Investment Company Act of 1940 — Section 15(a)
lNG Investments, LLC, Directed Services LLC, and lNG Investment Management Co. LLC

March 27, 2013

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
Our Ref. Nos. 801-48282; 801-32675; 801-9046

Your letter dated March 27, 2013, requests our assurance that we would not recommend enforcement action to the Securities and Exchange Commission (“Commission”) under section 15(a) of the Investment Company Act of 1940 (“1940 Act”) against ING Investments, LLC, Directed Services LLC, and ING Investment Management Co. LLC (collectively, the “Advisers”) if the ING Funds (defined below) obtain shareholder approval of new investment advisory agreements with the Advisers at a single meeting of shareholders, at the commencement of a series of related transactions that may be deemed to result in one or more “assignments” of the Funds’ advisory agreements.

BACKGROUND

You state the following:

Each Adviser is registered with the Commission under the Investment Advisers Act of 1940 (“Advisers Act”), and each serves as the investment adviser or subadviser to registered investment companies in a fund complex known as the “ING Funds.” Each ING Fund (“Fund”) is registered as an investment company with the Commission under the 1940 Act, or is a series of a registered investment company. The Funds include open-end and closed-end investment companies and currently hold approximately $90 billion in assets. The Advisers provide investment advisory services to the Funds pursuant to agreements that state that they terminate automatically in the event of an assignment (“Current Advisory Agreements”).

Each Adviser is an indirect, wholly owned subsidiary of ING U.S., Inc. (“ING U.S.”), which, in turn, is an indirect, wholly owned subsidiary of ING Groep N.V. (“ING Group”).¹ ING U.S. is the U.S. holding company for ING Group’s U.S.-based retirement, investments and insurance operations. ING Group is a global financial services company of Dutch origin that is active in the fields of banking, insurance, asset management, and retirement services. ING Group’s shares have been listed on Euronext since March 1991. In addition, depositary receipts for ING Group’s ordinary shares are listed on the stock exchanges of Amsterdam, Brussels, and New York (NYSE).

During the financial crisis of 2008-2009, in connection with financial assistance provided by the Kingdom of the Netherlands (“Dutch State”) to ING Group, ING Group was required, under European rules for state-supported companies, to agree to a restructuring plan calling for it to separate its global banking business from its global insurance, investment, and retirement businesses, including ING U.S. (“Divestiture”). Pursuant to the most recent agreement with the European Commission, ING Group is required to divest at least 25% of its interest in ING U.S. by the end of 2013, more than 50% of its interest by year-end 2014, and the remaining interest by year-end 2016.

ING Group has announced that the base case for the Divestiture includes an initial public offering of ING U.S. (“ING U.S. IPO”),² in which ING Group initially will sell a portion of its ownership interest in ING U.S. (which may include more or less than 25% of ING U.S.’s outstanding voting securities), and thereafter will divest its remaining ownership stake over time. The amount of stock to be sold in the ING U.S. IPO, and the number and timing of subsequent offerings, are not known to the Advisers, and will depend on a variety of factors, including the potential proceeds of the offerings and market conditions.

In light of these complexities, the Advisers have considered the timing of when to ask Fund shareholders to approve the new investment advisory agreements and subadvisory agreements to replace the Current Advisory Agreements, which will terminate automatically upon their assignment³ (“New Advisory Agreements”) and any subsequent advisory agreements that, subject to Board approval, may be entered into in the event that future offerings of shares of ING U.S. could be deemed to cause assignments of the advisory agreements then in force (“Subsequent Advisory Agreements”).

The Advisers and the Funds have developed a plan to solicit shareholder approval of the New Advisory Agreements and the Subsequent Advisory Agreements in connection with the ING U.S. IPO (“Plan”). This would be the only vote by the Funds’ shareholders on any assignments of investment advisory contracts arising from the Divestiture under the circumstances described herein.

Under the Plan, shareholders of the Funds would be asked to approve the New Advisory Agreements as well as any Subsequent Advisory Agreements at a single shareholder meeting. Proxy statements soliciting shareholder approval of the New Advisory Agreements and Subsequent Advisory Agreements would be distributed to Fund shareholders in near proximity to the anticipated time of the closing of the ING U.S. IPO. Thus, the Plan envisages seeking shareholder approval one time, through a single proxy statement, of all investment advisory agreements entered into in connection with the Divestiture under the circumstances described herein. This would occur even if the ING U.S. IPO does not involve the offering of more than 25% of the outstanding voting securities of ING U.S., and might, therefore, not be presumed to be an assignment, in which event the parties could be viewed as seeking approval of New Advisory Agreements and Subsequent Advisory Agreements even though the Current Advisory Agreements presumably would not have terminated. The Advisers would consider whether future offerings of ING U.S. shares may result in an assignment of the then-Current Advisory Agreements on a case-by-case basis, in which case the Advisers would ask the Board to approve, and the Board would need to approve, Subsequent Advisory Agreements. The terms of any Subsequent Advisory Agreements would not be materially different from the terms of the New Advisory Agreements.

After the meeting of shareholders contemplated by the proxy statement, and through the completion of the Divestiture, the prospectuses for each open-end Fund would disclose the relevant facts associated with the Divestiture and the fact, assuming shareholder approval, that the Fund’s shareholders had approved the New Advisory Agreements and Subsequent Advisory Agreements. Similar information would be included in shareholder reports for each closed-end Fund.

The Plan assumes that each public offering of the shares of ING U.S., including shares offered in the ING U.S. IPO, will involve the broad sale of the common stock of ING U.S. to the public with no single “person,” as such term is defined in the 1940 Act, acquiring more than 25% of ING U.S.’s outstanding voting securities in the offerings.

ANALYSIS

Section 15(a)(4) of the 1940 Act provides, in part:

It shall be unlawful for any person to serve or act as an investment adviser of a registered investment company, except pursuant to a written contract, which contract, whether with such registered company or with an investment adviser of such registered company, has been approved by the vote of a majority of the outstanding voting securities of such registered company, and . . . provides, in substance, for its automatic termination in the event of its assignment.

Section 2(a)(4) of the 1940 Act defines “assignment” to include:

any direct or indirect transfer or hypothecation of a contract . . . by the assignor, or of a controlling block of the assignor’s outstanding voting securities by a security holder of the assignor . . . .

While the phrase “controlling block of voting securities” is not defined in the 1940 Act, section 2(a)(9) of the 1940 Act defines “control” as “the power to exercise a controlling influence over the management or policies of a company . . . .”⁴

The Commission has indicated that Congress enacted section 15(a) of the 1940 Act “to give shareholders a voice in a fund’s investment advisory contract and to prevent trafficking in fund advisory contracts.”⁵ The staff of the Division of Investment Management has explained that trafficking essentially is the sale of investment advisory relationships.⁶

You believe that there are reasonable arguments in support of the conclusion that the Divestiture would not result in an “assignment” of the Current Advisory Agreements. Before and after the Divestiture, the Advisers’ outstanding voting securities will be held directly or indirectly by ING U.S. ING U.S. is indirectly owned by ING Group, itself a public company whose ownership is broadly dispersed. The Plan assumes that, as a result of the Divestiture, shares of ING U.S. will be broadly distributed, without the acquisition of more than 25% of the shares of ING U.S. by a single “person,” as such term is defined in section 2(a)(28) of the 1940 Act.⁷ That is, the Plan assumes that the ownership of ING U.S. is and will be held, directly or indirectly, by a broadly dispersed group of public shareholders both before and after the Divestiture. ⁸

Nevertheless, you believe that it is appropriate to seek Fund shareholder approval of investment advisory agreements in consideration of the fact that, upon completion of the Divestiture, the Advisers no longer will be owned indirectly by ING Group.⁹ Accordingly, on the recommendation of the Advisers and following their own due diligence reviews, the Funds’ Boards (collectively, the “Board”) approved the New Advisory Agreements to replace the Current Advisory Agreements. The Board also authorized the solicitation of shareholder approval of the New Advisory Agreements, as well as any Subsequent Advisory Agreements.

You believe that it is reasonable to seek Fund shareholder approval of the New Advisory Agreements and Subsequent Advisory Agreements at the commencement of the Divestiture, even though the overall Divestiture may take several years to complete. As described above, ING Group agreed to pursue the Divestiture in connection with aid it received from the Dutch State. If ING U.S. conducts multiple offerings to complete the Divestiture, you argue that the offerings will all be related and, in essence, part of a single plan for ING Group to divest its stake in ING U.S. You believe that the essential issue to be presented to Fund shareholders is whether the Advisers should continue to serve the ING Funds even though the Advisers will not be owned indirectly by ING Group. You state that this issue would be the same if there were one proxy solicitation or multiple proxy solicitations for each Fund. You argue that soliciting shareholder approval on multiple occasions in connection with subsequent offerings of ING U.S.’s shares may lead to confusion by Fund shareholders, who would see successive proxy statements that repeat substantially the same information, and would substantially increase printing, mailing and solicitation expenses which would be borne by the Advisers or an affiliate (but not the Funds).

You also believe that the timing of Fund shareholder approval of the New Advisory Agreements and Subsequent Advisory Agreements is appropriate. You believe that the Plan will allow Fund shareholders the opportunity to vote in near proximity to the anticipated time of the ING U.S. IPO, which is the offering that is expected to garner the most media and market attention, at which time there will be a meaningful change in the ownership and governance of ING U.S. in that, among other things, ING U.S. will begin to operate as a public company and as such will be subject to a host of governance, disclosure and other requirements to which it is not currently subject.

Finally, you believe that the proposal to include disclosure in fund prospectuses and shareholder reports about the Divestiture and shareholder approval of the New Advisory Agreements and Subsequent Advisory Agreements addresses any concern that new Fund shareholders may not have a voice on whether the Advisers should continue to serve the Funds. You argue that the disclosure ensures that shareholders are informed of all relevant facts about the Divestiture at the time they make the decision to invest with the Funds.

Based on the facts and representations set forth in your letter, we would not recommend enforcement action to the Commission against the Advisers under section 15(a) of the 1940 Act if the Funds obtain shareholder approval of the New Advisory Agreements and Subsequent Advisory Agreements at a single meeting of shareholders around the time of the closing of the ING U.S. IPO, consistent with the Plan described herein. Our position is based particularly on your representations that:

• ING Group was required, under European rules for state supported companies, to agree to a restructuring plan calling for it to separate its global banking business from its global insurance, investment, and retirement businesses, including ING U.S. If ING U.S. conducts multiple offerings to complete the Divestiture, the offerings will all be related and, in essence, part of a single plan for ING Group to divest its stake in ING U.S.
   
• The Plan assumes that as a result of the Divestiture, shares of ING U.S. will be broadly distributed, without the acquisition of more than 25% of the shares of ING U.S. by a single “person,” as such term is defined in Section 2(a)(28) of the 1940 Act. That is, the Plan assumes that the ownership of ING U.S. is and will be held, directly or indirectly, by a broadly dispersed group of public shareholders both before and after the Divestiture.

This response expresses our view on enforcement action only and does not express any legal or interpretive position on the issues presented. Because our position is based upon all of the facts and representations in your letter, any different facts or representations may require a different conclusion.¹⁰

Catherine A. Courtney
Senior Counsel

¹ ING Investment Management BV, a non-U.S. affiliate of the Advisers that is a wholly owned subsidiary of ING Group and is not a subsidiary of ING U.S., also serves as a subadviser to certain Funds.

² On November 9, 2012, ING U.S. filed a Form S-1 registration statement (file number 333-184847) with the Commission to register an initial public offering of ING U.S. common stock. Amendments to the Form S-1 were filed on January 23, 2013 and March 19, 2013. As of the date of this letter, the registration statement has not yet become effective.

³ The ING Funds complex currently is organized as two different “clusters” under two separate boards of trustees. The chairman of each board is independent and the independent trustees on each board are represented by counsel that is “independent legal counsel” as that term is defined in rule 0-1(a)(6) under the 1940 Act. Shareholders of all of the Funds will be asked to approve a single consolidated board at the same shareholder meetings, at which shareholders will consider the approval of the New Advisory Agreements and the Subsequent Advisory Agreements (as defined herein).

⁴ Section 2(a)(9) of the 1940 Act provides a rebuttable presumption of control when “[a]ny person . . . owns beneficially, either directly or through one or more controlled companies, more than 25 per centum of the voting securities of a company . . . .” A person who owns 25 per centum or less of the voting securities of a company is presumed not to control the company. Section 2(a)(9) provides that any presumption that is established under the section may be rebutted by evidence, but will continue until the Commission makes a determination to the contrary by order either on its own motion or on application by an interested person. See also In the Matter of Fundamental Investors, Inc., et al., Investment Company Act Release No. 3596 (Dec. 27, 1962) (A presumption of control or non-control may be rebutted in a judicial proceeding, as well as by Commission order.)

The Commission has held that the term "controlling influence" means the “act or process, or power of producing an effect which may be without apparent force or direct authority and is effective in checking or directing action, or exercising restraint or preventing free action.” See In the Matter of Investors Mutual, Inc., et al., Investment Company Act Release No. 4595 (May 11, 1966) at text preceding n.12 (citation omitted), aff'd, Phillips v. SEC, 388 F.2d 964 (2d Cir. 1968). Furthermore, a controlling influence:

need not be actually exercised; the latent power to exercise it is sufficient . . . . And those exercising a controlling influence need not necessarily be able to carry their point, since such influence may be effective without accomplishing its purpose fully. . . . In applying [these principles], however, it must be borne in mind that control determinations involve issues of fact which cannot be resolved by use of a mathematical formula. They require a careful appraisal of the over-all effect of the various relationships and other circumstances present in [each] particular case, some of which may point to one inference while others to an opposite one. Id. at text accompanying n.15 (citation omitted).

⁵ See, e.g., Temporary Exemption for Certain Investment Advisers, Investment Company Act Release No. 24177 (Nov. 29, 1999) citing Hearings on S.3580 Before the Subcomm. of the Senate Comm. on Banking and Currency, 76th Cong., 3d. Sess. 253 (1940) (“S.3580 Hearings”) (statement of David Schenker).

⁶ See SEC Staff Report, Exemptive Rule Amendments of 2004: The Independent Chair Condition 21 (2005) (citing S.3580 Hearings at 38 (statement of Commissioner Healy: “after investors have invested substantial sums in companies on their faith in the reputation and standing of the existing managements, the insiders have frequently transferred control . . . to other persons, without the prior knowledge or consent of these security holders.”)).

⁷ In particular, you do not ask, and we express no view, regarding compliance with section 15(a) of the 1940 Act in a situation where ownership is not broadly dispersed after the Divestiture or where a shareholder or organized group of shareholders may be deemed to control ING U.S. even if the shareholder or organized group of shareholders acquire less than 25% of the outstanding voting securities of ING U.S.

⁸ See, e.g., Dean Witter, Discover & Co.; Morgan Stanley Group Inc., SEC No-Action Letter (Apr. 18, 1997) (“Dean Witter”), in which the Staff stated that:

[t]he transfer or issuance of a block of stock in connection with a merger involving two issuers generally would not by itself cause an assignment of the advisory contracts of their advisory subsidiaries, for purposes of the [1940 Act] or the Advisers Act, unless (1) a person who had control of either issuer prior to the transaction does not have control of the surviving entity after the transaction, (2) a person who did not have control of either issuer prior to the transaction gains control of the surviving entity, or (3) the transaction results in an advisory subsidiary being merged out of existence.

⁹ See Willheim v. Murchison, 342 F.2d 33, 37 (2d Cir. 1965), cert. denied, 382 U.S. 840 (1965).

¹⁰ In particular, you do not ask, and we express no view, regarding compliance with section 15(a) of the 1940 Act in a situation where a shareholder or organized group of shareholders may be deemed to control ING U.S. even if the shareholder or organized group of shareholders acquire less than 25% of the outstanding voting securities of ING U.S.

Incoming Letter

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