As filed with the Securities and Exchange Commission on July 24, 2003
Securities Act File No. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No.
ING VARIABLE PRODUCTS TRUST
(Exact Name of Registrant as Specified in Charter)
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034
(Address of Principal Executive Offices) (Zip Code)
1-800-992-0180
(Registrant's Area Code and Telephone Number)
Kimberly A. Anderson
ING Investments, LLC
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
(Name and Address of Agent for Service)
With copies to:
Jeffrey S. Puretz, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401
---------------
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
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It is proposed that this filing will become effective on August 22, 2003
pursuant to Rule 488 under the Securities Act of 1933, as amended
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No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
ING VP LARGE COMPANY VALUE PORTFOLIO
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
August 29, 2003
Dear Variable Contract Holder:
Your Board of Trustees has called a Special Meeting of shareholders
("Special Meeting") of ING VP Large Company Value Portfolio ("Large Company
Value Portfolio"), which is scheduled for 10:00 a.m., Local time, on October 16,
2003 at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034.
The Board of Trustees of Large Company Value Portfolio has reviewed and
recommends the proposed reorganization (the "Reorganization") of Large Company
Value Portfolio ("ING Investments"), into ING VP MagnaCap Portfolio ("MagnaCap
Portfolio") (each a "Portfolio", and collectively, the "Portfolios"). Both
Portfolios are members of the mutual fund group called the "ING Funds."
Shares of Large Company Value Portfolio have been purchased at your
direction by your insurance company ("Insurance Company") through its separate
account to fund benefits payable under your variable annuity contract or
variable life insurance policy (each, a "variable contract"). Your Insurance
Company, as the legal owner of that separate account, has been asked to approve
the Reorganization. You, as an owner of a variable contract that has an interest
in the separate account, are being asked by your Insurance Company for
instructions as to how to vote the shares of Large Company Value Portfolio that
are attributable to your variable contract.
If the Reorganization is approved and consummated, the separate account
in which you have an interest will own shares of MagnaCap Portfolio instead of
shares of Large Company Value Portfolio. The Reorganization would provide the
separate account in which you have an interest with an opportunity to
participate in a larger fund with similar investment objectives and strategies.
After careful consideration, the Board of Trustees of Large Company
Value Portfolio unanimously approved this proposal and recommends shareholders
vote "FOR" the proposal.
A Proxy Statement/Prospectus that describes the Reorganization is
enclosed. We hope that you can attend the Special Meeting in person; however, we
urge you in any event to vote your shares by completing and returning the
enclosed proxy card in the envelope provided at your earliest convenience.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO
AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT/PROSPECTUS AND CAST YOUR
VOTE. IT IS IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN OCTOBER 15, 2003.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
/s/ James M. Hennessy,
James M. Hennessy,
President and Chief Executive Officer
ING VP LARGE COMPANY VALUE PORTFOLIO
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF ING VP LARGE COMPANY VALUE PORTFOLIO
SCHEDULED FOR OCTOBER 16, 2003
To the Variable Contract Holders:
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders ("Special
Meeting") of ING VP Large Company Value Portfolio ("Large Company Value
Portfolio") is scheduled for October 16, 2003 at 10:00 a.m., Local time, at 7337
East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034.
At the Special Meeting, you will be asked to consider and approve the
following proposals:
(1) To approve an Agreement and Plan of Reorganization (the
"Reorganization Agreement") by and among Large Company Value
Portfolio and ING VP MagnaCap Portfolio ("MagnaCap
Portfolio"), providing for the merger of Large Company Value
Portfolio with and into MagnaCap Portfolio.
Shareholders of record as of the close of business on July 28, 2003,
are entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof. Your attention is called to the accompanying Proxy
Statement/Prospectus. Regardless of whether you plan to attend the Special
Meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD so
that a quorum will be present and a maximum number of shares may be voted.
Proxies may be revoked at any time before they are exercised by executing and
submitting a revised proxy, by giving written notice of revocation to Large
Company Value Portfolio or by voting in person at the Special Meeting.
By Order of the Board of Trustees
/s/ Kimberly A. Anderson,
Kimberly A. Anderson,
Vice President and Secretary
August 29, 2003
ING VP LARGE COMPANY VALUE PORTFOLIO
PROXY STATEMENT/PROSPECTUS
AUGUST 29, 2003
TABLE OF CONTENTS
INTRODUCTION.................................................................................................... 1
SUMMARY......................................................................................................... 3
The Proposed Reorganization.................................................................................. 3
Comparison of Investment Objectives and Strategies........................................................... 5
Comparison of Portfolio Characteristics...................................................................... 7
Relative Performance......................................................................................... 8
Performance of MagnaCap Portfolio............................................................................ 9
Comparison of Investment Techniques and Principal Risks of Investing in the Portfolios....................... 10
COMPARISON OF FEES AND EXPENSES................................................................................. 12
Management Fees.............................................................................................. 12
Administration Fees.......................................................................................... 12
Service Fees................................................................................................. 12
Expense Limitation Arrangements.............................................................................. 12
Expense Tables............................................................................................... 13
INFORMATION ABOUT THE REORGANIZATION............................................................................ 14
The Reorganization Agreement................................................................................. 14
Reasons for the Reorganization............................................................................... 14
Board Considerations......................................................................................... 15
Tax Considerations........................................................................................... 15
Expenses of the Reorganization............................................................................... 16
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS..................................................................... 16
Form of Organization......................................................................................... 16
Distributor.................................................................................................. 16
Dividends and Other Distributions............................................................................ 16
Capitalization............................................................................................... 16
GENERAL INFORMATION ABOUT THE PROXY STATEMENT................................................................... 17
Solicitation of Proxies...................................................................................... 17
Voting Rights................................................................................................ 17
Other Matters to Come Before the Special Meeting............................................................. 18
Shareholder Proposals........................................................................................ 18
Reports to Shareholders...................................................................................... 18
APPENDICES
Portfolio Manager's Report for ING VP MagnaCap Portfolio..................................................... A-1
Form of Agreement and Plan of Reorganization................................................................. B-1
Additional Information Regarding ING VP MagnaCap Portfolio................................................... C-1
Security Ownership of Certain Beneficial and Record Owners................................................... D-1
PROXY STATEMENT/PROSPECTUS
AUGUST 29, 2003
ING VP MAGNACAP PORTFOLIO
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to you in connection
with a Special Meeting of shareholders of ING VP Large Company Value Portfolio
("Large Company Value Portfolio") to be held on October 16, 2003 ("Special
Meeting"). As more fully described in this Proxy Statement, the purpose of the
Special Meeting is to vote on a proposed reorganization ("Reorganization") of
Large Company Value Portfolio into ING VP MagnaCap Portfolio ("MagnaCap
Portfolio") (each a "Portfolio" and collectively, the "Portfolios").
Shares of Large Company Value Portfolio are sold to separate accounts
of insurance companies and are used to fund variable annuity and/or variable
life contracts ("Variable Contracts"). Variable contract owners who select the
Portfolio for investment through a Variable Contract have a beneficial interest
in the Portfolio, but do not invest directly in or hold shares of the Portfolio.
The insurance company that uses the Portfolio as a funding vehicle, is, in most
cases, the true shareholder of the Portfolio and, as the legal owner of the
Portfolio's shares, has sole voting and investment power with respect to the
shares, but generally will pass through any voting rights to variable contract
owners. For ease of reference throughout the Proxy Statement/Prospectus,
contract holders will be referred to as "shareholders" of the Portfolios.
Under an Agreement and Plan of Reorganization (the "Reorganization
Agreement"), Large Company Value Portfolio would transfer all of its assets to
MagnaCap Portfolio in exchange for shares of beneficial interest of MagnaCap
Portfolio and the assumption by MagnaCap Portfolio of Large Company Value
Portfolio's liabilities.
Because you, as a shareholder of Large Company Value Portfolio, are
being asked to approve the Reorganization Agreement that will result in a
transaction in which you will ultimately hold shares of MagnaCap Portfolio, this
Proxy Statement also serves as a Prospectus for MagnaCap Portfolio. MagnaCap
Portfolio is a diversified mutual fund. MagnaCap Portfolio's investment
objective is to seek growth of capital, with dividend income as a secondary
consideration. The Portfolio, under normal market conditions, seeks to achieve
its investment objective by investing at least 80% of its assets in common
stocks of large companies that the Sub-Adviser (Aeltus Investment Management,
Inc. ("ING Aeltus")) considers to be undervalued compared to the overall market.
This Proxy Statement/Prospectus, which should be read and retained for
future reference, sets forth concisely the information that a shareholder should
know before voting on the Reorganization Agreement. A Statement of Additional
Information ("SAI") relating to this Proxy Statement dated August 29, 2003
containing additional information about the Reorganization and the parties
thereto, has been filed with the U.S. Securities and Exchange Commission (the
"SEC") and is incorporated herein by reference. For a more detailed discussion
of the investment objectives, strategies and restrictions of the Portfolios, see
the Class S Prospectus and the SAI for the Portfolios, dated May 1, 2003, which
are incorporated herein by reference. Each Portfolio also provides periodic
reports to its shareholders which highlight certain important information about
the Portfolios, including investment results and financial information. The
annual report for MagnaCap Portfolio, dated December 31, 2002, is incorporated
herein by reference. You may receive a copy of the most recent Prospectus, SAI,
SAI relating to the Proxy Statement, and annual report for either of the
Portfolios without charge by contacting the Portfolios at ING Funds, 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258-2034 or by calling
1-800-992-0180.
You can copy and review information about each Portfolio (including the
SAI) at the SEC's Public Reference Room in Washington, D.C. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-202-942-8090. Reports and other information about the Portfolios are available
on the EDGAR Database on the SEC's internet site at http://www.sec.gov. You may
obtain copies of this information, after paying a duplicating fee, by electronic
request at the following e-mail address: publicinfo@sec.gov, or by writing the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
1
THE U.S. SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. You
should also consult the Class S Prospectus for the Portfolios for more
information about both of the Portfolios and the Reorganization Agreement, which
is attached hereto as Appendix B.
THE PROPOSED REORGANIZATION
On November 22, 2002, the Board of Trustees of Large Company Value
Portfolio and MagnaCap Portfolio approved the Reorganization. Subject to
shareholder approval, the Reorganization Agreement provides for:
- the transfer of all of the assets of Large Company Value
Portfolio to MagnaCap Portfolio in exchange for shares of
beneficial interest of MagnaCap Portfolio;
- the assumption by MagnaCap Portfolio of all of the liabilities
of Large Company Value Portfolio;
- the distribution of MagnaCap Portfolio shares to the
shareholders of Large Company Value Portfolio; and
- the complete liquidation of Large Company Value Portfolio.
MagnaCap Portfolio shares would then be distributed to shareholders of
Large Company Value Portfolio so that each shareholder would receive a number of
full and fractional shares of MagnaCap Portfolio equal to the aggregate value of
shares of Large Company Value Portfolio held by such shareholder.
As a result of the Reorganization, each owner of Class S shares of
Large Company Value Portfolio would become a shareholder of Class S shares of
MagnaCap Portfolio. The Reorganization is expected to be effective on October
18, 2003, or such other date as the parties may agree (the "Closing Date").
Each shareholder will hold, immediately after the Closing Date, Class S
shares of MagnaCap Portfolio having an aggregate value equal to the aggregate
value of the Class S shares of Large Company Value Portfolio held by that
shareholder as of the Closing Date.
In considering whether to approve the Reorganization, you should note
that:
- The Portfolios have substantially similar investment
objectives;
- The portfolio managers for both Large Company Value Portfolio
and MagnaCap Portfolio use a disciplined value approach to
investing in the common stocks of large companies, however,
until 9/30/03 MagnaCap Portfolio must invest 80% of its assets
in stocks meeting disciplined investment criteria with respect
to valuation characteristics, dividends, and balance sheet
strength;
- Both Funds have the same portfolio management team;
- MagnaCap Portfolio is the larger fund ($22.8 million versus
$1.7 million as of May 31, 2002); and
- The proposed Reorganization is expected to result in a
reduction in total operating expenses for shareholders of
Large Company Value Portfolio before taking management
subsidies into account. For example, the (unaudited) total
operating expenses before and after the Reorganization,
expressed as an annual percentage of average daily net asset
value per share for Class S shares of each Portfolio as of
December 31, 2002, are as follows:
CLASS S
-------
BEFORE THE MERGER
- Expenses of Large Company Value Portfolio
before expense reimbursement from
management: 3.55%
3
CLASS S
-------
- Expenses of MagnaCap Portfolio before
expense reimbursement from management: 1.45%
- Expenses of Large Company Value Portfolio
after expense reimbursement from
management:(1) 1.10%
- Expenses of MagnaCap Portfolio after
expense reimbursement from management:(1) 1.10%
AFTER THE MERGER
- Pro Forma estimated expenses before
reimbursement from management: 1.52%
- Pro Forma estimated expenses after
expense reimbursement from management:(1) 1.10%
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(1) ING Investments has entered into an expense limitation agreement with
Large Company Value Portfolio and MagnaCap Portfolio that limits
expenses to 1.10% for the Class S shares of each Portfolio. The expense
limitation agreement is contractual and will continue at least through
December 31, 2003. Thereafter, the expense limitation agreement shall
renew automatically for one-year terms unless ING Investments provides
written notice of the termination of the expense limitation agreement
at least 90 days prior to the end of the then current term or upon
termination of the investment management agreement.
Approval of the Reorganization Agreement requires the affirmative vote of the
holders of a majority of the shares of Large Company Value Portfolio. The
holders of a majority of outstanding shares present in person or by proxy shall
constitute a quorum at any meeting of the shareholders.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF LARGE COMPANY
VALUE PORTFOLIO UNANIMOUSLY APPROVED THE PROPOSED REORGANIZATION. THE BOARD
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED REORGANIZATION.
4
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
The following summarizes the investment objective, strategies and
management differences, if any, between MagnaCap Portfolio and Large Company
Value Portfolio:
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LARGE COMPANY VALUE PORTFOLIO MAGNACAP PORTFOLIO
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INVESTMENT Seeks long-term capital appreciation. Income is Seeks growth of capital, with dividend income as a
OBJECTIVE a secondary objective. secondary consideration.
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INVESTMENT INVESTMENT STRATEGIES EFFECTIVE SEPTEMBER 30, 2003:
STRATEGIES ---------------------------------------------------
- Normally invests at least 80% of its assets - Normally invests at least 80% of its assets in common
in common stocks of large companies. stocks of large companies.
- Normally invests in companies that the - Normally invests in companies that the Sub-Adviser,
Adviser considers to be undervalued compared using a disciplined value approach, considers to be
to the overall stock market. The Adviser undervalued compared to the overall stock market.
considers large companies to consist of the The Fund will generally invest in larger companies
500 largest U.S. companies, as measured by that are included in the 500 largest U.S. companies,
total revenues, net assets, cash flow, or as measured by total revenues, net assets, cash flow
earnings, or the 1,000 largest U.S. or earnings, or the 1,000 largest companies as
companies, as measured by equity market measured by equity market capitalization. Among the
capitalization. Within this universe of criteria the Sub-Adviser will consider are whether
large well-established companies, the companies have increased dividends or had the
Adviser will use a disciplined value financial capability to have increased dividends over
approach to select investments that the the past 10 years. The Sub-Adviser also analyzes
Adviser considers to be undervalued compared candidates for investment for some catalyst or vector
to the overall market. The Adviser also of change that may lead to an increase in the share
analyzes candidates for investment for some price. May invest the remaining 20% of its assets in
catalyst or vector of change that may spark other types of securities, including foreign
an increase in the share price. May invest securities and smaller companies.
the remaining 20% of its assets in other
types of securities, including foreign
securities and smaller companies.
INVESTMENT STRATEGIES PRIOR TO SEPTEMBER 30, 2003:
--------------------------------------------------
- Normally invests at least 80% of its assets in stocks
that meet the following criteria:
- Attractive Valuation Characteristics -- Companies with
market capitalizations above $2 billion are screened for
relatively attractive valuation characteristics.
Multiple valuation measures may be considered including:
price to earnings ratios; price to book value ratios;
price to cash flow ratios; price to sales ratios; and
enterprise value to earnings before interest, taxes,
depreciation and amortization. Companies selling at low
valuations compared to their expected growth rates will
also be considered.
- Dividends -- A company must have increased its dividends
or had the financial capability to have increased its
dividends over the past 10 years.
- Balance Sheet Strength -- If a company has long-term
debt, it must be rated investment grade by at least one
5
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LARGE COMPANY VALUE PORTFOLIO MAGNACAP PORTFOLIO
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nationally recognized rating agency. In the event the
company has no material long-term debt, the company must
be rated investment grade by at least one nationally
recognized rating agency.
Candidates for investment are also analyzed for some
catalyst or vector of change that may spark an increase in
share price.
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PRINCIPAL The equity securities in which the Portfolio PRINCIPAL INVESTMENTS EFFECTIVE SEPTEMBER 30, 2003:
INVESTMENTS may invest include common stock, convertible ---------------------------------------------------
securities, rights, warrants, and exchange- - May invest in common stocks, convertible securities,
traded index funds (ETFs). To the degree that rights or warrants. The Portfolio's investments may
the Portfolio invests assets in non-U.S. focus on particular sectors depending on the portfolio
securities, it may hedge the currency risk of manager's perception of the market environment.
these holdings with the use of forward
contracts or options on currencies. Although - Although the Portfolio normally will be invested as
the Portfolio normally will be invested as fully as practicably in equity securities, assets that
fully as practicable in equity securities, are not invested in equity securities may be invested
assets that are not invested in equity in high quality debt securities.
securities may be invested in high quality
debt securities including bonds, notes, PRINCIPAL INVESTMENTS PRIOR TO SEPTEMBER 30, 2003:
debentures, and short-term investments. --------------------------------------------------
- May invest in common stocks, convertible securities,
rights or warrants. Normally, the Portfolio's
investments are generally in larger companies that
are included in the 500 largest U.S. companies as
measured by sales, cash flow, earnings, or net
assets. The remainder of the Portfolio's assets may
be invested in equity securities that the portfolio
manager believes have growth potential because they
represent an attractive value, but which may not meet
the above criteria. The Portfolio's investments may
focus on particular sectors depending on the
portfolio manager's perception of the market
environment.
Although the Portfolio normally will be invested as fully
as practicably in equity securities, assets that are not
invested in equity securities may be invested in high
quality debt securities. The Portfolio may invest up to
5% of its assets, measured at the time of investment, in
foreign securities.
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INVESTMENT ADVISER ING Investments, LLC ING Investments, LLC
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SUB-ADVISER Aeltus Investment Management, Inc. Aeltus Investment Management, Inc.
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PORTFOLIO MANAGERS William F. Coughlin(1) William F. Coughlin(1)
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(1) Mr. Coughlin has been primarily responsible for the management of both Portfolios since April 2003. Prior to April 2003, the
Portfolios had the same portfolio management since June 2001.
As you can see from the chart above, the investment objectives of the
Portfolios are substantially similar. The Portfolios also invest in
substantially similar types of companies, as both Portfolios invest 80% of their
assets in common stocks of large companies while employing a disciplined value
investment approach. Even under MagnaCap Portfolio's current policies, there is
substantial commonality in objective and strategies in that a factor for
security selection for MagnaCap Portfolio is attractive valuation
characteristics; which is the factor stressed for Large Company Value Portfolio.
6
COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the Large
Company Value Portfolio and the MagnaCap Portfolio as of May 31, 2003:
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LARGE COMPANY VALUE PORTFOLIO MAGNACAP PORTFOLIO
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Net Assets $1,695,882 $23,064,882
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Number of Holdings 41 41
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Portfolio Turnover Rate(1) 110% 134%
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Average market capitalization of companies $29.9 billion $26.1 billion
in Portfolio
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Market capitalization range of companies
in Portfolio (as a % of net assets)
Holdings in companies with market
capitalizations over $10 billion: 86.58% 88.11%
Holdings in companies with market
capitalizations between $5 billion and
$10 billion: 6.94% 4.82%
Holdings in companies with market
capitalizations under $5 billion: 2.16% 1.40%
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Top 5 Industries
(as % of net assets) Diversified Financial Services 14.7% Diversified Financial Services 14.4%
Oil and Gas 13.6% Oil and Gas 12.2%
Insurance 6.8% Insurance 6.7%
Banks 5.5% Banks 5.3%
Food 5.2% Telecommunications 4.6%
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U.S Equity Securities (as a % of net assets) 87.5% 94.6%
Foreign Securities (as a % of net assets) 13.4% 4.3%
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Top 10 Holdings
(as a % of net assets) Altria Group Inc. 3.7% Honeywell Intl., Inc. 3.7%
Freddie Mac 3.5% Freddie Mac 3.6%
Fannie Mae 3.5% Altria Group Inc. 3.5%
Honeywell Int'l. Inc. 3.4% Fannie Mae 3.5%
BP PLC 3.2% Exxon Mobil Corp. 3.3%
ChevronTexaco Corp. 3.1% Hewlett Packard Co. 3.0%
Koninklijke Philips Electronics 3.1% American Int'l Group Inc. 2.8%
American Int'l. Group Inc. 2.9% Washington Mutual Inc. 2.8%
Washington Mutual Inc. 2.9% Wells Fargo & Co. 2.8%
Wells Fargo & Co. 2.8% Anadarko Petroleum Corp. 2.6%
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(1) For the one-year period ended May 31, 2003.
7
RELATIVE PERFORMANCE
The following table shows, for the periods shown, the unaudited average
annual total return for: (i) Class S shares of Large Company Value Portfolio;
(ii) shares of MagnaCap Portfolio; (iii) the S&P 500 Index; and (iv) the S&P
Barra Value Index. Performance of the Portfolios in the table below does not
reflect the deduction of expenses and charges which are, or may be imposed under
your annuity contract or life insurance policy, and would be lower if it did. An
index has an inherent performance advantage over the Portfolios since it has no
cash in its portfolios, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index. Total return is
calculated assuming reinvestment of all dividends and capital gain distributions
at net asset value. Each Portfolio's past performance is not an indication of
its future performance.
CALENDAR S&P BARRA
YEAR/ LARGE COMPANY MAGNACAP S&P 500 VALUE
PERIOD ENDED VALUE PORTFOLIO(1) PORTFOLIO(2)(3) INDEX(4) INDEX(5)
- ------------ ------------------ --------------- -------- --------
12/31/01 4.92% -10.44% -11.87% -11.71%
12/31/02 -22.39% -22.99% -22.10% -20.86%
06/30/03 10.39% 11.80% 11.77% 12.29%
- ----------------------
(1) Class S shares of Large Company Value Portfolio commenced operations on
July 31, 2001.
(2) Class S shares of MagnaCap Portfolio commenced operations on May 7,
2001. For the period ended December 31, 2001, the table reflects the
performance of Class R shares of the MagnaCap Portfolio because Class S
shares of the Portfolio did not have a full year's performance. Class R
shares of MagnaCap Portfolio commenced operations on May 8, 2000.
(3) Effective September 30, 2003, MagnaCap Fund will change its investment
strategies. Prior to this date, the investment strategies for the Fund
were different, although attractive valuation characteristics were part
of the prior strategy. In particular, under the former investment
strategy, at least 80% of the Fund's assets were invested in companies
that met three criteria: (1) attractive valuation characteristics; (2)
a strong balance sheet; and (3) the company had increased its dividends
or had the capability to have increased its dividends over the past 10
years.
(4) The S&P 500 Index is an unmanaged index that measures the performance
of securities of approximately 500 large-capitalization companies whose
securities are traded on major U.S. stock markets.
(5) The S&P Barra Value Index is a capitalization weighted index of all
stocks in the S&P 500 Index that have low price-to-book ratios. It is
designed so that approximately 50% of the market capitalization of the
S&P 500 Index is in the S&P Barra Value Index.
8
PERFORMANCE OF MAGNACAP PORTFOLIO
The following bar chart and tables provide an indication of the risks
of investing in MagnaCap Portfolio by showing (on a calendar year basis) changes
in MagnaCap Portfolio's annual total return from year to year and by showing (on
a calendar year basis) how MagnaCap Portfolio's average annual returns for one
year and since inception compare to those of the S&P 500 Index and the S&P Barra
Value Index. Performance does not reflect the deduction of expenses and charges
which are, or may be imposed under your annuity contract or life insurance
policy, and would be lower if they did. MagnaCap Portfolio's past performance is
not necessarily an indication of how the Portfolio will perform in the future.
Total returns include reinvestment of dividends and capital gains distributions,
if any. The S&P 500 Index and S&P Barra Value Index are unmanaged.
CALENDAR YEAR-BY-YEAR RETURNS(1)(2)(3)
[BAR CHART]
1993
1994
1995
1996
1997
1998
1999
2000
2001 -10.44
2002 -22.39
- ---------------------
(1) These figures are for the year ended December 31 of each year.
(2) Class S shares of the MagnaCap Portfolio were first offered in 2001.
The figure shown for the year 2001 provides the performance of Class R
shares of the Portfolio. The figure shown for the year 2002 provides
the performance of Class S shares of the Portfolio. Class R shares are
offered in a separate Prospectus. Class R shares would have
substantially similar annual returns as the Class S shares because the
classes are invested in the same Portfolio of securities. Annual
returns would differ only to the extent Class R and Class S shares have
different expenses. During the period shown in the chart, the
Portfolio's best quarterly performance was 9.29% for the quarter ended
December 31, 2002, and the Portfolio's worst quarterly performance was
-22.29% for the quarter ended September 30, 2002.
(3) Effective September 30, 2003, MagnaCap Fund will change its investment
strategies. Prior to this date, the investment strategies for the Fund
were different, although attractive valuation characteristics were part
of the prior strategy. In particular, under the former investment
strategy, at least 80% of the Fund's assets were invested in companies
that met three criteria: (1) attractive valuation characteristics; (2)
a strong balance sheet; and (3) the company had increased its dividends
or had the capability to have increased its dividends over the past 10
years.
9
The following table shows what the average annual total returns of MagnaCap
Portfolio would equal if you averaged out actual performance over various
lengths of time compared to the S&P 500 Index, an unmanaged index. The S&P 500
Index has an inherent performance advantage over MagnaCap Portfolio since it has
no cash in its portfolio, imposes no sales charges and incurs no operating
expenses. An investor cannot invest directly in an index.
MAGNACAP PORTFOLIO -- AVERAGE ANNUAL TOTAL RETURNS for the periods ended
December 31, 2002
1 YEAR SINCE INCEPTION
------ ---------------
Class S return (1) -22.99% -17.55%
Class R return (2) -22.76% -12.46%
S&P 500 Index(3) -22.10% -15.97%(4)
S&P Barra Value Index(5) -20.86% -10.47%(6)
- ----------------------------
(1) Class S shares commenced operations on March 7, 2001.
(2) Class R shares commenced operations on May 8, 2000.
(3) S&P 500 Index is an unmanaged index that measures the performance of
securities of approximately 500 large-capitalization companies whose
securities are traded on major U.S. stock markets.
(4) Index return is for the period beginning May 1, 2000. Index return for
the period beginning March 1, 2001 is -17.72%.
(5) The S&P Barra Value Index is a capitalization weighted index of all
stocks in the S&P 500 Index that have low price-to-book ratios. It is
designed so that approximately 50% of the market capitalization of the
S&P 500 Index is in the S&P Barra Value Index.
(6) Index return is for the period beginning May 1, 2000. Index return for
the period beginning March 1, 2001 is -16.53%.
For a discussion by the Adviser regarding the performance of MagnaCap
Portfolio for the fiscal year ended December 31, 2002, see Appendix A to this
Proxy Statement/Prospectus. Additional information about MagnaCap Portfolio is
included in Appendix C to this Proxy Statement/Prospectus.
COMPARISON OF INVESTMENT TECHNIQUES AND PRINCIPAL RISKS OF INVESTING IN THE
PORTFOLIOS
Because the Portfolios have investment objectives and strategies that
are substantially similar, many of the risks of investing in MagnaCap Portfolio
are substantially the same as the risks of investing in Large Company Value
Portfolio. You may lose money on your investment in either Portfolio. The value
of each Portfolio's shares may go up or down, sometimes rapidly and
unpredictably. Market conditions, financial conditions of issuers represented in
the portfolio, investment strategies, portfolio management, and other factors
affect the volatility of each Portfolio's shares. The following summarizes the
principal investment techniques and risks of investing in the Portfolios.
Equity Securities. Both Large Company Value Portfolio and MagnaCap
Portfolio are subject to risks associated with investing primarily in equity
securities and equity equivalent securities (preferred stocks, convertible
securities, warrants and other stock purchase rights) including market risk,
issuer risk, credit risk, price volatility risk and market trends risk. 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. Credit risk is the
risk that an issuer may not be able to meet its financial obligations when due,
including payments on outstanding debt. While equities may offer the potential
for greater long-term growth than most debt securities, they generally have
higher volatility. Market trends risk is the risk that from time to time, the
stock market may not favor the value securities in which the Portfolios invest.
Rather, the market could favor growth-oriented stocks, or may not favor equities
at all.
Inability to Sell Securities. Both Portfolios may invest a portion of
their assets (not more than 20%, measured at the time of investment) in the
equity securities of smaller companies. These securities usually trade in lower
volume and may be less liquid than securities of large established companies.
These less liquid securities could include securities of small and mid-size
companies, securities that originate from small offerings, and foreign
securities. The Portfolio could lose money if it cannot sell a security at the
time and price that would be most beneficial to the Portfolio.
10
Foreign Securities. Both the Large Company Value Portfolio and MagnaCap
Portfolio may invest a portion of their assets (not more than 20%, measured at
the time of investment) in foreign securities. There are certain risks in owning
foreign securities, including: (i) fluctuations in currency exchange rates; (ii)
devaluation of currencies; (iii) political or economic developments and the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions; (iv) reduced availability of public information concerning
issuers; (v) accounting, auditing and financial reporting standards or other
regulatory practices and requirements that are not uniform when compared to
those applicable to domestic companies; and (vi) 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 Portfolios, including the withholding of dividends.
Convertible Securities. Both Portfolios may invest in convertible
securities. The value of a convertible securities 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. The
Portfolios may be required to redeem or convert a convertible security before
they would otherwise choose.
Risks of Using Derivatives. To the extent that either Portfolio invests
in non-U.S. securities, the Portfolio may hedge the currency risks of holding
such securities by utilizing forward contracts and options on currencies.
Derivatives are subject to the risk of changes in the market price of the
security, credit risk with respect to the counterparty to the derivative
instrument and the risk of loss due to changes in interest rates. The use of
certain derivatives may also have a leveraging effect, which may increase the
volatility of the Portfolio. The use of derivatives may reduce the returns of
the Portfolio.
Exchange-Traded Index Funds. The Large Company Value Portfolio may
invest in ETFs. ETFs present risks similar to those of an investment in the
underlying securities held by the ETF. Because ETFs trade on an exchange, they
may not trade at net asset value (NAV). Sometimes, the prices of ETFs may vary
significantly from the ETFs' underlying NAVs. Additionally, if the Portfolio
elects to redeem its ETF shares rather than selling them on the secondary
market, the Portfolio will receive the underlying securities which it must then
sell in order to obtain cash. Additionally, you may pay a proportionate share of
the expenses of the ETF in addition to the expenses of the Portfolio.
Temporary Defensive Strategies. When the Adviser anticipates unusual
market or other conditions, the Portfolios may temporarily depart from their
principal investment strategies as a defensive measure. To the extent either
Portfolio is engaged in temporary defensive investments, it may not be pursuing
its investment objective.
11
COMPARISON OF FEES AND EXPENSES
The following discussion describes and compares the fees and expenses
of the Portfolios. For further information on the fees and expenses of MagnaCap
Portfolio, see "Appendix C: Additional Information Regarding MagnaCap
Portfolio."
MANAGEMENT FEES
Large Company Value Portfolio and MagnaCap Portfolio pay a management
fee of 0.75% of the Portfolio's average daily net assets. Additionally, ING
Investments, LLC ("ING Investments" or "Adviser") pays Aeltus Investment
Management, Inc. ("ING Aeltus") a sub-advisory fee of 0.3375% of Large Company
Value Portfolio's average daily net assets and 0.3375% of MagnaCap Portfolio's
average daily net assets for its services as sub-adviser to the Portfolios.
ADMINISTRATIVE FEES
Large Company Value Portfolio and MagnaCap Portfolio each pay an annual
administrative fee of 0.10% of the average daily net assets of each Portfolio.
SERVICE FEES
The Large Company Value Portfolio and MagnaCap Portfolio each has
adopted a Shareholder Services Plan (the Plan) for its Class S shares. Under the
Plan, each Portfolio makes payments at an annual rate of 0.25% of the
Portfolio's average daily net assets attributable to its Class S shares to
insurance companies, broker-dealers or other financial intermediaries that
provide services relating to Class S shares and their shareholders.
EXPENSE LIMITATION ARRANGEMENTS
Expense limitation agreements are in place for both Portfolios. Under
the terms of the expense limitation agreements, ING Investments has agreed to
limit the expenses of the Portfolios, excluding interest, taxes, brokerage and
extraordinary expenses, subject to possible recoupment by ING Investments within
three years. The current expense limitation agreement for each Portfolio is
contractual and provides that it will remain in effect through at least December
31, 2003. There can be no assurance that the expense limitation agreements will
be continued after this date. The expense limitations for Class S shares of
Large Company Value Portfolio and MagnaCap Portfolio are 1.10%. This information
and similar information is shown in the table below entitled "Annual Portfolio
Operating Expenses."
12
EXPENSE TABLE
The current expenses of each Portfolio and estimated pro forma expenses
giving effect to the proposed Reorganization are shown in the following table.
Expenses of the Portfolios are based upon the operating expenses incurred by
Class S shares of the Portfolios for the period ended December 31, 2002. Pro
forma fees show estimated fees of MagnaCap Portfolio after giving effect to the
proposed Reorganization. Pro forma numbers are estimated in good faith and are
hypothetical.
ANNUAL PORTFOLIO OPERATING EXPENSES (UNAUDITED)
(expenses that are deducted from Portfolio assets, shown as a ratio of expenses
to average daily net assets) (1)
TOTAL
MANAGEMENT OTHER OPERATING FEE WAIVER NET
FEES SERVICE FEES EXPENSES EXPENSES BY ADVISER(2) EXPENSES
---- ------------ -------- -------- ------------- --------
CLASS S
Large Company Value Portfolio 0.75% 0.25% 2.55% 3.55% 2.45% 1.10%
MagnaCap Portfolio 0.75% 0.25% 0.45% 1.45% 0.35% 1.10%
MagnaCap Portfolio
After the Reorganization
(Estimated Pro Forma) 0.75% 0.25% 0.52% 1.52% 0.42% 1.10%
- ----------------------
(1) The fiscal year end for Large Company Value Portfolio and MagnaCap
Portfolio is December 31.
(2) ING Investments has entered into an expense limitation agreement with
Large Company Value Portfolio and MagnaCap Portfolio under which it
will limit the expenses of the Portfolios (excluding interest, taxes,
brokerage and extraordinary expenses, subject to possible recoupment by
ING Investments within three years) to 1.10% for Class S shares of each
Portfolio. The expense limitation agreements are contractual and will
continue at least through December 31, 2003. Thereafter, the expense
limitation agreements renew automatically for one-year terms unless ING
Investments provides written notice of the termination of the expense
limitation agreement at least 90 days prior to the end of the
then-current term or upon termination of the investment management
agreement.
Following the Reorganization, certain holdings of Large Company Value
Portfolio that are transferred to MagnaCap Portfolio in connection with the
Reorganization may be sold. Such sales may result in increased transaction costs
for MagnaCap Portfolio, and the realization of taxable gains or losses for
MagnaCap Portfolio.
Examples. The following examples are intended to help you compare the
cost of investing in each Portfolio and the combined Portfolio. The examples
assume that you invest $10,000 in each Portfolio and in the combined Portfolio
after the Reorganization for the time periods indicated. The examples also
assume that your investment has a 5% return each year and that each Portfolio's
operating expenses remain the same. The 5% return is an assumption and is not
intended to portray past or future investment results. Based on the above
assumptions, you would pay the following expenses. Your actual costs may be
higher or lower.
ESTIMATED PRO FORMA:
LARGE COMPANY VALUE THE PORTFOLIOS
PORTFOLIO MAGNACAP PORTFOLIO COMBINED*
CLASS S CLASS S CLASS S
------- ------- -------
1 YEAR $ 112 $ 112 $ 112
3 YEARS $ 861 $ 424 $ 439
5 YEARS $1,631 $ 759 $ 789
10 YEARS $3,656 $1,705 $1,777
- ----------
* Estimated.
13
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION AGREEMENT
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Reorganization Agreement. Significant
provisions of the Reorganization Agreement are summarized below; however, this
summary is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached as Appendix B.
The Reorganization Agreement provides for (i) the transfer, as of the
Closing Date, of all of the assets of Large Company Value Portfolio in exchange
for shares of beneficial interest of MagnaCap Portfolio and the assumption by
MagnaCap Portfolio of all of Large Company Value Portfolio's liabilities; and
(ii) the distribution of shares of MagnaCap Portfolio to shareholders of Large
Company Value Portfolio, as provided for in the Reorganization Agreement. Large
Company Value Portfolio will then be liquidated.
After the Reorganization, each shareholder of Large Company Value
Portfolio will own shares of MagnaCap Portfolio having an aggregate value equal
to the aggregate value of the shares in Large Company Value Portfolio held by
that shareholder as of the Closing Date. Shareholders of Class S shares of Large
Company Value Portfolio will receive the same Class of shares of MagnaCap
Portfolio.
Until the Closing Date, shareholders of the Large Company Value
Portfolio will continue to be able to exchange their shares for shares of
another portfolio in accordance with the provisions in their variable insurance
contract prospectus. Exchange requests received after the Closing Date will be
treated as requests received by MagnaCap Portfolio for the exchange of its
shares.
The obligations of the Portfolios under the Reorganization Agreement
are subject to various conditions, including approval of the shareholders of
Large Company Value Portfolio. The Reorganization Agreement also requires that
each of the Portfolios take, or cause to be taken, all actions, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by the Reorganization
Agreement. The Reorganization Agreement may be terminated by mutual agreement of
the parties or on certain other grounds. Please refer to Appendix B to review
the terms and conditions of the Reorganization Agreement.
REASONS FOR THE REORGANIZATION
The Reorganization is one of several reorganizations that have taken
place among various ING Funds. The ING Fund complex has grown in recent years
through the addition of many funds. Management of the ING Funds has proposed the
consolidation of several of the ING Funds that they believe have similar or
compatible investment strategies. The reorganizations are designed to reduce the
substantial overlap in funds offered in the ING Funds complex, thereby
eliminating inefficiencies and confusion about overlapping funds. ING
Investments also believes that the reorganizations may benefit shareholders by
resulting in surviving funds with a greater asset base. This is expected to
provide greater investment opportunities for the surviving funds and the
potential to take larger portfolio positions.
The proposed Reorganization was presented to the Board of Trustees of
Large Company Value Portfolio and MagnaCap Portfolio for consideration at a
meeting held on November 22, 2002. For the reasons discussed below, the Trustees
of the Portfolios, including all of the Trustees who are not "interested
persons" (as defined in the Investment Company Act of 1940, as amended) of the
Portfolios, determined that the interests of the shareholders of either
Portfolio will not be diluted as a result of the proposed Reorganization, and
that the proposed Reorganization is in the best interests of both Portfolios and
their shareholders.
The Reorganization will allow Large Company Value Portfolio's
shareholders to continue to participate in a professionally-managed portfolio
that seeks to achieve growth of capital, with dividend income as a secondary
consideration, through investment in equity securities and equity equivalents of
large companies. Additionally, the Reorganization is expected to result in lower
total operating expenses for Class S shares of Large Company Value Portfolio
before taking management subsidies into account. Shares of the Portfolios may be
exchanged for shares of any other Portfolio before taking management subsidies
into account.
14
BOARD CONSIDERATIONS
The Board of Trustees of Large Company Value Portfolio, in recommending
the proposed transaction, considered a number of factors, including the
following:
- the plans of management to reduce overlap in funds in the ING Fund
complex;
- the potential benefits of the transaction to shareholders;
- the relative investment performance of Large Company Value Portfolio
as compared to MagnaCap Portfolio;
- expense ratios and information regarding fees and expenses of Large
Company Value Portfolio and MagnaCap Portfolio, including the expense
limitation arrangements offered by ING Investments;
- the relative size of the Portfolios;
- whether the Reorganization would dilute the interests of either
Portfolio's current shareholders;
- the similarity of investment objectives and strategies of MagnaCap
Portfolio with those of Large Company Value Portfolio;
- the fees or expenses that will be borne directly or indirectly by the
Portfolios in connection with the merger;
- any benefits that may be realized by the Adviser; and
- the tax consequences of the Reorganization to Large Company Value
Portfolio and its shareholders, including the tax-free nature of the
transaction.
The Board of Trustees also considered the future potential benefits to
ING Investments in that its costs to administer both Portfolios may be reduced
if the Reorganization is approved.
THE TRUSTEES OF LARGE COMPANY VALUE PORTFOLIO RECOMMEND THAT
SHAREHOLDERS APPROVE THE REORGANIZATION WITH MAGNACAP PORTFOLIO.
TAX CONSIDERATIONS
The Reorganization is intended to qualify for Federal income tax
purposes as a tax-free reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended. Accordingly, pursuant to this treatment, neither Large
Company Value Portfolio nor its shareholders, nor MagnaCap Portfolio nor its
shareholders, are expected to recognize any gain or loss for federal income tax
purposes from the transactions contemplated by the Reorganization Agreement. As
a condition to the Closing of the Reorganization, the Portfolios will receive an
opinion from the law firm of Dechert to the effect that the Reorganization will
qualify as a tax-free reorganization for Federal income tax purposes. That
opinion will be based in part upon certain assumptions and upon certain
representations made by the Portfolios.
Immediately prior to the Reorganization, Large Company Value Portfolio
will pay a dividend or dividends which, together with all previous dividends,
will have the effect of distributing to its shareholders all of Large Company
Value Portfolio's investment company taxable income for taxable years ending on
or prior to the Reorganization (computed without regard to any deduction for
dividends paid) and all of its net capital gain, if any, realized in taxable
years ending on or prior to the Reorganization (after reduction for any
available capital loss carryforward). Such dividends will be included in the
taxable income of Large Company Value Portfolio's shareholders.
As of December 31, 2002, Large Company Value Portfolio and MagnaCap
Portfolio had accumulated capital loss carryforwards of approximately $60,467
and $896,162, respectively. After the Reorganization, the losses of Large
Company Value Portfolio generally will be available to MagnaCap Portfolio to
offset its capital gains, although a portion of the amount of these losses that
may offset MagnaCap Portfolio's capital gains in any
15
given year will be limited due to this Reorganization. The ability of MagnaCap
Portfolio to use losses in the future depends upon a variety of factors that
cannot be known in advance, including the existence of capital gains against
which these losses may be offset. In addition, the benefits of any of these
various capital loss carryforwards currently are available only to
pre-reorganization shareholders of each Portfolio. After the Reorganization,
however, these benefits will inure to the benefit of all post-reorganization
shareholders of MagnaCap Portfolio.
EXPENSES OF THE REORGANIZATION
ING Investments will bear half the cost of the Reorganization. The
Portfolios will bear the other half of the expenses related to the proposed
Reorganization, including, but not limited to, the costs of solicitation of
voting instructions and any necessary filings with the SEC. Of the
Reorganization expenses allocated to the Portfolios, each Portfolio will bear a
pro rata portion based on its relative net asset values immediately before the
Closing Date.
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS
FORM OF ORGANIZATION
Large Company Value Portfolio and MagnaCap Portfolio are both
diversified series of ING Variable Products Trust, an open-end management
investment company organized as a Massachusetts business trust. ING Variable
Products Trust is governed by a Board of Trustees consisting of eleven members.
For more information on the history of the Portfolios, see the SAI.
DISTRIBUTOR
ING Funds Distributor, LLC (the "Distributor"), whose address is 7337
East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, is the principal
distributor for both Portfolios.
DIVIDENDS AND OTHER DISTRIBUTIONS
Both MagnaCap Portfolio and Large Company Value Portfolio pay dividends
from net investment income and net capital gains, if any, on a quarterly basis.
As a contract owner invested in a Portfolio, you are entitled to a share of the
income and capital gains that the Portfolio distributes. The amount you receive
is based on the number of shares you own. Since the sole shareholders of the
Portfolios are separate accounts, no discussion is included as to the federal
income tax consequences at the shareholder level.
If the Reorganization Agreement is approved by Large Company Value
Portfolio's shareholders, then as soon as practicable before the Closing Date,
Large Company Value Portfolio will pay its shareholders a cash distribution of
substantially all undistributed net investment income and undistributed realized
net capital gains.
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of
each of the Portfolios as of June 30, 2003, and on a pro forma basis as of June
30, 2003 giving effect to the Reorganization:
NET ASSET VALUE SHARES
NET ASSETS PER SHARE OUTSTANDING
---------- --------- -----------
LARGE COMPANY VALUE PORTFOLIO
Class S $ 1,694,763 $8.70 194,823
MAGNACAP PORTFOLIO
Class S $ 17,810,515 $7.61 2,340,315
PRO FORMA - MAGNACAP PORTFOLIO INCLUDING LARGE COMPANY VALUE PORTFOLIO
Class S $ 19,505,278 $7.61 2,563,017
16
GENERAL INFORMATION ABOUT THE PROXY STATEMENT
SOLICITATION OF PROXIES
Solicitation of proxies is being made primarily by the mailing of the
Notice and this Proxy Statement/Prospectus with its enclosures on or about
August 29, 2003. In addition to the solicitation of proxies by mail, employees
of ING Investments and its affiliates, without additional compensation, may
solicit proxies in person or by telephone, telegraph, facsimile, or oral
communications.
If a shareholder wishes to participate in the Special Meeting, but does
not wish to give a proxy by telephone, the shareholder may still submit the
proxy originally sent with the Proxy Statement/Prospectus, attend in person or
vote online. Should shareholders require additional information regarding the
proxy or require replacement of the proxy, they may contact Shareholder Services
toll-free at 1-800-992-0180.
A shareholder may revoke the accompanying proxy at any time prior to
its use by filing with Large Company Value Portfolio, a written revocation or
duly executed proxy bearing a later date. In addition, any shareholder who
attends the Special Meeting in person may vote by ballot at the Special Meeting,
thereby canceling any proxy previously given. The persons named in the
accompanying proxy will vote as directed by the proxy, but in the absence of
voting directions in any proxy that is signed and returned, they intend to vote
"FOR" the Reorganization proposal and may vote in their discretion with respect
to other matters not now known to the Board of Large Company Value Portfolio
that may be presented at the Special Meeting.
VOTING RIGHTS
Only shareholders of Large Company Value Portfolio at the close of
business on July 28, 2003 (the "Record Date") will be entitled to be present and
give voting instructions for Large Company Value Portfolio at the Special
Meeting with respect to their shares owned as of that Record Date. As of the
Record Date, [______] shares of Large Company Value Portfolio were outstanding
and entitled to vote. Each share is entitled to one vote and each fractional
share is entitled to a proportionate fractional vote.
Shares of Large Company Value Portfolio are sold to separate accounts
of insurance companies ("Separate Accounts") and are used to fund variable
annuity and/or variable life contracts ("Variable Contracts"). Variable contract
owners who select the Portfolio for investment through a Variable Contract have
a beneficial interest in the Portfolio, but do not invest directly in or hold
shares of the Portfolio. The insurance company that uses the Portfolio as a
funding vehicle, is, in most cases, the true shareholder of the Portfolio and,
as the legal owner of the Portfolio's shares, has sole voting and investment
power with respect to the shares, but generally will pass through any voting
rights to variable contract owners. Therefore, an insurance company will request
voting instructions from the variable contract owner and will vote shares or
other voting interests in the Separate Account in proportion to voting
instructions received. An insurance company will also vote shares of the
Portfolio held in its Separate Accounts for which no voting instructions have
been received in the same proportion as it votes shares held in the Separate
Accounts for which it has received instructions. Shares held by an insurance
company in its general account, if any, must be voted in the same proportion as
the votes cast with respect to shares held in all of the insurance company's
separate accounts in the aggregate.
Variable contract owners permitted to give instructions to the
Portfolio and the number of shares for which such instructions may be given for
purposes of voting at the Special Meeting, and any adjournment thereof, will be
determined as of the Record Date. In connection with the solicitation of such
instructions from variable contract owners, it is expected that the respective
insurance companies will furnish a copy of this Proxy Statement/Prospectus to
variable contract owners.
If a variable contract owner wishes to participate in the Special
Meeting, but does not wish to give a proxy by telephone, the variable contract
owner may still submit the Proxy Ballot(s) originally sent with the Proxy
Statement/Prospectus or attend in person. All persons entitled to direct the
voting of shares, whether they are variable contract owners or shareholders, are
described as voting for purposes of this Proxy Statement/Prospectus.
Approval of the Reorganization Agreement requires the affirmative vote
of the holders of a majority of the shares of Large Company Value Portfolio. The
holders of a majority of outstanding shares present in person or by
17
proxy shall constitute a quorum at any meeting of the shareholders. In the
absence of a quorum, a majority of outstanding shares entitled to vote present
in person or by proxy may adjourn the meeting from time to time until a quorum
shall be present.
To the knowledge of ING Investments, as of July 28, 2003, no current
Trustee owns 1% or more of the outstanding shares of either Portfolio, and the
officers and Trustees own, as a group, less than 1% of the shares of either
Portfolio.
Appendix D hereto lists the persons that, as of July 28, 2003, owned
beneficially or of record 5% or more of the outstanding shares of any Class of
Large Company Value Portfolio or MagnaCap Portfolio.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
Large Company Value Portfolio does not know of any matters to be
presented at the Special Meeting other than those described in this Proxy
Statement/Prospectus. If other business should properly come before the Special
Meeting, the proxyholders will vote thereon in accordance with their best
judgment.
SHAREHOLDER PROPOSALS
Large Company Value Portfolio is not required to hold regular annual
meetings and, in order to minimize its costs, does not intend to hold meetings
of shareholders unless so required by applicable law, regulation, regulatory
policy or if otherwise deemed advisable by Large Company Value Portfolio's
management. Therefore, it is not practicable to specify a date by which
shareholder proposals must be received in order to be incorporated in an
upcoming proxy statement for an annual meeting.
REPORTS TO SHAREHOLDERS
ING Investments will furnish, without charge, a copy of the most recent
Annual Report regarding either of the Portfolios and any more recent Semi-Annual
Report succeeding the Annual Report, if any, on request. Requests for such
reports should be directed in writing to the Portfolio at ING Funds, 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258-2034 or by calling
1-800-992-0180.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING MAY BE
ASSURED, PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
/s/ Kimberly A. Anderson,
Kimberly A. Anderson,
Vice President and Secretary
August 29, 2003
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
18
APPENDIX A
REPORT FOR ING VP MAGNACAP PORTFOLIO
Set forth below is an excerpt from ING VP MagnaCap Portfolio's Annual
Report, dated December 31, 2002, regarding the Portfolio's performance. [INSERT
SEMI-ANNUAL REPORT DATED JUNE 30, 2003 PRIOR TO DEFINITIVE FILING]
* * * *
PORTFOLIO MANAGEMENT TEAM: Thomas Jackson, Senior Vice President and
Senior Portfolio Manager, ING Investments, LLC.
GOAL: The ING VP MagnaCap Portfolio (the "Portfolio") seeks growth of
capital with dividend income as secondary consideration.
MARKET OVERVIEW: The U.S. stock market declined significantly in the
year ending December 31, 2002 with the S&P 500 Index (S&P 500) down 22.10% and
the S&P/Barra Value Index down 20.86%. The period exhibited substantial
volatility as the stock market declined dramatically into early October 2002 and
then rallied in the fourth quarter of the year. The stock market was buffeted by
a number of concerns: 1). The fear of a double dip recession as an already slow
economic rebound began to falter; 2). A below average rebound in corporate
profits; 3). An absolute aversion to risk in the corporate debt markets
resulting in quality spreads continuing to widen compared to Treasury bond
yields; and 4). Investor concerns regarding possible military action in Iraq.
The rebound from the October lows was accompanied initially by some better than
expected signs of economic growth; by a further cut in interest rates by the
Federal Reserve; and by narrowing quality spreads in the debt markets. For the
year, the stocks of smaller and mid-sized companies outperformed those of larger
companies.
Looking at the S&P/Barra style based indices, Value stocks outperformed
Growth stocks across the capitalization spectrum for the third year in a row.
PERFORMANCE: For the year ending December 2002, the Portfolio's Class S
shares, excluding any charges, provided a total return of -22.99%, compared to
the S&P 500, which returned -22.10%.
PORTFOLIO SPECIFICS: The Portfolio is being managed in a Value
investment style, which concentrates on companies that sell at significant
valuation discounts to the stock market and which also sell at significant
valuation discounts to their own history. There is a large degree of contrary
opinion embodied in this approach. Studies of the past indicate that this may be
a good way to manage money over the long run. However, it is worthwhile to point
out that the stock market isn't stupid. Generally companies that sell at large
valuation discounts to the market are experiencing some, hopefully temporary,
problem. The value investor is accepting the risk of the problems and the
attendant time risk until they are solved (if ever). In return, the investor
receives the potential "benefit" of buying investments on sale.
This description of value investing serves as a good introduction to
the analysis of the performance results for the period and to illustrate the
risks of the value approach. The under-performance of the Portfolio for the last
year relative to the S&P 500 and the S&P/Barra Value Index is more than
attributable to the Portfolio's large and unsuccessful investment in the
Electric Utility industry. This position was established after the Enron debacle
as the stocks in the industry declined substantially and were selling at both
very high dividend yields and low valuations compared to the past. However, the
confluence of events afflicting them turned out to be akin to the Perfect Storm.
They included questionable accounting and business practices; debt heavy balance
sheets; the California energy crisis; regional over capacity; lower demand for
electricity due to the recession; a collapse in energy trading; declining profit
margins; and rapidly declining credit ratings. These problems combined to
depress not only current profits, but ultimately the longer-term outlook for
company profits as well. In short, while the stocks appeared "cheap" on the
numbers, the problems proved to be much worse than expected resulting in
significant further declines in the stocks. The declines in the long-term profit
outlook made the initial valuation judgment incorrect. We eventually reduced the
Utility investment substantially, but not before it negatively impacted the
results of the Portfolio. There is a general lesson in this with regard to Value
investing: If the problem that is making the stock "cheap" turns out to be
intractable, the original "discount price" is likely to be insufficient to
justify the investment. If you buy what turns out to be shoddy merchandise, even
on sale, you are unlikely to have a happy result.
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Much did go relatively right over the last year. The Portfolio's under
weight in Technology, Financial, and Energy stocks combined with relatively good
selectivity in these groups partially offset the poor performance of the
Utilities.
MARKET OUTLOOK: While the length and depth of the market decline over
the last several years has been painful, the good news is that stocks appear now
more reasonably priced than they have been in a long time. In fact, at the
October lows, the market was selling below its long term average price to
earnings ratio based on consensus 2003 earnings estimates. Given the substantial
decline in interest rates (which compete with stocks for investor attention and
serve as the underpinning for stock valuation), stocks are at more attractive
valuation levels than has been the case for the last quarter of a century. In
fact, the dividend yield on the market is now higher than short-term interest
rates, a situation that hasn't been experienced for any extended period since
the early 1950's. Meanwhile, the economy and corporate profits continue to grow
albeit at modest rates, inflation seems under control, and the Federal Reserve
is accommodating. The market continues to deal with a number of issues
including: Accounting integrity and corporate governance; record levels of
corporate and consumer debt; the intermediate term trajectory of the economy;
the long-term growth of corporate profits; and the impact of the potential war
in Iraq and the war against terrorism in general. While each of these issues has
the potential to significantly impact short-term market returns, current
valuation levels would seem to be attractive enough to justify the belief that
the worst of this long and deep bear market may be behind us. With that said, it
is also reasonable to expect that future returns from stocks may be
significantly below what we became accustomed to in the 380's and 390's. In
fact, stocks may well provide returns below their long-term average. However,
compared to current low interest rates, they may still be the best deal in town.
Our strategy is to continue to seek out companies that have depressed
current valuations where we believe that their long-term prospects are not
adequately reflected in their stock price. Technology and Healthcare companies
are over-weighted compared to the Value indices (about in line with the S&P
500). As an offset, we are under-weighted in Financial Services (particularly
banks) and Consumer Cyclical companies compared to most value benchmarks. While
the portfolio has been constructed stock by stock, there are a couple of broad
themes that run through the portfolio: 1). To the degree possible, we own
companies with pricing power. In the current very low inflation environment,
pricing power is a valuable asset. Property and Casualty Insurance, Healthcare,
Tobacco, and perhaps Energy companies all currently have the ability to raise
prices on their products. 2). Dividends are a more certain component of equity
return than capital gains. All things equal, we would prefer to own dividend
payers rather than non-dividend payers.
[LINE GRAPH]
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 2002
SINCE INCEPTION
1 YEAR 5/3/01
------ ------
Class S -22.99% -17.55%
S&P 500 Index -22.10% -17.72%(1)
- ------------------
(1) Since inception performance for the index is shown from 5/1/01.
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Based on a $10,000 initial investment, the table and graph above
illustrate the total return of ING VP MagnaCap Portfolio against the S&P 500
Index. The Index is unmanaged and has an inherent performance advantage over the
Portfolio since it has no cash in its portfolio, imposes no sales charges and
incurs no operating expenses. An investor cannot invest directly in an index.
The Portfolio's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your annuity contract or life
insurance policy. Total returns would have been lower if such expenses or
charges were included.
Performance table and graph do not reflect the deduction of taxes that
a shareholder will pay on portfolio distributions or the redemption of portfolio
shares.
Total returns reflect the fact that the Investment Manager has waived
certain fees and expenses otherwise payable by the Portfolio. Total return
results would have been lower had there been no waiver to the Portfolio.
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE
PORTFOLIO WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
This report contains statements that may be "forward-looking"
statements. Actual results may differ materially from those projected in the
"forward-looking" statements.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE
PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
Portfolio holdings are subject to change daily.
PRINCIPAL RISK FACTOR(s): Exposure to financial and market risks that
accompany investments in equities. International investing does pose special
risks including currency fluctuation, economic, and political risks not found in
domestic investments. Investing in funds that are concentrated in a smaller
number of holdings poses greater risk than those funds with a larger number of
holdings because each investment has a greater effect on the Fund's performance.
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APPENDIX B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ____ day of ________, 2003, by and between ING Variable Products Trust,
a Massachusetts business trust (the "Trust") with its principal place of
business at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, on
behalf of the ING VP MagnaCap Portfolio (the "Acquiring Portfolio"), a separate
series of the Trust, and ING Variable Products Trust, on behalf of the ING VP
Large Company Value Portfolio (the "Acquired Portfolio"), another separate
series of the Trust.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of the
assets of the Acquired Portfolio to the Acquiring Portfolio in exchange solely
for Class S voting shares of beneficial interest of the Acquiring Portfolio (the
"Acquiring Portfolio Shares"), the assumption by the Acquiring Portfolio of all
liabilities of the Acquired Portfolio, and the distribution of the Acquiring
Portfolio Shares to the shareholders of the Acquired Portfolio in complete
liquidation of the Acquired Portfolio as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Portfolio and the Acquiring Portfolio are series
of an open-end, registered investment company of the management type, and the
Acquired Portfolio owns securities which generally are assets of the character
in which the Acquiring Portfolio is permitted to invest; and
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Acquired Portfolio for Acquiring Portfolio Shares and
the assumption of all liabilities of the Acquired Portfolio by the Acquiring
Portfolio is in the best interests of the Acquiring Portfolio and its
shareholders and that the interests of the existing shareholders of the
Acquiring Portfolio would not be diluted as a result of this transaction; and
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Acquired Portfolio for Acquiring Portfolio Shares and
the assumption of all liabilities of the Acquired Portfolio by the Acquiring
Portfolio is in the best interests of the Acquired Portfolio and its
shareholders and that the interests of the existing shareholders of the Acquired
Portfolio would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED PORTFOLIO TO THE ACQUIRING PORTFOLIO
IN EXCHANGE FOR THE ACQUIRING PORTFOLIO SHARES, THE ASSUMPTION OF ALL
ACQUIRED PORTFOLIO LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED
PORTFOLIO
1.1. Subject to the requisite approval of the Acquired Portfolio
shareholders and the other terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Acquired
Portfolio agrees to transfer all of the Acquired Portfolio's assets, as set
forth in paragraph 1.2, to the Acquiring Portfolio, and the Acquiring Portfolio
agrees in exchange therefor: (i) to deliver to the Acquired Portfolio the number
of full and fractional Class S Acquiring Portfolio Shares determined by dividing
the value of the Acquired Portfolio's net assets with respect to Class S,
computed in the manner and as of the time and date set forth in paragraph 2.1,
by the net asset value of one Acquiring Portfolio Share of Class S, computed in
the manner and as of the time and date set forth in paragraph 2.2; and (ii) to
assume all liabilities of the Acquired Portfolio as set forth in paragraph 1.3.
Such transactions shall take place at the closing provided for in paragraph 3.1
(the "Closing").
1.2. The assets of the Acquired Portfolio to be acquired by the
Acquiring Portfolio shall consist of all assets and property, including, without
limitation, all cash, securities, commodities and futures interests and
dividends or interests receivable, that are owned by the Acquired Portfolio, and
any deferred or prepaid expenses shown as an asset on the books of the Acquired
Portfolio, on the closing date provided for in paragraph 3.1 (the "Closing
Date") (collectively, "Assets").
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1.3. The Acquired Portfolio will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Portfolio
shall also assume all of the liabilities of the Acquired Portfolio, whether
accrued or contingent, known or unknown, existing at the Valuation Date, as
defined in paragraph 2.1 (collectively, "Liabilities"). On or as soon as
practicable prior to the Closing Date, the Acquired Portfolio will declare and
pay to its shareholders of record one or more dividends and/or other
distributions so that it will have distributed substantially all (and in no
event less than 98%) of its investment company taxable income (computed without
regard to any deduction for dividends paid) and realized net capital gain, if
any, for the current taxable year through the Closing Date.
1.4. Immediately after the transfer of Assets provided for in paragraph
1.1, the Acquired Portfolio will distribute to the Acquired Portfolio's
shareholders of record, determined as of immediately after the close of business
on the Closing Date (the "Acquired Portfolio Shareholders"), on a pro rata
basis, the Acquiring Portfolio Shares of the same class received by the Acquired
Portfolio pursuant to paragraph 1.1, and will completely liquidate. Such
distribution and liquidation will be accomplished, with respect to the Acquired
Portfolio's shares, by the transfer of the Acquiring Portfolio Shares then
credited to the account of the Acquired Portfolio on the books of the Acquiring
Portfolio to open accounts on the share records of the Acquiring Portfolio in
the names of the Acquired Portfolio Shareholders. The aggregate net asset value
of Class S Acquiring Portfolio Shares to be so credited to Class S Acquired
Portfolio Shareholders shall be equal to the aggregate net asset value of the
Acquired Portfolio shares of that same class owned by such shareholders on the
Closing Date. All issued and outstanding shares of the Acquired Portfolio will
simultaneously be canceled on the books of the Acquired Portfolio.
1.5. Ownership of Acquiring Portfolio Shares will be shown on the books
of the Acquiring Portfolio's transfer agent, as defined in paragraph 3.3.
1.6. Any reporting responsibility of the Acquired Portfolio including,
but not limited to, the responsibility for filing of regulatory reports, tax
returns, or other documents with the U.S. Securities and Exchange Commission
(the "Commission"), any state securities commission, and any federal, state or
local tax authorities or any other relevant regulatory authority, is and shall
remain the responsibility of the Acquired Portfolio.
2. VALUATION
2.1. The value of the Assets shall be the value computed as of
immediately after the close of business of the New York Stock Exchange ("NYSE")
and after the declaration of any dividends on the Closing Date (such time and
date being hereinafter called the "Valuation Date"), using the valuation
procedures in the then-current prospectus and statement of additional
information with respect to the Acquiring Portfolio, and valuation procedures
established by the Acquiring Portfolio's Board of Trustees.
2.2. The net asset value of a Class S Acquiring Portfolio Share shall
be the net asset value per share computed with respect to that class as of the
Valuation Date, using the valuation procedures set forth in the Acquiring
Portfolio's then-current prospectus and statement of additional information and
valuation procedures established by the Acquiring Portfolio's Board of Trustees.
2.3. The number of the Class S Acquiring Portfolio Shares to be issued
(including fractional shares, if any) in exchange for the Acquired Portfolio's
Assets shall be determined by dividing the value of the net assets with respect
to the Class S shares of the Acquired Portfolio, determined using the same
valuation procedures referred to in paragraph 2.1, by the net asset value of an
Acquiring Portfolio Share, determined in accordance with paragraph 2.2.
2.4. All computations of value shall be made by the Acquired
Portfolio's designated record keeping agent and shall be subject to review by
the Acquiring Portfolio's record keeping agent and by each Fund's respective
independent accountants.
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3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be October 18, 2003, or such other date as
the parties may agree to in writing. All acts taking place at the Closing shall
be deemed to take place simultaneously as of immediately after the close of
business on the Closing Date unless otherwise agreed to by the parties. The
close of business on the Closing Date shall be as of 4:00 p.m., Eastern Time.
The Closing shall be held at the offices of the Acquiring Portfolio or at such
other time and/or place as the parties may agree.
3.2. The Acquired Portfolio shall direct State Street Bank and Trust
Company, as custodian for the Acquired Portfolio (the "Custodian"), to deliver,
at the Closing, a certificate of an authorized officer stating that (i) the
Assets shall have been delivered in proper form to the Acquiring Portfolio
within two business days prior to or on the Closing Date, and (ii) all necessary
taxes in connection with the delivery of the Assets, including all applicable
federal and state stock transfer stamps, if any, have been paid or provision for
payment has been made. The Acquired Portfolio's portfolio securities represented
by a certificate or other written instrument shall be presented by the Acquired
Portfolio Custodian to the custodian for the Acquiring Portfolio for examination
no later than five business days preceding the Closing Date, and shall be
transferred and delivered by the Acquired Portfolio as of the Closing Date for
the account of the Acquiring Portfolio duly endorsed in proper form for transfer
in such condition as to constitute good delivery thereof. The Custodian shall
deliver, as of the Closing Date by Date by book entry, in accordance with the
customary practices of the Custodian and any securities depository (as defined
in Rule 17f-4 under the Investment Company Act of 1940, as amended (the "1940
Act")) in which the Acquired Portfolio's Assets are deposited, the Assets that
are deposited with such depositories. The cash to be transferred by the Acquired
Portfolio shall be delivered by wire transfer of federal funds on the Closing
Date.
3.3. The Acquired Portfolio shall direct DST Systems, Inc. (the
"Transfer Agent"), on behalf of the Acquired Portfolio, to deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Acquired Portfolio Shareholders and the number
and percentage ownership of outstanding Class S shares owned by each such
shareholder immediately prior to the Closing. The Acquiring Portfolio shall
issue and deliver a confirmation evidencing the Acquiring Portfolio Shares to be
credited on the Closing Date to the Secretary of the Acquiring Portfolio, or
provide evidence satisfactory to the Acquired Portfolio that such Acquiring
Portfolio Shares have been credited to the Acquired Portfolio's account on the
books of the Acquiring Portfolio. At the Closing each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
3.4. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the Acquiring Portfolio or
the Acquired Portfolio shall be closed to trading or trading thereupon shall be
restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board of Trustees,
respectively, accurate appraisal of the value of the net assets of the Acquiring
Portfolio or the Acquired Portfolio, respectively, is impracticable, the Closing
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Trust on behalf of the Acquired Portfolio, represents and
warrants as follows:
(a) The Acquired Portfolio is duly organized as a series of the Trust
which is a business trust duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts with power under the Trust's
Declaration of Trust ("Declaration of Trust") to own all of its Assets and to
carry on its business as it is now being conducted;
(b) The Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and the registration of
shares of the Acquired Portfolio under the Securities Act of 1933, as amended
("1933 Act"), is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired
Portfolio of the transactions contemplated herein, except such as have been
obtained
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under the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act") and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of
the Acquired Portfolio and each prospectus and statement of additional
information of the Acquired Portfolio used during the three years previous to
the date of this Agreement conforms or conformed at the time of its use in all
material respects to the applicable requirements of the 1933 Act and the 1940
Act and the rules and regulations of the Commission thereunder and does not or
did not at the time of its use include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not materially misleading;
(e) On the Closing Date, the Trust, on behalf of the Acquired Portfolio
will have good and marketable title to the Assets and full right, power, and
authority to sell, assign, transfer and deliver such Assets hereunder free of
any liens or other encumbrances, and upon delivery and payment for such Assets,
the Trust, on behalf of the Acquiring Portfolio will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Portfolio;
(f) The Acquired Portfolio is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a material
violation of the Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the Trust
on behalf of the Acquired Portfolio, is a party or by which it is bound, or (ii)
the acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Trust, on behalf of the Acquired Portfolio is a party or by which it is
bound;
(g) All material contracts or other commitments of the Acquired
Portfolio (other than this Agreement and certain investment contracts, including
options, futures, and forward contracts) will terminate without liability to the
Acquired Portfolio on or prior to the Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by the
Trust, on behalf of the Acquiring Portfolio, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Acquired
Portfolio, or any of its properties or assets that, if adversely determined,
would materially and adversely affect the Acquired Portfolio's financial
condition or the conduct of its business. The Trust, on behalf of the Acquired
Portfolio, knows of no facts which might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects the Acquired Portfolio's business or the Acquired Portfolio's
ability to consummate the transactions herein contemplated;
(i) The Statement of Assets and Liabilities, Statements of Operations
and Changes in Net Assets, and Portfolio of Investments of the Acquired
Portfolio as of December 31, 2002 have been audited by KPMG LLP, independent
accountants, and are in accordance with generally accepted accounting principles
("GAAP") consistently applied, and such statements (copies of which have been
furnished to the Acquiring Portfolio) present fairly, in all material respects,
the financial condition of the Acquired Portfolio as of such date in accordance
with GAAP, and there are no known contingent liabilities of the Acquired
Portfolio required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(j) Since December 31, 2002, there has not been any material adverse
change in the Acquired Portfolio's financial condition, assets, liabilities or
business, other than changes occurring in the ordinary course of business, or
any incurrence by the Acquired Portfolio of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise disclosed
to and accepted by the Acquiring Portfolio. For the purposes of this
subparagraph (j), a decline in net asset value per share of the Acquired
Portfolio due to declines in market values of securities in the Acquired
Portfolio's portfolio, the discharge of Acquired Portfolio liabilities, or the
redemption of Acquired Portfolio Shares by shareholders of the Acquired
Portfolio shall not constitute a material adverse change;
(k) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Portfolio
required by law to have been filed by such date (including any extensions) shall
have been filed and are or will be correct in all material respects, and all
Federal and other taxes shown as due or
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required to be shown as due on said returns and reports shall have been paid or
provision shall have been made for the payment thereof, and to the best of the
Acquired Portfolio's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Portfolio has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a regulated
investment company, has complied (or will comply) with the applicable
diversification requirements imposed by Subchapter L of the Code, has been (or
will be) eligible to and has computed (or will compute) its federal income tax
under Section 852 of the Code, and will have distributed all of its investment
company taxable income and net capital gain (as defined in the Code) that has
accrued through the Closing Date, and before the Closing Date will have declared
dividends sufficient to distribute all of its investment company taxable income
and net capital gain for the period ending on the Closing Date;
(m) All issued and outstanding shares of the Acquired Portfolio are,
and on the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Trust and have been offered and sold in every
state and the District of Columbia in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities laws.
All of the issued and outstanding shares of the Acquired Portfolio will, at the
time of Closing, be held by the persons and in the amounts set forth in the
records of the Transfer Agent, on behalf of the Acquired Portfolio, as provided
in paragraph 3.3. The Acquired Portfolio does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the shares of the
Acquired Portfolio, nor is there outstanding any security convertible into any
of the Acquired Portfolio shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the Trust on behalf of the Acquired Portfolio,
and, subject to the approval of the shareholders of the Acquired Portfolio, this
Agreement will constitute a valid and binding obligation of the Acquired
Portfolio, enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization, moratorium and other laws relating to
or affecting creditors' rights and to general equity principles;
(o) The information to be furnished by the Acquired Portfolio for use
in registration statements, proxy materials and other documents filed or to be
filed with any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects with
Federal securities and other laws and regulations thereunder applicable thereto;
and
(p) The proxy statement of the Acquired Portfolio (the "Proxy
Statement") to be included in the Registration Statement, insofar as it relates
to the Acquired Portfolio, will, on the effective date of the Registration
Statement and on the Closing Date (i) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading provided, however,
that the representations and warranties in this subparagraph (p) shall not apply
to statements in or omissions from the Proxy Statement and the Registration
Statement made in reliance upon and in conformity with information that was
furnished by the Acquiring Portfolio for use therein, and (ii) comply in all
material respects with the provisions of the 1933 Act, the 1934 Act and the 1940
Act and the rules and regulations thereunder.
4.2. The Trust, on behalf of the Acquiring Portfolio, represents and
warrants as follows:
(a) The Acquiring Portfolio is duly organized as a series of the Trust,
which is a business trust duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts with power under the Trust's
Declaration of Trust to own all of its properties and assets and to carry on its
business as it is now being conducted;
(b) The Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act and the registration of
shares of the Acquiring Portfolio under the 1933 Act, is in full force and
effect;
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(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring
Portfolio of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be
required by state securities laws;
(d) The current prospectus and statement of additional information of
the Acquiring Portfolio and each prospectus and statement of additional
information of the Acquiring Portfolio used during the three years previous to
the date of this Agreement conforms or conformed at the time of its use in all
material respects to the applicable requirements of the 1933 Act and the 1940
Act and the rules and regulations of the Commission thereunder and does not or
did not at the time of its use include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not materially misleading;
(e) On the Closing Date, the Acquiring Portfolio will have good and
marketable title to the Acquiring Portfolio's assets, free of any liens of other
encumbrances, except those liens or encumbrances as to which the Acquired
Portfolio has received notice and necessary documentation at or prior to the
Closing;
(f) The Acquiring Portfolio is not engaged currently, and the
execution, delivery and performance of this Agreement will not result, in (i) a
material violation of the Trust's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Trust, on behalf of the Acquiring Portfolio, is a party or by which it is
bound, or (ii) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease, judgment
or decree to which the Trust on behalf of the Acquiring Portfolio, is a party or
by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by the
Trust, on behalf of the Acquired Portfolio, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against the Trust, on behalf
of the Acquiring Portfolio, or any of the Acquiring Portfolio's properties or
assets that, if adversely determined, would materially and adversely affect the
Acquiring Portfolio's financial condition or the conduct of its business. The
Trust on behalf of the Acquiring Portfolio knows of no facts which might form
the basis for the institution of such proceedings and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the Acquiring
Portfolio's business or the Acquiring Portfolio's ability to consummate the
transactions herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations
and Changes in Net Assets and Portfolio of Investments of the Acquiring
Portfolio as of December 31, 2002 have been audited by KPMG LLP, independent
accountants, and are in accordance with GAAP consistently applied, and such
statements (copies of which have been furnished to the Acquired Portfolio)
present fairly, in all material respects, the financial condition of the
Acquiring Portfolio as of such date in accordance with GAAP, and there are no
known contingent liabilities of the Acquiring Portfolio required to be reflected
on a balance sheet (including the notes thereto) in accordance with GAAP as of
such date not disclosed therein;
(i) Since December 31, 2002, there has not been any material adverse
change in the Acquiring Portfolio's financial condition, assets, liabilities or
business, other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Portfolio of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise disclosed
to and accepted by the Acquired Portfolio. For purposes of this subparagraph
(i), a decline in net asset value per share of the Acquiring Portfolio due to
declines in market values of securities in the Acquiring Portfolio's portfolio,
the discharge of Acquiring Portfolio liabilities, or the redemption of Acquiring
Portfolio Shares by shareholders of the Acquiring Portfolio, shall not
constitute a material adverse change;
(j) On the Closing Date, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Portfolio
required by law to have been filed by such date (including any extensions) shall
have been filed and are or will be correct in all material respects, and all
Federal and other taxes shown as due or required to be shown as due on said
returns and reports shall have been paid or provision shall have been made for
the payment thereof, and to the best of the Acquiring Portfolio's knowledge no
such return is currently under audit and no assessment has been asserted with
respect to such returns;
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(k) For each taxable year of its operation (including the taxable year
that includes the Closing Date), the Acquiring Portfolio has met (or will meet)
the requirements of Subchapter M of the Code for qualification as a regulated
investment company, has complied (or will comply) with the applicable
diversification requirements imposed by Subchapter L of the Code, has been
eligible to (or will be eligible to) and has computed (or will compute) its
federal income tax under Section 852 of the Code, and has distributed all of its
investment company taxable income and net capital gain (as defined in the Code)
for periods ending prior to the Closing Date;
(l) All issued and outstanding Acquiring Portfolio Shares are, and on
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable (recognizing that, under Massachusetts law, it is
theoretically possible that shareholders of the Acquiring Portfolio could, under
certain circumstances, be held personally liable for obligations of the
Acquiring Portfolio) and have been offered and sold in every state and the
District of Columbia in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws. The
Acquiring Portfolio does not have outstanding any options, warrants or other
rights to subscribe for or purchase any Acquiring Portfolio Shares, nor is there
outstanding any security convertible into any Acquiring Portfolio Shares;
(m) The execution, delivery and performance of this Agreement will have
been fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the Trust on behalf of the Acquiring Portfolio
and this Agreement will constitute a valid and binding obligation of the Trust,
on behalf of the Acquiring Portfolio, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) Acquiring Portfolio Shares to be issued and delivered to the
Acquired Portfolio, for the account of the Acquired Portfolio Shareholders,
pursuant to the terms of this Agreement, will on the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly issued
Acquiring Portfolio Shares, and will be fully paid and non-assessable
(recognizing that, under Massachusetts law, it is theoretically possible that
shareholders of the Acquiring Portfolio could, under certain circumstances, be
held personally liable for obligations of the Acquiring Portfolio);
(o) The information to be furnished by the Trust for use in the
registration statements, proxy materials and other documents that may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations applicable
thereto; and
(p) That insofar as it relates to the Acquiring Portfolio, the
Registration Statement relating to the Acquiring Portfolio Shares issuable
hereunder, and the proxy materials of the Acquired Portfolio to be included in
the Registration Statement, and any amendment or supplement to the foregoing,
will, from the effective date of the Registration Statement through the date of
the meeting of shareholders of the Acquired Portfolio contemplated therein (i)
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading provided, however, that the representations and warranties in this
subparagraph (p) shall not apply to statements in or omissions from the
Registration Statement made in reliance upon and in conformity with information
that was furnished by the Acquired Portfolio for use therein, and (ii) comply in
all material respects with the provisions of the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder.
5. COVENANTS OF THE ACQUIRING PORTFOLIO AND THE ACQUIRED PORTFOLIO
5.1. The Acquiring Portfolio and the Acquired Portfolio each will
operate its business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions,
and any other distribution that may be advisable.
5.2. The Trust will call a meeting of the shareholders of the Acquired
Portfolio to consider and act upon this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated herein.
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5.3. The Acquired Portfolio covenants that the Class S Acquiring
Portfolio Shares to be issued hereunder are not being acquired for the purpose
of making any distribution thereof, other than in accordance with the terms of
this Agreement.
5.4. Subject to the provisions of this Agreement, the Acquiring
Portfolio and the Acquired Portfolio will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement.
5.5. As soon as is reasonably practicable after the Closing, the
Acquired Portfolio will make a liquidating distribution to its shareholders
consisting of the Class S Acquiring Portfolio Shares received at the Closing.
5.6. The Acquiring Portfolio and the Acquired Portfolio shall each use
its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to effect the transactions contemplated by this Agreement
as promptly as practicable.
5.7. The Trust, on behalf of the Acquired Portfolio, covenants that the
Trust will, from time to time, as and when reasonably requested by the Acquiring
Portfolio, execute and deliver or cause to be executed and delivered all such
assignments and other instruments, and will take or cause to be taken such
further action as the Trust, on behalf of the Acquiring Portfolio, may
reasonably deem necessary or desirable in order to vest in and confirm (a) the
Trust's, on behalf of the Acquired Portfolio's, title to and possession of the
Acquiring Portfolio Shares to be delivered hereunder, and (b) Trust's, on behalf
of the Acquiring Portfolio's, title to and possession of all the assets, and to
carry out the intent and purpose of this Agreement.
5.8. The Acquiring Portfolio will use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state blue sky or securities laws as may be necessary in order to
continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED PORTFOLIO
The obligations of the Trust, on behalf of the Acquired Portfolio, to
consummate the transactions provided for herein shall be subject, at the Trust's
election, to the performance by the Trust, on behalf of the Acquiring Portfolio,
of all the obligations to be performed by it hereunder on or before the Closing
Date, and, in addition thereto, the following further conditions:
6.1. All representations and warranties of the Trust, on behalf of the
Acquiring Portfolio, contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be affected
by the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
6.2. The Acquiring Portfolio shall have delivered to the Acquired
Portfolio a certificate executed in its name by its President or Vice President
and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to
the Acquired Portfolio and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Portfolio made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement and as to such other
matters as the Acquired Portfolio shall reasonably request;
6.3. The Trust, on behalf of the Acquiring Portfolio, shall have
performed all of the covenants and complied with all of the provisions required
by this Agreement to be performed or complied with by the Trust, on behalf of
the Acquiring Portfolio, on or before the Closing Date; and
6.4. The Acquired Portfolio and the Acquiring Portfolio shall have
agreed on the number of full and fractional Acquiring Portfolio Shares of Class
S to be issued in connection with the Reorganization after such number has been
calculated in accordance with paragraph 1.1.
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING PORTFOLIO
The obligations of the Trust, on behalf of the Acquiring Portfolio, to
complete the transactions provided for herein shall be subject, at the Trust's
election, to the performance by the Trust on behalf of the Acquired Portfolio of
all of the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of the Trust, on behalf of the
Acquired Portfolio, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
7.2. The Trust shall have delivered to the Acquiring Portfolio a
statement of the Acquired Portfolio's assets and liabilities, as of the Closing
Date, certified by the Treasurer of the Trust;
7.3 The Acquired Portfolio shall have delivered to the Acquiring
Portfolio a certificate executed in its name by its President or Vice President
and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to
the Acquiring Portfolio and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquired Portfolio made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement and as to such other
matters as the Acquiring Portfolio shall reasonably request;
7.4. The Trust, on behalf of the Acquired Portfolio, shall have
performed all of the covenants and complied with all of the provisions required
by this Agreement to be performed or complied with by the Trust, on behalf of
the Acquired Portfolio, on or before the Closing Date;
7.5. The Acquired Portfolio and the Acquiring Portfolio shall have
agreed on the number of full and fractional Acquiring Portfolio Shares of Class
S to be issued in connection with the Reorganization after such number has been
calculated in accordance with paragraph 1.1; and
7.6. The Acquired Portfolio shall have declared and paid a distribution
or distributions prior to the Closing that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its investment company taxable income and all of its net realized capital
gains, if any, for the period from the close of its last fiscal year to 4:00
p.m. Eastern time on the Closing; and (ii) any undistributed investment company
taxable income and net realized capital gains from any period to the extent not
otherwise already distributed.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING PORTFOLIO
AND THE ACQUIRED PORTFOLIO
If any of the conditions set forth below have not been satisfied on or
before the Closing Date with respect to the Trust, on behalf of the Acquired
Portfolio, or the Trust, on behalf of the Acquiring Portfolio, the other party
to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Portfolio in accordance with the provisions of the Trust's
Declaration of Trust, By-Laws, applicable Massachusetts law and the 1940 Act,
and certified copies of the resolutions evidencing such approval shall have been
delivered to the Acquiring Portfolio. Notwithstanding anything herein to the
contrary, the Trust may not waive the conditions set forth in this paragraph 8.1
on behalf of the Acquired Portfolio or the Acquiring Portfolio;
8.2. On the Closing Date no action, suit or other proceeding shall be
pending or, to the Trust's knowledge, threatened before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
damages or other relief in connection with, this Agreement or the transactions
contemplated herein;
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Trust to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order or
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permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Portfolio or the Acquired Portfolio, provided that
either party hereto may for itself waive any of such conditions;
8.4. The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
8.5. The parties shall have received the opinion of Dechert addressed
to the Trust substantially to the effect that, based upon certain facts,
assumptions, and representations, the transaction contemplated by this Agreement
shall constitute a tax-free reorganization for Federal income tax purposes. The
delivery of such opinion is conditioned upon receipt by Dechert of
representations it shall request of the Trust. Notwithstanding anything herein
to the contrary, the Trust may not waive the condition set forth in this
paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1. The Trust, on behalf of the Acquiring Portfolio and the Acquired
Portfolio, represents and warrants that there are no brokers or finders entitled
to receive any payments in connection with the transactions provided for herein.
9.2. The expenses relating to the proposed Reorganization will be
shared so that (1) half of such costs are borne by the investment adviser to the
Acquired and Acquiring Portfolios, and (2) half are borne by the Acquired and
Acquiring Portfolios and will be paid by the Acquired Portfolio and Acquiring
Portfolio pro rata based upon the relative net assets of the Acquired Portfolio
and Acquiring Portfolio as of the close of business on the record date for
determining the shareholders of the Acquired Portfolio entitled to vote on the
Reorganization. The costs of the Reorganization shall include, but not be
limited to, costs associated with obtaining any necessary order of exemption
from the 1940 Act, preparation of the Registration Statement, printing and
distributing the Acquiring Portfolio's prospectus and the Acquired Portfolio's
proxy materials, legal fees, accounting fees, securities registration fees, and
expenses of holding shareholders' meetings. Notwithstanding any of the
foregoing, expenses will in any event be paid by the party directly incurring
such expenses if and to the extent that the payment by another person of such
expenses would result in the disqualification of such party as a "regulated
investment company" within the meaning of Section 851 of the Code.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The Trust agrees that it has not made any representation,
warranty or covenant not set forth herein and that this Agreement constitutes
the entire agreement between the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing shall survive the Closing.
11. TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either party by (i) mutual agreement of the parties,
or (ii) by either party if the Closing shall not have occurred on or before
January 31, 2004, unless such date is extended by mutual agreement of the
parties, or (iii) by either party if the other party shall have materially
breached its obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any of the parties including the Trust or its Trustees
or officers, except for any such material breach or intentional
misrepresentation, as to each of which all remedies at law or in equity of the
party adversely affected shall survive.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be deemed necessary or advisable by the authorized officers of the Trust;
provided, however, that following the meeting of the shareholders
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of the Acquired Portfolio called by the Trust pursuant to paragraph 5.2 of this
Agreement, no such amendment may have the effect of changing the provisions for
determining the number of the Class S Acquiring Portfolio Shares to be issued to
the Acquired Portfolio Shareholders under this Agreement to the detriment of
such shareholders without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to the Trust,
7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, attn: Kimberly
A. Anderson, with a copy to Dechert LLP, 1775 I Street, N.W., Washington, D.C.
20006, attn: Jeffrey S. Puretz.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1. The Article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its principles of
conflicts of laws.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5. It is expressly agreed that the obligations of the parties
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Trust personally, but shall bind only the
trust property of such party, as provided in the Declaration of Trust of the
Trust. The execution and delivery by such officers shall not be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of such party as provided in
the Declaration of Trust.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its President or Vice President and its seal to be affixed thereto
and attested by its Secretary or Assistant Secretary.
ING VARIABLE PRODUCTS TRUST on behalf
of its ING VP LARGE COMPANY VALUE
PORTFOLIO
Attest:
_________________________________ By: _________________________________
Secretary
Its: ________________________________
ING VARIABLE PRODUCTS TRUST
on behalf of its ING VP MAGNACAP
PORTFOLIO
Attest:
_________________________________ By: _________________________________
Secretary
Its: ________________________________
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APPENDIX C
ADDITIONAL INFORMATION REGARDING ING VP MAGNACAP PORTFOLIO
("MAGNACAP PORTFOLIO")
SHAREHOLDER GUIDE
ABOUT YOUR INVESTMENT
The Portfolios are available only to serve as investment options under
variable annuity contracts or variable life insurance policies issued by
insurance companies that are part of the ING Group of companies. Shares of the
Portfolios may be sold in the future to insurance companies that are not
affiliated with ING Group.
ING Funds Distributor, LLC, the Distributor for the Trust, also offers
directly to the public other ING funds that have similar names, investment
objectives and strategies as those of the Portfolios offered by this Prospectus.
You should be aware that the Portfolios are likely to differ from these other
ING funds in size and cash flow pattern. Accordingly, the performance of these
Portfolios can be expected to vary from those of the other funds.
You do not buy, sell or exchange shares of the Portfolios. You choose
investment options through your annuity contract or life insurance policy.
The insurance company that issued your variable annuity contract or
life insurance policy is responsible for investing in the Portfolios according
to the investment options you've chosen. You should consult your variable
contract prospectus for additional information about how this works.
The Trust currently does not foresee any disadvantages to investors if
the Trust serves as an investment medium for both variable annuity contracts and
variable life insurance policies. However, it is possible that the interests of
owners of variable annuity contracts and variable insurance policies for which
the Trust serves as an investment medium might at some time be in conflict
because of differences in tax treatment or other considerations. The Board of
Trustees intends to monitor events to identify any material conflicts between
variable annuity contract owners and variable life insurance policy owners, and
would have to determine what action, if any, should be taken in the event of
such a conflict. If such a conflict occurred, an insurance company participating
in the Trust might be required to redeem the investment of one or more of its
separate accounts from the Trust, which might force the Trust to sell securities
at disadvantageous prices.
The Trust may discontinue offering shares of any Portfolio at any time.
If a Portfolio is discontinued, any allocation to that Portfolio will be
allocated to another Portfolio that the Board of Trustees believes is suitable,
as long as any required regulatory standards are met.
MANAGEMENT OF MAGNACAP PORTFOLIO
INVESTMENT ADVISER. ING Investments, LLC ("ING Investments" of "ING")
an Arizona limited liability company, serves as the investment adviser to
MagnaCap Portfolio. ING Investments has overall responsibility for management of
MagnaCap Portfolio. ING Investments has engaged a Sub-Adviser to provide the
day-to-day management of the MagnaCap Fund's portfolio. Under the terms of the
sub-advisory agreement, the agreement can be terminated by either ING
Investments or the Board of Trustees of the Fund. In the event the sub-advisory
agreement is terminated, the Sub-Adviser may be replaced subject to any
regulatory requirements or ING Investments may assume day-to-day investment
management of the Fund. ING Investments is responsible for monitoring the
investment program and performance of the Sub-Adviser as well as the custodial,
transfer agency, dividend disbursing, accounting, auditing, compliance and
related services. As of May 31, 2003, ING Investments managed over $34.6 billion
in assets.
SUB-ADVISER. Aeltus Investment Management, Inc. ("ING Aeltus"), a
registered investment adviser, is responsible for providing the day-to-day
management of MagnaCap Fund. ING Aeltus is an indirect, wholly-owned subsidiary
of ING Groep, N.V. (NYSE:ING) ("ING Group") and an affiliate of ING Investments.
ING Aeltus has been managing client assets for more than a quarter century and
as of May 31, 2003, managed over $41 billion in assets.
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MagnaCap Fund has been managed by a team of investment professionals
led by William F. Coughlin since April 2003. William F. Coughlin, Portfolio
Manager, joined ING in April 2003. Prior to joining ING, Mr. Coughlin was Chief
Investment Officer and a principal of Delta Capital Management LLC since 1998.
Before joining Delta Capital Management LLC, he was a Managing Director at
Scudder Kemper Investments, and its predecessor firm, Dreman Value Advisors.
PARENT COMPANY AND DISTRIBUTOR. ING Investments and ING Funds
Distributor, LLC (the "Distributor") are indirect, wholly owned subsidiaries of
ING Group. ING Group is a global financial institution active in the fields of
insurance, banking and asset management in more than 65 countries, with over
100,000 employees.
SERVICE FEES-CLASS S SHARES
The Trust has adopted a Shareholder Services Plan (the Plan) for the
Class S shares of each Portfolio. The Plan allows the Trust's Administrator, ING
Funds Services, LLC, to use payments under the Plan to make payments to
insurance companies, broker-dealers or other financial intermediaries that
provide services relating to Class S shares and their shareholders including
variable contract owners with interests in the portfolios. Services that may be
provided under the Plan include, among other things, providing information about
the Portfolios and delivering Portfolio documents. Under the Plan, a Portfolio
makes payments at an annual rate of 0.25% of the Portfolio's average daily net
assets attributable to its Class S shares.
DETERMINATION OF NET ASSET VALUE
The NAV per share of the Portfolio is determined each business day as
of the close of trading on the New York Stock Exchange (usually at 4:00 p.m.
Eastern Time). The NAV per share is calculated by taking the value of the
Portfolio's assets, subtracting the Portfolio's liabilities, and dividing by the
number of shares of that class that are outstanding. Please note that foreign
securities may trade in their primary markets on weekends or other days when the
Portfolio does not price its shares. Therefore, the value of the Portfolio's
investments (if the Portfolio holds foreign securities) may change on days when
you will not be able to reallocate between investment options.
In general, assets are valued based on actual or estimated market
value, with special provisions for assets not having readily available market
quotations, and short-term debt securities, and for situations where market
quotations are deemed unreliable. Short-term debt securities having a maturity
of 60 days or less are valued at amortized cost, unless the amortized cost does
not approximate market value. Securities prices may be obtained from automated
pricing services. When market quotations are not readily available or are deemed
unreliable, securities are valued at their fair value as determined in good
faith under the supervision of the Board of Trustees. Valuing securities at fair
value involves greater reliance on judgment than securities that have readily
available market quotations.
When a participating insurance company is buying shares, it will pay
the NAV that is next calculated after its order is received in proper form. When
a participating insurance company is selling shares, it will normally receive
the NAV that is next calculated after its order is received in proper form.
PRIVACY POLICY
The Portfolio has adopted a policy concerning investor privacy. To
review the privacy policy, contact a Shareholder Services Representative at
1-800-992-0180 and select Option 1 or obtain a policy over the internet at
www.ingfunds.com.
PORTFOLIO EARNINGS AND YOUR TAXES
Each Portfolio distributes virtually all of its net investment income
and net capital gains to shareholders in the form of dividends. The Portfolios
declare and pay dividends quarterly, with the exception of the High Yield Bond
Portfolio, which declares dividends daily and pays dividends quarterly.
As a contract owner invested in a Portfolio, you are entitled to a
share of the income and capital gains that the Portfolio distributes. The amount
you receive is based on the number of shares you own.
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Each Portfolio intends to elect to qualify as a "regulated investment
company" under the provisions of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). If each Portfolio qualifies as a "regulated
investment company" and complies with the appropriate provisions of the Code,
each Portfolio will be relieved of federal income tax on the amounts
distributed.
In order for the separate accounts to comply with regulations under
Section 817(h) of the Code, each Portfolio will diversify its investments so
that on the last day of each quarter of a calendar year, no more than 55% of the
value of each separate account's proportionate share of the assets owned by each
of the regulated investment companies in which it owns shares is represented by
any one investment, no more than 70% is represented by any two investments, no
more than 80% is represented by any three investments, and no more than 90% is
represented by any four investments. For this purpose, securities of a single
issuer are treated as one investment and each U.S. Government agency or
instrumentality is treated as a separate issuer. Any security issued,
guaranteed, or insured (to the extent so guaranteed or insured) by the U.S.
Government or an agency or instrumentality of the U.S. Government is treated as
a security issued by the U.S. Government or its agency or instrumentality,
whichever is applicable.
Since the sole shareholders of the Portfolios will be separate
accounts, no discussion is included herein as to the federal income tax
consequences at the shareholder level. For information concerning the federal
income tax consequences to purchasers of the policies, see the attached
prospectus for the policy.
You should consult the variable contract prospectus or offering
memorandum along with your tax advisor for information as to how investing in
variable portfolios affects your personal tax situation.
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FINANCIAL HIGHLIGHTS
The information in the table below has been derived from ING VP
MagnaCap Portfolio's financial statements, which have been audited by KPMG LLP,
independent auditors.
CLASS S
--------------------------------------------
YEAR PERIOD
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2002 2001(1)
---- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 8.98 9.59
Income from investment operations:
Net investment income $ 0.07 0.05
Net realized and unrealized loss on investments $ (2.13) (0.60)
Total from investment operations $ (2.06) (0.55)
Less distributions from:
Net investment income $ 0.07 0.06
Total distributions $ 0.07 0.06
Net asset value, end of period $ 6.85 8.98
TOTAL RETURN(2) % (22.99) (5.75)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 12,843 5,854
Ratio of expenses to average net assets after expense
reimbursement(3)(4) % 1.10 1.10
Ratio of expenses to average net assets prior to expense
reimbursement(3) % 1.45 1.53
Ratio of net investment income to average net assets
after expense reimbursement(3)(4) % 1.01 1.13
Portfolio turnover rate % 47 72
- ------------------
(1) The Portfolio commenced offering of Class S shares on May 7, 2001.
(2) Assumes dividends have been reinvested and does not reflect the effect of
contract insurance charges. Total return for periods less than one year are
not annualized.
(3) Annualized for periods less than one year.
(4) The Investment Manager has agreed to limit expenses (excluding interest,
taxes, brokerage and extraordinary expenses) subject to possible recoupment
by ING Investments, LLC within three years.
C-4
APPENDIX D
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL AND RECORD OWNERS
The following tables provide information about the persons or entities
who, to the knowledge of each Portfolio, owned beneficially or of record 5% or
more of any class of that Portfolio's outstanding shares as of August 12, 2003:
ING VP LARGE COMPANY VALUE PORTFOLIO
- --------------------------------------------------------------------------------------------------
PERCENTAGE OF
COMBINED PORTFOLIO
NAME AND ADDRESS OF PERCENT OF CLASS OF SHARES PERCENTAGE OF AFTER THE
SHAREHOLDER AND TYPE OF OWNERSHIP PORTFOLIO REORGANIZATION*
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
ING VP MAGNACAP PORTFOLIO
- --------------------------------------------------------------------------------------------------
PERCENTAGE OF
COMBINED PORTFOLIO
NAME AND ADDRESS OF PERCENT OF CLASS OF SHARES PERCENTAGE OF AFTER THE
SHAREHOLDER AND TYPE OF OWNERSHIP PORTFOLIO REORGANIZATION*
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- ---------------
* On a pro forma basis, assuming that the value of the shareholder's
interest in the Portfolio on the date of consummation of the
Reorganization is the same as on August 12, 2003.
D-1
PART B
ING VARIABLE PRODUCTS TRUST
Statement of Additional Information
August 29, 2003
Acquisition of the Assets and Liabilities of: By and in Exchange for Shares of:
ING VP Large Company Value Portfolio ING VP MagnaCap Portfolio (a series of ING
(a series of Variable Products Trust) (a series of ING Variable Products Trust)
7337 East Doubletree Ranch Road 7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034 Scottsdale, Arizona 85258-2034
This Statement of Additional Information is available to the shareholders of ING
VP Large Company Value Portfolio in connection with a proposed transaction
whereby all of the assets and liabilities of ING VP Large Company Value
Portfolio, a series of ING Variable Products Trust, will be transferred to ING
VP MagnaCap Portfolio, a series of ING Variable Products Trust, in exchange for
shares of ING VP MagnaCap Portfolio.
This Statement of Additional Information of ING Variable Products Trust consists
of this cover page and the following documents, each of which was filed
electronically with the U.S. Securities and Exchange Commission and is
incorporated by reference herein:
1. The Statement of Additional Information for ING VP Large Company Value
Portfolio and ING VP MagnaCap Portfolio, dated May 1, 2003, as filed on
April 28, 2003.
2. The Financial Statements of ING VP Large Company Value Portfolio and
ING VP MagnaCap Portfolio are included in the Annual Report of ING
Variable Products Trust dated December 31, 2002, as filed on March 4,
2003.
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement dated April 29, 2003 relating to the Reorganization of ING VP Large
Company Value Portfolio may be obtained, without charge, by writing to the ING
Funds at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034 or
calling 1-800-992-0180. This Statement of Additional Information should be read
in conjunction with the Prospectus/Proxy Statement.
PRO FORMA FINANCIAL STATEMENTS
Shown below are financial statements for each Portfolio and pro forma
financial statements for the combined Portfolio, assuming the Reorganization is
consummated, as of December 31, 2002. The first table presents Statements of
Assets and Liabilities for each Portfolio and estimated pro forma figures for
the combined Portfolio. The second table presents Statements of Operations for
each Portfolio and estimated pro forma figures for the combined Portfolio. The
third table presents Portfolio of Investments for each Portfolio and estimated
pro forma figures for the combined Portfolio. The tables are followed by the
Notes to the Pro Forma Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2002
ING
ING VP LARGE
VP MAGNACAP COMPANY VALUE PRO FORMA PRO FORMA
PORTFOLIO PORTFOLIO ADJUSTMENTS COMBINED
-------------------------------------------------------------
ASSETS:
Investments in securities, at value* $16,986,136 $ 1,320,628 $ 18,306,764
Short-term investments, at amortized cost 711,000 65,000 776,000
Cash 633 330 963
Receivables:
Fund shares sold 1,692 651 2,343
Dividends and interest 40,537 3,224 43,761
Prepaid expenses 105 - 105
Reimbursement due from manager 5,209 - 5,209
-------------------------------------------------------------
Total assets 17,745,312 1,389,833 - 19,135,145
-------------------------------------------------------------
LIABILITIES:
Payable for fund shares redeemed 7,821 - 7,821
Payable to affiliates 14,961 2,158 17,119
Other accrued expenses and liabilities 10,987 21,288 32,275
-------------------------------------------------------------
Total liabilities 33,769 23,446 - 57,215
-------------------------------------------------------------
NET ASSETS $17,711,543 $ 1,366,387 $ - $ 19,077,930
=============================================================
NET ASSETS CONSIST OF:
Paid-in capital $21,685,135 $ 1,668,504 $ 23,353,639
Undistributed net investment loss (1,439) (2,821) (4,260)
Accumulated net realized loss on investments and
foreign currencies (897,632) (60,647) (958,279)
Net unrealized depreciation of investments and
foreign currencies (3,074,521) (238,649) (3,313,170)
-------------------------------------------------------------
NET ASSETS $17,711,543 $ 1,366,387 $ - $ 19,077,930
=============================================================
*Cost of securities $20,060,657 $ 1,559,277 $ - $ 21,619,934
CLASS R:
Net Assets $ 4,868,494 n/a $ 4,868,494
Shares outstanding 714,226 n/a 714,226
Net asset value and redemption price per share $ 6.82 n/a $ 6.82
CLASS S:
Net Assets $12,843,049 $ 1,366,387 $ 14,209,436
Shares outstanding 1,875,537 172,416 27,057 (A) 2,075,010
Net asset value and redemption price per share $ 6.85 $ 7.92 $ 6.85
(A) Reflects new shares issued, net of retired shares of VP Large Company Value
Portfolio. (Calculation: Net Assets / NAV per share)
See Accompanying Notes to Final Statements
STATEMENTS OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 2002
ING
ING VP LARGE
VP MAGNACAP COMPANY VALUE PRO FORMA PRO FORMA
PORTFOLIO PORTFOLIO ADJUSTMENTS COMBINED
-------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 261,758 $ 22,529 $ 284,287
Interest 26,330 2,514 28,844
-------------------------------------------------------------
Total investment income 288,088 25,043 - 313,131
-------------------------------------------------------------
EXPENSES:
Investment advisory fees 102,228 8,906 111,134
Distribution and service fees:
Class S 25,425 2,969 28,394
Transfer agent fees:
Class R 3,591 - 3,591
Class S 10,432 7,483 (6,000) A 11,915
Administrative and service fees 13,630 1,188 14,818
Custodian and fund accounting fees 14,244 2,860 17,104
Shareholder reporting expense 5,628 4,110 9,738
Registration fees 9 - (4) A 5
Professional fees 11,991 7,720 (3,088) A 16,623
Trustee fees 541 747 1,288
Insurance expense 246 27 273
Miscellaneous expense 582 768 1,350
Organization fees - 5,371 (5,371) -
-------------------------------------------------------------
Total expenses 188,547 42,149 (14,463) 216,233
Less:
Net waived and reimbursed fees 45,577 29,033 (12,595) A 62,015
-------------------------------------------------------------
Net expenses 142,970 13,116 (1,868) 154,218
-------------------------------------------------------------
Net investment income 145,118 11,927 1,868 158,913
-------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized loss on investments (726,298) (54,063) (780,361)
Net change in unrealized depreciation of investments (3,062,141) (268,118) (3,330,259)
-------------------------------------------------------------
Net realized and unrealized loss on investments (3,788,439) (322,181) (4,110,620)
-------------------------------------------------------------
DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(3,643,321) $ (310,254) $ 1,868 $ (3,951,707)
=============================================================
(A) Reflects adjustment in expenses due to elimination of duplicative services.
See Accompanying Notes to Final Statements
PORTFOLIOS OF INVESTMENTS AS OF DECEMBER 31, 2002
ING VP ING VP ING VP ING VP
MAGNACAP LARGE COMPANY VALUE PRO FORMA MAGNACAP LARGE COMPANY VALUE PRO FORMA
SHARES SHARES SHARES COMMON STOCK: 95.96% VALUE VALUE VALUE
------ ------ ------ -------------------- ----- ----- -----
AGRICULTURE: 0.15%
1,387 68 1,455 Monsanto Co. $ 26,700 $ 1,309 $ 28,009
--------------------------------------------
26,700 1,309 28,009
--------------------------------------------
COMMERCIAL SERVICES: 3.25%
54,900 4,200 59,100 @ Cendant Corp. 575,352 44,016 619,368
--------------------------------------------
575,352 44,016 619,368
--------------------------------------------
COMPUTERS: 4.78%
69,500 5,500 75,000 @ EMC Corp.-Mass. 426,730 33,770 460,500
24,506 1,506 26,012 Hewlett-Packard Co. 425,424 26,144 451,568
--------------------------------------------
852,154 59,914 912,068
--------------------------------------------
COSMETICS/PERSONAL CARE: 1.05%
3,900 300 4,200 Kimberly-Clark Corp. 185,133 14,241 199,374
--------------------------------------------
185,133 14,241 199,374
--------------------------------------------
DIVERSIFIED FINANCIAL SERVICES: 7.13%
10,900 1,000 11,900 Alliance Capital Management Holding LP 337,900 31,000 368,900
14,900 1,200 16,100 Citigroup, Inc. 524,331 42,228 566,559
9,800 900 10,700 Morgan Stanley 391,216 35,928 427,144
--------------------------------------------
1,253,447 109,156 1,362,603
--------------------------------------------
ELECTRIC: 0.68%
37,800 2,800 40,600 @ Reliant Resources, Inc. 120,960 8,960 129,920
-------------------------------------------
120,960 8,960 129,920
--------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT: 1.55%
5,500 300 5,800 Emerson Electric Co. 279,675 15,255 294,930
--------------------------------------------
279,675 15,255 294,930
--------------------------------------------
PORTFOLIOS OF INVESTMENTS AS OF DECEMBER 31, 2002 (CONTINUED)
ING VP ING VP ING VP ING VP
MAGNACAP LARGE COMPANY VALUE PRO FORMA MAGNACAP LARGE COMPANY VALUE PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
------ ------ ------ ----- ----- -----
FOOD: 1.30%
9,800 700 10,500 Sara Lee Corp. 220,598 15,757 236,355
- 134 134 @ Del Monte Foods Co. - 1,031 1,031
- 300 300 HJ Heinz Co. - 9,861 9,861
------------------------------------------
220,598 26,649 247,247
------------------------------------------
FOREST PRODUCTS & PAPER:
3.11%
4,300 300 4,600 Bowater, Inc. 180,385 12,585 192,970
6,900 500 7,400 MeadWestvaco Corp. 170,499 12,355 182,854
4,600 300 4,900 Temple-Inland, Inc. 206,126 13,443 219,569
------------------------------------------
557,010 38,383 595,393
------------------------------------------
HEALTHCARE-SERVICES: 2.50%
5,600 500 6,100 @ Tenet Healthcare Corp. 91,840 8,200 100,040
5,000 300 5,300 @ WellPoint Health Networks 355,800 21,348 377,148
------------------------------------------
447,640 29,548 477,188
------------------------------------------
INSURANCE: 16.78%
9,300 500 9,800 Allstate Corp. 344,007 18,495 362,502
3,200 200 3,400 American Intl. Group 185,120 11,570 196,690
5,500 300 5,800 Chubb Corp. 287,100 15,660 302,760
14,900 1,100 16,000 Cigna Corp. 612,688 45,232 657,920
9,400 800 10,200 Hartford Financial Services
Group, Inc. 427,042 36,344 463,386
8,200 500 8,700 Loews Corp. 364,572 22,230 386,802
10,800 900 11,700 St. Paul Cos. 367,740 30,645 398,385
27,436 2,143 29,579 @ Travelers Property Casualty
Corp. 401,937 31,395 433,332
------------------------------------------
2,990,206 211,571 3,201,777
------------------------------------------
MACHINERY-CONSTRUCTION &
MINING: 1.25%
4,900 300 5,200 Caterpillar, Inc. 224,028 13,716 237,744
------------------------------------------
224,028 13,716 237,744
------------------------------------------
MEDIA: 1.12%
14,900 1,400 16,300 @ AOL Time Warner, Inc. 195,190 18,340 213,530
------------------------------------------
195,190 18,340 213,530
------------------------------------------
MINING: 2.73%
14,850 1,100 15,950 Alcoa, Inc. 338,283 25,058 363,341
8,400 1,000 9,400 @ Freeport-McMoRan Copper &
Gold, Inc. 140,952 16,780 157,732
------------------------------------------
479,235 41,838 521,073
------------------------------------------
PORTFOLIOS OF INVESTMENTS AS OF DECEMBER 31, 2002 (CONTINUED)
ING VP ING VP ING VP ING VP
MAGNACAP LARGE COMPANY VALUE PRO FORMA MAGNACAP LARGE COMPANY VALUE PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
------ ------ ------ ----- ----- -----
MISCELLANEOUS MANUFACTURER:
5.62%
21,200 1,800 23,000 Honeywell Intl., Inc. 508,800 43,200 552,000
27,910 2,500 30,410 @@ Tyco Intl. Ltd. 476,703 42,700 519,403
-------------------------------------------
985,503 85,900 1,071,403
-------------------------------------------
OIL & GAS: 11.80%
5,500 300 5,800 Amerada Hess Corp. 302,775 16,515 319,290
10,400 900 11,300 Anadarko Petroleum Corp. 498,160 43,110 541,270
6,560 320 6,880 Apache Corp. 373,854 18,237 392,091
3,800 100 3,900 ChevronTexaco Corp. 252,624 6,648 259,272
7,530 687 8,217 ConocoPhillips 364,377 33,244 397,621
3,300 - 3,300 GlobalSantaFe Corp. 80,256 - 80,256
5,600 300 5,900 Kerr-McGee Corp. 248,080 13,290 261,370
-------------------------------------------
2,120,126 131,044 2,251,170
-------------------------------------------
OIL & GAS SERVICES: 0.67%
6,850 - 6,850 Halliburton Co. 128,163 - 128,163
-------------------------------------------
128,163 - 128,163
-------------------------------------------
PHARMACEUTICALS: 7.00%
18,000 1,400 19,400 Bristol-Myers Squibb Co. 416,700 32,410 449,110
8,800 900 9,700 @ IVAX Corp. 106,744 10,917 117,661
11,200 900 12,100 @ King Pharmaceuticals, Inc. 192,528 15,471 207,999
6,500 600 7,100 Pfizer, Inc. 198,705 18,342 217,047
7,700 500 8,200 Pharmacia Corp. 321,860 20,900 342,760
-------------------------------------------
1,236,537 98,040 1,334,577
-------------------------------------------
PIPELINES: 0.79%
19,900 1,750 21,650 EL Paso Corp. 138,504 12,180 150,684
-------------------------------------------
138,504 12,180 150,684
-------------------------------------------
RETAIL: 7.08%
9,200 900 10,100 CVS Corp. 229,724 22,473 252,197
9,200 700 9,900 @ Federated Department Stores 264,592 20,132 284,724
11,900 900 12,800 May Department Stores Co. 273,462 20,682 294,144
18,200 1,400 19,600 McDonald's Corp. 292,656 22,512 315,168
9,800 1,100 10,900 RadioShack Corp. 183,652 20,614 204,266
-------------------------------------------
1,244,086 106,413 1,350,499
-------------------------------------------
PORTFOLIOS OF INVESTMENTS AS OF DECEMBER 31, 2002 (CONTINUED)
ING VP ING VP ING VP ING VP
MAGNACAP LARGE COMPANY VALUE PRO FORMA MAGNACAP LARGE COMPANY VALUE PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
------ ------ ------ ----- ----- -----
SAVINGS & LOANS: 1.65%
8,200 900 9,100 Washington Mutual, Inc. 283,146 31,077 314,223
-------------------------------------------
283,146 31,077 314,223
-------------------------------------------
SEMICONDUCTORS: 1.50%
40,500 3,900 44,400 @ Advanced Micro Devices, Inc. 261,630 25,194 286,824
-------------------------------------------
261,630 25,194 286,824
-------------------------------------------
TELECOMMUNICATIONS: 10.02%
18,900 1,700 20,600 @ 3Com Corp. 87,507 7,871 95,378
49,400 5,000 54,400 @ ADC Telecommunications, Inc. 103,246 10,450 113,696
47,300 4,400 51,700 @ AT&T Wireless Services, Inc. 267,245 24,860 292,105
97,500 8,800 106,300 @ JDS Uniphase Corp. 240,825 21,736 262,561
59,200 6,400 65,600 @ Lucent Technologies, Inc. 74,592 8,064 82,656
63,900 6,300 70,200 @ Tellabs, Inc. 464,553 45,801 510,354
13,200 1,100 14,300 Verizon Communications, Inc. 511,500 42,625 554,125
-------------------------------------------
1,749,468 161,407 1,910,875
-------------------------------------------
TOBACCO: 2.45%
10,650 900 11,550 Philip Morris Cos., Inc. 431,645 36,477 468,122
-------------------------------------------
431,645 36,477 468,122
-------------------------------------------
Total Long-Term Investments
(Cost $20,060,657, $1,559,
277,$21,619,934) 16,986,136 1,320,628 18,306,764
-------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------- -------------------------------------------
SHORT TERM INVESTMENTS: 4.07%
REPURCHASE AGREEMENT: 4.07%
$ 711,000 $ 65,000 $ 776,000 State Street Bank Repurchase
Agreement dated 12/31/02,
0.800% due 01/02/03,$711,
032, $65,003 to received
upon repurchase
(Collateralized by $660,000
USTN, 4.875% Market Value
$730,125 due 02/15/02 and
$45,000 USTB, 9.875% Market Value $ 711,000 $ 65,000 $ 776,000
$70,369 due 11/15/15) -------------------------------------------
Total Short-Term Investments
(Cost $711,000, $65,000,
$776,000) 711,000 65,000 776,000
-------------------------------------------
TOTAL INVESTMENTS IN
SECURITIES (COST $20,771,657
$1,624,277,$22,395,934) 100.03% $17,697,136 $ 1,385,628 $19,082,764
OTHER ASSETS AND
LIABILITIES-NET -0.03% 14,407 (19,241) (4,834)
---------------------------------------------------------
NET ASSETS 100.00% $17,711,543 $ 1,366,387 $19,077,930
=========================================================
@ Non-income producing security
@@ Foreign Issuer
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF COMBINATION:
On November 22, 2002, the Board of Trustees of ING VP Large Company Value
Portfolio ("VP Large Company Value Portfolio") and ING VP MagnaCap Portfolio
("VP MagnaCap Portfolio"), approved an Agreement and Plan of Reorganization (the
"Plan") whereby, subject to approval by the shareholders of VP Large Company
Value Portfolio, VP MagnaCap Portfolio will acquire all of the assets of the VP
Large Company Value Portfolio, be subject to the liabilities of such Portfolio,
in exchange for a number of shares of VP MagnaCap Portfolio equal in value to
the net assets of the VP Large Company Value Portfolio (the "Merger").
The Merger will be accounted for as a tax-free merger of investment
companies. The unaudited pro forma combined financial statements are presented
for the information of the reader and may not necessarily be representative of
what the actual combined financial statements would have been had the
reorganization occurred at December 31, 2002. The unaudited pro forma portfolio
of investments, and statement of assets and liabilities reflect the financial
position of VP Large Company Value Portfolio and VP MagnaCap Portfolio at
December 31, 2002. The unaudited pro forma statement of operations reflects the
results of operations of VP Large Company Value Portfolio and VP MagnaCap
Portfolio for the year ended December 31, 2002. These statements have been
derived from the Portfolios' respective books and records utilized in
calculating daily net asset value at the date indicated above for VP Large
Company Value Portfolio and VP MagnaCap Portfolio under generally accepted
accounting principles. The historical cost of investment securities will be
carried forward to the surviving entity and the results of operations of VP
MagnaCap Portfolio for pre-combination periods will not be restated.
The unaudited pro forma portfolio of investments, and unaudited statement
of assets and liabilities and statement of operations should be read in
conjunction with the historical financial statements of each Portfolio which are
incorporated by reference in the Statements of Additional Information.
NOTE 2 - SECURITY VALUATION:
Investments in equity securities traded on a national securities exchange
are valued at the last reported sale price. Portfolio securities reported by
NASDAQ will be valued at the NASDAQ official closing price. Securities traded on
an exchange or NASDAQ for which there has been no sale and securities traded in
the over-the-counter-market are valued at the mean between the last reported bid
and ask prices. U.S. Government obligations are valued by using market
quotations or independent pricing services which use prices provided by
market-makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. All investments quoted
in foreign currencies will be valued daily in U.S. Dollars on the basis of the
foreign currency exchange rates prevailing at the time such valuation is
determined by each Portfolio's Custodian. Securities for which market quotations
are not readily available are valued at their respective fair values as
determined in good faith and in accordance with policies set by the Board of
Directors. Investments in securities maturing in less than 60 days are valued at
amortized cost, which, when combined with accrued interest, approximates market
value.
NOTE 3 - CAPITAL SHARES:
The unaudited pro forma net asset value per share assumes additional shares
of common stock issued in connection with the proposed acquisition of VP Large
Company Value Portfolio by VP MagnaCap Portfolio as of December 31, 2002. The
number of additional shares issued was calculated by dividing the net asset
value of each Class of VP Large Company Value Portfolio by the respective Class
net asset value per share of VP MagnaCap Portfolio.
NOTE 4 - UNAUDITED PRO FORMA ADJUSTMENTS:
The accompanying unaudited pro forma financial statements reflect changes
in fund shares as if the merger had taken place on December 31, 2002. VP Large
Company Value Portfolio expenses were adjusted assuming VP MagnaCap Portfolio's
fee structure was in effect for the year ended December 31, 2002.
NOTE 5 - MERGER COSTS:
Merger costs are estimated at approximately $62,500 and are not included in
the unaudited pro forma statement of operations since these costs are not
reoccurring. These costs represent the estimated expense of both Portfolios
carrying out their obligations under the Plan and consist of management's
estimate of legal fees, accounting fees, printing costs and mailing charges
related to the proposed merger. ING Investments LLC, Investment Adviser to the
Portfolios, will bear half of the cost of the Reorganization. The Portfolios
will bear the other half of the expenses relating to the proposed
Reorganization.
NOTE 6 - FEDERAL INCOME TAXES:
It is the policy of the Portfolios, to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute substantially all of their net investment income and any net
realized gains to their shareholders. Therefore, a federal income tax or excise
tax provision is not required. In addition, by distributing during each calendar
year substantially all of its net investment income and net realized capital
gains, each Portfolio intends not to be subject to any federal excise tax.
The Portfolio intends to offset any net capital gains with any available
capital loss carryforward until each carryforward has been fully utilized or
expires. The amount of capital loss carryforward, which may offset VP MagnaCap
Portfolio's capital gains in any given year, may be limited as a result of
previous reorganizations. In addition, no capital gain distribution shall be
made until the capital loss carryforward has been fully utilized or expires.
ING VP LARGE COMPANY VALUE PORTFOLIO
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON OCTOBER 16, 2003. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) MICHAEL J. ROLAND AND KIMBERLY A.
ANDERSON or any one or both of them, proxies, with full power of substitution,
to vote all shares of ING VP Large Company Value Portfolio (the "Portfolio"), a
series of ING Variable Products Trust, which the undersigned is entitled to vote
at the Special Meeting of Shareholders of the Portfolio to be held at the
offices of the Portfolio at 7337 East Doubletree Ranch Road, Scottsdale, Arizona
85258-2034 on October 16, 2003 at 10:00 a.m., Local time, and at any adjournment
thereof.
This proxy will be voted as instructed. If no specification is made,
the proxy will be voted "FOR" the proposals.
Please vote, date and sign this proxy and return it promptly in the
enclosed envelope.
Please indicate your vote by an "x" in the appropriate box below.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL:
1. To approve an Agreement and Plan of Reorganization providing for
the acquisition of all of the assets of ING VP Large Company Value Portfolio by
ING VP MagnaCap Portfolio in exchange for Class S shares of beneficial interest
of ING VP MagnaCap Portfolio and the assumption by ING VP MagnaCap Portfolio of
all of the liabilities of ING VP Large Company Value Portfolio, a series of ING
Variable Products Trust.
For [ ] Against [ ] Abstain [ ]
This proxy card must be signed exactly as your name(s) appears hereon.
If as an attorney, executor, guardian or in some representative capacity or as
an officer of a corporation, please add titles as such. Joint owners must each
sign.
_________________________ _____________________
Signature Date
__________________________ _____________________
Signature (if held jointly) Date
ING Variable Products Trust
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Section 4.3 of Registrant's Declaration of Trust provides the following:
(a) Subject to the exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust
shall be indemnified by the Trust to the fullest extent permitted by
law against all liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof; and
(ii) the word "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; aria
the words "liability" and "expenses" shall include, without limitation,
attorneys fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust, a Series thereof, or the
Shareholders by reason of a final adjudication by a court or other body
before which a proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust; or
(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraph (h) (i) or (b) (ii)
resulting in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(a) by the court or other body approving the settlement or
other disposition; or
(b) based upon a review of readily available facts (as opposed
to a full trial-type inquiry) by (x) vote of a majority of the
Disinterested C-4 Trustees acting on the matter (provided that
a majority of the Disinterested Trustees then in office act on
the matter) or (y) written opinion of independent legal
counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to he such Trustee or officer and shall
inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be entitled by
contract or otherwise under law.
(c) Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding of the character described in paragraph (a) of this Section
4.3 may be advanced by the Trust prior to final
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disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either: (i)
such undertaking is secured by a surety bond or some other appropriate security
provided by the recipient, or the Trust shall be insured against losses arising
out of any such advances; or (ii) a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the disinterested Trustees act
on the matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will he found entitled to indemnification. As used in this Section
4.3, a "Disinterested Trustee" is one who is not (i) an Interested Person of the
Trust (including anyone who has been exempted from being an Interested Person by
any rule, regulation or order of the Commission), or (ii) involved in the claim,
action, suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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
connection with the successful defense of any action suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
shares 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 Act and be governed by final
adjudication of such issue.
ITEM 16. EXHIBITS
(1) (A) Declaration of Trust -- Filed as an Exhibit to Post-Effective
Amendment No. 4 to Registrant's Registration Statement on Form
N-1A on February 28, 1996, and incorporated herein by
reference.
(B) Certificate of Amendment of Declaration of Trust and
Redesignation of Series -- Filed as an Exhibit to
Post-Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A on April 30, 1997, and incorporated
herein by reference.
(C) Certificate of Establishment and Designation -- Filed as an
Exhibit to Post-Effective Amendment No. 7 to Registrant's
Registration Statement on Form N-1A on May 16, 1997, and
incorporated herein by reference.
(D) Certificate of Establishment and Designation -- Filed as an
Exhibit to Post-Effective Amendment No. 8 to Registrant's
Registration Statement on Form N-1A on May 20, 1997, and
incorporated herein by reference.
(E) Certificate of Amendment of Declaration of Trust and
Redesignation of Series -- Filed as an Exhibit to
Post-Effective Amendment No. 15 to Registrant's Registration
Statement on Form N-1A on January 28, 2000, and incorporated
herein by reference.
(F) Certificate of Amendment of Declaration of Trust -- Filed as
an Exhibit to Post-Effective Amendment No. 15 to Registrant's
Registration Statement on Form N-1A on January 28, 2000, and
incorporated herein by reference.
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(G) Certificate of Amendment of Declaration of Trust --Filed as an
Exhibit to Post-Effective Amendment No. 15 to Registrant's
Registration Statement on Form N-1A on January 28, 2000, and
incorporated herein by reference.
(H) Certificate of Establishment and Designation of Series --
Filed as an Exhibit to Post-Effective Amendment No. 15 to
Registrant's Registration Statement on Form N-1A on January
28, 2000, and incorporated herein by reference.
(I) Certificate of Amendment of Declaration of Trust and
Redesignation of Series -- Filed as an Exhibit to
Post-Effective Amendment No. 15 to Registrant's Registration
Statement on Form N-1A on January 28, 2000, and incorporated
herein by reference.
(J) Certificate of Amendment of Declaration of Trust and
Establishment and Designation of Additional Series of Shares
of Beneficial Interest; Establishment of Additional Series;
Establishment of New Principal Place of Business -- Filed as
an Exhibit to Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A on April 27, 2001, and
incorporated herein by reference.
(K) Form of Certificate of Amendment of Declaration of Trust:
Abolition of Series of Shares of Beneficial Interests -- Filed
as an Exhibit to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A on April 18,
2002, and incorporated herein by reference.
(L) Form of Certificate of Amendment of Declaration of Trust and
Redesignation of Series - Filed as an Exhibit to
Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A on April 18, 2002, and incorporated
herein by reference.
(M) Form of Certificate of Amendment of Declaration of Trust and
Redesignation of Series - Filed as an Exhibit to
Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A on April 18, 2002, and incorporated
herein by reference.
(N) Abolition of Series of shares of beneficial interest - Filed
as an Exhibit to Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A on April 28,
2003, and incorporated herein by reference.
(2) (A) By-laws. -- Filed as an Exhibit to Post-Effective Amendment
No. 4 to Registrant's Registration Statement on Form N-1A on
February 28, 1996, and incorporated herein by reference.
(3) Not Applicable
(4) Form of Agreement and Plan of Reorganization between ING Variable
Products Trust on behalf of ING VP Large Company Value Portfolio and
ING Variable Products Trust, on behalf of ING VP MagnaCap Portfolio
(5) Instruments defining the rights of holders -- set forth in the
Declaration of Trust.
(6) (A) Form of Advisory Agreement between Registrant and ING Pilgrim
Investments, LLC -- Filed as an Exhibit to Post-Effective
Amendment No. 24 to Registrant's Registration Statement on
Form N-1A on April 28, 2003, and incorporated herein by
reference.
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(B) Form of Investment Advisory Agreement between the Registrant
and ING Pilgrim Investments, LLC -- Filed as an Exhibit to
Post-Effective Amendment No. 15 to Registrant's Registration
Statement on Form N-1A on January 28, 2000, and incorporated
herein by reference.
(C) Form of Investment Advisory Agreement between the Registrant
and ING Pilgrim Investments, LLC -- Filed as an Exhibit to
Post-Effective Amendment No. 17 to Registrant's Registration
Statement on Form N-1A on April 27, 2000, and incorporated
herein by reference.
(D) Amended and Restated Schedule A with respect to the Investment
Advisory Agreement between the Registrant and ING Investments,
LLC -- Filed as an Exhibit to Post-Effective Amendment No. 23
to Registrant's Registration Statement on Form N-1A on April
28, 2003, and incorporated herein by reference.
(7) (A) Form of Distribution Agreement between the Registrant and ING
Pilgrim Securities, Inc. -- Filed as an Exhibit to
Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A on April 27, 2001, and incorporated
herein by reference.
(B) Amended and Restated Schedule of Portfolios with respet to the
Distribution Agreement between the Registrant and ING Funds
Distributor, LLC. -- Filed as an Exhibit to Post-Effective
Amendment No. 23 to Registrant's Registration Statement on
Form N-1A on April 28, 2003, and incorporated herein by
reference.
(8) (A) Not Applicable.
(9) (A) Custodian Agreement -- Filed as an Exhibit to Post-Effective
Amendment No. 4 to Registrant's Registration Statement on Form
N-1A on February 28, 1996, and incorporated herein by
reference.
(B) Amendment to Custodian Agreement -- Filed as an Exhibit to
Post-Effective Amendment No. 11 to Registrant's Registration
Statement on Form N-1A on February 27, 1998, and incorporated
herein by reference.
(C) Form of Custodian and Investment Accounting Agreement with
State Street Bank and Trust Company for Convertible Portfolio,
Financial Services Portfolio, Large Company Value Portfolio,
Growth + Value Portfolio, Growth Opportunities Portfolio, High
Yield Bond Portfolio, LargeCap Growth Portfolio, MagnaCap
Portfolio, MidCap Opportunities Portfolio, Research Enhanced
Index Portfolio, and SmallCap Opportunities Portfolio - Filed
as an Exhibit to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A on April 18,
2002, and incorporated herein by reference.
(D) Form of Amendment to Custodian and Investment Accounting
Agreement with State Street Bank and Trust Company -- Filed as
an Exhibit to Post-Effective Amendment No. 21 to Registrant's
Registration Statement on Form N-1A on April 18, 2002, and
incorporated herein by reference.
(10) (A) Not Applicable.
(11) Form of Opinion and Consent of Counsel
(12) Form of Opinion of Counsel Supporting Tax Matters and Consequences --
To Be Filed in a Subsequent Post-Effective Amendment.
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(13) (A) Administrative Services Agreement -- Filed as an Exhibit to
Post-Effective Amendment No. 8 to Registrant's Registration
Statement on Form N-1A on May 20, 1997, and incorporated
herein by reference.
(B) Amended and Restated Administrative Services Agreement --
Filed as an Exhibit to Post- Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A on April 27,
2000, and incorporated herein by reference.
(C) Form of Amended and Restated Administrative Services Agreement
-- Filed as an Exhibit to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A on April 27,
2001, and incorporated herein by reference.
(D) Amendment to Amended and Restated Administrative Services
Agreement between Registrant and ING Pilgrim Group, LLC--
Filed as an Exhibit to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A on April 18,
2002, and incorporated herein by reference.
(E) Form of Shareholder Service Plan -- Filed as an Exhibit to
Post-Effective Amendment No. 18 to Registrant's Registration
Statement on Form N-1A on February 15, 2001, and incorporated
herein by reference.
(F) Accounting Agency Agreement with Brown Brothers Harriman & Co.
for International Portfolio, International Value Portfolio,
Emerging Countries Portfolio, and International SmallCap
Growth Portfolio - Filed as an Exhibit to Post-Effective
Amendment No. 21 to Registrant's Registration Statement on
Form N-1A on April 18, 2002, and incorporated herein by
reference.
(G) Form of Amended and Restated Expense Limitation Agreement by
and between Registrant and ING Investments, LLC -- Filed as an
Exhibit to Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A on April 28, 2003, and
incorporated herein by reference.
(H) Form of Amended and Restated Schedule of Portfolios with
respect to the Shareholder Services Plan -- Filed as an
Exhibit to Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A on April 28, 2003, and
incorporated herein by reference.
(14) Consent of KPMG
(15) Not Applicable
(16) Powers of Attorney
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ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) under the 1933 Act (17 CFR
230.145(c)), the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
(3) The undersigned registrant undertakes to file a post-effective
amendment to this registration statement upon the closing of the Reorganization
described in this Registration Statement that contains an opinion of counsel
supporting the tax matters discussed in this Registration Statement.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), the Registrant has duly caused this Registration Statement on Form
N-14 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the city of Scottsdale and the State of Arizona on the 24th day of July,
2003.
ING VARIABLE PRODUCTS TRUST
By: /s/ Kimberly A. Anderson
----------------------------
Kimberly A. Anderson
Vice President and Secretary
Pursuant to the requirements of the 1933 Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee and Chairman July 24, 2003
____________________________________________
John G. Turner*
President and Chief Executive July 24, 2003
____________________________________________ Officer
James M. Hennessy*
Executive Vice President and July 24, 2003
____________________________________________ Principal Financial Officer
Michael J. Roland*
Trustee July 24, 2003
____________________________________________
Paul S. Doherty*
Trustee July 24, 2003
____________________________________________
J. Michael Earley*
Trustee July 24, 2003
____________________________________________
R. Barbara Gitenstein*
Trustee July 24, 2003
____________________________________________
Walter H. May, Jr.*
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Trustee July 24, 2003
____________________________________________
Thomas J. McInerney*
Trustee July 24, 2003
____________________________________________
Jock Patton*
Trustee July 24, 2003
____________________________________________
David W.C. Putnam*
Trustee July 24, 2003
____________________________________________
Blaine E. Rieke*
Trustee July 24, 2003
____________________________________________
Roger B. Vincent*
Trustee July 24, 2003
____________________________________________
Richard A. Wedemeyer*
*By: /s/ Kimberly A. Anderson
------------------------
Kimberly A. Anderson
Attorney-in-Fact**
** Executed pursuant to powers of attorney filed herewith.
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EXHIBIT INDEX
(4) Form of Agreement and Plan of Reorganization between ING Variable Products Trust , on behalf of ING VP Large
Company Value Portfolio and ING Variable Products Trust, on behalf of ING VP MagnaCap Portfolio.
(11) Form of Opinion and Consent of Counsel
(14) Consent of Independent Accountants
(16) Powers of Attorney