<PAGE> 1
As filed with the Securities and Exchange Commission on April 11, 2000
Registration Nos. 333-83071 and 811-09477
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. 1 |X|
Post-Effective Amendment No. _ |_|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 2 |X|
ING VARIABLE INSURANCE TRUST
(Exact Name of Registrant as Specified in Charter)
1475 Dunwoody Drive
West Chester, PA 19380
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (877) 463-6464
Louis S. Citron
ING Mutual Funds Management Co. LLC
1475 Dunwoody Drive
West Chester, PA 19380
(Name and Address of Agent for Service)
Approximate date of proposed public offering: As soon as practicable
after the effective date of the Registration Statement.
It is proposed that this filing will become effective (check
appropriate box):
|_| Immediately upon filing pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| On (date) pursuant to paragraph (b)
|_| On (date) pursuant to paragraph (a)(1)
|_| On (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Shares of Beneficial Interest, par value $0.001.
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ING VARIABLE INSURANCE TRUST PROSPECTUS
April 28, 2000
Stock Funds
ING Large Cap Growth Fund
ING Growth & Income Fund
ING International Equity Fund
ING Global Brand Names Fund
Lifestyle Fund of Funds
ING Income Allocation Fund
ING Balanced Allocation Fund
ING Growth Allocation Fund
ING Aggressive Growth Allocation Fund
This Prospectus has information you should know before you invest. Please read
it carefully and keep it with your investment records. Although these securities
have been registered with the Securities and Exchange Commission, the Commission
has not judged them for investment merit and does not guarantee the accuracy or
adequacy of the information in this Prospectus. Anyone who informs you otherwise
is committing a criminal offense.
[INSERT ING [LION LOGO] FUNDS]
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
FUNDS AT A GLANCE........................................................................................1
STOCK FUNDS..............................................................................................4
ING Large Cap Growth Fund.......................................................................4
ING Growth & Income Fund........................................................................5
ING International Equity Fund...................................................................6
ING Global Brand Names Fund.....................................................................7
LIFESTYLE FUND OF FUNDS..................................................................................9
ING Income Allocation Fund......................................................................9
ING Balanced Allocation Fund...................................................................11
ING Growth Allocation Fund.....................................................................13
ING Aggressive Growth Allocation Fund..........................................................16
FEES AND EXPENSES.......................................................................................19
MANAGEMENT OF THE FUNDS.................................................................................20
PURCHASE OF SHARES......................................................................................23
REDEMPTION OF SHARES....................................................................................23
PRICING OF SHARES.......................................................................................23
DIVIDENDS, DISTRIBUTIONS AND TAXES......................................................................24
MORE INFORMATION RELATED TO INVESTMENTS BY THE LIFESTYLE FUND OF FUNDS..................................24
MORE INFORMATION ABOUT RISKS............................................................................27
OBTAINING ADDITIONAL INFORMATION........................................................................31
</TABLE>
ii
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FUNDS AT A GLANCE
Stock Funds
The following Funds are open-end funds that invest primarily in securities
issued by operating companies or governments. The following Funds generally do
not invest in other investment companies.
ING LARGE CAP GROWTH FUND
Investment Objective: Long-term capital appreciation.
Main Investments: A diversified portfolio of equity
securities issued by companies with market
capitalizations of more than $1 billion at the time
of acquisition which in the Sub-Adviser's opinion
possess growth potential.
Main Risks: You could lose money. Other risks include price
volatility and risks, as discussed herein, related to
investments in growth-oriented equity securities.
ING GROWTH & INCOME FUND
Investment Objective: High total return.
Main Investments: A diversified portfolio of income-producing equity
securities.
Main Risks: You could lose money. Other risks include
price volatility and risks, as discussed herein,
related to investments in equity securities and
income producing equity securities (for example,
sensitivity to interest rate fluctuations).
ING INTERNATIONAL EQUITY FUND
Investment Objective: Long-term capital appreciation.
Main Investments: A diversified portfolio of equity securities of
issuers organized or having a majority of their
assets in or deriving a majority of their operating
income in any country throughout the world, not
including the United States.
Main Risks: You could lose money. Other risks include price
volatility and risks, as discussed herein, related to
investments in equity securities. The Fund also will
experience risks related to investments in foreign
securities (for example, currency exchange rate
fluctuations).
ING GLOBAL BRAND NAMES FUND
Investment Objective: Long-term capital appreciation.
Main Investments: A non-diversified portfolio of equity securities of
companies located throughout the world, including
the United States, which in the Sub-Adviser's opinion
have a well recognized franchise, a global presence
and derive most of their revenues from sales of
consumer goods.
Main Risks: You could lose money. Other risks include price
volatility and risks, as discussed herein, related to
investments in equity securities and maintaining a
non-diversified portfolio. The Fund also will
experience risks related to
<PAGE> 5
investments in foreign securities (for example,
currency exchange rate fluctuations).
Lifestyle Fund of Funds
The following Funds are open-end funds that invest primarily in the ING Funds.
The ING Funds in which the Funds may invest are ING Large Cap Growth Fund, ING
Growth & Income Fund, ING Mid Cap Growth Fund, ING Small Cap Growth Fund, ING
Global Brand Names Fund, ING International Equity Fund, ING European Equity
Fund, ING Focus Fund, ING Global Information Technology Fund, ING Global
Communications Fund, ING Internet Fund, ING Emerging Markets Equity Fund, ING
Intermediate Bond Fund, ING High Yield Bond Fund, ING International Bond Fund,
and ING Money Market Fund.
ING Mutual Funds Management Co. LLC (the "Investment Manager") in its sole
discretion may also make investments for the Funds in other non-affiliated
funds. Investors in the following Funds will indirectly bear the operating
expenses of the underlying funds in addition to the Fund's operating expenses.
The underlying funds also may simultaneously buy and sell the same security,
thereby accruing commission costs without accomplishing any investment purpose.
ING INCOME ALLOCATION FUND
Investment Objective: Primary - income; Secondary - long-term capital
appreciation.
Main Investments: A non-diversified portfolio consisting of funds that
focus on fixed income investments. However, up to 20%
of the portfolio's gross assets could be invested in
funds that focus on equity investments. Up to 30% of
the portfolio's gross assets may be invested in funds
that focus on investments outside of the United
States.
Main Risks: You could lose money. Other risks include price
volatility and risks, as discussed herein, related to
investments in fixed income funds (for example,
sensitivity to interest rate fluctuations). The Fund
also will experience risks related to investments in
equity funds and foreign funds (for example, currency
exchange rate fluctuations).
ING BALANCED ALLOCATION FUND
Investment Objective: A balance between income and capital appreciation.
Main Investments: A non-diversified portfolio consisting of a balance
of funds that focus on equity investments and fixed
income investments. Up to 40% of the portfolio's
gross assets may be invested in funds that focus on
investments outside of the United States.
Main Risks: You could lose money. Other risks include price
volatility and risks, as discussed herein,
related to investments in equity funds and fixed
income funds (for example, sensitivity to interest
rate fluctuations). The Fund also will experience
risks related to investments in foreign funds (for
example, currency exchange rate fluctuations).
ING GROWTH ALLOCATION FUND
Investment Objective: Primary - long-term capital appreciation; Secondary -
income.
Main Investments: A non-diversified portfolio consisting of funds that
focus on equity investments. However, up to 30% of
the portfolio's gross assets could be invested in
funds
2
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that focus on fixed income investments. Up to
30% of the portfolio's gross assets may be invested
in funds that focus on investments outside of the
United States.
Main Risks: You could lose money. Other risks include price
volatility and risks, as discussed herein, related
to investments in equity funds . The Fund also will
experience risks related to investments in fixed
income funds (for example, sensitivity to interest
rate fluctuations) and foreign funds (for example,
currency exchange rate fluctuations).
ING AGGRESSIVE GROWTH ALLOCATION FUND
Investment Objective: Long-term capital appreciation.
Main Investments: A non-diversified portfolio consisting of funds that
focus on equity investments. Over 50% of the
portfolio's gross assets may be invested in funds
that focus on investments outside of the United
States.
Main Risks: You could lose money. Other risks include price
volatility and risks, as discussed herein,
related to investments in equity funds and foreign
funds (for example, currency exchange rate
fluctuations).
3
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STOCK FUNDS
ING LARGE CAP GROWTH FUND
INVESTMENT OBJECTIVE. The Fund seeks to provide investors with
long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. Under normal market conditions, the
Fund will operate as a diversified fund and will invest at least 65% of its
total assets in a portfolio of equity securities of large companies (that is,
companies with market capitalizations of more than $1 billion at the time of
acquisition), which in the Sub-Adviser's opinion possess growth potential. As a
general matter, the Fund expects these investments to be in common stocks.
In choosing investments for the Fund, the Sub-Adviser employs a highly
disciplined, four-step investment process that seeks to identify unrecognized
growth and value in large capitalization stocks. The four steps are:
- First, the universe of companies is screened using
models developed by the Sub-Adviser to create a list
of possible investments;
- Second, the Sub-Adviser researches the companies
identified by the screening models. This research
includes a review of company management and other
factors that are more subjective and require the
extensive practical experience of the portfolio
managers;
- Third, the Sub-Adviser evaluates the return,
valuation and risk of the remaining potential
investments against a defined peer group; and
- Finally, in-house traders use specially developed
computer programs to efficiently purchase the
targeted securities.
A more detailed discussion of the Principal Investment Strategies is
available in the Statement of Additional Information under "Investment Policies
and Risks" section.
PRINCIPAL RISKS. You could lose money on an investment in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
The Fund may be affected by the following risks, among others:
- Price Volatility. The value of the Fund will decrease if the
value of the Fund's underlying investments decrease. Equity
securities face market, issuer and other risks, and their
values may go down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value
due to factors affecting securities markets generally or
particular industries. Issuer risk is the risk that the value
of a security may decline for reasons relating to the issuer,
such as changes in the financial condition of the issuer.
Equities generally have higher volatility than debt
securities. The Fund invests primarily in equity securities of
larger companies, which generally have more stable prices than
smaller companies.
- Market Trends. From time to time, the stock market may not
favor the large company, growth-oriented securities in which
the Fund invests. Rather, the market could favor value stocks
or small company stocks, or may not favor equities at all.
4
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PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING Large Cap
Growth Fund has not yet commenced operations, there is no performance
information included in this Prospectus.
ING GROWTH & INCOME FUND
INVESTMENT OBJECTIVE. The Fund seeks to provide investors with high
total return.
PRINCIPAL INVESTMENT STRATEGIES. Under normal market conditions, the
Fund will operate as a diversified fund and invest at least 65% of its total
assets in a portfolio of equity securities. As a general matter, the Fund
expects these investments to earn income and to be in common stocks of large
companies whose market capitalizations are generally in excess of $10 billion.
In choosing investments for the Fund, the Sub-Adviser employs a highly
disciplined, three-step investment process that seeks to identify growth at a
reasonable price. The three steps are:
- First, the universe of companies is screened using
models developed by the Sub-Adviser to rank possible
investments;
- Second, the Sub-Adviser researches the companies
identified by the screening models. This research
includes a review of earnings, sales and growth, as
well as the impact of broad economic trends found
within the economy upon possible investments;
- Third, in order to help manage the risk of the
portfolio, the characteristics of the portfolio are
evaluated against certain market benchmarks.
A more detailed discussion of the Principal Investment Strategies is
available in the Statement of Additional Information under "Investment Policies
and Risks" section.
PRINCIPAL RISKS. You could lose money on an investment in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
The Fund may be affected by the following risks, among others:
- Price Volatility. The value of the Fund will decrease if the
value of the Fund's underlying investments decrease. Equity
securities face market, issuer and other risks, and their
values may go down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value
due to factors affecting securities markets generally or
particular industries. Issuer risk is the risk that the value
of a security may decline for reasons relating to the issuer,
such as changes in the financial condition of the issuer.
Equities generally have higher volatility than debt
securities.
- Changes in Interest Rates. The Fund invests in securities that
produce income and therefore the value of its investments may
rise or fall in response to fluctuations in interest rates.
Generally, when interest rates increase, the value of income
producing securities may decrease, and when interest rates
decrease, the value of income producing securities may
increase.
- Market Trends. From time to time, the stock market may not
favor the income producing securities in which the Fund
invests. Rather, the market could favor non-income producing
large capitalization growth stocks, value stocks or small
company stocks, or may not favor equities at all.
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PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING Growth &
Income Fund has not yet commenced operations, there is no performance
information included in this Prospectus.
ING INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE. The Fund seeks to provide investors with
long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. Under normal market conditions, the
Fund will operate as a diversified fund and invest at least 65% of its total
assets in a portfolio of equity securities of issuers organized or having a
majority of their assets in or deriving a majority of their operating income in
any country throughout the world, not including the United States. This portion
of the portfolio will have investments in at least seven different countries.
The Fund may purchase securities in any foreign country, developed or
underdeveloped, or emerging market countries. The Fund will not invest more than
15% of its total assets in emerging market countries.
As a general matter, the Fund expects these investments to be in common
stocks of large companies whose market capitalizations are generally in excess
of $10 billion. The Fund may also use options and futures contracts involving
foreign currencies.
In choosing investments for the Fund, the Sub-Advisers employ a highly
disciplined, four-step investment process combining top-down country allocations
with bottom-up fundamental research that seeks to identify companies which will
provide superior relative returns. The four steps are:
- First, the Sub-Advisers perform a comprehensive
analysis of the relative value of geographic regions
to determine the degree of representation of such
geographic regions in the Fund's portfolio;
- Second, such determinations are reviewed by an
independent committee within the Sub-Advisers;
- Third, the Sub-Advisers select investments within the
selected geographical regions based on comprehensive
fundamental analysis; and
- Finally, in-house traders use specially developed
computer programs to efficiently purchase the
targeted securities.
A more detailed discussion of the Principal Investment Strategies is
available in the Statement of Additional Information under "Investment Policies
and Risks" section.
PRINCIPAL RISKS. You could lose money on an investment in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
The Fund may be affected by the following risks, among others:
- Price Volatility. The value of the Fund will decrease if the
value of the Fund's underlying investments decrease. Equity
securities face market, issuer and other risks, and their
values may go down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value
due to factors affecting securities markets generally or
particular industries. Issuer risk is the risk that the value
of a security may decline for reasons relating to the issuer,
such as changes in the financial condition of the issuer.
Equities generally have higher volatility than debt
securities.
6
<PAGE> 10
- Market Trends. From time to time, the stock market may not
favor the securities in which the Fund invests. For example,
the market could favor stocks in markets to which the Fund is
not exposed, or may not favor equities at all.
- Risks of Foreign Investing. Foreign investments may be riskier
than U.S. investments for many reasons, including changes in
currency exchange rates, unstable political and economic
conditions, possible security illiquidity, a lack of adequate
company information, differences in the way securities markets
operate, less secure foreign banks or securities depositories
than those in the U.S., and foreign controls on investment.
- Emerging Market Risk. To the extent the Fund invests in
emerging markets countries, the risks may be greater, partly
because emerging market countries may be less politically and
economically stable than other countries. It may also be more
difficult to buy and sell securities in emerging market
countries.
- Derivatives Risk. Derivatives are subject to the risk of
changes in the market price of the underlying security or
currency, as well as credit risk with respect to the
counterparty to the derivative instrument. The use of
derivatives may reduce returns.
PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING
International Equity Fund has not yet commenced operations, there is no
performance information included in this Prospectus.
ING GLOBAL BRAND NAMES FUND
INVESTMENT OBJECTIVE. The Fund seeks to provide investors with
long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. Under normal market conditions, the
Fund will operate as a non-diversified fund and invest at least 65% of its total
assets in a portfolio of equity securities of companies which, in the
Sub-Adviser's opinion, have a well recognized franchise, a global presence and
derive most of their revenues from sales of consumer goods. The companies in
which the Fund invests either have leading market positions, or in the
Sub-Adviser's opinion, have the potential to achieve leading market positions in
the foreseeable future. This portion of the portfolio will have investments
located in at least three different countries, including the United States. As a
general matter, the Fund expects these investments to be in common stocks of
large companies whose market capitalizations are generally in excess of $10
billion.
In choosing investments for the Fund, the Sub-Adviser believes that
well-established companies with strong brand names offer the following
investment advantages:
- First, demand for brand name products should rise as
global consumer tastes become more uniform;
- Second, large companies that can leverage doing
business on a larger scale have enhanced profit
potential;
- Third, perceived product quality and reliability
facilitates sales;
- Fourth, greater recognition leads to brand loyalty;
and
- Finally, brand extensions, or the ability to leverage
a company's established brand, provide opportunities
for growth.
7
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The Sub-Adviser employs a two-tiered approach to structuring the Fund's
portfolio with securities that offer growth at a reasonable price. The first
tier, which will comprise about 75% of the portfolio, is composed of core stocks
with stable earnings development, low cyclicality, large market capitalizations
and longer-term investment horizons. The second tier, which will comprise about
25% of the portfolio, is composed of companies possessing higher cyclicality,
smaller market capitalizations and shorter-term investment horizons. This second
tier is expected to provide the Fund with shorter-term performance benefits.
A more detailed discussion of the Principal Investment Strategies is
available in the Statement of Additional Information under "Investment Policies
and Risks" section.
PRINCIPAL RISKS. You could lose money on an investment in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
The Fund may be affected by the following risks, among others:
- Price Volatility. The value of the Fund will decrease if the
value of the Fund's underlying investments decrease. Equity
securities face market, issuer and other risks, and their
values may go down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value
due to factors affecting securities markets generally or
particular industries. Issuer risk is the risk that the value
of a security may decline for reasons relating to the issuer,
such as changes in the financial condition of the issuer.
Equities generally have higher volatility than debt
securities.
- Market Trends. From time to time, the stock market may not
favor the securities in which the Fund invests. Rather, the
market could favor value stocks or small company stocks, or
may not favor equities at all.
- Risks of Foreign Investing. Foreign investments may be riskier
than U.S. investments for many reasons, including changes in
currency exchange rates, unstable political and economic
conditions, possible security illiquidity, a lack of adequate
company information, differences in the way securities markets
operate, less secure foreign banks or securities depositories
than those in the U.S., and foreign controls on investment.
- Lack of Diversification. The Fund is classified as a
non-diversified investment company, which means that, compared
with other funds, the Fund may invest a greater percentage of
its assets in a particular issuer. The investment of a large
percentage of the Fund's assets in the securities of a small
number of issuers may cause the Fund's share price to
fluctuate more than that of a diversified investment company.
PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING Global
Brand Names Fund has not yet commenced operations, there is no performance
information included in this Prospectus.
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LIFESTYLE FUND OF FUNDS
ING INCOME ALLOCATION FUND
INVESTMENT OBJECTIVE. The Fund seeks to provide investors primarily
with income and secondarily with long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. The Fund is a fund of funds. Under
normal market conditions, the Fund will operate as a non-diversified fund and
invest primarily in funds that focus on fixed income investments. Up to 20% of
the portfolio's gross assets could be invested in funds that focus on equity
investments, and up to 30% of the portfolio's gross assets could be invested in
funds that focus on non-U.S. investments.
The Investment Manager periodically adjusts the allocation of the
Fund's assets primarily among different ING Funds depending upon the Investment
Manager's outlook for the different sectors of the bond market and, to a lesser
degree, the equity markets. In assessing the bond markets, the Investment
Manager considers a broad range of economic trends and quantitative factors. The
performance of the underlying funds also influences their weighting in the
portfolio. The Fund's underlying fixed income funds invest in a wide variety of
investment objectives and policies. In selecting equity funds, the Investment
Manager tends to emphasize underlying funds that focus upon large capitalization
stocks. However, the Investment Manager may invest in underlying equity funds
that have a range of investment objectives and policies.
Each portfolio is managed as an asset allocation program with a Target
Allocation and a Target Range. Target Allocation is the manager's initial
strategic focus in allocating between equity funds and fixed income funds.
Target Range is the range in which the manager may vary from the Target
Allocation.
<TABLE>
<CAPTION>
Target Allocation Underlying Funds and Target Percentage of Portfolio
- ----------------- ---------------------------------------------------
<S> <C> <C> <C>
Equity Funds 10% ING Money Market Fund 5%-50%
Fixed Income Funds 90% ING Intermediate Bond Fund 0%-50%
ING High Yield Bond Fund 0%-40%
Target Range ING International Bond Fund 0%-30%
Equity Funds 0-20% ING Growth & Income Fund 0%-20%
Fixed Income Funds 80-100% ING Large Cap Growth Fund 0%-20%
</TABLE>
PRINCIPAL RISKS. You could lose money on an investment in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. The
Fund may be affected by the following risks in addition to those described on
page 24, among others:
- Price Volatility. The value of the Fund will decrease if the
value of its investments represented by the underlying funds
decrease.
- Risks of Fixed Income Investments. Fixed income securities
held by the underlying funds are subject to a number of risks,
including, but not limited to:
Interest Rate Risk -- In general, when interest rates go up,
prices of fixed income securities go down. Securities with
longer maturities are subject to greater fluctuations in value
than securities with shorter maturities.
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<PAGE> 13
Spread Risk -- The price of a fixed income security is generally
determined by adding an interest rate spread to a benchmark
interest rate, such as the U.S. Treasury rate. As the spread on a
security widens (or increases), the price (or value) of the
security falls.
Default Risk -- An issuer of a security may default on its
obligation to pay principal and/or interest.
Credit Risk - An issuer of a security may have its credit rating
downgraded, which would negatively impact the price of such
security. Securities with lower credit ratings are generally
subject to greater fluctuations in value than higher rated
securities.
Call or Prepayment Risk. -- An issuer of a security may prepay
principal earlier than scheduled, which could force the Fund to
reinvest in lower yielding securities.
Extension Risk -- Slower than expected principal payments on a
mortgage-backed or asset-backed security may extend such
security's life, thereby locking in a below-market interest rate,
increasing the security's duration and reducing the value of the
security.
- Risks of Equity Investments. Equity securities held by the
underlying funds face market, issuer and other risks, and their
values may go down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to
factors affecting securities markets generally or particular
industries. Issuer risk is the risk that the value of a security
may decline for reasons relating to the issuer, such as changes in
the financial condition of the issuer. Equities generally have
higher volatility than debt securities.
- Investment Manager Risk. The Investment Manager's judgment about
the attractiveness and risk adjusted return potential of
investment objectives/policies and asset classes of the underlying
funds may prove to be wrong.
- Lack of Diversification. The Fund is classified as a
non-diversified investment company, which means that, compared
with other funds, the Fund may invest a greater percentage of its
assets in a particular issuer. The investment of a large
percentage of the Fund's assets in the securities of a small
number of issuers may cause the Fund's share price to fluctuate
more than that of a diversified investment company.
- Risk of High Yield Bonds. High yield bonds held by the underlying
funds carry particular market risks and may experience greater
volatility in market value than investment grade bonds. Changes in
interest rates, the market's perception of the issuers and the
creditworthiness of the issuers may significantly affect the value
of these bonds. Some of these securities may have a structure that
makes their reaction to interest rates and other factors difficult
to predict, causing their value to be highly volatile. Certain
high yield bonds, such as zero coupon, deferred interest and
payment-in-kind bonds, may be issued at deep discounts and may
experience greater volatility in market value. The secondary
market for high yield bonds may be less liquid than the markets
for higher quality securities and this may have an adverse effect
on the market values of certain securities.
- Risks of Foreign Investing. Foreign investments held by the
underlying funds may be riskier than U.S. investments for many
reasons, including changes in currency exchange rates, unstable
political and economic conditions, possible security illiquidity,
a lack of adequate company information, differences in the way
securities markets operate, less secure foreign banks or
securities depositories than those in the U.S., and foreign
controls on investment.
- Changes in Interest Rates. The Fund may invest in the ING Growth &
Income Fund. The ING Growth & Income Fund invests in securities
that produce income and therefore the value of its investments may
rise or fall in response to fluctuations in interest rates.
Generally,
10
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when interest rates increase, the value of income
producing securities may decrease, and when interest rates
decrease, the value of income producing securities may increase.
PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING Income
Allocation Fund has not yet commenced operations, there is no performance
information included in this Prospectus.
ING BALANCED ALLOCATION FUND
INVESTMENT OBJECTIVE. The Fund seeks to provide investors with a
balance between income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. The Fund is a fund of funds. Under
normal market conditions, the Fund will operate as a non-diversified fund and
invest primarily in a portfolio consisting of a balance of funds that focus on
equity investments and fixed income investments. Up to 40% of the portfolio's
gross assets could be invested in funds that focus on non-U.S. investments.
The Investment Manager periodically adjusts the allocation of the
Fund's assets primarily among different ING Funds depending upon the Investment
Manager's outlook for the equity and bond markets in general, particular sectors
of such markets and the performance outlook for the underlying funds. In
assessing the equity and bond markets, the Investment Manager considers a broad
range of market and economic trends and quantitative factors. The performance of
the underlying funds also influences their weighting in the portfolio. In
selecting equity funds, the Investment Manager emphasizes underlying funds that
focus upon large and mid capitalization stocks; however, the Investment Manager
may invest in underlying equity funds that have a range of investment objectives
and policies. The Fund's underlying fixed income funds invest in a wide variety
of investment objectives and policies.
Each portfolio is managed as an asset allocation program with a Target
Allocation and a Target Range. Target Allocation is the manager's initial
strategic focus in allocating between equity funds and fixed income funds.
Target Range is the range in which the manager may vary from the Target
Allocation.
<TABLE>
<CAPTION>
Target Allocation Underlying Funds and Target Percentage of Portfolio
- ----------------- ---------------------------------------------------
<S> <C> <C> <C>
Equity Funds 50% ING Money Market Fund 5%-15%
Fixed Income Funds 50% ING Intermediate Bond Fund 0%-20%
ING High Yield Bond Fund 0%-20%
Target Range ING International Bond Fund 0%-40%
Equity Funds 45-55% ING Growth & Income Fund 0%-50%
Fixed Income Funds 45-55% ING Large Cap Growth Fund 0%-50%
ING Mid Cap Growth Fund 0%-50%
</TABLE>
PRINCIPAL RISKS. You could lose money on an investment in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. The
Fund may be affected by the following risks in addition to those described on
page 24, among others:
- Price Volatility. The value of the Fund will decrease if the
value of its investments represented by the underlying funds
decrease.
11
<PAGE> 15
- Risks of Equity Investments. Equity securities held by the
underlying funds face market, issuer and other risks, and
their values may go down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value
due to factors affecting securities markets generally or
particular industries. Issuer risk is the risk that the value
of a security may decline for reasons relating to the issuer,
such as changes in the financial condition of the issuer.
Equities generally have higher volatility than debt
securities.
- Risks of Fixed Income Investments. Fixed income securities
held by the underlying funds are subject to a number of risks,
including, but not limited to:
Interest Rate Risk -- In general, when interest rates go up,
prices of fixed income securities go down. Securities with
longer maturities are subject to greater fluctuations in value
than securities with shorter maturities.
Spread Risk -- The price of a fixed income security is
generally determined by adding an interest rate spread to a
benchmark interest rate, such as the U.S. Treasury rate. As
the spread on a security widens (or increases), the price (or
value) of the security falls.
Default Risk -- An issuer of a security may default on its
obligation to pay principal and/or interest.
Credit Risk - An issuer of a security may have its credit
rating downgraded, which would negatively impact the price of
such security. Securities with lower credit ratings are
generally subject to greater fluctuations in value than higher
rated securities.
Call or Prepayment Risk. -- An issuer of a security may prepay
principal earlier than scheduled, which could force the Fund
to reinvest in lower yielding securities.
Extension Risk -- Slower than expected principal payments on a
mortgage-backed or asset-backed security may extend such
security's life, thereby locking in a below-market interest
rate, increasing the security's duration and reducing the
value of the security.
- Investment Manager Risk. The Investment Manager's judgment
about the attractiveness and risk adjusted return potential of
investment objectives/policies and asset classes of the
underlying funds may prove to be wrong.
- Lack of Diversification. The Fund is classified as a
non-diversified investment company, which means that, compared
with other funds, the Fund may invest a greater percentage of
its assets in a particular issuer. The investment of a large
percentage of the Fund's assets in the securities of a small
number of issuers may cause the Fund's share price to
fluctuate more than that of a diversified investment company.
- Mid-Sized Companies. The Fund may invest in the ING Mid Cap
Growth Fund. Investments in mid-sized companies by the ING Mid
Cap Growth Fund involve greater risk than is customarily
associated with larger, more established companies due to the
greater business risks of smaller size, more limited markets
and financial resources, narrower product lines and less depth
of management. The securities of mid-sized companies may be
subject to more volatile market movements than securities of
larger, more established growth companies.
- Risks of Foreign Investing. Foreign investments held by the
underlying funds may be riskier than U.S. investments for many
reasons, including changes in currency exchange rates,
unstable political and economic conditions, possible security
illiquidity, a lack of adequate company information,
differences in the way securities markets operate, less secure
foreign banks or securities depositories than those in the
U.S., and foreign controls on investment.
12
<PAGE> 16
- Risk of High Yield Bonds. High yield bonds held by the
underlying funds carry particular market risks and may
experience greater volatility in market value than investment
grade bonds. Changes in interest rates, the market's
perception of the issuers and the creditworthiness of the
issuers may significantly affect the value of these bonds.
Some of these securities may have a structure that makes their
reaction to interest rates and other factors difficult to
predict, causing their value to be highly volatile. Certain
high yield bonds, such as zero coupon, deferred interest and
payment-in-kind bonds, may be issued at deep discounts and may
experience greater volatility in market value. The secondary
market for high yield bonds may be less liquid than the
markets for higher quality securities and this may have an
adverse effect on the market values of certain securities.
- Changes in Interest Rates. The Fund may invest in the ING
Growth & Income Fund. The ING Growth & Income Fund invests in
securities that produce income and therefore the value of its
investments may rise or fall in response to fluctuations in
interest rates. Generally, when interest rates increase, the
value of income producing securities may decrease, and when
interest rates decrease, the value of income producing
securities may increase.
PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING Balanced
Allocation Fund has not yet commenced operations, there is no performance
information included in this Prospectus.
ING GROWTH ALLOCATION FUND
INVESTMENT OBJECTIVE. The Fund seeks to provide investors primarily
with long-term capital appreciation and, secondarily, with income.
PRINCIPAL INVESTMENT STRATEGIES. The Fund is a fund of funds. Under
normal market conditions, the Fund will operate as a non-diversified fund and
invest primarily in a portfolio consisting of funds that focus on equity
investments. Up to 30% of the portfolio's gross assets could be invested in
funds that focus on fixed income investments, and up to 30% of the portfolio's
gross assets could be invested in funds that focus on non-U.S. investments.
The Investment Manager periodically adjusts the allocation of the
Fund's assets primarily among different ING Funds depending upon the Investment
Manager's outlook for the equity markets in general, and, to a lesser degree,
the bond markets, particular sectors of such markets and the performance outlook
for the underlying funds. In assessing the equity and bond markets, the
Investment Manager considers a broad range of market and economic trends and
quantitative factors. The performance of the underlying funds also influences
their weighting in the portfolio. In selecting equity funds, the Investment
Manager emphasizes underlying funds that focus upon large, mid and small
capitalization stocks. The Fund's underlying fixed income funds invest in a wide
variety of investment objectives and policies.
Each portfolio is managed as an asset allocation program with a Target
Allocation and a Target Range. Target Allocation is the manager's initial
strategic focus in allocating between equity funds and fixed income funds.
Target Range is the range in which the manager may vary from the Target
Allocation.
<TABLE>
<CAPTION>
Target Allocation Underlying Funds and Target Percentage of Portfolio
- ----------------- ---------------------------------------------------
<S> <C> <C> <C>
Equity Funds 70% ING Money Market Fund 5%-15%
Fixed Income Funds 30% ING Intermediate Bond Fund 0%-30%
ING High Yield Bond Fund 0%-30%
Target Range ING International Bond Fund 0%-30%
</TABLE>
13
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
Equity Funds 70-100% ING Growth & Income Fund 0%-50%
Fixed Income Funds 0-30% ING Large Cap Growth Fund 0%-50%
ING Mid Cap Growth Fund 0%-25%
ING Small Cap Growth Fund 0%-25%
ING Focus Fund 0%-25%
ING Global Information
Technology Fund 0%-25%
ING International Equity Fund 0%-25%
ING European Equity Fund 0%-25%
ING Emerging Markets
Equity Fund 0%-25%
</TABLE>
PRINCIPAL RISKS. You could lose money on an investment in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. The
Fund may be affected by the following risks in addition to those described on
page 24, among others:
- Price Volatility. The value of the Fund will decrease if the
value of its investments represented by the underlying funds
decrease.
- Risks of Equity Investments. Equity securities held by the
underlying funds face market, issuer and other risks, and
their values may go down, sometimes rapidly and unpredictably.
Market risk is the risk that securities may decline in value
due to factors affecting securities markets generally or
particular industries. Issuer risk is the risk that the value
of a security may decline for reasons relating to the issuer,
such as changes in the financial condition of the issuer.
Equities generally have higher volatility than debt
securities.
- Risks of Fixed Income Investments. Fixed income securities
held by the underlying funds are subject to a number of risks,
including, but not limited to:
Interest Rate Risk -- In general, when interest rates go up,
prices of fixed income securities go down. Securities with
longer maturities are subject to greater fluctuations in value
than securities with shorter maturities.
Spread Risk -- The price of a fixed income security is
generally determined by adding an interest rate spread to a
benchmark interest rate, such as the U.S. Treasury rate. As
the spread on a security widens (or increases), the price (or
value) of the security falls.
Default Risk -- An issuer of a security may default on its
obligation to pay principal and/or interest.
Credit Risk -- An issuer of a security may have its credit
rating downgraded, which would negatively impact the price of
such security. Securities with lower credit ratings are
generally subject to greater fluctuations in value than higher
rated securities.
Call or Prepayment Risk -- An issuer of a security may prepay
principal earlier than scheduled, which could force the Fund
to reinvest in lower yielding securities.
14
<PAGE> 18
Extension Risk -- Slower than expected principal payments on a
mortgage-backed or asset-backed security may extend such
security's life, thereby locking in a below-market interest rate,
increasing the security's duration and reducing the value of the
security.
- - Investment Manager Risk. The Investment Manager's judgment about
the attractiveness and risk adjusted return potential of
investment objectives/policies and asset classes of the underlying
funds may prove to be wrong.
- - Lack of Diversification. The Fund is classified as a
non-diversified investment company, which means that, compared
with other funds, the Fund may invest a greater percentage of its
assets in a particular issuer. The investment of a large
percentage of the Fund's assets in the securities of a small
number of issuers may cause the Fund's share price to fluctuate
more than that of a diversified investment company.
- - Mid-Sized Companies. Investments in mid-sized companies by the
underlying funds involve greater risk than is customarily
associated with larger, more established companies due to the
greater business risks of smaller size, more limited markets and
financial resources, narrower product lines and less depth of
management. The securities of mid-sized companies may be subject
to more volatile market movements than securities of larger, more
established growth companies.
- - Small Companies. Investments in small companies by the underlying
funds involve greater risk than is customarily associated with
larger, more established companies due to the greater business
risks of small size, limited markets and financial resources,
narrow product lines and the frequent lack of depth of management.
The securities of smaller companies may be subject to more abrupt
or erratic market movements than securities of larger, more
established growth companies.
- - Risks of Foreign Investing. Foreign investments held by the
underlying funds may be riskier than U.S. investments for many
reasons, including changes in currency exchange rates, unstable
political and economic conditions, possible security illiquidity,
a lack of adequate company information, differences in the way
securities markets operate, less secure foreign banks or
securities depositories than those in the U.S., and foreign
controls on investment.
- - Emerging Market Risk. To the extent an underlying fund invests in
emerging markets countries, the risks may be greater, partly
because emerging market countries may be less politically and
economically stable than other countries. It may also be more
difficult to buy and sell securities in emerging market countries.
- - Risk of High Yield Bonds. High yield bonds held by the underlying
funds carry particular market risks and may experience greater
volatility in market value than investment grade bonds. Changes in
interest rates, the market's perception of the issuers and the
creditworthiness of the issuers may significantly affect the value
of these bonds. Some of these securities may have a structure that
makes their reaction to interest rates and other factors difficult
to predict, causing their value to be highly volatile. Certain
high yield bonds, such as zero coupon, deferred interest and
payment-in-kind bonds, may be issued at deep discounts and may
experience greater volatility in market value. The secondary
market for high yield bonds may be less liquid than the markets
for higher quality securities and this may have an adverse effect
on the market values of certain securities.
- - Changes in Interest Rates. The Fund may invest in the ING Growth &
Income Fund. The ING Growth & Income Fund invests in securities
that produce income and therefore the value of its investments may
rise or fall in response to fluctuations in interest rates.
Generally, when interest rates increase, the value of income
producing securities may decrease, and when interest rates
decrease, the value of income producing securities may increase.
15
<PAGE> 19
- - Industry Concentration. The Fund may invest in the ING Global
Information Technology Fund. As a result of the ING Global
Information Technology Fund concentrating its assets in securities
related to a particular industry, such Fund may be subject to
greater market fluctuation than a fund which has securities
representing a broader range of investment alternatives.
- - Information Technology Risk. The Fund may invest in the ING Global
Information Technology Fund. Information technology companies are
generally subject to the rate of change in technology, which is
higher than other industries. In addition, products and services
of companies engaged in the information technology industry are
subject to relatively high risks of rapid obsolescence caused by
scientific and technological advances. Swings in investor
psychology or significant trading by large institutional investors
can result in significant price fluctuations and stock price
declines.
PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING Growth
Allocation Fund has not yet commenced operations, there is no performance
information included in this Prospectus.
ING AGGRESSIVE GROWTH ALLOCATION FUND
INVESTMENT OBJECTIVE. The Fund seeks to provide investors primarily
with long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. The Fund is a fund of funds. Under
normal market conditions, the Fund will operate as a non-diversified fund and
invest in a primarily in a portfolio consisting of funds that focus on equity
investments. Up to 50% of the portfolio's gross assets could be invested in
funds that focus on non-U.S. investments.
The Investment Manager periodically adjusts the allocation of the
Fund's assets primarily among different ING Funds depending upon the Investment
Manager's outlook for the equity markets in general, particular sectors of such
markets and the performance outlook for the underlying funds. In assessing the
equity and bond markets, the Investment Manager considers a broad range of
market and economic trends and quantitative factors. The performance of the
underlying funds also influences their weighting in the portfolio. In selecting
equity funds, the Investment Manager emphasizes underlying funds that focus upon
large, mid and small capitalization stocks, as well as international stocks and
sector stocks.
Each portfolio is managed as an asset allocation program with a Target
Allocation and a Target Range. Target Allocation is the manager's initial
strategic focus in allocating between equity funds and fixed income funds.
Target Range is the range in which the manager may vary from the Target
Allocation.
<TABLE>
<CAPTION>
Target Allocation Underlying Funds and Target Percentage of Portfolio
- ----------------- ---------------------------------------------------
<S> <C> <C> <C>
Equity Funds 90% ING Money Market Fund 5-10%
Fixed Income Funds 10% ING Growth & Income Fund 0-50%
ING Large Cap Growth Fund 0-50%
Target Range ING Mid Cap Growth Fund 0-50%
Equity Funds 90-100% ING Small Cap Growth Fund 0-50%
Fixed Income Funds 0-10% ING Focus Fund 0-25%
</TABLE>
16
<PAGE> 20
<TABLE>
<S> <C> <C> <C>
ING Global Brand Names Fund 0-25%
ING Global Information Technology Fund 0-25%
ING Global Communications Fund 0-25%
ING Internet Fund 0-25%
ING International Equity Fund 0-25%
ING European Equity Fund 0-25%
ING Emerging Markets Equity Fund 0-25%
</TABLE>
PRINCIPAL RISKS. You could lose money on an investment in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. The
Fund may be affected by the following risks in addition to those described on
page 24, among others:
- - Price Volatility. The value of the Fund will decrease if the value
of its investments represented by the underlying funds decrease.
- - Risks of Equity Investments. Equity securities held by the
underlying funds face market, issuer and other risks, and their
values may go down, sometimes rapidly and unpredictably. Market
risk is the risk that securities may decline in value due to
factors affecting securities markets generally or particular
industries. Issuer risk is the risk that the value of a security
may decline for reasons relating to the issuer, such as changes in
the financial condition of the issuer. Equities generally have
higher volatility than debt securities.
- - Investment Manager Risk. The Investment Manager's judgment about
the attractiveness and risk adjusted return potential of
investment objectives/policies and asset classes of the underlying
funds may prove to be wrong.
- - Lack of Diversification. The Fund is classified as a
non-diversified investment company, which means that, compared
with other funds, the Fund may invest a greater percentage of its
assets in a particular issuer. The investment of a large
percentage of the Fund's assets in the securities of a small
number of issuers may cause the Fund's share price to fluctuate
more than that of a diversified investment company.
- - Mid-Sized Companies. Investments in mid-sized companies by the
underlying funds involve greater risk than is customarily
associated with larger, more established companies due to the
greater business risks of smaller size, more limited markets and
financial resources, narrower product lines and less depth of
management. The securities of mid-sized companies may be subject
to more volatile market movements than securities of larger, more
established growth companies.
- - Small Companies. Investments in small companies by the underlying
funds involve greater risk than is customarily associated with
larger, more established companies due to the greater business
risks of small size, limited markets and financial resources,
narrow product lines and the frequent lack of depth of management.
The securities of smaller companies may be subject to more abrupt
or erratic market movements than securities of larger, more
established growth companies.
- - Risks of Foreign Investing. Foreign investments held by the
underlying funds may be riskier than U.S. investments for many
reasons, including changes in currency exchange rates,
17
<PAGE> 21
unstable political and economic conditions, possible security
illiquidity, a lack of adequate company information, differences
in the way securities markets operate, less secure foreign banks
or securities depositories than those in the U.S., and foreign
controls on investment.
- - Emerging Market Risk. To the extent an underlying fund invests in
emerging markets countries, the risks may be greater, partly
because emerging market countries may be less politically and
economically stable than other countries. It may also be more
difficult to buy and sell securities in emerging market countries.
- - Changes in Interest Rates. The Fund may invest in the ING Growth &
Income Fund. The ING Growth & Income Fund invests in securities
that produce income and therefore the value of its investments may
rise or fall in response to fluctuations in interest rates.
Generally, when interest rates increase, the value of income
producing securities may decrease, and when interest rates
decrease, the value of income producing securities may increase.
- - Industry Concentration. To the extent the underlying funds
concentrate their assets in securities related to a particular
industry, such funds may be subject to greater market fluctuation
than a fund which has securities representing a broader range of
investment alternatives.
- - Information Technology Risk. The Fund may invest in the ING Global
Information Technology Fund. Information technology companies are
generally subject to the rate of change in technology, which is
higher than other industries. In addition, products and services
of companies engaged in the information technology industry are
subject to relatively high risks of rapid obsolescence caused by
scientific and technological advances. Swings in investor
psychology or significant trading by large institutional investors
can result in significant price fluctuations and stock price
declines.
- - Communications Technology Risk. The Fund may invest in the ING
Global Communications Fund. Communications companies are generally
subject to the rate of change in technology, which is higher than
other industries, as well as greater governmental regulation than
many other industries. In addition, products and services of
companies engaged in the communications industry are subject to
relatively high risks of rapid obsolescence caused by scientific
and technological advances. Swings in investor psychology or
significant trading by large institutional investors can result in
significant price fluctuations and stock price declines.
- - Internet Technology Risk. Internet and internet-related companies
are generally subject to the rate of change in technology, which
is higher than other industries. In addition, products and
services of companies engaged in internet and internet-related
activities are subject to relatively high risks of rapid
obsolescence caused by scientific and technological advances.
Swings in investor psychology or significant trading by large
institutional investors can result in significant price
fluctuations and stock price declines.
PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING
Aggressive Growth Allocation Fund has not yet commenced operations, there is no
performance information included in this Prospectus.
18
<PAGE> 22
FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if
you hold shares of a Fund. The Funds do not charge you any fees for buying,
selling or exchanging shares.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)(1)
<TABLE>
<CAPTION>
Fees
Waived/
Reimbursed
Fund by
Management Distribution Other Operating Investment
Fees Fees (3) Expenses Expenses Manager (2) Net Expenses
<S> <C> <C> <C> <C> <C> <C>
ING Large Cap Growth Fund 0.75% 0.15% 0.72% 1.62% (0.57)% 1.05%
ING Growth & Income Fund 0.75% 0.15% 0.72% 1.62% (0.57)% 1.05%
ING International Equity Fund 1.25% 0.15% 0.36% 1.76% (0.50)% 1.26%
ING Global Brand Names Fund 1.00% 0.15% 0.78% 1.93% (0.70)% 1.23%
ING Income Allocation Fund (4) 0.00% 0.15% 0.70% 0.85% (0.08)% 0.77%
ING Balanced Allocation Fund (4) 0.00% 0.15% 0.70% 0.85% (0.08)% 0.77%
ING Growth Allocation Fund (4) 0.00% 0.15% 0.70% 0.85% (0.08)% 0.77%
ING Aggressive Growth Allocation Fund (4) 0.00% 0.15% 0.70% 0.85% (0.08)% 0.77%
</TABLE>
(1) This table shows the estimated operating expenses for each Fund as a ratio
of expenses to average daily net assets. Each Fund's costs and expenses are
based upon estimates of the Fund's operating expenses for the Fund's first
fiscal year.
(2) The Investment Manager has entered into expense limitation contracts with
each of the Funds, under which it will limit expenses of each Fund, excluding
interest, taxes, brokerage and extraordinary expenses through December 31, 2000.
The expense limit for each such Fund is shown as "Net Expenses." Fee waiver
and/or reimbursements by the Investment Manager may vary in order to achieve
such contractually obligated "Net Expenses."
(3) Pursuant to a Plan of Distribution adopted by each Fund under Rule 12b-1
under the 1940 Act, each Fund pays the Distributor an annual fee of up to 0.15%
of average daily net assets attributable to that Fund's shares. The distribution
fee may be used by the Distributor for the purpose of financing any activity
which is primarily intended to result in the sale of shares of the applicable
Fund. For additional information, please see the Statement of Additional
Information.
(4) Based upon the expense ratios of the underlying ING Funds in which each of
the Funds is expected to be invested, the estimated gross expense ratios of the
ING Income Allocation Fund, ING Balanced Allocation Fund, ING Growth Allocation
Fund, and ING Aggressive Growth Allocation Fund are expected to be 1.97%, 2.05%,
2.20%, and 2.54%, respectively. Fee table expenses would be higher if the
expense ratios of the underlying funds were included.
EXAMPLES
These Examples are intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds. Each Example assumes:
- you invest $10,000 in the Fund for the time period indicated;
- your investment has a 5% return each year;
- the Fund's operating expenses remain the same;
- you redeem all your shares at the end of the time period
indicated; and
- with regard to the Fund of Funds, the expenses of the
underlying ING Funds are reflected.
19
<PAGE> 23
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
Fund 1 year 3 years
- ---- ------ -------
<S> <C> <C>
ING Large Cap Growth Fund $108 $459
ING Growth & Income Fund $108 $459
ING International Equity Fund $129 $509
ING Global Brand Names Fund $126 $548
ING Income Allocation Fund* $147 $571
ING Balanced Allocation Fund* $150 $591
ING Growth Allocation Fund* $158 $631
ING Aggressive Growth Allocation Fund* $171 $715
</TABLE>
- ----------
* The expenses reflected in the table are based on a typical asset mix
for the Allocation Funds.
MANAGEMENT OF THE FUNDS
General. ING Mutual Funds Management Co. LLC (the "Investment Manager")
serves as each Fund's investment manager. The Investment Manager is a wholly
owned indirect subsidiary of ING Group, N.V. ("ING Group") and is registered
with the Securities and Exchange Commission. The Investment Manager is located
at 1475 Dunwoody Drive, West Chester, PA 19380. As of March 31, 2000, the
Investment Manager managed over $ 1.5 billion in assets.
The Investment Manager supervises all aspects of each Fund's operations
and provides investment advisory services to the Funds. With regard to the Stock
Funds, this includes engaging sub-advisers, as well as monitoring and evaluating
the management of the assets of each such Fund by its sub-adviser. With regard
to the Fund of Funds, this includes allocating each Fund's assets among
different underlying funds after the portfolio manager obtains and evaluates
economic, statistical and financial information that permits the portfolio
manager to formulate and implement an investment programs for the Fund. The
Investment Manager has acted as an investment adviser to mutual funds since
1998. Today, the Investment Manager, advises or manages 23 investment
portfolios, including the Funds, encompassing a broad range of investment
objectives.
Sub-Advisers. The Investment Manager has engaged Baring Asset
Management, Inc. ("BAMI"), ING Investment Management Advisors ("IIMA") and ING
Investment Management LLC ("IIM") to act as sub-advisers to, respectively, the
ING Large Cap Growth Fund, ING Global Brand Names Fund and ING Growth & Income
Fund. The Investment Manager also has engaged BAMI and its affiliates, Baring
International Investment Limited ("BIIL") and Baring Asset Management (Asia)
Limited, to act as co-sub-advisers to the ING International Equity Fund.
BAMI and its affiliates are wholly-owned subsidiaries of Baring Asset
Management Holdings Limited ("BAMHL"). BAMHL, a global company registered in
England and Wales, is the parent of the world-wide group of investment
management companies that operate under the collective name Baring Asset
Management ("BAM Group"). BAM Group, together with is predecessor company, was
founded in 1762 and provides global investment management services and maintains
major investment offices in Boston, London, Hong Kong and Tokyo. BAM Group
provides advisory services to mutual funds, institutional investors, offshore
investment companies, insurance companies and private clients. As of March 31,
2000, the BAM Group managed approximately $56 billion of assets.
20
<PAGE> 24
The figures following show past performance of BAMI, BIIL and BIIAL
(the "Co-Sub-Advisers") in managing accounts with investment objectives,
policies, styles and techniques substantially similar though not identical to
those of the ING International Equity Fund. The performance is not necessarily
representative of the past performance of the Co-Sub-Advisers' management teams
or any individual of the teams. Information presented is based on performance
data provided by the Co-Sub-Advisers. The past performance does not represent
the performance of the ING International Equity Fund. The tables show the total
returns for a composite of the actual performance of international equity
accounts managed by the Co-Sub-Advisers for various periods ended December 31,
1999, as adjusted for the annualized gross expenses for the Fund's shares as
discussed in the Prospectus. The amounts shown assume redemption of Fund shares
at the end of each period indicated. Included for comparison purposes are
performance figures of the MSCI EAFE Index and the MSCI EMF Index, respectively,
each an unmanaged market index.
The performance shown is calculated in accordance with established
Securities and Exchange Commission rules and regulations. The similarly managed
investment product included in the performance shown has been managed by the
Co-Sub-Advisers during the entire period provided and has substantially similar
stated investment policies, objectives, and strategies as the ING International
Equity Fund. The performance shown includes all of the Co-Sub-Advisers' accounts
with investment policies, objectives, and strategies substantially similar to
those of the ING International Equity Fund, and includes performance results for
all periods during which such account existed and maintained investment
policies, objective, and strategies substantially similar to those of the Fund.
The composites include unregistered accounts that are not subject to
diversification and other requirements that apply to mutual funds under
applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. As a result, portfolio management strategies
used on the composite and those used on the ING International Equity Fund may
vary in some respects. The information should not be considered a prediction of
the future performance of the ING International Equity Fund. The actual
performance may be higher or lower than that shown.
CO-SUB-ADVISERS' PRIOR PERFORMANCE PRESENTATION - INTERNATIONAL EQUITY COMPOSITE
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
MSCI EAFE Index
<S> <C> <C>
1 Year 36.39% 27.30%
3 Years 19.03% 16.06%
5 Years 14.52% 13.14%
10 Years 9.46% 7.33%
</TABLE>
IIMA, located in The Hague, The Netherlands, and IIM, located in
Atlanta, Georgia, manage investments and provide investment advice on a
world-wide basis to entities affiliated and unaffiliated with ING Group. IIMA
and IIM operate under the collective management of ING Investment Management
which has investments under management of $150 billion as of March 31, 2000.
As sub-advisers, each Sub-Adviser has full investment discretion to
make all determinations with respect to the investment of their respective
Fund's assets and the purchase and sale of portfolio securities and other
investments. Each Sub-Adviser is wholly owned indirect subsidiary of ING Group
and is registered with the Securities and Exchange Commission.
Investment Manager Compensation. The following table shows the
aggregate annual advisory fee to be paid by each Fund in the current fiscal year
as a percentage of that Fund's average daily net assets:
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<PAGE> 25
<TABLE>
<CAPTION>
FUND ADVISORY FEE
<S> <C>
ING Large Cap Growth Fund 0.75%
ING Growth & Income Fund 0.75%
ING International Equity Fund 1.25%
ING Global Brand Names Fund 1.00%
ING Income Allocation Fund 0.00%*
ING Balanced Allocation Fund 0.00%*
ING Growth Allocation Fund 0.00%*
ING Aggressive Growth Allocation Fund 0.00%*
</TABLE>
* For more information regarding the management fees of the underlying
funds, please consult the statement of additional information.
Portfolio Managers. The following individuals are primarily responsible
for the day-to-day management of each Fund's portfolio:
Ralph G. Norton (ING Income Allocation Fund, ING Balanced Allocation
Fund, ING Growth Allocation Fund, ING Aggressive Growth Allocation
Fund). Mr. Norton has primary responsibility for the above listed
Funds. Mr. Norton also monitors and reviews the performance of the
Sub-Advisers on behalf of the Investment Manager. Mr. Norton has been
employed by the Investment Manager since March 1999. Prior to joining
the Investment Manager, Mr. Norton was employed by Standard & Poor's
and was a member of the Standard & Poor's Investment Policy Committee
and Co-Chairmember of the Standard & Poor's sub-committee on mutual
funds. As part of his job he was responsible for stock, bond and money
market mutual fund asset allocation models as well as fund selection
and analysis for retail client products. Prior to that he was vice
president with IBC Financial Data where he was responsible for retail
and institutional investment products and all mutual fund research.
Mr. Norton has over 18 years of investment experience.
Mr. William Thomas (ING Large Cap Growth Fund). Mr. Thomas has primary
responsibility for the above listed Fund and is a co-head of an eleven
member team of investment professionals. The team has an average of 19
years investment experience. Mr. Thomas has been an investment
professional with BAM since 1987 and has over 25 years of investment
experience.
Mr. James Williams and Mr. Hayes Miller (ING International Equity
Fund). Mr. Williams and Mr. Miller have primary responsibility for the
above listed Fund and co-head a six member team of investment
professionals. The team utilizes the resources of the regional equity
teams of the co-Sub-Advisers. The average experience of the team is 23
years. Mr. Williams has been an investment professional with BIIL and
its affiliates since 1975 and has over 25 years of investment
experience. Mr. Miller has been an investment professional with BIIL
since 1994 and has 19 years of investment experience.
Mr. Herman Kleeven (ING Global Brand Names Fund). Mr. Kleeven has
primary responsibility for the above listed Fund. Mr. Kleeven has been
employed by IIMA and its affiliates since 1997 and has seven years of
investment experience. Before joining IIMA and its affiliates, Mr.
Kleeven was a portfolio manager for Robeco Group, Rotterdam, The
Netherlands.
Mr. Martin Jansen and Mr. David Kushner (ING Growth & Income Fund). Mr.
Jansen and Mr. Kushner have primary responsibility for the above listed
Fund and co-head a six member team of investment professionals. Messrs.
Jansen and Kushner have been employed by IIMA and IIM, respectively, as
investment professionals since 1997 and they each have 20 years of
investment experience.
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<PAGE> 26
PURCHASE OF SHARES
Shares of the Funds are offered for purchase by Separate Accounts to
serve as an investment medium for Variable Contracts issued by life insurance
companies, and to qualified pension and retirement plans outside of the separate
account context. The Funds are "open for business" on each day the New York
Stock Exchange (the "Exchange") is open for trading. A purchase order, together
with payment in proper form, received before the close of regular trading on the
Exchange (normally 4:00 p.m., Eastern time) on a day the Fund is open for
business will be effected at that day's net asset value.
Life insurance companies participating in each Fund serve as the Fund's
designee for receiving purchase orders of separate accounts that invest in the
Fund. Variable Contract Owners do not deal directly with the Funds. The
allocation rights of Variable Contract Owners are described in the accompanying
Separate Account prospectus.
The Fund and the distributor each reserves the right, in its sole
discretion, to suspend the offering of shares of the Funds or to reject any
purchase order, in whole or in part, when, in the judgment of management, such
suspension or rejection is in the best interests of the Funds and their
investors.
REDEMPTION OF SHARES
Shares may be redeemed without charge on any day that the net asset
value is calculated. All redemption orders are effected at the net asset value
per share next determined after a redemption request is received. Life insurance
companies participating in each Fund serve as the Fund's designee for receiving
redemption orders of separate accounts that invest in the Fund. Variable
Contract Owners do not deal directly with the Funds. Payment for shares redeemed
normally will be made within seven days.
The Funds may suspend the right of redemption or postpone the payment
date at times when the Exchange is closed, or during certain other periods as
permitted under the Federal securities laws. In consideration of the best
interests of the remaining shareholders, the Funds reserve the right to pay
redemption proceeds in whole or in part by a distribution in kind of securities
held by a Fund in lieu of cash. If shares are redeemed in kind, the redeeming
shareholder should expect to incur transaction costs upon the disposition of the
securities received in the distribution.
PRICING OF SHARES
Each of the Funds prices its shares based on its net asset value. The
Stock Funds value portfolio securities for which market quotations are readily
available at market value. The Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. The Funds
value all other securities and assets at their fair value. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day. In addition, if, between the time trading
ends on a particular security and the close of the Exchange, events occur that
materially affect the value of the security, the Funds may value the security at
its fair value as determined in good faith by or under the supervision of the
Board of Trustees. The effect of using fair value pricing is that a Fund's net
asset value will be subject to the judgment of the Board of Trustees or its
designee instead of being determined by the market. Because some of the Funds
may invest in securities that are primarily listed on foreign exchanges, the
value of those Funds' shares may change on days when the separate account will
not be able to purchase or redeem shares. The Fund of Funds value their net
asset value based on the net asset value of the underlying funds, which is
calculated when regular trading closes on the Exchange. Each Fund determines the
net asset value of its shares as of the close of the Exchange on each day the
Exchange is open for business.
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<PAGE> 27
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. Each Fund, except the ING Income
Allocation Fund and ING Balanced Allocation Fund, generally declares and pays
dividends, if any, annually. The ING Income Allocation Fund generally declares
and pays dividends, if any, monthly and the ING Balanced Allocation Fund
generally declares and pays dividends, if any, quarterly. Each Fund generally
distributes long-term and short-term capital gains (including any net gains from
foreign currency transactions), if any, annually. At the election of
participating life insurance companies, dividends and distributions are
automatically reinvested at net asset value in shares of the Fund that has made
the payment or distribution.
Taxes. The amount, timing and character of distributions to the
separate account may be affected by special tax rules applicable to certain
investments purchased by the Funds. Holders of variable contracts should refer
to the prospectus for their contracts for information regarding the tax
consequences of owning such contracts and should consult their tax advisers
before investing.
MORE INFORMATION RELATED TO INVESTMENTS BY THE LIFESTYLE FUND OF FUNDS
The following is a description of the investment objectives and
principal investments of the underlying funds in which the Fund of Funds may
invest.
ING FUNDS TRUST
EQUITY FUNDS
The underlying funds that invest primarily in equity securities are:
ING Large Cap Growth Fund. The ING Large Cap Growth Fund seeks to
provide investors with long-term capital appreciation. Under normal market
conditions, the fund will operate as a diversified fund and will invest at least
65% of its total assets in a portfolio of equity securities of large companies
(that is, companies with market capitalizations of more than $1 billion at the
time of acquisition), which in the sub-adviser's opinion possess growth
potential. As a general matter, the fund expects these investments to be in
common stocks.
ING Growth & Income Fund. The ING Growth & Income Fund seeks to provide
investors with high total return. Under normal market conditions, the fund will
operate as a diversified fund and invest at least 65% of its total assets in a
portfolio of equity securities. As a general matter, the fund expects these
investments to earn income and to be in common stocks of large companies whose
market capitalizations are generally in excess of $10 billion.
ING Mid Cap Growth Fund. The ING Mid Cap Growth Fund seeks to provide
investors with long-term capital appreciation. Under normal market conditions,
the fund will operate as a diversified fund and invest at least 65% of its total
assets in a portfolio of equity securities of companies with market
capitalizations falling within the Russell Mid Cap Growth Index at the time of
acquisition which, in the sub-adviser's opinion, possess growth potential. The
average market capitalization and median market capitalization of this index as
of its latest reconstitution was $4.13 billion and $3.15 billion, respectively.
As a general matter, the fund expects these investments to be in common stocks.
ING Small Cap Growth Fund. The ING Small Cap Growth Fund seeks to
provide investors with long-term capital appreciation. Under normal market
conditions, the fund will operate as a diversified fund and invest at least 65%
of its total assets in a portfolio of equity securities of smaller companies
(that is, companies with market capitalizations falling within the Russell 2500
Growth Index at the time of acquisition), which in the sub-adviser's opinion
possess growth potential. The average market capitalization and median market
capitalization of this index as of its latest reconstitution was $870 million
and $580 million, respectively. As a general matter, the fund expects these
investments to be in common stocks.
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<PAGE> 28
ING Global Brand Names Fund. The ING Global Brand Names Fund seeks to
provide investors with long-term capital appreciation. Under normal market
conditions, the fund will operate as a non-diversified fund and invest at least
65% of its total assets in a portfolio of equity securities of companies which
in the sub-adviser's opinion, have a well recognized franchise, a global
presence and derive most of their revenues from sales of consumer goods. The
companies in which the fund invests either have leading market positions, or in
the sub-adviser's opinion, have the potential to achieve leading market
positions in the foreseeable future. This portion of the portfolio will have
investments located in at least three different countries including the United
States. As a general matter, the fund expects these investments to be in common
stocks of large companies whose market capitalizations are generally in excess
of $10 billion.
ING International Equity Fund. The ING International Equity Fund seeks
to provide investors with long-term capital appreciation. Under normal market
conditions, the fund will operate as a diversified fund and invest at least 65%
of its total assets in a portfolio of equity securities of issuers organized or
having a majority of their assets in or deriving a majority of their operating
income in any country throughout the world, not including the United States.
This portion of the portfolio will have investments in at least seven different
countries. The fund may purchase securities in any foreign country, developed or
underdeveloped, or emerging market countries. The fund will not invest more than
15% of its total assets in emerging market countries. As a general matter, the
fund expects these investments to be in common stocks of large companies whose
market capitalizations are generally in excess of $10 billion. The fund may also
use options and futures contracts involving foreign currencies.
ING European Equity Fund. The ING European Equity Fund seeks to provide
investors with long-term capital appreciation. Under normal market conditions,
the fund will operate as a diversified fund and invest at least 65% of its total
assets in a portfolio of equity securities of European issuers. The sub-adviser
considers European issuers to be companies whose securities are principally
traded in the European capital markets, that derive at least 50% of their total
revenues or earnings from either goods produced or services rendered in
countries located in Europe, regardless of where the securities of such
companies are principally traded, or that are organized under the laws of and
have a principal office in a European country. As a general matter, the fund
expects these investments to be in common stocks of large companies whose market
capitalizations are generally in excess of $10 billion.
ING Emerging Markets Equity Fund. The ING Emerging Markets Equity Fund
seeks to provide investors with long-term capital appreciation. Under normal
market conditions, the fund will operate as a diversified fund and invest at
least 65% of its total assets in a portfolio of equity securities of emerging
market issuers. The fund will typically maintain investments in at least seven
emerging market countries and will not invest more than 25% of its total assets
in any one emerging market country. The fund defines an emerging market country
as any country the economy and market of which the World Bank or the United
Nations considers to be emerging or developing or any country determined by the
sub-advisers to have emerging economies or developing markets. The fund
considers emerging market issuers to be companies the securities of which are
principally traded in the capital markets of emerging market countries; that
derive at least 50% of their total revenue or earnings from either goods
produced or services rendered in emerging market countries, regardless of where
the securities of such companies are principally traded; or that are organized
under the laws of and have a principal office in an emerging market country. As
a general matter, the fund expects these investments to be in common stocks of
large-, mid-, and small-sized companies. The Fund may also use options and
futures contracts involving foreign currencies.
ING Focus Fund. The ING Focus Fund seeks to provide investors with
long-term capital appreciation. Under normal market conditions, the fund will
operate as a non-diversified fund and invest in a portfolio of 20 to 40 equity
securities. As a general matter, the fund expects these investments to be in
common stocks of large-, mid-, and small-sized companies. The sub-adviser seeks
to invest the fund in growth companies that are positioned to benefit from
capitalizing on significant industry, regulatory, technological, and ownership
changes. To find such companies, the sub-adviser looks for management teams with
entrepreneurial spirit and a proven talent for creating value, with a focus on
industries expected to drive change in other industries (for example, technology
and financial services).
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<PAGE> 29
ING Global Information Technology Fund. The ING Global Information
Technology Fund seeks to provide investors with long-term capital appreciation.
Under normal market conditions, the fund will operate as a diversified fund and
invest at least 65% of its total assets in a portfolio of equity securities of
information technology companies. The fund defines information technology
companies as those companies that derive at least 50% of their total revenues or
earnings from information technology, hardware or software, or related
consulting and services industries. This portion of the portfolio will have
investments located in at least three different countries, including the United
States. As a general matter, the fund expects these investments to be in common
stocks of large-, mid-, and small-sized companies.
ING Global Communications Fund. The ING Global Communications Fund
seeks to provide investors with long-term capital appreciation. Under normal
market conditions, the fund will operate as a diversified fund and invest at
least 65% of its total assets in a portfolio of equity securities of
communications companies. This portion of the portfolio will have investments
located in at least three different countries, including the United States. As a
general matter, the fund expects these investments to be in common stocks of
large-, mid-, and small-sized companies. The fund considers communications
companies to be those that derive at least 50% of their total revenues or
earnings from designing, developing, operating, financing, manufacturing or
providing the following activities, products and services: communications
equipment and service (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcast (including
television and radio, satellite, microwave and cable television); computer
equipment, mobile telecommunications and cellular radio and paging; electronic
mail; local and wide area networking and linkage of work and data processing
systems.
ING Internet Fund. The ING Internet Fund seeks to provide investors
with long-term capital appreciation. Under normal market conditions, the fund
will operate as a non-diversified fund and invest at least 65% of its total
assets in a portfolio of equity securities of U.S. and non-U.S. internet
technology companies. The fund defines internet technology companies as those
companies with internet businesses or internet related consulting or services
businesses, or that derive at least 50% of their total revenues or earnings from
business operations in internet related hardware, software or infrastructure
industries. As a general matter, the fund expects these investments to be in
common stocks of large-, mid-, and small-sized companies.
FIXED INCOME FUNDS
The underlying funds that invest primarily in fixed income securities
are:
ING Intermediate Bond Fund. The ING Intermediate Bond Fund seeks to
provide investors with a high level of current income consistent with the
preservation of capital and liquidity. Under normal market conditions, the fund
will operate as a diversified fund and invest at least 65% of its total assets
in debt securities which, at the time of investment, are rated investment grade
(for example, rated at least BBB or better by Standard & Poor's Rating Group or
Baa by Moody's Investor Services) or have an equivalent rating by a nationally
recognized statistical rating organization, or of comparable quality if unrated.
Although the fund may invest a portion of its assets in high yield (high risk)
debt securities rated below investment grade, the fund will seek to maintain a
minimum average portfolio quality rating of at least investment grade. The
dollar-weighted average maturity of the fund will generally range between three
and ten years.
ING High Yield Bond Fund. The ING High Yield Bond Fund seeks to provide
investors with a high level of current income and total return. Under normal
market conditions, the fund will operate as a diversified fund and invest at
least 65% of its total assets in a portfolio of high yield (high risk) bonds.
High yield bonds are debt securities that are not rated by a nationally
recognized statistical rating organization or are rated below investment grade
(for example, rated below BBB by Standard & Poor's Rating Group or Baa by
Moody's Investor Services ) or have an equivalent rating by a nationally
recognized statistical rating organization. There are no restrictions on the
average maturity of the fund or the maturity of any single investment.
Maturities may vary widely depending on the sub-adviser's assessment of interest
rate trends and other economic or market factors.
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<PAGE> 30
ING International Bond Fund. The ING International Bond Fund seeks to
provide investors with high total return. Under normal market conditions, the
fund will operate as a non-diversified fund and invest at least 65% of its total
assets in a portfolio of fixed income securities of international issuers which,
at the time of investment, are rated investment grade (for example, rated at
least BBB or better by Standard & Poor's Rating Group or Baa by Moody's Investor
Services) or have an equivalent rating by a nationally recognized statistical
rating organization, or of comparable quality if unrated. This portion of the
portfolio will have investments in at least three different countries outside of
the United States. There are no restrictions on the average maturity of the fund
or the maturity of any single investment. Maturities may vary widely depending
on the sub-advisers' assessment of interest rate trends and other economic or
market factors.
The underlying fund that invests primarily in money market is:
ING Money Market Fund. The investment objective of the ING Money Market
Fund is to provide investors with a high level of current income as is
consistent with the preservation of capital and liquidity and the maintenance of
a stable $1.00 net asset value per share. The Fund will operate as a diversified
fund and invest in a portfolio of high quality, U.S. dollar-denominated
short-term obligations which are determined by the sub-adviser to present
minimal credit risks.
MORE INFORMATION ABOUT RISKS
A Fund's risk profile is largely a factor of the principal securities
in which it invests and investment techniques that it uses. The following pages
discuss the risks associated with certain of the types of securities in which
the Funds or the underlying funds of the Fund of Funds may invest and certain of
the investment practices that the Funds or the underlying funds of the Fund of
Funds may use. For more information about these and other types of securities
and investment techniques used by the Funds or the underlying funds of the Fund
of Funds, see the Statement of Additional Information. Unless indicated
otherwise, the following descriptions apply to all Funds (that are not Fund of
Funds) and the underlying funds of the Fund of Funds. THEY DO NOT DIRECTLY APPLY
TO THE FUND OF FUNDS UNLESS OTHERWISE INDICATED.
Many of the investment techniques and strategies discussed in this
Prospectus and in the Statement of Additional Information are discretionary,
which means that the Investment Manager or Sub-Adviser can decide whether to use
them or not. The Investment Manager or Sub-Adviser may also use investment
techniques or make investments in securities that are not a part of the Fund's
principal investment strategy.
Temporary Defensive Strategies (All Funds including Fund of Funds).
When the Investment Manager or Sub-Adviser to a Fund anticipates unusual market
or other conditions, the Fund may temporarily depart from its principal
investment strategies. Under such circumstances, up to 100% of the Fund's assets
may be invested in investment grade fixed income securities (for example, rated
at least BBB by Standard & Poor's Rating Group or Baa by Moody's Investor
Services), money market securities, certificates of deposit, bankers'
acceptances, commercial paper or in any other securities which in either the
Investment Manager's or Sub-Adviser's opinion are more conservative than the
types of securities in which the Fund typically invests. To the extent a Fund is
engaged in temporary defensive investments, it will not be pursuing its
investment objective. The Fund of Funds may also use Temporary Defensive
Strategies if it anticipates unusual market or other conditions.
Investments in Foreign Securities (All Funds except ING Money Market
Fund). There are certain risks in owning foreign securities, including those
resulting from: fluctuations in currency exchange rates; devaluation of
currencies; political or economic developments and the possible imposition of
currency exchange blockages or other foreign governmental laws or restrictions;
reduced availability of public information concerning issuers; accounting,
auditing and financial reporting standards or other regulatory practices and
requirements that are not uniform when compared to those applicable to domestic
companies; settlement and clearance procedures in some countries that may not be
reliable and can result in delays in
27
<PAGE> 31
settlement; higher transaction and custody expenses than for domestic
securities; and limitations on foreign ownership of equity securities. Also,
securities of many foreign companies may be less liquid and the prices more
volatile than those of domestic companies. With certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Funds,
including the withholding of dividends.
Each Fund that invests in foreign securities may enter into foreign
currency transactions either on a spot or cash basis at prevailing rates or
through forward foreign currency exchange contracts in order to have the
necessary currencies to settle transactions or to help protect the Fund against
adverse changes in foreign currency exchange rates. Such efforts could limit
potential gains that might result from a relative increase in the value of such
currencies, and might, in certain cases, result in losses to the Fund.
Emerging Market Investments (ING International Equity Funds, ING
Emerging Markets Equity Fund, ING High Yield Bond Fund, ING International Bond
Fund and ING Intermediate Bond Fund). Because of less developed markets and
economies and, in some countries, less mature governments and governmental
institutions, the risks of investing in foreign securities can be intensified in
the case of investments in issuers domiciled or doing substantial business in
emerging market countries. These risks include: high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries; political and social uncertainties; over-dependence on
exports, especially with respect to primary commodities, making these economies
vulnerable to changes in commodity prices; overburdened infrastructure and
obsolete financial systems; environmental problems; less well developed legal
systems; and less reliable custodial services and settlement practices.
High Yield Securities (ING High Yield Bond Fund, ING Intermediate Bond
Fund and ING International Bond Fund). Investments in high yield securities
generally provide greater income and increased opportunity for capital
appreciation than investments in higher quality debt securities, but they also
typically entail greater potential price volatility and principal and income
risk. High yield securities are not considered investment grade, and are
regarded as predominantly speculative with respect to the issuing company's
continuing ability to meet principal and interest payments. The prices of high
yield securities have been found to be less sensitive to interest rate changes
than higher-rated investments, but more sensitive to adverse economic downturns
or individual corporate developments. High yield securities structured as
zero-coupon or payment-in-kind securities tend to be more volatile. The
secondary market in which high yield securities are traded is generally less
liquid than the market for higher grade bonds. At times of less liquidity, it
may be more difficult to value high yield securities.
Corporate and Municipal Debt Securities (All Funds). Corporate debt
securities are subject to the risk of the issuer's inability to meet principal
and interest payments on the obligation and may also be subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the credit-worthiness of the issuer and general market liquidity. When
interest rates decline, the value of the debt securities can be expected to
rise, and when interest rates rise, the value of those securities can be
expected to decline. Debt securities with longer maturities tend to be more
sensitive to interest rate movements than those with shorter maturities.
Initial Public Offerings (All Funds, except ING Money Market Fund). A
significant portion of a Fund's return may be attributable to its investment in
initial public offerings. When a Fund's asset base is small, the impact of such
investments on a Fund's return will be magnified. As the Fund's assets grow, it
is probable that the effect of the Fund's investment in initial public offerings
on the Fund's total return will decline.
U.S. Government Securities (All Funds including Fund of Funds). Some
U.S. Government agency securities may be subject to varying degrees of credit
risk, and all U.S. Government securities may be subject to price declines in the
securities due to changing interest rates. The Fund of Funds may also invest in
U.S. Government Securities.
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<PAGE> 32
Convertible Securities (All Funds, except ING Money Market Fund). The
price of a convertible security will normally fluctuate in some proportion to
changes in the price of the underlying equity security, and as such is subject
to risks relating to the activities of the issuer and general market and
economic conditions. The income component of convertible securities causes
fluctuations based upon changes in interest rates and the credit quality of the
issuer. Convertible securities are often lower rated securities. A Fund may be
required to redeem or convert a convertible security before the holder would
otherwise choose.
Other Investment Companies (All Funds including Fund of Funds). Each
Fund may invest up to 10% of its assets in other unaffiliated investment
companies. With respect to the Fund of Funds, there is no limit with regard to
investments in affiliated investment companies. When a Fund invests in other
investment companies, you indirectly pay a proportionate share of the expenses
of that other investment company (including management fees, administration
fees, and custodial fees) in addition to the expenses of the Fund.
Restricted and Illiquid Securities (All Funds). Each Fund may invest
up to 15% of its net assets in restricted and illiquid securities. If a security
is illiquid, the Fund might be unable to sell the security at a time when the
sub-adviser might wish to sell, and the security could have the effect of
decreasing the overall level of the Fund's liquidity. Further, the lack of an
established secondary market may make it more difficult to value illiquid
securities, which could vary from the amount the Fund could realize upon
disposition. Restricted securities, i.e., securities subject to legal or
contractual restrictions on resale, may be illiquid. However, some restricted
securities may be treated as liquid, although they may be less liquid than
registered securities traded on established secondary markets.
Mortgage-Related Securities (All Funds). Although mortgage loans
underlying a mortgage-backed security may have maturities of up to 30 years, the
actual average life of a mortgage-backed security typically will be
substantially less because the mortgages will be subject to normal principal
amortization, and may be prepaid prior to maturity. Like other fixed income
securities, when interest rates rise, the value of a mortgage-backed security
generally will decline; however, when interest rates are declining, the value of
mortgage-backed securities with prepayment features may not increase as much as
other fixed income securities. The rate of prepayments on underlying mortgages
will affect the price and volatility of a mortgage-related security, and may
have the effect of shortening or extending the effective maturity of the
security beyond what was anticipated at the time of the purchase. Unanticipated
rates of prepayment on underlying mortgages can be expected to increase the
volatility of such securities. In addition, the value of these securities may
fluctuate in response to the market's perception of the creditworthiness of the
issuers of mortgage-related securities owned by a Fund. Additionally, although
mortgages and mortgage-related securities are generally supported by some form
of government or private guarantee and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations.
Asset-Backed Securities (All Funds). Asset-backed securities involve
certain risks that are not posed by mortgage-related securities, resulting
mainly from the fact that asset-backed securities often do not contain the
benefit of a complete security interest in the related collateral. The risks
associated with asset-backed securities may be reduced by the addition of credit
enhancements such as a bank letter of credit or a third-party guarantee.
Derivatives (All Funds, except ING Money Market Fund). Generally,
derivatives can be characterized as financial instruments whose performance is
derived, at least in part, from the performance of an underlying asset or
assets. Some derivatives are sophisticated instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. These may
include swap agreements, options, forwards and futures. Derivative securities
are subject to market risk, which could be significant for those that have a
leveraging effect. Many of the Funds do not invest in these types of
derivatives, so please check the description of the Fund's policies found in the
Statement of Additional Information. Derivatives are also subject to credit
risks related to the counterparty's ability to perform, and any deterioration in
the counterparty's creditworthiness could adversely affect the instrument. A
risk of using derivatives is that the adviser might imperfectly judge the
market's direction. For instance, if a derivative is
29
<PAGE> 33
used as a hedge to offset investment risk in another security, the hedge might
not correlate to the market's movements and may have unexpected or undesired
results, such as a loss or a reduction in gains.
Dollar Roll Transactions (All Funds, except ING Money Market Fund).
The Funds may enter into dollar roll transactions wherein the Fund sells fixed
income securities, typically mortgage-backed securities, and makes a commitment
to purchase similar, but not identical, securities at a later date from the same
party. Like a forward commitment, during the roll period no payment is made for
the securities purchased and no interest or principal payments on the security
accrue to the purchaser, but a Fund assumes the risk of ownership. A Fund is
compensated for entering into dollar roll transactions by the difference between
the current sales price and the forward price for the future purchase, as well
as by the interest earned on the cash proceeds of the initial sale. Like other
when-issued securities or firm commitment agreements, dollar roll transactions
involve the risk that the market value of the securities sold by the Funds may
decline below the price at which a Fund is committed to purchase similar
securities. In the event the buyer of securities under a dollar roll transaction
becomes insolvent, the Funds' use of the proceeds of the transaction may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Funds' obligation to repurchase the securities.
Repurchase Agreements (All Funds including Fund of Funds). Each Fund
may enter into repurchase agreements, which involve the purchase by a Fund of a
security that the seller has agreed to buy back. If the seller defaults and the
collateral value declines, the Fund might incur a loss. If the seller declares
bankruptcy, the Fund may not be able to sell the collateral at the desired time.
The Fund of Funds may also enter into repurchase agreements.
Lending Portfolio Securities (All Funds). In order to generate
additional income, each Fund may lend portfolio securities in an amount up to
33 1/3% of its total assets to broker-dealers, major banks, or other recognized
domestic institutional borrowers of securities. As with other extensions of
credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower default or fail financially.
Borrowing (All Funds including Fund of Funds). Each Fund may borrow
for certain types of temporary or emergency purposes subject to certain limits.
Borrowing may exaggerate the effect of any increase or decrease in the value of
portfolio securities or the net asset value of a Fund, and money borrowed will
be subject to interest costs. Interest costs on borrowings may fluctuate with
changing market rates of interest and may partially offset or exceed the return
earned on borrowed funds. Under adverse market conditions, a Fund might have to
sell portfolio securities to meet interest or principal payments at a time when
fundamental investment considerations would not favor such sales. The Fund of
Funds may also borrow for certain types of temporary or emergency purposes
subject to certain limits.
Reverse Repurchase Agreements (All Funds, except ING Money Market
Fund). A reverse repurchase agreement involves the sale of a security, with an
agreement to repurchase the same securities at an agreed upon price and date.
Whether such a transaction produces a gain for a Fund depends upon the costs of
the agreements and the income and gains of the securities purchased with the
proceeds received from the sale of the security. If the income and gains on the
securities purchased fail to exceed the costs, net asset value will decline
faster than otherwise would be the case. Reverse repurchase agreements, as
leveraging techniques, may increase a Fund's yield; however, such transactions
may result in a shareholder's loss of principal.
Short Sales (ING International Equity Funds, ING Emerging Markets
Equity Fund, ING Intermediate Bond Fund and ING High Yield Bond Fund). A "short
sale" is the sale by a Fund of a security which has been borrowed from a third
party on the expectation that the market price will drop. If the price of the
security rises, the Fund may have to cover its short position at a higher price
than the short sale price, resulting in a loss.
Investments in Small- and Mid-Capitalization Companies (All Funds
except ING Money Market Fund and ING International Bond Fund). The Funds may
invest in small and mid capitalization companies. Investments in mid- and
small-capitalization companies involve greater risk than is customarily
30
<PAGE> 34
associated with larger, more established companies due to the greater business
risks of small size, limited markets and financial resources, narrow product
lines and the frequent lack of depth of management. The securities of smaller
companies are often traded over-the-counter and may not be traded in volumes
typical on a national securities exchange. Consequently, the securities of
smaller companies may have limited market stability and may be subject to more
abrupt or erratic market movements than securities of larger, more established
growth companies or the market averages in general.
Non-diversified Investment Companies (Fund of Funds, ING Global Brand
Names Funds, ING Focus Fund, ING Internet Fund and ING International Bond Fund).
Certain Funds are classified as non-diversified investment companies under the
1940 Act, which means that each Fund is not limited by the 1940 Act in the
proportion of its assets that it may invest in the obligations of a single
issuer. The investment of a large percentage of a Fund's assets in the
securities of a small number of issuers may cause that Fund's share price to
fluctuate more than that of a diversified investment company.
Concentration (ING Global Information Technology Fund, ING Global
Communications Fund and ING Internet Fund). Certain Funds "concentrate" (for
purposes of the 1940 Act) their assets in securities related to a particular
sector or industry, which means that at least 25% of its assets will be invested
in these assets at all times. As a result, each Fund may be subject to greater
market fluctuation than a fund which has securities representing a broader range
of investment alternatives.
Fundamental and Non-Fundamental Policies (All Funds including Fund of
Funds). Unless otherwise stated, all investment objectives and policies are
non-fundamental and may be amended without shareholder approval.
Percentage Investment Limitations (All Funds including Fund of Funds).
Unless otherwise stated, percentage limitations in this prospectus apply at the
time of investment.
Portfolio Turnover (All Funds including Fund of Funds). Each Fund may
engage in frequent and active trading of portfolio securities to achieve its
investment objective. A high portfolio turnover rate involves greater expenses
to a Fund, including brokerage commissions and other transaction costs, and is
likely to generate more taxable short-term gains for shareholders, which may
have an adverse effect on the performance of the Fund. The Fund of Funds may
also may engage in frequent and active trading of portfolio securities to
achieve its investment objective.
Changes in Allocation (the Fund of Funds only). The underlying funds in
which the Fund of Funds may invest, and the range of assets allocated to each
underlying fund, may be changed by the Board of Trustees from time to time.
Similarly, the target allocation between equity and fixed income oriented
investments may be adjusted from time to time. If the target limits for
investment in a particular Fund of Fund are exceeded or are not met because of
cash flows or changes in the market value of the shares of the underlying funds,
the Investment Manager may but is not required to adjust the portfolio's
holdings.
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The
Statement of Additional Information (SAI), a current version of which is on file
with the Securities and Exchange Commission (SEC), contains more details about
each Fund and is incorporated by reference into the prospectus, meaning that it
is legally a part of this Prospectus. Annual and semiannual reports to
shareholders will contain additional information about each Fund's investments.
The Funds' annual report also will discuss the market conditions and investment
strategies that significantly affected each Fund's performance during its last
fiscal year.
If you wish to obtain free copies of the Funds' current SAI, please
send a written request to the Funds at P.O. Box 1239, Malvern, PA 19355-9836 or
calling the Funds at 1-877-463-6464. You also can obtain copies of the Funds'
SAI and other information at the SEC's Public Reference Room in Washington, DC,
on the SEC's website (http://www.sec.gov) or by sending a letter, including a
duplicating fee, to the
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<PAGE> 35
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
32
<PAGE> 36
STATEMENT OF ADDITIONAL INFORMATION
ING Variable Insurance Trust
1475 Dunwoody Drive
West Chester, PA 19380
General and Account Information: 1-877-INFO-ING
ING MUTUAL FUNDS MANAGEMENT CO. LLC, Investment Manager
("IMFC" or the "Manager")
ING FUNDS DISTRIBUTOR, INC., Distributor and Principal Underwriter
("IFD" or the "Distributor")
This Statement of Additional Information ("SAI") describes the shares
of eight funds (each, a "Fund" or, collectively, the "Funds") managed by IMFC.
Each Fund is a portfolio of ING Variable Insurance Trust (the "Trust"), an
open-end management investment company. The Funds are:
<TABLE>
<CAPTION>
Stock Funds Lifestyle Fund of Funds
<S> <C>
ING Large Cap Growth Fund ING Income Allocation Fund
ING Growth & Income Fund ING Balanced Allocation Fund
ING International Equity Fund ING Growth Allocation Fund
ING Global Brand Names Fund ING Aggressive Growth Allocation Fund
</TABLE>
This SAI is not a prospectus and is only authorized for distribution
when preceded or accompanied by the current Prospectus for the Funds, dated
April 28, 2000, as amended or supplemented from time to time. This SAI contains
additional and more detailed information than that set forth in the Prospectus
and should be read in conjunction with the Prospectus. The Prospectus may be
obtained without charge by writing or calling the Funds at the address and
telephone number printed above.
April 28, 2000
<PAGE> 37
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT POLICIES AND RISKS ........................................................................... 1
COMMON STOCKS .................................................................................. 1
PREFERRED STOCKS ............................................................................... 1
U.S. TREASURY OBLIGATIONS ...................................................................... 1
U.S. GOVERNMENT SECURITIES ..................................................................... 1
STRIPS AND ZERO COUPON SECURITIES .............................................................. 2
WHEN-ISSUED, DELAYED DELIVERY SECURITIES AND COMMITMENTS ....................................... 2
WARRANT ........................................................................................ 2
COMMERCIAL PAPER ............................................................................... 3
DOMESTIC AND FOREIGN BANK OBLIGATIONS .......................................................... 3
CORPORATE DEBT SECURITIES ...................................................................... 4
MORTGAGE-RELATED SECURITIES .................................................................... 4
GNMA CERTIFICATES .............................................................................. 5
FNMA CERTIFICATES .............................................................................. 4
FHLMC SECURITIES ............................................................................... 6
FHLMC CERTIFICATES ............................................................................. 6
NON-AGENCY MORTGAGE-BACKED SECURITIES .......................................................... 7
ADJUSTABLE RATE MORTGAGE SECURITIES ............................................................ 7
COLLATERALIZED MORTGAGE OBLIGATIONS ............................................................ 8
REAL ESTATE SECURITIES ......................................................................... 8
OPEN-END AND CLOSED END INVESTMENT COMPANIES ................................................... 10
ASSET-BACKED SECURITIES ........................................................................ 10
FOREIGN SECURITIES ............................................................................. 11
EMERGING COUNTRY AND EMERGING SECURITIES MARKET ................................................ 11
DEPOSITORY RECEIPTS ............................................................................ 12
CONVERTIBLE SECURITIES ......................................................................... 13
VARIABLE RATE DEMAND OBLIGATIONS AND FLOATING RATE INSTRUMENTS ................................. 13
GUARANTEED INVESTMENT CONTRACTS ................................................................ 14
PRIVATE FUNDS .................................................................................. 14
OPTIONS ON SECURITIES .......................................................................... 14
OVER-THE-COUNTER OPTIONS ....................................................................... 15
OPTIONS ON INDICES ............................................................................. 16
FOREIGN CURRENCY OPTIONS ....................................................................... 17
DOLLAR ROLL TRANSACTIONS ....................................................................... 17
SWAP AGREEMENTS ................................................................................ 18
FOREIGN CURRENCY FUTURES TRANSACTIONS .......................................................... 19
FOREIGN GOVERNMENT OBLIGATIONS;
SECURITIES OF SUPRANATIONAL ENTITIES .................................................. 19
INTEREST RATE FUTURES CONTRACTS ................................................................ 19
SHORT SALES .................................................................................... 20
</TABLE>
ii
<PAGE> 38
<TABLE>
<S> <C>
LOANS OF PORTFOLIO SECURITIES .................................................................. 20
REPURCHASE AGREEMENTS .......................................................................... 21
BORROWING ...................................................................................... 21
REVERSE REPURCHASE AGREEMENTS .................................................................. 21
LOWER-RATED SECURITIES ......................................................................... 21
ILLIQUID SECURITIES ............................................................................ 22
ADDITIONAL RISK CONSIDERATIONS .......................................................................... 24
GENERAL ........................................................................................ 24
EQUITY SECURITIES .............................................................................. 24
REAL ESTATE SECURITIES ......................................................................... 25
FOREIGN SECURITIES AGREEMENTS .................................................................. 25
FIXED INCOME SECURITIES ........................................................................ 26
OPTIONS AND FUTURES CONTRACTS .................................................................. 26
TECHNIQUES INVOLVING LEVERAGE .................................................................. 27
NON-DIVERSIFIED INVESTMENT COMPANIES ........................................................... 28
CONCENTRATION .................................................................................. 28
PORTFOLIO TURNOVER ............................................................................. 28
INVESTMENT RESTRICTIONS ................................................................................. 29
MANAGEMENT .............................................................................................. 30
Trustees and Officers ......................................................................... 30
Trustees Biographies .......................................................................... 30
Officers Biographies .......................................................................... 31
Investment Manager ............................................................................ 32
Sub-Advisers .................................................................................. 34
Distribution of Fund Shares ................................................................... 34
Transfer Agent, Fund Accountant and Account Services .......................................... 34
Rule 12b-1 Distribution Plan .................................................................. 35
DETERMINATION OF NET ASSET VALUE ........................................................................ 36
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION .......................................................... 37
PORTFOLIO TRANSACTIONS .................................................................................. 39
Portfolio Turnover ............................................................................ 40
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS ................................................................ 40
Dividends and Distributions ................................................................... 40
Tax Matters ................................................................................... 41
OTHER INFORMATION ....................................................................................... 43
Capitalization ................................................................................ 43
Code of Ethics ................................................................................ 44
Voting Rights ................................................................................. 44
Custodian ..................................................................................... 45
Yield and Performance Information ............................................................. 45
Performance of the Underlying Funds ........................................................... 46
Other Performance Comparisons ................................................................. 47
Legal Counsel ................................................................................. 48
Independent Auditors .......................................................................... 48
Registration Statement ........................................................................ 48
APPENDIX ................................................................................................ 49
</TABLE>
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INVESTMENT POLICIES AND RISKS
The Prospectus discusses the investment objectives of the
Funds and the policies to be employed to achieve those objectives. This section
contains supplemental information concerning certain types of securities and
other instruments in which the Funds or underlying funds of the Fund of Funds
may invest, the investment policies and portfolio strategies that the Funds or
the underlying funds of the Fund of Funds may utilize, and certain risks
attendant to such investments, policies and strategies. The following
descriptions apply to all Funds and underlying funds of the Fund of Funds as
indicated. THEY DO NOT DIRECTLY APPLY TO THE FUND OF FUNDS UNLESS OTHERWISE
INDICATED.
COMMON STOCK (All Funds, except the ING Money Market Fund).
Common stock represents the residual ownership interest in the issuer after all
of its obligations and preferred stocks are satisfied. Common stock fluctuates
in price in response to many factors, including historical and prospective
earnings of the issuer, the value of its assets, general economic conditions,
interest rates, investor perceptions and market volatility.
PREFERRED STOCK (All Funds, except the ING Money Market Fund).
Preferred stock has a preference over common stock in liquidation and generally
in dividends as well, but is subordinated to the liabilities of the issuer in
all respects. Preferred stock may or may not be convertible into common stock or
debt. As a general rule, the market value of preferred stock with a fixed
dividend rate and no conversion element varies inversely with interest rates and
perceived credit risk. Because preferred stock is junior to debt securities and
other obligations of the issuer, deterioration in the credit quality of the
issuer will cause greater changes in the value of a preferred stock than in a
more senior debt security with similar stated yield characteristics.
U.S. TREASURY OBLIGATIONS. (All Funds including the Fund of
Funds). Each Fund may invest in U.S. Treasury obligations, whose principal and
interest are backed by the full faith and credit of the United States
Government. U.S. Treasury obligations consist of bills, notes and bonds, and
separately traded interest and principal component parts of such obligations
known as STRIPS, which generally differ in their interest rates and maturities.
U.S. Treasury bills, which have original maturities of up to one year, notes,
which have maturities ranging from two years to 10 years and bonds, which have
original maturities of 10 to 30 years, are direct obligations of the United
States Government.
U.S. GOVERNMENT SECURITIES. (All Funds including the Fund of
Funds). U.S. Government securities are obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. U.S. Government securities
include debt securities issued or guaranteed by U.S. Government-sponsored
enterprises and federal agencies and instrumentalities. Some types of U.S.
Government securities are supported by the full faith and credit of the United
States Government or U.S. Treasury guarantees, such as mortgage-backed
certificates guaranteed by the Government National Mortgage Association
("GNMA"). Other types of U.S. Government securities, such as obligations of the
Student Loan Marketing Association, provide recourse only to the credit of the
agency or
<PAGE> 40
instrumentality issuing the obligation. In the case of obligations not backed by
the full faith and credit of the United States Government, the investor must
look to the agency issuing or guaranteeing the obligation for ultimate
repayment.
STRIPS AND ZERO COUPON SECURITIES . (All Funds). Each Fund may
invest in separately traded principal and interest components of securities
backed by the full faith and credit of the United States Treasury. The principal
and interests components of United States Treasury bonds with remaining
maturities of longer than ten years are eligible to be traded independently
under the Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request of
depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that of
United States Treasury bills with comparable maturities. The Funds will not
actively trade in STRIPS.
The Funds may invest in zero coupon securities. A zero coupon
security pays no interest to its holder during its life and is sold at a
discount to its face value at maturity. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are more sensitive to changes in interest rates
than non-zero coupon securities having similar maturities and credit qualities.
WHEN-ISSUED, DELAYED-DELIVERY SECURITIES AND FORWARD
COMMITMENTS (All Funds). The Funds may purchase securities on a when-issued or
delayed-delivery basis and may purchase or sell securities on a forward
commitment basis. When-issued or delayed-delivery transactions arise when
securities are purchased by a Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price and
yield to the Fund at the time of entering into the transaction. A forward
commitment transaction is an agreement by a Fund to purchase or sell securities
at a specified future date. When a Fund engages in these transactions, the Fund
relies on the buyer or seller, as the case may be, to consummate the sale.
Failure to do so may result in the Fund missing the opportunity to obtain a
price or yield considered to be advantageous. When-issued and delayed-delivery
transactions and forward commitment transactions may be expected to occur a
month or more before delivery is due. However, no payment or delivery is made by
a Fund until it receives payment or delivery from the other party to the
transaction. A separate account containing only liquid assets equal to the value
of purchase commitments will be maintained until payment is made. The securities
so purchased are subject to market fluctuation during this period and no income
accrues to the Fund until settlement takes place. While the Funds normally enter
into these transactions with the intention of actually receiving or delivering
the securities, they may sell these securities before the settlement date or
enter into new commitments to extend the delivery date into the future, if the
Sub-Adviser considers such action advisable as a matter of investment strategy.
Such securities have the effect of leverage on the Funds and may contribute to
volatility of a Fund's net asset value.
WARRANTS (All Funds). The Funds may purchase warrants. A
warrant gives the purchaser the right to purchase securities from the issuer at
a specific price (the strike price) for a limited period of time. The strike
price of a warrant typically is much lower than the current market price of the
underlying securities and therefore are subject to greater price
2
<PAGE> 41
fluctuations. As a result, warrants may be more volatile investments than the
underlying securities and may offer greater potential for capital appreciation
as well as capital loss.
COMMERCIAL PAPER (All Funds). Commercial paper includes
short-term unsecured promissory notes, variable rate demand notes and variable
rate master demand notes issued by domestic and foreign bank holding companies,
corporations and financial institutions and similar taxable instruments issued
by government agencies and instrumentalities. All commercial paper purchased by
the ING Money Market Fund is, at the time of investment, (i) rated in the
highest rating categories by at least two nationally recognized statistical
rating organizations ("NRSROs"), (ii) issued or guaranteed as to principal and
interest by issuers having an existing debt security rating in the highest
rating categories by a least two NRSROs, or (iii) securities which, if not rated
or single rated, are, in the opinion of the Fund's Sub-Adviser, of an investment
quality comparable to rated commercial paper in which the Fund may invest. See
"Variable Rate Demand Obligations and Floating Rate Instruments."
DOMESTIC AND FOREIGN BANK OBLIGATIONS (All Funds) . These
obligations include but are not restricted to certificates of deposit,
commercial paper, Yankee dollar certificates of deposit, bankers' acceptances,
Eurodollar certificates of deposit and time deposits, promissory notes and
medium-term deposit notes. The Funds will not invest in any obligations of their
affiliates, as defined under the Investment Company Act of 1940 (the"1940 Act").
Each Fund limits its investment in United States bank
obligations to obligations of United States banks (including foreign branches).
Each Fund limits its investment in foreign bank obligations to United States
dollar-denominated obligations of foreign banks (including United States
branches of foreign banks) which in the opinion of the Sub-Adviser, are of an
investment quality comparable to obligations of United States banks which may be
purchased by the Funds.
Fixed time deposits may be withdrawn on demand by the
investor, but may be subject to early withdrawal penalties which vary depending
upon market conditions and the remaining maturity of the obligation. There are
no contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing in more than seven days may not exceed 15% of the value of the net
assets of the Funds (10% of the value of the net assets in the case of money
market funds).
Obligations of foreign banks involve somewhat different
investment risks than those affecting obligations of United States banks,
including the possibilities that their liquidity could be impaired because of
future political and economic developments, that the obligations may be less
marketable than comparable obligations of United States banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that foreign deposits may be seized or nationalized, that foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal and interest on those obligations and
that the selection of those obligations may be more difficult because there may
be less publicly available information concerning foreign banks, or that the
accounting, auditing and financial reporting standards, practices and
requirements
3
<PAGE> 42
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not subject to examination by any United States
Government agency or instrumentality.
Investments in Eurodollar and Yankee dollar obligations
involve additional risks. Most notably, there generally is less publicly
available information about foreign companies; there may be less governmental
regulation and supervision; they may use different accounting and financial
standards; and the adoption of foreign governmental restrictions may adversely
affect the payment of principal and interest on foreign investments. In
addition, not all foreign branches of United States banks are supervised or
examined by regulatory authorities as are United States banks, and such branches
may not be subject to reserve requirements.
CORPORATE DEBT SECURITIES (All Funds). Fund investment in
these securities is limited to corporate debt securities (corporate bonds,
debentures, notes and similar corporate debt instruments) which meet the rating
criteria established for each Fund.
The ratings of Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), and other NRSROs represent their respective
opinions as to the quality of the obligations they undertake to rate. Ratings,
however, are general and are not absolute standards of quality. Consequently,
obligations with the same rating, maturity and interest rate may have different
market prices. After purchase by a Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund. However, each
Fund's Sub-Adviser will consider such event in its determination of whether the
Fund should continue to hold the security. To the extent the ratings given by an
NRSRO may change as a result of changes in such organizations or their rating
systems, the Sub-Adviser will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in the
Prospectus and in this SAI.
It is possible that unregistered securities purchased by a
Fund in reliance upon Section 4(2) or Rule 144A under the Securities Act of 1933
could have the effect of increasing the level of the Fund's illiquidity to the
extent that qualified institutional buyers become, for a period, uninterested in
purchasing these securities.
MORTGAGE-RELATED SECURITIES (All Funds). To the extent
permitted by the Funds' policies, the Funds may invest in mortgage-backed
securities, including those which represent undivided ownership interests in
pools of mortgages. The U.S. Government or the issuing agency or instrumentality
guarantees the payment of interest on and principal of these securities.
However, the guarantees do not extend to the yield or value of the securities
nor do the guarantees extend to the yield or value of a Fund's shares.
Consistent with the Funds' respective investment objective and policies,
mortgages backing the securities which may be purchased by the Funds include
conventional thirty-year fixed-rate mortgages, graduated payment mortgages,
fifteen-year mortgages, adjustable rate mortgages and balloon payment mortgages.
A balloon payment mortgage-backed security is an amortized mortgage security
with installments of principal and interest, the last installment of which is
predominantly principal. All of these mortgages can be used to create
pass-through securities.
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<PAGE> 43
A pass-through security is formed when mortgages are pooled together and
undivided interests in the pool or pools are sold. The cash flow from the
mortgages is passed through to the holders of the securities in the form of
periodic payments of interest, principal and prepayments (net of a service fee).
Prepayments occur when the holder of an undivided mortgage prepays the remaining
principal before the mortgage's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal then their stated maturity would indicate. The remaining expected
average life of a pool of mortgage loans underlying a mortgage-backed security
is a prediction of when the mortgage loans will be repaid and is based upon a
variety of factors, such as the demographic and geographic characteristics of
the borrowers and the mortgaged properties, the length of time that each of the
mortgage loans has been outstanding, the interest rates payable on the mortgage
loans and the current interest rate environment.
During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When mortgage obligations are prepaid, the Funds reinvest the prepaid amounts in
securities, the yields of which reflect interest rates prevailing at that time.
Therefore, a Fund's ability to maintain a portfolio of high-yielding
mortgage-backed securities will be adversely affected to the extent that
prepayments of mortgages are reinvested in securities which have lower yields
than the prepaid mortgages. Moreover, prepayments of mortgages which underlie
securities purchased at a premium generally will result in capital losses.
GNMA CERTIFICATES (All Funds). Certificates of the Government
National Mortgage Association (GNMA Certificates) are mortgage-backed securities
which evidence an undivided interest in a pool or pools of mortgages. GNMA
Certificates that the Funds may purchase are the "modified pass-through" type,
which entitle the holder to receive timely payment of all interest and principal
payments due on the mortgage pool, net of fees paid to the "issuer" and GNMA,
regardless of whether or not the mortgagor actually makes the payment. The GNMA
Certificates will represent a pro rata interest in one or more pools of the
following types of mortgage loans: (i) fixed rate level payment mortgage loans;
(ii) fixed rate graduated payment mortgage loans; (iii) fixed rate growing
equity mortgage loans; (iv) fixed rate mortgage loans secured by manufactured
(mobile) homes; (v) mortgage loans on multifamily residential properties under
construction; (vi) mortgage loans on completed multifamily projects; (vii) fixed
rate mortgage loans as to which escrowed funds are used to reduce the borrower's
monthly payments during the early years of the mortgage loans ("buydown"
mortgage loans); (viii) mortgage loans that provide for adjustments in payments
based on periodic changes in interest rates or in other payment terms of the
mortgage loans; and (ix) mortgage-backed serial notes. All of these mortgage
loans will be FHA Loans or VA Loans and, except as otherwise specified above,
will be fully-amortizing loans secured by first liens on one- to-four-family
housing units. Legislative changes may be proposed from time to time in relation
to the Department of Housing and Urban Development which, if adopted, could
alter the viability of investing in GNMAs.
FNMA CERTIFICATES (All Funds). FNMA is a federally chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act. FNMA provides funds to the mortgage
market primarily by
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purchasing home mortgage loans from local lenders, thereby replenishing their
funds for additional lending. FNMA acquires funds to purchase home mortgage
loans from many capital market investors that may not ordinarily invest in
mortgage loans directly.
Each FNMA Certificate will entitle the registered holder
thereof to receive amounts, representing such holder's pro rata interest in
scheduled principal payments and interest payments (at such FNMA Certificate's
pass-through rate, which is net of any servicing and guarantee fees on the
underlying mortgage loans), and any principal prepayments on the mortgage loans
in the pool represented by such FNMA Certificate and such holder's proportionate
interest in the full principal amount of any foreclosed or otherwise finally
liquidated mortgage loan. The full and timely payment of principal and interest
on each FNMA Certificate will be guaranteed by FNMA, which guarantee is not
backed by the full faith and credit of the U.S. Government.
Each FNMA Certificate will represent a pro rata interest in
one or more pools of FHA Loans, VA Loans or conventional mortgage loans (i.e.,
mortgage loans that are not insured or guaranteed by any governmental agency) of
the following types: (i) fixed rate level payment mortgage loans; (ii) fixed
rate growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed rate mortgage loans secured by multifamily
projects.
FHLMC SECURITIES (All Funds). The Federal Home Loan Mortgage
Corporation (FHLMC) was created in 1970 through enactment of Title III of the
Emergency Home Finance Act of 1970 (FHLMC Act). Its purpose is to promote
development of a nationwide secondary market in conventional residential
mortgages.
The FHLMC issues two types of mortgage pass-through
securities, mortgage participation certificates (PCs) and guaranteed mortgage
certificates (GMCs). PCs resemble GNMA Certificates in that each PC represents a
pro rata share of all interest and principal payments made and owned on the
underlying pool. The FHLMC guarantees timely monthly payment of interest on PCs
and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of
mortgages. However, these instruments pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The expected average life
of these securities is approximately ten years.
FHLMC CERTIFICATES (All Funds). FHLMC is a corporate
instrumentality of the United States created pursuant to the FHLMC Act. The
principal activity of FHLMC consists of the purchase of first lien,
conventional, residential mortgage loans and participation interests in such
mortgage loans and the resale of the mortgage loans so purchased in the form of
mortgage securities, primarily FHLMC Certificates.
FHLMC guarantees to each registered holder of the FHLMC
Certificate the timely payment of interest at the rate provided for by such
FHLMC Certificate, whether or not received. FHLMC also guarantees to each
registered holder of a FHLMC Certificate ultimate collection of all principal on
the related mortgage loans, without any offset or deduction, but
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does not, generally, guarantee the timely payment of scheduled principal. FHLMC
may remit the amount due on account of its guarantee of collection of principal
at any time after default on an underlying mortgage loan, but not later than 30
days following (i) foreclosure sale, (ii) payment of a claim by any mortgage
insurer or (iii) the expiration of any right of redemption, whichever occurs
later, but in any event no later than one year after demand has been made upon
the mortgagor for accelerated payment of principal. The obligations of FHLMC
under its guarantee are obligations solely of FHLMC and are not backed by the
full faith and credit of the U.S. Government.
FHLMC Certificates represent a pro rata interest in a group of
mortgage loans (a FHLMC Certificate group) purchased by FHLMC. The mortgage
loans underlying the FHLMC Certificates will consist of fixed rate or adjustable
rate mortgage loans with original terms to maturity of between ten and thirty
years, substantially all of which are secured by first liens on one- to
four-family residential properties or multifamily projects. Each mortgage loan
must meet the applicable standards set forth in the FHLMC Act. An FHLMC
Certificate group may include whole loans, participation interests in whole
loans and undivided interests in whole loans and participation comprising
another FHLMC Certificate group.
The market value of mortgage securities, like other
securities, will generally vary inversely with changes in market interest rates,
declining when interest rates rise and rising when interest rates decline.
However, mortgage securities, while having comparable risk of decline during
periods of rising rates, usually have less potential for capital appreciation
than other investments of comparable maturities due to the likelihood of
increased prepayments of mortgages as interest rates decline. In addition, to
the extent such mortgage securities are purchased at a premium, mortgage
foreclosures and unscheduled principal prepayments generally will result in some
loss of the holders' principal to the extent of the premium paid. On the other
hand, if such mortgage securities are purchased at a discount, an unscheduled
prepayment of principal will increase current and total returns and will
accelerate the recognition of income which when distributed to shareholders will
be taxable as ordinary income.
NON-AGENCY MORTGAGE-BACKED SECURITIES (All Funds). Certain
non-agency private entities also issue mortgage-backed securities. Other than
lacking the guarantee by the full faith and credit of the United States, the
mortgage-backed securities issued by private issuers generally have
characteristics and risks comparable to those issued by GNMA, as discussed
above. Some mortgage-backed securities issued by non-agency private issuers may
be supported by a pool of mortgages not acceptable to the agency issuers and
thus may carry greater risks. Consistent with the Funds' investment objective,
policies and quality standards, the Funds may invest in these mortgage-backed
securities issued by non-agency private issuers.
ADJUSTABLE RATE MORTGAGE SECURITIES (All Funds except ING
International Bond Fund). Adjustable rate mortgage securities (ARMS) are
pass-through mortgage securities collateralized by mortgages with adjustable
rather than fixed rates. Generally, ARMS have a specified maturity date and
amortize principal over their life. In periods of declining interest rates,
there is a reasonable likelihood that ARMS will experience increased rates of
prepayment of principal. However, the major difference between ARMS
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and fixed rate mortgage securities is that the interest rate and the rate of
amortization of principal of ARMS can and do change in accordance with movements
in a particular, pre-specified, published interest rate index.
The amount of interest on an ARM is calculated by adding a
specified amount, the "margin," to the index, subject to limitations on the
maximum and minimum interest that can be charged to the mortgagor during the
life of the mortgage or to maximum and minimum changes to that interest rate
during a given period. Because the interest rate on ARMS generally moves in the
same direction as market interest rates, the market value of ARMS tends to be
more stable than that of long-term fixed rate securities.
There are two main categories of indices which serve as
benchmarks for periodic adjustments to coupon rates on ARMS: those based on U.S.
Treasury securities and those derived from a calculated measure such as a cost
of funds index or a moving average of mortgage rates. Commonly utilized indices
include the one-year and five-year constant maturity Treasury Note rates, the
three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates on
longer-term Treasury securities, the 11th District Federal Home Loan Bank Cost
of Funds, the National Median Cost of Funds, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a specific bank, or commercial
paper rates. Some indices, such as the one-year constant maturity Treasury Note
rate, closely mirror changes in market interest rate levels. Others, such as the
11th District Home Loan Bank Cost of Funds index (often related to ARMS issued
by FNMA), tend to lag changes in market rate levels and tend to be somewhat less
volatile.
COLLATERALIZED MORTGAGE OBLIGATIONS (All Funds). Certain
issuers of collateralized mortgage obligations (CMOs), including certain CMOs
that have elected to be treated as Real Estate Mortgage Investment Conduits
(REMICs), are not considered investment companies pursuant to a rule adopted by
the Securities and Exchange Commission ("SEC"), and the Funds may invest in the
securities of such issuers without the limitations imposed by the 1940 Act, on
investments by the Funds in other investment companies. In addition, in reliance
on an earlier SEC interpretation, a Fund's investments in certain other
qualifying CMOs, which cannot or do not rely on the rule, are also not subject
to the limitation of the 1940 Act on acquiring interests in other investment
companies. In order to be able to rely on the SEC's interpretation, these CMOs
must be unmanaged, fixed asset issuers, that (a) invest primarily in
mortgage-backed securities, (b) do not issue redeemable securities, (c) operate
under general exemptive orders exempting them from all provisions of the 1940
Act and (d) are not registered or regulated under the 1940 Act as investment
companies. To the extent that a Fund selects CMOs or REMICs that cannot rely on
the rule or do not meet the above requirements, the Fund may not invest more
than 10% of its assets in all such entities and may not acquire more than 3% of
the voting securities of any single such entity.
REAL ESTATE SECURITIES (All Funds except the ING Money Market
Fund). The Funds may invest in real estate investment trusts ("REITs") and other
real estate industry operating companies ("REOCs"). For purposes of a Fund's
investments, a REOC is a company that derives at least 50% of its gross revenues
or net profits from either (1) the ownership, development, construction,
financing, management or sale of commercial,
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industrial or residential real estate, or (2) products or services related to
the real estate industry, such as building supplies or mortgage servicing.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Although the
Funds will not invest directly in real estate, the fund may invest in equity
securities of issuers primarily engaged in or related to the real estate
industry. Therefore, an investment in REITs is subject to certain risks
associated with the direct ownership of real estate and with the real estate
industry in general. These risks include, among others: possible declines in the
value of real estate; risks related to general and local economic conditions;
possible lack of availability of mortgage funds; overbuilding; extended
vacancies of properties; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up of, and
liability to third parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods, earthquakes or
other natural disasters; limitations on and variations in rents; and changes in
interest rates. To the extent that assets underlying the REITs' investments are
concentrated geographically, by property type or in certain other respects, the
REITs may be subject to certain of the foregoing risks to a greater extent.
Equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are not
diversified, are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the U.S. Internal Revenue Code
and failing to maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest
rate risks. When interest rates decline, the value of a REIT's investment in
fixed rate obligations can be expected to rise. Conversely, when interest rates
rise, the value of a REIT's investment in fixed rate obligations can be expected
to decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investment in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated
with investing in small capitalization companies. REITs may have limited
financial resources, may trade less frequently and in a limited volume and may
be subject to more abrupt or erratic price movements than larger company
securities.
Investments in mortgage-related securities involve certain
risks. In periods of declining interest rates, prices of fixed income securities
tend to rise. However, during such periods, the rate of prepayment of mortgages
underlying mortgage-related securities tends to increase, with the result that
such prepayments must be reinvested by the issuer at lower rates. In addition,
the value of such securities may fluctuate in response to the market's
perception of the creditworthiness of the issuers of mortgage-related securities
owned by the Fund. Because investments in mortgage-related securities are
interest sensitive, the ability of the issuer to reinvest or to reinvest
favorably in underlying mortgages may be limited by government regulation or tax
policy. For example, action by the Board of Governors of the Federal Reserve
System to limit the growth of the nation's money supply may cause interest
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rates to rise and thereby reduce the volume of new residential mortgages.
Additionally, although mortgages and mortgage-related securities are generally
supported by some form of government or private guarantees and/or insurance,
there is no assurance that private guarantors or insurers will be able to meet
their obligations.
OPEN-END AND CLOSED-END INVESTMENT COMPANIES. (All Funds
including the Fund of Funds). Each Fund may invest in shares of other open-end
and closed-end management investment companies, subject to the limitations of
the 1940 Act and subject to such investments being consistent with the overall
objective and policies of the Fund making such investment. The purchase of
securities of other investment companies results in duplication of expenses such
that investors indirectly bear a proportionate share of the expenses of such
mutual funds including operating costs, and investment advisory and
administrative fees.
INVESTMENT IN ING FUNDS (Fund of Funds, only). The investments
of each Fund of Fund are concentrated in underlying funds so each Fund of Fund's
performance is directly related to the investment performance of the underlying
funds held by it. The ability of each Fund of Fund to meet its investment
objective is directly related to the ability of the underlying funds to meet
their objectives as well as the allocation among those underlying funds by the
Investment Manager. There can be no assurance that the investment objective of
any Fund of Fund or any underlying fund will be achieved. The portfolios will
only invest in Class I shares of the underlying ING Funds and, accordingly, will
not pay any sales loads or 12b-1 or service or distribution fees in connection
with their investments in shares of the underlying funds. The Fund of Funds,
however, will indirectly bear their pro rata share of the fees and expenses
incurred by the underlying ING Funds that are applicable to Class I
shareholders. The investment returns of each Fund of Fund, therefore, will be
net of the expenses of the underlying funds in which it is invested.
ASSET-BACKED SECURITIES (All Funds). The Funds are permitted
to invest in asset-backed securities. Through the use of trusts and special
purpose subsidiaries, various types of assets, primarily home equity loans and
automobile and credit card receivables, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above.
Consistent with the Funds' investment objectives, policies and quality
standards, the Funds may invest in these and other types of asset-backed
securities which may be developed in the future.
Asset-backed securities involve certain risks that are not
posed by mortgage-related securities, resulting mainly from the fact that
asset-backed securities do not usually contain the benefit of a complete
security interest in the related collateral. For example, credit card
receivables generally are unsecured and the debtors are entitled to the
protection of a number of state and Federal consumer credit laws, some of which
may reduce the ability to obtain full payment. In the case of automobile
receivables, due to various legal and economic factors, proceeds from
repossessed collateral may not always be sufficient to support payments on these
securities. The risks associated with asset-backed securities are often reduced
by the addition of credit enhancements such as a letter of credit from a bank,
excess collateral or a third-party guarantee.
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FOREIGN SECURITIES (All Funds except the ING Money Market
Fund). As described in the Prospectus, changes in foreign exchange rates will
affect the value of securities denominated or quoted in currencies other than
the U.S. dollar.
Since the Funds may invest in securities denominated in
currencies other than the U.S. dollar, and since those Funds may temporarily
hold funds in bank deposits or other money market investments denominated in
foreign currencies, a Fund may be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rate between such currencies and
the dollar. Changes in foreign currency exchange rates will influence values
within the Fund from the perspective of U.S. investors. Changes in foreign
currency exchange rates may also affect the value of dividends and interest
earned, gains and losses realized on the sale of securities, and net investment
income and gains, if any, to be distributed to shareholders by the Fund. The
rate of exchange between the U.S. dollar and other currencies is determined by
the forces of supply and demand in the foreign exchange markets. These forces
are affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.
The Funds may enter into foreign currency exchange contracts
in order to protect against uncertainty in the level of future foreign exchange
rates. A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are entered into in the
interbank market conducted between currency traders (usually large commercial
banks) and their customers. Forward foreign currency exchange contracts may be
bought or sold to protect a Fund against a possible loss resulting from an
adverse change in the relationship between foreign currencies and the U.S.
dollar, or between foreign currencies. Although such contracts are intended to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result
should the value of such currency increase.
The Funds also are authorized to use a proxy currency to hedge
a foreign exchange risk. This is done by using a forward foreign exchange
contract in a currency other than the currency of the asset subject to hedging.
By engaging in cross-hedging transactions, a Fund assumes the risk of imperfect
correlation between the subject currencies. This practice may present risks
different from, or in addition to, the risks associated with investments in
foreign currencies made to lock in the U.S. dollar price of a security.
EMERGING COUNTRY AND EMERGING SECURITIES MARKETS (ING Emerging
Markets Equity Fund, ING International Equity Funds, ING High Yield Bond Fund,
ING Intermediate Bond Fund and ING International Bond Fund). Trading volume on
emerging country stock exchanges is substantially less than that on the New York
Stock Exchange. Further, securities of some emerging country or emerging market
companies are less liquid and more volatile than securities of comparable U.S.
companies. Similarly, volume and liquidity in most emerging country bond markets
is substantially less than in the U.S. and, consequently, volatility of price
can be greater than in the U.S. Fixed commissions on emerging country stock or
emerging market exchanges are generally higher than negotiated commissions on
U.S. exchanges, although the Fund endeavors to achieve the most favorable net
results on its
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portfolio transactions and may be able to purchase the securities in which the
Fund may invest on other stock exchanges where commissions are negotiable.
Foreign stock exchanges, brokers and listed companies are generally subject to
less government supervision and regulation than in the United States. The
customary settlement time for foreign securities may be longer than the five-day
customary settlement time for United States securities.
Companies in emerging countries are not generally subject to
uniform accounting, auditing and financial reporting standards, practices and
disclosure requirements comparable to those applicable to U.S. companies.
Consequently, there may be less publicly available information about an emerging
country company than about a U.S. company. Further, there is generally less
governmental supervision and regulation of foreign stock exchanges, brokers and
listed companies than in the U.S.
DEPOSITORY RECEIPTS (All Funds except ING Money Market Fund).
American Depositary Receipts ("ADRs") are U.S. dollar-denominated receipts
generally issued by domestic banks, which evidence the deposit with the bank of
the common stock of a foreign issuer and which are publicly traded on exchanges
or over-the-counter in the United States.
The Funds may invest in both sponsored and unsponsored ADR
programs. There are certain risks associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement for service and payment
will be between the depository and the shareholder. The company issuing the
stock underlying the ADR pays nothing to establish the unsponsored facility, as
fees for ADR issuance and cancellation are paid by brokers. Investors directly
bear the expenses associated with certificate transfer, custody and dividend
payment.
In an unsponsored ADR program, there also may be several
depositories with no defined legal obligations to the non-U.S. company. The
duplicate depositories may lead to marketplace confusion because there would be
no central source of information to buyers, sellers and intermediaries. The
efficiency of centralization gained in a sponsored program can greatly reduce
the delays in delivery of dividends and annual reports. In addition, with
respect to all ADRs there is always the risk of loss due to currency
fluctuations.
Investments in ADRs involve certain risks not typically
involved in purely domestic investments, including future foreign political and
economic developments, and the possible imposition of foreign governmental laws
or restrictions applicable to such investments. Securities of foreign issuers
through ADRs are subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
the particular ADR. There may be less publicly available information about a
foreign company than about a U.S. company, and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. In addition, such companies may use different accounting and
financial standards
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(and certain currencies may become unavailable for transfer from a foreign
currency), resulting in a Fund's possible inability to convert proceeds realized
upon the sale of portfolio securities of the affected foreign companies
immediately into U.S. currency. The Funds may also invest in European Depository
Receipts ("EDRs") and Global Depositary Receipts ("GDRs"). EDRs are receipts
issued in bearer form by a European financial institution and traded in European
securities' markets. GDRs are receipts issued globally. EDRs are designed for
trading in European Markets and GDRs are designed for trading in non-U.S.
securities markets. Investments in EDRs and GDRs involve similar risks as ADRs.
CONVERTIBLE SECURITIES (All Funds except the ING Money Market
Fund). Convertible securities may be converted at either a stated price or
stated rate into underlying shares of common stock and, therefore, are deemed to
be equity securities for purposes of the Funds' management policies. Convertible
securities have characteristics similar to both fixed-income and equity
securities. Convertible securities generally are subordinated to other similar
but nonconvertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar nonconvertible securities.
Although to a lesser extent than with fixed-income securities,
the market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Convertible securities are investments that provide for a
stable stream of income with generally higher yields than common stocks. There
can be no assurance of current income because the issuers of the convertible
securities may default on their obligations. A convertible security, in addition
to providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
VARIABLE RATE DEMAND OBLIGATIONS AND FLOATING RATE
INSTRUMENTS. (All Funds). The Funds may acquire variable rate demand
obligations. Variable and floating rate instruments are frequently not rated by
credit rating agencies; however, unrated variable and floating rate instruments
purchased by a Fund will be
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determined by the Sub-Adviser to be of comparable quality at the time of
purchase to rated instruments eligible for purchase by the Funds. In making such
determinations, the Sub-Adviser will consider the earning power, cash flows and
other liquidity ratios of the issuers of such instruments (such issuers include
financial, merchandising, investment banking, bank holding and other companies)
and will continuously monitor their financial condition. There may not be an
active secondary market with respect to a particular variable or floating rate
instrument purchased by a Fund. The absence of such an active secondary market
could make it difficult for a Fund to dispose of the variable or floating rate
instrument involved. In the event the issuer of the instrument defaulted on its
payment obligations, a Fund could, for this or other reasons, suffer a loss to
the extent of the default. Variable and floating rate instruments may be secured
by bank letters of credit, guarantees or lending commitments.
GUARANTEED INVESTMENT CONTRACTS (All Funds). The Funds may
invest in Guaranteed Investment Contracts ("GICs") issued by insurance
companies. Pursuant to such contracts, the Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Fund on a monthly basis guaranteed interest which is based
on an index. The GICs provide that this guaranteed interest will not be less
than a certain minimum rate. The insurance company may assess periodic charges
against a GIC for expense and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. In addition, because the
Funds may not receive the principal amount of a GIC from the insurance company
on seven days' notice or less, the GIC is considered an illiquid investment,
and, together with other instruments invested in by a Fund which are not readily
marketable, will not exceed 15% (10% in the case of the ING Money Market Fund)
of a Fund's net assets. The term of a GIC will be one year or less. In
determining average weighted portfolio maturity, a GIC will be deemed to have a
maturity equal to the period of time remaining until the next readjustment of
the guaranteed interest rate.
PRIVATE FUNDS (All Funds except ING Money Market Fund, ING
Intermediate Bond Fund and ING International Bond Fund). The Funds may invest in
U.S. or foreign private limited partnerships or other investment funds ("Private
Funds"). Investments in Private Funds may be highly speculative and volatile.
Because Private Funds generally are investment companies for purposes of the
1940 Act, the Fund's ability to invest in them will be limited. In addition,
Fund shareholders will remain subject to the Fund's expenses while also bearing
their pro rata share of the operating expenses of the Private Funds. The ability
of the Fund to dispose of interests in Private Funds is very limited and
involves risks, including loss of the Fund's entire investment in the Private
Fund.
OPTIONS ON SECURITIES (All Funds except the ING Money Market
Fund). Each Fund may purchase put and call options. In addition, each Fund may
write (sell) "covered" call options on securities as long as it owns the
underlying securities subject to the option or an option to purchase the same
underlying securities, having an exercise price equal to or less than the
exercise price of the "covered" option, or will establish and maintain for the
term of the option a segregated account consisting of cash or other liquid
securities ("eligible securities") to the extent required by applicable
regulation in connection with the optioned securities. A Fund may write
"covered" put options provided that, as long as the Fund is obligated as a
writer of a put option, the Fund will own an option to sell the
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underlying securities subject to the option, having an exercise price equal to
or greater than the exercise price of the "covered" option, or it will deposit
and maintain in a segregated account eligible securities having a value equal to
or greater than the exercise price of the option. A call option gives the
purchaser the right to buy, and the writer the obligation to sell, the
underlying security at the exercise price during or at the end of the option
period. A put option gives the purchaser the right to sell, and the writer has
the obligation to buy, the underlying security at the exercise price during or
at the end of the option period. The premium received for writing an option will
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to such market price, the price
volatility of the underlying security, the option period, supply and demand and
interest rates. The Funds may write or purchase spread options, which are
options for which the exercise price may be a fixed dollar spread or yield
spread between the security underlying the option and another security that is
used as a benchmark. The exercise price of an option may be below, equal to or
above the current market value of the underlying security at the time the option
is written. The buyer of a put who also owns the related security is protected
by ownership of a put option against any decline in that security's price below
the exercise price less the amount paid for the option. The ability to purchase
put options allows a Fund to protect capital gains in an appreciated security it
owns, without being required to actually sell that security. At times a Fund
would like to establish a position in a security upon which call options are
available. By purchasing a call option, a Fund is able to fix the cost of
acquiring the security, this being the cost of the call plus the exercise price
of the option. This procedure also provides some protection from an unexpected
downturn in the market because a Fund is only at risk for the amount of the
premium paid for the call option which it can, if it chooses, permit to expire.
During the option period the covered call writer gives up the
potential for capital appreciation above the exercise price should the
underlying asset rise in value, and the secured put writer retains the risk of
loss should the underlying security decline in value. For the covered call
writer, substantial appreciation in the value of the underlying asset would
result in the security being "called away." For the secured put writer,
substantial depreciation in the value of the underlying security would result in
the security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because of
the exercise of a call option, it realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium.
If a secured put option expires unexercised, the writer
realizes a gain from the amount of the premium. If the secured put writer has to
buy the underlying security because of the exercise of the put option, the
secured put writer incurs an unrealized loss to the extent that the current
market value of the underlying security is less than the exercise price of the
put option. However, this would be offset in whole or in part by gain from the
premium received.
OVER-THE-COUNTER OPTIONS (All Funds except the ING Money
Market Fund). As indicated in the prospectus, each Fund may deal in
over-the-counter traded options ("OTC options"). OTC options differ from
exchange-traded options in several respects. They are transacted directly with
dealers and not with a clearing corporation, and there is a
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risk of nonperformance by the dealer as a result of the insolvency of such
dealer or otherwise, in which event a Fund may experience material losses.
However, in writing options the premium is paid in advance by the dealer. OTC
options are available for a greater variety of securities, and a wider range of
expiration dates and exercise prices, than are exchange-traded options. Since
there is no exchange, pricing is normally done by reference to information from
market makers, which information is carefully monitored by the investment
manager and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it
voluntarily only by entering into a closing transaction. In the case of OTC
options, there can be no assurance that a continuous liquid secondary market
will exist for any particular option at any specific time. Consequently, a Fund
may be able to realize the value of an OTC option it has purchased only by
exercising it or entering into a closing sale transaction with the dealer that
issued it. Similarly, when a Fund writes an OTC option, it generally can close
out that option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The staff of the SEC has taken the position that purchased
options not traded on registered domestic securities exchanges and the assets
used as cover for written options not traded on such exchanges are generally
illiquid securities. However, the staff has also opined that, to the extent a
mutual fund sells an OTC option to a primary dealer that it considers
creditworthy and contracts with such primary dealer to establish a formula price
at which the fund would have the absolute right to repurchase the option, the
fund would only be required to treat as illiquid the portion of the assets used
to cover such option equal to the formula price minus the amount by which the
option is in-the-money. Pending resolution of the issue, the Funds will treat
such options and, except to the extent permitted through the procedure described
in the preceding sentence, assets as subject to each such Fund's limitation on
investments in securities that are not readily marketable.
OPTIONS ON INDICES (All Funds except the ING Money Market
Fund). Each Fund also may purchase and write call and put options on securities
indices in an attempt to hedge against market conditions affecting the value of
securities that the Fund owns or intends to purchase, and not for speculation.
Through the writing or purchase of index options, a Fund can achieve many of the
same objectives as through the use of options on individual securities. Options
on securities indices are similar to options on a security except that, rather
than the right to take or make delivery of a security at a specified price, an
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the securities
index upon which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. This amount
of cash is equal to the difference between the closing price of the index
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and the exercise price of the option. The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike
security options, all settlements are in cash and gain or loss depends upon
price movements in the market generally (or in a particular industry or segment
of the market), rather than upon price movements in individual securities. Price
movements in securities that the Fund owns or intends to purchase will probably
not correlate perfectly with movements in the level of an index since the prices
of such securities may be affected by somewhat different factors and, therefore,
the Fund bears the risk that a loss on an index option would not be completely
offset by movements in the price of such securities.
When a Fund writes an option on a securities index, it will
segregate and mark-to-market eligible securities to the extent required by
applicable regulation. In addition, where the Fund writes a call option on a
securities index at a time when the contract value exceeds the exercise price,
the Fund will segregate and mark-to-market, until the option expires or is
closed out, cash or cash equivalents equal in value to such excess.
Each Fund may also purchase and sell options on other
appropriate indices, as available, such as foreign currency indices. Options on
a securities index involve risks similar to those risks relating to transactions
in financial futures contracts described above. Also, an option purchased by a
Fund may expire worthless, in which case the fund would lose the premium paid
therefore.
FOREIGN CURRENCY OPTIONS (All Funds except the ING Money
Market Fund). Each Fund may engage in foreign currency options transactions. A
foreign currency option provides the option buyer with the right to buy or sell
a stated amount of foreign currency at the exercise price at a specified date or
during the option period. A call option gives its owner the right, but not the
obligation, to buy the currency, while a put option gives its owner the right,
but not the obligation, to sell the currency. The option seller (writer) is
obligated to fulfill the terms of the option sold if it is exercised. However,
either seller or buyer may close its position during the option period in the
secondary market for such options any time prior to expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if the Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, the
Fund would not have to exercise its call but could acquire in the spot market
the amount of foreign currency needed for settlement.
DOLLAR ROLL TRANSACTIONS (All Funds except the ING Money
Market Fund). In connection with their ability to purchase securities on a
when-issued or forward
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commitment basis, the Funds may enter into "dollar rolls" in which the Funds
sell securities for delivery in the current month and simultaneously contracts
with the same counterparty to repurchase similar (same type, coupon and
maturity) but not identical securities on a specified future date. The Funds
give up the right to receive principal and interest paid on the securities sold.
However, the Funds would benefit to the extent of any difference between the
price received for the securities sold and the lower forward price for the
future purchase plus any fee income received. Unless such benefits exceed the
income and capital appreciation that would have been realized on the securities
sold as part of the dollar roll, the use of this technique will diminish the
investment performance of the Funds compared with what such performance would
have been without the use of dollar rolls. The Funds will hold and maintain in a
segregated account until the settlement date liquid assets in an amount equal to
the value of the when-issued or forward commitment securities. The benefits
derived from the use of dollar rolls may depend, among other things, upon the
Sub-Advisers' ability to predict interest rates correctly. There is no assurance
that dollar rolls can be successfully employed. In addition, the use of dollar
rolls by the Funds while remaining substantially fully invested increases the
amount of a Fund's assets that are subject to market risk to an amount that is
greater than the Fund's net asset value, which could result in increased
volatility of the price of the Fund's shares.
SWAP AGREEMENTS (All Funds except the ING Money Market Fund).
To manage its exposure to different types of investments, the Funds may enter
into interest rate, total return, currency and mortgage (or other asset) swap
agreements and may purchase and sell interest rate "caps," "floors" and
"collars." In a typical interest rate swap agreement, one party agrees to make
regular payments equal to a floating interest rate on a specified amount (the
"notional principal amount") in return for payments to a fixed interest rate on
the same amount for a specified period. Total return swap agreements are similar
to interest rate swap agreements, except the numerical amount is tied to a
market-linked return. If a swap agreement provides for payment in different
currencies, the parties may also agree to exchange the notional principal
amount. Mortgage swap agreements are similar to interest rate swap agreements,
except that the notional principal amount is tied to a reference pool of
mortgages. In a cap or floor, one party agrees, usually in return for a fee, to
make payments under particular circumstances. For example, the purchaser of an
interest rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed upon level; the purchaser of an interest rate
floor has the right to receive payments to the extent a specified interest rate
falls below an agreed upon level. A collar entitles the purchaser to receive
payments to the extent a specified interest rate falls outside an agreed upon
range.
Swap agreements may involve leverage and may be highly
volatile; depending on how they are used, they may have a considerable impact on
the Fund's performance. Swap agreements involve risks depending upon the
counterparties creditworthiness and ability to perform as well as the Fund's
ability to terminate its swap agreements or reduce its exposure through
offsetting transactions. The Sub-Advisers monitor the creditworthiness of
counterparties to these transactions and intend to enter into these transactions
only when they believe the counterparties present minimal credit risks and the
income expected to be earned from the transaction justifies the attendant risks.
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FOREIGN CURRENCY FUTURES TRANSACTIONS (All Funds except the
ING Money Market Fund). As part of its financial futures transactions, each Fund
may use foreign currency futures contracts and options on such futures
contracts. Through the purchase or sale of such contracts, a Fund may be able to
achieve many of the same objectives as through forward foreign currency exchange
contracts more effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign
currency futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and are traded on boards of trade
and commodities exchanges. It is anticipated that such contracts may provide
greater liquidity and lower cost than forward foreign currency exchange
contracts.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL
ENTITIES (All Funds except the ING Money Market Fund). A Fund may invest in
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by the Sub-Adviser to be of comparable quality to the other obligations in which
the Fund may invest. Such securities also include debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
INTEREST RATE FUTURES CONTRACTS (All Funds except the ING
Money Market Fund). The Funds may purchase and sell interest rate futures
contracts ("futures contracts") as a hedge against changes in interest rates. A
futures contract is an agreement between two parties to buy and sell a security
for a set price on a future date. Future contracts are traded on designated
"contracts markets" which, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures contracts based on
securities such as long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA
Certificates and three-month U.S. Treasury bills.
Generally, if market interest rates increase, the value of
outstanding debt securities declines (and vice versa). Entering into a futures
contract for the sale of securities has an effect similar to the actual sale of
securities, although sale of the futures contract might be accomplished more
easily and quickly. For example, if a Fund holds long-term U.S. Government
securities and the Sub-Adviser anticipates a rise in long-term interest rates,
it could, in lieu of disposing of its portfolio securities, enter into futures
contracts for the sale of similar long-term securities. If rates increased and
the value of a Fund's portfolio securities declined, the value of a Fund's
futures contracts would increase, thereby protecting the Fund by preventing its
net asset value from declining as much as it otherwise would have. Similarly,
entering into futures contracts for the purchase of securities has an effect
similar to actual purchase of the underlying securities, but permits the
continued holding of securities other than the underlying securities. For
example, if the Sub-Adviser expects long-term interest rates to decline, a Fund
might enter into futures contracts for the purchase of
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long-term securities, so that it could gain rapid market exposure that may
offset anticipated increases in the cost of securities it intends to purchase,
while continuing to hold higher-yielding short-term securities or waiting for
the long-term market to stabilize. Futures transactions may fail as hedging
techniques where price movements of the underlying securities do not follow
price movements of the portfolio securities subject to the hedge. The loss with
respect to futures transactions is potentially unlimited. Also, the Funds may be
unable to control losses by closing its position where a liquid secondary market
does not exist.
SHORT SALES (ING International Equity Funds, ING Emerging
Markets Equity Fund, ING Intermediate Bond Fund and ING High Yield Bond Fund).
The Funds may sell a security it does not own in anticipation of a decline in
the market value of that security (short sales). To complete such a transaction,
the Fund must borrow the security to make delivery to the buyer. The Fund then
is obligated to replace the security borrowed by purchasing it at market price
at the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to pay to the lender any dividends or interest
which accrue during the period of the loan. To borrow the security, the Fund
also may be required to pay a premium, which would increase the cost of the
security sold. The proceeds of the short sale will be retained by the broker, to
the extent necessary to meet margin requirements, until the short position is
closed out. Until the Fund replaces a borrowed security, the Funds will maintain
daily a segregated account with the Funds' custodian, consisting of liquid
assets, at such a level that (i) the amount deposited in the account plus the
amount deposited with the broker as collateral will equal the current value of
the security sold short and (ii) the amount deposited in the segregated account
plus the amount deposited with the broker as collateral will not be less than
the market value of the security at the time it was sold short. The Fund will
incur a loss as a result of the short sale if the price of the security
increases between the date of the short sale and the date on which the Fund
replaces the borrowed security. The Funds will realize a gain if the security
declines in price between those dates. This result is the opposite of what one
would expect from a cash purchase of a long position in a security. The amount
of any gain will be decreased, and the amount of any loss increased, by the
amount of any premium, dividends or interest the Fund may be required to pay in
connection with a short sale. No more than 25% of a Fund's net assets will be,
when added together: (i) deposited as collateral for the obligation to replace
securities borrowed to effect short sales; and (ii) allocated to segregated
accounts in connection with short sales. Short sales against-the-box are not
subject to this 25% limit.
In a short sale "against-the-box," a Fund enters into a short
sale of a security which the Fund owns or has the right to obtain at no added
cost. Not more than 25% of a Fund's net assets (determined at the time of the
short sale against-the-box) may be subject to such sales.
LOANS OF PORTFOLIO SECURITIES. (All Funds). The Funds may lend
their portfolio securities to brokers, dealers and financial institutions,
provided: (1) the loan is secured continuously by collateral consisting of U.S.
Government securities or cash or letters of credit maintained on a daily
mark-to-market basis in an amount at least equal to the current market value of
the securities loaned; (2) the Funds may at any time call the loan and obtain
the return of the securities loaned within five business days; (3) the Funds
will receive any
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interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities loaned will not at any time exceed one-third of the
total assets of a particular Fund.
The Funds will earn income for lending their securities
because cash collateral pursuant to these loans will be invested in short-term
money market instruments. In connection with lending securities, the Funds may
pay reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
REPURCHASE AGREEMENTS. (All Funds including the Fund of
Funds). The Funds may invest in securities subject to repurchase agreements with
U.S. banks or broker-dealers. Such agreements may be considered to be loans by
the Funds for purposes of the 1940 Act. A repurchase agreement is a transaction
in which the seller of a security commits itself at the time of the sale to
repurchase that security from the buyer at a mutually agreed upon time and
price. The repurchase price exceeds the sale price, reflecting an agreed-upon
interest rate effective for the period the buyer owns the security subject to
repurchase. The agreed-upon rate is unrelated to the interest rate on that
security. Each Fund's Sub-Adviser will monitor the value of the underlying
security at the time the transaction is entered into and at all times during the
term of the repurchase agreement to ensure that the value of the security always
equals or exceeds the repurchase price. In the event of default by the seller
under the repurchase agreement, the Funds may have problems in exercising their
rights to the underlying securities and may incur costs and experience time
delays in connection with the disposition of such securities.
BORROWING. (All Funds including the Fund of Funds). A Fund may
borrow from banks up to 33 1/3% of the current value of its net assets to
purchase securities and for temporary or emergency purposes and those borrowings
may be secured by the pledge of not more than 33 1/3% of the current value of
that Fund's net assets.
REVERSE REPURCHASE AGREEMENTS (All Funds). A Fund may borrow
funds by selling portfolio securities to financial institutions such as banks
and broker/dealers and agreeing to repurchase them at a mutually specified date
and price ("reverse repurchase agreements"). Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the repurchase price. A Fund will pay interest on amounts obtained
pursuant to a reverse repurchase agreement. While reverse repurchase agreements
are outstanding, a Fund will maintain in a segregated account, other liquid
assets (as determined by the Board) of an amount at least equal to the market
value of the securities, plus accrued interest, subject to the agreement.
LOWER-RATED SECURITIES. (ING Emerging Markets Equity Fund, ING
High Yield Bond Fund, ING Intermediate Bond Fund and ING International Bond
Fund). Lower-rated securities are lower-rated bonds commonly referred to as junk
bonds or high-yield/high-risk securities. These securities are rated below Baa
by Moody's or below BBB by S&P. As described in the Prospectus, certain of the
Funds may invest in lower rated and unrated securities of comparable quality
subject to the restrictions stated in the Prospectus.
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Growth of High-Yield High-Risk Bond Market. The widespread
expansion of government, consumer and corporate debt within the U.S. economy has
made the corporate sector more vulnerable to economic downturns or increased
interest rates. Further, an economic downtown could severely disrupt the market
for lower-rated bonds and adversely affect the value of outstanding bonds and
the ability of the issuers to repay principal and interest. The market for
lower-rated securities may be less active, causing market price volatility and
limited liquidity in the secondary market. This may limit the Funds' ability to
sell such securities at their market value. In addition, the market for these
securities may be adversely affected by legislative and regulatory developments.
Credit quality in the junk bond market can change suddenly and unexpectedly, and
even recently issued credit ratings may not fully reflect the actual risks
imposed by a particular security.
Sensitivity to Interest Rate and Economic Changes. Lower rated
bonds are very sensitive to adverse economic changes and corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay interest
or principal or entered into bankruptcy proceedings, the Fund may incur losses
or expenses in seeking recovery of amounts owed to it. In addition, periods of
economic uncertainty and change can be expected to result in increased
volatility of market prices of high-yield, high-risk bonds and the Fund's net
asset value.
Payment Expectations. High-yield, high-risk bonds may contain
redemption or call provisions. If an issuer exercised these provisions in a
declining interest rate market, the Fund would have to replace the security with
a lower yielding security, resulting in a decreased return for investors.
Conversely, a high-yield, high-risk bond's value will decrease in a rising
interest rate market, as will the value of the Fund's assets. If the Fund
experiences significant unexpected net redemptions, this may force it to sell
high-yield, high-risk bonds without regard to their investment merits, thereby
decreasing the asset base upon which expenses can be spread and possibly
reducing the Fund's rate of return.
Liquidity and Valuation. There may be a little trading in the
secondary market for particular bonds, which may affect adversely the Fund's
ability to value accurately or dispose of such bonds. Adverse publicity and
investor perception, whether or not based on fundamental analysis, may decrease
the values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
ILLIQUID SECURITIES (All Funds including Fund of Funds).. Each
Fund has adopted a non-fundamental policy with respect to investments in
illiquid securities. Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended ("Securities Act"),
securities that are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities that have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because
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of the potential for delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of portfolio
securities and a mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. A mutual fund
might also have to register such restricted securities in order to dispose of
them resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the Securities
Act, including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on either an efficient institutional market in which the unregistered
security can be readily resold or on the issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.
Each Fund may also invest in restricted securities issued
under Section 4(2) of the Securities Act ("Section 4(2)"), which exempts from
registration "transactions by an issuer not involving any public offering."
Section 4(2) instruments are restricted in the sense that they can only be
resold through the issuing dealer and only to institutional investors; they
cannot be resold to the general public without registration. Restricted
securities issued under Section 4(2) (other than certain commercial paper issued
pursuant to Section 4(2) discussed below) will be treated as illiquid and
subject to the Fund's investment restriction on illiquid securities.
Pursuant to procedures adopted by the Board of Trustees, the
Funds may treat certain commercial paper issued pursuant to Section 4(2) as a
liquid security and not subject to the Funds' investment restriction on illiquid
investments. Section 4(2) commercial paper may be considered liquid only if all
of the following conditions are met: (i) the Section 4(2) commercial paper must
not be traded flat (i.e. without accrued interest) or be in default as to
principal or interest; and (ii) the Section 4(2) commercial paper must be rated
in one of the two highest rating categories by at least two NRSROs, or if only
NRSRO rates the security, by that NRSRO, or if the security is unrated, the
security has been determined to be of equivalent quality.
The SEC has adopted Rule 144A, which allows a broader
institutional trading market for securities otherwise subject to restrictions on
resale to the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act applicable to resales of certain
securities to qualified institutional buyers. It is the intent of the Funds to
invest, pursuant to procedures established by the Board of Trustees and subject
to applicable investment restrictions, in securities eligible for resale under
Rule 144A which are determined to be liquid based upon the trading markets for
the securities.
Pursuant to guidelines adopted by and under the supervision of
the Board of Trustees, the Sub-Adviser will monitor the liquidity of restricted
securities in a Fund's portfolio. In reaching liquidity decisions, the
Sub-Adviser will consider, among other things, the following factors: (1) the
frequency of trades and quotes for the security over the course of
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six months or as determined in the discretion of the Sub-Adviser; (2) the number
of dealers wishing to purchase or sell the security and the number of other
potential purchasers over the course of six months or as determined in the
discretion of the Sub-Adviser; (3) dealer undertakings to make a market in the
security; (4) the nature of the security and the marketplace in which it trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer); and (5) other factors, if any, which
the Sub-Adviser deems relevant.
Rule 144A securities and Section 4(2) commercial paper which
are determined to be liquid based upon their trading markets will not, however,
be required to be included among the securities considered to be illiquid.
Investments in Rule 144A securities and Section 4(2) commercial paper could have
the effect of increasing Fund illiquidity.
ADDITIONAL RISK CONSIDERATIONS
The following pages discuss the Additional Risk Considerations
associated with certain of the types of securities in which the Funds or the
underlying funds of the Fund of Funds may invest and certain of the investment
practices that the Funds or the underlying funds of the Fund of Funds may use.
The following descriptions apply to all Funds and underlying funds of the Fund
of Funds as indicated. THEY DO NOT DIRECTLY APPLY TO THE FUND OF FUNDS UNLESS
OTHERWISE INDICATED.
GENERAL (including the Fund of Funds). The price per share of
each of the Funds will fluctuate with changes in value of the investments held
by the Fund. For example, the value of a Fund's shares will generally fluctuate
inversely with the movements in interest rates. Shareholders of a Fund should
expect the value of their shares to fluctuate with changes in the value of the
securities owned by the Fund. There is, of course, no assurance that a Fund will
achieve its investment objective or be successful in preventing or minimizing
the risk of loss that is inherent in investing in particular types of investment
products. In order to attempt to minimize that risk, the Sub-Adviser monitors
developments in the economy, the securities markets, and with each particular
issuer. Also, as noted earlier, each diversified Fund (i.e., all funds except
the ING Global Brand Names Funds, ING Focus Fund, ING Internet Fund, ING
International Bond Fund and the Fund of Funds) is managed within certain
limitations that restrict the amount of the Fund's investment in any single
issuer. The ING Money Market Fund will attempt to maintain a stable $1.00 net
asset value per share.
EQUITY SECURITIES. Investments in equity securities in general
are subject to market risks that may cause their prices to fluctuate over time.
The value of convertible equity securities is also affected by prevailing
interest rates, the credit quality of the issuer and any call provisions.
Fluctuations in the value of equity securities in which a Fund invests will
cause the net asset value of the Fund to fluctuate.
Investments in mid- and small-capitalization companies involve
greater risk than is customarily associated with larger, more established
companies due to the greater business risks of small size, limited markets and
financial resources, narrow product lines and the frequent lack of depth of
management. The securities of smaller companies are often traded
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over-the-counter and may not be traded in volumes typical on a national
securities exchange. Consequently, the securities of smaller companies may have
limited market stability and may be subject to more abrupt or erratic market
movements than securities of larger, more established growth companies or the
market averages in general.
REAL ESTATE SECURITIES. While the Funds will not invest in
real estate directly, the Funds may be subject to risks similar to those
associated with the direct ownership of real estate (in addition to securities
markets risks) because of its policy of concentration in the securities of
companies in the real estate industry. These risks include declines in the value
of real estate, risks related to general and local economic conditions,
dependency on management skill, heavy cash flow dependency, possible lack of
availability of mortgage funds, overbuilding, extended vacancies of properties,
increased competition, increases in property taxes and operating expenses,
changes in zoning laws, losses due to costs resulting from the clean-up of
environmental problems, liability to third parties for damages resulting from
environmental problems, casualty or condemnation losses, limitations on rents,
changes in neighborhood values and in the appeal of properties to tenants and
changes in interest rates.
In addition to these risks, Equity REITs may be affected by
changes in the value of the underlying property owned by the trusts, while
Mortgage REITs may be affected by the quality of any credit they extend.
Further, Equity REITs and Mortgage REITs are dependent upon management skills
and generally may not be diversified. Equity REITs and Mortgage REITs are also
subject to heavy cash flow dependency, defaults by borrowers and
self-liquidation. In addition, Equity REITs and Mortgage REITs could possibly
fail to qualify for tax-free pass-through of income under the Code or to
maintain their exemptions from registration under the 1940 Act. The above
factors may also adversely affect a borrower's or a lessee's ability to meet its
obligations to the REIT. In the event of a default by a borrower or lessee, the
REIT may experience delays in enforcing its rights as a mortgagee or lessor and
may incur substantial costs associated with protecting its investments. In
addition to the foregoing risks, certain "special purpose" REITs may invest
their assets in specific real estate sectors, such as hotel REITs, nursing home
REITs or warehouse REITs, and are therefore subject to the risks associated with
adverse developments in any such sectors.
FOREIGN SECURITIES. Investing in the securities of issuers in
any foreign country including ADRs and EDRs involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards;
generally higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or
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quoted in currencies other than the U.S. dollar. The Funds' investments may be
affected either unfavorably or favorably by fluctuations in the relative rates
of exchange between the currencies of different nations, by exchange control
regulations and by indigenous economic and political developments.
FIXED INCOME SECURITIES. The market value of a Fund's fixed
income investments will change in response to interest rate changes and other
factors. During periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the values of such securities generally decline. Securities with
longer maturities are subject to greater fluctuations in value than securities
with shorter maturities. Changes by an NRSRO in the rating of any fixed income
security and in the ability of an issuer to make payments of interest and
principal also affect the value of these investments. Changes in the value of a
Fund's securities will not affect cash income derived from these securities but
will affect the Fund's net asset value.
Securities held by a Fund that are guaranteed by the U.S.
Government, its agencies or instrumentalities guarantee only the payment of
principal and interest on the guaranteed securities, and do not guarantee the
securities' yield or value or the yield or value of a Fund's shares.
OPTIONS AND FUTURES CONTRACTS. One risk involved in the
purchase and sale of futures and options is that a Fund may not be able to
effect closing transactions at a time when it wishes to do so. Positions in
futures contracts and options on futures contracts may be closed out only on an
exchange or board of trade that provides an active market for them, and there
can be no assurance that a liquid market will exist for the contract or the
option at any particular time. To mitigate this risk, each Fund will ordinarily
purchase and write options only if a secondary market for the options exists on
a national securities exchange or in the over-the-counter market. Another risk
is that during the option period, if a Fund has written a covered call option,
it will have given up the opportunity to profit from a price increase in the
underlying securities above the exercise price in return for the premium on the
option (although the premium can be used to offset any losses or add to a Fund's
income) but, as long as its obligation as a writer continues, such Fund will
have retained the risk of loss should the price of the underlying security
decline. Investors should note that because of the volatility of the market
value of the underlying security, the loss from investing in futures
transactions is potentially unlimited. In addition, a Fund has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once a Fund has received an exercise notice, it cannot effect a closing
transaction in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price.
The Funds' successful use of stock index futures contracts,
options on such contracts and options on indices depends upon the ability of the
Sub-Adviser to predict the direction of the market and is subject to various
additional risks. The correlation between movements in the price of the futures
contract and the price of the securities being hedged is imperfect and the risk
from imperfect correlation increases in the case of stock index futures as the
composition of the Funds' portfolios diverge from the composition of the
relevant index. Such imperfect correlation may prevent the Funds from achieving
the intended hedge or may expose the Funds to risk of loss. In addition, if the
Funds purchase futures to hedge against
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market advances before they can invest in common stock in an advantageous manner
and the market declines, the Funds might create a loss on the futures contract.
Particularly in the case of options on stock index futures and on stock indices,
the Funds' ability to establish and maintain positions will depend on market
liquidity. The successful utilization of options and futures transactions
requires skills different from those needed in the selection of the Funds'
portfolio securities. The Funds believe that the Sub-Adviser possesses the
skills necessary for the successful utilization of such transactions.
The Funds are permitted to engage in bona fide hedging
transactions (as defined in the rules and regulations of the Commodity Futures
Trading Commission) without any quantitative limitations. Futures and related
option transactions which are not for bona fide hedging purposes may be used
provided the total amount of the initial margin and any option premiums
attributable to such positions does not exceed 5% of each Fund's liquidating
value after taking into account unrealized profits and unrealized losses, and
excluding any in- the-money option premiums paid. The Funds will not market, and
are not marketing, themselves as commodity pools or otherwise as vehicles for
trading in futures and related options. The Funds will segregate liquid assets
such as cash, U.S. Government securities or other liquid high grade debt
obligations to cover the futures and options.
TECHNIQUES INVOLVING LEVERAGE . Utilization of leveraging
involves special risks and may involve speculative investment techniques.
Certain Funds may borrow for other than temporary or emergency purposes, lend
their securities, enter reverse repurchase agreements, and purchase securities
on a when issued or forward commitment basis. In addition, certain Funds may
engage in dollar roll transactions. Each of these transactions involve the use
of "leverage" when cash made available to the Fund through the investment
technique is used to make additional portfolio investments. The Funds use these
investment techniques only when the Sub-Adviser believes that the leveraging and
the returns available to the Fund from investing the cash will provide
shareholders a potentially higher return.
Leverage exists when a Fund achieves the right to a return on
a capital base that exceeds the investment the Fund has invested. Leverage
creates the risk of magnified capital losses which occur when losses affect an
asset base, enlarged by borrowings or the creation of liabilities, that exceeds
the equity base of the Fund. Leverage may involve the creation of a liability
that requires the Fund to pay interest (for instance, reverse repurchase
agreements) or the creation of a liability that does not entail any interest
costs (for instance, forward commitment transactions).
The risks of leverage include a higher volatility of the net
asset value of a Fund's shares and the relatively greater effect on the net
asset value of the shares caused by favorable or adverse market movements or
changes in the cost of cash obtained by leveraging and the yield obtained from
investing the cash. So long as a Fund is able to realize a net return on its
investment portfolio that is higher than interest expense incurred, if any,
leverage will result in higher current net investment income being realized by
such Fund than if the Fund were not leveraged. On the other hand, interest rates
change from time to time as does their relationship to each other depending upon
such factors as supply and demand, monetary and tax policies and investor
expectations. Changes in such factors could cause the relationship
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between the cost of leveraging and the yield to change so that rates involved in
the leveraging arrangement may substantially increase relative to the yield on
the obligations in which the proceeds of the leveraging have been invested. To
the extent that the interest expense involved in leveraging approaches the net
return on a Fund's investment portfolio, the benefit of leveraging will be
reduced, and, if the interest expense on borrowings were to exceed the net
return to shareholders, such Fund's use of leverage would result in a lower rate
of return than if the Fund were not leveraged. Similarly, the effect of leverage
in a declining market could be a greater decrease in net asset value per share
than if a Fund were not leveraged. In an extreme case, if a Fund's current
investment income were not sufficient to meet the interest expense of
leveraging, it could be necessary for such Fund to liquidate certain of its
investments at an inappropriate time. The use of leverage may be considered
speculative.
NON-DIVERSIFIED INVESTMENT COMPANIES (Fund of Funds, ING
Global Brand Names Funds, ING Focus Fund, ING Internet Fund and ING
International Bond Fund). The Funds are classified as non-diversified investment
companies under the 1940 Act, which means that each Fund is not limited by the
1940 Act in the proportion of its assets that it may invest in the obligations
of a single issuer. In addition, under Section 12d(l)(G) of the 1940 Act, each
Fund of Fund may invest substantially all of its assets in the underlying funds.
The investment of a large percentage of a Fund's assets in the securities of a
small number of issuers may cause that Fund's share price to fluctuate more than
that of a diversified investment company.
CONCENTRATION (Fund of Funds, ING Global Information
Technology Fund, ING Global Communications Fund and ING Internet Fund). The
Funds "concentrate" (for purposes of the 1940 Act) their assets in securities
related to a particular sector or industry, which means that at least 25% of its
assets will be invested in these assets at all times. Because of the investment
objectives and policies of the Fund of Funds, each will each concentrate more
than 25% of their assets in the mutual fund industry. As a result, each Fund may
be subject go greater market fluctuation than a fund which has securities
representing a broader range of investment alternatives.
PORTFOLIO TURNOVER (including the Fund of Funds). Each Fund
will adjust its portfolio as it deems advisable in view of prevailing or
anticipated market conditions or fluctuations in interest rates to accomplish
its respective investment objective. For example, each Fund may sell portfolio
securities in anticipation of an adverse market movement. Other than for tax
purposes, frequency of portfolio turnover will not be a limiting factor if a
Fund considers it advantageous to purchase or sell securities. The Funds do not
anticipate that the respective annual portfolio turnover rates will exceed the
following: ING Large Cap Growth Fund 100%; ING Growth & Income Fund 100%; ING
Mid Cap Growth Fund 100%; ING Small Cap Growth Fund 100%; ING Global Brand Names
Funds 100%; ING International Equity Funds 200%; ING European Equity Fund 100%;
ING Emerging Markets Equity Fund 200%; ING Focus Fund, 100%; ING Global
Information Technology Fund 100%; ING Global Communications Funds 100%; ING
Internet Fund, 250%; ING Intermediate Bond Fund 300%; ING High Yield Bond Fund
350%; ING International Bond Fund 150%;, and each of the Fund of Funds, 50%. A
high rate of portfolio turnover involves correspondingly greater transaction
expenses than a lower rate, which expenses must be borne by each Fund and its
shareholders.
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INVESTMENT RESTRICTIONS
The Funds have adopted investment restrictions numbered 1
through 8 as fundamental policies, which cannot be changed without approval by
the holders of a majority (as defined in the 1940 Act) of a Fund's outstanding
voting shares. Investment restriction number 9 is not a fundamental policy and
may be changed by vote of a majority of the members of the Board of Trustees at
any time.
Each Fund, except as indicated, may not:
(1) Borrow money, except to the extent permitted under the
1940 Act (which currently limits borrowing to no more than 33-1/3% of the value
of a Fund's total assets). For purposes of this Investment Restriction, the
entry into reverse repurchase agreements, options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices shall not constitute borrowing.
(2) Issue senior securities, except insofar as a Fund may be
deemed to have issued a senior security in connection with any repurchase
agreement or any permitted borrowing;
(3) Make loans, except loans of portfolio securities and
except that a Fund may enter into repurchase agreements with respect to its
portfolio securities and may purchase the types of debt instruments described in
its Prospectus or this SAI;
(4) Invest in companies for the purpose of exercising control
or management;
(5) Purchase, hold or deal in real estate, or oil, gas or
other mineral leases or exploration or development programs, but a Fund may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate or real estate investment trusts.
(6) Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(7) Purchase securities on margin, except that a Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities;
(8) Purchase a security if, as a result, more than 25% of the
value of its total assets would be invested in securities of one or more issuers
conducting their principal business activities in the same industry, provided
that (a) this limitation shall not apply to obligations issued or guaranteed by
the U.S. Government or its agencies and instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their parents;
(c) utilities will be divided according to their services.
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(9) Invest more than 15%, 10% in the case of the ING Money
Market Fund, of the value of its net assets in investments which are illiquid
(including repurchase agreements having maturities of more than seven calendar
days, variable and floating rate demand and master demand notes not requiring
receipt of principal note amount within seven days' notice and securities of
foreign issuers which are not listed on a recognized domestic or foreign
securities exchange).
In addition, all Funds except for the Fund of Funds and ING
Global Brand Names Funds are diversified funds. As such, each will not, with
respect to 75% of their total assets, invest more than 5% of its total assets in
the securities of any one issuer (except for U.S. Government securities) or
purchase more than 10% of the outstanding voting securities of any one issuer.
Each Fund, except ING International Equity, will only purchase
fixed income securities that are rated investment grade, i.e., rated at least
BBB by S&P or Baa by Moody's, or have an equivalent rating from another NRSRO,
or if unrated, are determined to be of comparable quality by the Sub-Adviser.
The ING International Equity Fund will only purchase fixed income securities
that are rated at least AA+ by S&P or Aa-2 by Moody's, or have an equivalent
rating from another NRSRO, or if unrated, are determined to be of comparable
quality by the Sub-Adviser. Money market securities, certificates of deposit,
banker's acceptance and commercial paper purchased by the Stock Funds must be
rated in one of the two top rating categories by an NRSRO or, if not rated,
determined to be of comparable quality by the Stock Fund's Sub-Adviser.
If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of a Fund's investments will not constitute a violation of
such limitation, except that any borrowing by a Fund that exceeds the
fundamental investment limitations stated above must be reduced to meet such
limitations within the period required by the 1940 Act (currently three days).
Otherwise, a Fund may continue to hold a security even though it causes the Fund
to exceed a percentage limitation because of fluctuation in the value of the
Fund's assets.
MANAGEMENT
Trustees and Officers
The business and affairs of the Funds are managed under the
direction of the Board of Trustees. The principal occupations of the Trustees
and executive officers of the Funds for the past five years are listed below.
The address of each, unless otherwise indicated, is 1475 Dunwoody Drive, West
Chester, PA 19380. Trustees deemed to be "interested persons" of the Funds for
purposes of the 1940 Act are indicated by an asterisk.
Trustees Biographies
John J. Pileggi,* Trustee, Chairman of the Board and President
- - Age 41. President and Chief Executive Officer of ING Mutual Funds Management
Co. LLC (1998-
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present); Director, President and Chief Executive Officer, ING Funds
Distributor, Inc. (1999-present); Chief Executive Officer of ING Fund Services
Co. LLC (1998-present); Director of Furman Selz LLC (1994-present). Mr. Pileggi
is also a Trustee of the First Choice Funds, Intrust Funds and the Performance
Funds.
Joseph N. Hankin, Trustee - Age 60, Four Merion Drive,
Purchase, NY 10577-1302. President, Westchester Community College (since 1971);
Adjunct Professor of Columbia University Teachers College (since 1976). Dr.
Hankin is also a Trustee of the First Choice Funds.
Jack D. Rehm, Trustee - Age 67, 3131 Fleur Drive, Des Moines,
IA 50321. Chairman of the Board (Retired) of Meredith Corp. (1992-1997);
President and Chief Executive Officer of Meredith Corp. (1989-1996). Mr. Rehm is
also a Director of Meredith Corp., International Multifoods Corp. and Star Tek,
Inc.
Blaine E. Rieke, Trustee - Age 66, 6111 North Berkeley Blvd.,
Milwaukee, WI 53217. General Partner of Huntington Partners (1997-present);
Chairman and Chief Executive Officer of Firstar Trust Company (1973-1996).
Richard A. Wedemeyer, Trustee - Age 63, 78 Summit Road,
Riverside, CT 06878. Vice President, The Channel Corporation (1996-present);
Vice President of Performance Advantage, Inc. (1992-1996); Vice President,
Operations and Administration of Jim Henson Productions (1979-1997). Mr.
Wedemeyer is also a Trustee of the First Choice Funds.
Officers Biographies
John J. Pileggi, President and Chief Executive Officer - Age
41. See above.
Donald Brostrom, Treasurer - Age 41. Executive Vice President
and Chief Operating Officer, ING Mutual Funds Management Co. LLC (1998-present);
Chief Financial Officer of ING Fund Services Co. LLC. (1998-present); Director,
Treasurer and Chief Financial Officer, ING Funds Distributor, Inc.
(1999-present); Managing Director, Furman Selz LLC (1984-1998).
Louis S. Citron, Vice President - Age 35. Senior Vice
President and General Counsel, ING Mutual Funds Management Co. LLC
(1998-present); Vice President of ING Fund Services Co. LLC. (1998-present);
Attorney at Kramer, Levin, Naftalis & Frankel (1994-1998).
Ralph G. Norton, III, Vice President - Age 40. Vice President
and Chief Investment Officer, ING Mutual Funds Management Co. LLC
(1999-present); Managing Editor, Standard & Poor's (1996-1999); Vice President,
IBC Financial Data (1992-1996).
Rachelle I. Rehner, Secretary - Age 38. Fund Legal Manager,
ING Mutual Funds Management Co. LLC (1998-present); Secretary, ING Funds
Distributor, Inc. (1999-present); ); Secretary, ING Fund Services Co. LLC
(1998-present); Senior Legal Assistant, Kramer, Levin, Naftalis & Frankel
(1995-1998); Compliance Administrator, BISYS Funds Services (1994-1995).
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Charles Eng, Assistant Treasurer - Age 36. Fund Accounting
Manager, ING Mutual Funds Management Co. LLC (1998-present); Assistant
Treasurer, Chase Manhattan Bank (1997-1998); Assistant Manager, BISYS Fund
Services (1996-1997); Associate Director, Furman Selz LLC (1992-1996).
Amy Lau, Assistant Treasurer - Age 34. Fund Administration
Manager, ING Mutual Funds Management Co. LLC (1998-present); Assistant Vice
President, Smith Barney Asset Management (1996-1998); Associate Director, Furman
Selz LLC (1992-1995).
Trustees of the Funds not affiliated with IMFC or IFD receive from the
Funds an annual retainer of $2,500.00 and a fee of $625.00 for Board of Trustees
meetings and Board committee meeting of the Funds attended and are reimbursed
for all out-of-pocket expenses relating to attendance at such meetings. Trustees
who are affiliated with IMFC or IFD do not receive compensation from the Funds.
Investment Manager
ING Mutual Funds Management Co. LLC, 1475 Dunwoody Drive, West Chester,
PA 19380, serves as the Manager of the Funds. IMFC is a wholly owned subsidiary
of ING America Insurance Holdings, Inc. which in turn is a wholly owned
subsidiary of ING Groep N.V. ("ING Group"). Under the Management Agreement, IMFC
has overall responsibility, subject to the supervision of the Board of Trustees,
for engaging Sub-advisers and for monitoring and evaluating the management of
the assets of each Fund by the Sub-Adviser, as well as performing the necessary
allocations in relation to the Fund of Funds. The Manager will make
recommendations to the Board of Trustees concerning changes to (a) the
underlying funds in which the Fund of Funds may invest, (b) the percentage range
of assets that may be invested by each Fund of Fund in any one underlying fund
and (c) the percentage range of assets of any Fund of Fund that may be invested
in equity funds and fixed income funds (including money market funds). The
Manager is also responsible for monitoring and evaluating the Sub-Advisers on a
periodic basis, and will consider their performance records with respect to the
investment objectives and policies of each Fund. The Sub-Advisers are affiliated
with the Manager and the Distributor by reason of common ownership. IMFC also
provides certain administrative services necessary for the Funds' operations
including: (i) coordination of the services performed by the Funds' transfer
agent, custodian, independent accountants and legal counsel; (ii) regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions; (iii)
preparation of proxy statements and shareholder reports for the Funds; (iv)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Funds' officers and Board of
Trustees; and (v) furnishing office space and certain facilities required for
conducting the business of the Funds.
Pursuant to the Management Agreement, the Manager is
authorized to exercise full investment discretion and make all determinations
with respect to the investment of a Fund's assets and the purchase and sale of
portfolio securities for one or more Funds in the event that at any time no
Sub-Adviser is engaged to manage the assets of a Fund. The Management Agreement
may be terminated without penalty by the vote of the Board of
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Trustees or the shareholders of the Fund or by the Manager, upon 60 days'
written notice by any party to the agreement, and will terminate automatically
if assigned as that term is described in the 1940 Act.
The Management Agreement provides that the Manager shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Funds in connection with its performance of services pursuant to the
Management Agreement, except loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the investment adviser in the performance of
its obligations under the Advisory Agreement.
The Manager also serves as investment adviser to each of the
underlying funds in which the Fund of Funds may invest and is responsible for
the selection and management of each of the underlying fund's investments.
Decisions to buy and sell shares of the underlying funds for the Funds of Funds
are made by Investment Manager, subject to the overall supervision and review of
the portfolios' Board of Directors.
Each Fund of Fund, as a shareholder in the underlying funds,
will indirectly bear its proportionate share of any investment management fees
and other expenses paid by the underlying funds. The effective management fee of
each of the underlying funds in which the portfolios may invest is set forth
below as a percentage rate of the fund's average net assets:
<TABLE>
<CAPTION>
UNDERLYING FUND MANAGEMENT FEES
<S> <C>
ING Large Cap Growth Fund 0.75%
ING Growth & Income Fund 0.75%
ING Mid Cap Growth Fund 1.00%
ING Small Cap Growth Fund 1.00%
ING Global Brand Names Fund 1.00%
ING International Equity Fund 1.25%
ING European Equity Fund 1.15%
ING Focus Fund 1.00%
ING Global Information Technology Fund 1.25%
ING Internet Fund 1.25%
ING Emerging Markets Equity Fund 1.25%
ING Global Communications Fund 1.00%
ING Intermediate Bond Fund 0.50%
ING High Yield Fund 0.65%
ING International Bond Fund 1.00%
ING Money Market Fund 0.25%
</TABLE>
An affiliate of the Manager has made a significant investment
in the underlying funds. The affiliate may redeem its investment in the
applicable Funds at any time. Such redemption may have an adverse effect on such
Funds. In addition, certain provisions of the 1940 Act may prohibit the Funds
from investing in securities issued by affiliates of the ING Group. Such
restrictions may adversely effect the Funds.
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Sub-Advisers
ING Investment Management LLC ("IIM") serves as Sub-Adviser to
the ING Growth & Income Fund. Located in Atlanta, Georgia, IIM is a Delaware
limited liability company which is engaged in the business of providing
investment advice to affiliated insurance companies.
Baring International Investment Limited ("BIIL") serves as
Co-Sub-Adviser to the ING International Equity Fund. Located in London, BIIL is
a wholly-owned subsidiary of Baring Asset Management Holdings Limited ("BAMHL"),
the parent of the worldwide group of investment management companies that
operate under the collective name, Baring Asset Management (the "BAM Group").
Baring Asset Management, Inc. ("BAM") serves as Sub-Adviser to
the ING Large Cap Growth Fund and acts as Co-Sub-Adviser to the ING
International Equity Fund. Located at 125 High Street, Boston, Massachusetts
02110, BAM is a wholly-owned subsidiary of BAMHL.
Baring Asset Management (Asia) Limited ("BAML") acts as
Co-Sub-Adviser to the ING International Equity Fund. BAML is located at 19/F
Edinburgh Tower, The Landmark, 15 Queens Road, Central, Hong Kong. BAML is a
wholly-owned subsidiary of BAMHL.
ING Investment Management Advisors B.V. ("IIMA"), serves as
Sub-Adviser to the ING Global Brand Names Fund. Located at Schenkkade 65, 2595
AS, The Hague, The Netherlands, IIMA operates under the collective management of
ING Investment Management.
Distribution of Fund Shares
ING Funds Distributor, Inc., 1475 Dunwoody Drive, West
Chester, PA 19380, serves as distributor and principal underwriter of the Funds.
As distributor, IFD is obligated to sell shares of each Fund on a best efforts
basis only against purchase orders for the shares. Shares of each Fund are
offered on a continuous basis. IFD is affiliated with the Manager and the
Sub-Advisers by reason of common ownership.
Transfer Agent, Fund Accountant and Account Services
ING Fund Services Co. LLC ("ING Fund Services") has entered
into a Fund Services Agreement with the Funds pursuant to which ING Fund
Services will perform or engage third parties to perform transfer agency, fund
accounting and other services. ING Fund Services is an affiliate of the Manager
and the Distributor by reason of common ownership. Under the Fund Services
Agreement, each Fund may pay ING Fund Services annually up to $40,000 for fund
accounting services plus out-of-pocket expenses, $17 per account for transfer
agency services plus out-of-pocket expenses. ING Fund Services may engage third
parties to perform some or all of these services. ING Fund Services has retained
DST Systems, Inc. ("DST") to act as the Funds' transfer agent and PFPC Inc.
("PFPC") to act as the Funds' fund accounting agent. DST is located at 333 W.
11th Street, Kansas City, Missouri 64105, and PFPC
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is located at 400 Bellvue Parkway, Wilmington, DE 19809. For their services as
transfer agent and fund accounting agent, DST and PFPC, respectively, receive a
fee from ING Fund Services (and not the Funds) on a monthly basis.
Rule 12b-1 Distribution Plan
Pursuant to a Plan of Distribution adopted by each Fund under
Rule 12b-1 under the 1940 Act, each Fund pays the Distributor an annual fee of
0.25% of average net assets attributable to that Fund's shares.
The distribution fee may be used by the Distributor for the
purpose of financing any activity which is primarily intended to result in the
sale of shares of the applicable Fund. For example, such distribution fee may be
used by the Distributor to compensate broker-dealers, including the Distributor
and its registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other financial institutions, and to pay other advertising and
promotional expenses in connection with the distribution of Fund shares. These
advertising and promotional expenses include, by way of example but not by way
of limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by the Distributor and affiliated
companies; and compensation paid to and expenses incurred by officers, employees
or representatives of the Distributor or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses. If the distribution plan is terminated by the Funds, the Board of
Trustees may allow the Funds to pay the 12b-1 Fees to the Distributor for
distributing shares before the plan was terminated.
Agreements implementing the Plan of Distribution (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plan of Distribution are made in accordance with written
agreements.
The continuance of the Plan of Distribution and the
Implementation Agreements must be specifically approved at least annually by a
vote of the Trust's Board of Trustees and by a vote of the Trustees who are not
interested persons of the Trust and have no direct or indirect financial
interest in the Plan or any Implementation Agreement (the "Independent
Trustees") at a meeting called for the purpose of voting on such continuance.
The Plan of Distribution may be terminated at any time by a vote of the majority
of the Independent Trustees or by a vote of the holders of a majority of the
outstanding shares of a Fund or the applicable class of a Fund. In the event the
Plan of Distribution is terminated in accordance with its terms, the affected
Fund (or class) will not be required to make any payments for distribution
expenses incurred after the termination date, although the Board of Trustees may
allow the Funds to pay distribution expenses to the Distributor which were
incurred before the Plan was terminated. Each Implementation Agreement
terminates automatically in the event of its assignment and may be terminated at
any time by a vote of the majority of the Independent Trustees or by a vote of
the holders of a majority of the outstanding shares of a Fund (or the applicable
class) on not more than 60 days' written notice to any other party to the
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Implementation Agreement. The Plan of Distribution may not be amended to
increase materially the amount to be spent for distribution without shareholder
approval. All material amendments to the Plan of Distribution must be approved
by a vote of the Trust's Board of Trustees and by a vote of the Independent
Trustees.
In approving the Plan of Distribution, the Trustees
determined, in the exercise of their business judgment and in light of their
fiduciary duties as Trustees, that there is a reasonable likelihood that the
Plan will benefit the Funds and their shareholders. The Board of Trustees
believes that expenditure of the Funds' assets for distribution expenses under
the Plan of Distribution should assist in the growth of the Funds which will
benefit the Funds and their shareholders through increased economies of scale,
greater investment flexibility, greater portfolio diversification and less
chance of disruption of planned investment strategies. The Plan of Distribution
will be renewed only if the Trustees make a similar determination for each
subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plan of Distribution is in effect, all amounts spent by the
Funds pursuant to the Plan and the purposes for which such expenditures were
made must be reported quarterly to the Board of Trustees for its review.
Distribution expenses attributable to the sale of more than one class of shares
of a Fund will be allocated at least annually to each class of shares based upon
the ratio in which the sales of each class of shares bears to the sales of all
of the shares of such Fund. In addition, the selection and nomination of those
Trustees who are not interested persons of the Trust are committed to the
discretion of the Independent Trustees during such period.
John J. Pileggi, as an interested person of the Trust, may be
deemed to have a financial interest in the operation of the Plan of Distribution
and the Implementation Agreements.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund's shares will be determined
on any day that the New York Stock Exchange (the "NYSE") is open. The NYSE is
closed on the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day, and on the preceding Friday or subsequent Monday
when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of each Fund is normally
determined daily as of the close of trading on the NYSE (generally 4:00 p.m.
Eastern time) on each business day of the Funds. For purposes of determining net
asset value per share, futures and options contracts closing prices which are
available 15 minutes after the close of trading of the NYSE will generally be
used. Net asset value per share is determined by dividing the value of the
Fund's securities, cash and other assets (including interest accrued but not
collected), less all its liabilities (including accrued expenses and dividends
payable), by the total number of shares outstanding. Determination of the Fund's
net asset value per share is made in accordance with generally accepted
accounting principles.
The value of each underlying fund will be its net asset value
at the time of
36
<PAGE> 75
computation. Short-term investments that have a maturity of more than 60 days
are valued at prices based on market quotations for securities of similar type,
yield and maturity. Short-term investments that have a maturity of 60 days or
less are valued at amortized cost, which constitutes fair value as determined by
the Board of Trustees of the Trust. Amortized cost involves valuing an
instrument at its original cost to the portfolio and thereafter assuming a
constant amortization to maturity of any discount or premium regardless of the
effect of fluctuating interest rates on the market value of the instrument.
Each equity security held by the Fund is valued at its last
sales price on the exchange where the security is principally traded or, lacking
any sales on a particular day, the security is valued at the closing bid price
on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued at
the mean between the last bid and asked prices based upon quotes furnished by
market makers for such securities. Each security reported on the NASDAQ National
Market System is valued at the last sales price on the valuation date or absent
a last sales price, at the closing bid price on that day. Debt securities are
valued on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance on
quoted prices, and may reflect appropriate factors such as institution-size
trading in similar groups of securities, developments related to special
securities, yield, quality, coupon rate, maturity, type of issue, individual
trading characteristics and other market data. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees of the Trust. Short-term
obligations having 60 days or less to maturity are valued on the basis of
amortized cost. For purposes of determining net asset value per share, futures
and options contracts generally will be valued 15 minutes after the close of
trading of the NYSE.
Generally, trading in foreign securities is substantially
completed each day at various times prior to the close of the NYSE. The values
of such foreign securities used in computing the net asset value of each Fund's
shares are determined at such times as trading is completed. Foreign currency
exchange rates are also generally determined prior the close of the NYSE.
Occasionally, events affecting the values of such foreign securities and such
foreign securities exchange rates may occur after the time at which such values
are determined and prior to the close of the NYSE that will not be reflected in
the computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Prospectus contains a general description of how investors
may buy shares of the Funds and states whether the Funds offer more than one
class of shares. This SAI contains additional information which may be of
interest to investors.
The obligation of each Fund to redeem its shares when called
upon to do so by the shareholder is mandatory with certain exceptions. The Funds
will pay in cash all redemption requests by any shareholder of record, limited
in amount during any 90-day period
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<PAGE> 76
to the lesser of $250,000 or 1% of the net asset value of a Fund at the
beginning of such period. When redemption requests exceed such amount, however,
the Funds reserve the right to make part or all of the payment in the form of
readily marketable securities or other assets of the Fund. An example of when
this might be done is in case of emergency, such as in those situations
enumerated in the following paragraph, or at any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing shareholders.
Any securities being so distributed would be valued in the same manner as the
portfolio of the Fund is valued. If the recipient sold such securities, he or
she probably would incur brokerage charges.
Redemption of shares, or payment, may be suspended at times
(a) when the NYSE is closed for other than customary weekend or holiday
closings, (b) when trading on NYSE is restricted, (c) when an emergency exists,
as a result of which disposal by a Fund of securities owned by it is not
reasonably practicable, or it is not reasonably practicable for a Fund fairly to
determine the value of its net assets, or during any other period when the SEC,
by order, so permits; provided that applicable rules and regulations of the SEC
shall govern as to whether the conditions prescribed in (b) or (c) exist. The
NYSE is not open for business on the following holidays (nor on the nearest
Monday or Friday if the holiday falls on a weekend), on which the Funds will not
redeem shares: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
The Trust offers the shares of the Funds, on a continuous
basis, to both registered and unregistered separate accounts of affiliated and
unaffiliated Participating Insurance Companies to fund variable annuity
contracts (the "Contracts") and variable life insurance policies ("Policies").
Each separate account contains divisions, each of which corresponds to a Fund in
the Trust. Net purchase payments under the Contracts are placed in one or more
of the divisions of the relevant separate account and the assets of each
division are invested in the shares of the Fund which corresponds to that
division. Each separate account purchases and redeems shares of these Funds for
its divisions at net asset value without sales or redemption charges.
The Trust may offer the shares of its Funds to certain pension
and retirement plans ("Plans") qualified under the Internal Revenue Code. The
relationships of Plans and Plan participants to the Fund would be subject, in
part, to the provisions of the individual plans and applicable law. Accordingly,
such relationships could be different from those described in this Prospectus
for separate accounts and owners of Contracts and Policies, in such areas, for
example, as tax matters and voting privileges.
The Board of Trustees monitors for possible conflicts among
separate accounts (and will do so for plans) buying shares of the Funds.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, the Board
of Trustees may require a separate account or Plan to withdraw its participation
in a Fund. A Fund's net asset value could decrease if it had to sell investment
securities to pay redemptions proceeds to a separate account (or plan)
withdrawing because of a conflict.
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<PAGE> 77
Each Fund ordinarily effects orders to purchase or redeem its
shares that are based on transactions under Policies or Contracts (e.g.,
purchase or premium payments, surrender or withdrawal requests, etc.) at the
Fund's net asset value per share next computed on the day on which the separate
account processes such transactions. Each Fund effects orders to purchase or
redeem its shares that are not based on such transactions at the Fund's net
asset value per share next computed on the day on which the Fund receives the
orders.
Please refer to the appropriate separate account prospectus
related to your Contract for more information regarding the Contract.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other
investment advisory clients of the Sub-Adviser are made with a view to achieving
their respective investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular client
involved. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients when
one or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that two
or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a manner which in the
Sub-Adviser's opinion is equitable to each and in accordance with the amount
being purchased or sold by each. There may be circumstances when purchases or
sales of portfolio securities for one or more clients will have an adverse
effect on other clients.
The Funds have no obligation to deal with any dealer or group
of dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Funds' Boards of Trustees, the Sub-Adviser is
primarily responsible for portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Funds to obtain the
best results taking into account the broker-dealer's general execution and
operational facilities, the type of transaction involved and other factors such
as the dealer's risk in positioning the securities. While the Sub-Adviser
generally seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available. The
reasonableness of such spreads or brokerage commissions will be evaluated by
comparing spreads or commissions among brokers or dealers in consideration of
the factors listed immediately above and research services described below.
Purchases and sales of securities will often be principal
transactions in the case of debt securities and equity securities traded
otherwise than on an exchange. The purchase or sale of equity securities will
frequently involve the payment of a commission to a broker-dealer who effects
the transaction on behalf of a Fund. Debt securities normally will be purchased
or sold from or to issuers directly or to dealers serving as market makers for
the securities at a net price. Generally, money market securities are traded on
a net basis and do not involve brokerage commissions. Under the 1940 Act,
persons affiliated with the Funds or the Distributor are prohibited from dealing
with the Funds as a principal in the purchase and
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<PAGE> 78
sale of securities except in limited situations permitted by SEC regulations,
unless an exemptive order allowing such transactions is obtained from the SEC.
The Sub-Adviser may, in circumstances in which two or more
broker-dealers are in a position to offer comparable results, give preference to
a dealer which has provided statistical or other research services to the
Sub-Adviser. By allocating transactions in this manner, the Sub-Adviser is able
to supplement its research and analysis with the views and information of
securities firms. These items, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services are of value to
the Sub-Adviser in advising various of its clients (including the Funds),
although not all of these services are necessarily useful and of value in
managing the Funds. The management fee paid by the Funds is not reduced because
the Sub-Adviser and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act
of 1934 (the "Act"), the Sub-Adviser may cause the Funds to pay a broker-dealer
which provides "brokerage and research services" (as defined in the Act) to the
Sub-Adviser an amount of disclosed commission for effecting a securities
transaction for the Funds in excess of the commission which another
broker-dealer would have charged for effecting that transaction.
The Sub-Adviser may allocate purchase and sales order for
portfolio securities to broker-dealers that are affiliated with the Manager or
the Distributor in agency transactions if the Sub-Adviser believes the quality
of the transaction and commissions are comparable to what they would be with
other qualified brokerage firms.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Sub-Adviser may consider sales of shares of the Funds as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Funds.
Portfolio Turnover
Changes may be made in the portfolio consistent with the
investment objectives and policies of the Funds whenever such changes are
believed to be in the best interests of the Funds and their shareholders.
Portfolio turnover rate is, in general, the percentage computed by taking the
lesser of purchases or sales of portfolio securities (excluding securities with
a maturity date of one year or less at the time of acquisition) for the period
and dividing it by the monthly average of the market value of such securities
during the period.
For purposes of this calculation, portfolio securities exclude
all securities having a maturity when purchased of one year or less.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS. The Funds declare and distribute dividends
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<PAGE> 79
representing substantially all net investment income as follows:
<TABLE>
<CAPTION>
DIVIDEND DECLARED DIVIDENDS
PAID
<S> <C> <C>
ING Large Cap Growth Fund annually annually
ING Growth & Income Fund quarterly quarterly
ING International Equity Fund annually annually
ING Global Brand Names Fund annually annually
ING Income Allocation Fund monthly monthly
ING Balanced Allocation Fund quarterly quarterly
ING Growth Allocation Fund quarterly quarterly
ING Aggressive Growth Allocation Fund annually annually
</TABLE>
All such distributions will be automatically reinvested, at
the election of Participating Insurance Companies, in shares of the Fund issuing
the distribution at the net asset value determined on the reinvestment date.
TAX MATTERS. Each Fund of the Trust is treated as a separate
association taxable as a corporation. Each Fund intends to qualify under the
Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company ("RIC") for each taxable year. As a RIC, a Fund will not be
subject to federal income tax to the extent it distributes to its shareholders
its net investment income and net capital gains.
In order to qualify as a regulated investment company, each
Fund must satisfy certain requirements concerning the nature of its income,
diversification of its assets and distribution of its income to shareholders. In
order to ensure that individuals holding the Contracts whose assets are invested
in a Fund will not be subject to federal income tax on distributions made by the
Fund prior to the receipt of payments under the Contracts, each Fund intends to
comply with additional requirements of Section 817(h) of the Code relating to
both diversification of its assets and eligibility of an investor to be its
shareholder. Certain of these requirements in the aggregate may limit the
ability of a Fund to engage in transactions involving options, futures
contracts, forward contracts and foreign currency and related deposits.
Any Fund's transactions in non-equity options, forward
contracts, futures contracts and foreign currency will be subject to special tax
rules, the effect of which may be to accelerate income to the Fund, defer Fund
losses, cause adjustments in the holding periods of fund securities and convert
short-term capital losses into long-term capital losses. These losses could
therefore affect the amount, timing and character of distributions.
The holding of the foreign currencies and investments by a
Fund in certain "passive foreign investment companies" may be limited in order
to avoid imposition of a tax on such Fund.
Each Fund investing in foreign securities may be subject to
foreign withholding
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<PAGE> 80
taxes on income from its investments. In any year in which more than 50% in
value of a Fund's total assets at the close of the taxable year consists of
securities of foreign corporations, the Fund may elect to treat any foreign
taxes paid by it as if they had been paid by its shareholders. The insurance
company segregated asset accounts holding Fund shares should consider the impact
of this election.
Holders of Contracts under which assets are invested in the
Funds should refer to the prospectus for the Contracts for information regarding
the tax aspects of ownership of such Contracts.
Each Fund is treated as a separate association taxable as a
corporation. Each Fund intends to qualify under the Internal Revenue Code of
1986, as amended (the "Code"), as a regulated investment company ("RIC") for
each taxable year. Accordingly, each Fund must, among other things, meet the
following requirements: A. Each Fund must generally derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities, foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities or currencies. B. Each Fund must diversify its holdings
so that, at the end of each fiscal quarter or within 30 days thereafter: (i) at
least 50% of the market value of the Fund's assets is represented by cash, cash
items (including receivables), U.S. Government securities, securities of other
RICs, and other securities, with such other securities limited, with respect to
any one issuer, to an amount not greater than 5% of the Fund's assets and not
more than 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than U.S. Government securities or securities of other RICs).
The Code imposes a nondeductible 4% excise tax on a RIC that
fails to distribute during each calendar year at least 98% of its ordinary
income for the calendar year, at least 98% of its capital gain net income for
the 12-month period ending on October 31 of the calendar year and certain other
amounts. Each Fund intends to make sufficient distributions to avoid imposition
of the excise tax. Some Funds meet an exception which results in their not being
subject to excise tax.
As a RIC, each Fund will not be subject to federal income tax
on its income and gains distributed to shareholders if it distributes at least
(i) 90% of its investment company taxable income for the taxable year; and (ii)
90% of the excess of its tax-exempt interest income under Code Section 103(a)
over its deductions disallowed under Code Sections 265 and 171(a)(2).
Each Fund intends to comply with the diversification
requirements imposed by Section 817(h) of the Code and the regulations
thereunder. These requirements, which are in addition to the diversification
requirements imposed on each Fund by the 1940 Act and Subchapter M of the Code,
place certain limitations on (i) the assets of the insurance company separate
accounts that may be invested in securities of a single issuer and (ii) eligible
investors. Because Section 817(h) and those regulations treat the assets of each
Fund as assets of the corresponding division of the insurance company separate
accounts, each Fund intends to comply with these diversification requirements.
Specifically, the regulations provide that,
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<PAGE> 81
except as permitted by the "safe harbor" described below, as of the end of each
calendar quarter or within 30 days thereafter no more than 55% of a Fund's total
assets may be represented by any one investment, no more than 70% by any two
investments, no more than 80% by any three investments and no more than 90% by
any four investments. For this purpose, all securities of the same issuer are
considered a single investment, and while each U.S. Government agency and
instrumentality is considered a separate issuer, a particular foreign government
and its agencies, instrumentalities and political subdivisions all will be
considered the same issuer. The regulations also provide that a Fund's
shareholders are limited, generally, to life insurance company separate
accounts, general accounts of the same life insurance company, an investment
adviser or affiliate in connection with the creation or management of a Fund or
the trustee of a qualified pension plan. Section 817(h) provides, as a safe
harbor, that a separate account will be treated as being adequately diversified
if the diversification requirements under Subchapter M are satisfied and no more
than 55% of the value of the account's total assets are cash and cash items,
government securities and securities of other RICs. Failure of a Fund to satisfy
the Section 817(h) requirements would result in taxation of and treatment of the
Contract holders investing in a corresponding division other than as described
in the applicable prospectuses of the various insurance company separate
accounts.
OTHER INFORMATION
Capitalization
The Trust is a Delaware business trust established under a
Trust Instrument dated July 15, 1999 and currently consists of eight separately
managed portfolios, all of which are discussed in this SAI. Each portfolio is
comprised of one class of shares.
The capitalization of the Funds consists solely of an
unlimited number of shares of beneficial interest with a par value of $0.001
each. The Board of Trustees may establish additional Funds (with different
investment objectives and fundamental policies) at any time in the future.
Establishment and offering of additional Funds will not alter the rights of the
shareholders. When issued, shares are fully paid, non-assessable, redeemable and
freely transferable. Shares do not have preemptive rights, conversion rights or
subscription rights. In any liquidation of a Fund, each shareholder is entitled
to receive his pro rata share of the net assets of that Fund.
In the event of a liquidation or dissolution of the Funds or
an individual Fund, shareholders of a particular Fund would be entitled to
receive the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative net asset values of the
respective Funds, of any general assets not belonging to any particular Fund
which are available for distribution. Shareholders of a Fund are entitled to
participate in the net distributable assets of the particular Fund involved in
liquidation, based on the number of shares of the Fund that are held by each
shareholder.
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<PAGE> 82
Code of Ethics
The Code of Ethics of the Manager and the Funds prohibits all
affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of a Fund's planned portfolio
transactions. Both organizations maintain careful monitoring of compliance with
the Code of Ethics.
Voting Rights
Under the Trust Instrument, the Funds are not required to hold
annual meetings of each Fund's shareholders to elect Trustees or for other
purposes. It is not anticipated that the Funds will hold shareholders' meetings
unless required by law or the Trust Instrument. In this regard, the Trust will
be required to hold a meeting to elect Trustees to fill any existing vacancies
on the Board if, at any time, fewer than a majority of the Trustees have been
elected by the shareholders of the Funds. In addition, the Trust Instrument
provides that the holders of not less than two-thirds of the outstanding shares
of the Funds may remove persons serving as Trustee either by declaration in
writing or at a meeting called for such purpose. The Trustees are required to
call a meeting for the purpose of considering the removal of persons serving as
Trustee if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Funds. To the extent required by applicable law,
the Trustees shall assist shareholders who seek to remove any person serving as
Trustee.
The Funds' shares do not have cumulative voting rights, so
that the holder of more than 50% of the outstanding shares may elect the entire
Board of Trustees, in which case the holders of the remaining shares would not
be able to elect any Trustees.
Shareholders of all of the Funds, as well as those of any
other investment portfolio now or hereafter offered by the Fund, will vote
together in the aggregate and not separately on a Fund-by-Fund basis, except as
otherwise required by law or when permitted by the Board of Trustees. Rule 18f-2
under the 1940 Act provides that any matter required to be submitted to the
holders of the outstanding voting securities of an investment company such as
the Funds shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by the matter. A Fund is affected by a matter unless it is clear that
the interests of each Fund in the matter are substantially identical or that the
matter does not affect any interest of the Fund. Under the Rule, the approval of
an investment advisory agreement or any change in a fundamental investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding shares of such Fund. However, the Rule also
provides that the ratification of the appointment of independent auditors, the
approval of principal underwriting contracts and the election of trustees may be
effectively acted upon by shareholders of the Funds voting together in the
aggregate without regard to a particular Fund.
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<PAGE> 83
Custodian
State Street Bank and Trust Company acts as custodian of the
Trust's assets. The Trustees of the Funds have reviewed and approved custodial
arrangements for securities held outside of the United States in accordance with
Rule 17f-5 of the 1940 Act.
Yield and Performance Information
The Funds may, from time to time, include their yields,
effective yields, tax equivalent yields and average annual total returns in
advertisements or reports to shareholders or prospective investors.
Quotations of yield for the Funds will be based on the
investment income per share earned during a particular 30-day period, less
expenses accrued during a period ("net investment income") and will be computed
by dividing net investment income by the maximum offering price per share on the
last day of the period, according to the following formula:
a - b 6
YIELD = 2[( ---- +1 ) - 1]
cd
where a = dividends and interest earned during the period, b =
expenses accrued for the period (net of any reimbursements), c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and d = the maximum offering price per share on the last day
of the period.
Quotations of average annual total return will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in a Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), calculated pursuant to the following formula:
n
P(l+T) = ERV
(where P = a hypothetical initial payment of $1,000, T = the
average annual total return, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures will reflect a proportional share of Fund
expenses (net of certain reimbursed expenses) on an annual basis, and will
assume that all dividends and distributions are reinvested when paid.
Quotations of yield and total return will reflect only the
performance of a hypothetical investment in the Funds during the particular time
period shown. Yield and total return for the Funds will vary based on changes in
the market conditions and the level of a Fund's expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
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<PAGE> 84
In connection with communicating its yields or total return to
current or prospective shareholders, the Funds also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to other unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
Performance of the Underlying Funds
The following chart shows the average annual total return
(unaudited) for the longest outstanding class of shares for each of the
underlying funds in which the Fund of Funds may invest for the most recent one-,
five-, and ten-year periods (or since inception if shorter and giving effect to
the maximum applicable sales charges), the 30-day yields for income-oriented
funds and the 7-day yields for Money Market funds, in each case for the period
ended March 31, 2000.
<TABLE>
<CAPTION>
ONE-YEAR SINCE INCEPTION
<S> <C> <C>
ING Large Cap Growth Fund 13.44% 21.70%
ING Growth & Income Fund 9.62% 13.69%
ING Mid Cap Growth Fund 28.43% 19.00%
ING Small Cap Growth Fund 65.26% 48.350%
ING Global Brand Names Fund 12.86% 19.50%
ING International Equity Fund 24.26% 24.76%
ING European Equity Fund 13.17% 13.58%
ING Focus Fund 15.57% 27.33%
ING Global Information Technology Fund 147.85% 137.07%
ING Internet Fund 1.25% 119.99%*
ING Emerging Markets Equity Fund -- (9.80)%*
ING Global Communications Fund -- (10.65)%*
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
ING Intermediate Bond Fund % (30-day period ended March 31, 2000)
ING High Yield Fund % (30-day period ended March 31, 2000)
ING International Bond Fund % (30-day period ended March 31, 2000)
ING Money Market Fund 5.38% (7-day period ended March 31, 2000)
(effective yield 5.53%)
</TABLE>
* Cumulative total returns. The underlying funds are in operations for less than
one year.
The Fund of Funds will invest only in Class I shares of the
underlying ING Funds and, accordingly, will not pay any sales load or 12b-1
service or distribution fees in connection with their investments in shares of
the underlying funds. The Fund of Funds, however, will indirectly bear their pro
rata share of the fees and expenses incurred by the underlying funds that are
applicable to Class I shareholders. The investment returns of each portfolio,
therefore, will be net of the expense of the underlying funds in which it is
invested. The following chart shows the expense ratios applicable to Class I
shareholders of each underlying fund held by a portfolio, based on net operating
expenses for its most recent fiscal year:
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<PAGE> 85
<TABLE>
<CAPTION>
UNDERLYING FUND EXPENSE RATIO
<S> <C>
ING Large Cap Growth Fund 0.74%
ING Growth & Income Fund 0.77%
ING Mid Cap Growth Fund 0.95%
ING Small Cap Growth Fund 0.88%
ING Global Brand Names Fund 0.98%
ING International Equity Fund 1.04%
ING European Equity Fund 1.07%
ING Tax Efficient Equity Fund 0.75%
ING Focus Fund 0.85%
ING Global Information Technology Fund 1.04%
ING Internet Fund 1.04%
ING Emerging Markets Equity Fund 1.15%
ING Global Communications Fund 0.98%
ING Intermediate Bond Fund 0.64%
ING High Yield Fund 0.69%
ING International Bond Fund 1.06%
ING Money Market Fund 0.31%
</TABLE>
Other Performance Comparisons
The Funds may from time to time include in advertisements,
sales literature, communications to shareholders and other materials,
comparisons of its total return to the return of other mutual funds with similar
investment objectives, broadly-based market indices, other investment
alternatives, rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the performance of the funds may be compared to data prepared by Lipper
Analytical Services, Inc., Morningstar, Inc., the S&P 500 Index, the Dow Jones
Industrial Average, the Russell 2000 or, in the case of the ING Money Market
Fund, iMoneyNet, Inc. Lipper Analytical Services, Inc. maintains statistical
performance databases, as reported by a diverse universe of
independently-managed mutual funds. Morningstar, Inc. is a mutual fund
performance rating service that rates mutual funds on the basis of risk-adjusted
performance. Evaluations of fund performance made by independent sources may
also be used in advertisements concerning the Funds, including reprints of, or
selections from editorials or articles about the Funds or the Funds' managers.
The Funds may also publish rankings or ratings of the
managers. Materials may include a list of representative clients of the Funds'
investment advisers and may contain information regarding the background,
expertise, etc. of the Funds' investment advisers or portfolio managers. The
distributor may provide information that discusses the managers' philosophy,
investment strategy, investment process, security selection criteria and
screening methodologies.
In addition, the Funds may also include in materials
discussions and/or illustrations of the potential investment goals of a
prospective investor, investment
47
<PAGE> 86
management strategies, techniques, policies or investment suitability of a Fund,
economic and political conditions, the relationship between sectors of the
economy and the economy as a whole, various securities markets, the effects of
inflation and historical performance of various asset classes, including but not
limited to, stocks, bonds and Treasury securities, and hypothetical investment
returns based on certain assumptions. From time to time, materials may summarize
the substance of information contained in shareholder reports (including the
investment composition of a Fund) as well as the views of the advisers as to
current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to a Fund. Material may also contain fund holdings,
sector allocations, asset allocations, credit ratings, and regional allocations.
Material may refer to various fund identifiers such as the CUSIP numbers or
NASDAQ symbols.
Legal Counsel
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel to
the Trust. Paul, Weiss, Rifkind, Wharton & Garrison's address is 1285 Avenue of
the Americas, New York, NY 10169-6064.
Independent Auditors
Ernst & Young LLP serves as the independent auditors for the
Funds. Ernst & Young LLP provides audit services, tax return preparation and
assistance and consultation in connection with review of SEC filings. Ernst &
Young LLP's address is 787 Seventh Avenue, New York, NY 10019.
Registration Statement
This SAI and the Prospectus do not contain all the information
included in the Funds' Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered hereby, certain
portions of which have been omitted pursuant to the rules and regulations of the
SEC. The Registration Statement, including the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the
contents of any contract or other documents referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
48
<PAGE> 87
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa -- judged to be the best quality and they carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally know as
high grade bonds; A -- possess many favorable investment attributes and are to
be considered as "upper medium grade obligations"; Baa -- considered to be
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. This group is the
lowest which qualifies for investment grade. Other Moody's bond descriptions
include: Ba -- judged to have speculative elements, their future cannot be
considered as well assured; B -- generally lack characteristics of the desirable
investment; Caa -- are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest; Ca --
speculative in a high degree, often in default; C -- lowest rated class of
bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates that the security is in the higher end of
its rating category; the modifier 2 indicates a mid-range ranking; and modifier
3 indicates a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are
listed as follows: AAA -- highest grade obligations, in which capacity to pay
interest and repay principal is extremely strong; AA -- also qualify as high
grade obligations, having a very strong capacity to pay interest and repay
principal, and differs from AAA issues only in a small degree; A -- regarded as
upper medium grade, having a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories; BBB -- regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories. This group is the lowest which
qualifies for investment grade. BB, B, CCC, CC -- predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with terms
of the obligations; BB indicates the highest grade and CC the lowest within the
speculative rating categories.
S&P applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
49
<PAGE> 88
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations which have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Trust may invest.
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term promissory obligations.
DESCRIPTION OF S&P'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A: Debt rated "A" has strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse
50
<PAGE> 89
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
SPECULATIVE GRADE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest
is being paid.
D: Debt rated "D" is in default, and payment of interest and/or
repayment of principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
DESCRIPTION OF S&P'S RATINGS FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to
pay principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR DEMAND OBLIGATIONS AND TAX-EXEMPT COMMERCIAL
PAPER:
An S&P commercial paper rating is a current assessment of the
likelihood of timely repayment of debt having an original maturity of no more
than 365 days. The two rating categories for securities in which the Trust may
invest are as follows:
A-1: This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics will be denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
51
<PAGE> 90
REPORT OF INDEPENDENT AUDITORS
To the Shareholder and Board of Trustees
ING Variable Insurance Trust
We have audited the accompanying statements of assets, liabilities and capital
of ING International Equity Fund and ING Global Brand Names Fund (two of the
funds comprising the ING Variable Insurance Trust (the "Trust")) as of April 10,
2000. These statements of assets, liabilities and capital are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
statements of assets, liabilities and capital based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the statements of assets,
liabilities and capital are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of assets, liabilities and capital. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statements of assets, liabilities and capital referred to
above, present fairly, in all material respects, the financial position of each
of the respective funds constituting ING Variable Insurance Trust at April 10,
2000, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
April 11, 2000
<PAGE> 91
ING VARIABLE INSURANCE TRUST
STATEMENTS OF ASSETS, LIABILITIES AND CAPITAL
APRIL 10, 2000
<TABLE>
<CAPTION>
ING ING
INTERNATIONAL GLOBAL BRAND
EQUITY FUND NAMES FUND
<S> <C> <C>
ASSETS:
Cash $50,000 $50,000
------- -------
LIABILITIES: -- --
======= =======
CAPITAL:
Shares of beneficial interest outstanding;
unlimited amount of shares authorized $50,000 $50,000
------- -------
NET ASSETS $50,000 $50,000
======= =======
SHARES OUTSTANDING 5,000 5,000
OFFERING AND REDEMPTION PRICE PER SHARE $ 10.00 $ 10.00
======= =======
</TABLE>
See Notes to Statements of Assets, Liabilities and Capital.
2
<PAGE> 92
ING VARIABLE INSURANCE TRUST
NOTES TO STATEMENTS OF ASSETS, LIABILITIES AND CAPITAL
APRIL 10, 2000
1. ORGANIZATION
The ING Variable Insurance Trust (the "Trust") was organized as a
Delaware business trust on July 15, 1999. The Trust is a diversified
open-end management investment company registered under the Investment
Company Act of 1940, as amended. The Trust consists of eight series and
has initially seeded two series, the ING International Equity Fund and
ING Global Brand Names Fund (collectively the "Funds" and individually
a "Fund"). The other series not yet seeded are ING Large Cap Growth
Fund, ING Growth & Income Fund, ING Income Allocation Fund, ING
Balanced Allocation Fund, ING Growth Allocation Fund, and ING
Aggressive Growth Allocation Fund. The Trust is authorized to issue an
unlimited number of shares. Shares of the Trust are offered to separate
accounts as an investment medium for variable contracts issued by life
insurance companies. The Trust has had no operations since July 15,
1999 other than matters relating to its organization and registration.
ORGANIZATION EXPENSES. All costs incurred by the Trust in connection
with the organization of the Funds and the initial public offering of
shares of the Funds, principally professional and printing fees, has
been borne by ING Mutual Funds Management Co. LLC.
2. RELATED PARTY TRANSACTIONS
ING Mutual Funds Management Co. LLC ("IMFC") will serve as the
investment manager of the Funds. As the investment manager of the
Funds, IMFC has overall responsibility, subject to the supervision of
the Board of Trustees, for engaging sub-advisers and for monitoring and
evaluating the management of the assets of each Fund by the
sub-adviser. IMFC also provides certain administrative services
necessary for the Funds' operations. Pursuant to a Management
Agreement, the Trust will pay IMFC a fee applied to the average daily
net assets of each Fund, computed daily and paid monthly, at an annual
rate as follows:
<TABLE>
<CAPTION>
Fund Annual Rate
----------------------------- -----------
<S> <C>
ING International Equity Fund 1.25%
ING Global Brand Names Fund 1.00%
</TABLE>
Pursuant to the Expense Limitation Agreement, IMFC has contractually
agreed to waive a portion of its advisory fees and if necessary
reimburse each Fund's operational expenses so that net expenses do not
exceed 1.26% for ING International Equity Fund and 1.23% for ING Global
Brand Names Fund until December 31, 2000.
The Trust also has adopted a Distribution Plan under which the Trust's
shares will be continuously offered by ING Funds Distributor, Inc., an
affiliate of IMFC. Pursuant to
3
<PAGE> 93
the Distribution Plan, the Funds pay ING Funds Distributor, Inc. for
advertising, marketing and distributing such shares at an annual rate
of 0.15% of the average daily net assets of each Fund. ING Funds
Distributor, Inc. may pay financial institutions, broker/dealers and
other institutions, in respect of these services.
ING Fund Services Co. LLC ("ING Fund Services") has entered into a Fund
Services Agreement with the Funds pursuant to which ING Fund Services
will perform or engage third parties to perform transfer agency, fund
accounting, account services and other services. Under the Fund
Services Agreement, each Fund may pay ING Fund Services up to $40,000
for fund accounting services plus out of pocket expenses, and $17 per
account for transfer agent services plus out of pocket expenses.
Certain Trustees and officers of the Trust are affiliated with IMFC.
Such persons are not paid directly by the Trust for serving in those
capacities.
3. FEDERAL INCOME TAXES: Each of the Funds intends to comply with the
requirements of the Internal Revenue Code necessary to qualify as a
regulated investment company and to make the requisite distributions of
taxable income (including realized capital gains) to its shareholders
which will be sufficient to relieve it from all or substantially all
federal income taxes.
4
<PAGE> 94
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits
--------
<S> <C> <C>
(a) -- Trust Instrument (1)
(b) -- By-Laws of Registrant (1)
(c) -- The rights of holders of the securities being registered are set out in Articles II, VII, IX and X of
the Declaration of Trust referenced in Exhibit (a) above and in Articles IV, VI and XIII of the
By-Laws referenced in Exhibit (b) above.
(d)(1) -- Form of Management Agreement between Registrant and ING Mutual Funds Management Co. LLC (the
"Manager") (1)
(d)(2) -- Form of Sub-Advisory Agreement between the Manager and Baring Asset Management, Inc. (1)
(d)(3) -- Form of Sub-Advisory Agreement between the Manager and Baring International Investment Limited (1)
(d)(4) -- Form of Sub-Advisory Agreement between the Manager and Baring Asset Management (Asia) Limited (1)
(d)(5) -- Form of Sub-Advisory Agreement between the Manager and ING Investment Management Advisors B.V. (1)
(d)(6) -- Form of Sub-Advisory Agreement between the Manager and ING Investment Management LLC (1)
(e) -- Form of Distribution Agreement between Registrant and ING Funds Distributor, Inc. (1)
(f) -- None
(g) -- Form of Custody Agreement between State Street Bank and Trust Company and Registrant (1)
(h)(1) -- Form of Fund Services Agreement between Registrant and ING Fund Services Co. LLC (1)
(h)(2) -- Form of Services Agreement between ING Fund Services Co. LLC and PFPC Inc. (1)
(h)(3) -- Form of Participation Agreement among __________, the Registrant and ING Fund Distributor, Inc. (1)
(i) -- Opinion and Consent of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Trust, regarding the
legality of the securities being issued (1)
(j) -- Consent of Ernst & Young LLP, independent auditors (1)
(k) -- None
</TABLE>
<PAGE> 95
<TABLE>
<S> <C> <C>
(l) -- Form of Purchase Agreement (1)
(m) -- Form of Rule l2b-l Distribution Plan and Agreement (1)
(n) -- None
(p) -- Code of Ethics (1)
(q) -- Power of Attorney (1)
</TABLE>
- ------------
(1) Filed herewith.
Item 24. Persons Controlled by or under Common Control with the Fund.
None.
Item 25. Indemnification.
Reference is made to Article IX of Registrants By-Laws and paragraphs 1.11
of the Distribution Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant understands that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
trustee, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The Registrant is covered under an insurance policy insuring its officers
and trustees against liabilities, and certain costs of defending claims
against such officers and trustees, to the extent such officers and trustees
are not found to have committed conduct constituting willful misfeasance,
bad faith, gross negligence or reckless disregard in the performance of
their duties. The insurance policy also insures the Registrant against the
cost of indemnification payments to officers under certain circumstances.
Section 12 of the Management Agreement between Registrant and Manager,
Section 10 of the Sub-Advisory Agreement with Baring Asset Management, Inc.,
Section 11 of the Sub-Advisory Agreement with Baring International
Investment Limited and Baring Asset Management (Asia) Limited, Section 9 of
the Sub-Advisory Agreement with ING Investment Management Advisors B.V. and
ING Investment Management LLC, and Section 1.11 of the Distribution
Agreement between the Registrant and Distributor limit the liability of
Manager, the Sub-Advisors and the Distributor to liabilities arising from
willful misfeasance, bad faith or gross negligence in the performance of
their respective duties or from reckless disregard by them of their
respective obligations and duties under the agreements.
2
<PAGE> 96
The Registrant hereby undertakes that it will apply the indemnification
provisions of its Trust Instrument, By-Laws, Management Agreement and
Distribution Agreement in a manner consistent with Release No. 11330 of the
Securities and Exchange Commission under the 1940 Act so long as the
interpretations of Section 17(h) and 17(i) of such Act remain in effect and
are consistently applied.
Item 26. Business and Other Connections of the Investment Adviser
ING Mutual Funds Management Co. LLC is an indirect wholly-owned
subsidiary of ING Groep N.V. ("ING Group"). The principal place of
business address of the Manager is 1475 Dunwoody Drive, West Chester, PA
19380. The directors and executive officers of the Manager and such
executive officers' positions during the past two years are as follows:
John J. Pileggi, President, Chief Executive Officer and
Director of the Manager since September 1998. Chief Executive
Officer of ING Fund Services Co. LLC since September 1998.
Senior Managing Director and Member of the Board of Directors
of Furman Selz LLC, May 1984 to September 1998.
Alexander H. Rinnooy-Kan, Director of the Manager since
September 1998. Member of Executive Board of ING Groep N.V.
since September 1996.
Glenn Hilliard, Director of the Manager since September 1998.
Chairman and Chief Executive Officer of ING Financial Services
International North America, January 1993 to present.
Frederick S. Hubbell, Director of the Manager since September
1998. Member of Executive Board of ING Groep N.V. since
January 1999. General Manager of ING Financial Services
International from September 1997 to January 1999.
Donald E. Brostrom, Executive Vice President and Chief
Operating Officer of the Manager since September 1998. Chief
Financial Officer of ING Fund Services Co. LLC. since
September 1998. Managing of Directors of Furman Selz LLC,
February 1986 to September 1998.
Louis S. Citron, Senior Vice President and General Counsel of
the Manager . since September 1998. Vice President of ING Fund
Services Co. LLC. since September 1998. Attorney with Kramer,
Levin, Naftalis & Frankel, September 1994 to July 1998.
Alan G. Holden, Senior Vice President and Chief Marketing
Officer of the Manager since September 1998. Marketing
Director of Oppenheimer Funds, Inc., October 1992 to August
1998.
3
<PAGE> 97
Jay Peters, Senior Vice President and Chief Technology Officer of
the Manager since September 1998. Vice President of ING Fund
Services Co. LLC since September 1998. Manager of Information
Technology at Furman Selz LLC, prior to September 1998.
Alan Lordi, Senior Vice President of the Manager since October
1999. Vice President and Portfolio Manager of Sefton Capital
Management from January 1997 to July 1999.
Peter J. DeMarco, Senior Vice President of the Manager since
November 1999. Executive Vice President, Reich & Tang Funds October
1995 to November 1999.
James W. MacCune, Vice President of the Manager since September
1998. Vice President of ING Fund Services Co. LLC since September
1998. Manager of Mutual Fund Operations at Furman Selz LLC from May
1998 to September 1998. Manager of Mutual Fund Relations at Lazard
Freres & Co. LLS from October 1996 to May 1998.
Ralph G. Norton, III, Vice President of the Manger since March
1999. Managing Editor, Standard & Poor's from December 1996 to
March 1999.
Cynthia M. Schaus, Vice President of Corporate Communication and
Strategy of the Manager since March 1999. Assistant Vice President
of ING FSI North America, US Retail Financial Services, October
1997 to March 1999.
Stuart H. Quillman, Vice President of Marketing of the Manager
since November 1998. Manager, Corporate Communications at Pilgrim,
Baxter & Associates, October 1997 to October 1998.
Item 27. Principal Underwriters
(a) ING Funds Distributor, Inc. also acts as the distributor for
the ING Funds Trust, as well as the following unit investment
trust:
Municipal Securities Trust, Series 49
Municipal Securities Trust, Series 52
Municipal Securities Trust, Series 53
Municipal Securities Trust, 1st Discount Series
Municipal Securities Trust, Multi-State Series 38 (NY)
Municipal Securities Trust, Multi-State Series 41 (VA)
Municipal Securities Trust, Multi-State Series 42 (NY, VA)
Municipal Securities Trust, Multi-State Series 43 (VA)
Municipal Securities Trust, Multi-State Series 44 (CA, VA)
Municipal Securities Trust, Multi-State Series 45 (VA)
Municipal Securities Trust, Multi-State Series 46 (CA, FL,
VA)
Insured Municipal Securities Trust, Series 27
Insured Municipal Securities Trust, Series 30
Insured Municipal Securities Trust, Series 31
Insured Municipal Securities Trust, Series 32
Insured Municipal Securities Trust, Series 33
4
<PAGE> 98
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 2
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 3
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 5
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 6
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 8
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 9
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 10
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 11
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 12
Insured Municipal Securities Trust, New Jersey Navigator
Insured Series 13
Insured Municipal Securities Trust, New York Navigator
Insured Series 11
Insured Municipal Securities Trust, New York Navigator
Insured Series 12
Insured Municipal Securities Trust, New York Navigator
Insured Series 13
Insured Municipal Securities Trust, New York Navigator
Insured Series 14
Insured Municipal Securities Trust, New York Navigator
Insured Series 15
Insured Municipal Securities Trust, New York Navigator
Insured Series 16
Insured Municipal Securities Trust, New York Navigator
Insured Series 17
Insured Municipal Securities Trust, Pennsylvania Navigator
Insured Series
Equity Securities Trust, Series 4, Equit's
Equity Securities Trust, Series 20, Municipal Series
Symphony Series
Equity Securities Trust, Series 21, Gabelli Entertainment
& Media Trust II
Equity Securities Trust, Series 23, Municipal Symphony
Series II, (CA and NY Portfolio)
Equity Securities Trust, Series 24, Municipal Symphony
Series III
Equity Securities Trust, Series 25, Symphony Series, Zacks
All-Stars Analysts Trust V
Equity Securities Trust, Signature Series, Reich & Tang
Growth and Value Trust II
McLaughlin, Piven, Vogel Family of Trusts, The Pinnacle
Trust, Large Cap Series II
McLaughlin, Piven, Vogel Family of Trusts, The Pinnacle
Growth Strategy Trust
McLaughlin, Piven, Vogel Family of Trusts, MPV Industrial
Trust
McLaughlin, Piven, Vogel Family of Trusts, MPV Technology
Trust
McLaughlin, Piven, Vogel Family of Trusts, Industrial
Trust Series II
McLaughlin, Piven, Vogel Family of Trusts, Technology
Trust Series II
McLaughlin, Piven, Vogel Family of Trusts, Pinnacle Trust
Large Cap Series III
McLaughlin, Piven, Vogel Family of Trusts, Industrial
Trust Series III
McLaughlin, Piven, Vogel Family of Trusts, Technology
Trust Series III
The Pinnacle Family of Trusts, Large Cap Series IV
The Pinnacle Family of Trusts, Industrial Series IV
The Pinnacle Family of Trusts, Technology Trust Series IV
The Pinnacle Family of Trusts, Internet Trust Series 1
Schwab Trusts, Schwab Ten Trust, 1999 Series A
Schwab Trusts, Schwab Ten Trust, 1999 Series B
Schwab Trusts, Schwab Ten Trust, 2000 Series A
5
<PAGE> 99
(b)
<TABLE>
<CAPTION>
----------------------------------- --------------------------- ------------------------
Name and Principal Business Positions and Offices Position and Offices
Address with Underwriter with Fund
----------------------------------- --------------------------- ------------------------
<S> <C> <C>
John J. Pileggi* CEO and Director President, CEO and
Trustee
----------------------------------- --------------------------- ------------------------
Donald E. Brostrom* Treasurer, CFO and Director Treasurer
----------------------------------- --------------------------- ------------------------
Mitchell Jay Mellen* President and Director None
----------------------------------- --------------------------- ------------------------
Peter J. DeMarco Senior Vice President None
600 Fifth Avenue
New York, New York 10022
----------------------------------- --------------------------- ------------------------
Rachelle I. Rehner* Secretary Secretary
----------------------------------- --------------------------- ------------------------
Gary Taiariol* Assistant Treasurer None
----------------------------------- --------------------------- ------------------------
Eric Rubin Senior Vice President and None
4802 East Ray Road Director
Suite 22-228
Phoenix, Arizona 85044
----------------------------------- --------------------------- ------------------------
</TABLE>
* 1475 Dunwoody Drive, West Chester, PA 19380
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder are maintained at the offices of:
(1) ING Variable Insurance Trust, 1475 Dunwoody Drive, West Chester, PA
19380 (records relating to the Trust)
(2) ING Mutual Funds Management Co. LLC, 1475 Dunwoody Drive, West
Chester, PA 19380 (records of the investment manager) and 600 Fifth
Avenue, New York, NY 10020 (records of the investment manager relating
to its UIT business)
(3) ING Funds Distributor, Inc. 1475 Dunwoody Drive, West Chester, PA
19380 (records of principal underwriter) and 600 Fifth Avenue, New
York, NY 10020 (records of principal underwriter relating to its UIT
business)
(4) Baring Asset Management, Inc., 125 High Street, Boston, MA 02110
(records relating to its functions as investment sub-adviser for ING
Large Cap only)
(5) Baring International Investment Limited, 155 Bishopsgate, London,
England EC2M 3XY (records relating to its functions as investment
co-sub-adviser for ING International Equity only)
(6) Baring Asset Management (Asia) Limited, 19/F Edinburgh Tower, The
Landmark, 15 Queens Road, Central, Hong Kong (records relating to its
functions as investment co-sub-adviser for ING International Equity
only)
(7) ING Investment Management Advisors B.V., Schenkkade 65, 2595 AS, The
Hague, The Netherlands (records relating to its functions as
investment sub-adviser for ING Global Brand Names only)
6
<PAGE> 100
(8) ING Investment Management LLC, 5780 Powers Ferry Road, N.W., Suite
300, Atlanta, GA 30327 (records relating to its functions as
investment sub-adviser for ING Global Brand Names only)
(9) State Street Bank Trust Company, 801 Pennsylvania Street, Kansas City,
MO 64105 (records related to its functions as custodian)
(10) DST Systems, Inc., 333 W. 11th Street, Kansas City, MO 64105 (records
relating to its functions as transfer agent)
(11) PFPC Inc., 4400 Computer Drive, Westborough, MA 01581 (records
relating to its function as fund accounting agent)
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
7
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, duly
authorized, in the City of West Chester, and Commonwealth of Pennsylvania, on
the 11th day of April, 2000.
ING VARIABLE INSURANCE TRUST
By: /s/ John J. Pileggi
-------------------------
John J. Pileggi
Trustee, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John J. Pileggi Trustee, President April 11, 2000
- ----------------------------------- and Chief Executive Officer
John J. Pileggi
/s/ Donald E. Brostrom Treasurer April 11, 2000
- -----------------------------------
Donald E. Brostrom
/s/ Joseph N. Hankin* Trustee
- -----------------------------------
Joseph N. Hankin
/s/ Jack D. Rehm* Trustee
- -----------------------------------
Jack D. Rehm
/s/ Blaine E. Rieke* Trustee
- -----------------------------------
Blaine E. Rieke
/s/ Richard A. Wedemeyer* Trustee
- -----------------------------------
Richard A. Wedemeyer
/s/ Louis S. Citron April 11, 2000
- -----------------------------------
Louis S. Citron
Attorney-in-Fact*
</TABLE>
- ------------
* Power of Attorney filed herewith.
8
<PAGE> 102
EXHIBITS
Exhibits
(a) Trust Instrument
(b) By-Laws of Registrant
(d)(1) Form of Management Agreement between Registrant and ING Mutual Funds
Management Co. LLC (the "Manager")
(d)(2) Form of Sub-Advisory Agreement between the Manager and Baring Asset
Management, Inc.
(d)(3) Form of Sub-Advisory Agreement between the Manager and Baring
International Investment Limited
(d)(4) Form of Sub-Advisory Agreement between the Manager and Baring Asset
Management (Asia) Limited
(d)(5) Form of Sub-Advisory Agreement between the Manager and ING Investment
Management Advisors B.V.
(d)(6) Form of Sub-Advisory Agreement between the Manager and ING Investment
Management LLC
(e) Form of Distribution Agreement between Registrant and ING Funds
Distributor, Inc.
(g) Form of Custody Agreement between State Street Bank and Trust Company
and Registrant
(h)(1) Form of Fund Services Agreement between Registrant and ING Fund Services
Co. LLC
(h)(2) Form of Services Agreement between ING Fund Services Co. LLC and PFPC
Inc.
(h)(3) Form of Participation Agreement among __________, the Registrant and ING
Fund Distributor, Inc.
(i) Opinion and Consent of Paul, Weiss, Rifkind, Wharton & Garrison, counsel
to the Trust, regarding the legality of the securities being issued
(j) Consent of Ernst & Young LLP, independent auditors
(l) Form of Purchase Agreement
(m) Form of Rule l2b-l Distribution Plan and Agreement
(p) Code of Ethics
(q) Power of Attorney
9
<PAGE> 1
Exhibit 99.A
ING VARIABLE INSURANCE TRUST
TRUST INSTRUMENT
DATED JULY 15, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I NAME AND DEFINITIONS.......................................................................... 1
Section 1.1 Name........................................................................ 1
Section 1.2 Definitions................................................................. 1
ARTICLE II BENEFICIAL INTEREST.......................................................................... 3
Section 2.1 Shares of Beneficial Interest............................................... 3
Section 2.2 Issuance of Shares.......................................................... 4
Section 2.3 Register of Shares and Share Certificates................................... 4
Section 2.4 Transfer of Shares.......................................................... 5
Section 2.5 Treasury Shares............................................................. 5
Section 2.6 Establishment of Series..................................................... 6
Section 2.7 Investment in the Trust..................................................... 7
Section 2.8 Assets and Liabilities of Series............................................ 7
Section 2.9 No Preemptive Rights........................................................ 9
Section 2.10 Personal Liability of Shareholders.......................................... 9
Section 2.11 Assent to Trust Instrument.................................................. 10
ARTICLE III THE TRUSTEES................................................................................ 10
Section 3.1 Management of the Trust..................................................... 10
Section 3.2 Initial Trustees............................................................ 11
Section 3.3 Term of Office of Trustees.................................................. 11
Section 3.4 Vacancies and Appointment of Trustees....................................... 12
Section 3.5 Temporary Absence of Trustee................................................ 13
Section 3.6 Number of Trustees.......................................................... 13
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee............................. 13
Section 3.8 Ownership of Assets of the Trust............................................ 13
ARTICLE IV POWERS OF THE TRUSTEES....................................................................... 14
Section 4.1 Powers...................................................................... 14
Section 4.2 Issuance and Repurchase of Shares........................................... 19
Section 4.3 Trustees and Officers as Shareholders....................................... 19
Section 4.4 Action by the Trustees...................................................... 19
Section 4.5 Chairman of the Trustees.................................................... 20
Section 4.6 Principal Transactions...................................................... 21
ARTICLE V EXPENSES OF THE TRUST......................................................................... 21
Section 5.1 Trustee Reimbursement....................................................... 21
ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT................................. 22
Section 6.1 Investment Adviser.......................................................... 22
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 6.2 Principal Underwriter....................................................... 23
Section 6.3 Transfer Agent.............................................................. 24
Section 6.4 Parties to Contract......................................................... 24
Section 6.5 Provisions and Amendments................................................... 25
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS.................................................... 25
Section 7.1 Voting Powers............................................................... 25
Section 7.2 Meetings.................................................................... 26
Section 7.3 Quorum and Required Vote.................................................... 27
ARTICLE VIII CUSTODIAN.................................................................................. 28
Section 8.1 Appointment and Duties...................................................... 28
Section 8.2 Central Certificate System.................................................. 29
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS................................................................ 30
Section 9.1 Distributions............................................................... 30
Section 9.2 Redemptions................................................................. 31
Section 9.3 Determination of Net Asset Value and Valuation of Portfolio Assets.......... 31
Section 9.4 Suspension of the Right of Redemption....................................... 33
Section 9.5 Redemption of Shares in Order to Qualify as Regulated Investment Company.... 33
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION................................................... 34
Section 10.1 Limitation of Liability..................................................... 34
Section 10.2 Indemnification............................................................. 35
Section 10.3 Shareholders................................................................ 37
ARTICLE XI MISCELLANEOUS................................................................................ 38
Section 11.1 Trust Not a Partnership..................................................... 38
Section 11.2 Trustee's Good Faith Action, Expert Advice, No Bond or Surety............... 38
Section 11.3 Establishment of Record Dates............................................... 39
Section 11.4 Termination of Trust........................................................ 40
Section 11.5 Reorganization.............................................................. 41
Section 11.6 Filing of Copies, References, Headings...................................... 41
Section 11.7 Applicable Law.............................................................. 42
Section 11.8 Amendments.................................................................. 43
Section 11.9 Fiscal Year................................................................. 44
Section 11.10 Name Reservation............................................................ 44
Section 11.11 Provisions in Conflict with Law............................................. 44
</TABLE>
ii
<PAGE> 4
ING VARIABLE INSURANCE TRUST
DATED July 15, 1999
TRUST INSTRUMENT, made July 15, 1999 by Louis S. Citron (the "Trustees").
The registered agent's name and address is Corporation Service Company, 1013
Centre Road, Wilmington, DE, 19805.
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from time
to time of shares, whether or not certificated, in this Trust as hereinafter set
forth.
ARTICLE I.
NAME AND DEFINITIONS
Section 1.1 Name. The trust shall be known as "ING Variable Insurance
Trust" and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.
Section 1.2. Definitions. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) "Bylaws" means the Bylaws referred to in Article IV, Section 4.1(e)
hereof, as from time to time amended;
(b) The term "Commission" has the meaning given it in the 1940 Act (as
defined below). The terms "Affiliated Person," "Assignment," "Interested
<PAGE> 5
2
Person" and "Principal Underwriter" shall have the meanings given them in the
1940 Act, as modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted or interpretive releases of the
Commission thereunder. "Majority Shareholder Vote" shall have the same meaning
as the term "vote of a majority of the outstanding voting securities" is given
in the 1940 Act, as modified by or interpreted by any applicable order or orders
of the Commission or any rules or regulations adopted or interpretive releases
of the Commission thereunder.
(c) The "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as it may be amended from
time to time.
(d) "Net Asset Value" means the net asset value of each Series (as
defined below) of the Trust determined in the manner provided in Article IX,
Section 9.3 hereof;
(e) "Outstanding Shares" means those Shares shown from time to time in
the books of the Trust or its Transfer Agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(f) "Series" means a series of Shares (as defined below) of the Trust
established in accordance with the provisions of Article II, Section 2.6 hereof.
(g) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(h) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
<PAGE> 6
3
(i) The "Trust" refers to all ING Variable Insurance Trust Funds and
reference to a Fund, when applicable to one or more Series of the Trust, shall
refer to any such Series;
(j) The "Trustees" means the person or persons who has or have signed
this Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their capacity as Trustees hereunder;
(k) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(l) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
ARTICLE II.
BENEFICIAL INTEREST
Section 2.1 Shares of Beneficial Interest. The beneficial interest in the
Trust shall be divided into such transferable Shares of one or more separate and
distinct Series or classes of a Series as the Trustees shall from time to time
create and establish. The number of Shares of each Series, and class thereof,
authorized hereunder is unlimited. Each Share shall have a par value of $0.001.
All Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
<PAGE> 7
4
Section 2.2 Issuance of Shares. The Trustees in their discretion may, from
time to time, without vote of the Shareholders, issue Shares, in addition to the
then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
Section 2.3 Register of Shares and Share Certificates. A register shall be
kept at the principal office of the Trust or an office of the Trust's transfer
agent which shall contain the names and addresses of the Shareholders of each
Series, the number of Shares of that Series (or any class or classes thereof)
held by them respectively and a record of all transfers thereof. As to Shares
for which no certificate has been issued, such register shall be conclusive as
to who are the holders of the Shares and who shall be entitled to receive
dividends or other distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or other distribution, nor to have notice given to him as herein or in
the Bylaws provided, until he has given his address to the transfer agent or
such other officer or agent of the Trustees as shall keep the said registrar for
entry thereon. The Trustees, in their discretion, may authorize the issuance of
share certificates and promulgate appropriate
<PAGE> 8
5
rules and regulations as to their use. Such certificates may be issuable for any
purpose limited in the Trustees discretion. In the event that one or more
certificates are issued, whether in the name of a shareholder or a nominee, such
certificate or certificates shall constitute evidence of ownership of Shares for
all purposes, including transfer, assignment or sale of such Shares, subject to
such limitations as the Trustees may, in their discretion, prescribe.
Section 2.4 Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate, if one is
outstanding, and such evidence of the genuineness of each such execution and
authorization and of such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the registrar of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
Section 2.5 Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 2.2 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.6 Establishment of Series. The Trust created hereby shall consist
of one or more Series and separate and distinct records shall be maintained by
the Trust for each Series and the assets associated with any such Series shall
be held and
<PAGE> 9
6
accounted for separately from the assets of the Trust or any other Series. The
Trustees shall have full power and authority, in their sole discretion, and
without obtaining any prior authorization or vote of the Shareholders of any
Series of the Trust, to establish and designate and to change in any manner such
Series of Shares or any classes of initial or additional Series and to fix such
preferences, voting powers, right and privileges of such Series or classes
thereof as the Trustees may from time to time determine, to divide and combine
the Shares or any Series or classes thereof into a greater or lesser number, to
classify or reclassify any issued Shares or any Series or classes thereof into
one or more Series or classes of Shares, and to take such other action with
respect to the Shares as the Trustees may deem desirable. The establishment and
designation of any Series shall be effective upon the adoption of a resolution
by a majority of the Trustees setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Series. A Series
may issue any number of Shares and need not issue shares. The Trustees may by a
majority vote abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of distributions of income and
capital gains, if any, made with respect to such Series. Upon redemption of his
Shares, such Shareholder shall be paid solely out of the funds and property of
such Series of the Trust.
<PAGE> 10
7
Section 2.7 Investment in the Trust. The Trustees shall accept investments
in any Series of the Trust from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which the
affected Series is authorized to invest, valued as provided in Article IX,
Section 9.3 hereof. Investments in a Series shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however, that
the Trustees may, in their sole discretion, (a) fix the Net Asset Value per
Share of the initial capital contribution, (b) impose a sales charge upon
investments in the Trust in such manner and at such time determined by the
Trustees or (c) issue fractional Shares.
Section 2.8 Assets and Liabilities of Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
be held and accounted for separately from the other assets of the Trust and of
every other Series and may be referred to herein as "assets belonging to" that
Series. The assets belonging to a particular Series shall belong to that Series
for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated by the
Trustees between and among one or more of the Series in such manner as the
Trustees, in their sole discretion, deem
<PAGE> 11
8
fair and equitable. Each such allocation shall be conclusive and binding upon
the Shareholders of all Series for all purposes, and such assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto shall
be assets belonging to that Series. The assets belonging to a particular Series
shall be so recorded upon the books of the Trust, and shall be held by the
Trustees in trust for the benefit of the holders of Shares of that Series. The
assets belonging to each particular Series shall be charged with the liabilities
of that Series and all expenses, costs, charges and reserves attributable to
that Series. Any general liabilities, expenses, costs, changes or reserves of
the Trust which are not readily identifiable as belonging to a particular Series
shall be allocated and changed by the Trustees belonging to any one or more of
the Series in such manner as the Trustees in their sole discretion deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes. Without limitation of the foregoing
provisions of this Section 2.8, but subject to the right of the Trustees in
their discretion to allocate general liabilities, expenses, costs, charges or
reserves as herein provided, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Series shall be enforceable against the assets of such Series only, and not
against the assets of the Trust generally. Notice of this contractual limitation
on inter-Series liabilities may, in the Trustee's sole discretion, be set forth
in the certificate of trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State of the State of
Delaware pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series.
<PAGE> 12
9
Any person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any
debt, liability, obligation or expense incurred, contracted for or otherwise
existing with respect to that Series. No Shareholder or former Shareholder of
any Series shall have a claim on or any right to any assets allocated or
belonging to any other Series.
Section 2.9 No Preemptive Rights. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust or the Trustees, whether of the same or other Series.
Section 2.10 Personal Liability of Shareholders. Each Shareholder of the
Trust and of each Series shall not be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
Section 2.11 Assent to Trust Instrument. Every Shareholder, by virtue of
having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
<PAGE> 13
10
ARTICLE III.
THE TRUSTEES
Section 3.1 Management of the Trust. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Trust Instrument, the presumption shall be
in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.4 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event
<PAGE> 14
11
that less than a majority of the Trustees holding office have been elected by
Shareholders, the Trustees then in office will call a Shareholders' meeting for
the election of Trustees.
Section 3.2 Initial Trustees. The initial Trustees shall be the persons
named herein. On a date fixed by the Trustees, the Shareholders shall elect at
least one but not more than twelve Trustees, as specified by the Trustees
pursuant to Section 3.6 of this Article III.
Section 3.3 Term of Office of Trustees. The Trustees shall hold office,
subject to mandatory retirement at age 72, during the lifetime of this Trust,
and until its termination as herein provided; except (a) that any Trustee may
resign his trust by written instrument signed by him and delivered to the other
Trustees, which shall take effect upon such delivery or upon such later date as
is specified therein; (b) that any Trustee may be removed at any time by written
instrument, signed by at least two-thirds of the number of Trustees prior to
such removal, specifying the date when such removal shall become effective; (c)
that any Trustee who requests in writing to be retired or who has died, become
physically or mentally incapacitated by reason of disease or otherwise, or is
otherwise unable to serve, may be retired by written instrument signed by a
majority of the other Trustees, specifying the date of his retirement; and (d)
that a Trustee may be removed at any meeting of the Shareholders of the Trust by
a vote of Shareholders owning at least two-thirds of the outstanding Shares.
Section 3.4 Vacancies and Appointment of Trustees. In case of the
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of disease or otherwise, or a Trustee is otherwise
unable to serve, or an increase in the number of Trustees, a vacancy shall
occur. Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, the other Trustees shall have all the
<PAGE> 15
12
powers hereunder and the certificate of the other Trustees of such vacancy shall
be conclusive. In the case of an existing vacancy, the remaining Trustees shall
fill such vacancy by appointing such other person as they in their discretion
shall see fit consistent with the limitations under the 1940 Act. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office or by resolution of the Trustees, duly adopted, which
shall be recorded in the minutes of a meeting of the Trustees, whereupon the
appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.4 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder. The power to appoint a Trustee pursuant to this
Section 3.4 is subject to the provisions of Section 16(a) of the 1940 Act.
Section 3.5 Temporary Absence of Trustee. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
Section 3.6 Number of Trustees. The number of Trustees shall be at least
one (1), and thereafter shall be such number as shall be fixed from time to time
by a
<PAGE> 16
13
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be more than twelve (12).
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee. The
declination to serve, death, resignation, retirement, removal, incapacity, or
inability of the Trustees, or any one of them, shall not operate to terminate
the Trust or to revoke any existing agency created pursuant to the terms of this
Trust Instrument.
Section 3.8 Ownership of Assets of the Trust. The assets of the Trust and
of each Series shall be held separate and apart from any assets now or hereafter
held in any capacity other than as Trustee hereunder by the Trustees or any
successor Trustees. Legal title in all of the assets of the Trust and the right
to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
ARTICLE IV.
POWERS OF THE TRUSTEES
Section 4.1 Powers. The Trustees in all instances shall act as principals,
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any
<PAGE> 17
14
and all contracts and instruments that they may consider necessary or
appropriate in connection with the management of the Trust. The Trustees shall
not in any way be bound or limited by present or future laws or customs in
regard to trust investments, but shall have full authority and power to make any
and all investments which they, in their sole discretion, shall deem proper to
accomplish the purpose of this Trust without recourse to any court or other
authority. Subject to any applicable limitation in this Trust Instrument or the
Bylaws of the Trust, the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
<PAGE> 18
15
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XI, Section 11.4(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
<PAGE> 19
16
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
<PAGE> 20
17
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or other
agents of the Trust therein) and any other characteristics of said committees as
the Trustees may deem proper. Notwithstanding the provisions of this Article IV,
and in addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations of
any Series;
<PAGE> 21
18
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and power, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
Section 4.2 Issuance and Repurchase of Shares. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, and otherwise deal in Shares and, subject to the provisions
set forth in Article II and Article IX, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust, or the particular Series of the Trust, with respect to
which such Shares are issued.
<PAGE> 22
19
Section 4.3 Trustees and Officers as Shareholders. Any Trustee, officer or
other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if he were not a Trustee, officer or agent; and the Trustees may issue
and sell or cause to be issued and sold Shares to and buy such Shares from any
such person or any firm or company in which he is interested, subject only to
the general limitations herein contained as to the sale and purchase of such
Shares; and all subject to any restrictions which may be contained in the
Bylaws.
Section 4.4 Action by the Trustees. The Trustees shall act by majority vote
at a meeting duly called or by unanimous written consent without a meeting or by
telephone meeting provided a quorum of Trustees participate in any such
telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman
and/or Trustees or by any two other Trustees. Notice of the time, date and place
of all meetings of the Trustees shall be given by the party calling the meeting
to each Trustee by telephone, telefax, or telegram sent to his home or business
address at least twenty-four hours in advance of the meeting or by written
notice mailed to his home or business address at least seventy-two hours in
advance of the meeting. Notice need not be given to any Trustee who attends the
meeting without objecting to the lack of notice or who executes a written waiver
of notice with respect to the meeting. Any meeting conducted by telephone shall
be deemed to take place at the principal office of the Trust, as determined by
the Bylaws or by the Trustees. Subject to the requirements of the 1940 Act, the
Trustees by majority vote may delegate to any one or more of their number their
authority to approve particular matters or take particular actions on behalf of
<PAGE> 23
20
the Trust. Written consents or waivers of the Trustees may be executed in one or
more counterparts. Execution of a written consent or waiver and delivery thereof
to the Trust may be accomplished by telefax.
Section 4.5 Chairman of the Trustees. The Trustees shall appoint one of
their number to be Chairman of the Board of Trustees. The Chairman shall preside
at all meetings of the Trustees, shall be responsible for the execution of
policies established by the Trustees and the administration of the Trust, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
Section 4.6 Principal Transactions. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustees
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, distributor or transfer agent for the Trust or with any Interested
Person of such person; and the Trust may employ any such person, or firm or
company in which such person is an Interested Person, as broker, legal counsel,
registrar, investment adviser, distributor, transfer agent, dividend disbursing
agent, custodian or in any other capacity upon customary terms.
ARTICLE V.
EXPENSES OF THE TRUST
Section 5.1 Trustee Reimbursement. Subject to the provisions of Article II,
Section 2.8 hereof, the Trustees shall be reimbursed from the Trust estate or
the assets belonging to the appropriate Series for their expenses and
disbursement, including, without limitation, fees and expenses of Trustees who
are not Interested Persons of the
<PAGE> 24
21
Trust, interest expense, taxes, fees and commissions of every kind, expenses of
pricing Trust portfolio securities, expenses of issue, repurchase and redemption
of shares, including expenses attributable to a program of periodic repurchases
or redemptions, expenses of registering and qualifying the Trust and its Shares
under Federal and State laws and regulations or under the laws of any foreign
jurisdiction, charges of third parties, including investment advisers, managers,
custodians, transfer agents, portfolio accounting and/or pricing agents, and
registrars, expenses of preparing and setting up in type prospectuses and
statements of additional information and other related Trust documents, expenses
of printing and distributing prospectuses sent to existing Shareholders,
auditing and legal expenses, reports to Shareholders, expenses of meetings of
Shareholders and proxy solicitations therefor, insurance expenses, association
membership dues and for such non-recurring items as may arise, including
litigation to which the Trust (or a Trustee acting as such) is a party, and for
all losses and liabilities by them incurred in administering the Trust, and for
the payment of such expenses, disbursements, losses and liabilities the Trustees
shall have a lien on the assets belonging to the appropriate Series, or in the
case of an expense allocable to more than one Series, on the assets of each such
Series, prior to any rights or interests of the Shareholders thereto. This
section shall not preclude the Trust from directly paying any of the
aforementioned fees and expenses.
ARTICLE VI.
INVESTMENT ADVISER, PRINCIPAL
UNDERWRITER AND TRANSFER AGENT
Section 6.1 Investment Adviser. The Trustees may in their discretion, from
time to time, enter into an investment advisory or management contract
<PAGE> 25
22
or contracts with respect to the Trust or any Series whereby the other party or
parties to such contract or contracts shall undertake to furnish the Trustees
with such management, investment advisory, statistical and research facilities
and services and such other facilities and services, if any, and all upon such
terms and conditions, as the Trustees may in their discretion determine;
provided, however, that the initial approval and entering into of such contract
or contracts shall be subject to a Majority Shareholder Vote. Notwithstanding
any other provision of this Trust Instrument, the Trustees may authorize any
investment adviser (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales or exchanges of
portfolio securities, other investment instruments of the Trust, or other Trust
Property on behalf of the Trustees, or may authorize any officer, agent, or
Trustee to effect such purchases, sales or exchanges pursuant to recommendations
of the investment adviser (and all without further action by the Trustees). Any
such purchases, sales and exchanges shall be deemed to have been authorized by
all of the Trustees.
The Trustees may authorize, subject to applicable requirements of the 1940
Act, including those relating to Shareholder approval, the investment adviser to
employ, from time to time, one or more sub-advisers to perform such of the acts
and services of the investment adviser, and upon such terms and conditions, as
may be agreed upon between the investment adviser and sub-adviser. Any reference
in this Trust Instrument to the investment adviser shall be deemed to include
such sub-advisers, unless the context otherwise requires.
Section 6.2 Principal Underwriter. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of Shares, whereby the Trust may either
agree to sell Shares to the other party to the contract or appoint such other
party its sales agent for such
<PAGE> 26
23
Shares. In either case, the contract shall be on such terms and conditions, if
any, as may be prescribed in the Bylaws, and such further terms and conditions
as the Trustees may in their discretion determine not inconsistent with the
provisions of this Article VI, or of the Bylaws; and such contract may also
provide for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust.
Section 6.3 Transfer Agent. The Trustees may in their discretion from time
to time enter into one or more transfer agency and shareholder service contracts
whereby the other party or parties shall undertake to furnish the Trustees with
transfer agency and shareholder services. The contract or contracts shall be on
such terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Trust Instrument or of the Bylaws.
Section 6.4 Parties to Contract. Any contract of the character described in
Sections 6.1, 6.2 and 6.3 of this Article VI or any contract of the character
described in Article VIII hereof may be entered into with any corporation, firm,
partnership, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder and/or
Trustee, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation,
<PAGE> 27
24
partnership, trust or association) may be the other party to contracts entered
into pursuant to Sections 6.1, 6.2 and 6.3 of this Article VI or pursuant to
Article VIII hereof, and any individual may be financially interested or
otherwise affiliated with persons who are parties to any or all of the contracts
mentioned in this Section 6.4.
Section 6.5 Provisions and Amendments. Any contract entered into pursuant
to Sections 6.1 or 6.2 of this Article VI shall be consistent with and subject
to the requirements of Section 15 of the 1940 Act or other applicable Act of
Congress hereafter enacted with respect to its continuance in effect, its
termination, and the method of authorization and approval of such contract or
renewal thereof, and no amendment to any contract, entered into pursuant to
Section 6.1 of this Article VI shall be effective unless assented to in a manner
consistent with the requirements of said Section 15, as modified by any
applicable rule, regulation or order of the Commission.
ARTICLE VII.
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.1 Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article III, Sections 3.1 and
3.2 hereof, (ii) for the removal of Trustees as provided in Article III, Section
3.3(d) hereof, (iii) with respect to any investment advisory or management
contract as provided in Article VI, Sections 6.1 and 6.5 hereof, and (iv) with
respect to such additional matters relating to the Trust as may be required by
law, by this Trust Instrument, or the Bylaws or any registration of the Trust
with the Commission or any State, or as the Trustees may consider desirable.
<PAGE> 28
25
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted separately by individual Series, except (i) when required by the 1940 Act,
Shares shall be voted in the aggregate and not by individual Series; and (ii)
when the Trustees have determined that the matter affects the interests of more
than one Series, then the Shareholders of all such Series shall be entitled to
vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the Bylaws. A proxy may
be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
Section 7.2 Meetings. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.2 of Article III hereof at the
principal office of the Trust or such other place as the Trustees may designate.
Meetings may be held within or without the State of Delaware. Special meetings
of the Shareholders of
<PAGE> 29
26
any Series may be called by the Trustees and shall be called by the Trustees
upon the written request of Shareholders owning at least one-tenth of the
Outstanding Shares entitled to vote. Whenever ten or more Shareholders meeting
the qualifications set forth in Section 16(c) of the 1940 Act, as the same may
be amended from time to time, seek the opportunity of furnishing materials to
the other Shareholders with a view to obtaining signatures on such a request for
a meeting, the Trustees shall comply with the provisions of said Section 16(c)
with respect to providing such Shareholders access to the list of the
Shareholders of record of the Trust or the mailing of such materials to such
Shareholders of record, subject to any rights provided to the Trust or any
Trustees provided by said Section 16(c). Notice shall be sent, by First Class
Mail or such other means determined by the Trustees, at least 15 days prior to
any such meeting.
Section 7.3 Quorum and Required Vote. One-third of Shares entitled to vote
in person or by proxy shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series
<PAGE> 30
27
(or that the holders of any class shall vote as a class), then a majority of the
Shares present in person or by proxy of that Series or, if required by law, a
Majority Shareholder Vote of that Series (or class), voted on the matter in
person or by proxy shall decide that matter insofar as that Series (or class) is
concerned. Shareholders may act by unanimous written consent. Actions taken by
Series (or class) may be consented to unanimously in writing by Shareholders of
that Series.
ARTICLE VIII.
CUSTODIAN
Section 8.1 Appointment and Duties. The Trustees shall at all times employ
a bank, a company that is a member of a national securities exchange, or a trust
company, each having capital, surplus and undivided profits of at least two
million dollars ($2,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same
upon written order or oral order confirmed in writing;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct; and
(3) to disburse such funds upon orders or vouchers; and the Trust may
also employ such custodian as its agent:
(4) to keep the books and accounts of the Trust or of any Series or
class and furnish clerical and accounting services; and
<PAGE> 31
28
(5) to compute, if authorized to do so by the Trustees, the Net Asset
Value of any Series, or class thereof, in accordance with the provisions
hereof; all upon such basis of compensation as may be agreed upon between
the Trustees and the custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, or a trust company organized under the laws of the
United States or one of the states thereof and having capital, surplus and
undivided profits of at least two million dollars ($2,000,000) or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act.
Section 8.2 Central Certificate System. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, as amended, or such other person as may be
permitted by the Commission, or otherwise in accordance with the 1940 Act,
pursuant to which system all securities of any particular class or series of any
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, subcustodians or other agents.
<PAGE> 32
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ARTICLE IX.
DISTRIBUTIONS AND REDEMPTIONS
Section 9.1 Distributions.
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or class thereof, as of the
record date of that Series fixed as provided in Section (b) hereof.
Section 9.2 Redemptions. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the shares in
accordance with this Section 9.2; and the
<PAGE> 33
30
Shareholder so requesting shall be entitled to require the Series to purchase,
and the Series or the principal underwriter of the Series shall purchase his
said Shares, but only at the Net Asset Value thereof (as described in Section
9.3 of this Article IX). The Series shall make payment for any shares to be
redeemed, as aforesaid, in cash or property from the assets of that Series and
payment for such Shares shall be made by the Series or the principal underwriter
of the Series to the Shareholder of record within seven (7) days after the date
upon which the request is effective. Upon redemption, shares shall become
Treasury shares and may be re-issued from time to time.
Section 9.3 Determination of Net Asset Value and Valuation of Portfolio
Assets. The term "Net Asset Value" of any Series shall mean that amount by which
the assets of that Series exceed its liabilities, all as determined by or under
the direction of the Trustees. Such value shall be determined separately for
each Series and shall be determined on such days and at such times as the
Trustees may determine. Such determination shall be made with respect to
securities for which market quotations are readily available, at the market
value of such securities; and with respect to other securities and assets, at
the fair value as determined in good faith by the Trustees; provided, however,
that the Trustees, without Shareholder approval, may alter the method of valuing
portfolio securities insofar as permitted under the 1940 Act and the rules,
regulations and interpretations thereof promulgated or issued by the Commission
or insofar as permitted by any Order of the Commission applicable to the Series.
The Trustees may delegate any of their powers and duties under this Section 9.3
with respect to valuation of assets and liabilities. The resulting amount, which
shall represent the total Net Asset Value of the particular Series, shall be
divided by the total number of shares of that Series outstanding at the time and
the quotient so obtained shall be the Net Asset
<PAGE> 34
31
Value per Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner and may
fix the time when such predetermined value shall become effective. If, for any
reason, the net income of any Series determined at any time, is a negative
amount, the Trustees shall have the power with respect to that Series (i) to
offset each Shareholder's pro rata share of such negative amount from the
accrued dividend account of such Shareholder, or (ii) to reduce the number of
Outstanding Shares of such Series by reducing the number of Shares in the
account of each Shareholder by a pro rata portion of the number of full and
fractional Shares which represents the amount of such excess negative net
income, or (iii) to cause to be recorded on the books of such Series an asset
account in the amount of such negative net income (provided that the same shall
thereupon become the property of such Series with respect to such Series and
shall not be paid to any Shareholder), which account may be reduced by the
amount, of dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero; (iv) to combine the methods described in clauses (i)
and (ii) and (iii) of the sentence; or (v) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net Asset
Value per Share of such Series to remain at a constant amount per Outstanding
Share immediately after each such determination and declaration. The Trustees
shall also have the power not to declare a dividend out of net income for the
purpose of causing the Net Asset Value per share to be increased. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
the practice of maintaining the Net Asset Value per Share of the Series at a
constant amount.
<PAGE> 35
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Section 9.4 Suspension of the Right of Redemption. The Trustees may declare
a suspension of the right of redemption or postpone the date of payment as
permitted under the 1940 Act. Such suspension shall take effect at such time as
the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series are divided into classes, the
provisions of this Section 9.3, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
Section 9.5 Redemption of Shares in Order to Qualify as Regulated
Investment Company. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify any Series
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power (but not the obligation) by lot or other means
deemed equitable by them (i) to call for redemption by any such person of a
number, or principal amount, of Shares sufficient to maintain or bring the
direct or indirect ownership of Shares into conformity with the requirements for
such qualification and (ii) to refuse to transfer or issue Shares to any person
whose acquisition of the Shares in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in this Article IX.
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The holders of Shares shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
ARTICLE X.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.1 Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or a
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
Section 10.2 Indemnification.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every Person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or
<PAGE> 37
34
otherwise by virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office,
(A) by the court or other body approving the
settlement;
(B) by at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to
the matter
<PAGE> 38
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based upon a review of readily available facts (as opposed
to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed
to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 10.2 may be paid by the Trust or Series from time
to time prior to final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid over by him to
the Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 10.2; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither
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36
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Section 10.2.
Section 10.3 Shareholders. In case any Shareholder or former Shareholder of
any Series shall be held to be personally liable solely by reason of his being
or having been a Shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his heirs, executors, administrators or other legal representatives, or, in the
case of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets belonging to the applicable Series to be
held harmless from and indemnified against all loss and expense arising from
such liability. The Trust, on behalf of the affected Series, shall, upon request
by the Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series.
ARTICLE XI.
MISCELLANEOUS
Section 11.1 Trust Not a Partnership. It is hereby expressly declared that
a trust and not a partnership is created hereby. No Trustee hereunder shall have
any power to bind personally either the Trust's officers or any Shareholder. All
persons extending credit to, contracting with or having any claim against the
Trust or the Trustees shall look only to the assets of the appropriate Series or
(if the Trustees shall have yet to have established Series) of the Trust for
payment under such credit, contract or claim; and
<PAGE> 40
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neither the Shareholders nor the Trustees, nor any of their agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Trust Instrument shall protect a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
Section 11.2 Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder in good
faith and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Article X hereof
and to Section 11.1 of this Article XI, the Trustees shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and operation of this Trust
Instrument, and subject to the provisions of Article X hereof and Section 11.1
of this Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
obtained.
Section 11.3 Establishment of Record Dates. The Trustees may close the
Share transfer books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
<PAGE> 41
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any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
Section 11.4 Termination of Trust.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 11.4.
(b) By a vote of a majority of Trustees, the Trustees may,
(i) liquidate or dissolve the Trust, or any Series.
(ii) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another trust, partnership,
association or corporation, or to a separate series of shares thereof,
organized under the laws of any state which trust, partnership,
association or corporation is an open-end management investment
company as defined in the 1940 Act, or is a series thereof, for
adequate consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust or any affected Series, and which may include
shares of beneficial interest,
<PAGE> 42
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stock or other ownership interests of such trust, partnership,
association or corporation or of a series thereof.
Upon making reasonable provision, in the determination of the Trustees, for
the payment of all such liabilities by such assumption or otherwise, the
Trustees shall distribute the remaining proceeds or assets (as the case may be)
of each Series (or class) ratably among the holders of Shares of that Series
then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged of any
and all further liabilities and duties hereunder and the right, title and
interest of all parties with respect to the Trust or Series shall be canceled
and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
Section 11.5 Reorganization. Notwithstanding anything else herein, the
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (i) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long as
the surviving or resulting entity is an open-end management investment company
under the 1940 Act, or is a series thereof, that will succeed to or assume the
Trust's registration under that Act and which is formed, organized or existing
under the laws of a state, commonwealth possession or colony of the United
States or (ii) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be
<PAGE> 43
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signed by a majority of Trustees and facsimile signatures conveyed by electronic
or telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.5 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
Section 11.6 Filing of Copies, References, Headings. The original or a copy
of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his," "he" and "him," shall be deemed to include the feminine
and neuter, as well as masculine, genders. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
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Section 11.7 Applicable Law. The trust set forth in this instrument is made
in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income and principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust," and without limiting the provisions hereof, the Trust may
exercise all powers or privileges afforded to trusts or actions that may be
engaged in by trusts under the Delaware Act, and the absence of a specific
reference herein to any such power, privilege or action shall not imply that the
Trust may not exercise such power or privilege or take such actions.
<PAGE> 45
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Section 11.8 Amendments. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(i) on any amendment which would affect their right to vote granted in Section
7.1 of Article VII hereof, (ii) on any amendment to this Section 11.8, (iii) on
any amendment as may be required by law or by the Trust's registration statement
filed with the Commission and (iv) on any amendment submitted to them by the
Trustees. Any amendment required or permitted to be submitted to Shareholders
which, as the Trustees determine, shall affect the Shareholders of one or more
Series shall be authorized by vote of the Shareholders of each Series affected
and no vote of shareholders of a Series not affected shall be required.
Notwithstanding anything else herein, any amendment to Article 10 hereof shall
not limit the rights to indemnification or insurance provided therein with
respect to action or omission of Covered Persons prior to such amendment.
Section 11.9 Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
Section 11.10 Name Reservation. The Trustees on behalf of the Trust
acknowledge that ING Mutual Funds Management Co. LLC has licensed to the Trust
the non-exclusive right to use the words "ING" as part of the name of the Trust,
and has reserved the right to grant the non-exclusive use of the words "ING" or
any derivative thereof the any other party. In addition, ING Mutual Funds
Management Co. LLC reserves the right to grant the non-exclusive use of the
words "ING" to, and to withdraw such right from, any other business or other
enterprise. ING Mutual Funds Management
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Co. LLC reserves the right to withdraw from the Trust the right to use said
words "ING" and will withdraw such right if the Trust ceases to employ, for any
reason, ING Mutual Funds Management Co. LLC, an affiliate or any successor as
adviser of the Trust.
Section 11.11 Provisions in Conflict with Law. The provisions of this Trust
Instrument are severable, and if the Trustees shall determine, with the advice
of counsel, that any of such provisions is in conflict with the 1940 Act, the
regulated investment company provisions of the Revenue Code or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Trust Instrument; provided, however, that
such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction, such
invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any other
jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the initial Trustees of
the Trust, have executed this instrument this 15th day of July, 1999.
/s/ Louis S. Citron
-----------------------------------
Louis S. Citron, as Trustee and
not individually
<PAGE> 1
EXHIBIT 99.B
BY-LAWS
OF
ING VARIABLE INSURANCE TRUST
These Bylaws of ING Variable Insurance Trust (the "Trust"), a
Delaware business trust, are subject to the Trust's Instrument of Trust dated
July 15, 1999 as from time to time amended, supplemented or restated (the "Trust
Instrument"). Capitalized terms used herein which are defined in the Trust
Instrument are used as therein defined.
ARTICLE I.
PRINCIPAL OFFICE
The principal office of the Trust shall be located at 1475
Dunwoody Drive, West Chester, Pennsylvania 19380, or such other location as the
Trustees may, from time to time, determine. The Trust may establish and maintain
such other offices and places of business as the Trustees may, from time to
time, determine.
ARTICLE II.
OFFICERS AND THEIR ELECTION
Section 2.1 Officers. The officers of the Trust shall be
President, a Treasurer, a Secretary, and such other officers as the Trustees may
from time to time elect. The Trustees may delegate to any officer or committee
the power to appoint any subordinate officers or agents. It shall not be
necessary for any Trustee or other officer to be a holder of Shares in the
Trust.
Section 2.2 Election of Officers. The President, Treasurer and
Secretary shall be chosen by the Trustees. Two or more offices may be held by a
single person except
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the offices of President and Secretary. Subject to the provisions of Section 12
hereof, the President, the Treasurer and the Secretary shall each hold office
until their successors are chosen and qualified and all other officers shall
hold office at the pleasure of the Trustees.
Section 2.3 Resignations. Any officer of the Trust may resign,
notwithstanding Section 2 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
ARTICLE III.
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
Section 3.1 Management of The Trust-General. The business and
affairs of the Trust shall be managed by, or under the direction of, the
Trustees, and they shall have all powers necessary and desirable to carry out
their responsibilities, so far as such powers are not inconsistent with the laws
of the State of Delaware, the Trust Instrument or with these Bylaws.
Section 3.2 Executive and Other Committees. The Trustees may
elect from their own number an executive committee, which shall have any or all
the powers of the Trustees while the Trustees are not in session. The Trustees
may also elect from their own number other committees from time to time. The
number composing such committees and the powers conferred upon the same are to
be determined by vote of a majority of the Trustees. All members of such
committees shall hold such offices at the pleasure of the Trustees. The Trustees
may abolish any such committee at any time. Any committee to which the Trustees
delegate any of their powers or duties shall keep records of its meetings
<PAGE> 3
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and shall report its actions to the Trustees. The Trustees shall have power to
rescind any action of any committee, but no such rescission shall have
retroactive effect.
Section 3.3 Compensation. Each Trustee and each committee
member may receive such compensation for his services and reimbursement for his
expenses as may be fixed from time to time by resolution of the Trustees.
Section 3.4 Chairman of the Trustees. The Trustees shall
appoint from among their number a Chairman who shall serve as such at the
pleasure of the Trustees. When present, he shall preside at all meetings of the
Shareholders and the Trustees, and he may, subject to the approval of the
Trustees, appoint a Trustee to preside at such meetings in his absence. He shall
perform such other duties as the Trustees may from time to time designate.
Section 3.5 President. The President shall be the chief
executive officer of the Trust and, subject to the direction of the Trustees,
shall have general administration of the business and policies of the Trust.
Except as the Trustees may otherwise order, the President shall have the power
to grant, issue, execute or sign such powers of attorney, proxies, agreements or
other documents as may be deemed advisable or necessary in the furtherance of
the interests of the Trust or any Series thereof. He shall also have the power
to employ attorneys, accountants and other advisers and agents and counsel for
the Trust. The President shall perform such duties additional to all of the
foregoing as the Trustees may from time to designate.
Section 3.6 Treasurer. The Treasurer shall be the principal
financial and accounting officer of the Trust. He shall deliver all funds and
securities of the Trust which may come into his hands to such company as the
Trustees shall employ as Custodian in
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accordance with the Trust Instrument and applicable provisions of law. He shall
make annual reports regarding the business and condition of the Trust, which
reports shall be preserved in Trust records, and he shall furnish such other
reports regarding the business and condition of the Trust as the Trustees may
from time to time require. The Treasurer shall perform such additional duties as
the Trustees may from time to time designate.
Section 3.7 Secretary. The Secretary shall record in books
kept for the purpose all votes and proceedings of the Trustees and the
Shareholders at their respective meetings. He shall have the custody of the seal
of the Trust. The Secretary shall perform such additional duties as the Trustees
may from time to time designate.
Section 3.8 Vice President. Any Vice President of the Trust
shall perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 3.9 Assistant Treasurer. Any Assistant Treasurer of
the Trust shall perform such duties as the Trustees or the Treasurer may from
time to time designate, and, in the absence of the Treasurer, the senior
Assistant Treasurer, present and able to act, may perform all the duties of the
Treasurer.
Section 3.10 Assistant Secretary. Any Assistant Secretary of
the Trust shall perform such duties as the Trustees or the Secretary may from
time to time designate, and, in the absence of the Secretary, the senior
Assistant Secretary, present and able to act, may perform all the duties of the
Secretary.
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Section 3.11 Subordinate Officers. The Trustees from time to
time may appoint such other officers or agents as they may deem advisable, each
of whom shall have such title, hold office for such period, have such authority
and perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or committees of Trustees the power to
appoint any such subordinate officers or agents and to prescribe their
respective terms of office, authorities and duties.
Section 3.12 Surety Bonds. The Trustees may require any
officer or agent of the Trust to execute a bond (including, without limitation,
any bond required by the Investment Company Act of 1940, as amended ("the 1940
Act") and the rules and regulations of the Securities and Exchange Commission
("Commission")) to the Trust in such sum and with such surety or sureties as the
Trustees may determine, conditioned upon the faithful performance of his duties
to the Trust including responsibility for negligence and for the accounting of
any of the Trust's property, funds or securities that may come into his hands.
Section 3.13 Removal. Any officer may be removed from office
whenever in the judgment of the Trustees the best interest of the Trust will be
served thereby, by the vote of a majority of the Trustees given at any regular
meeting or any special meeting of the Trustees. In addition, any officer or
agent appointed in accordance with the provisions of Section 10 hereof may be
removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by the Trustees.
Section 3.14 Remuneration. The salaries or other compensation,
if any, of the officers of the Trust shall be fixed from time to time by
resolution of the Trustees.
<PAGE> 6
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ARTICLE IV.
SHAREHOLDERS' MEETINGS
Section 4.1 Special Meetings. A special meeting of the
shareholders shall be called by the Secretary whenever (i) ordered by the
Trustees or (ii) requested in writing by the holder or holders of at least 10%
of the Outstanding Shares entitled to vote. If the Secretary, when so ordered or
requested, refuses or neglects for more than 30 days to call such special
meeting, the Trustees or the Shareholders so requesting, may, in the name of the
Secretary, call the meeting by giving notice thereof in the manner required when
notice is given by the Secretary. If the meeting is a meeting of the
Shareholders of one or more Series or classes of Shares, but not a meeting of
all Shareholders of the Trust, then only special meetings of the Shareholders of
such one or more Series or any Classes thereof shall be entitled to notice of
and to vote at such meeting.
Section 4.2 Notices. Except as above provided, notices of any
meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least fifteen days before the
meeting, to such address as may be registered with the Trust by the Shareholder.
Notice of any Shareholder meeting need not be given to any Shareholder if a
written waiver of notice, executed before or after such meeting, is filed with
the record of such meeting, or to any Shareholder who shall attend such meeting
in person or by proxy. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced at
the meeting and reasonable notice is given to persons present at the meeting and
the adjourned meeting is held within a reasonable time after the date set for
the original meeting.
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Section 4.3 Voting-Proxies. Subject to the provisions of the
Trust Instrument, shareholders entitled to vote may vote either in person or by
proxy, provided that either (i) an instrument authorizing such proxy to act is
executed by the Shareholder in writing and dated not more than eleven months
before the meeting, unless this instrument specifically provides for a longer
period or (ii) the Trustees adopt by resolution an electronic, telephonic,
computerized or other alternative to execution of a written instrument
authorizing the proxy to act which authorization is received no more than eleven
months before the meeting. Proxies shall be delivered to the Secretary of the
Trust or other persons responsible for recording the proceedings before being
voted. A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by one of them unless at or prior to exercise of such
proxy the Trust receives specific written notice to the contrary from any one of
them. Unless otherwise specifically limited by their terms, proxies shall
entitle the holder thereof to vote at any adjournment of a meeting. A proxy
purporting to be exercised by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden in proving
invalidity shall rest on the challenger. At all meetings of the Shareholders,
unless the voting is conducted by inspectors, all questions relating to the
qualifications of voting, the validity of proxies, and the acceptance or
rejection of votes shall be decided by the Chairman of the meeting. Except as
otherwise provided herein or in the Trust Instrument, as these By-laws or such
Trust Instrument may be amended or supplemented from time to time, all matters
relating to the giving, voting or validity or proxies shall be governed by the
General Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a Delaware corporation
and the Shareholders were shareholders of a Delaware corporation.
<PAGE> 8
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Section 4.4 Place of Meeting. All special meetings of the
Shareholders shall be held at the principal place of business of the Trust or at
such other place in the United States as the Trustees may designate.
Section 4.5 Action Without a Meeting. Any action to be taken
by Shareholders may be taken without a meeting if all shareholders entitled to
vote on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting of the Trustees held at
the principal place of business of the Trust.
ARTICLE V.
TRUSTEES' MEETINGS
Section 5.1 Special Meetings. Special meetings of the Trustees
may be called orally or in writing by the Chairman of the Board of Trustees or
any two other Trustees.
Section 5.2 Regular Meetings. Regular meetings of the Trustees
may be held at such places and at such times as the Trustees may from time to
time determine; each Trustee present at such determination shall be deemed a
party calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees, as
provided for in Section 4.04 of the Trust Instrument.
Section 5.3 Quorum. A majority of the Trustees shall
constitute a quorum for the transaction of business and an action of a majority
of the quorum shall constitute action of the Trustees.
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Section 5.4 Notice. Except as otherwise provided, notice of
any special meeting of the Trustees shall be given by the party calling the
meeting to each Trustee, as provided for in Section 4.04 of the Trust
Instrument. A written notice may be mailed, postage prepaid, addressed to him at
his address as registered on the books of the Trust or if not so registered, at
his last known address.
Section 5.5 Place Of Meeting. All special meetings of the
Trustees shall be held at the principal place of business of the Trust or such
other place as the Trustees may designate. Any meeting may adjourn to any place.
Section 5.6 Special Action. When all the Trustees shall be
present at any meeting, however called or wherever held, or shall assent to the
holding of the meeting without notice, or shall sign a written assent thereto
filed with the record of such meeting, the acts of such meeting shall be valid
as if such meeting had been regularly held.
Section 5.7 Action By Consent. Any action by the Trustees may
be taken without a meeting if a written consent thereto is signed by all the
Trustees and filed with the records of the Trustees' meeting. Such consent shall
be treated, for all purposes, as a vote at a meeting of the Trustees held at the
principal place of business of the Trustees.
Section 5.8 Participation in Meetings By Conference Telephone.
Except when presence in person is required at a meeting under the 1940 Act or
other applicable laws, Trustees may participate in a meeting of Trustees by
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting. Any meeting conducted by
telephone shall be deemed to take place at and from the principal office of the
Trust.
<PAGE> 10
10
ARTICLE VI.
SHARES OF BENEFICIAL INTEREST
Section 6.1 Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into such transferable Shares of one or
more separate and distinct Series, or classes thereof, as the Trustees shall
from time to time create and establish. The number of Shares is unlimited, and
each Share of each Series or class thereof shall be without par value and shall
represent an equal proportionate interest with each other Share in the Series,
none having priority or preference over another, except to the extent that such
priorities or preferences are established with respect to one or more classes of
shares consistent with applicable law and any rule or order to the Commission.
Section 6.2 Transfer of Shares. The Shares of the Trust shall
be transferable, so as to affect the rights of the Trust, only by transfer
recorded on the books of the Trust, in person or by attorney.
Section 6.3 Equitable Interest Not Recognized. The Trust shall
be entitled to treat the holder of record of any Share or Shares of beneficial
interest as the holder in fact thereof, and shall not be bound to recognize any
equitable or other claim or interest in such Share or Shares on the part of any
other person except as may be otherwise expressly provided by law.
Section 6.4 Share Certificate. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
authorize. The Trustees may issue certificates to a Shareholder of any Series or
class thereof for any purpose and the issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates generally. In the
event that the Trustees authorize the issuance of Share
<PAGE> 11
11
certificates, such certificate shall be in the form prescribed from time to time
by the Trustees and shall be signed by the President or a Vice President and by
the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary. Such
signatures may be facsimiles if the certificate is signed by a transfer or
shareholder services agent or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Trust with
the same effect as if he or she were such officer at the time of its issue.
In lieu of issuing certificates for Shares, the Trustees or
the transfer or shareholder services agent may either issue receipts therefor or
may keep accounts upon the books of the Trust for the record holders of such
Shares, who shall in either case be deemed, for all purposes hereunder, to be
holders of certificates for such Shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
Section 6.5 Loss of Certificate. In the case of the alleged
loss or destruction or the mutilation of a Share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as the Trustees may
prescribe.
Section 6.6 Discontinuance of Issuance of Certificates. The
Trustees may at any time discontinue the issuance of Share certificates and may,
by written notice to each Shareholder, require the surrender of Share
certificates to the Trust for cancellation. Such surrender and cancellation
shall not affect the ownership of Shares in the Trust.
<PAGE> 12
12
ARTICLE VII.
OWNERSHIP OF ASSETS OF THE TRUST
The Trustees, acting for and on behalf of the Trust, shall be
deemed to hold legal and beneficial ownership of any income earned on securities
held by the Trust issued by any business entity formed, organized or existing
under the laws of any jurisdiction other than a state, commonwealth, possession
or colony of the United States or the laws of the United States.
ARTICLE VIII.
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees or by resolution of the Shareholders.
ARTICLE IX.
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
The Trust may purchase and maintain insurance on behalf of any
Covered Person or employee of the Trust, including any Covered Person or
employee of the Trust who is or was serving at the request of the Trust as a
Trustee, officer or employee of a corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and incurred by
him in any such capacity or arising out of his status as such, whether or not
the Trustees would have the power to indemnify him against such liability.
<PAGE> 13
13
The Trust may not acquire or obtain a contract for insurance
that protects or purports to protect any Trustee or officer of the Trust against
any liability to the Trust or its Shareholder to which he would otherwise be
subject by reason or willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE X.
SEAL
The seal of the Trust shall be circular in form bearing the
inscription:
"ING VARIABLE INSURANCE TRUST
THE STATE OF DELAWARE"
The form of the seal shall be subject to alteration by the
Trustees and the seal my be used by causing it or a facsimile to be impressed or
affixed or printed or otherwise reproduced.
Any officer or Trustee of the trust shall have authority to
affix the seal of the Trust to any document, instrument or other paper executed
and delivered by or on behalf of the Trust; however, unless otherwise required
by the Trustees, the seal shall not be necessary to be placed on and its absence
shall not impair the validity of any document, instrument, or other paper
executed by or on behalf of the Trust.
ARTICLE XI.
FISCAL YEAR
The fiscal year of the Trust shall end on such date as the
Trustees shall from time to time determine.
<PAGE> 14
14
ARTICLE XII.
AMENDMENTS
These Bylaws may be amended at any meeting of the Trustees of
the Trust by a majority vote.
ARTICLE XIII.
REPORT TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the Trust including financial
statements which shall be certified at least annually by independent public
accountants.
ARTICLE XIV.
HEADINGS
Headings are placed in these Bylaws for convenience of
reference only and in case of any conflict, the text of these Bylaws rather than
the headings shall control.
<PAGE> 1
EXHIBIT 99.D(1)
FORM OF
MANAGEMENT AGREEMENT
THIS AGREEMENT is made this ___ day of _______, 2000 by and between the ING
VARIABLE INSURANCE TRUST, a Delaware business trust (the "Trust"), on behalf of
each of its series as listed in Schedule 1 (each, a "Fund", and collectively,
the "Funds"), and ING MUTUAL FUNDS MANAGEMENT CO. LLC, a Delaware limited
liability company (the "Investment Manager").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and the rules and regulations promulgated thereunder; and
WHEREAS, the Investment Manager is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Trust and the Investment Manager desire to enter into an
agreement to provide for the management of the assets of each Fund on the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Management. The Investment Manager shall act as investment adviser for
the Funds of the Trust and shall, in such capacity, supervise the investment and
reinvestment of the cash, securities or other properties comprising each Fund's
assets, subject at all times to the policies and control of the Trust's Board of
Trustees. The Investment Manager shall give each Fund the benefit of its best
judgment, efforts and facilities in rendering its services as investment
adviser. The Investment Manager shall, for all purposes herein, be deemed an
independent contractor and shall have, unless otherwise expressly provided or
authorized, no authority to act for or represent the Trust, on behalf of the
Funds, in any way or otherwise be deemed an agent of the Trust.
2. Duties of Investment Manager. In carrying out its obligation under
paragraph 1 hereof, the Investment Manager shall: (a) supervise and manage all
aspects of the Funds' operations; (b) provide the Funds or obtain for each, and
thereafter supervise, such executive, administrative, clerical and shareholder
servicing services as are deemed advisable by the Trust's Board of Trustees; (c)
arrange, but not pay for, the periodic updating of prospectuses and supplements
thereto, proxy material, tax returns, reports to the Funds' shareholders and
reports to and filings with the Securities and Exchange Commission and state
Blue Sky authorities; (d) provide the
<PAGE> 2
Funds with, or obtain for each, adequate office space and all necessary office
equipment and services, including telephone service, heat, utilities, stationery
supplies and similar items for the Funds' principal office; (e) provide the
Board of Trustees of the Trust on a regular basis with financial reports and
analyses on the Funds' operations and the operations of comparable investment
companies; (f) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Funds, and whether
concerning the individual issuers whose securities are included in the Funds or
the activities in which they engage, or with respect to securities which the
Investment Manager considers desirable for inclusion in the Funds; (g) determine
what issuers and securities shall be represented in the Funds' respective
portfolios and regularly report them to the Board of Trustees of the Trust; (h)
formulate and implement continuing programs for the purchases and sales of the
securities of such issuers and regularly report thereon to the Board of Trustees
of the Trust; and (i) take, on behalf of the Funds, all actions which appear
necessary to carry into effect such purchase and sale programs and supervisory
functions as aforesaid, including the placing of orders for the purchase and
sale of portfolio securities.
3. Broker-Dealer Relationships. The Investment Manager is responsible for
decisions to buy and sell securities for the Funds, broker-dealer selection, and
negotiation of brokerage commission rates. The Investment Manager may select any
affiliated person of the Trust or the Investment Manager to the extent permitted
pursuant to the Trust's procedures for securities transactions with affiliated
brokers pursuant to Section 17(e)(2) and Rule 17e-1 under the Investment Company
Act.
The Investment Manager's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Investment Manager will take the following into consideration: the best net
price available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Investment Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused a Fund to pay a broker or dealer that provides
brokerage and research services to the Investment Manager for the Fund's use an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Investment Manager determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Investment Manager's
2
<PAGE> 3
overall responsibilities with respect to the Fund. The Investment Manager is
further authorized to allocate the orders placed by it on behalf of a Fund to
such brokers and dealers who also provide research or statistical material, or
other services to the Fund or the Investment Manager for the Fund's use. Such
allocation shall be in such amounts and proportions as the Investment Manager
shall determine and the Investment Manager will report on said allocations
regularly to the Board of Trustees of the Trust indicating the brokers to whom
such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Investment Manager pursuant to this Agreement, as well as any other activities
undertaken by the Investment Manager on behalf of the Funds pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Trust.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Investment Manager shall at all times
conform to: (a) all applicable provisions of the Investment Company Act and the
Investment Advisers Act and any rules and regulations adopted thereunder as
amended; and (b) the provisions of the Registration Statement of the Trust under
the Securities Act of 1933, as amended, and the Investment Company Act; and (c)
the provisions of the Trust Instrument of the Trust, as amended; and (d) the
provisions of the By-laws of the Trust, as amended; and (e) any other applicable
provisions of state and federal law.
6. Expenses. The expenses connected with the Funds shall be allocable
between the Funds and the Investment Manager as follows:
(a) The Investment Manager shall furnish, at its expense and
without cost to the Funds, the services of a President,
Secretary and one or more Vice Presidents of the Trust, to the
extent that such additional officers may be required by the
Trust for the proper conduct of its affairs;
(b) The Investment Manager shall further maintain, at its expense
and without cost to the Funds, a trading function in order to
carry out its obligations under subparagraph (h) of paragraph
2 hereof to place orders for the purchase and sale of
portfolio securities for the Funds;
(c) Nothing in subparagraph (a) hereof shall be construed to
require the Investment Manager to bear: (i) any of the costs
(including applicable office space, facilities and equipment)
of the services of a principal financial officer of the Trust
whose normal duties consist of maintaining the financial
accounts and books and records of the Funds; including the
review of calculations of net asset value and preparing tax
returns; or (ii) any of the costs (including applicable office
space, facilities and equipment) of the services of any of the
personnel operating under the direction of such principal
financial officer. Notwithstanding the obligation of the Funds
to bear the expense of the functions referred to in clauses
(i) and (ii) of this subparagraph (c), the Investment Manager
may pay the salaries, including any applicable employment or
payroll taxes and other salary costs, of the principal
financial officer and other
3
<PAGE> 4
personnel carrying out such functions and the Funds shall
reimburse the Investment Manager therefor upon proper
accounting.
(d) All of the ordinary business expenses incurred in the
operations of the Funds and the offering of shares shall be
borne by the Fund unless specifically provided otherwise in
this paragraph 6. These expenses include, but are not limited
to, brokerage commissions, legal, auditing, taxes or
governmental fees, networking servicing costs, fund accounting
servicing costs, fulfillment servicing costs, the cost of
preparing share certificates, custodian, depository, transfer
and shareholder service agent costs, expenses of issue, sale,
redemption and repurchase of shares, expenses of registering
and qualifying shares for sale, insurance premiums on property
or personnel (including officers and trustees if available) of
the Funds which inure to each Funds benefit, expenses relating
to trustee and shareholder meetings, the cost of preparing and
distributing reports and notices to shareholders, the fees and
other expenses incurred by the Trust in connection with
membership in investment company organizations and the cost of
printing copies of prospectuses and statements of additional
information distributed to shareholders.
7. Delegation of Responsibilities. The Investment Manager may delegate the
performance of certain investment advisory services, as described hereunder, to
a sub-adviser.
8. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each Fund will pay the Investment Manager and the
Investment Manager will accept as full compensation therefor a fee computed
daily and paid monthly in arrears at the annual rate set forth on Schedule 1,
based on each Fund's average daily net assets, computed in the manner set forth
in the Registration Statement of the Trust. If the fees payable to the
Investment Manager begin to accrue before the end of any month, or if this
Agreement terminates before the end of any month, then such fees for such month
shall be prorated according to the proportion which the partial period bears to
the full month in which such effectiveness or termination occurs. The Investment
Manager may from time to time and for such periods as it deems appropriate
voluntarily reduce its compensation hereunder (and/or voluntarily assume
expenses) for a Fund.
9. Non-Exclusivity. The services of the Investment Manager to the Funds
are not to be deemed to be exclusive, and the Investment Manager shall be free
to render investment advisory and corporate administrative or other services to
others (including other investment companies) and to engage in other activities.
It is understood and agreed that officers or members of the Investment Manager
may serve as officers or trustees of the Trust, and that officers or trustees of
the Trust may serve as officers or members of the Investment Manager to the
extent permitted by law; and that the officers and members of the Investment
Manager are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, officers or
partners of any other firm or corporation, including other investment companies.
4
<PAGE> 5
10. Term and Approval. This Agreement shall become effective as it pertains
to a Fund at the close of business on the date opposite the Fund's name on
Schedule 1 and shall remain in force and effect for two years for the Fund and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section 2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
11. Termination. This Agreement may be terminated at any time as it
pertains to a Fund, without the payment of any penalty, by vote of the Trust's
Board of Trustees or by vote of a majority of the Fund's outstanding voting
securities, or by the Investment Manager, on sixty (60) days' written notice to
the other party. The notice provided for herein may be waived by either party.
This Agreement shall automatically terminate as it pertain to all Funds in the
event of its assignment, the term "assignment" for the purpose having the
meaning defined in Section 2(a)(4) of the Investment Company Act.
12. Liability of Investment Manager and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Investment Manager or any of
its officers, trustees or employees, the Investment Manager shall not be subject
to liability to the Trust or to the Funds or to any shareholder of the Funds for
any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Investment Manager or any officer, director or employee of the Investment
Manager, the Trust hereby agrees to indemnify and hold the Investment Manager
harmless from and against all claims, actions, suits, and proceedings at law or
in equity whether brought or asserted by a private party or a governmental
agency, instrumentality or entity of any kind, relating to the sale, purchase,
pledge of, advertisement of, or solicitation of sales or purchases of any
security (whether of a Fund or otherwise) by the Trust, its officers, directors,
employees or agents in alleged violation of applicable federal, state or foreign
laws, rules or regulations.
13. Limit of Liability. The terms the "ING Variable Insurance Trust" and
"Trustees" (of the Trust) refer, respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Trust's organizational documentation, to which reference is
hereby made. The obligations of the "ING Variable Insurance Trust" entered into
in the name or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Funds, and all persons dealing with
the Funds or other series of the Trust must look solely to the assets of the
Funds for the enforcement of any claims against the Trust.
5
<PAGE> 6
14. License Agreement. The Trust shall have the non-exclusive right to use
the name "ING" to designate itself and any current or future series of shares
only so long as ING Mutual Funds Management Co. LLC serves as investment manager
or adviser to the Trust with respect to such series of shares. In the event that
the Investment Manager ceases to act as the investment manager to the Funds, the
Trust shall cease using the name "ING" upon the Investment Manager's written
request.
15. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Further, any material amendment, as
determined by the parties hereto with the assistance of legal counsel, shall not
be effective until approved: (a) (i) by the Trust's Board of Trustees and (ii)
by the vote of a majority of the Fund's or Funds', as applicable, outstanding
voting securities (as defined in Section 2(a)(42) of the Investment Company
Act); and (b) by the affirmative vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as Trust trustees), by votes cast in person at a meeting
specifically called for such purpose.
16. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
and that of the Investment Manager shall be 1475 Dunwoody Drive, West Chester,
PA 19380.
17. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act and to interpretations thereof, if any, by
the United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is released by rules, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and both of which, collectively, shall
constitute one agreement.
19. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of New York.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the day and year first above
written.
ING VARIABLE INSURANCE TRUST, ING MUTUAL FUNDS MANAGEMENT CO. LLC
on behalf each of its series listed
on Schedule 1
By: __________________________ By: ___________________________
Title: __________________________ Title: ___________________________
Attest By:_________________________ Attest By:_________________________
Title: __________________________ Title: __________________________
7
<PAGE> 8
Schedule 1
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
<S> <C> <C>
ING Large Cap Growth Fund 0.75% October 1, 1999
ING Growth & Income Fund 0.75% October 1, 1999
ING International Equity Fund 1.25% October 1, 1999
ING Global Brand Names Fund 1.00% October 1, 1999
ING Income Allocation Fund 0.35% October 1, 1999
ING Balanced Allocation Fund 0.35% October 1, 1999
ING Growth Allocation Fund 0.35% October 1, 1999
ING Aggressive Growth Allocation Fund 0.35% October 1, 1999
</TABLE>
- ----------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
8
<PAGE> 1
EXHIBIT 99.D(2)
FORM OF
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this ___ day of _______, 2000 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and Baring Asset Management, Inc. (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Variable Insurance Trust (the "Trust"); and
WHEREAS, the Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
2. Asset Allocation. Baring International Investment Limited shall allocate the
assets of each of the Funds for which the Sub-Adviser, Baring International
Investment Limited and Baring Asset Management (Asia) Limited act as
co-sub-advisers (collectively, the "Co-Sub-Advisers") among the Co-Sub-Advisers.
3. Sub-Investment Advisory Services. Subject always to the supervision of the
Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
furnish an investment program in respect of, and make investment decisions for,
the portions of the Funds allocated directly to it by the Investment Adviser or,
with regard to the Funds to be managed by the Co-Sub-Advisers as indicated on
Schedule A, the portions of the Funds allocated to it by Baring International
Investment Limited. The Sub-Adviser will place all orders for the purchase and
sale of securities
<PAGE> 2
for such portions of the Funds allocated to it. In the performance of its
duties, the Sub-Adviser will (a) comply with the provisions of the Trust's
written procedures adopted by its Board of Trustees, and the investment
objective, policies and restrictions of the Funds as provided in the Trust's
Registration Statement on Form N-1A dated July 16, 1999 and in subsequent
post-effective amendments to its registration statement and filings made under
Rule 497 of the Securities Act of 1933, as amended, that are delivered to the
Sub-Adviser in writing, (b) use its best efforts to safeguard and promote the
welfare of the Funds, and (c) will comply with other policies which the Trust's
Board of Trustees or the Investment Adviser, as the case may be, may from time
to time determine and communicate in writing to the Sub-Adviser.
The Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to other accounts for which it has
investment management responsibilities;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer or, in the case of foreign exchange transactions, with a
bank;
(c) will report regularly to the Board of Trustees of the Trust and to
the Investment Adviser and will make appropriate persons available
for the purpose of reviewing with representatives of the
Investment Adviser on a regular basis the management of the Funds,
including, without limitation, review of the general investment
strategy of the Funds, interest rate considerations and general
conditions affecting the marketplace;
(d) will maintain books and records with respect to the Funds'
securities transactions as are required of the Sub-Adviser
pursuant to Paragraph 6 hereof and will furnish the Trust's Board
of Trustees such periodic and special reports as the Board may
reasonably request;
(e) will treat confidentially all records and other information
relative to the Trust; and
(f) in making investment recommendations for the Funds, the
Sub-Adviser's personnel will not inquire as to or take into
consideration whether the issuers of securities proposed for
purchase or sale for a Fund's accounts are clients of the
Sub-Adviser or of its affiliates. In dealing with such clients,
the Sub-Adviser and its affiliates will not inquire as to or take
into consideration whether securities of those customers are held
by the Trust.
4. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2)
2
<PAGE> 3
and Rule 17e-1 under the Investment Company Act of 1940, as amended (the
"Investment Company Act").
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will seek the best overall terms available and will take the
following into consideration: the best net price available; the reliability,
integrity, financial condition and execution capability of the broker-dealer;
the size of and difficulty in executing the order; and the value of the
brokerage and research services provided by the broker-dealer. Accordingly, the
price to a Fund in any transaction may be less favorable than that available
from another broker-dealer.
The Sub-Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused a Fund to pay a broker or dealer that provides brokerage and
research services an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-Adviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Sub-Adviser's
overall responsibilities with respect to the Trust. The Sub-Adviser is further
authorized to allocate the orders placed by it on behalf of a Fund to such
brokers and dealers who also provide research or statistical material, or other
services to the Fund, the Trust and/or other accounts over which the Sub-Adviser
or an affiliate exercises investment discretion. Such allocation shall be in
such amounts and proportions as the Sub-Adviser shall determine and the
Sub-Adviser will report regularly to the Board of Trustees of the Trust
indicating the brokers to whom such allocations have been made and the basis
therefor.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act and the Investment Advisers
Act and any rules and regulations adopted thereunder as amended; (b) the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933, as amended, and the Investment Company Act; (c) the provisions of the
Trust Instrument of the Trust, as amended; (d) the provisions of the By-laws of
the Trust, as amended; and (e) any other applicable provisions of state and
federal law.
6. Books and Records. In compliance with Rule 3la-3 under the Investment Company
Act, the Sub-Adviser hereby agrees that all records which it maintains for the
Trust on behalf of the Investment Adviser are the property of the Trust and
further agrees to surrender promptly to the Trust or to the Investment Adviser
copies of any of such records upon request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 3la-2 adopted under the Investment
Company Act all records required to be maintained by the Sub-Adviser on behalf
of the Investment Adviser under Rule 3la-1(b)(5), (6), (7), (9) and (10) under
the Investment Company Act.
3
<PAGE> 4
7. Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
8. Compensation. For the services provided and the expenses assumed pursuant to
this Agreement, the Investment Adviser will pay the Sub-Adviser and the
Sub-Adviser will accept as full compensation therefor a fee computed daily and
paid monthly in arrears at the annual rate set forth on Schedule A, based on
each Fund's average daily net assets, computed in the manner set forth in the
Registration Statement of the Trust. With regard to certain of the Funds
indicated on Schedule A for which the Co-Sub-Advisers provide co-sub-advisory
services, the Investment Adviser will pay the full fee to the Sub-Adviser who
will accept the fee on behalf of all the Co-Sub-Advisers and who will in turn
pay to the other Co-Sub-Advisers their compensation as agreed between the
Sub-Adviser and the other Co-Sub-Advisers. In the event that investment advisory
fees charged to a Fund by the Investment Adviser are waived, deferred or
reduced, then sub-advisory fees payable in accordance with this Paragraph 8
shall be proportionally waived, deferred or reduced. Such fee reduction, if
applicable, shall be applied on a monthly basis at the time each payment of
sub-advisory fees is due hereunder. The Sub-Adviser will be given at least 30
days' written notice of any proposed waiver, deferral or reduction of investment
advisory and sub-advisory fees. Further, if the fees payable to the Sub-Adviser
begin to accrue before the end of any month, or if this Agreement terminates
before the end of any month, then such fees for such month shall be prorated
according to the proportion which the partial period bears to the full month in
which such effectiveness or termination occurs.
9. Exclusivity. The investment management services furnished by the Sub-Adviser
shall not be deemed exclusive, and the Sub-Adviser shall be free to render
investment advisory and administrative or other services to other clients
(including other investment companies) and engage in other activities. It is
understood that depending upon the investment objectives, policies and
circumstances of the Sub-Adviser's other clients, the investment advice rendered
by the Sub-Adviser to such other clients may differ from the investment advice
rendered to the Funds.
10. Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
11. Limit of Liability. The terms the "ING Variable Insurance Trust" and
"Trustees" (of the Trust) refer, respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Trust's organizational documentation, to which reference is
hereby made. The obligations of the "ING Variable Insurance Trust" entered into
in the name or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Funds, and all persons
4
<PAGE> 5
dealing with the Funds or other series of the Trust must look solely to the
assets of the Funds for the enforcement of any claims against the Trust.
12. Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule A and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section 2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
13. Termination. This Agreement may be terminated at any time as it pertains to
a Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate in the event of its
assignment. The term "assignment" for the purpose of this paragraph has the
meaning defined in Section 2(a)(4) of the Investment Company Act.
14. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
15. Notices. Any notices under this Agreement may be by facsimile, electronic
mail or by any other method, provided that such notice shall be followed by
written notice, addressed and delivered or mailed postage paid to the other
party at the address set forth below or such address as may subsequently be
designated for the receipt of such notice in accordance with the provisions
hereof. Until further notice to the other party, it is agreed that the address
of the Trust and the Investment Adviser shall be 1475 Dunwoody Drive, West
Chester, PA 19380, and the address of the Sub-Adviser shall be 125 High Street,
Boston, MA 02110.
16. Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified by rules, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
17. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
18. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their
5
<PAGE> 6
construction or effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the day and year first above
written.
BARING ASSET MANAGEMENT, INC. ING MUTUAL FUNDS MANAGEMENT CO. LLC
By: _________________________ By: __________________________
Title: _________________________ Title: __________________________
Attest By:_________________________ Attest By:_________________________
Title: __________________________ Title: __________________________
6
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
<S> <C> <C>
ING Large Cap Growth Fund 0.375% October 1, 1999
ING International Equity Fund** 0.625% October 1, 1999
</TABLE>
- ---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
** The Sub-Adviser with the other Co-Sub-Advisers provides co-sub-advisory
services to these Funds.
7
<PAGE> 1
EXHIBIT 99.D(3)
FORM OF
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this ___ day of __________, 2000 by and between ING
MUTUAL FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the
"Investment Adviser"), and Baring International Investment Limited (the
"Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, is registered with Securities and Futures Commission ("SFC") as an
Investment Adviser and as a Commodity Trading Adviser, and engages in the
business of acting as an investment adviser; and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Variable Insurance Trust (the "Trust"); and
WHEREAS, the Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
2. Asset Allocation. Baring International Investment Limited shall allocate the
assets of each of the Funds for which the Sub-Adviser, Baring Asset Management,
Inc. and Baring Asset Management (Asia) Limited act as co-sub-advisers
(collectively, the "Co-Sub-Advisers") among the Co-Sub-Advisers.
3. Sub-Investment Advisory Services. Subject always to the supervision of the
Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
furnish an investment program in respect of, and make investment decisions for,
the portions of the Funds allocated directly to it by the Investment Adviser or,
with regard to the Funds to be managed by the Co-Sub-Advisers as indicated on
Schedule A, the portions of the Funds allocated to it by Baring International
<PAGE> 2
Investment Limited. The Sub-Adviser will place all orders for the purchase and
sale of securities for such portions of the Funds allocated to it. In the
performance of its duties, the Sub-Adviser will (a) comply with the provisions
of the Trust's written procedures adopted by its Board of Trustees, and the
investment objective, policies and restrictions of the Funds as provided in the
Trust's Registration Statement on Form N-1A dated July 16, 1999 and in
subsequent post-effective amendments to its registration statement and filings
made under Rule 497 of the Securities Act of 1933, as amended, that are
delivered to the Sub-Adviser in writing, (b) use its best efforts to safeguard
and promote the welfare of the Funds, and (c) will comply with other policies
which the Trust's Board of Trustees or the Investment Adviser, as the case may
be, may from time to time determine and communicate in writing to the
Sub-Adviser.
The Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to other accounts for which it has
investment management responsibilities;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer or, in the case of foreign exchange transactions, with a
bank;
(c) will report regularly to the Board of Trustees of the Trust and to
the Investment Adviser and will make appropriate persons available
for the purpose of reviewing with representatives of the
Investment Adviser on a regular basis the management of the Funds,
including, without limitation, review of the general investment
strategy of the Funds, interest rate considerations and general
conditions affecting the marketplace;
(d) will maintain books and records with respect to the Funds'
securities transactions as are required of the Sub-Adviser
pursuant to Paragraph 7 hereof and will furnish the Trust's Board
of Trustees such periodic and special reports as the Board may
reasonably request;
(e) will treat confidentially all records and other information
relative to the Trust; and
(f) in making investment recommendations for the Funds, the
Sub-Adviser's personnel will not inquire as to or take into
consideration whether the issuers of securities proposed for
purchase or sale for a Fund's accounts are clients of the
Sub-Adviser or of its affiliates. In dealing with such clients,
the Sub-Adviser and its affiliates will not inquire as to or take
into consideration whether securities of those customers are held
by the Trust.
4. Sub-Adviser Disclosures as Required by SFC. In accordance with the rules of
SFC, the Sub-Adviser is required to inform the Trust that:
(a) the price of securities can and do fluctuate, and any individual
security may experience upward or downward movements, and may even
become valueless. There
2
<PAGE> 3
is an inherent risk that losses may be incurred rather than profit
made as a result of buying and selling securities;
(b) investments may be made by the Sub-Adviser in various currencies
in accordance with the investment objective, policies and
restrictions of the Funds as described under Paragraph 3 and the
movement of exchange rates may have a separate effect,
unfavourable as well as favourable, on the gains or losses
otherwise experienced on the investments;
(c) the Sub-Adviser may effect transactions in warrants in accordance
with the investment objective, policies and restrictions of the
Funds as described under Paragraph 3, which often involve a high
degree of gearing so that a relatively small movement in the price
of the security to which the warrant relates may result in a
disproportionately large movement, unfavorable as well as
favorable, in the price of the warrant;
(d) the risk of loss in trading futures contracts or options can be
substantial. In some circumstances, a client may sustain losses in
excess of its initial margin funds. Placing contingent orders,
such as "stop-loss" or "stop-limit" orders, will not necessarily
achieve the desired results. Market conditions may make it
impossible to execute such orders. A Fund may be called upon at
short notice to deposit additional margin funds. If the required
funds are not provided within the prescribed time, the Fund's
position may be liquidated. The Fund will remain liable for any
resulting deficit in its account. The Investment Adviser should
therefore study and understand futures contracts and options
before permitting the Sub-Adviser to trade and carefully consider
whether such trading is suitable in the light of the Funds'
investment objectives; and
(e) the Investment Adviser and the Sub-Adviser undertake to notify the
other in the event of any material change to the information
provided in this agreement.
5. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2) and Rule 17e-1 under the Investment Company Act of 1940, as
amended (the "Investment Company Act").
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will seek the best overall terms available and will take the
following into consideration: the best net price available; the reliability,
integrity, financial condition and
3
<PAGE> 4
execution capability of the broker-dealer; the size of and difficulty in
executing the order; and the value of the brokerage and research services
provided by the broker-dealer. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another
broker-dealer.
The Sub-Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused a Fund to pay a broker or dealer that provides brokerage and
research services an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-Adviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Sub-Adviser's
overall responsibilities with respect to the Trust. The Sub-Adviser is further
authorized to allocate the orders placed by it on behalf of a Fund to such
brokers and dealers who also provide research or statistical material, or other
services to the Fund, the Trust and/or other accounts over which the Sub-Adviser
or an affiliate exercises investment discretion. Such allocation shall be in
such amounts and proportions as the Sub-Adviser shall determine and the
Sub-Adviser will report regularly to the Board of Trustees of the Trust
indicating the brokers to whom such allocations have been made and the basis
therefor. In addition, the Sub-Adviser will report to the Trust annually its
soft dollar practices and provide a description of research goods and services
received by the Sub-Adviser.
6. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act and the Investment Advisers
Act and any rules and regulations adopted thereunder as amended; (b) the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933, as amended, and the Investment Company Act; (c) the provisions of the
Trust Instrument of the Trust, as amended; (d) the provisions of the By-laws of
the Trust, as amended; and (e) any other applicable provisions of state and
federal law.
7. Books and Records. In compliance with Rule 3la-3 under the Investment Company
Act, the Sub-Adviser hereby agrees that all records which it maintains for the
Trust on behalf of the Investment Adviser are the property of the Trust and
further agrees to surrender promptly to the Trust or to the Investment Adviser
copies of any of such records upon request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 3la-2 adopted under the Investment
Company Act all records required to be maintained by the Sub-Adviser on behalf
of the Investment Adviser under Rule 3la-1(b)(5), (6), (7), (9) and (10) under
the Investment Company Act.
8. Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
9. Compensation. For the services provided and the expenses assumed pursuant to
this Agreement, the Investment Adviser will pay the Sub-Adviser and the
Sub-Adviser will accept as full compensation therefor a fee computed daily and
paid monthly in arrears at the annual rate set
4
<PAGE> 5
forth on Schedule A, based on each Fund's average daily net assets, computed in
the manner set forth in the Registration Statement of the Trust. With regard to
certain of the Funds indicated on Schedule A for which the Co-Sub-Advisers
provide co-sub-advisory services, the Investment Adviser will pay the full fee
to Baring Asset Management, Inc. who will accept the fee on behalf of all the
Co-Sub-Advisers and who will in turn pay to the other Co-Sub-Advisers their
compensation as agreed between Baring Asset Management, Inc. and the other
Co-Sub-Advisers. In the event that investment advisory fees charged to a Fund by
the Investment Adviser are waived, deferred or reduced, then sub-advisory fees
payable in accordance with this Paragraph 9 shall be proportionally waived,
deferred or reduced. Such fee reduction, if applicable, shall be applied on a
monthly basis at the time each payment of sub-advisory fees is due hereunder.
The Sub-Adviser will be given at least 30 days' written notice of any proposed
waiver, deferral or reduction of investment advisory and sub-advisory fees.
Further, if the fees payable to the Sub-Adviser begin to accrue before the end
of any month, or if this Agreement terminates before the end of any month, then
such fees for such month shall be prorated according to the proportion which the
partial period bears to the full month in which such effectiveness or
termination occurs.
10. Exclusivity. The investment management services furnished by the Sub-Adviser
shall not be deemed exclusive, and the Sub-Adviser shall be free to render
investment advisory and administrative or other services to other clients
(including other investment companies) and engage in other activities. It is
understood that depending upon the investment objectives, policies and
circumstances of the Sub-Adviser's other clients, the investment advice rendered
by the Sub-Adviser to such other clients may differ from the investment advice
rendered to the Funds.
11. Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
12. Limit of Liability. The terms the "ING Variable Insurance Trust" and
"Trustees" (of the Trust) refer, respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Trust's organizational documentation, to which reference is
hereby made. The obligations of the "ING Variable Insurance Trust" entered into
in the name or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Funds, and all persons dealing with
the Funds or other series of the Trust must look solely to the assets of the
Funds for the enforcement of any claims against the Trust.
13. Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule A and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of
5
<PAGE> 6
Trustees or (ii) by the vote of a majority of the Fund's outstanding voting
securities (as defined in Section 2(a)(42) of the Investment Company Act); and
(b) by the affirmative vote of a majority of the Trustees who are not parties to
this Agreement or interested persons of a party to this Agreement (other than as
Trust trustees), by votes cast in person at a meeting specifically called for
such purpose.
14. Termination. This Agreement may be terminated at any time as it pertains to
a Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate in the event of its
assignment. The term "assignment" for the purpose of this paragraph has the
meaning defined in Section 2(a)(4) of the Investment Company Act.
15. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
16. Notices. Any notices under this Agreement may be by facsimile, electronic
mail or by any other method, provided that such notice shall be followed by
written notice, addressed and delivered or mailed postage paid to the other
party at the address set forth below or such address as may subsequently be
designated for the receipt of such notice in accordance with the provisions
hereof. Until further notice to the other party, it is agreed that the address
of the Trust and the Investment Adviser shall be 1475 Dunwoody Drive, West
Chester, PA 19380, and the address of the Sub-Adviser shall be 155 Bishopsgate,
London, England EC2M 3XY.
17. Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified by rules, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
18. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
19. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the day and year first above
written.
6
<PAGE> 7
BARING INTERNATIONAL ING MUTUAL FUNDS MANAGEMENT CO.
MANAGEMENT INVESTMENT
By: _________________________ By: ___________________________
Title: _________________________ Title: ___________________________
Attest By:_________________________ Attest By:_________________________
Title: __________________________ Title: __________________________
7
<PAGE> 8
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
<S> <C> <C>
ING International Equity Fund** 0.625% October 1, 1999
</TABLE>
- ---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
** The Sub-Adviser with the other Co-Sub-Advisers provides co-sub-advisory
services to these Funds.
8
<PAGE> 1
EXHIBIT 99.D(4)
FORM OF
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this ___ day of _________, 2000 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and Baring Asset Management (Asia) Limited (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, is registered with Securities and Futures Commission ("SFC") as an
Investment Adviser and as a Commodity Trading Adviser, and engages in the
business of acting as an investment adviser; and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Variable Insurance Trust (the "Trust"); and
WHEREAS, the Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
2. Asset Allocation. Baring International Investment Limited shall allocate the
assets of each of the Funds for which the Sub-Adviser, Baring International
Investment Limited and Baring Asset Management, Inc. act as co-sub-advisers
(collectively, the "Co-Sub-Advisers") among the Co-Sub-Advisers.
3. Sub-Investment Advisory Services. Subject always to the supervision of the
Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
furnish an investment program in respect of, and make investment decisions for,
the portions of the Funds allocated directly to it by the Investment Adviser or,
with regard to the Funds to be managed by the Co-Sub-Advisers as indicated on
Schedule A, the portions of the Funds allocated to it by Baring International
<PAGE> 2
Investment Limited. The Sub-Adviser will place all orders for the purchase and
sale of securities for such portions of the Funds allocated to it. In the
performance of its duties, the Sub-Adviser will (a) comply with the provisions
of the Trust's written procedures adopted by its Board of Trustees, and the
investment objective, policies and restrictions of the Funds as provided in the
Trust's Registration Statement on Form N-1A dated July 16, 1999 and in
subsequent post-effective amendments to its registration statement and filings
made under Rule 497 of the Securities Act of 1933, as amended, that are
delivered to the Sub-Adviser in writing, (b) use its best efforts to safeguard
and promote the welfare of the Funds, and (c) will comply with other policies
which the Trust's Board of Trustees or the Investment Adviser, as the case may
be, may from time to time determine and communicate in writing to the
Sub-Adviser.
The Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to other accounts for which it has
investment management responsibilities;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer or, in the case of foreign exchange transactions, with a
bank;
(c) will report regularly to the Board of Trustees of the Trust and to
the Investment Adviser and will make appropriate persons available
for the purpose of reviewing with representatives of the
Investment Adviser on a regular basis the management of the Funds,
including, without limitation, review of the general investment
strategy of the Funds, interest rate considerations and general
conditions affecting the marketplace;
(d) will maintain books and records with respect to the Funds'
securities transactions as are required of the Sub-Adviser
pursuant to Paragraph 7 hereof and will furnish the Trust's Board
of Trustees such periodic and special reports as the Board may
reasonably request;
(e) will treat confidentially all records and other information
relative to the Trust; and
(f) in making investment recommendations for the Funds, the
Sub-Adviser's personnel will not inquire as to or take into
consideration whether the issuers of securities proposed for
purchase or sale for a Fund's accounts are clients of the
Sub-Adviser or of its affiliates. In dealing with such clients,
the Sub-Adviser and its affiliates will not inquire as to or take
into consideration whether securities of those customers are held
by the Trust.
4. Sub-Adviser Disclosures as Required by SFC. In accordance with the rules of
SFC, the Sub-Adviser is required to inform the Trust that:
(a) the price of securities can and do fluctuate, and any individual
security may experience upward or downward movements, and may even
become valueless. There
2
<PAGE> 3
is an inherent risk that losses may be incurred rather than profit
made as a result of buying and selling securities;
(b) investments may be made by the Sub-Adviser in various currencies
in accordance with the investment objective, policies and
restrictions of the Funds as described under Paragraph 3 and the
movement of exchange rates may have a separate effect,
unfavourable as well as favourable, on the gains or losses
otherwise experienced on the investments;
(c) the Sub-Adviser may effect transactions in warrants in accordance
with the investment objective, policies and restrictions of the
Funds as described under Paragraph 3, which often involve a high
degree of gearing so that a relatively small movement in the price
of the security to which the warrant relates may result in a
disproportionately large movement, unfavorable as well as
favorable, in the price of the warrant;
(d) the risk of loss in trading futures contracts or options can be
substantial. In some circumstances, a client may sustain losses in
excess of its initial margin funds. Placing contingent orders,
such as "stop-loss" or "stop-limit" orders, will not necessarily
achieve the desired results. Market conditions may make it
impossible to execute such orders. A Fund may be called upon at
short notice to deposit additional margin funds. If the required
funds are not provided within the prescribed time, the Fund's
position may be liquidated. The Fund will remain liable for any
resulting deficit in its account. The Investment Adviser should
therefore study and understand futures contracts and options
before permitting the Sub-Adviser to trade and carefully consider
whether such trading is suitable in the light of the Funds'
investment objectives; and
(e) the Investment Adviser and the Sub-Adviser undertake to notify the
other in the event of any material change to the information
provided in this agreement.
5. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of the Trust, the
Investment Adviser, or the Sub-Adviser to the extent permitted pursuant to the
Trust's procedures for securities transactions with affiliated brokers pursuant
to Section 17(e)(2) and Rule 17e-1 under the Investment Company Act of 1940, as
amended (the "Investment Company Act").
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will seek the best overall terms available and will take the
following into consideration: the best net price available; the reliability,
integrity, financial condition and
3
<PAGE> 4
execution capability of the broker-dealer; the size of and difficulty in
executing the order; and the value of the brokerage and research services
provided by the broker-dealer. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another
broker-dealer.
The Sub-Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused a Fund to pay a broker or dealer that provides brokerage and
research services an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-Adviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Sub-Adviser's
overall responsibilities with respect to the Trust. The Sub-Adviser is further
authorized to allocate the orders placed by it on behalf of a Fund to such
brokers and dealers who also provide research or statistical material, or other
services to the Fund, the Trust and/or other accounts over which the Sub-Adviser
or an affiliate exercises investment discretion. Such allocation shall be in
such amounts and proportions as the Sub-Adviser shall determine and the
Sub-Adviser will report regularly to the Board of Trustees of the Trust
indicating the brokers to whom such allocations have been made and the basis
therefor. In addition, the Sub-Adviser will report to the Trust annually its
soft dollar practices and provide a description of research goods and services
received by the Sub-Adviser.
6. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act and the Investment Advisers
Act and any rules and regulations adopted thereunder as amended; (b) the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933, as amended, and the Investment Company Act; (c) the provisions of the
Trust Instrument of the Trust, as amended; (d) the provisions of the By-laws of
the Trust, as amended; and (e) any other applicable provisions of state and
federal law.
7. Books and Records. In compliance with Rule 3la-3 under the Investment Company
Act, the Sub-Adviser hereby agrees that all records which it maintains for the
Trust on behalf of the Investment Adviser are the property of the Trust and
further agrees to surrender promptly to the Trust or to the Investment Adviser
copies of any of such records upon request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 3la-2 adopted under the Investment
Company Act all records required to be maintained by the Sub-Adviser on behalf
of the Investment Adviser under Rule 3la-1(b)(5), (6), (7), (9) and (10) under
the Investment Company Act.
8. Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
9. Compensation. For the services provided and the expenses assumed pursuant to
this Agreement, the Investment Adviser will pay the Sub-Adviser and the
Sub-Adviser will accept as full compensation therefor a fee computed daily and
paid monthly in arrears at the annual rate set
4
<PAGE> 5
forth on Schedule A, based on each Fund's average daily net assets, computed in
the manner set forth in the Registration Statement of the Trust. With regard to
certain of the Funds indicated on Schedule A for which the Co-Sub-Advisers
provide co-sub-advisory services, the Investment Adviser will pay the full fee
to Baring Asset Management, Inc. who will accept the fee on behalf of all the
Co-Sub-Advisers and who will in turn pay to the other Co-Sub-Advisers their
compensation as agreed between Baring Asset Management, Inc. and the other
Co-Sub-Advisers. In the event that investment advisory fees charged to a Fund by
the Investment Adviser are waived, deferred or reduced, then sub-advisory fees
payable in accordance with this Paragraph 9 shall be proportionally waived,
deferred or reduced. Such fee reduction, if applicable, shall be applied on a
monthly basis at the time each payment of sub-advisory fees is due hereunder.
The Sub-Adviser will be given at least 30 days' written notice of any proposed
waiver, deferral or reduction of investment advisory and sub-advisory fees.
Further, if the fees payable to the Sub-Adviser begin to accrue before the end
of any month, or if this Agreement terminates before the end of any month, then
such fees for such month shall be prorated according to the proportion which the
partial period bears to the full month in which such effectiveness or
termination occurs.
10. Exclusivity. The investment management services furnished by the Sub-Adviser
shall not be deemed exclusive, and the Sub-Adviser shall be free to render
investment advisory and administrative or other services to other clients
(including other investment companies) and engage in other activities. It is
understood that depending upon the investment objectives, policies and
circumstances of the Sub-Adviser's other clients, the investment advice rendered
by the Sub-Adviser to such other clients may differ from the investment advice
rendered to the Funds.
11. Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
12. Limit of Liability. The terms the "ING Variable Insurance Trust" and
"Trustees" (of the Trust) refer, respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Trust's organizational documentation, to which reference is
hereby made. The obligations of the "ING Variable Insurance Trust" entered into
in the name or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Funds, and all persons dealing with
the Funds or other series of the Trust must look solely to the assets of the
Funds for the enforcement of any claims against the Trust.
13. Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule A and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of
5
<PAGE> 6
Trustees or (ii) by the vote of a majority of the Fund's outstanding voting
securities (as defined in Section 2(a)(42) of the Investment Company Act); and
(b) by the affirmative vote of a majority of the Trustees who are not parties to
this Agreement or interested persons of a party to this Agreement (other than as
Trust trustees), by votes cast in person at a meeting specifically called for
such purpose.
14. Termination. This Agreement may be terminated at any time as it pertains to
a Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate in the event of its
assignment. The term "assignment" for the purpose of this paragraph has the
meaning defined in Section 2(a)(4) of the Investment Company Act.
15. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
16. Notices. Any notices under this Agreement may be by facsimile, electronic
mail or by any other method, provided that such notice shall be followed by
written notice, addressed and delivered or mailed postage paid to the other
party at the address set forth below or such address as may subsequently be
designated for the receipt of such notice in accordance with the provisions
hereof. Until further notice to the other party, it is agreed that the address
of the Trust and the Investment Adviser shall be 1475 Dunwoody Drive, West
Chester, PA 19380, and the address of the Sub-Adviser shall be 19/F Edinburgh
Tower, The Landmark, 15 Queens Road, Central Hong Kong.
17. Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified by rules, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
18. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
19. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the day and year first above
written.
BARING ASSET MANAGEMENT ING MUTUAL FUNDS MANAGEMENT CO. LLC
(ASIA) LIMITED
By: _________________________ By: ___________________________
Title: _________________________ Title: ___________________________
Attest By:_________________________ Attest By:_________________________
Title: __________________________ Title: __________________________
7
<PAGE> 8
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
<S> <C> <C>
ING International Equity Fund** 0.625% October 1, 1999
</TABLE>
- ---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
** The Sub-Adviser with the other Co-Sub-Advisers provides co-sub-advisory
services to these Funds.
8
<PAGE> 1
EXHIBIT 99.D(5)
FORM OF
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this ___ day of _________, 2000 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and ING Investment Management Advisors B.V. (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain
registered during the term of this Agreement as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Variable Insurance Trust (the "Trust"); and
WHEREAS, the Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
2. Sub-Investment Advisory Services. Subject always to the supervision of the
Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
furnish an investment program in respect of, and make investment decisions for,
the portions of the Funds allocated to it by the Investment Adviser, and place
all orders for the purchase and sale of securities for such portions of the
Funds. In the performance of its duties, the Sub-Adviser will comply with the
provisions of the Trust's organizational documentation, and the respective
stated investment objective, policies and restrictions of each of the Funds, as
amended, and will comply with other policies which the Trust's Board of Trustees
or the Investment Adviser, as the case may be, may from time to time reasonably
determine and communicate to the Sub-Adviser.
<PAGE> 2
The Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to other accounts for which it has
investment management responsibilities;
(b) will place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or
dealer;
(c) will report regularly to the Board of Trustees of the Trust and to
the Investment Adviser and will make appropriate persons available
for the purpose of reviewing with representatives of the
Investment Adviser on a regular basis the management of the Funds,
including, without limitation, review of the general investment
strategy of the Funds, interest rate considerations and general
conditions affecting the marketplace, such reports and reviews to
be scheduled at times mutually acceptable to the Sub-Adviser, the
Board of Trustees and the Investment Adviser;
(d) will maintain books and records with respect to the Funds'
securities transactions as are required by applicable laws and
regulations to be maintained and will furnish the Trust's Board of
Trustees such periodic and special reports as are required by
applicable laws and regulations to be furnished or as the Board
may reasonably request;
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust, and
will not use such records and information for any purpose other
than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the
Trust, except where such information is already in the
Sub-Adviser's possession as of the date of this Agreement, is
developed independently by the Sub-Adviser, becomes publicly
available through no fault of the Sub-Adviser or is disclosed
pursuant to law, rule or legal process;
(f) in making investment recommendations for the Funds, the
Sub-Adviser's personnel will not inquire as to or take into
consideration whether the issuers of securities proposed for
purchase or sale for a Fund's accounts are clients of the
Sub-Adviser or of its affiliates. In dealing with such clients,
the Sub-Adviser and its affiliates will not inquire as to or take
into consideration whether securities of those customers are held
by the Trust; and
(g) will provide advice and recommendations with respect to other
aspects of the business and affairs of the Funds and perform such
other functions related to the provision of investment management
services as the Investment Adviser may reasonably request.
3. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of
2
<PAGE> 3
the Trust, the Investment Adviser, or the Sub-Adviser to the extent permitted
pursuant to the Trust's procedures for securities transactions with affiliated
brokers pursuant to Section 17(e)(2) and Rule 17e-1 under the Investment Company
Act.
The Sub-Adviser's primary consideration in effecting a security
transaction will be execution at a price that is reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Sub-Adviser for the Fund's use an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of a Fund to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Sub-Adviser for the Fund's use. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
4. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Investment Advisers Act and any rules and
regulations adopted thereunder as amended; (b) the provisions of the
Registration Statement of the Trust under the Securities Act of 1933, as
amended, and the Investment Company Act (the "Registration Statement"); (c) the
provisions of the Trust Instrument of the Trust, as amended; (d) the provisions
of the By-laws of the Trust, as amended; and (e) any other applicable provisions
of state and federal law.
5. Books and Records. In compliance with Rule 3la-3 under the Investment Company
Act, the Sub-Adviser hereby agrees that all records which it maintains for the
Trust on behalf of the Investment Adviser are the property of the Trust and
further agrees to surrender promptly to the Trust or to the Investment Adviser
any of such records upon request. The Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 3la-2 adopted under the Investment
3
<PAGE> 4
Company Act all records required to be maintained by Sub-Adviser on behalf of
the Investment Adviser under Rule 3la-1 under the Investment Company Act.
6. Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
7. Compensation. For the services provided and the expenses assumed pursuant to
this Agreement, the Investment Adviser will pay the Sub-Adviser and the
Sub-Adviser will accept as full compensation therefor a fee computed daily and
paid monthly in arrears at the annual rate set forth on Schedule A, based on
each Fund's average daily net assets, computed in the manner set forth in the
Registration Statement. In the event that investment advisory fees charged to a
Fund by the Investment Adviser are waived, deferred or reduced, then
sub-advisory fees payable in accordance with this Paragraph 7 shall be
proportionally waived, deferred or reduced. Such fee reduction, if applicable,
shall be applied on a monthly basis at the time each payment of sub-advisory
fees is due hereunder. Further, if the fees payable to the Sub-Adviser begin to
accrue before the end of any month, or if this Agreement terminates before the
end of any month, then such fees for such month shall be prorated according to
the proportion which the partial period bears to the full month in which such
effectiveness or termination occurs.
8. Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
9. Limit of Liability. The terms the "ING Variable Insurance Trust" and
"Trustees" (of the Trust) refer, respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Trust's organizational documentation, to which reference is
hereby made. The obligations of the "ING Variable Insurance Trust" entered into
in the name or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Funds, and all persons dealing with
the Funds or other series of the Trust must look solely to the assets of the
Funds for the enforcement of any claims against the Trust.
10. Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule A and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section 2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
4
<PAGE> 5
11. Termination. This Agreement may be terminated at any time as it pertains to
a Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate as it pertains to all Funds
in the event of its assignment. The term "assignment" for the purpose of this
paragraph has the meaning defined in Section 2(a)(4) of the Investment Company
Act.
12. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the parties hereto.
13. Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and the
Investment Adviser shall be 1475 Dunwoody Drive, West Chester, PA 19380, and the
address of the Sub-Adviser shall be Schenkkade 65, 2595 AS The Hague, The
Netherlands.
14. Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
15. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
16. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the day and year first above
written.
ING INVESTMENT MANAGEMENT ING MUTUAL FUNDS MANAGEMENT CO. LLC
ADVISORS B.V.
By: _________________________ By: ___________________________
Title: _________________________ Title: ___________________________
Attest By:_________________________ Attest By:_________________________
Title: __________________________ Title: __________________________
6
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
<S> <C> <C>
ING Global Brand Names Fund 0.500% October 1, 1999
</TABLE>
- ---------------
* For the first year of operations, the fee rate will be one-quarter
(1/4) of the annual fee rate reflected herein. For the second year of
operations, the fee rate will be one-half (1/2) of the annual fee rate
reflected herein.
7
<PAGE> 1
EXHIBIT 99.D(6)
FORM OF
SUBADVISORY AGREEMENT
THIS AGREEMENT is made this ___ day of _______, 2000 by and between ING MUTUAL
FUNDS MANAGEMENT CO. LLC, a Delaware limited liability company (the "Investment
Adviser"), and ING Investment Management LLC (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, the Investment Adviser is registered and will remain registered
during the term of this Agreement as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"), and engages in
the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser is registered and will remain registered during
the term of this Agreement as an investment adviser under the Investment
Advisers Act, and engages in the business of acting as an investment adviser;
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
furnish investment advisory services to the Investment Adviser in connection
with the underlying investment funds specified on Schedule A hereto
(collectively, the "Funds," and each, a "Fund"), each of which is an investment
portfolio of the ING Variable Insurance Trust (the "Trust"); and
WHEREAS, the Sub-Adviser is willing to make available to the Investment
Adviser and to the Funds certain sub-investment advisory services.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser to
provide certain sub-investment advisory services for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
2. Sub-Investment Advisory Services. Subject always to the supervision of the
Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
furnish an investment program in respect of, and make investment decisions for,
the portions of the Funds allocated to it by the Investment Adviser, and place
all orders for the purchase and sale of securities for such portions of the
Funds. In the performance of its duties, the Sub-Adviser will comply with the
provisions of the Trust's organizational documentation, and the respective
stated investment objective, policies and restrictions of each of the Funds, as
amended, and will comply with other policies which the Trust's Board of Trustees
or the Investment Adviser, as the case may be, may from time to time reasonably
determine and communicate to the Sub-Adviser.
<PAGE> 2
The Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it uses
in providing services to other accounts for which it has investment
management responsibilities;
(b) will place orders pursuant to its investment determinations for the
Funds either directly with the issuer or with any broker or dealer;
(c) will report regularly to the Board of Trustees of the Trust and to the
Investment Adviser and will make appropriate persons available for the
purpose of reviewing with representatives of the Investment Adviser on
a regular basis the management of the Funds, including, without
limitation, review of the general investment strategy of the Funds,
interest rate considerations and general conditions affecting the
marketplace, such reports and reviews to be scheduled at times
mutually acceptable to the Sub-Adviser, the Board of Trustees and the
Investment Adviser;
(d) will maintain books and records with respect to the Funds' securities
transactions as are required by applicable laws and regulations to be
maintained and will furnish the Trust's Board of Trustees such
periodic and special reports as are required by applicable laws and
regulations to be furnished or as the Board may reasonably request;
(e) will treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust, and will not
use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, except
where such information is already in the Sub-Adviser's possession as
of the date of this Agreement, is developed independently by the
Sub-Adviser, becomes publicly available through no fault of the
Sub-Adviser or is disclosed pursuant to law, rule or legal process;
(f) in making investment recommendations for the Funds, the Sub-Adviser's
personnel will not inquire as to or take into consideration whether
the issuers of securities proposed for purchase or sale for a Fund's
accounts are clients of the Sub-Adviser or of its affiliates. In
dealing with such clients, the Sub-Adviser and its affiliates will not
inquire as to or take into consideration whether securities of those
customers are held by the Trust; and
(g) will provide advice and recommendations with respect to other aspects
of the business and affairs of the Funds and perform such other
functions related to the provision of investment management services
as the Investment Adviser may reasonably request.
3. Broker-Dealer Relationships. With regard to the portions of the Funds
allocated to it, the Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of brokerage commission
rates. The Sub-Adviser may select any affiliated person of
2
<PAGE> 3
the Trust, the Investment Adviser, or the Sub-Adviser to the extent permitted
pursuant to the Trust's procedures for securities transactions with affiliated
brokers pursuant to Section 17(e)(2) and Rule 17e-1 under the Investment Company
Act.
The Sub-Adviser's primary consideration in effecting a security transaction
will be execution at a price that is reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions, including similar securities
being purchased or sold on a securities exchange during a comparable period of
time. In selecting a broker-dealer to execute each particular transaction, the
Sub-Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Subject to such policies and procedures as the Board of Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Sub-Adviser for the Fund's use an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The Sub-Adviser is further authorized to allocate the
orders placed by it on behalf of a Fund to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Sub-Adviser for the Fund's use. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
4. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to: (a) all
applicable provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Investment Advisers Act and any rules and
regulations adopted thereunder as amended; (b) the provisions of the
Registration Statement of the Trust under the Securities Act of 1933, as
amended, and the Investment Company Act (the "Registration Statement"); (c) the
provisions of the Trust Instrument of the Trust, as amended; (d) the provisions
of the By-laws of the Trust, as amended; and (e) any other applicable provisions
of state and federal law.
5. Books and Records. In compliance with Rule 3la-3 under the Investment Company
Act, the Sub-Adviser hereby agrees that all records which it maintains for the
Trust on behalf of the Investment Adviser are the property of the Trust and
further agrees to surrender promptly to the Trust or to the Investment Adviser
any of such records upon request. The Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 3la-2 adopted under the Investment
3
<PAGE> 4
Company Act all records required to be maintained by Sub-Adviser on behalf of
the Investment Adviser under Rule 3la-1 under the Investment Company Act.
6. Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
7. Compensation. For the services provided and the expenses assumed pursuant to
this Agreement, the Investment Adviser will pay the Sub-Adviser and the
Sub-Adviser will accept as full compensation therefor a fee computed daily and
paid monthly in arrears at the annual rate set forth on Schedule A, based on
each Fund's average daily net assets, computed in the manner set forth in the
Registration Statement. In the event that investment advisory fees charged to a
Fund by the Investment Adviser are waived, deferred or reduced, then
sub-advisory fees payable in accordance with this Paragraph 7 shall be
proportionally waived, deferred or reduced. Such fee reduction, if applicable,
shall be applied on a monthly basis at the time each payment of sub-advisory
fees is due hereunder. Further, if the fees payable to the Sub-Adviser begin to
accrue before the end of any month, or if this Agreement terminates before the
end of any month, then such fees for such month shall be prorated according to
the proportion which the partial period bears to the full month in which such
effectiveness or termination occurs.
8. Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser or any of its officers, directors or employees, the
Sub-Adviser shall not be subject to liability to the Investment Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
9. Limit of Liability. The terms the "ING Variable Insurance Trust" and
"Trustees" (of the Trust) refer, respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Trust's organizational documentation, to which reference is
hereby made. The obligations of the "ING Variable Insurance Trust" entered into
in the name or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Funds, and all persons dealing with
the Funds or other series of the Trust must look solely to the assets of the
Funds for the enforcement of any claims against the Trust.
10. Term. This Agreement shall become effective as it pertains to a Fund at the
close of business on the date opposite the Fund's name on Schedule A and shall
remain in force and effect for two years for the Fund from such date and
thereafter from year to year, provided that such continuance is specifically
approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by
the vote of a majority of the Fund's outstanding voting securities (as defined
in Section 2(a)(42) of the Investment Company Act); and (b) by the affirmative
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of a party to this Agreement (other than as Trust trustees),
by votes cast in person at a meeting specifically called for such purpose.
4
<PAGE> 5
11. Termination. This Agreement may be terminated at any time as it pertains to
a Fund, without the payment of any penalty, by vote of the Trust's Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities,
by the Investment Adviser, or by the Sub-Adviser on sixty (60) days' written
notice to the other parties. The notice provided for herein may be waived by any
party. This Agreement shall automatically terminate as it pertains to all Funds
in the event of its assignment. The term "assignment" for the purpose of this
paragraph has the meaning defined in Section 2(a)(4) of the Investment Company
Act.
12. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the parties hereto.
13. Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and the
Investment Adviser shall be 1475 Dunwoody Drive, West Chester, PA 19380, and the
address of the Sub-Adviser shall be 5780 Powers Ferry Road, N.W. Suite 300,
Atlanta, GA 30327.
14. Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act shall be resolved by reference
to such term or provision of the Act. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of this
Agreement is modified by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
15. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which, collectively, shall constitute
one agreement.
16. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
State of New York.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the day and year first above
written.
ING INVESTMENT MANAGEMENT LLC ING MUTUAL FUNDS MANAGEMENT CO. LLC
By: _________________________ By: _________________________
Title: _________________________ Title: _________________________
Attest By:_______________________ Attest By:_______________________
Title: ________________________ Title: ________________________
6
<PAGE> 7
Schedule A
<TABLE>
<CAPTION>
Name of Fund Fee Rate* Organizational Approval Date
- ------------ --------- ----------------------------
<S> <C> <C>
ING Growth and Income Fund 0.375% October 1, 1999
</TABLE>
- ----------
* For the first year of operations, the fee rate will be one-quarter (1/4) of
the annual fee rate reflected herein.
For the second year of operations, the fee rate will be one-half (1/2) of
the annual fee rate reflected herein.
7
<PAGE> 1
EXHIBIT 99.E
FORM OF
DISTRIBUTION AGREEMENT
Agreement made as of _________, 2000, between ING Variable Insurance Trust,
a Delaware business trust (the "Trust"), on behalf of each of its investment
company portfolios listed in Schedule A attached, which may be amended from time
to time (each a "Fund" and collectively the "Funds") and ING Funds Distributor,
Inc., (the "Distributor").
WHEREAS, the Trust is an open-end management investment company, organized
as a Delaware business trust and registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other, with respect to the continuous offering of the Fund's shares (the
"Shares") from and after the date hereof in order to promote the growth of the
Funds and facilitate the distribution of their Shares; and
WHEREAS, it is contemplated that the Trust on behalf of the Funds will
adopt a plan of distribution pursuant to Rule 12b-1 under the 1940 Act (the
"Rule 12b-1 Plan") authorizing the payment by the Funds to the Distributor with
respect to the distribution of their Shares and the maintenance of shareholder
accounts.
NOW THEREFORE, in consideration of the mutual premises and covenants herein
set forth, the parties agree as follows:
1. Services as Distributor.
1.1 Distributor (i) will act as agent for the distribution of the
Shares covered by the registration statement of the Trust then in effect under
the Securities Act of 1933, as amended (the "Securities Act") and (ii) will
perform such additional services as are provided in this Section 1
(collectively, the "Services"). As used in this Agreement, the term
"registration statement" shall mean Parts A (the prospectus), B (the statement
of additional information) and C of each registration statement that is filed on
Form N-1A, or any successor thereto, with the Commission, together with any
amendments thereto. The term "Prospectus" for purposes of this Agreement shall
mean each form of prospectus and statement of additional information used by the
Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above-referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in
<PAGE> 2
connection with such solicitation. The Trust understands that Distributor may in
the future be the distributor of the shares of several investment companies or
series (together, "Investment Companies") including Investment Companies having
investment objectives similar to those of the Funds. The Trust further
understands that investors and potential investors in the Funds may invest in
shares of such other Investment Companies. The Trust agrees that Distributor's
duties to such Investment Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
To the extent not compensated by the Trust's Rule 12b-1 Plan, the
Distributor shall, at its own expense, finance appropriate activities which it
deems reasonable, which are primarily intended to result in the sale of the
Shares, including, but not limited to, advertising, compensation of
broker-dealers and sales personnel, the printing and mailing of prospectuses to
other than current Shareholders, and the printing and mailing of sales
literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), all rules
and regulations promulgated by the Commission under the 1940 Act and 1934 Act,
thereunder and all rules and regulations adopted by any securities association.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Funds of
the Trust.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books
2
<PAGE> 3
and accounts prepared by the Trust, (b) a monthly itemized list of the
securities in the Funds, (c) monthly balance sheets as soon as practicable after
the end of each month, and (d) from time to time such additional information
regarding the financial condition of the Funds as Distributor may reasonably
request.
1.10 The Trust represents to Distributor that, with respect to the
Shares, the registration statement, and amendments thereto, filed by the Trust
with the Commission under the Securities Act have been carefully prepared in
conformity with requirements of said Act and rules and regulations of the
Commission thereunder. The registration statement and amendments thereto,
contain all statements required to be stated therein in conformity with said Act
and the rules and regulations of said Commission and all statements of fact
contained in any such registration statement are true and correct. Furthermore,
the registration statement does not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading to a purchaser of the Shares. The
Trust may, but shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such supplement or
supplements to any Prospectus as, in the light of future developments, may, in
the opinion of the Trust's counsel, be necessary or advisable. If the Trust
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Trust of a written request from
Distributor to do so, Distributor may, at its option, terminate this Agreement.
The Trust shall not file any amendment to any registration statement or
supplement to any Prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any Prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any Prospectus
in the form furnished from time to time in connection with the sale of the
Shares. The Trust agrees to indemnify, defend and hold Distributor, its several
partners and employees, and any person who controls Distributor within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor, its partners and
employees, or any such controlling person, may incur under the Securities Act or
under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any Prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any Prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any Prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the Prospectus, or arising
out of or based upon any omission or alleged omission to state a material
3
<PAGE> 4
fact in connection with the giving of such information required to be stated in
such answers or necessary to make the answers not misleading; and further
provided that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.10 shall
not be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties under this Agreement.
The Trust will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the Trust and approved
by Distributor, which approval shall not be unreasonably withheld. In the event
the Trust elects to assume the defense of any such suit and retain counsel of
good standing approved by Distributor, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel retained by any of
them; but in case the Trust does not elect to assume the defense of any such
suit, or in case Distributor reasonably does not approve of counsel chosen by
the Trust, the Trust will reimburse Distributor, its partners and employees, or
the controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by Distributor or them. The
Trust's indemnification agreement contained in this paragraph 1.11 and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling person,
and shall survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or Trustees or such controlling person
resulting from such claims or demands, shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in information
furnished in writing by Distributor to the Trust and used in the answers to any
of the items of the registration statement or in the corresponding statements
made in the prospectus, or shall arise out of or be based upon any omission, or
alleged omission, to state a material fact in connection with such information
furnished in writing by Distributor to the Trust required to be stated in such
answers or necessary to make such information not misleading. Distributor shall
have the right of first control of the defense of any action brought against the
Trust, its officers or Trustees, or any such controlling person, with counsel of
its own choosing, satisfactory to the
4
<PAGE> 5
Trust, if such action is based solely upon such alleged misstatement or omission
on Distributor's part, and in any other event the Trust, its officers or
Trustees or such controlling person shall each have the right to participate in
the defense or preparation of the defense of any such action.
1.13 No Shares shall be offered by either Distributor or the Trust under
any of the provisions of this Agreement and no orders for the purchase or sale
of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current Prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's Prospectus,
Trust Instrument or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as reasonably practical
by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or Prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
Prospectus then in effect or the initiation by service of process
on the Trust of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of
a material fact made in the registration statement or Prospectus
then in effect or which requires the making of a change in such
registration statement or Prospectus in order to make the
statements therein not misleading; and
(d) of all action of the Commission with respect to any amendment to
any registration statement or Prospectus which may from time to
time be filed with the Commission.
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
1.15 Distributor agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and its prior, present or potential
Shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except, after
prior notification to and approval in writing by the Trust, which approval
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<PAGE> 6
shall not be unreasonably withheld and may not be withheld where Distributor may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the State of New
York.
2. Fee.
Distributor shall receive from the Funds identified in Schedule A
hereto (the "Distribution Plan Funds") all amounts received as sales charges as
described in the Funds' most current Prospectus. Out of such sales charges, the
Distributor may allow such concessions or reallowances to dealers as it may from
time to time determine. The distribution fee shall be accrued daily and shall be
paid on the first business day of each month, or at such time(s) as the
Distributor shall reasonably request.
3. Sale and Payment.
Shares of a Fund may be subject to a sales load and may be subject to
the imposition of a distribution fee pursuant to the Rule 12b-1 Distribution
Plan. To the extent that Shares of a Fund are sold at an offering price which
includes a sales load or at net asset value subject to a contingent deferred
sales load with respect to certain redemptions (either within a single class of
Shares or pursuant to two or more classes of Shares), such Shares shall
hereinafter be referred to collectively as "Load Shares". Under this Agreement,
the following provisions shall apply with respect to the sale of, and payment
for, Load Shares.
3.1 Distributor shall have the right to purchase Load Shares at their
net asset value and to sell such Load Shares to the public against orders
therefor at the applicable public offering price, as defined in Section 4
hereof. Distributor shall also have the right to sell Load Shares to dealers
against orders therefor at the public offering price less a concession
determined by Distributor, which concession shall not exceed the amount of the
sales charge or underwriting discount, if any, referred to in Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load Fund to,
or on the order of, Distributor, Distributor shall pay or cause to be paid to
the Load Fund or to its order an amount in Boston or New York clearing house
funds equal to the applicable net asset value of such Shares. Distributor may
retain so much of any sales charge or underwriting discount as is not allowed by
Distributor as a concession to dealers.
4. Public Offering Price.
The public offering price of a Load Share shall be the net asset value
of such Load Share, plus any applicable sales charge, all as set forth in the
current Prospectus of the Load Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Trust Instrument and Bylaws
of the Trust and the then-current Prospectus of the Load Fund.
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<PAGE> 7
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load Shares at
net asset value (a) in connection with the merger or consolidation of the Trust
or the Load Fund(s) with any other investment company or the acquisition by the
Trust or the Load Fund(s) of all or substantially all of the assets or of the
outstanding Shares of any other investment company; (b) in connection with a pro
rata distribution directly to the holders of Shares in the nature of a stock
dividend or split; (c) upon the exercise of subscription rights granted to the
holders of Shares on a pro rata basis; (d) in connection with the issuance of
Load Shares pursuant to any exchange and reinvestment privileges described in
any then-current Prospectus of the Load Fund; and (e) otherwise in accordance
with any then-current Prospectus of the Load Fund.
6. Term, Duration and Termination.
The initial term of this Agreement (the "Initial Term") shall be for a
period of one year commencing on the date this Agreement is executed by both
parties. Thereafter, if not terminated, this Agreement shall continue with
respect to a particular Fund automatically for successive one-year terms,
provided that such continuance is specifically approved at least annually by (a)
by the vote of a majority of those members of the Trust's Board of Trustees who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting for the purpose of voting on such approval and (b) by the
vote of the Trust's Board of Trustees or the vote of a majority of the
outstanding voting securities of such Fund. This Agreement is terminable without
penalty, on not less than sixty days' prior written notice, by the Trust's Board
of Trustees, by vote of a majority of the outstanding voting securities of the
Trust or by the Distributor. This Agreement will also terminate automatically in
the event of its assignment. (As used in this Agreement, the terms "majority of
the outstanding voting securities," "interested persons" and "assignment" shall
have the same meanings as ascribed to such terms in the 1940 Act.) In the event
this Agreement is terminated by the Trust, the Distributor shall be entitled to
be paid any applicable contingent deferred sales charges (as contemplated by
Section 2 of this Agreement) on the redemption of shares sold prior to the
effective date of such termination.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
ING VARIABLE INSURANCE TRUST ING FUNDS DISTRIBUTOR, INC.
By:_______________________________ By:_______________________________
Title:____________________________ Title:____________________________
Date:_____________________________ Date:_____________________________
8
<PAGE> 9
SCHEDULE A
<TABLE>
<CAPTION>
Name of Fund Date of Approval
- ------------ ----------------
<S> <C>
ING Large Cap Growth Fund October 1, 1999
ING Growth & Income Fund October 1, 1999
ING International Equity Fund October 1, 1999
ING Global Brand Names Fund October 1, 1999
ING Income Allocation Fund October 1, 1999
ING Balanced Allocation Fund October 1, 1999
ING Growth Allocation Fund October 1, 1999
ING Aggressive Growth Allocation Fund October 1, 1999
</TABLE>
A-1
<PAGE> 1
EXHIBIT 99.G
FORM OF
CUSTODY AGREEMENT
THIS AGREEMENT is made effective the ___ day of ____, 2000, by and
between STATE STREET BANK AND TRUST COMPANY, a trust company chartered under the
laws of the state of Massachusetts, having its trust office located at 801
Pennsylvania Avenue, Kansas City, Missouri 64105 ("State Street"), and ING
VARIABLE INSURANCE TRUST ("Fund"), a Delaware business trust, having its
principal office and place of business at 1475 Dunwoody Drive, West Chester, PA
19380 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint State Street as custodian of the
assets of the Fund's investment portfolio or portfolios (each a "Portfolio", and
collectively the "Portfolios"); and
WHEREAS, State Street is willing to accept such appointment on the
terms and conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN AND AGENT. Fund hereby constitutes and
appoints State Street as custodian of the investment securities,
interests in loans and other non-cash investment property, and monies
at any time owned by each of the Portfolios and delivered to State
Street as custodian hereunder ("Assets").
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to State
Street:
1. That it is a trust duly organized and existing and in
good standing under the laws of its state of
organization, and that it is registered under the
Investment Company Act of 1940, as amended (the "1940
Act"); and
2. That it has the requisite power and authority under
applicable law and its trust instrument to enter into
this Agreement; it has taken all requisite action
necessary to appoint State Street as custodian for
the Portfolios; this Agreement has been duly executed
and delivered by Fund; and this Agreement constitutes
a legal, valid and binding obligation of Fund,
enforceable in accordance with its terms.
B. State Street hereby represents, warrants and acknowledges to
Fund:
1. That it is a trust company duly organized and
existing and in good standing under the laws of the
State of Massachusetts; and
2. That it has the requisite power and authority under
applicable law, its charter and its bylaws to enter
into and perform this Agreement; this Agreement has
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been duly executed and delivered by State Street; and
this Agreement constitutes a legal, valid and binding
obligation of State Street, enforceable in accordance
with its terms.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
A. Delivery of Assets. Except as permitted by the 1940 Act, Fund
will deliver or cause to be delivered to State Street on the
effective date hereof, or as soon thereafter as practicable,
and from time to time thereafter, all Assets acquired by,
owned by or from time to time coming into the possession of
each of the Portfolios during the term hereof. State Street
has no responsibility or liability whatsoever for or on
account of assets not so delivered.
B. Delivery of Accounts and Records. Fund will turn over or cause
to be turned over to State Street all of each Portfolio's
relevant accounts and records reasonably determined by State
Street to be needed to perform its duties and responsibilities
hereunder fully and properly. State Street may rely
conclusively on the completeness and correctness of such
accounts and records.
C. Delivery of Assets to Third Parties. State Street will receive
delivery of and keep safely the Assets of each Portfolio
segregated in a separate account. Upon delivery of any such
Assets to a subcustodian appointed pursuant hereto
(hereinafter referred to as "Subcustodian"), State Street will
create and maintain records identifying such Assets as
belonging to the applicable Portfolio. State Street is
responsible for the safekeeping of the Assets only until they
have been transmitted to and received by other persons as
permitted under the terms hereof, except for Assets
transmitted to Subcustodians, for which State Street remains
responsible to the extent provided herein. State Street may
participate directly or indirectly through a subcustodian in
the Depository Trust Company (DTC), Treasury/Federal Reserve
Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by Fund (as such entities
are defined at 17 CFR Section 270.17f-4(b)) (each a
"Depository" and collectively the "Depositories"). State
Street will be responsible to Fund for any loss, damage or
expense suffered or incurred by Fund resulting from the
actions or omissions of any Depository only to the same extent
such Depository is responsible to State Street.
D. Registration. State Street will at all times hold registered
Assets in the name of State Street as custodian, the
applicable Portfolio, or a nominee of either of them, unless
specifically directed by Instructions, as hereinafter defined,
to hold such registered Assets in so-called "street name;"
provided that, in any event, State Street will hold all such
Assets in an account of State Street as custodian containing
only Assets of the applicable Portfolio, or only assets held
by State Street as a fiduciary or custodian for customers; and
provided further, that State Street's records at all times
will indicate the Portfolio or other customer for which such
Assets are held and the respective interests therein. If,
however, Fund directs State Street to maintain Assets in
"street name", notwithstanding anything contained herein to
the contrary, State Street will be obligated only to utilize
its best efforts to timely collect income due the Portfolio
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<PAGE> 3
on such Assets and to notify the Portfolio of relevant
information, such as maturities and pendency of calls, and
corporate actions including, without limitation, calls for
redemption, tender or exchange offers, declaration, record and
payment dates and amounts of any dividends or income,
reorganization, recapitalization, merger, consolidation,
split-up of shares, change of par value, or conversion
("Corporate Actions"). All Assets and the ownership thereof by
Portfolio will at all times be identifiable on the records of
State Street. Fund agrees to hold State Street and its nominee
harmless for any liability as a shareholder of record of
securities held in custody.
E. Exchange. Upon receipt of Instructions, State Street will
exchange, or cause to be exchanged, Assets held for the
account of a Portfolio for other Assets issued or paid in
connection with any Corporate Action or otherwise, and will
deposit any such Assets in accordance with the terms of any
such Corporate Action. Without Instructions, State Street is
authorized to exchange Assets in temporary form for Assets in
definitive form, to effect an exchange of shares when the par
value of stock is changed, and, upon receiving payment
therefor, to surrender bonds or other Assets at maturity or
when advised of earlier call for redemption, except that State
Street will receive Instruction prior to surrendering any
convertible security.
F. Purchases of Investments -- Other Than Options and Futures. On
each business day on which a Portfolio makes a purchase of
Assets other than options and futures, Fund will deliver to
State Street Instructions specifying with respect to each such
purchase:
1. If applicable, the name of the Portfolio making such
purchase;
2. The name of the issuer and description of the Asset;
3. The number of shares and the principal amount
purchased, and accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage
commission, taxes and other expenses payable in
connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or
dealer through whom the purchase was made; and
9. Whether the Asset is to be received in certificated
form or via a specified Depository.
In accordance with such Instructions, State Street will pay
for out of monies held for the purchasing Portfolio, but only
insofar as such monies are available for such purpose, and
receive the Assets so purchased by or for the account of such
Portfolio, except that State Street, or a Subcustodian, may in
its sole discretion advance funds to such Portfolio which may
result in an overdraft because the monies held on behalf of
such Portfolio are insufficient to pay the total amount
payable upon such purchase. Except as otherwise instructed by
Fund, State Street will make such payment only upon receipt of
Assets: (a) by State Street; (b) by a clearing corporation of
a national exchange of which State Street is a member; or (c)
by a Depository. Notwithstanding
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<PAGE> 4
the foregoing, (i) State Street may release funds to a
Depository prior to the receipt of advice from the Depository
that the Assets underlying a repurchase agreement have been
transferred by book-entry into the account maintained with
such Depository by State Street on behalf of its customers;
provided that State Street's instructions to the Depository
require that the Depository make payment of such funds only
upon transfer by book-entry of the Assets underlying the
repurchase agreement in such account; (ii) State Street may
make payment for time deposits, call account deposits,
currency deposits and other deposits, foreign exchange
transactions, futures contracts or options, before receipt of
an advice or confirmation evidencing said deposit or entry
into such transaction; and (iii) State Street may make, or
cause a Subcustodian to make, payment for the purchase of
Assets the settlement of which occurs outside of the United
States of America in accordance with generally accepted local
custom and market practice.
G. Sales and Deliveries of Investments -- Other Than Options and
Futures. On each business day on which a Portfolio makes a
sale of Assets other than options and futures, Fund will
deliver to State Street Instructions specifying with respect
to each such sale:
1. If applicable, the name of the Portfolio making such
sale;
2. The name of the issuer and description of the Asset;
3. The number of shares and principal amount sold, and
accrued interest, if any;
4. The date on which the Assets sold were purchased or
other information identifying the Assets sold and to
be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission,
taxes or other expenses payable in connection with
such sale;
8. The total amount to be received by the Portfolio upon
such sale; and
9. The name and address of the broker or dealer through
whom or person to whom the sale was made.
State Street will deliver or cause to be delivered the Assets
thus designated as sold for the account of the selling
Portfolio as specified in the Instructions. Except as
otherwise instructed by Fund, State Street will make such
delivery upon receipt of: (a) payment therefor in such form as
is satisfactory to State Street; (b) credit to the account of
State Street with a clearing corporation of a national
securities exchange of which State Street is a member; or (c)
credit to the account maintained by State Street on behalf of
its customers with a Depository. Notwithstanding the
foregoing: (i) State Street will deliver Assets held in
physical form in accordance with "street delivery custom" to a
broker or its clearing agent; or (ii) State Street may make,
or cause a Subcustodian to make, delivery of Assets the
settlement of which occurs outside of the United States of
America upon payment therefor in accordance with generally
accepted local custom and market practice.
H. Purchases or Sales of Options and Futures. On each business
day on which a Portfolio makes a purchase or sale of the
options and/or futures listed below, Fund
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<PAGE> 5
will deliver to State Street Instructions specifying with
respect to each such purchase or sale:
1. If applicable, the name of the Portfolio making such
purchase or sale;
2. In the case of security options:
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer
through whom the sale or purchase was made.
3. In the case of options on indices:
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening,
exercising, expiring or closing transaction;
h. Whether the transaction involves a put or
call;
i. Whether the option is written or purchased;
and
j. The name and address of the broker or dealer
through whom the sale or purchase was made,
or other applicable settlement instructions.
4. In the case of security index futures contracts:
a. The last trading date specified in the
contract and, when available, the closing
level, thereof;
b. The index level on the date the contract is
entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in
addition to Instructions, and if not already
in the possession of STATE STREET, Fund will
deliver a substantially complete and
executed custodial safekeeping account and
procedural agreement, incorporated herein by
reference); and
f. The name and address of the futures
commission merchant through whom the sale or
purchase was made, or other applicable
settlement instructions.
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<PAGE> 6
5. In the case of options on index future contracts:
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
and
i. The market on which the option is traded.
I. Assets Pledged or Loaned. If specifically allowed for in the
prospectus of a Portfolio, and subject to such additional
terms and conditions as State Street may require:
1. Upon receipt of Instructions, State Street will
release or cause to be released Assets to the
designated pledgee by way of pledge or hypothecation
to secure any loan incurred by a Portfolio; provided,
however, that State Street will release Assets only
upon payment to State Street of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made, further
Assets may be released or caused to be released for
that purpose. Upon receipt of Instructions, State
Street will pay, but only from funds available for
such purpose, any such loan upon redelivery to it of
the Assets pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan.
2. Upon receipt of Instructions, State Street will
release Assets to the designated borrower; provided,
however, that the Assets will be released only upon
deposit with State Street of full cash collateral as
specified in such Instructions, and that the lending
Portfolio will retain the right to any dividends,
interest or distribution on such loaned Assets. Upon
receipt of Instructions and the loaned Assets, State
Street will release the cash collateral to the
borrower.
J. Routine Matters. State Street will, in general, attend to all
routine and mechanical matters in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings
with the Assets except as may be otherwise provided herein or
upon Instruction from Fund.
K. Deposit Accounts. State Street will open and maintain one or
more special purpose deposit accounts for each Portfolio in
the name of State Street in such banks or trust companies
(including, without limitation, affiliates of State Street) as
may be designated by it or Fund in writing ("Accounts"),
subject only to draft or order by State Street upon receipt of
Instructions. State Street will deposit all monies received by
State Street from or for the account of a Portfolio in an
Account maintained for such Portfolio. Subject to Section 5L.
hereof, State Street agrees:
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<PAGE> 7
1. To make Fed Funds available to the applicable
Portfolio at 9:00 a.m., Kansas City time, on the
second business day after deposit of any check into
an Account, in the amount of the check;
2. To make funds available immediately upon a deposit
made by Federal Reserve wire; and
3. To make funds available on the next business day
after deposit of ACH wires.
L. Income and Other Payments. State Street will:
1. Collect, claim and receive and deposit for the
account of the applicable Portfolio all income
(including income from the Accounts) and other
payments which become due and payable on or after the
effective date hereof with respect to the Assets, and
credit the account of such Portfolio in accordance
with the schedule attached hereto as Exhibit A. If,
for any reason, a Portfolio is credited with income
that is not subsequently collected, State Street may
reverse that credited amount. If monies are collected
after such reversal, State Street will credit the
Portfolio in that amount;
2. Execute ownership and other certificates and
affidavits for all federal, state and local tax
purposes in connection with the collection of bond
and note coupons; and
3. Take such other action as may be necessary or proper
in connection with (a) the collection, receipt and
deposit of such income and other payments, including
but not limited to the presentation for payment of
all coupons and other income items requiring
presentation; and all other Assets which may mature
or be called, redeemed, retired or otherwise become
payable and regarding which State Street has actual
knowledge, or should reasonably be expected to have
knowledge; and (b) the endorsement for collection, in
the name of Fund or a Portfolio, of all checks,
drafts or other negotiable instruments.
State Street, however, will not be required to institute suit
or take other extraordinary action to enforce collection
except upon receipt of Instructions and upon being indemnified
to its satisfaction against the costs and expenses of such
suit or other actions. State Street will receive, claim and
collect all stock dividends, rights and other similar items
and will deal with the same pursuant to Instructions.
M. Proxies and Notices State Street will promptly deliver or mail
(or have delivered or mailed) to Fund all proxies properly
signed, all notices of meetings, all proxy statements and
other notices, requests or announcements affecting or relating
to Assets and will, upon receipt of Instructions, execute and
deliver or mail (or cause its nominee to execute and deliver
or mail) such proxies or other authorizations as may be
required. Except as provided herein or pursuant to
Instructions hereafter
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<PAGE> 8
received by State Street, neither it nor its nominee will
exercise any power inherent in any such Assets, including any
power to vote the same, or execute any proxy, power of
attorney, or other similar instrument voting any of such
Assets, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
N. Disbursements. State Street will pay or cause to be paid,
insofar as funds are available for the purpose, bills,
statements and other obligations of each Portfolio (including
but not limited to obligations in connection with the
conversion, exchange or surrender of Assets, interest charges,
dividend disbursements, taxes, management fees, custodian
fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other
operating expenses of such Portfolio) pursuant to Instructions
setting forth the name of the person to whom payment is to be
made, and the amount and purpose of the payment.
O. Daily Statement of Accounts. State Street will, within a
reasonable time, render to Fund a detailed statement of the
amounts received or paid and of Assets received or delivered
for the account of each Portfolio during each business day
State Street will maintain such books and records as are
necessary to enable it to render, from time to time upon
request by Fund, a detailed statement of the Assets. State
Street will permit, and upon Instruction will cause any
Subcustodian to permit, such persons as are authorized by
Fund, including Fund's independent public accountants,
reasonable access to such records or will provide reasonable
confirmation of the contents of such records, and if demanded,
State Street will permit, and will cause any Subcustodian to
permit, federal and state regulatory agencies to examine the
Assets, books and records of the Portfolios.
P. Appointment of Subcustodians. Notwithstanding any other
provisions hereof:
1. All or any of the Assets may be held in State
Street's own custody or in the custody of one or more
other banks or trust companies (including, without
limitation, affiliates of State Street) acting as
Subcustodians as may be selected by State Street. Any
such Subcustodian selected State Street must have the
qualifications required for a custodian under the
1940 Act. State Street will be responsible to the
applicable Portfolio for any loss, damage or expense
suffered or incurred by such Portfolio resulting from
the actions or omissions of any Subcustodians
selected and appointed by State Street (except
Subcustodians appointed at the request of Fund and as
provided in Subsection 2 below) to the same extent
State Street would be responsible to Fund hereunder
if it committed the act or omission itself.
2. Upon request of Fund, State Street will contract with
other Subcustodians reasonably acceptable to State
Street for purposes of (a) effecting third-party
repurchase transactions with banks, brokers, dealers,
or other entities through the use of a common
custodian or subcustodian, or (b) providing
depository and clearing agency services with respect
to certain variable rate demand note securities, or
(c) for other reasonable purposes specified by Fund;
provided, however, that State Street will be
responsible to Fund for any loss, damage or expense
suffered or incurred by Fund resulting from the
actions or
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<PAGE> 9
omissions of any such Subcustodian only to the same
extent such Subcustodian is responsible to State
Street. Fund may State Street's contracts with such
Subcustodians.
Q. Foreign Custody Manager.
1. Delegation to State Street as FCM. The Fund, pursuant
to resolution adopted by its Board of Trustees or
Directors (the "Board"), hereby delegates to State
Street, subject to Section (b) of Rule 17f-5, the
responsibilities set forth in this Section Q with
respect to Foreign Assets held outside the United
States, and State Street hereby accepts such
delegation, as Foreign Custody Manager ("FCM") of
each Portfolio. It is understood and agreed that
State Street will sub-contract the performance of its
responsibilities hereunder with State Street Bank &
Trust Company. State Street will be responsible to
the applicable Portfolio for any loss, damage or
expense suffered or incurred by such Portfolio
resulting from the actions or omissions of State
Street Bank & Trust Company to the same extent State
Street would be responsible to Fund hereunder if it
committed the act or omission itself. References
herein to "FCM" shall include State Street and State
Street Bank & Trust Company.
2. Definitions. Capitalized terms in this Section Q have
the following meanings:
"Country Risk" means all factors reasonably related
to the systemic risk of holding Foreign Assets in a
particular country including, but not limited to,
such country's political environment; economic and
financial infrastructure (including financial
institutions such as any Mandatory Securities
Depositories operating in the country); prevailing or
developing custody and settlement practices; and laws
and regulations applicable to the safekeeping and
recovery of Foreign Assets held in custody in that
country.
"Eligible Foreign Custodian" has the meaning set
forth in section (a)(1) of Rule 17f-5, except that
the term does not include Mandatory Securities
Depositories.
"Foreign Assets" means any of the Portfolios'
investments (including foreign currencies) for which
the primary market is outside the United States and
such cash and cash equivalents in amounts deemed by
Fund to be reasonably necessary to effect the
Portfolios' transactions in such investments.
"Foreign Custody Manager" or "FCM" has the meaning
set forth in section (a)(2) of Rule 17f-5.
"Mandatory Securities Depository" means a foreign
securities depository or clearing agency that, either
as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country
outside the United States (i) because required by law
or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or
clearing agency; or
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(iii) because maintaining or effecting trades in
securities outside the foreign securities depository
or clearing agency is not consistent with prevailing
or developing custodial or market practices.
3. Countries Covered. The FCM is responsible for
performing the delegated responsibilities defined
below only with respect to the countries and custody
arrangements for each such country listed on Exhibit
C hereto , which may be amended from time to time by
the FCM. The FCM will list on Exhibit C the Eligible
Foreign Custodians selected by the FCM to maintain
the assets of each Portfolio. Mandatory Securities
Depositories are listed on Exhibit D hereto, which
Exhibit D may be amended from time to time by the
FCM. The FCM will provide amended versions of
Exhibits C and D in accordance with subsection 7 of
this Section Q.
Upon the receipt by the FCM of Instructions to open
an account, or to place or maintain Foreign Assets,
in a country listed on Exhibit C, and the fulfillment
by the Fund of the applicable account opening
requirements for such country, the FCM is deemed to
have been delegated by the Board responsibility as
FCM with respect to that country and to have accepted
such delegation. Following the receipt of
Instructions directing the FCM to close the account
of a Portfolio with the Eligible Foreign Custodian
selected by the FCM in a designated country, the
delegation by the Board to State Street as FCM for
that country is deemed to have been withdrawn and
State Street will immediately cease to be the FCM of
the Portfolio with respect to that country.
The FCM may withdraw its acceptance of delegated
responsibilities with respect to a designated country
upon written notice to the Fund. Thirty days (or such
longer period as to which the parties agree in
writing) after receipt of any such notice by the
Fund, State Street will have no further
responsibility as FCM to a Portfolio with respect to
the country as to which State Street's acceptance of
delegation is withdrawn.
4. Scope of Delegated Responsibilities.
a. Selection of Eligible Foreign Custodians.
Subject to the provisions of this Section Q,
the FCM may place and maintain the Foreign
Assets in the care of the Eligible Foreign
Custodian selected by the FCM in each
country listed on Exhibit C, as amended from
time to time.
In performing its delegated responsibilities
as FCM to place or maintain Foreign Assets
with an Eligible Foreign Custodian, the FCM
will determine that the Foreign Assets will
be subject to reasonable care, based on the
standards applicable to custodians in the
country in which the Foreign Assets will be
held by that Eligible Foreign Custodian,
after considering all factors relevant to
the
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<PAGE> 11
safekeeping of such assets, including,
without limitation, those set forth in Rule
17f-5(c)(1)(i) through (iv).
b. Contracts With Eligible Foreign Custodians.
The FCM will determine that the contract (or
the rules or established practices or
procedures in the case of an Eligible
Foreign Custodian that is a foreign
securities depository or clearing agency)
governing the foreign custody arrangements
with each Eligible Foreign Custodian
selected by the FCM will provide reasonable
care for the Foreign Assets held by that
Eligible Foreign Custodian based on the
standards applicable to custodians in the
particular country. Each such contract will
include the provisions set forth in Rule
17f-5(c)(2)(I)(A) through (F), or, in lieu
of any or all of the provisions set forth in
said (A) through (F), such other provisions
that the FCM determines will provide, in
their entirety, the same or greater level of
care and protection for the Foreign Assets
as the provisions set forth in said (A)
through (F) in their entirety.
c. Monitoring. In each case in which the FCM
maintains Foreign Assets with an Eligible
Foreign Custodian selected by the FCM, the
FCM will establish a system to monitor (a)
the appropriateness of maintaining the
Foreign Assets with such Eligible Foreign
Custodian and (b) the contract governing the
custody arrangements established by the FCM
with the Eligible Foreign Custodian. In the
event the FCM determines that the custody
arrangements with an Eligible Foreign
Custodian it has selected are no longer
appropriate, the FCM will notify the Board
in accordance with subsection 7 of this
Section Q.
5. Guidelines for the Exercise of Delegated Authority.
For purposes of this Section Q, the Board will be
solely responsible for considering and determining to
accept such Country Risk as is incurred by placing
and maintaining the Foreign Assets in each country
for which State Street is serving as FCM of a
Portfolio, and the Board will be solely responsible
for monitoring on a continuing basis such Country
Risk to the extent that the Board considers necessary
or appropriate. The Fund, on behalf of the
Portfolios, and STATE STREET each expressly
acknowledge that the FCM will not be delegated any
responsibilities under this Section Q with respect to
Mandatory Securities Depositories.
6. Standard of Care as FCM of a Portfolio. In performing
the responsibilities delegated to it, the FCM agrees
to exercise reasonable care, prudence and diligence
such as a person having responsibility for the
safekeeping of assets of management investment
companies registered under the 1940 Act would
exercise.
7. Reporting Requirements. The FCM will report the
withdrawal of the Foreign Assets from an Eligible
Foreign
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<PAGE> 12
Custodian and the placement of such Foreign Assets
with another Eligible Foreign Custodian by providing
to the Board amended Exhibits C and D at the end of
the calendar quarter in which an amendment to either
Schedule has occurred. The FCM will make written
reports notifying the Board of any other material
change in the foreign custody arrangements of a
Portfolio described in this Section Q after the
occurrence of the material change.
8. Representations with Respect to Rule 17f-5. The FCM
represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.
The Fund represents to State Street that the Board
has determined that it is reasonable for the Board to
rely on State Street and State Street Bank & Trust
Company to perform the responsibilities delegated
pursuant to this Contract to State Street and State
Street Bank & Trust Company as the FCM of each
Portfolio and that State Street has been granted the
authority by Fund to delegate to State Street Bank &
Trust Company the FCM functions to which State Street
has been appointed by Fund.
9. Effective Date and Termination of State Street as
FCM. The Board's delegation to State Street as FCM of
a Portfolio will be effective as of the date hereof
and will remain in effect until terminated at any
time, without penalty, by written notice from the
terminating party to the non-terminating party.
Termination will become effective thirty days after
receipt by the non-terminating party of such notice.
The provisions of subsection 3 of this Section Q
govern the delegation to and termination of State
Street as FCM of the Fund with respect to designated
countries.
R. Accounts and Records Property of Fund. State Street
acknowledges that all of the accounts and records maintained
by State Street pursuant hereto are the property of Fund, and
will be made available to Fund for inspection or reproduction
within a reasonable period of time, upon demand. State Street
will assist Fund's independent auditors, or upon the prior
written approval of Fund, or upon demand, any regulatory body,
in any requested review of Fund's accounts and records,
provided that Fund will reimburse State Street for all
expenses and employee time invested in any such review outside
of routine and normal periodic reviews. Upon receipt from Fund
of the necessary information or instructions, State Street
will supply information from the books and records it
maintains for Fund that Fund may reasonably request for tax
returns, questionnaires, periodic reports to shareholders and
such other reports and information requests as Fund and State
Street may agree upon from time to time.
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<PAGE> 13
S. Adoption of Procedures. State Street and Fund hereby adopt the
Funds Transfer Operating Guidelines attached hereto as Exhibit
B. State Street and Fund may from time to time adopt such
additional procedures as they agree upon, and State Street may
conclusively assume that no procedure approved or directed by
Fund, Fund's or Portfolio's accountants or other advisors
conflicts with or violates any requirements of the prospectus,
trust instrument, any applicable law, rule or regulation, or
any order, decree or agreement by which Fund may be bound.
Fund will be responsible for notifying State Street of any
changes in statutes, regulations, rules, requirements or
policies which may impact State Street's responsibilities or
procedures under this Agreement.
T. Advances. Fund will pay on demand any advance of cash or
securities made by State Street or any Subcustodian, in its
sole discretion, for any purpose (including but not limited to
securities settlements, purchase or sale of foreign exchange
or foreign exchange contracts and assumed settlement) for the
benefit of any Portfolio. Any such cash advance will be
subject to an overdraft charge at the rate set forth in the
then-current fee schedule from the date advanced until the
date repaid. As security for each such advance, Fund hereby
grants State Street and such Subcustodian a lien on and
security interest in all Assets at any time held for the
account of the applicable Portfolio, including without
limitation all Assets acquired with the amount advanced.
Should Fund fail to promptly repay the advance, State Street
and such Subcustodian may utilize available cash and dispose
of such Portfolio's Assets pursuant to applicable law to the
extent necessary to obtain reimbursement of the amount
advanced and any related overdraft charges.
U. Exercise of Rights; Tender Offers. Upon receipt of
Instructions, State Street will: (1) deliver warrants, puts,
calls, rights or similar securities to the issuer or trustee
thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new Assets, if
any, are to be delivered to State Street; and (2) deposit
securities upon invitations for tenders thereof, provided that
the consideration for such securities is to be paid or
delivered to State Street or the tendered securities are to be
returned to State Street.
V. Fund Shares.
1. Fund will deliver to State Street Instructions with
respect to the declaration and payment of any
dividend or other distribution on the shares of
capital stock of a Portfolio ("Fund Shares") by a
Portfolio. On the date specified in such Instruction,
State Street will pay out of the monies held for the
account of the Portfolio, insofar as it is available
for such purposes, and credit to the account of the
Dividend Disbursing Agent for the Portfolio, the
amount specified in such Instructions.
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<PAGE> 14
2. Whenever Fund Shares are repurchased or redeemed by a
Portfolio, Portfolio or its agent will give State
Street Instructions regarding the aggregate dollar
amount to be paid for such shares. Upon receipt of
such Instruction, State Street will charge such
aggregate dollar amount to the account of the
Portfolio and either deposit the same in the account
maintained for the purpose of paying for the
repurchase or redemption of Fund Shares or deliver
the same in accordance with such Instruction. State
Street has no duty or responsibility to determine
that Fund Shares have been removed from the proper
shareholder accounts or that the proper number of
Fund Shares have been canceled and removed from the
shareholder records.
3. Whenever Fund Shares are purchased from Fund, Fund
will deposit or cause to be deposited with State
Street the amount received for such shares. State
Street has no duty or responsibility to determine
that Fund Shares purchased from Fund have been added
to the proper shareholder account or that the proper
number of such shares have been added to the
shareholder records.
4. INSTRUCTIONS.
A. The term "Instructions", as used herein, means written
(including telecopied, telexed, or electronically transmitted)
or oral instructions which State Street reasonably believes
were given by a designated representative of Fund. Fund will
deliver to State Street, prior to delivery of any Assets to
State Street and thereafter from time to time as changes
therein are necessary, written Instructions naming one or more
designated representatives to give Instructions in the name
and on behalf of Fund, which Instructions may be received and
accepted by State Street as conclusive evidence of the
authority of any designated representative to act for Fund and
may be considered to be in full force and effect until receipt
by State Street of notice to the contrary. Unless such written
Instructions delegating authority to any person to give
Instructions specifically limit such authority to specific
matters or require that the approval of anyone else will first
have been obtained, State Street will be under no obligation
to inquire into the right of such person, acting alone, to
give any Instructions whatsoever. If Fund fails to provide
State Street any such Instructions naming designated
representatives, any Instructions received by State Street
from a person reasonably believed to be an appropriate
representative of Fund will constitute valid and proper
Instructions hereunder. The term "designated representative"
may include Fund's or a Portfolio's employees and agents,
including investment managers and their employees.
B. No later than the next business day immediately following each
oral Instruction, Fund will send State Street written
confirmation of such oral Instruction. At State Street's sole
discretion, State Street may record on tape, or otherwise, any
oral Instruction whether given in person or via telephone,
each such recording identifying the date and the time of the
beginning and ending of such oral Instruction.
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<PAGE> 15
C. Fund will provide, upon State Street's request a certificate
signed by an officer or designated representative of Fund, as
conclusive proof of any fact or matter required to be
ascertained from Fund hereunder. Fund will also provide State
Street Instructions with respect to any matter concerning this
Agreement requested by State Street. If State Street
reasonably believes that it could not prudently act according
to the Instructions, or the instruction or advice of Fund's or
a Portfolio's accountants or counsel, it may in its
discretion, with notice to Fund, not act according to such
Instructions.
5. LIMITATION OF LIABILITY OF STATE STREET. State Street is not
responsible or liable for, and Fund will indemnify and hold State
Street harmless from and against, any and all costs, expenses, losses,
damages, charges, counsel fees (including, without limitation,
disbursements and the allocable cost of in-house counsel), payments and
liabilities which may be asserted against or incurred by State Street
or for which State Street may be held to be liable, arising out of or
attributable to:
A. State Street's action or failure to act pursuant hereto;
provided that State Street has acted in good faith, with
reasonable care and without negligence; and provided further,
that, in no event is State Street liable for consequential,
special, or punitive damages;
B. State Street's payment of money as requested by Fund, or the
taking of any action which might make it or its nominee liable
for payment of monies or in any other way; provided, however,
that nothing herein obligates State Street to take any such
action or expend its own monies except in its sole discretion;
C. State Street's action or failure to act hereunder upon any
Instructions, advice, notice, request, consent, certificate or
other instrument or paper appearing to it to be genuine and to
have been properly executed, including any Instruction,
communications, data or other information received by State
Street by means of the Systems, as hereinafter defined, or any
electronic system of communication;
D. State Street's action or failure to act in good faith
reliance on the advice or opinion of counsel for Fund or of
its own counsel with respect to questions or matters of law,
which advice or opinion may be obtained by State Street at the
expense of Fund, or on the Instruction, advice or statements
of any officer or employee of Fund, or Fund's accountants or
other authorized individuals, and other persons believed by it
in good faith to be expert in matters upon which they are
consulted;
E. The purchase or sale of any securities or foreign currency
positions. Without limiting the generality of the foregoing,
State Street is under no duty or obligation to inquire into:
1. The validity of the issue of any securities purchased
by or for any Portfolio, or the legality of the
purchase thereof or of foreign currency positions, or
evidence of ownership required by Fund to be received
by State Street, or the propriety of the decision to
purchase or the amount paid therefor;
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<PAGE> 16
2. The legality of the sale of any securities or foreign
currency positions by or for any Portfolio, or the
propriety of the amount for which the same are sold;
or
3. The legality of the issue or sale of any Fund Shares,
or the sufficiency of the amount to be received
therefor, the legality of the repurchase or
redemption of any Fund Shares, or the propriety of
the amount to be paid therefor, or the legality of
the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment
of any stock dividend.
F. Any error, omission, inaccuracy or other deficiency in any
Portfolio's accounts and records or other information provided
to State Street by or on behalf of a Portfolio, or the failure
of Fund to provide, or provide in a timely manner, any
accounts, records, or information needed by State Street to
perform its duties hereunder;
G. Fund's refusal or failure to comply with the terms hereof
(including without limitation Fund's failure to pay or
reimburse State Street under Section 5 hereof), Fund's
negligence or willful misconduct, or the failure of any
representation or warranty of Fund hereunder to be and remain
true and correct in all respects at all times;
H. The use or misuse, whether authorized or unauthorized, of the
Systems or any electronic system of communication used
hereunder, by Fund or by any person who acquires access to the
Systems or such other systems through the terminal device,
passwords, access instructions or other means of access to
such Systems or such other system which are utilized by,
assigned to or otherwise made available to Fund, except to the
extent attributable to any negligence or willful misconduct
State Street;
I. Any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the
payment of money to be received State Street on behalf of a
Portfolio until actually received; provided, however, that
State Street will advise Fund promptly if it fails to receive
any such money in the ordinary course of business and will
cooperate with Fund toward the end that such money is
received;
J. Except as provided in Section 3.P hereof, loss occasioned by
the acts, omissions, defaults or insolvency of any broker,
bank, trust company, securities system or any other person
with whom State Street may deal; and
K. The failure or delay in performance of its obligations
hereunder, or those of any entity for which it is responsible
hereunder, arising out of or caused, directly or indirectly,
by circumstances beyond the affected entity's reasonable
control, including, without limitation: any interruption, loss
or malfunction of any utility, transportation, computer
(hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a
delay in mails; governmental or exchange action, statute,
ordinance, rulings, regulations or direction; war, strike,
riot, emergency, civil disturbance, terrorism, vandalism,
explosions, labor disputes, freezes, floods, fires, tornadoes,
acts of God or public enemy, revolutions, or insurrection.
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<PAGE> 17
6. COMPENSATION. In consideration for its services hereunder, Fund will
pay to State Street the compensation set forth in a separate fee
schedule, incorporated herein by reference, to be agreed to by Fund and
State Street from time to time, and, upon demand, reimbursement for
State Street's cash disbursements and reasonable out-of-pocket costs
and expenses, including attorney's fees and disbursements, incurred by
State Street in connection with the performance of services hereunder.
State Street may charge such compensation against monies held by it for
the account of the Portfolios. State Street will also be entitled to
charge against any monies held by it for the account of the Portfolios
the amount of any loss, damage, liability, advance, overdraft or
expense for which it is entitled to reimbursement from Fund, including
but not limited to fees and expenses due State Street for other
services provided to Fund by State Street. State Street will be
entitled to reimbursement by Fund for the losses, damages, liabilities,
advances, overdrafts and expenses of Subcustodians only to the extent
that (a) State Street would have been entitled to reimbursement
hereunder if it had incurred the same itself directly, and (b) State
Street is obligated to reimburse the Subcustodian therefor.
7. TERM AND TERMINATION. The initial term of this Agreement is for a
period of one (1) year. Thereafter, either Fund or State Street may
terminate this Agreement by notice in writing, delivered or mailed,
postage prepaid, to the other party and received not less than ninety
(90) days prior to the date upon which such termination will take
effect. Upon termination hereof:
A. Fund will pay State Street its fees and compensation due
hereunder and its reimbursable disbursements, costs and
expenses paid or incurred to such date;
B. Fund will designate a successor custodian by Instruction to
State Street by the termination date. In the event no such
Instruction has been delivered to State Street on or before
the date when such termination becomes effective, then State
Street may, at its option, (i) choose as successor custodian a
bank or trust company meeting the qualifications for custodian
set forth in the 1940 Act and having not less than Two Million
Dollars ($2,000,000) aggregate capital, surplus and undivided
profits, as shown by its last published report, or (ii) apply
to a court of competent jurisdiction for the appointment of a
successor or other proper relief, or take any other lawful
action under the circumstances; provided, however, that Fund
will State Street for its costs and expenses, including
reasonable attorney's fees, incurred in connection therewith;
and
C. State Street will, upon payment of all sums due to State
Street from Fund hereunder or otherwise, deliver all Assets,
duly endorsed and in form for transfer, to the successor
custodian, or as specified by the court, at State Street's
office. State Street will co-operate in effecting changes in
book-entries at all Depositories. Upon delivery to a successor
or as specified by the court, State Street will have no
further obligations or liabilities hereunder. Thereafter such
successor will be the successor hereunder and will be entitled
to reasonable compensation for its services.
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<PAGE> 18
In the event that Assets remain in the possession of State Street after
the date of termination hereof for any reason other than State Street's
failure to deliver the same, State Street is entitled to compensation
as provided in the then-current fee schedule for its services during
such period, and the provisions hereof relating to the duties and
obligations State Street will remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed
to Fund at the address set forth above, or at such other address as
Fund may have designated to State Street in writing, will be deemed to
have been properly given to Fund hereunder. Notices, requests,
Instructions and other writings addressed to State Street at the
address set forth above, Attention: Custody Department, or to such
other address as it may have designated to Fund in writing, will be
deemed to have been properly given to State Street hereunder.
9. THE SYSTEMS; CONFIDENTIALITY.
A. If State Street provides Fund direct access to the
computerized investment portfolio custody systems used by
State Street ("Systems") or if State Street and Fund agree to
utilize any electronic system of communication, Fund agrees to
implement and enforce appropriate security policies and
procedures to prevent unauthorized or improper access to or
use of the Systems or such other system.
B. Fund will preserve the confidentiality of the Systems and the
tapes, books, reference manuals, instructions, records,
programs, documentation and information of, and other
materials relevant to, the Systems and the business of State
Street or its affiliates ("Confidential Information"). Fund
agrees that it will not voluntarily disclose any such
Confidential Information to any other person other than its
own employees who reasonably have a need to know such
information pursuant hereto. Fund will return all such
Confidential Information to State Street upon termination or
expiration hereof.
C. Fund has been informed that the Systems are licensed for use
by State Street and its affiliates from one or more third
parties ("Licensors"), and Fund acknowledges that State Street
and Licensors have proprietary rights in and to the Systems
and all other State Street or Licensor programs, code,
techniques, know-how, data bases, supporting documentation,
data formats, and procedures, including without limitation any
changes or modifications made at the request or expense or
both of Fund (collectively, the "Protected Information"). Fund
acknowledges that the Protected Information constitutes
confidential material and trade secrets of State Street and
Licensors. Fund will preserve the confidentiality of the
Protected Information, and Fund hereby acknowledges that any
unauthorized use, misuse, disclosure or taking of Protected
Information, residing or existing internal or external to a
computer, computer system, or computer network, or the knowing
and unauthorized accessing or causing to be accessed of any
computer, computer system, or computer network, may be subject
to civil liabilities and criminal penalties under applicable
law. Fund will so inform employees and agents who have access
to the Protected Information or to any computer equipment
capable of accessing the same. Licensors are intended to be
and are third party beneficiaries of Fund's obligations and
undertakings contained in this Section.
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<PAGE> 19
D. Fund hereby represents and warrants to State Street that it
has determined to its satisfaction that the Systems are
appropriate and suitable for its use. THE SYSTEMS ARE PROVIDED
ON AN AS IS, AS AVAILABLE BASIS. STATE STREET EXPRESSLY
DISCLAIMS ALL WARRANTIES INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, EXCEPT THOSE WARRANTIES STATED EXPRESSLY
HEREIN.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio,
the following provisions apply:
A. Each Portfolio will be regarded for all purposes hereunder as
a separate party apart from each other Portfolio. Unless the
context otherwise requires, with respect to every transaction
covered hereby, every reference herein to Fund is deemed to
relate solely to the particular Portfolio to which such
transaction relates. Under no circumstances will the rights,
obligations or remedies with respect to a particular Portfolio
constitute a right, obligation or remedy applicable to any
other Portfolio. The use of this single document to
memorialize the separate agreement as to each Portfolio is
understood to be for clerical convenience only and will not
constitute any basis for joining the Portfolios for any
reason.
B. Fund may appoint State Street as its custodian for additional
Portfolios from time to time by written notice, provided that
State Street consents to such addition. Rates or charges for
each additional Portfolio will be as agreed upon by State
Street and Fund in writing.
11. MISCELLANEOUS.
A. This Agreement will be construed according to, and the rights
and liabilities of the parties hereto will be governed by, the
laws of the State of Massachusetts, without reference to the
choice of laws principles thereof.
B. All terms and provisions hereof will be binding upon, inure to
the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
C. The representations and warranties, the indemnifications
extended hereunder, and the provisions of Section 9 hereof are
intended to and will continue after and survive the
expiration, termination or cancellation hereof.
D. No provisions hereof may be amended or modified in any manner
except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of
any terms or conditions hereof or to enforce any rights
resulting from any breach of any of the terms or conditions
hereof, including the payment of damages, will not be
construed as a continuing or permanent waiver of any such
terms, conditions, rights or privileges,
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<PAGE> 20
but the same will continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver,
release or discharge of any party's rights hereunder will be
effective unless contained in a written instrument signed by
the party sought to be charged.
F. The captions herein are included for convenience of reference
only, and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts,
each of which is deemed an original but all of which together
constitute one and the same instrument.
H. If any provision hereof is determined to be invalid, illegal,
in conflict with any law or otherwise unenforceable, the
remaining provisions hereof will be considered severable and
will not be affected thereby, and every remaining provision
hereof will remain in full force and effect and will remain
enforceable to the fullest extent permitted by applicable law.
I. The benefits of this Agreement may not be assigned by either
party nor may either party delegate all or a portion of its
duties hereunder without the prior written consent of the
other party. Notwithstanding the foregoing, Fund agrees that
State Street may delegate all or a portion of its duties to an
affiliate of State Street, provided that such delegation will
not reduce the obligations of State Street under this
Agreement.
J. Neither the execution nor performance hereof will be deemed to
create a partnership or joint venture by and between State
Street and Fund or any Portfolio.
K. Except as specifically provided herein, this Agreement does
not in any way affect any other agreements entered into among
the parties hereto and any actions taken or omitted by either
party hereunder will not affect any rights or obligations of
the other party hereunder.
L. Notice is hereby given that a copy of Fund's Trust Agreement
and all amendments thereto is on file with the Secretary of
State of the state of its organization; that this Agreement
has been executed on behalf of Fund by the undersigned duly
authorized representative of Fund in his/her capacity as such
and not individually; and that the obligations of this
Agreement are binding only upon the assets and property of
Fund and not upon any trustee, officer of shareholder of Fund
individually.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
STATE STREET BANK AND TRUST COMPANY ING VARIABLE INSURANCE TRUST
By: _______________________________ By: _______________________________
Title: ____________________________ Title: ____________________________
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<PAGE> 22
EXHIBIT A -- INCOME AVAILABILITY SCHEDULE
FOREIGN--Income will be credited contractually on pay day in the markets noted
with Contractual Income Policy. The markets noted with Actual income policy will
be credited income when it is received.
<TABLE>
<CAPTION>
MARKET INCOME POLICY MARKET INCOME POLICY MARKET INCOME POLICY
<S> <C> <C> <C> <C> <C>
Argentina Actual Hong Kong Contractual Poland Actual
Australia Contractual Hungary Actual Portugal Contractual
Austria Contractual India Actual Russia Actual
Bahrain Actual Indonesia Actual Singapore Contractual
Bangladesh Actual Ireland Actual Slovak Republic Actual
Belgium Contractual Israel Actual South Africa Actual
Bermuda Actual Italy Contractual South Korea Actual
* Bolivia Actual Ivory Coast Actual Spain Contractual
Botswana Actual * Jamaica Actual Sri Lanka Actual
Brazil Actual Japan Contractual Swaziland Actual
Canada Contractual Jordan Actual Sweden Contractual
Chile Actual Kenya Actual Switzerland Contractual
China Actual Lebanon Actual Taiwan Actual
Colombia Actual Luxembourg Actual Thailand Actual
Cyprus Actual Malaysia Actual * Trinidad & Actual
Tobago
Czech Republic Actual Mauritius Actual * Tunisia Actual
Denmark Contractual Mexico Actual Turkey Actual
Ecuador Actual Morocco Actual United Kingdom Contractual
Egypt Actual Namibia Actual United States See Attached
**Euroclear Contractual/ Netherlands Contractual Uruguay Actual
Actual
Euro CDs Actual New Zealand Contractual Venezuela Actual
Finland Contractual Norway Contractual Zambia Actual
France Contractual Oman Actual Zimbabwe Actual
Germany Contractual Pakistan Actual
Ghana Actual Peru Actual
Greece Actual Philippines Actual
</TABLE>
* Market is not 17F-5 eligible
** For Euroclear, contractual income paid only in markets listed with Income
Policy of Contractual.
<PAGE> 23
UNITED STATES--
<TABLE>
<CAPTION>
INCOME TYPE DTC FED PTC PHYSICAL
<S> <C> <C> <C> <C>
Dividends Contractual N/A N/A Actual
Fixed Rate Interest Contractual Contractual N/A Actual
Variable Rate Interest Contractual Contractual N/A Actual
GNMA I N/A N/A Contractual PD +1 N/A
GNMA II N/A N/A Contractual PD *** N/A
Mortgages Actual Contractual Contractual Actual
Maturities Actual Contractual N/A Actual
</TABLE>
Exceptions to the above Contractual Income Policy include securities that are:
[ ] Involved in a trade whose settlement either failed, or is pending over
the record date, (excluding the United States);
[ ] On loan under a self directed securities lending program other than
STATE STREET's own vendor lending program;
[ ] Known to be in a condition of default, or suspected to present a risk
of default or payment delay;
[ ] In the asset categories, without limitation, of Private Placements,
Derivatives, Options, Futures, CMOs, and Zero Coupon Bonds.
[ ] Securities whose amount of income and redemption cannot be calculated
in advance of payable date, or determined in advance of actual
collection, examples include ADRs;
[ ] Payments received as the result of a corporate action, not limited to,
bond calls, mandatory or optional puts, and tender offers.
*** For GNMA II securities, if the 19th day of the month is a business day,
Payable/Distribution Date is the next business day. If the 19th is not a
business day, but the 20th is a business day, Payable/Distribution date is the
first business day after the 20th. If both the 19th and 20th are not business
days, Payable/Distribution will be the next business day hereafter.
<PAGE> 24
EXHIBIT B -- FUNDS TRANSFER OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: State Street Bank and Trust Company and affiliates
("SSB") is authorized to promptly debit Client's account(s) upon the receipt of
a payment order in compliance with any of the Security Procedures chosen by the
Client, from those offered on the attached selection form (and any updated
selection forms hereafter executed by the Client), for funds transfers and in
the amount of money that SSB has been instructed to transfer. SSB is hereby
instructed to accept funds transfer instructions only via the delivery methods
and Security Procedures indicated on the attached selection form (and any
updated selection forms hereafter executed by the Client). The Client agrees
that the Security Procedures are reasonable and adequate for its wire transfer
transactions and agrees to be bound by any payment orders, amendments and
cancellations, whether or not authorized, issued in its name and accepted by SSB
after being confirmed by any of the selected Security Procedures. The Client
also agrees to be bound by any other valid and authorized payment order accepted
by SSB. SSB shall execute payment orders in compliance with the selected
Security Procedures and with the Client's/Investment Manager's instructions on
the execution date provided that such payment order is received by the customary
deadline for processing such a request, unless the payment order specifies a
later time. SSB will use reasonable efforts to execute on the execution date
payment orders received after the customary deadline, but if it is unable to
execute any such payment order on the execution date, such payment order will be
deemed to have been received on the next business day.
2. SECURITY PROCEDURES: The Client acknowledges that the selected Security
Procedures were selected by the Client from Security Procedures offered by SSB.
The Client shall restrict access to confidential information relating to the
Security Procedures to authorized persons as communicated in writing to SSB. The
Client must notify SSB immediately if it has reason to believe unauthorized
persons may have obtained access to such information or of any change in the
Client's authorized personnel. SSB shall verify the authenticity of all
instructions according to the selected Security Procedures.
3. ACCOUNT NUMBERS: SSB shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account number, the
account number shall take precedence and govern. Financial institutions that
receive payment orders initiated by SSB at the instruction of the Client may
also process payment orders on the basis of account numbers, regardless of any
name included in the payment order. SSB will also rely on any financial
institution identification numbers included in any payment order, regardless of
any financial institution name included in the payment order.
4. REJECTION: SSB reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of SSB's receipt of such payment order;
(b) if initiating such payment order would cause SSB, in SSB's sole judgment, to
exceed any applicable volume, aggregate dollar, network, time, credit or similar
limits upon wire transfers; or (c) if SSB, in good faith, is unable to satisfy
itself that the transaction has been properly authorized.
5. CANCELLATION OR AMENDMENT: SSB shall use reasonable efforts to act on all
authorized requests to cancel or amend payment orders received in compliance
with the selected Security Procedures provided that such requests are received
in sufficient time to afford SSB a reasonable opportunity to act prior to
executing the payment order. However, SSB assumes no liability if the request
for amendment or cancellation cannot be satisfied by SSB's reasonable efforts.
6. ERRORS: SSB shall assume no responsibility for failure to detect any
erroneous payment order provided that SSB complies with the payment order
instructions as received and SSB complies with the selected Security Procedures.
The Security Procedures are established for the purpose of authenticating
payment orders only and not for the detection of errors in payment orders.
7. INTEREST AND LIABILITY LIMITS: SSB shall assume no responsibility for lost
interest with respect to the refundable amount of any unauthorized payment
order, unless SSB is notified of the unauthorized payment order within thirty
(30) days of notification by SSB of the acceptance of such payment order. In no
event (including but not limited to failure to execute a payment order) shall
SSB be liable for special, indirect or consequential damages, even if advised of
the possibility of such damages.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When
the Client initiates or receives ACH credit and debit entries pursuant to these
Guidelines and the rules of the National Automated Clearing House Association
and the Mid-America Payment Exchange or other similar body, SSB or its agent
will act as an Originating Depository Financial Institution and/or Receiving
Depository Financial Institution, as the case may be, with respect to such
entries. Credits given with respect to an ACH credit entry are provisional until
final settlement for such entry is received from the Federal Reserve Bank. If
such final settlement is not received, the Client agrees to promptly refund the
amount credited to the Client in connection with such entry, and the party
making payment to the Client via such entry shall not be deemed to have paid the
amount of the entry.
9. CONFIRMATIONS: Confirmation of SSB's execution of payment orders shall
ordinarily be provided within 24 hours. Notice may be delivered through SSB's
account statements, advices, information systems, or by facsimile or callback.
The Client must report any objections to the execution of a payment order within
30 days.
10. MISCELLANEOUS: SSB may use the Federal Reserve System Fedwire to execute
payment orders, and any payment order carried in whole or in part through
Fedwire will be subject to applicable Federal Reserve Board rules and
regulations. SSB and the Client agree to cooperate to attempt to recover any
funds erroneously paid to wrong parties, regardless of any fault of SSB or the
Client, but the party responsible for the erroneous payment shall bear all costs
and expenses incurred in trying to effect such recovery. These Guidelines may
not be amended except by a written agreement signed by the parties.
<PAGE> 25
SECURITY PROCEDURES SELECTION FORM
Please select at least two of the funds transfer security procedures indicated
below.
[ ] SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions
that provides telecommunication services for its membership. Participation
is limited to securities brokers and dealers, clearing and depository
institutions, recognized exchanges for securities, and investment
management institutions. SWIFT provides a number of security features
through encryption and authentication to protect against unauthorized
access, loss or wrong delivery of messages, transmission errors, loss of
confidentiality and fraudulent changes to messages.
Selection of this security procedure would be most appropriate for
existing SWIFT members.
[ ] REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer
(CPU-CPU) data communications between the Client and/or its agent and SSB
and/or its agent. Security procedures include encryption and/or the use of
a test key by those individuals authorized as Automated Batch Verifiers or
a callback procedure to those individuals.
Clients selecting this option should have an existing facility for
completing CPU-CPU transmissions. This delivery mechanism is typically
used for high-volume business such as shareholder redemptions and dividend
payments.
[ ] AUTOMATED CLEARING HOUSE (ACH)
SSB or its agent receives an automated transmission from a Client for the
initiation of payment (credit) or collection (debit) transactions through
the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. The transmission is sent from the
Client's or its agent's system to SSB's or its agent's system with
encryption.
[ ] REPETITIVE WIRES
For situations where funds are transferred periodically from an existing
authorized account to the same payee (destination bank and account number)
and only the date and currency amount are variable, a repetitive wire may
be implemented. Repetitive wires will be subject to a $10 million limit.
If the payment order exceeds the $10 million limit, the instruction will
be confirmed by Telephone Confirmation (Call Back) or Test Key prior to
execution. Repetitive wire instructions must be reconfirmed annually.
Clients may establish Repetitive Wires by following the agreed upon
security procedures as described by Telephone Confirmation (Call Back) or
Test Key.
This alternative is recommended whenever funds are frequently transferred
between the same two accounts. IF THIS OPTION IS SELECTED, CHOOSE EITHER
TELEPHONE CONFIRMATION OR TEST KEY TO BE USED AS A SECONDARY PROCEDURE
WHEN OVER $10 MILLION.
[ ] STANDING INSTRUCTIONS
Funds are transferred by SSB to a counter party on the Client's
established list of authorized counter parties. Only the date and the
dollar amount are variable. Clients may establish Standby Instructions by
following the agreed upon security procedures as described by Telephone
Confirmation (Call Back) or Test Key. Additional paperwork will be
required from insurance Clients using 1031 drawdowns.
This option is used for transactions that include but are not limited to
Foreign Exchange Contracts, Time Deposits and Tri-Party Repurchase
Agreements. IF THIS OPTION IS SELECTED, CHOOSE EITHER TELEPHONE
CONFIRMATION OR TEST KEY TO BE USED AS A SECONDARY PROCEDURE WHEN OVER $10
MILLION.
[ ] TELEPHONE CONFIRMATION (CALL BACK)
This procedure requires Clients to designate individuals as authorized
initiators and authorized verifiers. SSB will verify that the instruction
contains the signature of an authorized person and prior to execution of
the payment order, will contact someone other than the originator at the
Client's location to authenticate the instruction.
Selection of this alternative is appropriate for Clients who do not have
the capability to use other security procedures. PLEASE COMPLETE THE
TELEPHONE CONFIRMATION INSTRUCTIONS ATTACHED AS A SCHEDULE HERETO.
[ ] TEST KEY
Test Key confirmation will be used to verify all non-repetitive funds
transfer instructions received via facsimile or phone. SSB will provide
test keys if this option is chosen. SSB will verify that the instruction
contains the signature of an authorized person and prior to execution of
the payment order, will authenticate the test key provided with the
corresponding test key at SSB.
Selection of this alternative is appropriate for Clients who do not have
the capability to use other security procedures.
The individual signing below must be authorized to sign contract on behalf of
the client. The execution of payment orders under the selected Security
Procedures is governed by the Funds Transfer Operating Guidelines, which are
incorporated by reference.
ING VARIABLE INSURANCE TRUST
By: ________________________
Authorized Signature
____________________________
Type or Print Name
Title ______________________
Date _______________________
<PAGE> 26
SCHEDULE TO FUNDS TRANSFER OPERATING GUIDELINES
AND SECURITY PROCEDURES SELECTION FORM
CLIENT/INVESTMENT MANAGER: ING VARIABLE INSURANCE TRUST
---------------------------------------
Company Name
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
- -------------------------- --------------------------
Name Name
- -------------------------- --------------------------
Address Address
- -------------------------- --------------------------
City/State/Zip Code City/State/Zip Code
- -------------------------- --------------------------
Telephone Number Telephone Number
- -------------------------- --------------------------
Facsimile Number Facsimile Number
- --------------------------
SWIFT Number
TELEPHONE CONFIRMATION INSTRUCTIONS
Authorized Initiators (Please Type or Print) - Please provide a listing of your
staff members who are currently authorized to INITIATE wire transfer
instructions:
NAME TITLE SPECIMEN SIGNATURE
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
Authorized Verifiers (Please Type or Print) - Please provide a listing of your
staff members who will be CALLED BACK to verify the initiation of repetitive
wires of $10 million or more and all non-repetitive wire instructions:
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY)
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
<PAGE> 27
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain The British Bank of the Middle East (as delegate of the --
Hongkong and Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada State Street Trust Company Canada --
Chile Citibank, N.A. --
People's The Hongkong and Shanghai Banking Corporation --
Republic of Limited, Shanghai and Shenzhen branches
China
Colombia Cititrust Colombia S.A.Sociedad Fiduciaria --
Costa Rica Banco BCT S.A. --
Croatia Privredana Banka Zagreb d.d --
Cyprus The Cyprus Popular Bank Ltd. --
Czech Ceskoslovenska Obchodni Banka, A.S. --
Republic
Denmark Den Danske Bank --
</TABLE>
<PAGE> 28
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Ecuador Citibank, N.A. --
Egypt Egyptian British Bank --
(as delegate of The Hongkong and Shanghai Banking
Corporation Limited)
Estonia Hansabank --
Finland Merita Bank Plc --
France Paribas, S.A. --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Rt. --
Iceland Icebank Ltd. --
India Deutsche Bank AG --
The Hongkong and Shanghai Banking
Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Paribas, S.A. --
Ivory Coast Societe Generale de Banques en Cote d'Ivoire --
Jamaica Scotiabank Jamaica Trust and Merchant Bank, Ltd. --
Japan The Fuji Bank Limited Japan Securities Depository
The Sumitomo Bank, Limited Center (JASDEC)
</TABLE>
<PAGE> 29
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Jordan British Bank of the Middle East (as delegate of The --
Hongkong and Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of The Hongkong and Shanghai Banking --
Korea Corporation Limited
Latvia A/s Hansabank --
Lebanon British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank Malaysia Berhad
--
Mauritius The Hongkong and Shanghai Banking --
Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group (New Zealand) Limited --
Norway Christiania Bank og Kreditkasse, ASA --
Oman The British Bank of the Middle East(as delegate of The --
Hongkong and Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Palestine British Bank of the Middle East (as delegate of the --
Hongkong and Shanghai Banking Corporation Limited)
Peru Citibank, N.A. --
</TABLE>
<PAGE> 30
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Portugal Banco Comercial Portugues --
Romania ING Bank, N.V. --
Russia Credit Suisse First Boston, AO, Moscow --
(as delegate of Credit Suisse First Boston, Zurich)
Singapore The Development Bank of Singapore Ltd. --
Slovak Ceskoslovenska Obchodna Banka A.S. --
Republic
Slovenia Banka Austria d.d. --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander Central Hispano, S.A. --
Sri Lanka The Hongkong and Shanghai Banking Corporation Limited--
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - Central Trust of China --
R.O.C.
Thailand Standard Chartered Bank --
Trinidad Republic Bank Ltd. --
& Tobago
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ukraine ING Bank, Ukraine --
</TABLE>
<PAGE> 31
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
United State Street Bank and Trust Company, --
Kingdom London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Vietnam The Hongkong and Shanghai --
Banking Corporation Limited
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
</TABLE>
<PAGE> 32
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<S> <C>
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH USE IS MANDATORY AS A MATTER OF
LAW OR EFFECTIVELY MANDATORY AS A MATTER OF MARKET PRACTICE)
Argentina -Caja de Valores S.A.
Australia -Austraclear Limited;
-Reserve Bank Information and Transfer System
Austria -Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division)
Belgium -Caisse Interprofessionnelle de Depots et de Virement de Titres S.A.;
-Banque Nationale de Belgique
Brazil -Companhia Brasileira de Liquidacao e
Bulgaria -Central Depository AD
-Bulgarian National Bank
Canada -The Canadian Depository for Securities Limited
Chile -Deposito Central de Valores S.A.
People's Republic -Shanghai Securities Central Clearing and Registration Corporation;
of China -Shenzhen Securities Central Clearing Co., Ltd.
Colombia -Deposito Centralizado de Valores
Costa Rica -Central de Valores S.A.
Croatia Ministry of Finance; - National Bank of Croatia
Czech Republic --Stredisko cennych papiru;
-Czech National Bank
Denmark -Vaerdipapircentralen (The Danish Securities Center)
Egypt -Misr Company for Clearing, Settlement, and Central Depository
Estonia -Eesti Vaartpaberite Keskdepositooruim
Finland -The Finnish Central Securities Depository
France -Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres
Germany -The Deutscher Borse Clearing AG
</TABLE>
<PAGE> 33
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH USE IS MANDATORY AS A MATTER OF LAW
OR EFFECTIVELY MANDATORY AS A MATTER OF MARKET PRACTICE)
<S> <C>
Greece -The Central Securities Depository (Apothetirion Titlon AE)
Hong Kong -The Central Clearing and Settlement System;
-Central Money Markets Unit
Hungary -Kozponti Elszamolohaz es Ertekatr (Budapest) Rt. (KELER) [Mandatory for gov't Bonds
and dematerialized equities only; SSB does not use for other securities]
India -The National Securities Depository Limited
-Reserve Bank of India
Indonesia -Bank Indonesia
-PT Kustodian Sentral Efek Indonesia
Ireland -The Central Bank of Ireland, Securities Settlement Office
Israel -The Tel Aviv Stock Exchange Clearing House Ltd.;
-Bank of Israel (As part of the TASE Clearinghouse system)
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Ivory Coast -Depositaire Central - Banque de Reglement
Jamaica -Jamaica Central Securities Depository
Japan -Bank of Japan Net System
Kenya -Central Bank of Kenya
Republic of Korea -Korea Securities Depository Corporation
Latvia -The Latvian Central Depository
Lebanon -The Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle
East (MIDCLEAR) S.A.L.; - The Central Bank of Lebanon
Lithuania -The Central Securities Depository of Lithuania
Malaysia -The Malaysian Central Depository Sdn. Bhd.;
-Bank Negara Malaysia, Scripless Securities Trading and Safekeeping Systems
</TABLE>
<PAGE> 34
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH USE IS MANDATORY AS A MATTER OF LAW
OR EFFECTIVELY MANDATORY AS A MATTER OF MARKET PRACTICE)
<S> <C>
Mauritius -The Central Depository & Settlement Co. Ltd.
Mexico -S.D. INDEVAL, S.A. de C.V.(Instituto para el Deposito de Valores);
Morocco -Maroclear
The Netherlands -Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (NECIGEF)
New Zealand -New Zealand Central Securities Depository Limited
Norway -Verdipapirsentralen (the Norwegian Registry of Securities)
Oman -Muscat Securities Market Depository & Securities Registration Company
Pakistan -Central Depository Company of Pakistan Limited; state Bank of Pakistan
Palestine -The Palestine Stock Exchange
Peru -Caja de Valores y Liquidaciones S.A.
Philippines -The Philippines Central Depository Inc.
-The Registry of Scripless Securities (ROSS) of the Bureau of the Treasury
Poland -The National Depository of Securities (Krajowy Depozyt Papierow Wartos'ciowych);
-Central Treasury Bills Registrar
Portugal -Central de Valores Mobiliarios (Central)
Romania -National Securities Clearing, Settlement and Depository Co.;
-Bucharest Stock Exchange Registry Division;
-National Bank of Romania
Singapore -Central Depository (Pte)Limited;
-Monetary Authority of Singapore
Slovak Republic -Stredisko cennych papierov SR Bratislava, a.s.;
-National Bank of Slovakia
Slovenia -Klirinsko Depotna Druzba d.d.
South Africa -The Central Depository Limited
</TABLE>
<PAGE> 35
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH USE IS MANDATORY AS A MATTER OF LAW
OR EFFECTIVELY MANDATORY AS A MATTER OF MARKET PRACTICE)
<S> <C>
Spain -Servicio de Compensacion y Liquidacion de Valores, S.A.;
-Banco de Espana; Central de Anotaciones en Cuenta
Sri Lanka -Central Depository System (Pvt) Limited
Sweden -Vardepapperscentralen VPC AB (the Swedish Central Securities Depository)
Switzerland -SIS SegaIntersettle
Taiwan - R.O.C. -The Taiwan Securities Central Depository Company, Ltd.
Thailand -Thailand Securities Depository Company Limited
Tunisia -Societe Tunisienne Interprofessionelle de Compensation et de Depot de
Valeurs Mobilieres
Turkey -Takas ve Saklama Bankasi A.S. (TAKASBANK)
-Central Bank of Turkey
Ukraine -The National Bank of Ukraine
United Kingdom -The Bank of England, The Central Gilts Office; The Central Moneymarkets Office
Venezuela -Central Bank of Venezuela
Zambia -LuSE Central Shares Depository Limited
-Bank of Zambia
</TABLE>
<PAGE> 1
EXHIBIT 99.H(1)
FORM OF
FUND SERVICES AGREEMENT
THIS AGREEMENT is made this ___ day of ______, 2000 by and between ING VARIABLE
INSURANCE TRUST, a Delaware business trust (the "Trust"), on behalf of each of
its series as listed in Schedule A (each, a "Fund", and collectively, the
"Funds"), and ING FUND SERVICES CO. LLC, a Delaware limited liability company
("ING Fund Services").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and the rules and regulations promulgated thereunder; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in the Trust (the "Shares") in separate series, with each such series
representing interests in a separate portfolio of securities or other assets;
WHEREAS, the Trust initially intends to offer Shares in those Funds
identified in the attached Schedule A, each such Fund, together with all other
Funds subsequently established by the Fund, shall be subject to this Agreement
in accordance with Article 11;
WHEREAS, the Trust on behalf of the Funds, desires to appoint ING Fund
Services as its fund accounting agent, transfer agent, dividend disbursing
agent, account servicing agent, and agent in connection with certain other
activities and ING Fund Services desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
Article 1. Definitions
1.1 Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Trust, or (ii) any person, whether or not such person
is an officer or employee of the Trust, duly authorized to give Oral
Instructions or Written Instructions on behalf of the Trust as indicated in
writing to ING Fund Services from time to time.
(b) "Board of Trustees" shall mean the Board of Trustees of
the Trust.
(c) "Commission" shall mean the Securities and Exchange
Commission.
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(d) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Trust may from time to time deposit, or
cause to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(e) "1934 Act" shall mean the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, all as amended from
time to time.
(f) "Oral Instructions" shall mean instructions, other than
written instructions, actually received by ING Fund Services from a person
reasonably believed by ING Fund Services to be an Authorized Person.
(g) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any supplements
thereto, if any, which has become effective under the Securities Act of 1933 and
the Investment Company Act of 1940, as amended.
(h) "Shareholder" shall mean a record owner of Shares of a
Fund.
(i) "Written Instructions" shall mean a written
communication signed by a person reasonably believed by ING Fund Services to be
an Authorized Person and actually received by ING Fund Services. Written
Instructions shall include manually executed originals and authorized electronic
transmissions, including telefacsimile of a manually executed original or other
process.
Article 2. Appointment. The Trust, on behalf of the Funds, hereby
appoints and constitutes ING Fund Services as its sole and exclusive transfer
agent and dividend disbursing agent for Shares of each respective Fund of the
Trust and as fund accounting agent and account servicing agent for the Trust and
ING Fund Services hereby accepts such appointments and agrees to perform the
duties hereinafter set forth.
Article 3. Duties of ING Fund Services
3.1 ING Fund Services shall be responsible for:
(a) Administering and/or performing the customary services
of a transfer agent acting as service agent in connection with dividend and
distribution functions; and for performing account servicing and administrative
agent functions in connection with the issuance, transfer and redemption or
repurchase (including coordination with the Custodian) of Shares of each Fund,
as more fully described in the written schedule of Duties of ING Fund Services
annexed hereto as Schedule B and incorporated herein, and in accordance with the
terms of the Prospectus of the Trust on behalf of the applicable Fund,
applicable law and the procedures established from time to time between ING Fund
Services and the Trust.
<PAGE> 3
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(b) Recording the issuance of Shares and maintaining
pursuant to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Fund which are authorized, based upon data provided to it by the
Trust, and issued and outstanding. ING Fund Services shall provide the Trust on
a regular basis with the total number of Shares of each Fund which are
authorized and issued and outstanding and shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such Shares or to
take cognizance of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Trust.
(c) ING Fund Services shall be responsible for the
following: performing the customary services of a fund accounting agent for the
Trust, as more fully described in the written schedule of Duties of ING Fund
Services annexed hereto as Schedule B and incorporated herein, and subject to
the supervision and direction of the Board of Trustees of the Trust.
(d) Notwithstanding any of the foregoing provisions of this
Agreement, ING Fund Services shall be under no duty or obligation to inquire
into, and shall not be liable for (i) the legality of the issuance or sale of
any Shares or the sufficiency of the amount to be received therefor; (ii) the
legality of the redemption of any Shares, or the propriety of the amount to be
paid therefor; (iii) the legality of the declaration of any dividend by the
Board of Trustees, or the legality of the issuance of any Shares in payment of
any dividend or (iv) the legality of any recapitalization or readjustment of the
Shares.
3.2 In addition, the Trust shall (i) identify to ING Fund
Services in writing those transactions and assets to be treated as exempt from
blue sky reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and thereafter
monitor the daily activity for each State. The responsibility of ING Fund
Services for the Trust's blue sky State registration status is solely limited to
the initial establishment of transactions subject to blue sky compliance by the
Trust and the reporting of such transactions to the Trust as provided above.
3.3 In performing its duties under this Agreement, ING Fund
Services: (a) will act in accordance with the Trust Instrument, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the
Trust and will conform to and comply with the requirements of the Investment
Company Act and all other applicable federal or state laws and regulations and
(b) will consult with legal counsel to the Trust, as necessary and appropriate.
Furthermore, ING Fund Services shall not have or be required to have any
authority to supervise the investment or reinvestment of the securities or other
properties which comprise the assets of the Trust or any of its Funds and shall
not provide any investment advisory services to the Trust or any of its Funds.
3.4 In addition to the duties set forth herein, ING Fund
Services shall perform such other duties and functions, and shall be paid such
amounts therefor, as may from time to time be agreed upon in writing between the
Trust and ING Fund Services.
Article 4. Recordkeeping and Other Information
<PAGE> 4
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4.1 ING Fund Services shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the Investment Company Act. Where applicable, such
records shall be maintained by ING Fund Services for the periods and in the
places required by Rule 31a-2 under the Investment Company Act.
4.2 To the extent required by Section 31 of the Investment
Company Act, ING Fund Services agrees that all such records prepared or
maintained by ING Fund Services relating to the services to be performed by ING
Fund Services hereunder are the property of the Trust and will be preserved,
maintained and made available in accordance with such section, and be
surrendered promptly to the Trust on and in accordance with the Trust's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Trust, ING Fund Services will endeavor to notify the
Trust of such request and secure Written Instructions as to the handling of such
request. ING Fund Services reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to comply with such request.
Article 5. Trust Instructions
5.1 ING Fund Services will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an authorized person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Trust. ING Fund Services will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Trust and the proper
countersignature of ING Fund Services.
5.2 At any time, ING Fund Services may request Written
Instructions from the Trust and may seek advice from legal counsel for the
Trust, or its own legal counsel, with respect to any matter arising in
connection with this Agreement, and it shall not be liable for any action taken
or not taken or suffered by it in good faith in accordance with such Written
Instructions or in accordance with the opinion of counsel for the Trust or for
ING Fund Services. Written instructions requested by ING Fund Services will be
provided by the Trust within a reasonable period of time.
5.3 ING Fund Services, its officers, agents or employees,
shall accept Oral Instructions or Written Instructions given to them by any
person representing or acting on behalf of the Trust only if said representative
is an Authorized Person. The Trust agrees that all Oral Instructions shall be
followed within one business day by confirming Written Instructions, and that
the Trust's failure to so confirm shall not impair in any respect ING Fund
Services' right to rely on Oral Instructions.
<PAGE> 5
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Article 6. Compensation
6.1 The Trust on behalf of each of the Funds will compensate
ING Fund Services for the performance of its obligations hereunder in accordance
with the fees set forth in the written Fee Schedule annexed hereto as Schedule C
and incorporated herein. In addition to those fees set forth in Section 6.1, the
Trust on behalf of each of the Funds agrees to pay, and will be billed
separately for, reasonable out-of-pocket expenses incurred by ING Fund Services
in the performance of its duties hereunder.
6.2 The Trust on behalf of the Funds agrees to pay all fees
and out-of-pocket expenses to ING Fund Services by federal funds wire within
fifteen (15) business days following the receipt of the respective invoice.
6.3 Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule C, a revised Fee Schedule executed and
dated by the parties hereto.
6.4 ING Fund Services will from time to time employ or
associate with itself such person or persons as ING Fund Services may believe to
be particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
ING Fund Services and the Trust. The compensation of such person or persons
shall be paid by ING Fund Services and no obligation shall be incurred on behalf
of the Fund in such respect.
6.5 ING Fund Services shall not be required to pay any of the
following expenses incurred by the Trust: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of the Trust's Board of Trustees who are not affiliated with ING
Fund Services; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.5
which may be properly payable by the Fund.
Article 7. ING Fund Services System
7.1 ING Fund Services shall retain title to and ownership of
any and all databases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by ING Fund Services in
connection with the services provided by ING Fund Services to the Trust herein
(the "ING Fund Services System").
7.2 ING Fund Services hereby grants to the Trust a limited
license to the ING Fund Services System for the sole and limited purpose of
having ING Fund Services provide the services contemplated hereunder and nothing
contained in this Agreement shall
<PAGE> 6
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be construed or interpreted otherwise and such license shall immediately
terminate with the termination of this Agreement.
Article 8. Representations and Warranties
8.1 ING Fund Services represents and warrants to the Trust
that:
(a) it is a limited liability company duly organized,
existing and in good standing under the laws of Delaware;
(b) it is empowered under applicable laws and by its
organizational documentation to enter into and perform this Agreement;
(c) all requisite company proceedings have been taken to
authorize it to enter into this Agreement; and
(d) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
8.2 The Fund represents and warrants to ING Fund Services that:
(a) it is duly organized, existing and in good standing
under the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Trust
Instrument and By-Laws to enter into this Agreement;
(c) all proceedings required by said Trust Instrument,
By-Laws and applicable laws have been taken to authorize it to enter into this
Agreement;
(d) a registration statement under the Securities Act of
1933, as amended, and the Investment Company Act on behalf of each of the Funds
is currently effective and will remain effective, and all appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Fund being offered for sale;
(e) all outstanding Shares are validly issued, fully paid
and nonassessable and when Shares are hereafter issued in accordance with the
terms of the Trust's Trust Instrument and its Prospectus with respect to each
Fund, such Shares shall be validly issued, fully paid and nonassessable; and
(f) as of the date hereof, each Fund is duly registered and
lawfully eligible for sale in each jurisdiction indicated for such Fund and the
Trust will notify ING Fund Services immediately of any changes.
<PAGE> 7
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Article 9. Indemnification
9.1 ING Fund Services shall not be responsible for and the
Trust on behalf of each Fund shall indemnify and hold ING Fund Services harmless
from and against any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of any sort
or kind which may be asserted against ING Fund Services or for which ING Fund
Services may be held to be liable (a "Claim") arising out of or attributable to
any of the following:
(a) any actions of ING Fund Services required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent act or
omission to act or bad faith by ING Fund Services in the performance of its
duties hereunder;
(b) ING Fund Services' reasonable reliance on, or reasonable
use of information, data, records and documents (including but not limited to
magnetic tapes, computer printouts, hard copies and microfilm copies) received
by ING Fund Services from the Trust, or any authorized third party acting on
behalf of the Trust, in the performance of ING Fund Services' duties and
obligations hereunder;
(c) the reliance on, or the implementation of, any Written
or Oral Instructions or any other instructions or requests of the Trust on
behalf of the applicable Fund;
(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that such
shares be registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale of such
shares in such state; and
(e) the Trust's refusal or failure to comply with the terms
of this Agreement, or any Claim which arises out of the Trust's negligence or
misconduct or the breach of any representation or warranty of the Trust made
herein.
9.2 ING Fund Services shall indemnify and hold the Trust
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against the Trust or for which the
Trust may be held to be liable in connection with this Agreement (a "Claim"),
provided that such Claim resulted from a negligent act or omission to act, bad
faith, willful misfeasance or reckless disregard by ING Fund Services in the
performance of its duties hereunder.
9.3 In any case in which one party (the "Indemnifying Party")
may be asked to indemnify or hold the other party (the "Indemnified Party")
harmless, the Indemnified Party will notify the Indemnifying Party promptly
after identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnified Party although the
failure to do so shall not prevent recovery by the Indemnified
<PAGE> 8
8
Party and shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall have the
option to defend the Indemnified Party against any Claim which may be the
subject of this indemnification, and, in the event that the Indemnifying Party
so elects, such defense shall be conducted by counsel chosen by the Indemnifying
Party and satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Article 9 shall survive the termination of this
Agreement.
9.4 Any claim for indemnification under this Agreement must be
made prior to the earlier of:
(a) one year after the indemnifying party becomes aware of
the event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
9.5 Except for remedies that cannot be waived as a matter of
law (and injunctive or provisional relief), the provisions of this Article 9
shall be the Indemnified Party's sole and exclusive remedy for claims or other
actions or proceedings to which the Indemnifying Party's indemnification
obligations pursuant to this Article 9 may apply.
Article 10. Standard of Care
10.1 ING Fund Services shall at all times act in good faith
and agrees to use its best efforts within commercially reasonable limits to
ensure the accuracy of all services performed under this Agreement, but assumes
no responsibility for loss or damage to the Trust unless said errors are caused
by ING Fund Services' own negligence, bad faith or wilful misconduct or that of
its employees.
10.2 Each party shall have the duty to mitigate damages for
which the other party may become responsible.
Article 11. Additional Funds. In the event that the Trust establishes
one or more Funds in addition to those identified in Schedule A, with respect to
which the Trust desires to have ING Fund Services render services as transfer
agent under the terms hereof, the Fund shall so notify ING Fund Services in
writing, and if ING Fund Services agrees in writing to provide such services,
Schedule A shall be amended to include such additional Portfolios.
Article 12. Confidentiality
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12.2 The parties agree that the Proprietary Information
(defined below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensors. The Trust and ING Fund Services shall exercise at least the same
degree of care, but not less than reasonable care, to safeguard the
confidentiality of the Confidential Information of the other as it would
exercise to protect its own confidential information of a similar nature. The
Trust and ING Fund Services shall not duplicate, sell or disclose to others the
Confidential Information of the other, in whole or in part, without the prior
written permission of the other party. The Trust and ING Fund Services may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Trust and ING Fund Services may also disclose the
Confidential Information to independent contractors, auditors, and professional
advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 12.1.
Notwithstanding the previous sentence, in no event shall either the Trust or ING
Fund Services disclose the Confidential Information to any competitor of the
other without specific, prior written consent.
12.3 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, sales estimates, business plans, and
internal performance results relating to the past, present or future business
activities of the Trust or ING Fund Services, their respective subsidiaries and
affiliated companies and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design,
process, procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Trust or ING Fund
Services a competitive advantage over its competitors; and
(c) all confidential or proprietary concepts,
documentation, reports, data, specifications, computer software, source code,
object code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
12.4 Confidential Information includes, without limitation,
all documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
12.5 The obligations of confidentiality and restriction on use
herein shall not apply to any Confidential Information that a party proves:
<PAGE> 10
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(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party
free of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to
receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal remedies for maintaining
such information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of such
disclosure as practical so the other party may attempt to stop such disclosure
or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently developed by
employees, consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 13. Term and Termination. This Agreement shall become effective
as it pertains to a Fund at the close of business on the date opposite the
Fund's name on Schedule A and shall remain in force and effect for two years and
thereafter from year to year, unless the Trust or ING Fund Services provides
written notice of its intent not to renew. Such notice must be received not less
than ninety (90) days and not more than one hundred eighty (180) days prior to
the expiration of the then current term. In the event a termination notice is
given by the Trust, all expenses associated with movement of records and
materials and conversion thereof to a successor transfer agent will be borne by
the Trust.
Article 14. Limit of Liability. The terms "The ING Funds Trust" and
"Trustees" (of the Trust) refer, respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Trust's organizational documentation, to which reference is
hereby made. The obligations of "The ING Funds Trust" entered into in the name
or on behalf thereof by any of the Trustees, representatives or agents are made
not individually, but in such capacities and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the assets of the Funds, and all persons dealing with the Funds or other series
of the Trust must look solely to the assets of the Funds for the enforcement of
any claims against the Trust.
Article 15. Non-Exclusivity. The services of ING Fund Services to the
Trust are not to be deemed to be exclusive, and ING Fund Services shall be free
to render such services to others (including other investment companies) and to
engage in other activities. It is understood and agreed that officers or members
of ING Fund Services may serve as officers or trustees of the Trust, and that
officers or trustees of the Trust may serve as officers or members of ING Fund
Services to the extent permitted by law; and that the officers and members of
ING Fund Services are not prohibited from engaging in any other business
<PAGE> 11
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activity or from rendering services to any other person, or from serving as
partners, officers or partners of any other firm or corporation, including other
investment companies.
Article 16. Assignment and Subcontracting. This Agreement, its benefits
and obligations shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement may
not be assigned or otherwise transferred by either party hereto, without the
prior written consent of the other party. ING Fund Services may, in its sole
discretion, engage subcontractors to perform any of the obligations contained in
this Agreement to be performed by ING Fund Services.
Article 17. Force Majeure. No party shall be liable for any default or
delay in the performance of its obligations under this Agreement if and to the
extent such default or delay is caused, directly or indirectly, by (i) fire,
flood, elements of nature or other acts of God; (ii) any outbreak or escalation
of hostilities, war, riots or civil disorders in any country; (iii) any act or
omission of the other party or any government authority; (iv) any labor disputes
(whether or not the employees' demands are reasonable or within the party's
power to satisfy); or (v) nonperformance by a third party or any similar cause
beyond the reasonable control of such party, including, without limitation,
failures or fluctuations in telecommunications or other equipment. In any such
event, the non-performing party shall be excused from any further performance
and observance of the obligations so affected only for as long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.
Article 18. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
Article 19. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Trust and that of ING Fund Services shall be 1475 Dunwoody Drive, West Chester,
PA 19380.
Article 20. Relationship of Parties. The parties agree that they are
independent contractors and are not partners or co-venturers and nothing
contained herein shall be interpreted or construed otherwise.
Article 21. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Investment Company Act shall be resolved
by reference to such term or provision of the Investment Company Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Commission issued pursuant to said Act. In addition, where the effect of
a requirement of the Investment Company Act reflected in any provision of this
<PAGE> 12
Agreement is released by rules, regulation or order of the Commission, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order.
Article 22. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and both of which,
collectively, shall constitute one agreement.
Article 23. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
ING VARIABLE INSURANCE TRUST ING FUND SERVICES CO. LLC
on behalf each of its series listed
on Schedule A
By: ___________________________ By: ___________________________
Title: ___________________________ Title: ___________________________
Attest By:__________________________ Attest By:_________________________
Title: ___________________________ Title: __________________________
<PAGE> 13
SCHEDULE A
LIST OF PORTFOLIOS
ING Large Cap Growth Fund
ING Growth & Income Fund
ING International Equity Fund
ING Global Brand Names Fund
ING Income Allocation Fund
ING Balanced Allocation Fund
ING Growth Allocation Fund
ING Aggressive Growth Active Fund
<PAGE> 14
SCHEDULE B
DUTIES OF ING FUND SERVICES
I. TRANSFER AGENCY SERVICES.
Perform transfer agency and dividend disbursing services as may be
required, including, but not limited to:
- Receive for acceptance, order for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof
to the custodian of the Fund
- Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate shareholder
account
- Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the custodian
- At the appropriate time as and when it receives monies paid to
it by the custodian with respect to any redemption, pay over
or cause to be paid over in the appropriate manner such monies
as instructed by the Fund
- Effect transfers of Shares by the registered owners therof
upon receipt of appropriate instructions
- Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the Shares
- Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing
- Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of Shares which are authorized, based upon data provided to it
by the Fund, and issued and outstanding.
II. FUND ACCOUNTING
Perform fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of each Fund as may be
required by Section 31(a) of the Investment Company Act of 1940, as
amended), including, but not limited to:
- Daily, weekly, and monthly reporting
- Portfolio and general ledger accounting
<PAGE> 15
- Daily valuation of all portfolio securities
- Daily valuation and NAV calculation
- Comparison of NAV to market movement
- Review research of price tolerance/fluctuation report to
market movements and events
- Research of items appearing on the price exception report
- Weekly cost monitoring along with mark-to-market valuations in
accordance with Rule 2a-7
- Security trade processing
- Daily cash and position reconciliation with the custodian bank
- Daily updating of price and distribution rate information to
the transfer agent/insurance agent
- Daily support and report delivery to portfolio management
- Daily calculation of portfolio adviser fees and waivers
- Daily calculation of distribution rates
- Daily investable cash call
- Monitor and research aged receivable
- Collect aged income items and perform reclaims
- Update NASDAQ reporting
- Daily maintenance of each portfolio's general ledger including
expense accruals
- Daily NAV per share notification to other vendors as required
- Calculation of 30 day SEC yields and total returns
- Preparation of month-end reconciliation package
- Monthly reconciliation of portfolio expense records
<PAGE> 16
- Application of monthly pay down gain/loss
- Preparation of all annual and semi-annual audit work papers
III. ACCOUNT SERVICING
Perform account servicing services as may be required, including, but
not limited to:
- Maintaining shareholder accounts which shall include name,
address, taxpayer identification number, and number of shares
- Preparation of shareholder statements
- Preparation of confirmations
- Preparation of shareholder lists
- Mailing shareholder communication, including, but not limited
to, shareholder statements, confirmations, prospectuses,
statements of additional information, annual and semi-annual
reports and proxy statements
- Tabulating proxies
- Withholding taxes on U.S. resident and non-resident accounts
where applicable
- Preparation and filing of U.S. Treasury Department Forms 1099
and other appropriate forms required by applicable statutes,
rules and regulations
- Providing other services directly to accounts as may be
required.
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SCHEDULE C
FEE SCHEDULE
Each Fund may pay ING Fund Services on an annual basis the following amounts:
- - $40,000 for fund accounting services plus out-of-pocket expenses
- - $17 per account for transfer agency services plus out-of-pocket
expenses. For these purposes an account shall include each plan
participant who invests in a Fund through a benefit plan.
- - 0.25% of average daily net assets for account servicing services
<PAGE> 1
Exhibit 99.H(2)
FORM OF
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this ____ of _______ , 2000 (the "Effective Date")
between ING FUND SERVICES CO. LLC (the "Company"), a Delaware limited liability
company having its principal place of business at 1475 Dunwoody Drive, West
Chester, Pennsylvania 19380 and FIRST DATA INVESTOR SERVICES GROUP, INC.
("Investor Services Group"), a Massachusetts corporation with principal offices
at 4400 Computer Drive, Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Company manages the operations of the ING Variable
Insurance Trust (the "Fund"); and
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets (a "Portfolio"); and
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14; and
WHEREAS, the Company is authorized by the Fund to engage service
providers for the performance of certain services for the Fund and the
Portfolios; and
WHEREAS, the Company desires to appoint Investor Services Group as the
Fund's fund accounting agent, and Investor Services Group desires to accept such
appointment.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Company and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Company; or (ii) any person, whether or not
such person is an officer or employee of the Company, duly authorized
to give Oral Instructions or Written Instructions on
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behalf of the Company as indicated in writing to Investor Services
Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of
the governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Company pursuant to
this Agreement.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(i) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(j) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from
a person reasonably believed by Investor Services Group to be an
Authorized Person;
(k) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets;
(l) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(m) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually
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<PAGE> 3
executed originals and electronic transmissions, including
telefacsimile of a manually executed original or other process.
Article 2 Appointment of Investor Services Group.
The Company, on behalf of the Portfolios, hereby appoints and
constitutes Investor Services Group as its fund accounting agent for the Fund
and Investor Services Group hereby accepts such appointments and agrees to
perform the duties hereinafter set forth. This Agreement shall be effective as
of the Effective Date.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Investor Services Group shall be responsible for the
following: performing the customary services of a fund accounting agent
for the Fund, as more fully described in the written schedule of Duties
of Investor Services Group annexed hereto as Schedule B and
incorporated herein, and subject to the supervision and direction of
the Board of Directors of the Fund.
(b) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any dividend by the Board of Directors, or the
legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the
Shares.
3.2 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the
Company and will conform to and comply with the requirements of the 1940 Act and
all other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.3 Investor Services Group agrees to provide the services described
herein in accordance with the Performance Standards annexed hereto as Exhibit 1
of Schedule A and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time upon written agreement of
the parties.
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<PAGE> 4
3.4 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Company
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Company and will be preserved,
maintained and made available in accordance with such section, and will be
surrendered promptly to the Company on and in accordance with the Company's
request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Company of such request and secure Written Instructions as to the handling
of such request. Investor Services Group reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to comply with such request.
Article 5 Company Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions reasonably believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Company. Investor Services Group will also have no liability
when processing Share certificates which it reasonably believes to bear the
proper manual or facsimile signatures of the officers of the Company and the
proper countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Company and may seek advice from legal counsel for the
Fund, or its own legal counsel, with respect to any matter arising in connection
with this Agreement, and it shall not be liable for any action taken or not
taken or suffered by it in good faith in accordance with such Written
Instructions or in accordance with the opinion of counsel for the Fund or for
Investor Services Group. Written Instructions requested by Investor Services
Group will be provided by the Company within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Company only if said representative is
an Authorized Person. The Company agrees that all
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<PAGE> 5
Oral Instructions shall be followed within one business day by confirming
Written Instructions, and that the Company's failure to so confirm shall not
impair in any respect Investor Services Group's right to rely on Oral
Instructions.
Article 6 Compensation.
6.1 The Company on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees set forth in the written Fee Schedule annexed hereto as
Schedule C and incorporated herein.
6.2 In the event that Investor Services Group has failed to meet a
specific Performance Standard, as set forth on Exhibit 1 of Schedule A, in two
of any rolling three month period, the Company may reduce the amount of fees due
to Investor Services Group under this Agreement for such service, excluding
out-of-pocket expenses, by an amount equal to five percent (5%) of the fees for
such service for the third month. For purposes of the foregoing fee reduction,
Investor Services Group's obligation to meet the Performance Standards shall be
measured in the aggregate with respect to all Portfolios. Notwithstanding the
foregoing, the Company's rights under this Section 6.2 shall not become
effective until ninety (90) days following the Commencement Date.
6.3 In addition to those fees set forth in Section 6.1 above, the
Company on behalf of each of the Portfolios agrees to pay, and will be billed
separately for, out-of-pocket expenses incurred by Investor Services Group in
the performance of its duties hereunder. Out-of-pocket expenses shall include,
but shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder and previously approved by the Company.
6.4 The Company on behalf of each of the Portfolios agrees to pay all
fees and out-of-pocket expenses to Investor Services Group by Federal Funds Wire
within thirty (30) business days following the receipt of the respective
invoice. In addition, with respect to all fees under this Agreement, Investor
Services Group may charge a service fee equal to the lesser of (i) one and one
half percent (1 1/2%) per month or (ii) the highest interest rate legally
permitted on any past due invoiced amounts.
6.5 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.
6.6 The Company acknowledges that the fees that Investor Services Group
charges the Company under this Agreement reflect the allocation of risk between
the parties, including the exclusion of remedies in Article 12. Modifying the
allocation of risk from what is stated here would affect the fees that Investor
Services Group charges, and in consideration of those fees, the Company agrees
to the stated allocation of risk.
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<PAGE> 6
6.7 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Company. The compensation of such person or
persons shall be paid by Investor Services Group and no obligation shall be
incurred on behalf of the Company in such respect.
6.8 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Company: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.8
which may be properly payable by the Company or the Fund.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the
Company shall, on or before the date this Agreement goes into effect, but in any
case within a reasonable period of time for Investor Services Group to prepare
to perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 Investor Services Group System.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to the
Company herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Company a limited
license to the Investor Services Group System for the sole and limited purpose
of having Investor Services Group provide the services contemplated hereunder
and nothing contained in this Agreement shall be construed or interpreted
otherwise and such license shall immediately terminate with the termination of
this Agreement.
8.3 In the event that the Company, including any affiliate or agent of
the Company or any third party acting on behalf of the Company is provided with
direct access to the Investor Services Group System for either account inquiry
or to transmit transaction information, including but not limited to
maintenance, exchanges, purchases and redemptions, such direct access capability
shall be limited to direct entry to the Investor Services Group System by means
of on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry or any
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other transmission method approved by Investor Services Group and any other
non-conforming method of transmission of information to the Investor Services
Group System is strictly prohibited without the prior written consent of
Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Company
that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) all equipment and software provided or used by Investor
Services Group or any of its subsidiaries or divisions in connection
with rendering services to the Company under the terms of this
Agreement, include or shall include design and performance capabilities
so that prior to, during, and after December 31, 1999 (the "Millennium
Date Change") they will not malfunction, produce invalid or incorrect
results, cause an interruption in or diminish the quality of the
services provided to the Company, or abnormally cease to function due
to the Millennium Date Change. Such design and performance capabilities
shall include without limitation the ability to recognize and process
the year 2000 and thereafter and to manage and manipulate data
involving dates, including without limitation, (i) single century and
multi-century formulas and date values without resulting in the
generation of incorrect values involving such dates or causing an
abnormal ending, (ii) date data interfaces with functionalities and
data fields that indicate the century, and (iii) date-related functions
that indicate the century; and
(e) all equipment and software provided by Investor Services
Group in connection with the services rendered to the Company under the
terms of this Agreement, as amended include or shall include design and
performance capabilities so that prior to, during, and after the
calendar year 2000, they will not malfunction, produce invalid or
incorrect results, or abnormally cease to function due solely to the
year 2000 date change. Such design and performance capabilities shall
include without limitation the ability to recognize the century and to
manage and manipulate data involving dates, including single century
and multi-century formulas and date values, without resulting in the
generation of incorrect values involving such dates or causing an
abnormal ending; date data interfaces with functionality's and data
fields that indicate the century; and date-related functions that
indicate the century.
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(f) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Company represents and warrants to Investor Services Group
that:
(a) it is duly organized, existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933,
as amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable; and
(f) as of the date hereof, each Portfolio is duly registered
and lawfully eligible for sale in each jurisdiction indicated for such
Portfolio on the list furnished to Investor Services Group pursuant to
Article 7 of this Agreement and that it will notify Investor Services
Group immediately of any changes to the aforementioned list.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the
Company on behalf of each Portfolio shall indemnify and hold Investor Services
Group harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of Investor Services Group required to be
taken pursuant to this Agreement unless such Claim resulted from a
negligent act or omission to act or bad faith by Investor Services
Group in the performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable use of information, data, records and documents (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services
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Group from the Company, or any authorized third party acting on behalf
of the Company, including but not limited to the prior transfer agent
for the Fund, in the performance of Investor Services Group's duties
and obligations hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Company
on behalf of the applicable Portfolio;
(d) the offer or sales of shares by the principal underwriter
of the Fund or any broker-dealer or service organization in violation
of any requirement under the securities laws or regulations of any
state that such shares be registered in such state or in violation of
any stop order or other determination or ruling by any state with
respect to the offer or sale of such shares in such state; and
(e) the Company's refusal or failure to comply with the terms
of this Agreement, or any Claim which arises out of the Company's
negligence or misconduct or the breach of any representation or
warranty of the Company made herein.
10.2 The Company agrees and acknowledges that Investor Services Group
has not prior to the date hereof assumed, and will not assume, any obligations
or liabilities arising out of the conduct by the Company prior to the date
hereof of those duties which Investor Services Group has agreed to perform
pursuant to this Agreement. The Company further agrees to indemnify Investor
Services Group against any losses, claims, damages or liabilities to which
Investor Services Group may become subject in connection with the conduct by the
Company or its agent of such duties prior to the date hereof.
10.3 Investor Services Group shall indemnify and hold the Company
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against the Company or for which the
Company may be held to be liable in connection with this Agreement (a "Claim"),
provided that such Claim resulted from a negligent act or omission to act, bad
faith, willful misfeasance or reckless disregard by Investor Services Group in
the performance of its duties hereunder.
10.4 In any case in which one party (the "Indemnifying Party") may be
asked to indemnify or hold the other party (the "Indemnified Party") harmless,
the Indemnified Party will notify the Indemnifying Party promptly after
identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnified Party although the
failure to do so shall not prevent recovery by the Indemnified Party and shall
keep the Indemnifying Party advised with respect to all developments concerning
such situation. The Indemnifying Party shall have the option to defend the
Indemnified Party against any Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
satisfactory to the Indemnified Party, and thereupon the Indemnifying Party
shall take over complete defense of the Claim and the Indemnified Party shall
sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make
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any compromise in any case in which the Indemnifying Party will be asked to
provide indemnification, except with the Indemnifying Party's prior written
consent. The obligations of the parties hereto under this Article 10 shall
survive the termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Indemnifying Party becomes aware of the
event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
the Indemnified Party's sole and exclusive remedy for claims or other actions or
proceedings to which the Indemnifying Party's indemnification obligations
pursuant to this Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Company unless said errors are caused
by Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY TO THIS AGREEMENT, ITS AFFILIATES OR ANY OF ITS OR THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR LOST
PROFITS, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of two (2) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, the parties agree to
renegotiate in good faith the terms of this Agreement.
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13.3 In the event a termination notice is given by the Company, all
expenses associated with movement of records and materials and conversion
thereof to a successor service provider will be borne by the Company.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 (a) In the event that Investor Services Group has failed to meet a
specific performance standard category, as set forth in Exhibit 1 of Schedule A,
with respect to the Fund in four consecutive months of any rolling twelve month
period (a "Termination Event"), the Company may terminate this Agreement. The
Company will provide Investor Services Group with sixty (60) days notice in
writing if the Company intend to exercise its option under this Section 13.5;
provided that such notice must be given to Investor Services Group no later than
ninety (90) days following notification of the Termination Event.
Notwithstanding the foregoing, the Company's rights under this Section 13.5,
shall not become effective until ninety (90) days following the Commencement
Date.
(b) For purposes of the Company's option to terminate this
Agreement under Section 13.5(a) above, Investor Services Group's obligation to
meet the Performance Standards shall be measured in the aggregate with respect
to all of the Portfolios of the Fund.
13.6 (a) Notwithstanding anything contained in this Agreement to the
contrary and except as provided in Sections 13.4, 13.5, 13.6(b), and 13.7,
should the Company desire to move any of the services provided by Investor
Services Group hereunder, to a successor service provider prior to the
expiration of the Initial Term, or should the Company or any of its affiliates
take any action which would result in Investor Services Group ceasing to provide
fund accounting services to the Company prior to the expiration of the Initial
Term, the payment of fees to Investor Services Group as set forth herein shall
be accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained with Investor Services Group until
the expiration of the Initial Term and calculated at the asset and/or
Shareholder account levels, as the case may be, on the date notice of
termination was given to Investor Services Group.
(b) Notwithstanding anything contained in this Agreement to the
contrary, in the event that a merger, acquisition or change in control of the
Company, the Fund or an affiliate (as defined under the 1940 Act) of the
foregoing results, either directly or indirectly, in the
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termination of this Agreement, the Company shall pay to Investor Services Group
within 30 days of the notice of termination the fee set forth in Schedule C (the
"Merger/Termination Fee"). Such Merger/Termination Fee shall not be payable if
Investor Services Group will provide or continues to provide fund accounting
services to either the legal entity which holds the portfolio assets of the Fund
determined as of the date of the constructive termination of this Agreement (the
"Successor Fund") or the direct provider of such fund accounting services to the
Successor Fund to a successor in interest of the Fund services substantially
similar to those services provided to the Fund hereunder.
13.7 This Agreement may be terminated by the Company without penalty
(a) in the event of its assignment by Investor Services Group to a third-party
not affiliated with Investor Services Group as of the Effective Date or (b) in
the event that the Company and Investor Services Group in good faith determine
that Investor Services Group is no longer able to provide fund accounting
services to the Fund in accordance with prevailing industry standards and for
commercially reasonable fees; provided that 45 days prior written notice of
termination must be given to Investor Services Group within 120 days following
such event of termination.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Company
desires to have Investor Services Group render services as fund accounting agent
under the terms hereof, the Company shall so notify Investor Services Group in
writing, and if Investor Services Group agrees in writing to provide such
services, Schedule A shall be amended to include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The
Company and Investor Services Group shall exercise at least the same degree of
care, but not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Company and Investor Services
Group shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party. The Company and Investor Services Group may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Company and Investor Services Group may also
disclose the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Company or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
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15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Company or
Investor Services Group, their respective subsidiaries and affiliated
companies and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Company or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault
of such party; or
(b) Was lawfully received by the party from a third party free
of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to
receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal remedies for
maintaining such information in confidence have been exhausted
including, but not limited to, giving the other party as much advance
notice of the possibility of such disclosure as practical so the other
party may attempt to stop such disclosure or obtain a protective order
concerning such disclosure; or
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<PAGE> 14
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In any such event, the non-performing
party shall be excused from any further performance and observance of the
obligations so affected only for as long as such circumstances prevail and such
party continues to use commercially reasonable efforts to recommence performance
or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party;
provided, however, that Investor Services Group may, in its sole discretion,
assign all its right, title and interest in this Agreement to an affiliate,
parent or subsidiary. Investor Services Group may, in its sole discretion,
engage subcontractors to perform any of the obligations contained in this
Agreement to be performed by Investor Services Group.
Article 18 Equipment Failures.
Notwithstanding any other provision in this Agreement, in the event of
equipment failures or the occurrence of events beyond Investor Services Group's
control which render its performance under this Agreement impossible, Investor
Services Group shall at no additional expense to the Company take reasonable
steps to minimize service interruptions. Investor Services Group represents that
the various procedures and systems which Investor Services Group has implemented
with regard to safekeeping from loss or damage attributable to fire, theft or
any other cause of the records, and other data of the Fund and Investor Services
Group's records, data, equipment, facilities and other property used in
performance of its obligations hereunder are reasonably adequate and are covered
by a reasonably adequate disaster recovery plan, and it will make such changes
therein from time to time as are reasonably required for the secure performance
of its obligations hereunder.
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<PAGE> 15
Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Company or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Company:
ING Fund Services Co. LLC
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
Attention: President
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
The laws of the State of Delaware, excluding the laws on conflicts of
laws, shall govern the interpretation, validity, and enforcement of this
agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Company hereby submit themselves to the
exclusive jurisdiction of those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
Neither Investor Services Group nor the Company shall release or
publish news releases, public announcements, advertising or other publicity
relating to this Agreement or to the
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<PAGE> 16
transactions contemplated by it without the prior review and written approval of
the other party; provided, however, that either party may make such disclosures
as are required by legal, accounting or regulatory requirements after making
reasonable efforts in the circumstances to consult in advance with the other
party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Company shall not recruit, solicit, employ or engage, for the Company or
others, Investor Services Group's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
ING FUND SERVICES CO. LLC
By: __________________________
Title: _________________________
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<PAGE> 17
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: ____________________________
Title: __________________________
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<PAGE> 18
SCHEDULE A
LIST OF PORTFOLIOS
Stock Funds
ING Large Cap Growth Fund
ING Growth & Income Fund
ING International Equity Fund
ING Global Brand Names Fund
Lifestyle Fund of Funds
ING Income Allocation Fund
ING Balanced Allocation Fund
ING Growth Allocation Fund
ING Aggressive Growth Allocation Fund
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<PAGE> 19
SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
FUND ACCOUNTING SERVICES
Performing fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Fund as may be required
by Section 31(a) of the 1940 Act) as follows:
- Daily, Weekly, and Monthly Reporting
- Portfolio and General Ledger Accounting
- Daily Valuation of all Portfolio Securities
- Daily Valuation and NAV Calculation
- Comparison of NAV to market movement
- Review research of price tolerance/fluctuation report to
market movements and events
- Research of items appearing on the price exception report
- Weekly cost monitoring along with market-to-market valuations
in accordance with Rule 2a-7
- Security trade processing
- Daily cash and position reconciliation with the custodian bank
- Daily updating of price and distribution rate information to
the Transfer Agent/Insurance Agent
- Daily support and report delivery to Portfolio Management
- Daily calculation of Portfolio adviser fees and waivers
- Daily calculation of distribution rates
- Daily investable cash call
- Monitor and research aged receivables
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<PAGE> 20
- Collect aged income items and perform reclaims
- Update NASDAQ reporting
- Daily maintenance of each Portfolio's general ledger including
expense accruals
- Daily NAV per share notification to other vendors as required
- Calculation of 30-day SEC yields and total returns
- Preparation of month-end reconciliation package
- Monthly reconciliation of Portfolio expense records
- Application of monthly pay down gain/loss
- Preparation of all annual and semi-annual audit work papers
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<PAGE> 21
Exhibit 1 to Schedule B
Performance Standards
Investor Services Group's obligation to meet the following Performance Standards
shall be measured in the aggregate with respect to all Portfolios of the Fund.
Investor Services Group will report to the Company on a monthly basis the
percent of items completed within standard as well as a quality rating. A
pass/fail determination for contractual penalties will however be based on the
categories listed below. For example, the accuracy of NAVs will be reported to
the Company on an individual basis and as a collective group. Investor Services
Group will receive a "fail" for the month if the collective score for all
categories falls below the contractual level.
Fund Accounting
A. NAVs calculated accurately, provided that all information received from
external vendors or Fund managers is correct
B. Information to nasdaq is reported accurately and within appropriate
time frames
C. Daily bulletin is released by 6:30 p.m. Eastern Time, provided that all
information received from external vendors or Fund managers is received
on a timely basis
D. Accurate Cash Availability will be provided by 9:30 a.m. Eastern Time
assuming supersheets are received by 8:30 a.m. Eastern Time.
The above standards will be adhered to at least 98% of the time measured on an
aggregate and monthly basis.
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<PAGE> 22
SCHEDULE C
FEE SCHEDULE
1. Fund Accounting Fees:
$35,000 per Portfolio per annum plus $5,000 per class per
annum for each \additional class above four (4) classes
2. Other Fees and Expenses:
- Microfiche/microfilm production, including imaging
- Ad hoc reports, as agreed upon by the Company
3. Programming Costs
(a) Dedicated Team:
Programmer $100,000 per annum
BSA $ 85,000 per annum
Tester $ 65,000 per annum
(b) System Enhancements to be used for any customized programming
requests (Non Dedicated Team):
Programmer $135.00 per hour
After the one year anniversary of the effective date of this Agreement, Investor
Services Group may adjust the above fees once per calendar year, upon thirty
(30) days prior written notice in an amount not to exceed the cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S.
Department of Labor since the last such adjustment in the Client's monthly fees
(or the Effective Date absent a prior such adjustment).
4. Termination Fees:
(a) Merger/Termination Fee: $100,000
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<PAGE> 23
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Company shall reimburse Investor Services Group monthly for
applicable out-of-pocket expenses, including, but not limited to the following
items:
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct
pass through to the Company
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Company
- Temporary staff, as approved by the Company
- Travel to and from Board meetings
- Travel and entertainment, as approved by the Company
- Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
- Third party audit reviews
- Ad hoc SQL time
- Insurance
- Pricing services (or services used to determine Fund NAV)
- Forms and supplies for the preparation of Board meetings and
other materials for the Company
- Customized programming requests
- SAS 70
- Cold Storage
- Document Retrieval
- Vendor pricing comparison
- Manual pricing
- Such other miscellaneous expenses reasonably incurred by
Investor Services Group in performing its duties and
responsibilities under this Agreement.
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<PAGE> 24
The Company agrees that postage and mailing expenses will be paid on
the day of or prior to mailing as agreed with Investor Services Group. In
addition, the Company will promptly reimburse Investor Services Group for any
other unscheduled expenses incurred by Investor Services Group whenever the
Company and Investor Services Group mutually agree that such expenses are not
otherwise properly borne by Investor Services Group as part of its duties and
obligations under the Agreement.
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<PAGE> 25
SCHEDULE E
FUND DOCUMENTS
- Certified copy of the Articles of Incorporation of the Fund,
as amended
- Certified copy of the By-laws of the Fund, as amended
- Copy of the resolution of the Board of Directors authorizing
the execution and delivery of this Agreement
- Copies of all agreements between the Fund and its service
providers
- A listing of all jurisdictions in which each Portfolio is
registered and lawfully available for sale as of the date of
this Agreement and all information relative to the monitoring
of sales and registrations of Fund shares in such
jurisdictions
- Each Fund's most recent post-effective amendment to its
Registration Statement
- Each Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and supplements
thereto
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<PAGE> 1
Exhibit 99.H(3)
FORM OF
PARTICIPATION AGREEMENT
AMONG
[INSURANCE COMPANY,]
ING VARIABLE INSURANCE TRUST,
AND ING FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT, dated as of the ___ day of, 20__ by and among _________
__________________, (the "Company"), an [insert state] life insurance company on
its own behalf and on behalf of each segregated asset account of the Company set
forth on Schedule A hereto as may be amended from time to time (each account
hereinafter referred to as the "Account"), ING Variable Insurance Trust (the
"Fund"), a Delaware business trust, and ING Funds Distributor, Inc. (the
"Underwriter"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is or will be available to act as the investment vehicle
for separate accounts established for variable life insurance and variable
annuity contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest the Fund are divided into
several series of shares, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities and other assets;
WHEREAS, the Fund will, to the extent necessary, obtain an order from
the Securities and Exchange Commission (the "SEC") granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (the "1940 Act") and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, if and to the extent necessary
to permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (the "Mixed and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, ING Mutual Funds Management Co. LLC (the "Adviser"), which
serves as investment adviser to the Fund, is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940, as amended;
<PAGE> 2
WHEREAS, the Company has issued or will issue certain variable life
insurance and/or variable annuity contracts supported wholly or partially by the
Account (the "Contracts"), and said Contracts are listed in Schedule A hereto,
as it may be amended from time to time by mutual written agreement;
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the Fund, is
registered as a broker dealer with the SEC under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund has granted to the Underwriter exclusive
authority to distribute the Fund's shares, and has agreed to instruct, and has
so instructed, the Underwriter to make available to the Company for purchase on
behalf of the Account Fund shares of those Designated Portfolios selected by the
Underwriter. Pursuant to such authority and instructions, and subject to Article
X hereof, the Underwriter agrees to make available to the Company for purchase
on behalf of the Account, shares of those Designated Portfolios listed on
Schedule A to this Agreement, such purchases to be effected at net asset value
in accordance with Section 1.3 of this Agreement. Notwithstanding the foregoing,
(i) Fund series (other than those listed on Schedule A) in existence now or that
may be established in the future will be made available to the Company only as
the Underwriter may so provide, and (ii) the Board of Trustees of the Fund (the
"Board") may suspend or terminate the offering of Fund shares of any Designated
Portfolio or class thereof, if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Board
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, suspension or termination is necessary in the best
interests of the shareholders of such Designated Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full
or fractional Designated Portfolio shares held by the Company on behalf of the
Account, such redemptions to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Company
shall not redeem Fund shares attributable to Contract owners
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<PAGE> 3
except in the circumstances permitted in Section 10.3 of this Agreement, and
(ii) the Fund may delay redemption of Fund shares of any Designated Portfolio to
the extent permitted by the 1940 Act, and any rules, regulations or orders
thereunder.
1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent
of the Fund for the limited purpose of receiving purchase and redemption
requests on behalf of the Account (but not with respect to any Fund shares that
may be held in the general account of the Company) for shares of those
Designated Portfolios made available hereunder, based on allocations of amounts
to the Account or subaccounts thereof under the Contracts and other transactions
relating to the Contracts or the Account. Receipt of any such request (or
relevant transactional information therefor) on any day the New York Stock
Exchange is open for trading and on which the Fund calculates it net asset value
pursuant to the rules of the SEC (a "Business Day") by the Company as such
limited agent of the Fund prior to the time that the Fund calculates its net
asset value as described from time to time in the Fund Prospectus (which as of
the date of execution of this Agreement is ____ p.m. Eastern Time) shall
constitute receipt by the Fund on that same Business Day, provided that the Fund
receives notice of such request by ____ a.m. Eastern Time on the next following
Business Day.
(b) The Company shall pay for shares of each
Designated Portfolio on the same day that it notifies the Fund of a purchase
request for such shares. Payment for Designated Portfolio shares shall be made
in federal funds transmitted to the Fund by wire to be received by the Fund by
____ p.m. Eastern Time on the day the Fund is notified of the purchase request
for Designated Portfolio shares (unless the Fund determines and so advises the
Company that sufficient proceeds are available from redemption of shares of
other Designated Portfolios effected pursuant to redemption requests tendered by
the Company on behalf of the Account). If federal funds are not received on
time, such funds will be invested, and Designated Portfolio shares purchased
thereby will be issued, as soon as practicable and the Company shall promptly,
upon the Fund's request, reimburse the Fund for any charges, costs, fees,
interest or other expenses incurred by the Fund in connection with any advances
to, or borrowing or overdrafts by, the Fund, or any similar expenses incurred by
the Fund, as a result of portfolio transactions effected by the Fund based upon
such purchase request. Upon receipt of federal funds so wired, such funds shall
cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed
by the Account or the Company shall be made in federal funds transmitted by wire
to the Company or any other designated person on the next Business Day after the
Fund is properly notified of the redemption order of such shares (unless
redemption proceeds are to be applied to the purchase of shares of other
Designated Portfolio in accordance with Section 1.3(b) of this Agreement),
except that the Fund reserves the right to redeem Designated Portfolio shares in
assets other than cash and to delay payment of redemption proceeds to the extent
permitted under Section 22(e) of the 1940 Act and any Rules thereunder, and in
accordance with the procedures and policies of the Fund as
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<PAGE> 4
described in the then current prospectus. The Fund shall not bear any
responsibility whatsoever for the proper disbursement or crediting of redemption
proceeds by the Company, the Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Designated
Portfolio shares held or to be held in the Company's general account shall be
effected at the net asset value per share next determined after the Fund's
receipt of such request, provided that, in the case of a purchase request,
payment for Fund shares so requested is received by the Fund in federal funds
prior to close of business for determination of such value, as defined from time
to time in the Fund Prospectus.
1.4. The Fund shall use its best efforts to make the net asset
value per share for each Designated Portfolio available to the Company by ____
p.m. Eastern Time each Business Day, and in any event, as soon as reasonably
practicable after the net asset value per share for such Designated Portfolio is
calculated, and shall calculate such net asset value in accordance with the
Fund's Prospectus. Neither the Fund, any Designated Portfolio, the Underwriter,
nor any of their affiliates shall be liable for any information provided to the
Company pursuant to this Agreement which information is based on incorrect
information supplied by the Company or any other Participating Insurance Company
to the Fund or the Underwriter.
1.5. The Fund shall furnish notice (by wire or telephone
followed by written confirmation) to the Company as soon as reasonably
practicable of any income dividends or capital gain distributions payable on any
Designated Portfolio shares. The Company, on its behalf and on behalf of the
Account, hereby elects to receive all such dividends and distributions as are
payable on any Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Company reserves the right, on its behalf and on
behalf of the Account, to revoke this election and to receive all such dividends
and capital gain distributions in cash. The Fund shall notify the Company
promptly of the number of Designated Portfolio shares so issued as payment of
such dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Fund shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may be sold
to other insurance companies (subject to Section 1.8 hereof) and the cash value
of the Contracts may be invested in other investment companies, provided,
however, that until this Agreement is terminated pursuant to Article X, the
Company shall promote the Designated Portfolios on the same basis as other
funding vehicles available under the Contracts. Funding vehicles other than
those listed on Schedule A to this Agreement may be available for the investment
of the cash value of the Contracts, provided, however, (i) any such vehicle or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of the Designated
Portfolios available hereunder; (ii) the Company gives the Fund and the
Underwriter
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<PAGE> 5
45 days written notice of its intention to make such other investment vehicle
available as a funding vehicle for the Contracts; and (iii) unless such other
investment company was available as a Funding vehicle for the Contracts prior to
the date of this Agreement and the Company has so informed the Fund and the
Underwriter prior to their signing this Agreement, the Fund or Underwriter
consents in writing to the use of such other vehicle, such consent not to be
unreasonably withheld.
(b) The Company shall not, without prior notice to
the Underwriter (unless otherwise required by applicable law), take any action
to operate the Account as a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to
the Underwriter (unless otherwise required by applicable law), induce Contract
owners to change or modify the Fund or change the Fund's distributor or
investment adviser.
(d) The Company shall not, without prior notice to
the Fund, induce Contract owners to vote on any matter submitted for
consideration by the shareholders of the Fund in a manner other than as
recommended by the Board of Trustees of the Fund.
1.8. The Underwriter and the Fund shall sell Fund shares only
to Participating Insurance Companies and their separate accounts and to persons
or plans ("Qualified Persons") that communicate to the Underwriter and the Fund
that they qualify to purchase shares of the Fund under Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
thereunder without impairing the ability of the Account to consider the
portfolio investments of the Fund as constituting investments of the Account for
the purpose of satisfying the diversification requirements of Section 817(h).
The Underwriter and the Fund shall not sell Fund shares to any insurance company
or separate account unless an agreement complying with Article VI of this
Agreement is in effect to govern such sales, to the extent required. The Company
hereby represents and warrants that it and the Account are Qualified Persons.
The Fund reserves the right to cease offering shares of any Designated Portfolio
in the discretion of the Fund.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts
(a) are, or prior to issuance will be, registered under the 1933 Act, or (b) are
not registered because they are properly exempt from registration under the 1933
Act or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under [insert state] insurance laws, and that it (a) has registered or, prior to
any issuance or sale of the Contracts, will
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<PAGE> 6
register the Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts, or alternatively (b) has not registered the Account in proper
reliance upon an exclusion from registration under the 1940 Act. The Company
shall register and qualify the Contracts or interests therein as securities in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Company.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with applicable state and federal
securities laws and that the Fund is and shall remain registered under the 1940
Act. The Fund shall amend the registration statement for its shares under the
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund or the Underwriter.
2.3. The Fund may make payments to finance distribution
expenses pursuant to Rule 12b-1 under the 1940 Act. Prior to financing
distribution expenses pursuant to Rule 12b-1, the Fund will have the Board, a
majority of whom are not interested persons of the Fund, formulate and approve a
plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund makes no representations as to whether any
aspect of its operations, including, but not limited to, investment policies,
fees and expenses, complies with the insurance and other applicable laws of the
various states.
2.5. The Fund represents that it is lawfully organized and
validly existing under the laws of the State of Delaware and that it does and
will comply in all material respects with the 1940 Act.
2.6. The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and distribute the
Fund shares in accordance with any applicable state and federal securities laws.
2.7. The Fund and the Underwriter represent and warrant that
all of their trustees/directors, officers, employees, investment advisers, and
other individuals or entities dealing with the money and/or securities of the
Fund are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less than
the minimum coverage as required currently by Rule 17g-1 of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.8. The Company represents and warrants that all of its
directors, officers, employees, and other individuals/entities employed or
controlled by the Company dealing with
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<PAGE> 7
the money and/or securities of the Account are covered by a blanket fidelity
bond or similar coverage for the benefit of the Account, in an amount not less
than $5 million. The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Company agrees to
hold for the benefit of the Fund and to pay to the Fund any amounts lost from
larceny, embezzlement or other events covered by the aforesaid bond to the
extent such amounts properly belong to the Fund pursuant to the terms of this
Agreement. The Company agrees to make all reasonable efforts to see that this
bond or another bond containing these provisions is always in effect, and agrees
to notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many
copies of the Fund's current prospectus (describing only the Designated
Portfolios listed on Schedule A) or, to the extent permitted, the Fund's
profiles as the Company may reasonably request. The Company shall bear the
expense of printing copies of the current prospectus and profiles for the
Contracts that will be distributed to existing Contract owners, and the Company
shall bear the expense of printing copies of the Fund's prospectus and profiles
that are used in connection with offering the Contracts issued by the Company.
If requested by the Company in lieu thereof, the Fund shall provide such
documentation (including a final copy of the new prospectus on diskette at the
Fund's expense) and other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the prospectus for the Fund is
amended) to have the prospectus for the Contracts and the Fund's prospectus or
profile printed together in one document (such printing to be at the Company's
expense).
3.2. The Fund's prospectus shall state that the current
Statement of Additional Information ("SAI") for the Fund is available, and the
Underwriter (or the Fund), at its expense, shall provide a reasonable number of
copies of such SAI free of charge to the Company for itself and for any owner of
a Contract who requests such SAI.
3.3. The Fund shall provide the Company with information
regarding the Fund's expenses, which information may include a table of fees and
related narrative disclosure for use in any prospectus or other descriptive
document relating to a Contract. The Company agrees that it will use such
information in the form provided. The Company shall provide prior written notice
of any proposed modification of such information, which notice will describe in
detail the manner in which the Company proposes to modify the information, and
agrees that it may not modify such information in any way without the prior
consent of the Fund.
3.4. The Fund, at its expense, shall provide the Company with
copies of its proxy material, reports to shareholders, and other communications
to shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.5. The Company shall: (i) solicit voting instructions from
Contract owners; (ii) vote the Fund shares in accordance with instructions
received from Contract owners; and (iii) vote Fund shares for which no
instructions have been received in the same proportion as Fund
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<PAGE> 8
shares of such portfolio for which instructions have been received, so long as
and to the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners or to the extent
otherwise required by law. The Company will vote Fund shares held in any
segregated asset account in the same proportion as Fund shares of such portfolio
for which voting instructions have been received from Contract owners, to the
extent permitted by law.
3.6. Participating Insurance Companies shall be responsible
for assuring that each of their separate accounts participating in a Designated
Portfolio calculates voting privileges as required by the Shared Funding
Exemptive Order and consistent with any reasonable standards that the Fund may
adopt and provide in writing.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee, each piece of sales literature or other
promotional material that the Company develops and in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter is named. No
such material shall be used until approved by the Fund or its designee, and the
Fund will use its best efforts for it or its designee to review such sales
literature or promotional material within ten Business Days after receipt of
such material. The Fund or its designee reserves the right to reasonably object
to the continued use of any such sales literature or other promotional material
in which the Fund (or a Designated Portfolio thereof) or the Adviser or the
Underwriter is named, and no such material shall be used if the Fund or its
designee so object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser or the Underwriter in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or prospectus or SAI for the Fund shares, as such registration
statement and prospectus or SAI may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee or by the
Underwriter, except with the permission of the Fund or the Underwriter or the
designee of either.
4.3. The Fund and the Underwriter, or their designee, shall
furnish, or cause to be furnished, to the Company, each piece of sales
literature or other promotional material that it develops and in which the
Company, and/or its Account, is named. No such material shall be used until
approved by the Company, and the Company will use its best efforts to review
such sales literature or promotional material within ten Business Days after
receipt of such material. The Company reserves the right to reasonably object to
the continued use of any such sales literature or other promotional material in
which the Company and/or its Account is named, and no such material shall be
used if the Company so objects.
4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, the Account, or the
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<PAGE> 9
Contracts other than the information or representations contained in a
registration statement, prospectus (which shall include an offering memorandum,
if any, if the Contracts issued by the Company or interests therein are not
registered under the 1933 Act), or SAI for the Contracts, as such registration
statement, prospectus, or SAI may be amended or supplemented from time to time,
or in published reports for the Account which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Fund or its shares, promptly after the filing of such
document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one
complete copy of all registration statements, prospectuses (which shall include
an offering memorandum, if any, if the Contracts issued by the Company or
interests therein are not registered under the 1933 Act), SAIs, reports,
solicitations for voting instructions, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or the Account,
promptly after the filing of such document(s) with the SEC or other regulatory
authorities. The Company shall provide to the Fund and the Underwriter any
complaints received from the Contract owners pertaining to the Fund or the
Designated Portfolio.
4.7. The Fund will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Designated
Portfolio, and of any material change in the Fund's registration statement,
particularly any change resulting in a change to the registration statement or
prospectus for any Account. The Fund will work with the Company so as to enable
the Company to solicit proxies from Contract owners, or to make changes to its
prospectus or registration statement, in an orderly manner. The Fund will make
reasonable efforts to attempt to have changes affecting Contract prospectuses
become effective simultaneously with the annual updates for such prospectuses.
4.8. For purposes of this Article IV, the phrase "sales
literature and other promotional materials" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, SAIs, shareholder reports, proxy
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<PAGE> 10
materials, and any other communications distributed or made generally available
with regard to the Fund.
ARTICLE V. Fees and Expenses
5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Fund or Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. Currently, no such payments are
contemplated.
5.2. All expenses incident to performance by the Fund under
this Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1. The Fund will invest its assets in such a manner as to
ensure that the Contracts will be treated as annuity or life insurance
contracts, whichever is appropriate, under the Code and the regulations issued
thereunder (or any successor provisions). Without limiting the scope of the
foregoing, each Designated Portfolio has complied and will continue to comply
with Section 817(h) of the Code and Treasury Regulation Section 1.817-5, and any
Treasury interpretations thereof, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts, and any amendments
or other modifications or successor provisions to such Section or Regulations.
In the event of a breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 1.817-5.
6.2. The Fund represents that it is or will be qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
make every effort to maintain such qualification (under Subchapter M or any
successor or similar provisions) and that
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<PAGE> 11
it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
6.3. The Company represents that the Contracts are currently,
and at the time of issuance shall be, treated as life insurance or annuity
insurance contracts, under applicable provisions of the Code, and that it will
make every effort to maintain such treatment, and that it will notify the Fund
and the Underwriter immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be so treated in
the future. The Company agrees that any prospectus offering a contract that is a
"modified endowment contract" as that term is defined in Section 7702A of the
Code (or any successor or similar provision), shall identify such contract as a
modified endowment contract.
ARTICLE VII. Potential Conflicts
The following provisions shall apply only upon issuance of the Mixed and Shared
Funding Order and the sale of shares of the Fund to variable life insurance
separate accounts and the extent required under the 1940 Act.
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the Contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing
conflicts of which it is aware to the Board. The Company will assist the Board
in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever Contract
owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested members, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority of
the disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited
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<PAGE> 12
to) another Portfolio of the Fund, or submitting the question whether such
segregation should be implemented to a vote of all affected contract owners and,
as appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement with respect to each
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Fund shall
continue to accept and implement orders by the Company for the purchase (and a
redemption) of shares of the Fund.
7.6. For purposes of Section 7.3 through 7.6 of this
Agreement, a majority of the disinterested members of the Board shall determine
whether any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Contract if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent the Mixed and Shared Funding
Exemption Order or any amendment thereto contains terms and conditions different
from Sections 3.4, 3.5, 3.6, 7.1,
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<PAGE> 13
7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be necessary
to comply with the Mixed and Shared Funding Exemptive Order, and Sections 3.4,
3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to such
Sections are contained in the Mixed and Shared Funding Exemptive Order or any
amendment thereto. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the Mixed and
Shared Funding Exemptive Order, then (a) the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be necessary
to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to
the extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1., 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold
harmless the Fund and the Underwriter and each of its trustees/directors and
officers, and each person, if any, who controls the Fund or Underwriter within
the meaning of Section 15 of the 1933 Act or who is under common control with
the Underwriter (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statements of any
material fact contained in the registration
statement, prospectus (which shall include a written
description of a Contract that is not registered
under the 1933 Act), or SAI for the Contracts or
contained in the Contracts or sales literature for
the Contracts (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Fund for use in the
registration statement, prospectus or SAI for the
Contracts or in the Contracts
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<PAGE> 14
or sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, SAI, or sales literature of
the Fund not supplied by the Company or persons
under its control) or wrongful conduct of the
Company or its agents or persons under the Company's
authorization or control, with respect to the sale
or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI, or sales
literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged
omission to state therein a material fact required
to be stated therein or necessary to make the
statements therein not misleading if such a
statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of
the Company; or
(iv) arise as a result of any material failure by
the Company to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
qualification requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company, as limited by and in accordance with
the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any
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<PAGE> 15
such action is brought against an Indemnified Party, the Company shall be
entitled to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company to
such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the registration
statement or prospectus or SAI or sales literature
of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company
for use in the registration statement, prospectus or
SAI for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, SAI or sales literature for
the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of
the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of
the Contracts or Fund shares; or
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<PAGE> 16
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Fund or the Underwriter; or
(iv) arise as a result of any failure by the Fund or
the Underwriter to provide the services and furnish
the materials under the terms of this Agreement
(including a failure of the Fund, whether
unintentional or in good faith or otherwise, to
comply with the diversification and other
qualification requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under
this indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under
this indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to notify
the Underwriter of any such claim shall not relieve the Underwriter from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Party, the Underwriter will be
entitled to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Underwriter
to such party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation. The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
-16-
<PAGE> 17
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, expenses, damages, liabilities
or expenses (or actions in respect thereof) or settlements, are related to the
operations of the Fund and:
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification and other
qualification requirements specified in Article VI
of this Agreement); or
(ii) arise out of or result from any material breach
of any representation and/or warranty made by the
Fund in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Fund; as limited by and in accordance with the
provisions of Sections 8.3(b) and 8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or the
Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the
-17-
<PAGE> 18
fees and expenses of any additional counsel retained by it, and the Fund will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree
promptly to notify the Fund of the commencement of any litigation or proceeding
against it or any of its respective officers or directors in connection with the
Agreement, the issuance or sale of the Contracts, the operation of the Account,
or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, any Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith. If, in the future, the Mixed and Shared Funding Exemptive Order
should no longer be necessary under applicable law, then Article VII shall no
longer apply.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party, for any reason with
respect to some or all Designated Portfolios, by three (3) months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to
the Fund and the Underwriter based upon the Company's determination that shares
of the Fund are not reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to
the Fund and the Underwriter in the event any of the Designated Portfolio's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
(d) termination by the Fund or Underwriter in the
event that formal administrative proceedings are instituted against the Company
by the NASD, the SEC, the Insurance Commissioner or like official of any state
or any other regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the operation of any Account, or the
purchase of the Fund's shares; provided, however, that the Fund or
-18-
<PAGE> 19
Underwriter determines in its sole judgment exercised in good faith, that any
such administrative proceedings will have a material adverse effect upon the
ability of the Company to perform its obligations under this Agreement; or
(e) termination by the Company in the event that
formal administrative proceedings are instituted against the Fund or Underwriter
by the NASD, the SEC, or any state securities or insurance department or any
other regulatory body; provided, however, that the Company determines in its
sole judgment exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Fund or Underwriter
to perform its obligations under this Agreement; or
(f) termination by the Company by written notice to
the Fund and the Underwriter with respect to any Designated Portfolio in the
event that such Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M or fails to comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if the Company reasonably
believes that such Portfolio may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written
notice to the Company in the event that the Contracts fail to meet the
qualifications specified in Article VI hereof; or
(h) termination by either the Fund or the Underwriter
by written notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment exercised in
good faith, that the Company has suffered a material adverse change in its
business, operations, financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(i) termination by the Company by written notice to
the Fund and the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund, Adviser, or the Underwriter has
suffered a material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(j) termination by the Fund or the Underwriter by
written notice to the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.7(a)(ii) hereof and at the time such
notice was given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however, any termination under this
Section 10.1(j) shall be effective forty-five days after the notice specified in
Section 1.7(a)(ii) was given; or
(k) termination by the Company upon any substitution
of the shares of another investment company or series thereof for shares of a
Designated Portfolio of the Fund in accordance with the terms of the Contracts,
provided that the Company has given at least 45 days prior written notice to the
Fund and Underwriter of the date of substitution; or
-19-
<PAGE> 20
(l) termination by any party in the event that the
Fund's Board of Trustees determines that a material irreconcilable conflict
exists as provided in Article VII.
10.2. Notwithstanding any termination of this Agreement, the
Fund and the Underwriter shall, at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Underwriter requests that the Company seek an order pursuant to Section 26(b) of
the 1940 Act to permit the substitution of other securities for the shares of
the Designated Portfolios. The Underwriter agrees to split the cost of seeking
such an order, and the Company agrees that it shall reasonably cooperate with
the Underwriter and seek such an order upon request. Specifically, the owners of
the Existing Contracts may be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts (subject to any such
election by the Underwriter). The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any terminations under
Section 10.1(g) of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to
the Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract owner
initiated or approved transactions, (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption"), (iii)
upon 45 days prior written notice to the Fund and Underwriter, as permitted by
an order of the SEC pursuant to Section 26(b) of the 1940 Act, but only if a
substitution of other securities for the shares of the Designated Portfolios is
consistent with the terms of the Contracts, or (iv) as permitted under the terms
of the Contract. Upon request, the Company will promptly furnish to the Fund and
the Underwriter reasonable assurance that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contacts, the Company shall not prevent
Contract owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
45 days notice of its intention to do so.
10.4. Notwithstanding any termination of this Agreement, each
party's obligation under Article VIII to indemnify the other parties shall
survive.
-20-
<PAGE> 21
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to the Fund: ING Variable Insurance Trust
1475 Dunwoody Drive
West Chester, PA 19380
If to the Company: ___________________________
___________________________
___________________________
If to Underwriter: ING Funds Distributor, Inc.
1475 Dunwoody Drive
West Chester, PA 19380
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to
the property of the Fund, and in the case of a series company, the respective
Designated Portfolios listed on Schedule A hereto as though each such Designated
Portfolio had separately contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree that neither the
Board, officers, agents or shareholders of the Fund assume any personal
liability or responsibility for obligations entered into by or on behalf of the
Fund.
12.2. Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the affected party until such time as such information has
come into the public domain.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
-21-
<PAGE> 22
12.6. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the [insert state] Insurance Commissioner with any information
or reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
[insert state] variable annuity laws and regulations and another applicable law
or regulations.
12.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies,
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report (prepared under generally
accepted accounting principles) filed with any state or federal regulatory body
or otherwise made available to the public, as soon as practicable and in any
event within 90 days after the end of each fiscal year; and
(b) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulatory, as soon as practicable after the
filing thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
COMPANY:
By its authorized officer
By:______________________________
Title:___________________________
Date:____________________________
-22-
<PAGE> 23
ING VARIABLE INSURANCE TRUST
By its authorized officer
By:______________________________
Title:___________________________
Date:____________________________
ING FUNDS DISTRIBUTOR, INC.
By its authorized officer
By:______________________________
Title:___________________________
Date:____________________________
-23-
<PAGE> 24
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
Portfolios
-24-
<PAGE> 1
Exhibit i
[PAUL, WEISS, RIFKIND, WHARTON & GARRISON LETTERHEAD]
April 11, 2000
ING Variable Insurance Trust
1475 Dunwoody Drive
West Chester, PA 19380
Re: ING Variable Insurance Trust
1933 Act File No. 333-83071
1940 Act File No. 811-09477
Dear Sirs:
We understand that ING Variable Insurance Trust, a Delaware
business trust (the "Trust"), has filed with the Securities and Exchange
Commission a Registration Statement on Form N-1A under the Securities Act of
1933 and the Investment Company Act of 1940.
In connection with the registration of such shares, we have
examined the Trust's Agreement and Declaration of Trust, its By-Laws, and the
Registration Statement, as amended, or as proposed to be amended, including all
exhibits thereto, as well as such other records and documents as we have deemed
necessary. Based upon such examination, we are of the opinion that:
1. The Trust has been duly organized and is validly existing
in good standing as a business trust under the laws of the Commonwealth of
Delaware; and
2. The shares of beneficial interest in the Trust to be
offered to the public have been duly authorized for issuance and will be legally
issued, fully paid and nonassessable when said shares have been issued and sold
in accordance with the terms and in the manner set forth in the Trust's
Registration Statement, as amended.
We hereby consent to the filing of this opinion as an exhibit
to the Trust's Registration Statement and to the reference to our name in the
documents comprising said Registration Statement.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
Paul, Weiss, Rifkind, Wharton & Garrison
<PAGE> 1
Exhibit j
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Other
Information - Independent Auditors" and to the use of our report dated April 11,
2000 in this Registration Statement (Form N-1A Nos. 333-83071 and 811-09477) of
ING Variable Insurance Trust.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
April 11, 2000
<PAGE> 1
EXHIBIT 99.L
FORM OF
PURCHASE AGREEMENT
ING Variable Insurance Trust, a Delaware business trust (the "Trust"),
and ING Mutual Funds Management Co. LLC hereby agree as follows:
1. The Trust hereby offers and ING Mutual Funds Management Co. LLC
hereby purchases shares (the "Original Shares"), par value $.001 per share, of
each portfolio ("Fund") of the Trust as indicated on Exhibit A, attached hereto.
ING Mutual Funds Management Co. LLC hereby acknowledges receipt of a purchase
confirmation reflecting the purchase of the Shares, and the Trust hereby
acknowledges receipt ING Mutual Funds Management Co. LLC in the amount of
$100,000 in full payment for the Original Shares.
2. ING Mutual Funds Management Co. LLC represents and warrants to the
Trust that the Original Shares are being acquired for investment purposes and
not with a view to the distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
this ______ day of ____________, 2000.
ING VARIABLE INSURANCE TRUST
Attest:
_____________________________ By: _______________________________
Name:
Title:
ING MUTUAL FUNDS MANAGEMENT CO. LLC
Attest:
_____________________________ By: _______________________________
Name:
Title:
<PAGE> 2
EXHIBIT A
<TABLE>
<CAPTION>
Name of Fund Number of Shares Price Per Share
- ------------ ---------------- ---------------
<S> <C> <C>
ING International Equity Fund 5,000 $10.00
ING Global Brand Names Fund 5,000 $10.00
</TABLE>
<PAGE> 1
EXHIBIT 99.M
FORM OF
ING VARIABLE INSURANCE TRUST
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the distribution Plan
for the Shares of the portfolio series (each a "Fund" and collectively the
"Funds") of ING Variable Insurance Trust, a Delaware business trust (the
"Trust"), adopted pursuant to the provisions of Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") and the related agreement between the Trust and
ING Funds Distributor, Inc. (the "Distributor"). During the effective term of
this Plan, the Fund may incur expenses primarily intended to result in the sale
of its shares upon the terms and conditions hereinafter set forth:
SECTION 1. The Fund shall pay to the Distributor a monthly fee at the
annual rate of 0.25% of the average net asset value of the Shares of the Fund,
as determined at the close of each business day during the month (the "Monthly
Limitation"), to compensate the Distributor for services provided and expenses
incurred by it in connection with the offering of the Fund's Shares, which may
include, without limitation, (i) the payment by the Distributor to investment
dealers of commissions on the sale of Shares as set forth in the then current
Prospectus or Statement of Additional Information of the Fund; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares; (iii) paying of or reimbursing the Distributor for
interest and other borrowing costs on its unreimbursed Carry Forward Expenses
(as hereinafter defined) at the rate paid by the Distributor or, if such amounts
are financed by the Distributor by its own resources or by an affiliate, at the
rate of 1% per annum above the prime rate (which shall mean the most
preferential interest rate on corporate loans at large U.S. money center
commercial banks) then being reported in the Eastern edition of the Wall Street
Journal (or if such prime rate is no longer so reported, such other rate as may
be designated from time to time by the Distributor with the approval of the
Qualified Trustees, as defined below); and (iv) other direct distribution costs
of the type approved by the Board of Trustees, including without limitation the
costs of sales literature, advertising and prospectuses, (other than those
furnished to current shareholders) and state "blue sky" registration expenses.
Such fees shall be payable for each month within 15 days after the close of such
month. The Distributor's cost of providing the above mentioned services are
hereinafter collectively referred to as "Distribution Costs". Carry Forward
Expenses are Distribution Costs that are not paid in the fiscal month in which
they arise because they exceed the Monthly Limitation. A majority of the
Qualified Trustees, may, from time to time, reduce the amount of such payments,
or may suspend the operation of the Plan for such period or periods of time as
they may determine.
SECTION 2. This Plan shall not take effect until: (a) it has been
approved by a vote of a majority of the outstanding Shares of the Fund; (b) it
has been approved, together with any related agreements, by votes of the
majority (or whatever greater percentage may, from time to time, be required by
Section 12(b) of the Act or the rules and regulations thereunder) of both (i)
the Trustees of the Trust, and (ii) the Qualified Trustees of the Trust, cast in
person at a meeting called for the purpose of voting on this
<PAGE> 2
Plan or such agreement; and (c) the Fund has received the proceeds of the
initial public offering of its Shares.
SECTION 3. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2(b).
SECTION 4. The Distributor shall provide to the Trustees of the Trust,
and the Trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote of a
majority of the Qualified Trustees or by vote of the majority of the outstanding
Shares of the Fund. In the event of such termination, the Board and its
Qualified Trustees shall determine whether the Distributor is entitled to
payment from the Fund of all Carry Forward Expenses and related costs properly
incurred in respect of Shares sold prior to the effective date of such
termination, and whether the Fund shall continue to make payment to the
Distributor in the amount the Distributor is entitled to retain under Section 1
hereof, until such time as the Distributor has been reimbursed for all such
amounts by the Fund and by retaining CDSC payments.
SECTION 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide: (a) that such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding Shares of the Fund, on not more than 60 days'
written notice to any other party to the agreement; and (b) that such agreement
shall terminate automatically in the event of its assignment.
SECTION 7. This Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
the approval of a majority of the outstanding Shares of the Fund and all
material amendments to this Plan shall be approved in the manner provided for
approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, and (b) the term "majority of the
outstanding Shares of the Fund" means the affirmative vote, at a duly called and
held meeting of shareholders of the Fund, (i) of the holders of 67% or more of
the Shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding Shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (ii)
of the holders of more than 50% of he outstanding shares of the Class of shares
of the Fund entitled to vote at such meeting, whichever is less, and (c) the
terms "assignment" and "interested person" shall have the respective meanings
specified in the Act and the rules and regulations thereunder, subject to such
exemptions as may be granted by the Securities and Exchange Commission.
<PAGE> 3
SECTION 9. So long as the Plan is in effect, the selection and
nomination of the Trust's Qualified Trustees shall be committed to the
discretion of such Qualified Trustees. This Plan and the terms and provisions
thereof are hereby accepted and agreed to by the Trust, on behalf of the Funds,
and the Distributor as evidenced by their execution hereof.
Executed as of ________, 2000
ING VARIABLE INSURANCE TRUST ING FUNDS DISTRIBUTOR, INC.
By: _______________________ By: _________________________
<PAGE> 1
EXHIBIT 99.P
Adopted: October 1, 1999
Each Registered Investment
Company or series thereof
(each of which is considered
to be a Fund for this purpose)
for which ING Mutual Funds
Management Co. LLC presently
or hereafter provides
investment advisory or
principal underwriter services
CODE OF ETHICS
This Code of Ethics (the "Code") establishes rules of conduct
for persons who are associated with the Funds referred to above. The Code
governs their personal investment and other investment-related activities.
The basic rule is very simple: put the client's interests
first. Officers, Directors and employees owe a fiduciary duty to, among others,
the Shareholders of the Funds, to conduct their personal Securities transactions
in a manner which does not interfere with Fund portfolio transactions or
otherwise take unfair advantage of their relationships with the Funds. Persons
covered by the Code must adhere to these general principles as well as comply
with the Code's specific provisions.
Some of the rules are imposed specifically by law. For
example, the laws that govern investment advisers specifically prohibit
fraudulent activity, making statements that are not true or that are misleading
or omit something that is significant in the context and engaging in
manipulative practices. These are general concepts, of course, and over the
years the courts, the regulators and investment advisers issued interpretations
and established codes of conduct for their employees and others who have access
to their investment decisions and trading activities. Indeed, the rules obligate
investment advisers to adopt written rules that are reasonably designed to
prevent the illegal activities described above and must follow procedures that
will enable them to prevent such activities.
This Code is intended to assist persons associated with the
Funds in fulfilling their obligations under the law. The first part lays out who
the Code applies to, the second part deals with personal investment activities,
the third part deals with other sensitive business practices, and subsequent
parts deal with reporting and administrative procedures.
<PAGE> 2
The Code is very important to the Funds and persons associated
with the Funds. Violations not only cause persons associated with the Funds
embarrassment, loss of business, legal restrictions, fines and other punishments
but for employees lead to demotion, suspension, firing, ejection from the
securities business and very large fines.
I. APPLICABILITY
(A) The Code applies to each of the following:
1. The Funds referred to at the top of page one of the
Code. A listing of the Funds, which is periodically
updated, is attached as Exhibit A.
2. Any officer, director or employee of any Funds or
Affiliates of the Funds (as defined below) whose job
regularly involves him in the investment process.
This includes the formulation and making of
investment recommendations and decisions, the
purchase and sale of securities for the Funds and the
utilization of information about investment
recommendations, decisions and trades. Due to the
manner in which the Funds and the Affiliates of the
Funds conduct their business, every employee should
assume that he is subject to the Code unless the
Divisional Compliance Officer specifies otherwise.
3. Any natural person who controls any of the Funds or
Affiliates of the Funds, and who obtains information
regarding the Funds' investment recommendations or
decisions. However, a person whose control arises
only as a result of his official position with such
entity is excluded. Disinterested directors of the
Funds, for example, are excluded from coverage under
this item.
4. Any director, officer, general partner or person
performing a similar function for the Funds or
Affiliates of the Funds even if he has no knowledge
of and is not involved in the investment process.
Disinterested directors of the Funds are covered
under this term. The Code shall not apply to any
director, officer, general partner or person
performing a similar function if such individual is
required to comply with another organization's code
of ethics pursuant to Rule 17j-1 under the Investment
Company Act of 1940, as amended.
(B) DEFINITIONS
1. ACCESS PERSONS. The persons described in items (A)2
and (A)3 above.
- 2 -
<PAGE> 3
2. ACCESS PERSON ACCOUNT. Includes all advisory,
brokerage, trust or other accounts or forms of direct
beneficial ownership in which one or more Access
Person and/or one or more members of an Access
Person's immediate family have a substantial
proportionate economic interest. Immediate family
includes an Access Person's spouse and minor children
living with the Access Person. A substantial
proportionate economic interest will generally be 10%
of the principal amount in the case of an account in
which only one Access Person has an interest and 25%
of the principal amount in the case of an account in
which more than one Access Person has an interest,
whichever is first applicable. Investment
partnerships and similar indirect means of ownership
are also included.
As an exception, accounts in which one or more Access
Persons and/or their immediate family have a
substantial proportionate interest which are
maintained with persons who have no affiliation with
the Funds or Affiliates of the Funds and with respect
to which no Access Person has, in the judgment of the
Divisional Compliance Officer after reviewing the
terms and circumstances, any direct or indirect
influence or control over the investment or portfolio
execution process are not Access Person Accounts.
3. AFFILIATES OF THE FUNDS. The Funds' investment
advisers and principal underwriters.
4. ASSOCIATE PORTFOLIO MANAGERS. Access Persons who are
engaged in securities research and analysis for
designated Funds or are responsible for investment
recommendations for designated Funds but who are not
particularly responsible for investment decisions
with respect to any Funds.
5. COMPLIANCE OFFICER. The compliance officer of the
companies identified in (A)1 above shall be an
individual who is an employee of ING Mutual Funds
Management Co. LLC, or an affiliate. For purposes of
this Code, the compliance officer of the
administrator shall only be responsible for a covered
persons compliance with this code, unless such
covered person is otherwise excluded under (A)4
above.
6. COVERED PERSONS. The Funds, the Access Persons and
the persons described in item (A)4 above.
7. PORTFOLIO MANAGERS. Access Persons who are
principally responsible for investment decisions with
respect to any of the Funds.
8. SECURITY. Any financial instrument treated as a
security for investment purposes and any related
instrument such as futures, forward or swap contract
entered into with respect to one or more securities,
a basket of or
- 3 -
<PAGE> 4
an index of securities or components of securities.
However, the term security does not include
securities issued by the Government of the United
States, bankers' acceptances, bank certificates of
deposit, or shares of registered open-end investment
companies.
II. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
(A) FRAUDULENT OR DECEPTIVE PRACTICES
No access person shall, in connection with the purchase or
sale, directly or indirectly, by such person of a security
held or to be acquired by the Funds:
(1) employ any device, scheme or artifice to
defraud the Funds;
(2) make to the Fund any untrue statement of a
material fact or omit to make to the Funds a
material fact necessary in order to make the
statement made, in light of the
circumstances under which they are made, not
misleading;
(3) engage in any act, practice or course of
business which would operate as a fraud or
deceit upon the Funds;
(4) engage in any manipulative practice with
respect to the Funds;
(5) trade while in possession of material
non-public information for personal or other
investment accounts, or disclosing such
information to others in or outside the
Adviser's firm who have no need for this
information.
It is a violation of federal securities laws to buy or sell
securities while in possession of material non-public
information and illegal to communicate such information to a
third party who buys or sells.
(B) BASIC RESTRICTION ON INVESTING ACTIVITIES
If a purchase or sale order is pending or under active
consideration for any Fund, neither the same Security nor any
related Security (such as an option, warrant or convertible
security) may be bought or sold for any Access Person Account.
(C) INITIAL PUBLIC OFFERINGS
No Security or related Security may be acquired in an initial
public offering for any Portfolio Manager or Associate
Portfolio Manager.
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<PAGE> 5
(D) BLACKOUT PERIOD
No Security or related Security may be bought or sold for the
account of any Portfolio Manager or Associate Portfolio
Manager during the period commencing seven (7) calendar days
prior to and ending seven (7) calendar days after the purchase
or sale (or entry of an order for the purchase or sale) of
that Security or any related Security for the account of any
Fund with respect to which such person has been designated a
Portfolio Manager or Associate Portfolio Manager.
(E) EXEMPT TRANSACTIONS
Participation on an ongoing basis in an issuer's dividend
reinvestment or stock purchase plan, participation in any
transaction over which no Access Person had any direct or
indirect influence or control and involuntary transactions
(such as mergers, inheritances, gifts, etc.) are exempt from
the restrictions set forth in paragraphs (B) and (D) above
without case by case preclearance under paragraph (G) below.
(F) PERMITTED EXCEPTIONS
Purchases and sales of the following Securities are exempt
from the restrictions set forth in paragraphs B and D above if
such purchases and sales comply with the preclearance
requirements of paragraph (G) below:
1. Non-convertible fixed income Securities rated at
least "A";
2. Equity Securities of a class having a market
capitalization in excess of $1 billion;
3. Equity Securities of a class having a market
capitalization in excess of $500 million if the
transaction in question and the aggregate amount of
such Securities and any related Securities purchased
and sold for the Access Person Account in question
during the preceding 60 days does not exceed $10,000
or 100 shares; and
4. Municipal Securities.
In addition, the exercise of rights that were received pro
rata with other security holders is exempt if the preclearance
procedures are satisfied.
(G) PRE-CLEARANCE OF PERSONAL SECURITIES
TRANSACTIONS
No Security may be bought or sold for an Access Person Account
unless (i) the Access Person obtains prior approval from the
Divisional Compliance Officer or, in the absence of the
Divisional Compliance Officer, from a designee of the
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<PAGE> 6
Divisional Compliance Officer; (ii) the approved transaction
is completed on the same day approval is received; and (iii)
the Divisional Compliance Officer does not rescind such
approval prior to execution of the transaction (See paragraph
I below for details of the Pre-Clearance Process.)
(H) PRIVATE PLACEMENTS
The Divisional Compliance Officer will not approve purchases
or sale of Securities that are not publicly traded, unless the
Access Person provides full details of the proposed
transaction (including written certification that the
investment opportunity did not arise by virtue of such
person's activities on behalf of any Fund) and the Divisional
Compliance Officer concludes, after consultation with one or
more of the relevant Portfolio Managers, that the Fund would
have no foreseeable interest in investing in such Security.
(I) PRE-CLEARANCE PROCESS
1. No Securities may be purchased or sold for any Access
Person Account unless the particular transaction has
been approved in writing by the Divisional Compliance
Officer. The Divisional Compliance Officer shall
review, not less frequently than biweekly (once every
two weeks), reports from the trading desk (or, if
applicable, confirmations from brokers) to assure
that all transactions effected for Access Person
Accounts are effected in compliance with this Code.
2. No Securities may be purchased or sold for any Access
Person Account other than through the trading desk
designated by the Divisional Compliance Officer,
unless express permission is granted by the
Divisional Compliance Officer. Such permission may be
granted only on the condition that the third party
broker supply the Divisional Compliance Officer, on a
timely basis, duplicate copies of confirmations of
all personal Securities transactions for such Access
Person in the accounts maintained with such third
party broker and copies of periodic statements for
all such accounts.
3. A Trading Approval Form, attached as Exhibit B, must
be completed and submitted to the Divisional
Compliance Officer for approval prior to entry of an
order.
4. After reviewing the proposed trade and the level of
potential investment interest on behalf of the Funds
in the Security in question and the Funds restricted
lists, the Divisional Compliance Officer shall
approve (or disapprove) a trading order on behalf of
an Access Person as expeditiously as possible. The
Divisional Compliance Officer will generally approve
transactions described in paragraph (F) above unless
the Security in question or a related security is on
the restricted list or the Divisional
- 6 -
<PAGE> 7
Compliance Officer believes for any other reason that
the Access Person Account should not trade in such
Security at such time.
5. Once an Access Person's Trading Approval Form is
approved, the form must be forwarded to the trading
desk (or, if a third party broker is permitted, to
the Divisional Compliance Officer) for execution on
the same day. If the Access Person's trading order
request is not approved, or is not executed on the
same day it is approved, the clearance lapses
although such trading order request may be
resubmitted at a later date.
6. In the absence of the Divisional Compliance Officer,
an Access Person may submit his or her Trading
Approval Form to a designee of the Divisional
Compliance Officer if the Divisional Compliance
Officer in its sole discretion wishes to appoint one.
Trading Approval for the Divisional Compliance
Officer must be obtained from a designated
supervisory person of the Divisional Compliance
Officer. In no case will the Trading Desk accept an
order for an Access Person Account unless it is
accompanied by a signed Trading Approval Form.
7. The Divisional Compliance Officer shall review all
Trading Approval Forms, all initial, quarterly and
annual disclosure certifications and the trading
activities on behalf of all Funds with a view to
ensuring that all Covered Persons are complying with
the spirit as well as the detailed requirements of
this Code.
III. OTHER INVESTMENT-RELATED RESTRICTIONS
(A) GIFTS
No Access Person shall accept any gift or other item of more
than $100 in value from any person or entity that does
business with or on behalf of any Fund.
(B) SERVICE AS A DIRECTOR
No Portfolio Manager or Assistant Portfolio Manager shall
commence service on the Board of Directors of a publicly
traded company or any company in which any Fund has an
interest without prior authorization from the Divisional
Compliance Officer based upon a determination that the Board
service would not be inconsistent with the interests of the
Funds.
IV. REPORT AND ADDITIONAL COMPLIANCE PROCEDURES
(A) Every Covered Person, including disinterested directors of the
Funds, must submit a report (a form of which is appended as
Exhibit C) containing the information set forth in paragraph
(B) below with respect to transactions in any Security in
which such Covered Person has or by reason of such
transactions acquires, any direct or
- 7 -
<PAGE> 8
indirect beneficial ownership (as defined in Exhibit D) in the
Security; provided, however, that:
1. a Covered Person who is required to make reports only
because he is a director of one of the Funds and who
is a "disinterested" director thereof need not make a
report with respect to any transactions other than
those where he knew or should have known in the
course of his duties as a director that any Fund of
which he is a director has made or makes a purchase
or sale of the same or a related Security within 15
days before or after the purchase or sale of such
Security or related Security by such director.
2. a Covered Person need not make a report with respect
to any transaction effected for any account over
which such person does not have any direct or
indirect influence or control; and
3. a Covered Person need not make a report with respect
to any transaction affected through the trading desk
designated by the Divisional Compliance Officer.
4. a Covered Person will be deemed to have complied with
the requirements of this Article IV insofar as the
Divisional Compliance Officer receives in a timely
fashion duplicate monthly or quarterly brokerage
statements on which all transactions required to be
reported hereunder are described.
(B) A Covered Person must submit the report required by this
Article to the Divisional Compliance Officer no later than 10
days after the end of the calendar quarter in which the
transaction to which the report relates was effected. A report
must contain the following information:
1. The date of the transaction, the title and number of
shares and the principal amount of each Security
involved;
2. The nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
3. The price at which the transaction was effected; and
4. The name of the broker, dealer or bank with or
through whom the transaction was effected.
(C) Any report submitted to comply with the requirements of this
Article IV may contain a statement that the report shall not
be construed as an admission by the person making such report
that he has any direct or indirect benefit ownership in the
Security to which the report relates.
- 8 -
<PAGE> 9
(D) Upon commencement of employment with any of the Funds or
Affiliates of the Funds, each Access Person shall be required
to disclose all current personal Securities holdings contained
in any Access Person Account in which such Access Person has
an interest.
(E) Annually each Covered Person must certify on a report (the
form of which is appended as Exhibit E) that he has read and
understood the Code and recognizes that he is subject to such
Code. In addition, annually each Covered Person must certify
that he has disclosed or reported all personal Securities
transactions required to be disclosed or reported under the
Code and that he is not subject to any regulatory disability.
(F) At least annually (or quarterly in the case of Items 3 and 4
below), the Funds shall report to the Boards of Directors of
the Funds:
1. All existing procedures concerning Covered Persons'
personal trading activities and reporting
requirements and any procedural changes made during
the past year;
2. Any recommended changes to the Funds' Codes of Ethics
or procedures;
3. A summary of any violations of this Code which
occurred during the past quarter and the nature of
any remedial action taken; and
4. Any exceptions to any provisions of this Code of
Ethics as determined under Article VI below.
(G) The Divisional Compliance Officer shall notify each employee
of any of the Funds and Affiliates of the Funds as to whether
such person is considered to be an Access Person or Covered
Person.
V. SANCTIONS
Upon discovering that a Covered Person has not complied with the
requirements of this Code, the Board of Directors of the relevant Fund
may impose whatever sanctions within its power the Board deems
appropriate, including, among other things, termination of the Fund's
adviser or recommendations of disgorgement of profit, censure,
suspension or termination of employment. Material violations of
requirements of this Code by employees of Covered Persons and any
sanctions imposed in connection therewith shall be reported not less
frequently than quarterly to the Board of Directors of any relevant
Fund.
VI. EXCEPTIONS
The Compliance Committee of the Funds reserves the right to decide, on
a case-by-case basis, exceptions to any provisions under this Code. Any
exceptions made hereunder will
- 9 -
<PAGE> 10
be maintained in writing by the Compliance Committee and presented to the Board
of Directors of any relevant Fund at its next scheduled meeting.
VII. PRESERVATION OF DOCUMENTS
This Code, a copy of each report by a Covered Person, any written
report made hereunder by the Funds, Affiliates of the Funds or the
Divisional Compliance Officer, and lists of all persons required to
make reports, shall be preserved with the records of the relevant Fund
for a five year period in an easily accessible place.
VIII. OTHER LAWS, RULES AND STATEMENTS OF POLICY
Nothing contained in this Code shall be interpreted as relieving any
Covered Person from acting in accordance with the provision of any
applicable law, rule or regulation or any other statement of policy or
procedure governing the conduct of such person adopted by Funds or
Affiliates of the Funds.
IX. FURTHER INFORMATION
If any person has any question with regard to the applicability of the
provisions of this Code generally or with regard to any Securities
transaction or transactions, he should consult the Divisional
Compliance Officer.
- 10 -
<PAGE> 11
EXHIBIT A
LIST OF REGISTERED INVESTMENT COMPANIES
ING Large Cap Growth Fund
ING Growth & Income Fund
ING International Equity Fund
ING Global Brand Names Fund
ING Income Allocation Fund
ING Balanced Allocation Fund
ING Growth Allocation Fund
ING Aggressive Growth Allocation Fund
<PAGE> 12
Exhibit B
PRE-CLEARANCE TRADING APPROVAL FORM
I, ___________________________________________________ (name), am an Access
Person and seek pre-clearance to engage in the transaction described below:
Acquisition or Disposition (circle one)
Name of Account: ____________________________________________
Account Number: ____________________________________________
Date of Request: ____________________________________________
Security: ____________________________________________
Amount or # of Shares: ____________________________________________
Broker: ____________________________________________
If the transaction involves a Security that is not publicly traded, a
description of proposed transaction, source of investment opportunity and any
potential conflicts of interest:
I hereby certify that, to the best of my knowledge, the transaction described
herein is not prohibited by the Funds' Code of Ethics dated ___________ and that
the opportunity to engage in the transaction did not arise by virtue of my
activities on behalf of any Client.
Signature: ______________________________________
Print Name:
Approved or Disapproved (Circle One)
Date of Approval:
Signature: ______________________________________
Print Name:
If approval is granted, please forward this form to the trading desk (or if a
third party broker is permitted, to the Divisional Compliance Officer) for
immediate execution.
<PAGE> 13
Exhibit C
TRANSACTION REPORT
Report Submitted by: _____________________________________________________
Print Your Name
This transaction report (the "Report") is submitted pursuant
to Section IV(B) of the Code of Ethics of the Funds and supplies information
with respect to transactions in any Security in which you may be deemed to have,
or by reason of such transaction acquire, any direct or indirect beneficial
ownership interest for the period specified below. If you were not employed by
us during this entire period, amend the dates specified below to cover your
period of employment.
Unless the context otherwise requires, all terms used in the
Report shall have the same meaning as set forth in the Code of Ethics dated
October 30, 1998.
If you have no reportable transactions, sign and return this
page only. If you have reportable transactions, complete, sign and return page 2
and any attachments.
I HAD NO REPORTABLE SECURITIES TRANSACTIONS DURING THE PERIOD
__________, 199_ THROUGH _________, 199_. I CERTIFY THAT I AM FULLY FAMILIAR
WITH THE CODE OF ETHICS AND THAT TO THE BEST OF MY KNOWLEDGE THE INFORMATION
FURNISHED IN THIS REPORT IS TRUE AND CORRECT.
Signature
__________________________________
Position
__________________________________
Date
__________________________________
<PAGE> 14
Page 2
TRANSACTION REPORT
Report Submitted by:__________________________________________________________
Print Your Name
The following table supplies the information required by
Section IV(B) of the Code of Ethics dated October 30, 1998 for the period
specified below. Transactions reported on brokerage statements or duplicate
confirmations actually received by the Divisional Compliance Officer do not have
to be listed although it is your responsibility to make sure that such
statements or confirmations are complete and have been received in a timely
fashion.
<TABLE>
<CAPTION>
Securities Date of Whether Purchase, Quantity of Price Per Share Name of the Nature of
(Name and Transaction Sale, Short Sale, Securities or Other Unit Broker/Dealer Ownership of
Symbol) or Other Type of with or through Securities
Disposition or whom the
Acquisition Transaction
was Effected
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
To the extent specified above, I hereby disclaim beneficial
ownership of any security listed in this Report or in brokerage statements or
transaction confirmations provided by you.
I CERTIFY THAT I AM FULLY FAMILIAR WITH THE CODE OF ETHICS AND
THAT TO THE BEST OF MY KNOWLEDGE THE INFORMATION FURNISHED IN THIS REPORT IS
TRUE AND CORRECT FOR THE PERIOD OF __________, 199_ THROUGH 199_.
Signature _________________________ Date_______________________
Position _________________________
<PAGE> 15
Exhibit D
BENEFICIAL OWNERSHIP
For purposes of the attached Code of Ethics, "beneficial
ownership" shall be interpreted in the same manner as it would be in determining
whether a person is subject to the provisions of Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, except the
determination of direct or indirect beneficial ownership shall apply to all
securities that a Covered Person has or acquires. The term "beneficial
ownership" of securities would include not only ownership of securities held by
a Covered Person for his own benefit, whether in bearer form or registered in
his name or otherwise, but also ownership of securities held for his benefit by
others (regardless of whether or how they are registered) such as custodians,
brokers, executors, administrators, or trustees (including trusts in which he
has only a remainder interest), and securities held for his account by pledges,
securities owned by a partnership in which he is a member if he may exercise a
controlling influence over the purchase, sale of voting of such securities, and
securities owned by any corporation or similar entry in which he owns securities
if the shareholder is a controlling shareholder of the entity and has or shares
investment control over the entity's portfolio.
Ordinarily, this term would not include securities held by
executors or administrators in estates in which a Covered Person is a legatee or
beneficiary unless there is a specified legacy to such person of such securities
or such person is the sole legatee or beneficiary and there are other assets in
the estate sufficient to pay debts ranking ahead of such legacy, or the
securities are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by a Covered Person where such person enjoys "financial
benefits substantially equivalent to ownership." The Securities and Exchange
Commission has said that although the final determination of beneficial
ownership is a question to be determined in the light of the facts of the
particular case, generally a person is regarded as the beneficial owner of
securities held in the name of his or her spouse and their minor children.
Absent special circumstances such relationship ordinarily results in such person
obtaining financial benefits substantially equivalent to ownership, e.g.,
application of the income derived from such securities to maintain a common
home, or to meet expenses that such person otherwise would meet from other
sources, or the ability to exercises a controlling influence over the purchase,
sale or voting of such securities.
A Covered Person also may be regarded as the beneficial owner
of securities held in the name of another person, if by reason of any contract,
understanding, relationship, agreement, or other agreement, he obtains therefrom
financial benefits substantially equivalent to those of ownership.
A Covered Person also is regarded as the beneficial owner of
securities held in the name of a spouse, minor children or other person, even
though he does not obtain therefrom the aforementioned benefits of ownership, if
he can vest or revest title in himself at once or at some future time.
<PAGE> 16
Exhibit E
ANNUAL CERTIFICATION OF CODE OF ETHICS
A. I (a Covered Person) hereby certify that I have read and
understood the Code of Ethics dated October 30, 1998, and
recognize that I am subject to its provisions. In addition, I
hereby certify that I have complied with the requirements of
the Code of Ethics and that I have disclosed or reported all
personal Securities transactions required to be disclosed or
reported under the Code of Ethics;
B. Within the last ten years there have been no complaints or
disciplinary actions filled against me by any regulated
securities or commodities exchange, any self-regulatory
securities or commodities organization, any attorney general,
or any governmental office or agency regulating insurance
securities, commodities or financial transactions in the
United States, in any state of the United States, or in any
other country;
C. I have not within the last ten years been convicted of or
acknowledged commission of any felony or misdemeanor arising
out of my conduct as an employee, salesperson, officer,
director, insurance agent, broker, dealer, underwriter,
investment manager or investment advisor; and
D. I have not been denied permission or otherwise enjoined by
order, judgment or decree of any court of competent
jurisdiction, regulated securities or commodities exchange,
self-regulatory securities or commodities organization or
other federal or state regulatory authority from acting as an
investment advisor, securities or commodities broker or
dealer, commodity pool operator or trading advisor or as an
affiliated person or employee of any investment company, bank,
insurance company or commodity broker, dealer, pool operator
or trading advisor, or from engaging in or continuing any
conduct or practice in connection with any such activity or
the purchase or sale of any security.
Print Name: ______________
Signature: ______________
Date: ______________
<PAGE> 1
EXHIBIT 99.Q
POWER OF ATTORNEY
We, the undersigned Trustees of ING Variable Insurance Trust (the
"Funds"), an open-ended, diversified, management investment company, organized
as a Delaware business trust, do hereby constitute and appoint John J. Pileggi,
Louis S. Citron, and Steven R. Howard and each of them individually, our true
and lawful attorneys and agents to take any and all action and execute any and
all instruments which said attorneys and agents may deem necessary or advisable
to enable the Funds to comply with:
(i) the Securities Act of 1933, as amended, and any rules,
regulations, orders or other requirements of the Securities and
Exchange Commission thereunder, in connection with the registration
under such Securities Act of 1933, as amended, of shares of beneficial
interest of the Funds to be offered by the Funds;
(ii) the Investment Company Act of 1940, as amended, and any
rules, regulations, orders or other requirements of the Securities and
Exchange Commission thereunder, in connection with the registration of
the Funds under the Investment Company Act of 1940, as amended; and
(iii) state securities laws and any rules, regulations, orders
or other requirements of state securities commissions, in connection
with the registration under state securities laws of the Funds and with
the registration under state securities laws of shares of beneficial
interest of the Funds to be offered by the Funds;
including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Funds in its behalf and to affix its seal, and
to sign the name of such Trustee in his behalf as such Trustee to any amendment
or supplement (including post-effective amendments) to the registration
statement or statements filed with the Securities and Exchange Commission under
such Securities Act of 1933, as amended, and such Investment Company Act of
1940, as amended, and to execute any instruments or documents filed or to be
filed as part of or in connection with such registration statement or
statements, and to execute any instruments or documents filed or to be filed as
a part of or in connection with compliance with state securities laws,
including, but not limited to, all state filings for any purpose, state filings
in connection with corporate or trust organization or amending corporate or
trust documentation, filings for purposes of state tax laws and filings in
connection with blue sky regulations; and the undersigned hereby ratifies and
confirms all that said attorneys and agents shall do or cause to be done by
virtue hereof.
1
<PAGE> 2
IN WITNESS WHEREOF, the undersigned place their hands as of this 1st
day of October, 1999.
/s/ John J. Pileggi
--------------------
John J. Pileggi
/s/ Joseph N. Hankin
--------------------
Joseph N. Hankin
/s/ Jack D. Rehm
--------------------
Jack D. Rehm
/s/ Blaine E. Reike
--------------------
Blaine E. Reike
/s/ Richard A. Wedemeyer
--------------------
Richard A. Wedemeyer
2
