June 5, 2009
VIA EDGAR
Mr. Jeffrey A. Foor
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: ING Variable Funds (on behalf of ING Growth and Income Portfolio) (File No. 333-158794)
Dear Mr. Foor:
This letter responds to the comments that you provided to us on May 26, 2009 and on June 3, 2009, and the accounting comments that we received from Mr. Jason Fox on May 27, 2009, in connection with the staff’s review of the Registration Statement filed on Form N-14 on behalf of ING Growth and Income Portfolio (the “Acquiring Portfolio”), a series of ING Variable Funds (the “Registrant”), on April 24, 2009. The Registration Statement was filed in connection with the proposed reorganization (the “Reorganization”) of ING Growth and Income Portfolio II (the “Acquired Portfolio” and with the Acquiring Portfolio, the “Portfolios”), a series of ING Investors Trust, with and into the Acquiring Portfolio. Your comments and the Registrant’s responses are provided below. In response to your comments, the Registrant has also revised the Registration Statement. All of these revisions will be reflected in the Registration Statement which will be filed on or about June 5, 2009 on the EDGAR system. Unless otherwise noted, defined terms have the same meaning as in the Registration Statement.
1) Comment 1(a): Page 3. In the fourth bullet point from the bottom of page 3 and the second bullet point from the top of page 26, please revise the disclosure to state that both the gross and net expense ratios for all classes of the Acquired Portfolio are expected to decrease as a result of the Reorganization;
Response: In response to your comment, the disclosure has been revised as follows:
“both the gross and net expense ratios for all classes of the disappearing Growth and Income Portfolio II are expected to decrease as a result of the Reorganization” [Emphasis added.]
2) Comment 2(a): Page 3. Explain why it is necessary to direct variable contract owners and qualified plan participants to consult underlying product prospectus or qualified plan documents, respectively.
Response: Item 3(b) of Form N-14 requires the comparison of the Acquired Portfolio’s and the Acquiring Portfolio’s share purchase and redemption procedures and exchange rights. However, shares of the Portfolios are not offered directly to the public but are sold to qualified pension and retirement plans and to separate accounts of certain participating life insurance companies and are used to fund variable annuity and/or variable life contracts. As a result, in connection with purchases, exchanges and redemption of shares of the Portfolios, variable contract owners and qualified plan participants are directed to the underlying product prospectus or qualified plan documents, respectively.
Comment 2(b): In a disclosure that directs variable contract owners and qualified plan participants to consult underlying product prospectus or qualified plan documents, respectively, please disclose specifically that the underlying product prospectus or qualified
1
plan documents include fee information for the purchases, exchanges and redemption of shares.
Response: The disclosure has been revised as follows:
“The purchase and redemption of shares of each Portfolio may be made by Separate Accounts of Participating Insurance Companies and by Plan Participants in a Qualified Plan; consequently, Variable Contract owners and Plan Participants should consult the underlying product prospectus or Qualified Plan documents, respectively, with respect to purchases, exchanges, and redemption of shares, and related fees;” [Emphasis added.]
3) Comment 5(a): Page 4. Explain why it is necessary to have a disclosure about cash distribution.
Response: The Acquired Portfolio is expected to make a cash distribution consisting of all undistributed income or gains, if any, prior to the closing of the Reorganization to avoid being taxed on these income and gains. If the Acquired Portfolio had any shareholder who is not tax-exempt, the shareholder would be taxed on the distribution amount received and thus it would be important for that shareholder to be informed of the distribution and tax consequences. However, since shareholders of the Acquired Portfolio are separate accounts of insurance companies and qualified pension and retirement plans, which are tax-exempt, they are not subject to any tax consequences as a result of the distribution. Accordingly, as a practical matter it may not be necessary to disclose this distribution in the Registration Statement. However, the disclosure is included in the Registration Statement to be consistent with a similar disclosure made in other registration statements on Form N-14 for reorganizations of ING funds whose shareholders are subject to tax.
Comment 5(b): Please disclose the tax consequences of a cash distribution by the Acquired Portfolio prior to the closing date of the Reorganization.
Response: The disclosure has been revised as follows:
“Prior to the Closing Date, Growth and Income Portfolio II will pay to the Separate Accounts of Participating Insurance Companies and Qualified Plans that own its shares, a cash distribution consisting of any undistributed investment company taxable income and/or any undistributed realized net capital gains, including any net gains realized from any sales of assets prior to the Closing Date. Variable Contract owners and Plan Participants are not expected to recognize any income or gains for federal income tax purposes from this cash distribution.” [Emphasis added.]
4) Comment: Comparison of Portfolio Characteristics. Provide disclosure explaining why the Registrant is providing two sets of comparison tables, one as of December 31, 2008 and one as of May 31, 2009.
Response: The Registrant has provided the following disclosure to the table titled comparing the Portfolios’ characteristics as of May 31, 2009:
“The following table compares certain characteristics of the Portfolios as of May 31, 2009. This table is being presented to compare the characteristics of both Portfolios after April 30, 2009 when Growth and Income Portfolio II began implementing the same investment objective and principal investment strategies as Growth and Income Portfolio.”
5) Comment: Page 17. Please explain why the inception date of a class of each Portfolio is different from the inception date shown for the performance of that class’s index.
Response: The performance of the benchmark indices of ING funds is generated and provided to ING funds by non-affiliated service providers, usually on the first date of each month. As a result, there tends to be a time gap between the inception date of a class of an ING fund and the inception date shown for the performance of the benchmark index as applied to that class. ING has a policy with respect to showing benchmark returns in ING funds’ registration statements. Specifically, (i) when a class of an ING fund is launched between the 1st and 15th day of the month, ING funds will show “since inception” returns for
2
the benchmark(s) beginning on the first day of month that the class was launched, and (ii) when a class commences operations between the 16th and the last day of the month, ING funds will show “since inception” returns for the benchmark(s) beginning the first day of the following month after the class is launched.
6) Comment: In the table titled “Annual Portfolio Operating Expenses,” recoupment, if any, of each Portfolio should be included in the “Other Expenses,” instead of being included in “Waivers, Reimbursement, and Recoupment.”
Response: There is no recoupment amount for the Portfolios reflected in this fee table. The caption “Waivers, Reimbursement, and Recoupment” has been revised to state “Waivers and Reimbursement.”
7) Comment: Page 4. Item 3(a) of N-14 requires a fee table near the front of the prospectus that conforms to the requirements of Form N-1A. The table on page 4 does not conform to Form N-1A and the later table titled “Annual Portfolio Operating Expenses” should be moved forward.
Response: In response to your comment, the Registrant has added to the fee table on page 4 a prominent reference to the “Annual Portfolio Operating Expenses” table found on pages 18-19.
8) Comment: Since the separate accounts of insurance companies and qualified plans are the record owners of the shares of the Acquired Portfolio, please clarify whether a “quorum” can be established by counting shares held in the separate accounts of insurance companies and qualified plans that are present at the shareholders’ meeting. Please also clarify whether in order to approve the Reorganization and the sub-advisory agreement to appoint ING IM as the Acquired Portfolio’s new sub-adviser during the Transition Period, the Registrant imposes any requirement that a specific percentage of variable contract owners and qualified plan participants need to give instructions on how to vote their shares.
Response: A “quorum” can be established by counting shares held in the separate accounts of insurance companies and qualified plans that are present at the shareholders’ meeting. The Registrant does not mandate any specific percentage of variable contract owners and qualified plan participants who need to give instructions on how to vote their shares in order to approve the Reorganization and the sub-advisory agreement to appoint ING IM as the Acquired Portfolio’s new sub-adviser during the Transition Period. However, the Registrant has a policy that requires a proxy statement be mailed to shareholders at least 30 days prior to the date of the shareholders’ meeting to allow sufficient time for shareholder solicitation.
In addition, a disclosure has been added on page 5 to state the following:
“The Separate Accounts of the Participating Insurance Companies and Qualified Plans are the record owners of the shares of the Portfolios. The Qualified Plans and Participating Insurance Companies will vote the Growth and Income Portfolio II’s shares at the Special Meeting in accordance with the timely instructions received from persons entitled to give voting instructions under the Variable Contracts or Qualified Plans. Growth and Income Portfolio II does not impose any requirement that a minimum percentage of voting instructions be received, before counting the Participating Insurance Companies and Qualified Plans as the Portfolio’s shareholders in determining whether a quorum is present.” [Emphasis added]
3
9) Comment: Pages 15 - 20. Move the section titled “Portfolio Performance” on pages 15 - 17 and other sections on pages 18 - 19 to the pages after the table titled “Annual Portfolio Operating Expenses” on pages 22 - 23 pursuant to Item 3(a) of Form N-14.
Response: Item 3(a) of Form N-14 requires the disclosure of the current fees of the Acquired Portfolio and the Acquiring Portfolio and the pro forma fees. However, unlike Item 3(b) and Item 3(c) of Form N-14, which specifically require certain information to be at the beginning of a prospectus/proxy statement on Form N-14, Item 3(a) does not require the fee table to be included at any specific place in a proxy statement/prospectus. The Registrant believes that the current structure of the Proxy Statement/Prospectus provides prominent disclosure of the fee information required under Item 3(a) as this information is included in both the summary of the proposal at the beginning of the Proxy Statement/Prospectus as well as in a detailed discussion and comparison under the section “Comparison of Fees and Expenses.”
The Registrant also notes that the purpose of Form N-14 is to provide essential information about the Registrant and the Reorganization in a clear, concise and understandable manner to assist investors in making informed decisions about whether to purchase the securities being offered. The organization of this Proxy Statement/Prospectus is consistent with those that have been filed by the Registrant as well as other ING registrants in the past and, as we believe, is consistent with the overall purpose of Form N-14.
10) Comment: Pages 33-34. Please disclose the Board’s conclusions with regard to its consideration of the direct and indirect costs, including the transaction costs of initiating the transition of the Portfolio’s investment portfolio prior to the Reorganization.
Response: In response to this comment, the following has been added to the Board’s consideration of “The Nature, Extent and Quality of the Sub-Advisory Service To Be Provided”:
“The Trustees also concluded that the services ING IM proposed to provide, are appropriate in scope and extent in light of Growth and Income Portfolio II’s current operations and during the transition period leading to the Reorganization. In reaching this conclusion, the Board considered, among other factors, the direct and indirect costs, including the transaction costs of initiating the transition of the Portfolio’s investment portfolio prior to the Reorganization.” [Emphasis added.]
11) Comment: Item 3(a) of Form N-14 requires to include a fee table showing, among other things, the pro forma fees if different from the Acquiring Portfolio’s current fees. The pro forma fees and the Acquiring Portfolio’s current fees are not different.
Response: The pro forma fees column in the table titled “Annual Portfolio Operating Expenses” has been deleted in response to this comment.
12) Comment: In view of the significant portions of portfolio securities that will be sold in the Reorganization, include adjustments for the transaction costs in the Capitalization Table and add a corresponding footnote explaining such adjustments.
Response. The adjustments for the transaction costs and a corresponding footnote explaining such adjustments have been added to the Capitalization Table in response to this comment.
13) Comment: Please provide the required Tandy letter along with your response.
Response: The requested representation letter is attached.
* * *
We hope you find our changes to these materials to be responsive. If you have any additional questions, please do not hesitate to contact the undersigned at 202.261.3496 or Jutta M. Frankfurter at 202.261.3484.
Sincerely, |
|
|
|
/s/ Hoang T. Pham |
|
Hoang T. Pham |
|
|
|
Attachment |
|
4
cc: | Huey P. Falgout, Jr. |
| Counsel |
| ING U.S. Legal Services |
|
|
| Christopher C. Okoroegbe |
| Counsel |
| ING U.S. Legal Services |
|
|
| Jeffrey S. Puretz |
| Partner |
| Dechert LLP |
5
[ING FUNDS LOGO]
June 5, 2009
VIA EDGAR
Mr. Jeffrey A. Foor
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE: ING Variable Funds (on behalf of ING Growth and Income Portfolio) (File No. 333-158794)
Dear Mr. Foor:
In connection with a response being made on behalf of the Registrant to comments provided by you with respect to the Registration Statement filed on Form N-14 on behalf of ING Growth and Income Portfolio on April 24, 2009 (the “Registration Statement”), the Registrant hereby acknowledges that:
· the Registrant is responsible for the adequacy and the accuracy of the disclosure contained in the Registration Statement;
· comments of the staff of the Securities and Exchange Commission (“SEC”) or changes to disclosure in response to SEC staff comments in the filing reviewed by the staff do not foreclose the SEC from taking any action with respect to the Registration Statement;
· should the SEC or the SEC staff, acting pursuant to delegated authority, declare the Registration Statement effective, it does not foreclose the SEC from taking any action with respect to the Registration Statement; and
· the Registrant may not assert SEC staff comments as a defense in any proceeding initiated by the SEC or any person under the federal securities laws of the United States.
We hope that the foregoing is responsive to your request. Please do not hesitate to contact me at 480.477.2666, if you have any questions concerning the foregoing.
Regards,
/s/ Huey P. Falgout, Jr. |
|
Huey P. Falgout, Jr. |
|
Counsel |
|
ING U.S. Legal Services |
|
cc: | Jeffrey S. Puretz |
| Dechert LLP |
