As filed with the Securities and Exchange Commission on September 4, 2003
Securities Act File No. 333-107316
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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. 1 [X]
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 immediately
pursuant to Rule 485(b) 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
September 9, 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 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
September 9, 2003
ING VP MAGNACAP PORTFOLIO
PROXY STATEMENT/PROSPECTUS
SEPTEMBER 9, 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 ........................................................... A-D
Portfolio Managers' 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
SEPTEMBER 9, 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. dba ING
Aeltus Investment Management, Inc. ("ING Aeltus")) considers to be undervalued
compared to the overall market. ING Aeltus is an indirect wholly-owned
subsidiary of ING Groep N.V. and is an affiliate of ING Investments.
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 September 9, 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 November 8, 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 also invest 80% of its
assets in stocks meeting disciplined investment criteria with
respect to valuation characteristics, dividends, and balance
sheet strength;
- after 9/30/03 the portfolio managers of MagnaCap Portfolio
will seek to invest primarily in common stocks of large
companies believed to be undervalued in comparison to the
overall market;
- Both Portfolios have the same portfolio management team;
- MagnaCap Portfolio is the larger fund ($23.6 million versus $1.7
million as of June 30, 2003); and
- The Portfolios have substantially similar purchase options, exchange
rights and redemption procedures;
- 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
June 30, 2003, are as follows:
3
BEFORE THE MERGER
CLASS S
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- Expenses of Large Company
Value Portfolio before
expense reimbursement from
management: 2.43%
- Expenses of MagnaCap
Portfolio before expense
reimbursement from
management: 1.38%
- 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: 1.56%(2)
- Pro Forma estimated expenses
after expense reimbursement
from management:(1) 1.17%(2)
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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.
(2) Includes 0.07% of estimated one-time merger expenses which are
excluded from the expense limitation 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 (THESE
STRATEGIES INVESTMENT STRATEGIES WILL BE IN EFFECT ON THE DATE OF
THE REORGANIZATION):
- Normally invests at least 80% of its - Normally invests at least 80% of its assets in
assets in common stocks of large companies. common stocks of large companies.
- Normally invests in companies that the - Normally invests in companies that the
Adviser considers to be undervalued Sub-Adviser, using a disciplined value approach,
compared to the overall stock market. The considers to be undervalued compared to the overall
Adviser considers large companies to stock market.The Fund will generally invest in
consist of the 500 largest U.S. companies, larger companies that are included in the 500 largest
as measured by total revenues, net assets, U.S. companies, as measured by total revenues, net
cash flow, or earnings, or the 1,000 assets, cash flow or earnings, or the 1,000 largest
largest U.S. companies, as measured by companies as measured by equity market
equity market capitalization. Within this capitalization. Among the criteria the Sub-Adviser
universe of large well-established will consider are whether companies have increased
companies, the Adviser will use a dividends or had the financial capability to have
disciplined value approach to select increased dividends over the past 10 years. The
investments that the Adviser considers to Sub-Adviser also analyzes candidates for investment
be undervalued compared to the overall for some catalyst or vector of change that may lead
market. The Adviser also analyzes to an increase in the share price. May invest the
candidates for investment for some catalyst remaining 20% of its assets in other types of
or vector of change that may spark an securities, including foreign securities and smaller
increase in the share price. May invest 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 (THESE
INVESTMENT STRATEGIES WILL NOT BE IN EFFECT ON THE DATE
OF THE REORGANIZATION):
- 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
5
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LARGE COMPANY VALUE PORTFOLIO MAGNACAP PORTFOLIO
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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 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 (THESE
INVESTMENTS may invest include common stock, convertible PRINCIPAL INVESTMENTS WILL BE IN EFFECT ON THE DATE OF
securities, rights, warrants, and THE REORGANIZATION):
exchange-traded index funds (ETFs). To the
degree that the Portfolio invests assets in - May invest in common stocks, convertible
non-U.S. securities, it may hedge the securities, rights or warrants. The Portfolio's
currency risk of these holdings with the use investments may focus on particular sectors
of forward contracts or options on depending on the portfolio manager's perception of
currencies. Although the Portfolio normally the market environment.
will be invested as fully as practicable in
equity securities, assets that are not - Although the Portfolio normally will be invested
invested in equity securities may be as fully as practicably in equity securities, assets
invested in high quality debt securities that are not invested in equity securities may be
including bonds, notes, debentures, and invested in high quality debt securities.
short-term investments.
PRINCIPAL INVESTMENTS PRIOR TO SEPTEMBER 30, 2003 (THESE
PRINCIPAL INVESTMENTS WILL NOT BE IN EFFECT ON THE DATE
OF THE REORGANIZATION):
- 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 ING Investments, LLC ING Investments, LLC
ADVISER
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SUB-ADVISER Aeltus Investment Management, Inc. Aeltus Investment Management, Inc.
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6
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LARGE COMPANY VALUE PORTFOLIO MAGNACAP PORTFOLIO
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PORTFOLIO William F. Coughlin(1) William F. Coughlin(1)
MANAGERS
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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 manager 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.
COMPARISON OF PORTFOLIO CHARACTERISTICS
The following table compares certain characteristics of the portfolios of
the Funds as of June 30, 2003:
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Large Company Value Portfolio MagnaCap Portfolio
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Net Assets $1,694,763 $23,613,431
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Number of Holdings 41 41
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Portfolio Turnover Rate(1) 81% 95%
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Average market capitalization of companies $23.5 billion $27.3 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: 90.0% 91.6%
Holdings in companies with market
capitalizations between $5 billion and
$10 billion: 5.0% 3.0%
Holdings in companies with market
capitalizations under $5 billion: 2.2% 1.4%
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Top 5 Industries Diversified Financial Services 13.7% Diversified Financial Services 13.6%
(as % of net assets)
Oil and Gas 13.5% Oil and Gas 12.3%
Insurance 6.8% Insurance 6.9%
Banks 5.8% Banks 5.8%
Telecommunications 4.7% Telecommunications 4.9%
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U.S Equity Securities (as a % of net
assets) 84.8% 92.4%
Foreign Securities (as a % of net assets) 12.4% 3.6%
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Top 10 Holdings
(as a % of net assets) Altria Group Inc. 4.0% Altria Group Inc. 4.1%
Honeywell Intl., Inc. 3.5% Honeywell Intl., Inc. 3.9%
BP PLC 3.2% Exxon Mobil Corp. 3.3%
7
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Large Company Value Portfolio MagnaCap Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
General Dynamics Corp. 3.2% Hewlett Packard Co. 3.3%
ChevronTexaco Corp. 3.2% Fannie Mae 3.2%
Fannie Mae 3.2% Freddie Mac 3.1%
Koninklijke Philips Electronics 3.0% Emerson Electric Co. 3.0%
Emerson Electric Co. 3.0% Wells Fargo & Co. 3.0%
Freddie Mac 3.0% Washington Mutual Inc. 3.0%
Wells Fargo & Co. 2.9% American Intl. Group, Inc. 2.8%
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(1) For the six months ended June 30, 2003.
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 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 LARGE COMPANY S&P BARRA
YEAR/ VALUE MAGNACAP S&P 500 VALUE
PERIOD ENDED PORTFOLIO(1) PORTFOLIO(2)(3) INDEX(4) INDEX(5)
- ------------ ------------ -------------- -------- --------
12/31/01 N/A -10.44% -11.87% -11.71%
12/31/02 -22.39% -22.99% -22.10% -20.86%
06/30/03 10.06% 11.32% 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. The
performance of Class S shares would have been lower due to the higher
expenses of Class S shares. 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 2002
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
-10.44 -22.99
(1) These figures are for the year ended December 31 of each year. The figures
do not reflect expenses or charges which are, or may be, imposed under your
annuity contract or life insurance policy and would be lower if it did.
(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. The performance of Class S shares would
have been lower due to the higher expenses of Class S shares. 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 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. The Large Company Value Portfolio is subject
to the risks of using derivatives. To the extent that this 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.
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 TABLES
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 June 30, 2003. 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)
MANAGEMENT OTHER TOTAL OPERATING FEE WAIVER NET
FEES SERVICE FEES EXPENSES EXPENSES BY ADVISER(2) EXPENSES
---- ------------ -------- -------- ----------- --------
CLASS S
Large Company Value Portfolio 0.75% 0.25% 1.43% 2.43% 1.33% 1.10%
MagnaCap Portfolio 0.75% 0.25% 0.38% 1.38% 0.28% 1.10%
MagnaCap Portfolio
After the Reorganization
(Estimated Pro Forma) 0.75% 0.25% 0.37% 1.37% 0.27% 1.10%
(Estimated Pro Forma with
one time merger expenses) 0.75% 0.25% 0.44%(3) 1.44%(3) 0.27%(3) 1.17%(3)
- ----------
(1) The fiscal year end for Large Company Value Portfolio and MagnaCap
Portfolio is December 31. Presented are based on the semi-annual period
ended June 30, 2003.
(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.
(3) Includes 0.07% of estimated one-time merger expenses which are excluded
from the expense limitation 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: THE PORTFOLIOS
LARGE COMPANY VALUE PORTFOLIO MAGNACAP PORTFOLIO COMBINED*
CLASS S CLASS S CLASS S
------- ------- -------
1 YEAR(1) $ 112 $ 112 $ 119
3 YEARS $ 630 $ 409 $ 414
5 YEARS $1,175 $ 729 $ 731
10 YEARS $2,665 $1,633 $1,629
- ----------
* Estimated.
(1) The 1-year examples take into account the expense waiver/reimbursement
described under "Expense Limitation Arrangement" above.
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 to the extent
that such shareholders are subject to tax on dividends.
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 R $ 5,802,916 $ 7.58 765,785
Class S $17,810,515 $ 7.61 2,340,315
-----------
Total MagnaCap Portfolio $23,613,431
PRO FORMA - MAGNACAP PORTFOLIO INCLUDING LARGE COMPANY VALUE PORTFOLIO
Class R $ 5,799,477(1) $ 7.57 765,785
Class S $19,493,717(1) $ 7.61 2,563,008
--------------
Total Pro Forma MagnaCap Portfolio $25,293,194(1)
(1) Includes one-time merger expenses allocated pro-rata based on net assets
totaling an estimated $15,000 to be paid by the Portfolios.
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
September 9, 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, 202,647.9360 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 August 12, 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 August 12, 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 a 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
September 9, 2003
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
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APPENDIX A
PORTFOLIO MANAGERS' REPORT FOR ING VP MAGNACAP PORTFOLIO
Set forth below is an excerpt from ING VP MagnaCap Portfolio's Semi-Annual
Report, dated June 30, 2003, regarding the Portfolio's performance.
* * * *
PORTFOLIO MANAGEMENT: A team of investment professionals led by William F.
Coughlin, CFA, ING Investments, LLC.
GOAL: The ING VP MagnaCap Portfolio ("the Portfolio") seeks growth of
capital, with dividend income as a secondary consideration.
MARKET OVERVIEW: The first half of 2003 marked a return to positive
territory for the S&P 500, with the Index increasing 11.77% for the six months
ending June 30, 2003. The positive first half performance was led by a
blistering 15.37% increase in the second quarter. Investors showed their
fondness for equities once again, as the Iraqi War came to an end. Resolution of
this conflict allowed investors to refocus on the markets, and less on the
uncertain geo-political events abroad. The Federal Reserve and Washington both
did their parts to create a favorable environment for equities compared to fixed
income through a low interest rate environment and a tax rate reduction on
dividends.
PERFORMANCE: For the six months ended June 30, 2003, the Portfolio's Class
S shares, excluding any charges, provided a total return of 11.32% compared to
the S&P Barra Value Index and S&P 500, which returned 12.29% and 11.77%,
respectively.
PORTFOLIO SPECIFICS: During this period, the primary source of the
underperformance was sector selection, although the components were individually
small. In the largest case, we underweighted utilities, which was the best
performing sector in the Index. By contrast, the aggregate effect of stock
selection was minor, although some of the components were individually
significant. Stock selection in financials and the consumer sectors had an
adverse effect on performance, while stock selection in health care and
industrials was positive. Over the last six months, portfolio sector weights
underwent significant change. The primary change was to move to an overweight in
financials and reduced the underweight in the consumer sectors. This was
financed by increased underweights in technology and health care. However, our
security selection in the financial services sector has been disappointing.
Specifically, Freddie Mac and Fannie Mae (both government-sponsored enterprises
engaged in the mortgage markets) were hampered by various accounting issues and
management resignations. Both stocks have declined as considerable debate has
emerged as how best to reflect hedging strategies in their public financial
statements.
MARKET OUTLOOK: Value stocks have recently been trailing their growth
counterparts. While we believe this is a short-term reactionary move, equities
across the spectrum are very reasonably priced today. This, in combination with
low interest rates and fairly indifferent/low consumer sentiment, makes for one
of the best investment opportunities we have seen in at least five years. Adding
in such factors as stock market fear, post-war reconstruction uncertainty,
record low interest rates, and a business environment that has been extremely
conservative, we believe the upside potential for our equity market far exceeds
the downside risk.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2003
SINCE INCEPTION
1 YEAR 5/3/01
------ ------
Class S -5.53% -9.40%
S&P Barra Value Index -1.84% -10.51%(1)
S&P 500 Index 0.25% -9.39%(1)
- ----------
(1) Since inception performance for the index is shown from 5/1/01.
The table above illustrates the total return of ING VP MagnaCap Portfolio
against the S&P Barra Value Index and the S&P 500 Index. The Indices are
unmanaged and have no cash in their portfolio, impose no sales charges and incur
no operating expenses. An investor cannot invest directly in an
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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 does 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. The value of convertible debt may fall when interest rates
rise.
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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 22nd day of November, 2002, 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.
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3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be November 8, 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
auditors, and are in accordance with generally accepted accounting principles in
the United States ("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
auditors, 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 closing date. 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
Title:_______________________________
ING VARIABLE PRODUCTS TRUST
on behalf of its ING VP MAGNACAP
PORTFOLIO
Attest:
__________________________ By:__________________________________
Secretary
Title:_______________________________
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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. Because these fees are paid out of the
Portfolio's assets on an on-going basis, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges.
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
VP MagnaCap Portfolio distributes virtually all of its net investment
income and net capital gains to shareholders in the form of dividends. The
Portfolio declares and pays dividends quarterly.
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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.
C-3
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
--------------------------------------------
PERIOD
ENDED YEAR PERIOD
JUNE 30, ENDED ENDED
2003 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2002 2001(1)
----------- ---- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 6.85 8.98 9.59
Income from investment operations:
Net investment income $ 0.03 0.07 0.05
Net realized and unrealized loss on investments $ 0.74 (2.13) (0.60)
Total from investment operations $ 0.77 (2.06) (0.55)
Less distributions from:
Net investment income $ 0.01 0.07 0.06
Total distributions $ 0.01 0.07 0.06
Net asset value, end of period $ 7.61 6.85 8.98
TOTAL RETURN(2) % 11.32 (22.99) (5.75)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 17,811 12,843 5,854
Ratio of expenses to average net assets after expense
reimbursement(3)(4) % 1.10 1.10 1.10
Ratio of expenses to average net assets prior to expense
reimbursement(3) % 1.38 1.45 1.53
Ratio of net investment income to average net assets
after expense reimbursement(3)(4) % 0.99 1.01 1.13
Portfolio turnover rate % 95 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
NAME AND ADDRESS OF PERCENT OF CLASS OF SHARES PERCENTAGE OF PORTFOLIO AFTER
SHAREHOLDER AND TYPE OF OWNERSHIP PORTFOLIO THE REORGANIZATION*
- -------------------------------- -------------------------------- ----------------- ----------------------------
N/A N/A N/A N/A
ING VP MAGNACAP PORTFOLIO
PERCENTAGE OF COMBINED
NAME AND ADDRESS OF PERCENT OF CLASS OF SHARES PERCENTAGE OF PORTFOLIO AFTER
SHAREHOLDER AND TYPE OF OWNERSHIP PORTFOLIO THE REORGANIZATION*
- -------------------------------- -------------------------------- ----------------- ----------------------------
ING Life Insurance & Annuity 21.36% of Class R, 5.17% 2.24%
Aces Separate Acct B Beneficial
Valuations Processing Dept
151 Farmington Ave - RSMA
Hartford CT 06156-0001
Security Life Insurance of 21.89% of Class R, 5.30% 2.29%
Denver A VUL Beneficial
Rte 5106 PO Box 20
Minneapolis MN 55440-0020
Reliastar Life Insurance Co 54.67% of Class R, 13.24% 5.72%
FBO Select III Non Qualified Beneficial
Rte 5106 PO Box 20
Minneapolis MN 55440-0020
Golden American Life Insurance Co 96.41% of Class S, 73.06% 31.57%
1475 Dunwoody Dr Beneficial
West Chester PA 19380-1478
- ----------
* 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
September 9, 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 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 September 9, 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 June 30, 2003. 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 JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ING VP
ING VP LARGE
MAGNACAP COMPANY VALUE PRO FORMA PRO FORMA
ASSETS: PORTFOLIO PORTFOLIO ADJUSTMENTS COMBINED
--------- --------- ----------- --------
Investments in securities at value* $ 22,671,200 $ 1,646,817 $ 24,318,017
Short-term investments at amortized cost 849,000 66,000 915,000
Cash 603 62 665
Receivables:
Portfolio shares sold 91,761 1,518 93,279
Dividends and interest 26,771 1,885 28,656
Prepaid expenses 36 -- 36
Reimbursement due from manager 6,653 1,660 8,313
------------ ------------ ------------ ------------
Total assets 23,646,024 1,717,942 25,363,966
------------ ------------ ------------ ------------
LIABILITIES:
Payable for portfolio shares redeemed 1,754 -- 1,754
Payable to affiliates 19,546 1,568 21,114
Payable for trustee fees 253 1,208 1,461
Payable for merger expense -- -- 15,000 (B) 15,000
Other accrued expenses and liabilities 11,040 20,403 31,443
------------ ------------ ------------ ------------
Total liabilities 32,593 23,179 15,000 70,772
------------ ------------ ------------ ------------
NET ASSETS $ 23,613,431 $ 1,694,763 $ (15,000) $ 25,293,194
------------ ------------ ------------ ------------
NET ASSETS WERE COMPRISED OF:
Paid-in capital 25,391,310 1,848,711 27,265,595
Accumulated net investment income 62,917 2,415 (15,000)(B) 50,332
Accumulated net realized loss on investments and foreign currencies (2,420,416) (183,906) (2,629,896)
Net unrealized appreciation of investments and foreign currencies 579,620 27,543 607,163
------------ ------------ ------------ ------------
NET ASSETS $ 23,613,431 $ 1,694,763 $ (15,000) 25,293,194
------------ ------------ ------------ ------------
* Cost of investments in securities $ 22,091,580 $ 1,619,274 23,710,854
CLASS R:
Net Assets $ 5,802,916 n/a $ (3,439)(B) $ 5,799,477
Shares outstanding 765,785 n/a 765,785
Net asset value and redemption price per share $ 7.58 n/a $ 7.57
CLASS S:
Net Assets $ 17,810,515 $ 1,694,763 $ (11,561)(B) $ 19,493,717
Shares outstanding 2,340,315 194,823 27,870 (A) 2,563,008
Net asset value and redemption price per share $ 7.61 $ 8.70 $ 7.61
(A) Reflects new shares issued, net of retired shares of VP Large Company Value
Portfolio. (Calculation: Net Assets / NAV per share)
(B) Reflects adjustment for estimated one time merger expenses (See Note 5 in
Notes to Unaudited Pro Forma Financial Statements).
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2003 (UNAUDITED)
ING ING VP
VP MAGNACAP LARGE COMPANY PRO FORMA PRO FORMA
PORTFOLIO VALUE PORTFOLIO ADJUSTMENTS COMBINED
--------- --------------- ----------- --------
INVESTMENT INCOME:
Dividends (net of foreign withholding tax) 352,155 28,603 -- 380,758
Interest 16,903 1,765 -- 18,668
----------- ----------- ----------- -----------
Total investment income 369,058 30,368 -- 399,426
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees 129,411 10,375 139,786
Distribution fees:
Class S 31,823 3,459 35,282
Transfer agent fees 15,242 6,807 (6,807)(A) 15,242
Administrative and service fees 17,254 1,384 18,638
Custodian and fund accounting fees 10,670 1,020 11,690
Printing and postage expenses 6,318 2,320 (1,500)(A) 7,138
Registration fees 15 -- 15
Professional fees 20,830 2,590 (2,590)(A) 20,830
Trustee fees 365 730 (386)(A) 709
Miscellaneous expenses 1,010 793 1,803
Offering and organization expense -- 411 411
----------- ----------- ----------- -----------
Total expenses 232,938 29,889 (11,283) 251,544
Less:
Net waived and reimbursed fees 51,784 14,625 (10,845)(C) 55,564
----------- ----------- ----------- -----------
Net expenses 181,154 15,264 (438) 195,980
----------- ----------- ----------- -----------
Net investment income 187,904 15,104 438 203,446
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on investments (2,026,132) (164,356) -- (2,190,488)
Net change in unrealized appreciation of investments 1,922,134 111,817 -- 2,033,951
----------- ----------- ----------- -----------
Net realized and unrealized gain on investments (103,998) (52,539) -- (156,537)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 83,906 $ (37,435) $ 438 $ 46,909
=========== =========== =========== ===========
* Foreign withholding taxes $ 1,498 $ 291 $ 1,789
(A) Reflects adjustment in expenses due to elimination of duplicative services.
(B) Reflects adjustment for estimated one time merger expenses (See Note 5 in
Notes to Unaudited Pro Forma Financial Statements).
(C) Reflects adjustment in waivers due to expense levels in surviving fund.
PORTFOLIOS OF INVESTMENTS AS OF JUNE 30, 2003 (UNAUDITED)*
ING VP ING VP ING VP ING VP
MAGNACAP LARGE COMPANY PRO FORMA MAGNACAP LARGE COMPANY PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
- ------- ------------- --------- ---------- ------------- ----------
COMMON STOCK: 96.1%
AEROSPACE/DEFENSE: 2.8%
9,000 750 9,750 General Dynamics Corp. $ 652,500 $ 54,375 $ 706,875
---------- --------- ----------
652,500 54,375 706,875
---------- --------- ----------
AGRICULTURE: 4.0%
21,000 1,500 22,500 Altria Group, Inc. 954,240 68,160 1,022,400
---------- --------- ----------
954,240 68,160 1,022,400
---------- --------- ----------
APPAREL: 1.3%
5,900 400 6,300 Nike, Inc. 315,591 21,396 336,987
---------- --------- ----------
315,591 21,396 336,987
---------- --------- ----------
AUTO MANUFACTURERS: 1.0%
22,300 1,600 23,900 Ford Motor Co. 245,077 17,584 262,661
---------- --------- ----------
245,077 17,584 262,661
---------- --------- ----------
BANKS: 5.8%
8,400 600 9,000 Bank of America Corp. 663,852 47,418 711,270
13,800 1,000 14,800 Wells Fargo & Co. 695,520 50,400 745,920
---------- --------- ----------
1,359,372 97,818 1,457,190
---------- --------- ----------
BUILDING MATERIALS: 1.5%
15,100 1,100 16,200 Masco Corp. 360,135 26,235 386,370
---------- --------- ----------
360,135 26,235 386,370
---------- --------- ----------
CHEMICALS: 3.8%
16,800 1,200 18,000 Dow Chemical Co. 520,128 37,152 557,280
6,100 400 6,500 Praxair, Inc. 366,610 24,040 390,650
---------- --------- ----------
886,738 61,192 947,930
---------- --------- ----------
COMPUTERS: 3.3%
36,806 1,806 38,612 Hewlett-Packard Co. 783,968 38,467 822,435
---------- --------- ----------
783,968 38,467 822,435
---------- --------- ----------
COSMETICS/PERSONAL CARE: 1.6%
7,000 500 7,500 Kimberly-Clark Corp. 364,980 26,070 391,050
---------- --------- ----------
364,980 26,070 391,050
---------- --------- ----------
DIVERSIFIED FINANCIAL SERVICES: 13.6%
13,500 1,000 14,500 Citigroup, Inc. 577,800 42,800 620,600
11,200 800 12,000 Fannie Mae 755,328 53,952 809,280
14,200 1,000 15,200 Freddie Mac 720,934 50,770 771,704
12,700 1,000 13,700 Merrill Lynch & Co., Inc. 592,836 46,680 639,516
13,200 900 14,100 Morgan Stanley 564,300 38,475 602,775
---------- --------- ----------
3,211,198 232,677 3,443,875
---------- --------- ----------
ELECTRICAL COMPONENTS & EQUIPMENT: 3.0%
13,700 1,000 14,700 Emerson Electric Co. 700,070 51,100 751,170
---------- --------- ----------
700,070 51,100 751,170
---------- --------- ----------
ING VP ING VP ING VP ING VP
MAGNACAP LARGE COMPANY PRO FORMA MAGNACAP LARGE COMPANY PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
- ------- ------------- --------- ---------- ------------- ----------
ELECTRONICS: 0.2%
- 2,700 2,700 @@ Koninklijke Philips Electronics NV ADR - 51,597 51,597
---------- --------- ----------
- 51,597 51,597
---------- --------- ----------
FOOD: 3.6%
10,500 900 11,400 @@ Nestle SA ADR 544,425 46,665 591,090
5,700 450 6,150 @@ Unilever NV ADR 307,800 24,300 332,100
---------- --------- ----------
852,225 70,965 923,190
---------- --------- ----------
FOREST PRODUCTS & PAPER: 1.8%
12,100 900 13,000 International Paper Co. 432,333 32,157 464,490
---------- --------- ----------
432,333 32,157 464,490
---------- --------- ----------
HEALTHCARE-PRODUCTS: 2.3%
21,100 - 21,100 Baxter Intl., Inc. 548,600 - 548,600
- 900 900 Beckman Coulter, Inc. - 36,576 36,576
---------- --------- ----------
548,600 36,576 585,176
---------- --------- ----------
HEALTHCARE-SERVICES: 1.5%
29,700 2,500 32,200 @ Tenet Healthcare Corp. 346,005 29,125 375,130
---------- --------- ----------
346,005 29,125 375,130
---------- --------- ----------
INSURANCE: 6.9%
12,100 850 12,950 American Intl. Group 667,678 46,903 714,581
1,000 - 1,000 John Hancock Financial Services, Inc. - 30,730 30,730
18,000 1,300 19,300 Metlife, Inc. 509,760 36,816 546,576
13,200 - 13,200 Prudential Financial, Inc. 444,180 - 444,180
---------- --------- ----------
1,621,618 114,449 1,736,067
---------- --------- ----------
MEDIA: 2.6%
8,000 600 8,600 Gannett Co., Inc. 614,480 46,086 660,566
---------- --------- ----------
614,480 46,086 660,566
---------- --------- ----------
MISCELLANEOUS MANUFACTURING: 3.8%
33,700 2,200 35,900 Honeywell Intl., Inc. 904,845 59,070 963,915
---------- --------- ----------
904,845 59,070 963,915
---------- --------- ----------
OIL & GAS: 12.4%
12,800 900 13,700 Anadarko Petroleum Corp. 569,216 40,023 609,239
- 1,300 1,300 @@ BP PLC ADR - 54,626 54,626
8,900 750 9,650 ChevronTexaco Corp. 642,580 54,150 696,730
10,700 - 10,700 ConocoPhillips 586,360 - 586,360
21,900 1,300 23,200 Exxon Mobil Corp. 786,429 46,683 833,112
- 700 700 @@ Royal Dutch Petroleum Co. ADR - 32,634 32,634
9,000 - 9,000 Valero Energy Corp. 326,970 - 326,970
---------- --------- ----------
2,911,555 228,116 3,139,671
---------- --------- ----------
PHARMACEUTICALS: 4.4%
21,900 1,500 23,400 Bristol-Myers Squibb Co. 594,585 40,725 635,310
7,300 600 7,900 Merck & Co., Inc. 442,015 36,330 478,345
---------- --------- ----------
1,036,600 77,055 1,113,655
---------- --------- ----------
ING VP ING VP ING VP ING VP
MAGNACAP LARGE COMPANY PRO FORMA MAGNACAP LARGE COMPANY PRO FORMA
SHARES SHARES SHARES VALUE VALUE VALUE
- ------- ------------- --------- ---------- ------------- ----------
RETAIL: 2.4%
25,800 1,700 27,500 McDonald's Corp. 569,148 37,502 606,650
---------- --------- ----------
569,148 37,502 606,650
---------- --------- ----------
SAVINGS & LOANS: 2.9%
16,800 1,200 18,000 Washington Mutual, Inc. 693,840 49,560 743,400
---------- --------- ----------
693,840 49,560 743,400
---------- --------- ----------
SEMICONDUCTORS: 2.5%
29,900 - 29,900 Intel Corp. 621,441 - 621,441
---------- --------- ----------
621,441 - 621,441
---------- --------- ----------
TELECOMMUNICATIONS: 4.8%
19,800 1,400 21,200 SBC Communications, Inc. 505,890 35,770 541,660
16,200 1,100 17,300 Verizon Communications, Inc. 639,090 43,395 682,485
---------- --------- ----------
1,144,980 79,165 1,224,145
---------- --------- ----------
TRANSPORTATION: 2.3%
8,700 650 9,350 FedEx Corp. 539,661 40,320 579,981
---------- --------- ----------
539,661 40,320 579,981
---------- --------- ----------
---------- --------- ----------
Total Common Stock ($22,091,580,
$1,619,274, $23,710,854) 22,671,200 1,646,817 24,318,017
---------- --------- ----------
PRINCIPAL AMOUNT VALUE
- ---------------------------------- --------------------------------------
SHORT TERM INVESTMENTS: 3.6%
REPURCHASE AGREEMENT: 3.6%
$849,000 $ 66,000 $915,000 State Street Bank Repurchase Agreements dated
06/30/03, 0.950% due 07/01/03, $849,022,
$65,002 to received upon repurchase
(Collateralized by $770,000 USTN, 4.875%,
Market Value $868,578 due 11/30/04,
collateralized by $70,000 USTN, 1.750% Market
Value $70,558 due 12/31/04) $ 849,000 $ 66,000 $ 915,000
----------- ---------- -----------
Total Short-Term Investments (Cost $849,000,
$66,000, $915,000) 849,000 66,000 915,000
----------- ---------- -----------
TOTAL INVESTMENTS IN SECURITIES (COST
$22,940,580, $1,685,274, $24,625,854) $23,520,200 $1,712,817 $25,233,017
----------- ---------- -----------
@ Non-income producing security
@@ Foreign Issuer
ADR American Depositary Receipt
*No adjustments are shown to the unaudited pro forma combined portfolios of
investments because it is expected that upon consummation of the Reorganization,
no securities would need to be sold in order for the ING MagnaCap Portfolio to
comply with its prospectus requirements and SEC and IRS guidelines and
restrictions. However, the ING Large Company Value Portfolio or ING MagnaCap
Portfolio may purchase or sell any securities in the ordinary course of business
as a mutual fund, and following the Reorganization, certain holdings of ING
Large Company Value Portfolio that are transferred to ING MagnaCap Portfolio may
be expected to be sold.
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 ("Large Company Value Portfolio") and ING VP MagnaCap Portfolio
("MagnaCap Portfolio"), approved an Agreement and Plan of Reorganization (the
"Plan") whereby, subject to approval by the shareholders of Large Company Value
Portfolio, MagnaCap Portfolio will acquire all of the assets of the Large
Company Value Portfolio, be subject to the liabilities of such Portfolio, in
exchange for a number of shares of MagnaCap Portfolio equal in value to the net
assets of the 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 June 30, 2003. The unaudited pro forma portfolio of
investments, and statement of assets and liabilities reflect the financial
position of Large Company Value Portfolio and MagnaCap Portfolio at June 30,
2003. The unaudited pro forma statement of operations reflects the results of
operations of Large Company Value Portfolio and MagnaCap Portfolio for the year
ended June 30, 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 Large Company Value Portfolio and 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 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
Trustees. 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
Large Company Value Portfolio by MagnaCap Portfolio as of June 30, 2003. The
number of additional shares issued was calculated by dividing the net asset
value of each Class of Large Company Value Portfolio by the respective Class net
asset value per share of MagnaCap Portfolio.
NOTE 4 - UNAUDITED PRO FORMA ADJUSTMENTS:
The accompanying unaudited pro forma financial statements reflect changes
in Portfolio shares as if the merger had taken place on June 30, 2003. Large
Company Value Portfolio expenses were adjusted assuming MagnaCap Portfolio's fee
structure was in effect for the year ended June 30, 2003.
NOTE 5 - MERGER COSTS:
Merger costs are estimated at approximately $15,000 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 - USE OF ESTIMATES
Management of the Portfolios has made certain estimates and assumptions
relating to the reporting of assets, liabilities, income, and expenses to
prepare these financial statements in conformity with accounting principles
generally accepted in the United States of America. Actual results could differ
from these estimates.
NOTE 7 - 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 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 PROPOSAL.
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.
(d) 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 --
Filed as an exhibit to the Registrant's Registration Statement on Form
N-14 on July 24, 2003 and incorporated herein by reference.
(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 respect 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) Not Applicable.
(11) 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 Filed as an exhibit to the Registrant's Registration
Statement on Form N-14 on July 24, 2003 and incorporated herein by
reference.
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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 certifies that it meets all of the requirements for
effectiveness of this Post-Effective Amendment No. 1 to the Registration
Statement under Rule 485(b) under the 1933 Act and has duly caused this
Post-Effective Amendment No. 1 to the 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 4th day of September, 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 September 4, 2003
John G. Turner*
President and Chief Executive September 4, 2003
- ---------------------------------- Officer
James M. Hennessy*
Executive Vice President and September 4, 2003
- ---------------------------------- Principal Financial Officer
Michael J. Roland*
- ---------------------------------- Trustee September 4, 2003
Paul S. Doherty*
- ---------------------------------- Trustee September 4, 2003
J. Michael Earley*
- ---------------------------------- Trustee September 4, 2003
R. Barbara Gitenstein*
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- --------------------------------- Trustee September 4, 2003
Walter H. May, Jr.*
- --------------------------------- Trustee September 4, 2003
Thomas J. McInerney*
- --------------------------------- Trustee September 4, 2003
Jock Patton*
- --------------------------------- Trustee September 4, 2003
David W.C. Putnam*
- --------------------------------- Trustee September 4, 2003
Blaine E. Rieke*
- --------------------------------- Trustee September 4, 2003
Roger B. Vincent*
- --------------------------------- Trustee September 4, 2003
Richard A. Wedemeyer*
*By: /s/ Kimberly A. Anderson
------------------------
Kimberly A. Anderson
Attorney-in-Fact**
** Executed pursuant to powers of attorney filed as part of Registrant's
Registration Statement on Form N-14 which was filed with the U.S.
Securities and Exchange Commission on July 24, 2003.
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EXHIBIT INDEX
(11) Opinion and Consent of Counsel
(14) Consent of Independent Accountants