-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eg1w5QaAlqQKC5fbkP1jJE4eDEPhJ3ArgncZXEksAtAxfamlNKPpEeV6Uxf9gp4l r6tK85/CzBq/oZcGMORtTQ== 0000837276-04-000196.txt : 20040419 0000837276-04-000196.hdr.sgml : 20040419 20040419121825 ACCESSION NUMBER: 0000837276-04-000196 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20040419 EFFECTIVENESS DATE: 20040501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF ING LIFE INS & ANNUITY CO CENTRAL INDEX KEY: 0000103005 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-34370 FILM NUMBER: 04739858 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 860-723-4646 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA VARIABLE ANNUITY LIFE IN DATE OF NAME CHANGE: 19791108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF ING LIFE INS & ANNUITY CO CENTRAL INDEX KEY: 0000103005 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02512 FILM NUMBER: 04739859 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 860-723-4646 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA VARIABLE ANNUITY LIFE IN DATE OF NAME CHANGE: 19791108 485BPOS 1 n-4marathon.txt REGISTRATION STATEMENT As filed with the Securities and Exchange Registration No. 33-34370* Commission on April 19, 2004 Registration No. 811-2512 - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 POST-EFFECTIVE AMENDMENT NO. 53 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 (610) 425-4139 Linda E. Senker, Esq Kimberly J. Smith, Esq. ING ING 1475 Dunwoody Drive 1475 Dunwoody Drive West Chester, PA 19380-1478 West Chester, PA 19380-1478 (610) 425-4139 (610) 425-4139 (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, 2004 pursuant to paragraph (b) of Rule 485 *Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has included a combined prospectus under this Registration Statement which includes all the information which would currently be required in a prospectus relating to the following earlier Registration Statement: 33-87932. PART A - -------------------------------------------------------------------------------- CONTRACT PROSPECTUS -- MAY 1, 2004 - -------------------------------------------------------------------------------- THE CONTRACTS. The contracts described in this prospectus are group or individual "ING Marathon Plus" deferred variable annuity contracts issued by ING Insurance Company of America (formerly known as Aetna Insurance Company of America) (the "Company", "we", "us", "our"). They are issued to you, the contract holder, as either a nonqualified deferred annuity; a qualified individual retirement annuity (IRA) under section 408(b) of the Internal Revenue Code of 1986, as amended (Tax Code); a qualified Roth IRA under section 408A of the Tax Code; or as a qualified contract for use with certain employer sponsored retirement plans. Prior to May 1, 1998, the contracts were available as tax-deferred annuities as described under section 401(a) of the Tax Code. The contracts are not available as SIMPLE IRAs under Tax Code section 408(p). WHY READING THIS PROSPECTUS IS IMPORTANT. This prospectus contains facts about the contracts and their investment options that you should know before purchasing. This information will help you decide if the contracts are right for you. Please read this prospectus carefully. TABLE OF CONTENTS ... PAGE 3 INVESTMENT OPTIONS. The contracts offer 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. VARIABLE INVESTMENT OPTIONS. These options are called subaccounts. The subaccounts are within Variable Annuity Account I (the separate account), a separate account of the Company. Each subaccount invests in one of the mutual funds listed on this 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 THE FUNDS (CONTINUED) THE FUNDS (CONTINUED) o Calvert Socially Balanced o ING UBS U.S. Large Cap Equity o ING VP Value Opportunity Portfolio Portfolio (Initial I) Portfolio (Class I) o Fidelity(R)VIP Asset ManagerSM o ING VP Balanced Portfolio o Janus Aspen Series Balanced Portfolio (Initial Class) (Class I) Portfolio (Institutional Shares) o Fidelity(R)VIP Contrafund(R) o ING VP Bond Portfolio (Class I) o Janus Aspen Series Flexible Portfolio (Initial Class) o ING VP Global Science and Income Portfolio (Institutional o Fidelity(R)VIP Equity-Income Technology Portfolio (Class I) Shares) Portfolio (Initial Class) o ING VP Growth and Income o Janus Aspen Series Growth o Fidelity(R)VIP Growth Portfolio Portfolio (Class I) Portfolio (Institutional Shares) (Initial Class) o ING VP Growth Portfolio (Class o Janus Aspen Series MidCap o Fidelity(R)VIP High Income I) Growth Portfolio (Institutional Portfolio (Initial Class) o ING VP Index Plus LargeCap Shares) o Fidelity(R)VIP Index 500 Portfolio Portfolio (Class I) o Janus Aspen Series Worldwide (Initial Class) o ING VP International Equity Growth Portfolio (Institutional o Fidelity(R)VIP Overseas Portfolio Portfolio (Class I) Shares) (Initial Class) o ING VP Money Market Portfolio o MFS(R)Strategic Income Series o ING GET U.S. Core Portfolio (Class I) (Initial Class) o ING JPMorgan Fleming o ING VP Small Company Portfolio o MFS(R)Total Return Series International Portfolio (Initial (Class I) (Initial Class) Class) o ING VP Strategic Allocation o Oppenheimer Aggressive Growth o ING MFS Capital Opportunities Balanced Portfolio (Class I) Fund/VA Portfolio (Initial Class) o ING VP Strategic Allocation o Oppenheimer Global Securities o ING Salomon Brothers Aggressive Growth Portfolio (Class I) Fund/VA Growth Portfolio (Initial Class) o ING VP Strategic Allocation o Oppenheimer Main Street Fund/VA o ING T. Rowe Price Growth Equity Income Portfolio (Class I) o Oppenheimer Strategic Bond Portfolio (Initial Class) Fund/VA - --------------------------------------------------------------------------------------------------------------------------------
ILIAC Marathon Plus - 131764 1 PROSPECTUS - MAY 1, 2004 (CONTINUED) 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 800-531-4547. READ THIS PROSPECTUS IN CONJUNCTION WITH THE FUND PROSPECTUSES, AND RETAIN THE PROSPECTUSES FOR FUTURE REFERENCE. GETTING ADDITIONAL INFORMATION. You may obtain free of charge the May 1, 2004, Statement of Additional Information (SAI) about the separate account by indicating your request on your application or calling us at 1-800-531-4547. You may also obtain free of charge the most recent annual and/or quarterly report of ING USA Annuity and Life Insurance Company by 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 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. These contracts are not deposits with, obligations of or guaranteed by any bank, nor are they insured by the FDIC. The contracts are subject to investment risk, including the possible loss of the principal amount of your investment. ILIAC Marathon Plus - 131764 2 TABLE OF CONTENTS Contract Overview........................................................ 4 Contract Design Contract Facts 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................ 5 FEES TABLE............................................................... 6 CONDENSED FINANCIAL INFORMATION.......................................... 13 INVESTMENT OPTIONS....................................................... 13 TRANSFERS AMONG INVESTMENT OPTIONS....................................... 15 PURCHASE AND RIGHTS...................................................... 17 RIGHT TO CANCEL.......................................................... 19 FEES .................................................................... 20 YOUR ACCOUNT VALUE....................................................... 26 WITHDRAWALS.............................................................. 28 SYSTEMATIC DISTRIBUTION OPTIONS.......................................... 30 DEATH BENEFIT............................................................ 31 THE INCOME PHASE......................................................... 36 TAXATION................................................................. 40 OTHER TOPICS............................................................. 47 The Company -- Variable Annuity Account I -- Contract Distribution -- Payment of Commissions -- Payment Delay or Suspension -- Voting Rights -- Contract Modifications -- Transfer of Ownership: Assignment -- Involuntary Terminations -- Trading - Industry Developments -- Legal Matters and Proceedings CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION...................... 52 APPENDIX I-- ILIAC GUARANTEED ACCOUNT.................................... 53 APPENDIX II-- FIXED ACCOUNT.............................................. 56 APPENDIX III-- DESCRIPTION OF UNDERLYING FUNDS........................... 57 APPENDIX IV-- PROJECTED SCHEDULE OF ING GET U.S. CORE PORTFOLIO OFFERINGS.................................................. 83 APPENDIX V-- CONDENSED FINANCIAL INFORMATION............................ 84 ILIAC Marathon Plus - 131764 3 [sidebar] QUESTIONS: CONTACTING THE COMPANY. To answer your questions, contact your sales representative or write or call the Company's Customer Service Center at: P.O. Box 9271 Des Moines, IA 50306-9271 1-800-531-4547 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 one of 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 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. ------------------------------------------------------------------------------ CONTRACT FACTS ------------------------------------------------------------------------------ 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. Any death benefit during the income phase will depend upon the income phase payment option selected. See "Death Benefit" and "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. 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. 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 401(a), 403(b) and 457 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 Marathon Plus - 131764 4 - ------------------------------------------------------------------------------- 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. STEP 2: You direct us to invest your purchase payment 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. 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 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. [side bar] ------------- Payments to your Account ------------- Step 1 - ---------------------------------------------- ING Insurance Company of America - ---------------------------------------------- (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 ---------- ---------- [end sidebar] ILIAC Marathon Plus - 131764 5 [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 [end sidebar] FEE TABLE - ------------------------------------------------------------------------------- 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 the purchase payments withdrawn.) - ------------------------------------------------------------------------------- CONTRACTS ISSUED OUTSIDE OF THE STATE OF NEW YORK: - ------------------------------------------------------------------------------- CONTRACTS OTHER THAN ROTH IRA CONTRACTS: - ------------------------------------------------------------------------------- YEARS FROM RECEIPT EARLY WITHDRAWAL OF PURCHASE PAYMENT 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: (1) ------------------------------------------------------------------------------ COMPLETED EARLY WITHDRAWAL ACCOUNT YEARS 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% - ------------------------------------------------------------------------------- CONTRACT ISSUED IN THE STATE OF NEW YORK: - ------------------------------------------------------------------------------- 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 (2) TRANSFER CHARGE ............................................... $ 0.00 (3) -------------------------------------------------------------------------- 1 If the purchase payment is a rollover from another contract issued by us or one of our affiliates and the early withdrawal charge was waived, the early withdrawal charge will be based on the number of completed account years since the date of the initial payment to the former contract. 2 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." 3 During the accumulation phase we currently allow you 12 free transfers each calendar year. We reserve the right to charge $10 for each additional transfer. We currently do not impose this charge. See "Transfers." ILIAC Marathon Plus - 131764 6 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.) CONTRACTS ISSUED OUTSIDE OF THE STATE OF NEW YORK > Other than Roth IRA Contracts Issued before May 1, 1998 Mortality and Expense Risk Charge 1.25% (4) Administrative Expense Charge 0.15% ------ Total Separate Account Expenses* 1.40% ====== > Roth IRA Contracts and Contracts Issued on or after May 1, 1998 Mortality and Expense Risk Charge 1.10% (4) Administrative Expense Charge 0.15% ------ Total Separate Account Expenses* 1.25% ====== CONTRACTS ISSUED IN NEW YORK > All Contracts Mortality and Expense Risk Charge 1.25%4 Administrative Expense Charge 0.15% ------ Total Separate Account Expenses* 1.40% ====== GET FUND GUARANTEE CHARGE* 0.50% * FOR INVESTMENTS IN THE ING GET U.S. CORE PORTFOLIO SUBACCOUNT, AN ADDITIONAL 0.50% GUARANTEE CHARGE WILL BE MADE. 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. AMOUNT DURING THE INCOME PHASE. (Daily deductions, equal to the following percentages on an annual basis, from amounts invested in the subaccounts.) > All Contracts Mortality and Expense Risk Charge 1.25% (4) Administrative Expense Charge 0.00%--0.25% (5) ----------------- Total Separate Account Expenses 1.25%--1.50% ================= 4 Under certain contracts the mortality and expense risk charge during the accumulation period may be reduced. See "Fees-- Mortality and Expense Risk Charge." 5 We currently do not deduct an administrative expense charge during the income phase; however, we reserve the right to deduct a daily charge of not more than 0.25% per year. See "The Income Phase--Charges Deducted." ILIAC Marathon Plus - 131764 7 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% 1.38% (12b-1) fees (2), and other expenses): - --------------------------------------------------------- ----------- ---------- 1 The minimum and maximum total operating expenses charged by a Trust or Fund including applicable expense reimbursement or fee waiver arrangements would also be 0.34 % to 1.15%. The expense reimbursement or fee arrangement reflected is expected to continue through December 31, 2004. 2 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, record keeping 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. 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, applicable to each type of contract, contract fees, separate account annual expenses, and Trust or Fund fees and expenses. The examples assume that you invest $10,000 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: ILIAC Marathon Plus - 131764 8 - -------------------------------------------------------------------------------- FOR CONTRACTS OTHER THAN ROTH IRA CONTRACTS ISSUED OUTSIDE OF THE STATE OF NEW YORK - -------------------------------------------------------------------------------- 1) If you withdraw your entire account value at the end of the applicable time period: 1 year 3 years 5 years 10 years $915 $1,415 $1,853 $3,164 - -------------------------------------------------------------------------------- 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 $287 $879 $1,498 $3,164 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FOR ROTH IRA CONTRACTS ISSUED OUTSIDE OF THE STATE OF NEW YORK - -------------------------------------------------------------------------------- 1) If you withdraw your entire account value at the end of the applicable time period: 1 year 3 years 5 years 10 years $631 $1,013 $1,853 $3,164 - -------------------------------------------------------------------------------- 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 $272 $835 $1,424 $3,020 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FOR CONTRACTS ISSUED IN THE STATE OF NEW YORK - -------------------------------------------------------------------------------- 1) If you withdraw your entire account value at the end of the applicable time period: 1 year 3 years 5 years 10 years $826 $1,237 $1,675 $3,164 - -------------------------------------------------------------------------------- 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 $287 $879 $1,498 $3,164 - -------------------------------------------------------------------------------- * 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 Marathon Plus - 131764 9 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. 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 ILIAC Marathon Plus - 131764 10 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 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. - -------------------------------------------------------------------------------- ILIAC Marathon Plus - 131764 11 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. 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 where the Guaranteed Account is not available, will be considered an option. 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. ILIAC Marathon Plus - 131764 12 TRANSFERS AMONG INVESTMENT OPTIONS - -------------------------------------------------------------------------------- You may transfer amounts among the available subaccounts. During the accumulation phase we allow you 12 free transfers each calendar year. We reserve the right to charge $10 for each additional transfer. We currently do not impose this charge. During the income phase, if approved in your state, transfers are limited to four per year and allowed only if you select variable payments. 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 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. LIMITS ON FREQUENT OR DISRUPTIVE TRANSFERS. The contract is not designed to serve as a vehicle for frequent trading. Frequent trading can disrupt management of a fund and raise its expenses through: 1) increased trading and transaction costs; 2) forced and unplanned portfolio turnover; 3) lost opportunity costs; and 4) large asset swings that decrease the fund's ability to provide maximum investment return to all contract owners. This in turn can have an adverse effect on fund performance. 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; and (2) not accepting preauthorized transfer forms from market timers or other entities acting on behalf of more than one contract holder at a time. We monitor transfer activity. With regard to frequent transfers, in the event that an individual's or organization's transfer activity: 1. exceeds our then-current monitoring standard for frequent trading; 2. is identified as problematic by an underlying fund even if the activity does not exceed our monitoring standard for frequent trading; or 3. if we determine in our sole discretion that such transfer activity may not be in the best interest of other contract holders, we reserve the right to take any necessary action to deter such activity. Such actions may include, but are not limited to, the suspension of trading privileges via facsimile, telephone, email and internet, and the limiting of trading privileges to submission by regular U.S. mail. We will notify you in writing if we take any of these actions. Our current definition of frequent trading is more than one purchase and sale of the same underlying fund within a 30-day period. We do not count transfers associated with scheduled dollar cost averaging or automatic rebalancing programs, transfers involving funds that affirmatively permit short-term trading in their fund shares, such as the ProFund portfolios, movement between such funds and the Liquid Assets Portfolio, and transfers involving certain de minimis amounts when determining whether trading activity is excessive. We reserve the right to modify our general standard, or the standard as it may apply to a particular fund, at any time without prior notice, depending on, among other factors, the needs of the underlying fund(s), the best interests of contract owners and fund investors and/or state or federal regulatory requirements. ILIAC Marathon Plus - 131764 13 In addition, if, due to the excessive dollar amounts of trades, even though not within our then current definition of frequent trading, an individual's or organization's transfer activity is determined, in our sole discretion, to be disruptive, we may take the same actions as are described above to limit frequent transfers. Currently there are no waivers to the above policy. Our excessive trading policy may not be completely successful in preventing market timing or excessive trading activity. 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 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 III 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 number of free transfers that may be made each calendar 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 Marathon Plus - 131764 14 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 you 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. 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 (age 85 for those contracts issued in New York and Pennsylvania). ILIAC Marathon Plus - 131764 15 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 sump; > Periodic payments; or > Transfer or rollover from a pre-existing retirement plan or account.* We reserve the right to reject any payments to a prospective or existing account without advance notice. * In some states an IRA contract can only accept a lump-sum, rollover payment. ILIAC Marathon Plus - 131764 16 PURCHASE PAYMENT AMOUNTS. The minimum initial purchase payment amounts are as follows: - ------------------------------------- -------------------- --------------------- NONQUALIFIED QUALIFIED - ------------------------------------- -------------------- --------------------- Minimum Initial Purchase Payment $5,000 $1,500 - ------------------------------------- -------------------- --------------------- 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. 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. 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. 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. ILIAC Marathon Plus - 131764 17 [sidebar] TYPES OF FEES There are five types of fees or deductions that may affect your account. TRANSACTION FEES > Early Withdrawal Charge > Annual Maintenance Fee > Transfer Charge FEES DEDUCTED FROM INVESTMENTS IN THE SEPARATE ACCOUNT > Mortality and Expense Risk Charge > Administrative Expense Charge FEES DEDUCTED BY THE FUNDS > Investment Advisory Fees > 12b-1 Fees > Other Expenses PREMIUM AND OTHER TAXES CHARTES FOR THE ING GET U.S. CORE PORTFOLIO [end sidebar] 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 requested 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 - ------------------------------------------------------------------------------- CONTRACTS ISSUED OUTSIDE OF THE STATE OF NEW YORK - ------------------------------------------------------------------------------- CONTRACTS OTHER THAN ROTH IRA CONTRACTS - ------------------------------------------------------------------------------- YEARS FROM RECEIPT EARLY WITHDRAWAL OF PURCHASE PAYMENT 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 (1) - ------------------------------------------------------------------------------- COMPLETED EARLY WITHDRAWAL ACCOUNT YEARS 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% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CONTRACTS ISSUED IN THE STATE OF NEW YORK - ------------------------------------------------------------------------------- YEARS FROM RECEIPT EARLY WITHDRAWAL OF PURCHASE PAYMENT 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 2% 6 or more but less than 7 1% 7 or more 0% - ------------------------------------------------------------------------------- 1 If the purchase payment is a rollover from another contract issued by us or one of our affiliates and the early withdrawal charge has been waived, the early withdrawal charge will be based on the number of completed account years since the date of the initial purchase payment to the former contract. ILIAC Marathon Plus - 131764 18 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). For example: For contracts other than Roth IRAs issued outside of New York, we calculate the early withdrawal charge 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% of the portion of that purchase payment withdrawn. The next time you make a withdrawal we will assess the charge against the portion of the first purchase payment that you did not withdraw and/or your subsequent purchase payments to your account in the order they were received. For Roth IRAs, we calculate the early withdrawal charge based on the number of completed account years. If three years have elapsed since your initial purchase payment was made, we will deduct an early withdrawal charge equal to 2% of the portion of that purchase payment withdrawn. The next time you make a withdrawal we will assess the charge against the portion of the first purchase payment that you did not withdraw and/or your 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 calendar year, the amount withdrawn is 10% or less (for contracts issued in New York, 15% or less on the first withdrawal each calendar year after the first account year) than: > Your account value as of the last valuation day of the preceding calendar year or the date of your first purchase payment, whichever is later (if approved in your state); or > Your account value on the next valuation day after we receive your withdrawal request. The free withdrawal amount will be adjusted for amounts withdrawn under a systematic distribution option or taken as a required minimum distribution during the calendar 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; ILIAC Marathon Plus - 131764 19 > Taken because of the election of a systematic distribution option but, with respect to the Systematic Withdrawal Option (SWO) and the Life Expectancy Option (LEO), only to the extent that the amount taken is 10% or less (15% or less for contracts issued in the State of New York) of your account value on the later of the date we established your account or the most recent anniversary of that date (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 Estate Conservation Option (ECO) systematic distribution option); or > Paid upon termination of your account by us (see "Other Topics -- Involuntary Terminations"). NURSING HOME WAIVER. You may withdraw all or a portion of your account value without an early withdrawal charge if: > More than one year has elapsed since the account effective date; > The withdrawal is requested within three years of the annuitant's admission to a licensed nursing care facility (in New Hampshire non-licensed facilities are included); and > The annuitant has spent at least 45 consecutive days in such nursing care facility. We will not waive the early withdrawal charge if the annuitant was in a nursing care facility on the date we established your account. It will also not apply if otherwise prohibited by state law. 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 related 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 calendar 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 depends upon which contract you purchase. The amount of this charge, on an annual basis, is equal to the following percentages of your account value invested in the subaccounts: ILIAC Marathon Plus - 131764 20 CONTRACTS ISSUED OUTSIDE OF THE STATE OF NEW YORK o Contracts other than Roth IRAs Issued before May 1, 1998 1.25% o Contracts Issued on or after May 1, 1998, and all Roth IRA Contracts 1.10% CONTRACTS ISSUED IN THE STATE OF NEW YORK o All Contracts 1.25% During the income phase this charge, on an annual basis, is equal to 1.25% of amounts held 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. ADMINISTRATIVE EXPENSE CHARGE MAXIMUM AMOUNT. During the accumulation phase the amount of this charge, on an annual basis, is equal to 0.15% of your account value invested in the subaccounts. 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. This charge may be assessed during the accumulation phase or the income phase. If we are currently 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 that cannot be covered by the mortality and expense risk charge described above. This charge is not intended to exceed the average expected cost of administering the contract. We do not expect to make a profit from this 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." ILIAC Marathon Plus - 131764 21 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 or administrative expense 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 offered; > The amount of expected purchase payments; > A prior or existing relationship with the Company, such as being an employee or 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 fees 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. 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. The Fund Expense Table in this prospectus identifies which funds have service fees or 12b-1 fees. 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." MAXIMUM AMOUNT. Each fund's advisory fee and expenses are different. They are set forth in "Fee Table--Fees Deducted by the Funds" and described in more detail in each fund prospectus. WHEN/HOW. A fund's fees and expenses are not deducted from your account value. ILIAC Marathon Plus - 131764 22 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 Marathon Plus - 131764 23 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 and the administrative expense 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, the administrative expense charge, if any, and any other fees deducted from investments in the separate account, such as guarantee charges for the ING GET U.S. Core Portfolio. See "Fees." The net investment rate may be either positive or negative. ILIAC Marathon Plus - 131764 24 [sidebar] ------------------------ $5,000 Purchase Payment ------------------------ STEP 1 -------------------------------------- ING Life Insurance and Annuity Company -------------------------------------- STEP 2 --------------------------------- ------------------------------------------------ Subaccount A Subaccount B 300 accumulation 100 accumulation Etc. units units ------------------------------------------------ STEP 3 ------------------------------------------------ Mutual Mutual Fund A Fund B ------------------------------------------------ [end sidebar] 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 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 I. 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 Variable Annuity Account I 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 I ($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). 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 Marathon Plus - 131764 25 WITHDRAWALS - -------------------------------------------------------------------------------- You may withdraw all or a portion of your account value at any time during the accumulation phase (for contracts issued in New York, partial withdrawals are not available in the first accont year unless they are taken under a systematic distribution option). 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 and annual maintenance fee. (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 and any positive or negative market value adjustment for amounts withdrawn from the Guaranteed Account. 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 bear to your total account value. > Properly complete a disbursement form and deliver it to our 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 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 [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") > 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] ILIAC Marathon Plus - 131764 26 our receipt of your request and the amount to be reinstated. We will credit the amount reinstated proportionally for annual maintenance fees and early withdrawal charges imposed at the time of withdrawal. We will deduct from the amounts 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 a 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 reinstatements 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 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 Marathon Plus - 131764 27 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 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. [sidebar] FEATURES OF A SYSTEMATIC DISTRIBUTION 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] ILIAC Marathon Plus - 131764 28 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 death benefit proceeds 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 Service Center. Please contact our Service Center to learn what information is required for a request for payment 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. MARKET VALUE ADJUSTMENT:An adjustment that may be made to amounts withdrawn from the Guaranteed Account.The adjustment may be positive or negative. [end sidebar] 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 DEATH BENEFIT PROCEEDS? 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 have 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 that 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 MINIMUM GUARANTEED DEATH BENEFIT. If approved in your state, upon the death of the annuitant the death benefit will be the greater of: (1) The account value on the claim date; or (2) The minimum guaranteed death benefit as of the date of death, adjusted for purchase payments made and any amounts deducted from your account (including withdrawals, payments made under an income phase payment plan and fees and expenses) since the date the minimum guaranteed death benefit was determined. DETERMINING THE MINIMUM GUARANTEED DEATH BENEFIT. On the day we establish your account, the minimum guaranteed death benefit equals the amount of your initial purchase payment. Thereafter, the minimum guaranteed death benefit is determined once a year on the account anniversary (until the account anniversary i (a) The minimum guaranteed death benefit as last determined, adjusted for any purchase payments made and any amounts deducted from your account (including withdrawals, payments made under an income phase payment plan and fees and expenses) since the date the minimum guaranteed death benefit was determined; or (b) Your account value on that account anniversary. After the annuitant's 85th birthday, the minimum guaranteed death benefit equals the minimum guaranteed death benefit on the account anniversary immediately before the annuitant's 85th birthday, adjusted for payments made and any amounts deducted from your account (including withdrawals, payments made under an income phase payment plan and fees and expenses) since that account anniversary. ILIAC Marathon Plus - 131764 29 DEATH BENEFIT GREATER THAN THE ACCOUNT VALUE. If the minimum guaranteed death benefit is greater than your account value on the claim date, 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 death benefit payment 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. Unless your beneficiary elects otherwise, the distribution will be made into an interest bearing account, backed by our general account, that is accessed by the beneficiary through a checkbook feature. The beneficiary may access death benfit proceeds at any time without penalty. Interest earned on this account may be less than interest paid on other settlement options. DEATH BENEFIT AMOUNTS IN CERTAIN CASES IF THE CONTRACT HOLDER IS NOT THE ANNUITANT. Under nonqualified contracts only, the minimum guaranteed death benefit described above will not apply if the contract holder who is not the annuitant dies. Rather, the death benefit proceeds will be equal to the account value on the claim date, plus or minus any market value adjustment. An early withdrawal charge may apply to any full or partial payment of this death benefit. If the spousal beneficiary continues the account at the death of the contract holder who was not also the annuitant, the annuitant will not change and the minimum guaranteed death benefit will not apply on the death of the spousal beneficiary. Rather, the death benefit proceeds will equal the account value on the claim date, plus or minus any market value adjustment, and minus any applicable early withdrawal charge. IF THE SPOUSAL BENEFICIARY CONTINUES THE ACCOUNT. If the spousal beneficiary continues the account at the death of the contract holder who was also the annuitant, the spousal beneficiary becomes the annuitant. In this circumstance the minimum guaranteed death benefit payable at the death of a spousal beneficiary shall be determined as described above, except that the initial minimum guaranteed death benefit will equal the minimum guaranteed death benefit payable at the death of the original contract holder/annuitant. ALTERNATIVE DEATH BENEFIT. If the minimum guaranteed death benefit is not approved in your state, the following death benefit will apply: Upon the death of the annuitant, the death benefit will be the greatest of: (1) The total payments made to your account, adjusted for any amounts deducted from your account (including withdrawals, payments made under an income phase payment plan and fees and expenses); (2) The highest account value on any account anniversary until the account anniversary immediately before the annuitant's 75th birthday (85th birthday for contracts issued in New York) or date of death, whichever is earlier, adjusted for payments made and any amounts deducted from your account (including withdrawals, payments made under an income phase payment plan and fees and expenses) since that account anniversary; or (3) The account value as of the date of death. DEATH BENEFIT GREATER THAN THE ACCOUNT VALUE. If the alternative death benefit is greater than the account value as of the date of death, the amount by which the death ILIAC Marathon Plus - 131764 30 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 death benefit payment 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. Unless your beneficiary elects otherwise, the distribution will be made into an interest bearing account, backed by our general account, that is accessed by the beneficiary through a checkbook feature. The beneficiary may access death benefit proceeds at any time without penalty. Interest earned on this account may be less than interest paid on other settlement options. DEATH BENEFIT AMOUNTS IN CERTAIN CASES IF THE CONTRACT HOLDER IS NOT THE ANNUITANT. Under nonqualified contracts only, the alternative death benefit described above will not apply if the contract holder who is not the annuitant dies. Rather, the death benefit proceeds will be equal to the account value on the date the request for payment is received, plus or minus any market value adjustment. An early withdrawal charge may apply to any full or partial payment of this death benefit. If the spousal beneficiary continues the account at the death of the contract holder who was not the annuitant, the annuitant will not change and the alternative death benefit described above will not apply on the death of the spousal beneficiary. Rather, the death benefit proceeds will equal the account value on the date the request for payment is received, plus or minus any market value adjustment, and minus any early withdrawal charge, if approved in your state. If your state has not approved deduction of an early withdrawal charge in this situation, then an early withdrawal charge will apply only to payments made since the death of the original contract holder/annuitant. IF THE SPOUSAL BENEFICIARY CONTINUES THE ACCOUNT. If the spousal beneficiary continues the account at the death of the contract holder who was also the annuitant, the spousal beneficiary will become the annuitant. In this circumstance the death benefit payable at the death of a spousal beneficiary shall equal the account value on the date the request for payment is received, plus or minus any market value adjustment and minus any applicable early withdrawal charge applicable to payments made since the death of the original contract holder/annuitant. 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--Required Minimum Distributions")); ILIAC Marathon Plus - 131764 31 > 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 or 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. 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 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). 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. ILIAC Marathon Plus - 131764 32 [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] 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." 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. ILIAC Marathon Plus - 131764 33 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." MINIMUM PAYMENT AMOUNTS. The income phase payment option you select m > 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 (fifth anniversary for contracts issued in Pennsylvania). 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 (the fifth anniversary for contracts issued in Pennsylvania) may have adverse tax consequences. You should consult with a qualified tax adviser if you are considering either of these courses of action. 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. For contracts issued in New York, income phase payments may not begin later than the first day of the month following the annuitant's 90th birthday. 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. ILIAC Marathon Plus - 131764 34 CHARGES DEDUCTED. 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. We may also deduct a daily administrative charge from amounts held in the subaccounts. See "Fees." 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. Unless your beneficiary elects otherwise, the distribution will be made into an interest bearing account, backed by our general account, that is accessed by the beneficiary through a checkbook feature. The beneficiary may access death benefit proceeds at any time without penalty. Interest earned on this account may be less than interest paid on other settlement options. 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. INCOME PHASE 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 Marathon Plus - 131764 35 - -------------------------------------------------------------------------------- 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. Two Lives It is 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, Two Lives-- with payments guaranteed from 5 to 30 years or as otherwise Guaranteed specified in the contract. Payments CONTINUING PAYMENTS: 100% of the payment to continue to the surviving annuitant after thefirst 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 DEATH BENEFIT -- PAYMENT TO THE BENEFICIARY: Following the Option annuitant's death, we will pay a lump-sum payment equal limited to the amount originally applied to the income phase payment availability option (less any premium tax) and less the total amount of -- income payments paid. fixed payment only) - -------------------------------------------------------------------------------- Life Income--Two LENGTH OF PAYMENTS: For as long as either annuitant lives. Lives--Cash Refund Option CONTINUING PAYMENTS: 100% of the payment to continue after (limited the first death. availability-- fixed payment DEATH BENEFIT-- PAYMENT TO THE BENEFICIARY: When both only) annuitants die we will pay a lump-sum payment equal to the amount applied to the income phase payment option (less any 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 Guaranteed years. In certain cases a lump-sum payment may be requested Payments 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 payment 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 our 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 Marathon Plus - 131764 36 TAXATION - -------------------------------------------------------------------------------- INTRODUCTION This section discusses our understanding of current federal income tax laws affecting the contract. You should keep the following in mind when reading it: o Your tax position (or the tax position of the designated beneficiary, as applicable) determines federal taxation of amounts held or paid out under the contract; o Tax laws change. It is possible that a change in the future could affect contracts issued in the past; o This section addresses federal income tax rules and does not discuss federal estate and gift tax implications, state and local taxes, foreign taxes or any other tax provisions; and o We do not make any guarantee about the tax treatment of the contract or transactions involving the contract. We do not intend this information to be tax advice. For advice about the effect of federal income taxes or any other taxes on amounts held or paid out under the contract, consult a tax adviser. For more comprehensive information, contact the Internal Revenue Service (IRS). 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. Non-qualified contracts are purchased with after tax contributions and are not related to retirement plans that receive special income tax treatment under the Code. 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(a), 403(b), 408, 408A or 457 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 your tax status. In addition, certain requirements must be satisfied in purchasing a qualified Contract with proceeds from a tax-qualified plan in order to continue receiving favorable tax treatment. Some retirement plans are subject to additional distribution and other requirements that are not incorporated into our Contract. Because the Plan is not part of the Contract, we are not bound by any Plan's terms or conditions. 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. TAXATION OF NON-QUALIFIED CONTRACTS TAXATION PRIOR TO DISTRIBUTION We believe that if you are a natural person you will generally not be taxed on increases in the value of a non-qualified Contract until a distribution occurs or until annuity payments begin. This assumes that the Contract will qualify as an annuity ILIAC Marathon Plus - 131764 37 contract for federal income tax purposes. For these purposes, the agreement to assign or pledge any portion of the contract value generally will be treated as a distribution. In order to receive deferral of taxation, the following requirements must be satisfied: DIVERSIFICATION. Internal Revenue Code Section 817(h) requires investments of a variable account be adequately diversified in order for a contract to be treated as annuity contract for federal income tax purposes. The Treasury has issued regulations which set the standards for measuring the adequacy of any diversification. To be adequately diversified, each variable investment option must meet certain tests. Each sub-account's corresponding fund has represented that it will meet the diversification standards that apply to your policy. It is intended that Variable Annuity Account B, through the subaccounts, will satisfy these diversification requirements. INVESTOR CONTROL. Although earnings under non-qualified contracts are generally not taxed until withdrawn, the Internal Revenue Service (IRS) has stated in published rulings that a variable contract owner will be considered the owner of separate account assets if the contract owner possesses incidents of investment control over the assets. In these circumstances, income and gains from the separate account assets would be currently includible in the variable contract owner's gross income. The Treasury announced that it will issue guidance regarding the extent to which owners could direct their investments among subaccounts without being treated as owners of the underlying assets of the separate account. It is possible that the Treasury's position, when announced, may adversely affect the tax treatment of existing contracts. The Company therefore reserves the right to modify the contract as necessary to attempt to prevent the contract holder from being considered the federal tax owner of a pro rata share of the assets of the separate account. 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 distribution 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. NON-NATURAL PERSONS. 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. 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. TAXATION OF DISTRIBUTIONS GENERAL. When a withdrawal from a non-qualified Contract occurs, 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. Investment in the contract is generally equal to ILIAC Marathon Plus - 131764 38 the amount of all contributions to the contract, less the aggregate amount of non-taxable distributions previously made. 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 benefits. 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. 10% PENALTY TAX. 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. TAX-FREE EXCHANGES. Section 1035 of the Tax Code permits the exchange of a life insurance, endowment or annuity contract for an annuity contract on a tax-free basis. In such instance, the "investment in the contract" in the old contract will carry over to the new contract. You should consult with your tax advisor regarding procedures for making Section 1035 exchanges. If your Contract is purchased through a tax-free exchange of a life insurance, endowment or annuity contract that was purchased prior to August 14, 1982, then any distributions other than annuity payments will be treated, for tax purposes, as coming: o First, from any remaining "investment in the contract" made prior to August 14, 1982 and exchanged into the Contract; o Next, from any "income on the contract" attributable to the investment made prior to August 14, 1982; o Then, from any remaining "income on the contract"; and o Lastly, from any remaining "investment in the contract". The IRS has concluded that in certain instances, the partial exchange of a portion of one annuity contract for another contract will be tax-free. However, the IRS has reserved the right to treat transactions it considers abusive as ineligible for favorable partial 1035 tax-free exchange treatment. The IRS has not provided any additional guidance on what it considers abusive. It is not certain whether the IRS would treat an immediate withdrawal or annuitization after a partial exchange as abusive. In addition, it is unclear how the IRS will treat a partial exchange from a life insurance, endowment, or annuity contract directly into an immediate annuity. Currently, we will accept a partial 1035 exchange from a non-qualified annuity into a deferred annuity or ILIAC Marathon Plus - 131764 39 an immediate annuity as a tax-free transaction unless we believe that we would be expected to treat the transaction as abusive. We are not responsible for the manner in which any other insurance company, for tax reporting purposes, or the IRS, with respect to the ultimate tax treatment, recognizes or reports a partial exchange. We strongly advise you to discuss any proposed 1035 exchange with your tax advisor prior to proceeding with the transaction. TAXATION OF 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. DEATH BENEFITS. 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. The Contract offers a death benefit (including the benefit provided by the earnings multiplier benefit rider) 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. ASSIGNMENTS AND OTHER TRANSFERS. A transfer, pledge or assignment of ownership of a Contract, or the designation of an annuitant or payee other than an owner, may result in certain tax consequences to you that are not discussed herein. A contract owner contemplating any such transfer, pledge, assignment, or designation or exchange, should consult a tax adviser as to the tax consequences. IMMEDIATE ANNUITIES. Under section 72 of the Tax Code, an immediate annuity means an annuity (1) which is purchased with a single premium, (2) with annuity payments starting within one year from the date of purchase, and (3) which provides a series of substantially equal periodic payments made annually or more frequently. Treatment as an immediate annuity will have significance with respect to exceptions from the 10% early withdrawal penalty, to contracts owned by non-natural persons, and for certain policy exchanges. MULTIPLE CONTRACTS. The tax law requires that all non-qualified deferred annuity contracts that are issued by a company or its 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. 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. The withholding rates applicable to the taxable portion of periodic annuity payments 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. Regardless of whether you elect not to have federal income ILIAC Marathon Plus - 131764 40 tax withheld, you are still liable for payment of federal income tax on the taxable portion of the payment. TAXATION OF QUALIFIED CONTRACTS GENERAL 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 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. You will not generally pay taxes on earnings from the annuity contract described in this prospectus until they are withdrawn. When an annuity contract is used to fund one of these tax qualified retirement arrangements, 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. Tax-qualified retirement arrangements under Tax Code sections 401(a), 401(k), 403(a), 403(b) or governmental 457 plans also generally defer payment of taxes on earnings until they are withdrawn (or in the case of a non-governmental 457 plan, paid or made available to you or a designated beneficiary). However, annuities do provide other features and benefits which may be valuable to you. You should discuss your alternatives with your local representative. DISTRIBUTIONS - GENERAL 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 ILIAC Marathon Plus - 131764 41 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 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 - GENERAL 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. INDIVIDUAL RETIREMENT ANNUITIES - DISTRIBUTIONS 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 ILIAC Marathon Plus - 131764 42 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 required minimum distributions 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 required minimum 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. 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 required minimum distributions at your death. The death benefit under the contract and also certain other contract benefits, such as living benefits, 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, 2004, your entire balance must be distributed to the designated beneficiary by December 31, 2009. 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: ILIAC Marathon Plus - 131764 43 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. ROTH IRAS - GENERAL 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. ROTH IRAS - DISTRIBUTIONS 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. 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 - GENERAL 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 reduction contributions, but not earnings on such contributions, may also be distributed upon hardship. Certain penalties may apply. TAX SHELTERED ANNUITIES - 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, the Code and other federal and state regulations. 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 ILIAC Marathon Plus - 131764 44 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: o 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. o Death Benefits, Annuitization and Surrenders: We deduct the outstanding loan balance from any amounts otherwise payable and in determining the amount available for annuitization. TAX SHELTERED ANNUITIES - DISTRIBUTIONS All distributions from Section 403(b) plans are taxed as received unless either of the following is 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 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 required minimum 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 (including the benefit provided by the earnings multiplier benefit rider) 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 ILIAC Marathon Plus - 131764 45 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%. ASSIGNMENTS Adverse tax consequences to the plan and/or to you may result if your beneficial interest in the contract is assigned or transferred to persons other than: a plan participant as a means to provide benefit payments; an alternate payee under a qualified domestic relations order in accordance with code section 414(p); or to the Company as collateral for a loan. TAXATION OF COMPANY We are taxed as a life insurance company under the Tax Code. The Separate Account is not a separate entity from us. Therefore, it is not taxed separately as a "regulated investment company," but is taxed as part of the Company. We automatically apply investment income and capital gains attributable to the separate account to increase reserves under the contracts. Because of this, under existing federal tax law we believe that any such income and gains will not be taxed to the extent that such income and gains are applied to increase reserves under the contracts. In addition, any foreign tax credits attributable to the separate account will be first used to reduce any income taxes imposed on the separate account before being used by the Company. In summary, we do not expect that we will incur any federal income tax liability attributable to the separate account and we do not intend to make any provision for such taxes. However, changes in federal tax laws and/or their interpretation may result in our being taxed on income or gains attributable to the separate account. In this case, we may impose a charge against the separate account (with respect to some or all of the contracts) to set aside provisions to pay such taxes. We may deduct this amount from the separate account, including from your account value invested in the subaccounts. ILIAC Marathon Plus - 131764 46 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 selling 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 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. CONTRACT DISTRIBUTION 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 contracts. 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. (NASD) and the Securities Investor Protection Corporation. ING Financial's principal office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. The contracts are 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 ING Financial. We refer to ING Financial and the other broker-dealers selling the contracts as "distributors." ILIAC Marathon Plus - 131764 47 All registered representatives selling the contracts must also be licensed as insurance agents for the Company. Broker-dealers which have or may enter into selling agreements with ING Financial include the following broker-dealers which are affiliated with the Company: Baring Investment Services, Inc. Compulife Investor Services, Inc. Directed Services, Inc. Financial Network Investment Corporation Granite Investment Services, Inc. Guaranty Brokerage Services, Inc. ING America Equities, Inc. ING Barings Corp. ING Direct Funds Limited ING DIRECT Securities, INC. ING Financial Partners, Inc. ING Funds Distributor, LLC ING Furman Selz Financial Service LLC ING TT&S (U.S.) Securities, Inc. Multi-Financial Securities Corporation PrimeVest Financial Services, Inc. Systematized Benefits Administrators, Inc. ILIAC Marathon Plus - 131764 48 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 6% 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 6% 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 educational and/or business 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 or 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. ILIAC Marathon Plus - 131764 49 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. 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 ILIAC Marathon Plus - 131764 50 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 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 ILIAC Marathon Plus - 131764 51 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. TRADING-INDUSTRY DEVELOPMENTS As with many financial services companies, the Company and affiliates of the Company have received requests for information from various governmental and self-regulatory agencies in connection with investigations related to trading in investment company shares. In each case, full cooperation and responses are being provided. The Company is also reviewing its policies and procedures in this area. LEGAL MATTERS AND PROCEEDINGS We are not aware of any pending legal proceedings which involve Separate Account B as a party. 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, (the "distributor"), is a party to threatened or pending lawsuits/arbitration that generally arise from the normal conduct of business. Suits against the distributor sometimes include claims for substantial compensatory, consequential or punitive damages and other types of relief. In a number of pending cases, claims have been made that a former registered representative of the distributor converted client funds to the representative's personal use. ING Financial Advisers, LLC is not involved in any legal proceeding which, in the opinion of management, is likely to have material adverse effect on its ability to distribute the contract. ILIAC Marathon Plus - 131764 52 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 Income Phase Payments Sales Material and Advertising Independent Auditors Financial Statements of the Separate Account 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 Marathon Plus - 131764 53 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. 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. ILIAC Marathon Plus - 131764 I-1 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 Marathon Plus - 131764 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 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") (formerly Aetna Investment Services, LLC) 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 Marathon Plus - 131764 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 Marathon Plus - 131764 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. You should consider the investment objectives, risks, charges and expenses of the funds carefully before investing. Please refer to the fund prospectuses for this and additional information. 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. 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 MFS Research Equity Portfolio ING UBS U.S. Large Cap Equity Portfolio Oppenheimer Main Street Growth & Income Fund/VA(R) Oppenheimer Main Street Fund/VA(R) - ------------------------------------------------------------------------------------------------------------------------------------ FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------------------------------------------------------ ING GET U.S. CORE PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------------------ ING GET U.S. CORE PORTFOLIO Seeks to achieve maximum total return and minimal exposure of the Series' assets to a market value loss, by participating, to the INVESTMENT ADVISER: ING Investments, LLC extent possible, 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. - ------------------------------------------------------------------------------------------------------------------------------------
ILIAC Marathon Plus - 131764 III-1
- ----------------------------------------------------------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------------------------------------------------------- ING PARTNERS, INC. - ----------------------------------------------------------------------------------------------------------------------------------- ING JP MORGAN FLEMING INTERNATIONAL PORTFOLIO (Initial Class) Seeks long-term growth of capital. Invests primarily (at least 65% of total assets) in the equity securities of INVESTMENT ADVISER: ING Life Insurance and Annuity foreign companies that the subadviser believes have high Company growth potential. Will normally invest in a number of INVESTMENT SUBADVISER: J.P. Morgan Fleming Asset issuers in several countries other than the U.S. and will Management (London) Ltd. invest in securities in both developed and developing markets. - ----------------------------------------------------------------------------------------------------------------------------------- ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Seeks capital appreciation. Invests primarily (at least (Initial Class) 65% of net assets) in common stocks and related securities, such as preferred stocks, convertible INVESTMENT ADVISER: ING Life Insurance and Annuity securities and depositary receipts. Company INVESTMENT SUBADVISER: Massachusetts Financial Services Company - ----------------------------------------------------------------------------------------------------------------------------------- ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Seeks long-term growth of capital. Invests primarily (at (Initial Class) least 80% of net assets under normal circumstances) in common stocks and related securities, such as preferred INVESTMENT ADVISER: ING Life Insurance and Annuity stocks, convertible securities and depositary receipts, of Company emerging growth companies. INVESTMENT SUBADVISER: Salomon Brothers Asset Management Inc. - ----------------------------------------------------------------------------------------------------------------------------------- ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO Seeks long-term capital growth, and secondarily, (Initial Class) increasing dividend income. Invests primarily (at least 80% of net assets under normal circumstances) in common INVESTMENT ADVISER: ING Life Insurance and Annuity stocks. Concentrates its investments in growth Company companies. Investments in foreign securities are limited INVESTMENT SUBADVISER: T. Rowe Price Associates, Inc. to 30% of total assets. - -----------------------------------------------------------------------------------------------------------------------------------
ILIAC Marathon Plus - 131764 III-2
- ----------------------------------------------------------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------------------------------------------------------- ING UBS U.S. LARGE CAP EQUITY PORTFOLIO Seeks long-term growth of capital and future income. Under (Initial Class) (formerly ING MFS Research Equity normal circumstances, invests at least 80% of net assets Portfolio) (plus borrowings for investment purposes, if any) in U.S. INVESTMENT ADVISER: ING Life Insurance and Annuity equity securities. Investments in equity securities may Company include dividend-paying securities, common stock and INVESTMENT SUBADVISER: UBS Global Asset Management Inc. preferred stock. - ----------------------------------------------------------------------------------------------------------------------------------- ING STRATEGIC ALLOCATION PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------------------- ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO Seeks to provide total return (i.e., income and capital (Class I) appreciation, both realized and unrealized). Managed for investors seeking a balance between income and capital appreciation who generally have an investment horizon INVESTMENT ADVISER: ING Investments, LLC tolerance. Under normal market conditions, allocates assets among INVESTMENT SUBADVISER: Aeltus Investment several classes of equities, fixed-income securities (including Management, Inc. up to 15% of total assets in high-yield instruments) and money market instruments. The benchmark portfolio is 60% equities, 35% fixed income and 5% money market instruments under neutral market conditions. - ----------------------------------------------------------------------------------------------------------------------------------- ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO Seeks to provide capital appreciation. Managed for (Class I) investors seeking capital appreciation who generally have an investment horizon exceeding 15 years and a high level INVESTMENT ADVISER: ING Investments, LLC of risk tolerance. Under normal market conditions, INVESTMENT SUBADVISER: Aeltus Investment Management, Inc. allocates assets among several classes of equities, INVESTMENT fixed-income securities (including up to 15% of total assets in high-yield instruments) and money market instruments. The benchmark portfolio is 80% equities and 20% fixed income under neutral market conditions. - ----------------------------------------------------------------------------------------------------------------------------------- ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO Seeks to provide total return consistent with preservation (Class I) of capital. Managed for investors primarily seeking total return consistent with capital preservation who generally INVESTMENT ADVISER: ING Investments, LLC have an investment horizon exceeding five years and a low INVESTMENT SUBADVISER: Aeltus Investment Management, Inc. level of risk tolerance. Under normal market conditions, allocates assets among several classes of equities, fixed-income securities (including up to 15% of total assets in high-yield instruments) and money market instruments. The benchmark portfolio is 35% equities, 55% fixed income and 10% money market instruments under neutral market conditions. - ----------------------------------------------------------------------------------------------------------------------------------- ING VARIABLE FUNDS, INC. - ----------------------------------------------------------------------------------------------------------------------------------- ING VP GROWTH AND INCOME PORTFOLIO Seeks to maximize total return through investments in a (Class I) diversified portfolio of common stocks and securities convertible into common stock. Under normal market INVESTMENT ADVISER: ING Investments, LLC conditions, invests at least 65% of total assets in common INVESTMENT SUBADVISER: Aeltus Investment Management, Inc. stocks that the Portfolio's subadviser believes have significant potential for capital appreciation or income growth or both. - ----------------------------------------------------------------------------------------------------------------------------------- ING VARIABLE PORTFOLIOS, INC. - ----------------------------------------------------------------------------------------------------------------------------------- ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO Seeks long-term capital appreciation. Normally invests at (Class I) least 80% of net assets in equity securities issued by science and technology companies in all market INVESTMENT ADVISER: ING Investments, LLC capitalization ranges. Will invest primarily in equity INVESTMENT SUBADVISER: Blackrock Advisors, Inc. securities of U.S. and non-U.S. companies selected for their rapid and sustainable growth potential from the development, advancement and use of science and/or technology. May invest up to 25% of its net assets in stocks of issuers in emerging market countries. - -----------------------------------------------------------------------------------------------------------------------------------
ILIAC Marathon Plus - 131764 III-3
- ----------------------------------------------------------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------------------------------------------------------- ING VP GROWTH PORTFOLIO (Class I) Seeks growth of capital through investment in a diversified portfolio consisting primarily of common INVESTMENT ADVISER: ING Investments, LLC stocks and securities convertible into common stocks INVESTMENT SUBADVISER: Aeltus Investment believed to offer growth potential. Under normal market Management, Inc. 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 performance of the (Class I) Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), while maintaining a market level of risk. Invests INVESTMENT ADVISER: ING Investments, LLC at least 80% of assets in stocks included in the S&P 500 INVESTMENT SUBADVISER: Aeltus Investment Index. The subadviser's objective is to overweight those Management, Inc. stocks in the S&P 500 Index that it believes will outperform the index and underweight or avoid those stocks that it believes will under perform the index. - ----------------------------------------------------------------------------------------------------------------------------------- ING VP INTERNATIONAL EQUITY PORTFOLIO Seeks long-term capital growth primarily through (Class I) investment in a diversified portfolio of common stocks principally traded in countries outside of the United INVESTMENT ADVISER: ING Investments, LLC States. The Portfolio will not target any given level of INVESTMENT SUBADVISER: Aeltus Investment current income. Under normal market conditions, invests at Management, Inc. 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 (Class I) Seeks growth of capital primarily through investment in a diversified portfolio of common stocks and securities INVESTMENT ADVISER: ING Investments, LLC convertible into common stocks of companies with smaller INVESTMENT SUBADVISER: Aeltus Investment market capitalizations. Under normal market conditions, Management, Inc. invests at least 80% of net assets in common stocks and securities convertible into common stock of small-capitalization companies. - ----------------------------------------------------------------------------------------------------------------------------------- ING VP VALUE OPPORTUNITY PORTFOLIO (Class I) Seeks growth of capital primarily through the investment in a diversified portfolio of common stocks and securities INVESTMENT ADVISER: ING Investments, LLC convertible in common stock. Under normal market INVESTMENT SUBADVISER: Aeltus Investment conditions, invests at least 65% of total assets in common Management, Inc. stocks and securities convertible into common stock. - ----------------------------------------------------------------------------------------------------------------------------------- ING VP BALANCED PORTFOLIO, INC. - ----------------------------------------------------------------------------------------------------------------------------------- ING VP BALANCED PORTFOLIO, INC. (Class I) Seeks to maximize investment return, consistent with reasonable safety of principal, by investing in a INVESTMENT ADVISER: ING Investments, LLC diversified portfolio of one or more of the following INVESTMENT SUBADVISER: Aeltus Investment asset classes: stocks, bonds and cash equivalents, based Management, Inc. 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 Marathon Plus - 131764 III-4
- ----------------------------------------------------------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------------------------------------------------------- ING VP BOND PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------------------- ING VP BOND PORTFOLIO (Class I) Seeks to maximize total return as is consistent with reasonable risk, through investment in a diversified INVESTMENT ADVISER: ING Investments, LLC portfolio consisting of investment-grade corporate bonds, INVESTMENT SUBADVISER: Aeltus Investment and debt securities issued or guaranteed by the U.S. Management, Inc. Government, its agencies or instrumentalities. Under normal market conditions, invests at least 80% of 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 also 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 - ----------------------------------------------------------------------------------------------------------------------------------- ING VP MONEY MARKET PORTFOLIO (Class I) Seeks to provide high current return, consistent with preservation of capital and liquidity, through investment INVESTMENT ADVISER: ING Investments, LLC in high-quality money market instruments. Invests in a INVESTMENT SUBADVISER: Aeltus Investment diversified portfolio of high-quality fixed income Management, Inc. 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. - ----------------------------------------------------------------------------------------------------------------------------------- CALVERT VARIABLE SERIES, INC. - ----------------------------------------------------------------------------------------------------------------------------------- CALVERT SOCIALLY BALANCED PORTFOLIO Seeks to achieve a competitive total return through an actively managed NON-DIVERSIFIED portfolio of stocks, INVESTMENT ADVISER: Calvert Asset Management Company, Inc. bonds and money market instruments which offer income and INVESTMENT SUBADVISER: Brown Capital Management, Inc. and capital growth opportunity and which satisfy the SsgA Funds Management, Inc. investment and social criteria for the Portfolio. Typically invests about 60% of its assets in stocks and 40% in bonds or other fixed-income investments. Stock investments are primarily common stock in large-cap companies, while the fixed-income investments are primarily a wide variety of investment grade bonds. - ----------------------------------------------------------------------------------------------------------------------------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS - ----------------------------------------------------------------------------------------------------------------------------------- FIDELITY(R) VIP ASSET MANAGERSM PORTFOLIO Seeks to obtain high total return with reduced risk over the long (Initial Class) term by allocating its assets among stocks, bonds and short-term instruments. Assets are allocated among INVESTMENT ADVISER: Fidelity Management & Research stocks, bonds, and short-term and money market Company instruments, maintaining neutral mix over time of 50% of (U.K.) INVESTMENT SUBADVISERS: Fidelity Management & Research assets in stocks, 40% of assets in bonds, and 10% of Inc.; Fidelity Management & Research (Far East) assets in short-term and money market instruments. Inc.; Fidelity Investments Japan Limited; Fidelity Investments Money Management, Inc.; FMR Co., Inc. - ----------------------------------------------------------------------------------------------------------------------------------- FIDELITY(R)VIP CONTRAFUND(R)PORTFOLIO (Initial Class) Seeks long-term capital appreciation. Normally invests primarily in common stocks of companies whose value the INVESTMENT ADVISER: Fidelity Management & Research Portfolio's investment adviser believes is not fully Company recognized by the public. INVESTMENT SUBADVISER: Fidelity Management & Research (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc. - -----------------------------------------------------------------------------------------------------------------------------------
ILIAC Marathon Plus - 131764 III-5
- ----------------------------------------------------------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------------------------------------------------------- FIDELITY(R)VIP EQUITY-INCOME PORTFOLIO ( Initial Class) Seeks reasonable income. Also considers the potential for capital appreciation. Seeks to achieve a yield which INVESTMENT ADVISER: Fidelity Management & Research exceeds the composite yield on the securities comprising Company the Standard & Poor's 500 Index. Normally invests at least INVESTMENT SUBADVISER: FMR Co., Inc. 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 (Initial Class) Seeks to achieve capital appreciation. Normally invests primarily in common stocks of companies the investment INVESTMENT ADVISER: Fidelity Management & Research adviser believes have above-average growth potential Company (often called "growth" stocks). INVESTMENT SUBADVISER: FMR Co., Inc. - ----------------------------------------------------------------------------------------------------------------------------------- FIDELITY(R) VIP HIGH INCOME PORTFOLIO (Initial Class) Seeks a high level of current income while also considering growth of capital. Normally invests primarily in income-producing debt securities, preferred stocks and INVESTMENT ADVISER: Fidelity Management & Research convertible securities, with an emphasis on lower-quality Company debt securities. INVESTMENT SUBADVISER: Fidelity Management & Research (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc. - ----------------------------------------------------------------------------------------------------------------------------------- FIDELITY(R)VIP INDEX 500 PORTFOLIO (Initial Class) Seeks investment results that correspond to the total return of common stocks publicly traded in the United INVESTMENT ADVISER: Fidelity Management & Research States, as represented by the Standard & Poor's 500 Company Index (SM) (S&P 500(R)). Normally invests at least 80% of INVESTMENT SUBADVISER: Geode Capital Management, LLC assets in common stocks included in the S&P 500(R). (Geode) - ----------------------------------------------------------------------------------------------------------------------------------- FIDELITY(R)VIP OVERSEAS PORTFOLIO (Initial Class) Seeks long-term growth of capital. Normally invests at least 80% of assets in non-U.S. securities, primarily in INVESTMENT ADVISER: Fidelity Management & Research common stocks. Company INVESTMENT SUBADVISER: Fidelity Management & Research (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity International Investment Advisors (U.K.) Limited; Fidelity Investments Japan Limited; FMR Co., Inc. - ----------------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - ----------------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - BALANCED PORTFOLIO Seeks long-term capital growth, consistent with (Institutional Class) preservation of capital and balanced by current income. Normally invests 40-60% of its assets in securities INVESTMENT ADVISER: Janus Capital selected primarily for their growth potential and 40-60% of its assets in securities selected primarily for their income potential. Will limit its investment of high-yield/high-risk bonds to less than 35% of its net assets. may invest without limit on foreign equity and debt securities. - ----------------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - FLEXIBLE INCOME PORTFOLIO Seeks to obtain maximum total return, consistent with (Institutional Class) preservation of capital. Invests primarily in a wide variety of income-producing securities such as corporate INVESTMENT ADVISER: Janus Capital bonds and notes; government securities including agency securities; and preferred stock. Will invest at least 80% of its assets in income-producing securities. Will invest at least 65% of its assets in investment grade debt securities and will maintain a dollar-weighted average portfolio maturity of five to ten years. May invest without limit in foreign debt and equity securities. - -----------------------------------------------------------------------------------------------------------------------------------
ILIAC Marathon Plus - 131764 III-6
- ----------------------------------------------------------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - GROWTH PORTFOLIO Seeks long-term growth of capital in a manner consistent (Institutional Class) with the preservation of capital. Invests primarily in common stocks selected for their growth potential. INVESTMENT ADVISER: Janus Capital Although it can invest in companies of any size, it generally invests in larger, more established companies. Will limit its investment in high-yield/high-risk bonds to less than 35% of its net assets. May invest without limit in foreign equity and debt securities. - ----------------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - MIDCAP GROWTH PORTFOLIO Seeks long-term growth of capital. Invests, under normal (Institutional Class) (formerly Aggressive Growth) circumstances, at least 80% of its net assets in equity securities of mid-sized companies whose market INVESTMENT ADVISER: Janus Capital capitalization falls, at the time of initial purchase, in the 12-month average of the capitalization range of the Russell MidCap Growth Index. Will limit its investment in high-yield/high-risk bonds to less than 20% of its net assets. May invest without limit in foreign equity and debt securities. - ----------------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO Seeks long-term growth of capital in a manner consistent (Institutional Class) with the preservation of capital. Invests primarily in common stocks of companies of any size located throughout INVESTMENT ADVISER: Janus Capital the world. Normally invests in issuers from at least five different countries, including the United States. May, under unusual circumstances, invest in fewer than five countries or even in a single country. Will limit its investment of high-yield/high-risk bonds to less than 35% of its net assets. May invest without limit in foreign equity and debt securities. - ----------------------------------------------------------------------------------------------------------------------------------- MFS(R) VARIABLE INSURANCE TRUST (SM) - ----------------------------------------------------------------------------------------------------------------------------------- MFS(R)STRATEGIC INCOME SERIES (Initial Class) A NONDIVERSIFIED fund that seeks to provide high current income by investing in fixed income securities. Its INVESTMENT ADVISER: Massachusetts Financial secondary objective is to provide significant capital Services Company 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. The series may also invest in derivative securities. - ----------------------------------------------------------------------------------------------------------------------------------- MFS(R) TOTAL RETURN SERIES (Initial Class) Seeks mainly to provide above-average income (compared to INVESTMENT ADVISER: Massachusetts Financial Services a portfolio invested entirely in equity securities) Company consistent with the prudent employment of capital, and secondarily to provide reasonable opportunity for growth of capital and income. Under normal market conditions, invests at least 40%, but not more than 75%, of net assets in common stocks and related securities (referred to as equity securities) such as preferred stock; bonds, warrants or rights convertible into stock; and depositary receipts for those securities. The series generally seeks equity securities of companies believed to be undervalued. Invests at least 25% of net assets in non-convertible fixed income securities, including U.S. government securities, mortgage- and asset-backed securities and corporate bonds. The series may also invest in foreign securities. - ----------------------------------------------------------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - ----------------------------------------------------------------------------------------------------------------------------------- OPPENHEIMER AGGRESSIVE GROWTH FUND/VA Seeks capital appreciation by investing in "growth type" companies. Invests mainly in equity securities, such as INVESTMENT ADVISER: OppenheimerFunds, Inc. common stocks and can invest in other equity securities, such as preferred stocks and securities convertible into common stocks. - -----------------------------------------------------------------------------------------------------------------------------------
ILIAC Marathon Plus - 131764 III-7
- ----------------------------------------------------------------------------------------------------------------------------------- FUND NAME AND INVESTMENT ADVISER/SUBADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------------------------------------------------------- OPPENHEIMER GLOBAL SECURITIES FUND/VA Seeks long-term capital appreciation by investing a substantial portion of assets in securities of foreign INVESTMENT ADVISER: OppenheimerFunds, Inc. issuers, "growth-type" companies, cyclical industries and special situations that are considered to have appreciation possibilities. Invests mainly in common stocks and can also buy other equity securities, including preferred stocks and convertible securities in the U.S. and foreign countries. - ----------------------------------------------------------------------------------------------------------------------------------- OPPENHEIMER MAIN STREET FUND/VA Seeks high total return (which includes growth in the (formerly Oppenheimer Main Street Growth & Income Fund/VA) value of its shares as well as current income) from equity and debt securities. Invests mainly in common stocks of INVESTMENT ADVISER: OppenheimerFunds, Inc. 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 debt securities. Invests mainly in debt INVESTMENT ADVISER: OppenheimerFunds, Inc. 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. - -----------------------------------------------------------------------------------------------------------------------------------
ILIAC Marathon Plus - 131764 III-8
APPENDIX IV PROJECTED SCHEDULE OF ING GET U.S. CORE PORTFOLIO* OFFERINGS - ------------------------------------------------------------------------------------------- OFFERING DATES GUARANTEE DATES - ------------------------------------------------------------------------------------------- ING GET U.S. CORE PORTFOLIO - SERIES 4 03/12/04 - 06/10/04 06/11/04 - 06/12/09 ING GET U.S. CORE PORTFOLIO - SERIES 5 06/11/04 - 09/09/04 09/10/04 - 09/09/11 ING GET U.S. CORE PORTFOLIO - SERIES 6 09/10/04 - 12/09/04 12/10/04 - 12/09/11 ING GET U.S. CORE PORTFOLIO - SERIES 7 12/10/04 - 03/08/05 03/09/05 - 03/08/12 ING GET U.S. CORE PORTFOLIO - SERIES 8 03/09/05 - 06/07/05 06/08/05 - 06/07/12
* Previously known as ING GET Fund. ILIAC Marathon Plus - 131764 IV-1 APPENDIX V CONDENSED FINANCIAL INFORMATION - ------------------------------------------------------------------------------- EXCEPT FOR SUBACCOUNTS WHICH DID NOT COMMENCE OPERATIONS AS OF DECEMBER 31, 2003, THE FOLLOWING TABLES GIVE (1) THE ACCUMULATION UNIT VALUE (AUV) AT THE BEGINNING OF THE PERIOD, (2) THE AUV AT THE END OF THE PERIOD AND (3) THE TOTAL NUMBER OF ACCUMULATION UNITS OUTSTANDING AT THE END OF THE PERIOD FOR EACH SUBACCOUNT OF VARIABLE ANNUITY ACCOUNT B AVAILABLE UNDER THE CONTRACTS FOR THE INDICATED PERIODS. FOR THOSE SUBACCOUNTS THAT COMMENCED OPERATIONS DURING THE PERIOD ENDED DECEMBER 31, 2003 THE "VALUE AT BEGINNING OF PERIOD" SHOWN IS THE VALUE AT FIRST DATE OF INVESTMENT. FOR THOSE SUBACCOUNTS THAT ENDED OPERATIONS DURING THE PERIOD ENDED DECEMBER 31, 2003 THE "VALUE AT END OF PERIOD" SHOWN IS THE VALUE AT THE LAST DATE OF INVESTMENT. TABLE I
FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.40% (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) 2003 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- CALVERT SOCIAL BALANCED PORTFOLIO (Funds were first received in this option during December 1997) Value at beginning of period $9.61 $11.092 $12.089 $12.656 $11.437 $9.976 $9.805 Value at end of period $11.30 $9.61 $11.092 $12.089 $12.656 $11.437 $9.976 Number of accumulation units outstanding at end of 84,238 79,520 73,665 75,859 63,517 34,438 4,827 period FIDELITY(R)VIP ASSET MANAGERSM PORTFOLIO (Funds were first received in this option during January 1995) Value at beginning of period $15.71 $17.452 $18.456 $19.482 $17.786 $15.679 $13.180 Value at end of period $18.27 $15.71 $17.452 $18.456 $19.482 $17.786 $15.679 Number of accumulation units outstanding at end of 545,090 593,741 690,331 829,363 951,973 1,019,122 748,981 period FIDELITY(R)VIP CONTRAFUND(R)PORTFOLIO (The initial accumulation unit value was established at $10.000 during June 1995, when the fund became available under the contract) Value at beginning of period $19.08 $21.347 $24.674 $26.797 $21.872 $17.066 $13.943 Value at end of period $24.17 $19.08 $21.347 $24.674 $26.797 $21.872 $17.066 Number of accumulation units outstanding at end of 3,011,967 3,334,536 3,675,855 4,392,710 5,373,381 5,718,966 5,222,894 period FIDELITY(R)VIP EQUITY-INCOME PORTFOLIO (Funds were first received in this option during December 1994) Value at beginning of period $17.95 $21.922 $23.395 $21.883 $20.872 $18.963 $15.013 Value at end of period $23.07 $17.95 $21.922 $23.395 $21.883 $20.872 $18.963 Number of accumulation units outstanding at end of 3,679,829 3,974,733 4,671,456 5,036,497 6,104,314 6,923,692 6,378,264 period
1996 1995 1994 ---- ---- ---- CALVERT SOCIAL BALANCED PORTFOLIO (Funds were first received in this option during December 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period FIDELITY(R)VIP ASSET MANAGERSM PORTFOLIO (Funds were first received in this option during January 1995) Value at beginning of period $11.664 $10.000 Value at end of period $13.180 $11.664 Number of accumulation units outstanding at end of 450,051 116,810 period FIDELITY(R)VIP CONTRAFUND(R)PORTFOLIO (The initial accumulation unit value was established at $10.000 during June 1995, when the fund became available under the contract) Value at beginning of period $11.658 $10.000 Value at end of period $13.943 $11.658 Number of accumulation units outstanding at end of 3,294,964 684,272 period FIDELITY(R)VIP EQUITY-INCOME PORTFOLIO (Funds were first received in this option during December 1994) Value at beginning of period $13.324 $10.002 $10.000 Value at end of period $15.013 $13.324 $10.002 Number of accumulation units outstanding at end of 4,200,501 913,517 17,013 period
ILIAC Marathon Plus - 131764 V-1
APPENDIX V CONDENSED FINANCIAL INFORMATION (CONTINUED) - ---------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- FIDELITY(R)VIP GROWTH PORTFOLIO (Funds were first received in this option during December 1994) Value at beginning of period $17.54 $25.446 $31.342 $35.706 $26.348 $19.157 $15.734 Value at end of period $22.97 $17.54 $25.446 $31.342 $35.706 $26.348 $19.157 Number of accumulation units outstanding at end of 2,283,686 2,620,007 3,217,102 3,812,422 4,177,866 4,154,250 3,697,132 period FIDELITY(R)VIP HIGH INCOME PORTFOLIO (The initial accumulation unit value was established at $10.000 during June 1995, when the fund became available under the contract) Value at beginning of period $9.53 $9.342 $10.735 $14.042 $13.168 $13.959 $12.031 Value at end of period $11.96 $9.53 $9.342 $10.735 $14.042 $13.168 $13.959 Number of accumulation units outstanding at end of 1,760,439 1,611,770 1,838,001 2,107,872 2,739,738 3,196,921 2,522,965 period FIDELITY(R)VIP INDEX 500 PORTFOLIO (The initial accumulation unit value was established at $10.000 during June 1995, when the fund became available under the contract) Value at beginning of period $16.04 $20.929 $24.151 $27.005 $22.727 $17.961 $13.728 Value at end of period $20.31 $16.04 $20.929 $24.151 $27.005 $22.727 $17.961 Number of accumulation units outstanding at end of 3,107,194 3,363,853 4,072,090 4,683,497 5,394,051 5,533,320 4,286,245 period FIDELITY(R)VIP OVERSEAS PORTFOLIO (Funds were first received in this option during January 1995) Value at beginning of period $10.42 $13.261 $17.062 $21.391 $15.210 $13.682 $12.439 Value at end of period $14.74 $10.42 $13.261 $17.062 $21.391 $15.210 $13.682 Number of accumulation units outstanding at end of 424,904 392,647 489,657 589,199 685,323 929,310 807,976 period ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period $8.39 $10.384 $14.415 $18.181 $11.640 $9.912 $9.971 Value at end of period $10.71 $8.39 $10.384 $14.415 $18.181 $11.640 $9.912 Number of accumulation units outstanding at end of 179,917 191,334 218,709 253,493 183,802 199,291 5,904 period ING MFS CAPITAL OPPORTUNITIES PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period $8.84 $12.836 $17.303 $18.612 $12.686 $10.152 $10.009 Value at end of period $11.16 $8.84 $12.836 $17.303 $18.612 $12.686 $10.152 Number of accumulation units outstanding at end of 726,562 846,007 1,075,773 1,162,340 975,016 881,252 486,822 period
APPENDIX V CONDENSED FINANCIAL INFORMATION (CONTINUED) - ---------------------------------------------------------------------------------------------- 1996 1995 1994 ---- ---- ---- FIDELITY(R)VIP GROWTH PORTFOLIO (Funds were first received in this option during December 1994) Value at beginning of period $13.913 $10.423 $10.000 Value at end of period $15.734 $13.913 $10.423 Number of accumulation units outstanding at end of 3,260,855 885,545 17,013 period FIDELITY(R)VIP HIGH INCOME PORTFOLIO (The initial accumulation unit value was established at $10.000 during June 1995, when the fund became available under the contract) Value at beginning of period $10.701 $10.000 Value at end of period $12.031 $10.701 Number of accumulation units outstanding at end of 1,222,580 112,819 period FIDELITY(R)VIP INDEX 500 PORTFOLIO (The initial accumulation unit value was established at $10.000 during June 1995, when the fund became available under the contract) Value at beginning of period $11.336 $10.000 Value at end of period $13.728 $11.336 Number of accumulation units outstanding at end of 1,994,556 191,671 period FIDELITY(R)VIP OVERSEAS PORTFOLIO (Funds were first received in this option during January 1995) Value at beginning of period $11.143 $10.000 Value at end of period $12.439 $11.143 Number of accumulation units outstanding at end of 681,094 150,017 period ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING MFS CAPITAL OPPORTUNITIES PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period
ILIAC Marathon Plus - 131764 V-2
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ----------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period $9.24 $14.485 $19.644 $27.973 $18.803 $14.707 $14.894 Value at end of period $12.59 $9.24 $14.485 $19.644 $27.973 $18.803 $14.707 Number of accumulation units outstanding at end of 2,405,160 2,842,989 3,504,571 4,169,944 4,571,240 5,270,772 5,027,952 period ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period $18.37 $24.288 $27.438 $27.835 $23.078 $18.343 $17.979 Value at end of period $23.71 $18.37 $24.288 $27.438 $27.835 $23.078 $18.343 Number of accumulation units outstanding at end of 2,230,071 2,520,654 3,007,877 3,475,122 3,902,489 4,440,083 4,434,574 period ING UBS U.S. LARGE CAP EQUITY PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period $10.20 $13.775 $17.659 $18.750 $15.331 $12.641 $12.892 Value at end of period $12.57 $10.20 $13.775 $17.659 $18.750 $15.331 $12.641 Number of accumulation units outstanding at end of 1,734,132 2,125,862 2,768,107 3,282,514 3,631,867 4,136,851 3,899,626 period ING VP BALANCED PORTFOLIO, INC. (Funds were first received in this option during July 1994) Value at beginning of period $19.73 $22.309 $23.622 $24.091 $21.507 $18.653 $15.445 Value at end of period $23.12 $19.73 $22.309 $23.622 $24.091 $21.507 $18.653 Number of accumulation units outstanding at end of 1,386,103 1,497,149 1,777,784 2,057,800 2,243,590 2,533,501 2,265,203 period ING VP BOND PORTFOLIO (Funds were first received in this option during August 1994) Value at beginning of period $16.96 $15.880 $14.811 $13.700 $13.998 $13.128 $12.294 Value at end of period $17.78 $16.96 $15.880 $14.811 $13.700 $13.998 $13.128 Number of accumulation units outstanding at end of 1,906,360 2,475,954 2,227,649 1,640,793 1,967,951 1,948,373 1,528,968 period ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO (Funds were first received in this option during May 2000) Value at beginning of period $2.56 $4.424 $5.824 $9.738 Value at end of period $3.67 $2.56 $4.424 $5.824 Number of accumulation units outstanding at end of 822,310 476,267 451,032 366,685 period
CONDENSED FINANCIAL INFORMATION (CONTINUED) - -------------------------------------------------------------------------------------------- 1996 1995 1994 ---- ---- ---- ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING UBS U.S. LARGE CAP EQUITY PORTFOLIO (Funds were first received in this option during November 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP BALANCED PORTFOLIO, INC. (Funds were first received in this option during July 1994) Value at beginning of period $13.602 $10.828 $10.000 Value at end of period $15.445 $13.602 $10.828 Number of accumulation units outstanding at end of 1,544,723 919,744 911,281 period ING VP BOND PORTFOLIO (Funds were first received in this option during August 1994) Value at beginning of period $12.037 $10.324 $10.000 Value at end of period $12.294 $12.037 $10.324 Number of accumulation units outstanding at end of 1,129,814 988,199 983,357 period ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO (Funds were first received in this option during May 2000) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period
ILIAC Marathon Plus - 131764 V-3
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ 2003 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- ING VP GROWTH AND INCOME PORTFOLIO (Funds were first received in this option during October 1994) Value at beginning of period $15.02 $20.311 $25.247 $28.758 $24.839 $22.004 $17.181 Value at end of period $18.67 $15.02 $20.311 $25.247 $28.758 $24.839 $22.004 Number of accumulation units outstanding at end of 3,762,254 4,488,575 5,533,623 6,649,057 7,621,660 8,999,336 8,522,639 period ING VP GROWTH PORTFOLIO (Funds were first received in this option during May 1997) Value at beginning of period $10.40 $14.840 $20.638 $23.771 $17.862 $13.158 $11.084 Value at end of period $13.36 $10.40 $14.840 $20.638 $23.771 $17.862 $13.158 Number of accumulation units outstanding at end of 498,520 573,853 801,461 1,107,042 947,366 738,449 241,289 period ING VP INDEX PLUS LARGECAP PORTFOLIO (The initial accumulation unit value was established at $10.000 during September 1996, when the fund became available under the contract.) Value at beginning of period $13.49 $17.439 $20.478 $22.923 $18.704 $14.414 $10.919 Value at end of period $16.78 $13.49 $17.439 $20.478 $22.923 $18.704 $14.414 Number of accumulation units outstanding at end of 1,709,966 1,883,338 2,099,794 2,629,361 2,708,365 2,252,763 1,179,485 period ING VP INTERNATIONAL EQUITY PORTFOLIO (Funds were first received in this option during June 1998) Value at beginning of period $6.20 $8.581 $11.434 $14.554 $9.754 $10.169 Value at end of period $8.08 $6.20 $8.581 $11.434 $14.554 $9.754 Number of accumulation units outstanding at end of 123,931 98,804 93,668 101,230 44,241 45,143 period ING VP MONEY MARKET PORTFOLIO (Funds were first received in this option during October 1994) Value at beginning of period $13.75 $13.723 $13.392 $12.766 $12.322 $11.850 $11.394 Value at end of period $13.68 $13.75 $13.723 $13.392 $12.766 $12.322 $11.850 Number of accumulation units outstanding at end of 4,086,227 6,600,978 7,306,703 5,982,730 7,902,384 6,973,165 6,770,680 period ING VP SMALL COMPANY PORTFOLIO (Funds were first received in this option during May 1997) Value at beginning of period $14.33 $18.926 $18.458 $17.540 $13.595 $13.638 $10.603 Value at end of period $19.42 $14.33 $18.926 $18.458 $17.540 $13.595 $13.638 Number of accumulation units outstanding at end of 1,058,759 1,032,724 993,412 970,627 715,582 873,316 424,486 period
1996 1995 1994 ---- ---- ---- ING VP GROWTH AND INCOME PORTFOLIO (Funds were first received in this option during October 1994) Value at beginning of period $14.001 $10.737 $10.000 Value at end of period $17.181 $14.001 $10.737 Number of accumulation units outstanding at end of 4,919,945 3,068,782 3,178,712 period ING VP GROWTH PORTFOLIO (Funds were first received in this option during May 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP INDEX PLUS LARGECAP PORTFOLIO (The initial accumulation unit value was established at $10.000 during September 1996, when the fund became available under the contract.) Value at beginning of period $10.000 Value at end of period $10.919 Number of accumulation units outstanding at end of 19,177 period ING VP INTERNATIONAL EQUITY PORTFOLIO (Funds were first received in this option during June 1998) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP MONEY MARKET PORTFOLIO (Funds were first received in this option during October 1994) Value at beginning of period $10.968 $10.489 $10.000 Value at end of period $11.394 $10.968 $10.489 Number of accumulation units outstanding at end of 4,871,015 2,694,034 3,407,448 period ING VP SMALL COMPANY PORTFOLIO (Funds were first received in this option during May 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period
ILIAC Marathon Plus - 131764 V-4
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ---------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO (The initial accumulation unit value was established at $10.000 during August 1995, when the fund became available under the contract) Value at beginning of period $13.21 $14.814 $16.155 $16.316 $15.013 $14.377 $12.402 Value at end of period $15.56 $13.21 $14.814 $16.155 $16.316 $15.013 $14.377 Number of accumulation units outstanding at end of 629,632 589,474 671,070 765,165 947,776 1,316,579 1,112,043 period ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO (The initial accumulation unit value was established at $10.000 during August 1995, when the fund became available under the contract) Value at beginning of period $12.91 $15.187 $17.415 $17.779 $15.769 $15.333 $12.970 Value at end of period $15.83 $12.91 $15.187 $17.415 $17.779 $15.769 $15.333 Number of accumulation units outstanding at end of 464,322 493,887 554,667 664,702 742,494 1,027,839 898,302 period ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO (The initial accumulation unit value was established at $10.000 during September 1995, when the portfolio became available under the contract) Value at beginning of period $13.86 $14.695 $15.267 $14.772 $13.989 $13.267 $11.751 Value at end of period $15.53 $13.86 $14.695 $15.267 $14.772 $13.989 $13.267 Number of accumulation units outstanding at end of 674,272 798,446 917,449 988,465 1,203,703 1,551,324 1,217,781 period ING VP VALUE OPPORTUNITY PORTFOLIO (Funds were first received in this option during May 1997) Value at beginning of period $13.32 $18.250 $20.480 $18.847 $15.985 $13.246 $10.856 Value at end of period $16.37 $13.32 $18.250 $20.480 $18.847 $15.985 $13.246 Number of accumulation units outstanding at end of 654,656 760,214 849,750 641,673 609,862 841,078 289,182 period JANUS ASPEN BALANCED PORTFOLIO (Funds were first received in this option during January 1995) Value at beginning of period $23.08 $25.019 $26.630 $27.623 $22.101 $16.692 $13.865 Value at end of period $25.95 $23.08 $25.019 $26.630 $27.623 $22.101 $16.692 Number of accumulation units outstanding at end of 1,991,913 2,369,860 2,695,283 2,943,151 2,773,992 2,277,804 1,544,831 period
1996 1995 1994 ---- ---- ---- ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO (The initial accumulation unit value was established at $10.000 during August 1995, when the fund became available under the contract) Value at beginning of period $10.587 $10.000 ------- Value at end of period $12.402 $10.587 ------- Number of accumulation units outstanding at end of 326,292 27,089 period ------ ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO (The initial accumulation unit value was established at $10.000 during August 1995, when the fund became available under the contract) Value at beginning of period $10.645 $10.000 Value at end of period $12.970 $10.645 Number of accumulation units outstanding at end of 298,740 15,832 period ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO (The initial accumulation unit value was established at $10.000 during September 1995, when the portfolio became available under the contract) Value at beginning of period $10.438 $10.000 Value at end of period $11.751 $10.438 Number of accumulation units outstanding at end of 492,915 28,778 period ING VP VALUE OPPORTUNITY PORTFOLIO (Funds were first received in this option during May 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period JANUS ASPEN BALANCED PORTFOLIO (Funds were first received in this option during January 1995) Value at beginning of period $12.104 $10.000 Value at end of period $13.865 $12.104 Number of accumulation units outstanding at end of 682,296 53,016 period
ILIAC Marathon Plus - 131764 V-5
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ----------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- JANUS ASPEN FLEXIBLE INCOME PORTFOLIO (Funds were first received in this option during November 1994) Value at beginning of period $18.71 $17.176 $16.170 $15.433 $15.405 $14.320 $12.995 Value at end of period $19.63 $18.71 $17.176 $16.170 $15.433 $15.405 $14.320 Number of accumulation units outstanding at end of 657,675 908,267 751,090 673,857 783,971 855,510 523,315 period JANUS ASPEN GROWTH PORTFOLIO (Funds were first received in this option during July 1994) Value at beginning of period $15.78 $21.775 $29.345 $34.828 $24.532 $18.340 $15.153 Value at end of period $20.49 $15.78 $21.775 $29.345 $34.828 $24.532 $18.340 Number of accumulation units outstanding at end of 1,326,487 1,698,475 2,272,405 2,868,919 2,701,099 2,097,548 1,863,396 period JANUS ASPEN MID CAP GROWTH PORTFOLIO (The initial accumulation unit value was established at $10.000 during May 1994, when the fund became available under the contract) Value at beginning of period $12.94 $18.205 $30.497 $45.363 $20.410 $15.418 $13.879 Value at end of period $17.23 $12.94 $18.205 $30.497 $45.363 $20.410 $15.418 Number of accumulation units outstanding at end of 1,295,022 1,563,269 2,092,270 2,725,308 2,409,624 1,622,089 1,558,985 period JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO (Funds were first received in this option during April 1995) Value at beginning of period $18.21 $24.786 $32.413 $38.979 $24.039 $18.910 $15.701 Value at end of period $22.26 $18.21 $24.786 $32.413 $38.979 $24.039 $18.910 Number of accumulation units outstanding at end of 3,307,619 4,329,392 5,466,151 6,694,492 7,044,821 7,196,142 6,453,536 period MFS(R)STRATEGIC INCOME SERIES (The initial accumulation unit value was established at $10.000 during May 1996, when the series became available under the contract) Value at beginning of period $11.92 $11.153 $10.799 $10.440 $10.860 $10.207 $10.471 Value at end of period $12.97 $11.92 $11.153 $10.799 $10.440 $10.860 $10.207 Number of accumulation units outstanding at end of 171,584 190,603 123,681 124,226 138,331 156,298 129,739 period MFS(R)TOTAL RETURN SERIES (The initial accumulation unit value was established at $10.000 during May 1996, when the series became available under the contract) Value at beginning of period $15.51 $16.586 $16.782 $14.669 $14.432 $13.030 $10.894 Value at end of period $17.79 $15.51 $16.586 $16.782 $14.669 $14.432 $13.030 Number of accumulation units outstanding at end of 2,028,652 2,066,374 2,148,561 1,935,234 2,056,863 2,203,927 1,456,174 period
1996 1995 1994 ---- ---- ---- JANUS ASPEN FLEXIBLE INCOME PORTFOLIO (Funds were first received in this option during November 1994) Value at beginning of period $12.071 $9.884 $10.000 Value at end of period $12.995 $12.071 $9.884 Number of accumulation units outstanding at end of 225,717 45,714 0 period JANUS ASPEN GROWTH PORTFOLIO (Funds were first received in this option during July 1994) Value at beginning of period $12.975 $10.109 $10.000 Value at end of period $15.153 $12.975 $10.109 Number of accumulation units outstanding at end of 1,145,305 176,111 9,588 period JANUS ASPEN MID CAP GROWTH PORTFOLIO (The initial accumulation unit value was established at $10.000 during May 1994, when the fund became available under the contract) Value at beginning of period $13.040 $10.374 $10.000 Value at end of period $13.879 $13.040 $10.374 Number of accumulation units outstanding at end of 1,248,669 187,584 0 period JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO (Funds were first received in this option during April 1995) Value at beginning of period $12.341 $10.000 Value at end of period $15.701 $12.341 Number of accumulation units outstanding at end of 3,060,432 252,485 period MFS(R)STRATEGIC INCOME SERIES (The initial accumulation unit value was established at $10.000 during May 1996, when the series became available under the contract) Value at beginning of period $10.000 Value at end of period $10.471 Number of accumulation units outstanding at end of 38,958 period MFS(R)TOTAL RETURN SERIES (The initial accumulation unit value was established at $10.000 during May 1996, when the series became available under the contract) Value at beginning of period $10.000 Value at end of period $10.894 Number of accumulation units outstanding at end of 387,019 period
ILIAC Marathon Plus - 131764 V-6
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ----------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- OPPENHEIMER AGGRESSIVE GROWTH FUND/VA (Funds were first received in this option during May 1997) Value at beginning of period $10.34 $14.517 $21.423 $24.477 $13.520 $12.204 $10.725 Value at end of period $12.80 $10.34 $14.517 $21.423 $24.477 $13.520 $12.204 Number of accumulation units outstanding at end of 603,866 645,051 827,072 1,000,873 734,834 659,693 302,223 period OPPENHEIMER GLOBAL SECURITIES FUND/VA (Funds were first received in this option during May 1997) Value at beginning of period $14.00 $18.231 $21.023 $20.287 $12.982 $11.539 $10.457 Value at end of period $19.74 $14.00 $18.231 $21.023 $20.287 $12.982 $11.539 Number of accumulation units outstanding at end of 807,349 619,881 517,495 515,085 346,236 465,279 232,338 period OPPENHEIMER MAIN STREET FUND(R)/VA (Funds were first received in this option during May 1997) Value at beginning of period $10.10 $12.620 $14.248 $15.839 $13.199 $12.785 $10.497 Value at end of period $12.63 $10.10 $12.620 $14.248 $15.839 $13.199 $12.785 Number of accumulation units outstanding at end of 1,565,911 1,627,171 1,868,141 1,984,152 1,942,405 2,014,343 992,461 period OPPENHEIMER STRATEGIC BOND FUND/VA (Funds were first received in this option during May 1997) Value at beginning of period $12.27 $11.583 $11.206 $11.072 $10.921 $10.764 $10.167 Value at end of period $14.29 $12.27 $11.583 $11.206 $11.072 $10.921 $10.764 Number of accumulation units outstanding at end of 857,973 814,287 773,100 785,150 831,203 890,900 287,313 period
1996 1995 1994 ---- ---- ---- OPPENHEIMER AGGRESSIVE GROWTH FUND/VA (Funds were first received in this option during May 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period OPPENHEIMER GLOBAL SECURITIES FUND/VA (Funds were first received in this option during May 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period OPPENHEIMER MAIN STREET FUND(R)/VA (Funds were first received in this option during May 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period OPPENHEIMER STRATEGIC BOND FUND/VA (Funds were first received in this option during May 1997) Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period
ILIAC Marathon Plus - 131764 V-7
CONDENSED FINANCIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------------- TABLE II FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.25% (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) 2003 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- ---- CALVERT SOCIAL BALANCED PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $9.68 $11.161 $12.146 $12.696 $11.456 $10.882 Value at end of period $11.41 $9.68 $11.161 $12.146 $12.696 $11.456 Number of accumulation units outstanding at end of period 71,475 65,983 61,262 59,786 58,632 56,713 FIDELITY(R) VIP ASSET MANAGERSM PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $13.13 $14.572 $15.387 $16.218 $14.783 $13.995 Value at end of period $15.30 $13.13 $14.572 $15.387 $16.218 $14.783 N umber of accumulation units outstanding at end of period 135,610 133,918 140,460 163,400 183,310 154,809 FIDELITY(R) VIP CONTRAFUND(R) PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $15.35 $17.150 $19.792 $21.463 $17.492 $15.503 Value at end of period $19.48 $15.35 $17.150 $19.792 $21.463 $17.492 Number of accumulation units outstanding at end of period 591,046 590,672 614,227 731,695 787,797 637,258 FIDELITY(R) VIP EQUITY-INCOME PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $12.93 $15.765 $16.799 $15.689 $14.942 $15.151 Value at end of period $16.64 $12.93 $15.765 $16.799 $15.689 $14.942 Number of accumulation units outstanding at end of period 795,914 820,646 895,708 877,097 992,829 919,970 FIDELITY(R) VIP GROWTH PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $11.66 $16.901 $20.785 $23.643 $17.420 $14.533 Value at end of period $15.30 $11.66 $16.901 $20.785 $23.643 $17.420 Number of accumulation units outstanding at end of period 550,944 587,470 772,781 878,022 831,556 600,814 FIDELITY(R) VIP HIGH INCOME PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $8.59 $8.409 $9.648 $12.601 $11.798 $13.167 Value at end of period $10.79 $8.59 $8.409 $9.648 $12.601 $11.798 Number of accumulation units outstanding at end of period 425,259 389,530 511,032 494,024 688,516 530,362 FIDELITY(R) VIP INDEX 500 PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $13.44 $17.509 $20.173 $22.522 $18.925 $17.227 Value at end of period $17.05 $13.44 $17.509 $20.173 $22.522 $18.925 Number of accumulation units outstanding at end of period 654,473 761,472 888,564 988,345 1,101,289 844,490
ILIAC Marathon Plus - 131764 V-8
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ----------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- ---- FIDELITY(R) VIP OVERSEAS PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $8.88 $11.280 $14.491 $18.139 $12.879 $13.796 Value at end of period $12.57 $8.88 $11.280 $14.491 $18.139 $12.879 Number of accumulation units outstanding at end of period 37,597 35,341 45,272 55,033 58,815 77,431 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $8.45 $10.449 $14.482 $18.238 $11.659 $11.775 Value at end of period $10.81 $8.45 $10.449 $14.482 $18.238 $11.659 Number of accumulation units outstanding at end of period 67,796 68,657 56,361 67,478 80,485 107,009 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $8.91 $12.917 $17.385 $18.672 $12.708 $12.147 Value at end of period $11.27 $8.91 $12.917 $17.385 $18.672 $12.708 Number of accumulation units outstanding at end of period 203,718 243,401 308,780 314,991 289,620 214,290 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $6.31 $9.875 $13.372 $19.012 $12.761 $12.011 Value at end of period $8.61 $6.31 $9.875 $13.372 $19.012 $12.761 Number of accumulation units outstanding at end of period 359,508 393,581 482,715 555,263 554,655 503,944 ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $13.36 $17.636 $19.893 $20.151 $16.682 $15.327 Value at end of period $17.27 $13.36 $17.636 $19.893 $20.151 $16.682 Number of accumulation units outstanding at end of period 244,873 234,755 281,779 293,211 304,102 272,321 ING UBS U.S. LARGE CAP EQUITY PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $7.05 $9.506 $12.169 $12.901 $10.532 $10.102 Value at end of period $8.70 $7.05 $9.506 $12.169 $12.901 $10.532 Number of accumulation units outstanding at end of period 310,163 356,088 491,018 579,224 576,382 554,095 ING VP BALANCED PORTFOLIO, INC. (Funds were first received in this option during May 1998) Value at beginning of period $14.04 $15.852 $16.759 $17.066 $15.212 $14.392 Value at end of period $16.48 $14.04 $15.852 $16.759 $17.066 $15.212 Number of accumulation units outstanding at end of period 356,122 342,040 387,907 452,342 456,097 363,745 ING VP BOND PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $14.52 $13.573 $12.640 $11.674 $11.910 $11.367 Value at end of period $15.24 $14.52 $13.573 $12.640 $11.674 $11.910 Number of accumulation units outstanding at end of period 490,687 624,875 512,374 429,645 487,814 387,995
ILIAC Marathon Plus - 131764 V-9
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ----------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- ---- ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO (Funds were first received in this option during May 2000) Value at beginning of period $2.57 $4.435 $5.830 $9.999 Value at end of period $3.69 $2.57 $4.435 $5.830 Number of accumulation units outstanding at end of period 113,309 61,730 70,054 53,902 ING VP GROWTH AND INCOME PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $10.10 $13.640 $16.928 $19.253 $16.604 $16.554 Value at end of period $12.58 $10.10 $13.640 $16.928 $19.253 $16.604 Number of accumulation units outstanding at end of period 779,501 892,957 1,051,190 1,199,815 1,372,572 1,327,157 ING VP GROWTH PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $10.49 $14.948 $20.755 $23.870 $17.909 $15.809 Value at end of period $13.50 $10.49 $14.948 $20.755 $23.870 $17.909 Number of accumulation units outstanding at end of period 216,334 234,214 312,228 419,749 367,226 266,761 ING VP INDEX PLUS LARGECAP PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $13.39 $17.281 $20.261 $22.646 $18.449 $16.421 Value at end of period $16.68 $13.39 $17.281 $20.261 $22.646 $18.449 Number of accumulation units outstanding at end of period 596,166 635,456 719,529 867,634 838,357 609,863 ING VP INTERNATIONAL EQUITY PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $6.25 $8.630 $11.481 $14.592 $9.764 $10.100 Value at end of period $8.15 $6.25 $8.630 $11.481 $14.592 $9.764 Number of accumulation units outstanding at end of period 35,338 34,502 38,228 40,045 33,245 41,047 ING VP MONEY MARKET PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $12.51 $12.465 $12.145 $11.561 $11.141 $10.847 Value at end of period $12.46 $12.51 $12.465 $12.145 $11.561 $11.141 Number of accumulation units outstanding at end of period 729,177 1,031,858 1,479,116 939,266 1,373,014 1,221,159 ING VP SMALL COMPANY PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $14.45 $19.063 $18.563 $17.613 $13.631 $15.596 Value at end of period $19.62 $14.45 $19.063 $18.563 $17.613 $13.631 Number of accumulation units outstanding at end of period 294,168 286,773 287,178 297,717 276,386 272,562 ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $12.03 $13.468 $14.665 $14.789 $13.588 $14.044 Value at end of period $14.19 $12.03 $13.468 $14.665 $14.789 $13.588 Number of accumulation units outstanding at end of period 126,684 139,966 177,460 228,739 254,767 237,468
ILIAC Marathon Plus - 131764 V-10
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ----------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- ---- ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $11.55 $13.557 $15.521 $15.822 $14.012 $14.947 Value at end of period $14.18 $11.55 $13.557 $15.521 $15.822 $14.012 Number of accumulation units outstanding at end of period 92,633 97,671 121,059 128,642 143,278 160,746 ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $12.99 $13.757 $14.271 $13.787 $13.037 $13.073 Value at end of period $14.58 $12.99 $13.757 $14.271 $13.787 $13.037 Number of accumulation units outstanding at end of period 244,360 283,368 327,498 368,911 430,582 467,027 ING VP VALUE OPPORTUNITY PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $13.44 $18.382 $20.596 $18.926 $16.028 $15.274 Value at end of period $16.53 $13.44 $18.382 $20.596 $18.926 $16.028 Number of accumulation units outstanding at end of period 137,774 171,772 211,524 157,762 160,010 173,741 JANUS ASPEN BALANCED PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $18.46 $19.980 $21.234 $21.992 $17.569 $15.156 Value at end of period $20.79 $18.46 $19.980 $21.234 $21.992 $17.569 Number of accumulation units outstanding at end of period 588,055 673,360 769,234 827,115 807,835 480,187 JANUS ASPEN FLEXIBLE INCOME PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $15.73 $14.419 $13.554 $12.916 $12.873 $12.363 Value at end of period $16.53 $15.73 $14.419 $13.554 $12.916 $12.873 Number of accumulation units outstanding at end of period 167,980 212,110 219,466 201,337 249,484 221,988 JANUS ASPEN GROWTH PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $11.30 $15.570 $20.951 $24.827 $17.461 $15.094 Value at end of period $14.70 $11.30 $15.570 $20.951 $24.827 $17.461 Number of accumulation units outstanding at end of period 287,050 346,670 470,608 586,508 521,852 281,234 JANUS ASPEN MID CAP GROWTH PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $9.03 $12.690 $21.226 $31.525 $14.162 $12.108 Value at end of period $12.05 $9.03 $12.690 $21.226 $31.525 $14.162 Number of accumulation units outstanding at end of period 317,328 357,736 466,910 667,971 532,221 216,958 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO (Funds were first received in this option during May 1998) Value at beginning of period $13.23 $17.979 $23.476 $28.189 $17.358 $16.509 Value at end of period $16.19 $13.23 $17.979 $23.476 $28.189 $17.358 Number of accumulation units outstanding at end of period 640,259 816,356 978,798 1,190,701 1,226,256 941,812
V-11
CONDENSED FINANCIAL INFORMATION (CONTINUED) - ----------------------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- ---- MFS(R) STRATEGIC INCOME SERIES (Funds were first received in this option during May 1998) Value at beginning of period $12.04 $11.249 $10.875 $10.498 $10.904 $10.312 Value at end of period $13.13 $12.04 $11.249 $10.875 $10.498 $10.904 Number of accumulation units outstanding at end of period 22,704 37,246 32,268 18,002 18,980 29,055 MFS(R) TOTAL RETURN SERIES (Funds were first received in this option during May 1998) Value at beginning of period $15.67 $16.730 $16.901 $14.751 $14.491 $14.096 Value at end of period $18.00 $15.67 $16.730 $16.901 $14.751 $14.491 Number of accumulation units outstanding at end of period 455,399 475,213 486,346 422,692 483,033 400,396 OPPENHEIMER AGGRESSIVE GROWTH FUND/VA (Funds were first received in this option during May 1998) Value at beginning of period $10.43 $14.622 $21.545 $24.578 $13.556 $14.076 Value at end of period $12.93 $10.43 $14.622 $21.545 $24.578 $13.556 Number of accumulation units outstanding at end of period 207,574 228,736 262,224 311,924 251,983 211,732 OPPENHEIMER GLOBAL SECURITIES FUND/VA (Funds were first received in this option during May 1998) Value at beginning of period $14.12 $18.363 $21.142 $20.372 $13.016 $13.007 Value at end of period $19.94 $14.12 $18.363 $21.142 $20.372 $13.016 Number of accumulation units outstanding at end of period 157,881 120,065 95,209 91,348 82,153 113,575 OPPENHEIMER MAIN STREET FUND(R)/VA (Funds were first received in this option during May 1998) Value at beginning of period $10.19 $12.711 $14.329 $15.905 $13.234 $14.890 Value at end of period $12.76 $10.19 $12.711 $14.329 $15.905 $13.234 Number of accumulation units outstanding at end of period 538,157 567,565 616,805 642,720 685,331 602,061 OPPENHEIMER STRATEGIC BOND FUND/VA (Funds were first received in this option during May 1998) Value at beginning of period $12.38 $11.667 $11.269 $11.118 $10.950 $11.084 Value at end of period $14.43 $12.38 $11.667 $11.269 $11.118 $10.950 Number of accumulation units outstanding at end of period 178,956 197,895 230,730 248,905 307,278 254,861
V-12 PART B - -------------------------------------------------------------------------------- VARIABLE ANNUITY ACCOUNT B - -------------------------------------------------------------------------------- OF - -------------------------------------------------------------------------------- ING LIFE INSURANCE AND ANNUITY COMPANY - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 2004 MARATHON PLUS 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, 2004. 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 1-800-531-4547 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 Variable Annuity Account B Offering and Purchase of Contracts Income Phase Payments Sales Material and Advertising Independent Auditors Consolidated Financial Statements of ING Life Insurance and Annuity Company and Subsidiaries F- Financial Statements of the Separate Account S- 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, 2003, the Company (ING Life Insurance and Annuity Company) and its subsidiary life company had $48 billion invested through their products, including $33 billion in their separate accounts (of which the Company, or its affiliate ING Investments, LLC manages or oversees the management of $22 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, 2002. 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 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 contracts. 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's 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." Compensation paid to the principal underwriter, ING Financial Advisers, LLC, for the years ending December 31, 2003, 2002 and 2001 amounted to $83,358.64, $94,896.76, and $95,466.36, respectively. These amounts reflect 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. 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 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 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 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 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 a 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 contracts and the characteristics of and market for such financial instruments. INDEPENDENT AUDITORS Ernst & Young LLP, Suite 2800, 600 Peachtree Street, Atlanta GA 30308, independent auditors for the separate account and for the Company for the year ended December 31, 2003. 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 LION CONNECTICUT HOLDINGS INC.) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Auditors C-2 Consolidated Financial Statements: Consolidated Income Statements for the years ended December 31, 2003, 2002 and 2001 C-3 Consolidated Balance Sheets as of December 31, 2003 and 2002 C-4 Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 2003, 2002 and 2001 C-5 Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001 C-6 Notes to Consolidated Financial Statements C-7
C-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, 2003 and 2002, and the related consolidated income statements, consolidated statements of changes in shareholder's equity, and consolidated statements of cash flows for each of the three years in the period ended December 31, 2003. 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 as of December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. As discussed in Note 1 to the financial statements, the Company changed its accounting principle for goodwill and other intangible assets effective January 1, 2002. /s/ Ernst & Young LLP Atlanta, Georgia March 22, 2004 C-2 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) CONSOLIDATED INCOME STATEMENTS (Millions)
YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 2003 2002 2001 -------------- -------------- -------------- Revenues: Premiums $ 95.8 $ 98.7 $ 114.2 Fee income 384.3 418.2 553.4 Net investment income 919.1 959.5 888.4 Net realized capital gains (losses) 64.5 (101.0) (21.0) -------------- -------------- -------------- Total revenue 1,463.7 1,375.4 1,535.0 -------------- -------------- -------------- Benefits, losses and expenses: Benefits: Interest credited and other benefits to policyholders 757.6 746.4 729.6 Underwriting, acquisition, and insurance expenses: General expenses 421.2 392.5 559.9 Commissions 122.4 124.0 101.2 Policy acquisition costs deferred (159.7) (155.1) (216.9) Amortization: Deferred policy acquisition costs and value of business acquired 106.5 181.5 112.0 Goodwill -- -- 61.9 -------------- -------------- -------------- Total benefits, losses and expenses 1,248.0 1,289.3 1,347.7 -------------- -------------- -------------- Income before income taxes and cumulative effect of change in accounting principle 215.7 86.1 187.3 Income tax expense 61.1 18.6 87.4 -------------- -------------- -------------- Income before cumulative effect of change in accounting principle 154.6 67.5 99.9 Cumulative effect of change in accounting principle -- (2,412.1) -- -------------- -------------- -------------- Net income (loss) $ 154.6 $ (2,344.6) $ 99.9 ============== ============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. C-3 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) CONSOLIDATED BALANCE SHEETS (Millions, except share data)
AS OF DECEMBER 31, 2003 2002 -------------- -------------- ASSETS: Investments: Fixed maturities, available for sale, at fair value (amortized cost of $16,961.7 at 2003 and $15,041.2 at 2002) $ 17,574.3 $ 15,767.0 Equity securities at fair value: Nonredeemable preferred stock (cost of $34.1 at 2003 and $34.2 at 2002) 34.1 34.2 Investment in affiliated mutual funds (cost of $112.3 at 2003 and $203.9 at 2002) 121.7 201.0 Common stock (cost of $0.1 at 2003 and $0.2 at 2002) 0.1 0.2 Mortgage loans on real estate 754.5 576.6 Policy loans 270.3 296.3 Short-term investments 1.0 6.2 Other investments 52.6 52.2 Securities pledged to creditors (amortized cost of $117.7 at 2003 and $154.9 at 2002) 120.2 155.0 -------------- -------------- Total investments 18,928.8 17,088.7 Cash and cash equivalents 57.8 65.4 Short term investments under securities loan agreement 123.9 164.3 Accrued investment income 169.6 170.9 Reinsurance recoverable 2,953.2 2,986.5 Deferred policy acquisition costs 307.9 229.8 Value of business acquired 1,415.4 1,438.4 Property, plant and equipment (net of accumulated depreciation of $79.8 at 2003 and $56.0 at 2002) 31.7 49.8 Other assets 129.6 145.8 Assets held in separate accounts 33,014.7 28,071.1 -------------- -------------- Total assets $ 57,132.6 $ 50,410.7 ============== ============== LIABILITIES AND SHAREHOLDER'S EQUITY Policy liabilities and accruals: Future policy benefits and claims reserves $ 3,379.9 $ 3,305.2 Unpaid claims and claim expenses 25.4 30.0 Other policyholders' funds 15,871.3 14,756.0 -------------- -------------- Total policy liabilities and accruals 19,276.6 18,091.2 Payable under securities loan agreement 123.9 164.3 Current income taxes 85.6 84.5 Deferred income taxes 184.7 163.1 Other liabilities 1,801.2 1,573.7 Liabilities related to separate accounts 33,014.7 28,071.1 -------------- -------------- Total liabilities 54,486.7 48,147.9 -------------- -------------- Shareholder's equity: Common stock (100,000 shares authorized; 55,000 shares issued and outstanding, $50.00 per share per value) 2.8 2.8 Additional paid-in capital 4,646.5 4,416.5 Accumulated other comprehensive income 106.8 108.3 Retained deficit (2,110.2) (2,264.8) -------------- -------------- Total shareholder's equity 2,645.9 2,262.8 -------------- -------------- Total liabilities and shareholder's equity $ 57,132.6 $ 50,410.7 ============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. C-4 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (Millions)
ACCUMULATED ADDITIONAL OTHER RETAINED TOTAL COMMON PAID-IN COMPREHENSIVE EARNINGS SHAREHOLDER'S STOCK CAPITAL INCOME (LOSS) (DEFICIT) EQUITY ----------- ----------- -------------- ----------- -------------- 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 loss: 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 Comprehensive income: Net income -- -- -- 154.6 154.6 Other comprehensive income net of tax: Unrealized loss on securities (($2.4) pretax) -- -- (1.5) -- (1.5) ----------- Comprehensive income 153.1 Capital contributions -- 230.0 -- -- 230.0 ----------- ----------- ----------- ----------- ----------- Balance at December 31, 2003 $ 2.8 $ 4,646.5 $ 106.8 $ (2,110.2) $ 2,645.9 =========== =========== =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. C-5 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions)
YEARS ENDED DECEMBER 31, ------------------------------------------------ 2003 2002 2001 ------------ ------------ ------------ Cash Flows from Operating Activities: Net income (loss) $ 154.6 $ (2,344.6) $ 99.9 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Net amortization (accretion) of (discounts) premiums on investments 198.9 115.5 (1.2) Net realized capital (gains) losses (64.5) 101.0 21.0 Amortization of deferred policy acquisition costs 15.5 12.2 112.0 Amortization of value of business acquired 91.0 146.3 -- Depreciation of property, plant and equipment 23.3 20.9 8.4 (Increase) decrease in accrued investment income 1.3 (10.0) (13.7) (Increase) decrease in receivables 33.3 172.7 (95.6) (Increase) decrease in value of business acquired -- (6.9) 13.9 Amortization of goodwill -- -- 61.9 Impairment of goodwill -- 2,412.1 -- Policy acquisition costs deferred (159.7) (120.7) (233.3) Interest credited and other changes in insurance reserve liabilities 705.9 953.7 (118.7) Change in current income taxes payable and other changes in assets and liabilities 233.1 51.9 (76.4) Provision for deferred income taxes 22.1 23.6 89.5 ------------ ------------ ------------ Net cash provided by (used for) operating activities 1,254.8 1,527.7 (132.3) ------------ ------------ ------------ Cash Flows from Investing Activities: Proceeds from the sale, maturity, or repayment of: Fixed maturities available for sale 29,977.9 26,315.3 15,338.5 Equity securities 130.2 57.2 4.4 Mortgages 16.3 2.0 5.2 Short-term investments 5.2 11,796.7 7,087.3 Acquisition of investments: Fixed maturities available for sale (31,951.6) (28,105.5) (16,489.8) Equity securities (34.8) (81.8) (50.0) Short-term investments -- (11,771.3) (6,991.1) Mortgages (194.2) (343.7) (242.0) Increase in policy loans 26.0 32.7 10.3 Purchase of property and equipment (5.2) (5.8) 7.4 Change in other investments (13.3) (47.8) (4.7) ------------ ------------ ------------ Net cash used for investing activities (2,043.5) (2,152.0) (1,324.5) ------------ ------------ ------------ Cash Flows from Financing Activities: Deposits and interest credited for investment contracts 2,040.5 1,332.5 1,941.5 Maturities and withdrawals from insurance contracts (1,745.5) (741.4) (1,082.7) Transfers to/from separate accounts 256.1 16.6 (105.0) Capital contributions 230.0 -- -- Return of capital -- -- (11.3) ------------ ------------ ------------ Net cash provided by financing activities 781.1 607.7 742.5 ------------ ------------ ------------ Net decrease in cash and cash equivalents (7.6) (16.6) (714.3) Cash and cash equivalents, beginning of period 65.4 82.0 796.3 ------------ ------------ ------------ Cash and cash equivalents, end of period $ 57.8 $ 65.4 $ 82.0 ============ ============ ============ Supplemental cash flow information: Income taxes (received) paid, net $ 29.8 $ 6.7 $ (12.3) ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. C-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION ING Life Insurance and Annuity Company ("ILIAC"), and its wholly-owned subsidiaries (collectively, the "Company") are providers of financial products and services in the United States. These consolidated financial statements include ILIAC and its wholly-owned subsidiaries, ING Insurance Company of America ("IICA"), ING Financial Advisers, LLC ("IFA") and, through February 28, 2002, ING Investment Adviser Holding, Inc. ("IA Holdco"). Until March 30, 2003, ILIAC was a wholly-owned subsidiary of ING Retirement Holdings, Inc. ("HOLDCO"), which was a wholly-owned subsidiary of ING Retirement Services, Inc. ("IRSI"). Until March 30, 2003, IRSI was a wholly-owned subsidiary of Lion Connecticut Holding, Inc. ("Lion"), which in turn was ultimately owned by ING Groep N.V. ("ING"), a financial services company based in The Netherlands. On March 30, 2003, a series of mergers occurred in the following order: IRSI merged into Lion, HOLDCO merged into Lion and IA Holdco merged into Lion. As a result, ILIAC is now a direct wholly-owned subsidiary of Lion. 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. 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"). 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 variety 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 C-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. DESCRIPTION OF BUSINESS The Company offers qualified and nonqualified 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 compensation plans. 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. RECENTLY ADOPTED ACCOUNTING STANDARDS ACCOUNTING FOR GOODWILL AND INTANGIBLE ASSETS During 2002, the Company adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("FAS No. 142"). The adoption of this standard resulted in an impairment loss of $2,412.1 million. The Company, in accordance with FAS No. 142, recorded the impairment loss retroactive to the first quarter of 2002; prior quarters of 2002 were restated accordingly. This impairment loss represented the entire carrying amount of goodwill, net of accumulated amortization. This impairment charge was shown as a change in accounting principle on the December 31, 2002 Consolidated Income Statement. Application of the nonamortization provision (net of tax) of the standard resulted in an increase in net income of $61.9 million for the twelve months ended December 31, 2001. 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:
YEAR ENDED DECEMBER 31, (MILLIONS) 2001 ----------------------------------------------------------------------- Reported net income after tax $ 99.9 Add back goodwill amortization, net of tax 61.9 ----------------------------------------------------------------------- Adjusted net income after tax $ 161.8 =======================================================================
C-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. 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 holdings 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, 2003 and 2002, 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 C-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. The Derivative Implementation Group ("DIG") responsible for issuing guidance on behalf of the FASB for implementation of FAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES recently issued Statement Implementation Issue No. B36, EMBEDDED DERIVATIVES: MODIFIED COINSURANCE ARRANGEMENTS AND DEBT INSTRUMENTS THAT INCORPORATE CREDIT RISK EXPOSURES THAT ARE UNRELATED OR ONLY PARTIALLY RELATED TO THE CREDIT WORTHINESS OF THE OBLIGOR UNDER THOSE INSTRUMENTS ("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 embedded derivatives that are required to be bifurcated. The required date of adoption of DIG B36 for the Company was October 1, 2003. The Company completed its evaluation of DIG B36 and determined that the Company had modified coinsurance treaties that require implementation of the guidance. The applicable contracts, however, were determined to generate embedded derivatives with a fair value of zero. Therefore, the guidance, while implemented, did not impact the Company's financial position, results of operations or cash flows. 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, 2003. 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, 2003. The Company has performed an assessment of its guarantees and believes that all of its guarantees are excluded from the scope of this interpretation. VARIABLE INTEREST ENTITIES In January 2003, the FASB issued FASB Interpretation 46, CONSOLIDATION OF VARIABLE INTEREST ENTITIES, AN INTERPRETATION OF ARB NO.51 ("FIN 46"). In December 2003, the FASB modified FIN 46 to make certain technical revisions and address certain implementation issues that had arisen. FIN 46 provides a new framework for identifying variable interest entities ("VIE") and determining when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements. C-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In general, a VIE is a corporation, partnership, limited- liability corporation, trust, or any other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations. FIN 46 requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) is obligated to absorb a majority of the risk of loss from the VIE's activities, is entitled to receive a majority of the VIE's residual returns (if no party absorbs a majority of the VIE's losses), or both. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIE's assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. FIN 46 also requires disclosures about VIEs that the variable interest holder is required to consolidate and additions for those VIEs it is not required to consolidate but in which it has a significant variable interest. At December 31, 2003, the Company held the following investments that, for purposes of FIN 46, were evaluated and determined to not require consolidation in the Company's financial statements:
ASSET TYPE PURPOSE BOOK VALUE (1) MARKET VALUE ---------------------------------------------------------------------------------------------------------- Private Corporate Securities--synthetic leases; project financings; credit tenant leases Investment Holdings $ 1,600.1 $ 1,697.6 Foreign Securities--US VIE subsidiaries of foreign companies Investment Holdings 583.1 615.2 Commercial Mortgage Obligations (CMO) Investment Holdings 6,038.8 6,109.4 Collateralized Debt Obligations (CDO) Investment Holdings and/or Collateral Manager 20.9 12.3 Asset-Backed Securities (ABS) Investment Holdings 949.6 975.8 Commercial Mortgage Backed Securities (CMBS) Investment Holdings 1,278.5 1,380.2
(1) Represents maximum exposure to loss except for those structures for which the Company also receives asset management fees NEW ACCOUNTING PRONOUNCEMENTS In July 2003, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS, which the Company intends to adopt on January 1, 2004. The impact on the financial statements is not known at this time. 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 C-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. 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 included in other policyholders' funds on the Consolidated C-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Balance Sheets. Realized capital gains and losses 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 maturities 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, general account securities on loan are reflected on the Consolidated Balance Sheet as "Securities pledged to creditors". Total securities pledged to creditors at December 31, 2003 and 2002 consisted entirely of fixed maturities. 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 maturities 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. C-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. 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. Value of Business Acquired ("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 fees, 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. C-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Activity for the years-ended December 31, 2003, 2002 and 2001 within VOBA were as follows:
(MILLIONS) ---------------------------------------------------------------------- Balance at December 31, 2000 $ 1,780.9 Adjustment of allocation purchase price (165.3) Additions 90.0 Interest accrued at 7% 110.0 Amortization (213.8) -------- Balance at December 31, 2001 1,601.8 Adjustment for unrealized loss (21.9) Additions 25.0 Interest accrued at 7% 86.8 Amortization (253.3) -------- Balance at December 31, 2002 1,438.4 Adjustment for unrealized gain 6.2 Additions 59.1 Interest accrued at 7% 92.2 Amortization (180.5) ---------------------------------------------------------------------- Balance at December 31, 2003 $ 1,415.4 ======================================================================
The estimated amount of VOBA to be amortized, net of interest, over the next five years is $112.3 million, $106.4 million, $99.9 million, $94.7 million and $90.7 million for the years 2004, 2005, 2006, 2007 and 2008, 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 of 2002, the Company unlocked its long-term rate of return assumptions. The Company reset long-term assumptions for the separate account returns to 9.0% (gross before fund management fees and mortality and expense and other policy charges), as of December 31, 2002, reflecting a blended return of equity and other sub-accounts. The initial unlocking adjustment in 2002 was primarily driven by the sustained downturn in the equity markets and revised expectations for future returns. During 2002, the Company recorded an acceleration of DAC/VOBA amortization totaling $45.6 million before tax, or $29.7 million, net of $15.9 million of federal income tax benefit. The Company has remained unlocked during 2003, and reset long-term assumptions for the separate account returns from 9.0% to 8.5% (gross before fund management fees and mortality and expense and other policy charges), as of December 31, 2003, maintaining a blended return of equity and other sub-accounts. The 2003 unlocking adjustment from the previous year was primarily driven by improved market performance. For the year ended December 31, 2003, the Company recorded a deceleration of DAC/VOBA amortization totaling $3.7 million before tax, or $2.4 million, net of $1.3 million of federal income tax expense C-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 (see Note 11). 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 3.0% to 10.1% 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. 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 assessed against policyholders are recorded as revenue in the fee income line on the Consolidated Income Statements. 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 Consolidated 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. C-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 policyholder 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, 2003 and 2002, unrealized gains of $36.2 million and of $29.7 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 2.4% to 7.3% in 2003 and 3.0% to 10.0% in 2002. 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 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, 2003 and 2002 is related to the reinsurance recoverable from Lincoln National Corporation ("Lincoln") arising from the sale of the Company's domestic life insurance business. INCOME TAXES 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. C-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Deferred corporate tax is stated at the face value and is calculated for temporary valuation differences between carrying amounts of assets and liabilities in the balance sheet and tax bases based on tax rates that are expected to apply in the period when the assets are realized or the liabilities are settled. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. A deferred tax asset is recognized for the carryforward of unused tax losses to the extent that it is probable that future taxable profits will be available for compensation. 2. INVESTMENTS Fixed maturities available for sale as of December 31 were as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR 2003 (MILLIONS) COST GAINS LOSSES VALUE -------------------------------------------------------------------------------------------------------------- U.S. government and government agencies and authorities $ 350.0 $ 1.7 $ 0.3 $ 351.4 States, municipalities and political subdivisions 2.1 0.1 -- 2.2 U.S. corporate securities: Public utilities 970.7 48.9 11.4 1,008.2 Other corporate securities 6,846.6 432.9 32.4 7,247.1 -------------------------------------------------------------------------------------------------------------- Total U.S. corporate securities 7,817.3 481.8 43.8 8,255.3 -------------------------------------------------------------------------------------------------------------- Foreign securities: Government 605.2 33.7 2.8 636.1 Other 1,364.7 74.5 11.0 1,428.2 -------------------------------------------------------------------------------------------------------------- Total foreign securities 1,969.9 108.2 13.8 2,064.3 -------------------------------------------------------------------------------------------------------------- Mortgage-backed securities 5,903.7 91.8 35.1 5,960.4 Other assets-backed securities 1,036.4 34.0 9.5 1,060.9 -------------------------------------------------------------------------------------------------------------- Total fixed maturities, including fixed maturities pledged to creditors 17,079.4 717.6 102.5 17,694.5 Less: fixed maturities pledged to creditors 117.7 2.7 0.2 120.2 -------------------------------------------------------------------------------------------------------------- Fixed maturities $ 16,961.7 $ 714.9 $ 102.3 $ 17,574.3 ==============================================================================================================
C-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 0.4 -- -- 0.4 U.S. corporate securities: Public utilities 623.9 28.1 6.4 645.6 Other corporate securities 6,845.8 482.4 30.8 7,297.4 -------------------------------------------------------------------------------------------------------------- Total U.S. corporate securities 7,469.7 510.5 37.2 7,943.0 -------------------------------------------------------------------------------------------------------------- Foreign securities: Government 350.4 20.7 6.5 364.6 Other 1,044.8 69.5 3.6 1,110.8 -------------------------------------------------------------------------------------------------------------- Total foreign securities 1,395.2 90.2 10.1 1,475.8 -------------------------------------------------------------------------------------------------------------- Mortgage-backed securities 5,374.2 167.1 34.0 5,507.3 Other assets-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 ==============================================================================================================
At December 31, 2003 and 2002, net unrealized appreciation of $615.1 million and $725.9 million, respectively, on available-for-sale fixed maturities including fixed maturities pledged to creditors included $491.5 million and $563.1 million, respectively, related to experience-rated contracts, which were not reflected in shareholder's equity but in other policyholders' funds. C-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The aggregate unrealized losses and related fair values of investments with unrealized losses as of December 31, 2003, are shown below by duration:
UNREALIZED FAIR (MILLIONS) LOSS VALUE --------------------------------------------------------------------------- Duration category: Less than six months below cost $ 27.1 $ 2,774.3 More than six months and less than twelve months below cost 65.5 1,772.1 More than twelve months below cost 9.9 82.5 --------------------------------------------------------------------------- Fixed maturities, including fixed maturities pledged to creditors $ 102.5 $ 4,628.9 ===========================================================================
Of the losses more than 6 months and less than 12 months in duration of $65.5 million, there were $20.4 million in unrealized losses that are primarily related to interest rate movement or spread widening for other than credit-related reasons. Business and operating fundamentals are performing as expected. The remaining losses of $45.1 million as of December 31, 2003 included the following items: - $21.5 million of unrealized losses related to securities reviewed for impairment under the guidance proscribed by EITF 99-20. This category includes U.S. government-backed securities, principal protected securities and structured securities which did not have an adverse change in cash flows for which the carrying amount was $594.2 million. - $15.0 million of unrealized losses relating to the energy/utility industry, for which the carrying amount was $202.8 million. During 2003, the energy sector recovered due to a gradually improving economic picture and the lack of any material accounting irregularities similar to those experienced in the prior two years. The Company's year-end analysis indicates that we can expect the debt to be serviced in accordance with the contractual terms. - $5.3 million of unrealized losses relating to non-domestic issues, with no unrealized loss exposure per country in excess of $3.0 million for which the carrying amount was $111.4 million. The Company's credit exposures are well diversified in these markets including banking and beverage companies. - $3.2 million of unrealized losses relating to the telecommunications/ cable/media industry, for which the carrying amount was $83.5 million. During 2003, the sector recovered somewhat due to a gradually improving economy and reduced investor concern with management decisions even though it remains challenged by over capacity. The Company's exposure is primarily focused in the largest and most financially secure companies in the sector. An analysis of the losses more than 12 months in duration of $9.9 million follows. There were $0.6 million in unrealized losses that are primarily related to interest rate movement or spread widening for other than credit-related reasons. Business and operating fundamentals are performing as expected. The remaining losses of $9.3 million as of December 31, 2003 included the following significant items: - $8.7 million of unrealized losses related to securities reviewed for impairment under the guidance proscribed by EITF 99-20. This category includes U.S. government-backed securities, principal protected securities and structured securities which did not have an adverse change in cash flows for which the carrying amount was $47.2 million. C-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - The remaining unrealized losses totaling $0.6 million relate to a carrying amount of $9.0 million. The amortized cost and fair value of total fixed maturities for the year ended December 31, 2003 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 $ 370.7 $ 379.9 After one year through five years 3,073.7 3,204.9 After five years through ten years 3,385.5 3,533.7 After ten years 2,031.0 2,174.6 Mortgage-backed securities 7,225.1 7,389.9 Other asset-backed securities 993.4 1,011.5 Less: fixed maturities securities pledged to creditors 117.7 120.2 -------------------------------------------------------------------------------------------- Fixed maturities $ 16,961.7 $ 17,574.3 ============================================================================================
At December 31, 2003 and 2002, fixed maturities with carrying values of $11.2 million and $10.5 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, 2003 or 2002. 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, 2003 and 2002, approximately 2.8% and 5.5%, 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) 2003 2002 -------------------------------------------------------------------------- Amortized cost $ 146.5 $ 238.3 Gross unrealized gains 9.4 -- Gross unrealized losses -- 2.9 -------------------------------------------------------------------------- Fair value $ 155.9 $ 235.4 ==========================================================================
Beginning in April 2001, the Company entered into reverse dollar repurchase agreement ("dollar rolls") 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 substantially the same securities as C-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 $1.5 billion and $1.3 billion at December 31, 2003 and 2002, respectively. 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, 2003. 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 2003, the Company determined that eighty-seven fixed maturities had other than temporary impairments. As a result, at December 31, 2003, the Company recognized a pre-tax loss of $94.4 million to reduce the carrying value of the fixed maturities to their combined fair value of $123.1 million. During 2002, the Company determined that fifty-six fixed maturities 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 maturities to their combined fair value of $124.7 million. During 2001, the Company determined that fourteen fixed maturities 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 fair 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 following 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 quality of the issuer and cash flow characteristics of C-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 AND CASH EQUIVALENTS, 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 policyholder 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. The carrying values and estimated fair values of certain of the Company's financial instruments at December 31, 2003 and 2002 were as follows:
2003 2002 --------------------------- --------------------------- CARRYING FAIR CARRYING FAIR (MILLIONS) VALUE VALUE VALUE VALUE ---------------------------------------------------------------------------------------------------------------- Assets: Fixed maturity securities $ 17,574.3 $ 17,574.3 $ 15,767.0 $ 15,767.0 Equity securities 155.9 155.9 235.4 235.4 Mortgage loans 754.5 798.5 576.6 632.6 Policy loans 270.3 270.3 296.3 296.3 Short term investments 1.0 1.0 6.2 6.2 Cash and cash equivalents 57.8 57.8 65.4 65.4 Liabilities: Investment contract liabilities: With a fixed maturity 1,056.4 1,067.8 1,129.8 1,122.8 Without a fixed maturity 12,152.5 12,116.4 10,783.6 10,733.8 ----------------------------------------------------------------------------------------------------------------
C-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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, 2003 or 2002. 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, 2003 were $739.6 million, $8.2 million and $8.2 million, respectively. 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. 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, 2003 were $950.0 million, $(14.4) million and $(14.4) million, respectively. 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. 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, 2003 were $78.1 million, $(12.8) million and $(12.8) million, respectively. The notional amount, carrying value and estimated fair value of the Company's open foreign C-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) exchange rate swaps as of December 31, 2002 were $49.4 million, $(0.5) million and $(0.5) 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, 2003 and 2002 was $(3.7) million and $(1.4) million, respectively. 4. NET INVESTMENT INCOME Sources of net investment income were as follows:
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ----------------------------------------------------------------------------------------------- Fixed maturities $ 946.2 $ 964.1 $ 887.2 Nonredeemable preferred stock 9.9 3.9 1.5 Investment in affiliated mutual funds -- -- 7.2 Mortgage loans 42.7 23.3 5.9 Policy loans 9.0 8.7 8.9 Cash equivalents 1.7 1.7 18.2 Other (1.0) 23.4 15.9 ----------------------------------------------------------------------------------------------- Gross investment income 1,008.5 1,025.1 944.8 Less: investment expenses 89.4 65.6 56.4 ----------------------------------------------------------------------------------------------- Net investment income $ 919.1 $ 959.5 $ 888.4 ===============================================================================================
Net investment income includes amounts allocable to experience rated contractholders of $783.3 million, $766.9 million and $704.2 million for the years-ended December 31, 2003, 2002 and 2001, 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 2003, 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 $67.5 million, $148.8 million, C-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) and $(92.3) million for the years ended December 31, 2003, 2002 and 2001, respectively. Statutory capital and surplus was $1,230.7 million and $1,006.0 million as of December 31, 2003 and 2002, respectively. As of December 31, 2003, 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. 6. CAPITAL GAINS AND LOSSES 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:
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ----------------------------------------------------------------------------------------------- Fixed maturities $ 63.9 $ (97.5) $ (20.6) Equity securities 0.6 (3.5) (0.4) ----------------------------------------------------------------------------------------------- Pretax realized capital gains (losses) $ 64.5 $ (101.0) $ (21.0) =============================================================================================== After-tax realized capital gains (losses) $ 41.9 $ (58.3) $ (13.7) ===============================================================================================
Net realized capital gains of $43.9 million, $63.6 million and $117.0 million for the years ended December 31, 2003, 2002 and 2001, respectively, allocable to experience rated contracts, were deducted from net realized capital gains and an offsetting amount was reflected in Other policyholders' funds on the Consolidated Balance Sheets. Net unamortized gains allocable to experienced-rated contractholders were $213.7 million, $199.3 million and $172.7 million at December 31, 2003, 2002 and 2001, respectively. 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:
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ----------------------------------------------------------------------------------------------- Proceeds on sales $ 12,812.5 $ 13,265.2 $ 15,338.5 Gross gains 291.9 276.7 57.0 Gross losses 228.0 374.2 77.6 -----------------------------------------------------------------------------------------------
C-26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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:
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ----------------------------------------------------------------------------------------------- Fixed maturities $ (54.3) $ 104.8 $ 24.0 Equity securities 17.9 (1.6) 2.0 Other investments 34.0 (8.3) 6.5 ----------------------------------------------------------------------------------------------- Subtotal (2.4) 94.9 32.5 Increase in deferred income taxes (0.9) 33.2 11.3 ----------------------------------------------------------------------------------------------- Net changes in accumulated other comprehensive income (loss) $ (1.5) $ 61.7 $ 21.2 ===============================================================================================
Net unrealized capital gains allocable to experience-rated contracts of $491.5 million and $563.1 million at December 31, 2003 and 2002, respectively, are reflected on the Consolidated Balance Sheets in Other policyholders' funds and are not included in shareholder's equity. Shareholder's equity included the following accumulated other comprehensive income, which is net of amounts allocable to experience-rated contractholders:
AS OF AS OF AS OF DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ----------------------------------------------------------------------------------------------- Net unrealized capital gains (losses): Fixed maturities $ 108.5 $ 162.8 $ 58.0 Equity securities 14.4 (3.5) (1.9) Other investments 41.3 7.3 15.6 ----------------------------------------------------------------------------------------------- 164.2 166.6 71.7 ----------------------------------------------------------------------------------------------- Less: deferred income taxes 57.4 58.3 25.1 ----------------------------------------------------------------------------------------------- Net accumulated other comprehensive income $ 106.8 $ 108.3 $ 46.6 ===============================================================================================
C-27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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:
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ----------------------------------------------------------------------------------------------- Unrealized holding gains (losses) arising during the year (1) $ (48.1) $ 127.4 $ 8.3 Less: reclassification adjustment for gains(losses) and other items included in net income (2) (46.6) 65.7 (12.9) ----------------------------------------------------------------------------------------------- Net unrealized gains (losses) on securities $ (1.5) $ 61.7 $ 21.2 ===============================================================================================
(1) Pretax unrealized holding gains (losses) arising during the year were $(74.0) million, $196.0 million and $12.7 million for the years ended December 31, 2003, 2002 and 2001, respectively. (2) Pretax reclassification adjustments for gains (losses) and other items included in net income were $(71.6) million, $101.1 million and $(19.8) million for the years ended December 31, 2003, 2002 and 2001, respectively. 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. During the first quarter of 2003, the Company performed a detailed analysis of its severance accrual. As part of this analysis, the Company corrected the initial planned number of people to eliminate from 580 to 515 (corrected from the 2002 Annual Report on Form 10-K) and extended the date of expected substantial completion for severance actions to June 30, 2003. Activity for the year ended December 31, 2003 within the severance liability and positions eliminated related to such actions were as follows:
SEVERANCE (MILLIONS) LIABILITY POSITIONS ---------------------------------------------------------------------------- Balance at December 31, 2002 $ 9.2 75 Actions taken 7.3 72 ---------------------------------------------------------------------------- Balance at December 31, 2003 $ 1.9 3 ============================================================================
8. INCOME TAXES The Company files a consolidated federal income tax return with its subsidiary, 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. C-28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Income taxes consist of the following:
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ----------------------------------------------------------------------------------------------- Current taxes (benefits): Federal $ (13.7) $ 28.9 $ 3.2 State 1.1 1.8 2.2 Net realized capital gains 51.6 11.5 16.1 ----------------------------------------------------------------------------------------------- Total current taxes 39.0 42.2 21.5 ----------------------------------------------------------------------------------------------- Deferred taxes (benefits): Federal 51.1 30.6 89.3 Net realized capital losses (29.0) (54.2) (23.4) ----------------------------------------------------------------------------------------------- Total deferred taxes (benefits) 22.1 (23.6) 65.9 ----------------------------------------------------------------------------------------------- Total income tax expense $ 61.1 $ 18.6 $ 87.4 ===============================================================================================
Income taxes were different from the amount computed by applying the federal income tax rate to income before income taxes for the following reasons:
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ----------------------------------------------------------------------------------------------- Income before income taxes and cumulative effect of change in accounting principle $ 215.7 $ 86.1 $ 187.3 Tax rate 35% 35% 35% ----------------------------------------------------------------------------------------------- Application of the tax rate 75.5 30.1 65.6 Tax effect of: State income tax, net of federal benefit 0.7 1.2 1.4 Excludable dividends (14.0) (5.3) (1.8) Goodwill amortization -- -- 21.6 Transfer of mutual fund shares -- (6.7) -- Other, net (1.1) (0.7) 0.6 ----------------------------------------------------------------------------------------------- Income taxes $ 61.1 $ 18.6 $ 87.4 ===============================================================================================
C-29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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) 2003 2002 ----------------------------------------------------------------------------------------------- Deferred tax assets: Insurance reserves $ 263.7 $ 234.5 Unrealized gains allocable to experience rated contracts 172.0 197.1 Investments 69.7 113.4 Postretirement benefits 30.2 29.5 Deferred compensation 56.0 58.6 Other 19.7 19.5 ----------------------------------------------------------------------------------------------- Total gross assets 611.3 652.6 ----------------------------------------------------------------------------------------------- Deferred tax liabilities: Value of business acquired 495.4 509.7 Market discount -- 4.1 Net unrealized capital gains 236.4 263.8 Depreciation 0.2 3.8 Deferred policy acquisition costs 59.2 29.2 Other 4.8 5.1 ----------------------------------------------------------------------------------------------- Total gross liabilities 796.0 815.7 ----------------------------------------------------------------------------------------------- Net deferred tax liability $ 184.7 $ 163.1 ===============================================================================================
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, 2003. 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. C-30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. BENEFIT PLANS DEFINED BENEFIT PLAN ING North America Insurance Corporation ("ING North America") sponsors the ING Americas Retirement Plan (the "Retirement Plan"), effective as of December 31, 2001. Substantially all employees of ING North America and its subsidiaries and affiliates (excluding certain employees) are eligible to participate, including the Company's employees other than Company agents. The Retirement Plan is a tax-qualified defined benefit plan, the benefits of which are guaranteed (within certain specified legal limits) by the Pension Benefit Guaranty Corporation ("PBGC"). As of January 1, 2002, each participant in the Retirement Plan (except for certain specified employees) earns a benefit under a final average compensation formula. Subsequent to December 31, 2001, ING North America is responsible for all Retirement Plan liabilities. The costs allocated to the Company for its employees' participation in the Retirement Plan were $15.1 million for 2003 and $6.4 million for 2002, respectively. DEFINED CONTRIBUTION PLANS ING North America sponsors the ING Savings Plan and ESOP (the "Savings Plan"). Substantially all employees of ING North America and its subsidiaries and affiliates (excluding certain employees, including but not limited to Career Agents (as defined below)) are eligible to participate, including the Company's employees other than Company agents. The Savings Plan is a tax-qualified profit sharing and stock bonus plan, which includes an employee stock ownership plan ("ESOP") component. Savings Plan benefits are not guaranteed by the PBGC. The Savings Plan allows eligible participants to defer into the Savings Plan a specified percentage of eligible compensation on a pre-tax basis. ING North America matches such pre-tax contributions, up to a maximum of 6% of eligible compensation. All matching contributions are subject to a 4-year graded vesting schedule (although certain specified participants are subject to a 5-year graded vesting schedule). All contributions made to the Savings Plan are subject to certain limits imposed by applicable law. Pre-tax charges of operations of the Company for the Savings Plan were $7.1 million in 2003 and 2002. The Company sponsors the ING 401(k) Plan for ILIAC Agents (formerly the ING 401(k) Plan for ALIAC Agents, and originally named the Agents of Aetna Life Insurance and Annuity Company Incentive Savings Plan) (the "Agents 401(k) Plan"), which is a tax-qualified profit sharing plan. The Agents 401(k) Plan covers Career Agents (defined below) who meet certain requirements. Benefits under the Agents 401(k) Plan are not guaranteed by the PBGC. The Agents 401(k) Plan allows eligible participants to defer into the Agents 401(k) Plan a specified percentage of eligible earnings on a pre-tax basis. The Company matches such pre-tax contribution, at the rate of 50%, up to a maximum of 6% of eligible earnings. Effective January 1, 2002, all matching contributions are subject to a 4-year vesting schedule, except Career Agents who were credited with vesting service earned prior to January 1, 2002, are subject to a 3-year vesting schedule. All contributions made to the Agents 401(k) Plan are subject to certain limits imposed by applicable law. Pre-tax charges of operations of the Company for the Agents 401(k) Plan were $1.0 million in 2003 and $1.0 in 2002, respectively. C-31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NON-QUALIFIED RETIREMENT PLANS As of December 31, 2001, the Company, in conjunction with ING, offers certain eligible employees (excluding, among others, Career Agents (as defined below)) the Supplemental ING Retirement Plan for Aetna Financial Services and Aetna International Employees ("SERP"). The SERP is a non-qualified defined benefit pension plan, which means all benefits are payable from the general assets of the Company and ING. SERP benefits are not guaranteed by the PBGC. Benefit accruals under the SERP ceased effective as of December 31, 2001. Benefits under the SERP are determined based on an eligible employees years of service and such employee's average annual compensation for the highest five years during the last ten years of employment. Effective January 1, 2002, the Company, in conjunction with ING, offers certain employees (other than Career Agents) supplemental retirement benefits under the ING Americas Supplemental Executive Retirement Plan (the "Americas Supplemental Plan"). The Americas Supplemental Plan is a non-qualified defined benefit pension plan, which means all benefits are payable from the general assets of the Company and ING. Americas Supplemental Plan benefits are not guaranteed by the PBGC. Benefits under the Americas Supplemental Plan are based on the benefits formula contained in the Retirement Plan, but without taking into account the compensation and benefit limits imposed by applicable law. Any benefits payable from the Americas Supplemental Plan are reduced by the benefits payable to the eligible participant under the Retirement Plan. The Company, in conjunction with ING, sponsors the Pension Plan for Certain Producers of ING Life Insurance and Annuity Company (formerly the Pension Plan for Certain Producers of Aetna Life Insurance and Annuity Company) (the "Agents Non-Qualified Plan"), a non-qualified defined benefit pension plan. This plan covers certain full-time insurance salesmen who have entered into a career agent agreement with the Company and certain other individuals who meet the eligibility criteria specified in the plan ("Career Agents"). The Agents Non-Qualified Plan was terminated effective January 1, 2002. In connection with the termination, all benefit accruals ceased and all accrued benefits were frozen. Benefits under this plan are payable from the general assets of the Company and ING and are not guaranteed by the PBGC. The Company also sponsors the Producers' Incentive Savings Plan ("PIP"), which is a non-qualified deferred compensation plan for eligible Career Agents and certain other individuals who meet the eligibility criteria specified in the PIP. The PIP is unfunded, which means benefit payments are made from the general assets of the Company. PIP benefits are not guaranteed by the PBGC. Eligible PIP participants can defer either 4% or 5% of eligible earnings, depending on their commission level, which is 100% matched by the Company. Matching contributions are fully vested when contributed to the PIP. In addition, eligible PIP participants can contribute up to an additional 10% of eligible earnings, with no Company match on such contributions. Pretax charges of operations of the Company for the PIP were $0.6 million for 2003 and $0.9 million for 2002. The Company also sponsors the Producers' Deferred Compensation Plan ("DCP"), which is a non-qualified deferred compensation plan for eligible Career Agents and certain other individuals who meet the eligibility criteria specified in the DCP. The DCP is unfunded, which means benefit payments are made from the general assets of the Company. DCP benefits are not guaranteed by the PBGC. Eligible C-32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) participants can defer up to 100% of eligible earnings, provided the election to defer is made within the applicable election period established by the Company. Amounts contributed to the DCP are not matched by the Company. DCP participants are 100% vested in amounts contributed to the DCP. The following tables summarize the benefit obligations and the funded status for the SERP and the Agents Non-Qualified Plan for the years ended December 31, 2003 and 2002:
(MILLIONS) 2003 2002 ---------------------------------------------------------------------------------------------- Change in Benefit Obligation: Defined Benefit Obligation, January 1 $ 106.8 $ 95.3 Service cost -- -- Interest cost 6.9 6.8 Benefits paid (9.7) (5.5) Plan adjustments -- 4.5 Actuarial (gain) loss on obligation (2.4) 5.7 ---------------------------------------------------------------------------------------------- Defined Benefit Obligation, December 31 $ 101.6 $ 106.8 ============================================================================================== Funded status: Funded status at December 31 $ (101.6) $ (106.8) Unrecognized past service cost 3.1 6.4 Unrecognized net loss 0.6 0.8 ---------------------------------------------------------------------------------------------- Net amount recognized $ (97.9) $ (99.6) ==============================================================================================
At December 31, 2003 and 2002, the accumulated benefit obligation was $97.2 million and $99.7 million, respectively. The weighted-average assumptions used in the measurement of the December 31, 2003 and 2002 benefit obligation for the Retirement Plan were as follows:
2003 2002 ---------------------------------------------------------------------------------------------- Discount rate 6.25% 6.75% Rate of compensation increase 3.75 3.75 ----------------------------------------------------------------------------------------------
Net periodic benefit costs for the years ended December31, 2003 and 2002 were as follows:
(MILLIONS) 2003 2002 ---------------------------------------------------------------------------------------------- Service cost $ -- $ -- Interest cost $ 6.9 6.8 Net actuarial (gain) loss recognized in the year 0.9 -- Unrecognized past service cost recognized in year 0.2 (0.3) The effect of any curtailment or settlement -- (2.6) ---------------------------------------------------------------------------------------------- Net periodic benefit cost $ 8.0 $ 3.9 ==============================================================================================
C-33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) POST-RETIREMENT BENEFITS In addition to providing pension benefits, the Company, in conjunction with ING, provides certain health care and life insurance benefits for retired employees and certain agents, including certain Career Agents. Generally, retired employees and eligible Career Agents pay a portion of the cost of these post-retirement benefits, usually based on their years of service with the Company. The amount a retiree or eligible Career Agent pays for such coverage is subject to change in the future. The following tables summarize the benefit obligations and the funded status for retired employees' and retired agents' post-retirement health care benefits over the years ended December 31, 2003 and 2002:
(MILLIONS) 2003 2002 ---------------------------------------------------------------------------------------------- Change in Benefit Obligation: Defined Benefit Obligation, January 1 $ 23.7 $ 25.4 Service cost 0.8 0.5 Interest cost 1.7 1.5 Benefits paid (1.3) (1.2) Plan amendments -- (6.5) Actuarial loss on obligation 4.8 4.0 ---------------------------------------------------------------------------------------------- Defined Benefit Obligation, December 31 29.7 23.7 Funded status: Funded status at December 31 (29.7) (23.7) Unrecognized losses 9.9 5.4 Unrecognized past service cost (3.2) (3.6) ---------------------------------------------------------------------------------------------- Net amount recognized $ (23.0) $ (21.9) ==============================================================================================
The medical health care trend rate was 10% for 2004, gradually decreasing to 5.0% by 2009. Increasing the health care trend by 1% would increase the benefit obligation by $3.3 million as of December 31, 2003. Decreasing the health care trend rate by 1% would decrease the benefit obligation by $2.9 million as of December 31, 2003. Net periodic benefit costs were as follows:
(Millions) 2003 2002 ---------------------------------------------------------------------------------------------- Service cost $ 0.8 $ 0.5 Interest cost 1.7 1.5 Net actuarial loss recognized in the year 0.4 -- Past service cost--unrecognized psc recognized in year -- (2.9) Past service cost--recognized this year (0.5) -- ---------------------------------------------------------------------------------------------- Net periodic benefit cost $ 2.4 $ (0.9) ==============================================================================================
C-34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. RELATED PARTY TRANSACTIONS INVESTMENT ADVISORY AND OTHER FEES ILIAC serves as investment advisor to certain variable funds used in Company products (collectively, the "Company Funds"). The Company Funds pay ILIAC, as investment advisor, a daily fee which, on an annual basis, ranged, depending on the Fund, from 0.5% to 1.0% of their average daily net assets. Each of the Company Funds managed by ILIAC are subadvised by investment advisors, in which case ILIAC pays a subadvisory fee to the investment advisors, which may include affiliates. The Company is also compensated by the separate accounts 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 affiliated mutual funds and separate accounts, amounted to $201.4 million (excludes fees paid to Aeltus), $391.8 million (includes fees paid to Aeltus through February 28, 2002 when IA Holdco, Aeltus' parent, ceased to be a subsidiary of ILIAC) and $421.7 million in 2003, 2002 and 2001, respectively. RECIPROCAL LOAN AGREEMENT ILIAC maintains a reciprocal loan agreement with ING AIH, an indirect wholly-owned subsidiary of ING and affiliate to ILIAC, 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, 2003, 2002 and 2001, respectively, and earned interest income of $0.9 million, $2.1 million and $3.3 million for the years ended December 31, 2003, 2002 and 2001, respectively. At December 31, 2003, ILIAC had a $41.4 million receivable from ING AIH under this agreement. At December 2002, the Company had no receivables under this agreement. CAPITAL TRANSACTIONS In 2003, the Company received $230.0 million in cash capital contributions from Lion. In 2002, the Company received capital contributions in the form of investments in affiliated mutual funds of $164.3 million from HOLDCO. OTHER Premiums due and other receivables include $0.1 million due from affiliates at December 31, 2003 and 2002. Other liabilities include $92.3 million and $3.5 million due to affiliates for the years ended December 31, 2003 and 2002, respectively. C-35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. REINSURANCE At December 31, 2003, 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 $63.8 million and $66.2 million as of December 31, 2003 and 2002, 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 $20.4 million and $19.6 million were maintained for this contract as of December 31, 2003 and 2002, respectively. The effect of reinsurance on premiums and recoveries was as follows:
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, (MILLIONS) 2003 2002 2001 ------------------------------------------------------------------------------------------------------ Direct premiums $ 93.0 $ 97.3 $ 112.3 Reinsurance assumed 12.1 9.7 0.6 Reinsurance ceded 9.3 8.3 (1.3) ------------------------------------------------------------------------------------------------------ Net premiums 95.8 98.7 114.2 ------------------------------------------------------------------------------------------------------ Reinsurance recoveries $ 184.9 $ 317.6 $ 363.7 ======================================================================================================
C-36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. COMMITMENTS AND CONTINGENT LIABILITIES LEASES For the years ended December 31, 2003, 2002 and 2001, rent expense for leases was $20.8 million, $18.1 million and $17.6 million, respectively. The future net minimum payments under noncancelable leases for the years ended December 31, 2004 through 2008 are estimated to be $17.2 million, $16.1 million, $14.6 million, $13.1 million, and $0.7 million, respectively, and $0.1 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, 2003 and 2002, the Company had off-balance sheet commitments to purchase investments of $154.3 million with an estimated fair value of $154.3 million and $236.7 million with an estimated fair value of $236.7 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 the opinion of management that the disposition of such lawsuits will not have materially adverse effect on the Company's operations or financial position. OTHER REGULATORY MATTERS Like many financial services companies, certain U.S. affiliates of ING Groep N.V. have received informal and formal requests for information since September 2003 from various governmental and self-regulatory agencies in connection with investigations related to mutual funds and variable insurance products. ING has cooperated fully with each request. In addition to responding to regulatory requests, ING management initiated an internal review of trading in ING insurance, retirement, and mutual fund products. The goal of this review has been to identify whether there have been any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel. This internal review is being conducted by independent special counsel and auditors. Additionally, ING reviewed its controls and procedures in a continuing effort to deter improper frequent trading in ING products. ING's internal reviews related to mutual fund trading are continuing. C-37 The internal review has identified several arrangements allowing third parties to engage in frequent trading of mutual funds within our variable insurance and mutual fund products, and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. Most of the identified arrangements were initiated prior to ING's acquisition of the businesses in question. In each arrangement identified, ING has terminated the inappropriate trading, taken steps to discipline or terminate employees who were involved, and modified policies and procedures to deter inappropriate activity. While the review is not completed, management believes the activity identified does not represent a systemic problem in the businesses involved. These instances included agreements (initiated in 1998) that permitted one variable life insurance customer of Reliastar Life Insurance Company ("Reliastar") to engage in frequent trading, and to submit orders until 4pm Central Time, instead of 4pm Eastern Time. Reliastar was acquired by ING in 2000. The late trading arrangement was immediately terminated when current senior management became aware of it in 2002. ING believes that no profits were realized by the customer from the late trading aspect of the arrangement. In addition, the review has identified five arrangements that allowed frequent trading of funds within variable insurance products issued by Reliastar and by ING USA Annuity & Life Insurance Company; and in certain ING Funds. ING entities did not receive special benefits in return for any of these arrangements, which have all been terminated. The internal review also identified two investment professionals who engaged in improper frequent trading in ING Funds. ING will reimburse any ING Fund or its shareholders affected by inappropriate trading for any profits that accrued to any person who engaged in improper frequent trading for which ING is responsible. Management believes that the total amount of such reimbursements will not be material to ING or its U.S. business. 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, 2003 and 2002 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 periods ending December 31, 2003 and 2002. C-38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 ---------------------------------------------------------------------------------------------------------------------- 2003 Revenues from external customers $ 480.1 $ -- $ -- $ 480.1 Net investment income 919.1 919.1 ---------------------------------------------------------------------------------------------------------------------- Total revenue excluding net realized capital gains $ 1,399.2 $ -- $ -- $ 1,399.2 ====================================================================================================================== Operating earnings (4) $ 112.7 $ -- $ -- $ 112.7 Net realized capital gains, net of tax 41.9 -- -- 41.9 ---------------------------------------------------------------------------------------------------------------------- Net income $ 154.6 $ -- $ -- $ 154.6 ====================================================================================================================== 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) ======================================================================================================================
(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 variety 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. C-39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) QUARTERLY DATA (UNAUDITED) Restatement of Financial Information: During the quarterly period ended June 30, 2003, the Company incorrectly recorded investment income and realized capital gains related to Separate Accounts. The Company noted the effect of this error during the compilation of the December 31, 2003 financial statements and made the appropriate changes to the quarterly periods ended June 30, 2003 and September 30, 2003. The following tables show the previously reported and restated amounts for each of the periods affected.
AS REPORTED 2003 (MILLIONS) FIRST SECOND THIRD FOURTH ---------------------------------------------------------------------------------------------------------------------- Total revenue $ 359.2 $ 383.6 $ 362.4 $ 358.5 ---------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 17.5 111.5 33.2 53.5 Income tax expense 5.1 36.2 3.3 16.5 ---------------------------------------------------------------------------------------------------------------------- Income from continuing operations 12.4 75.3 29.9 37.0 ---------------------------------------------------------------------------------------------------------------------- Net income $ 12.4 $ 75.3 $ 29.9 $ 37.0 ====================================================================================================================== AS RESTATED 2003 (MILLIONS) FIRST SECOND* THIRD* FOURTH ---------------------------------------------------------------------------------------------------------------------- Total revenue $ 359.2 $ 381.3 $ 354.7 $ 368.5 ---------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 17.5 109.2 25.5 63.5 Income tax expense 5.1 35.4 0.6 20.0 ---------------------------------------------------------------------------------------------------------------------- Income from continuing operations 12.4 73.8 24.9 43.5 ---------------------------------------------------------------------------------------------------------------------- Net income $ 12.4 $ 73.8 $ 24.9 $ 43.5 ====================================================================================================================== 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) $ (2,383.2) $ 26.4 $ (13.2) $ 25.4 ======================================================================================================================
* Restated C-40 FINANCIAL STATEMENTS ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B YEAR ENDED DECEMBER 31, 2003 WITH REPORT OF INDEPENDENT AUDITORS S-1 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2003 CONTENTS Report of Independent Auditors 2 Audited Financial Statements Statements of Assets and Liabilities 5 Statements of Operations 29 Statements of Changes in Net Assets 53 Notes to Financial Statements 83
1 Report of Independent Auditors The Board of Directors and Participants ING Life Insurance and Annuity Company We have audited the accompanying statements of assets and liabilities of ING Life Insurance and Annuity Company Variable Annuity Account B as of December 31, 2003, 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. The Account is comprised of the following Divisions: AIM Variable Insurance Funds: AIM V.I. Capital Appreciation Fund - Series I Shares AIM V.I. Core Equity Fund - Series I Shares AIM V.I. Government Securities Fund - Series I Shares AIM V.I. Growth Fund - Series I Shares AIM V.I. Premier Equity Fund - Series I Shares Alger American Funds: Alger American Balanced Portfolio Alger American Income & Growth Portfolio Alger American Leveraged AllCap Portfolio AllianceBernstein Variable Products Series Fund, Inc.: AllianceBernstein VPSF Growth and Income Class A AllianceBernstein VPSF Premier Growth Class A AllianceBernstein VPSF Quasar Class A American Century(R) Investments: American Century(R) VP Balanced Fund American Century(R) VP International Fund Calvert Social Balanced Portfolio Federated Insurance Series: Federated American Leaders Fund II Federated Capital Income Fund II Federated Equity Income Fund II Federated Fund for U.S. Government Securities II Federated Growth Strategies Fund II Federated High Income Bond Fund II Federated International Equity Fund II Federated Prime Money Fund II Fidelity(R) Variable Insurance Products Fund: Fidelity(R) VIP ASSET MANAGER(SM) Portfolio - Initial Class Fidelity(R) VIP Contrafund(R) Portfolio - Initial Class Fidelity(R) VIP Equity-Income Portfolio - Initial Class Fidelity(R) VIP Growth Portfolio - Initial Class Fidelity(R) VIP High Income Portfolio - Initial Class Fidelity(R) VIP Index 500 Portfolio - Initial Class Fidelity(R) VIP Investment Grade Bond Portfolio - Initial Class Fidelity(R) VIP Overseas Portfolio - Initial Class Franklin Templeton Variable Insurance Products Trust: Franklin Small Cap Value Securities Fund - Class 2 ING GET Fund: ING GET Fund - Series D ING GET Fund - Series E ING GET Fund - Series G ING GET Fund - Series H ING GET Fund (continued) 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 GET Fund - Series V ING VP Balanced Portfolio, Inc. - Class R ING VP Bond Portfolio - Class R ING VP Emerging Markets Fund ING VP Money Market Portfolio - Class R ING VP Natural Resources Trust ING Generations Portfolio, Inc.: ING VP Strategic Allocation Balanced Portfolio - Class R ING VP Strategic Allocation Growth Portfolio - Class R ING VP Strategic Allocation Income Portfolio - Class R ING Investors Trust: ING MFS Total Return Portfolio - Service Class ING T. Rowe Price Equity Income Portfolio - Service Class ING Partners, Inc.: ING Alger Aggressive Growth Portfolio - Service Class ING Alger Growth Portfolio - Service Class ING American Century Small Cap Value Portfolio - Service Class ING Baron Small Cap Growth Portfolio - Service Class ING DSI Enhanced Index Portfolio - Service Class ING Goldman Sachs(R) Capital Growth Portfolio - Service Class ING JPMorgan Fleming International Portfolio - Initial Class ING JPMorgan Mid Cap Value Portfolio - Service Class ING MFS Capital Opportunities Portfolio - Initial Class ING MFS Global Growth Portfolio - Service Class ING MFS Research Equity Portfolio - Initial Class ING OpCap Balanced Value Portfolio - Service Class ING PIMCO Total Return Portfolio - Service Class ING Salomon Brothers Aggressive Growth Portfolio - Initial Class ING Salomon Brothers Fundamental Value Portfolio - Service Class ING Salomon Brothers Investors Value Portfolio - Service Class ING T. Rowe Price Growth Equity Portfolio - Initial Class ING UBS Tactical Asset Allocation Portfolio - Service Class ING Van Kampen Comstock Portfolio - Service Class ING Variable Funds: ING VP Growth and Income Portfolio - Class R ING Variable Insurance Trust: ING GET U.S. Core Portfolio - Series 1 ING GET U.S. Core Portfolio - Series 2 ING GET U.S. Core Portfolio - Series 3 ING Variable Portfolios, Inc.: ING VP Growth Portfolio - Class R ING VP Index Plus LargeCap Portfolio - Class R ING VP Index Plus MidCap Portfolio - Class R ING VP Index Plus SmallCap Portfolio - Class R ING VP International Equity Portfolio - Class R ING VP Small Company Portfolio - Class R ING VP Technology Portfolio - Class R ING VP Value Opportunity Portfolio - Class R ING Variable Products Trust: ING VP Growth Opportunities Portfolio - Class R ING VP Growth Opportunities Portfolio - Class S ING VP International Value Portfolio - Class R ING VP MagnaCap Portfolio - Class R ING VP MagnaCap Portfolio - Class S ING VP MidCap Opportunities Portfolio - Class R ING VP MidCap Opportunities Portfolio - Class S ING VP SmallCap Opportunities Portfolio - Class R ING Variable Products Trust (continued) ING VP SmallCap Opportunities Portfolio - Class S Janus Aspen Series: Janus Aspen Balanced Portfolio - Inst Shares Janus Aspen Flexible Income Portfolio - Inst Shares Janus Aspen Growth Portfolio - Inst Shares Janus Aspen Mid Cap Growth Portfolio - Inst Shares Janus Aspen Worldwide Growth Portfolio - Inst Shares Lord Abbett Funds: Lord Abbett Growth and Income Portfolio Lord Abbett Mid-Cap Value Portfolio MFS(R) Funds: MFS(R) Global Governments Series MFS(R) Total Return Series - Initial Class Oppenheimer Variable Account Funds: Oppenheimer Aggressive Growth Fund/VA Oppenheimer Global Securities Fund/VA Oppenheimer Main Street(R) Fund/VA Oppenheimer Strategic Bond Fund/VA Pioneer Variable Contracts Trust: Pioneer Equity Income VCT Portfolio - Class I Pioneer Fund VCT Portfolio - Class I Pioneer Mid Cap Value VCT Portfolio - Class I Prudential Series Fund, Inc.: Jennison Portfolio - Class II Shares SP Jennison International Growth Portfolio - Class II Shares UBS Series Trust: UBS Tactical Allocation Portfolio - Class I 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, 2003, 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, 2003, 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 15, 2004 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
AIM V.I. AIM V.I. AIM V.I. CAPITAL AIM V.I. GOVERNMENT AIM V.I. PREMIER APPRECIATION CORE EQUITY SECURITIES GROWTH EQUITY ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 17,500 $ 34,908 $ 15,026 $ 18,067 $ 42,830 ------------- ------------- ------------- ------------- ------------- Total assets 17,500 34,908 15,026 18,067 42,830 ------------- ------------- ------------- ------------- ------------- Net assets $ 17,500 $ 34,908 $ 15,026 $ 18,067 $ 42,830 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 16,418 $ 29,543 $ 15,026 $ 16,798 $ 40,439 Contracts in payout (annuitization) period 1,082 5,365 - 1,269 2,391 ------------- ------------- ------------- ------------- ------------- Total net assets $ 17,500 $ 34,908 $ 15,026 $ 18,067 $ 42,830 ============= ============= ============= ============= ============= Total number of shares 822,346 1,667,044 1,228,608 1,218,249 2,117,163 ============= ============= ============= ============= ============= Cost of shares $ 16,939 $ 33,390 $ 15,267 $ 18,318 $ 45,615 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 5 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ALGER ALGER ALLIANCE ALLIANCE ALGER AMERICAN AMERICAN BERNSTEIN BERNSTEIN AMERICAN INCOME & LEVERAGED VPSF GROWTH VPSF PREMIER BALANCED GROWTH ALLCAP AND INCOME GROWTH ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 2,367 $ 6,470 $ 6,443 $ 34,971 $ 7,314 ------------- ------------- ------------- ------------- ------------- Total assets 2,367 6,470 6,443 34,971 7,314 ------------- ------------- ------------- ------------- ------------- Net assets $ 2,367 $ 6,470 $ 6,443 $ 34,971 $ 7,314 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 2,367 $ 6,470 $ 6,443 $ 34,971 $ 7,314 Contracts in payout (annuitization) period - - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 2,367 $ 6,470 $ 6,443 $ 34,971 $ 7,314 ============= ============= ============= ============= ============= Total number of shares 179,846 690,542 229,364 1,604,168 338,936 ============= ============= ============= ============= ============= Cost of shares $ 2,284 $ 6,887 $ 6,796 $ 34,038 $ 7,374 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 6 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ALLIANCE AMERICAN AMERICAN BERNSTEIN CENTURY(R) CENTURY(R) CALVERT FEDERATED VPSF VP VP SOCIAL AMERICAN QUASAR BALANCED INTERNATIONAL BALANCED LEADERS ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 3,918 $ 1,420 $ 1,346 $ 2,228 $ 51,717 ------------- ------------- ------------- ------------- ------------- Total assets 3,918 1,420 1,346 2,228 51,717 ------------- ------------- ------------- ------------- ------------- Net assets $ 3,918 $ 1,420 $ 1,346 $ 2,228 $ 51,717 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 3,918 $ 1,420 $ 1,346 $ 2,228 $ 51,632 Contracts in payout (annuitization) period - - - - 85 ------------- ------------- ------------- ------------- ------------- Total net assets $ 3,918 $ 1,420 $ 1,346 $ 2,228 $ 51,717 ============= ============= ============= ============= ============= Total number of shares 385,297 210,706 209,301 1,267,338 2,707,703 ============= ============= ============= ============= ============= Cost of shares $ 3,317 $ 1,335 $ 1,352 $ 2,138 $ 53,375 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 7 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
FEDERATED FEDERATED FEDERATED FUND FOR US FEDERATED FEDERATED CAPITAL EQUITY GOVERNMENT GROWTH HIGH INCOME INCOME INCOME SECURITIES STRATEGIES BOND ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 6,460 $ 11,005 $ 9,833 $ 11,813 $ 15,774 ------------- ------------- ------------- ------------- ------------- Total assets 6,460 11,005 9,833 11,813 15,774 ------------- ------------- ------------- ------------- ------------- Net assets $ 6,460 $ 11,005 $ 9,833 $ 11,813 $ 15,774 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 6,443 $ 10,912 $ 9,830 $ 11,813 $ 15,754 Contracts in payout (annuitization) period 17 93 3 - 20 ------------- ------------- ------------- ------------- ------------- Total net assets $ 6,460 $ 11,005 $ 9,833 $ 11,813 $ 15,774 ============= ============= ============= ============= ============= Total number of shares 765,453 907,239 835,471 648,725 1,974,219 ============= ============= ============= ============= ============= Cost of shares $ 8,665 $ 12,440 $ 9,465 $ 17,049 $ 15,223 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 8 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
FEDERATED FEDERATED FIDELITY(R) FIDELITY(R) FIDELITY(R) INTERNATIONAL PRIME VIP ASSET VIP VIP EQUITY- EQUITY MONEY MANAGER(SM) CONTRAFUND(R) INCOME ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 6,565 $ 4,930 $ 12,034 $ 188,055 $ 192,149 ------------- ------------- ------------- ------------- ------------- Total assets 6,565 4,930 12,034 188,055 192,149 ------------- ------------- ------------- ------------- ------------- Net assets $ 6,565 $ 4,930 $ 12,034 $ 188,055 $ 192,149 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 6,520 $ 4,930 $ 12,034 $ 188,055 $ 192,149 Contracts in payout (annuitization) period 45 - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 6,565 $ 4,930 $ 12,034 $ 188,055 $ 192,149 ============= ============= ============= ============= ============= Total number of shares 566,464 4,929,941 832,202 8,130,350 8,289,421 ============= ============= ============= ============= ============= Cost of shares $ 11,119 $ 4,930 $ 11,306 $ 166,186 $ 175,158 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 9 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
FIDELITY(R) FIDELITY(R) FIDELITY(R) VIP FIDELITY(R) FIDELITY(R) VIP HIGH VIP INVESTMENT VIP VIP GROWTH INCOME INDEX 500 GRADE BOND OVERSEAS ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 125,864 $ 56,970 $ 74,266 $ 2,244 $ 13,904 ------------- ------------- ------------- ------------- ------------- Total assets 125,864 56,970 74,266 2,244 13,904 ------------- ------------- ------------- ------------- ------------- Net assets $ 125,864 $ 56,970 $ 74,266 $ 2,244 $ 13,904 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 125,864 $ 54,477 $ 74,266 $ 2,244 $ 13,904 Contracts in payout (annuitization) period - 2,493 - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 125,864 $ 56,970 $ 74,266 $ 2,244 $ 13,904 ============= ============= ============= ============= ============= Total number of shares 4,054,892 8,197,185 588,804 164,409 891,878 ============= ============= ============= ============= ============= Cost of shares $ 127,838 $ 48,899 $ 71,884 $ 2,081 $ 12,868 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 10 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
FRANKLIN SMALL ING GET ING GET ING GET ING GET CAP VALUE FUND - FUND - FUND - FUND - SECURITIES SERIES D SERIES E SERIES G SERIES H ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 662 $ 86,431 $ 238,886 $ 138,281 $ 105,009 ------------- ------------- ------------- ------------- ------------- Total assets 662 86,431 238,886 138,281 105,009 ------------- ------------- ------------- ------------- ------------- Net assets $ 662 $ 86,431 $ 238,886 $ 138,281 $ 105,009 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 662 $ 86,431 $ 238,886 $ 138,281 $ 105,009 Contracts in payout (annuitization) period - - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 662 $ 86,431 $ 238,886 $ 138,281 $ 105,009 ============= ============= ============= ============= ============= Total number of shares 52,226 9,435,712 24,627,419 14,081,614 10,459,101 ============= ============= ============= ============= ============= Cost of shares $ 535 $ 92,027 $ 243,729 $ 140,594 $ 105,295 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 11 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET ING GET ING GET FUND - FUND - FUND - FUND - FUND - SERIES I SERIES J SERIES K SERIES L SERIES M ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 74,750 $ 60,090 $ 70,505 $ 66,868 $ 94,718 ------------- ------------- ------------- ------------- ------------- Total assets 74,750 60,090 70,505 66,868 94,718 ------------- ------------- ------------- ------------- ------------- Net assets $ 74,750 $ 60,090 $ 70,505 $ 66,868 $ 94,718 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 74,750 $ 60,090 $ 70,505 $ 66,868 $ 94,718 Contracts in payout (annuitization) period - - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 74,750 $ 60,090 $ 70,505 $ 66,868 $ 94,718 ============= ============= ============= ============= ============= Total number of shares 7,423,043 6,021,011 6,925,817 6,614,045 9,304,356 ============= ============= ============= ============= ============= Cost of shares $ 74,294 $ 59,619 $ 69,410 $ 65,216 $ 91,425 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 12 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET ING GET ING GET FUND - FUND - FUND - FUND - FUND - SERIES N SERIES P SERIES Q SERIES R SERIES S ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 76,785 $ 58,003 $ 44,336 $ 38,175 $ 44,140 ------------- ------------- ------------- ------------- ------------- Total assets 76,785 58,003 44,336 38,175 44,140 ------------- ------------- ------------- ------------- ------------- Net assets $ 76,785 $ 58,003 $ 44,336 $ 38,175 $ 44,140 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 76,785 $ 58,003 $ 44,336 $ 38,175 $ 44,140 Contracts in payout (annuitization) period - - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 76,785 $ 58,003 $ 44,336 $ 38,175 $ 44,140 ============= ============= ============= ============= ============= Total number of shares 7,469,328 5,625,862 4,198,488 3,564,466 4,144,631 ============= ============= ============= ============= ============= Cost of shares $ 76,207 $ 56,200 $ 41,928 $ 35,717 $ 41,546 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 13 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET FUND - FUND - FUND - ING VP ING VP SERIES T SERIES U SERIES V BALANCED BOND ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 32,020 $ 30,078 $ 74,677 $ 172,818 $ 143,435 ------------- ------------- ------------- ------------- ------------- Total assets 32,020 30,078 74,677 172,818 143,435 ------------- ------------- ------------- ------------- ------------- Net assets $ 32,020 $ 30,078 $ 74,677 $ 172,818 $ 143,435 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 32,020 $ 30,078 $ 74,677 $ 128,409 $ 129,468 Contracts in payout (annuitization) period - - - 44,409 13,967 ------------- ------------- ------------- ------------- ------------- Total net assets $ 32,020 $ 30,078 $ 74,677 $ 172,818 $ 143,435 ============= ============= ============= ============= ============= Total number of shares 2,992,478 2,797,930 7,566,067 13,825,445 10,136,717 ============= ============= ============= ============= ============= Cost of shares $ 29,999 $ 28,024 $ 75,763 $ 172,181 $ 134,359 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 14 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP ING VP ING VP STRATEGIC STRATEGIC EMERGING MONEY NATURAL ALLOCATION ALLOCATION MARKETS MARKET RESOURCES BALANCED GROWTH ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 809 $ 173,894 $ 1,732 $ 16,937 $ 14,808 ------------- ------------- ------------- ------------- ------------- Total assets 809 173,894 1,732 16,937 14,808 ------------- ------------- ------------- ------------- ------------- Net assets $ 809 $ 173,894 $ 1,732 $ 16,937 $ 14,808 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 809 $ 165,313 $ 1,732 $ 14,681 $ 12,889 Contracts in payout (annuitization) period - 8,581 - 2,256 1,919 ------------- ------------- ------------- ------------- ------------- Total net assets $ 809 $ 173,894 $ 1,732 $ 16,937 $ 14,808 ============= ============= ============= ============= ============= Total number of shares 122,932 13,441,074 109,502 1,325,272 1,111,734 ============= ============= ============= ============= ============= Cost of shares $ 706 $ 173,306 $ 1,480 $ 16,478 $ 14,195 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 15 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP STRATEGIC ING T. ROWE ING ALGER ALLOCATION ING MFS PRICE EQUITY AGGRESSIVE ING ALGER INCOME TOTAL RETURN INCOME GROWTH GROWTH ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 19,422 $ 401 $ 704 $ 1,017 $ 380 ------------- ------------- ------------- ------------- ------------- Total assets 19,422 401 704 1,017 380 ------------- ------------- ------------- ------------- ------------- Net assets $ 19,422 $ 401 $ 704 $ 1,017 $ 380 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 15,836 $ 401 $ 704 $ 1,017 $ 380 Contracts in payout (annuitization) period 3,586 - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 19,422 $ 401 $ 704 $ 1,017 $ 380 ============= ============= ============= ============= ============= Total number of shares 1,577,771 23,278 58,104 138,185 42,936 ============= ============= ============= ============= ============= Cost of shares $ 19,081 $ 389 $ 625 $ 969 $ 347 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 16 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING ING GOLDMAN ING ING AMERICAN BARON ING DSI SACHS(R) JPMORGAN CENTURY SMALL SMALL CAP ENHANCED CAPITAL FLEMING CAP VALUE GROWTH INDEX GROWTH INTERNATIONAL ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 561 $ 1,381 $ 6 $ 25 $ 34,019 ------------- ------------- ------------- ------------- ------------- Total assets 561 1,381 6 25 34,019 ------------- ------------- ------------- ------------- ------------- Net assets $ 561 $ 1,381 $ 6 $ 25 $ 34,019 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 561 $ 1,381 $ 6 $ 25 $ 32,160 Contracts in payout (annuitization) period - - - - 1,859 ------------- ------------- ------------- ------------- ------------- Total net assets $ 561 $ 1,381 $ 6 $ 25 $ 34,019 ============= ============= ============= ============= ============= Total number of shares 52,099 118,094 796 2,425 3,249,196 ============= ============= ============= ============= ============= Cost of shares $ 480 $ 1,222 $ 6 $ 22 $ 30,774 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 17 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING ING ING JPMORGAN ING MFS MFS ING MFS OPCAP MID CAP CAPITAL GLOBAL RESEARCH BALANCED VALUE OPPORTUNITIES GROWTH EQUITY VALUE ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 678 $ 39,287 $ 5 $ 42,940 $ 1,250 ------------- ------------- ------------- ------------- ------------- Total assets 678 39,287 5 42,940 1,250 ------------- ------------- ------------- ------------- ------------- Net assets $ 678 $ 39,287 $ 5 $ 42,940 $ 1,250 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 678 $ 36,463 $ 5 $ 42,940 $ 1,250 Contracts in payout (annuitization) period - 2,824 - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 678 $ 39,287 $ 5 $ 42,940 $ 1,250 ============= ============= ============= ============= ============= Total number of shares 57,016 1,622,750 435 5,694,962 101,723 ============= ============= ============= ============= ============= Cost of shares $ 601 $ 36,389 $ 5 $ 45,393 $ 1,170 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 18 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING SALOMON ING SALOMON ING SALOMON BROTHERS BROTHERS BROTHERS ING T. ROWE ING PIMCO AGGRESSIVE FUNDAMENTAL INVESTORS PRICE GROWTH TOTAL RETURN GROWTH VALUE VALUE EQUITY ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 2,613 $ 58,639 $ 1,215 $ 179 $ 74,887 ------------- ------------- ------------- ------------- ------------- Total assets 2,613 58,639 1,215 179 74,887 ------------- ------------- ------------- ------------- ------------- Net assets $ 2,613 $ 58,639 $ 1,215 $ 179 $ 74,887 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 2,613 $ 57,096 $ 1,215 $ 179 $ 69,506 Contracts in payout (annuitization) period - 1,543 - - 5,381 ------------- ------------- ------------- ------------- ------------- Total net assets $ 2,613 $ 58,639 $ 1,215 $ 179 $ 74,887 ============= ============= ============= ============= ============= Total number of shares 246,233 1,610,512 73,242 13,777 1,651,318 ============= ============= ============= ============= ============= Cost of shares $ 2,652 $ 56,001 $ 1,130 $ 161 $ 70,957 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 19 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING UBS ING VAN ING VP ING GET ING GET TACTICAL ASSET KAMPEN GROWTH AND U.S. CORE - U.S. CORE - ALLOCATION COMSTOCK INCOME SERIES 1 SERIES 2 ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 53 $ 899 $ 455,361 $ 25,945 $ 24,501 ------------- ------------- ------------- ------------- ------------- Total assets 53 899 455,361 25,945 24,501 ------------- ------------- ------------- ------------- ------------- Net assets $ 53 $ 899 $ 455,361 $ 25,945 $ 24,501 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 53 $ 899 $ 351,987 $ 25,945 $ 24,501 Contracts in payout (annuitization) period - - 103,374 - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 53 $ 899 $ 455,361 $ 25,945 $ 24,501 ============= ============= ============= ============= ============= Total number of shares 1,754 85,006 24,910,333 2,506,810 2,430,686 ============= ============= ============= ============= ============= Cost of shares $ 50 $ 807 $ 554,426 $ 25,084 $ 24,319 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 20 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING GET ING VP ING VP ING VP U.S. CORE - ING VP INDEX PLUS INDEX PLUS INDEX PLUS SERIES 3 GROWTH LARGECAP MIDCAP SMALLCAP ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 1,965 $ 32,091 $ 186,926 $ 15,032 $ 6,712 ------------- ------------- ------------- ------------- ------------- Total assets 1,965 32,091 186,926 15,032 6,712 ------------- ------------- ------------- ------------- ------------- Net assets $ 1,965 $ 32,091 $ 186,926 $ 15,032 $ 6,712 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 1,965 $ 29,189 $ 141,950 $ 15,032 $ 6,712 Contracts in payout (annuitization) period - 2,902 44,976 - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 1,965 $ 32,091 $ 186,926 $ 15,032 $ 6,712 ============= ============= ============= ============= ============= Total number of shares 196,398 3,593,634 13,805,434 961,121 496,429 ============= ============= ============= ============= ============= Cost of shares $ 1,965 $ 31,872 $ 178,876 $ 12,438 $ 5,537 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 21 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP ING VP GROWTH INTERNATIONAL SMALL ING VP VALUE OPPORTUNITIES EQUITY COMPANY TECHNOLOGY OPPORTUNITY - CLASS R ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 8,924 $ 80,458 $ 13,372 $ 18,645 $ 49 ------------- ------------- ------------- ------------- ------------- Total assets 8,924 80,458 13,372 18,645 49 ------------- ------------- ------------- ------------- ------------- Net assets $ 8,924 $ 80,458 $ 13,372 $ 18,645 $ 49 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 7,411 $ 73,471 $ 13,372 $ 18,645 $ 49 Contracts in payout (annuitization) period 1,513 6,987 - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 8,924 $ 80,458 $ 13,372 $ 18,645 $ 49 ============= ============= ============= ============= ============= Total number of shares 1,181,983 4,602,850 3,455,188 1,543,489 9,878 ============= ============= ============= ============= ============= Cost of shares $ 8,012 $ 69,275 $ 11,410 $ 19,656 $ 45 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 22 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP ING VP GROWTH ING VP ING VP ING VP MIDCAP OPPORTUNITIES INTERNATIONAL MAGNACAP MAGNACAP OPPORTUNITIES - CLASS S VALUE - CLASS R - CLASS S - CLASS R ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 853 $ 1,199 $ 42 $ 928 $ 905 ------------- ------------- ------------- ------------- ------------- Total assets 853 1,199 42 928 905 ------------- ------------- ------------- ------------- ------------- Net assets $ 853 $ 1,199 $ 42 $ 928 $ 905 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 853 $ 1,199 $ 42 $ 928 $ 905 Contracts in payout (annuitization) period - - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 853 $ 1,199 $ 42 $ 928 $ 905 ============= ============= ============= ============= ============= Total number of shares 171,230 108,885 4,803 104,530 147,217 ============= ============= ============= ============= ============= Cost of shares $ 774 $ 982 $ 35 $ 822 $ 781 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 23 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP JANUS MIDCAP SMALLCAP SMALLCAP JANUS ASPEN OPPORTUNITIES OPPORTUNITIES OPPORTUNITIES ASPEN FLEXIBLE - CLASS S - CLASS R - CLASS S BALANCED INCOME ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 6,818 $ 1,392 $ 4,528 $ 186,531 $ 22,158 ------------- ------------- ------------- ------------- ------------- Total assets 6,818 1,392 4,528 186,531 22,158 ------------- ------------- ------------- ------------- ------------- Net assets $ 6,818 $ 1,392 $ 4,528 $ 186,531 $ 22,158 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 6,818 $ 1,392 $ 4,528 $ 186,531 $ 22,158 Contracts in payout (annuitization) period - - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 6,818 $ 1,392 $ 4,528 $ 186,531 $ 22,158 ============= ============= ============= ============= ============= Total number of shares 1,115,847 94,315 308,460 8,117,083 1,774,047 ============= ============= ============= ============= ============= Cost of shares $ 5,861 $ 1,403 $ 3,901 $ 184,245 $ 21,622 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 24 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
JANUS ASPEN JANUS ASPEN LORD ABBETT LORD ABBETT JANUS ASPEN MID CAP WORLDWIDE GROWTH AND MID-CAP GROWTH GROWTH GROWTH INCOME VALUE ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 105,326 $ 88,717 $ 190,923 $ 3,110 $ 1,217 ------------- ------------- ------------- ------------- ------------- Total assets 105,326 88,717 190,923 3,110 1,217 ------------- ------------- ------------- ------------- ------------- Net assets $ 105,326 $ 88,717 $ 190,923 $ 3,110 $ 1,217 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 98,579 $ 88,717 $ 183,912 $ 3,110 $ 1,217 Contracts in payout (annuitization) period 6,747 - 7,011 - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 105,326 $ 88,717 $ 190,923 $ 3,110 $ 1,217 ============= ============= ============= ============= ============= Total number of shares 5,477,159 4,145,640 7,394,403 126,831 71,402 ============= ============= ============= ============= ============= Cost of shares $ 105,411 $ 74,298 $ 194,181 $ 2,765 $ 1,020 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 25 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MFS (R) MFS(R) OPPENHEIMER OPPENHEIMER OPPENHEIMER GLOBAL TOTAL AGGRESSIVE GLOBAL MAIN GOVERNMENTS RETURN GROWTH SECURITIES STREET(R) ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 2,524 $ 110,405 $ 29,115 $ 29,539 $ 65,121 ------------- ------------- ------------- ------------- ------------- Total assets 2,524 110,405 29,115 29,539 65,121 ------------- ------------- ------------- ------------- ------------- Net assets $ 2,524 $ 110,405 $ 29,115 $ 29,539 $ 65,121 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 2,524 $ 110,405 $ 27,884 $ 29,539 $ 58,386 Contracts in payout (annuitization) period - - 1,231 - 6,735 ------------- ------------- ------------- ------------- ------------- Total net assets $ 2,524 $ 110,405 $ 29,115 $ 29,539 $ 65,121 ============= ============= ============= ============= ============= Total number of shares 228,998 5,638,645 793,103 1,177,804 3,391,699 ============= ============= ============= ============= ============= Cost of shares $ 2,367 $ 106,577 $ 28,637 $ 25,891 $ 62,747 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 26 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
OPPENHEIMER PIONEER PIONEER PIONEER MID STRATEGIC EQUITY INCOME FUND CAP VALUE PRUDENTIAL BOND VCT VCT VCT JENNISON ------------- ------------- ------------- ------------- ------------- ASSETS Investments in mutual funds at fair value $ 42,500 $ 253 $ 4 $ 739 $ 859 ------------- ------------- ------------- ------------- ------------- Total assets 42,500 253 4 739 859 ------------- ------------- ------------- ------------- ------------- Net assets $ 42,500 $ 253 $ 4 $ 739 $ 859 ============= ============= ============= ============= ============= NET ASSETS Accumulation units $ 40,566 $ 253 $ 4 $ 739 $ 859 Contracts in payout (annuitization) period 1,934 - - - - ------------- ------------- ------------- ------------- ------------- Total net assets $ 42,500 $ 253 $ 4 $ 739 $ 859 ============= ============= ============= ============= ============= Total number of shares 8,415,845 13,974 223 36,082 52,212 ============= ============= ============= ============= ============= Cost of shares $ 37,793 $ 210 $ 4 $ 683 $ 732 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 27 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
PRUDENTIAL SP JENNISON INTERNATIONAL UBS TACTICAL GROWTH ALLOCATION ------------- ------------- ASSETS Investments in mutual funds at fair value $ 3,269 $ 11,708 ------------- ------------- Total assets 3,269 11,708 ------------- ------------- Net assets $ 3,269 $ 11,708 ============= ============= NET ASSETS Accumulation units $ 3,269 $ 11,708 Contracts in payout (annuitization) period - - ------------- ------------- Total net assets $ 3,269 $ 11,708 ============= ============= Total number of shares 560,755 953,419 ============= ============= Cost of shares $ 2,986 $ 11,626 ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 28 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
AIM V.I. AIM V.I. AIM V.I. CAPITAL AIM V.I. GOVERNMENT AIM V.I. PREMIER APPRECIATION CORE EQUITY SECURITIES GROWTH EQUITY ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 316 $ 365 $ - $ 120 ------------- ------------- ------------- ------------- ------------- Total investment income - 316 365 - 120 Expenses: Mortality and expense risk and other charges 198 388 282 197 515 ------------- ------------- ------------- ------------- ------------- Total expenses 198 388 282 197 515 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (198) (72) 83 (197) (395) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (625) (546) 603 (678) (2,160) Capital gains distributions - - 6 - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (625) (546) 609 (678) (2,160) Net unrealized appreciation (depreciation) of investments 4,685 7,126 (826) 4,981 11,202 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 3,862 $ 6,508 $ (134) $ 4,106 $ 8,647 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 29 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ALGER ALGER ALLIANCE ALLIANCE ALGER AMERICAN AMERICAN BERNSTEIN BERNSTEIN AMERICAN INCOME & LEVERAGED VPSF GROWTH VPSF PREMIER BALANCED GROWTH ALLCAP AND INCOME GROWTH ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 54 $ 20 $ - $ 257 $ - ------------- ------------- ------------- ------------- ------------- Total investment income 54 20 - 257 - Expenses: Mortality and expense risk and other charges 35 88 86 332 86 ------------- ------------- ------------- ------------- ------------- Total expenses 35 88 86 332 86 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 19 (68) (86) (75) (86) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (34) (339) (265) (917) (358) Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (34) (339) (265) (917) (358) Net unrealized appreciation (depreciation) of investments 413 1,960 2,058 8,091 1,693 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 398 $ 1,553 $ 1,707 $ 7,099 $ 1,249 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 30 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ALLIANCE AMERICAN AMERICAN BERNSTEIN CENTURY(R) CENTURY(R) CALVERT FEDERATED VPSF VP VP SOCIAL AMERICAN QUASAR BALANCED INTERNATIONAL BALANCED LEADERS ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 40 $ 11 $ 40 $ 774 ------------- ------------- ------------- ------------- ------------- Total investment income - 40 11 40 774 Expenses: Mortality and expense risk and other charges 23 21 19 24 680 ------------- ------------- ------------- ------------- ------------- Total expenses 23 21 19 24 680 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (23) 19 (8) 16 94 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (125) (7) (99) (37) (2,953) Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (125) (7) (99) (37) (2,953) Net unrealized appreciation (depreciation) of investments 864 227 372 343 13,953 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 716 $ 239 $ 265 $ 322 $ 11,094 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 31 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
FEDERATED FEDERATED FEDERATED FEDERATED FUND FOR US FEDERATED HIGH CAPITAL EQUITY GOVERNMENT GROWTH INCOME INCOME INCOME SECURITIES STRATEGIES BOND ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 441 $ 200 $ 434 $ - $ 1,247 ------------- ------------- ------------- ------------- ------------- Total investment income 441 200 434 - 1,247 Expenses: Mortality and expense risk and other charges 91 142 159 148 230 ------------- ------------- ------------- ------------- ------------- Total expenses 91 142 159 148 230 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 350 58 275 (148) 1,017 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (1,548) (540) 371 (421) (971) Capital gains distributions - - 56 - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (1,548) (540) 427 (421) (971) Net unrealized appreciation (depreciation) of investments 2,295 2,785 (608) 3,953 3,008 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,097 $ 2,303 $ 94 $ 3,384 $ 3,054 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 32 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
FEDERATED FEDERATED FIDELITY(R) FIDELITY(R) FIDELITY(R) INTERNATIONAL PRIME VIP ASSET VIP VIP EQUITY- EQUITY MONEY MANAGER(SM) CONTRAFUND(R) INCOME ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 44 $ 406 $ 715 $ 2,774 ------------- ------------- ------------- ------------- ------------- Total investment income - 44 406 715 2,774 Expenses: Mortality and expense risk and other charges 83 88 156 1,973 2,021 ------------- ------------- ------------- ------------- ------------- Total expenses 83 88 156 1,973 2,021 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (83) (44) 250 (1,258) 753 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (781) - (99) (2,724) (6,755) Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (781) - (99) (2,724) (6,755) Net unrealized appreciation (depreciation) of investments 2,426 - 1,563 42,317 47,447 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,562 $ (44) $ 1,714 $ 38,335 $ 41,445 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 33 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
FIDELITY(R) FIDELITY(R) FIDELITY(R) VIP FIDELITY(R) FIDELITY(R) VIP HIGH VIP INVESTMENT VIP VIP GROWTH INCOME INDEX 500 GRADE BOND OVERSEAS ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 287 $ 2,950 $ 996 $ 113 $ 59 ------------- ------------- ------------- ------------- ------------- Total investment income 287 2,950 996 113 59 Expenses: Mortality and expense risk and other charges 1,348 624 917 37 98 ------------- ------------- ------------- ------------- ------------- Total expenses 1,348 624 917 37 98 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (1,061) 2,326 79 76 (39) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (3,844) 1,393 (2,618) 49 1,142 Capital gains distributions - - - 40 - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (3,844) 1,393 (2,618) 89 1,142 Net unrealized appreciation (depreciation) of investments 34,021 6,885 18,365 (69) 2,299 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 29,116 $ 10,604 $ 15,826 $ 96 $ 3,402 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 34 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
FRANKLIN SMALL CAP ING GET ING GET ING GET ING GET VALUE FUND - FUND - FUND - FUND - SECURITIES SERIES D SERIES E SERIES G SERIES H ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 1 $ 3,929 $ 10,827 $ 6,123 $ 4,655 ------------- ------------- ------------- ------------- ------------- Total investment income 1 3,929 10,827 6,123 4,655 Expenses: Mortality and expense risk and other charges 4 1,441 4,433 2,635 1,946 ------------- ------------- ------------- ------------- ------------- Total expenses 4 1,441 4,433 2,635 1,946 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (3) 2,488 6,394 3,488 2,709 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 18 (1,414) (903) (335) (63) Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 18 (1,414) (903) (335) (63) Net unrealized appreciation (depreciation) of investments 125 (988) (2,753) (2,355) (1,049) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 140 $ 86 $ 2,738 $ 798 $ 1,597 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 35 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET ING GET ING GET FUND - FUND - FUND - FUND - FUND - SERIES I SERIES J SERIES K SERIES L SERIES M ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2,734 $ 2,406 $ 2,430 $ 2,470 $ 3,721 ------------- ------------- ------------- ------------- ------------- Total investment income 2,734 2,406 2,430 2,470 3,721 Expenses: Mortality and expense risk and other charges 1,365 1,153 1,483 1,394 2,115 ------------- ------------- ------------- ------------- ------------- Total expenses 1,365 1,153 1,483 1,394 2,115 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 1,369 1,253 947 1,076 1,606 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 100 148 303 343 1,021 Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 100 148 303 343 1,021 Net unrealized appreciation (depreciation) of investments (373) (799) (922) (356) (674) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,096 $ 602 $ 328 $ 1,063 $ 1,953 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 36 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET ING GET ING GET FUND - FUND - FUND - FUND - FUND - SERIES N SERIES P SERIES Q SERIES R SERIES S ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2,210 $ 1,722 $ 1 $ 6 $ 47 ------------- ------------- ------------- ------------- ------------- Total investment income 2,210 1,722 1 6 47 Expenses: Mortality and expense risk and other charges 1,673 1,376 992 797 956 ------------- ------------- ------------- ------------- ------------- Total expenses 1,673 1,376 992 797 956 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 537 346 (991) (791) (909) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 65 663 462 290 493 Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 65 663 462 290 493 Net unrealized appreciation (depreciation) of investments 1,328 303 2,082 2,111 2,330 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,930 $ 1,312 $ 1,553 $ 1,610 $ 1,914 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 37 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET FUND - FUND - FUND - ING VP ING VP SERIES T SERIES U SERIES V BALANCED BOND ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 48 $ - $ - $ 3,122 $ 2,772 ------------- ------------- ------------- ------------- ------------- Total investment income 48 - - 3,122 2,772 Expenses: Mortality and expense risk and other charges 702 568 915 1,846 1,952 ------------- ------------- ------------- ------------- ------------- Total expenses 702 568 915 1,846 1,952 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (654) (568) (915) 1,276 820 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 412 768 (307) (6,377) 1,734 Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 412 768 (307) (6,377) 1,734 Net unrealized appreciation (depreciation) of investments 1,635 2,053 (1,086) 30,184 5,194 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,393 $ 2,253 $ (2,308) $ 25,083 $ 7,748 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 38 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP ING VP ING VP STRATEGIC STRATEGIC EMERGING MONEY NATURAL ALLOCATION ALLOCATION MARKETS MARKET RESOURCES BALANCED GROWTH ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 4,119 $ - $ 220 $ 113 ------------- ------------- ------------- ------------- ------------- Total investment income - 4,119 - 220 113 Expenses: Mortality and expense risk and other charges 10 2,819 19 187 154 ------------- ------------- ------------- ------------- ------------- Total expenses 10 2,819 19 187 154 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (10) 1,300 (19) 33 (41) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (21) (1,414) (20) (421) (254) Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (21) (1,414) (20) (421) (254) Net unrealized appreciation (depreciation) of investments 287 (660) 435 2,802 2,920 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 256 $ (774) $ 396 $ 2,414 $ 2,625 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 39 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP STRATEGIC ING MFS ING T. ROWE ING ALGER ALLOCATION TOTAL PRICE EQUITY AGGRESSIVE ING ALGER INCOME RETURN INCOME GROWTH GROWTH ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 456 $ 2 $ 2 $ - $ - ------------- ------------- ------------- ------------- ------------- Total investment income 456 2 2 - - Expenses: Mortality and expense risk and other charges 255 - 2 4 1 ------------- ------------- ------------- ------------- ------------- Total expenses 255 - 2 4 1 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 201 2 - (4) (1) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (299) 2 6 71 9 Capital gains distributions - - 1 - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (299) 2 7 71 9 Net unrealized appreciation (depreciation) of investments 2,310 12 79 59 34 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 2,212 $ 16 $ 86 $ 126 $ 42 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 40 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING ING AMERICAN ING BARON ING DSI ING GOLDMAN JPMORGAN CENTURY SMALL SMALL CAP ENHANCED SACHS(R) CAPITAL FLEMING CAP VALUE GROWTH INDEX GROWTH INTERNATIONAL ------------- ------------- ------------- ---------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 1 $ - $ - $ - $ 305 ------------- ------------- ------------- ---------------- ------------- Total investment income 1 - - - 305 Expenses: Mortality and expense risk and other charges 3 6 - - 308 ------------- ------------- ------------- ---------------- ------------- Total expenses 3 6 - - 308 ------------- ------------- ------------- ---------------- ------------- Net investment income (loss) (2) (6) - - (3) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 40 37 1 - 4,418 Capital gains distributions 14 - - - - ------------- ------------- ------------- ---------------- ------------- Total realized gain (loss) on investments and capital gains distributions 54 37 1 - 4,418 Net unrealized appreciation (depreciation) of investments 74 159 - 4 3,476 ------------- ------------- ------------- ---------------- ------------- Net increase (decrease) in net assets resulting from operations $ 126 $ 190 $ 1 $ 4 $ 7,891 ============= ============= ============= ================ =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 41 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING ING ING ING ING MFS MFS MFS OPCAP JPMORGAN CAPITAL GLOBAL RESEARCH BALANCED MID CAP VALUE OPPORTUNITIES GROWTH EQUITY VALUE ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2 $ 74 $ - $ 237 $ 11 ------------- ------------- ------------- ------------- ------------- Total investment income 2 74 - 237 11 Expenses: Mortality and expense risk and other charges 4 449 - 526 4 ------------- ------------- ------------- ------------- ------------- Total expenses 4 449 - 526 4 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (2) (375) - (289) 7 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 20 (7,641) 3 (1,984) 8 Capital gains distributions 5 - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 25 (7,641) 3 (1,984) 8 Net unrealized appreciation (depreciation) of investments 79 16,575 - 10,721 80 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 102 $ 8,559 $ 3 $ 8,448 $ 95 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 42 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING SALOMON ING SALOMON ING SALOMON BROTHERS BROTHERS BROTHERS ING T. ROWE ING PIMCO AGGRESSIVE FUNDAMENTAL INVESTORS PRICE GROWTH TOTAL RETURN GROWTH VALUE VALUE EQUITY ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 72 $ - $ 5 $ 1 $ 101 ------------- ------------- ------------- ------------- ------------- Total investment income 72 - 5 1 101 Expenses: Mortality and expense risk and other charges 22 674 5 1 848 ------------- ------------- ------------- ------------- ------------- Total expenses 22 674 5 1 848 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 50 (674) - - (747) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 52 (3,532) 103 3 (2,008) Capital gains distributions 16 - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 68 (3,532) 103 3 (2,008) Net unrealized appreciation (depreciation) of investments (57) 20,204 85 20 19,241 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 61 $ 15,998 $ 188 $ 23 $ 16,486 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 43 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING UBS TACTICAL ING VAN ING VP ING GET ING GET ASSET KAMPEN GROWTH AND U.S. CORE - U.S. CORE - ALLOCATION COMSTOCK INCOME SERIES 1 SERIES 2 ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 5 $ - $ - $ - ------------- ------------- ------------- ------------- ------------- Total investment income - 5 - - - Expenses: Mortality and expense risk and other charges - 5 4,562 162 36 ------------- ------------- ------------- ------------- ------------- Total expenses - 5 4,562 162 36 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) - - (4,562) (162) (36) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 1 32 (65,679) 16 - Capital gains distributions - 13 - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 1 45 (65,679) 16 - Net unrealized appreciation (depreciation) of investments 3 103 163,033 861 182 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 4 $ 148 $ 92,792 $ 715 $ 146 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 44 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING GET ING VP ING VP ING VP U.S. CORE - ING VP INDEX PLUS INDEX PLUS INDEX PLUS SERIES 3 GROWTH LARGECAP MIDCAP SMALLCAP ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ - $ 1,750 $ 59 $ 9 ------------- ------------- ------------- ------------- ------------- Total investment income - - 1,750 59 9 Expenses: Mortality and expense risk and other charges 1 341 1,990 106 40 ------------- ------------- ------------- ------------- ------------- Total expenses 1 341 1,990 106 40 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (1) (341) (240) (47) (31) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments - (1,434) (6,964) (736) (377) Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions - (1,434) (6,964) (736) (377) Net unrealized appreciation (depreciation) of investments - 9,318 43,359 4,296 1,857 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ (1) $ 7,543 $ 36,155 $ 3,513 $ 1,449 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 45 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP ING VP GROWTH INTERNATIONAL SMALL ING VP VALUE OPPORTUNITIES EQUITY COMPANY TECHNOLOGY OPPORTUNITY - CLASS R ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 63 $ 161 $ - $ 135 $ - ------------- ------------- ------------- ------------- ------------- Total investment income 63 161 - 135 - Expenses: Mortality and expense risk and other charges 72 752 105 212 2 ------------- ------------- ------------- ------------- ------------- Total expenses 72 752 105 212 2 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (9) (591) (105) (77) (2) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 842 (4,193) (728) (911) (1) Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 842 (4,193) (728) (911) (1) Net unrealized appreciation (depreciation) of investments 966 23,973 3,935 4,627 23 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,799 $ 19,189 $ 3,102 $ 3,639 $ 20 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 46 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP ING VP GROWTH ING VP ING VP ING VP MIDCAP OPPORTUNITIES INTERNATIONAL MAGNACAP MAGNACAP OPPORTUNITIES - CLASS S VALUE - CLASS R - CLASS S - CLASS R ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 13 $ - $ 5 $ - ------------- ------------- ------------- ------------- ------------- Total investment income - 13 - 5 - Expenses: Mortality and expense risk and other charges 4 8 - 7 7 ------------- ------------- ------------- ------------- ------------- Total expenses 4 8 - 7 7 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (4) 5 - (2) (7) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 4 12 (4) (52) 182 Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 4 12 (4) (52) 182 Net unrealized appreciation (depreciation) of investments 109 247 12 221 125 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 109 $ 264 $ 8 $ 167 $ 300 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 47 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP JANUS MIDCAP SMALLCAP SMALLCAP JANUS ASPEN OPPORTUNITIES OPPORTUNITIES OPPORTUNITIES ASPEN FLEXIBLE - CLASS S - CLASS R - CLASS S BALANCED INCOME ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ - $ - $ 4,171 $ 1,178 ------------- ------------- ------------- ------------- ------------- Total investment income - - - 4,171 1,178 Expenses: Mortality and expense risk and other charges 52 2 33 2,389 338 ------------- ------------- ------------- ------------- ------------- Total expenses 52 2 33 2,389 338 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (52) (2) (33) 1,782 840 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (176) 39 (426) (2,339) 734 Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (176) 39 (426) (2,339) 734 Net unrealized appreciation (depreciation) of investments 1,406 (7) 1,223 23,364 (248) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 1,178 $ 30 $ 764 $ 22,807 $ 1,326 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 48 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
JANUS JANUS JANUS ASPEN ASPEN LORD ABBETT LORD ABBETT ASPEN MID CAP WORLDWIDE GROWTH AND MID-CAP GROWTH GROWTH GROWTH INCOME VALUE ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 87 $ - $ 2,044 $ 18 $ 6 ------------- ------------- ------------- ------------- ------------- Total investment income 87 - 2,044 18 6 Expenses: Mortality and expense risk and other charges 1,227 963 2,327 12 7 ------------- ------------- ------------- ------------- ------------- Total expenses 1,227 963 2,327 12 7 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (1,140) (963) (283) 6 (1) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (4,646) (5,140) (13,982) 7 (12) Capital gains distributions - - - - 12 ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions (4,646) (5,140) (13,982) 7 - Net unrealized appreciation (depreciation) of investments 32,018 29,450 51,811 364 222 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 26,232 $ 23,347 $ 37,546 $ 377 $ 221 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 49 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MFS (R) MFS (R) OPPENHEIMER OPPENHEIMER OPPENHEIMER GLOBAL TOTAL AGGRESSIVE GLOBAL MAIN GOVERNMENTS RETURN GROWTH SECURITIES STREET(R) ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 155 $ 1,653 $ - $ 122 $ 489 ------------- ------------- ------------- ------------- ------------- Total investment income 155 1,653 - 122 489 Expenses: Mortality and expense risk and other charges 38 1,279 335 222 713 ------------- ------------- ------------- ------------- ------------- Total expenses 38 1,279 335 222 713 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 117 374 (335) (100) (224) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 67 (807) (1,055) (902) (1,676) Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 67 (807) (1,055) (902) (1,676) Net unrealized appreciation (depreciation) of investments 55 14,113 6,608 7,819 14,143 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 239 $ 13,680 $ 5,218 $ 6,817 $ 12,243 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 50 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
PIONEER PIONEER OPPENHEIMER EQUITY PIONEER MID CAP STRATEGIC INCOME FUND VALUE PRUDENTIAL BOND VCT VCT VCT JENNISON ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2,304 $ 5 $ - $ 1 $ - ------------- ------------- ------------- ------------- ------------- Total investment income 2,304 5 - 1 - Expenses: Mortality and expense risk and other charges 487 2 - 2 8 ------------- ------------- ------------- ------------- ------------- Total expenses 487 2 - 2 8 ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 1,817 3 - (1) (8) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 661 (8) - 22 5 Capital gains distributions - - - - - ------------- ------------- ------------- ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 661 (8) - 22 5 Net unrealized appreciation (depreciation) of investments 3,307 49 - 56 156 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 5,785 $ 44 $ - $ 77 $ 153 ============= ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 51 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
PRUDENTIAL SP JENNISON INTERNATIONAL UBS TACTICAL GROWTH ALLOCATION ------------- ------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 86 ------------- ------------- Total investment income - 86 Expenses: Mortality and expense risk and other charges 12 132 ------------- ------------- Total expenses 12 132 ------------- ------------- Net investment income (loss) (12) (46) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 89 (189) Capital gains distributions - - ------------- ------------- Total realized gain (loss) on investments and capital gains distributions 89 (189) Net unrealized appreciation (depreciation) of investments 289 2,649 ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 366 $ 2,414 ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 52 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
AIM V.I. AIM V.I. CAPITAL AIM V.I. GOVERNMENT AIM V.I. APPRECIATION CORE EQUITY SECURITIES GROWTH ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 23,509 $ 42,858 $ 9,149 $ 27,757 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (234) (337) 257 (253) Net realized gain (loss) on investments and capital gains distributions (11,841) (19,166) 274 (21,532) Net unrealized appreciation (depreciation) of investments 6,413 12,697 710 13,606 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (5,662) (6,806) 1,241 (8,179) Changes from principal transactions: Total unit transactions (3,015) (6,112) 15,607 (4,632) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (3,015) (6,112) 15,607 (4,632) ------------- ------------- ------------- ------------- Total increase (decrease) (8,677) (12,918) 16,848 (12,811) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 14,832 29,940 25,997 14,946 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (198) (72) 83 (197) Net realized gain (loss) on investments and capital gains distributions (625) (546) 609 (678) Net unrealized appreciation (depreciation) of investments 4,685 7,126 (826) 4,981 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 3,862 6,508 (134) 4,106 Changes from principal transactions: Total unit transactions (1,194) (1,540) (10,837) (985) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (1,194) (1,540) (10,837) (985) ------------- ------------- ------------- ------------- Total increase (decrease) 2,668 4,968 (10,971) 3,121 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 17,500 $ 34,908 $ 15,026 $ 18,067 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 53 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ALGER ALGER AIM V.I. ALGER AMERICAN AMERICAN PREMIER AMERICAN INCOME & LEVERAGED EQUITY BALANCED GROWTH ALLCAP ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 74,008 $ 3,765 $ 11,279 $ 10,424 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (519) 9 (64) (110) Net realized gain (loss) on investments and capital gains distributions (22,964) (480) (4,173) (5,524) Net unrealized appreciation (depreciation) of investments 1,596 (8) 798 2,220 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (21,887) (479) (3,439) (3,414) Changes from principal transactions: Total unit transactions (10,794) (710) (1,673) (1,286) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (10,794) (710) (1,673) (1,286) ------------- ------------- ------------- ------------- Total increase (decrease) (32,681) (1,189) (5,112) (4,700) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 41,327 2,576 6,167 5,724 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (395) 19 (68) (86) Net realized gain (loss) on investments and capital gains distributions (2,160) (34) (339) (265) Net unrealized appreciation (depreciation) of investments 11,202 413 1,960 2,058 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 8,647 398 1,553 1,707 Changes from principal transactions: Total unit transactions (7,144) (607) (1,250) (988) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (7,144) (607) (1,250) (988) ------------- ------------- ------------- ------------- Total increase (decrease) 1,503 (209) 303 719 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 42,830 $ 2,367 $ 6,470 $ 6,443 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 54 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ALLIANCE ALLIANCE BERNSTEIN BERNSTEIN ALLIANCE AMERICAN VPSF VPSF BERNSTEIN CENTURY(R) GROWTH PREMIER VPSF VP AND INCOME GROWTH QUASAR BALANCED ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 28,177 $ 8,532 $ 910 $ 2,043 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (166) (97) (12) 25 Net realized gain (loss) on investments and capital gains distributions (2,052) (2,301) (53) (331) Net unrealized appreciation (depreciation) of investments (5,862) (436) (321) 89 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (8,080) (2,834) (386) (217) Changes from principal transactions: Total unit transactions 2,072 140 160 (343) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 2,072 140 160 (343) ------------- ------------- ------------- ------------- Total increase (decrease) (6,008) (2,694) (226) (560) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 22,169 5,838 684 1,483 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (75) (86) (23) 19 Net realized gain (loss) on investments and capital gains distributions (917) (358) (125) (7) Net unrealized appreciation (depreciation) of investments 8,091 1,693 864 227 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 7,099 1,249 716 239 Changes from principal transactions: Total unit transactions 5,703 227 2,518 (302) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 5,703 227 2,518 (302) ------------- ------------- ------------- ------------- Total increase (decrease) 12,802 1,476 3,234 (63) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 34,971 $ 7,314 $ 3,918 $ 1,420 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 55 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
AMERICAN CALVERT FEDERATED FEDERATED CENTURY(R) VP SOCIAL AMERICAN CAPITAL INTERNATIONAL BALANCED LEADERS INCOME ----------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 2,759 $ 1,959 $ 83,193 $ 13,230 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (12) 29 (148) 441 Net realized gain (loss) on investments and capital gains distributions (1,559) (466) (64) (2,779) Net unrealized appreciation (depreciation) of investments 1,039 157 (16,207) (761) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (532) (280) (16,419) (3,099) Changes from principal transactions: Total unit transactions (688) 96 (16,235) (3,110) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (688) 96 (16,235) (3,110) ------------- ------------- ------------- ------------- Total increase (decrease) (1,220) (184) (32,654) (6,209) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 1,539 1,775 50,539 7,021 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (8) 16 94 350 Net realized gain (loss) on investments and capital gains distributions (99) (37) (2,953) (1,548) Net unrealized appreciation (depreciation) of investments 372 343 13,953 2,295 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 265 322 11,094 1,097 Changes from principal transactions: Total unit transactions (458) 131 (9,916) (1,658) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (458) 131 (9,916) (1,658) ------------- ------------- ------------- ------------- Total increase (decrease) (193) 453 1,178 (561) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 1,346 $ 2,228 $ 51,717 $ 6,460 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 56 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
FEDERATED FEDERATED FEDERATED FUND FOR US FEDERATED HIGH EQUITY GOVERNMENT GROWTH INCOME INCOME SECURITIES STRATEGIES BOND ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 17,476 $ 11,702 $ 20,974 $ 20,899 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 98 271 (217) 1,712 Net realized gain (loss) on investments and capital gains distributions (607) 178 (785) (4,158) Net unrealized appreciation (depreciation) of investments (3,031) 443 (4,061) 2,397 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (3,540) 892 (5,063) (49) Changes from principal transactions: Total unit transactions (3,672) 80 (5,496) (4,167) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (3,672) 80 (5,496) (4,167) ------------- ------------- ------------- ------------- Total increase (decrease) (7,212) 972 (10,559) (4,216) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 10,264 12,674 10,415 16,683 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 58 275 (148) 1,017 Net realized gain (loss) on investments and capital gains distributions (540) 427 (421) (971) Net unrealized appreciation (depreciation) of investments 2,785 (608) 3,953 3,008 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 2,303 94 3,384 3,054 Changes from principal transactions: Total unit transactions (1,562) (2,935) (1,986) (3,963) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (1,562) (2,935) (1,986) (3,963) ------------- ------------- ------------- ------------- Total increase (decrease) 741 (2,841) 1,398 (909) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 11,005 $ 9,833 $ 11,813 $ 15,774 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 57 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
FEDERATED FEDERATED FIDELITY(R) FIDELITY(R) INTERNATIONAL PRIME VIP ASSET VIP EQUITY MONEY MANAGER(SM) CONTRAFUND(R) ------------- ------------- ------------- -------------- NET ASSETS AT JANUARY 1, 2002 $ 10,976 $ 8,812 $ 14,094 $ 173,999 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (119) (1) 342 (690) Net realized gain (loss) on investments and capital gains distributions (716) - (2,462) (27,676) Net unrealized appreciation (depreciation) of investments (1,458) - 734 10,037 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (2,293) (1) (1,386) (18,329) Changes from principal transactions: Total unit transactions (2,659) (1,424) (1,622) (10,099) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (2,659) (1,424) (1,622) (10,099) ------------- ------------- ------------- ------------- Total increase (decrease) (4,952) (1,425) (3,008) (28,428) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 6,024 7,387 11,086 145,571 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (83) (44) 250 (1,258) Net realized gain (loss) on investments and capital gains distributions (781) - (99) (2,724) Net unrealized appreciation (depreciation) of investments 2,426 - 1,563 42,317 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 1,562 (44) 1,714 38,335 Changes from principal transactions: Total unit transactions (1,021) (2,413) (766) 4,149 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (1,021) (2,413) (766) 4,149 ------------- ------------- ------------- ------------- Total increase (decrease) 541 (2,457) 948 42,484 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 6,565 $ 4,930 $ 12,034 $ 188,055 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 58 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
FIDELITY(R) FIDELITY(R) FIDELITY(R) VIP EQUITY- FIDELITY(R) VIP HIGH VIP INCOME VIP GROWTH INCOME INDEX 500 ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 193,019 $ 167,319 $ 39,385 $ 100,783 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 779 (1,307) 3,617 21 Net realized gain (loss) on investments and capital gains distributions (13,369) (75,975) (15,315) (18,284) Net unrealized appreciation (depreciation) of investments (23,431) 27,425 12,364 (4,036) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (36,021) (49,857) 666 (22,299) Changes from principal transactions: Total unit transactions (10,578) (19,282) (3,595) (14,294) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (10,578) (19,282) (3,595) (14,294) ------------- ------------- ------------- ------------- Total increase (decrease) (46,599) (69,139) (2,929) (36,593) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 146,420 98,180 36,456 64,190 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 753 (1,061) 2,326 79 Net realized gain (loss) on investments and capital gains distributions (6,755) (3,844) 1,393 (2,618) Net unrealized appreciation (depreciation) of investments 47,447 34,021 6,885 18,365 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 41,445 29,116 10,604 15,826 Changes from principal transactions: Total unit transactions 4,284 (1,432) 9,910 (5,750) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 4,284 (1,432) 9,910 (5,750) ------------- ------------- ------------- ------------- Total increase (decrease) 45,729 27,684 20,514 10,076 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 192,149 $ 125,864 $ 56,970 $ 74,266 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 59 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
FIDELITY(R) FRANKLIN VIP FIDELITY(R) SMALL ING GET INVESTMENT VIP CAP VALUE FUND - GRADE BOND OVERSEAS SECURITIES SERIES D ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 3,084 $ 9,914 $ - $ 119,943 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 79 (33) - 3,192 Net realized gain (loss) on investments and capital gains distributions 126 (4,667) (241) (3,904) Net unrealized appreciation (depreciation) of investments 44 2,758 2 (198) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 249 (1,942) (239) (910) Changes from principal transactions: Total unit transactions (443) (1,355) 604 (15,335) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (443) (1,355) 604 (15,335) ------------- ------------- ------------- ------------- Total increase (decrease) (194) (3,297) 365 (16,245) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 2,890 6,617 365 103,698 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 76 (39) (3) 2,488 Net realized gain (loss) on investments and capital gains distributions 89 1,142 18 (1,414) Net unrealized appreciation (depreciation) of investments (69) 2,299 125 (988) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 96 3,402 140 86 Changes from principal transactions: Total unit transactions (742) 3,885 157 (17,353) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (742) 3,885 157 (17,353) ------------- ------------- ------------- ------------- Total increase (decrease) (646) 7,287 297 (17,267) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 2,244 $ 13,904 $ 662 $ 86,431 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 60 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET ING GET FUND - FUND - FUND - FUND - SERIES E SERIES G SERIES H SERIES I ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 300,383 $ 171,369 $ 131,686 $ 87,402 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 6,692 3,565 2,395 1,568 Net realized gain (loss) on investments and capital gains distributions (12,384) (362) (2,377) (285) Net unrealized appreciation (depreciation) of investments 12,265 2,002 3,658 1,680 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 6,573 5,205 3,676 2,963 Changes from principal transactions: Total unit transactions (30,559) (12,697) (13,759) (6,286) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (30,559) (12,697) (13,759) (6,286) ------------- ------------- ------------- ------------- Total increase (decrease) (23,986) (7,492) (10,083) (3,323) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 276,397 163,877 121,603 84,079 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 6,394 3,488 2,709 1,369 Net realized gain (loss) on investments and capital gains distributions (903) (335) (63) 100 Net unrealized appreciation (depreciation) of investments (2,753) (2,355) (1,049) (373) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 2,738 798 1,597 1,096 Changes from principal transactions: Total unit transactions (40,249) (26,394) (18,191) (10,425) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (40,249) (26,394) (18,191) (10,425) ------------- ------------- ------------- ------------- Total increase (decrease) (37,511) (25,596) (16,594) (9,329) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 238,886 $ 138,281 $ 105,009 $ 74,750 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 61 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET ING GET FUND - FUND - FUND - FUND - SERIES J SERIES K SERIES L SERIES M ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 74,801 $ 88,558 $ 80,345 $ 123,165 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,300 604 (1,481) (2,333) Net realized gain (loss) on investments and capital gains distributions (1,217) (1,167) (2,040) (3,483) Net unrealized appreciation (depreciation) of investments 2,934 3,623 4,000 7,557 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 3,017 3,060 479 1,741 Changes from principal transactions: Total unit transactions (5,974) (10,358) (5,569) (9,525) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (5,974) (10,358) (5,569) (9,525) ------------- ------------- ------------- ------------- Total increase (decrease) (2,957) (7,298) (5,090) (7,784) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 71,844 81,260 75,255 115,381 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,253 947 1,076 1,606 Net realized gain (loss) on investments and capital gains distributions 148 303 343 1,021 Net unrealized appreciation (depreciation) of investments (799) (922) (356) (674) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 602 328 1,063 1,953 Changes from principal transactions: Total unit transactions (12,356) (11,083) (9,450) (22,616) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (12,356) (11,083) (9,450) (22,616) ------------- ------------- ------------- ------------- Total increase (decrease) (11,754) (10,755) (8,387) (20,663) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 60,090 $ 70,505 $ 66,868 $ 94,718 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 62 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET ING GET FUND - FUND - FUND - FUND - SERIES N SERIES P SERIES Q SERIES R ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 104,606 $ 83,012 $ 1,620 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,868) (1,569) 176 148 Net realized gain (loss) on investments and capital gains distributions 2,453 (414) (239) (4) Net unrealized appreciation (depreciation) of investments (2,953) 1,307 325 348 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (2,368) (676) 262 492 Changes from principal transactions: Total unit transactions (12,095) (6,002) 52,944 43,064 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (12,095) (6,002) 52,944 43,064 ------------- ------------- ------------- ------------- Total increase (decrease) (14,463) (6,678) 53,206 43,556 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 90,143 76,334 54,826 43,556 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 537 346 (991) (791) Net realized gain (loss) on investments and capital gains distributions 65 663 462 290 Net unrealized appreciation (depreciation) of investments 1,328 303 2,082 2,111 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 1,930 1,312 1,553 1,610 Changes from principal transactions: Total unit transactions (15,288) (19,643) (12,043) (6,991) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (15,288) (19,643) (12,043) (6,991) ------------- ------------- ------------- ------------- Total increase (decrease) (13,358) (18,331) (10,490) (5,381) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 76,785 $ 58,003 $ 44,336 $ 38,175 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 63 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING GET ING GET ING GET ING GET FUND - FUND - FUND - FUND - SERIES S SERIES T SERIES U SERIES V ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 5 (51) - - Net realized gain (loss) on investments and capital gains distributions (5) 2 - - Net unrealized appreciation (depreciation) of investments 264 386 - - ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 264 337 - - Changes from principal transactions: Total unit transactions 53,289 39,041 503 - ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 53,289 39,041 503 - ------------- ------------- ------------- ------------- Total increase (decrease) 53,553 39,378 503 - ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 53,553 39,378 503 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (909) (654) (568) (915) Net realized gain (loss) on investments and capital gains distributions 493 412 768 (307) Net unrealized appreciation (depreciation) of investments 2,330 1,635 2,053 (1,086) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 1,914 1,393 2,253 (2,308) Changes from principal transactions: Total unit transactions (11,327) (8,751) 27,322 76,985 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (11,327) (8,751) 27,322 76,985 ------------- ------------- ------------- ------------- Total increase (decrease) (9,413) (7,358) 29,575 74,677 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 44,140 $ 32,020 $ 30,078 $ 74,677 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 64 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP ING EMERGING MONEY BALANCED VP BOND MARKETS MARKET ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 189,948 $ 144,459 $ 912 $ 293,027 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (197) 3,230 (11) 7,338 Net realized gain (loss) on investments and capital gains distributions (31,427) 4,301 (281) (5,982) Net unrealized appreciation (depreciation) of investments 10,085 2,691 220 (372) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (21,539) 10,222 (72) 984 Changes from principal transactions: Total unit transactions (19,541) 9,883 (191) (31,455) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (19,541) 9,883 (191) (31,455) ------------- ------------- ------------- ------------- Total increase (decrease) (41,080) 20,104 (263) (30,471) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 148,868 164,563 649 262,556 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,276 820 (10) 1,300 Net realized gain (loss) on investments and capital gains distributions (6,377) 1,734 (21) (1,414) Net unrealized appreciation (depreciation) of investments 30,184 5,194 287 (660) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 25,083 7,748 256 (774) Changes from principal transactions: Total unit transactions (1,133) (28,876) (96) (87,888) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (1,133) (28,876) (96) (87,888) ------------- ------------- ------------- ------------- Total increase (decrease) 23,950 (21,128) 160 (88,662) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 172,818 $ 143,435 $ 809 $ 173,894 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 65 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP ING VP STRATEGIC STRATEGIC STRATEGIC NATURAL ALLOCATION ALLOCATION ALLOCATION RESOURCES BALANCED GROWTH INCOME ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 2,003 $ 17,390 $ 13,876 $ 23,347 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (19) 194 59 431 Net realized gain (loss) on investments and capital gains distributions 19 (1,295) (1,733) (810) Net unrealized appreciation (depreciation) of investments (81) (696) (368) (899) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (81) (1,797) (2,042) (1,278) Changes from principal transactions: Total unit transactions (355) (1,249) (577) (1,981) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (355) (1,249) (577) (1,981) ------------- ------------- ------------- ------------- Total increase (decrease) (436) (3,046) (2,619) (3,259) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 1,567 14,344 11,257 20,088 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (19) 33 (41) 201 Net realized gain (loss) on investments and capital gains distributions (20) (421) (254) (299) Net unrealized appreciation (depreciation) of investments 435 2,802 2,920 2,310 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 396 2,414 2,625 2,212 Changes from principal transactions: Total unit transactions (231) 179 926 (2,878) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (231) 179 926 (2,878) ------------- ------------- ------------- ------------- Total increase (decrease) 165 2,593 3,551 (666) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 1,732 $ 16,937 $ 14,808 $ 19,422 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 66 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING MFS ING T. ROWE ING ALGER TOTAL PRICE EQUITY AGGRESSIVE ING ALGER RETURN INCOME GROWTH GROWTH ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ - $ - $ - 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 - - (12) (1) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations - - (12) (1) Changes from principal transactions: Total unit transactions - - 191 10 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions - - 191 10 ------------- ------------- ------------- ------------- Total increase (decrease) - - 179 9 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 - - 179 9 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 2 - (4) (1) Net realized gain (loss) on investments and capital gains distributions 2 7 71 9 Net unrealized appreciation (depreciation) of investments 12 79 59 34 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 16 86 126 42 Changes from principal transactions: Total unit transactions 385 618 712 329 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 385 618 712 329 ------------- ------------- ------------- ------------- Total increase (decrease) 401 704 838 371 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 401 $ 704 $ 1,017 $ 380 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 67 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING ING ING GOLDMAN AMERICAN BARON ING DSI SACHS(R) CENTURY SMALL SMALL CAP ENHANCED CAPITAL CAP VALUE GROWTH INDEX GROWTH ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (1) - - Net realized gain (loss) on investments and capital gains distributions (5) 5 - - Net unrealized appreciation (depreciation) of investments 7 - - (1) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 2 4 - (1) Changes from principal transactions: Total unit transactions 171 189 - 19 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 171 189 - 19 ------------- ------------- ------------- ------------- Total increase (decrease) 173 193 - 18 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 173 193 - 18 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (2) (6) - - Net realized gain (loss) on investments and capital gains distributions 54 37 1 - Net unrealized appreciation (depreciation) of investments 74 159 - 4 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 126 190 1 4 Changes from principal transactions: Total unit transactions 262 998 5 3 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 262 998 5 3 ------------- ------------- ------------- ------------- Total increase (decrease) 388 1,188 6 7 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 561 $ 1,381 $ 6 $ 25 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 68 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING ING JPMORGAN JPMORGAN ING MFS ING MFS FLEMING MID CAP CAPITAL GLOBAL INTERNATIONAL VALUE OPPORTUNITIES GROWTH ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 30,449 $ - $ 62,832 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (154) - (593) - Net realized gain (loss) on investments and capital gains distributions (3,362) - (41,813) - Net unrealized appreciation (depreciation) of investments (591) (2) 23,517 - ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (4,107) (2) (18,889) - Changes from principal transactions: Total unit transactions (2,298) 89 (8,202) 1 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (2,298) 89 (8,202) 1 ------------- ------------- ------------- ------------- Total increase (decrease) (6,405) 87 (27,091) 1 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 24,044 87 35,741 1 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (3) (2) (375) - Net realized gain (loss) on investments and capital gains distributions 4,418 25 (7,641) 3 Net unrealized appreciation (depreciation) of investments 3,476 79 16,575 - ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 7,891 102 8,559 3 Changes from principal transactions: Total unit transactions 2,084 489 (5,013) 1 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 2,084 489 (5,013) 1 ------------- ------------- ------------- ------------- Total increase (decrease) 9,975 591 3,546 4 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 34,019 $ 678 $ 39,287 $ 5 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 69 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING ING ING SALOMON ING MFS OP CAP PIMCO BROTHERS RESEARCH BALANCED TOTAL AGGRESSIVE EQUITY VALUE RETURN GROWTH ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 69,394 $ - $ - $ 91,535 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (600) - 14 (849) Net realized gain (loss) on investments and capital gains distributions (43,750) - 18 (25,189) Net unrealized appreciation (depreciation) of investments 27,569 - 18 (4,737) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (16,781) - 50 (30,775) Changes from principal transactions: Total unit transactions (11,944) 15 1,225 (13,752) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (11,944) 15 1,225 (13,752) ------------- ------------- ------------- ------------- Total increase (decrease) (28,725) 15 1,275 (44,527) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 40,669 15 1,275 47,008 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (289) 7 50 (674) Net realized gain (loss) on investments and capital gains distributions (1,984) 8 68 (3,532) Net unrealized appreciation (depreciation) of investments 10,721 80 (57) 20,204 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 8,448 95 61 15,998 Changes from principal transactions: Total unit transactions (6,177) 1,140 1,277 (4,367) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (6,177) 1,140 1,277 (4,367) ------------- ------------- ------------- ------------- Total increase (decrease) 2,271 1,235 1,338 11,631 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 42,940 $ 1,250 $ 2,613 $ 58,639 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 70 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING SALOMON ING SALOMON ING UBS BROTHERS BROTHERS ING T. ROWE TACTICAL FUNDAMENTAL INVESTORS PRICE GROWTH ASSET VALUE VALUE EQUITY ALLOCATION ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ - $ 89,395 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - (835) - Net realized gain (loss) on investments and capital gains distributions - - (31,652) - Net unrealized appreciation (depreciation) of investments - (2) 11,325 - ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations - (2) (21,162) - Changes from principal transactions: Total unit transactions 5 16 (9,790) - ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 5 16 (9,790) - ------------- ------------- ------------- ------------- Total increase (decrease) 5 14 (30,952) - ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 5 14 58,443 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - (747) - Net realized gain (loss) on investments and capital gains distributions 103 3 (2,008) 1 Net unrealized appreciation (depreciation) of investments 85 20 19,241 3 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 188 23 16,486 4 Changes from principal transactions: Total unit transactions 1,022 142 (42) 49 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 1,022 142 (42) 49 ------------- ------------- ------------- ------------- Total increase (decrease) 1,210 165 16,444 53 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 1,215 $ 179 $ 74,887 $ 53 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 71 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING VAN ING VP ING GET ING GET KAMPEN GROWTH AND U.S. CORE - U.S. CORE - COMSTOCK INCOME SERIES 1 SERIES 2 ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ 663,646 $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1 (1,352) - - Net realized gain (loss) on investments and capital gains distributions - (193,419) - - Net unrealized appreciation (depreciation) of investments (11) 35,220 - - ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (10) (159,551) - - Changes from principal transactions: Total unit transactions 329 (88,129) - - ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 329 (88,129) - - ------------- ------------- ------------- ------------- Total increase (decrease) 319 (247,680) - - ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 319 415,966 - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (4,562) (162) (36) Net realized gain (loss) on investments and capital gains distributions 45 (65,679) 16 - Net unrealized appreciation (depreciation) of investments 103 163,033 861 182 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 148 92,792 715 146 Changes from principal transactions: Total unit transactions 432 (53,397) 25,230 24,355 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 432 (53,397) 25,230 24,355 ------------- ------------- ------------- ------------- Total increase (decrease) 580 39,395 25,945 24,501 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 899 $ 455,361 $ 25,945 $ 24,501 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 72 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING GET ING VP ING VP U.S. CORE - ING VP INDEX PLUS INDEX PLUS SERIES 3 GROWTH LARGECAP MIDCAP ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ 52,088 $ 224,762 $ 9,214 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (473) (1,838) (54) Net realized gain (loss) on investments and capital gains distributions - (8,444) (58,481) (760) Net unrealized appreciation (depreciation) of investments - (5,648) 11,268 (1,413) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations - (14,565) (49,051) (2,227) Changes from principal transactions: Total unit transactions - (9,237) (21,294) 4,792 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions - (9,237) (21,294) 4,792 ------------- ------------- ------------- ------------- Total increase (decrease) - (23,802) (70,345) 2,565 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 - 28,286 154,417 11,779 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1) (341) (240) (47) Net realized gain (loss) on investments and capital gains distributions - (1,434) (6,964) (736) Net unrealized appreciation (depreciation) of investments - 9,318 43,359 4,296 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (1) 7,543 36,155 3,513 Changes from principal transactions: Total unit transactions 1,966 (3,738) (3,646) (260) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 1,966 (3,738) (3,646) (260) ------------- ------------- ------------- ------------- Total increase (decrease) 1,965 3,805 32,509 3,253 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 1,965 $ 32,091 $ 186,926 $ 15,032 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 73 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP INDEX PLUS INTERNATIONAL SMALL ING VP SMALLCAP EQUITY COMPANY TECHNOLOGY ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 2,411 $ 7,991 $ 62,576 $ 11,745 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (30) (64) (469) (109) Net realized gain (loss) on investments and capital gains distributions (75) (1,577) (3,581) (3,681) Net unrealized appreciation (depreciation) of investments (732) (300) (14,441) (1,844) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (837) (1,941) (18,491) (5,634) Changes from principal transactions: Total unit transactions 2,701 (822) 8,073 453 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 2,701 (822) 8,073 453 ------------- ------------- ------------- ------------- Total increase (decrease) 1,864 (2,763) (10,418) (5,181) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 4,275 5,228 52,158 6,564 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (31) (9) (591) (105) Net realized gain (loss) on investments and capital gains distributions (377) 842 (4,193) (728) Net unrealized appreciation (depreciation) of investments 1,857 966 23,973 3,935 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 1,449 1,799 19,189 3,102 Changes from principal transactions: Total unit transactions 988 1,897 9,111 3,706 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 988 1,897 9,111 3,706 ------------- ------------- ------------- ------------- Total increase (decrease) 2,437 3,696 28,300 6,808 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 6,712 $ 8,924 $ 80,458 $ 13,372 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 74 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP GROWTH GROWTH ING VP VALUE OPPORTUNITIES OPPORTUNITIES INTERNATIONAL OPPORTUNITY - CLASS R - CLASS S VALUE ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 26,362 $ - $ 141 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (184) - (2) - Net realized gain (loss) on investments and capital gains distributions (4,332) 2 (28) (19) Net unrealized appreciation (depreciation) of investments (2,719) (19) (29) (30) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (7,235) (17) (59) (49) Changes from principal transactions: Total unit transactions (2,126) 401 43 453 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (2,126) 401 43 453 ------------- ------------- ------------- ------------- Total increase (decrease) (9,361) 384 (16) 404 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 17,001 384 125 404 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (77) (2) (4) 5 Net realized gain (loss) on investments and capital gains distributions (911) (1) 4 12 Net unrealized appreciation (depreciation) of investments 4,627 23 109 247 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 3,639 20 109 264 Changes from principal transactions: Total unit transactions (1,995) (355) 619 531 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (1,995) (355) 619 531 ------------- ------------- ------------- ------------- Total increase (decrease) 1,644 (335) 728 795 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 18,645 $ 49 $ 853 $ 1,199 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 75 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING VP ING VP ING VP ING VP MIDCAP MIDCAP MAGNACAP MAGNACAP OPPORTUNITIES OPPORTUNITIES - CLASS R - CLASS S - CLASS R - CLASS S ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ 431 $ - $ 865 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (1) - (23) Net realized gain (loss) on investments and capital gains distributions - (10) - (97) Net unrealized appreciation (depreciation) of investments (6) (121) (1) (459) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (6) (132) (1) (579) Changes from principal transactions: Total unit transactions 33 191 77 2,297 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 33 191 77 2,297 ------------- ------------- ------------- ------------- Total increase (decrease) 27 59 76 1,718 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 27 490 76 2,583 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (2) (7) (52) Net realized gain (loss) on investments and capital gains distributions (4) (52) 182 (176) Net unrealized appreciation (depreciation) of investments 12 221 125 1,406 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 8 167 300 1,178 Changes from principal transactions: Total unit transactions 7 271 529 3,057 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 7 271 529 3,057 ------------- ------------- ------------- ------------- Total increase (decrease) 15 438 829 4,235 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 42 $ 928 $ 905 $ 6,818 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 76 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
ING VP ING VP JANUS SMALLCAP SMALLCAP JANUS ASPEN OPPORTUNITIES OPPORTUNITIES ASPEN FLEXIBLE - CLASS R - CLASS S BALANCED INCOME ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ 1,280 $ 240,241 $ 23,940 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (21) 2,536 856 Net realized gain (loss) on investments and capital gains distributions (10) (338) (19,146) 761 Net unrealized appreciation (depreciation) of investments (4) (622) (1,490) 571 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (14) (981) (18,100) 2,188 Changes from principal transactions: Total unit transactions 72 1,473 (24,316) 2,264 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 72 1,473 (24,316) 2,264 ------------- ------------- ------------- ------------- Total increase (decrease) 58 492 (42,416) 4,452 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 58 1,772 197,825 28,392 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (2) (33) 1,782 840 Net realized gain (loss) on investments and capital gains distributions 39 (426) (2,339) 734 Net unrealized appreciation (depreciation) of investments (7) 1,223 23,364 (248) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 30 764 22,807 1,326 Changes from principal transactions: Total unit transactions 1,304 1,992 (34,101) (7,560) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 1,304 1,992 (34,101) (7,560) ------------- ------------- ------------- ------------- Total increase (decrease) 1,334 2,756 (11,294) (6,234) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 1,392 $ 4,528 $ 186,531 $ 22,158 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 77 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
JANUS JANUS JANUS ASPEN ASPEN LORD ABBETT ASPEN MID CAP WORLDWIDE GROWTH AND GROWTH GROWTH GROWTH INCOME ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 176,779 $ 141,806 $ 331,396 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,668) (1,204) (1,013) 1 Net realized gain (loss) on investments and capital gains distributions (88,052) (110,103) (139,153) - Net unrealized appreciation (depreciation) of investments 45,741 73,321 58,703 (19) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (43,979) (37,986) (81,463) (18) Changes from principal transactions: Total unit transactions (34,297) (26,587) (51,653) 440 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (34,297) (26,587) (51,653) 440 ------------- ------------- ------------- ------------- Total increase (decrease) (78,276) (64,573) (133,116) 422 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 98,503 77,233 198,280 422 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,140) (963) (283) 6 Net realized gain (loss) on investments and capital gains distributions (4,646) (5,140) (13,982) 7 Net unrealized appreciation (depreciation) of investments 32,018 29,450 51,811 364 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 26,232 23,347 37,546 377 Changes from principal transactions: Total unit transactions (19,409) (11,863) (44,903) 2,311 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions (19,409) (11,863) (44,903) 2,311 ------------- ------------- ------------- ------------- Total increase (decrease) 6,823 11,484 (7,357) 2,688 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 105,326 $ 88,717 $ 190,923 $ 3,110 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 78 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
LORD ABBETT MFS(R) MFS(R) OPPENHEIMER MID-CAP GLOBAL TOTAL AGGRESSIVE VALUE GOVERNMENTS RETURN GROWTH ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ 1,742 $ 93,910 $ 40,449 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1 36 355 (189) Net realized gain (loss) on investments and capital gains distributions (22) 31 3,617 (5,968) Net unrealized appreciation (depreciation) of investments (25) 84 (10,681) (5,031) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (46) 151 (6,709) (11,188) Changes from principal transactions: Total unit transactions 520 827 4,524 (5,331) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 520 827 4,524 (5,331) ------------- ------------- ------------- ------------- Total increase (decrease) 474 978 (2,185) (16,519) ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 474 2,720 91,725 23,930 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1) 117 374 (335) Net realized gain (loss) on investments and capital gains distributions - 67 (807) (1,055) Net unrealized appreciation (depreciation) of investments 222 55 14,113 6,608 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 221 239 13,680 5,218 Changes from principal transactions: Total unit transactions 522 (435) 5,000 (33) ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 522 (435) 5,000 (33) ------------- ------------- ------------- ------------- Total increase (decrease) 743 (196) 18,680 5,185 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 1,217 $ 2,524 $ 110,405 $ 29,115 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 79 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
PIONEER OPPENHEIMER OPPENHEIMER OPPENHEIMER EQUITY GLOBAL MAIN STRATEGIC INCOME SECURITIES STREET(R) BOND VCT ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ 16,403 $ 65,709 $ 28,892 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (124) (328) 1,846 1 Net realized gain (loss) on investments and capital gains distributions (3,498) (11,300) (1,632) (1) Net unrealized appreciation (depreciation) of investments (1,164) (1,390) 1,590 (6) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (4,786) (13,018) 1,804 (6) Changes from principal transactions: Total unit transactions 3,560 (3,890) 2,039 159 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 3,560 (3,890) 2,039 159 ------------- ------------- ------------- ------------- Total increase (decrease) (1,226) (16,908) 3,843 153 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 15,177 48,801 32,735 153 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (100) (224) 1,817 3 Net realized gain (loss) on investments and capital gains distributions (902) (1,676) 661 (8) Net unrealized appreciation (depreciation) of investments 7,819 14,143 3,307 49 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 6,817 12,243 5,785 44 Changes from principal transactions: Total unit transactions 7,545 4,077 3,980 56 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 7,545 4,077 3,980 56 ------------- ------------- ------------- ------------- Total increase (decrease) 14,362 16,320 9,765 100 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 29,539 $ 65,121 $ 42,500 $ 253 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 80 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
PIONEER PRUDENTIAL PIONEER MID CAP SP JENNISON FUND VALUE PRUDENTIAL INTERNATIONAL VCT VCT JENNISON GROWTH ------------- ------------- ------------- ------------- NET ASSETS AT JANUARY 1, 2002 $ - $ - $ 724 $ 59 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - (9) (3) Net realized gain (loss) on investments and capital gains distributions - (9) (252) (44) Net unrealized appreciation (depreciation) of investments - - (50) (7) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations - (9) (311) (54) Changes from principal transactions: Total unit transactions 1 39 14 209 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 1 39 14 209 ------------- ------------- ------------- ------------- Total increase (decrease) 1 30 (297) 155 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2002 1 30 427 214 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (1) (8) (12) Net realized gain (loss) on investments and capital gains distributions - 22 5 89 Net unrealized appreciation (depreciation) of investments - 56 156 289 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations - 77 153 366 Changes from principal transactions: Total unit transactions 3 632 279 2,689 ------------- ------------- ------------- ------------- Increase (decrease) in assets derived from principal transactions 3 632 279 2,689 ------------- ------------- ------------- ------------- Total increase (decrease) 3 709 432 3,055 ------------- ------------- ------------- ------------- NET ASSETS AT DECEMBER 31, 2003 $ 4 $ 739 $ 859 $ 3,269 ============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 81 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (DOLLARS IN THOUSANDS)
UBS TACTICAL ALLOCATION ------------- Net assets at January 1, 2002 $ 14,334 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (86) Net realized gain (loss) on investments and capital gains distributions (3,544) Net unrealized appreciation (depreciation) of investments 284 ------------- Net increase (decrease) in net assets from operations (3,346) Changes from principal transactions: Total unit transactions (1,263) ------------- Increase (decrease) in assets derived from principal transactions (1,263) ------------- Total increase (decrease) (4,609) ------------- Net assets at December 31, 2002 9,725 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (46) Net realized gain (loss) on investments and capital gains distributions (189) Net unrealized appreciation (depreciation) of investments 2,649 ------------- Net increase (decrease) in net assets from operations 2,414 Changes from principal transactions: Total unit transactions (431) ------------- Increase (decrease) in assets derived from principal transactions (431) ------------- Total increase (decrease) 1,983 ------------- NET ASSETS AT DECEMBER 31, 2003 $ 11,708 =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 82 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 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. At December 31, 2003, the Account had 117 investment divisions (the "Divisions"), 50 of which invest in independently managed mutual funds and 67 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, 2003 and related Trusts are as follows: AIM Variable Insurance Funds: AIM V.I. Capital Appreciation Fund - Series I Shares AIM V.I. Core Equity Fund - Series I Shares AIM V.I. Government Securities Fund - Series I Shares AIM V.I. Growth Fund - Series I Shares AIM V.I. Premier Equity Fund - Series I Shares Alger American Funds: Alger American Balanced Portfolio Alger American Income & Growth Portfolio Alger American Leveraged AllCap Portfolio AllianceBernstein Variable Products Series Fund, Inc.: AllianceBernstein VPSF Growth and Income Class A AllianceBernstein VPSF Premier Growth Class A AllianceBernstein VPSF Quasar Class A American Century(R) Investments: American Century(R) VP Balanced Fund American Century(R) VP International Fund Calvert Social Balanced Portfolio 83 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS Federated Insurance Series: Federated American Leaders Fund II Federated Capital Income Fund II Federated Equity Income Fund II Federated Fund for U.S. Government Securities II Federated Growth Strategies Fund II Federated High Income Bond Fund II Federated International Equity Fund II Federated Prime Money Fund II Fidelity(R) Variable Insurance Products Fund: Fidelity(R) VIP ASSET MANAGER(SM) Portfolio - Initial Class Fidelity(R) VIP Contrafund(R) Portfolio - Initial Class Fidelity(R) VIP Equity-Income Portfolio - Initial Class Fidelity(R) VIP Growth Portfolio - Initial Class Fidelity(R) VIP High Income Portfolio - Initial Class Fidelity(R) VIP Index 500 Portfolio - Initial Class Fidelity(R) VIP Investment Grade Bond Portfolio - Initial Class Fidelity(R) VIP Overseas Portfolio - Initial Class Franklin Templeton Variable Insurance Products Trust: Franklin Small Cap Value Securities Fund - Class 2* ING GET Fund: 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 GET Fund - Series V ** ING VP Balanced Portfolio, Inc. - Class R ING VP Bond Portfolio - Class R ING VP Emerging Markets Fund ING VP Money Market Portfolio - Class R ING VP Natural Resources Trust ING Generations Portfolio, Inc.: ING VP Strategic Allocation Balanced Portfolio - Class R ING VP Strategic Allocation Growth Portfolio - Class R ING VP Strategic Allocation Income Portfolio - Class R ING Investors Trust: ING MFS Total Return Portfolio - Service Class ** ING T. Rowe Price Equity Income Portfolio - Service Class ** ING Partners, Inc.: ING Alger Aggressive Growth Portfolio - Service Class * ING Alger Growth Portfolio - Service Class * ING American Century Small Cap Value Portfolio - Service Class * ING Baron Small Cap Growth Portfolio - Service Class * ING DSI Enhanced Index Portfolio - Service Class ** ING Goldman Sachs(R) Capital Growth Portfolio - Service Class * ING JPMorgan Fleming International Portfolio - Initial Class ING JPMorgan Mid Cap Value Portfolio - Service Class * ING MFS Capital Opportunities Portfolio - Initial Class ING MFS Global Growth Portfolio - Service Class * ING MFS Research Equity Portfolio - Initial Class ING OpCap Balanced Value Portfolio - Service Class * ING PIMCO Total Return Portfolio - Service Class * ING Salomon Brothers Aggressive Growth Portfolio - Initial Class ING Salomon Brothers Fundamental Value Portfolio - Service Class * ING Salomon Brothers Investors Value Portfolio - Service Class * 84 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS ING Partners, Inc (continued): ING T. Rowe Price Growth Equity Portfolio - Initial Class ING UBS Tactical Asset Allocation Portfolio - Service Class * ING Van Kampen Comstock Portfolio - Service Class * ING Variable Funds: ING VP Growth and Income Portfolio - Class R ING Variable Insurance Trust: ING GET U.S. Core Portfolio - Series 1 ** ING GET U.S. Core Portfolio - Series 2 ** ING GET U.S. Core Portfolio - Series 3 ** ING Variable Portfolios, Inc.: ING VP Growth Portfolio - Class R ING VP Index Plus LargeCap Portfolio - Class R ING VP Index Plus MidCap Portfolio - Class R ING VP Index Plus SmallCap Portfolio - Class R ING VP International Equity Portfolio - Class R ING VP Small Company Portfolio - Class R ING VP Technology Portfolio - Class R ING VP Value Opportunity Portfolio - Class R ING Variable Products Trust: ING VP Growth Opportunities Portfolio - Class R * ING VP Growth Opportunities Portfolio - Class S ING VP International Value Portfolio - Class R* ING VP MagnaCap Portfolio - Class R * ING VP MagnaCap Portfolio - Class S ING VP MidCap Opportunities Portfolio - Class R * ING VP MidCap Opportunities Portfolio - Class S ING VP SmallCap Opportunities Portfolio - Class R * ING VP SmallCap Opportunities Portfolio - Class S Janus Aspen Series: Janus Aspen Balanced Portfolio - Inst Shares Janus Aspen Flexible Income Portfolio - Inst Shares Janus Aspen Growth Portfolio - Inst Shares Janus Aspen Mid Cap Growth Portfolio - Inst Shares Janus Aspen Worldwide Growth Portfolio - Inst Shares Lord Abbett Funds: Lord Abbett Growth and Income Portfolio * Lord Abbett Mid-Cap Value Portfolio * MFS(R) Funds: MFS (R) Global Governments Series MFS(R) Total Return Series - Initial Class Oppenheimer Variable Account Funds: Oppenheimer Aggressive Growth Fund/VA Oppenheimer Global Securities Fund/VA Oppenheimer Main Street(R) Fund/VA Oppenheimer Strategic Bond Fund/VA Pioneer Variable Contracts Trust: Pioneer Equity Income VCT Portfolio - Class I * Pioneer Fund VCT Portfolio - Class I * Pioneer Mid Cap Value VCT Portfolio - Class I * Prudential Series Fund, Inc.: Jennison Portfolio - Class II Shares SP Jennison International Growth Portfolio - Class II Shares UBS Series Trust: UBS Tactical Allocation Portfolio - Class I * Investment Division added in 2002. ** Investment Division added in 2003. 85 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS The names of certain Divisions were changed during 2003. The following is a summary of current and former names for those Divisions:
CURRENT NAME FORMER NAME ----------------------------------------------- ----------------------------------------- AllianceBernstein VPSF Growth and Income Alliance Growth and Income Class A AllianceBernstein VPSF Premier Growth Alliance Premier Growth Portfolio Class A AllianceBernstein VPSF Quasar Class A Alliance Quasar Portfolio Federated Capital Income Fund Fund II Federated Utility Fund II Fidelity(R) VIP ASSET MANAGER(SM) Portfolio - Fidelity(R) VIP II ASSET MANAGER(SM) Initial Class Portfolio - Initial Class Fidelity(R) VIP Contrafund(R) Portfolio - Fidelity(R) VIP II Contrafund(R) Portfolio - Initial Class Initial Class Fidelity(R) VIP Index 500 Portfolio - Fidelity(R) VIP II Index 500 Portfolio - Initial Class Initial Class Fidelity(R) VIP Investment Grade Bond Fidelity(R) VIP II Investment Grade Bond Portfolio - Initial Class Portfolio - Initial Class ING MFS Research Equity Portfolio - ING MFS Research Portfolio - Initial Class Initial Class ING Salomon Brothers Capital Portfolio - ING Salomon Brothers Fundamental Value Service Class Portfolio - Service Class Janus Aspen Aggressive Growth Portfolio - Janus Aspen Mid Cap Growth Portfolio - Inst Shares Inst Shares Oppenheimer Main Street(R) Growth & Oppenheimer Main Street(R) Fund/VA IncomeFund/VA Brinson Series Tactical Allocation UBS Tactical Allocation Portfolio - Class I Portfolio - Class I
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. 86 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 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. 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. 87 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 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. 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 that ranges up to 7% 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, 2003, 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 0.50% to 1.00% of the average net assets of each respective Fund of the Trust. 88 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 5. PURCHASES AND SALES OF INVESTMENT SECURITIES The aggregate cost of purchases and proceeds from sales of investments follows:
YEAR ENDED DECEMBER 31 2003 2002 ----------------------- ----------------------- PURCHASES SALES PURCHASES SALES ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) AIM Variable Insurance Funds: AIM V.I. Capital Appreciation $ 1,737 $ 3,129 $ 24,514 $ 27,763 AIM V.I. Core Equity 3,305 4,917 38,407 44,855 AIM V.I. Government Securities 6,524 17,272 32,681 16,817 AIM V.I. Growth 1,907 3,089 24,478 29,364 AIM V.I. Premier Equity 1,284 8,823 68,844 80,157 Alger American Funds: Alger American Balanced 132 720 3,639 4,339 Alger American Income & Growth 168 1,486 10,413 12,151 Alger American Leveraged AllCap 1 1,075 9,454 10,850 AllianceBernstein Variable Products Series Fund, Inc.: AllianceBernstein VPSF Growth and Income 9,057 3,429 46,961 44,016 AllianceBernstein VPSF Premier Growth 1,645 1,504 10,145 10,102 AllianceBernstein VPSF Quasar 3,231 736 1,723 1,577 American Century(R) Investments: American Century(R) VP Balanced 40 323 1,989 2,307 American Century(R) VP International 19 485 2,499 3,200 Calvert Social Balanced 559 412 1,931 1,806 Federated Insurance Series: Federated American Leaders 1,301 11,123 8,627 25,009 Federated Capital Income 534 1,842 2,331 5,001 Federated Equity Income 627 2,131 820 4,394 Federated Fund for U.S. Government Securities 1,190 3,794 4,984 4,633 Federated Growth Strategies 475 2,609 112 5,825 Federated High Income Bond 1,589 4,535 6,847 9,302 Federated International Equity 361 1,465 127 2,905 Federated Prime Money 2,583 5,040 5,760 7,185 Fidelity(R) Variable Insurance Products Fund: Fidelity(R) VIP ASSET MANAGER(SM) 1,642 2,158 15,172 16,452 Fidelity(R) VIP Contrafund(R) 26,291 23,400 175,617 186,406 Fidelity(R) VIP Equity-Income 41,183 36,146 247,113 252,808 Fidelity(R) VIP Growth 10,899 13,392 141,688 162,277 Fidelity(R) VIP High Income 30,754 18,518 58,138 58,116 Fidelity(R) VIP Index 500 7,977 13,648 121,951 136,223 Fidelity(R) VIP Investment Grade Bond 220 846 3,174 3,538 Fidelity(R) VIP Overseas 36,192 32,346 14,243 15,632
89 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31 2003 2002 --------------------------- --------------------------- PURCHASES SALES PURCHASES SALES ------------ ------------ ------------ ------------ (DOLLARS IN THOUSANDS) Franklin Templeton Variable Insurance Products Trust: Franklin Small Cap Value Securities $ 433 $ 279 $ 2,565 $ 1,920 ING GET Fund: ING GET Fund - Series D 4,052 18,917 91,906 104,050 ING GET Fund - Series E 10,996 44,851 287,090 310,958 ING GET Fund - Series G 6,153 29,059 172,316 181,449 ING GET Fund - Series H 4,789 20,271 131,547 142,911 ING GET Fund - Series I 3,353 12,409 89,384 94,102 ING GET Fund - Series J 2,456 13,559 76,351 81,025 ING GET Fund - Series K 2,775 12,911 88,905 98,660 ING GET Fund - Series L 3,093 11,467 78,713 85,764 ING GET Fund - Series M 4,217 25,227 120,605 132,464 ING GET Fund - Series N 2,265 17,016 97,858 110,571 ING GET Fund - Series P 1,839 21,136 83,551 91,096 ING GET Fund - Series Q 691 13,725 115,914 62,794 ING GET Fund - Series R 124 7,906 47,063 3,851 ING GET Fund - Series S 82 12,318 55,817 2,522 ING GET Fund - Series T 259 9,664 39,328 338 ING GET Fund - Series U 42,784 16,030 508 6 ING GET Fund - Series V 84,529 8,459 - - ING VP Balanced 19,176 19,033 79,596 99,335 ING VP Bond 18,786 46,842 125,655 111,843 ING VP Emerging Markets 10 116 976 1,178 ING VP Money Market 260,698 347,286 760,239 784,356 ING VP Natural Resources 30 280 1,139 1,513 ING Generations Portfolio, Inc.: ING VP Strategic Allocation Balanced 2,839 2,627 13,854 14,909 ING VP Strategic Allocation Growth 2,913 2,028 11,735 12,253 ING VP Strategic Allocation Income 2,116 4,793 21,591 23,140 ING Investors Trust: ING MFS Total Return 443 56 - - ING T. Rowe Price Equity Income 702 83 - - ING Partners, Inc.: ING Alger Aggressive Growth 3,224 2,516 190 - ING Alger Growth 1,205 877 10 - ING American Century Small Cap Value 490 216 253 82 ING Baron Small Cap Growth 1,230 238 359 171 ING DSI Enhanced Index 48 43 - - ING Goldman Sachs(R) Capital Growth 11 8 19 -
90 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31 2003 2002 --------------------------- --------------------------- PURCHASES SALES PURCHASES SALES ------------ ------------ ------------ ------------ (DOLLARS IN THOUSANDS) ING Partners, Inc. (continued): ING JPMorgan Fleming International $ 163,765 $ 161,684 $ 210,312 $ 212,764 ING JPMorgan Mid Cap Value 605 113 89 - ING MFS Capital Opportunities 21,700 27,088 46,601 55,397 ING MFS Global Growth 25 24 8 6 ING MFS Research Equity 1,157 7,623 50,965 63,509 ING OpCap Balanced Value 1,204 57 15 - ING PIMCO Total Return 2,644 1,301 1,359 107 ING Salomon Brothers Aggressive Growth 10,004 15,045 109,117 123,719 ING Salomon Brothers Fundamental Value 22,906 21,884 5 - ING Salomon Brothers Investors Value 171 29 16 - ING T. Rowe Price Growth Equity 12,358 13,147 77,576 88,202 ING UBS Tactical Asset Allocation 82 33 - - ING Van Kampen Comstock 707 262 331 1 ING Variable Funds: ING VP Growth and Income 13,533 71,492 172,371 261,853 ING Variable Insurance Trust: ING GET U.S. Core Portfolio - Series 1 26,984 1,916 - - ING GET U.S. Core Portfolio - Series 2 24,434 115 - - ING GET U.S. Core Portfolio - Series 3 1,965 - - - ING Variable Portfolios, Inc.: ING VP Growth 2,962 7,041 69,783 79,492 ING VP Index Plus LargeCap 33,821 37,707 190,972 214,104 ING VP Index Plus MidCap 8,395 8,702 11,890 7,151 ING VP Index Plus SmallCap 3,097 2,140 8,976 6,252 ING VP International Equity 17,944 16,056 46,107 46,993 ING VP Small Company 39,143 30,623 116,436 108,833 ING VP Technology 10,849 7,248 23,571 23,226 ING VP Value Opportunity 1,688 3,760 26,750 29,060 ING Variable Products Trust: ING VP Growth Opportunities - Class R 205 562 864 463 ING VP Growth Opportunities - Class S 795 180 278 238 ING VP International Value 824 288 523 70 ING VP MagnaCap - Class R 26 19 33 - ING VP MagnaCap - Class S 446 177 879 689 ING VP MidCap Opportunities - Class R 3,751 3,229 78 1 ING VP MidCap Opportunities - Class S 3,992 987 4,360 2,084 ING VP SmallCap Opportunities - Class R 6,129 4,827 265 193 ING VP SmallCap Opportunities - Class S 3,215 1,256 3,798 2,346
91 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31 2003 2002 --------------------------- --------------------------- PURCHASES SALES PURCHASES SALES ------------ ------------ ------------ ------------ (DOLLARS IN THOUSANDS) Janus Aspen Series: Janus Aspen Balanced $ 8,930 $ 41,249 $ 225,500 $ 247,280 Janus Aspen Flexible Income 4,792 11,512 31,418 28,299 Janus Aspen Growth 2,952 23,501 150,997 186,962 Janus Aspen Mid Cap Growth 24,529 37,355 141,416 169,207 Janus Aspen Worldwide Growth 11,748 56,934 323,687 376,352 Lord Abbett Funds: Lord Abbett Growth and Income 2,511 194 442 1 Lord Abbett Mid-Cap Value 787 254 805 284 MFS(R) Funds: MFS (R) Global Governments 1,124 1,442 3,217 2,355 MFS(R) Total Return 13,814 8,440 119,828 113,668 Oppenheimer Variable Account Funds: Oppenheimer Aggressive Growth 5,069 5,437 64,141 69,661 Oppenheimer Global Securities 13,931 6,486 20,873 17,437 Oppenheimer Main Street(R) 13,702 9,849 70,215 74,433 Oppenheimer Strategic Bond 15,898 10,101 38,679 34,794 Pioneer Variable Contracts Trust: Pioneer Equity Income VCT 116 57 165 5 Pioneer Fund VCT 4 1 1 - Pioneer Mid Cap Value VCT 764 133 82 42 Prudential Series Fund, Inc.: Prudential Jennison 646 375 2,065 2,060 Prudential SP Jennison International Growth 4,361 1,684 2,655 2,449 UBS Series Trust: UBS Tactical Allocation 565 1,042 14,269 15,619
92 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 6. CHANGES IN UNITS The changes in units outstanding were as follows:
YEAR ENDED DECEMBER 31 2003 2002 ------------ ------------ NET UNITS NET UNITS ISSUED ISSUED (REDEEMED) (REDEEMED) ------------ ------------ AIM Variable Insurance Funds: AIM V.I. Capital Appreciation (215,223) (366,408) AIM V.I. Core Equity (376,156) (748,286) AIM V.I. Government Securities (899,844) 1,319,594 AIM V.I. Growth (285,985) (842,874) AIM V.I. Premier Equity (951,357) (1,440,923) Alger American Funds: Alger American Balanced (26,135) (31,808) Alger American Income & Growth (64,405) (86,313) Alger American Leveraged AllCap (49,907) (61,140) AllianceBernstein Variable Products Series Fund, Inc.: AllianceBernstein VPSF Growth and Income 588,049 63,544 AllianceBernstein VPSF Premier Growth 35,073 2,737 AllianceBernstein VPSF Quasar 371,072 12,434 American Century(R) Investments: American Century(R) VP Balanced (17,978) (21,928) American Century(R) VP International (37,686) (53,475) Calvert Social Balanced 11,388 9,032 Federated Insurance Series: Federated American Leaders (508,356) (802,047) Federated Capital Income (147,192) (270,317) Federated Equity Income (150,869) (349,138) Federated Fund for U.S. Government Securities (191,021) 5,984 Federated Growth Strategies (136,784) (353,291) Federated High Income Bond (266,792) (311,614) Federated International Equity (88,913) (215,775) Federated Prime Money (190,956) (112,344) Fidelity(R) Variable Insurance Products Fund: Fidelity(R) VIP ASSET MANAGER(SM) (46,959) (103,131) Fidelity(R) VIP Contrafund(R) 571,228 (705,725) Fidelity(R) VIP Equity-Income 522,988 (690,353) Fidelity(R) VIP Growth 215,167 (1,160,706) Fidelity(R) VIP High Income 1,123,161 (483,340) Fidelity(R) VIP Index 500 (363,659) (835,328) Fidelity(R) VIP Investment Grade Bond (46,941) (29,946) Fidelity(R) VIP Overseas 324,783 (115,998)
93 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31 2003 2002 ------------ ------------ NET UNITS NET UNITS ISSUED ISSUED (REDEEMED) (REDEEMED) ------------ ------------ Franklin Templeton Variable Insurance Products Trust: Franklin Small Cap Value Securities 15,203 39,416 ING GET Fund: ING GET Fund - Series D (1,707,796) (1,502,708) ING GET Fund - Series E (3,914,768) (3,020,220) ING GET Fund - Series G (2,581,173) (1,275,410) ING GET Fund - Series H (1,762,825) (1,368,020) ING GET Fund - Series I (1,017,746) (633,744) ING GET Fund - Series J (1,217,984) (606,080) ING GET Fund - Series K (1,092,454) (1,044,318) ING GET Fund - Series L (936,734) (566,108) ING GET Fund - Series M (2,237,666) (972,717) ING GET Fund - Series N (1,500,256) (1,199,074) ING GET Fund - Series P (1,948,391) (608,071) ING GET Fund - Series Q (1,178,495) 5,298,242 ING GET Fund - Series R (678,100) 4,312,314 ING GET Fund - Series S (1,098,481) 5,334,290 ING GET Fund - Series T (845,512) 3,907,841 ING GET Fund - Series U 2,803,440 50,278 ING GET Fund - Series V 7,680,444 - ING VP Balanced (83,996) (1,231,538) ING VP Bond (1,696,435) 413,356 ING VP Emerging Markets (14,583) (26,185) ING VP Money Market (6,789,055) (2,485,092) ING VP Natural Resources (19,060) (31,200) ING Generations Portfolio, Inc.: ING VP Strategic Allocation Balanced (29,336) (104,759) ING VP Strategic Allocation Growth (21,901) (62,890) ING VP Strategic Allocation Income (205,539) (143,555) ING Investors Trust: ING MFS Total Return 35,396 - ING T. Rowe Price Equity Income 57,696 - ING Partners, Inc.: ING Alger Aggressive Growth 71,512 24,342 ING Alger Growth 37,994 1,297 ING American Century Small Cap Value 29,741 19,821 ING Baron Small Cap Growth 97,665 21,310 ING DSI Enhanced Index 621 - ING Goldman Sachs(R) Capital Growth 243 2,242 ING JPMorgan Fleming International 286,684 17,057
94 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31 2003 2002 ------------ ------------ NET UNITS NET UNITS ISSUED ISSUED (REDEEMED) (REDEEMED) ------------ ------------ ING Partners, Inc. (continued): ING JPMorgan Mid Cap Value 45,969 9,450 ING MFS Capital Opportunities (475,678) (840,713) ING MFS Global Growth 276 168 ING MFS Research Equity (638,397) (1,203,069) ING OpCap Balanced Value 114,002 1,825 ING PIMCO Total Return 117,809 118,777 ING Salomon Brothers Aggressive Growth (471,812) (1,425,104) ING Salomon Brothers Fundamental Value 112,732 655 ING Salomon Brothers Investors Value 15,639 1,835 ING T. Rowe Price Growth Equity (82,398) (562,460) ING UBS Tactical Asset Allocation 5,211 53 ING Van Kampen Comstock 44,597 38,291 ING Variable Funds: ING VP Growth and Income (3,322,672) (4,914,917) ING Variable Insurance Trust: ING GET U.S. Core Portfolio - Series 1 2,530,968 - ING GET U.S. Core Portfolio - Series 2 2,441,629 - ING GET U.S. Core Portfolio - Series 3 196,496 - ING Variable Portfolios, Inc.: ING VP Growth (329,681) (944,382) ING VP Index Plus LargeCap (1,018,952) (1,975,577) ING VP Index Plus MidCap (23,571) 293,309 ING VP Index Plus SmallCap 74,019 238,930 ING VP International Equity 156,583 (117,376) ING VP Small Company 612,976 398,526 ING VP Technology 1,059,264 (95,211) ING VP Value Opportunity (141,302) (168,461) ING Variable Products Trust: ING VP Growth Opportunities - Class R (58,161) 63,829 ING VP Growth Opportunities - Class S 97,238 5,464 ING VP International Value 65,868 49,414 ING VP MagnaCap - Class R 857 3,913 ING VP MagnaCap - Class S 32,197 22,872 ING VP MidCap Opportunities - Class R 85,049 10,923 ING VP MidCap Opportunities - Class S 400,115 315,913 ING VP SmallCap Opportunities - Class R 190,033 (139,170) ING VP SmallCap Opportunities - Class S 327,810 376,449
95 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31 2003 2002 ------------ ------------ NET UNITS NET UNITS ISSUED ISSUED (REDEEMED) (REDEEMED) ------------ ------------ Janus Aspen Series: Janus Aspen Balanced (2,223,852) (1,543,962) Janus Aspen Flexible Income (394,174) 123,393 Janus Aspen Growth (1,648,598) (3,008,365) Janus Aspen Mid Cap Growth (1,191,018) (2,540,697) Janus Aspen Worldwide Growth (3,435,063) (3,807,460) Lord Abbett Funds: Lord Abbett Growth and Income 249,236 53,538 Lord Abbett Mid-Cap Value 62,337 54,692 MFS(R) Funds: MFS(R) Global Governments (33,561) 71,900 MFS(R) Total Return 441,718 404,893 Oppenheimer Variable Account Funds: Oppenheimer Aggressive Growth (134,199) (616,159) Oppenheimer Global Securities 459,397 197,129 Oppenheimer Main Street(R) 182,239 (523,616) Oppenheimer Strategic Bond 289,876 151,517 Pioneer Variable Contracts Trust: Pioneer Equity Income VCT 6,570 19,140 Pioneer Fund VCT 276 172 Pioneer Mid Cap Value VCT 58,218 3,470 Prudential Series Fund, Inc.: Prudential Jennison 40,553 (10,806) Prudential SP Jennison International Growth 378,568 29,475 UBS Series Trust: UBS Tactical Allocation (61,001) (180,912)
96 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 7. UNIT SUMMARY A summary of units outstanding at December 31, 2003 follows:
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- AIM V.I. CAPITAL APPRECIATION Currently payable annuity contracts: $ 1,081,892 Contracts in accumulation period: Non-Qualified V 10,189.299 $ 8.76 89,258 Non-Qualified V (0.75) 63,788.195 8.97 572,180 Non-Qualified XII 755.842 8.95 6,765 Non-Qualified XIII 445,452.485 9.46 4,213,981 Non-Qualified XIV 595,055.988 9.30 5,534,021 Non-Qualified XV 280,980.651 9.23 2,593,451 Non-Qualified XVI 232,704.920 5.52 1,284,531 Non-Qualified XVIII 159,214.742 5.44 866,128 Non-Qualified XIX 229,855.064 5.47 1,257,307 --------------- -------------- 2,017,997.186 $ 17,499,514 =============== ============== AIM V.I. CORE EQUITY Currently payable annuity contracts: $ 5,364,725 Contracts in accumulation period: Non-Qualified V 44,573.096 $ 7.72 344,104 Non-Qualified V (0.75) 108,040.860 7.90 853,523 Non-Qualified IX 854.568 7.63 6,520 Non-Qualified XII 990.885 7.88 7,808 Non-Qualified XIII 859,271.993 9.45 8,120,120 Non-Qualified XIV 1,330,081.463 9.30 12,369,758 Non-Qualified XV 474,287.077 9.22 4,372,927 Non-Qualified XVI 200,687.487 6.37 1,278,379 Non-Qualified XVIII 99,620.062 6.28 625,614 Non-Qualified XIX 247,908.048 6.31 1,564,300 Non-Qualified XX 10.508 11.86 125 --------------- -------------- 3,366,326.047 $ 34,907,903 =============== ============== AIM V.I. GOVERNMENT SECURITIES Contracts in accumulation period: Non-Qualified XIII 346,391.536 $ 12.37 $ 4,284,863 Non-Qualified XIV 467,444.949 12.23 5,716,852 Non-Qualified XV 145,354.085 12.16 1,767,506 Non-Qualified XVI 93,136.186 11.72 1,091,556 Non-Qualified XVIII 65,075.143 11.55 751,618 Non-Qualified XIX 121,746.539 11.61 1,413,477 --------------- -------------- 1,239,148.438 $ 15,025,872 =============== ==============
97 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- ---------------- AIM V.I. GROWTH Currently payable annuity contracts: $ 1,268,793 Contracts in accumulation period: Non-Qualified V 13,652.955 $ 5.47 74,682 Non-Qualified V (0.75) 81,576.978 5.60 456,831 Non-Qualified IX 464.862 5.40 2,510 Non-Qualified XII 1,480.361 5.58 8,260 Non-Qualified XIII 686,220.760 6.62 4,542,781 Non-Qualified XIV 1,067,508.226 6.51 6,949,479 Non-Qualified XV 341,364.852 6.46 2,205,217 Non-Qualified XVI 166,356.398 4.36 725,314 Non-Qualified XVIII 113,901.835 4.30 489,778 Non-Qualified XIX 310,878.472 4.32 1,342,995 --------------- -------------- 2,783,405.699 $ 18,066,640 =============== ============== AIM V.I. PREMIER EQUITY Currently payable annuity contracts: $ 2,390,597 Contracts in accumulation period: Non-Qualified V 8,617.808 $ 7.12 61,359 Non-Qualified V (0.75) 74,738.020 7.29 544,840 Non-Qualified IX 91.584 7.04 645 Non-Qualified XII 1,138.315 7.28 8,287 Non-Qualified XIII 1,268,375.871 8.56 10,857,297 Non-Qualified XIV 2,017,118.702 8.42 16,984,139 Non-Qualified XV 747,409.524 8.35 6,240,870 Non-Qualified XVI 299,982.129 6.43 1,928,885 Non-Qualified XVIII 126,619.280 6.33 801,500 Non-Qualified XIX 473,550.761 6.36 3,011,783 --------------- -------------- 5,017,641.994 $ 42,830,202 =============== ============== ALGER AMERICAN BALANCED Contracts in accumulation period: Non-Qualified VII 94,256.181 $ 25.11 $ 2,366,773 --------------- -------------- 94,256.181 $ 2,366,773 =============== ============== ALGER AMERICAN INCOME & GROWTH Contracts in accumulation period: Non-Qualified VII 291,852.976 $ 22.17 $ 6,470,380 --------------- -------------- 291,852.976 $ 6,470,380 =============== ============== ALGER AMERICAN LEVERAGED ALLCAP Contracts in accumulation period: Non-Qualified VII 277,225.744 $ 23.23 $ 6,439,954 Non-Qualified VIII 167.508 17.13 2,869 --------------- -------------- 277,393.252 $ 6,442,823 =============== ==============
98 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ALLIANCEBERNSTEIN VPSF GROWTH AND INCOME Contracts in accumulation period: Non-Qualified XIII 1,037,180.107 $ 10.20 $ 10,579,237 Non-Qualified XIV 1,055,319.729 10.09 10,648,176 Non-Qualified XV 396,339.879 10.03 3,975,289 Non-Qualified XVI 451,491.519 10.30 4,650,363 Non-Qualified XVIII 155,625.177 10.15 1,579,596 Non-Qualified XIX 346,881.673 10.20 3,538,193 --------------- -------------- 3,442,838.084 $ 34,970,854 =============== ============== ALLIANCEBERNSTEIN VPSF PREMIER GROWTH Contracts in accumulation period: Non-Qualified XIII 379,024.612 $ 5.26 $ 1,993,669 Non-Qualified XIV 323,966.059 5.20 1,684,624 Non-Qualified XV 126,508.754 5.17 654,050 Non-Qualified XVI 190,489.279 5.57 1,061,025 Non-Qualified XVIII 67,891.757 5.49 372,726 Non-Qualified XIX 280,459.496 5.52 1,548,136 --------------- -------------- 1,368,339.957 $ 7,314,230 =============== ============== ALLIANCEBERNSTEIN VPSF QUASAR Contracts in accumulation period: Non-Qualified XIII 134,787.615 $ 8.19 $ 1,103,911 Non-Qualified XIV 165,580.970 8.10 1,341,206 Non-Qualified XV 41,351.517 8.06 333,293 Non-Qualified XVI 45,523.247 7.29 331,864 Non-Qualified XVIII 44,821.552 7.18 321,819 Non-Qualified XIX 67,459.200 7.21 486,381 --------------- -------------- 499,524.101 $ 3,918,474 =============== ============== AMERICAN CENTURY(R) VP BALANCED Contracts in accumulation period: Non-Qualified VII 78,073.697 $ 18.19 $ 1,420,161 --------------- -------------- 78,073.697 $ 1,420,161 =============== ============== AMERICAN CENTURY(R) VP INTERNATIONAL Contracts in accumulation period: Non-Qualified VII 93,228.187 $ 14.41 $ 1,343,418 Non-Qualified VIII 181.700 13.13 2,386 --------------- -------------- 93,409.887 $ 1,345,804 =============== ==============
99 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- CALVERT SOCIAL BALANCED Contracts in accumulation period: Non-Qualified V 7,083.055 $ 20.34 $ 144,069 Non-Qualified V (0.75) 14,750.233 21.15 311,967 Non-Qualified VII 84,238.446 11.30 951,894 Non-Qualified VIII 71,475.490 11.41 815,535 Non-Qualified XX 390.655 11.56 4,516 --------------- -------------- 177,937.879 $ 2,227,981 =============== ============== FEDERATED AMERICAN LEADERS Currently payable annuity contracts: $ 84,899 Contracts in accumulation period: Non-Qualified VII 2,203,916.167 $ 23.37 51,505,521 Non-Qualified VIII 7,506.725 16.88 126,714 --------------- -------------- 2,211,422.892 $ 51,717,134 =============== ============== FEDERATED CAPITAL INCOME Currently payable annuity contracts: $ 17,473 Contracts in accumulation period: Non-Qualified VII 505,276.162 $ 12.75 6,442,271 Non-Qualified VIII 63.397 10.65 675 --------------- -------------- 505,339.559 $ 6,460,419 =============== ============== FEDERATED EQUITY INCOME Currently payable annuity contracts: $ 92,839 Contracts in accumulation period: Non-Qualified VII 884,275.954 $ 12.34 10,911,965 --------------- -------------- 884,275.954 $ 11,004,804 =============== ============== FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES Currently payable annuity contracts: $ 2,648 Contracts in accumulation period: Non-Qualified VII 634,657.350 $ 15.49 9,830,842 --------------- -------------- 634,657.350 $ 9,833,490 =============== ============== FEDERATED GROWTH STRATEGIES Contracts in accumulation period: Non-Qualified VII 627,365.021 $ 18.83 $ 11,813,283 --------------- -------------- 627,365.021 $ 11,813,283 =============== ============== FEDERATED HIGH INCOME BOND Currently payable annuity contracts: $ 19,637 Contracts in accumulation period: Non-Qualified VII 969,244.579 $ 16.25 15,750,224 Non-Qualified VIII 299.226 13.87 4,150 --------------- -------------- 969,543.805 $ 15,774,011 =============== ==============
100 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- FEDERATED INTERNATIONAL EQUITY Currently payable annuity contracts: $ 44,651 Contracts in accumulation period: Non-Qualified VII 462,016.816 $ 14.11 6,519,057 Non-Qualified VIII 123.555 13.06 1,614 --------------- -------------- 462,140.371 $ 6,565,322 =============== ============== FEDERATED PRIME MONEY Contracts in accumulation period: Non-Qualified VII 391,575.907 $ 12.59 $ 4,929,941 --------------- -------------- 391,575.907 $ 4,929,941 =============== ============== FIDELITY(R) VIP ASSET MANAGER(SM) Contracts in accumulation period: Non-Qualified VII 545,090.168 $ 18.27 $ 9,958,797 Non-Qualified VIII 135,610.345 15.30 2,074,838 --------------- -------------- 680,700.513 $ 12,033,635 =============== ============== FIDELITY(R) VIP CONTRAFUND(R) Contracts in accumulation period: Non-Qualified V 459,839.543 $ 21.98 $ 10,107,273 Non-Qualified V (0.75) 740,795.132 22.86 16,934,577 Non-Qualified VII 3,011,967.167 24.17 72,799,246 Non-Qualified VIII 591,045.505 19.48 11,513,566 Non-Qualified IX 27,754.943 21.61 599,784 Non-Qualified X 22,238.130 21.98 488,794 Non-Qualified XII 48,268.840 12.74 614,945 Non-Qualified XIII 2,257,321.504 11.91 26,884,699 Non-Qualified XIV 2,423,625.905 11.71 28,380,659 Non-Qualified XV 908,324.174 11.62 10,554,727 Non-Qualified XVI 396,289.022 9.23 3,657,748 Non-Qualified XVIII 99,480.914 9.10 905,276 Non-Qualified XIX 470,820.270 9.14 4,303,297 Non-Qualified XX 25,359.265 12.24 310,397 --------------- -------------- 11,483,130.314 $ 188,054,988 =============== ==============
101 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- FIDELITY(R) VIP EQUITY-INCOME Contracts in accumulation period: Non-Qualified V 447,621.315 $ 19.39 $ 8,679,377 Non-Qualified V (0.75) 810,958.495 20.16 16,348,923 Non-Qualified VII 3,679,828.901 23.07 84,893,653 Non-Qualified VIII 795,913.705 16.64 13,244,004 Non-Qualified IX 15,133.993 19.06 288,454 Non-Qualified X 16,682.801 19.39 323,480 Non-Qualified XII 10,948.402 11.51 126,016 Non-Qualified XIII 1,917,300.612 11.21 21,492,940 Non-Qualified XIV 2,405,810.208 11.02 26,512,028 Non-Qualified XV 767,723.534 10.93 8,391,218 Non-Qualified XVI 556,680.352 10.49 5,839,577 Non-Qualified XVIII 92,557.995 10.33 956,124 Non-Qualified XIX 479,897.961 10.39 4,986,140 Non-Qualified XX 5,511.291 12.13 66,852 --------------- -------------- 12,002,569.565 $ 192,148,786 =============== ============== FIDELITY(R) VIP GROWTH Contracts in accumulation period: Non-Qualified V 444,797.942 $ 16.83 $ 7,485,949 Non-Qualified V (0.75) 801,208.218 17.51 14,029,156 Non-Qualified VII 2,283,685.777 22.97 52,456,262 Non-Qualified VIII 550,943.844 15.30 8,429,441 Non-Qualified IX 10,940.031 16.55 181,058 Non-Qualified X 13,738.554 16.83 231,220 Non-Qualified XII 13,775.230 10.56 145,466 Non-Qualified XIII 1,906,545.323 8.29 15,805,261 Non-Qualified XIV 1,615,540.122 8.17 13,198,963 Non-Qualified XV 592,005.062 8.12 4,807,081 Non-Qualified XVI 780,055.984 6.26 4,883,150 Non-Qualified XVIII 135,448.670 6.17 835,718 Non-Qualified XIX 533,582.328 6.20 3,308,210 Non-Qualified XX 5,490.076 12.19 66,924 --------------- -------------- 9,687,757.161 $ 125,863,859 =============== ==============
102 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- FIDELITY(R) VIP HIGH INCOME Currently payable annuity contracts: $ 2,492,941 Contracts in accumulation period: Non-Qualified VII 1,760,438.582 $ 11.96 21,054,845 Non-Qualified VIII 425,258.887 10.79 4,588,543 Non-Qualified XIII 1,157,540.233 8.31 9,619,159 Non-Qualified XIV 1,181,961.109 8.18 9,668,442 Non-Qualified XV 500,838.519 8.11 4,061,800 Non-Qualified XVI 182,940.448 9.42 1,723,299 Non-Qualified XVIII 52,952.742 9.28 491,401 Non-Qualified XIX 350,482.825 9.33 3,270,005 --------------- -------------- 5,612,413.345 $ 56,970,435 =============== ============== FIDELITY(R) VIP INDEX 500 Contracts in accumulation period: Non-Qualified VII 3,107,193.548 $ 20.31 $ 63,107,101 Non-Qualified VIII 654,473.153 17.05 11,158,767 --------------- -------------- 3,761,666.701 $ 74,265,868 =============== ============== FIDELITY(R) VIP INVESTMENT GRADE BOND Contracts in accumulation period: Non-Qualified VII 139,374.895 $ 16.07 $ 2,239,755 Non-Qualified VIII 280.831 15.76 4,426 --------------- -------------- 139,655.726 $ 2,244,181 =============== ============== FIDELITY(R) VIP OVERSEAS Contracts in accumulation period: Non-Qualified V 99,214.333 $ 13.46 $ 1,335,425 Non-Qualified V (0.75) 412,068.123 14.00 5,768,954 Non-Qualified VII 424,904.175 14.74 6,263,088 Non-Qualified VIII 37,597.218 12.57 472,597 Non-Qualified IX 2,045.757 13.24 27,086 Non-Qualified X 679.847 13.46 9,151 Non-Qualified XII 710.635 9.75 6,929 Non-Qualified XX 1,756.209 12.04 21,145 --------------- -------------- 978,976.297 $ 13,904,375 =============== ==============
103 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- FRANKLIN SMALL CAP VALUE SECURITIES Contracts in accumulation period: Non-Qualified V 23,696.242 $ 12.04 $ 285,303 Non-Qualified V (0.75) 29,354.091 12.18 357,533 Non-Qualified XII 30.484 12.17 371 Non-Qualified XX 1,538.558 12.02 18,493 --------------- -------------- 54,619.375 $ 661,700 =============== ============== ING GET FUND - SERIES D Contracts in accumulation period: Non-Qualified V 1,191,822.656 $ 10.16 $ 12,108,918 Non-Qualified V (0.75) 705,055.402 10.43 7,353,728 Non-Qualified VII 2,552,873.224 10.07 25,707,433 Non-Qualified VIII 1,247,980.873 10.17 12,691,965 Non-Qualified IX 304.794 10.03 3,057 Non-Qualified X 115,290.208 10.16 1,171,349 Non-Qualified XIII 1,142,700.580 10.32 11,792,670 Non-Qualified XIV 1,230,039.106 10.16 12,497,197 Non-Qualified XV 308,016.020 10.08 3,104,801 --------------- -------------- 8,494,082.863 $ 86,431,118 =============== ============== ING GET FUND - SERIES E Contracts in accumulation period: Non-Qualified V 1,302,479.845 $ 10.46 $ 13,623,939 Non-Qualified V (0.75) 171,187.936 10.70 1,831,711 Non-Qualified VII 2,539,560.874 10.27 26,081,290 Non-Qualified VIII 328,680.992 10.34 3,398,561 Non-Qualified X 93,280.808 10.46 975,717 Non-Qualified XIII 6,982,124.987 10.48 73,172,670 Non-Qualified XIV 6,506,209.577 10.34 67,274,207 Non-Qualified XV 5,114,690.230 10.27 52,527,869 --------------- -------------- 23,038,215.249 $ 238,885,964 =============== ============== ING GET FUND - SERIES G Contracts in accumulation period: Non-Qualified V 143,341.777 $ 10.32 $ 1,479,287 Non-Qualified V (0.75) 65,856.318 10.54 694,126 Non-Qualified VII 1,851,507.045 10.14 18,774,281 Non-Qualified VIII 169,262.869 10.21 1,728,174 Non-Qualified X 11,537.009 10.32 119,062 Non-Qualified XIII 3,616,773.788 10.34 37,397,441 Non-Qualified XIV 5,118,191.255 10.21 52,256,733 Non-Qualified XV 2,547,568.598 10.14 25,832,346 --------------- -------------- 13,524,038.659 $ 138,281,450 =============== ==============
104 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING GET FUND - SERIES H Contracts in accumulation period: Non-Qualified V 83,485.913 $ 10.47 $ 874,098 Non-Qualified V (0.75) 49,204.664 10.69 525,998 Non-Qualified VII 1,139,157.441 10.30 11,733,322 Non-Qualified VIII 84,738.490 10.37 878,738 Non-Qualified IX 392.651 10.37 4,072 Non-Qualified X 989.540 10.48 10,370 Non-Qualified XIII 3,336,869.111 10.50 35,037,126 Non-Qualified XIV 3,543,295.103 10.37 36,743,970 Non-Qualified XV 1,864,240.686 10.30 19,201,679 --------------- -------------- 10,102,373.599 $ 105,009,373 =============== ============== ING GET FUND - SERIES I Contracts in accumulation period: Non-Qualified VII 270,913.854 $ 10.22 $ 2,768,740 Non-Qualified VIII 25,797.234 10.28 265,196 Non-Qualified XIII 2,297,815.865 10.40 23,897,285 Non-Qualified XIV 2,743,133.081 10.28 28,199,408 Non-Qualified XV 1,919,707.874 10.22 19,619,414 --------------- -------------- 7,257,367.908 $ 74,750,043 =============== ============== ING GET FUND - SERIES J Contracts in accumulation period: Non-Qualified VII 175,263.039 $ 10.12 $ 1,773,662 Non-Qualified VIII 35,713.918 10.18 363,568 Non-Qualified XIII 1,644,208.368 10.29 16,918,904 Non-Qualified XIV 2,499,278.203 10.18 25,442,652 Non-Qualified XV 1,540,603.053 10.12 15,590,903 --------------- -------------- 5,895,066.581 $ 60,089,689 =============== ============== ING GET FUND - SERIES K Contracts in accumulation period: Non-Qualified VII 42,935.581 $ 10.17 $ 436,655 Non-Qualified VIII 4,919.573 10.22 50,278 Non-Qualified XIII 1,276,923.882 10.33 13,190,624 Non-Qualified XIV 1,443,646.602 10.22 14,754,068 Non-Qualified XV 799,117.035 10.17 8,127,020 Non-Qualified XVI 1,211,123.108 10.13 12,268,677 Non-Qualified XVIII 977,538.278 9.98 9,755,832 Non-Qualified XIX 1,188,600.236 10.03 11,921,660 --------------- -------------- 6,944,804.295 $ 70,504,814 =============== ============== ING GET FUND - SERIES L Contracts in accumulation period: Non-Qualified VII 68,959.393 $ 10.15 $ 699,938 Non-Qualified VIII 28,655.567 10.19 292,000 Non-Qualified XIII 1,273,740.831 10.29 13,106,793
105 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING GET FUND - SERIES L (CONTINUED) Non-Qualified XIV 763,172.953 $ 10.19 $ 7,776,732 Non-Qualified XV 689,377.651 10.15 6,997,183 Non-Qualified XVI 1,625,490.687 10.13 16,466,221 Non-Qualified XVIII 868,744.893 9.99 8,678,761 Non-Qualified XIX 1,279,916.619 10.04 12,850,363 --------------- -------------- 6,598,058.594 $ 66,867,991 =============== ============== ING GET FUND - SERIES M Contracts in accumulation period: Non-Qualified VII 165,076.000 $ 10.18 $ 1,680,474 Non-Qualified VIII 5,527.787 10.23 56,549 Non-Qualified XIII 1,332,926.881 10.32 13,755,805 Non-Qualified XIV 1,236,515.978 10.23 12,649,558 Non-Qualified XV 628,561.341 10.18 6,398,754 Non-Qualified XVI 2,700,223.977 10.17 27,461,278 Non-Qualified XVIII 1,456,729.147 10.04 14,625,561 Non-Qualified XIX 1,794,678.714 10.08 18,090,361 --------------- -------------- 9,320,239.825 $ 94,718,340 =============== ============== ING GET FUND - SERIES N Contracts in accumulation period: Non-Qualified VII 275,981.742 $ 10.28 $ 2,837,092 Non-Qualified VIII 2,234.810 10.32 23,063 Non-Qualified XIII 1,028,187.070 10.40 10,693,146 Non-Qualified XIV 764,525.476 10.32 7,889,903 Non-Qualified XV 463,578.946 10.28 4,765,592 Non-Qualified XVI 2,500,577.587 10.27 25,680,932 Non-Qualified XVIII 853,489.077 10.15 8,662,914 Non-Qualified XIX 1,592,938.549 10.19 16,232,044 --------------- -------------- 7,481,513.257 $ 76,784,686 =============== ============== ING GET FUND - SERIES P Contracts in accumulation period: Non-Qualified VII 453,293.482 $ 10.15 $ 4,600,929 Non-Qualified VIII 44,937.362 10.18 457,462 Non-Qualified XIII 778,101.699 10.25 7,975,542 Non-Qualified XIV 502,748.456 10.18 5,117,979 Non-Qualified XV 270,458.128 10.15 2,745,150 Non-Qualified XVI 1,448,074.801 10.13 14,668,998 Non-Qualified XVIII 1,082,254.675 10.03 10,855,014 Non-Qualified XIX 1,151,248.634 10.06 11,581,561 --------------- -------------- 5,731,117.237 $ 58,002,635 =============== ============== ING GET FUND - SERIES Q Contracts in accumulation period: Non-Qualified VII 192,371.099 $ 10.37 $ 1,994,888 Non-Qualified VIII 25,521.832 10.40 265,427
106 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING GET FUND - SERIES Q (CONTINUED) Non-Qualified XIII 699,859.030 $ 10.47 $ 7,327,524 Non-Qualified XIV 459,984.607 10.40 4,783,840 Non-Qualified XV 110,280.867 10.37 1,143,613 Non-Qualified XVI 1,244,549.008 10.36 12,893,528 Non-Qualified XVIII 476,583.901 10.26 4,889,751 Non-Qualified XIX 1,072,639.337 10.29 11,037,459 --------------- -------------- 4,281,789.681 $ 44,336,030 =============== ============== ING GET FUND - SERIES R Contracts in accumulation period: Non-Qualified VII 112,707.833 $ 10.51 $ 1,184,559 Non-Qualified VIII 28,384.847 10.54 299,176 Non-Qualified XIII 752,680.364 10.60 7,978,412 Non-Qualified XIV 327,154.947 10.54 3,448,213 Non-Qualified XV 93,221.700 10.51 979,760 Non-Qualified XVI 1,018,118.184 10.50 10,690,241 Non-Qualified XVIII 342,018.662 10.42 3,563,834 Non-Qualified XIX 959,926.995 10.45 10,031,237 --------------- -------------- 3,634,213.532 $ 38,175,432 =============== ============== ING GET FUND - SERIES S Contracts in accumulation period: Non-Qualified V 25,131.488 $ 10.49 $ 263,629 Non-Qualified V (0.75) 211,465.668 10.57 2,235,192 Non-Qualified VII 356,745.765 10.43 3,720,858 Non-Qualified VIII 76,140.478 10.45 795,668 Non-Qualified XIII 537,136.736 10.50 5,639,936 Non-Qualified XIV 370,677.364 10.45 3,873,578 Non-Qualified XV 156,444.651 10.43 1,631,718 Non-Qualified XVI 853,807.382 10.42 8,896,673 Non-Qualified XVIII 469,057.191 10.35 4,854,742 Non-Qualified XIX 1,179,202.002 10.37 12,228,325 --------------- -------------- 4,235,808.725 $ 44,140,319 =============== ============== ING GET FUND - SERIES T Contracts in accumulation period: Non-Qualified VII 257,825.462 $ 10.47 $ 2,699,433 Non-Qualified VIII 33,778.815 10.49 354,340 Non-Qualified XIII 402,537.356 10.53 4,238,718 Non-Qualified XIV 221,461.597 10.49 2,323,132 Non-Qualified XV 100,445.927 10.47 1,051,669 Non-Qualified XVI 869,755.132 10.46 9,097,639 Non-Qualified XVIII 240,326.759 10.40 2,499,398 Non-Qualified XIX 936,198.649 10.42 9,755,190 --------------- -------------- 3,062,329.697 $ 32,019,519 =============== ==============
107 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING GET FUND - SERIES U Contracts in accumulation period: Non-Qualified VII 123,391.551 $ 10.55 $ 1,301,781 Non-Qualified VIII 19,674.996 10.57 207,965 Non-Qualified XIII 429,401.676 10.60 4,551,658 Non-Qualified XIV 207,184.651 10.57 2,189,942 Non-Qualified XV 72,475.849 10.55 764,620 Non-Qualified XVI 967,556.965 10.54 10,198,050 Non-Qualified XVIII 197,343.657 10.49 2,070,135 Non-Qualified XIX 836,688.761 10.51 8,793,599 --------------- -------------- 2,853,718.106 $ 30,077,750 =============== ============== ING GET FUND - SERIES V Contracts in accumulation period: Non-Qualified VII 151,272.695 $ 9.73 $ 1,471,883 Non-Qualified VIII 115,324.383 9.74 1,123,259 Non-Qualified XIII 678,791.075 9.77 6,631,789 Non-Qualified XIV 594,981.015 9.74 5,795,115 Non-Qualified XV 130,419.277 9.73 1,268,980 Non-Qualified XVI 3,233,729.672 9.73 31,464,190 Non-Qualified XVIII 461,661.790 9.69 4,473,503 Non-Qualified XIX 2,314,264.417 9.70 22,448,365 --------------- -------------- 7,680,444.324 $ 74,677,084 =============== ============== ING VP BALANCED Currently payable annuity contracts: $ 44,409,020 Contracts in accumulation period: Non-Qualified V 1,352,428.111 $ 23.77 32,147,216 Non-Qualified V (0.75) 936,580.844 24.72 23,152,278 Non-Qualified VI 42,114.968 20.05 844,405 Non-Qualified VII 1,386,102.872 23.12 32,046,698 Non-Qualified VIII 356,121.660 16.48 5,868,885 Non-Qualified IX 9,943.030 23.37 232,369 Non-Qualified X 210,962.600 24.16 5,096,856 Non-Qualified XI 3,257.312 20.38 66,384 Non-Qualified XII 6,770.008 11.71 79,277
108 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING VP BALANCED (CONTINUED) Non-Qualified XIII 1,029,177.965 $ 11.37 $ 11,701,753 Non-Qualified XIV 742,505.916 11.18 8,301,216 Non-Qualified XV 361,022.129 11.09 4,003,735 Non-Qualified XVI 302,566.837 9.32 2,819,923 Non-Qualified XVIII 80,703.797 9.18 740,861 Non-Qualified XIX 141,762.923 9.22 1,307,054 Non-Qualified XX 12.101 11.54 140 --------------- -------------- 6,962,033.073 $ 172,818,070 =============== ============== ING VP BOND Currently payable annuity contracts: $ 13,967,373 Contracts in accumulation period: Non-Qualified V 688,344.612 $ 18.27 12,576,056 Non-Qualified V (0.75) 1,093,869.037 19.00 20,783,512 Non-Qualified VI 31,456.048 16.75 526,889 Non-Qualified VII 1,906,360.217 17.78 33,895,085 Non-Qualified VIII 490,686.776 15.24 7,478,066 Non-Qualified IX 9,060.611 17.96 162,729 Non-Qualified X 248,725.095 18.45 4,588,978 Non-Qualified XI 1,200.358 16.91 20,298 Non-Qualified XII 2,255.099 13.60 30,669 Non-Qualified XIII 1,257,971.098 13.41 16,869,392 Non-Qualified XIV 1,229,858.896 13.19 16,221,839 Non-Qualified XV 495,078.984 13.08 6,475,633 Non-Qualified XVI 457,788.969 12.55 5,745,252 Non-Qualified XVIII 66,982.228 12.36 827,900 Non-Qualified XIX 258,563.538 12.43 3,213,945 Non-Qualified XX 4,655.544 10.94 50,932 --------------- -------------- 8,242,857.110 $ 143,434,548 =============== ============== ING VP EMERGING MARKETS Contracts in accumulation period: Non-Qualified VII 88,114.636 $ 9.18 $ 808,892 --------------- -------------- 88,114.636 $ 808,892 =============== ============== ING VP MONEY MARKET Currently payable annuity contracts: $ 8,580,947 Contracts in accumulation period: Non-Qualified V 760,049.144 $ 13.91 10,572,284 Non-Qualified V (0.75) 1,310,806.851 14.46 18,954,267 Non-Qualified VI 18,538.552 13.62 252,495 Non-Qualified VII 4,086,227.427 13.68 55,899,591 Non-Qualified VIII 729,176.709 12.46 9,085,542 Non-Qualified IX 3,355.702 13.67 45,872 Non-Qualified X 236,795.210 13.91 3,293,821 Non-Qualified XII 12,391.581 11.71 145,105 Non-Qualified XIII 1,967,774.812 11.58 22,786,832
109 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING VP MONEY MARKET (CONTINUED) Non-Qualified XIV 1,880,006.571 $ 11.39 $ 21,413,275 Non-Qualified XV 809,314.494 11.30 9,145,254 Non-Qualified XVI 545,754.487 10.35 5,648,559 Non-Qualified XVIII 226,001.959 10.19 2,302,960 Non-Qualified XIX 559,971.050 10.24 5,734,104 Non-Qualified XX 3,292.232 10.02 32,988 --------------- -------------- 13,149,456.781 $ 173,893,896 =============== ============== ING VP NATURAL RESOURCES Contracts in accumulation period: Non-Qualified V 36,294.840 $ 15.03 $ 545,511 Non-Qualified V (0.75) 14,532.110 15.64 227,282 Non-Qualified VII 63,991.751 14.78 945,798 Non-Qualified IX 31.624 14.78 467 Non-Qualified X 882.223 15.03 13,260 --------------- -------------- 115,732.548 $ 1,732,318 =============== ============== ING VP STRATEGIC ALLOCATION BALANCED Currently payable annuity contracts: $ 2,256,383 Contracts in accumulation period: Non-Qualified V 77,501.476 $ 15.78 1,222,973 Non-Qualified V (0.75) 103,788.383 16.41 1,703,167 Non-Qualified VII 629,631.802 15.56 9,797,071 Non-Qualified VIII 126,684.196 14.19 1,797,649 Non-Qualified X 9,896.338 16.14 159,727 --------------- -------------- 947,502.195 $ 16,936,970 =============== ============== ING VP STRATEGIC ALLOCATION GROWTH Currently payable annuity contracts: $ 1,919,215 Contracts in accumulation period: Non-Qualified V 75,583.424 $ 16.05 1,213,114 Non-Qualified V (0.75) 160,275.739 16.69 2,675,002 Non-Qualified VII 464,321.589 15.83 7,350,211 Non-Qualified VIII 92,632.835 14.18 1,313,534 Non-Qualified IX 2,270.185 15.78 35,824 Non-Qualified X 18,355.634 16.42 301,400 --------------- -------------- 813,439.406 $ 14,808,300 =============== ============== ING VP STRATEGIC ALLOCATION INCOME Currently payable annuity contracts: $ 3,585,605 Contracts in accumulation period: Non-Qualified V 52,208.536 $ 15.74 821,762 Non-Qualified V (0.75) 39,732.555 16.37 650,422 Non-Qualified VII 674,271.513 15.53 10,471,437 Non-Qualified VIII 244,359.775 14.58 3,562,766 Non-Qualified X 20,519.617 16.10 330,366 --------------- -------------- 1,031,091.996 $ 19,422,358 =============== ==============
110 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING MFS TOTAL RETURN Contracts in accumulation period: Non-Qualified V 9,006.365 $ 11.29 $ 101,682 Non-Qualified V (0.75) 25,035.393 11.33 283,651 Non-Qualified X 1,353.816 11.29 15,285 --------------- -------------- 35,395.574 $ 400,618 =============== ============== ING T. ROWE PRICE EQUITY INCOME Contracts in accumulation period: Non-Qualified V 16,436.682 $ 12.17 $ 200,034 Non-Qualified V (0.75) 41,258.947 12.22 504,184 --------------- -------------- 57,695.629 $ 704,218 =============== ============== ING ALGER AGGRESSIVE GROWTH Contracts in accumulation period: Non-Qualified V 17,475.875 $ 10.44 $ 182,448 Non-Qualified V (0.75) 72,920.930 10.53 767,857 Non-Qualified IX 1,574.155 10.20 16,056 Non-Qualified XX 3,883.418 13.05 50,679 --------------- -------------- 95,854.378 $ 1,017,040 =============== ============== ING ALGER GROWTH Contracts in accumulation period: Non-Qualified V 4,186.467 $ 9.60 $ 40,190 Non-Qualified V (0.75) 33,600.821 9.68 325,256 Non-Qualified XII 1,503.306 9.67 14,537 --------------- -------------- 39,290.594 $ 379,983 =============== ============== ING AMERICAN CENTURY SMALL CAP VALUE Contracts in accumulation period: Non-Qualified V 9,101.931 $ 10.81 $ 98,392 Non-Qualified V (0.75) 27,225.869 10.91 297,034 Non-Qualified XX 13,234.319 12.48 165,164 --------------- -------------- 49,562.119 $ 560,590 =============== ============== ING BARON SMALL CAP GROWTH Contracts in accumulation period: Non-Qualified V 36,427.287 $ 11.45 $ 417,092 Non-Qualified V (0.75) 72,761.356 11.54 839,666 Non-Qualified IX 905.328 11.40 10,321 Non-Qualified XII 119.128 11.53 1,374 Non-Qualified XX 8,762.007 12.79 112,066 --------------- -------------- 118,975.106 $ 1,380,519 =============== ============== ING DSI ENHANCED INDEX Contracts in accumulation period: Non-Qualified V (0.75) 620.941 $ 10.20 $ 6,334 --------------- -------------- 620.941 $ 6,334 =============== ==============
111 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING GOLDMAN SACHS(R) CAPITAL GROWTH Contracts in accumulation period: Non-Qualified V 453.907 $ 9.82 $ 4,457 Non-Qualified V (0.75) 1,069.764 9.90 10,591 Non-Qualified XII 652.218 9.90 6,457 Non-Qualified XX 309.340 11.70 3,619 --------------- -------------- 2,485.229 $ 25,124 =============== ============== ING JPMORGAN FLEMING INTERNATIONAL Currently payable annuity contracts: $ 1,859,222 Contracts in accumulation period: Non-Qualified V 202,505.868 $ 19.52 3,952,915 Non-Qualified V (0.75) 203,359.740 20.30 4,128,203 Non-Qualified VII 179,917.080 10.71 1,926,912 Non-Qualified VIII 67,795.532 10.81 732,870 Non-Qualified IX 4,784.195 19.20 91,857 Non-Qualified X 1,614.313 19.52 31,511 Non-Qualified XIII 1,004,100.896 8.70 8,735,678 Non-Qualified XIV 704,367.088 8.56 6,029,382 Non-Qualified XV 435,173.558 8.49 3,694,624 Non-Qualified XVI 271,528.296 7.25 1,968,580 Non-Qualified XVIII 12,779.618 7.14 91,246 Non-Qualified XIX 107,187.260 7.18 769,605 Non-Qualified XX 575.121 11.27 6,482 --------------- -------------- 3,195,688.565 $ 34,019,087 =============== ============== ING JPMORGAN MID CAP VALUE Contracts in accumulation period: Non-Qualified V 14,775.018 $ 11.78 $ 174,050 Non-Qualified V (0.75) 25,669.849 11.87 304,701 Non-Qualified IX 178.391 11.73 2,093 Non-Qualified XX 14,795.489 13.32 197,076 --------------- -------------- 55,418.747 $ 677,920 =============== ============== ING MFS CAPITAL OPPORTUNITIES Currently payable annuity contracts: $ 2,824,242 Contracts in accumulation period: Non-Qualified V 204,827.906 $ 23.69 4,852,373 Non-Qualified V (0.75) 149,650.547 24.64 3,687,389 Non-Qualified VII 726,561.670 11.16 8,108,428 Non-Qualified VIII 203,718.026 11.27 2,295,902 Non-Qualified IX 6,266.190 23.30 146,002 Non-Qualified X 5,194.762 23.69 123,064 Non-Qualified XIII 666,673.292 9.18 6,120,061 Non-Qualified XIV 726,480.513 9.02 6,552,854 Non-Qualified XV 183,336.932 8.95 1,640,866 Non-Qualified XVI 245,421.179 5.67 1,391,538 Non-Qualified XVIII 108,387.749 5.58 604,804
112 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING MFS CAPITAL OPPORTUNITIES (CONTINUED) Non-Qualified XIX 166,817.132 $ 5.61 $ 935,844 Non-Qualified XX 287.287 11.86 3,407 --------------- -------------- 3,393,623.185 $ 39,286,774 =============== ============== ING MFS GLOBAL GROWTH Contracts in accumulation period: Non-Qualified V 391.860 $ 10.83 $ 4,244 Non-Qualified V (0.75) 52.220 10.92 570 --------------- -------------- 444.080 $ 4,814 =============== ============== ING MFS RESEARCH EQUITY Contracts in accumulation period: Non-Qualified V 279,653.158 $ 12.79 $ 3,576,764 Non-Qualified V (0.75) 200,227.745 13.31 2,665,031 Non-Qualified VI 17,066.294 10.84 184,999 Non-Qualified VII 1,734,131.530 12.57 21,798,033 Non-Qualified VIII 310,163.298 8.70 2,698,421 Non-Qualified IX 9,364.239 12.58 117,802 Non-Qualified X 108,921.983 12.79 1,393,112 Non-Qualified XI 3,920.490 10.84 42,498 Non-Qualified XIII 331,059.363 8.48 2,807,383 Non-Qualified XIV 549,257.206 8.34 4,580,805 Non-Qualified XV 159,052.559 8.27 1,315,365 Non-Qualified XVI 130,099.169 6.20 806,615 Non-Qualified XVIII 35,349.264 6.11 215,984 Non-Qualified XIX 120,064.588 6.14 737,197 --------------- -------------- 3,988,330.886 $ 42,940,009 =============== ============== ING OPCAP BALANCED VALUE Contracts in accumulation period: Non-Qualified V 46,766.192 $ 10.73 $ 501,801 Non-Qualified V (0.75) 60,054.633 10.83 650,392 Non-Qualified IX 6,658.417 10.24 68,182 Non-Qualified XX 2,348.085 12.69 29,797 --------------- -------------- 115,827.327 $ 1,250,172 =============== ============== ING PIMCO TOTAL RETURN Contracts in accumulation period: Non-Qualified V 56,188.212 $ 11.01 $ 618,632 Non-Qualified V (0.75) 138,571.252 11.10 1,538,141 Non-Qualified IX 21,337.010 10.97 234,067 Non-Qualified XX 20,489.489 10.82 221,696 --------------- -------------- 236,585.963 $ 2,612,536 =============== ==============
113 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING SALOMON BROTHERS AGGRESSIVE GROWTH Currently payable annuity contracts: $ 1,542,682 Contracts in accumulation period: Non-Qualified V 365,959.549 $ 13.15 4,812,368 Non-Qualified V (0.75) 352,628.701 13.68 4,823,961 Non-Qualified VII 2,405,160.054 12.59 30,280,965 Non-Qualified VIII 359,507.736 8.61 3,095,362 Non-Qualified IX 12,215.824 12.93 157,951 Non-Qualified X 15,712.442 13.15 206,619 Non-Qualified XII 11,871.798 7.48 88,801 Non-Qualified XIII 664,935.609 7.10 4,721,043 Non-Qualified XIV 747,149.415 6.99 5,222,574 Non-Qualified XV 248,250.930 6.93 1,720,379 Non-Qualified XVI 137,013.360 4.87 667,255 Non-Qualified XVIII 97,562.000 4.80 468,298 Non-Qualified XIX 157,742.751 4.82 760,320 Non-Qualified XX 5,591.317 12.55 70,171 --------------- -------------- 5,581,301.486 $ 58,638,749 =============== ============== ING SALOMON BROTHERS FUNDAMENTAL VALUE Contracts in accumulation period: Non-Qualified V 34,134.378 $ 10.64 $ 363,190 Non-Qualified V (0.75) 75,628.638 10.73 811,495 Non-Qualified IX 2,432.683 10.34 25,154 Non-Qualified XX 1,190.780 12.80 15,242 --------------- -------------- 113,386.479 $ 1,215,081 =============== ============== ING SALOMON BROTHERS INVESTORS VALUE Contracts in accumulation period: Non-Qualified V 6,280.755 $ 10.14 $ 63,687 Non-Qualified V (0.75) 10,865.837 10.23 111,158 Non-Qualified XX 327.739 12.14 3,979 --------------- -------------- 17,474.331 $ 178,824 =============== ============== ING T. ROWE PRICE GROWTH EQUITY Currently payable annuity contracts: $ 5,380,880 Contracts in accumulation period: Non-Qualified V 218,595.713 $ 18.80 4,109,599 Non-Qualified V (0.75) 399,671.846 19.55 7,813,585 Non-Qualified VII 2,230,071.074 23.71 52,874,985 Non-Qualified VIII 244,873.219 17.27 4,228,960 Non-Qualified IX 9,105.886 18.48 168,277 Non-Qualified X 9,380.397 18.80 176,351 Non-Qualified XII 8,178.297 11.57 94,623 Non-Qualified XX 3,154.450 12.68 39,998 --------------- -------------- 3,123,030.882 $ 74,887,258 =============== ==============
114 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING UBS TACTICAL ASSET ALLOCATION Contracts in accumulation period: Non-Qualified V 2,833.420 $ 10.05 $ 28,476 Non-Qualified V (0.75) 2,395.878 10.14 24,294 Non-Qualified IX 34.677 9.51 330 --------------- -------------- 5,263.975 $ 53,100 =============== ============== ING VAN KAMPEN COMSTOCK Contracts in accumulation period: Non-Qualified V 22,950.006 $ 10.64 $ 244,188 Non-Qualified V (0.75) 50,265.640 10.73 539,350 Non-Qualified XII 2,359.724 10.72 25,296 Non-Qualified XX 7,312.631 12.38 90,530 --------------- -------------- 82,888.001 $ 899,364 =============== ============== ING VP GROWTH AND INCOME Currently payable annuity contracts: $ 103,374,271 Contracts in accumulation period: Non-Qualified 1964 958.692 $ 202.58 194,212 Non-Qualified V 3,649,455.998 18.87 68,865,235 Non-Qualified V (0.75) 6,316,074.533 19.63 123,984,543 Non-Qualified VI 1,073,218.808 17.73 19,028,169 Non-Qualified VII 3,762,254.053 18.67 70,241,283 Non-Qualified VIII 779,501.415 12.58 9,806,128 Non-Qualified IX 52,582.729 18.56 975,935 Non-Qualified X 1,674,699.215 19.19 32,137,478 Non-Qualified XI 30,269.910 18.02 545,464 Non-Qualified XII 41,038.876 7.91 324,618 Non-Qualified XIII 1,213,385.179 7.60 9,221,727 Non-Qualified XIV 1,277,114.094 7.48 9,552,813 Non-Qualified XV 456,278.036 7.42 3,385,583 Non-Qualified XVI 206,943.582 6.63 1,372,036 Non-Qualified XVIII 80,266.715 6.53 524,142 Non-Qualified XIX 158,741.441 6.56 1,041,344 Non-Qualified XX 69,059.705 11.38 785,899 --------------- -------------- 20,841,842.981 $ 455,360,880 =============== ============== ING GET U.S. CORE PORTFOLIO - SERIES 1 Contracts in accumulation period: Non-Qualified VII 83,172.199 $ 10.25 $ 852,515 Non-Qualified VIII 25,410.783 10.26 260,715 Non-Qualified XIII 599,838.539 10.28 6,166,340 Non-Qualified XIV 239,199.940 10.26 2,454,191 Non-Qualified XV 44,141.457 10.25 452,450 Non-Qualified XVI 717,621.579 10.25 7,355,621 Non-Qualified XVIII 114,549.208 10.22 1,170,693 Non-Qualified XIX 707,034.036 10.23 7,232,958 --------------- -------------- 2,530,967.741 $ 25,945,483 =============== ==============
115 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING GET U.S. CORE PORTFOLIO - SERIES 2 Contracts in accumulation period: Non-Qualified VII 176,490.792 $ 10.03 $ 1,770,203 Non-Qualified VIII 41,214.458 10.04 413,793 Non-Qualified XIII 543,152.110 10.05 5,458,679 Non-Qualified XIV 503,449.556 10.04 5,054,634 Non-Qualified XV 131,404.665 10.03 1,317,989 Non-Qualified XVI 591,955.402 10.03 5,937,313 Non-Qualified XVIII 79,901.689 10.02 800,615 Non-Qualified XIX 374,060.723 10.02 3,748,088 --------------- -------------- 2,441,629.395 $ 24,501,314 =============== ============== ING GET U.S. CORE PORTFOLIO - SERIES 3 Contracts in accumulation period: Non-Qualified VII 7,545.792 $ 10.00 $ 75,458 Non-Qualified VIII 33,801.534 10.00 338,015 Non-Qualified XIII 23,388.083 10.00 233,881 Non-Qualified XIV 15,192.180 10.00 151,922 Non-Qualified XV 3,929.819 10.00 39,298 Non-Qualified XVI 266.078 10.00 2,661 Non-Qualified XIX 112,372.820 10.00 1,123,728 --------------- -------------- 196,496.306 $ 1,964,963 =============== ============== ING VP GROWTH Currently payable annuity contracts: $ 2,902,336 Contracts in accumulation period: Non-Qualified V 62,048.578 $ 13.51 838,276 Non-Qualified V (0.75) 460,682.519 13.97 6,435,735 Non-Qualified VII 498,520.345 13.36 6,660,232 Non-Qualified VIII 216,334.235 13.50 2,920,512 Non-Qualified IX 1,934.849 13.28 25,695 Non-Qualified XII 2,781.035 8.70 24,195 Non-Qualified XIII 667,167.608 8.03 5,357,356 Non-Qualified XIV 596,440.738 7.90 4,711,882 Non-Qualified XV 117,745.581 7.83 921,948 Non-Qualified XVI 135,250.338 5.19 701,949 Non-Qualified XVIII 13,017.218 5.11 66,518 Non-Qualified XIX 101,519.268 5.14 521,809 Non-Qualified XX 227.824 11.88 2,707 --------------- -------------- 2,873,670.136 $ 32,091,150 =============== ============== ING VP INDEX PLUS LARGECAP Currently payable annuity contracts: $ 44,975,833 Contracts in accumulation period: Non-Qualified V 308,017.673 $ 16.98 5,230,140 Non-Qualified V (0.75) 1,059,395.680 17.61 18,655,958 Non-Qualified VII 1,709,966.350 16.78 28,693,235 Non-Qualified VIII 596,165.596 16.68 9,944,042
116 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING VP INDEX PLUS LARGECAP (CONTINUED) Non-Qualified IX 19,667.975 $ 16.70 $ 328,455 Non-Qualified XII 18,597.894 10.26 190,814 Non-Qualified XIII 3,215,532.492 9.84 31,640,840 Non-Qualified XIV 2,732,298.797 9.68 26,448,652 Non-Qualified XV 1,074,895.107 9.60 10,318,993 Non-Qualified XVI 713,780.628 7.37 5,260,563 Non-Qualified XVIII 202,024.550 7.26 1,466,698 Non-Qualified XIX 512,898.694 7.29 3,739,031 Non-Qualified XX 2,725.332 11.86 32,322 --------------- -------------- 12,165,966.768 $ 186,925,576 =============== ============== ING VP INDEX PLUS MIDCAP Contracts in accumulation period: Non-Qualified V 165,078.384 $ 16.32 $ 2,694,079 Non-Qualified V (0.75) 685,255.769 16.79 11,505,444 Non-Qualified IX 14,642.571 16.09 235,599 Non-Qualified XII 29,309.963 17.49 512,631 Non-Qualified XX 6,664.589 12.63 84,174 --------------- -------------- 900,951.276 $ 15,031,927 =============== ============== ING VP INDEX PLUS SMALLCAP Contracts in accumulation period: Non-Qualified V 97,815.769 $ 12.19 $ 1,192,374 Non-Qualified V (0.75) 424,685.464 12.54 5,325,556 Non-Qualified IX 6,963.848 12.02 83,705 Non-Qualified XII 6,950.061 13.49 93,756 Non-Qualified XX 1,290.101 12.66 16,333 --------------- -------------- 537,705.243 $ 6,711,724 =============== ============== ING VP INTERNATIONAL EQUITY Currently payable annuity contracts: $ 1,513,497 Contracts in accumulation period: Non-Qualified V 5,719.858 $ 8.15 46,617 Non-Qualified V (0.75) 31,701.491 8.39 265,976 Non-Qualified VII 123,930.902 8.08 1,001,362 Non-Qualified VIII 35,338.353 8.15 288,008 Non-Qualified XIII 314,549.289 7.75 2,437,757 Non-Qualified XIV 206,797.224 7.62 1,575,795 Non-Qualified XIX 53,643.047 6.10 327,223 Non-Qualified XV 75,410.326 7.56 570,102 Non-Qualified XVI 137,643.636 6.17 849,261 Non-Qualified XVIII 7,969.772 6.07 48,377 --------------- -------------- 992,703.898 $ 8,923,975 =============== ==============
117 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING VP SMALL COMPANY Currently payable annuity contracts: $ 6,987,093 Contracts in accumulation period: Non-Qualified V 52,308.081 $ 19.63 1,026,808 Non-Qualified V (0.75) 367,449.359 20.30 7,459,222 Non-Qualified VII 1,058,759.124 19.42 20,561,102 Non-Qualified VIII 294,167.953 19.62 5,771,575 Non-Qualified IX 4,087.255 19.30 78,884 Non-Qualified XII 37,662.254 14.01 527,648 Non-Qualified XIII 1,313,138.154 13.67 17,950,599 Non-Qualified XIV 709,514.017 13.45 9,542,964 Non-Qualified XV 271,333.630 13.34 3,619,591 Non-Qualified XVI 436,486.301 9.70 4,233,917 Non-Qualified XVIII 42,545.757 9.56 406,737 Non-Qualified XIX 237,295.349 9.60 2,278,035 Non-Qualified XX 1,096.065 12.44 13,635 --------------- -------------- 4,825,843.299 $ 80,457,810 =============== ============== ING VP TECHNOLOGY Contracts in accumulation period: Non-Qualified V 325,256.029 $ 3.70 $ 1,203,447 Non-Qualified V (0.75) 663,725.099 3.76 2,495,606 Non-Qualified VII 822,309.855 3.67 3,017,877 Non-Qualified VIII 113,309.435 3.69 418,112 Non-Qualified IX 27,033.768 3.66 98,944 Non-Qualified X 10,422.214 3.73 38,875 Non-Qualified XII 5,113.686 3.76 19,227 Non-Qualified XIII 729,377.767 3.74 2,727,873 Non-Qualified XIV 508,346.259 3.69 1,875,798 Non-Qualified XV 98,525.019 3.67 361,587 Non-Qualified XVI 174,871.694 3.83 669,759 Non-Qualified XVIII 22,774.838 3.78 86,089 Non-Qualified XIX 93,594.408 3.80 355,659 Non-Qualified XX 222.570 12.23 2,722 --------------- -------------- 3,594,882.641 $ 13,371,575 =============== ============== ING VP VALUE OPPORTUNITY Contracts in accumulation period: Non-Qualified V 48,690.868 $ 16.54 $ 805,347 Non-Qualified V (0.75) 267,707.630 17.11 4,580,478 Non-Qualified VII 654,655.653 16.37 10,716,713 Non-Qualified VIII 137,774.100 16.53 2,277,406 Non-Qualified IX 2,047.446 16.27 33,312 Non-Qualified XII 19,231.949 11.57 222,514 Non-Qualified XX 854.692 11.21 9,581 --------------- -------------- 1,130,962.338 $ 18,645,351 =============== ==============
118 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING VP GROWTH OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 1,129.847 $ 7.91 $ 8,937 Non-Qualified V (0.75) 3,456.376 8.00 27,651 Non-Qualified XX 1,082.117 11.74 12,704 --------------- -------------- 5,668.340 $ 49,292 =============== ============== ING VP GROWTH OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 75,151.115 $ 7.12 $ 535,076 Non-Qualified XIV 14,797.160 7.06 104,468 Non-Qualified XV 11,289.048 7.03 79,362 Non-Qualified XVI 8,054.439 7.02 56,542 Non-Qualified XVIII 9,355.081 6.94 64,924 Non-Qualified XIX 1,774.875 6.96 12,353 --------------- -------------- 120,421.718 $ 852,725 =============== ============== ING VP INTERNATIONAL VALUE Contracts in accumulation period: Non-Qualified V 21,661.622 $ 10.23 $ 221,598 Non-Qualified V (0.75) 79,035.872 10.36 818,812 Non-Qualified IX 5,676.061 10.17 57,726 Non-Qualified XII 589.756 10.35 6,104 Non-Qualified XX 8,318.672 11.37 94,583 --------------- -------------- 115,281.983 $ 1,198,823 =============== ============== ING VP MAGNACAP - CLASS R Contracts in accumulation period: Non-Qualified V 560.883 $ 8.83 $ 4,953 Non-Qualified V (0.75) 4,209.036 8.91 37,503 --------------- -------------- 4,769.919 $ 42,456 =============== ============== ING VP MAGNACAP - CLASS S Contracts in accumulation period: Non-Qualified XIII 54,558.357 $ 9.22 $ 503,028 Non-Qualified XIV 27,368.269 9.14 250,146 Non-Qualified XV 5,556.793 9.10 50,567 Non-Qualified XVI 6,959.287 9.09 63,260 Non-Qualified XVIII 3,275.054 8.98 29,410 Non-Qualified XIX 3,527.195 9.02 31,815 --------------- -------------- 101,244.955 $ 928,226 =============== ============== ING VP MIDCAP OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 12,644.819 $ 9.33 $ 117,976 Non-Qualified V (0.75) 79,747.335 9.45 753,612 Non-Qualified XII 3,579.990 9.44 33,795 --------------- -------------- 95,972.144 $ 905,383 =============== ==============
119 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- ING VP MIDCAP OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 219,159.730 $ 8.41 $ 1,843,133 Non-Qualified XIV 263,133.574 8.34 2,194,534 Non-Qualified XV 81,802.903 8.31 679,782 Non-Qualified XVI 126,701.711 8.30 1,051,624 Non-Qualified XVIII 13,424.602 8.20 110,082 Non-Qualified XIX 114,054.525 8.23 938,669 --------------- -------------- 818,277.045 $ 6,817,824 =============== ============== ING VP SMALLCAP OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 12,597.583 $ 6.82 $ 85,916 Non-Qualified V (0.75) 188,392.721 6.90 1,299,910 Non-Qualified IX 519.879 6.78 3,525 Non-Qualified XX 234.023 11.71 2,740 --------------- -------------- 201,744.206 $ 1,392,091 =============== ============== ING VP SMALLCAP OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 175,467.356 $ 6.49 $ 1,138,783 Non-Qualified XIV 233,330.030 6.44 1,502,645 Non-Qualified XV 98,422.443 6.41 630,888 Non-Qualified XVI 101,399.711 6.40 648,958 Non-Qualified XVIII 13,008.359 6.32 82,213 Non-Qualified XIX 82,631.262 6.35 524,709 --------------- -------------- 704,259.161 $ 4,528,196 =============== ============== JANUS ASPEN BALANCED Contracts in accumulation period: Non-Qualified V 452,635.131 $ 23.53 $ 10,650,505 Non-Qualified V (0.75) 513,517.793 24.47 12,565,780 Non-Qualified VII 1,991,912.682 25.95 51,690,134 Non-Qualified VIII 588,054.574 20.79 12,225,655 Non-Qualified IX 5,148.167 23.14 119,129 Non-Qualified X 12,261.418 23.53 288,511 Non-Qualified XII 9,373.025 13.94 130,660 Non-Qualified XIII 2,765,469.466 13.15 36,365,923 Non-Qualified XIV 3,012,811.130 12.93 38,955,648 Non-Qualified XV 1,027,563.387 12.83 13,183,638 Non-Qualified XVI 551,462.715 9.48 5,227,867 Non-Qualified XVIII 138,078.587 9.34 1,289,654 Non-Qualified XIX 373,097.087 9.39 3,503,382 Non-Qualified XX 29,882.005 11.18 334,081 --------------- -------------- 11,471,267.167 $ 186,530,567 =============== ==============
120 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- JANUS ASPEN FLEXIBLE INCOME Contracts in accumulation period: Non-Qualified V 119,900.090 $ 19.92 $ 2,388,410 Non-Qualified V (0.75) 185,976.979 20.72 3,853,443 Non-Qualified VII 657,674.720 19.63 12,910,155 Non-Qualified VIII 167,980.141 16.53 2,776,712 Non-Qualified IX 3,409.363 19.59 66,789 Non-Qualified X 6,727.837 19.92 134,019 Non-Qualified XII 1,020.240 13.56 13,834 Non-Qualified XX 1,300.881 11.13 14,479 --------------- -------------- 1,143,990.251 $ 22,157,841 =============== ============== JANUS ASPEN GROWTH Currently payable annuity contracts: $ 6,746,617 Contracts in accumulation period: Non-Qualified V 275,014.410 $ 17.39 4,782,501 Non-Qualified V (0.75) 426,544.435 18.09 7,716,189 Non-Qualified VII 1,326,487.159 20.49 27,179,722 Non-Qualified VIII 287,050.025 14.70 4,219,635 Non-Qualified IX 7,753.428 17.10 132,584 Non-Qualified X 21,576.925 17.39 375,223 Non-Qualified XII 7,899.966 9.84 77,736 Non-Qualified XIII 1,932,747.579 9.35 18,071,190 Non-Qualified XIV 2,595,082.727 9.19 23,848,810 Non-Qualified XV 852,745.315 9.12 7,777,037 Non-Qualified XVI 290,985.637 5.79 1,684,807 Non-Qualified XVIII 120,724.785 5.71 689,339 Non-Qualified XIX 344,773.770 5.74 1,979,001 Non-Qualified XX 3,768.837 12.04 45,377 --------------- -------------- 8,493,154.998 $ 105,325,768 =============== ============== JANUS ASPEN MID CAP GROWTH Contracts in accumulation period: Non-Qualified V 516,538.067 $ 17.39 $ 8,982,597 Non-Qualified V (0.75) 706,991.712 18.09 12,789,480 Non-Qualified VII 1,295,022.073 17.23 22,313,230 Non-Qualified VIII 317,327.757 12.05 3,823,799 Non-Qualified IX 17,492.044 17.10 299,114 Non-Qualified X 19,777.700 17.39 343,934 Non-Qualified XII 5,235.685 10.16 53,195 Non-Qualified XIII 1,724,863.990 9.54 16,455,202 Non-Qualified XIV 1,507,892.942 9.38 14,144,036 Non-Qualified XV 568,037.801 9.30 5,282,752 Non-Qualified XVI 541,527.023 3.93 2,128,201 Non-Qualified XVIII 229,054.704 3.88 888,732 Non-Qualified XIX 293,507.548 3.90 1,144,679 Non-Qualified XX 5,300.560 12.78 67,741 --------------- -------------- 7,748,569.606 $ 88,716,692 =============== ==============
121 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- JANUS ASPEN WORLDWIDE GROWTH Currently payable annuity contracts: $ 7,010,995 Contracts in accumulation period: Non-Qualified V 482,318.045 $ 19.90 9,598,129 Non-Qualified V (0.75) 919,159.326 20.70 19,026,598 Non-Qualified VII 3,307,618.789 22.26 73,627,594 Non-Qualified VIII 640,258.630 16.19 10,365,787 Non-Qualified IX 17,909.778 19.57 350,494 Non-Qualified X 20,915.249 19.90 416,213 Non-Qualified XII 24,138.624 9.72 234,627 Non-Qualified XIII 3,033,408.583 9.07 27,513,016 Non-Qualified XIV 2,987,514.768 8.92 26,648,632 Non-Qualified XV 875,428.740 8.85 7,747,544 Non-Qualified XVI 615,336.256 5.88 3,618,177 Non-Qualified XVIII 186,073.582 5.79 1,077,366 Non-Qualified XIX 617,687.182 5.82 3,594,939 Non-Qualified XX 8,395.860 11.12 93,362 --------------- -------------- 13,736,163.412 $ 190,923,473 =============== ============== LORD ABBETT GROWTH AND INCOME Contracts in accumulation period: Non-Qualified V 97,606.433 $ 10.16 $ 991,681 Non-Qualified V (0.75) 195,607.244 10.29 2,012,799 Non-Qualified IX 5,135.481 10.10 51,868 Non-Qualified XII 366.677 10.27 3,766 Non-Qualified XX 4,057.255 12.27 49,783 --------------- -------------- 302,773.090 $ 3,109,897 =============== ============== LORD ABBETT MID-CAP VALUE Contracts in accumulation period: Non-Qualified V 24,027.019 $ 10.25 $ 246,277 Non-Qualified V (0.75) 89,083.152 10.38 924,683 Non-Qualified IX 533.351 10.19 5,435 Non-Qualified XII 546.351 10.37 5,666 Non-Qualified XX 2,838.496 12.20 34,630 --------------- -------------- 117,028.369 $ 1,216,691 =============== ============== MFS(R) GLOBAL GOVERNMENTS Contracts in accumulation period: Non-Qualified VII 171,584.350 $ 12.97 $ 2,225,449 Non-Qualified VIII 22,704.193 13.13 298,106 --------------- -------------- 194,288.543 $ 2,523,555 =============== ============== MFS(R) TOTAL RETURN Contracts in accumulation period: Non-Qualified VII 2,028,651.998 $ 17.79 $ 36,089,719 Non-Qualified VIII 455,398.588 18.00 8,197,175 Non-Qualified XIII 1,339,015.664 12.82 17,166,181
122 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- -------------- MFS(R) TOTAL RETURN (CONTINUED) Non-Qualified XIV 2,075,932.812 $ 12.61 $ 26,177,513 Non-Qualified XV 575,689.149 12.51 7,201,871 Non-Qualified XVI 710,713.387 11.39 8,095,025 Non-Qualified XVIII 156,337.741 11.22 1,754,109 Non-Qualified XIX 507,364.722 11.28 5,723,074 --------------- -------------- 7,849,104.061 $ 110,404,667 =============== ============== OPPENHEIMER AGGRESSIVE GROWTH Currently payable annuity contracts: $ 1,231,180 Contracts in accumulation period: Non-Qualified VII 603,866.190 $ 12.80 7,729,487 Non-Qualified VIII 207,574.483 12.93 2,683,938 Non-Qualified XIII 575,554.571 9.07 5,220,280 Non-Qualified XIV 717,707.046 8.92 6,401,947 Non-Qualified XV 201,787.880 8.84 1,783,805 Non-Qualified XVI 408,856.239 4.07 1,664,045 Non-Qualified XVIII 325,522.539 4.01 1,305,345 Non-Qualified XIX 271,656.734 4.03 1,094,777 --------------- -------------- 3,312,525.682 $ 29,114,804 =============== ============== OPPENHEIMER GLOBAL SECURITIES Contracts in accumulation period: Non-Qualified V 139,240.643 $ 15.35 $ 2,137,344 Non-Qualified V (0.75) 485,486.859 15.80 7,670,692 Non-Qualified VII 807,349.163 19.74 15,937,072 Non-Qualified VIII 157,881.003 19.94 3,148,147 Non-Qualified IX 14,098.486 15.14 213,451 Non-Qualified XII 16,957.816 15.85 268,781 Non-Qualified XX 12,869.958 12.73 163,835 --------------- -------------- 1,633,883.928 $ 29,539,322 =============== ============== OPPENHEIMER MAIN STREET(R) Currently payable annuity contracts: $ 6,735,165 Contracts in accumulation period: Non-Qualified VII 1,565,911.299 $ 12.63 19,777,460 Non-Qualified VIII 538,157.238 12.76 6,866,886 Non-Qualified XIII 957,263.407 8.88 8,500,499 Non-Qualified XIV 1,573,160.137 8.74 13,749,420 Non-Qualified XV 492,452.384 8.67 4,269,562 Non-Qualified XVI 281,793.912 7.82 2,203,628 Non-Qualified XVIII 101,349.229 7.70 780,389 Non-Qualified XIX 289,098.107 7.74 2,237,619 --------------- -------------- 5,799,185.713 $ 65,120,628 =============== ==============
123 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- ---------------- OPPENHEIMER STRATEGIC BOND Currently payable annuity contracts: $ 1,933,703 Contracts in accumulation period: Non-Qualified V 38,834.279 $ 13.05 506,787 Non-Qualified V (0.75) 84,949.296 13.42 1,140,020 Non-Qualified VII 857,973.306 14.29 12,260,439 Non-Qualified VIII 178,955.608 14.43 2,582,329 Non-Qualified IX 227.750 12.86 2,929 Non-Qualified XIII 508,541.024 13.15 6,687,314 Non-Qualified XIV 728,495.128 12.93 9,419,442 Non-Qualified XV 224,445.542 12.82 2,877,392 Non-Qualified XVI 238,270.180 12.65 3,014,118 Non-Qualified XVIII 39,218.708 12.46 488,665 Non-Qualified XIX 117,139.231 12.53 1,467,755 Non-Qualified XX 9,740.578 12.23 119,127 --------------- -------------- 3,026,790.630 $ 42,500,020 =============== ============== PIONEER EQUITY INCOME VCT Contracts in accumulation period: Non-Qualified V 21,897.886 $ 9.67 $ 211,753 Non-Qualified V (0.75) 960.668 9.79 9,405 Non-Qualified IX 244.221 9.61 2,347 Non-Qualified XII 474.905 9.78 4,645 Non-Qualified XX 2,132.665 11.55 24,632 --------------- -------------- 25,710.345 $ 252,782 =============== ============== PIONEER FUND VCT Contracts in accumulation period: Non-Qualified V 29.007 $ 9.21 $ 267 Non-Qualified V (0.75) 418.894 9.32 3,904 --------------- -------------- 447.901 $ 4,171 =============== ============== PIONEER MID CAP VALUE VCT Contracts in accumulation period: Non-Qualified V 11,461.519 $ 11.86 $ 135,934 Non-Qualified V (0.75) 49,902.015 12.00 598,824 Non-Qualified IX 317.331 11.79 3,741 Non-Qualified XX 7.594 13.17 100 --------------- -------------- 61,688.459 $ 738,599 =============== ============== PRUDENTIAL JENNISON Contracts in accumulation period: Non-Qualified XIII 23,314.809 $ 7.79 $ 181,622 Non-Qualified XIV 50,522.412 7.73 390,538 Non-Qualified XV 19,308.203 7.70 148,673 Non-Qualified XVI 12,325.729 7.69 94,785 Non-Qualified XVIII 1,355.775 7.59 10,290 Non-Qualified XIX 4,396.056 7.62 33,498 --------------- -------------- 111,222.984 $ 859,406 =============== ==============
124 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
DIVISION/CONTRACT UNITS UNIT VALUE EXTENDED VALUE ------------------------------------------ --------------- -------------- ---------------- PRUDENTIAL SP JENNISON INTERNATIONAL GROWTH Contracts in accumulation period: Non-Qualified XIII 100,680.680 $ 7.94 $ 799,405 Non-Qualified XIV 129,476.203 7.87 1,018,978 Non-Qualified XV 31,363.039 7.84 245,886 Non-Qualified XVI 88,107.095 7.83 689,879 Non-Qualified XVIII 6,705.458 7.74 51,900 Non-Qualified XIX 59,607.597 7.77 463,151 --------------- -------------- 415,940.072 $ 3,269,199 =============== ============== UBS TACTICAL ALLOCATION Contracts in accumulation period: Non-Qualified XIII 184,873.143 $ 8.61 $ 1,591,758 Non-Qualified XIV 921,723.134 8.49 7,825,429 Non-Qualified XV 86,929.063 8.43 732,812 Non-Qualified XVI 88,297.917 7.86 694,022 Non-Qualified XVIII 31,946.491 7.74 247,266 Non-Qualified XIX 79,266.894 7.78 616,696 --------------- -------------- 1,393,036.642 $ 11,707,983 =============== ==============
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 retirement annuity Contracts issued since May 4, 1994. 125 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 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 XII Certain individual retirement annuity contracts issued since March 1999. 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. 126 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 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. 127 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS 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, 2003, 2002 and 2001, along with units outstanding and unit values for the year ended December 31, 2000, follows:
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- AIM V.I. Capital Appreciation 2003 2,018 $5.44 to $9.46 $ 17,500 -% 2002 2,233 $4.28 to $7.37 14,832 - 2001 2,600 $5.77 to $9.84 23,509 7.71 2000 2,085 $7.67 to $12.95 25,987 * AIM V.I. Core Equity 2003 3,366 $6.28 to $11.86 34,908 0.97 2002 3,742 $5.14 to $7.67 29,940 0.30 2001 4,491 $6.21 to $9.17 42,858 0.05 2000 4,034 $8.20 to $12.00 49,823 * AIM V.I. Government Securities 2003 1,239 $11.55 to $12.37 15,026 1.78 2002 2,139 $11.65 to $12.36 25,997 2.67 2001 819 $10.83 to $11.38 9,149 5.55 2000 28 $10.38 to $10.80 295 * AIM V.I. Growth 2003 2,783 $4.30 to $6.62 18,067 - 2002 3,069 $3.34 to $5.09 14,946 - 2001 3,912 $4.93 to $7.44 27,757 0.20 2000 3,321 $7.60 to $11.37 37,257 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- AIM V.I. Capital Appreciation 2003 0.75% to 1.90% 27.10% to 28.59% 2002 0.45% to 1.90% -25.80% to -0.04% 2001 0.45% to 2.25% -24.75% to -23.82% 2000 * * AIM V.I. Core Equity 2003 0.75% to 2.25% 22.18% to 23.44% 2002 0.75% to 2.25% -17.19% to -16.21% 2001 0.45% to 2.25% -24.31% to -16.23% 2000 * * AIM V.I. Government Securities 2003 0.95% to 1.90% -0.86% to 0.08% 2002 0.95% to 1.90% 0.07% to 8.01% 2001 0.50% to 1.90% 4.38% to 5.40% 2000 * * AIM V.I. Growth 2003 0.75% to 1.90% 28.74% to 30.23% 2002 0.75% to 1.90% -32.29% to -31.49% 2001 0.45% to 2.25% -35.18% to -34.38% 2000 * *
128 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- AIM V.I. Premier Equity 2003 5,018 $6.33 to $8.56 $ 42,830 0.28% 2002 5,969 $5.16 to $6.91 41,327 0.29 2001 7,410 $7.54 to $10.00 74,008 2.16 2000 6,222 $8.79 to $11.55 73,350 * Alger American Balanced 2003 94 $25.11 2,367 2.17 2002 120 $21.40 2,576 1.69 2001 152 $24.74 3,765 3.07 2000 191 $25.59 4,888 * Alger American Income & Growth 2003 292 $22.17 6,470 0.32 2002 356 $17.31 6,167 0.64 2001 443 $25.49 11,279 6.98 2000 550 $30.17 16,586 * Alger American Leveraged AllCap 2003 277 $17.13 to $23.23 6,443 - 2002 327 $12.87 to $17.49 5,724 0.01 2001 388 $19.73 to $26.84 10,424 3.28 2000 481 $23.77 to $32.38 15,563 * AllianceBernstein VPSF Growth and Income 2003 3,443 $10.03 to $10.30 34,971 0.90 2002 2,855 $7.68 to $7.89 22,169 0.80 2001 2,791 $9.99 to $10.27 28,177 4.75 2000 88 $10.10 to $10.39 898 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- AIM V.I. Premier Equity 2003 0.75% to 1.90% 22.67% to 24.23% 2002 0.45% to 1.90% -31.59% to -30.57% 2001 0.45% to 2.25% -14.24% to -9.62% 2000 * * Alger American Balanced 2003 1.40% 17.34% 2002 1.40% -13.52% 2001 0.85% to 1.40% -3.31% 2000 * * Alger American Income & Growth 2003 1.40% 28.08% 2002 1.40% -32.07% 2001 0.85% to 1.40% -15.53% 2000 * * Alger American Leveraged AllCap 2003 1.25% to 1.40% 32.82% to 33.10% 2002 1.25% to 1.40% -34.84% to -34.74% 2001 0.85% to 1.40% -17.11% to -16.99% 2000 * * AllianceBernstein VPSF Growth and Income 2003 0.95% to 1.90% 29.96% to 31.27% 2002 0.95% to 1.90% -23.53% to -22.79% 2001 0.50% to 1.90% -1.56% to -0.60% 2000 * *
129 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- AllianceBernstein VPSF Premier Growth 2003 1,368 $5.17 to $5.57 $ 7,314 -% 2002 1,333 $4.24 to $4.57 5,838 - 2001 1,331 $6.20 to $6.69 8,532 6.31 2000 341 $7.60 to $8.20 2,687 * AllianceBernstein VPSF Quasar 2003 500 $7.18 to $8.19 3,918 - 2002 128 $4.91 to $5.55 684 - 2001 116 $7.34 to $8.22 910 3.62 2000 9 $8.58 to $9.51 82 * American Century(R) VP Balanced 2003 78 $18.19 1,420 2.75 2002 96 $15.44 1,483 2.84 2001 118 $17.32 2,043 6.22 2000 147 $18.21 2,684 * American Century(R) VP International 2003 93 $13.13 to $14.41 1,346 0.75 2002 131 $10.68 to $11.74 1,539 0.83 2001 185 $13.59 to $14.95 2,759 10.20 2000 229 $19.43 to $21.41 4,905 * Calvert Social Balanced 2003 178 $11.30 to $21.15 2,228 1.98 2002 167 $9.61 to $17.86 1,775 2.79 2001 158 $11.09 to $20.48 1,959 4.91 2000 175 $12.09 to $22.18 2,514 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- AllianceBernstein VPSF Premier Growth 2003 0.95% to 1.90% 21.46% to 22.61% 2002 0.95% to 1.90% -31.96% to -31.30% 2001 0.50% to 1.90% -18.80% to -17.99% 2000 * * AllianceBernstein VPSF Quasar 2003 0.95% to 1.90% 46.23% to 47.57% 2002 0.95% to 1.90% -33.07% to -32.42% 2001 0.50% to 1.90% -14.43% to -13.59% 2000 * * American Century(R) VP Balanced 2003 1.40% 17.81% 2002 1.40% -10.82% 2001 0.85% to 1.40% -4.90% 2000 * * American Century(R) VP International 2003 1.25% to 1.40% 22.74% to 22.94% 2002 1.25% to 1.40% -21.49% to -21.37% 2001 0.85% to 1.40% -30.17% to -30.06% 2000 * * Calvert Social Balanced 2003 0.75% to 1.40% 17.59% to 18.42% 2002 0.75% to 1.40% -13.38% to -12.81% 2001 0.45% to 1.50% -8.25% to -7.64% 2000 * *
130 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- Federated American Leaders 2003 2,211 $16.88 to $23.37 $ 51,717 1.51% 2002 2,720 $13.39 to $18.56 50,539 1.17 2001 3,522 $16.99 to $23.59 83,193 2.06 2000 4,105 $17.97 to $24.98 102,586 * Federated Capital Income 2003 505 $10.65 to $12.75 6,460 6.55 2002 653 $8.94 to $10.72 7,021 5.71 2001 923 $11.90 to $14.29 13,230 3.57 2000 1,149 $13.97 to $16.80 19,351 * Federated Equity Income 2003 884 $12.34 11,005 1.89 2002 1,035 $9.83 10,264 2.11 2001 1,384 $12.58 17,476 1.97 2000 1,690 $14.33 24,264 * Federated Fund for U.S. Government Securities 2003 635 $15.49 9,833 3.85 2002 826 $15.35 12,674 3.65 2001 820 $14.28 11,702 3.90 2000 823 $13.53 11,133 * Federated Growth Strategies 2003 627 $18.83 11,813 - 2002 764 $13.63 10,415 - 2001 1,117 $18.77 20,974 1.68 2000 1,378 $24.53 33,809 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- Federated American Leaders 2003 1.25% to 1.40% 25.92% to 26.06% 2002 1.25% to 1.40% -21.33% to -21.21% 2001 0.85% to 1.40% -5.56% to -5.42% 2000 * * Federated Capital Income 2003 1.25% to 1.40% 18.94% to 19.13% 2002 1.25% to 1.40% -25.01% to -24.90% 2001 0.85% to 1.40% -14.94% to -14.81% 2000 * * Federated Equity Income 2003 1.25% to 1.40% 25.53% 2002 1.25% to 1.40% -21.85% 2001 0.75% to 1.40% -12.24% 2000 * * Federated Fund for U.S. Government Securities 2003 1.25% to 1.40% 0.91% 2002 1.40% 7.52% 2001 0.85% to 1.40% 5.53% 2000 * * Federated Growth Strategies 2003 1.40% 38.15% 2002 1.40% -27.38% 2001 0.85% to 1.40% -23.48% 2000 * *
131 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- Federated High Income Bond 2003 970 $13.87 to $16.25 $ 15,774 7.68% 2002 1,236 $11.49 to $13.48 16,683 10.52 2001 1,548 $11.48 to $13.49 20,899 11.00 2000 1,959 $11.46 to $13.49 26,446 * Federated International Equity 2003 462 $13.06 to $14.11 6,565 - 2002 551 $10.03 to $10.85 6,024 - 2001 767 $13.15 to $14.25 10,976 12.94 2000 978 $18.87 to $20.48 20,057 * Federated Prime Money 2003 392 $12.59 4,930 0.71 2002 583 $12.68 7,387 1.37 2001 695 $12.68 8,812 3.44 2000 702 $12.40 8,703 * Fidelity(R) VIP ASSET MANAGER(SM) 2003 681 $15.30 to $18.27 12,034 3.51 2002 728 $13.13 to $15.71 11,086 4.06 2001 831 $14.57 to $17.45 14,094 6.08 2000 993 $15.39 to $18.46 17,821 * Fidelity(R) VIP Contrafund(R) 2003 11,483 $9.10 to $24.17 188,055 0.43 2002 10,912 $7.22 to $19.81 145,571 0.86 2001 11,618 $8.12 to $21.96 173,999 3.56 2000 12,102 $9.43 to $24.67 216,963 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- Federated High Income Bond 2003 1.25% to 1.40% 20.55% to 20.71% 2002 1.25% to 1.40% -0.03% to 0.12% 2001 0.85% to 1.40% -0.04% to 0.10% 2000 * * Federated International Equity 2003 1.25% to 1.40% 30.05% to 30.21% 2002 1.25% to 1.40% -23.84% to -23.73% 2001 0.85% to 1.40% -30.42% to -30.31% 2000 * * Federated Prime Money 2003 1.40% -0.71% 2002 1.40% 0% 2001 0.85% to 1.40% 2.28% 2000 * * Fidelity(R) VIP ASSET MANAGER(SM) 2003 1.25% to 1.40% 16.30% to 16.53% 2002 1.25% to 1.40% -10.01% to -9.87% 2001 0.85% to 1.40% -5.44% to -5.30% 2000 * * Fidelity(R) VIP Contrafund(R) 2003 0.75% to 1.90% -29.37% to 27.50% 2002 0.45% to 1.90% -11.07% to 78.65% 2001 0.45% to 1.90% -13.93% to -3.25% 2000 * *
132 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- Fidelity(R) VIP Equity-Income 2003 12,003 $10.33 to $23.07 $ 192,149 1.64% 2002 11,480 $8.08 to $17.95 146,420 1.78 2001 12,170 $9.92 to $21.92 193,019 6.26 2000 10,395 $10.64 to $23.40 188,025 * Fidelity(R) VIP Growth 2003 9,688 $6.17 to $22.97 125,864 0.26 2002 9,473 $4.73 to $17.54 98,180 0.26 2001 10,633 $6.90 to 25.45 167,319 7.26 2000 9,467 $8.54 to $31.34 209,610 * Fidelity(R) VIP High Income 2003 5,612 $8.11 to $11.96 56,970 6.32 2002 4,489 $6.46 to $9.53 36,456 10.78 2001 4,973 $6.34 to $9.34 39,385 13.71 2000 4,980 $7.28 to $10.74 45,512 * Fidelity(R) VIP Index 500 2003 3,762 $17.05 to $20.31 74,266 1.44 2002 4,125 $13.44 to $16.04 64,190 1.38 2001 4,961 $17.51 to $20.93 100,783 1.20 2000 5,672 $20.17 to $24.15 133,049 * Fidelity(R) VIP Investment Grade Bond 2003 140 $15.76 to $16.07 2,244 4.39 2002 187 $15.17 to $15.49 2,890 4.05 2001 217 $13.92 to $14.24 3,084 5.86 2000 278 $13.00 to $13.32 3,700 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- Fidelity(R) VIP Equity-Income 2003 0.75% to 1.90% 27.85% to 29.33% 2002 0.75% to 1.90% -18.53% to -17.57% 2001 0.45% to 1.90% -6.77% to -5.67% 2000 * * Fidelity(R) VIP Growth 2003 0.75% to 1.90% 30.44% to 31.85% 2002 0.45% to 1.90% -31.44% to -30.42% 2001 0.45% to 1.90% -19.23% to -18.23% 2000 * * Fidelity(R) VIP High Income 2003 0.95% to 2.25% 24.90% to 26.10% 2002 0.95% to 2.25% 1.48% to 2.46% 2001 0.50% to 2.25% -13.42% to -12.58% 2000 * * Fidelity(R) VIP Index 500 2003 1.25% to 1.40% 26.62% to 26.86% 2002 1.25% to 1.40% -23.34% to -23.22% 2001 0.85% to 1.40% -13.34% to -13.21% 2000 * * Fidelity(R) VIP Investment Grade Bond 2003 1.25% to 1.40% 3.74% to 3.89% 2002 1.25% to 1.40% 8.80% to 8.96% 2001 0.85% to 1.40% 6.94% to 7.10% 2000 * *
133 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- Fidelity(R) VIP Overseas 2003 979 $9.75 to $14.74 $ 13,904 0.58% 2002 654 $6.85 to $10.42 6,617 0.85 2001 770 $8.67 to $13.26 9,914 13.97 2000 872 $11.08 to $17.06 14,451 * Franklin Small Cap Value Securities 2003 55 $12.02 to $12.18 662 0.19 2002 39 $9.22 to $9.29 365 *** 2001 *** *** *** *** 2000 *** *** *** *** ING GET Fund - Series D 2003 8,494 $10.03 to $10.43 86,431 4.13 2002 10,202 $10.04 to $10.37 103,698 4.34 2001 11,705 $10.15 to $10.40 119,943 1.44 2000 12,726 $10.13 to $10.29 129,776 * ING GET Fund - Series E 2003 23,038 $10.27 to $10.70 238,886 4.20 2002 26,953 $10.18 to $10.51 276,397 4.02 2001 29,973 $9.97 to $10.20 300,383 0.78 2000 33,010 $10.08 to $10.22 333,833 * ING GET Fund - Series G 2003 13,524 $10.14 to $10.54 138,281 4.05 2002 16,105 $10.11 to $10.41 163,877 3.84 2001 17,381 $9.82 to $10.02 171,369 0.38 2000 18,850 $9.87 to $9.98 186,445 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- Fidelity(R) VIP Overseas 2003 0.75% to 1.50% 41.30% to 42.34% 2002 0.75% to 1.50% -21.47% to -20.88% 2001 0.45% to 1.50% -22.35% to -21.76% 2000 * * Franklin Small Cap Value Securities 2003 0.75% to 1.25% 30.59% to 31.11% 2002 0.75% to 1.25% -21.04% to -19.73% 2001 *** *** 2000 *** *** ING GET Fund - Series D 2003 1.00% to 1.75% -0.10% to 0.58% 2002 1.00% to 1.75% -1.09% to -0.34% 2001 0.70% to 2.15% 0.22% to 0.98% 2000 * * ING GET Fund - Series E 2003 1.00% to 1.90% 0.88% to 1.81% 2002 1.00% to 1.90% 2.11% to 3.05% 2001 1.00% to 2.40% -1.12% to -0.21% 2000 * * ING GET Fund - Series G 2003 1.00% to 1.90% 0.30% to 1.25% 2002 1.00% to 1.90% 2.97% to 3.92% 2001 1.00% to 2.40% -0.52% to 0.40% 2000 * *
134 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING GET Fund - Series H 2003 10,102 $10.30 to $10.69 $ 105,009 4.11% 2002 11,865 $10.18 to $10.46 121,603 3.59 2001 13,233 $9.91 to $10.01 131,686 0.47 2000 14,101 $10.03 to $10.12 141,764 * ING GET Fund - Series I 2003 7,257 $10.22 to $10.40 74,750 3.44 2002 8,275 $10.10 to $10.23 84,079 3.54 2001 8,909 $9.78 to $9.86 87,402 0.25 2000 9,419 $9.85 to $9.89 92,929 * ING GET Fund - Series J 2003 5,895 $10.12 to $10.29 60,090 3.65 2002 7,113 $10.05 to $10.17 71,844 3.49 2001 7,719 $9.66 to $9.73 74,801 0.18 2000 8,207 $9.72 to $9.75 79,872 * ING GET Fund - Series K 2003 6,945 $9.98 to $10.33 70,505 3.20 2002 8,037 $9.99 to $10.24 81,260 2.68 2001 9,082 $9.68 to $9.82 88,558 - 2000 9,357 $10.00 to $10.05 93,790 * ING GET Fund - Series L 2003 6,598 $9.99 to $10.29 66,868 3.48 2002 7,535 $9.89 to $10.09 75,255 0.05 2001 8,101 $9.87 to $9.97 80,345 4.63 2000 58 $10.01 to $10.02 585 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING GET Fund - Series H 2003 1.00% to 1.90% 1.18% to 2.20% 2002 1.00% to 1.90% 2.78% to 3.72% 2001 1.00% to 2.40% -1.24% to -0.33% 2000 * * ING GET Fund - Series I 2003 1.45% to 1.90% 1.19% to 1.66% 2002 1.45% to 1.90% 3.35% to 3.82% 2001 1.35% to 2.40% -0.76% to -0.30% 2000 * * ING GET Fund - Series J 2003 1.45% to 1.90% 0.70% to 1.18% 2002 1.45% to 1.90% 4.05% to 4.53% 2001 1.35% to 2.40% -0.63% to -0.16% 2000 * * ING GET Fund - Series K 2003 1.45% to 2.40% -0.10% to 0.88% 2002 1.45% to 2.40% 3.20% to 4.20% 2001 1.35% to 2.40% -3.19% to -2.24% 2000 * * ING GET Fund - Series L 2003 1.45% to 2.40% 1.01% to 1.98% 2002 1.45% to 2.40% 0.22% to 1.20% 2001 1.35% to 2.40% -1.53% to -0.46% 2000 * *
135 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING GET Fund - Series M 2003 9,320 $10.04 to $10.32 $ 94,718 3.54% 2002 11,558 $9.91 to $10.08 115,381 0.03 2001 12,531 $9.80 to $9.87 123,165 ** 2000 ** ** ** ** ING GET Fund - Series N 2003 7,482 $10.15 to $10.40 76,785 2.65 2002 8,982 $9.97 to $10.12 90,143 0.02 2001 10,181 $10.25 to $10.31 104,606 ** 2000 ** ** ** ** ING GET Fund - Series P 2003 5,731 $10.03 to $10.25 58,003 2.56 2002 7,680 $9.89 to $10.01 76,334 0.04 2001 8,288 $10.00 to $10.03 83,012 ** 2000 ** ** ** ** ING GET Fund - Series Q 2003 4,282 $10.26 to $10.47 44,336 - 2002 5,460 $10.00 to $10.10 54,826 3.81 2001 162 $10.00 1,620 ** 2000 ** ** ** ** ING GET Fund - Series R 2003 3,634 $10.42 to $10.60 38,175 0.01 2002 4,312 $10.06 to $10.14 43,556 *** 2001 *** *** *** *** 2000 *** *** *** *** EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING GET Fund - Series M 2003 1.45% to 2.40% 1.31% to 2.38% 2002 1.45% to 2.40% 1.12% to 2.10% 2001 1.45% to 2.40% ** 2000 ** ** ING GET Fund - Series N 2003 1.45% to 2.40% 1.81% to 2.77% 2002 1.45% to 2.40% -2.77% to -1.82% 2001 ** ** 2000 ** ** ING GET Fund - Series P 2003 1.45% to 2.40% 1.42% to 2.40% 2002 1.45% to 2.40% -1.16% to -0.20% 2001 ** ** 2000 ** ** ING GET Fund - Series Q 2003 1.45% to 2.40% 2.60% to 3.66% 2002 1.45% to 2.40% 0.00% to 0.97% 2001 ** ** 2000 ** ** ING GET Fund - Series R 2003 1.45% to 2.40% 3.58% to 4.54% 2002 1.45% to 2.40% 0.65% to 1.42% 2001 *** *** 2000 *** ***
136 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING GET Fund - Series S 2003 4,236 $10.35 to $10.57 $ 44,140 0.10% 2002 5,334 $10.01 to $10.08 53,553 *** 2001 *** *** *** *** 2000 *** *** *** *** ING GET Fund - Series T 2003 3,062 $10.40 to $10.53 32,020 0.14 2002 3,908 $10.06 to $10.09 39,378 *** 2001 *** *** *** *** 2000 *** *** *** *** ING GET Fund - Series U 2003 2,854 $10.49 to $10.60 30,078 - 2002 50 $9.99 to $10.00 503 *** 2001 *** *** *** *** 2000 *** *** *** *** ING GET Fund - Series V 2003 7,680 $9.69 to $9.77 74,677 **** 2002 **** **** **** **** 2001 **** **** **** **** 2000 **** **** **** **** ING VP Balanced 2003 6,962 $9.18 to $24.72 172,818 1.94 2002 7,046 $7.87 to $26.80 148,868 1.07 2001 8,277 $8.94 to $30.01 189,948 5.84 2000 8,309 $9.52 to $24.76 199,768 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING GET Fund - Series S 2003 1.00% to 2.40% 3.40% to 4.86% 2002 1.00% to 2.40% 0.14% to 0.87% 2001 *** *** 2000 *** *** ING GET Fund - Series T 2003 1.45% to 2.40% 3.38% to 4.36% 2002 1.45% to 2.40% 0.88% to 0.93% 2001 *** *** 2000 *** *** ING GET Fund - Series U 2003 1.45% to 2.40% 5.21% to 6.00% 2002 0.95% to 1.75% -0.05% to 0.00% 2001 *** *** 2000 *** *** ING GET Fund - Series V 2003 1.45% to 2.40% **** 2002 **** **** 2001 **** **** 2000 **** **** ING VP Balanced 2003 0.75% to 2.25% 16.65% to 18.00% 2002 0.45% to 2.25% -12.01% to -10.71% 2001 0.45% to 2.25% -6.04% to 0.46% 2000 * *
137 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING VP Bond 2003 8,243 $10.94 to $19.00 $ 143,435 1.80% 2002 9,939 $11.86 to $18.01 164,563 3.25 2001 9,525 $11.16 to $16.75 144,459 6.51 2000 6,869 $10.46 to $15.52 99,490 * ING VP Emerging Markets 2003 88 $9.18 809 - 2002 103 $6.32 649 - 2001 129 $7.08 912 19.78 2000 157 $8.01 1,255 * ING VP Money Market 2003 13,149 $10.02 to $14.46 173,894 1.89 2002 19,939 $10.30 to $14.44 262,556 3.85 2001 22,423 $10.33 to $48.45 293,027 4.69 2000 16,310 $10.13 to $13.88 211,809 * ING VP Natural Resources 2003 116 $14.78 to $15.64 1,732 - 2002 135 $11.48 to $12.07 1,567 0.19 2001 166 $11.90 to $12.42 2,003 - 2000 193 $14.35 to $14.87 2,801 * ING VP Strategic Allocation Balanced 2003 948 $14.19 to $16.41 16,937 1.41 2002 977 $12.03 to $13.84 14,344 2.50 2001 1,082 $13.47 to $15.41 17,390 2.50 2000 1,232 $14.66 to $16.69 21,090 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING VP Bond 2003 0.75% to 2.25% 4.22% to 5.51% 2002 0.75% to 2.25% 6.28% to 7.53% 2001 0.45% to 2.25% 6.67% to 7.93% 2000 * * ING VP Emerging Markets 2003 1.40% 45.25% 2002 1.40% -10.60% 2001 0.85% to 1.40% -11.68% 2000 * * ING VP Money Market 2003 0.75% to 2.25% -1.07% to 0.14% 2002 0.75% to 2.25% -0.31% to 0.86% 2001 0.45% to 2.25% 1.33% to 3.16% 2000 * * ING VP Natural Resources 2003 0.75% to 1.50% 28.52% to 29.58% 2002 0.75% to 1.50% -3.56% to -2.83% 2001 0.45% to 1.50% -17.19% to -16.57% 2000 * * ING VP Strategic Allocation Balanced 2003 0.75% to 2.25% 17.79% to 18.57% 2002 0.45% to 1.40% -10.81% to -9.94% 2001 0.45% to 2.25% -8.30% to -7.65% 2000 * *
138 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING VP Strategic Allocation Growth 2003 813 $14.18 to $16.69 $ 14,808 0.87% 2002 835 $11.55 to $13.52 11,257 1.75 2001 898 $13.56 to $15.80 13,876 1.59 2000 1,013 $15.52 to $18.00 17,520 * ING VP Strategic Allocation Income 2003 1,031 $14.58 to $16.37 19,422 2.31 2002 1,237 $12.99 to $14.51 20,088 3.32 2001 1,380 $10.79 to $15.29 23,347 4.36 2000 1,518 $11.13 to $15.77 26,191 * ING MFS Total Return 2003 35 $11.29 to $11.33 401 **** 2002 **** **** **** **** 2001 **** **** **** **** 2000 **** **** **** **** ING T. Rowe Price Equity Income 2003 58 $12.17 to $12.22 704 **** 2002 **** **** **** **** 2001 **** **** **** **** 2000 **** **** **** **** ING Alger Aggressive Growth 2003 96 $10.20 to $13.05 1,017 - 2002 24 $7.31 to $7.34 179 *** 2001 *** *** *** *** 2000 *** *** *** *** EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING VP Strategic Allocation Growth 2003 0.75% to 2.25% 22.52% to 23.45% 2002 0.75% to 2.25% -15.04% to -14.40% 2001 0.45% to 2.25% -12.87% to -12.21% 2000 * * ING VP Strategic Allocation Income 2003 0.75% to 1.40% 12.05% to 12.82% 2002 0.75% to 1.40% -5.69% to -0.78% 2001 0.45% to 2.25% -3.75% to -3.11% 2000 * * ING MFS Total Return 2003 0.75% to 1.25% **** 2002 **** **** 2001 **** **** 2000 **** **** ING T. Rowe Price Equity Income 2003 0.75% to 1.25% **** 2002 **** **** 2001 **** **** 2000 **** **** ING Alger Aggressive Growth 2003 0.75% to 1.50% 42.82% to 43.46% 2002 0.75% to 1.25% -8.53% to -0.37% 2001 *** *** 2000 *** ***
139 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING Alger Growth 2003 39 $9.60 to $9.68 $ 380 -% 2002 1 $7.24 to $7.26 9 *** 2001 *** *** *** *** 2000 *** *** *** *** ING American Century Small Cap Value 2003 50 $10.81 to $12.48 561 0.16 2002 20 $8.11 to $9.30 173 *** 2001 *** *** *** *** 2000 *** *** *** *** ING Baron Small Cap Growth 2003 119 $11.40 to $12.79 1,381 - 2002 21 $8.72 to $9.68 193 *** 2001 *** *** *** *** 2000 *** *** *** *** ING DSI Enhanced Index 2003 1 $10.20 6 **** 2002 **** **** **** **** 2001 **** **** **** **** 2000 **** **** **** **** ING Goldman Sachs(R) Capital Growth 2003 2 $9.82 to $11.70 25 - 2002 2 $8.07 18 *** 2001 *** *** *** *** 2000 *** *** *** *** EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING Alger Growth 2003 0.75% to 1.25% 32.60% to 33.33% 2002 0.75% to 1.25% -23.21% to -6.63% 2001 *** *** 2000 *** *** ING American Century Small Cap Value 2003 0.75% to 1.25% 16.24% to 34.53% 2002 0.75% to 1.25% -19.84% to -1.82% 2001 *** *** 2000 *** *** ING Baron Small Cap Growth 2003 0.75% to 1.50% 18.29% to 32.34% 2002 0.75% to 1.25% -12.61% to -1.83% 2001 *** *** 2000 *** *** ING DSI Enhanced Index 2003 0.75% **** 2002 **** **** 2001 **** **** 2000 **** **** ING Goldman Sachs(R) Capital Growth 2003 0.75% to 1.25% 22.68% 2002 0.75% to 0.80% -3.04% to -0.05% 2001 *** *** 2000 *** ***
140 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING JPMorgan Fleming International 2003 3,196 $7.14 to $20.30 $ 34,019 1.05% 2002 2,909 $5.62 to $15.80 24,044 0.62 2001 2,892 $7.00 to $19.44 30,449 25.04 2000 2,451 $9.76 to $26.80 38,280 * ING JPMorgan Mid Cap Value 2003 55 $11.73 to $13.32 678 0.48 2002 9 $9.17 to $9.20 87 *** 2001 *** *** *** *** 2000 *** *** *** *** ING MFS Capital Opportunities 2003 3,394 $5.58 to $24.64 39,287 0.20 2002 3,869 $4.44 to $20.94 35,741 - 2001 4,710 $6.49 to $30.11 62,832 19.25 2000 4,048 $8.79 to $40.30 78,233 * ING MFS Global Growth 2003 - $10.83 to $10.92 5 - 2002 - $8.32 to $8.35 1 *** 2001 *** *** *** *** 2000 *** *** *** *** ING MFS Research Equity 2003 3,988 $6.11 to $13.31 42,940 0.57 2002 4,627 $4.98 to $10.73 40,669 0.20 2001 5,830 $6.77 to $14.39 69,394 20.49 2000 6,216 $8.71 to $18.33 97,910 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING JPMorgan Fleming International 2003 0.75% to 1.90% 27.05% to 28.48% 2002 0.75% to 1.90% -19.64% to -18.69% 2001 0.45% to 2.25% -28.33% to -27.48% 2000 * * ING JPMorgan Mid Cap Value 2003 0.75% to 1.50% 28.46% to 29.02% 2002 0.75% to 1.25% -8.51% to 0.47% 2001 *** *** 2000 *** *** ING MFS Capital Opportunities 2003 0.75% to 1.90% 25.68% to 27.14% 2002 0.45% to 1.90% -31.49% to -30.48% 2001 0.45% to 2.25% -26.19% to -25.29% 2000 * * ING MFS Global Growth 2003 0.75% to 1.25% 30.17% to 30.78% 2002 0.75% to 1.25% -10.41% to -0.17% 2001 *** *** 2000 *** *** ING MFS Research Equity 2003 0.75% to 1.90% 22.69% to 24.04% 2002 0.75% to 1.90% -26.32% to -25.45% 2001 0.45% to 1.90% -22.40% to -21.48% 2000 * *
141 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING OpCap Balanced Value 2003 116 $10.24 to $12.69 $ 1,250 1.66% 2002 2 $8.34 to $8.37 15 *** 2001 *** *** *** *** 2000 *** *** *** *** ING PIMCO Total Return 2003 237 $10.82 to $11.10 2,613 3.68 2002 119 $10.70 to $10.75 1,275 *** 2001 *** *** *** *** 2000 *** *** *** *** ING Salomon Brothers Aggressive Growth 2003 5,581 $4.80 to $13.68 58,639 - 2002 6,053 $3.54 to $9.97 47,008 - 2001 7,478 $5.58 to $15.53 91,535 6.31 2000 8,010 $7.60 to $20.93 136,685 * ING Salomon Brothers Fundamental Value 2003 113 $10.34 to $12.80 1,215 0.75 2002 1 7.69 5 *** 2001 *** *** *** *** 2000 *** *** *** *** ING Salomon Brothers Investors Value 2003 17 $10.14 to $12.14 179 0.65 2002 2 7.82 14 *** 2001 *** *** *** *** 2000 *** *** *** *** EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING OpCap Balanced Value 2003 0.75% to 1.50% 28.66% 2002 0.80% to 1.25% -0.14% to 5.35% 2001 *** *** 2000 *** *** ING PIMCO Total Return 2003 0.75% to 1.50% 0.93% to 3.26% 2002 0.75% to 1.50% 3.07% to 7.55% 2001 *** *** 2000 *** *** ING Salomon Brothers Aggressive Growth 2003 0.75% to 1.90% 35.59% to 37.25% 2002 0.45% to 1.90% -36.54% to -35.60% 2001 0.45% to 2.25% -26.64% to -25.74% 2000 * * ING Salomon Brothers Fundamental Value 2003 0.75% to 1.50% 39.53% 2002 0.75% 0.67% 2001 *** *** 2000 *** *** ING Salomon Brothers Investors Value 2003 0.75% to 1.25% 29.67% 2002 1.25% -21.97% 2001 *** *** 2000 *** ***
142 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING T. Rowe Price Growth Equity 2003 3,123 $11.57 to $23.71 $ 74,887 0.15% 2002 3,205 $8.90 to $18.37 58,443 0.19 2001 3,768 $11.70 to $24.29 89,395 15.41 2000 4,250 $13.14 to $27.44 113,230 * ING UBS Tactical Asset Allocation 2003 5 $9.51 to $10.14 53 0.01 2002 - 8.01 428 *** 2001 *** *** *** *** 2000 *** *** *** *** ING Van Kampen Comstock 2003 83 $10.64 to $12.38 899 0.77 2002 38 $8.31 to $8.34 319 *** 2001 *** *** *** *** 2000 *** *** *** *** ING VP Growth and Income 2003 20,842 $6.53 to $202.58 455,361 - 2002 24,165 $5.28 to $162.71 415,966 0.84 2001 29,079 $7.17 to $219.66 663,646 0.60 2000 32,914 $8.96 to $272.61 928,210 * ING GET U.S. Core Portfolio - Series 1 2003 2,531 $10.22 to $10.28 25,945 **** 2002 **** **** **** **** 2001 **** **** **** **** 2000 **** **** **** **** EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING T. Rowe Price Growth Equity 2003 0.75% to 1.50% 28.96% to 30.00% 2002 0.45% to 1.50% -24.44% to -23.64% 2001 0.45% to 2.25% -11.56% to -10.85% 2000 * * ING UBS Tactical Asset Allocation 2003 0.75% to 1.50% 25.47% 2002 1.25% 0.33% 2001 *** *** 2000 *** *** ING Van Kampen Comstock 2003 0.75% to 1.25% 28.04% to 28.69% 2002 0.75% to 1.25% -18.72% to -2.95% 2001 *** *** 2000 *** *** ING VP Growth and Income 2003 0.75% to 2.25% -24.93% to 25.16% 2002 0.45% to 1.90% -26.42% to 60.86% 2001 0.45% to 2.25% -19.96% to -18.98% 2000 * * ING GET U.S. Core Portfolio - Series 1 2003 1.45% to 2.40% **** 2002 **** **** 2001 **** **** 2000 **** ****
143 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING GET U.S. Core Portfolio - Series 2 2003 2,442 $10.02 to $10.05 $ 24,501 ****% 2002 **** **** **** **** 2001 **** **** **** **** 2000 **** **** **** **** ING GET U.S. Core Portfolio - Series 3 2003 196 $10.00 1,965 **** 2002 **** **** **** **** 2001 **** **** **** **** 2000 **** **** **** **** ING VP Growth 2003 2,874 $5.11 to $13.97 32,091 - 2002 3,203 $4.00 to $10.80 28,286 - 2001 4,148 $5.73 to $15.31 52,088 12.13 2000 4,705 $8.02 to $21.15 85,002 * ING VP Index Plus LargeCap 2003 12,166 $7.26 to $17.61 186,926 1.03 2002 13,185 $5.86 to $14.07 154,417 0.24 2001 15,160 $7.62 to $18.06 224,762 4.07 2000 14,826 $8.99 to $21.06 261,795 * ING VP Index Plus MidCap 2003 901 $12.63 to $17.49 15,032 0.44 2002 925 $12.33 to $13.31 11,779 0.50 2001 631 $14.24 to $15.26 9,214 6.54 2000 452 $14.50 to $15.59 6,733 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING GET U.S. Core Portfolio - Series 2 2003 1.45% to 2.40% **** 2002 **** **** 2001 **** **** 2000 **** **** ING GET U.S. Core Portfolio - Series 3 2003 0.95% to 1.75% **** 2002 **** **** 2001 **** **** 2000 **** **** ING VP Growth 2003 0.75% to 1.90% 27.75% to 29.46% 2002 0.75% to 1.90% -30.30% to -29.47% 2001 0.45% to 2.25% -28.45% to -27.61% 2000 * * ING VP Index Plus LargeCap 2003 0.75% to 2.25% 23.89% to 25.16% 2002 0.45% to 2.25% -23.02% to -21.88 2001 0.45% to 2.25% -15.27% to -5.62% 2000 * * ING VP Index Plus MidCap 2003 0.75% to 1.50% 30.49% to 31.40% 2002 0.45% to 1.50% -13.40% to -12.49% 2001 0.45% to 1.50% -2.80% to 12.09% 2000 * *
144 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING VP Index Plus SmallCap 2003 538 $12.02 to $13.49 $ 6,712 0.16% 2002 464 $8.96 to $9.99 4,275 0.19 2001 225 $10.48 to $11.60 2,411 3.71 2000 104 $10.39 to $11.42 1,098 * ING VP International Equity 2003 993 $6.07 to $8.39 8,924 0.89 2002 836 $4.69 to $6.40 5,228 0.22 2001 954 $6.51 to $8.79 7,991 0.12 2000 863 $8.73 to $11.64 9,708 * ING VP Small Company 2003 4,826 $9.56 to $20.30 80,458 0.24 2002 4,213 $7.09 to $14.88 52,158 0.52 2001 3,814 $9.41 to $19.53 62,576 3.89 2000 2,815 $9.22 to $18.92 47,270 * ING VP Technology 2003 3,595 $3.66 to $12.23 13,372 - 2002 2,536 $2.55 to $2.67 6,564 - 2001 2,631 $4.42 to $4.62 11,745 - 2000 1,680 $5.82 to $6.09 9,833 * ING VP Value Opportunity 2003 1,131 $11.21 to $17.11 18,645 0.76 2002 1,272 $9.36 to $13.84 17,001 0.44 2001 1,441 $12.75 to $18.83 26,362 5.21 2000 963 $14.22 to $20.99 19,710 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING VP Index Plus SmallCap 2003 0.75% to 1.50% 34.15% to 35.13% 2002 0.75% to 1.50% -14.50% to -13.86% 2001 0.45% to 1.50% 0.87% to 1.64% 2000 * * ING VP International Equity 2003 0.75% to 1.90% 29.42% to 31.09% 2002 0.75% to 1.90% -28.07% to -27.23% 2001 0.45% to 2.25% -25.34% to -24.45% 2000 * * ING VP Small Company 2003 0.75% to 1.90% 34.84% to 36.42% 2002 0.45% to 1.90% -24.69% to -23.57% 2001 0.45% to 2.25% 0.50% to 3.22% 2000 * * ING VP Technology 2003 0.75% to 1.90% 42.64% to 44.62% 2002 0.75% to 1.90% -42.40% to -41.72% 2001 0.45% to 1.90% -24.42 to -23.54% 2000 * * ING VP Value Opportunity 2003 0.75% to 1.50% 22.79% to 23.63% 2002 0.45% to 1.50% -27.07% to -26.30% 2001 0.45% to 1.50% -10.97% to 0.58% 2000 * *
145 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING VP Growth Opportunities - Class R 2003 6 $7.91 to $11.74 $ 49 -% 2002 64 $6.02 384 *** 2001 *** *** *** *** 2000 *** *** *** *** ING VP Growth Opportunities - Class S 2003 120 $6.94 to $7.12 853 - 2002 23 $5.34 to $5.43 125 - 2001 18 $7.95 to $8.00 141 ** 2000 ** ** ** ** ING VP International Value 2003 115 $10.17 to $11.37 1,199 1.60 2002 49 $7.95 to $8.83 404 *** 2001 *** *** *** *** 2000 *** *** *** *** ING VP MagnaCap - Class R 2003 5 $8.83 to $8.91 42 1.03 2002 4 $6.85 27 *** 2001 *** *** *** *** 2000 *** *** *** *** ING VP MagnaCap - Class S 2003 101 $8.98 to $9.22 928 0.71 2002 69 $7.01 to $7.12 490 0.95 2001 46 $9.28 to $9.34 431 ** 2000 ** ** ** ** EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING VP Growth Opportunities - Class R 2003 0.75% to 1.25% 31.40% 2002 1.25% -27.19% 2001 *** *** 2000 *** *** ING VP Growth Opportunities - Class S 2003 0.95% to 1.90% 29.96% to 31.12% 2002 0.95% to 1.90% -32.71% to -28.88% 2001 0.95% to 1.90% -20.95% to -5.87% 2000 ** ** ING VP International Value 2003 0.75% to 1.50% 15.86% to 29.02% 2002 0.75% to 1.50% -19.18% to -1.19% 2001 *** *** 2000 *** *** ING VP MagnaCap - Class R 2003 0.75% to 1.25% 30.07% 2002 0.75% -21.38% 2001 *** *** 2000 *** *** ING VP MagnaCap - Class S 2003 0.95% to 1.90% 28.10% to 29.49% 2002 0.95% to 1.90% -25.77% to -23.73% 2001 0.95% to 1.90% -5.87% to 0.00% 2000 ** **
146 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- ING VP MidCap Opportunities - Class R 2003 96 $9.33 to $9.45 $ 905 -% 2002 11 $6.89 to $6.97 76 *** 2001 *** *** *** *** 2000 *** *** *** *** ING VP MidCap Opportunities - Class S 2003 818 $8.20 to $8.41 6,818 - 2002 418 $6.11 to $6.21 2,583 - 2001 102 $8.42 to $8.48 865 ** 2000 ** ** ** ** ING VP SmallCap Opportunities - Class R 2003 202 $6.78 to $11.71 1,392 - 2002 12 $4.98 to $5.02 58 *** 2001 *** *** *** *** 2000 *** *** *** *** ING VP SmallCap Opportunities - Class S 2003 704 $6.32 to $6.49 4,528 - 2002 376 $4.66 to $4.73 1,772 - 2001 151 $8.44 to $8.50 1,280 ** 2000 ** ** ** ** Janus Aspen Balanced 2003 11,471 $9.34 to $25.95 186,531 2.17 2002 13,695 $8.35 to $23.08 197,825 2.41 2001 15,239 $9.10 to $25.02 240,241 2.63 2000 13,985 $9.73 to $26.63 244,144 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- ING VP MidCap Opportunities - Class R 2003 0.75% to 1.25% 34.83% to 35.58% 2002 0.75% to 1.50% -20.85% to -9.47% 2001 *** *** 2000 *** *** ING VP MidCap Opportunities - Class S 2003 0.95% to 1.90% 34.21% to 35.43% 2002 0.95% to 1.90% -27.40% to -26.70% 2001 0.95% to 1.90% -16.75% to -10.14% 2000 ** ** ING VP SmallCap Opportunities - Class R 2003 0.75% to 1.50% 36.95% to 37.45% 2002 0.75% to 1.25% -33.20% to -9.70% 2001 *** *** 2000 *** *** ING VP SmallCap Opportunities - Class S 2003 0.95% to 1.90% 35.62% to 37.21% 2002 0.95% to 1.90% -44.82% to -44.28% 2001 0.95% to 1.90% -24.98% to -12.33% 2000 ** ** Janus Aspen Balanced 2003 0.75% to 1.90% -46.48% to 13.18% 2002 0.45% to 1.90% -8.22% to 109.99% 2001 0.45% to 1.90% -6.53% to -5.42% 2000 * *
147 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- Janus Aspen Flexible Income 2003 1,144 $11.13 to $20.72 $ 22,158 4.66% 2002 1,538 $12.85 to $19.62 28,392 4.45 2001 1,415 $11.72 to $17.89 23,940 5.95 2000 1,182 $10.97 to $16.73 18,730 * Janus Aspen Growth 2003 8,493 $5.71 to $20.49 105,326 0.08 2002 10,142 $4.42 to $15.78 98,503 - 2001 13,150 $6.13 to $21.78 176,779 0.26 2000 14,324 $8.30 to $29.34 267,653 * Janus Aspen Mid Cap Growth 2003 7,749 $3.88 to $18.09 88,717 - 2002 8,940 $2.92 to $15.64 77,233 - 2001 11,480 $4.14 to $21.80 141,806 - 2000 12,172 $6.97 to $36.27 274,462 * Janus Aspen Worldwide Growth 2003 13,736 $5.79 to $22.26 190,923 1.05 2002 17,171 $4.76 to $18.46 198,280 0.84 2001 20,979 $6.51 to $24.89 331,396 0.44 2000 21,842 $8.56 to $32.41 483,863 * Lord Abbett Growth and Income 2003 303 $10.10 to $12.27 3,110 1.02 2002 54 $7.85 to $7.91 422 *** 2001 *** *** *** *** 2000 *** *** *** *** EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- Janus Aspen Flexible Income 2003 0.75% to 1.50% 4.82% to 5.61% 2002 0.45% to 1.50% 8.83% to 9.98% 2001 0.45% to 1.50% -0.78% to 6.93% 2000 * * Janus Aspen Growth 2003 0.75% to 1.90% 29.19% to 30.80% 2002 0.45% to 1.90% -27.91% to -26.84% 2001 0.45% to 2.25% -26.17% to -25.27% 2000 * * Janus Aspen Mid Cap Growth 2003 0.75% to 1.90% 32.77% to 34.10% 2002 0.45% to 1.90% -29.31% to -28.26% 2001 0.45% to 1.90% -40.61% to -39.88% 2000 * * Janus Aspen Worldwide Growth 2003 0.75% to 1.90% 21.64% to 23.07% 2002 0.45% to 1.90% -26.92% to -25.84% 2001 0.45% to 2.25% -23.92% to -22.98% 2000 * * Lord Abbett Growth and Income 2003 0.75% to 1.50% 29.43% to 30.09% 2002 0.75% to 1.25% -17.45% to -15.55% 2001 *** *** 2000 *** ***
148 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- Lord Abbett Mid-Cap Value 2003 117 $10.19 to $12.20 $ 1,217 0.66% 2002 55 $8.38 to $9.87 474 *** 2001 *** *** *** *** 2000 *** *** *** *** MFS(R) Global Governments 2003 194 $12.97 to $13.13 2,524 5.90 2002 228 $11.92 to $12.04 2,720 2.91 2001 156 $11.15 to $11.25 1,742 3.89 2000 142 $10.80 to $10.87 1,537 * MFS(R) Total Return 2003 7,849 $11.22 to $18.00 110,405 1.64 2002 7,407 $9.83 to $15.67 91,725 1.74 2001 7,002 $10.57 to $16.73 93,910 5.19 2000 4,368 $10.75 to $16.90 63,398 * Oppenheimer Aggressive Growth 2003 3,313 $4.01 to $12.93 29,115 - 2002 3,447 $3.26 to $10.43 23,930 0.67 2001 4,063 $4.60 to $14.62 40,449 15.39 2000 3,454 $6.82 to $21.54 57,052 * Oppenheimer Global Securities 2003 1,634 $12.73 to $19.94 29,539 0.55 2002 1,174 $10.74 to $14.12 15,177 0.57 2001 977 $14.01 to $18.36 16,403 12.79 2000 881 $16.17 to $21.14 17,260 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- Lord Abbett Mid-Cap Value 2003 0.75% to 1.50% 3.85% to 23.87% 2002 0.75% to 1.25% -13.36% to 1.56% 2001 *** *** 2000 *** *** MFS(R) Global Governments 2003 1.25% to 1.40% 8.81% to 9.05% 2002 1.25% to 1.40% 6.89% to 7.05% 2001 0.85% to 1.40% 3.28% to 3.44% 2000 * * MFS(R) Total Return 2003 0.95% to 1.90% 14.14% to 15.18% 2002 0.95% to 1.90% -6.97% to -6.07% 2001 0.50% to 1.90% -1.67% to -0.70% 2000 * * Oppenheimer Aggressive Growth 2003 0.95% to 1.90% 23.01% to 24.42% 2002 0.95% to 1.90% -29.17% to -28.48% 2001 0.50% to 2.25% -32.58% to -31.92% 2000 * * Oppenheimer Global Securities 2003 0.75% to 1.50% 40.97% to 41.96% 2002 0.75% to 1.50% -23.30% to -22.72% 2001 0.75% to 1.50% -13.36% to -12.70% 2000 * *
149 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- Oppenheimer Main Street(R) 2003 5,799 $7.70 to $12.76 $ 65,121 0.86% 2002 5,617 $6.20 to $10.19 48,801 0.77 2001 6,141 $7.78 to $12.71 65,709 0.53 2000 5,613 $8.83 to $14.33 67,652 * Oppenheimer Strategic Bond 2003 3,027 $12.23 to $14.43 42,500 6.13 2002 2,737 $10.76 to $12.38 32,735 7.25 2001 2,585 $10.21 to $11.67 28,892 6.16 2000 2,144 $9.93 to $11.27 23,335 * Pioneer Equity Income VCT 2003 26 $9.61 to $11.55 253 2.46 2002 19 $7.99 to $8.05 153 *** 2001 *** *** *** *** 2000 *** *** *** *** Pioneer Fund VCT 2003 - $9.21 to $9.32 4 0.58 2002 - $7.59 1 *** 2001 *** *** *** *** 2000 *** *** *** *** Pioneer Mid Cap Value VCT 2003 62 $11.79 to $13.17 739 0.14 2002 3 $8.73 to $8.80 30 *** 2001 *** *** *** *** 2000 *** *** *** *** EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- Oppenheimer Main Street(R) 2003 0.95% to 2.25% 24.19% to 25.42% 2002 0.95% to 2.25% -20.34% to -19.57% 2001 0.50% to 2.25% -11.87% to -11.02% 2000 * * Oppenheimer Strategic Bond 2003 0.75% to 2.25% 15.80% to 17.10% 2002 0.75% to 2.25% 5.40% to 6.64% 2001 0.50% to 2.25% 2.84% to 4.06% 2000 * * Pioneer Equity Income VCT 2003 0.75% to 1.50% 21.03% to 21.61% 2002 0.75% to 1.25% -17.35% to -16.32% 2001 *** *** 2000 *** *** Pioneer Fund VCT 2003 0.75% to 1.25% 22.79% 2002 0.75% 0.06% 2001 *** *** 2000 *** *** Pioneer Mid Cap Value VCT 2003 0.75% to 1.50% 35.85% to 36.36% 2002 0.75% to 1.25% -17.31% to -16.24% 2001 *** *** 2000 *** ***
150 ING LIFE INSURANCE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT B NOTES TO FINANCIAL STATEMENTS
INVESTMENT UNITS UNIT FAIR VALUE NET ASSETS INCOME DIVISION (000'S) (LOWEST TO HIGHEST) (000'S) RATIO(A) ---------------------------------------------- ------- ------------------- ---------- ---------- Prudential Jennison 2003 111 $7.59 to $7.79 $ 859 -% 2002 71 $5.97 to $6.07 427 - 2001 81 $8.84 to $8.90 724 - 2000 ** ** ** ** Prudential SP Jennison International Growth 2003 416 $7.74 to $7.94 3,269 - 2002 37 $5.67 to $5.76 214 - 2001 8 $7.49 to $7.52 59 - 2000 ** ** ** ** UBS Tactical Allocation 2003 1,393 $7.74 to $8.61 11,708 0.80 2002 1,454 $6.19 to $6.83 9,725 0.55 2001 1,635 $8.20 to $8.94 14,334 7.95 2000 1,218 $9.56 to $10.33 12,509 * EXPENSE RATIO(B) TOTAL RETURN(C) DIVISION (LOWEST TO HIGHEST) (LOWEST TO HIGHEST) ---------------------------------------------- ------------------- ------------------- Prudential Jennison 2003 0.95% to 1.90% 27.14% to 28.34% 2002 0.95% to 1.90% -32.48% to -31.82% 2001 0.95% to 1.90% -3.52% to 9.12% 2000 ** ** Prudential SP Jennison International Growth 2003 0.95% to 1.90% 36.51% to 37.85% 2002 0.95% to 1.90% -24.30% to -21.53% 2001 0.95% to 1.90% -19.54% to 4.42% 2000 ** ** UBS Tactical Allocation 2003 0.95% to 1.90% 25.04% to 26.06% 2002 0.95% to 1.90% -24.42% to -23.69% 2001 0.50% to 1.90% -14.22% to -13.38% 2000 * *
* Not provided for 2000. ** As investment Division was not available until 2001, this data is not meaningful and is therefore not presented. *** As investment Division was not available until 2002, this data is not meaningful and is therefore not presented. **** As investment Division was not available until 2003, this data is not meaningful and is therefore not presented. (A) The Investment Income Ratio represents dividends received by the Division, excluding capital gains distributions, divided by the average net assets. The recognition of investment income is determined by the timing of the declaration of dividends by the underlying fund in which the Division invests. (B) The Expense Ratio considers only the expenses borne directly by the Account and is equal to the mortality and expense charge, plus the annual administrative charge, as defined in Note 3.Certain items in this table are presented as a range of minimum and maximum values; however, such information is calculated independently for each column in the table. (C) Total Return is calculated as the change in unit value for each Contract presented in Note 7.Certain items in this table are presented as a range of minimum and maximum values; however, such information is calculated independently for each column in the table. 151 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, 2003 - Statement of Operations for the year ended December 31, 2003 - Statements of Changes in Net Assets for the years ended December 31, 2003 and 2002 - Notes to Financial Statements Financial Statements of ING Life Insurance and Annuity Company: - Report of Independent Auditors - Consolidated Income Statements for the years ended December 31, 2003, 2002 and 2001 - Consolidated Balance Sheets of December 31, 2003 and 2002 - Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 2003, 2002 and 2001 - Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001 - Notes to Consolidated Financial Statements (b) Exhibits (1) Resolution establishing Variable Annuity Account B(1) (2) Not applicable (3.1) Selling Agreement(2) (3.2) Alternative Form of Wholesaling Agreement and Related Selling Agreement(3) (3.3) Federated Broker Dealer Agreement (9/2/94)(4) (3.4) 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(5) (3.5) Underwriting Agreement dated November 17, 2000 between Aetna Life Insurance and Annuity Company and Aetna Investment Services, LLC(5) (4.1) Variable Annuity Contract (G-CDA-97(NY))(6) (4.2) Variable Annuity Contract Certificate (GMCC-97(NY)) to Contract G-CDA-97(NY)(6) (4.3) Variable Annuity Contract (G-MP1(5/97))(7) (4.4) Variable Annuity Contract Certificate (MP1CERT(5/97))(7) (4.5) Variable Annuity Contract (I-MP1(5/97))(7) (4.6) Variable Annuity Contract (G-MP1(5/96))(8) (4.7) Variable Annuity Contract Certificate (MP1CERT(5/96))(8) (4.8) Variable Annuity Contract (I-MP1(5/96))(8) (4.9) Variable Annuity Contract (G-CDA-96(NY))(8) (4.10) Variable Annuity Contract Certificate (GMCC-96(NY))(8) (4.11) Variable Annuity Contract (G-CDA-IC(NQ))(9) (4.12) Variable Annuity Certificate (GMCC-IC(NQ))(9) (4.13) Variable Annuity Contract (G-CDA-IC(IR))(9) (4.14) Variable Annuity Contract (I-CDA-IC(NQ/MP))(9) (4.15) Variable Annuity Contract Certificate (GMCC-IC(IR))(10) (4.16) Variable Annuity Contract (I-CDA-IC(IR/MP))(9) (4.17) Variable Annuity Contracts and Certificates (G-CDA-IC(IR/NY)), (GMCC-IC(IR/NY)), (G-CDA-IC(NQ/NY)), and (GMCC-IC(NQ/NY))(11) (4.18) Endorsements (MP1IRA(5/97)) and (I-MP1IRA(5/97)) to Contract G-MP1(5/96) and Certificate MP1CERT(5/96)(8) (4.19) Endorsements (MP1QP(5/97)) and (I-MP1QP(5/97)) to Contract G-MP1(5/96) and Certificate MP1CERT(5/96)(8) (4.20) Endorsements (MP1TDA(5/97)) and (I-MP1TDA(5/97)) to Contract G-MP1(5/96) and Certificate MP1CERT(5/96)(8) (4.21) Endorsements (MP1DC(5/97)) and (I-MP1DC(5/97)) to Contract G-MP1(5/96) and Certificate MP1CERT(5/96)(8) (4.22) Endorsement (G-MP1IRA(11/96)) to Contract G-CDA-96(NY) and Certificate GMCC-96(NY)(8) (4.23) Endorsement (I-MP1END(9/97)) to Contract I-MP1(5/96)(7) (4.24) Endorsement (E1-MPROTH-97) to Contract G-MP1(5/97)(6) (4.25) Endorsement (EI1MPROTH-97) to Contract I-MP1(5/97)(6) (4.26) Endorsement (MP1IRA(11/97)) to Contract G-MP1(5/97)(6) (4.27) Endorsement (I-MP1IRA(11/97)) to Contract I-MP1(5/97)(6) (4.28) Endorsement (MP1END(9/97)) to Contract G-MP1(5/97) and Certificate MP1CERT(5/97)(12) (4.29) Endorsement (I-MP1END(9/97)) to Contract I-MP1(5/97)(12) (4.30) Endorsement (MPNQEND(4/95)) to Contract G-CDA-IC(NQ)(13) (4.31) Endorsement (MPIREND(4/95)) to Contract G-CDA-IC(IR)(13) (4.32) Endorsement (IMPNQEND(4/95)) to Contract I-CDA-IC(NQ/MP)(13) (4.33) Endorsement (IMPIREND(4/95)) to Contract I-CDA-IC(IR/MP)(13) (4.34) Endorsement (EMPGET98) to Contract G-MP1(5/97) and Certificate MP1CERT(5/97)(14) (4.35) Endorsement (MPNQCERTEND(4/95)) to Certificate GMCC-IC(NQ)(13) (4.36) Endorsement (MPIRCERTEND(4/95)) to Certificate GMCC-IC(IR)(13) (4.37) Endorsement EGET(99) to Contracts G-MP1(5/97), G-CDA-97(NY) and I-MP1(5/97) and Certificates MP1(CERT(5/97)) and GMCC-97(NY)(15) (4.38) Endorsements ENMCHG (05/02) and ENMCHGI (05/02) for name change(16) (4.39) Contract Schedule I Accumulation Period (G-MP1(11/97)-5) to Group Contract G-MP1(5/97)(6) (4.40) Contract Schedule I Accumulation Period (I-MP1(11/97)-5) to Individual Contract I-MP1(5/97)(6) (5.1) Variable Annuity Contract Application (MPAPPNY(1/96))(6) (5.2) Variable Annuity Contract Application (300-MAR-IB)(17) (5.3) Variable Annuity Contract Application (710.6.13)(17) (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)(18) (6.2) By-Laws restated as of January 1, 2002 of ING Life Insurance and Annuity Company (formerly Aetna Life Insurance and Annuity Company)(18) (7) Not applicable (8.1) 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.(19) (8.2) 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.(20) (8.3) 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.(21) (8.4) 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.(22) (8.5) 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.(22) (8.6) 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 Variable Portfolios, Inc. on behalf of each of its series and Aeltus Investment Management, Inc.(23) (8.7) Sixth Amendment dated as of June 19, 2001 to Fund Participation Agreement dated as of May 1, 1998 and amended on November 9, 1998, December 31, 1999, February 11, 2000, May 1, 2000 and February 27, 2001 among Aetna Life Insurance and Annuity Company, Aeltus Investment Management, Inc. 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 Generations Portfolios, Inc., on behalf of each of its series, and Aetna Variable Portfolios, Inc., on behalf of each of its series(24) (8.8) 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(19) (8.9) 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(20) (8.10) 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(22) (8.11) 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(22) (8.12) Fourth Amendment dated as of June 26, 2001 to Service Agreement with Investment Advisor effective as of May 1, 1998, as amended on November 4, 1998, February 11, 2000 and May 1, 2000 between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company(24) (8.13) Administrative Service Agreement between Aetna Life Insurance and Annuity Company and Agency, Inc.(2) (8.14) Fund Participation Agreement dated December 1, 1997 among Calvert Responsibly Invested Balanced Portfolio, Calvert Asset Management Company, Inc. and Aetna Life Insurance and Annuity Company(25) (8.15) Service Agreement dated December 1, 1997 between Calvert Asset Management Company, Inc. and Aetna Life Insurance and Annuity Company(25) (8.16) Fund Participation Agreement dated July 1, 1994 by and among Aetna Life Insurance and Annuity Company, Insurance Management Series and Federated Advisors(25) (8.17) 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(26) (8.18) 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(7) (8.19) 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(27) (8.20) 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(19) (8.21) 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(21) (8.22) 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(26) (8.23) 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(7) (8.24) 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(28) (8.25) 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(19) (8.26) 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(21) (8.27) Service Agreement dated as of November 1, 1995 between Aetna Life Insurance and Annuity Company and Fidelity Investments Institutional Operations Company(29) (8.28) 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(7) (8.29) Service Contract dated May 2, 1997 between Fidelity Distributors Corporation and Aetna Life Insurance and Annuity Company(20) (8.30) Fund Participation Agreement dated December 8, 1997 among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation(30) (8.31) 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(20) (8.32) 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(21) (8.33) Amendment dated as of August 1, 2000 to Fund Participation Agreement dated December 8, 1997 and amended on October 12, 1998 and December 1, 1999 among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation(31) (8.34) 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(16) (8.35) Service Agreement dated December 8, 1997 between Janus Capital Corporation and Aetna Life Insurance and Annuity Company(30) (8.36) 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(31) (8.37) 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(31) (8.38) 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(16) (8.39) 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(19) (8.40) 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(32) (8.41) 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(33) (8.42) 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(34) (8.43) Sixth Amendment dated November 17, 2000 to the Fund Participation Agreement dated April 30, 1996 and 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(5) (8.44) Fund Participation Agreement dated March 11, 1997 between Aetna Life Insurance and Annuity Company and Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc.(35) (8.45) First Amendment dated December 1, 1999 to Fund Participation Agreement dated March 11, 1997 between Aetna Life Insurance and Annuity Company and Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc.(21) (8.46) Service Agreement effective as of March 11, 1997 between Oppenheimer Funds, Inc. and Aetna Life Insurance and Annuity Company(35) (8.47) Participation Agreement dated as of November 28, 2001 among Portfolio Partners, Inc., Aetna Life Insurance and Annuity Company and Aetna Investment Services, LLC(16) (8.48) 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(16) (8.49) 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(35) (8.50) Shareholder Servicing Agreement (Service Class Shares) dated as of November 27, 2001 between Portfolio Partners, Inc. and Aetna Life Insurance and Annuity Company(16) (8.51) 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(16) (8.52) 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(36) (8.53) Fund Participation Agreement dated July 29, 1992 and amended December 22, 1992 and June 1, 1994 between Aetna Life Insurance and Annuity Company, Investors Research Corporation and TCI Portfolios, Inc.(3) (9) Opinion and Consent of Counsel (10) Consent of Independent Auditors (11) Not applicable (12) Not applicable (13.1) Powers of Attorney(37) (13.2) 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 Post-Effective Amendment No. 22 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 22, 1996. 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 Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-79122), as filed on August 16, 1995. 5. 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. 6. Incorporated by reference to Post-Effective Amendment No. 32 to Registration Statement on Form N-4 (File No. 33-34370), as filed on December 16, 1997. 7. 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. 8. Incorporated by reference to Post-Effective Amendment No. 26 to Registration Statement on Form N-4 (File No. 33-34370), as filed on February 21, 1997. 9. Incorporated by reference to Post-Effective Amendment No. 35 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 17, 1998. 10. Incorporated by reference to Post-Effective Amendment No. 37 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 9, 1999. 11. Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-87932), as filed on September 19, 1995. 12. Incorporated by reference to Post-Effective Amendment No. 33 to Registration Statement on Form N-4 (File No. 33-34370), as filed on February 12, 1998. 13. Incorporated by reference to Post-Effective Amendment No. 34 to Registration Statement on Form N-4 (File No. 33-34370), as filed on February 27, 1998. 14. Incorporated by reference to Post-Effective Amendment No. 37 to Registration Statement on Form N-4 (File No. 33-34370), as filed on September 14, 1998. 15. 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. 16. 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. 17. Incorporated by reference to Post-Effective Amendment No. 29 to Registration Statement on Form N-4 (File No. 33-34370), as filed on August 18, 1997. 18. 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. 19. Incorporated by reference to Registration Statement on Form N-4 (File No. 333-56297) as filed on June 8, 1998. 20. 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. 21. 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. 22. 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. 23. 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. 24. Incorporated by reference to Post-Effective Amendment No. 32 to Registration Statement on Form N-4 (File No. 33-75988), as filed on April 13, 2004. 25. Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 333-01107), as filed on February 19, 1998. 26. 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. 27. 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. 28. 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. 29. 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. 30. 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. 31. 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. 32. 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. 33. 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. 34. 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. 35. 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. 36. 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. 37. Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form S-2 of ING Life Insurance and Annuity Company (File No. 333-104456), as filed on April 5, 2004. Item 25. Directors and Officers of the Depositor* Name and Principal Positions and Offices with Business Address Depositor Keith Gubbay1 Director and President Thomas Joseph McInerney1 Director Kathleen Ann Murphy1 Director Jacques de Vaucleroy1 Director and Senior Vice President David A. Wheat1 Director, Senior Vice President and Chief Financial Officer Allan Baker2 Senior Vice President Robert L. Francis Senior Vice President 6140 Stonehedge Mall Rd., Ste. 375 Pleasanton, California 94588 Shaun Patrick Mathews2 Senior Vice President Stephen Joseph Preston3 Senior Vice President Boyd George Combs1 Senior Vice President, Tax James G. Auger2 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 V. Camp2 Vice President Kevin L. Christensen4 Vice President Andrew D. Chua5 Vice President Elizabeth A. Clifford3 Vice President Brian D. Comer2 Vice President Patricia Marie Corbett4 Vice President Karen Czizik5 Vice President Robert B. DiMartino2 Vice President Shari Ann Enger3 Vice President Brian K. Haendiges2 Vice President Steven J. Haun4 Vice President James Hennessy6 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 Roger Ernest Lavallee2 Vice President Frederick C. Litow1 Vice President Christine Cannon Marcks2 Vice President Gregory J. Miller2 Vice President Todd E. Nevenhoven4 Vice President Ethel Pippin2 Vice President Mary Kathleen Reid2 Vice President Robert A. Richard2 Vice President Michael Roland6 Vice President Carl P. Steinhilber2 Vice President Laurie M. Tillinghast2 Vice President Stanley Vyner7 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 Richard Lau3 Vice President and Actuary Laurie A. Lombardo2 Vice President and Actuary Mark D. Sperry2 Vice President and Actuary Alice Su3 Vice President and Actuary Lawrence D. Taylor5 Vice President and Actuary Albert Sekac2 Vice President and Appointed Actuary John R. Dobo5 Vice President and Chief Actuary Brian John Murphy2 Vice President and Chief Compliance Officer David Scott Pendergrass1 Vice President and Treasurer Dawn Peck1 Vice President, Assistant Treasurer Ira Braunstein1 Vice President, Investments Daniel J. Foley1 Vice President, Investments Christopher P. Lyons1 Vice President, Investments Gregory G. McGreevey1 Vice President, Investments Maurice Melvin Moore1 Vice President, Investments Joseph J. Elmy2 Vice President, Tax Paula Cludray-Engelke8 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 Krystal L. Ols8 Assistant Secretary Loralee Ann Renelt8 Assistant Secretary Carol Semplice2 Assistant Secretary Linda Ellen Senker3 Assistant Secretary Patricia M. Smith2 Assistant Secretary Edwina Steffer8 Assistant Secretary John F. Todd2 Assistant Secretary Diane Yell9 Assistant Secretary Glenn Allan Black1 Tax Officer Terry L. Owens1 Tax Officer James Taylor1 Tax Officer William Zolkowski1 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 1290 Broadway, Denver, Colorado 80203 6 The principal business address of this officer is 7337 E Doubletree Ranch Road, Scottsdale, Arizona 85258. 7 The principal business address of this officer is 520 Madison Avenue, 10th Floor, New York, New York 10022. 8 The principal business address of these officers is 20 Washington Avenue South, Minneapolis, Minnesota 55401. 9 The principal business address of this officer is 100 Washington Square, 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. 2 to Registration Statement on Form N-4 for Separate Account B of ING USA Annuity and Life Insurance Company (File No. 333-90516), as filed on April 9, 2004. Item 27. Number of Contract Owners As of February 29, 2004, there were 114,778 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 to cover errors and omissions, directors and officers, employment practices, fiduciary and fidelity. The policy covers ING Groep N.V. and any company in which ING Groep N.V. has controlling interest of 50% or more. This would encompass the principal underwriter as well as the depositor. 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 (i) 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), (ii) Separate Account N of ReliaStar Life Insurance Company (RLIC) (a separate account of RLIC registered as a unit investment trust under the 1940 Act.), (iii) ReliaStar Select Variable Account of ReliaStar Life Insurance Company (a separate account of RLIC registered as a unit investment trusts under the 1940 Act), (iv) MFS ReliaStar Variable Account (a separate account of RLIC registered as a unit investment trusts under the 1940 Act), (v) Northstar Variable Account (a separate account of RLIC registered as a unit investment trusts under the 1940 Act) (vi) ReliaStar Life Insurance Company of New York Variable Annuity Funds A, B, C (a management investment company registered under the 1940 Act), (vii) ReliaStar Life Insurance Company of New York Variable Annuity Funds D, E, F, G, H, I (a management investment company registered under the 1940 Act), (viii) ReliaStar Life Insurance Company of New York Variable Annuity Funds M, P, and Q (a management investment company registered under the1940 Act), and (ix) ReliaStar Life Insurance Company of New York Variable Annuity Funds M P (a management investment company registered under the1940 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, Tax Susan J. Stamm2 Chief Financial Officer 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 Bernard P. Heffernon Vice President 10740 Nall Ave., Ste. 120 Overland Park, KS 66211 William S. Jasien4 Vice President David Kelsey2 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 Frederick C. Litow3 Vice President 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 Mary Kathleen Reid2 Vice President Deborah Rubin4 Vice President Frank W. Snodgrass Vice President 150 4th Ave., N., Ste. 410 Nashville, TN 37219 Terran Titus2 Vice President Bess B. Twyman2 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 Joseph Elmy2 Vice President, Tax Paula Cludray-Engelke5 Secretary Loralee Ann Renelt5 Assistant Secretary John F. Todd2 Assistant Secretary Robert J. Scalise2 Assistant Treasurer Glenn Allan Black3 Tax Officer G. Michael Fell3 Tax Officer Terry L. Owens3 Tax Officer James Taylor3 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 to Principal Underwriter:
(1) (2) (3) (4) (5) Name of Net Underwriting Compensation on Principal Underwriter Discounts and Redemption or Brokerage Commissions Annuitization Commissions Compensation* ING Financial $83,358.64 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 2003. 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 maintained by ING Life Insurance and Annuity Company at 151 Farmington Avenue, Hartford, Connecticut 06156 and at ING Americas at 5780 Powers Ferry Road, Atlanta, Georgia 30327-4390. 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. (d) Registrant hereby undertakes to mail notices to current contract owners promptly after the happening of significant events related to the guarantee issued by ING USA Annuity and Life Insurance Company with respect to allocation of contract value to a series of the ING GET U.S. Core Portfolio (the "Guarantee"). These significant events include (i) the termination of the Guarantee; (ii) a default under the Guarantee that has a material adverse effect on a contract owner's right to receive his or her guaranteed amount on the maturity date; (iii) the insolvency of ING USA Annuity and Life Insurance Company; or (iv) a reduction in the credit rating of ING USA Annuity and Life Insurance Company's long-term debt as issued by Standard & Poor's or Moody's Investors Service, Inc. to BBB+ or lower or Baa1 or lower, respectively. During the Guarantee Period, the Registrant hereby undertakes to include in the Registrant's prospectus, an offer to supply the most recent annual and/or quarterly report of each of ING USA Annuity and Life Insurance Company, or their successors to the Guarantee, free of charge, upon a contract owner's 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. 33-34370) and has duly caused this Post-Effective Amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut, on the 19th day of April, 2004. 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. 53 to the Registration Statement on Form N-4 (File No. 33-34370) has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date Keith Gubbay* Director and President ) ) Keith Gubbay (principal executive officer) ) ) Thomas J. McInerney* Director April 19, 2004 ) Thomas J. McInerney ) ) Kathleen A. Murphy* Director ) ) Kathleen A. Murphy ) ) Jacques de Vaucleroy* Director ) ) Jacques de Vaucleroy ) ) David Wheat* Director and Chief Financial Officer ) ) David Wheat (principal accounting officer) ) ) By: /s/ Linda E. Senker ------------------- Linda E. Senker *Attorney-in-Fact VARIABLE ANNUITY ACCOUNT B Exhibit Index Exhibit No. Exhibit 99-B.9 Opinion and Consent of Counsel ------------ 99-B.10 Consent of Independent Auditors ------------ EX-99.B9 3 kjsopinionltrn4.txt OPINION OF COUNSEL ING KIMBERLY J. SMITH Counsel April 19, 2004 Members of the Board of Directors ING Life Insurance and Annuity Company of America 1475 Dunwoody Drive West Chester, PA 19380-1478 Gentlemen: In my capacity as Counsel to ING Life Insurance and Annuity Company of America (the "Company"), I have examined the form of Registration Statement on Form N-4 to be filed by you with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended, of an indefinite number of units of interest in Variable Annuity Account B of the Company (the "Account"). I am familiar with the proceedings taken and proposed to be taken in connection with the authorization, issuance and sale of units. Based upon my examination and upon my knowledge of the corporate activities relating to the Account, it is my opinion that: (1) The Company was organized in accordance with the laws of the State of Connecticut and is a duly authorized stock life insurance company under the laws of Connecticut and the laws of those states in which the Company is admitted to do business; (2) The Account is a validly established separate investment account of the Company; (3) Under Connecticut law, the portion of the assets to be held in the Account equals the reserve and other liabilities for variable benefits under variable annuity contracts to be issued by the Account, and such assets are not chargeable with liabilities arising out of any other business the Company conducts; (4) The units and the variable annuity contracts will, when issued and sold in the manner described in the registration statement, be legal and binding obligations of the Company and will be legally and validly issued, fully paid, and non-assessable. I hereby consent to the filing of this opinion as an exhibit to the registration statement and to the reference to my name under the heading "Legal Matters" in the prospectus contained in said registration statement. In giving this consent I do not thereby admit that I come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the Rules and Regulations of the Securities and Exchange Commission thereunder. Sincerely, /s/Kimberly J. Smith - --------------------- 1475 Dunwoody Drive Tel: 610-425-3427 West Chester, PA 19380-1478 Fax: 610-425-3735 EX-99.B10A 4 eyconsent.txt E&Y CONSENT Exhibit 99-B.10 - Consent of Ernst and Young LLP, Independent Auditors We consent to the reference to our firm under the caption "Independent Auditors" and to the use of our report dated March 22, 2004, with respect to the consolidated financial statements of ING Life Insurance and Annuity Company as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003 and to the use of our report dated March 15, 2004, with respect to the statement of assets and liabilities of ING Life Insurance and Annuity Company Variable Annuity Account B as of December 31, 2003, and the related statement of operations for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended included in Post-Effective Amendment No. 53 to the Registration Statement under the Securities Act of 1933 (Form N-4 No. 33-34370) and the related Prospectus and Statement of Additional Information of ING Life Insurance and Annuity Company Variable Annuity Account B. /s/ Ernst & Young LLP Atlanta, Georgia April 19, 2004 -----END PRIVACY-ENHANCED MESSAGE-----