

[Federal Register: October 18, 2005 (Volume 70, Number 200)]
[Notices]               
[Page 60577-60581]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18oc05-127]                         

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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\
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    \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.''
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    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.
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    \2\ Aetna Variable Fund, Investment Company Act Release Nos. 
23545 (Nov. 23, 1998) (notice) and 23616 (Dec. 21, 1998) (order).
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    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\
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    \3\ Id.
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    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
