SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
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[ ] Preliminary information statement [ ] Confidential, for use of the
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________________________________________________________________________________
ING INVESTORS TRUST
________________________________________________________________________________
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ING INVESTORS TRUST
ING JANUS GROWTH AND INCOME PORTFOLIO
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
(800) 366-0066
March 23, 2004
Dear Variable Contract Holder or Qualified Plan Participant:
On behalf of the Board of Trustees (the "Board") of ING Janus Growth
and Income Portfolio (the "Portfolio"), I invite you to a Special Meeting of
shareholders ("Special Meeting") of the Portfolio scheduled for 10:00 a.m.,
Local time, on April 27, 2004, at 7337 East Doubletree Ranch Road, Scottsdale,
Arizona 85258-2034.
At the Special Meeting, shareholders of the Portfolio will be asked to
approve a Proposal to change the Portfolio's investment objective. If approved,
the Portfolio's investment objective would change from a fundamental investment
objective of "long term capital growth and current income" to a non-fundamental
objective of "long-term growth of capital." Because the Portfolio's investment
objective currently is fundamental, the Proposal requires the approval of
variable contract holders and qualified plan participants. The enclosed Proxy
Statement provides important information with respect to the Proposal.
The Proposal to change the fundamental investment restriction arises
because of a change in the sub-adviser to the Portfolio. Effective May 3, 2004,
Legg Mason Funds Management, Inc. ("Legg Mason") will serve as sub-adviser to
the Portfolio. William Miller, Chief Executive Officer of Legg Mason, will have
day-to-day responsibility for the management of the Portfolio. The change in
sub-adviser will occur automatically on May 3, 2004, and does not require
shareholder approval. While the Portfolio is not soliciting shareholders to
approve the change in sub-adviser, the attached document serves as an
Information Statement that describes the Portfolio's new sub-advisory
arrangement.
After careful consideration, your Board of Trustees unanimously
approved the Proposal to change the fundamental investment objective of the
Portfolio, and recommends that shareholders vote "FOR" the Proposal.
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 AND CAST YOUR VOTE. IT IS
IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN APRIL 26, 2004.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
/s/ James M. Hennessy
--------------------------------
James M. Hennessy
President and Chief
Executive Officer
ING INVESTORS TRUST
ING JANUS GROWTH AND INCOME PORTFOLIO
7337 EAST DOUBLETREE RANCH ROAD
SCOTTSDALE, ARIZONA 85258-2034
(800) 366-0066
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF ING JANUS GROWTH AND INCOME PORTFOLIO
SCHEDULED FOR APRIL 27, 2004
To the Variable Contract Holders or Qualified Plan Participants:
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders ("Special
Meeting") of ING Janus Growth and Income Portfolio (the "Portfolio), is
scheduled for April 27, 2004, 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
proposal to change the Portfolio's fundamental investment objective to a
non-fundamental objective of seeking "long-term growth of capital."
Shareholders of record as of the close of business on February 27, 2004
are entitled to notice of, and to vote at, the Special Meeting. Your attention
is called to the accompanying Proxy Statement. Regardless of whether you plan to
attend the Special Meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE
ENCLOSED VOTING INSTRUCTION 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 (i) executing and submitting a revised proxy, (ii) giving
written notice of revocation to the Portfolio or (iii) voting in person at the
Special Meeting.
By Order of the Board of
Trustees,
/s/ Huey P. Falgout, Jr.
---------------------------
Huey P. Falgout, Jr.
Secretary
Dated: March 23, 2004
(This page intentionally left blank)
PROXY STATEMENT
MARCH 23, 2004
ING INVESTORS TRUST
ING JANUS GROWTH AND INCOME PORTFOLIO
TOLL FREE: (800) 366-0066
7337 EAST DOUBLETREE RANCH ROAD
SCOTTSDALE, ARIZONA 85258-2034
SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR APRIL 27, 2004
(This page intentionally left blank)
WHY DID YOU SEND ME THIS BOOKLET?
This booklet is a combined Proxy Statement and Information Statement.
The Proxy Statement will provide you with information regarding certain proposed
change to the fundamental investment objective of ING Janus Growth and Income
Portfolio (the "Portfolio"), as described below. Contract holders and qualified
plan participants are being asked to vote on this change. This booklet also
contains an Information Statement (beginning on page 12), which provides you
with important information with respect to a change in the Portfolio's
sub-adviser. The Portfolio is required to send you an Information Statement upon
a change in sub-adviser. Contract holders are not being asked to vote on the
change in sub-adviser described in the accompanying Information Statement.
The Proxy Statement provides you with information you should review
before voting or instructing your Insurance Company on how to vote on the
matters listed above and in the Notice of Special Meeting for the Portfolio. You
are receiving these proxy materials -- a booklet that includes the Proxy
Statement and one Voting Instruction Card for the Portfolio -- because you have
the right to vote on the important Proposal concerning your Portfolio, described
below.
The word "you" is used in this Proxy Statement to refer to the person
or entity who owns the shares, and who accordingly has voting rights in
connection with the shares. For a pension plan, this usually means the trustee
for the plan. Shares of the Portfolio are available as investment options in the
variable annuity contract or variable life insurance contract issued by an
Insurance Company, and qualified plans, participants and Insurance Companies
are, in most cases, the true "shareholders" of the Portfolio. Variable annuity
and/or variable life contract holders (or participants under group contracts, as
applicable) ("Variable Contract Holders"), however, generally have the right to
instruct the Insurance Company through which they hold an interest on how to
vote their interests regarding the Proposal set forth in this Proxy Statement.
Therefore, references to "you" or "shareholders" throughout the proxy materials
usually can be read to include shareholders, Variable Contract Holders, and
qualified plan participants.
WHO IS ASKING FOR MY VOTE?
The Board of Trustees (the "Board") of ING Investors Trust (the
"Trust") is sending this Proxy Statement and the enclosed Voting Instruction
Card to you and all other Variable Contract Holders and qualified plan
participants who have a beneficial interest in the Portfolio. The Board is
soliciting your vote for a Special Meeting of shareholders ("Special Meeting")
of the Portfolio with respect to certain changes to the Portfolio's investment
objective.
WHO IS ELIGIBLE TO VOTE?
The Board is sending this Proxy Statement, the attached Notice of
Special Meeting and the enclosed Voting Instruction Card on or about March 23,
2004 to all shareholders of record entitled to vote and Variable Contract
Holders of record who are eligible to instruct the Insurance Company through
which they hold an interest in the Portfolio as to how to vote those shares.
Shareholders and Variable Contract Holders of record who hold an interest in
shares of the Portfolio as of the close of business on February 27, 2004 (the
"Record Date") are eligible to vote or instruct their Insurance Company how to
vote the shares. (See "How do I vote?" and "Additional Information Regarding the
Proxy Solicitation" below, for a more detailed
discussion of voting procedures.)
Each share of each class of the Portfolio is entitled to one vote. The
following table sets forth the number of shares of each class of the Portfolio
issued and outstanding as of the Record Date:
Class Shares Outstanding
----- ------------------
Adviser Class (Class A) 816,970.724
Institutional Class (Class I) 0.000
Retirement Class (Class R) 0.000
Service Class (Class S) 24,512,076.960
TOTAL 25,329,047.684
To the best of the Trust's knowledge, as of March 12, 2004, no person
owned beneficially more than 5% of any class of the Portfolio's securities. To
the best of the Trust's knowledge, as of March 12, 2004, no Trustee or Executive
Officer owned beneficially more than 1% of any class of the Portfolio's
securities.
WHY IS THE SPECIAL MEETING BEING HELD?
The Special Meeting is being held for the following purposes:
(1) To approve a new, non-fundamental investment objective for the
Portfolio; and
(2) To transact other business, not currently contemplated, that
may properly come before the Special Meeting or any
adjournment(s) thereof in the discretion of the proxies or
their substitutes.
2
HOW DO I VOTE?
Variable Contract Holders can instruct the Insurance Company through
which they hold interests in the Portfolio how to vote, by completing, signing
and returning the enclosed Voting Instruction Card promptly in the enclosed
envelope or by attending the Special Meeting in person and voting. Joint owners
must each sign the Voting Instruction Card.
Shares of the Portfolio are sold to separate accounts of Insurance
Companies ("Separate Accounts") and are used to fund Variable Contracts.
Variable Contract Holders 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. As noted above, Insurance Companies
generally will pass through any voting rights to Variable Contract Holders.
Therefore, an Insurance Company will request voting instructions from the
Variable Contract Holder. Variable Contract Holders permitted to give
instructions to the Insurance Company 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 Holders, it is
expected that the respective Insurance Companies will furnish a copy of this
Proxy Statement to Variable Contract Holders.
If the Variable Contract Holder wishes to participate in the Special
Meeting, the Variable Contract Holder may submit the Voting Instruction Card
originally sent with this Proxy Statement or attend the Special Meeting in
person. All persons entitled to direct the voting of shares, whether they are
Variable Contract Holders or qualified plan participants, are described as
voting for purposes of this Proxy Statement.
WHEN AND WHERE WILL THE SPECIAL MEETING BE HELD?
The Special Meeting will be held at 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258-2034, on April 27, 2004, at 10:00 a.m., Local time,
and, if the Special Meeting is adjourned or postponed, at any adjournment(s) or
postponement(s) of the Special Meeting. If you expect to attend the Special
Meeting in person, please call the Customer Contact Center toll-free at
1-800-366-0066.
HOW CAN I OBTAIN MORE INFORMATION ABOUT THE PORTFOLIO?
Copies of the Portfolio's Semi-Annual Report for the period ended June
30, 2003 and the Annual Report for the fiscal year ended December 31, 2003 have
3
previously been mailed to Variable Contract Holders. This Proxy Statement should
be read in conjunction with the Annual and Semi-Annual Reports.
YOU CAN OBTAIN COPIES OF THE ANNUAL AND SEMI-ANNUAL REPORTS, WITHOUT
CHARGE, BY WRITING TO THE ING FUNDS, 7337 EAST DOUBLETREE RANCH ROAD,
SCOTTSDALE, ARIZONA, 85258-2034, ATTENTION: LITERATURE FULFILLMENT, OR BY
CALLING 1-800-366-0066.
Should you have any questions about the Portfolio, please do not
hesitate to contact our Customer Contact Center at 1-800-366-0066. The Customer
Contact Center is available Monday through Thursday 8:00 a.m. - 8:00 p.m.
Eastern Time and Friday from 8:00 a.m. - 5:30 p.m. Eastern Time.
4
PROPOSAL 1
APPROVAL OF A CHANGE IN INVESTMENT OBJECTIVE
WHAT IS THE PROPOSAL?
At a meeting on February 25, 2004, the Board authorized a change in the
Portfolio's fundamental investment objective. The Portfolio's investment
objective is a fundamental policy and, therefore, any change in the objective
requires shareholder approval. The change is being proposed because the Board
approved Legg Mason Funds Management, Inc. ("Legg Mason") as the Portfolio's new
sub-adviser, and, in view of the manner in which Legg Mason will manage the
Portfolio's assets, it has requested the change. For more information with
respect to Legg Mason and the new sub-advisory arrangement, please refer to the
accompanying Information Statement.
HOW WILL THE PROPOSAL CHANGE THE INVESTMENT OBJECTIVE OF THE PORTFOLIO?
The Portfolio's current investment objective is "long term capital
growth and current income" ("Current Investment Objective"). It is proposed that
the Portfolio's investment objective be changed to "long-term growth of capital"
("Proposed Investment Objective"). Under the Proposed Investment Objective, the
Portfolio will no longer seek to achieve the income component of the Current
Investment Objective, and will concentrate to a greater extent on equity
securities that offer the potential for capital growth. While it is not
anticipated there would be any future modifications to the investment objective,
in order to give the Portfolio flexibility to make changes in the interests of
shareholders without the cost of proxy solicitation, the Proposed Investment
Objective would be non-fundamental, so that any future change would not require
a shareholder vote.
In connection with the Proposed Investment Objective, the Board has
also approved a change in the Portfolio's investment strategies. Effective May
3, 2004, the Portfolio's investment strategies will change from investing in
stocks with growth and income potential, to a strategy that concentrates to a
greater extent on equity securities that offer the potential for capital growth.
For more information on the Portfolio's new investment strategies, please see
"Change in the Portfolio's Investment Strategies" in the accompanying
Information Statement.
WHAT IS THE REQUIRED VOTE?
Shareholders of the Portfolio must approve the Proposal for it to be
effective. The Proposal must be approved by the affirmative vote of a "majority
of the outstanding voting securities" of the Portfolio, which, for this purpose,
means the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Portfolio, or (2) 67% or more of the shares of the Portfolio
present at the meeting, if more than 50% of the outstanding shares of the
Portfolio are represented at the meeting in person or by proxy.
5
WHAT HAPPENS IF SHAREHOLDERS DO NOT APPROVE THE PROPOSAL?
If shareholders of the Portfolio do not approve the Proposal, the
Portfolio will continue to be managed under the Current Investment Objective,
and the Board will determine what action, if any, should be taken.
WHAT IS THE RECOMMENDATION OF THE BOARD?
Based upon its review, the Board has determined that the Proposal is in
the best interests of the Portfolio and its shareholders. Accordingly, after
consideration of such factors and information it considered relevant, the Board,
including all of the Independent Trustees present at the meeting, unanimously
approved the Proposal and voted to recommend their approval.
6
ADDITIONAL INFORMATION REGARDING THE PROXY
SOLICITATION
WHAT HAPPENS TO MY PROXY ONCE I VOTE IT?
The Board has named Huey P. Falgout, Jr. and Michael J. Roland, or one
or more substitutes designated by them, as proxies who are authorized to vote
Portfolio shares as directed by Variable Contract Holders. Please complete and
execute your Voting Instruction Card. If you followed the instructions when you
voted, your proxies will vote these shares as you have directed. If you
submitted your Voting Instruction Card but did not vote on the Proposal, your
proxies will vote on the Proposal as recommended by the Board, except as
described under "What are the voting rights and the quorum requirements?"
WHAT IF A PROPOSAL THAT IS NOT IN THE PROXY STATEMENT COMES UP AT THE SPECIAL
MEETING?
If any other matter is properly presented, your proxies will vote in
their discretion in accordance with their best judgment. At the time this Proxy
Statement was printed, the Board knew of no matter that needed to be acted on at
the Special Meeting other than the Proposal discussed in this Proxy Statement.
I WANT TO ATTEND THE SPECIAL MEETING AND VOTE IN PERSON. HOW DO I DO THIS?
If you attend the Special Meeting and wish to vote in person, you will
be given a Voting Instruction Card when you arrive.
WHAT ARE THE VOTING RIGHTS AND THE QUORUM REQUIREMENTS?
February 27, 2004 has been chosen as the Record Date. Each share of
each class of the Portfolio owned on the Record Date is entitled to one vote.
Shareholders of the Portfolio at the close of business on the Record Date will
be entitled to be present and to give voting instructions for the Portfolio at
the Special Meeting and any adjournments thereof with respect to their shares
owned as of the Record Date. Thirty percent of outstanding shares of the Trust
present or represented by proxy at the Special Meeting will constitute a quorum.
Shares owned of record by a shareholder or an Insurance Company and voted at the
Special Meeting or represented by proxy will be considered present at the
Special Meeting. In the event that a quorum of shareholders is not represented
at the Special Meeting, the meeting may be adjourned by a majority of the
Portfolio's shareholders present in person or by proxy until a quorum exists. If
there are insufficient votes to approve either Proposal, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
additional time for the solicitation of proxies, in accordance with applicable
law. Adjourned meetings must be held within a reasonable time after the date
originally set for the meeting (but not more than 180 days after the Record
Date). Solicitation of votes
7
may continue to be made without any obligation to provide any additional notice
of the adjournment. The persons named as proxies will vote in favor of such
adjournment(s) in their discretion.
If a shareholder abstains from voting as to any matter, or if a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on a matter,
then the shares represented by such abstention or non-vote will be treated as
shares that are present at the Special Meeting for purposes of determining the
existence of a quorum. However, abstentions and broker non-votes will be
disregarded in determining the "votes cast" on an issue. For this reason, with
respect to matters requiring the affirmative vote of a majority of the total
shares outstanding, an abstention or broker non-vote will have the effect of a
vote against such matters.
An Insurance Company will vote shares of the Portfolio held by its
Separate Accounts in accordance with instructions received from the Variable
Contract Holders. If a Variable Contract Holder executes and returns a Voting
Instruction Card, but fails to indicate how that vote should be cast, the proxy
will be voted in favor of the Proposal. An Insurance Company will also vote
shares of the Portfolio held in SEC-registered Separate Accounts for which no
voting instructions have been received in the same proportion as it votes shares
held in Separate Accounts for which it has received instructions. With respect
to shares held by the Insurance Company in unregistered Separate Accounts, the
Insurance Company generally will only vote those Separate Account shares 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 such company's Separate Accounts in the
aggregate.
CAN I REVOKE MY VOTING INSTRUCTIONS AFTER I GIVE THEM?
A shareholder may revoke the voting instructions given under the
accompanying Voting Instruction Card at any time prior to its execution by
filing with the Trust a written revocation or a duly executed Voting Instruction
Card bearing a later date. In addition, any Variable Contract Holder who attends
the Special Meeting in person may vote by ballot at the Special Meeting, thereby
canceling any voting instruction previously given. The persons named in the
accompanying Voting Instruction Card will vote as directed by the shareholders
under the Card, but in the absence of voting directions under any Voting
Instruction Card that is signed and returned, they intend to vote "FOR" the
Proposal and may vote in their discretion with respect to other matters not now
known to the Board that may be presented at the Special Meeting.
CAN SHAREHOLDERS SUBMIT PROPOSALS FOR CONSIDERATION IN A PROXY STATEMENT?
The Portfolio is not required to hold annual meetings and currently
does not intend to hold such meetings unless shareholder action is required in
accordance with the Investment Company Act of 1940, as amended ("1940 Act").
8
A shareholder proposal to be considered for inclusion in a proxy statement at
any subsequent meeting of shareholders must be submitted in a reasonable time
before a proxy statement for that meeting is mailed. Whether a proposal is
submitted in a proxy statement will be determined in accordance with applicable
federal and state laws.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING MAY BE
ASSURED, PROMPT EXECUTION AND RETURN OF THE ENCLOSED VOTING INSTRUCTION CARD IS
REQUESTED. A SELF-ADDRESSED POSTAGE PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE.
9
GENERAL INFORMATION
WHO ARE THE SERVICE PROVIDERS TO THE PORTFOLIO?
Directed Services, Inc. ("DSI" or "Adviser"), whose principal office is
located at 1475 Dunwoody Drive, West Chester, PA 19380, is a New York
corporation that serves as the investment adviser to the Portfolio. DSI also
serves as the distributor of the Portfolio. DSI is registered with the U.S.
Securities and Exchange Commission (the "SEC") as an investment adviser. DSI is
an indirect, wholly owned subsidiary of ING Groep, N.V. ("ING Groep"). ING Groep
is a global financial institution active in the fields of insurance, banking and
asset management in more than 65 countries, with more than 100,000 employees. As
of December 31, 2003, DSI served as adviser for approximately $13 billion in
assets.
DSI has entered into a sub-administrative services agreement with ING
Funds Services, LLC ("IFS"), an affiliate of DSI. IFS' principal offices are
located at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034.
See APPENDIX A for a listing of the names, addresses, and the principal
occupations of the principal executive officers of DSI and IFS.
During the fiscal year ended December 31, 2003, the Portfolio did not
pay any commissions to affiliated broker-dealers.
10
WHO PAYS FOR THIS PROXY SOLICITATION?
The Portfolio will not pay the expenses in connection with this Proxy
Statement and Information Statement or the Special Meeting of shareholders. The
Adviser and/or its affiliates will pay 100% of the expenses in connection with
this Information Statement, Proxy Statement and Special Meeting, including the
printing, mailing, solicitation, vote tabulation expenses, legal fees, and
out-of-pocket expenses.
/s/ Huey P. Falgout, Jr.
Huey P. Falgout, Jr.
Secretary
March 23, 2004
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
11
INFORMATION STATEMENT
MARCH 23, 2004
ING INVESTORS TRUST
ING JANUS GROWTH AND INCOME PORTFOLIO
TOLL FREE: (800) 366-0066
7337 EAST DOUBLETREE RANCH ROAD
SCOTTSDALE, ARIZONA 85258-2034
12
GENERAL INFORMATION
This Information Statement is being furnished in connection with the
change in the sub-adviser of the Portfolio of the Trust that will take place
effective May 3, 2004. The sub-advisory or "Portfolio Management" agreement
between DSI and Janus Capital Management LLC ("Janus") was terminated by the
Board and a new sub-adviser was selected. As a result of this action, Legg Mason
will begin providing investment sub-advisory services to the Portfolio effective
May 3, 2004. Also effective on that date, the Portfolio's name will be changed
to ING Legg Mason Value Portfolio.
The Trust has obtained an exemptive order from the SEC that permits the
Adviser to enter into new sub-advisory agreements without obtaining shareholder
approval of such new agreements under certain conditions. Any such changes must
be approved by a majority of the disinterested Trustees and, as a condition of
such exemption, DSI must furnish shareholders of the affected portfolio with
certain information about the changes. This Information Statement is intended to
comply with that condition.
THE TRUST IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY WITH RESPECT TO THE CHANGE IN SUB-ADVISER DISCUSSED IN THIS
INFORMATION STATEMENT.
13
NEW SUB-ADVISORY AGREEMENT
BETWEEN DSI AND LEGG MASON
BACKGROUND
DSI has served as investment adviser to the Portfolio since 1997,
pursuant to a Management Agreement between DSI and the Trust, on behalf of the
Portfolio and other series of the Trust, dated October 24, 1997, as amended May
24, 2002 (the "Management Agreement"). Under the Management Agreement, DSI, in
carrying out its responsibility to supervise and manage all aspects of the
Portfolio's operations, may engage, subject to the approval of the Trustees and,
where required, the shareholders of the Portfolio, a sub-adviser to provide
day-to-day advisory services in relation to the Portfolio. The Management
Agreement provides, among other things, that DSI is authorized to enter into
portfolio manager agreements with other registered investment advisers to serve
as sub-advisers to the Trust's portfolios, and may manage each portfolio in a
manager-of-managers style with portfolio managers. DSI may delegate to a
sub-adviser the duty, among other things, to formulate and implement the
investment program for the Trust's portfolios, including the duty to determine
what issuers and securities will be purchased and sold for a portfolio. In
accordance with this provision for delegation of authority, DSI entered into a
sub-advisory agreement with Janus with respect to the Portfolio effective
September 9, 2002 (the "Former Agreement"), pursuant to which those sub-advisory
duties were delegated to Janus.
At an in person board meeting on February 25, 2004, the Trustees were
asked to consider a new agreement between DSI and Legg Mason, under which Legg
Mason will provide sub-advisory services to the Portfolio ("the New Agreement").
The New Agreement was approved at the meeting by a unanimous vote of the Board,
including a majority of the Trustees who are not "interested" persons of the
Trust, as that term is defined in the 1940 Act, nor have any interest in the New
Agreement (the "Independent Trustees"). The Trustees authorized the preparation
and distribution of this Notice. The New Agreement was subsequently executed by
DSI and Legg Mason to be effective May 3, 2004 (the "New Agreement").
The decision to terminate Janus and retain Legg Mason under the New
Agreement was based on several factors including the fact that David Corkins,
former Vice President and Portfolio Manager at Janus, would no longer serve as
the manager of the Portfolio, as well as the reputation and long-term
performance record of Legg Mason. The Trustees also evaluated the ability of
Legg Mason to provide quality portfolio management to the Portfolio. The
sub-advisory agreement with Janus will terminate effective May 2, 2004.
Under the new sub-advisory arrangement, investment decisions for the
Portfolio will be made by an investment management team at Legg Mason led by
William Miller, Chief Executive Officer of Legg Mason. Mr. Miller and his team
14
will have day-to-day responsibility for the Portfolio. Mr. Miller has an
Economics degree from Washington & Lee University and a Ph.D. in Philosophy from
The Johns Hopkins University. Prior to joining Legg Mason in 1981, Mr. Miller
served as Treasurer of the J.E. Baker Company, a major manufacturer of products
for the steel and cement industries. Mr. Miller was Director of Research for
Legg Mason from October 1981 through June 1985, has been the sole portfolio
manager of the Legg Mason Value Trust since 1990 and served as co-manager of the
fund from its inception in 1982 until 1990.
EVALUATION OF THE BOARD OF TRUSTEES
At a meeting of the Board held on February 25, 2004 (the "Meeting"),
the New Agreement for the Portfolio was considered by the Board, including the
Independent Trustees. During the Meeting, the Independent Trustees met in
executive session with their independent counsel to discuss Legg Mason, the New
Agreement and the legal standards applicable to the proposed change.
In determining whether or not it was appropriate to approve the New
Agreement, the Board, including a majority of the Independent Trustees,
considered several factors including, but not limited to, the following: (1) the
performance of the Portfolio under the current sub-adviser and the performance
of Legg Mason, and in particular, William Miller, the proposed portfolio manager
for the Portfolio, on accounts that are comparable to the Portfolio; (2) DSI's
view of the reputation of Legg Mason; (3) the nature and quality of services to
be provided by Legg Mason; (4) the fairness of the compensation under the New
Agreement in light of the services to be provided; (5) the personnel,
operations, financial condition, and investment management capabilities and
methodologies of Legg Mason, and in particular, the portfolio management
capabilities of William Miller; (6) the costs for the services of Legg Mason and
the fact that these costs will be paid by DSI and not directly by the Portfolio;
(7) the proposed changes to the Portfolio's fundamental investment objective and
non-fundamental investment strategies that had been requested by Legg Mason; and
(8) Legg Mason's Code of Ethics. The Board also considered the advisory fee to
be retained by DSI, including the change in the amount to be retained by DSI
under the proposal, for its oversight and monitoring services that will be
provided to the Portfolio. After considering DSI's recommendation and these
other factors, the Board concluded that engaging Legg Mason as sub-adviser to
the Portfolio would be in the best interests of the Portfolio and its
shareholders.
THE NEW AND FORMER AGREEMENTS
The New Agreement will become effective as of May 3, 2004, and will
remain in effect through September 1, 2005, unless earlier terminated under the
provisions of Section 15 of the New Agreement, or by operation of the provisions
of the 1940 Act. Following the expiration of its initial term, the New Agreement
may be renewed on an annual basis provided that certain conditions are met, as
15
discussed below. The material terms and provisions of the New Agreement are
substantially similar to the terms of the Former Agreement, except for the names
of the entities; the effective date; the effective fee rate provisions;
additional provisions in the New Agreement with respect to spot and foreign
exchange contracts, marketing materials, and compliance functions, including
privacy and Patriot Act Compliance; terms in the New Agreement governing the
respective obligations of DSI and Legg Mason with respect to voting proxies;
and the inclusion in the New Agreement of an additional confidentiality
provision and an exclusivity provision. The material terms and provisions of the
New Agreement are summarized below. The description of the New Agreement in this
Information Statement is qualified in its entirety by reference to the copy of
the New Agreement, attached to this Information Statement as APPENDIX B.
Under the terms of the New Agreement, as under the Former Agreement,
Legg Mason agrees to furnish the Adviser with investment advisory services in
connection with a continuous investment program for the Portfolio. The Portfolio
will be managed by Legg Mason in accordance with its investment objective,
investment policies and restrictions as set forth in the Trust's Prospectus and
Statement of Additional Information. Subject to the supervision and control of
the Adviser, which in turn is subject to the supervision and control of the
Trustees, Legg Mason, in its discretion, determines and selects the securities
to be purchased for and sold from the Portfolio and places orders with and gives
instructions to brokers, dealers and others to cause such transactions to be
executed.
Under the terms of the New Agreement, as under the Former Agreement,
sub-advisory fees are payable by DSI, not by the Portfolio or its shareholders.
For its fee, DSI agrees to furnish at its expense all necessary investment and
management facilities, including salaries of personnel required for it to
execute its duties under the New Agreement. Legg Mason's compensation for the
services provided under the New Agreement is computed at an annual rate and is
payable monthly in arrears. For all services rendered to the Portfolio, DSI will
calculate and pay Legg Mason at an annual rate in accordance with the table
below:
ING Legg Mason Value Portfolio 0.70% on the first $50 million;
0.45% on the next $50 million;
0.40% on the next $50 million;
0.35% on the next $50 million; and
0.30% on assets over $200 million
Under the Former Agreement, DSI calculated and paid Janus at an annual
rate in accordance with the table below:
ING Janus Growth and Income Portfolio 0.45% on the first $500 million;
0.425% on the next $500 million; and
0.40% thereafter
16
For the fiscal year ended December 31, 2003, the fee paid by DSI to
Janus for services rendered with respect to the Portfolio was $949,179.00. Under
the sub-advisory agreement in effect January 1, 2004, the amount paid to Janus
by DSI for the fiscal year ended December 31, 2003 would have been $809,261.00.
If the New Agreement had been in effect during this period, the fee paid by DSI
to Legg Mason for services rendered with respect to the Portfolio would have
been $871,745.00. This amount represents a 8.16% decrease over the amount paid
by DSI to Janus during that time frame but an increase over fees that would
have been paid had the January 1, 2004 Janus sub-advisory agreement been in
effect.
At lower asset levels, the portfolio management fee payable by DSI to
Legg Mason would increase under the New Agreement. However, due to the
breakpoint schedule, at higher asset levels, the fee payable decreases. As of
December 31, 2003, the Portfolio had $230.8 million in assets under management.
At this asset level, the fee rate payable to Janus is 0.45%, whereas under the
New Agreement, Legg Mason would receive 0.4516% (blended), an effective increase
of 0.16 basis point.
The New Agreement may be terminated at any time without penalty by vote
of the Board, by vote of a majority of the outstanding voting securities of the
Portfolio or upon the election of DSI upon 60 days' written notice to Legg
Mason. The New Agreement will automatically terminate in the event of its
"assignment" by either party (as defined under the 1940 Act) or upon termination
of the Management Agreement between the Trust and DSI. The New Agreement also
may be terminated by Legg Mason upon three months written notice to the Trust
and DSI, unless the Trust or DSI requests additional time, not to exceed three
months, to find a replacement for the sub-adviser.
Under the terms of the New Agreement as under the Former Agreement, the
agreement will continue in full force and effect from year to year, provided
such continuance is specifically approved at least annually by the Trustees or
by a majority of the outstanding voting securities of the Portfolio (as defined
in the 1940 Act). In either event, such renewal is also required to be approved
by the vote of a majority of the Independent Trustees cast in person at a
meeting called for the purpose of voting on such renewal.
Under the terms of the New Agreement, as under the Former Agreement, in
the absence of willful misconduct, malfeasance, bad faith or negligence of
its obligations under the New Agreement, Legg Mason shall not be liable to the
Portfolio or its shareholders or to the Adviser for any act or omission
resulting in any loss suffered by the Trust, the Portfolio or the Portfolio's
shareholders in connection with any service provided under the New Agreement.
INFORMATION CONCERNING LEGG MASON
The principal business address of Legg Mason is 100 Light Street,
Baltimore, Maryland 21202. Legg Mason is a registered investment adviser and is
17
a wholly owned subsidiary of Legg Mason, Inc, and a part of the Mutual Funds
Division of Legg Mason, Inc.'s asset management business. Legg Mason, Inc. is a
globally diversified organization headquartered at 100 Light Street, Baltimore,
Maryland 21202, with operations in many areas of the financial services
industry. As of December 31, 2003, Legg Mason's total assets under management
were approximately $35 billion.
The principal occupations of each director and principal executive
officer of Legg Mason are set forth in the table below. The principal business
address of each director and principal executive officer, as it relates to his
or her duties at Legg Mason, is 100 Light Street, Baltimore, Maryland 21202.
NAME POSITION WITH LEGG MASON
Nancy Dennin Senior Vice President
Robert George Hagstrom Senior Vice President
Raymond Adams Mason Chairman and Director
William Herbert Miller President, Chief Executive Officer, and Director
David Eric Nelson Senior Vice President
Timothy Charles Scheve Director
Mary Christine Gay Senior Vice President
Jennifer Williams Murphy Senior Vice President, Chief Operating Officer,
Chief Financial Officer, and Director
Mark Raymond Fetting Director
Ira Malis Senior Vice President
Michael Mauboussin Senior Vice President
No Trustees or officers of the Trust are employees, officers, directors
or shareholders of Legg Mason or its parent company.
Legg Mason acts as an investment adviser or sub-adviser to various
other series of registered investment companies, some of which have investment
objectives and programs similar to the investment objective and program for the
Portfolio (collectively the "Comparable Legg Mason Funds"). For the Comparable
18
Legg Mason Funds that Legg Mason serves as investment adviser, Legg Mason may
perform certain administrative and other services for such fund that it is not
required to perform for the Portfolio under the New Agreement. For each
Comparable Legg Mason Fund, the chart set forth as APPENDIX C lists the net
assets as of February 29, 2004, as well as the current advisory or sub-advisory
fee rate payable to Legg Mason.
CHANGES IN THE PORTFOLIO'S INVESTMENT STRATEGIES
Effective May 3, 2004, Legg Mason will employ the following investment
strategies for the Portfolio:
The Portfolio invests primarily in equity securities that, in the
manager's opinion, offer the potential for capital growth. The manager
follows a value discipline in selecting securities, and therefore seeks
to purchase securities at large discounts to the manager's assessment
of their intrinsic value. Intrinsic value, according to the manager, is
the value of the company measured, to different extents depending on
the type of company, on factors such as, but not limited to, the
discounted value of its projected future free cash flows, the company's
ability to earn returns on capital in excess of its cost of capital,
private market values of similar companies and the costs to replicate
the business. Qualitative factors, such as an assessment of the
company's products, competitive positioning, strategy, industry
economics and dynamics, regulatory frameworks and more, are also
important. Securities may be undervalued due to uncertainty arising
from the limited availability of accurate information, economic growth
and change, changes in competitive conditions, technological change,
changes in government policy or geopolitical dynamics and more. It
should be noted that in this description of the criteria for selecting
securities the word "value" is used in its natural sense rather than in
the context often seen in current industry literature of "value" or
"growth". Thus the adviser may invest in securities that some analysts
consider to be "value stocks" or "growth stocks". The manager takes a
long-term approach to investing, generally characterized by long
holding periods and low portfolio turnover. The Portfolio generally
invests in companies with market capitalizations greater than $5
billion, but may invest in companies of any size.
The Portfolio's manager may decide to sell securities given a variety
of circumstances, such as when a security no longer appears to the
manager to offer the potential for long-term growth of capital, when an
investment opportunity arises that the manager believes is more
compelling, or to realize gains or limit potential losses.
The Portfolio may also invest in debt securities of companies having
one or more of the above characteristics. The Portfolio may invest up
to 25%
19
of its total assets in long-term debt securities. Up to 10% of its
total assets may be invested in debt securities rated below investment
grade, commonly known as "junk bonds."
For temporary defensive purposes, or when cash is temporarily
available, the Portfolio may invest without limit in investment grade,
short-term debt instruments, including government, corporate and money
market securities. If the Portfolio invests substantially in such
instruments, it may not be pursuing its principal investment strategies
and may not achieve its investment objective.
OTHER MATTERS
In connection with the change in sub-adviser and the execution of the
New Agreement, the name of the Portfolio will change from ING Janus Growth and
Income Portfolio to ING Legg Mason Value Portfolio effective May 3, 2004.
20
APPENDIX A
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS OF
DIRECTED SERVICES, INC.
1475 DUNWOODY DRIVE
WEST CHESTER, PA 19380
NAME AND TITLE
James R. McInnis, Director & President
Alan G. Hoden, Director
Stephen J. Preston, Director
David S. Pendergrass, Vice President & Treasurer
David L. Jacobson, Senior Vice President
Kimberly J. Smith, Secretary
PRINCIPAL EXECUTIVE OFFICERS OF ING FUNDS SERVICES, LLC
7337 E. DOUBLETREE RANCH ROAD
SCOTTSDALE, AZ 85258
NAME AND TITLE
James M. Hennessy - President & CEO
Michael J. Roland - Executive VP, CFO & Treasurer
Lydia L. Homer - Senior VP & Controller
Robert S. Naka - Senior VP & Assistant Secretary
Kimberly A. Anderson - Senior VP & Assistant Secretary
PRINCIPAL EXECUTIVE OFFICERS OF ING FUNDS DISTRIBUTOR, LLC
7337 E. DOUBLETREE RANCH ROAD
SCOTTSDALE, AZ 85258
NAME AND TITLE
Robert J. Boulware - President & CEO
James M. Hennessy - Senior Executive VP & Chief Operating Officer
Michael J. Roland - Executive VP, CFO & Treasurer
Lydia L. Homer - Senior VP & Controller
Lauren Bensinger - VP & Chief Compliance Officer
Kimberly A. Anderson - Senior VP & Assistant Secretary
Robert S. Naka - Senior VP & Assistant Secretary
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APPENDIX B
FORM OF PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this __ day of ___, 2004, among ING Investors Trust (the
"Trust"), a Massachusetts business trust, Directed Services, Inc. (the
"Manager"), a New York corporation, and Legg Mason Funds Management, Inc. (the
"Portfolio Manager"), a corporation organized under the laws of the State of
Maryland.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of
which will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may
offer shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of May 24,
2002, as amended, a copy of which has been provided to the Portfolio Manager,
the Trust has retained the Manager to render advisory, management, and
administrative services with respect to the Trust's series; and
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager.
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the Manager
and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint the Portfolio
Manager to act as the portfolio manager to the series of the Trust designated on
SCHEDULE A of this Agreement (each a "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.
In the event the Trust designates one or more series other than the
Series with respect to which the Trust and the Manager wish to retain the
Portfolio Manager to render investment advisory services hereunder, they shall
promptly notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to
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render such services, it shall so notify the Trust and Manager in writing,
whereupon such series shall become a Series hereunder, and be subject to this
Agreement.
2. PORTFOLIO MANAGEMENT DUTIES AND AUTHORITY.
Subject to the supervision of the Trust's Board of Trustees (the
"Board") and the Manager, the Portfolio Manager will provide a continuous
investment program for each Series' portfolio and determine the composition of
the assets of each Series' portfolio, including determination of the purchase,
retention, or sale of the securities, cash, and other investments contained in
the portfolio. The Portfolio Manager will provide investment research and
conduct a continuous program of evaluation, investment, sales, and reinvestment
of each Series' assets by determining the securities and other investments that
shall be purchased, entered into, sold, closed, or exchanged for the Series,
when these transactions should be executed, and what portion of the assets of
each Series should be held in the various securities and other investments in
which it may invest, and the Portfolio Manager is hereby authorized to execute
and perform such services on behalf of each Series. To the extent permitted by
the investment policies of the Series, the Portfolio Manager shall make
decisions for the Series as to foreign currency matters. The Portfolio Manager
will provide the services under this Agreement in accordance with the Series'
investment objective or objectives, policies, and restrictions as stated in the
Trust's Registration Statement filed with the U.S. Securities and Exchange
Commission (the "SEC"), as from time to time amended (the "Registration
Statement"), copies of which shall be sent to the Portfolio Manager by the
Manager upon filing with the SEC. The Portfolio Manager is authorized to
exercise tender offers and exchange offers on behalf of the Series, each as the
Portfolio Manager determines is in the best interest of the Series. The
Portfolio Manager and Manager further agree as follows:
(a) The Portfolio Manager will (1) manage each Series so that no action
or omission on the part of the Portfolio Manager will cause a Series to fail to
meet the requirements to qualify as a regulated investment company specified in
Section 851 of the Internal Revenue Code of 1986, as amended (the "Code") (other
than the requirements for the Trust to register under the 1940 Act and to file
with its tax return an election to be a regulated investment company and to file
with its tax return an election to be a regulated investment company and satisfy
the distribution requirements under Section 852 (a) of the Internal Revenue
Code, all of which shall not be the responsibility of the Portfolio Manager),
(2) manage each Series so that no action or omission on the part of the
Portfolio Manager shall cause a Series to fail to comply with the
diversification requirements of Section 817(h) of the Code, and the regulations
issued thereunder, and (3) use reasonable efforts to manage the Series so that
no action or omission on the part of the Portfolio Manager shall cause a Series
to fail to comply with any other rules and regulations pertaining to investment
vehicles underlying variable annuity or variable life insurance policies. The
Manager will notify the Portfolio Manager promptly if the Manager believes
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that a Series is in violation of any requirement specified in the first sentence
of this paragraph.
(b) On occasions when the Portfolio Manager deems the purchase or sale
of a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its affiliates,
the Portfolio Manager may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be so
sold or purchased with those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Registration Statement. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Portfolio Manager in a
manner that is fair and equitable in the judgment of the Portfolio Manager in
the exercise of its fiduciary obligations to the Trust and to such other
clients, provided, however that the Manager and the Board shall have the right
to review and request changes to the Portfolio Manager's manner of allocation,
provided further that any requested changes to such manner of allocation shall
be implemented on a prospective basis only.
(c) In connection with the purchase and sale of securities for each
Series, the Portfolio Manager will arrange for the transmission to the custodian
and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information, including, but
not limited to, Cusip, Sedol, or other numbers that identify securities to be
purchased or sold on behalf of the Series, as may be reasonably necessary to
enable the custodian and portfolio accounting agent to perform their
administrative and recordkeeping responsibilities with respect to the Series.
With respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Portfolio Manager will arrange for the automatic
transmission of the confirmation of such trades to the Trust's custodian and
portfolio accounting agent.
(d) The Portfolio Manager will assist the portfolio accounting agent
for the Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement, the value of any portfolio
securities or other assets of the Series for which the portfolio accounting
agent seeks assistance from or identifies for review by the Portfolio Manager.
(e) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon reasonable request, all of the Series' investment records
and ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian and portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), as well as other applicable laws. The Portfolio
Manager will furnish to regulatory authorities having the requisite authority
any information or reports in connection with such services which may be
requested in order to
B-3
ascertain whether the operations of the Trust are being conducted in a manner
consistent with applicable laws and regulations.
(f) The Portfolio Manager will provide reports to the Trust's Board for
consideration at meetings of the Board on the investment program for the Series
and the issuers and securities represented in the Series' portfolio, and will
furnish the Trust's Board with respect to the Series such periodic and special
reports as the Trustees and the Manager may reasonably request.
(g) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
affiliated or unaffiliated person or persons as it believes necessary to assist
it in carrying out its obligations under this Agreement. The Portfolio Manager
may not retain, employ or associate itself with any company that would be an
"investment adviser," as that term is defined in the 1940 Act, to the Series
unless the contract with such company is approved by a majority of the Trust's
Board and a majority of Trustees who are not parties to any agreement or
contract with such company and who are not "interested persons," as defined in
the 1940 Act, of the Trust, the Manager, or the Portfolio Manager, or any such
company, and is approved by the vote of a majority of the outstanding voting
securities of the applicable Series of the Trust to the extent required by the
1940 Act. The Portfolio Manager shall be responsible for making reasonable
inquiries and for reasonably ensuring that no associated person of the Portfolio
Manager, or of any company that the Portfolio Manager has retained, employed, or
with which it has associated with respect to the investment management of the
Series, to the best of the Portfolio Manager's knowledge, had in any material
connection with the handling of assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement,
fraudulent conversion, or misappropriation of funds or
securities, involving violations of Sections 1341, 1342, or
1343 of Title 18, United States Code, or involving the
purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged
violation of any provision of any state insurance law
involving fraud, deceit, or knowing misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated
or to have acknowledged violation of any provision of federal
or state securities laws involving fraud, deceit, or knowing
misrepresentation.
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(h) In using spot and forward foreign exchange contracts for the Series
as an investment the parties represent the following:
(i) that the Manager is properly and lawfully established with
full power and authority to enter into spot and forward
foreign exchange contracts, to perform its obligations under
such foreign exchange contracts and to procure the Portfolio
Manager to enter into such foreign exchange contracts on its
behalf.
(ii) that the Manager may not, except for purposes of
redemptions, expenses, and other costs of doing business,
encumber funds which the Portfolio Manager has under the
Portfolio Manager's management or which benefit from the
Portfolio Manager's investment advice. If the Manager requires
funds for any redemptions, expenses, and other costs of doing
business, the Portfolio Manager will make funds available in a
reasonably timely manner for the Manager to meet such
obligations. The Manager reserves the right to segregate
assets upon notice to the Portfolio Manager and provide
different arrangements for investment management with respect
to those assets.
(iii) that the Portfolio Manager has been granted full power
and authority to enter into foreign exchange contracts as
agent on the Manager's behalf and to give instructions for
settlement for the same.
(iv) that the Portfolio Manager has full authority to instruct
the Manager's and the Trust's custodian in conformity with its
mandate.
(v) that in the event of the termination of this Agreement,
the Portfolio Manager, if legally and operationally possible,
may offer the Series' counterparty the option to leave open
any existing foreign exchange contracts or to close them out
at prevailing market rates.
(i) The Portfolio Manager will have no duty to vote any proxy solicited
by or with respect to the issuers of securities in which assets of the Series
are invested unless the Manager gives the Portfolio Manager written instructions
to the contrary. The Portfolio Manager will immediately forward any proxy
solicited by or with respect to the issuers of securities in which assets of the
Series are invested to the Manager or to any agent of the Manager designated by
the Manager in writing.
The Portfolio Manager will make appropriate personnel available for
consultation for the purpose of reviewing with representatives of the Manager
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and/or the Board any proxy solicited by or with respect to the issuers of
securities in which assets of the Series are invested. Upon request, the
Portfolio Manager will submit a written voting recommendation to the Manager for
such proxies. In making such recommendations, the Portfolio Manager shall use
its good faith judgment to act in the best interests of the Series. The
Portfolio Manager shall disclose to the best of its knowledge any conflict of
interest with the issuers of securities that are the subject of such
recommendation including whether such issuers are clients or are being solicited
as clients of the Portfolio Manager or of its affiliates.
3. BROKER-DEALER SELECTION. The Portfolio Manager is hereby authorized
to place orders for the purchase and sale of securities and other investments
for each Series' portfolio, with or through such persons, brokers or dealers and
to negotiate commissions to be paid on such transactions and to supervise the
execution thereof. The Portfolio Manager's primary consideration in effecting
any such transaction will be to obtain the best execution for the Series, taking
into account the factors specified in the Registration Statement, which include
price (including the applicable brokerage commission or dollar spread), the size
of the order, the nature of the market for the security, the timing of the
transaction, the reputation, the experience and financial stability of the
broker-dealer involved, the quality of the service, the difficulty of execution,
and the execution capabilities and operational facilities of the firms involved,
and the firm's risk in positioning a block of securities. Accordingly, the price
to a Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the judgment
of the Portfolio Manager in the exercise of its fiduciary obligations to the
Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended, the Portfolio
Manager may effect a transaction on behalf of the Series with a broker-dealer
who provides brokerage and research services to the Portfolio Manager
notwithstanding the fact that the commissions payable with respect to any such
transaction may be greater than the amount of any commission another
broker-dealer might have charged for effecting that transaction, if the
Portfolio Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion.
The Portfolio Manager will consult with the Manager to the end that
portfolio transactions on behalf of a Series are directed to broker-dealers on
the basis of criteria reasonably considered appropriate by the Manager. To the
extent consistent with this Agreement, the Portfolio Manager is further
authorized to allocate orders placed by it on behalf of the Series to the
Portfolio Manager as agent
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if it is registered as a broker-dealer with the SEC, to any of its affiliated
broker-dealers as agents, or to such brokers and dealers who also provide
research or statistical material, or other services to the Series, the Portfolio
Manager, or an affiliate of the Portfolio Manager. Such allocation shall be in
such amounts and proportions as the Portfolio Manager shall determine consistent
with the above standards, and the Portfolio Manager will report on said
allocation regularly to the Board indicating the broker-dealers to which such
allocations have been made and the basis therefore.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the post-effective amendment to the Registration Statement for the
Trust filed with the SEC that contains disclosure about the Portfolio Manager,
and represents and warrants that, with respect to the disclosure about or
information relating, directly or indirectly, to the Portfolio Manager, to the
Portfolio Manager's knowledge, such Registration Statement contains, as of the
date hereof, no untrue statement of any material fact and does not omit any
statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The Portfolio
Manager further represents and warrants that it is a duly registered investment
adviser under the Advisers Act, or alternatively that it is not required to be a
registered investment adviser under the Advisers Act to perform the duties
described in this Agreement, and that it is a duly registered investment adviser
in all states in which the Portfolio Manager is required to be registered and
will maintain such registration so long as this Agreement remains in effect. The
Portfolio Manager will provide the Manager with a copy of the Portfolio
Manager's Form ADV, Part II at the time the Form ADV and any amendment is filed
with the SEC, and a copy of its written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act, together with evidence of its
adoption.
5. EXPENSES. During the term of this Agreement, the Portfolio Manager
will pay all expenses incurred by it and its staff and for their activities in
connection with the portfolio management duties specified in this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public
accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of each
Series' net assets;
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(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions, transfer fees, registration fees,
taxes and similar liabilities and costs properly payable or incurred in
connection with the purchase and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to its
shareholders, the filing of reports with regulatory bodies, the maintenance of
the Trust's existence, and the regulation of shares with federal and state
securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate thereof;
(n) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(o) Association membership dues;
(p) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims (unless
the Portfolio Manager is responsible for such expenses under Section 15 of this
Agreement), and the legal obligations of the Trust to indemnify its Trustees,
officers, employees, shareholders, distributors, and agents with respect
thereto; and
(q) Organizational and offering expenses.
6. COMPENSATION. For the services provided to each Series, the Manager
will pay the Portfolio Manager a fee, payable as described in SCHEDULE B.
The fee will be prorated to reflect any portion of a calendar month
that this Agreement is not in effect among the parties. In accordance with the
provisions of
B-8
the Management Agreement, the Manager is solely responsible for the payment of
fees to the Portfolio Manager, and the Portfolio Manager agrees to seek payment
of its fees solely from the Manager.
7. MARKETING MATERIALS.
(a) During the term of this Agreement, the Portfolio Manager agrees to
furnish the Manager at its principal office for prior review and approval by the
Manager all written and/or printed materials, including but not limited to,
PowerPoint(R) or slide presentations, news releases, advertisements, brochures,
fact sheets and other promotional, informational or marketing materials (the
"Marketing Materials") for internal use or public dissemination, that are
produced or are for use or reference by the Portfolio Manager, its affiliates or
other designees, broker-dealers or the public in connection with the Series, and
Portfolio Manager shall not use any such materials if the Manager reasonably
objects in writing within five business days (or such other period as may be
mutually agreed) after receipt thereof. Marketing Materials may be furnished to
the Manager by first class or overnight mail, facsimile transmission equipment,
electronic delivery or hand delivery.
(b) During the term of this Agreement, the Manager agrees to furnish
the Portfolio Manager at its principal office all prospectuses, proxy
statements, reports to shareholders, or Marketing Materials prepared for
distribution to shareholders of each Series, or the public that refer to the
Portfolio Manager in any way, prior to the use thereof, and the Manager shall
not use any such materials if the Portfolio Manager reasonably objects in
writing within five business days (or such other period as may be mutually
agreed) after receipt thereof. The Portfolio Manager's right to object to such
materials is limited to the portions of such materials that expressly relate to
the Portfolio Manager, its services and its clients. The Manager agrees to use
its reasonable best efforts to ensure that materials prepared by its employees
or agents or its affiliates that refer to the Portfolio Manager or its clients
in any way are consistent with those materials previously approved by the
Portfolio Manager as referenced in the first sentence of this paragraph.
Marketing Materials may be furnished to the Portfolio Manager by first class or
overnight mail, facsimile transmission equipment, electronic delivery or hand
delivery.
8. SEED MONEY. The Manager agrees that the Portfolio Manager shall not
be responsible for providing money for the initial capitalization of the Series.
9. COMPLIANCE.
(a) The Trust and the Manager acknowledge that the Portfolio Manager is
not the compliance agent for any Series or for the Trust or the Manager, and
does not have access to all of the books and records for each Series necessary
to perform certain compliance testing. To the extent that the Portfolio Manager
has agreed to perform the services specified in Section 2 in accordance with the
Trust's
B-9
Registration Statement, the Trust's Amended and Restated Agreement and
Declaration of Trust and By-Laws, the Trust's Prospectus and any policies
adopted by the Trust's Board applicable to the Series (collectively, the
"Charter Requirements"), and in accordance with applicable law (including
Subchapters M and L of the Code, the 1940 Act and the Advisers Act ("Applicable
Law")), the Portfolio Manager shall perform such services based upon its books
and records with respect to each Series, which comprise a portion of each
Series' books and records, and upon information and written instructions
received from the Trust, the Manager or the Trust's administrator, and shall not
be held responsible under this Agreement so long as it performs such services in
accordance with this Agreement, the Charter Requirements and Applicable Law
based upon such books and records and such information and instructions provided
by the Trust, the Manager, or the Trust's administrator. The Manager shall
promptly provide the Portfolio Manager with copies of the Trust's Registration
Statement, the Trust's Amended and Restated Agreement and Declaration of Trust
and By-Laws, the Trust's currently effective Prospectus and any written policies
and procedures adopted by the Trust's Board applicable to the Series and any
amendments or revisions thereto. The Portfolio Manager agrees that it shall
promptly notify the Manager and the Trust (1) in the event that the SEC or other
governmental authority has censured the Portfolio Manager; placed limitations
upon its activities, functions or operations; suspended or revoked its
registration, if any, as an investment adviser; or has commenced proceedings or
an investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that the Series has ceased to qualify or might
not qualify as a regulated investment company under Subchapter M of the Code, or
(3) upon having a reasonable basis for believing that the Series has ceased to
comply with the diversification provisions of Section 817(h) of the Code or the
regulations thereunder. The Portfolio Manager further agrees to notify the
Manager and the Trust promptly of any material fact known to the Portfolio
Manager respecting or relating to the Portfolio Manager that is not contained in
the Registration Statement as then in effect, and is required to be stated
therein or necessary to make the statements therein not misleading, or of any
statement contained therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the Trust;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Manager's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Code, or (3) upon having a reasonable basis for believing
that the Series has ceased to comply with the diversification provisions of
Section 817(h) of the Code or the regulations thereunder.
10. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
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which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's reasonable request, although the Portfolio Manager may, at its
own expense, make and retain a copy of such records. The Portfolio Manager
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-l under the 1940 Act
and to preserve the records required by Rule 204-2 under the Advisers Act for
the period specified in such rules.
11. COOPERATION; CONFIDENTIALITY. Each party to this Agreement agrees
to cooperate with each other party and with all appropriate governmental
authorities having the requisite jurisdiction (including, but not limited to,
the SEC and state insurance regulators) in connection with any investigation or
inquiry relating to this Agreement or the Trust.
Subject to the foregoing, the Portfolio Manager shall treat as
confidential all information pertaining to the Trust and actions of the Trust,
the Manager and the Portfolio Manager, and the Manager shall treat as
confidential and use only in connection with the Series all information
furnished to the Trust or the Manager by the Portfolio Manager, in connection
with its duties under the Agreement except that the aforesaid information need
not be treated as confidential if required to be disclosed under applicable law,
if generally available to the public through means other than by disclosure by
the Portfolio Manager or the Manager, or if available from a source other than
the Manager, Portfolio Manager or the Trust.
12. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER.
(a) During the term of this Agreement, the Trust and the Manager agree
to furnish to the Portfolio Manager at its principal offices prior to use
thereof copies of all Registration Statements and amendments thereto,
prospectuses, proxy statements, reports to shareholders, sales literature or
other material prepared for distribution to shareholders of the Trust or any
Series or to the public that refer or relate in any way to the Portfolio Manager
or any of its affiliates (other than the Manager), or that use any derivative of
the names "Legg Mason Funds Management, Inc.," or any derivative thereof or
logos associated therewith. The Trust and the Manager agree that they will not
use any such material without the prior consent of the Portfolio Manager, which
consent shall not be unreasonably withheld. In the event of the termination of
this Agreement, the Trust and the Manager will furnish to the Portfolio Manager
copies of any of the above-mentioned materials that refer or relate in any way
to the Portfolio Manager;
(b) The Trust and the Manager will furnish to the Portfolio Manager
such information relating to either of them or the business affairs of the Trust
as the Portfolio Manager shall from time to time reasonably request in order to
discharge its obligations hereunder;
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(c) The Manager and the Trust agree that neither the Trust, the
Manager, nor affiliated persons of the Trust or the Manager shall give any
information or make any representations or statements in connection with the
sale of shares of the Series concerning the Portfolio Manager or the Series
other than the information or representations contained in the Registration
Statement, prospectus, or statement of additional information for the Trust, as
they may be amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional material
approved in advance by the Portfolio Manager, except with the prior permission
of the Portfolio Manager.
13. SERVICES NOT EXCLUSIVE.
(a) It is understood that the services of the Portfolio Manager are not
exclusive, and nothing in this Agreement shall prevent the Portfolio Manager (or
its affiliates) from providing similar services to other clients, including
investment companies (whether or not their investment objectives and policies
are similar to those of the Series) or from engaging in other activities.
(b) The Portfolio Manager shall be free to render investment advisory
or other services to others (including other investment companies) and to engage
in other activities, provided, however, that the Portfolio Manager may not
consult with any other portfolio manager of the Trust concerning transactions in
securities or other assets for any investment portfolio of the Trust, including
the Series, except that such consultations are permitted between the current and
successor portfolio managers of the Series in order to effect an orderly
transition of portfolio management duties so long as such consultations are not
concerning transactions prohibited by Section 17(a) of the 1940 Act.
14. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the Securities Act
of 1933, as amended ("1933 Act"), controls the Portfolio Manager (1) shall bear
no responsibility and shall not be subject to any liability for any act or
omission respecting any series of the Trust that is not a Series hereunder, and
(2) shall not be liable for any error of judgment, mistake of law, any
diminution in value of the investment portfolio of the Series, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or negligence in the performance by
the Portfolio Manager of its duties, or by reason of reckless disregard by the
Portfolio Manager of its obligations and duties under this Agreement.
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15. INDEMNIFICATION.
(a) Notwithstanding Section 14 of this Agreement, the Manager agrees to
indemnify and hold harmless the Portfolio Manager, any affiliated person of the
Portfolio Manager (other than the Manager), and each person, if any, who, within
the meaning of Section 15 of the 1933 Act controls ("controlling person") the
Portfolio Manager (all of such persons being referred to as "Portfolio Manager
Indemnified Persons") against any and all losses, claims, damages, liabilities,
or litigation (including legal and other expenses) to which a Portfolio Manager
Indemnified Person may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, the Code, under any other statute, at common law or otherwise,
arising out of the Manager's responsibilities to the Trust which (1) may be
based upon any violations of willful misconduct, malfeasance, bad faith or
negligence by the Manager, any of its employees or representatives, or any
affiliate of or any person acting on behalf of the Manager, or (2) may be based
upon any untrue statement or alleged untrue statement of a material fact
supplied by, or which is the responsibility of, the Manager and contained in the
Registration Statement or prospectus covering shares of the Trust or any Series,
or any amendment thereof or any supplement thereto, or the omission or alleged
omission to state therein a material fact known or which should have been known
to the Manager and was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon information furnished to the Manager or the Trust or to any
affiliated person of the Manager by a Portfolio Manager Indemnified Person;
provided however, that in no case shall the indemnity in favor of the Portfolio
Manager Indemnified Person be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or negligence in the performance of its duties,
or by reason of its reckless disregard of obligations and duties under this
Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of the
Manager (other than the Portfolio Manager), and each person, if any, who, is a
controlling person of the Manager (all of such persons being referred to as
"Manager Indemnified Persons") against any and all losses, claims, damages,
liabilities, or litigation (including legal and other expenses) to which a
Manager Indemnified Person may become subject under the 1933 Act, 1940 Act, the
Advisers Act, the Code, under any other statute, at common law or otherwise,
arising out of the Portfolio Manager's responsibilities as Portfolio Manager of
the Series which (1) may be based upon any violations of willful misconduct,
malfeasance, bad faith or negligence by the Portfolio Manager, any of its
employees or representatives, or any affiliate of or any person acting on behalf
of the Portfolio Manager, including but not limited to its responsibilities
under Section 2 of this Agreement, or (2) any breach of any representations or
warranties contained in Section 4; provided, however, that in no case shall the
indemnity in favor of a Manager Indemnified Person be deemed to protect such
person against
B-13
any liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
15 with respect to any claim made against a Portfolio Manager Indemnified Person
unless such Portfolio Manager Indemnified Person shall have notified the Manager
in writing within a reasonable time after the summons, notice, or other first
legal process or notice giving information of the nature of the claim shall have
been served upon such Portfolio Manager Indemnified Person (or after such
Portfolio Manager Indemnified Person shall have received notice of such service
on any designated agent), but failure to notify the Manager of any such claim
shall not relieve the Manager from any liability which it may have to the
Portfolio Manager Indemnified Person against whom such action is brought except
to the extent the Manager is prejudiced by the failure or delay in giving such
notice. In case any such action is brought against the Portfolio Manager
Indemnified Person, the Manager will be entitled to participate, at its own
expense, in the defense thereof or, after notice to the Portfolio Manager
Indemnified Person, to assume the defense thereof, with counsel satisfactory to
the Portfolio Manager Indemnified Person. If the Manager assumes the defense of
any such action and the selection of counsel by the Manager to represent both
the Manager and the Portfolio Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment of
the Portfolio Manager Indemnified Person, adequately represent the interests of
the Portfolio Manager Indemnified Person, the Manager will, at its own expense,
assume the defense with counsel to the Manager and, also at its own expense,
with separate counsel to the Portfolio Manager Indemnified Person, which counsel
shall be satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall not be
liable to the Portfolio Manager Indemnified Person under this Agreement for any
legal or other expenses subsequently incurred by the Portfolio Manager
Indemnified Person independently in connection with the defense thereof other
than reasonable costs of investigation. The Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of the
Portfolio Manager Indemnified Person if the compromise or settlement results, or
may result in a finding of wrongdoing on the part of the Portfolio Manager
Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of
this Section 15 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the Portfolio
Manager in writing within a reasonable time after the summons, notice, or other
first legal process or notice giving information of the nature of the claim
shall have been served upon such Manager Indemnified Person (or after such
Manager Indemnified Person shall have received notice of such service on any
designated agent), but failure to notify the Portfolio Manager of any such claim
shall not relieve the
B-14
Portfolio Manager from any liability which it may have to the Manager
Indemnified Person against whom such action is brought except to the extent the
Portfolio Manager is prejudiced by the failure or delay in giving such notice.
In case any such action is brought against the Manager Indemnified Person, the
Portfolio Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Manager Indemnified Person, to assume
the defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense of any such action and the
selection of counsel by the Portfolio Manager to represent both the Portfolio
Manager and the Manager Indemnified Person would result in a conflict of
interests and therefore, would not, in the reasonable judgment of the Manager
Indemnified Person, adequately represent the interests of the Manager
Indemnified Person, the Portfolio Manager will, at its own expense, assume the
defense with counsel to the Portfolio Manager and, also at its own expense, with
separate counsel to the Manager Indemnified Person, which counsel shall be
satisfactory to the Portfolio Manager and to the Manager Indemnified Person. The
Manager Indemnified Person shall bear the fees and expenses of any additional
counsel retained by it, and the Portfolio Manager shall not be liable to the
Manager Indemnified Person under this Agreement for any legal or other expenses
subsequently incurred by the Manager Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Portfolio Manager shall not have the right to compromise on
or settle the litigation without the prior written consent of the Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Manager Indemnified Person.
(e) The Manager shall not be liable under this Section 15 to indemnify
and hold harmless the Portfolio Manager and the Portfolio Manager shall not be
liable under this Section 15 to indemnify and hold harmless the Manager with
respect to any losses, claims, damages, liabilities, or litigation that first
become known to the party seeking indemnification during any period that the
Portfolio Manager is, within the meaning of Section 15 of the 1933 Act, a
controlling person of the Manager.
16. DURATION AND TERMINATION. This Agreement shall become effective
with respect to each Series on the later of the date first indicated above or
the date of the commencement of operations of each Series. Unless terminated as
provided herein, the Agreement shall remain in full force and effect until
SEPTEMBER 1, 2005, and continue on an annual basis thereafter with respect to
each Series; provided that such annual continuance is specifically approved each
year by (a) the vote of a majority of the entire Board of the Trust, or by the
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of each Series, and (b) the vote of a majority of those Trustees who are
not parties to this Agreement or interested persons (as such term is defined in
the 1940 Act) of any such party to this Agreement cast in person at a meeting
called for the purpose of voting on such approval. The Portfolio Manager shall
not provide any services for such Series or receive any fees on account of such
Series with respect to which this Agreement is
B-15
not approved as described in the preceding sentence. However, any approval of
this Agreement by the holders of a majority of the outstanding shares (as
defined in the 1940 Act) of a Series shall be effective to continue this
Agreement with respect to such Series notwithstanding (1) that this Agreement
has not been approved by the holders of a majority of the outstanding shares of
any other Series or (2) that this agreement has not been approved by the vote of
a majority of the outstanding shares of the Trust, unless such approval shall be
required by any other applicable law or otherwise. Notwithstanding the
foregoing, this Agreement may be terminated for each or any Series hereunder (1)
by the Manager at any time without penalty, upon sixty (60) days' written notice
to the Portfolio Manager and the Trust, (2) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board or a
majority of the outstanding voting securities of each Series, upon sixty (60)
days' written notice to the Manager and the Portfolio Manager, or (3) by the
Portfolio Manager at any time without penalty, upon three (3) months' written
notice to the Manager and the Trust, unless the Manager or the Trust requests
additional time to find a replacement for the Portfolio Manager, in which case
the Portfolio Manager shall allow the additional time requested by the Trust or
the Manager not to exceed three (3) months beyond the initial three-month notice
period; provided however, that the Portfolio Manager may terminate this
Agreement at any time without penalty effective upon written notice to the
Manager and the Trust, in the event either the Portfolio Manager (acting in good
faith) or the Manager ceases to be registered as an investment adviser under the
Advisers Act or otherwise becomes legally incapable of providing investment
management services pursuant to its respective contract with the Trust, or in
the event the Manager becomes bankrupt or otherwise incapable of carrying out
its obligations under this Agreement, or in the event that the Portfolio Manager
does not receive compensation for its services from the Manager or the Trust as
required by the terms of this Agreement. In addition, this Agreement shall
terminate with respect to a Series in the event that it is not approved by the
vote of a majority of the outstanding voting securities of that Series at a
meeting of shareholders at which approval of the Agreement shall be considered
by shareholders of the Series. In the event of termination for any reason, all
records of each Series for which the Agreement is terminated shall promptly be
returned to the Manager or the Trust, free from any claim or retention of rights
in such records by the Portfolio Manager, although the Portfolio Manager may, at
its own expense, make and retain a copy of such records. The Agreement shall
automatically terminate in the event of its assignment (as such term is
described in the 1940 Act). In the event this Agreement is terminated or is not
approved in the manner described above, the Sections or Paragraphs numbered
2(e), 10, 11, 12, 14, 15, and 19 of this Agreement shall remain in effect, as
well as any applicable provision of this Paragraph numbered 16.
17. NOTICES. Any notice must be in writing and shall be deemed to have
been given when (1) delivered in person, (2) dispatched by telegram or electric
facsimile transfer (confirmed in writing by postage prepaid first class mail
simultaneously dispatched), (3) sent by internationally recognized overnight
courier service (with receipt confirmed by such overnight courier
B-16
service), or (4) sent by registered or certified mail, to the other party at the
address of such party set forth below or at such other address as such party may
from time to time specify in writing to the other party.
IF TO THE TRUST:
ING Investors Trust
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
Attention: Chief Counsel
IF TO THE MANAGER:
Directed Services, Inc.
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
Attention: Chief Counsel
IF TO THE PORTFOLIO MANAGER:
Legg Mason Funds Management, Inc.
100 Light Street
Baltimore, Maryland 21202
Attention: Mary Chris Gay
18. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (1) the Trustees of the Trust,
including a majority of the Trustees of the Trust who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, if such approval is required by applicable
law, and (2) the holders of a majority of the outstanding voting securities of
the Series.
Notwithstanding the foregoing, this Agreement may be amended without
the approval of a majority of the Series' outstanding voting securities if the
amendment relates solely to a change that is permitted or not prohibited under
federal law, rule, regulation, SEC Order or SEC staff interpretation thereof to
be made without shareholder approval.
19. USE OF NAMES.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property of
the
B-17
Manager and/or its affiliates, and that the Portfolio Manager has the right to
use such name (or derivative or logo) only with the approval of the Manager and
only so long as the Manager is Manager to the Trust and/or the Series. Upon
termination of the Management Agreement between the Trust and the Manager, the
Trust or the Manager shall notify the Portfolio Manager of the termination of
the Management Agreement and the Portfolio Manager shall as soon as is
reasonably possible cease to use such name (or derivative or logo).
(b) It is understood that the name "Legg Mason Funds Management, Inc."
or any derivative thereof or logos associated with those names are the valuable
property of the Portfolio Manager and its affiliates and that the Trust and/or
the Series have the right to use such names (or derivatives or logos) in
offering materials of the Trust with the approval of the Portfolio Manager and
for so long as the Portfolio Manager is a portfolio manager to the Trust and/or
the Series. Upon termination of this Agreement between the Trust, the Manager
and the Portfolio Manager, the Trust shall as soon as is reasonably possible
cease to use such names (or derivatives or logos).
20. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
21. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts, without giving effect to the provisions, policies or principals
thereof relating to choice or conflict of laws, provided that nothing herein
shall be construed in a manner inconsistent with the 1940 Act, the Advisers Act
or rules or orders of the SEC thereunder. The term "affiliate" or "affiliated
person" as used in this Agreement shall mean "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 15 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent of
the other parties.
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(d) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
(f) The Manager and the Portfolio Manager each affirm that it has
procedures in place reasonably designed to protect the privacy of non-public
personal consumer/customer financial information.
(g) The Trust, the Manager and the Portfolio Manager acknowledge that
each may have obligations under the laws and regulations of the United States to
verify the source of funds and identity of investors in accordance with the USA
Patriot Act of 2001, and any rules or regulations adopted thereunder
(collectively "the Patriot Act"). Each party agrees to assist the other parties
in monitoring transactions in accordance with the Patriot Act. If required by
applicable law or regulation, each party shall provide the other parties with
documentation evidencing the identity of a beneficial owner or owners of shares
of the Series upon request when a party is required by a law, court order, of by
administrative or regulatory entity to disclose the identity of the beneficial
owner(s).
(h) This agreement may be executed in counterparts.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
ING INVESTORS TRUST
Attest:_____________________________ By:_________________________________
Name:_______________________________ Name:_______________________________
Title:______________________________ Title:______________________________
DIRECTED SERVICES, INC.
Attest:_____________________________ By:_________________________________
Name:_______________________________ Name:_______________________________
Title:______________________________ Title:______________________________
LEGG MASON FUNDS MANAGEMENT, INC.
Attest:_____________________________ By:_________________________________
Name:_______________________________ Name:_______________________________
Title:______________________________ Title:______________________________
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SCHEDULE A
The Series of ING Investors Trust, as described in Section 1 of the
attached Portfolio Management Agreement, to which Legg Mason Funds Management,
Inc. shall act as Portfolio Manager is as follows:
ING Legg Mason Value Portfolio
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SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Legg Mason Funds Management, Inc.
("Portfolio Manager") to the following Series of ING Investors Trust, pursuant
to the attached Portfolio Management Agreement, the Manager will pay the
Portfolio Manager a fee, computed daily and payable monthly, based on the
average daily net assets of the Series at the following annual rates of the
average daily net assets of the Series:
SERIES RATE
------ ----
ING Legg Mason Value 0.70% on first $50 million of assets
Portfolio 0.45% on next $50 million of assets
0.40% on next $50 million of assets
0.35% on next $50 million of assets
0.30% on assets over $200 million
If this Agreement becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion that such period bears to the full
month in which such effectiveness or termination occurs.
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APPENDIX C
ADVISORY FEE RATES FOR FUNDS WITH SIMILAR
INVESTMENT OBJECTIVES ADVISED OR SUB-ADVISED BY
LEGG MASON
The following table sets forth the name of each investment company with an
investment objective similar to the Portfolio for which Legg Mason serves as an
investment adviser or a sub-adviser, the annual rate of compensation and the net
assets of the investment company as of February 29, 2004.
FUND ANNUAL FEE WAIVER/
NAME SERVICES PROVIDED COMPENSATION REDUCTION NET ASSETS
---- ----------------- ------------ --------- ----------
Legg Mason Legg Mason Legg Mason is Not $14.4 Billion
Value Trust provides paid an Applicable
investment effective annual
advisory, fee rate of
management, and 0.66% on fund
administrative assets.
services to the
fund.
Ohio Legg Mason serves The total annual Not $ 424 Million
National as a sub-advisor investment Applicable
Equity and provides advisory fee
Portfolio investment paid by the fund
advisory services is 0.80% on fund
to the fund. assets. Of this
amount, Legg Mason
is paid an effective
annual fee rate of
0.45% on fund assets.
C-1
ING INVESTORS TRUST
ING JANUS GROWTH AND INCOME PORTFOLIO
VOTING INSTRUCTION CARD FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 2004
THIS VOTING INSTRUCTION CARD
IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
OF ING INVESTORS TRUST
PORTFOLIO NAME PRINTS HERE
INSURANCE COMPANY NAME PRINTS HERE ("INSURANCE COMPANY")
The undersigned hereby instructs Huey P. Falgout, Jr. or Michael J. Roland, or
one or more substitutes designated by them or their Insurance Company
("Proxies"), to vote the shares held by him or her or as to which he or she has
a beneficial interest under a variable contract issued by his or her Insurance
Company at the Special Meeting of shareholders ("Special Meeting") of ING Janus
Growth and Income Portfolio (the "Portfolio") to be held at: 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, on April 27, 2004 at
10:00 a.m., local time and at any adjournment(s) thereof, in the manner directed
below with respect to the matters referred to in the Proxy Statement for the
Special Meeting, receipt of which is hereby acknowledged, and in the Proxies'
discretion, upon such other matters as may properly come before the meeting or
any adjournment(s) thereof.
These voting instructions will be voted as specified. IF NO SPECIFICATION IS
MADE, THIS VOTING INSTRUCTION WILL BE VOTED "FOR" THE PROPOSAL.
Please vote, sign and date this voting
instruction and return it in the enclosed
envelope.
Date ____________________, 2004
Signature(s) (if held jointly) (Sign in the
Box)
This Voting Instruction 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
title(s) as such. Joint owners must each
sign.
PLEASE FILL IN BOX(ES) AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. X
PLEASE DO NOT USE FINE POINT PENS.
To avoid the additional expense of further solicitation, we strongly urge you to
review, complete and return your VOTING INSTRUCTION CARD as soon as possible.
Your vote is important regardless of the number of shares you own.
THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND DATED.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL.
FOR AGAINST ABSTAIN
--- ------- -------
1. To approve a new investment objective for the Portfolio. [ ] [ ] [ ]
PLEASE SIGN AND DATE ON THE REVERSE SIDE.