ING Partners, Inc., et al.; Notice of Application, 60577-60581 [E5-5735]
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Federal Register / Vol. 70, No. 200 / Tuesday, October 18, 2005 / Notices
AGENCY:
investment companies or unit
investment trusts that are within or
outside the same group of investment
companies as well as a guaranteed rate
investment contract issued by an
affiliated insurance company.
Applicants: ING Partners, Inc. (‘‘IPI’’),
ING Investors Trust (‘‘IIT’’), ING
Variable Insurance Trust (‘‘IVIT’’), ING
Variable Products Trust (‘‘IVPT’’), ING
VP Emerging Markets Fund, Inc.
(‘‘IVPEMF’’), ING VP Natural Resources
Trust (‘‘IVPNRT’’) (the ‘‘ING Investment
Companies’’), ING Life Insurance and
Annuity Company (‘‘ILIAC’’), ING
Investments, LLC (‘‘IIL’’) and Directed
Services, Inc. (the ‘‘Advisers’’).1
Filing Dates: The application was
filed on August 13, 2004 and amended
on April 7, 2005, and September 28,
2005. Applicants have agreed to file an
amendment during the notice period,
the substance of which is reflected in
this notice.
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
Commission’s Secretary 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 November 7, 2005, 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 writer’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
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F St.,
NE., Washington, DC 20549–9303.
Applicants, c/o Huey P. Falgout, Jr.,
Chief Counsel, ING Americas U.S. Legal
Services, 7337 E. Doubletree Ranch Rd.,
Scottsdale, Arizona 85258.
FOR FURTHER INFORMATION CONTACT:
Marilyn Mann, Senior Counsel, at (202)
551–6813, or Mary Kay Frech, Branch
Summary of the Application: The
order would permit certain registered
open-end management investment
companies to acquire shares of other
registered open-end management
1 All entities that currently intend to rely on the
requested order are named as applicants and any
other entity that relies on the order in the future
will comply with the terms and conditions of the
application. Applicants request that the relief also
apply to any existing or future registered open-end
management investment company that is part of the
same group of investment companies as defined in
section 12(d)(1)(G) of the Act as the ING Investment
Companies (included in the term ‘‘ING Investment
Companies’’) and any existing or future insurance
company controlling, controlled by or under
common control with ILIAC that may issue a
guaranteed rate investment contract (each an ‘‘ING
Insurance Company’’). Each series of an ING
Investment Company is referred to as a ‘‘Fund’’ and
collectively as ‘‘Funds.’’
informed investment decisions. Every
issuer subject to Sections 13(a) and
15(d) under the Exchange Act must file
a periodic report with the Commission
containing information about its
business and financial condition. We
estimate that Form 10–SB takes
approximately 133 hours per response
and is filed by 254 respondents. It is
estimated that 25% of the 33,782 annual
burden hours (8,446 burden hours)
would be prepared by the company.
Written comments are invited on: (a)
Whether this collection of information
is necessary for the proper performance
of the functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden of the
collections of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Please direct your written comments
to R. Corey Booth, Director/Chief
Information Officer, Office of
Information Technology, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549.
Dated: October 7, 2005.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–5729 Filed 10–17–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27116; 812–13116]
ING Partners, Inc., et al.; Notice of
Application
October 12, 2005.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
sections 6(c) and 17(b) of the Investment
Company Act of 1940 (the ‘‘Act’’)
exempting applicants from section 17(a)
of the Act and under section 12(d)(1)(J)
of the Act exempting applicants from
sections 12(d)(1)(A) and 12(d)(1)(B) of
the Act.
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60577
Chief, at (202) 551–6821 (Division of
Investment Management, Office of
Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Branch,
100 F St., NE., Washington, DC 20549–
0102 (tel. (202) 551–5850).
Applicants’ Representations
1. IPI is a Maryland corporation and
is registered under the Act as an openend management investment company.
IPI currently consists of 25 Funds, each
with its own investment objective and
policies. The shares of each IPI Fund are
offered and sold through registered
separate accounts of insurance
companies that are affiliates of the
Advisers (‘‘Registered Separate
Accounts’’) and unregistered separate
accounts of insurance companies that
are affiliates of the Advisers
(‘‘Unregistered Separate Accounts’’ and,
together with the Registered Separate
Accounts, the ‘‘Separate Accounts’’),
which are used to fund variable annuity
contracts and variable life insurance
contracts, and may be offered and sold
to retirement plans and certain
investment advisers, pursuant to an
order granted by the Commission.2 IPI
has created 5 new Funds known as the
Solutions Portfolios, which will be
managed by ILIAC and each of which
will be a fund of funds (‘‘Funds of
Funds’’). The Solutions Portfolios are
the only Funds of Funds that currently
intend to rely on the requested relief.
2. IIT is a Massachusetts business
trust and is registered under the Act as
an open-end management investment
company. IIT currently consists of 46
Funds, each with its own investment
objective and policies. The shares of
each IIT Fund currently are offered and
sold through Separate Accounts which
are used to fund variable annuity
contracts and variable life insurance
contracts, and may be offered and sold
to retirement plans, pursuant to an order
granted by the Commission.3
3. IVIT is a Delaware statutory trust
and is registered under the Act as an
open-end management investment
company. IVIT currently consists of 11
Funds, each with its own investment
objective and policies. IVPT is a
Massachusetts business trust and is
registered under the Act as an open-end
management investment company. IVPT
currently consists of 10 Funds, each
2 Aetna Variable Fund, Investment Company Act
Release Nos. 23545 (Nov. 23, 1998) (notice) and
23616 (Dec. 21, 1998) (order).
3 Id.
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with its own investment objective and
policies. IVPEMF is a Maryland
corporate and is registered under the
Act as an open-end management
investment company. IVPEMF currently
consists of one Fund. IVPNRT is a
Massachusetts business trust and is
registered under the Act as an open-end
management investment company.
IVPNRT currently consists of one Fund.
4. The Funds of Funds will invest in
other Funds (‘‘Affiliated Underlying
Funds’’) and in other registered openend management investment companies
and unit investment trusts that are not
part of the same group of investment
companies, as defined in section
12(d)(1)(G) of the Act, as the Funds of
Funds (‘‘Unaffiliated Underlying
Funds’’). The Affiliated Underlying
Funds and the Unaffiliated Underlying
Funds are together the ‘‘Underlying
Funds.’’ Each Fund of Funds may also
make investments in other securities
and in a guaranteed rate investment
contract issued by ILIAC or another ING
Insurance Company (the ‘‘ING
Guaranteed Contract’’). ILIAC and all
other ING Insurance Companies are
indirect subsidiaries of ING Groep, N.V.
Applicants state that each Fund of
Funds will enable investors to create a
comprehensive asset allocation program
with just one investment and provide a
simple, convenient and cost-efficient
program for investors who are able to
identify their investment goals and risk
tolerances but may not be comfortable
deciding how to invest their assets to
achieve those goals.
5. Each Adviser is registered with the
Commission as an investment adviser
under the Investment Advisers Act of
1940, is a direct or indirect subsidiary
of ING Groep, N.V., and serves as
investment adviser to the Funds. Each
investment adviser to a Fund of Funds
that meets the definition of section
2(a)(20)(A) of the Act is referred to as a
‘‘Fund of Funds Adviser.’’ Any
investment adviser to a Fund of Funds
that meets the definition in section
2(a)(20)(B) of the Act is referred to as a
‘‘Fund of Funds Subadviser.’’
6. Applicants request relief to permit
the Funds of Funds to purchase shares
of the Underlying Funds in excess of the
limits set forth in section 12(d)(1)(A) of
the Act and for the Underlying Funds,
their principal underwriters and any
broker or dealer to sell shares of the
Underlying Funds to the Funds of
Funds in excess of the limits set forth
in section 12(d)(1)(B) of the Act.
Applicants also seek relief from section
17(a) of the Act to permit Underlying
Funds to sell shares to, and redeem
shares from, the Funds of Funds. In
addition, applicants seek relief from
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section 17(a) of the Act to permit a Fund
of Funds to purchase the ING
Guaranteed Contract.
Applicants’ Legal Analysis
A. Sections 12(d)(1)(A) and (B) of the
Act
1. Section 12(d)(1)(A) prohibits a
registered investment company from
acquiring shares of another registered
investment company if the securities
represent more than 3% of the total
outstanding voting stock of the acquired
company, more than 5% of the total
assets of the acquiring company or,
together with the securities of other
investment companies, more than 10%
of the total assets of the acquiring
company. Section 12(d)(1)(B) prohibits a
registered open-end investment
company, its principal underwriter and
any broker or dealer from selling shares
of the company to another investment
company if the sale will cause the
acquiring company to own more than
3% of the acquired company’s
outstanding voting stock or more than
10% of the acquired company’s voting
stock to be owned by investment
companies generally.
2. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security or
transaction from any provision of
section 12(d)(1), if the exemption is
consistent with the public interest and
the protection of investors. Applicants
seek an exemption under section
12(d)(1)(J) to permit Funds of Funds to
acquire shares of Underlying Funds and
Underlying Funds to sell their shares to
Funds of Funds, beyond the limits set
forth in sections 12(d)(1)(A) and (B).
3. Applicants state that the proposed
arrangement will be structured to
mitigate the potential abuses from
which sections 12(d)(1)(A) and (B) are
designed to protect investors, such as
undue influence by a fund of funds over
underlying funds, excessive layering of
fees and overly complex fund
structures. Accordingly, applicants
believe that the requested exemption is
consistent with the public interest and
the protection of investors.
4. Applicants state that the proposed
arrangement will not result in undue
influence by a Fund of Funds or its
affiliates over any Underlying Fund. To
limit the influence that a Fund of Funds
may have over an Unaffiliated
Underlying Fund, applicants propose a
condition prohibiting (a)(i) The Fund of
Funds Adviser, (ii) any person
controlling, controlled by or under
common control with the Fund of
Funds Adviser and (iii) any investment
company or issuer that would be an
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investment company but for section
3(c)(1) or 3(c)(7) of the Act advised or
sponsored by the Fund of Funds
Adviser or any person controlling,
controlled by or under common control
with the Fund of Funds Adviser
(‘‘Group’’), and (b)(i) Any Fund of
Funds Subadviser, (ii) any person
controlling, controlled by or under
common control with the Fund of
Funds Subadviser and (iii) any
investment company or issuer that
would be an investment company but
for section 3(c)(1) or 3(c)(7) of the Act
(or portion of such investment company
or issuer) advised or sponsored by the
Fund of Funds Subadviser or any
person controlling, controlled by or
under common control with the Fund of
Funds Subadviser (‘‘Subadviser
Group’’), from controlling (individually
or in the aggregate) an Unaffiliated
Underlying Fund within the meaning of
section 2(a)(9) of the Act.
5. Applicants also propose conditions
2–7, stated below, to preclude a Fund of
Funds and its affiliated entities from
taking advantage of an Unaffiliated
Underlying Fund with respect to
transactions between the entities and to
ensure the transactions will be on an
arm’s length basis. Condition 2
precludes a Fund of Funds and its Fund
of Funds Adviser, any Fund of Funds
Subadviser, promoter, principal
underwriter and any person controlling,
controlled by or under common control
with any of these entities (each, a ‘‘Fund
of Funds Affiliate’’) from causing any
existing or potential investment by the
Fund of Funds in an Unaffiliated
Underlying Fund to influence the terms
of any services or transactions between
the Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated
Underlying Fund or its investment
adviser(s), sponsor, promoter, principal
underwriter and any person controlling,
controlled by or under common control
with any of these entities (each, an
‘‘Unaffiliated Fund Affiliate’’).
Condition 5 precludes a Fund of Funds
or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an
investment adviser to an Unaffiliated
Underlying Fund that is an open-end
management investment company
(‘‘Unaffiliated Fund’’) or sponsor to an
Unaffiliated Underlying Fund that is a
unit investment trust (‘‘Unaffiliated
Trust’’)) from causing an Unaffiliated
Underlying Fund to purchase a security
in an offering of securities during the
existence of any underwriting or selling
syndicate of which a principal
underwriter is an officer, director,
member of an advisory board, Fund of
Funds Adviser, Fund of Funds
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Subadviser, sponsor or employee of the
Fund of Funds, or a person of which
any such officer, director, member of an
advisory board, Fund of Funds Adviser,
Fund of Funds Subadviser, sponsor or
employee is an affiliated person (each,
an ‘‘Underwriting Affiliate,’’ except any
person whose relationship to the
Unaffiliated Underlying Fund is covered
by section 10(f) of the Act is not an
Underwriting Affiliate). An offering of
securities during the existence of any
underwriting or selling syndicate of
which a principal underwriter is an
Underwriting Affiliate is an ‘‘Affiliated
Underwriting.’’
6. In addition, as an assurance that an
Unaffiliated Fund understands the
implications of an investment by a Fund
of Funds operating in reliance on the
requested relief from sections
12(d)(1)(A) and (B), prior to any
investment by the Fund of Funds in the
Unaffiliated Fund in excess of the limit
set forth in section 12(d)(1)(A)(i),
condition 10 requires the Fund of Funds
and the Unaffiliated Fund to execute an
agreement stating, without limitation,
that their boards and their investment
adviser understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order. Applicants note that an
Unaffiliated Underlying Fund has the
right to reject an investment from a
Fund of Funds.
7. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. With respect
to investment advisory fees, applicants
state that, prior to the approval of any
investment advisory contract under
section 15 of the Act, the board of
directors or trustees (‘‘Board’’) of a Fund
of Funds, including a majority of the
directors or trustees who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act
(‘‘Disinterested Trustees’’), will find that
any investment advisory fees charged to
the Fund of Funds under its investment
advisory contract are based on services
provided that are in addition to, rather
than duplicative of, services provided
under the investment advisory
contract(s) of any Underlying Fund.
Applicants further state that the Fund of
Funds Adviser will waive or offset fees
otherwise payable to it by the Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to a plan adopted by an
Unaffiliated Fund under rule 12b–1
under the Act) received from an
Unaffiliated Underlying Fund by the
Fund of Funds Adviser, or an affiliated
person of the Fund of Funds Adviser,
other than any advisory fees paid to the
Fund of Funds Adviser or its affiliated
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person by an Unaffiliated Fund, in
connection with the investment by the
Fund of Funds in the Unaffiliated
Underlying Fund. Applicants also state
that any Fund of Funds Subadviser will
waive fees otherwise payable to the
Fund of Funds Subadviser, directly or
indirectly, by the Fund of Funds in an
amount at least equal to any
compensation received from an
Unaffiliated Underlying Fund by the
Fund of Funds Subadviser, or an
affiliated person of the Fund of Funds
Subadviser, other than any advisory fees
paid to the Fund of Funds Subadviser
or its affiliated person, in connection
with the investment by the Fund of
Funds in the Unaffiliated Underlying
Fund made at the direction of the Fund
of Funds Subadviser. Applicants agree
that the benefit of any such waiver by
a Fund of Funds Subadviser will be
passed through to the Fund of Funds.
8. Applicants represent that the
aggregate sales charges and/or service
fees (as defined in the Conduct Rules of
the NASD (‘‘NASD Conduct Rules’’))
charged with respect to shares of any
Fund of Funds will not exceed the
limits applicable to funds of funds set
forth in rule 2830 of the NASD Conduct
Rules. Moreover, the prospectus and
sales literature of a Fund of Funds will
contain concise, ‘‘plain English’’
disclosure tailored to the particular
document designed to inform investors
of the unique characteristics of the fund
of funds structure including, but not
limited to, its expense structure and the
additional expenses of investing in
Underlying Funds.
9. Applicants contend that the
proposed arrangement will not create an
overly complex fund structure.
Applicants note that Underlying Funds
will be prohibited from acquiring
securities of any investment company or
company relying on section 3(c)(1) or
3(c)(7) of the Act in excess of the limits
contained in section 12(d)(1)(A), except
to the extent that an Underlying Fund
(a) receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(1)),
or (b) acquires (or is deemed to have
acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to (i)
acquire securities of one or more
affiliated investment companies for
short-term cash management purposes
or (ii) engage in interfund borrowing
and lending transactions.
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B. Section 17(a) of the Act
1. Section 17(a) generally prohibits
purchases and sales of securities, on a
principal basis, between a registered
investment company and any affiliated
person or promoter of, or principal
underwriter for, the company, and
affiliated persons of such persons.
Section 2(a)(3) of the Act defines an
‘‘affiliated person’’ of another person to
include, among other things, any person
directly or indirectly owning,
controlling or holding with power to
vote 5% or more of the other’s
outstanding voting securities; any
person 5% or more of whose
outstanding voting securities are
directly or indirectly owned, controlled
or held with power to vote by the other
person; any person directly or indirectly
controlling, controlled by or under
common control with the other person;
and any investment adviser to an
investment company.
2. Section 17(b) authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction, including the consideration
to be paid and received, are fair and
reasonable and do not involve
overreaching on the part of any person
concerned; (b) the proposed transaction
is consistent with the policies of each
registered investment company
concerned; and (c) the proposed
transaction is consistent with the
general purposes of the Act. Section 6(c)
permits the Commission to exempt any
person or transaction, or any class or
classes of persons or transactions from
any provisions of the Act, if 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 Act.
3. Applicants state that an Underlying
Fund might be deemed to be an
affiliated person of a Fund of Funds if
the Fund of Funds acquires 5% or more
of the Underlying Fund’s outstanding
voting securities. Applicants also state
that since the Funds of Funds and
Affiliated Underlying Funds will be
advised by an Adviser, they may be
deemed to be under common control
and, therefore, affiliated persons of each
other. Accordingly, section 17(a) could
prevent an Underlying Fund from
selling shares to, and redeeming shares
from, a Fund of Funds. Applicants state
that the consideration paid in sales and
redemptions permitted under the
requested order of shares of Underlying
Funds will be based on the net asset
values of the Underlying Funds.
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4. ILIAC or another ING Insurance
Company will issue an ING Guaranteed
Contract to the Funds of Funds. ILIAC
also may serve as investment adviser to
a Fund of Funds and may also be the
record owner of 5% or more of the
shares of a Fund of Funds and thus may
be deemed to be an affiliated person of
the Fund of Funds. The purchase by a
Fund of Funds of an ING Guaranteed
Contract would therefore be prohibited
by section 17(a). Applicants submit that
the ING Guaranteed Contract will bear
a fixed rate of interest which will be at
least as favorable as the guaranteed rate
on substantially similar guaranteed
contracts offered by the ING Insurance
Companies and other insurance
companies. Applicants further submit
that the Funds of Funds may withdraw
assets from the ING Guaranteed Contract
at any time if the rate becomes noncompetitive (or for any other reason)
without the imposition of any sales
charge or market value adjustment.
5. Applicants seek an exemption
under sections 6(c) and 17(b) to allow
the proposed transactions. Applicants
state that the transactions satisfy the
standards for relief under sections 6(c)
and 17(b). Applicants represent that the
proposed transactions will be consistent
with the policies of each Fund of Funds
and Underlying Fund and with the
general purposes of the Act.
Applicants’ Conditions
Applicants agree that the order
granting the requested relief shall be
subject to the following conditions:
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated Underlying Fund within
the meaning of section 2(a)(9) of the Act.
The members of a Subadviser Group
will not control (individually or in the
aggregate) an Unaffiliated Underlying
Fund within the meaning of section
2(a)(9) of the Act. If, as a result of a
decrease in the outstanding voting
securities of an Unaffiliated Underlying
Fund, the Group or the Subadviser
Group, each in the aggregate, becomes a
holder of more than 25% of the
outstanding voting securities of the
Unaffiliated Underlying Fund, then the
Group or the Subadviser Group (except
for any member of the Group or the
Subadviser Group that is a Separate
Account) will vote its shares of the
Unaffiliated Underlying Fund in the
same proportion as the vote of all other
holders of the Unaffiliated Underlying
Fund’s shares. A Registered Separate
Account will seek voting instructions
from its contract holders and will vote
its shares in accordance with the
instructions received and will vote
those shares for which no instructions
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were received in the same proportion as
the shares for which instructions were
received. An Unregistered Separate
Account will either (i) vote its shares of
the Unaffiliated Underlying Fund in the
same proportion as the vote of all other
holders of the Unaffiliated Underlying
Fund’s shares; or (ii) seek voting
instructions from its contract holders
and vote its shares in accordance with
the instructions received and vote those
shares for which no instructions were
received in the same proportion as the
shares for which instructions were
received. This condition shall not apply
to a Subadviser Group with respect to
an Unaffiliated Underlying Fund for
which the Fund of Funds Subadviser or
person controlling, controlled by or
under common control with the Fund of
Funds Subadviser acts as the investment
adviser within the meaning of section
2(a)(20)(A) of the Act (in the case of an
Unaffiliated Fund) or as the sponsor (in
the case of an Unaffiliated Trust).
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in shares of an Unaffiliated
Underlying Fund to influence the terms
of any services or transactions between
the Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated
Underlying Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Disinterested
Trustees, will adopt procedures
reasonably designed to assure that the
Fund of Funds Adviser and any Fund of
Funds Subadviser are conducting the
investment program of the Fund of
Funds without taking into account any
consideration received by the Fund of
Funds or a Fund of Funds Affiliate from
an Unaffiliated Underlying Fund or an
Unaffiliated Fund Affiliate in
connection with any services or
transactions.
4. Once an investment by a Fund of
Funds in the securities of an
Unaffiliated Fund exceeds the limit of
section 12(d)(1)(A)(i) of the Act, the
Board of the Unaffiliated Fund,
including a majority of the Disinterested
Trustees, will determine that any
consideration paid by the Unaffiliated
Fund to a Fund of Funds or a Fund of
Funds Affiliate in connection with any
services or transactions: (a) Is fair and
reasonable in relation to the nature and
quality of the services and benefits
received by the Unaffiliated Fund; (b) is
within the range of consideration that
the Unaffiliated Fund would be required
to pay to another unaffiliated entity in
connection with the same services or
transactions; and (c) does not involve
overreaching on the part of any person
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concerned. This condition does not
apply with respect to any services or
transactions between an Unaffiliated
Fund and its investment adviser(s), or
any person controlling, controlled by or
under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of
Funds Affiliate (except to the extent it
is acting in its capacity as an investment
adviser to an Unaffiliated Fund or
sponsor to an Unaffiliated Trust) will
cause an Unaffiliated Underlying Fund
to purchase a security in an Affiliated
Underwriting.
6. The Board of an Unaffiliated Fund,
including a majority of the Disinterested
Trustees, will adopt procedures
reasonably designed to monitor any
purchases of securities by the
Unaffiliated Fund in an Affiliated
Underwriting, once an investment by a
Fund of Funds in the securities of the
Unaffiliated Fund exceeds the limit of
section 12(d)(1)(A)(i) of the Act,
including any purchases made directly
from an Underwriting Affiliate. The
Board of the Unaffiliated Fund will
review these purchases periodically, but
no less frequently than annually, to
determine whether the purchases were
influenced by the investment by the
Fund of Funds in shares of the
Unaffiliated Fund. The Board of the
Unaffiliated Fund will consider, among
other things, (a) whether the purchases
were consistent with the investment
objectives and policies of the
Unaffiliated Fund; (b) how the
performance of securities purchased in
an Affiliated Underwriting compares to
the performance of comparable
securities purchased during a
comparable period of time in
underwritings other than Affiliated
Underwritings or to a benchmark such
as a comparable market index; and (c)
whether the amount of securities
purchased by the Unaffiliated Fund in
Affiliated Underwritings and the
amount purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board will take any appropriate actions
based on its review, including, if
appropriate, the institution of
procedures designed to assure that
purchases of securities in Affiliated
Underwritings are in the best interest of
shareholders.
7. Each Unaffiliated Fund will
maintain and preserve permanently in
an easily accessible place a written copy
of the procedures described in the
preceding condition, and any
modifications to such procedures, and
will maintain and preserve for a period
of not less than six years from the end
of the fiscal year in which any purchase
E:\FR\FM\18OCN1.SGM
18OCN1
Federal Register / Vol. 70, No. 200 / Tuesday, October 18, 2005 / Notices
in an Affiliated Underwriting occurred,
the first two years in an easily accessible
place, a written record of each purchase
made once an investment by a Fund of
Funds in the securities of an
Unaffiliated Fund exceeds the limit of
section 12(d)(1)(A)(i) of the Act, setting
forth from whom the securities were
acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the determinations of the Unaffiliated
Fund’s Board were made.
8. A Fund of Funds will pay no sales
load when purchasing an ING
Guaranteed Contract, and will be
permitted to remove its assets from an
ING Guaranteed Contract at any time
without the imposition of a sales charge
or market value adjustment.
9. Prior to purchasing an ING
Guaranteed Contract, and prior to any
periodic adjustment to the rate of
interest on an ING Guaranteed Contract
held by a Fund of Funds, the Board of
the Fund of Funds, including a majority
of the Disinterested Trustees, will make
a determination that (i) purchasing or
maintaining, as applicable, the ING
Guaranteed Contract is in the best
interests of the Fund of Funds and its
shareholders and does not involve
overreaching on the part of any person
concerned, and (ii) the guaranteed rate
on the ING Guaranteed Contract is at
least as favorable as the guaranteed rate
on substantially similar guaranteed
contracts offered by the ING Insurance
Companies and other insurance
companies. This determination, and the
information upon which it was based,
will be recorded fully in the minute
books of the Fund of Funds.
10. Prior to an investment in shares of
an Unaffiliated Fund in excess of the
limit in section 12(d)(1)(A)(i), the Fund
of Funds and the Unaffiliated Fund will
execute an agreement stating, without
limitation, that their boards of directors
or trustees and their investment advisers
understand the terms and conditions of
the order and agree to fulfill their
responsibilities under the order
(‘‘Participation Agreement’’). At the
time of its investment in shares of an
Unaffiliated Fund in excess of the limit
in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Unaffiliated Fund
of the investment. At such time, the
Fund of Funds also will transmit to the
Unaffiliated Fund a list of the names of
each Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated Fund
of any changes to the list as soon as
reasonably practicable after a change
occurs. The Unaffiliated Fund and the
Fund of Funds will maintain and
VerDate Aug<31>2005
17:22 Oct 17, 2005
Jkt 208001
preserve a copy of the order, the
Participation Agreement, and the list
with any updated information for the
duration of the investment and for a
period of not less than six years
thereafter, the first two years in an
easily accessible place.
11. Prior to approving any investment
advisory or management contract under
section 15 of the Act, the Board of each
Fund of Funds, including a majority of
the Disinterested Trustees, will find that
the advisory or management fees
charged under such contract are based
on services provided that are in addition
to, rather than duplicative of, the
services provided under the advisory
contract(s) of any Affiliated Underlying
Funds or Unaffiliated Funds in which
the Fund of Funds may invest. This
finding, and the basis upon which the
finding was made, will be recorded fully
in the minute books of the Fund of
Funds.
12. The Fund of Funds Adviser will
waive or offset fees otherwise payable to
it by the Fund of Funds in an amount
at least equal to any compensation
(including fees received pursuant to a
plan adopted by an Unaffiliated Fund
under rule 12b–1 under the Act)
received by the Fund of Funds Adviser
or an affiliated person of the Fund of
Funds Adviser from an Unaffiliated
Underlying Fund, other than any
advisory fees paid to the Fund of Funds
Adviser or its affiliated person by an
Unaffiliated Fund, in connection with
the investment by the Fund of Funds in
the Unaffiliated Underlying Fund. Any
Fund of Funds Subadviser will waive
fees otherwise payable to the Fund of
Funds Subadviser, directly or indirectly,
by the Fund of Funds in an amount at
least equal to any compensation
received from an Unaffiliated
Underlying Fund by the Fund of Funds
Subadviser, or an affiliated person of the
Fund of Funds Subadviser, other than
any advisory fees paid to the Fund of
Funds Subadviser or its affiliated person
by the Unaffiliated Fund, in connection
with the investment by the Fund of
Funds in the Unaffiliated Underlying
Fund made at the direction of the Fund
of Funds Subadviser. In the event that
the Fund of Funds Subadviser waives
fees, the benefit of the waiver will be
passed through to the Fund of Funds.
13. With respect to Registered
Separate Accounts that invest in a Fund
of Funds, no sales load will be charged
at the Fund of Funds level or at the
Underlying Fund level. Other sales
charges and service fees, as defined in
rule 2830 of the Conduct Rules of the
NASD, if any, will only be charged at
the Fund of Funds level or at the
Underlying Fund level, not both. With
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
60581
respect to other investments in a Fund
of Funds, any sales charges and/or
service fees charged with respect to
shares of a Fund of Funds will not
exceed the limits applicable to funds of
funds set forth in rule 2830 of the
Conduct Rules of the NASD.
14. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A) of the Act, except to the
extent that such Underlying Fund (i)
receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading Section 12(d)(1)
of the Act); or (ii) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to (a)
acquire securities of one or more
affiliated investment companies for
short-term cash management purposes,
or (b) engage in interfund borrowing and
lending transactions.
15. The Board of any Fund of Funds
will satisfy the fund governance
standards as defined in rule 0–1(a)(7)
under the Act (‘‘Governance
Standards’’) by the later of (i) the
compliance date for the rule
(‘‘Compliance Date’’) or (ii) the earlier of
the date of reliance on the order or the
date on which the Fund of Funds
executes a Participation Agreement. The
Board of any Unaffiliated Fund will
satisfy the Governance Standards by the
later of (i) the Compliance Date or (ii)
the date on which the Unaffiliated Fund
executes a Participation Agreement.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–5735 Filed 10–17–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 35–28045]
Filings Under the Public Utility Holding
Company Act of 1935, as Amended
(‘‘Act’’)
October 12, 2005.
Notice is hereby given that the
following filing(s) has/have been made
with the Commission pursuant to
provisions of the Act and rules
promulgated under the Act. All
interested persons are referred to the
E:\FR\FM\18OCN1.SGM
18OCN1
]]>Agencies
[Federal Register Volume 70, Number 200 (Tuesday, October 18, 2005)]
[Notices]
[Pages 60577-60581]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-5735]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27116; 812-13116]
ING Partners, Inc., et al.; Notice of Application
October 12, 2005.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under sections 6(c) and 17(b) of the
Investment Company Act of 1940 (the ``Act'') exempting applicants from
section 17(a) of the Act and under section 12(d)(1)(J) of the Act
exempting applicants from sections 12(d)(1)(A) and 12(d)(1)(B) of the
Act.
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Summary of the Application: The order would permit certain
registered open-end management investment companies to acquire shares
of other registered open-end management investment companies or unit
investment trusts that are within or outside the same group of
investment companies as well as a guaranteed rate investment contract
issued by an affiliated insurance company.
Applicants: ING Partners, Inc. (``IPI''), ING Investors Trust
(``IIT''), ING Variable Insurance Trust (``IVIT''), ING Variable
Products Trust (``IVPT''), ING VP Emerging Markets Fund, Inc.
(``IVPEMF''), ING VP Natural Resources Trust (``IVPNRT'') (the ``ING
Investment Companies''), ING Life Insurance and Annuity Company
(``ILIAC''), ING Investments, LLC (``IIL'') and Directed Services, Inc.
(the ``Advisers'').\1\
---------------------------------------------------------------------------
\1\ All entities that currently intend to rely on the requested
order are named as applicants and any other entity that relies on
the order in the future will comply with the terms and conditions of
the application. Applicants request that the relief also apply to
any existing or future registered open-end management investment
company that is part of the same group of investment companies as
defined in section 12(d)(1)(G) of the Act as the ING Investment
Companies (included in the term ``ING Investment Companies'') and
any existing or future insurance company controlling, controlled by
or under common control with ILIAC that may issue a guaranteed rate
investment contract (each an ``ING Insurance Company''). Each series
of an ING Investment Company is referred to as a ``Fund'' and
collectively as ``Funds.''
---------------------------------------------------------------------------
Filing Dates: The application was filed on August 13, 2004 and
amended on April 7, 2005, and September 28, 2005. Applicants have
agreed to file an amendment during the notice period, the substance of
which is reflected in this notice.
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 Commission's
Secretary 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 November 7, 2005, 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
writer'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 Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
St., NE., Washington, DC 20549-9303. Applicants, c/o Huey P. Falgout,
Jr., Chief Counsel, ING Americas U.S. Legal Services, 7337 E.
Doubletree Ranch Rd., Scottsdale, Arizona 85258.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202)
551-6813, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Division
of Investment Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Branch, 100 F St., NE., Washington, DC
20549-0102 (tel. (202) 551-5850).
Applicants' Representations
1. IPI is a Maryland corporation and is registered under the Act as
an open-end management investment company. IPI currently consists of 25
Funds, each with its own investment objective and policies. The shares
of each IPI Fund are offered and sold through registered separate
accounts of insurance companies that are affiliates of the Advisers
(``Registered Separate Accounts'') and unregistered separate accounts
of insurance companies that are affiliates of the Advisers
(``Unregistered Separate Accounts'' and, together with the Registered
Separate Accounts, the ``Separate Accounts''), which are used to fund
variable annuity contracts and variable life insurance contracts, and
may be offered and sold to retirement plans and certain investment
advisers, pursuant to an order granted by the Commission.\2\ IPI has
created 5 new Funds known as the Solutions Portfolios, which will be
managed by ILIAC and each of which will be a fund of funds (``Funds of
Funds''). The Solutions Portfolios are the only Funds of Funds that
currently intend to rely on the requested relief.
---------------------------------------------------------------------------
\2\ Aetna Variable Fund, Investment Company Act Release Nos.
23545 (Nov. 23, 1998) (notice) and 23616 (Dec. 21, 1998) (order).
---------------------------------------------------------------------------
2. IIT is a Massachusetts business trust and is registered under
the Act as an open-end management investment company. IIT currently
consists of 46 Funds, each with its own investment objective and
policies. The shares of each IIT Fund currently are offered and sold
through Separate Accounts which are used to fund variable annuity
contracts and variable life insurance contracts, and may be offered and
sold to retirement plans, pursuant to an order granted by the
Commission.\3\
---------------------------------------------------------------------------
\3\ Id.
---------------------------------------------------------------------------
3. IVIT is a Delaware statutory trust and is registered under the
Act as an open-end management investment company. IVIT currently
consists of 11 Funds, each with its own investment objective and
policies. IVPT is a Massachusetts business trust and is registered
under the Act as an open-end management investment company. IVPT
currently consists of 10 Funds, each
[[Page 60578]]
with its own investment objective and policies. IVPEMF is a Maryland
corporate and is registered under the Act as an open-end management
investment company. IVPEMF currently consists of one Fund. IVPNRT is a
Massachusetts business trust and is registered under the Act as an
open-end management investment company. IVPNRT currently consists of
one Fund.
4. The Funds of Funds will invest in other Funds (``Affiliated
Underlying Funds'') and in other registered open-end management
investment companies and unit investment trusts that are not part of
the same group of investment companies, as defined in section
12(d)(1)(G) of the Act, as the Funds of Funds (``Unaffiliated
Underlying Funds''). The Affiliated Underlying Funds and the
Unaffiliated Underlying Funds are together the ``Underlying Funds.''
Each Fund of Funds may also make investments in other securities and in
a guaranteed rate investment contract issued by ILIAC or another ING
Insurance Company (the ``ING Guaranteed Contract''). ILIAC and all
other ING Insurance Companies are indirect subsidiaries of ING Groep,
N.V. Applicants state that each Fund of Funds will enable investors to
create a comprehensive asset allocation program with just one
investment and provide a simple, convenient and cost-efficient program
for investors who are able to identify their investment goals and risk
tolerances but may not be comfortable deciding how to invest their
assets to achieve those goals.
5. Each Adviser is registered with the Commission as an investment
adviser under the Investment Advisers Act of 1940, is a direct or
indirect subsidiary of ING Groep, N.V., and serves as investment
adviser to the Funds. Each investment adviser to a Fund of Funds that
meets the definition of section 2(a)(20)(A) of the Act is referred to
as a ``Fund of Funds Adviser.'' Any investment adviser to a Fund of
Funds that meets the definition in section 2(a)(20)(B) of the Act is
referred to as a ``Fund of Funds Subadviser.''
6. Applicants request relief to permit the Funds of Funds to
purchase shares of the Underlying Funds in excess of the limits set
forth in section 12(d)(1)(A) of the Act and for the Underlying Funds,
their principal underwriters and any broker or dealer to sell shares of
the Underlying Funds to the Funds of Funds in excess of the limits set
forth in section 12(d)(1)(B) of the Act. Applicants also seek relief
from section 17(a) of the Act to permit Underlying Funds to sell shares
to, and redeem shares from, the Funds of Funds. In addition, applicants
seek relief from section 17(a) of the Act to permit a Fund of Funds to
purchase the ING Guaranteed Contract.
Applicants' Legal Analysis
A. Sections 12(d)(1)(A) and (B) of the Act
1. Section 12(d)(1)(A) prohibits a registered investment company
from acquiring shares of another registered investment company if the
securities represent more than 3% of the total outstanding voting stock
of the acquired company, more than 5% of the total assets of the
acquiring company or, together with the securities of other investment
companies, more than 10% of the total assets of the acquiring company.
Section 12(d)(1)(B) prohibits a registered open-end investment company,
its principal underwriter and any broker or dealer from selling shares
of the company to another investment company if the sale will cause the
acquiring company to own more than 3% of the acquired company's
outstanding voting stock or more than 10% of the acquired company's
voting stock to be owned by investment companies generally.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security or transaction from any provision of
section 12(d)(1), if the exemption is consistent with the public
interest and the protection of investors. Applicants seek an exemption
under section 12(d)(1)(J) to permit Funds of Funds to acquire shares of
Underlying Funds and Underlying Funds to sell their shares to Funds of
Funds, beyond the limits set forth in sections 12(d)(1)(A) and (B).
3. Applicants state that the proposed arrangement will be
structured to mitigate the potential abuses from which sections
12(d)(1)(A) and (B) are designed to protect investors, such as undue
influence by a fund of funds over underlying funds, excessive layering
of fees and overly complex fund structures. Accordingly, applicants
believe that the requested exemption is consistent with the public
interest and the protection of investors.
4. Applicants state that the proposed arrangement will not result
in undue influence by a Fund of Funds or its affiliates over any
Underlying Fund. To limit the influence that a Fund of Funds may have
over an Unaffiliated Underlying Fund, applicants propose a condition
prohibiting (a)(i) The Fund of Funds Adviser, (ii) any person
controlling, controlled by or under common control with the Fund of
Funds Adviser and (iii) any investment company or issuer that would be
an investment company but for section 3(c)(1) or 3(c)(7) of the Act
advised or sponsored by the Fund of Funds Adviser or any person
controlling, controlled by or under common control with the Fund of
Funds Adviser (``Group''), and (b)(i) Any Fund of Funds Subadviser,
(ii) any person controlling, controlled by or under common control with
the Fund of Funds Subadviser and (iii) any investment company or issuer
that would be an investment company but for section 3(c)(1) or 3(c)(7)
of the Act (or portion of such investment company or issuer) advised or
sponsored by the Fund of Funds Subadviser or any person controlling,
controlled by or under common control with the Fund of Funds Subadviser
(``Subadviser Group''), from controlling (individually or in the
aggregate) an Unaffiliated Underlying Fund within the meaning of
section 2(a)(9) of the Act.
5. Applicants also propose conditions 2-7, stated below, to
preclude a Fund of Funds and its affiliated entities from taking
advantage of an Unaffiliated Underlying Fund with respect to
transactions between the entities and to ensure the transactions will
be on an arm's length basis. Condition 2 precludes a Fund of Funds and
its Fund of Funds Adviser, any Fund of Funds Subadviser, promoter,
principal underwriter and any person controlling, controlled by or
under common control with any of these entities (each, a ``Fund of
Funds Affiliate'') from causing any existing or potential investment by
the Fund of Funds in an Unaffiliated Underlying Fund to influence the
terms of any services or transactions between the Fund of Funds or a
Fund of Funds Affiliate and the Unaffiliated Underlying Fund or its
investment adviser(s), sponsor, promoter, principal underwriter and any
person controlling, controlled by or under common control with any of
these entities (each, an ``Unaffiliated Fund Affiliate''). Condition 5
precludes a Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Underlying Fund that is an open-end management investment
company (``Unaffiliated Fund'') or sponsor to an Unaffiliated
Underlying Fund that is a unit investment trust (``Unaffiliated
Trust'')) from causing an Unaffiliated Underlying Fund to purchase a
security in an offering of securities during the existence of any
underwriting or selling syndicate of which a principal underwriter is
an officer, director, member of an advisory board, Fund of Funds
Adviser, Fund of Funds
[[Page 60579]]
Subadviser, sponsor or employee of the Fund of Funds, or a person of
which any such officer, director, member of an advisory board, Fund of
Funds Adviser, Fund of Funds Subadviser, sponsor or employee is an
affiliated person (each, an ``Underwriting Affiliate,'' except any
person whose relationship to the Unaffiliated Underlying Fund is
covered by section 10(f) of the Act is not an Underwriting Affiliate).
An offering of securities during the existence of any underwriting or
selling syndicate of which a principal underwriter is an Underwriting
Affiliate is an ``Affiliated Underwriting.''
6. In addition, as an assurance that an Unaffiliated Fund
understands the implications of an investment by a Fund of Funds
operating in reliance on the requested relief from sections 12(d)(1)(A)
and (B), prior to any investment by the Fund of Funds in the
Unaffiliated Fund in excess of the limit set forth in section
12(d)(1)(A)(i), condition 10 requires the Fund of Funds and the
Unaffiliated Fund to execute an agreement stating, without limitation,
that their boards and their investment adviser understand the terms and
conditions of the order and agree to fulfill their responsibilities
under the order. Applicants note that an Unaffiliated Underlying Fund
has the right to reject an investment from a Fund of Funds.
7. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. With respect to investment advisory
fees, applicants state that, prior to the approval of any investment
advisory contract under section 15 of the Act, the board of directors
or trustees (``Board'') of a Fund of Funds, including a majority of the
directors or trustees who are not ``interested persons,'' as defined in
section 2(a)(19) of the Act (``Disinterested Trustees''), will find
that any investment advisory fees charged to the Fund of Funds under
its investment advisory contract are based on services provided that
are in addition to, rather than duplicative of, services provided under
the investment advisory contract(s) of any Underlying Fund. Applicants
further state that the Fund of Funds Adviser will waive or offset fees
otherwise payable to it by the Fund of Funds in an amount at least
equal to any compensation (including fees received pursuant to a plan
adopted by an Unaffiliated Fund under rule 12b-1 under the Act)
received from an Unaffiliated Underlying Fund by the Fund of Funds
Adviser, or an affiliated person of the Fund of Funds Adviser, other
than any advisory fees paid to the Fund of Funds Adviser or its
affiliated person by an Unaffiliated Fund, in connection with the
investment by the Fund of Funds in the Unaffiliated Underlying Fund.
Applicants also state that any Fund of Funds Subadviser will waive fees
otherwise payable to the Fund of Funds Subadviser, directly or
indirectly, by the Fund of Funds in an amount at least equal to any
compensation received from an Unaffiliated Underlying Fund by the Fund
of Funds Subadviser, or an affiliated person of the Fund of Funds
Subadviser, other than any advisory fees paid to the Fund of Funds
Subadviser or its affiliated person, in connection with the investment
by the Fund of Funds in the Unaffiliated Underlying Fund made at the
direction of the Fund of Funds Subadviser. Applicants agree that the
benefit of any such waiver by a Fund of Funds Subadviser will be passed
through to the Fund of Funds.
8. Applicants represent that the aggregate sales charges and/or
service fees (as defined in the Conduct Rules of the NASD (``NASD
Conduct Rules'')) charged with respect to shares of any Fund of Funds
will not exceed the limits applicable to funds of funds set forth in
rule 2830 of the NASD Conduct Rules. Moreover, the prospectus and sales
literature of a Fund of Funds will contain concise, ``plain English''
disclosure tailored to the particular document designed to inform
investors of the unique characteristics of the fund of funds structure
including, but not limited to, its expense structure and the additional
expenses of investing in Underlying Funds.
9. Applicants contend that the proposed arrangement will not create
an overly complex fund structure. Applicants note that Underlying Funds
will be prohibited from acquiring securities of any investment company
or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess
of the limits contained in section 12(d)(1)(A), except to the extent
that an Underlying Fund (a) receives securities of another investment
company as a dividend or as a result of a plan of reorganization of a
company (other than a plan devised for the purpose of evading section
12(d)(1)), or (b) acquires (or is deemed to have acquired) securities
of another investment company pursuant to exemptive relief from the
Commission permitting such Underlying Fund to (i) acquire securities of
one or more affiliated investment companies for short-term cash
management purposes or (ii) engage in interfund borrowing and lending
transactions.
B. Section 17(a) of the Act
1. Section 17(a) generally prohibits purchases and sales of
securities, on a principal basis, between a registered investment
company and any affiliated person or promoter of, or principal
underwriter for, the company, and affiliated persons of such persons.
Section 2(a)(3) of the Act defines an ``affiliated person'' of another
person to include, among other things, any person directly or
indirectly owning, controlling or holding with power to vote 5% or more
of the other's outstanding voting securities; any person 5% or more of
whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by the other person; any person
directly or indirectly controlling, controlled by or under common
control with the other person; and any investment adviser to an
investment company.
2. Section 17(b) authorizes the Commission to grant an order
permitting a transaction otherwise prohibited by section 17(a) if it
finds that (a) the terms of the proposed transaction, including the
consideration to be paid and received, are fair and reasonable and do
not involve overreaching on the part of any person concerned; (b) the
proposed transaction is consistent with the policies of each registered
investment company concerned; and (c) the proposed transaction is
consistent with the general purposes of the Act. Section 6(c) permits
the Commission to exempt any person or transaction, or any class or
classes of persons or transactions from any provisions of the Act, if
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 Act.
3. Applicants state that an Underlying Fund might be deemed to be
an affiliated person of a Fund of Funds if the Fund of Funds acquires
5% or more of the Underlying Fund's outstanding voting securities.
Applicants also state that since the Funds of Funds and Affiliated
Underlying Funds will be advised by an Adviser, they may be deemed to
be under common control and, therefore, affiliated persons of each
other. Accordingly, section 17(a) could prevent an Underlying Fund from
selling shares to, and redeeming shares from, a Fund of Funds.
Applicants state that the consideration paid in sales and redemptions
permitted under the requested order of shares of Underlying Funds will
be based on the net asset values of the Underlying Funds.
[[Page 60580]]
4. ILIAC or another ING Insurance Company will issue an ING
Guaranteed Contract to the Funds of Funds. ILIAC also may serve as
investment adviser to a Fund of Funds and may also be the record owner
of 5% or more of the shares of a Fund of Funds and thus may be deemed
to be an affiliated person of the Fund of Funds. The purchase by a Fund
of Funds of an ING Guaranteed Contract would therefore be prohibited by
section 17(a). Applicants submit that the ING Guaranteed Contract will
bear a fixed rate of interest which will be at least as favorable as
the guaranteed rate on substantially similar guaranteed contracts
offered by the ING Insurance Companies and other insurance companies.
Applicants further submit that the Funds of Funds may withdraw assets
from the ING Guaranteed Contract at any time if the rate becomes non-
competitive (or for any other reason) without the imposition of any
sales charge or market value adjustment.
5. Applicants seek an exemption under sections 6(c) and 17(b) to
allow the proposed transactions. Applicants state that the transactions
satisfy the standards for relief under sections 6(c) and 17(b).
Applicants represent that the proposed transactions will be consistent
with the policies of each Fund of Funds and Underlying Fund and with
the general purposes of the Act.
Applicants' Conditions
Applicants agree that the order granting the requested relief shall
be subject to the following conditions:
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Underlying Fund within the meaning of
section 2(a)(9) of the Act. The members of a Subadviser Group will not
control (individually or in the aggregate) an Unaffiliated Underlying
Fund within the meaning of section 2(a)(9) of the Act. If, as a result
of a decrease in the outstanding voting securities of an Unaffiliated
Underlying Fund, the Group or the Subadviser Group, each in the
aggregate, becomes a holder of more than 25% of the outstanding voting
securities of the Unaffiliated Underlying Fund, then the Group or the
Subadviser Group (except for any member of the Group or the Subadviser
Group that is a Separate Account) will vote its shares of the
Unaffiliated Underlying Fund in the same proportion as the vote of all
other holders of the Unaffiliated Underlying Fund's shares. A
Registered Separate Account will seek voting instructions from its
contract holders and will vote its shares in accordance with the
instructions received and will vote those shares for which no
instructions were received in the same proportion as the shares for
which instructions were received. An Unregistered Separate Account will
either (i) vote its shares of the Unaffiliated Underlying Fund in the
same proportion as the vote of all other holders of the Unaffiliated
Underlying Fund's shares; or (ii) seek voting instructions from its
contract holders and vote its shares in accordance with the
instructions received and vote those shares for which no instructions
were received in the same proportion as the shares for which
instructions were received. This condition shall not apply to a
Subadviser Group with respect to an Unaffiliated Underlying Fund for
which the Fund of Funds Subadviser or person controlling, controlled by
or under common control with the Fund of Funds Subadviser acts as the
investment adviser within the meaning of section 2(a)(20)(A) of the Act
(in the case of an Unaffiliated Fund) or as the sponsor (in the case of
an Unaffiliated Trust).
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in shares of an
Unaffiliated Underlying Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Underlying Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Disinterested Trustees, will adopt procedures reasonably designed to
assure that the Fund of Funds Adviser and any Fund of Funds Subadviser
are conducting the investment program of the Fund of Funds without
taking into account any consideration received by the Fund of Funds or
a Fund of Funds Affiliate from an Unaffiliated Underlying Fund or an
Unaffiliated Fund Affiliate in connection with any services or
transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Fund exceeds the limit of section 12(d)(1)(A)(i) of the
Act, the Board of the Unaffiliated Fund, including a majority of the
Disinterested Trustees, will determine that any consideration paid by
the Unaffiliated Fund to a Fund of Funds or a Fund of Funds Affiliate
in connection with any services or transactions: (a) Is fair and
reasonable in relation to the nature and quality of the services and
benefits received by the Unaffiliated Fund; (b) is within the range of
consideration that the Unaffiliated Fund would be required to pay to
another unaffiliated entity in connection with the same services or
transactions; and (c) does not involve overreaching on the part of any
person concerned. This condition does not apply with respect to any
services or transactions between an Unaffiliated Fund and its
investment adviser(s), or any person controlling, controlled by or
under common control with such investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Fund or sponsor to an Unaffiliated Trust) will cause an
Unaffiliated Underlying Fund to purchase a security in an Affiliated
Underwriting.
6. The Board of an Unaffiliated Fund, including a majority of the
Disinterested Trustees, will adopt procedures reasonably designed to
monitor any purchases of securities by the Unaffiliated Fund in an
Affiliated Underwriting, once an investment by a Fund of Funds in the
securities of the Unaffiliated Fund exceeds the limit of section
12(d)(1)(A)(i) of the Act, including any purchases made directly from
an Underwriting Affiliate. The Board of the Unaffiliated Fund will
review these purchases periodically, but no less frequently than
annually, to determine whether the purchases were influenced by the
investment by the Fund of Funds in shares of the Unaffiliated Fund. The
Board of the Unaffiliated Fund will consider, among other things, (a)
whether the purchases were consistent with the investment objectives
and policies of the Unaffiliated Fund; (b) how the performance of
securities purchased in an Affiliated Underwriting compares to the
performance of comparable securities purchased during a comparable
period of time in underwritings other than Affiliated Underwritings or
to a benchmark such as a comparable market index; and (c) whether the
amount of securities purchased by the Unaffiliated Fund in Affiliated
Underwritings and the amount purchased directly from an Underwriting
Affiliate have changed significantly from prior years. The Board will
take any appropriate actions based on its review, including, if
appropriate, the institution of procedures designed to assure that
purchases of securities in Affiliated Underwritings are in the best
interest of shareholders.
7. Each Unaffiliated Fund will maintain and preserve permanently in
an easily accessible place a written copy of the procedures described
in the preceding condition, and any modifications to such procedures,
and will maintain and preserve for a period of not less than six years
from the end of the fiscal year in which any purchase
[[Page 60581]]
in an Affiliated Underwriting occurred, the first two years in an
easily accessible place, a written record of each purchase made once an
investment by a Fund of Funds in the securities of an Unaffiliated Fund
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth
from whom the securities were acquired, the identity of the
underwriting syndicate's members, the terms of the purchase, and the
information or materials upon which the determinations of the
Unaffiliated Fund's Board were made.
8. A Fund of Funds will pay no sales load when purchasing an ING
Guaranteed Contract, and will be permitted to remove its assets from an
ING Guaranteed Contract at any time without the imposition of a sales
charge or market value adjustment.
9. Prior to purchasing an ING Guaranteed Contract, and prior to any
periodic adjustment to the rate of interest on an ING Guaranteed
Contract held by a Fund of Funds, the Board of the Fund of Funds,
including a majority of the Disinterested Trustees, will make a
determination that (i) purchasing or maintaining, as applicable, the
ING Guaranteed Contract is in the best interests of the Fund of Funds
and its shareholders and does not involve overreaching on the part of
any person concerned, and (ii) the guaranteed rate on the ING
Guaranteed Contract is at least as favorable as the guaranteed rate on
substantially similar guaranteed contracts offered by the ING Insurance
Companies and other insurance companies. This determination, and the
information upon which it was based, will be recorded fully in the
minute books of the Fund of Funds.
10. Prior to an investment in shares of an Unaffiliated Fund in
excess of the limit in section 12(d)(1)(A)(i), the Fund of Funds and
the Unaffiliated Fund will execute an agreement stating, without
limitation, that their boards of directors or trustees and their
investment advisers understand the terms and conditions of the order
and agree to fulfill their responsibilities under the order
(``Participation Agreement''). At the time of its investment in shares
of an Unaffiliated Fund in excess of the limit in section
12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Fund of
the investment. At such time, the Fund of Funds also will transmit to
the Unaffiliated Fund a list of the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The Fund of Funds will notify the
Unaffiliated Fund of any changes to the list as soon as reasonably
practicable after a change occurs. The Unaffiliated Fund and the Fund
of Funds will maintain and preserve a copy of the order, the
Participation Agreement, and the list with any updated information for
the duration of the investment and for a period of not less than six
years thereafter, the first two years in an easily accessible place.
11. Prior to approving any investment advisory or management
contract under section 15 of the Act, the Board of each Fund of Funds,
including a majority of the Disinterested Trustees, will find that the
advisory or management fees charged under such contract are based on
services provided that are in addition to, rather than duplicative of,
the services provided under the advisory contract(s) of any Affiliated
Underlying Funds or Unaffiliated Funds in which the Fund of Funds may
invest. This finding, and the basis upon which the finding was made,
will be recorded fully in the minute books of the Fund of Funds.
12. The Fund of Funds Adviser will waive or offset fees otherwise
payable to it by the Fund of Funds in an amount at least equal to any
compensation (including fees received pursuant to a plan adopted by an
Unaffiliated Fund under rule 12b-1 under the Act) received by the Fund
of Funds Adviser or an affiliated person of the Fund of Funds Adviser
from an Unaffiliated Underlying Fund, other than any advisory fees paid
to the Fund of Funds Adviser or its affiliated person by an
Unaffiliated Fund, in connection with the investment by the Fund of
Funds in the Unaffiliated Underlying Fund. Any Fund of Funds Subadviser
will waive fees otherwise payable to the Fund of Funds Subadviser,
directly or indirectly, by the Fund of Funds in an amount at least
equal to any compensation received from an Unaffiliated Underlying Fund
by the Fund of Funds Subadviser, or an affiliated person of the Fund of
Funds Subadviser, other than any advisory fees paid to the Fund of
Funds Subadviser or its affiliated person by the Unaffiliated Fund, in
connection with the investment by the Fund of Funds in the Unaffiliated
Underlying Fund made at the direction of the Fund of Funds Subadviser.
In the event that the Fund of Funds Subadviser waives fees, the benefit
of the waiver will be passed through to the Fund of Funds.
13. With respect to Registered Separate Accounts that invest in a
Fund of Funds, no sales load will be charged at the Fund of Funds level
or at the Underlying Fund level. Other sales charges and service fees,
as defined in rule 2830 of the Conduct Rules of the NASD, if any, will
only be charged at the Fund of Funds level or at the Underlying Fund
level, not both. With respect to other investments in a Fund of Funds,
any sales charges and/or service fees charged with respect to shares of
a Fund of Funds will not exceed the limits applicable to funds of funds
set forth in rule 2830 of the Conduct Rules of the NASD.
14. No Underlying Fund will acquire securities of any other
investment company or company relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained in section 12(d)(1)(A) of the
Act, except to the extent that such Underlying Fund (i) receives
securities of another investment company as a dividend or as a result
of a plan of reorganization of a company (other than a plan devised for
the purpose of evading Section 12(d)(1) of the Act); or (ii) acquires
(or is deemed to have acquired) securities of another investment
company pursuant to exemptive relief from the Commission permitting
such Underlying Fund to (a) acquire securities of one or more
affiliated investment companies for short-term cash management
purposes, or (b) engage in interfund borrowing and lending
transactions.
15. The Board of any Fund of Funds will satisfy the fund governance
standards as defined in rule 0-1(a)(7) under the Act (``Governance
Standards'') by the later of (i) the compliance date for the rule
(``Compliance Date'') or (ii) the earlier of the date of reliance on
the order or the date on which the Fund of Funds executes a
Participation Agreement. The Board of any Unaffiliated Fund will
satisfy the Governance Standards by the later of (i) the Compliance
Date or (ii) the date on which the Unaffiliated Fund executes a
Participation Agreement.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-5735 Filed 10-17-05; 8:45 am]
BILLING CODE 8010-01-P
