NOTES TO FINANCIAL STATEMENTS
AS OF FEBRUARY 28, 2013
(CONTINUED)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
(continued)
option is that the Fund gives up the opportunity for
profit if the market price of the security increases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. Risks may also arise from an illiquid secondary market or from the inability of counterparties to meet the terms of the
contract.
The Fund generates premiums and seeks gains by writing OTC
call options on custom baskets of equity securities on a portion of the value of the equity portfolio. Please refer to Note 7 for the volume of written
OTC call option activity during the year ended February 28, 2013.
J. Indemnifications. In the normal course of
business, the Fund may enter into contracts that provide certain indemnifications. The Fund’s maximum exposure under these arrangements is
dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, based on experience, management considers
risk of loss from such claims remote.
NOTE 3 — INVESTMENT MANAGEMENT AND ADMINISTRATIVE
FEES
ING Investments, LLC (“ING Investments” or the
“Investment Adviser”), an Arizona limited liability company, is the Investment Adviser of the Fund. The Fund pays the Investment Adviser for
its services under the investment management agreement (“Management Agreement”), a fee, payable monthly, based on an annual rate of 1.00% of
the Fund’s average daily managed assets. For the purposes of the Management Agreement, managed assets are defined as the Fund’s average daily
gross asset value, minus the sum of the Fund’s accrued and unpaid dividends on any outstanding preferred shares and accrued liabilities (other
than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Fund and the liquidation preference of
any outstanding preferred shares). As of February 28, 2013, there were no preferred shares outstanding.
The Investment Adviser entered into a sub-advisory
agreement (a “Sub-Advisory Agreement”) with ING Investment Management Co. LLC (“ING IM”), a Delaware limited liability company.
Subject to policies as the Board or the Investment Adviser might determine, ING IM manages the Fund’s assets in accordance with the Fund’s
investment objectives, policies and limitations.
ING Funds Services, LLC (the “Administrator”), a
Delaware limited liability company, serves as Administrator to the Fund. The Fund pays the Administrator for its services a fee based on an annual rate
of 0.10% of the Fund’s average daily managed assets.
NOTE 4 — OTHER TRANSACTIONS WITH AFFILIATED AND RELATED
PARTIES
The Fund has adopted a Deferred Compensation Plan (the
“Plan”), which allows eligible non-affiliated trustees as described in the Plan to defer the receipt of all or a portion of the trustees fees
payable. Amounts deferred are treated as though invested in various “notional” funds advised by ING Investments until distribution in
accordance with the Plan.
NOTE 5 — PURCHASES AND SALES OF INVESTMENT
SECURITIES
The cost of purchases and the proceeds from sales of
investments for the year ended February 28, 2013, excluding short-term securities, were $88,919,741 and $114,840,059, respectively.
NOTE 6 — EXPENSE LIMITATION
The Investment Adviser has entered into a written expense
limitation agreement (“Expense Limitation Agreement”) with the Fund under which it will limit the expenses of the Fund, excluding interest,
taxes, leverage expenses, and extraordinary expenses to 1.25% of average daily managed assets. The Investment Adviser may at a later date recoup from
the Fund fees waived and other expenses assumed by the Investment Adviser during the previous 36 months, but only if, after such reimbursement, the
Fund’s expense ratio does not exceed the percentage described above. The Expense Limitation Agreement is contractual and shall renew automatically
for one-year terms unless ING Investments or the Fund provides written notice of the termination within 90 days of the end of the then current term or
upon written termination of the Management Agreement. As of February 28, 2013, the Fund did not have any amounts waived or reimbursed that are subject
to recoupment by the Investment Adviser.
NOTE 7 — TRANSACTIONS IN WRITTEN
OPTIONS
Transactions in written OTC call options on custom baskets
on equity securities were as follows:
|
|
|
|
Number of
Contracts
|
|
Premiums
Received
|
|
|
|
|
|
854,162 |
|
|
$ |
3,256,195 |
|
|
|
|
|
|
437,739,056 |
|
|
|
33,221,413 |
|
16
NOTES TO FINANCIAL STATEMENTS
AS OF FEBRUARY 28, 2013
(CONTINUED)
NOTE 7 — TRANSACTIONS IN WRITTEN
OPTIONS
(continued)
|
|
|
|
Number of
Contracts
|
|
Premiums
Received
|
|
|
|
|
|
(208,262,603 |
) |
|
$ |
(16,367,740 |
) |
|
|
|
|
|
— |
|
|
|
— |
|
Options Terminated in Closing Purchase Transactions |
|
|
|
|
(229,177,637 |
) |
|
|
(18,216,229 |
) |
|
|
|
|
|
1,152,978 |
|
|
$ |
1,893,639 |
|
NOTE 8 — CONCENTRATION OF RISKS
All mutual funds involve risk — some more than others
— and there is always the chance that you could lose money or not earn as much as you hope. The Fund’s risk profile is largely a factor of
the principal securities in which it invests and investment techniques that it uses. For more information regarding the types of securities and
investment techniques that may be used by the Fund and its corresponding risks, see the Fund’s Prospectus and/or the Statement of Additional
Information.
Foreign Securities and Emerging Markets. The
Fund makes significant investments in foreign securities and securities issued by companies located in countries with emerging markets. Investments in
foreign securities may entail risks not present in domestic investments. Since investments in securities are denominated in foreign currencies, changes
in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund.
Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or
economic developments, as well as from movements in currency, security value and interest rate, all of which could affect the market and/or credit risk
of the investments. The risks of investing in foreign securities can be intensified in the case of investments in issuers located in countries with
emerging markets.
Leverage. Although the Fund has no current
intention to do so, the Fund is authorized to utilize leverage through the issuance of preferred shares and/or borrowings, including the issuance of
debt securities. In the event that the Fund determines in the future to utilize investment leverage, there can be no assurance that such a leveraging
strategy will be successful during any period in which it is employed.
Infrastructure-Related Investment. Because
the Fund invests in infrastructure companies, it has greater exposure to potentially adverse economic, regulatory, political and other changes
affecting such companies. Infrastructure companies are subject to a variety of factors that may adversely affect their business or operations including
interest rates and costs in connection with capital construction projects, costs associated with environmental and other regulations, the effects of
economic slowdowns, surplus capacity, increased competition from other suppliers of services, uncertainties concerning the availability of necessary
fuels, energy costs, the effects of energy conservation policies and other factors.
Industrials Sector. The industrials sector
can be significantly affected by general economic trends, including employment, economic growth, and interest rates, changes in consumer sentiment and
spending, the supply of and demand for specific industrial and energy products or services, commodity prices, legislation, government regulation and
spending, import controls, and worldwide competition. Furthermore, a company in the industrials sector can be subject to liability for environmental
damage, depletion of resources, and mandated expenditures for safety and pollution control.
Materials Sector. The materials sector can be
significantly affected by the level and volatility of commodity prices, the exchange value of the dollar, import controls, and worldwide competition.
At times, worldwide production of materials has exceeded demand as a result of over-building or economic downturns, which has led to commodity price
declines and unit price reductions. Companies in the materials industries can also be adversely affected by liability for environmental damage,
depletion of resources, mandated expenditures for safety and pollution control, labor relations, and government regulations.
NOTE 9 — CAPITAL SHARES
There was no capital share activity during the years ended
February 29, 2012, or February 28, 2013.
NOTE 10 — FEDERAL INCOME TAXES
The amount of distributions from net investment income and
net realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting
principles for investment companies. These book/tax differences may be either temporary or permanent. Permanent differences are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary differences are not reclassified. Key differences include the treatment of
short-term capital gains, foreign currency transactions, income from passive foreign investment companies (PFICs) and wash sale deferrals.
Distributions in excess of net investment income and/or net realized capital gains for tax purposes are reported as return of capital.
17
NOTES TO FINANCIAL STATEMENTS
AS OF FEBRUARY 28, 2013
(CONTINUED)
NOTE 10 — FEDERAL INCOME TAXES
(continued)
The following permanent tax differences have been
reclassified as of the Fund’s tax year ended December 31, 2012:
Undistributed
Net Investment Income
|
|
|
|
Accumulated
Net Realized
Gains/(Losses)
|
|
|
|
|
|
Dividends paid by the Fund from net investment income and
distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to
shareholders.
The tax composition of dividends and distributions in the
current period will not be determined until after the Fund’s tax year-end of December 31, 2013. The tax composition of dividends and distributions
as of the Fund’s most recent tax year-ends was as follows:
Tax Year Ended
December 31, 2012
|
|
Tax Year Ended
December 31, 2011
|
|
Ordinary
Income
|
|
Long-term
Capital Gain
|
|
Return
of Capital
|
|
Ordinary
Income
|
|
Long-term
Capital Gain
|
|
Return
of Capital
|
|
|
|
|
|
|
|
|
|
|
|
The tax-basis components of distributable earnings as of
the tax year ended December 31, 2012 were:
Unrealized
Appreciation/
(Depreciation)
|
|
|
|
|
|
|
|
|
|
|
The Fund’s major tax jurisdictions are U.S. federal
and Arizona. The earliest tax year that remains subject to examination by these jurisdictions is the Fund’s initial tax year of
2010.
As of February 28, 2013, no provision for income tax is
required in the Fund’s financial statements as a result of tax positions taken on federal and state income tax returns for open tax years. The
Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are
subject to examination by the Internal Revenue Service and state department of revenue.
NOTE 11 — RESTRUCTURING PLAN
The Investment Adviser, ING IM, and the Administrator, are
indirect, wholly-owned subsidiaries of ING U.S., Inc. (“ING U.S.”). ING U.S. is a U.S.-based financial institution whose subsidiaries operate
in the retirement, investment, and insurance industries. As of February 28, 2013, ING U.S. is a wholly-owned subsidiary of ING Groep N.V. (“ING
Groep”), which is a global financial institution of Dutch origin, with operations in more than 40 countries.
In October 2009, ING Groep submitted a restructuring plan
(the ″Restructuring Plan″) to the European Commission in order to receive approval for state aid granted to ING Groep by the Kingdom of the
Netherlands in November 2008 and March 2009. To receive approval for this state aid, ING Groep was required to divest its insurance and investment
management businesses, including ING U.S., before the end of 2013. In November 2012, the Restructuring Plan was amended to permit ING Groep additional
time to complete the divestment. Pursuant to the amended Restructuring Plan, ING Groep must divest at least 25% of ING U.S. by the end of 2013, more
than 50% by the end of 2014, and the remaining interest by the end of 2016 (such divestment, the ″Separation Plan″).
On November 9, 2012, ING U.S. filed a Registration
Statement on Form S-1 (the ″Form S-1″) with the U.S. Securities and Exchange Commission (″SEC″) to register an initial public
offering of ING U.S. common stock (the ″IPO″). Following an IPO, ING Groep would likely continue to own a majority of the common stock of
ING U.S. Subsequent to an IPO, ING Groep would likely sell its controlling ownership interest in ING U.S. over time. While the base case for the
Separation Plan is the IPO, all options remain open and it is possible that ING Groep’s divestment of ING U.S. may take place by means of a sale
to a single buyer or group of buyers. Notwithstanding the filing of the Form S-1, there can be no assurance that the IPO will occur.
It is anticipated that one or more of the transactions
contemplated by the Separation Plan would result in the automatic termination of the existing advisory and sub-advisory agreements under which the
Adviser and sub-adviser(s) provide services to the Fund. In order to ensure that the existing investment advisory and
18
NOTES TO FINANCIAL STATEMENTS
AS OF FEBRUARY 28, 2013
(CONTINUED)
NOTE 11 — RESTRUCTURING PLAN
(continued)
sub-advisory services can continue uninterrupted, the Board
approved new advisory and sub-advisory agreements for the Fund in connection with the IPO. In addition, shareholders of the Fund will be asked to
approve new investment advisory and sub-advisory agreements prompted by the IPO, as well as any future advisory and sub-advisory agreements prompted by
the Separation Plan that are approved by the Board and whose terms are not be materially different from the current agreements. This means that
shareholders may not have another opportunity to vote on a new agreement with the Adviser or an affiliated sub-adviser even if they undergo a change of
control, as long as no single person or group of persons acting together gains ″control″ (as defined in the 1940 Act) of ING
U.S.
The Separation Plan, whether implemented through public
offerings or other means, may be disruptive to the businesses of ING U.S. and its subsidiaries, including the Adviser and affiliated entities that
provide services to the Fund, and may cause, among other things, interruption of business operations or services, diversion of management’s
attention from day-to-day operations, reduced access to capital, and loss of key employees or customers. The completion of the Separation Plan is
expected to result in the Adviser’s and affiliated entities loss of access to the resources of ING Groep, which could adversely affect its
business. It is anticipated that ING U.S., as a stand-alone entity, may be a publicly held U.S. company subject to the reporting requirements of the
Securities Exchange Act of 1934 as well as other U.S. government and state regulations, and subject to the risk of changing
regulation.
During the time that ING Groep retains a majority interest
in ING U.S., circumstances affecting ING Groep, including restrictions or requirements imposed on ING Groep by European and other authorities, may also
affect ING U.S. A failure to complete the Separation Plan could create uncertainty about the nature of the relationship between ING U.S. and ING Groep,
and could adversely affect ING U.S. and the Adviser and its affiliates. Currently, the Adviser and its affiliates do not anticipate that the Separation
Plan will have a material adverse impact on their operations or the Fund and its operation.
NOTE 12 — SUBSEQUENT EVENTS
Dividends: Subsequent to February 28, 2013, the Fund made a
distribution of:
Per Share
Amount
|
|
|
|
Declaration
Date
|
|
Payable
Date
|
|
Record Date
|
|
|
|
|
|
|
|
|
|
Each quarter, the Fund will provide disclosures with
distribution payments made that estimate the percentages of that distribution that represent net investment income, capital gains, and return of
capital, if any. A significant portion of the quarterly distribution payments made by the Fund may constitute a return of capital.
At a meeting of the Board on January 10, 2013, the Board
nominated to Class I of the Board five individuals (collectively, the “Nominees”) for election as Trustees of the Trust. The Nominees include
John V. Boyer, Patricia W. Chadwick, and Sheryl K. Pressler, each of whom is a current member of the Board. In addition, the Board has nominated to
Class I of the Board Albert E. DePrince Jr. and Martin J. Gavin and appointed to Class III of the Board Joseph E. Obermeyer and Russell H. Jones, each
of whom is not currently a member of the Board, but serves as a director or trustee to other investment companies in the ING Fund complex. If the
Nominees are approved by shareholders, the election of the Nominees and appointment of Messrs. Obermeyer and Jones are expected to be effective May 21,
2013. These nominations and appointments are, in part, the result of an effort on the part of the Board, another board in the ING Fund complex, and the
Investment Adviser to the Fund to consolidate the membership of the boards so that the same members serve on each board in the ING Fund complex. A
proxy statement has been sent to shareholders of the Fund included in this report, as well as shareholders of other ING Funds, seeking approval of the
same Nominees. If these proposals were all approved by shareholders, the result would be that all ING Funds would be governed by a board made up of the
same individuals.
The Fund has evaluated events occurring after the Statement
of Assets and Liabilities date (subsequent events) to determine whether any subsequent events necessitated adjustment to or disclosure in the financial
statements. Other than the above, no such subsequent events were identified.
19
ING INFRASTRUCTURE, INDUSTRIALS
AND MATERIALS FUND |
SUMMARY PORTFOLIO OF INVESTMENTS
AS
OF FEBRUARY 28, 2013 |
Shares
|
|
|
|
|
|
|
|
Value
|
|
Percentage
of Net
Assets
|
| |
|
|
|
|
|
|
|
|
|
|
|
$ |
4,365,801 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
3,780,653 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
2,796,876 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
10,943,330 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,139,287 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,412,982 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,784,040 |
|
|
|
1.3 |
|
|
|
|
|
|
|
China Unicom Hong Kong Ltd. ADR |
|
|
4,516,700 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
3,225,907 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
12,526,647 |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,374,631 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,122,766 |
|
|
|
1.4 |
|
|
|
|
|
|
|
Cie Generale de Geophysique-Veritas |
|
|
3,924,921 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
6,073,677 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
5,081,180 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
4,299,904 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
2,376,172 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
26,878,620 |
|
|
|
7.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
6,084,683 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
4,361,498 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
3,627,532 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
3,509,761 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
7,750,814 |
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
3,410,170 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
28,744,458 |
|
|
|
7.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,478,581 |
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,069,529 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,998,607 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
4,705,872 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
9,704,479 |
|
|
|
2.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,640,911 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
4,112,268 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
6,475,554 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
15,228,733 |
|
|
|
4.2 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
5,157,614 |
|
|
|
1.4 |
|
|
|
|
|
|
|
Millicom International Cellular SA |
|
|
3,875,430 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
9,033,044 |
|
|
|
2.5 |
|
|
|
|
|
|
|
|
|
|
European Aeronautic Defence and Space Co. NV |
|
|
6,857,202 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
3,095,536 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
9,952,738 |
|
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
Mobile Telesystems OJSC ADR |
|
|
5,083,533 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,468,047 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,831,501 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,168,800 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
2,853,866 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
8,022,666 |
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,130,430 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
8,591,957 |
|
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
7,106,468 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
7,594,765 |
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
3,628,765 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
6,232,746 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
37,285,131 |
|
|
|
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,593,473 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
7,269,519 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
6,630,442 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
7,392,506 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
4,944,829 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
5,017,140 |
|
|
|
1.4 |
|
|
|
|
|
|
|
EI Du Pont de Nemours & Co. |
|
|
4,962,440 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
7,564,180 |
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
7,082,474 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
8,020,188 |
|
|
|
2.2 |
|
|
|
|
|
|
|
Honeywell International, Inc. |
|
|
9,863,070 |
|
|
|
2.7 |
|
|
|
|
|
|
|
|
|
|
3,576,903 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
5,385,600 |
|
|
|
1.5 |
|
|
|
|
|
|
|
|
|
|
4,839,337 |
|
|
|
1.3 |
|
|
|
|
|
|
|
National Oilwell Varco, Inc. |
|
|
5,429,961 |
|
|
|
1.5 |
|
|
|
|
|
|
|
|
|
|
5,206,464 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
6,504,642 |
|
|
|
1.8 |
|
See Accompanying Notes to Financial
Statements
20
ING INFRASTRUCTURE, INDUSTRIALS
AND MATERIALS FUND |
SUMMARY PORTFOLIO OF INVESTMENTS
AS
OF FEBRUARY 28, 2013 (CONTINUED) |
Shares
|
|
|
|
|
|
|
|
Value
|
|
Percentage
of Net
Assets
|
| |
COMMON STOCK: (continued) |
|
United States: (continued) |
|
|
|
|
|
|
|
|
$ |
9,225,225 |
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
3,394,800 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
5,565,494 |
|
|
|
1.5 |
|
|
|
|
|
|
|
|
|
|
9,433,168 |
|
|
|
2.6 |
|
|
|
|
|
|
|
United Parcel Service, Inc. — Class B |
|
|
7,405,440 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
4,851,632 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
16,575,179 |
|
|
|
4.5 |
|
|
|
|
|
|
|
|
|
|
161,734,106 |
|
|
|
44.6 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
359,912,043 |
|
|
|
99.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
13,084 |
|
|
|
0.0 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,084 |
|
|
|
0.0 |
|
| |
|
|
|
|
|
|
Total Long-Term Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
359,925,127 |
|
|
|
99.3 |
|
SHORT-TERM INVESTMENTS: 1.0% |
|
|
|
|
|
|
|
|
BlackRock Liquidity Funds, TempFund, Institutional Class |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,722,300 |
|
|
|
1.0 |
|
| |
|
|
|
|
|
|
Total Short-Term Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,722,300 |
|
|
|
1.0 |
|
| |
|
|
|
|
|
|
Total Investments
in Securities
(Cost $321,841,160) |
|
$ |
363,647,427 |
|
|
|
100.3 |
|
|
|
|
|
|
|
Liabilities in Excess of Other Assets |
|
|
(1,153,852 |
) |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
$ |
362,493,575 |
|
|
|
100.0 |
|
“Other Securities” represents issues not
identified as the top 50 holdings in terms of market value and issues or issuers not exceeding 1% of net assets individually or in aggregate
respectively as of February 28, 2013.
The following footnotes apply to either the individual
securities noted or one or more of the securities aggregated and listed as a single line item.
@ |
|
Non-income producing security |
ADR |
|
American Depositary Receipt |
|
|
Cost for federal income tax purposes is
$322,437,240. |
Net unrealized appreciation consists of: |
|
|
|
|
|
|
Gross Unrealized Appreciation |
|
|
|
$ |
65,458,074 |
|
Gross Unrealized Depreciation |
|
|
|
|
(24,247,887 |
) |
Net Unrealized Appreciation |
|
|
|
$ |
41,210,187 |
|
Industry Diversification
|
|
|
|
Percentage
of Net Assets
|
|
|
|
|
|
50.4 |
% |
|
|
|
|
|
16.9 |
|
|
|
|
|
|
8.2 |
|
Oil & Gas Equipment & Services |
|
|
|
|
5.5 |
|
Telecommunication Services |
|
|
|
|
4.6 |
|
|
|
|
|
|
3.8 |
|
|
|
|
|
|
2.0 |
|
|
|
|
|
|
1.4 |
|
|
|
|
|
|
1.3 |
|
|
|
|
|
|
0.9 |
|
|
|
|
|
|
0.9 |
|
|
|
|
|
|
0.9 |
|
|
|
|
|
|
0.9 |
|
Diversified Metals & Mining |
|
|
|
|
0.8 |
|
|
|
|
|
|
0.8 |
|
|
|
|
|
|
0.0 |
|
|
|
|
|
|
1.0 |
|
Liabilities in Excess of Other Assets |
|
|
|
|
(0.3 |
) |
|
|
|
|
|
100.0 |
% |
Fair Value Measurementsˆ
The following is a summary of the fair valuations according
to the inputs used as of February 28, 2013 in valuing the assets and liabilities:
|
|
|
|
Quoted Prices
in Active Markets
for
Identical
Investments
(Level 1)
|
|
Significant
Other
Observable
Inputs#
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair Value
at
February 28, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,943,330 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
10,943,330 |
|
|
|
|
|
|
2,139,287 |
|
|
|
— |
|
|
|
— |
|
|
|
2,139,287 |
|
|
|
|
|
|
2,412,982 |
|
|
|
— |
|
|
|
— |
|
|
|
2,412,982 |
|
|
|
|
|
|
9,300,740 |
|
|
|
3,225,907 |
|
|
|
— |
|
|
|
12,526,647 |
|
|
|
|
|
|
— |
|
|
|
4,374,631 |
|
|
|
— |
|
|
|
4,374,631 |
|
|
|
|
|
|
— |
|
|
|
26,878,620 |
|
|
|
— |
|
|
|
26,878,620 |
|
|
|
|
|
|
— |
|
|
|
28,744,458 |
|
|
|
— |
|
|
|
28,744,458 |
|
|
|
|
|
|
— |
|
|
|
1,478,581 |
|
|
|
— |
|
|
|
1,478,581 |
|
|
|
|
|
|
— |
|
|
|
5,069,529 |
|
|
|
— |
|
|
|
5,069,529 |
|
See Accompanying Notes to Financial
Statements
21
ING INFRASTRUCTURE, INDUSTRIALS
AND MATERIALS FUND |
SUMMARY PORTFOLIO OF INVESTMENTS
AS
OF FEBRUARY 28, 2013 (CONTINUED) |
|
|
|
|
Quoted Prices
in Active Markets
for
Identical
Investments
(Level 1)
|
|
Significant
Other
Observable
Inputs#
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair Value
at
February 28, 2013
|
|
|
|
|
$ |
— |
|
|
$ |
9,704,479 |
|
|
$ |
— |
|
|
$ |
9,704,479 |
|
|
|
|
|
|
— |
|
|
|
15,228,733 |
|
|
|
— |
|
|
|
15,228,733 |
|
|
|
|
|
|
9,033,044 |
|
|
|
— |
|
|
|
— |
|
|
|
9,033,044 |
|
|
|
|
|
|
— |
|
|
|
9,952,738 |
|
|
|
— |
|
|
|
9,952,738 |
|
|
|
|
|
|
5,083,533 |
|
|
|
— |
|
|
|
— |
|
|
|
5,083,533 |
|
|
|
|
|
|
4,468,047 |
|
|
|
— |
|
|
|
— |
|
|
|
4,468,047 |
|
|
|
|
|
|
— |
|
|
|
4,831,501 |
|
|
|
— |
|
|
|
4,831,501 |
|
|
|
|
|
|
5,168,800 |
|
|
|
2,853,866 |
|
|
|
— |
|
|
|
8,022,666 |
|
|
|
|
|
|
1,658,262 |
|
|
|
35,626,869 |
|
|
|
— |
|
|
|
37,285,131 |
|
|
|
|
|
|
161,734,106 |
|
|
|
— |
|
|
|
— |
|
|
|
161,734,106 |
|
|
|
|
|
|
211,942,131 |
|
|
|
147,969,912 |
|
|
|
— |
|
|
|
359,912,043 |
|
|
|
|
|
|
13,084 |
|
|
|
— |
|
|
|
— |
|
|
|
13,084 |
|
|
|
|
|
|
3,722,300 |
|
|
|
— |
|
|
|
— |
|
|
|
3,722,300 |
|
Total Investments, at fair value |
|
|
|
$ |
215,677,515 |
|
|
$ |
147,969,912 |
|
|
$ |
— |
|
|
$ |
363,647,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Instruments+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1,744,221 |
) |
|
$ |
(1,744,221 |
) |
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1,744,221 |
) |
|
$ |
(1,744,221 |
) |
ˆ |
|
See Note 2, “Significant Accounting Policies” in the
Notes to Financial Statements for additional information. |
+ |
|
Other Financial Instruments are derivatives not reflected in the
Portfolio of Investments and may include open forward foreign currency contracts, equity forwards, futures, swaps, and written options. Forward foreign
currency contracts, equity forwards and futures are valued at the unrealized gain (loss) on the instrument. Swaps and written options are valued at the
fair value of the instrument. |
# |
|
The earlier close of the foreign markets gives rise to the
possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those
securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party
vendor modeling tools to the extent available. Accordingly, a portion of the Fund’s investments are categorized as Level 2
investments. |
ING Infrastructure, Industrials and Materials Fund
Written OTC Options on February 28, 2013:
Number of
Contracts
|
|
|
|
Counterparty
|
|
Description
|
|
Exercise
Price
|
|
Expiration
Date
|
|
Premiums
Received
|
|
Fair Value
|
| Options on Securities |
|
|
|
265,320 |
|
|
|
|
|
Call on Custom Basket
of Equity Securities |
|
|
|
|
03/15/13 |
|
|
$ |
595,595 |
|
|
$ |
(1,107,059 |
) |
82,908 |
|
|
|
Credit Suisse First Boston |
|
Call on Custom Basket
of Equity Securities |
|
|
|
|
03/15/13 |
|
|
|
208,412 |
|
|
|
(40,034 |
) |
386,280 |
|
|
|
|
|
Call on Custom Basket
of Equity Securities |
|
|
|
|
03/13/13 |
|
|
|
583,283 |
|
|
|
(151,499 |
) |
418,470 |
|
|
|
|
|
Call on Custom Basket
of Equity Securities |
|
|
|
|
03/13/13 |
|
|
|
506,349 |
|
|
|
(445,629 |
) |
|
|
|
|
|
|
|
|
|
Total Written OTC
Options |
$ |
1,893,639 |
|
|
$ |
(1,744,221 |
) |
A summary of derivative instruments by primary risk
exposure is outlined in the following tables.
The fair value of derivative instruments as of February 28,
2013 was as follows:
Derivatives not accounted for as
hedging
instruments
|
|
|
|
Location on Statement
of Assets and Liabilities
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written options, at fair value |
|
$ |
1,744,221 |
|
Total Liability Derivatives |
|
|
|
|
|
$ |
1,744,221 |
|
See Accompanying Notes to Financial
Statements
22
ING INFRASTRUCTURE, INDUSTRIALS
AND MATERIALS FUND |
SUMMARY PORTFOLIO OF INVESTMENTS
AS
OF FEBRUARY 28, 2013 (CONTINUED) |
The effect of derivative instruments on the Fund’s
Statement of Operations for the year ended February 28, 2013 was as follows:
|
|
|
|
Amount of Realized Gain or (Loss)
on Derivatives
Recognized in Income |
| |
| Derivatives not accounted for as hedging
instruments |
|
|
|
Written options
|
|
|
|
|
$ |
2,966,324 |
|
|
|
|
|
$ |
2,966,324 |
|
|
|
|
|
Change in Unrealized Appreciation
or Depreciation on
Derivatives
Recognized in Income |
| |
| Derivatives not accounted for as hedging
instruments |
|
|
|
Written options
|
|
|
|
|
$ |
(588,258 |
) |
|
|
|
|
$ |
(588,258 |
) |
Supplemental Option Information
(Unaudited)
Supplemental Call Option Statistics as of February 28,
2013:
% of Total Net Assets against which calls written |
|
|
|
|
34.96 |
% |
Average Days to Expiration at time written |
|
|
|
|
28 days |
|
Average Call Moneyness* at time written |
|
|
|
|
ATM |
|
Premiums received for calls |
|
|
|
$ |
1,893,639 |
|
|
|
|
|
$ |
(1,744,221 |
) |
* |
|
“Moneyness” is the term used to describe the
relationship between the price of the underlying asset and the option’s exercise or strike price. For example, a call (buy) option is considered
“in-the-money” when the value of the underlying asset exceeds the strike price. Conversely, a put (sell) option is considered
“in-the-money” when its strike price exceeds the value of the underlying asset. Options are characterized for the purpose of Moneyness as,
“in-the-money” (“ITM”), “out-of-the-money” (“OTM”) or “at-the-money” (“ATM”), where the
underlying asset value equals the strike price. |
See Accompanying Notes to Financial
Statements
23
TAX INFORMATION
(UNAUDITED)
Dividends and distributions paid during the tax year ended December 31, 2012 were as follows:
Fund Name
|
|
|
|
Type
|
|
Per Share Amount
|
ING Infrastructure, Industrials and Materials Fund |
|
|
|
|
NII |
|
|
$ |
0.2965 |
|
|
|
|
|
|
LTCG |
|
|
$ |
0.1971 |
|
|
|
|
|
|
ROC |
|
|
$ |
1.2164 |
|
NII — Net investment income
LTCG — Long-term capital gain
ROC — Return of capital
Of the ordinary distributions made during the tax year ended December 31, 2012, 63.01% qualifies for the dividends received deduction (DRD)
available to corporate shareholders.
For the tax year ended December 31, 2012, 100% of ordinary income dividends paid by the Fund (including creditable foreign taxes paid) are designated
as qualifying dividend income (QDI) subject to reduced income tax rates for individuals.
Pursuant to Section 853 of the Internal Revenue Code, the Fund designates the following amounts as foreign taxes paid for the tax year ended December
31, 2012:
Creditable
Foreign
Taxes Paid
|
|
|
|
Per Share
Amount
|
|
Portion of Ordinary
Income Distribution
Derived
from Foreign
Sourced Income*
|
|
|
|
|
|
|
|
* |
|
None of the Fund’s income was derived from ineligible
foreign sources as defined under Section 901(j) of the Internal Revenue Code. |
Foreign taxes paid or withheld should be included in taxable income with an offsetting deduction from gross income or as a credit for taxes
paid to foreign governments. Shareholders are strongly advised to consult their own tax advisors regarding the appropriate treatment of foreign taxes
paid.
Above figures may differ from those cited elsewhere in this
report due to differences in the calculation of income and gains under U.S. generally accepted accounting principles (book) purposes and Internal
Revenue Service (tax) purposes.
Shareholders are strongly advised to consult their own tax
advisers with respect to the tax consequences of their investments in the Fund. In January, shareholders, excluding corporate shareholders, receive an
IRS 1099-DIV regarding the federal tax status of the dividends and distributions they received in the calendar year.
24
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
The business and affairs of the Trust are managed under the
direction of the Trusts Board. A Trustee, who is not an interested person of the Trust, as defined in the 1940 Act, is an independent trustee
(Independent Trustee). The Trustees and Officers of the Trust are listed below. The Statement of Additional Information includes additional information
about trustees of the Trust and is available, without charge, upon request at (800) 992-0180.
Name, Address and Age
|
|
|
|
Position(s)
Held with
the Trust
|
|
Term of Office
and Length of
Time Served(1)
|
|
Principal
Occupation(s) —
During the Past 5 Years
|
|
Number of
Funds in
Fund
Complex
Overseen by
Trustee(2)
|
|
Other Board
Positions
Held by
Trustee
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Colleen D. Baldwin
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 52 |
|
|
|
|
|
|
|
President, Glantuam Partners, LLC, a business consulting firm (January 2009–Present). |
|
|
|
|
|
| |
John V. Boyer
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 59 |
|
|
|
|
|
|
|
President and Chief Executive Officer, Bechtler Arts Foundation, an arts and education foundation (January
2008–Present). |
|
|
|
|
|
| |
Patricia W. Chadwick
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 64 |
|
|
|
|
|
|
|
Consultant and President, Ravengate Partners LLC, a consulting firm that provides advice regarding financial markets and the global
economy (January 2000–Present). |
|
|
|
Wisconsin
Energy Corporation
(June 2006–Present) and The
Royce Fund, (35 funds)
(December 2009–Present). |
|
| |
Peter S. Drotch
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 71 |
|
|
|
|
|
|
|
|
|
|
|
First
Marblehead Corporation
(September 2003–Present). |
|
| |
J. Michael Earley
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 67 |
|
|
|
|
|
|
|
Retired. Formerly, Banking President and Chief Executive Officer, Bankers Trust Company, N.A., Des Moines (June 1992–December
2008). |
|
|
|
|
|
| |
Patrick W. Kenny
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 70 |
|
|
|
|
|
|
|
Retired. Formerly, President and Chief Executive Officer, International Insurance Society (June 2001–June
2009). |
|
|
|
Assured
Guaranty Ltd. (April
2004–Present). |
|
| |
Sheryl K. Pressler
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 62 |
|
|
|
|
|
|
|
Consultant (May 2001–Present). |
|
|
|
Stillwater
Mining Company
(May 2002–Present). |
|
| |
Roger B. Vincent
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 67 |
|
|
|
|
|
|
|
Retired. Formerly, President, Springwell Corporation, a corporate finance firm (March 1989–August 2011). |
|
|
|
UGI
Corporation (February
2006–Present) and UGI Utilities,
Inc. (February 2006–Present). |
|
25
TRUSTEE AND OFFICER INFORMATION (UNAUDITED) (CONTINUED)
Name, Address and Age
|
|
|
|
Position(s)
Held with
the Trust
|
|
Term of Office
and Length of
Time Served(1)
|
|
Principal
Occupation(s) —
During the Past 5 Years
|
|
Number of
Funds in
Fund
Complex
Overseen
by
Trustee(2)
|
|
Other Board
Positions
Held by
Trustee
|
|
| |
Trustees who are “Interested Persons”: |
| |
Robert W. Crispin(3)
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale,
Arizona 85258
Age: 66 |
|
|
|
|
|
|
|
|
|
|
Intact
Financial Corporation (December 2004–Present) and PFM Group (November 2010–Present). |
|
| |
Shaun P. Mathews(3)
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale,
Arizona 85258
Age: 57 |
|
|
|
|
|
|
|
President and Chief Executive Officer, ING Investments, LLC (November 2006–
Present). |
|
|
ING Capital
Corporation, LLC (December 2005–Present). |
|
(1) |
|
The Board is divided into three classes, with the term of one
class expiring at each annual meeting of the Trust. At each annual meeting, one class of Trustees is elected to a three - year term and serves until
their successors are duly elected and qualified. The tenure of each Trustee is subject to the Board’s retirement policy, which states that each
duly elected or appointed Trustee who is not an “interested person” of the Trust, as defined in the Investment Company Act of 1940, as
amended (“Independent Trustee”), shall retire from and cease to be a member of the Board of Trustees as of the close of business on December
31 of the calendar year in which the Independent Trustee attains the age of 73. A majority vote of the Board’s other Independent Trustees may
extend the retirement date of an Independent Trustee if the retirement would trigger a requirement to hold a meeting of shareholders of the Trust under
applicable law, whether for purposes of appointing a successor to the Independent Trustee or otherwise comply with applicable law, in which case the
extension would apply until such time as the shareholder meeting can be held or is no longer required (as determined by a vote of a majority of the
other Independent Trustees). |
(2) |
|
Except for Mr. Mathews and for the purposes of this table
”Fund Complex“ means the following investment companies: ING Asia Pacific High Dividend Equity Income Fund; ING Emerging Markets High
Dividend Equity Fund; ING Emerging Markets Local Bond Fund; ING Equity Trust; ING Funds Trust; ING Global Equity Dividend and Premium Opportunity Fund;
ING Global Advantage and Premium Opportunity Fund; ING Global Strategic Income Fund; ING Infrastructure, Industrials and Materials Fund; ING
International High Dividend Equity Income Fund; ING Investors Trust; ING Mayflower Trust; ING Mutual Funds; ING Partners, Inc.; ING Prime Rate Trust;
ING Risk Managed Natural Resources Fund; ING Senior Income Fund; ING Separate Portfolios Trust; ING Short Duration High Income Fund; ING Variable
Insurance Trust; and ING Variable Products Trust. For Mr. Mathews, the ING Fund Complex also includes the following investment companies: ING Balanced
Portfolio, Inc.; ING Intermediate Bond Portfolio; ING Money Market Portfolio; ING Series Fund, Inc.; ING Strategic Allocation Portfolios, Inc.; ING
Variable Funds; and ING Variable Portfolios, Inc. Therefore, for the purposes of this table with reference to Mr. Mathews, ”Fund Complex“
includes these investment companies. The number of funds in the ING Fund Complex is as of March 31, 2013. |
(3) |
|
Messrs. Crispin and Matthews are deemed ”Interested
Persons“ of the Trust because of their current or prior affiliation with ING Groep, N.V., the parent corporation of the Investment Adviser(s) and
the Distributor. |
26
TRUSTEE AND OFFICER INFORMATION (UNAUDITED) (CONTINUED)
Name, Address and Age
|
|
|
|
Position(s)
Held With
the Trust
|
|
Term of Office
and Length of
Time Served(1)
|
|
Principal
Occupation(s) —
During the Past 5 Years
|
| |
Shaun P. Mathews
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 57 |
|
|
|
President and Chief Executive Officer |
|
|
|
President and Chief Executive Officer, ING Investments, LLC (November 2006–Present). |
| |
Michael J. Roland
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 54 |
|
|
|
|
|
|
|
Managing Director and Chief Operating Officer, ING Investments, LLC and ING Funds Services, LLC (April 2012–Present) and Chief
Compliance Officer, Directed Services LLC and ING Investments, LLC (March 2011–Present). Formerly, Executive Vice President and Chief Operating
Officer, ING Investments, LLC and ING Funds Services, LLC (January 2007–April 2012) and Chief Compliance Officer, ING Funds (March
2011–February 2012). |
| |
Stanley D. Vyner
230 Park Avenue
New York, New York 10169
Age: 62 |
|
|
|
Executive Vice President
Chief Investment Risk Officer |
|
November 2007–Present
September 2009–Present |
|
Executive Vice President, ING Investments, LLC (July 2000–Present) and Chief Investment Risk Officer, ING Investments, LLC
(January 2003–Present). |
| |
Kevin M. Gleason
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 46 |
|
|
|
|
|
|
|
Senior Vice President, ING Investments, LLC (February 2012–Present). Formerly, Assistant General Counsel and Assistant
Secretary, The Northwestern Mutual Life Insurance Company (June 2004–January 2012). |
| |
Todd Modic
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 45 |
|
|
|
Senior Vice President, Chief/Principal Financial Officer and Assistant Secretary |
|
|
|
Senior Vice President, ING Funds Services, LLC (March 2005–Present). |
| |
Kimberly A. Anderson
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 48 |
|
|
|
|
|
|
|
Senior Vice President, ING Investments, LLC (October 2003–Present). |
| |
Robert Terris
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 42 |
|
|
|
|
|
|
|
Senior Vice President, Head of Division Operations, ING Funds Services, LLC (January 2006–Present). |
| |
Julius A. Drelick, III
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 46 |
|
|
|
|
|
|
|
Senior Vice President — Fund Compliance, ING Funds Services, LLC (June 2012–Present). Formerly, Vice President —
Platform Product Management & Project Management, ING Investments, LLC (April 2007–June 2012). |
| |
Fred Bedoya
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 40 |
|
|
|
Vice President and Treasurer |
|
|
|
Vice President, ING Funds Services, LLC (March 2012–Present). Formerly, Assistant Vice President — Director, ING Funds
Services, LLC (March 2003–March 2012). |
| |
Robyn L. Ichilov
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 45 |
|
|
|
|
|
|
|
Vice President and Treasurer, ING Funds Services, LLC (November 1995–Present) and ING Investments, LLC (August
1997–Present). Formerly, Treasurer, ING Funds (November 1999–February 2012). |
| |
Maria M. Anderson
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 54 |
|
|
|
|
|
|
|
Vice President, ING Funds Services, LLC (September 2004–Present). |
27
TRUSTEE AND OFFICER INFORMATION (UNAUDITED) (CONTINUED)
Name, Address and Age
|
|
|
|
Position(s)
Held With
the Trust
|
|
Term of Office
and Length of
Time Served(1)
|
|
Principal
Occupation(s) —
During the Past 5 Years
|
| |
Lauren D. Bensinger
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 59 |
|
|
|
|
|
|
|
Vice President, ING Investments, LLC and ING Funds Services, LLC (February 1996–Present); Director of Compliance, ING
Investments, LLC (October 2004–Present); and Vice President and Money Laundering Reporting Officer, ING Investments Distributor, LLC (April
2010–Present). Formerly, Chief Compliance Officer, ING Investments Distributor, LLC (August 1995 –April 2010). |
| |
Jason Kadavy
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 37 |
|
|
|
|
|
|
|
Vice President, ING Funds Services, LLC (July 2007–Present). |
| |
Kimberly K. Springer
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 55 |
|
|
|
|
|
|
|
Vice President — Platform Product Management & Project Management, ING Investments, LLC (July 2012–Present); Vice
President, ING Investment Management — ING Funds (March 2010–Present) and Vice President, ING Funds Services, LLC (March 2006–Present).
Formerly Managing Paralegal, Registration Statements (June 2003–July 2012). |
| |
Craig Wheeler
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 44 |
|
|
|
|
|
|
|
Vice President — Director of Tax, ING Funds Services, LLC (March 2013–Present). Formerly, Assistant Vice President —
Director of Tax, ING Funds Services, LLC (March 2008–March 2013). |
| |
Huey P. Falgout, Jr.
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 49 |
|
|
|
|
|
|
|
Senior Vice President and Chief Counsel, ING Investment Management — ING Funds (March 2010–Present). Formerly, Chief
Counsel, ING Americas, U.S. Legal Services (October 2003–March 2010). |
| |
Theresa K. Kelety
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 50 |
|
|
|
|
|
|
|
Vice President and Senior Counsel, ING Investment Management — ING Funds (March 2010–Present). Formerly, Senior Counsel,
ING Americas, U.S. Legal Services (April 2008–March 2010) and Counsel, ING Americas, U.S. Legal Services (April 2003–April
2008). |
| |
Paul A. Caldarelli
7337 East Doubletree Ranch Rd.
Suite 100
Scottsdale, Arizona 85258
Age: 61 |
|
|
|
|
|
|
|
Vice President and Senior Counsel, ING Investment Management — ING Funds (March 2010–Present). Formerly, Senior Counsel,
ING Americas, U.S. Legal Services (April 2008–March 2010) and Counsel, ING Americas, U.S. Legal Services (May 2005–April
2008). |
(1) |
|
The Officers hold office until the next annual meeting of the
Board of Trustees and until their successors shall have been elected and qualified. |
28
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED)
BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND
SUB-ADVISORY CONTRACTS
Section 15(c) of the Investment Company Act of 1940, as
amended (the ”1940 Act“) provides that, after an initial period, the existing investment advisory and sub-advisory contracts for ING
Infrastructure, Industrials and Materials Fund (the ”Fund“) will remain in effect only if the Board of Trustees (the ”Board“) of
the Fund, including a majority of Board members who have no direct or indirect interest in the advisory and sub-advisory contracts, and who are not
”interested persons“ of the Fund, as such term is defined under the 1940 Act (the ”Independent Trustees“), annually review and
approve them. Thus, at a meeting held on November 29, 2012, the Board, including a majority of the Independent Trustees, considered whether to renew
the investment advisory contract (the ”Advisory Contract“) between ING Investments, LLC (the ”Adviser“) and the Fund and the
sub-advisory contract (”Sub-Advisory Contract“) with ING Investment Management Co. LLC (the ”Sub-Adviser“).
The Independent Trustees also held separate meetings on
October 24 and November 27, 2012 to consider the renewal of the Advisory and Sub-Advisory Contracts. As a result, subsequent references herein to
factors considered and determinations made by the Independent Trustees include, as applicable, factors considered and determinations made on those
earlier dates by the Independent Trustees.
At its November 29, 2012 meeting, the Board voted to renew
the Advisory and Sub-Advisory Contracts for the Fund. In reaching these decisions, the Board took into account information furnished to it throughout
the year at meetings of the Board and the Board’s committees, as well as information prepared specifically in connection with the annual renewal
process. Determinations by the Independent Trustees also took into account various factors that they believed, in light of the legal advice furnished
to them by K&L Gates LLP (”K&L Gates“), their independent legal counsel, and their own business judgment, to be relevant. Further,
while the Board considered at the same meeting the advisory contracts and sub-advisory contracts that were subject to renewal for each of the ING Funds
under its jurisdiction, the Trustees considered the Fund’s advisory and sub-advisory relationships separately.
Provided below is an overview of the Board’s contract
approval process in general, as well as a discussion of certain specific factors that the Board considered at its renewal meeting. While the Board gave
its attention to the information furnished at the request of the Independent Trustees that was most relevant to its considerations, discussed below are
a number of the primary factors relevant to the Board’s consideration as to whether to renew the Advisory and Sub-Advisory Contracts for the
one-year period ending November 30, 2013. Each Board member may have accorded different weight to the various factors in reaching his or her
conclusions with respect to the Fund’s advisory and sub-advisory arrangements.
Overview of the Contract Renewal and Approval
Process
The Board follows a structured process pursuant to which it
seeks and considers relevant information when it decides whether to approve new or existing advisory and sub-advisory arrangements for the investment
companies in the ING Fund complex under its jurisdiction, including the Fund’s existing Advisory and Sub-Advisory Contracts. Among other actions,
the Independent Trustees of the Board: retain the services of independent consultants with experience in the mutual fund industry to assist the
Independent Trustees in working with the personnel employed by the Adviser or its affiliates who administer the Fund (”Management“) to
identify the types of information presented to the Board to inform its deliberations with respect to advisory and sub-advisory relationships and to
help evaluate that information; evaluate industry best practices in regard to the consideration of investment advisory and sub-advisory contracts;
establish a specific format in which certain requested information is provided to the Board; and determine the process for reviewing such information
in connection with advisory and sub-advisory contract renewals and approvals. The result is a process (the ”Contract Review Process“)
employed by the Board and its Independent Trustees to review and analyze information in connection with the annual renewal of the ING Funds’
advisory and sub-advisory contracts, as well as the review and approval of new advisory and sub-advisory relationships.
Since the Contract Review Process was first implemented,
the Board’s membership has changed through periodic retirements of some Trustees and the appointment and election of new Trustees. In addition,
the Independent Trustees have reviewed and refined the renewal and approval process at least annually in order to request additional or revised
information from Management and address certain unique characteristics related to new or existing ING Funds.
The Board has established (among other committees) two
Investment Review Committees (each, an ”IRC“), which meet independently and, at times, jointly, and a Contracts Committee. Among other
matters, the
29
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
Contracts Committee provides oversight with respect to
the Contract Review Process, and the Fund is assigned to the IRCs, jointly, which provide oversight regarding, among other matters, the investment
performance of the Adviser and Sub-Adviser, as well as the oversight by the Adviser of the performance of the Sub-Adviser. The IRCs may apply a
heightened level of scrutiny in cases where performance has lagged the Fund’s relevant benchmark, Lipper, Inc. (”Lipper“) category
median, and/or Morningstar, Inc. (”Morningstar“) category median.
The type and format of the information provided to the
Board or to legal counsel for the Independent Trustees in connection with the Contract Review Process has been codified in the ING Funds’ 15(c)
Methodology Guide. This Guide was developed under the direction of the Independent Trustees and sets out a blueprint pursuant to which the Independent
Trustees request certain information that they deem important to facilitate an informed review in connection with initial and annual approvals of
advisory and sub-advisory contracts. The Independent Trustees review and update the 15(c) Methodology Guide annually.
Management provides certain of the information requested by
the 15(c) Methodology Guide in Fund Analysis and Comparison Tables (”FACT sheets“) prior to the Independent Trustees’ review of advisory
and sub-advisory arrangements (including the Fund’s Advisory and Sub-Advisory Contracts). The Independent Trustees previously retained an
independent firm to verify and test the accuracy of certain FACT sheet data for a representative sample of funds in the ING Fund complex. In addition,
the Contracts Committee routinely employs the services of an independent consultant to assist in its review and analysis of, among other matters, the
15(c) Methodology Guide, the content and format of the FACT sheets, and selected peer group of investment companies (”Selected Peer Group“)
to be used by the Fund for certain comparison purposes during the renewal process. As part of an ongoing process, the Contracts Committee recommends or
considers recommendations from Management for refinements to the 15(c) Methodology Guide and other aspects of the review process, and the Board’s
IRCs review benchmarks used to assess the performance of funds in the ING Fund complex.
The Board employed its process for reviewing contracts when
considering the renewals of the Fund’s Advisory and Sub-Advisory Contracts that would be effective through November 30, 2013. Set forth below is a
discussion of many of the Board’s primary considerations and conclusions resulting from this process.
Nature, Extent and Quality of Service
In determining whether to approve the Advisory and
Sub-Advisory Contracts for the Fund for the year ending November 30, 2013, the Independent Trustees received and evaluated such information as they
deemed necessary regarding the nature, extent and quality of services provided to the Fund by the Adviser and Sub-Adviser. This included information
regarding the Adviser and Sub-Adviser provided throughout the year at meetings of the Board and its committees, as well as information furnished in
connection with the contract renewal meetings.
The materials requested by the Independent Trustees and
provided to the Board, K&L Gates and/or independent consultants that assist the Independent Trustees prior to the November 29, 2012 Board meeting
included, among other information, the following items for the Fund: (1) FACT sheets that provided information regarding the expenses of the Fund and
other similarly managed funds in its Selected Peer Group, as well as information regarding the Fund’s performance, investment portfolio, objective
and strategies; (2) reports providing risk and attribution analyses of the Fund; (3) the 15(c) Methodology Guide, which describes how the FACT sheets
were prepared, including the manner in which the Fund’s benchmark and Selected Peer Group were selected and how profitability was determined; (4)
responses from the Adviser and Sub-Adviser to a series of questions posed by K&L Gates on behalf of the Independent Trustees; (5) copies of the
forms of Advisory and Sub-Advisory Contracts; (6) copies of the Forms ADV for the Adviser and Sub-Adviser; (7) financial statements for the Adviser and
Sub-Adviser; (8) a draft of a narrative summary addressing key factors the Board customarily considers in evaluating the renewals of the ING
Funds’ (including the Fund’s) advisory contracts and sub-advisory contracts, including a written analysis for the Fund of how performance,
fees and expenses compare to its Selected Peer Group and/or designated benchmark(s); (9) independent analyses of Fund performance by the Fund’s
Chief Investment Risk Officer; and (10) other information relevant to the Board’s evaluations.
The Board also noted that ING Groep, N.V. (”ING
Groep“), the ultimate parent company of the Adviser and the Sub-Adviser, has announced plans for the separation of its U.S.-based insurance,
retirement services and investment management operations, which include the Adviser and Sub-Adviser, into an independent, standalone company by the end
of 2016.
30
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
The Board further noted that this separation may result
in the Adviser and Sub-Adviser’s loss of access to the services and resources of their current ultimate parent company, which could adversely
affect its businesses and profitability. The Board recognized that, if the separation plan is deemed to be a change of control, the investment advisory
and sub-advisory agreements for the Fund would terminate and trigger the necessity for new agreements, which would require the approval of the Board
and, potentially, the shareholders of the Fund. The Board also recognized that there can be no assurance that the separation plan will be carried out.
The Board considered the potential effects of the separation on the Fund, the Adviser, and Sub-Adviser, including their ability prior to, during and
after the separation to perform the same level of service to the Fund as the Adviser and Sub-Adviser, currently provide. In this regard, the Board
noted that the Adviser and Sub-Adviser, do not currently anticipate that the separation would have a material adverse impact on the Fund or their
operations and administration.
The Fund’s common shares were used for purposes of
certain comparisons to the funds in its Selected Peer Group. Common shares were selected because they are the only Fund class issued and outstanding.
The common shares were compared to the analogous class of shares for each fund in the Selected Peer Group. The mutual funds included in the Fund’s
Selected Peer Group were selected based upon criteria designed to represent the Fund share class being compared to the Selected Peer
Group.
In arriving at its conclusions with respect to the Advisory
Contract, the Board was mindful of the ”manager-of-managers“ platform of the ING Funds that has been developed by the Adviser. The Board
recognized that the Adviser is responsible for monitoring the investment program and performance of the Sub-Adviser under this manager-of-managers
arrangement. The Board also considered the techniques and resources that the Adviser has developed to provide ongoing oversight of the nature, extent
and quality of the services the Sub-Adviser provides to the Fund and the Sub-Adviser’s compliance with applicable laws and regulations. The Board
noted that to assist in the selection and monitoring of the Sub-Adviser, the Adviser has developed an oversight process formulated by its Manager
Research & Selection Group (”MRSG“), which analyzes both qualitative (such as in-person meetings and telephonic meetings with the
Sub-Adviser and research on sub-advisers) and quantitative information (such as performance data, portfolio data and attribution analysis) about the
Sub-Adviser and the Fund that it manages. The Board recognized that the MRSG also typically provides in-person reports to the IRCs at their meetings
prior to any Sub-Adviser presentations. In addition, the Board noted that the MRSG prepares periodic due diligence reports regarding the Sub-Adviser
based on on-site visits and information and analysis which, team members use to attempt to gain and maintain an in-depth understanding of the
Sub-Adviser’s investment processes and to try to identify issues that may be relevant to the Sub-Adviser’s services to the Fund and/or its
performance. The Board also noted that the MRSG provides written reports on these due diligence analyses to the pertinent IRC. The Board noted the
resources that the Adviser has committed to its services as a manager-of-managers, including resources for reporting to the Board and the IRCs to
assist them with their assessment of the investment performance of the Fund on an on-going basis throughout the year. This includes the appointment of
a Chief Investment Risk Officer and his staff, who report directly to the Board and who have developed attribution analyses and other metrics used by
the IRCs to analyze the key factors underlying investment performance for the funds in the ING Fund complex.
The Board also considered the techniques that the Adviser
has developed to screen and perform due diligence on new sub-advisers if and when the Adviser recommends to the Board a new sub-adviser to manage a
fund in the ING Fund complex. The Board noted that, for new non-ING-affiliated sub-advisers, the MRSG is responsible for: identifying qualified
candidates; analyzing their investment process, personnel and resources; conducting due diligence on the candidates; and selecting the firm to propose
as a new sub-adviser, as well as preparing written materials and reports to the committees and the Board as part of the process of approving any new
sub-adviser for the Fund.
The Board also considered that in the course of monitoring
performance of the Sub-Adviser, the MRSG has developed, based on guidance from the IRCs, a methodology for comparing performance of the Fund to the
Fund’s Morningstar category median, Lipper category median, and/or primary benchmark. The Board also recognized that the MRSG provides the IRCs
with regular updates on the Fund and alerts the IRCs to potential issues as they arise. The Board noted that another service provided by the MSRG is
the preparation of the Fund Dispersion Report. The Board also noted that the Adviser regularly monitors performance, personnel, compliance and a myriad
of other issues that may arise on a day-to-day basis with regards to the Sub-Adviser and noted that, if issues are identified either through formal or
informal processes, they are brought before the IRCs and the Board for consideration and action and the Adviser consistently
31
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
makes its resources available to the Board and the IRCs
to assist with addressing any issues that arise.
The Board noted that the Fund also benefits from the
services of the Adviser’s Investment Risk Management Department (the ”IRMD“), under the leadership of the Chief Investment Risk Officer,
the costs of which are shared by the Fund and the Adviser. The Board noted that the IRMD regularly presents written materials and reports to the IRCs
that focus on the investment risks of the Fund. The Board also noted that the IRMD provides the IRCs with analyses that are developed to assist the
IRCs in identifying trends in Fund performance and other areas over consecutive periods. The Board noted that the services provided by the IRMD are
meant to provide an additional perspective for the benefit of the IRCs, which may vary from the perspective of the MRSG.
The Board also noted the techniques used by the Adviser to
monitor the performance of the Sub-Adviser and the proactive approach that the Adviser, working in cooperation with the IRCs, has taken to advocate or
recommend, when it believed appropriate, changes designed to assist in improving the Fund’s performance.
In considering the Fund’s Advisory Contract, the Board
also considered the extent of benefits provided to the Fund’s shareholders, beyond advisory services, from being part of the ING family of funds.
This includes, in most cases, the right to exchange or transfer investments, without a sales charge, between the same class of shares of such funds or
among ING Funds available on a product platform, and the wide range of ING Funds available for exchange or transfer. The Board also took into account
the Adviser’s ongoing efforts to reduce the expenses of the ING Funds through renegotiated arrangements with the ING Funds’ service
providers. In addition, the Board considered the efforts of the Adviser and the expenses that it incurred in recent years to help make the ING Fund
complex more balanced and efficient by the launch of new investment products and the combinations of similar funds.
Further, the Board received periodic reports showing that
the investment policies and restrictions for the Fund were consistently complied with and other periodic reports covering matters such as compliance by
Adviser and Sub-Adviser personnel with codes of ethics. The Board considered reports from the Fund’s Chief Compliance Officer (”CCO“)
evaluating whether the regulatory compliance systems and procedures of the Adviser and Sub-Adviser are reasonably designed to assure compliance with
the federal securities laws, including those related to, among others, late trading and market timing, best execution, fair value pricing, proxy voting
and trade allocation practices. The Board also took into account the CCO’s annual and periodic reports and recommendations with respect to service
provider compliance programs. In this regard, the Board also considered the policies and procedures developed by the CCO in consultation with the
Board’s Compliance Committee that guide the CCO’s compliance oversight function.
The Board reviewed the level of staffing, quality and
experience of the Fund’s portfolio management team. The Board took into account the respective resources and reputations of the Adviser and
Sub-Adviser, and evaluated the ability of the Adviser and the Sub-Adviser to attract and retain qualified investment advisory personnel. The Board also
considered the adequacy of the resources committed to the Fund (and other relevant funds in the ING Fund complex) by the Adviser and Sub-Adviser, and
whether those resources are commensurate with the needs of the Fund and are sufficient to sustain appropriate levels of performance and compliance
needs. In this regard, the Board considered the financial stability of the Adviser and the Sub-Adviser.
Based on their deliberations and the materials presented to
them, the Board concluded that the advisory and related services provided by the Adviser and Sub-Adviser are appropriate in light of the Fund’s
operations, the competitive landscape of the investment company business, and investor needs, and that the nature, extent, and quality of the overall
services provided by the Adviser and the Sub-Adviser were appropriate.
Fund Performance
In assessing advisory and sub-advisory relationships, the
Board placed emphasis on the investment returns of the Fund. While the Board considered the performance reports and discussions with portfolio managers
at Board and committee meetings during the year, particular attention in assessing performance was given to the FACT sheets furnished in connection
with the renewal process. The FACT sheet prepared for the Fund included its investment performance compared to the Fund’s Morningstar category
median, Lipper category median, and/or primary benchmark. The FACT sheet performance data was as of June 30, 2012. In addition, the Board also
considered at its November 29, 2012 meeting certain additional data regarding performance and Fund asset levels as of September 30 and October 31,
2012.
The Fund’s performance was compared to its Morningstar
category median and average, as well as its primary benchmark, a broad-based securities market index that appears in the Fund’s shareholder
report.
32
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
With respect to Morningstar quintile rankings, the
first quintile represents the highest (best) performance and the fifth quintile represents the lowest performance. The Fund’s management fee and
expense ratio were compared to the fees and expense ratios of the funds in its Selected Peer Group.
In considering whether to approve the renewal of the
Advisory and Sub-Advisory Contracts for the Fund, the Board considered that, based on performance data for the periods ended June 30, 2012: (1) the
Fund underperformed its Morningstar category median for the most recent calendar quarter and one-year periods, but outperformed for the year-to-date
period; (2) the Fund underperformed its primary benchmark for all periods presented; and (3) the Fund is ranked in the first (highest) quintile of its
Morningstar category for the year-to-date period, and the fifth (lowest) quintile for the most recent calendar quarter and one-year
periods.
In analyzing this performance data, the Board took into
account Management’s representations regarding the strength of the Portfolio’s performance during more recent periods.
Economies of Scale
When evaluating the reasonableness of advisory fee rates,
the Board considered whether economies of scale likely will be realized by the Adviser and Sub-Adviser as the Fund grows larger and the extent to which
any such economies are reflected in contractual fee rates. The Board noted that the Fund, as a closed-end fund, generally does not issue new shares and
is less likely to realize economies of scale from additional share purchases. The Board also considered that the Fund that does not have advisory fee
rate breakpoints. In the case of sub-advisory fees, the Board considered that breakpoints would inure to the benefit of the Adviser, except to the
extent that there are corresponding advisory fee rate breakpoints or waivers. In evaluating fee rate breakpoint arrangements and economies of scale,
the Independent Trustees also considered prior periodic management reports, industry information on this topic and the Fund’s investment
performance.
Information Regarding Services to Other
Clients
The Board requested and considered information regarding
the nature of services and fee rates offered by the Adviser and Sub-Adviser to other clients, including other registered investment companies and
relevant institutional accounts. When fee rates offered to other clients differed materially from those charged to the Fund, the Board considered any
underlying rationale provided by the Adviser or the Sub-Adviser for these differences. The Board also noted that the fee rates charged to the Fund and
other institutional clients of the Adviser or Sub-Adviser (including other investment companies) may differ materially due to, among other reasons:
differences in services; different regulatory requirements associated with registered investment companies, such as the Fund, as compared to
non-registered investment company clients; market differences in fee rates that existed when the Fund first was organized; investment capacity
constraints that existed when certain contracts were first agreed upon or that might exist at present; and different pricing structures that are
necessary to be competitive in different marketing channels.
Fee Rates and Profitability
The Board reviewed and considered the contractual
investment advisory fee rate, combined with the administrative fee rate, payable by the Fund to the Adviser. The Board also considered the contractual
sub-advisory fee rate payable by the Adviser to the Sub-Adviser for sub-advisory services for the Fund, including the portion of the contractual
advisory fees that are paid to the Sub-Adviser, as compared to the portion retained by the Adviser. In addition, the Board considered fee waivers and
expense limitations applicable to the fees payable by the Fund.
The Board considered: (1) the fee structure of the Fund as
it relates to the services provided under the contracts; and (2) the potential fall-out benefits to the Adviser and the Sub-Adviser and their
respective affiliates from their association with the Fund. For the Fund, the Board separately determined that the fee rate payable to the Adviser and
the fee rate payable to the Sub-Adviser are reasonable for the services that each performs, which were considered in light of the nature, extent and
quality of the services that each has performed and is expected to perform.
In considering the fee rates payable under the Advisory and
Sub-Advisory Contracts for the Fund, the Board took into account the factors described above and also considered: (1) the fairness of the compensation
under an Advisory Contract with a level fee rate that does not include breakpoints; and (2) the pricing structure (including the expense ratio to be
borne by shareholders) of the Fund, as compared to its Selected Peer Group, including that: (a) the management fee (inclusive of a 0.10% administration
fee) for the Fund is above the median and the average management fees of the funds in its Selected Peer Group; and (b) the expense ratio for the Fund
is below the median and the average expense ratios of the funds in its Selected Peer Group.
33
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
In analyzing this fee data, the Board took into account
Management’s representations that closed-end funds have unique distribution characteristics and their pricing structures are highly driven by the
market and competitive environment at the time of their initial offering when their fee structures were established.
The Board considered information on revenues, costs and
profits realized by the Adviser and Sub-Advisor, which was prepared by Management in accordance with the allocation methodology (including related
assumptions) specified in the 15(c) Methodology Guide. In analyzing the profitability of the Adviser and Sub-Adviser in connection with its services to
the Fund, the Board took into account the sub-advisory fee rate payable by the Adviser to the Sub-Adviser. In addition, the Board considered
information that it requested and was provided by Management with respect to the profitability of service providers affiliated with the Adviser. In
this regard, the Board also noted that the Adviser (and not the Fund) pays the sub-advisory fees earned by the Sub-Adviser.
Although the 15(c) Methodology Guide establishes certain
standards for profit calculation, the Board recognized that profitability analysis on a client-by-client basis is not an exact science and there is no
uniform methodology within the asset management industry for determining profitability for this purpose. In this context, the Board realized that
Management’s calculations regarding its costs incurred in establishing the infrastructure necessary for the Fund’s operations may not be
fully reflected in the expenses allocated to the Fund in determining profitability, and that the information presented may not portray all of the costs
borne by the Adviser and Management or capture their entrepreneurial risk associated with offering and managing a mutual fund complex in the current
regulatory and market environment. In addition, the Board recognized that the use of different methodologies for purposes of calculating profit data
can give rise to dramatically different profit and loss results.
In making its determinations, the Board based its
conclusions as to the reasonableness of the advisory and sub-advisory fee rates of the Adviser and Sub-Adviser primarily on the factors described for
the Fund below. At the request of the Board, the Adviser has from time to time agreed to implement remedial actions regarding certain funds in the ING
Fund complex. These remedial actions have included, among others: reductions in effective fee rates through expense limitation or fee waiver
arrangements or through contractual fee rate revisions, such as the addition of the fee schedule breakpoints at higher asset levels; changes in
sub-adviser or portfolio managers; and strategy modifications.
Conclusion
After its deliberation, the Board reached the following
conclusions: (1) the Fund’s management fee rate is reasonable in the context of all factors considered by the Board; (2) the Fund’s expense
ratio is reasonable in the context of all factors considered by the Board; (3) the Fund’s performance is reasonable in the context of all factors
considered by the Board; and (4) the sub-advisory fee rate payable by the Adviser to the Sub-Adviser is reasonable in the context of all factors
considered by the Board. Based on these conclusions and other factors, the Board voted to renew the Advisory and Sub-Advisory Contracts for the Fund
for the year ending November 30, 2013. During this renewal process, different Board members may have given different weight to different individual
factors and related conclusions.
APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY CONTRACTS IN
CONNECTION WITH SEPARATION PLAN
Pursuant to an agreement with the European Commission, ING
Groep has announced its intention to divest ING U.S., Inc. (”ING U.S.“), a wholly owned, indirect subsidiary of ING Groep and a parent
company of the Adviser and Sub-Adviser (such divestment, the ”Separation Plan“). ING Groep’s base case to achieve the Separation Plan is
through an initial public offering of ING U.S. (the ”IPO“) followed by the divestment of ING Groep’s remaining ownership interest over
time through one or more additional public offerings of ING U.S. stock, or, possibly, through one or more privately negotiated sales of the stock.
(While the Separation Plan is the base case, it is possible that the Separation Plan may be achieved by means of a sale to a single buyer or group of
buyers.)
The Fund is subject to the 1940 Act, which provides that
any investment advisory agreement, including any sub-advisory agreement, must terminate automatically upon its ”assignment.“ As used in the
1940 Act, the term assignment includes any transfer of a controlling block of outstanding voting securities of an adviser or the parent company of an
adviser. Such a transfer is often referred to as a ”Change of Control Event.“ It is anticipated that one or more of the transactions
contemplated by the Separation Plan would be deemed a Change of Control Event.
As described above, the Separation Plan contemplates one or
more transactions, commencing with the IPO, that are expected to result ultimately in a direct or indirect ”Change of Control Event“ for the
Adviser and
34
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
Sub-Adviser, which in turn would result in the automatic termination of the current
advisory agreement and current sub-advisory agreement (collectively, ”the Current Agreements“). The decisions by the Board, including a
majority of the Independent Trustees, to approve a proposed new advisory agreement and a proposed new sub-advisory agreement for the Fund
(collectively, the ”Proposed Agreements“) were based on a determination by the Board that it would be in the best interests of the
shareholders of the Fund for the Adviser and Sub-Adviser to continue providing investment advisory, sub-advisory, and related services for the Fund,
without interruption, as consummation of the Separation Plan proceeds.
The Board was aware that the IPO may not result immediately
in a Change of Control Event, but also recognized that the Separation Plan contemplates a series of transactions that are expected to result in one or
more Change of Control Events in the future. The Board concluded that approval by shareholders at this time of both the Proposed Agreements and future
agreements that may become effective upon certain Change of Control Events in the future will permit the Fund to benefit from the continuation of
services by the Adviser, Sub-Adviser and their affiliates throughout the Separation Plan without the need for multiple shareholder meetings. The Board
was informed by the Adviser and its counsel that the Adviser is seeking to obtain regulatory assurances that the staff of the SEC would not object to
approval of future agreements by shareholders at this time.
Prior to its approval of the Proposed Agreements, the Board
reviewed, among other matters, the quality, extent, and nature of the services currently being provided by the Adviser and Sub-Adviser under the
Current Agreements and to be provided under the Proposed Agreements. A substantial portion of this review was conducted as part of, and in conjunction
with, the Board’s annual reviews of the Current Agreements, which were most recently approved for continuation at an in-person meeting of the
Board held on November 29, 2012. During the review process that led to its approval of the Current Agreements on November 29, 2012, the Board was aware
that it likely would be asked in the very near future to consider approval of the Proposed Agreements.
On November 29, 2012, as applicable, the Board concluded,
in light of all factors it considered, including undertakings by the Adviser relating to certain follow-up actions, that the approval of the Current
Agreements was in the best interests of the Fund and its shareholders and that the fee rates set forth in the Current Agreements were fair and
reasonable. Among other factors, the Board considered: (1) the nature, extent and quality of services provided and to be provided under the Current
Agreements; (2) the extent to which economies of scale are reflected in fee rate schedules under the Current Agreements; (3) the existence of any
”fall-out“ benefits to the Adviser, Sub-Adviser and their affiliates; (4) a comparison of fee rates, expense ratios, and investment
performance to those of similar funds; and (5) the costs incurred and profits realized by the Adviser, Sub-Adviser and their affiliates with respect to
their services to the Fund. A further description of the process followed by the Board in approving the continuation of the Current Agreements on
November 29, 2012, including the information reviewed, certain material factors considered and certain related conclusions reached, is set forth above
under the section titled ”BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY CONTRACTS.“
In connection with its approval of the Proposed Agreements,
on January 10, 2013, the Board considered its conclusions in connection with its November 29, 2012 approvals of those Current Agreements that were in
effect on that date, including the Board’s general satisfaction with the nature, extent and quality of services being provided and, as applicable,
actions taken or to be taken in certain instances to improve the relationship between the costs and the quality of services being provided. Also in
connection with its January 10, 2013 approvals of the Proposed Agreements, the Board considered a representation made to it on that date by the
Adviser’s president that there were no additional developments not already disclosed to the Board since November 29, 2012 that would be a material
consideration to the Board in connection with its consideration of the Proposed Agreements.
As a result, in addition to the information identified
above, in considering the Proposed Agreements, the Board focused its review on, and requested and evaluated other information relating to, the
potential impact of implementing the Separation Plan on the operations, personnel, organizational structure, capitalization, and financial and other
resources of the Adviser and its affiliates that render investment sub-advisory, administrative, distribution, compliance and other services to the
Fund. When making its decisions on January 10, 2013, the Board took into account that, commencing in early 2011, it had posed ongoing inquiries to, and
received regular updates from, management relating to the Separation Plan.
Between November 2012 and January 2013, the Board and its
committees accelerated their due diligence
35
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
processes by engaging in an extensive review and
analysis of additional information regarding the proposed IPO and related matters. This analysis focused on, among other matters, the expectations for
continuity and stability of ING U.S. throughout implementation of the Separation Plan and thereafter. In this connection, the Board considered that the
Separation Plan is being implemented as a result of legal and regulatory commitments by ING Groep, that the Board generally has been satisfied with the
nature, extent and quality of the services provided to the Fund, including investment advisory, administrative and support services, and that it would
be in the Fund’s best interests to maintain continuity and stability of the services currently being provided. The Board carefully considered ING
U.S.’s anticipated future plans related to capitalization, operational matters, and the retention of current levels of staffing and related
compensation structures, as well as the desires of its senior executives and key employees and the importance of the investment management operations
within the ING U.S. business structure going forward.
Among other steps in its nearly two-year due diligence
process, which accelerated upon ING U.S.’s Form S-1 filing, the following actions were taken and considered by or on behalf of the
Board:
1. |
|
The Independent Trustees solicited and received ongoing advice
regarding the Board’s legal duties from K&L Gates, legal counsel for such Board members, which law firm has extensive experience regarding
such matters. |
2. |
|
The Independent Trustees established an Ad Hoc IPO Transaction
Committee (the ”IPO Committee“), consisting exclusively of Independent Trustees, to help oversee, coordinate, and perform portions of the
Board’s due diligence activities. In this connection, the IPO Committee considered, among other matters, relevant legal guidance and the processes
followed by certain other investment company boards of directors or trustees when they approved contracts in connection with Change of Control
events. |
3. |
|
The Independent Trustees, with assistance from K&L Gates,
prepared written inquiries to the Adviser and its affiliates regarding the IPO, including details regarding ING U.S.’s anticipated business plan
for continuing operations after the IPO and potential Change of Control Events. |
4. |
|
The Board received and evaluated written responses from the
Adviser and its affiliates pursuant to inquiries made on the Board’s behalf. These evaluations were conducted through a series of separate
meetings by the Board’s Audit Committee, Compliance Committee, Contracts Committee, Domestic Equity Funds Investment Review Committee,
International/Balanced/Fixed Income Funds Investment Review Committee, Nominating and Governance Committee, and IPO Committee (collectively, the
”Committees“), and by the Independent Trustees (which, at times, included one or both Board members who are not Independent Trustees). With
respect to services to be rendered to the Fund by ING U.S. during implementation of the Separation Plan, each Committee evaluated matters relating to
those services typically overseen by such Committee (and, in the case of the IPO Committee, relevant matters not otherwise assigned to a standing
Committee). Future references herein to actions taken by the Board or the Independent Trustees may include, in some instances, actions taken by one or
more of the Committees. |
5. |
|
The Board requested and participated in a series of in-person
and/or telephonic meetings involving presentations from senior management personnel at ING U.S. (including its Chief Executive Officer, Chief Operating
Officer, Chief Risk Officer, Head of Corporate Development, Head of Proprietary Investments, and the heads of each proposed primary operating unit of
ING U.S.), as well as from senior management of the Adviser and its affiliates, including senior human resources personnel, senior investment
personnel, and senior compliance personnel at the Sub-Adviser. The Board also requested and had such meetings with the Fund’s Chief Compliance
Officer and Chief Investment Risk Officer who, as a matter of course, report directly to the Board or its Committees. |
6. |
|
The Board received and reviewed the preliminary Form S-1 that
contained extensive information relating to, among other matters, ING U.S.’s anticipated business plans and financial structure. In this
connection, the Board considered, among other matters: the anticipated arrangements between ING Groep and ING U.S. over the course of the Separation
Plan; the anticipated use of potential proceeds of the capital that would be raised through the Form S-1 offering (including that portion of potential
proceeds that may be retained by ING Groep and that portion that may be dedicated to the capitalization and operations of ING U.S., including its asset
management operations); the potential short-term and long-term financial consequences to ING U.S. of the closed book of variable annuity business that
would be maintained by ING U.S.-affiliated |
36
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
|
|
insurance companies; and other information provided by the
Adviser and its affiliates. |
7. |
|
K&L Gates retained Grail Partners LLC (”Grail“),
an independent investment banking firm with extensive experience relating to business operations such as those to be conducted by ING U.S., in order to
help K&L Gates evaluate and advise the Board with respect to, among other matters, details of ING U.S.’s anticipated business plan and
financial capitalization as set forth in its Form S-1 and related information provided by the Adviser and its affiliates, including the potential
implications to the Adviser and its non-insurance affiliates of insurance regulations and related capitalization matters. The Independent Trustees or
IPO Committee members attended certain in-person and telephone conference call meetings at which Grail rendered advice to K&L Gates regarding these
matters and responded to questions. |
8. |
|
The Independent Trustees, the Board, and many of its Committees
held in-person meetings on November 27, 28, and 29, 2012 during which, among other actions, they evaluated the responsive due diligence information
provided to date by the Adviser and its affiliates, and considered input from K&L Gates, Grail, and others regarding the Form S-1. At the
conclusion of these meetings, the Independent Trustees and the Committees posed to the Adviser and its affiliates a series of follow-up information
requests. |
9. |
|
Among the follow-up actions arising from the November 27, 28,
and 29 meetings, the Independent Trustees requested and received written assurances that the Adviser and its affiliates: are committed to maintaining
appropriate levels of overall staffing, ongoing resources and service quality; and throughout the time period during which the Separation Plan is
implemented, will notify and consult with the Board in advance if management proposes to take certain actions with respect to these matters. The Board
considered that such services include, but are not limited to, portfolio management services, administrative services, and regulatory compliance
services. In this regard, the Board considered representations by the Adviser and its affiliates that their separation from ING Groep as contemplated
by the Separation Plan will not lead to a reduction in the quality or scope of these and other services provided by those firms to the Fund. The Board
also considered that the importance of the asset management operations to the overall success of ING U.S., as described by the Form S-1 and during
presentations by senior ING U.S. management personnel, could provide a strong incentive to ING U.S. to provide appropriate resource allocations to
support those asset management operations. |
10. |
|
The Board considered representations by the Adviser and its
affiliates that approval of the Proposed Agreements would be necessary for the Fund to continue receiving investment management services from the
Adviser and Sub-Adviser following the Change of Control Events contemplated by the Separation Plan. |
11. |
|
The Board considered representations by the Adviser and its
affiliates, as well as related supporting documentation, indicating that the Proposed Agreements, including the fees payable thereunder, are
substantially similar to and, in any event, are no less favorable to the Fund than, the terms of the corresponding Current Agreements. |
12. |
|
The Board considered that, to the extent that the Proposed
Agreements do have changes, those changes are designed to benefit shareholders and/or to provide management, subject to Board supervision, with greater
flexibility to manage the Fund in a manner consistent with stated investment objectives. In this connection, the Board considered, among other matters,
the Adviser’s representation that no material changes would be made to the Proposed Agreements, as compared to the Current Agreements, with
respect to the material contractual terms that were previously negotiated under which the Fund and its Adviser and Sub-Adviser currently operate,
including contractual provisions relating to fees and expenses. |
13. |
|
The Board considered representations by the Adviser and its
affiliates, including senior investment management personnel, as well as related supporting documentation, indicating that: (a) the Adviser and
Sub-Adviser can be expected to provide services of the same nature, extent, and quality under the Proposed Agreements as are provided thereby under the
Current Agreements; and (b) the Separation Plan is not expected to result in any changes to: (i) the management of the Fund, including the continuity
of the Fund’s portfolio managers and other personnel responsible for the management operations of the Fund; or (ii) the investment objective of or
the principal investment strategies used to manage any of the Fund. |
37
ADVISORY CONTRACT APPROVAL DISCUSSION (UNAUDITED) (CONTINUED)
14. |
|
The Board considered the steps by the Adviser and its affiliates
that have been taken and are planned to be taken to retain the employment of key personnel, including incentive compensation plan arrangements, as well
as the overall positive indications by many such personnel regarding the opportunities presented by the Separation Plan to create and grow an
investment management operation that is independent from other ING Groep banking and insurance operations that will not be part of ING U.S. |
15. |
|
The Board considered that the Adviser and its affiliates have
agreed to bear all expenses associated with obtaining shareholder approval of the Proposed Agreements. |
16. |
|
The Board considered ING U.S.’s preliminary
”branding“ plans regarding the future name of its asset management operations, as well as its anticipated ability to continue to use the
”ING“ brand name for such operations for a period of time following the IPO. |
17. |
|
The Board considered the advice provided by Dechert LLP, legal
counsel to the Fund and the Adviser, with respect to the Proposed Agreements (including advice relating to the process and timing of seeking
shareholder approval of the Proposed Agreements, and whether shareholder approvals would be required in connection with any future aspects of the
Separation Plan following the IPO) and regarding the Board’s role and responsibilities with respect to ING Groep’s restructuring. |
18. |
|
The Board considered the legal obligation of ING Groep under the
Separation Plan to divest its ownership interest in ING U.S., as well as certain potential advantages and disadvantages to shareholders of the Fund of
this divestiture, and certain potential advantages and disadvantages of alternative divestiture actions that ING Groep might be forced to take if the
Proposed Agreements are not approved by the Board or by shareholders of the Fund. |
19. |
|
The Board considered peer group and benchmark investment
performance comparison data relating to the Fund that was more current than related comparison data considered by it in connection with the November
29, 2012 approvals of the Current Agreements. |
20. |
|
The Board considered actions taken by the Adviser subsequent to
the November 29, 2012 approvals of the Current Agreements with respect to certain ING Funds in response to requests made by the Board in connection
with those approvals. |
21. |
|
The Board considered the potential benefits to be realized by
the Adviser and its affiliates as a result of the Proposed Agreements. |
22. |
|
The Board considered that, if shareholders approve the Proposed
Agreements, the Board currently expects to continue to conduct an annual contracts review process consistent with the process it would have conducted
had the Current Agreements continued in effect and not been replaced by the Proposed Agreements, notwithstanding the two-year initial term set forth in
the Proposed Agreements. For example, if the Proposed Agreements are approved by shareholders in 2013, the Board would not legally be required to
review or renew those contracts until 2015. However, the Board currently intends to conduct annual reviews of such contracts in 2013 and 2014, and ING
has consented to this process. Thus, the Board emphasized that it would be able to, and intends to, monitor on a regular basis the ability of the
Adviser and its affiliates to comply with their undertakings to the Board and to monitor on an ongoing basis the quality of services to, and expenses
of, the Fund. In addition, the Board considered that, under the Proposed Agreements, it will continue to have the authority, should the need arise in
its view, to terminate any of the Proposed Agreements without penalty upon 60 days’ notice. |
Based on the foregoing and other relevant considerations,
at a meeting of the Board held on January 10, 2013, the Board, including a majority of the Independent Trustees, voted to approve the Proposed
Agreements and to recommend approval of the Proposed Agreements by shareholders of the Fund. In this connection, the Board concluded that, in light of
all factors considered, the terms of the Proposed Agreements, including fee rates, were fair and reasonable, and that it would be in the best interests
of shareholders of the Fund to approve the Proposed Agreements so as to enable there to be a continuation without interruption of the current services
being provided by the current service providers pursuant to the Current Agreements. In this connection, the Board noted that no one factor was
determinative of its decisions which, instead, were premised upon the totality of factors considered. In this connection, the Board also noted that
different Board members likely placed emphasis on different factors in reaching their individual conclusions to vote in favor of the Proposed
Agreements and to recommend approval of the Proposed Agreements to shareholders.
38
SHAREHOLDER MEETING INFORMATION (UNAUDITED)
An annual meeting of shareholders of the ING
Infrastructure, Industrials and Materials Fund was held July 5, 2012, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Suite 100,
Scottsdale, AZ 85258.
ING Infrastructure, Industrials and Materials Fund,
Class III Trustees
To elect three members of the Board of Trustees to
represent the interests of the holders of Common Shares of the Fund, with all three individuals to serve as Class III Trustees, for a term of
three-years, and until the election and qualification of their successors.
|
|
|
|
Proposal*
|
|
Shares voted for
|
|
Shares voted
against or withheld
|
|
Shares
abstained
|
|
Total Shares
Voted
|
|
|
|
|
|
|
|
|
18,320,609.732 |
|
|
|
331,625.276 |
|
|
|
— |
|
|
|
18,652,235.008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,320,468.809 |
|
|
|
2,331,766.199 |
|
|
|
— |
|
|
|
18,652,235.008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,301,364.871 |
|
|
|
350,870.137 |
|
|
|
— |
|
|
|
18,652,235.008 |
|
|
|
|
|
|
|
|
|
39
ADDITIONAL INFORMATION (UNAUDITED)
During the period, there were no material changes in the
Fund’s investment objective or policies that were not approved by the shareholders or the Fund’s charter or by-laws or in the principal risk
factors associated with investment in the Fund.
During the fiscal year, the Fund reduced its quarterly
distribution from $0.450 to $0.405 per quarter, commencing with the distribution paid on October 1, 2012.
The Fund may lend portfolio securities in an amount equal
to up to 33-1/3% of its managed assets to broker dealers or other institutional borrowers, in exchange for cash collateral and fees. The fund may use
the cash collateral in connection with the Fund’s investment program as approved by the Adviser, including generating cash to cover collateral
posting requirements. Although the Fund has no current intention to do so, it may use the cash collateral to generate additional income. The use of
cash collateral in connection with the Fund’s investment program may have a leveraging effect on the Fund, which would increase the volatility of
the Fund and could reduce its returns and/or cause a loss.
The Fund intends to engage in lending portfolio securities
only when such lending is secured by cash or other permissible collateral in an amount at least equal to the market value of the securities loaned. The
Fund will maintain cash, cash equivalents or liquid securities holdings in an amount sufficient to cover its repayment obligation with respect to the
collateral, marked to market on a daily basis.
Securities lending involves the risks of delay in recovery
or even loss of rights in the securities loaned if the borrower of the securities fails financially. Loans will be made only to organizations whose
credit quality or claims paying ability is considered by the Sub-Adviser to be at least investment grade. The financial condition of the borrower will
be monitored by the Adviser on an ongoing basis. The Fund will not lend portfolio securities subject to a written American style covered call option
contract. The Fund may lend portfolio securities subject to a written European style covered call option contract as long as the lending period is less
than or equal to the term of the covered call option contract.
Dividend Reinvestment Plan
Unless the registered owner of Common Shares elects to
receive cash by contacting Computershare Shareowner Services LLC (the ”Plan Agent“), all dividends declared on Common Shares of the Fund will
be automatically reinvested by the Plan Agent for shareholders in additional Common Shares of the Fund through the Fund’s Dividend Reinvestment
Plan (the ”Plan“). Shareholders who elect not to participate in the Plan will receive all dividends and other distributions in cash paid by
check mailed directly to the shareholder of record (or, if the Common Shares are held in street or other nominee name, then to such nominee) by the
Plan Agent. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and
processed by the Plan Agent prior to the dividend record date; otherwise such termination or resumption will be effective with respect to any
subsequently declared dividend or other distribution. Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash
in additional Common Shares of the Fund for you. If you wish for all dividends declared on your Common Shares of the Fund to be automatically
reinvested pursuant to the Plan, please contact your broker.
The Plan Agent will open an account for each Common
Shareholder under the Plan in the same name in which such Common Shareholder’s Common Shares are registered. Whenever the Fund declares a dividend
or other distribution (together, a ”Dividend“) payable in cash, non-participants in the Plan will receive cash and participants in the Plan
will receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Agent for the participants’ accounts, depending upon
the circumstances described below, either (i) through receipt of additional unissued but authorized Common Shares from the Fund (”Newly Issued
Common Shares“) or (ii) by purchase of outstanding Common Shares on the open market (”Open-Market Purchases“) on the NYSE or elsewhere.
Open-market purchases and sales are usually made through a broker affiliated with the Plan Agent.
If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commissions per Common Share is equal to or greater than the net asset value per Common Share, the Plan Agent
will invest the Dividend amount in Newly Issued Common Shares on behalf of the participants. The number of Newly Issued Common Shares to be credited to
each participant’s account will be determined by dividing the dollar amount of the Dividend by the net asset value per Common Share on the payment
date; provided that, if the net asset value is less than or equal to 95% of the closing market value on the payment date, the dollar amount of the
Dividend will be divided by 95% of the closing market price per Common Share on the payment date. If, on the payment date for any Dividend, the net
asset value per Common Share is greater than the closing market value plus estimated brokerage commissions, the Plan Agent will invest the Dividend
amount in Common Shares acquired on behalf of the participants in Open-Market Purchases. In the event of a market discount on the payment date for any
Dividend, the Plan Agent will have until the last business day before the next date on which the Common Shares trade on an ”ex-dividend“
basis or 30 days after the payment date for such Dividend, whichever is sooner (the ”Last Purchase Date“), to invest the Dividend amount in
Common Shares acquired in Open-Market Purchases.
The Fund pays quarterly Dividends. Therefore, the period
during which Open-Market Purchases can be made will exist only from the payment date of each Dividend through the date before the next
”ex-dividend“ date, which typically will be approximately ten days.
40
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
If, before the Plan Agent has completed its Open-Market
Purchases, the market price per common share exceeds the net asset value per Common Share, the average per Common Share purchase price paid by the Plan
Administrator may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if the Dividend had been
paid in Newly Issued Common Shares on the Dividend payment date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan
provides that if the Plan Agent is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market
discount shifts to a market premium during the purchase period, the Plan Agent will cease making Open-Market Purchases and will invest the un-invested
portion of the Dividend amount in Newly Issued Common Shares at the net asset value per common share at the close of business on the Last Purchase Date
provided that, if the net asset value is less than or equal to 95% of the then current market price per Common Share, the dollar amount of the Dividend
will be divided by 95% of the market price on the payment date.
The Plan Agent maintains all shareholders’ accounts in
the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common
Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the Plan participant, and each shareholder proxy will
include those shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote
proxies for shares held under the Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or
nominees which hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common
Shares certified from time to time by the record shareholder’s name and held for the account of beneficial owners who participate in the
Plan.
There will be no brokerage charges with respect to Common
Shares issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with
Open-Market Purchases. The automatic reinvestment of Dividends will not relieve participants of any federal, state or local income tax that may be
payable (or required to be withheld) on such Dividends. Participants that request a partial or full sale of shares through the Plan Agent are subject
to a $15.00 sales fee and a $0.10 per share brokerage commission on purchases or sales, and may be subject to certain other service
charges.
The Fund reserves the right to amend or terminate the Plan.
There is no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan to
include a service charge payable by the participants.
All questions concerning the Plan should be directed to the
Fund’s Shareholder Service Department at (800) 992-0180.
Key Financial Dates — Calendar 2013
Distributions:
Declaration Date
|
|
Ex-Dividend Date
|
|
Payable Date
|
March 15, 2013 |
|
|
April 1, 2013 |
|
|
|
April 15, 2013 |
|
June 17, 2013 |
|
|
July 1, 2013 |
|
|
|
July 15, 2013 |
|
September 16, 2013 |
|
|
October 1, 2013 |
|
|
|
October 15, 2013 |
|
December 16, 2013 |
|
|
December 27, 2013 |
|
|
|
January 15, 2014 |
|
Record date will be two business days after each
Ex-Dividend Date. These dates are subject to change.
Stock Data
The Fund’s common shares are traded on the NYSE
(Symbol: IDE).
Repurchase of Securities by Closed-End
Companies
In accordance with Section 23(c) of the 1940 Act, and Rule
23c-1 under the 1940 Act the Fund may from time to time purchase shares of beneficial interest of the Fund in the open market, in privately negotiated
transactions and/or purchase shares to correct erroneous transactions.
Number of Shareholders
The approximate number of record holders of Common Stock as
of February 28, 2013 was 5, which does not include approximately 9,570 beneficial owners of shares held in the name of brokers of other
nominees.
Certifications
In accordance with Section 303A.12 (a) of the New York
Stock Exchange Listed Company Manual, the Fund’s CEO submitted the Annual CEO Certification on August 2, 2012 certifying that he was not aware, as
of the date of submission, of any violation by the Fund of the NYSE’s Corporate governance listing standards. In addition, as required by Section
302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund’s principal executive and financial officers are required to make quarterly
certifications, included in filings with the SEC on Forms N-CSR and N-Q, relating to, among other things, the Fund’s disclosure controls and
procedures and internal controls over financial reporting.
41
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
Investment Adviser
ING Investments, LLC
7337 East
Doubletree Ranch Road, Suite 100
Scottsdale, Arizona 85258
Administrator
ING Funds Services, LLC
7337 East
Doubletree Ranch Road, Suite 100
Scottsdale, Arizona 85258
Transfer Agent
Computershare Shareowner Services
LLC
480 Washington Boulevard
Jersey City, New Jersey 07310-1900
Independent Registered Public Accounting Firm
KPMG
LLP
Two Financial Center
60 South Street
Boston, Massachusetts 02111
Custodian
The Bank of New York Mellon
One Wall
Street
New York, New York 10286
Legal Counsel
Dechert LLP
1900 K Street, N.W.
Washington, D.C. 20006
Toll-Free Shareholder Information
Call us from 9:00
a.m. to 7:00 p.m. Eastern time on any business day for account or other information, at (800) 992-0180
 |
AR-UIDE (0213-042413) |
As of the end of the
period covered by this report, Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to the Registrant’s principal executive officer and principal financial officer. There were no amendments to the Code
during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code during the period covered by this report. The code of ethics is filed herewith pursuant to
Item 10(a)(1), Exhibit 99.CODE ETH.
| Item 3. |
Audit Committee Financial Expert. |
The
Board of Trustees has determined that J. Michael Earley, Peter S. Drotch and Colleen Baldwin are audit committee financial experts, as defined in Item 3 of Form N-CSR. Mr. Earley, Mr. Drotch and Ms. Baldwin are “independent” for
purposes of Item 3 of Form N-CSR.
| Item 4. |
Principal Accountant Fees and Services. |
|
|
|
| (a) |
|
Audit Fees: The aggregate fees billed for the last fiscal period for professional services rendered by KPMG LLP (“KPMG”), the principal accountant for the audit
of the registrant’s annual financial statements, for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year was $24,500 for the fiscal year ended
February 28, 2013 and $25,000 for the period ended February 29, 2012. |
|
|
| (b) |
|
Audit-Related Fees: The aggregate fees billed in each of the last two fiscal years for assurance and related services by KPMG that are reasonably related to the
performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this item were $2,400 for the year ended February 28, 2013 and $2,400 for the period ended February 29, 2012. |
|
|
| (c) |
|
Tax Fees: The aggregate fees billed in each the last two fiscal years for professional services rendered by KPMG for tax compliance, tax advice, and tax planning were
$8,926 in the year ended February 28, 2013 and $7,602 in the period ended February 29, 2012. Such services included review of excise distribution calculations (if applicable), preparation of the Fund’s federal, state and excise tax returns,
tax services related to mergers and routine consulting. |
|
|
| (d) |
|
All Other Fees: NONE. |
|
|
| (e)(1) |
|
Audit Committee Pre-Approval Policies and Procedures |
AUDIT
AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY
I. Statement of
Principles
Under
the Sarbanes-Oxley Act of 2002 (the “Act”), the Audit Committee of the Board of Directors or Trustees (the “Committee”)
of the ING Funds (each a “Fund,” collectively, the “Funds”) set out on Exhibit A to this
Audit and Non-Audit Services Pre-Approval Policy (“Policy”) is
responsible for the oversight of the work of the Funds’ independent auditors. As part of its responsibilities, the Committee
must pre-approve the audit and non-audit services performed by the auditors in order to assure that the provision of these services
does not impair the auditors’ independence from the Funds. The Committee has adopted, and the Board has ratified, this Policy,
which sets out the procedures and conditions under which the services of the independent auditors may be pre-approved.
Under Securities and
Exchange Commission (“SEC”) rules promulgated in accordance with the Act, the Funds may establish two different approaches
to pre-approving audit and non-audit services. The Committee may approve services without consideration of specific case-by-case
services (“general pre-approval”) or it may pre-approve specific services (“specific pre-approval”). The
Committee believes that the combination of these approaches contemplated in this Policy results in an effective and efficient method
for pre-approving audit and non-audit services to be performed by the Funds’ independent auditors. Under this Policy, services
that are not of a type that may receive general pre-approval require specific pre-approval by the Committee. Any proposed services
that exceed pre-approved cost levels or budgeted amounts will also require the Committee’s specific pre-approval.
For both types of approval,
the Committee considers whether the subject services are consistent with the SEC’s rules on auditor independence and that
such services are compatible with maintaining the auditors independence. The Committee also considers whether a particular audit
firm is in the best position to provide effective and efficient services to the Funds. Reasons that the auditors are in the best
position include the auditors’ familiarity with the Funds’ business, personnel, culture, accounting systems, risk profile,
and other factors, and whether the services will enhance the Funds’ ability to manage and control risk or improve audit quality.
Such factors will be considered as a whole, with no one factor being determinative.
The appendices attached
to this Policy describe the audit, audit-related, tax-related, and other services that have the Committee’s general pre-approval.
For any service that has been approved through general pre-approval, the general pre-approval will remain in place for a period
12 months from the date of pre-approval, unless the Committee determines that a different period is appropriate. The Committee
will annually review and pre-approve the services that may be provided by the independent auditors without specific pre-approval.
The Committee will revise the list of services subject to general pre-approval as appropriate. This Policy does not serve as a
delegation to Fund management of the Committee’s duty to pre-approve services performed by the Funds’ independent auditors.
II. Audit Services
The annual
audit services engagement terms and fees are subject to the Committee’s specific pre-approval. Audit services are
those services that are normally provided by auditors in connection with statutory and regulatory filings or engagements or those
that generally only independent auditors can reasonably provide. They include the Funds’ annual financial statement audit
and procedures that the independent auditors must perform in order to form an opinion on the Funds’ financial statements
(e.g., information systems and procedural reviews and testing). The Committee will monitor the audit services engagement
and approve any changes in terms, conditions or fees deemed by the Committee to be necessary or appropriate.
The Committee may grant general pre-approval to other audit
services, such as statutory audits and services associated with SEC registration statements, periodic reports and other documents
filed with the SEC or issued in connection with securities offerings.
The Committee has pre-approved the audit services listed on
Appendix A. The Committee must specifically approve all audit services not listed on Appendix A.
III. Audit-related Services
Audit-related services
are assurance and related services that are reasonably related to the performance of the audit or the review of the Funds’
financial statements or are traditionally performed by the independent auditors. The Committee believes that the provision of audit-related
services will not impair the independent auditors’ independence, and therefore may grant pre-approval to audit-related services.
Audit-related services include accounting consultations related to accounting, financial reporting or disclosure matters not classified
as “audit services;” assistance with understanding and implementing new accounting and financial reporting guidance
from rulemaking authorities; agreed-upon or expanded audit procedures relating to accounting and/or billing records required to
respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting
requirements under Form N-SAR or Form N-CSR.
The Committee has pre-approved the audit-related services
listed on Appendix B. The Committee must specifically approve all audit-related services not listed on Appendix B.
IV. Tax Services
The Committee believes
the independent auditors can provide tax services to the Funds, including tax compliance, tax planning, and tax advice, without
compromising the auditors’ independence. Therefore, the Committee may grant general pre-approval with respect to tax services
historically provided by the Funds’ independent auditors that do not, in the Committee’s view, impair auditor independence
and that are consistent with the SEC’s rules on auditor independence.
The Committee will not
grant pre-approval if the independent auditors initially recommends a transaction the sole business purpose of which is tax avoidance
and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Committee may consult
2
outside counsel to determine
that tax planning and reporting positions are consistent with this Policy.
The Committee has pre-approved the tax-related services listed
on Appendix C. The Committee must specifically approve all tax-related services not listed on Appendix C.
V. Other Services
The Committee believes
it may grant approval of non-audit services that are permissible services for independent auditors to a Fund. The Committee has
determined to grant general pre-approval to other services that it believes are routine and recurring, do not impair auditor independence,
and are consistent with SEC rules on auditor independence.
The Committee has pre-approved the non-audit services listed
on Appendix D. The Committee must specifically approve all non-audit services not listed on Appendix D.
A list of the SEC’s prohibited non-audit services is
attached to this Policy as Appendix E. The SEC’s rules and relevant guidance should be consulted to determine the precise
definitions of these impermissible services and the applicability of exceptions to certain of the SEC’s prohibitions.
VI. Pre-approval of Fee levels and Budgeted Amounts
The Committee will annually
establish pre-approval fee levels or budgeted amounts for audit, audit-related, tax and non-audit services to be provided to the
Funds by the independent auditors. Any proposed services exceeding these levels or amounts require the Committee’s specific
pre-approval. The Committee considers fees for audit and non-audit services when deciding whether to pre-approve services. The
Committee may determine, for a pre-approval period of 12 months, the appropriate ratio between the total amount of fees for the
Fund’s audit, audit-related, and tax services (including fees for services provided to Fund affiliates that are subject to
pre-approval), and the total amount of fees for certain permissible non-audit services for the Fund classified as other services
(including any such services provided to Fund affiliates that are subject to pre-approval).
VII. Procedures
Requests or applications
for services to be provided by the independent auditors will be submitted to management. If management determines that the services
do not fall within those services generally pre-approved by the Committee and set out in the appendices to these procedures, management
will submit the services to the Committee or its delagee. Any such submission will include a detailed description of the services
to be rendered. Notwithstanding this paragraph, the Committee will, on a quarterly basis, receive from the independent auditors
a list of services provided for the previous calendar quarter on a cumulative basis by the auditors during the Pre-Approval Period.
3
VIII. Delegation
The Committee may delegate pre-approval authority to one or
more of the Committee’s members. Any member or members to whom such pre-approval authority is delegated must report any pre-approval
decisions, including any pre-approved services, to the Committee at its next scheduled meeting. The Committee will identify any
member to whom pre-approval authority is delegated in writing. The member will retain such authority for a period of 12 months
from the date of pre-approval unless
the Committee determines that a different period is appropriate. The period of delegated authority may be terminated by the Committee
or at the option of the member.
IX. Additional
Requirements
The Committee will take
any measures the Committee deems necessary or appropriate to oversee the work of the independent auditors and to assure the auditors’
independence from the Funds. This may include reviewing a formal written statement from the independent auditors delineating all
relationships between the auditors and the Funds, consistent with Independence Standards Board No. 1, and discussing with the auditors
their methods and procedures for ensuring independence.
Effective April 23,
2008, the KPMG LLP (“KPMG”) audit team for the ING Funds accepted the global responsibility for monitoring the auditor
independence for KPMG relative to the ING Funds. Using a proprietary system called Sentinel, the audit team is able to identify
and manage potential conflicts of interest across the member firms of the KPMG International Network and prevent the provision
of prohibited services to the ING entities that would impair KPMG independence with the respect to the ING Funds. In addition to
receiving pre-approval from the ING Funds Audit Committee for services provided to the ING Funds and for services for ING entities
in the Investment Company Complex, the audit team has developed a process for periodic notification via email to the ING Funds’
Audit Committee Chairpersons regarding requests to provide services to ING Groep NV and its affiliates from KPMG offices worldwide.
Additionally, KPMG provides a quarterly summary of the fees for services that have commenced for ING Groep NV and Affiliates at
each Audit Committee Meeting.
4
Last Approved: November
29, 2012
5
Appendix A
Pre-Approved Audit Services for the Pre-Approval Period January 1, 2013through December 31, 2013
| Service |
| |
The Fund(s) |
Fee Range |
| Statutory audits or financial audits (including tax services associated with audit services) |
√ |
As presented to Audit Committee1 |
| Services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., consents), and assistance in responding to SEC comment letters. |
√ |
Not to exceed $9,750 per filing |
| Consultations by Fund management with respect to accounting or disclosure treatment of transactions or events and/or the actual or potential effect of final or proposed rules, standards or interpretations by the SEC, Financial Accounting Standards Board, or other regulatory or standard setting bodies. |
√ |
Not to exceed $8,000 during the Pre-Approval Period |
| Seed capital audit and related review and issuance of consent on the N-2 registration statement |
√ |
Not to exceed $13,000 per audit |
__________
| 1 | For new Funds launched during the Pre-Approval Period, the fee ranges pre-approved will be the same as those for existing Funds,
pro-rated in accordance with inception dates as provided in the auditors’ Proposal or any Engagement Letter covering the
period at issue. Fees in the Engagement Letter will be controlling. |
6
Appendix B
Pre-Approved Audit-Related Services for the Pre-Approval Period January 1, 2013 through December 31, 2013
| Service |
| |
The Fund(s) |
Fund Affiliates |
Fee Range |
| Services related to Fund mergers (Excludes tax services - See Appendix C for tax services associated with Fund mergers) |
√ |
√ |
Not to exceed $10,000 per merger |
| Consultations by Fund management with respect to accounting or disclosure treatment of transactions or events and/or the actual or potential effect of final or proposed rules, standards or interpretations by the SEC, Financial Accounting Standards Board, or other regulatory or standard setting bodies. [Note: Under SEC rules some consultations may be “audit” services and others may be “audit-related” services.] |
√ |
|
Not to exceed $5,000 per occurrence during the Pre-Approval Period |
| Review of the Funds’ semi-annual and quarterly financial statements |
√ |
|
Not to exceed $2,400 per set of financial statements per fund |
| Reports to regulatory or government agencies related to the annual engagement |
√ |
|
Up to $5,000 per occurrence during the Pre-Approval Period |
| Regulatory compliance assistance |
√ |
√ |
Not to exceed $5,000 per quarter |
| Training courses |
|
√ |
Not to exceed $2,000 per course |
| For Prime Rate Trust, agreed upon procedures for quarterly reports to rating agencies |
√ |
|
Not to exceed $9,450 per quarter |
| |
|
|
|
7
Appendix C
Pre-Approved Tax Services for the Pre-Approval Period January 1, 2013 through December 31, 2013
| Service |
| |
The Fund(s) |
Fund Affiliates |
Fee Range |
| Preparation of federal and state income tax returns and federal excise tax returns for the Funds including assistance and review with excise tax distributions |
√ |
|
As presented to Audit Committee2 |
| Review of IRC Sections 851(b) and 817(h) diversification testing on a real-time basis |
√ |
|
As presented to Audit Committee2 |
| Assistance and advice regarding year-end reporting for 1099’s |
√ |
|
As presented to Audit Committee2 |
| Tax assistance and advice regarding statutory, regulatory or administrative developments |
√ |
√ |
Not to exceed $5,000 for the Funds or for the Funds’ investment adviser during the Pre-Approval Period |
__________
| 2 | For new Funds launched during the Pre-Approval Period, the fee ranges pre-approved will be the same as those for existing Funds,
pro-rated in accordance with inception dates as provided in the auditors’ Proposal or any Engagement Letter covering the
period at issue. Fees in the Engagement Letter will be controlling. |
8
Appendix C, continued
| Service |
| |
The Fund(s) |
Fund Affiliates |
Fee Range |
| Tax training courses |
|
√ |
Not to exceed $2,000 per course during the Pre-Approval Period |
| Tax services associated with Fund mergers |
√ |
√ |
Not to exceed $4,000 per fund per merger during the Pre-Approval Period |
| Other tax-related assistance and consultation, including, without limitation, assistance in evaluating derivative financial instruments and international tax issues, qualification and distribution issues, and similar routine tax consultations. |
√ |
|
Not to exceed $120,000 during the Pre-Approval Period |
9
Appendix D
Pre-Approved Other Services for the Pre-Approval Period January 1, 2013through December 31, 2013
| Service |
| |
The Fund(s) |
Fund Affiliates |
Fee Range |
| Agreed-upon procedures for Class B share 12b-1 programs |
|
√ |
Not to exceed $60,000 during the Pre-Approval Period |
|
Security counts performed
pursuant to Rule 17f-2 of the 1940 Act (i.e., counts for Funds holding securities with affiliated sub-custodians)
Cost to be borne 50%
by the Funds and 50% by ING Investments, LLC. |
√
|
√
|
Not to exceed $5,000 per Fund during the Pre-Approval Period |
| Agreed upon procedures for 15 (c) FACT Books |
√ |
|
Not to exceed $35,000 during the Pre-Approval Period |
10
Appendix E
Prohibited Non-Audit Services
Dated: January 1, 2013 to December 31, 2013
| · | Bookkeeping or other services related to the accounting records or financial statements of the
Funds |
| · | Financial information systems design and implementation |
| · | Appraisal or valuation services, fairness opinions, or contribution-in-kind reports |
| · | Internal audit outsourcing services |
| · | Broker-dealer, investment adviser, or investment banking services |
| · | Expert services unrelated to the audit |
| · | Any other service that the Public Company Accounting Oversight Board determines, by regulation,
is impermissible |
11
EXHIBIT
A
ING ASIA PACIFIC HIGH DIVIDEND EQUITY INCOME
FUND
ING EMERGING MARKETS LOCAL BOND FUND
ING EMERING MARKETS HIGH DIVIDEND EQUITY FUND
ING EQUITY TRUST
ING FUNDS TRUST
ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY
FUND
ING GLOBAL EQUITY DIVIDEND AND PREMIUM OPPORTUNITY
FUND
ING GLOBAL STRATEGIC INCOME FUND
ING INFRASTRUCTURE, INDUSTRIALS, AND MATERIALS
FUND
ING INTERNATIONAL HIGH DIVIDEND EQUITY INCOME
FUND
ING INVESTORS TRUST
ING MAYFLOWER TRUST
ING MUTUAL FUNDS
ING PARTNERS, INC.
ING PRIME RATE TRUST
ING RISK MANAGED NATURAL RESOURCES FUNDING INVESTORS
TRUST
ING SENIOR INCOME FUND
ING SEPARATE PORTFOLIOS TRUST
ING VARIABLE INSURANCE TRUST
ING VARIABLE PRODUCTS TRUST
|
|
|
| (e)(2) |
|
Percentage of services referred to in 4(b) — (4)(d) that were approved by the audit committee |
|
|
|
|
100% of the services were approved by the audit committee. |
|
|
| (f) |
|
Percentage of hours expended attributable to work performed by other than full time employees of KPMG if greater than 50%. |
|
|
|
|
Not applicable. |
|
|
| (g) |
|
Non-Audit Fees: The non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment
adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were $574,179 for the year ended February 28, 2013 and $1,233,678 for the period ended February 29,
2012. |
|
|
| (h) |
|
Principal Accountants Independence: The Registrant’s Audit committee has considered whether the provision of non-audit services that were rendered to the
registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of
Regulation S-X is compatible with maintaining KPMG’s independence. |
| Item 5. |
Audit Committee of Listed Registrants. |
|
|
|
| a. |
|
The registrant has a separately-designated standing audit committee. The members are J. Michael Earley, Patricia W. Chadwick and Peter S. Drotch. |
|
|
| b. |
|
Not applicable. |
13
| Item 6. |
Schedule of Investments |
Report of Independent Registered Public
Accounting Firm
The Shareholders and Board of Trustees
ING Infrastructure, Industrials and Materials
Fund
We have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States), the statement of assets and liabilities, including the summary
portfolio of investments, of ING Infrastructure, Industrials and Materials Fund as of February 28, 2013, and the related statement
of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years in the three-year period then ended and the period January 26, 2010 (commencement
of operations) to February 28, 2010 and have issued our unqualified report thereon dated April 24, 2013 (which report and financial
statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR). In connection with our audits of the aforementioned
financial statements and financial highlights, we also audited the related portfolio of investments included in Item 6 of this
Form N-CSR. The portfolio of investments is the responsibility of management. Our responsibility is to express an opinion on the
portfolio of investments based on our audits.
In our opinion, the portfolio of investments,
when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
Boston, Massachusetts
April 24, 2013
ING Infrastructure, Industrials
and Materials Fund |
PORTFOLIO OF INVESTMENTS |
| as of February 28, 2013 |
| |
Shares |
|
|
|
Value |
Percentage
of Net
Assets |
| |
COMMON STOCK: 99.3% |
| |
|
|
Brazil: 3.0% |
| |
136,300 |
|
CPFL Energia SA ADR |
2,796,876 |
0.8 |
| |
229,900 |
|
Vale SA ADR |
4,365,801 |
1.2 |
| |
282,500 |
|
Weg S.A. |
3,780,653 |
1.0 |
| |
|
|
|
10,943,330 |
3.0 |
| |
|
|
|
|
|
| |
|
|
Canada: 0.6% |
| |
531,600 |
|
Bombardier, Inc. - Class B |
2,139,287 |
0.6 |
| |
|
|
|
|
|
| |
|
|
Chile: 0.7% |
| |
129,800 |
|
Enersis SA ADR |
2,412,982 |
0.7 |
| |
|
|
|
|
|
| |
|
|
China: 3.5% |
| |
87,300 |
|
China Mobile Ltd. ADR |
4,784,040 |
1.3 |
| |
310,000 |
|
China Unicom Hong Kong Ltd. ADR |
4,516,700 |
1.3 |
| |
1,718,639 |
|
Dongfang Electrical Machinery Co., Ltd. |
3,225,907 |
0.9 |
| |
|
|
|
12,526,647 |
3.5 |
| |
|
|
|
|
|
| |
|
|
Finland: 1.2% |
| |
66,684 |
|
Outotec Oyj |
4,374,631 |
1.2 |
| |
|
|
|
|
|
| |
|
|
France: 7.4% |
| |
42,210 |
|
Air Liquide |
5,122,766 |
1.4 |
| |
158,628 |
|
Cie Generale de Geophysique-Veritas |
3,924,921 |
1.1 |
| |
79,298 |
|
Schneider Electric S.A. |
6,073,677 |
1.7 |
| |
178,583 |
|
Suez Environnement S.A. |
2,376,172 |
0.6 |
| |
47,023 |
|
Technip S.A. |
5,081,180 |
1.4 |
| |
93,276 |
|
Vinci S.A. |
4,299,904 |
1.2 |
| |
|
|
|
26,878,620 |
7.4 |
| |
|
|
|
|
|
| |
|
|
Germany: 7.9% |
| |
64,788 |
|
BASF AG |
6,084,683 |
1.7 |
| |
152,335 |
|
Deutsche Post AG |
3,410,170 |
0.9 |
| |
406,989 |
|
Deutsche Telekom AG |
4,361,499 |
1.2 |
| |
217,737 |
|
E.ON AG |
3,627,531 |
1.0 |
| |
98,840 |
|
GEA Group AG |
3,509,761 |
1.0 |
| |
74,677 |
|
Siemens AG |
7,750,814 |
2.1 |
| |
|
|
|
28,744,458 |
7.9 |
| |
|
|
|
|
|
| |
|
|
India: 0.4% |
| |
58,900 |
|
Larsen & Toubro Ltd. |
1,478,581 |
0.4 |
| |
|
|
|
|
|
| |
|
|
Ireland: 1.4% |
| |
233,167 |
|
CRH PLC |
5,069,529 |
1.4 |
| |
|
|
|
|
|
| |
|
|
Italy: 2.7% |
| |
1,384,960 |
|
Enel S.p.A. |
4,998,607 |
1.4 |
| |
388,232 |
|
Fiat Industrial SpA |
4,705,872 |
1.3 |
| |
|
|
|
9,704,479 |
2.7 |
| |
|
|
|
|
|
| |
|
|
Japan: 4.2% |
| |
828,000 |
|
Hitachi Ltd. |
4,640,911 |
1.3 |
| |
163,300 |
|
Komatsu Ltd. |
4,112,268 |
1.1 |
| |
419,000 |
|
Mitsubishi Electric Corp. |
3,407,791 |
0.9 |
| |
49,900 |
|
Shin-Etsu Chemical Co., Ltd. |
3,067,763 |
0.9 |
| |
|
|
|
15,228,733 |
4.2 |
| |
|
|
|
|
|
| |
|
|
Luxembourg: 2.5% |
| |
344,300 |
|
ArcelorMittal |
5,157,614 |
1.4 |
| |
49,400 |
|
Millicom International Cellular SA |
3,875,430 |
1.1 |
| |
|
|
|
9,033,044 |
2.5 |
| |
|
|
|
|
|
| |
|
|
Netherlands: 2.8% |
| |
134,519 |
|
European Aeronautic Defence and Space Co. NV |
6,857,202 |
1.9 |
| |
53,000 |
|
Koninklijke DSM NV |
3,095,536 |
0.9 |
| |
|
|
|
9,952,738 |
2.8 |
| |
|
|
|
|
|
| |
|
|
Russia: 1.4% |
| |
245,700 |
|
Mobile Telesystems OJSC ADR |
5,083,533 |
1.4 |
| |
|
|
|
|
|
| |
|
|
South Korea: 1.2% |
| |
55,373 |
|
POSCO ADR |
4,468,047 |
1.2 |
| |
|
|
|
|
|
| |
|
|
Sweden: 1.3% |
| |
323,157 |
|
Volvo AB - B Shares |
4,831,501 |
1.3 |
| |
|
|
|
|
|
| |
|
|
Switzerland: 2.2% |
| |
227,500 |
|
ABB Ltd. ADR |
5,168,800 |
1.4 |
| |
60,768 |
|
Wolseley PLC |
2,853,866 |
0.8 |
| |
|
|
|
8,022,666 |
2.2 |
| |
|
|
|
|
|
| |
|
|
United Kingdom: 10.3% |
| |
293,050 |
|
Alent PLC |
1,658,262 |
0.5 |
| |
142,542 |
|
Anglo American PLC |
4,130,430 |
1.1 |
| |
175,000 |
|
Antofagasta PLC |
2,885,268 |
0.8 |
| |
272,276 |
|
BHP Billiton PLC |
8,591,957 |
2.4 |
| |
132,899 |
|
Rio Tinto PLC |
7,106,468 |
1.9 |
| |
293,050 |
|
Vesuvius PLC |
1,689,216 |
0.5 |
| |
3,027,960 |
|
Vodafone Group PLC |
7,594,765 |
2.1 |
| |
102,301 |
|
Weir Group PLC |
3,628,765 |
1.0 |
| |
|
|
|
37,285,131 |
10.3 |
| |
|
|
|
|
|
| |
|
|
United States: 44.6% |
| |
82,100 |
|
Acuity Brands, Inc. |
5,593,473 |
1.6 |
| |
78,700 |
|
Caterpillar, Inc. |
7,269,519 |
2.0 |
| |
309,400 |
|
CenterPoint Energy, Inc. |
6,630,442 |
1.8 |
| |
63,800 |
|
Cummins, Inc. |
7,392,506 |
2.0 |
| |
56,300 |
|
Deere & Co. |
4,944,829 |
1.4 |
| |
68,400 |
|
Dover Corp. |
5,017,140 |
1.4 |
| |
103,600 |
|
EI Du Pont de Nemours & Co. |
4,962,440 |
1.4 |
| |
122,200 |
|
Fluor Corp. |
7,564,180 |
2.1 |
| |
104,200 |
|
General Dynamics Corp. |
7,082,474 |
2.0 |
| |
345,400 |
|
General Electric Co. |
8,020,188 |
2.2 |
| |
140,700 |
|
Honeywell International, Inc. |
9,863,070 |
2.7 |
| |
117,700 |
|
KBR, Inc. |
3,576,903 |
1.0 |
| |
61,200 |
|
Lockheed Martin Corp. |
5,385,600 |
1.5 |
| |
47,900 |
|
Monsanto Co. |
4,839,337 |
1.3 |
| |
79,700 |
|
National Oilwell Varco, Inc. |
5,429,961 |
1.5 |
| |
48,900 |
|
Pall Corp. |
3,334,002 |
0.9 |
See
Accompanying Notes to Financial Statements
1
ING Infrastructure, Industrials
and
Materials Fund |
PORTFOLIO OF INVESTMENTS |
| as of February 28, 2013 (continued) |
| |
|
|
|
|
|
|
| |
142,300 |
|
Patterson-UTI Energy, Inc. |
3,321,282 |
0.9 |
| |
156,700 |
|
Peabody Energy Corp. |
3,378,452 |
0.9 |
| |
165,600 |
|
Republic Services, Inc. |
5,206,464 |
1.4 |
| |
52,200 |
|
Roper Industries, Inc. |
6,504,642 |
1.8 |
| |
118,500 |
|
Schlumberger Ltd. |
9,225,225 |
2.6 |
| |
75,900 |
|
TAL International Group, Inc. |
3,267,495 |
0.9 |
| |
196,800 |
|
TECO Energy, Inc. |
3,394,800 |
0.9 |
| |
39,100 |
|
TransDigm Group, Inc. |
5,565,494 |
1.5 |
| |
91,400 |
|
UGI Corp. |
3,273,948 |
0.9 |
| |
68,800 |
|
Union Pacific Corp. |
9,433,168 |
2.6 |
| |
89,600 |
|
United Parcel Service, Inc. - Class B |
7,405,440 |
2.1 |
| |
70,600 |
@ |
WABCO Holdings, Inc. |
4,851,632 |
1.3 |
| |
|
|
|
161,734,106 |
44.6 |
| |
|
|
|
|
|
| |
|
Total Common Stock |
|
|
|
| |
|
(Cost $318,118,860) |
359,912,043 |
99.3 |
| |
|
|
|
|
| |
RIGHTS: 0.0% |
| |
|
|
Chile: 0.0% |
| |
65,419 |
|
Enersis SA |
13,084 |
0.0 |
| |
|
|
|
|
|
| |
|
Total Rights |
|
|
|
| |
|
(Cost $–) |
13,084 |
0.0 |
| |
|
|
|
|
| |
|
Total Long-Term Investments |
|
|
|
| |
|
(Cost $318,118,860) |
359,925,127 |
99.3 |
| |
|
|
|
|
| SHORT-TERM INVESTMENTS: 1.0% |
| |
|
|
Mutual Funds: 1.0% |
| |
3,722,300 |
|
BlackRock Liquidity Funds, TempFund, Institutional Class |
|
|
| |
|
|
(Cost $3,722,300) |
3,722,300 |
1.0 |
| |
|
|
|
|
|
| |
|
Total Short-Term Investments |
|
|
|
| |
|
(Cost $3,722,300) |
3,722,300 |
1.0 |
| |
|
|
|
|
| |
|
Total Investments in Securities
(Cost $321,841,160) |
$ 363,647,427 |
100.3 |
| |
|
Liabilities in Excess of Other Assets |
(1,153,852) |
(0.3) |
| |
|
Net Assets |
$ 362,493,575 |
100.0 |
| |
| @ |
Non-income producing security
|
| ADR |
American Depositary Receipt |
| |
Cost for federal income tax purposes is $322,437,240. |
| |
Net unrealized appreciation consists of: |
| |
Gross Unrealized Appreciation |
$65,458,074 |
| |
Gross Unrealized Depreciation |
(24,247,887) |
| |
Net Unrealized Appreciation |
$41,210,187 |
| |
| Industry Diversification |
Percentage
of Net Assets |
| Industrials |
50.5% |
| Materials |
16.8 |
| Utilities |
8.1 |
| Oil & Gas Equipment & Services |
5.5 |
| Telecommunication Services |
4.6 |
| Telecommunications |
3.8 |
| Energy |
2.0 |
| Building Materials |
1.4 |
| Information Technology |
1.3 |
| Miscellaneous Manufactur |
1.0 |
| Health Care |
0.9 |
| Oil & Gas |
0.9 |
| Trucking&Leasing |
0.9 |
| Diversified Metals & Mining |
0.8 |
| Distribution/Wholesale |
0.8 |
| Electric |
0.0 |
| Short-Term Investments |
1.0 |
| Liabilities in Excess of Other Assets |
(0.3) |
| Net Assets |
100.0% |
| |
See
Accompanying Notes to Financial Statements
2
| Fair Value Measurements^ |
| The following is a summary of the fair valuations according to the inputs used as of February 28, 2013 in valuing the assets and liabilities: |
| |
| |
Quoted Prices
in Active Markets
for Identical
Investments
(Level 1) |
|
Significant
Other
Observable
Inputs #
(Level 2) |
|
Significant
Unobservable
Inputs
(Level 3) |
|
Fair Value
at
February 28, 2013 |
| Asset Table |
|
|
|
|
|
|
|
| Investments, at fair value |
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
|
| Brazil |
$ 10,943,330 |
|
$ – |
|
$ – |
|
$ 10,943,330 |
| Canada |
2,139,287 |
|
– |
|
– |
|
2,139,287 |
| Chile |
2,412,982 |
|
– |
|
– |
|
2,412,982 |
| China |
9,300,740 |
|
3,225,907 |
|
– |
|
12,526,647 |
| Finland |
– |
|
4,374,631 |
|
– |
|
4,374,631 |
| France |
– |
|
26,878,620 |
|
– |
|
26,878,620 |
| Germany |
– |
|
28,744,458 |
|
– |
|
28,744,458 |
| India |
– |
|
1,478,581 |
|
– |
|
1,478,581 |
| Ireland |
– |
|
5,069,529 |
|
– |
|
5,069,529 |
| Italy |
– |
|
9,704,479 |
|
– |
|
9,704,479 |
| Japan |
– |
|
15,228,733 |
|
– |
|
15,228,733 |
| Luxembourg |
9,033,044 |
|
– |
|
– |
|
9,033,044 |
| Netherlands |
– |
|
9,952,738 |
|
– |
|
9,952,738 |
| Russia |
5,083,533 |
|
– |
|
– |
|
5,083,533 |
| South Korea |
4,468,047 |
|
– |
|
– |
|
4,468,047 |
| Sweden |
– |
|
4,831,501 |
|
– |
|
4,831,501 |
| Switzerland |
5,168,800 |
|
2,853,866 |
|
– |
|
8,022,666 |
| United Kingdom |
1,658,262 |
|
35,626,869 |
|
– |
|
37,285,131 |
| United States |
161,734,106 |
|
– |
|
– |
|
161,734,106 |
| Total Common Stock |
211,942,131 |
|
147,969,912 |
|
– |
|
359,912,043 |
| Rights |
13,084 |
|
– |
|
– |
|
13,084 |
| Short-Term Investments |
3,722,300 |
|
– |
|
– |
|
3,722,300 |
| Total Investments, at fair value |
$ 215,677,515 |
|
$ 147,969,912 |
|
$ – |
|
$ 363,647,427 |
| Liabilities Table |
|
|
|
|
|
|
|
| Other Financial Instruments+ |
|
|
|
|
|
|
|
| Written Options |
$ – |
|
$ – |
|
$ (1,744,221) |
|
$ (1,744,221) |
| Total Liabilities |
$ – |
|
$ – |
|
$ (1,744,221) |
|
$ (1,744,221) |
| |
| ^ |
See Note 2, "Significant Accounting Policies" in the Notes to Financial Statements for additional information. |
| + |
Other Financial Instruments are derivatives not reflected in the Portfolio of Investments and may include open forward foreign currency contracts, equity forwards, futures, swaps, and written options. Forward foreign currency contracts, equity forwards and futures are valued at the unrealized gain (loss) on the instrument. Swaps and written options are valued at the fair value of the instrument. |
| # |
The earlier close of the foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. Accordingly, a portion of the Fund's investments are categorized as Level 2 investments. |
| |
ING Infrastructure, Industrials and Materials Fund Written OTC Options on February 28, 2013: |
| |
Number of Contracts |
Counterparty |
Description |
Exercise
Price |
Expiration
Date |
Premiums
Received |
Fair Value |
| Options on Securities |
| |
265,320 |
UBS Warburg LLC |
Call on Custom Basket of Equity Securities |
100.000 EUR |
03/15/13 |
$ 595,595 |
$ (1,107,059) |
| |
82,908 |
Credit Suisse First Boston |
Call on Custom Basket of Equity Securities |
100.000 GBP |
03/15/13 |
208,412 |
(40,034) |
| |
386,280 |
Goldman Sachs & Co. |
Call on Custom Basket of Equity Securities |
100.000 USD |
03/13/13 |
583,283 |
(151,499) |
| |
418,470 |
Goldman Sachs & Co. |
Call on Custom Basket of Equity Securities |
100.000 USD |
03/13/13 |
506,349 |
(445,629) |
| |
|
|
Total Written OTC Options |
$ 1,893,639 |
$ (1,744,221) |
| |
See
Accompanying Notes to Financial Statements
3
| Item 7. |
Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment companies. |
ING FUNDS
PROXY VOTING PROCEDURES AND GUIDELINES
Effective Date: July 10, 2003
Revision Date: March 7, 2013
Table of Contents
|
|
|
|
|
1 |
|
|
|
|
|
|
1 |
|
|
|
Delegation of Voting Authority |
|
|
2 |
|
|
|
Approval and Review of Procedures |
|
|
3 |
|
|
|
Voting Procedures and Guidelines |
|
|
3 |
|
|
|
|
|
|
7 |
|
|
|
Reporting and Record Retention |
|
|
7 |
|
EXHIBIT 1 — List of ING Funds
|
|
8 |
|
EXHIBIT 2 — Proxy Voting Procedures of the Advisers
|
|
9 |
|
|
|
|
|
|
9 |
|
|
|
Roles and Responsibilities |
|
|
9 |
|
|
|
|
|
|
12 |
|
|
|
Assessment of the Agent and Conflicts of Interest |
|
|
14 |
|
|
|
Reporting and Record Retention |
|
|
16 |
|
|
|
17 |
|
EXHIBIT 3 — Proxy Voting Guidelines of the ING Funds |
|
18 |
|
|
|
|
|
|
18 |
|
|
|
|
|
|
18 |
|
|
|
18 |
|
|
|
|
|
|
19 |
|
|
|
|
|
|
26 |
|
|
|
|
|
|
27 |
|
|
|
|
|
|
27 |
|
|
|
|
|
|
28 |
|
|
|
|
|
|
29 |
|
|
|
|
|
|
31 |
|
|
|
Executive and Director Compensation |
|
|
34 |
|
|
|
|
|
|
38 |
|
|
|
Mergers and Corporate Restructurings |
|
|
38 |
|
|
|
|
|
|
39 |
|
|
|
Social and Environmental Issues |
|
|
39 |
|
|
|
|
|
|
40 |
|
i
I.
Introduction
The following are the Proxy Voting Procedures and
Guidelines (the “Procedures and Guidelines”) of the ING Funds set forth on Exhibit 1 attached
hereto and each portfolio or series thereof, except for any “Sub-Adviser-Voted Series” identified on Exhibit 1
and further described in Section III below (each non-Sub-Adviser-Voted Series hereinafter referred to as a
“Fund” and collectively, the “Funds”). The purpose of these Procedures and Guidelines is to set forth the
process by which each Fund subject to these Procedures and Guidelines will vote proxies related to the equity assets in its
investment portfolio (the “portfolio securities”). The term “proxies” as used herein shall include votes
in connection with annual and special meetings of equity stockholders but not those regarding bankruptcy matters and/or
related plans of reorganization. The Procedures and Guidelines have been approved by the Funds’ Boards of
Trustees/Directors1 (each a “Board” and collectively, the “Boards”), including a majority of
the independent Trustees/Directors2 of the Board. These Procedures and Guidelines may be amended only by the
Board. The Board shall review these Procedures and Guidelines at its discretion, and make any revisions thereto as deemed
appropriate by the Board.
II.
Compliance Committee
The Boards hereby delegate to the Compliance Committee of each
Board (each a “Committee” and collectively, the “Committees”) the authority and responsibility to oversee the
implementation of these Procedures and Guidelines, and where applicable, to make determinations on behalf of the Board with respect to
the voting of proxies on behalf of each Fund. Furthermore, the Boards hereby delegate to each Committee the authority to review and
approve material changes to proxy voting procedures of any Fund’s investment adviser (the “Adviser”). The Proxy
Voting Procedures of the Adviser (the “Adviser Procedures”) are attached hereto as Exhibit 2. Any
determination regarding the voting of proxies of each Fund that is made by a Committee, or any member thereof, as permitted herein, shall
be deemed to be a good faith determination regarding the
voting of proxies by the full Board. Each Committee may rely on the Adviser through the Proxy Coordinator, Agent, and/or Proxy
Group (as such terms are defined in the Adviser Procedures (Exhibit 2, Sections II.A., B., and C., respectively))
to deal in the first instance with the application of these Procedures and Guidelines. Each Committee shall conduct itself in
accordance with its charter.
1
Reference in these Procedures to one or more Funds shall,
as applicable, mean those Funds that are under the jurisdiction of the particular Board or Compliance Committee at issue. No
provision in these Procedures is intended to impose any duty upon the particular Board or Compliance Committee with respect to any other
Fund.
2
The independent Trustees/Directors are those Board members
who are not “interested persons” of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940.
1
III.
Delegation of Voting Authority
Except as otherwise provided for herein, the Board hereby delegates
to the Adviser to each Fund the authority and responsibility to vote all proxies with respect to all portfolio securities of the Fund in
accordance with the current proxy voting procedures and guidelines that have been approved by the Board. The Board may revoke such
delegation with respect to any proxy or proposal, and assume the responsibility of voting any Fund proxy or proxies as it deems
appropriate. Non-material amendments to the Procedures and Guidelines may be approved for immediate implementation by the President
or Chief Financial Officer of a Fund, subject to ratification at the next regularly scheduled meeting of the Compliance Committee.
A Board may elect to delegate the voting of
proxies to the Sub-Adviser of a portfolio or series of the ING Funds. In so doing, the Board shall also approve the
Sub-Adviser’s proxy policies for implementation on behalf of such portfolio or series (a “Sub-Adviser-Voted Series”). Sub-Adviser-Voted Series shall not be covered under these Procedures and Guidelines but rather shall be covered by such
Sub-Adviser’s proxy policies, provided that the Board, including a majority of the independent Trustees/Directors3,
has approved them on behalf of such Sub-Adviser-Voted Series, and ratifies any subsequent changes at
the next regularly scheduled meeting of the Compliance Committee and the Board.
When a Fund participates in the lending of
its securities and the securities are on loan at record date, proxies related to such securities will not be forwarded to the Adviser by
the Fund’s custodian and therefore will not be voted. However, the Adviser shall use best efforts to recall or restrict
specific securities from loan for the purpose of facilitating a “material” vote as described in the Adviser Procedures.
Funds that are “funds-of-funds”
will “echo” vote their interests in underlying mutual funds, which may include ING Funds (or portfolios or series thereof)
other than those set forth on Exhibit 1 attached hereto. This means that, if the fund-of-funds must vote on a
proposal with respect to an underlying investment company, the fund-of-funds will vote its interest in that underlying fund in the same
proportion all other shareholders in the underlying investment company voted their interests.
However, if the underlying fund has no
other shareholders, the fund-of-funds will vote as follows:
A.
If the fund-of-funds and
the underlying fund are being solicited to vote on the same proposal (e.g., the election of fund directors/trustees), the
fund-of-funds will vote the shares it holds in the underlying fund in the same proportion as all votes received from the holders of the
fund-of-funds’ shares with respect to that proposal; and
B.
If the fund-of-funds is
being solicited to vote on a proposal for an underlying fund (e.g., a new Sub-Adviser to the underlying fund), and there is no
corresponding proposal at the fund-of-funds level, the Board shall determine the most appropriate method of voting with respect to the
underlying fund proposal
3
The independent Trustees/Directors are those Board members who are not
“interested persons” of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940.
2
The foregoing procedure shall also apply to
any ING Fund (an “Investing Fund”) that, while not a fund-of-funds, invests in one or more underlying funds. Accordingly:
A.
Each Investing Fund will
“echo” vote its interests in an underlying fund, if the underlying fund has shareholders other than the Investing Fund;
B.
In the event an
underlying fund has no other shareholders, and the Investing Fund and the underlying fund are being solicited to vote on the same
proposal, the Investing Fund will vote its interests in the underlying fund in the same proportion as all votes received from the holders
of its own shares on that proposal; and
C.
In the event an
underlying fund has no other shareholders, and there is no corresponding proposal at the Investing Fund level, the Board shall determine
the most appropriate method of voting with respect to the underlying fund proposal.
A fund that is a “feeder” fund in
a master-feeder structure does not echo vote. Rather, it passes votes requested by the underlying master fund to its shareholders. This means that, if the feeder fund is solicited by the master fund, it will request instructions from its own shareholders, either
directly or, in the case of an insurance-dedicated Fund, through an insurance product or retirement plan, as to the manner in which to
vote its interest in an underlying master fund.
When a Fund is a feeder in a master-feeder
structure, proxies for the portfolio securities owned by the master fund will be voted pursuant to the master fund’s proxy voting
policies and procedures. As such, and except as otherwise noted herein with respect to vote reporting requirements, feeder Funds
shall not be subject to these Procedures and Guidelines.
IV.
Approval and Review of Procedures
Each Fund’s Adviser has adopted proxy voting procedures in
connection with the voting of portfolio securities for the Funds as attached hereto in Exhibit 2. The Board
hereby approves such procedures. All material changes to the Adviser Procedures must be approved by the Board or the Compliance
Committee prior to implementation; however, the President or Chief Financial Officer of a Fund may make such non-material changes as they
deem appropriate, subject to ratification by the Board or the Compliance Committee at its next regularly scheduled meeting.
V.
Voting Procedures and Guidelines
The Guidelines that are set forth in Exhibit 3
hereto specify the manner in which the Funds generally will vote with respect to the proposals discussed therein.
Unless otherwise noted, the defined
terms used hereafter shall have the same meaning as defined in the Adviser Procedures.
A.
Routine Matters
The Agent shall be
instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear policy (e.g., “For,”
“Against,” “Withhold,” or “Abstain”) on a proposal. However, the Agent shall be directed to refer any
proxy proposal to the
3
Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances
where the application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional
(as such term is defined in the Adviser Procedures (Exhibit 2, Section II.D.)) recommends a vote contrary to the
Guidelines.
B.
Matters Requiring
Case-by-Case Consideration
The Agent shall be
directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the
Guidelines have noted “case-by-case” consideration.
Upon receipt of a
referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as
from any other source or service.
Except in cases in which
the Proxy Group has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s
recommendation, the Proxy Coordinator will forward the Agent’s analysis and recommendation and/or any research obtained from the
Investment Professional(s), the Agent, or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or
Investment Professional(s), as it deems necessary.
The Proxy Coordinator
shall use best efforts to convene the Proxy Group with respect to all matters requiring its consideration. In the event quorum
requirements cannot be timely met in connection with a voting deadline, it shall be the policy of the Funds to vote in accordance with
the Agent’s recommendation, unless the Agent’s recommendation is deemed to be conflicted as provided for under the Adviser
Procedures, in which case no action shall be taken on such matter (i.e., a “Non-Vote”).
1.
Within-Guidelines Votes: Votes
in Accordance with a Fund’s Guidelines and/or where applicable, Agent Recommendation
In the event the Proxy
Group, and where applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the
Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in this manner, except that the Proxy Coordinator may first
consult with a Fund’s Compliance Committee as described in Section V.B.5. below. Except as provided for herein, no Conflicts
Report (as such term is defined in the Adviser Procedures (Exhibit 2, Section IV.B.)) is required in connection
with Within-Guidelines Votes.
2.
Non-Votes:
Votes in Which No Action is Taken
The Proxy Group may recommend that a Fund
refrain from voting under circumstances including, but not limited to, the following: (1) if the economic effect on
shareholders’ interests or the value of the portfolio holding is indeterminable or insignificant, e.g., proxies in connection
with fractional shares, securities no longer held in the portfolio of an ING Fund or proxies being
4
considered on behalf of a Fund that is
no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g., certain international proxies,
particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security. In such
instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy. The Proxy Group may
provide the Proxy Coordinator with standing instructions on parameters that
would dictate a Non-Vote without the Proxy Group’s review of a specific proxy.
Reasonable efforts shall be made to secure
and vote all other proxies for the Funds, but, particularly in markets in which shareholders’ rights are limited, Non-Votes may also
occur in connection with a Fund’s related inability to timely access ballots or other proxy information in connection with its
portfolio securities.
Non-Votes may also result in certain cases
in which the Agent’s recommendation has been deemed to be conflicted, as described in V.B. above and V.B.4. below.
3.
Out-of-Guidelines
Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, Where No Recommendation is
Provided by Agent, or Where Agent’s Recommendation is Conflicted
If the Proxy Group
recommends that a Fund vote contrary to the Guidelines, or the recommendation of the Agent, where applicable, if the Agent has made no
recommendation on a matter and the Procedures and Guidelines are silent, or the Agent’s recommendation on a matter is deemed to be
conflicted as provided for under the Adviser Procedures, the Proxy Coordinator will then request that all members of the Proxy Group,
including any members who abstained from voting on the matter or were not in attendance at the meeting at which the relevant proxy is
being considered, and each Investment Professional participating in the voting process complete a Conflicts Report. As provided for
in the Adviser Procedures, the Proxy Coordinator shall be responsible for identifying to Counsel potential conflicts of interest with
respect to the Agent.
If Counsel determines
that a conflict of interest appears to exist with respect to the Agent, any member of the Proxy Group, or the participating Investment
Professional(s), the Proxy Coordinator will then contact the Compliance Committee(s) and forward to such Committee(s) all information
relevant to their review, including the following materials or a summary thereof: the applicable Procedures and Guidelines, the
recommendation of the Agent, where applicable, the recommendation of the Investment Professional(s), where applicable, any resources used
by the Proxy Group in arriving at its recommendation, the Conflicts Report and any other written materials establishing whether a
conflict of interest exists, and findings of Counsel (as such term is defined in the Adviser Procedures (Exhibit 2,
Section IV.A.)). Upon Counsel’s finding that a conflict of
interest exists with respect to one or more members of the Proxy Group or the Advisers generally, the remaining members of the Proxy
Group shall not be required to complete a Conflicts Report in connection with the proxy.
5
If Counsel determines
that there does not appear to be a conflict of interest with respect to the Agent, any member of the Proxy Group, or the participating
Investment Professional(s), the Proxy Coordinator will instruct the Agent to vote the proxy as recommended by the Proxy Group.
A vote that is contrary
to the Agent’s recommendation, but is based on input from an Investment Professional provided in connection with a Guideline
requiring case-by-case review while specifying that primary consideration will be given to such input, shall be not be deemed an
Out-of-Guidelines Vote if the Investment Professional completes and returns a Conflicts Report and Counsel determines that no conflict of
interest appears to be present. The Proxy Group shall not be required to complete a Conflicts Report in connection with such votes.
4.
Referrals to a
Fund’s Compliance Committee
A Fund’s Compliance
Committee may consider all recommendations, analysis, research and Conflicts Reports provided to it by the Agent, Proxy Group and/or
Investment Professional(s), and any other written materials used to establish whether a conflict of interest exists, in determining how
to vote the proxies referred to the Committee. The Committee will instruct the Agent through the Proxy Coordinator how to vote such
referred proposals.
The Proxy Coordinator
shall use best efforts to timely refer matters to a Fund’s Committee for its consideration. In the event any such matter
cannot be timely referred to or considered by the Committee, it shall be the policy of the Funds to vote in accordance with the
Agent’s recommendation, unless the Agent’s recommendation is conflicted on a matter, in which case no action shall be taken on
such matter (i.e., a “Non-Vote”).
The Proxy Coordinator
will maintain a record of all proxy questions that have been referred to a Fund’s Committee, as well as all applicable
recommendations, analysis, research, Conflicts Reports and vote determinations.
5.
Consultation with a
Fund’s Compliance Committee
The Proxy Coordinator may consult with the
Chair of a Fund’s Compliance Committee for guidance on behalf of the Committee if application of the Procedures and Guidelines is
unclear or in connection with any unusual or controversial issue or a recommendation received from an Investment Professional. The
Chair may consider all recommendations, analysis, research, or Conflicts Reports provided by the Agent, Proxy Group, and/or Investment
Professional(s). The Chair may provide guidance or direct the Proxy Coordinator to refer the proposal(s) to the full Compliance
Committee. The guidance of the Chair, or the Committee, as applicable, shall be given primary consideration by the Proxy Group in
making a vote determination.
6
The Proxy Coordinator will maintain a
record of all proxy questions that have been referred to the Chair or Committee for guidance, as well as all applicable recommendations,
analysis, research, Conflicts Reports and vote determinations.
VI.
Conflicts of Interest
In all cases in which a vote has not been clearly determined in
advance by the Procedures and Guidelines or for which the Proxy Group recommends an Out-of-Guidelines Vote, and Counsel has determined
that a conflict of interest appears to exist with respect to the Agent, any member of the Proxy Group, or any Investment Professional
participating in the voting process, the proposal shall be referred to the Fund’s Committee for determination so that the Adviser
shall have no opportunity to exercise voting discretion over a Fund’s proxy in a situation in which the Adviser or certain other
related parties or the Agent may be deemed to have a conflict of interest. In the event a member of a Fund’s Committee
believes he/she has a conflict of interest that would preclude him/her from making a voting determination in the best interests of the
beneficial owners of the applicable Fund, such Committee member shall so advise the
Proxy Coordinator and recuse himself/herself with respect to determinations regarding the relevant proxy.
VII.
Reporting and Record Retention
A.
Reporting by the Funds
Annually in August, each
Fund will post its proxy voting record, or a link thereto, for the prior one-year period ending on June 30th on the ING
Funds’ website. The proxy voting record for each Fund will also be available on Form N-PX in the EDGAR database on the website
of the Securities and Exchange Commission (“SEC”). For any Fund that is a feeder in a master/feeder structure, no proxy
voting record related to the portfolio securities owned by the master fund will be posted on the ING Funds’ website or included in
the Fund’s Form N-PX; however, a cross-reference to the master fund’s proxy voting record as filed in the SEC’s EDGAR
database will be included in the Fund’s Form N-PX and posted on the ING Funds’ website. If any feeder fund was solicited
for vote by its underlying master fund during
the reporting period, a record of the votes cast by means of the pass-through process described in Section III above will be
included on the ING Funds’ website and in the Fund’s Form N-PX.
B.
Reporting to a
Fund’s Compliance Committee
At
each regularly scheduled meeting, the Committee will receive a report from the Proxy Coordinator indicating each proxy proposal, or a
summary of such proposals, that was (1) voted Out-of-Guidelines, including any proposals voted Out-of-Guidelines pursuant to special
circumstances raised by an Investment Professional; (2) voted Within Guidelines in cases in which an Investment Professional’s
recommendation was not adopted by the Proxy Group; or (3) referred to the Committee for determination in accordance with Section V.
hereof. Such report shall indicate the name of the issuer, the substance of the proposal, a summary of the Investment
Professional’s recommendation, where applicable and the reasons for voting, or recommending, an Out-of-Guidelines Vote or, in the
case of (2) above, a Within-Guidelines Vote.
7
EXHIBIT 1 – List of ING Funds
ING ASIA PACIFIC HIGH DIVIDEND EQUITY INCOME
FUND
ING EMERGING MARKETS HIGH DIVIDEND EQUITY FUND
ING EMERGING MARKETS LOCAL BOND FUND
ING EQUITY TRUST
ING FUNDS TRUST
ING GLOBAL ADVANTAGE AND PREMIUM OPPORTUNITY FUND
ING GLOBAL EQUITY DIVIDEND AND PREMIUM OPPORTUNITY FUND
ING GLOBAL STRATEGIC INCOME FUND
ING INFRASTRUCTURE, INDUSTRIALS AND MATERIALS FUND
ING INTERNATIONAL HIGH DIVIDEND EQUITY INCOME FUND
ING INVESTORS TRUST1
ING MAYFLOWER TRUST
ING MUTUAL FUNDS
ING PARTNERS, INC.
ING PRIME RATE TRUST
ING RISK MANAGED NATURAL RESOURCES FUND
ING SENIOR INCOME FUND
ING SEPARATE PORTFOLIOS TRUST
ING VARIABLE INSURANCE TRUST
ING VARIABLE PRODUCTS TRUST
1
Sub-Adviser-Voted Series: ING Franklin Mutual Shares Portfolio
8
EXHIBIT 2 – Proxy Voting
Procedures of the Advisers
ING Investments, LLC,
ING Investment Management Co. LLC
and
Directed Services LLC
I.
Introduction
ING Investments, LLC, ING Investment Management Co. LLC and
Directed Services LLC (each an “Adviser” and collectively, the “Advisers”) are the investment advisers for the
registered investment companies and each series or portfolio thereof (each a “Fund” and collectively, the “Funds”)
comprising the ING family of funds. As such, the Advisers have been delegated the authority to vote proxies with respect to
securities for certain Funds over which they have day-to-day portfolio management responsibility.
The Advisers will abide by the proxy voting
guidelines adopted by a Fund’s respective Board of Directors or Trustees (each a “Board” and collectively, the
“Boards”) with regard to the voting of proxies unless otherwise provided in the proxy voting procedures adopted by a
Fund’s Board.
In voting proxies, the Advisers are guided
by general fiduciary principles. Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Advisers will not subordinate the interest of beneficial owners to unrelated objectives. Each Adviser will vote proxies
in the manner that it believes will do the most to maximize shareholder value.
The following are the Proxy Voting
Procedures of ING Investments, LLC, ING Investment Management Co. LLC and Directed Services LLC (the “Adviser Procedures”) with
respect to the voting of proxies on behalf of their client Funds as approved by the respective Board of each Fund.
Unless otherwise noted, best efforts shall
be used to vote proxies in all instances.
II.
Roles and
Responsibilities
A.
Proxy Coordinator
The Proxy Coordinator
identified in Appendix 1 will assist in the coordination of the voting of each Fund’s proxies in accordance with the
ING Funds Proxy Voting Procedures and Guidelines (the “Procedures” or “Guidelines” and collectively the
“Procedures and Guidelines”). The Proxy Coordinator is authorized to direct the Agent to vote a Fund’s proxy in
accordance with the Procedures and Guidelines unless the Proxy Coordinator receives a recommendation from an Investment Professional (as
described below) to vote contrary to the Guidelines. In such event, and in connection with proxy proposals requiring case-by-case
consideration (except in cases in which the Proxy Group has previously provided the Proxy Coordinator with standing instructions to
9
vote
in accordance with the Agent’s recommendation), the Proxy Coordinator will call
a meeting of the Proxy Group (as described below).
Responsibilities
assigned herein to the Proxy Coordinator, or activities in support thereof, may be performed by such members of the Proxy Group or
employees of the Advisers’ affiliates as are deemed appropriate by the Proxy Group.
Unless specified
otherwise, information provided to the Proxy Coordinator in connection with duties of the parties described herein shall be deemed
delivered to the Advisers.
B.
Agent
An independent proxy
voting service (the “Agent”), as approved by the Board of each Fund, shall be engaged to assist in the voting of Fund proxies
for publicly traded securities through the provision of vote analysis, implementation, recordkeeping, and disclosure services. The
Agent is Institutional Shareholder Services Inc., a subsidiary of MSCI Inc. The Agent is responsible for coordinating with the
Funds’ custodians to ensure that all proxy materials received by the custodians relating to the portfolio securities are processed
in a timely fashion. To the extent applicable, the Agent is required to vote and/or refer all proxies in accordance with these
Adviser Procedures. The Agent will retain a record of all proxy votes handled by the Agent. Such record must reflect all the
information required to be disclosed in a Fund’s Form N-PX pursuant to
Rule 30b1-4 under the Investment Company Act. In addition, the Agent is responsible for maintaining copies of all proxy
statements received by issuers and to promptly provide such materials to the Adviser upon request.
The Agent shall be
instructed to vote all proxies in accordance with a Fund’s Guidelines, except as otherwise instructed through the Proxy Coordinator
by the Advisers’ Proxy Group or a Fund’s Compliance Committee (“Committee”).
The Agent shall be
instructed to obtain all proxies from the Funds’ custodians and to review each proxy proposal against the Guidelines. The
Agent also shall be requested to call the Proxy Coordinator’s attention to specific proxy proposals that although governed by the
Guidelines appear to involve unusual or controversial issues.
Subject to the oversight
of the Advisers, the Agent shall establish and maintain adequate internal controls and policies in connection with the provision of proxy
voting services voting to the Advisers, including methods to reasonably ensure that its analysis and recommendations are not influenced
by conflict of interest, and shall disclose such controls and policies to the Advisers when and as provided for herein. Unless
otherwise specified, references herein to recommendations of the Agent shall refer to those in which no conflict of interest has been
identified.
C.
Proxy Group
The Adviser shall establish a Proxy Group
(the “Group” or “Proxy Group”) which shall assist in the review of the Agent’s recommendations when a proxy
voting issue is referred to the Group through the Proxy Coordinator. The members of the Proxy Group,
10
which may include employees of
the Advisers’ affiliates, are identified in Appendix 1, as may be amended from time at the Advisers’ discretion.
A minimum of four (4) members of the Proxy
Group (or three (3) if one member of the quorum is either the Fund’s Chief Investment Risk Officer or Chief Financial Officer) shall
constitute a quorum for purposes of taking action at any meeting of the Group. The vote of a simple majority of the members present
and voting shall determine any matter submitted to a vote. Tie votes shall be broken by securing the vote of members not present at
the meeting; provided, however, that the Proxy Coordinator shall ensure compliance with all applicable voting and conflict of interest
procedures and shall use best efforts to secure votes from all or as many absent members as may reasonably be accomplished. A
member of the Proxy Group may abstain from voting on any given matter, provided that quorum is not lost for purposes of taking action and
that the abstaining member still participates in any conflict of
interest processes required in connection with the matter. The Proxy Group may meet in person or by telephone. The Proxy
Group also may take action via electronic mail in lieu of a meeting, provided that each Group member has received a copy of any relevant
electronic mail transmissions circulated by each other participating Group member prior to voting and provided that the Proxy Coordinator
follows the directions of a majority of a quorum (as defined above) responding via electronic mail. For all votes taken in person
or by telephone or teleconference, the vote shall be taken outside the presence of any person other than the members of the Proxy Group
and such other persons whose attendance may be deemed appropriate by the Proxy Group from time to time in furtherance of its duties or
the day-to-day administration of the Funds. In its discretion, the Proxy Group may provide the Proxy Coordinator with standing
instructions to perform responsibilities assigned herein to the Proxy
Group, or activities in support thereof, on its behalf, provided that such instructions do not contravene any requirements of these
Adviser Procedures or a Fund’s Procedures and Guidelines.
A meeting of the Proxy Group will be held
whenever (1) the Proxy Coordinator receives a recommendation from an Investment Professional to vote a Fund’s proxy contrary to
the Guidelines, or the recommendation of the Agent, where applicable, (2) the Agent has made no recommendation on a matter and the
Procedures and Guidelines are silent, or (3) a matter requires case-by-case consideration, including those in which the Agent’s
recommendation is deemed to be conflicted as provided for under these Adviser Procedures, provided that, if the Proxy Group has
previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation and no
issue of conflict must be considered, the Proxy Coordinator may implement the instructions without calling a meeting of the Proxy Group.
For each proposal referred to the Proxy
Group, it will review (1) the relevant Procedures and Guidelines, (2) the recommendation of the Agent, if any, (3) the
recommendation of the Investment Professional(s), if any, and (4) any other resources that any member of the Proxy Group deems
appropriate to aid in a determination of a recommendation.
If the Proxy Group recommends that a Fund
vote in accordance with the Procedures and Guidelines, or the recommendation of the Agent, where applicable, it shall instruct the
11
Proxy
Coordinator to so advise the Agent, except that the Proxy Coordinator shall follow any procedures established by a Fund’s Board with
respect to recommendations received from an Investment Professional.
If the Proxy Group recommends that a Fund
vote contrary to the Guidelines, or the recommendation of the Agent, where applicable, or if the Agent’s recommendation on a matter
is deemed to be conflicted, it shall follow the procedures for such voting as established by a Fund’s Board. The Proxy Group
may vote contrary to the Guidelines based on a recommendation from an Investment Professional, provided that incorporation of any such
recommendation shall be subject to the conflict of interest review process established by a Fund’s Board.
The Proxy Coordinator shall use best
efforts to convene the Proxy Group with respect to all matters requiring its consideration. In the event quorum requirements cannot
be timely met in connection with a voting deadline, the Proxy Coordinator shall follow the procedures for such voting as established by a
Fund’s Board.
D.
Investment Professionals
The Funds’ Advisers, Sub-Advisers,
and/or portfolio managers (each referred to herein as an “Investment Professional” and collectively, “Investment
Professionals”) may submit, or be asked to submit, a recommendation to the Proxy Group regarding the voting of proxies related to
the portfolio securities over which they have day-to-day portfolio management responsibility. The Investment Professionals may
accompany their recommendation with any other research materials that they deem appropriate or with a request that the vote be deemed
“material” in the context of the portfolio(s) they manage, such that lending activity on behalf of such portfolio(s) with
respect to the relevant security should be reviewed by the Proxy Group and considered for recall and/or restriction. Input from the
relevant
Sub-Advisers and/or portfolio managers shall be given primary consideration in the Proxy Group’s determination of whether a given
proxy vote is to be deemed material and the associated security accordingly restricted from lending. The determination that a vote
is material in the context of a Fund’s portfolio shall not mean that such vote is considered material across all Funds voting that
meeting. In order to recall or restrict shares timely for material voting purposes, the Proxy Group shall use best efforts to
consider, and when deemed appropriate, to act upon, such requests timely, and requests to review lending activity in connection with a
potentially material vote may be initiated by any relevant Investment Professional and submitted for the Proxy Group’s consideration
at any time.
III.
Voting Procedures
A.
In all cases, the Adviser shall follow the
voting procedures as set forth in the Procedures and Guidelines of the Fund on whose behalf the Adviser is exercising delegated authority
to vote.
B.
Routine Matters
The Agent shall be instructed to submit a
vote in accordance with the Guidelines where such Guidelines provide a clear policy (e.g., “For,” “Against,”
“Withhold,” or “Abstain”)
12
on a proposal. However, the Agent shall be directed to refer any proxy proposal to
the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the
application of the Guidelines is unclear, it appears to involve unusual or controversial issues, or an Investment Professional recommends
a vote contrary to the Guidelines.
C.
Matters Requiring Case-by-Case
Consideration
The Agent shall be directed to refer proxy
proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted
“case-by-case” consideration.
Upon receipt of a referral from the Agent,
the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or
service.
Except in cases in which the Proxy Group
has previously provided the Proxy Coordinator with standing instructions to vote in accordance with the Agent’s recommendation, the
Proxy Coordinator will forward the Agent’s analysis and recommendation and/or any research obtained from the Investment
Professional(s), the Agent, or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment
Professional(s), as it deems necessary.
1.
Within-Guidelines Votes: Votes in Accordance with a Fund’s Guidelines and/or where applicable, Agent Recommendation
In the event the Proxy Group, and where
applicable, any Investment Professional participating in the voting process, recommend a vote Within Guidelines, the Proxy Group will
instruct the Agent, through the Proxy Coordinator, to vote in this manner, except that the Proxy Coordinator shall follow any procedures
established by a Fund’s Board with respect to recommendations received from an Investment Professional. Except as provided for
herein, no Conflicts Report (as such term is defined herein) is required in connection with Within-Guidelines Votes.
2.
Non-Votes: Votes in Which No
Action is Taken
The Proxy Group may recommend that a Fund
refrain from voting under circumstances including, but not limited to, the following: (1) if the economic effect on
shareholders’ interests or the value of the portfolio holding is indeterminable or insignificant, e.g., proxies in connection
with fractional shares, securities no longer held in the portfolio of an ING Fund or proxies being considered on behalf of a Fund that is
no longer in existence; or (2) if the cost of voting a proxy outweighs the benefits, e.g., certain international proxies,
particularly in cases in which share blocking practices may impose trading restrictions on the relevant portfolio security. In such
instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy. The Proxy Group may
provide the Proxy Coordinator with standing instructions
13
on parameters that
would dictate a Non-Vote without the Proxy Group’s review of a specific proxy.
Reasonable efforts shall be made to secure
and vote all other proxies for the Funds, but, particularly in markets in which shareholders’ rights are limited, Non-Votes may also
occur in connection with a Fund’s related inability to timely access ballots or other proxy information in connection with its
portfolio securities.
Non-Votes may also result in certain cases
in which the Agent’s recommendation has been deemed to be conflicted, as provided for in the Funds’ Procedures.
3.
Out-of-Guidelines Votes: Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, Where No Recommendation is Provided by
Agent, or Where Agent’s Recommendation is Conflicted
If the Proxy Group or where applicable, an
Investment Professional, recommends that a Fund vote contrary to the Guidelines, or the recommendation of the Agent, where applicable, if
the Agent has made no recommendation on a matter and the Procedures and Guidelines are silent, or the Agent’s recommendation on a
matter is deemed to be conflicted as provided for under these Adviser Procedures, the Proxy Coordinator will then implement the
procedures for handling such votes as adopted by the Fund’s Board.
The Proxy Coordinator will maintain a
record of all recommendations from Investment Professionals to vote contrary to the Guidelines, all proxy questions that have been
referred to a Fund’s Compliance Committee, and all applicable recommendations, analysis, research, Conflicts Reports and vote
determinations.
IV.
Assessment of the
Agent and Conflicts of Interest
In furtherance of the Advisers’ fiduciary duty to the
Funds and their beneficial owners, the Advisers shall establish the following:
A.
Assessment of the Agent
The Advisers shall establish that the
Agent (1) is independent from the Advisers, (2) has resources that indicate it can competently provide analysis of proxy
issues, and (3) can make recommendations in an impartial manner and in the best interests of the Funds and their beneficial owners. The Advisers shall utilize, and the Agent shall comply with, such methods for establishing the foregoing as the Advisers may deem
reasonably appropriate and shall do so not less than annually as well as prior to engaging the services of any new proxy service. The Agent shall also notify the Advisers in writing within fifteen (15) calendar days of any material change to information
previously provided to an Adviser in connection with establishing the Agent’s independence, competence, or impartiality.
Information provided in connection with
assessment of the Agent shall be forwarded to a member of the mutual funds practice group of ING U.S. Investment
14
Management
(“Counsel”) for review. Counsel shall review such information and advise the Proxy Coordinator as to whether a material
concern exists and if so, determine the most appropriate course of action to eliminate such concern.
B.
Conflicts of Interest
The Advisers shall establish and maintain
procedures to identify and address conflicts that may arise from time to time concerning the Agent. Upon the Advisers’
request, which shall be not less than annually, and within fifteen (15) calendar days of any material change to such information
previously provided to an Adviser, the Agent shall provide the Advisers with such information as the Advisers deem reasonable and
appropriate for use in determining material relationships of the Agent that may pose a conflict of interest with respect to the
Agent’s proxy analysis or recommendations. The Proxy Coordinator shall forward all such information to Counsel for review. Counsel shall review such information and provide the Proxy Coordinator with a brief statement regarding whether or not a material
conflict of interest is present. Matters as to which a material conflict of interest is
deemed to be present shall be handled as provided in the Fund’s Procedures and Guidelines.
In connection with their participation in
the voting process for portfolio securities, each member of the Proxy Group, and each Investment Professional participating in the voting
process, must act solely in the best interests of the beneficial owners of the applicable Fund. The members of the Proxy Group may
not subordinate the interests of the Fund’s beneficial owners to unrelated objectives, including taking steps to reasonably insulate
the voting process from any conflict of interest that may exist in connection with the Agent’s services or utilization thereof.
For all matters for which the Proxy Group
or where applicable, an Investment Professional, recommends an Out-of-Guidelines Vote, or for which a recommendation contrary to that of
the Agent or the Guidelines has been received from an Investment Professional, the Proxy Coordinator will implement the procedures for
handling such votes as adopted by the Fund’s Board, including completion of such Conflicts Reports as may be required under the
Fund’s Procedures. Completed Conflicts Reports should be provided to the Proxy Coordinator within two (2) business days and
may be submitted to the Proxy Coordinator verbally, provided the Proxy Coordinator documents the Conflicts Report in writing. Such
Conflicts Report should describe any known conflicts of either a business or personal nature, and set forth any contacts with respect to
the referral item with non-investment personnel in its organization or
with outside parties (except for routine communications from proxy solicitors). The Conflicts Report should also include written
confirmation that any recommendation from an Investment Professional provided in connection with an Out-of-Guidelines Vote or under
circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.
The Proxy Coordinator shall forward all
Conflicts Reports to Counsel for review. Counsel shall review each report and provide the Proxy Coordinator with a brief
15
statement
regarding whether or not a material conflict of interest is present. Matters as to which a material conflict of interest is deemed
to be present shall be handled as provided in the Fund’s Procedures and Guidelines.
V.
Reporting and Record
Retention
The Adviser shall maintain the records required by Rule
204-2(c)(2), as may be amended from time to time, including the following: (1) A copy of each proxy statement received regarding a
Fund’s portfolio securities. Such proxy statements received from issuers are available either in the SEC’s EDGAR database
or are kept by the Agent and are available upon request. (2) A record of each vote cast on behalf of a Fund. (3) A copy of any
document created by the Adviser that was material to making a decision how to vote a proxy, or that memorializes the basis for that
decision. (4) A copy of written requests for Fund proxy voting information and any written response thereto or to any oral request
for information on how the Adviser voted proxies on behalf of a Fund. All proxy voting materials and supporting documentation will
be retained for a minimum of six (6) years, the first two
(2) years in the Advisers’ office.
16
APPENDIX 1 – Proxy Group
| |
Name
| Title or Affiliation
|
Stanley D. Vyner
| Chief Investment Risk Officer and Executive Vice
President, ING Investments, LLC
|
Todd Modic
| Senior Vice President, ING Funds Services, LLC and
ING Investments, LLC; and Chief Financial Officer of the ING Funds
|
Maria Anderson
| Vice President, Fund Compliance, ING Funds
Services, LLC
|
Karla J. Bos
| Proxy Coordinator for the ING Funds and Vice
President, Proxy Voting, ING Funds Services, LLC
|
Julius A. Drelick III, CFA
| Senior Vice President, Head of Fund Compliance, ING
Funds Services, LLC
|
Harley Eisner
| Vice President, Financial Analysis, ING Funds
Services, LLC
|
Evan Posner
| Vice President and Counsel, ING Funds
|
Effective as of July 19, 2012
17
EXHIBIT 3 –
Proxy Voting Guidelines of the ING Funds
I.
Introduction
The following is a statement of the Proxy Voting Guidelines (“Guidelines”)
that have been adopted by the respective Boards of Directors or Trustees of each Fund. Unless otherwise provided for herein, any
defined term used herein shall have the meaning assigned to it in the Funds’ and Advisers’ Proxy Voting Procedures (the
“Procedures”).
Proxies must be voted in the best interest of the Fund(s). The Guidelines summarize the Funds’ positions on various issues of concern to investors, and give a general indication of how
Fund portfolio securities will be voted on proposals dealing with particular issues. The Guidelines are not exhaustive and do not
include all potential voting issues.
The Advisers, in exercising their delegated authority, will
abide by the Guidelines as outlined below with regard to the voting of proxies except as otherwise provided in the Procedures. In
voting proxies, the Advisers are guided by general fiduciary principles. Each must act prudently, solely in the interest of the
beneficial owners of the Funds it manages. The Advisers will not subordinate the interest of beneficial owners to unrelated
objectives. Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.
II.
Guidelines
The following Guidelines are grouped according to the types of proposals generally
presented to shareholders of U.S. issuers: Board of Directors, Proxy Contests, Auditors, Proxy Contest Defenses, Tender Offer
Defenses, Miscellaneous, Capital Structure, Executive and Director Compensation, State of Incorporation, Mergers and Corporate
Restructurings, Mutual Fund Proxies, and Social and Environmental Issues. An additional section addresses proposals most frequently
found in global proxies.
General Policies
These Guidelines apply to securities of publicly traded companies and to those of
privately held companies if publicly available disclosure permits such application. All matters for which such disclosure is not
available shall be considered CASE-BY-CASE.
In all cases receiving CASE-BY-CASE consideration, including
cases not specifically provided for under these Guidelines, unless otherwise determined in accordance with the Procedures or otherwise
provided for under these Guidelines, it shall generally be the policy of the Funds to vote in accordance with the recommendation provided
by the Funds’ Agent, Institutional Shareholder Services Inc., a subsidiary of MSCI
Inc.
Unless otherwise provided for herein, it shall generally be
the policy of the Funds to vote in accordance with the Agent’s recommendation when such recommendation aligns with the
recommendation of the relevant issuer’s management or management has made no recommendation. However, this policy shall not
apply to CASE-BY-CASE proposals for which a contrary recommendation from the relevant Investment Professional(s) has been received and
18
is
to be utilized, provided that incorporation of any such recommendation shall be subject to the conflict of interest review process
required under the Procedures.
Recommendations from the Investment Professionals, while not
required under the Procedures, may be submitted or requested in connection with any proposal and are likely to be requested with respect
to proxies for private equity securities and/or proposals related to merger transactions/corporate restructurings, proxy contests, or
unusual or controversial issues. Such input shall be given primary consideration with respect to CASE-BY-CASE proposals being
considered on behalf of the relevant Fund, provided that incorporation of any such recommendation shall be subject to the conflict of
interest review process required under the Procedures.
Except as otherwise provided for herein, it shall generally
be the policy of the Funds not to support proposals that would impose a negative impact on existing rights of the Funds to the extent
that any positive impact would not be deemed sufficient to outweigh removal or diminution of such rights.
The foregoing policies may be overridden in any case as
provided for in the Procedures. Similarly, the Procedures provide that proposals whose Guidelines prescribe a firm voting position
may instead be considered on a CASE-BY-CASE basis when unusual or controversial circumstances so dictate.
Interpretation and application of these Guidelines is not
intended to supersede any law, regulation, binding agreement, or other legal requirement to which an issuer may be or become subject. No proposal shall be supported whose implementation would contravene such requirements.
1.
The Board of
Directors
Voting on Director Nominees in Uncontested Elections
Unless otherwise provided for herein, the Agent’s
standards with respect to determining director independence shall apply. These standards generally provide that, to be considered
completely independent, a director shall have no material connection to the company other than the board seat.
Agreement with the Agent’s independence standards shall
not dictate that a Fund’s vote shall be cast according to the Agent’s corresponding recommendation. Votes on director
nominees not subject to specific policies described herein should be made on a CASE-BY-CASE basis.
Where applicable and except as otherwise provided for herein,
it shall generally be the policy of the Funds to lodge disagreement with an issuer’s policies or practices by withholding support
from a proposal for the relevant policy or practice rather than the director nominee(s) to which the Agent assigns a correlation. Support shall be withheld from nominees deemed responsible for governance shortfalls, but if they are not standing for election (
e.g., the board is classified), support shall generally not be withheld from others in their stead. When a determination is
made to withhold support due to concerns other than those related to an individual director’s independence or actions,
responsibility may be attributed to the entire board, a committee, or an
19
individual (such as the CEO or committee chair), taking into
consideration whether the desired effect is to send a message or to
remove the director from service.
Where applicable and except as otherwise provided for herein,
generally vote FOR nominees in connection with issues raised by the Agent if the nominee did not serve on the board or relevant committee
during the majority of the time period relevant to the concerns cited by the Agent.
WITHHOLD support from a nominee who, during both of the most
recent two years, attended less than 75 percent of the board and committee meetings during the nominee’s period of service without a
valid reason for the absences. WITHHOLD support if two-year attendance cannot be ascertained from available disclosure. DO
NOT WITHHOLD support in connection with attendance issues for nominees who have served on the board for less than the two most recent
years.
Unless a company has implemented a policy that should
reasonably prevent abusive use of its poison pill, WITHHOLD support from nominees responsible for implementing excessive anti-takeover
measures, including failure to remove restrictive poison pill features or to ensure a pill’s expiration or timely submission to
shareholders for vote. Responsibility will generally be assigned to the board chair or, if not standing for election, the lead
director. If neither is standing for election, WITHHOLD support from all continuing directors.
Consider on a CASE-BY-CASE basis any nominee whom the Agent
cites as having failed to implement a majority-approved shareholder proposal. Vote FOR if the shareholder proposal has been
reasonably addressed. Proposals seeking shareholder ratification of a poison pill may be deemed reasonably addressed if the company
has implemented a policy that should reasonably prevent abusive use of the pill. WITHHOLD support if the shareholder proposal at
issue is supported under these Guidelines and the board has not disclosed a credible rationale for not implementing the proposal.
Consider on a CASE-BY-CASE basis any nominee whom the Agent
cites as having failed to opt out of a state law requiring companies to implement a staggered board structure, generally withholding
support when the company:
(1)
Demonstrates sustained poor stock
performance (measured by one- and three-year total shareholder returns);
(2)
Has a non-shareholder-approved poison pill
in place, without provisions to redeem or seek approval in a reasonable period of time; and
(3)
Maintains a dual class capital structure,
imposes a supermajority vote requirement, or has authority to issue blank check preferred stock.
20
If the board has not acted upon negative votes (WITHHOLD or
AGAINST, as applicable based on the issuer’s election standard) representing a majority of the votes cast at the previous annual
meeting, consider board nominees on a CASE-BY-CASE basis. Generally, vote FOR nominees when:
(1)
The issue
relevant to the majority negative vote has been adequately addressed or cured, which may include disclosure of the board’s
rationale; or
(2)
The Funds’
Guidelines or voting record do not support the relevant issue causing the majority negative vote.
If the above provisions have not been satisfied, generally
WITHHOLD support from the chair of the nominating committee, or if not standing for election, consider CASE-BY-CASE.
WITHHOLD support from inside or affiliated outside directors
who sit on the audit committee.
Vote FOR inside or affiliated outside directors who sit on the
nominating or compensation committee, provided that such committee meets the applicable independence requirements of the relevant listing
exchange.
Vote FOR inside or affiliated outside directors if the full
board serves as the compensation or nominating committee OR has not created one or both committees, provided that the issuer is in
compliance with all provisions of the listing exchange in connection with performance of relevant functions (e.g., performance of
relevant functions by a majority of independent directors in lieu of the formation of a separate committee).
Compensation
Practices:
It shall generally be the policy of the Funds that matters of
compensation are best determined by an independent board and compensation committee, but that support may be withheld from compensation
committee members whose actions or disclosure do not appear to support compensation practices aligned with the best interests of the
company and its shareholders. Votes on compensation committee members in connection with compensation practices should be
considered on a CASE-BY-CASE basis, and generally:
(1)
Say on pay. If shareholders have been provided with an advisory vote on executive compensation (say on pay, or “SOP”), and practices
not supported under these Guidelines have been identified, it shall generally be the policy of the Funds to align with the Agent when a
vote AGAINST the say on pay proposal has been recommended in lieu of withholding support from certain nominees for compensation concerns. Issuers receiving negative recommendations on both compensation committee members and say on pay regarding issues not otherwise
supported by these Guidelines will be considered on a CASE-BY-CASE basis.
(2)
Say on pay
responsiveness. Compensation committee members opposed by the Agent for failure to sufficiently address compensation concerns
evidenced by significant opposition to the most recent SOP vote will be considered on a CASE-BY-CASE basis, factoring in the following:
(a)
If the most recent SOP
vote received majority opposition, generally vote AGAINST the compensation committee chair if the company has not demonstrated an
adequate level of responsiveness.
21
(b)
If the most recent SOP
vote passed but received significant opposition, generally vote FOR the nominee(s) if a Fund voted FOR that SOP proposal or did not have
voting rights on that proposal. If a Fund voted AGAINST the SOP proposal and the company has not demonstrated an adequate level of
responsiveness, generally vote AGAINST the compensation committee chair.
(c)
If the compensation
committee chair is not standing for election under circumstances meriting the chair’s opposition, consider the compensation
committee member(s) opposed by the Agent on a CASE-BY-CASE basis.
(3)
Say on frequency. If the Agent opposes nominees because the company has implemented an SOP schedule that is less frequent than the frequency most
recently preferred by at least a plurality of shareholders, generally WITHHOLD support from the compensation committee chair. If
the compensation committee chair is not standing for election, WITHHOLD support from the other compensation committee members. If
no compensation committee members are standing for election, consider other nominees opposed by the Agent on a CASE-BY-CASE basis.
(4)
Tenure. Where applicable and except as otherwise provided for herein, vote FOR compensation committee members who did not serve on the
compensation committee during the majority of the time period relevant to the concerns cited by the Agent.
(5)
Pay for performance. Consider compensation committee members receiving an adverse recommendation from the Agent CASE-BY-CASE when the Agent has
identified a pay practice (or combination of practices) not otherwise supported under these Guidelines that appears to have created a
misalignment between CEO pay and performance with regard to shareholder value. Generally vote FOR nominees if the company has
provided a reasonable rationale regarding pay and performance and/or they appear reasonably correlated. Generally WITHHOLD
support from compensation committee members for structuring compensation packages that unreasonably insulate pay from performance
conditions.
(6)
Pay disparity. Generally DO NOT WITHHOLD support from compensation committee members solely due to internal pay disparity as assessed by the
Agent, but consider pay magnitude concerns on a CASE-BY-CASE basis.
(7)
Change in control
provisions. If the Agent recommends withholding support from compensation committee members in connection with overly liberal
change in control provisions, including those lacking a double trigger, generally WITHHOLD support from such nominees. If the Agent
recommends withholding support from compensation committee members in connection with potential change in control payments or
tax-gross-ups on change in control payments, vote FOR the nominees if the amount appears reasonable and no material governance concerns
exist. Generally WITHHOLD support if the amount is so significant (individually or collectively) as to potentially influence an
executive’s decision to enter into a transaction or to effectively act as a poison pill.
(8)
Repricing. If the Agent recommends withholding support from compensation committee members in connection with their failure to seek, or
acknowledge, a shareholder vote on plans to reprice, replace, buy back, or exchange options, generally
22
WITHHOLD support from such
nominees, except that cancellation of options would not be considered an exchange unless the cancelled options were regranted or
expressly returned to the plan reserve for reissuance.
(9)
Tax benefits. If the Agent recommends withholding support from compensation committee members that have approved compensation that is ineligible
for tax benefits to the company (e.g., under Section 162(m) of OBRA), generally vote FOR such nominees if the company has
provided an adequate rationale or the plan itself is being put to shareholder vote at the same meeting. If the plan is up for vote,
the provisions under Section 8. OBRA-Related Compensation Proposals shall apply.
(10)
Director perquisites. If the Agent recommends withholding support from compensation committee members in connection with
director compensation in the form of perquisites, generally vote FOR the nominees if the cost is reasonable in the context of the
directors’ total compensation and the perquisites themselves appear reasonable given their purpose, the directors’
duties, and the company’s line of business.
(11)
Incentive plans. Generally consider nominees on a CASE-BY-CASE basis in connection with short-term incentive plans over
which the nominee has exercised discretion to exclude extraordinary items, and WITHHOLD support if treatment of such items has been
inconsistent (e.g., exclusion of losses but not gains). Generally WITHHOLD support from compensation committee members
opposed by the Agent in connection with long-term incentive plans, or total executive compensation packages, inadequately aligned with
shareholders because the performance period is too short or they lack an appropriate equity component (e.g., overly cash-based
plans), except that the latter will be considered CASE-BY-CASE in connection with executives already holding significant equity
positions.
(12)
Options backdating. If the Agent has raised issues of options backdating, consider members of the compensation committee, as
well as company executives nominated as directors, on a CASE-BY-CASE basis.
(13)
Independence from management. Generally WITHHOLD support from compensation committee members cited by the Agent for
permitting named executives to have excessive input into setting their own compensation.
(14)
Multiple concerns. If the Agent recommends withholding support from compensation committee members in connection with other
compensation practices such as tax gross-ups, perquisites, retention or recruitment provisions (including contract length or renewal
provisions), “guaranteed” awards, pensions/SERPs, or severance or termination arrangements, vote FOR such nominees if the
issuer has provided adequate rationale and/or disclosure, factoring in any overall adjustments or reductions to the compensation package
at issue. Except as otherwise provided for herein, generally DO NOT WITHHOLD support solely due to any single such practice if the
total compensation appears reasonable, but consider on a CASE-BY-CASE basis compensation packages representing a combination of such
provisions and deemed by the Agent to be excessive.
(15)
Commitments. Generally, vote FOR compensation committee members receiving an adverse recommendation from the Agent due to
problematic pay practices if the issuer
23
makes a public commitment (e.g., via a Form 8-K filing) to rectify the practice on a
going-forward basis.
(16)
Other. If the Agent has raised other considerations regarding poor compensation practices, consider compensation committee
members on a CASE-BY-CASE basis.
Accounting Practices:
(1)
Generally, except as otherwise provided for herein, vote FOR independent outside director nominees serving on the audit committee.
(2)
Where applicable and except as otherwise provided for herein, generally vote FOR nominees serving on the audit committee, or the company’s CEO or CFO if nominated as directors, who did not serve on that committee or have responsibility over the relevant financial function, as applicable, during the majority of the time period relevant to the concerns cited by the Agent.
(3)
If the Agent has raised concerns regarding poor accounting practices, consider the company’s CEO and CFO, if nominated as directors, and nominees serving on the audit committee on a CASE-BY-CASE basis. Generally vote FOR nominees if the company has taken adequate steps to remediate the concerns cited, which would typically include removing or replacing the responsible executives, and if the concerns are not re-occurring and/or the company has not yet had a full year to remediate the concerns since the time they were identified.
(4)
If total non-audit fees exceed the total of audit fees, audit-related fees, and tax compliance and preparation fees, the provisions under Section 3. Auditor Ratification shall apply.
Board Independence:
It shall generally be the policy of the
Funds that a board should be majority independent and therefore to consider inside or affiliated outside director nominees when the full
board is not majority independent on a CASE-BY-CASE basis. Generally:
(1)
WITHHOLD support from
the fewest directors whose removal would achieve majority independence across the remaining board,
except that support may be withheld from additional nominees whose relative level of independence cannot be differentiated.
(2)
WITHHOLD support from
all non-independent nominees, including the founder, chairman, or CEO, if the number required to achieve majority independence is equal
to or greater than the number of non-independent nominees.
(3)
Except as provided
above, vote FOR non-independent nominees in the role of CEO, and when appropriate, founder or chairman, and determine support for other
non-independent nominees based on the qualifications and contributions of the nominee as well as the Funds’ voting precedent for
assessing relative independence to management, e.g., insiders holding senior executive positions are deemed less independent than
affiliated outsiders with a transactional or advisory relationship to the company, and affiliated outsiders with a material transactional
or advisory relationship are deemed less independent than those with lesser relationships.
24
(4)
Non-voting directors (e.g., director emeritus or advisory director) shall be excluded from calculations with respect to majority board independence.
(5)
When conditions
contributing to a lack of majority independence remain substantially similar to those in the previous year, it shall generally be the
policy of the Funds to vote on nominees in a manner consistent with votes cast by the Fund(s) in the previous year.
Generally vote FOR nominees without regard
to “over-boarding” issues raised by the Agent unless other concerns requiring CASE-BY-CASE consideration have been raised.
Generally, when the Agent recommends
withholding support due to assessment that a nominee acted in bad faith or against shareholder interests in connection with a major
transaction, such as a merger or acquisition, or if the Agent recommends withholding support due to other material failures or egregious
actions, consider on a CASE-BY-CASE basis, factoring in the merits of the nominee’s performance and rationale and disclosure
provided. If the Agent cites concerns regarding actions in connection with a candidate’s service on another board, vote FOR
the nominee if the issuer has provided adequate rationale regarding the appropriateness of the nominee to serve on the board under
consideration.
Performance Test for Directors
Consider nominees failing the Agent’s
performance test, which includes market-based and operating performance measures, on a CASE-BY-CASE basis. Input from the
relevant Investment Professional(s) shall be given primary consideration with respect
to such proposals.
Support will generally be WITHHELD from
nominees receiving a negative recommendation from the Agent due to sustained poor stock performance (measured by one- and three-year
total shareholder returns) combined with multiple takeover defenses/entrenchment devices if the issuer:
(1)
Is a controlled company or has a non-shareholder-approved poison pill in place, without provisions to redeem or seek approval in a reasonable period of time; and
(2)
Maintains a dual class capital structure, imposes a supermajority vote requirement, or has authority to issue blank check preferred stock.
Nominees receiving a negative recommendation
from the Agent due to sustained poor stock performance combined with other takeover defenses/entrenchment devices will be considered on a
CASE-BY-CASE basis.
Proposals Regarding Board Composition or
Board Service
Generally, except as otherwise provided for
herein, vote AGAINST shareholder proposals to impose new board structures or policies, including those requiring that the positions of
chairman and CEO be held separately, but vote FOR proposals in connection with a binding agreement or other legal requirement to which an
issuer has or reasonably may expect to become subject, and consider such proposals on a CASE-BY-CASE basis if the board is not majority
independent or corporate governance concerns have been identified. Generally, except as otherwise provided for herein, vote FOR
management proposals to adopt or amend board structures or policies, except consider such proposals on a CASE-BY-CASE basis if the board
is not majority independent, corporate governance concerns have been identified, or the proposal may result in a material reduction in
shareholders’ rights.
25
Generally, vote AGAINST shareholder
proposals:
·
Asking that more than a
simple majority of directors be independent.
·
Asking that the
independence of the compensation and/or nominating committees be greater than that required by the listing exchange.
·
Limiting the number of
public company boards on which a director may serve.
·
Seeking to redefine
director independence or directors’ specific roles (e.g., responsibilities of the lead director).
·
Requesting creation of
additional board committees or offices, except as otherwise provided for herein.
·
Limiting the tenure of
outside directors or imposing a mandatory retirement age for outside directors (unless the proposal seeks to relax existing standards),
but generally vote FOR management proposals in this regard.
Generally, vote FOR shareholder proposals
that seek creation of an audit, compensation, or nominating committee of the board, unless the committee in question is already in
existence or the issuer has availed itself of an applicable exemption of the listing exchange (e.g., performance of relevant
functions by a majority of independent directors in lieu of the formation of a separate committee).
Stock Ownership Requirements
Generally, vote AGAINST shareholder
proposals requiring directors to own a minimum amount of company stock in order to qualify as a director or to remain on the board.
Director and Officer Indemnification and
Liability Protection
Proposals on director and officer
indemnification and liability protection should be evaluated on a CASE-BY-CASE basis, using Delaware law as the standard. Vote
AGAINST proposals to limit or eliminate entirely directors’ and officers’ liability for monetary damages for violating the duty
of care. Vote AGAINST indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence,
that are more serious violations of fiduciary obligation than mere carelessness. Vote FOR only those proposals providing such
expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if:
(1)
The director was found to
have acted in good faith and in a manner that he reasonably believed was in the best interests of the company; and
(2)
Only if the
director’s legal expenses would be covered.
2.
Proxy Contests
These proposals should generally be analyzed
on a CASE-BY-CASE basis. Input from the relevant Investment Professional(s) shall be given primary consideration with respect to
proposals in connection with proxy contests being considered on behalf of that Fund.
Voting for Director Nominees in Contested
Elections
Votes in a contested election of directors must be evaluated on a
CASE-BY-CASE basis.
26
Reimburse Proxy Solicitation Expenses
Voting to reimburse proxy solicitation expenses should be analyzed
on a CASE-BY-CASE basis, generally voting FOR if associated nominees are also supported.
3.
Auditors
Ratifying Auditors
Generally, except in cases of poor
accounting practices or high non-audit fees, vote FOR management proposals to ratify auditors. Consider management proposals to
ratify auditors on a CASE-BY-CASE basis if the Agent cites poor accounting practices. If fees for non-audit services exceed 50
percent of total auditor fees as described below, consider on a CASE-BY-CASE basis, voting AGAINST management proposals to ratify
auditors only if concerns exist that remuneration for the non-audit work is so lucrative as to taint the auditor’s independence. For purposes of this review, fees deemed to be reasonable, generally non-recurring exceptions to the non-audit fee category (
e.g., those related to an IPO) shall be excluded. Generally vote FOR shareholder proposals asking the issuer to present its
auditor annually for ratification.
Auditor Independence
Generally, consider shareholder proposals asking companies to
prohibit their auditors from engaging in non-audit services (or capping the level of non-audit services) on a CASE-BY-CASE basis.
Audit Firm Rotation
Generally, vote AGAINST shareholder
proposals asking for mandatory audit firm rotation.
4.
Proxy Contest
Defenses
Presentation of management and shareholder
proposals on the same matter on the same agenda shall not require a Fund to vote FOR one and AGAINST the other.
Board Structure: Staggered vs. Annual Elections
Generally, vote AGAINST proposals to
classify the board or otherwise restrict shareholders’ ability to vote upon directors and FOR proposals to repeal classified boards
and to elect all directors annually.
Shareholder Ability to Remove Directors
Generally, vote AGAINST proposals that
provide that directors may be removed only for cause.
Generally, vote FOR proposals to restore
shareholder ability to remove directors with or without cause.
Generally, vote AGAINST proposals that
provide that only continuing directors may elect replacements to fill board vacancies.
Generally, vote FOR proposals that permit
shareholders to elect directors to fill board vacancies.
Cumulative Voting
If the company is controlled or maintains a
classified board of directors or a dual class voting structure, generally, vote AGAINST management proposals to eliminate cumulative
voting (except that such proposals may be supported irrespective of classification in furtherance of an
27
issuer’s plan to declassify
its board or adopt a majority voting standard), and vote FOR shareholder proposals to restore or permit cumulative voting.
Time-Phased Voting
Generally, vote AGAINST proposals to
implement, and FOR proposals to eliminate, time-phased or other forms of voting that do not promote a one share, one vote standard.
Shareholder Ability to Call Special
Meetings
Generally, vote FOR shareholder proposals
that provide shareholders with the ability to call special meetings when either (1) the company does not currently permit
shareholders to do so or (2) the existing ownership threshold is greater than 25 percent.
Consider management proposals to permit
shareholders to call special meetings on a CASE-BY-CASE basis, generally voting FOR such proposals not opposed by the Agent. Generally vote FOR such proposals if the Agent’s sole concern relates to a net-long position requirement.
Shareholder Ability to Act by Written
Consent
Generally, vote AGAINST shareholder
proposals seeking the right to act by written consent if the issuer:
(1)
Permits shareholders to
call special meetings;
(2)
Does not impose
supermajority vote requirements; and
(3)
Has otherwise
demonstrated its accountability to shareholders (e.g., the company has reasonably addressed majority-supported shareholder
proposals).
Consider management proposals to eliminate
the right to act by written consent on a CASE-BY-CASE basis, generally voting FOR if the above conditions are present.
Generally, vote FOR shareholder proposals
seeking the right to act by written consent if the above conditions are not present.
Shareholder Ability to Alter the Size of
the Board
Generally, vote FOR proposals that seek to
fix the size of the board or designate a range for its size.
Generally, vote AGAINST proposals that give
management the ability to alter the size of the board outside of a specified range without shareholder approval.
5.
Tender Offer
Defenses
Poison Pills
Generally, vote FOR shareholder proposals
that ask a company to submit its poison pill for shareholder ratification, or to redeem its pill in lieu thereof, unless
(1) shareholders have approved adoption of the plan, (2) a policy has already been implemented by the company that should
reasonably prevent abusive use of the pill, or (3) the board had determined that it was in the best interest of shareholders to
adopt a pill without delay, provided that such plan would be put to shareholder vote within twelve months of adoption or expire, and if
not approved by a majority of the votes cast, would immediately terminate.
Review on a CASE-BY-CASE basis shareholder
proposals to redeem a company’s poison pill.
28
Review on a CASE-BY-CASE basis management
proposals to approve or ratify a poison pill or any plan or charter amendment (e.g., investment restrictions) that can reasonably
be construed as an anti-takeover measure, with voting decisions generally based on the Agent’s approach to evaluating such
proposals, considering factors such as rationale, trigger level, and sunset provisions. Votes will generally be cast in a manner
that seeks to preserve shareholder value and the right to consider a valid offer, voting AGAINST management proposals in connection with
poison pills or anti-takeover activities that do not meet the Agent’s standards.
Fair Price Provisions
Vote proposals to adopt fair price
provisions on a CASE-BY-CASE basis.
Generally, vote AGAINST fair price
provisions with shareholder vote requirements greater than a majority of disinterested shares.
Greenmail
Generally, vote FOR proposals to adopt
anti-greenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments.
Review on a CASE-BY-CASE basis
anti-greenmail proposals when they are bundled with other charter or bylaw amendments.
Pale Greenmail
Review on a CASE-BY-CASE basis restructuring
plans that involve the payment of pale greenmail.
Unequal Voting Rights
Generally, except as otherwise provided for
herein, vote AGAINST dual-class exchange offers and dual-class recapitalizations.
Supermajority Shareholder Vote
Requirement
Generally, vote AGAINST proposals to require
a supermajority shareholder vote and FOR management or shareholder proposals to lower supermajority shareholder vote requirements,
unless, for companies with shareholder(s) with significant ownership levels, the Agent recommends retention of existing supermajority
requirements in order to protect minority shareholder interests.
White Squire Placements
Generally, vote FOR shareholder proposals to
require approval of blank check preferred stock issues for other than general corporate purposes.
6.
Miscellaneous
Amendments to Corporate Documents
Except to align with legislative or
regulatory changes or when support is recommended by the Agent or relevant Investment Professional(s) (including, for example, as a
condition to a major transaction such as a merger), generally, vote AGAINST proposals seeking to remove shareholder approval requirements
or otherwise remove or diminish shareholder rights, e.g., by (1) adding restrictive provisions, (2) removing provisions
or moving them to portions of the charter not requiring shareholder approval, or (3) in corporate structures such as holding
companies, removing provisions in an active subsidiary’s charter that provide voting rights to parent company
29
shareholders. This policy would also generally apply to proposals seeking approval of corporate agreements or amendments to such agreements that
the Agent recommends AGAINST because a similar reduction in shareholder rights is
requested.
Generally, vote AGAINST proposals for
charter amendments that support board entrenchment or may be used as an anti-takeover device (or to further anti-takeover conditions),
particularly if the proposal is bundled or the board is classified.
Generally, vote FOR proposals seeking
charter or bylaw amendments to remove anti-takeover provisions.
Consider proposals seeking charter or bylaw
amendments not addressed under these Guidelines on a CASE-BY-CASE basis.
Confidential Voting
Generally, vote FOR shareholder proposals
that request companies to adopt confidential voting, use independent tabulators, and use independent inspectors of election as long as
the proposals include clauses for proxy contests as follows:
·
In the case of a
contested election, management should be permitted to request that the dissident group honor its confidential voting policy.
·
If the dissidents agree,
the policy remains in place.
·
If the dissidents do not
agree, the confidential voting policy is waived.
Generally, vote FOR management proposals to
adopt confidential voting.
Proxy Access
Consider on a CASE-BY-CASE basis proposals
to provide shareholders with access to management’s proxy material in order to nominate their own candidates(s) to the board.
Majority Voting Standard
Except as otherwise provided for herein,
it shall generally be the policy of the Funds to extend discretion to issuers to determine when it may be appropriate to adopt a majority
voting standard. Generally, vote FOR management proposals, provided the proposal contains a
plurality carve-out for contested elections, but AGAINST shareholder proposals unless also supported by management, seeking election of
directors by the affirmative vote of the majority of votes cast in connection with a meeting of shareholders, including amendments to
corporate documents or other actions in furtherance of a majority standard, and provided such standard does not conflict with state law
in which the company is incorporated. For issuers with a history of significant corporate governance concerns, consider such
proposals on a CASE-BY-CASE basis. (See also
Section 11. Mutual Fund Proxies.)
Bundled Proposals
Except as otherwise provided for herein,
review on a CASE-BY-CASE basis bundled or “conditioned” proxy proposals, generally voting AGAINST bundled proposals containing
one or more items not supported under these Guidelines if the Agent or relevant Investment Professional(s) deems the negative
impact, on balance, to outweigh any positive impact.
Shareholder Advisory Committees
Review on a CASE-BY-CASE basis proposals to
establish a shareholder advisory committee.
30
Reimburse Shareholder for Expenses
Incurred
Voting to reimburse expenses incurred in
connection with shareholder proposals should be analyzed on a CASE-BY-CASE basis.
Other Business
In connection with proxies of U.S. issuers (
e.g., those filing a DEF 14A and considered domestic by the Agent), generally vote FOR management proposals for Other Business,
except when the primary proposal is not supported by a Fund or in connection with a proxy contest in which a Fund is not voting in
support of management.
Quorum Requirements
Review on a CASE-BY-CASE basis proposals to
lower quorum requirements for shareholder meetings below a majority of the shares outstanding.
Advance Notice for Shareholder Proposals
Generally, vote FOR management proposals
related to advance notice period requirements, provided that the period requested is in accordance with applicable law and no material
governance concerns have been identified in connection with the issuer.
Multiple Proposals
Multiple proposals of a similar nature
presented as options to the course of action favored by management may all be voted FOR, provided that support for a single proposal is
not operationally required, no one proposal is deemed superior in the interest of the Fund(s), and each proposal would otherwise be
supported under these Guidelines.
7.
Capital Structure
Common Stock Authorization
Review proposals to increase the number of
shares of common stock authorized for issuance on a CASE-BY-CASE basis. Except where otherwise indicated, the Agent’s
proprietary approach of determining appropriate thresholds and, for requests above such allowable threshold, applying a company-specific,
qualitative review (e.g., considering rationale and prudent historical usage), will generally be utilized in evaluating such
proposals.
Generally, vote FOR:
·
Proposals to authorize
capital increases within the Agent’s allowable thresholds or those in excess but meeting Agent’s qualitative standards, but
consider on a CASE-BY-CASE basis those requests failing the Agent’s review for proposals in connection with which a contrary
recommendation from the relevant Investment Professional(s) has been received and is to be utilized (e.g., in support of a merger
or acquisition proposal).
·
Proposals to authorize
capital increases within the Agent’s allowable thresholds or those in excess but meeting Agent’s qualitative standards, unless
the company states that the stock may be used as a takeover defense. In those cases, consider on a CASE-BY-CASE basis if a contrary
recommendation from the relevant Investment Professional(s) has been received and is to be utilized.
31
·
Proposals to authorize
capital increases exceeding the Agent’s thresholds when a company’s shares are in danger of being delisted or if a
company’s ability to continue to operate as a going concern is uncertain.
Generally, vote AGAINST:
·
Proposals to increase the
number of authorized shares of a class of stock if the issuance which the increase is intended to service is not supported under these
Guidelines.
·
Nonspecific proposals
authorizing excessive discretion to a board.
Consider management proposals to make
changes to the capital structure not otherwise addressed under these Guidelines CASE-BY-CASE, generally voting with the Agent’s
recommendation unless a contrary recommendation has been received from the relevant Investment Professional(s) and is to be utilized.
Dual Class Capital Structures
Generally, vote AGAINST:
·
Proposals to create or
perpetuate dual class capital structures unless supported by the Agent (e.g., to avert bankruptcy or generate non-dilutive
financing, and not designed to increase the voting power of an insider or significant shareholder).
·
Proposals to increase the
number of authorized shares of the class of stock that has superior voting rights in companies that have dual class capital structures.
However, consider such proposals
CASE-BY-CASE if (1) bundled with favorable proposal(s), (2) approval of such proposal(s) is a condition of such favorable
proposal(s), or (3) part of a recapitalization for which support is recommended by the Agent or relevant Investment
Professional(s).
Consider management proposals to eliminate
or make changes to dual class capital structures CASE-BY-CASE, generally voting with the Agent’s recommendation unless a contrary
recommendation has been received from the relevant Investment Professional(s) and is to be utilized.
Generally, vote FOR shareholder proposals to
eliminate dual class capital structures unless the relevant Fund owns a class with superior voting rights.
Stock Distributions: Splits and Dividends
Generally, vote FOR management proposals to
increase common share authorization for a stock split, provided that the increase in authorized shares falls within the Agent’s
allowable thresholds, but consider on a CASE-BY-CASE basis those proposals exceeding the Agent’s threshold for proposals in
connection with which a contrary recommendation from the relevant Investment Professional(s) has been received and is to be utilized.
Reverse Stock Splits
Consider on a CASE-BY-CASE basis management
proposals to implement a reverse stock split. In the event the split constitutes a capital increase effectively exceeding the
Agent’s allowable threshold because the request does not proportionately reduce the number of shares authorized, consider
management’s rationale and/or disclosure, generally voting FOR, but generally not supporting additional requests for capital
increases on the same agenda.
32
Preferred Stock
Review proposals to increase the number of
shares of preferred stock authorized for issuance on a CASE-BY-CASE basis, and except where otherwise indicated, generally utilize the
Agent’s approach for evaluating such proposals. This approach incorporates both qualitative and quantitative measures,
including a review of past performance (e.g., board governance, shareholder returns and historical share usage) and the current
request (e.g., rationale, whether shares are blank check and declawed, and dilutive impact as determined through the Agent’s
proprietary model for assessing appropriate thresholds).
Generally, vote AGAINST proposals
authorizing the issuance of preferred stock or creation of new classes of preferred stock with unspecified voting, conversion, dividend
distribution, and other rights (“blank check” preferred stock), but vote FOR if the Agent or relevant Investment
Professional(s) so recommends because the issuance is required to effect a merger or acquisition proposal.
Generally, vote FOR proposals to issue or
create blank check preferred stock in cases when the company expressly states that the stock will not be used as a takeover defense. Generally vote AGAINST in cases where the company expressly states that, or fails to disclose whether, the stock may be used as a
takeover defense, but vote FOR if the Agent or relevant Investment Professional(s) so recommends because the issuance is required
to address special circumstances such as a merger or acquisition.
Generally, vote FOR proposals to authorize
or issue preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the
terms of the preferred stock appear reasonable.
Vote CASE-BY-CASE on proposals to increase
the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company’s
industry and performance in terms of shareholder returns.
Shareholder Proposals Regarding Blank
Check Preferred Stock
Generally, vote FOR shareholder proposals to
have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in
the normal course of business, submitted for shareholder ratification.
Adjustments to Par Value of Common Stock
Generally, vote FOR management proposals to
reduce the par value of common stock, unless doing so raises other concerns not otherwise supported under these Guidelines.
Preemptive Rights
Review on a CASE-BY-CASE basis shareholder
proposals that seek preemptive rights or management proposals that seek to eliminate them. In evaluating proposals on preemptive
rights, consider the size of a company and the characteristics of its shareholder base.
Debt Restructurings
Review on a CASE-BY-CASE basis proposals to
increase common and/or preferred shares and to issue shares as part of a debt restructuring plan.
Share Repurchase Programs
Generally, vote FOR management proposals to
institute open-market share repurchase plans in
33
which all shareholders may participate on equal terms, but vote AGAINST plans with terms
favoring selected parties. This policy shall also apply to companies incorporated outside the U.S. if they are listed on a U.S.
exchange and treated as a U.S. domestic issuer by the Securities and Exchange Commission (“SEC”).
Generally, vote FOR management proposals to
cancel repurchased shares.
Generally, vote AGAINST proposals for share
repurchase methods lacking adequate risk mitigation or exceeding appropriate volume or duration parameters for the market.
Consider shareholder proposals seeking share
repurchase programs on a CASE-BY-CASE basis, with input from the relevant Investment Professional(s) to be given primary
consideration.
Tracking Stock
Votes on the creation of tracking stock are
determined on a CASE-BY-CASE basis.
8.
Executive and
Director Compensation
Except as otherwise provided for herein,
votes with respect to compensation and employee benefit plans, or the issuance of shares in connection with such plans, should be
determined on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such plans, which
includes determination of costs and comparison to an allowable cap, except as otherwise provided herein.
·
Generally, vote in accordance with the Agent’s recommendations FOR equity-based plans with costs within such
cap and AGAINST those with costs in excess of it, except that plans above the cap may be supported if so recommended by the Agent or
relevant Investment Professional(s) as a condition to a major transaction such as a merger.
·
Generally, vote AGAINST plans if the Agent suggests cost or dilution assessment may not be possible due to the method of
disclosing shares allocated to the plan(s).
·
Generally, vote AGAINST equity-based plans whose awards further a misalignment between CEO pay and performance with regard
to shareholder value, including where pay appears unreasonably insulated from performance conditions and/or awards under the plan are
concentrated among named executive officers.
·
Generally, vote AGAINST plans with inadequate disclosure regarding vesting or performance requirements. However,
except as otherwise provided herein, consider plans CASE-BY-CASE if the Agent questions the form or stringency of the vesting or
performance criteria.
·
Generally, vote FOR plans with costs within the cap if the primary concerns raised by the Agent pertain to matters that
would not result in a negative vote under these Guidelines on a management say on pay proposal or the relevant board or committee
member(s).
·
Generally, vote AGAINST plans administered by potential grant recipients.
·
Generally, vote AGAINST proposals to eliminate existing shareholder approval requirements for material plan changes, unless
the company has provided a reasonable rationale and/or adequate disclosure regarding the requested changes.
34
·
Generally vote AGAINST long-term incentive plans that are inadequately aligned with shareholders because the performance
period is too short or they lack an appropriate equity component, except that such cases will be considered CASE-BY-CASE in connection
with executives already holding significant equity positions.
·
Generally, vote AGAINST plans that contain an overly liberal change in control definition (e.g., does not result in
actual change in control).
·
Consider plans CASE-BY-CASE if the Agent raises other considerations not otherwise provided for herein.
Management Proposals Seeking Approval to
Reprice Options
Review on a CASE-BY-CASE basis management
proposals seeking approval to reprice, replace, or exchange options, considering factors such as rationale, historic trading patterns,
value-for-value exchange, vesting periods, and replacement option terms. Generally, vote FOR proposals that meet the Agent’s
criteria for acceptable repricing, replacement, or exchange transactions. Generally, vote AGAINST compensation plans that
(1) permit or may permit (e.g., history of repricing and no express prohibition against future repricing) repricing of stock
options, or any form or alternative to repricing, without shareholder approval, (2) include provisions that permit repricing,
replacement, or exchange transactions that do not meet the Agent’s criteria, or (3) give the board sole discretion to approve
option repricing, replacement, or exchange programs.
Director Compensation
Votes on stock-based plans for directors are
made on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s quantitative approach described above as well as
a review of qualitative features of the plan when costs exceed the Agent’s threshold.
Employee Stock Purchase Plans
Votes on employee stock purchase plans, and
capital issuances in support of such plans, should be made on a CASE-BY-CASE basis, with voting decisions generally based on the
Agent’s approach to evaluating such plans.
OBRA-Related Compensation Proposals
Votes on plans intended to qualify for
favorable tax treatment under the provisions of Section 162(m) of OBRA should be evaluated irrespective of the Agent’s assessment of
board independence, provided that the board meets the independence requirements of the relevant listing exchange and no potential
recipient under the plan(s) sits on the committee that exercises discretion over the related compensation awards. Unless the issuer
has provided a compelling rationale, generally vote with the Agent’s recommendations AGAINST plans that include practices or
features not supported under these Guidelines or deliver excessive compensation that fails to qualify for favorable tax treatment.
Amendments that Place
a Cap on Annual Grants or Amend Administrative Features
Generally, vote FOR plans
that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant
may receive to comply with the provisions of Section 162(m) of OBRA.
Amendments to Add
Performance-Based Goals
Generally, vote FOR
amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA, unless they
are clearly inappropriate.
35
Amendments to Increase
Shares and Retain Tax Deductions Under OBRA
Votes on amendments to
existing plans to increase shares reserved and to qualify the plan for favorable tax
treatment under the provisions of Section 162(m) should be evaluated on a CASE-BY-CASE basis, generally voting FOR such plans that do not
raise any negative concerns under these Guidelines.
Approval of Cash or
Cash-and-Stock Bonus Plans
Generally, vote FOR cash
or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of OBRA, with primary
consideration given to management’s assessment that such plan meets the requirements for exemption of performance-based
compensation. However, consider CASE-BY-CASE when broader compensation concerns exist.
Shareholder Proposals Regarding Executive and Director Pay
Unless evidence exists of abuse in
historical compensation practices, and except as otherwise provided for herein, generally vote AGAINST shareholder proposals that seek to
impose new compensation structures or policies.
Severance and Termination Payments
Generally, vote FOR shareholder proposals to
have parachute arrangements submitted for shareholder ratification (with “parachutes” defined as compensation arrangements
related to termination that specify change in control events) and provided that the proposal does not include unduly restrictive or
arbitrary provisions such as advance approval requirements.
Generally, vote FOR shareholder proposals
seeking double triggers on change in control awards. Consider on a CASE-BY-CASE basis proposals seeking a specific treatment of
equity that vests upon change in control.
Generally vote FOR shareholder proposals to
submit executive severance agreements for shareholder ratification, if such proposals specify change in control events, Supplemental
Executive Retirement Plans, or deferred executive compensation plans, or if ratification is required by the listing exchange.
Review on a CASE-BY-CASE basis all proposals
to approve, ratify, or cancel executive severance or termination arrangements, including those related to executive recruitment or
retention. Generally vote FOR such compensation arrangements if:
(1)
The primary concerns
raised by the Agent would not result in a negative vote under these Guidelines on a management say on pay proposal or the relevant board
or committee member(s);
(2)
The issuer has provided
adequate rationale and/or disclosure; or
(3)
Support is recommended by
the Agent or relevant Investment Professional(s) (e.g., as a condition to a major transaction such as a merger).
However, vote in accordance with the
Agent’s recommendations AGAINST new or materially amended plans, contracts, or payments that include single trigger change in
control cash severance provisions or do not require an actual change in control in order to be triggered.
36
Consider on a
CASE-BY-CASE basis any proposals opposed by the Agent due to single trigger equity acceleration or legacy single trigger change in
control cash severance provisions.
Employee Stock Ownership Plans (ESOPs)
Generally, vote FOR proposals that request
shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number
of shares allocated to the ESOP is “excessive” (i.e., generally greater than five percent of outstanding shares).
401(k) Employee Benefit Plans
Generally, vote FOR proposals to implement a
401(k) savings plan for employees.
Holding Periods
Generally, vote AGAINST proposals requiring
mandatory periods for officers and directors to hold company stock.
Advisory Votes on Executive Compensation
(Say on Pay)
Generally, management proposals seeking
ratification of the company’s compensation program will be voted FOR unless the program includes practices or features not supported
under these Guidelines (including those referenced under Section 1. The Board of Directors, Compensation Practices) and the proposal
receives a negative recommendation from the Agent. Unless otherwise provided for herein, proposals not receiving the Agent’s
support due to concerns regarding incentive structures, severance/termination payments, or vesting or performance criteria not otherwise
supported by these Guidelines will be considered on a CASE-BY-CASE basis, factoring in whether the issuer has made improvements to its
overall compensation program, and generally voting FOR if CEO pay appears aligned with performance and/or the company has provided a
reasonable rationale and/or adequate disclosure regarding
the matter(s) under consideration. For say on pay proposals not supported by the Agent and referencing incentive plan concerns:
(1)
Short-term incentive plans: Proposals will be considered on a CASE-BY-CASE basis if they cite short-term incentive plans over which the board has exercised discretion to exclude extraordinary items, and voted AGAINST if treatment of such items has been inconsistent (e.g., exclusion of losses but not gains).
(2)
Long-term incentive plans: Proposals will be voted AGAINST if they cite long-term incentive plans that are inadequately aligned with shareholders because the performance period is too short or they lack an appropriate equity component (e.g., overly cash-based plans), except that the latter will be considered CASE-BY-CASE in connection with executives already holding significant equity positions.
Generally, vote AGAINST proposals when named
executives have material input into setting their own compensation.
Generally, vote AGAINST proposals presented
by issuers subject to Troubled Asset Relief Program (TARP) provisions if there is inadequate discussion of the process for ensuring that
incentive compensation does not encourage excessive risk-taking.
Frequency of Advisory Votes on Executive
Compensation
Generally, support proposals seeking an
annual say on pay and oppose those seeking a less
37
frequent say on pay.
9.
State of
Incorporation
Voting on State Takeover Statutes
Review on a CASE-BY-CASE basis proposals to
opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freezeout
provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions,
anti-greenmail provisions, and disgorgement provisions).
Voting on Reincorporation Proposals
Proposals to change a company’s state
of incorporation should be examined on a CASE-BY-CASE basis, generally supporting management proposals not assessed as a potential
takeover defense, but if so assessed, weighing management’s rationale for the change. Generally, vote FOR management
reincorporation proposals upon which another key proposal, such as a merger transaction, is contingent if the other key proposal is also
supported. Generally, vote AGAINST shareholder reincorporation proposals not also supported by the company.
10.
Mergers and
Corporate Restructurings
Input from the relevant Investment
Professional(s) shall be given primary consideration with respect to proposals regarding business combinations, particularly those
between otherwise unaffiliated parties, or other corporate restructurings being considered on behalf of that Fund.
Generally, vote FOR a proposal not typically
supported under these Guidelines if a key proposal, such as a merger transaction, is contingent upon its support and a vote FOR is
accordingly recommended by the Agent or relevant Investment Professional(s).
Mergers and Acquisitions
Votes on mergers and acquisitions should be
considered on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such proposals if no
input is provided by the relevant Investment Professional(s).
Corporate Restructurings
Votes on corporate restructuring proposals,
including demergers, minority squeezeouts, leveraged buyouts, spinoffs, liquidations, dispositions, divestitures, and asset sales, should
be considered on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such proposals if
no input is provided by the relevant Investment Professional(s).
Adjournment
Generally, vote FOR proposals to adjourn a
meeting to provide additional time for vote solicitation when the primary proposal, such as a merger or corporate restructuring, is also
supported. Absent such a proposal, vote FOR adjournment if all other proposals are supported and AGAINST if all others are opposed.
Under any other circumstances, consider on a CASE-BY-CASE basis.
Appraisal Rights
Generally, vote FOR proposals to restore, or
provide shareholders with, rights of appraisal.
38
Changing Corporate Name
Generally, vote FOR changing the corporate
name.
11.
Mutual Fund Proxies
Approving New Classes or Series of Shares
Generally, vote FOR the establishment of new
classes or series of shares.
Authorizing the Board to Hire and
Terminate Sub-Advisers Without Shareholder Approval
Generally, vote FOR these proposals.
Master-Feeder Structure
Generally, vote FOR the establishment of a
master-feeder structure.
Establish Director Ownership Requirement
Generally, vote AGAINST shareholder
proposals for the establishment of a director ownership requirement.
The matters below should be examined on a
CASE-BY-CASE basis:
·
Election of Directors
·
Converting Closed-end
Fund to Open-end Fund
·
Proxy Contests
·
Investment Advisory
Agreements
·
Preferred Stock Proposals
·
1940 Act Policies
·
Changing a Fundamental
Restriction to a Nonfundamental Restriction
·
Change Fundamental
Investment Objective to Nonfundamental
·
Name Rule Proposals
·
Disposition of
Assets/Termination/Liquidation
·
Changes to the Charter
Document
·
Changing the Domicile of
a Fund
·
Change in Fund’s
Subclassification
·
Distribution Agreements
·
Mergers
·
Reimburse Shareholder for
Expenses Incurred
·
Terminate the
Investment Adviser
12.
Social and
Environmental Issues
Boards of directors and company management
are responsible for guiding the corporation in connection with matters that are most often the subject of shareholder proposals on social
and environmental issues: ensuring that the companies they oversee comply with applicable legal, regulatory and ethical standards,
effectively managing risk, and assessing and addressing matters that may have a financial impact on shareholder value. The Funds
will generally vote in
39
accordance with the board’s recommendation on such proposals unless it appears both that the stewardship
noted above has fallen short and the issue is material to the company. The former may be evidenced by the company’s failure to
align its actions and disclosure with market practice and that of its peers, or the company’s having been subject to significant
controversies, litigation, fines, or penalties in
connection with the relevant issue. Such instances will be considered CASE-BY-CASE. The Funds will generally vote AGAINST
shareholder proposals seeking to dictate corporate conduct, impose excessive costs or restrictions, duplicate policies already
substantially in place, or release information that would not help a shareholder evaluate an investment in the corporation as an economic
matter. The Funds may ABSTAIN from voting on shareholder proposals where application of the Guidelines
is unclear. This may include cases where the concerns raised are considered valid but the policies or actions requested are not
deemed appropriate or the issues are not clearly relevant to corporate performance or are not deemed appropriate for shareholder
consideration.
13.
Global Proxies
Companies incorporated outside the U.S.
shall generally be subject to the foregoing U.S. Guidelines if they are listed on a U.S. exchange and treated as a U.S. domestic issuer
by the SEC. Where applicable and not provided for otherwise herein, certain U.S. Guidelines may also be applied to companies
incorporated outside the U.S., e.g., companies with a significant base of U.S. operations and employees. However, the
following provide for differing regulatory and legal requirements, market practices, and political and economic systems existing in
various global markets.
Unless otherwise provided for herein, it
shall generally be the policy of the Funds to vote AGAINST global proxy proposals when the Agent recommends voting AGAINST such proposal
because relevant disclosure by the issuer, or the time provided for consideration of such disclosure, is inadequate. For purposes
of these global Guidelines, “AGAINST” shall mean withholding of support for a proposal, resulting in submission of a vote of
AGAINST or ABSTAIN, as appropriate for the given market and level of concern raised by the Agent regarding the issue or lack of
disclosure or time provided.
In connection with practices described
herein that are associated with a firm AGAINST vote, it shall generally be the policy of the Funds to consider them on a CASE-BY-CASE
basis if the Agent recommends their support (1) as the issuer or market transitions to better practices (e.g., having
committed to new regulations or governance codes) or (2) as the more favorable choice when shareholders must choose between
alternate proposals.
Routine Management Proposals
Generally, vote FOR the following and other similar
routine management proposals:
·
the opening of the
shareholder meeting
·
that the meeting has been
convened under local regulatory requirements
·
the presence of quorum
·
the agenda for the
shareholder meeting
·
the election of the chair
of the meeting
·
the appointment of
shareholders to co-sign the minutes of the meeting
·
regulatory filings (e.g., to effect approved share issuances)
40
·
the designation of
inspector or shareholder representative(s) of minutes of meeting
·
the designation of two
shareholders to approve and sign minutes of meeting
·
the allowance of
questions
·
the publication of
minutes
·
the closing of the
shareholder meeting
Consider proposals seeking authority to call
shareholder meetings on less than 21 days’ notice on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s
approach to consider whether the issuer has provided clear disclosure of its compliance with any hurdle conditions for the authority
imposed by applicable law and has historically limited its use of such authority to time-sensitive matters.
Discharge of Management/Supervisory Board
Members
Generally, vote FOR management proposals
seeking the discharge of management and supervisory board members, unless the Agent recommends AGAINST due to concern about the past
actions of the company’s auditors or directors or legal action is being taken against the board by other shareholders, including
when the proposal is bundled. Generally do not withhold support from such proposals in connection with remuneration practices
otherwise supported under these Guidelines or as a means of expressing disapproval of broader practices of the issuer or its board.
Director Elections
Unless otherwise provided for herein, the
Agent’s standards with respect to determining director independence shall apply. These standards generally provide that, to be
considered completely independent, a director shall have no material connection to the company other than the board seat.
Agreement with the Agent’s independence
standards shall not dictate that a Fund’s vote shall be cast according to the Agent’s corresponding recommendation.
Further, unless otherwise provided for herein, the application of Guidelines in connection with such standards shall apply only
when the nominee’s level of independence can be ascertained based on available disclosure. These policies generally apply to
director nominees in uncontested elections; votes in contested elections, and votes on director nominees not subject to policies
described herein, should be made on a CASE-BY-CASE basis, with primary consideration in contested elections given to input from the
relevant Investment Professional(s).
For issuers domiciled in Finland, France,
Ireland, the Netherlands, Sweden, or tax haven markets, generally vote AGAINST non-independent directors opposed by the Agent when the
full board serves as the audit committee, or the company does not have an audit committee.
For issuers in all markets, vote AGAINST
non-independent nominees to the audit committee, as well as bundled slates including such nominees, unless the Agent otherwise recommends
support (e.g., due to market practices or requirements). If the slate is bundled and audit committee membership is unclear
or proposed as a separate agenda item, vote FOR if the Agent otherwise recommends support. For Canadian issuers, the Funds’
U.S. Guidelines with respect to audit committees shall apply. For issuers in all markets, nominees (or slates of nominees) will be
voted AGAINST if opposed by the Agent for failing to disclose audit fees broken down by category. If the Agent opposes audit
committee members because fees for non-audit services
41
(excluding significant, one-time events) exceed 50 percent of total auditor fees,
the provisions under Section 13. Ratification of Auditors and Approval
of Auditors’ Fees shall apply.
Generally, vote FOR non-independent
directors when the full board serves as the remuneration (compensation) or nominating committee, or the company does not have a
remuneration or nominating committee, if the board meets the applicable independence requirements of the relevant listing exchange. Vote FOR non-independent directors who sit on the remuneration or nominating committees if such committee meets the applicable
independence requirements of the relevant listing exchange.
Generally follow the Agent’s
recommendations to vote AGAINST individuals nominated as outside/non-executive directors who do not meet the Agent’s standard for
independence, unless the slate of nominees is bundled and includes independent nominees, in which case the proposal(s) to elect board
members shall be considered on a CASE-BY-CASE basis.
Generally follow the Agent’s standards
for withholding support (AGAINST or ABSTAIN, as appropriate) from bundled slates or non-independent directors (typically, but not always,
excluding the CEO), as applicable, if the board does not meet the Agent’s
independence standards or the board’s independence cannot be ascertained due to inadequate disclosure.
For issuers in Italy presenting multiple
slates of directors (voto di lista), generally withhold support (AGAINST or ABSTAIN, as appropriate) from all slates until nominee
names are disclosed, and upon disclosure, generally follow the Agent’s standards for assessing which slate is best suited to
represent shareholder interests.
For issuers in Japan, generally follow the
Agent’s recommendations in furtherance of greater board independence and minority shareholder protections, including:
·
At companies with
controlling shareholders, if the board after the shareholder meeting does not include at least two directors deemed independent under the
Agent’s standards, generally vote AGAINST reelection of top executives.
·
At companies with a
three-committee structure, generally vote AGAINST (1) outside director nominees not deemed independent under the Agent’s
standards if the board after the shareholder meeting is not majority independent and (2) non-independent directors on the nominating
committee if the board does not include at least two directors deemed independent under the Agent’s standards.
·
At all companies, vote
AGAINST the top executive if the board does not include at least one outside director.
Consider on a CASE-BY-CASE basis any nominee
whom the Agent cites as having failed to implement a majority-approved shareholder proposal. Vote FOR if the shareholder proposal
has been reasonably addressed. Vote AGAINST if the shareholder proposal is supported under these Guidelines and the board has not
disclosed a credible rationale for not implementing the proposal.
Generally, withhold support (AGAINST or
ABSTAIN, as appropriate) from nominees or slates of nominees opposed by the Agent because they are presented in a manner not aligned with
market best practice and/or regulation, including:
·
Bundled slates of
nominees (e.g., Canada, France, Hong Kong, or Spain);
42
·
Simultaneous
reappointment of retiring directors (e.g., South Africa);
·
In markets with term
lengths capped by regulation or market practice, nominees whose terms exceed the caps or are not disclosed; or
·
Nominees whose names are
not disclosed in advance of the meeting or far enough in advance relative to voting deadlines to make an informed voting decision.
Generally vote FOR nominees without regard
to recommendations that the position of chairman should be separate from that of CEO or otherwise required to be independent, unless
other concerns requiring CASE-BY-CASE consideration have been raised. The latter would include former CEOs proposed as board
chairmen in markets such as the United Kingdom for which best practice and the Agent recommend against such practice.
When cumulative or net voting applies,
generally vote with the Agent’s recommendation to support nominees asserted by the issuer to be independent, irrespective of audit
committee membership, even if independence disclosure or criteria fall short of Agent’s standards.
Consider nominees for whom the Agent has
raised concerns regarding scandals or internal controls on a CASE-BY-CASE basis, generally withholding support (AGAINST or ABSTAIN, as
appropriate) from nominees or slates of nominees when:
·
The scandal or shortfall
in controls took place at the company, or an affiliate, for which the nominee is being considered;
·
Culpability can be
attributed to the nominee (e.g., nominee manages or audits the relevant function); and
·
The nominee has been
directly implicated, with resulting arrest and criminal charge or regulatory sanction.
Consider non-independent nominees on a
CASE-BY-CASE basis when the Agent has raised concerns regarding diminished shareholder value as evidenced by a significant drop in share
price, generally voting with Agent’s recommendation AGAINST such nominees when few, if any, outside directors are present on the
board and:
·
The founding family has
retained undue influence over the company despite a history of scandal or problematic controls;
·
The nominees have engaged
in protectionist activities such as introduction of a poison pill or preferential and/or dilutive share issuances; or
·
Evidence exists regarding
compliance or accounting shortfalls.
If the Agent recommends withholding support
due to other material failures or egregious actions, the Funds’ U.S. Guidelines with respect to such issues shall apply.
Consider nominees serving on the
remuneration committee on a CASE-BY-CASE basis if the Agent recommends withholding support from nominees in connection with remuneration
practices not otherwise supported by these Guidelines, including cases in which the issuer has not followed market practice by submitting
a resolution on executive compensation. For Canadian issuers, the Funds’ U.S. Guidelines with respect to Section 1.
Voting on Director Nominees in Uncontested Elections, Compensation Practices, shall apply.
43
For issuers in markets in which it is common
practice for nominees’ attendance records to be disclosed, the Funds’ U.S. Guidelines with respect to director attendance shall
apply. The same two-year attendance policy shall be applied regarding attendance by directors and statutory auditors of Japanese
companies if year-over-year data can be tracked by nominee.
Consider self-nominated director candidates
on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such candidates, except that
(1) an unqualified candidate will generally not be supported simply to effect a “protest vote” and (2) cases of
multiple self-nominated candidates may be considered as a proxy contest if similar issues are raised (e.g., potential change in
control).
Generally vote FOR nominees without regard
to “over-boarding” issues raised by the Agent unless other concerns requiring CASE-BY-CASE consideration have been raised.
In cases where a director holds more than
one board seat and corresponding votes, manifested as one seat as a physical person plus an additional seat as a representative of a
legal entity, generally vote with the Agent’s recommendation to withhold support (AGAINST or ABSTAIN, as appropriate) from the legal
entity and vote on the physical person.
Generally, vote with the Agent’s
recommendation to withhold support (AGAINST or ABSTAIN, as appropriate) from nominees for whom support has become moot since the time the
individual was nominated (e.g., due to death, disqualification, or determination not to accept appointment).
Generally, vote with the Agent’s
recommendation when more candidates are presented than available seats and no other provisions under these Guidelines apply.
Board Structure
Generally, vote FOR proposals to fix board
size, but vote AGAINST if the Agent opposes due to corporate governance, anti-takeover, or board independence concerns. Generally,
vote FOR proposals seeking a board range if the range is reasonable in the context of market practice and anti-takeover considerations.
Proposed article amendments in this regard shall be considered on a CASE-BY-CASE basis, with voting decisions generally based on
the Agent’s approach to evaluating such proposals.
Consider other proposals regarding board structure or policies on a CASE-BY-CASE basis, voting AGAINST if they promote
practices not supported under these Guidelines.
Director and Officer Indemnification and
Liability Protection
Generally, vote in accordance with the
Agent’s standards for indemnification and liability protection for officers and directors, voting AGAINST overly broad provisions.
Independent Statutory Auditors
With respect to Japanese companies that have
not adopted the three-committee structure, vote AGAINST any nominee to the position of “independent statutory auditor” whom the
Agent considers affiliated, e.g., if the nominee has worked a significant portion of his career for the company, its main bank, or
one of its top shareholders. Where shareholders must vote on multiple nominees in a single resolution, vote AGAINST all nominees. When multiple slates of statutory auditors are presented, generally vote with the
Agent’s recommendation, typically to support nominees deemed to be more independent and/or aligned with interests of minority
shareholders.
44
Generally, vote AGAINST incumbent nominees
at companies implicated in scandals or exhibiting poor internal controls.
Key Committees
Generally, except where market practice
otherwise dictates, vote AGAINST proposals that permit non-board members to serve on the audit, remuneration (compensation), or
nominating committee, provided that bundled slates, if otherwise acceptable under these Guidelines, may be supported if no slate nominee
serves on the relevant committee(s). If not otherwise addressed under these Guidelines, consider other negative recommendations
from the Agent regarding committee members on a CASE-BY-CASE basis.
Director and Statutory Auditor
Remuneration
Consider director compensation plans on a
CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such proposals, while also factoring
in the merits of the rationale and disclosure provided.
Generally, vote FOR proposals to approve the
remuneration of directors and auditors as long as the amount is not excessive (e.g., significant increases should be supported by
adequate rationale and disclosure), there is no evidence of abuse, the recipient’s overall compensation appears reasonable, and the
board and/or responsible committee meet exchange or market standards for independence.
For European issuers, vote AGAINST
non-executive director remuneration if:
·
The advance general
meeting documents do not specify fees paid to non-executive directors;
·
The company seeks to
excessively increase the fees relative to market or sector practices without providing a reasonable rationale for the increase; or
·
It provides for granting
of stock options or similarly structured equity-based compensation.
For Toronto Stock Exchange (TSX) issuers,
the Agent’s limits with respect to equity awards to non-employee directors shall apply.
Bonus Payments
With respect to Japanese companies,
generally follow the Agent’s guidelines on retirement and annual bonus payments, which include voting FOR retirement bonus proposals
if all payments are for directors or auditors who have served as executives of the company and AGAINST such proposals if any payments are
for outsiders, except when deemed appropriate by the Agent, provided that no payments shall be supported unless the individual or
aggregate amounts are disclosed. In all markets, if issues have been raised regarding a scandal or internal controls, generally
vote AGAINST bonus proposals for retiring directors or continuing directors or auditors when culpability can be attributed to the nominee
(e.g., if a Fund is also voting AGAINST the nominee under criteria herein regarding issues of scandal or internal controls),
unless bundled with bonuses for a majority of directors or
auditors a Fund is voting FOR.
Stock Option Plans for Independent
Internal Statutory Auditors
With respect to Japanese companies, follow
the Agent’s guidelines with respect to proposals regarding option grants to independent internal statutory auditors or other outside
parties, generally voting AGAINST such plans.
45
Amendment Procedures for Equity
Compensation Plans and Employee Share Purchase Plans (ESPPs)
For TSX issuers, votes with respect to
amendment procedures for security-based compensation arrangements and ESPPs shall generally be cast in a manner designed to preserve
shareholder approval rights, with voting decisions generally based on the Agent’s recommendation.
Compensation Plans and Shares Reserved
for Equity Compensation Plans
Unless otherwise provided for herein, votes
with respect to equity compensation plans (e.g., option, warrant, restricted stock, or employee share purchase plans or
participation in company offerings such as IPOs or private placements) or awards thereunder, the issuance of shares in connection with
such plans, cash-based plans where appropriate, or related management proposals (e.g., article amendments), should be determined
on a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such proposals, considering
quantitative or qualitative factors as appropriate for the market and utilizing the Agent’s methodology, including classification of
a company’s stage of development as growth or mature and the corresponding determination as to reasonability of the share requests.
Generally, vote AGAINST proposals that:
·
Exceed Agent’s
recommended burn rates or dilution limits, including cases in which the Agent suggests dilution cannot be fully assessed (e.g.,
due to inadequate disclosure);
·
Provide deep or near-term
discounts (or the equivalent, such as dividend equivalents on unexercised options) to executives or directors, unless discounts to
executives are deemed by the Agent to be adequately mitigated by other requirements such as long-term vesting or performance requirements
(e.g., Japan) or broad-based employee participation otherwise meeting the Agent’s standards (e.g., France);
·
Are administered with
discretion by potential grant recipients, unless such discretion is deemed acceptable due to market practice or other mitigating
provisions;
·
Provide for retirement
benefits or equity incentive awards to outside directors if not in line with market practice (e.g., Australia, Belgium, or The
Netherlands);
·
Permit financial
assistance to executives, directors, subsidiaries, affiliates, or related parties under conditions not supported by the Agent (e.g., misaligned with shareholders’ interests and/or posing excessive risk or independence concerns);
·
For matching share plans,
do not meet the Agent’s standards, considering holding period, discounts, dilution, participation, purchase price, and performance
criteria;
·
Provide for vesting upon
change in control if deemed to evidence a potential conflict of interest or anti-takeover device or if the change in control definition
is too liberal (e.g., does not result in actual change in control);
·
Provide inadequate
disclosure regarding vesting or performance requirements.
·
Include vesting or
performance periods that do not meet market standards (or the Agent’s standards where market standards are unclear);
·
Permit post-employment
vesting or exercise if deemed inappropriate by the Agent;
·
Allow plan administrators
to make material amendments without shareholder approval unless adequate prior disclosure has been provided, with such voting decisions
generally based on the Agent’s approach to evaluating such plans;
46
·
Provide for contract or
notice periods or severance/termination payments that exceed market practice, e.g., relative to multiples of annual compensation;
·
Promote a pay practice
(or combination of practices) not otherwise supported under these Guidelines that appears to diminish accountability to shareholders
and/or has created a misalignment between CEO pay and performance with regard to shareholder value; or
·
Provide for retesting in
connection with achievement of performance hurdles unless the Agent’s analysis indicates that (1) performance targets are
adequately increased in proportion to the additional time available, (2) the retesting is de minimis as a percentage of
overall compensation or is acceptable relative to market practice, or (3) the issuer has committed to cease retesting within a
reasonable period of time.
Generally, vote FOR such plans/awards or the
related issuance of shares that (1) do not suffer from the defects noted above or (2) otherwise meet the Agent’s tests if
the considerations raised by the Agent pertain primarily to vesting provisions, performance hurdles, discretionary bonuses, recruitment
awards, retention incentives, non-compete payments, severance/termination payments, or incentive structures if:
(1)
The company has
provided adequate disclosure and/or a reasonable rationale regarding the relevant plan/award, practice, or participation;
(2)
The recipient’s
overall compensation appears reasonable;
(3)
Potential payments or
awards are not so significant (individually or collectively) as to potentially influence an executive’s decision-making (e.g., to enter into a transaction that will result in a change of control payment) or to effectively act as a poison pill; and
(4)
The board and/or
responsible committee meet exchange or market standards for independence.
Unless otherwise provided for herein, market
practice of the primary country in which a company does business or competes for talent, or in which an employee is serving, as
applicable, shall supersede that of the issuer’s domicile.
Consider proposals in connection with such
plans or the related issuance of shares in other instances on a CASE-BY-CASE basis.
Remuneration Reports (Advisory Votes on
Executive Compensation)
Generally, withhold support (AGAINST or
ABSTAIN as appropriate for specific market and level of concerns identified) from remuneration reports/advisory votes on compensation
that include compensation plans that:
(1)
Permit practices
or features not supported under these Guidelines, including conditions described under Compensation Plans and Shares Reserved for Equity Compensation Plans above;
(2)
Permit retesting
excessive relative to market practice (irrespective of the Agent’s support for the report as a whole);
(3)
Cite long-term
incentive plans deemed to be inadequately aligned with shareholders because the performance period is too short or they lack an appropriate equity component
(e.g., overly cash-based plans), except that the latter will be considered CASE-BY-CASE in connection with executives already holding significant equity positions;
47
(4)
Cite equity award
valuation methods triggering a negative recommendation from the Agent;
(5)
Include components,
metrics, or rationales that have not been disclosed in line with market practice (although retrospective disclosure may be considered adequate);
(6)
For issuers in
Australia, permit open market purchase of shares in support of equity grants in lieu of seeking shareholder approval, but only if the issuer has a history of
significant negative votes when formally seeking approval for such grants; or
(7)
Include provisions for
retirement benefits or equity incentive awards to outside directors if not in line with market practice, except that reports will generally be voted FOR if
contractual components are reasonably aligned with market practices on a going-forward basis (e.g., existing obligations related to retirement benefits or
terms contrary to evolving standards would not preclude support for the report).
Reports receiving the Agent’s support
and not triggering the concerns cited above will generally be voted FOR. Unless otherwise provided for herein, reports not
receiving the Agent’s support due to concerns regarding vesting provisions, performance hurdles, discretionary bonuses, recruitment
awards, retention incentives, non-compete payments, severance/termination payments, or incentive structures not otherwise supported by
these Guidelines shall be considered on a CASE-BY-CASE basis, generally voted FOR if:
(1)
The company has provided
a reasonable rationale and/or adequate disclosure regarding the matter(s) under consideration;
(2)
The recipient’s
overall compensation appears reasonable;
(3)
Potential payments or
awards are not so significant (individually or collectively) as to potentially influence an executive’s decision-making (e.g., to enter into a transaction that will result in a change of control payment) or to effectively act as a poison pill; and
(4)
The board and/or
responsible committee meet exchange or market standards for independence.
Reports with typically unsupported features
may be voted FOR when the Agent recommends their initial support as the issuer or market transitions to better practices (e.g.,
having committed to new regulations or governance codes).
Proposals to Provide an Advisory Vote on
Executive Compensation
For issuers in Canada, generally support
proposals seeking a say on pay, with a preference for an annual vote.
Shareholder Proposals Regarding Executive
and Director Pay
Except as otherwise provided for herein, the
Funds’ U.S. Guidelines with respect to shareholder proposals regarding executive and director pay shall generally apply.
General Share Issuances
Unless otherwise provided for herein, voting
decisions shall generally be based on the Agent’s practice to determine support for general issuance requests (with or without
preemptive rights), or related requests to repurchase and reissue shares, based on their amount relative to currently issued capital,
appropriate volume and duration parameters, and market-specific considerations (e.g., priority right protections in France,
reasonable levels of dilution and discount in Hong
48
Kong). Requests to reissue repurchased shares will not be supported unless a
related general issuance request is also supported.
Consider specific issuance requests on a
CASE-BY-CASE basis based on the proposed use and the company’s rationale.
Generally, vote AGAINST proposals to issue
shares (with or without preemptive rights), convertible bonds, or warrants, to grant rights to acquire shares, or to amend the corporate
charter relative to such issuances or grants when concerns have been identified by the Agent with respect to inadequate disclosure,
inadequate restrictions on discounts, failure to meet the Agent’s standards for general issuance requests, or authority to refresh
share issuance amounts without prior shareholder approval.
Generally, vote AGAINST nonspecific
proposals authorizing excessive discretion to a board.
Increases in Authorized Capital
Unless otherwise provided for herein, voting
decisions should generally be based on the Agent’s approach, as follows. Generally:
·
Vote FOR nonspecific
proposals, including bundled proposals, to increase authorized capital up to 100 percent over the current authorization unless the
increase would leave the company with less than 30 percent of its new authorization outstanding.
·
Vote FOR specific
proposals to increase authorized capital, unless:
§
The specific purpose of
the increase (such as a share-based acquisition or merger) does not meet these Guidelines for the purpose being proposed; or
§
The increase would leave
the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances.
·
Vote AGAINST proposals to
adopt unlimited capital authorizations.
·
The Agent’s market-specific exceptions to
the above parameters shall be applied.
Preferred Stock
Unless otherwise provided for herein, voting
decisions should generally be based on the Agent’s approach, including:
·
Vote FOR the creation of
a new class of preferred stock or issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred
stock would adversely affect the rights of existing shareholders.
·
Vote FOR the
creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion
meets the Agent’s guidelines on equity issuance requests.
·
Vote AGAINST the creation
of (1) a new class of preference shares that would carry superior voting rights to the common shares or (2) blank check
preferred stock, unless the board states that the authorization will not be used to thwart a takeover bid.
Poison Pills/Protective Preference Shares
Generally, vote AGAINST management proposals
in connection with poison pills or anti-takeover activities (e.g., disclosure requirements or issuances, transfers, or
repurchases) that do not meet the Agent’s standards. Generally vote in accordance with Agent’s recommendation to withhold
support from a nominee in connection with poison pill or anti-takeover considerations
49
when responsibility for the actions can be
reasonably attributed to the nominee. Generally DO NOT VOTE AGAINST director remuneration in connection with poison pill
considerations raised by the Agent.
Waiver on Tender-Bid Requirement
Generally, consider proposals on a
CASE-BY-CASE basis seeking a waiver for a major shareholder or concert party from the requirement to make a buyout offer to minority
shareholders, voting FOR when little concern of a creeping takeover exists and the company has provided a reasonable rationale for the
request, and with voting decisions generally based on the Agent’s approach to evaluating such requests.
Approval of Financial Statements and
Director and Auditor Reports
Generally, vote FOR management
proposals seeking approval of financial accounts and reports, unless there is concern about the company’s financial accounts and
reporting, which, in the case of related party transactions, would include concerns raised by the Agent regarding inadequate disclosure,
remuneration arrangements (including severance/termination payments exceeding local standards for multiples of annual compensation), or
consulting agreements with non-executive directors. Unless otherwise provided for herein, reports not receiving the Agent’s
support due to other concerns regarding severance/termination payments not otherwise supported by these Guidelines shall be considered on
a CASE-BY-CASE basis, factoring in the merits of the rationale or disclosure provided and generally voted FOR if the overall remuneration
package and/or program at issue appears reasonable and the board and/or
responsible committee meet exchange or market standards for independence. Generally, vote AGAINST board-issued reports receiving a
negative recommendation from the Agent due to concerns regarding independence of the board or the presence of non-independent directors
on the audit committee. However, generally do not withhold support from such proposals in connection with remuneration practices
otherwise supported under these Guidelines or as a means of expressing disapproval of broader practices of the issuer or its board.
Remuneration of Auditors
Generally, vote FOR proposals to authorize
the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature
of the company.
Indemnification of Auditors
Generally, vote AGAINST proposals to
indemnify auditors.
Ratification of Auditors and Approval of
Auditors’ Fees
For Canadian issuers, the Funds’ U.S.
Guidelines with respect to auditors and auditor fees shall apply.
For other markets, generally, follow the
Agent’s standards for proposals seeking auditor ratification or approval of auditors’ fees, which generally indicate a vote FOR
such proposals if the level of disclosure and independence meet the Agent’s standards. However, if fees for non-audit services
(excluding significant, one-time events) exceed 50 percent of total auditor fees, consider on a CASE-BY-CASE basis, and vote AGAINST
ratification of auditors or approval of auditors’ fees opposed by the Agent if it appears that remuneration for the non-audit work
is so lucrative as to taint the auditor’s independence, including circumstances where no rationale is provided.
50
In other cases, generally vote FOR such
proposals unless there are material concerns raised by the Agent about the auditor’s practices or independence.
Audit Commission
Consider nominees to the audit commission on
a CASE-BY-CASE basis, with voting decisions generally based on the Agent’s approach to evaluating such candidates.
Allocation of Income and Dividends
With respect to Japanese companies, consider
management proposals concerning allocation of income and the distribution of dividends, including adjustments to reserves to make capital
available for such purposes, on a CASE-BY-CASE basis, generally voting with the Agent’s recommendations to support such proposals
unless:
·
The dividend payout ratio
has been consistently below 30 percent without adequate explanation; or
·
The payout is excessive
given the company’s financial position.
Generally vote FOR such proposals by
issuers in other markets.
In any markets, in the event management
offers multiple dividend proposals on the same agenda, consider on a CASE-BY-CASE basis, with primary consideration given to input from
the relevant Investment Professional(s) and voting decisions generally based on the Agent’s recommendation if no input is received.
Stock (Scrip) Dividend Alternatives
Generally, vote FOR most stock (scrip)
dividend proposals, but vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is
harmful to shareholder value.
Debt Instruments and Issuance Requests
Generally, vote AGAINST proposals
authorizing excessive discretion to a board to issue or set terms for debt instruments (e.g., commercial paper).
Generally, vote FOR debt issuances for
companies when the gearing level (current debt-to-equity ratio) is between zero and 100 percent. Review on a
CASE-BY-CASE basis proposals where the issuance of debt will result in the gearing level being greater than 100 percent, or for
which inadequate disclosure precludes calculation of the gearing level, comparing any such proposed debt issuance to industry and market
standards, and with voting decisions generally based on the Agent’s approach to evaluating such requests.
Financing Plans
Generally, vote FOR the adoption of
financing plans if they are in the best economic interests of shareholders.
Related Party Transactions
Consider related party transactions on a
CASE-BY-CASE basis. Generally, vote FOR approval of such transactions unless the agreement requests a strategic move outside the
company’s charter, contains unfavorable or high-risk terms (e.g., deposits without security interest or guaranty), or is
deemed likely to have a negative impact on director independence.
51
Approval of Donations
Generally, vote AGAINST such proposals
unless adequate, prior disclosure of amounts is provided; if so, single- or multi-year authorities may be supported.
Capitalization of Reserves
Generally, vote FOR proposals to capitalize
the company’s reserves for bonus issues of shares or to increase the par value of shares, unless concerns not otherwise supported
under these Guidelines are raised by the Agent.
Investment of Company Reserves
These proposals should generally be analyzed
on a CASE-BY-CASE basis, with primary consideration given to input from the relevant Investment Professional(s).
Article and Bylaw Amendments
Review on a CASE-BY-CASE basis all proposals
seeking adoption of, or amendments to, the articles of association, bylaws, or related board policies.
Generally, vote FOR the proposal if:
·
The change or policy is
editorial in nature;
·
Shareholder rights are
protected;
·
There is negligible or
positive impact on shareholder value;
·
Management provides
adequate reasons for the amendments or the Agent otherwise supports management’s position;
·
It seeks to discontinue
and/or delist a form of the issuer’s securities when the relevant Fund does not hold the affected security type;
·
Notice or disclosure
requirements are reasonable; or
·
The company is required
to do so by law (if applicable).
Generally, vote AGAINST the proposal if:
·
It removes or lowers
quorum requirements for board or shareholder meetings below levels recommended by the Agent;
·
It reduces relevant
disclosure to shareholders;
·
It seeks to align the
articles with provisions of another proposal not supported by these Guidelines;
·
It is not supported under
these Guidelines, is presented within a bundled proposal, and the negative impact, on balance, outweighs any positive impact; or
·
It imposes a negative
impact on existing shareholder rights, including rights of the Funds, or diminishes accountability to shareholders to the extent that any
positive impact would not be deemed to be sufficient to outweigh removal or diminution of such rights.
With respect to article amendments for
Japanese companies:
·
Generally vote FOR
management proposals to amend a company’s articles to expand its business lines.
52
·
Generally vote FOR
management proposals to amend a company’s articles to provide for an expansion or reduction in the size of the board, unless the
expansion/reduction is clearly disproportionate to the growth/decrease in the scale of the business
or raises anti-takeover concerns.
·
If anti-takeover concerns
exist, generally vote AGAINST management proposals, including bundled proposals, to amend a company’s articles to authorize the
Board to vary the annual meeting record date or to otherwise align them with provisions of a takeover defense.
·
Generally follow the
Agent’s guidelines with respect to management proposals regarding amendments to authorize share repurchases at the board’s
discretion, voting AGAINST proposals unless there is little to no likelihood of a creeping takeover or constraints on liquidity (free
float of shares is low), and where the company is trading at below book value or is facing a real likelihood of substantial share sales;
or where this amendment is bundled with other amendments which are clearly in shareholders’ interest.
Other Business
In connection with global proxies,
vote in accordance with the Agent’s market-specific recommendations on management proposals for Other Business, generally AGAINST.
53
| Item 8. |
Portfolio Managers of Closed-End Management Investment Companies. |
(a) (1) Portfolio Management. The following individuals share responsibility for the day-to-day management of the Fund’s portfolio:
Brian Madonick. Mr. Madonick will serve as a portfolio manager for the Fund and will be responsible for security analysis and
selection within the industrial sector. Mr. Madonick joined ING IM in 2004. Prior to 47 joining ING, he was an industrials analyst at U.S. Trust from 2000-2004. Prior to that, he was a senior analyst at Bear Stearns. Mr. Madonick has over 16 years
of investment management experience. Mr. Madonick received a B.A. from SUNY Binghamton.
Joseph Vultaggio. Mr. Vultaggio
will serve as a portfolio manager for the Fund and will be responsible for the security analysis and selection of the international securities within the industrials, materials and telecom services sectors and will liaise with the Sub-Adviser’s
international affiliates on the outlook. Mr. Vultaggio joined ING IM in 1994. He received a B.S. in finance from Trenton State College and an M.B.A. in finance at Rutgers Graduate School of Management.
Paul Zemsky. Mr. Zemsky will serve as a portfolio manager for the Fund and will implement and oversee the Fund’s option overlay
strategy. Mr. Zemsky is the Head of Asset Allocation and Multi-Manager Investments with responsibility for traditional and alternative investment solutions. He joined ING IM in 2005 as Head of Derivative Strategies. Prior to assuming his role at ING
IM, Mr. Zemsky spent 18 years at J.P. Morgan Investment Management, where he held a number of key positions, including responsibility for asset allocation for the firm’s fixed income business and handling option trading in both the
exchange-traded and over-thecounter markets. He has 25 years of investment experience. Mr. Zemsky holds a dual degree in finance and electrical engineering from the Management and Technology Program at the University of Pennsylvania.0
Martin
Jansen. Martin Jansen is the lead portfolio manager of International Value. He is also portfolio manager of ING’s Infrastructure, Industrials and Materials Fund as well as the Global Equity Dividend SMA and the International Enhanced
EAFE and International High Dividend Income strategies. Previously, he was responsible for managing the transition of the U.S. equity trading facility and U.S. equity assets from ING Investment Management in The Hague to ING Aeltus. He joined ING in
1997 as senior manager to co-manage U.S. equity portfolios and was named head of the U.S. equity team in 1999. Prior to joining ING, Martin was responsible for the U.S. equity and venture capital portfolios at a large corporate Dutch pension fund.
He received a Bachelor of Commerce and M.B.A. from the University of the Witwatersrand, South Africa.
Frank van Etten. Frank is
the Deputy Head of the Multi-Asset Strategies and Solutions (MASS) team. In this role, he manages the research and investment teams that design and implement investment products and solutions with asset-allocation, manager selection and/or
structured investment components. Frank also drives product development and chairs the MASS Executive Team that sets the group’s strategic direction. He joined ING Investment Management in Europe in 2002 on the Structured Investment Strategies
team, where he initially carried out research in equity derivatives markets. Subsequently, as a portfolio manager, he oversaw two investment teams that managed a range of liability-driven investment solutions, structured funds, alternative
investments and derivatives trading. Frank obtained his master’s degree in econometrics from Tilburg University in the Netherlands in 2003, specializing in quantitative finance.
(a) (2) (i-iii) Other Accounts Managed
The following table shows the number of accounts and total assets in the accounts managed by the portfolio managers of the Sub-Adviser as of February 28, 2013, unless otherwise noted:
ING Infrastructure, Industrials and Materials Fund (IDE)
|
|
|
|
|
|
|
| |
|
Mutual
Funds
Registered Investment Companies |
|
Trusts, Sep Accts and
Stable
Value Other Pooled Investment
Vehicles and Alternative |
|
Other Accounts, IIM Managed |
| Portfolio Manager |
|
Number of Accts /
Total Assets
(rounded to nearest million) |
|
Number of Accts /
Total
Assets
(rounded to nearest million) |
|
Number of Accts /
Total Assets
(rounded to nearest million) |
| Frank van Etten |
|
3 accounts / $637 million |
|
0/0 |
|
0/0 |
| Brian Madonick |
|
1 account / $362 million |
|
0/0 |
|
0/0 |
| Joseph Vultaggio |
|
5 accounts / $901 million |
|
1 account / $36 million |
|
0/0 |
| Paul Zemsky |
|
51 accounts / $17,867 million |
|
29 accounts / $1,641 million |
|
0/0 |
| Martin Jansen |
|
6 accounts / $909 million |
|
1 account / $36 million |
|
3 accounts / $121 million |
(a) (2) (iv) Conflicts of Interest
A portfolio manager may be subject to potential conflicts of interest because the portfolio manager is responsible for other accounts in addition to the Fund. These other accounts may include, among
others, other mutual funds, separately managed advisory accounts, commingled trust accounts, insurance, wrap fee programs and hedge funds. Potential conflicts may arise out of the implementation of differing investment strategies for the portfolio
manager’s various accounts, the allocation of investment opportunities among those accounts or differences in the advisory fees paid by the portfolio manager’s accounts.
A potential conflict of interest may arise as a result of the portfolio manager’s responsibility for multiple accounts with similar investment guidelines. Under these circumstances, a potential
investment may be suitable for more than one of the portfolio manager’s accounts, but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally devote to the opportunity. Similar
conflicts may arise when multiple accounts seek to dispose of the same investment.
A portfolio manager may also manage accounts whose
objectives and policies differ from those of the Fund. These differences may be such that under certain circumstances, trading activity appropriate for one account managed by the portfolio manager may have adverse consequences for another account
managed by the portfolio manager. For example, if an account were to sell a significant position in a security, which could cause the market price of that security to decrease, while the Fund maintained its position in that security.
A potential conflict may arise when a portfolio manager is responsible for accounts that have different advisory fees — the difference in the fees
may create an incentive for the portfolio manager to favor one account over another, for example, in terms of access to particularly appealing investment opportunities. This conflict may be heightened where an account is subject to a
performance-based fee.
As part of its compliance program, ING IM, ING IM Europe and ING IM Asia/Pacific have each adopted policies and
procedures reasonably designed to address the potential conflicts of interest described above.
(a) (3) Compensation
ING IM
Compensation for ING IM generally
consists of (a) a fixed base salary; (b) a bonus which is based on INGIM’s calendar year performance, consisting of one-year pre-tax performance of the accounts for which the portfolio managers are primarily and jointly responsible
compared to account benchmarks and relevant peer groups (see below), and revenue growth of the accounts for which they are responsible for; and (c) long-term equity awards tied to the performance of ING Investments’ and ING IM’s
parent company, ING Groep.
Portfolio managers are eligible to participate in an annual incentive plan. The overall
design of the ING IM’s annual incentive plan was developed to closely tie compensation to performance, structured in such a ways as to drive performance and promote retention of top talent. Investment performance is measured on both index and
Adviser relative performance in all areas. The relevant index is the MSCI AC (All Countries) ex USA IndexSM and, where applicable, peer groups including, but not limited to, Russell, Morningstar, Lipper and Lehman and set performance goals to appropriately reflect requirements for each investment team.
Investment professionals’ performance measures for bonus determinations are weighted by 25% being attributable to the overall ING IM
performance and 75% attributable to their specific team results (60% investment performance and 15% net cash flow). The portfolio managers participate in ING’s Pension, Retirement and Options plans, which do not discriminate in favor of
portfolio managers or group of employees that include portfolio managers and are available generally to all salaried employees.
ING IM Europe
Within ING IM Europe, the portfolio managers’ compensation typically consists of a base salary and a bonus which is based on ING IM
Europe’s performance as well as the 1-year pre-tax performance of the accounts that the portfolio managers are primarily and jointly responsible for, relative to the performance of the accounts’ benchmarks. In addition, the portfolio
managers are offered long-term equity awards, such as stocks and/or stock options, which are tied to the performance of the Sub-Adviser’s parent company, ING Groep.
Portfolio managers are eligible to participate in an annual incentive plan. The overall design of the ING IM Europe annual incentive plan was developed to closely tie compensation to performance,
structured in such a way as to drive performance and promote retention of top talent. As with base salary compensation, individual target awards are determined and set based on external market data and internal comparators. Investment performance is
measured on both relative and absolute performance in all areas. ING IM Europe has defined indices and set performance goals to appropriately reflect requirements for each investment team. The measures for each team are outlined on a
“scorecard” that is reviewed on an annual basis. These scorecards reflect a comprehensive approach to measuring investment performance versus benchmark(s) over a one year period. The results for overall ING IM Europe scorecards are
calculated on an asset-weighted performance basis of the individual team scorecards.
Investment professionals’ performance measures for
bonus determinations are typically weighted by 20% being attributable to the overall ING IM Europe performance and 80% attributable to their specific team results.
ING IM Asia/Pacific
Compensation for portfolio managers employed by ING IM Asia/Pacific generally
consists of (a) fixed base salary; (b) bonus which is based on ING IM Asia/Pacific’s calendar year performance, consisting of one-year pre-tax performance of the accounts for which the portfolio managers are primarily and jointly
responsible compared to account benchmarks and relevant peer groups (as described below), and revenue growth of the accounts for which they are responsible for; and (c) long-term equity awards tied to the performance of ING Investments’
and ING IM Asia/Pacific’s parent company, ING Groep.
Portfolio managers are eligible to participate in an annual
incentive plan. The overall design of the ING IM Asia/Pacific’s annual incentive plan was developed to closely tie compensation to performance, structured in such a ways as to drive performance and promote retention of top talent. Investment
performance is measured on both index and Adviser relative performance in all areas. The relevant index is the MSCI AC (All Countries) Asia Pacific ex Japan IndexSM. Relevant peer groups include Morningstar Pacific/Asia-Ex Japan Stock funds and Lipper category China Region funds.
The portfolio managers participate in ING’s Pension, Retirement and Options plans, which do not discriminate in favor of portfolio managers or group of employees that include portfolio managers and are available generally to all salaried
employees.
(a) (4) Ownership of Securities
Ownership:
|
|
|
| Portfolio Manager |
|
Dollar Range of Trust Shares Owned |
| Frank van Etten |
|
None |
| Brian Madonick |
|
None |
| Joseph Vultaggio |
|
None |
| Paul Zemsky |
|
None |
| Martin Jansen |
|
None |
| Item 9. |
Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers |
NONE.
| Item 10. |
Submission of Matters to a Vote of Security Holders. |
The Board has a Nominating Committee for the purpose of considering and presenting to the Board candidates it proposes for nomination to fill Independent Trustee vacancies on the Board. The Committee
currently consists of all Independent Trustees of the Board (6 individuals). The Nominating Committee operates pursuant to a Charter approved by the Board. The primary purpose of the Nominating Committee is to consider and present to the Board the
candidates it proposes for nomination to fill vacancies on the Board. In evaluating candidates, the Nominating Committee may consider a variety of factors, but it has not at this time set any specific minimum qualifications that must be met.
Specific qualifications of candidates for Board membership will be based on the needs of the Board at the time of nomination.
The Nominating
Committee is willing to consider nominations received from shareholders and shall assess shareholder nominees in the same manner as it reviews its own nominees. A shareholder nominee for director should be submitted in writing to the Fund’s
Secretary. Any such shareholder nomination should include at a minimum the following information as to each individual proposed for nomination as trustee: such individual’s written consent to be named in the proxy statement as a nominee (if
nominated) and to serve as a trustee (if elected), and all information relating to such individual that is required to be disclosed in the solicitation of proxies for election of trustees, or is otherwise required, in each case under applicable
federal securities laws, rules and regulations.
The Secretary shall submit all nominations received in a timely manner to
the Nominating Committee. To be timely, any such submission must be delivered to the Fund’s Secretary not earlier than the 90th day prior to such meeting and not later than the close of business on the later of the 60th day prior to such meeting or the 10th day following the day on which public announcement of the date of
the meeting is first made, by either disclosure in a press release or in a document publicly filed by the Fund with the Securities and Exchange Commission.
| Item 11. |
Controls and Procedures. |
| (a) |
Based on our evaluation conducted within 90 days of the filing date, hereof, the design and operation of the registrant’s disclosure controls and procedures
are effective to ensure that material information relating to the registrant is made known to the certifying officers by others within the appropriate entities, particularly during the period in which Forms N-CSR are being prepared, and the
registrant’s disclosure controls and procedures allow timely preparation and review of the information for the registrant’s Form N-CSR and the officer certifications of such Form N-CSR. |
| (b) |
There were no significant changes in the registrant’s internal controls that occurred during the second fiscal quarter of the period covered by this report that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
|
|
|
|
|
| (a) |
|
(l) |
|
Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
|
|
|
| (a) |
|
(2) |
|
A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is
attached hereto as EX-99.CERT. |
|
|
|
| (b) |
|
|
|
The officer certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT. |
|
|
|
|
|
(3) |
|
Not applicable. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
(Registrant): ING Infrastructure, Industrials and Materials
|
|
|
| By: |
|
/s/ Shaun P. Mathews |
|
|
Shaun P. Mathews |
|
|
President and Chief Executive Officer |
Date: May 3, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
|
|
|
| By: |
|
/s/ Shaun P. Mathews |
|
|
Shaun P. Mathews |
|
|
President and Chief Executive Officer |
Date: May 3, 2013
|
|
|
| By |
|
/s/ Todd Modic |
|
|
Todd Modic |
|
|
Senior Vice President and Chief Financial Officer |
Date: May 3, 2013
E-Delivery Sign-up — details
inside
