<PAGE> 1
As filed with the Securities and Exchange Commission on May 18, 2000
Registration Nos. 333-83071 and 811-09477
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [x]
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
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(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)
[x] 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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<PAGE> 2
ING VARIABLE INSURANCE TRUST PROSPECTUS
August __, 2000
Stock Funds
ING Global Information Technology Fund
ING Internet Fund
Bond Fund
ING High Yield Bond 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]]
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FUNDS AT A GLANCE....................................................................................... 1
STOCK FUNDS............................................................................................. 2
ING Global Information Technology Fund......................................................... 2
ING Internet Fund.............................................................................. 3
BOND FUND............................................................................................... 5
ING High Yield Bond Fund....................................................................... 5
FEES AND EXPENSES....................................................................................... 7
MANAGEMENT OF THE FUNDS................................................................................. 8
PURCHASE OF SHARES...................................................................................... 9
REDEMPTION OF SHARES.................................................................................... 9
PRICING OF SHARES....................................................................................... 9
DIVIDENDS, DISTRIBUTIONS AND TAXES...................................................................... 10
MORE INFORMATION ABOUT RISKS............................................................................ 10
OBTAINING ADDITIONAL INFORMATION........................................................................ 14
</TABLE>
ii
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FUNDS AT A GLANCE
Stock Funds
ING GLOBAL INFORMATION TECHNOLOGY FUND
Investment Objective. Long-term capital appreciation.
Main Investments. A diversified portfolio of equity securities of
information technology companies located throughout
the world, 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). Products and services of companies
engaged in the information technology sector are
subject to relatively high risks of rapid
obsolescence caused by scientific and technological
advances.
ING INTERNET FUND
Investment Objective. Long-term capital appreciation.
Main Investments. A non-diversified portfolio of U.S. and non-U.S.
internet technology companies.
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 investments in
foreign securities (for example, currency exchange
rate fluctuations). Products and services of
companies engaged in internet-related activities are
subject to relatively high risks of rapid
obsolescence caused by scientific and technological
advances.
Bond Fund
ING HIGH YIELD BOND FUND
Investment Objective. A high level of current income and total return.
Main Investments. A diversified portfolio of high yield (high risk)
debt securities that are unrated or rated below
investment grade, as discussed herein.
Main Risks. You could lose money. Other risks include
price volatility and risks, as discussed herein,
related to investments in fixed income securities,
including sensitivity to interest rate fluctuations.
Lower-rated securities may be subject to wider
fluctuations in yield and market value than
higher-rated securities. The market for high yield
securities may be less liquid than the markets for
higher-rated securities, which may have an adverse
effect on the market value of certain securities.
<PAGE> 5
STOCK FUNDS
ING GLOBAL INFORMATION TECHNOLOGY 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 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-sized, and small
companies.
The Sub-Adviser believes that because of rapid advances in information
technology, investment in companies within this sector should offer substantial
opportunities for long-term capital appreciation. The information technology
area has exhibited and continues to demonstrate rapid growth, both through
increasing demand for existing products and services and the broadening of the
technology market. Generally, the Sub-Adviser's overall stock selection for the
Fund will be based on an assessment of the company's fundamental prospects. The
Sub-Adviser anticipates, however, that a portion of the Fund's holdings will be
invested in newly issued securities being sold in the primary or secondary
market.
The Sub-Adviser combines broad industry analysis and bottom-up company
analysis to identify the stocks of companies it believes will become tomorrow's
information technology leaders. In choosing investments for the Fund, the
Sub-Adviser first identifies themes that address industry and technological
changes. Using intensive fundamental research, the Sub-Adviser then analyzes
individual companies worldwide to find those firms most likely to benefit from
the selected investment themes.
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.
- Mid-Sized Companies. Investments in mid-sized companies 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 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
2
<PAGE> 6
subject to more abrupt or erratic market movements than
securities of larger, more established growth companies.
- 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 value stocks or stocks in industries 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.
- Industry Concentration. As a result of the Fund concentrating
its assets in securities related to a particular industry, the
Fund may be subject to greater market fluctuation than a fund
which has securities representing a broader range of investment
alternatives.
- Information Technology Risk. 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 Global
Information Technology Fund has not yet commenced operations, there is no
performance information included in this Prospectus.
ING INTERNET 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 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-sized, and small companies.
The Sub-Adviser believes that the internet is in the early stages of a
period of promising growth. The internet has enabled companies to tap into new
markets, use new distribution channels and do business with end users of their
products all over the world without having to go through wholesalers and
distributors. The Sub-Adviser believes that investment in companies related to
the internet should offer substantial opportunities for long-term capital
appreciation. Generally, the Sub-Adviser's overall stock selection for the Fund
will be based on an assessment of a company's fundamental prospects. The
Sub-Adviser anticipates, however, that a portion of the Fund's holdings will be
invested in newly issued securities being sold in the primary or secondary
market.
In choosing investments for the Fund, the Sub-Adviser first identifies
themes which it believes will drive the internet in the future. Then, by
conducting extensive fundamental research, the Sub-Adviser analyzes individual
companies worldwide to identify those firms that are most likely to benefit from
the selected investment themes.
A more detailed discussion of the Principal Investment Strategies is
available in the Statement of Additional Information under "Investment Policies
and Risks" section.
3
<PAGE> 7
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.
- Mid-Sized Companies. Investments in mid-sized companies 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 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.
- 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 value stocks or stocks in industries 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.
- 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.
- Industry Concentration. As a result of the Fund concentrating
its assets in securities related to a particular industry, the
Fund may be subject to greater market fluctuation than a fund
which has securities representing a broader range of investment
alternatives.
- 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 Internet
Fund has not yet commenced operations, there is no performance information
included in this Prospectus.
4
<PAGE> 8
BOND FUND
ING HIGH YIELD BOND FUND
Investment Objective. The Fund seeks to provide investors with a high
level of current income and 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 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.
The Fund defines high yield bonds to include bank loans, payment-in-kind
securities, fixed, variable, floating rate and deferred interest debt
obligations, zero coupon bonds, mortgage-backed and asset-backed debt
obligations, structured debt obligations and convertible bonds, provided they
are unrated or rated below investment grade. In evaluating the quality of a
particular high yield bond for investment by the Fund, the Sub-Adviser does not
rely exclusively on ratings assigned by the nationally recognized statistical
rating organizations. The Sub-Adviser will utilize a security's credit rating as
simply one indication of an issuer's creditworthiness and will principally rely
upon its own analysis of any security. However, the Sub-Adviser does not have
restrictions on the rating level of the securities in the Fund's portfolio and
may purchase and hold securities in default. There are no restrictions on the
average maturity of the Fund or the maturity of any single investment.
Maturities may very widely depending on the Sub-Adviser's assessment of interest
rate trends and other economic or market factors.
Any remaining assets may be invested in investment grade debt
securities; common and preferred stocks; U.S. Government securities and money
market instruments that the Sub-Adviser believes are appropriate in light of the
Fund's investment objectives; and debt securities of foreign issuers. The Fund
may purchase structured debt obligations and may engage in dollar roll
transactions and swap agreements. The Fund may also use options and futures
contracts involving securities, securities indices and interest rates.
The Fund will not purchase any common stocks if, after such purchase,
more than 20% of the value of its total assets would be invested in common
stocks. The Fund will invest in common stocks in order to attempt to achieve
either a combination of its primary and secondary objectives, in which case the
common stocks will be dividend-paying, or to achieve its secondary objective, in
which case the common stocks may not pay dividends.
In choosing investments for the Fund, the Sub-Adviser combines
extensive company and industry research with relative value analysis to identify
high yield bonds expected to provide above-average returns. Relative value
analysis is intended to enhance returns by moving from overvalued to undervalued
sectors of the bond market. The Sub-Adviser's team approach to decision making
includes contributions from individual managers responsible for specific
industry sectors.
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.
- Risks of Fixed Income Investments. Fixed income securities
held by the Fund are subject to a number of risks, including,
but not limited to:
5
<PAGE> 9
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.
- Risk of High Yield Bonds. High yield bonds 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.
- Derivatives Risk. Derivatives are subject to the risk of
changes in the market price of the underlying security, as
well as credit risk with respect to the counterparty to the
derivative instrument. The use of derivatives may reduce
returns.
- Risks of Equity Investments. 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.
PERFORMANCE SUMMARY. Performance information is only shown for those
Funds which have had a full calendar year of operations. Since the ING High
Yield Fund has not yet commenced operations, there is no performance information
included in this Prospectus.
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<PAGE> 10
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
Fund by Investment
Management Distribution Other Operating Manager and Net
Fees Fees(2) Expenses Expenses Distributor(3) Expenses
---------- ------------ -------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
ING Global Information Technology Fund 1.25% 0.25%
ING Internet Fund 1.25% 0.25%
ING High Yield Bond Fund 0.65% 0.25%
</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) Pursuant to a Plan of Distribution adopted by each Fund under Rule 12b-1
under the 1940 Act, each Fund pays ING Funds Distributor, Inc. (the
"Distributor") an annual fee of up to 0.25% of the Funds' average daily
net assets. 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.
(3) 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."
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; and
- you redeem all your shares at the end of the time period
indicated.
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 Global Information Technology Fund $_____ $_____
ING Internet Fund $_____ $_____
ING High Yield Bond Fund $_____ $_____
</TABLE>
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<PAGE> 11
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 Groep, 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. This includes engaging
sub-advisers, as well as monitoring and evaluating the management of the assets
of each such Fund by its sub-adviser. The Investment Manager has acted as an
investment adviser to mutual funds since 1998. Today, the Investment Manager,
advises or manages 22 investment portfolios, including the Funds, encompassing a
broad range of investment objectives.
Sub-Advisers. The Investment Manager has engaged ING Investment
Management LLC ("IIM") to act as sub-adviser to the ING High Yield Bond Fund and
ING Investment Management Advisors B.V. (IIMA) to act as sub-adviser to the ING
Global Information Technology Fund and ING Internet Fund. 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 a wholly owned
indirect subsidiary of ING Group and is registered with the Securities and
Exchange Commission.
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 a 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:
<TABLE>
<CAPTION>
FUND ADVISORY FEE
---- ------------
<S> <C>
ING Global Communications Fund 1.25%
ING Internet Fund 1.25%
ING High Yield Bond Fund 0.65%
</TABLE>
Portfolio Managers. The following individuals are primarily responsible
for the day-to-day management of each Fund's portfolio:
Mr. Guy Uding (ING Global Information Technology Fund and ING Internet
Fund). Mr. Uding has primary responsibility for managing each Fund and
heads a three-member team of investment professionals. Mr. Uding has
been employed by IIMA and its affiliates since 1995 and has five years
of investment experience.
Mr. Robert Bowman (ING High Yield Bond Fund). Mr. Bowman, with more
than 20 years of investment experience, leads a team of five investment
professionals in managing the Fund. Mr. Bowman has been a Senior Vice
President and Managing Director at IIM since 1998.
8
<PAGE> 12
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
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. 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.
9
<PAGE> 13
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. Each Fund, except the ING High Yield Bond
Fund, generally declares and pays dividends, if any, annually. The ING High
Yield Bond Fund will declare dividends daily and pay dividends monthly. 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 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 may invest and certain of the investment practices that the Funds may
use. For more information about these and other types of securities and
investment techniques used by the Funds, see the Statement of Additional
Information. Unless indicated otherwise, the following descriptions apply to all
Funds.
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). 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.
Investments in Foreign Securities (All Funds). 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 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
10
<PAGE> 14
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 High Yield Bond Fund only). 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 only). 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). 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). 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.
Convertible Securities (All Funds). 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). Each Fund may invest up to 10%
of its assets in other unaffiliated investment companies. 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.
11
<PAGE> 15
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). 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 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). 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
12
<PAGE> 16
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). 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.
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). 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.
Reverse Repurchase Agreements (All Funds). 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 High Yield Bond Fund only). 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).
The Funds may invest in small and mid capitalization companies. 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 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 (ING Internet Fund only). The ING
Internet Fund is classified as non-diversified investment company under the 1940
Act, which means that the 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 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.
Concentration (ING Global Information Technology 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.
13
<PAGE> 17
Fundamental and Non-Fundamental Policies (All Funds). Unless otherwise
stated, all investment objectives and policies are non-fundamental and may be
amended without shareholder approval.
Percentage Investment Limitations (All Funds). Unless otherwise stated,
percentage limitations in this prospectus apply at the time of investment.
Portfolio Turnover (All 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.
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 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.
14
<PAGE> 18
MANAGER
ING Mutual Funds Management Co. LLC
1475 Dunwoody Drive
West Chester, PA 19380
SUB-ADVISERS
ING Investment Management Advisors B.V
Schenkkade 65, 2595 AS
The Hague, The Netherlands
ING Investment Management LLC
5780 Powers Ferry Road, N.W., Suite 300
Atlanta, GA 30327
DISTRIBUTOR
ING Funds Distributor, Inc.
1475 Dunwoody Drive
West Chester, PA 19380
CUSTODIAN
State Street Bank and Trust Company
801 Pennsylvania Street
Kansas City, MO 64105
TRANSFER AGENT
DST Systems, Inc.
333 W. 11th Street
Kansas City, MO 64105
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
LEGAL COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Additional information about the Funds is included in the Statement of
Additional Information ("SAI") dated April 28, 2000, as amended or supplemented
from time to time, which is incorporated by reference in its entirety.
Additional information about the Funds' investments is available in the Funds'
annual and semiannual reports to shareholders. In the Funds' annual report you
will find a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during their last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Funds, or to make inquiries about the Funds, please call
1-877-INFO-ING.
Information about the Funds (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's public reference room in Washington,
D.C. Information about the operation of the public reference room can be
obtained by calling the Commission at 1-800-SEC-0330. Reports and other
information about the Funds are available on the Commission's Internet site at
http://www.sec.gov. Copies of information on the Commission's Internet site can
be obtained for a fee by writing to: Securities and Exchange Commission, Public
Reference Section, Washington D.C. 20549-6009.
Investment Company Act File No. 811-09477
<PAGE> 19
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
ING Global Information Technology Fund
ING Internet Fund
</TABLE>
Bond Funds
ING High Yield Bond Fund
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, as amended August __, 2000
<PAGE> 20
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
WARRANTS................................................................................................. 2
COMMERCIAL PAPER........................................................................................ 3
DOMESTIC AND FOREIGN BANK OBLIGATIONS................................................................... 3
CORPORATE DEBT SECURITIES............................................................................... 4
MORTGAGE-RELATED SECURITIES............................................................................. 4
GNMA CERTIFICATES....................................................................................... 5
FNMA CERTIFICATES....................................................................................... 5
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
INVESTMENT IN ING FUNDS................................................................................. 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> 21
<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................................................................................... 31
Officers Biographies................................................................................... 31
Investment Manager..................................................................................... 32
Sub-Advisers........................................................................................... 34
Distribution of Fund Shares............................................................................ 34
Transfer Agent, Fund Accountant and Account Services................................................... 35
Rule 12b-1 Distribution Plan........................................................................... 35
DETERMINATION OF NET ASSET VALUE................................................................................. 36
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................................................... 38
PORTFOLIO TRANSACTIONS........................................................................................... 39
Portfolio Turnover..................................................................................... 41
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS......................................................................... 41
Dividends and Distributions............................................................................ 41
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>
iii
<PAGE> 22
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> 23
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
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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
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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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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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<PAGE> 29
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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<PAGE> 30
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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<PAGE> 31
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; and (d) the ING
Global Information Technology Fund and ING Internet Fund will concentrate their
investments as described in the Prospectus.
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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 and ING Internet Fund 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.
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Trustees Biographies
John J. Pileggi,* Trustee, Chairman of the Board and President
- - Age 41. President, Chief Executive Officer and Chairman of the Board of ING
Funds Trust (1998-present); President and Chief Executive Officer of ING Mutual
Funds Management Co. LLC (1998-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 and ING Funds Trust.
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., Star Tek,
Inc. and ING Funds Trust,
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). Mr.
Wedemeyer is also a Trustee of ING Funds Trust.
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 and ING Funds Trust.
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);
Treasurer of ING Funds Trust (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 Funds Trust (1998-present); Vice President
of ING Fund Services Co. LLC. (1998-present); Attorney at Kramer, Levin,
Naftalis & Frankel (1994-1998).
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Ralph G. Norton, III, Vice President - Age 40. Vice President
and Chief Investment Officer, ING Mutual Funds Management Co. LLC
(1999-present); Vice President of ING Funds Trust (1999-present); Managing
Editor, Standard & Poor's (1996-1999); Vice President, IBC Financial Data
(1992-1996).
Rachelle I. Rehner, Secretary - Age 38. Secretary and Fund
Legal Manager, ING Mutual Funds Management Co. LLC (1998-present); Secretary of
ING Funds Trust (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).
Charles Eng, Assistant Treasurer - Age 36. Fund Accounting
Manager, ING Mutual Funds Management Co. LLC (1998-present); Assistant Treasurer
of ING Funds Trust (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 Treasurer
of ING Funds Trust (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
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<PAGE> 54
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 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%
NG 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%
</TABLE>
33
<PAGE> 55
<TABLE>
<S> <C>
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.
Sub-Advisers
ING Investment Management LLC ("IIM") serves as Sub-Adviser to
the ING Growth & Income Fund and ING High Yield Bond 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, ING Global Information
Technology Fund and ING Internet 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.
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<PAGE> 56
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 and up to 0.25% of each Fund's
average daily net assets annually for account servicing activities. 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 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
35
<PAGE> 57
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 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
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<PAGE> 58
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 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
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<PAGE> 59
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 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
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<PAGE> 60
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.
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
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<PAGE> 61
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 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.
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<PAGE> 62
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 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 Global Information Technology Fund annually annually
ING Internet Fund annually annually
ING High Yield Bond Fund daily monthly
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
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<PAGE> 63
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 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
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<PAGE> 64
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, 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
43
<PAGE> 65
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.
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
44
<PAGE> 66
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.
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
45
<PAGE> 67
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.
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)%*
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.
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<PAGE> 68
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:
<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.
47
<PAGE> 69
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 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
_________serves as counsel to the Trust. ________'s address
is ____________.
Independent Auditors
____________ serves as the independent auditors for the Funds.
____________ provides audit services, tax return preparation and assistance and
consultation in connection with review of SEC filings. ____________'s address is
____________.
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> 70
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.
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<PAGE> 71
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
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<PAGE> 72
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."
ING-VIT-SAI (8/00)
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<PAGE> 73
PART C. OTHER INFORMATION
Item 23. Exhibits
(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) -- Participation Agreement among Equitable Life
Insurance Company of Iowa, the Registrant, ING
Mutual Funds Management Co. LLC and ING Fund
Distributor, Inc. (2)
(h)(4) -- Participation Agreement among Golden American Life
Insurance Company, the Registrant, ING Mutual
Funds Management Co. LLC and ING Fund Distributor,
Inc. (2)
(h(5) -- Participation Agreement among First Golden
American Life Insurance Company of New York, the
Registrant, ING Mutual Funds Management Co. LLC
and ING Fund Distributor, Inc. (2)
<PAGE> 74
(i)(1) -- Opinion and Consent of Paul, Weiss, Rifkind,
Wharton & Garrison, counsel to the Trust,
regarding the legality of the SECURITIES
BEING issued. (1)
(i)(2) -- Consent of __________________, counsel to the
Trust. (3)
(j) -- Consent of __________________, independent
auditors. (3)
(k) -- None.
(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)
- ------------
(1) Filed as an exhibit to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A filed electronically on April 11,
2000, accession number 0000893220-00-000459.
(2) Filed herewith.
(3) To be filed.
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
2
<PAGE> 75
such officers and trustees are not found to have committed conduct
constituting 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
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.
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. Chairman of the Board,
President and Chief Executive Officer of ING Funds Trust since
October 1998. Chairman of the Board, President and Chief Executive
Officer of ING Variable Insurance Trust since October 1999 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.
Treasurer of ING Funds Trust since October 1998. Treasurer of ING
Variable Insurance Trust since October 1999. Managing of Directors
of Furman Selz LLC, February 1986 to September 1998.
3
<PAGE> 76
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. Vice President of ING Funds
Trust since October 1998. Vice President of ING Variable Insurance
Trust since October 1999. 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.
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. Vice President of ING Funds Trust since March 1999. Vice
President of ING Variable Insurance Trust since October 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)
4
<PAGE> 77
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
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,
5
<PAGE> 78
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
Schwab Trusts, Schwab Ten Trust, 2000 Series B
(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 Treasurer
Director
Mitchell Jay Mellen* President and Director None
Eric Rubin* Senior Vice President and None
Director
Peter J. DeMarco Senior Vice President None
230 Park Avenue
New York, New York 10169
Rachelle I. Rehner* Secretary Secretary
Gary Taiariol* Assistant Treasurer None
</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 230
Park Avenue, New York, NY 10169 (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 230 Park Avenue,
New York, NY 10169 (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 growth Fund only)
6
<PAGE> 79
(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 Fund
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 Fund 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 Fund, ING
Global Information Technology Fund and ING Internet Fund only)
(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 High Yield Bond Fund 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> 80
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 18th day of May, 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 May 18, 2000
- -------------------------
John J. Pileggi and Chief Executive Officer
/s/ Donald E. Brostrom Treasurer May 18, 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 May 18, 2000
- -------------------------
Louis S. Citron
Attorney-in-Fact*
</TABLE>
- ------------
* Powers of Attorney filed as an exhibit to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A filed electronically on
April 11, 2000, accession number 0000893220-00-000459.
8
<PAGE> 81
EXHIBITS
--------
Exhibits
- --------
(h)(3) Participation Agreement among Equitable Life Insurance Company of Iowa,
the Registrant, ING Mutual Funds Management Co. LLC and ING Fund
Distributor, Inc.
(h)(4) Participation Agreement among Golden American Life Insurance Company,
the Registrant, ING Mutual Funds Management Co. LLC and ING Fund
Distributor, Inc.
(h)(5) Participation Agreement among First Golden American Life Insurance
Company of New York, the Registrant, ING Mutual Funds Management Co.
LLC and ING Fund Distributor, Inc.
9
<PAGE> 1
Exhibit h(3)
PARTICIPATION AGREEMENT
AMONG
EQUITABLE LIFE INSURANCE COMPANY OF IOWA,
ING VARIABLE INSURANCE TRUST,
ING MUTUAL FUNDS MANAGEMENT CO. LLC
AND
ING FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT, dated as of the 28th day of April 2000, by and among
Equitable Life Insurance Company of Iowa (the "Company"), a life insurance
company organized under the laws of the State of Iowa, on its own behalf and on
behalf of each separate account of the Company set forth on Schedule A hereto as
may be amended from time to time (each such account hereinafter referred to as
the "Account"), ING Variable Insurance Trust (the "Fund"), a management
investment company and business trust organized under the laws of the State of
Delaware, ING Mutual Funds Management Co. LLC (the "Adviser"), a limited
liability company organized under the laws of the State of Delaware, and ING
Funds Distributors, Inc. (the "Distributor"), a corporation organized under the
laws of the State of Iowa.
WHEREAS, the Fund engages in business as an open-end management
investment company and is 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,
Adviser and Distributor ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of 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 has obtained, or will obtain before entering into a
Participation Agreement with any other party, 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"), and the parties to this
Agreement agree to comply with the conditions or undertakings specified in the
Mixed and Shared Funding Exemptive Order to the extent applicable to each such
party;
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");
<PAGE> 2
WHEREAS, the Adviser, which serves as investment adviser to the
Designated Portfolios (as hereinafter defined) of the Fund, is duly registered
as an investment adviser under the federal Investment Advisers Act of 1940, as
amended;
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act;
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by the Company under the insurance laws of the State
of Delaware, to set aside and invest assets attributable to the Contracts;
WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act;
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 Distributor, 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 B 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 Distributor 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, the Adviser, and the Distributor agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account or the appropriate subaccount of each
Account orders, executing such orders on a daily basis at the net asset value
next computed after receipt and acceptance by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
will be the designee of the Fund for receipt of such orders from each Account or
the appropriate subaccount of each Account and receipt by such designee will
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following business day ("T+1").
"Business Day" will mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Company will pay for Fund shares on T+1 that an order to
purchase Fund shares is made in accordance with Section 1.1 above. Payment will
be in federal funds transmitted by wire. This wire transfer will be initiated by
12:00 p.m. Eastern Time.
1.3. The Fund agrees to make shares of the Designated Portfolios
available indefinitely for purchase at the applicable net asset value per share
by Participating Insurance Companies and their separate accounts on those days
on which the Fund calculates its Designated Portfolio net asset value pursuant
to rules of the SEC and the Fund shall use reasonable efforts to calculate such
net asset value on
-2-
<PAGE> 3
each day the New York Stock Exchange is open for trading; provided, however,
that the Board of Trustees of the Fund (the "Fund Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Fund Board,
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
such Portfolio.
1.4. On each Business Day on which the Fund calculates its net asset
value, the Company will aggregate and calculate the net purchase or redemption
orders for each Account or the appropriate subaccount of each Account maintained
by the Fund in which contractowner assets are invested. Net orders will only
reflect orders that the Company has received prior to the close of regular
trading on the New York Stock Exchange, Inc. (the "NYSE") (currently 4:00 p.m.,
Eastern Time) on that Business Day. Orders that the Company has received after
the close of regular trading on the NYSE will be treated as though received on
the next Business Day. Each communication of orders by the Company will
constitute a representation that such orders were received by it prior to the
close of regular trading on the NYSE on the Business Day on which the purchase
or redemption order is priced in accordance with Rule 22c-1 under the 1940 Act.
Other procedures relating to the handling of orders will be in accordance with
the prospectus and statement of information of the relevant Designated Portfolio
or with oral or written instructions that the Distributor or the Fund will
forward to the Company from time to time.
1.5. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts, qualified pension
and retirement plans or such other persons as are permitted under applicable
provisions of the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the sale to which will
not impair the tax treatment currently afforded the Contracts. No shares of any
Portfolio will be sold to the general public except as set forth in this Section
1.5.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.6, the Company will be the designee of the Fund for receipt of
requests for redemption from each Account or the appropriate subaccount of each
Account and receipt by such designee will constitute receipt by the Fund,
provided the Fund receives notice of request for redemption by 10:00 a.m.
Eastern Time on the next following Business Day. Payment will be in federal
funds transmitted by wire to the Company's account as designated by the Company
in writing from time to time, on the same Business Day the Fund receives notice
of the redemption order from the Company. The Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment be delayed
longer than the period permitted by the 1940 Act. The Fund will not bear any
responsibility whatsoever for the proper disbursement or crediting of redemption
proceeds; the Company alone will be responsible for such action. If notification
of redemption is received after 10:00 a.m. Eastern Time, payment for redeemed
shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus of the Fund in
accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
-3-
<PAGE> 4
1.9. The Fund will furnish same day notice (by telecopier, followed by
written confirmation) to the Company of the declaration of any income, dividends
or capital gain distributions payable on each Designated Portfolio's shares. The
Company hereby elects to receive all such dividends and distributions as are
payable on the Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and distributions. The Company
reserves the right to revoke this election upon reasonable prior notice to the
Fund and to receive all such dividends and distributions in cash.
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated and will
use its best efforts to make such net asset value per share available by 6:00
p.m., Eastern Time, but in no event later than 7:00 p.m., Eastern Time, each
Business Day.
1.11. In the event adjustments are required to correct any error in the
computation of the net asset value of the Fund's shares, the Fund or the
Distributor will notify the Company as soon as practicable after discovering the
need for those adjustments that result in an aggregate reimbursement of $150 or
more to any one subaccount of each Account maintained by a Designated Portfolio
unless notified otherwise by the Company (or, if greater, results in an
adjustment of $10 or more to each contractowner's account). Any such notice will
state for each day for which an error occurred the incorrect price, the correct
price and, to the extent communicated to the Fund's shareholders, the reason for
the price change. The Company may send this notice or a derivation thereof (so
long as such derivation is approved in advance by the Distributor or the
Adviser) to contractowners whose accounts are affected by the price change. The
parties will negotiate in good faith to develop a reasonable method for
effecting such adjustments. The Fund shall provide the Company, on behalf of the
Account or the appropriate subaccount of each Account, with a prompt adjustment
to the number of shares purchased or redeemed to reflect the correct share net
asset value.
1.12.
(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 1.5 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 and funding vehicles other than those listed on Schedule
B to this Agreement may be available for the investment of the cash
value of the Contracts.
(b) The Company shall not, without prior notice to the Advisor
and the Distributor (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 Advisor
and the Distributor (unless otherwise required by applicable law),
induce contractowners 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 contractowners to vote on any matter submitted for consideration
by the shareholders of the Fund in a manner other than as recommended
by the Fund Board.
-4-
<PAGE> 5
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act and that the Contracts will be issued and sold
in compliance with all applicable federal and state laws, including 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 and that it has legally and validly established each Account as a
separate account under applicable state law and has registered 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, and that it will maintain
such registration for so long as any Contracts are outstanding. The Company will
amend the registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Account from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and at the
time of issuance will be treated as endowment, annuity or life insurance
contracts under applicable provisions of the Internal Revenue Code, and that it
will make every effort to maintain such treatment and that it will notify the
Fund and the Adviser immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from tax-qualified
retirement plans except, indirectly, through Contracts purchased in connection
with such plans.
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be registered under
the 1933 Act and duly authorized for issuance in accordance with applicable law
and that the Fund is and will remain registered under the 1940 Act for as long
as such shares of the Designated Portfolios are outstanding. The Fund will 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 will register and qualify the shares of the Designated
Portfolios for sale in accordance with the laws of the various states only if
and to the extent deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that 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.
2.6. The Fund represents and warrants that in performing the services
described in this Agreement, the Fund will comply with all applicable laws,
rules and regulations. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies with the insurance
laws and regulations of any state. The Fund and the Distributor agree that upon
request they will use their best efforts to furnish the information required by
state insurance laws so that the Company can obtain the authority needed to
issue the Contracts in the various states.
2.7. The Fund represents and warrants its Fund Board has formulated and
approved a plan under Rule 12b-1 to finance distribution expenses in accordance
with the 1940 Act.
-5-
<PAGE> 6
2.8. The Distributor represents and warrants that it will distribute
the Fund shares of the Designated Portfolios in accordance with all applicable
federal and state securities laws including, without limitation, the 1933 Act,
the 1934 Act and the 1940 Act.
2.9. 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 applicable provisions of the 1940 Act.
2.10. The Distributor represents and warrants that it is and will
remain duly registered under all applicable federal and state securities laws
and that it will perform its obligations for the Fund in accordance in all
material respects with any applicable state and federal securities laws.
2.11. The Fund and the Distributor represent and warrant that all of
their trustees, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and 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
minimal 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
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund or the Distributor will provide, at its expense, a single
final copy of a current prospectus, in such format requested by the Company, in
conjunction with the Company's standard annual printing cycle. At its expense,
the Company will be responsible, in conjunction with its standard annual
printing cycle, for printing the prospectus and distributing the prospectus to
prospective and existing applicants and contractholders. If in the event the
Fund issues a new prospectus outside of the Company's standard annual printing
cycle, or if the Fund does not provide a single final copy of the current
prospectus in the format requested by the Company in conjunction with the
Company's standard annual printing cycle, by the deadlines established by the
Company, then the Fund or the Distributor will provide the Company, at the
Fund's or Distributor's expense, with as many copies of the current Fund
prospectus for the Designated Portfolios as the Company may reasonably request
for distribution, at the Company's expense, to existing and prospective
contractowners and applicants.
3.2. The Fund or the Distributor will provide the Company, at the
Company's expense, with as many copies of the statement of additional
information as the Company may reasonably request for distribution, at the
Company's expense, to prospective contractowners and applicants. The Fund or the
Distributor will provide, at the Company's expense, as many copies of said
statement of additional information as necessary for distribution, at the
Company's expense, to any existing contractowner who requests such statement or
whenever state or federal law otherwise requires that such statement be
provided. The Fund or the Distributor will provide the copies of said statement
of additional information to the Company or to its mailing agent. If requested
by the Company in lieu thereof, the Fund or the Distributor will provide such
documentation, including a computer diskette together with a single final copy
of a current statement of additional information set in type at the Fund's or
Distributor's expense.
3.3. The Fund or the Distributor, at the Fund's or its affiliate's
expense, will provide the Company or its mailing agent with copies of its proxy
material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company will reasonably require. The
Company will distribute this proxy material, reports and other communications to
existing contractowners and tabulate the votes.
-6-
<PAGE> 7
3.4. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in the
Account in accordance with instructions received from contractowners;
and
(c) vote shares of the Designated Portfolios held in the
Account for which no timely instructions have been received, as well as
shares it owns, in the same proportion as shares of such Designated
Portfolio for which instructions have been received from the Company's
contractowners;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contractowners. Except as
set forth above, the Company reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent permitted by law. The
Company will be responsible for assuring that each of its separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with all legal requirements, including the Mixed and Shared Funding Exemptive
Order.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends to comply
with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the SEC may promulgate
with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Distributor will provide the Company on a timely basis with
investment performance information for each Designated Portfolio in which the
Company maintains a subaccount of the Account, including total return for the
preceding calendar month and calendar quarter, the calendar year to date, and
the prior one-year, five-year, and ten year (or life of the Fund) periods. The
Company may, based on the SEC mandated information supplied by the Distributor,
prepare communications for contractowners ("Contractowner Materials"). The
Company will provide copies of all Contractowner Materials concurrently with
their first use for the Distributor's internal recordkeeping purposes. It is
understood that neither the Distributor nor any Designated Portfolio will be
responsible for errors or omissions in, or the content of, Contractowner
Materials except to the extent that the error or omission resulted from
information provided by or on behalf of the Distributor or the Designated
Portfolio. Any printed information that is furnished to the Company pursuant to
this Agreement other than each Designated Portfolio's prospectus or statement of
additional information (or information supplemental thereto), periodic reports
and proxy solicitation materials is the Distributor's sole responsibility and
not the responsibility of any Designated Portfolio or the Fund. The Company
agrees that the Portfolios, the shareholders of the Portfolios and the officers
and governing Board of the Fund will have no liability or responsibility to the
Company in these respects.
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or statement
of additional information for Fund shares, as such registration statement,
prospectus and statement of additional
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<PAGE> 8
information may be amended or supplemented from time to time, or in reports or
proxy statements for the Fund, or in published reports for the Fund which are
in the public domain or approved by the Fund or the Distributor for
distribution, or in sales literature or other material provided by the Fund,
Adviser or by the Distributor, except with permission of the Distributor. Any
piece of sales literature or other promotional material intended to be used by
the Company which requires the permission of the Distributor prior to use will
be furnished by Company to the Distributor, or its designee, at least ten (10)
business days prior to its use. No such material will be used if the
Distributor reasonably objects to such use within five (5) business days after
receipt of such material.
Nothing in this Section 4.2 will be construed as preventing the Company or its
employees or agents from giving advice on investment in the Fund.
4.3. The Fund, the Adviser or the Distributor will furnish, or will
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its Account is
named, at least ten (10) business days prior to its use. No such material will
be used if the Company reasonably objects to such use within five (5) business
days after receipt of such material.
4.4. The Fund, the Adviser and the Distributor will not give any
information or make any representations or statements on behalf of the Company
or concerning the Company, each Account, or the Contracts other than the
information or representations contained in a registration statement, prospectus
or statement of additional information for the Contracts, as such registration
statement, prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the Company for
distribution to contractowners, or in sales literature or other material
provided by the Company, except with permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
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, contemporaneously
with the filing of such document with the SEC, the NASD or other regulatory
authority.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
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
each Account, contemporaneously with the filing of such document with the SEC,
the NASD or other regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, 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, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisements, sales literature, or published article), educational
or training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information,
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<PAGE> 9
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 1940
Act.
4.8. The Fund and the Distributor hereby consent to the Company's use
of the names ING Mutual Funds Management Co. LLC, ING Variable Insurance Trust,
the portfolio names designated on Schedule B or other designated names as may be
used from time to time in connection with the marketing of the Contracts,
subject to the terms of Sections 4.1 and 4.2 of this Agreement. Such consent
will terminate with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund, the Adviser and the Distributor will pay no fee or other
compensation to the Company under this Agreement except pursuant to Rule 12b-1
under the 1940 Act to finance distribution expenses. The Fund may make Rule
12b-1 payments to the Company or to the underwriter for the Contracts if and in
such amounts agreed to by the Fund in writing.
5.2. All expenses incident to performance by the Fund of this Agreement
will be paid by the Fund to the extent permitted by law. The Fund will bear the
expenses for the cost of registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of additional
information and registration statement, proxy materials and reports; setting in
type and printing proxy materials and reports by it to contractowners (including
the costs of printing a Fund prospectus that constitutes an annual report); the
preparation of all statements and notices required by any federal or state law;
all taxes on the issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a plan, if any, under
Rule 12b-1 under the 1940 Act; and all other expenses set forth in Article III
of this Agreement.
ARTICLE VI. Diversification and Qualification
6.1. The Adviser will ensure that the Fund will at all times invest
money from the Contracts in such a manner as to ensure that the Contracts will
be treated as variable annuity contracts under the Internal Revenue Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund will comply with Section 817(h) of the Internal Revenue Code and Treasury
Regulation 1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulation. 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 Treasury 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 Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provisions) and that 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 Internal Revenue Code, and that it
will make every effort to maintain such treatment, and that it will notify the
Fund and the Distributor 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
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<PAGE> 10
defined in Section 7702A of the Internal Revenue Code (or any successor or
similar provision), shall identify such contract as a modified endowment
contract.
ARTICLE VII. Potential Conflicts
7.1. The Fund Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contractowners 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
contractowners; or (f) a decision by an insurer to disregard the voting
instructions of contractowners. The Fund 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 Fund Board. The Company will assist the Fund Board in
carrying out its responsibilities under the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information reasonably necessary for
the Fund Board to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Fund Board whenever contractowner
voting instructions are disregarded.
7.3. If it is determined by a majority of the Fund 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 Fund Board members), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including: (a)
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 to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contractowners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contractowners, life insurance
contractowners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected contractowners the option of making such a change; and (b) 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 contractowner 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 Fund 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.
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<PAGE> 11
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 Fund 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 Fund 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 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 Fund 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 Fund 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 Fund 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 Fund Board.
7.7. If and to the extent the Mixed and Shared Funding Exemptive Order
or any amendment thereto contains terms and conditions different from Sections
3.4, 3.5, 3.6, 7.1, 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.
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<PAGE> 12
ARTICLE VIII. Indemnification
8.1. Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Adviser, the Distributor, and each person, if any, who
controls or is associated with the Fund, the Adviser or the Distributor
within the meaning of such terms under the federal securities laws and
any director, trustee, officer, partner, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including reasonable legal and
other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the registration statement, prospectus or
statement of additional information for the Contracts or
contained in the Contracts or sales literature or other
promotional material 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 or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that this
agreement to indemnify will 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
written information furnished to the Company by the Fund, the
Adviser or the Distributor for use in the registration
statement, prospectus or statement of additional information
for the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company or wrongful
conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(3) arise out of any untrue statement or alleged
untrue statement of a material fact contained in the Fund
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Fund (or amendment or supplement) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make such statements not
misleading in light of the circumstances in which they were
made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund
by or on behalf of the Company or persons under its control;
or
(4) arise as a result of any failure by the Company
to provide the services and furnish the materials under the
terms of this Agreement; or
(5) arise out of 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 by the Company of this Agreement;
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except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification will be in addition to any liability that the Company
otherwise may have.
(b) No party will be entitled to indemnification under Section
8.1(a) to the extent such loss, claim, damage, liability or litigation
is due to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement, or by
reason of such party's reckless disregard of its obligations or duties
under this Agreement by the party seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company
of the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities 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 Adviser, the Fund and the Distributor
(a) The Adviser, the Fund and the Distributor, in each case
solely to the extent relating to such party's responsibilities
hereunder, agree to indemnify and hold harmless the Company and each
person, if any, who controls or is associated with the Company within
the meaning of such terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section
8.2) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of the
Adviser) or litigation (including reasonable legal and other expenses)
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(1) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement, prospectus or
statement of additional information for the Fund or sales
literature or other promotional material 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 or
necessary to make such statements not misleading in light of
the circumstances in which they were made; provided that this
agreement to indemnify will 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 Adviser, the Distributor or the
Fund by or on behalf of the Company for use in the
registration statement, prospectus or statement of additional
information for the Fund or in sales literature of the Fund
(or any amendment or supplement thereto) or otherwise for use
in connection with the sale of the Contracts or Fund shares;
or
(2) arise out of or as a result of statements or
representations or wrongful conduct of the Adviser, the Fund
or the Distributor or persons under the control of the
Adviser, the Fund or the Distributor respectively, with
respect to the sale of the Fund shares; or
(3) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
covering the Contracts (or any amendment or supplement
thereto), or the omission or alleged omission to state therein
a material fact
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<PAGE> 14
required to be stated or necessary to make such statement or
statements not misleading in light of the circumstances in
which they were made, if such statement or omission was made
in reliance upon and in conformity with written information
furnished to the Company by the Adviser, the Fund or the
Distributor or persons under the control of the Adviser, the
Fund or the Distributor; or
(4) arise as a result of any failure by the Fund, the
Adviser or the Distributor 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 requirements and procedures
related thereto specified in Article VI of this Agreement); or
(5) arise out of or result from any material breach
of any representation and/or warranty made by the Adviser, the
Fund or the Distributor in this Agreement, or arise out of or
result from any other material breach of this Agreement by the
Adviser, the Fund or the Distributor;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification will be in addition to any liability that the Fund,
Adviser or the Distributor otherwise may have.
(b) No party will be entitled to indemnification under Section
8.2(a) to the extent such loss, claim, damage, liability or litigation
is due to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement, or by
reason of such party's reckless disregard of its obligations or duties
under this Agreement by the party seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser,
the Fund and the Distributor of the commencement of any litigation,
proceedings, complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the Contracts or the
operation of the account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.3) will not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("Indemnified Party" for the purpose of this Section 8.3) unless such
Indemnified Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim will have been served upon such
Indemnified Party (or after such party will have received notice of such service
on any designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of the indemnification provision of this Article VIII, except to
the extent that the failure to notify results in the failure of actual notice to
the Indemnifying Party and such Indemnifying Party is damaged solely as a result
of failure to give such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to participate, at
its own expense, in the defense thereof. The Indemnifying Party also will be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Indemnifying Party to the Indemnified
Party of the Indemnifying Party's election to assume the defense thereof, the
Indemnified Party will bear the fees and expenses of any additional counsel
retained by it, and the Indemnifying Party will not be liable to such party
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<PAGE> 15
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, unless: (a) the Indemnifying Party and the
Indemnified Party will have mutually agreed to the retention of such counsel; or
(b) the named parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Indemnifying Party will not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there is a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from
and against any loss or liability by reason of such settlement or judgment. A
successor by law of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive any
termination of this Agreement.
8.4 Distributor Limitation on Liability. Notwithstanding the foregoing,
the Distributor shall not be liable to any party to this Agreement for lost
profits, punitive, special, incidental, indirect or consequential damages.
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 Delaware.
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 will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios, upon sixty (60)
days' advance written notice to the other parties or, if later, upon
receipt of any required exemptive relief or orders from the SEC, unless
otherwise agreed in a separate written agreement among the parties; or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio if shares of the Designated Portfolio are not
reasonably available to meet the requirements of the Contracts as
determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio 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 Company; or
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<PAGE> 16
(d) at the option of the Fund, upon receipt of the Fund's
written notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission 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 administration of the Contracts, the operation of the
Account, or the purchase of the Fund shares, provided that the Fund
determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Company's
ability to perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon institution of
formal proceedings against the Fund, Adviser or the Distributor by the
NASD, the SEC, or any state securities or insurance department or any
other regulatory body, provided that the Company determines in its sole
judgment, exercised in good faith, that any such proceeding would have
a material adverse effect on the Fund's or the Distributor's ability to
perform its obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code, or under any successor or similar provision, or
if the Company reasonably and in good faith believes that the Fund may
fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio if the Fund fails to meet the diversification
requirements specified in Article VI hereof or if the Company
reasonably and in good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material breach of
any provision of this Agreement which material breach is not cured
within thirty (30) days of said notice; or
(i) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the Fund, the
Adviser or the Distributor has suffered a material adverse change in
its business, operations or financial condition since the date of this
Agreement or is the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Company, such termination to be effective sixty (60)
days' after receipt by the other parties of written notice of the
election to terminate; or
(j) at the option of the Fund or the Distributor, if the Fund
or the Distributor respectively, determines in its sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations or financial condition since
the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the
business and operations of the Fund or the Adviser, such termination to
be effective sixty (60) days' after receipt by the other parties of
written notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Designated Portfolio shares of the Fund in accordance
with the terms of the Contracts for which those Designated Portfolio
shares had been selected to serve as the underlying investment media.
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<PAGE> 17
The Company will give sixty (60) days' prior written notice to the Fund
of the date of any proposed vote or other action taken to replace the
Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of: (1) all contractowners of
variable insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies investing in the
Fund as set forth in Article VII of this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with applicable federal
and/or state law. Termination will be effective immediately upon such
occurrence without notice.
10.2. Notice Requirement. No termination of this Agreement will be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to terminate, which notice
will set forth the basis for the termination.
10.3. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Distributor will, 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"). Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in the Portfolios (as in
effect on such date), redeem investments in the Portfolios and/or invest in the
Portfolios upon the making of additional purchase payments under the Existing
Contracts.
10.4. Surviving Provisions. Notwithstanding any termination of this
Agreement, each party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination of this Agreement.
In addition, each party's obligations under Section 12.7 will survive and not be
affected by any termination of this Agreement. Finally, with respect to Existing
Contracts, all provisions of this Agreement also will survive and not be
affected by any termination of this Agreement.
ARTICLE XI. Notices
11.1. 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
c/o Louis Citron
1475 Dunwoody Drive
West Chester, PA 19380
If to the Company: Equitable Life Insurance Company of Iowa
c/o Myles Tashman
Executive Vice President and General Counsel
1475 Dunwoody Drive
West Chester, PA 19380
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<PAGE> 18
If to Adviser: ING Mutual Funds Management Co. LLC
c/o Louis Citron
1475 Dunwoody Drive
West Chester, PA 19380
If to Distributor: ING Funds Distributor, Inc
c/o Donald Brostrom
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 for the enforcement of any claims against the Fund as
neither the directors, trustees, officers, partners, employees, agents or
shareholders assume any personal liability for obligations entered into on
behalf of the Fund. No Portfolio or series of the Fund will be liable for the
obligations or liabilities of any other Portfolio or series.
12.2. The Fund, the Adviser and the Distributor acknowledge that the
identities of the customers of the Company or any of its affiliates, except for
customers of the Adviser or its affiliates (collectively the "Company Protected
Parties" for purposes of this Section 12.2), information maintained regarding
those customers, and all computer programs and procedures or other information
developed or used by the Company Protected Parties or any of their employees or
agents in connection with the Company's performance of its duties under this
Agreement are the valuable property of the Company Protected Parties. The Fund,
the Adviser and the Distributor agree that if they come into possession of any
list or compilation of the identities of or other information about the Company
Protected Parties' customers, or any other information or property of the
Company Protected Parties, other than such information as is publicly available
or as may be independently developed or compiled by the Fund, the Adviser or the
Distributor from information supplied to them by the Company Protected Parties'
customers who also maintain accounts directly with the Fund, the Adviser or the
Distributor, the Fund, the Adviser and the Distributor will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with the
Company's prior written consent; or (b) as required by law or judicial process.
The Company acknowledges that the identities of the customers of the Fund, the
Adviser, the Distributor or any of their affiliates (collectively the "Adviser
Protected Parties" for purposes of this Section 12.2), information maintained
regarding those customers, and all computer programs and procedures or other
information developed or used by the Adviser Protected Parties or any of their
employees or agents in connection with the Fund's, the Adviser's or the
Distributor's performance of their respective duties under this Agreement are
the valuable property of the Adviser Protected Parties. The Company agrees that
if it comes into possession of any list or compilation of the identities of or
other information about the Adviser Protected Parties' customers, or any other
information or property of the Adviser Protected Parties, other than such
information as is publicly available or as may be independently developed or
compiled by the Company from information supplied to them by the Adviser
Protected Parties' customers who also maintain accounts directly with the
Company, the Company will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Fund's, the Adviser's or the Distributor's prior
written consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 12.2 would result
in immediate and irreparable harm to the other parties for which there would be
no adequate remedy at law and agree that in the event of such a breach, the
other
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<PAGE> 19
parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
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 will constitute one and the same
instrument.
12.5. If any provision of this Agreement will be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto without
the prior written consent of all the parties.
12.7. Each party to this Agreement will maintain all records required
by law, including records detailing the services it provides. Such records will
be preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and 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. Upon request by the
Fund or the Distributor, the Company agrees to promptly make copies or, if
required, originals of all records pertaining to the performance of services
under this Agreement available to the Fund or the Distributor, as the case may
be. The Fund agrees that the Company will have the right to inspect, audit and
copy all records pertaining to the performance of services under this Agreement
pursuant to the requirements of any state insurance department. Each party also
agrees to promptly notify the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete manner. This provision will
survive termination of this Agreement.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Designated Portfolios of the Fund or other applicable terms
of this Agreement.
12.10. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights.
12.11. The names "ING Variable Insurance Trust" and "Trustees of ING
Variable Insurance Trust" refer respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated July 15, 1999 which is hereby referred
to and a copy of which is at the principal office of the Fund. The obligations
of "ING Variable
-19-
<PAGE> 20
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 Fund personally, but bind only the Trust Property, and
all persons dealing with any class of Shares of the Fund must look solely to the
Trust Property belonging to such class for the enforcement of any claims against
the Fund.
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:
EQUITABLE LIFE INSURANCE
COMPANY OF IOWA:
By: /s/David L. Jacobson
-----------------------
Title: Assistant Secretary
-----------------------
Date: April 28, 2000
-----------------------
ING VARIABLE INSURANCE TRUST:
By: /s/Louis S. Citron
-----------------------
Title: Vice President
-----------------------
Date: April 28, 2000
-----------------------
ING MUTUAL FUNDS MANAGEMENT
CO. LLC:
By: /s/Louis S. Citron
-----------------------
Title: Senior Vice President
-----------------------
Date: April 28, 2000
-----------------------
ING FUNDS DISTRIBUTOR, INC.
By: /s/Donald E. Brostrom
-----------------------
Title: Treasurer
-----------------------
Date: April 28, 2000
-----------------------
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<PAGE> 21
SCHEDULE A
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
CONTRACTS AND SEPARATE ACCOUNT(S)
CONTRACT(S):
Deferred Combination Variable and Fixed Annuity Contracts
SEPARATE ACCOUNT(S):
Equitable Life Insurance Company of Iowa - Equitable Life Insurance Company
of Iowa Separate Account A
SCHEDULE B
ING VARIABLE INSURANCE TRUST
DESIGNATED PORTFOLIOS
PORTFOLIOS:
ING International Equity Fund
ING Global Brand Names Fund
Schedule Date: April 28, 2000
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<PAGE> 1
Exhibit h(4)
PARTICIPATION AGREEMENT
AMONG
GOLDEN AMERICAN LIFE INSURANCE COMPANY,
ING VARIABLE INSURANCE TRUST,
ING MUTUAL FUNDS MANAGEMENT CO. LLC
AND
ING FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT, dated as of the 28th day of April 2000, by and among
Golden American Life Insurance Company (the "Company"), a life insurance company
organized under the laws of the State of Delaware, on its own behalf and on
behalf of each separate account of the Company set forth on Schedule A hereto as
may be amended from time to time (each such account hereinafter referred to as
the "Account"), ING Variable Insurance Trust (the "Fund"), a management
investment company and business trust organized under the laws of the State of
Delaware, ING Mutual Funds Management Co. LLC (the "Adviser"), a limited
liability company organized under the laws of the State of Delaware, and ING
Funds Distributors, Inc. (the "Distributor"), a corporation organized under the
laws of the State of Iowa.
WHEREAS, the Fund engages in business as an open-end management
investment company and is 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,
Adviser and Distributor ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of 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 has obtained, or will obtain before entering into a
Participation Agreement with any other party, 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"), and the parties to this
Agreement agree to comply with the conditions or undertakings specified in the
Mixed and Shared Funding Exemptive Order to the extent applicable to each such
party;
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");
<PAGE> 2
WHEREAS, the Adviser, which serves as investment adviser to the
Designated Portfolios (as hereinafter defined) of the Fund, is duly registered
as an investment adviser under the federal Investment Advisers Act of 1940, as
amended;
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act;
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by the Company under the insurance laws of the State
of Delaware, to set aside and invest assets attributable to the Contracts;
WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act;
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 Distributor, 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 B 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 Distributor 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, the Adviser, and the Distributor agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account or the appropriate subaccount of each
Account orders, executing such orders on a daily basis at the net asset value
next computed after receipt and acceptance by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
will be the designee of the Fund for receipt of such orders from each Account or
the appropriate subaccount of each Account and receipt by such designee will
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following business day ("T+1").
"Business Day" will mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Company will pay for Fund shares on T+1 that an order to
purchase Fund shares is made in accordance with Section 1.1 above. Payment will
be in federal funds transmitted by wire. This wire transfer will be initiated by
12:00 p.m. Eastern Time.
1.3. The Fund agrees to make shares of the Designated Portfolios
available indefinitely for purchase at the applicable net asset value per share
by Participating Insurance Companies and their separate accounts on those days
on which the Fund calculates its Designated Portfolio net asset value pursuant
to rules of the SEC and the Fund shall use reasonable efforts to calculate such
net asset value on
- 2 -
<PAGE> 3
each day the New York Stock Exchange is open for trading; provided, however,
that the Board of Trustees of the Fund (the "Fund Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Fund Board,
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
such Portfolio.
1.4. On each Business Day on which the Fund calculates its net asset
value, the Company will aggregate and calculate the net purchase or redemption
orders for each Account or the appropriate subaccount of each Account maintained
by the Fund in which contractowner assets are invested. Net orders will only
reflect orders that the Company has received prior to the close of regular
trading on the New York Stock Exchange, Inc. (the "NYSE") (currently 4:00 p.m.,
Eastern Time) on that Business Day. Orders that the Company has received after
the close of regular trading on the NYSE will be treated as though received on
the next Business Day. Each communication of orders by the Company will
constitute a representation that such orders were received by it prior to the
close of regular trading on the NYSE on the Business Day on which the purchase
or redemption order is priced in accordance with Rule 22c-1 under the 1940 Act.
Other procedures relating to the handling of orders will be in accordance with
the prospectus and statement of information of the relevant Designated Portfolio
or with oral or written instructions that the Distributor or the Fund will
forward to the Company from time to time.
1.5. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts, qualified pension
and retirement plans or such other persons as are permitted under applicable
provisions of the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the sale to which will
not impair the tax treatment currently afforded the Contracts. No shares of any
Portfolio will be sold to the general public except as set forth in this Section
1.5.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.6, the Company will be the designee of the Fund for receipt of
requests for redemption from each Account or the appropriate subaccount of each
Account and receipt by such designee will constitute receipt by the Fund,
provided the Fund receives notice of request for redemption by 10:00 a.m.
Eastern Time on the next following Business Day. Payment will be in federal
funds transmitted by wire to the Company's account as designated by the Company
in writing from time to time, on the same Business Day the Fund receives notice
of the redemption order from the Company. The Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment be delayed
longer than the period permitted by the 1940 Act. The Fund will not bear any
responsibility whatsoever for the proper disbursement or crediting of redemption
proceeds; the Company alone will be responsible for such action. If notification
of redemption is received after 10:00 a.m. Eastern Time, payment for redeemed
shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus of the Fund in
accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
- 3 -
<PAGE> 4
1.9. The Fund will furnish same day notice (by telecopier, followed by
written confirmation) to the Company of the declaration of any income, dividends
or capital gain distributions payable on each Designated Portfolio's shares. The
Company hereby elects to receive all such dividends and distributions as are
payable on the Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and distributions. The Company
reserves the right to revoke this election upon reasonable prior notice to the
Fund and to receive all such dividends and distributions in cash.
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated and will
use its best efforts to make such net asset value per share available by 6:00
p.m., Eastern Time, but in no event later than 7:00 p.m., Eastern Time, each
Business Day.
1.11. In the event adjustments are required to correct any error in the
computation of the net asset value of the Fund's shares, the Fund or the
Distributor will notify the Company as soon as practicable after discovering the
need for those adjustments that result in an aggregate reimbursement of $150 or
more to any one subaccount of each Account maintained by a Designated Portfolio
unless notified otherwise by the Company (or, if greater, results in an
adjustment of $10 or more to each contractowner's account). Any such notice will
state for each day for which an error occurred the incorrect price, the correct
price and, to the extent communicated to the Fund's shareholders, the reason for
the price change. The Company may send this notice or a derivation thereof (so
long as such derivation is approved in advance by the Distributor or the
Adviser) to contractowners whose accounts are affected by the price change. The
parties will negotiate in good faith to develop a reasonable method for
effecting such adjustments. The Fund shall provide the Company, on behalf of the
Account or the appropriate subaccount of each Account, with a prompt adjustment
to the number of shares purchased or redeemed to reflect the correct share net
asset value.
1.12.
(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 1.5 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 and funding vehicles other than those listed on Schedule
B to this Agreement may be available for the investment of the cash
value of the Contracts.
(b) The Company shall not, without prior notice to the Advisor
and the Distributor (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 Advisor
and the Distributor (unless otherwise required by applicable law),
induce contractowners 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 contractowners to vote on any matter submitted for consideration
by the shareholders of the Fund in a manner other than as recommended
by the Fund Board.
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<PAGE> 5
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act and that the Contracts will be issued and sold
in compliance with all applicable federal and state laws, including 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 and that it has legally and validly established each Account as a
separate account under applicable state law and has registered 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, and that it will maintain
such registration for so long as any Contracts are outstanding. The Company will
amend the registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Account from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and at the
time of issuance will be treated as endowment, annuity or life insurance
contracts under applicable provisions of the Internal Revenue Code, and that it
will make every effort to maintain such treatment and that it will notify the
Fund and the Adviser immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from tax-qualified
retirement plans except, indirectly, through Contracts purchased in connection
with such plans.
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be registered under
the 1933 Act and duly authorized for issuance in accordance with applicable law
and that the Fund is and will remain registered under the 1940 Act for as long
as such shares of the Designated Portfolios are outstanding. The Fund will 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 will register and qualify the shares of the Designated
Portfolios for sale in accordance with the laws of the various states only if
and to the extent deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that 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.
2.6. The Fund represents and warrants that in performing the services
described in this Agreement, the Fund will comply with all applicable laws,
rules and regulations. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies with the insurance
laws and regulations of any state. The Fund and the Distributor agree that upon
request they will use their best efforts to furnish the information required by
state insurance laws so that the Company can obtain the authority needed to
issue the Contracts in the various states.
2.7. The Fund represents and warrants its Fund Board has formulated and
approved a plan under Rule 12b-1 to finance distribution expenses in accordance
with the 1940 Act.
- 5 -
<PAGE> 6
2.8. The Distributor represents and warrants that it will distribute
the Fund shares of the Designated Portfolios in accordance with all applicable
federal and state securities laws including, without limitation, the 1933 Act,
the 1934 Act and the 1940 Act.
2.9. 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 applicable provisions of the 1940 Act.
2.10. The Distributor represents and warrants that it is and will
remain duly registered under all applicable federal and state securities laws
and that it will perform its obligations for the Fund in accordance in all
material respects with any applicable state and federal securities laws.
2.11. The Fund and the Distributor represent and warrant that all of
their trustees, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and 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
minimal 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
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund or the Distributor will provide, at its expense, a single
final copy of a current prospectus, in such format requested by the Company, in
conjunction with the Company's standard annual printing cycle. At its expense,
the Company will be responsible, in conjunction with its standard annual
printing cycle, for printing the prospectus and distributing the prospectus to
prospective and existing applicants and contractholders. If in the event the
Fund issues a new prospectus outside of the Company's standard annual printing
cycle, or if the Fund does not provide a single final copy of the current
prospectus in the format requested by the Company in conjunction with the
Company's standard annual printing cycle, by the deadlines established by the
Company, then the Fund or the Distributor will provide the Company, at the
Fund's or Distributor's expense, with as many copies of the current Fund
prospectus for the Designated Portfolios as the Company may reasonably request
for distribution, at the Company's expense, to existing and prospective
contractowners and applicants.
3.2. The Fund or the Distributor will provide the Company, at the
Company's expense, with as many copies of the statement of additional
information as the Company may reasonably request for distribution, at the
Company's expense, to prospective contractowners and applicants. The Fund or the
Distributor will provide, at the Company's expense, as many copies of said
statement of additional information as necessary for distribution, at the
Company's expense, to any existing contractowner who requests such statement or
whenever state or federal law otherwise requires that such statement be
provided. The Fund or the Distributor will provide the copies of said statement
of additional information to the Company or to its mailing agent. If requested
by the Company in lieu thereof, the Fund or the Distributor will provide such
documentation, including a computer diskette together with a single final copy
of a current statement of additional information set in type at the Fund's or
Distributor's expense.
3.3. The Fund or the Distributor, at the Fund's or its affiliate's
expense, will provide the Company or its mailing agent with copies of its proxy
material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company will reasonably require. The
Company will distribute this proxy material, reports and other communications to
existing contractowners and tabulate the votes.
- 6 -
<PAGE> 7
3.4. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in the
Account in accordance with instructions received from contractowners;
and
(c) vote shares of the Designated Portfolios held in the
Account for which no timely instructions have been received, as well as
shares it owns, in the same proportion as shares of such Designated
Portfolio for which instructions have been received from the Company's
contractowners;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contractowners. Except as
set forth above, the Company reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent permitted by law. The
Company will be responsible for assuring that each of its separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with all legal requirements, including the Mixed and Shared Funding Exemptive
Order.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends to comply
with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the SEC may promulgate
with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Distributor will provide the Company on a timely basis with
investment performance information for each Designated Portfolio in which the
Company maintains a subaccount of the Account, including total return for the
preceding calendar month and calendar quarter, the calendar year to date, and
the prior one-year, five-year, and ten year (or life of the Fund) periods. The
Company may, based on the SEC mandated information supplied by the Distributor,
prepare communications for contractowners ("Contractowner Materials"). The
Company will provide copies of all Contractowner Materials concurrently with
their first use for the Distributor's internal recordkeeping purposes. It is
understood that neither the Distributor nor any Designated Portfolio will be
responsible for errors or omissions in, or the content of, Contractowner
Materials except to the extent that the error or omission resulted from
information provided by or on behalf of the Distributor or the Designated
Portfolio. Any printed information that is furnished to the Company pursuant to
this Agreement other than each Designated Portfolio's prospectus or statement of
additional information (or information supplemental thereto), periodic reports
and proxy solicitation materials is the Distributor's sole responsibility and
not the responsibility of any Designated Portfolio or the Fund. The Company
agrees that the Portfolios, the shareholders of the Portfolios and the officers
and governing Board of the Fund will have no liability or responsibility to the
Company in these respects.
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or statement
of additional information for Fund shares, as such registration statement,
prospectus and statement of additional
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<PAGE> 8
information may be amended or supplemented from time to time, or in reports or
proxy statements for the Fund, or in published reports for the Fund which are in
the public domain or approved by the Fund or the Distributor for distribution,
or in sales literature or other material provided by the Fund, Adviser or by the
Distributor, except with permission of the Distributor. Any piece of sales
literature or other promotional material intended to be used by the Company
which requires the permission of the Distributor prior to use will be furnished
by Company to the Distributor, or its designee, at least ten (10) business days
prior to its use. No such material will be used if the Distributor reasonably
objects to such use within five (5) business days after receipt of such
material.
Nothing in this Section 4.2 will be construed as preventing the Company or its
employees or agents from giving advice on investment in the Fund.
4.3. The Fund, the Adviser or the Distributor will furnish, or will
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its Account is
named, at least ten (10) business days prior to its use. No such material will
be used if the Company reasonably objects to such use within five (5) business
days after receipt of such material.
4.4. The Fund, the Adviser and the Distributor will not give any
information or make any representations or statements on behalf of the Company
or concerning the Company, each Account, or the Contracts other than the
information or representations contained in a registration statement, prospectus
or statement of additional information for the Contracts, as such registration
statement, prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the Company for
distribution to contractowners, or in sales literature or other material
provided by the Company, except with permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
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, contemporaneously
with the filing of such document with the SEC, the NASD or other regulatory
authority.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
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
each Account, contemporaneously with the filing of such document with the SEC,
the NASD or other regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, 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, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisements, sales literature, or published article), educational
or training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information,
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<PAGE> 9
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 1940
Act.
4.8. The Fund and the Distributor hereby consent to the Company's use
of the names ING Mutual Funds Management Co. LLC, ING Variable Insurance Trust,
the portfolio names designated on Schedule B or other designated names as may be
used from time to time in connection with the marketing of the Contracts,
subject to the terms of Sections 4.1 and 4.2 of this Agreement. Such consent
will terminate with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund, the Adviser and the Distributor will pay no fee or other
compensation to the Company under this Agreement except pursuant to Rule 12b-1
under the 1940 Act to finance distribution expenses. The Fund may make Rule
12b-1 payments to the Company or to the underwriter for the Contracts if and in
such amounts agreed to by the Fund in writing.
5.2. All expenses incident to performance by the Fund of this Agreement
will be paid by the Fund to the extent permitted by law. The Fund will bear the
expenses for the cost of registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of additional
information and registration statement, proxy materials and reports; setting in
type and printing proxy materials and reports by it to contractowners (including
the costs of printing a Fund prospectus that constitutes an annual report); the
preparation of all statements and notices required by any federal or state law;
all taxes on the issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a plan, if any, under
Rule 12b-1 under the 1940 Act; and all other expenses set forth in Article III
of this Agreement.
ARTICLE VI. Diversification and Qualification
6.1. The Adviser will ensure that the Fund will at all times invest
money from the Contracts in such a manner as to ensure that the Contracts will
be treated as variable annuity contracts under the Internal Revenue Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund will comply with Section 817(h) of the Internal Revenue Code and Treasury
Regulation 1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulation. 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 Treasury 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 Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provisions) and that 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 Internal Revenue Code, and that it
will make every effort to maintain such treatment, and that it will notify the
Fund and the Distributor 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
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<PAGE> 10
defined in Section 7702A of the Internal Revenue Code (or any successor or
similar provision), shall identify such contract as a modified endowment
contract.
ARTICLE VII. Potential Conflicts
7.1. The Fund Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contractowners 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
contractowners; or (f) a decision by an insurer to disregard the voting
instructions of contractowners. The Fund 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 Fund Board. The Company will assist the Fund Board in
carrying out its responsibilities under the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information reasonably necessary for
the Fund Board to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Fund Board whenever contractowner
voting instructions are disregarded.
7.3. If it is determined by a majority of the Fund 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 Fund Board members), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including: (a)
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 to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contractowners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contractowners, life insurance
contractowners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected contractowners the option of making such a change; and (b) 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 contractowner 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 Fund 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.
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<PAGE> 11
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 Fund 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 Fund 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 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 Fund 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 Fund 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 Fund 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 Fund Board.
7.7. If and to the extent the Mixed and Shared Funding Exemptive Order
or any amendment thereto contains terms and conditions different from Sections
3.4, 3.5, 3.6, 7.1, 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.
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<PAGE> 12
ARTICLE VIII. Indemnification
8.1. Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Adviser, the Distributor, and each person, if any, who
controls or is associated with the Fund, the Adviser or the Distributor
within the meaning of such terms under the federal securities laws and
any director, trustee, officer, partner, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including reasonable legal and
other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the registration statement, prospectus or
statement of additional information for the Contracts or
contained in the Contracts or sales literature or other
promotional material 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 or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that this
agreement to indemnify will 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
written information furnished to the Company by the Fund, the
Adviser or the Distributor for use in the registration
statement, prospectus or statement of additional information
for the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company or wrongful
conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(3) arise out of any untrue statement or alleged
untrue statement of a material fact contained in the Fund
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Fund (or amendment or supplement) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make such statements not
misleading in light of the circumstances in which they were
made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund
by or on behalf of the Company or persons under its control;
or
(4) arise as a result of any failure by the Company
to provide the services and furnish the materials under the
terms of this Agreement; or
(5) arise out of 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 by the Company of this Agreement;
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<PAGE> 13
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification will be in addition to any liability that the Company
otherwise may have.
(b) No party will be entitled to indemnification under Section
8.1(a) to the extent such loss, claim, damage, liability or litigation
is due to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement, or by
reason of such party's reckless disregard of its obligations or duties
under this Agreement by the party seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company
of the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities 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 Adviser, the Fund and the Distributor
(a) The Adviser, the Fund and the Distributor, in each case
solely to the extent relating to such party's responsibilities
hereunder, agree to indemnify and hold harmless the Company and each
person, if any, who controls or is associated with the Company within
the meaning of such terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section
8.2) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of the
Adviser) or litigation (including reasonable legal and other expenses)
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(1) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement, prospectus or
statement of additional information for the Fund or sales
literature or other promotional material 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 or
necessary to make such statements not misleading in light of
the circumstances in which they were made; provided that this
agreement to indemnify will 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 Adviser, the Distributor or the
Fund by or on behalf of the Company for use in the
registration statement, prospectus or statement of additional
information for the Fund or in sales literature of the Fund
(or any amendment or supplement thereto) or otherwise for use
in connection with the sale of the Contracts or Fund shares;
or
(2) arise out of or as a result of statements or
representations or wrongful conduct of the Adviser, the Fund
or the Distributor or persons under the control of the
Adviser, the Fund or the Distributor respectively, with
respect to the sale of the Fund shares; or
(3) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
covering the Contracts (or any amendment or supplement
thereto), or the omission or alleged omission to state therein
a material fact
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<PAGE> 14
required to be stated or necessary to make such statement or
statements not misleading in light of the circumstances in
which they were made, if such statement or omission was made
in reliance upon and in conformity with written information
furnished to the Company by the Adviser, the Fund or the
Distributor or persons under the control of the Adviser, the
Fund or the Distributor; or
(4) arise as a result of any failure by the Fund, the
Adviser or the Distributor 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 requirements and procedures
related thereto specified in Article VI of this Agreement); or
(5) arise out of or result from any material breach
of any representation and/or warranty made by the Adviser, the
Fund or the Distributor in this Agreement, or arise out of or
result from any other material breach of this Agreement by the
Adviser, the Fund or the Distributor;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification will be in addition to any liability that the Fund,
Adviser or the Distributor otherwise may have.
(b) No party will be entitled to indemnification under Section
8.2(a) to the extent such loss, claim, damage, liability or litigation
is due to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement, or by
reason of such party's reckless disregard of its obligations or duties
under this Agreement by the party seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser,
the Fund and the Distributor of the commencement of any litigation,
proceedings, complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the Contracts or the
operation of the account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.3) will not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("Indemnified Party" for the purpose of this Section 8.3) unless such
Indemnified Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim will have been served upon such
Indemnified Party (or after such party will have received notice of such service
on any designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of the indemnification provision of this Article VIII, except to
the extent that the failure to notify results in the failure of actual notice to
the Indemnifying Party and such Indemnifying Party is damaged solely as a result
of failure to give such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to participate, at
its own expense, in the defense thereof. The Indemnifying Party also will be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Indemnifying Party to the Indemnified
Party of the Indemnifying Party's election to assume the defense thereof, the
Indemnified Party will bear the fees and expenses of any additional counsel
retained by it, and the Indemnifying Party will not be liable to such party
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<PAGE> 15
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, unless: (a) the Indemnifying Party and the
Indemnified Party will have mutually agreed to the retention of such counsel; or
(b) the named parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Indemnifying Party will not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there is a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from
and against any loss or liability by reason of such settlement or judgment. A
successor by law of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive any
termination of this Agreement.
8.4 Distributor Limitation on Liability. Notwithstanding the foregoing,
the Distributor shall not be liable to any party to this Agreement for lost
profits, punitive, special, incidental, indirect or consequential damages.
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 Delaware.
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 will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios, upon sixty (60)
days' advance written notice to the other parties or, if later, upon
receipt of any required exemptive relief or orders from the SEC, unless
otherwise agreed in a separate written agreement among the parties; or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio if shares of the Designated Portfolio are not
reasonably available to meet the requirements of the Contracts as
determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio 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 Company; or
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<PAGE> 16
(d) at the option of the Fund, upon receipt of the Fund's
written notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission 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 administration of the Contracts, the operation of the
Account, or the purchase of the Fund shares, provided that the Fund
determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Company's
ability to perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon institution of
formal proceedings against the Fund, Adviser or the Distributor by the
NASD, the SEC, or any state securities or insurance department or any
other regulatory body, provided that the Company determines in its sole
judgment, exercised in good faith, that any such proceeding would have
a material adverse effect on the Fund's or the Distributor's ability to
perform its obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code, or under any successor or similar provision, or
if the Company reasonably and in good faith believes that the Fund may
fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio if the Fund fails to meet the diversification
requirements specified in Article VI hereof or if the Company
reasonably and in good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material breach of
any provision of this Agreement which material breach is not cured
within thirty (30) days of said notice; or
(i) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the Fund, the
Adviser or the Distributor has suffered a material adverse change in
its business, operations or financial condition since the date of this
Agreement or is the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Company, such termination to be effective sixty (60)
days' after receipt by the other parties of written notice of the
election to terminate; or
(j) at the option of the Fund or the Distributor, if the Fund
or the Distributor respectively, determines in its sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations or financial condition since
the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the
business and operations of the Fund or the Adviser, such termination to
be effective sixty (60) days' after receipt by the other parties of
written notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Designated Portfolio shares of the Fund in accordance
with the terms of the Contracts for which those Designated Portfolio
shares had been selected to serve as the underlying investment media.
- 16 -
<PAGE> 17
The Company will give sixty (60) days' prior written notice to the Fund
of the date of any proposed vote or other action taken to replace the
Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of: (1) all contractowners of
variable insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies investing in the
Fund as set forth in Article VII of this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with applicable federal
and/or state law. Termination will be effective immediately upon such
occurrence without notice.
10.2. Notice Requirement. No termination of this Agreement will be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to terminate, which notice
will set forth the basis for the termination.
10.3. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Distributor will, 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"). Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in the Portfolios (as in
effect on such date), redeem investments in the Portfolios and/or invest in the
Portfolios upon the making of additional purchase payments under the Existing
Contracts.
10.4. Surviving Provisions. Notwithstanding any termination of this
Agreement, each party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination of this Agreement.
In addition, each party's obligations under Section 12.7 will survive and not be
affected by any termination of this Agreement. Finally, with respect to Existing
Contracts, all provisions of this Agreement also will survive and not be
affected by any termination of this Agreement.
ARTICLE XI. Notices
11.1. 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
c/o Louis Citron
1475 Dunwoody Drive
West Chester, PA 19380
If to the Company: Golden American Life Insurance Company
c/o Myles Tashman
Executive Vice President and General Counsel
1475 Dunwoody Drive
West Chester, PA 19380
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<PAGE> 18
If to Adviser: ING Mutual Funds Management Co. LLC
c/o Louis Citron
1475 Dunwoody Drive
West Chester, PA 19380
If to Distributor: ING Funds Distributor, Inc
c/o Donald Brostrom
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 for the enforcement of any claims against the Fund as
neither the directors, trustees, officers, partners, employees, agents or
shareholders assume any personal liability for obligations entered into on
behalf of the Fund. No Portfolio or series of the Fund will be liable for the
obligations or liabilities of any other Portfolio or series.
12.2. The Fund, the Adviser and the Distributor acknowledge that the
identities of the customers of the Company or any of its affiliates, except for
customers of the Adviser or its affiliates (collectively the "Company Protected
Parties" for purposes of this Section 12.2), information maintained regarding
those customers, and all computer programs and procedures or other information
developed or used by the Company Protected Parties or any of their employees or
agents in connection with the Company's performance of its duties under this
Agreement are the valuable property of the Company Protected Parties. The Fund,
the Adviser and the Distributor agree that if they come into possession of any
list or compilation of the identities of or other information about the Company
Protected Parties' customers, or any other information or property of the
Company Protected Parties, other than such information as is publicly available
or as may be independently developed or compiled by the Fund, the Adviser or the
Distributor from information supplied to them by the Company Protected Parties'
customers who also maintain accounts directly with the Fund, the Adviser or the
Distributor, the Fund, the Adviser and the Distributor will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with the
Company's prior written consent; or (b) as required by law or judicial process.
The Company acknowledges that the identities of the customers of the Fund, the
Adviser, the Distributor or any of their affiliates (collectively the "Adviser
Protected Parties" for purposes of this Section 12.2), information maintained
regarding those customers, and all computer programs and procedures or other
information developed or used by the Adviser Protected Parties or any of their
employees or agents in connection with the Fund's, the Adviser's or the
Distributor's performance of their respective duties under this Agreement are
the valuable property of the Adviser Protected Parties. The Company agrees that
if it comes into possession of any list or compilation of the identities of or
other information about the Adviser Protected Parties' customers, or any other
information or property of the Adviser Protected Parties, other than such
information as is publicly available or as may be independently developed or
compiled by the Company from information supplied to them by the Adviser
Protected Parties' customers who also maintain accounts directly with the
Company, the Company will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Fund's, the Adviser's or the Distributor's prior
written consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 12.2 would result
in immediate and irreparable harm to the other parties for which there would be
no adequate remedy at law and agree that in the event of such a breach, the
other
- 18 -
<PAGE> 19
parties will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent jurisdiction
deems appropriate.
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 will constitute one and the same
instrument.
12.5. If any provision of this Agreement will be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto without
the prior written consent of all the parties.
12.7. Each party to this Agreement will maintain all records required
by law, including records detailing the services it provides. Such records will
be preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and 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. Upon request by the
Fund or the Distributor, the Company agrees to promptly make copies or, if
required, originals of all records pertaining to the performance of services
under this Agreement available to the Fund or the Distributor, as the case may
be. The Fund agrees that the Company will have the right to inspect, audit and
copy all records pertaining to the performance of services under this Agreement
pursuant to the requirements of any state insurance department. Each party also
agrees to promptly notify the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete manner. This provision will
survive termination of this Agreement.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Designated Portfolios of the Fund or other applicable terms
of this Agreement.
12.10. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights.
12.11. The names "ING Variable Insurance Trust" and "Trustees of ING
Variable Insurance Trust" refer respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated July 15, 1999 which is hereby referred
to and a copy of which is at the principal office of the Fund. The obligations
of "ING Variable
- 19 -
<PAGE> 20
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 Fund personally, but bind only the Trust Property, and
all persons dealing with any class of Shares of the Fund must look solely to the
Trust Property belonging to such class for the enforcement of any claims against
the Fund.
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:
GOLDEN AMERICAN LIFE
INSURANCE COMPANY:
By: /s/David L. Jacobson
-----------------------------------
Title: Senior Vice President
--------------------------------
Date: April 28, 2000
--------------------------------
ING VARIABLE INSURANCE TRUST:
By: /s/Louis S. Citron
-----------------------------------
Title: Vice President
--------------------------------
Date: April 28, 2000
--------------------------------
ING MUTUAL FUNDS MANAGEMENT
CO. LLC:
By: /s/Louis S. Citron
-----------------------------------
Title: Senior Vice President
--------------------------------
Date: April 28, 2000
--------------------------------
ING FUNDS DISTRIBUTOR, INC.
By: /s/Donald E. Brostrom
-----------------------------------
Title: Treasurer
--------------------------------
Date: April 28, 2000
--------------------------------
- 20 -
<PAGE> 21
SCHEDULE A
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONTRACTS AND SEPARATE ACCOUNT(S)
CONTRACT(S):
Deferred Combination Variable and Fixed Annuity Contracts
SEPARATE ACCOUNT(S):
Separate Account B of Golden American Life Insurance
Company
SCHEDULE B
ING VARIABLE INSURANCE TRUST
DESIGNATED PORTFOLIOS
PORTFOLIOS:
ING International Equity Fund
ING Global Brand Names Fund
Schedule Date: April 28, 2000
- 21 -
<PAGE> 1
Exhibit h(5)
PARTICIPATION AGREEMENT
AMONG
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK,
ING VARIABLE INSURANCE TRUST,
ING MUTUAL FUNDS MANAGEMENT CO. LLC
AND
ING FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT, dated as of the 28th day of April 2000, by and among
First Golden American Life Insurance Company of New York(the "Company"), a life
insurance company organized under the laws of the State of New York, on its own
behalf and on behalf of each separate account of the Company set forth on
Schedule A hereto as may be amended from time to time (each such account
hereinafter referred to as the "Account"), ING Variable Insurance Trust (the
"Fund"), a management investment company and business trust organized under the
laws of the State of Delaware, ING Mutual Funds Management Co. LLC (the
"Adviser"), a limited liability company organized under the laws of the State of
Delaware, and ING Funds Distributors, Inc. (the "Distributor"), a corporation
organized under the laws of the State of Iowa.
WHEREAS, the Fund engages in business as an open-end management
investment company and is 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,
Adviser and Distributor ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of 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 has obtained, or will obtain before entering into a
Participation Agreement with any other party, 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"), and the parties to this
Agreement agree to comply with the conditions or undertakings specified in the
Mixed and Shared Funding Exemptive Order to the extent applicable to each such
party;
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");
<PAGE> 2
WHEREAS, the Adviser, which serves as investment adviser to the
Designated Portfolios (as hereinafter defined) of the Fund, is duly registered
as an investment adviser under the federal Investment Advisers Act of 1940, as
amended;
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act;
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by the Company under the insurance laws of the State
of Delaware, to set aside and invest assets attributable to the Contracts;
WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act;
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 Distributor, 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 B 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 Distributor 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, the Adviser, and the Distributor agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account or the appropriate subaccount of each
Account orders, executing such orders on a daily basis at the net asset value
next computed after receipt and acceptance by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
will be the designee of the Fund for receipt of such orders from each Account or
the appropriate subaccount of each Account and receipt by such designee will
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following business day ("T+1").
"Business Day" will mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Company will pay for Fund shares on T+1 that an order to
purchase Fund shares is made in accordance with Section 1.1 above. Payment will
be in federal funds transmitted by wire. This wire transfer will be initiated by
12:00 p.m. Eastern Time.
1.3. The Fund agrees to make shares of the Designated Portfolios
available indefinitely for purchase at the applicable net asset value per share
by Participating Insurance Companies and their separate accounts on those days
on which the Fund calculates its Designated Portfolio net asset value pursuant
to rules of the SEC and the Fund shall use reasonable efforts to calculate such
net asset value on
- 2 -
<PAGE> 3
each day the New York Stock Exchange is open for trading; provided, however,
that the Board of Trustees of the Fund (the "Fund Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Fund Board,
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
such Portfolio.
1.4. On each Business Day on which the Fund calculates its net asset
value, the Company will aggregate and calculate the net purchase or redemption
orders for each Account or the appropriate subaccount of each Account maintained
by the Fund in which contractowner assets are invested. Net orders will only
reflect orders that the Company has received prior to the close of regular
trading on the New York Stock Exchange, Inc. (the "NYSE") (currently 4:00 p.m.,
Eastern Time) on that Business Day. Orders that the Company has received after
the close of regular trading on the NYSE will be treated as though received on
the next Business Day. Each communication of orders by the Company will
constitute a representation that such orders were received by it prior to the
close of regular trading on the NYSE on the Business Day on which the purchase
or redemption order is priced in accordance with Rule 22c-1 under the 1940 Act.
Other procedures relating to the handling of orders will be in accordance with
the prospectus and statement of information of the relevant Designated Portfolio
or with oral or written instructions that the Distributor or the Fund will
forward to the Company from time to time.
1.5. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts, qualified pension
and retirement plans or such other persons as are permitted under applicable
provisions of the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the sale to which will
not impair the tax treatment currently afforded the Contracts. No shares of any
Portfolio will be sold to the general public except as set forth in this Section
1.5.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.6, the Company will be the designee of the Fund for receipt of
requests for redemption from each Account or the appropriate subaccount of each
Account and receipt by such designee will constitute receipt by the Fund,
provided the Fund receives notice of request for redemption by 10:00 a.m.
Eastern Time on the next following Business Day. Payment will be in federal
funds transmitted by wire to the Company's account as designated by the Company
in writing from time to time, on the same Business Day the Fund receives notice
of the redemption order from the Company. The Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment be delayed
longer than the period permitted by the 1940 Act. The Fund will not bear any
responsibility whatsoever for the proper disbursement or crediting of redemption
proceeds; the Company alone will be responsible for such action. If notification
of redemption is received after 10:00 a.m. Eastern Time, payment for redeemed
shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus of the Fund in
accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
- 3 -
<PAGE> 4
1.9. The Fund will furnish same day notice (by telecopier, followed by
written confirmation) to the Company of the declaration of any income, dividends
or capital gain distributions payable on each Designated Portfolio's shares. The
Company hereby elects to receive all such dividends and distributions as are
payable on the Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and distributions. The Company
reserves the right to revoke this election upon reasonable prior notice to the
Fund and to receive all such dividends and distributions in cash.
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated and will
use its best efforts to make such net asset value per share available by 6:00
p.m., Eastern Time, but in no event later than 7:00 p.m., Eastern Time, each
Business Day.
1.11. In the event adjustments are required to correct any error in the
computation of the net asset value of the Fund's shares, the Fund or the
Distributor will notify the Company as soon as practicable after discovering the
need for those adjustments that result in an aggregate reimbursement of $150 or
more to any one subaccount of each Account maintained by a Designated Portfolio
unless notified otherwise by the Company (or, if greater, results in an
adjustment of $10 or more to each contractowner's account). Any such notice will
state for each day for which an error occurred the incorrect price, the correct
price and, to the extent communicated to the Fund's shareholders, the reason for
the price change. The Company may send this notice or a derivation thereof (so
long as such derivation is approved in advance by the Distributor or the
Adviser) to contractowners whose accounts are affected by the price change. The
parties will negotiate in good faith to develop a reasonable method for
effecting such adjustments. The Fund shall provide the Company, on behalf of the
Account or the appropriate subaccount of each Account, with a prompt adjustment
to the number of shares purchased or redeemed to reflect the correct share net
asset value.
1.12.
(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 1.5 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 and funding vehicles other than those listed on Schedule
B to this Agreement may be available for the investment of the cash
value of the Contracts.
(b) The Company shall not, without prior notice to the Advisor
and the Distributor (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 Advisor
and the Distributor (unless otherwise required by applicable law),
induce contractowners 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 contractowners to vote on any matter submitted for consideration
by the shareholders of the Fund in a manner other than as recommended
by the Fund Board.
- 4 -
<PAGE> 5
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act and that the Contracts will be issued and sold
in compliance with all applicable federal and state laws, including 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 and that it has legally and validly established each Account as a
separate account under applicable state law and has registered 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, and that it will maintain
such registration for so long as any Contracts are outstanding. The Company will
amend the registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Account from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and at the
time of issuance will be treated as endowment, annuity or life insurance
contracts under applicable provisions of the Internal Revenue Code, and that it
will make every effort to maintain such treatment and that it will notify the
Fund and the Adviser immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from tax-qualified
retirement plans except, indirectly, through Contracts purchased in connection
with such plans.
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be registered under
the 1933 Act and duly authorized for issuance in accordance with applicable law
and that the Fund is and will remain registered under the 1940 Act for as long
as such shares of the Designated Portfolios are outstanding. The Fund will 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 will register and qualify the shares of the Designated
Portfolios for sale in accordance with the laws of the various states only if
and to the extent deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that 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.
2.6. The Fund represents and warrants that in performing the services
described in this Agreement, the Fund will comply with all applicable laws,
rules and regulations. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies with the insurance
laws and regulations of any state. The Fund and the Distributor agree that upon
request they will use their best efforts to furnish the information required by
state insurance laws so that the Company can obtain the authority needed to
issue the Contracts in the various states.
2.7. The Fund represents and warrants its Fund Board has formulated and
approved a plan under Rule 12b-1 to finance distribution expenses in accordance
with the 1940 Act.
- 5 -
<PAGE> 6
2.8. The Distributor represents and warrants that it will distribute
the Fund shares of the Designated Portfolios in accordance with all applicable
federal and state securities laws including, without limitation, the 1933 Act,
the 1934 Act and the 1940 Act.
2.9. 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 applicable provisions of the 1940 Act.
2.10. The Distributor represents and warrants that it is and will
remain duly registered under all applicable federal and state securities laws
and that it will perform its obligations for the Fund in accordance in all
material respects with any applicable state and federal securities laws.
2.11. The Fund and the Distributor represent and warrant that all of
their trustees, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and 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
minimal 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
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund or the Distributor will provide, at its expense, a single
final copy of a current prospectus, in such format requested by the Company, in
conjunction with the Company's standard annual printing cycle. At its expense,
the Company will be responsible, in conjunction with its standard annual
printing cycle, for printing the prospectus and distributing the prospectus to
prospective and existing applicants and contractholders. If in the event the
Fund issues a new prospectus outside of the Company's standard annual printing
cycle, or if the Fund does not provide a single final copy of the current
prospectus in the format requested by the Company in conjunction with the
Company's standard annual printing cycle, by the deadlines established by the
Company, then the Fund or the Distributor will provide the Company, at the
Fund's or Distributor's expense, with as many copies of the current Fund
prospectus for the Designated Portfolios as the Company may reasonably request
for distribution, at the Company's expense, to existing and prospective
contractowners and applicants.
3.2. The Fund or the Distributor will provide the Company, at the
Company's expense, with as many copies of the statement of additional
information as the Company may reasonably request for distribution, at the
Company's expense, to prospective contractowners and applicants. The Fund or the
Distributor will provide, at the Company's expense, as many copies of said
statement of additional information as necessary for distribution, at the
Company's expense, to any existing contractowner who requests such statement or
whenever state or federal law otherwise requires that such statement be
provided. The Fund or the Distributor will provide the copies of said statement
of additional information to the Company or to its mailing agent. If requested
by the Company in lieu thereof, the Fund or the Distributor will provide such
documentation, including a computer diskette together with a single final copy
of a current statement of additional information set in type at the Fund's or
Distributor's expense.
3.3. The Fund or the Distributor, at the Fund's or its affiliate's
expense, will provide the Company or its mailing agent with copies of its proxy
material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company will reasonably require. The
Company will distribute this proxy material, reports and other communications to
existing contractowners and tabulate the votes.
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<PAGE> 7
3.4. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in the
Account in accordance with instructions received from contractowners;
and
(c) vote shares of the Designated Portfolios held in the
Account for which no timely instructions have been received, as well as
shares it owns, in the same proportion as shares of such Designated
Portfolio for which instructions have been received from the Company's
contractowners;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contractowners. Except as
set forth above, the Company reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent permitted by law. The
Company will be responsible for assuring that each of its separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with all legal requirements, including the Mixed and Shared Funding Exemptive
Order.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends to comply
with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the SEC may promulgate
with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Distributor will provide the Company on a timely basis with
investment performance information for each Designated Portfolio in which the
Company maintains a subaccount of the Account, including total return for the
preceding calendar month and calendar quarter, the calendar year to date, and
the prior one-year, five-year, and ten year (or life of the Fund) periods. The
Company may, based on the SEC mandated information supplied by the Distributor,
prepare communications for contractowners ("Contractowner Materials"). The
Company will provide copies of all Contractowner Materials concurrently with
their first use for the Distributor's internal recordkeeping purposes. It is
understood that neither the Distributor nor any Designated Portfolio will be
responsible for errors or omissions in, or the content of, Contractowner
Materials except to the extent that the error or omission resulted from
information provided by or on behalf of the Distributor or the Designated
Portfolio. Any printed information that is furnished to the Company pursuant to
this Agreement other than each Designated Portfolio's prospectus or statement of
additional information (or information supplemental thereto), periodic reports
and proxy solicitation materials is the Distributor's sole responsibility and
not the responsibility of any Designated Portfolio or the Fund. The Company
agrees that the Portfolios, the shareholders of the Portfolios and the officers
and governing Board of the Fund will have no liability or responsibility to the
Company in these respects.
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or statement
of additional information for Fund shares, as such registration statement,
prospectus and statement of additional
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<PAGE> 8
information may be amended or supplemented from time to time, or in reports or
proxy statements for the Fund, or in published reports for the Fund which are in
the public domain or approved by the Fund or the Distributor for distribution,
or in sales literature or other material provided by the Fund, Adviser or by the
Distributor, except with permission of the Distributor. Any piece of sales
literature or other promotional material intended to be used by the Company
which requires the permission of the Distributor prior to use will be furnished
by Company to the Distributor, or its designee, at least ten (10) business days
prior to its use. No such material will be used if the Distributor reasonably
objects to such use within five (5) business days after receipt of such
material.
Nothing in this Section 4.2 will be construed as preventing the Company or its
employees or agents from giving advice on investment in the Fund.
4.3. The Fund, the Adviser or the Distributor will furnish, or will
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its Account is
named, at least ten (10) business days prior to its use. No such material will
be used if the Company reasonably objects to such use within five (5) business
days after receipt of such material.
4.4. The Fund, the Adviser and the Distributor will not give any
information or make any representations or statements on behalf of the Company
or concerning the Company, each Account, or the Contracts other than the
information or representations contained in a registration statement, prospectus
or statement of additional information for the Contracts, as such registration
statement, prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the Company for
distribution to contractowners, or in sales literature or other material
provided by the Company, except with permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
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, contemporaneously
with the filing of such document with the SEC, the NASD or other regulatory
authority.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
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
each Account, contemporaneously with the filing of such document with the SEC,
the NASD or other regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, 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, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisements, sales literature, or published article), educational
or training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information,
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<PAGE> 9
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 1940
Act.
4.8. The Fund and the Distributor hereby consent to the Company's use
of the names ING Mutual Funds Management Co. LLC, ING Variable Insurance Trust,
the portfolio names designated on Schedule B or other designated names as may be
used from time to time in connection with the marketing of the Contracts,
subject to the terms of Sections 4.1 and 4.2 of this Agreement. Such consent
will terminate with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund, the Adviser and the Distributor will pay no fee or other
compensation to the Company under this Agreement except pursuant to Rule 12b-1
under the 1940 Act to finance distribution expenses. The Fund may make Rule
12b-1 payments to the Company or to the underwriter for the Contracts if and in
such amounts agreed to by the Fund in writing.
5.2. All expenses incident to performance by the Fund of this Agreement
will be paid by the Fund to the extent permitted by law. The Fund will bear the
expenses for the cost of registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of additional
information and registration statement, proxy materials and reports; setting in
type and printing proxy materials and reports by it to contractowners (including
the costs of printing a Fund prospectus that constitutes an annual report); the
preparation of all statements and notices required by any federal or state law;
all taxes on the issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a plan, if any, under
Rule 12b-1 under the 1940 Act; and all other expenses set forth in Article III
of this Agreement.
ARTICLE VI. Diversification and Qualification
6.1. The Adviser will ensure that the Fund will at all times invest
money from the Contracts in such a manner as to ensure that the Contracts will
be treated as variable annuity contracts under the Internal Revenue Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund will comply with Section 817(h) of the Internal Revenue Code and Treasury
Regulation 1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulation. 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 Treasury 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 Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provisions) and that 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 Internal Revenue Code, and that it
will make every effort to maintain such treatment, and that it will notify the
Fund and the Distributor 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
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<PAGE> 10
defined in Section 7702A of the Internal Revenue Code (or any successor or
similar provision), shall identify such contract as a modified endowment
contract.
ARTICLE VII. Potential Conflicts
7.1. The Fund Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contractowners 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
contractowners; or (f) a decision by an insurer to disregard the voting
instructions of contractowners. The Fund 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 Fund Board. The Company will assist the Fund Board in
carrying out its responsibilities under the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information reasonably necessary for
the Fund Board to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Fund Board whenever contractowner
voting instructions are disregarded.
7.3. If it is determined by a majority of the Fund 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 Fund Board members), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including: (a)
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 to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contractowners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contractowners, life insurance
contractowners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected contractowners the option of making such a change; and (b) 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 contractowner 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 Fund 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.
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<PAGE> 11
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 Fund 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 Fund 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 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 Fund 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 Fund 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 Fund 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 Fund Board.
7.7. If and to the extent the Mixed and Shared Funding Exemptive Order
or any amendment thereto contains terms and conditions different from Sections
3.4, 3.5, 3.6, 7.1, 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.
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<PAGE> 12
ARTICLE VIII. Indemnification
8.1. Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Adviser, the Distributor, and each person, if any, who
controls or is associated with the Fund, the Adviser or the Distributor
within the meaning of such terms under the federal securities laws and
any director, trustee, officer, partner, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including reasonable legal and
other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the registration statement, prospectus or
statement of additional information for the Contracts or
contained in the Contracts or sales literature or other
promotional material 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 or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that this
agreement to indemnify will 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
written information furnished to the Company by the Fund, the
Adviser or the Distributor for use in the registration
statement, prospectus or statement of additional information
for the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company or wrongful
conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(3) arise out of any untrue statement or alleged
untrue statement of a material fact contained in the Fund
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Fund (or amendment or supplement) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make such statements not
misleading in light of the circumstances in which they were
made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund
by or on behalf of the Company or persons under its control;
or
(4) arise as a result of any failure by the Company
to provide the services and furnish the materials under the
terms of this Agreement; or
(5) arise out of 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 by the Company of this Agreement;
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<PAGE> 13
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification will be in addition to any liability that the Company
otherwise may have.
(b) No party will be entitled to indemnification under Section
8.1(a) to the extent such loss, claim, damage, liability or litigation
is due to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement, or by
reason of such party's reckless disregard of its obligations or duties
under this Agreement by the party seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company
of the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities 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 Adviser, the Fund and the Distributor
(a) The Adviser, the Fund and the Distributor, in each case
solely to the extent relating to such party's responsibilities
hereunder, agree to indemnify and hold harmless the Company and each
person, if any, who controls or is associated with the Company within
the meaning of such terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section
8.2) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of the
Adviser) or litigation (including reasonable legal and other expenses)
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(1) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement, prospectus or
statement of additional information for the Fund or sales
literature or other promotional material 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 or
necessary to make such statements not misleading in light of
the circumstances in which they were made; provided that this
agreement to indemnify will 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 Adviser, the Distributor or the
Fund by or on behalf of the Company for use in the
registration statement, prospectus or statement of additional
information for the Fund or in sales literature of the Fund
(or any amendment or supplement thereto) or otherwise for use
in connection with the sale of the Contracts or Fund shares;
or
(2) arise out of or as a result of statements or
representations or wrongful conduct of the Adviser, the Fund
or the Distributor or persons under the control of the
Adviser, the Fund or the Distributor respectively, with
respect to the sale of the Fund shares; or
(3) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
covering the Contracts (or any amendment or supplement
thereto), or the omission or alleged omission to state therein
a material fact
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<PAGE> 14
required to be stated or necessary to make such statement or
statements not misleading in light of the circumstances in
which they were made, if such statement or omission was made
in reliance upon and in conformity with written information
furnished to the Company by the Adviser, the Fund or the
Distributor or persons under the control of the Adviser, the
Fund or the Distributor; or
(4) arise as a result of any failure by the Fund, the
Adviser or the Distributor 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 requirements and procedures
related thereto specified in Article VI of this Agreement); or
(5) arise out of or result from any material breach
of any representation and/or warranty made by the Adviser, the
Fund or the Distributor in this Agreement, or arise out of or
result from any other material breach of this Agreement by the
Adviser, the Fund or the Distributor;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification will be in addition to any liability that the Fund,
Adviser or the Distributor otherwise may have.
(b) No party will be entitled to indemnification under Section
8.2(a) to the extent such loss, claim, damage, liability or litigation
is due to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement, or by
reason of such party's reckless disregard of its obligations or duties
under this Agreement by the party seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser,
the Fund and the Distributor of the commencement of any litigation,
proceedings, complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the Contracts or the
operation of the account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.3) will not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("Indemnified Party" for the purpose of this Section 8.3) unless such
Indemnified Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim will have been served upon such
Indemnified Party (or after such party will have received notice of such service
on any designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of the indemnification provision of this Article VIII, except to
the extent that the failure to notify results in the failure of actual notice to
the Indemnifying Party and such Indemnifying Party is damaged solely as a result
of failure to give such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to participate, at
its own expense, in the defense thereof. The Indemnifying Party also will be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Indemnifying Party to the Indemnified
Party of the Indemnifying Party's election to assume the defense thereof, the
Indemnified Party will bear the fees and expenses of any additional counsel
retained by it, and the Indemnifying Party will not be liable to such party
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<PAGE> 15
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, unless: (a) the Indemnifying Party and the
Indemnified Party will have mutually agreed to the retention of such counsel; or
(b) the named parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Indemnifying Party will not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there is a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from
and against any loss or liability by reason of such settlement or judgment. A
successor by law of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive any
termination of this Agreement.
8.4 Distributor Limitation on Liability. Notwithstanding the foregoing,
the Distributor shall not be liable to any party to this Agreement for lost
profits, punitive, special, incidental, indirect or consequential damages.
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 Delaware.
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 will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios, upon sixty (60)
days' advance written notice to the other parties or, if later, upon
receipt of any required exemptive relief or orders from the SEC, unless
otherwise agreed in a separate written agreement among the parties; or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio if shares of the Designated Portfolio are not
reasonably available to meet the requirements of the Contracts as
determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio 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 Company; or
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<PAGE> 16
(d) at the option of the Fund, upon receipt of the Fund's
written notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission 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 administration of the Contracts, the operation of the
Account, or the purchase of the Fund shares, provided that the Fund
determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Company's
ability to perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon institution of
formal proceedings against the Fund, Adviser or the Distributor by the
NASD, the SEC, or any state securities or insurance department or any
other regulatory body, provided that the Company determines in its sole
judgment, exercised in good faith, that any such proceeding would have
a material adverse effect on the Fund's or the Distributor's ability to
perform its obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code, or under any successor or similar provision, or
if the Company reasonably and in good faith believes that the Fund may
fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio if the Fund fails to meet the diversification
requirements specified in Article VI hereof or if the Company
reasonably and in good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material breach of
any provision of this Agreement which material breach is not cured
within thirty (30) days of said notice; or
(i) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the Fund, the
Adviser or the Distributor has suffered a material adverse change in
its business, operations or financial condition since the date of this
Agreement or is the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Company, such termination to be effective sixty (60)
days' after receipt by the other parties of written notice of the
election to terminate; or
(j) at the option of the Fund or the Distributor, if the Fund
or the Distributor respectively, determines in its sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations or financial condition since
the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the
business and operations of the Fund or the Adviser, such termination to
be effective sixty (60) days' after receipt by the other parties of
written notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Designated Portfolio shares of the Fund in accordance
with the terms of the Contracts for which those Designated Portfolio
shares had been selected to serve as the underlying investment media.
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<PAGE> 17
The Company will give sixty (60) days' prior written notice to the Fund
of the date of any proposed vote or other action taken to replace the
Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of: (1) all contractowners of
variable insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies investing in the
Fund as set forth in Article VII of this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with applicable federal
and/or state law. Termination will be effective immediately upon such
occurrence without notice.
10.2. Notice Requirement. No termination of this Agreement will be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to terminate, which notice
will set forth the basis for the termination.
10.3. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Distributor will, 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"). Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in the Portfolios (as in
effect on such date), redeem investments in the Portfolios and/or invest in the
Portfolios upon the making of additional purchase payments under the Existing
Contracts.
10.4. Surviving Provisions. Notwithstanding any termination of this
Agreement, each party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination of this Agreement.
In addition, each party's obligations under Section 12.7 will survive and not be
affected by any termination of this Agreement. Finally, with respect to Existing
Contracts, all provisions of this Agreement also will survive and not be
affected by any termination of this Agreement.
ARTICLE XI. Notices
11.1. 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
c/o Louis Citron
1475 Dunwoody Drive
West Chester, PA 19380
If to the Company: First Golden American Life Insurance Company of New
York
c/o Myles Tashman
Executive Vice President and General Counsel
1475 Dunwoody Drive
West Chester, PA 19380
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<PAGE> 18
If to Adviser: ING Mutual Funds Management Co. LLC
c/o Louis Citron
1475 Dunwoody Drive
West Chester, PA 19380
If to Distributor: ING Funds Distributor, Inc
c/o Donald Brostrom
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 for the enforcement of any claims against the Fund as
neither the directors, trustees, officers, partners, employees, agents or
shareholders assume any personal liability for obligations entered into on
behalf of the Fund. No Portfolio or series of the Fund will be liable for the
obligations or liabilities of any other Portfolio or series.
12.2. The Fund, the Adviser and the Distributor acknowledge that the
identities of the customers of the Company or any of its affiliates, except for
customers of the Adviser or its affiliates (collectively the "Company Protected
Parties" for purposes of this Section 12.2), information maintained regarding
those customers, and all computer programs and procedures or other information
developed or used by the Company Protected Parties or any of their employees or
agents in connection with the Company's performance of its duties under this
Agreement are the valuable property of the Company Protected Parties. The Fund,
the Adviser and the Distributor agree that if they come into possession of any
list or compilation of the identities of or other information about the Company
Protected Parties' customers, or any other information or property of the
Company Protected Parties, other than such information as is publicly available
or as may be independently developed or compiled by the Fund, the Adviser or the
Distributor from information supplied to them by the Company Protected Parties'
customers who also maintain accounts directly with the Fund, the Adviser or the
Distributor, the Fund, the Adviser and the Distributor will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with the
Company's prior written consent; or (b) as required by law or judicial process.
The Company acknowledges that the identities of the customers of the Fund, the
Adviser, the Distributor or any of their affiliates (collectively the "Adviser
Protected Parties" for purposes of this Section 12.2), information maintained
regarding those customers, and all computer programs and procedures or other
information developed or used by the Adviser Protected Parties or any of their
employees or agents in connection with the Fund's, the Adviser's or the
Distributor's performance of their respective duties under this Agreement are
the valuable property of the Adviser Protected Parties. The Company agrees that
if it comes into possession of any list or compilation of the identities of or
other information about the Adviser Protected Parties' customers, or any other
information or property of the Adviser Protected Parties, other than such
information as is publicly available or as may be independently developed or
compiled by the Company from information supplied to them by the Adviser
Protected Parties' customers who also maintain accounts directly with the
Company, the Company will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Fund's, the Adviser's or the Distributor's prior
written consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 12.2 would result
in immediate and irreparable harm to the other parties for which there would be
no adequate remedy at law and agree that in the event of such a breach, the
other
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<PAGE> 19
parties will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent jurisdiction
deems appropriate.
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 will constitute one and the same
instrument.
12.5. If any provision of this Agreement will be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto without
the prior written consent of all the parties.
12.7. Each party to this Agreement will maintain all records required
by law, including records detailing the services it provides. Such records will
be preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and 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. Upon request by the
Fund or the Distributor, the Company agrees to promptly make copies or, if
required, originals of all records pertaining to the performance of services
under this Agreement available to the Fund or the Distributor, as the case may
be. The Fund agrees that the Company will have the right to inspect, audit and
copy all records pertaining to the performance of services under this Agreement
pursuant to the requirements of any state insurance department. Each party also
agrees to promptly notify the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete manner. This provision will
survive termination of this Agreement.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Designated Portfolios of the Fund or other applicable terms
of this Agreement.
12.10. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights.
12.11. The names "ING Variable Insurance Trust" and "Trustees of ING
Variable Insurance Trust" refer respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated July 15, 1999 which is hereby referred
to and a copy of which is at the principal office of the Fund. The obligations
of "ING Variable
- 19 -
<PAGE> 20
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 Fund personally, but bind only the Trust Property, and
all persons dealing with any class of Shares of the Fund must look solely to the
Trust Property belonging to such class for the enforcement of any claims against
the Fund.
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:
FIRST GOLDEN AMERICAN LIFE
INSURANCE COMPANY OF
NEW YORK:
By: /s/David L. Jacobson
---------------------------------
Title: Senior Vice President
------------------------------
Date: April 28, 2000
------------------------------
ING VARIABLE INSURANCE TRUST:
By: /s/Louis S. Citron
---------------------------------
Title: Vice President
------------------------------
Date: April 28, 2000
------------------------------
ING MUTUAL FUNDS MANAGEMENT
CO. LLC:
By: /s/Louis S. Citron
---------------------------------
Title: Senior Vice President
------------------------------
Date: April 28, 2000
------------------------------
ING FUNDS DISTRIBUTOR, INC.
By: /s/Donald E. Brostrom
---------------------------------
Title: Treasurer
------------------------------
Date: April 28, 2000
------------------------------
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<PAGE> 21
SCHEDULE A
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
CONTRACTS AND SEPARATE ACCOUNT(S)
CONTRACT(S):
Deferred Combination Variable and Fixed Annuity
Contracts
SEPARATE ACCOUNT(S):
First Golden American Life Insurance Company of New
York - Separate Account NY-B
SCHEDULE B
ING VARIABLE INSURANCE TRUST
DESIGNATED PORTFOLIOS
PORTFOLIOS:
ING International Equity Fund
ING Global Brand Names Fund
Schedule Date: April 28, 2000
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