
[Federal Register: May 2, 2008 (Volume 73, Number 86)]
[Notices]               
[Page 24324-24327]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02my08-135]                         


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28256; File No. 812-13466]

 
ING USA Annuity and Life Insurance Company, et al., Notice of 
Application

April 28, 2008.
AGENCY: The Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order pursuant to Section 26(c) of 
the Investment Company Act of 1940, as amended (the ``1940 Act'') 
approving a substitution of securities.

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Applicants: ING USA Annuity and Life Insurance Company and ReliaStar 
Life Insurance Company of New York (each a ``Company'' and together, 
the ``Companies''), Separate Account B of ING USA Annuity and Life 
Insurance Company, ReliaStar Life Insurance Company of New York 
Separate Account NY-B (each, an ``Account'' and together, the 
``Accounts''), and ING Variable Portfolios, Inc. are collectively 
referred to herein as the ``Applicants.''

Summary of Application: The Applicants request an order, pursuant to 
Section 26(c) of the 1940 Act, permitting the substitution 
(``Substitution'') of shares of the ING Russell Small Cap Index 
Portfolio--Class S (the ``Substitute Fund'') for shares of ProFund VP 
Small-Cap (the ``Replaced Fund'').

Filing Date: The Application was filed on December 27, 2007 and amended 
and restated on April 18, 2008.

Hearing or Notification of Hearing: An order granting the Application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Secretary of the 
Commission and serving Applicants with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on May 22, 2008, 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 Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants, J. Neil McMurdie, Counsel, 
ING Americas U.S. Legal Services, One Orange Way, C1S, Windsor, CT 
06095.

FOR FURTHER INFORMATION CONTACT: Alison White, Senior Counsel, or Joyce 
M. Pickholz, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 551-6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
Application. The complete Application is available for a fee from the 
Public Reference Branch of the Commission, 100 F Street, NE., Room 
1580, Washington, DC 20549.

Applicants' Representations

    1. Each of the Companies is an indirect wholly owned subsidiary of 
ING Groep, N.V. (``ING''). ING is a global financial services holding 
company based in The Netherlands which is active in the field of 
insurance, banking and asset management. As a result, each Company 
likely would be deemed to be an affiliate of the others.
    2. ING USA Annuity and Life Insurance Company (``ING USA'') is an 
Iowa stock life insurance company which was originally organized in 
1973 under the insurance laws of Minnesota. Through January 1, 2004 
mergers, ING USA's operations include the business of Equitable Life 
Insurance Company of Iowa, United Life and Annuity Insurance Company, 
and USG Annuity and Life Company. Prior to January 1, 2004, ING USA was 
known as Golden American Life Insurance Company. ING USA is principally 
engaged in the business of issuing life insurance and annuities.
    3. ReliaStar Life Insurance Company of New York (``ReliaStar NY'') 
is a stock life insurance company which was incorporated under the laws 
of the State of New York in 1917. Through an April 1, 2002 merger, 
ReliaStar NY's operations include the business of First Golden American 
Life Insurance Company of New York. ReliaStar NY is principally engaged 
in the business of issuing life insurance and annuities.
    4. Each of the Accounts is a segregated asset account of the 
Company that is the depositor of such Account, and is registered under 
the 1940 Act as a unit investment trust. Each of the respective 
Accounts is used by the Company of which it is a part to support the 
Contracts that it issues.
    5. Separate Account B of ING USA Annuity and Life Insurance Company 
(File No. 811-5626) was established by Golden in 1988 under the laws of 
the State of Minnesota.
    6. ReliaStar Life Insurance Company of New York Separate Account 
NY-B, formerly Separate Account NY-B of First Golden American Life 
Insurance Company of New York (File No. 811-7935), was established by 
First Golden in 1996 under the laws of the State of New York.
    7. The ING Russell Small Cap Index Portfolio, a series of ING 
Variable Portfolios, Inc., will be used as the Substitute Fund.
    8. ING Variable Portfolios, formerly known as Aetna Variable 
Portfolios, Inc., was organized as a Maryland Corporation in 1996. ING 
Variable Portfolios is registered under the 1940 Act as an open-end 
management investment company (File No. 811-07651).
    9. ING Investments, LLC (``ING Investments''), an Arizona limited 
liability company and an SEC registered investment adviser, serves as 
the investment adviser to each portfolio of ING Variable Portfolios. 
ING Investments maintains its offices at 7337 East Doubletree Ranch 
Road, Scottsdale, Arizona 85258.
    10. ING Investments, subject to the direction of ING Variable 
Portfolios Board of Directors (the ``Board''), will have overall 
responsibility for the management of the Substitute Fund. ING 
Investments will provide all investment advisory and portfolio 
management services for the Substitute Fund and assist in managing and 
supervising all aspects of the general day-to-day business activities 
and operations of the Substitute Fund, including custodial, transfer 
agency, dividend disbursing, accounting, auditing, compliance and 
related services.
    11. The ProFund VP Small-Cap, a series of the ProFunds Trust, will 
be replaced pursuant to any order issued pursuant to this Application.
    12. The terms and conditions, including charges and expenses, 
applicable to each Contract are described in the registration 
statements filed with the SEC for each. The Contracts are issued as 
individual variable annuity contracts. As each Contract is structured, 
owners of the Contract (each a ``Contract Owner'') may select one or 
more of the investment options available under the Contract by 
allocating premiums and transferring account value to that subaccount 
of the relevant Account that corresponds to the investment option 
desired. Thereafter, the account value of the Contract Owner will vary 
based on the investment experience of the selected subaccount(s). 
Generally, a Contract Owner may, during the life of each Contract, make 
unlimited transfers of account values among the subaccounts available 
under the Contract, subject to any administrative and/or transfer fees 
applicable under the Contracts and any

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limits related to frequent or disruptive transfers.
    13. The comparative fees and expenses for each fund in this 
proposed substitution are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                  In percent
                             -----------------------------------------------------------------------------------
                                                                              Total
                                Management     Distribution      Other        annual      Expense     Net annual
                                   fees        (12b-1) fees     expenses     expenses     waivers      expenses
----------------------------------------------------------------------------------------------------------------
Substitute Fund:
     ING Russell                0.33            0.25         0.23         0.81     \1\ 0.11         0.70
     Small Cap Index
     Portfolio--Class S.....
Replaced Fund:
     ProFund VP                 0.75            0.25         0.56         1.56  ...........         1.56
     Small-Cap \1\..........
----------------------------------------------------------------------------------------------------------------
\1\ The expense limits will continue through at least May 1, 2009.

    14. With respect to the Replaced Fund, the Applicants represent 
that the investment objective and the investment policies of the 
Substitute Fund are the same as those of the Replaced Fund and 
therefore the essential objectives and risk expectations of those 
Contract Owners with interests in subaccounts of the Replaced Fund 
(individually, an ``Affected Contract Owner'' and, collectively, 
``Affected Contract Owners'') will continue to be met after the 
Substitution.
    15. The expense ratios and total return figures for each fund as of 
September 30, 2007, are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                 In percent
                                                          ------------------------------------------------------
                                                            Expense
                                                             ratio      1 Year    3 Years    5 Years    10 Years
----------------------------------------------------------------------------------------------------------------
Substitute Fund:
     ING Russell Small Cap Index Portfolio--Class       0.70  .........  .........  .........  .........
     S \2\...............................................
Replaced Fund:
     ProFund VP Small-Cap \1\....................       1.56      -2.21       4.88      13.97  .........
----------------------------------------------------------------------------------------------------------------
\1\ The expense limits will continue through at least May 1, 2009.
\2\ This portfolio commenced operations on March 4, 2008. Therefore, annual performance information is not yet
  available.

    16. Applicants will effect the Substitution as soon as practicable 
following the issuance of the requested order. As of the Effective Date 
of the Substitution, shares of the Replaced Fund will be redeemed for 
cash. The Companies, on behalf of the Replaced Fund subaccount of each 
relevant Account, will simultaneously place a redemption request with 
the Replaced Fund and a purchase order with the Substitute Fund so that 
the purchase of Substitute Fund shares will be for the exact amount of 
the redemption proceeds. Thus, Contract values will remain fully 
invested at all times. The proceeds of such redemptions will then be 
used to purchase the appropriate number of shares of the Substitute 
Fund.
    17. The Substitution will take place at relative net asset value 
(in accordance with Rule 22c-1 under the 1940 Act) with no change in 
the amount of any affected Contract owner's contract value, cash value, 
accumulation value, account value or death benefit, or in the dollar 
value of his or her investment in the applicable Account. No brokerage 
commissions, fees or other remuneration will be paid by either the 
Replaced Fund or the Substitute Fund or by affected Contract owners in 
connection with the Substitution. The transactions comprising the 
Substitution will be consistent with the policies of each investment 
company involved and with the general purposes of the 1940 Act.
    18. Affected Contract owners will not incur any fees or charges as 
a result of the Substitution nor will their rights or the Companies' 
obligations under the Contracts be altered in any way. The Companies or 
their affiliates will pay all expenses and transaction costs of the 
Substitution, including legal and accounting expenses, any applicable 
brokerage expenses, and other fees and expenses. In addition, the 
Substitution will not impose any tax liability on affected Contract 
owners. The Substitution will not cause the Contract fees and charges 
currently being paid by affected Contract owners to be greater after 
the Substitution than before the Substitution. Also, as described more 
fully below, after notification of the Substitution and for 30 days 
after the Substitution, affected Contract owners may reallocate to any 
other investment options available under their Contract the subaccount 
value of the Replaced Fund without incurring any administrative costs 
or allocation (transfer) charges.
    19. All affected Contract owners were notified of the Substitution 
by means of supplements to the Contract prospectuses shortly after the 
date the Application was first filed with the Commission. Among other 
information regarding the Substitution, the supplements informed 
affected Contract owners that beginning on the date of the first 
supplement the Companies would not exercise any rights reserved by them 
under the Contracts to impose restrictions or fees on transfers from 
the Replaced Fund (other than restrictions related to frequent or 
disruptive transfers) until at least 30 days after the Effective Date 
of the Substitution. Following the date the order requested by the 
Application is issued, but before the Effective Date, affected Contract 
owners will receive a second supplement to the Contract prospectus 
setting forth the Effective Date and advising affected Contract owners 
of their right, if they so choose, at any time prior to the Effective 
Date, to reallocate or withdraw accumulated value in the Replaced Fund 
subaccounts under their Contracts or otherwise terminate their interest 
therein in accordance with the terms and conditions of their Contracts. 
If affected Contract Owners reallocate account value prior to the 
Effective Date or within 30 days after the Effective Date, there will 
be no charge for the

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reallocation of accumulated value from the Replaced Fund subaccount and 
the reallocation will not count as a transfer when imposing any 
applicable restriction or limit under the Contract on transfers. The 
Companies will not exercise any right they may have under the Contracts 
to impose additional restrictions or fees on transfers from the 
Replaced Fund under the Contracts (other than restrictions related to 
frequent or disruptive transfers) for a period of at least 30 days 
following the Effective Date of the Substitution. Additionally, all 
current Contract Owners will be sent prospectuses of the Substitute 
Fund before the Effective Date.
    20. Within five (5) business days after the Effective Date, 
affected Contract Owners will be sent a written confirmation (``Post-
Substitution Confirmation'') indicating that shares of the Replaced 
Fund have been redeemed and that the shares of Substitute Fund have 
been substituted. The Post-Substitution Confirmation will show how the 
allocation of the Contract Owner's account value before and immediately 
following the Substitution has changed as a result of the Substitution 
and detail the transactions effected on behalf of the respective 
affected Contract Owner because of the Substitution.

Applicant's Legal Analysis

    1. Applicants represent that each of the prospectuses for the 
Contracts expressly discloses the reservation of the Companies' right, 
subject to Commission approval and compliance with applicable law, to 
substitute shares of another open-end management investment company for 
shares of an open-end management investment company held by a 
subaccount of an Account.
    2. Applicants state that the Companies reserved this right of 
substitution both to protect themselves and their Contract owners in 
situations where either might be harmed or disadvantaged by 
circumstances surrounding the issuer of the shares held by one or more 
of its separate accounts, and to afford the opportunity to replace such 
shares where to do so could benefit the Contract owners and Companies.
    3. Applicants maintain that Contract Owners will be better served 
by the proposed Substitution. Applicants anticipate that the 
replacement of the Replaced Fund will result in a Contract that is 
administered and managed more efficiently, and one that is more 
competitive with other variable products in both wholesale and retail 
markets. The Substitute Fund will be managed according to the same 
investment objective and policies as the Replaced Fund. Moreover, the 
overall expenses of the Substitute Fund are less than those of the 
Replaced Fund.
    4. Applicants anticipate that Contract owners will be at least as 
well off with the proposed array of subaccounts to be offered after the 
proposed substitutions as they have been with the array of subaccounts 
offered before the substitutions. The proposed Substitution retains for 
Contract owners the investment flexibility which is a central feature 
of the Contracts. If the proposed Substitution is carried out, all 
Contract owners will be permitted to allocate purchase payments and 
transfer accumulated values and contract values between and among the 
remaining subaccounts as they could before the proposed Substitution.

Applicant's Conditions

    1. The Substitute Fund has an investment objective and investment 
policies that are the same as the investment objective and policies of 
the Replaced Fund, so that the objective of the Affected Contract 
Owners can continue to be met.
    2. For two years following the implementation of the Substitution 
described herein, the net annual expenses of the Substitute Fund will 
not exceed the net annual expenses of the Replaced Fund immediately 
preceding the Substitution. To achieve this limitation, ING Investments 
will waive fees or reimburse the Substitute Fund in certain amounts to 
maintain expenses at or below the limit. Any adjustments will be made 
at least on a quarterly basis. In addition, the Companies will not 
increase the Contract fees and charges, including asset based charges 
such as mortality and expense risk charges deducted from the 
Subaccounts, that would otherwise be assessed under the terms of the 
Contracts for a period of at least two years following the 
Substitution.
    3. Affected Contract Owners may reallocate amounts from the 
Replaced Fund without incurring a reallocation charge or limiting their 
number of future reallocations, or withdraw amounts under any Affected 
Contract or otherwise terminate their interest therein at any time 
prior to the Effective Date and for a period of at least 30 days 
following the Effective Date in accordance with the terms and 
conditions of such Contract. Any such reallocation will not count as a 
transfer when imposing any applicable restriction or limit under the 
Contract on transfers.
    4. The Substitution will be effected at the net asset value of the 
respective shares in conformity with Section 22(c) of the 1940 Act and 
Rule 22c-1 thereunder, without the imposition of any transfer or 
similar charge by Applicants.
    5. The Substitution will take place at relative net asset value 
without change in the amount or value of any Contract held by Affected 
Contract Owners. Affected Contract Owners will not incur any fees or 
charges as a result of the Substitution, nor will their rights or the 
obligations of the Companies under such Contracts be altered in any 
way.
    6. No brokerage commissions, fees or other remuneration will be 
paid by the Replaced Fund or the Substitute Fund or Affected Contract 
Owners in connection with the Substitution.
    7. The Substitution will not alter in any way the annuity, life or 
tax benefits afforded under the Contracts held by any Affected Contract 
Owner.
    8. The Companies will send to their Affected Contract Owners within 
five (5) business days of the Substitution a written Post-Substitution 
Confirmation which will include the before and after account values 
(which will not have changed as a result of the Substitution) and 
detail the transactions effected on behalf of the respective Affected 
Contract Owner with regard to the Substitution. With the Post-
Substitution Confirmations the Companies will remind Affected Contract 
Owners that they may reallocate amounts from the Substitute Fund 
without incurring a reallocation charge or limiting their number of 
future reallocations for a least 30 days following the Effective Date 
in accordance with the terms and conditions of their Contract.
    9. The Companies or their affiliates will pay all expenses and 
transaction costs of the Substitution, including legal and accounting 
expenses, any applicable brokerage expenses, and other fees and 
expenses. In addition, the Substitution will not impose any tax 
liability on Affected Contract Owners.
    10. Under the manager-of-managers relief covering ING Variable 
Portfolios, a vote of the shareholders is not necessary to change a 
sub-adviser, except for changes involving an affiliated sub-adviser. 
Notwithstanding, the Applicants agree not to change the Substitute 
Fund's sub-adviser without first obtaining shareholder approval after 
the Effective Date of the Substitution of either (a) the sub-adviser 
change or (b) the Applicants' continued ability to rely on their 
manager-of-manager relief.

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    11. The Commission shall have issued an order approving the 
Substitution under Section 26(c) of the 1940 Act.
    12. A registration statement for the Substitute Fund is effective 
and the investment objectives and policies and fees and expenses for 
the Substitute Fund as described herein have been implemented.
    13. Each Affected Contract Owner will have been sent a copy of (a) 
a Contract prospectus supplement informing shareholders of this 
Application; (b) a prospectus for the Substitute Fund, and (c) a second 
supplement to the Contract prospectus setting forth the Effective Date 
and advising Affected Contract Owners of their right to reconsider the 
Substitution and, if they so choose, any time prior to the Effective 
Date and for 30 days thereafter, to reallocate or withdraw amounts 
under their affected Contract or otherwise terminate their interest 
therein in accordance with the terms and conditions of their Contract.
    14. The Companies shall have satisfied themselves, that (a) the 
Contracts allow the substitution of investment company shares in the 
manner contemplated by the Substitution and related transactions 
described herein; (b) the transaction can be consummated as described 
in this Application under applicable insurance laws; and (c) that any 
regulatory requirements in each jurisdiction where the Contracts are 
qualified for sale, have been complied with to the extent necessary to 
complete the transaction.

Conclusion

    For the reasons and upon the facts set forth above, Applicants 
submit that the requested order meets the standards set forth in 
Section 26(c) of the 1940 Act. Applicants request an order of the 
Commission, pursuant to Section 26(c) of the 1940 Act, approving the 
Substitutions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-9632 Filed 5-1-08; 8:45 am]

BILLING CODE 8010-01-P
