[Federal Register Volume 77, Number 240 (Thursday, December 13, 2012)]
[Notices]
[Pages 74245-74247]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30050]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30295; 812-14013]
ING Investments, LLC, et al.; Notice of Application
December 6, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 17(d) of the
Investment Company Act of 1940 (``Act'') and rule 17d-1 under the Act.
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Summary of Application: Applicants request an order to permit certain
registered open-end investment companies in the same group of
investment companies to enter into a special servicing agreement
(``Special Servicing Agreement'').
Applicants: ING Investments, LLC (``IIL''), Directed Services LLC
(``DSL'') and ING Investment Management Co. LLC (``IIM'') (each, an
``Adviser,'' and collectively, the ``Advisers'') and ING Balanced
Portfolio, Inc., ING Equity Trust, ING Funds Trust, ING Intermediate
Bond Portfolio, ING Investors Trust, ING Mayflower Trust, ING Money
Market Portfolio, ING Mutual Funds, ING Partners, Inc., ING Separate
Portfolios Trust, ING Series Fund, Inc., ING Strategic Allocation
Portfolios, Inc., ING Variable Funds, ING Variable Portfolios, Inc.,
ING Variable Insurance Trust and ING Variable Products Trust
(collectively, the ``Registrants'') and the series thereof (the
Registrants and their series, collectively with the Advisers, the
``Applicants.'').\1\
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\1\ All entities that currently intend to rely on the order have
been named as applicants. Any other entity that relies on the order
in the future will comply with the terms and conditions of the
application.
Filing Dates: The application was filed on March 9, 2012, and amended
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on June 18, 2012, and October 26, 2012.
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 December 31, 2012, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants,
Huey P. Falgout, Jr., Chief Counsel, ING Funds, 7337 East Doubletree
Ranch Road, Suite 100, Scottsdale, Arizona 85255.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at
(202) 551-6868, or Daniele Marchesani, 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 via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. The Advisers are investment advisers registered under the
Investment Advisers Act of 1940 and serve as investment advisers to the
Funds. Each Adviser is a direct or indirect subsidiary of ING Groep,
N.V.
2. Each Registrant is registered under the Act as an open-end
management investment company. Certain of the Funds, as defined below,
currently serve, and others in the future may serve, in ``fund-of-
funds'' arrangements whereby a Fund (each, a ``Top-Tier Fund,'' and
collectively, the ``Top-Tier Funds'') invests their assets in other
Funds (``Underlying Funds'').\2\
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\2\ The Top-Tier Funds will not be Underlying Funds. Exhibit A
to the application identifies the current Top-Tier Funds and
Underlying Funds.
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3. Applicants request that the order also apply to each existing or
future registered open-end management investment company or series
thereof that is part of the same ``group of investment companies'' as
the Registrants under Section 12(d)(1)(G)(ii) of the Act, and is
advised or sub-advised now or in the future by an Adviser or any entity
controlling, controlled by, or under common control with an Adviser
(such entity included in the term ``Adviser'' and such investment
companies or series thereof, collectively with the Registrants and
their series, the ``Funds'').
4. Applicants propose that the Funds enter into a Special Servicing
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Agreement that would allow an Underlying Fund to bear the expenses of a
Top-Tier Fund (other than investment management fees, rule 12b-1 fees
and class-specific administrative service fees). Under the Special
Servicing Agreement, each Underlying Fund will bear expenses of a Top-
Tier Fund in proportion to the estimated benefits to the Underlying
Fund arising from the investment in the Underlying Fund by the Top-Tier
Fund (``Underlying Fund Benefits'').
5. Applicants state that the Underlying Fund Benefits are expected
to result primarily from the incremental increase in assets resulting
from investments in the Underlying Funds by the Top-Tier Funds and the
large size of a Top-Tier Fund's holdings of shares in a shareholder
account relative to the average size of the share balances held in
other Underlying Fund shareholder accounts. A Top-Tier Fund's
shareholder account will experience fewer shareholder transactions and
greater predictability of transaction activity than other shareholder
accounts. As a result, the shareholder servicing costs to any
Underlying Fund for servicing one account registered to a Top-Tier Fund
will be significantly less than the cost to that same Underlying Fund
of servicing the same pool of assets contributed by a large group of
shareholders owning relatively small accounts in one or more Underlying
Funds. In addition, by reducing Top-Tier Fund expenses, the Special
Servicing Agreement may lead to increased assets being invested in the
Top-Tier Funds, which in turn would lead to increased assets being
invested in the Underlying Funds. Further, increased assets could
enable the Underlying Funds to control and reduce their expense ratios
because their operating expenses will be spread over a larger asset
base.
6. No Fund will enter into a Special Servicing Agreement unless the
Special Servicing Agreement: (a) Precisely describes the services
provided to the Top-Tier Funds and the expenses incurred by a Top-Tier
Fund that may be reimbursed by an Underlying Fund (``Underlying Fund
Payments''); (b) provides that no affiliated person of the Top-Tier
Funds, or affiliated person of such person, will receive, directly or
indirectly, any portion of the Underlying Fund Payments; (c) provides
that the Underlying Fund Payments may not exceed the amount of actual
expenses incurred by the Top-Tier Funds; (d) provides that no
Underlying Fund will reimburse transfer agent expenses of a Top-Tier
Fund, including out-of-pocket expenses and other expenses, at a rate in
excess of the average per account transfer agent expenses of the
Underlying Fund, including out-of-pocket and other expenses, expressed
as a basis point charge (for purposes of calculating the Underlying
Fund's average per account transfer agent expense, the Top-Tier Fund's
investment in the Underlying Fund will be excluded); and (e) has been
approved by the Fund's board of trustees (``Board''), including a
majority of trustees who are not ``interested persons'' (within the
meaning of section 2(a)(19) of the Act) (``Independent Directors/
Trustees''), as being in the best interests of any Fund and its
shareholders and not involving overreaching on the part of any person
concerned.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 under the Act provide
that an affiliated person of, or a principal underwriter for, a
registered investment company, or an affiliate of such person or
principal underwriter, acting as principal, shall not participate in,
or effect any transaction in connection with, any joint enterprise or
other joint arrangement in which the registered investment company is a
participant unless the Commission has issued an order approving the
arrangement. Each Adviser, as investment adviser, is an affiliated
person of each of the Underlying Funds and Top-Tier Funds, which in
turn could be deemed to be under common control of the Advisers and
therefore affiliated persons of each other. The Top-Tier Funds and the
Underlying Funds also may be affiliated persons by virtue of a Top-Tier
Fund's ownership of more than 5% of the outstanding voting securities
of an Underlying Fund. Consequently, the Special Servicing Agreement
could be deemed to be a joint transaction among the Top-Tier Funds, the
Underlying Funds and Advisers.
2. Rule 17d-1 under the Act provides that, in passing upon a joint
arrangement under the rule, the Commission will consider whether
participation of the investment company in the joint enterprise or
joint arrangement on the basis proposed is consistent with the
provisions, policies, and purposes of the Act and the extent to which
the participation is on a basis different from or less advantageous
than that of other participants.
3. Applicants request an order under section 17(d) and rule 17d-1
to permit the proposed expense sharing arrangements. Applicants state
that participation by the Top-Tier Funds, the Underlying Funds and
Advisers in the proposed expense sharing arrangements is consistent
with the provisions, policies and purposes of the Act, and that the
terms of the Special Servicing Agreement and the conditions set forth
below will ensure that no participant will participate on a basis less
advantageous than that of other participants.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. No Fund will enter into a Special Servicing Agreement unless the
Special Servicing Agreement: (a) Precisely describes the services
provided to the Top-Tier Funds and the Underlying Fund Payments; (b)
provides that no affiliated person of the Top-Tier Funds, or affiliated
person of such person, will receive, directly or indirectly, any
portion of the Underlying Fund Payments; (c) provides that the
Underlying Fund Payments may not exceed the amount of actual expenses
incurred by the Top-Tier Funds; (d) provides that no Underlying Fund
will reimburse transfer agent expenses of a Top-Tier Fund, including
out-of-pocket expenses and other expenses, at a rate in excess of the
average per account transfer agent expenses of the Underlying Fund,
including out-of-pocket expenses and other expenses, expressed as a
basis point charge (for purposes of calculating the Underlying Fund's
average per account transfer agent expense, the Top-Tier Funds'
investment in the Underlying Fund will be excluded); and (e) has been
approved by the Funds' Board, including a majority of the Independent
Directors/Trustees, as being in the best interests of the Fund and its
shareholders and not involving overreaching on the part of any person
concerned.
2. In approving a Special Servicing Agreement, the Board of an
Underlying Fund will consider, without limitation: (a) The reasons for
the Underlying Fund's entering into the Special Servicing Agreement;
(b) information quantifying the Underlying Fund Benefits; (c) the
extent to which investors in the Top-Tier Fund could have purchased
shares of the Underlying Fund; (d) the extent to which an investment in
the Top-Tier Fund represents or would represent a consolidation of
accounts in the Underlying Funds, through exchanges or otherwise, or a
reduction in the rate of increase in the number of accounts in the
Underlying Funds; (e) the extent to which the expense ratio of the
Underlying Fund was reduced following investment in the Underlying Fund
by
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the Top-Tier Fund and the reasonably foreseeable effects of the
investment by the Top-Tier Fund on the Underlying Fund's expense ratio;
(f) the reasonably foreseeable effects of participation in the Special
Servicing Agreement on the Underlying Fund's expense ratio; and (g) any
conflicts of interest that the Advisers, any affiliated person of the
Advisers, or any other affiliated person of the Underlying Fund may
have relating to the Underlying Fund's participation in the Special
Servicing Agreement.
3. Prior to approving a Special Servicing Agreement on behalf of an
Underlying Fund, the Board of the Underlying Fund, including a majority
of the Independent Directors/Trustees, will determine that: (a) The
Underlying Fund Payments under the Special Servicing Agreement are
expenses that the Underlying Fund would have incurred if the
shareholders of the Top-Tier Fund had instead purchased shares of the
Underlying Fund through the same broker-dealer or other financial
intermediary; (b) the amount of the Underlying Fund Payments is less
than the amount of Underlying Fund Benefits; and (c) by entering into
the Special Servicing Agreement, the Underlying Fund is not engaging,
directly or indirectly, in financing any activity which is primarily
intended to result in the sale of shares issued by the Underlying Fund.
4. In approving a Special Servicing Agreement, the Board of a Fund
will request and evaluate, and Advisers will furnish, such information
as may reasonably be necessary to evaluate the terms of the Special
Servicing Agreement and the factors set forth in condition 2 above, and
make the determinations set forth in conditions 1 and 3 above.
5. Approval by the Fund's Board, including a majority of the
Independent Directors/Trustees, in accordance with conditions 1 through
4 above, will be required at least annually after the Fund's entering
into a Special Servicing Agreement and prior to any material amendment
to a Special Servicing Agreement.
6. To the extent Underlying Fund Payments are treated, in whole or
in part, as a class expense of an Underlying Fund, or are used to pay a
class-based expense of a Top-Tier Fund, conditions 1 through 5 above
must be met with respect to each class of a Fund as well as the Fund as
a whole.
7. Each Fund will maintain and preserve the Board's findings and
determinations set forth in conditions 1 and 3 above, and the
information and considerations on which they were based, for the
duration of the Special Servicing Agreement, and for a period not less
than six years thereafter, the first two years in an easily accessible
place.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30050 Filed 12-12-12; 8:45 am]
BILLING CODE 8011-01-P