485BPOS 1 n-4variableann.txt REGISTRATION STATEMENT As filed with the Securities and Exchange Registration No. 333-56297 Commission on April 18, 2003 Registration No. 811-02512 -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 -------------------------------------------------------------------------------- POST-EFFECTIVE AMENDMENT NO. 28 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 and Amendment to REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 -------------------------------------------------------------------------------- Variable Annuity Account B of ING Life Insurance and Annuity Company ING Life Insurance and Annuity Company 151 Farmington Avenue, TS31, Hartford, Connecticut 06156 Depositor's Telephone Number, including Area Code: (860) 723-2260 Linda E. Senker, Counsel CC: Kimberly J. Smith, Chief Counsel ING Americas ING Americas Legal Department Legal department 1475 Dunwoody Drive 1475 Dunwoody Drive West Chester, PA 19308 West Chester, PA 19308 (610-425-4139) (610-425-3427) (Name and Address of Agent for Service) -------------------------------------------------------------------------------- It is proposed that this filing will become effective: immediately upon filing pursuant to paragraph (b) of Rule 485 ------ X on May 1, 2003 pursuant to paragraph (b) of Rule 485 ------ PART A -------------------------------------------------------------------------------- CONTRACT PROSPECTUS -- MAY 1, 2003 -------------------------------------------------------------------------------- THE CONTRACT. The contract described in this prospectus is a group or individual ING Variable Annuity deferred variable annuity contract issued by ING Life Insurance and Annuity Company (the Company, we, us, our) (formerly known as Aetna Life Insurance and Annuity Company). It is issued to you, the contract holder, as either a nonqualified deferred annuity, including contracts offered to a custodian for an Individual Retirement Account as described in Section 408(a) of the Internal Revenue Code of 1986, as amended (Tax Code); a qualified individual retirement annuity (IRA); a qualified Roth IRA; or as a qualified contract for use with certain employer sponsored retirement plans. The contract is not available as a SIMPLE IRA under Tax Code Section 408(p). -------------------------------------------------------------------------------- WHY READING THIS PROSPECTUS IS IMPORTANT. This prospectus contains facts about the contract and its investment options that you should know before purchasing. This information will help you decide if the contract is right for you. Please read this prospectus carefully. TABLE OF CONTENTS ... PAGE 3 -------------------------------------------------------------------------------- PREMIUM BONUS OPTION. We will credit a premium bonus to your account for each purchase payment you make during the first account year if you elect the premium bonus option. There is an additional charge for this option during the first seven account years. Therefore, the fees you will pay if you elect the premium bonus option will be greater than the fees you will pay if you do not elect the premium bonus option. The premium bonus option may not be right for you if you expect to make additional purchase payments after the first account year or if you anticipate that you will need to make withdrawals during the first seven account years. In these circumstances the amount of the premium bonus option charge may be more than the amount of the premium bonus we credit to your account. See "Premium Bonus Option-Suitability." INVESTMENT OPTIONS. The contract offers variable investment options and fixed interest options. When we establish your account you instruct us to direct account dollars to any of the available options. -------------------------------------------------------------------------------- THE FUNDS o AIM V.I. Capital Appreciation Fund (Series I) o AIM V.I. Core Equity Fund (Series I) o AIM V.I. Government Securities Fund (Series I) o AIM V.I. Growth Fund (Series I) o AIM V.I. Premier Equity Fund (Series I) o AllianceBernstein Growth and Income Portfolio (Class A) (1) o AllianceBernstein Premier Growth Portfolio (Class A) (1) o AllianceBernstein Quasar Portfolio (Class A) (1) o Fidelity(R)VIP Contrafund(R)Portfolio (Initial Class) o Fidelity(R)VIP Equity-Income Portfolio (Initial Class) o Fidelity(R)VIP Growth Portfolio (Initial Class) o Fidelity(R)VIP High Income Portfolio (Initial Class) o ING JPMorgan Fleming International Portfolio (Initial Class) o ING MFS Capital Opportunities Portfolio (Initial Class) o ING MFS Research Equity Portfolio (Initial Class) (1) o ING Salomon Brothers Aggressive Growth Portfolio (Initial Class) o ING VP Balanced Portfolio, Inc. (Class R) o ING VP Bond Portfolio (Class R) o ING VP Growth and Income Portfolio (Class R) o ING VP Growth Opportunities Portfolio (Class R) o ING VP Growth Portfolio (Class R) o ING VP Index Plus LargeCap Portfolio (Class R) o ING VP International Equity Portfolio (Class R) o ING VP MagnaCap Portfolio (Class R) o ING VP MidCap Opportunities Portfolio (Class R) o ING VP Money Market Portfolio (Class R) o ING VP Small Company Portfolio (Class R) o ING VP SmallCap Opportunities Portfolio (Class R) o ING VP Technology Portfolio (Class R) o Janus Aspen Balanced Portfolio (Institutional Shares) o Janus Aspen Growth Portfolio (Institutional Shares) o Janus Aspen Mid Cap Growth Portfolio (Institutional Shares) (1) o Janus Aspen Worldwide Growth Portfolio (Institutional Shares) o Jennison Portfolio (Class II) o Lord Abbett Mid-Cap Value Portfolio (Class VC) o MFS(R)Total Return Series (Initial Class) o Oppenheimer Aggressive Growth Fund/VA o Oppenheimer Main Street Fund/VA o Oppenheimer Strategic Bond Fund/VA o Pioneer Fund VCT Portfolio (Class I) o Pioneer Mid Cap Value VCT Portfolio (Class I) o SP Jennison International Growth Portfolio (Class II) o UBS Series Trust - Tactical Allocation Portfolio (Class I) -------------------------------------------------------------------------------- (1) Effective May 1, 2003 this fund has changed its name to the name listed above. See Appendix III for a complete list of former and current fund names. (2) See Appendix IV for a list of ING GET U.S. Core Portfolio series and their projected offering periods. ILIAC Variable Annuity - 126064 PROSPECTUS - MAY 1, 2003 (CONTINUED) -------------------------------------------------------------------------------- VARIABLE INVESTMENT OPTIONS. These options are called subaccounts. The subaccounts are within Variable Annuity Account B (the separate account), a separate account of the Company. Each subaccount invests in one of the mutual funds listed on the previous page. Earnings on amounts invested in a subaccount will vary depending upon the performance of its underlying fund. You do not invest directly in or hold shares of the funds. THE FUNDS. Information about the funds in which the subaccounts invest is located in Appendix III -- Description of Underlying Funds and in each fund prospectus. A prospectus containing more information on each Underlying Fund may be obtained by calling our Customer Service Center at 800-366-0066. READ THIS PROSPECTUS IN CONJUNCTION WITH THE FUND PROSPECTUSES, AND RETAIN THE PROSPECTUSES FOR FUTURE REFERENCE. GETTING ADDITIONAL INFORMATION. You may obtain the May 1, 2003, Statement of Additional Information (SAI) about the separate account by indicating your request on your application or calling us at 1-800-366-0066. You may also obtain an SAI for any of the funds by calling that number. The Securities and Exchange Commission (SEC) also makes available to the public reports and information about the separate account and the funds. Certain reports and information, including this prospectus and SAI, are available on the EDGAR Database on the SEC web site, www.sec.gov, or at the SEC Public Reference Room in Washington, D.C. You may call 1-202-942-8090 or 1-800-SEC-0330 to get information about the operations of the Public Reference Room. You may obtain copies of reports and other information about the separate account and the funds, after paying a duplicating fee, by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC Public Reference Room, Washington, D.C. 20549-0102. The SAI table of contents is listed in this prospectus. The SAI is incorporated into this prospectus by reference. ADDITIONAL DISCLOSURE INFORMATION. Neither the SEC nor any state securities commission has approved or disapproved the securities offered through this prospectus or passed on the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. We do not intend for this prospectus to be an offer to sell or a solicitation of an offer to buy these securities in any state that does not permit their sale. We have not authorized anyone to provide you with information that is different than that contained in this prospectus. FIXED INTEREST OPTIONS. > ILIAC Guaranteed Account (the Guaranteed Account) > Fixed Account Except as specifically mentioned, this prospectus describes only the investment options offered through the separate account. However, we describe the fixed interest options in appendices to this prospectus. There is also a separate Guaranteed Account prospectus. AVAILABILITY OF OPTIONS. Some funds or fixed interest options may be unavailable through your contract or in your state. THE CONTRACT IS NOT A DEPOSIT WITH, OBLIGATION OF OR GUARANTEED OR ENDORSED BY ANY BANK, NOR IS IT INSURED BY THE FDIC. THE CONTRACT IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT OF YOUR INVESTMENT. ILIAC Variable Annuity - 126064 TABLE OF CONTENTS -------------------------------------------------------------------------------- CONTRACT OVERVIEW......................................................... 4 Contract Design........................................................... 4 New York Contracts........................................................ 4 Contract Facts............................................................ 4 Questions: Contacting the Company (sidebar) Sending Forms and Written Requests in Good Order (sidebar) Sending Additional Purchase Payments (sidebar) Contract Phases: The Accumulation Phase, The Income Phase................ 7 -------------------------------------------------------------------------------- FEES AND EXPENSES......................................................... 8 CONDENSED FINANCIAL INFORMATION .......................................... 17 PURCHASE AND RIGHTS ...................................................... 17 RIGHT TO CANCEL .......................................................... 20 PREMIUM BONUS OPTION ..................................................... 20 INVESTMENT OPTIONS ....................................................... 22 TRANSFERS AMONG INVESTMENT OPTIONS ....................................... 25 TRANSFERS BETWEEN OPTION PACKAGES ........................................ 27 FEES ..................................................................... 28 YOUR ACCOUNT VALUE ....................................................... 34 WITHDRAWALS .............................................................. 36 SYSTEMATIC DISTRIBUTION OPTIONS .......................................... 38 DEATH BENEFIT ............................................................ 39 THE INCOME PHASE ......................................................... 44 NEW YORK CONTRACTS........................................................ 49 TAXATION ................................................................. 53 OTHER TOPICS ............................................................. 61 The Company -- Variable Annuity Account B -- Contract Distribution -- Payment of Commissions -- Payment Delay or Suspension -- Performance Reporting -- Voting Rights -- Contract Modifications -- Transfer of Ownership: Assignment -- Involuntary Terminations -- Legal Matters and Proceedings CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION....................... 66 APPENDIX I-- ILIAC GUARANTEED ACCOUNT .................................... 67 APPENDIX II-- FIXED ACCOUNT .............................................. 70 APPENDIX III-- DESCRIPTION OF UNDERLYING FUNDS ........................... 71 APPENDIX IV-- PROJECTED SCHEDULE OF ING GET U.S. CORE PORTFOLIO OFFERINGS 98 APPENDIX V-- CONDENSED FINANCIAL INFORMATION ............................. 99 ILIAC Variable Annuity - 126064 3 [sidebar] QUESTIONS: CONTACTING THE COMPANY. To answer your questions, contact your sales representative or write or call our Customer Service Center at: ING P.O. Box 9271 Des Moines, IA 50306-9271 1-800-366-0066 SENDING FORMS AND WRITTEN REQUESTS IN GOOD ORDER. If you are writing to change your beneficiary, request a withdrawal or for any other purpose, contact us or your sales representative to learn what information is required for the request to be in "good order." We can only act upon requests that are received in good order. Generally, a request is considered to be in "good order" when it is signed, dated and made with such clarity and completeness that we are not required to exercise any discretion in carrying it out. SENDING ADDITIONAL PURCHASE PAYMENTS. Use the following addresses when sending additional purchase payments. If using the U.S. Postal Service: ING Attn: Customer Service P.O. Box 9271 Des Moines, IA 50306-9271 If using express mail: ING Attn: Customer Service Center 909 Locust Street Des Moines, IA 50309-2899 Express mail packages should not be sent to the P.O. Box address. [end sidebar] CONTRACT OVERVIEW -------------------------------------------------------------------------------- The following is intended as a summary. Please read each section of this prospectus for additional detail. -------------------------------------------------------------------------------- CONTRACT DESIGN -------------------------------------------------------------------------------- The contract described in this prospectus is a group or individual deferred variable annuity contract. It is intended to be a retirement savings vehicle that offers a variety of investment options to help meet long-term financial goals. The term "contract" in this prospectus refers to individual contracts and to certificates issued under group contracts. -------------------------------------------------------------------------------- NEW YORK CONTRACTS -------------------------------------------------------------------------------- Some of the fees, features and benefits of the contract are different if it is issued in the State of New York. For details regarding the New York contracts, see the "Fee Table" and the "New York Contracts" sections of this prospectus. -------------------------------------------------------------------------------- CONTRACT FACTS -------------------------------------------------------------------------------- OPTION PACKAGES. There are three option packages available under the contract. You select an option package at the time of application. Each option package is distinct. See "Purchase and Rights" for age maximums on the calculation of death benefits. The differences are summarized as follows:
--------------------------------------------------------------------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III --------------------------------------------------------------------------------------- Mortality and Expense Risk 0.80% 1.10% 1.25% Charge1: --------------------------------------------------------------------------------------- Death Benefit2 The greater of: The greatest of: The greatest of: on Death of the 1) The sum of all 1) The sum of all 1) The sum of all Annuitant3: purchase purchase purchase payments, payments, payments, adjusted for adjusted for adjusted for amounts amounts amounts withdrawn withdrawn or withdrawn or or applied to an applied to an applied to an income phase income phase income phase payment option as payment option payment option of the claim as of the claim as of the claim date; or date; or date; or 2) The account value 2) The account 2) The account on the claim value on the value on the date; or claim date. claim date; or 3) The "step-up 3) The "step-up value" on the value" on the claim date; or claim date. 4) The "roll-up value" on the claim date.4 --------------------------------------------------------------------------------------- NON- NON- NON- Minimum Initial QUALIFIED: QUALIFIED: QUALIFIED: QUALIFIED: QUALIFIED: QUALIFIED: Purchase $15,000 $1,500 $5,000 $1,500 $5,000 $1,500 Payment5: --------------------------------------------------------------------------------------- Free 10% of your account 10% of your account 10% of your account Withdrawals6: value each account value each account value each account year, non-cumulative. year, non-cumulative. year, cumulative to a maximum 30%. --------------------------------------------------------------------------------------- Nursing Home Waiver -- Waiver Not of Early Available Available Available Withdrawal Charge7: ---------------------------------------------------------------------------------------
1 See "Fee Table" and "Fees." 2 See "Death Benefit." If a death benefit is payable based on account value, step-up value or roll-up value, the death benefit will not include any premium bonus credited to the account after or within 12 months of the date of death. See "Premium Bonus Option--Forfeiture." 3 When a contract holder who is not the annuitant dies, the amount of the death benefit is not the same as shown above under each option package. See "Death Benefit." THEREFORE, CONTRACT HOLDERS WHO ARE NOT ALSO THE ANNUITANT SHOULD SERIOUSLY CONSIDER WHETHER OPTION PACKAGES II AND III ARE SUITABLE FOR THEIR CIRCUMSTANCES. 4 See the "New York Contracts" section of this prospectus for details regarding the death benefit under Option Package III for contracts issued in New York. 5 See "Purchase and Rights." 6 See "Fees." 7 See "Fees" and the "New York Contracts" sections of this prospectus for details regarding contracts issued in New York. -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 4 PREMIUM BONUS OPTION. At the time of application you may elect the premium bonus option. Once elected it may not be revoked. If you elect this option we will credit your account with a 4% premium bonus for each purchase payment you make during the first account year. The premium bonus will be included in your account value and allocated among the investment options you have selected in the same proportion as the purchase payment. See "Premium Bonus Option." In exchange for the premium bonus, during the first seven account years you will pay an annual premium bonus option charge equal to 0.50% of your account value allocated to the subaccounts. This charge may also be deducted from amounts allocated to the fixed interest options, resulting in a 0.50% reduction in the interest which would have been credited to your account during the first seven account years if you had not elected the premium bonus option. See "Fee Table" and "Fees." In each of the following circumstances all or part of a premium bonus credited to your account will be forfeited: > If you exercise your free look privilege and cancel your contract. See "Premium Bonus Option--Forfeiture" and "Right to Cancel." > If a death benefit is payable based on account value, step-up value or roll-up value, but only the amount of any premium bonus credited to the account after or within 12 months of the date of death. See "Premium Bonus Option--Forfeiture" and "Death Benefit--Premium Bonus." > If all or part of a purchase payment for which a premium bonus was credited is withdrawn during the first seven account years. See "Premium Bonus Option--Forfeiture" and "Withdrawals." If you expect to make purchase payments to your contract after the first account year, the premium bonus option may not be right for you. Also, if you anticipate that you will need to make withdrawals from your account during the first seven account years, you may not want to elect the premium bonus option. See "Premium Bonus Option--Suitability." Your sales representative can help you decide if the premium bonus option is right for you. TRANSFERABILITY. You may transfer from one option package to another. > Transfers must occur on an account anniversary. > A written request for the transfer must be received by us within 60 days of an account anniversary. > Certain minimum account values must be met. See "Transfers Between Option Packages." FREE LOOK/RIGHT TO CANCEL. You may cancel your contract within ten days (some states require more than ten days) of receipt. See "Right to Cancel." DEATH BENEFIT. Your beneficiary may receive a financial benefit in the event of your death prior to the income phase. The amount of the death benefit will depend upon the option package selected. See "Death Benefit." Any death benefit during the income phase will depend upon the income phase payment option selected. See "The Income Phase." WITHDRAWALS. During the accumulation phase you may withdraw all or part of your account value. Certain fees, taxes and early withdrawal penalties may apply. In addition, the Tax Code restricts full and partial withdrawals in some circumstances. See "Withdrawals." Amounts withdrawn from the Guaranteed Account may be subject to a market value adjustment. See Appendix I. ILIAC Variable Annuity - 126064 5 SYSTEMATIC DISTRIBUTION OPTIONS. These are made available for you to receive periodic withdrawals from your account, while retaining the account in the accumulation phase. See "Systematic Distribution Options." FEES AND EXPENSES. Certain fees and expenses are deducted from the value of your contract. The fees and expenses deducted may vary depending upon the option package you select. See "Fee Table" and "Fees." TAXATION. You will generally not pay taxes on any earnings from the annuity contract described in this prospectus until they are withdrawn. Tax-qualified retirement arrangements (e.g., IRAs or 403(b) plans) also defer payment of taxes on earnings until they are withdrawn. If you are considering funding a tax-qualified retirement arrangement with an annuity contract, you should know that the annuity contract does not provide any additional tax deferral of earnings beyond the tax deferral provided by the tax-qualified retirement arrangement. However, annuities do provide other features and benefits which may be valuable to you. You should discuss your decision with your financial representative. Taxes will generally be due when you receive a distribution. Tax penalties may apply in some circumstances. See "Taxation." USE OF AN ANNUITY CONTRACT IN AN IRA OR OTHER QUALIFIED PLAN. Under the federal tax laws, earnings on amounts held in annuity contracts are generally not taxed until they are withdrawn. However, in the case of an Individual Retirement Account or other qualified retirement account, an annuity contract is not necessary to obtain this favorable tax treatment. However, annuities do provide other features and benefits (such as the guaranteed death benefit or the option of lifetime income phase options at established rates) which may be valuable to you. You should discuss your alternatives with your sales representative taking into account the additional fees and expenses you may incur in an annuity. See "Purchase and Rights." ILIAC Variable Annuity - 126064 6 -------------------------------------------------------------------------------- CONTRACT PHASES -------------------------------------------------------------------------------- I. THE ACCUMULATION PHASE (accumulating dollars under your contract) STEP 1: You provide us with your completed application and initial purchase payment. We establish an account for you and credit that account with your initial purchase payment. If you elected the premium bonus option we will also credit your account with a premium bonus. STEP 2: You direct us to invest your purchase payment and the premium bonus, if applicable, in one or more of the following investment options: (a) Fixed Interest Options; or (b) Variable Investment Options. (The variable investment options are the subaccounts of Variable Annuity Account B. Each one invests in a specific mutual fund.) STEP 3: Each subaccount you select purchases shares of its assigned fund. --------------------- Payments to Your Account --------------------- Step 1 ----------------------------------------------- ING Life Insurance and Annuity Company ----------------------------------------------- (a) Step 2 (b) ----------- ------------------------------- Fixed Variable Annuity Interest Separate Account B Options Variable Investment Options ----------- ------------------------------- The Subaccounts ------------------------------- A B Etc. ---------- ---------- --------- Step 3 ---------- ---------- Mutual Mutual Fund A Fund B ---------- ---------- II. THE INCOME PHASE (receiving income phase payments from your contract) When you want to begin receiving payments from your contract you may select from the options available. The contract offers several income phase payment options (see "The Income Phase"). In general, you may: > Receive income phase payments for a specified period of time or for life; > Receive income phase payments monthly, quarterly, semi-annually or annually; > Select an income phase payment option that provides for payments to your beneficiary; or > Select income phase payments that are fixed or vary depending upon the performance of the variable investment options you select. ILIAC Variable Annuity - 126064 7 [sidebar] IN THIS SECTION: > Maximum Transaction Fees > Maximum Fees Deducted from Investments in the Separate Account > Fees Deducted by the Funds > Hypothetical Examples ALSO SEE THE "FEES" SECTION FOR: > How, When and Why Fees are Deducted > Reduction, Waiver and/or Elimination of Certain Fees > Premium and Other Taxes > Charges for the ING GET U.S. Core Portfolio [end sidebar] FEES AND EXPENSES -------------------------------------------------------------------------------- The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the contract. The first table describes the fees and expenses that you will pay at the time that you buy the contract, surrender the contract, or transfer contract value between investment options. State premium taxes may also be deducted. See "The Income Phase" for the different fees that may apply after you begin receiving payments under the contract. MAXIMUM TRANSACTION FEES EARLY WITHDRAWAL CHARGE (As a percentage of payments withdrawn.) -------------------------------------------------------------------------------- FOR CONTRACTS ISSUED OUTSIDE OF THE STATE OF NEW YORK ALL CONTRACTS (EXCEPT ROTH IRA CONTRACTS ISSUED BEFORE SEPTEMBER 20, 2000): ---------------------------------------- --------------------------------------- Years from Receipt of Purchase Payment Early Withdrawal Charge Less than 2 7% 2 or more but less than 4 6% 4 or more but less than 5 5% 5 or more but less than 6 4% 6 or more but less than 7 3% 7 or more 0% -------------------------------------------------------------------------------- ROTH IRA CONTRACTS ISSUED BEFORE SEPTEMBER 20, 2000 -------------------------------------------------------------------------------- Completed Account Years Early Withdrawal Charge Less than 1 5% 1 or more but less than 2 4% 2 or more but less than 3 3% 3 or more but less than 4 2% 4 or more but less than 5 1% 5 or more 0% -------------------------------------------------------------------------------- FOR CONTRACTS ISSUED IN THE STATE OF NEW YORK -------------------------------------------------------------------------------- ALL CONTRACTS -------------------------------------------------------------------------------- Years from Receipt of Purchase Payment Early Withdrawal Charge Less than 1 7% 1 or more but less than 2 6% 2 or more but less than 3 5% 3 or more but less than 4 4% 4 or more but less than 5 3% 5 or more but less than 6 2% 6 or more but less than 7 1% 7 or more 0% -------------------------------------------------------------------------------- ANNUAL MAINTENANCE FEE ................................................$30.00/1/ TRANSFER CHARGE .......................................................$ 0.00/2/ -------------------------------------------------------------------------------- 1 The annual maintenance fee will be waived if your account value is $50,000 or greater on the date this fee is due. See "Fees--Annual Maintenance Fee." 2 We currently do not impose this charge. We reserve the right, however, during the accumulation phase to charge $10 for each transfer after the first 12 transfers in each account year. See "Transfers" for additional information. ILIAC Variable Annuity - 126064 8 The next table describes the fees and expenses that you will pay periodically during the time that you own the contract, not including Trust or Fund fees and expenses. FEES DEDUCTED FROM INVESTMENTS IN THE SEPARATE ACCOUNT AMOUNT DURING THE ACCUMULATION PHASE (Daily deductions, equal to the following percentages on an annual basis, from amounts invested in the subaccounts.)
ALL ACCOUNT o IF YOU DO NOT ELECT THE PREMIUM BONUS OPTION YEARS > OPTION PACKAGE I-- Mortality and Expense Risk Charge 0.80% Administrative Expense Charge 0.15% ------------ Total Separate Account Expenses 0.95% ============ > OPTION PACKAGE II-- Mortality and Expense Risk Charge 1.10% Administrative Expense Charge 0.15% ------------ Total Separate Account Expenses 1.25% ============ > OPTION PACKAGE III-- Mortality and Expense Risk Charge 1.25% Administrative Expense Charge 0.15% ------------ Total Separate Account Expenses 1.40% ============ ACCOUNT YEARS AFTER THE 7TH o IF YOU ELECT THE PREMIUM BONUS OPTION 1-7 ACCOUNT YEAR > OPTION PACKAGE I-- Mortality and Expense Risk Charge 0.80% 0.80% Administrative Expense Charge 0.15% 0.15% Premium Bonus Option Charge 0.50% 0.00% ------------ ------------ Total Separate Account Expenses 1.45% 0.95% ============ ============ > OPTION PACKAGE II-- Mortality and Expense Risk Charge 1.10% 1.10% Administrative Expense Charge 0.15% 0.15% Premium Bonus Option Charge 0.50% 0.00% ------------ ------------ Total Separate Account Expenses 1.75% 1.25% ============ ============ > OPTION PACKAGE III-- Mortality and Expense Risk Charge 1.25% 1.25% Administrative Expense Charge 0.15% 0.15% Premium Bonus Option Charge 0.50% 0.00% ------------ ------------ Total Separate Account Expenses 1.90% 1.40% ============ ============
ILIAC Variable Annuity - 126064 9
o IF YOU ELECT THE PREMIUM BONUS OPTION AND INVEST IN THE ACCOUNT ACCOUNT AFTER THE 7TH GET FUND* YEARS YEARS ACCOUNT 1-5 6&7 YEAR > OPTION PACKAGE I-- Mortality and Expense Risk Charge 0.80% 0.80% 0.80% Administrative Expense Charge 0.15% 0.15% 0.15% Premium Bonus Option Charge 0.50% 0.50% 0.00% GET Fund Guarantee Charge 0.50% 0.00% 0.00% -------------------------------------------------- Total Separate Account Expenses 1.95% 1.45% 0.95% ================================================== > OPTION PACKAGE II-- Mortality and Expense Risk Charge 1.10% 1.10% 1.10% Administrative Expense Charge 0.15% 0.15% 0.15% Premium Bonus Option Charge 0.50% 0.50% 0.00% GET Fund Guarantee Charge 0.50% 0.00% 0.00% -------------------------------------------------- Total Separate Account Expenses 2.25% 1.75% 1.25% ================================================== > OPTION PACKAGE III-- Mortality and Expense Risk Charge 1.25% 1.25% 1.25% Administrative Expense Charge 0.15% 0.15% 0.15% Premium Bonus Option Charge 0.50% 0.50% 0.00% GET Fund Guarantee Charge 0.50% 0.00% 0.00% -------------------------------------------------- Total Separate Account Expenses 2.40% 1.90% 1.40% ==================================================
* The GET Fund guarantee charge applies during each five year guarantee period to amounts invested in the GET Fund investment option only. See "Investment Options -- Variable Investment Options" for additional information. FEES DEDUCTED BY THE FUNDS The next item shows the minimum and maximum total operating expenses charged by a Trust or Fund that you may pay periodically during the time that you own the Contract. More detail concerning each Trust or Fund's fees and expenses is contained in the prospectus for each Trust or Fund. -------------------------------------------------------------------------------- TOTAL ANNUAL TRUST OR FUND OPERATING EXPENSES 1 MINIMUM MAXIMUM -------------------------------------------------------------------------------- (expenses that are deducted from Trust or Fund assets, including management fees, distribution and/or service 0.34% 1.80% (12b-1) fees*, and other expenses): -------------------------------------------------------------------------------- * The Company may receive compensation from each of the funds or the funds' affiliates based on an annual percentage of the average net assets held in that fund by the Company. The percentage paid may vary from one fund company to another. For certain funds, some of this compensation may be paid out of 12b-1 fees or service fees that are deducted from fund assets. Any such fees deducted from fund assets are disclosed in the fund prospectuses. The Company may also receive additional compensation from certain funds for administrative, recordkeeping or other services provided by the Company to the funds or the funds' affiliates. These additional payments are made by the funds or the funds' affiliates to the Company and do not increase, directly or indirectly, the fees and expenses shown above. See "Fees - Fund Expenses" for additional information. 1 The minimum and maximum total operating expenses charged by a Trust or Fund including applicable expense reimbursement or fee waiver arrangements would be the same as shown above. ILIAC Variable Annuity - 126064 10 EXAMPLES These examples are intended to help you compare the costs of investing in the Contract with the cost of investing in other variable annuity Contracts. These costs include contract owner transaction expenses, contract fees, separate account annual expenses, and Trust or Fund fees and expenses. The examples assume that you invest $10,000, plus a credit of $400, in the Contract for the time periods indicated. The examples also assume that your investment has a 5% return each year and assumes the maximum fees and expenses of the Contracts and of any of the Trusts or Funds without taking into account any fee waiver or expense reimbursement arrangements that may apply. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: FOR CONTRACTS ISSUED OUTSIDE THE STATE OF NEW YORK Assuming You Elect the Premium Bonus Option: --------------------------------------------------------------------------- 1) If you withdraw your entire account value at the end of the applicable time period: --------------------------------------------------------------------------- 1 year 3 years 5 years 10 years $1,007 $1,687 $2,296 $4,001 --------------------------------------------------------------------------- 2) If you do not withdraw your entire account value or if you select an income phase payment option at the end of the applicable time period*: 1 year 3 years 5 years 10 years $378 $1,149 $1,939 $4,001 --------------------------------------------------------------------------- FOR CONTRACTS ISSUED IN THE STATE OF NEW YORK Assuming You Elect the Premium Bonus Option: --------------------------------------------------------------------------- 1) If you withdraw your entire account value at the end of the applicable time period: --------------------------------------------------------------------------- 1 year 3 years 5 years 10 years $917 $1,507 $2,117 $4,001 --------------------------------------------------------------------------- 2) If you do not withdraw your entire account value or if you select an income phase payment option at the end of the applicable time period*: --------------------------------------------------------------------------- 1 year 3 years 5 years 10 years $378 $1,149 $1,939 $4,001 --------------------------------------------------------------------------- * This example does not apply during the income phase if you selected a nonlifetime income phase payment option with variable payments and take a lump-sum withdrawal after payments start. In this case the lump-sum payment is treated as a withdrawal during the accumulation phase and may be subject to an early withdrawal charge (refer to Example 1). ILIAC Variable Annuity - 126064 11 CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- UNDERSTANDING CONDENSED FINANCIAL INFORMATION. In Appendix V of this prospectus we provide condensed financial information about the Variable Annuity Account B (the separate account) subaccounts you may invest in through the contract. The numbers show the year-end unit values of each subaccount from the time purchase payments were first received in the subaccounts under the contract. PURCHASE AND RIGHTS -------------------------------------------------------------------------------- HOW TO PURCHASE > Individual Contracts. In some states, where group contracts are not available, you may purchase the contract directly from us by completing an application and delivering it and your initial purchase payment to us. Upon our approval we will issue you a contract and set up an account for you under the contract. > Group Contracts. In most states we have distributors, usually broker-dealers or banks, who hold the contract as a group contract (see "Other Topics -- Contract Distribution"). You may purchase an interest (or, in other words, participate) in the group contract by contacting a distributor and completing an application and delivering it with your initial purchase payment to that distributor. Upon our approval, we will set up an account for you under the group contract and issue you a certificate showing your rights under the contract. > Joint Contracts (generally spouses). For a nonqualified contract, you may participate in a group contract as a joint contract holder. References to "contract holder" in this prospectus mean both contract holders under joint contracts. Tax law prohibits the purchase of qualified contracts by joint contract holders. FACTORS TO CONSIDER IN THE PURCHASE DECISION. You should discuss your decision to purchase a contract with your sales representative. You should understand the investment options it provides, its other features, the risks and potential benefits it includes, and the fees and expenses you will incur. You should take note of the following issues, among others: 1. Long-Term Investment - This contract is designed for people seeking long-term tax-deferred accumulation of assets, generally for retirement or other long-term purposes. Early withdrawals may cause you to incur surrender charges and/or tax penalties. The value of deferred taxation on earnings grows with the amount of time funds are left in the contract. You should not buy this contract if you are looking for a short-term investment or expect to need to make withdrawals before you are 59 1/2. 2. Investment Risk - The value of investment options available under this contract may fluctuate with the markets and interest rates. You should not buy this contract in order to invest in these options if you cannot risk getting back less money than you put in. 3. Features and Fees - The fees for this contract reflect costs associated with the features and benefits it provides. In some cases, you have the option to elect certain benefits that carry additional charges. As you consider this contract, you should determine the value that these various benefits and features have for you, taking into account the charges for those features. 4. Exchanges - If this contract will be a replacement for another annuity contract, you should compare the two contracts carefully. You should consider whether any additional benefits under this contract justify any increased charges that might apply. Also, be sure to talk to your sales representative or tax adviser to make sure that the exchange will be handled so that it is tax-free. ILIAC Variable Annuity - 126064 12 MAXIMUM ISSUE AGE. The maximum issue age for you and the annuitant (if you are not the annuitant) on the date we establish your account is 90. Please note that there are age maximums on the calculation of the step-up value and roll-up value death benefits under Option Packages II and III. Therefore, if you are age 75 or older you may want to consider whether choosing one of these options is in your best interest. See "Death Benefit" for a description of the calculation of death benefits above certain ages. YOUR RIGHTS UNDER THE CONTRACT > Individual Contracts. You have all contract rights. > Group Contracts. The holder of the group contract has title to the contract and, generally, only the right to accept or reject any modifications to the contract. You have all other rights to your account under the contract. > Joint Contracts. Joint contract holders have equal rights under the contract with respect to their account. All rights under the contract must be exercised by both joint contract holders with the exception of transfers among investment options. See the "Death Benefit" section for the rights of the surviving joint contract holder upon the death of a joint contract holder prior to the income phase start date. PURCHASE PAYMENT METHODS. The following purchase payment methods are allowed: > One lump sum; > Periodic payments; or > Transfer or rollover from a pre-existing retirement plan or account. ILIAC Variable Annuity - 126064 13 We reserve the right to reject any purchase payments to a prospective or existing account without advance notice. If you are considering making periodic payments beyond the first contract year, the premium bonus option may not be right for you. See "Premium Bonus Option--Suitability." PURCHASE PAYMENT AMOUNTS. The minimum initial purchase payment depends upon the option package you select when you purchase the contract and must be met without consideration of any premium bonus.
--------------------------------------------------------------------------------------------- OPTION OPTION OPTION PACKAGE I PACKAGE II PACKAGE III --------------------------------------------------------------------------------------------- MINIMUM INITIAL Non- Non- Non- PURCHASE Qualified: Qualified:* Qualified: Qualified:* Qualified: Qualified:* PAYMENT $15,000 $1,500 $5,000 $1,500 $5,000 $1,500 ---------------------------------------------------------------------------------------------
*The Tax Code imposes a maximum limit on annual payments which may be excluded from your gross income. Additional purchase payments must be at least $50 (we may change this amount from time to time). A purchase payment of more than $1,000,000 will be allowed only with our consent. REDUCTION OF PURCHASE PAYMENT AMOUNTS. In certain circumstances we may reduce the minimum initial or additional purchase payment amount we will accept under a contract. Whether such a reduction is available will be based on consideration of each of the following factors: > The size and type of the prospective group, if any, to which the reduction would apply; > The method and frequency of purchase payments to be made under the contract; and > The amount of compensation to be paid to distributors and their registered representative on each purchase payment. Any reduction of the minimum initial or additional purchase payment amount will not be unfairly discriminatory against any person. We will make any such reduction according to our own rules in effect at the time the purchase payment is received. We reserve the right to change these rules from time to time. ACCEPTANCE OR REJECTION OF YOUR APPLICATION. We must accept or reject your application within two business days of receipt. If the application is incomplete, we may hold any forms and accompanying purchase payment(s) for five business days. We may hold purchase payments for longer periods, pending acceptance of the application, only with your permission. If the application is rejected, the application and any purchase payments will be returned to you. We may also refuse to accept certain forms of premium payments or loan repayments, if applicable, (traveler's checks, for example) or restrict the amount of certain forms of premium payments or loan repayments (money orders totaling more than $5,000, for example). In addition, we may require information as to why a particular form of payment was used (third party checks, for example) and the source of the funds of such payment in order to determine whether or not we will accept it. Use of an unacceptable form of payment may result in us returning your premium payment and not issuing the contract. ALLOCATING PURCHASE PAYMENTS TO THE INVESTMENT OPTIONS. We will allocate your purchase payments among the investment options you select. Allocations must be in whole percentages and there may be limits on the number of investment options you may select. When selecting investment options you may find it helpful to review the "Investment Options" section. ILIAC Variable Annuity - 126064 14 RIGHT TO CANCEL -------------------------------------------------------------------------------- WHEN AND HOW TO CANCEL. You may cancel your contract within ten days of receipt (some states require more than ten days) by returning it to our Customer Service Center along with a written notice of cancellation. REFUNDS. We will issue you a refund within seven days of our receipt of your contract and written notice of cancellation. Unless your state requires otherwise or unless you purchased an IRA, your refund will equal the purchase payments made plus any earnings or minus any losses attributable to those purchase payments allocated among the subaccounts. Any premium bonus credited to your account will be forfeited and your refund will reflect any earnings or losses attributable to the premium bonus. In other words, you will bear the entire investment risk for amounts allocated among the subaccounts during this period and the amount refunded could be less than the amount paid. If your state requires or if you purchased an IRA, we will refund all purchase payments made. If the purchase payments for your canceled contract came from a rollover from another contract issued by us or one of our affiliates where an early withdrawal charge was reduced or eliminated, the purchase payments will be restored to your prior contract. PREMIUM BONUS OPTION -------------------------------------------------------------------------------- ELECTION. At the time of application you may elect the premium bonus option. Once elected it may not be revoked. The premium bonus option may not be available under all contracts. PREMIUM BONUS AMOUNT. If you elect this option we will credit your account with a 4% premium bonus for each purchase payment you make during the first account year. The premium bonus will be included in your account value and allocated among the investment options you have selected in the same proportion as the purchase payment. The amount of the premium bonus we credit to an account may be reduced if the premium bonus option charge is reduced or eliminated. PREMIUM BONUS OPTION CHARGE. In exchange for the premium bonus, during the first seven account years you will pay an annual premium bonus option charge equal to 0.50% of your account value allocated to the subaccounts. We may also deduct this charge from amounts allocated to the fixed interest options, resulting in an annual 0.50% reduction in the interest which would have been credited to your account during the first seven account years if you had not elected the premium bonus option. Under certain contracts, the premium bonus option charge may be reduced or eliminated. See "Fees--Reduction or Elimination of Certain Fees." After the seventh account year you will no longer pay the premium bonus option charge. We will administer the elimination of this charge by decreasing the number of accumulation units and increasing the accumulation unit values of the subaccounts in which you are then invested. The elimination of this charge and the adjustment of the number of accumulation units and accumulation unit values will not affect your account value. See "Your Account Value." FORFEITURE. In each of the following circumstances all or part of a premium bonus credited to your account will be forfeited: > If you exercise your free look privilege and cancel your contract. See "Right to Cancel." ILIAC Variable Annuity - 126064 15 > If a death benefit is payable based on account value, step-up value or roll-up value, but only the amount of any premium bonus credited to the account after or within 12 months of the date of death. See "Death Benefit--Premium Bonus." > If all or part of a purchase payment for which a premium bonus was credited is withdrawn during the first seven account years. The amount of the premium bonus forfeited will be in the same percentage as the amount withdrawn subject to an early withdrawal charge is to the total purchase payments made during the first account year. See "Withdrawals." The following hypothetical example illustrates how the forfeiture of premium bonus is calculated when you withdraw all or part of a purchase payment for which a premium bonus was credited during the first seven account years.
------------------------------------------------------------------------------------------------------------------------ PURCHASE PREMIUM ACCOUNT WITHDRAWAL DATE PAYMENT BONUS VALUE AMOUNT EXPLANATION ------------------------------------------------------------------------------------------------------------------------ May 2, 2003 $100,000 $4,000 $104,000 -- You make a $100,000 initial purchase payment and we credit your account with a 4% ($4,000) premium bonus. Your beginning account value equals $104,000. ------------------------------------------------------------------------------------------------------------------------ May 2, 2006 -- -- $120,000 $30,000 Assume that your account value grows to $120,000 over the next three years and you request a $30,000 withdrawal. $18,000 of that $30,000 will be subject to an early withdrawal charge ($30,000 minus $12,000 (the 10% free withdrawal amount, see "Fees--Free Withdrawals")) and you would pay a $1,080 early withdrawal charge (6% of $18,000). Additionally, because $18,000 is 18% of the $100,000 purchase payment made in the first account year, 18% of your $4,000 premium bonus, or $720, would be forfeited.* ------------------------------------------------------------------------------------------------------------------------
* This example assumes that either Option Package I or II has been in effect since you purchased the contract. If Option Package III has been in effect since inception, none of the withdrawal would be subject to an early withdrawal charge because the 30% cumulative free withdrawal amount ($36,000) would be greater than the amount of the withdrawal. See "Fees--Free Withdrawals." Therefore, the withdrawal would not result in forfeiture of any of the premium bonus. See the "New York Contracts" section of this prospectus for details about forfeiture of the premium bonus under contracts issued in New York. SUITABILITY. If you expect to make purchase payments to your account after the first account year, the premium bonus option may not be right for you. Your account will not be credited with a premium bonus for purchase payments made after the first account year yet we will assess the premium bonus option charge against your account value which is increased by these additional purchase payments. Consequently, the amount of the premium bonus option charge you would pay over time may be more than the amount of the premium bonus we credited to your account. Also, if you anticipate that you will need to make withdrawals from your account during the first seven account years, you may not want to elect the premium bonus option. When you make such a withdrawal you may forfeit part of your premium bonus, and the amount of the premium bonus option charge you have paid may be more than the amount of the premium bonus not forfeited. Likewise, if you make a withdrawal during the first seven account years and the market is down, the amount of the bonus forfeited may be greater than the then current market value of the premium bonus. Your sales representative can help you decide if the premium bonus option is right for you. ILIAC Variable Annuity - 126064 16 INVESTMENT OPTIONS -------------------------------------------------------------------------------- The contract offers variable investment options and fixed interest options. VARIABLE INVESTMENT OPTIONS. These options are called subaccounts. The subaccounts are within Variable Annuity Account B (the separate account), a separate account of the Company. Each subaccount invests in a specific mutual fund. You do not invest directly in or hold shares of the funds. > MUTUAL FUND (FUND) DESCRIPTIONS. We provide brief descriptions of the funds in Appendix III. Investment results of the funds are likely to differ significantly and there is no assurance that any of the funds will achieve their respective investment objectives. Shares of the funds will rise and fall in value and you could lose money by investing in the funds. Shares of the funds are not bank deposits and are not guaranteed, endorsed or insured by any financial institution, the Federal Deposit Insurance Corporation or any other government agency. Unless otherwise noted, all funds are diversified as defined under the Investment Company Act of 1940. Refer to the fund prospectuses for additional information. Fund prospectuses may be obtained, free of charge, from our Customer Service Center at the address and phone number listed in "Contract Overview--Questions: Contacting the Company", by accessing the SEC's web site or by contacting the SEC Public Reference Room. > ING GET U.S. CORE PORTFOLIO (FORMERLY KNOWN AS, AND REFERRED TO HEREIN AS, "GET FUND"). A GET Fund series may be available during the accumulation phase of the Contract. We make a guarantee, as described below, when you allocate money into a GET Fund series. Each GET Fund series has an offering period of three months which precedes the guarantee period. The GET Fund investment option may not be available under your Contract or in your state. Various series of the GET Fund may be offered from time to time, and additional charges will apply if you elect to invest in one of these series. Please see Appendix IV for a projected schedule of GET Fund Series Offerings. The Company makes a guarantee when you direct money into a GET Fund series. We guarantee that the value of an accumulation unit of the GET Fund subaccount for that series under the Contract on the maturity date will not be less than its value as determined after the close of business on the last day of the offering period for that GET Fund series. If the value on the maturity date is lower than it was on the last day of the offering period, we will add funds to the GET Fund subaccount for that series to make up the difference. This means that if you remain invested in the GET Fund series until the maturity date, at the maturity date, you will receive no less than the value of your separate account investment directed to the GET Fund series as of the last day of the offering period, less any maintenance fees or any amounts you transfer or withdraw from the GET Fund subaccount for that series. The value of dividends and distributions made by the GET Fund series throughout the guarantee period is taken into account in determining whether, for purposes of the guarantee, the value of your GET Fund investment on the maturity date is no less than its value as of the last day of the offering period. The guarantee does not promise that you will earn the fund's minimum targeted return referred to in the investment objective. If you withdraw or transfer funds from a GET Fund series prior to the maturity date, we will process the transactions at the actual unit value next ILIAC Variable Annuity - 126064 17 determined after we receive your request. The guarantee will not apply to these amounts or to amounts deducted as a maintenance fee, if applicable. The GET Fund subaccount is not available for the dollar cost averaging program or the account rebalancing program. Before the maturity date, we will send a notice to each contract owner who has allocated amounts to the GET Fund series. This notice will remind you that the maturity date is approaching and that you must choose other investment options for your GET Fund series amounts. If you do not make a choice on the maturity date, we will transfer your GET Fund series amounts to another available series of the GET Fund that is then accepting deposits. If no GET Fund series is then available, we will transfer your GET Fund series amounts to the fund or funds that we designate. Please see the ING GET U.S. Core Portfolio prospectus for a complete description of the GET Fund investment option, including charges and expenses. FIXED INTEREST OPTIONS. If available in your state, the ILIAC Guaranteed Account (the Guaranteed Account) or the Fixed Account. The Guaranteed Account offers certain guaranteed minimum interest rates for a stated period of time. Amounts must remain in the Guaranteed Account for specific periods to receive the quoted interest rates, or a market value adjustment will be applied. The market value adjustment may be positive or negative. The Fixed Account guarantees payment of the minimum interest rate specified in the contract. The Fixed Account is only available in certain states. For a description of these options, see Appendices I and II and the Guaranteed Account prospectus. -------------------------------------------------------------------------------- SELECTING INVESTMENT OPTIONS o CHOOSE OPTIONS APPROPRIATE FOR YOU. Your sales representative can help you evaluate which investment options may be appropriate for your financial goals. o UNDERSTAND THE RISKS ASSOCIATED WITH THE OPTIONS YOU CHOOSE. Some subaccounts invest in funds that are considered riskier than others. Funds with additional risks are expected to have values that rise and fall more rapidly and to a greater degree than other funds. For example, funds investing in foreign or international securities are subject to risks not associated with domestic investments, and their investment performance may vary accordingly. Also, funds using derivatives in their investment strategy may be subject to additional risks. o BE INFORMED. Read this prospectus, the fund prospectuses, the Guaranteed Account and Fixed Account appendices and the Guaranteed Account prospectus. -------------------------------------------------------------------------------- LIMITS ON AVAILABILITY OF OPTIONS. Some funds or fixed interest options may be unavailable through your contract or in your state. We may add, withdraw or substitute funds, subject to the conditions in your contract and compliance with regulatory requirements. In the case of a substitution, the new fund may have different fees and charges than the fund it replaced. ILIAC Variable Annuity - 126064 18 LIMITS ON HOW MANY INVESTMENT OPTIONS YOU MAY SELECT. Although there is currently no limit, we reserve the right to limit the number of investment options you may select at any one time or during the life of the contract. For purposes of determining any limit, each subaccount and each guaranteed term of the Guaranteed Account, or an investment in the Fixed Account in certain contracts, will be considered an investment option. LIMITS IMPOSED BY THE UNDERLYING FUND. Orders for the purchase of fund shares may be subject to acceptance by the fund. We reserve the right to reject, without prior notice, any allocation of a purchase payment to a subaccount if the subaccount's investment in the corresponding fund is not accepted by the fund for any reason. ADDITIONAL RISKS OF INVESTING IN THE FUNDS (MIXED AND SHARED FUNDING). "Shared funding" occurs when shares of a fund, which the subaccounts buy for variable annuity contracts, are also bought by other insurance companies for their variable annuity contracts. "Mixed funding" occurs when shares of a fund, which the subaccounts buy for variable annuity contracts, are bought for variable life insurance contracts issued by us or other insurance companies. > Shared--bought by more than one company. > Mixed--bought for annuities and life insurance. It is possible that a conflict of interest may arise due to mixed and/or shared funding, which could adversely impact the value of a fund. For example, if a conflict of interest occurred and one of the subaccounts withdrew its investment in a fund, the fund may be forced to sell its securities at disadvantageous prices, causing its share value to decrease. Each fund's Board of Directors or Trustees will monitor events to identify any conflicts which may arise and to determine what action, if any, should be taken to address such conflicts. TRANSFERS AMONG INVESTMENT OPTIONS -------------------------------------------------------------------------------- You may transfer amounts among the available subaccounts. During the accumulation phase we allow you 12 free transfers each account year. We reserve the right to charge $10 for each additional transfer. We currently do not impose this charge. During the income phase we allow you four free transfers each account year. We reserve the right to charge $10 for each additional transfer. We currently do not impose this charge. Transfers from the Guaranteed Account are subject to certain restrictions and may be subject to a market value adjustment. Transfers from the Fixed Account are subject to certain restrictions and transfers into the Fixed Account from any of the other investment options are not allowed. Transfers must be made in accordance with the terms of your contract. TRANSFER REQUESTS. Requests may be made in writing, by telephone or, where applicable, electronically. LIMITS ON FREQUENT TRANSFERS. The contract is not designed to serve as a vehicle for frequent trading in response to short-term fluctuations in the market. Such frequent trading can disrupt management of a fund and raise its expenses. This in turn can have an adverse effect on fund performance. ILIAC Variable Annuity - 126064 19 Accordingly, organizations or individuals that use market-timing investment strategies and make frequent transfers should not purchase the contract. We reserve the right to restrict, in our sole discretion and without prior notice, transfers initiated by a market-timing organization or individual or other party authorized to give transfer instructions on behalf of multiple contract holders. Such restrictions could include: (1) not accepting transfer instructions from an agent acting on behalf of more than one contract holder; (2) not accepting preauthorized transfer forms from market timers or other entities acting on behalf of more than one contract holder at a time; and (3) not accepting transfer requests transmitted by phone, facsimile or by other electronic means. We further reserve the right to impose, without prior notice, restrictions on transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other contract holders. Additionally, orders for the purchase of fund shares may be subject to acceptance by the fund. We reserve the right to reject, without prior notice, any transfer request to a subaccount if the subaccount's investment in the corresponding fund is not accepted for any reason. VALUE OF YOUR TRANSFERRED DOLLARS. The value of amounts transferred into or out of subaccounts will be based on the subaccount unit values next determined after we receive your transfer request in good order at our Customer Service Center or, if you are participating in the dollar cost averaging or account rebalancing programs, after your scheduled transfer or reallocation. TELEPHONE AND ELECTRONIC TRANSACTIONS: SECURITY MEASURES. To prevent fraudulent use of telephone and electronic transactions (including, but not limited to, internet transactions), we have established security procedures. These include recording calls on our toll-free telephone lines and requiring use of a personal identification number (PIN) to execute transactions. You are responsible for keeping your PIN and account information confidential. If we fail to follow reasonable security procedures, we may be liable for losses due to unauthorized or fraudulent telephone or other electronic transactions. We are not liable for losses resulting from telephone or electronic instructions we believe to be genuine. If a loss occurs when we rely on such instructions, you will bear the loss. THE DOLLAR COST AVERAGING PROGRAM. Dollar cost averaging is an investment strategy whereby you purchase fixed dollar amounts of an investment at regular intervals, regardless of price. Under this program a fixed dollar amount is automatically transferred from certain subaccounts, the Guaranteed Account or Fixed Account to any of the other subaccounts. A market value adjustment will not be applied to dollar cost averaging transfers from a guaranteed term of the Guaranteed Account during participation in the dollar cost averaging program. If such participation is discontinued, we will automatically transfer the remaining balance in that guaranteed term to another guaranteed term of the same duration, unless you initiate a transfer into another investment option. In either case a market value adjustment will apply. See Appendix I for more information about dollar cost averaging from the Guaranteed Account. If dollar cost averaging is stopped with respect to amounts invested in the Fixed Account, the remaining balance will be transferred to the money market subaccount. DOLLAR COST AVERAGING NEITHER ENSURES A PROFIT NOR GUARANTEES AGAINST LOSS IN A DECLINING MARKET. YOU SHOULD CONSIDER YOUR FINANCIAL ABILITY TO CONTINUE PURCHASES THROUGH PERIODS OF LOW PRICE LEVELS. THERE IS NO ADDITIONAL CHARGE FOR THIS PROGRAM AND TRANSFERS MADE UNDER THIS PROGRAM DO NOT COUNT AS TRANSFERS WHEN DETERMINING THE ILIAC Variable Annuity - 126064 20 NUMBER OF FREE TRANSFERS THAT MAY BE MADE EACH ACCOUNT YEAR. FOR ADDITIONAL INFORMATION ABOUT THIS PROGRAM, CONTACT YOUR SALES REPRESENTATIVE OR CALL US AT THE NUMBER LISTED IN "CONTRACT OVERVIEW--QUESTIONS: CONTACTING THE COMPANY." In certain states purchase payments allocated to the Fixed Account may require participation in the dollar cost averaging program. THE ACCOUNT REBALANCING PROGRAM. Account rebalancing allows you to reallocate your account value to match the investment allocations you originally selected. Only account values invested in the subaccounts may be rebalanced. We automatically reallocate your account value annually (or more frequently as we allow). Account rebalancing neither ensures a profit nor guarantees against loss in a declining market. There is no additional charge for this program and transfers made under this program do not count as transfers when determining the number of free transfers that may be made each account year. You may participate in this program by completing the account rebalancing section of your application or by contacting us at the address and/or number listed in "Contract Overview--Questions: Contacting the Company." ILIAC Variable Annuity - 126064 21 TRANSFERS BETWEEN OPTION PACKAGES -------------------------------------------------------------------------------- You may transfer from one option package to another. > Transfers must occur on an account anniversary. > A written request for the transfer must be received by us within 60 days before an account anniversary. > The following minimum account values need to be met: -------------------------------------------------------------------------------- TRANSFERS TO TRANSFERS TO OPTION PACKAGE I OPTION PACKAGES II OR III -------------------------------------------------------------------------------- MINIMUM ACCOUNT Non- Non- VALUE Qualified: Qualified: Qualified: Qualified: $15,000 $1,500 $5,000 $1,500 -------------------------------------------------------------------------------- > You will receive a new contract schedule page upon transfer. > Only one option package may be in effect at any time.
------------------------------------------------------------------------------------------------------------------------------ TRANSFERS TO TRANSFERS TO TRANSFERS TO OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III ------------------------------------------------------------------------------------------------------------------------------ DEATH BENEFIT1: DEATH BENEFIT1: DEATH BENEFIT1: o The sum of all purchase payments o The sum of all purchase payments o The sum of all purchase payments made, adjusted for amounts made, adjusted for amounts made, adjusted for amounts withdrawn or applied to an income withdrawn or applied to an income withdrawn or applied to an income phase payment option as of the phase payment option as of the phase payment option as of the claim date, will continue to be claim date, will continue to be claim date, will continue to be calculated from the account calculated from the account calculated from the account effective date. effective date. effective date. o The "step-up value" under Option o If transferring from Option Package o If transferring from Option Package Packages II and III will terminate I, the "step-up value" will be I, the "step-up value" will be on the new schedule effective date. calculated beginning on the new calculated beginning on the new schedule effective date. schedule effective date. o The "roll-up value" under Option Package III will terminate on the o If transferring from Option Package o If transferring from Option Package new schedule effective date. III, the "step-up value" will II, the "step-up value" will continue to be calculated from the continue to be calculated from the date calculated under Option date calculated under Option Package III. Package II. o The "roll-up value" under Option o The "roll-up value" will be Package III will terminate on the calculated beginning on the new new schedule effective date. schedule effective date. ------------------------------------------------------------------------------------------------------------------------------ NURSING HOME WAIVER2: NURSING HOME WAIVER2: NURSING HOME WAIVER2: o The availability of the waiver of o If transferring from Option Package o If transferring from Option Package the early withdrawal charge under I, the waiting period under the I, the waiting period under the the Nursing Home Waiver will Nursing Home Waiver will begin to Nursing Home Waiver will begin to terminate on the new schedule be measured from the new schedule be measured from the new schedule effective date. effective date. effective date. o If transferring from Option Package o If transferring from Option Package III, the waiting period will have II, the waiting period will have been satisfied on the new schedule been satisfied on the new schedule effective date. effective date. ------------------------------------------------------------------------------------------------------------------------------ FREE WITHDRAWALS3: FREE WITHDRAWALS3: FREE WITHDRAWALS3: o If transferring from Option Package o If transferring from Option Package o The cumulative to 30% available III, any available free withdrawal III, any available free withdrawal free withdrawal amount will begin amount in excess of 10% will be amount in excess of 10% will be to be calculated as of the new lost as of the new schedule lost as of the new schedule schedule effective date. effective date. effective date. ------------------------------------------------------------------------------------------------------------------------------
1 See "Death Benefit." 2 See "Fees--Nursing Home Waiver." 3 See "Fees--Free Withdrawals." ILIAC Variable Annuity - 126064 22 FEES -------------------------------------------------------------------------------- The following repeats and adds to information provided in the "Fees and Expenses" section. Please review both sections for information on fees. TRANSACTION FEES EARLY WITHDRAWAL CHARGE Withdrawals of all or a portion of your account value may be subject to a charge. In the case of a partial withdrawal where you request a specified dollar amount, the amount withdrawn from your account will be the amount you specified plus adjustment for any applicable early withdrawal charge. AMOUNT. A percentage of the purchase payments that you withdraw. The percentage will be determined by the early withdrawal charge schedule that applies to your account. EARLY WITHDRAWAL CHARGE SCHEDULES -------------------------------------------------------------------------------- FOR CONTRACTS ISSUED OUTSIDE OF THE STATE OF NEW YORK -------------------------------------------------------------------------------- ALL CONTRACTS (EXCEPT ROTH IRA CONTRACTS ISSUED BEFORE SEPTEMBER 20, 2000): -------------------------------------------------------------------------------- Years from Receipt of Purchase Payment Early Withdrawal Charge Less than 2 7% 2 or more but less than 4 6% 4 or more but less than 5 5% 5 or more but less than 6 4% 6 or more but less than 7 3% 7 or more 0% -------------------------------------------------------------------------------- ROTH IRA CONTRACTS ISSUED BEFORE SEPTEMBER 20, 2000: -------------------------------------------------------------------------------- Completed Account Years Early Withdrawal Charge Less than 1 5% 1 or more but less than 2 4% 2 or more but less than 3 3% 3 or more but less than 4 2% 4 or more but less than 5 1% 5 or more 0% -------------------------------------------------------------------------------- FOR CONTRACTS ISSUED IN THE STATE OF NEW YORK -------------------------------------------------------------------------------- ALL CONTRACTS -------------------------------------------------------------------------------- Years from Receipt of Purchase Payment Early Withdrawal Charge Less than 1 7% 1 or more but less than 2 6% 2 or more but less than 3 5% 3 or more but less than 4 4% 4 or more but less than 5 3% 5 or more but less than 6 2% 6 or more but less than 7 1% 7 or more 0% -------------------------------------------------------------------------------- [sidebar] TYPES OF FEES There are five types of fees or deductions that may affect your account. TRANSACTION FEES o Early Withdrawal Charge o Annual Maintenance Fee o Transfer Charge FEES DEDUCTED FROM INVESTMENTS IN THE SEPARATE ACCOUNT o Mortality and Expense Risk Charge o Administrative Expense Charge o Premium Bonus Option Charge FEES DEDUCTED BY THE FUNDS o Investment Advisory Fees o 12b-1 fees o Other Expenses PREMIUM AND OTHER TAXES CHARGES FOR THE ING GET U.S. CORE PORTFOLIO [end sidebar] ILIAC Variable Annuity - 126064 23 PURPOSE. This is a deferred sales charge. It reimburses us for some of the sales and administrative expenses associated with the contract. If our expenses are greater than the amount we collect for the early withdrawal charge, we may use any of our corporate assets, including potential profit that may arise from the mortality and expense risk charge, to make up any difference. FIRST IN, FIRST OUT. The early withdrawal charge is calculated separately for each purchase payment withdrawn. For purposes of calculating your early withdrawal charge, we consider that your first purchase payment to the account (first in) is the first you withdraw (first out). ILIAC Variable Annuity - 126064 24 Examples: Where the early withdrawal charge is based on the number of years since the purchase payment was received, if your initial purchase payment was made three years ago, we will deduct an early withdrawal charge equal to 6% (4% for a Contract issued in NY) of the portion of that purchase payment withdrawn. For certain Roth IRA contracts where the early withdrawal charge is based on the number of completed account years, if your initial purchase payment was made three years ago, we will deduct an early withdrawal charge equal to 2% of the portion of that purchase payment withdrawn. In each case the next time you make a withdrawal we will assess the early withdrawal charge, if any, against the portion of the first purchase payment you did not withdraw and/or subsequent purchase payments to your account in the order they were received. Earnings may be withdrawn after all purchase payments have been withdrawn. There is no early withdrawal charge for withdrawal of earnings. FREE WITHDRAWALS. There is no early withdrawal charge if, during each account year, the amount withdrawn is 10% or less of your account value on the later of the date we established your account or the most recent anniversary of that date. Under Option Package III, any unused percentage of the 10% free withdrawal amount shall carry forward into successive account years, up to a maximum 30% of your account value. The free withdrawal amount will be adjusted for amounts withdrawn under a systematic distribution option or taken as a required minimum distribution during the account year. WAIVER. The early withdrawal charge is waived for purchase payments withdrawn if the withdrawal is: > Used to provide income phase payments to you; > Paid due to the annuitant's death during the accumulation phase in an amount up to the sum of purchase payments made, minus the total of all partial withdrawals, amounts applied to an income phase payment option and deductions made prior to the annuitant's death; > Paid upon a full withdrawal where your account value is $2,500 or less and no part of the account has been withdrawn during the prior 12 months; > Taken because of the election of a systematic distribution option (see "Systematic Distribution Options"); > Applied as a rollover to certain Roth IRAs issued by us or an affiliate; > If approved in your state, taken under a qualified contract, when the amount withdrawn is equal to the minimum distribution required by the Tax Code for your account calculated using a method permitted under the Tax Code and agreed to by us (including required minimum distributions using the ECO systematic distribution option (see "Systematic Distribution Options")); or > Paid upon termination of your account by us (see "Other Topics -- Involuntary Terminations"). NURSING HOME WAIVER. Under Option Packages II and III, you may withdraw all or a portion of your account value without an early withdrawal charge if: > More than one account year has elapsed since the schedule effective date; > The withdrawal is requested within three years of the annuitant's admission to a licensed nursing care facility (in Oregon there is no three year limitation period and in New Hampshire non-licensed facilities are included); and > The annuitant has spent at least 45 consecutive days in such nursing care facility. ILIAC Variable Annuity - 126064 25 We will not waive the early withdrawal charge if the annuitant was in a nursing care facility for at least one day during the two week period immediately preceding or following the schedule effective date. It will also not apply to contracts where prohibited by state law. See the "New York Contracts" section of this prospectus for contracts issued in New York. ANNUAL MAINTENANCE FEE MAXIMUM AMOUNT. $30.00 WHEN/HOW. Each year during the accumulation phase we deduct this fee from your account value. We deduct it on your account anniversary and at the time of full withdrawal. It is deducted proportionally from each investment option. PURPOSE. This fee reimburses us for our administrative expenses relating to the establishment and maintenance of your account. ELIMINATION. We will not deduct the annual maintenance fee if your account value is $50,000 or more on the date this fee is to be deducted. TRANSFER CHARGE AMOUNT. During the accumulation phase we currently allow you 12 free transfers each account year. We reserve the right to charge $10 for each additional transfer. We currently do not impose this charge. PURPOSE. This charge reimburses us for administrative expenses associated with transferring your dollars among investment options. FEES DEDUCTED FROM INVESTMENTS IN THE SEPARATE ACCOUNT MORTALITY AND EXPENSE RISK CHARGE MAXIMUM AMOUNT. During the accumulation phase the amount of this charge, on an annual basis, is equal to the following percentages of your account value invested in the subaccounts: -------------------------------------------------------------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III -------------------------------------------------------------------------------- 0.80% 1.10% 1.25% -------------------------------------------------------------------------------- During the income phase this charge, on an annual basis, is equal to 1.25% of amounts invested in the subaccounts. See "The Income Phase - Charges Deducted." WHEN/HOW. We deduct this charge daily from the subaccounts corresponding to the funds you select. We do not deduct this charge from any fixed interest option. PURPOSE. This charge compensates us for the mortality and expense risks we assume under the contract. > The mortality risks are those risks associated with our promise to make lifetime income phase payments based on annuity rates specified in the contract. > The expense risk is the risk that the actual expenses we incur under the contract will exceed the maximum costs that we can charge. If the amount we deduct for this charge is not enough to cover our mortality costs and expenses under the contract, we will bear the loss. We may use any excess to recover distribution costs relating to the contract and as a source of profit. We expect to make a profit from this charge. ILIAC Variable Annuity - 126064 26 ADMINISTRATIVE EXPENSE CHARGE MAXIMUM AMOUNT. During the accumulation phase the amount of this charge, on an annual basis, is equal to the following percentages of your account value invested in the subaccounts: -------------------------------------------------------------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III -------------------------------------------------------------------------------- 0.15% 0.15% 0.15% -------------------------------------------------------------------------------- There is currently no administrative expense charge during the income phase. We reserve the right, however, to charge an administrative expense charge of up to 0.25% during the income phase. WHEN/HOW. If imposed, we deduct this charge daily from the subaccounts corresponding to the funds you select. We do not deduct this charge from the fixed interest options. If we are imposing this charge when you enter the income phase, the charge will apply to you during the entire income phase. PURPOSE. This charge helps defray our administrative expenses. PREMIUM BONUS OPTION CHARGE MAXIMUM AMOUNT. 0.50%, but only if you elect the premium bonus option. WHEN/HOW. We deduct this charge daily from the subaccounts corresponding to the funds you select. We may also deduct this charge from amounts allocated to the fixed interest options. This charge is deducted for the first seven account years during the accumulation phase and, if applicable, the income phase. PURPOSE. This charge compensates us for the cost associated with crediting the premium bonus to your account on purchase payments made during the first account year. See "Premium Bonus Option - Premium Bonus Option Charge." ING GET U.S. CORE PORTFOLIO GUARANTEE CHARGE MAXIMUM AMOUNT. 0.50%, but only if you elect to invest in the GET Fund investment option. WHEN/HOW. We deduct this charge daily during the guarantee period from amounts allocated to the GET Fund investment option. PURPOSE. This charge compensates us for the cost of providing a guarantee of accumulation unit values of the GET Fund subaccount. See "Investment Options-Variable Investment Options." REDUCTION OR ELIMINATION OF CERTAIN FEES When sales of the contract are made to individuals or a group of individuals in a manner that results in savings of sales or administrative expenses, we may reduce or eliminate the early withdrawal charge, annual maintenance fee, mortality and expense risk charge, administrative expense charge or premium bonus option charge. Our decision to reduce or eliminate any of these fees will be based on one or more of the following: > The size and type of group to whom the contract is issued; > The amount of expected purchase payments; > A prior or existing relationship with the Company, such as being an employee or ILIAC Variable Annuity - 126064 27 former employee of the Company or one of our affiliates, receiving distributions or making transfers from other contracts issued by us or one of our affiliates or transferring amounts held under qualified retirement plans sponsored by us or one of our affiliates; > The type and frequency of administrative and sales services provided; or > The level of annual maintenance fee and early withdrawal charges. In the case of an exchange of another contract issued by us or one of our affiliates where the early withdrawal charge has been waived, the early withdrawal charge for certain contracts offered by this prospectus may be determined based on the dates purchase payments were received in the prior contract. The reduction or elimination of any of these fees will not be unfairly discriminatory against any person and will be done according to our rules in effect at the time the contract is issued. We reserve the right to change these rules from time to time. The right to reduce or eliminate any of these fees may be subject to state approval. ILIAC Variable Annuity - 126064 28 FUND EXPENSES AMOUNT. Each fund determines its own advisory fee, service fees or 12b-1 fees (if applicable) and other expenses. Service fees and 12b-1 fees are generally deducted from fund assets in order to pay for the servicing or distribution of fund shares. If a fund has such fees, some or all of such fees may be paid to the Company as compensation for distribution or shareholder services performed by the Company with respect to the use of the funds as investment options under the contracts. In addition to any service fees or 12b-1 fees that the Company may receive from a fund or its affiliate, the Company may also receive compensation from a fund or its affiliate for administrative, recordkeeping or other services provided by the Company to the fund or the fund affiliates. Such additional payments do not increase, directly or indirectly, the fund's fees and expenses. The amount of such additional payments can range up to 0.425% of average net assets held in a fund by the Company. The fees are described in more detail in each fund prospectus. Various series of the ING GET U.S. Core Portfolio may be offered from time to time, and additional charges may apply if you elect to invest in one of these series. See "Fees Deducted from Investments in the Separate Account-ING GET U.S. Core Portfolio Guarantee Charge." WHEN/HOW. A fund's fees and expenses are not deducted from your account value. Instead, they are reflected in the daily value of fund shares which, in turn, will affect the daily value of the subaccounts. PURPOSE. These fees and expenses help to pay the fund's investment adviser and operating expenses. PREMIUM AND OTHER TAXES MAXIMUM AMOUNT. Some states and municipalities charge a premium tax on annuities. These taxes currently range from 0% to 4%, depending upon the jurisdiction. WHEN/HOW. We reserve the right to deduct a charge for premium taxes from your account value or from purchase payments to the account at any time, but not before there is a tax liability under state law. For example, we may deduct a charge for premium taxes at the time of a complete withdrawal or we may reflect the cost of premium taxes in our income phase payment rates when you commence income phase payments. We will not deduct a charge for any municipal premium tax of 1% or less, but we reserve the right to reflect such an expense in our annuity purchase rates. IN ADDITION, WE RESERVE THE RIGHT TO ASSESS A CHARGE FOR ANY FEDERAL TAXES DUE AGAINST THE SEPARATE ACCOUNT. SEE "TAXATION." ILIAC Variable Annuity - 126064 29 YOUR ACCOUNT VALUE -------------------------------------------------------------------------------- During the accumulation phase your account value at any given time equals: > The current dollar value of amounts invested in the subaccounts; plus > The current dollar values of amounts invested in the fixed interest options, including interest earnings to date. SUBACCOUNT ACCUMULATION UNITS. When you select a fund as an investment option, your account dollars invest in "accumulation units" of the Variable Annuity Account B subaccount corresponding to that fund. The subaccount invests directly in the fund shares. The value of your interests in a subaccount is expressed as the number of accumulation units you hold multiplied by an "accumulation unit value," as described below, for each unit. ACCUMULATION UNIT VALUE (AUV). The value of each accumulation unit in a subaccount is called the accumulation unit value or AUV. The AUV varies daily in relation to the underlying fund's investment performance. The value also reflects deductions for fund fees and expenses, the mortality and expense risk charge, the administrative expense charge, the premium bonus option charge (if any) and, for amounts allocated to the ING GET U.S. Core Portfolio subaccount only, the GET Fund guarantee charge. We discuss these deductions in more detail in "Fee Table" and "Fees." VALUATION. We determine the AUV every normal business day after the close of the New York Stock Exchange (normally at 4:00 p.m. eastern time). At that time we calculate the current AUV by multiplying the AUV last calculated by the "net investment factor" of the subaccount. The net investment factor measures the investment performance of the subaccount from one valuation to the next. Current AUV = Prior AUV x Net Investment Factor NET INVESTMENT FACTOR. The net investment factor for a subaccount between two consecutive valuations equals the sum of 1.0000 plus the net investment rate. NET INVESTMENT RATE. The net investment rate is computed according to a formula that is equivalent to the following: > The net assets of the fund held by the subaccount as of the current valuation; minus > The net assets of the fund held by the subaccount at the preceding valuation; plus or minus > Taxes or provisions for taxes, if any, due to subaccount operations (with any federal income tax liability offset by foreign tax credits to the extent allowed); divided by > The total value of the subaccount's units at the preceding valuation; minus > A daily deduction for the mortality and expense risk charge and the administrative expense charge, if any, and any other fees deducted from investments in the separate account, such as the premium bonus option charge and guarantee charges for the ING GET U.S. Core Portfolio. See "Fees." The net investment rate may be either positive or negative. ILIAC Variable Annuity - 126064 30 HYPOTHETICAL ILLUSTRATION. As a hypothetical illustration assume that your initial purchase payment to a qualified contract is $5,000 and you direct us to invest $3,000 in Fund A and $2,000 in Fund B. Also assume that you did not elect the premium bonus option and on the day we receive the purchase payment the applicable AUVs after the next close of business of the New York Stock Exchange (normally at 4:00 p.m. Eastern Time) are $10 for Subaccount A and $20 for Subaccount B. Your account is credited with 300 accumulation units of Subaccount A and 100 accumulation units of Subaccount B. STEP 1: You make an initial purchase payment of $5000. STEP 2: A. You direct us to invest $3,000 in Fund A. The purchase payment purchases 300 accumulation units of Subaccount A ($3,000 divided by the current $10 AUV). B. You direct us to invest $2,000 in Fund B. The purchase payment purchases 100 accumulation units of Subaccount B ($2,000 divided by the current $20 AUV). STEP 3: The separate account purchases shares of the applicable funds at the then current market value (net asset value or NAV). ----------------------------- $5,000 Purchase Payment ----------------------------- Step 1 ----------------------------------------------- ING Life Insurance and Annuity Company ----------------------------------------------- Step 2 ---------------------------------------- Variable Annuity Account B ---------------------------------------- Subaccount A Subaccount B 300 100 Etc. accumulation accumulation units units ---------------------------------------- Step 3 -------------- ------------- Mutual Mutual Fund A Fund B -------------- ------------- Each fund's subsequent investment performance, expenses and charges, and the daily charges deducted from the subaccount, will cause the AUV to move up or down on a daily basis. PURCHASE PAYMENTS TO YOUR ACCOUNT. If all or a portion of your initial purchase payment is directed to the subaccounts, it will purchase subaccount accumulation units at the AUV next computed after our acceptance of your application as described in "Purchase and Rights." Subsequent purchase payments or transfers directed to the subaccounts will purchase subaccount accumulation units at the AUV next computed following our receipt of the purchase payment or transfer request in good order. The AUV will vary day to day. ILIAC Variable Annuity - 126064 31 [sidebar] TAXES, FEES AND DEDUCTIONS Amounts withdrawn may be subject to one or more of the following: > Early Withdrawal Charge (see "Fees--Early Withdrawal Charge") > Annual Maintenance Fee (see "Fees--Annual Maintenance Fee") > Premium Bonus Option Charge (See "Premium Bonus Option--Premium Bonus Option Charge") > Market Value Adjustment for amounts held in the Guaranteed Account (see Appendix I and the Guaranteed Account prospectus) > Tax Penalty (see "Taxation") > Tax Withholding (see "Taxation") To determine which may apply to you, refer to the appropriate sections of this prospectus, contact your sales representative or call us at the number listed in "Contract Overview--Questions: Contacting the Company." [end sidebar] WITHDRAWALS -------------------------------------------------------------------------------- You may withdraw all or a portion of your account value at any time during the accumulation phase. If you participate in the contract through a 403(b) plan, certain restrictions apply. See "Restrictions on Withdrawals from 403(b) Plan Accounts." STEPS FOR MAKING A WITHDRAWAL > Select the withdrawal amount. (1) Full Withdrawal: You will receive, reduced by any required withholding tax, your account value allocated to the subaccounts, the Guaranteed Account (plus or minus any applicable market value adjustment) and the Fixed Account, minus any applicable early withdrawal charge, annual maintenance fee and forfeited premium bonus. (2) Partial Withdrawal (Percentage or Specified Dollar Amount): You will receive, reduced by any required withholding tax, the amount you specify, subject to the value available in your account. However, the amount actually withdrawn from your account will be adjusted by any applicable early withdrawal charge, any positive or negative market value adjustment for amounts withdrawn from the Guaranteed Account and any forfeited premium bonus. See Appendices I and II and the Guaranteed Account prospectus for more information about withdrawals from the Guaranteed Account and the Fixed Account. > Select investment options. If you do not specify this, we will withdraw dollars in the same proportion as the values you hold in the various investment options from each investment option in which you have an account value. > Properly complete a disbursement form and deliver it to our Customer Service Center. RESTRICTIONS ON WITHDRAWALS FROM 403(B) PLAN ACCOUNTS Under Section 403(b) contracts the withdrawal of salary reduction contributions and earnings on such contributions is generally prohibited prior to the participant's death, disability, attainment of age 59 1/2, separation from service or financial hardship. See "Taxation." CALCULATION OF YOUR WITHDRAWAL. We determine your account value every normal business day after the close of the New York Stock Exchange (normally at 4:00 p.m. Eastern Time). We pay withdrawal amounts based on your account value as of the next valuation after we receive a request for withdrawal in good order at our Customer Service Center. DELIVERY OF PAYMENT. Payments for withdrawal requests will be made in accordance with SEC requirements. Normally, your withdrawal amount will be sent no later than seven calendar days following our receipt of your properly-completed disbursement form in good order. REINSTATING A FULL WITHDRAWAL. Within 30 days after a full withdrawal, if allowed by law and the contract, you may elect to reinstate all or a portion of your withdrawal. We must receive any reinstated amounts within 60 days of the withdrawal. We reserve the right, however, to accept a reinstatement election received more than 30 days after the withdrawal and accept proceeds received more than 60 days after the withdrawal. We will credit your account for the amount reinstated based on the subaccount values next computed following our receipt of your request and the amount to be reinstated. We will credit the amount reinstated proportionally for annual maintenance fees and ILIAC Variable Annuity - 126064 32 early withdrawal charges imposed at the time of withdrawal. We will deduct from the amount reinstated any annual maintenance fee which fell due after the withdrawal and before the reinstatement. We will reinstate in the same investment options and proportions in place at the time of withdrawal. If you withdraw amounts from a series of the ING GET U.S. Core Portfolio and then elect to reinstate them, we will reinstate them in an ING GET U.S. Core Portfolio series that is then accepting deposits, if one is available. If one is not available, we will reallocate your GET amounts among other investment options in which you invested, on a pro rata basis. The reinstatement privilege may be used only once. Special rules apply to reinstatement of amounts withdrawn from the Guaranteed Account (see Appendix I and the Guaranteed Account prospectus). We will not credit your account for market value adjustments or any premium bonus forfeited that we deducted at the time of your withdrawal or refund any taxes that were withheld. Seek competent advice regarding the tax consequences associated with reinstatement. ILIAC Variable Annuity - 126064 33 [sidebar] FEATURES OF A SYSTEMATICDISTRIBUTION OPTION A systematic distribution option allows you to receive regular payments from your contract without moving into the income phase. By remaining in the accumulation phase, you retain certain rights and investment flexibility not available during the income phase. [end sidebar] SYSTEMATIC DISTRIBUTION OPTIONS -------------------------------------------------------------------------------- Systematic distribution options may be exercised at any time during the accumulation phase. The following systematic distribution options may be available: > SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of automatic partial withdrawals from your account based on a payment method you select. Consider this option if you would like a periodic income while retaining investment flexibility for amounts accumulated in the account. > ECO--ESTATE CONSERVATION OPTION. ECO offers the same investment flexibility as SWO, but is designed for those who want to receive only the minimum distribution that the Tax Code requires each year. Under ECO we calculate the minimum distribution amount required by law, generally at age 70 1/2, and pay you that amount once a year. ECO is not available under nonqualified contracts. An early withdrawal charge will not be deducted from and a market value adjustment will not be applied to any part of your account value paid under an ECO. > LEO--LIFE EXPECTANCY OPTION. LEO provides for annual payments for a number of years equal to your life expectancy or the life expectancy of you and a designated beneficiary. It is designed to meet the substantially equal periodic payment exception to the 10% premature distribution penalty under Tax Code section 72. See "Taxation." OTHER SYSTEMATIC DISTRIBUTION OPTIONS. We may add additional systematic distribution options from time to time. You may obtain additional information relating to any of the systematic distribution options from your sales representative or by calling us at the number listed in "Contract Overview--Questions: Contacting the Company." SYSTEMATIC DISTRIBUTION OPTION AVAILABILITY. Withdrawals under a systematic distribution option are limited to your free withdrawal amount. See "Fees - Early Withdrawal Charge - Free Withdrawals." If allowed by applicable law, we may discontinue the availability of one or more of the systematic distribution options for new elections at any time and/or to change the terms of future elections. ELIGIBILITY FOR A SYSTEMATIC DISTRIBUTION OPTION. To determine if you meet the age and account value criteria and to assess terms and conditions that may apply, contact your sales representative or the Company at the number listed in "Contract Overview--Questions: Contacting the Company." TERMINATING A SYSTEMATIC DISTRIBUTION OPTION. You may revoke a systematic distribution option at any time by submitting a written request to our Customer Service Center. ECO, once revoked, may not, unless allowed under the Tax Code, be elected again. CHARGES AND TAXATION. When you elect a systematic distribution option your account value remains in the accumulation phase and subject to the charges and deductions described in the "Fees" and "Fee Table" sections. Taking a withdrawal under a systematic distribution option, or later revoking the option, may have tax consequences. If you are concerned about tax implications, consult a qualified tax adviser before electing an option. ILIAC Variable Annuity - 126064 34 DEATH BENEFIT -------------------------------------------------------------------------------- DURING THE ACCUMULATION PHASE WHEN IS A DEATH BENEFIT PAYABLE? During the accumulation phase a death benefit is payable when the contract holder or the annuitant dies. If there are joint contract holders, the death benefit is payable when either one dies. WHO RECEIVES THE DEATH BENEFIT? If you would like certain individuals or entities to receive the death benefit when it becomes payable, you may name them as your beneficiaries. However, if you are a joint contract holder and you die, the beneficiary will automatically be the surviving joint contract holder. In this circumstance any other beneficiary you named will be treated as the primary or contingent beneficiary, as originally named, of the surviving joint contract holder. The surviving joint contract holder may change the beneficiary designation. If you die and no beneficiary exists, the death benefit will be paid in a lump sum to your estate. DESIGNATING YOUR BENEFICIARY. You may designate a beneficiary on your application or by contacting your sales representative or us as indicated in "Contract Overview--Questions: Contacting the Company." DEATH BENEFIT AMOUNT. The death benefit depends upon the option package in effect on the date the annuitant dies.
---------------------------------------------------------------------------------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III ---------------------------------------------------------------------------------------------------- DEATH BENEFIT The greater of: The greatest of: The greatest of: ON DEATH OF THE ANNUITANT: (1) The sum of all (1) The sum of all (1) The sum of all purchase payments, purchase payments, purchase payments, adjusted for amounts adjusted for amounts adjusted for amounts withdrawn or applied withdrawn or applied withdrawn or applied to an income phase to an income phase to an income phase payment option as of payment option as of payment option as of the claim date; or the claim date; or the claim date; or (2) The account value* (2) The account value* (2) The account value* on the claim date. on the claim date; on the claim date; or or (4) The "step-up value"* (3) The "step-up value"* (as described below) (as described below) on the claim date. on the claim date; or (4) The "roll-up value"* (as described below) on the claim date.** ----------------------------------------------------------------------------------------------------
* For purposes of calculating the death benefit, the account value, step-up value and roll-up value will be reduced by the amount of any premium bonus credited to your account after or within 12 months of the date of death. See "Premium Bonus Option--Forfeiture." ** See the "New York Contracts" section of this prospectus for details about the Option Package III death benefit for contracts issued in New York. [sidebar] This section provides information about the death benefit during the accumulation phase. For death benefit information applicable to the income phase, see "The Income Phase." TERMS TO UNDERSTAND: ACCOUNT YEAR/ACCOUNT ANNIVERSARY: A period of 12 months measured from the date we established your account and each anniversary of this date. Account anniversaries are measured from this date. ANNUITANT(S): The person(s) on whose life(lives) or life expectancy(ies) the income phase payments are based. BENEFICIARY(IES): The person(s) or entity(ies) entitled to receive a death benefit under the contract. CLAIM DATE: The date proof of death and the beneficiary's right to receive the death benefit are received in good order at our Customer Service Center. Please contact our Customer Service Center to learn what information is required for a request for payment of the death benefit to be in good order. CONTRACT HOLDER (YOU/YOUR): The contract holder of an individually owned contract or the certificate holder of a group contract. The contract holder and annuitant may be the same person. SCHEDULE EFFECTIVE DATE: The date an option package and benefits become effective. The initial schedule effective date equals the date we established your account. Thereafter, this date can occur only on an account anniversary. [end sidebar] ILIAC Variable Annuity - 126064 35 STEP-UP VALUE. On the schedule effective date, the step-up value is equal to the greater of: > The account value; or > The step-up value, if any, calculated on the account anniversary prior to the schedule effective date, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option during the prior account year. Thereafter, once each year on the anniversary of the schedule effective date until the anniversary immediately preceding the annuitant's 85th birthday or death, whichever is earlier, the step-up value is equal to the greater of: > The step-up value most recently calculated, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option during the prior account year; or > The account value on that anniversary of the schedule effective date. On each anniversary of the schedule effective date after the annuitant's 85th birthday, the step-up value shall be equal to the step-up value on the anniversary immediately preceding the annuitant's 85th birthday, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option since that anniversary. On the claim date, the step-up value shall equal the step-up value on the anniversary of the schedule effective date immediately preceding the annuitant's death, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option since that anniversary. For purposes of calculating the death benefit, the step-up value will be reduced by the amount of any premium bonus credited to your account after or within 12 months of the date of death. See "Premium Bonus Option--Forfeiture." ROLL-UP VALUE. On the schedule effective date, the roll-up value is equal to the account value. Thereafter, once each year on the anniversary of the schedule effective date until the anniversary immediately preceding the annuitant's 76th birthday or death, whichever is earlier, the roll-up value is equal to the roll-up value most recently calculated multiplied by a factor of 1.05, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option during the prior account year. The roll-up value may not exceed 200% of the account value on the schedule effective date, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option since that date. On each anniversary of the schedule effective date after the annuitant's 76th birthday, the roll-up value shall be equal to the roll-up value on the anniversary immediately preceding the annuitant's 76th birthday, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option since that anniversary. On the claim date, the roll-up value shall equal the roll-up value on the anniversary of the schedule effective date immediately preceding the annuitant's death, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option since that anniversary. For purposes of calculating the death benefit, the roll-up value will be reduced by the amount of any premium bonus credited to your account after or within 12 months of the date of death. See "Premium Bonus Option--Forfeiture." ILIAC Variable Annuity - 126064 36 THE "ROLL-UP VALUE" IS NOT AVAILABLE ON CONTRACTS ISSUED IN THE STATE OF NEW YORK. SEE THE "NEW YORK CONTRACTS" SECTION OF THIS PROSPECTUS FOR DETAILS ABOUT THE OPTION PACKAGE III DEATH BENEFIT FOR CONTRACTS ISSUED IN NEW YORK. ADJUSTMENT. For purposes of determining the death benefit, the adjustment for purchase payments made will be dollar for dollar. The adjustment for amounts withdrawn or applied to an income phase payment option will be proportionate, reducing the sum of all purchase payments made, the step-up value and the roll-up value in the same proportion that the account value was reduced on the date of the withdrawal or application to an income phase payment option. DEATH BENEFIT GREATER THAN THE ACCOUNT VALUE. Notwithstanding which option package is selected, on the claim date, if the amount of the death benefit is greater than the account value, the amount by which the death benefit exceeds the account value will be deposited and allocated to the money market subaccount available under the contract, thereby increasing the account value available to the beneficiary to an amount equal to the death benefit. Prior to the election of a method of payment of the death benefit by the beneficiary, the account value will remain in the account and continue to be affected by the investment performance of the investment option(s) selected. The beneficiary has the right to allocate or transfer any amount to any available investment option (subject to a market value adjustment, as applicable). The amount paid to the beneficiary will equal the adjusted account value on the day the payment is processed. DEATH BENEFIT AMOUNTS IN CERTAIN CASES IF A SPOUSAL BENEFICIARY CONTINUES THE ACCOUNT FOLLOWING THE DEATH OF THE CONTRACT HOLDER/ANNUITANT. If a spousal beneficiary continues the account at the death of a contract holder who was also the annuitant, the spousal beneficiary becomes the annuitant. The option package in effect at the death of the contract holder will also apply to the spousal beneficiary, unless later changed by the spousal beneficiary. The premium bonus option charge, if any, will continue, unless the premium bonus was forfeited when calculating the account value, step-up value and roll-up value on the death of the original contract holder/annuitant. The amount of the death benefit payable at the death of a spousal beneficiary who has continued the account shall be determined under the option package then in effect, except that: (1) In calculating the sum of all purchase payments, adjusted for amounts withdrawn or applied to an income phase payment option, the account value on the claim date following the original contract holder's/annuitant's death shall be treated as the spousal beneficiary's initial purchase payment; (2) In calculating the step-up value, the step-up value on the claim date following the original contract holder's/annuitant's death shall be treated as the spousal beneficiary's initial step-up value; and (3) In calculating the roll-up value, the roll-up value on the claim date following the original contract holder's/annuitant's death shall be treated as the initial roll-up value. IF THE CONTRACT HOLDER IS NOT THE ANNUITANT. Under nonqualified contracts only the death benefit described above under Option Packages I, II and III will not apply if a contract holder (including a spousal beneficiary who has continued the account) who is not also the annuitant dies. In these circumstances the amount paid will be equal to the ILIAC Variable Annuity - 126064 37 account value on the date the payment is processed, plus or minus any market value adjustment. An early withdrawal charge may apply to any full or partial payment of this death benefit. BECAUSE THE DEATH BENEFIT IN THESE CIRCUMSTANCES EQUALS THE ACCOUNT VALUE, PLUS OR MINUS ANY MARKET VALUE ADJUSTMENT, A CONTRACT HOLDER WHO IS NOT ALSO THE ANNUITANT SHOULD SERIOUSLY CONSIDER WHETHER OPTION PACKAGES II AND III ARE SUITABLE FOR THEIR CIRCUMSTANCES. If the spousal beneficiary who is the annuitant continues the account at the death of the contract holder who was not the annuitant, the annuitant will not change. The option package in effect at the death of the contract holder will also apply to the spousal beneficiary, unless later changed by the spousal beneficiary, and the death benefit payable at the spousal beneficiary's death shall be determined under the option package then in effect. GUARANTEED ACCOUNT. For amounts held in the Guaranteed Account, see Appendix I for a discussion of the calculation of the death benefit. DEATH BENEFIT--METHODS OF PAYMENT FOR QUALIFIED CONTRACTS. Under a qualified contract if the annuitant dies the beneficiary may choose one of the following three methods of payment: > Apply some or all of the account value, plus or minus any market value adjustment, to any of the income phase payment options (subject to the Tax Code distribution rules (see "Taxation Minimum Distribution Requirements")); > Receive, at any time, a lump-sum payment equal to all or a portion of the account value, plus or minus any market value adjustment; or > Elect SWO, ECO or LEO (described in "Systematic Distribution Options"), provided the election would satisfy the Tax Code minimum distribution rules. PAYMENTS FROM A SYSTEMATIC DISTRIBUTION OPTION. If the annuitant was receiving payments under a systematic distribution option and died before the Tax Code's required beginning date for minimum distributions, payments under the systematic distribution option will stop. The beneficiary, or contract holder on behalf of the beneficiary, may elect a systematic distribution option provided the election is permitted under the Tax Code minimum distribution rules. If the annuitant dies after the required beginning date for minimum distributions, payments will continue as permitted under the Tax Code minimum distribution rules, unless the option is revoked. DISTRIBUTION REQUIREMENTS. Subject to Tax Code limitations, a beneficiary may be able to defer distribution of the death benefit. Death benefit payments must satisfy the distribution rules in Tax Code Section 401(a)(9). See "Taxation." FOR NONQUALIFIED CONTRACTS. (1) If you die and the beneficiary is your surviving spouse, or if you are a non-natural person and the annuitant dies and the beneficiary is the annuitant's surviving spouse, then the beneficiary becomes the successor contract holder. In this circumstance the Tax Code does not require distributions under the contract until the successor contract holder's death. ILIAC Variable Annuity - 126064 38 As the successor contract holder, the beneficiary may exercise all rights under the account and has the following options: (a) Continue the contract in the accumulation phase; (b) Elect to apply some or all of the account value, plus or minus any market value adjustment, to any of the income phase payment options; or (c) Receive at any time a lump-sum payment equal to all or a portion of the account value, plus or minus any market value adjustment. If you die and are not the annuitant, an early withdrawal charge will apply if a lump sum is elected. (2) If you die and the beneficiary is not your surviving spouse, he or she may elect option 1(b) or option 1(c) above (subject to the Tax Code distribution rules). See "Taxation--Minimum Distribution Requirements." In this circumstance the Tax Code requires any portion of the account value, plus or minus any market value adjustment, not distributed in installments over the beneficiary's life or life expectancy, beginning within one year of your death, must be paid within five years of your death. See "Taxation." (3) If you are a natural person but not the annuitant and the annuitant dies, the beneficiary may elect option 1(b) or 1(c) above. If the beneficiary does not elect option 1(b) within 60 days from the date of death, the gain, if any, will be included in the beneficiary's income in the year the annuitant dies. PAYMENTS FROM A SYSTEMATIC DISTRIBUTION OPTION. If the contract holder or annuitant dies and payments were made under SWO, payments will stop. A beneficiary, however, may elect to continue SWO. TAXATION. In general, payments received by your beneficiary after your death are taxed to the beneficiary in the same manner as if you had received those payments. Additionally, your beneficiary may be subject to tax penalties if he or she does not begin receiving death benefit payments within the time-frame required by the Tax Code. See "Taxation." ILIAC Variable Annuity - 126064 39 [sidebar] We may have used the following terms in prior prospectuses: ANNUITY PHASE--Income Phase ANNUITY OPTION--Income Phase Payment Option ANNUITY PAYMENT--Income Phase Payment [end sidebar] THE INCOME PHASE -------------------------------------------------------------------------------- During the income phase you stop contributing dollars to your account and start receiving payments from your accumulated account value. INITIATING PAYMENTS. At least 30 days prior to the date you want to start receiving payments you must notify us in writing of all of the following: > Payment start date; > Income phase payment option (see the income phase payment options table in this section); > Payment frequency (i.e., monthly, quarterly, semi-annually or annually); > Choice of fixed, variable or a combination of both fixed and variable payments; and > Selection of an assumed net investment rate (only if variable payments are elected). Your account will continue in the accumulation phase until you properly initiate income phase payments. Once an income phase payment option is selected it may not be changed. WHAT AFFECTS PAYMENT AMOUNTS? Some of the factors that may affect the amount of your income phase payments include your age, gender, account value, the income phase payment option selected, the number of guaranteed payments (if any) selected and whether you select fixed, variable or a combination of both fixed and variable payments and, for variable payments, the assumed net investment rate selected. FIXED PAYMENTS. Amounts funding fixed income phase payments will be held in the Company's general account. The amount of fixed payments does not vary with investment performance over time. VARIABLE PAYMENTS. Amounts funding your variable income phase payments will be held in the subaccount(s) you select. Not all subaccounts available during the accumulation phase may be available during the income phase. Payment amounts will vary depending upon the performance of the subaccounts you select. For variable income phase payments, you must select an assumed net investment rate. ASSUMED NET INVESTMENT RATE. If you select variable income phase payments, you must also select an assumed net investment rate of either 5% or 3 1/2%. If you select a 5% rate, your first income phase payment will be higher, but subsequent payments will increase only if the investment performance of the subaccounts you selected is greater than 5% annually, after deduction of fees. Payment amounts will decline if the investment performance is less than 5%, after deduction of fees. If you select a 3 1/2% rate, your first income phase payment will be lower and subsequent payments will increase more rapidly or decline more slowly depending upon changes to the net investment rate of the subaccounts you selected. For more information about selecting an assumed net investment rate, call us for a copy of the SAI. See "Contract Overview--Questions: Contacting the Company." ILIAC Variable Annuity - 126064 40 MINIMUM PAYMENT AMOUNTS. The income phase payment option you select must result in: > A first income phase payment of at least $50; and > Total yearly income phase payments of at least $250. If your account value is too low to meet these minimum payment amounts, you will receive one lump-sum payment. Unless prohibited by law, we reserve the right to increase the minimum payment amount based on increases reflected in the Consumer Price Index-Urban (CPI-U) since July 1, 1993. RESTRICTIONS ON START DATES AND THE DURATION OF PAYMENTS. Income phase payments may not begin during the first account year, or, unless we consent, later than the later of: (a) The first day of the month following the annuitant's 85th birthday; or (b) The tenth anniversary of the last purchase payment made to your account. Income phase payments will not begin until you have selected an income phase payment option. Failure to select an income phase payment option by the later of the annuitant's 85th birthday or the tenth anniversary of your last purchase payment may have adverse tax consequences. You should consult with a qualified tax adviser if you are considering delaying the selection of an income phase payment option before the later of these dates. For qualified contracts only, income phase payments may not extend beyond: (a) The life of the annuitant; (b) The joint lives of the annuitant and beneficiary; (c) A guaranteed period greater than the annuitant's life expectancy; or (d) A guaranteed period greater than the joint life expectancies of the annuitant and beneficiary. When income phase payments start the age of the annuitant plus the number of years for which payments are guaranteed may not exceed 95. If income phase payments start when the annuitant is at an advanced age, such as over 85, it is possible that the contract will not be considered an annuity for federal tax purposes. See "Taxation" for further discussion of rules relating to income phase payments. CHARGES DEDUCTED. > If variable income phase payments are selected, we make a daily deduction for mortality and expense risks from amounts held in the subaccounts. Therefore, if you choose variable income phase payments and a nonlifetime income phase payment option, we still make this deduction from the subaccounts you select, even though we no longer assume any mortality risks. The amount of this charge, on an annual basis, is equal to 1.25% of amounts invested in the subaccounts. See "Fees--Mortality and Expense Risk Charge." > There is currently no administrative expense charge during the income phase. We reserve the right, however, to charge an administrative expense charge of up to 0.25% during the income phase. If imposed, we deduct this charge daily from the subaccounts corresponding to the funds you select. If we are imposing this charge when you enter the income phase, the charge will apply to you during the entire income phase. See "Fees--Administrative Expense Charge." ILIAC Variable Annuity - 126064 41 > If you elected the premium bonus option and variable income phase payments, we may also deduct the premium bonus option charge. We deduct this charge daily during the first seven account years from the subaccounts corresponding to the funds you select. If fixed income phase payments are selected, this charge may be reflected in the income phase payment rates. See "Fees--Premium Bonus Option Charge." DEATH BENEFIT DURING THE INCOME PHASE. The death benefits that may be available to a beneficiary are outlined in the income phase payment options table below. If a lump-sum payment is due as a death benefit, we will make payment within seven calendar days after we receive proof of death acceptable to us and the request for the payment in good order at our Customer Service Center. If continuing income phase payments are elected, the beneficiary may not elect to receive a lump sum at a future date unless the income phase payment option specifically allows a withdrawal right. We will calculate the value of any death benefit at the next valuation after we receive proof of death and a request for payment. Such value will be reduced by any payments made after the date of death. BENEFICIARY RIGHTS. A beneficiary's right to elect an income phase payment option or receive a lump-sum payment may have been restricted by the contract holder. If so, such rights or options will not be available to the beneficiary. PARTIAL ENTRY INTO THE INCOME PHASE. You may elect an income phase payment option for a portion of your account dollars, while leaving the remaining portion invested in the accumulation phase. Whether the Tax Code considers such payments taxable as income phase payments or as withdrawals is currently unclear; therefore, you should consult with a qualified tax adviser before electing this option. The same or different income phase payment option may be selected for the portion left invested in the accumulation phase. TAXATION. To avoid certain tax penalties, you or your beneficiary must meet the distribution rules imposed by the Tax Code. Additionally, when selecting an income phase payment option, the Tax Code requires that your expected payments will not exceed certain durations. See "Taxation" for additional information. PAYMENT OPTIONS. The following table lists the income phase payment options and accompanying death benefits available during the income phase. We may offer additional income phase payment options under the contract from time to time. Once income phase payments begin the income phase payment option selected may not be changed. TERMS TO UNDERSTAND: ANNUITANT(S): The person(s) on whose life expectancy(ies) the income phase payments are based. BENEFICIARY(IES): The person(s) or entity(ies) entitled to receive a death benefit under the contract. ILIAC Variable Annuity - 126064 42 -------------------------------------------------------------------------------- LIFETIME INCOME PHASE PAYMENT OPTIONS -------------------------------------------------------------------------------- Life Income LENGTH OF PAYMENTS: For as long as the annuitant lives. It is possible that only one payment will be made if the annuitant dies prior to the second payment's due date. DEATH BENEFIT--NONE: All payments end upon the annuitant's death. -------------------------------------------------------------------------------- Life Income-- LENGTH OF PAYMENTS: For as long as the annuitant lives, with Guaranteed payments guaranteed for your choice of 5 to 30 years or as Payments otherwise specified in the contract. DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If the annuitant dies before we have made all the guaranteed payments, we will continue to pay the beneficiary the remaining payments, unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. -------------------------------------------------------------------------------- Life Income-- LENGTH OF PAYMENTS: For as long as either annuitant lives. It is Two Lives possible that only one payment will be made if both annuitants die before the second payment's due date. CONTINUING PAYMENTS: When you select this option you choose for: (a) 100%, 66 2/3 % or 50% of the payment to continue to the surviving annuitant after the first death; or (b) 100% of the payment to continue to the annuitant on the second annuitant's death, and 50% of the payment to continue to the second annuitant on the annuitant's death. DEATH BENEFIT--NONE: All payments end upon the death of both annuitants. -------------------------------------------------------------------------------- Life Income-- LENGTH OF PAYMENTS: For as long as either annuitant lives, with Two Lives-- payments guaranteed from 5 to 30 years or as otherwise specified Guaranteed in the contract. Payments CONTINUING PAYMENTS: 100% of the payment to continue to the surviving annuitant after the first death. DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If both annuitants die before we have made all the guaranteed payments, we will continue to pay the beneficiary the remaining payments, unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. -------------------------------------------------------------------------------- Life Income-- LENGTH OF PAYMENTS: For as long as the annuitant lives. Cash Refund Option DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: Following the (limited annuitant's death, we will pay a lump sum payment equal to the availability-- amount originally applied to the income phase payment option fixed payments (less any applicable premium tax) and less the total amount of only) income payments paid. -------------------------------------------------------------------------------- Life Income-- LENGTH OF PAYMENTS: For as long as either annuitant lives. Two Lives-- Cash Refund CONTINUING PAYMENTS: 100% of the payment to continue after the Option first death. (limited availability-- DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: When both annuitants fixed payments die we will pay a lump-sum payment equal to the amount applied to only) the income phase payment option (less any applicable premium tax) and less the total amount of income payments paid. -------------------------------------------------------------------------------- NONLIFETIME INCOME PHASE PAYMENT OPTION -------------------------------------------------------------------------------- Nonlifetime-- LENGTH OF PAYMENTS: You may select payments for 5 to 30 years (15 Guaranteed to 30 years if you elected the premium bonus option). In certain Payments cases a lump-sum payment may be requested at any time (see below). DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If the annuitant dies before we make all the guaranteed payments, we will continue to pay the beneficiary the remaining payments, unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. We will not impose any early withdrawal charge. -------------------------------------------------------------------------------- LUMP-SUM PAYMENT: If the "Nonlifetime--Guaranteed Payments" option is elected with variable payments, you may request at any time that all or a portion of the present value of the remaining payments be paid in one lump sum. Any such lump-sum payments will be treated as a withdrawal during the accumulation phase and we will charge any applicable early withdrawal charge. See "Fees--Early Withdrawal Charge." Lump-sum payments will be sent within seven calendar days after we receive the request for payment in good order at the Customer Service Center. -------------------------------------------------------------------------------- CALCULATION OF LUMP-SUM PAYMENTS: If a lump-sum payment is available under the income phase payment options above, the rate used to calculate the present value of the remaining guaranteed payments is the same rate we used to calculate the income phase payments (i.e., the actual fixed rate used for fixed payments or the 3 1/2% or 5% assumed net investment rate used for variable payments). -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 43 NEW YORK CONTRACTS -------------------------------------------------------------------------------- Some of the fees, features and benefits of the contract are different if it is issued in the State of New York. This section identifies the different features and benefits and replaces the portions of this prospectus that contain the differences with information that relates specifically to New York contacts. This section should be read in conjunction with the rest of this prospectus. The fees that apply to New York contracts are described in the "Fee Table" and "Fees" sections of this prospectus. CONTRACT OVERVIEW - CONTRACT FACTS. The following information about New York contracts replaces the "Contract Facts" subsection in the "Contract Overview" section of this prospectus: -------------------------------------------------------------------------------- CONTRACT FACTS -------------------------------------------------------------------------------- OPTION PACKAGES: There are three option packages available under the contract. You select an option package at the time of application. Each option package is distinct. The differences are summarized as follows:
--------------------------------------------------------------------------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III --------------------------------------------------------------------------------------------- Mortality and Expense Risk Charge1: 0.80% 1.10% 1.25% --------------------------------------------------------------------------------------------- Death Benefit2 on The greater of: The greatest of: The greatest of: Death of the (1) The sum of (1) The sum of (1) The sum of Annuitant3: all purchase all purchase all purchase payments, payments, payments, adjusted for adjusted for adjusted for amounts amounts amounts withdrawn or withdrawn or withdrawn or applied to an applied to an applied to an income phase income phase income phase payment option payment option payment option as of the claim as of the claim as of the claim date; or date; or date; or (2) The account (2) The account (2) The account value on the value on the value on the claim date. claim date; or claim date; or (3) The (3) The "step-up value" "step-up value" on the claim on the claim date. date.4 --------------------------------------------------------------------------------------------- Minimum Initial NON- NON- NON- Payment/ QUALIFIED: QUALIFIED: QUALIFIED: QUALIFIED: QUALIFIED: QUALIFIED: Account Value5: $15,000 $1,500 $5,000 $1,500 $5,000 $1,500 --------------------------------------------------------------------------------------------- Free Withdrawals6: 10% of your account 10% of your account 10% of your account value each account value each account value each account year, non-cumulative. year, non-cumulative. year, cumulative to a maximum 30%. --------------------------------------------------------------------------------------------- Nursing Home Waiver -Waiver of Early Not Not Not Withdrawal Charge7: Available Available Available ---------------------------------------------------------------------------------------------
1 See "Fee Table" and "Fees." 2 See "Death Benefit." If a death benefit is payable based on account value or step-up value, the death benefit will not include any premium bonus credited to the account after or within 12 months of the date of death. See "Premium Bonus Option--Forfeiture" in this section. 3 When a contract holder who is not the annuitant dies, the amount of the death benefit is not the same as shown above under each option package. See "Death Benefit." THEREFORE, CONTRACT HOLDERS WHO ARE NOT ALSO THE ANNUITANT SHOULD SERIOUSLY CONSIDER WHETHER OPTION PACKAGES II AND III ARE SUITABLE FOR THEIR CIRCUMSTANCES. 4 The death benefit is the same under Option Packages II and III for contracts issued in New York. THEREFORE, CONTRACT HOLDERS OF CONTRACTS ISSUED IN NEW YORK SHOULD SERIOUSLY CONSIDER WHETHER OPTION PACKAGE III IS SUITABLE FOR THEIR CIRCUMSTANCES. 5 See "Purchase and Rights." 6 See "Fees." 7 See "Fees." ILIAC Variable Annuity - 126064 44 PREMIUM BONUS OPTION - FORFEITURE. The following information about New York contracts replaces the "Forfeiture" subsection in the "Premium Bonus Option" section of this prospectus: FORFEITURE. In each of the following circumstances all or part of a premium bonus credited to your account will be forfeited: > If you exercise your free look privilege and cancel your contract. See "Right to Cancel." > If a death benefit is payable based on account value or step-up value, but only the amount of any premium bonus credited to the account after or within 12 months of the date of death. See "Death Benefit--Premium Bonus." > If all or part of a purchase payment for which a premium bonus was credited is withdrawn during the first seven account years. The amount of the premium bonus forfeited will be calculated by: (1) Determining the amount of the premium bonus that is subject to forfeiture according to the following table: -------------------------------------------------------------------------------- COMPLETED ACCOUNT YEARS AMOUNT OF PREMIUM AT THE TIME OF THE WITHDRAWAL BONUS SUBJECT TO FORFEITURE -------------------------------------------------------------------------------- Less than 1 100% 1 or more but less than 2 100% 2 or more but less than 3 100% 3 or more but less than 4 100% 4 or more but less than 5 100% 5 or more but less than 6 75% 6 or more but less than 7 50% 7 or more 0% -------------------------------------------------------------------------------- (2) And multiplying that amount by the same percentage as the amount withdrawn subject to the early withdrawal charge is to the total of all purchase payments made to the account during the first account year. The following hypothetical example illustrates how the forfeiture of premium bonus is calculated when you withdraw all or part of a purchase payment for which a premium bonus was credited during the first seven account years.
------------------------------------------------------------------------------------------------------------------------------ PURCHASE PREMIUM ACCOUNT WITHDRAWAL DATE PAYMENT BONUS VALUE AMOUNT EXPLANATION ------------------------------------------------------------------------------------------------------------------------------ May 2, 2003 $100,000 $4,000 $104,000 -- You make a $100,000 initial purchase payment and we credit your account with a 4% ($4,000) premium bonus. Your beginning account value equals $104,000. ------------------------------------------------------------------------------------------------------------------------------ May 2, 2005 -- -- $120,000 $30,000 Assume that your account value grows to $120,000 over the next three years and you request a $30,000 withdrawal. $18,000 of that $30,000 will be subject to an early withdrawal charge ($30,000 minus $12,000 (the 10% free withdrawal amount, see "Fees--Free Withdrawals")) and you would pay a $720 early withdrawal charge (4% of $18,000). Additionally, 100% of the premium bonus is subject to forfeiture according to the table above, and because $18,000 is 18% of the $100,000 purchase payment made in the first account year, 18% of your $4,000 premium bonus, or $720, would be forfeited.* ------------------------------------------------------------------------------------------------------------------------------
* This example assumes that either Option Package I or II has been in effect since you purchased the contract. If Option Package III has been in effect since inception, none of the withdrawal would be subject to an early withdrawal charge because the 30% cumulative free withdrawal amount ($36,000) would be greater than the amount of the withdrawal. See "Fees--Free Withdrawals." Therefore, the withdrawal would not result in forfeiture of any of the premium bonus. ILIAC Variable Annuity - 126064 45 DEATH BENEFIT - DEATH BENEFIT AMOUNT. The following information about New York contracts replaces the "Death Benefit Amount" subsection in the "Death Benefit" section of this prospectus: DEATH BENEFIT AMOUNT. The death benefit depends upon the option package in effect on the date the annuitant dies.
---------------------------------------------------------------------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III** ---------------------------------------------------------------------------------------- DEATH BENEFIT The greater of: The greatest of: The greatest of: ON DEATH OF THE (1) The sum of (1) The sum of (1) The sum of all ANNUITANT: all purchase all purchase purchase payments, payments, payments, adjusted for adjusted for adjusted for amounts withdrawn amounts amounts or applied to an withdrawn or withdrawn or income phase applied to an applied to an payment option as income phase income phase of the claim date; payment option payment option or as of the as of the claim (2) The account claim date; or date; or value* on the THE ACCOUNT VALUE* (2) The account claim date; or ON THE CLAIM DATE. value* on the THE "STEP-UP VALUE"* claim date; or (AS DESCRIBED BELOW) ON THE "STEP-UP VALUE"* THE CLAIM DATE.** (AS DESCRIBED BELOW) ON THE CLAIM DATE. ----------------------------------------------------------------------------------------
* For purposes of calculating the death benefit, the account value and step-up value will be reduced by the amount of any premium bonus credited to your account after or within 12 months of the date of death. See "Premium Bonus Option--Forfeiture." ** FOR CONTRACTS ISSUED IN THE STATE OF NEW YORK, THE BENEFIT PAYABLE UPON THE DEATH OF THE ANNUITANT UNDER OPTION PACKAGE III IS THE SAME AS THAT DESCRIBED UNDER OPTION PACKAGE II. THEREFORE, CONTRACT HOLDERS OF CONTRACTS ISSUED IN NEW YORK SHOULD SERIOUSLY CONSIDER WHETHER OPTION PACKAGE III IS SUITABLE FOR THEIR CIRCUMSTANCES. ILIAC Variable Annuity - 126064 46 STEP-UP VALUE. On the schedule effective date, the step-up value is equal to the greater of: > The account value; or > The step-up value, if any, calculated on the account anniversary prior to the schedule effective date, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option during the prior account year. Thereafter, once each year on the anniversary of the schedule effective date until the anniversary immediately preceding the annuitant's 85th birthday or death, whichever is earlier, the step-up value is equal to the greater of: > The step-up value most recently calculated, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option during the prior account year; or > The account value on that anniversary of the schedule effective date. On each anniversary of the schedule effective date after the annuitant's 85th birthday, the step-up value shall be equal to the step-up value on the anniversary immediately preceding the annuitant's 85th birthday, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option since that anniversary. On the claim date, the step-up value shall equal the step-up value on the anniversary of the schedule effective date immediately preceding the annuitant's death, adjusted for purchase payments made and amounts withdrawn or applied to an income phase payment option since that anniversary. For purposes of calculating the death benefit, the step-up value will be reduced by the amount of any premium bonus credited to your account after or within 12 months of the date of death. See "Premium Bonus Option--Forfeiture" above. ILIAC Variable Annuity - 126064 47 TAXATION The following summary provides a general description of the federal income tax considerations associated with this Contract and does not purport to be complete or to cover all tax situations. This discussion is not intended as tax advice. You should consult your counsel or other competent tax advisers for more complete information. This discussion is based upon our understanding of the present federal income tax laws. We do not make any representations as to the likelihood of continuation of the present federal income tax laws or as to how they may be interpreted by the IRS. This summary references enhanced death benefits and earnings multiplier benefits that may not be available under your Contract. Please see your Contract, and "The Annuity Contract -- Optional Riders" and "Death Benefit Choices" in this prospectus. TYPES OF CONTRACTS: NON-QUALIFIED OR QUALIFIED The Contract may be purchased on a non-tax-qualified basis or purchased on a tax-qualified basis. Qualified Contracts are designed for use by individuals whose premium payments are comprised solely of proceeds from and/or contributions under retirement plans that are intended to qualify as plans entitled to special income tax treatment under Sections 401(a), 403(b), 408, or 408A of the Code. The ultimate effect of federal income taxes on the amounts held under a Contract, or annuity payments, depends on the type of retirement plan, on the tax and employment status of the individual concerned, and on our tax status. In addition, certain requirements must be satisfied in purchasing a qualified Contract with proceeds from a tax-qualified plan and receiving distributions from a qualified Contract in order to continue receiving favorable tax treatment. Some retirement plans are subject to distribution and other requirements that are not incorporated into our Contract administration procedures. Contract owners, participants and beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the Contract comply with applicable law. Therefore, you should seek competent legal and tax advice regarding the suitability of a Contract for your particular situation. The following discussion assumes that qualified Contracts are purchased with proceeds from and/or contributions under retirement plans that qualify for the intended special federal income tax treatment. TAX STATUS OF THE CONTRACTS DIVERSIFICATION REQUIREMENTS. The Code requires that the investments of a variable account be "adequately diversified" in order for non-qualified Contracts to be treated as annuity contracts for federal income tax purposes. It is intended that Variable Annuity Account B, through the subaccounts, will satisfy these diversification requirements. INVESTOR CONTROL. In certain circumstances, owners of variable annuity contracts have been considered for federal income tax purposes to be the owners of the assets of the separate account supporting their contracts due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the separate account assets. There is little guidance in this area, and some features of the Contracts, such as the flexibility of a contract owner to allocate premium payments and transfer contract values, have not been explicitly addressed in published rulings. It is possible that these Contract features may exceed the limits imposed by the tax law. If so, you would be treated as the owner of the Variable Annuity Account B assets that underlie your Contract and thus subject to current taxation on the income and gains from those assets. While we believe that the Contracts do not give contract owners investment control over Variable Annuity Account B assets, we reserve the right to modify the Contracts as necessary to prevent a contract owner from being treated as the owner of the Variable Account B assets supporting the Contract. ILIAC Variable Annuity - 126064 48 REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for federal income tax purposes, the Code requires any non-qualified Contract to contain certain provisions specifying how your interest in the Contract will be distributed in the event of your death. The non-qualified Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. We intend to review such provisions and modify them if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise. See "Death Benefit Choices" for additional information on required distributions from non-qualified contracts. Qualified Contracts are subject to special rules -- see below. The following discussion assumes that the Contracts will qualify as annuity contracts for federal income tax purposes. IN GENERAL. We believe that if you are a natural person you will generally not be taxed on increases in the value of a Contract until a distribution occurs or until annuity payments begin. For these purposes, the agreement to assign or pledge any portion of the contract value, and, in the case of a qualified Contract, any portion of an interest in the qualified plan, generally will be treated as a distribution. TAXATION OF NON-QUALIFIED CONTRACTS NON-NATURAL PERSON. The owner of any annuity contract who is not a natural person generally must include in income any increase in the excess of the contract value over the "investment in the contract" (generally, the premiums or other consideration you paid for the contract less any nontaxable withdrawals) during the taxable year. There are some exceptions to this rule and a prospective contract owner that is not a natural person may wish to discuss these with a tax adviser. The following discussion generally applies to Contracts owned by natural persons. DELAYED ANNUITY STARTING DATE. If the Contract's annuity starting date occurs (or is scheduled to occur) at a time when the annuitant has reached an advanced age (e.g., age 85), it is possible that the Contract would not be treated as an annuity for federal income tax purposes. In that event, the income and gains under the Contract could be currently includible in your income. WITHDRAWALS. When a withdrawal from a non-qualified Contract occurs (including amounts paid to you under the MGWB rider), the amount received will be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the contract value (unreduced by the amount of any surrender charge) immediately before the distribution over the contract owner's investment in the Contract at that time. Credits constitute earnings (not premiums) for federal tax purposes and are not included in the owner's investment in the Contract. The contract value that applies for this purpose is unclear in some respects. For example, the market value adjustment could increase the contract value that applies. Thus, the income on the Contracts could be higher than the amount of income that would be determined without regard to such adjustment. As a result, you could have higher amounts of income than will be reported to you. In the case of a surrender under a non-qualified Contract, the amount received generally will be taxable only to the extent it exceeds the contract owner's investment in the Contract. The Contract offers a death benefit that may exceed the greater of the premium payments and the contract value. Certain charges are imposed with respect to the death benefit. It is possible that these charges (or some portion thereof) could be treated for federal tax purposes as a distribution from the Contract. ILIAC Variable Annuity - 126064 49 PENALTY TAX ON CERTAIN WITHDRAWALS. A distribution from a non-qualified Contract may be subject to a federal tax penalty equal to 10% of the amount treated as income. In general, however, there is no penalty on distributions: o made on or after the taxpayer reaches age 59 1/2; o made on or after the death of a contract owner; o attributable to the taxpayer's becoming disabled; or o made as part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer. Other exceptions may be applicable under certain circumstances and special rules may be applicable in connection with the exceptions enumerated above. A tax adviser should be consulted with regard to exceptions from the penalty tax. ANNUITY PAYMENTS. Although tax consequences may vary depending on the payment option elected under an annuity contract, a portion of each annuity payment is generally not taxed and the remainder is taxed as ordinary income. The non-taxable portion of an annuity payment is generally determined in a manner that is designed to allow you to recover your investment in the Contract ratably on a tax-free basis over the expected stream of annuity payments, as determined when annuity payments start. Once your investment in the Contract has been fully recovered, however, the full amount of each annuity payment is subject to tax as ordinary income. The tax treatment of partial annuitizations is unclear. We currently treat any partial annuitizations as withdrawals rather than as annuity payments. Please consult your tax adviser before electing a partial annuitization. TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a Contract because of your death or the death of the annuitant. Generally, such amounts are includible in the income of recipient as follows: (i) if distributed in a lump sum, they are taxed in the same manner as a surrender of the Contract, or (ii) if distributed under a payment option, they are taxed in the same way as annuity payments. Special rules may apply to amounts distributed after a Beneficiary has elected to maintain Contract value and receive payments. TRANSFERS, ASSIGNMENTS AND EXCHANGES. A transfer or assignment of ownership of a Contract, the designation of an annuitant or payee other than an owner, or the exchange of a Contract may result in certain tax consequences to you that are not discussed herein. A contract owner contemplating any such transfer, assignment, designation or exchange, should consult a tax adviser as to the tax consequences. MULTIPLE CONTRACTS. All non-qualified deferred annuity contracts that are issued by us (or our affiliates) to the same contract owner during any calendar year are treated as one non-qualified deferred annuity contract for purposes of determining the amount includible in such contract owner's income when a taxable distribution occurs. TAXATION OF QUALIFIED CONTRACTS The Contracts are designed for use with several types of qualified plans. The tax rules applicable to participants in these qualified plans vary according to the type of plan and the terms and conditions of the plan itself. Special favorable tax treatment may be available for certain types of contributions and distributions. Adverse tax consequences may result from: contributions in excess of specified limits; distributions before age 59 1/2 (subject to certain exceptions); distributions that do not conform to specified commencement and minimum distribution rules; and in other specified circumstances. Therefore, no attempt is made to provide more than general information about the use of the Contracts with the various types of qualified ILIAC Variable Annuity - 126064 50 retirement plans. Contract owners, annuitants, and beneficiaries are cautioned that the rights of any person to any benefits under these qualified retirement plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the Contract, but we shall not be bound by the terms and conditions of such plans to the extent such terms contradict the Contract, unless the Company consents. For qualified plans under Section 401(a) and 403(b), the Code requires that distributions generally must commence no later than the later of April 1 of the calendar year following the calendar year in which the plan participant for whose benefit the contract is purchased (i) reaches age 70 1/2 or (ii) retires, and must be made in a specified form or manner. If the plan participant is a "5 percent owner" (as defined in the Code), distributions generally must begin no later than April 1 of the calendar year following the calendar year in which the plan participant reaches age 70 1/2. For IRAs described in Section 408, distributions generally must commence no later than by April 1 of the calendar year following the calendar year in which the individual contract owner reaches age 70 1/2. Roth IRAs under Section 408A do not require distributions at any time before the contract owner's death. PLEASE NOTE THAT REQUIRED MINIMUM DISTRIBUTIONS UNDER QUALIFIED CONTRACTS MAY BE SUBJECT TO SURRENDER CHARGE AND/OR MARKET VALUE ADJUSTMENT, IN ACCORDANCE WITH THE TERMS OF THE CONTRACT. THIS COULD AFFECT THE AMOUNT THAT MUST BE TAKEN FROM THE CONTRACT IN ORDER TO SATISFY REQUIRED MINIMUM DISTRIBUTIONS. DIRECT ROLLOVERS. If the Contract is used in connection with a pension, profit-sharing, or annuity plan qualified under sections 401(a) or 403(a) of the Code, or is a tax-sheltered annuity under section 403(b) of the Code, or is used with an eligible deferred compensation plan that has a government sponsor and that is qualified under section 457(b), any "eligible rollover distribution" from the Contract will be subject to direct rollover and mandatory withholding requirements. An eligible rollover distribution generally is any taxable distribution from a qualified pension plan under section 401(a) of the Code, qualified annuity plan under section 403(a) of the Code, section 403(b) annuity or custodial account, or an eligible section 457(b) deferred compensation plan that has a government sponsor, excluding certain amounts (such as minimum distributions required under section 401(a)(9) of the Code, distributions which are part of a "series of substantially equal periodic payments" made for life or a specified period of 10 years or more, or hardship distributions as defined in the tax law). Under these requirements, federal income tax equal to 20% of the eligible rollover distribution will be withheld from the amount of the distribution. Unlike withholding on certain other amounts distributed from the Contract, discussed below, you cannot elect out of withholding with respect to an eligible rollover distribution. However, this 20% withholding will not apply if, instead of receiving the eligible rollover distribution, you elect to have it directly transferred to certain qualified plans. Prior to receiving an eligible rollover distribution, you will receive a notice (from the plan administrator or us) explaining generally the direct rollover and mandatory withholding requirements and how to avoid the 20% withholding by electing a direct rollover. CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Section 401(a) of the Code permits corporate employers to establish various types of retirement plans for employees, and permits self-employed individuals to establish these plans for themselves and their employees. These retirement plans may permit the purchase of the Contracts to accumulate retirement savings under the plans. Adverse tax or other legal consequences to the plan, to the participant, or to both may result if this Contract is assigned or transferred to any individual as a means to provide benefit payments, unless the plan complies with all legal requirements ILIAC Variable Annuity - 126064 51 applicable to such benefits before transfer of the Contract. Employers intending to use the Contract with such plans should seek competent advice. INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" or "IRA." These IRAs are subject to limits on the amount that can be contributed, the deductible amount of the contribution, the persons who may be eligible, and the time when distributions commence. Also, distributions from certain other types of qualified retirement plans may be "rolled over" on a tax-deferred basis into an IRA. Also, amounts in another IRA or individual retirement account can be rolled over or transferred tax-free to an IRA. There are significant restrictions on rollover or transfer contributions from Savings Incentive Match Plans for Employees (SIMPLE), under which certain employers may provide contributions to IRAs on behalf of their employees, subject to special restrictions. Employers may establish Simplified Employee Pension (SEP) Plans to provide IRA contributions on behalf of their employees. If you make a tax-free rollover of a distribution from any of these IRAs, you may not make another tax-free rollover from the IRA within a 1-year period. Sales of the Contract for use with IRAs may be subject to special requirements of the IRS. DISTRIBUTIONS - IRAS. All distributions from a traditional IRA are taxed as received unless either one of the following is true: o The distribution is rolled over to a plan eligible to receive rollovers or to another traditional IRA or certain qualified plans in accordance with the Tax Code; or o You made after-tax contributions to the IRA. In this case, the distribution will be taxed according to rules detailed in the Tax Code. To avoid certain tax penalties, you and any designated beneficiary must also meet the minimum distribution requirements imposed by the Tax Code. The requirements do not apply to Roth IRA contracts while the owner is living. These rules may dictate one or more of the following: o Start date for distributions; o The time period in which all amounts in your account(s) must be distributed; or o Distribution amounts. Generally, you must begin receiving distributions from a traditional IRA by April 1 of the calendar year following the calendar year in which you attain age 70 1/2. We must pay out distributions from the contract over one of the following time periods: o Over your life or the joint lives of you and your designated beneficiary; or o Over a period not greater than your life expectancy or the joint life expectancies of you and your designated beneficiary. The amount of each periodic distribution must be calculated in accordance with IRS regulations. If you fail to receive the minimum required distribution for any tax year, a 50% excise tax is imposed on the required amount that was not distributed. The following applies to the distribution of death proceeds under 408(b) and 408A (Roth IRA - See below) plans. Different distribution requirements apply after your death. ILIAC Variable Annuity - 126064 52 If your death occurs after you begin receiving minimum distributions under the contract, distributions must be made at least as rapidly as under the method in effect at the time of your death. Code section 401(a)(9) provides specific rules for calculating the minimum required distributions at your death. The death benefit under the contract may affect the amount of the required minimum distribution that must be taken. If your death occurs before you begin receiving minimum distributions under the contract, your entire balance must be distributed by December 31 of the calendar year containing the fifth anniversary of the date of your death. For example, if you die on September 1, 2002, your entire balance must be distributed to the designated beneficiary by December 31, 2007. However, if the distributions begin by December 31 of the calendar year following the calendar year of your death, and you have named a designated beneficiary, then payments may be made over either of the following time-frames: o Over the life of the designated beneficiary; or o Over a period not extending beyond the life expectancy of the designated beneficiary. If the designated beneficiary is your spouse, distributions must begin on or before the later of the following: o December 31 of the calendar year following the calendar year of your death; or o December 31 of the calendar year in which you would have attained age 70 1/2. In lieu of taking a distribution under these rules, a spouse who is the sole beneficiary may elect to treat the account as his or her own IRA. In such case, the surviving spouse will be able to make contributions to the account, make rollovers from the account, and defer taking a distribution until his or her age 70 1/2. The surviving spouse is deemed to have made such an election if the surviving spouse makes a rollover to or from the account, makes additional contributions to the account, or fails to take a distribution within the required time period. ROTH IRA. Section 408A of the Code permits certain eligible individuals to contribute to a Roth IRA. Contributions to a Roth IRA, which are subject to limits on the amount of the contributions and the persons who may be eligible to contribute, are not deductible, and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. Certain qualifying individuals may convert an IRA, SEP, or SIMPLE IRA, to a Roth IRA. Such rollovers and conversions are subject to tax, and other special rules may apply. If you make a tax-free rollover of a distribution from a Roth IRA to another Roth IRA, you may not make another tax-free rollover from the Roth IRA from which the rollover was made within a 1-year period. A 10% penalty may apply to amounts attributable to a conversion to a Roth IRA if the amounts are distributed during the five taxable years beginning with the year in which the conversion was made. DISTRIBUTIONS -- ROTH IRAS. A qualified distribution from a Roth IRA is not taxed when it is received. A qualified distribution is a distribution: o Made after the five-taxable year period beginning with the first taxable year for which a contribution was made to a Roth IRA of the owner; and o Made after you attain age 59 1/2, die, become disabled as defined in the Tax Code, or for a qualified first-time home purchase. ILIAC Variable Annuity - 126064 53 If a distribution is not qualified, it will be taxable to the extent of the accumulated earnings. Under special ordering rules, a partial distribution will first be treated generally as a return of contributions which is not taxable and then as taxable accumulated earnings. TAX SHELTERED ANNUITIES. Section 403(b) of the Code allows employees of certain Section 501(c)(3) organizations and public schools to exclude from their gross income the premium payments made, within certain limits, on a Contract that will provide an annuity for the employee's retirement. These premium payments may be subject to FICA (Social Security) tax. Distributions of (1) salary reduction contributions made in years beginning after December 31, 1988; (2) earnings on those contributions; and (3) earnings on amounts held as of the last year beginning before January 1, 1989, are not allowed prior to age 59 1/2, severance from employment, death or disability. Distributions allocable to salary Salary reduction contributions, but not earnings on such contributions, may also be distributed upon hardship. Certain penalties may apply. TSAS -- LOANS. Loans may be available if you purchased your contract in connection with a non-ERISA plan qualified under Section 403(b) of the Code ("TSA"). We do not currently permit loans under Section 403(b) Contracts that are subject to ERISA. If your contract was issued in connection with a TSA and the terms of your plan permit, you may take a loan from us, using your surrender value as collateral for the loan. Loans are subject to the terms of the Contract, your 403(b) plan, and the Code. The amount and number of loans outstanding at any one time under your TSA are limited, whether under our contracts or those of other carriers. We may modify the terms of a loan to comply with changes in applicable law. Various mandatory repayment requirements apply to loans, and failure to repay generally would result in income to you and the potential application of tax penalties. We urge you to consult with a qualified tax advisor prior to effecting a loan transaction under your Contract. We may apply additional restrictions or limitations on loans, and you must make loan requests in accordance with our administrative practices and loan request procedures in effect at the time you submit your request. Read the terms of the loan agreement before submitting any request. Any outstanding loan balance impacts the following: 1) Withdrawals and Charges: We determine amounts available for maximum withdrawal amounts, free partial withdrawals, systematic withdrawals and waiver of administrative charges by reducing the otherwise applicable amounts by the amount of any outstanding loan balance. 2) Death Benefits, Annuitization and Surrenders: We deduct the outstanding loan balance from any amounts otherwise payable and in determining the amount available for annuitization. TSAS -- DISTRIBUTIONS. All distributions from Section 403(b) plans are taxed as received unless either of the following are true: o The distribution is rolled over to another plan eligible to receive rollovers or to a traditional individual retirement annuity/account (IRA) in accordance with the Tax Code; or o You made after-tax contributions to the plan. In this case, the amount will be taxed according to rules detailed in the Tax Code. Generally, you must begin receiving distributions by April 1 of the calendar year following the calendar year in which you attain age 70 1/2 or retire, whichever occurs ILIAC Variable Annuity - 126064 54 later, unless you had amounts under the contract as of December 31, 1986. In this case, distribution of these amounts generally must begin by the end of the calendar year in which you attain age 75 or retire, if later. The death benefit under the contract and also certain other contract benefits, such as the living benefits, may affect the amount of the required minimum distribution that must be taken. If you take any distributions in excess of the minimum required amount, then special rules require that some or all of the December 31, 1986 balance be distributed earlier. TAX CONSEQUENCES OF ENHANCED DEATH BENEFIT The Contract offers a death benefit that may exceed the greater of the premium payments and the contract value. It is possible that the IRS could characterize such a death benefit as an incidental death benefit. There are limitations on the amount of incidental benefits that may be provided under pension and profit sharing plans. In addition, the provision of such benefits may result in currently taxable income to participants. Also, as stated above, the presence of the death benefit, as well as certain other contract benefits, could affect the amount of required minimum distributions. OTHER TAX CONSEQUENCES As noted above, the foregoing comments about the federal tax consequences under the Contracts are not exhaustive, and special rules are provided with respect to other tax situations not discussed in this prospectus. Further, the federal income tax consequences discussed herein reflect our understanding of current law, and the law may change. Federal estate and state and local estate, inheritance and other tax consequences of ownership or receipt of distributions under a Contract depend on the individual circumstances of each contract owner or recipient of the distribution. A competent tax adviser should be consulted for further information. POSSIBLE CHANGES IN TAXATION Although the likelihood of legislative change is uncertain, there is always the possibility that the tax treatment of the Contracts could change by legislation or other means. It is also possible that any change could be retroactive (that is, effective before the date of the change). You should consult a tax adviser with respect to legislative developments and their effect on the Contract. FEDERAL INCOME TAX WITHHOLDING We will withhold and remit to the U.S. government a part of the taxable portion of each distribution made under a Contract unless the distributee notifies us at or before the time of the distribution that he or she elects not to have any amounts withheld. In certain circumstances, we may be required to withhold tax, as explained above. The withholding rates applicable to the taxable portion of periodic annuity payments (other than eligible rollover distributions) are the same as the withholding rates generally applicable to payments of wages. In addition, a 10% withholding rate applies to the taxable portion of non-periodic payments (including withdrawals prior to the annuity starting date) and conversions of, and rollovers from, non-Roth IRAs to Roth IRAs. Regardless of whether you elect not to have federal income tax withheld, you are still liable for payment of federal income tax on the taxable portion of the payment. As discussed above, the withholding rate applicable to eligible rollover distributions is 20%. ILIAC Variable Annuity - 126064 55 OTHER TOPICS -------------------------------------------------------------------------------- THE COMPANY We issue the contract described in this prospectus and are responsible for providing each contract's insurance and annuity benefits. We are a stock life insurance company organized under the insurance laws of the State of Connecticut in 1976 and an indirect wholly-owned subsidiary of ING Groep N.V., a global financial institution active in the fields of insurance, banking and asset management. Through a merger our operations include the business of Aetna Variable Annuity Life Insurance Company (formerly known as Participating Annuity Life Insurance Company, an Arkansas life insurance company organized in 1954). Prior to May 1, 2002, the Company was known as Aetna Life Insurance and Annuity Company. We are engaged in the business of issuing life insurance and annuities. Our principal executive offices are located at: 151 Farmington Avenue Hartford, Connecticut 06156 VARIABLE ANNUITY ACCOUNT B We established Variable Annuity Account B (the separate account) in 1976 under Connecticut Law as a continuation of the separate account established in 1974 under Arkansas Law of Aetna Variable Annuity Life Insurance Company. The separate account was established as a segregated asset account to fund variable annuity contracts. The separate account is registered as a unit investment trust under the Investment Company Act of 1940 (the "40 Act"). It also meets the definition of "separate account" under the federal securities laws. The separate account is divided into subaccounts. The subaccounts invest directly in shares of a pre-assigned fund. Although we hold title to the assets of the separate account, such assets are not chargeable with the liabilities of any other business that we conduct. Income, gains or losses of the separate account are credited to or charged against the assets of the separate account without regard to other income, gains or losses of the Company. All obligations arising under the contract are obligations of the Company. ILIAC Variable Annuity - 126064 56 CONTRACT DISTRIBUTION The Company's subsidiary, ING Financial Advisers LLC ("ING Financial")(prior to May 1, 2002 known as Aetna Investment Services, LLC), serves as the principal underwriter for the contract., ING Financial, a Delaware limited liability company, is registered as a broker-dealer with the SEC. ING Financial is also a member of the National Association of Security Dealers, Inc. (NASD) and the Securities Investor Protection Corporation. ING Financial's principal office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. The contract is offered to the public by individuals who are registered representatives of ING Financial or other broker-dealers which have entered into a selling arrangement with IFA. ING Financial may also enter into these arrangements with banks that may be acting as broker-dealers without separate registration under the Securities Exchange Act of 1934 pursuant to legal and regulatory exceptions. We refer to ING Financial and the other broker-dealers selling the contract as "distributors." All registered representatives selling the contract must also be licensed as insurance agents for the Company. Occasionally ING Financial may enter into arrangements with independent entities to help find broker-dealers or banks interested in distributing the contract or to provide training, marketing and other sales-related functions or administrative services. ING Financial will reimburse such entities for expenses related to and may pay fees to such entities in return for these services. ING Financial may offer customers of certain broker-dealers special guaranteed rates in connection with the Guaranteed Account offered through the contract and may negotiate different commissions for these broker-dealers. ING Financial may also contract with independent third party broker-dealers who will act as wholesalers by assisting them in selecting broker-dealers or banks interested in acting as distributors. These wholesalers may also provide training, marketing and other sales related functions for the Company and the distributors and may provide certain administrative services in connection with the contract. ING Financial may pay such wholesalers compensation based on payments to contracts purchased through distributors that they select. ING Financial may also designate third parties to provide services in connection with the contract such as reviewing applications for completeness and compliance with insurance requirements and providing the distributors with approved marketing material, prospectuses or other supplies. These parties may also receive payments for their services based on purchase payments, to the extent such payments are allowed by applicable securities laws. ING Financial will pay all costs and expenses related to these services. PAYMENT OF COMMISSIONS Persons who offer and sell the contract may be paid commissions and service fees. Distributors will be paid commissions up to an amount currently equal to 7% of purchase payments or as a combination of a certain percentage of purchase payments at time of sale and a trail commission as a percentage of assets. Under the latter arrangement commission payments may exceed 7% of purchase payments over the life of the contract. Some sales personnel may receive various types of non-cash compensation as special sales incentives, including trips and education and/or business ILIAC Variable Annuity - 126064 57 Seminars. In addition, we may provide additional compensation to the Company's supervisory and other management personnel if the overall amount of investments in funds advised by the Company or its affiliates increases over time. The total compensation package for sales, supervisory and management personnel of affiliated or related broker-dealers may be positively impacted if the overall amount of investments in the contract and other products issued or advised by the Company or its affiliates increases over time. We pay these commissions, fees and related distribution expenses out of any early withdrawal charges assessed or out of our general assets, including investment income and any profit from investment advisory fees and mortality and expense risk charges. No additional deductions or charges are imposed for commissions and related expenses. PAYMENT DELAY OR SUSPENSION We reserve the right to suspend or postpone the date of any payment of benefits or values under any one of the following circumstances: > On any valuation date when the New York Stock Exchange is closed (except customary weekend and holiday closings) or when trading on the New York Stock Exchange is restricted; > When an emergency exists as determined by the SEC so that disposal of the securities held in the subaccounts is not reasonably practicable or it is not reasonably practicable to fairly determine the value of the subaccount's assets; or > During any other periods the SEC may by order permit for the protection of investors. The conditions under which restricted trading or an emergency exists shall be determined by the rules and regulations of the SEC. PERFORMANCE REPORTING We may advertise different types of historical performance for the subaccounts including: > Standardized average annual total returns; and > Non-standardized average annual total returns. STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS. We calculate standardized average annual total returns according to a formula prescribed by the SEC. This shows the percentage return applicable to $1,000 invested in the subaccounts over the most recent one, five and ten-year periods. If the investment option was not available for the full period, we give a history from the date money was first received in that option under the separate account. Standardized average annual total returns reflect deduction of all recurring charges during each period (i.e., mortality and expense risk charges, annual maintenance fees, administrative expense charges, if any, and any applicable early withdrawal charges), but currently do not include the premium bonus or the deduction of any premium bonus option charge. To the extent permitted by applicable law, we may include the premium bonus and any corresponding premium bonus charge in standardized average annual total returns in the future. NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS. We calculate non-standardized average annual total returns in a similar manner as that stated above, except we do not include the deduction of any applicable early withdrawal charge. Some non-standardized returns may also exclude the effect of a maintenance fee. If we reflected these charges in the calculation, they would decrease the level of performance reflected by the calculation. Non-standardized returns may also include performance ILIAC Variable Annuity - 126064 58 from the fund's inception date, if that date is earlier than the one we use for standardized returns. Non-standardized calculations do not include the premium bonus or premium bonus option charge. We may also advertise ratings, rankings or other information related to the Company, the subaccounts or the funds. For further details regarding performance reporting and advertising, you may request a Statement of Additional Information (SAI) by calling us at the number listed in "Contract Overview--Questions: Contacting the Company." VOTING RIGHTS Each of the subaccounts holds shares in a fund and each is entitled to vote at regular and special meetings of that fund. Under our current view of applicable law, we will vote the shares for each subaccount as instructed by persons having a voting interest in the subaccount. If you are a contract holder under a group contract, you have a fully vested interest in the contract and may instruct the group contract holder how to direct the Company to cast a certain number of votes. We will vote shares for which instructions have not been received in the same proportion as those for which we received instructions. Each person who has a voting interest in the separate account will receive periodic reports relating to the funds in which he or she has an interest, as well as any proxy materials and a form on which to give voting instructions. Voting instructions will be solicited by a written communication at least 14 days before the meeting. The number of votes (including fractional votes) you are entitled to direct will be determined as of the record date set by any fund you invest in through the subaccounts. > During the accumulation phase the number of votes is equal to the portion of your account value invested in the fund, divided by the net asset value of one share of that fund. > During the income phase the number of votes is equal to the portion of reserves set aside for the contract's share of the fund, divided by the net asset value of one share of that fund. CONTRACT MODIFICATIONS We may change the contract as required by federal or state law or as otherwise permitted in the contract. In addition, we may, upon 30 days' written notice to the group contract holder, make other changes to a group contract that would apply only to individuals who become participants under that contract after the effective date of such changes. If a group contract holder does not agree to a change, we reserve the right to refuse to establish new accounts under the contract. Certain changes will require the approval of appropriate state or federal regulatory authorities. TRANSFER OF OWNERSHIP: ASSIGNMENT We will accept assignments or transfers of ownership of a nonqualified contract or a qualified contract where such assignments or transfers are not prohibited, with proper notification. The date of any assignment or transfer of ownership will be the date we receive the notification at our Customer Service Center. An assignment or transfer of ownership may have tax consequences and you should consult with a tax adviser before assigning or transferring ownership of the contract. An assignment of a contract will only be binding on the Company if it is made in writing and sent to the Company at our Customer Service Center. We will use reasonable procedures to confirm that the assignment is authentic, including verification of signature. If we fail to follow our own procedures, we will be liable for any losses ILIAC Variable Annuity - 126064 59 to you directly resulting from such failure. Otherwise, we are not responsible for the validity of any assignment. The rights of the contract holder and the interest of the annuitant and any beneficiary will be subject to the rights of any assignee we have on our records. INVOLUNTARY TERMINATIONS We reserve the right to terminate any account with a value of $2,500 or less immediately following a partial withdrawal. However, an IRA may only be closed out when payments to the contract have not been received for a 24-month period and the paid-up annuity benefit at maturity would be less than $20 per month. If such right is exercised, you will be given 90 days' advance written notice. No early withdrawal charge will be deducted for involuntary terminations. We do not intend to exercise this right in cases where the account value is reduced to $2,500 or less solely due to investment performance. LEGAL MATTERS AND PROCEEDINGS We are not aware of any pending legal proceedings which involve Separate Account B as a party. The validity of the securities offered by this prospectus has been passed upon by Counsel to the Company. We are, or may be in the future, a defendant in various legal proceedings in connection with the normal conduct of our insurance operations. Some of these cases may seek class action status and may include a demand for punitive damages as well as for compensatory damages. In the opinion of management, the ultimate resolution of any existing legal proceeding is not likely to have a material adverse effect on our ability to meet our obligations under the contract. ING Financial Advisers, LLC, the principal underwriter and distributor of the contract, is not involved in any legal proceeding which, in the opinion of management, is likely to have a material adverse effect on its ability to distribute the contract. ILIAC Variable Annuity - 126064 60 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION -------------------------------------------------------------------------------- The Statement of Additional Information (SAI) contains more specific information on the separate account and the contract, as well as the financial statements of the separate account and the Company. The following is a list of the contents of the SAI. General Information and History Variable Annuity Account B Offering and Purchase of Contracts Performance Data General Average Annual Total Return Quotations Income Phase Payments Sales Material and Advertising Independent Auditors Financial Statements of the Separate Account Consolidated Financial Statements of ING Life Insurance and Annuity Company and Subsidiaries You may request an SAI by calling the Company at the number listed in "Contract Overview-- Questions: Contacting the Company." ILIAC Variable Annuity - 126064 61 APPENDIX I ILIAC GUARANTEED ACCOUNT -------------------------------------------------------------------------------- THE ILIAC GUARANTEED ACCOUNT (THE GUARANTEED ACCOUNT) IS A FIXED INTEREST OPTION AVAILABLE DURING THE ACCUMULATION PHASE UNDER THE CONTRACT. THIS APPENDIX IS ONLY A SUMMARY OF CERTAIN FACTS ABOUT THE GUARANTEED ACCOUNT. PLEASE READ THE GUARANTEED ACCOUNT PROSPECTUS CAREFULLY BEFORE INVESTING IN THIS OPTION. IN GENERAL. Amounts invested in the Guaranteed Account earn specified interest rates if left in the Guaranteed Account for specified periods of time. If you withdraw or transfer those amounts before the specified periods elapse, we may apply a market value adjustment (described below) which may be positive or negative. When deciding to invest in the Guaranteed Account, contact your sales representative or the Company to learn: > The interest rate(s) we will apply to amounts invested in the Guaranteed Account. We change the rate(s) periodically. Be certain you know the rate we guarantee on the day your account dollars are invested in the Guaranteed Account. Guaranteed interest rates will never be less than an annual effective rate of 3%. > The period of time your account dollars need to remain in the Guaranteed Account in order to earn the rate(s). You are required to leave your account dollars in the Guaranteed Account for a specified period of time in order to earn the guaranteed interest rate(s). DEPOSIT PERIOD. During a deposit period, we offer a specific interest rate for dollars invested for a certain guaranteed term. For a specific interest rate and guaranteed term to apply, account dollars must be invested in the Guaranteed Account during the deposit period for which that rate and term are offered. INTEREST RATES. We guarantee different interest rates, depending upon when account dollars are invested in the Guaranteed Account. For guaranteed terms one year or longer, we may apply more than one specified interest rate. The interest rate we guarantee is an annual effective yield. That means the rate reflects a full year's interest. We credit interest daily at a rate that will provide the guaranteed annual effective yield over one year. Guaranteed interest rates will never be less than an annual effective rate of 3%. Among other factors, the safety of the interest rate guarantees depends upon the Company's claims-paying ability. GUARANTEED TERMS. The guaranteed term is the period of time account dollars must be left in the Guaranteed Account in order to earn the guaranteed interest rate. For guaranteed terms one year or longer, we may offer different rates for specified time periods within a guaranteed term. We offer different guaranteed terms at different times. We also may offer more than one guaranteed term of the same duration with different interest rates. Check with your sales representative or our Customer Service Center to learn what terms are being offered. The Company also reserves the right to limit the number of guaranteed terms or the availability of certain guaranteed terms. FEES AND OTHER DEDUCTIONS. If all or a portion of your account value in the Guaranteed Account is withdrawn or transferred, you may incur one or more of the following: > Market Value Adjustment (MVA)--as described in this appendix and in the Guaranteed Account prospectus; > Tax penalties and/or tax withholding--see "Taxation"; > Early withdrawal charge--see "Fees"; or > Maintenance fee--see "Fees." We do not make deductions from amounts in the Guaranteed Account to cover mortality and expense risks. Rather, we consider these risks when determining the interest rate to be credited. Also, if you elected the premium bonus option, a charge may be deducted from amounts allocated to the Guaranteed Account, resulting in a 0.50% reduction in the interest which would have been credited to your account during the first seven account years if you had not elected the premium bonus option. See the "Premium Bonus Option - Forfeiture" and "Withdrawals" sections of the contract prospectus. ILIAC Variable Annuity - 126064 I-1 MARKET VALUE ADJUSTMENT (MVA). If your account value is withdrawn or transferred from the Guaranteed Account before the guaranteed term is completed, an MVA may apply. The MVA reflects investment value changes caused by changes in interest rates occurring since the date of deposit. The MVA may be positive or negative. If interest rates at the time of withdrawal or transfer have increased since the date of deposit, the value of the investment decreases and the MVA will be negative. This could result in your receiving less than the amount you paid into the Guaranteed Account. If interest rates at the time of withdrawal or transfer have decreased since the date of deposit, the value of the investment increases and the MVA will be positive. MVA WAIVER. For withdrawals or transfers from a guaranteed term before the guaranteed term matures, the MVA may be waived for: > Transfers due to participation in the dollar cost averaging program; > Withdrawals taken due to your election of SWO or ECO (described in "Systematic Distribution Options"), if available; > Withdrawals for minimum distributions required by the Tax Code and for which the early withdrawal charge is waived; and > Withdrawals due to your exercise of the right to cancel your contract (described in "Right to Cancel"). DEATH BENEFIT. When a death benefit is paid under the contract within six months of the date of death, only a positive aggregate MVA amount, if any, is applied to the account value attributable to amounts withdrawn from the Guaranteed Account. This provision does not apply upon the death of a spousal beneficiary or joint contract holder who continued the account after the first death. If a death benefit is paid more than six months from the date of death, a positive or negative aggregate MVA amount, as applicable, will be applied, except under certain contracts issued in the State of New York. PARTIAL WITHDRAWALS. For partial withdrawals during the accumulation phase, amounts to be withdrawn from the Guaranteed Account will be withdrawn pro-rata from each group of deposits having the same length of time until the maturity date ("Guaranteed Term Group"). Within each Guaranteed Term Group, the amount will be withdrawn first from the oldest deposit period, then from the next oldest and so on until the amount requested is satisfied. GUARANTEED TERMS MATURITY. As a guaranteed term matures, assets accumulating under the Guaranteed Account may be (a) transferred to a new guaranteed term; (b) transferred to other available investment options; or (c) withdrawn. Amounts withdrawn may be subject to an early withdrawal charge, taxation and, if you are under age 59 1/2, tax penalties may apply. If no direction is received from you at our Customer Service Center by the maturity date of a guaranteed term, the amount from the maturing guaranteed term will be transferred to a new guaranteed term of a similar length. If the same guaranteed term is no longer available, the next shortest guaranteed term available in the current deposit period will be used. If no shorter guaranteed term is available, the next longer guaranteed term will be used. If you do not provide instructions concerning the maturity value of a maturing guaranteed term, the maturity value transfer provision applies. This provision allows transfers or withdrawals without an MVA if the transfer or withdrawal occurs during the calendar month immediately following a guaranteed term maturity date. This waiver of the MVA only applies to the first transaction regardless of the amount involved in the transaction. Under the Guaranteed Account each guaranteed term is counted as one funding option. If a guaranteed term matures and is renewed for the same term, it will not count as an additional investment option for purposes of any limitation on the number of investment options. SUBSEQUENT PURCHASE PAYMENTS. Purchase payments received after your initial purchase payment to the Guaranteed Account will be allocated in the same proportions as the last allocation, unless you properly instruct us to do otherwise. If the same guaranteed term(s) is not available, the next shortest term will be used. If no shorter guaranteed term is available, the next longer guaranteed term will be used. DOLLAR COST AVERAGING. The Company may offer more than one guaranteed term of the same duration and credit one with a higher rate contingent upon use only with the dollar cost averaging program. If amounts are applied to a guaranteed term which is credited with a higher rate using dollar cost averaging and the dollar cost averaging is discontinued, the amounts will be transferred to another guaranteed term of the same duration and an MVA will apply. ILIAC Variable Annuity - 126064 I-2 TRANSFER OF ACCOUNT DOLLARS. Generally, account dollars invested in the Guaranteed Account may be transferred among guaranteed terms offered through the Guaranteed Account and/or to other investment options offered through the contract. However, transfers may not be made during the deposit period in which your account dollars are invested in the Guaranteed Account or for 90 days after the close of that deposit period. We will apply an MVA to transfers made before the end of a guaranteed term. The 90-day wait does not apply to (1) amounts transferred on the maturity date or under the maturity value transfer provision; (2) amounts transferred from the Guaranteed Account before the maturity date due to the election of an income phase payment option; (3) amounts distributed under the ECO or SWO (see "Systematic Distribution Options"); and (4) amounts transferred from an available guaranteed term in connection with the dollar cost averaging program. Transfers after the 90-day period are permitted from guaranteed term(s) to other guaranteed term(s) available during a deposit period or to other available investment options. Transfers of the Guaranteed Account values on or within one calendar month of a term's maturity date are not counted as one of the 12 free transfers of accumulated values in the account. REINSTATING AMOUNTS WITHDRAWN FROM THE GUARANTEED ACCOUNT. If amounts are withdrawn and then reinstated in the Guaranteed Account, we apply the reinstated amount to the current deposit period. This means the guaranteed annual interest rate and guaranteed terms available on the date of reinstatement will apply. We reinstate amounts proportionately in the same way as they were allocated before withdrawal. We will not credit your account for market value adjustments or any premium bonus forfeited that we deducted at the time of withdrawal or refund any taxes that were withheld. THE INCOME PHASE. The Guaranteed Account cannot be used as an investment option during the income phase. However, you may notify us at least 30 days in advance to elect a fixed or variable payment option and to transfer your Guaranteed Account dollars to the general account or any of the subaccounts available during the income phase. Transfers made due to the election of a lifetime income phase payment option will be subject to only a positive aggregate MVA. DISTRIBUTION. The Company's subsidiary, ING Financial Advisers, LLC ("ING Financial") serves as the principal underwriter of the contract. ING Financial, a Delaware limited liability company, is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. and the Securities Investor Protection Corporation. From time to time ING Financial may offer customers of certain broker-dealers special guaranteed rates in connection with the Guaranteed Account offered through the contract and may negotiate different commissions for these broker-dealers. ILIAC Variable Annuity - 126064 I-3 APPENDIX II FIXED ACCOUNT -------------------------------------------------------------------------------- GENERAL DISCLOSURE. > The Fixed Account is an investment option available during the accumulation phase under the contract. > Amounts allocated to the Fixed Account are held in the Company's general account which supports insurance and annuity obligations. > Interests in the Fixed Account have not been registered with the SEC in reliance on exemptions under the Securities Act of 1933, as amended. > Disclosure in this prospectus regarding the Fixed Account may be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of the statements. > Disclosure in this appendix regarding the Fixed Account has not been reviewed by the SEC. > Additional information about this option may be found in the contract. INTEREST RATES. > The Fixed Account guarantees that amounts allocated to this option will earn the minimum interest rate specified in the contract. We may credit a higher interest rate from time to time, but the rate we credit will never fall below the guaranteed minimum specified in the contract. Amounts applied to the Fixed Account will earn the interest rate in effect at the time money is applied. Amounts in the Fixed Account will reflect a compound interest rate as credited by us. The rate we quote is an annual effective yield. Among other factors, the safety of the interest rate guarantees depends upon the Company's claims-paying ability. > Our determination of credited interest rates reflects a number of factors, including mortality and expense risks, interest rate guarantees, the investment income earned on invested assets and the amortization of any capital gains and/or losses realized on the sale of invested assets. Under this option we assume the risk of investment gain or loss by guaranteeing the amounts you allocate to this option and promising a minimum interest rate and income phase payment. DOLLAR COST AVERAGING. Amounts you invest in the Fixed Account must be transferred into the other investment options available under the contract over a period not to exceed 12 months. If you discontinue dollar cost averaging, the remaining balance amounts in the Fixed Account will be transferred into the money market subaccount available under the contract, unless you direct us to transfer the balance into other available options. WITHDRAWALS. Under certain emergency conditions we may defer payment of any withdrawal for a period of up to six months or as provided by federal law. CHARGES. We do not make deductions from amounts in the Fixed Account to cover mortality and expense risks. We consider these risks when determining the credited rate. If you make a withdrawal from amounts in the Fixed Account, an early withdrawal charge may apply. See "Fees." TRANSFERS. During the accumulation phase you may transfer account dollars from the Fixed Account to any other available investment option. We may vary the dollar amount that you are allowed to transfer, but it will never be less than 10% of your account value held in the Fixed Account. By notifying the Customer Service Center at least 30 days before income phase payments begin, you may elect to have amounts transferred to one or more of the subaccounts available during the income phase to provide variable payments. ILIAC Variable Annuity - 126064 II-1 APPENDIX III DESCRIPTION OF UNDERLYING FUNDS -------------------------------------------------------------------------------- During the accumulation phase, you may allocate your premium payments and contract value to any of the investment portfolios available under this Contract. They are listed in this appendix. You bear the entire investment risk for amounts you allocate to any investment portfolio, and you may lose your principal. The investment results of the mutual funds (funds) are likely to differ significantly and there is no assurance that any of the funds will achieve their respective investment objectives. Shares of the funds will rise and fall in value and you could lose money by investing in the funds. Shares of the funds are not bank deposits and are not guaranteed, endorsed or insured by any financial institution, the Federal Deposit Insurance Corporation or any other government agency. Except as noted, all funds are diversified, as defined under the Investment Company Act of 1940. Please refer to the fund prospectuses for additional information. Fund prospectuses may be obtained free of charge, from our Customer Service Center at the address and telephone number listed in the prospectus, by accessing the SEC's web site or by contacting the SEC Public Reference Room. Certain funds offered under the contracts have investment objectives and policies similar to other funds managed by the fund's investment adviser. The investment results of a fund may be higher or lower than those of other funds managed by the same adviser. There is no assurance and no representation is made that the investment results of any fund will be comparable to those of another fund managed by the same investment adviser.
------------------------------------------------------------------------------------------- LIST OF FUND NAME CHANGES ------------------------------------------------------------------------------------------- FORMER FUND NAME CURRENT FUND NAME ------------------------------------------------------------------------------------------- ING GET Fund ING GET U.S. Core Portfolio ------------------------------------------------------------------------------------------- ING MFS Emerging Equities Portfolio ING Salomon Brothers Aggressive Growth Portfolio ------------------------------------------------------------------------------------------- ING MFS Research Portfolio ING MFS Research Equity Portfolio ------------------------------------------------------------------------------------------- Alliance Growth and Income Portfolio AllianceBernstein Growth and Income Portfolio ------------------------------------------------------------------------------------------- Alliance Premier Growth Portfolio AllianceBernstein Premier Growth Portfolio ------------------------------------------------------------------------------------------- Alliance Quasar Portfolio AllianceBernstein Quasar Portfolio -------------------------------------------------------------------------------------------
ILIAC Variable Annuity - 126064 III-1 -------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- ING GET U.S. Core Portfolio -------------------------------------------------------------------------------- ING GET U.S. CORE PORTFOLIO (formerly Seeks to achieve maximum total return ING GET Fund) and minimal exposure of the Series' assets to a market value loss, by INVESTMENT ADVISER: Aeltus participating, to the extent possible Investment Management, Inc. in favorable equity market performance during the Guarantee Period. The Series will not implement an "investment strategy" in any conventional sense. Rather, the Series' asset allocation strategy seeks to optimize the exposure of the Series to the Equity Component while protecting Series' assets. Assets allocated to the Equity Component may be reduced or eliminated in order to conserve assets at a level equal to or above the present value of the Guarantee. -------------------------------------------------------------------------------- ING PARTNERS, INC. -------------------------------------------------------------------------------- ING JP MORGAN FLEMING INTERNATIONAL Seeks long-term growth of capital. PORTFOLIO (Initial Class) Invests primarily (at least 65% of total assets) in the equity securities INVESTMENT ADVISER: ING Life of foreign companies that the Insurance and Annuity Company subadviser believes have high growth INVESTMENT SUBADVISER: J.P. Morgan potential. Will normally invest in Fleming Asset Management (London) securities of at least three different Ltd. countries other than the U.S. and will invest in securities in both developed and developing markets. -------------------------------------------------------------------------------- ING MFS CAPITAL OPPORTUNITIES Seeks capital appreciation. Invests PORTFOLIO (Initial Class) primarily (at least 65% of net assets) in common stocks and related INVESTMENT ADVISER: ING Life securities, such as preferred stocks, Insurance and Annuity Company convertible securities and depositary INVESTMENT SUBADVISER: Massachusetts receipts. Financial Services Company -------------------------------------------------------------------------------- ING MFS RESEARCH EQUITY PORTFOLIO Seeks long-term growth of capital and (Initial Class) (formerly ING MFS future income. Invests primarily (at Research Portfolio) least 80% of net assets) in common stocks and related securities, such as INVESTMENT ADVISER: ING Life preferred stocks, convertible Insurance and Annuity Company securities and depositary receipts. INVESTMENT SUBADVISER: Massachusetts Financial Services Company -------------------------------------------------------------------------------- ING SALOMON BROTHERS AGGRESSIVE GROWTH Seeks long-term growth of capital. PORTFOLIO (Initial Class) (formerly Invests primarily (at least 80% of net ING MFS Emerging Equities Portfolio) assets under normal circumstances) in common stocks and related securities, INVESTMENT ADVISER: ING Life such as preferred stocks, convertible Insurance and Annuity Company securities and depositary receipts, of INVESTMENT SUBADVISER: Salomon emerging growth companies. Brothers Asset Management Inc -------------------------------------------------------------------------------- ING VARIABLE FUNDS, INC. -------------------------------------------------------------------------------- ING VP GROWTH AND INCOME PORTFOLIO Seeks to maximize total return through (Class R) investments in a diversified portfolio of common stocks and securities INVESTMENT ADVISER: ING Investments, convertible into common stock. Under LLC normal market conditions, invests at INVESTMENT SUBADVISER: Aeltus least 65% of total assets in common Investment Management, Inc. stocks that the Portfolio's subadviser believes have significant potential for capital appreciation or income growth or both. -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 III-2 -------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- ING VARIABLE PORTFOLIOS, INC. -------------------------------------------------------------------------------- ING VP GROWTH PORTFOLIO (Class R) Seeks growth of capital through investment in a diversified portfolio INVESTMENT ADVISER: ING Investments, consisting primarily of common stocks LLC and securities convertible into common INVESTMENT SUBADVISER: Aeltus stocks believed to offer growth Investment Management, Inc. potential. Under normal market conditions, invests at least 65% of total assets in common stocks and securities convertible into common stock. -------------------------------------------------------------------------------- ING VP INDEX PLUS LARGECAP PORTFOLIO Seeks to outperform the total return (Class R) performance of the Standard & Poor's 500 Composite Index (S&P 500), while INVESTMENT ADVISER: ING Investments, maintaining a market level of risk. LLC Invests at least 80% of net assets in INVESTMENT SUBADVISER: Aeltus stocks included in the S&P 500. The Investment Management, Inc. subadviser's objective is to overweight those stocks in the S&P 500 that they believe will outperform the index and underweight or avoid those stocks in the S&P 500 that they believe will underperform the index. -------------------------------------------------------------------------------- ING VP INTERNATIONAL EQUITY PORTFOLIO Seeks long-term capital growth (Class R) primarily through investment in a diversified portfolio of common stocks INVESTMENT ADVISER: ING Investments, principally traded in countries LLC outside of the United States. The INVESTMENT SUBADVISER: Aeltus Portfolio will not target any given Investment Management, Inc. level of current income. Under normal market conditions, invests at least 80% of assets in equity securities and at least 65% of its assets will normally be invested in securities principally traded in three or more countries outside of the U.S. These securities may include common stocks as well as securities convertible into common stock. -------------------------------------------------------------------------------- ING VP SMALL COMPANY PORTFOLIO Seeks growth of capital primarily (Class R) through investment in a diversified portfolio of common stocks and INVESTMENT ADVISER: ING Investments, securities convertible into common LLC stocks of companies with smaller INVESTMENT SUBADVISER: Aeltus market capitalizations. Under normal Investment Management, Inc. market conditions, invests at least 80% of net assets in common stocks and securities convertible into common stock of small-capitalization companies, defined as: 1) the 2,000 smallest of the 3,000 largest U.S. companies (as measured by market capitalization); 2) all companies not included above that are included in the Standard & Poor's SmallCap 600 Index or the Russell 2000 Index; and 3) companies with market capitalizations lower than companies included in the first two categories. -------------------------------------------------------------------------------- ING VP TECHNOLOGY PORTFOLIO Seeks long-term capital appreciation. (Class R) Invests at least 80% of net assets in common stocks and securities INVESTMENT ADVISER: ING Investments, convertible into common stock of LLC companies in the information INVESTMENT SUBADVISER: AIC Asset technology industry sector. Management, LLC (AIC) -------------------------------------------------------------------------------- ING VARIABLE PRODUCT PORTFOLIOS -------------------------------------------------------------------------------- ING VP BALANCED PORTFOLIO, INC. Seeks to maximize investment return, (Class R) consistent with reasonable safety of principal, by investing in a INVESTMENT ADVISER: ING Investments, diversified portfolio of one or more LLC of the following asset classes: INVESTMENT SUBADVISER: Aeltus stocks, bonds and cash equivalents, Investment Management, Inc. based on the judgment of the Portfolio's management, of which of those sectors or mix thereof offers the best investment prospects. Typically, maintains approximately 60% of total assets in equities and approximately 40% of total assets in debt (including money market instruments). The Portfolio may invest up to 15% of total assets in high-yield instruments. -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 III-3 -------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- ING VP BOND PORTFOLIO (Class R) Seeks to maximize total return as is consistent with reasonable risk, INVESTMENT ADVISER: ING Investments, through investment in a diversified LLC portfolio consisting of debt INVESTMENT SUBADVISER: Aeltus securities. Under normal market Investment Management, Inc. conditions, invests at least 80% of net assets in high-grade corporate bonds, mortgage-related and other asset-backed securities, and securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities. The Portfolio may invest up to 15% of total assets in high-yield instruments and up to 25% of total assets in foreign debt securities. -------------------------------------------------------------------------------- ING VP MONEY MARKET PORTFOLIO Seeks to provide high current return, (Class R) consistent with preservation of capital and liquidity, through INVESTMENT ADVISER: ING Investments, investment in high-quality money LLC market instruments. Invests in a INVESTMENT SUBADVISER: Aeltus diversified portfolio of high-quality Investment Management, Inc. fixed income securities denominated in U.S. dollars, with short remaining maturities. THERE IS NO GUARANTEE THAT THE ING VP MONEY MARKET SUBACCOUNT WILL HAVE A POSITIVE OR LEVEL RETURN. -------------------------------------------------------------------------------- ING VARIABLE PRODUCTS TRUST -------------------------------------------------------------------------------- ING VP GROWTH OPPORTUNITIES PORTFOLIO Seeks long-term growth of capital. (Class S) Invests primarily in common stock of U.S. companies that the portfolio INVESTMENT ADVISER: ING Investments, managers feel have above average LLC prospects for growth. Under normal market conditions, invests at least 65% of total assets in securities purchased on the basis of the potential for capital appreciation. These securities may be from large-cap, mid-cap or small-cap companies. -------------------------------------------------------------------------------- ING VP MAGNACAP PORTFOLIO Seeks growth of capital, with dividend (Class S) income as a secondary consideration. Under normal conditions, invests at INVESTMENT ADVISER: ING Investments, least 80% of assets in equity LLC securities that meet the following criteria: attractive valuation characteristics; dividends; and balance sheet strength. Normally, investments are generally in larger companies that are included in the largest 500 U.S. companies as measured by sales, earnings or assets. -------------------------------------------------------------------------------- ING VP MIDCAP OPPORTUNITIES PORTFOLIO Seeks long-term capital appreciation. (Class S) Normally invests at least 80% of assets in the common stocks of INVESTMENT ADVISER: ING Investments, mid-sized U.S. companies that the LLC portfolio managers feel have above average prospects for growth. For this Portfolio, mid-size companies are those with market capitalizations that fall within the range of companies in the Standard & Poor's MidCap 400 Index. -------------------------------------------------------------------------------- ING VP SMALLCAP OPPORTUNITIES Seeks long-term capital appreciation. PORTFOLIO (Class S) Normally invests at least 80% of assets in the common stock of smaller, INVESTMENT ADVISER: ING Investments, lesser-known U.S. companies that are LLC believed to have above average prospects for growth. For this Portfolio, smaller companies are those with market capitalizations that fall within the range of companies in the Russell 2000 Index. -------------------------------------------------------------------------------- AIM VARIABLE INSURANCE FUNDS -------------------------------------------------------------------------------- AIM V.I. CAPITAL APPRECIATION FUND Seeks growth of capital. Seeks to meet PORTFOLIO (Class I) its objective by investing principally in common stocks of companies the INVESTMENT ADVISER: A I M Advisors, portfolio managers believe are likely Inc. to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 III-4 -------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- AIM V.I. CORE EQUITY FUND (Class I) Seeks growth of capital. Seeks to meet its objective by investing, normally, INVESTMENT ADVISER: A I M Advisors, at least 80% of net assets in equity Inc. securities, including convertible securities, of established companies that have long-term above-average growth in earnings, and growth companies that the portfolio managers believe have the potential for above-average growth in earnings. -------------------------------------------------------------------------------- AIM V.I. GOVERNMENT SECURITIES FUND Seeks to achieve a high level of (Class I) current income consistent with reasonable concern for safety of INVESTMENT ADVISER: A I M Advisors, principal. Seeks to meet its objective Inc. by investing, normally, 80% of net assets in debt securities issued, guaranteed or otherwise backed by the U.S. Government. -------------------------------------------------------------------------------- AIM V.I. GROWTH FUND (Class I) Seeks growth of capital. Seeks to meet its investment objective by investing INVESTMENT ADVISER: A I M Advisors, principally in seasoned and better Inc. capitalized companies considered to have strong earnings momentum. -------------------------------------------------------------------------------- AIM V.I. PREMIER EQUITY FUND PORTFOLIO Seeks to achieve long-term growth of (Class I) capital with a secondary objective of income. Seeks to meet its objectives INVESTMENT ADVISER: A I M Advisors, by investing, normally, at least 80% Inc. of net assets in equity securities, including convertible securities. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN GROWTH AND INCOME Seeks reasonable current income and PORTFOLIO (Class A) (formerly reasonable opportunity for Alliance Growth and Income appreciation through investments Portfolio) primarily in dividend-paying common stocks of good quality. Invests INVESTMENT ADVISER: Alliance Capital primarily in dividend-paying common Management L.P. stocks of large, well-established "blue chip" companies. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN PREMIER GROWTH Seeks growth of capital by pursuing PORTFOLIO (Class A) (formerly aggressive investment policies. Alliance Premier Growth Portfolio) Invests primarily in equity securities of a limited number of large, INVESTMENT ADVISER: Alliance Capital carefully selected, high-quality U.S. Management L.P. companies that are judged likely to achieve superior earnings growth. Normally invests at least 80% of total assets in equity securities of U.S. companies and up to 20% of assets in non-U.S. companies. -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN QUASAR PORTFOLIO Seeks growth of capital by pursuing (Class A) (formerly Alliance Quasar aggressive investment policies. Portfolio) Current income is incidental to the Portfolio's objective. Generally INVESTMENT ADVISER: Alliance Capital invests in widely diversified Management L.P. portfolio of equity securities spread among many industries that offer the possibility of above-average earnings growth. Currently emphasizes investment in small-cap companies. -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 III-5 -------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS PORTFOLIO -------------------------------------------------------------------------------- FIDELITY(R)VIP CONTRAFUND(R)PORTFOLIO Seeks long-term capital appreciation. (Service Class 2) Normally invests primarily in common stocks of companies whose value the INVESTMENT ADVISER: Fidelity Portfolio's investment adviser Management & Research Company believes is not fully recognized by INVESTMENT SUBADVISER: Fidelity the public. Management & Research (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc. -------------------------------------------------------------------------------- FIDELITY(R)VIP EQUITY-INCOME PORTFOLIO Seeks reasonable income. Also (Service Class 2) considers the potential for capital appreciation. Seeks to achieve a yield INVESTMENT ADVISER: Fidelity which exceeds the composite yield on Management & Research Company the securities comprising the Standard INVESTMENT SUBADVISER: FMR Co., Inc. & Poor's 500 Index. Normally invests at least 80% of total assets in income-producing equity securities (which tends to lead to investments in large cap "value" stocks). -------------------------------------------------------------------------------- FIDELITY(R) VIP GROWTH PORTFOLIO Seeks to achieve capital appreciation. (Service Class 2) Normally invests primarily in common stocks of companies the investment INVESTMENT ADVISER: Fidelity adviser believes have above-average Management & Research Company growth potential (often called INVESTMENT SUBADVISER: FMR Co., Inc. "growth" stocks). -------------------------------------------------------------------------------- FIDELITY(R)VIP HIGH INCOME PORTFOLIO Seeks a high level of current income (Class I) while also considering growth of capital. Normally invests primarily in INVESTMENT ADVISER: Fidelity income-producing debt securities, Management & Research Company preferred stocks and convertible INVESTMENT SUBADVISER: Fidelity securities, with an emphasis on Management & Research (U.K.) Inc.; lower-quality debt securities. Fidelity Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc. -------------------------------------------------------------------------------- JANUS ASPEN SERIES -------------------------------------------------------------------------------- JANUS ASPEN SERIES - BALANCED Seeks long-term capital growth, PORTFOLIO (Class I) consistent with preservation of capital and balanced by current INVESTMENT ADVISER: Janus Capital income. Normally invests 40-60% of its assets in securities selected primarily for their growth potential and 40-60% of its assets in securities selected primarily for their income potential. Will normally invest at least 25% of its assets in fixed-income securities. -------------------------------------------------------------------------------- JANUS ASPEN SERIES - GROWTH PORTFOLIO Seeks long-term growth of capital in a (Class I) manner consistent with the preservation of capital. Invests INVESTMENT ADVISER: Janus Capital primarily in common stocks selected for their growth potential. Although it can invest in companies of any size, it generally invests in larger, more established companies. -------------------------------------------------------------------------------- JANUS ASPEN SERIES - MIDCAP GROWTH A nondiversified Portfolio that PORTFOLIO (Class I) (formerly invests, under normal circumstances, Aggressive Growth) at least 80% of its net assets in equity securities of mid-sized INVESTMENT ADVISER: Janus Capital companies whose market capitalization falls, at the time of initial purchase, in the 12-month average of the capitalization ranges of the Russell MidCap Growth Index. -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 III-6 -------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- JANUS ASPEN SERIES WORLDWIDE GROWTH Seeks long-term growth of capital in a PORTFOLIO (Class I) manner consistent with the preservation of capital. Invests INVESTMENT ADVISER: Janus Capital primarily in common stocks of companies of any size located throughout the world. Normally invests in issuers from at least five different countries, including the United States. May at times invest in fewer than five countries or even in a single country. -------------------------------------------------------------------------------- MFS(R) VARIABLE INSURANCE TRUSTSM -------------------------------------------------------------------------------- MFS(R) TOTAL RETURN SERIES (Class I) A nondiversified fund that seeks to provide high current income by INVESTMENT ADVISER: MFS Investment investing in fixed income securities. Management(R) Its secondary objective is to provide significant capital appreciation. Under normal market conditions, invests at least 65% of net assets in fixed income securities including: U.S. government securities, foreign government securities, mortgage-backed and asset-backed securities, corporate bonds and emerging market securities. -------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS -------------------------------------------------------------------------------- OPPENHEIMER AGGRESSIVE GROWTH FUND/VA Seeks capital appreciation by investing in "growth type" companies. INVESTMENT ADVISER: Invests mainly in equity securities, OppenheimerFunds, Inc. such as common stocks and can invest in other equity securities, such as preferred stocks and securities convertible into common stocks. -------------------------------------------------------------------------------- OPPENHEIMER MAIN STREET FUND/VA(R) Seeks high total return (which includes growth in the value of its INVESTMENT ADVISER: shares as well as current income) from OppenheimerFunds, Inc. equity and debt securities. Invests mainly in common stocks of U.S. companies, and can also invest in other equity securities such as preferred stocks and securities convertible into common stocks. -------------------------------------------------------------------------------- OPPENHEIMER STRATEGIC BOND FUND/VA Seeks a high level of current income principally derived from interest on INVESTMENT ADVISER: debt securities. Invests mainly in OppenheimerFunds, Inc. debt securities of issuers in three market sectors: foreign governments and companies, U.S. Government securities, and lower-grade high-yield securities of U.S. and foreign companies. -------------------------------------------------------------------------------- PRUDENTIAL SERIES FUND, INC. -------------------------------------------------------------------------------- JENNISON PORTFOLIO (Class II) Seeks to achieve long-term growth of capital. Invests primarily in equity INVESTMENT ADVISER: Prudential securities of major, established Investments LLC corporations that the investment INVESTMENT SUBADVISER: Jennison adviser believes offer above-average Associates LLC growth prospects. May invest up to 30% of total assets in foreign securities. Normally invests 65% of total assets in common stocks and preferred stocks of companies with capitalization in excess of $1 billion. -------------------------------------------------------------------------------- SP JENNISON INTERNATIONAL GROWTH Seeks long-term growth of capital. PORTFOLIO (Class II) Invests in equity-related securities of foreign issuers that the subadviser INVESTMENT ADVISER: Prudential thinks will increase in value over a Investments LLC period of years. Invests primarily in INVESTMENT SUBADVISER: Jennison the common stock of large and Associates LLC medium-sized foreign companies. Under normal circumstances, invests at least 65% of total assets in common stock of foreign companies operating or based in at least five different countries. -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 III-7 -------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- UBS SERIES TRUST -------------------------------------------------------------------------------- UBS TACTICAL ALLOCATION PORTFOLIO Total return, consisting of long-term (Class I) capital appreciation and current income. Principal investment INVESTMENT ADVISER: UBS Global Asset strategies used by the Portfolio in Management (US) Inc. pursuing its investment objective involve allocating assets between a stock portion that is designed to track the performance of the S&P 500 Composite Stock Price Index and a fixed income portion that consists of either U.S. Treasury notes with a maturity of approximately 5 years or U.S. Treasury bills with remaining maturities of approximately 30 days. -------------------------------------------------------------------------------- ILIAC Variable Annuity - 126064 III-8 APPENDIX IV PROJECTED SCHEDULE OF ING GET U.S. CORE PORTFOLIO* OFFERINGS --------------------------------------------------------------------------------
----------------------------------------------------------------------------------------- OFFERING DATES GUARANTEE DATES ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- GET V SERIES 03/13/03 - 06/12/03 06/13/03 - 06/13/08 ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- ING GET U.S. CORE PORTFOLIO-- SERIES 1 06/12/03 - 09/11/03 09/12/03 - 09/12/08 ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- ING GET U.S. CORE PORTFOLIO-- SERIES 2 09/12/03 - 12/11/03 12/12/03 - 12/12/08 ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- ING GET U.S. CORE PORTFOLIO-- SERIES 3 12/12/03 - 03/11/04 03/12/04 - 03/13/09 ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- ING GET U.S. CORE PORTFOLIO-- SERIES 4 03/12/04 - 06/10/04 06/11/04 - 06/12/09 -----------------------------------------------------------------------------------------
* Formerly known as ING GET Fund. ILIAC Variable Annuity - 126064 IV-1 APPENDIX V CONDENSED FINANCIAL INFORMATION -------------------------------------------------------------------------------- TABLE I FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 0.95% (Selected data for accumulation units outstanding throughout each period) ================================================================================ The condensed financial information presented below for each of the periods in the two-year period ended December 31, 2002 is derived from the financial statements of the separate account, which have been audited by Ernst & Young LLP, independent auditors. The condensed financial information presented below for each of the periods in the three-year period ended December 31, 2000 (as applicable), is derived from the financial statements of the separate account, which have been audited by other auditors. The financial statements and the independent auditors' report thereon for the year ended December 31, 2002 are included in the Statement of Additional Information.
2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- AIM V.I. CAPITAL APPRECIATION FUND Value at beginning of period $9.841 $12.951 $14.675 $10.245 $7.522(1) Value at end of period $7.37 $9.841 $12.951 $14.675 $10.245 Number of accumulation units outstanding at end of period 501,618 613,912 552,619 190,831 10,913 AIM V.I. CORE EQUITY FUND Value at beginning of period $9.172 $12.001 $14.179 $10.663 $7.948(1) Value at end of period $7.67 $9.172 $12.001 $14.179 $10.663 Number of accumulation units outstanding at end of period 948,642 1,160,320 1,098,096 370,289 3,666 AIM V.I. GOVERNMENT SECURITIES FUND Value at beginning of period $11.383 $10.800 $10.488(1) Value at end of period $12.36 $11.383 $10.800 Number of accumulation units outstanding at end of period 590,034 178,808 8,235 AIM V.I. GROWTH FUND Value at beginning of period $7.446 $11.371 $14.438 $10.779 $7.856(1) Value at end of period $5.09 $7.446 $11.371 $14.438 $10.779 Number of accumulation units outstanding at end of period 753,288 964,134 935,078 300,327 11,163 AIM V.I. PREMIER EQUITY FUND Value at beginning of period $10.001 $11.548 $13.659 $10.616 $7.820(1) Value at end of period $6.91 $10.001 $11.548 $13.659 $10.616 Number of accumulation units outstanding at end of period 1,508,348 1,985,504 1,793,243 895,401 27,668 ALLIANCEBERNSTEIN GROWTH AND INCOME PORTFOLIO Value at beginning of period $10.068 $10.129 $9.778(2) Value at end of period $7.77 $10.068 $10.129 Number of accumulation units outstanding at end of period 826,949 713,345 29,928 ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO Value at beginning of period $6.249 $7.620 $9.283(2) Value at end of period $4.29 $6.249 $7.620 Number of accumulation units outstanding at end of period 366,995 378,917 83,126 ALLIANCEBERNSTEIN QUASAR PORTFOLIO Value at beginning of period $8.218 $9.511 $10.602(3) Value at end of period $5.55 $8.218 $9.511 Number of accumulation units outstanding at end of period 42,354 23,023 1,070 FIDELITY(R) VIP CONTRAFUND(R) PORTFOLIO Value at beginning of period $10.424 $11.993 $12.966 $10.535 $8.083(1) Value at end of period $9.36 $10.424 $11.993 $12.966 $10.535 Number of accumulation units outstanding at end of period 2,018,022 2,109,547 1,991,818 1,126,347 42,196 FIDELITY(R) VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $10.553 $11.210 $10.438 $9.911 $8.459(1) Value at end of period $8.68 $10.553 $11.210 $10.438 $9.911 Number of accumulation units outstanding at end of period 1,734,825 1,805,355 1,176,439 735,175 48,260 FIDELITY(R) VIP GROWTH PORTFOLIO Value at beginning of period $9.097 $11.154 $12.649 $10.265(1) Value at end of period $6.30 $9.097 $11.154 $12.649 Number of accumulation units outstanding at end of period 1,714,741 1,711,082 1,214,067 84,394 FIDELITY(R) VIP HIGH INCOME PORTFOLIO Value at beginning of period $6.436 $7.362 $9.586 $8.949 $8.626(2) Value at end of period $6.59 $6.436 $7.362 $9.586 $8.949 Number of accumulation units outstanding at end of period 893,040 941,816 887,740 590,621 40,909 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period $8.364 $11.557 $14.511 $9.248 $8.553(2) Value at end of period $6.79 $8.364 $11.557 $14.511 $9.248 Number of accumulation units outstanding at end of period 868,696 856,532 695,491 292,270 46,182 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $10.456 $14.030 $15.023 $10.193 $9.507(2) Value at end of period $7.23 $10.456 $14.030 $15.023 $10.193 Number of accumulation units outstanding at end of period 760,839 863,568 643,763 207,410 10,086 ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period $9.211 $11.755 $12.424 $10.113 $8.805(2) Value at end of period $6.85 $9.211 $11.755 $12.424 $10.113 Number of accumulation units outstanding at end of period 358,337 416,034 383,389 208,889 4,604 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $8.099 $10.933 $15.499 $10.371 $7.999(1) Value at end of period $5.19 $8.099 $10.933 $15.499 $10.371 Number of accumulation units outstanding at end of period 688,422 853,538 844,849 360,244 11,391 ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $10.870 $11.457 $11.632 $10.337 $9.555(2) Value at end of period $9.66 $10.870 $11.457 $11.632 $10.337 Number of accumulation units outstanding at end of period 993,956 1,075,274 788,863 417,961 5,235 ING VP BOND PORTFOLIO Value at beginning of period $11.867 $11.018 $10.145 $10.319 $10.157(1) Value at end of period $12.73 $11.867 $11.018 $10.145 $10.319 Number of accumulation units outstanding at end of period 1,452,812 1,338,812 722,145 708,744 16,582 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $8.195 $10.140 $11.498 $9.886 $7.862(1) Value at end of period $6.09 $8.195 $10.140 $11.498 $9.886 Number of accumulation units outstanding at end of period 1,413,021 1,650,395 1,630,201 1,093,630 125,488 ING VP GROWTH OPPORTUNITIES PORTFOLIO Value at beginning of period $7.998 $9.367(1) Value at end of period $5.43 $7.998 Number of accumulation units outstanding at end of period 10,588 6,966 ING VP GROWTH PORTFOLIO Value at beginning of period $8.834 $12.229 $14.022 $10.489 $8.387(1) Value at end of period $6.22 $8.834 $12.229 $14.022 $10.489 Number of accumulation units outstanding at end of period 744,203 962,023 1,034,464 453,570 8,460 ING VP INDEX PLUS LARGECAP PORTFOLIO Value at beginning of period $10.129 $11.839 $13.193 $10.716 $8.469(1) Value at end of period $7.87 $10.129 $11.839 $13.193 $10.716 Number of accumulation units outstanding at end of period 3,628,671 4,201,884 4,191,119 2,135,759 31,054 ING VP INTERNATIONAL EQUITY PORTFOLIO Value at beginning of period $8.160 $10.824 $13.715 $9.149 $8.583(2) Value at end of period $5.93 $8.160 $10.824 $13.715 $9.149 Number of accumulation units outstanding at end of period 273,415 304,009 274,728 75,017 587 ING VP MAGNACAP PORTFOLIO Value at beginning of period $9.335 $9.602(2) Value at end of period $7.12 $9.335 Number of accumulation units outstanding at end of period 35,551 28,149 ING VP MIDCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.476 $10.181(3) Value at end of period $6.21 $8.476 Number of accumulation units outstanding at end of period 120,171 31,788 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $11.515 $11.186 $10.615 $10.199 $10.122(1) Value at end of period $11.59 $11.515 $11.186 $10.615 $10.199 Number of accumulation units outstanding at end of period 3,154,101 3,693,592 2,214,734 2,174,383 103,626 ING VP SMALL COMPANY PORTFOLIO Value at beginning of period $13.205 $12.820 $12.128 $9.357 $8.799(2) Value at end of period $10.04 $13.205 $12.820 $12.128 $9.357 Number of accumulation units outstanding at end of period 1,077,683 886,919 578,289 163,679 13,538 ING VP SMALLCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.497 $10.065(3) Value at end of period $4.73 $8.497 Number of accumulation units outstanding at end of period 117,669 73,607 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period $4.458 $5.842 $9.999(4) Value at end of period $2.59 $4.458 $5.842 Number of accumulation units outstanding at end of period 588,646 572,939 367,378 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $12.560 $13.308 $13.742 $10.945 $9.175(1) Value at end of period $11.64 $12.560 $13.308 $13.742 $10.945 Number of accumulation units outstanding at end of period 3,258,035 3,515,601 3,217,068 1,721,022 114,603 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $9.842 $13.203 $15.599 $10.938 $7.907(1) Value at end of period $7.16 $9.842 $13.203 $15.599 $10.938 Number of accumulation units outstanding at end of period 2,342,510 2,954,711 3,180,106 1,611,327 138,459 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $9.985 $16.650 $24.654 $11.042 $7.183(1) Value at end of period $7.13 $9.985 $16.650 $24.654 $11.042 Number of accumulation units outstanding at end of period 1,964,783 2,548,970 2,655,062 1,018,787 18,318 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $10.010 $13.030 $15.599 $9.576 $7.245(1) Value at end of period $7.39 $10.010 $13.030 $15.599 $9.576 Number of accumulation units outstanding at end of period 3,739,037 4,534,179 4,326,254 1,828,183 63,712 JENNISON PORTFOLIO Value at beginning of period $8.903 $9.126(1) Value at end of period $6.07 $8.903 Number of accumulation units outstanding at end of period 17,204 16,482 MFS(R) TOTAL RETURN SERIES Value at beginning of period $11.850 $11.934 $10.385 $10.171 $9.712(2) Value at end of period $11.13 $11.850 $11.934 $10.385 $10.171 Number of accumulation units outstanding at end of period 1,138,016 1,083,172 485,471 321,447 11,625 OPPENHEIMER AGGRESSIVE GROWTH FUND VA Value at beginning of period $10.191 $14.970 $17.027 $9.362 $7.289(1) Value at end of period $7.29 $10.191 $14.970 $17.027 $9.362 Number of accumulation units outstanding at end of period 566,444 733,701 614,552 102,852 730 OPPENHEIMER MAIN STREET FUND VA Value at beginning of period $8.801 $9.891 $10.946 $9.080 $6.913(1) Value at end of period $7.08 $8.801 $9.891 $10.946 $9.080 Number of accumulation units outstanding at end of period 825,724 872,461 768,952 341,458 27,241 OPPENHEIMER STRATEGIC BOND FUND VA Value at beginning of period $10.562 $10.171 $10.005 $9.823 $9.550(2) Value at end of period $11.24 $10.562 $10.171 $10.005 $9.823 Number of accumulation units outstanding at end of period 535,397 554,902 410,623 247,095 21,480 SP JENNISON INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period $7.540(1) Value at end of period $5.76 Number of accumulation units outstanding at end of period 9,143 UBS SERIES TRUST - TACTICAL ALLOCATION PORTFOLIO Value at beginning of period $8.944 $10.326 $10.651 $9.451(2) Value at end of period $6.83 $8.944 $10.326 $10.651 Number of accumulation units outstanding at end of period 198,038 229,676 187,906 101,508
Footnote for period ended December 31, 2002: (1) Funds were first received in this option during January 2002. Footnotes for period ended December 31, 2001: (1) Funds were first received in this option during June 2001. (2) Funds were first received in this option during May 2001. (3) Funds were first received in this option during April 2001. Footnotes for period ended December 31, 2000: (1) Funds were first received in this option during September 2000. (2) Funds were first received in this option during August 2000. (3) Funds were first received in this option during October 2000. (4) Funds were first received in this option during May 2000. Footnotes for period ended December 31, 1999: (1) Funds were first received in this option during September 1999. (2) Funds were first received in this option during May 1999. Footnotes for period ended December 31, 1998: (1) Funds were first received in this option during October 1998. (2) Funds were first received in this option during November 1998. Condensed Financial Information -------------------------------------------------------------------------------- TABLE II FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.25% (Selected data for accumulation units outstanding throughout each period) ================================================================================ The condensed financial information presented below for each of the periods in the two-year period ended December 31, 2002 is derived from the financial statements of the separate account, which have been audited by Ernst & Young LLP, independent auditors. The condensed financial information presented below for each of the periods in the three-year period ended December 31, 2000 (as applicable), is derived from the financial statements of the separate account, which have been audited by other auditors. The financial statements and the independent auditors' report thereon for the year ended December 31, 2002 are included in the Statement of Additional Information.
2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- AIM V.I. CAPITAL APPRECIATION FUND Value at beginning of period $9.738 $12.855 $14.611 $10.231 $7.914(1) Value at end of period $7.27 $9.738 $12.855 $14.611 $10.231 Number of accumulation units outstanding at end of period 657,037 752,138 701,844 317,266 17,420 AIM V.I. CORE EQUITY FUND Value at beginning of period $9.076 $11.912 $14.117 $10.649 $8.179(1) Value at end of period $7.57 $9.076 $11.912 $14.117 $10.649 Number of accumulation units outstanding at end of period 1,538,823 1,890,198 1,809,797 938,411 9,968 AIM V.I. GOVERNMENT SECURITIES FUND Value at beginning of period $11.325 $10.843(1) Value at end of period $12.26 $11.325 Number of accumulation units outstanding at end of period 768,636 245,192 AIM V.I. GROWTH FUND Value at beginning of period $7.369 $11.288 $14.375 $10.764 $8.120(1) Value at end of period $5.02 $7.369 $11.288 $14.375 $10.764 Number of accumulation units outstanding at end of period 1,178,462 1,455,036 1,389,231 722,832 14,904 AIM V.I. PREMIER EQUITY FUND Value at beginning of period $9.897 $11.463 $13.599 $10.601 $8.093(1) Value at end of period $6.82 $9.897 $11.463 $13.599 $10.601 Number of accumulation units outstanding at end of period 2,427,698 3,031,052 2,930,390 1,538,846 29,486 ALLIANCEBERNSTEIN GROWTH AND INCOME PORTFOLIO Value at beginning of period $10.017 $10.108 $9.765(1) Value at end of period $7.71 $10.017 $10.108 Number of accumulation units outstanding at end of period 882,219 929,829 16,099 ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO Value at beginning of period $6.217 $7.605 $9.083(2) Value at end of period $4.26 $6.217 $7.605 Number of accumulation units outstanding at end of period 306,904 313,435 76,848 ALLIANCEBERNSTEIN QUASAR PORTFOLIO Value at beginning of period $8.177 $9.491 $10.504(3) Value at end of period $5.51 $8.177 $9.491 Number of accumulation units outstanding at end of period 30,165 36,073 431 FIDELITY(R) VIP CONTRAFUND(R) PORTFOLIO Value at beginning of period $10.315 $11.904 $12.909 $10.521 $8.746(2) Value at end of period $9.23 $10.315 $11.904 $12.909 $10.521 Number of accumulation units outstanding at end of period 2,369,434 2,524,943 2,706,891 1,682,680 29,543 FIDELITY(R) VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $10.443 $11.127 $10.392 $9.897 $8.314(1) Value at end of period $8.56 $10.443 $11.127 $10.392 $9.897 Number of accumulation units outstanding at end of period 2,273,947 2,332,214 2,028,220 1,507,320 59,609 FIDELITY(R) VIP GROWTH PORTFOLIO Value at beginning of period $9.027 $11.102 $12.628 $10.231(1) Value at end of period $6.23 $9.027 $11.102 $12.628 Number of accumulation units outstanding at end of period 1,513,916 1,544,437 1,209,832 124,948 FIDELITY(R) VIP HIGH INCOME PORTFOLIO Value at beginning of period $6.369 $7.307 $9.544 $8.936 $8.411(3) Value at end of period $6.51 $6.369 $7.307 $9.544 $8.936 Number of accumulation units outstanding at end of period 908,261 1,005,301 990,111 712,099 19,661 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period $8.277 $11.472 $14.448 $9.236 $8.395(1) Value at end of period $6.70 $8.277 $11.472 $14.448 $9.236 Number of accumulation units outstanding at end of period 567,196 529,984 453,858 180,822 25,860 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $10.347 $13.926 $14.957 $10.180 $9.302(3) Value at end of period $7.14 $10.347 $13.926 $14.957 $10.180 Number of accumulation units outstanding at end of period 775,399 911,394 845,124 361,089 9,561 ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period $9.115 $11.668 $12.370 $10.099 $9.089(3) Value at end of period $6.76 $9.115 $11.668 $12.370 $10.099 Number of accumulation units outstanding at end of period 619,494 766,265 740,495 434,221 36,363 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $8.015 $10.853 $15.431 $10.357 $6.702(1) Value at end of period $5.12 $8.015 $10.853 $15.431 $10.357 Number of accumulation units outstanding at end of period 836,353 1,011,359 1,063,458 421,059 13,509 ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $10.757 $11.372 $11.581 $10.323 $9.276(2) Value at end of period $9.53 $10.757 $11.372 $11.581 $10.323 Number of accumulation units outstanding at end of period 701,902 759,422 741,768 403,187 17,681 ING VP BOND PORTFOLIO Value at beginning of period $11.743 $10.937 $10.101 $10.305 $10.119(1) Value at end of period $12.56 $11.743 $10.937 $10.101 $10.305 Number of accumulation units outstanding at end of period 1,436,808 1,394,133 1,025,035 806,343 30,949 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $8.110 $10.065 $11.447 $9.872 $7.672(1) Value at end of period $6.01 $8.110 $10.065 $11.447 $9.872 Number of accumulation units outstanding at end of period 1,439,279 1,759,669 1,840,246 1,317,642 55,707 ING VP GROWTH OPPORTUNITIES PORTFOLIO Value at beginning of period $7.981 $10.031(2) Value at end of period $5.40 $7.981 Number of accumulation units outstanding at end of period 2,346 3,705 ING VP GROWTH PORTFOLIO Value at beginning of period $8.742 $12.139 $13.961 $10.475 $8.359(1) Value at end of period $6.13 $8.742 $12.139 $13.961 $10.475 Number of accumulation units outstanding at end of period 640,934 822,257 901,462 536,727 8,297 ING VP INDEX PLUS LARGECAP PORTFOLIO Value at beginning of period $10.024 $11.752 $13.136 $10.702 $8.964(2) Value at end of period $7.77 $10.024 $11.752 $13.136 $10.702 Number of accumulation units outstanding at end of period 3,014,921 3,558,547 3,665,275 2,394,661 94,255 ING VP INTERNATIONAL EQUITY PORTFOLIO Value at beginning of period $8.075 $10.744 $13.655 $9.137 $8.497(3) Value at end of period $5.85 $8.075 $10.744 $13.655 $9.137 Number of accumulation units outstanding at end of period 174,150 191,553 211,631 79,291 4,529 ING VP MAGNACAP PORTFOLIO Value at beginning of period $9.316 $9.567(2) Value at end of period $7.08 $9.316 Number of accumulation units outstanding at end of period 18,913 6,683 ING VP MIDCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.458 $10.125(3) Value at end of period $6.18 $8.458 Number of accumulation units outstanding at end of period 138,997 27,540 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $11.396 $11.103 $10.569 $10.186 $10.086(2) Value at end of period $11.44 $11.396 $11.103 $10.569 $10.186 Number of accumulation units outstanding at end of period 2,724,201 2,794,371 1,993,511 1,313,322 44,014 ING VP SMALL COMPANY PORTFOLIO Value at beginning of period $13.068 $12.726 $12.074 $9.345 $7.219(1) Value at end of period $9.91 $13.068 $12.726 $12.074 $9.345 Number of accumulation units outstanding at end of period 617,861 558,858 419,834 114,138 7,787 ING VP SMALLCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.479 $10.064(3) Value at end of period $4.71 $8.479 Number of accumulation units outstanding at end of period 101,824 37,135 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period $4.435 $5.830 $9.999(4) Value at end of period $2.57 $4.435 $5.830 Number of accumulation units outstanding at end of period 381,818 433,715 223,693 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $12.430 $13.210 $13.681 $10.930 $8.301(1) Value at end of period $11.48 $12.430 $13.210 $13.681 $10.930 Number of accumulation units outstanding at end of period 3,601,529 4,073,988 3,812,377 2,130,090 27,397 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $9.740 $13.106 $15.531 $10.923 $7.596(1) Value at end of period $7.07 $9.740 $13.106 $15.531 $10.923 Number of accumulation units outstanding at end of period 3,015,363 3,897,751 4,430,382 2,407,010 35,759 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $9.881 $16.527 $24.546 $11.027 $6.858(1) Value at end of period $7.03 $9.881 $16.527 $24.546 $11.027 Number of accumulation units outstanding at end of period 1,696,306 2,197,460 2,338,682 994,780 21,356 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $9.906 $12.934 $15.531 $9.563 $8.027(2) Value at end of period $7.29 $9.906 $12.934 $15.531 $9.563 Number of accumulation units outstanding at end of period 3,645,285 4,448,459 4,782,841 2,118,680 39,602 JENNISON PORTFOLIO Value at beginning of period $8.884 $9.208(4) Value at end of period $6.04 $8.884 Number of accumulation units outstanding at end of period 42,520 24,556 MFS(R) TOTAL RETURN SERIES Value at beginning of period $11.726 $11.846 $10.339 $10.157 $9.772(3) Value at end of period $10.98 $11.726 $11.846 $10.339 $10.157 Number of accumulation units outstanding at end of period 1,935,085 1,711,650 1,107,868 675,246 12,838 OPPENHEIMER AGGRESSIVE GROWTH FUND VA Value at beginning of period $10.085 $14.860 $16.952 $9.350 $6.300(1) Value at end of period $7.19 $10.085 $14.860 $16.952 $9.350 Number of accumulation units outstanding at end of period 653,599 774,543 677,022 139,615 12,609 OPPENHEIMER MAIN STREET FUND VA Value at beginning of period $8.710 $9.818 $10.898 $9.067 $6.647(1) Value at end of period $6.98 $8.710 $9.818 $10.898 $9.067 Number of accumulation units outstanding at end of period 1,503,687 1,636,809 1,516,368 737,210 41,656 OPPENHEIMER STRATEGIC BOND FUND VA Value at beginning of period $10.453 $10.096 $9.961 $9.810 $9.566(1) Value at end of period $11.09 $10.453 $10.096 $9.961 $9.810 Number of accumulation units outstanding at end of period 629,246 574,226 497,551 321,797 13,169 SP JENNISON INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period $7.521 $9.347(5) Value at end of period $5.73 $7.521 Number of accumulation units outstanding at end of period 7,304 260 UBS SERIES TRUST - TACTICAL ALLOCATION PORTFOLIO Value at beginning of period $8.871 $10.273 $10.629 $9.852(2) Value at end of period $6.75 $8.871 $10.273 $10.629 Number of accumulation units outstanding at end of period 964,640 1,022,443 917,170 541,487
Footnotes for period ended December 31, 2001: (1) Funds were first received in this option during January 2001. (2) Funds were first received in this option during May 2001. (3) Funds were first received in this option during April 2001. (4) Funds were first received in this option during June 2001. (5) Funds were first received in this option during July 2001. Footnotes for period ended December 31, 2000: (1) Funds were first received in this option during September 2000. (2) Funds were first received in this option during August 2000. (3) Funds were first received in this option during October 2000. (4) Funds were first received in this option during May 2000. Footnotes for period ended December 31, 1999: (1) Funds were first received in this option during September 1999. (2) Funds were first received in this option during May 1999. Footnotes for period ended December 31, 1998: (1) Funds were first received in this option during October 1998. (2) Funds were first received in this option during September 1998. (3) Funds were first received in this option during November 1998. Condensed Financial Information -------------------------------------------------------------------------------- TABLE III FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.40% (Selected data for accumulation units outstanding throughout each period) ================================================================================ The condensed financial information presented below for each of the periods in the two-year period ended December 31, 2002 is derived from the financial statements of the separate account, which have been audited by Ernst & Young LLP, independent auditors. The condensed financial information presented below for each of the periods in the three-year period ended December 31, 2000 (as applicable), is derived from the financial statements of the separate account, which have been audited by other auditors. The financial statements and the independent auditors' report thereon for the year ended December 31, 2002 are included in the Statement of Additional Information.
2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- AIM V.I. CAPITAL APPRECIATION FUND Value at beginning of period $9.687 $12.808 $14.579 $10.224 $9.078(1) Value at end of period $7.23 $9.687 $12.808 $14.579 $10.224 Number of accumulation units outstanding at end of period 329,703 424,755 392,207 156,884 857 AIM V.I. CORE EQUITY FUND Value at beginning of period $9.029 $11.868 $14.086 $10.641 $8.830(2) Value at end of period $7.52 $9.029 $11.868 $14.086 $10.641 Number of accumulation units outstanding at end of period 507,917 607,793 628,311 259,387 7,172 AIM V.I. GOVERNMENT SECURITIES FUND Value at beginning of period $11.296 $10.767 $10.743(1) Value at end of period $12.21 $11.296 $10.767 Number of accumulation units outstanding at end of period 283,516 86,120 10,553 AIM V.I. GROWTH FUND Value at beginning of period $7.330 $11.246 $14.343 $10.757 $9.702(3) Value at end of period $4.99 $7.330 $11.246 $14.343 $10.757 Number of accumulation units outstanding at end of period 372,278 500,453 539,472 228,578 1,498 AIM V.I. PREMIER EQUITY FUND Value at beginning of period $9.845 $11.420 $13.569 $10.594 $9.664(3) Value at end of period $6.77 $9.845 $11.420 $13.569 $10.594 Number of accumulation units outstanding at end of period 868,527 1,050,807 1,085,664 492,467 9,219 ALLIANCEBERNSTEIN GROWTH AND INCOME PORTFOLIO Value at beginning of period $9.991 $10.098 $9.310(2) Value at end of period $7.68 $9.991 $10.098 Number of accumulation units outstanding at end of period 356,243 341,168 4,460 ALLIANCEBERSTEIN PREMIER GROWTH PORTFOLIO Value at beginning of period $6.201 $7.597 $7.918(2) Value at end of period $4.24 $6.201 $7.597 Number of accumulation units outstanding at end of period 138,235 85,676 23,775 ALLIANCEBERNSTEIN QUASAR PORTFOLIO Value at beginning of period $8.156 $9.482 $8.851(3) Value at end of period $5.49 $8.156 $9.482 Number of accumulation units outstanding at end of period 10,982 8,785 296 FIDELITY(R) VIP CONTRAFUND(R) PORTFOLIO Value at beginning of period $10.262 $11.860 $12.881 $10.514 $8.946(1) Value at end of period $9.17 $10.262 $11.860 $12.881 $10.514 Number of accumulation units outstanding at end of period 842,283 1,021,502 1,105,565 604,942 3,861 FIDELITY(R) VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $10.388 $11.086 $10.369 $9.891 $9.412(3) Value at end of period $8.51 $10.388 $11.086 $10.369 $9.891 Number of accumulation units outstanding at end of period 665,354 681,661 597,258 471,012 9,907 FIDELITY(R) VIP GROWTH PORTFOLIO Value at beginning of period $8.993 $11.076 $12.618 $10.793(1) Value at end of period $6.20 $8.993 $11.076 $12.618 Number of accumulation units outstanding at end of period 531,768 556,572 444,916 35,352 FIDELITY(R) VIP HIGH INCOME PORTFOLIO Value at beginning of period $6.336 $7.280 $9.523 $8.930 $8.987(3) Value at end of period $6.46 $6.336 $7.280 $9.523 $8.930 Number of accumulation units outstanding at end of period 390,976 442,314 460,731 244,927 48,476 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period $8.234 $11.430 $14.416 $9.229 $8.841(1) Value at end of period $6.65 $8.234 $11.430 $14.416 $9.229 Number of accumulation units outstanding at end of period 399,228 415,390 360,841 122,089 2,368 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $10.293 $13.875 $14.924 $10.173 $9.421(3) Value at end of period $7.09 $10.293 $13.875 $14.924 $10.173 Number of accumulation units outstanding at end of period 201,250 268,472 258,457 99,417 161 ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period $9.068 $11.625 $12.343 $10.092 $8.886(1) Value at end of period $6.72 $9.068 $11.625 $12.343 $10.092 Number of accumulation units outstanding at end of period 179,084 239,620 281,914 145,910 6,259 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $7.973 $10.812 $15.397 $10.350 $8.599(1) Value at end of period $5.09 $7.973 $10.812 $15.397 $10.350 Number of accumulation units outstanding at end of period 250,908 336,248 337,201 173,671 12,479 ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $10.701 $11.330 $11.555 $10.316 $9.581(1) Value at end of period $9.46 $10.701 $11.330 $11.555 $10.316 Number of accumulation units outstanding at end of period 324,406 390,130 383,215 237,246 9,447 ING VP BOND PORTFOLIO Value at beginning of period $11.682 $10.896 $10.078 $10.298 $10.188(1) Value at end of period $12.48 $11.682 $10.896 $10.078 $10.298 Number of accumulation units outstanding at end of period 534,744 504,706 402,297 300,240 3,930 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $8.067 $10.028 $11.422 $9.866 $8.961(1) Value at end of period $5.97 $8.067 $10.028 $11.422 $9.866 Number of accumulation units outstanding at end of period 490,461 598,188 609,964 407,605 47,020 ING VP GROWTH OPPORTUNITIES PORTFOLIO Value at beginning of period $7.973 $10.086(1) Value at end of period $5.38 $7.973 Number of accumulation units outstanding at end of period 1,383 2,168 ING VP GROWTH PORTFOLIO Value at beginning of period $8.697 $12.094 $13.930 $10.468 $8.899(1) Value at end of period $6.09 $8.697 $12.094 $13.930 $10.468 Number of accumulation units outstanding at end of period 122,600 179,315 205,559 114,036 2,298 ING VP INDEX PLUS LARGECAP PORTFOLIO Value at beginning of period $9.971 $11.709 $13.107 $10.694 $9.134(2) Value at end of period $7.71 $9.971 $11.709 $13.107 $10.694 Number of accumulation units outstanding at end of period 1,263,503 1,515,400 1,645,365 926,393 4,957 ING VP INTERNATIONAL EQUITY PORTFOLIO Value at beginning of period $8.033 $10.704 $13.625 $9.131 $8.663(3) Value at end of period $5.81 $8.033 $10.704 $13.625 $9.131 Number of accumulation units outstanding at end of period 61,383 79,279 82,568 28,091 718 ING VP MAGNACAP PORTFOLIO Value at beginning of period $9.306 $9.624(2) Value at end of period $7.07 $9.306 Number of accumulation units outstanding at end of period 1,232 701 ING VP MIDCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.449 $9.402(2) Value at end of period $6.17 $8.449 Number of accumulation units outstanding at end of period 26,454 14,864 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $11.336 $11.062 $10.546 $10.179 $10.120(1) Value at end of period $11.36 $11.336 $11.062 $10.546 $10.179 Number of accumulation units outstanding at end of period 1,186,508 1,293,086 818,340 707,569 47,079 ING VP SMALL COMPANY PORTFOLIO Value at beginning of period $13.000 $12.679 $12.048 $9.338 $8.739(3) Value at end of period $9.84 $13.000 $12.679 $12.048 $9.338 Number of accumulation units outstanding at end of period 200,548 165,137 119,263 39,754 396 ING VP SMALLCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.470 $11.291(1) Value at end of period $4.70 $8.470 Number of accumulation units outstanding at end of period 56,606 14,405 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period $4.424 $5.824 $8.693(4) Value at end of period $2.56 $4.424 $5.824 Number of accumulation units outstanding at end of period 55,830 79,126 74,724 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $12.365 $13.161 $13.651 $10.923 $9.275(4) Value at end of period $11.41 $12.365 $13.161 $13.651 $10.923 Number of accumulation units outstanding at end of period 1,255,266 1,450,692 1,480,174 778,170 9,108 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $9.689 $13.057 $15.497 $10.915 $9.157(1) Value at end of period $7.02 $9.689 $13.057 $15.497 $10.915 Number of accumulation units outstanding at end of period 983,467 1,297,820 1,465,080 647,596 6,648 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $9.829 $16.466 $24.492 $11.020 $9.497(3) Value at end of period $6.98 $9.829 $16.466 $24.492 $11.020 Number of accumulation units outstanding at end of period 657,392 849,468 933,621 368,330 944 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $9.854 $12.886 $15.497 $9.557 $8.519(1) Value at end of period $7.24 $9.854 $12.886 $15.497 $9.557 Number of accumulation units outstanding at end of period 1,076,133 1,330,767 1,437,826 583,969 7,974 JENNISON PORTFOLIO Value at beginning of period $8.875 $9.047(3) Value at end of period $6.02 $8.875 Number of accumulation units outstanding at end of period 4,457 7,748 MFS(R) TOTAL RETURN SERIES Value at beginning of period $11.665 $11.803 $10.317 $10.150 $9.737(1) Value at end of period $10.91 $11.665 $11.803 $10.317 $10.150 Number of accumulation units outstanding at end of period 561,729 515,486 359,846 307,463 27,534 OPPENHEIMER AGGRESSIVE GROWTH FUND VA Value at beginning of period $10.032 $14.805 $16.915 $9.343 $8.309(3) Value at end of period $7.14 $10.032 $14.805 $16.915 $9.343 Number of accumulation units outstanding at end of period 205,718 257,900 262,829 58,765 407 OPPENHEIMER MAIN STREET FUND VA Value at beginning of period $8.664 $9.782 $10.874 $9.061 $8.449(1) Value at end of period $6.94 $8.664 $9.782 $10.874 $9.061 Number of accumulation units outstanding at end of period 475,185 542,225 527,870 255,253 1,468 OPPENHEIMER STRATEGIC BOND FUND VA Value at beginning of period $10.398 $10.059 $9.939 $9.803 $9.768(3) Value at end of period $11.02 $10.398 $10.059 $9.939 $9.803 Number of accumulation units outstanding at end of period 209,695 190,058 151,921 118,824 10 SP JENNISON INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period $7.280(1) Value at end of period $5.72 Number of accumulation units outstanding at end of period 7,013 UBS SERIES TRUST - TACTICAL ALLOCATION PORTFOLIO Value at beginning of period $8.835 $10.247 $10.618 $9.567(2) Value at end of period $6.71 $8.835 $10.247 $10.618 Number of accumulation units outstanding at end of period 94,577 100,437 $93,298 49,695
Footnote for period ended December 31, 2002: (1) Funds were first received in this option during January 2002. Footnotes for period ended December 31, 2001: (1) Funds were first received in this option during April 2001. (2) Funds were first received in this option during May 2001. (3) Funds were first received in this option during June 2001. Footnotes for period ended December 31, 2000: (1) Funds were first received in this option during November 2000. (2) Funds were first received in this option during September 2000. (3) Funds were first received in this option during October 2000. (4) Funds were first received in this option during May 2000. Footnotes for period ended December 31, 1999: (1) Funds were first received in this option during October 1999. (2) Funds were first received in this option during June 1999. Footnotes for period ended December 31, 1998: (1) Funds were first received in this option during November 1998. (2) Funds were first received in this option during October 1998. (3) Funds were first received in this option during December 1998. (4) Funds were first received in this option during September 1998. Condensed Financial Information -------------------------------------------------------------------------------- TABLE IV FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.45% (Selected data for accumulation units outstanding throughout each period) ================================================================================ The condensed financial information presented below for each of the periods in the two-year period ended December 31, 2002 is derived from the financial statements of the separate account, which have been audited by Ernst & Young LLP, independent auditors. The condensed financial information presented below for the period ended December 31, 2000 is derived from the financial statements of the separate account, which have been audited by other auditors. The financial statements and the independent auditors' report thereon for the year ended December 31, 2002 are included in the Statement of Additional Information. 2002 2001 2000 ---- ---- ---- AIM V.I. CAPITAL APPRECIATION FUND Value at beginning of period $5.805 $7.678 $9.935(1) Value at end of period $4.33 $5.805 $7.678 Number of accumulation units outstanding at end of period 224,044 228,066 100,309 AIM V.I. CORE EQUITY FUND Value at beginning of period $6.246 $8.214 $9.846(2) Value at end of period $5.20 $6.246 $8.214 Number of accumulation units outstanding at end of period 233,332 248,334 61,552 AIM V.I. GOVERNMENT SECURITIES FUND Value at beginning of period $10.897 $10.392 $10.090(3) Value at end of period $11.77 $10.897 $10.392 Number of accumulation units outstanding at end of period 175,025 184,082 918 AIM V.I. GROWTH FUND Value at beginning of period $4.958 $7.611 $9.945(1) Value at end of period $3.37 $4.958 $7.611 Number of accumulation units outstanding at end of period 164,058 256,729 121,073 AIM V.I. PREMIER EQUITY FUND Value at beginning of period $7.585 $8.804 $9.590(2) Value at end of period $5.21 $7.585 $8.804 Number of accumulation units outstanding at end of period 341,816 371,813 83,391 ALLIANCEBERNSTEIN GROWTH AND INCOME PORTFOLIO Value at beginning of period $10.272 $10.387 $9.984(2) Value at end of period $7.89 $10.272 $10.387 Number of accumulation units outstanding at end of period 380,963 433,113 20,209 ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO Value at beginning of period $6.688 $8.198 $9.505(2) Value at end of period $4.57 $6.688 $8.198 Number of accumulation units outstanding at end of period 201,715 174,117 38,184 ALLIANCEBERNSTEIN QUASAR PORTFOLIO Value at beginning of period $7.384 $8.589 $9.718(2) Value at end of period $4.97 $7.384 $8.589 Number of accumulation units outstanding at end of period 13,239 16,639 963 FIDELITY(R) VIP CONTRAFUND(R) PORTFOLIO Value at beginning of period $8.163 $9.440 $10.000(1) Value at end of period $7.29 $8.163 $9.440 Number of accumulation units outstanding at end of period 267,452 229,470 56,160 FIDELITY(R) VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $9.978 $10.654 $10.343(2) Value at end of period $8.17 $9.978 $10.654 Number of accumulation units outstanding at end of period 416,662 402,042 19,341 FIDELITY(R) VIP GROWTH PORTFOLIO Value at beginning of period $6.941 $8.554 $9.783(1) Value at end of period $4.78 $6.941 $8.554 Number of accumulation units outstanding at end of period 678,024 646,257 131,209 FIDELITY(R) VIP HIGH INCOME PORTFOLIO Value at beginning of period $7.367 $8.470 $9.860(2) Value at end of period $7.51 $7.367 $8.470 Number of accumulation units outstanding at end of period 102,212 110,266 13,910 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period $7.038 $9.775 $9.570(2) Value at end of period $5.68 $7.038 $9.775 Number of accumulation units outstanding at end of period 289,604 227,334 29,924 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $6.526 $8.801 $9.991(2) Value at end of period $4.49 $6.526 $8.801 Number of accumulation units outstanding at end of period 288,030 339,484 54,610 ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period $6.803 $8.726 $9.951(1) Value at end of period $5.04 $6.803 $8.726 Number of accumulation units outstanding at end of period 151,906 165,808 31,491 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $5.612 $7.614 $8.529(2) Value at end of period $3.58 $5.612 $7.614 Number of accumulation units outstanding at end of period 108,235 140,983 24,330 ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $8.998 $9.532 $9.867(2) Value at end of period $7.95 $8.998 $9.532 Number of accumulation units outstanding at end of period 241,435 255,686 50,040 ING VP BOND PORTFOLIO Value at beginning of period $11.222 $10.472 $10.042(2) Value at end of period $11.98 $11.222 $10.472 Number of accumulation units outstanding at end of period 473,230 358,474 26,415 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $7.215 $8.973 $9.481(2) Value at end of period $5.33 $7.215 $8.973 Number of accumulation units outstanding at end of period 217,039 229,035 37,513 ING VP GROWTH OPPORTUNITIES PORTFOLIO Value at beginning of period $7.970 $8.467(1) Value at end of period $5.38 $7.970 Number of accumulation units outstanding at end of period 6,242 3,467 ING VP GROWTH PORTFOLIO Value at beginning of period $5.769 $8.027 $9.187(2) Value at end of period $4.04 $5.769 $8.027 Number of accumulation units outstanding at end of period 121,103 144,533 44,666 ING VP INDEX PLUS LARGECAP PORTFOLIO Value at beginning of period $7.662 $9.002 $9.846(2) Value at end of period $5.93 $7.662 $9.002 Number of accumulation units outstanding at end of period 675,425 649,181 90,026 ING VP INTERNATIONAL EQUITY PORTFOLIO Value at beginning of period $6.557 $8.741 $9.183(2) Value at end of period $4.74 $6.557 $8.741 Number of accumulation units outstanding at end of period 71,158 77,492 27,898 ING VP MAGNACAP PORTFOLIO Value at beginning of period $9.303 $9.883(2) Value at end of period $7.06 $9.303 Number of accumulation units outstanding at end of period 7,235 7,867 ING VP MIDCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.447 $10.001(2) Value at end of period $6.16 $8.447 Number of accumulation units outstanding at end of period 78,501 13,287 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $10.389 $10.143 $10.044(2) Value at end of period $10.40 $10.389 $10.143 Number of accumulation units outstanding at end of period 727,899 825,726 101,038 ING VP SMALL COMPANY PORTFOLIO Value at beginning of period $9.463 $9.234 $8.762(2) Value at end of period $7.16 $9.463 $9.234 Number of accumulation units outstanding at end of period 339,072 272,628 19,542 ING VP SMALLCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.467 $10.136(2) Value at end of period $4.69 $8.467 Number of accumulation units outstanding at end of period 49,257 18,432 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period $4.622 $6.088 $9.288(2) Value at end of period $2.67 $4.622 $6.088 Number of accumulation units outstanding at end of period 125,467 115,833 27,854 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $9.152 $9.746 $9.982(1) Value at end of period $8.44 $9.152 $9.746 Number of accumulation units outstanding at end of period 678,472 656,847 175,868 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $6.162 $8.308 $10.000(1) Value at end of period $4.46 $6.162 $8.308 Number of accumulation units outstanding at end of period 327,790 388,433 139,032 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $4.161 $6.975 $10.000(1) Value at end of period $2.96 $4.161 $6.975 Number of accumulation units outstanding at end of period 555,398 600,078 131,436 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $6.550 $8.570 $10.000(1) Value at end of period $4.81 $6.550 $8.570 Number of accumulation units outstanding at end of period 771,583 821,676 255,501 JENNISON PORTFOLIO Value at beginning of period $8.872 $8.978(3) Value at end of period $6.02 $8.872 Number of accumulation units outstanding at end of period 879 25,615 MFS(R) TOTAL RETURN SERIES Value at beginning of period $10.632 $10.763 $10.244(2) Value at end of period $9.94 $10.632 $10.763 Number of accumulation units outstanding at end of period 617,718 560,757 23,734 OPPENHEIMER AGGRESSIVE GROWTH FUND/VA Value at beginning of period $4.625 $6.828 $10.000(1) Value at end of period $3.29 $4.625 $6.828 Number of accumulation units outstanding at end of period 507,860 548,565 159,723 OPPENHEIMER MAIN STREET FUND/VA Value at beginning of period $7.824 $8.838 $10.000(1) Value at end of period $6.26 $7.824 $8.838 Number of accumulation units outstanding at end of period 265,864 260,614 86,667 OPPENHEIMER STRATEGIC BOND FUND/VA Value at beginning of period $10.269 $9.939 $9.995(2) Value at end of period $10.87 $10.269 $9.939 Number of accumulation units outstanding at end of period 157,440 129,253 17,052 SP JENNISON INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period $7.510 $8.170(4) Value at end of period $5.71 $7.510 Number of accumulation units outstanding at end of period 6,381 6,249 UBS SERIES TRUST - TACTICAL ALLOCATION PORTFOLIO Value at beginning of period $8.244 $9.567 $9.565(3) Value at end of period $6.26 $8.244 $9.567 Number of accumulation units outstanding at end of period 81,758 149,872 200 Footnotes for period ended December 31, 2001: (1) Funds were first received in this option during July 2001. (2) Funds were first received in this option during April 2001. (3) Funds were first received in this option during June 2001. (4) Funds were first received in this option during May 2001. Footnotes for period ended December 31, 2000: (1) Funds were first received in this option during August 2000. (2) Funds were first received in this option during September 2000. (3) Funds were first received in this option during October 2000. Condensed Financial Information -------------------------------------------------------------------------------- TABLE V FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.75% (Selected data for accumulation units outstanding throughout each period) ================================================================================ The condensed financial information presented below for each of the periods in the two-year period ended December 31, 2002 is derived from the financial statements of the separate account, which have been audited by Ernst & Young LLP, independent auditors. The condensed financial information presented below for the period ended December 31, 2000 is derived from the financial statements of the separate account, which have been audited by other auditors. The financial statements and the independent auditors' report thereon for the year ended December 31, 2002 are included in the Statement of Additional Information. 2002 2001 2000 ---- ---- ---- AIM V.I. CAPITAL APPRECIATION FUND Value at beginning of period $5.782 $7.672 $10.077(1) Value at end of period $4.30 $5.782 $7.672 Number of accumulation units outstanding at end of period 235,585 261,736 88,286 AIM V.I. CORE EQUITY FUND Value at beginning of period $6.222 $8.207 $10.000(1) Value at end of period $5.16 $6.222 $8.207 Number of accumulation units outstanding at end of period 263,338 297,127 162,481 AIM V.I. GOVERNMENT SECURITIES FUND Value at beginning of period $10.855 $10.384 $10.222(2) Value at end of period $11.69 $10.855 $10.384 Number of accumulation units outstanding at end of period 259,823 72,882 5,029 AIM V.I. GROWTH FUND Value at beginning of period $4.929 $7.604 $10.000(1) Value at end of period $3.35 $4.929 $7.604 Number of accumulation units outstanding at end of period 361,314 122,963 98,934 AIM V.I. PREMIER EQUITY FUND Value at beginning of period $7.556 $8.796 $9.667(3) Value at end of period $5.18 $7.556 $8.796 Number of accumulation units outstanding at end of period 562,473 575,874 156,962 ALLIANCEBERNSTEIN GROWTH AND INCOME PORTFOLIO Value at beginning of period $10.232 $10.378 $10.240(1) Value at end of period $7.84 $10.232 $10.378 Number of accumulation units outstanding at end of period 324,306 301,192 15,500 ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO Value at beginning of period $6.662 $8.191 $9.170(3) Value at end of period $4.54 $6.662 $8.191 Number of accumulation units outstanding at end of period 235,804 298,931 113,044 ALLIANCEBERNSTEIN QUASAR PORTFOLIO Value at beginning of period $7.356 $8.582 $9.065(3) Value at end of period $4.93 $7.356 $8.582 Number of accumulation units outstanding at end of period 26,431 25,884 5,820 FIDELITY(R) VIP CONTRAFUND(R) PORTFOLIO Value at beginning of period $8.131 $9.432 $10.000(1) Value at end of period $7.24 $8.131 $9.432 Number of accumulation units outstanding at end of period 281,389 255,868 58,407 FIDELITY(R) VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $9.939 $10.645 $10.000(1) Value at end of period $8.11 $9.939 $10.645 Number of accumulation units outstanding at end of period 442,137 376,901 17,998 FIDELITY(R) VIP GROWTH PORTFOLIO Value at beginning of period $6.914 $8.546 $9.790(1) Value at end of period $4.75 $6.914 $8.546 Number of accumulation units outstanding at end of period 529,194 547,139 121,084 FIDELITY(R) VIP HIGH INCOME PORTFOLIO Value at beginning of period $7.338 $8.463 $9.903(1) Value at end of period $7.46 $7.338 $8.463 Number of accumulation units outstanding at end of period 138,089 78,147 13,207 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period $7.011 $9.767 $10.111(3) Value at end of period $5.64 $7.011 $9.767 Number of accumulation units outstanding at end of period 90,377 74,030 19,915 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $6.500 $8.794 $9.984(3) Value at end of period $4.46 $6.500 $8.794 Number of accumulation units outstanding at end of period 196,376 287,459 59,096 ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period $6.777 $8.719 $9.996(1) Value at end of period $5.00 $6.777 $8.719 Number of accumulation units outstanding at end of period 121,588 131,798 26,544 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $5.590 $7.608 $9.683(3) Value at end of period $3.55 $5.590 $7.608 Number of accumulation units outstanding at end of period 162,543 184,512 23,377 ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $8.963 $9.524 $10.000(1) Value at end of period $7.90 $8.963 $9.524 Number of accumulation units outstanding at end of period 128,993 156,038 56,480 ING VP BOND PORTFOLIO Value at beginning of period $11.178 $10.463 $10.131(4) Value at end of period $11.90 $11.178 $10.463 Number of accumulation units outstanding at end of period 257,779 174,378 24,878 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $7.187 $8.965 $10.000(1) Value at end of period $5.30 $7.187 $8.965 Number of accumulation units outstanding at end of period 141,086 140,249 49,524 ING VP GROWTH OPPORTUNITIES PORTFOLIO Value at beginning of period $7.954 $9.970(1) Value at end of period $5.35 $7.954 Number of accumulation units outstanding at end of period 1,596 1,414 ING VP GROWTH PORTFOLIO Value at beginning of period $5.747 $8.021 $9.727(1) Value at end of period $4.01 $5.747 $8.021 Number of accumulation units outstanding at end of period 105,967 116,474 46,376 ING VP INDEX PLUS LARGECAP PORTFOLIO Value at beginning of period $7.633 $8.995 $10.000(5) Value at end of period $5.88 $7.633 $8.995 Number of accumulation units outstanding at end of period 539,612 651,208 214,203 ING VP INTERNATIONAL EQUITY PORTFOLIO Value at beginning of period $6.531 $8.734 $10.038(3) Value at end of period $4.70 $6.531 $8.734 Number of accumulation units outstanding at end of period 50,412 66,652 20,253 ING VP MAGNACAP PORTFOLIO Value at beginning of period $9.284 $9.284(2) Value at end of period $7.02 $9.284 Number of accumulation units outstanding at end of period 2,778 2,777 ING VP MIDCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.429 $9.630(3) Value at end of period $6.13 $8.429 Number of accumulation units outstanding at end of period 47,024 14,483 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $10.348 $10.135 $10.015(3) Value at end of period $10.33 $10.348 $10.135 Number of accumulation units outstanding at end of period 832,127 716,591 68,061 ING VP SMALL COMPANY PORTFOLIO Value at beginning of period $9.426 $9.226 $10.169(1) Value at end of period $7.11 $9.426 $9.226 Number of accumulation units outstanding at end of period 170,804 175,854 22,000 ING VP SMALLCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.450 $9.638(3) Value at end of period $4.67 $8.450 Number of accumulation units outstanding at end of period 39,805 4,949 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period $4.604 $6.083 $9.300(1) Value at end of period $2.66 $4.604 $6.083 Number of accumulation units outstanding at end of period 90,585 130,825 72,410 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $9.116 $9.738 $10.000(1) Value at end of period $8.38 $9.116 $9.738 Number of accumulation units outstanding at end of period 472,318 483,591 180,750 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $6.138 $8.301 $10.000(1) Value at end of period $4.43 $6.138 $8.301 Number of accumulation units outstanding at end of period 353,242 478,007 198,258 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $4.145 $6.969 $10.000(1) Value at end of period $2.93 $4.145 $6.969 Number of accumulation units outstanding at end of period 385,034 470,611 127,628 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $6.525 $8.563 $10.000(1) Value at end of period $4.78 $6.525 $8.563 Number of accumulation units outstanding at end of period 699,890 883,452 276,998 JENNISON PORTFOLIO Value at beginning of period $8.854 $9.109(3) Value at end of period $5.99 $8.854 Number of accumulation units outstanding at end of period 4,124 6,445 MFS(R) TOTAL RETURN SERIES Value at beginning of period $10.591 $10.754 $10.243(3) Value at end of period $9.87 $10.591 $10.754 Number of accumulation units outstanding at end of period 469,356 343,895 17,925 OPPENHEIMER AGGRESSIVE GROWTH FUND/VA Value at beginning of period $4.607 $6.823 $10.000(1) Value at end of period $3.27 $4.607 $6.823 Number of accumulation units outstanding at end of period 263,904 297,834 108,107 OPPENHEIMER MAIN STREET FUND/VA Value at beginning of period $7.794 $8.831 $9.736(3) Value at end of period $6.22 $7.794 $8.831 Number of accumulation units outstanding at end of period 245,483 249,385 72,969 OPPENHEIMER STRATEGIC BOND FUND/VA Value at beginning of period $10.229 $9.931 $9.991(3) Value at end of period $10.80 $10.229 $9.931 Number of accumulation units outstanding at end of period 100,171 72,122 16,124 SP JENNISON INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period $7.495 $8.295(3) Value at end of period $5.68 $7.495 Number of accumulation units outstanding at end of period 7,318 1,176 UBS SERIES TRUST - TACTICAL ALLOCATION PORTFOLIO Value at beginning of period $8.212 $9.559 $9.954(4) Value at end of period $6.22 $8.212 $9.559 Number of accumulation units outstanding at end of period 74,439 66,813 8,215 Footnotes for period ended December 31, 2001: (1) Funds were first received in this option during April 2001. (2) Funds were first received in this option during November 2001. (3) Funds were first received in this option during June 2001. Footnotes for period ended December 31, 2000: (1) Funds were first received in this option during August 2000. (2) Funds were first received in this option during November 2000. (3) Funds were first received in this option during September 2000. (4) Funds were first received in this option during October 2000. (5) Funds were first received in this option during December 2000. Condensed Financial Information -------------------------------------------------------------------------------- TABLE VI FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.90% (Selected data for accumulation units outstanding throughout each period) ================================================================================ The condensed financial information presented below for each of the periods in the two-year period ended December 31, 2002 is derived from the financial statements of the separate account, which have been audited by Ernst & Young LLP, independent auditors. The condensed financial information presented below for the period ended December 31, 2000 is derived from the financial statements of the separate account, which have been audited by other auditors. The financial statements and the independent auditors' report thereon for the year ended December 31, 2002 are included in the Statement of Additional Information. 2002 2001 2000 ---- ---- ---- AIM V.I. CAPITAL APPRECIATION FUND Value at beginning of period $5.771 $7.669 $10.097(1) Value at end of period $4.28 $5.771 $7.669 Number of accumulation units outstanding at end of period 158,970 177,076 98,266 AIM V.I. CORE EQUITY FUND Value at beginning of period $6.210 $8.204 $9.845(2) Value at end of period $5.14 $6.210 $8.204 Number of accumulation units outstanding at end of period 105,523 135,664 69,883 AIM V.I. GOVERNMENT SECURITIES FUND Value at beginning of period $10.834 $10.379 $10.350(3) Value at end of period $11.65 $10.834 $10.379 Number of accumulation units outstanding at end of period 61,959 52,316 2,947 AIM V.I. GROWTH FUND Value at beginning of period $4.939 $7.601 $10.032(1) Value at end of period $3.34 $4.939 $7.601 Number of accumulation units outstanding at end of period 111,966 442,717 52,042 AIM V.I. PREMIER EQUITY FUND Value at beginning of period $7.541 $8.793 $10.009(1) Value at end of period $5.16 $7.541 $8.793 Number of accumulation units outstanding at end of period 143,877 168,627 28,615 ALLIANCEBERNSTEIN GROWTH AND INCOME PORTFOLIO Value at beginning of period $10.212 $10.374 $10.145(3) Value at end of period $7.81 $10.212 $10.374 Number of accumulation units outstanding at end of period 84,109 72,600 1,545 ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO Value at beginning of period $6.649 $8.188 $9.504(2) Value at end of period $4.52 $6.649 $8.188 Number of accumulation units outstanding at end of period 83,613 79,454 6,109 ALLIANCEBERNSTEIN QUASAR PORTFOLIO Value at beginning of period $7.341 $8.579 $9.714(2) Value at end of period $4.91 $7.341 $8.579 Number of accumulation units outstanding at end of period 5,281 5,613 835 FIDELITY(R) VIP CONTRAFUND(R) PORTFOLIO Value at beginning of period $8.115 $9.428 $9.607(2) Value at end of period $7.22 $8.115 $9.428 Number of accumulation units outstanding at end of period 79,561 68,936 10,423 FIDELITY(R) VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $9.920 $10.640 $10.074(2) Value at end of period $8.08 $9.920 $10.640 Number of accumulation units outstanding at end of period 51,427 61,951 7,261 FIDELITY(R) VIP GROWTH PORTFOLIO Value at beginning of period $6.900 $8.543 $9.018(2) Value at end of period $4.73 $6.900 $8.543 Number of accumulation units outstanding at end of period 101,766 111,952 37,652 FIDELITY(R) VIP HIGH INCOME PORTFOLIO Value at beginning of period $7.324 $8.459 $9.371(2) Value at end of period $7.43 $7.324 $8.459 Number of accumulation units outstanding at end of period 55,375 45,717 12,250 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period $6.997 $9.763 $9.724(2) Value at end of period $5.62 $6.997 $9.763 Number of accumulation units outstanding at end of period 10,991 10,819 7,075 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $6.488 $8.790 $9.186(2) Value at end of period $4.44 $6.488 $8.790 Number of accumulation units outstanding at end of period 114,025 126,421 94,883 ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period $6.763 $8.715 $9.414(2) Value at end of period $4.98 $6.763 $8.715 Number of accumulation units outstanding at end of period 38,140 51,496 2,326 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $5.579 $7.605 $8.273(2) Value at end of period $3.54 $5.579 $7.605 Number of accumulation units outstanding at end of period 58,907 74,707 22,160 ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $8.945 $9.520 $9.924(2) Value at end of period $7.87 $8.945 $9.520 Number of accumulation units outstanding at end of period 77,192 74,575 29,543 ING VP BOND PORTFOLIO Value at beginning of period $11.157 $10.459 $10.323(3) Value at end of period $11.86 $11.157 $10.459 Number of accumulation units outstanding at end of period 72,408 134,013 2,717 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $7.173 $8.962 $9.312(2) Value at end of period $5.28 $7.173 $8.962 Number of accumulation units outstanding at end of period 77,343 70,511 6,539 ING VP GROWTH OPPORTUNITIES PORTFOLIO Value at beginning of period $7.510(1) Value at end of period $5.34 Number of accumulation units outstanding at end of period 1,028 ING VP GROWTH PORTFOLIO Value at beginning of period $5.736 $8.017 $9.280(2) Value at end of period $4.00 $5.736 $8.017 Number of accumulation units outstanding at end of period 12,355 15,657 5,769 ING VP INDEX PLUS LARGECAP PORTFOLIO Value at beginning of period $7.618 $8.991 $10.031(4) Value at end of period $5.86 $7.618 $8.991 Number of accumulation units outstanding at end of period 220,225 197,497 12,685 ING VP INTERNATIONAL EQUITY PORTFOLIO Value at beginning of period $6.518 $8.730 $9.317(2) Value at end of period $4.69 $6.518 $8.730 Number of accumulation units outstanding at end of period 5,586 6,120 899 ING VP MAGNACAP PORTFOLIO Value at beginning of period $9.440(1) Value at end of period $7.01 Number of accumulation units outstanding at end of period 3,338 ING VP MIDCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.420 $9.481(1) Value at end of period $6.11 $8.420 Number of accumulation units outstanding at end of period 7,015 288 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $10.328 $10.130 $10.014(2) Value at end of period $10.30 $10.328 $10.130 Number of accumulation units outstanding at end of period 207,160 290,006 92,189 ING VP SMALL COMPANY PORTFOLIO Value at beginning of period $9.408 $9.223 $9.222(5) Value at end of period $7.09 $9.408 $9.223 Number of accumulation units outstanding at end of period 36,062 31,930 3,438 ING VP SMALLCAP OPPORTUNITIES PORTFOLIO Value at beginning of period $8.441 $10.175(2) Value at end of period $4.66 $8.441 Number of accumulation units outstanding at end of period 11,288 2,354 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period $4.595 $6.080 $8.131(2) Value at end of period $2.65 $4.595 $6.080 Number of accumulation units outstanding at end of period 22,240 31,073 27,016 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $9.098 $9.734 $10.056(1) Value at end of period $8.35 $9.098 $9.734 Number of accumulation units outstanding at end of period 144,444 159,510 49,506 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $6.126 $8.298 $9.982(2) Value at end of period $4.42 $6.126 $8.298 Number of accumulation units outstanding at end of period 129,993 140,973 83,221 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $4.137 $6.966 $9.755(2) Value at end of period $2.92 $4.137 $6.966 Number of accumulation units outstanding at end of period 278,823 273,183 131,360 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $6.512 $8.559 $9.853(2) Value at end of period $4.76 $6.512 $8.559 Number of accumulation units outstanding at end of period 194,741 210,061 113,875 JENNISON PORTFOLIO Value at beginning of period $8.844 $8.105(3) Value at end of period $5.97 $8.844 Number of accumulation units outstanding at end of period 1,485 629 MFS(R) TOTAL RETURN SERIES Value at beginning of period $10.570 $10.749 $10.077(1) Value at end of period $9.83 $10.570 $10.749 Number of accumulation units outstanding at end of period 143,894 152,627 15,277 OPPENHEIMER AGGRESSIVE GROWTH FUND/VA Value at beginning of period $4.598 $6.820 $10.260(1) Value at end of period $3.26 $4.598 $6.820 Number of accumulation units outstanding at end of period 375,412 361,045 318,940 OPPENHEIMER MAIN STREET FUND/VA Value at beginning of period $7.779 $8.827 $9.168(2) Value at end of period $6.20 $7.779 $8.827 Number of accumulation units outstanding at end of period 106,267 94,124 13,806 OPPENHEIMER STRATEGIC BOND FUND/VA Value at beginning of period $10.209 $9.927 $9.822(5) Value at end of period $10.76 $10.209 $9.927 Number of accumulation units outstanding at end of period 28,773 33,698 2,305 SP JENNISON INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period $7.487 $7.170(4) Value at end of period $5.67 $7.487 Number of accumulation units outstanding at end of period 212 213 UBS SERIES TRUST - TACTICAL ALLOCATION PORTFOLIO Value at beginning of period $8.196 $9.555 $9.803(2) Value at end of period $6.19 $8.196 $9.555 Number of accumulation units outstanding at end of period 40,586 65,708 11,556 Footnotes for period ended December 31, 2002: (1) Funds were first received in this option during March 2002. Footnotes for period ended December 31, 2001: (1) Funds were first received in this option during May 2001. (2) Funds were first received in this option during April 2001. (3) Funds were first received in this option during September 2001. (4) Funds were first received in this option during June 2001. Footnotes for period ended December 31, 2000: (1) Funds were first received in this option during August 2000. (2) Funds were first received in this option during September 2000. (3) Funds were first received in this option during November 2000. (4) Funds were first received in this option during December 2000. (5) Funds were first received in this option during October 2000. ILIAC Variable Annuity - 126064 V-1 PART B -------------------------------------------------------------------------------- VARIABLE ANNUITY ACCOUNT B OF ING LIFE INSURANCE AND ANNUITY COMPANY -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 2003 ING VARIABLE ANNUITY This Statement of Additional Information is not a prospectus and should be read in conjunction with the current prospectus for Variable Annuity Account B (the "separate account") dated May 1, 2003. A free prospectus is available upon request from the local ING Life Insurance and Annuity Company office or by writing to or calling our Service Center at Customer Service Center P.O. Box 9271 Des Moines, IA 50306-9271 1-800-366-0066 Read the prospectus before you invest. Unless otherwise indicated, terms used in this Statement of Additional Information shall have the same meaning as in the prospectus. TABLE OF CONTENTS PAGE General Information and History.......................................... 2 Variable Annuity Account B............................................... 2 Offering and Purchase of Contracts....................................... 3 Performance Data......................................................... 3 General............................................................ 3 Average Annual Total Return Quotations............................. 4 Income Phase Payments.................................................... 7 Sales Material and Advertising........................................... 8 Independent Auditors..................................................... 9 Financial Statements of the Separate Account............................. S-1 Consolidated Financial Statements of ING Life Insurance and Annuity Company and Subsidiaries........................................... F-1 GENERAL INFORMATION AND HISTORY ING Life Insurance and Annuity Company (the "Company," we, us, our) is a stock life insurance company which was organized under the insurance laws of the State of Connecticut in 1976. Prior to May 1, 2002, the Company was known as Aetna Life Insurance and Annuity Company. Through a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance Company (formerly Participating Annuity Life Insurance Company organized in 1954). As of December 31, 2002, the Company (ING Life Insurance and Annuity Company) and its subsidiary life company had $44 billion invested through their products, including $28 billion in their separate accounts (of which the Company, or its affiliate ING Investments, LLC manages or oversees the management of $18 billion). The Company is ranked based on assets among the top 1% of all life insurance companies rated by A.M. Best Company as of December 31, 2001. The Company is an indirect wholly owned subsidiary of ING Groep N.V., a global financial institution active in the fields of insurance, banking and asset management. The Company is engaged in the business of issuing life insurance policies and annuity contracts. Our Home Office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. In addition to serving as the depositor for the separate account, the Company is a registered investment adviser under the Investment Advisers Act of 1940. We provide investment advice to several of the registered management investment companies offered as variable investment options under the contracts funded by the separate account (see "Variable Annuity Account B" below). Other than the mortality and expense risk charge and administrative expense charge, if any, described in the prospectus, all expenses incurred in the operations of the separate account are borne by the Company. However, the Company does receive compensation for certain administrative or distribution costs from the funds or affiliates of the funds used as funding options under the contract. (See "Fees" in the prospectus.) The assets of the separate account are held by the Company. The separate account has no custodian. However, the funds in whose shares the assets of the separate account are invested each have custodians, as discussed in their respective prospectuses. From this point forward, the term "contract(s)" refers only to those offered through the prospectus. VARIABLE ANNUITY ACCOUNT B Variable Annuity Account B is a separate account established by the Company for the purpose of funding variable annuity contracts issued by the Company. The separate account is registered with the Securities and Exchange Commission ("SEC") as a unit investment trust under the Investment Company Act of 1940, as amended. Payments to accounts under the contract may be allocated to one or more of the subaccounts. Each subaccount invests in the shares of only one of the funds listed below. We may make additions to, deletions from or substitutions of available investment options as permitted by law and subject to the conditions of the contract. The availability of the funds is subject to applicable regulatory authorization. Not all funds are available in all jurisdictions, under all contracts, or under all plans. OFFERING AND PURCHASE OF CONTRACTS The Company's affiliate, ING Financial Advisers, LLC ("ING Financial") (prior to May 1, 2002 known as Aetna Investment Services, LLC), serves as the principal underwriter for the contract. ING Financial, a Delaware limited liability company, is registered as a broker-dealer with the SEC. ING Financial is also a member of the National Association of Securities Dealers, Inc. and the Securities Investor Protection Corporation. ING Financial' principal office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. The contracts are distributed through life insurance agents licensed to sell variable annuities who are registered representatives of ING Financial or of other registered broker-dealers who have entered into sales arrangements with ING Financial. The offering of the contracts is continuous. A description of the manner in which the contracts are purchased can be found in the prospectus under the sections entitled "Purchase and Rights" and "Your Account Value." PERFORMANCE DATA GENERAL From time to time we may advertise different types of historical performance for the subaccounts of the separate account available under the contract. We may advertise the "standardized average annual total returns," calculated in a manner prescribed by the SEC (the "standardized return"), as well as "non-standardized returns," both of which are described below. The standardized and non-standardized total return figures are computed according to a formula in which a hypothetical initial purchase payment of $1,000 is applied to the various subaccounts under the contract, and then related to the ending redeemable values over one, five and ten year periods (or fractional periods thereof). The redeemable value is then divided by the initial investment and this quotient is taken to the Nth root (N represents the number of years in the period) and 1 is subtracted from the result which is then expressed as a percentage, carried to at least the nearest hundredth of a percent. The standardized figures use the actual returns of the fund since the date contributions were first received in the fund under the separate account, adjusted to reflect the deduction of the maximum recurring charges under the contract during each period (i.e., Option Package III: 1.25% mortality and expense risk charge, $30 annual maintenance fee, 0.15% administrative charge, and early withdrawal charge of 7% of purchase payments grading down to 0% after 7 years). These charges will be deducted on a pro rata basis in the case of fractional periods. The maintenance fee is converted to a percentage of assets based on the average account size under the contract described in the prospectus. The total return figures shown below will be lower than the standardized figures for Option Packages I and II because of the lower mortality and expense risk charge under those Option Packages (0.80% and 1.10% respectively). We may also advertise standardized returns and non-standardized returns using the fees and charges applicable to Option Packages I and II. The non-standardized figures will be calculated in a similar manner, except that they will not reflect the deduction of any applicable early withdrawal charge, and in some advertisements will also exclude the effect of the annual maintenance fee. The deduction of the early withdrawal charge and the annual maintenance fee would decrease the level of performance shown if reflected in these calculations. The non-standardized figures may also include monthly, quarterly, year-to-date and three-year periods, and may include returns calculated from the fund's inception date and/or the date contributions were first received in the fund under the separate account. The non-standardized returns shown in the tables below reflect the deduction of the maximum recurring charges under the contract except the early withdrawal charge (i.e., Option Package III: 1.25% mortality and expense risk charge, $30 annual maintenance fee, and 0.15% administrative charge). We may also advertise returns based on lower charges that may apply to contracts under Option Packages I and II. Standardized and non-standardized calculations do not currently include the premium bonus or reflect the deduction of the corresponding premium bonus charge; but, to the extent permitted by applicable law, we may include the premium bonus and corresponding charge in the standardized and non-standardized average annual total returns in the future. Investment results of the funds will fluctuate over time, and any presentation of the subaccounts' total return quotations for any prior period should not be considered as a representation of how the subaccounts will perform in any future period. Additionally, the account value upon redemption may be more or less than your original cost. AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED The tables below reflect the average annual standardized and non-standardized total return quotation figures for the periods ended December 31, 2002 for the subaccounts under the contract. The standardized returns assume the maximum charges under the contract (i.e., Option Package III) as described under "General" above. The non-standardized returns assume the same charges but do not include the early withdrawal charges. We may also advertise returns based on lower charges that may apply to particular contracts under option packages I and II. For the ING MFS Capital Opportunities Portfolio (Initial Class), ING MFS Emerging Equities Portfolio (Initial Class), ING MFS Research Portfolio (Initial Class), and ING Scudder International Growth Portfolio (Initial Class) subaccounts, two sets of performance returns are shown for each subaccount: one showing performance based solely on the performance of the ING Partners, Inc. ("IPI") portfolio from November 28, 1997 the date the portfolio commenced operations; and one quotation based on (a) performance through November 26, 1997 of the fund it replaced under many contracts and (b) after November 26, 1997 based on the performance of the IPI portfolio. For those subaccounts where results are not available for the full calendar period indicated, performance for such partial periods is shown in the column labeled "Since Inception." For standardized performance, the "Since Inception" column shows the average annual return since the date contributions were first received in the fund under the separate account. For non-standardized performance, the "Since Inception" column shows the average annual total return since the fund's inception date. The current Series of ING GET Fund was not available as of December 31, 2002, therefore, there is no performance history reported in the performance tables for this subaccount.
------------------------------------------------------------------- DATE CONTRIBUTIONS FIRST RECEIVED UNDER STANDARDIZED THE SEPARATE ACCOUNT ------------------------------------------------------------------------------------------------------------------------------------ SINCE SUBACCOUNT 1 YEAR 5 YEAR 10 YEAR INCEPTION* ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Capital Appreciation Fund (Series I) (31.95%) (3.34%) 10/02/1998 ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Core Equity Fund (Series I) (23.24%) (3.19%) 10/02/1998 ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Government Securities Fund (Series I) 1.76% 1.14% 10/30/2000 ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Growth Fund (Series I) (38.52%) (12.54%) 10/02/1998 ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Premier Equity Fund (Series I) (37.82%) (5.43%) 10/02/1998 ------------------------------------------------------------------------------------------------------------------------------------ AllianceBernstein Growth and Income Portfolio (Class A) (29.67%) (12.91%) 09/22/2000 ------------------------------------------------------------------------------------------------------------------------------------ AllianceBernstein Premier Growth Portfolio (Class A) (38.20%) (33.17%) 09/21/2000 ------------------------------------------------------------------------------------------------------------------------------------ AllianceBernstein Quasar Portfolio (Class A) (39.31%) (31.44%) 10/23/2000 ------------------------------------------------------------------------------------------------------------------------------------ Fidelity(R)VIP Contrafund(R)Portfolio (Initial Class) (17.05%) 1.54% 8.22% 06/30/1995 ------------------------------------------------------------------------------------------------------------------------------------ Fidelity(R)VIP Equity-Income Portfolio (Initial Class) (24.60%) (1.92%) 7.52% 12/30/1994 ------------------------------------------------------------------------------------------------------------------------------------ Fidelity(R)VIP Growth Portfolio (Initial Class) (37.66%) (2.60%) 6.66% 12/30/1994 ------------------------------------------------------------------------------------------------------------------------------------ Fidelity(R)VIP High Income Portfolio (Initial Class) (4.35%) (8.45%) (0.71%) 06/30/1995 ------------------------------------------------------------------------------------------------------------------------------------ ING JPMorgan Fleming International Portfolio (Initial Class) (25.72%) (4.20%) (3.88%) 11/28/1997 ------------------------------------------------------------------------------------------------------------------------------------ Scudder VLIF International/ING JPMorgan Fleming International(1) (25.72%) (4.20%) 4.07% ------------------------------------------------------------------------------------------------------------------------------------ ING MFS Capital Opportunities Portfolio (Initial Class) (37.72%) (3.62%) (3.27%) 11/28/1997 ------------------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT Growth/ING MFS Capital Opportunities(1) (37.72%) (3.62%) 4.05% ------------------------------------------------------------------------------------------------------------------------------------ ING MFS Research Equity Portfolio (Initial Class) (32.49%) (5.15%) (5.44%) 11/28/1997 ------------------------------------------------------------------------------------------------------------------------------------ American Century VP Capital Appreciation/ING MFS Research Equity(1) (32.49%) (5.15%) (0.08%) ------------------------------------------------------------------------------------------------------------------------------------ ING Salomon Brothers Aggressive Growth Portfolio (Initial Class) (42.83%) (10.05%) (10.12%) 11/28/1997 ------------------------------------------------------------------------------------------------------------------------------------ Alger American Small Cap/ING Salomon Brothers Aggressive Growth(1) (42.83%) (10.05%) (0.60%) 09/30/1993 ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------- DATE CONTRIBUTIONS FIRST RECEIVED UNDER STANDARDIZED THE SEPARATE ACCOUNT ------------------------------------------------------------------------------------------------------------------------------------ ING VP Balanced Portfolio, Inc. (Class R)(2) (18.00%) 0.38% 6.78% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Bond Portfolio (Class R)(2) 0.51% 4.63% 5.30% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Growth and Income Portfolio (Class R)(2) (32.59%) (8.44%) 3.64% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Growth Opportunities Portfolio (Class R) (39.06%) (36.75%) 05/03/2001 ------------------------------------------------------------------------------------------------------------------------------------ ING VP Growth Portfolio (Class R) (36.51%) (5.57%) (1.86%) 05/30/1997 ------------------------------------------------------------------------------------------------------------------------------------ ING VP Index Plus LargeCap Portfolio (Class R) (29.15%) (2.15%) 3.84% 10/31/1996 ------------------------------------------------------------------------------------------------------------------------------------ ING VP International Equity Portfolio (Class R) (34.26%) (11.62%) 05/05/1998 ------------------------------------------------------------------------------------------------------------------------------------ ING VP MagnaCap Portfolio (Class R) (32.24%) (24.96%) 05/30/2001 ------------------------------------------------------------------------------------------------------------------------------------ ING VP MidCap Opportunities Portfolio (Class R) (33.58%) (30.78%) 05/03/2001 ------------------------------------------------------------------------------------------------------------------------------------ ING VP Money Market Portfolio (Class R)(2)(3) (6.16%) 2.33% 3.13% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Small Company Portfolio (Class R) (30.83%) 0.23% 3.73% 05/30/1997 ------------------------------------------------------------------------------------------------------------------------------------ ING VP SmallCap Opportunities Portfolio (Class R) (51.21%) (42.62%) 05/07/2001 ------------------------------------------------------------------------------------------------------------------------------------ ING VP Technology Portfolio (Class R) (48.76%) (45.61%) 05/01/2000 ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Balanced Portfolio (Institutional Shares) (14.17%) 6.10% 11.09% 01/31/1995 ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Growth Portfolio (Institutional Shares) (34.09%) (3.86%) 5.46% 07/29/1994 ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Mid Cap Growth Portfolio (Institutional Shares) (35.51%) (4.37%) 2.49% 10/31/1994 ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Worldwide Growth Portfolio (Institutional Shares) (33.09%) (1.57%) 8.06% 04/28/1995 ------------------------------------------------------------------------------------------------------------------------------------ Jennison Portfolio (Class II) (38.72%) (28.86%) 07/10/2001 ------------------------------------------------------------------------------------------------------------------------------------ MFS(R)Total Return Series (Initial Class) (12.90%) 2.87% 6.52% 05/31/1996 ------------------------------------------------------------------------------------------------------------------------------------ Lord Abbett Mid-Cap Value Portfolio (Class VC) (35.36%) (4.18%) (2.06%) 05/30/1997 ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Aggressive Growth Fund/VA (26.43%) (5.56%) (1.91%) 05/30/1997 ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Main Street Fund/VA (0.38%) 1.95% 2.72% 05/30/1997 ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Strategic Bond Fund/VA (30.44%) (31.83%) 06/01/2001 ------------------------------------------------------------------------------------------------------------------------------------ SP Jennison International Growth Portfolio (Class II) (30.56%) (12.21%) 05/17/1999 ------------------------------------------------------------------------------------------------------------------------------------ UBS Series Trust - Tactical Allocation Portfolio (Class I) (7.31%) 07/26/2001 ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Fund VCT Portfolio (Class I) 5.26% 09/27/2001 ------------------------------------------------------------------------------------------------------------------------------------ Pioneer Mid Cap Value VCT Portfolio (Class I) (3.66%) 08/09/2001 ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the discussion preceding the tables for an explanation of the charges included and methodology used in calculating the standardized and non-standardized figures. These figures represent historical performance and should not be considered a projection of future performance. * Reflects performance from the date contributions were first received in the fund under the separate account. (1) The fund first listed was replaced with the applicable ING Portfolio after the close of business on November 26, 1997. The performance shown is based on the performance of the replaced fund until November 26, 1997, and the performance of the applicable ING Portfolio after that date. The replaced fund may not have been available under all contracts. The "Date Contributions First Received Under the Separate Account" refers to the applicable date for the replaced fund. If no date is shown, contributions were first received in the replaced fund under the separate account more than ten years ago. (2) These funds have been available through the separate account for more than ten years. (3) The current yield for the subaccount for the seven-day period ended December 31, 2002 (on an annualized basis) was (0.37%). Current yield more closely reflects current earnings than does total return. The current yield reflects the deduction of all charges under the contract that are deducted from the total return quotations shown above except the maximum 7% early withdrawal charge.
----------------------------------------------------------------- FUND INCEPTION NON-STANDARDIZED DATE ------------------------------------------------------------------------------------------------------------------------------------ SINCE SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Capital Appreciation Fund (Series I) (25.48%) (20.92%) (3.69%) 5.77% 05/05/1993 ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Core Equity Fund (Series I) (16.83%) (18.95%) (2.38%) 6.30% 05/02/1994 ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Government Securities Fund (Series I) 8.00% 4.39% 1.93% 0.96% 05/05/1993 ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Growth Fund (Series I) (32.00%) (29.73%) (9.37%) 2.30% 05/05/1993 ------------------------------------------------------------------------------------------------------------------------------------ AIM V.I. Premier Equity Fund (Series I) (31.30%) (20.75%) (3.62%) 6.28% 05/05/1993 ------------------------------------------------------------------------------------------------------------------------------------ AllianceBernstein Growth and Income Portfolio (Class A) (1) (23.20%) (5.19%) 2.19% 9.61% ------------------------------------------------------------------------------------------------------------------------------------ AllianceBernstein Premier Growth Portfolio (Class A) (1) (31.68%) (22.91%) (2.72%) 7.74% ------------------------------------------------------------------------------------------------------------------------------------ AllianceBernstein Quasar Portfolio (Class A) (32.79%) (20.50%) (12.84%) (7.16%) 08/05/1996 ------------------------------------------------------------------------------------------------------------------------------------ Fidelity(R)VIP Contrafund(R)Portfolio (Initial Class) (10.68%) (10.76%) 2.20% 10.65% 01/03/1995 ------------------------------------------------------------------------------------------------------------------------------------ Fidelity(R)VIP Equity-Income Portfolio (Initial Class) (1) (18.17%) (6.45%) (1.15%) 8.20% ------------------------------------------------------------------------------------------------------------------------------------ Fidelity(R)VIP Growth Portfolio (Initial Class) (1) (31.15%) (21.16%) (1.81%) 6.86% ------------------------------------------------------------------------------------------------------------------------------------ Fidelity(R)VIP High Income Portfolio (Initial Class) (1) 1.94% (12.19%) (7.41%) 1.95% ------------------------------------------------------------------------------------------------------------------------------------ ING JPMorgan Fleming International Portfolio (Initial Class) (19.29%) (22.79%) (3.34%) (3.01%) 11/28/1997 ------------------------------------------------------------------------------------------------------------------------------------ Scudder VLIF International/ING JPMorgan Fleming International(2) (19.29%) (22.79%) (3.34%) 4.07% ------------------------------------------------------------------------------------------------------------------------------------ ING MFS Capital Opportunities Portfolio (Initial Class) (31.20%) (22.04%) (2.79%) (2.50%) 11/28/1997 ------------------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT Growth/ING MFS Capital Opportunities(2) (31.20%) (22.04%) (2.79%) 4.05% ------------------------------------------------------------------------------------------------------------------------------------ ING MFS Research Equity Portfolio (Initial Class) (26.00%) (18.42%) (4.26%) (4.56%) 11/28/1997 ------------------------------------------------------------------------------------------------------------------------------------ American Century VP Capital Appreciation/ING MFS Research Equity(2) (26.00%) (18.42%) (4.26%) (0.08%) ------------------------------------------------------------------------------------------------------------------------------------ ING Salomon Brothers Aggressive Growth Portfolio (Initial Class) (36.27%) (30.93%) (8.94%) (9.01%) 11/28/1997 ------------------------------------------------------------------------------------------------------------------------------------ Alger American Small Cap/ING Salomon Brothers Aggressive Growth(2) (36.27%) (30.94%) (8.94%) 0.35% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Balanced Portfolio, Inc. (Class R)(1) (11.62%) (6.50%) 1.07% 6.78% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Bond Portfolio (Class R)(1) 6.76% 7.32% 5.20% 5.30% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Growth and Income Portfolio (Class R)(1) (26.10%) (19.52%) (7.41%) 3.64% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Growth Opportunities Portfolio (Class R) (32.53%) (31.67%) 04/30/2000 ------------------------------------------------------------------------------------------------------------------------------------ ING VP Growth Portfolio (Class R) (30.00%) (24.15%) (4.66%) 0.78% 12/13/1996 ------------------------------------------------------------------------------------------------------------------------------------ ING VP Index Plus LargeCap Portfolio (Class R) (22.69%) (16.25%) (1.37%) 4.82% 09/16/1996 ------------------------------------------------------------------------------------------------------------------------------------ ING VP International Equity Portfolio (Class R) (27.77%) (24.80%) (5.76%) (5.23%) 12/22/1997 ------------------------------------------------------------------------------------------------------------------------------------ ING VP MagnaCap Portfolio (Class R) (25.76%) (14.42%) 05/01/2000 ------------------------------------------------------------------------------------------------------------------------------------ ING VP MidCap Opportunities Portfolio (Class R) (27.09%) (27.11%) 04/30/2000 ------------------------------------------------------------------------------------------------------------------------------------ ING VP Money Market Portfolio (Class R)(1)(3) 0.14% 2.45% 2.96% 3.13% ------------------------------------------------------------------------------------------------------------------------------------ ING VP Small Company Portfolio (Class R) (24.36%) (6.58%) 0.93% 5.82% 12/27/1996 ------------------------------------------------------------------------------------------------------------------------------------ ING VP SmallCap Opportunities Portfolio (Class R) (44.59%) (27.27%) 1.13% 5.83% 05/06/1994 ------------------------------------------------------------------------------------------------------------------------------------ ING VP Technology Portfolio (Class R) (42.16%) (40.06%) 05/01/2000 ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Balanced Portfolio (Institutional Shares) (7.81%) (5.87%) 6.63% 10.25% 09/13/1993 ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Growth Portfolio (Institutional Shares) (27.60%) (23.26%) (3.02%) 5.34% 09/13/1993 ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Mid Cap Growth Portfolio (Institutional Shares) (29.01%) (34.24%) (3.51%) 5.69% 09/13/1993 ------------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Worldwide Growth Portfolio (Institutional Shares) (26.61%) (22.47%) (0.81%) 8.79% 09/13/1993 ------------------------------------------------------------------------------------------------------------------------------------ Jennison Portfolio (Class II) (32.19%) (26.10%) 02/10/2000 ------------------------------------------------------------------------------------------------------------------------------------ MFS(R)Total Return Series (Initial Class) (6.56%) 1.81% 3.49% 9.11% 01/03/1995 ------------------------------------------------------------------------------------------------------------------------------------ Lord Abbett Mid-Cap Value Portfolio (Class VC) (1) (28.86%) (25.04%) (3.33%) 5.09% ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Aggressive Growth Fund/VA (20.00%) (13.97%) (4.66%) 7.10% 07/05/1995 ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Main Street Fund/VA 5.88% 3.43% 2.60% 4.26% 05/03/1993 ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Strategic Bond Fund/VA (23.98%) (32.50%) 10/04/2000 ------------------------------------------------------------------------------------------------------------------------------------ SP Jennison International Growth Portfolio (Class II) (24.09%) (14.24%) (7.36%) 01/04/1999 ------------------------------------------------------------------------------------------------------------------------------------ UBS Series Trust - Tactical Allocation Portfolio (Class I) 15.90% 10.95% 10.82% 12.90% 05/07/1993 ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the discussion preceding the tables for an explanation of the charges included and methodology used in calculating the standardized and non-standardized figures. These figures represent historical performance and should not be considered a projection of future performance. ** Reflects performance from the fund's inception date. (1) These funds have been in operation for more than ten years. (2) The fund first listed was replaced with the applicable ING Portfolio after the close of business on November 26, 1997. The performance shown is based on the performance of the replaced fund until November 26, 1997, and the performance of the applicable ING Portfolio after that date. The replaced fund may not have been available under all contracts. The "Fund Inception Date" refers to the applicable date for the replaced fund. If no date is shown, the replaced fund has been in operation for more than ten years. (3) The current yield for the subaccount for the seven-day period ended December 31, 2002 (on an annualized basis) was (0.37%). Current yield more closely reflects current earnings than does total return. The current yield reflects the deduction of all charges under the contract that are deducted from the total return quotations shown above. As in the table above, the maximum 7% early withdrawal charge is not reflected. INCOME PHASE PAYMENTS When you begin receiving payments under the contract during the income phase (see "The Income Phase" in the prospectus), the value of your account is determined using accumulation unit values as of the tenth valuation before the first income phase payment is due. Such value (less any applicable premium tax charge) is applied to provide income phase payments to you in accordance with the income phase payment option and investment options elected. The annuity option tables found in the contract show, for each option, the amount of the first income phase payment for each $1,000 of value applied. Thereafter, variable income phase payments fluctuate as the annuity unit value(s) fluctuates with the investment experience of the selected investment option(s). The first income phase payment and subsequent income phase payments also vary depending upon the assumed net investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a higher first income phase payment, but income phase payments will increase thereafter only to the extent that the investment performance of the subaccounts you selected is greater than 5% annually, after deduction of fees. Income phase payments would decline if the performance was less than 5%. Use of the 3.5% assumed rate causes a lower first income phase payment, but subsequent income phase payments would increase more rapidly or decline more slowly as changes occur in the performance of the subaccounts selected. When the income phase begins, the annuitant is credited with a fixed number of annuity units (which does not change thereafter) in each of the designated investment options. This number is calculated by dividing (a) by (b), where (a) is the amount of the first income phase payment based on a particular investment option, and (b) is the then current annuity unit value for that investment option. As noted, annuity unit values fluctuate from one valuation to the next (see "Your Account Value" in the prospectus); such fluctuations reflect changes in the net investment factor for the appropriate subaccount(s) (with a ten valuation lag which gives the Company time to process income phase payments) and a mathematical adjustment which offsets the assumed net investment rate of 3.5% or 5% per annum. The operation of all these factors can be illustrated by the following hypothetical example. These procedures will be performed separately for the investment options selected during the income phase. EXAMPLE: Assume that, at the date income phase payments are to begin, there are 3,000 accumulation units credited under a particular contract and that the value of an accumulation unit for the tenth valuation prior to retirement was $13.650000. This produces a total value of $40,950. Assume also that no premium tax charge is payable and that the annuity table in the contract provides, for the income phase payment option elected, a first monthly variable income phase payment of $6.68 per $1000 of value applied; the annuitant's first monthly income phase payment would thus be $40.950 multiplied by $6.68, or $273.55. Assume then that the value of an annuity unit upon the valuation on which the first income phase payment was due was $13.400000. When this value is divided into the first monthly income phase payment, the number of annuity units is determined to be 20.414. The value of this number of annuity units will be paid in each subsequent month. If the net investment factor with respect to the appropriate subaccount is 1.0015000 as of the tenth valuation preceding the due date of the second monthly income phase payment, multiplying this factor by .9999058* (to take into account the assumed net investment rate of 3.5% per annum built into the number of annuity units determined above) produces a result of 1.0014057. This is then multiplied by the annuity unit value for the prior valuation (assume such value to be $13.504376) to produce an annuity unit value of $13.523359 for the valuation occurring when the second income phase payment is due. The second monthly income phase payment is then determined by multiplying the number of annuity units by the current annuity unit value, or 20.414 times $13.523359, which produces an income phase payment of $276.07. *If an assumed net investment rate of 5% is elected, the appropriate factor to take into account such assumed rate would be .9998663. SALES MATERIAL AND ADVERTISING We may include hypothetical illustrations in our sales literature that explain the mathematical principles of dollar cost averaging, compounded interest, tax deferred accumulation, and the mechanics of variable annuity contracts. We may also discuss the difference between variable annuity contracts and other types of savings or investment products such as personal savings accounts and certificates of deposit. We may distribute sales literature that compares the percentage change in accumulation unit values for any of the subaccounts to established market indices such as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average or to the percentage change in values of other management investment companies that have investment objectives similar to the subaccount being compared. We may publish in advertisements and reports, the ratings and other information assigned to us by one or more independent rating organizations such as A.M. Best Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors Service, Inc. The purpose of the ratings is to reflect our financial strength and/or claims-paying ability. We may also quote ranking services such as Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable Insurance Products Performance Analysis Service (VIPPAS), which rank variable annuity or life subaccounts or their underlying funds by performance and/or investment objective. We may categorize the underlying funds in terms of the asset classes they represent and use such categories in marketing materials for the contracts. We may illustrate in advertisements the performance of the underlying funds, if accompanied by performance which also shows the performance of such funds reduced by applicable charges under the separate account. We may also show in advertisements the portfolio holdings of the underlying funds, updated at various intervals. From time to time, we will quote articles from newspapers and magazines or other publications or reports such as The Wall Street Journal, Money magazine, USA Today and The VARDS Report. We may provide in advertising, sales literature, periodic publications or other materials information on various topics of interest to current and prospective contract holders. These topics may include the relationship between sectors of the economy and the economy as a whole and its effect on various securities markets, investment strategies and techniques (such as value investing, market timing, dollar cost averaging, asset allocation, constant ratio transfer and account rebalancing), the advantages and disadvantages of investing in tax-deferred and taxable investments, customer profiles and hypothetical purchase and investment scenarios, financial management and tax and retirement planning, and investment alternatives to certificates of deposit and other financial instruments, including comparison between the contract and the characteristics of and market for such financial instruments. INDEPENDENT AUDITORS Ernst & Young LLP, are the independent auditors for the separate account and for the Company for the year ended December 31, 2002. Prior to May 3, 2001, KPMG LLP, were the independent auditors for the separate account and for the Company. The independent auditors provide services to the separate account that include primarily the audit of the separate account's financial statements. ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF ING RETIREMENT HOLDINGS, INC.) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Reports of Independent Auditors................... F-2 Consolidated Financial Statements: Consolidated Income Statements for the years ended December 31, 2002 and 2001, one month ended December 31, 2000 and eleven months ended November 30, 2000.................... F-4 Consolidated Balance Sheets as of December 31, 2002 and 2001................. F-5 Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 2002 and 2001, one month ended December 31, 2000 and eleven months ended November 30, 2000.......................... F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2002 and 2001, one month ended December 31, 2000 and eleven months ended November 30, 2000............. F-7 Notes to Consolidated Financial Statements.... F-8
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors ING Life Insurance and Annuity Company We have audited the accompanying consolidated balance sheets of ING Life Insurance and Annuity Company as of December 31, 2002 and 2001, and the related income statements, statements of changes in shareholder's equity, and statements of cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ING Life Insurance and Annuity Company at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States. As discussed in Note 1 to the financial statements, the Company changed the accounting principle for goodwill and other intangible assets effective January 1, 2002. /s/ Ernst & Young LLP Atlanta, Georgia March 25, 2003 F-2 INDEPENDENT AUDITORS' REPORT The Shareholders and Board of Directors ING Life Insurance and Annuity Company We have audited the accompanying consolidated statements of income, changes in shareholder's equity and cash flows of ING Life Insurance and Annuity Company and Subsidiaries, formerly known as Aetna Life Insurance and Annuity Company and Subsidiaries, for the period from December 1, 2000 to December 31, 2000 ("Successor Company"), and for the period from January 1, 2000 to November 30, 2000 ("Preacquisition Company"). These consolidated financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Successor Company's consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of ING Life Insurance and Annuity Company and Subsidiaries for the period from December 1, 2000 to December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the Preacquisition Company's consolidated financial statements referred to above present fairly, in all material respects, the results of their operations and their cash flows for the period from January 1, 2000 to November 30, 2000, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1 to the consolidated financial statements, effective November 30, 2000, ING America Insurance Holdings Inc. acquired all of the outstanding stock of Aetna Inc., Aetna Life Insurance and Annuity Company's indirect parent and sole shareholder in a business combination accounted for as a purchase. As a result of the acquisition, the consolidated financial information for the periods after the acquisition is presented on a different cost basis than that for the periods before the acquisition and, therefore, is not comparable. /s/ KPMG LLP Hartford, Connecticut March 27, 2001 F-3 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of ING Retirement Holdings, Inc.) CONSOLIDATED INCOME STATEMENTS (Millions)
Preacquisition One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, 2002 2001 2000 2000 ------------- ------------- ------------- -------------- Revenues: Premiums $ 98.7 $ 114.2 $ 16.5 $ 137.7 Fee income 418.2 553.4 49.8 573.3 Net investment income 959.5 888.4 78.6 833.8 Net realized capital gains (losses) (101.0) (21.0) 1.8 (37.2) --------- -------- ------ -------- Total revenue 1,375.4 1,535.0 146.7 1,507.6 --------- -------- ------ -------- Benefits, losses and expenses: Benefits: Interest credited and other benefits to policyholders 746.4 729.6 68.9 726.7 Underwriting, acquisition, and insurance expenses: Operating expenses 361.4 444.2 49.1 414.6 Amortization: Deferred policy acquisition costs and value of business acquired 181.5 112.0 10.2 116.7 Goodwill -- 61.9 -- -- --------- -------- ------ -------- Total benefits, losses and expenses 1,289.3 1,347.7 128.2 1,258.0 --------- -------- ------ -------- Income before income taxes, discontinued operations and cumulative effect of change in accounting principle 86.1 187.3 18.5 249.6 Income tax expense 18.6 87.4 5.9 78.1 --------- -------- ------ -------- Income before discontinued operations and cumulative effect of change in accounting principle 67.5 99.9 12.6 171.5 Discontinued operations, net of tax -- -- -- 5.7 Cumulative effect of change in accounting principle (2,412.1) -- -- -- --------- -------- ------ -------- Net income (loss) $(2,344.6) $ 99.9 $ 12.6 $ 177.2 ========= ======== ====== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-4 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of ING Retirement Holdings, Inc.) CONSOLIDATED BALANCE SHEETS (Millions, except share data)
As of December 31, -------------------- 2002 2001 --------- --------- ASSETS Investments: Fixed maturities, available for sale, at fair value (amortized cost of $15,041.2 at 2002 and $13,249.2 at 2001) $15,767.0 $13,539.9 Equity securities at fair value: Nonredeemable preferred stock (cost of $34.2 at 2002 and $27.0 at 2001) 34.2 24.6 Investment in affiliated mutual funds (cost of $203.9 at 2002 and $22.9 at 2001) 201.0 25.0 Common stock (cost of $0.2 at 2002 and $2.3 at 2001) 0.2 0.7 Mortgage loans on real estate 576.6 241.3 Policy loans 296.3 329.0 Short-term investments 6.2 31.7 Other investments 52.2 18.2 Securities pledged to creditors (amortized cost of $154.9 at 2002 and $466.9 at 2001) 155.0 467.2 --------- --------- Total investments 17,088.7 14,677.6 Cash and cash equivalents 65.4 82.0 Short term investments under securities loan agreement 164.3 488.8 Accrued investment income 170.9 160.9 Reciprocal loan with affiliate -- 191.1 Reinsurance recoverable 2,986.5 2,990.7 Deferred policy acquisition costs 229.8 121.3 Value of business acquired 1,438.4 1,601.8 Goodwill (net of accumulated amortization of $61.9 at 2001) -- 2,412.1 Property, plant and equipment (net of accumulated depreciation of $56.0 at 2002 and $33.9 at 2001) 49.8 66.1 Other assets 145.8 149.7 Assets held in separate accounts 28,071.1 32,663.1 --------- --------- Total assets $50,410.7 $55,605.2 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY Policy liabilities and accruals: Future policy benefits and claims' reserves $ 3,305.2 $ 3,996.8 Unpaid claims and claim expenses 30.0 28.8 Other policyholder's funds 14,756.0 12,135.8 --------- --------- Total policy liabilities and accruals 18,091.2 16,161.4 Payables under securities loan agreement 164.3 488.8 Current income taxes 84.5 59.2 Deferred income taxes 163.1 153.7 Other liabilities 1,573.7 1,624.7 Liabilities related to separate accounts 28,071.1 32,663.1 --------- --------- Total liabilities 48,147.9 51,150.9 --------- --------- Shareholder's equity: Common stock (100,000 shares authorized; 55,000 shares issued and outstanding, $50.00 per share par value) 2.8 2.8 Additional paid-in capital 4,416.5 4,292.4 Accumulated other comprehensive income 108.3 46.6 Retained earnings (deficit) (2,264.8) 112.5 --------- --------- Total shareholder's equity 2,262.8 4,454.3 --------- --------- Total liabilities and shareholder's equity $50,410.7 $55,605.2 ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-5 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of ING Retirement Holdings, Inc.) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (Millions)
Accumulated Other Additional Comprehensive Retained Total Common Paid-in- Income Earnings Shareholder's Stock Capital (Loss) (Deficit) Equity ------ ---------- ------------- --------- ------------- Balance at December 31, 1999 $2.8 $ 431.9 $(44.8) $ 995.8 $ 1,385.7 Comprehensive income: Net income -- -- -- 177.2 177.2 Other comprehensive income net of tax: Unrealized gain on securities ($79.4 pretax) -- -- 51.6 -- 51.6 --------- Comprehensive income 228.8 Adjustment for purchase accounting -- 3,751.7 -- (1,173.0) 2,578.7 Capital contributions -- 129.5 -- -- 129.5 Common stock dividends -- (10.1) -- -- (10.1) Other changes -- 0.8 -- -- 0.8 ---- -------- ------ --------- --------- Balance at November 30, 2000 2.8 4,303.8 6.8 -- 4,313.4 Comprehensive income: Net income -- -- -- 12.6 12.6 Other comprehensive income net of tax: Unrealized gain on securities ($28.7 pretax) -- -- 18.6 -- 18.6 --------- Comprehensive income 31.2 ---- -------- ------ --------- --------- Balance at December 31, 2000 2.8 4,303.8 25.4 12.6 4,344.6 Comprehensive income: Net income -- -- -- 99.9 99.9 Other comprehensive income net of tax: Unrealized gain on securities ($32.5 pretax) -- -- 21.2 -- 21.2 --------- Comprehensive income 121.1 Return of capital -- (11.3) -- -- (11.3) Other changes -- (0.1) -- -- (0.1) ---- -------- ------ --------- --------- Balance at December 31, 2001 2.8 4,292.4 46.6 112.5 4,454.3 Comprehensive income: Net (loss) -- -- -- (2,344.6) (2,344.6) Other comprehensive income net of tax: Unrealized gain on securities ($94.9 pretax) -- -- 61.7 -- 61.7 --------- Comprehensive (loss) (2,282.9) Distribution of IA Holdco -- (27.4) -- (32.7) (60.1) Capital contributions -- 164.3 -- -- 164.3 SERP -- transfer -- (15.1) -- -- (15.1) Other changes -- 2.3 -- -- 2.3 ---- -------- ------ --------- --------- Balance at December 31, 2002 $2.8 $4,416.5 $108.3 $(2,264.8) $ 2,262.8 ---- -------- ------ --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of ING Retirement Holdings, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions)
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, 2002 2001 2000 2000 ----------------------- --------------- --------------- -------------- Cash Flows from Operating Activities: Net income (loss) $ (2,344.6) $ 99.9 $ 12.6 $ 177.2 Adjustments to reconcile net income to net cash provided by operating activities: Net amortization or (accretion) of discount on investments 115.5 (1.2) (2.7) (32.6) Amortization of deferred gain on sale -- -- -- (5.7) Net realized capital (gains) losses 101.0 21.0 (1.8) 37.2 (Increase) decrease in accrued investment income (10.0) (13.7) 6.6 (3.1) (Increase) decrease in premiums due and other receivables 172.7 (95.6) 31.1 (23.7) (Increase) decrease in policy loans -- 10.3 0.1 (25.4) (Increase) decrease in deferred policy acquisition costs (108.5) (121.3) (12.2) (136.6) (Increase) decrease in value of business acquired 139.4 13.9 -- -- Amortization of goodwill -- 61.9 -- -- Impairment of goodwill 2,412.1 -- -- -- Increase (decrease) in universal life account balances -- 17.6 (3.8) 23.8 Change in other insurance reserve liabilities 953.7 (136.3) (5.3) 85.6 Change in other assets and liabilities 72.8 (68.0) 103.9 (75.2) Provision for deferred income taxes 23.6 89.5 (14.3) 23.1 ---------- ---------- ------- ---------- Net cash provided by (used for) operating activities 1,527.7 (122.0) 114.2 44.6 ---------- ---------- ------- ---------- Cash Flows from Investing Activities: Proceeds from the sale of: Fixed maturities available for sale 24,980.4 14,216.7 233.0 10,083.2 Equity securities 57.2 4.4 1.5 118.4 Mortgages 2.0 5.2 0.1 2.1 Investment maturities and collections of: Fixed maturities available for sale 1,334.9 1,121.8 53.7 573.1 Short-term investments 11,796.7 7,087.3 0.4 59.9 Acquisition of investments: Fixed maturities available for sale (28,105.5) (16,489.8) (230.7) (10,505.5) Equity securities (81.8) (50.0) (27.8) (17.6) Short-term investments (11,771.3) (6,991.1) (10.0) (113.1) Mortgages (343.7) (242.0) -- -- (Increase) decrease in policy loans 32.7 -- -- -- (Increase) decrease in property and equipment (5.8) 7.4 1.9 5.4 Other, net (47.8) (4.7) 0.3 (4.0) ---------- ---------- ------- ---------- Net cash provided by (used for) investing activities (2,152.0) (1,334.8) 22.4 201.9 ---------- ---------- ------- ---------- Cash Flows from Financing Activities: Deposits and interest credited for investment contracts 1,332.5 1,941.5 164.2 1,529.7 Maturities and withdrawals from insurance contracts (741.4) (1,082.7) (156.3) (1,832.6) Capital contribution from HOLDCO -- -- -- 73.5 Return of capital -- (11.3) -- -- Dividends paid to shareholder -- -- -- (10.1) Other, net 16.6 (105.0) (73.6) 22.0 ---------- ---------- ------- ---------- Net cash provided by (used for) financing activities 607.7 742.5 (65.7) (217.5) ---------- ---------- ------- ---------- Net increase (decrease) in cash and cash equivalents (16.6) (714.3) 70.9 29.0 Effect of exchange rate changes on cash and cash equivalents -- -- -- 2.0 Cash and cash equivalents, beginning of period 82.0 796.3 725.4 694.4 ---------- ---------- ------- ---------- Cash and cash equivalents, end of period $ 65.4 $ 82.0 $ 796.3 $ 725.4 ========== ========== ======= ========== Supplemental cash flow information: Income taxes (received) paid, net $ 6.7 $ (12.3) $ 20.3 $ 39.9 ========== ========== ======= ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include ING Life Insurance and Annuity Company ("ILAIC" or the "Company") and its wholly-owned subsidiaries, ING Insurance Company of America ("IICA"), ING Financial Advisors, LLC ("IFA"), and through February 28, 2002, Aetna Investment Adviser Holding Company, Inc. ("IA Holdco"). The Company is a wholly-owned subsidiary of ING Retirement Holdings, Inc. ("HOLDCO"), which is a wholly-owned subsidiary of ING Retirement Services, Inc. ("IRSI"). IRSI is ultimately owned by ING Groep N.V. ("ING"), a financial services company based in the Netherlands. HOLDCO contributed IFA to the Company on June 30, 2000 and contributed IA Holdco to the Company on July 1, 1999. On February 28, 2002, ILIAC distributed 100% of the stock of IA Holdco to HOLDCO in the form of a $60.1 million dividend distribution. The primary operating subsidiary of IA Holdco is Aeltus Investment Management, Inc. ("Aeltus"). Accordingly, fees earned by Aeltus were not included in Company results subsequent to the dividend date. As a result of this transaction, the Investment Management Services is no longer reflected as an operating segment of the Company. On December 13, 2000, ING America Insurance Holdings, Inc. ("ING AIH"), an indirect wholly-owned subsidiary of ING, acquired Aetna Inc., comprised of the Aetna Financial Services business, of which the Company is a part, and Aetna International businesses, for approximately $7,700.0 million. The purchase price was comprised of approximately $5,000.0 million in cash and the assumption of $2,700.0 million of outstanding debt and other net liabilities. In connection with the acquisition, Aetna Inc. was renamed Lion Connecticut Holdings Inc. ("Lion"). At the time of the sale, Lion entered into certain transition services agreements with a former related party, Aetna U.S. Healthcare, which was renamed Aetna Inc. ("former Aetna"). For accounting purposes, the acquisition was recorded as of November 30, 2000 using the purchase method. The effects of this transaction, including the recognition of goodwill, were pushed down and reflected on the financial statements of certain IRSI (a subsidiary of Lion) subsidiaries, including the Company. The Balance Sheet changes related to accounting for this purchase were entirely non-cash in nature and accordingly were excluded from the pre-acquisition Consolidated Statement of Cash Flows for the eleven months ended November 30, 2000. The purchase price was allocated to assets and liabilities based on their respective fair values. This revaluation resulted in a net increase to assets, excluding the effects of goodwill, of $592.0 million and a net increase to liabilities of $310.6 million. Additionally, the Company established goodwill of $2,297.4 million. Goodwill was amortized over a period of 40 years prior to January 1, 2002. The allocation of the purchase price to assets and liabilities was subjected to further refinement throughout 2001 as additional information became available to more precisely estimate the fair F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) values of the Company's respective assets and liabilities at the purchase date. The refinements to the Company's purchase price allocations were as follows: The Company completed a full review relative to the assumptions and profit streams utilized in the development of value of business acquired ("VOBA") and determined that certain refinements were necessary. Such refinements resulted in a reduction of VOBA; The Company completed the review of the fixed assets that existed at or prior to the acquisition and determined that an additional write down was necessary; The Company completed the review of severance actions related to individuals who were employed before or at the acquisition date and determined that an additional severance accrual was necessary; The Company completed its valuation of certain benefit plan liabilities and, as a result, reduced those benefit plan liabilities; The Company adjusted its reserve for other policyholders' funds in order to conform its accounting policies with those of ING; The Company, after giving further consideration to certain exposures in the general market place, determined that a reduction of its investment portfolio carrying value was warranted; The Company determined that the establishment of a liability for certain noncancellable operating leases that existed prior to or at the acquisition date but were no longer providing a benefit to the Company's operations, was warranted; and The Company determined that the contractual lease payment of one of its operating leases was more than the current market rate, and established a corresponding unfavorable lease liability. The net impact of the refinements in purchase price allocations, as described above, resulted in a net decrease to assets, excluding the effects of goodwill, of $236.4 million, a net decrease to liabilities of $59.8 million and a net increase to the Company's goodwill of $176.6 million. Unaudited proforma consolidated income from continuing operations and net income of the Company for the period from January 1, 2000 to November 30, 2000, assuming that the acquisition of the Company occurred at the beginning of each period, would have been approximately $118.1 million. The pro forma adjustments, which did not affect revenues, reflect primarily goodwill amortization, amortization of the favorable lease asset and the elimination of amortization of the deferred gain on sale associated with the life business. In the fourth quarter of 2001, ING announced its decision to pursue a move to a fully integrated U.S. structure that would separate manufacturing from distribution in its retail and worksite operations to support a more customer-focused business strategy. As a result of the integration, the Company's Worksite Products and Individual Products operating segments were realigned into one reporting segment, U.S. Financial Services ("USFS"). F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) USFS offers qualified and nonqualified annuity contracts that include a variety of funding and payout options for individuals and employer sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403 and 457, as well as nonqualified deferred compensation plans. Annuity contracts may be deferred or immediate (payout annuities). These products also include programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and record-keeping services along with a menu of investment options, including affiliated and nonaffiliated mutual funds and variable and fixed investment options. In addition, USFS offers wrapper agreements entered into with retirement plans which contain certain benefit responsive guarantees (i.e. liquidity guarantees of principal and previously accrued interest for benefits paid under the terms of the plan) with respect to portfolios of plan-owned assets not invested with the Company. USFS also offers investment advisory services and pension plan administrative services. Investment Management Services, through February 28, 2002, provided: investment advisory services to affiliated and unaffiliated institutional and retail clients on a fee-for-service basis; underwriting services to the ING Series Fund, Inc. (formerly known as the Aetna Series Fund, Inc.), and the ING Variable Portfolios, Inc. (formerly known as the Aetna Variable Portfolios, Inc.); distribution services for other company products; and trustee, administrative, and other fiduciary services to retirement plans requiring or otherwise utilizing a trustee or custodian. Discontinued Operations included universal life, variable universal life, traditional whole life and term insurance. DESCRIPTION OF BUSINESS The Company offers annuity contracts that include a variety of funding and payout options for employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408 and 457, as well as nonqualified deferred. The Company's products are offered primarily to individuals, pension plans, small businesses and employer-sponsored groups in the health care, government, educations (collectively "not-for-profit" organizations) and corporate markets. The Company's products generally are sold through pension professionals, independent agents and brokers, third party administrators, banks, dedicated career agents and financial planners. NEW ACCOUNTING STANDARDS ACCOUNTING FOR GOODWILL AND INTANGIBLE ASSETS In June 2001, the Financial Accounting Standards Board ("FASB") issued FAS No. 142, "Goodwill and Other Intangible Assets," ("FAS No.142"), effective for fiscal years beginning after December 15, 2001. Under FAS No. 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets are still amortized over their estimated useful lives. The Company adopted the new standard effective January 1, 2002. F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) As required under FAS No. 142, the Company completed the first of the required impairment tests as of January 1, 2002. Step one of the impairment test was a screen for potential impairment, while step two measured the amount of the impairment. All of the Company's operations fall under one reporting unit, USFS, due to the consolidated nature of the Company's operations. Step one of the impairment test required the Company to estimate the fair value of the reporting unit and compare the estimated fair value to its carrying value. The Company determined the estimated fair value utilizing a discounted cash flow approach and applying a discount rate equivalent to the Company's weighted average cost of capital. Fair value was determined to be less than carrying value which required the Company to complete step two of the test. In step two, the Company allocated the fair value of the reporting unit determined in step one to the assets and liabilities of the reporting unit resulting in an implied fair value of goodwill of zero. The comparison of the fair value amount allocated to goodwill and the carrying value of goodwill resulted in an impairment loss of $2,412.1 million, which represents the entire carrying amount of goodwill, net of accumulated amortization. This impairment charge is shown as a change in accounting principle on the Consolidated Income Statement. Application of the nonamortization provision (net of tax) of the new standard resulted in an increase in net income of $61.9 million for the twelve months ended December 31, 2002. Had the Company been accounting for goodwill under FAS No. 142 for all periods presented, the Company's net income would have been as follows:
Preacquisition -------------- One month Eleven months Year ended ended ended December 31, December 31, November 30, (Millions) 2001 2000 2000 Reported net income after tax $ 99.9 $12.6 $177.2 Add back goodwill amortization, net of tax 61.9 -- -- ------------------------------------------------------------------------------------- Adjusted net income after tax $161.8 $12.6 $177.2 =====================================================================================
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the FASB issued FAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted by FAS No. 137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement 133, FAS No.138, Accounting for Certain Derivative Instruments and Certain Hedging Activities -- an Amendment of FAS No. 133, and certain FAS No. 133 implementation issues. This standard, as amended, requires companies to record all derivatives on the balance sheet as either assets or liabilities and measure those instruments at fair value. The manner in which companies are to record gains or losses resulting from changes in the fair values of those derivatives depends on the use of the derivative and whether it qualifies for hedge accounting. FAS No. 133 was effective for the Company's financial statements beginning January 1, 2001. F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) Adoption of FAS No.133 did not have a material effect on the Company's financial position or results of operations given the Company's limited derivative and embedded derivative holdings. The Company utilizes, interest rate swaps, caps and floors, foreign exchange swaps and warrants in order to manage interest rate and price risk (collectively, market risk). These financial exposures are monitored and managed by the Company as an integral part of the overall risk management program. Derivatives are recognized on the balance sheet at their fair value. The Company chose not to designate its derivative instruments as part of hedge transactions. Therefore, changes in the fair value of the Company's derivative instruments are recorded immediately in the consolidated statements of income as part of realized capital gains and losses. Warrants are carried at fair value and are recorded as either derivative instruments or FAS No. 115 available for sale securities. Warrants that are considered derivatives are carried at fair value if they are readily convertible to cash. The values of these warrants can fluctuate given that the companies that underlie the warrants are non-public companies. At December 31, 2002 and 2001, the estimated value of these warrants, including the value of their effectiveness, in managing market risk, was immaterial. These warrants will be revalued each quarter and the change in the value of the warrants will be included in the consolidated statements of income. The Company, at times, may own warrants on common stock which are not readily convertible to cash as they contain certain conditions which preclude their convertibility and therefore, will not be included in assets or liabilities as derivatives. If conditions are satisfied and the underlying stocks become marketable, the warrants would be reclassified as derivatives and recorded at fair value as an adjustment through current period results of operations. The Company occasionally purchases a financial instrument that contains a derivative that is "embedded" in the instrument. In addition, the Company's insurance products are reviewed to determine whether they contain an embedded derivative. The Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the financial instrument or insurance product (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and carried at fair value. However, in cases where the host contract is measured at fair value, with changes in fair value reported in current period earnings or the Company is unable to reliably identify and measure the embedded derivative for separation from its host contracts, the entire contract is carried on the balance sheet at fair value and is not designated as a hedging instrument. F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) GUARANTEES In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," to clarify accounting and disclosure requirements relating to a guarantor's issuance of certain types of guarantees. FIN 45 requires entities to disclose additional information of certain guarantees, or groups of similar guarantees, even if the likelihood of the guarantor's having to make any payments under the guarantee is remote. The disclosure provisions are effective for financial statements for fiscal years ended after December 15, 2002. For certain guarantees, the interpretation also requires that guarantors recognize a liability equal to the fair value of the guarantee upon its issuance. This initial recognition and measurement provision is to be applied only on a prospective basis to guarantees issued or modified after December 31, 2002. The Company has performed an assessment of its guarantees and believes that all of its guarantees are excluded from the scope of this interpretation. FUTURE ACCOUNTING STANDARDS EMBEDDED DERIVATIVES The FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS No.133") in 1998 and continues to issue guidance for implementation through its Derivative Implementation Group ("DIG"). DIG recently released a draft of FASB Statement 133 Implementation Issue B36, "Embedded Derivatives: Bifurcation of a Debt Instrument That Incorporates Both Interest Rate Risk and Credit Risk Exposures That are Unrelated or Only Partially Related to the Creditworthiness of the Issuer of That Instrument" ("DIG B36"). Under this interpretation, modified coinsurance and coinsurance with funds withheld reinsurance agreements as well as other types of receivables and payables where interest is determined by reference to a pool of fixed maturity assets or total return debt index may be determined to contain bifurcatable embedded derivatives. The required date of adoption of DIG B36 has not been determined. If the guidance is finalized in its current form, the Company has determined that certain of its existing reinsurance receivables (payables), investments or insurance products contain embedded derivatives that may require bifurcation. The Company has not yet completed its evaluation of the potential impact, if any, on its consolidated financial positions, results of operations, or cash flows. FASB INTERPRETATION NO. 46 CONSOLIDATION OF VARIABLE INTEREST ENTITIES In January 2003, FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities" ("VIE"), an interpretation of Accounting Research Bulletin ("ARB") No. 51. This Interpretation addresses consolidation by business enterprises of variable interest entities, which have one or both of the following characteristics: a) insufficient equity investment at risk, or b) insufficient control by equity investors. This guidance is effective for VIEs created after January 31, 2003 and for existing VIEs as of July 1, 2003. An entity with variable interest in VIEs created before February 1, 2003 shall apply the guidance no later than the beginning of the first interim or annual reporting period beginning after June 15, 2003. F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) In conjunction with the issuance of this guidance, the Company conducted a review of its involvement with the VIEs and does not believe it has any significant investments or ownership in VIEs. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates. RECLASSIFICATIONS Certain reclassifications have been made to prior year financial information to conform to the current year classifications. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, money market instruments and other debt issues with a maturity of 90 days or less when purchased. INVESTMENTS All of the Company's fixed maturity and equity securities are currently designated as available-for-sale. Available-for-sale securities are reported at fair value and unrealized gains and losses on these securities are included directly in shareholder's equity, after adjustment for related charges in deferred policy acquisition costs, value of business acquired, and deferred income taxes. The Company analyzes the general account investments to determine whether there has been an other than temporary decline in fair value below the amortized cost basis in accordance with FAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Management considers the length of time and the extent to which the fair value has been less than amortized cost; the financial condition and near-term prospects of the issuer; future economic conditions and market forecasts; and the Company's intent and ability to retain the investment in the issuer for a period of time sufficient to allow for recovery in fair value. If it is probable that all amounts due according to the contractual terms of a debt security will not be collected, an other than temporary impairment is considered to have occurred. In addition, the Company invests in structured securities that meet the criteria of Emerging Issues Task Force ("EITF") Issue No. 99-20 "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Under Issue No. EITF 99-20, a determination of the required impairment is based on credit risk and the possibility of significant prepayment risk that restricts the Company's ability to recover the investment. An impairment is recognized if the fair value of the security is less than amortized cost and there has been an adverse change in cash flow since the last remeasurement date. F-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) When a decline in fair value is determined to be other than temporary, the individual security is written down to fair value and the loss is accounted for as a realized loss. Included in available-for-sale securities are investments that support experience-rated products. Experience-rated products are products where the customer, not the Company, assumes investment (including realized capital gains and losses) and other risks, subject to, among other things, minimum guarantees. Realized gains and losses on the sale of, as well as unrealized capital gains and losses on, investments supporting these products are reflected in other policyholders' funds. Realized capital gains and losses on all other investments are reflected on all other investments are reflected in the Company's results of operations. Unrealized capital gains and losses on all other investments are reflected in shareholder's equity, net of related income taxes. Purchases and sales of fixed maturities and equity securities (excluding private placements) are recorded on the trade date. Purchases and sales of private placements and mortgage loans are recorded on the closing date. Fair values for fixed maturity securities are obtained from independent pricing services or broker/ dealer quotations. Fair values for privately placed bonds are determined using a matrix-based model. The matrix-based model considers the level of risk-free interest rates, current corporate spreads, the credit quality of the issuer and cash flow characteristics of the security. The fair values for equity securities are based on quoted market prices. For equity securities not actively traded, estimated fair values are based upon values of issues of comparable yield and quality or conversion value where applicable. The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned domestic securities. The collateral is deposited by the borrower with a lending agent, and retained and invested by the lending agent according to the Company's guidelines to generate additional income. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. In September 2000, the FASB issued FAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." In accordance with this new standard, F-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) general account securities on loan are reflected on the Consolidated Balance Sheet as "Securities pledged to creditors", which includes the following:
Gross Gross December 31, 2002 Amortized Unrealized Unrealized Fair (Millions) Cost Gains Losses Value Total securities pledged to creditors $154.9 $0.1 $ -- $155.0 ===========================================================================
Gross Gross December 31, 2001 Amortized Unrealized Unrealized Fair (Millions) Cost Gains Losses Value Total securities pledged to creditors $466.9 $1.1 $0.8 $467.2 ===========================================================================
Total securities pledged to creditors at December 31, 2002 and 2001 consisted entirely of fixed maturity securities. The investment in affiliated mutual funds represents an investment in mutual funds managed by the Company and its affiliates, and is carried at fair value. Mortgage loans on real estate are reported at amortized cost less impairment writedowns. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to the present value of expected cash flows from the loan, discounted at the loan's effective interest rate, or to the loan's observable market price, or the fair value of the underlying collateral. The carrying value of the impaired loans is reduced by establishing a permanent writedown charged to realized loss. Policy loans are carried at unpaid principal balances, net of impairment reserves. Short-term investments, consisting primarily of money market instruments and other fixed maturity securities issues purchased with an original maturity of 91 days to one year, are considered available for sale and are carried at fair value, which approximates amortized cost. Reverse dollar repurchase agreement and reverse repurchase agreement transactions are accounted for as collateralized borrowings, where the amount borrowed is equal to the sales price of the underlying securities. These transactions are reported in "Other Liabilities." The Company's use of derivatives is limited to economic hedging purposes. The Company enters into interest rate and currency contracts, including swaps, caps, and floors to reduce and manage risks associated with changes in value, yield, price, cash flow or exchange rates of assets or liabilities held or intended to be held. Changes in the fair value of open derivative contracts are recorded in net realized capital gains and losses. F-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) On occasion, the Company sells call options written on underlying securities that are carried at fair value. Changes in the fair value of these options are recorded in net realized capital gains or losses. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED Deferred Policy Acquisition Costs ("DAC") is an asset, which represents certain costs of acquiring certain insurance business, which are deferred and amortized. These costs, all of which vary with and are primarily related to the production of new and renewal business, consist principally of commissions, certain underwriting and contract issuance expenses, and certain agency expenses. VOBA is an asset, which represents the present value of estimated net cash flows embedded in the Company's contracts, which existed at the time the Company was acquired by ING. DAC and VOBA are evaluated for recoverability at each balance sheet date and these assets would be reduced to the extent that gross profits are inadequate to recover the asset. The amortization methodology varies by product type based upon two accounting standards: FAS No. 60, "Accounting and Reporting by Insurance Enterprises" ("FAS No. 60") and FAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and Realized Gains and Losses from the Sale of Investments" ("FAS No. 97"). Under FAS No. 60, acquisition costs for traditional life insurance products, which primarily include whole life and term life insurance contracts, are amortized over the premium payment period in proportion to the premium revenue recognition. Under FAS No. 97, acquisition costs for universal life and investment-type products, which include universal life policies and fixed and variable deferred annuities, are amortized over the life of the blocks of policies (usually 25 years) in relation to the emergence of estimated gross profits from surrender charges, investment margins, mortality and expense margins, asset-based fee income, and actual realized gains (losses) on investments. Amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised. DAC and VOBA are written off to the extent that it is determined that future policy premiums and investment income or gross profits are not adequate to cover related expenses. Activity for the year-ended December 31, 2002 within VOBA was as follows:
(Millions) Balance at December 31, 2001 $1,601.8 Adjustment for unrealized gain (loss) (21.9) Additions 25.0 Interest accrued at 7% 86.8 Amortization (253.3) ------------------------------------------------------------ Balance at December 31, 2002 $1,438.4 ============================================================
F-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) The estimated amount of VOBA to be amortized, net of interest, over the next five years is $105.6 million, $102.1 million, $101.9 million, $91.5 million and $88.3 million for the years 2003, 2004, 2005, 2006 and 2007, respectively. Actual amortization incurred during these years may vary as assumptions are modified to incorporate actual results. As part of the regular analysis of DAC/VOBA, at the end of third quarter 2002, the Company unlocked its assumptions by resetting its near-term and long-term assumptions for the separate account returns to 9% (gross before fund management fees and mortality and expense and other policy charges), reflecting a blended return of equity and other sub-accounts. This unlocking adjustment was primarily driven by the sustained downturn in the equity markets and revised expectations for future returns. In 2002, the Company recorded an acceleration of DAC/VOBA amortization totaling $45.6 million before tax, or $29.7 million, net $15.9 million of federal income tax benefit. POLICY LIABILITIES AND ACCRUALS Future policy benefits and claims reserves include reserves for universal life, immediate annuities with life contingent payouts and traditional life insurance contracts. Reserves for universal life products are equal to cumulative deposits less withdrawals and charges plus credited interest thereon. Reserves for traditional life insurance contracts represent the present value of future benefits to be paid to or on behalf of policyholders and related expenses less the present value of future net premiums. Reserves for immediate annuities with life contingent payout contracts are computed on the basis of assumed investment yield, mortality, and expenses, including a margin for adverse deviations. Such assumptions generally vary by plan, year of issue and policy duration. Reserve interest rates range from 2.0% to 9.5% for all years presented. Investment yield is based on the Company's experience. Mortality and withdrawal rate assumptions are based on relevant Company experience and are periodically reviewed against both industry standards and experience. Because the sale of the domestic individual life insurance business was substantially in the form of an indemnity reinsurance agreement, the Company reported an addition to its reinsurance recoverable approximating the Company's total individual life reserves at the sale date. Other policyholders' funds include reserves for deferred annuity investment contracts and immediate annuities without life contingent payouts. Reserves on such contracts are equal to cumulative deposits less charges and withdrawals plus credited interest thereon (rates range from 2.0% to 12.3% for all years presented) net of adjustments for investment experience that the Company is entitled to reflect in future credited interest. These reserves also include unrealized gains/losses related to FAS No.115 for experience-rated contracts. Reserves on contracts subject to experience rating reflect the rights of contractholders, plan participants and the Company. F-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) Unpaid claims and claim expenses for all lines of insurance include benefits for reported losses and estimates of benefits for losses incurred but not reported. REVENUE RECOGNITION For certain annuity contracts, fee income for the cost of insurance, expenses, and other fees are recorded as revenue in and are included in the fee income line on the Income Statements assessed against policyholders. Other amounts received for these contracts are reflected as deposits and are not recorded as revenue but are included in the other policyholders' funds line on the Balance Sheets. Related policy benefits are recorded in relation to the associated premiums or gross profit so that profits are recognized over the expected lives of the contracts. When annuity payments with life contingencies begin under contracts that were initially investment contracts, the accumulated balance in the account is treated as a single premium for the purchase of an annuity and reflected as an offsetting amount in both premiums and current and future benefits in the Consolidated Income Statements. SEPARATE ACCOUNTS Separate Account assets and liabilities generally represent funds maintained to meet specific investment objectives of contractholders who bear the investment risk, subject, in some cases, to minimum guaranteed rates. Investment income and investment gains and losses generally accrue directly to such contractholders. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company. Separate Account assets supporting variable options under universal life and annuity contracts are invested, as designated by the contractholder or participant under a contract (who bears the investment risk subject, in limited cases, to minimum guaranteed rates) in shares of mutual funds which are managed by the Company, or other selected mutual funds not managed by the Company. Separate Account assets are carried at fair value. At December 31, 2002 and 2001, unrealized gains of $29.7 million and of $10.8 million, respectively, after taxes, on assets supporting a guaranteed interest option are reflected in shareholder's equity. Separate Account liabilities are carried at fair value, except for those relating to the guaranteed interest option. Reserves relating to the guaranteed interest option are maintained at fund value and reflect interest credited at rates ranging from 3.0% to 10.0% in 2002 and 3.0% to 14.0% in 2001. Separate Account assets and liabilities are shown as separate captions in the Consolidated Balance Sheets. Deposits, investment income and net realized and unrealized capital gains and losses of the Separate Accounts are not reflected in the Consolidated Financial Statements (with the exception of realized and unrealized capital gains and losses on the assets supporting the F-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) guaranteed interest option). The Consolidated Statements of Cash Flows do not reflect investment activity of the Separate Accounts. REINSURANCE The Company utilizes indemnity reinsurance agreements to reduce its exposure to large losses in all aspects of its insurance business. Such reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge the primary liability of the Company as direct insurer of the risks reinsured. The Company evaluates the financial strength of potential reinsurers and continually monitors the financial condition of reinsurers. Only those reinsurance recoverable balances deemed probable of recovery are reflected as assets on the Company's Balance Sheets. Of the reinsurance recoverable on the Balance Sheets, $3.0 billion at both December 31, 2002 and 2001 is related to the reinsurance recoverable from Lincoln arising from the sale of the Company's domestic life insurance business. INCOME TAXES The Company files a consolidated federal income tax return with its subsidiary IICA. The Company is taxed at regular corporate rates after adjusting income reported for financial statement purposes for certain items. Deferred income tax expenses/benefits result from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities. F-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. INVESTMENTS Fixed maturities available for sale as of December 31 were as follows:
Gross Gross Amortized Unrealized Unrealized Fair 2002 (Millions) Cost Gains Losses Value U.S. government and government agencies and authorities $ 74.2 $ 2.9 $ -- $ 77.1 States, municipalities and political subdivisions 10.2 2.5 -- 12.7 U.S. corporate securities: Public utilities 627.6 28.1 6.4 649.3 Other corporate securities 7,742.6 543.5 33.1 8,253.0 ------------------------------------------------------------------------------ Total U.S. corporate securities 8,370.2 571.6 39.5 8,902.3 ------------------------------------------------------------------------------ Foreign securities: Government 336.9 18.2 6.6 348.5 Other 148.0 8.4 1.2 155.2 ------------------------------------------------------------------------------ Total foreign securities 484.9 26.6 7.8 503.7 ------------------------------------------------------------------------------ Mortgage-backed securities 5,374.2 167.1 34.0 5,507.3 Other asset-backed securities 882.4 47.0 10.5 918.9 ------------------------------------------------------------------------------ Total fixed maturities, including fixed maturities pledged to creditors 15,196.1 817.7 91.8 15,922.0 Less: Fixed maturities pledged to creditors 154.9 0.1 -- 155.0 ------------------------------------------------------------------------------ Fixed maturities $15,041.2 $817.6 $91.8 $15,767.0 ==============================================================================
F-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. INVESTMENTS (continued)
Gross Gross Amortized Unrealized Unrealized Fair 2001 (Millions) Cost Gains Losses Value U.S. government and government agencies and authorities $ 391.0 $ 11.0 $ 4.2 $ 397.8 States, municipalities and political subdivisions 173.7 7.7 -- 181.4 U.S. corporate securities: Public utilities 268.5 6.5 7.9 267.1 Other corporate securities 6,138.8 203.0 62.6 6,279.2 ------------------------------------------------------------------------------ Total U.S. corporate securities 6,407.3 209.5 70.5 6,546.3 ------------------------------------------------------------------------------ Foreign securities: Government 153.2 5.2 0.9 157.5 ------------------------------------------------------------------------------ Total foreign securities 153.2 5.2 0.9 157.5 ------------------------------------------------------------------------------ Mortgage-backed securities 4,513.3 90.1 15.9 4,587.5 Other asset-backed securities 2,077.6 67.1 8.1 2,136.6 ------------------------------------------------------------------------------ Total fixed maturities, including fixed maturities pledged to creditors 13,716.1 390.6 99.6 14,007.1 Less: Fixed maturities pledged to creditors 466.9 1.1 0.8 467.2 ------------------------------------------------------------------------------ Fixed maturities $13,249.2 $389.5 $98.8 $13,539.9 ==============================================================================
At December 31, 2002 and 2001, net unrealized appreciation of $725.9 million and $291.0 million, respectively, on available-for-sale fixed maturities including fixed maturities pledged to creditors included $563.1 million and $233.0 million, respectively, related to experience-rated contracts, which were not reflected in shareholder's equity but in other policyholders' funds. F-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. INVESTMENTS (continued) The amortized cost and fair value of total fixed maturities for the year-ended December 31, 2002 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called, or prepaid.
Amortized Fair (Millions) Cost Value Due to mature: One year or less $ -- $ -- After one year through five years 1,826.6 1,907.8 After five years through ten years 3,455.2 3,673.3 After ten years 3,657.7 3,914.7 Mortgage-backed securities 5,374.2 5,507.3 Other asset-backed securities 882.4 918.9 Less: Fixed maturities securities pledged to creditor 154.9 155.0 -------------------------------------------------------------- Fixed maturities $15,041.2 $15,767.0 ==============================================================
At December 31, 2002 and 2001, fixed maturities with carrying values of $10.5 million and $9.0 million, respectively, were on deposit as required by regulatory authorities. The Company did not have any investments in a single issuer, other than obligations of the U.S. government, with a carrying value in excess of 10% of the Company's shareholder's equity at December 31, 2002 or 2001. The Company has various categories of CMOs that are subject to different degrees of risk from changes in interest rates and, for CMOs that are not agency-backed, defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to dramatic decreases and increases in interest rates resulting in the repayment of principal from the underlying mortgages either earlier or later than originally anticipated. At December 31, 2002 and 2001, approximately 5.5% and 3.0%, respectively, of the Company's CMO holdings were invested in types of CMOs which are subject to more prepayment and extension risk than traditional CMOs (such as interest-only or principal-only strips). Investments in equity securities as of December 31 were as follows:
(Millions) 2002 2001 Amortized Cost $238.3 $52.2 Gross unrealized gains -- 4.5 Gross unrealized losses 2.9 6.4 ------------------------------------------------------- Fair Value $235.4 $50.3 =======================================================
Beginning in April 2001, the Company entered into reverse dollar repurchase agreement and reverse repurchase agreement transactions to increase its return on investments and improve liquidity. These transactions involve a sale of securities and an agreement to repurchase F-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. INVESTMENTS (continued) substantially the same securities as those sold. The dollar rolls and reverse repurchase agreements are accounted for as short-term collateralized financings and the repurchase obligation is reported as borrowed money in "Other Liabilities" on the Consolidated Balance Sheets. The repurchase obligation totaled $1.3 billion at December 31, 2002. The primary risk associated with short-term collateralized borrowings is that the counterparty will be unable to perform under the terms of the contract. The Company's exposure is limited to the excess of the net replacement cost of the securities over the value of the short-term investments, an amount that was not material at December 31, 2002. The Company believes the counterparties to the dollar roll and reverse repurchase agreements are financially responsible and that the counterparty risk is immaterial. IMPAIRMENTS During 2002, the Company determined that fifty-six fixed maturity securities had other than temporary impairments. As a result, at December 31, 2002, the Company recognized a pre-tax loss of $106.4 million to reduce the carrying value of the fixed maturity securities to their combined fair value of $124.7 million. During 2001, the Company determined that fourteen fixed maturity securities had other than temporary impairments. As a result, at December 31, 2001, the Company recognized a pre-tax loss of $51.8 million to reduce the carrying value of the fixed maturities to their value of $10.5 million. 3. FINANCIAL INSTRUMENTS ESTIMATED FAIR VALUE The following disclosures are made in accordance with the requirements of FAS No. 107, "Disclosures about Fair Value of Financial Instruments." FAS No. 107 requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates, in many cases, could not be realized in immediate settlement of the instrument. FAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following valuation methods and assumptions were used by the Company in estimating the fair value of the above financial instruments: FIXED MATURITIES: The fair values for the actively traded marketable bonds are determined based upon the quoted market prices. The fair values for marketable bonds without an active market are obtained through several commercial pricing services which provide the estimated fair values. Fair values of privately placed bonds are determined using a matrix-based pricing model. The model considers the current level of risk-free interest rates, current corporate spreads, the credit F-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. FINANCIAL INSTRUMENTS (continued) quality of the issuer and cash flow characteristics of the security. Using this data, the model generates estimated market values which the Company considers reflective of the fair value of each privately placed bond. Fair values for privately placed bonds are determined through consideration of factors such as the net worth of the borrower, the value of collateral, the capital structure of the borrower, the presence of guarantees and the Company's evaluation of the borrower's ability to compete in their relevant market. EQUITY SECURITIES: Fair values of these securities are based upon quoted market value. MORTGAGE LOANS ON REAL ESTATE: The fair values for mortgage loans on real estate are estimated using discounted cash flow analyses and rates currently being offered in the marketplace for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amounts for these assets approximate the assets' fair values. OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS: The carrying amounts for these financial instruments (primarily premiums and other accounts receivable and accrued investment income) approximate those assets' fair values. INVESTMENT CONTRACT LIABILITIES (INCLUDED IN OTHER POLICYHOLDERS' FUNDS): WITH A FIXED MATURITY: Fair value is estimated by discounting cash flows at interest rates currently being offered by, or available to, the Company for similar contracts. WITHOUT A FIXED MATURITY: Fair value is estimated as the amount payable to the contractholder upon demand. However, the Company has the right under such contracts to delay payment of withdrawals which may ultimately result in paying an amount different than that determined to be payable on demand. F-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. FINANCIAL INSTRUMENTS (continued) The carrying values and estimated fair values of certain of the Company's financial instruments at December 31, 2002 and 2001 were as follows:
2002 2001 ---------------------- ---------------------- Carrying Fair Carrying Fair (Millions) Value Value Value Value Assets: Fixed maturity securities $ 15,767.0 $ 15,767.0 $ 13,539.9 $ 13,539.9 Equity securities 235.4 235.4 50.3 50.3 Mortgage loans 576.6 632.6 241.3 247.7 Policy loans 296.3 296.3 329.0 329.0 Short term investments 6.2 6.2 31.7 31.7 Cash and cash equivalents 65.4 65.4 82.0 82.0 Liabilities: Investment contract liabilities: With a fixed maturity (1,129.8) (1,121.4) (1,021.7) (846.5) Without a fixed maturity (10,783.6) (10,733.8) (11,114.1) (10,624.3) ------------------------------------------------------------------------------
Fair value estimates are made at a specific point in time, based on available market information and judgments about various financial instruments, such as estimates of timing and amounts of future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instruments. In evaluating the Company's management of interest rate, price and liquidity risks, the fair values of all assets and liabilities should be taken into consideration, not only those presented above. DERIVATIVE FINANCIAL INSTRUMENTS INTEREST RATE FLOORS Interest rate floors are used to manage the interest rate risk in the Company's bond portfolio. Interest rate floors are purchased contracts that provide the Company with an annuity in a declining interest rate environment. The Company had no open interest rate floors at December 31, 2002 or 2001. INTEREST RATE CAPS Interest rate caps are used to manage the interest rate risk in the Company's bond portfolio. Interest rate caps are purchased contracts that provide the Company with an annuity in an increasing interest rate environment. The notional amount, carrying value and estimated fair value of the Company's open interest rate caps as of December 31, 2002 were $256.4 million, $0.7 million and $0.7 million, respectively. The Company did not have interest rate caps at December 31, 2001. F-26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. FINANCIAL INSTRUMENTS (continued) INTEREST RATE SWAPS Interest rate swaps are used to manage the interest rate risk in the Company's bond portfolio and well as the Company's liabilities. Interest rate swaps represent contracts that require the exchange of cash flows at regular interim periods, typically monthly or quarterly. The notional amount, carrying value and estimated fair value of the Company's open interest rate swaps as of December 31, 2002 were $400.0 million, $(6.8) million and $(6.8) million, respectively. The Company did not have interest rate swaps at December 31, 2001. FOREIGN EXCHANGE SWAPS Foreign exchange swaps are used to reduce the risk of a change in the value, yield or cash flow with respect to invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash flows for US dollar cash flows at regular interim periods, typically quarterly or semi-annually. The notional amount, carrying value and estimated fair value of the Company's open foreign exchange rate swaps as of December 31, 2002 were $49.4 million, $(0.5) million and $(0.5) million, respectively. The notional amount, carrying value and estimated fair value of the Company's open foreign exchange rate swaps as of December 31, 2001 were 25.0 million, $0.7 million and $0.7 million, respectively. EMBEDDED DERIVATIVES The Company also had investments in certain fixed maturity instruments that contain embedded derivatives, including those whose market value is at least partially determined by, among other things, levels of or changes in domestic and/or foreign interest rates (short- or long-term), exchange rates, prepayment rates, equity markets or credit ratings/spreads. The estimated fair value of the embedded derivatives within such securities as of December 31, 2002 and 2001 was $(1.4) and $(15.5) million, respectively. F-27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. NET INVESTMENT INCOME Sources of net investment income were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Fixed maturities $ 964.1 $887.2 $70.3 $768.9 Nonredeemable preferred stock 3.9 1.5 1.8 9.5 Investment in affiliated mutual funds -- 7.2 0.5 2.1 Mortgage loans 23.3 5.9 0.1 0.5 Policy loans 8.7 8.9 0.7 7.9 Cash equivalents 1.7 18.2 4.4 50.3 Other 23.4 15.9 2.6 13.1 ------------------------------------------------------------------------------------------------- Gross investment income 1,025.1 944.8 80.4 852.3 Less: investment expenses 65.6 56.4 1.8 18.5 ------------------------------------------------------------------------------------------------- Net investment income $ 959.5 $888.4 $78.6 $833.8 =================================================================================================
Net investment income includes amounts allocable to experience rated contractholders of $766.9 million for the year-ended December 31, 2002, $704.2 million for the year-ended December 31, 2001, and $55.9 million and $622.2 million for the one and eleven month periods ended December 31, 2000 and November 30, 2000, respectively. Interest credited to contractholders is included in future policy benefits and claims reserves. 5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY In conjunction with the sale of Aetna, Inc. to ING AIH, the Company was restricted from paying any dividends to its parent for a two year period from the date of sale without prior approval by the Insurance Commissioner of the State of Connecticut. This restriction expired on December 13, 2002. The Company did not pay dividends to its parent in 2002 or 2001. The Insurance Department of the State of Connecticut (the "Department") recognizes as net income and capital and surplus those amounts determined in conformity with statutory accounting practices prescribed or permitted by the Department, which differ in certain respects from accounting principles generally accepted in the United States of America. Statutory net income (loss) was $148.8 million, $(92.3) million and $100.6 million for the years-ended December 31, 2002, 2001, and 2000, respectively. Statutory capital and surplus was $1,006.0 million and $826.2 million as of December 31, 2002 and 2001, respectively. F-28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY (continued) As of December 31, 2002, the Company does not utilize any statutory accounting practices, which are not prescribed by state regulatory authorities that, individually or in the aggregate, materially affect statutory capital and surplus. For 2001, the Company was required to implement statutory accounting changes ("Codification") ratified by the National Association of Insurance Commissioners ("NAIC") and state insurance departments. The cumulative effect of Codification to the Company's statutory surplus as of January 1, 2001 was a decrease of $12.5 million. 6. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS Realized capital gains or losses are the difference between the carrying value and sale proceeds of specific investments sold. Net realized capital gains (losses) on investments were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Fixed maturities $ (97.5) $(20.6) $1.2 $(36.3) Equity securities (3.5) (0.4) 0.6 (0.9) ------------------------------------------------------------------------------------------------- Pretax realized capital gains (losses) $(101.0) $(21.0) $1.8 $(37.2) ================================================================================================= After-tax realized capital gains (losses) $ (58.3) $(13.7) $1.3 $(24.3) =================================================================================================
Net realized capital gains (losses) of $63.6 million, $117.0 million, $0.9 million and $(17.7) million for the years ended December 31, 2002 and 2001, the one month period ended December 31, 2000 and the eleven month period ended November 30, 2000, respectively, allocable to experience rated contracts, were deducted from net realized capital gains and an offsetting amount was reflected in other policyholders' funds. Net unamortized gains (losses) allocable to experienced-rated contractholders were $199.3 million, $172.7 million, $(2.5) million and $47.6 million at December 31, 2002 and 2001, the one month ended December 31, 2000 and the eleven months ended November 30, 2000, respectively. F-29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (continued) Proceeds from the sale of total fixed maturities and the related gross gains and losses (excluding those related to experience-related contractholders) were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Proceeds on sales $24,980.4 $14,216.7 $233.0 $10,083.2 Gross gains 276.7 57.0 1.2 2.5 Gross losses 374.2 77.6 -- 38.8 -------------------------------------------------------------------------------------------------
Changes in shareholder's equity related to changes in accumulated other comprehensive income (unrealized capital gains and losses on securities including securities pledged to creditors and excluding those related to experience-rated contractholders) were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Fixed maturities $104.8 $24.0 $24.5 $ 67.6 Equity securities (1.6) 2.0 (1.5) (4.0) Other investments (8.3) 6.5 5.7 (15.8) ------------------------------------------------------------------------------------------------- Subtotal 94.9 32.5 28.7 79.4 Increase in deferred income taxes 33.2 11.3 10.1 27.8 ------------------------------------------------------------------------------------------------- Net changes in accumulated other comprehensive income (loss) $ 61.7 $21.2 $18.6 $ 51.6 =================================================================================================
Net unrealized capital gains (losses) allocable to experience-rated contracts of $563.1 million and $233.0 million at December 31, 2002 and 2001, respectively, are reflected on the Consolidated Balance Sheets in other policyholders' funds and are not included in shareholder's equity. F-30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (continued) Shareholder's equity included the following accumulated other comprehensive income (loss), which is net of amounts allocable to experience-rated contractholders:
Preacquisition -------------- As of As of As of As of December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Net unrealized capital gains (losses): Fixed maturities $162.8 $58.0 $34.0 $ 9.5 Equity securities (3.5) (1.9) (3.9) (2.4) Other investments 7.3 15.6 9.1 3.4 ------------------------------------------------------------------------------------------------- 166.6 71.7 39.2 10.5 Deferred income taxes 58.3 25.1 13.8 3.7 ------------------------------------------------------------------------------------------------- Net accumulated other comprehensive income $108.3 $46.6 $25.4 $ 6.8 =================================================================================================
Changes in accumulated other comprehensive income related to changes in unrealized gains (losses) on securities, including securities pledged to creditors (excluding those related to experience-rated contractholders) were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Unrealized holding gains (losses) arising the year (1) $(127.4) $ 8.3 $18.6 $51.4 Less: reclassification adjustment for gains (losses) and other items included in net income (2) 65.7 (12.9) -- (0.2) ------------------------------------------------------------------------------------------------- Net unrealized gains (losses) on securities $ 61.7 $ 21.2 $18.6 $51.6 =================================================================================================
(1) Pretax unrealized holding gains (losses) arising during the year were $196.0 million, $12.7 million, $28.6 million and $79.4 million for the years ended December 31, 2002 and 2001, the one month ended December 31, 2000 and the eleven months ended November 31, 2000, respectively. (2) Pretax reclassification adjustments for gains (losses) and other items included in net income were $101.0 million, $(19.8) million and $(0.1) million for the years ended December 31, 2002 and 2001, and the eleven months ended November 30, 2000, respectively. There were no pretax reclassification adjustments for gains (losses) and other items included in net income for the one month ended December 31, 2000. F-31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 7. SEVERANCE In December 2001, ING announced its intentions to further integrate and streamline the U.S.-based operations of ING Americas (a business division of ING which includes the Company) in order to build a more customer-focused organization. In connection with these actions, the Company recorded a charge of $29.2 million pretax. The severance portion of this charge ($28.4 million pretax) is based on a plan to eliminate 580 positions (primarily operations, information technology and other administrative/staff support personnel). Severance actions are expected to be substantially complete by March 31, 2003. The facilities portion ($0.8 million pretax) of the charge represents the amount to be incurred by the Company to terminate a contractual lease obligation. Activity for the year ended December 31, 2002 within the severance liability and positions eliminated related to such actions were as follows:
(Millions) Severance Liability Positions Balance at December 31, 2001 $ 28.4 580 Actions taken (19.2) (440) ------------------------------------------------------------------------ Balance at December 31, 2002 $ 9.2 140 ========================================================================
8. INCOME TAXES The Company files a consolidated federal income tax return with IICA. The Company has a tax allocation agreement with IICA whereby the Company charges its subsidiary for taxes it would have incurred were it not a member of the consolidated group and credits the member for losses at the statutory tax rate. Income taxes from continuing operations consist of the following:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Current taxes (benefits): Federal $ 28.9 $ 3.2 $ 9.4 $ 5.3 State 1.8 2.2 0.2 2.6 Net realized capital gains (losses) 11.5 16.1 0.3 (11.5) ------------------------------------------------------------------------------------------------- Total current taxes (benefits) 42.2 21.5 9.9 (3.6) ------------------------------------------------------------------------------------------------- Deferred taxes (benefits): Federal 30.6 89.3 (4.3) 83.2 Net realized capital gains (losses) (54.2) (23.4) 0.3 (1.5) ------------------------------------------------------------------------------------------------- Total deferred taxes (benefits) (23.6) 65.9 (4.0) 81.7 ------------------------------------------------------------------------------------------------- Total income tax expense $ 18.6 $ 87.4 $ 5.9 $ 78.1 =================================================================================================
F-32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. INCOME TAXES (continued) Income taxes were different from the amount computed by applying the federal income tax rate to income from continuing operations before income taxes for the following reasons:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Income from continuing operations before income taxes and cumulative effect of change in accounting principle $86.1 $187.3 $18.5 $249.6 Tax rate 35% 35% 35% 35% ------------------------------------------------------------------------------------------------- Application of the tax rate 30.1 65.6 6.4 87.4 Tax effect of: State income tax, net of federal benefit 1.2 1.4 0.1 1.7 Excludable dividends (5.3) (1.8) (0.9) (12.6) Goodwill amortization -- 21.6 -- -- Transfer of mutual fund shares (6.7) -- -- -- Other, net (0.7) 0.6 0.3 1.6 ------------------------------------------------------------------------------------------------- Income taxes $18.6 $ 87.4 $ 5.9 $ 78.1 =================================================================================================
F-33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. INCOME TAXES (continued) The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 are presented below:
(Millions) 2002 2001 Deferred tax assets: Deferred policy acquisition costs $ -- $ 11.7 Insurance reserves 269.8 286.9 Unrealized gains allocable to experience rated contracts 197.1 81.5 Investment losses 69.7 36.7 Postretirement benefits 29.5 26.3 Deferred compensation 58.6 52.0 Other 19.5 27.7 ---------------------------------------------------------- Total gross assets 644.2 522.8 ---------------------------------------------------------- Deferred tax liabilities: Value of business acquired 509.7 558.5 Market discount 4.1 4.6 Net unrealized capital gains 255.4 106.6 Depreciation 3.8 5.1 Deferred policy acquisition costs 29.2 -- Other 5.1 1.7 ---------------------------------------------------------- Total gross liabilities 807.3 676.5 ---------------------------------------------------------- Net deferred tax liability $(163.1) $(153.7) ==========================================================
Net unrealized capital gains and losses are presented in shareholder's equity net of deferred taxes. The "Policyholders' Surplus Account," which arose under prior tax law, is generally that portion of a life insurance company's statutory income that has not been subject to taxation. As of December 31, 1983, no further additions could be made to the Policyholders' Surplus Account for tax return purposes under the Deficit Reduction Act of 1984. The balance in such account was approximately $17.2 million at December 31, 2002. This amount would be taxed only under certain conditions. No income taxes have been provided on this amount since management believes under current tax law the conditions under which such taxes would become payable are remote. The Internal Revenue Service (the "Service") has completed examinations of the federal income tax returns of the Company through 1997. Discussions are being held with the Service with respect to proposed adjustments. Management believes there are adequate defenses against, or sufficient reserves to provide for, any such adjustments. The Service has commenced its examinations for the years 1998 through 2000. F-34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS Prior to December 31, 2001, ILIAC, in conjunction with ING, had a qualified defined benefit pension plan covering substantially all employees ("Transition Pension Plan"). The Transition Pension Plan provided pension benefits based on a cash balance formula, which credited employees annually with an amount equal to a percentage of eligible pay based on age and years of service as well as an interest credit based on individual account balances. Contributions were determined using the Projected Unit Credit Method and were limited to the amounts that are tax-deductible. The accumulated benefit obligation and plan assets were recorded by ILIAC. As of December 31, 2001, the Transition Pension Plan merged into the ING Americas Retirement Plan ("ING Pension Plan"), which is sponsored by ING North America Insurance Corporation ("ING North America"), an affiliate of ILIAC. The ING Pension Plan covers substantially all U.S. employees. Accordingly, the Company transferred $17.4 million of net assets ($11.3 million after tax) related to the movement of the Transition Pension Plan to ING North America. The Company reported this transfer of net assets as a $11.3 million reduction in paid in capital. The new plan's benefits are based on years of service and the employee's average annual compensation during the last five years of employment. Contributions are determined using the Projected Unit Credit Method and are limited to the amounts that are tax-deductible. The costs allocated to the Company for its members' participation in the ING Pension Plan were $6.0 million for 2002. The benefit obligations and the funded status for the Company's qualified pension plan over the period ended December 31 are presented below:
(Millions) 2001 Change in benefit obligation: Benefit obligation at January 1 $ 135.1 Service cost 9.4 Interest cost 10.3 Actuarial loss (0.7) Plan amendments 4.0 Curtailments/settlements 0.4 Benefits paid (3.0) Effect of transfer of assets (155.5) ----------------------------------------------------------- Benefit obligation at December 31 $ -- =========================================================== Funded status: Funded status at December 31 $ (4.3) Unrecognized past service cost 3.4 Unrecognized net loss 20.4 Transfer of funded status to the parent (19.5) ----------------------------------------------------------- Net amount recognized $ -- ===========================================================
F-35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS (continued) The reconciliation of the plan assets for the year ended December 31 is presented below:
(Millions) 2001 Fair value of plan assets at January 1 $ 160.7 Actual return on plan assets (6.4) Benefits paid (3.0) Effect of transfer of assets (151.3) ----------------------------------------------------------- Fair value of plan assets at December 31 $ -- ===========================================================
The net periodic benefit cost for the year ended December 31 is presented below:
(Millions) 2001 Service cost $ 9.4 Interest cost 10.2 Expected return on assets (14.6) ---------------------------------------------------------- Net periodic benefit cost $ 5.0 ==========================================================
The weighted average discount rate, expected rate of return on plan assets, and rate of compensation increase was 7.5%, 9.3%, and 4.5% for 2001. POSTRETIREMENT BENEFIT PLANS In addition to providing pension benefits, ILIAC, in conjunction with ING, provides certain health care and life insurance benefits for retired employees and certain agents. Retired employees are generally required to contribute to the plans based on their years of service with the Company. The following tables summarize the benefit obligations and the funded status for F-36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS (continued) retired agents' and retired employees' postretirement benefits over the periods ended December 31:
(Millions) 2002 2001 Change in benefit obligation: Benefit obligation at January 1 $ 25.4 $ 19.1 Service cost 0.5 0.7 Interest cost 1.5 1.7 Actuarial (gain) loss 4.0 1.4 Acquisitions -- 3.7 Plan amendments (6.5) -- Benefits paid (1.2) (1.2) -------------------------------------------------------- Benefit obligation at December 31 $ 23.7 $ 25.4 ======================================================== Funded status: Funded status at December 31 $(23.7) $(25.4) Unrecognized past service cost (3.6) -- Unrecognized net loss 5.4 1.4 -------------------------------------------------------- Net amount recognized $(21.9) $(24.0) ========================================================
The weighted-average discount rate assumption for retired agents' and retired employees postretirement benefits was 6.8% for 2002 and 7.5% for 2001. The medical health care cost trend rates were 10.0%, decreasing to 5.0% by 2008 for 2002; and 8.5%, gradually decreasing to 5.5% by 2007 for 2001. Increasing the health care trend rate by 1% would increase the benefit obligation by $1.6 million. Decreasing the health care trend rate by 1% would decrease the benefit obligation by $1.4 million as of December 31, 2002. Net periodic benefit costs were as follows:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Service cost $ 0.5 $0.7 $ -- $0.2 Interest cost 1.5 1.7 0.1 1.2 Actuarial (gain) loss -- -- -- 0.2 Unrecognized past service cost (2.9) -- -- -- ------------------------------------------------------------------------------------------------- Net periodic benefit cost $(0.9) $2.4 $0.1 $1.2 =================================================================================================
F-37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS (continued) There were no gains or losses resulting from curtailments or settlements of the postretirement benefit plans during 2002, 2001 or 2000. NON-QUALIFIED DEFINED BENEFIT PENSION PLANS Prior to December 31, 2001, ILIAC, in conjunction with ING, had a non-qualified defined benefit pension plan covering certain eligible employees. The plan provided pension benefits based on a cash balance formula, which credited employees annually with an amount equal to a percentage of eligible pay based on age and years of service as well as an interest credit based on individual account balances. As of December 31, 2001, ILIAC, in conjunction with ING, has a non-qualified defined benefit pension plan providing benefits to certain eligible employees based on years of service and the employee's average annual compensation during the last five years of employment, which was assumed at December 31, 2002 to increase at an annual rate of 3.8%. Contributions are determined using the Projected Unit Credit Method. ILIAC, in conjunction with ING, also has a non-qualified pension plan covering certain agents. The plan provides pension benefits based on annual commission earnings. During 2002, liabilities, net of tax, totaling $15.1 million were allocated to the Company related to a Supplemental Excess Retirement Plan ("SERP") that covers certain employees of ING Life Insurance Company of America and Aeltus, affiliates of the Company. The following tables summarize the benefit obligations and the funded status for the Company's non-qualified pension plans for the periods ended December 31, 2002 and 2001. These tables have been presented, for comparison purposes, as though the SERP transfer had occurred as of January 1, 2001. The accompanying consolidated balance sheet and income statement do not reflect the SERP transfer until 12/31/02:
(Millions) 2002 2001 Change in benefit obligation: Benefit obligation at January 1 $ 95.3 $ 88.7 Service cost -- 4.4 Interest cost 6.8 7.1 Actuarial (gain) loss 5.7 0.7 Plan amendments 4.5 (4.1) Benefits paid (5.5) (1.5) ---------------------------------------------------------- Benefit obligation at December 31 $ 106.8 $ 95.3 ========================================================== Funded status: Funded status at December 31 $(106.8) $ (95.3) Unrecognized past service cost 0.8 1.2 Unrecognized net loss (gain) 6.4 (7.1) ---------------------------------------------------------- Net amount recognized $ (99.6) $(101.2) ==========================================================
At December 31, 2002 and 2001, the accumulated benefit obligation was $43.8 million and $27.3 million, respectively. F-38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS (continued) The weighted-average discount rate assumption for Agents' and employees' non-qualified pension plans was 6.8%, and 3.8% for 2002 and 7.5% and 5.3% for 2001. Net periodic benefit costs were as follows:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Service cost $ 6.8 $ 4.4 $ 0.3 $ 2.1 Interest cost -- 7.1 0.3 3.8 Actuarial (gain) loss -- -- -- 0.2 Return on plan assets -- -- (0.3) (3.2) Unrecognized past service cost (0.3) -- -- (0.1) ------------------------------------------------------------------------------------------------- Net periodic benefit cost $ 6.5 $11.5 $ 0.3 $ 2.8 =================================================================================================
There was a curtailment of $2.6 million in 2002. There were no gains or losses resulting from curtailments or settlements of the non-qualified pension plans during 2000. ING SAVINGS AND INVESTMENT PLANS ILIAC, in conjunction with ING, also has a Savings Plan. Substantially all employees are eligible to participate in a savings plan under which designated contributions, which may be invested in a variety of financial instruments, are matched up to 6.0% of compensation by ING. Pretax charges to operations for the incentive savings plan were $6.8 million, $11.0 million, and $9.0 million in 2002, 2001, and 2000, respectively. ILIAC, in conjunction with former Aetna, had a stock incentive plan that provided for stock options, deferred contingent common stock or equivalent cash awards or restricted stock to employees. Certain executive, middle management and non-management employees were granted options to purchase common stock of former Aetna at or above the market price on the date of grant. Options generally became 100% vested three years after the grant was made, with one-third of the options vesting each year. The former Aetna did not recognize compensation expense for stock options granted at or above the market price on the date of grant under its stock incentive plans. In addition, executives were, from time to time, granted incentive units which were rights to receive common stock or an equivalent value in cash. The sale of the Company to ING AIH by former Aetna caused all outstanding stock options to vest immediately. The costs to the Company associated with the former Aetna stock plans for 2001 and 2000 were $1.8 million and $2.7 million, respectively. F-39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. RELATED PARTY TRANSACTIONS INVESTMENT ADVISORY AND OTHER FEES ILIAC and Aeltus serve as investment advisors and administrators to the Company's mutual funds and variable funds (collectively, the Funds). Company mutual funds pay Aeltus or ILIAC, as investment advisor or administrator, a daily fee which, on an annual basis, ranged, depending on the fund, from 0.1% to 0.5% of their average daily net assets. All of the funds managed by ILIAC and certain of the funds managed by Aeltus are subadvised by investment advisors, in which case, Aeltus or ILIAC pays a subadvisory fee to the investment advisors. The Company is also compensated by the separate accounts (variable funds) for bearing mortality and expense risks pertaining to variable life and annuity contracts. Under the insurance and annuity contracts, the separate accounts pay the Company a daily fee, which, on an annual basis is, depending on the product, up to 3.4% of their average daily net assets. The amount of compensation and fees received from the Company mutual funds and separate accounts, included in fee income amounted to $391.8 million, $421.7 million and $506.3 million in 2002, 2001 and 2000, respectively. RECIPROCAL LOAN AGREEMENT ILIAC maintains a reciprocal loan agreement with ING AIH, a Delaware corporation and affiliate, to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Under this agreement, which became effective in June 2001 and expires on April 1, 2011, ILIAC and ING AIH can borrow up to 3% of ILIAC's statutory admitted assets as of the preceding December 31 from one another. Interest on any ILIAC borrowings is charged at the rate of ING AIH's cost of funds for the interest period plus 0.15%. Interest on any ING AIH borrowings is charged at a rate based on the prevailing interest rate of U.S. commercial paper available for purchase with a similar duration. Under this agreement, ILIAC incurred interest expense of $0.1 million for the years ended December 31, 2002 and 2001, and earned interest income of $2.1 million and $3.3 million for the years ended December 31, 2002 and 2001, respectively. At December 31, 2002, ILIAC had no receivables and no outstanding borrowings from ING AIH under this agreement. CAPITAL TRANSACTIONS In 2002, the company received capital contributions in the form of investments in affiliated mutual funds of $164.3 million from HOLDCO. The Company did not receive capital contributions in 2001. OTHER Premiums due and other receivables include $0.1 million and $1.0 million due from affiliates at December 31, 2002 and 2001, respectively. Other liabilities include $1.3 million and $0.6 million due to affiliates for the years ended December 31, 2002 and 2001, respectively. F-40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 11. REINSURANCE At December 31, 2002, the Company had reinsurance treaties with six unaffiliated reinsurers and one affiliated reinsurer covering a significant portion of the mortality risks and guaranteed death and living benefits under its variable contracts. The Company remains liable to the extent its reinsurers do not meet their obligations under the reinsurance agreements. On October 1, 1998, the Company sold its domestic individual life insurance business to Lincoln for $1 billion in cash. The transaction is generally in the form of an indemnity reinsurance arrangement, under which Lincoln contractually assumed from the Company certain policyholder liabilities and obligations, although the Company remains directly obligated to policyholders. Effective January 1, 1998, 90% of the mortality risk on substantially all individual universal life product business written from June 1, 1991 through October 31, 1997 was reinsured externally. Beginning November 1, 1997, 90% of new business written on these products was reinsured externally. Effective October 1, 1998 this agreement was assigned from the third party reinsurer to Lincoln. Effective December 31, 1988, the Company entered into a modified coinsurance reinsurance agreement ("MODCO") with Aetna Life Insurance Company ("Aetna Life"), (formerly an affiliate of the Company), in which substantially all of the nonparticipating individual life and annuity business written by Aetna Life prior to 1981 was assumed by the Company. Effective January 1, 1997, this agreement was amended to transition (based on underlying investment rollover in Aetna Life) from a modified coinsurance arrangement to a coinsurance agreement. As a result of this change, reserves were ceded to the Company from Aetna Life as investment rollover occurred. Effective October 1, 1998, this agreement was fully transitioned to a coinsurance arrangement and this business along with the Company's direct individual life insurance business, with the exception of certain supplemental contracts with reserves of $66.2 million and $69.9 million as of December 31, 2002 and 2001, respectively, was sold to Lincoln. On December 16, 1988, the Company assumed $25.0 million of premium revenue from Aetna Life, for the purchase and administration of a life contingent single premium variable payout annuity contract. In addition, the Company is also responsible for administering fixed annuity payments that are made to annuitants receiving variable payments. Reserves of $19.6 million and $24.1 million were maintained for this contract as of December 31, 2002 and 2001, respectively. F-41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 11. REINSURANCE (continued) The effect of reinsurance on premiums and recoveries was as follows:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Direct Premiums Federal $ 97.3 $112.3 $17.2 $143.2 Reinsurance assumed 9.7 0.6 0.1 0.8 Reinsurance ceded 8.3 (1.3) 0.8 6.3 ------------------------------------------------------------------------------------------------- Net Premiums 98.7 114.2 16.5 137.7 ------------------------------------------------------------------------------------------------- Reinsurance Recoveries $317.6 $363.7 $44.5 $371.6 =================================================================================================
12. COMMITMENTS AND CONTINGENT LIABILITIES LEASES For the year ended December 31, 2002 rent expense for leases was $18.1 million. The future net minimum payments under noncancelable leases for the years ended December 31, 2003 through 2007 are estimated to be $17.5 million, $15.7 million, $14.9 million, $13.6 million and $12.1 million, respectively, and $0.2 million, thereafter. The Company pays substantially all expenses associated with its leased and subleased office properties. Expenses not paid directly by the Company are paid for by an affiliate and allocated back to the Company. COMMITMENTS Through the normal course of investment operations, the Company commits to either purchase or sell securities, commercial mortgage loans or money market instruments at a specified future date and at a specified price or yield. The inability of counterparties to honor these commitments may result in either higher or lower replacement cost. Also, there is likely to be a change in the value of the securities underlying the commitments. At December 31, 2002 and 2001, the Company had off-balance sheet commitments to purchase investments of $236.7 million with an estimated fair value of $236.7 million and $92.7 million with an estimated fair value of $92.7 million, respectively. LITIGATION The Company is a party to threatened or pending lawsuits arising, from the normal conduct of business. Due to the climate in insurance and business litigation, suits against the Company sometimes include claims for substantial compensatory, consequential or punitive damages and other types of relief. Moreover, certain claims are asserted as class actions, purporting to represent a group of similarly situated individuals. While it is not possible to forecast the outcome of such lawsuits, in light of existing insurance, reinsurance and established reserves, it is F-42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. COMMITMENTS AND CONTINGENT LIABILITIES (continued) the opinion of management that the disposition of such lawsuits will not have materially adverse effect on the Company's operations or financial position. 13. SEGMENT INFORMATION The Company's realignment of Worksite Products and Individual Products operating segments into one reporting segment (USFS) is reflected in the restated summarized financial information for December 31, 2001 and 2000 in the table below. Effective with the third quarter of 2002, items that were previously not allocated back to USFS but reported in Other are now allocated to USFS and reported in the restated financial information for the period ending December 31, 2001 and 2000. Summarized financial information for the Company's principal operations for December 31, were as follows:
Non-Operating Segments ----------------------- Investment Management (Millions) USFS (1) Services (2) Other (3) Total 2002 ------------------------------ Revenues from external customers $ 507.2 $ 19.2 $ (9.5) $ 516.9 Net investment income 959.2 0.2 0.1 959.5 ------------------------------------------------------------------------------ Total revenue excluding net realized capital gains (losses) $1,466.4 $ 19.4 $ (9.4) $ 1,476.4 ============================================================================== Operating earnings (4) $ 121.1 $ 4.7 $ -- $ 125.8 Cumulative effect of accounting change (2,412.1) -- -- (2,412.1) Net realized capital losses, net of tax (58.3) -- -- (58.3) ------------------------------------------------------------------------------ Net income (loss) $(2,349.3) $ 4.7 -- $(2,344.6) ============================================================================== 2001 ------------------------------ Revenues from external customers $ 585.0 $119.6 $(37.0) $ 667.6 Net investment income 885.5 1.7 1.2 888.4 ------------------------------------------------------------------------------ Total revenue excluding net realized capital gains (losses) $1,470.5 $121.3 $(35.8) $ 1,556.0 ============================================================================== Operating earnings (4) $ 86.2 $ 27.4 $ -- $ 113.6 Net realized capital gains, net of tax (13.8) 0.1 -- (13.7) ------------------------------------------------------------------------------ Net income $ 72.4 $ 27.5 $ -- $ 99.9 ==============================================================================
F-43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 13. SEGMENT INFORMATION (continued)
Non-Operating Segments ----------------------- Investment Management (Millions) USFS (1) Services (2) Other (3) Total 2000 ------------------------------ Revenues from external customers $ 692.1 $138.2 $(53.0) $ 777.3 Net investment income 905.8 2.8 3.8 912.4 ------------------------------------------------------------------------------ Total revenue excluding net realized capital gains (losses) $1,597.9 $141.0 $(49.2) $ 1,689.7 ============================================================================== Operating earnings (4) $ 197.4 $ 9.7 $ -- $ 207.1 Net realized capital gains, net of tax (23.1) 0.1 -- (23.0) ------------------------------------------------------------------------------ Net income from continuing operations $ 174.3 $ 9.8 $ -- $ 184.1 ==============================================================================
(1) USFS includes deferred annuity contracts that fund defined contribution and deferred compensation plans, immediate annuity contracts; mutual funds; distribution services for annuities and mutual funds; programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and record- keeping services along with a menu of investment options; wrapper agreements containing certain benefit responsive guarantees that are entered into with retirement plans, whose assets are not invested with the Company; investment advisory services and pension plan administrative services. USFS also includes deferred and immediate annuity contracts, both qualified and nonqualified, that are sold to individuals and provide variable or fixed investment options or a combination of both. (2) Investment Management Services include: investment advisory services to affiliated and unaffiliated institutional and retail clients; underwriting; distribution for Company mutual funds and a former affiliate's separate ccounts; and trustee, administrative and other services to retirement plans. On February 28, 2002, IA Holdco and its subsidiaries, which comprised this segment, were distributed to HOLDCO (refer to Note 1). (3) Other includes consolidating adjustments between USFS and Investment Management Services. (4) Operating earnings is comprised of net income (loss) excluding net realized capital gains and losses. While operating earnings is the measure of profit or loss used by the Company's management when assessing performance or making operating decisions, it does not replace net income as a measure of profitability. 14. DISCONTINUED OPERATIONS--INDIVIDUAL LIFE INSURANCE On October 1, 1998, the Company sold its domestic individual life insurance business to Lincoln for $1,000.0 million in cash. The transaction was generally in the form of an indemnity reinsurance arrangement, under which Lincoln contractually assumed from the Company certain policyholder liabilities and obligations, although the Company remains directly obligated to policyholders. Assets related to and supporting the life policies were transferred to Lincoln and the Company recorded a reinsurance recoverable from Lincoln. The transaction resulted in an after-tax gain on the sale of approximately $117.0 million, of which $57.7 million was deferred and was being recognized over approximately 15 years. The remaining portion of the gain was recognized immediately in net income and was largely attributed to access to the agency sales force and brokerage distribution channel. Approximately $5.7 million (after tax) of amortization related to the deferred gain was recognized in both 2000 and 1999. During the fourth quarter of 1999, the Company refined certain accrual and tax estimates which had been established in F-44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. DISCONTINUED OPERATIONS--INDIVIDUAL LIFE INSURANCE (continued) connection with the recording of the deferred gain. As a result, the deferred gain was increased by $12.9 million (after tax) to $65.4 million at December 31, 1999. In conjunction with the accounting for the 2000 acquisition of the Aetna Financial Services business, of which the Company is a part, the deferred gain, which was previously part of other liabilities, was written off (Refer to Note 1). QUARTERLY DATA (UNAUDITED)
2002 (Millions) First Second Third Fourth Total Revenue $363.5 $351.3 $349.8 $ 310.8 ----------------------------------------------------------------- Income (loss) from continuing operations before income taxes 44.1 39.3 (23.1) 25.8 Income tax expense (benefit) 15.2 12.9 (9.9) 0.4 Income (loss) from continuing operations 28.9 26.4 (13.2) 25.4 ----------------------------------------------------------------- Cumulative effect of change in accounting principle -- -- -- (2,412.1) ----------------------------------------------------------------- Net income (loss) $ 28.9 $26.4 $(13.2) $(2,386.7) ----------------------------------------------------------------- 2001 (Millions) First Second Third Fourth Total Revenue $395.5 $411.9 $387.2 $ 340.4 ----------------------------------------------------------------- Income (loss) from continuing operations before income taxes 64.3 95.0 68.9 (40.9) Income tax expense (benefit) 28.2 39.1 27.1 (7.0) ----------------------------------------------------------------- Income from continuing operations 36.1 55.9 41.8 (33.9) ----------------------------------------------------------------- Net (loss) $ 36.1 $55.9 $ 41.8 $ (33.9) -----------------------------------------------------------------
F-45 ING Life Insurance and Annuity Company Variable Annuity Account B Financial Statements Year ended December 31, 2002 CONTENTS Report of Independent Auditors S-2 Audited Financial Statements Statement of Assets and Liabilities S-4 Statement of Operations S-14 Statements of Changes in Net Assets S-26 Notes to Financial Statements S-49
S-1 Report of Independent Auditors The Board of Directors and Participants ING Life Insurance and Annuity Company We have audited the accompanying statement of assets and liabilities of ING Life Insurance and Annuity Company Variable Annuity Account B (comprised of the AIM V.I. Capital Appreciation, AIM V.I. Core Equity, AIM V.I. Government Securities, AIM V.I. Growth, AIM V.I. Premier Equity, Alger American Balanced, Alger American Income & Growth, Alger American Leveraged AllCap, Alliance Growth and Income, Alliance Premier Growth, Alliance Quasar, American Century VP Balanced, American Century VP International, Brinson Series Growth & Income, Brinson Series Small Cap, Brinson Series Tactical Allocation, Calvert Social Balanced, Federated American Leaders, Federated Equity Income, Federated Fund for U.S. Government Securities, Federated Growth Strategies, Federated High Income Bond, Federated International Equity, Federated Prime Money, Federated Utility, Fidelity(R) VIP Equity-Income, Fidelity(R) VIP Growth, Fidelity(R) VIP High Income, Fidelity(R) VIP Overseas, Fidelity(R) VIP II ASSET MANAGER(SM), Fidelity(R) VIP II Contrafund(R), Fidelity(R) VIP II Index 500, Fidelity(R) VIP II Investment Grade Bond, Franklin Small Cap Value Securities, ING GET Fund - Series C, ING GET Fund - Series D, ING GET Fund - Series E, ING GET Fund - Series G, ING GET Fund - Series H, ING GET Fund - Series I, ING GET Fund - Series J, ING GET Fund - Series K, ING GET Fund - Series L, ING GET Fund - Series M, ING GET Fund - Series N, ING GET Fund - Series P, ING GET Fund - Series Q, ING GET Fund - Series R, ING GET Fund - Series S, ING GET Fund - Series T, ING GET Fund - Series U, ING VP Balanced, ING VP Bond, ING VP Emerging Markets, ING VP Money Market, ING VP Natural Resources, ING VP Strategic Allocation Balanced, ING VP Strategic Allocation Growth, ING VP Strategic Allocation Income, ING Alger Aggressive Growth, ING Alger Growth, ING American Century Small Cap Value, ING Baron Small Cap Growth, ING Goldman Sachs Capital Growth, ING JP Morgan Fleming International, ING JP Morgan Mid Cap Value, ING MFS Capital Opportunities, ING MFS Global Growth, ING MFS Research, ING OpCap Balanced Value, ING PIMCO Total Return, ING Salomon Brothers Aggressive Growth, ING Salomon Brothers Capital, ING Salomon Brothers Investors Value, ING T. Rowe Price Growth Equity, ING UBS Tactical Asset Allocation, ING Van Kampen Comstock, ING VP Growth and Income, ING VP Growth, ING VP Index Plus LargeCap, ING VP Index Plus MidCap, ING VP Index Plus SmallCap, ING VP International Equity, ING VP Small Company, ING VP Technology, ING VP Value Opportunity, ING VP Growth Opportunities - Class R, ING VP Growth Opportunities - Class S, ING VP International Value, ING VP MagnaCap - Class R, ING VP MagnaCap - Class S, ING VP MidCap Opportunities - Class R, ING VP MidCap Opportunities - Class S, ING VP SmallCap Opportunities - Class R, ING VP SmallCap Opportunities - Class S, Janus Aspen Aggressive Growth, Janus Aspen Balanced, Janus Aspen Flexible Income, Janus Aspen S-2 Growth, Janus Aspen Worldwide Growth, Lord Abbett Growth and Income, Lord Abbett MidCap Value, MFS(R) Global Governments, MFS(R) Total Return, Oppenheimer Aggressive Growth, Oppenheimer Global Securities, Oppenheimer Main Street Growth & Income, Oppenheimer Strategic Bond, Pioneer Equity Income VCT, Pioneer VCT, Pioneer Mid Cap Value VCT, Prudential Jennison, and SP Jennison International Growth Divisions) as of December 31, 2002, and the related statements of operations and changes in net assets for the periods disclosed in the financial statements. These financial statements are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2002, by correspondence with the transfer agents. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Divisions comprising the ING Life Insurance and Annuity Company Variable Annuity Account B at December 31, 2002, and the results of their operations and changes in their net assets for the periods disclosed in the financial statements, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Atlanta, Georgia March 14, 2003 S-3 ING Life Insurance and Annuity Company Variable Annuity Account B Statement of Assets and Liabilities December 31, 2002
AIM V.I. AIM V.I. CAPITAL AIM V.I. CORE GOVERNMENT AIM V.I. APPRECIATION EQUITY SECURITIES GROWTH ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 14,831,979 $ 29,940,240 $ 25,997,225 $ 14,945,690 ----------------------------------------------------------------- Total assets 14,831,979 29,940,240 25,997,225 14,945,690 ----------------------------------------------------------------- Net assets $ 14,831,979 $ 29,940,240 $ 25,997,225 $ 14,945,690 ================================================================= NET ASSETS Accumulation units $ 14,401,283 $ 26,781,106 $ 25,997,225 $ 14,294,057 Contracts in payout (annuitization) period 430,696 3,159,134 - 651,633 ----------------------------------------------------------------- Total net assets $ 14,831,979 $ 29,940,240 $ 25,997,225 $ 14,945,690 ================================================================= Total number of shares 902,738 1,762,227 2,096,550 1,322,627 ================================================================= Cost of shares $ 18,955,748 $ 35,547,810 $ 25,411,578 $ 20,177,678 ================================================================= AMERICAN AMERICAN BRINSON SERIES CENTURY(R) VP CENTURY(R) VP TACTICAL CALVERT SOCIAL BALANCED INTERNATIONAL ALLOCATION BALANCED ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 1,483,040 $ 1,538,873 $ 9,724,571 $ 1,775,384 ----------------------------------------------------------------- Total assets 1,483,040 1,538,873 9,724,571 1,775,384 ----------------------------------------------------------------- Net assets $ 1,483,040 $ 1,538,873 $ 9,724,571 $ 1,775,384 ================================================================= NET ASSETS Accumulation units $ 1,483,040 $ 1,538,873 $ 9,724,571 $ 1,775,384 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 1,483,040 $ 1,538,873 $ 9,724,571 $ 1,775,384 ================================================================= Total number of shares 255,256 295,369 999,442 1,183,589 ================================================================= Cost of shares $ 1,625,187 $ 1,916,928 $ 12,292,389 $ 2,028,088 =================================================================
SEE ACCOMPANYING NOTES. S-4
ALGER AMERICAN ALGER AMERICAN AIM V.I. ALGER AMERICAN INCOME & LEVERAGED PREMIER EQUITY BALANCED GROWTH ALLCAP ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 41,326,592 $ 2,576,379 $ 6,166,827 $ 5,723,711 ----------------------------------------------------------------- Total assets 41,326,592 2,576,379 6,166,827 5,723,711 ----------------------------------------------------------------- Net assets $ 41,326,592 $ 2,576,379 $ 6,166,827 $ 5,723,711 ================================================================= NET ASSETS Accumulation units $ 38,978,157 $ 2,576,379 $ 6,166,827 $ 5,723,711 Contracts in payout (annuitization) period 2,348,435 - - - ----------------------------------------------------------------- Total net assets $ 41,326,592 $ 2,576,379 $ 6,166,827 $ 5,723,711 ================================================================= Total number of shares 2,547,879 228,200 851,772 274,519 ================================================================= Cost of shares $ 55,313,967 $ 2,906,080 $ 8,544,208 $ 8,135,410 ================================================================= ALLIANCE ALLIANCE GROWTH AND PREMIER ALLIANCE INCOME GROWTH QUASAR ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 22,168,501 $ 5,838,258 $ 683,596 ------------------------------------------------ Total assets 22,168,501 5,838,258 683,596 ------------------------------------------------ Net assets $ 22,168,501 $ 5,838,258 $ 683,596 ================================================ NET ASSETS Accumulation units $ 22,168,501 $ 5,838,258 $ 683,596 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 22,168,501 $ 5,838,258 $ 683,596 ================================================ Total number of shares 1,333,845 334,571 100,087 ================================================ Cost of shares $ 29,326,543 $ 7,590,985 $ 946,508 ================================================ FEDERATED FUND FEDERATED FOR US FEDERATED AMERICAN FEDERATED GOVERNMENT GROWTH LEADERS EQUITY INCOME SECURITIES STRATEGIES ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 50,538,929 $ 10,263,865 $ 12,674,158 $ 10,415,347 ----------------------------------------------------------------- Total assets 50,538,929 10,263,865 12,674,158 10,415,347 ----------------------------------------------------------------- Net assets $ 50,538,929 $ 10,263,865 $ 12,674,158 $ 10,415,347 ================================================================= NET ASSETS Accumulation units $ 50,440,295 $ 10,175,474 $ 12,674,158 $ 10,415,347 Contracts in payout (annuitization) period 98,634 88,391 - - ----------------------------------------------------------------- Total net assets $ 50,538,929 $ 10,263,865 $ 12,674,158 $ 10,415,347 ================================================================= Total number of shares 3,322,744 1,054,868 1,057,943 801,181 ================================================================= Cost of shares $ 66,150,117 $ 14,483,890 $ 11,697,945 $ 19,603,994 ================================================================= FEDERATED FEDERATED HIGH INTERNATIONAL FEDERATED INCOME BOND EQUITY PRIME MONEY ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 16,683,252 $ 6,023,743 $ 7,386,500 ------------------------------------------------ Total assets 16,683,252 6,023,743 7,386,500 ------------------------------------------------ Net assets $ 16,683,252 $ 6,023,743 $ 7,386,500 ================================================ NET ASSETS Accumulation units $ 16,665,208 $ 5,978,828 $ 7,386,500 Contracts in payout (annuitization) period 18,044 44,915 - ------------------------------------------------ Total net assets $ 16,683,252 $ 6,023,743 $ 7,386,500 ================================================ Total number of shares 2,356,392 685,295 7,386,500 ================================================ Cost of shares $ 19,139,746 $ 13,004,078 $ 7,386,500 ================================================
S-5
FEDERATED FIDELITY(R) VIP FIDELITY(R) VIP FIDELITY(R) VIP UTILITY EQUITY-INCOME GROWTH HIGH INCOME ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 7,020,743 $ 146,420,473 $ 98,179,526 $ 36,456,443 ----------------------------------------------------------------- Total assets 7,020,743 146,420,473 98,179,526 36,456,443 ----------------------------------------------------------------- Net assets $ 7,020,743 $ 146,420,473 $ 98,179,526 $ 36,456,443 ================================================================= NET ASSETS Accumulation units $ 6,995,021 $ 146,420,473 $ 98,179,526 $ 35,239,038 Contracts in payout (annuitization) period 25,722 - - 1,217,405 ----------------------------------------------------------------- Total net assets $ 7,020,743 $ 146,420,473 $ 98,179,526 $ 36,456,443 ================================================================= Total number of shares 933,609 8,062,801 4,188,546 6,147,798 ================================================================= Cost of shares $ 11,520,737 $ 176,875,742 $ 134,175,187 $ 35,269,905 ================================================================= ING GET ING GET FUND - SERIES FUND - SERIES ING GET FUND - ING GET FUND - E G SERIES H SERIES I ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 276,396,796 $ 163,876,702 $ 121,603,049 $ 84,078,702 ----------------------------------------------------------------- Total assets 276,396,796 163,876,702 121,603,049 84,078,702 ----------------------------------------------------------------- Net assets $ 276,396,796 $ 163,876,702 $ 121,603,049 $ 84,078,702 ================================================================= NET ASSETS Accumulation units $ 276,396,796 $ 163,876,702 $ 121,603,049 $ 84,078,702 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 276,396,796 $ 163,876,702 $ 121,603,049 $ 84,078,702 ================================================================= Total number of shares 28,089,105 16,387,670 11,992,411 8,316,390 ================================================================= Cost of shares $ 278,487,403 $ 163,834,851 $ 120,839,531 $ 83,250,451 =================================================================
SEE ACCOMPANYING NOTES. S-6
FIDELITY(R) VIP FIDELITY(R) FIDELITY(R) VIP II ASSET VIP II FIDELITY(R) VIP OVERSEAS MANAGER(SM) CONTRAFUND(R) II INDEX 500 ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 6,616,775 $ 11,086,015 $ 145,571,079 $ 64,190,398 ----------------------------------------------------------------- Total assets 6,616,775 11,086,015 145,571,079 64,190,398 ----------------------------------------------------------------- Net assets $ 6,616,775 $ 11,086,015 $ 145,571,079 $ 64,190,398 ================================================================= NET ASSETS Accumulation units $ 6,616,775 $ 11,086,015 $ 145,571,079 $ 64,190,398 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 6,616,775 $ 11,086,015 $ 145,571,079 $ 64,190,398 ================================================================= Total number of shares 602,621 869,491 8,042,601 642,418 ================================================================= Cost of shares $ 7,879,773 $ 11,920,837 $ 166,018,954 $ 80,173,340 ================================================================= FIDELITY(R) VIP FRANKLIN SMALL II INVESTMENT CAP VALUE ING GET FUND GRADE BOND SECURITIES - SERIES D ------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 2,890,300 $ 364,802 $ 103,697,732 ------------------------------------------------ Total assets 2,890,300 364,802 103,697,732 ------------------------------------------------ Net assets $ 2,890,300 $ 364,802 $ 103,697,732 ================================================ NET ASSETS Accumulation units $ 2,890,300 $ 364,802 $ 103,697,732 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 2,890,300 $ 364,802 $ 103,697,732 ================================================ Total number of shares 210,971 37,961 11,043,422 ================================================ Cost of shares $ 2,658,230 $ 363,037 $ 108,305,744 ================================================ ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES J - SERIES K - SERIES L - SERIES M ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 71,844,245 $ 81,260,062 $ 75,254,546 $ 115,381,108 ----------------------------------------------------------------- Total assets 71,844,245 81,260,062 75,254,546 115,381,108 ----------------------------------------------------------------- Net assets $ 71,844,245 $ 81,260,062 $ 75,254,546 $ 115,381,108 ================================================================= NET ASSETS Accumulation units $ 71,844,245 $ 81,260,062 $ 75,254,546 $ 115,381,108 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 71,844,245 $ 81,260,062 $ 75,254,546 $ 115,381,108 ================================================================= Total number of shares 7,127,405 7,912,372 7,436,220 11,356,408 ================================================================= Cost of shares $ 70,574,219 $ 79,242,590 $ 73,247,260 $ 111,414,328 ================================================================= ING GET FUND ING GET FUND ING GET FUND - SERIES N - SERIES P - SERIES Q ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 90,143,302 $ 76,333,735 $ 54,825,559 ------------------------------------------------ Total assets 90,143,302 76,333,735 54,825,559 ------------------------------------------------ Net assets $ 90,143,302 $ 76,333,735 $ 54,825,559 ================================================ NET ASSETS Accumulation units $ 90,143,302 $ 76,333,735 $ 54,825,559 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 90,143,302 $ 76,333,735 $ 54,825,559 ================================================ Total number of shares 8,907,441 7,498,402 $ 5,460,713 ================================================ Cost of shares $ 90,892,913 $ 74,834,416 $ 54,500,194 ================================================
S-7
ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES R - SERIES S - SERIES T - SERIES U ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 43,556,397 $ 53,553,407 $ 39,378,494 $ 502,569 ----------------------------------------------------------------- Total assets 43,556,397 53,553,407 39,378,494 502,569 ----------------------------------------------------------------- Net assets $ 43,556,397 $ 53,553,407 $ 39,378,494 $ 502,569 ================================================================= NET ASSETS Accumulation units $ 43,556,397 $ 53,553,407 $ 39,378,494 $ 502,569 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 43,556,397 $ 53,553,407 $ 39,378,494 $ 502,569 ================================================================= Total number of shares 4,312,515 5,318,114 3,891,156 50,234 ================================================================= Cost of shares $ 43,208,554 $ 53,289,484 $ 38,992,044 $ 502,399 ================================================================= ING VP STRATEGIC ING ALGER ING AMERICAN ALLOCATION AGGRESSIVE ING ALGER CENTURY SMALL INCOME GROWTH GROWTH CAP VALUE ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 20,088,287 $ 178,669 $ 9,413 $ 172,840 ----------------------------------------------------------------- Total assets 20,088,287 178,669 9,413 172,840 ----------------------------------------------------------------- Net assets $ 20,088,287 $ 178,669 $ 9,413 $ 172,840 ================================================================= NET ASSETS Accumulation units $ 16,945,520 $ 178,669 $ 9,413 $ 172,840 Contracts in payout (annuitization) period 3,142,767 - - - ----------------------------------------------------------------- Total net assets $ 20,088,287 $ 178,669 $ 9,413 $ 172,840 ================================================================= Total number of shares 1,811,388 35,102 1,428 21,207 ================================================================= Cost of shares $ 22,057,068 $ 190,259 $ 10,342 $ 165,978 =================================================================
SEE ACCOMPANYING NOTES. S-8
ING VP ING VP EMERGING ING VP MONEY BALANCED ING VP BOND MARKETS MARKET ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 148,867,834 $ 164,563,104 $ 649,050 $ 262,555,759 ----------------------------------------------------------------- Total assets 148,867,834 164,563,104 649,050 262,555,759 ----------------------------------------------------------------- Net assets $ 148,867,834 $ 164,563,104 $ 649,050 $ 262,555,759 ================================================================= NET ASSETS Accumulation units $ 113,344,138 $ 150,113,484 $ 649,050 $ 252,582,665 Contracts in payout (annuitization) period 35,523,696 14,449,620 - 9,973,094 ----------------------------------------------------------------- Total net assets $ 148,867,834 $ 164,563,104 $ 649,050 $ 262,555,759 ================================================================= Total number of shares 13,873,983 12,162,831 145,201 20,157,213 ================================================================= Cost of shares $ 178,415,327 $ 160,681,216 $ 833,454 $ 261,307,778 ================================================================= ING VP ING VP ING VP STRATEGIC STRATEGIC NATURAL ALLOCATION ALLOCATION RESOURCES BALANCED GROWTH ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 1,566,801 $ 14,344,005 $ 11,256,899 ------------------------------------------------ Total assets 1,566,801 14,344,005 11,256,899 ------------------------------------------------ Net assets $ 1,566,801 $ 14,344,005 $ 11,256,899 ================================================ NET ASSETS Accumulation units $ 1,566,801 $ 12,850,128 $ 10,763,357 Contracts in payout (annuitization) period - 1,493,877 493,542 ------------------------------------------------ Total net assets $ 1,566,801 $ 14,344,005 $ 11,256,899 ================================================ Total number of shares 129,274 1,320,811 1,041,341 ================================================ Cost of shares $ 1,750,492 $ 16,686,947 $ 13,564,418 ================================================
ING BARON ING GOLDMAN ING JPMORGAN SMALL CAP SACHS(R) CAPITAL FLEMING ING JPMORGAN GROWTH GROWTH INTERNATIONAL MID CAP VALUE --------------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 193,278 $ 18,093 $ 24,044,050 $ 86,925 -------------------------------------------------------------------- Total assets 193,278 18,093 24,044,050 86,925 -------------------------------------------------------------------- Net assets $ 193,278 $ 18,093 $ 24,044,050 $ 86,925 ==================================================================== NET ASSETS Accumulation units $ 193,278 $ 18,093 $ 23,318,905 $ 86,925 Contracts in payout (annuitization) period - - 725,145 - -------------------------------------------------------------------- Total net assets $ 193,278 $ 18,093 $ 24,044,050 $ 86,925 ==================================================================== Total number of shares 22,064 2,159 2,942,968 9,418 ==================================================================== Cost of shares $ 192,951 $ 18,642 $ 24,274,938 $ 89,224 ==================================================================== ING MFS CAPITAL ING MFS ING MFS OPPORTUNITIES GLOBAL GROWTH RESEARCH ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 35,740,787 $ 1,402 $ 40,668,842 ------------------------------------------------ Total assets 35,740,787 1,402 40,668,842 ------------------------------------------------ Net assets $ 35,740,787 $ 1,402 $ 40,668,842 ================================================ NET ASSETS Accumulation units $ 33,216,756 $ 1,402 $ 40,668,842 Contracts in payout (annuitization) period 2,524,031 - - ------------------------------------------------ Total net assets $ 35,740,787 $ 1,402 $ 40,668,842 ================================================ Total number of shares 1,887,053 167 6,699,974 ================================================ Cost of shares $ 49,418,144 $ 1,419 $ 53,843,434 ================================================
S-9
ING SALOMON BROTHERS ING SALOMON ING OPCAP ING PIMCO AGGRESSIVE BROTHERS BALANCED VALUE TOTAL RETURN GROWTH CAPITAL ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 15,244 $ 1,275,028 $ 47,007,829 $ 5,034 ----------------------------------------------------------------- Total assets 15,244 1,275,028 47,007,829 5,034 ----------------------------------------------------------------- Net assets $ 15,244 $ 1,275,028 $ 47,007,829 $ 5,034 ================================================================= NET ASSETS Accumulation units $ 15,244 $ 1,275,028 $ 46,015,154 $ 5,034 Contracts in payout (annuitization) period - - 992,675 - ----------------------------------------------------------------- Total net assets $ 15,244 $ 1,275,028 $ 47,007,829 $ 5,034 ================================================================= Total number of shares 1,581 120,856 1,783,978 421 ================================================================= Cost of shares $ 14,972 $ 1,256,640 $ 64,573,920 $ 5,000 ================================================================= ING VP ING VP INDEX ING VP INDEX INTERNATIONAL ING VP SMALL PLUS MIDCAP PLUS SMALLCAP EQUITY COMPANY ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 11,779,436 $ 4,274,524 $ 5,227,820 $ 52,157,900 ----------------------------------------------------------------- Total assets 11,779,436 4,274,524 5,227,820 52,157,900 ----------------------------------------------------------------- Net assets $ 11,779,436 $ 4,274,524 $ 5,227,820 $ 52,157,900 ================================================================= NET ASSETS Accumulation units $ 11,779,436 $ 4,274,524 $ 4,851,325 $ 48,275,927 Contracts in payout (annuitization) period - - 376,495 3,881,973 ----------------------------------------------------------------- Total net assets $ 11,779,436 $ 4,274,524 $ 5,227,820 $ 52,157,900 ================================================================= Total number of shares 993,207 429,600 904,467 4,090,816 ================================================================= Cost of shares $ 13,481,416 $ 4,957,354 $ 5,282,086 $ 64,947,675 =================================================================
SEE ACCOMPANYING NOTES. S-10
ING SALOMON ING T. ROWE ING UBS ING VAN BROTHERS PRICE GROWTH TACTICAL ASSET KAMPEN INVESTORS VALUE EQUITY ALLOCATION COMSTOCK ------------------------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 14,349 $ 58,442,588 $ 428 $ 318,983 ----------------------------------------------------------------- Total assets 14,349 58,442,588 428 318,983 ----------------------------------------------------------------- Net assets $ 14,349 $ 58,442,588 $ 428 $ 318,983 ================================================================= NET ASSETS Accumulation units $ 14,349 $ 56,097,352 $ 428 $ 318,983 Contracts in payout (annuitization) period - 2,345,236 - - ----------------------------------------------------------------- Total net assets $ 14,349 $ 58,442,588 $ 428 $ 318,983 ================================================================= Total number of shares 1,444 1,684,710 18 38,247 ================================================================= Cost of shares $ 15,996 $ 73,754,294 $ 440 $ 330,123 ================================================================= ING VP GROWTH AND ING VP ING VP INDEX INCOME GROWTH PLUS LARGECAP ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 415,966,022 $ 28,286,199 $ 154,416,728 ------------------------------------------------ Total assets 415,966,022 28,286,199 154,416,728 ------------------------------------------------ Net assets $ 415,966,022 $ 28,286,199 $ 154,416,728 ================================================ NET ASSETS Accumulation units $ 329,440,424 $ 25,655,013 $ 122,505,931 Contracts in payout (annuitization) period 86,525,598 2,631,186 31,910,797 ------------------------------------------------ Total net assets $ 415,966,022 $ 28,286,199 $ 154,416,728 ================================================ Total number of shares 28,687,312 4,129,372 14,231,957 ================================================ Cost of shares $ 678,063,682 $ 37,384,530 $ 189,726,070 ================================================ ING VP ING VP GROWTH GROWTH ING VP ING VP VALUE OPPORTUNITIES OPPORTUNITIES TECHNOLOGY OPPORTUNITY - CLASS R - CLASS S ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 6,564,063 $ 17,000,985 $ 384,251 $ 125,218 ----------------------------------------------------------------- Total assets 6,564,063 17,000,985 384,251 125,218 ----------------------------------------------------------------- Net assets $ 6,564,063 $ 17,000,985 $ 384,251 $ 125,218 ================================================================= NET ASSETS Accumulation units $ 6,564,063 $ 17,000,985 $ 384,251 $ 125,218 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 6,564,063 $ 17,000,985 $ 384,251 $ 125,218 ================================================================= Total number of shares 2,467,693 1,740,121 102,467 33,303 ================================================================= Cost of shares $ 8,536,756 $ 22,638,830 $ 403,353 $ 154,512 ================================================================= ING VP ING VP ING VP INTERNATIONAL MAGNACAP - MAGNACAP - VALUE CLASS R CLASS S ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 403,983 $ 26,804 $ 489,722 ------------------------------------------------ Total assets 403,983 26,804 489,722 ------------------------------------------------ Net assets $ 403,983 $ 26,804 $ 489,722 ================================================ NET ASSETS Accumulation units $ 403,983 $ 26,804 $ 489,722 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 403,983 $ 26,804 $ 489,722 ================================================ Total number of shares 46,975 3,930 71,492 ================================================ Cost of shares $ 434,101 $ 32,494 $ 604,708 ================================================
S-11
ING VP ING VP ING VP ING VP MIDCAP MIDCAP SMALLCAP SMALLCAP OPPORTUNITIES - OPPORTUNITIES - OPPORTUNITIES- OPPORTUNITIES - CLASS R CLASS S CLASS R CLASS S ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 76,098 $ 2,583,170 $ 58,445 $ 1,771,721 ----------------------------------------------------------------- Total assets 76,098 2,583,170 58,445 1,771,721 ----------------------------------------------------------------- Net assets $ 76,098 $ 2,583,170 $ 58,445 $ 1,771,721 ================================================================= NET ASSETS Accumulation units $ 76,098 $ 2,583,170 $ 58,445 $ 1,771,721 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 76,098 $ 2,583,170 $ 58,445 $ 1,771,721 ================================================================= Total number of shares 16,911 577,890 5,488 166,986 ================================================================= Cost of shares $ 76,903 $ 3,032,227 $ 62,023 $ 2,367,889 ================================================================= OPPENHEIMER OPPENHEIMER MFS(R) GLOBAL MFS(R) TOTAL AGGRESSIVE GLOBAL GOVERNMENTS RETURN GROWTH SECURITIES ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 2,720,439 $ 91,725,015 $ 23,930,198 $ 15,176,818 ----------------------------------------------------------------- Total assets 2,720,439 91,725,015 23,930,198 15,176,818 ----------------------------------------------------------------- Net assets $ 2,720,439 $ 91,725,015 $ 23,930,198 $ 15,176,818 ================================================================= NET ASSETS Accumulation units $ 2,720,439 $ 91,725,015 $ 23,110,791 $ 15,176,818 Contracts in payout (annuitization) period - - 819,407 - ----------------------------------------------------------------- Total net assets $ 2,720,439 $ 91,725,015 $ 23,930,198 $ 15,176,818 ================================================================= Total number of shares 258,351 5,351,518 818,686 857,447 ================================================================= Cost of shares $ 2,618,004 $ 102,010,242 $ 30,059,768 $ 19,348,041 =================================================================
SEE ACCOMPANYING NOTES. S-12
JANUS ASPEN AGGRESSIVE JANUS ASPEN JANUS ASPEN JANUS ASPEN GROWTH BALANCED FLEXIBLE INCOME GROWTH ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 77,233,111 $ 197,825,408 $ 28,391,748 $ 98,502,589 ----------------------------------------------------------------- Total assets 77,233,111 197,825,408 28,391,748 98,502,589 ----------------------------------------------------------------- Net assets $ 77,233,111 $ 197,825,408 $ 28,391,748 $ 98,502,589 ================================================================= NET ASSETS Accumulation units $ 77,233,111 $ 197,825,408 $ 28,391,748 $ 92,138,870 Contracts in payout (annuitization) period - - - 6,363,719 ----------------------------------------------------------------- Total net assets $ 77,233,111 $ 197,825,408 $ 28,391,748 $ 98,502,589 ================================================================= Total number of shares 4,875,828 9,607,839 2,308,272 6,742,135 ================================================================= Cost of shares $ 92,264,412 $ 218,902,715 $ 27,607,794 $ 130,606,459 ================================================================= JANUS ASPEN LORD ABBETT WORLDWIDE GROWTH AND LORD ABBETT GROWTH INCOME MID-CAP VALUE ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 198,280,103 $ 421,513 $ 473,961 ------------------------------------------------ Total assets 198,280,103 421,513 473,961 ------------------------------------------------ Net assets $ 198,280,103 $ 421,513 $ 473,961 ================================================ NET ASSETS Accumulation units $ 190,950,563 $ 421,513 $ 473,961 Contracts in payout (annuitization) period 7,329,540 - - ------------------------------------------------ Total net assets $ 198,280,103 $ 421,513 $ 473,961 ================================================ Total number of shares 9,419,482 22,385 34,196 ================================================ Cost of shares $ 253,349,460 $ 440,890 $ 499,299 ================================================ OPPENHEIMER MAIN STREET GROWTH & OPPENHEIMER PIONEER EQUITY PIONEER INCOME STRATEGIC BOND INCOME VCT VCT ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 48,800,609 $ 32,734,881 $ 153,293 $ 1,303 ----------------------------------------------------------------- Total assets 48,800,609 32,734,881 153,293 1,303 ----------------------------------------------------------------- Net assets $ 48,800,609 $ 32,734,881 $ 153,293 $ 1,303 ================================================================= NET ASSETS Accumulation units $ 45,707,631 $ 31,581,706 $ 153,293 $ 1,303 Contracts in payout (annuitization) period 3,092,978 1,153,175 - - ----------------------------------------------------------------- Total net assets $ 48,800,609 $ 32,734,881 $ 153,293 $ 1,303 ================================================================= Total number of shares 3,185,418 7,162,994 10,145 85 ================================================================= Cost of shares $ 60,569,880 $ 31,335,136 $ 159,271 $ 1,302 ================================================================= SP JENNISON PIONEER MID PRUDENTIAL INTERNATIONAL CAP VALUE VCT JENNISON GROWTH ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 30,425 $ 426,947 $ 213,838 ------------------------------------------------ Total assets 30,425 426,947 213,838 ------------------------------------------------ Net assets $ 30,425 $ 426,947 $ 213,838 ================================================ NET ASSETS Accumulation units $ 30,425 $ 426,947 $ 213,838 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 30,425 $ 426,947 $ 213,838 ================================================ Total number of shares 2,036 33,618 51,035 ================================================ Cost of shares $ 30,375 $ 456,396 $ 220,447 ================================================
S-13 ING Life Insurance and Annuity Company Variable Annuity Account B Statement of Operations For the year ended December 31, 2002
AIM V.I. AIM V.I. CAPITAL AIM V.I. CORE GOVERNMENT APPRECIATION EQUITY SECURITIES ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 110,893 $ 469,767 ------------------------------------------------ Total investment income - 110,893 469,767 Expenses: Mortality and expense risk and other charges 234,121 447,816 212,298 ------------------------------------------------ Total expenses 234,121 447,816 212,298 ------------------------------------------------ Net investment income (loss) (234,121) (336,923) 257,469 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (11,841,069) (19,166,365) 274,461 Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (11,841,069) (19,166,365) 274,461 Net unrealized appreciation (depreciation) of investments 6,412,975 12,696,921 710,014 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (5,662,215) $ (6,806,367) $ 1,241,944 ================================================ AMERICAN AMERICAN ALLIANCE CENTURY(R) VP CENTURY(R) VP QUASAR BALANCED INTERNATIONAL ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 50,084 $ 17,753 ------------------------------------------------ Total investment income - 50,084 17,753 Expenses: Mortality and expense risk and other charges 11,757 24,787 29,964 ------------------------------------------------ Total expenses 11,757 24,787 29,964 ------------------------------------------------ Net investment income (loss) (11,757) 25,297 (12,211) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (52,585) (331,096) (1,559,008) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (52,585) (331,096) (1,559,008) Net unrealized appreciation (depreciation) of investments (320,915) 88,916 1,039,420 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (385,257) $ (216,883) $ (531,799) ================================================
SEE ACCOMPANYING NOTES. S-14
ALGER AMERICAN AIM V.I. AIM V.I. ALGER AMERICAN INCOME & GROWTH PREMIER EQUITY BALANCED GROWTH ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 167,442 $ 53,511 $ 55,622 ----------------------------------------------------------------- Total investment income - 167,442 53,511 55,622 Expenses: Mortality and expense risk and other charges 252,850 686,444 44,948 119,926 ----------------------------------------------------------------- Total expenses 252,850 686,444 44,948 119,926 ----------------------------------------------------------------- Net investment income (loss) (252,850) (519,002) 8,563 (64,304) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (21,531,563) (22,963,948) (480,416) (4,172,553) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (21,531,563) (22,963,948) (480,416) (4,172,553) Net unrealized appreciation (depreciation) of investments 13,605,701 1,596,273 (8,111) 797,771 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (8,178,712) $ (21,886,677) $ (479,964) $ (3,439,086) ================================================================= ALGER AMERICAN ALLIANCE ALLIANCE LEVERAGED GROWTH AND PREMIER ALLCAP INCOME GROWTH ------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 620 $ 202,121 $ - ------------------------------------------------ Total investment income 620 202,121 - Expenses: Mortality and expense risk and other charges 110,396 367,630 96,634 ------------------------------------------------ Total expenses 110,396 367,630 96,634 ------------------------------------------------ Net investment income (loss) (109,776) (165,509) (96,634) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (5,523,735) (3,091,091) (2,300,618) Capital gains distributions - 1,038,771 - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (5,523,735) (2,052,320) (2,300,618) Net unrealized appreciation (depreciation) of investments 2,219,572 (5,861,654) (435,725) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,413,939) $ (8,079,483) $ (2,832,977) ================================================ BRINSON SERIES FEDERATED TACTICAL CALVERT SOCIAL AMERICAN FEDERATED ALLOCATION BALANCED LEADERS EQUITY INCOME ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 66,628 $ 52,110 $ 783,023 $ 292,633 ----------------------------------------------------------------- Total investment income 66,628 52,110 783,023 292,633 Expenses: Mortality and expense risk and other charges 152,368 23,413 931,162 194,259 ----------------------------------------------------------------- Total expenses 152,368 23,413 931,162 194,259 ----------------------------------------------------------------- Net investment income (loss) (85,740) 28,697 (148,139) 98,374 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (3,543,581) (465,640) (64,392) (606,693) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (3,543,581) (465,640) (64,392) (606,693) Net unrealized appreciation (depreciation) of investments 283,934 156,806 (16,206,809) (3,030,582) ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,345,387) $ (280,137) $ (16,419,340) $ (3,538,901) ================================================================= FEDERATED FUND FOR US FEDERATED GOVERNMENT GROWTH FEDERATED HIGH SECURITIES STRATEGIES INCOME BOND ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 444,456 $ - $ 1,977,547 ------------------------------------------------ Total investment income 444,456 - 1,977,547 Expenses: Mortality and expense risk and other charges 173,838 216,927 265,446 ------------------------------------------------ Total expenses 173,838 216,927 265,446 ------------------------------------------------ Net investment income (loss) 270,618 (216,927) 1,712,101 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 178,225 (785,326) (4,158,428) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 178,225 (785,326) (4,158,428) Net unrealized appreciation (depreciation) of investments 443,220 (4,061,042) 2,397,304 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 892,063 $ (5,063,295) $ (49,023) ================================================
S-15
FEDERATED INTERNATIONAL FEDERATED FEDERATED EQUITY PRIME MONEY UTILITY ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 110,872 $ 578,444 ------------------------------------------------ Total investment income - 110,872 578,444 Expenses: Mortality and expense risk and other charges 119,497 111,953 137,007 ------------------------------------------------ Total expenses 119,497 111,953 137,007 ------------------------------------------------ Net investment income (loss) (119,497) (1,081) 441,437 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (716,353) - (2,778,666) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (716,353) - (2,778,666) Net unrealized appreciation (depreciation) of investments (1,457,973) - (761,186) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,293,823) $ (1,081) $ (3,098,415) ================================================ FTVIP FIDELITY(R) VIP FRANKLIN SMALL INVESTMENT CAP VALUE ING GET FUND GRADE BOND SECURITIES - SERIES D ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 121,052 $ 5,817 $ 4,849,503 ------------------------------------------------ Total investment income 121,052 5,817 4,849,503 Expenses: Mortality and expense risk and other charges 42,060 5,846 1,657,804 ------------------------------------------------ Total expenses 42,060 5,846 1,657,804 ------------------------------------------------ Net investment income (loss) 78,992 (29) 3,191,699 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 126,348 (281,659) (3,903,504) Capital gains distributions - 40,688 - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 126,348 (240,971) (3,903,504) Net unrealized appreciation (depreciation) of investments 43,860 1,765 (197,690) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 249,200 $ (239,235) $ (909,495) ================================================
SEE ACCOMPANYING NOTES. S-16
FIDELITY(R) VIP FIDELITY(R) VIP FIDELITY(R) VIP FIDELITY(R) VIP EQUITY-INCOME GROWTH HIGH INCOME OVERSEAS ------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 3,015,262 $ 346,250 $ 4,088,481 $ 70,417 ------------------------------------------------------------------ Total investment income 3,015,262 346,250 4,088,481 70,417 Expenses: Mortality and expense risk and other charges 2,236,636 1,653,283 471,021 103,668 ------------------------------------------------------------------ Total expenses 2,236,636 1,653,283 471,021 103,668 ------------------------------------------------------------------ Net investment income (loss) 778,626 (1,307,033) 3,617,460 (33,251) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (17,472,822) (75,974,775) (15,314,996) (4,666,771) Capital gains distributions 4,104,107 - - - ------------------------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (13,368,715) (75,974,775) (15,314,996) (4,666,771) Net unrealized appreciation (depreciation) of investments (23,430,907) 27,425,197 12,364,126 2,758,026 ------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (36,020,996) $ (49,856,611) $ 666,590 $ (1,941,996) ================================================================== FIDELITY(R) VIP FIDELITY(R) II ASSET VIP II FIDELITY(R) VIP MANAGER(SM) CONTRAFUND(R) II INDEX 500 ------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 511,394 $ 1,374,415 $ 1,141,533 ------------------------------------------------- Total investment income 511,394 1,374,415 1,141,533 Expenses: Mortality and expense risk and other charges 169,457 2,063,981 1,120,404 ------------------------------------------------- Total expenses 169,457 2,063,981 1,120,404 ------------------------------------------------- Net investment income (loss) 341,937 (689,566) 21,129 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (2,462,332) (27,675,618) (18,283,780) Capital gains distributions - - - ------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (2,462,332) (27,675,618) (18,283,780) Net unrealized appreciation (depreciation) of investments 734,377 10,036,956 (4,035,555) ------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,386,018) $ (18,328,228) $ (22,298,206) ================================================= ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES E - SERIES G - SERIES H - SERIES I ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 11,590,668 $ 6,437,372 $ 4,541,020 $ 3,032,380 ----------------------------------------------------------------- Total investment income 11,590,668 6,437,372 4,541,020 3,032,380 Expenses: Mortality and expense risk and other charges 4,898,811 2,872,854 2,145,806 1,464,041 ----------------------------------------------------------------- Total expenses 4,898,811 2,872,854 2,145,806 1,464,041 ----------------------------------------------------------------- Net investment income (loss) 6,691,857 3,564,518 2,395,214 1,568,339 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (12,383,728) (361,655) (2,376,877) (285,274) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (12,383,728) (361,655) (2,376,877) (285,274) Net unrealized appreciation (depreciation) of investments 12,265,411 2,001,769 3,657,819 1,679,757 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,573,540 $ 5,204,632 $ 3,676,156 $ 2,962,822 ================================================================= ING GET FUND ING GET FUND ING GET FUND - SERIES J - SERIES K - SERIES L ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2,556,052 $ 2,272,115 $ 38,481 ------------------------------------------------ Total investment income 2,556,052 2,272,115 38,481 Expenses: Mortality and expense risk and other charges 1,256,435 1,667,708 1,518,985 ------------------------------------------------ Total expenses 1,256,435 1,667,708 1,518,985 ------------------------------------------------ Net investment income (loss) 1,299,617 604,407 (1,480,504) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (1,217,195) (1,166,744) (2,039,616) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (1,217,195) (1,166,744) (2,039,616) Net unrealized appreciation (depreciation) of investments 2,934,305 3,623,216 3,999,896 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 3,016,727 $ 3,060,879 $ 479,776 ================================================
S-17
ING GET FUND ING GET FUND ING GET FUND - SERIES M - SERIES N - SERIES P ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 41,036 $ 16,602 $ 32,612 ------------------------------------------------ Total investment income 41,036 16,602 32,612 Expenses: Mortality and expense risk and other charges 2,373,549 1,884,690 1,601,653 ------------------------------------------------ Total expenses 2,373,549 1,884,690 1,601,653 ------------------------------------------------ Net investment income (loss) (2,332,513) (1,868,088) (1,569,041) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (3,482,609) 1,203,432 (439,883) Capital gains distributions - 1,249,744 26,248 ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (3,482,609) 2,453,176 (413,635) Net unrealized appreciation (depreciation) of investments 7,557,322 (2,953,390) 1,306,756 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,742,200 $ (2,368,302) $ (675,920) ================================================ ING VP ING VP EMERGING ING VP MONEY NATURAL MARKETS MARKET RESOURCES ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 10,706,663 $ 3,316 ------------------------------------------------ Total investment income - 10,706,663 3,316 Expenses: Mortality and expense risk and other charges 11,406 3,368,994 22,483 ------------------------------------------------ Total expenses 11,406 3,368,994 22,483 ------------------------------------------------ Net investment income (loss) (11,406) 7,337,669 (19,167) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (281,423) (5,982,099) 18,761 Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (281,423) (5,982,099) 18,761 Net unrealized appreciation (depreciation) of investments 220,172 (371,722) (80,642) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (72,657) $ 983,848 $ (81,048) ================================================
SEE ACCOMPANYING NOTES. S-18
ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES Q - SERIES R - SERIES S - SERIES T ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 1,076,043 $ 623,634 $ 341,597 $ 4,295 ----------------------------------------------------------------- Total investment income 1,076,043 623,634 341,597 4,295 Expenses: Mortality and expense risk and other charges 899,725 475,819 336,831 54,990 ----------------------------------------------------------------- Total expenses 899,725 475,819 336,831 54,990 ----------------------------------------------------------------- Net investment income (loss) 176,318 147,815 4,766 (50,695) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (238,981) (4,010) (5,368) 1,926 Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (238,981) (4,010) (5,368) 1,926 Net unrealized appreciation (depreciation) of investments 324,608 347,843 263,923 386,450 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 261,945 $ 491,648 $ 263,321 $ 337,681 ================================================================= ING GET FUND ING VP - SERIES U BALANCED ING VP BOND ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 1,817,690 $ 5,023,710 ------------------------------------------------ Total investment income - 1,817,690 5,023,710 Expenses: Mortality and expense risk and other charges 285 2,014,873 1,794,046 ------------------------------------------------ Total expenses 285 2,014,873 1,794,046 ------------------------------------------------ Net investment income (loss) (285) (197,183) 3,229,664 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 3 (31,426,581) 3,601,145 Capital gains distributions - - 699,805 ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 3 (31,426,581) 4,300,950 Net unrealized appreciation (depreciation) of investments 171 10,085,344 2,690,919 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (111) $ (21,538,420) $ 10,221,533 ================================================ ING VP ING VP ING VP STRATEGIC STRATEGIC STRATEGIC ING ALGER ALLOCATION ALLOCATION ALLOCATION AGGRESSIVE BALANCED GROWTH INCOME GROWTH ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 396,251 $ 219,880 $ 721,832 $ - ----------------------------------------------------------------- Total investment income 396,251 219,880 721,832 - Expenses: Mortality and expense risk and other charges 202,267 160,701 291,218 107 ----------------------------------------------------------------- Total expenses 202,267 160,701 291,218 107 ----------------------------------------------------------------- Net investment income (loss) 193,984 59,179 430,614 (107) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (1,295,397) (1,733,172) (810,159) 2 Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (1,295,397) (1,733,172) (810,159) 2 Net unrealized appreciation (depreciation) of investments (696,127) (367,779) (898,794) (11,590) ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,797,540) $ (2,041,772) $ (1,278,339) $ (11,695) ================================================================= ING AMERICAN ING BARON ING ALGER CENTURY SMALL SMALL CAP GROWTH CAP VALUE GROWTH ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 32 $ - ------------------------------------------------ Total investment income - 32 - Expenses: Mortality and expense risk and other charges 19 499 588 ------------------------------------------------ Total expenses 19 499 588 ------------------------------------------------ Net investment income (loss) (19) (467) (588) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (4) (4,695) 5,232 Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (4) (4,695) 5,232 Net unrealized appreciation (depreciation) of investments (929) 6,863 327 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (952) $ 1,701 $ 4,971 ================================================
S-19
ING GOLDMAN ING JPMORGAN SACHS(R) CAPITAL FLEMING ING JPMORGAN GROWTH INTERNATIONAL MID CAP VALUE ------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 169,596 $ 136 ------------------------------------------------ Total investment income - 169,596 136 Expenses: Mortality and expense risk and other charges 24 323,589 130 ------------------------------------------------ Total expenses 24 323,589 130 ------------------------------------------------ Net investment income (loss) (24) (153,993) 6 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 1 (3,362,234) (9) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 1 (3,362,234) (9) Net unrealized appreciation (depreciation) of investments (548) (590,934) (2,299) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (571) $ (4,107,161) $ (2,302) ================================================ ING SALOMON ING T. ROWE ING UBS BROTHERS PRICE GROWTH TACTICAL ASSET INVESTORS VALUE EQUITY ALLOCATION ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2 $ 137,970 $ - ------------------------------------------------ Total investment income 2 137,970 - Expenses: Mortality and expense risk and other charges 51 972,473 - ------------------------------------------------ Total expenses 51 972,473 - ------------------------------------------------ Net investment income (loss) (49) (834,503) - REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (11) (31,652,050) - Capital gains distributions 7 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (4) (31,652,050) - Net unrealized appreciation (depreciation) of investments (1,647) 11,325,203 (12) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,700) $ (21,161,350) $ (12) ================================================
SEE ACCOMPANYING NOTES. S-20
ING MFS CAPITAL ING MFS ING MFS ING OPCAP OPPORTUNITIES GLOBAL GROWTH RESEARCH BALANCED VALUE ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ - $ 107,573 $ 2 ----------------------------------------------------------------- Total investment income - - 107,573 2 Expenses: Mortality and expense risk and other charges 592,876 2 707,793 26 ----------------------------------------------------------------- Total expenses 592,876 2 707,793 26 ----------------------------------------------------------------- Net investment income (loss) (592,876) (2) (600,220) (24) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (41,812,683) (28) (43,750,229) - Capital gains distributions - - - 88 ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (41,812,683) (28) (43,750,229) 88 Net unrealized appreciation (depreciation) of investments 23,516,791 (17) 27,569,249 272 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,888,768) $ (47) $ (16,781,200) $ 336 ================================================================= ING SALOMON BROTHERS ING SALOMON ING PIMCO AGGRESSIVE BROTHERS TOTAL RETURN GROWTH CAPITAL ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 18,115 $ - $ - ------------------------------------------------ Total investment income 18,115 - - Expenses: Mortality and expense risk and other charges 4,387 848,784 - ------------------------------------------------ Total expenses 4,387 848,784 - ------------------------------------------------ Net investment income (loss) 13,728 (848,784) - REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 4,402 (25,188,977) - Capital gains distributions 13,350 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 17,752 (25,188,977) - Net unrealized appreciation (depreciation) of investments 18,387 (4,736,656) 34 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 49,867 $ (30,774,417) $ 34 ================================================ ING VP ING VAN GROWTH KAMPEN AND ING VP ING VP INDEX COMSTOCK INCOME GROWTH PLUS LARGECAP ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 1,411 $ 4,537,816 $ - $ 446,833 ----------------------------------------------------------------- Total investment income 1,411 4,537,816 - 446,833 Expenses: Mortality and expense risk and other charges 860 5,889,748 472,716 2,284,906 ----------------------------------------------------------------- Total expenses 860 5,889,748 472,716 2,284,906 ----------------------------------------------------------------- Net investment income (loss) 551 (1,351,932) (472,716) (1,838,073) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (132) (193,418,765) (8,444,150) (58,481,089) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (132) (193,418,765) (8,444,150) (58,481,089) Net unrealized appreciation (depreciation) of investments (11,139) 35,220,058 (5,648,119) 11,268,433 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (10,720) $ (159,550,639) $ (14,564,985) $ (49,050,729) ================================================================= ING VP ING VP INDEX ING VP INDEX INTERNATIONAL PLUS MIDCAP PLUS SMALLCAP EQUITY ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 52,909 $ 6,485 $ 14,840 ------------------------------------------------ Total investment income 52,909 6,485 14,840 Expenses: Mortality and expense risk and other charges 106,832 36,617 79,248 ------------------------------------------------ Total expenses 106,832 36,617 79,248 ------------------------------------------------ Net investment income (loss) (53,923) (30,132) (64,408) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (760,138) (127,680) (1,577,469) Capital gains distributions - 52,453 - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (760,138) (75,227) (1,577,469) Net unrealized appreciation (depreciation) of investments (1,413,335) (732,353) (299,583) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,227,396) $ (837,712) $ (1,941,460) ================================================
S-21
ING VP SMALL ING VP ING VP VALUE COMPANY TECHNOLOGY OPPORTUNITY ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 301,043 $ - $ 95,253 ------------------------------------------------ Total investment income 301,043 - 95,253 Expenses: Mortality and expense risk and other charges 769,899 108,774 279,553 ------------------------------------------------ Total expenses 769,899 108,774 279,553 ------------------------------------------------ Net investment income (loss) (468,856) (108,774) (184,300) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (3,580,613) (3,681,243) (4,332,295) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (3,580,613) (3,681,243) (4,332,295) Net unrealized appreciation (depreciation) of investments (14,440,776) (1,844,374) (2,719,443) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,490,245) $ (5,634,391) $ (7,236,038) ================================================ ING VP ING VP SMALLCAP SMALLCAP JANUS ASPEN OPPORTUNITIES - OPPORTUNITIES - AGGRESSIVE CLASS R CLASS S GROWTH ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ - $ - ------------------------------------------------ Total investment income - - - Expenses: Mortality and expense risk and other charges 130 20,930 1,204,437 ------------------------------------------------ Total expenses 130 20,930 1,204,437 ------------------------------------------------ Net investment income (loss) (130) (20,930) (1,204,437) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (9,641) (338,439) (110,103,453) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (9,641) (338,439) (110,103,453) Net unrealized appreciation (depreciation) of investments (3,578) (622,428) 73,321,455 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (13,349) $ (981,797) $ (37,986,435) ================================================
SEE ACCOMPANYING NOTES. S-22
ING VP ING VP GROWTH GROWTH ING VP ING VP OPPORTUNITIES - OPPORTUNITIES - INTERNATIONAL MAGNACAP - CLASS R CLASS S VALUE CLASS R ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ - $ 1,825 $ 231 ----------------------------------------------------------------- Total investment income - - 1,825 231 Expenses: Mortality and expense risk and other charges 282 1,717 1,556 103 ----------------------------------------------------------------- Total expenses 282 1,717 1,556 103 ----------------------------------------------------------------- Net investment income (loss) (282) (1,717) 269 128 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 1,805 (27,626) (18,718) (20) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions 1,805 (27,626) (18,718) (20) Net unrealized appreciation (depreciation) of investments (19,103) (29,240) (30,118) (5,689) ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (17,580) $ (58,583) $ (48,567) $ (5,581) ================================================================= ING VP ING ING VP MIDCAP VP MIDCAP MAGNACAP - OPPORTUNITIES - OPPORTUNITIES - CLASS S CLASS R CLASS S ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 4,366 $ - $ - ------------------------------------------------ Total investment income 4,366 - - Expenses: Mortality and expense risk and other charges 5,123 15 22,826 ------------------------------------------------ Total expenses 5,123 15 22,826 ------------------------------------------------ Net investment income (loss) (757) (15) (22,826) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (9,688) (200) (97,225) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (9,688) (200) (97,225) Net unrealized appreciation (depreciation) of investments (121,268) (805) (459,418) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (131,713) $ (1,020) $ (579,469) ================================================ JANUS ASPEN JANUS ASPEN JANUS ASPEN JANUS ASPEN WORLDWIDE BALANCED FLEXIBLE INCOME GROWTH GROWTH ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 5,282,647 $ 1,165,302 $ - $ 2,232,135 ----------------------------------------------------------------- Total investment income 5,282,647 1,165,302 - 2,232,135 Expenses: Mortality and expense risk and other charges 2,746,947 308,883 1,668,494 3,244,833 ----------------------------------------------------------------- Total expenses 2,746,947 308,883 1,668,494 3,244,833 ----------------------------------------------------------------- Net investment income (loss) 2,535,700 856,419 (1,668,494) (1,012,698) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (19,145,911) 761,446 (88,052,075) (139,153,473) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (19,145,911) 761,446 (88,052,075) (139,153,473) Net unrealized appreciation (depreciation) of investments (1,489,908) 571,088 45,741,303 58,703,035 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,100,119) $ 2,188,953 $ (43,979,266) $ (81,463,136) ================================================================= LORD ABBETT LORD ABBETT MFS(R) GLOBAL GROWTH AND MID-CAP GOVERNMENTS INCOME VALUE SERIES ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2,196 $ 2,458 $ 64,883 ------------------------------------------------ Total investment income 2,196 2,458 64,883 Expenses: Mortality and expense risk and other charges 1,166 1,609 28,883 ------------------------------------------------ Total expenses 1,166 1,609 28,883 ------------------------------------------------ Net investment income (loss) 1,030 849 36,000 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (101) (21,787) 31,230 Capital gains distributions 49 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (52) (21,787) 31,230 Net unrealized appreciation (depreciation) of investments (19,377) (25,338) 84,246 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,399) $ (46,276) $ 151,476 ================================================
S-23
OPPENHEIMER OPPENHEIMER MFS(R) TOTAL AGGRESSIVE GLOBAL RETURN GROWTH SECURITIES ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 1,615,499 $ 216,818 $ 90,455 ------------------------------------------------ Total investment income 1,615,499 216,818 90,455 Expenses: Mortality and expense risk and other charges 1,260,416 405,709 214,774 ------------------------------------------------ Total expenses 1,260,416 405,709 214,774 ------------------------------------------------ Net investment income (loss) 355,083 (188,891) (124,319) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 2,335,973 (5,968,060) (3,498,317) Capital gains distributions 1,280,830 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 3,616,803 (5,968,060) (3,498,317) Net unrealized appreciation (depreciation) of investments (10,681,462) (5,031,083) (1,163,987) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,709,576) $ (11,188,034) $ (4,786,623) ================================================
SEE ACCOMPANYING NOTES. S-24
OPPENHEIMER MAIN STREET GROWTH & OPPENHEIMER PIONEER EQUITY PIONEER INCOME STRATEGIC BOND INCOME VCT VCT ------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 438,945 $ 2,233,631 $ 2,134 $ - ----------------------------------------------------------------- Total investment income 438,945 2,233,631 2,134 - Expenses: Mortality and expense risk and other charges 766,599 387,948 689 - ----------------------------------------------------------------- Total expenses 766,599 387,948 689 - ----------------------------------------------------------------- Net investment income (loss) (327,654) 1,845,683 1,445 - REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (11,300,002) (1,631,959) (909) - Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (11,300,002) (1,631,959) (909) - Net unrealized appreciation (depreciation) of investments (1,390,151) 1,589,777 (5,978) 1 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (13,017,807) $ 1,803,501 $ (5,442) $ 1 ================================================================= SP JENNISON PIONEER MID PRUDENTIAL INTERNATIONAL CAP VALUE VCT JENNISON GROWTH ----------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 112 $ - $ - ------------------------------------------------ Total investment income 112 - - Expenses: Mortality and expense risk and other charges 239 8,938 2,814 ------------------------------------------------ Total expenses 239 8,938 2,814 ------------------------------------------------ Net investment income (loss) (127) (8,938) (2,814) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (10,015) (252,055) (44,193) Capital gains distributions 990 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (9,025) (252,055) (44,193) Net unrealized appreciation (depreciation) of investments 50 (50,168) (7,265) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (9,102) $ (311,161) $ (54,272) ================================================
S-25 ING Life Insurance and Annuity Company Variable Annuity Account B Statements of Changes in Net Assets For the years ended December 31, 2002 and 2001
AIM V.I. AIM V.I. CAPITAL AIM V.I. CORE GOVERNMENT APPRECIATION EQUITY SECURITIES ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 25,987,131 $ 49,823,138 $ 294,912 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,607,214 (540,544) 198,905 Net realized gain (loss) on investments and capital gains distributions (3,943,522) (2,905,719) 94,842 Net unrealized appreciation (depreciation) of investments (4,771,612) (9,765,396) (124,108) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (7,107,920) (13,211,659) 169,639 Changes from principal transactions: Total unit transactions 4,629,631 6,246,089 8,684,291 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 4,629,631 6,246,089 8,684,291 ------------------------------------------------ Total increase (decrease) (2,478,289) (6,965,570) 8,853,930 ------------------------------------------------ Net assets at December 31, 2001 23,508,842 42,857,568 9,148,842 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (234,121) (336,923) 257,469 Net realized gain (loss) on investments and capital gains distributions (11,841,069) (19,166,365) 274,461 Net unrealized appreciation (depreciation) of investments 6,412,975 12,696,921 710,014 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (5,662,215) (6,806,367) 1,241,944 Changes from principal transactions: Total unit transactions (3,014,648) (6,110,961) 15,606,439 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (3,014,648) (6,110,961) 15,606,439 ------------------------------------------------ Total increase (decrease) (8,676,863) (12,917,328) 16,848,383 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 14,831,979 $ 29,940,240 $ 25,997,225 ================================================
SEE ACCOMPANYING NOTES. S-26
ALGER AMERICAN AIM V.I. AIM V.I. ALGER AMERICAN INCOME & GROWTH PREMIER EQUITY BALANCED GROWTH ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 37,256,929 $ 73,349,994 $ 4,887,859 $ 16,586,009 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (305,064) 676,926 74,716 790,430 Net realized gain (loss) on investments and capital gains distributions (3,920,194) (4,177,377) (59,596) (662,398) Net unrealized appreciation (depreciation) of investments (9,793,918) (7,849,544) (161,916) (2,624,832) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (14,019,176) (11,349,995) (146,796) (2,496,800) Changes from principal transactions: Total unit transactions 4,519,235 12,007,731 (975,636) (2,809,855) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 4,519,235 12,007,731 (975,636) (2,809,855) ----------------------------------------------------------------- Total increase (decrease) (9,499,941) 657,736 (1,122,432) (5,306,655) ----------------------------------------------------------------- Net assets at December 31, 2001 27,756,988 74,007,730 3,765,427 11,279,354 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (252,850) (519,002) 8,563 (64,304) Net realized gain (loss) on investments and capital gains distributions (21,531,563) (22,963,948) (480,416) (4,172,553) Net unrealized appreciation (depreciation) of investments 13,605,701 1,596,273 (8,111) 797,771 ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (8,178,712) (21,886,677) (479,964) (3,439,086) Changes from principal transactions: Total unit transactions (4,632,586) (10,794,461) (709,084) (1,673,441) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (4,632,586) (10,794,461) (709,084) (1,673,441) ----------------------------------------------------------------- Total increase (decrease) (12,811,298) (32,681,138) (1,189,048) (5,112,527) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 14,945,690 $ 41,326,592 $ 2,576,379 $ 6,166,827 ================================================================= ALGER AMERICAN ALLIANCE ALLIANCE LEVERAGED GROWTH AND PREMIER ALLCAP INCOME GROWTH ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 15,562,934 $ 897,717 $ 2,687,461 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 259,039 487,785 266,205 Net realized gain (loss) on investments and capital gains distributions (1,130,076) (54,847) (227,098) Net unrealized appreciation (depreciation) of investments (1,724,700) (1,330,699) (1,211,231) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,595,737) (897,761) (1,172,124) Changes from principal transactions: Total unit transactions (2,543,425) 28,176,820 7,016,678 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (2,543,425) 28,176,820 7,016,678 ------------------------------------------------ Total increase (decrease) (5,139,162) 27,279,059 5,844,554 ------------------------------------------------ Net assets at December 31, 2001 10,423,772 28,176,776 8,532,015 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (109,776) (165,509) (96,634) Net realized gain (loss) on investments and capital gains distributions (5,523,735) (2,052,320) (2,300,618) Net unrealized appreciation (depreciation) of investments 2,219,572 (5,861,654) (435,725) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (3,413,939) (8,079,483) (2,832,977) Changes from principal transactions: Total unit transactions (1,286,122) 2,071,208 139,220 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (1,286,122) 2,071,208 139,220 ------------------------------------------------ Total increase (decrease) (4,700,061) (6,008,275) (2,693,757) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 5,723,711 $ 22,168,501 $ 5,838,258 ================================================
S-27
AMERICAN AMERICAN ALLIANCE CENTURY(R) VP CENTURY(R) VP QUASAR BALANCED INTERNATIONAL ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 82,470 $ 2,684,483 $ 4,904,674 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 11,233 115,422 341,217 Net realized gain (loss) on investments and capital gains distributions (51,042) (55,447) (296,586) Net unrealized appreciation (depreciation) of investments 55,774 (186,838) (1,441,450) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 15,965 (126,863) (1,396,819) Changes from principal transactions: Total unit transactions 811,867 (514,673) (748,774) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 811,867 (514,673) (748,774) ------------------------------------------------ Total increase (decrease) 827,832 (641,536) (2,145,593) ------------------------------------------------ Net assets at December 31, 2001 910,302 2,042,947 2,759,081 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (11,757) 25,297 (12,211) Net realized gain (loss) on investments and capital gains distributions (52,585) (331,096) (1,559,008) Net unrealized appreciation (depreciation) of investments (320,915) 88,916 1,039,420 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (385,257) (216,883) (531,799) Changes from principal transactions: Total unit transactions 158,551 (343,024) (688,409) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 158,551 (343,024) (688,409) ------------------------------------------------ Total increase (decrease) (226,706) (559,907) (1,220,208) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 683,596 $ 1,483,040 $ 1,538,873 ================================================
SEE ACCOMPANYING NOTES. S-28
BRINSON SERIES BRINSON SERIES GROWTH & BRINSON SERIES TACTICAL CALVERT SOCIAL INCOME SMALL CAP ALLOCATION BALANCED ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 950,238 $ 208,747 $ 12,509,283 $ 2,513,732 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 226,054 (1,968) 885,330 83,359 Net realized gain (loss) on investments and capital gains distributions (231,524) (60,691) (450,606) (76,083) Net unrealized appreciation (depreciation) of investments (30,611) 31,643 (2,603,918) (191,904) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (36,081) (31,016) (2,169,194) (184,628) Changes from principal transactions: Total unit transactions (914,157) (177,731) 3,994,345 (369,758) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (914,157) (177,731) 3,994,345 (369,758) ----------------------------------------------------------------- Total increase (decrease) (950,238) (208,747) 1,825,151 (554,386) ----------------------------------------------------------------- Net assets at December 31, 2001 - - 14,334,434 1,959,346 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - (85,740) 28,697 Net realized gain (loss) on investments and capital gains distributions - - (3,543,581) (465,640) Net unrealized appreciation (depreciation) of investments - - 283,934 156,806 ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations - - (3,345,387) (280,137) Changes from principal transactions: Total unit transactions - - (1,264,476) 96,175 ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions - - (1,264,476) 96,175 ----------------------------------------------------------------- Total increase (decrease) - - (4,609,863) (183,962) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ - $ - $ 9,724,571 $ 1,775,384 ================================================================= FEDERATED FUND FEDERATED FOR US AMERICAN FEDERATED GOVERNMENT LEADERS EQUITY INCOME SECURITIES ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 102,586,049 $ 24,264,247 $ 11,133,403 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 624,010 127,895 284,376 Net realized gain (loss) on investments and capital gains distributions 4,010,157 248,468 128,207 Net unrealized appreciation (depreciation) of investments (10,151,128) (3,322,426) 191,136 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (5,516,961) (2,946,063) 603,719 Changes from principal transactions: Total unit transactions (13,876,471) (3,842,680) (35,167) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (13,876,471) (3,842,680) (35,167) ------------------------------------------------ Total increase (decrease) (19,393,432) (6,788,743) 568,552 ------------------------------------------------ Net assets at December 31, 2001 83,192,617 17,475,504 11,701,955 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (148,139) 98,374 270,618 Net realized gain (loss) on investments and capital gains distributions (64,392) (606,693) 178,225 Net unrealized appreciation (depreciation) of investments (16,206,809) (3,030,582) 443,220 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (16,419,340) (3,538,901) 892,063 Changes from principal transactions: Total unit transactions (16,234,348) (3,672,738) 80,140 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (16,234,348) (3,672,738) 80,140 ------------------------------------------------ Total increase (decrease) (32,653,688) (7,211,639) 972,203 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 50,538,929 $ 10,263,865 $ 12,674,158 ================================================
S-29
FEDERATED FEDERATED GROWTH FEDERATED HIGH INTERNATIONAL STRATEGIES INCOME BOND EQUITY ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 33,809,187 $ 26,446,176 $ 20,057,326 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 101,731 2,265,323 1,804,980 Net realized gain (loss) on investments and capital gains distributions 1,439,089 (2,047,225) 598,776 Net unrealized appreciation (depreciation) of investments (9,464,697) (107,530) (7,961,481) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (7,923,877) 110,568 (5,557,725) Changes from principal transactions: Total unit transactions (4,910,965) (5,657,520) (3,523,772) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (4,910,965) (5,657,520) (3,523,772) ------------------------------------------------ Total increase (decrease) (12,834,842) (5,546,952) (9,081,497) ------------------------------------------------ Net assets at December 31, 2001 20,974,345 20,899,224 10,975,829 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (216,927) 1,712,101 (119,497) Net realized gain (loss) on investments and capital gains distributions (785,326) (4,158,428) (716,353) Net unrealized appreciation (depreciation) of investments (4,061,042) 2,397,304 (1,457,973) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (5,063,295) (49,023) (2,293,823) Changes from principal transactions: Total unit transactions (5,495,703) (4,166,949) (2,658,263) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (5,495,703) (4,166,949) (2,658,263) ------------------------------------------------ Total increase (decrease) (10,558,998) (4,215,972) (4,952,086) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 10,415,347 $ 16,683,252 $ 6,023,743 ================================================
SEE ACCOMPANYING NOTES. S-30
FEDERATED FEDERATED FIDELITY(R) VIP FIDELITY(R) VIP PRIME MONEY UTILITY EQUITY-INCOME GROWTH ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 8,703,425 $ 19,350,590 $ 188,024,984 $ 209,609,983 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 183,680 352,094 754,873 4,618,214 Net realized gain (loss) on investments and capital gains distributions - (29,007) (445,915) (7,202,886) Net unrealized appreciation (depreciation) of investments - (2,878,438) (1,302,300) (26,336,426) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 183,680 (2,555,351) (993,342) (28,921,098) Changes from principal transactions: Total unit transactions (75,384) (3,565,172) 5,987,428 (13,370,131) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (75,384) (3,565,172) 5,987,428 (13,370,131) ----------------------------------------------------------------- Total increase (decrease) 108,296 (6,120,523) 4,994,086 (42,291,229) ----------------------------------------------------------------- Net assets at December 31, 2001 8,811,721 13,230,067 193,019,070 167,318,754 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,081) 441,437 778,626 (1,307,033) Net realized gain (loss) on investments and capital gains distributions - (2,778,666) (13,368,715) (75,974,775) Net unrealized appreciation (depreciation) of investments - (761,186) (23,430,907) 27,425,197 ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (1,081) (3,098,415) (36,020,996) (49,856,611) Changes from principal transactions: Total unit transactions (1,424,140) (3,110,909) (10,577,601) (19,282,617) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (1,424,140) (3,110,909) (10,577,601) (19,282,617) ----------------------------------------------------------------- Total increase (decrease) (1,425,221) (6,209,324) (46,598,597) (69,139,228) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 7,386,500 $ 7,020,743 $ 146,420,473 $ 98,179,526 ================================================================= FIDELITY(R) VIP FIDELITY(R) VIP FIDELITY(R) VIP II ASSET HIGH INCOME OVERSEAS MANAGER(SM) ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 45,511,833 $ 14,451,215 $ 17,820,958 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 9,457,584 11,399,803 5,249,880 Net realized gain (loss) on investments and capital gains distributions (2,705,353) (9,878,682) (5,287,995) Net unrealized appreciation (depreciation) of investments (19,142,344) (41,561,108) (5,871,216) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (12,390,113) (40,039,987) (5,909,331) Changes from principal transactions: Total unit transactions 6,263,146 35,503,221 2,182,805 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 6,263,146 35,503,221 2,182,805 ------------------------------------------------ Total increase (decrease) (6,126,967) (4,536,766) (3,726,526) ------------------------------------------------ Net assets at December 31, 2001 39,384,866 9,914,449 14,094,432 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 3,617,460 (33,251) 341,937 Net realized gain (loss) on investments and capital gains distributions (15,314,996) (4,666,771) (2,462,332) Net unrealized appreciation (depreciation) of investments 12,364,126 2,758,026 734,377 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 666,590 (1,941,996) (1,386,018) Changes from principal transactions: Total unit transactions (3,595,013) (1,355,678) (1,622,399) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (3,595,013) (1,355,678) (1,622,399) ------------------------------------------------ Total increase (decrease) (2,928,423) (3,297,674) (3,008,417) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 36,456,443 $ 6,616,775 $ 11,086,015 ================================================
S-31
FIDELITY(R) VIP FIDELITY(R) VIP II FIDELITY(R) VIP II INVESTMENT CONTRAFUND(R) II INDEX 500 GRADE BOND -------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 216,963,354 $ 133,049,029 $ 3,699,966 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (156,534) 151,447 1,556,493 Net realized gain (loss) on investments and capital gains distributions (10,037,529) 28,433 (1,058,361) Net unrealized appreciation (depreciation) of investments (6,940,504) 53,028 (3,573,305) -------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (17,134,567) 232,908 (3,075,173) Changes from principal transactions: Total unit transactions (25,829,941) (32,499,293) 2,458,909 -------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (25,829,941) (32,499,293) 2,458,909 -------------------------------------------------------- Total increase (decrease) (42,964,508) (32,266,385) (616,264) -------------------------------------------------------- Net assets at December 31, 2001 173,998,846 100,782,644 3,083,702 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (689,566) 21,129 78,992 Net realized gain (loss) on investments and capital gains distributions (27,675,618) (18,283,780) 126,348 Net unrealized appreciation (depreciation) of investments 10,036,956 (4,035,555) 43,860 -------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (18,328,228) (22,298,206) 249,200 Changes from principal transactions: Total unit transactions (10,099,539) (14,294,040) (442,602) -------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (10,099,539) (14,294,040) (442,602) -------------------------------------------------------- Total increase (decrease) (28,427,767) (36,592,246) (193,402) -------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 145,571,079 $ 64,190,398 $ 2,890,300 ========================================================
SEE ACCOMPANYING NOTES. S-32
FRANKLIN SMALL CAP VALUE ING GET FUND ING GET FUND - ING GET FUND SECURITIES - SERIES C SERIES D - SERIES E ------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ 5,898,705 $ 129,775,588 $ 333,832,965 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 293,859 (22,012) (2,832,358) Net realized gain (loss) on investments and capital gains distributions - (2,549,105) (420,664) (2,038,326) Net unrealized appreciation (depreciation) of investments - 1,291,730 1,095,968 1,793,609 ------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations - (963,516) 653,292 (3,077,075) Changes from principal transactions: Total unit transactions - (4,935,189) (10,485,646) (30,372,937) ------------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions - (4,935,189) (10,485,646) (30,372,937) ------------------------------------------------------------------- Total increase (decrease) - (5,898,705) (9,832,354) (33,450,012) ------------------------------------------------------------------- Net assets at December 31, 2001 - - 119,943,234 300,382,953 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (29) - 3,191,699 6,691,857 Net realized gain (loss) on investments and capital gains distributions (240,971) - (3,903,504) (12,383,728) Net unrealized appreciation (depreciation) of investments 1,765 - (197,690) 12,265,411 ------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (239,235) - (909,495) 6,573,540 Changes from principal transactions: Total unit transactions 604,037 - (15,336,007) (30,559,697) ------------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 604,037 - (15,336,007) (30,559,697) ------------------------------------------------------------------- Total increase (decrease) 364,802 - (16,245,502) (23,986,157) ------------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 364,802 $ - $ 103,697,732 $ 276,396,796 =================================================================== ING GET FUND ING GET FUND ING GET FUND - SERIES G - SERIES H - SERIES I -------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 186,444,632 $ 141,763,690 $ 92,928,925 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (2,345,173) (1,652,269) (1,309,240) Net realized gain (loss) on investments and capital gains distributions (434,775) (369,766) (219,903) Net unrealized appreciation (depreciation) of investments 2,133,011 564,872 987,709 -------------------------------------------------- Net increase (decrease) in net assets resulting from operations (646,937) (1,457,163) (541,434) Changes from principal transactions: Total unit transactions (14,428,668) (8,620,592) (4,985,289) -------------------------------------------------- Increase (decrease) in assets derived from principal transactions (14,428,668) (8,620,592) (4,985,289) -------------------------------------------------- Total increase (decrease) (15,075,605) (10,077,755) (5,526,723) -------------------------------------------------- Net assets at December 31, 2001 171,369,027 131,685,935 87,402,202 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 3,564,518 2,395,214 1,568,339 Net realized gain (loss) on investments and capital gains distributions (361,655) (2,376,877) (285,274) Net unrealized appreciation (depreciation) of investments 2,001,769 3,657,819 1,679,757 -------------------------------------------------- Net increase (decrease) in net assets resulting from operations 5,204,632 3,676,156 2,962,822 Changes from principal transactions: Total unit transactions (12,696,957) (13,759,042) (6,286,322) -------------------------------------------------- Increase (decrease) in assets derived from principal transactions (12,696,957) (13,759,042) (6,286,322) -------------------------------------------------- Total increase (decrease) (7,492,325) (10,082,886) (3,323,500) -------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 163,876,702 $ 121,603,049 $ 84,078,702 ==================================================
S-33
ING GET FUND ING GET FUND ING GET FUND - SERIES J - SERIES K - SERIES L ----------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 79,871,616 $ 93,789,821 $ 584,846 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,178,440) (1,749,150) 549,879 Net realized gain (loss) on investments and capital gains distributions (283,781) (112,344) 127,113 Net unrealized appreciation (depreciation) of investments 1,098,645 (668,196) (1,992,805) ----------------------------------------------- Net increase (decrease) in net assets resulting from operations (363,576) (2,529,690) (1,315,813) Changes from principal transactions: Total unit transactions (4,706,710) (2,701,829) 81,075,629 ----------------------------------------------- Increase (decrease) in assets derived from principal transactions (4,706,710) (2,701,829) 81,075,629 ----------------------------------------------- Total increase (decrease) (5,070,286) (5,231,519) 79,759,816 ----------------------------------------------- Net assets at December 31, 2001 74,801,330 88,558,302 80,344,662 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,299,617 604,407 (1,480,504) Net realized gain (loss) on investments and capital gains distributions (1,217,195) (1,166,744) (2,039,616) Net unrealized appreciation (depreciation) of investments 2,934,305 3,623,216 3,999,896 ----------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,016,727 3,060,879 479,776 Changes from principal transactions: Total unit transactions (5,973,812) (10,359,119) (5,569,892) ----------------------------------------------- Increase (decrease) in assets derived from principal transactions (5,973,812) (10,359,119) (5,569,892) ----------------------------------------------- Total increase (decrease) (2,957,085) (7,298,240) (5,090,116) ----------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 71,844,245 $ 81,260,062 $ 75,254,546 ===============================================
SEE ACCOMPANYING NOTES. S-34
ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES M - SERIES N - SERIES P - SERIES Q ------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 645,422 109,984 (66,562) (1,059) Net realized gain (loss) on investments and capital gains distributions (51,667) 210,767 300 163 Net unrealized appreciation (depreciation) of investments (3,590,542) 2,203,779 192,563 757 ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (2,996,787) 2,524,530 126,301 (139) Changes from principal transactions: Total unit transactions 126,161,862 102,081,211 82,886,000 1,620,487 ------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 126,161,862 102,081,211 82,886,000 1,620,487 ------------------------------------------------------------- Total increase (decrease) 123,165,075 104,605,741 83,012,301 1,620,348 ------------------------------------------------------------- Net assets at December 31, 2001 123,165,075 104,605,741 83,012,301 1,620,348 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (2,332,513) (1,868,088) (1,569,041) 176,318 Net realized gain (loss) on investments and capital gains distributions (3,482,609) 2,453,176 (413,635) (238,981) Net unrealized appreciation (depreciation) of investments 7,557,322 (2,953,390) 1,306,756 324,608 ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,742,200 (2,368,302) (675,920) 261,945 Changes from principal transactions: Total unit transactions (9,526,167) (12,094,137) (6,002,646) 52,943,266 ------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (9,526,167) (12,094,137) (6,002,646) 52,943,266 ------------------------------------------------------------- Total increase (decrease) (7,783,967) (14,462,439) (6,678,566) 53,205,211 ------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 115,381,108 $ 90,143,302 $ 76,333,735 $ 54,825,559 ============================================================= ING GET FUND ING GET FUND ING GET FUND - SERIES R - SERIES S - SERIES T -------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - - Net realized gain (loss) on investments and capital gains distributions - - - Net unrealized appreciation (depreciation) of investments - - - -------------------------------------------- Net increase (decrease) in net assets resulting from operations - - - Changes from principal transactions: Total unit transactions - - - -------------------------------------------- Increase (decrease) in assets derived from principal transactions - - - -------------------------------------------- Total increase (decrease) - - - -------------------------------------------- Net assets at December 31, 2001 - - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 147,815 4,766 (50,695) Net realized gain (loss) on investments and capital gains distributions (4,010) (5,368) 1,926 Net unrealized appreciation (depreciation) of investments 347,843 263,923 386,450 -------------------------------------------- Net increase (decrease) in net assets resulting from operations 491,648 263,321 337,681 Changes from principal transactions: Total unit transactions 43,064,749 53,290,086 39,040,813 -------------------------------------------- Increase (decrease) in assets derived from principal transactions 43,064,749 53,290,086 39,040,813 -------------------------------------------- Total increase (decrease) 43,556,397 53,553,407 39,378,494 -------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 43,556,397 $ 53,553,407 $ 39,378,494 ============================================
S-35
ING GET FUND ING VP - SERIES U BALANCED ING VP BOND ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 199,767,841 $ 99,490,083 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 9,113,021 6,509,189 Net realized gain (loss) on investments and capital gains distributions - (7,103,330) 869,818 Net unrealized appreciation (depreciation) of investments - (12,960,839) 898,172 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (10,951,148) 8,277,179 Changes from principal transactions: Total unit transactions - 1,130,931 36,691,750 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions - 1,130,931 36,691,750 ------------------------------------------------ Total increase (decrease) - (9,820,217) 44,968,929 ------------------------------------------------ Net assets at December 31, 2001 - 189,947,624 144,459,012 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (285) (197,183) 3,229,664 Net realized gain (loss) on investments and capital gains distributions 3 (31,426,581) 4,300,950 Net unrealized appreciation (depreciation) of investments 171 10,085,344 2,690,919 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (111) (21,538,420) 10,221,533 Changes from principal transactions: Total unit transactions 502,680 (19,541,370) 9,882,559 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 502,680 (19,541,370) 9,882,559 ------------------------------------------------ Total increase (decrease) 502,569 (41,079,790) 20,104,092 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 502,569 $ 148,867,834 $ 164,563,104 ================================================
SEE ACCOMPANYING NOTES. S-36
ING VP ING VP ING VP STRATEGIC EMERGING ING VP MONEY NATURAL ALLOCATION MARKETS MARKET RESOURCES BALANCED ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 1,255,139 $ 211,808,608 $ 2,800,522 $ 21,090,188 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 200,313 8,471,018 (27,769) 242,613 Net realized gain (loss) on investments and capital gains distributions (46,024) (787,890) (74,546) (147,526) Net unrealized appreciation (depreciation) of investments (286,135) (382,266) (343,776) (1,743,663) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (131,846) 7,300,862 (446,091) (1,648,576) Changes from principal transactions: Total unit transactions (211,449) 73,917,208 (351,677) (2,051,275) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (211,449) 73,917,208 (351,677) (2,051,275) ----------------------------------------------------------------- Total increase (decrease) (343,295) 81,218,070 (797,768) (3,699,851) ----------------------------------------------------------------- Net assets at December 31, 2001 911,844 293,026,678 2,002,754 17,390,337 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (11,406) 7,337,669 (19,167) 193,984 Net realized gain (loss) on investments and capital gains distributions (281,423) (5,982,099) 18,761 (1,295,397) Net unrealized appreciation (depreciation) of investments 220,172 (371,722) (80,642) (696,127) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (72,657) 983,848 (81,048) (1,797,540) Changes from principal transactions: Total unit transactions (190,137) (31,454,767) (354,905) (1,248,792) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (190,137) (31,454,767) (354,905) (1,248,792) ----------------------------------------------------------------- Total increase (decrease) (262,794) (30,470,919) (435,953) (3,046,332) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 649,050 $ 262,555,759 $ 1,566,801 $ 14,344,005 ================================================================= ING VP ING VP STRATEGIC STRATEGIC ING ALGER ALLOCATION ALLOCATION AGGRESSIVE GROWTH INCOME GROWTH ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 17,520,083 $ 26,191,216 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 57,331 757,517 - Net realized gain (loss) on investments and capital gains distributions (214,747) (148,474) - Net unrealized appreciation (depreciation) of investments (2,028,011) (1,543,863) - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,185,427) (934,820) - Changes from principal transactions: Total unit transactions (1,458,785) (1,909,739) - ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (1,458,785) (1,909,739) - ------------------------------------------------ Total increase (decrease) (3,644,212) (2,844,559) - ------------------------------------------------ Net assets at December 31, 2001 13,875,871 23,346,657 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 59,179 430,614 (107) Net realized gain (loss) on investments and capital gains distributions (1,733,172) (810,159) 2 Net unrealized appreciation (depreciation) of investments (367,779) (898,794) (11,590) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,041,772) (1,278,339) (11,695) Changes from principal transactions: Total unit transactions (577,200) (1,980,031) 190,364 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (577,200) (1,980,031) 190,364 ------------------------------------------------ Total increase (decrease) (2,618,972) (3,258,370) 178,669 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 11,256,899 $ 20,088,287 $ 178,669 ================================================
S-37
ING AMERICAN ING BARON ING ALGER CENTURY SMALL SMALL CAP GROWTH CAP VALUE GROWTH ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - - Net realized gain (loss) on investments and capital gains distributions - - - Net unrealized appreciation (depreciation) of investments - - - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - - - Changes from principal transactions: Total unit transactions - - - ------------------------------------------------ Increase (decrease) in assets derived from principal transaction - - - ------------------------------------------------ Total increase (decrease) - - - ------------------------------------------------ Net assets at December 31, 2001 - - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (19) (467) (588) Net realized gain (loss) on investments and capital gains distributions (4) (4,695) 5,232 Net unrealized appreciation (depreciation) of investment (929) 6,863 327 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (952) 1,701 4,971 Changes from principal transactions: Total unit transactions 10,365 171,139 188,307 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 10,365 171,139 188,307 ------------------------------------------------ Total increase (decrease) 9,413 172,840 193,278 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 9,413 $ 172,840 $ 193,278 ================================================
SEE ACCOMPANYING NOTES. S-38
ING GOLDMAN ING JPMORGAN ING MFS SACHS(R) CAPITAL FLEMING ING JPMORGAN CAPITAL GROWTH INTERNATIONAL MID CAP VALUE OPPORTUNITIES ------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 38,279,673 $ - $ 78,233,370 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 8,217,492 - 12,719,778 Net realized gain (loss) on investments and capital gains distributions - (18,250,125) - (7,777,680) Net unrealized appreciation (depreciation) of investments - (320,460) - (27,031,102) ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (10,353,093) - (22,089,004) Changes from principal transactions: Total unit transactions - 2,522,566 - 6,687,762 ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions - 2,522,566 - 6,687,762 ------------------------------------------------------------------ Total increase (decrease) - (7,830,527) - (15,401,242) ------------------------------------------------------------------ Net assets at December 31, 2001 - 30,449,146 - 62,832,128 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (24) (153,993) 6 (592,876) Net realized gain (loss) on investments and capital gains distributions 1 (3,362,234) (9) (41,812,683) Net unrealized appreciation (depreciation) of investments (548) (590,934) (2,299) 23,516,791 ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (571) (4,107,161) (2,302) (18,888,768) Changes from principal transactions: Total unit transactions 18,664 (2,297,935) 89,227 (8,202,573) ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions 18,664 (2,297,935) 89,227 (8,202,573) ------------------------------------------------------------------ Total increase (decrease) 18,093 (6,405,096) 86,925 (27,091,341) ------------------------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 18,093 $ 24,044,050 $ 86,925 $ 35,740,787 ================================================================== ING MFS ING MFS ING OPCAP GLOBAL GROWTH RESEARCH BALANCED VALUE ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 97,910,276 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 16,100,795 - Net realized gain (loss) on investments and capital gains distributions - (5,309,113) - Net unrealized appreciation (depreciation) of investments - (32,124,468) - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (21,332,786) - Changes from principal transactions: Total unit transactions - (7,183,612) - ------------------------------------------------ Increase (decrease) in assets derived from principal transactions - (7,183,612) - ------------------------------------------------ Total increase (decrease) - (28,516,398) - ------------------------------------------------ Net assets at December 31, 2001 - 69,393,878 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (2) (600,220) (24) Net realized gain (loss) on investments and capital gains distributions (28) (43,750,229) 88 Net unrealized appreciation (depreciation) of investments (17) 27,569,249 272 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (47) (16,781,200) 336 Changes from principal transactions: Total unit transactions 1,449 (11,943,836) 14,908 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 1,449 (11,943,836) 14,908 ------------------------------------------------ Total increase (decrease) 1,402 (28,725,036) 15,244 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 1,402 $ 40,668,842 $ 15,244 ================================================
S-39
ING SALOMON BROTHERS ING SALOMON ING PIMCO AGGRESSIVE BROTHERS TOTAL RETURN GROWTH CAPITAL ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 136,684,647 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 5,810,330 - Net realized gain (loss) on investments and capital gains distributions - (51,885,576) - Net unrealized appreciation (depreciation) of investments - 10,682,971 - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (35,392,275) - Changes from principal transactions: Total unit transactions - (9,757,019) - ------------------------------------------------ Increase (decrease) in assets derived from principal transactions - (9,757,019) - ------------------------------------------------ Total increase (decrease) - (45,149,294) - ------------------------------------------------ Net assets at December 31, 2001 - 91,535,353 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 13,728 (848,784) - Net realized gain (loss) on investments and capital gains distributions 17,752 (25,188,977) - Net unrealized appreciation (depreciation) of investments 18,387 (4,736,656) 34 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 49,867 (30,774,417) 34 Changes from principal transactions: Total unit transactions 1,225,161 (13,753,107) 5,000 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 1,225,161 (13,753,107) 5,000 ------------------------------------------------ Total increase (decrease) 1,275,028 (44,527,524) 5,034 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 1,275,028 $ 47,007,829 $ 5,034 ================================================
SEE ACCOMPANYING NOTES. S-40
ING SALOMON ING T. ROWE ING UBS ING VAN BROTHERS PRICE GROWTH TACTICAL ASSET KAMPEN INVESTORS VALUE EQUITY ALLOCATION COMSTOCK ------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 113,229,886 $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 14,327,213 - - Net realized gain (loss) on investments and capital gains distributions - (4,691,348) - - Net unrealized appreciation (depreciation) of investments - (22,787,331) - - ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (13,151,466) - - Changes from principal transactions: Total unit transactions - (10,683,369) - - ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions - (10,683,369) - - ------------------------------------------------------------------ Total increase (decrease) - (23,834,835) - - ------------------------------------------------------------------ Net assets at December 31, 2001 - 89,395,051 - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (49) (834,503) - 551 Net realized gain (loss) on investments and capital gains distributions (4) (31,652,050) - (132) Net unrealized appreciation (depreciation) of investments (1,647) 11,325,203 (12) (11,139) ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (1,700) (21,161,350) (12) (10,720) Changes from principal transactions: Total unit transactions 16,049 (9,791,113) 440 329,703 ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions 16,049 (9,791,113) 440 329,703 ------------------------------------------------------------------ Total increase (decrease) 14,349 (30,952,463) 428 318,983 ------------------------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 14,349 $ 58,442,588 $ 428 $ 318,983 ================================================================== ING VP GROWTH ING VP INDEX AND INCOME ING VP GROWTH PLUS LARGECAP ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 928,209,700 $ 85,002,177 $ 261,795,046 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (3,421,173) 7,586,438 7,044,685 Net realized gain (loss) on investments and capital gains distributions (113,876,325) (37,814,320) (36,788,778) Net unrealized appreciation (depreciation) of investments (55,992,671) 7,848,570 (9,243,704) ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (173,290,169) (22,379,312) (38,987,797) Changes from principal transactions: Total unit transactions (91,273,079) (10,534,849) 1,954,479 ------------------------------------------------- Increase (decrease) in assets derived from principal transactions (91,273,079) (10,534,849) 1,954,479 ------------------------------------------------- Total increase (decrease) (264,563,248) (32,914,161) (37,033,318) ------------------------------------------------- Net assets at December 31, 2001 663,646,452 52,088,016 224,761,728 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,351,932) (472,716) (1,838,073) Net realized gain (loss) on investments and capital gains distributions (193,418,765) (8,444,150) (58,481,089) Net unrealized appreciation (depreciation) of investments 35,220,058 (5,648,119) 11,268,433 ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (159,550,639) (14,564,985) (49,050,729) Changes from principal transactions: Total unit transactions (88,129,791) (9,236,832) (21,294,271) ------------------------------------------------- Increase (decrease) in assets derived from principal transactions (88,129,791) (9,236,832) (21,294,271) ------------------------------------------------- Total increase (decrease) (247,680,430) (23,801,817) (70,345,000) ------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 415,966,022 $ 28,286,199 $ 154,416,728 =================================================
S-41
ING VP ING VP INDEX ING VP INDEX INTERNATIONAL PLUS MIDCAP PLUS SMALLCAP EQUITY ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 6,733,274 $ 1,097,872 $ 9,707,836 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 455,151 53,118 (95,343) Net realized gain (loss) on investments and capital gains distributions (303,328) 16,027 (4,401,994) Net unrealized appreciation (depreciation) of investments (366,632) (19,980) 2,100,297 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (214,809) 49,165 (2,397,040) Changes from principal transactions: Total unit transactions 2,695,562 1,263,589 680,138 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 2,695,562 1,263,589 680,138 ------------------------------------------------ Total increase (decrease) 2,480,753 1,312,754 (1,716,902) ------------------------------------------------ Net assets at December 31, 2001 9,214,027 2,410,626 7,990,934 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (53,923) (30,132) (64,408) Net realized gain (loss) on investments and capital gains distributions (760,138) (75,227) (1,577,469) Net unrealized appreciation (depreciation) of investments (1,413,335) (732,353) (299,583) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,227,396) (837,712) (1,941,460) Changes from principal transactions: Total unit transactions 4,792,805 2,701,610 (821,654) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 4,792,805 2,701,610 (821,654) ------------------------------------------------ Total increase (decrease) 2,565,409 1,863,898 (2,763,114) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 11,779,436 $ 4,274,524 $ 5,227,820 ================================================
SEE ACCOMPANYING NOTES. S-42
ING VP GROWTH ING VP SMALL ING VP ING VP VALUE OPPORTUNITIES - COMPANY TECHNOLOGY OPPORTUNITY CLASS R ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 47,270,402 $ 9,832,599 $ 19,709,584 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,495,826 (128,546) 890,299 - Net realized gain (loss) on investments and capital gains distributions (79,276) (7,168,946) (717,768) - Net unrealized appreciation (depreciation) of investments 422,864 3,648,984 (3,302,248) - ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,839,414 (3,648,508) (3,129,717) - Changes from principal transactions: Total unit transactions 13,466,616 5,560,799 9,782,353 - ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 13,466,616 5,560,799 9,782,353 - ----------------------------------------------------------------- Total increase (decrease) 15,306,030 1,912,291 6,652,636 - ----------------------------------------------------------------- Net assets at December 31, 2001 62,576,432 11,744,890 26,362,220 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (468,856) (108,774) (184,300) (282) Net realized gain (loss) on investments and capital gains distributions (3,580,613) (3,681,243) (4,332,295) 1,805 Net unrealized appreciation (depreciation) of investments (14,440,776) (1,844,374) (2,719,443) (19,103) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (18,490,245) (5,634,391) (7,236,038) (17,580) Changes from principal transactions: Total unit transactions 8,071,713 453,564 (2,125,197) 401,831 ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 8,071,713 453,564 (2,125,197) 401,831 ----------------------------------------------------------------- Total increase (decrease) (10,418,532) (5,180,827) (9,361,235) 384,251 ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 52,157,900 $ 6,564,063 $ 17,000,985 $ 384,251 ================================================================= ING VP GROWTH ING VP ING VP OPPORTUNITIES - INTERNATIONAL MAGNACAP - CLASS S VALUE CLASS R ------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (495) - - Net realized gain (loss) on investments and capital gains distributions (2,161) - - Net unrealized appreciation (depreciation) of investments (54) - - ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (2,710) - - Changes from principal transactions: Total unit transactions 144,161 - - ------------------------------------------------- Increase (decrease) in assets derived from principal transactions 144,161 - - ------------------------------------------------- Total increase (decrease) 141,451 - - ------------------------------------------------- Net assets at December 31, 2001 141,451 - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,717) 269 128 Net realized gain (loss) on investments and capital gains distributions (27,626) (18,718) (20) Net unrealized appreciation (depreciation) of investments (29,240) (30,118) (5,689) ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (58,583) (48,567) (5,581) Changes from principal transactions: Total unit transactions 42,350 452,550 32,385 ------------------------------------------------- Increase (decrease) in assets derived from principal transactions 42,350 452,550 32,385 ------------------------------------------------- Total increase (decrease) (16,233) 403,983 26,804 ------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 125,218 $ 403,983 $ 26,804 =================================================
S-43
ING VP ING VP MIDCAP ING VP MIDCAP OPPORTUNITIES - MAGNACAP - OPPORTUNITIES - CLASS S CLASS S CLASS R ------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (3,490) 501 - Net realized gain (loss) on investments and capital gains distributions (11,400) (1,655) - Net unrealized appreciation (depreciation) of investments 10,360 6,282 - ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (4,530) 5,128 - Changes from principal transactions: Total unit transactions 869,213 425,382 - ------------------------------------------------- Increase (decrease) in assets derived from principal transactions 869,213 425,382 - ------------------------------------------------- Total increase (decrease) 864,683 430,510 - ------------------------------------------------- Net assets at December 31, 2001 864,683 430,510 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (22,826) (757) (15) Net realized gain (loss) on investments and capital gains distributions (97,225) (9,688) (200) Net unrealized appreciation (depreciation) of investments (459,418) (121,268) (805) ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (579,469) (131,713) (1,020) Changes from principal transactions: Total unit transactions 2,297,956 190,925 77,118 ------------------------------------------------- Increase (decrease) in assets derived from principal transactions 2,297,956 190,925 77,118 ------------------------------------------------- Total increase (decrease) 1,718,487 59,212 76,098 ------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 2,583,170 $ 489,722 $ 76,098 =================================================
SEE ACCOMPANYING NOTES. S-44
ING VP ING VP SMALLCAP SMALLCAP JANUS ASPEN OPPORTUNITIES - OPPORTUNITIES - AGGRESSIVE JANUS ASPEN CLASS R CLASS S GROWTH BALANCED ------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ - $ 274,462,060 $ 244,144,219 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (3,318) (2,163,717) 3,408,631 Net realized gain (loss) on investments and capital gains distributions - (119,912) (102,981,631) (3,517,430) Net unrealized appreciation (depreciation) of investments - 26,260 (425,456) (14,919,519) ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (96,970) (105,570,804) (15,028,318) Changes from principal transactions: Total unit transactions - 1,377,039 (27,084,902) 11,125,134 ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions - 1,377,039 (27,084,902) 11,125,134 ------------------------------------------------------------------ Total increase (decrease) - 1,280,069 (132,655,706) (3,903,184) ------------------------------------------------------------------ Net assets at December 31, 2001 - 1,280,069 141,806,354 240,241,035 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (130) (20,930) (1,204,437) 2,535,700 Net realized gain (loss) on investments and capital gains distributions (9,641) (338,439) (110,103,453) (19,145,911) Net unrealized appreciation (depreciation) of investments (3,578) (622,428) 73,321,455 (1,489,908) ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (13,349) (981,797) (37,986,435) (18,100,119) Changes from principal transactions: Total unit transactions 71,794 1,473,449 (26,586,808) (24,315,508) ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions 71,794 1,473,449 (26,586,808) (24,315,508) ------------------------------------------------------------------ Total increase (decrease) 58,445 491,652 (64,573,243) (42,415,627) ------------------------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 58,445 $ 1,771,721 $ 77,233,111 $ 197,825,408 ================================================================== JANUS ASPEN JANUS ASPEN FLEXIBLE JANUS ASPEN WORLDWIDE INCOME GROWTH GROWTH ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 18,729,553 $ 267,652,979 $ 483,862,628 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,003,379 (2,103,210) (2,995,164) Net realized gain (loss) on investments and capital gains distributions 291,118 (29,054,576) (52,114,953) Net unrealized appreciation (depreciation) of investments (9,015) (38,086,553) (56,467,361) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 1,285,482 (69,244,339) (111,577,478) Changes from principal transactions: Total unit transactions 3,925,181 (21,629,929) (40,889,293) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 3,925,181 (21,629,929) (40,889,293) ------------------------------------------------ Total increase (decrease) 5,210,663 (90,874,268) (152,466,771) ------------------------------------------------ Net assets at December 31, 2001 23,940,216 176,778,711 331,395,857 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 856,419 (1,668,494) (1,012,698) Net realized gain (loss) on investments and capital gains distributions 761,446 (88,052,075) (139,153,473) Net unrealized appreciation (depreciation) of investments 571,088 45,741,303 58,703,035 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 2,188,953 (43,979,266) (81,463,136) Changes from principal transactions: Total unit transactions 2,262,579 (34,296,856) (51,652,618) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 2,262,579 (34,296,856) (51,652,618) ------------------------------------------------ Total increase (decrease) 4,451,532 (78,276,122) (133,115,754) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 28,391,748 $ 98,502,589 $ 198,280,103 ================================================
S-45
LORD ABBETT GROWTH AND LORD ABBETT MFS(R) GLOBAL INCOME MID-CAP VALUE GOVERNMENTS ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ - $ 1,537,291 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - 39,877 Net realized gain (loss) on investments and capital gains distributions - - 52,236 Net unrealized appreciation (depreciation) of investments - - (40,415) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - - 51,698 Changes from principal transactions: Total unit transactions - - 153,415 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions - - 153,415 ------------------------------------------------ Total increase (decrease) - - 205,113 ------------------------------------------------ Net assets at December 31, 2001 - - 1,742,404 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,030 849 36,000 Net realized gain (loss) on investments and capital gains distributions (52) (21,787) 31,230 Net unrealized appreciation (depreciation) of investments (19,377) (25,338) 84,246 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (18,399) (46,276) 151,476 Changes from principal transactions: Total unit transactions 439,912 520,237 826,559 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 439,912 520,237 826,559 ------------------------------------------------ Total increase (decrease) 421,513 473,961 978,035 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 421,513 $ 473,961 $ 2,720,439 ================================================
SEE ACCOMPANYING NOTES. S-46
OPPENHEIMER OPPENHEIMER OPPENHEIMER MAIN STREET MFS(R) TOTAL AGGRESSIVE GLOBAL GROWTH & RETURN GROWTH SECURITIES INCOME ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 63,398,107 $ 57,052,022 $ 17,259,574 $ 67,652,421 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 3,012,322 6,906,604 1,960,521 (500,428) Net realized gain (loss) on investments and capital gains distributions (4,439) (42,931,360) (1,060,601) (1,058,708) Net unrealized appreciation (depreciation) of investments (3,698,764) 15,925,135 (3,174,371) (6,494,391) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (690,881) (20,099,621) (2,274,451) (8,053,527) Changes from principal transactions: Total unit transactions 31,202,325 3,496,997 1,417,786 6,109,792 ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 31,202,325 3,496,997 1,417,786 6,109,792 ----------------------------------------------------------------- Total increase (decrease) 30,511,444 (16,602,624) (856,665) (1,943,735) ----------------------------------------------------------------- Net assets at December 31, 2001 93,909,551 40,449,398 16,402,909 65,708,686 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 355,083 (188,891) (124,319) (327,654) Net realized gain (loss) on investments and capital gains distributions 3,616,803 (5,968,060) (3,498,317) (11,300,002) Net unrealized appreciation (depreciation) of investments (10,681,462) (5,031,083) (1,163,987) (1,390,151) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (6,709,576) (11,188,034) (4,786,623) (13,017,807) Changes from principal transactions: Total unit transactions 4,525,040 (5,331,166) 3,560,532 (3,890,270) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 4,525,040 (5,331,166) 3,560,532 (3,890,270) ----------------------------------------------------------------- Total increase (decrease) (2,184,536) (16,519,200) (1,226,091) (16,908,077) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 91,725,015 $ 23,930,198 $ 15,176,818 $ 48,800,609 ================================================================= OPPENHEIMER PIONEER EQUITY PIONEER STRATEGIC BOND INCOME VCT VCT ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 23,334,535 $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,267,653 - - Net realized gain (loss) on investments and capital gains distributions (55,135) - - Net unrealized appreciation (depreciation) of investments (335,512) - - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 877,006 - - Changes from principal transactions: Total unit transactions 4,680,276 - - ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 4,680,276 - - ------------------------------------------------ Total increase (decrease) 5,557,282 - - ------------------------------------------------ Net assets at December 31, 2001 28,891,817 - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,845,683 1,445 - Net realized gain (loss) on investments and capital gains distributions (1,631,959) (909) - Net unrealized appreciation (depreciation) of investments 1,589,777 (5,978) 1 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 1,803,501 (5,442) 1 Changes from principal transactions: Total unit transactions 2,039,563 158,735 1,302 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 2,039,563 158,735 1,302 ------------------------------------------------ Total increase (decrease) 3,843,064 153,293 1,303 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 32,734,881 $ 153,293 $ 1,303 ================================================
S-47
SP JENNISON PIONEER MID PRUDENTIAL INTERNATIONAL CAP VALUE VCT JENNISON GROWTH -------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (1,106) (620) Net realized gain (loss) on investments and capital gains distributions - (11,906) (27,800) Net unrealized appreciation (depreciation) of investments - 20,719 656 -------------------------------------------- Net increase (decrease) in net assets resulting from operations - 7,707 (27,764) Changes from principal transactions: Total unit transactions - 715,846 87,050 -------------------------------------------- Increase (decrease) in assets derived from principal transactions - 715,846 87,050 -------------------------------------------- Total increase (decrease) - 723,553 59,286 -------------------------------------------- Net assets at December 31, 2001 - 723,553 59,286 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (127) (8,938) (2,814) Net realized gain (loss) on investments and capital gains distributions (9,025) (252,055) (44,193) Net unrealized appreciation (depreciation) of investments 50 (50,168) (7,265) -------------------------------------------- Net increase (decrease) in net assets resulting from operations (9,102) (311,161) (54,272) Changes from principal transactions: Total unit transactions 39,527 14,555 208,824 -------------------------------------------- Increase (decrease) in assets derived from principal transactions 39,527 14,555 208,824 -------------------------------------------- Total increase (decrease) 30,425 (296,606) 154,552 -------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 30,425 $ 426,947 $ 213,838 ============================================
SEE ACCOMPANYING NOTES. S-48 ING Life Insurance and Annuity Company Variable Annuity Account B Notes to Financial Statements December 31, 2002 1. ORGANIZATION ING Life Insurance and Annuity Company Variable Annuity Account B (the "Account") was established by ING Insurance Company of America ("ILIAC" or the "Company") to support the operations of variable annuity contracts ("Contracts"). The Company is an indirect wholly owned subsidiary of ING America Insurance Holdings, Inc. ("ING AIH"), an insurance holding company domiciled in the State of Delaware. ING AIH is a wholly owned subsidiary of ING Groep, N.V., a global financial services holding company based in The Netherlands. The Account is registered as a unit investment trust with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended. The account is sold exclusively for use with variable annuity Contracts that may be entitled to tax-deferred treatment under specific sections of the Internal Revenue Code of 1986, as amended. ILIAC provides for variable accumulation and benefits under the Contracts by crediting annuity considerations to one or more divisions within the Account or the fixed separate account, which is not part of the Account, as directed by the Contractowners. The portion of the Account's assets applicable to Contracts will not be charged with liabilities arising out of any other business ILIAC may conduct, but obligations of the Account, including the promise to make benefit payments, are obligations of ILIAC. The assets and liabilities of the Account are clearly identified and distinguished from the other assets and liabilities of ILIAC. S-49 At December 31, 2002, the Account had 110 investment divisions (the "Divisions"), 50 of which invest in independently managed mutual funds and 60 of which invest in mutual funds managed by affiliates, either ING Investments, LLC or ING Life Insurance and Annuity Company. The assets in each Division are invested in shares of a designated fund ("Fund") of various investment trusts (the "Trusts"). Investment Divisions at December 31, 2002 and related Trusts are as follows: AIM V.I. Funds: Fidelity Variable Insurance Products Fund II (continued): AIM V.I. Capital Appreciation Fund - Series I Shares Fidelity(R) VIP II Index 500 Portfolio - Initial Class AIM V.I. Core Equity Fund - Series I Shares Fidelity(R) VIP II Investment Grade Bond Portfolio - Initial Class AIM V.I. Government Securities Fund - Series I Shares Franklin Templeton Variable Insurance Products Trust: AIM V.I. Growth Fund - Series I Shares Franklin Small Cap Value Securities Fund - Class 2 ** AIM V.I. Premier Equity Fund - Series I Shares ING GET Fund: Alger American Funds: ING GET Fund - Series D Alger American Balanced Portfolio ING GET Fund - Series E Alger American Income & Growth Portfolio ING GET Fund - Series G Alger American Leveraged AllCap Portfolio ING GET Fund - Series H Alliance Funds: ING GET Fund - Series I Alliance Growth and Income ING GET Fund - Series J Alliance Premier Growth Portfolio ING GET Fund - Series K Alliance Quasar Portfolio ING GET Fund - Series L American Century VP Funds: ING GET Fund - Series M * American Century VP Balanced Fund ING GET Fund - Series N * American Century VP International Fund ING GET Fund - Series P * Brinson Series Funds: ING GET Fund - Series Q * Brinson Tactical Allocation Portfolio - Class I ING GET Fund - Series R ** Calvert Social Balanced Portfolio ING GET Fund - Series S ** Federated Insurance Series: ING GET Fund - Series T ** Federated American Leaders Fund II ING GET Fund - Series U ** Federated Equity Income Fund II ING VP Balanced Portfolio, Inc. - Class R Federated Fund for U.S. Government Securities II ING VP Bond Portfolio - Class R Federated Growth Strategies Fund II ING VP Emerging Markets Fund Federated High Income Bond Fund II ING VP Money Market Portfolio - Class R Federated International Equity Fund II ING VP Natural Resources Trust Federated Prime Money Fund II ING Generations Portfolio, Inc.: Federated Utility Fund II ING VP Strategic Allocation Balanced Portfolio - Class R Fidelity(R) Variable Insurance Products Fund: ING VP Strategic Allocation Growth Portfolio - Class R Fidelity(R) VIP Equity-Income Portfolio - Initial Class ING VP Strategic Allocation Income Portfolio - Class R Fidelity(R) VIP Growth Portfolio - Initial Class ING Partners, Inc.: Fidelity(R) VIP High Income Portfolio - Initial Class ING Alger Aggressive Growth Portfolio - Service Class ** Fidelity(R) VIP Overseas Portfolio - Initial Class ING Alger Growth Portfolio - Service Class ** Fidelity Variable Insurance Products Fund II: ING American Century Small Cap Value Portfolio ** Fidelity(R) VIP II ASSET MANAGER(SM) Portfolio - Initial ING Baron Small Cap Growth Portfolio - Service Class ** Class Fidelity(R) VIP II Contrafund(R) Portfolio - Initial ING Goldman Sachs Capital Growth Portfolio - Service Class ** Class
S-50 ING Partners, Inc. (continued): ING Variable Products Trust (continued) ING JP Morgan Fleming International Portfolio - Initial ING VP MagnaCap Portfolio - Class R ** Class ING JP Morgan Mid Cap Value Portfolio - Service ING VP MagnaCap Portfolio - Class S * Class ** ING MFS Capital Opportunities Portfolio - Initial Class ING VP MidCap Opportunities Portfolio - Class R ** ING MFS Global Growth Portfolio - Service Class ** ING VP MidCap Opportunities Portfolio - Class S * ING MFS Research Portfolio - Initial Class ING VP SmallCap Opportunities Portfolio - Class R ** ING OpCap Balanced Value Portfolio - Service Class ** ING VP SmallCap Opportunities Portfolio - Class S * ING PIMCO Total Return Portfolio - Service Class ** Janus Aspen Series: ING Salomon Brothers Aggressive Growth Portfolio - Janus Aspen Aggressive Growth Portfolio - Institutional Shares Initial Class Janus Aspen Balanced Portfolio - Inst Shares ING Salomon Brothers Capital Portfolio - Service Janus Aspen Flexible Income Portfolio - Inst Shares Class ** ING Salomon Brothers Investors Value Portfolio - Janus Aspen Growth Portfolio - Inst Shares Service Class ** ING T. Rowe Price Growth Equity Portfolio - Initial Janus Aspen Worldwide Growth Portfolio - Inst Shares Class ING UBS Tactical Asset Allocation Portfolio - Lord Abbett Funds: Service Class ** Lord Abbett Growth and Income Portfolio ** ING Van Kampen Comstock Portfolio - Service Class ** Lord Abbett MidCap Value Portfolio ** ING Variable Funds: MFS(R) Funds: ING VP Growth and Income Portfolio - Class R MFS(R) Global Governments Series ING Variable Portfolios, Inc.: MFS(R) Total Return Series - Initial Class ING VP Growth Portfolio - Class R Oppenheimer Variable Account Funds: ING VP Index Plus LargeCap Portfolio - Class R Oppenheimer Aggressive Growth Fund/VA ING VP Index Plus MidCap Portfolio - Class R Oppenheimer Global Securities Fund/VA ING VP Index Plus SmallCap Portfolio - Class R Oppenheimer Main Street Growth & Income Fund/VA ING VP International Equity Portfolio - Class R Oppenheimer Strategic Bond Fund/VA ING VP Small Company Portfolio - Class R Pioneer Variable Contracts Trust: ING VP Technology Portfolio - Class R Pioneer Equity Income VCT Portfolio - Class I ** ING VP Value Opportunity Portfolio - Class R Pioneer VCT Portfolio - Class I ** ING Variable Products Trust: Pioneer Mid Cap Value VCT Portfolio - Class I ** ING VP Growth Opportunities Portfolio - Class R ** Prudential Series Fund, Inc.: ING VP Growth Opportunities Portfolio - Class S * Prudential Jennison Portfolio - Class II Shares * ING VP International Value Portfolio - Class R ** SP Jennison International Growth Portfolio - Class II Shares *
* Investment Division added in 2001. ** Investment Division added in 2002. Effective September 15, 2000, the Brinson Series Trust Small Cap Portfolio (formerly the Mitchell Hutchins Series Trust Small Cap Portfolio) was closed to new Contractowners and to new investments from existing Contractowners. All remaining amounts were transferred to other Funds prior to December 31, 2001 at the Contractowners' direction. Effective October 8, 2001, the Brinson Series Trust Growth and Income Portfolio (formerly the Mitchell Hutchins Series Trust Growth and Income Portfolio) was closed to new Contractowners and to new investments from existing Contractowners. All remaining amounts were transferred to other Funds prior to December 31, 2001 at the Contractowners' direction. S-51 ING GET Fund Series C reached the end of its offering period and closed on December 16, 2001. All remaining amounts were transferred to other Funds prior to December 31, 2001 at the Contractowners' direction. The names of certain Divisions were changed during 2002. The following is a summary of current and former names for those Divisions:
CURRENT NAME FORMER NAME ------------------------------------------------------------------------------------------ AIM V.I. Core Equity AIM V.I. Growth and Income AIM V.I. Premier Equity AIM V.I. Value ING GET Fund - Series D Aetna GET Fund - Series D ING GET Fund - Series E Aetna GET Fund - Series E ING GET Fund - Series G Aetna GET Fund - Series G ING GET Fund - Series H Aetna GET Fund - Series H ING GET Fund - Series I Aetna GET Fund - Series I ING GET Fund - Series J Aetna GET Fund - Series J ING GET Fund - Series K Aetna GET Fund - Series K ING GET Fund - Series L Aetna GET Fund - Series L ING GET Fund - Series M Aetna GET Fund - Series M ING GET Fund - Series N Aetna GET Fund - Series N ING GET Fund - Series P Aetna GET Fund - Series P ING GET Fund - Series Q Aetna GET Fund - Series Q ING VP Balanced Aetna Balanced VP, Inc. ING VP Bond Aetna Bond VP ING VP Emerging Markets Aetna Emerging Markets VP ING VP Money Market Aetna Money Market VP ING VP Natural Resources Aetna Natural Resources VP ING VP Strategic Allocation Balanced Aetna Crossroads VP ING VP Strategic Allocation Growth Aetna Ascent VP ING VP Strategic Allocation Income Aetna Legacy VP ING JP Morgan Fleming International PPI Scudder International Growth ING MFS Capital Opportunities PPI MFS Capital Opportunities ING MFS Research PPI MFS Research ING Salomon Brothers Aggressive Growth PPI MFS Emerging Equities ING T. Rowe Price Growth Equity PPI T. Rowe Price Growth Equity ING VP Growth and Income Aetna Growth and Income VP ING VP Growth Aetna Growth VP ING VP Index Plus LargeCap Aetna Index Plus LargeCap VP ING VP Index Plus MidCap Aetna Index Plus MidCap VP ING VP Index Plus SmallCap Aetna Index Plus SmallCap VP ING VP International Equity Aetna International VP ING VP Small Company Aetna Small Company VP ING VP Technology Aetna Technology VP ING VP Value Opportunity Aetna Value Opportunity VP ING VP Growth Opportunities - Class S Pilgrim Growth Opportunities ING VP MagnaCap - Class S Pilgrim International Value ING VP MidCap Opportunities - Class S Pilgrim MidCap Opportunities ING VP SmallCap Opportunities - Class S Pilgrim SmallCap Opportunities
S-52 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies of the Account: USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. INVESTMENTS Investments are made in shares of a Fund and are recorded at fair value, determined by the net asset value per share of the respective Fund. Investment transactions in each Fund are recorded on the trade date. Distributions of net investment income and capital gains from each Fund are recognized on the ex-distribution date. Realized gains and losses on redemptions of the shares of the Fund are determined by specific identification. The difference between cost and current market value is recorded as unrealized appreciation or depreciation of investments. FEDERAL INCOME TAXES Operations of the Account form a part of, and are taxed with, the total operations of ILIAC, which is taxed as a life insurance company under the Internal Revenue Code. Earnings and realized capital gains of the Account attributable to the Contractowners are excluded in the determination of the federal income tax liability of ILIAC. S-53 ANNUITY RESERVES Prior to the annuity date, the Contracts are redeemable for the net cash surrender value of the Contracts. The annuity reserves are recorded in the financial statements at the aggregate account values of the Contractholders invested in the Account Divisions. Annuity reserves held in the Account for currently payable contracts are computed according to the Progressive Annuity, a49, 1971 Individual Annuity Mortality, 1971 Group Annuity Mortality, 1983a, and 1983 Group Annuity Mortality tables using various assumed interest rates not to exceed seven percent. Mortality experience is monitored by the Company. Charges to annuity reserves for mortality experience are reimbursed to the Company if the reserves required are less than originally estimated. If additional reserves are required, the Company reimburses the Account. Conversely, if amounts allocated exceed amounts required, transfers may be made to ILIAC. 3. CHARGES AND FEES Under the terms of the Contracts, certain charges are allocated to the Contracts to cover ILIAC's expenses in connection with the issuance and administration of the Contracts. Following is a summary of these charges: MORTALITY AND EXPENSE RISK CHARGES ILIAC assumes mortality and expense risks related to the operations of the Account and, in accordance with the terms of the Contracts, deducts a daily charge from the assets of the Account. Daily charges are deducted at annual rates of up to 1.90% of the average daily net asset value of each Division of the Account to cover these risks, as specified in the Contract. ADMINISTRATIVE CHARGES A daily charge at an annual rate of up to 0.50% of the assets attributable to the Contracts is deducted, as specified in the Contract. S-54 CONTRACT MAINTENANCE CHARGES An annual contract or certificate maintenance fee of up to $20 may be deducted from the accumulation value of Contracts to cover ongoing administrative expenses, as specified in the Contract. CONTINGENT DEFERRED SALES CHARGES For certain Contracts, a contingent deferred sales charge is imposed as a percentage of each premium payment if the Contract is surrendered or an excess partial withdrawal is taken, as specified in the Contract. PREMIUM TAXES For certain Contracts, premium taxes are deducted, where applicable, from the accumulation value of each Contract. The amount and timing of the deduction depends on the Contractowner's state of residence and currently ranges up to 4.0% of premiums. 4. RELATED PARTY TRANSACTIONS During the year ended December 31, 2002, management fees were paid indirectly to ING Investments, LLC, an affiliate of the Company, in its capacity as investment adviser to the ING GET Fund, ING Balanced Portfolio, Inc., ING VP Emerging Markets Fund, ING VP Natural Resources Trust, ING VP Money Market Portfolio, ING Generations Portfolios, Inc., ING Variable Funds, ING VP Bond Portfolio, ING Variable Portfolios, Inc., and ING Variable Products Trust. The annual fee rate ranged from 0.25% to 1.00% of the average net assets of each respective Fund or Fund of the Trust. In addition, management fees were paid to ILIAC, an affiliate, in its capacity as investment adviser to ING Partners, Inc. The annual fee rate ranged from 0.75% to 1.00% of the average net assets of each respective Fund of the Trust. S-55 5. PURCHASES AND SALES OF INVESTMENT SECURITIES The aggregate cost of purchases and proceeds from sales of investments follows:
YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------- PURCHASES SALES PURCHASES SALES --------------------------------------------- (DOLLARS IN THOUSANDS) AIM V.I. Funds: AIM V.I. Capital Appreciation $ 24,514 $ 27,763 $ 12,618 $ 6,381 AIM V.I. Core Equity 38,407 44,855 10,567 4,862 AIM V.I. Government Securities 32,681 16,817 11,327 2,444 AIM V.I. Growth 24,478 29,364 8,492 4,277 AIM V.I. Premier Equity 68,844 80,157 24,777 12,092 Alger American Funds: Alger American Balanced 3,639 4,339 142 1,043 Alger American Income & Growth 10,413 12,151 983 3,003 Alger American Leveraged AllCap 9,454 10,850 463 2,747 Alliance Funds: Alliance Growth and Income 46,961 44,016 29,482 817 Alliance Premier Growth 10,145 10,102 7,887 604 Alliance Quasar 1,723 1,577 1,231 408 American Century VP Funds: American Century VP Balanced 1,989 2,307 156 555 American Century VP International 2,499 3,200 402 809 Brinson Series Funds: Brinson Growth & Income - - 258 946 Brinson Small Cap - - - 180 Brinson Tactical Allocation 14,269 15,619 6,605 1,725 Calvert Social Balanced Portfolio 1,931 1,806 332 618 Federated Insurance Series: Federated American Leaders 8,627 25,009 3,691 16,943 Federated Federated Equity Income 820 4,394 1,658 5,373 Federated Fund for U.S. Government Securities 4,984 4,633 2,709 2,460 Federated Growth Strategies 112 5,825 2,009 6,819 Federated High Income Bond 6,847 9,302 2,881 6,274 Federated International Equity 127 2,905 2,139 3,858 Federated Prime Money 5,760 7,185 6,418 6,310 Federated Utility 2,331 5,001 874 4,087 Fidelity(R) Variable Insurance Products Fund: Fidelity(R) VIP Equity-Income 247,113 252,808 80,363 53,521 Fidelity(R) VIP Growth 141,688 162,277 30,277 21,128 Fidelity(R) VIP High Income 58,138 58,116 21,375 16,342 Fidelity(R) VIP Overseas 14,243 15,632 4,335 4,240 Fidelity Variable Insurance Products Fund II: Fidelity(R) VIP II ASSET MANAGER(SM) 15,172 16,452 1,425 3,404 Fidelity(R) VIP II Contrafund(R) 175,617 186,406 24,172 33,597 Fidelity(R) VIP II Index 500 121,951 136,223 50,031 65,319 Fidelity(R) VIP II Investment Grade Bond 3,174 3,538 215 913 Franklin Templeton Variable Insurance Products Trust: Franklin Small Cap Value Securities 2,565 1,920 - -
S-56
YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------- PURCHASES SALES PURCHASES SALES --------------------------------------------- (DOLLARS IN THOUSANDS) ING GET Fund: ING GET Fund - Series C $ - $ - $ 349 $ 4,990 ING GET Fund - Series D 91,906 104,050 1,913 12,420 ING GET Fund - Series E 287,090 310,958 3,579 36,784 ING GET Fund - Series G 172,316 181,449 978 17,752 ING GET Fund - Series H 131,547 142,911 1,466 11,739 ING GET Fund - Series I 89,384 94,102 434 6,729 ING GET Fund - Series J 76,351 81,025 485 6,370 ING GET Fund - Series K 88,905 98,660 1,365 5,816 ING GET Fund - Series L 78,713 85,764 89,118 7,492 ING GET Fund - Series M 120,605 132,464 131,389 4,582 ING GET Fund - Series N 97,858 110,571 111,246 9,055 ING GET Fund - Series P 83,551 91,096 85,500 2,681 ING GET Fund - Series Q 115,914 62,794 2,594 974 ING GET Fund - Series R 47,063 3,851 - - ING GET Fund - Series S 55,817 2,522 - - ING GET Fund - Series T 39,328 338 - - ING GET Fund - Series U 508 6 - - ING VP Balanced 79,596 99,335 33,417 23,173 ING VP Bond 125,655 111,843 63,481 20,280 ING VP Emerging Markets Fund 976 1,178 215 226 ING VP Money Market 760,239 784,356 831,495 749,107 ING VP Natural Resources Trust 1,139 1,513 21 400 ING Generations Portfolio, Inc.: ING VP Strategic Allocation Balanced 13,854 14,909 1,228 3,037 ING VP Strategic Allocation Growth 11,735 12,253 1,104 2,506 ING VP Strategic Allocation Income 21,591 23,140 5,315 6,467 ING Partners, Inc.: ING Alger Aggressive Growth 190 - - - ING Alger Growth 10 - - - ING American Century Small Cap Value 253 82 - - ING Baron Small Cap Growth 359 171 - - ING Goldman Sachs Capital Growth 19 - - - ING JP Morgan Fleming International 210,312 212,764 152,032 141,292 ING JP Morgan Mid Cap Value 89 - - - ING MFS Capital Opportunities 46,601 55,397 29,866 10,459 ING MFS Global Growth 8 6 - - ING MFS Research 50,965 63,509 21,456 12,539 ING OpCap Balanced Value 15 - - - ING PIMCO Total Return 1,359 107 - - ING Salomon Brothers Aggressive Growth 109,117 123,719 104,463 108,410 ING Salomon Brothers Capital 5 - - - ING Salomon Brothers Investors Value 16 - - - ING T. Rowe Price Growth Equity 77,576 88,202 21,394 17,750 ING UBS Tactical Asset Allocation - - - - ING Van Kampen Comstock 331 1 - -
S-57
YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------- PURCHASES SALES PURCHASES SALES --------------------------------------------- (DOLLARS IN THOUSANDS) ING Variable Funds: ING VP Growth and Income $ 172,371 $ 261,853 $ 83,464 $ 178,158 ING Variable Portfolios, Inc.: ING VP Growth 69,783 79,492 91,682 94,630 ING VP Index Plus LargeCap 190,972 214,104 115,106 106,107 ING VP Index Plus MidCap 11,890 7,151 5,587 2,436 ING VP Index Plus SmallCap 8,976 6,252 2,924 1,607 ING VP International Equity 46,107 46,993 46,170 45,585 ING VP Small Company 116,436 108,833 77,290 62,327 ING VP Technology 23,571 23,226 19,487 14,055 ING VP Value Opportunity 26,750 29,060 18,600 7,927 ING Variable Products Trust: ING VP Growth Opportunities - Class R 864 463 - - ING VP Growth Opportunities - Class S 278 238 187 44 ING VP International Value 523 70 - - ING VP MagnaCap - Class R 33 - - - ING VP MagnaCap - Class S 879 689 454 29 ING VP MidCap Opportunities - Class R 78 1 - - ING VP MidCap Opportunities - Class S 4,360 2,084 1,863 997 ING VP SmallCap Opportunities - Class R 265 193 - - ING VP SmallCap Opportunities - Class S 3,798 2,346 2,039 666 Janus Aspen Series: Janus Aspen Aggressive Growth 141,416 169,207 83,655 112,904 Janus Aspen Balanced 225,500 247,280 34,727 20,193 Janus Aspen Flexible Income 31,418 28,299 11,219 6,290 Janus Aspen Growth 150,997 186,962 41,962 65,695 Janus Aspen Worldwide Growth 323,687 376,352 84,870 128,755 Lord Abbett Funds: Lord Abbett Growth and Income 442 1 - - Lord Abbett MidCap Value 805 284 - - MFS Funds: MFS Global Governments 3,217 2,355 1,276 1,083 MFS Total Return 119,828 113,668 38,490 4,276 Oppenheimer Variable Account Funds: Oppenheimer Aggressive Growth 64,141 69,661 68,878 58,475 Oppenheimer Global Securities 20,873 17,437 7,967 4,589 Oppenheimer Main Street Growth & Income 70,215 74,433 11,707 6,098 Oppenheimer Strategic Bond 38,679 34,794 9,644 3,697 Pioneer Variable Contracts Trust: Pioneer Equity Income VCT 165 5 - - Pioneer VCT 1 - - - Pioneer Mid Cap Value VCT 82 42 - - Prudential Series Fund, Inc.: Prudential Jennison 2,065 2,060 1,222 507 SP Jennison International Growth 2,655 2,449 770 684
S-58 6. CHANGES IN UNITS The changes in units outstanding were as follows:
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------ NET UNITS ISSUED NET UNITS ISSUED (REDEEMED) (REDEEMED) ------------------------------------ AIM V.I. Funds: AIM V.I. Capital Appreciation (366,408) 514,760 AIM V.I. Core Equity (748,286) 456,934 AIM V.I. Government Securities 1,319,594 797,417 AIM V.I. Growth (842,874) 591,129 AIM V.I. Premier Equity (1,440,923) 6,787,724 Alger American Funds: Alger American Balanced (31,808) (38,822) Alger American Income & Growth (86,313) (107,145) Alger American Leveraged AllCap (61,140) (92,253) Alliance Funds: Alliance Growth and Income 63,544 2,703,504 Alliance Premier Growth 2,737 989,444 Alliance Quasar 12,434 106,602 American Century VP Funds: American Century VP Balanced (21,928) (29,454) American Century VP International (53,475) (44,530) Brinson Series Funds: Brinson Growth & Income - (92,381) Brinson Small Cap - (15,656) Brinson Tactical Allocation (180,912) 416,605 Calvert Social Balanced 9,032 (17,551) Federated Insurance Series: Federated American Leaders (802,047) (583,244) Federated Equity Income (349,138) (305,498) Federated Fund for U.S. Government Securities 5,984 (3,295) Federated Growth Strategies (353,291) (260,952) Federated High Income Bond (311,614) (411,220) Federated International Equity (215,775) (210,789) Federated Prime Money (112,344) (7,126) Federated Utility (270,317) (226,436) Fidelity(R) Variable Insurance Products Fund: Fidelity(R) VIP Equity-Income (690,353) 1,774,965 Fidelity(R) VIP Growth (1,160,706) 1,166,480 Fidelity(R) VIP High Income (483,340) (7,252) Fidelity(R) VIP Overseas (115,998) (101,429)
S-59
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------ NET UNITS ISSUED NET UNITS ISSUED (REDEEMED) (REDEEMED) ------------------------------------ Fidelity Variable Insurance Products Fund II: Fidelity(R) VIP II ASSET MANAGER(SM) (103,131) (162,242) Fidelity(R) VIP II Contrafund(R) (705,725) (484,033) Fidelity(R) VIP II Index 500 (835,328) (711,188) Fidelity(R) VIP II Investment Grade Bond (29,946) (61,301) Franklin Templeton Variable Insurance Products Trust: Franklin Small Cap Value Securities 39,416 - ING GET Fund: ING GET Fund - Series C - (332,642) ING GET Fund - Series D (1,502,708) (1,021,289) ING GET Fund - Series E (3,020,220) (3,037,122) ING GET Fund - Series G (1,275,410) (1,469,116) ING GET Fund - Series H (1,368,020) (867,644) ING GET Fund - Series I (633,744) (510,638) ING GET Fund - Series J (606,080) (487,793) ING GET Fund - Series K (1,044,318) (275,902) ING GET Fund - Series L (566,108) 8,042,502 ING GET Fund - Series M (972,717) 12,530,623 ING GET Fund - Series N (1,199,074) 10,180,844 ING GET Fund - Series P (608,071) 8,287,579 ING GET Fund - Series Q 5,298,242 162,043 ING GET Fund - Series R 4,312,314 - ING GET Fund - Series S 5,334,290 - ING GET Fund - Series T 3,907,841 - ING GET Fund - Series U 50,278 - ING VP Balanced (1,231,538) (31,417) ING VP Bond 413,356 2,657,410 ING VP Emerging Markets (26,185) (27,794) ING VP Money Market (2,485,092) 6,113,512 ING VP Natural Resources (31,200) (26,923) ING Generations Portfolio, Inc.: ING VP Strategic Allocation Balanced (104,759) (150,126) ING VP Strategic Allocation Growth (62,890) (115,234) ING VP Strategic Allocation Income (143,555) (137,472) ING Partners, Inc.: ING Alger Aggressive Growth 24,342 - ING Alger Growth 1,297 - ING American Century Small Cap Value 19,821 - ING Baron Small Cap Growth 21,310 - ING Goldman Sachs Capital Growth 2,242 -
S-60
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------ NET UNITS ISSUED NET UNITS ISSUED (REDEEMED) (REDEEMED) ------------------------------------ ING Partners, Inc. (continued): ING JP Morgan Fleming International 17,057 440,496 ING JP Morgan Mid Cap Value 9,450 - ING MFS Capital Opportunities (840,713) 662,303 ING MFS Global Growth 168 - ING MFS Research (1,203,069) (385,928) ING OpCap Balanced Value 1,825 - ING PIMCO Total Return 118,777 - ING Salomon Brothers Aggressive Growth (1,425,104) (532,114) ING Salomon Brothers Capital 655 - ING Salomon Brothers Investors Value 1,835 - ING T. Rowe Price Growth Equity (562,460) (481,925) ING UBS Tactical Asset Allocation 53 - ING Van Kampen Comstock 38,291 - ING Variable Funds: ING VP Growth and Income (4,914,917) (3,837,503) ING Variable Portfolios, Inc.: ING VP Growth (944,382) (557,260) ING VP Index Plus LargeCap (1,975,577) 334,278 ING VP Index Plus MidCap 293,309 179,712 ING VP Index Plus SmallCap 238,930 90,802 ING VP International Equity (117,376) 90,389 ING VP Small Company 398,526 999,271 ING VP Technology (95,211) 951,241 ING VP Value Opportunity (168,461) 477,971 ING Variable Products Trust: ING VP Growth Opportunities - Class R 63,829 - ING VP Growth Opportunities - Class S 5,464 17,720 ING VP International Value 49,414 - ING VP MagnaCap - Class R 3,913 - ING VP MagnaCap - Class S 22,872 46,176 ING VP MidCap Opportunities - Class R 10,923 - ING VP MidCap Opportunities - Class S 315,913 102,249 ING VP SmallCap Opportunities - Class R (139,170) 150,882 ING VP SmallCap Opportunities - Class S 376,449 - Janus Aspen Series: Janus Aspen Aggressive Growth (2,540,697) (691,812) Janus Aspen Balanced (1,543,962) 1,254,108 Janus Aspen Flexible Income 123,393 232,337 Janus Aspen Growth (3,008,365) (1,173,398) Janus Aspen Worldwide Growth (3,807,460) (863,462)
S-61
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------ NET UNITS ISSUED NET UNITS ISSUED (REDEEMED) (REDEEMED) ------------------------------------ Lord Abbett Funds: Lord Abbett Growth and Income 53,538 - Lord Abbett MidCap Value 54,692 - MFS(R) Funds: MFS(R) Global Governments 71,900 13,722 MFS(R) Total Return 404,893 2,634,447 Oppenheimer Variable Account Funds: Oppenheimer Aggressive Growth (616,159) 1,508,913 Oppenheimer Global Securities 197,129 96,835 Oppenheimer Main Street Growth & Income (523,616) 527,060 Oppenheimer Strategic Bond 151,517 441,109 Pioneer Variable Contracts Trust: Pioneer Equity Income VCT 19,140 - Pioneer VCT 172 - Pioneer Mid Cap Value VCT 3,470 - Prudential Series Fund, Inc.: Prudential Jennison (10,806) 81,476 SP Jennison International Growth 29,475 7,897
S-62 7. UNIT SUMMARY A summary of units outstanding at December 31, 2002 follows:
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- AIM V.I. CAPITAL APPRECIATION Currently payable annuity contracts: $ 430,696 Contracts in accumulation period: Non-Qualified V 7,141.870 $ 6.85 48,922 Non-Qualified V (0.75) 117,784.846 6.98 822,138 Non-Qualified XII 756.497 6.96 5,265 Non-Qualified XIII 501,618.196 7.37 3,696,926 Non-Qualified XIV 657,037.276 7.27 4,776,661 Non-Qualified XV 329,702.890 7.23 2,383,752 Non-Qualified XVI 224,043.766 4.33 970,110 Non-Qualified XVII 580.253 7.07 4,102 Non-Qualified XVIII 158,970.137 4.28 680,392 Non-Qualified XIX 235,584.768 4.30 1,013,015 ------------- ------------- 2,233,220.499 $ 14,831,979 ============= ============= AIM V.I. CORE EQUITY Currently payable annuity contracts: $ 3,159,134 Contracts in accumulation period: Non-Qualified V 41,012.179 $ 6.28 257,556 Non-Qualified V (0.75) 100,702.786 6.40 644,498 Non-Qualified IX 2,325.916 6.22 14,467 Non-Qualified XII 866.371 6.39 5,536 Non-Qualified XIII 948,642.123 7.67 7,276,085 Non-Qualified XIV 1,538,823.386 7.57 11,648,893 Non-Qualified XV 507,916.587 7.52 3,819,533 Non-Qualified XVI 233,331.906 5.20 1,213,326 Non-Qualified XVIII 105,523.130 5.14 542,389 Non-Qualified XIX 263,337.768 5.16 1,358,823 ------------- ------------- 3,742,482.152 $ 29,940,240 ============= ============= AIM V.I. GOVERNMENT SECURITIES Contracts in accumulation period: Non-Qualified XIII 590,033.975 $ 12.36 $ 7,292,820 Non-Qualified XIV 768,636.365 12.26 9,423,482 Non-Qualified XV 283,516.080 12.21 3,461,731 Non-Qualified XVI 175,024.768 11.77 2,060,042 Non-Qualified XVIII 61,958.666 11.65 721,818 Non-Qualified XIX 259,823.060 11.69 3,037,332 ------------- ------------- 2,138,992.914 $ 25,997,225 ============= ============ AIM V.I. GROWTH Currently payable annuity contracts: $ 651,633 Contracts in accumulation period: Non-Qualified V 17,754.161 $ 4.22 74,923 Non-Qualified V (0.75) 108,862.037 4.30 468,107
S-63
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- AIM V.I. GROWTH (CONTINUED) Non-Qualified XII 1,037.684 $ 4.29 $ 4,452 Non-Qualified XIII 753,288.092 5.09 3,834,236 Non-Qualified XIV 1,178,462.059 5.02 5,915,880 Non-Qualified XV 372,278.087 4.99 1,857,668 Non-Qualified XVI 164,058.196 3.37 552,876 Non-Qualified XVIII 111,965.966 3.34 373,966 Non-Qualified XIX 361,313.751 3.35 1,210,401 ------------- ------------- 3,069,390.342 $ 14,945,690 ============= ============= AIM V.I. PREMIER EQUITY Currently payable annuity contracts: $ 2,348,435 Contracts in accumulation period: Non-Qualified V 17,054.546 $ 5.77 98,405 Non-Qualified V (0.75) 97,537.305 5.88 573,519 Non-Qualified IX 50.112 5.71 286 Non-Qualified XII 1,139.580 5.86 6,678 Non-Qualified XIII 1,508,348.111 6.91 10,422,685 Non-Qualified XIV 2,427,698.196 6.82 16,556,902 Non-Qualified XV 868,527.131 6.77 5,879,929 Non-Qualified XVI 341,816.310 5.21 1,780,863 Non-Qualified XVII 476.985 6.02 2,871 Non-Qualified XVIII 143,877.432 5.16 742,408 Non-Qualified XIX 562,473.154 5.18 2,913,611 ------------- ------------- 5,968,998.862 $ 41,326,592 ============= ============= ALGER AMERICAN BALANCED Contracts in accumulation period: Non-Qualified VII 120,391.551 $ 21.40 $ 2,576,379 ------------- ------------- 120,391.551 $ 2,576,379 ============= ============= ALGER AMERICAN INCOME & GROWTH Contracts in accumulation period: Non-Qualified VII 356,258.045 $ 17.31 $ 6,166,827 ------------- ------------- 356,258.045 $ 6,166,827 ============= ============= ALGER AMERICAN LEVERAGED ALLCAP Contracts in accumulation period: Non-Qualified VII 327,132.695 $ 17.49 $ 5,721,551 Non-Qualified VIII 167.794 12.87 2,160 ------------- ------------- 327,300.489 $ 5,723,711 ============= ============= ALLIANCE GROWTH AND INCOME Contracts in accumulation period: Non-Qualified XIII 826,949.294 $ 7.77 $ 6,425,396 Non-Qualified XIV 882,219.483 7.71 6,801,912
S-64
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ALLIANCE GROWTH AND INCOME (CONTINUED) Non-Qualified IX 370.309 $ 4.18 $ 1,548 Non-Qualified XV 356,243.025 7.68 2,735,946 Non-Qualified XVI 380,962.591 7.89 3,005,795 Non-Qualified XVIII 84,109.046 7.81 656,892 Non-Qualified XIX 324,306.091 7.84 2,542,560 ------------- ------------- 2,854,789.530 $ 22,168,501 ============= ============= ALLIANCE PREMIER GROWTH Contracts in accumulation period: Non-Qualified XIII 366,995.250 $ 4.29 $ 1,574,410 Non-Qualified XIV 306,904.215 4.26 1,307,412 Non-Qualified XV 138,234.900 4.24 586,116 Non-Qualified XVI 201,714.666 4.57 921,836 Non-Qualified XVIII 83,613.201 4.52 377,932 Non-Qualified XIX 235,804.351 4.54 1,070,552 ------------- ------------- 1,333,266.583 $ 5,838,258 ============= ============= ALLIANCE QUASAR Contracts in accumulation period: Non-Qualified XIII 42,353.535 $ 5.55 $ 235,062 Non-Qualified XIV 30,165.049 5.51 166,209 Non-Qualified XV 10,982.404 5.49 60,293 Non-Qualified XVI 13,238.968 4.97 65,798 Non-Qualified XVIII 5,280.521 4.91 25,927 Non-Qualified XIX 26,431.352 4.93 130,307 ------------- ------------- 128,451.829 $ 683,596 ============= ============= AMERICAN CENTURY(R) VP BALANCED Contracts in accumulation period: Non-Qualified VII 96,051.803 $ 15.44 $ 1,483,040 ------------- ------------- 96,051.803 $ 1,483,040 ============= ============= AMERICAN CENTURY(R) VP INTERNATIONAL Contracts in accumulation period: Non-Qualified VII 130,913.859 $ 11.74 $ 1,536,929 Non-Qualified VIII 181.976 10.68 1,944 ------------- ------------- 131,095.835 $ 1,538,873 ============= ============= BRINSON SERIES TACTICAL ALLOCATION Contracts in accumulation period: Non-Qualified XIII 198,037.849 $ 6.83 $ 1,352,599 Non-Qualified XIV 964,639.557 6.75 6,511,317 Non-Qualified XV 94,577.105 6.71 634,612 Non-Qualified XVI 81,758.493 6.26 511,808 Non-Qualified XVIII 40,585.885 6.19 251,227 Non-Qualified XIX 74,438.589 6.22 463,008 ------------- ------------- 1,454,037.478 $ 9,724,571 ============= =============
S-65
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- CALVERT SOCIAL BALANCED Contracts in accumulation period: Non-Qualified V 5,689.041 $ 17.26 $ 98,193 Non-Qualified V (0.75) 15,357.764 17.86 274,290 Non-Qualified VII 79,520.147 9.61 764,189 Non-Qualified VIII 65,982.625 9.68 638,712 ------------- ------------- 166,549.577 $ 1,775,384 ============= ============= FEDERATED AMERICAN LEADERS Currently payable annuity contracts: $ 98,634 Contracts in accumulation period: Non-Qualified VII 2,712,272.577 $ 18.56 50,339,779 Non-Qualified VIII 7,506.773 13.39 100,516 ------------- ------------- 2,719,779.350 $ 50,538,929 ============= ============= FEDERATED EQUITY INCOME Currently payable annuity contracts: $ 88,391 Contracts in accumulation period: Non-Qualified VII 1,035,144.898 $ 9.83 10,175,474 ------------- ------------- 1,035,144.898 $ 10,263,865 ============= ============= FEDERATED FUND FOR US GOVERNMENT SECURITIES Contracts in accumulation period: Non-Qualified VII 825,678.064 $ 15.35 $ 12,674,158 ------------- ------------- 825,678.064 $ 12,674,158 ============= ============= FEDERATED GROWTH STRATEGIES Contracts in accumulation period: Non-Qualified VII 764,148.738 $ 13.63 $ 10,415,347 ------------- ------------- 764,148.738 $ 10,415,347 ============= ============= FEDERATED HIGH INCOME BOND Currently payable annuity contracts: $ 18,044 Contracts in accumulation period: Non-Qualified VII 1,236,035.841 $ 13.48 16,661,763 Non-Qualified VIII 299.808 11.49 3,445 ------------- ------------- 1,236,335.649 $ 16,683,252 ============= ============= FEDERATED INTERNATIONAL EQUITY Currently payable annuity contracts: $ 44,915 Contracts in accumulation period: Non-Qualified VII 550,927.936 $ 10.85 5,977,568 Non-Qualified VIII 125.653 10.03 1,260 ------------- ------------- 551,053.589 $ 6,023,743 ============= =============
S-66
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ FEDERATED PRIME MONEY Contracts in accumulation period: Non-Qualified VII 582,531.577 $ 12.68 $ 7,386,500 -------------- ------------- 582,531.577 $ 7,386,500 ============== ============= FEDERATED UTILITY Currently payable annuity contracts: $ 25,722 Contracts in accumulation period: Non-Qualified VII 652,466.859 $ 10.72 6,994,445 Non-Qualified VIII 64.474 8.94 576 -------------- ------------- 652,531.333 $ 7,020,743 ============== ============= FIDELITY(R) VIP EQUITY-INCOME Contracts in accumulation period: Non-Qualified V 362,704.384 $ 15.06 $ 5,462,328 Non-Qualified V (0.75) 686,999.409 15.59 10,710,321 Non-Qualified VII 3,974,733.140 17.95 71,346,460 Non-Qualified VIII 820,645.762 12.93 10,610,950 Non-Qualified IX 13,069.093 14.85 194,076 Non-Qualified X 28,494.416 15.06 429,126 Non-Qualified XII 8,583.989 8.90 76,398 Non-Qualified XIII 1,734,825.032 8.68 15,058,281 Non-Qualified XIV 2,273,946.636 8.56 19,464,983 Non-Qualified XV 665,353.799 8.51 5,662,161 Non-Qualified XVI 416,662.296 8.17 3,404,131 Non-Qualified XVIII 51,426.657 8.08 415,527 Non-Qualified XIX 442,137.016 8.11 3,585,731 -------------- ------------- 11,479,581.629 $ 146,420,473 ============== ============= FIDELITY(R) VIP GROWTH Contracts in accumulation period: Non-Qualified V 424,020.409 $ 12.83 $ 5,440,182 Non-Qualified V (0.75) 733,179.043 13.28 9,736,618 Non-Qualified VII 2,620,006.788 17.54 45,954,919 Non-Qualified VIII 587,469.554 11.66 6,849,895 Non-Qualified IX 9,053.810 12.65 114,531 Non-Qualified X 16,200.041 12.83 207,847 Non-Qualified XII 12,915.092 8.02 103,579 Non-Qualified XIII 1,714,740.719 6.30 10,802,867 Non-Qualified XIV 1,513,916.283 6.23 9,431,698 Non-Qualified XV 531,767.553 6.20 3,296,959 Non-Qualified XVI 678,024.059 4.78 3,240,955 Non-Qualified XVII 336.432 13.23 4,451 Non-Qualified XVIII 101,766.189 4.73 481,354 Non-Qualified XIX 529,193.848 4.75 2,513,671 -------------- ------------- 9,472,589.820 $ 98,179,526 ============== =============
S-67
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ FIDELITY(R) VIP HIGH INCOME Currently payable annuity contracts: $ 1,217,405 Contracts in accumulation period: Non-Qualified VII 1,611,770.135 $ 9.53 15,360,169 Non-Qualified VIII 389,529.941 8.59 3,346,062 Non-Qualified XIII 893,039.712 6.59 5,885,132 Non-Qualified XIV 908,261.072 6.51 5,912,780 Non-Qualified XV 390,975.879 6.46 2,525,704 Non-Qualified XVI 102,212.069 7.51 767,613 Non-Qualified XVIII 55,374.736 7.43 411,434 Non-Qualified XIX 138,088.943 7.46 1,030,144 -------------- ------------- 4,489,252.487 $ 36,456,443 ============== ============= FIDELITY(R) VIP OVERSEAS Contracts in accumulation period: Non-Qualified V 41,583.740 $ 9.51 $ 395,461 Non-Qualified V (0.75) 183,724.044 9.84 1,807,845 Non-Qualified VII 392,647.462 10.42 4,091,387 Non-Qualified VIII 35,340.601 8.88 313,825 Non-Qualified IX 837.068 9.37 7,843 Non-Qualified XII 60.449 6.85 414 -------------- ------------- 654,193.364 $ 6,616,775 ============== ============= FIDELITY(R) VIP ASSET MANAGER(SM) Contracts in accumulation period: Non-Qualified VII 593,741.050 $ 15.71 $ 9,327,672 Non-Qualified VIII 133,917.999 13.13 1,758,343 -------------- ------------- 727,659.049 $ 11,086,015 ============== ============= FIDELITY(R) VIP CONTRAFUND(R) Contracts in accumulation period: Non-Qualified V 368,355.545 $ 17.33 $ 6,383,602 Non-Qualified V (0.75) 690,400.658 17.93 12,378,884 Non-Qualified VII 3,334,536.314 19.08 63,622,953 Non-Qualified VIII 590,671.796 15.35 9,066,812 Non-Qualified IX 24,256.016 17.08 414,293 Non-Qualified X 18,503.380 17.33 320,664 Non-Qualified XII 19,242.185 10.00 192,422 Non-Qualified XIII 2,018,021.570 9.36 18,888,682 Non-Qualified XIV 2,369,433.895 9.23 21,869,875 Non-Qualified XV 842,282.760 9.17 7,723,733 Non-Qualified XVI 267,452.170 7.29 1,949,726 Non-Qualified XVII 5,100.638 19.81 101,044 Non-Qualified XVIII 79,561.408 7.22 574,433 Non-Qualified XIX 281,388.712 7.24 2,037,254 Non-Qualified XX 2,694.843 17.33 46,702 -------------- ------------- 10,911,901.890 $ 145,571,079 ============== =============
S-68
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ FIDELITY(R) VIP INDEX 500 Contracts in accumulation period: Non-Qualified VII 3,363,853.383 $ 16.04 $ 53,956,208 Non-Qualified VIII 761,472.493 13.44 10,234,190 -------------- ------------- 4,125,325.876 $ 64,190,398 ============== ============= FIDELITY(R) VIP INVESTMENT GRADE BOND Contracts in accumulation period: Non-Qualified VII 186,316.058 $ 15.49 $ 2,886,036 Non-Qualified VIII 281.071 15.17 4,264 -------------- ------------- 186,597.129 $ 2,890,300 ============== ============= FRANKLIN SMALL CAP VALUE SECURITIES Contracts in accumulation period: Non-Qualified V 19,632.225 $ 9.22 $ 181,009 Non-Qualified V (0.75) 19,783.954 9.29 183,793 -------------- ------------- 39,416.179 $ 364,802 ============== ============= ING GET FUND - SERIES D Contracts in accumulation period: Non-Qualified V 1,438,091.944 $ 10.15 $ 14,596,633 Non-Qualified V (0.75) 903,871.339 10.37 9,373,146 Non-Qualified VII 3,071,344.110 10.08 30,959,149 Non-Qualified VIII 1,556,538.084 10.16 15,814,427 Non-Qualified IX 306.257 10.04 3,075 Non-Qualified X 134,431.816 10.15 1,364,483 Non-Qualified XIII 1,316,941.837 10.28 13,538,162 Non-Qualified XIV 1,414,759.922 10.15 14,359,813 Non-Qualified XV 365,594.021 10.09 3,688,844 -------------- ------------- 10,201,879.330 $ 103,697,732 ============== ============= ING GET FUND - SERIES E Contracts in accumulation period: Non-Qualified V 1,401,276.150 $ 10.32 $ 14,461,170 Non-Qualified V (0.75) 181,392.356 10.51 1,906,434 Non-Qualified VII 2,888,646.116 10.18 29,406,417 Non-Qualified VIII 370,683.850 10.23 3,792,096 Non-Qualified X 106,195.475 10.33 1,096,999 Non-Qualified XIII 8,419,319.065 10.34 87,055,759 Non-Qualified XIV 7,556,647.083 10.23 77,304,500 Non-Qualified XV 6,028,823.299 10.18 61,373,421 -------------- ------------- 26,952,983.394 $ 276,396,796 ============== ============= ING GET FUND - SERIES G Contracts in accumulation period: Non-Qualified V 155,561.048 $ 10.24 $ 1,592,945 Non-Qualified V (0.75) 160,536.151 10.41 1,671,181
S-69
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING GET FUND - SERIES G (CONTINUED) Non-Qualified VII 2,096,429.634 $ 10.11 $ 21,194,904 Non-Qualified VIII 268,123.792 10.16 2,724,138 Non-Qualified X 11,531.076 10.25 118,194 Non-Qualified XIII 4,441,901.240 10.26 45,573,907 Non-Qualified XIV 6,066,389.974 10.16 61,634,522 Non-Qualified XV 2,904,738.963 10.11 29,366,911 -------------- ------------- 16,105,211.878 $ 163,876,702 ============== ============= ING GET FUND - SERIES H Contracts in accumulation period: Non-Qualified V 88,397.575 $ 10.31 $ 911,379 Non-Qualified V (0.75) 49,236.815 10.46 515,017 Non-Qualified VII 1,241,029.239 10.18 12,633,678 Non-Qualified VIII 98,421.437 10.23 1,006,851 Non-Qualified IX 430.483 10.23 4,404 Non-Qualified X 989.734 10.31 10,204 Non-Qualified XIII 4,103,205.698 10.32 42,345,083 Non-Qualified XIV 4,210,476.009 10.23 43,073,170 Non-Qualified XV 2,073,012.107 10.18 21,103,263 -------------- ------------- 11,865,199.097 $ 121,603,049 ============== ============= ING GET FUND - SERIES I Contracts in accumulation period: Non-Qualified VII 346,004.672 $ 10.10 $ 3,494,647 Non-Qualified VIII 27,192.295 10.15 276,002 Non-Qualified XIII 2,619,267.030 10.23 26,795,102 Non-Qualified XIV 3,163,705.087 10.15 32,111,607 Non-Qualified XV 2,118,944.962 10.10 21,401,344 -------------- ------------- 8,275,114.046 $ 84,078,702 ============== ============= ING GET FUND - SERIES J Contracts in accumulation period: Non-Qualified VII 197,504.225 $ 10.05 $ 1,984,917 Non-Qualified VIII 36,671.736 10.09 370,018 Non-Qualified XIII 1,932,011.749 10.17 19,648,559 Non-Qualified XIV 3,119,385.286 10.09 31,474,598 Non-Qualified XV 1,827,477.880 10.05 18,366,153 -------------- ------------- 7,113,050.876 $ 71,844,245 ============== ============= ING GET FUND - SERIES K Contracts in accumulation period: Non-Qualified VII 73,297.874 $ 10.13 $ 742,507 Non-Qualified VIII 4,919.630 10.17 50,033 Non-Qualified XIII 1,382,151.705 10.24 14,153,233 Non-Qualified XIV 1,605,395.953 10.17 16,326,877 Non-Qualified XV 869,098.605 10.13 8,803,969 Non-Qualified XVI 1,584,792.554 10.09 15,990,557
S-70
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING GET FUND - SERIES K (CONTINUED) Non-Qualified XVIII 1,116,196.526 $ 9.99 $ 11,150,803 Non-Qualified XIX 1,401,405.466 10.02 14,042,083 -------------- ------------- 8,037,258.313 $ 81,260,062 ============== ============= ING GET FUND - SERIES L Contracts in accumulation period: Non-Qualified VII 92,268.385 $ 10.00 $ 922,684 Non-Qualified VIII 28,661.448 10.03 287,474 Non-Qualified XIII 1,400,377.299 10.09 14,129,807 Non-Qualified XIV 882,418.325 10.03 8,850,656 Non-Qualified XV 785,079.376 10.00 7,850,794 Non-Qualified XVI 1,879,134.201 9.99 18,772,551 Non-Qualified XVIII 1,020,237.568 9.89 10,090,150 Non-Qualified XIX 1,446,615.975 9.92 14,350,430 -------------- ------------- 7,534,792.577 $ 75,254,546 ============== ============= ING GET FUND - SERIES M Contracts in accumulation period: Non-Qualified VII 186,412.625 $ 10.00 $ 1,864,126 Non-Qualified VIII 17,605.832 10.02 176,410 Non-Qualified XIII 1,492,510.501 10.08 15,044,506 Non-Qualified XIV 1,434,017.677 10.02 14,368,857 Non-Qualified XV 705,761.298 10.00 7,057,613 Non-Qualified XVI 3,827,410.385 9.99 38,235,830 Non-Qualified XVIII 1,775,880.501 9.91 17,598,976 Non-Qualified XIX 2,118,307.184 9.93 21,034,790 -------------- ------------- 11,557,906.003 $ 115,381,108 ============== ============= ING GET FUND - SERIES N Contracts in accumulation period: Non-Qualified VII 459,369.278 $ 10.05 $ 4,616,661 Non-Qualified VIII 2,237.858 10.07 22,535 Non-Qualified XIII 1,205,119.919 10.12 12,195,814 Non-Qualified XIV 848,334.273 10.07 8,542,726 Non-Qualified XV 533,675.137 10.05 5,363,435 Non-Qualified XVI 3,034,794.505 10.04 30,469,337 Non-Qualified XVIII 1,030,556.991 9.97 10,274,653 Non-Qualified XIX 1,867,681.749 9.99 18,658,141 -------------- ------------- 8,981,769.710 $ 90,143,302 ============== ============= ING GET FUND - SERIES P Contracts in accumulation period: Non-Qualified VII 515,693.266 $ 9.95 $ 5,131,148 Non-Qualified VIII 54,056.942 9.97 538,948 Non-Qualified XIII 988,745.270 10.01 9,897,340 Non-Qualified XIV 597,369.796 9.97 5,955,777 Non-Qualified XV 401,832.774 9.95 3,998,236
S-71
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING GET FUND - SERIES P (CONTINUED) Non-Qualified XVI 2,173,193.416 $ 9.95 $ 21,623,274 Non-Qualified XVIII 1,588,963.354 9.89 15,714,848 Non-Qualified XIX 1,359,653.242 9.91 13,474,164 -------------- ------------- 7,679,508.060 $ 76,333,735 ============== ============= ING GET FUND - SERIES Q Contracts in accumulation period: Non-Qualified VII 255,562.411 $ 10.05 $ 2,568,402 Non-Qualified VIII 28,688.221 10.07 288,890 Non-Qualified XIII 831,795.799 10.10 8,401,138 Non-Qualified XIV 528,587.177 10.07 5,322,873 Non-Qualified XV 197,153.922 10.05 1,981,397 Non-Qualified XVI 1,577,133.032 10.04 15,834,416 Non-Qualified XVIII 560,993.401 10.00 5,609,934 Non-Qualified XIX 1,480,370.543 10.01 14,818,509 -------------- ------------- 5,460,284.506 $ 54,825,559 ============== ============= ING GET FUND - SERIES R Contracts in accumulation period: Non-Qualified VII 116,201.136 $ 10.10 $ 1,173,631 Non-Qualified VIII 31,906.082 10.12 322,890 Non-Qualified XIII 874,285.963 10.14 8,865,260 Non-Qualified XIV 365,660.994 10.12 3,700,489 Non-Qualified XV 101,169.656 10.10 1,021,814 Non-Qualified XVI 1,142,979.457 10.10 11,544,093 Non-Qualified XVIII 364,760.117 10.06 3,669,487 Non-Qualified XIX 1,315,350.494 10.08 13,258,733 -------------- ------------- 4,312,313.899 $ 43,556,397 ============== ============= ING GET FUND - SERIES S Contracts in accumulation period: Non-Qualified V 25,318.365 $ 10.06 $ 254,703 Non-Qualified V (0.75) 363,762.474 10.08 3,666,726 Non-Qualified VII 443,770.184 10.04 4,455,453 Non-Qualified VIII 146,702.345 10.05 1,474,359 Non-Qualified XII 1,863.085 10.08 18,780 Non-Qualified XIII 666,365.791 10.07 6,710,304 Non-Qualified XIV 430,412.940 10.05 4,325,650 Non-Qualified XV 181,463.051 10.04 1,821,889 Non-Qualified XVI 1,153,141.624 10.04 11,577,542 Non-Qualified XVIII 533,195.480 10.01 5,337,287 Non-Qualified XIX 1,388,294.852 10.02 13,910,714 -------------- ------------- 5,334,290.191 $ 53,553,407 ============== =============
S-72
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING GET FUND - SERIES T Contracts in accumulation period: Non-Qualified VII 269,746.236 $ 10.08 $ 2,719,042 Non-Qualified VIII 34,715.641 10.08 349,934 Non-Qualified XIII 526,476.619 10.09 5,312,149 Non-Qualified XIV 378,188.886 10.08 3,812,144 Non-Qualified XV 121,313.226 10.08 1,222,837 Non-Qualified XVI 1,082,294.692 10.08 10,909,530 Non-Qualified XVIII 285,984.756 10.06 2,877,007 Non-Qualified XIX 1,209,121.268 10.07 12,175,851 ------------- ------------- 3,907,841.324 $ 39,378,494 ============= ============= ING GET FUND - SERIES U Contracts in accumulation period: Non-Qualified VII 6,141.747 $ 10.00 $ 61,417 Non-Qualified XIII 9,296.975 10.00 92,970 Non-Qualified XIV 13,986.861 10.00 139,869 Non-Qualified XIX 20,852.140 9.99 208,313 ------------- ------------- 50,277.723 $ 502,569 ============= ============= ING VP BALANCED Currently payable annuity contracts: $ 35,523,696 Contracts in accumulation period: Non-Qualified V 1,483,863.331 $ 20.25 30,048,232 Non-Qualified V (0.75) 986,778.536 20.95 20,673,010 Non-Qualified VI 20,703.131 17.07 353,402 Non-Qualified VII 1,497,149.388 19.73 29,538,757 Non-Qualified VIII 342,040.301 14.04 4,802,246 Non-Qualified IX 14,551.892 19.96 290,456 Non-Qualified X 226,170.671 20.53 4,643,284 Non-Qualified XI 2,742.037 17.31 47,465 Non-Qualified XII 4,113.357 9.93 40,846 Non-Qualified XIII 993,956.078 9.66 9,601,616 Non-Qualified XIV 701,902.194 9.53 6,689,128 Non-Qualified XV 324,405.934 9.46 3,068,880 Non-Qualified XVI 241,434.783 7.95 1,919,407 Non-Qualified XVII 32.139 26.80 861 Non-Qualified XVIII 77,191.932 7.87 607,501 Non-Qualified XIX 128,993.349 7.90 1,019,047 ------------- ------------- 7,046,029.053 $ 148,867,834 ============= ============= ING VP BOND Currently payable annuity contracts: $ 14,449,620 Contracts in accumulation period: Non-Qualified V 807,470.040 $ 17.40 14,049,979 Non-Qualified V (0.75) 1,401,270.288 18.01 25,236,878 Non-Qualified VI 53,398.857 15.94 851,178 Non-Qualified VII 2,475,953.642 16.96 41,992,174
S-73
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING VP BOND (CONTINUED) Non-Qualified VIII 624,874.822 $ 14.52 $ 9,073,182 Non-Qualified IX 13,059.853 17.16 224,107 Non-Qualified X 332,174.406 17.55 5,829,661 Non-Qualified XI 1,199.932 16.08 19,295 Non-Qualified XII 2,108.816 12.89 27,183 Non-Qualified XIII 1,452,812.389 12.73 18,494,302 Non-Qualified XIV 1,436,808.048 12.56 18,046,309 Non-Qualified XV 534,744.241 12.48 6,673,608 Non-Qualified XVI 473,229.681 11.98 5,669,292 Non-Qualified XVIII 72,408.196 11.86 858,761 Non-Qualified XIX 257,779.393 11.90 3,067,575 -------------- ------------- 9,939,292.604 $ 164,563,104 ============== ============= ING VP MONEY MARKET Currently payable annuity contracts: $ 9,973,094 Contracts in accumulation period: Non-Qualified V 1,044,246.011 $ 13.95 14,567,232 Non-Qualified V (0.75) 2,039,090.716 14.44 29,444,470 Non-Qualified VI 24,147.002 13.66 329,848 Non-Qualified VII 6,600,977.927 13.75 90,763,446 Non-Qualified VIII 1,031,857.646 12.51 12,908,539 Non-Qualified IX 8,794.115 13.76 121,007 Non-Qualified X 340,943.431 13.95 4,756,161 Non-Qualified XII 16,459.213 11.70 192,573 Non-Qualified XIII 3,154,101.390 11.59 36,556,035 Non-Qualified XIV 2,724,200.692 11.44 31,164,856 Non-Qualified XV 1,186,507.736 11.36 13,478,728 Non-Qualified XVI 727,898.933 10.40 7,570,149 Non-Qualified XVIII 207,159.936 10.30 2,133,747 Non-Qualified XIX 832,127.163 10.33 8,595,874 -------------- ------------- 19,938,511.911 $ 262,555,759 ============== ============= ING VP NATURAL RESOURCES Contracts in accumulation period: Non-Qualified V 38,147.559 $ 11.66 $ 444,801 Non-Qualified V (0.75) 20,936.663 12.07 252,706 Non-Qualified VII 74,794.455 11.48 858,640 Non-Qualified IX 32.032 11.50 368 Non-Qualified X 882.195 11.66 10,286 -------------- ------------- 134,792.904 $ 1,566,801 ============== ============= ING VP STRATEGIC ALLOCATION BALANCED Currently payable annuity contracts: $ 1,493,877 Contracts in accumulation period: Non-Qualified V 89,223.696 $ 13.37 1,192,921 Non-Qualified V (0.75) 145,424.762 13.84 2,012,679 Non-Qualified VII 589,474.191 13.21 7,786,954
S-74
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING VP STRATEGIC ALLOCATION BALANCED (CONTINUED) Non-Qualified VIII 139,965.786 $ 12.03 $ 1,683,788 Non-Qualified X 9,897.430 13.63 134,902 Non-Qualified XVII 2,852.790 13.63 38,884 ------------- ------------- 976,838.655 $ 14,344,005 ============= ============= ING VP STRATEGIC ALLOCATION GROWTH Currently payable annuity contracts: $ 493,542 Contracts in accumulation period: Non-Qualified V 72,637.199 $ 13.07 949,368 Non-Qualified V (0.75) 151,275.388 13.52 2,045,243 Non-Qualified VII 493,886.930 12.91 6,376,080 Non-Qualified VIII 97,671.315 11.55 1,128,104 Non-Qualified IX 670.338 12.88 8,634 Non-Qualified X 19,199.436 13.33 255,928 ------------- ------------- 835,340.606 $ 11,256,899 ============= ============= ING VP STRATEGIC ALLOCATION INCOME Currently payable annuity contracts: $ 3,142,767 Contracts in accumulation period: Non-Qualified V 88,782.076 $ 14.02 1,244,725 Non-Qualified V (0.75) 43,244.558 14.51 627,479 Non-Qualified VII 798,445.513 13.86 11,066,455 Non-Qualified VIII 283,367.875 12.99 3,680,949 Non-Qualified X 22,791.065 14.30 325,912 ------------- ------------- 1,236,631.087 $ 20,088,287 ============= ============= ING ALGER AGGRESSIVE GROWTH Contracts in accumulation period: Non-Qualified V 69.605 $ 7.31 $ 509 Non-Qualified V (0.75) 24,272.518 7.34 178,160 ------------- ------------- 24,342.123 $ 178,669 ============= ============= ING ALGER GROWTH Contracts in accumulation period: Non-Qualified V 169.817 $ 7.24 $ 1,229 Non-Qualified V (0.75) 1,127.269 7.26 8,184 ------------- ------------- 1,297.086 $ 9,413 ============= ============= ING AMERICAN CENTURY SMALL CAP VALUE Contracts in accumulation period: Non-Qualified V 6,554.415 $ 9.30 $ 60,956 Non-Qualified V (0.75) 9,661.639 8.11 78,356 Non-Qualified XX 3,605.133 9.30 33,528 ------------- ------------- 19,821.187 $ 172,840 ============= =============
S-75
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING BARON SMALL CAP GROWTH Contracts in accumulation period: Non-Qualified V 6,056.996 $ 9.68 $ 58,632 Non-Qualified V (0.75) 13,543.464 8.72 118,099 Non-Qualified XX 1,709.418 9.68 16,547 ------------- ------------- 21,309.878 $ 193,278 ============= ============= ING GOLDMAN SACHS(R) CAPITAL GROWTH Contracts in accumulation period: Non-Qualified V (0.75) 1,589.626 $ 8.07 $ 12,828 Non-Qualified XII 652.397 8.07 5,265 ------------- ------------- 2,242.023 $ 18,093 ============= ============= ING JPMORGAN FLEMING INTERNATIONAL Currently payable annuity contracts: $ 725,145 Contracts in accumulation period: Non-Qualified V 216,774.890 $ 15.27 3,310,153 Non-Qualified V (0.75) 200,628.910 15.80 3,169,937 Non-Qualified VII 191,333.958 8.39 1,605,292 Non-Qualified VIII 68,657.317 8.45 580,154 Non-Qualified IX 3,903.746 15.05 58,751 Non-Qualified X 1,614.188 15.27 24,649 Non-Qualified XIII 868,695.784 6.79 5,898,444 Non-Qualified XIV 567,196.378 6.70 3,800,216 Non-Qualified XV 399,227.648 6.65 2,654,864 Non-Qualified XVI 289,603.614 5.68 1,644,949 Non-Qualified XVIII 10,991.066 5.62 61,770 Non-Qualified XIX 90,376.964 5.64 509,726 ------------- ------------- 2,909,004.463 $ 24,044,050 ============= ============= ING JPMORGAN MID CAP VALUE Contracts in accumulation period: Non-Qualified V 525.287 $ 9.17 $ 4,817 Non-Qualified V (0.75) 8,924.783 9.20 82,108 ------------- ------------- 9,450.070 $ 86,925 ============= ============= ING MFS CAPITAL OPPORTUNITIES Currently payable annuity contracts: $ 2,524,031 Contracts in accumulation period: Non-Qualified V 249,445.381 $ 18.73 4,672,112 Non-Qualified V (0.75) 180,680.003 19.38 3,501,578 Non-Qualified VII 846,006.622 8.84 7,478,699 Non-Qualified VIII 243,400.894 8.91 2,168,702 Non-Qualified IX 3,746.424 18.46 69,159 Non-Qualified X 9,460.209 18.73 177,190 Non-Qualified XII 268.795 7.61 2,046 Non-Qualified XIII 760,838.627 7.23 5,500,863 Non-Qualified XIV 775,399.104 7.14 5,536,350
S-76
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING MFS CAPITAL OPPORTUNITIES (CONTINUED) Non-Qualified XV 201,250.408 $ 7.09 $ 1,426,865 Non-Qualified XVI 288,029.971 4.49 1,293,255 Non-Qualified XVII 373.914 20.94 7,830 Non-Qualified XVIII 114,024.815 4.44 506,270 Non-Qualified XIX 196,376.005 4.46 875,837 ------------- ------------- 3,869,301.172 $ 35,740,787 ============= ============= ING MFS GLOBAL GROWTH Contracts in accumulation period: Non-Qualified V 114.677 $ 8.32 $ 954 Non-Qualified V (0.75) 53.670 8.35 448 ------------- ------------- 168.347 $ 1,402 ============= ============= ING MFS RESEARCH Contracts in accumulation period: Non-Qualified V 300,020.696 $ 10.37 $ 3,111,215 Non-Qualified V (0.75) 226,503.440 10.73 2,430,382 Non-Qualified VI 15,681.895 8.78 137,687 Non-Qualified VII 2,125,862.279 10.20 21,683,795 Non-Qualified VIII 356,088.081 7.05 2,510,421 Non-Qualified IX 11,475.529 10.22 117,280 Non-Qualified X 121,245.136 10.37 1,257,312 Non-Qualified XI 1,302.911 8.78 11,440 Non-Qualified XIII 358,336.776 6.85 2,454,607 Non-Qualified XIV 619,493.614 6.76 4,187,777 Non-Qualified XV 179,084.071 6.72 1,203,445 Non-Qualified XVI 151,905.555 5.04 765,604 Non-Qualified XVIII 38,140.149 4.98 189,938 Non-Qualified XIX 121,587.728 5.00 607,939 ------------- ------------- 4,626,727.860 $ 40,668,842 ============= ============= ING OPCAP BALANCED VALUE Contracts in accumulation period: Non-Qualified V 1,003.030 $ 8.34 $ 8,365 Non-Qualified XII 821.815 8.37 6,879 ------------- ------------- 1,824.845 $ 15,244 ============= ============= ING PIMCO TOTAL RETURN Contracts in accumulation period: Non-Qualified V 25,282.897 $ 10.72 $ 271,033 Non-Qualified V (0.75) 69,178.707 10.75 743,671 Non-Qualified IX 17,742.566 10.70 189,845 Non-Qualified XII 676.412 10.75 7,271 Non-Qualified XX 5,896.283 10.72 63,208 ------------- ------------- 118,776.865 $ 1,275,028 ============= =============
S-77
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING SALOMON BROTHERS AGGRESSIVE GROWTH Currently payable annuity contracts: $ 992,675 Contracts in accumulation period: Non-Qualified V 353,914.829 $ 9.64 3,411,739 Non-Qualified V (0.75) 337,984.906 9.97 3,369,710 Non-Qualified VII 2,842,989.175 9.24 26,269,220 Non-Qualified VIII 393,580.696 6.31 2,483,494 Non-Qualified IX 6,741.530 9.50 64,045 Non-Qualified X 9,980.736 9.64 96,214 Non-Qualified XII 2,174.834 5.45 11,853 Non-Qualified XIII 688,421.610 5.19 3,572,908 Non-Qualified XIV 836,352.565 5.12 4,282,125 Non-Qualified XV 250,907.607 5.09 1,277,120 Non-Qualified XVI 108,235.112 3.58 387,482 Non-Qualified XVII 380.139 9.70 3,687 Non-Qualified XVIII 58,907.037 3.54 208,531 Non-Qualified XIX 162,542.564 3.55 577,026 ------------- ------------- 6,053,113.340 $ 47,007,829 ============= ============= ING SALOMON BROTHERS CAPITAL Contracts in accumulation period: Non-Qualified V (0.75) 654.575 $ 7.69 $ 5,034 ------------- ------------- 654.575 $ 5,034 ============= ============= ING SALOMON BROTHERS INVESTORS VALUE Contracts in accumulation period: Non-Qualified V 1,834.938 $ 7.82 $ 14,349 ------------- ------------- 1,834.938 $ 14,349 ============= ============= ING T. ROWE PRICE GROWTH EQUITY Currently payable annuity contracts: $ 2,345,236 Contracts in accumulation period: Non-Qualified V 192,649.640 $ 14.54 2,801,126 Non-Qualified V (0.75) 242,809.642 15.04 3,651,857 Non-Qualified VII 2,520,654.151 18.37 46,304,417 Non-Qualified VIII 234,754.639 13.36 3,136,322 Non-Qualified IX 5,444.907 14.33 78,026 Non-Qualified X 6,422.007 14.54 93,376 Non-Qualified XII 1,681.613 8.90 14,966 Non-Qualified XVII 1,011.823 17.06 17,262 ------------- ------------- 3,205,428.422 $ 58,442,588 ============= =============
S-78
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING UBS TACTICAL ASSET ALLOCATION Contracts in accumulation period: Non-Qualified V 53.433 $ 8.01 $ 428 -------------- ------------- 53.433 $ 428 ============== ============= ING VAN KAMPEN COMSTOCK Contracts in accumulation period: Non-Qualified V 12,024.347 $ 8.31 $ 99,922 Non-Qualified V (0.75) 26,015.863 8.34 216,972 Non-Qualified XII 250.818 8.33 2,089 -------------- ------------- 38,291.028 $ 318,983 ============== ============= ING VP GROWTH AND INCOME Currently payable annuity contracts: $ 86,525,598 Contracts in accumulation period: Non-Qualified 1964 958.685 $ 162.71 155,988 Non-Qualified V 4,278,161.961 15.16 64,856,935 Non-Qualified V (0.75) 7,378,211.382 15.69 115,764,137 Non-Qualified VI 1,177,819.575 14.23 16,760,373 Non-Qualified VII 4,488,575.286 15.02 67,418,401 Non-Qualified VIII 892,956.523 10.10 9,018,861 Non-Qualified IX 64,044.542 14.94 956,825 Non-Qualified X 1,943,270.653 15.37 29,868,070 Non-Qualified XI 30,716.608 14.43 443,241 Non-Qualified XII 36,379.347 6.32 229,917 Non-Qualified XIII 1,413,021.263 6.09 8,605,299 Non-Qualified XIV 1,439,278.744 6.01 8,650,065 Non-Qualified XV 490,461.079 5.97 2,928,053 Non-Qualified XVI 217,038.958 5.33 1,156,818 Non-Qualified XVII 205.889 152.21 31,338 Non-Qualified XVIII 77,342.947 5.28 408,371 Non-Qualified XIX 141,086.356 5.30 747,758 Non-Qualified XX 94,985.088 15.16 1,439,974 -------------- ------------- 24,164,514.886 $ 415,966,022 ============== ============= ING VP GROWTH Currently payable annuity contracts: $ 2,631,186 Contracts in accumulation period: Non-Qualified V 84,932.756 $ 10.49 890,945 Non-Qualified V (0.75) 558,745.766 10.80 6,034,454 Non-Qualified VII 573,852.673 10.40 5,968,068 Non-Qualified VIII 234,214.218 10.49 2,456,907 Non-Qualified IX 1,843.949 10.34 19,066 Non-Qualified XII 2,598.937 6.72 17,465 Non-Qualified XIII 744,202.893 6.22 4,628,942 Non-Qualified XIV 640,933.606 6.13 3,928,923
S-79
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING VP GROWTH (CONTINUED) Non-Qualified XV 122,600.479 $ 6.09 $ 746,637 Non-Qualified XVI 121,103.308 4.04 489,257 Non-Qualified XVIII 12,355.061 4.00 49,420 Non-Qualified XIX 105,967.306 4.01 424,929 -------------- ------------- 3,203,350.952 $ 28,286,199 ============== ============= ING VP INDEX PLUS LARGECAP Currently payable annuity contracts: $ 31,910,797 Contracts in accumulation period: Non-Qualified V 288,486.014 $ 13.63 3,932,064 Non-Qualified V (0.75) 999,688.403 14.07 14,065,616 Non-Qualified VII 1,883,337.515 13.49 25,406,223 Non-Qualified VIII 635,456.372 13.39 8,508,761 Non-Qualified IX 20,458.132 13.44 274,957 Non-Qualified XII 15,082.003 8.20 123,672 Non-Qualified XIII 3,628,670.916 7.87 28,557,640 Non-Qualified XIV 3,014,920.796 7.77 23,425,935 Non-Qualified XV 1,263,502.914 7.71 9,741,607 Non-Qualified XVI 675,425.261 5.93 4,005,272 Non-Qualified XVII 53.946 13.87 748 Non-Qualified XVIII 220,224.676 5.86 1,290,517 Non-Qualified XIX 539,612.055 5.88 3,172,919 -------------- ------------- 13,184,919.003 $ 154,416,728 ============== ============= ING VP INDEX PLUS MIDCAP Contracts in accumulation period: Non-Qualified V 138,190.533 $ 12.48 $ 1,724,618 Non-Qualified V (0.75) 757,291.244 12.78 9,678,182 Non-Qualified IX 10,079.041 12.33 124,275 Non-Qualified XII 18,708.753 13.31 249,014 Non-Qualified XVII 253.199 13.22 3,347 -------------- ------------- 924,522.770 $ 11,779,436 ============== ============= ING VP INDEX PLUS SMALLCAP Contracts in accumulation period: Non-Qualified V 128,310.022 $ 9.07 $ 1,163,772 Non-Qualified V (0.75) 328,141.058 9.28 3,045,149 Non-Qualified IX 6,481.411 8.96 58,073 Non-Qualified XII 753.745 9.99 7,530 -------------- ------------- 463,686.236 $ 4,274,524 ============== =============
S-80
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING VP INTERNATIONAL EQUITY PORTFOLIO - CLASS R Currently payable annuity contracts: $ 376,495 Contracts in accumulation period: Non-Qualified V 6,875.696 $ 6.25 42,973 Non-Qualified V (0.75) 59,835.340 6.40 382,946 Non-Qualified VII 98,804.174 6.20 612,586 Non-Qualified VIII 34,502.077 6.25 215,638 Non-Qualified XIII 273,415.239 5.93 1,621,352 Non-Qualified XIV 174,150.116 5.85 1,018,778 Non-Qualified XV 61,382.639 5.81 356,633 Non-Qualified XVI 71,157.557 4.74 337,287 Non-Qualified XVIII 5,585.598 4.69 26,196 Non-Qualified XIX 50,411.975 4.70 236,936 ------------- ------------- 836,120.411 $ 5,227,820 ============= ============= ING VP SMALL COMPANY Currently payable annuity contracts: $ 3,881,973 Contracts in accumulation period: Non-Qualified V 49,493.214 $ 14.46 715,672 Non-Qualified V (0.75) 362,103.959 14.88 5,388,107 Non-Qualified VII 1,032,724.107 14.33 14,798,936 Non-Qualified VIII 286,772.659 14.45 4,143,865 Non-Qualified IX 1,379.067 14.25 19,652 Non-Qualified XII 35,405.059 10.27 363,610 Non-Qualified XIII 1,077,682.721 10.04 10,819,935 Non-Qualified XIV 617,860.717 9.91 6,123,000 Non-Qualified XV 200,547.557 9.84 1,973,388 Non-Qualified XVI 339,071.983 7.16 2,427,755 Non-Qualified XVII 2,960.186 10.78 31,911 Non-Qualified XVIII 36,061.563 7.09 255,676 Non-Qualified XIX 170,804.473 7.11 1,214,420 ------------- ------------- 4,212,867.265 $ 52,157,900 ============= ============= ING VP TECHNOLOGY Contracts in accumulation period: Non-Qualified V 240,058.230 $ 2.57 $ 616,950 Non-Qualified V (0.75) 470,065.068 2.61 1,226,870 Non-Qualified VII 476,267.450 2.56 1,219,245 Non-Qualified VIII 61,729.892 2.57 158,646 Non-Qualified IX 17,615.456 2.55 44,919 Non-Qualified X 1,784.761 2.59 4,623 Non-Qualified XII 3,512.025 2.60 9,131 Non-Qualified XIII 588,646.420 2.59 1,524,594 Non-Qualified XIV 381,817.732 2.57 981,272 Non-Qualified XV 55,830.093 2.56 142,925 Non-Qualified XVI 125,466.581 2.67 334,996 Non-Qualified XVIII 22,239.898 2.65 58,936 Non-Qualified XIX 90,584.798 2.66 240,956 ------------- ------------- 2,535,618.404 $ 6,564,063 ============= =============
S-81
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING VP VALUE OPPORTUNITY Contracts in accumulation period: Non-Qualified V 66,506.128 $ 13.44 $ 893,842 Non-Qualified V (0.75) 246,272.709 13.84 3,408,414 Non-Qualified VII 760,213.853 13.32 10,126,049 Non-Qualified VIII 171,772.473 13.44 2,308,622 Non-Qualified IX 1,697.542 13.25 22,492 Non-Qualified XII 25,733.010 9.36 240,861 Non-Qualified XVII 68.291 10.32 705 ------------- ------------- 1,272,264.006 $ 17,000,985 ============= ============= ING VP EMERGING MARKETS Contracts in accumulation period: Non-Qualified VII 102,697.805 $ 6.32 $ 649,050 ------------- ------------- 102,697.805 $ 649,050 ============= ============= ING VP GROWTH OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 63,828.994 $ 6.02 $ 384,251 ------------- ------------- 63,828.994 $ 384,251 ============= ============= ING VP GROWTH OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 10,587.862 $ 5.43 $ 57,492 Non-Qualified XIV 2,346.431 5.40 12,671 Non-Qualified XV 1,383.401 5.38 7,443 Non-Qualified XVI 6,241.577 5.38 33,580 Non-Qualified XVIII 1,028.483 5.34 5,492 Non-Qualified XIX 1,596.215 5.35 8,540 ------------- ------------- 23,183.969 $ 125,218 ============= ============= ING VP INTERNATIONAL VALUE Contracts in accumulation period: Non-Qualified V 5,855.824 $ 8.83 $ 51,707 Non-Qualified V (0.75) 34,787.430 8.03 279,343 Non-Qualified IX 4,254.293 7.95 33,822 Non-Qualified XII 963.184 8.03 7,734 Non-Qualified XX 3,553.474 8.83 31,377 ------------- ------------- 49,414.205 $ 403,983 ============= ============= ING VP MAGNACAP - CLASS R Contracts in accumulation period: Non-Qualified V (0.75) 3,912.983 $ 6.85 $ 26,804 ------------- ------------- 3,912.983 $ 26,804 ============= =============
S-82
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ---------------------------------------------------- ING VP MAGNACAP - CLASS S Contracts in accumulation period: Non-Qualified XIII 35,550.671 $ 7.12 $ 253,121 Non-Qualified XIV 18,913.322 7.08 133,906 Non-Qualified XV 1,231.619 7.07 8,708 Non-Qualified XVI 7,235.436 7.06 51,082 Non-Qualified XVIII 3,338.428 7.01 23,402 Non-Qualified XIX 2,778.145 7.02 19,503 ----------- ------------- 69,047.621 $ 489,722 =========== ============= ING VP MIDCAP OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 31.666 $ 6.92 $ 219 Non-Qualified V (0.75) 10,442.470 6.97 72,784 Non-Qualified IX 449.133 6.89 3,095 ----------- ------------- 10,923.269 $ 76,098 =========== ============= ING VP MIDCAP OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 120,170.564 $ 6.21 $ 746,259 Non-Qualified XIV 138,997.470 6.18 859,004 Non-Qualified XV 26,454.022 6.17 163,221 Non-Qualified XVI 78,501.188 6.16 483,567 Non-Qualified XVIII 7,014.780 6.11 42,860 Non-Qualified XIX 47,024.353 6.13 288,259 ----------- ------------- 418,162.377 $ 2,583,170 =========== ============= ING VP SMALLCAP OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 8,679.356 $ 4.98 $ 43,223 Non-Qualified V (0.75) 3,032.308 5.02 15,222 ----------- ------------- 11,711.664 $ 58,445 =========== ============= ING VP SMALLCAP OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 117,668.602 $ 4.73 $ 556,572 Non-Qualified XIV 101,824.267 4.71 479,592 Non-Qualified XV 56,605.761 4.70 266,047 Non-Qualified XVI 49,256.630 4.69 231,014 Non-Qualified XVIII 11,288.326 4.66 52,604 Non-Qualified XIX 39,805.483 4.67 185,892 ----------- ------------- 376,449.069 $ 1,771,721 =========== =============
S-83
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ JANUS ASPEN AGGRESSIVE GROWTH Contracts in accumulation period: Non-Qualified V 566,617.723 $ 13.03 $ 7,383,029 Non-Qualified V (0.75) 858,374.479 13.49 11,579,472 Non-Qualified VII 1,563,268.522 12.94 20,228,695 Non-Qualified VIII 357,735.529 9.03 3,230,352 Non-Qualified IX 21,634.844 12.85 278,008 Non-Qualified X 27,926.793 13.03 363,886 Non-Qualified XII 4,662.942 7.58 35,345 Non-Qualified XIII 1,964,782.621 7.13 14,008,900 Non-Qualified XIV 1,696,306.388 7.03 11,925,034 Non-Qualified XV 657,391.909 6.98 4,588,596 Non-Qualified XVI 555,397.758 2.96 1,643,977 Non-Qualified XVII 1,630.686 15.64 25,504 Non-Qualified XVIII 278,823.059 2.92 814,163 Non-Qualified XIX 385,034.113 2.93 1,128,150 -------------- ------------- 8,939,587.366 $ 77,233,111 ============== ============= JANUS ASPEN BALANCED Contracts in accumulation period: Non-Qualified V 555,951.615 $ 20.89 $ 11,613,829 Non-Qualified V (0.75) 630,340.005 21.62 13,627,951 Non-Qualified VII 2,369,859.609 23.08 54,696,360 Non-Qualified VIII 673,359.597 18.46 12,430,218 Non-Qualified IX 7,450.766 20.60 153,486 Non-Qualified X 23,295.212 20.89 486,637 Non-Qualified XII 21,381.782 12.32 263,424 Non-Qualified XIII 3,258,034.827 11.64 37,923,525 Non-Qualified XIV 3,601,528.948 11.48 41,345,552 Non-Qualified XV 1,255,265.952 11.41 14,322,585 Non-Qualified XVI 678,471.836 8.44 5,726,302 Non-Qualified XVII 41.959 21.30 894 Non-Qualified XVIII 144,444.286 8.35 1,206,110 Non-Qualified XIX 472,317.742 8.38 3,958,023 Non-Qualified XX 3,375.393 20.89 70,512 -------------- ------------- 13,695,119.529 $ 197,825,408 ============== =============
S-84
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ JANUS ASPEN FLEXIBLE INCOME Contracts in accumulation period: Non-Qualified V 171,615.702 $ 18.96 $ 3,253,834 Non-Qualified V (0.75) 231,891.054 19.62 4,549,702 Non-Qualified VII 908,267.435 18.71 16,993,684 Non-Qualified VIII 212,109.882 15.73 3,336,488 Non-Qualified IX 3,310.389 18.69 61,871 Non-Qualified X 8,977.805 18.96 170,219 Non-Qualified XII 1,937.840 12.85 24,901 Non-Qualified XVII 54.245 19.34 1,049 -------------- ------------- 1,538,164.352 $ 28,391,748 ============== ============= JANUS ASPEN GROWTH PORTFOLIO Currently payable annuity contracts: $ 6,363,719 Contracts in accumulation period: Non-Qualified V 338,648.733 $ 13.37 4,527,734 Non-Qualified V (0.75) 565,225.869 13.83 7,817,074 Non-Qualified VII 1,698,475.232 15.78 26,801,939 Non-Qualified VIII 346,669.873 11.30 3,917,370 Non-Qualified IX 6,850.744 13.18 90,293 Non-Qualified X 22,475.711 13.37 300,500 Non-Qualified XII 10,427.083 7.53 78,516 Non-Qualified XIII 2,342,509.576 7.16 16,772,369 Non-Qualified XIV 3,015,362.805 7.07 21,318,615 Non-Qualified XV 983,466.889 7.02 6,903,938 Non-Qualified XVI 327,789.685 4.46 1,461,942 Non-Qualified XVII 616.632 14.84 9,151 Non-Qualified XVIII 129,992.688 4.42 574,568 Non-Qualified XIX 353,241.795 4.43 1,564,861 -------------- ------------- 10,141,753.315 $ 98,502,589 ============== ============= JANUS ASPEN WORLDWIDE GROWTH Currently payable annuity contracts: $ 7,329,540 Contracts in accumulation period: Non-Qualified V 609,558.631 $ 16.25 9,905,328 Non-Qualified V (0.75) 1,211,566.461 16.82 20,378,548 Non-Qualified VII 4,329,391.897 18.21 78,838,226 Non-Qualified VIII 816,356.134 13.23 10,800,392 Non-Qualified IX 23,370.570 16.02 374,397 Non-Qualified X 26,438.976 16.25 429,633 Non-Qualified XII 25,670.941 7.90 202,800 Non-Qualified XIII 3,739,036.827 7.39 27,631,482 Non-Qualified XIV 3,645,285.344 7.29 26,574,130 Non-Qualified XV 1,076,133.408 7.24 7,791,206 Non-Qualified XVI 771,583.143 4.81 3,711,315 Non-Qualified XVII 2,202.702 18.46 40,662 Non-Qualified XVIII 194,741.283 4.76 926,969 Non-Qualified XIX 699,890.190 4.78 3,345,475 -------------- ------------- 17,171,226.507 $ 198,280,103 ============== =============
S-85
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- JANUS ASPEN WORLDWIDE GROWTH (CONTINUED) LORD ABBETT GROWTH AND INCOME Contracts in accumulation period: Non-Qualified V 32,820.831 $ 7.85 $ 257,644 Non-Qualified V (0.75) 20,716.722 7.91 163,869 ------------- ------------- 53,537.553 $ 421,513 ============= ============= LORD ABBETT MID-CAP VALUE Contracts in accumulation period: Non-Qualified V 5,655.376 $ 9.87 $ 55,819 Non-Qualified V (0.75) 44,192.623 8.38 370,334 Non-Qualified XX 4,843.782 9.87 47,808 ------------- ------------- 54,691.781 $ 473,961 ============= ============= MFS (R) GLOBAL GOVERNMENTS Contracts in accumulation period: Non-Qualified VII 190,603.352 $ 11.92 $ 2,271,992 Non-Qualified VIII 37,246.397 12.04 448,447 ------------- ------------- 227,849.749 $ 2,720,439 ============= ============= MFS(R) TOTAL RETURN Contracts in accumulation period: Non-Qualified VII 2,066,374.204 $ 15.51 $ 32,049,464 Non-Qualified VIII 475,213.219 15.67 7,446,591 Non-Qualified XIII 1,138,016.463 11.13 12,666,123 Non-Qualified XIV 1,935,084.719 10.98 21,247,230 Non-Qualified XV 561,729.213 10.91 6,128,466 Non-Qualified XVI 617,717.854 9.94 6,140,115 Non-Qualified XVIII 143,894.186 9.83 1,414,480 Non-Qualified XIX 469,356.259 9.87 4,632,546 ------------- ------------- 7,407,386.117 $ 91,725,015 ============= ============= OPPENHEIMER AGGRESSIVE GROWTH Currently payable annuity contracts: $ 819,407 Contracts in accumulation period: Non-Qualified VII 645,050.621 $ 10.34 6,669,823 Non-Qualified VIII 228,735.970 10.43 2,385,716 Non-Qualified XIII 566,444.270 7.29 4,129,379 Non-Qualified XIV 653,599.318 7.19 4,699,379 Non-Qualified XV 205,717.696 7.14 1,468,824 Non-Qualified XVI 507,860.304 3.29 1,670,860
S-86
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- OPPENHEIMER AGGRESSIVE GROWTH (CONTINUED) Non-Qualified XVIII 375,412.433 3.26 1,223,845 Non-Qualified XIX 263,903.806 3.27 862,965 ------------- ------------- 3,446,724.418 $ 23,930,198 ============= ============= OPPENHEIMER GLOBAL SECURITIES Contracts in accumulation period: Non-Qualified V 124,642.865 $ 10.87 $ 1,354,868 Non-Qualified V (0.75) 294,074.348 11.13 3,273,047 Non-Qualified VII 619,881.256 14.00 8,678,338 Non-Qualified VIII 120,065.031 14.12 1,695,318 Non-Qualified IX 3,483.077 10.74 37,408 Non-Qualified XII 12,340.120 11.17 137,839 ------------- ------------- 1,174,486.697 $ 15,176,818 ============= ============= OPPENHEIMER MAIN STREET GROWTH & INCOME Currently payable annuity contracts: $ 3,092,978 Contracts in accumulation period: Non-Qualified VII 1,627,170.955 $ 10.10 16,434,427 Non-Qualified VIII 567,565.104 10.19 5,783,488 Non-Qualified XIII 825,724.271 7.08 5,846,128 Non-Qualified XIV 1,503,686.572 6.98 10,495,732 Non-Qualified XV 475,185.289 6.94 3,297,786 Non-Qualified XVI 265,863.679 6.26 1,664,307 Non-Qualified XVIII 106,267.399 6.20 658,858 Non-Qualified XIX 245,483.133 6.22 1,526,905 ------------- ------------- 5,616,946.402 $ 48,800,609 ============= ============= OPPENHEIMER STRATEGIC BOND Currently payable annuity contracts: $ 1,153,175 Contracts in accumulation period: Non-Qualified V 10,728.017 $ 11.19 120,047 Non-Qualified V (0.75) 53,130.525 11.46 608,876 Non-Qualified VII 814,287.332 12.27 9,991,306 Non-Qualified VIII 197,895.041 12.38 2,449,941 Non-Qualified IX 151.867 11.06 1,680 Non-Qualified XIII 535,396.772 11.24 6,017,860 Non-Qualified XIV 629,245.584 11.09 6,978,334 Non-Qualified XV 209,695.372 11.02 2,310,843 Non-Qualified XVI 157,440.299 10.87 1,711,376 Non-Qualified XVIII 28,772.871 10.76 309,596 Non-Qualified XIX 100,170.989 10.80 1,081,847 ------------- ------------- 2,736,914.669 $ 32,734,881 ============= =============
S-87
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- PIONEER EQUITY INCOME VCT Contracts in accumulation period: Non-Qualified V 13,107.385 $ 7.99 $ 104,728 Non-Qualified V (0.75) 6,032.919 8.05 48,565 ------------- ------------- 19,140.304 $ 153,293 ============= ============= PIONEER FUND VCT Contracts in accumulation period: Non-Qualified V (0.75) 171.721 $ 7.59 $ 1,303 ------------- ------------- 171.721 $ 1,303 ============= ============= PIONEER MID CAP VALUE VCT Contracts in accumulation period: Non-Qualified V 1,622.935 $ 8.73 $ 14,168 Non-Qualified V (0.75) 1,847.373 8.80 16,257 ------------- ------------- 3,470.308 $ 30,425 ============= ============= PRUDENTIAL JENNISON Contracts in accumulation period: Non-Qualified XIII 17,204.028 $ 6.07 $ 104,428 Non-Qualified XIV 42,520.383 6.04 256,823 Non-Qualified XV 4,457.203 6.02 26,832 Non-Qualified XVI 879.203 6.02 5,293 Non-Qualified XVIII 1,484.914 5.97 8,865 Non-Qualified XIX 4,124.459 5.99 24,706 ------------- ------------- 70,670.190 $ 426,947 ============= ============= SP JENNISON INTERNATIONAL GROWTH Contracts in accumulation period: Non-Qualified XIII 9,143.351 $ 5.76 $ 52,666 Non-Qualified XIV 7,304.232 5.73 41,853 Non-Qualified XV 7,013.356 5.72 40,116 Non-Qualified XVI 6,381.407 5.71 36,438 Non-Qualified XVIII 211.729 5.67 1,201 Non-Qualified XIX 7,317.637 5.68 41,564 ------------- ------------- 37,371.712 $ 213,838 ============= =============
S-88 NON-QUALIFIED 1964 Individual Contracts issued from December 1, 1964 to March 14, 1967. NON-QUALIFIED V Certain AetnaPlus Contracts issued in connection with deferred compensation plans issued since August 28, 1992, and certain individual non-qualified Contracts. NON-QUALIFIED V (0.75) Subset of Non-Qualified V Contracts having a mortality and expense charge of 0.75% NON-QUALIFIED VI Certain existing Contracts that were converted to ACES, an administrative system (previously valued under Non-Qualified I). NON-QUALIFIED VII Certain individual and group Contracts issued as non-qualified deferred annuity contracts or Individual individual retirement annuity Contracts issued since May 4, 1994. NON-QUALIFIED VIII Certain individual retirement annuity Contracts issued since May 1, 1998. NON-QUALIFIED IX Group Aetna Plus Contracts assessing an administrative expense charge effective April 7, 1997 issued in connection with deferred compensation plans. NON-QUALIFIED X Group AetnaPlus contracts containing contractual limits on fees, issued in connection with deferred compensation plans and as individual non-qualified Contracts, resulting in reduced daily charges for certain funding options effective May 29, 1997. NON-QUALIFIED XI Certain Contracts, previously valued under Non-Qualified VI, containing contractual limits on fees, resulting in reduced daily charges for certain funding options effective May 29, 1997. NON-QUALIFIED XIII Certain individual retirement annuity Contracts issued since October 1, 1998. NON-QUALIFIED XIV Certain individual retirement annuity Contracts issued since September 1, 1998. NON-QUALIFIED XV Certain individual retirement annuity Contracts issued since September 1, 1998. NON-QUALIFIED XVI Certain individual retirement annuity Contracts issued since August 2000. NON-QUALIFIED XVII Group AetnaPlus contracts issued in connection with deferred compensation plans having Contract modifications effective September 1, 1999. NON-QUALIFIED XVIII Certain individual retirement annuity Contracts issued since September 2000. NON-QUALIFIED XIX Certain individual retirement annuity Contracts issued since August 2000. NON-QUALIFIED XX Certain deferred compensation Contracts issued since December 2002. S-89 8. FINANCIAL HIGHLIGHTS A summary of unit values and units outstanding for variable annuity Contracts, expense ratios, excluding expenses of underlying Funds, investment income ratios, and total return for the years ended December 31, 2002 and 2001, along with units outstanding and unit values for the year ended December 31, 2000, follows:
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- AIM VARIABLE INSURANCE FUNDS: AIM V.I. Capital Appreciation 2002 2,233 $4.28 to $7.37 $ 14,832 - 0.45% to 1.90% -25.80% to -0.04% 2001 2,600 $5.77 to $9.84 23,509 7.71% 0.45% to 2.25% -24.75% to -23.82% 2000 2,085 $7.67 to $12.95 25,987 * * * AIM V.I. Core Equity 2002 3,742 $5.14 to $7.67 29,940 0.30% 0.75% to 2.25% -17.19% to -16.21% 2001 4,491 $6.21 to $9.17 42,858 0.05% 0.45% to 2.25% -24.31% to -16.23% 2000 4,034 $8.20 to $12.00 49,823 * * * AIM V.I. Government Securities 2002 2,139 $11.65 to $12.36 25,997 2.67% 0.95% to 1.90% 0.07% to 8.01% 2001 819 $10.83 to $11.38 9,149 5.55% 0.50% to 1.90% 4.38% to 5.40% 2000 28 $10.38 to $10.80 295 * * * AIM V.I. Growth 2002 3,069 $3.34 to $5.09 14,946 - 0.75% to 1.90% -32.29% to -31.49% 2001 3,912 $4.93 to $7.44 27,757 0.20% 0.45% to 2.25% -35.18% to -34.38% 2000 3,321 $7.60 to $11.37 37,257 * * * AIM V.I. Premier Equity 2002 5,969 $5.16 to $6.91 41,327 0.29% 0.45% to 1.90% -31.59% to -30.57% 2001 7,410 $7.54 to $10.00 74,008 2.16% 0.45% to 2.25% -14.24% to -9.62% 2000 6,222 $8.79 to $11.55 73,350 * * *
S-90
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- THE ALGER AMERICAN FUND: Alger American Balanced 2002 120 $21.40 $ 2,576 1.69% 1.40% -13.52% 2001 152 $24.74 3,765 3.07% 0.85% to 1.40% -3.31% 2000 191 $25.59 4,888 * * * Alger American Income & Growth 2002 356 $17.31 6,167 0.64% 1.40% -32.07% 2001 443 $25.49 11,279 6.98% 0.85% to 1.40% -15.53% 2000 550 $30.17 16,586 * * * Alger American Leveraged AllCap 2002 327 $12.87 to $17.49 5,724 0.01% 1.25% to 1.40% -34.84% to -34.74% 2001 388 $19.73 to $26.84 10,424 3.28% 0.85% to 1.40% -17.11% to -16.99% 2000 481 $23.77 to $32.38 15,563 * * * ALLIANCE FUNDS: Alliance Growth and Income 2002 2,855 $7.68 to $7.89 22,169 0.80% 0.95% to 1.90% -23.53% to -22.79% 2001 2,791 $9.99 to $10.27 28,177 4.75% 0.50% to 1.90% -1.56% to -0.60% 2000 88 $10.10 to $10.39 898 * * * Alliance Premier Growth 2002 1,333 $4.24 to $4.57 5,838 - 0.95% to 1.90% -31.96% to -31.30% 2001 1,331 $6.20 to $6.69 8,532 6.31% 0.50% to 1.90% -18.80% to -17.99% 2000 341 $7.60 to $8.20 2,687 * * * Alliance Quasar 2002 128 $4.91 to $5.55 684 - 0.95% to 1.90% -33.07% to -32.42% 2001 116 $7.34 to $8.22 910 3.62% 0.50% to 1.90% -14.43% to -13.59% 2000 9 $8.58 to $9.51 82 * * *
S-91
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- AMERICAN CENTURY(R) VP FUNDS: American Century(R) VP Balanced 2002 96 $15.44 $ 1,483 2.84% 1.40% -10.82% 2001 118 $17.32 2,043 6.22% 0.85% to 1.40% -4.90% 2000 147 $18.21 2,684 * * * American Century(R) VP International 2002 131 $10.68 to $11.74 1,539 0.83% 1.25% to 1.40% -21.49% to -21.37% 2001 185 $13.59 to $14.95 2,759 10.20% 0.85% to 1.40% -30.17% to -30.06% 2000 229 $19.43 to $21.41 4,905 * * * BRINSON SERIES FUNDS: Brinson Series Tactical Allocation 2002 1,454 $6.19 to $6.83 9,725 0.55% 0.95% to 1.90% -24.42% to -23.69% 2001 1,635 $8.20 to $8.94 14,334 7.95% 0.50% to 1.90% -14.22% to -13.38% 2000 1,218 $9.56 to $10.33 12,509 * * * Calvert Social Balanced 2002 167 $9.61 to $17.86 1,775 2.79% 0.75% to 1.40% -13.38% to -12.81% 2001 158 $11.09 to $20.48 1,959 4.91% 0.45% to 1.50% -8.25% to -7.64% 2000 175 $12.09 to $22.18 2,514 * * * FEDERATED INSURANCE SERIES: Federated American Leaders 2002 2,720 $13.39 to $18.56 50,539 1.17% 1.25% to 1.40% -21.33% to -21.21% 2001 3,522 $16.99 to $23.59 83,193 2.06% 0.85% to 1.40% -5.56% to -5.42% 2000 4,105 $17.97 to $24.98 102,586 * * * Federated Equity Income 2002 1,035 $9.83 10,264 2.11% 1.25% to 1.40% -21.85% 2001 1,384 $12.58 17,476 1.97% 0.75% to 1.40% -12.24% 2000 1,690 $14.33 24,264 * * *
S-92
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- FEDERATED INSURANCE SERIES (CONTINUED): Federated Fund for US Government Securities 2002 826 $15.35 $ 12,674 3.65% 1.40% 7.52% 2001 820 $14.28 11,702 3.90% 0.85% to 1.40% 5.53% 2000 823 $13.53 11,133 * * * Federated Growth Strategies 2002 764 $13.63 10,415 - 1.40% -27.38% 2001 1,117 $18.77 20,974 1.68% 0.85% to 1.40% -23.48% 2000 1,378 $24.53 33,809 * * * Federated High Income Bond 2002 1,236 $11.49 to $13.48 16,683 10.52% 1.25% to 1.40% -0.03% to 0.12% 2001 1,548 $11.48 to $13.49 20,899 11.00% 0.85% to 1.40% -0.04% to 0.10% 2000 1,959 $11.46 to $13.49 26,446 * * * Federated International Equity 2002 551 $10.03 to $10.85 6,024 - 1.25% to 1.40% -23.84% to -23.73% 2001 767 $13.15 to $14.25 10,976 12.94% 0.85% to 1.40% -30.42% to -30.31% 2000 978 $18.87 to $20.48 20,057 * * * Federated Prime Money 2002 583 $12.68 7,387 1.37% 1.40% 0% 2001 695 $12.68 8,812 3.44% 0.85% to 1.40% 2.28% 2000 702 $12.40 8,703 * * * Federated Utility 2002 653 $8.94 to $10.72 7,021 5.71% 1.25% to 1.40% -25.01% to -24.90% 2001 923 $11.90 to $14.29 13,230 3.57% 0.85% to 1.40% -14.94% to -14.81% 2000 1,149 $13.97 to $16.80 19,351 * * *
S-93
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS FUND: Fidelity(R) VIP Equity-Income 2002 11,480 $8.08 to $17.95 $ 146,420 1.78% 0.75% to 1.90% -18.53% to -17.57% 2001 12,170 $9.92 to $21.92 193,019 6.26% 0.45% to 1.90% -6.77% to -5.67% 2000 10,395 $10.64 to $23.40 188,025 * * * Fidelity(R) VIP Growth 2002 9,473 $4.73 to $17.54 98,180 0.26% 0.45% to 1.90% -31.44% to -30.42% 2001 10,633 $6.90 to 25.45 167,319 7.26% 0.45% to 1.90% -19.23% to -18.23% 2000 9,467 $8.54 to $31.34 209,610 * * * Fidelity(R) VIP High Income 2002 4,489 $6.46 to $9.53 36,456 10.78% 0.95% to 2.25% 1.48% to 2.46% 2001 4,973 $6.34 to $9.34 39,385 13.71% 0.50% to 2.25% -13.42% to -12.58% 2000 4,980 $7.28 to $10.74 45,512 * * * Fidelity(R) VIP Overseas 2002 654 $6.85 to $10.42 6,617 0.85% 0.75% to 1.50% -21.47% to -20.88% 2001 770 $8.67 to $13.26 9,914 13.97% 0.45% to 1.50% -22.35% to -21.76% 2000 872 $11.08 to $17.06 14,451 * * * FIDELITY(R) VARIABLE INSURANCE PRODUCTS FUND II: Fidelity(R) VIP II ASSET MANAGER(SM) 2002 728 $13.13 to $15.71 11,086 4.06% 1.25% to 1.40% -10.01% to -9.87% 2001 831 $14.57 to $17.45 14,094 6.08% 0.85% to 1.40% -5.44% to -5.30% 2000 993 $15.39 to $18.46 17,821 * * * Fidelity(R) VIP II Contrafund(R) 2002 10,912 $7.22 to $19.81 145,571 0.86% 0.45% to 1.90% -11.07% to 78.65% 2001 11,618 $8.12 to $21.96 173,999 3.56% 0.45% to 1.90% -13.93% to -3.25% 2000 12,102 $9.43 to $24.67 216,963 * * *
S-94
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS FUND II (CONTINUED): Fidelity(R) VIP II Index 500 2002 4,125 $13.44 to $16.04 $ 64,190 1.38% 1.25% to 1.40% -23.34% to -23.22% 2001 4,961 $17.51 to $20.93 100,783 1.20% 0.85% to 1.40% -13.34% to -13.21% 2000 5,672 $20.17 to $24.15 133,049 * * * Fidelity(R) VIP II Investment Grade Bond 2002 187 $15.17 to $15.49 2,890 4.05% 1.25% to 1.40% 8.80% to 8.96% 2001 217 $13.92 to $14.24 3,084 5.86% 0.85% to 1.40% 6.94% to 7.10% 2000 278 $13.00 to $13.32 3,700 * * * FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST: Franklin Small Cap Value Securities 2002 39 $9.22 to $9.29 365 *** 0.75% to 1.25% -21.04% to -19.73% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING GET FUND: ING GET Fund - Series D 2002 10,202 $10.04 to $10.37 103,698 4.34% 1.00% to 1.75% -1.09% to -0.34% 2001 11,705 $10.15 to $10.40 119,943 1.44% 0.70% to 2.15% 0.22% to 0.98% 2000 12,726 $10.13 to $10.29 129,776 * * * ING GET Fund - Series E 2002 26,953 $10.18 to $10.51 276,397 4.02% 1.00% to 1.90% 2.11% to 3.05% 2001 29,973 $9.97 to $10.20 300,383 0.78% 1.00% to 2.40% -1.12% to -0.21% 2000 33,010 $10.08 to $10.22 333,833 * * * ING GET Fund - Series G 2002 16,105 $10.11 to $10.41 163,877 3.84% 1.00% to 1.90% 2.97% to 3.92% 2001 17,381 $9.82 to $10.02 171,369 0.38% 1.00% to 2.40% -0.52% to 0.40% 2000 18,850 $9.87 to $9.98 186,445 * * *
S-95
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING GET FUND (CONTINUED): ING GET Fund - Series H 2002 11,865 $10.18 to $10.46 $ 121,603 3.59% 1.00% to 1.90% 2.78% to 3.72% 2001 13,233 $9.91 to $10.01 131,686 0.47% 1.00% to 2.40% -1.24% to -0.33% 2000 14,101 $10.03 to $10.12 141,764 * * * ING GET Fund - Series I 2002 8,275 $10.10 to $10.23 84,079 3.54% 1.45% to 1.90% 3.35% to 3.82% 2001 8,909 $9.78 to $9.86 87,402 0.25% 1.35% to 2.40% -0.76% to -0.30% 2000 9,419 $9.85 to $9.89 92,929 * * * ING GET Fund - Series J 2002 7,113 $10.05 to $10.17 71,844 3.49% 1.45% to 1.90% 4.05% to 4.53% 2001 7,719 $9.66 to $9.73 74,801 0.18% 1.35% to 2.40% -0.63% to -0.16% 2000 8,207 $9.72 to $9.75 79,872 * * * ING GET Fund - Series K 2002 8,037 $9.99 to $10.24 81,260 2.68% 1.45% to 2.40% 3.20% to 4.20% 2001 9,082 $9.68 to $9.82 88,558 - 1.35% to 2.40% -3.19% to -2.24% 2000 9,357 $10.00 to $10.05 93,790 * * * ING GET Fund - Series L 2002 7,535 $9.89 to $10.09 75,255 0.05% 1.45% to 2.40% 0.22% to 1.20% 2001 8,101 $9.87 to $9.97 80,345 4.63% 1.35% to 2.40% -1.53% to -0.46% 2000 58 $10.01 to $10.02 585 * * * ING GET Fund - Series M 2002 11,558 $9.91 to $10.08 $ 115,381 0.03% 1.45% to 2.40% 1.12% to 2.10% 2001 12,531 $9.80 to $9.87 123,165 ** 1.45% to 2.40% -2.23% to -1.33% 2000 ** ** ** ** ** **
S-96
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING GET FUND (CONTINUED): ING GET Fund - Series N 2002 8,982 $9.97 to $10.12 $ 90,143 0.02% 1.45% to 2.40% -2.77% to -1.82% 2001 10,181 $10.25 to $10.31 104,606 ** ** ** 2000 ** ** ** ** ** ** ING GET Fund - Series P 2002 7,680 $9.89 to $10.01 76,334 0.04% 1.45% to 2.40% -1.16% to -0.20% 2001 8,288 $10.00 to $10.03 83,012 ** ** ** 2000 ** ** ** ** ** ** ING GET Fund - Series Q 2002 5,460 $10.00 to $10.10 54,826 3.81% 1.45% to 2.40% 0.00% to 0.97% 2001 162 $10.00 1,620 ** ** ** 2000 ** ** ** ** ** ** ING GET Fund - Series R 2002 4,312 $10.06 to $10.14 43,556 *** 1.45% to 2.40% 0.65% to 1.42% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING GET Fund - Series S 2002 5,334 $10.01 to $10.08 53,553 *** 1.00% to 2.40% 0.14% to 0.87% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING GET Fund - Series T 2002 3,908 $10.06 to $10.09 39,378 *** 1.45% to 2.40% 0.88% to 0.93% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-97
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING GET FUND (CONTINUED): ING GET Fund - Series U 2002 50 $9.99 to $10.00 $ 503 *** 0.95% to 1.75% -0.05% to 0.00% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP BALANCED 2002 7,046 $7.87 to $26.80 148,868 1.07% 0.45% to 2.25% -12.01% to -10.71% 2001 8,277 $8.94 to $30.01 189,948 5.84% 0.45% to 2.25% -6.04% to 0.46% 2000 8,309 $9.52 to $24.76 199,768 * * * ING VP BOND 2002 9,939 $11.86 to $18.01 164,563 3.25% 0.75% to 2.25% 6.28% to 7.53% 2001 9,525 $11.16 to $16.75 144,459 6.51% 0.45% to 2.25% 6.67% to 7.93% 2000 6,869 $10.46 to $15.52 99,490 * * * ING VP EMERGING MARKETS 2002 103 $6.32 649 - 1.40% -10.60% 2001 129 $7.08 912 19.78% 0.85% to 1.40% -11.68% 2000 157 $8.01 1,255 * * * ING VP MONEY MARKET 2002 19,939 $10.30 to $14.44 262,556 3.85% 0.75% to 2.25% -0.31% to 0.86% 2001 22,423 $10.33 to $48.45 293,027 4.69% 0.45% to 2.25% 1.33% to 3.16% 2000 16,310 $10.13 to $13.88 211,809 * * * ING VP NATURAL RESOURCES 2002 135 $11.48 to $12.07 1,567 0.19% 0.75% to 1.50% -3.56% to -2.83% 2001 166 $11.90 to $12.42 2,003 0.00% 0.45% to 1.50% -17.19% to -16.57% 2000 193 $14.35 to $14.87 2,801 * * *
S-98
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING GENERATIONS PORTFOLIO, INC.: ING VP Strategic Allocation Balanced 2002 977 $12.03 to $13.84 $ 14,344 2.50% 0.45% to 1.40% -10.81% to -9.94% 2001 1,082 $13.47 to $15.41 17,390 2.50% 0.45% to 2.25% -8.30% to -7.65% 2000 1,232 $14.66 to $16.69 21,090 * * * ING VP Strategic Allocation Growth 2002 835 $11.55 to $13.52 11,257 1.75% 0.75% to 2.25% -15.04% to -14.40% 2001 898 $13.56 to $15.80 13,876 1.59% 0.45% to 2.25% -12.87% to -12.21% 2000 1,013 $15.52 to $18.00 17,520 * * * ING VP Strategic Allocation Income 2002 1,237 $12.99 to $14.51 20,088 3.32% 0.75% to 1.40% -5.69% to -0.78% 2001 1,380 $10.79 to $15.29 23,347 4.36% 0.45% to 2.25% -3.75% to -3.11% 2000 1,518 $11.13 to $15.77 26,191 * * * ING PARTNERS, INC.: ING Alger Aggressive Growth 2002 24 $7.31 to $7.34 179 *** 0.75% to 1.25% -8.53% to -0.37% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Alger Growth 2002 1 $7.24 to $7.26 9 *** 0.75% to 1.25% -23.21% to -6.63% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING American Century Small Cap Value 2002 20 $8.11 to $9.30 173 *** 0.75% to 1.25% -19.84% to -1.82% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-99
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING PARTNERS, INC. (CONTINUED): ING Baron Small Cap Growth 2002 21 $8.72 to $9.68 $ 193 *** 0.75% to 1.25% -12.61% to -1.83% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Goldman Sachs Capital Growth 2002 2 $8.07 18 *** 0.75% to 0.80% -3.04% to -0.05% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING JPMorgan Fleming International 2002 2,909 $5.62 to $15.80 24,044 0.62% 0.75% to 1.90% -19.64% to -18.69% 2001 2,892 $7.00 to $19.44 30,449 25.04% 0.45% to 2.25% -28.33% to -27.48% 2000 2,451 $9.76 to $26.80 38,280 * * * ING JPMorgan Mid Cap Value 2002 9 $9.17 to $9.20 87 *** 0.75% to 1.25% -8.51% to 0.47% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING MFS Capital Opportunities 2002 3,869 $4.44 to $20.94 35,741 - 0.45% to 1.90% -31.49% to -30.48% 2001 4,710 $6.49 to $30.11 62,832 19.25% 0.45% to 2.25% -26.19% to -25.29% 2000 4,048 $8.79 to $40.30 78,233 * * * ING MFS Global Growth 2002 - $8.32 to $8.35 1 *** 0.75% to 1.25% -10.41% to -0.17% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-100
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING PARTNERS, INC. (CONTINUED): ING MFS Research 2002 4,627 $4.98 to $10.73 $ 40,669 0.20% 0.75% to 1.90% -26.32% to -25.45% 2001 5,830 $6.77 to $14.39 69,394 20.49% 0.45% to 1.90% -22.40% to -21.48% 2000 6,216 $8.71 to $18.33 97,910 * * * ING OpCap Balanced Value Portfolio 2002 2 $8.34 to $8.37 15 *** 0.80% to 1.25% -0.14% to 5.35% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING PIMCO Total Return Portfolio 2002 119 $10.70 to $10.75 1,275 *** 0.75% to 1.50% 3.07% to 7.55% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Salomon Brothers Aggressive Growth 2002 6,053 $3.54 to $9.97 47,008 - 0.45% to 1.90% -36.54% to -35.60% 2001 7,478 $ 5.58 to $15.53 91,535 6.31% 0.45% to 2.25% -26.64% to -25.74% 2000 8,010 $7.60 to $20.93 136,685 * * * ING Salomon Brothers Capital 2002 1 $7.69 5 *** 0.75% 0.67% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Salomon Brothers Investors Value 2002 2 $7.82 14 *** 1.25% -21.97% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-101
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING PARTNERS, INC. (CONTINUED): ING T. Rowe Price Growth Equity 2002 3,205 $8.90 to $18.37 $ 58,443 0.19% 0.45% to 1.50% -24.44% to -23.64% 2001 3,768 $ 11.70 to $24.29 89,395 15.41% 0.45% to 2.25% -11.56% to -10.85% 2000 4,250 $13.14 to $27.44 113,230 * * * ING UBS Tactical Asset Allocation 2002 - $8.01 428 *** 1.25% 0.33% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Van Kampen Comstock 2002 38 $8.31 to $8.34 319 *** 0.75% to 1.25% -18.72% to -2.95% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VARIABLE FUNDS: ING VP Growth and Income 2002 24,165 $5.28 to $162.71 415,966 0.84% 0.45% to 1.90% -26.42% to 60.86% 2001 29,079 $7.17 to $219.66 663,646 0.60% 0.45% to 2.25% -19.96% to -18.98% 2000 32,914 $8.96 to $272.61 928,210 * * * ING VARIABLE PORTFOLIOS, INC.: ING VP Growth 2002 3,203 $4.00 to $10.80 28,286 - 0.75% to 1.90% -30.30% to -29.47% 2001 4,148 $5.73 to $15.31 52,088 12.13% 0.45% to 2.25% -28.45% to -27.61% 2000 4,705 $8.02 to $21.15 85,002 * * * ING VP Index Plus LargeCap 2002 13,185 $5.86 to $14.07 154,417 0.24% 0.45% to 2.25% -23.02% to -21.88 2001 15,160 $7.62 to $18.06 224,762 4.07% 0.45% to 2.25% -15.27% to -5.62% 2000 14,826 $8.99 to $21.06 261,795 * * *
S-102
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING VARIABLE PORTFOLIOS, INC. (CONTINUED): ING VP Index Plus MidCap 2002 925 $12.33. to $13.31 $ 11,779 0.50% 0.45% to 1.50% -13.40% to -12.49% 2001 631 $14.24 to $15.26 9,214 6.54% 0.45% to 1.50% -2.80% to 12.09% 2000 452 $14.50 to $15.59 6,733 * * * ING VP Index Plus SmallCap 2002 464 $8.96 to $9.99 4,275 0.19% 0.75% to 1.50% -14.50% to -13.86% 2001 225 $10.48 to $11.60 2,411 3.71% 0.45% to 1.50% 0.87% to 1.64% 2000 104 $10.39 to $11.42 1,098 * * * ING VP International Equity 2002 836 $4.69 to $6.40 5,228 0.22% 0.75% to 1.90% -28.07% to -27.23% 2001 954 $6.51 to $8.79 7,991 0.12% 0.45% to 2.25% -25.34% to -24.45% 2000 863 $8.73 to $11.64 9,708 * * * ING VP Small Company 2002 4,213 $7.09 to $14.88 52,158 0.52% 0.45% to 1.90% -24.69% to -23.57% 2001 3,814 $9.41 to $19.53 62,576 3.89% 0.45% to 2.25% 0.50% to 3.22% 2000 2,815 $9.22 to $18.92 47,270 * * * ING VP Technology 2002 2,536 $2.55 to $2.67 6,564 - 0.75% to 1.90% -42.40% to -41.72% 2001 2,631 $4.42 to $4.62 11,745 - 0.45% to 1.90% -24.42 to -23.54% 2000 1,680 $5.82 to $6.09 9,833 * * * ING VP Value Opportunity 2002 1,272 $9.36 to $13.84 17,001 0.44% 0.45% to 1.50% -27.07% to -26.30% 2001 1,441 $12.75 to $18.83 26,362 5.21% 0.45% to 1.50% -10.97% to 0.58% 2000 963 $14.22 to $20.99 19,710 * * *
S-103
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING VARIABLE PRODUCTS TRUST: ING VP Growth Opportunities - Class R 2002 64 $6.02 $ 384 *** 1.25% -27.19% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP Growth Opportunities - Class S 2002 23 $5.34 to $5.43 125 - 0.95% to 1.90% -32.71% to -28.88% 2001 18 $7.95 to $8.00 141 ** 0.95% to 1.90% -20.95% to -5.87% 2000 ** ** ** ** ** ** ING VP International Value 2002 49 $7.95 to $8.83 404 *** 0.75% to 1.50% -19.18% to -1.19% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP MagnaCap - Class R 2002 4 $6.85 27 *** 0.75% -21.38% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP MagnaCap - Class S 2002 69 $7.01 to $7.12 490 0.95% 0.95% to 1.90% -25.77% to -23.73% 2001 46 $9.28 to $9.34 431 ** 0.95% to 1.90% -5.87% to 0.00% 2000 ** ** ** ** ** ** ING VP MidCap Opportunities - Class R 2002 11 $6.89 to $6.97 76 *** 0.75% to 1.50% -20.85% to -9.47% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-104
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING VARIABLE PRODUCTS TRUST (CONTINUED): ING VP MidCap Opportunities - Class S 2002 418 $6.11 to $6.21 $ 2,583 - 0.95% to 1.90% -27.40% to -26.70 2001 102 $8.42 to $8.48 865 ** 0.95% to 1.90% -16.75% to -10.14% 2000 ** ** ** ** ** ** ING VP SmallCap Opportunities - Class R 2002 12 $4.98 to $5.02 58 *** 0.75% to 1.25% -33.20% to -9.70% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP SmallCap Opportunities - Class S 2002 376 $4.66 to $4.73 1,772 - 0.95% to 1.90% -44.82% to -44.28% 2001 151 $8.44 to $8.50 1,280 ** 0.95% to 1.90% -24.98% to -12.33% 2000 ** ** ** ** ** ** JANUS ASPEN SERIES: Janus Aspen Aggressive Growth 2002 8,940 $2.92 to $15.64 77,233 - 0.45% to 1.90% -29.31% to -28.26% 2001 11,480 $4.14 to $21.80 141,806 - 0.45% to 1.90% -40.61% to -39.88% 2000 12,172 $6.97 to $36.27 274,462 * * * Janus Aspen Balanced 2002 13,695 $8.35 to $23.08 197,825 2.41% 0.45% to 1.90% -8.22% to 109.99% 2001 15,239 $9.10 to $25.02 240,241 2.63% 0.45% to 1.90% -6.53% to -5.42% 2000 13,985 $9.73 to $26.63 244,144 * * *
S-105
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- JANUS ASPEN SERIES (CONTINUED): Janus Aspen Flexible Income 2002 1,538 $12.85 to $19.62 $ 28,392 4.45% 0.45% to 1.50% 8.83% to 9.98% 2001 1,415 $11.72 to $17.89 23,940 5.95% 0.45% to 1.50% -0.78% to 6.93% 2000 1,182 $10.97 to $16.73 18,730 * * * Janus Aspen Growth 2002 10,142 $4.42 to $15.78 98,503 - 0.45% to 1.90% -27.91% to -26.84% 2001 13,150 $6.13 to $21.78 176,779 0.26% 0.45% to 2.25% -26.17% to -25.27% 2000 14,324 $8.30 to $29.34 267,653 * * * Janus Aspen Worldwide Growth 2002 17,171 $4.76 to $18.46 198,280 0.84% 0.45% to 1.90% -26.92% to -25.84% 2001 20,979 $6.51 to $24.89 331,396 0.44% 0.45% to 2.25% -23.92% to -22.98% 2000 21,842 $8.56 to $32.41 483,863 * * * LORD ABBETT FUNDS: Lord Abbett Growth and Income Portfolio 2002 54 $7.85 to $7.91 422 *** 0.75% to 1.25% -17.45% to -15.55% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** Lord Abbett Mid-Cap Value 2002 55 $8.38 to $9.87 474 *** 0.75% to 1.25% -13.36% to 1.56% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** MFS(R) FUNDS: MFS(R) Global Governments 2002 228 $11.92 to $12.04 2,720 2.91% 1.25% to 1.40% 6.89% to 7.05% 2001 156 $11.15 to $11.25 1,742 3.89% 0.85% to 1.40% 3.28% to 3.44% 2000 142 $10.80 to $10.87 1,537 * * *
S-106
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- MFS(R) FUNDS (CONTINUED): MFS(R) Total ReturN 2002 7,407 $9.83 to $15.67 $ 91,725 1.74% 0.95% to 1.90% -6.97% to -6.07% 2001 7,002 $10.57 to $16.73 93,910 5.19% 0.50% to 1.90% -1.67% to -0.70% 2000 4,368 $10.75 to $16.90 63,398 * * * OPPENHEIMER VARIABLE ACCOUNT FUNDS: Oppenheimer Aggressive Growth 2002 3,447 $3.26 to $10.43 23,930 0.67% 0.95% to 1.90% -29.17% to -28.48% 2001 4,063 $4.60 to $14.62 40,449 15.39% 0.50% to 2.25% -32.58% to -31.92% 2000 3,454 $6.82 to $21.54 57,052 * * * Oppenheimer Global Securities 2002 1,174 $10.74 to $14.12 15,177 0.57% 0.75% to 1.50% -23.30% to -22.72% 2001 977 $14.01 to $18.36 16,403 12.79% 0.75% to 1.50% -13.36% to -12.70% 2000 881 $16.17 to $21.14 17,260 * * * Oppenheimer Main Street Growth & Income 2002 5,617 $6.20 to $10.19 48,801 0.77% 0.95% to 2.25% -20.34% to -19.57% 2001 6,141 $7.78 to $12.71 65,709 0.53% 0.50% to 2.25% -11.87% to -11.02% 2000 5,613 $8.83 to $14.33 67,652 * * * Oppenheimer Strategic Bond 2002 2,737 $10.76 to $12.38 32,735 7.25% 0.75% to 2.25% 5.40% to 6.64% 2001 2,585 $10.21 to $11.67 28,892 6.16% 0.50% to 2.25% 2.84% to 4.06% 2000 2,144 $9.93 to $11.27 23,335 * * * PIONEER VARIABLE CONTRACTS TRUST: Pioneer Equity Income VCT 2002 19 $7.99 to $8.05 153 *** 0.75% to 1.25% -17.35% to -16.32% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-107
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- PIONEER VARIABLE CONTRACTS TRUST (CONTINUED): Pioneer Fund VCT 2002 - $7.59 $ 1 *** 0.75% 0.06% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** Pioneer Mid Cap Value VCT 2002 3 $8.73 to $8.80 30 *** 0.75% to 1.25% -17.31% to -16.24% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** PRUDENTIAL SERIES FUND, INC.: Prudential Jennison 2002 71 $5.97 to $6.07 427 - 0.95% to 1.90% -32.48% to -31.82% 2001 81 $8.84 to $8.90 724 ** 0.95% to 1.90% -3.52% to 9.12% 2000 ** ** ** ** ** ** * SP Jennison International Growth 2002 37 $5.67 to $5.76 214 - 0.95% to 1.90% -24.30% to -21.53% 2001 8 $ 7.49 to $7.52 59 ** 0.95% to 1.90% -19.54% to 4.42% 2000 ** ** ** ** ** **
* Not provided for 2000. ** As this investment Division was not available until 2001, this data is not meaningful and therefore is not presented. *** As this investment Division was not available until 2002, this data is not meaningful and therefore is not presented. S-108 VARIABLE ANNUITY ACCOUNT B PART C - OTHER INFORMATION Item 24. Financial Statements and Exhibits ------------------------------------------ (a) Financial Statements: (1) Included in Part A: Condensed Financial Information (2) Included in Part B: Financial Statements of Variable Annuity Account B: - Report of Independent Auditors - Statement of Assets and Liabilities as of December 31, 2002 - Statement of Operations for the year ended December 31, 2002 - Statements of Changes in Net Assets for the years ended December 31, 2002 and 2001 - Notes to Financial Statements Consolidated Financial Statements of ING Life Insurance and Annuity Company: - Reports of Independent Auditors - Consolidated Income Statements for the years ended December 31, 2002 and 2001, one month ended December 31, 2000, and eleven months ended November 30, 2000 - Consolidated Balance Sheets as of December 31, 2002 and 2001 - Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 2002 and 2001, one month ended December 31, 2000, and eleven months ended November 30, 2000 - Consolidated Statements of Cash Flows for the years ended December 31, 2002 and 2001, one month ended December 31, 2000, and eleven months ended November 30, 2000 - Notes to Consolidated Financial Statements (b) Exhibits (1) Resolution establishing Variable Annuity Account B(1) (2) Not applicable (3.1) Broker-Dealer Agreement(2) (3.2) Alternative Form of Wholesaling Agreement and Related Selling Agreement(3) (3.3) Broker-Dealer Agreement dated June 7, 2000 between Aetna Life Insurance and Annuity Company and Aetna Investment Services, Inc. (AISI) and Letter of Assignment to AISI(4) (3.4) Underwriting Agreement dated November 17, 2000 between Aetna Life Insurance and Annuity Company and Aetna Investment Services, LLC(4) (4.1) Variable Annuity Contract (GM-VA-98)(2) (4.2) Variable Annuity Contract Certificate (GMC-VA-98)(2) (4.3) Variable Annuity Contract (GM-VA-98(NY))(5) (4.4) Variable Annuity Contract Certificate (GMC-VA-98(NY))(5) (4.5) Endorsement (EVAGET98) to Variable Annuity Contract GM-VA-98 and Variable Annuity Contract Certificate GMC-VA-98(6) (4.6) Endorsement (EGET-99) to Variable Annuity Contract GM-VA-98 and Variable Annuity Contract Certificate GMC-VA-98(7) (4.7) Endorsement (EVA-PB-00) to Variable Annuity Contract GM-VA-98 and Variable Annuity Contract Certificate GMC-VA-98(8) (4.8) Endorsement (EVA-PB-00 (NY)) to Variable Annuity Contract GM-VA-98(NY) and Variable Annuity Contract Certificate GMC-VA-98(NY)(9) (4.9) Endorsements ENMCHG (05/02) and ENMCHGI (05/02) for name change(11) (5) Variable Annuity Contract Application (9.5.89-6(9/98))(10) (6.1) Restated Certificate of Incorporation (amended and restated as of January 1, 2002) of ING Life Insurance and Annuity Company (formerly Aetna Life Insurance and Annuity Company)(12) (6.2) By-Laws restated as of January 1, 2002 of ING Life Insurance and Annuity Company (formerly Aetna Life Insurance and Annuity Company)(12) (7) Not applicable (8.1) Fund Participation Agreement dated June 30, 1998 by and among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc. and Aetna Life Insurance and Annuity Company(10) (8.2) Amendment No. 1 dated October 1, 2000 to Participation Agreement dated June 30, 1998 by and among AIM Variable Insurance Funds (formerly AIM Variable Insurance Funds, Inc.), A I M Distributors, Inc. and Aetna Life Insurance and Annuity Company(13) (8.3) First Amendment dated November 17, 2000 to Participation Agreement dated June 30, 1998 by and among AIM Variable Insurance Funds (formerly AIM Variable Insurance Funds, Inc.), A I M Distributors, Inc. and Aetna Life Insurance and Annuity Company(13) (8.4) Service Agreement effective June 30, 1998 between Aetna Life Insurance and Annuity Company and AIM Advisors, Inc.(10) (8.5) First Amendment dated October 1, 2000 to the Service Agreement dated June 30, 1998 between Aetna Life Insurance and Annuity Company and AIM Advisors, Inc.(4) (8.6) Fund Participation Agreement dated March 1, 2000 between Aetna Life Insurance and Annuity Company and Alliance Capital(14) (8.7) Service Agreement dated March 1, 2000 between Aetna Life Insurance and Annuity Company and Alliance Capital(14) (8.8) Fund Participation Agreement dated as of May 1, 1998 by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc.(2) (8.9) Amendment dated November 9, 1998 to Fund Participation Agreement dated as of May 1, 1998 by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc.(15) (8.10) Second Amendment dated December 31, 1999 to Fund Participation Agreement dated as of May 1, 1998 and amended on November 9, 1998 by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc.(16) (8.11) Third Amendment dated February 11, 2000 to Fund Participation Agreement dated as of May 1, 1998 and amended on November 9, 1998 and December 31, 1999 by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc.(17) (8.12) Fourth Amendment dated May 1, 2000 to Fund Participation Agreement dated as of May 1, 1998 and amended on November 9, 1998, December 31, 1999 and February 11, 2000 by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc.(17) (8.13) Fifth Amendment dated February 27, 2001 to Fund Participation Agreement dated as of May 1, 1998 and amended on November 9, 1998, December 31, 1999, February 11, 2000 and May 1, 2000 by and among Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series, and Aeltus Investment Management, Inc.(18) (8.14) Service Agreement dated as of May 1, 1998 between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company in connection with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, and Aetna Variable Portfolios, Inc. on behalf of each of its series(2) (8.15) Amendment dated November 4, 1998 to Service Agreement dated as of May 1, 1998 between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company in connection with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series and Aetna Variable Portfolios, Inc. on behalf of each of its series(15) (8.16) Second Amendment dated February 11, 2000 to Service Agreement dated as of May 1, 1998 and amended on November 4, 1998 between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company in connection with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series and Aetna Variable Portfolios, Inc. on behalf of each of its series(17) (8.17) Third Amendment dated May 1, 2000 to Service Agreement dated as of May 1, 1998 and amended on November 4, 1998 and February 11, 2000 between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company in connection with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series and Aetna Variable Portfolios, Inc. on behalf of each of its series(17) (8.18) Fund Participation Agreement dated May 1, 1999 between Aetna Life Insurance and Annuity Company, Brinson Series Trust (formerly Mitchell Hutchins Series Trust), and Brinson Advisors, Inc. (formerly Mitchell Hutchins Asset Management, Inc.)(19) (8.19) Service Agreement dated May 1, 1999 between Brinson Advisors, Inc. (formerly Mitchell Hutchins Asset Management, Inc.) and Aetna Life Insurance and Annuity Company(19) (8.20) Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation(20) (8.21) Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation(21) (8.22) Sixth Amendment dated November 6, 1997 to the Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996 and May 1, 1997 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation(22) (8.23) Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997 and November 6, 1997 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation(2) (8.24) Eighth Amendment dated December 1, 1999 to Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997, November 6, 1997 and May 1, 1998 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation(16) (8.25) Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation(20) (8.26) Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation(21) (8.27) Sixth Amendment dated as of January 20, 1998 to the Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996 and May 1, 1997 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation(23) (8.28) Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997 and January 20, 1998 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation(2) (8.29) Eighth Amendment dated December 1, 1999 to Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997, January 20, 1998 and May 1, 1998 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation(16) (8.30) Service Agreement dated as of November 1, 1995 between Aetna Life Insurance and Annuity Company and Fidelity Investments Institutional Operations Company(24) (8.31) Amendment dated January 1, 1997 to Service Agreement dated as of November 1, 1995 between Aetna Life Insurance and Annuity Company and Fidelity Investments Institutional Operations Company(21) (8.32) Service Contract dated May 2, 1997 between Fidelity Distributors Corporation and Aetna Life Insurance and Annuity Company(15) (8.33) Fund Participation Agreement dated December 8, 1997 among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation(25) (8.34) Amendment dated October 12, 1998 to Fund Participation Agreement dated December 8, 1997 among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation(15) (8.35) Second Amendment dated December 1, 1999 to Fund Participation Agreement dated December 8, 1997 and amended on October 12, 1998 among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation(16) (8.36) Amendment dated as of August 1, 2000 to Fund Participation Agreement dated December 8, 1997, as amended on October 12, 1998 and December 1, 1999 among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation(26) (8.37) Letter Agreement dated December 7, 2001 between Janus and Aetna Life Insurance and Annuity Company reflecting evidence of a new Fund Participation Agreement with the same terms as the current Fund Participation Agreement except with a new effective date of March 28, 2002(11) (8.38) Service Agreement dated December 8, 1997 between Janus Capital Corporation and Aetna Life Insurance and Annuity Company(25) (8.39) First Amendment dated as of August 1, 2000 to Service Agreement dated December 8, 1997 between Janus Capital Corporation and Aetna Life Insurance and Annuity Company(26) (8.40) Distribution and Shareholder Services Agreement - Service Shares of Janus Aspen Series (for Insurance Companies) dated August 1, 2000 between Janus Distributors, Inc. and Aetna Life Insurance and Annuity Company(26) (8.41) Letter Agreement dated October 19, 2001 between Janus and Aetna Life Insurance and Annuity Company reflecting evidence of a new Distribution and Shareholder Service Agreement with the same terms as the current Distribution and Shareholder Service Agreement except with a new effective date of March 28, 2002(11) (8.42) Fund Participation Agreement dated April 30, 1996, and amended on September 3, 1996, March 14, 1997 and November 28, 1997 among MFS Variable Insurance Trust, Aetna Life Insurance and Annuity Company and Massachusetts Financial Services Company(2) (8.43) Fourth Amendment dated May 1, 1998 to the Fund Participation Agreement dated April 30, 1996, and amended on September 3, 1996, March 14, 1997 and November 28, 1997 by and among MFS Variable Insurance Trust, Aetna Life Insurance and Annuity Company and Massachusetts Financial Services Company(10) (8.44) Fifth Amendment dated May 1, 1998 to Fund Participation Agreement dated April 30, 1996, and amended on September 3, 1996, March 14, 1997 and November 28, 1997 by and among MFS Variable Insurance Trust, Aetna Life Insurance and Annuity Company and Massachusetts Financial Services Company(27) (8.45) Fifth Amendment dated July 1, 1999 to Fund Participation Agreement dated April 30, 1996, and amended on September 3, 1996, March 14, 1997, November 28, 1997 and May 1, 1998 by and among MFS Variable Insurance Trust, Aetna Life Insurance and Annuity Company and Massachusetts Financial Services Company(28) (8.46) Sixth Amendment dated November 17, 2000 to the Fund Participation Agreement dated April 30, 1996, as amended on September 3, 1996, March 14, 1997, November 28, 1997, May 1, 1998 and July 1, 1999 between Aetna Life Insurance and Annuity Company, MFS Variable Insurance Trust and Massachusetts Financial Services Company(4) (8.47) Fund Participation Agreement dated March 11, 1997 between Aetna Life Insurance and Annuity Company and Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc.(29) (8.48) First Amendment dated December 1, 1999 to Fund Participation Agreement dated March 11, 1997between Aetna Life Insurance and Annuity Company and Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc.(16) (8.49) Service Agreement effective as of March 11, 1997 between Oppenheimer Funds, Inc. and Aetna Life Insurance and Annuity Company(29) (8.50) Fund Participation Agreement dated as of May 1, 2001 among Pilgrim Variable Products Trust, Aetna Life Insurance and Annuity Company and ING Pilgrim Securities, Inc.(30) (8.51) Fund Participation Agreement dated as of April 27, 2001 among Aetna Life Insurance and Annuity Company, The Prudential Series Fund, Inc., Prudential Investments Fund Management LLC, and Prudential Investment Management Services LLC(31) (8.52) Participation Agreement dated as of November 28, 2001 among Portfolio Partners, Inc., Aetna Life Insurance and Annuity Company and Aetna Investment Services, LLC(11) (8.53) Amendment dated March 5, 2002 between Portfolio Partners, Inc. (to be renamed ING Partners, Inc. effective May 1, 2002), Aetna Life Insurance and Annuity Company (to be renamed ING Life Insurance and Annuity Company effective May 1, 2002) and Aetna Investment Services LLC (to be renamed ING Financial Advisers, LLC) to Participation Agreement dated November 28, 2001(11) (8.54) Amendment dated May 1, 2003 between ING Partners, INC., ING Life Insurance and Annuity Company and ING Financial Advisers, LLC to the Participation Agreement dated as of November 28, 2001 and subsequently amended on March 5, 2002.(32) (8.55) Shareholder Servicing Agreement (Service Class Shares) dated as of November 27, 2001 between Portfolio Partners, Inc. and Aetna Life Insurance and Annuity Company(11) (8.56) Amendment dated March 5, 2002 between Portfolio Partners, Inc. (to be renamed ING Partners, Inc. effective May 1, 2002) and Aetna Life Insurance and Annuity Company (to be renamed ING Life Insurance and Annuity Company effective May 1, 2002) to the Shareholder Servicing Agreement dated November 27, 2001(11) (8.57) Amendment dated May 1, 2003 by and between ING Partners, Inc. and ING Life Insurance and Annuity Company to the Shareholder Servicing Agreement (Service Class Shares) dated November 27, 2001, as amended on March 5, 2002.(32) (9) Opinion and Consent of Counsel (10) Consents of Independent Auditors (11) Not applicable (12) Not applicable (13) Schedule for Computation of Performance Data(8) (14.1) Powers of Attorney(32) (14.2) Authorization for Signatures(3) ---------------------- 1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75986), as filed on April 22, 1996. 2. Incorporated by reference to Registration Statement on Form N-4 (File No. 333-56297), as filed on June 8, 1998. 3. Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 33-75986), as filed on April 12, 1996. 4. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-49176), as filed on November 30, 2000. 5. Incorporated by reference to Post-Effective Amendment No. 18 to Registration Statement on Form N-4 (File No. 333-56297), as filed on August 30, 2000. 6. Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-56297), as filed on September 14, 1998. 7. Incorporated by reference to Post-Effective Amendment No. 13 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 7, 1999. 8. Incorporated by reference to Post-Effective Amendment No. 15 to Registration Statement on Form N-4 (File No. 333-56297), as filed on May 8, 2000. 9. Incorporated by reference to Post-Effective Amendment No. 21 to Registration Statement on Form N-4 (File No. 333-56297), as filed on December 13, 2000. 10. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-56297), as filed on August 4, 1998. 11. Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-75962), as filed on April 8, 2002. 12. Incorporated by reference to ING Life Insurance and Annuity Company annual report on Form 10-K (File No. 33-23376), as filed on March 28, 2002. 13. Incorporated by reference to Post-Effective Amendment No. 24 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 13, 2001. 14. Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 333-87305), as filed on April 26, 2000. 15. Incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form N-4 (File No. 333-56297), as filed on December 14, 1998. 16. Incorporated by reference to Post-Effective Amendment No. 19 to Registration Statement on Form N-4 (File No. 333-01107), as filed on February 16, 2000. 17. Incorporated by reference to Post-Effective Amendment No. 20 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 4, 2000. 18. Incorporated by reference to Post-Effective Amendment No. 27 to Registration Statement on Form N-4 (File No. 33-75962), as filed on April 10, 2001. 19. Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 333-56297), as filed on June 25, 1999. 20. Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-75964), as filed on February 11, 1997. 21. Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-34370), as filed on September 29, 1997. 22. Incorporated by reference to Post-Effective Amendment No. 16 to Registration Statement on Form N-4 (File No. 33-75964), as filed on February 9, 1998. 23. Incorporated by Reference to Post-Effective Amendment No. 7 to Registration Statement on Form S-6 (File No. 33-75248), as filed on February 24, 1998. 24. Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-88720), as filed on June 28, 1996. 25. Incorporated by reference to Post-Effective Amendment No. 10 to Registration Statement on Form N-4 (File No. 33-75992), as filed on December 31, 1997. 26. Incorporated by reference to Post-Effective Amendment No. 22 to Registration Statement on Form N-4 (File No. 333-01107), as filed on August 14, 2000. 27. Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 333-56297), as filed on February 16, 1999. 28. Incorporated by reference to Post-Effective Amendment No. 11 to Registration Statement on Form N-4 (File No. 333-56297), as filed on November 23, 1999. 29. Incorporated by reference to Post-Effective Amendment No. 27 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 16, 1997. 30. Incorporated by reference to Post-Effective Amendment No. 26 to Registration Statement on Form N-4 (File No. 333-01107), as filed on July 13, 2001. 31. Incorporated by reference to Post-Effective Amendment No. 24 to Registration Statement on Form N-4 (File No. 333-56297), as filed on September 6, 2001. 32. Incorporated by reference to Post-Effective Amendment No. 28 to Registration Statement on Form N-4 (File No. 33-75988), as filed on April 10, 2003 for Variable Annuity Account C of ING Life Insurance and Annuity Company. Item 25. Directors and Principal Officers of the Depositor* ------------------------------------------------------------ Name and Principal Positions and Offices with Business Address Principal Underwriter ---------------- --------------------- Keith Gubbay1 Director and President Phillip Randall Lowery1 Director Thomas Joseph McInerney1 Director Mark Alan Tullis1 Director David Wheat1 Director Allan Baker2 Senior Vice President Robert L. Francis Senior Vice President 6140 Stonehedge Mall Rd., Ste. 375 Pleasanton, California 94588 Willard I. Hill, Jr.2 Senior Vice President Shaun Patrick Mathews2 Senior Vice President Stephen Joseph Preston3 Senior Vice President Jacques de Vaucleroy1 Senior Vice President Boyd George Combs1 Senior Vice President, Tax James G. Auger2 Vice President Marie Merrill Augsberger2 Vice President Pamela M. Barcia2 Vice President Ronald R. Barhorst Vice President 7676 Hazard Ctr. Dr. San Diego, California 92108 Linda Beblo3 Vice President Jeoffrey A. Block4 Vice President Kevin P. Brown2 Vice President Anthony Camp2 Vice President Kevin L. Christensen4 Vice President Elizabeth Clifford3 Vice President Brian D. Comer2 Vice President Patricia Marie Corbett4 Vice President Robert B. DiMartino2 Vice President Shari Ann Enger3 Vice President Brian K. Haendiges2 Vice President Steven J. Haun4 Vice President Ronald Christian Hull2 Vice President William S. Jasien Vice President 12701 Fair Lakes Circle, Suite 470 Fairfax, Virginia 22033 David Kelsey2 Vice President Mary Ann Langevin2 Vice President Christine Cannon Marcks2 Vice President Gregory J. Miller2 Vice President Todd E. Nevenhoven4 Vice President M. Kathleen Reid2 Vice President Robert A. Richard2 Vice President Carl P. Steinhilber2 Vice President Laurie M. Tillinghast2 Vice President Christopher Robert Welp4 Vice President Mary Broesch3 Vice President and Actuary Bruce T. Campbell2 Vice President and Actuary Dianne Clous2 Vice President and Actuary Michael Harris3 Vice President and Actuary Richard Lau3 Vice President and Actuary Antonio Manuel Muniz3 Vice President and Actuary Laurie A. Schlenkermann2 Vice President and Actuary Mark D. Sperry2 Vice President and Actuary Alice Su3 Vice President and Actuary Lawrence D. Taylor Vice President and Actuary 1290 Broadway Denver, Colorado 80203-5699 Albert Sekac2 Vice President and Appointed Actuary Frederick C. Litow1 Vice President and Assistant Treasurer Cheryl Lynn Price1 Vice President, Chief Financial Officer and Chief Accounting Officer Brian John Murphy2 Vice President and Chief Compliance Officer David Scott Pendergrass1 Vice President and Treasurer Renee Evelyn McKenzie1 Vice President, Assistant Treasurer and Assistant Secretary Robin Angel1 Vice President, Investments Daniel J. Foley1 Vice President, Investments Maurice Melvin Moore1 Vice President, Investments Fred Cooper Smith1 Vice President, Investments Joseph J. Elmy2 Vice President, Tax Paula Cludray-Engelke5 Secretary Jane A. Boyle2 Assistant Secretary Linda H. Freitag1 Assistant Secretary Daniel F. Hinkel1 Assistant Secretary William Hope1 Assistant Secretary Joseph D. Horan1 Assistant Secretary David Lee Jacobson3 Assistant Secretary Terri Wecker Maxwell1 Assistant Secretary Donna M. O'Brien2 Assistant Secretary Loralee Ann Renelt5 Assistant Secretary Rebecca A. Schoff5 Assistant Secretary Carol Semplice2 Assistant Secretary Linda Ellen Senker3 Assistant Secretary Patricia M. Smith2 Assistant Secretary John F. Todd2 Assistant Secretary Glenn Allan Black1 Tax Officer Terry L. Owens1 Tax Officer James Taylor1 Tax Officer * These individuals may also be directors and/or officers of other affiliates of the Company. 1 The principal business address of these directors and these officers is 5780 Powers Ferry Road, N.W., Atlanta, Georgia 30327. 2 The principal business address of this director and these officers is 151 Farmington Avenue, Hartford, Connecticut 06156. 3 The principal business address of these officers is 1475 Dunwoody Drive, West Chester, Pennsylvania 19380. 4 The principal business address of these officers is 909 Locust Street, Des Moines, Iowa 50309. 5 The principal business address of these officers is 20 Washington Avenue South, Minneapolis, Minnesota 55401. Item 26. Persons Controlled by or Under Common Control with the Depositor or ---------------------------------------------------------------------------- Registrant ---------- Incorporated herein by reference to Item 26 in Post-Effective Amendment No. 28 to Registration Statement on Form N-4 (File No. 33-75988), as filed on April 10, 2003 for Variable Annuity Account C of ING Life Insurance and Annuity Company. Item 27. Number of Contract Owners ---------------------------------- As of February 28, 2003, there were 122,413 individuals holding interests in variable annuity contracts funded through Variable Annuity Account B. Item 28. Indemnification ------------------------ Section 33-779 of the Connecticut General Statutes ("CGS") provides that a corporation may provide indemnification of or advance expenses to a director, officer, employee or agent only as permitted by Sections 33-770 to 33-778, inclusive, of the Connecticut General Statutes, as amended by Sections 12 to 20, inclusive, of the CGS. Reference is hereby made to Section 33-771(e) of the CGS regarding indemnification of directors and Section 33-776(d) of CGS regarding indemnification of officers, employees and agents of Connecticut corporations. These statutes provide in general that Connecticut corporations incorporated prior to January 1, 1997 shall, except to the extent that their certificate of incorporation expressly provides otherwise, indemnify their directors, officers, employees and agents against "liability" (defined as the obligation to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding) when (1) a determination is made pursuant to Section 33-775 that the party seeking indemnification has met the standard of conduct set forth in Section 33-771 or (2) a court has determined that indemnification is appropriate pursuant to Section 33-774. Under Section 33-775, the determination of and the authorization for indemnification are made (a) by the disinterested directors, as defined in Section 33-770(3); (b) by special counsel; (c) by the shareholders; or (d) in the case of indemnification of an officer, agent or employee of the corporation, by the general counsel of the corporation or such other officer(s) as the board of directors may specify. Also, Section 33-772 with Section 33-776 provide that a corporation shall indemnify an individual who was wholly successful on the merits or otherwise against reasonable expenses incurred by him in connection with a proceeding to which he was a party because he is or was a director, officer, employee, or agent of the corporation. Pursuant to Section 33-771(d), in the case of a proceeding by or in the right of the corporation or with respect to conduct for which the director, officer, agent or employee was adjudged liable on the basis that he received a financial benefit to which he was not entitled, indemnification is limited to reasonable expenses incurred in connection with the proceeding against the corporation to which the individual was named a party. The statute does specifically authorize a corporation to procure indemnification insurance on behalf of an individual who was a director, officer, employee or agent of the corporation. Consistent with the statute, ING Groep N.V. maintains an umbrella insurance policy with an international insurer. The policy covers ING Groep N.V. and any company in which ING Groep N.V. has an ownership control of over 50%. This would encompass the principal underwriter as well as the depositor. The policy provides for the following types of coverage: errors and omissions, directors and officers, employment practices, fiduciary and fidelity. Section 20 of the ING Financial Advisers, LLC Limited Liability Company Agreement provides that ING Financial Advisers, LLC will indemnify certain persons against any loss, damage, claim or expenses (including legal fees) incurred by such person if he is made a party or is threatened to be made a party to a suit or proceeding because he was a member, officer, director, employee or agent of ING Financial Advisers, LLC, as long as he acted in good faith on behalf of ING Financial Advisers, LLC and in a manner reasonably believed to be within the scope of his authority. An additional condition requires that no person shall be entitled to indemnity if his loss, damage, claim or expense was incurred by reason of his gross negligence or willful misconduct. This indemnity provision is authorized by and is consistent with Title 8, Section 145 of the General Corporation Law of the State of Delaware. Item 29. Principal Underwriter ------------------------------ (a) In addition to serving as the principal underwriter for the Registrant, ING Financial Advisers, LLC also acts as the principal underwriter for ING Partners, Inc. (a management investment company registered under the Investment Company Act of 1940 (1940 Act)). Additionally, ING Financial Advisers, LLC acts as the principal underwriter for Variable Life Account B of ING Life Insurance and Annuity Company (ILIAC), Variable Life Account C of ILIAC, Variable Annuity Account C of ILIAC and Variable Annuity Account G of ILIAC (separate accounts of ILIAC registered as unit investment trusts under the 1940 Act). ING Financial Advisers, LLC is also the principal underwriter for Variable Annuity Account I of ING Insurance Company of America (IICA) (a separate account of IICA registered as a unit investment trust under the 1940 Act). (b) The following are the directors and officers of the Principal Underwriter: Name and Principal Positions and Offices with Business Address Principal Underwriter ---------------- --------------------- Ronald R. Barhorst Director and President 7676 Hazard Ctr. Dr. San Diego, CA 92108 Robert L. Francis1 Director and Senior Vice President Shaun Patrick Mathews2 Director and Senior Vice President Allan Baker2 Senior Vice President Boyd George Combs3 Senior Vice President Susan J. Stamm2 Chief Financial Officer William T. Abramowicz Vice President 2525 Cabot Dr., Ste. 300 Lisle, IL 60532 Maryellen R. Allen2 Vice President Douglas J. Ambrose1 Vice President Louis E. Bachetti Vice President 581 Main Street, 4th Fl. Woodbridge, NJ 07095 Robert H. Barley2 Vice President David A. Brounley2 Vice President Brian D. Comer2 Vice President Keith J. Green3 Vice President Brian K. Haendiges2 Vice President Brian P. Harrington4 Vice President Bernard P. Heffernon Vice President 10740 Nall Ave., Ste. 120 Overland Park, KS 66211 William S. Jasien4 Vice President Jess D. Kravitz2 Vice President Mary Ann Langevin2 Vice President Christina Lareau2 Vice President Katherine E. Lewis Vice President 2675 N Mayfair Road, Ste. 501 Milwaukee, WI 53226 Susan J. K. Lewis Vice President 16530 Ventura Blvd., Ste. 600 Encino, CA 91436 David J. Linney Vice President 2900 N. Loop W., Ste. 180 Houston, TX 77092 Mark R. Luckinbill Vice President 2841 Plaza Place, Ste. 210 Raleigh, NC 27612 Christine Cannon Marcks2 Vice President Richard T. Mason Vice President 440 S. Warren St., Ste. 702 Syracuse, NY 13202 Pamela L. Mulvey2 Vice President Scott T. Neeb1 Vice President Ethel Pippin2 Vice President Deborah Rubin4 Vice President Frank W. Snodgrass Vice President 150 4th Ave., N., Ste. 410 Nashville, TN 37219 Terran Titus2 Vice President S. Bradford Vaughan, Jr. Vice President 601 Union St., Ste. 810 Seattle, WA 98101 Judeen T. Wrinn2 Vice President Therese M. Squillacote2 Vice President and Chief Compliance Officer David Scott Pendergrass1 Vice President and Treasurer David A. Kelsey2 Assistant Vice President Paula Cludray-Engelke5 Secretary Loralee Ann Renelt5 Assistant Secretary Rebecca A. Schoff5 Assistant Secretary John F. Todd2 Assistant Secretary Robert J. Scalise2 Assistant Treasurer Glenn Allan Black3 Tax Officer Joseph J. Elmy2 Tax Officer G. Michael Fell3 Tax Officer 1 The principal business address of this director and these officers is 6140 Stonehedge Mall Rd., Ste. 375, Pleasanton, California 94588. 2 The principal business address of this director and these officers is 151 Farmington Avenue, Hartford, Connecticut 06156. 3 The principal business address of these officers is 5780 Powers Ferry Road, N.W., Atlanta, Georgia 30327. 4 The principal business address of these officers is 12701 Fair Lakes Circle, Suite 470, Fairfax, Virginia 22033. 5 The principal business address of these officers is 20 Washington Avenue South, Minneapolis, Minnesota 55401. (c) Compensation from January 1, 2002 to December 31, 2002:
(1) (2) (3) (4) (5) Name of Net Underwriting Compensation on Principal Discounts and Redemption or Brokerage Underwriter Commissions Annuitization Commissions Compensation* ----------- ----------- ------------- ----------- ------------- ING Financial $94,896.76 Advisers, LLC
* Reflects compensation paid to ING Financial Advisers, LLC attributable to regulatory and operating expenses associated with the distribution of all products issued by Variable Annuity Account B of ING Life Insurance and Annuity Company during 2002. Item 30. Location of Accounts and Records ----------------------------------------- All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules under it relating to the securities described in and issued under this Registration Statement are located at the home office of the Depositor as follows: ING Life Insurance and Annuity Company 151 Farmington Avenue Hartford, Connecticut 06156 Item 31. Management Services ---------------------------- Not applicable Item 32. Undertakings Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement on Form N-4 as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen months old for as long as payments under the variable annuity contracts may be accepted; (b) to include as part of any application to purchase a contract offered by a prospectus which is part of this registration statement on Form N-4, a space that an applicant can check to request a Statement of Additional Information; and (c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form N-4 promptly upon written or oral request. The Company hereby represents that it is relying upon and will comply with the provisions of Paragraphs (1) through (4) of the SEC Staff's No-Action Letter dated November 28, 1988 with respect to language concerning withdrawal restrictions applicable to plans established pursuant to Section 403(b) of the Internal Revenue Code. See American Counsel of Life Insurance; SEC No-Action Letter, [1988 WL 235221, *13 (S.E.C.)]. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ING Life Insurance and Annuity Company represents that the fees and charges deducted under the contracts covered by this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Variable Annuity Account B of ING Life Insurance and Annuity Company, certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment to its Registration Statement on Form N-4 (File No. 333-56297) and has duly caused this Post-Effective Amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Chester, Commonwealth of Pennsylvania, on the 18th day of April, 2003. VARIABLE ANNUITY ACCOUNT B OF ING LIFE INSURANCE AND ANNUITY COMPANY (Registrant) By: ING LIFE INSURANCE AND ANNUITY COMPANY (Depositor) By: Keith Gubbay* --------------------------------------- Keith Gubbay President As required by the Securities Act of 1933, this Post-Effective Amendment No. 28 to the Registration Statement on Form N-4 (File No. 333-56297) has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date Keith Gubbay* 1 Director and President ) ----------------------------- (principal executive officer) ) Keith Gubbay ) ) Randy Lowery* 1 Director ) April ----------------------------- ) P. Randall Lowery ) [ ], 2003 ) Thomas J. McInerney* 1 Director ) ----------------------------- ) Thomas J. McInerney ) ) Mark A. Tullis* 1 Director ) ----------------------------- ) Mark A. Tullis ) ) Director ) ----------------------------- ) David Wheat ) ) Cheryl L. Price* Chief Financial Officer and Chief ) ----------------------------- Accounting Officer (principal ) Cheryl L. Price accounting officer) ) By: /s/ Linda E. Senker ------------------------------------- Linda E. Senker *Attorney-in-Fact 1 Constitutes a majority of directors VARIABLE ANNUITY ACCOUNT B Exhibit Index Exhibit No. Exhibit ----------- ------- 9 Opinion and Consent of Counsel EX-99.B9 10 Consents of Independent Auditors EX-99.B10