, 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; and (3) there is no requirement to pass through voting rights to Qualified Plan participants.

12. Applicants argue that an Investment Manager and General Accounts are similar in that they are not subject to any pass-through voting requirements. Applicants therefore conclude that, unlike the case with insurance company Separate Accounts, the issue of resolution of material irreconcilable conflicts with respect to voting is not present with Eligible Purchasers.

13. Applicants represent that where a Qualified Plan does not provide participants with the right to give voting instructions, the trustee or named fiduciary has responsibility to vote the shares held by the Qualified Plan in the best interest of the Qualified Plan participants. Accordingly, Applicants argue that even if DMC or an affiliate of DMC were to serve in the capacity of trustee or named fiduciary with voting responsibilities, DMC or the affiliates would have a fiduciary duty to vote those shares in the best interest of the Qualified Plan participants.

14. Further, Applicants assert that even if a Qualified Plan were to hold a controlling interest in a Portfolio, Applicants do not believe that such control would disadvantage other investors in such Portfolio 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 a Portfolio by a Qualified Plan will not create any of the voting complications occasioned by mixed funding or shared funding. Unlike mixed funding or shared funding, Applicants argue that Qualified Plan investor voting rights cannot be frustrated by veto rights of insurers or state regulators.

15. Where a Qualified 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 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. Applicants assert that the purchase of Shares by Qualified Plans that provide voting rights does not present any complications not otherwise occasioned by mixed or shared funding.

16. Applicants do not believe that sale of the shares of the Portfolios 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 those which would otherwise exist between variable annuity and variable life insurance contract owners.

17. Unlike the circumstances of many investment companies that serve as underlying investment media for variable insurance products, the Fund may be deemed to lack an insurance company “promoter” for purposes of Rule 14a-2 under the 1940 Act. Accordingly, the Fund and any other such Future Funds or Portfolios that are established as new registrants will be subject to the requirements of section 14(a) of the 1940 Act, which generally requires that an investment company have a net worth of $100,000 upon making a public offering of its shares. Portfolios also will require more limited amounts of initial capital in connection with the creation of new series and the voting of initial shares of such series on matters requiring the approval of shareholders. A potential source of the requisite initial capital is a Portfolio's adviser or a Participating Insurance Company. Either of these parties may have an interest in making the requisite capital investments. Applicants note, however, that the provision of initial capital may be deemed to violate the exclusivity requirement of Rule 6e-2(b)(15) and/or Rule 6e-3(T)(b)(15).

18. Given the conditions of Treas. Reg. 1.817-5(f)(3) and the harmony of interest between a Portfolio, on the one hand, and DMC Entities or a Participating Insurance Company, on the other, Applicants assert that little incentive for overreaching exists. Applicants further assert that such investment should not implicate the concerns discussed above regarding the creation of material irreconcilable conflicts. Instead, Applicants argue that permitting investment by DMC Entities or Participating Insurance Companies' General Accounts will permit the orderly and efficient creation of the Funds or series thereof, and reduce the expense and uncertainty of using outside parties at the early stages of Portfolio operations.

Applicants' Conditions

Applicants agree that the order granting the requested relief shall be subject to the following conditions:

1. A majority of the Board of Trustees (the “Board”) of the Fund will consist of persons who are not “interested persons” of the Fund, as defined by section 2(a)(19) of the 1940 Act, and the rules thereunder, and 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 trustees, then the operation of this condition will be suspended: (a) For a period of 90 days if the vacancy or vacancies may be filled by the Board; (b) for a period of 150 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 or by future rule.

2. The Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contract owners of all Separate Accounts and participants of all Qualified Plans investing in the 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 interpretative 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 annuity contract owners, variable life insurance contract owners, and trustees of the Qualified Plans; (f) a decision by a Participating Insurance Company to disregard the voting instructions of contract owners; or (g) if applicable, a decision by a Qualified Plan to disregard the voting instructions of Qualified Plan participants.

3. Participating Insurance Companies (on their own behalf, as well as by virtue of any investment of general account assets in a Portfolio), DMC Entities, and any trustee on behalf of a Qualified Plan that executes a Participation Agreement upon becoming an owner of 10 percent or more of the assets of any Portfolio (collectively, “Participants”) will report any potential or existing conflicts to the Board. Participants will be responsible for assisting the Board in carrying out the Board's 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 of each Participating Insurance Company to inform the Board whenever contract owner voting instructions are disregarded, and, if pass-through voting is applicable, an obligation of each of the trustees on behalf of a Qualified Plan to inform the Board whenever it has determined to disregard Qualified Plan participant voting instructions. The responsibility to report such information and conflicts, and to assist the Board, will be a contractual obligation of all Participating Insurance Companies under their Participation Agreements with the Fund, and these responsibilities will be carried out with a view only to the interests of the contract owners. The responsibility to report such information and conflicts, and to assist the Board, also will be contractual obligations of all Qualified Plans under their Participation Agreements, and such agreements will provide that these responsibilities will be carried out with a view only to the interests of Qualified Plan participants.

4. If it is determined by a majority of the Board or a majority of the disinterested trustees of the Board, that a material irreconcilable conflict exists, then the relevant Participant will, at its expense and to the extent reasonably practicable (as determined by a majority of the disinterested trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, up to and including: (a) Withdrawing the assets allocable to some or all of the Separate Accounts from the relevant Portfolio and reinvesting such assets in a different investment vehicle including another Portfolio, or in the case of a Participating Insurance Company Participant submitting the question as to whether such segregation should be implemented to a vote of all affected contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners or life insurance contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (b) establishing a new registered management investment company or managed separate account. If a material irreconcilable conflict arises because of a decision by a Participating Insurance Company to disregard contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, then the insurer may be required, at the election of the Fund, to withdraw such insurer's Separate Account's investment in the 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 Qualified Plan participant voting instructions, if applicable, and that decision represents a minority position or would preclude a majority vote, the Qualified Plan may be required, at the election of the Fund, to withdraw its investment in the 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 Board determination 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 Fund, and these responsibilities will be carried out with a view only to the interests of contract owners and Qualified Plan participants.

For purposes of this Condition 4, a majority of the disinterested members of the Board Fund will determine whether or not any proposed action adequately remedies any material irreconcilable conflict, but, in no event will the Fund, DMC or an affiliate of DMC, as relevant, be required to establish a new funding vehicle for any Variable Contract. No Participating Insurance Company will be required by this Condition 4 to establish a new funding vehicle for any Variable Contract if any offer to do so has been declined by vote of a majority of the contract owners materially and adversely affected by the material irreconcilable conflict. Further, no Qualified Plan will be required by this Condition 4 to establish a new funding vehicle for the Qualified Plan if: (a) A majority of the Qualified 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 Qualified Plan makes such decision without a Qualified Plan participant vote.

5. The Board's determination of the existence of a material irreconcilable conflict and its implications will be made known in writing promptly to all Participants.

6. As to Variable Contracts issued by Separate Accounts registered under the 1940 Act, Participating Insurance Companies will provide pass-through voting privileges to all Variable Contract owners as required by the 1940 Act as interpreted by the Commission. However, as to Variable Contracts issued by unregistered Separate Accounts, pass-through voting privileges will be extended to contract owners to the extent granted by the issuing insurance company. Accordingly, such Participants, where applicable, will vote shares of the applicable Portfolio held in their Separate Accounts in a manner consistent with voting instructions timely received from Variable Contract owners. Participating Insurance Companies will be responsible for assuring that each Separate Account investing in a Portfolio calculates voting privileges in a manner consistent with other Participants.

The obligation to calculate voting privileges as provided in the Application will be a contractual obligation of all Participating Insurance Companies under their agreement with the Funds governing participation in a Portfolio. Each Participating Insurance Company will vote shares for which it has not received timely voting instructions, as well as shares held in its General Account or otherwise attributed to it, 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 and governing Qualified Plan documents.

7. As long as the 1940 Act requires pass-through voting privileges to be provided to variable contract owners, DMC Entities and any General Account will vote its shares of any Portfolio in the same proportion as all variable contract owners having voting rights with respect to that Portfolio; provided, however, that DMC Entities or any insurance company General Account shall vote its shares in such other manner as may be required by the Commission or its staff.

8. The 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 the respective Portfolio, and, in particular, the 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) and will comply with section 16(a) of the 1940 Act, section 16(c) of the 1940 Act (although the Fund is not one of those trusts of the type described in section 16(c) of the 1940 Act) and, if and when applicable, section 16(b) of the 1940 Act. Further, the Fund will act in accordance with the Commission's interpretation of the requirements of section 16(a) with respect to periodic elections of directors/trustees and with whatever rules the Commission may promulgate with respect thereto.

9. A Portfolio will make its shares available under Variable Contracts and to Qualified Plans at or about the same time it accepts any seed capital from DMC Entities or a General Account of a Participating Insurance Company.

10. The Fund will notify all Participants that Separate Account prospectus disclosure or Qualified Plan prospectuses or other Qualified Plan disclosure documents regarding potential risks of mixed and shared funding may be appropriate. The Fund will disclose in its prospectus that (a) shares of the Fund may be offered to Separate Accounts of both variable annuity and variable life insurance contracts and, if applicable, to Qualified Plans; (b) due to differences in tax treatment and other considerations, the interests of various contract owners participating in the Fund and the interests of Qualified Plans investing in the Fund, if applicable, may conflict; and (c) the Fund's Board will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict.

11. If and to the extent that Rule 6e-2 and Rule 6e-3(T) under the 1940 Act are amended, or proposed Rule 6e-3 under the 1940 Act is adopted, to provide exemptive relief from any provision of the 1940 Act, or the rules promulgated thereunder, with respect to mixed or shared funding, on terms and conditions materially different from any exemptions granted in the order requested in the Application, then the Fund and/or Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), or Rule 6e-3, as such rules are applicable.

12. The Participants, at least annually, will submit to the Board such reports, materials, or data as a Board reasonably may request so that the trustees of the Board may fully carry out the obligations imposed upon the Board by the conditions contained in the Application. Such reports, materials, and data will be submitted more frequently if deemed appropriate by the Board. The obligations of the Participants to provide these reports, materials, and data to the Board, when it so reasonably requests, will be a contractual obligation of all Participants under their agreements governing participation in the Portfolios.

13. All reports of potential or existing conflicts received by the Board, and all Board action with regard to determining the existence of a conflict, notifying Participants of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records shall be made available to the Commission upon request.

14. The Fund will not accept a purchase order from a Qualified Plan if such purchase would make the Qualified Plan shareholder an owner of 10 percent or more of the assets of a Portfolio unless the Trustees of such Qualified Plan execute an agreement with the Fund governing participation in such Portfolio that includes the conditions set forth herein to the extent applicable. The Trustees of a Qualified Plan will execute an application containing an acknowledgment of this condition at the time of its initial purchase of shares of any Portfolio.

Conclusions

Applicants submit that, for the reasons summarized above and to the extent necessary or appropriate to provide for the transactions described herein, the requested 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, in accordance with the standards of section 6(c) of the 1940 Act, are 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.

Florence E. Harmon,

Deputy Secretary.