-----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, CVNnwncGkBGQqDO9TDTWhc0mKtGjwUp2FDS2xg5Eyt20oO3NhQe9F1+qBjR+KTYy d8/HcExhXiq1qR4Rz0zNzg== 0001047469-03-013536.txt : 20030416 0001047469-03-013536.hdr.sgml : 20030416 20030416095516 ACCESSION NUMBER: 0001047469-03-013536 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20030416 EFFECTIVENESS DATE: 20030416 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: 033-75998 FILM NUMBER: 03651755 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 2032734808 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA VARIABLE ANNUITY LIFE IN DATE OF NAME CHANGE: 19791108 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO DATE OF NAME CHANGE: 19920703 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: 03651756 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 2032734808 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA VARIABLE ANNUITY LIFE IN DATE OF NAME CHANGE: 19791108 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO DATE OF NAME CHANGE: 19920703 485BPOS 1 a2094824z485bpos.txt 485BPOS As filed with the Securities and Exchange Registration No. 33-75998 Commission on April 16, 2003 Registration No. 811-2512 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 - -------------------------------------------------------------------------------- POST-EFFECTIVE AMENDMENT NO. 18 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 and Amendment to REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 - -------------------------------------------------------------------------------- Variable Annuity Account B of ING Life Insurance and Annuity Company ING Life Insurance and Annuity Company 151 Farmington Avenue, TS31, Hartford, Connecticut 06156 Depositor's Telephone Number, including Area Code: (860) 723-2260 Julie E. Rockmore, Counsel ING Life Insurance and Annuity Company 151 Farmington Avenue, TS31, Hartford, Connecticut 06156 (NAME AND ADDRESS OF AGENT FOR SERVICE) - -------------------------------------------------------------------------------- It is proposed that this filing will become effective: immediately upon filing pursuant to paragraph (b) of Rule 485 ------ X on May 1, 2003 pursuant to paragraph (b) of Rule 485 ------ PROSPECTUS - MAY 1, 2003 - -------------------------------------------------------------------------------- [SIDE NOTE] THE FUNDS Fidelity-Registered Trademark- VIP Contrafund-Registered Trademark- Portfolio (Initial Class) Fidelity-Registered Trademark- VIP Equity-Income Portfolio (Initial Class) Fidelity-Registered Trademark- VIP Growth Portfolio (Initial Class) Fidelity-Registered Trademark- VIP Overseas Portfolio (Initial Class) ING JPMorgan Fleming International Portfolio (formerly ING Scudder International Growth Portfolio) (Initial Class) ING MFS Capital Opportunities Portfolio (Initial Class) ING MFS Research Equity Portfolio (formerly ING MFS Research Portfolio) (Initial Class) ING Salomon Brothers Aggressive Growth Portfolio (formerly ING MFS Emerging Equities Portfolio) (Initial Class) ING T. Rowe Price Growth Equity Portfolio (Initial Class) ING VP Balanced Portfolio, Inc. (Class R) ING VP Bond Portfolio (Class R) ING VP Growth and Income Portfolio (Class R) ING VP Money Market Portfolio (Class R) ING VP Strategic Allocation Balanced Portfolio (formerly ING VP Crossroads Portfolio) (Class R) ING VP Strategic Allocation Growth Portfolio (formerly ING VP Ascent Portfolio) (Class R) ING VP Strategic Allocation Income Portfolio (formerly ING VP Legacy Portfolio) (Class R) ING VP Technology Portfolio (Class R) Janus Aspen Balanced Portfolio (Institutional Shares) Janus Aspen Flexible Income Portfolio (Institutional Shares) Janus Aspen Growth Portfolio (Institutional Shares) Janus Aspen Mid Cap Growth Portfolio (formerly Janus Aspen Aggressive Growth Portfolio) (Institutional Shares) Janus Aspen Worldwide Growth Portfolio (Institutional Shares) [END SIDE NOTE] THE CONTRACT. The contracts described in this prospectus are individual non qualified deferred variable annuity contracts issued by ING Life Insurance and Annuity Company (the Company, we, us, our). They are intended to provide retirement benefits to individuals who either are not participating in a formal retirement plan or are participating in a formal retirement plan but want to supplement their benefits. WHY READING THIS PROSPECTUS IS IMPORTANT. This prospectus contains facts about the contracts and their investment options 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 a fixed interest option. When we establish your account, you instruct us to direct your account dollars to any of the available investment 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 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 mutual fund. You do not invest directly in or hold shares of the funds. RISKS ASSOCIATED WITH INVESTING IN THE FUNDS. The funds in which the subaccounts invest have various risks. Information about the risks of investing in the funds is located in the "Investment Options" section on page 10, in Appendix II--Description of Underlying Funds, and in each fund prospectus. Read this prospectus in conjunction with the fund prospectuses, and retain the prospectuses for future reference. GETTING ADDITIONAL INFORMATION. You may obtain the May 1, 2003, Statement of Additional Information (SAI) by indicating your request on your enrollment materials or calling the Company at 1-800-262-3862. You may also obtain an SAI for any of the funds by calling that number. This prospectus, the SAI and other information about the separate account may be obtained by accessing the Securities and Exchange Commission's (SEC) web site, www.sec.gov. Copies of this information may also be obtained, after paying a duplicating fee, by contacting the SEC Public Reference Room. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-202-942-8090 or 1-800-SEC-0330, e-mailing publicinfo@sec.gov or by writing to SEC Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. The SAI table of contents is listed on page 37 of this prospectus. The SAI is incorporated into this prospectus by reference. PROSPECTUS - MAY 1, 2003 (CONTINUED) - -------------------------------------------------------------------------------- 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 from that contained in this prospectus. FIXED INTEREST OPTION. -- Fixed Account Except as specifically mentioned, this prospectus describes only the variable investment options. However, we describe the Fixed Account in Appendix I of this prospectus. These contracts are not deposits with, obligations of or guaranteed or endorsed 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 invested. TABLE OF CONTENTS CONTRACT OVERVIEW............................... 4 Contract Design Contract Facts Questions: Contacting the Company (sidebar) Sending Forms and Written Requests in Good Order (sidebar) Contract Phases: The Accumulation Phase, The Income Phase FEE TABLE......................................... 6 CONDENSED FINANCIAL INFORMATION................... 10 INVESTMENT OPTIONS................................ 10 TRANSFERS AMONG INVESTMENT OPTIONS................ 12 PURCHASE AND RIGHTS............................... 13 RIGHT TO CANCEL................................... 14 FEES.............................................. 15 YOUR ACCOUNT VALUE................................ 18 WITHDRAWALS....................................... 20 SYSTEMATIC DISTRIBUTION OPTIONS................... 21 DEATH BENEFIT..................................... 22 THE INCOME PHASE.................................. 24 TAXATION.......................................... 28 OTHER TOPICS...................................... 32 The Company - Variable Annuity Account B - Contract Distribution - Payment Delay or Suspension - Performance Reporting - Voting Rights - Contract Modification - Transfer of Ownership: Assignment - Legal Matters and Proceedings CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION....................................... 37 APPENDIX I - FIXED ACCOUNT........................ 38 APPENDIX II - DESCRIPTION OF UNDERLYING FUNDS..... 39 APPENDIX III - CONDENSED FINANCIAL INFORMATION.... 43
3 [SIDE NOTE] QUESTIONS: CONTACTING THE COMPANY. To answer your questions, contact your local representative or write or call our Home Office: ING USFS Customer Service Defined Contribution Administration, TS21 151 Farmington Avenue Hartford, CT 06156-1277 1-800-262-3862 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 local representative to learn what information is required for the request to be 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. We can only act upon requests that are received in good order. [END SIDE NOTE] CONTRACT OVERVIEW - ---------------------------------------------- The following summarizes contract information. Read each section of this prospectus for additional information. CONTRACT DESIGN - ------------------------------------------------------------------- The contracts described in this prospectus are individual variable annuity contracts. They are intended as a retirement savings vehicle that defers taxes on investment earnings and offers a variety of investment options to help meet long-term financial goals. CONTRACT FACTS - ------------------------------------------------------------------- FREE LOOK/RIGHT TO CANCEL: You may cancel your contract within ten days (some states may 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 on 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. See "Withdrawals." 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. Taxes will generally be due when you receive a distribution. Tax penalties may apply in some circumstances. See "Taxation." 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 Option (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. [EDGAR REPRESENTATION OF PRINTED GRAPHIC] Payments to Your Account Step 1 ING Life Insurance and Annuity Company (a) Step 2 (b) Fixed Interest VARIABLE ANNUITY ACCOUNT B Option Variable Investment Options THE SUBACCOUNTS A B ETC. Step 3 Mutual Fund A Mutual Fund B
II. THE INCOME PHASE (receiving income phase payments from your contract) When you want to begin receiving payments from your contract, you may select from the options available. The contract offers several income phase payment options (see "The Income Phase"). In general, you may: - -- Receive income phase payments for a specified period of time or for life; - -- Receive income phase payments monthly, quarterly, semi-annually or annually; - -- Select an income phase payment option that provides for payments to your beneficiary; and - -- Select income phase payments that are fixed or that vary depending on the performance of the variable investment options you select. 5 [SIDE NOTE] IN THIS SECTION: - -- Maximum Contract Holder Transaction Expenses; - -- Annual Maintenance Fee; - -- Maximum Separate Account Annual Expenses; - -- Total Annual Fund Operating Expenses; - -- Fund Expense Table; and - -- Hypothetical Examples. ALSO SEE "FEES" FOR: - -- How, When and Why Fees are Deducted; - -- Reduction, Waiver and/or Elimination of Certain Fees; and - -- Premium and Other Taxes. [END SIDE NOTE] FEE TABLE - ---------------------------------------------- THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND WITHDRAWING FROM YOUR CONTRACT. THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT, WITHDRAW FROM THE CONTRACT, OR TRANSFER CASH VALUE BETWEEN INVESTMENT OPTIONS. STATE PREMIUM TAXES MAY ALSO BE DEDUCTED. SEE "THE INCOME PHASE" FOR FEES THAT MAY APPLY AFTER YOU BEGIN RECEIVING PAYMENTS UNDER THE CONTRACT. MAXIMUM CONTRACT HOLDER TRANSACTION EXPENSES EARLY WITHDRAWAL CHARGE(1) (as a percentage of amount withdrawn)......... 5%
(1) This is a deferred sales charge. The percentage will be determined by the applicable early withdrawal charge schedule in the "Fees" section. In certain cases, this charge may not apply to a portion or all of your withdrawal. The early withdrawal charge reduces over time. These fees may be waived, reduced or eliminated in certain circumstances. See the "Fees" section. THE NEXT TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT, NOT INCLUDING FUND FEES AND EXPENSES. ANNUAL MAINTENANCE FEE Installment Purchase Payment Contracts........ $20.00(2)
MAXIMUM SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value) MORTALITY AND EXPENSE RISK CHARGE................. 1.25% ADMINISTRATIVE EXPENSE CHARGE(3).................. 0.00% - 0.25% ------------- TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES............ 1.25% - 1.50% -------------
(2) The annual maintenance fee is generally deducted only from installment purchase payment contracts. Under certain contracts, the annual maintenance fee may also be deducted upon full withdrawals. See "Fees--Annual Maintenance Fee." (3) We currently do not impose this charge, however, if allowed by your contract, we reserve the right to charge up to 0.25% annually. See "Fees--Administrative Expense Charge." THE NEXT ITEM SHOWS THE MINIMUM AND MAXIMUM TOTAL OPERATING EXPENSES CHARGED BY THE FUNDS THAT YOU MAY PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT. THE MINIMUM AND MAXIMUM EXPENSES LISTED BELOW ARE BASED ON EXPENSES FOR THE FUNDS' MOST RECENT FISCAL YEAR ENDS WITHOUT TAKING INTO ACCOUNT ANY FEE WAIVER OR EXPENSE REIMBURSEMENT ARRANGEMENTS THAT MAY APPLY. MORE DETAIL CONCERNING EACH FUND'S FEES AND EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH FUND. TOTAL ANNUAL FUND OPERATING EXPENSES* Minimum Maximum (expenses that are deducted from fund assets, including management fees and other expenses) 0.34% 1.12% * After taking into account any fee waiver or expense reimbursement arrangements, the minimum and maximum total fund operating expenses would be the same as shown above.
6 FEES DEDUCTED BY THE FUNDS USING THIS INFORMATION. The following table shows the investment advisory fees and other expenses including service fees (if applicable) charged annually by each fund. See the "Fees" section of this prospectus and the fund prospectuses for additional information. HOW FEES ARE DEDUCTED. Fund fees are not deducted from account values. Instead, they are deducted from the value of the fund shares on a daily basis, which in turn affects the value of each subaccount that purchases fund shares. The fees and expense information shown in the following table was provided by the funds. Except as noted below, the following figures are a percentage of the average net assets of each fund, and are based on figures for the year ended December 31, 2002. FUND EXPENSE TABLE(1)
TOTAL NET ANNUAL FEES AND ANNUAL MANAGEMENT FUND EXPENSES FUND (ADVISORY) 12B-1 OTHER OPERATING WAIVED OR OPERATING FUND NAME FEES FEE EXPENSES EXPENSES REIMBURSED EXPENSES - --------- ---------- ------- -------- --------- ---------- --------- Fidelity-Registered Trademark- VIP Contrafund-Registered Trademark- Portfolio (Initial Class) 0.58% -- 0.10% 0.68% -- 0.68% Fidelity-Registered Trademark- VIP Equity-Income Portfolio (Initial Class) 0.48% -- 0.09% 0.57% -- 0.57% Fidelity-Registered Trademark- VIP Growth Portfolio (Initial Class) 0.58% -- 0.09% 0.67% -- 0.67% Fidelity-Registered Trademark- VIP Overseas Portfolio (Initial Class) 0.73% -- 0.17% 0.90% -- 0.90% ING JPMorgan Fleming International Portfolio (Initial Class) 0.80% -- 0.20% 1.00% -- 1.00% ING MFS Capital Opportunities Portfolio (Initial Class) 0.65% -- 0.25% 0.90% -- 0.90% ING MFS Research Equity Portfolio (Initial Class) 0.70% -- 0.15% 0.85% -- 0.85% ING Salomon Brothers Aggressive Growth Portfolio (Initial Class) 0.69% -- 0.13% 0.82% -- 0.82% ING T. Rowe Price Growth Equity Portfolio (Initial Class) 0.60% -- 0.15% 0.75% -- 0.75% ING VP Balanced Portfolio, Inc. (Class R)(2) 0.50% -- 0.10% 0.60% -- 0.60% ING VP Bond Portfolio (Class R)(2) 0.40% -- 0.09% 0.49% -- 0.49% ING VP Growth and Income Portfolio (Class R)(2) 0.50% -- 0.09% 0.59% -- 0.59% ING VP Money Market Portfolio (Class R)(2) 0.25% -- 0.09% 0.34% -- 0.34% ING VP Strategic Allocation Balanced Portfolio (Class R)(2)(3) 0.60% -- 0.17% 0.77% 0.07% 0.70% ING VP Strategic Allocation Growth Portfolio (Class R)(2)(3) 0.60% -- 0.17% 0.77% 0.02% 0.75% ING VP Strategic Allocation Income Portfolio (Class R)(2)(3) 0.60% -- 0.17% 0.77% 0.12% 0.65% ING VP Technology Portfolio (Class R)(2) 0.95% -- 0.17% 1.12% -- 1.12% Janus Aspen Balanced Portfolio (Institutional Shares)(4) 0.65% -- 0.02% 0.67% -- 0.67% Janus Aspen Flexible Income Portfolio (Institutional Shares)(4) 0.61% -- 0.05% 0.66% -- 0.66% Janus Aspen Growth Portfolio (Institutional Shares)(4) 0.65% -- 0.02% 0.67% -- 0.67% Janus Aspen Mid Cap Growth Portfolio (Institutional Shares)(4) 0.65% -- 0.02% 0.67% -- 0.67% Janus Aspen Worldwide Growth Portfolio (Institutional Shares)(4) 0.65% -- 0.05% 0.70% -- 0.70%
FOOTNOTES TO "FUND EXPENSE TABLE" (1) 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 this Fund Expense Table and the fund prospectuses. The Company may also receive additional compensation from certain funds for administrative, recordkeeping or other services provided by the Company to the funds or the funds' affiliates. These additional payments are made by the funds or the funds' affiliates to the Company and do not increase, directly or indirectly, the fees and expenses shown above. See "Fees -- Fund Expenses" for additional information. 7 (2) Effective March 1, 2002, ING Investments, LLC, the investment adviser to each Portfolio, entered into written expense limitation agreements with each Portfolio (except Balanced, Bond, Growth and Income, and Money Market) under which it will limit expenses of the Portfolios, excluding interest, brokerage and extraordinary expenses, subject to possible recoupment by the investment adviser within three years. For each Portfolio, the expense limits will continue through at least December 31, 2003. The expense limitation agreements are contractual. The amounts of each Portfolio's expenses waived or reimbursed during the last fiscal year are shown under "Fees and Expenses Waived or Reimbursed" in the table above. (3) This table shows the estimated operating expenses for each Portfolio as a ratio of expenses to average daily net assets. These estimates are based on each Portfolio's actual operating expenses for its most recently completed fiscal year and fee waivers to which the Portfolio's adviser has agreed for each Portfolio. (4) All expenses are shown without the effect of any expense offset arrangements. 8 HYPOTHETICAL EXAMPLES THE FOLLOWING EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE COSTS INCLUDE CONTRACT HOLDER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE ACCOUNT ANNUAL EXPENSES, AND FUND FEES AND EXPENSES. Example 1: The following Example assumes that you invest $10,000 in the contract for the time periods indicated. The Example also assumes that your investment has a 5% return each year and assumes the MAXIMUM fees and expenses of any of the funds as listed in the "Total Annual Fund Operating Expenses" column in the Fund Expense Table above. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: (A) IF YOU WITHDRAW YOUR ENTIRE ACCOUNT VALUE AT THE END OF THE APPLICABLE TIME PERIOD*:
1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------ ------- ------- -------- $718 $1,273 $1,855 $2,995
(B) 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 - ------ ------- ------- -------- $269 $827 $1,411 $2,995
Example 2: The following Example assumes that you invest $10,000 in the contract for the time periods indicated. The Example also assumes that your investment has a 5% return each year and assumes the MINIMUM fees and expenses of any of the funds as listed in the "Total Annual Fund Operating Expenses" column in the Fund Expense Table above. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: (A) IF YOU WITHDRAW YOUR ENTIRE ACCOUNT VALUE AT THE END OF THE APPLICABLE TIME PERIOD*:
1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------ ------- ------- -------- $640 $1,037 $1,459 $2,203
(B) 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 - ------ ------- ------- -------- $191 $591 $1,017 $2,203
- -------------------------- * This example reflects deduction of an early withdrawal charge calculated using the schedule applicable to Installment Purchase Payment Contracts. The Installment Purchase Payment Contracts schedule is listed in "Fees." Under that schedule, if only one $10,000 payment was made as described above, fewer than 5 purchase payment periods would have been completed at the end of years 1, 3 and 5, and the 5% charge would apply. At the end of the tenth year the early withdrawal charge is waived regardless of the number of purchase payment periods completed, and no early withdrawal charge would apply. ** This example does not apply during the income phase if you elect to receive income phase payments under a nonlifetime variable payment option and subsequently request a lump-sum withdrawal after the income phase payments start. In this circumstance, the lump-sum payment is treated as a withdrawal during the accumulation phase and may be subject to an early withdrawal charge as shown in Example A. 9 CONDENSED FINANCIAL INFORMATION - ---------------------------------------------- UNDERSTANDING CONDENSED FINANCIAL INFORMATION. In Appendix III of this prospectus, we provide condensed financial information about 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 a fixed interest option. VARIABLE INTEREST 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 II. 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 Home Office 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. FIXED INTEREST OPTION. The Fixed Account guarantees payment of the minimum interest rate specified in the contract. For a description of the Fixed Account, see Appendix I. SELECTING INVESTMENT OPTIONS - CHOOSE OPTIONS APPROPRIATE FOR YOU. Your local representative can help you evaluate which investment options may be appropriate for your financial goals. - 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 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. - BE INFORMED. Read this prospectus, the fund prospectuses and Fixed Account appendix (Appendix I). LIMITS ON AVAILABILITY OF OPTIONS. Some funds or the fixed interest option may be unavailable through your contract or in your state. We may add, withdraw or 10 substitute funds, subject to 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. You may select no more than 18 investment options during the accumulation phase. Each subaccount you select and the Fixed Account counts as one option once you have made an allocation to it, even if you no longer have amounts allocated to that option. LIMITS IMPOSED BY THE UNDERLYING FUNDS. Orders for the purchase of fund shares may be subject to acceptance by the fund. We reserve the right to reject, without prior notice, any allocation of a purchase payment to a subaccount if the subaccount's investment in the corresponding fund is not accepted by the fund for any reason. ADDITIONAL RISKS OF INVESTING IN THE FUNDS. (MIXED AND SHARED FUNDING) "Mixed funding" occurs when shares of a fund, which the subaccounts buy for variable annuity contracts, is bought for variable life insurance contracts issued by us or other insurance companies. "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--bought for annuities and life insurance - -- Shared--bought by more than one company 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. 11 TRANSFERS AMONG INVESTMENT OPTIONS - ---------------------------------------------- During the accumulation phase, you may transfer amounts among the available subaccounts. Transfers from the Fixed Account may be restricted as outlined in Appendix I, and the total number of investment options that you may select during the accumulation period is limited. See "Investment Options--Limits on How Many Investment Options You May Select." The minimum transfer amount is $500. You may establish automated transfers of account value. See "Dollar Cost Averaging." Transfers must be made in accordance with the terms of your contract. You may not make transfers once you enter the income phase. See "The Income Phase." TRANSFER REQUESTS. Requests may be made in writing, by telephone or, where applicable, electronically. LIMITS ON FREQUENT TRANSFERS. The contract is not designed to serve as a vehicle for frequent trading in response to short-term fluctuations in the market. Such frequent trading can disrupt management of a fund and raise its expenses. This in turn can have an adverse effect on fund performance. Accordingly, individuals who 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 further reserve the right to impose, without prior notice, restrictions on transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other contract holders. Additionally, orders for the purchase of fund shares may be subject to acceptance by the fund. We reserve the right to reject, without prior notice, any transfer request to a subaccount if the subaccount's investment in the corresponding fund is not accepted for any reason. CHARGES FOR TRANSFERS. We currently do not charge for transfers. 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 Home Office, or, if you are participating in the dollar cost averaging program, after your scheduled transfer. 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 following telephone or electronic instructions we believe to be genuine. If a loss occurs when we rely on such instructions, you will bear the loss. THE DOLLAR COST AVERAGING PROGRAM. Dollar cost averaging is an investment strategy whereby you purchase fixed dollar amounts of an investment at regular 12 intervals, regardless of price. Under this program a fixed dollar amount is automatically transferred from one of your investment options to one or more of the subaccounts. Transfers from the Fixed Account under the dollar cost averaging program may be restricted. See Appendix I. 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. For additional information about this program, contact your local representative or call us at the number listed in "Contract Overview--Questions: Contacting the Company." PURCHASE AND RIGHTS - ---------------------------------------------- HOW TO PURCHASE - -- Complete the application and deliver it along with your initial purchase payment to us. Upon our approval, we will issue you a contract and set up an account for you. - -- Two types of contracts are available. - Installment Purchase Payment contracts. Under these contracts, you make continuing periodic payments. - Single Purchase Payment contracts. Under these contracts you make a single payment to the contract or a lump-sum transfer of amounts accumulated under a pre-existing annuity or retirement arrangement. PAYMENT AMOUNTS - -- The minimum payment for a single purchase payment contract is $5,000. - -- Installment purchase payments must be at least $100 per month ($1,200 annually) and may not be less than $25 per payment. 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. 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 a limit on the number of investment options you may select. When selecting investment options, you may find it helpful to review the "Investment Options" section. FACTORS TO CONSIDER IN THE PURCHASE DECISION. The decision to purchase the contract should be discussed with your financial representative, making sure that you understand the investment options it provides, its other features, the risks and potential benefits you will face, and the fees and expenses you will incur. You should pay attention to the following issues, among others: 1. Long-Term Investment--This contract is a long-term investment, and is typically most useful as part of a personal retirement plan. Early withdrawals may expose you to early withdrawal charges 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 participate in this contract if you are looking for a short-term investment or expect to need to make withdrawals before you are 59 1/2. 13 2. Investment Risk--The value of investment options available under this contract may fluctuate with the markets and interest rates. You should not participate in 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. As you consider this contract, you should determine the value that these various benefits and features have for you, given your particular circumstances, and consider the charges for those features. 4. Exchanges--If this contract will be a replacement for another annuity contract, you should compare the two options carefully, compare the costs associated with each, and identify additional benefits available under this contract. You should consider whether these additional benefits justify incurring a new schedule of early withdrawal charges or any increased charges that might apply under this contract. Also, be sure to talk to your financial professional or tax adviser to make sure that the exchange will be handled so that it is tax-free. RIGHT TO CANCEL - ---------------------------------------------- WHEN AND HOW TO CANCEL. You may cancel the contract within ten days of receipt (some states require more than ten days) by returning it to our Home Office 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, your refund will equal the purchase payments made plus any earnings or minus any losses attributable to those amounts allocated to the subaccounts. Any mortality and expense risk charges and administrative expense charges (if any) deducted during the period you held the contract will not be returned. We will not deduct an early withdrawal charge, nor apply a market value adjustment to any amounts you contributed to the Guaranteed Accumulation Account. 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, we will refund all purchase payments made. If the purchase payments for your cancelled 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. 14 [SIDE NOTE] TYPES OF FEES There are five types of fees or deductions that may affect your account: - -- Transaction Fees - Early Withdrawal Charge - Annual Maintenance Fee - -- Fees Deducted from Investments in the Separate Account - Mortality and Expense Risk Charge - Administrative Expense Charge - -- Fees Deducted by the Funds - -- Premium and Other Taxes - -- Charges for ING GET Fund TERMS TO UNDERSTAND - -- "PAYMENT PERIOD" (for installment purchase payment contracts)--The period of time it takes to complete the number of installment payments expected to be made to your account over a year. For example, if your payment frequency is monthly, a payment period is completed after 12 payments are made. If only 11 payments are made, the payment period is not completed until the twelfth payment is made. The number of payment periods completed cannot exceed the number of account years completed, regardless of the number of payments made. - -- "CONTRACT YEAR" (for single purchase payment contracts)--A 12 month period measured from the date we establish your account, or measured from any anniversary of that date. [END SIDE NOTE] FEES - ---------------------------------------------- The following repeats and adds to information provided under "Fee Table." Please review both sections for information on fees. TRANSACTION FEES EARLY WITHDRAWAL CHARGE Withdrawals of all or a portion of your account value may be subject to a charge. In the case of a partial withdrawal where you request a specified dollar amount, the amount withdrawn from your account will be the amount you specified plus adjustment for any applicable early withdrawal charge. AMOUNT. The charge is a percentage of the amount that you withdraw. The percentage will be determined by the early withdrawal charge schedule that applies to your contract. The schedules are listed below and appear on your contract schedule page. The charge will never be more than 8.5% of your total payments to the contract. EARLY WITHDRAWAL CHARGE SCHEDULES
SCHEDULE A -- INSTALLMENT PURCHASE PAYMENT CONTRACTS COMPLETED PAYMENT PERIODS EARLY WITHDRAWAL CHARGE - ------------------------- ----------------------- Less than 5 5% 5 or more but less than 7 4% 7 or more but less than 9 3% 9 or more but less than 10 2% 10 or more 0%
SCHEDULE B -- SINGLE PURCHASE PAYMENT CONTRACTS* COMPLETED CONTRACT YEARS EARLY WITHDRAWAL CHARGE - ------------------------ ----------------------- Less than 5 5% 5 or more but less than 6 4% 6 or more but less than 7 3% 7 or more but less than 8 2% 8 or more but less than 9 1% 9 or more 0%
* Schedule B also may apply to certain older contracts that accept more than one purchase payment. Check your contract to determine which early withdrawal charge schedule applies to you. 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. WAIVER. The early withdrawal charge is waived if the withdrawal is: - -- Used to provide income phase payments to you; - -- Paid because of your death; - -- Taken under a systematic distribution option (See "Systematic Distribution Options"); 15 - -- Taken on or after the tenth anniversary of the effective date of an installment purchase payment contract; - -- Paid when your account value is $2,500 or less and no withdrawal has been taken from the account within the prior 12 months; - -- Taken in part or in full from an installment purchase payment contract provided you are at least 59 1/2 and nine purchase payment periods have been completed; or - -- Taken in an amount of ten percent or less of your account value. This applies only to the first partial withdrawal in each calendar year and does not apply to full withdrawals or withdrawals under a systematic distribution option. The ten percent amount will be calculated using your account value as of the next valuation after your withdrawal request is received in good order at our Home Office. This does not apply to contracts issued in the state of Washington. ANNUAL MAINTENANCE FEE MAXIMUM AMOUNT. $20.00 for installment purchase payment contracts. There is no maintenance fee for single purchase payment contracts. WHEN/HOW. Each year during the accumulation phase, we deduct this fee from your account value on your account anniversary. It is also deducted at the time of a full withdrawal, to the extent permitted under state law. It is deducted proportionately from each subaccount and fixed interest option in which you have interest. PURPOSE. This fee reimburses us for administrative expenses related to the establishment and maintenance of your account. FEES DEDUCTED FROM INVESTMENTS IN THE SEPARATE ACCOUNT MORTALITY AND EXPENSE RISK CHARGE MAXIMUM AMOUNT. 1.25% annually of your account value invested in the subaccounts. See "The Income Phase--Charges Deducted." WHEN/HOW. We deduct this charge daily from the subaccounts corresponding to the funds you select. We do not deduct this charge from any fixed interest option. This charge is deducted during the accumulation phase and the income phase. PURPOSE. This charge compensates us for the mortality and expense risks we assume under the contracts. - -- The mortality risks are those risks associated with our promises to pay the death benefit available under the contract and 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 contracts 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 contracts, 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. 0.25%. We currently do not impose this charge. We reserve the right, however, on 30 days' notice, if allowed by your contract, to charge up to 0.25% annually of your daily net assets invested in the subaccounts. 16 WHEN/HOW. If imposed, we will deduct this charge daily from the subaccounts corresponding to the funds you select. We do not deduct this charge from the fixed interest option. This charge may be assessed during the accumulation phase and/or the income phase. If we are imposing this charge when you enter the income phase, the charge will apply to you during the entire income phase. PURPOSE. This charge helps defray our administrative expenses that cannot be recovered by the mortality and expense risk charge described above. The charge is not intended to exceed the average expected cost of administering the contracts. We do not expect to make a profit from this charge. FEES DEDUCTED BY THE FUNDS AMOUNT. Each fund determines its own advisory fee and other expenses. For a list of fund fees, see "Fee Table." The fees are described in more detail in each fund prospectus. The Company receives compensation from each fund or its affiliate (other than the ING Partners Portfolios, of which the Company is the investment adviser) 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. As of December 31, 2002, the amount of such additional payments ranged up to 0.25% annually of the average net assets held in a fund by the Company. WHEN/HOW. A fund's fees and expenses are not deducted from your account value. Instead, they are reflected in the daily value of fund shares, which in turn will affect the daily value of the subaccounts. PURPOSE. These fees and expenses help to pay the fund's investment adviser and operating expenses. PREMIUM AND OTHER TAXES MAXIMUM AMOUNT. Some states and municipalities charge a premium tax on annuities. These taxes currently range from 0% to 4%, depending upon the jurisdiction. WHEN/HOW. We reserve the right to deduct a charge for premium taxes from your account value or from purchase payments to the account at any time, but not before there is a tax liability under state law. For example, we may deduct a charge for premium taxes at the time of a complete withdrawal or we may reflect the cost of premium taxes in our income phase payment rates when you commence income phase payments. We will not deduct a charge for any municipal premium tax of 1% or less, but we reserve the right to reflect such an expense in our income phase payment rates. In addition, the Company reserves the right to assess a charge for any federal taxes due against the separate account, see "Taxation." CHARGES FOR ING GET FUND Various series of ING GET Fund may be offered from time to time, and additional charges may apply if you elect to invest in one of these series. If a series is available, it will be described in a supplement to this prospectus at the time it is offered. The supplement will include fee table information about the option. 17 YOUR ACCOUNT VALUE - ---------------------------------------------- During the accumulation phase, your account value at any given time equals: - -- The current dollar value of amounts held in the subaccounts which takes into account investment performance and fees deducted from the subaccounts, plus - -- The current dollar value of amounts held in the Fixed Account, including interest 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's shares. The value of your interest 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). We discuss these deductions in more detail in "Fee Table" and "Fees." VALUATION. We determine the AUV every normal business day after the close of the New York Stock Exchange (normally at 4:00 p.m. Eastern Time). At that time, we calculate the current AUV by multiplying the AUV last calculated by the "net investment factor" of the subaccount. The net investment factor measures the investment performance of the subaccount from one valuation to the next. Current AUV = Prior AUV x Net Investment Factor NET INVESTMENT FACTOR. The net investment factor for a subaccount between two consecutive valuations equals the sum of 1.0000 plus the net investment rate. NET INVESTMENT RATE. The net investment rate is computed according to a formula that is equivalent to the following: - -- The net assets of the fund held by the subaccount as of the current valuation; minus - -- The net assets of the fund held by the subaccount at the preceding valuation; plus or minus - -- Taxes or provisions for taxes, if any, due to subaccount operations (with any federal income tax liability offset by foreign tax credits to the extent allowed); divided by - -- The total value of the subaccount's units at the preceding valuation; minus - -- A daily deduction for the mortality and expense risk charge and the administrative expense charge, if any, and any other fees deducted from investments in the separate account, such as guarantee charges for ING GET Fund. See "Fees." The net investment rate may be either positive or negative. 18 HYPOTHETICAL ILLUSTRATION. As a hypothetical illustration, assume that your initial purchase payment 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 AUV's 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 $25 for Subaccount B. Your account is credited with 300 accumulation units of Subaccount A, and 80 accumulation units of Subaccount B. STEP 1: You make an initial purchase payment of $5000. STEP 2: A. You direct us to invest $3,000 in Fund A. The purchase payment purchases 300 accumulation units of Subaccount A ($3,000 divided by the current $10 AUV). B. You direct us to invest $2,000 in Fund B. The purchase payment purchases 80 accumulation units of Subaccount B ($2,000 divided by the current $25 AUV). STEP 3: The separate account purchases shares of the applicable funds at the then current market value (net asset value or NAV). [EDGAR REPRESENTATION OF PRINTED GRAPHIC] $5,000 Purchase Payment STEP 1 ING Life Insurance and Annuity Company STEP 2 Variable Annuity Account B Subaccount A Subaccount B Etc. 300 accumulation 80 accumulation units units STEP 3 Mutual Fund A Mutual Fund B
Each fund's subsequent investment performance, expenses and charges, and the daily charges deducted from the subaccount, will cause the AUV to move up or down on a daily basis. PURCHASE PAYMENTS TO YOUR ACCOUNT. If all or a portion of the 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 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 value of subaccounts may vary day to day. 19 [SIDE NOTE] 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") - -- 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 local representative or call us at the number listed in "Contract Overview--Questions: Contacting the Company." [END SIDE NOTE] WITHDRAWALS - ---------------------------------------------- You may withdraw all or a portion of your account value at any time during the accumulation phase. STEPS FOR MAKING A WITHDRAWAL. - -- Select the withdrawal amount. 1) Full Withdrawal: You will receive, reduced by any required withholding tax, your account value 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. See Appendix I for more information about withdrawals from the Fixed Account. - -- Select investment options. If you do not specify this, we will withdraw dollars from each investment option in which you have account value in the same proportion as that value bears to your total account value. - -- Properly complete a disbursement form and send it to our Home Office. 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 Home Office. 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. REINVESTING A FULL WITHDRAWAL. Within 30 days after a full withdrawal, if allowed by law and the contract, you may elect to reinvest all or a portion of the withdrawal. We must receive any reinvested amounts within 60 days of the withdrawal. We reserve the right, however, to accept a reinvestment 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 reinvested based upon the subaccount values next computed following our receipt of your request and the amount to be reinvested. We will credit the amount reinvested proportionally for annual maintenance fees and for early withdrawal charges imposed at the time of withdrawal. We will deduct from the amount reinvested any annual maintenance fee which fell due after the withdrawal and before the reinvestment. We will reinvest 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 Fund and then elect to reinvest them, we will reinvest them in a GET Fund 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 reinvestment privilege may be used only once. Seek competent advice regarding the tax consequences associated with reinvestment. 20 [SIDE NOTE] 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 SIDE NOTE] SYSTEMATIC DISTRIBUTION OPTIONS - ---------------------------------------------- These options may be exercised at any time during the accumulation phase of the contract. 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. - -- 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 local representative or by calling us at the number listed in "Contract Overview--Questions: Contacting the Company." SYSTEMATIC DISTRIBUTION OPTION AVAILABILITY. 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 local representative or the Company at the number listed in "Contract Overview--Question: 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 Home Office. Once you revoke an option, you may not elect it again, until the next calendar year, nor may you elect any other systematic distribution option that may be available, unless you are allowed under the Internal Revenue Code of 1986, as amended (Tax Code). 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 may have tax consequences. If you are concerned about tax implications consult a tax adviser before electing an option. 21 [SIDE NOTE] 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." [END SIDE NOTE] DEATH BENEFIT - ---------------------------------------------- DURING THE ACCUMULATION PHASE WHO RECEIVES THE DEATH BENEFIT? If you would like certain individuals or entities to receive a death benefit when it becomes payable, you may name them as your beneficiaries. 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 local representative or us as indicated in "Contract Overview--Questions: Contacting the Company." WHEN IS A DEATH BENEFIT PAYABLE? During the accumulation phase a death benefit is payable when you, the contract holder, die. DEATH BENEFIT AMOUNT. The death benefit will equal your account value as of the next time we value your account after the date on which we receive proof of death acceptable to us. In addition to this amount, some states require we pay interest calculated from date of death at a rate specified by law. DEATH BENEFIT--METHODS OF PAYMENT (For payment options during the income phase, see "The Income Phase.") If you die during the accumulation phase of your contract, the following payment options are available to your beneficiary, if allowed by the Tax Code: - -- Lump-sum payment; or - -- Payment in accordance with any of the available income phase payment plans. See "The Income Phase--Payment Plans." The following options are also available, however, the Tax Code limits how long the death benefit proceeds may be left in these options: - -- Leave the account value invested in the contract; or - -- Leave the account value on deposit in the Company's general account, and receive monthly, quarterly, semi-annual or annual interest payments at the interest rate then being credited on such deposits. Your beneficiary can withdraw the balance on deposit at any time or request to receive payment in accordance with any of the available income phase payment plans. See "The Income Phase--Payment Plans." STEPS REQUIRED FOR DEATH BENEFITS TO BE PAID TO YOUR BENEFICIARY: 1. You must have designated a beneficiary(ies) for your contract; 2. Your beneficiary or someone on their behalf must provide us with proof of your death acceptable to us; and 3. Your beneficiary must elect one of the payment options available under the contract. We will not pay any death proceeds until the beneficiary elects a method of payment. Prior to the election of a payment method 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 will have the right to allocate or transfer amounts among available investment options. (Limitations may apply to transfers from the Fixed Account--see Appendix I.) 22 We will mail payment to the beneficiary within seven days after we receive proof of death and an election of the method of payment acceptable to us. 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." 23 [SIDE NOTE] 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 ANNUITIZATION--Initiating Income Phase Payments [END SIDE NOTE] 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 before the date you want to start receiving income phase payments, you must notify us in writing of all of the following: - -- Payment start date; - -- Income phase payment option (see the payment options table in this section); - -- Payment frequency (i.e. monthly, quarterly, semi-annually or annually); - -- Choice of fixed or variable payments or a combination of fix 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 invested in subaccount(s) you select. Not all subaccounts available during the accumulation phase may be available during the income phase. Currently, ING VP Balanced Portfolio, Inc., ING VP Bond Portfolio and ING VP Growth and Income Portfolio are the only subaccounts available during the income phase. For variable payments, you must also select an assumed net investment rate. ASSUMED NET INVESTMENT RATE. If you select variable income phase payments, you must also select an assumed net investment rate of either 5% or 3 1/2%. If you select a 5% rate, your first 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 performance 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 must result in: - -- A first income phase payment of at least $20; or - -- Total yearly income phase payments of at least $100. 24 If your account value is too low to meet these minimum payment amounts you will receive one lump-sum payment. RESTRICTIONS ON START DATES AND THE DURATION OF PAYMENTS. When income phase payments start, the age of the annuitant plus the number of years for which payments are guaranteed may not exceed 95. Income phase payments will not begin until you have selected an income phase payment option. Failure to select an income phase payment option may have adverse tax consequences. You should consult with a qualified tax adviser if you are considering this course of action. CHARGES DEDUCTED. When you select an income payment phase option (one of the options listed in the tables immediately below), a mortality and expense risk charge, consisting of a daily deduction of 1.25% on an annual basis, will be deducted from amounts held in the subaccounts. This charge compensates us for mortality and expense risks we assume under variable income phase payout options and is applicable to all variable income phase payout options, including variable nonlifetime options under which we do not assume mortality risk. Although we expect to make a profit from this fee, we do not always do so. We may also deduct a daily administrative charge of 0.25% annually from amounts held in the subaccounts. DEATH BENEFIT DURING THE INCOME PHASE. The death benefits that may be available to a beneficiary are outlined in the income phase payment option 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 payment in good order at our Home Office. If the 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 we made after the date of death. 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; consult a tax adviser before electing this option. The same or a 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. 25 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.
LIFETIME INCOME PHASE PAYMENT OPTIONS LENGTH OF PAYMENTS: For as long as the annuitant lives. It is possible that only one payment will Life Income 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. LENGTH OF PAYMENTS: For as long as the annuitant lives, with payments guaranteed for your choice of 5, 10, 15 or 20 years or as otherwise specified in the contract. Life Income-- DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If the Guaranteed annuitant dies before we have made all the Payments guaranteed payments, we will continue to pay the beneficiary the remaining guaranteed payments unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. LENGTH OF PAYMENTS: For as long as either annuitant lives. It is possible that only one payment will be made if both annuitants die before the second payment's due date. CONTINUING PAYMENTS: (A) When you select this option you choose for Life Income--Two 100%, 66 2/3% or 50% of the payment to continue to Lives 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 will continue to the second annuitant on the annuitant's death. DEATH BENEFIT--NONE: All payments end upon the death of both annuitants. LENGTH OF PAYMENTS: For as long as either annuitant lives, with payments guaranteed for a minimum of 120 months. CONTINUING PAYMENTS: 100% of the payment will Life Income--Two continue to the surviving annuitant after the Lives with first death. Guaranteed DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If both Payments annuitants die before the guaranteed payments have all been paid, we will continue to pay the beneficiary the remaining guaranteed payments, unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments.
Table continued -- 26
NONLIFETIME INCOME PHASE PAYMENT OPTIONS LENGTH OF PAYMENT: You may select payments for 3-30 years. In certain cases a lump-sum payment may be requested at any time. (see below) Nonlifetime-- DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If the Guaranteed annuitant dies before we make all the guaranteed Payments payments, we will continue to pay the beneficiary the remaining guaranteed payments, unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. 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. If the early withdrawal charge is based on completed purchase payment periods, each year that passes after income payments have begun is treated as a completed purchase payment period even though no additional purchase payments have been made. See "Fees--Early Withdrawal Charge." We will send lump-sum payments within seven calendar days after we receive the request for payment in good order at our Home Office. 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 for the remaining guaranteed payments is the same rate we used to calculate the income phase payments (i.e. the actual fixed rate used for the fixed payments or the 3 1/2% or 5% assumed net investment rate used for variable payments).
27 [SIDE NOTE] IN THIS SECTION: - -- Introduction - -- Contract Type - -- Withdrawals and Other Distributions - -- Taxation of Distributions - -- 10% Penalty Tax - -- Withholding for Federal Income Tax Liability - -- Minimum Distribution of Death Benefit Proceeds - -- Taxation of Nonqualified Contracts - -- Taxation of the Company [END SIDE NOTE] 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: - -- 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. - -- Tax laws change. It is possible that a change in the future could affect contracts issued in the past. - -- This section addresses federal income tax rules and does not discuss federal estate and gift tax implications, state and local taxes or any other tax provisions. - -- We do not make any guarantee about the tax treatment of the contract or any transaction involving the contract. - -- The term "payment" in this section refers to income phase payments. 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. TAXATION OF GAINS PRIOR TO DISTRIBUTION. You will generally not pay taxes on any earnings from the annuity contract described in this prospectus until they are withdrawn (or otherwise made available to you or a designated beneficiary). The IRS has stated in published rulings, however, that a variable contract owner will be considered the owner of separate account assets if the owner possesses incidents of investment control over the assets. In these circumstances, income and gains from the separate account assets would be 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 a contract holder from being considered the federal tax owner of a pro rata share of the assets of the separate account. DIVERSIFICATION. Tax Code section 817(h) requires that in a nonqualified contract the investments of the funds be "adequately diversified" in accordance with Treasury Regulations in order for the contracts to qualify as annuity contracts under federal tax law. The separate account, through the funds, intends to comply with the diversification requirements prescribed by the Treasury in Reg. Sec. 1.817-5, which affects how the funds' assets may be invested. CONTRACT TYPE The contracts are designed for use on a non-tax qualified basis as a nonqualified deferred annuity contract. THE CONTRACT. You are responsible for determining that contributions, distributions, investments and other transactions satisfy applicable laws. Legal counsel and a tax adviser should be consulted regarding suitability of the contract. 28 WITHDRAWALS AND OTHER DISTRIBUTIONS Certain tax rules apply to distributions from the contract. A distribution is any amount taken from the contract including withdrawals, income phase payments, rollovers, exchanges and death benefit proceeds. We report the taxable portion of all distributions to the Internal Revenue Service (IRS). TAXATION OF DISTRIBUTIONS NONQUALIFIED CONTRACTS. A full withdrawal of a nonqualified contract is taxable to the extent that the amount received exceeds the investment in the contract. A partial withdrawal is taxable to the extent that the account value immediately before the withdrawal exceeds the investment in the contract. In other words, a partial withdrawal is treated first as a withdrawal of taxable earnings. For income phase payments, a portion of each payment which represents the investment in the contract is not taxable. An exclusion ratio is calculated to determine the nontaxable portion. For fixed income phase payments, in general, there is no tax on the portion of each payment which represents the same ratio that the investment in the contract bears to the total dollar amount of the expected payments as defined in Tax Code section 72(c). The entire income phase payment will be taxable once the recipient has recovered the investment in the contract. For variable income phase payments, an equation is used to establish a specific dollar amount of each payment that is not taxed. The dollar amount is determined by dividing the investment in the contract by the total number of expected periodic payments. The entire income phase payment will be taxable once the recipient has recovered the investment in the contract. All deferred nonqualified annuity contracts that are issued by the Company (or its affiliates) to the same contract holder during any calendar year are treated as one annuity contract for purposes of determining the amount includible in gross income under Tax Code section 72(e). In addition, the Treasury Department has specific authority to issue regulations that prevent the avoidance of Tax Code section 72(e) through the serial purchase of annuity contracts or otherwise. TAXATION OF DEATH BENEFIT PROCEEDS. In general, payments received by your designated beneficiaries after your death are taxed in the same manner as if you had received those payments. 10% PENALTY TAX Under certain circumstances, the Tax Code may impose a 10% penalty tax on the taxable portion of any distribution from a nonqualified contract unless one or more of the following have occurred: - -- You have attained age 59 1/2; - -- You have become disabled within the meaning of the Tax Code; - -- You have died; - -- The distribution is made in substantially equal periodic payments (at least annually) over your life or life expectancy or the joint lives or joint life expectancies of you and your designated beneficiary; or - -- The distribution is allocable to investment in the contract before August 14, 1982. 29 WITHHOLDING FOR FEDERAL INCOME TAX LIABILITY Any taxable distributions under the contract are generally subject to withholding. Federal income tax liability rates vary according to the type of distribution and the recipient's tax status. Generally, you or a designated beneficiary may elect not to have tax withheld from distributions. NON-RESIDENT ALIENS. If you or your designated beneficiary is a non-resident alien, then any withholding is governed by Tax Code section 1441 based on the individual's citizenship, the country of domicile and treaty status. MINIMUM DISTRIBUTION OF DEATH BENEFIT PROCEEDS DEATH OF CONTRACT HOLDER. The following requirements apply to nonqualified contracts at your death. Different distribution requirements apply if your death occurs: - -- After you begin receiving income phase payments under the contract, or - -- Before you begin receiving such distributions. If your death occurs after you begin receiving income phase payments, distributions must be made at least as rapidly as under the method in effect at the time of your death. If your death occurs before you begin receiving income phase payments, your entire balance must be distributed within five years after the date of your death. For example, if you die on September 1, 2003, your entire balance must be distributed by August 31, 2008. However, if the distribution begins within one year of your death, then payments may be made over one of the following time- frames: - -- Over the life of the designated beneficiary; or - -- Over a period not extending beyond the life expectancy of the designated beneficiary. SPOUSAL DESIGNATED BENEFICIARIES. If the designated beneficiary is your spouse, the contract may be continued with the surviving spouse as the new contract holder. DEATH OF THE ANNUITANT. If the contract holder is a nonnatural person and the annuitant dies, the same rules apply as outlined above for death of a contract holder, with the annuitant treated as the holder of the contract. If there is a change in the annuitant, such change shall be treated as the death of the holder of the contract. If the contract holder is a natural person but not the annuitant and the annuitant dies, the designated beneficiary must elect an income phase payment option within 60 days of the date of death, or any gain under the contract will be includible in the designated beneficiary's income in the year the annuitant dies. TAXATION OF NONQUALIFIED CONTRACTS IN GENERAL. Tax Code section 72 governs taxation of annuities in general. A contract holder under a nonqualified contract who is a natural person generally is not taxed on increases in the account value until distribution occurs by withdrawing all or part of such account value. The taxable portion of a distribution is taxable as ordinary income. NON-NATURAL HOLDERS OF A NONQUALIFIED CONTRACT. If the contract holder is not a natural person, a nonqualified contract generally is not treated as an annuity for income tax purposes and the income on the contract for the taxable year is 30 currently taxable as ordinary income. Income on the contract is any increase over the year in the surrender value, adjusted for purchase payments made during the year, amounts previously distributed and amounts previously included in income. There are some exceptions to this rule and a non-natural person should consult a tax adviser prior to purchasing the contract. A non-natural person exempt from federal income taxes should consult a tax adviser regarding treatment of income on the contract for purposes of the unrelated business income tax. When the contract holder is not a natural person, a change in annuitant is treated as the death of the contract holder. TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A NONQUALIFIED CONTRACT. A transfer of ownership of a nonqualified contract, the designation of an annuitant, payee or other designated beneficiary who is not also the contract holder, the selection of certain income phase payment dates, or the exchange of a contract may result in certain tax consequences. The assignment, pledge, or agreement to assign or pledge any portion of the contract value generally will be treated as a distribution. Anyone contemplating any such designation, transfer, assignment, selection, or exchange should contact a tax adviser regarding the potential tax effects of such a transaction. TAXATION OF THE COMPANY We are taxed as a life insurance company under the Tax Code. Variable Annuity Separate Account B 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 contract value invested in the subaccounts. 31 OTHER TOPICS - ---------------------------------------------- THE COMPANY We issue the contracts described in this prospectus and are responsible for providing each contract's insurance and annuity benefits. We are a stock life insurance company organized under the insurance laws of the State of Connecticut in 1976 and an indirect wholly-owned subsidiary of ING Groep N.V., a global financial institution active in the fields of insurance, banking and asset management. Through a merger, our operations include the business of Aetna Variable Annuity Life Insurance Company (formerly known as Participating Annuity Life Insurance Company, an Arkansas life insurance company organized in 1954). Prior to May 1, 2002, the Company was known as Aetna Life Insurance and Annuity Company. We are engaged in the business of issuing life insurance and annuities. Our principal executive offices are located at: 151 Farmington Avenue Hartford, Connecticut 06156 VARIABLE ANNUITY ACCOUNT B We established Variable Annuity Account B (the "separate account") under Connecticut Law in 1976 as a continuation of the separate account established in 1974 under Arkansas law by 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 contracts are obligations of the Company. CONTRACT DISTRIBUTION The Company's subsidiary, ING Financial Advisers, LLC , serves as the principal underwriter for the contracts. ING Financial Advisers, LLC, a Delaware limited liability company, is registered as a broker-dealer with the SEC. ING Financial Advisers, LLC is also a member of the National Association of Securities Dealers, Inc. (NASD) and the Securities Investor Protection Corporation. ING Financial Advisers, LLC'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 Advisers, LLC or other broker-dealers which have or may enter into a selling arrangement with ING Financial Advisers, LLC. We refer to ING Financial Advisers, LLC and the other broker-dealers selling the contracts as "distributors." All registered representatives selling the contracts must also be licensed as insurance agents for the Company. 32 Broker-dealers which have or may enter into selling agreements with ING Financial Advisers, LLC include the following broker-dealers which are affiliated with the Company: Aeltus Capital, Inc. BancWest Investment Services, Inc. Baring Investment Services, Inc. Compulife Investor Services, Inc. Directed Services, Inc. Financial Network Investment Corporation Granite Investment Services, Inc. Guaranty Brokerage Services, Inc. IFG Network Securities, Inc. ING America Equities, Inc. ING Barings Corp. ING Direct Funds Limited ING DIRECT Securities, Inc. ING Funds Distributor, Inc. ING Furman Selz Financial Services LLC ING TT&S (U.S.) Securities, Inc. Locust Street Securities, Inc. Multi-Financial Securities Corporation PrimeVest Financial Services, Inc. Systematized Benefits Administrators, Inc. United Variable Services, Inc. VESTAX Securities Corporation Washington Square Securities, Inc. Occasionally, ING Financial Advisers, LLC 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. We will reimburse such entities for expenses related to and may pay fees to such entities in return for these services. ING Financial Advisers, LLC may also contract with independent third party broker-dealers who will act as wholesalers by assisting us in selecting broker- dealers or banks interested in acting as distributors. These wholesalers may also provide training, marketing and other sales related functions to the distributors and may provide certain administrative services in connection with the contract. ING Financial Advisers, LLC may pay such wholesalers compensation based upon purchase payments to contracts purchased through distributors that they select. ING Financial Advisers, LLC may also designate third parties to provide services in connection with the contracts 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 upon purchase payments. ING Financial Advisers, LLC will pay all costs and expenses related to these services. PAYMENT OF COMMISSIONS. We pay distributors and their registered representatives who sell the contract commissions and service fees. Distributors will be paid commissions up to an amount currently equal to 7 1/2% of first year purchase payments or as a combination of a certain percentage of purchase payments at time of sale and a trail commission as a percentage of assets. Under the latter arrangement, commission payments may exceed 7 1/2% of purchase payments over the life of the contract. We may also pay renewal commissions on purchase payments made after the first year and asset-based service fees. Some sales personnel may receive various types of non-cash compensation as special sales 33 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 of affiliated or related broker-dealers may be positively impacted if the overall amount of investments in the contracts and other products issued or advised by the Company or its affiliates increases over time. We pay these commissions, fees and related distribution expenses out of any early withdrawal charges assessed or out of our general assets, including investment income and any profit from investment advisory fees and mortality and expense risk charges. No additional deductions or charges are imposed for commissions and related expenses. PAYMENT DELAY OR SUSPENSION We reserve the right to suspend or postpone the date of any payment of benefits or values under any one of the following circumstances: - -- On any valuation date when the New York Stock Exchange is closed (except customary weekend and holiday closings) or when trading on the New York Stock Exchange is restricted; - -- When an emergency exists as determined by the SEC so that disposal of the securities held in the subaccounts is not reasonably practicable or it is not reasonably practicable to fairly determine the value of the subaccount's assets; or - -- During any other periods the SEC may by order permit for the protection of investors. The conditions under which restricted trading or an emergency exists shall be determined by the rules and regulations of the SEC. PERFORMANCE REPORTING We may advertise different types of historical performance for the subaccounts including: - -- Standardized average annual total returns; and - -- Non-standardized average annual total returns. STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS. We calculate standardized average annual total returns according to a formula prescribed by the SEC. This shows the percentage return applicable to $1,000 invested in the subaccounts over the most recent one, five and ten-year periods. If the investment option was not available for the full period, we give a history from the date money was first received in that option under the separate account. Standardized average annual total returns reflect deduction of all recurring charges during each period (i.e. mortality and expense risk charges, annual maintenance fees, administrative expense charges, if any, and any applicable early withdrawal charges). NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS. We calculate non-standardized average annual total returns in a similar manner as that stated above, except we do not include the deduction of any applicable early withdrawal charge. Some nonstandardized returns may also exclude the effect of an annual maintenance fee. If we reflected these charges in the calculation it would decrease the level of performance reflected by the calculation. Non-standardized returns may include performance from the fund's inception date, if that date is earlier than the one we use for standardized returns. 34 We may also advertise certain ratings, rankings or other information related to the Company, the subaccounts or the funds. For further details regarding performance reporting and advertising you may request a Statement of Additional Information at the number listed in "Contract Overview--Questions: Contacting the Company." VOTING RIGHTS Each of the subaccounts holds shares in a fund and each is entitled to vote at regular and special meetings of that fund. Under our current view of applicable law, we will vote the shares for each subaccount as instructed by persons having a voting interest in the subaccount. We will vote shares for which we receive no instructions in the same proportion as those for which we receive instructions. You will receive periodic reports relating to the funds in which you have 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 MODIFICATION We may change the contract as required by federal or state law or as otherwise permitted in 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 where such assignments are not prohibited, with proper notification. The date of any such assignment or transfer of ownership will be the date we receive the notification at our Home Office. 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 us at our Home Office. 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. Your rights and the interest of the annuitant and any beneficiary will be subject to the rights of any assignee we have on our records. LEGAL MATTERS AND PROCEEDINGS We are not aware of any pending legal proceedings which involve the separate account as a party. The validity of the securities offered by this prospectus has been passed upon by Counsel to the Company. We are, or may be in the future, a defendant in various legal proceedings in connection with the normal conduct of our insurance operations. Some of these cases may seek class action status and may include a demand for punitive damages as well as for compensatory damages. In the opinion of management, 35 the ultimate resolution of any existing legal proceeding is not likely to have a material adverse effect on our ability to meet our obligations under the contract. ING Financial Advisers, LLC, the principal underwriter and distributor of the contract, is not involved in any legal proceeding which, in the opinion of management, is likely to have material adverse effect on its ability to distribute the contract. 36 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 Contract Performance Data General Average Annual Total Return Quotations 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 Home Office at the number listed in "Contract Overview--Questions: Contacting the Company." 37 APPENDIX I FIXED ACCOUNT - ------------------------------------------------------------------ The Fixed Account is an investment option available during the accumulation phase of the contract. Additional information about this option may be found in the contract. Amounts allocated to the Fixed Account are held in the Company's general account which supports insurance and annuity obligations. GENERAL DISCLOSURE. - -- 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. - -- The SEC has not reviewed disclosure in this Appendix regarding the Fixed Account. 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 receive 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 guarantee depends upon the claims-paying ability of the Company. - -- 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. WITHDRAWALS. Except for contracts issued in the state of New York, withdrawals from the Fixed Account over $250,000 (for contracts issued prior to 1988) or $500,000 (for contracts issued after 1988) will be paid pursuant to a five year schedule. See your contract for details. Under certain emergency conditions, some contracts allow us to defer payment of any withdrawal for period of up to 6 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 once during each calendar year. 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 Home Office at least 30 days before income payments begin you may elect to have amounts transferred to one or more of the funds available during the income phase to provide variable payments. 38 APPENDIX II DESCRIPTION OF UNDERLYING FUNDS - ------------------------------------------------------------------ THE INVESTMENT RESULTS OF THE MUTUAL FUNDS (FUNDS) ARE LIKELY TO DIFFER SIGNIFICANTLY AND THERE IS NO ASSURANCE THAT ANY OF THE FUNDS WILL ACHIEVE THEIR RESPECTIVE INVESTMENT OBJECTIVES. SHARES OF THE FUNDS WILL RISE AND FALL IN VALUE AND YOU COULD LOSE MONEY BY INVESTING IN THE FUNDS. SHARES OF THE FUNDS ARE NOT BANK DEPOSITS AND ARE NOT GUARANTEED, ENDORSED OR INSURED BY ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. EXCEPT AS NOTED, ALL FUNDS ARE DIVERSIFIED, AS DEFINED UNDER THE INVESTMENT COMPANY ACT OF 1940. PLEASE REFER TO THE FUND PROSPECTUSES FOR ADDITIONAL INFORMATION. FUND PROSPECTUSES MAY BE OBTAINED FREE OF CHARGE, FROM OUR HOME OFFICE AT THE ADDRESS AND TELEPHONE NUMBER LISTED IN "CONTRACT OVERVIEW--QUESTIONS", 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.
INVESTMENT ADVISER/ INVESTMENT OBJECTIVE(S)/ FUND NAME SUBADVISER SUMMARY OF PRINCIPAL INVESTMENT STRATEGIES FIDELITY-REGISTERED TRADEMARK- Fidelity Management & Seeks long-term capital appreciation. VARIABLE INSURANCE PRODUCTS -- Research Company Normally invests primarily in common FIDELITY-REGISTERED TRADEMARK- Subadvisers: Fidelity stocks of companies whose value the VIP CONTRAFUND-REGISTERED Management & Research Portfolio's investment adviser believes is TRADEMARK- PORTFOLIO (U.K.) Inc.; Fidelity not fully recognized by the public. (INITIAL CLASS) Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc. FIDELITY-REGISTERED TRADEMARK- Fidelity Management & Seeks reasonable income. Also considers VARIABLE INSURANCE PRODUCTS -- Research Company the potential for capital appreciation. FIDELITY-REGISTERED TRADEMARK- Subadviser: FMR Seeks to achieve a yield which exceeds the VIP EQUITY-INCOME PORTFOLIO Co., Inc. composite yield on the securities (INITIAL CLASS) comprising the Standard & Poor's 500 Index. Normally invests at least 80% of total assets in income-producing equity securities (which tends to lead to investments in large cap "value" stocks). FIDELITY-REGISTERED TRADEMARK- Fidelity Management & Seeks to achieve capital appreciation. VARIABLE INSURANCE PRODUCTS -- Research Company Normally invests primarily in common FIDELITY-REGISTERED TRADEMARK- Subadviser: FMR stocks of companies the investment adviser VIP GROWTH PORTFOLIO Co., Inc. believes have above-average growth (INITIAL CLASS) potential (often called "growth" stocks). FIDELITY-REGISTERED TRADEMARK- Fidelity Management & Seeks long-term growth of capital. VARIABLE INSURANCE PRODUCTS -- Research Company Normally invests at least 80% of assets in FIDELITY-REGISTERED TRADEMARK- Subadvisers: Fidelity non-U.S. securities, primarily in common VIP OVERSEAS PORTFOLIO Management & Research stocks. (INITIAL CLASS) (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity International Investment Advisors (U.K.) Limited; Fidelity Investments Japan Limited; FMR Co., Inc.
39
INVESTMENT ADVISER/ INVESTMENT OBJECTIVE(S)/ FUND NAME SUBADVISER SUMMARY OF PRINCIPAL INVESTMENT STRATEGIES ING PARTNERS, INC. -- ING JPMORGAN ING Life Insurance and Seeks long-term growth of capital. Invests FLEMING INTERNATIONAL PORTFOLIO Annuity Company primarily (at least 65% of total assets) (formerly ING Scudder Subadviser: J.P. in the equity securities of foreign International Growth Portfolio) Morgan Fleming Asset companies that the subadviser believes (INITIAL CLASS) Management (London) have high growth potential. Will normally Ltd. invest in securities of at least three different countries other than the U.S. and will invest in securities in both developed and developing markets. ING PARTNERS, INC. -- ING MFS ING Life Insurance and Seeks capital appreciation. Invests CAPITAL OPPORTUNITIES PORTFOLIO Annuity Company primarily (at least 65% of net assets) in (INITIAL CLASS) Subadviser: common stocks and related securities, such Massachusetts as preferred stocks, convertible Financial Services securities and depositary receipts. Company ING PARTNERS, INC. -- ING MFS ING Life Insurance and Seeks long-term growth of capital and RESEARCH EQUITY PORTFOLIO Annuity Company future income. Invests primarily (at least (formerly ING MFS Research Subadviser: 80% of net assets) in common stocks and Portfolio) Massachusetts related securities, such as preferred (INITIAL CLASS) Financial Services stocks, convertible securities and Company depositary receipts. ING PARTNERS, INC. -- ING SALOMON ING Life Insurance and Seeks long-term growth of capital. Invests BROTHERS AGGRESSIVE GROWTH Annuity Company primarily (at least 80% of net assets PORTFOLIO (formerly ING MFS Subadviser: Salomon under normal circumstances) in common Emerging Equities Portfolio) Brothers Asset stocks and related securities, such as (INITIAL CLASS) Management Inc preferred stocks, convertible securities and depositary receipts, of emerging growth companies. ING PARTNERS, INC. -- ING T. ROWE ING Life Insurance and Seeks long-term capital growth, and PRICE GROWTH EQUITY PORTFOLIO Annuity Company secondarily, increasing dividend income. (INITIAL CLASS) Subadviser: T. Rowe Invests primarily (at least 80% of net Price assets under normal circumstances) in the Associates, Inc. common stocks. Concentrates its investments in growth companies. Investments in foreign securities are limited to 30% of total assets. ING VP BALANCED PORTFOLIO, INC. ING Investments, LLC Seeks to maximize investment return, (CLASS R SHARES) Subadviser: Aeltus consistent with reasonable safety of Investment principal, by investing in a diversified Management, Inc. portfolio of one or more of the following asset classes: stocks, bonds and cash equivalents, based on the judgment of the Portfolio's management, of which of those sectors or mix thereof offers the best investment prospects. Typically, maintains approximately 60% of total assets in equities and approximately 40% of total assets in debt (including money market instruments). The Portfolio may invest up to 15% of total assets in high-yield instruments. ING VP BOND PORTFOLIO ING Investments, LLC Seeks to maximize total return as is (CLASS R SHARES) Subadviser: Aeltus consistent with reasonable risk, through Investment investment in a diversified portfolio Management, Inc. consisting of debt securities. Under normal market conditions, invests at least 80% of net assets in high-grade corporate bonds, mortgage-related and other asset-backed securities, and securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities. The Portfolio may invest up to 15% of total assets in high-yield instruments and up to 25% of total assets in foreign debt securities.
40
INVESTMENT ADVISER/ INVESTMENT OBJECTIVE(S)/ FUND NAME SUBADVISER SUMMARY OF PRINCIPAL INVESTMENT STRATEGIES ING VARIABLE FUNDS -- ING VP GROWTH ING Investments, LLC Seeks to maximize total return through AND INCOME PORTFOLIO Subadviser: Aeltus investments in a diversified portfolio of (CLASS R SHARES) Investment common stocks and securities convertible Management, Inc. into common stock. Under normal market conditions, invests at least 65% of total assets in common stocks that the Portfolio's subadviser believes have significant potential for capital appreciation or income growth or both. ING VP MONEY MARKET PORTFOLIO ING Investments, LLC Seeks to provide high current return, (CLASS R SHARES) Subadviser: Aeltus consistent with preservation of capital Investment and liquidity, through investment in Management, Inc. high-quality money market instruments. Invests in a diversified portfolio of high-quality fixed income securities denominated in U.S. dollars, with short remaining maturities. THERE IS NO GUARANTEE THAT THE ING VP MONEY MARKET SUBACCOUNT WILL HAVE A POSITIVE OR LEVEL RETURN. ING STRATEGIC ALLOCATION ING Investments, LLC Seeks to provide total return (i.e., PORTFOLIOS, INC. -- ING VP Subadviser: Aeltus income and capital appreciation, both STRATEGIC ALLOCATION BALANCED Investment realized and unrealized). Managed for PORTFOLIO (formerly ING Management, Inc. investors seeking a balance between income Generation Portfolios, Inc. -- and capital appreciation who generally ING VP Crossroads Portfolio) have an investment horizon exceeding ten (CLASS R SHARES) years and a moderate 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 60% equities, 35% fixed income and 5% money market instruments under neutral market conditions. ING STRATEGIC ALLOCATION ING Investments, LLC Seeks to provide capital appreciation. PORTFOLIOS, INC. -- ING VP Subadviser: Aeltus Managed for investors seeking capital STRATEGIC ALLOCATION GROWTH Investment appreciation who generally have an PORTFOLIO (formerly ING Management, Inc. investment horizon exceeding 15 years and Generation Portfolios, Inc. -- a high level of risk tolerance. Under ING VP Ascent Portfolio) normal market conditions, allocates assets (CLASS R SHARES) 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 80% equities and 20% fixed income under neutral market conditions. ING STRATEGIC ALLOCATION ING Investments, LLC Seeks to provide total return consistent PORTFOLIOS, INC. -- ING VP Subadviser: Aeltus with preservation of capital. Managed for STRATEGIC ALLOCATION INCOME Investment investors primarily seeking total return PORTFOLIO (formerly ING Management, Inc. consistent with capital preservation who Generation Portfolios, Inc. -- generally have an investment horizon ING VP Legacy Portfolio) exceeding five years and a low level of (CLASS R SHARES) 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 PORTFOLIOS, INC. -- ING Investments, LLC Seeks long-term capital appreciation. ING VP TECHNOLOGY PORTFOLIO Subadviser: AIC Asset Invests at least 80% of net assets in (CLASS R SHARES) Management, LLC (AIC) common stocks and securities convertible into common stock of companies in the information technology industry sector. JANUS ASPEN SERIES -- BALANCED Janus Capital Seeks long-term capital growth, consistent PORTFOLIO with preservation of capital and balanced (INSTITUTIONAL SHARES) by current income. Normally invests 40-60% of its assets in securities selected primarily for their growth potential and 40-60% of its assets in securities selected primarily for their income potential. Will normally invest at least 25% of its assets in fixed-income securities.
41
INVESTMENT ADVISER/ INVESTMENT OBJECTIVE(S)/ FUND NAME SUBADVISER SUMMARY OF PRINCIPAL INVESTMENT STRATEGIES JANUS ASPEN SERIES -- FLEXIBLE Janus Capital Invests primarily in a wide variety of INCOME PORTFOLIO income-producing securities such as (INSTITUTIONAL SHARES) corporate bonds and notes, government 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 with a dollar- weighted maturity of five to ten years. Will limit its investment in high-yield/high-risk bonds to 35% or less of its net assets. JANUS ASPEN SERIES -- GROWTH Janus Capital Seeks long-term growth of capital in a PORTFOLIO manner consistent with the preservation of (INSTITUTIONAL SHARES) capital. Invests primarily in common stocks selected for their growth potential. Although it can invest in companies of any size, it generally invests in larger, more established companies. JANUS ASPEN SERIES -- MID CAP Janus Capital A NONDIVERSIFIED Portfolio that invests, GROWTH PORTFOLIO (formerly under normal circumstances, at least 80% Aggressive Growth Portfolio) of its net assets in equity securities of (INSTITUTIONAL SHARES) mid-sized companies whose market capitalization falls, at the time of initial purchase, in the 12-month average of the capitalization ranges of the Russell MidCap Growth Index. JANUS ASPEN SERIES -- WORLDWIDE Janus Capital Seeks long-term growth of capital in a GROWTH PORTFOLIO manner consistent with the preservation of (INSTITUTIONAL SHARES) capital. Invests primarily in common stocks of companies of any size located throughout the world. Normally invests in issuers from at least five different countries, including the United States. May at times invest in fewer than five countries or even in a single country.
42 APPENDIX III CONDENSED FINANCIAL INFORMATION - ------------------------------------------------------------------ TABLE I FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.25% (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE PERIODS IN THE TWO-YEAR PERIOD ENDED DECEMBER 31, 2002 IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH HAVE BEEN AUDITED BY ERNST & YOUNG LLP, INDEPENDENT AUDITORS. THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE PERIODS IN THE EIGHT-YEAR PERIOD ENDED DECEMBER 31, 2000 (AS APPLICABLE), IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH HAVE BEEN AUDITED BY OTHER AUDITORS. THE FINANCIAL STATEMENTS AND THE INDEPENDENT AUDITORS' REPORT THEREON FOR THE YEAR ENDED DECEMBER 31, 2002 ARE INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- FIDELITY-REGISTERED TRADEMARK- VIP CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO Value at beginning of period $19.354 $22.333 $24.217 $19.735 $15.374 $12.540 Value at end of period $17.33 $19.354 $22.333 $24.217 $19.735 $15.374 Number of accumulation units outstanding at end of period 368,356 350,846 365,499 449,134 488,102 465,699 FIDELITY-REGISTERED TRADEMARK- VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $18.363 $19.565 $18.272 $17.400 $15.784 $12.475 Value at end of period $15.06 $18.363 $19.565 $18.272 $17.400 $15.784 Number of accumulation units outstanding at end of period 362,704 304,410 204,704 236,374 298,921 328,562 FIDELITY-REGISTERED TRADEMARK- VIP GROWTH PORTFOLIO Value at beginning of period $18.588 $22.858 $25.999 $19.155 $13.904 $11.402 Value at end of period $12.83 $18.588 $22.858 $25.999 $19.155 $13.904 Number of accumulation units outstanding at end of period 424,020 497,068 536,656 474,649 324,558 229,060 FIDELITY-REGISTERED TRADEMARK- VIP OVERSEAS PORTFOLIO Value at beginning of period $12.077 $15.514 $19.419 $13.786 $12.381 $11.238 Value at end of period $9.51 $12.077 $15.514 $19.419 $13.786 $12.381 Number of accumulation units outstanding at end of period 41,584 40,745 33,208 37,275 54,226 51,780 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period $18.876 $26.160 $32.942 $21.057 $17.903 $17.682(1) Value at end of period $15.27 $18.876 $26.160 $32.942 $21.057 $17.903 Number of accumulation units outstanding at end of period 216,775 254,404 286,301 316,726 360,392 411,600 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $27.159 $36.551 $39.254 $26.713 $21.343 $21.038(1) Value at end of period $18.73 $27.159 $36.551 $39.254 $26.713 $21.343 Number of accumulation units outstanding at end of period 249,445 300,792 335,970 278,562 303,746 296,540 ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period $13.976 $17.889 $18.963 $15.481 $12.744 $12.995(1) Value at end of period $10.37 $13.976 $17.889 $18.963 $15.481 $12.744 Number of accumulation units outstanding at end of period 300,021 351,117 395,373 408,870 605,271 664,979 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $15.086 $20.426 $29.040 $19.489 $15.219 $15.411(1) Value at end of period $9.64 $15.086 $20.426 $29.040 $19.489 $15.219 Number of accumulation units outstanding at end of period 353,915 420,422 455,264 485,026 695,813 742,913 ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO Value at beginning of period $19.189 $21.643 $21.922 $18.146 $14.400 $14.112(1) Value at end of period $14.54 $19.189 $21.643 $21.922 $18.146 $14.400 Number of accumulation units outstanding at end of period 192,650 212,838 192,790 177,799 287,914 231,297 1996 1995 1994 1993 ---- ---- ---- ---- FIDELITY-REGISTERED TRADEMARK- VIP CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO Value at beginning of period $10.468 $10.000(1) Value at end of period $12.540 $10.468 Number of accumulation units outstanding at end of period 273,189 379,862 FIDELITY-REGISTERED TRADEMARK- VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $11.054 $10.000(1) Value at end of period $12.475 $11.054 Number of accumulation units outstanding at end of period 208,072 294,244 FIDELITY-REGISTERED TRADEMARK- VIP GROWTH PORTFOLIO Value at beginning of period $10.066 $10.000(1) Value at end of period $11.402 $10.066 Number of accumulation units outstanding at end of period 199,720 288,576 FIDELITY-REGISTERED TRADEMARK- VIP OVERSEAS PORTFOLIO Value at beginning of period $10.052 $10.000(1) Value at end of period $11.238 $10.052 Number of accumulation units outstanding at end of period 38,994 33,813 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO 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 Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period
43 CONDENSED FINANCIAL INFORMATION (CONTINUED) - ------------------------------------------------------------------
2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $22.856 $24.163 $24.603 $21.929 $18.989 $15.698 Value at end of period $20.25 $22.856 $24.163 $24.603 $21.929 $18.989 Number of accumulation units outstanding at end of period 1,483,863 1,725,814 2,014,690 2,278,136 2,929,720 3,174,738 ING VP BOND PORTFOLIO Value at beginning of period $16.266 $15.147 $13.988 $14.270 $13.361 $12.493 Value at end of period $17.40 $16.266 $15.147 $13.988 $14.270 $13.361 Number of accumulation units outstanding at end of period 807,470 862,575 722,494 887,371 1,129,589 1,168,988 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $20.465 $25.397 $28.883 $24.907 $22.028 $17.173 Value at end of period $15.16 $20.465 $25.397 $28.883 $24.907 $22.028 Number of accumulation units outstanding at end of period 4,278,162 5,447,988 6,188,910 7,212,849 9,491,619 10,689,845 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $13.905 $13.547 $12.894 $12.425 $11.930 $11.453 Value at end of period $13.95 $13.905 $13.547 $12.894 $12.425 $11.930 Number of accumulation units outstanding at end of period 1,044,246 1,134,800 894,024 1,034,154 1,146,661 974,714 ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO Value at beginning of period $14.966 $16.295 $16.431 $15.095 $14.432 $12.430 Value at end of period $13.37 $14.966 $16.295 $16.431 $15.095 $14.432 Number of accumulation units outstanding at end of period 89,224 99,986 99,845 115,324 218,649 175,559 ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO Value at beginning of period $15.344 $17.566 $17.905 $15.855 $15.392 $12.999 Value at end of period $13.07 $15.344 $17.566 $17.905 $15.855 $15.392 Number of accumulation units outstanding at end of period 72,637 76,069 79,352 96,551 274,115 317,579 ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO Value at beginning of period $14.844 $15.397 $14.875 $14.064 $13.317 $11.776 Value at end of period $14.02 $14.844 $15.397 $14.875 $14.064 $13.317 Number of accumulation units outstanding at end of period 88,782 82,972 99,655 111,343 197,742 133,741 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period $4.436 $5.831 $9.558(1) Value at end of period $2.57 $4.436 $5.831 Number of accumulation units outstanding at end of period 240,058 172,469 127,430 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $22.613 $24.030 $24.886 $19.880 $14.990 $12.431 Value at end of period $20.89 $22.613 $24.030 $24.886 $19.880 $14.990 Number of accumulation units outstanding at end of period 555,952 594,286 582,229 527,201 334,508 193,429 JANUS ASPEN FLEXIBLE INCOME PORTFOLIO Value at beginning of period $17.375 $16.331 $15.562 $15.509 $14.393 $13.040 Value at end of period $18.96 $17.375 $16.331 $15.562 $15.509 $14.393 Number of accumulation units outstanding at end of period 171,616 114,775 62,404 73,596 85,517 109,812 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $18.419 $24.782 $29.366 $20.651 $15.414 $12.716 Value at end of period $13.37 $18.419 $24.782 $29.366 $20.651 $15.414 Number of accumulation units outstanding at end of period 338,649 458,627 541,342 432,037 217,310 179,226 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $18.313 $30.628 $45.486 $20.433 $15.410 $13.850 Value at end of period $13.03 $18.313 $30.628 $45.486 $20.433 $15.410 Number of accumulation units outstanding at end of period 566,618 759,840 986,825 828,592 512,154 469,230 1996 1995 1994 1993 ---- ---- ---- ---- ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $13.803 $10.971 $11.164 $10.286 Value at end of period $15.698 $13.803 $10.971 $11.164 Number of accumulation units outstanding at end of period 3,885,730 6,430,772 3,541,703 318,711 ING VP BOND PORTFOLIO Value at beginning of period $12.212 $10.457 $11.006 $10.160 Value at end of period $12.493 $12.212 $10.457 $11.006 Number of accumulation units outstanding at end of period 1,947,629 4,853,662 1,988,960 166,913 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $13.972 $10.698 $10.940 $10.378 Value at end of period $17.173 $13.972 $10.698 $10.940 Number of accumulation units outstanding at end of period 15,372,944 30,554,957 11,117,383 879,670 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $11.007 $10.509 $10.223 $10.031 Value at end of period $11.453 $11.007 $10.509 $10.223 Number of accumulation units outstanding at end of period 1,984,269 4,354,272 1,822,449 90,782 ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO Value at beginning of period $10.594 $10.000(1) Value at end of period $12.430 $10.594 Number of accumulation units outstanding at end of period 74,128 16,953 ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO Value at beginning of period $10.652 $10.000(1) Value at end of period $12.999 $10.652 Number of accumulation units outstanding at end of period 99,589 16,791 ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO Value at beginning of period $10.443 $10.000(1) Value at end of period $11.776 $10.443 Number of accumulation units outstanding at end of period 25,977 2,222 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $10.835 $10.000(1) Value at end of period $12.431 $10.835 Number of accumulation units outstanding at end of period 74,184 7,772 JANUS ASPEN FLEXIBLE INCOME PORTFOLIO Value at beginning of period $12.094 $9.886 $10.000(1) Value at end of period $13.040 $12.094 $9.886 Number of accumulation units outstanding at end of period 96,128 84,048 15,893 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $10.870 $10.000(1) Value at end of period $12.716 $10.870 Number of accumulation units outstanding at end of period 132,465 26,022 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $12.992 $10.319 $10.000(1) Value at end of period $13.850 $12.992 $10.319 Number of accumulation units outstanding at end of period 590,904 723,839 131,702
44 CONDENSED FINANCIAL INFORMATION (CONTINUED) - ------------------------------------------------------------------
2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $22.088 $28.839 $34.626 $21.320 $16.745 $13.880 Value at end of period $16.25 $22.088 $28.839 $34.626 $21.320 $16.745 Number of accumulation units outstanding at end of period 609,559 760,308 966,698 902,510 1,069,704 953,522 1996 1995 1994 1993 ---- ---- ---- ---- JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $10.893 $10.000(1) Value at end of period $13.880 $10.893 Number of accumulation units outstanding at end of period 520,275 227,582
- ---------------------------------- FOOTNOTE FOR PERIOD ENDED DECEMBER 31, 2000: (1) Funds were first received in this option during May 2000. FOOTNOTE FOR PERIOD ENDED DECEMBER 31, 1997: (1) Funds were first received in this option during November 1997. FOOTNOTE FOR PERIOD ENDED DECEMBER 31, 1995: (1) The initial accumulation unit value was established at $10.000 during August 1995, when the fund became available under the contract. FOOTNOTE FOR PERIOD ENDED DECEMBER 31, 1994: (1) The initial accumulation unit value was established at $10.000 during October 1994, when the funds were first received in this option. 45 CONDENSED FINANCIAL INFORMATION (CONTINUED) - ------------------------------------------------------------------ TABLE II FOR CONTRACTS CONTAINING LIMITS ON FEES (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE PERIODS IN THE TWO-YEAR PERIOD ENDED DECEMBER 31, 2002 IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH HAVE BEEN AUDITED BY ERNST & YOUNG LLP, INDEPENDENT AUDITORS. THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE PERIODS IN THE FOUR-YEAR PERIOD ENDED DECEMBER 31, 2000 (AS APPLICABLE), IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT WHICH HAVE BEEN AUDITED BY OTHER AUDITORS. THE FINANCIAL STATEMENTS AND THE INDEPENDENT AUDITORS' REPORT THEREON FOR THE YEAR ENDED DECEMBER 31, 2002 ARE INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- FIDELITY-REGISTERED TRADEMARK- VIP CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO Value at beginning of period $19.354 $22.333 $24.217 $19.735 $15.374 $13.535(1) Value at end of period $17.33 $19.354 $22.333 $24.217 $19.735 $15.374 Number of accumulation units outstanding at end of period 18,503 11,769 8,064 13,750 14,618 13,675 FIDELITY-REGISTERED TRADEMARK- VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $18.363 $19.565 $18.272 $17.400 $15.784 $14.017(1) Value at end of period $15.06 $18.363 $19.565 $18.272 $17.400 $15.784 Number of accumulation units outstanding at end of period 28,494 5,108 7,656 11,370 13,539 35,342 FIDELITY-REGISTERED TRADEMARK- VIP GROWTH PORTFOLIO Value at beginning of period $18.588 $22.858 $25.999 $19.155 $13.904 $12.498(1) Value at end of period $12.83 $18.588 $22.858 $25.999 $19.155 $13.904 Number of accumulation units outstanding at end of period 16,200 30,698 29,626 32,858 24,195 3,029 ING JPMORGAN FLEMING INTERNATIONAL PORTFOLIO Value at beginning of period $18.876 $26.160 $32.942 $21.057 $17.903 $17.682(2) Value at end of period $15.27 $18.876 $26.160 $32.942 $21.057 $17.903 Number of accumulation units outstanding at end of period 1,614 2,389 4,808 4,496 5,245 3,986 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $27.159 $36.551 $39.254 $26.713 $21.343 $21.038(2) Value at end of period $18.73 $27.159 $36.551 $39.254 $26.713 $21.343 Number of accumulation units outstanding at end of period 9,460 9,287 11,362 9,451 9,947 8,563 ING MFS RESEARCH EQUITY PORTFOLIO Value at beginning of period $13.976 $17.889 $18.963 $15.481 $12.744 $12.995(2) Value at end of period $10.37 $13.976 $17.889 $18.963 $15.481 $12.744 Number of accumulation units outstanding at end of period 121,245 141,938 162,448 135,420 148,963 141,582 ING SALOMON BROTHERS AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $15.086 $20.426 $29.040 $19.489 $15.219 $15.411(2) Value at end of period $9.64 $15.086 $20.426 $29.040 $19.489 $15.219 Number of accumulation units outstanding at end of period 9,981 15,417 13,795 12,142 11,330 11,848 ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO Value at beginning of period $19.189 $21.643 $21.922 $18.146 $14.400 $14.112(2) Value at end of period $14.54 $19.189 $21.643 $21.922 $18.146 $14.400 Number of accumulation units outstanding at end of period 6,422 6,688 4,920 4,491 4,730 3,310 ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $23.119 $24.379 $24.762 $22.015 $19.016 $16.898(1) Value at end of period $20.53 $23.119 $24.379 $24.762 $22.015 $19.016 Number of accumulation units outstanding at end of period 226,171 340,426 361,203 383,141 452,764 477,504 ING VP BOND PORTFOLIO Value at beginning of period $16.378 $15.229 $14.042 $14.304 $13.373 $12.747(1) Value at end of period $17.55 $16.378 $15.229 $14.042 $14.304 $13.373 Number of accumulation units outstanding at end of period 332,174 362,413 364,573 387,135 452,992 489,431
46 CONDENSED FINANCIAL INFORMATION (CONTINUED) - ------------------------------------------------------------------
2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $20.700 $25.624 $29.069 $25.005 $22.060 $19.527(1) Value at end of period $15.37 $20.700 $25.624 $29.069 $25.005 $22.060 Number of accumulation units outstanding at end of period 1,943,271 2,540,138 2,862,933 3,297,663 3,821,349 4,106,796 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $13.905 $13.547 $12.894 $12.425 $11.930 $11.654(1) Value at end of period $13.95 $13.905 $13.547 $12.894 $12.425 $11.930 Number of accumulation units outstanding at end of period 340,943 362,580 424,946 457,619 505,775 580,412 ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO Value at beginning of period $15.207 $16.499 $16.579 $15.179 $14.461 $13.178(1) Value at end of period $13.63 $15.207 $16.499 $16.579 $15.179 $14.461 Number of accumulation units outstanding at end of period 9,897 9,895 9,913 9,939 10,769 10,798 ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO Value at beginning of period $15.591 $17.786 $18.066 $15.942 $15.422 $13.943(1) Value at end of period $13.33 $15.591 $17.786 $18.066 $15.942 $15.422 Number of accumulation units outstanding at end of period 19,199 21,776 21,776 21,776 24,014 23,868 ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO Value at beginning of period $14.410(1) $14.141 $13.343 $12.335(1) Value at end of period $14.30 $14.497 $14.141 $13.343 Number of accumulation units outstanding at end of period 22,791 0 1,958 2,254 ING VP TECHNOLOGY PORTFOLIO Value at beginning of period $4.454 $5.841 $9.564(1) Value at end of period $2.59 $4.454 $5.841 Number of accumulation units outstanding at end of period 1,785 7,505 7,135 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $22.613 $24.030 $24.886 $19.880 $14.990 $13.554(1) Value at end of period $20.89 $22.613 $24.030 $24.886 $19.880 $14.990 Number of accumulation units outstanding at end of period 23,295 30,038 16,214 12,101 6,712 2,819 JANUS ASPEN FLEXIBLE INCOME PORTFOLIO Value at beginning of period $17.375 $16.331 $15.562 $15.509 $14.630(1) Value at end of period $18.96 $17.375 $16.331 $15.562 $15.509 Number of accumulation units outstanding at end of period 8,978 3,110 3,110 3,110 5,158 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $18.419 $24.782 $29.366 $20.651 $15.414 $13.985(1) Value at end of period $13.37 $18.419 $24.782 $29.366 $20.651 $15.414 Number of accumulation units outstanding at end of period 22,476 45,290 46,192 29,284 1,028 750 JANUS ASPEN MID CAP GROWTH PORTFOLIO Value at beginning of period $18.313 $30.628 $45.486 $20.433 $15.410 $13.806(1) Value at end of period $13.03 $18.313 $30.628 $45.486 $20.433 $15.410 Number of accumulation units outstanding at end of period 27,927 34,366 37,118 34,550 24,373 19,818 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $22.088 $28.839 $34.626 $21.320 $16.745 $15.851(1) Value at end of period $16.25 $22.088 $28.839 $34.626 $21.320 $16.745 Number of accumulation units outstanding at end of period 26,439 36,002 42,596 44,861 45,971 44,433
- ---------------------------------- FOOTNOTE FOR PERIOD ENDED DECEMBER 31, 2002: (1) Funds were first received in this option during July 2002. FOOTNOTE FOR PERIOD ENDED DECEMBER 31, 2000: (1) Funds were first received in this option during August 2000. FOOTNOTE FOR PERIOD ENDED DECEMBER 31, 1998: (1) Funds were first received in this option during February 1998. FOOTNOTES FOR PERIOD ENDED DECEMBER 31, 1997: (1) Funds were first received in this option during June 1997. (2) Funds were first received in this option during November 1997. 47 VARIABLE ANNUITY ACCOUNT B OF ING LIFE INSURANCE AND ANNUITY COMPANY STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 2003 Individual Variable Annuity Contracts This Statement of Additional Information is not a prospectus and should be read in conjunction with the current prospectus for Variable Annuity Account B (the "Separate Account") dated May 1, 2003. A free prospectus is available upon request from the local ING Life Insurance and Annuity Company office or by writing to or calling: ING USFS Customer Service Defined Contribution Administration, TS21 151 Farmington Avenue Hartford, CT 06156-1277 1-800-262-3862 Read the prospectus before you invest. Terms used in this Statement of Additional Information shall have the same meaning as in the prospectus. TABLE OF CONTENTS
PAGE General Information and History 2 Variable Annuity Account B 2 Offering and Purchase of Contracts 3 Performance Data 3 General 3 Average Annual Total Return Quotations 4 Income Phase Payments 8 Sales Material and Advertising 9 Independent Auditors 9 Financial Statements of the Separate Account S-1 Financial Statements of ING Life Insurance and Annuity Company and Subsidiaries F-1
GENERAL INFORMATION AND HISTORY ING Life Insurance and Annuity Company (the "Company," we, us, our) is a stock life insurance company which was organized under the insurance laws of the State of Connecticut in 1976. Prior to May 1, 2002, the Company was known as Aetna Life Insurance and Annuity Company. 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. Through a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance Company (formerly Participating Annuity Life Insurance Company organized in 1954). 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. As of December 31, 2002, the Company and its subsidiary life company had $44 billion invested through their products, including $28 billion in their separate accounts (of which the Company, or its affiliate ING Investments, LLC manages or oversees the management of $18 billion). The Company is ranked based on assets among the top 1% of all life insurance companies rated by A.M. Best Company as of December 31, 2001. 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. 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 or under all contracts. 2 The funds currently available under the contract are as follows: - - 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 Overseas Portfolio (Initial Class) - - ING JP Morgan Fleming International Portfolio (formerly ING Scudder International Growth Portfolio) (Initial Class) - - ING MFS Capital Opportunities Portfolio (Initial Class) - - ING MFS Research Equity Portfolio (formerly ING MFS Research Portfolio) (Initial Class) - - ING Salomon Brothers Aggressive Growth Portfolio (formerly ING MFS Emerging Equities Portfolio) (Initial Class) - - ING T. Rowe Price Growth Equity Portfolio (Initial Class) - - ING VP Balanced Portfolio, Inc. (Class R) - - ING VP Bond Portfolio (Class R) - - ING VP Growth and Income Portfolio (Class R) - - ING VP Money Market Portfolio (Class R) - - ING VP Strategic Allocation Balanced Portfolio (formerly ING VP Crossroads Portfolio) (Class R) - - ING VP Strategic Allocation Growth Portfolio (formerly ING VP Ascent Portfolio) (Class R) - - ING VP Strategic Allocation Income Portfolio (formerly ING VP Legacy Portfolio) (Class R) - - ING VP Technology Portfolio (Class R) - - Janus Aspen Balanced Portfolio (Institutional Shares) - - Janus Aspen Flexible Income Portfolio (Institutional Shares) - - Janus Aspen Growth Portfolio (Institutional Shares) - - Janus Aspen Mid Cap Growth Portfolio (formerly Janus Aspen Aggressive Growth Portfolio) (Institutional Shares) - - Janus Aspen Worldwide Growth Portfolio (Institutional Shares) Complete descriptions of each of the funds, including their investment objectives, policies, risks and fees and expenses, are contained in the prospectuses and statements of additional information for each of the funds. OFFERING AND PURCHASE OF CONTRACTS The Company's subsidiary, ING Financial Advisers, LLC serves as the principal underwriter for the contracts. ING Financial Advisers, LLC, a Delaware limited liability company, is registered as a broker-dealer with the SEC. ING Financial Advisers, LLC is also a member of the National Association of Securities Dealers, Inc. and the Securities Investor Protection Corporation. ING Financial Advisers, LLC'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 Advisers, LLC or of other registered broker-dealers who have entered into sales arrangements with ING Financial Advisers, LLC. The offering of the contracts is continuous. A description of the manner in which contracts are purchased may be found in the prospectus under the sections entitled "Purchase and Rights" and "Your Account Value." PERFORMANCE DATA GENERAL From time to time, we may advertise different types of historical performance for the subaccounts of the separate account available under the contracts. We may advertise the "standardized average annual total returns," calculated in a manner prescribed by the Securities and Exchange Commission (the "standardized return"), as well as "non-standardized returns," both of which are described below. The standardized total return figures are computed according to a formula in which a hypothetical initial payment of $1,000 is applied to the various subaccounts under the contract, and then related to the ending redeemable values over one, five and ten year periods (or fractional periods thereof). The redeemable value is then divided by the initial investment and this quotient is taken to the Nth root (N represents the number of years in the 3 period) and 1 is subtracted from the result which is then expressed as a percentage, carried to at least the nearest hundredth of a percent. 1/N TR = ((ERV/P) ) - 1 Where: TR = The standardized returns net of subaccount recurring charges. ERV = The ending redeemable value of the hypothetical account at the end of the period. P = A hypothetical initial payment of $1,000. N = The number of years in the period. The standardized figures use the actual returns of the fund since the date contributions were first received in the fund under the separate account, adjusted to reflect the deduction of all recurring charges under the contracts during each period (1.25% mortality and expense risk charge, $20 annual maintenance fee (converted to a percentage of assets equal to 0.042%), and an early withdrawal charge of 5% grading down to 0% after 10 payment periods). These charges will be deducted on a pro rata basis in the case of fractional periods. The maintenance fee is converted to a percentage of assets based on the average account size under the contracts described in the prospectus. The total return figures shown below may be different from the actual historical total return under your contract because for periods prior to 1994, the subaccount's investment performance was based on the performance of the underlying fund plus any cash held by the subaccount. The non-standardized figures will be calculated in a similar manner, except that they will not reflect the deduction of any applicable early withdrawal charge, and in some advertisements will also exclude the effect of the maintenance fee. The deduction of the early withdrawal charge and the maintenance fee would decrease the level of performance shown if reflected in these calculations. The non-standardized figures may also include monthly, quarterly, year-to-date and three year periods, and may include returns calculated from the fund's inception date and/or the date contributions were first received in the fund under the separate account. The non-standardized returns shown in the tables below reflect the deduction of all charges under the contract except the early withdrawal charge. The maintenance fee has been deducted for the purpose of calculating the returns. Investment results of the funds will fluctuate over time, and any presentation of the subaccounts' total return quotations for any prior period should not be considered as a representation of how the subaccounts will perform in any future period. Additionally, the contract value and/or account value upon redemption may be more or less than your original cost. AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED The tables below show the average annual standardized and non-standardized total return quotation figures for the periods ended December 31, 2002 for the subaccounts under installment payment contracts. The standardized returns assume the maximum charges under the contract as described under "General" above. For those subaccounts where results are not available for the full calendar period indicated, performance for such partial periods is shown in the column labeled "Since Inception." For standardized performance, the "Since Inception" column shows average annual return since the date contributions were first received in the fund under the separate account. For non-standardized performance, the "Since Inception" column shows average annual total return since the fund's inception date. For the ING MFS Capital Opportunities Portfolio (Initial Class), ING Salomon Brothers Aggressive Growth Portfolio (Initial Class), ING MFS Research Equity Portfolio (Initial Class), ING JPMorgan 4 Fleming International Portfolio (Initial Class) and ING T. Rowe Price Growth Equity Portfolio (Initial Class) subaccounts, two sets of performance returns are shown for each subaccount: one showing performance based solely on the performance of the ING Partners, Inc. (IPI) portfolio from November 28, 1997, the date the portfolio commenced operations; and one quotation based on (a) performance through November 26, 1997 of the fund it replaced under many contracts and; (b) after November 26, 1997, based on the performance of the IPI portfolio. 5
DATE CONTRIBUTIONS FIRST RECEIVED UNDER THE STANDARDIZED SEPARATE ACCOUNT ---------------------------------------- ---------------- SINCE SUBACCOUNT 1 YEAR 5 YEAR 10 YEAR INCEPTION* - ------------------------------------------------------------------- -------- -------- ------- ---------- ---------------- Fidelity(R) VIP Contrafund(R) Portfolio (Initial Class) (15.07%) 1.56% 8.09% 06/30/1995 Fidelity(R) VIP Equity-Income Portfolio (Initial Class) (22.61%) (1.93%) 7.41% 12/30/1994 Fidelity(R) VIP Growth Portfolio (Initial Class) (35.67%) (2.62%) 6.52% 12/30/1994 Fidelity(R) VIP Overseas Portfolio (Initial Class) (25.92%) (6.35%) 0.28% 01/31/1995 ING JPMorgan Fleming International Portfolio (Initial Class) (23.73%) (4.23%) (3.91%) 11/28/1997 Scudder VLIF International/ING JPMorgan Fleming International(1) (23.73%) (4.23%) 4.25% ING MFS Capital Opportunities Portfolio (Initial Class) (35.73%) (3.65%) (3.30%) 11/28/1997 Neuberger Berman AMT Growth/ING MFS Capital Opportunities(1) (35.73%) (3.65%) 4.23% ING MFS Research Equity Portfolio (Initial Class) (30.50%) (5.20%) (5.49%) 11/28/1997 American Century VP Capital Appreciation/ING MFS Research Equity(1) (30.50%) (5.20%) 0.10% ING Salomon Brothers Aggressive Growth Portfolio (Initial Class) (40.83%) (10.17%) (10.23%) 11/28/1997 Alger American Small Cap/ING Salomon Brothers Aggressive Growth(1) (40.83%) (10.17%) (0.94%) 09/30/1993 ING T. Rowe Price Growth Equity Portfolio (Initial Class) (28.91%) (0.76%) (0.33%) 11/28/1997 Alger American Growth/ING T. Rowe Price Growth Equity(1) (28.91%) (0.76%) 7.82% 02/28/1995 ING VP Balanced Portfolio, Inc. (Class R)(2) (16.02%) 0.38% 6.97% ING VP Bond Portfolio (Class R)(2) 2.48% 4.67% 5.48% ING VP Growth and Income Portfolio (Class R)(2) (30.60%) (8.54%) 3.82% ING VP Money Market Portfolio (Class R)(2)(3) (4.18%) 2.35% 3.31% ING VP Strategic Allocation Balanced Portfolio (Class R) (15.26%) (2.54%) 3.38% 08/31/1995 ING VP Strategic Allocation Growth Portfolio (Class R) (19.45%) (4.33%) 3.03% 08/31/1995 ING VP Strategic Allocation Income Portfolio (Class R) (10.10%) 0.12% 4.27% 08/31/1995 ING VP Technology Portfolio (Class R) (46.76%) (44.49%) 05/01/2000 Janus Aspen Balanced Portfolio (Institutional Shares) (12.19%) 6.15% 11.05% 01/31/1995 Janus Aspen Flexible Income Portfolio (Institutional Shares) 4.61% 4.91% 7.82% 10/31/1994 Janus Aspen Growth Portfolio (Institutional Shares) (32.10%) (3.90%) 5.31% 07/29/1994 Janus Aspen Mid Cap Growth Portfolio (Institutional Shares) (33.52%) (4.41%) 2.22% 10/31/1994 Janus Aspen Worldwide Growth Portfolio (Institutional Shares) (31.10%) (1.58%) 7.93% 04/28/1995
Please refer to the discussion preceding the tables for an explanation of the charges included and methodology used in calculating the standardized and non-standardized figures. These figures represent historical performance and should not be considered a projection of future performance. * Reflects performance from the date contributions were first received in the fund under the separate account. (1) The fund first listed was replaced with the applicable ING Portfolio after the close of business on November 26, 1997. The performance shown is based on the performance of the replaced fund until November 26, 1997, and the performance of the applicable ING Portfolio after that date. The replaced fund may not have been available under all contracts. The "Date Contributions First Received Under the Separate Account" refers to the applicable date for the replaced fund. If no date is shown, contributions were first received in the replaced fund under the separate account more than ten years ago. (2) These funds have been available through the separate account for more than ten years. (3) The current yield for the subaccount for the seven-day period ended December 31, 2002 (on an annualized basis) was (0.20%). Current yield more closely reflects current earnings than does total return. The current yield reflects the deduction of all charges under the contract that are deducted from the total return quotations shown above except the maximum 5% early withdrawal charge. 6
FUND INCEPTION NON-STANDARDIZED DATE --------------------------------------------------- ----------- SINCE SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** - ------------------------------------------------------------------- -------- -------- ------- --------- ----------- ---------- Fidelity(R) VIP Contrafund(R) Portfolio (Initial Class) (10.52%) (10.60%) 2.38% 10.84% 01/03/1995 Fidelity(R) VIP Equity-Income Portfolio (Initial Class) (1) (18.02%) (6.28%) (0.97%) 8.39% Fidelity(R) VIP Growth Portfolio (Initial Class) (1) (31.02%) (21.02%) (1.64%) 7.05% Fidelity(R) VIP Overseas Portfolio (Initial Class) (1) (21.31%) (21.22%) (5.19%) 3.36% ING JPMorgan Fleming International Portfolio (Initial Class) (19.14%) (22.65%) (3.17%) (2.88%) 11/28/1997 Scudder VLIF International/ING JPMorgan Fleming International(2) (19.14%) (22.65%) (3.17%) 4.25% ING MFS Capital Opportunities Portfolio (Initial Class) (31.07%) (21.90%) (2.62%) (2.32%) 11/28/1997 Neuberger Berman AMT Growth/ING MFS Capital Opportunities(2) (31.07%) (21.90%) (2.62%) 4.23% ING MFS Research Equity Portfolio (Initial Class) (25.87%) (18.28%) (4.09%) (4.38%) 11/28/1997 American Century VP Capital Appreciation/ING MFS Research Equity(2) (25.87%) (18.28%) (4.09%) 0.10% ING Salomon Brothers Aggressive Growth Portfolio (Initial Class) (36.15%) (30.81%) (8.77%) (8.85%) 11/28/1997 Alger American Small Cap/ING Salomon Brothers Aggressive Growth(2) (36.15%) (30.81%) (8.77%) 0.53% ING T. Rowe Price Growth Equity Portfolio (Initial Class) (24.29%) (12.84%) 0.15% 0.54% 11/28/1997 Alger American Growth/ING T. Rowe Price Growth Equity(2) (24.29%) (12.84%) 0.15% 8.81% ING VP Balanced Portfolio, Inc. (Class R)(1) (11.46%) (6.33%) 1.25% 6.97% ING VP Bond Portfolio (Class R)(1) 6.95% 7.51% 5.39% 5.48% ING VP Growth and Income Portfolio (Class R)(1) (25.97%) (19.38%) (7.24%) 3.82% ING VP Money Market Portfolio (Class R)(1)(3) 0.32% 2.63% 3.14% 3.31% ING VP Strategic Allocation Balanced Portfolio (Class R) (10.70%) (6.68%) (1.56%) 4.26% 07/05/1995 ING VP Strategic Allocation Growth Portfolio (Class R) (14.87%) (10.01%) (3.26%) 4.01% 07/05/1995 ING VP Strategic Allocation Income Portfolio (Class R) (5.58%) (1.99%) 1.00% 5.00% 07/05/1995 ING VP Technology Portfolio (Class R) (42.05%) (39.94%) 05/01/2000 Janus Aspen Balanced Portfolio (Institutional Shares) (7.65%) (5.71%) 6.82% 10.45% 09/13/1993 Janus Aspen Flexible Income Portfolio (Institutional Shares) 9.06% 6.76% 5.62% 7.00% 09/13/1993 Janus Aspen Growth Portfolio (Institutional Shares) (27.47%) (23.12%) (2.85%) 5.52% 09/13/1993 Janus Aspen Mid Cap Growth Portfolio (Institutional Shares) (28.87%) (34.12%) (3.34%) 5.88% 09/13/1993 Janus Aspen Worldwide Growth Portfolio (Institutional Shares) (26.47%) (22.33%) (0.64%) 8.98% 09/13/1993
Please refer to the discussion preceding the tables for an explanation of the charges included and methodology used in calculating the standardized and non-standardized figures. These figures represent historical performance and should not be considered a projection of future performance. ** Reflects performance from the fund's inception date. (1) These funds have been in operation for more than ten years. (2) The fund first listed was replaced with the applicable ING Portfolio after the close of business on November 26, 1997. The performance shown is based on the performance of the replaced fund until November 26, 1997, and the performance of the applicable ING Portfolio after that date. The replaced fund may not have been available under all contracts. The "Fund Inception Date" refers to the applicable date for the replaced fund. If no date is shown, the replaced fund has been in operation for more than ten years. (3) The current yield for the subaccount for the seven-day period ended December 31, 2002 (on an annualized basis) was (0.20%). Current yield more closely reflects current earnings than does total return. The current yield reflects the deduction of all charges under the contract that are deducted from the total return quotations shown above. As in the table above, the maximum 5% early withdrawal charge is not reflected. 7 INCOME PHASE PAYMENTS When you begin receiving payments under the contract during the income phase (see "Income Phase" in the prospectus), the value of your account is determined using accumulation unit values as of the tenth valuation before the first payment is due. Such value (less any applicable premium tax charge) is applied to provide payments to you in accordance with the payment option and investment options elected. The annuity option tables found in the contract show, for each option, the amount of the first payment for each $1,000 of value applied. Thereafter, variable payments fluctuate as the annuity unit value(s) fluctuates with the investment experience of the selected investment option(s). The first payment and subsequent payments also vary depending on the assumed net investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a higher first payment, but payments will increase thereafter only to the extent that the net investment rate increases by more than 5% on an annual basis. Payments would decline if the rate failed to increase by 5%. Use of the 3.5% assumed rate causes a lower first payment, but subsequent payments would increase more rapidly or decline more slowly as changes occur in the net investment rate. 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 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 period to the next (see "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 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 payments are to begin, there are 3,000 accumulation units credited under a particular contract or account and that the value of an accumulation unit for the tenth valuation period 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 payment option elected, a first monthly variable payment of $6.68 per $1000 of value applied; the annuitant's first monthly 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 period in which the first 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 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 period (assume such value to be $13.504376) to produce an annuity unit value of $13.523359 for the valuation period occurring when the second payment is due. 8 The second monthly 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 funds in terms of the asset classes they represent and use such categories in marketing material 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, 600 Peachtree Street, Suite 2800, Atlanta, GA 30308 are the independent auditors for the separate account and for the Company. The services provided to the separate account include primarily the audit of the separate account's financial statements. Prior to May 3, 2001, KPMG LLP were the independent auditors for the separate account and for the Company. 9 ING Life Insurance and Annuity Company Variable Annuity Account B Financial Statements Year ended December 31, 2002 CONTENTS Report of Independent Auditors S-2 Audited Financial Statements Statement of Assets and Liabilities S-4 Statement of Operations S-14 Statements of Changes in Net Assets S-26 Notes to Financial Statements S-49
S-1 Report of Independent Auditors The Board of Directors and Participants ING Life Insurance and Annuity Company We have audited the accompanying statement of assets and liabilities of ING Life Insurance and Annuity Company Variable Annuity Account B (comprised of the AIM V.I. Capital Appreciation, AIM V.I. Core Equity, AIM V.I. Government Securities, AIM V.I. Growth, AIM V.I. Premier Equity, Alger American Balanced, Alger American Income & Growth, Alger American Leveraged AllCap, Alliance Growth and Income, Alliance Premier Growth, Alliance Quasar, American Century VP Balanced, American Century VP International, Brinson Series Growth & Income, Brinson Series Small Cap, Brinson Series Tactical Allocation, Calvert Social Balanced, Federated American Leaders, Federated Equity Income, Federated Fund for U.S. Government Securities, Federated Growth Strategies, Federated High Income Bond, Federated International Equity, Federated Prime Money, Federated Utility, Fidelity(R) VIP Equity-Income, Fidelity(R) VIP Growth, Fidelity(R) VIP High Income, Fidelity(R) VIP Overseas, Fidelity(R) VIP II ASSET MANAGER(SM), Fidelity(R) VIP II Contrafund(R), Fidelity(R) VIP II Index 500, Fidelity(R) VIP II Investment Grade Bond, Franklin Small Cap Value Securities, ING GET Fund - Series C, ING GET Fund - Series D, ING GET Fund - Series E, ING GET Fund - Series G, ING GET Fund - Series H, ING GET Fund - Series I, ING GET Fund - Series J, ING GET Fund - Series K, ING GET Fund - Series L, ING GET Fund - Series M, ING GET Fund - Series N, ING GET Fund - Series P, ING GET Fund - Series Q, ING GET Fund - Series R, ING GET Fund - Series S, ING GET Fund - Series T, ING GET Fund - Series U, ING VP Balanced, ING VP Bond, ING VP Emerging Markets, ING VP Money Market, ING VP Natural Resources, ING VP Strategic Allocation Balanced, ING VP Strategic Allocation Growth, ING VP Strategic Allocation Income, ING Alger Aggressive Growth, ING Alger Growth, ING American Century Small Cap Value, ING Baron Small Cap Growth, ING Goldman Sachs Capital Growth, ING JP Morgan Fleming International, ING JP Morgan Mid Cap Value, ING MFS Capital Opportunities, ING MFS Global Growth, ING MFS Research, ING OpCap Balanced Value, ING PIMCO Total Return, ING Salomon Brothers Aggressive Growth, ING Salomon Brothers Capital, ING Salomon Brothers Investors Value, ING T. Rowe Price Growth Equity, ING UBS Tactical Asset Allocation, ING Van Kampen Comstock, ING VP Growth and Income, ING VP Growth, ING VP Index Plus LargeCap, ING VP Index Plus MidCap, ING VP Index Plus SmallCap, ING VP International Equity, ING VP Small Company, ING VP Technology, ING VP Value Opportunity, ING VP Growth Opportunities - Class R, ING VP Growth Opportunities - Class S, ING VP International Value, ING VP MagnaCap - Class R, ING VP MagnaCap - Class S, ING VP MidCap Opportunities - Class R, ING VP MidCap Opportunities - Class S, ING VP SmallCap Opportunities - Class R, ING VP SmallCap Opportunities - Class S, Janus Aspen Aggressive Growth, Janus Aspen Balanced, Janus Aspen Flexible Income, Janus Aspen S-2 Growth, Janus Aspen Worldwide Growth, Lord Abbett Growth and Income, Lord Abbett MidCap Value, MFS(R) Global Governments, MFS(R) Total Return, Oppenheimer Aggressive Growth, Oppenheimer Global Securities, Oppenheimer Main Street Growth & Income, Oppenheimer Strategic Bond, Pioneer Equity Income VCT, Pioneer VCT, Pioneer Mid Cap Value VCT, Prudential Jennison, and SP Jennison International Growth Divisions) as of December 31, 2002, and the related statements of operations and changes in net assets for the periods disclosed in the financial statements. These financial statements are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2002, by correspondence with the transfer agents. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Divisions comprising the ING Life Insurance and Annuity Company Variable Annuity Account B at December 31, 2002, and the results of their operations and changes in their net assets for the periods disclosed in the financial statements, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Atlanta, Georgia March 14, 2003 S-3 ING Life Insurance and Annuity Company Variable Annuity Account B Statement of Assets and Liabilities December 31, 2002
AIM V.I. AIM V.I. CAPITAL AIM V.I. CORE GOVERNMENT AIM V.I. APPRECIATION EQUITY SECURITIES GROWTH ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 14,831,979 $ 29,940,240 $ 25,997,225 $ 14,945,690 ----------------------------------------------------------------- Total assets 14,831,979 29,940,240 25,997,225 14,945,690 ----------------------------------------------------------------- Net assets $ 14,831,979 $ 29,940,240 $ 25,997,225 $ 14,945,690 ================================================================= NET ASSETS Accumulation units $ 14,401,283 $ 26,781,106 $ 25,997,225 $ 14,294,057 Contracts in payout (annuitization) period 430,696 3,159,134 - 651,633 ----------------------------------------------------------------- Total net assets $ 14,831,979 $ 29,940,240 $ 25,997,225 $ 14,945,690 ================================================================= Total number of shares 902,738 1,762,227 2,096,550 1,322,627 ================================================================= Cost of shares $ 18,955,748 $ 35,547,810 $ 25,411,578 $ 20,177,678 ================================================================= AMERICAN AMERICAN BRINSON SERIES CENTURY(R) VP CENTURY(R) VP TACTICAL CALVERT SOCIAL BALANCED INTERNATIONAL ALLOCATION BALANCED ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 1,483,040 $ 1,538,873 $ 9,724,571 $ 1,775,384 ----------------------------------------------------------------- Total assets 1,483,040 1,538,873 9,724,571 1,775,384 ----------------------------------------------------------------- Net assets $ 1,483,040 $ 1,538,873 $ 9,724,571 $ 1,775,384 ================================================================= NET ASSETS Accumulation units $ 1,483,040 $ 1,538,873 $ 9,724,571 $ 1,775,384 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 1,483,040 $ 1,538,873 $ 9,724,571 $ 1,775,384 ================================================================= Total number of shares 255,256 295,369 999,442 1,183,589 ================================================================= Cost of shares $ 1,625,187 $ 1,916,928 $ 12,292,389 $ 2,028,088 =================================================================
SEE ACCOMPANYING NOTES. S-4
ALGER AMERICAN ALGER AMERICAN AIM V.I. ALGER AMERICAN INCOME & LEVERAGED PREMIER EQUITY BALANCED GROWTH ALLCAP ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 41,326,592 $ 2,576,379 $ 6,166,827 $ 5,723,711 ----------------------------------------------------------------- Total assets 41,326,592 2,576,379 6,166,827 5,723,711 ----------------------------------------------------------------- Net assets $ 41,326,592 $ 2,576,379 $ 6,166,827 $ 5,723,711 ================================================================= NET ASSETS Accumulation units $ 38,978,157 $ 2,576,379 $ 6,166,827 $ 5,723,711 Contracts in payout (annuitization) period 2,348,435 - - - ----------------------------------------------------------------- Total net assets $ 41,326,592 $ 2,576,379 $ 6,166,827 $ 5,723,711 ================================================================= Total number of shares 2,547,879 228,200 851,772 274,519 ================================================================= Cost of shares $ 55,313,967 $ 2,906,080 $ 8,544,208 $ 8,135,410 ================================================================= ALLIANCE ALLIANCE GROWTH AND PREMIER ALLIANCE INCOME GROWTH QUASAR ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 22,168,501 $ 5,838,258 $ 683,596 ------------------------------------------------ Total assets 22,168,501 5,838,258 683,596 ------------------------------------------------ Net assets $ 22,168,501 $ 5,838,258 $ 683,596 ================================================ NET ASSETS Accumulation units $ 22,168,501 $ 5,838,258 $ 683,596 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 22,168,501 $ 5,838,258 $ 683,596 ================================================ Total number of shares 1,333,845 334,571 100,087 ================================================ Cost of shares $ 29,326,543 $ 7,590,985 $ 946,508 ================================================ FEDERATED FUND FEDERATED FOR US FEDERATED AMERICAN FEDERATED GOVERNMENT GROWTH LEADERS EQUITY INCOME SECURITIES STRATEGIES ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 50,538,929 $ 10,263,865 $ 12,674,158 $ 10,415,347 ----------------------------------------------------------------- Total assets 50,538,929 10,263,865 12,674,158 10,415,347 ----------------------------------------------------------------- Net assets $ 50,538,929 $ 10,263,865 $ 12,674,158 $ 10,415,347 ================================================================= NET ASSETS Accumulation units $ 50,440,295 $ 10,175,474 $ 12,674,158 $ 10,415,347 Contracts in payout (annuitization) period 98,634 88,391 - - ----------------------------------------------------------------- Total net assets $ 50,538,929 $ 10,263,865 $ 12,674,158 $ 10,415,347 ================================================================= Total number of shares 3,322,744 1,054,868 1,057,943 801,181 ================================================================= Cost of shares $ 66,150,117 $ 14,483,890 $ 11,697,945 $ 19,603,994 ================================================================= FEDERATED FEDERATED HIGH INTERNATIONAL FEDERATED INCOME BOND EQUITY PRIME MONEY ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 16,683,252 $ 6,023,743 $ 7,386,500 ------------------------------------------------ Total assets 16,683,252 6,023,743 7,386,500 ------------------------------------------------ Net assets $ 16,683,252 $ 6,023,743 $ 7,386,500 ================================================ NET ASSETS Accumulation units $ 16,665,208 $ 5,978,828 $ 7,386,500 Contracts in payout (annuitization) period 18,044 44,915 - ------------------------------------------------ Total net assets $ 16,683,252 $ 6,023,743 $ 7,386,500 ================================================ Total number of shares 2,356,392 685,295 7,386,500 ================================================ Cost of shares $ 19,139,746 $ 13,004,078 $ 7,386,500 ================================================
S-5
FEDERATED FIDELITY(R) VIP FIDELITY(R) VIP FIDELITY(R) VIP UTILITY EQUITY-INCOME GROWTH HIGH INCOME ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 7,020,743 $ 146,420,473 $ 98,179,526 $ 36,456,443 ----------------------------------------------------------------- Total assets 7,020,743 146,420,473 98,179,526 36,456,443 ----------------------------------------------------------------- Net assets $ 7,020,743 $ 146,420,473 $ 98,179,526 $ 36,456,443 ================================================================= NET ASSETS Accumulation units $ 6,995,021 $ 146,420,473 $ 98,179,526 $ 35,239,038 Contracts in payout (annuitization) period 25,722 - - 1,217,405 ----------------------------------------------------------------- Total net assets $ 7,020,743 $ 146,420,473 $ 98,179,526 $ 36,456,443 ================================================================= Total number of shares 933,609 8,062,801 4,188,546 6,147,798 ================================================================= Cost of shares $ 11,520,737 $ 176,875,742 $ 134,175,187 $ 35,269,905 ================================================================= ING GET ING GET FUND - SERIES FUND - SERIES ING GET FUND - ING GET FUND - E G SERIES H SERIES I ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 276,396,796 $ 163,876,702 $ 121,603,049 $ 84,078,702 ----------------------------------------------------------------- Total assets 276,396,796 163,876,702 121,603,049 84,078,702 ----------------------------------------------------------------- Net assets $ 276,396,796 $ 163,876,702 $ 121,603,049 $ 84,078,702 ================================================================= NET ASSETS Accumulation units $ 276,396,796 $ 163,876,702 $ 121,603,049 $ 84,078,702 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 276,396,796 $ 163,876,702 $ 121,603,049 $ 84,078,702 ================================================================= Total number of shares 28,089,105 16,387,670 11,992,411 8,316,390 ================================================================= Cost of shares $ 278,487,403 $ 163,834,851 $ 120,839,531 $ 83,250,451 =================================================================
SEE ACCOMPANYING NOTES. S-6
FIDELITY(R) VIP FIDELITY(R) FIDELITY(R) VIP II ASSET VIP II FIDELITY(R) VIP OVERSEAS MANAGER(SM) CONTRAFUND(R) II INDEX 500 ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 6,616,775 $ 11,086,015 $ 145,571,079 $ 64,190,398 ----------------------------------------------------------------- Total assets 6,616,775 11,086,015 145,571,079 64,190,398 ----------------------------------------------------------------- Net assets $ 6,616,775 $ 11,086,015 $ 145,571,079 $ 64,190,398 ================================================================= NET ASSETS Accumulation units $ 6,616,775 $ 11,086,015 $ 145,571,079 $ 64,190,398 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 6,616,775 $ 11,086,015 $ 145,571,079 $ 64,190,398 ================================================================= Total number of shares 602,621 869,491 8,042,601 642,418 ================================================================= Cost of shares $ 7,879,773 $ 11,920,837 $ 166,018,954 $ 80,173,340 ================================================================= FIDELITY(R) VIP FRANKLIN SMALL II INVESTMENT CAP VALUE ING GET FUND GRADE BOND SECURITIES - SERIES D ------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 2,890,300 $ 364,802 $ 103,697,732 ------------------------------------------------ Total assets 2,890,300 364,802 103,697,732 ------------------------------------------------ Net assets $ 2,890,300 $ 364,802 $ 103,697,732 ================================================ NET ASSETS Accumulation units $ 2,890,300 $ 364,802 $ 103,697,732 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 2,890,300 $ 364,802 $ 103,697,732 ================================================ Total number of shares 210,971 37,961 11,043,422 ================================================ Cost of shares $ 2,658,230 $ 363,037 $ 108,305,744 ================================================ ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES J - SERIES K - SERIES L - SERIES M ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 71,844,245 $ 81,260,062 $ 75,254,546 $ 115,381,108 ----------------------------------------------------------------- Total assets 71,844,245 81,260,062 75,254,546 115,381,108 ----------------------------------------------------------------- Net assets $ 71,844,245 $ 81,260,062 $ 75,254,546 $ 115,381,108 ================================================================= NET ASSETS Accumulation units $ 71,844,245 $ 81,260,062 $ 75,254,546 $ 115,381,108 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 71,844,245 $ 81,260,062 $ 75,254,546 $ 115,381,108 ================================================================= Total number of shares 7,127,405 7,912,372 7,436,220 11,356,408 ================================================================= Cost of shares $ 70,574,219 $ 79,242,590 $ 73,247,260 $ 111,414,328 ================================================================= ING GET FUND ING GET FUND ING GET FUND - SERIES N - SERIES P - SERIES Q ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 90,143,302 $ 76,333,735 $ 54,825,559 ------------------------------------------------ Total assets 90,143,302 76,333,735 54,825,559 ------------------------------------------------ Net assets $ 90,143,302 $ 76,333,735 $ 54,825,559 ================================================ NET ASSETS Accumulation units $ 90,143,302 $ 76,333,735 $ 54,825,559 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 90,143,302 $ 76,333,735 $ 54,825,559 ================================================ Total number of shares 8,907,441 7,498,402 $ 5,460,713 ================================================ Cost of shares $ 90,892,913 $ 74,834,416 $ 54,500,194 ================================================
S-7
ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES R - SERIES S - SERIES T - SERIES U ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 43,556,397 $ 53,553,407 $ 39,378,494 $ 502,569 ----------------------------------------------------------------- Total assets 43,556,397 53,553,407 39,378,494 502,569 ----------------------------------------------------------------- Net assets $ 43,556,397 $ 53,553,407 $ 39,378,494 $ 502,569 ================================================================= NET ASSETS Accumulation units $ 43,556,397 $ 53,553,407 $ 39,378,494 $ 502,569 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 43,556,397 $ 53,553,407 $ 39,378,494 $ 502,569 ================================================================= Total number of shares 4,312,515 5,318,114 3,891,156 50,234 ================================================================= Cost of shares $ 43,208,554 $ 53,289,484 $ 38,992,044 $ 502,399 ================================================================= ING VP STRATEGIC ING ALGER ING AMERICAN ALLOCATION AGGRESSIVE ING ALGER CENTURY SMALL INCOME GROWTH GROWTH CAP VALUE ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 20,088,287 $ 178,669 $ 9,413 $ 172,840 ----------------------------------------------------------------- Total assets 20,088,287 178,669 9,413 172,840 ----------------------------------------------------------------- Net assets $ 20,088,287 $ 178,669 $ 9,413 $ 172,840 ================================================================= NET ASSETS Accumulation units $ 16,945,520 $ 178,669 $ 9,413 $ 172,840 Contracts in payout (annuitization) period 3,142,767 - - - ----------------------------------------------------------------- Total net assets $ 20,088,287 $ 178,669 $ 9,413 $ 172,840 ================================================================= Total number of shares 1,811,388 35,102 1,428 21,207 ================================================================= Cost of shares $ 22,057,068 $ 190,259 $ 10,342 $ 165,978 =================================================================
SEE ACCOMPANYING NOTES. S-8
ING VP ING VP EMERGING ING VP MONEY BALANCED ING VP BOND MARKETS MARKET ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 148,867,834 $ 164,563,104 $ 649,050 $ 262,555,759 ----------------------------------------------------------------- Total assets 148,867,834 164,563,104 649,050 262,555,759 ----------------------------------------------------------------- Net assets $ 148,867,834 $ 164,563,104 $ 649,050 $ 262,555,759 ================================================================= NET ASSETS Accumulation units $ 113,344,138 $ 150,113,484 $ 649,050 $ 252,582,665 Contracts in payout (annuitization) period 35,523,696 14,449,620 - 9,973,094 ----------------------------------------------------------------- Total net assets $ 148,867,834 $ 164,563,104 $ 649,050 $ 262,555,759 ================================================================= Total number of shares 13,873,983 12,162,831 145,201 20,157,213 ================================================================= Cost of shares $ 178,415,327 $ 160,681,216 $ 833,454 $ 261,307,778 ================================================================= ING VP ING VP ING VP STRATEGIC STRATEGIC NATURAL ALLOCATION ALLOCATION RESOURCES BALANCED GROWTH ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 1,566,801 $ 14,344,005 $ 11,256,899 ------------------------------------------------ Total assets 1,566,801 14,344,005 11,256,899 ------------------------------------------------ Net assets $ 1,566,801 $ 14,344,005 $ 11,256,899 ================================================ NET ASSETS Accumulation units $ 1,566,801 $ 12,850,128 $ 10,763,357 Contracts in payout (annuitization) period - 1,493,877 493,542 ------------------------------------------------ Total net assets $ 1,566,801 $ 14,344,005 $ 11,256,899 ================================================ Total number of shares 129,274 1,320,811 1,041,341 ================================================ Cost of shares $ 1,750,492 $ 16,686,947 $ 13,564,418 ================================================
ING BARON ING GOLDMAN ING JPMORGAN SMALL CAP SACHS(R) CAPITAL FLEMING ING JPMORGAN GROWTH GROWTH INTERNATIONAL MID CAP VALUE --------------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 193,278 $ 18,093 $ 24,044,050 $ 86,925 -------------------------------------------------------------------- Total assets 193,278 18,093 24,044,050 86,925 -------------------------------------------------------------------- Net assets $ 193,278 $ 18,093 $ 24,044,050 $ 86,925 ==================================================================== NET ASSETS Accumulation units $ 193,278 $ 18,093 $ 23,318,905 $ 86,925 Contracts in payout (annuitization) period - - 725,145 - -------------------------------------------------------------------- Total net assets $ 193,278 $ 18,093 $ 24,044,050 $ 86,925 ==================================================================== Total number of shares 22,064 2,159 2,942,968 9,418 ==================================================================== Cost of shares $ 192,951 $ 18,642 $ 24,274,938 $ 89,224 ==================================================================== ING MFS CAPITAL ING MFS ING MFS OPPORTUNITIES GLOBAL GROWTH RESEARCH ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 35,740,787 $ 1,402 $ 40,668,842 ------------------------------------------------ Total assets 35,740,787 1,402 40,668,842 ------------------------------------------------ Net assets $ 35,740,787 $ 1,402 $ 40,668,842 ================================================ NET ASSETS Accumulation units $ 33,216,756 $ 1,402 $ 40,668,842 Contracts in payout (annuitization) period 2,524,031 - - ------------------------------------------------ Total net assets $ 35,740,787 $ 1,402 $ 40,668,842 ================================================ Total number of shares 1,887,053 167 6,699,974 ================================================ Cost of shares $ 49,418,144 $ 1,419 $ 53,843,434 ================================================
S-9
ING SALOMON BROTHERS ING SALOMON ING OPCAP ING PIMCO AGGRESSIVE BROTHERS BALANCED VALUE TOTAL RETURN GROWTH CAPITAL ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 15,244 $ 1,275,028 $ 47,007,829 $ 5,034 ----------------------------------------------------------------- Total assets 15,244 1,275,028 47,007,829 5,034 ----------------------------------------------------------------- Net assets $ 15,244 $ 1,275,028 $ 47,007,829 $ 5,034 ================================================================= NET ASSETS Accumulation units $ 15,244 $ 1,275,028 $ 46,015,154 $ 5,034 Contracts in payout (annuitization) period - - 992,675 - ----------------------------------------------------------------- Total net assets $ 15,244 $ 1,275,028 $ 47,007,829 $ 5,034 ================================================================= Total number of shares 1,581 120,856 1,783,978 421 ================================================================= Cost of shares $ 14,972 $ 1,256,640 $ 64,573,920 $ 5,000 ================================================================= ING VP ING VP INDEX ING VP INDEX INTERNATIONAL ING VP SMALL PLUS MIDCAP PLUS SMALLCAP EQUITY COMPANY ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 11,779,436 $ 4,274,524 $ 5,227,820 $ 52,157,900 ----------------------------------------------------------------- Total assets 11,779,436 4,274,524 5,227,820 52,157,900 ----------------------------------------------------------------- Net assets $ 11,779,436 $ 4,274,524 $ 5,227,820 $ 52,157,900 ================================================================= NET ASSETS Accumulation units $ 11,779,436 $ 4,274,524 $ 4,851,325 $ 48,275,927 Contracts in payout (annuitization) period - - 376,495 3,881,973 ----------------------------------------------------------------- Total net assets $ 11,779,436 $ 4,274,524 $ 5,227,820 $ 52,157,900 ================================================================= Total number of shares 993,207 429,600 904,467 4,090,816 ================================================================= Cost of shares $ 13,481,416 $ 4,957,354 $ 5,282,086 $ 64,947,675 =================================================================
SEE ACCOMPANYING NOTES. S-10
ING SALOMON ING T. ROWE ING UBS ING VAN BROTHERS PRICE GROWTH TACTICAL ASSET KAMPEN INVESTORS VALUE EQUITY ALLOCATION COMSTOCK ------------------------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 14,349 $ 58,442,588 $ 428 $ 318,983 ----------------------------------------------------------------- Total assets 14,349 58,442,588 428 318,983 ----------------------------------------------------------------- Net assets $ 14,349 $ 58,442,588 $ 428 $ 318,983 ================================================================= NET ASSETS Accumulation units $ 14,349 $ 56,097,352 $ 428 $ 318,983 Contracts in payout (annuitization) period - 2,345,236 - - ----------------------------------------------------------------- Total net assets $ 14,349 $ 58,442,588 $ 428 $ 318,983 ================================================================= Total number of shares 1,444 1,684,710 18 38,247 ================================================================= Cost of shares $ 15,996 $ 73,754,294 $ 440 $ 330,123 ================================================================= ING VP GROWTH AND ING VP ING VP INDEX INCOME GROWTH PLUS LARGECAP ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 415,966,022 $ 28,286,199 $ 154,416,728 ------------------------------------------------ Total assets 415,966,022 28,286,199 154,416,728 ------------------------------------------------ Net assets $ 415,966,022 $ 28,286,199 $ 154,416,728 ================================================ NET ASSETS Accumulation units $ 329,440,424 $ 25,655,013 $ 122,505,931 Contracts in payout (annuitization) period 86,525,598 2,631,186 31,910,797 ------------------------------------------------ Total net assets $ 415,966,022 $ 28,286,199 $ 154,416,728 ================================================ Total number of shares 28,687,312 4,129,372 14,231,957 ================================================ Cost of shares $ 678,063,682 $ 37,384,530 $ 189,726,070 ================================================ ING VP ING VP GROWTH GROWTH ING VP ING VP VALUE OPPORTUNITIES OPPORTUNITIES TECHNOLOGY OPPORTUNITY - CLASS R - CLASS S ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 6,564,063 $ 17,000,985 $ 384,251 $ 125,218 ----------------------------------------------------------------- Total assets 6,564,063 17,000,985 384,251 125,218 ----------------------------------------------------------------- Net assets $ 6,564,063 $ 17,000,985 $ 384,251 $ 125,218 ================================================================= NET ASSETS Accumulation units $ 6,564,063 $ 17,000,985 $ 384,251 $ 125,218 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 6,564,063 $ 17,000,985 $ 384,251 $ 125,218 ================================================================= Total number of shares 2,467,693 1,740,121 102,467 33,303 ================================================================= Cost of shares $ 8,536,756 $ 22,638,830 $ 403,353 $ 154,512 ================================================================= ING VP ING VP ING VP INTERNATIONAL MAGNACAP - MAGNACAP - VALUE CLASS R CLASS S ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 403,983 $ 26,804 $ 489,722 ------------------------------------------------ Total assets 403,983 26,804 489,722 ------------------------------------------------ Net assets $ 403,983 $ 26,804 $ 489,722 ================================================ NET ASSETS Accumulation units $ 403,983 $ 26,804 $ 489,722 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 403,983 $ 26,804 $ 489,722 ================================================ Total number of shares 46,975 3,930 71,492 ================================================ Cost of shares $ 434,101 $ 32,494 $ 604,708 ================================================
S-11
ING VP ING VP ING VP ING VP MIDCAP MIDCAP SMALLCAP SMALLCAP OPPORTUNITIES - OPPORTUNITIES - OPPORTUNITIES- OPPORTUNITIES - CLASS R CLASS S CLASS R CLASS S ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 76,098 $ 2,583,170 $ 58,445 $ 1,771,721 ----------------------------------------------------------------- Total assets 76,098 2,583,170 58,445 1,771,721 ----------------------------------------------------------------- Net assets $ 76,098 $ 2,583,170 $ 58,445 $ 1,771,721 ================================================================= NET ASSETS Accumulation units $ 76,098 $ 2,583,170 $ 58,445 $ 1,771,721 Contracts in payout (annuitization) period - - - - ----------------------------------------------------------------- Total net assets $ 76,098 $ 2,583,170 $ 58,445 $ 1,771,721 ================================================================= Total number of shares 16,911 577,890 5,488 166,986 ================================================================= Cost of shares $ 76,903 $ 3,032,227 $ 62,023 $ 2,367,889 ================================================================= OPPENHEIMER OPPENHEIMER MFS(R) GLOBAL MFS(R) TOTAL AGGRESSIVE GLOBAL GOVERNMENTS RETURN GROWTH SECURITIES ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 2,720,439 $ 91,725,015 $ 23,930,198 $ 15,176,818 ----------------------------------------------------------------- Total assets 2,720,439 91,725,015 23,930,198 15,176,818 ----------------------------------------------------------------- Net assets $ 2,720,439 $ 91,725,015 $ 23,930,198 $ 15,176,818 ================================================================= NET ASSETS Accumulation units $ 2,720,439 $ 91,725,015 $ 23,110,791 $ 15,176,818 Contracts in payout (annuitization) period - - 819,407 - ----------------------------------------------------------------- Total net assets $ 2,720,439 $ 91,725,015 $ 23,930,198 $ 15,176,818 ================================================================= Total number of shares 258,351 5,351,518 818,686 857,447 ================================================================= Cost of shares $ 2,618,004 $ 102,010,242 $ 30,059,768 $ 19,348,041 =================================================================
SEE ACCOMPANYING NOTES. S-12
JANUS ASPEN AGGRESSIVE JANUS ASPEN JANUS ASPEN JANUS ASPEN GROWTH BALANCED FLEXIBLE INCOME GROWTH ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 77,233,111 $ 197,825,408 $ 28,391,748 $ 98,502,589 ----------------------------------------------------------------- Total assets 77,233,111 197,825,408 28,391,748 98,502,589 ----------------------------------------------------------------- Net assets $ 77,233,111 $ 197,825,408 $ 28,391,748 $ 98,502,589 ================================================================= NET ASSETS Accumulation units $ 77,233,111 $ 197,825,408 $ 28,391,748 $ 92,138,870 Contracts in payout (annuitization) period - - - 6,363,719 ----------------------------------------------------------------- Total net assets $ 77,233,111 $ 197,825,408 $ 28,391,748 $ 98,502,589 ================================================================= Total number of shares 4,875,828 9,607,839 2,308,272 6,742,135 ================================================================= Cost of shares $ 92,264,412 $ 218,902,715 $ 27,607,794 $ 130,606,459 ================================================================= JANUS ASPEN LORD ABBETT WORLDWIDE GROWTH AND LORD ABBETT GROWTH INCOME MID-CAP VALUE ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 198,280,103 $ 421,513 $ 473,961 ------------------------------------------------ Total assets 198,280,103 421,513 473,961 ------------------------------------------------ Net assets $ 198,280,103 $ 421,513 $ 473,961 ================================================ NET ASSETS Accumulation units $ 190,950,563 $ 421,513 $ 473,961 Contracts in payout (annuitization) period 7,329,540 - - ------------------------------------------------ Total net assets $ 198,280,103 $ 421,513 $ 473,961 ================================================ Total number of shares 9,419,482 22,385 34,196 ================================================ Cost of shares $ 253,349,460 $ 440,890 $ 499,299 ================================================ OPPENHEIMER MAIN STREET GROWTH & OPPENHEIMER PIONEER EQUITY PIONEER INCOME STRATEGIC BOND INCOME VCT VCT ----------------------------------------------------------------- ASSETS Investments in mutual funds at fair value $ 48,800,609 $ 32,734,881 $ 153,293 $ 1,303 ----------------------------------------------------------------- Total assets 48,800,609 32,734,881 153,293 1,303 ----------------------------------------------------------------- Net assets $ 48,800,609 $ 32,734,881 $ 153,293 $ 1,303 ================================================================= NET ASSETS Accumulation units $ 45,707,631 $ 31,581,706 $ 153,293 $ 1,303 Contracts in payout (annuitization) period 3,092,978 1,153,175 - - ----------------------------------------------------------------- Total net assets $ 48,800,609 $ 32,734,881 $ 153,293 $ 1,303 ================================================================= Total number of shares 3,185,418 7,162,994 10,145 85 ================================================================= Cost of shares $ 60,569,880 $ 31,335,136 $ 159,271 $ 1,302 ================================================================= SP JENNISON PIONEER MID PRUDENTIAL INTERNATIONAL CAP VALUE VCT JENNISON GROWTH ------------------------------------------------ ASSETS Investments in mutual funds at fair value $ 30,425 $ 426,947 $ 213,838 ------------------------------------------------ Total assets 30,425 426,947 213,838 ------------------------------------------------ Net assets $ 30,425 $ 426,947 $ 213,838 ================================================ NET ASSETS Accumulation units $ 30,425 $ 426,947 $ 213,838 Contracts in payout (annuitization) period - - - ------------------------------------------------ Total net assets $ 30,425 $ 426,947 $ 213,838 ================================================ Total number of shares 2,036 33,618 51,035 ================================================ Cost of shares $ 30,375 $ 456,396 $ 220,447 ================================================
S-13 ING Life Insurance and Annuity Company Variable Annuity Account B Statement of Operations For the year ended December 31, 2002
AIM V.I. AIM V.I. CAPITAL AIM V.I. CORE GOVERNMENT APPRECIATION EQUITY SECURITIES ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 110,893 $ 469,767 ------------------------------------------------ Total investment income - 110,893 469,767 Expenses: Mortality and expense risk and other charges 234,121 447,816 212,298 ------------------------------------------------ Total expenses 234,121 447,816 212,298 ------------------------------------------------ Net investment income (loss) (234,121) (336,923) 257,469 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (11,841,069) (19,166,365) 274,461 Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (11,841,069) (19,166,365) 274,461 Net unrealized appreciation (depreciation) of investments 6,412,975 12,696,921 710,014 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (5,662,215) $ (6,806,367) $ 1,241,944 ================================================ AMERICAN AMERICAN ALLIANCE CENTURY(R) VP CENTURY(R) VP QUASAR BALANCED INTERNATIONAL ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 50,084 $ 17,753 ------------------------------------------------ Total investment income - 50,084 17,753 Expenses: Mortality and expense risk and other charges 11,757 24,787 29,964 ------------------------------------------------ Total expenses 11,757 24,787 29,964 ------------------------------------------------ Net investment income (loss) (11,757) 25,297 (12,211) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (52,585) (331,096) (1,559,008) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (52,585) (331,096) (1,559,008) Net unrealized appreciation (depreciation) of investments (320,915) 88,916 1,039,420 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (385,257) $ (216,883) $ (531,799) ================================================
SEE ACCOMPANYING NOTES. S-14
ALGER AMERICAN AIM V.I. AIM V.I. ALGER AMERICAN INCOME & GROWTH PREMIER EQUITY BALANCED GROWTH ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 167,442 $ 53,511 $ 55,622 ----------------------------------------------------------------- Total investment income - 167,442 53,511 55,622 Expenses: Mortality and expense risk and other charges 252,850 686,444 44,948 119,926 ----------------------------------------------------------------- Total expenses 252,850 686,444 44,948 119,926 ----------------------------------------------------------------- Net investment income (loss) (252,850) (519,002) 8,563 (64,304) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (21,531,563) (22,963,948) (480,416) (4,172,553) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (21,531,563) (22,963,948) (480,416) (4,172,553) Net unrealized appreciation (depreciation) of investments 13,605,701 1,596,273 (8,111) 797,771 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (8,178,712) $ (21,886,677) $ (479,964) $ (3,439,086) ================================================================= ALGER AMERICAN ALLIANCE ALLIANCE LEVERAGED GROWTH AND PREMIER ALLCAP INCOME GROWTH ------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 620 $ 202,121 $ - ------------------------------------------------ Total investment income 620 202,121 - Expenses: Mortality and expense risk and other charges 110,396 367,630 96,634 ------------------------------------------------ Total expenses 110,396 367,630 96,634 ------------------------------------------------ Net investment income (loss) (109,776) (165,509) (96,634) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (5,523,735) (3,091,091) (2,300,618) Capital gains distributions - 1,038,771 - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (5,523,735) (2,052,320) (2,300,618) Net unrealized appreciation (depreciation) of investments 2,219,572 (5,861,654) (435,725) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,413,939) $ (8,079,483) $ (2,832,977) ================================================ BRINSON SERIES FEDERATED TACTICAL CALVERT SOCIAL AMERICAN FEDERATED ALLOCATION BALANCED LEADERS EQUITY INCOME ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 66,628 $ 52,110 $ 783,023 $ 292,633 ----------------------------------------------------------------- Total investment income 66,628 52,110 783,023 292,633 Expenses: Mortality and expense risk and other charges 152,368 23,413 931,162 194,259 ----------------------------------------------------------------- Total expenses 152,368 23,413 931,162 194,259 ----------------------------------------------------------------- Net investment income (loss) (85,740) 28,697 (148,139) 98,374 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (3,543,581) (465,640) (64,392) (606,693) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (3,543,581) (465,640) (64,392) (606,693) Net unrealized appreciation (depreciation) of investments 283,934 156,806 (16,206,809) (3,030,582) ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,345,387) $ (280,137) $ (16,419,340) $ (3,538,901) ================================================================= FEDERATED FUND FOR US FEDERATED GOVERNMENT GROWTH FEDERATED HIGH SECURITIES STRATEGIES INCOME BOND ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 444,456 $ - $ 1,977,547 ------------------------------------------------ Total investment income 444,456 - 1,977,547 Expenses: Mortality and expense risk and other charges 173,838 216,927 265,446 ------------------------------------------------ Total expenses 173,838 216,927 265,446 ------------------------------------------------ Net investment income (loss) 270,618 (216,927) 1,712,101 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 178,225 (785,326) (4,158,428) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 178,225 (785,326) (4,158,428) Net unrealized appreciation (depreciation) of investments 443,220 (4,061,042) 2,397,304 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 892,063 $ (5,063,295) $ (49,023) ================================================
S-15
FEDERATED INTERNATIONAL FEDERATED FEDERATED EQUITY PRIME MONEY UTILITY ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 110,872 $ 578,444 ------------------------------------------------ Total investment income - 110,872 578,444 Expenses: Mortality and expense risk and other charges 119,497 111,953 137,007 ------------------------------------------------ Total expenses 119,497 111,953 137,007 ------------------------------------------------ Net investment income (loss) (119,497) (1,081) 441,437 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (716,353) - (2,778,666) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (716,353) - (2,778,666) Net unrealized appreciation (depreciation) of investments (1,457,973) - (761,186) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,293,823) $ (1,081) $ (3,098,415) ================================================ FTVIP FIDELITY(R) VIP FRANKLIN SMALL INVESTMENT CAP VALUE ING GET FUND GRADE BOND SECURITIES - SERIES D ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 121,052 $ 5,817 $ 4,849,503 ------------------------------------------------ Total investment income 121,052 5,817 4,849,503 Expenses: Mortality and expense risk and other charges 42,060 5,846 1,657,804 ------------------------------------------------ Total expenses 42,060 5,846 1,657,804 ------------------------------------------------ Net investment income (loss) 78,992 (29) 3,191,699 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 126,348 (281,659) (3,903,504) Capital gains distributions - 40,688 - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 126,348 (240,971) (3,903,504) Net unrealized appreciation (depreciation) of investments 43,860 1,765 (197,690) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 249,200 $ (239,235) $ (909,495) ================================================
SEE ACCOMPANYING NOTES. S-16
FIDELITY(R) VIP FIDELITY(R) VIP FIDELITY(R) VIP FIDELITY(R) VIP EQUITY-INCOME GROWTH HIGH INCOME OVERSEAS ------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 3,015,262 $ 346,250 $ 4,088,481 $ 70,417 ------------------------------------------------------------------ Total investment income 3,015,262 346,250 4,088,481 70,417 Expenses: Mortality and expense risk and other charges 2,236,636 1,653,283 471,021 103,668 ------------------------------------------------------------------ Total expenses 2,236,636 1,653,283 471,021 103,668 ------------------------------------------------------------------ Net investment income (loss) 778,626 (1,307,033) 3,617,460 (33,251) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (17,472,822) (75,974,775) (15,314,996) (4,666,771) Capital gains distributions 4,104,107 - - - ------------------------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (13,368,715) (75,974,775) (15,314,996) (4,666,771) Net unrealized appreciation (depreciation) of investments (23,430,907) 27,425,197 12,364,126 2,758,026 ------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (36,020,996) $ (49,856,611) $ 666,590 $ (1,941,996) ================================================================== FIDELITY(R) VIP FIDELITY(R) II ASSET VIP II FIDELITY(R) VIP MANAGER(SM) CONTRAFUND(R) II INDEX 500 ------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 511,394 $ 1,374,415 $ 1,141,533 ------------------------------------------------- Total investment income 511,394 1,374,415 1,141,533 Expenses: Mortality and expense risk and other charges 169,457 2,063,981 1,120,404 ------------------------------------------------- Total expenses 169,457 2,063,981 1,120,404 ------------------------------------------------- Net investment income (loss) 341,937 (689,566) 21,129 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (2,462,332) (27,675,618) (18,283,780) Capital gains distributions - - - ------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (2,462,332) (27,675,618) (18,283,780) Net unrealized appreciation (depreciation) of investments 734,377 10,036,956 (4,035,555) ------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,386,018) $ (18,328,228) $ (22,298,206) ================================================= ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES E - SERIES G - SERIES H - SERIES I ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 11,590,668 $ 6,437,372 $ 4,541,020 $ 3,032,380 ----------------------------------------------------------------- Total investment income 11,590,668 6,437,372 4,541,020 3,032,380 Expenses: Mortality and expense risk and other charges 4,898,811 2,872,854 2,145,806 1,464,041 ----------------------------------------------------------------- Total expenses 4,898,811 2,872,854 2,145,806 1,464,041 ----------------------------------------------------------------- Net investment income (loss) 6,691,857 3,564,518 2,395,214 1,568,339 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (12,383,728) (361,655) (2,376,877) (285,274) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (12,383,728) (361,655) (2,376,877) (285,274) Net unrealized appreciation (depreciation) of investments 12,265,411 2,001,769 3,657,819 1,679,757 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,573,540 $ 5,204,632 $ 3,676,156 $ 2,962,822 ================================================================= ING GET FUND ING GET FUND ING GET FUND - SERIES J - SERIES K - SERIES L ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2,556,052 $ 2,272,115 $ 38,481 ------------------------------------------------ Total investment income 2,556,052 2,272,115 38,481 Expenses: Mortality and expense risk and other charges 1,256,435 1,667,708 1,518,985 ------------------------------------------------ Total expenses 1,256,435 1,667,708 1,518,985 ------------------------------------------------ Net investment income (loss) 1,299,617 604,407 (1,480,504) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (1,217,195) (1,166,744) (2,039,616) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (1,217,195) (1,166,744) (2,039,616) Net unrealized appreciation (depreciation) of investments 2,934,305 3,623,216 3,999,896 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 3,016,727 $ 3,060,879 $ 479,776 ================================================
S-17
ING GET FUND ING GET FUND ING GET FUND - SERIES M - SERIES N - SERIES P ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 41,036 $ 16,602 $ 32,612 ------------------------------------------------ Total investment income 41,036 16,602 32,612 Expenses: Mortality and expense risk and other charges 2,373,549 1,884,690 1,601,653 ------------------------------------------------ Total expenses 2,373,549 1,884,690 1,601,653 ------------------------------------------------ Net investment income (loss) (2,332,513) (1,868,088) (1,569,041) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (3,482,609) 1,203,432 (439,883) Capital gains distributions - 1,249,744 26,248 ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (3,482,609) 2,453,176 (413,635) Net unrealized appreciation (depreciation) of investments 7,557,322 (2,953,390) 1,306,756 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,742,200 $ (2,368,302) $ (675,920) ================================================ ING VP ING VP EMERGING ING VP MONEY NATURAL MARKETS MARKET RESOURCES ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 10,706,663 $ 3,316 ------------------------------------------------ Total investment income - 10,706,663 3,316 Expenses: Mortality and expense risk and other charges 11,406 3,368,994 22,483 ------------------------------------------------ Total expenses 11,406 3,368,994 22,483 ------------------------------------------------ Net investment income (loss) (11,406) 7,337,669 (19,167) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (281,423) (5,982,099) 18,761 Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (281,423) (5,982,099) 18,761 Net unrealized appreciation (depreciation) of investments 220,172 (371,722) (80,642) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (72,657) $ 983,848 $ (81,048) ================================================
SEE ACCOMPANYING NOTES. S-18
ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES Q - SERIES R - SERIES S - SERIES T ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 1,076,043 $ 623,634 $ 341,597 $ 4,295 ----------------------------------------------------------------- Total investment income 1,076,043 623,634 341,597 4,295 Expenses: Mortality and expense risk and other charges 899,725 475,819 336,831 54,990 ----------------------------------------------------------------- Total expenses 899,725 475,819 336,831 54,990 ----------------------------------------------------------------- Net investment income (loss) 176,318 147,815 4,766 (50,695) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (238,981) (4,010) (5,368) 1,926 Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (238,981) (4,010) (5,368) 1,926 Net unrealized appreciation (depreciation) of investments 324,608 347,843 263,923 386,450 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 261,945 $ 491,648 $ 263,321 $ 337,681 ================================================================= ING GET FUND ING VP - SERIES U BALANCED ING VP BOND ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 1,817,690 $ 5,023,710 ------------------------------------------------ Total investment income - 1,817,690 5,023,710 Expenses: Mortality and expense risk and other charges 285 2,014,873 1,794,046 ------------------------------------------------ Total expenses 285 2,014,873 1,794,046 ------------------------------------------------ Net investment income (loss) (285) (197,183) 3,229,664 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 3 (31,426,581) 3,601,145 Capital gains distributions - - 699,805 ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 3 (31,426,581) 4,300,950 Net unrealized appreciation (depreciation) of investments 171 10,085,344 2,690,919 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (111) $ (21,538,420) $ 10,221,533 ================================================ ING VP ING VP ING VP STRATEGIC STRATEGIC STRATEGIC ING ALGER ALLOCATION ALLOCATION ALLOCATION AGGRESSIVE BALANCED GROWTH INCOME GROWTH ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 396,251 $ 219,880 $ 721,832 $ - ----------------------------------------------------------------- Total investment income 396,251 219,880 721,832 - Expenses: Mortality and expense risk and other charges 202,267 160,701 291,218 107 ----------------------------------------------------------------- Total expenses 202,267 160,701 291,218 107 ----------------------------------------------------------------- Net investment income (loss) 193,984 59,179 430,614 (107) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (1,295,397) (1,733,172) (810,159) 2 Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (1,295,397) (1,733,172) (810,159) 2 Net unrealized appreciation (depreciation) of investments (696,127) (367,779) (898,794) (11,590) ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,797,540) $ (2,041,772) $ (1,278,339) $ (11,695) ================================================================= ING AMERICAN ING BARON ING ALGER CENTURY SMALL SMALL CAP GROWTH CAP VALUE GROWTH ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 32 $ - ------------------------------------------------ Total investment income - 32 - Expenses: Mortality and expense risk and other charges 19 499 588 ------------------------------------------------ Total expenses 19 499 588 ------------------------------------------------ Net investment income (loss) (19) (467) (588) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (4) (4,695) 5,232 Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (4) (4,695) 5,232 Net unrealized appreciation (depreciation) of investments (929) 6,863 327 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (952) $ 1,701 $ 4,971 ================================================
S-19
ING GOLDMAN ING JPMORGAN SACHS(R) CAPITAL FLEMING ING JPMORGAN GROWTH INTERNATIONAL MID CAP VALUE ------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ 169,596 $ 136 ------------------------------------------------ Total investment income - 169,596 136 Expenses: Mortality and expense risk and other charges 24 323,589 130 ------------------------------------------------ Total expenses 24 323,589 130 ------------------------------------------------ Net investment income (loss) (24) (153,993) 6 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 1 (3,362,234) (9) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 1 (3,362,234) (9) Net unrealized appreciation (depreciation) of investments (548) (590,934) (2,299) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (571) $ (4,107,161) $ (2,302) ================================================ ING SALOMON ING T. ROWE ING UBS BROTHERS PRICE GROWTH TACTICAL ASSET INVESTORS VALUE EQUITY ALLOCATION ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2 $ 137,970 $ - ------------------------------------------------ Total investment income 2 137,970 - Expenses: Mortality and expense risk and other charges 51 972,473 - ------------------------------------------------ Total expenses 51 972,473 - ------------------------------------------------ Net investment income (loss) (49) (834,503) - REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (11) (31,652,050) - Capital gains distributions 7 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (4) (31,652,050) - Net unrealized appreciation (depreciation) of investments (1,647) 11,325,203 (12) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,700) $ (21,161,350) $ (12) ================================================
SEE ACCOMPANYING NOTES. S-20
ING MFS CAPITAL ING MFS ING MFS ING OPCAP OPPORTUNITIES GLOBAL GROWTH RESEARCH BALANCED VALUE ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ - $ 107,573 $ 2 ----------------------------------------------------------------- Total investment income - - 107,573 2 Expenses: Mortality and expense risk and other charges 592,876 2 707,793 26 ----------------------------------------------------------------- Total expenses 592,876 2 707,793 26 ----------------------------------------------------------------- Net investment income (loss) (592,876) (2) (600,220) (24) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (41,812,683) (28) (43,750,229) - Capital gains distributions - - - 88 ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (41,812,683) (28) (43,750,229) 88 Net unrealized appreciation (depreciation) of investments 23,516,791 (17) 27,569,249 272 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,888,768) $ (47) $ (16,781,200) $ 336 ================================================================= ING SALOMON BROTHERS ING SALOMON ING PIMCO AGGRESSIVE BROTHERS TOTAL RETURN GROWTH CAPITAL ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 18,115 $ - $ - ------------------------------------------------ Total investment income 18,115 - - Expenses: Mortality and expense risk and other charges 4,387 848,784 - ------------------------------------------------ Total expenses 4,387 848,784 - ------------------------------------------------ Net investment income (loss) 13,728 (848,784) - REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 4,402 (25,188,977) - Capital gains distributions 13,350 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 17,752 (25,188,977) - Net unrealized appreciation (depreciation) of investments 18,387 (4,736,656) 34 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 49,867 $ (30,774,417) $ 34 ================================================ ING VP ING VAN GROWTH KAMPEN AND ING VP ING VP INDEX COMSTOCK INCOME GROWTH PLUS LARGECAP ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 1,411 $ 4,537,816 $ - $ 446,833 ----------------------------------------------------------------- Total investment income 1,411 4,537,816 - 446,833 Expenses: Mortality and expense risk and other charges 860 5,889,748 472,716 2,284,906 ----------------------------------------------------------------- Total expenses 860 5,889,748 472,716 2,284,906 ----------------------------------------------------------------- Net investment income (loss) 551 (1,351,932) (472,716) (1,838,073) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (132) (193,418,765) (8,444,150) (58,481,089) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (132) (193,418,765) (8,444,150) (58,481,089) Net unrealized appreciation (depreciation) of investments (11,139) 35,220,058 (5,648,119) 11,268,433 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (10,720) $ (159,550,639) $ (14,564,985) $ (49,050,729) ================================================================= ING VP ING VP INDEX ING VP INDEX INTERNATIONAL PLUS MIDCAP PLUS SMALLCAP EQUITY ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 52,909 $ 6,485 $ 14,840 ------------------------------------------------ Total investment income 52,909 6,485 14,840 Expenses: Mortality and expense risk and other charges 106,832 36,617 79,248 ------------------------------------------------ Total expenses 106,832 36,617 79,248 ------------------------------------------------ Net investment income (loss) (53,923) (30,132) (64,408) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (760,138) (127,680) (1,577,469) Capital gains distributions - 52,453 - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (760,138) (75,227) (1,577,469) Net unrealized appreciation (depreciation) of investments (1,413,335) (732,353) (299,583) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,227,396) $ (837,712) $ (1,941,460) ================================================
S-21
ING VP SMALL ING VP ING VP VALUE COMPANY TECHNOLOGY OPPORTUNITY ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 301,043 $ - $ 95,253 ------------------------------------------------ Total investment income 301,043 - 95,253 Expenses: Mortality and expense risk and other charges 769,899 108,774 279,553 ------------------------------------------------ Total expenses 769,899 108,774 279,553 ------------------------------------------------ Net investment income (loss) (468,856) (108,774) (184,300) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (3,580,613) (3,681,243) (4,332,295) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (3,580,613) (3,681,243) (4,332,295) Net unrealized appreciation (depreciation) of investments (14,440,776) (1,844,374) (2,719,443) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,490,245) $ (5,634,391) $ (7,236,038) ================================================ ING VP ING VP SMALLCAP SMALLCAP JANUS ASPEN OPPORTUNITIES - OPPORTUNITIES - AGGRESSIVE CLASS R CLASS S GROWTH ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ - $ - ------------------------------------------------ Total investment income - - - Expenses: Mortality and expense risk and other charges 130 20,930 1,204,437 ------------------------------------------------ Total expenses 130 20,930 1,204,437 ------------------------------------------------ Net investment income (loss) (130) (20,930) (1,204,437) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (9,641) (338,439) (110,103,453) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (9,641) (338,439) (110,103,453) Net unrealized appreciation (depreciation) of investments (3,578) (622,428) 73,321,455 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (13,349) $ (981,797) $ (37,986,435) ================================================
SEE ACCOMPANYING NOTES. S-22
ING VP ING VP GROWTH GROWTH ING VP ING VP OPPORTUNITIES - OPPORTUNITIES - INTERNATIONAL MAGNACAP - CLASS R CLASS S VALUE CLASS R ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ - $ - $ 1,825 $ 231 ----------------------------------------------------------------- Total investment income - - 1,825 231 Expenses: Mortality and expense risk and other charges 282 1,717 1,556 103 ----------------------------------------------------------------- Total expenses 282 1,717 1,556 103 ----------------------------------------------------------------- Net investment income (loss) (282) (1,717) 269 128 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 1,805 (27,626) (18,718) (20) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions 1,805 (27,626) (18,718) (20) Net unrealized appreciation (depreciation) of investments (19,103) (29,240) (30,118) (5,689) ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (17,580) $ (58,583) $ (48,567) $ (5,581) ================================================================= ING VP ING ING VP MIDCAP VP MIDCAP MAGNACAP - OPPORTUNITIES - OPPORTUNITIES - CLASS S CLASS R CLASS S ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 4,366 $ - $ - ------------------------------------------------ Total investment income 4,366 - - Expenses: Mortality and expense risk and other charges 5,123 15 22,826 ------------------------------------------------ Total expenses 5,123 15 22,826 ------------------------------------------------ Net investment income (loss) (757) (15) (22,826) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (9,688) (200) (97,225) Capital gains distributions - - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (9,688) (200) (97,225) Net unrealized appreciation (depreciation) of investments (121,268) (805) (459,418) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (131,713) $ (1,020) $ (579,469) ================================================ JANUS ASPEN JANUS ASPEN JANUS ASPEN JANUS ASPEN WORLDWIDE BALANCED FLEXIBLE INCOME GROWTH GROWTH ----------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 5,282,647 $ 1,165,302 $ - $ 2,232,135 ----------------------------------------------------------------- Total investment income 5,282,647 1,165,302 - 2,232,135 Expenses: Mortality and expense risk and other charges 2,746,947 308,883 1,668,494 3,244,833 ----------------------------------------------------------------- Total expenses 2,746,947 308,883 1,668,494 3,244,833 ----------------------------------------------------------------- Net investment income (loss) 2,535,700 856,419 (1,668,494) (1,012,698) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (19,145,911) 761,446 (88,052,075) (139,153,473) Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (19,145,911) 761,446 (88,052,075) (139,153,473) Net unrealized appreciation (depreciation) of investments (1,489,908) 571,088 45,741,303 58,703,035 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,100,119) $ 2,188,953 $ (43,979,266) $ (81,463,136) ================================================================= LORD ABBETT LORD ABBETT MFS(R) GLOBAL GROWTH AND MID-CAP GOVERNMENTS INCOME VALUE SERIES ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 2,196 $ 2,458 $ 64,883 ------------------------------------------------ Total investment income 2,196 2,458 64,883 Expenses: Mortality and expense risk and other charges 1,166 1,609 28,883 ------------------------------------------------ Total expenses 1,166 1,609 28,883 ------------------------------------------------ Net investment income (loss) 1,030 849 36,000 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (101) (21,787) 31,230 Capital gains distributions 49 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (52) (21,787) 31,230 Net unrealized appreciation (depreciation) of investments (19,377) (25,338) 84,246 ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,399) $ (46,276) $ 151,476 ================================================
S-23
OPPENHEIMER OPPENHEIMER MFS(R) TOTAL AGGRESSIVE GLOBAL RETURN GROWTH SECURITIES ------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 1,615,499 $ 216,818 $ 90,455 ------------------------------------------------ Total investment income 1,615,499 216,818 90,455 Expenses: Mortality and expense risk and other charges 1,260,416 405,709 214,774 ------------------------------------------------ Total expenses 1,260,416 405,709 214,774 ------------------------------------------------ Net investment income (loss) 355,083 (188,891) (124,319) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 2,335,973 (5,968,060) (3,498,317) Capital gains distributions 1,280,830 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions 3,616,803 (5,968,060) (3,498,317) Net unrealized appreciation (depreciation) of investments (10,681,462) (5,031,083) (1,163,987) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,709,576) $ (11,188,034) $ (4,786,623) ================================================
SEE ACCOMPANYING NOTES. S-24
OPPENHEIMER MAIN STREET GROWTH & OPPENHEIMER PIONEER EQUITY PIONEER INCOME STRATEGIC BOND INCOME VCT VCT ------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) Income: Dividends $ 438,945 $ 2,233,631 $ 2,134 $ - ----------------------------------------------------------------- Total investment income 438,945 2,233,631 2,134 - Expenses: Mortality and expense risk and other charges 766,599 387,948 689 - ----------------------------------------------------------------- Total expenses 766,599 387,948 689 - ----------------------------------------------------------------- Net investment income (loss) (327,654) 1,845,683 1,445 - REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (11,300,002) (1,631,959) (909) - Capital gains distributions - - - - ----------------------------------------------------------------- Total realized gain (loss) on investments and capital gains distributions (11,300,002) (1,631,959) (909) - Net unrealized appreciation (depreciation) of investments (1,390,151) 1,589,777 (5,978) 1 ----------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (13,017,807) $ 1,803,501 $ (5,442) $ 1 ================================================================= SP JENNISON PIONEER MID PRUDENTIAL INTERNATIONAL CAP VALUE VCT JENNISON GROWTH ----------------------------------------------- NET INVESTMENT INCOME (LOSS) Income: Dividends $ 112 $ - $ - ------------------------------------------------ Total investment income 112 - - Expenses: Mortality and expense risk and other charges 239 8,938 2,814 ------------------------------------------------ Total expenses 239 8,938 2,814 ------------------------------------------------ Net investment income (loss) (127) (8,938) (2,814) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (10,015) (252,055) (44,193) Capital gains distributions 990 - - ------------------------------------------------ Total realized gain (loss) on investments and capital gains distributions (9,025) (252,055) (44,193) Net unrealized appreciation (depreciation) of investments 50 (50,168) (7,265) ------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (9,102) $ (311,161) $ (54,272) ================================================
S-25 ING Life Insurance and Annuity Company Variable Annuity Account B Statements of Changes in Net Assets For the years ended December 31, 2002 and 2001
AIM V.I. AIM V.I. CAPITAL AIM V.I. CORE GOVERNMENT APPRECIATION EQUITY SECURITIES ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 25,987,131 $ 49,823,138 $ 294,912 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,607,214 (540,544) 198,905 Net realized gain (loss) on investments and capital gains distributions (3,943,522) (2,905,719) 94,842 Net unrealized appreciation (depreciation) of investments (4,771,612) (9,765,396) (124,108) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (7,107,920) (13,211,659) 169,639 Changes from principal transactions: Total unit transactions 4,629,631 6,246,089 8,684,291 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 4,629,631 6,246,089 8,684,291 ------------------------------------------------ Total increase (decrease) (2,478,289) (6,965,570) 8,853,930 ------------------------------------------------ Net assets at December 31, 2001 23,508,842 42,857,568 9,148,842 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (234,121) (336,923) 257,469 Net realized gain (loss) on investments and capital gains distributions (11,841,069) (19,166,365) 274,461 Net unrealized appreciation (depreciation) of investments 6,412,975 12,696,921 710,014 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (5,662,215) (6,806,367) 1,241,944 Changes from principal transactions: Total unit transactions (3,014,648) (6,110,961) 15,606,439 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (3,014,648) (6,110,961) 15,606,439 ------------------------------------------------ Total increase (decrease) (8,676,863) (12,917,328) 16,848,383 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 14,831,979 $ 29,940,240 $ 25,997,225 ================================================
SEE ACCOMPANYING NOTES. S-26
ALGER AMERICAN AIM V.I. AIM V.I. ALGER AMERICAN INCOME & GROWTH PREMIER EQUITY BALANCED GROWTH ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 37,256,929 $ 73,349,994 $ 4,887,859 $ 16,586,009 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (305,064) 676,926 74,716 790,430 Net realized gain (loss) on investments and capital gains distributions (3,920,194) (4,177,377) (59,596) (662,398) Net unrealized appreciation (depreciation) of investments (9,793,918) (7,849,544) (161,916) (2,624,832) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (14,019,176) (11,349,995) (146,796) (2,496,800) Changes from principal transactions: Total unit transactions 4,519,235 12,007,731 (975,636) (2,809,855) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 4,519,235 12,007,731 (975,636) (2,809,855) ----------------------------------------------------------------- Total increase (decrease) (9,499,941) 657,736 (1,122,432) (5,306,655) ----------------------------------------------------------------- Net assets at December 31, 2001 27,756,988 74,007,730 3,765,427 11,279,354 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (252,850) (519,002) 8,563 (64,304) Net realized gain (loss) on investments and capital gains distributions (21,531,563) (22,963,948) (480,416) (4,172,553) Net unrealized appreciation (depreciation) of investments 13,605,701 1,596,273 (8,111) 797,771 ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (8,178,712) (21,886,677) (479,964) (3,439,086) Changes from principal transactions: Total unit transactions (4,632,586) (10,794,461) (709,084) (1,673,441) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (4,632,586) (10,794,461) (709,084) (1,673,441) ----------------------------------------------------------------- Total increase (decrease) (12,811,298) (32,681,138) (1,189,048) (5,112,527) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 14,945,690 $ 41,326,592 $ 2,576,379 $ 6,166,827 ================================================================= ALGER AMERICAN ALLIANCE ALLIANCE LEVERAGED GROWTH AND PREMIER ALLCAP INCOME GROWTH ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 15,562,934 $ 897,717 $ 2,687,461 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 259,039 487,785 266,205 Net realized gain (loss) on investments and capital gains distributions (1,130,076) (54,847) (227,098) Net unrealized appreciation (depreciation) of investments (1,724,700) (1,330,699) (1,211,231) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,595,737) (897,761) (1,172,124) Changes from principal transactions: Total unit transactions (2,543,425) 28,176,820 7,016,678 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (2,543,425) 28,176,820 7,016,678 ------------------------------------------------ Total increase (decrease) (5,139,162) 27,279,059 5,844,554 ------------------------------------------------ Net assets at December 31, 2001 10,423,772 28,176,776 8,532,015 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (109,776) (165,509) (96,634) Net realized gain (loss) on investments and capital gains distributions (5,523,735) (2,052,320) (2,300,618) Net unrealized appreciation (depreciation) of investments 2,219,572 (5,861,654) (435,725) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (3,413,939) (8,079,483) (2,832,977) Changes from principal transactions: Total unit transactions (1,286,122) 2,071,208 139,220 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (1,286,122) 2,071,208 139,220 ------------------------------------------------ Total increase (decrease) (4,700,061) (6,008,275) (2,693,757) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 5,723,711 $ 22,168,501 $ 5,838,258 ================================================
S-27
AMERICAN AMERICAN ALLIANCE CENTURY(R) VP CENTURY(R) VP QUASAR BALANCED INTERNATIONAL ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 82,470 $ 2,684,483 $ 4,904,674 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 11,233 115,422 341,217 Net realized gain (loss) on investments and capital gains distributions (51,042) (55,447) (296,586) Net unrealized appreciation (depreciation) of investments 55,774 (186,838) (1,441,450) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 15,965 (126,863) (1,396,819) Changes from principal transactions: Total unit transactions 811,867 (514,673) (748,774) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 811,867 (514,673) (748,774) ------------------------------------------------ Total increase (decrease) 827,832 (641,536) (2,145,593) ------------------------------------------------ Net assets at December 31, 2001 910,302 2,042,947 2,759,081 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (11,757) 25,297 (12,211) Net realized gain (loss) on investments and capital gains distributions (52,585) (331,096) (1,559,008) Net unrealized appreciation (depreciation) of investments (320,915) 88,916 1,039,420 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (385,257) (216,883) (531,799) Changes from principal transactions: Total unit transactions 158,551 (343,024) (688,409) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 158,551 (343,024) (688,409) ------------------------------------------------ Total increase (decrease) (226,706) (559,907) (1,220,208) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 683,596 $ 1,483,040 $ 1,538,873 ================================================
SEE ACCOMPANYING NOTES. S-28
BRINSON SERIES BRINSON SERIES GROWTH & BRINSON SERIES TACTICAL CALVERT SOCIAL INCOME SMALL CAP ALLOCATION BALANCED ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 950,238 $ 208,747 $ 12,509,283 $ 2,513,732 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 226,054 (1,968) 885,330 83,359 Net realized gain (loss) on investments and capital gains distributions (231,524) (60,691) (450,606) (76,083) Net unrealized appreciation (depreciation) of investments (30,611) 31,643 (2,603,918) (191,904) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (36,081) (31,016) (2,169,194) (184,628) Changes from principal transactions: Total unit transactions (914,157) (177,731) 3,994,345 (369,758) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (914,157) (177,731) 3,994,345 (369,758) ----------------------------------------------------------------- Total increase (decrease) (950,238) (208,747) 1,825,151 (554,386) ----------------------------------------------------------------- Net assets at December 31, 2001 - - 14,334,434 1,959,346 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - (85,740) 28,697 Net realized gain (loss) on investments and capital gains distributions - - (3,543,581) (465,640) Net unrealized appreciation (depreciation) of investments - - 283,934 156,806 ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations - - (3,345,387) (280,137) Changes from principal transactions: Total unit transactions - - (1,264,476) 96,175 ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions - - (1,264,476) 96,175 ----------------------------------------------------------------- Total increase (decrease) - - (4,609,863) (183,962) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ - $ - $ 9,724,571 $ 1,775,384 ================================================================= FEDERATED FUND FEDERATED FOR US AMERICAN FEDERATED GOVERNMENT LEADERS EQUITY INCOME SECURITIES ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 102,586,049 $ 24,264,247 $ 11,133,403 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 624,010 127,895 284,376 Net realized gain (loss) on investments and capital gains distributions 4,010,157 248,468 128,207 Net unrealized appreciation (depreciation) of investments (10,151,128) (3,322,426) 191,136 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (5,516,961) (2,946,063) 603,719 Changes from principal transactions: Total unit transactions (13,876,471) (3,842,680) (35,167) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (13,876,471) (3,842,680) (35,167) ------------------------------------------------ Total increase (decrease) (19,393,432) (6,788,743) 568,552 ------------------------------------------------ Net assets at December 31, 2001 83,192,617 17,475,504 11,701,955 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (148,139) 98,374 270,618 Net realized gain (loss) on investments and capital gains distributions (64,392) (606,693) 178,225 Net unrealized appreciation (depreciation) of investments (16,206,809) (3,030,582) 443,220 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (16,419,340) (3,538,901) 892,063 Changes from principal transactions: Total unit transactions (16,234,348) (3,672,738) 80,140 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (16,234,348) (3,672,738) 80,140 ------------------------------------------------ Total increase (decrease) (32,653,688) (7,211,639) 972,203 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 50,538,929 $ 10,263,865 $ 12,674,158 ================================================
S-29
FEDERATED FEDERATED GROWTH FEDERATED HIGH INTERNATIONAL STRATEGIES INCOME BOND EQUITY ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 33,809,187 $ 26,446,176 $ 20,057,326 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 101,731 2,265,323 1,804,980 Net realized gain (loss) on investments and capital gains distributions 1,439,089 (2,047,225) 598,776 Net unrealized appreciation (depreciation) of investments (9,464,697) (107,530) (7,961,481) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (7,923,877) 110,568 (5,557,725) Changes from principal transactions: Total unit transactions (4,910,965) (5,657,520) (3,523,772) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (4,910,965) (5,657,520) (3,523,772) ------------------------------------------------ Total increase (decrease) (12,834,842) (5,546,952) (9,081,497) ------------------------------------------------ Net assets at December 31, 2001 20,974,345 20,899,224 10,975,829 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (216,927) 1,712,101 (119,497) Net realized gain (loss) on investments and capital gains distributions (785,326) (4,158,428) (716,353) Net unrealized appreciation (depreciation) of investments (4,061,042) 2,397,304 (1,457,973) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (5,063,295) (49,023) (2,293,823) Changes from principal transactions: Total unit transactions (5,495,703) (4,166,949) (2,658,263) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (5,495,703) (4,166,949) (2,658,263) ------------------------------------------------ Total increase (decrease) (10,558,998) (4,215,972) (4,952,086) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 10,415,347 $ 16,683,252 $ 6,023,743 ================================================
SEE ACCOMPANYING NOTES. S-30
FEDERATED FEDERATED FIDELITY(R) VIP FIDELITY(R) VIP PRIME MONEY UTILITY EQUITY-INCOME GROWTH ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 8,703,425 $ 19,350,590 $ 188,024,984 $ 209,609,983 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 183,680 352,094 754,873 4,618,214 Net realized gain (loss) on investments and capital gains distributions - (29,007) (445,915) (7,202,886) Net unrealized appreciation (depreciation) of investments - (2,878,438) (1,302,300) (26,336,426) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 183,680 (2,555,351) (993,342) (28,921,098) Changes from principal transactions: Total unit transactions (75,384) (3,565,172) 5,987,428 (13,370,131) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (75,384) (3,565,172) 5,987,428 (13,370,131) ----------------------------------------------------------------- Total increase (decrease) 108,296 (6,120,523) 4,994,086 (42,291,229) ----------------------------------------------------------------- Net assets at December 31, 2001 8,811,721 13,230,067 193,019,070 167,318,754 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,081) 441,437 778,626 (1,307,033) Net realized gain (loss) on investments and capital gains distributions - (2,778,666) (13,368,715) (75,974,775) Net unrealized appreciation (depreciation) of investments - (761,186) (23,430,907) 27,425,197 ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (1,081) (3,098,415) (36,020,996) (49,856,611) Changes from principal transactions: Total unit transactions (1,424,140) (3,110,909) (10,577,601) (19,282,617) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (1,424,140) (3,110,909) (10,577,601) (19,282,617) ----------------------------------------------------------------- Total increase (decrease) (1,425,221) (6,209,324) (46,598,597) (69,139,228) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 7,386,500 $ 7,020,743 $ 146,420,473 $ 98,179,526 ================================================================= FIDELITY(R) VIP FIDELITY(R) VIP FIDELITY(R) VIP II ASSET HIGH INCOME OVERSEAS MANAGER(SM) ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 45,511,833 $ 14,451,215 $ 17,820,958 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 9,457,584 11,399,803 5,249,880 Net realized gain (loss) on investments and capital gains distributions (2,705,353) (9,878,682) (5,287,995) Net unrealized appreciation (depreciation) of investments (19,142,344) (41,561,108) (5,871,216) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (12,390,113) (40,039,987) (5,909,331) Changes from principal transactions: Total unit transactions 6,263,146 35,503,221 2,182,805 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 6,263,146 35,503,221 2,182,805 ------------------------------------------------ Total increase (decrease) (6,126,967) (4,536,766) (3,726,526) ------------------------------------------------ Net assets at December 31, 2001 39,384,866 9,914,449 14,094,432 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 3,617,460 (33,251) 341,937 Net realized gain (loss) on investments and capital gains distributions (15,314,996) (4,666,771) (2,462,332) Net unrealized appreciation (depreciation) of investments 12,364,126 2,758,026 734,377 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 666,590 (1,941,996) (1,386,018) Changes from principal transactions: Total unit transactions (3,595,013) (1,355,678) (1,622,399) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (3,595,013) (1,355,678) (1,622,399) ------------------------------------------------ Total increase (decrease) (2,928,423) (3,297,674) (3,008,417) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 36,456,443 $ 6,616,775 $ 11,086,015 ================================================
S-31
FIDELITY(R) VIP FIDELITY(R) VIP II FIDELITY(R) VIP II INVESTMENT CONTRAFUND(R) II INDEX 500 GRADE BOND -------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 216,963,354 $ 133,049,029 $ 3,699,966 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (156,534) 151,447 1,556,493 Net realized gain (loss) on investments and capital gains distributions (10,037,529) 28,433 (1,058,361) Net unrealized appreciation (depreciation) of investments (6,940,504) 53,028 (3,573,305) -------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (17,134,567) 232,908 (3,075,173) Changes from principal transactions: Total unit transactions (25,829,941) (32,499,293) 2,458,909 -------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (25,829,941) (32,499,293) 2,458,909 -------------------------------------------------------- Total increase (decrease) (42,964,508) (32,266,385) (616,264) -------------------------------------------------------- Net assets at December 31, 2001 173,998,846 100,782,644 3,083,702 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (689,566) 21,129 78,992 Net realized gain (loss) on investments and capital gains distributions (27,675,618) (18,283,780) 126,348 Net unrealized appreciation (depreciation) of investments 10,036,956 (4,035,555) 43,860 -------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (18,328,228) (22,298,206) 249,200 Changes from principal transactions: Total unit transactions (10,099,539) (14,294,040) (442,602) -------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (10,099,539) (14,294,040) (442,602) -------------------------------------------------------- Total increase (decrease) (28,427,767) (36,592,246) (193,402) -------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 145,571,079 $ 64,190,398 $ 2,890,300 ========================================================
SEE ACCOMPANYING NOTES. S-32
FRANKLIN SMALL CAP VALUE ING GET FUND ING GET FUND - ING GET FUND SECURITIES - SERIES C SERIES D - SERIES E ------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ 5,898,705 $ 129,775,588 $ 333,832,965 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 293,859 (22,012) (2,832,358) Net realized gain (loss) on investments and capital gains distributions - (2,549,105) (420,664) (2,038,326) Net unrealized appreciation (depreciation) of investments - 1,291,730 1,095,968 1,793,609 ------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations - (963,516) 653,292 (3,077,075) Changes from principal transactions: Total unit transactions - (4,935,189) (10,485,646) (30,372,937) ------------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions - (4,935,189) (10,485,646) (30,372,937) ------------------------------------------------------------------- Total increase (decrease) - (5,898,705) (9,832,354) (33,450,012) ------------------------------------------------------------------- Net assets at December 31, 2001 - - 119,943,234 300,382,953 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (29) - 3,191,699 6,691,857 Net realized gain (loss) on investments and capital gains distributions (240,971) - (3,903,504) (12,383,728) Net unrealized appreciation (depreciation) of investments 1,765 - (197,690) 12,265,411 ------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (239,235) - (909,495) 6,573,540 Changes from principal transactions: Total unit transactions 604,037 - (15,336,007) (30,559,697) ------------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 604,037 - (15,336,007) (30,559,697) ------------------------------------------------------------------- Total increase (decrease) 364,802 - (16,245,502) (23,986,157) ------------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 364,802 $ - $ 103,697,732 $ 276,396,796 =================================================================== ING GET FUND ING GET FUND ING GET FUND - SERIES G - SERIES H - SERIES I -------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 186,444,632 $ 141,763,690 $ 92,928,925 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (2,345,173) (1,652,269) (1,309,240) Net realized gain (loss) on investments and capital gains distributions (434,775) (369,766) (219,903) Net unrealized appreciation (depreciation) of investments 2,133,011 564,872 987,709 -------------------------------------------------- Net increase (decrease) in net assets resulting from operations (646,937) (1,457,163) (541,434) Changes from principal transactions: Total unit transactions (14,428,668) (8,620,592) (4,985,289) -------------------------------------------------- Increase (decrease) in assets derived from principal transactions (14,428,668) (8,620,592) (4,985,289) -------------------------------------------------- Total increase (decrease) (15,075,605) (10,077,755) (5,526,723) -------------------------------------------------- Net assets at December 31, 2001 171,369,027 131,685,935 87,402,202 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 3,564,518 2,395,214 1,568,339 Net realized gain (loss) on investments and capital gains distributions (361,655) (2,376,877) (285,274) Net unrealized appreciation (depreciation) of investments 2,001,769 3,657,819 1,679,757 -------------------------------------------------- Net increase (decrease) in net assets resulting from operations 5,204,632 3,676,156 2,962,822 Changes from principal transactions: Total unit transactions (12,696,957) (13,759,042) (6,286,322) -------------------------------------------------- Increase (decrease) in assets derived from principal transactions (12,696,957) (13,759,042) (6,286,322) -------------------------------------------------- Total increase (decrease) (7,492,325) (10,082,886) (3,323,500) -------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 163,876,702 $ 121,603,049 $ 84,078,702 ==================================================
S-33
ING GET FUND ING GET FUND ING GET FUND - SERIES J - SERIES K - SERIES L ----------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 79,871,616 $ 93,789,821 $ 584,846 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,178,440) (1,749,150) 549,879 Net realized gain (loss) on investments and capital gains distributions (283,781) (112,344) 127,113 Net unrealized appreciation (depreciation) of investments 1,098,645 (668,196) (1,992,805) ----------------------------------------------- Net increase (decrease) in net assets resulting from operations (363,576) (2,529,690) (1,315,813) Changes from principal transactions: Total unit transactions (4,706,710) (2,701,829) 81,075,629 ----------------------------------------------- Increase (decrease) in assets derived from principal transactions (4,706,710) (2,701,829) 81,075,629 ----------------------------------------------- Total increase (decrease) (5,070,286) (5,231,519) 79,759,816 ----------------------------------------------- Net assets at December 31, 2001 74,801,330 88,558,302 80,344,662 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,299,617 604,407 (1,480,504) Net realized gain (loss) on investments and capital gains distributions (1,217,195) (1,166,744) (2,039,616) Net unrealized appreciation (depreciation) of investments 2,934,305 3,623,216 3,999,896 ----------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,016,727 3,060,879 479,776 Changes from principal transactions: Total unit transactions (5,973,812) (10,359,119) (5,569,892) ----------------------------------------------- Increase (decrease) in assets derived from principal transactions (5,973,812) (10,359,119) (5,569,892) ----------------------------------------------- Total increase (decrease) (2,957,085) (7,298,240) (5,090,116) ----------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 71,844,245 $ 81,260,062 $ 75,254,546 ===============================================
SEE ACCOMPANYING NOTES. S-34
ING GET FUND ING GET FUND ING GET FUND ING GET FUND - SERIES M - SERIES N - SERIES P - SERIES Q ------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 645,422 109,984 (66,562) (1,059) Net realized gain (loss) on investments and capital gains distributions (51,667) 210,767 300 163 Net unrealized appreciation (depreciation) of investments (3,590,542) 2,203,779 192,563 757 ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (2,996,787) 2,524,530 126,301 (139) Changes from principal transactions: Total unit transactions 126,161,862 102,081,211 82,886,000 1,620,487 ------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 126,161,862 102,081,211 82,886,000 1,620,487 ------------------------------------------------------------- Total increase (decrease) 123,165,075 104,605,741 83,012,301 1,620,348 ------------------------------------------------------------- Net assets at December 31, 2001 123,165,075 104,605,741 83,012,301 1,620,348 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (2,332,513) (1,868,088) (1,569,041) 176,318 Net realized gain (loss) on investments and capital gains distributions (3,482,609) 2,453,176 (413,635) (238,981) Net unrealized appreciation (depreciation) of investments 7,557,322 (2,953,390) 1,306,756 324,608 ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,742,200 (2,368,302) (675,920) 261,945 Changes from principal transactions: Total unit transactions (9,526,167) (12,094,137) (6,002,646) 52,943,266 ------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (9,526,167) (12,094,137) (6,002,646) 52,943,266 ------------------------------------------------------------- Total increase (decrease) (7,783,967) (14,462,439) (6,678,566) 53,205,211 ------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 115,381,108 $ 90,143,302 $ 76,333,735 $ 54,825,559 ============================================================= ING GET FUND ING GET FUND ING GET FUND - SERIES R - SERIES S - SERIES T -------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - - Net realized gain (loss) on investments and capital gains distributions - - - Net unrealized appreciation (depreciation) of investments - - - -------------------------------------------- Net increase (decrease) in net assets resulting from operations - - - Changes from principal transactions: Total unit transactions - - - -------------------------------------------- Increase (decrease) in assets derived from principal transactions - - - -------------------------------------------- Total increase (decrease) - - - -------------------------------------------- Net assets at December 31, 2001 - - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 147,815 4,766 (50,695) Net realized gain (loss) on investments and capital gains distributions (4,010) (5,368) 1,926 Net unrealized appreciation (depreciation) of investments 347,843 263,923 386,450 -------------------------------------------- Net increase (decrease) in net assets resulting from operations 491,648 263,321 337,681 Changes from principal transactions: Total unit transactions 43,064,749 53,290,086 39,040,813 -------------------------------------------- Increase (decrease) in assets derived from principal transactions 43,064,749 53,290,086 39,040,813 -------------------------------------------- Total increase (decrease) 43,556,397 53,553,407 39,378,494 -------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 43,556,397 $ 53,553,407 $ 39,378,494 ============================================
S-35
ING GET FUND ING VP - SERIES U BALANCED ING VP BOND ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 199,767,841 $ 99,490,083 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 9,113,021 6,509,189 Net realized gain (loss) on investments and capital gains distributions - (7,103,330) 869,818 Net unrealized appreciation (depreciation) of investments - (12,960,839) 898,172 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (10,951,148) 8,277,179 Changes from principal transactions: Total unit transactions - 1,130,931 36,691,750 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions - 1,130,931 36,691,750 ------------------------------------------------ Total increase (decrease) - (9,820,217) 44,968,929 ------------------------------------------------ Net assets at December 31, 2001 - 189,947,624 144,459,012 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (285) (197,183) 3,229,664 Net realized gain (loss) on investments and capital gains distributions 3 (31,426,581) 4,300,950 Net unrealized appreciation (depreciation) of investments 171 10,085,344 2,690,919 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (111) (21,538,420) 10,221,533 Changes from principal transactions: Total unit transactions 502,680 (19,541,370) 9,882,559 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 502,680 (19,541,370) 9,882,559 ------------------------------------------------ Total increase (decrease) 502,569 (41,079,790) 20,104,092 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 502,569 $ 148,867,834 $ 164,563,104 ================================================
SEE ACCOMPANYING NOTES. S-36
ING VP ING VP ING VP STRATEGIC EMERGING ING VP MONEY NATURAL ALLOCATION MARKETS MARKET RESOURCES BALANCED ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 1,255,139 $ 211,808,608 $ 2,800,522 $ 21,090,188 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 200,313 8,471,018 (27,769) 242,613 Net realized gain (loss) on investments and capital gains distributions (46,024) (787,890) (74,546) (147,526) Net unrealized appreciation (depreciation) of investments (286,135) (382,266) (343,776) (1,743,663) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (131,846) 7,300,862 (446,091) (1,648,576) Changes from principal transactions: Total unit transactions (211,449) 73,917,208 (351,677) (2,051,275) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (211,449) 73,917,208 (351,677) (2,051,275) ----------------------------------------------------------------- Total increase (decrease) (343,295) 81,218,070 (797,768) (3,699,851) ----------------------------------------------------------------- Net assets at December 31, 2001 911,844 293,026,678 2,002,754 17,390,337 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (11,406) 7,337,669 (19,167) 193,984 Net realized gain (loss) on investments and capital gains distributions (281,423) (5,982,099) 18,761 (1,295,397) Net unrealized appreciation (depreciation) of investments 220,172 (371,722) (80,642) (696,127) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (72,657) 983,848 (81,048) (1,797,540) Changes from principal transactions: Total unit transactions (190,137) (31,454,767) (354,905) (1,248,792) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions (190,137) (31,454,767) (354,905) (1,248,792) ----------------------------------------------------------------- Total increase (decrease) (262,794) (30,470,919) (435,953) (3,046,332) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 649,050 $ 262,555,759 $ 1,566,801 $ 14,344,005 ================================================================= ING VP ING VP STRATEGIC STRATEGIC ING ALGER ALLOCATION ALLOCATION AGGRESSIVE GROWTH INCOME GROWTH ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 17,520,083 $ 26,191,216 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 57,331 757,517 - Net realized gain (loss) on investments and capital gains distributions (214,747) (148,474) - Net unrealized appreciation (depreciation) of investments (2,028,011) (1,543,863) - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,185,427) (934,820) - Changes from principal transactions: Total unit transactions (1,458,785) (1,909,739) - ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (1,458,785) (1,909,739) - ------------------------------------------------ Total increase (decrease) (3,644,212) (2,844,559) - ------------------------------------------------ Net assets at December 31, 2001 13,875,871 23,346,657 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 59,179 430,614 (107) Net realized gain (loss) on investments and capital gains distributions (1,733,172) (810,159) 2 Net unrealized appreciation (depreciation) of investments (367,779) (898,794) (11,590) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,041,772) (1,278,339) (11,695) Changes from principal transactions: Total unit transactions (577,200) (1,980,031) 190,364 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions (577,200) (1,980,031) 190,364 ------------------------------------------------ Total increase (decrease) (2,618,972) (3,258,370) 178,669 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 11,256,899 $ 20,088,287 $ 178,669 ================================================
S-37
ING AMERICAN ING BARON ING ALGER CENTURY SMALL SMALL CAP GROWTH CAP VALUE GROWTH ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - - Net realized gain (loss) on investments and capital gains distributions - - - Net unrealized appreciation (depreciation) of investments - - - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - - - Changes from principal transactions: Total unit transactions - - - ------------------------------------------------ Increase (decrease) in assets derived from principal transaction - - - ------------------------------------------------ Total increase (decrease) - - - ------------------------------------------------ Net assets at December 31, 2001 - - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (19) (467) (588) Net realized gain (loss) on investments and capital gains distributions (4) (4,695) 5,232 Net unrealized appreciation (depreciation) of investment (929) 6,863 327 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (952) 1,701 4,971 Changes from principal transactions: Total unit transactions 10,365 171,139 188,307 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 10,365 171,139 188,307 ------------------------------------------------ Total increase (decrease) 9,413 172,840 193,278 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 9,413 $ 172,840 $ 193,278 ================================================
SEE ACCOMPANYING NOTES. S-38
ING GOLDMAN ING JPMORGAN ING MFS SACHS(R) CAPITAL FLEMING ING JPMORGAN CAPITAL GROWTH INTERNATIONAL MID CAP VALUE OPPORTUNITIES ------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 38,279,673 $ - $ 78,233,370 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 8,217,492 - 12,719,778 Net realized gain (loss) on investments and capital gains distributions - (18,250,125) - (7,777,680) Net unrealized appreciation (depreciation) of investments - (320,460) - (27,031,102) ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (10,353,093) - (22,089,004) Changes from principal transactions: Total unit transactions - 2,522,566 - 6,687,762 ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions - 2,522,566 - 6,687,762 ------------------------------------------------------------------ Total increase (decrease) - (7,830,527) - (15,401,242) ------------------------------------------------------------------ Net assets at December 31, 2001 - 30,449,146 - 62,832,128 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (24) (153,993) 6 (592,876) Net realized gain (loss) on investments and capital gains distributions 1 (3,362,234) (9) (41,812,683) Net unrealized appreciation (depreciation) of investments (548) (590,934) (2,299) 23,516,791 ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (571) (4,107,161) (2,302) (18,888,768) Changes from principal transactions: Total unit transactions 18,664 (2,297,935) 89,227 (8,202,573) ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions 18,664 (2,297,935) 89,227 (8,202,573) ------------------------------------------------------------------ Total increase (decrease) 18,093 (6,405,096) 86,925 (27,091,341) ------------------------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 18,093 $ 24,044,050 $ 86,925 $ 35,740,787 ================================================================== ING MFS ING MFS ING OPCAP GLOBAL GROWTH RESEARCH BALANCED VALUE ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 97,910,276 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 16,100,795 - Net realized gain (loss) on investments and capital gains distributions - (5,309,113) - Net unrealized appreciation (depreciation) of investments - (32,124,468) - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (21,332,786) - Changes from principal transactions: Total unit transactions - (7,183,612) - ------------------------------------------------ Increase (decrease) in assets derived from principal transactions - (7,183,612) - ------------------------------------------------ Total increase (decrease) - (28,516,398) - ------------------------------------------------ Net assets at December 31, 2001 - 69,393,878 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (2) (600,220) (24) Net realized gain (loss) on investments and capital gains distributions (28) (43,750,229) 88 Net unrealized appreciation (depreciation) of investments (17) 27,569,249 272 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (47) (16,781,200) 336 Changes from principal transactions: Total unit transactions 1,449 (11,943,836) 14,908 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 1,449 (11,943,836) 14,908 ------------------------------------------------ Total increase (decrease) 1,402 (28,725,036) 15,244 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 1,402 $ 40,668,842 $ 15,244 ================================================
S-39
ING SALOMON BROTHERS ING SALOMON ING PIMCO AGGRESSIVE BROTHERS TOTAL RETURN GROWTH CAPITAL ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 136,684,647 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 5,810,330 - Net realized gain (loss) on investments and capital gains distributions - (51,885,576) - Net unrealized appreciation (depreciation) of investments - 10,682,971 - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (35,392,275) - Changes from principal transactions: Total unit transactions - (9,757,019) - ------------------------------------------------ Increase (decrease) in assets derived from principal transactions - (9,757,019) - ------------------------------------------------ Total increase (decrease) - (45,149,294) - ------------------------------------------------ Net assets at December 31, 2001 - 91,535,353 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 13,728 (848,784) - Net realized gain (loss) on investments and capital gains distributions 17,752 (25,188,977) - Net unrealized appreciation (depreciation) of investments 18,387 (4,736,656) 34 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 49,867 (30,774,417) 34 Changes from principal transactions: Total unit transactions 1,225,161 (13,753,107) 5,000 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 1,225,161 (13,753,107) 5,000 ------------------------------------------------ Total increase (decrease) 1,275,028 (44,527,524) 5,034 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 1,275,028 $ 47,007,829 $ 5,034 ================================================
SEE ACCOMPANYING NOTES. S-40
ING SALOMON ING T. ROWE ING UBS ING VAN BROTHERS PRICE GROWTH TACTICAL ASSET KAMPEN INVESTORS VALUE EQUITY ALLOCATION COMSTOCK ------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ 113,229,886 $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - 14,327,213 - - Net realized gain (loss) on investments and capital gains distributions - (4,691,348) - - Net unrealized appreciation (depreciation) of investments - (22,787,331) - - ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (13,151,466) - - Changes from principal transactions: Total unit transactions - (10,683,369) - - ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions - (10,683,369) - - ------------------------------------------------------------------ Total increase (decrease) - (23,834,835) - - ------------------------------------------------------------------ Net assets at December 31, 2001 - 89,395,051 - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (49) (834,503) - 551 Net realized gain (loss) on investments and capital gains distributions (4) (31,652,050) - (132) Net unrealized appreciation (depreciation) of investments (1,647) 11,325,203 (12) (11,139) ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (1,700) (21,161,350) (12) (10,720) Changes from principal transactions: Total unit transactions 16,049 (9,791,113) 440 329,703 ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions 16,049 (9,791,113) 440 329,703 ------------------------------------------------------------------ Total increase (decrease) 14,349 (30,952,463) 428 318,983 ------------------------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 14,349 $ 58,442,588 $ 428 $ 318,983 ================================================================== ING VP GROWTH ING VP INDEX AND INCOME ING VP GROWTH PLUS LARGECAP ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 928,209,700 $ 85,002,177 $ 261,795,046 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (3,421,173) 7,586,438 7,044,685 Net realized gain (loss) on investments and capital gains distributions (113,876,325) (37,814,320) (36,788,778) Net unrealized appreciation (depreciation) of investments (55,992,671) 7,848,570 (9,243,704) ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (173,290,169) (22,379,312) (38,987,797) Changes from principal transactions: Total unit transactions (91,273,079) (10,534,849) 1,954,479 ------------------------------------------------- Increase (decrease) in assets derived from principal transactions (91,273,079) (10,534,849) 1,954,479 ------------------------------------------------- Total increase (decrease) (264,563,248) (32,914,161) (37,033,318) ------------------------------------------------- Net assets at December 31, 2001 663,646,452 52,088,016 224,761,728 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,351,932) (472,716) (1,838,073) Net realized gain (loss) on investments and capital gains distributions (193,418,765) (8,444,150) (58,481,089) Net unrealized appreciation (depreciation) of investments 35,220,058 (5,648,119) 11,268,433 ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (159,550,639) (14,564,985) (49,050,729) Changes from principal transactions: Total unit transactions (88,129,791) (9,236,832) (21,294,271) ------------------------------------------------- Increase (decrease) in assets derived from principal transactions (88,129,791) (9,236,832) (21,294,271) ------------------------------------------------- Total increase (decrease) (247,680,430) (23,801,817) (70,345,000) ------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 415,966,022 $ 28,286,199 $ 154,416,728 =================================================
S-41
ING VP ING VP INDEX ING VP INDEX INTERNATIONAL PLUS MIDCAP PLUS SMALLCAP EQUITY ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 6,733,274 $ 1,097,872 $ 9,707,836 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 455,151 53,118 (95,343) Net realized gain (loss) on investments and capital gains distributions (303,328) 16,027 (4,401,994) Net unrealized appreciation (depreciation) of investments (366,632) (19,980) 2,100,297 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (214,809) 49,165 (2,397,040) Changes from principal transactions: Total unit transactions 2,695,562 1,263,589 680,138 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 2,695,562 1,263,589 680,138 ------------------------------------------------ Total increase (decrease) 2,480,753 1,312,754 (1,716,902) ------------------------------------------------ Net assets at December 31, 2001 9,214,027 2,410,626 7,990,934 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (53,923) (30,132) (64,408) Net realized gain (loss) on investments and capital gains distributions (760,138) (75,227) (1,577,469) Net unrealized appreciation (depreciation) of investments (1,413,335) (732,353) (299,583) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,227,396) (837,712) (1,941,460) Changes from principal transactions: Total unit transactions 4,792,805 2,701,610 (821,654) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 4,792,805 2,701,610 (821,654) ------------------------------------------------ Total increase (decrease) 2,565,409 1,863,898 (2,763,114) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 11,779,436 $ 4,274,524 $ 5,227,820 ================================================
SEE ACCOMPANYING NOTES. S-42
ING VP GROWTH ING VP SMALL ING VP ING VP VALUE OPPORTUNITIES - COMPANY TECHNOLOGY OPPORTUNITY CLASS R ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 47,270,402 $ 9,832,599 $ 19,709,584 $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,495,826 (128,546) 890,299 - Net realized gain (loss) on investments and capital gains distributions (79,276) (7,168,946) (717,768) - Net unrealized appreciation (depreciation) of investments 422,864 3,648,984 (3,302,248) - ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,839,414 (3,648,508) (3,129,717) - Changes from principal transactions: Total unit transactions 13,466,616 5,560,799 9,782,353 - ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 13,466,616 5,560,799 9,782,353 - ----------------------------------------------------------------- Total increase (decrease) 15,306,030 1,912,291 6,652,636 - ----------------------------------------------------------------- Net assets at December 31, 2001 62,576,432 11,744,890 26,362,220 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (468,856) (108,774) (184,300) (282) Net realized gain (loss) on investments and capital gains distributions (3,580,613) (3,681,243) (4,332,295) 1,805 Net unrealized appreciation (depreciation) of investments (14,440,776) (1,844,374) (2,719,443) (19,103) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (18,490,245) (5,634,391) (7,236,038) (17,580) Changes from principal transactions: Total unit transactions 8,071,713 453,564 (2,125,197) 401,831 ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 8,071,713 453,564 (2,125,197) 401,831 ----------------------------------------------------------------- Total increase (decrease) (10,418,532) (5,180,827) (9,361,235) 384,251 ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 52,157,900 $ 6,564,063 $ 17,000,985 $ 384,251 ================================================================= ING VP GROWTH ING VP ING VP OPPORTUNITIES - INTERNATIONAL MAGNACAP - CLASS S VALUE CLASS R ------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (495) - - Net realized gain (loss) on investments and capital gains distributions (2,161) - - Net unrealized appreciation (depreciation) of investments (54) - - ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (2,710) - - Changes from principal transactions: Total unit transactions 144,161 - - ------------------------------------------------- Increase (decrease) in assets derived from principal transactions 144,161 - - ------------------------------------------------- Total increase (decrease) 141,451 - - ------------------------------------------------- Net assets at December 31, 2001 141,451 - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (1,717) 269 128 Net realized gain (loss) on investments and capital gains distributions (27,626) (18,718) (20) Net unrealized appreciation (depreciation) of investments (29,240) (30,118) (5,689) ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (58,583) (48,567) (5,581) Changes from principal transactions: Total unit transactions 42,350 452,550 32,385 ------------------------------------------------- Increase (decrease) in assets derived from principal transactions 42,350 452,550 32,385 ------------------------------------------------- Total increase (decrease) (16,233) 403,983 26,804 ------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 125,218 $ 403,983 $ 26,804 =================================================
S-43
ING VP ING VP MIDCAP ING VP MIDCAP OPPORTUNITIES - MAGNACAP - OPPORTUNITIES - CLASS S CLASS S CLASS R ------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (3,490) 501 - Net realized gain (loss) on investments and capital gains distributions (11,400) (1,655) - Net unrealized appreciation (depreciation) of investments 10,360 6,282 - ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (4,530) 5,128 - Changes from principal transactions: Total unit transactions 869,213 425,382 - ------------------------------------------------- Increase (decrease) in assets derived from principal transactions 869,213 425,382 - ------------------------------------------------- Total increase (decrease) 864,683 430,510 - ------------------------------------------------- Net assets at December 31, 2001 864,683 430,510 - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (22,826) (757) (15) Net realized gain (loss) on investments and capital gains distributions (97,225) (9,688) (200) Net unrealized appreciation (depreciation) of investments (459,418) (121,268) (805) ------------------------------------------------- Net increase (decrease) in net assets resulting from operations (579,469) (131,713) (1,020) Changes from principal transactions: Total unit transactions 2,297,956 190,925 77,118 ------------------------------------------------- Increase (decrease) in assets derived from principal transactions 2,297,956 190,925 77,118 ------------------------------------------------- Total increase (decrease) 1,718,487 59,212 76,098 ------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 2,583,170 $ 489,722 $ 76,098 =================================================
SEE ACCOMPANYING NOTES. S-44
ING VP ING VP SMALLCAP SMALLCAP JANUS ASPEN OPPORTUNITIES - OPPORTUNITIES - AGGRESSIVE JANUS ASPEN CLASS R CLASS S GROWTH BALANCED ------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ - $ 274,462,060 $ 244,144,219 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (3,318) (2,163,717) 3,408,631 Net realized gain (loss) on investments and capital gains distributions - (119,912) (102,981,631) (3,517,430) Net unrealized appreciation (depreciation) of investments - 26,260 (425,456) (14,919,519) ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations - (96,970) (105,570,804) (15,028,318) Changes from principal transactions: Total unit transactions - 1,377,039 (27,084,902) 11,125,134 ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions - 1,377,039 (27,084,902) 11,125,134 ------------------------------------------------------------------ Total increase (decrease) - 1,280,069 (132,655,706) (3,903,184) ------------------------------------------------------------------ Net assets at December 31, 2001 - 1,280,069 141,806,354 240,241,035 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (130) (20,930) (1,204,437) 2,535,700 Net realized gain (loss) on investments and capital gains distributions (9,641) (338,439) (110,103,453) (19,145,911) Net unrealized appreciation (depreciation) of investments (3,578) (622,428) 73,321,455 (1,489,908) ------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (13,349) (981,797) (37,986,435) (18,100,119) Changes from principal transactions: Total unit transactions 71,794 1,473,449 (26,586,808) (24,315,508) ------------------------------------------------------------------ Increase (decrease) in assets derived from principal transactions 71,794 1,473,449 (26,586,808) (24,315,508) ------------------------------------------------------------------ Total increase (decrease) 58,445 491,652 (64,573,243) (42,415,627) ------------------------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 58,445 $ 1,771,721 $ 77,233,111 $ 197,825,408 ================================================================== JANUS ASPEN JANUS ASPEN FLEXIBLE JANUS ASPEN WORLDWIDE INCOME GROWTH GROWTH ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 18,729,553 $ 267,652,979 $ 483,862,628 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,003,379 (2,103,210) (2,995,164) Net realized gain (loss) on investments and capital gains distributions 291,118 (29,054,576) (52,114,953) Net unrealized appreciation (depreciation) of investments (9,015) (38,086,553) (56,467,361) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 1,285,482 (69,244,339) (111,577,478) Changes from principal transactions: Total unit transactions 3,925,181 (21,629,929) (40,889,293) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 3,925,181 (21,629,929) (40,889,293) ------------------------------------------------ Total increase (decrease) 5,210,663 (90,874,268) (152,466,771) ------------------------------------------------ Net assets at December 31, 2001 23,940,216 176,778,711 331,395,857 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 856,419 (1,668,494) (1,012,698) Net realized gain (loss) on investments and capital gains distributions 761,446 (88,052,075) (139,153,473) Net unrealized appreciation (depreciation) of investments 571,088 45,741,303 58,703,035 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 2,188,953 (43,979,266) (81,463,136) Changes from principal transactions: Total unit transactions 2,262,579 (34,296,856) (51,652,618) ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 2,262,579 (34,296,856) (51,652,618) ------------------------------------------------ Total increase (decrease) 4,451,532 (78,276,122) (133,115,754) ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 28,391,748 $ 98,502,589 $ 198,280,103 ================================================
S-45
LORD ABBETT GROWTH AND LORD ABBETT MFS(R) GLOBAL INCOME MID-CAP VALUE GOVERNMENTS ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ - $ - $ 1,537,291 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - - 39,877 Net realized gain (loss) on investments and capital gains distributions - - 52,236 Net unrealized appreciation (depreciation) of investments - - (40,415) ------------------------------------------------ Net increase (decrease) in net assets resulting from operations - - 51,698 Changes from principal transactions: Total unit transactions - - 153,415 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions - - 153,415 ------------------------------------------------ Total increase (decrease) - - 205,113 ------------------------------------------------ Net assets at December 31, 2001 - - 1,742,404 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,030 849 36,000 Net realized gain (loss) on investments and capital gains distributions (52) (21,787) 31,230 Net unrealized appreciation (depreciation) of investments (19,377) (25,338) 84,246 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations (18,399) (46,276) 151,476 Changes from principal transactions: Total unit transactions 439,912 520,237 826,559 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 439,912 520,237 826,559 ------------------------------------------------ Total increase (decrease) 421,513 473,961 978,035 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 421,513 $ 473,961 $ 2,720,439 ================================================
SEE ACCOMPANYING NOTES. S-46
OPPENHEIMER OPPENHEIMER OPPENHEIMER MAIN STREET MFS(R) TOTAL AGGRESSIVE GLOBAL GROWTH & RETURN GROWTH SECURITIES INCOME ----------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ 63,398,107 $ 57,052,022 $ 17,259,574 $ 67,652,421 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 3,012,322 6,906,604 1,960,521 (500,428) Net realized gain (loss) on investments and capital gains distributions (4,439) (42,931,360) (1,060,601) (1,058,708) Net unrealized appreciation (depreciation) of investments (3,698,764) 15,925,135 (3,174,371) (6,494,391) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (690,881) (20,099,621) (2,274,451) (8,053,527) Changes from principal transactions: Total unit transactions 31,202,325 3,496,997 1,417,786 6,109,792 ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 31,202,325 3,496,997 1,417,786 6,109,792 ----------------------------------------------------------------- Total increase (decrease) 30,511,444 (16,602,624) (856,665) (1,943,735) ----------------------------------------------------------------- Net assets at December 31, 2001 93,909,551 40,449,398 16,402,909 65,708,686 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 355,083 (188,891) (124,319) (327,654) Net realized gain (loss) on investments and capital gains distributions 3,616,803 (5,968,060) (3,498,317) (11,300,002) Net unrealized appreciation (depreciation) of investments (10,681,462) (5,031,083) (1,163,987) (1,390,151) ----------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (6,709,576) (11,188,034) (4,786,623) (13,017,807) Changes from principal transactions: Total unit transactions 4,525,040 (5,331,166) 3,560,532 (3,890,270) ----------------------------------------------------------------- Increase (decrease) in assets derived from principal transactions 4,525,040 (5,331,166) 3,560,532 (3,890,270) ----------------------------------------------------------------- Total increase (decrease) (2,184,536) (16,519,200) (1,226,091) (16,908,077) ----------------------------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 91,725,015 $ 23,930,198 $ 15,176,818 $ 48,800,609 ================================================================= OPPENHEIMER PIONEER EQUITY PIONEER STRATEGIC BOND INCOME VCT VCT ------------------------------------------------ NET ASSETS AT JANUARY 1, 2001 $ 23,334,535 $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,267,653 - - Net realized gain (loss) on investments and capital gains distributions (55,135) - - Net unrealized appreciation (depreciation) of investments (335,512) - - ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 877,006 - - Changes from principal transactions: Total unit transactions 4,680,276 - - ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 4,680,276 - - ------------------------------------------------ Total increase (decrease) 5,557,282 - - ------------------------------------------------ Net assets at December 31, 2001 28,891,817 - - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) 1,845,683 1,445 - Net realized gain (loss) on investments and capital gains distributions (1,631,959) (909) - Net unrealized appreciation (depreciation) of investments 1,589,777 (5,978) 1 ------------------------------------------------ Net increase (decrease) in net assets resulting from operations 1,803,501 (5,442) 1 Changes from principal transactions: Total unit transactions 2,039,563 158,735 1,302 ------------------------------------------------ Increase (decrease) in assets derived from principal transactions 2,039,563 158,735 1,302 ------------------------------------------------ Total increase (decrease) 3,843,064 153,293 1,303 ------------------------------------------------ NET ASSETS AT DECEMBER 31, 2002 $ 32,734,881 $ 153,293 $ 1,303 ================================================
S-47
SP JENNISON PIONEER MID PRUDENTIAL INTERNATIONAL CAP VALUE VCT JENNISON GROWTH -------------------------------------------- NET ASSETS AT JANUARY 1, 2001 $ - $ - $ - INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) - (1,106) (620) Net realized gain (loss) on investments and capital gains distributions - (11,906) (27,800) Net unrealized appreciation (depreciation) of investments - 20,719 656 -------------------------------------------- Net increase (decrease) in net assets resulting from operations - 7,707 (27,764) Changes from principal transactions: Total unit transactions - 715,846 87,050 -------------------------------------------- Increase (decrease) in assets derived from principal transactions - 715,846 87,050 -------------------------------------------- Total increase (decrease) - 723,553 59,286 -------------------------------------------- Net assets at December 31, 2001 - 723,553 59,286 INCREASE (DECREASE) IN NET ASSETS Operations: Net investment income (loss) (127) (8,938) (2,814) Net realized gain (loss) on investments and capital gains distributions (9,025) (252,055) (44,193) Net unrealized appreciation (depreciation) of investments 50 (50,168) (7,265) -------------------------------------------- Net increase (decrease) in net assets resulting from operations (9,102) (311,161) (54,272) Changes from principal transactions: Total unit transactions 39,527 14,555 208,824 -------------------------------------------- Increase (decrease) in assets derived from principal transactions 39,527 14,555 208,824 -------------------------------------------- Total increase (decrease) 30,425 (296,606) 154,552 -------------------------------------------- NET ASSETS AT DECEMBER 31, 2002 $ 30,425 $ 426,947 $ 213,838 ============================================
SEE ACCOMPANYING NOTES. S-48 ING Life Insurance and Annuity Company Variable Annuity Account B Notes to Financial Statements December 31, 2002 1. ORGANIZATION ING Life Insurance and Annuity Company Variable Annuity Account B (the "Account") was established by ING Insurance Company of America ("ILIAC" or the "Company") to support the operations of variable annuity contracts ("Contracts"). The Company is an indirect wholly owned subsidiary of ING America Insurance Holdings, Inc. ("ING AIH"), an insurance holding company domiciled in the State of Delaware. ING AIH is a wholly owned subsidiary of ING Groep, N.V., a global financial services holding company based in The Netherlands. The Account is registered as a unit investment trust with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended. The account is sold exclusively for use with variable annuity Contracts that may be entitled to tax-deferred treatment under specific sections of the Internal Revenue Code of 1986, as amended. ILIAC provides for variable accumulation and benefits under the Contracts by crediting annuity considerations to one or more divisions within the Account or the fixed separate account, which is not part of the Account, as directed by the Contractowners. The portion of the Account's assets applicable to Contracts will not be charged with liabilities arising out of any other business ILIAC may conduct, but obligations of the Account, including the promise to make benefit payments, are obligations of ILIAC. The assets and liabilities of the Account are clearly identified and distinguished from the other assets and liabilities of ILIAC. S-49 At December 31, 2002, the Account had 110 investment divisions (the "Divisions"), 50 of which invest in independently managed mutual funds and 60 of which invest in mutual funds managed by affiliates, either ING Investments, LLC or ING Life Insurance and Annuity Company. The assets in each Division are invested in shares of a designated fund ("Fund") of various investment trusts (the "Trusts"). Investment Divisions at December 31, 2002 and related Trusts are as follows: AIM V.I. Funds: Fidelity Variable Insurance Products Fund II (continued): AIM V.I. Capital Appreciation Fund - Series I Shares Fidelity(R) VIP II Index 500 Portfolio - Initial Class AIM V.I. Core Equity Fund - Series I Shares Fidelity(R) VIP II Investment Grade Bond Portfolio - Initial Class AIM V.I. Government Securities Fund - Series I Shares Franklin Templeton Variable Insurance Products Trust: AIM V.I. Growth Fund - Series I Shares Franklin Small Cap Value Securities Fund - Class 2 ** AIM V.I. Premier Equity Fund - Series I Shares ING GET Fund: Alger American Funds: ING GET Fund - Series D Alger American Balanced Portfolio ING GET Fund - Series E Alger American Income & Growth Portfolio ING GET Fund - Series G Alger American Leveraged AllCap Portfolio ING GET Fund - Series H Alliance Funds: ING GET Fund - Series I Alliance Growth and Income ING GET Fund - Series J Alliance Premier Growth Portfolio ING GET Fund - Series K Alliance Quasar Portfolio ING GET Fund - Series L American Century VP Funds: ING GET Fund - Series M * American Century VP Balanced Fund ING GET Fund - Series N * American Century VP International Fund ING GET Fund - Series P * Brinson Series Funds: ING GET Fund - Series Q * Brinson Tactical Allocation Portfolio - Class I ING GET Fund - Series R ** Calvert Social Balanced Portfolio ING GET Fund - Series S ** Federated Insurance Series: ING GET Fund - Series T ** Federated American Leaders Fund II ING GET Fund - Series U ** Federated Equity Income Fund II ING VP Balanced Portfolio, Inc. - Class R Federated Fund for U.S. Government Securities II ING VP Bond Portfolio - Class R Federated Growth Strategies Fund II ING VP Emerging Markets Fund Federated High Income Bond Fund II ING VP Money Market Portfolio - Class R Federated International Equity Fund II ING VP Natural Resources Trust Federated Prime Money Fund II ING Generations Portfolio, Inc.: Federated Utility Fund II ING VP Strategic Allocation Balanced Portfolio - Class R Fidelity(R) Variable Insurance Products Fund: ING VP Strategic Allocation Growth Portfolio - Class R Fidelity(R) VIP Equity-Income Portfolio - Initial Class ING VP Strategic Allocation Income Portfolio - Class R Fidelity(R) VIP Growth Portfolio - Initial Class ING Partners, Inc.: Fidelity(R) VIP High Income Portfolio - Initial Class ING Alger Aggressive Growth Portfolio - Service Class ** Fidelity(R) VIP Overseas Portfolio - Initial Class ING Alger Growth Portfolio - Service Class ** Fidelity Variable Insurance Products Fund II: ING American Century Small Cap Value Portfolio ** Fidelity(R) VIP II ASSET MANAGER(SM) Portfolio - Initial ING Baron Small Cap Growth Portfolio - Service Class ** Class Fidelity(R) VIP II Contrafund(R) Portfolio - Initial ING Goldman Sachs Capital Growth Portfolio - Service Class ** Class
S-50 ING Partners, Inc. (continued): ING Variable Products Trust (continued) ING JP Morgan Fleming International Portfolio - Initial ING VP MagnaCap Portfolio - Class R ** Class ING JP Morgan Mid Cap Value Portfolio - Service ING VP MagnaCap Portfolio - Class S * Class ** ING MFS Capital Opportunities Portfolio - Initial Class ING VP MidCap Opportunities Portfolio - Class R ** ING MFS Global Growth Portfolio - Service Class ** ING VP MidCap Opportunities Portfolio - Class S * ING MFS Research Portfolio - Initial Class ING VP SmallCap Opportunities Portfolio - Class R ** ING OpCap Balanced Value Portfolio - Service Class ** ING VP SmallCap Opportunities Portfolio - Class S * ING PIMCO Total Return Portfolio - Service Class ** Janus Aspen Series: ING Salomon Brothers Aggressive Growth Portfolio - Janus Aspen Aggressive Growth Portfolio - Institutional Shares Initial Class Janus Aspen Balanced Portfolio - Inst Shares ING Salomon Brothers Capital Portfolio - Service Janus Aspen Flexible Income Portfolio - Inst Shares Class ** ING Salomon Brothers Investors Value Portfolio - Janus Aspen Growth Portfolio - Inst Shares Service Class ** ING T. Rowe Price Growth Equity Portfolio - Initial Janus Aspen Worldwide Growth Portfolio - Inst Shares Class ING UBS Tactical Asset Allocation Portfolio - Lord Abbett Funds: Service Class ** Lord Abbett Growth and Income Portfolio ** ING Van Kampen Comstock Portfolio - Service Class ** Lord Abbett MidCap Value Portfolio ** ING Variable Funds: MFS(R) Funds: ING VP Growth and Income Portfolio - Class R MFS(R) Global Governments Series ING Variable Portfolios, Inc.: MFS(R) Total Return Series - Initial Class ING VP Growth Portfolio - Class R Oppenheimer Variable Account Funds: ING VP Index Plus LargeCap Portfolio - Class R Oppenheimer Aggressive Growth Fund/VA ING VP Index Plus MidCap Portfolio - Class R Oppenheimer Global Securities Fund/VA ING VP Index Plus SmallCap Portfolio - Class R Oppenheimer Main Street Growth & Income Fund/VA ING VP International Equity Portfolio - Class R Oppenheimer Strategic Bond Fund/VA ING VP Small Company Portfolio - Class R Pioneer Variable Contracts Trust: ING VP Technology Portfolio - Class R Pioneer Equity Income VCT Portfolio - Class I ** ING VP Value Opportunity Portfolio - Class R Pioneer VCT Portfolio - Class I ** ING Variable Products Trust: Pioneer Mid Cap Value VCT Portfolio - Class I ** ING VP Growth Opportunities Portfolio - Class R ** Prudential Series Fund, Inc.: ING VP Growth Opportunities Portfolio - Class S * Prudential Jennison Portfolio - Class II Shares * ING VP International Value Portfolio - Class R ** SP Jennison International Growth Portfolio - Class II Shares *
* Investment Division added in 2001. ** Investment Division added in 2002. Effective September 15, 2000, the Brinson Series Trust Small Cap Portfolio (formerly the Mitchell Hutchins Series Trust Small Cap Portfolio) was closed to new Contractowners and to new investments from existing Contractowners. All remaining amounts were transferred to other Funds prior to December 31, 2001 at the Contractowners' direction. Effective October 8, 2001, the Brinson Series Trust Growth and Income Portfolio (formerly the Mitchell Hutchins Series Trust Growth and Income Portfolio) was closed to new Contractowners and to new investments from existing Contractowners. All remaining amounts were transferred to other Funds prior to December 31, 2001 at the Contractowners' direction. S-51 ING GET Fund Series C reached the end of its offering period and closed on December 16, 2001. All remaining amounts were transferred to other Funds prior to December 31, 2001 at the Contractowners' direction. The names of certain Divisions were changed during 2002. The following is a summary of current and former names for those Divisions:
CURRENT NAME FORMER NAME - ------------------------------------------------------------------------------------------ AIM V.I. Core Equity AIM V.I. Growth and Income AIM V.I. Premier Equity AIM V.I. Value ING GET Fund - Series D Aetna GET Fund - Series D ING GET Fund - Series E Aetna GET Fund - Series E ING GET Fund - Series G Aetna GET Fund - Series G ING GET Fund - Series H Aetna GET Fund - Series H ING GET Fund - Series I Aetna GET Fund - Series I ING GET Fund - Series J Aetna GET Fund - Series J ING GET Fund - Series K Aetna GET Fund - Series K ING GET Fund - Series L Aetna GET Fund - Series L ING GET Fund - Series M Aetna GET Fund - Series M ING GET Fund - Series N Aetna GET Fund - Series N ING GET Fund - Series P Aetna GET Fund - Series P ING GET Fund - Series Q Aetna GET Fund - Series Q ING VP Balanced Aetna Balanced VP, Inc. ING VP Bond Aetna Bond VP ING VP Emerging Markets Aetna Emerging Markets VP ING VP Money Market Aetna Money Market VP ING VP Natural Resources Aetna Natural Resources VP ING VP Strategic Allocation Balanced Aetna Crossroads VP ING VP Strategic Allocation Growth Aetna Ascent VP ING VP Strategic Allocation Income Aetna Legacy VP ING JP Morgan Fleming International PPI Scudder International Growth ING MFS Capital Opportunities PPI MFS Capital Opportunities ING MFS Research PPI MFS Research ING Salomon Brothers Aggressive Growth PPI MFS Emerging Equities ING T. Rowe Price Growth Equity PPI T. Rowe Price Growth Equity ING VP Growth and Income Aetna Growth and Income VP ING VP Growth Aetna Growth VP ING VP Index Plus LargeCap Aetna Index Plus LargeCap VP ING VP Index Plus MidCap Aetna Index Plus MidCap VP ING VP Index Plus SmallCap Aetna Index Plus SmallCap VP ING VP International Equity Aetna International VP ING VP Small Company Aetna Small Company VP ING VP Technology Aetna Technology VP ING VP Value Opportunity Aetna Value Opportunity VP ING VP Growth Opportunities - Class S Pilgrim Growth Opportunities ING VP MagnaCap - Class S Pilgrim International Value ING VP MidCap Opportunities - Class S Pilgrim MidCap Opportunities ING VP SmallCap Opportunities - Class S Pilgrim SmallCap Opportunities
S-52 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies of the Account: USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. INVESTMENTS Investments are made in shares of a Fund and are recorded at fair value, determined by the net asset value per share of the respective Fund. Investment transactions in each Fund are recorded on the trade date. Distributions of net investment income and capital gains from each Fund are recognized on the ex-distribution date. Realized gains and losses on redemptions of the shares of the Fund are determined by specific identification. The difference between cost and current market value is recorded as unrealized appreciation or depreciation of investments. FEDERAL INCOME TAXES Operations of the Account form a part of, and are taxed with, the total operations of ILIAC, which is taxed as a life insurance company under the Internal Revenue Code. Earnings and realized capital gains of the Account attributable to the Contractowners are excluded in the determination of the federal income tax liability of ILIAC. S-53 ANNUITY RESERVES Prior to the annuity date, the Contracts are redeemable for the net cash surrender value of the Contracts. The annuity reserves are recorded in the financial statements at the aggregate account values of the Contractholders invested in the Account Divisions. Annuity reserves held in the Account for currently payable contracts are computed according to the Progressive Annuity, a49, 1971 Individual Annuity Mortality, 1971 Group Annuity Mortality, 1983a, and 1983 Group Annuity Mortality tables using various assumed interest rates not to exceed seven percent. Mortality experience is monitored by the Company. Charges to annuity reserves for mortality experience are reimbursed to the Company if the reserves required are less than originally estimated. If additional reserves are required, the Company reimburses the Account. Conversely, if amounts allocated exceed amounts required, transfers may be made to ILIAC. 3. CHARGES AND FEES Under the terms of the Contracts, certain charges are allocated to the Contracts to cover ILIAC's expenses in connection with the issuance and administration of the Contracts. Following is a summary of these charges: MORTALITY AND EXPENSE RISK CHARGES ILIAC assumes mortality and expense risks related to the operations of the Account and, in accordance with the terms of the Contracts, deducts a daily charge from the assets of the Account. Daily charges are deducted at annual rates of up to 1.90% of the average daily net asset value of each Division of the Account to cover these risks, as specified in the Contract. ADMINISTRATIVE CHARGES A daily charge at an annual rate of up to 0.50% of the assets attributable to the Contracts is deducted, as specified in the Contract. S-54 CONTRACT MAINTENANCE CHARGES An annual contract or certificate maintenance fee of up to $20 may be deducted from the accumulation value of Contracts to cover ongoing administrative expenses, as specified in the Contract. CONTINGENT DEFERRED SALES CHARGES For certain Contracts, a contingent deferred sales charge is imposed as a percentage of each premium payment if the Contract is surrendered or an excess partial withdrawal is taken, as specified in the Contract. PREMIUM TAXES For certain Contracts, premium taxes are deducted, where applicable, from the accumulation value of each Contract. The amount and timing of the deduction depends on the Contractowner's state of residence and currently ranges up to 4.0% of premiums. 4. RELATED PARTY TRANSACTIONS During the year ended December 31, 2002, management fees were paid indirectly to ING Investments, LLC, an affiliate of the Company, in its capacity as investment adviser to the ING GET Fund, ING Balanced Portfolio, Inc., ING VP Emerging Markets Fund, ING VP Natural Resources Trust, ING VP Money Market Portfolio, ING Generations Portfolios, Inc., ING Variable Funds, ING VP Bond Portfolio, ING Variable Portfolios, Inc., and ING Variable Products Trust. The annual fee rate ranged from 0.25% to 1.00% of the average net assets of each respective Fund or Fund of the Trust. In addition, management fees were paid to ILIAC, an affiliate, in its capacity as investment adviser to ING Partners, Inc. The annual fee rate ranged from 0.75% to 1.00% of the average net assets of each respective Fund of the Trust. S-55 5. PURCHASES AND SALES OF INVESTMENT SECURITIES The aggregate cost of purchases and proceeds from sales of investments follows:
YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------- PURCHASES SALES PURCHASES SALES --------------------------------------------- (DOLLARS IN THOUSANDS) AIM V.I. Funds: AIM V.I. Capital Appreciation $ 24,514 $ 27,763 $ 12,618 $ 6,381 AIM V.I. Core Equity 38,407 44,855 10,567 4,862 AIM V.I. Government Securities 32,681 16,817 11,327 2,444 AIM V.I. Growth 24,478 29,364 8,492 4,277 AIM V.I. Premier Equity 68,844 80,157 24,777 12,092 Alger American Funds: Alger American Balanced 3,639 4,339 142 1,043 Alger American Income & Growth 10,413 12,151 983 3,003 Alger American Leveraged AllCap 9,454 10,850 463 2,747 Alliance Funds: Alliance Growth and Income 46,961 44,016 29,482 817 Alliance Premier Growth 10,145 10,102 7,887 604 Alliance Quasar 1,723 1,577 1,231 408 American Century VP Funds: American Century VP Balanced 1,989 2,307 156 555 American Century VP International 2,499 3,200 402 809 Brinson Series Funds: Brinson Growth & Income - - 258 946 Brinson Small Cap - - - 180 Brinson Tactical Allocation 14,269 15,619 6,605 1,725 Calvert Social Balanced Portfolio 1,931 1,806 332 618 Federated Insurance Series: Federated American Leaders 8,627 25,009 3,691 16,943 Federated Federated Equity Income 820 4,394 1,658 5,373 Federated Fund for U.S. Government Securities 4,984 4,633 2,709 2,460 Federated Growth Strategies 112 5,825 2,009 6,819 Federated High Income Bond 6,847 9,302 2,881 6,274 Federated International Equity 127 2,905 2,139 3,858 Federated Prime Money 5,760 7,185 6,418 6,310 Federated Utility 2,331 5,001 874 4,087 Fidelity(R) Variable Insurance Products Fund: Fidelity(R) VIP Equity-Income 247,113 252,808 80,363 53,521 Fidelity(R) VIP Growth 141,688 162,277 30,277 21,128 Fidelity(R) VIP High Income 58,138 58,116 21,375 16,342 Fidelity(R) VIP Overseas 14,243 15,632 4,335 4,240 Fidelity Variable Insurance Products Fund II: Fidelity(R) VIP II ASSET MANAGER(SM) 15,172 16,452 1,425 3,404 Fidelity(R) VIP II Contrafund(R) 175,617 186,406 24,172 33,597 Fidelity(R) VIP II Index 500 121,951 136,223 50,031 65,319 Fidelity(R) VIP II Investment Grade Bond 3,174 3,538 215 913 Franklin Templeton Variable Insurance Products Trust: Franklin Small Cap Value Securities 2,565 1,920 - -
S-56
YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------- PURCHASES SALES PURCHASES SALES --------------------------------------------- (DOLLARS IN THOUSANDS) ING GET Fund: ING GET Fund - Series C $ - $ - $ 349 $ 4,990 ING GET Fund - Series D 91,906 104,050 1,913 12,420 ING GET Fund - Series E 287,090 310,958 3,579 36,784 ING GET Fund - Series G 172,316 181,449 978 17,752 ING GET Fund - Series H 131,547 142,911 1,466 11,739 ING GET Fund - Series I 89,384 94,102 434 6,729 ING GET Fund - Series J 76,351 81,025 485 6,370 ING GET Fund - Series K 88,905 98,660 1,365 5,816 ING GET Fund - Series L 78,713 85,764 89,118 7,492 ING GET Fund - Series M 120,605 132,464 131,389 4,582 ING GET Fund - Series N 97,858 110,571 111,246 9,055 ING GET Fund - Series P 83,551 91,096 85,500 2,681 ING GET Fund - Series Q 115,914 62,794 2,594 974 ING GET Fund - Series R 47,063 3,851 - - ING GET Fund - Series S 55,817 2,522 - - ING GET Fund - Series T 39,328 338 - - ING GET Fund - Series U 508 6 - - ING VP Balanced 79,596 99,335 33,417 23,173 ING VP Bond 125,655 111,843 63,481 20,280 ING VP Emerging Markets Fund 976 1,178 215 226 ING VP Money Market 760,239 784,356 831,495 749,107 ING VP Natural Resources Trust 1,139 1,513 21 400 ING Generations Portfolio, Inc.: ING VP Strategic Allocation Balanced 13,854 14,909 1,228 3,037 ING VP Strategic Allocation Growth 11,735 12,253 1,104 2,506 ING VP Strategic Allocation Income 21,591 23,140 5,315 6,467 ING Partners, Inc.: ING Alger Aggressive Growth 190 - - - ING Alger Growth 10 - - - ING American Century Small Cap Value 253 82 - - ING Baron Small Cap Growth 359 171 - - ING Goldman Sachs Capital Growth 19 - - - ING JP Morgan Fleming International 210,312 212,764 152,032 141,292 ING JP Morgan Mid Cap Value 89 - - - ING MFS Capital Opportunities 46,601 55,397 29,866 10,459 ING MFS Global Growth 8 6 - - ING MFS Research 50,965 63,509 21,456 12,539 ING OpCap Balanced Value 15 - - - ING PIMCO Total Return 1,359 107 - - ING Salomon Brothers Aggressive Growth 109,117 123,719 104,463 108,410 ING Salomon Brothers Capital 5 - - - ING Salomon Brothers Investors Value 16 - - - ING T. Rowe Price Growth Equity 77,576 88,202 21,394 17,750 ING UBS Tactical Asset Allocation - - - - ING Van Kampen Comstock 331 1 - -
S-57
YEAR ENDED DECEMBER 31, 2002 2001 --------------------------------------------- PURCHASES SALES PURCHASES SALES --------------------------------------------- (DOLLARS IN THOUSANDS) ING Variable Funds: ING VP Growth and Income $ 172,371 $ 261,853 $ 83,464 $ 178,158 ING Variable Portfolios, Inc.: ING VP Growth 69,783 79,492 91,682 94,630 ING VP Index Plus LargeCap 190,972 214,104 115,106 106,107 ING VP Index Plus MidCap 11,890 7,151 5,587 2,436 ING VP Index Plus SmallCap 8,976 6,252 2,924 1,607 ING VP International Equity 46,107 46,993 46,170 45,585 ING VP Small Company 116,436 108,833 77,290 62,327 ING VP Technology 23,571 23,226 19,487 14,055 ING VP Value Opportunity 26,750 29,060 18,600 7,927 ING Variable Products Trust: ING VP Growth Opportunities - Class R 864 463 - - ING VP Growth Opportunities - Class S 278 238 187 44 ING VP International Value 523 70 - - ING VP MagnaCap - Class R 33 - - - ING VP MagnaCap - Class S 879 689 454 29 ING VP MidCap Opportunities - Class R 78 1 - - ING VP MidCap Opportunities - Class S 4,360 2,084 1,863 997 ING VP SmallCap Opportunities - Class R 265 193 - - ING VP SmallCap Opportunities - Class S 3,798 2,346 2,039 666 Janus Aspen Series: Janus Aspen Aggressive Growth 141,416 169,207 83,655 112,904 Janus Aspen Balanced 225,500 247,280 34,727 20,193 Janus Aspen Flexible Income 31,418 28,299 11,219 6,290 Janus Aspen Growth 150,997 186,962 41,962 65,695 Janus Aspen Worldwide Growth 323,687 376,352 84,870 128,755 Lord Abbett Funds: Lord Abbett Growth and Income 442 1 - - Lord Abbett MidCap Value 805 284 - - MFS Funds: MFS Global Governments 3,217 2,355 1,276 1,083 MFS Total Return 119,828 113,668 38,490 4,276 Oppenheimer Variable Account Funds: Oppenheimer Aggressive Growth 64,141 69,661 68,878 58,475 Oppenheimer Global Securities 20,873 17,437 7,967 4,589 Oppenheimer Main Street Growth & Income 70,215 74,433 11,707 6,098 Oppenheimer Strategic Bond 38,679 34,794 9,644 3,697 Pioneer Variable Contracts Trust: Pioneer Equity Income VCT 165 5 - - Pioneer VCT 1 - - - Pioneer Mid Cap Value VCT 82 42 - - Prudential Series Fund, Inc.: Prudential Jennison 2,065 2,060 1,222 507 SP Jennison International Growth 2,655 2,449 770 684
S-58 6. CHANGES IN UNITS The changes in units outstanding were as follows:
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------ NET UNITS ISSUED NET UNITS ISSUED (REDEEMED) (REDEEMED) ------------------------------------ AIM V.I. Funds: AIM V.I. Capital Appreciation (366,408) 514,760 AIM V.I. Core Equity (748,286) 456,934 AIM V.I. Government Securities 1,319,594 797,417 AIM V.I. Growth (842,874) 591,129 AIM V.I. Premier Equity (1,440,923) 6,787,724 Alger American Funds: Alger American Balanced (31,808) (38,822) Alger American Income & Growth (86,313) (107,145) Alger American Leveraged AllCap (61,140) (92,253) Alliance Funds: Alliance Growth and Income 63,544 2,703,504 Alliance Premier Growth 2,737 989,444 Alliance Quasar 12,434 106,602 American Century VP Funds: American Century VP Balanced (21,928) (29,454) American Century VP International (53,475) (44,530) Brinson Series Funds: Brinson Growth & Income - (92,381) Brinson Small Cap - (15,656) Brinson Tactical Allocation (180,912) 416,605 Calvert Social Balanced 9,032 (17,551) Federated Insurance Series: Federated American Leaders (802,047) (583,244) Federated Equity Income (349,138) (305,498) Federated Fund for U.S. Government Securities 5,984 (3,295) Federated Growth Strategies (353,291) (260,952) Federated High Income Bond (311,614) (411,220) Federated International Equity (215,775) (210,789) Federated Prime Money (112,344) (7,126) Federated Utility (270,317) (226,436) Fidelity(R) Variable Insurance Products Fund: Fidelity(R) VIP Equity-Income (690,353) 1,774,965 Fidelity(R) VIP Growth (1,160,706) 1,166,480 Fidelity(R) VIP High Income (483,340) (7,252) Fidelity(R) VIP Overseas (115,998) (101,429)
S-59
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------ NET UNITS ISSUED NET UNITS ISSUED (REDEEMED) (REDEEMED) ------------------------------------ Fidelity Variable Insurance Products Fund II: Fidelity(R) VIP II ASSET MANAGER(SM) (103,131) (162,242) Fidelity(R) VIP II Contrafund(R) (705,725) (484,033) Fidelity(R) VIP II Index 500 (835,328) (711,188) Fidelity(R) VIP II Investment Grade Bond (29,946) (61,301) Franklin Templeton Variable Insurance Products Trust: Franklin Small Cap Value Securities 39,416 - ING GET Fund: ING GET Fund - Series C - (332,642) ING GET Fund - Series D (1,502,708) (1,021,289) ING GET Fund - Series E (3,020,220) (3,037,122) ING GET Fund - Series G (1,275,410) (1,469,116) ING GET Fund - Series H (1,368,020) (867,644) ING GET Fund - Series I (633,744) (510,638) ING GET Fund - Series J (606,080) (487,793) ING GET Fund - Series K (1,044,318) (275,902) ING GET Fund - Series L (566,108) 8,042,502 ING GET Fund - Series M (972,717) 12,530,623 ING GET Fund - Series N (1,199,074) 10,180,844 ING GET Fund - Series P (608,071) 8,287,579 ING GET Fund - Series Q 5,298,242 162,043 ING GET Fund - Series R 4,312,314 - ING GET Fund - Series S 5,334,290 - ING GET Fund - Series T 3,907,841 - ING GET Fund - Series U 50,278 - ING VP Balanced (1,231,538) (31,417) ING VP Bond 413,356 2,657,410 ING VP Emerging Markets (26,185) (27,794) ING VP Money Market (2,485,092) 6,113,512 ING VP Natural Resources (31,200) (26,923) ING Generations Portfolio, Inc.: ING VP Strategic Allocation Balanced (104,759) (150,126) ING VP Strategic Allocation Growth (62,890) (115,234) ING VP Strategic Allocation Income (143,555) (137,472) ING Partners, Inc.: ING Alger Aggressive Growth 24,342 - ING Alger Growth 1,297 - ING American Century Small Cap Value 19,821 - ING Baron Small Cap Growth 21,310 - ING Goldman Sachs Capital Growth 2,242 -
S-60
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------ NET UNITS ISSUED NET UNITS ISSUED (REDEEMED) (REDEEMED) ------------------------------------ ING Partners, Inc. (continued): ING JP Morgan Fleming International 17,057 440,496 ING JP Morgan Mid Cap Value 9,450 - ING MFS Capital Opportunities (840,713) 662,303 ING MFS Global Growth 168 - ING MFS Research (1,203,069) (385,928) ING OpCap Balanced Value 1,825 - ING PIMCO Total Return 118,777 - ING Salomon Brothers Aggressive Growth (1,425,104) (532,114) ING Salomon Brothers Capital 655 - ING Salomon Brothers Investors Value 1,835 - ING T. Rowe Price Growth Equity (562,460) (481,925) ING UBS Tactical Asset Allocation 53 - ING Van Kampen Comstock 38,291 - ING Variable Funds: ING VP Growth and Income (4,914,917) (3,837,503) ING Variable Portfolios, Inc.: ING VP Growth (944,382) (557,260) ING VP Index Plus LargeCap (1,975,577) 334,278 ING VP Index Plus MidCap 293,309 179,712 ING VP Index Plus SmallCap 238,930 90,802 ING VP International Equity (117,376) 90,389 ING VP Small Company 398,526 999,271 ING VP Technology (95,211) 951,241 ING VP Value Opportunity (168,461) 477,971 ING Variable Products Trust: ING VP Growth Opportunities - Class R 63,829 - ING VP Growth Opportunities - Class S 5,464 17,720 ING VP International Value 49,414 - ING VP MagnaCap - Class R 3,913 - ING VP MagnaCap - Class S 22,872 46,176 ING VP MidCap Opportunities - Class R 10,923 - ING VP MidCap Opportunities - Class S 315,913 102,249 ING VP SmallCap Opportunities - Class R (139,170) 150,882 ING VP SmallCap Opportunities - Class S 376,449 - Janus Aspen Series: Janus Aspen Aggressive Growth (2,540,697) (691,812) Janus Aspen Balanced (1,543,962) 1,254,108 Janus Aspen Flexible Income 123,393 232,337 Janus Aspen Growth (3,008,365) (1,173,398) Janus Aspen Worldwide Growth (3,807,460) (863,462)
S-61
YEAR ENDED DECEMBER 31, 2002 2001 ------------------------------------ NET UNITS ISSUED NET UNITS ISSUED (REDEEMED) (REDEEMED) ------------------------------------ Lord Abbett Funds: Lord Abbett Growth and Income 53,538 - Lord Abbett MidCap Value 54,692 - MFS(R) Funds: MFS(R) Global Governments 71,900 13,722 MFS(R) Total Return 404,893 2,634,447 Oppenheimer Variable Account Funds: Oppenheimer Aggressive Growth (616,159) 1,508,913 Oppenheimer Global Securities 197,129 96,835 Oppenheimer Main Street Growth & Income (523,616) 527,060 Oppenheimer Strategic Bond 151,517 441,109 Pioneer Variable Contracts Trust: Pioneer Equity Income VCT 19,140 - Pioneer VCT 172 - Pioneer Mid Cap Value VCT 3,470 - Prudential Series Fund, Inc.: Prudential Jennison (10,806) 81,476 SP Jennison International Growth 29,475 7,897
S-62 7. UNIT SUMMARY A summary of units outstanding at December 31, 2002 follows:
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- AIM V.I. CAPITAL APPRECIATION Currently payable annuity contracts: $ 430,696 Contracts in accumulation period: Non-Qualified V 7,141.870 $ 6.85 48,922 Non-Qualified V (0.75) 117,784.846 6.98 822,138 Non-Qualified XII 756.497 6.96 5,265 Non-Qualified XIII 501,618.196 7.37 3,696,926 Non-Qualified XIV 657,037.276 7.27 4,776,661 Non-Qualified XV 329,702.890 7.23 2,383,752 Non-Qualified XVI 224,043.766 4.33 970,110 Non-Qualified XVII 580.253 7.07 4,102 Non-Qualified XVIII 158,970.137 4.28 680,392 Non-Qualified XIX 235,584.768 4.30 1,013,015 ------------- ------------- 2,233,220.499 $ 14,831,979 ============= ============= AIM V.I. CORE EQUITY Currently payable annuity contracts: $ 3,159,134 Contracts in accumulation period: Non-Qualified V 41,012.179 $ 6.28 257,556 Non-Qualified V (0.75) 100,702.786 6.40 644,498 Non-Qualified IX 2,325.916 6.22 14,467 Non-Qualified XII 866.371 6.39 5,536 Non-Qualified XIII 948,642.123 7.67 7,276,085 Non-Qualified XIV 1,538,823.386 7.57 11,648,893 Non-Qualified XV 507,916.587 7.52 3,819,533 Non-Qualified XVI 233,331.906 5.20 1,213,326 Non-Qualified XVIII 105,523.130 5.14 542,389 Non-Qualified XIX 263,337.768 5.16 1,358,823 ------------- ------------- 3,742,482.152 $ 29,940,240 ============= ============= AIM V.I. GOVERNMENT SECURITIES Contracts in accumulation period: Non-Qualified XIII 590,033.975 $ 12.36 $ 7,292,820 Non-Qualified XIV 768,636.365 12.26 9,423,482 Non-Qualified XV 283,516.080 12.21 3,461,731 Non-Qualified XVI 175,024.768 11.77 2,060,042 Non-Qualified XVIII 61,958.666 11.65 721,818 Non-Qualified XIX 259,823.060 11.69 3,037,332 ------------- ------------- 2,138,992.914 $ 25,997,225 ============= ============ AIM V.I. GROWTH Currently payable annuity contracts: $ 651,633 Contracts in accumulation period: Non-Qualified V 17,754.161 $ 4.22 74,923 Non-Qualified V (0.75) 108,862.037 4.30 468,107
S-63
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- AIM V.I. GROWTH (CONTINUED) Non-Qualified XII 1,037.684 $ 4.29 $ 4,452 Non-Qualified XIII 753,288.092 5.09 3,834,236 Non-Qualified XIV 1,178,462.059 5.02 5,915,880 Non-Qualified XV 372,278.087 4.99 1,857,668 Non-Qualified XVI 164,058.196 3.37 552,876 Non-Qualified XVIII 111,965.966 3.34 373,966 Non-Qualified XIX 361,313.751 3.35 1,210,401 ------------- ------------- 3,069,390.342 $ 14,945,690 ============= ============= AIM V.I. PREMIER EQUITY Currently payable annuity contracts: $ 2,348,435 Contracts in accumulation period: Non-Qualified V 17,054.546 $ 5.77 98,405 Non-Qualified V (0.75) 97,537.305 5.88 573,519 Non-Qualified IX 50.112 5.71 286 Non-Qualified XII 1,139.580 5.86 6,678 Non-Qualified XIII 1,508,348.111 6.91 10,422,685 Non-Qualified XIV 2,427,698.196 6.82 16,556,902 Non-Qualified XV 868,527.131 6.77 5,879,929 Non-Qualified XVI 341,816.310 5.21 1,780,863 Non-Qualified XVII 476.985 6.02 2,871 Non-Qualified XVIII 143,877.432 5.16 742,408 Non-Qualified XIX 562,473.154 5.18 2,913,611 ------------- ------------- 5,968,998.862 $ 41,326,592 ============= ============= ALGER AMERICAN BALANCED Contracts in accumulation period: Non-Qualified VII 120,391.551 $ 21.40 $ 2,576,379 ------------- ------------- 120,391.551 $ 2,576,379 ============= ============= ALGER AMERICAN INCOME & GROWTH Contracts in accumulation period: Non-Qualified VII 356,258.045 $ 17.31 $ 6,166,827 ------------- ------------- 356,258.045 $ 6,166,827 ============= ============= ALGER AMERICAN LEVERAGED ALLCAP Contracts in accumulation period: Non-Qualified VII 327,132.695 $ 17.49 $ 5,721,551 Non-Qualified VIII 167.794 12.87 2,160 ------------- ------------- 327,300.489 $ 5,723,711 ============= ============= ALLIANCE GROWTH AND INCOME Contracts in accumulation period: Non-Qualified XIII 826,949.294 $ 7.77 $ 6,425,396 Non-Qualified XIV 882,219.483 7.71 6,801,912
S-64
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ALLIANCE GROWTH AND INCOME (CONTINUED) Non-Qualified IX 370.309 $ 4.18 $ 1,548 Non-Qualified XV 356,243.025 7.68 2,735,946 Non-Qualified XVI 380,962.591 7.89 3,005,795 Non-Qualified XVIII 84,109.046 7.81 656,892 Non-Qualified XIX 324,306.091 7.84 2,542,560 ------------- ------------- 2,854,789.530 $ 22,168,501 ============= ============= ALLIANCE PREMIER GROWTH Contracts in accumulation period: Non-Qualified XIII 366,995.250 $ 4.29 $ 1,574,410 Non-Qualified XIV 306,904.215 4.26 1,307,412 Non-Qualified XV 138,234.900 4.24 586,116 Non-Qualified XVI 201,714.666 4.57 921,836 Non-Qualified XVIII 83,613.201 4.52 377,932 Non-Qualified XIX 235,804.351 4.54 1,070,552 ------------- ------------- 1,333,266.583 $ 5,838,258 ============= ============= ALLIANCE QUASAR Contracts in accumulation period: Non-Qualified XIII 42,353.535 $ 5.55 $ 235,062 Non-Qualified XIV 30,165.049 5.51 166,209 Non-Qualified XV 10,982.404 5.49 60,293 Non-Qualified XVI 13,238.968 4.97 65,798 Non-Qualified XVIII 5,280.521 4.91 25,927 Non-Qualified XIX 26,431.352 4.93 130,307 ------------- ------------- 128,451.829 $ 683,596 ============= ============= AMERICAN CENTURY(R) VP BALANCED Contracts in accumulation period: Non-Qualified VII 96,051.803 $ 15.44 $ 1,483,040 ------------- ------------- 96,051.803 $ 1,483,040 ============= ============= AMERICAN CENTURY(R) VP INTERNATIONAL Contracts in accumulation period: Non-Qualified VII 130,913.859 $ 11.74 $ 1,536,929 Non-Qualified VIII 181.976 10.68 1,944 ------------- ------------- 131,095.835 $ 1,538,873 ============= ============= BRINSON SERIES TACTICAL ALLOCATION Contracts in accumulation period: Non-Qualified XIII 198,037.849 $ 6.83 $ 1,352,599 Non-Qualified XIV 964,639.557 6.75 6,511,317 Non-Qualified XV 94,577.105 6.71 634,612 Non-Qualified XVI 81,758.493 6.26 511,808 Non-Qualified XVIII 40,585.885 6.19 251,227 Non-Qualified XIX 74,438.589 6.22 463,008 ------------- ------------- 1,454,037.478 $ 9,724,571 ============= =============
S-65
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- CALVERT SOCIAL BALANCED Contracts in accumulation period: Non-Qualified V 5,689.041 $ 17.26 $ 98,193 Non-Qualified V (0.75) 15,357.764 17.86 274,290 Non-Qualified VII 79,520.147 9.61 764,189 Non-Qualified VIII 65,982.625 9.68 638,712 ------------- ------------- 166,549.577 $ 1,775,384 ============= ============= FEDERATED AMERICAN LEADERS Currently payable annuity contracts: $ 98,634 Contracts in accumulation period: Non-Qualified VII 2,712,272.577 $ 18.56 50,339,779 Non-Qualified VIII 7,506.773 13.39 100,516 ------------- ------------- 2,719,779.350 $ 50,538,929 ============= ============= FEDERATED EQUITY INCOME Currently payable annuity contracts: $ 88,391 Contracts in accumulation period: Non-Qualified VII 1,035,144.898 $ 9.83 10,175,474 ------------- ------------- 1,035,144.898 $ 10,263,865 ============= ============= FEDERATED FUND FOR US GOVERNMENT SECURITIES Contracts in accumulation period: Non-Qualified VII 825,678.064 $ 15.35 $ 12,674,158 ------------- ------------- 825,678.064 $ 12,674,158 ============= ============= FEDERATED GROWTH STRATEGIES Contracts in accumulation period: Non-Qualified VII 764,148.738 $ 13.63 $ 10,415,347 ------------- ------------- 764,148.738 $ 10,415,347 ============= ============= FEDERATED HIGH INCOME BOND Currently payable annuity contracts: $ 18,044 Contracts in accumulation period: Non-Qualified VII 1,236,035.841 $ 13.48 16,661,763 Non-Qualified VIII 299.808 11.49 3,445 ------------- ------------- 1,236,335.649 $ 16,683,252 ============= ============= FEDERATED INTERNATIONAL EQUITY Currently payable annuity contracts: $ 44,915 Contracts in accumulation period: Non-Qualified VII 550,927.936 $ 10.85 5,977,568 Non-Qualified VIII 125.653 10.03 1,260 ------------- ------------- 551,053.589 $ 6,023,743 ============= =============
S-66
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ FEDERATED PRIME MONEY Contracts in accumulation period: Non-Qualified VII 582,531.577 $ 12.68 $ 7,386,500 -------------- ------------- 582,531.577 $ 7,386,500 ============== ============= FEDERATED UTILITY Currently payable annuity contracts: $ 25,722 Contracts in accumulation period: Non-Qualified VII 652,466.859 $ 10.72 6,994,445 Non-Qualified VIII 64.474 8.94 576 -------------- ------------- 652,531.333 $ 7,020,743 ============== ============= FIDELITY(R) VIP EQUITY-INCOME Contracts in accumulation period: Non-Qualified V 362,704.384 $ 15.06 $ 5,462,328 Non-Qualified V (0.75) 686,999.409 15.59 10,710,321 Non-Qualified VII 3,974,733.140 17.95 71,346,460 Non-Qualified VIII 820,645.762 12.93 10,610,950 Non-Qualified IX 13,069.093 14.85 194,076 Non-Qualified X 28,494.416 15.06 429,126 Non-Qualified XII 8,583.989 8.90 76,398 Non-Qualified XIII 1,734,825.032 8.68 15,058,281 Non-Qualified XIV 2,273,946.636 8.56 19,464,983 Non-Qualified XV 665,353.799 8.51 5,662,161 Non-Qualified XVI 416,662.296 8.17 3,404,131 Non-Qualified XVIII 51,426.657 8.08 415,527 Non-Qualified XIX 442,137.016 8.11 3,585,731 -------------- ------------- 11,479,581.629 $ 146,420,473 ============== ============= FIDELITY(R) VIP GROWTH Contracts in accumulation period: Non-Qualified V 424,020.409 $ 12.83 $ 5,440,182 Non-Qualified V (0.75) 733,179.043 13.28 9,736,618 Non-Qualified VII 2,620,006.788 17.54 45,954,919 Non-Qualified VIII 587,469.554 11.66 6,849,895 Non-Qualified IX 9,053.810 12.65 114,531 Non-Qualified X 16,200.041 12.83 207,847 Non-Qualified XII 12,915.092 8.02 103,579 Non-Qualified XIII 1,714,740.719 6.30 10,802,867 Non-Qualified XIV 1,513,916.283 6.23 9,431,698 Non-Qualified XV 531,767.553 6.20 3,296,959 Non-Qualified XVI 678,024.059 4.78 3,240,955 Non-Qualified XVII 336.432 13.23 4,451 Non-Qualified XVIII 101,766.189 4.73 481,354 Non-Qualified XIX 529,193.848 4.75 2,513,671 -------------- ------------- 9,472,589.820 $ 98,179,526 ============== =============
S-67
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ FIDELITY(R) VIP HIGH INCOME Currently payable annuity contracts: $ 1,217,405 Contracts in accumulation period: Non-Qualified VII 1,611,770.135 $ 9.53 15,360,169 Non-Qualified VIII 389,529.941 8.59 3,346,062 Non-Qualified XIII 893,039.712 6.59 5,885,132 Non-Qualified XIV 908,261.072 6.51 5,912,780 Non-Qualified XV 390,975.879 6.46 2,525,704 Non-Qualified XVI 102,212.069 7.51 767,613 Non-Qualified XVIII 55,374.736 7.43 411,434 Non-Qualified XIX 138,088.943 7.46 1,030,144 -------------- ------------- 4,489,252.487 $ 36,456,443 ============== ============= FIDELITY(R) VIP OVERSEAS Contracts in accumulation period: Non-Qualified V 41,583.740 $ 9.51 $ 395,461 Non-Qualified V (0.75) 183,724.044 9.84 1,807,845 Non-Qualified VII 392,647.462 10.42 4,091,387 Non-Qualified VIII 35,340.601 8.88 313,825 Non-Qualified IX 837.068 9.37 7,843 Non-Qualified XII 60.449 6.85 414 -------------- ------------- 654,193.364 $ 6,616,775 ============== ============= FIDELITY(R) VIP ASSET MANAGER(SM) Contracts in accumulation period: Non-Qualified VII 593,741.050 $ 15.71 $ 9,327,672 Non-Qualified VIII 133,917.999 13.13 1,758,343 -------------- ------------- 727,659.049 $ 11,086,015 ============== ============= FIDELITY(R) VIP CONTRAFUND(R) Contracts in accumulation period: Non-Qualified V 368,355.545 $ 17.33 $ 6,383,602 Non-Qualified V (0.75) 690,400.658 17.93 12,378,884 Non-Qualified VII 3,334,536.314 19.08 63,622,953 Non-Qualified VIII 590,671.796 15.35 9,066,812 Non-Qualified IX 24,256.016 17.08 414,293 Non-Qualified X 18,503.380 17.33 320,664 Non-Qualified XII 19,242.185 10.00 192,422 Non-Qualified XIII 2,018,021.570 9.36 18,888,682 Non-Qualified XIV 2,369,433.895 9.23 21,869,875 Non-Qualified XV 842,282.760 9.17 7,723,733 Non-Qualified XVI 267,452.170 7.29 1,949,726 Non-Qualified XVII 5,100.638 19.81 101,044 Non-Qualified XVIII 79,561.408 7.22 574,433 Non-Qualified XIX 281,388.712 7.24 2,037,254 Non-Qualified XX 2,694.843 17.33 46,702 -------------- ------------- 10,911,901.890 $ 145,571,079 ============== =============
S-68
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ FIDELITY(R) VIP INDEX 500 Contracts in accumulation period: Non-Qualified VII 3,363,853.383 $ 16.04 $ 53,956,208 Non-Qualified VIII 761,472.493 13.44 10,234,190 -------------- ------------- 4,125,325.876 $ 64,190,398 ============== ============= FIDELITY(R) VIP INVESTMENT GRADE BOND Contracts in accumulation period: Non-Qualified VII 186,316.058 $ 15.49 $ 2,886,036 Non-Qualified VIII 281.071 15.17 4,264 -------------- ------------- 186,597.129 $ 2,890,300 ============== ============= FRANKLIN SMALL CAP VALUE SECURITIES Contracts in accumulation period: Non-Qualified V 19,632.225 $ 9.22 $ 181,009 Non-Qualified V (0.75) 19,783.954 9.29 183,793 -------------- ------------- 39,416.179 $ 364,802 ============== ============= ING GET FUND - SERIES D Contracts in accumulation period: Non-Qualified V 1,438,091.944 $ 10.15 $ 14,596,633 Non-Qualified V (0.75) 903,871.339 10.37 9,373,146 Non-Qualified VII 3,071,344.110 10.08 30,959,149 Non-Qualified VIII 1,556,538.084 10.16 15,814,427 Non-Qualified IX 306.257 10.04 3,075 Non-Qualified X 134,431.816 10.15 1,364,483 Non-Qualified XIII 1,316,941.837 10.28 13,538,162 Non-Qualified XIV 1,414,759.922 10.15 14,359,813 Non-Qualified XV 365,594.021 10.09 3,688,844 -------------- ------------- 10,201,879.330 $ 103,697,732 ============== ============= ING GET FUND - SERIES E Contracts in accumulation period: Non-Qualified V 1,401,276.150 $ 10.32 $ 14,461,170 Non-Qualified V (0.75) 181,392.356 10.51 1,906,434 Non-Qualified VII 2,888,646.116 10.18 29,406,417 Non-Qualified VIII 370,683.850 10.23 3,792,096 Non-Qualified X 106,195.475 10.33 1,096,999 Non-Qualified XIII 8,419,319.065 10.34 87,055,759 Non-Qualified XIV 7,556,647.083 10.23 77,304,500 Non-Qualified XV 6,028,823.299 10.18 61,373,421 -------------- ------------- 26,952,983.394 $ 276,396,796 ============== ============= ING GET FUND - SERIES G Contracts in accumulation period: Non-Qualified V 155,561.048 $ 10.24 $ 1,592,945 Non-Qualified V (0.75) 160,536.151 10.41 1,671,181
S-69
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING GET FUND - SERIES G (CONTINUED) Non-Qualified VII 2,096,429.634 $ 10.11 $ 21,194,904 Non-Qualified VIII 268,123.792 10.16 2,724,138 Non-Qualified X 11,531.076 10.25 118,194 Non-Qualified XIII 4,441,901.240 10.26 45,573,907 Non-Qualified XIV 6,066,389.974 10.16 61,634,522 Non-Qualified XV 2,904,738.963 10.11 29,366,911 -------------- ------------- 16,105,211.878 $ 163,876,702 ============== ============= ING GET FUND - SERIES H Contracts in accumulation period: Non-Qualified V 88,397.575 $ 10.31 $ 911,379 Non-Qualified V (0.75) 49,236.815 10.46 515,017 Non-Qualified VII 1,241,029.239 10.18 12,633,678 Non-Qualified VIII 98,421.437 10.23 1,006,851 Non-Qualified IX 430.483 10.23 4,404 Non-Qualified X 989.734 10.31 10,204 Non-Qualified XIII 4,103,205.698 10.32 42,345,083 Non-Qualified XIV 4,210,476.009 10.23 43,073,170 Non-Qualified XV 2,073,012.107 10.18 21,103,263 -------------- ------------- 11,865,199.097 $ 121,603,049 ============== ============= ING GET FUND - SERIES I Contracts in accumulation period: Non-Qualified VII 346,004.672 $ 10.10 $ 3,494,647 Non-Qualified VIII 27,192.295 10.15 276,002 Non-Qualified XIII 2,619,267.030 10.23 26,795,102 Non-Qualified XIV 3,163,705.087 10.15 32,111,607 Non-Qualified XV 2,118,944.962 10.10 21,401,344 -------------- ------------- 8,275,114.046 $ 84,078,702 ============== ============= ING GET FUND - SERIES J Contracts in accumulation period: Non-Qualified VII 197,504.225 $ 10.05 $ 1,984,917 Non-Qualified VIII 36,671.736 10.09 370,018 Non-Qualified XIII 1,932,011.749 10.17 19,648,559 Non-Qualified XIV 3,119,385.286 10.09 31,474,598 Non-Qualified XV 1,827,477.880 10.05 18,366,153 -------------- ------------- 7,113,050.876 $ 71,844,245 ============== ============= ING GET FUND - SERIES K Contracts in accumulation period: Non-Qualified VII 73,297.874 $ 10.13 $ 742,507 Non-Qualified VIII 4,919.630 10.17 50,033 Non-Qualified XIII 1,382,151.705 10.24 14,153,233 Non-Qualified XIV 1,605,395.953 10.17 16,326,877 Non-Qualified XV 869,098.605 10.13 8,803,969 Non-Qualified XVI 1,584,792.554 10.09 15,990,557
S-70
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING GET FUND - SERIES K (CONTINUED) Non-Qualified XVIII 1,116,196.526 $ 9.99 $ 11,150,803 Non-Qualified XIX 1,401,405.466 10.02 14,042,083 -------------- ------------- 8,037,258.313 $ 81,260,062 ============== ============= ING GET FUND - SERIES L Contracts in accumulation period: Non-Qualified VII 92,268.385 $ 10.00 $ 922,684 Non-Qualified VIII 28,661.448 10.03 287,474 Non-Qualified XIII 1,400,377.299 10.09 14,129,807 Non-Qualified XIV 882,418.325 10.03 8,850,656 Non-Qualified XV 785,079.376 10.00 7,850,794 Non-Qualified XVI 1,879,134.201 9.99 18,772,551 Non-Qualified XVIII 1,020,237.568 9.89 10,090,150 Non-Qualified XIX 1,446,615.975 9.92 14,350,430 -------------- ------------- 7,534,792.577 $ 75,254,546 ============== ============= ING GET FUND - SERIES M Contracts in accumulation period: Non-Qualified VII 186,412.625 $ 10.00 $ 1,864,126 Non-Qualified VIII 17,605.832 10.02 176,410 Non-Qualified XIII 1,492,510.501 10.08 15,044,506 Non-Qualified XIV 1,434,017.677 10.02 14,368,857 Non-Qualified XV 705,761.298 10.00 7,057,613 Non-Qualified XVI 3,827,410.385 9.99 38,235,830 Non-Qualified XVIII 1,775,880.501 9.91 17,598,976 Non-Qualified XIX 2,118,307.184 9.93 21,034,790 -------------- ------------- 11,557,906.003 $ 115,381,108 ============== ============= ING GET FUND - SERIES N Contracts in accumulation period: Non-Qualified VII 459,369.278 $ 10.05 $ 4,616,661 Non-Qualified VIII 2,237.858 10.07 22,535 Non-Qualified XIII 1,205,119.919 10.12 12,195,814 Non-Qualified XIV 848,334.273 10.07 8,542,726 Non-Qualified XV 533,675.137 10.05 5,363,435 Non-Qualified XVI 3,034,794.505 10.04 30,469,337 Non-Qualified XVIII 1,030,556.991 9.97 10,274,653 Non-Qualified XIX 1,867,681.749 9.99 18,658,141 -------------- ------------- 8,981,769.710 $ 90,143,302 ============== ============= ING GET FUND - SERIES P Contracts in accumulation period: Non-Qualified VII 515,693.266 $ 9.95 $ 5,131,148 Non-Qualified VIII 54,056.942 9.97 538,948 Non-Qualified XIII 988,745.270 10.01 9,897,340 Non-Qualified XIV 597,369.796 9.97 5,955,777 Non-Qualified XV 401,832.774 9.95 3,998,236
S-71
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING GET FUND - SERIES P (CONTINUED) Non-Qualified XVI 2,173,193.416 $ 9.95 $ 21,623,274 Non-Qualified XVIII 1,588,963.354 9.89 15,714,848 Non-Qualified XIX 1,359,653.242 9.91 13,474,164 -------------- ------------- 7,679,508.060 $ 76,333,735 ============== ============= ING GET FUND - SERIES Q Contracts in accumulation period: Non-Qualified VII 255,562.411 $ 10.05 $ 2,568,402 Non-Qualified VIII 28,688.221 10.07 288,890 Non-Qualified XIII 831,795.799 10.10 8,401,138 Non-Qualified XIV 528,587.177 10.07 5,322,873 Non-Qualified XV 197,153.922 10.05 1,981,397 Non-Qualified XVI 1,577,133.032 10.04 15,834,416 Non-Qualified XVIII 560,993.401 10.00 5,609,934 Non-Qualified XIX 1,480,370.543 10.01 14,818,509 -------------- ------------- 5,460,284.506 $ 54,825,559 ============== ============= ING GET FUND - SERIES R Contracts in accumulation period: Non-Qualified VII 116,201.136 $ 10.10 $ 1,173,631 Non-Qualified VIII 31,906.082 10.12 322,890 Non-Qualified XIII 874,285.963 10.14 8,865,260 Non-Qualified XIV 365,660.994 10.12 3,700,489 Non-Qualified XV 101,169.656 10.10 1,021,814 Non-Qualified XVI 1,142,979.457 10.10 11,544,093 Non-Qualified XVIII 364,760.117 10.06 3,669,487 Non-Qualified XIX 1,315,350.494 10.08 13,258,733 -------------- ------------- 4,312,313.899 $ 43,556,397 ============== ============= ING GET FUND - SERIES S Contracts in accumulation period: Non-Qualified V 25,318.365 $ 10.06 $ 254,703 Non-Qualified V (0.75) 363,762.474 10.08 3,666,726 Non-Qualified VII 443,770.184 10.04 4,455,453 Non-Qualified VIII 146,702.345 10.05 1,474,359 Non-Qualified XII 1,863.085 10.08 18,780 Non-Qualified XIII 666,365.791 10.07 6,710,304 Non-Qualified XIV 430,412.940 10.05 4,325,650 Non-Qualified XV 181,463.051 10.04 1,821,889 Non-Qualified XVI 1,153,141.624 10.04 11,577,542 Non-Qualified XVIII 533,195.480 10.01 5,337,287 Non-Qualified XIX 1,388,294.852 10.02 13,910,714 -------------- ------------- 5,334,290.191 $ 53,553,407 ============== =============
S-72
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING GET FUND - SERIES T Contracts in accumulation period: Non-Qualified VII 269,746.236 $ 10.08 $ 2,719,042 Non-Qualified VIII 34,715.641 10.08 349,934 Non-Qualified XIII 526,476.619 10.09 5,312,149 Non-Qualified XIV 378,188.886 10.08 3,812,144 Non-Qualified XV 121,313.226 10.08 1,222,837 Non-Qualified XVI 1,082,294.692 10.08 10,909,530 Non-Qualified XVIII 285,984.756 10.06 2,877,007 Non-Qualified XIX 1,209,121.268 10.07 12,175,851 ------------- ------------- 3,907,841.324 $ 39,378,494 ============= ============= ING GET FUND - SERIES U Contracts in accumulation period: Non-Qualified VII 6,141.747 $ 10.00 $ 61,417 Non-Qualified XIII 9,296.975 10.00 92,970 Non-Qualified XIV 13,986.861 10.00 139,869 Non-Qualified XIX 20,852.140 9.99 208,313 ------------- ------------- 50,277.723 $ 502,569 ============= ============= ING VP BALANCED Currently payable annuity contracts: $ 35,523,696 Contracts in accumulation period: Non-Qualified V 1,483,863.331 $ 20.25 30,048,232 Non-Qualified V (0.75) 986,778.536 20.95 20,673,010 Non-Qualified VI 20,703.131 17.07 353,402 Non-Qualified VII 1,497,149.388 19.73 29,538,757 Non-Qualified VIII 342,040.301 14.04 4,802,246 Non-Qualified IX 14,551.892 19.96 290,456 Non-Qualified X 226,170.671 20.53 4,643,284 Non-Qualified XI 2,742.037 17.31 47,465 Non-Qualified XII 4,113.357 9.93 40,846 Non-Qualified XIII 993,956.078 9.66 9,601,616 Non-Qualified XIV 701,902.194 9.53 6,689,128 Non-Qualified XV 324,405.934 9.46 3,068,880 Non-Qualified XVI 241,434.783 7.95 1,919,407 Non-Qualified XVII 32.139 26.80 861 Non-Qualified XVIII 77,191.932 7.87 607,501 Non-Qualified XIX 128,993.349 7.90 1,019,047 ------------- ------------- 7,046,029.053 $ 148,867,834 ============= ============= ING VP BOND Currently payable annuity contracts: $ 14,449,620 Contracts in accumulation period: Non-Qualified V 807,470.040 $ 17.40 14,049,979 Non-Qualified V (0.75) 1,401,270.288 18.01 25,236,878 Non-Qualified VI 53,398.857 15.94 851,178 Non-Qualified VII 2,475,953.642 16.96 41,992,174
S-73
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING VP BOND (CONTINUED) Non-Qualified VIII 624,874.822 $ 14.52 $ 9,073,182 Non-Qualified IX 13,059.853 17.16 224,107 Non-Qualified X 332,174.406 17.55 5,829,661 Non-Qualified XI 1,199.932 16.08 19,295 Non-Qualified XII 2,108.816 12.89 27,183 Non-Qualified XIII 1,452,812.389 12.73 18,494,302 Non-Qualified XIV 1,436,808.048 12.56 18,046,309 Non-Qualified XV 534,744.241 12.48 6,673,608 Non-Qualified XVI 473,229.681 11.98 5,669,292 Non-Qualified XVIII 72,408.196 11.86 858,761 Non-Qualified XIX 257,779.393 11.90 3,067,575 -------------- ------------- 9,939,292.604 $ 164,563,104 ============== ============= ING VP MONEY MARKET Currently payable annuity contracts: $ 9,973,094 Contracts in accumulation period: Non-Qualified V 1,044,246.011 $ 13.95 14,567,232 Non-Qualified V (0.75) 2,039,090.716 14.44 29,444,470 Non-Qualified VI 24,147.002 13.66 329,848 Non-Qualified VII 6,600,977.927 13.75 90,763,446 Non-Qualified VIII 1,031,857.646 12.51 12,908,539 Non-Qualified IX 8,794.115 13.76 121,007 Non-Qualified X 340,943.431 13.95 4,756,161 Non-Qualified XII 16,459.213 11.70 192,573 Non-Qualified XIII 3,154,101.390 11.59 36,556,035 Non-Qualified XIV 2,724,200.692 11.44 31,164,856 Non-Qualified XV 1,186,507.736 11.36 13,478,728 Non-Qualified XVI 727,898.933 10.40 7,570,149 Non-Qualified XVIII 207,159.936 10.30 2,133,747 Non-Qualified XIX 832,127.163 10.33 8,595,874 -------------- ------------- 19,938,511.911 $ 262,555,759 ============== ============= ING VP NATURAL RESOURCES Contracts in accumulation period: Non-Qualified V 38,147.559 $ 11.66 $ 444,801 Non-Qualified V (0.75) 20,936.663 12.07 252,706 Non-Qualified VII 74,794.455 11.48 858,640 Non-Qualified IX 32.032 11.50 368 Non-Qualified X 882.195 11.66 10,286 -------------- ------------- 134,792.904 $ 1,566,801 ============== ============= ING VP STRATEGIC ALLOCATION BALANCED Currently payable annuity contracts: $ 1,493,877 Contracts in accumulation period: Non-Qualified V 89,223.696 $ 13.37 1,192,921 Non-Qualified V (0.75) 145,424.762 13.84 2,012,679 Non-Qualified VII 589,474.191 13.21 7,786,954
S-74
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING VP STRATEGIC ALLOCATION BALANCED (CONTINUED) Non-Qualified VIII 139,965.786 $ 12.03 $ 1,683,788 Non-Qualified X 9,897.430 13.63 134,902 Non-Qualified XVII 2,852.790 13.63 38,884 ------------- ------------- 976,838.655 $ 14,344,005 ============= ============= ING VP STRATEGIC ALLOCATION GROWTH Currently payable annuity contracts: $ 493,542 Contracts in accumulation period: Non-Qualified V 72,637.199 $ 13.07 949,368 Non-Qualified V (0.75) 151,275.388 13.52 2,045,243 Non-Qualified VII 493,886.930 12.91 6,376,080 Non-Qualified VIII 97,671.315 11.55 1,128,104 Non-Qualified IX 670.338 12.88 8,634 Non-Qualified X 19,199.436 13.33 255,928 ------------- ------------- 835,340.606 $ 11,256,899 ============= ============= ING VP STRATEGIC ALLOCATION INCOME Currently payable annuity contracts: $ 3,142,767 Contracts in accumulation period: Non-Qualified V 88,782.076 $ 14.02 1,244,725 Non-Qualified V (0.75) 43,244.558 14.51 627,479 Non-Qualified VII 798,445.513 13.86 11,066,455 Non-Qualified VIII 283,367.875 12.99 3,680,949 Non-Qualified X 22,791.065 14.30 325,912 ------------- ------------- 1,236,631.087 $ 20,088,287 ============= ============= ING ALGER AGGRESSIVE GROWTH Contracts in accumulation period: Non-Qualified V 69.605 $ 7.31 $ 509 Non-Qualified V (0.75) 24,272.518 7.34 178,160 ------------- ------------- 24,342.123 $ 178,669 ============= ============= ING ALGER GROWTH Contracts in accumulation period: Non-Qualified V 169.817 $ 7.24 $ 1,229 Non-Qualified V (0.75) 1,127.269 7.26 8,184 ------------- ------------- 1,297.086 $ 9,413 ============= ============= ING AMERICAN CENTURY SMALL CAP VALUE Contracts in accumulation period: Non-Qualified V 6,554.415 $ 9.30 $ 60,956 Non-Qualified V (0.75) 9,661.639 8.11 78,356 Non-Qualified XX 3,605.133 9.30 33,528 ------------- ------------- 19,821.187 $ 172,840 ============= =============
S-75
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING BARON SMALL CAP GROWTH Contracts in accumulation period: Non-Qualified V 6,056.996 $ 9.68 $ 58,632 Non-Qualified V (0.75) 13,543.464 8.72 118,099 Non-Qualified XX 1,709.418 9.68 16,547 ------------- ------------- 21,309.878 $ 193,278 ============= ============= ING GOLDMAN SACHS(R) CAPITAL GROWTH Contracts in accumulation period: Non-Qualified V (0.75) 1,589.626 $ 8.07 $ 12,828 Non-Qualified XII 652.397 8.07 5,265 ------------- ------------- 2,242.023 $ 18,093 ============= ============= ING JPMORGAN FLEMING INTERNATIONAL Currently payable annuity contracts: $ 725,145 Contracts in accumulation period: Non-Qualified V 216,774.890 $ 15.27 3,310,153 Non-Qualified V (0.75) 200,628.910 15.80 3,169,937 Non-Qualified VII 191,333.958 8.39 1,605,292 Non-Qualified VIII 68,657.317 8.45 580,154 Non-Qualified IX 3,903.746 15.05 58,751 Non-Qualified X 1,614.188 15.27 24,649 Non-Qualified XIII 868,695.784 6.79 5,898,444 Non-Qualified XIV 567,196.378 6.70 3,800,216 Non-Qualified XV 399,227.648 6.65 2,654,864 Non-Qualified XVI 289,603.614 5.68 1,644,949 Non-Qualified XVIII 10,991.066 5.62 61,770 Non-Qualified XIX 90,376.964 5.64 509,726 ------------- ------------- 2,909,004.463 $ 24,044,050 ============= ============= ING JPMORGAN MID CAP VALUE Contracts in accumulation period: Non-Qualified V 525.287 $ 9.17 $ 4,817 Non-Qualified V (0.75) 8,924.783 9.20 82,108 ------------- ------------- 9,450.070 $ 86,925 ============= ============= ING MFS CAPITAL OPPORTUNITIES Currently payable annuity contracts: $ 2,524,031 Contracts in accumulation period: Non-Qualified V 249,445.381 $ 18.73 4,672,112 Non-Qualified V (0.75) 180,680.003 19.38 3,501,578 Non-Qualified VII 846,006.622 8.84 7,478,699 Non-Qualified VIII 243,400.894 8.91 2,168,702 Non-Qualified IX 3,746.424 18.46 69,159 Non-Qualified X 9,460.209 18.73 177,190 Non-Qualified XII 268.795 7.61 2,046 Non-Qualified XIII 760,838.627 7.23 5,500,863 Non-Qualified XIV 775,399.104 7.14 5,536,350
S-76
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING MFS CAPITAL OPPORTUNITIES (CONTINUED) Non-Qualified XV 201,250.408 $ 7.09 $ 1,426,865 Non-Qualified XVI 288,029.971 4.49 1,293,255 Non-Qualified XVII 373.914 20.94 7,830 Non-Qualified XVIII 114,024.815 4.44 506,270 Non-Qualified XIX 196,376.005 4.46 875,837 ------------- ------------- 3,869,301.172 $ 35,740,787 ============= ============= ING MFS GLOBAL GROWTH Contracts in accumulation period: Non-Qualified V 114.677 $ 8.32 $ 954 Non-Qualified V (0.75) 53.670 8.35 448 ------------- ------------- 168.347 $ 1,402 ============= ============= ING MFS RESEARCH Contracts in accumulation period: Non-Qualified V 300,020.696 $ 10.37 $ 3,111,215 Non-Qualified V (0.75) 226,503.440 10.73 2,430,382 Non-Qualified VI 15,681.895 8.78 137,687 Non-Qualified VII 2,125,862.279 10.20 21,683,795 Non-Qualified VIII 356,088.081 7.05 2,510,421 Non-Qualified IX 11,475.529 10.22 117,280 Non-Qualified X 121,245.136 10.37 1,257,312 Non-Qualified XI 1,302.911 8.78 11,440 Non-Qualified XIII 358,336.776 6.85 2,454,607 Non-Qualified XIV 619,493.614 6.76 4,187,777 Non-Qualified XV 179,084.071 6.72 1,203,445 Non-Qualified XVI 151,905.555 5.04 765,604 Non-Qualified XVIII 38,140.149 4.98 189,938 Non-Qualified XIX 121,587.728 5.00 607,939 ------------- ------------- 4,626,727.860 $ 40,668,842 ============= ============= ING OPCAP BALANCED VALUE Contracts in accumulation period: Non-Qualified V 1,003.030 $ 8.34 $ 8,365 Non-Qualified XII 821.815 8.37 6,879 ------------- ------------- 1,824.845 $ 15,244 ============= ============= ING PIMCO TOTAL RETURN Contracts in accumulation period: Non-Qualified V 25,282.897 $ 10.72 $ 271,033 Non-Qualified V (0.75) 69,178.707 10.75 743,671 Non-Qualified IX 17,742.566 10.70 189,845 Non-Qualified XII 676.412 10.75 7,271 Non-Qualified XX 5,896.283 10.72 63,208 ------------- ------------- 118,776.865 $ 1,275,028 ============= =============
S-77
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING SALOMON BROTHERS AGGRESSIVE GROWTH Currently payable annuity contracts: $ 992,675 Contracts in accumulation period: Non-Qualified V 353,914.829 $ 9.64 3,411,739 Non-Qualified V (0.75) 337,984.906 9.97 3,369,710 Non-Qualified VII 2,842,989.175 9.24 26,269,220 Non-Qualified VIII 393,580.696 6.31 2,483,494 Non-Qualified IX 6,741.530 9.50 64,045 Non-Qualified X 9,980.736 9.64 96,214 Non-Qualified XII 2,174.834 5.45 11,853 Non-Qualified XIII 688,421.610 5.19 3,572,908 Non-Qualified XIV 836,352.565 5.12 4,282,125 Non-Qualified XV 250,907.607 5.09 1,277,120 Non-Qualified XVI 108,235.112 3.58 387,482 Non-Qualified XVII 380.139 9.70 3,687 Non-Qualified XVIII 58,907.037 3.54 208,531 Non-Qualified XIX 162,542.564 3.55 577,026 ------------- ------------- 6,053,113.340 $ 47,007,829 ============= ============= ING SALOMON BROTHERS CAPITAL Contracts in accumulation period: Non-Qualified V (0.75) 654.575 $ 7.69 $ 5,034 ------------- ------------- 654.575 $ 5,034 ============= ============= ING SALOMON BROTHERS INVESTORS VALUE Contracts in accumulation period: Non-Qualified V 1,834.938 $ 7.82 $ 14,349 ------------- ------------- 1,834.938 $ 14,349 ============= ============= ING T. ROWE PRICE GROWTH EQUITY Currently payable annuity contracts: $ 2,345,236 Contracts in accumulation period: Non-Qualified V 192,649.640 $ 14.54 2,801,126 Non-Qualified V (0.75) 242,809.642 15.04 3,651,857 Non-Qualified VII 2,520,654.151 18.37 46,304,417 Non-Qualified VIII 234,754.639 13.36 3,136,322 Non-Qualified IX 5,444.907 14.33 78,026 Non-Qualified X 6,422.007 14.54 93,376 Non-Qualified XII 1,681.613 8.90 14,966 Non-Qualified XVII 1,011.823 17.06 17,262 ------------- ------------- 3,205,428.422 $ 58,442,588 ============= =============
S-78
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING UBS TACTICAL ASSET ALLOCATION Contracts in accumulation period: Non-Qualified V 53.433 $ 8.01 $ 428 -------------- ------------- 53.433 $ 428 ============== ============= ING VAN KAMPEN COMSTOCK Contracts in accumulation period: Non-Qualified V 12,024.347 $ 8.31 $ 99,922 Non-Qualified V (0.75) 26,015.863 8.34 216,972 Non-Qualified XII 250.818 8.33 2,089 -------------- ------------- 38,291.028 $ 318,983 ============== ============= ING VP GROWTH AND INCOME Currently payable annuity contracts: $ 86,525,598 Contracts in accumulation period: Non-Qualified 1964 958.685 $ 162.71 155,988 Non-Qualified V 4,278,161.961 15.16 64,856,935 Non-Qualified V (0.75) 7,378,211.382 15.69 115,764,137 Non-Qualified VI 1,177,819.575 14.23 16,760,373 Non-Qualified VII 4,488,575.286 15.02 67,418,401 Non-Qualified VIII 892,956.523 10.10 9,018,861 Non-Qualified IX 64,044.542 14.94 956,825 Non-Qualified X 1,943,270.653 15.37 29,868,070 Non-Qualified XI 30,716.608 14.43 443,241 Non-Qualified XII 36,379.347 6.32 229,917 Non-Qualified XIII 1,413,021.263 6.09 8,605,299 Non-Qualified XIV 1,439,278.744 6.01 8,650,065 Non-Qualified XV 490,461.079 5.97 2,928,053 Non-Qualified XVI 217,038.958 5.33 1,156,818 Non-Qualified XVII 205.889 152.21 31,338 Non-Qualified XVIII 77,342.947 5.28 408,371 Non-Qualified XIX 141,086.356 5.30 747,758 Non-Qualified XX 94,985.088 15.16 1,439,974 -------------- ------------- 24,164,514.886 $ 415,966,022 ============== ============= ING VP GROWTH Currently payable annuity contracts: $ 2,631,186 Contracts in accumulation period: Non-Qualified V 84,932.756 $ 10.49 890,945 Non-Qualified V (0.75) 558,745.766 10.80 6,034,454 Non-Qualified VII 573,852.673 10.40 5,968,068 Non-Qualified VIII 234,214.218 10.49 2,456,907 Non-Qualified IX 1,843.949 10.34 19,066 Non-Qualified XII 2,598.937 6.72 17,465 Non-Qualified XIII 744,202.893 6.22 4,628,942 Non-Qualified XIV 640,933.606 6.13 3,928,923
S-79
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ ING VP GROWTH (CONTINUED) Non-Qualified XV 122,600.479 $ 6.09 $ 746,637 Non-Qualified XVI 121,103.308 4.04 489,257 Non-Qualified XVIII 12,355.061 4.00 49,420 Non-Qualified XIX 105,967.306 4.01 424,929 -------------- ------------- 3,203,350.952 $ 28,286,199 ============== ============= ING VP INDEX PLUS LARGECAP Currently payable annuity contracts: $ 31,910,797 Contracts in accumulation period: Non-Qualified V 288,486.014 $ 13.63 3,932,064 Non-Qualified V (0.75) 999,688.403 14.07 14,065,616 Non-Qualified VII 1,883,337.515 13.49 25,406,223 Non-Qualified VIII 635,456.372 13.39 8,508,761 Non-Qualified IX 20,458.132 13.44 274,957 Non-Qualified XII 15,082.003 8.20 123,672 Non-Qualified XIII 3,628,670.916 7.87 28,557,640 Non-Qualified XIV 3,014,920.796 7.77 23,425,935 Non-Qualified XV 1,263,502.914 7.71 9,741,607 Non-Qualified XVI 675,425.261 5.93 4,005,272 Non-Qualified XVII 53.946 13.87 748 Non-Qualified XVIII 220,224.676 5.86 1,290,517 Non-Qualified XIX 539,612.055 5.88 3,172,919 -------------- ------------- 13,184,919.003 $ 154,416,728 ============== ============= ING VP INDEX PLUS MIDCAP Contracts in accumulation period: Non-Qualified V 138,190.533 $ 12.48 $ 1,724,618 Non-Qualified V (0.75) 757,291.244 12.78 9,678,182 Non-Qualified IX 10,079.041 12.33 124,275 Non-Qualified XII 18,708.753 13.31 249,014 Non-Qualified XVII 253.199 13.22 3,347 -------------- ------------- 924,522.770 $ 11,779,436 ============== ============= ING VP INDEX PLUS SMALLCAP Contracts in accumulation period: Non-Qualified V 128,310.022 $ 9.07 $ 1,163,772 Non-Qualified V (0.75) 328,141.058 9.28 3,045,149 Non-Qualified IX 6,481.411 8.96 58,073 Non-Qualified XII 753.745 9.99 7,530 -------------- ------------- 463,686.236 $ 4,274,524 ============== =============
S-80
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING VP INTERNATIONAL EQUITY PORTFOLIO - CLASS R Currently payable annuity contracts: $ 376,495 Contracts in accumulation period: Non-Qualified V 6,875.696 $ 6.25 42,973 Non-Qualified V (0.75) 59,835.340 6.40 382,946 Non-Qualified VII 98,804.174 6.20 612,586 Non-Qualified VIII 34,502.077 6.25 215,638 Non-Qualified XIII 273,415.239 5.93 1,621,352 Non-Qualified XIV 174,150.116 5.85 1,018,778 Non-Qualified XV 61,382.639 5.81 356,633 Non-Qualified XVI 71,157.557 4.74 337,287 Non-Qualified XVIII 5,585.598 4.69 26,196 Non-Qualified XIX 50,411.975 4.70 236,936 ------------- ------------- 836,120.411 $ 5,227,820 ============= ============= ING VP SMALL COMPANY Currently payable annuity contracts: $ 3,881,973 Contracts in accumulation period: Non-Qualified V 49,493.214 $ 14.46 715,672 Non-Qualified V (0.75) 362,103.959 14.88 5,388,107 Non-Qualified VII 1,032,724.107 14.33 14,798,936 Non-Qualified VIII 286,772.659 14.45 4,143,865 Non-Qualified IX 1,379.067 14.25 19,652 Non-Qualified XII 35,405.059 10.27 363,610 Non-Qualified XIII 1,077,682.721 10.04 10,819,935 Non-Qualified XIV 617,860.717 9.91 6,123,000 Non-Qualified XV 200,547.557 9.84 1,973,388 Non-Qualified XVI 339,071.983 7.16 2,427,755 Non-Qualified XVII 2,960.186 10.78 31,911 Non-Qualified XVIII 36,061.563 7.09 255,676 Non-Qualified XIX 170,804.473 7.11 1,214,420 ------------- ------------- 4,212,867.265 $ 52,157,900 ============= ============= ING VP TECHNOLOGY Contracts in accumulation period: Non-Qualified V 240,058.230 $ 2.57 $ 616,950 Non-Qualified V (0.75) 470,065.068 2.61 1,226,870 Non-Qualified VII 476,267.450 2.56 1,219,245 Non-Qualified VIII 61,729.892 2.57 158,646 Non-Qualified IX 17,615.456 2.55 44,919 Non-Qualified X 1,784.761 2.59 4,623 Non-Qualified XII 3,512.025 2.60 9,131 Non-Qualified XIII 588,646.420 2.59 1,524,594 Non-Qualified XIV 381,817.732 2.57 981,272 Non-Qualified XV 55,830.093 2.56 142,925 Non-Qualified XVI 125,466.581 2.67 334,996 Non-Qualified XVIII 22,239.898 2.65 58,936 Non-Qualified XIX 90,584.798 2.66 240,956 ------------- ------------- 2,535,618.404 $ 6,564,063 ============= =============
S-81
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- ING VP VALUE OPPORTUNITY Contracts in accumulation period: Non-Qualified V 66,506.128 $ 13.44 $ 893,842 Non-Qualified V (0.75) 246,272.709 13.84 3,408,414 Non-Qualified VII 760,213.853 13.32 10,126,049 Non-Qualified VIII 171,772.473 13.44 2,308,622 Non-Qualified IX 1,697.542 13.25 22,492 Non-Qualified XII 25,733.010 9.36 240,861 Non-Qualified XVII 68.291 10.32 705 ------------- ------------- 1,272,264.006 $ 17,000,985 ============= ============= ING VP EMERGING MARKETS Contracts in accumulation period: Non-Qualified VII 102,697.805 $ 6.32 $ 649,050 ------------- ------------- 102,697.805 $ 649,050 ============= ============= ING VP GROWTH OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 63,828.994 $ 6.02 $ 384,251 ------------- ------------- 63,828.994 $ 384,251 ============= ============= ING VP GROWTH OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 10,587.862 $ 5.43 $ 57,492 Non-Qualified XIV 2,346.431 5.40 12,671 Non-Qualified XV 1,383.401 5.38 7,443 Non-Qualified XVI 6,241.577 5.38 33,580 Non-Qualified XVIII 1,028.483 5.34 5,492 Non-Qualified XIX 1,596.215 5.35 8,540 ------------- ------------- 23,183.969 $ 125,218 ============= ============= ING VP INTERNATIONAL VALUE Contracts in accumulation period: Non-Qualified V 5,855.824 $ 8.83 $ 51,707 Non-Qualified V (0.75) 34,787.430 8.03 279,343 Non-Qualified IX 4,254.293 7.95 33,822 Non-Qualified XII 963.184 8.03 7,734 Non-Qualified XX 3,553.474 8.83 31,377 ------------- ------------- 49,414.205 $ 403,983 ============= ============= ING VP MAGNACAP - CLASS R Contracts in accumulation period: Non-Qualified V (0.75) 3,912.983 $ 6.85 $ 26,804 ------------- ------------- 3,912.983 $ 26,804 ============= =============
S-82
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ---------------------------------------------------- ING VP MAGNACAP - CLASS S Contracts in accumulation period: Non-Qualified XIII 35,550.671 $ 7.12 $ 253,121 Non-Qualified XIV 18,913.322 7.08 133,906 Non-Qualified XV 1,231.619 7.07 8,708 Non-Qualified XVI 7,235.436 7.06 51,082 Non-Qualified XVIII 3,338.428 7.01 23,402 Non-Qualified XIX 2,778.145 7.02 19,503 ----------- ------------- 69,047.621 $ 489,722 =========== ============= ING VP MIDCAP OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 31.666 $ 6.92 $ 219 Non-Qualified V (0.75) 10,442.470 6.97 72,784 Non-Qualified IX 449.133 6.89 3,095 ----------- ------------- 10,923.269 $ 76,098 =========== ============= ING VP MIDCAP OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 120,170.564 $ 6.21 $ 746,259 Non-Qualified XIV 138,997.470 6.18 859,004 Non-Qualified XV 26,454.022 6.17 163,221 Non-Qualified XVI 78,501.188 6.16 483,567 Non-Qualified XVIII 7,014.780 6.11 42,860 Non-Qualified XIX 47,024.353 6.13 288,259 ----------- ------------- 418,162.377 $ 2,583,170 =========== ============= ING VP SMALLCAP OPPORTUNITIES - CLASS R Contracts in accumulation period: Non-Qualified V 8,679.356 $ 4.98 $ 43,223 Non-Qualified V (0.75) 3,032.308 5.02 15,222 ----------- ------------- 11,711.664 $ 58,445 =========== ============= ING VP SMALLCAP OPPORTUNITIES - CLASS S Contracts in accumulation period: Non-Qualified XIII 117,668.602 $ 4.73 $ 556,572 Non-Qualified XIV 101,824.267 4.71 479,592 Non-Qualified XV 56,605.761 4.70 266,047 Non-Qualified XVI 49,256.630 4.69 231,014 Non-Qualified XVIII 11,288.326 4.66 52,604 Non-Qualified XIX 39,805.483 4.67 185,892 ----------- ------------- 376,449.069 $ 1,771,721 =========== =============
S-83
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ JANUS ASPEN AGGRESSIVE GROWTH Contracts in accumulation period: Non-Qualified V 566,617.723 $ 13.03 $ 7,383,029 Non-Qualified V (0.75) 858,374.479 13.49 11,579,472 Non-Qualified VII 1,563,268.522 12.94 20,228,695 Non-Qualified VIII 357,735.529 9.03 3,230,352 Non-Qualified IX 21,634.844 12.85 278,008 Non-Qualified X 27,926.793 13.03 363,886 Non-Qualified XII 4,662.942 7.58 35,345 Non-Qualified XIII 1,964,782.621 7.13 14,008,900 Non-Qualified XIV 1,696,306.388 7.03 11,925,034 Non-Qualified XV 657,391.909 6.98 4,588,596 Non-Qualified XVI 555,397.758 2.96 1,643,977 Non-Qualified XVII 1,630.686 15.64 25,504 Non-Qualified XVIII 278,823.059 2.92 814,163 Non-Qualified XIX 385,034.113 2.93 1,128,150 -------------- ------------- 8,939,587.366 $ 77,233,111 ============== ============= JANUS ASPEN BALANCED Contracts in accumulation period: Non-Qualified V 555,951.615 $ 20.89 $ 11,613,829 Non-Qualified V (0.75) 630,340.005 21.62 13,627,951 Non-Qualified VII 2,369,859.609 23.08 54,696,360 Non-Qualified VIII 673,359.597 18.46 12,430,218 Non-Qualified IX 7,450.766 20.60 153,486 Non-Qualified X 23,295.212 20.89 486,637 Non-Qualified XII 21,381.782 12.32 263,424 Non-Qualified XIII 3,258,034.827 11.64 37,923,525 Non-Qualified XIV 3,601,528.948 11.48 41,345,552 Non-Qualified XV 1,255,265.952 11.41 14,322,585 Non-Qualified XVI 678,471.836 8.44 5,726,302 Non-Qualified XVII 41.959 21.30 894 Non-Qualified XVIII 144,444.286 8.35 1,206,110 Non-Qualified XIX 472,317.742 8.38 3,958,023 Non-Qualified XX 3,375.393 20.89 70,512 -------------- ------------- 13,695,119.529 $ 197,825,408 ============== =============
S-84
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ------------------------------------------------------ JANUS ASPEN FLEXIBLE INCOME Contracts in accumulation period: Non-Qualified V 171,615.702 $ 18.96 $ 3,253,834 Non-Qualified V (0.75) 231,891.054 19.62 4,549,702 Non-Qualified VII 908,267.435 18.71 16,993,684 Non-Qualified VIII 212,109.882 15.73 3,336,488 Non-Qualified IX 3,310.389 18.69 61,871 Non-Qualified X 8,977.805 18.96 170,219 Non-Qualified XII 1,937.840 12.85 24,901 Non-Qualified XVII 54.245 19.34 1,049 -------------- ------------- 1,538,164.352 $ 28,391,748 ============== ============= JANUS ASPEN GROWTH PORTFOLIO Currently payable annuity contracts: $ 6,363,719 Contracts in accumulation period: Non-Qualified V 338,648.733 $ 13.37 4,527,734 Non-Qualified V (0.75) 565,225.869 13.83 7,817,074 Non-Qualified VII 1,698,475.232 15.78 26,801,939 Non-Qualified VIII 346,669.873 11.30 3,917,370 Non-Qualified IX 6,850.744 13.18 90,293 Non-Qualified X 22,475.711 13.37 300,500 Non-Qualified XII 10,427.083 7.53 78,516 Non-Qualified XIII 2,342,509.576 7.16 16,772,369 Non-Qualified XIV 3,015,362.805 7.07 21,318,615 Non-Qualified XV 983,466.889 7.02 6,903,938 Non-Qualified XVI 327,789.685 4.46 1,461,942 Non-Qualified XVII 616.632 14.84 9,151 Non-Qualified XVIII 129,992.688 4.42 574,568 Non-Qualified XIX 353,241.795 4.43 1,564,861 -------------- ------------- 10,141,753.315 $ 98,502,589 ============== ============= JANUS ASPEN WORLDWIDE GROWTH Currently payable annuity contracts: $ 7,329,540 Contracts in accumulation period: Non-Qualified V 609,558.631 $ 16.25 9,905,328 Non-Qualified V (0.75) 1,211,566.461 16.82 20,378,548 Non-Qualified VII 4,329,391.897 18.21 78,838,226 Non-Qualified VIII 816,356.134 13.23 10,800,392 Non-Qualified IX 23,370.570 16.02 374,397 Non-Qualified X 26,438.976 16.25 429,633 Non-Qualified XII 25,670.941 7.90 202,800 Non-Qualified XIII 3,739,036.827 7.39 27,631,482 Non-Qualified XIV 3,645,285.344 7.29 26,574,130 Non-Qualified XV 1,076,133.408 7.24 7,791,206 Non-Qualified XVI 771,583.143 4.81 3,711,315 Non-Qualified XVII 2,202.702 18.46 40,662 Non-Qualified XVIII 194,741.283 4.76 926,969 Non-Qualified XIX 699,890.190 4.78 3,345,475 -------------- ------------- 17,171,226.507 $ 198,280,103 ============== =============
S-85
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- JANUS ASPEN WORLDWIDE GROWTH (CONTINUED) LORD ABBETT GROWTH AND INCOME Contracts in accumulation period: Non-Qualified V 32,820.831 $ 7.85 $ 257,644 Non-Qualified V (0.75) 20,716.722 7.91 163,869 ------------- ------------- 53,537.553 $ 421,513 ============= ============= LORD ABBETT MID-CAP VALUE Contracts in accumulation period: Non-Qualified V 5,655.376 $ 9.87 $ 55,819 Non-Qualified V (0.75) 44,192.623 8.38 370,334 Non-Qualified XX 4,843.782 9.87 47,808 ------------- ------------- 54,691.781 $ 473,961 ============= ============= MFS (R) GLOBAL GOVERNMENTS Contracts in accumulation period: Non-Qualified VII 190,603.352 $ 11.92 $ 2,271,992 Non-Qualified VIII 37,246.397 12.04 448,447 ------------- ------------- 227,849.749 $ 2,720,439 ============= ============= MFS(R) TOTAL RETURN Contracts in accumulation period: Non-Qualified VII 2,066,374.204 $ 15.51 $ 32,049,464 Non-Qualified VIII 475,213.219 15.67 7,446,591 Non-Qualified XIII 1,138,016.463 11.13 12,666,123 Non-Qualified XIV 1,935,084.719 10.98 21,247,230 Non-Qualified XV 561,729.213 10.91 6,128,466 Non-Qualified XVI 617,717.854 9.94 6,140,115 Non-Qualified XVIII 143,894.186 9.83 1,414,480 Non-Qualified XIX 469,356.259 9.87 4,632,546 ------------- ------------- 7,407,386.117 $ 91,725,015 ============= ============= OPPENHEIMER AGGRESSIVE GROWTH Currently payable annuity contracts: $ 819,407 Contracts in accumulation period: Non-Qualified VII 645,050.621 $ 10.34 6,669,823 Non-Qualified VIII 228,735.970 10.43 2,385,716 Non-Qualified XIII 566,444.270 7.29 4,129,379 Non-Qualified XIV 653,599.318 7.19 4,699,379 Non-Qualified XV 205,717.696 7.14 1,468,824 Non-Qualified XVI 507,860.304 3.29 1,670,860
S-86
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- OPPENHEIMER AGGRESSIVE GROWTH (CONTINUED) Non-Qualified XVIII 375,412.433 3.26 1,223,845 Non-Qualified XIX 263,903.806 3.27 862,965 ------------- ------------- 3,446,724.418 $ 23,930,198 ============= ============= OPPENHEIMER GLOBAL SECURITIES Contracts in accumulation period: Non-Qualified V 124,642.865 $ 10.87 $ 1,354,868 Non-Qualified V (0.75) 294,074.348 11.13 3,273,047 Non-Qualified VII 619,881.256 14.00 8,678,338 Non-Qualified VIII 120,065.031 14.12 1,695,318 Non-Qualified IX 3,483.077 10.74 37,408 Non-Qualified XII 12,340.120 11.17 137,839 ------------- ------------- 1,174,486.697 $ 15,176,818 ============= ============= OPPENHEIMER MAIN STREET GROWTH & INCOME Currently payable annuity contracts: $ 3,092,978 Contracts in accumulation period: Non-Qualified VII 1,627,170.955 $ 10.10 16,434,427 Non-Qualified VIII 567,565.104 10.19 5,783,488 Non-Qualified XIII 825,724.271 7.08 5,846,128 Non-Qualified XIV 1,503,686.572 6.98 10,495,732 Non-Qualified XV 475,185.289 6.94 3,297,786 Non-Qualified XVI 265,863.679 6.26 1,664,307 Non-Qualified XVIII 106,267.399 6.20 658,858 Non-Qualified XIX 245,483.133 6.22 1,526,905 ------------- ------------- 5,616,946.402 $ 48,800,609 ============= ============= OPPENHEIMER STRATEGIC BOND Currently payable annuity contracts: $ 1,153,175 Contracts in accumulation period: Non-Qualified V 10,728.017 $ 11.19 120,047 Non-Qualified V (0.75) 53,130.525 11.46 608,876 Non-Qualified VII 814,287.332 12.27 9,991,306 Non-Qualified VIII 197,895.041 12.38 2,449,941 Non-Qualified IX 151.867 11.06 1,680 Non-Qualified XIII 535,396.772 11.24 6,017,860 Non-Qualified XIV 629,245.584 11.09 6,978,334 Non-Qualified XV 209,695.372 11.02 2,310,843 Non-Qualified XVI 157,440.299 10.87 1,711,376 Non-Qualified XVIII 28,772.871 10.76 309,596 Non-Qualified XIX 100,170.989 10.80 1,081,847 ------------- ------------- 2,736,914.669 $ 32,734,881 ============= =============
S-87
UNITS EXTENDED OUTSTANDING UNIT VALUE VALUE ----------------------------------------------------- PIONEER EQUITY INCOME VCT Contracts in accumulation period: Non-Qualified V 13,107.385 $ 7.99 $ 104,728 Non-Qualified V (0.75) 6,032.919 8.05 48,565 ------------- ------------- 19,140.304 $ 153,293 ============= ============= PIONEER FUND VCT Contracts in accumulation period: Non-Qualified V (0.75) 171.721 $ 7.59 $ 1,303 ------------- ------------- 171.721 $ 1,303 ============= ============= PIONEER MID CAP VALUE VCT Contracts in accumulation period: Non-Qualified V 1,622.935 $ 8.73 $ 14,168 Non-Qualified V (0.75) 1,847.373 8.80 16,257 ------------- ------------- 3,470.308 $ 30,425 ============= ============= PRUDENTIAL JENNISON Contracts in accumulation period: Non-Qualified XIII 17,204.028 $ 6.07 $ 104,428 Non-Qualified XIV 42,520.383 6.04 256,823 Non-Qualified XV 4,457.203 6.02 26,832 Non-Qualified XVI 879.203 6.02 5,293 Non-Qualified XVIII 1,484.914 5.97 8,865 Non-Qualified XIX 4,124.459 5.99 24,706 ------------- ------------- 70,670.190 $ 426,947 ============= ============= SP JENNISON INTERNATIONAL GROWTH Contracts in accumulation period: Non-Qualified XIII 9,143.351 $ 5.76 $ 52,666 Non-Qualified XIV 7,304.232 5.73 41,853 Non-Qualified XV 7,013.356 5.72 40,116 Non-Qualified XVI 6,381.407 5.71 36,438 Non-Qualified XVIII 211.729 5.67 1,201 Non-Qualified XIX 7,317.637 5.68 41,564 ------------- ------------- 37,371.712 $ 213,838 ============= =============
S-88 NON-QUALIFIED 1964 Individual Contracts issued from December 1, 1964 to March 14, 1967. NON-QUALIFIED V Certain AetnaPlus Contracts issued in connection with deferred compensation plans issued since August 28, 1992, and certain individual non-qualified Contracts. NON-QUALIFIED V (0.75) Subset of Non-Qualified V Contracts having a mortality and expense charge of 0.75% NON-QUALIFIED VI Certain existing Contracts that were converted to ACES, an administrative system (previously valued under Non-Qualified I). NON-QUALIFIED VII Certain individual and group Contracts issued as non-qualified deferred annuity contracts or Individual individual retirement annuity Contracts issued since May 4, 1994. NON-QUALIFIED VIII Certain individual retirement annuity Contracts issued since May 1, 1998. NON-QUALIFIED IX Group Aetna Plus Contracts assessing an administrative expense charge effective April 7, 1997 issued in connection with deferred compensation plans. NON-QUALIFIED X Group AetnaPlus contracts containing contractual limits on fees, issued in connection with deferred compensation plans and as individual non-qualified Contracts, resulting in reduced daily charges for certain funding options effective May 29, 1997. NON-QUALIFIED XI Certain Contracts, previously valued under Non-Qualified VI, containing contractual limits on fees, resulting in reduced daily charges for certain funding options effective May 29, 1997. NON-QUALIFIED XIII Certain individual retirement annuity Contracts issued since October 1, 1998. NON-QUALIFIED XIV Certain individual retirement annuity Contracts issued since September 1, 1998. NON-QUALIFIED XV Certain individual retirement annuity Contracts issued since September 1, 1998. NON-QUALIFIED XVI Certain individual retirement annuity Contracts issued since August 2000. NON-QUALIFIED XVII Group AetnaPlus contracts issued in connection with deferred compensation plans having Contract modifications effective September 1, 1999. NON-QUALIFIED XVIII Certain individual retirement annuity Contracts issued since September 2000. NON-QUALIFIED XIX Certain individual retirement annuity Contracts issued since August 2000. NON-QUALIFIED XX Certain deferred compensation Contracts issued since December 2002. S-89 8. FINANCIAL HIGHLIGHTS A summary of unit values and units outstanding for variable annuity Contracts, expense ratios, excluding expenses of underlying Funds, investment income ratios, and total return for the years ended December 31, 2002 and 2001, along with units outstanding and unit values for the year ended December 31, 2000, follows:
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- AIM VARIABLE INSURANCE FUNDS: AIM V.I. Capital Appreciation 2002 2,233 $4.28 to $7.37 $ 14,832 - 0.45% to 1.90% -25.80% to -0.04% 2001 2,600 $5.77 to $9.84 23,509 7.71% 0.45% to 2.25% -24.75% to -23.82% 2000 2,085 $7.67 to $12.95 25,987 * * * AIM V.I. Core Equity 2002 3,742 $5.14 to $7.67 29,940 0.30% 0.75% to 2.25% -17.19% to -16.21% 2001 4,491 $6.21 to $9.17 42,858 0.05% 0.45% to 2.25% -24.31% to -16.23% 2000 4,034 $8.20 to $12.00 49,823 * * * AIM V.I. Government Securities 2002 2,139 $11.65 to $12.36 25,997 2.67% 0.95% to 1.90% 0.07% to 8.01% 2001 819 $10.83 to $11.38 9,149 5.55% 0.50% to 1.90% 4.38% to 5.40% 2000 28 $10.38 to $10.80 295 * * * AIM V.I. Growth 2002 3,069 $3.34 to $5.09 14,946 - 0.75% to 1.90% -32.29% to -31.49% 2001 3,912 $4.93 to $7.44 27,757 0.20% 0.45% to 2.25% -35.18% to -34.38% 2000 3,321 $7.60 to $11.37 37,257 * * * AIM V.I. Premier Equity 2002 5,969 $5.16 to $6.91 41,327 0.29% 0.45% to 1.90% -31.59% to -30.57% 2001 7,410 $7.54 to $10.00 74,008 2.16% 0.45% to 2.25% -14.24% to -9.62% 2000 6,222 $8.79 to $11.55 73,350 * * *
S-90
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- THE ALGER AMERICAN FUND: Alger American Balanced 2002 120 $21.40 $ 2,576 1.69% 1.40% -13.52% 2001 152 $24.74 3,765 3.07% 0.85% to 1.40% -3.31% 2000 191 $25.59 4,888 * * * Alger American Income & Growth 2002 356 $17.31 6,167 0.64% 1.40% -32.07% 2001 443 $25.49 11,279 6.98% 0.85% to 1.40% -15.53% 2000 550 $30.17 16,586 * * * Alger American Leveraged AllCap 2002 327 $12.87 to $17.49 5,724 0.01% 1.25% to 1.40% -34.84% to -34.74% 2001 388 $19.73 to $26.84 10,424 3.28% 0.85% to 1.40% -17.11% to -16.99% 2000 481 $23.77 to $32.38 15,563 * * * ALLIANCE FUNDS: Alliance Growth and Income 2002 2,855 $7.68 to $7.89 22,169 0.80% 0.95% to 1.90% -23.53% to -22.79% 2001 2,791 $9.99 to $10.27 28,177 4.75% 0.50% to 1.90% -1.56% to -0.60% 2000 88 $10.10 to $10.39 898 * * * Alliance Premier Growth 2002 1,333 $4.24 to $4.57 5,838 - 0.95% to 1.90% -31.96% to -31.30% 2001 1,331 $6.20 to $6.69 8,532 6.31% 0.50% to 1.90% -18.80% to -17.99% 2000 341 $7.60 to $8.20 2,687 * * * Alliance Quasar 2002 128 $4.91 to $5.55 684 - 0.95% to 1.90% -33.07% to -32.42% 2001 116 $7.34 to $8.22 910 3.62% 0.50% to 1.90% -14.43% to -13.59% 2000 9 $8.58 to $9.51 82 * * *
S-91
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- AMERICAN CENTURY(R) VP FUNDS: American Century(R) VP Balanced 2002 96 $15.44 $ 1,483 2.84% 1.40% -10.82% 2001 118 $17.32 2,043 6.22% 0.85% to 1.40% -4.90% 2000 147 $18.21 2,684 * * * American Century(R) VP International 2002 131 $10.68 to $11.74 1,539 0.83% 1.25% to 1.40% -21.49% to -21.37% 2001 185 $13.59 to $14.95 2,759 10.20% 0.85% to 1.40% -30.17% to -30.06% 2000 229 $19.43 to $21.41 4,905 * * * BRINSON SERIES FUNDS: Brinson Series Tactical Allocation 2002 1,454 $6.19 to $6.83 9,725 0.55% 0.95% to 1.90% -24.42% to -23.69% 2001 1,635 $8.20 to $8.94 14,334 7.95% 0.50% to 1.90% -14.22% to -13.38% 2000 1,218 $9.56 to $10.33 12,509 * * * Calvert Social Balanced 2002 167 $9.61 to $17.86 1,775 2.79% 0.75% to 1.40% -13.38% to -12.81% 2001 158 $11.09 to $20.48 1,959 4.91% 0.45% to 1.50% -8.25% to -7.64% 2000 175 $12.09 to $22.18 2,514 * * * FEDERATED INSURANCE SERIES: Federated American Leaders 2002 2,720 $13.39 to $18.56 50,539 1.17% 1.25% to 1.40% -21.33% to -21.21% 2001 3,522 $16.99 to $23.59 83,193 2.06% 0.85% to 1.40% -5.56% to -5.42% 2000 4,105 $17.97 to $24.98 102,586 * * * Federated Equity Income 2002 1,035 $9.83 10,264 2.11% 1.25% to 1.40% -21.85% 2001 1,384 $12.58 17,476 1.97% 0.75% to 1.40% -12.24% 2000 1,690 $14.33 24,264 * * *
S-92
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- FEDERATED INSURANCE SERIES (CONTINUED): Federated Fund for US Government Securities 2002 826 $15.35 $ 12,674 3.65% 1.40% 7.52% 2001 820 $14.28 11,702 3.90% 0.85% to 1.40% 5.53% 2000 823 $13.53 11,133 * * * Federated Growth Strategies 2002 764 $13.63 10,415 - 1.40% -27.38% 2001 1,117 $18.77 20,974 1.68% 0.85% to 1.40% -23.48% 2000 1,378 $24.53 33,809 * * * Federated High Income Bond 2002 1,236 $11.49 to $13.48 16,683 10.52% 1.25% to 1.40% -0.03% to 0.12% 2001 1,548 $11.48 to $13.49 20,899 11.00% 0.85% to 1.40% -0.04% to 0.10% 2000 1,959 $11.46 to $13.49 26,446 * * * Federated International Equity 2002 551 $10.03 to $10.85 6,024 - 1.25% to 1.40% -23.84% to -23.73% 2001 767 $13.15 to $14.25 10,976 12.94% 0.85% to 1.40% -30.42% to -30.31% 2000 978 $18.87 to $20.48 20,057 * * * Federated Prime Money 2002 583 $12.68 7,387 1.37% 1.40% 0% 2001 695 $12.68 8,812 3.44% 0.85% to 1.40% 2.28% 2000 702 $12.40 8,703 * * * Federated Utility 2002 653 $8.94 to $10.72 7,021 5.71% 1.25% to 1.40% -25.01% to -24.90% 2001 923 $11.90 to $14.29 13,230 3.57% 0.85% to 1.40% -14.94% to -14.81% 2000 1,149 $13.97 to $16.80 19,351 * * *
S-93
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS FUND: Fidelity(R) VIP Equity-Income 2002 11,480 $8.08 to $17.95 $ 146,420 1.78% 0.75% to 1.90% -18.53% to -17.57% 2001 12,170 $9.92 to $21.92 193,019 6.26% 0.45% to 1.90% -6.77% to -5.67% 2000 10,395 $10.64 to $23.40 188,025 * * * Fidelity(R) VIP Growth 2002 9,473 $4.73 to $17.54 98,180 0.26% 0.45% to 1.90% -31.44% to -30.42% 2001 10,633 $6.90 to 25.45 167,319 7.26% 0.45% to 1.90% -19.23% to -18.23% 2000 9,467 $8.54 to $31.34 209,610 * * * Fidelity(R) VIP High Income 2002 4,489 $6.46 to $9.53 36,456 10.78% 0.95% to 2.25% 1.48% to 2.46% 2001 4,973 $6.34 to $9.34 39,385 13.71% 0.50% to 2.25% -13.42% to -12.58% 2000 4,980 $7.28 to $10.74 45,512 * * * Fidelity(R) VIP Overseas 2002 654 $6.85 to $10.42 6,617 0.85% 0.75% to 1.50% -21.47% to -20.88% 2001 770 $8.67 to $13.26 9,914 13.97% 0.45% to 1.50% -22.35% to -21.76% 2000 872 $11.08 to $17.06 14,451 * * * FIDELITY(R) VARIABLE INSURANCE PRODUCTS FUND II: Fidelity(R) VIP II ASSET MANAGER(SM) 2002 728 $13.13 to $15.71 11,086 4.06% 1.25% to 1.40% -10.01% to -9.87% 2001 831 $14.57 to $17.45 14,094 6.08% 0.85% to 1.40% -5.44% to -5.30% 2000 993 $15.39 to $18.46 17,821 * * * Fidelity(R) VIP II Contrafund(R) 2002 10,912 $7.22 to $19.81 145,571 0.86% 0.45% to 1.90% -11.07% to 78.65% 2001 11,618 $8.12 to $21.96 173,999 3.56% 0.45% to 1.90% -13.93% to -3.25% 2000 12,102 $9.43 to $24.67 216,963 * * *
S-94
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS FUND II (CONTINUED): Fidelity(R) VIP II Index 500 2002 4,125 $13.44 to $16.04 $ 64,190 1.38% 1.25% to 1.40% -23.34% to -23.22% 2001 4,961 $17.51 to $20.93 100,783 1.20% 0.85% to 1.40% -13.34% to -13.21% 2000 5,672 $20.17 to $24.15 133,049 * * * Fidelity(R) VIP II Investment Grade Bond 2002 187 $15.17 to $15.49 2,890 4.05% 1.25% to 1.40% 8.80% to 8.96% 2001 217 $13.92 to $14.24 3,084 5.86% 0.85% to 1.40% 6.94% to 7.10% 2000 278 $13.00 to $13.32 3,700 * * * FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST: Franklin Small Cap Value Securities 2002 39 $9.22 to $9.29 365 *** 0.75% to 1.25% -21.04% to -19.73% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING GET FUND: ING GET Fund - Series D 2002 10,202 $10.04 to $10.37 103,698 4.34% 1.00% to 1.75% -1.09% to -0.34% 2001 11,705 $10.15 to $10.40 119,943 1.44% 0.70% to 2.15% 0.22% to 0.98% 2000 12,726 $10.13 to $10.29 129,776 * * * ING GET Fund - Series E 2002 26,953 $10.18 to $10.51 276,397 4.02% 1.00% to 1.90% 2.11% to 3.05% 2001 29,973 $9.97 to $10.20 300,383 0.78% 1.00% to 2.40% -1.12% to -0.21% 2000 33,010 $10.08 to $10.22 333,833 * * * ING GET Fund - Series G 2002 16,105 $10.11 to $10.41 163,877 3.84% 1.00% to 1.90% 2.97% to 3.92% 2001 17,381 $9.82 to $10.02 171,369 0.38% 1.00% to 2.40% -0.52% to 0.40% 2000 18,850 $9.87 to $9.98 186,445 * * *
S-95
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING GET FUND (CONTINUED): ING GET Fund - Series H 2002 11,865 $10.18 to $10.46 $ 121,603 3.59% 1.00% to 1.90% 2.78% to 3.72% 2001 13,233 $9.91 to $10.01 131,686 0.47% 1.00% to 2.40% -1.24% to -0.33% 2000 14,101 $10.03 to $10.12 141,764 * * * ING GET Fund - Series I 2002 8,275 $10.10 to $10.23 84,079 3.54% 1.45% to 1.90% 3.35% to 3.82% 2001 8,909 $9.78 to $9.86 87,402 0.25% 1.35% to 2.40% -0.76% to -0.30% 2000 9,419 $9.85 to $9.89 92,929 * * * ING GET Fund - Series J 2002 7,113 $10.05 to $10.17 71,844 3.49% 1.45% to 1.90% 4.05% to 4.53% 2001 7,719 $9.66 to $9.73 74,801 0.18% 1.35% to 2.40% -0.63% to -0.16% 2000 8,207 $9.72 to $9.75 79,872 * * * ING GET Fund - Series K 2002 8,037 $9.99 to $10.24 81,260 2.68% 1.45% to 2.40% 3.20% to 4.20% 2001 9,082 $9.68 to $9.82 88,558 - 1.35% to 2.40% -3.19% to -2.24% 2000 9,357 $10.00 to $10.05 93,790 * * * ING GET Fund - Series L 2002 7,535 $9.89 to $10.09 75,255 0.05% 1.45% to 2.40% 0.22% to 1.20% 2001 8,101 $9.87 to $9.97 80,345 4.63% 1.35% to 2.40% -1.53% to -0.46% 2000 58 $10.01 to $10.02 585 * * * ING GET Fund - Series M 2002 11,558 $9.91 to $10.08 $ 115,381 0.03% 1.45% to 2.40% 1.12% to 2.10% 2001 12,531 $9.80 to $9.87 123,165 ** 1.45% to 2.40% -2.23% to -1.33% 2000 ** ** ** ** ** **
S-96
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING GET FUND (CONTINUED): ING GET Fund - Series N 2002 8,982 $9.97 to $10.12 $ 90,143 0.02% 1.45% to 2.40% -2.77% to -1.82% 2001 10,181 $10.25 to $10.31 104,606 ** ** ** 2000 ** ** ** ** ** ** ING GET Fund - Series P 2002 7,680 $9.89 to $10.01 76,334 0.04% 1.45% to 2.40% -1.16% to -0.20% 2001 8,288 $10.00 to $10.03 83,012 ** ** ** 2000 ** ** ** ** ** ** ING GET Fund - Series Q 2002 5,460 $10.00 to $10.10 54,826 3.81% 1.45% to 2.40% 0.00% to 0.97% 2001 162 $10.00 1,620 ** ** ** 2000 ** ** ** ** ** ** ING GET Fund - Series R 2002 4,312 $10.06 to $10.14 43,556 *** 1.45% to 2.40% 0.65% to 1.42% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING GET Fund - Series S 2002 5,334 $10.01 to $10.08 53,553 *** 1.00% to 2.40% 0.14% to 0.87% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING GET Fund - Series T 2002 3,908 $10.06 to $10.09 39,378 *** 1.45% to 2.40% 0.88% to 0.93% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-97
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING GET FUND (CONTINUED): ING GET Fund - Series U 2002 50 $9.99 to $10.00 $ 503 *** 0.95% to 1.75% -0.05% to 0.00% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP BALANCED 2002 7,046 $7.87 to $26.80 148,868 1.07% 0.45% to 2.25% -12.01% to -10.71% 2001 8,277 $8.94 to $30.01 189,948 5.84% 0.45% to 2.25% -6.04% to 0.46% 2000 8,309 $9.52 to $24.76 199,768 * * * ING VP BOND 2002 9,939 $11.86 to $18.01 164,563 3.25% 0.75% to 2.25% 6.28% to 7.53% 2001 9,525 $11.16 to $16.75 144,459 6.51% 0.45% to 2.25% 6.67% to 7.93% 2000 6,869 $10.46 to $15.52 99,490 * * * ING VP EMERGING MARKETS 2002 103 $6.32 649 - 1.40% -10.60% 2001 129 $7.08 912 19.78% 0.85% to 1.40% -11.68% 2000 157 $8.01 1,255 * * * ING VP MONEY MARKET 2002 19,939 $10.30 to $14.44 262,556 3.85% 0.75% to 2.25% -0.31% to 0.86% 2001 22,423 $10.33 to $48.45 293,027 4.69% 0.45% to 2.25% 1.33% to 3.16% 2000 16,310 $10.13 to $13.88 211,809 * * * ING VP NATURAL RESOURCES 2002 135 $11.48 to $12.07 1,567 0.19% 0.75% to 1.50% -3.56% to -2.83% 2001 166 $11.90 to $12.42 2,003 0.00% 0.45% to 1.50% -17.19% to -16.57% 2000 193 $14.35 to $14.87 2,801 * * *
S-98
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING GENERATIONS PORTFOLIO, INC.: ING VP Strategic Allocation Balanced 2002 977 $12.03 to $13.84 $ 14,344 2.50% 0.45% to 1.40% -10.81% to -9.94% 2001 1,082 $13.47 to $15.41 17,390 2.50% 0.45% to 2.25% -8.30% to -7.65% 2000 1,232 $14.66 to $16.69 21,090 * * * ING VP Strategic Allocation Growth 2002 835 $11.55 to $13.52 11,257 1.75% 0.75% to 2.25% -15.04% to -14.40% 2001 898 $13.56 to $15.80 13,876 1.59% 0.45% to 2.25% -12.87% to -12.21% 2000 1,013 $15.52 to $18.00 17,520 * * * ING VP Strategic Allocation Income 2002 1,237 $12.99 to $14.51 20,088 3.32% 0.75% to 1.40% -5.69% to -0.78% 2001 1,380 $10.79 to $15.29 23,347 4.36% 0.45% to 2.25% -3.75% to -3.11% 2000 1,518 $11.13 to $15.77 26,191 * * * ING PARTNERS, INC.: ING Alger Aggressive Growth 2002 24 $7.31 to $7.34 179 *** 0.75% to 1.25% -8.53% to -0.37% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Alger Growth 2002 1 $7.24 to $7.26 9 *** 0.75% to 1.25% -23.21% to -6.63% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING American Century Small Cap Value 2002 20 $8.11 to $9.30 173 *** 0.75% to 1.25% -19.84% to -1.82% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-99
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING PARTNERS, INC. (CONTINUED): ING Baron Small Cap Growth 2002 21 $8.72 to $9.68 $ 193 *** 0.75% to 1.25% -12.61% to -1.83% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Goldman Sachs Capital Growth 2002 2 $8.07 18 *** 0.75% to 0.80% -3.04% to -0.05% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING JPMorgan Fleming International 2002 2,909 $5.62 to $15.80 24,044 0.62% 0.75% to 1.90% -19.64% to -18.69% 2001 2,892 $7.00 to $19.44 30,449 25.04% 0.45% to 2.25% -28.33% to -27.48% 2000 2,451 $9.76 to $26.80 38,280 * * * ING JPMorgan Mid Cap Value 2002 9 $9.17 to $9.20 87 *** 0.75% to 1.25% -8.51% to 0.47% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING MFS Capital Opportunities 2002 3,869 $4.44 to $20.94 35,741 - 0.45% to 1.90% -31.49% to -30.48% 2001 4,710 $6.49 to $30.11 62,832 19.25% 0.45% to 2.25% -26.19% to -25.29% 2000 4,048 $8.79 to $40.30 78,233 * * * ING MFS Global Growth 2002 - $8.32 to $8.35 1 *** 0.75% to 1.25% -10.41% to -0.17% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-100
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING PARTNERS, INC. (CONTINUED): ING MFS Research 2002 4,627 $4.98 to $10.73 $ 40,669 0.20% 0.75% to 1.90% -26.32% to -25.45% 2001 5,830 $6.77 to $14.39 69,394 20.49% 0.45% to 1.90% -22.40% to -21.48% 2000 6,216 $8.71 to $18.33 97,910 * * * ING OpCap Balanced Value Portfolio 2002 2 $8.34 to $8.37 15 *** 0.80% to 1.25% -0.14% to 5.35% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING PIMCO Total Return Portfolio 2002 119 $10.70 to $10.75 1,275 *** 0.75% to 1.50% 3.07% to 7.55% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Salomon Brothers Aggressive Growth 2002 6,053 $3.54 to $9.97 47,008 - 0.45% to 1.90% -36.54% to -35.60% 2001 7,478 $ 5.58 to $15.53 91,535 6.31% 0.45% to 2.25% -26.64% to -25.74% 2000 8,010 $7.60 to $20.93 136,685 * * * ING Salomon Brothers Capital 2002 1 $7.69 5 *** 0.75% 0.67% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Salomon Brothers Investors Value 2002 2 $7.82 14 *** 1.25% -21.97% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-101
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING PARTNERS, INC. (CONTINUED): ING T. Rowe Price Growth Equity 2002 3,205 $8.90 to $18.37 $ 58,443 0.19% 0.45% to 1.50% -24.44% to -23.64% 2001 3,768 $ 11.70 to $24.29 89,395 15.41% 0.45% to 2.25% -11.56% to -10.85% 2000 4,250 $13.14 to $27.44 113,230 * * * ING UBS Tactical Asset Allocation 2002 - $8.01 428 *** 1.25% 0.33% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING Van Kampen Comstock 2002 38 $8.31 to $8.34 319 *** 0.75% to 1.25% -18.72% to -2.95% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VARIABLE FUNDS: ING VP Growth and Income 2002 24,165 $5.28 to $162.71 415,966 0.84% 0.45% to 1.90% -26.42% to 60.86% 2001 29,079 $7.17 to $219.66 663,646 0.60% 0.45% to 2.25% -19.96% to -18.98% 2000 32,914 $8.96 to $272.61 928,210 * * * ING VARIABLE PORTFOLIOS, INC.: ING VP Growth 2002 3,203 $4.00 to $10.80 28,286 - 0.75% to 1.90% -30.30% to -29.47% 2001 4,148 $5.73 to $15.31 52,088 12.13% 0.45% to 2.25% -28.45% to -27.61% 2000 4,705 $8.02 to $21.15 85,002 * * * ING VP Index Plus LargeCap 2002 13,185 $5.86 to $14.07 154,417 0.24% 0.45% to 2.25% -23.02% to -21.88 2001 15,160 $7.62 to $18.06 224,762 4.07% 0.45% to 2.25% -15.27% to -5.62% 2000 14,826 $8.99 to $21.06 261,795 * * *
S-102
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING VARIABLE PORTFOLIOS, INC. (CONTINUED): ING VP Index Plus MidCap 2002 925 $12.33. to $13.31 $ 11,779 0.50% 0.45% to 1.50% -13.40% to -12.49% 2001 631 $14.24 to $15.26 9,214 6.54% 0.45% to 1.50% -2.80% to 12.09% 2000 452 $14.50 to $15.59 6,733 * * * ING VP Index Plus SmallCap 2002 464 $8.96 to $9.99 4,275 0.19% 0.75% to 1.50% -14.50% to -13.86% 2001 225 $10.48 to $11.60 2,411 3.71% 0.45% to 1.50% 0.87% to 1.64% 2000 104 $10.39 to $11.42 1,098 * * * ING VP International Equity 2002 836 $4.69 to $6.40 5,228 0.22% 0.75% to 1.90% -28.07% to -27.23% 2001 954 $6.51 to $8.79 7,991 0.12% 0.45% to 2.25% -25.34% to -24.45% 2000 863 $8.73 to $11.64 9,708 * * * ING VP Small Company 2002 4,213 $7.09 to $14.88 52,158 0.52% 0.45% to 1.90% -24.69% to -23.57% 2001 3,814 $9.41 to $19.53 62,576 3.89% 0.45% to 2.25% 0.50% to 3.22% 2000 2,815 $9.22 to $18.92 47,270 * * * ING VP Technology 2002 2,536 $2.55 to $2.67 6,564 - 0.75% to 1.90% -42.40% to -41.72% 2001 2,631 $4.42 to $4.62 11,745 - 0.45% to 1.90% -24.42 to -23.54% 2000 1,680 $5.82 to $6.09 9,833 * * * ING VP Value Opportunity 2002 1,272 $9.36 to $13.84 17,001 0.44% 0.45% to 1.50% -27.07% to -26.30% 2001 1,441 $12.75 to $18.83 26,362 5.21% 0.45% to 1.50% -10.97% to 0.58% 2000 963 $14.22 to $20.99 19,710 * * *
S-103
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING VARIABLE PRODUCTS TRUST: ING VP Growth Opportunities - Class R 2002 64 $6.02 $ 384 *** 1.25% -27.19% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP Growth Opportunities - Class S 2002 23 $5.34 to $5.43 125 - 0.95% to 1.90% -32.71% to -28.88% 2001 18 $7.95 to $8.00 141 ** 0.95% to 1.90% -20.95% to -5.87% 2000 ** ** ** ** ** ** ING VP International Value 2002 49 $7.95 to $8.83 404 *** 0.75% to 1.50% -19.18% to -1.19% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP MagnaCap - Class R 2002 4 $6.85 27 *** 0.75% -21.38% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP MagnaCap - Class S 2002 69 $7.01 to $7.12 490 0.95% 0.95% to 1.90% -25.77% to -23.73% 2001 46 $9.28 to $9.34 431 ** 0.95% to 1.90% -5.87% to 0.00% 2000 ** ** ** ** ** ** ING VP MidCap Opportunities - Class R 2002 11 $6.89 to $6.97 76 *** 0.75% to 1.50% -20.85% to -9.47% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-104
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- ING VARIABLE PRODUCTS TRUST (CONTINUED): ING VP MidCap Opportunities - Class S 2002 418 $6.11 to $6.21 $ 2,583 - 0.95% to 1.90% -27.40% to -26.70 2001 102 $8.42 to $8.48 865 ** 0.95% to 1.90% -16.75% to -10.14% 2000 ** ** ** ** ** ** ING VP SmallCap Opportunities - Class R 2002 12 $4.98 to $5.02 58 *** 0.75% to 1.25% -33.20% to -9.70% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** ING VP SmallCap Opportunities - Class S 2002 376 $4.66 to $4.73 1,772 - 0.95% to 1.90% -44.82% to -44.28% 2001 151 $8.44 to $8.50 1,280 ** 0.95% to 1.90% -24.98% to -12.33% 2000 ** ** ** ** ** ** JANUS ASPEN SERIES: Janus Aspen Aggressive Growth 2002 8,940 $2.92 to $15.64 77,233 - 0.45% to 1.90% -29.31% to -28.26% 2001 11,480 $4.14 to $21.80 141,806 - 0.45% to 1.90% -40.61% to -39.88% 2000 12,172 $6.97 to $36.27 274,462 * * * Janus Aspen Balanced 2002 13,695 $8.35 to $23.08 197,825 2.41% 0.45% to 1.90% -8.22% to 109.99% 2001 15,239 $9.10 to $25.02 240,241 2.63% 0.45% to 1.90% -6.53% to -5.42% 2000 13,985 $9.73 to $26.63 244,144 * * *
S-105
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- JANUS ASPEN SERIES (CONTINUED): Janus Aspen Flexible Income 2002 1,538 $12.85 to $19.62 $ 28,392 4.45% 0.45% to 1.50% 8.83% to 9.98% 2001 1,415 $11.72 to $17.89 23,940 5.95% 0.45% to 1.50% -0.78% to 6.93% 2000 1,182 $10.97 to $16.73 18,730 * * * Janus Aspen Growth 2002 10,142 $4.42 to $15.78 98,503 - 0.45% to 1.90% -27.91% to -26.84% 2001 13,150 $6.13 to $21.78 176,779 0.26% 0.45% to 2.25% -26.17% to -25.27% 2000 14,324 $8.30 to $29.34 267,653 * * * Janus Aspen Worldwide Growth 2002 17,171 $4.76 to $18.46 198,280 0.84% 0.45% to 1.90% -26.92% to -25.84% 2001 20,979 $6.51 to $24.89 331,396 0.44% 0.45% to 2.25% -23.92% to -22.98% 2000 21,842 $8.56 to $32.41 483,863 * * * LORD ABBETT FUNDS: Lord Abbett Growth and Income Portfolio 2002 54 $7.85 to $7.91 422 *** 0.75% to 1.25% -17.45% to -15.55% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** Lord Abbett Mid-Cap Value 2002 55 $8.38 to $9.87 474 *** 0.75% to 1.25% -13.36% to 1.56% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** MFS(R) FUNDS: MFS(R) Global Governments 2002 228 $11.92 to $12.04 2,720 2.91% 1.25% to 1.40% 6.89% to 7.05% 2001 156 $11.15 to $11.25 1,742 3.89% 0.85% to 1.40% 3.28% to 3.44% 2000 142 $10.80 to $10.87 1,537 * * *
S-106
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- MFS(R) FUNDS (CONTINUED): MFS(R) Total ReturN 2002 7,407 $9.83 to $15.67 $ 91,725 1.74% 0.95% to 1.90% -6.97% to -6.07% 2001 7,002 $10.57 to $16.73 93,910 5.19% 0.50% to 1.90% -1.67% to -0.70% 2000 4,368 $10.75 to $16.90 63,398 * * * OPPENHEIMER VARIABLE ACCOUNT FUNDS: Oppenheimer Aggressive Growth 2002 3,447 $3.26 to $10.43 23,930 0.67% 0.95% to 1.90% -29.17% to -28.48% 2001 4,063 $4.60 to $14.62 40,449 15.39% 0.50% to 2.25% -32.58% to -31.92% 2000 3,454 $6.82 to $21.54 57,052 * * * Oppenheimer Global Securities 2002 1,174 $10.74 to $14.12 15,177 0.57% 0.75% to 1.50% -23.30% to -22.72% 2001 977 $14.01 to $18.36 16,403 12.79% 0.75% to 1.50% -13.36% to -12.70% 2000 881 $16.17 to $21.14 17,260 * * * Oppenheimer Main Street Growth & Income 2002 5,617 $6.20 to $10.19 48,801 0.77% 0.95% to 2.25% -20.34% to -19.57% 2001 6,141 $7.78 to $12.71 65,709 0.53% 0.50% to 2.25% -11.87% to -11.02% 2000 5,613 $8.83 to $14.33 67,652 * * * Oppenheimer Strategic Bond 2002 2,737 $10.76 to $12.38 32,735 7.25% 0.75% to 2.25% 5.40% to 6.64% 2001 2,585 $10.21 to $11.67 28,892 6.16% 0.50% to 2.25% 2.84% to 4.06% 2000 2,144 $9.93 to $11.27 23,335 * * * PIONEER VARIABLE CONTRACTS TRUST: Pioneer Equity Income VCT 2002 19 $7.99 to $8.05 153 *** 0.75% to 1.25% -17.35% to -16.32% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** ***
S-107
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO TOTAL RETURN DIVISION (000s) LOWEST TO HIGHEST (000s) INCOME RATIO LOWEST TO HIGHEST LOWEST TO HIGHEST - -------------------------- ------ ----------------- ---------- ------------ ----------------- ----------------- PIONEER VARIABLE CONTRACTS TRUST (CONTINUED): Pioneer Fund VCT 2002 - $7.59 $ 1 *** 0.75% 0.06% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** Pioneer Mid Cap Value VCT 2002 3 $8.73 to $8.80 30 *** 0.75% to 1.25% -17.31% to -16.24% 2001 *** *** *** *** *** *** 2000 *** *** *** *** *** *** PRUDENTIAL SERIES FUND, INC.: Prudential Jennison 2002 71 $5.97 to $6.07 427 - 0.95% to 1.90% -32.48% to -31.82% 2001 81 $8.84 to $8.90 724 ** 0.95% to 1.90% -3.52% to 9.12% 2000 ** ** ** ** ** ** * SP Jennison International Growth 2002 37 $5.67 to $5.76 214 - 0.95% to 1.90% -24.30% to -21.53% 2001 8 $ 7.49 to $7.52 59 ** 0.95% to 1.90% -19.54% to 4.42% 2000 ** ** ** ** ** **
* Not provided for 2000. ** As this investment Division was not available until 2001, this data is not meaningful and therefore is not presented. *** As this investment Division was not available until 2002, this data is not meaningful and therefore is not presented. S-108 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF ING RETIREMENT HOLDINGS, INC.) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Reports of Independent Auditors................... F-2 Consolidated Financial Statements: Consolidated Income Statements for the years ended December 31, 2002 and 2001, one month ended December 31, 2000 and eleven months ended November 30, 2000.................... F-4 Consolidated Balance Sheets as of December 31, 2002 and 2001................. F-5 Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 2002 and 2001, one month ended December 31, 2000 and eleven months ended November 30, 2000.......................... F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2002 and 2001, one month ended December 31, 2000 and eleven months ended November 30, 2000............. F-7 Notes to Consolidated Financial Statements.... F-8
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors ING Life Insurance and Annuity Company We have audited the accompanying consolidated balance sheets of ING Life Insurance and Annuity Company as of December 31, 2002 and 2001, and the related income statements, statements of changes in shareholder's equity, and statements of cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ING Life Insurance and Annuity Company at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States. As discussed in Note 1 to the financial statements, the Company changed the accounting principle for goodwill and other intangible assets effective January 1, 2002. /s/ Ernst & Young LLP Atlanta, Georgia March 25, 2003 F-2 INDEPENDENT AUDITORS' REPORT The Shareholders and Board of Directors ING Life Insurance and Annuity Company We have audited the accompanying consolidated statements of income, changes in shareholder's equity and cash flows of ING Life Insurance and Annuity Company and Subsidiaries, formerly known as Aetna Life Insurance and Annuity Company and Subsidiaries, for the period from December 1, 2000 to December 31, 2000 ("Successor Company"), and for the period from January 1, 2000 to November 30, 2000 ("Preacquisition Company"). These consolidated financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Successor Company's consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of ING Life Insurance and Annuity Company and Subsidiaries for the period from December 1, 2000 to December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the Preacquisition Company's consolidated financial statements referred to above present fairly, in all material respects, the results of their operations and their cash flows for the period from January 1, 2000 to November 30, 2000, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1 to the consolidated financial statements, effective November 30, 2000, ING America Insurance Holdings Inc. acquired all of the outstanding stock of Aetna Inc., Aetna Life Insurance and Annuity Company's indirect parent and sole shareholder in a business combination accounted for as a purchase. As a result of the acquisition, the consolidated financial information for the periods after the acquisition is presented on a different cost basis than that for the periods before the acquisition and, therefore, is not comparable. /s/ KPMG LLP Hartford, Connecticut March 27, 2001 F-3 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of ING Retirement Holdings, Inc.) CONSOLIDATED INCOME STATEMENTS (Millions)
Preacquisition One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, 2002 2001 2000 2000 ------------- ------------- ------------- -------------- Revenues: Premiums $ 98.7 $ 114.2 $ 16.5 $ 137.7 Fee income 418.2 553.4 49.8 573.3 Net investment income 959.5 888.4 78.6 833.8 Net realized capital gains (losses) (101.0) (21.0) 1.8 (37.2) --------- -------- ------ -------- Total revenue 1,375.4 1,535.0 146.7 1,507.6 --------- -------- ------ -------- Benefits, losses and expenses: Benefits: Interest credited and other benefits to policyholders 746.4 729.6 68.9 726.7 Underwriting, acquisition, and insurance expenses: Operating expenses 361.4 444.2 49.1 414.6 Amortization: Deferred policy acquisition costs and value of business acquired 181.5 112.0 10.2 116.7 Goodwill -- 61.9 -- -- --------- -------- ------ -------- Total benefits, losses and expenses 1,289.3 1,347.7 128.2 1,258.0 --------- -------- ------ -------- Income before income taxes, discontinued operations and cumulative effect of change in accounting principle 86.1 187.3 18.5 249.6 Income tax expense 18.6 87.4 5.9 78.1 --------- -------- ------ -------- Income before discontinued operations and cumulative effect of change in accounting principle 67.5 99.9 12.6 171.5 Discontinued operations, net of tax -- -- -- 5.7 Cumulative effect of change in accounting principle (2,412.1) -- -- -- --------- -------- ------ -------- Net income (loss) $(2,344.6) $ 99.9 $ 12.6 $ 177.2 ========= ======== ====== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-4 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of ING Retirement Holdings, Inc.) CONSOLIDATED BALANCE SHEETS (Millions, except share data)
As of December 31, -------------------- 2002 2001 --------- --------- ASSETS Investments: Fixed maturities, available for sale, at fair value (amortized cost of $15,041.2 at 2002 and $13,249.2 at 2001) $15,767.0 $13,539.9 Equity securities at fair value: Nonredeemable preferred stock (cost of $34.2 at 2002 and $27.0 at 2001) 34.2 24.6 Investment in affiliated mutual funds (cost of $203.9 at 2002 and $22.9 at 2001) 201.0 25.0 Common stock (cost of $0.2 at 2002 and $2.3 at 2001) 0.2 0.7 Mortgage loans on real estate 576.6 241.3 Policy loans 296.3 329.0 Short-term investments 6.2 31.7 Other investments 52.2 18.2 Securities pledged to creditors (amortized cost of $154.9 at 2002 and $466.9 at 2001) 155.0 467.2 --------- --------- Total investments 17,088.7 14,677.6 Cash and cash equivalents 65.4 82.0 Short term investments under securities loan agreement 164.3 488.8 Accrued investment income 170.9 160.9 Reciprocal loan with affiliate -- 191.1 Reinsurance recoverable 2,986.5 2,990.7 Deferred policy acquisition costs 229.8 121.3 Value of business acquired 1,438.4 1,601.8 Goodwill (net of accumulated amortization of $61.9 at 2001) -- 2,412.1 Property, plant and equipment (net of accumulated depreciation of $56.0 at 2002 and $33.9 at 2001) 49.8 66.1 Other assets 145.8 149.7 Assets held in separate accounts 28,071.1 32,663.1 --------- --------- Total assets $50,410.7 $55,605.2 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY Policy liabilities and accruals: Future policy benefits and claims' reserves $ 3,305.2 $ 3,996.8 Unpaid claims and claim expenses 30.0 28.8 Other policyholder's funds 14,756.0 12,135.8 --------- --------- Total policy liabilities and accruals 18,091.2 16,161.4 Payables under securities loan agreement 164.3 488.8 Current income taxes 84.5 59.2 Deferred income taxes 163.1 153.7 Other liabilities 1,573.7 1,624.7 Liabilities related to separate accounts 28,071.1 32,663.1 --------- --------- Total liabilities 48,147.9 51,150.9 --------- --------- Shareholder's equity: Common stock (100,000 shares authorized; 55,000 shares issued and outstanding, $50.00 per share par value) 2.8 2.8 Additional paid-in capital 4,416.5 4,292.4 Accumulated other comprehensive income 108.3 46.6 Retained earnings (deficit) (2,264.8) 112.5 --------- --------- Total shareholder's equity 2,262.8 4,454.3 --------- --------- Total liabilities and shareholder's equity $50,410.7 $55,605.2 ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-5 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of ING Retirement Holdings, Inc.) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (Millions)
Accumulated Other Additional Comprehensive Retained Total Common Paid-in- Income Earnings Shareholder's Stock Capital (Loss) (Deficit) Equity ------ ---------- ------------- --------- ------------- Balance at December 31, 1999 $2.8 $ 431.9 $(44.8) $ 995.8 $ 1,385.7 Comprehensive income: Net income -- -- -- 177.2 177.2 Other comprehensive income net of tax: Unrealized gain on securities ($79.4 pretax) -- -- 51.6 -- 51.6 --------- Comprehensive income 228.8 Adjustment for purchase accounting -- 3,751.7 -- (1,173.0) 2,578.7 Capital contributions -- 129.5 -- -- 129.5 Common stock dividends -- (10.1) -- -- (10.1) Other changes -- 0.8 -- -- 0.8 ---- -------- ------ --------- --------- Balance at November 30, 2000 2.8 4,303.8 6.8 -- 4,313.4 Comprehensive income: Net income -- -- -- 12.6 12.6 Other comprehensive income net of tax: Unrealized gain on securities ($28.7 pretax) -- -- 18.6 -- 18.6 --------- Comprehensive income 31.2 ---- -------- ------ --------- --------- Balance at December 31, 2000 2.8 4,303.8 25.4 12.6 4,344.6 Comprehensive income: Net income -- -- -- 99.9 99.9 Other comprehensive income net of tax: Unrealized gain on securities ($32.5 pretax) -- -- 21.2 -- 21.2 --------- Comprehensive income 121.1 Return of capital -- (11.3) -- -- (11.3) Other changes -- (0.1) -- -- (0.1) ---- -------- ------ --------- --------- Balance at December 31, 2001 2.8 4,292.4 46.6 112.5 4,454.3 Comprehensive income: Net (loss) -- -- -- (2,344.6) (2,344.6) Other comprehensive income net of tax: Unrealized gain on securities ($94.9 pretax) -- -- 61.7 -- 61.7 --------- Comprehensive (loss) (2,282.9) Distribution of IA Holdco -- (27.4) -- (32.7) (60.1) Capital contributions -- 164.3 -- -- 164.3 SERP -- transfer -- (15.1) -- -- (15.1) Other changes -- 2.3 -- -- 2.3 ---- -------- ------ --------- --------- Balance at December 31, 2002 $2.8 $4,416.5 $108.3 $(2,264.8) $ 2,262.8 ---- -------- ------ --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly-owned subsidiary of ING Retirement Holdings, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions)
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, 2002 2001 2000 2000 ----------------------- --------------- --------------- -------------- Cash Flows from Operating Activities: Net income (loss) $ (2,344.6) $ 99.9 $ 12.6 $ 177.2 Adjustments to reconcile net income to net cash provided by operating activities: Net amortization or (accretion) of discount on investments 115.5 (1.2) (2.7) (32.6) Amortization of deferred gain on sale -- -- -- (5.7) Net realized capital (gains) losses 101.0 21.0 (1.8) 37.2 (Increase) decrease in accrued investment income (10.0) (13.7) 6.6 (3.1) (Increase) decrease in premiums due and other receivables 172.7 (95.6) 31.1 (23.7) (Increase) decrease in policy loans -- 10.3 0.1 (25.4) (Increase) decrease in deferred policy acquisition costs (108.5) (121.3) (12.2) (136.6) (Increase) decrease in value of business acquired 139.4 13.9 -- -- Amortization of goodwill -- 61.9 -- -- Impairment of goodwill 2,412.1 -- -- -- Increase (decrease) in universal life account balances -- 17.6 (3.8) 23.8 Change in other insurance reserve liabilities 953.7 (136.3) (5.3) 85.6 Change in other assets and liabilities 72.8 (68.0) 103.9 (75.2) Provision for deferred income taxes 23.6 89.5 (14.3) 23.1 ---------- ---------- ------- ---------- Net cash provided by (used for) operating activities 1,527.7 (122.0) 114.2 44.6 ---------- ---------- ------- ---------- Cash Flows from Investing Activities: Proceeds from the sale of: Fixed maturities available for sale 24,980.4 14,216.7 233.0 10,083.2 Equity securities 57.2 4.4 1.5 118.4 Mortgages 2.0 5.2 0.1 2.1 Investment maturities and collections of: Fixed maturities available for sale 1,334.9 1,121.8 53.7 573.1 Short-term investments 11,796.7 7,087.3 0.4 59.9 Acquisition of investments: Fixed maturities available for sale (28,105.5) (16,489.8) (230.7) (10,505.5) Equity securities (81.8) (50.0) (27.8) (17.6) Short-term investments (11,771.3) (6,991.1) (10.0) (113.1) Mortgages (343.7) (242.0) -- -- (Increase) decrease in policy loans 32.7 -- -- -- (Increase) decrease in property and equipment (5.8) 7.4 1.9 5.4 Other, net (47.8) (4.7) 0.3 (4.0) ---------- ---------- ------- ---------- Net cash provided by (used for) investing activities (2,152.0) (1,334.8) 22.4 201.9 ---------- ---------- ------- ---------- Cash Flows from Financing Activities: Deposits and interest credited for investment contracts 1,332.5 1,941.5 164.2 1,529.7 Maturities and withdrawals from insurance contracts (741.4) (1,082.7) (156.3) (1,832.6) Capital contribution from HOLDCO -- -- -- 73.5 Return of capital -- (11.3) -- -- Dividends paid to shareholder -- -- -- (10.1) Other, net 16.6 (105.0) (73.6) 22.0 ---------- ---------- ------- ---------- Net cash provided by (used for) financing activities 607.7 742.5 (65.7) (217.5) ---------- ---------- ------- ---------- Net increase (decrease) in cash and cash equivalents (16.6) (714.3) 70.9 29.0 Effect of exchange rate changes on cash and cash equivalents -- -- -- 2.0 Cash and cash equivalents, beginning of period 82.0 796.3 725.4 694.4 ---------- ---------- ------- ---------- Cash and cash equivalents, end of period $ 65.4 $ 82.0 $ 796.3 $ 725.4 ========== ========== ======= ========== Supplemental cash flow information: Income taxes (received) paid, net $ 6.7 $ (12.3) $ 20.3 $ 39.9 ========== ========== ======= ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include ING Life Insurance and Annuity Company ("ILAIC" or the "Company") and its wholly-owned subsidiaries, ING Insurance Company of America ("IICA"), ING Financial Advisors, LLC ("IFA"), and through February 28, 2002, Aetna Investment Adviser Holding Company, Inc. ("IA Holdco"). The Company is a wholly-owned subsidiary of ING Retirement Holdings, Inc. ("HOLDCO"), which is a wholly-owned subsidiary of ING Retirement Services, Inc. ("IRSI"). IRSI is ultimately owned by ING Groep N.V. ("ING"), a financial services company based in the Netherlands. HOLDCO contributed IFA to the Company on June 30, 2000 and contributed IA Holdco to the Company on July 1, 1999. On February 28, 2002, ILIAC distributed 100% of the stock of IA Holdco to HOLDCO in the form of a $60.1 million dividend distribution. The primary operating subsidiary of IA Holdco is Aeltus Investment Management, Inc. ("Aeltus"). Accordingly, fees earned by Aeltus were not included in Company results subsequent to the dividend date. As a result of this transaction, the Investment Management Services is no longer reflected as an operating segment of the Company. On December 13, 2000, ING America Insurance Holdings, Inc. ("ING AIH"), an indirect wholly-owned subsidiary of ING, acquired Aetna Inc., comprised of the Aetna Financial Services business, of which the Company is a part, and Aetna International businesses, for approximately $7,700.0 million. The purchase price was comprised of approximately $5,000.0 million in cash and the assumption of $2,700.0 million of outstanding debt and other net liabilities. In connection with the acquisition, Aetna Inc. was renamed Lion Connecticut Holdings Inc. ("Lion"). At the time of the sale, Lion entered into certain transition services agreements with a former related party, Aetna U.S. Healthcare, which was renamed Aetna Inc. ("former Aetna"). For accounting purposes, the acquisition was recorded as of November 30, 2000 using the purchase method. The effects of this transaction, including the recognition of goodwill, were pushed down and reflected on the financial statements of certain IRSI (a subsidiary of Lion) subsidiaries, including the Company. The Balance Sheet changes related to accounting for this purchase were entirely non-cash in nature and accordingly were excluded from the pre-acquisition Consolidated Statement of Cash Flows for the eleven months ended November 30, 2000. The purchase price was allocated to assets and liabilities based on their respective fair values. This revaluation resulted in a net increase to assets, excluding the effects of goodwill, of $592.0 million and a net increase to liabilities of $310.6 million. Additionally, the Company established goodwill of $2,297.4 million. Goodwill was amortized over a period of 40 years prior to January 1, 2002. The allocation of the purchase price to assets and liabilities was subjected to further refinement throughout 2001 as additional information became available to more precisely estimate the fair F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) values of the Company's respective assets and liabilities at the purchase date. The refinements to the Company's purchase price allocations were as follows: The Company completed a full review relative to the assumptions and profit streams utilized in the development of value of business acquired ("VOBA") and determined that certain refinements were necessary. Such refinements resulted in a reduction of VOBA; The Company completed the review of the fixed assets that existed at or prior to the acquisition and determined that an additional write down was necessary; The Company completed the review of severance actions related to individuals who were employed before or at the acquisition date and determined that an additional severance accrual was necessary; The Company completed its valuation of certain benefit plan liabilities and, as a result, reduced those benefit plan liabilities; The Company adjusted its reserve for other policyholders' funds in order to conform its accounting policies with those of ING; The Company, after giving further consideration to certain exposures in the general market place, determined that a reduction of its investment portfolio carrying value was warranted; The Company determined that the establishment of a liability for certain noncancellable operating leases that existed prior to or at the acquisition date but were no longer providing a benefit to the Company's operations, was warranted; and The Company determined that the contractual lease payment of one of its operating leases was more than the current market rate, and established a corresponding unfavorable lease liability. The net impact of the refinements in purchase price allocations, as described above, resulted in a net decrease to assets, excluding the effects of goodwill, of $236.4 million, a net decrease to liabilities of $59.8 million and a net increase to the Company's goodwill of $176.6 million. Unaudited proforma consolidated income from continuing operations and net income of the Company for the period from January 1, 2000 to November 30, 2000, assuming that the acquisition of the Company occurred at the beginning of each period, would have been approximately $118.1 million. The pro forma adjustments, which did not affect revenues, reflect primarily goodwill amortization, amortization of the favorable lease asset and the elimination of amortization of the deferred gain on sale associated with the life business. In the fourth quarter of 2001, ING announced its decision to pursue a move to a fully integrated U.S. structure that would separate manufacturing from distribution in its retail and worksite operations to support a more customer-focused business strategy. As a result of the integration, the Company's Worksite Products and Individual Products operating segments were realigned into one reporting segment, U.S. Financial Services ("USFS"). F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) USFS offers qualified and nonqualified annuity contracts that include a variety of funding and payout options for individuals and employer sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403 and 457, as well as nonqualified deferred compensation plans. Annuity contracts may be deferred or immediate (payout annuities). These products also include programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and record-keeping services along with a menu of investment options, including affiliated and nonaffiliated mutual funds and variable and fixed investment options. In addition, USFS offers wrapper agreements entered into with retirement plans which contain certain benefit responsive guarantees (i.e. liquidity guarantees of principal and previously accrued interest for benefits paid under the terms of the plan) with respect to portfolios of plan-owned assets not invested with the Company. USFS also offers investment advisory services and pension plan administrative services. Investment Management Services, through February 28, 2002, provided: investment advisory services to affiliated and unaffiliated institutional and retail clients on a fee-for-service basis; underwriting services to the ING Series Fund, Inc. (formerly known as the Aetna Series Fund, Inc.), and the ING Variable Portfolios, Inc. (formerly known as the Aetna Variable Portfolios, Inc.); distribution services for other company products; and trustee, administrative, and other fiduciary services to retirement plans requiring or otherwise utilizing a trustee or custodian. Discontinued Operations included universal life, variable universal life, traditional whole life and term insurance. DESCRIPTION OF BUSINESS The Company offers annuity contracts that include a variety of funding and payout options for employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408 and 457, as well as nonqualified deferred. The Company's products are offered primarily to individuals, pension plans, small businesses and employer-sponsored groups in the health care, government, educations (collectively "not-for-profit" organizations) and corporate markets. The Company's products generally are sold through pension professionals, independent agents and brokers, third party administrators, banks, dedicated career agents and financial planners. NEW ACCOUNTING STANDARDS ACCOUNTING FOR GOODWILL AND INTANGIBLE ASSETS In June 2001, the Financial Accounting Standards Board ("FASB") issued FAS No. 142, "Goodwill and Other Intangible Assets," ("FAS No.142"), effective for fiscal years beginning after December 15, 2001. Under FAS No. 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets are still amortized over their estimated useful lives. The Company adopted the new standard effective January 1, 2002. F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) As required under FAS No. 142, the Company completed the first of the required impairment tests as of January 1, 2002. Step one of the impairment test was a screen for potential impairment, while step two measured the amount of the impairment. All of the Company's operations fall under one reporting unit, USFS, due to the consolidated nature of the Company's operations. Step one of the impairment test required the Company to estimate the fair value of the reporting unit and compare the estimated fair value to its carrying value. The Company determined the estimated fair value utilizing a discounted cash flow approach and applying a discount rate equivalent to the Company's weighted average cost of capital. Fair value was determined to be less than carrying value which required the Company to complete step two of the test. In step two, the Company allocated the fair value of the reporting unit determined in step one to the assets and liabilities of the reporting unit resulting in an implied fair value of goodwill of zero. The comparison of the fair value amount allocated to goodwill and the carrying value of goodwill resulted in an impairment loss of $2,412.1 million, which represents the entire carrying amount of goodwill, net of accumulated amortization. This impairment charge is shown as a change in accounting principle on the Consolidated Income Statement. Application of the nonamortization provision (net of tax) of the new standard resulted in an increase in net income of $61.9 million for the twelve months ended December 31, 2002. Had the Company been accounting for goodwill under FAS No. 142 for all periods presented, the Company's net income would have been as follows:
Preacquisition -------------- One month Eleven months Year ended ended ended December 31, December 31, November 30, (Millions) 2001 2000 2000 Reported net income after tax $ 99.9 $12.6 $177.2 Add back goodwill amortization, net of tax 61.9 -- -- ------------------------------------------------------------------------------------- Adjusted net income after tax $161.8 $12.6 $177.2 =====================================================================================
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the FASB issued FAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted by FAS No. 137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement 133, FAS No.138, Accounting for Certain Derivative Instruments and Certain Hedging Activities -- an Amendment of FAS No. 133, and certain FAS No. 133 implementation issues. This standard, as amended, requires companies to record all derivatives on the balance sheet as either assets or liabilities and measure those instruments at fair value. The manner in which companies are to record gains or losses resulting from changes in the fair values of those derivatives depends on the use of the derivative and whether it qualifies for hedge accounting. FAS No. 133 was effective for the Company's financial statements beginning January 1, 2001. F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) Adoption of FAS No.133 did not have a material effect on the Company's financial position or results of operations given the Company's limited derivative and embedded derivative holdings. The Company utilizes, interest rate swaps, caps and floors, foreign exchange swaps and warrants in order to manage interest rate and price risk (collectively, market risk). These financial exposures are monitored and managed by the Company as an integral part of the overall risk management program. Derivatives are recognized on the balance sheet at their fair value. The Company chose not to designate its derivative instruments as part of hedge transactions. Therefore, changes in the fair value of the Company's derivative instruments are recorded immediately in the consolidated statements of income as part of realized capital gains and losses. Warrants are carried at fair value and are recorded as either derivative instruments or FAS No. 115 available for sale securities. Warrants that are considered derivatives are carried at fair value if they are readily convertible to cash. The values of these warrants can fluctuate given that the companies that underlie the warrants are non-public companies. At December 31, 2002 and 2001, the estimated value of these warrants, including the value of their effectiveness, in managing market risk, was immaterial. These warrants will be revalued each quarter and the change in the value of the warrants will be included in the consolidated statements of income. The Company, at times, may own warrants on common stock which are not readily convertible to cash as they contain certain conditions which preclude their convertibility and therefore, will not be included in assets or liabilities as derivatives. If conditions are satisfied and the underlying stocks become marketable, the warrants would be reclassified as derivatives and recorded at fair value as an adjustment through current period results of operations. The Company occasionally purchases a financial instrument that contains a derivative that is "embedded" in the instrument. In addition, the Company's insurance products are reviewed to determine whether they contain an embedded derivative. The Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the financial instrument or insurance product (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and carried at fair value. However, in cases where the host contract is measured at fair value, with changes in fair value reported in current period earnings or the Company is unable to reliably identify and measure the embedded derivative for separation from its host contracts, the entire contract is carried on the balance sheet at fair value and is not designated as a hedging instrument. F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) GUARANTEES In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," to clarify accounting and disclosure requirements relating to a guarantor's issuance of certain types of guarantees. FIN 45 requires entities to disclose additional information of certain guarantees, or groups of similar guarantees, even if the likelihood of the guarantor's having to make any payments under the guarantee is remote. The disclosure provisions are effective for financial statements for fiscal years ended after December 15, 2002. For certain guarantees, the interpretation also requires that guarantors recognize a liability equal to the fair value of the guarantee upon its issuance. This initial recognition and measurement provision is to be applied only on a prospective basis to guarantees issued or modified after December 31, 2002. The Company has performed an assessment of its guarantees and believes that all of its guarantees are excluded from the scope of this interpretation. FUTURE ACCOUNTING STANDARDS EMBEDDED DERIVATIVES The FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS No.133") in 1998 and continues to issue guidance for implementation through its Derivative Implementation Group ("DIG"). DIG recently released a draft of FASB Statement 133 Implementation Issue B36, "Embedded Derivatives: Bifurcation of a Debt Instrument That Incorporates Both Interest Rate Risk and Credit Risk Exposures That are Unrelated or Only Partially Related to the Creditworthiness of the Issuer of That Instrument" ("DIG B36"). Under this interpretation, modified coinsurance and coinsurance with funds withheld reinsurance agreements as well as other types of receivables and payables where interest is determined by reference to a pool of fixed maturity assets or total return debt index may be determined to contain bifurcatable embedded derivatives. The required date of adoption of DIG B36 has not been determined. If the guidance is finalized in its current form, the Company has determined that certain of its existing reinsurance receivables (payables), investments or insurance products contain embedded derivatives that may require bifurcation. The Company has not yet completed its evaluation of the potential impact, if any, on its consolidated financial positions, results of operations, or cash flows. FASB INTERPRETATION NO. 46 CONSOLIDATION OF VARIABLE INTEREST ENTITIES In January 2003, FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities" ("VIE"), an interpretation of Accounting Research Bulletin ("ARB") No. 51. This Interpretation addresses consolidation by business enterprises of variable interest entities, which have one or both of the following characteristics: a) insufficient equity investment at risk, or b) insufficient control by equity investors. This guidance is effective for VIEs created after January 31, 2003 and for existing VIEs as of July 1, 2003. An entity with variable interest in VIEs created before February 1, 2003 shall apply the guidance no later than the beginning of the first interim or annual reporting period beginning after June 15, 2003. F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) In conjunction with the issuance of this guidance, the Company conducted a review of its involvement with the VIEs and does not believe it has any significant investments or ownership in VIEs. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates. RECLASSIFICATIONS Certain reclassifications have been made to prior year financial information to conform to the current year classifications. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, money market instruments and other debt issues with a maturity of 90 days or less when purchased. INVESTMENTS All of the Company's fixed maturity and equity securities are currently designated as available-for-sale. Available-for-sale securities are reported at fair value and unrealized gains and losses on these securities are included directly in shareholder's equity, after adjustment for related charges in deferred policy acquisition costs, value of business acquired, and deferred income taxes. The Company analyzes the general account investments to determine whether there has been an other than temporary decline in fair value below the amortized cost basis in accordance with FAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Management considers the length of time and the extent to which the fair value has been less than amortized cost; the financial condition and near-term prospects of the issuer; future economic conditions and market forecasts; and the Company's intent and ability to retain the investment in the issuer for a period of time sufficient to allow for recovery in fair value. If it is probable that all amounts due according to the contractual terms of a debt security will not be collected, an other than temporary impairment is considered to have occurred. In addition, the Company invests in structured securities that meet the criteria of Emerging Issues Task Force ("EITF") Issue No. 99-20 "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Under Issue No. EITF 99-20, a determination of the required impairment is based on credit risk and the possibility of significant prepayment risk that restricts the Company's ability to recover the investment. An impairment is recognized if the fair value of the security is less than amortized cost and there has been an adverse change in cash flow since the last remeasurement date. F-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) When a decline in fair value is determined to be other than temporary, the individual security is written down to fair value and the loss is accounted for as a realized loss. Included in available-for-sale securities are investments that support experience-rated products. Experience-rated products are products where the customer, not the Company, assumes investment (including realized capital gains and losses) and other risks, subject to, among other things, minimum guarantees. Realized gains and losses on the sale of, as well as unrealized capital gains and losses on, investments supporting these products are reflected in other policyholders' funds. Realized capital gains and losses on all other investments are reflected on all other investments are reflected in the Company's results of operations. Unrealized capital gains and losses on all other investments are reflected in shareholder's equity, net of related income taxes. Purchases and sales of fixed maturities and equity securities (excluding private placements) are recorded on the trade date. Purchases and sales of private placements and mortgage loans are recorded on the closing date. Fair values for fixed maturity securities are obtained from independent pricing services or broker/ dealer quotations. Fair values for privately placed bonds are determined using a matrix-based model. The matrix-based model considers the level of risk-free interest rates, current corporate spreads, the credit quality of the issuer and cash flow characteristics of the security. The fair values for equity securities are based on quoted market prices. For equity securities not actively traded, estimated fair values are based upon values of issues of comparable yield and quality or conversion value where applicable. The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned domestic securities. The collateral is deposited by the borrower with a lending agent, and retained and invested by the lending agent according to the Company's guidelines to generate additional income. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. In September 2000, the FASB issued FAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." In accordance with this new standard, F-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) general account securities on loan are reflected on the Consolidated Balance Sheet as "Securities pledged to creditors", which includes the following:
Gross Gross December 31, 2002 Amortized Unrealized Unrealized Fair (Millions) Cost Gains Losses Value Total securities pledged to creditors $154.9 $0.1 $ -- $155.0 ===========================================================================
Gross Gross December 31, 2001 Amortized Unrealized Unrealized Fair (Millions) Cost Gains Losses Value Total securities pledged to creditors $466.9 $1.1 $0.8 $467.2 ===========================================================================
Total securities pledged to creditors at December 31, 2002 and 2001 consisted entirely of fixed maturity securities. The investment in affiliated mutual funds represents an investment in mutual funds managed by the Company and its affiliates, and is carried at fair value. Mortgage loans on real estate are reported at amortized cost less impairment writedowns. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to the present value of expected cash flows from the loan, discounted at the loan's effective interest rate, or to the loan's observable market price, or the fair value of the underlying collateral. The carrying value of the impaired loans is reduced by establishing a permanent writedown charged to realized loss. Policy loans are carried at unpaid principal balances, net of impairment reserves. Short-term investments, consisting primarily of money market instruments and other fixed maturity securities issues purchased with an original maturity of 91 days to one year, are considered available for sale and are carried at fair value, which approximates amortized cost. Reverse dollar repurchase agreement and reverse repurchase agreement transactions are accounted for as collateralized borrowings, where the amount borrowed is equal to the sales price of the underlying securities. These transactions are reported in "Other Liabilities." The Company's use of derivatives is limited to economic hedging purposes. The Company enters into interest rate and currency contracts, including swaps, caps, and floors to reduce and manage risks associated with changes in value, yield, price, cash flow or exchange rates of assets or liabilities held or intended to be held. Changes in the fair value of open derivative contracts are recorded in net realized capital gains and losses. F-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) On occasion, the Company sells call options written on underlying securities that are carried at fair value. Changes in the fair value of these options are recorded in net realized capital gains or losses. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED Deferred Policy Acquisition Costs ("DAC") is an asset, which represents certain costs of acquiring certain insurance business, which are deferred and amortized. These costs, all of which vary with and are primarily related to the production of new and renewal business, consist principally of commissions, certain underwriting and contract issuance expenses, and certain agency expenses. VOBA is an asset, which represents the present value of estimated net cash flows embedded in the Company's contracts, which existed at the time the Company was acquired by ING. DAC and VOBA are evaluated for recoverability at each balance sheet date and these assets would be reduced to the extent that gross profits are inadequate to recover the asset. The amortization methodology varies by product type based upon two accounting standards: FAS No. 60, "Accounting and Reporting by Insurance Enterprises" ("FAS No. 60") and FAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and Realized Gains and Losses from the Sale of Investments" ("FAS No. 97"). Under FAS No. 60, acquisition costs for traditional life insurance products, which primarily include whole life and term life insurance contracts, are amortized over the premium payment period in proportion to the premium revenue recognition. Under FAS No. 97, acquisition costs for universal life and investment-type products, which include universal life policies and fixed and variable deferred annuities, are amortized over the life of the blocks of policies (usually 25 years) in relation to the emergence of estimated gross profits from surrender charges, investment margins, mortality and expense margins, asset-based fee income, and actual realized gains (losses) on investments. Amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised. DAC and VOBA are written off to the extent that it is determined that future policy premiums and investment income or gross profits are not adequate to cover related expenses. Activity for the year-ended December 31, 2002 within VOBA was as follows:
(Millions) Balance at December 31, 2001 $1,601.8 Adjustment for unrealized gain (loss) (21.9) Additions 25.0 Interest accrued at 7% 86.8 Amortization (253.3) ------------------------------------------------------------ Balance at December 31, 2002 $1,438.4 ============================================================
F-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) The estimated amount of VOBA to be amortized, net of interest, over the next five years is $105.6 million, $102.1 million, $101.9 million, $91.5 million and $88.3 million for the years 2003, 2004, 2005, 2006 and 2007, respectively. Actual amortization incurred during these years may vary as assumptions are modified to incorporate actual results. As part of the regular analysis of DAC/VOBA, at the end of third quarter 2002, the Company unlocked its assumptions by resetting its near-term and long-term assumptions for the separate account returns to 9% (gross before fund management fees and mortality and expense and other policy charges), reflecting a blended return of equity and other sub-accounts. This unlocking adjustment was primarily driven by the sustained downturn in the equity markets and revised expectations for future returns. In 2002, the Company recorded an acceleration of DAC/VOBA amortization totaling $45.6 million before tax, or $29.7 million, net $15.9 million of federal income tax benefit. POLICY LIABILITIES AND ACCRUALS Future policy benefits and claims reserves include reserves for universal life, immediate annuities with life contingent payouts and traditional life insurance contracts. Reserves for universal life products are equal to cumulative deposits less withdrawals and charges plus credited interest thereon. Reserves for traditional life insurance contracts represent the present value of future benefits to be paid to or on behalf of policyholders and related expenses less the present value of future net premiums. Reserves for immediate annuities with life contingent payout contracts are computed on the basis of assumed investment yield, mortality, and expenses, including a margin for adverse deviations. Such assumptions generally vary by plan, year of issue and policy duration. Reserve interest rates range from 2.0% to 9.5% for all years presented. Investment yield is based on the Company's experience. Mortality and withdrawal rate assumptions are based on relevant Company experience and are periodically reviewed against both industry standards and experience. Because the sale of the domestic individual life insurance business was substantially in the form of an indemnity reinsurance agreement, the Company reported an addition to its reinsurance recoverable approximating the Company's total individual life reserves at the sale date. Other policyholders' funds include reserves for deferred annuity investment contracts and immediate annuities without life contingent payouts. Reserves on such contracts are equal to cumulative deposits less charges and withdrawals plus credited interest thereon (rates range from 2.0% to 12.3% for all years presented) net of adjustments for investment experience that the Company is entitled to reflect in future credited interest. These reserves also include unrealized gains/losses related to FAS No.115 for experience-rated contracts. Reserves on contracts subject to experience rating reflect the rights of contractholders, plan participants and the Company. F-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) Unpaid claims and claim expenses for all lines of insurance include benefits for reported losses and estimates of benefits for losses incurred but not reported. REVENUE RECOGNITION For certain annuity contracts, fee income for the cost of insurance, expenses, and other fees are recorded as revenue in and are included in the fee income line on the Income Statements assessed against policyholders. Other amounts received for these contracts are reflected as deposits and are not recorded as revenue but are included in the other policyholders' funds line on the Balance Sheets. Related policy benefits are recorded in relation to the associated premiums or gross profit so that profits are recognized over the expected lives of the contracts. When annuity payments with life contingencies begin under contracts that were initially investment contracts, the accumulated balance in the account is treated as a single premium for the purchase of an annuity and reflected as an offsetting amount in both premiums and current and future benefits in the Consolidated Income Statements. SEPARATE ACCOUNTS Separate Account assets and liabilities generally represent funds maintained to meet specific investment objectives of contractholders who bear the investment risk, subject, in some cases, to minimum guaranteed rates. Investment income and investment gains and losses generally accrue directly to such contractholders. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company. Separate Account assets supporting variable options under universal life and annuity contracts are invested, as designated by the contractholder or participant under a contract (who bears the investment risk subject, in limited cases, to minimum guaranteed rates) in shares of mutual funds which are managed by the Company, or other selected mutual funds not managed by the Company. Separate Account assets are carried at fair value. At December 31, 2002 and 2001, unrealized gains of $29.7 million and of $10.8 million, respectively, after taxes, on assets supporting a guaranteed interest option are reflected in shareholder's equity. Separate Account liabilities are carried at fair value, except for those relating to the guaranteed interest option. Reserves relating to the guaranteed interest option are maintained at fund value and reflect interest credited at rates ranging from 3.0% to 10.0% in 2002 and 3.0% to 14.0% in 2001. Separate Account assets and liabilities are shown as separate captions in the Consolidated Balance Sheets. Deposits, investment income and net realized and unrealized capital gains and losses of the Separate Accounts are not reflected in the Consolidated Financial Statements (with the exception of realized and unrealized capital gains and losses on the assets supporting the F-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (continued) guaranteed interest option). The Consolidated Statements of Cash Flows do not reflect investment activity of the Separate Accounts. REINSURANCE The Company utilizes indemnity reinsurance agreements to reduce its exposure to large losses in all aspects of its insurance business. Such reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge the primary liability of the Company as direct insurer of the risks reinsured. The Company evaluates the financial strength of potential reinsurers and continually monitors the financial condition of reinsurers. Only those reinsurance recoverable balances deemed probable of recovery are reflected as assets on the Company's Balance Sheets. Of the reinsurance recoverable on the Balance Sheets, $3.0 billion at both December 31, 2002 and 2001 is related to the reinsurance recoverable from Lincoln arising from the sale of the Company's domestic life insurance business. INCOME TAXES The Company files a consolidated federal income tax return with its subsidiary IICA. The Company is taxed at regular corporate rates after adjusting income reported for financial statement purposes for certain items. Deferred income tax expenses/benefits result from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities. F-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. INVESTMENTS Fixed maturities available for sale as of December 31 were as follows:
Gross Gross Amortized Unrealized Unrealized Fair 2002 (Millions) Cost Gains Losses Value U.S. government and government agencies and authorities $ 74.2 $ 2.9 $ -- $ 77.1 States, municipalities and political subdivisions 10.2 2.5 -- 12.7 U.S. corporate securities: Public utilities 627.6 28.1 6.4 649.3 Other corporate securities 7,742.6 543.5 33.1 8,253.0 ------------------------------------------------------------------------------ Total U.S. corporate securities 8,370.2 571.6 39.5 8,902.3 ------------------------------------------------------------------------------ Foreign securities: Government 336.9 18.2 6.6 348.5 Other 148.0 8.4 1.2 155.2 ------------------------------------------------------------------------------ Total foreign securities 484.9 26.6 7.8 503.7 ------------------------------------------------------------------------------ Mortgage-backed securities 5,374.2 167.1 34.0 5,507.3 Other asset-backed securities 882.4 47.0 10.5 918.9 ------------------------------------------------------------------------------ Total fixed maturities, including fixed maturities pledged to creditors 15,196.1 817.7 91.8 15,922.0 Less: Fixed maturities pledged to creditors 154.9 0.1 -- 155.0 ------------------------------------------------------------------------------ Fixed maturities $15,041.2 $817.6 $91.8 $15,767.0 ==============================================================================
F-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. INVESTMENTS (continued)
Gross Gross Amortized Unrealized Unrealized Fair 2001 (Millions) Cost Gains Losses Value U.S. government and government agencies and authorities $ 391.0 $ 11.0 $ 4.2 $ 397.8 States, municipalities and political subdivisions 173.7 7.7 -- 181.4 U.S. corporate securities: Public utilities 268.5 6.5 7.9 267.1 Other corporate securities 6,138.8 203.0 62.6 6,279.2 ------------------------------------------------------------------------------ Total U.S. corporate securities 6,407.3 209.5 70.5 6,546.3 ------------------------------------------------------------------------------ Foreign securities: Government 153.2 5.2 0.9 157.5 ------------------------------------------------------------------------------ Total foreign securities 153.2 5.2 0.9 157.5 ------------------------------------------------------------------------------ Mortgage-backed securities 4,513.3 90.1 15.9 4,587.5 Other asset-backed securities 2,077.6 67.1 8.1 2,136.6 ------------------------------------------------------------------------------ Total fixed maturities, including fixed maturities pledged to creditors 13,716.1 390.6 99.6 14,007.1 Less: Fixed maturities pledged to creditors 466.9 1.1 0.8 467.2 ------------------------------------------------------------------------------ Fixed maturities $13,249.2 $389.5 $98.8 $13,539.9 ==============================================================================
At December 31, 2002 and 2001, net unrealized appreciation of $725.9 million and $291.0 million, respectively, on available-for-sale fixed maturities including fixed maturities pledged to creditors included $563.1 million and $233.0 million, respectively, related to experience-rated contracts, which were not reflected in shareholder's equity but in other policyholders' funds. F-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. INVESTMENTS (continued) The amortized cost and fair value of total fixed maturities for the year-ended December 31, 2002 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called, or prepaid.
Amortized Fair (Millions) Cost Value Due to mature: One year or less $ -- $ -- After one year through five years 1,826.6 1,907.8 After five years through ten years 3,455.2 3,673.3 After ten years 3,657.7 3,914.7 Mortgage-backed securities 5,374.2 5,507.3 Other asset-backed securities 882.4 918.9 Less: Fixed maturities securities pledged to creditor 154.9 155.0 -------------------------------------------------------------- Fixed maturities $15,041.2 $15,767.0 ==============================================================
At December 31, 2002 and 2001, fixed maturities with carrying values of $10.5 million and $9.0 million, respectively, were on deposit as required by regulatory authorities. The Company did not have any investments in a single issuer, other than obligations of the U.S. government, with a carrying value in excess of 10% of the Company's shareholder's equity at December 31, 2002 or 2001. The Company has various categories of CMOs that are subject to different degrees of risk from changes in interest rates and, for CMOs that are not agency-backed, defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to dramatic decreases and increases in interest rates resulting in the repayment of principal from the underlying mortgages either earlier or later than originally anticipated. At December 31, 2002 and 2001, approximately 5.5% and 3.0%, respectively, of the Company's CMO holdings were invested in types of CMOs which are subject to more prepayment and extension risk than traditional CMOs (such as interest-only or principal-only strips). Investments in equity securities as of December 31 were as follows:
(Millions) 2002 2001 Amortized Cost $238.3 $52.2 Gross unrealized gains -- 4.5 Gross unrealized losses 2.9 6.4 ------------------------------------------------------- Fair Value $235.4 $50.3 =======================================================
Beginning in April 2001, the Company entered into reverse dollar repurchase agreement and reverse repurchase agreement transactions to increase its return on investments and improve liquidity. These transactions involve a sale of securities and an agreement to repurchase F-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. INVESTMENTS (continued) substantially the same securities as those sold. The dollar rolls and reverse repurchase agreements are accounted for as short-term collateralized financings and the repurchase obligation is reported as borrowed money in "Other Liabilities" on the Consolidated Balance Sheets. The repurchase obligation totaled $1.3 billion at December 31, 2002. The primary risk associated with short-term collateralized borrowings is that the counterparty will be unable to perform under the terms of the contract. The Company's exposure is limited to the excess of the net replacement cost of the securities over the value of the short-term investments, an amount that was not material at December 31, 2002. The Company believes the counterparties to the dollar roll and reverse repurchase agreements are financially responsible and that the counterparty risk is immaterial. IMPAIRMENTS During 2002, the Company determined that fifty-six fixed maturity securities had other than temporary impairments. As a result, at December 31, 2002, the Company recognized a pre-tax loss of $106.4 million to reduce the carrying value of the fixed maturity securities to their combined fair value of $124.7 million. During 2001, the Company determined that fourteen fixed maturity securities had other than temporary impairments. As a result, at December 31, 2001, the Company recognized a pre-tax loss of $51.8 million to reduce the carrying value of the fixed maturities to their value of $10.5 million. 3. FINANCIAL INSTRUMENTS ESTIMATED FAIR VALUE The following disclosures are made in accordance with the requirements of FAS No. 107, "Disclosures about Fair Value of Financial Instruments." FAS No. 107 requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates, in many cases, could not be realized in immediate settlement of the instrument. FAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following valuation methods and assumptions were used by the Company in estimating the fair value of the above financial instruments: FIXED MATURITIES: The fair values for the actively traded marketable bonds are determined based upon the quoted market prices. The fair values for marketable bonds without an active market are obtained through several commercial pricing services which provide the estimated fair values. Fair values of privately placed bonds are determined using a matrix-based pricing model. The model considers the current level of risk-free interest rates, current corporate spreads, the credit F-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. FINANCIAL INSTRUMENTS (continued) quality of the issuer and cash flow characteristics of the security. Using this data, the model generates estimated market values which the Company considers reflective of the fair value of each privately placed bond. Fair values for privately placed bonds are determined through consideration of factors such as the net worth of the borrower, the value of collateral, the capital structure of the borrower, the presence of guarantees and the Company's evaluation of the borrower's ability to compete in their relevant market. EQUITY SECURITIES: Fair values of these securities are based upon quoted market value. MORTGAGE LOANS ON REAL ESTATE: The fair values for mortgage loans on real estate are estimated using discounted cash flow analyses and rates currently being offered in the marketplace for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amounts for these assets approximate the assets' fair values. OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS: The carrying amounts for these financial instruments (primarily premiums and other accounts receivable and accrued investment income) approximate those assets' fair values. INVESTMENT CONTRACT LIABILITIES (INCLUDED IN OTHER POLICYHOLDERS' FUNDS): WITH A FIXED MATURITY: Fair value is estimated by discounting cash flows at interest rates currently being offered by, or available to, the Company for similar contracts. WITHOUT A FIXED MATURITY: Fair value is estimated as the amount payable to the contractholder upon demand. However, the Company has the right under such contracts to delay payment of withdrawals which may ultimately result in paying an amount different than that determined to be payable on demand. F-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. FINANCIAL INSTRUMENTS (continued) The carrying values and estimated fair values of certain of the Company's financial instruments at December 31, 2002 and 2001 were as follows:
2002 2001 ---------------------- ---------------------- Carrying Fair Carrying Fair (Millions) Value Value Value Value Assets: Fixed maturity securities $ 15,767.0 $ 15,767.0 $ 13,539.9 $ 13,539.9 Equity securities 235.4 235.4 50.3 50.3 Mortgage loans 576.6 632.6 241.3 247.7 Policy loans 296.3 296.3 329.0 329.0 Short term investments 6.2 6.2 31.7 31.7 Cash and cash equivalents 65.4 65.4 82.0 82.0 Liabilities: Investment contract liabilities: With a fixed maturity (1,129.8) (1,121.4) (1,021.7) (846.5) Without a fixed maturity (10,783.6) (10,733.8) (11,114.1) (10,624.3) ------------------------------------------------------------------------------
Fair value estimates are made at a specific point in time, based on available market information and judgments about various financial instruments, such as estimates of timing and amounts of future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instruments. In evaluating the Company's management of interest rate, price and liquidity risks, the fair values of all assets and liabilities should be taken into consideration, not only those presented above. DERIVATIVE FINANCIAL INSTRUMENTS INTEREST RATE FLOORS Interest rate floors are used to manage the interest rate risk in the Company's bond portfolio. Interest rate floors are purchased contracts that provide the Company with an annuity in a declining interest rate environment. The Company had no open interest rate floors at December 31, 2002 or 2001. INTEREST RATE CAPS Interest rate caps are used to manage the interest rate risk in the Company's bond portfolio. Interest rate caps are purchased contracts that provide the Company with an annuity in an increasing interest rate environment. The notional amount, carrying value and estimated fair value of the Company's open interest rate caps as of December 31, 2002 were $256.4 million, $0.7 million and $0.7 million, respectively. The Company did not have interest rate caps at December 31, 2001. F-26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. FINANCIAL INSTRUMENTS (continued) INTEREST RATE SWAPS Interest rate swaps are used to manage the interest rate risk in the Company's bond portfolio and well as the Company's liabilities. Interest rate swaps represent contracts that require the exchange of cash flows at regular interim periods, typically monthly or quarterly. The notional amount, carrying value and estimated fair value of the Company's open interest rate swaps as of December 31, 2002 were $400.0 million, $(6.8) million and $(6.8) million, respectively. The Company did not have interest rate swaps at December 31, 2001. FOREIGN EXCHANGE SWAPS Foreign exchange swaps are used to reduce the risk of a change in the value, yield or cash flow with respect to invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash flows for US dollar cash flows at regular interim periods, typically quarterly or semi-annually. The notional amount, carrying value and estimated fair value of the Company's open foreign exchange rate swaps as of December 31, 2002 were $49.4 million, $(0.5) million and $(0.5) million, respectively. The notional amount, carrying value and estimated fair value of the Company's open foreign exchange rate swaps as of December 31, 2001 were 25.0 million, $0.7 million and $0.7 million, respectively. EMBEDDED DERIVATIVES The Company also had investments in certain fixed maturity instruments that contain embedded derivatives, including those whose market value is at least partially determined by, among other things, levels of or changes in domestic and/or foreign interest rates (short- or long-term), exchange rates, prepayment rates, equity markets or credit ratings/spreads. The estimated fair value of the embedded derivatives within such securities as of December 31, 2002 and 2001 was $(1.4) and $(15.5) million, respectively. F-27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. NET INVESTMENT INCOME Sources of net investment income were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Fixed maturities $ 964.1 $887.2 $70.3 $768.9 Nonredeemable preferred stock 3.9 1.5 1.8 9.5 Investment in affiliated mutual funds -- 7.2 0.5 2.1 Mortgage loans 23.3 5.9 0.1 0.5 Policy loans 8.7 8.9 0.7 7.9 Cash equivalents 1.7 18.2 4.4 50.3 Other 23.4 15.9 2.6 13.1 ------------------------------------------------------------------------------------------------- Gross investment income 1,025.1 944.8 80.4 852.3 Less: investment expenses 65.6 56.4 1.8 18.5 ------------------------------------------------------------------------------------------------- Net investment income $ 959.5 $888.4 $78.6 $833.8 =================================================================================================
Net investment income includes amounts allocable to experience rated contractholders of $766.9 million for the year-ended December 31, 2002, $704.2 million for the year-ended December 31, 2001, and $55.9 million and $622.2 million for the one and eleven month periods ended December 31, 2000 and November 30, 2000, respectively. Interest credited to contractholders is included in future policy benefits and claims reserves. 5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY In conjunction with the sale of Aetna, Inc. to ING AIH, the Company was restricted from paying any dividends to its parent for a two year period from the date of sale without prior approval by the Insurance Commissioner of the State of Connecticut. This restriction expired on December 13, 2002. The Company did not pay dividends to its parent in 2002 or 2001. The Insurance Department of the State of Connecticut (the "Department") recognizes as net income and capital and surplus those amounts determined in conformity with statutory accounting practices prescribed or permitted by the Department, which differ in certain respects from accounting principles generally accepted in the United States of America. Statutory net income (loss) was $148.8 million, $(92.3) million and $100.6 million for the years-ended December 31, 2002, 2001, and 2000, respectively. Statutory capital and surplus was $1,006.0 million and $826.2 million as of December 31, 2002 and 2001, respectively. F-28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY (continued) As of December 31, 2002, the Company does not utilize any statutory accounting practices, which are not prescribed by state regulatory authorities that, individually or in the aggregate, materially affect statutory capital and surplus. For 2001, the Company was required to implement statutory accounting changes ("Codification") ratified by the National Association of Insurance Commissioners ("NAIC") and state insurance departments. The cumulative effect of Codification to the Company's statutory surplus as of January 1, 2001 was a decrease of $12.5 million. 6. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS Realized capital gains or losses are the difference between the carrying value and sale proceeds of specific investments sold. Net realized capital gains (losses) on investments were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Fixed maturities $ (97.5) $(20.6) $1.2 $(36.3) Equity securities (3.5) (0.4) 0.6 (0.9) ------------------------------------------------------------------------------------------------- Pretax realized capital gains (losses) $(101.0) $(21.0) $1.8 $(37.2) ================================================================================================= After-tax realized capital gains (losses) $ (58.3) $(13.7) $1.3 $(24.3) =================================================================================================
Net realized capital gains (losses) of $63.6 million, $117.0 million, $0.9 million and $(17.7) million for the years ended December 31, 2002 and 2001, the one month period ended December 31, 2000 and the eleven month period ended November 30, 2000, respectively, allocable to experience rated contracts, were deducted from net realized capital gains and an offsetting amount was reflected in other policyholders' funds. Net unamortized gains (losses) allocable to experienced-rated contractholders were $199.3 million, $172.7 million, $(2.5) million and $47.6 million at December 31, 2002 and 2001, the one month ended December 31, 2000 and the eleven months ended November 30, 2000, respectively. F-29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (continued) Proceeds from the sale of total fixed maturities and the related gross gains and losses (excluding those related to experience-related contractholders) were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Proceeds on sales $24,980.4 $14,216.7 $233.0 $10,083.2 Gross gains 276.7 57.0 1.2 2.5 Gross losses 374.2 77.6 -- 38.8 -------------------------------------------------------------------------------------------------
Changes in shareholder's equity related to changes in accumulated other comprehensive income (unrealized capital gains and losses on securities including securities pledged to creditors and excluding those related to experience-rated contractholders) were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Fixed maturities $104.8 $24.0 $24.5 $ 67.6 Equity securities (1.6) 2.0 (1.5) (4.0) Other investments (8.3) 6.5 5.7 (15.8) ------------------------------------------------------------------------------------------------- Subtotal 94.9 32.5 28.7 79.4 Increase in deferred income taxes 33.2 11.3 10.1 27.8 ------------------------------------------------------------------------------------------------- Net changes in accumulated other comprehensive income (loss) $ 61.7 $21.2 $18.6 $ 51.6 =================================================================================================
Net unrealized capital gains (losses) allocable to experience-rated contracts of $563.1 million and $233.0 million at December 31, 2002 and 2001, respectively, are reflected on the Consolidated Balance Sheets in other policyholders' funds and are not included in shareholder's equity. F-30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (continued) Shareholder's equity included the following accumulated other comprehensive income (loss), which is net of amounts allocable to experience-rated contractholders:
Preacquisition -------------- As of As of As of As of December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Net unrealized capital gains (losses): Fixed maturities $162.8 $58.0 $34.0 $ 9.5 Equity securities (3.5) (1.9) (3.9) (2.4) Other investments 7.3 15.6 9.1 3.4 ------------------------------------------------------------------------------------------------- 166.6 71.7 39.2 10.5 Deferred income taxes 58.3 25.1 13.8 3.7 ------------------------------------------------------------------------------------------------- Net accumulated other comprehensive income $108.3 $46.6 $25.4 $ 6.8 =================================================================================================
Changes in accumulated other comprehensive income related to changes in unrealized gains (losses) on securities, including securities pledged to creditors (excluding those related to experience-rated contractholders) were as follows:
Preacquisition -------------- One Eleven Year ended Year ended month ended months ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Unrealized holding gains (losses) arising the year (1) $(127.4) $ 8.3 $18.6 $51.4 Less: reclassification adjustment for gains (losses) and other items included in net income (2) 65.7 (12.9) -- (0.2) ------------------------------------------------------------------------------------------------- Net unrealized gains (losses) on securities $ 61.7 $ 21.2 $18.6 $51.6 =================================================================================================
(1) Pretax unrealized holding gains (losses) arising during the year were $196.0 million, $12.7 million, $28.6 million and $79.4 million for the years ended December 31, 2002 and 2001, the one month ended December 31, 2000 and the eleven months ended November 31, 2000, respectively. (2) Pretax reclassification adjustments for gains (losses) and other items included in net income were $101.0 million, $(19.8) million and $(0.1) million for the years ended December 31, 2002 and 2001, and the eleven months ended November 30, 2000, respectively. There were no pretax reclassification adjustments for gains (losses) and other items included in net income for the one month ended December 31, 2000. F-31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 7. SEVERANCE In December 2001, ING announced its intentions to further integrate and streamline the U.S.-based operations of ING Americas (a business division of ING which includes the Company) in order to build a more customer-focused organization. In connection with these actions, the Company recorded a charge of $29.2 million pretax. The severance portion of this charge ($28.4 million pretax) is based on a plan to eliminate 580 positions (primarily operations, information technology and other administrative/staff support personnel). Severance actions are expected to be substantially complete by March 31, 2003. The facilities portion ($0.8 million pretax) of the charge represents the amount to be incurred by the Company to terminate a contractual lease obligation. Activity for the year ended December 31, 2002 within the severance liability and positions eliminated related to such actions were as follows:
(Millions) Severance Liability Positions Balance at December 31, 2001 $ 28.4 580 Actions taken (19.2) (440) ------------------------------------------------------------------------ Balance at December 31, 2002 $ 9.2 140 ========================================================================
8. INCOME TAXES The Company files a consolidated federal income tax return with IICA. The Company has a tax allocation agreement with IICA whereby the Company charges its subsidiary for taxes it would have incurred were it not a member of the consolidated group and credits the member for losses at the statutory tax rate. Income taxes from continuing operations consist of the following:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Current taxes (benefits): Federal $ 28.9 $ 3.2 $ 9.4 $ 5.3 State 1.8 2.2 0.2 2.6 Net realized capital gains (losses) 11.5 16.1 0.3 (11.5) - ------------------------------------------------------------------------------------------------- Total current taxes (benefits) 42.2 21.5 9.9 (3.6) - ------------------------------------------------------------------------------------------------- Deferred taxes (benefits): Federal 30.6 89.3 (4.3) 83.2 Net realized capital gains (losses) (54.2) (23.4) 0.3 (1.5) - ------------------------------------------------------------------------------------------------- Total deferred taxes (benefits) (23.6) 65.9 (4.0) 81.7 - ------------------------------------------------------------------------------------------------- Total income tax expense $ 18.6 $ 87.4 $ 5.9 $ 78.1 =================================================================================================
F-32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. INCOME TAXES (continued) Income taxes were different from the amount computed by applying the federal income tax rate to income from continuing operations before income taxes for the following reasons:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Income from continuing operations before income taxes and cumulative effect of change in accounting principle $86.1 $187.3 $18.5 $249.6 Tax rate 35% 35% 35% 35% - ------------------------------------------------------------------------------------------------- Application of the tax rate 30.1 65.6 6.4 87.4 Tax effect of: State income tax, net of federal benefit 1.2 1.4 0.1 1.7 Excludable dividends (5.3) (1.8) (0.9) (12.6) Goodwill amortization -- 21.6 -- -- Transfer of mutual fund shares (6.7) -- -- -- Other, net (0.7) 0.6 0.3 1.6 - ------------------------------------------------------------------------------------------------- Income taxes $18.6 $ 87.4 $ 5.9 $ 78.1 =================================================================================================
F-33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. INCOME TAXES (continued) The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 are presented below:
(Millions) 2002 2001 Deferred tax assets: Deferred policy acquisition costs $ -- $ 11.7 Insurance reserves 269.8 286.9 Unrealized gains allocable to experience rated contracts 197.1 81.5 Investment losses 69.7 36.7 Postretirement benefits 29.5 26.3 Deferred compensation 58.6 52.0 Other 19.5 27.7 ---------------------------------------------------------- Total gross assets 644.2 522.8 ---------------------------------------------------------- Deferred tax liabilities: Value of business acquired 509.7 558.5 Market discount 4.1 4.6 Net unrealized capital gains 255.4 106.6 Depreciation 3.8 5.1 Deferred policy acquisition costs 29.2 -- Other 5.1 1.7 ---------------------------------------------------------- Total gross liabilities 807.3 676.5 ---------------------------------------------------------- Net deferred tax liability $(163.1) $(153.7) ==========================================================
Net unrealized capital gains and losses are presented in shareholder's equity net of deferred taxes. The "Policyholders' Surplus Account," which arose under prior tax law, is generally that portion of a life insurance company's statutory income that has not been subject to taxation. As of December 31, 1983, no further additions could be made to the Policyholders' Surplus Account for tax return purposes under the Deficit Reduction Act of 1984. The balance in such account was approximately $17.2 million at December 31, 2002. This amount would be taxed only under certain conditions. No income taxes have been provided on this amount since management believes under current tax law the conditions under which such taxes would become payable are remote. The Internal Revenue Service (the "Service") has completed examinations of the federal income tax returns of the Company through 1997. Discussions are being held with the Service with respect to proposed adjustments. Management believes there are adequate defenses against, or sufficient reserves to provide for, any such adjustments. The Service has commenced its examinations for the years 1998 through 2000. F-34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS Prior to December 31, 2001, ILIAC, in conjunction with ING, had a qualified defined benefit pension plan covering substantially all employees ("Transition Pension Plan"). The Transition Pension Plan provided pension benefits based on a cash balance formula, which credited employees annually with an amount equal to a percentage of eligible pay based on age and years of service as well as an interest credit based on individual account balances. Contributions were determined using the Projected Unit Credit Method and were limited to the amounts that are tax-deductible. The accumulated benefit obligation and plan assets were recorded by ILIAC. As of December 31, 2001, the Transition Pension Plan merged into the ING Americas Retirement Plan ("ING Pension Plan"), which is sponsored by ING North America Insurance Corporation ("ING North America"), an affiliate of ILIAC. The ING Pension Plan covers substantially all U.S. employees. Accordingly, the Company transferred $17.4 million of net assets ($11.3 million after tax) related to the movement of the Transition Pension Plan to ING North America. The Company reported this transfer of net assets as a $11.3 million reduction in paid in capital. The new plan's benefits are based on years of service and the employee's average annual compensation during the last five years of employment. Contributions are determined using the Projected Unit Credit Method and are limited to the amounts that are tax-deductible. The costs allocated to the Company for its members' participation in the ING Pension Plan were $6.0 million for 2002. The benefit obligations and the funded status for the Company's qualified pension plan over the period ended December 31 are presented below:
(Millions) 2001 Change in benefit obligation: Benefit obligation at January 1 $ 135.1 Service cost 9.4 Interest cost 10.3 Actuarial loss (0.7) Plan amendments 4.0 Curtailments/settlements 0.4 Benefits paid (3.0) Effect of transfer of assets (155.5) ----------------------------------------------------------- Benefit obligation at December 31 $ -- =========================================================== Funded status: Funded status at December 31 $ (4.3) Unrecognized past service cost 3.4 Unrecognized net loss 20.4 Transfer of funded status to the parent (19.5) ----------------------------------------------------------- Net amount recognized $ -- ===========================================================
F-35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS (continued) The reconciliation of the plan assets for the year ended December 31 is presented below:
(Millions) 2001 Fair value of plan assets at January 1 $ 160.7 Actual return on plan assets (6.4) Benefits paid (3.0) Effect of transfer of assets (151.3) ----------------------------------------------------------- Fair value of plan assets at December 31 $ -- ===========================================================
The net periodic benefit cost for the year ended December 31 is presented below:
(Millions) 2001 Service cost $ 9.4 Interest cost 10.2 Expected return on assets (14.6) ---------------------------------------------------------- Net periodic benefit cost $ 5.0 ==========================================================
The weighted average discount rate, expected rate of return on plan assets, and rate of compensation increase was 7.5%, 9.3%, and 4.5% for 2001. POSTRETIREMENT BENEFIT PLANS In addition to providing pension benefits, ILIAC, in conjunction with ING, provides certain health care and life insurance benefits for retired employees and certain agents. Retired employees are generally required to contribute to the plans based on their years of service with the Company. The following tables summarize the benefit obligations and the funded status for F-36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS (continued) retired agents' and retired employees' postretirement benefits over the periods ended December 31:
(Millions) 2002 2001 Change in benefit obligation: Benefit obligation at January 1 $ 25.4 $ 19.1 Service cost 0.5 0.7 Interest cost 1.5 1.7 Actuarial (gain) loss 4.0 1.4 Acquisitions -- 3.7 Plan amendments (6.5) -- Benefits paid (1.2) (1.2) -------------------------------------------------------- Benefit obligation at December 31 $ 23.7 $ 25.4 ======================================================== Funded status: Funded status at December 31 $(23.7) $(25.4) Unrecognized past service cost (3.6) -- Unrecognized net loss 5.4 1.4 -------------------------------------------------------- Net amount recognized $(21.9) $(24.0) ========================================================
The weighted-average discount rate assumption for retired agents' and retired employees postretirement benefits was 6.8% for 2002 and 7.5% for 2001. The medical health care cost trend rates were 10.0%, decreasing to 5.0% by 2008 for 2002; and 8.5%, gradually decreasing to 5.5% by 2007 for 2001. Increasing the health care trend rate by 1% would increase the benefit obligation by $1.6 million. Decreasing the health care trend rate by 1% would decrease the benefit obligation by $1.4 million as of December 31, 2002. Net periodic benefit costs were as follows:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Service cost $ 0.5 $0.7 $ -- $0.2 Interest cost 1.5 1.7 0.1 1.2 Actuarial (gain) loss -- -- -- 0.2 Unrecognized past service cost (2.9) -- -- -- - ------------------------------------------------------------------------------------------------- Net periodic benefit cost $(0.9) $2.4 $0.1 $1.2 =================================================================================================
F-37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS (continued) There were no gains or losses resulting from curtailments or settlements of the postretirement benefit plans during 2002, 2001 or 2000. NON-QUALIFIED DEFINED BENEFIT PENSION PLANS Prior to December 31, 2001, ILIAC, in conjunction with ING, had a non-qualified defined benefit pension plan covering certain eligible employees. The plan provided pension benefits based on a cash balance formula, which credited employees annually with an amount equal to a percentage of eligible pay based on age and years of service as well as an interest credit based on individual account balances. As of December 31, 2001, ILIAC, in conjunction with ING, has a non-qualified defined benefit pension plan providing benefits to certain eligible employees based on years of service and the employee's average annual compensation during the last five years of employment, which was assumed at December 31, 2002 to increase at an annual rate of 3.8%. Contributions are determined using the Projected Unit Credit Method. ILIAC, in conjunction with ING, also has a non-qualified pension plan covering certain agents. The plan provides pension benefits based on annual commission earnings. During 2002, liabilities, net of tax, totaling $15.1 million were allocated to the Company related to a Supplemental Excess Retirement Plan ("SERP") that covers certain employees of ING Life Insurance Company of America and Aeltus, affiliates of the Company. The following tables summarize the benefit obligations and the funded status for the Company's non-qualified pension plans for the periods ended December 31, 2002 and 2001. These tables have been presented, for comparison purposes, as though the SERP transfer had occurred as of January 1, 2001. The accompanying consolidated balance sheet and income statement do not reflect the SERP transfer until 12/31/02:
(Millions) 2002 2001 Change in benefit obligation: Benefit obligation at January 1 $ 95.3 $ 88.7 Service cost -- 4.4 Interest cost 6.8 7.1 Actuarial (gain) loss 5.7 0.7 Plan amendments 4.5 (4.1) Benefits paid (5.5) (1.5) ---------------------------------------------------------- Benefit obligation at December 31 $ 106.8 $ 95.3 ========================================================== Funded status: Funded status at December 31 $(106.8) $ (95.3) Unrecognized past service cost 0.8 1.2 Unrecognized net loss (gain) 6.4 (7.1) ---------------------------------------------------------- Net amount recognized $ (99.6) $(101.2) ==========================================================
At December 31, 2002 and 2001, the accumulated benefit obligation was $43.8 million and $27.3 million, respectively. F-38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. BENEFIT PLANS (continued) The weighted-average discount rate assumption for Agents' and employees' non-qualified pension plans was 6.8%, and 3.8% for 2002 and 7.5% and 5.3% for 2001. Net periodic benefit costs were as follows:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Service cost $ 6.8 $ 4.4 $ 0.3 $ 2.1 Interest cost -- 7.1 0.3 3.8 Actuarial (gain) loss -- -- -- 0.2 Return on plan assets -- -- (0.3) (3.2) Unrecognized past service cost (0.3) -- -- (0.1) ------------------------------------------------------------------------------------------------- Net periodic benefit cost $ 6.5 $11.5 $ 0.3 $ 2.8 =================================================================================================
There was a curtailment of $2.6 million in 2002. There were no gains or losses resulting from curtailments or settlements of the non-qualified pension plans during 2000. ING SAVINGS AND INVESTMENT PLANS ILIAC, in conjunction with ING, also has a Savings Plan. Substantially all employees are eligible to participate in a savings plan under which designated contributions, which may be invested in a variety of financial instruments, are matched up to 6.0% of compensation by ING. Pretax charges to operations for the incentive savings plan were $6.8 million, $11.0 million, and $9.0 million in 2002, 2001, and 2000, respectively. ILIAC, in conjunction with former Aetna, had a stock incentive plan that provided for stock options, deferred contingent common stock or equivalent cash awards or restricted stock to employees. Certain executive, middle management and non-management employees were granted options to purchase common stock of former Aetna at or above the market price on the date of grant. Options generally became 100% vested three years after the grant was made, with one-third of the options vesting each year. The former Aetna did not recognize compensation expense for stock options granted at or above the market price on the date of grant under its stock incentive plans. In addition, executives were, from time to time, granted incentive units which were rights to receive common stock or an equivalent value in cash. The sale of the Company to ING AIH by former Aetna caused all outstanding stock options to vest immediately. The costs to the Company associated with the former Aetna stock plans for 2001 and 2000 were $1.8 million and $2.7 million, respectively. F-39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. RELATED PARTY TRANSACTIONS INVESTMENT ADVISORY AND OTHER FEES ILIAC and Aeltus serve as investment advisors and administrators to the Company's mutual funds and variable funds (collectively, the Funds). Company mutual funds pay Aeltus or ILIAC, as investment advisor or administrator, a daily fee which, on an annual basis, ranged, depending on the fund, from 0.1% to 0.5% of their average daily net assets. All of the funds managed by ILIAC and certain of the funds managed by Aeltus are subadvised by investment advisors, in which case, Aeltus or ILIAC pays a subadvisory fee to the investment advisors. The Company is also compensated by the separate accounts (variable funds) for bearing mortality and expense risks pertaining to variable life and annuity contracts. Under the insurance and annuity contracts, the separate accounts pay the Company a daily fee, which, on an annual basis is, depending on the product, up to 3.4% of their average daily net assets. The amount of compensation and fees received from the Company mutual funds and separate accounts, included in fee income amounted to $391.8 million, $421.7 million and $506.3 million in 2002, 2001 and 2000, respectively. RECIPROCAL LOAN AGREEMENT ILIAC maintains a reciprocal loan agreement with ING AIH, a Delaware corporation and affiliate, to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Under this agreement, which became effective in June 2001 and expires on April 1, 2011, ILIAC and ING AIH can borrow up to 3% of ILIAC's statutory admitted assets as of the preceding December 31 from one another. Interest on any ILIAC borrowings is charged at the rate of ING AIH's cost of funds for the interest period plus 0.15%. Interest on any ING AIH borrowings is charged at a rate based on the prevailing interest rate of U.S. commercial paper available for purchase with a similar duration. Under this agreement, ILIAC incurred interest expense of $0.1 million for the years ended December 31, 2002 and 2001, and earned interest income of $2.1 million and $3.3 million for the years ended December 31, 2002 and 2001, respectively. At December 31, 2002, ILIAC had no receivables and no outstanding borrowings from ING AIH under this agreement. CAPITAL TRANSACTIONS In 2002, the company received capital contributions in the form of investments in affiliated mutual funds of $164.3 million from HOLDCO. The Company did not receive capital contributions in 2001. OTHER Premiums due and other receivables include $0.1 million and $1.0 million due from affiliates at December 31, 2002 and 2001, respectively. Other liabilities include $1.3 million and $0.6 million due to affiliates for the years ended December 31, 2002 and 2001, respectively. F-40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 11. REINSURANCE At December 31, 2002, the Company had reinsurance treaties with six unaffiliated reinsurers and one affiliated reinsurer covering a significant portion of the mortality risks and guaranteed death and living benefits under its variable contracts. The Company remains liable to the extent its reinsurers do not meet their obligations under the reinsurance agreements. On October 1, 1998, the Company sold its domestic individual life insurance business to Lincoln for $1 billion in cash. The transaction is generally in the form of an indemnity reinsurance arrangement, under which Lincoln contractually assumed from the Company certain policyholder liabilities and obligations, although the Company remains directly obligated to policyholders. Effective January 1, 1998, 90% of the mortality risk on substantially all individual universal life product business written from June 1, 1991 through October 31, 1997 was reinsured externally. Beginning November 1, 1997, 90% of new business written on these products was reinsured externally. Effective October 1, 1998 this agreement was assigned from the third party reinsurer to Lincoln. Effective December 31, 1988, the Company entered into a modified coinsurance reinsurance agreement ("MODCO") with Aetna Life Insurance Company ("Aetna Life"), (formerly an affiliate of the Company), in which substantially all of the nonparticipating individual life and annuity business written by Aetna Life prior to 1981 was assumed by the Company. Effective January 1, 1997, this agreement was amended to transition (based on underlying investment rollover in Aetna Life) from a modified coinsurance arrangement to a coinsurance agreement. As a result of this change, reserves were ceded to the Company from Aetna Life as investment rollover occurred. Effective October 1, 1998, this agreement was fully transitioned to a coinsurance arrangement and this business along with the Company's direct individual life insurance business, with the exception of certain supplemental contracts with reserves of $66.2 million and $69.9 million as of December 31, 2002 and 2001, respectively, was sold to Lincoln. On December 16, 1988, the Company assumed $25.0 million of premium revenue from Aetna Life, for the purchase and administration of a life contingent single premium variable payout annuity contract. In addition, the Company is also responsible for administering fixed annuity payments that are made to annuitants receiving variable payments. Reserves of $19.6 million and $24.1 million were maintained for this contract as of December 31, 2002 and 2001, respectively. F-41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 11. REINSURANCE (continued) The effect of reinsurance on premiums and recoveries was as follows:
Preacquisition -------------- One month Eleven months Year ended Year ended ended ended December 31, December 31, December 31, November 30, (Millions) 2002 2001 2000 2000 Direct Premiums Federal $ 97.3 $112.3 $17.2 $143.2 Reinsurance assumed 9.7 0.6 0.1 0.8 Reinsurance ceded 8.3 (1.3) 0.8 6.3 ------------------------------------------------------------------------------------------------- Net Premiums 98.7 114.2 16.5 137.7 ------------------------------------------------------------------------------------------------- Reinsurance Recoveries $317.6 $363.7 $44.5 $371.6 =================================================================================================
12. COMMITMENTS AND CONTINGENT LIABILITIES LEASES For the year ended December 31, 2002 rent expense for leases was $18.1 million. The future net minimum payments under noncancelable leases for the years ended December 31, 2003 through 2007 are estimated to be $17.5 million, $15.7 million, $14.9 million, $13.6 million and $12.1 million, respectively, and $0.2 million, thereafter. The Company pays substantially all expenses associated with its leased and subleased office properties. Expenses not paid directly by the Company are paid for by an affiliate and allocated back to the Company. COMMITMENTS Through the normal course of investment operations, the Company commits to either purchase or sell securities, commercial mortgage loans or money market instruments at a specified future date and at a specified price or yield. The inability of counterparties to honor these commitments may result in either higher or lower replacement cost. Also, there is likely to be a change in the value of the securities underlying the commitments. At December 31, 2002 and 2001, the Company had off-balance sheet commitments to purchase investments of $236.7 million with an estimated fair value of $236.7 million and $92.7 million with an estimated fair value of $92.7 million, respectively. LITIGATION The Company is a party to threatened or pending lawsuits arising, from the normal conduct of business. Due to the climate in insurance and business litigation, suits against the Company sometimes include claims for substantial compensatory, consequential or punitive damages and other types of relief. Moreover, certain claims are asserted as class actions, purporting to represent a group of similarly situated individuals. While it is not possible to forecast the outcome of such lawsuits, in light of existing insurance, reinsurance and established reserves, it is F-42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. COMMITMENTS AND CONTINGENT LIABILITIES (continued) the opinion of management that the disposition of such lawsuits will not have materially adverse effect on the Company's operations or financial position. 13. SEGMENT INFORMATION The Company's realignment of Worksite Products and Individual Products operating segments into one reporting segment (USFS) is reflected in the restated summarized financial information for December 31, 2001 and 2000 in the table below. Effective with the third quarter of 2002, items that were previously not allocated back to USFS but reported in Other are now allocated to USFS and reported in the restated financial information for the period ending December 31, 2001 and 2000. Summarized financial information for the Company's principal operations for December 31, were as follows:
Non-Operating Segments ----------------------- Investment Management (Millions) USFS (1) Services (2) Other (3) Total 2002 ------------------------------ Revenues from external customers $ 507.2 $ 19.2 $ (9.5) $ 516.9 Net investment income 959.2 0.2 0.1 959.5 ------------------------------------------------------------------------------ Total revenue excluding net realized capital gains (losses) $1,466.4 $ 19.4 $ (9.4) $ 1,476.4 ============================================================================== Operating earnings (4) $ 121.1 $ 4.7 $ -- $ 125.8 Cumulative effect of accounting change (2,412.1) -- -- (2,412.1) Net realized capital losses, net of tax (58.3) -- -- (58.3) ------------------------------------------------------------------------------ Net income (loss) $(2,349.3) $ 4.7 -- $(2,344.6) ============================================================================== 2001 ------------------------------ Revenues from external customers $ 585.0 $119.6 $(37.0) $ 667.6 Net investment income 885.5 1.7 1.2 888.4 ------------------------------------------------------------------------------ Total revenue excluding net realized capital gains (losses) $1,470.5 $121.3 $(35.8) $ 1,556.0 ============================================================================== Operating earnings (4) $ 86.2 $ 27.4 $ -- $ 113.6 Net realized capital gains, net of tax (13.8) 0.1 -- (13.7) ------------------------------------------------------------------------------ Net income $ 72.4 $ 27.5 $ -- $ 99.9 ==============================================================================
F-43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 13. SEGMENT INFORMATION (continued)
Non-Operating Segments ----------------------- Investment Management (Millions) USFS (1) Services (2) Other (3) Total 2000 ------------------------------ Revenues from external customers $ 692.1 $138.2 $(53.0) $ 777.3 Net investment income 905.8 2.8 3.8 912.4 ------------------------------------------------------------------------------ Total revenue excluding net realized capital gains (losses) $1,597.9 $141.0 $(49.2) $ 1,689.7 ============================================================================== Operating earnings (4) $ 197.4 $ 9.7 $ -- $ 207.1 Net realized capital gains, net of tax (23.1) 0.1 -- (23.0) ------------------------------------------------------------------------------ Net income from continuing operations $ 174.3 $ 9.8 $ -- $ 184.1 ==============================================================================
(1) USFS includes deferred annuity contracts that fund defined contribution and deferred compensation plans, immediate annuity contracts; mutual funds; distribution services for annuities and mutual funds; programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and record- keeping services along with a menu of investment options; wrapper agreements containing certain benefit responsive guarantees that are entered into with retirement plans, whose assets are not invested with the Company; investment advisory services and pension plan administrative services. USFS also includes deferred and immediate annuity contracts, both qualified and nonqualified, that are sold to individuals and provide variable or fixed investment options or a combination of both. (2) Investment Management Services include: investment advisory services to affiliated and unaffiliated institutional and retail clients; underwriting; distribution for Company mutual funds and a former affiliate's separate ccounts; and trustee, administrative and other services to retirement plans. On February 28, 2002, IA Holdco and its subsidiaries, which comprised this segment, were distributed to HOLDCO (refer to Note 1). (3) Other includes consolidating adjustments between USFS and Investment Management Services. (4) Operating earnings is comprised of net income (loss) excluding net realized capital gains and losses. While operating earnings is the measure of profit or loss used by the Company's management when assessing performance or making operating decisions, it does not replace net income as a measure of profitability. 14. DISCONTINUED OPERATIONS--INDIVIDUAL LIFE INSURANCE On October 1, 1998, the Company sold its domestic individual life insurance business to Lincoln for $1,000.0 million in cash. The transaction was generally in the form of an indemnity reinsurance arrangement, under which Lincoln contractually assumed from the Company certain policyholder liabilities and obligations, although the Company remains directly obligated to policyholders. Assets related to and supporting the life policies were transferred to Lincoln and the Company recorded a reinsurance recoverable from Lincoln. The transaction resulted in an after-tax gain on the sale of approximately $117.0 million, of which $57.7 million was deferred and was being recognized over approximately 15 years. The remaining portion of the gain was recognized immediately in net income and was largely attributed to access to the agency sales force and brokerage distribution channel. Approximately $5.7 million (after tax) of amortization related to the deferred gain was recognized in both 2000 and 1999. During the fourth quarter of 1999, the Company refined certain accrual and tax estimates which had been established in F-44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. DISCONTINUED OPERATIONS--INDIVIDUAL LIFE INSURANCE (continued) connection with the recording of the deferred gain. As a result, the deferred gain was increased by $12.9 million (after tax) to $65.4 million at December 31, 1999. In conjunction with the accounting for the 2000 acquisition of the Aetna Financial Services business, of which the Company is a part, the deferred gain, which was previously part of other liabilities, was written off (Refer to Note 1). QUARTERLY DATA (UNAUDITED)
2002 (Millions) First Second Third Fourth Total Revenue $363.5 $351.3 $349.8 $ 310.8 ----------------------------------------------------------------- Income (loss) from continuing operations before income taxes 44.1 39.3 (23.1) 25.8 Income tax expense (benefit) 15.2 12.9 (9.9) 0.4 Income (loss) from continuing operations 28.9 26.4 (13.2) 25.4 ----------------------------------------------------------------- Cumulative effect of change in accounting principle -- -- -- (2,412.1) ----------------------------------------------------------------- Net income (loss) $ 28.9 $26.4 $(13.2) $(2,386.7) ----------------------------------------------------------------- 2001 (Millions) First Second Third Fourth Total Revenue $395.5 $411.9 $387.2 $ 340.4 ----------------------------------------------------------------- Income (loss) from continuing operations before income taxes 64.3 95.0 68.9 (40.9) Income tax expense (benefit) 28.2 39.1 27.1 (7.0) ----------------------------------------------------------------- Income from continuing operations 36.1 55.9 41.8 (33.9) ----------------------------------------------------------------- Net (loss) $ 36.1 $55.9 $ 41.8 $ (33.9) -----------------------------------------------------------------
F-45 FORM NO. SAI.75998-03 ILIAC ED. MAY 2003 VARIABLE ANNUITY ACCOUNT B PART C - OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements: (1) Included in Part A: Condensed Financial Information (2) Included in Part B: Financial Statements of Variable Annuity Account B: - Report of Independent Auditors - Statement of Assets and Liabilities as of December 31, 2002 - Statement of Operations for the year ended December 31, 2002 - Statements of Changes in Net Assets for the years ended December 31, 2002 and 2001 - Notes to Financial Statements Financial Statements of ING Life Insurance and Annuity Company: - Reports of Independent Auditors - Consolidated Income Statements for the years ended December 31, 2002 and 2001, one month ended December 31, 2000, and eleven months ended November 30, 2000 - Consolidated Balance Sheets as of December 31, 2002 and 2001 - Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 2002 and 2001, one month ended December 31, 2000, and eleven months ended November 30, 2000 - Consolidated Statements of Cash Flows for the years ended December 31, 2002 and 2001, one month ended December 31, 2000, and eleven months ended November 30, 2000 - Notes to Consolidated Financial Statements (b) Exhibits (1) Resolution establishing Variable Annuity Account B(1) (2) Not applicable (3.1) Broker-Dealer Agreement(2) (3.2) Alternative Form of Wholesaling Agreement and Related Selling Agreement(3) (3.3) Broker-Dealer Agreement dated June 7, 2000 between Aetna Life Insurance and Annuity Company and Aetna Investment Services, Inc. (AISI) and Letter of Assignment to AISI(4) (3.4) Underwriting Agreement dated November 17, 2000 between Aetna Life Insurance and Annuity Company and Aetna Investment Services, LLC(4) (4.1) Variable Annuity Contract (IA-CDA-IA)(5) (4.2) Variable Annuity Contract (I-CDA-HD)(6) (4.3) Variable Annuity Contract (I-CDA-HD(XC))(7) (4.4) Endorsement (EIGET-IC(R)) to Contracts IA-CDA-IA and I-CDA-HD (NQ Modals)(8) (4.5) Endorsement EGET(99) to Contracts IA-CDA-IA, I-CDA-HD and I-CDA-HD(XC)(9) (4.6) Endorsement ENQSWO-IC to Contract IA-CDA-IA (4.7) Endorsement EIAMSF-IC to Contract IA-CDA-IA (4.8) Endorsement EGET-IC(SPD-R) to Contracts I-CDA-HD and IA-CDA-IA (NQ Single Premiums) (4.9) Endorsement EGET-HG to Contract I-CDA-HD (4.10) Endorsement EIEP-HG to Contract I-CDA-HD (4.11) Endorsement EIM-CVTDTP-HI to Contract I-CDA-HD (4.12) Endorsement EIMSF-HI to Contract I-CDA-HD (Single Premiums) (4.13) Endorsement EISFSM-HI to Contract I-CDA-HD (Modals) (4.14) Endorsement EIS25-IA to Contract I-CDA-HD (Single Pays) (4.15) Endorsement EIM25-IA to Contract I-CDA-HD (4.16) Endorsement EDRA-HD to Contract I-CDA-HD ( (4.17) Endorsement ESFPPS-HD to I-CDA-HD(XC)(NU)(7) (4.18) Endorsement EIMCVT-HI(XC) to I-CDA-HD(XC)(NU)(7) (4.19) Endorsement E-LOANA(01/01) to Contracts IA-CDA-IA,I-CDA-HD and I-CDA-HD(XC)(10) (4.20) Endorsements (re name change) ENMCHG (05/02) and ENMCHGI (05/02 to Contracts I-CDA-HD, IA-CDA-IA and I-CDA-HD(XC)(11) (4.21) Endorsement EIM25-IA(XC) to Contract I-CDA-HD(XC)(7) (4.22) Endorsement EIGF-IC(NY) to Contract I-CDA-HD(XC)(7) (4.23) Endorsement EIMSF-HI to Contract I-CDA-HD(XC)(7) (4.24) Endorsement EGF-IC(SPD-NY) to Contract I-CDA-HD(XC)(7) (4.25) Endorsement EIS25-IA(XC) to Contract I-CDA-HD(XC)(7) (4.26) Endorsement ENQFD-IC to Contract I-CDA-HD(XC)(7) (4.27) Endorsement EDRAH-I to Contract I-CDA-HD(XC)(7) (4.28) Endorsement EGISA-IA to Contract I-CDA-HD(XC)(7) (4.29) Endorsement EVP-IC to Contracts I-CDA-HD(XC), I-CDA-HD and IA-CDA-IA(7) (4.30) Endorsement PRFMHEG to Contract I-CDA-HD(XC)(7) (5) Variable Annuity Contract Application (713.00.1(C))(12) (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)(13) (6.2) By-Laws restated as of January 1, 2002 of ING Life Insurance and Annuity Company (formerly Aetna Life Insurance and Annuity Company)(13) (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 eac, of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series and Aeltus Investment Management, Inc.(2) h (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.(14) (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 Portfolio, Inc. on behalf of each of its series and Aeltus Investment Management, Inc.(15) (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 Portfolio, Inc. on behalf of each of its series and Aeltus Investment Management, Inc.(16) (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.(16) (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 eac, of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf h of each of its series and Aeltus Investment Management, Inc.(17) (8.7) Service Agreement dated as of May 1, 1998 between Aeltus Investment Management, Inc. and Aetna Life Insurance and Annuity Company in connection with the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each of its series and Aetna Variable Portfolios, Inc. on behalf of each of its series(2) (8.8) 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 th sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET e 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(14) (8.9) 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(16) (8.10) 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(16) (8.11) 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(6) (8.12) 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(18) (8.13) 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(19) (8.14) Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997 and November 6, 1997 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund and Fidelity Distributors Corporation(2) (8.15) 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(15) (8.16) 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(6) (8.17) 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(18) (8.18) 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(20) (8.19) Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement dated February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997 and January 20, 1998 between Aetna Life Insurance and Annuity Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation(2) (8.20) 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(15) (8.21) Service Agreement dated as of November 1, 1995 between Aetna Life Insurance and Annuity Company and Fidelity Investments Institutional Operations Company(21) (8.22) 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(18) (8.23) Service Contract Company dated May 2, 1997 between Fidelity Distributors Corporation and Aetna Life Insurance and Annuity (14) (8.24) Fund Participation Agreement dated December 8, 1997 among Janus Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital Corporation(22) (8.25) 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(14) (8.26) 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(15) (8.27) 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(23) (8.28) Letter Agreement dated December 7, 2001 between Janus and Aetna Life Insurance and Annuity Company reflecting evidence of a new Fund Participation Agreement with the same terms as the current Fund Participation Agreement except with a new effective date of March 28, 2002(11) (8.29) Service Agreement dated December 8, 1997 between Janus Capital Corporation and Aetna Life Insurance and Annuity Company(22) (8.30) 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(23) (8.31) 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(23) (8.32) Letter Agreement dated October 19, 2001 between Janus and Aetna Life Insurance and Annuity Company reflecting evidence of a new Distribution and Shareholder Service Agreement with the same terms as the current Distribution and Shareholder Service Agreement except with a new effective date of March 28, 2002 (11) (8.33) Participation Agreement dated as of November 28, 2001 among Portfolio Partners, Inc., Aetna Life Insurance and Annuity Company and Aetna Investment Services, LLC(11) (8.34) Amendment dated March 5, 2002 between Portfolio Partners, Inc. (to be renamed ING Partners, Inc. effective May 1, 2002), Aetna Life Insurance and Annuity Company (to be renamed ING Life Insurance and Annuity Company effective May 1, 2002) and Aetna Investment Services LLC (to be renamed ING Financial Advisers, LLC) to Participation Agreement dated November 28, 2001(11) (8.35) Amendment dated May 1, 2003 between ING Partners, Inc., ING Life Insurance and Annuity Company and ING Financial Advisers, LLC to the articipation Agreement dated as of November 28, 2001 and subsequently amended on March 5, 2002.(25) (8.36) Shareholder Servicing Agreement (Service Class Shares) dated as of November 27, 2001 between Portfolio Partners, Inc. and Aetna Life Insurance and Annuity Company(11) (8.37) Amendment dated March 5, 2002 between Portfolio Partners, Inc. (to be renamed ING Partners, Inc. effective May 1, 2002) and Aetna Life Insurance and Annuity Company (to be renamed ING Life Insurance and Annuity Company effective May 1, 2002) to the Shareholder Servicing Agreement dated November 27, 2001(11) (8.38) 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 March 5, 2002.(25) (9) Opinion and Consent of Counsel (10) Consents of Independent Auditors (11) Not applicable (12) Not applicable (13) Schedule for Computation of Performance Data(24) (14.1) Powers of Attorney(25) (14.2) Authorizations for Signatures(3) 1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75986), as filed on April 22, 1996. 2. Incorporated by reference to Registration Statement on Form N-4 (File No. 333-56297), as filed on June 8, 1998. 3. Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 33-75986), as filed on April 12, 1996. 4. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-49176), as filed on November 30, 2000. 5. Incorporated by reference to Post-Effective Amendment No. 14 to Registration Statement on Form N-4 (File No. 33-75964), as filed on July 29, 1997. 6. 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. 7. Incorporated by reference to Post-Effective Amendment No. 17 to Registration Statement on Form N-4 (File No. 33-75998), as filed on April 12, 2002. 8. Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 33-75964), as filed on August 30, 1996. 9. 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. 10. Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 10, 2002. 11. Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-75962), as filed on April 8, 2002. 12. Incorporated by reference to Post-Effective Amendment No. 7 to Registration Statement on Form N-4 (File No. 33-75998), as filed on August 21, 1997. 13. 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. 14. 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. 15. 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. 16. 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. 17. 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. 18. 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. 19. 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. 20. 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. 21. 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. 22. 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. 23. 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. 24. Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 33-75998), as filed on April 17, 1998. 25. 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. ITEM 25. DIRECTORS AND PRINCIPAL OFFICERS OF THE DEPOSITOR*
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH BUSINESS ADDRESS PRINCIPAL UNDERWRITER Keith Gubbay(1) Director and President Phillip Randall Lowery(1) Director Thomas Joseph McInerney(1) Director Mark Alan Tullis(1) Director David Wheat(1) Director Allan Baker(2) Senior Vice President Robert L. Francis 6140 Stonehedge Mall Rd., Ste. 375 Pleasanton, California 94588 Senior Vice President Willard I. Hill, Jr.(2) Senior Vice President Shaun Patrick Mathews(2) Senior Vice President Stephen Joseph Preston(3) Senior Vice President Jacques de Vaucleroy(1) Senior Vice President Boyd George Combs(1) Senior Vice President, Tax James G. Auger(2) Vice President Marie Merrill Augsberger(2) Vice President Pamela M. Barcia(2) Vice President Ronald R. Barhorst 7676 Hazard Ctr. Dr. San Diego, California 92108 Vice President Linda Beblo(3) Vice President Jeoffrey A. Block(4) Vice President Kevin P. Brown(2) Vice President Anthony Camp(2) Vice President Kevin L. Christensen(4) Vice President Elizabeth Clifford(3) Vice President Brian D. Comer(2) Vice President Patricia Marie Corbett(4) Vice President Robert B. DiMartino(2) Vice President Shari Ann Enger(3) Vice President Brian K. Haendiges(2) Vice President Steven J. Haun(4) Vice President Ronald Christian Hull(2) Vice President William S. Jasien 12701 Fair Lakes Circle, Suite 470 Fairfax, Virginia 22033 Vice President David Kelsey(2) Vice President Mary Ann Langevin(2) Vice President Christine Cannon Marcks(2) Vice President Gregory J. Miller(2) Vice President Todd E. Nevenhoven(4) Vice President M. Kathleen Reid(2) Vice President Robert A. Richard(2) Vice President Carl P. Steinhilber(2) Vice President Laurie M. Tillinghast(2) Vice President Christopher Robert Welp(4) Vice President Mary Broesch(3) Vice President and Actuary Bruce T. Campbell(2) Vice President and Actuary Dianne Clous(2) Vice President and Actuary Michael Harris(3) Vice President and Actuary Richard Lau(3) Vice President and Actuary Antonio Manuel Muniz(3) Vice President and Actuary Laurie A. Schlenkermann(2) Vice President and Actuary Mark D. Sperry(2) Vice President and Actuary Alice Su(3) Vice President and Actuary Lawrence D. Taylor 1290 Broadway Denver, Colorado 80203-5699 Vice President and Actuary Albert Sekac(2) Vice President and Appointed Actuary Frederick C. Litow(1) Vice President and Assistant Treasurer Cheryl Lynn Price(1) Vice President, Chief Financial Officer and Chief Accounting Officer Brian John Murphy(2) Vice President and Chief Compliance Officer David Scott Pendergrass(1) Vice President and Treasurer Renee Evelyn McKenzie(1) Vice President, Assistant Treasurer and Assistant Secretary Robin Angel(1) Vice President, Investments Daniel J. Foley(1) Vice President, Investments Maurice Melvin Moore(1) Vice President, Investments Fred Cooper Smith(1) Vice President, Investments Joseph J. Elmy(2) Vice President, Tax Paula Cludray-Engelke(5) Secretary Jane A. Boyle(2) Assistant Secretary Linda H. Freitag(1) Assistant Secretary Daniel F. Hinkel(1) Assistant Secretary William Hope(1) Assistant Secretary Joseph D. Horan(1) Assistant Secretary David Lee Jacobson(3) Assistant Secretary Terri Wecker Maxwell(1) Assistant Secretary Donna M. O'Brien(2) Assistant Secretary Loralee Ann Renelt(5) Assistant Secretary Rebecca A. Schoff(5) Assistant Secretary Carol Semplice(2) Assistant Secretary Linda Ellen Senker(3) Assistant Secretary Patricia M. Smith(2) Assistant Secretary John F. Todd(2) Assistant Secretary Glenn Allan Black(1) Tax Officer Terry L. Owens(1) Tax Officer James Taylor(1) Tax Officer
* These individuals may also be directors and/or officers of other affiliates of the Company. 1 The principal business address of these directors and these officers is 5780 Powers Ferry Road, N.W., Atlanta, Georgia 30327. 2 The principal business address of this director and these officers is 151 Farmington Avenue, Hartford, Connecticut 06156. 3 The principal business address of these officers is 1475 Dunwoody Drive, West Chester, Pennsylvania 19380. 4 The principal business address of these officers is 909 Locust Street, Des Moines, Iowa 50309. 5 The principal business address of these officers is 20 Washington Avenue South, Minneapolis, Minnesota 55401. ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT Incorporated herein by reference to Item 26 in Post-Effective Amendment No. 28 to Registration Statement on Form N-4 (File No. 33-75988), as filed on April 10, 2003 for Variable Annuity Account C of ING Life Insurance and Annuity Company. ITEM 27. NUMBER OF CONTRACT OWNERS As of February 28, 2003, there were 122,413 individuals holding interests in variable annuity contracts funded through Variable Annuity Account B. ITEM 28. INDEMNIFICATION Section 33-779 of the Connecticut General Statutes ("CGS") provides that a corporation may provide indemnification of or advance expenses to a director, officer, employee or agent only as permitted by Sections 33-770 to 33-778, inclusive, of the CGS. Reference is hereby made to Section 33-771(e) of the CGS regarding indemnification of directors and Section 33-776(d) of CGS regarding indemnification of officers, employees and agents of Connecticut corporations. These statutes provide in general that Connecticut corporations incorporated prior to January 1, 1997 shall, except to the extent that their certificate of incorporation expressly provides otherwise, indemnify their directors, officers, employees and agents against "liability" (defined as the obligation to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding) when (1) a determination is made pursuant to Section 33-775 that the party seeking indemnification has met the standard of conduct set forth in Section 33-771 or (2) a court has determined that indemnification is appropriate pursuant to Section 33-774. Under Section 33-775, the determination of and the authorization for indemnification are made (a) by the disinterested directors, as defined in Section 33-770(3); (b) by special counsel; (c) by the shareholders; or (d) in the case of indemnification of an officer, agent or employee of the corporation, by the general counsel of the corporation or such other officer(s) as the board of directors may specify. Also, Section 33-772 with Section 33-776 provide that a corporation shall indemnify an individual who was wholly successful on the merits or otherwise against reasonable expenses incurred by him in connection with a proceeding to which he was a party because he is or was a director, officer, employee, or agent of the corporation. Pursuant to Section 33-771(d), in the case of a proceeding by or in the right of the corporation or with respect to conduct for which the director, officer, agent or employee was adjudged liable on the basis that he received a financial benefit to which he was not entitled, indemnification is limited to reasonable expenses incurred in connection with the proceeding against the corporation to which the individual was named a party. The statute does specifically authorize a corporation to procure indemnification insurance on behalf of an individual who was a director, officer, employee or agent of the corporation. Consistent with the statute, ING Groep N.V. maintains an umbrella insurance policy with an international insurer. The policy covers ING Groep N.V. and any company in which ING Groep N.V. has an ownership control of over 50%. This would encompass the principal underwriter as well as the depositor. The policy provides for the following types of coverage: errors and omissions, directors and officers, employment practices, fiduciary and fidelity. Section 20 of the ING Financial Advisers, LLC Limited Liability Company Agreement provides that ING Financial Advisers, LLC will indemnify certain persons against any loss, damage, claim or expenses (including legal fees) incurred by such person if he is made a party or is threatened to be made a party to a suit or proceeding because he was a member, officer, director, employee or agent of ING Financial Advisers, LLC, as long as he acted in good faith on behalf of ING Financial Advisers, LLC and in a manner reasonably believed to be within the scope of his authority. An additional condition requires that no person shall be entitled to indemnity if his loss, damage, claim or expense was incurred by reason of his gross negligence or willful misconduct. This indemnity provision is authorized by and is consistent with Title 8, Section 145 of the General Corporation Law of the State of Delaware. ITEM 29. PRINCIPAL UNDERWRITER (a) In addition to serving as the principal underwriter for the Registrant, ING Financial Advisers, LLC also acts as the principal underwriter for ING Partners, Inc. (a management investment company registered under the Investment Company Act of 1940 (1940 Act)). Additionally, ING Financial Advisers, LLC acts as the principal underwriter for Variable Life Account B of ING Life Insurance and Annuity Company (ILIAC), Variable Life Account C of ILIAC, Variable Annuity Account B of ILIAC and Variable Annuity Account G of ILIAC (separate accounts of ILIAC registered as unit investment trusts under the 1940 Act). ING Financial Advisers, LLC is also the principal underwriter for Variable Annuity Account I of ING Insurance Company of America (IICA) (a separate account of IICA registered as a unit investment trust under the 1940 Act). (b) The following are the directors and officers of the Principal Underwriter:
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH BUSINESS ADDRESS PRINCIPAL UNDERWRITER Ronald R. Barhorst 7676 Hazard Ctr. Dr. San Diego, CA 92108 Director and President Robert L. Francis(1) Director and Senior Vice President Shaun Patrick Mathews(2) Director and Senior Vice President Allan Baker(2) Senior Vice President Boyd George Combs(3) Senior Vice President Susan J. Stamm(2) Chief Financial Officer William T. Abramowicz 2525 Cabot Dr., Ste. 300 Lisle, IL 60532 Vice President Maryellen R. Allen(2) Vice President Douglas J. Ambrose(1) Vice President Louis E. Bachetti 581 Main Street, 4th Fl. Woodbridge, NJ 07095 Vice President Robert H. Barley(2) Vice President David A. Brounley(2) Vice President Brian D. Comer(2) Vice President Keith J. Green(3) Vice President Brian K. Haendiges(2) Vice President Brian P. Harrington(4) Vice President Bernard P. Heffernon 10740 Nall Ave., Ste. 120 Overland Park, KS 66211 Vice President William S. Jasien(4) Vice President Jess D. Kravitz(2) Vice President Mary Ann Langevin(2) Vice President Christina Lareau(2) Vice President Katherine E. Lewis 2675 N Mayfair Road, Ste. 501 Milwaukee, WI 53226 Vice President Susan J. K. Lewis 16530 Ventura Blvd., Ste. 600 Encino, CA 91436 Vice President David J. Linney 2900 N. Loop W., Ste. 180 Houston, TX 77092 Vice President Mark R. Luckinbill 2841 Plaza Place, Ste. 210 Raleigh, NC 27612 Vice President Christine Cannon Marcks(2) Vice President Richard T. Mason 440 S. Warren St., Ste. 702 Syracuse, NY 13202 Vice President Pamela L. Mulvey(2) Vice President Scott T. Neeb(1) Vice President Ethel Pippin(2) Vice President Deborah Rubin(4) Vice President Frank W. Snodgrass 150 4th Ave., N., Ste. 410 Nashville, TN 37219 Vice President Terran Titus(2) Vice President S. Bradford Vaughan, Jr. 601 Union St., Ste. 810 Seattle, WA 98101 Vice President Judeen T. Wrinn(2) Vice President Therese M. Squillacote(2) Vice President and Chief Compliance Officer David Scott Pendergrass(1) Vice President and Treasurer David A. Kelsey(2) Assistant Vice President Paula Cludray-Engelke(5) Secretary Loralee Ann Renelt(5) Assistant Secretary Rebecca A. Schoff(5) Assistant Secretary John F. Todd(2) Assistant Secretary Robert J. Scalise(2) Assistant Treasurer Glenn Allan Black(3) Tax Officer Joseph J. Elmy(2) Tax Officer G. Michael Fell(3) Tax Officer
1 The principal business address of this director and these officers is 6140 Stonehedge Mall Rd., Ste. 375, Pleasanton, California 94588. 2 The principal business address of this director and these officers is 151 Farmington Avenue, Hartford, Connecticut 06156. 3 The principal business address of these officers is 5780 Powers Ferry Road, N.W., Atlanta, Georgia 30327. 4 The principal business address of these officers is 12701 Fair Lakes Circle, Suite 470, Fairfax, Virginia 22033. 5 The principal business address of these officers is 20 Washington Avenue South, Minneapolis, Minnesota 55401. (c) Compensation from January 1, 2002 to December 31, 2002: (1) (2) (3) (4) (5) NAME OF NET UNDERWRITING COMPENSATION BROKERAGE COMPENSATION* PRINCIPAL DISCOUNTS AND ON REDEMPTION COMMISSIONS UNDERWRITER COMMISSIONS OR ANNUITIZATION ING Financial $94,896.76 Advisers, LLC * Reflects compensation paid to ING Financial Advisers, LLC attributable to regulatory and operating expenses associated with the distribution of all products issued by Variable Annuity Account B of ING Life Insurance and Annuity Company during 2002. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules under it relating to the securities described in and issued under this Registration Statement are located at the home office of the Depositor as follows: ING Life Insurance and Annuity Company 151 Farmington Avenue Hartford, Connecticut 06156 ITEM 31. MANAGEMENT SERVICES Not applicable ITEM 32. UNDERTAKINGS Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement on Form N-4 as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen months old for as long as payments under the variable annuity contracts may be accepted; (b) to include as part of any application to purchase a contract offered by a prospectus which is part of this registration statement on Form N-4, a space that an applicant can check to request a Statement of Additional Information; and (c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form N-4 promptly upon written or oral request. 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. 33-75998) and has 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 16th day of April, 2003. VARIABLE ANNUITY ACCOUNT B OF ING LIFE INSURANCE AND ANNUITY COMPANY (REGISTRANT) By: ING LIFE INSURANCE AND ANNUITY COMPANY (DEPOSITOR) By: /s/Keith Gubbay* ----------------------------- Keith Gubbay President As required by the Securities Act of 1933, this Post-Effective Amendment No. 18 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date /s/Keith Gubbay* (1) Director and President ) - --------------------------- (principal executive officer) ) Keith Gubbay ) /s/Randy Lowery* (1) Director ) - --------------------------- P. Randall Lowery ) April 16, 2003 ) /s/Thomas J. McInerney* (1) Director ) - --------------------------- Thomas J. McInerney ) ) /s/Mark A. Tullis* (1) Director ) - --------------------------- Mark A. Tullis ) ) ---- ) - --------------------------- Director ) David Wheat ) ) /s/Cheryl L. Price* Chief Financial Officer and Chief Accounting Officer ) - ---------------------------- (principal accounting officer) Cheryl L. Price )
By: /s/ Michael A. Pignatella ------------------------------ Michael A.Pignatella *Attorney-in-Fact (1) Constitutes a majority of directors VARIABLE ANNUITY ACCOUNT B EXHIBIT INDEX
EXHIBIT NO. EXHIBIT 99-B.4.6 Endorsement ENQSWO-IC to Contract IA-CDA-IA 99-B.4.7 Endorsement EIAMSF-IC to Contract IA-CDA-IA 99-B.4.8 Endorsement EGET-IC(SPD-R) to Contracts I-CDA-HD and IA-CDA-IA (NQ Single Premiums) 99-B.4.9 Endorsement EGET-HG to Contract I-CDA-HD 99-B.4.10 Endorsement EIEP-HG to Contract I-CDA-HD 99-B.4.11 Endorsement EIM-CVTDTP-HI to Contract I-CDA-HD 99-B.4.12 Endorsement EIMSF-HI to Contract I-CDA-HD (Single Premiums) 99-B.4.13 Endorsement EISFSM-HI to Contract I-CDA-HD (Modals) 99-B.4.14 Endorsement EIS25-IA to Contract I-CDA-HD (Single Pays) 99-B.4.15 Endorsement EIM25-IA to Contract I-CDA-HD 99-B.4.16 Endorsement EDRA-HD to Contract I-CDA-HD 99-B.9 Opinion and Consent of Counsel 99-B.10 Consents of Independent Auditors
EX-99.B(4)(6) 4 a2094824zex-99_b46.txt EXH-99.B(4)(6) EX. 99-B.4.6 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed to add the following provision under Section 5.04 entitled INDIVIDUAL ANNUITY PLAN. SYSTEMATIC WITHDRAWAL OPTION (SWO): A distribution option under which a portion of the Current Value will automatically be surrendered and distributed each year. SWO payments will be calculated based on the Contract's full Current Value. The distributed amount will be withdrawn pro rata from each investment option used under the Contract. A Surrender Fee will not be deducted from any portion of the Current Value which is paid as a distribution under SWO. Contract Holders should consult their tax adviser prior to requesting this distribution option. The Company will not be responsible for any adverse tax consequences due to receiving SWO payments. (a) Amount of Distribution: The Contract Holder may elect one of the three payment methods described below. Specified Amount: Payments of a designated dollar amount. The annual amount may not be greater than 10% of the Current Value on the date of the SWO election. This annual dollar amount will remain constant. At its discretion, the Company may require a minimum payment amount. If SWO payment are made more frequently than annually, the designated annual amount is divided by the number of payments due each year; Specified Period: Payments made over a designated period of time of at least 10 years. The annual amount is calculated by dividing the Current Value as of December 31 of the year prior to the payment year by the number of payment years remaining. If SWO payments are made more frequently than annually, the designated annual amount is divided by the number of payments due each year; or Specified Percentage: Payments of a designated percentage. The annual percentage cannot be greater than 10% of the Current Value on the date of the SWO election. The percentage remains constant. The annual amount is calculated by multiplying the Current Value as of December 31 of the year prior to the payment year by the designated percentage. If SWO payments are made more frequently than annually, the designated annual amount is divided by the number of payments due each year. Payments upon the Contract Holder's death will continue to the beneficiary in the manner described above, unless the beneficiary elects otherwise (see Sum Payable at Death (Before Annuity Payments Start)). Any mode elected must provide payments to be made at least as rapidly as those made prior to the Contract Holder's death. (b) Minimum Initial Current Value: At its discretion, the Company may require a minimum initial Current Value for election of this option. If the remaining Current Value is insufficient at any time to make a scheduled SWO payment, the Company will distribute the entire Contract balance. (c) Date of Distribution: The Contract Holder may elect to have SWO payments made monthly, quarterly, semi-annually or annually. The Contract Holder shall specify the first payment date. The earliest allowable first payment date is the date on which the Contract Holder attains age 59 1/2. Subsequent payments will be made on the 15th of the appropriate months or on such other date the Company may designate or allow. (d) Election and Revocation: SWO may be elected by the Contract Holder by submitting a completed and signed election form to the Company's Home Office. Once elected, this option may be revoked by the Contract Holder by submitting a written request to the Company at its Home Office. Any revocation will apply only to amounts not yet paid. SWO may be elected only once. 1 (e) Reservation of Rights: The Company reserves the right to change the terms of SWO for future elections and discontinue the availability of this option after proper notification. Endorsed and made a part of this Contract on its effective date. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company 2 EX-99.B(4)(7) 5 a2094824zex-99_b47.txt EXH-99.B(4)(7) EX. 99-B.4.7 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed. Delete and replace subsection (c) of Section 6.02 entitled SURRENDER FEE for INDIVIDUAL ANNUITY plans with the following statement. (c) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year. The Current Value is calculated as of the date the partial surrender request is received in good order at the Company's Home Office. This provision does not apply to full surrender requests. This waiver is not available to the Contract Holder while the Systematic Withdrawal Option (SWO) is in effect. Endorsed and made a part of this Contract on the Contract's effective date. /s/ Keith Gubbay President ING Life Insurance and Annuity Company EX-99.B(4)(8) 6 a2094824zex-99_b48.txt EXH-99.B(4)(8) EX. 99-B.4.8 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed as follows: GENERAL DEFINITIONS is amended to include the following defined terms: ING GET FUND (GET FUND): An open-end registered management investment company organized as a series fund. Each series of GET Fund constitutes a separate Fund under this Contract. ALLOCATION PERIOD: The period of time, usually from one to three months, during which amounts may be allocated to a series of GET Fund, whether by Transfer or by Net Purchase Payment(s). Each series of GET Fund will have a specific Allocation Period. At its discretion, the Company may allow additional amounts to be allocated to a series of GET Fund during the Guarantee Period. The Guarantee established at the close of the Allocation Period will apply to these amounts. At its discretion, the Company may specify a minimum amount per Transfer and per Net Purchase Payment amount for each series prior to the beginning of the Allocation Period for that series. The Company will specify a minimum amount of assets that a series of the GET Fund must contain at the close of the Allocation Period; and reserves the right to terminate a series if it does not meet this minimum standard. If the Company elects to terminate the GET Fund and not to start the Guarantee Period, the Company will mail each Contract Holder with amount(s) in the series a notice that the series is being canceled. The cancellation notice will be mailed no later than 15 calendar days after the Allocation Period ends. The Contract Holder will have 45 calendar days from the end of the Allocation Period to: (a) Transfer the Current Value of the canceled series of GET Fund to another accumulation option(s); or (b) request a surrender of the portion of any Net Purchase Payment allocated to the canceled series of the GET Fund without a surrender fee. If no Transfer or surrender is made prior to the end of the 45 calendar day period, the Current Value in the canceled series of GET Fund will be transferred to ING Variable Encore Fund, a money market fund during the next Valuation Period. The Company will also specify the maximum amount of assets that will be accepted into a series of the GET Fund; and reserves the right to not allow additional allocation to a series if it exceeds this maximum standard. If the Company elects not to allow additional allocation to the series of GET Fund, the Company will stop accepting Net Purchase Payments and Transfers into the series 10 calendar days after such election. The Allocation Period will continue until the date the Guarantee Period begins. GET FUND MATURITY DATE: The date at which the Guaranteed Period for a series will end and the GET Fund Record Units for that series will be liquidated. Another accumulation option must then be elected. If no such election is made by the GET Fund Maturity Date, the portion of the Current Value based on that GET Fund series will be transferred to the Allocation Period for another series of GET Fund. If no GET Fund Series is available, 50% of the Current Value from that GET Fund series will be transferred to ING Variable Fund, a growth and income fund. The remaining 50% of the Current Value will be transferred to ING Income Shares, a bond fund. The Transfers will be made during the next Valuation Period. Such Transfers will not be counted as one of the free Transfers. The GET Fund Maturity Date will be specified before the Allocation Period for that series begins. GUARANTEE: The Company guarantees that on a series' GET Fund Maturity Date, the value of each GET Fund Record Unit then outstanding in that series will not be less than the value of the Record Unit on the last day of the Allocation Period. The Company will transfer any amount necessary from its general account to the Separate Account in order to bring that Record Unit Value to the guaranteed level. This Guarantee does not apply to GET Fund Record Unit Values withdrawn or transferred before the GET Fund Maturity Date. GUARANTEED PERIOD: The length of time to which the Guarantee applies for a series, ending on the GET Fund Maturity Date. This period will be specified before the Allocation Period for a series begins. 1 The Contract section entitled FUND(S) is amended to add the following sentence: Unless specifically indicated otherwise in this Contract, all references to Fund(s) in this Contract shall include each series of GET Fund. The Contract section entitled NET RETURN FACTOR(S) - SEPARATE ACCOUNT is hereby endorsed to add the following as subsection (f): Minus a daily fee at an annual rate of 0.25% during the Guaranteed Period for the Company's guarantee of GET Fund Record Unit Values. This fee will be determined prior to the start of any series of GET Fund's Allocation Period. The Contract section entitled TRANSFER OF CURRENT VALUE FROM THE FUNDS is amended to include the following paragraph at the end of this provision: Withdrawals or Transfers from a GET Fund series before the Maturity Date will be at the then applicable GET Fund Record Unit Value, which may be more or less than the Record Unit Value guaranteed at the GET Fund Maturity Date. The Contract section entitled REINSTATEMENT is amended to include the following paragraph at the end of this provision: Amounts attributable to GET will be reinstated to the Allocation Period of a GET series, if available. If a GET series Allocation Period is unavailable, amounts will be reallocated among other Fund(s) and the Fixed Account on a prorata basis. The Contract section entitled CHOICES TO BE MADE is amended to include the following paragraph at the end of this provision: Contract values based on any GET Fund series must be transferred to another accumulation option prior to election of an Annuity Option. Endorsed and made a part of this Contract on the effective date of the Contract. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company 2 EX-99.B(4)(9) 7 a2094824zex-99_b49.txt EXH-99.B(4)(9) EX. 99-B.4.9 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is endorsed to provide an additional accumulation option. This option does not replace or limit the use of any other option(s) available under this Contract for such purpose. This option is known as ING Guaranteed Equity Trust (GET Fund). The use of this option is described and limited as follows: 1. ING Guaranteed Equity Trust (GET Fund) - An open-end registered management investment company organized as a series fund. Each series of GET Fund constitutes a separate Fund under this Contract. 2. Allocation Period - The period of time, usually from one to three months, during which amounts may be allocated to a series of GET Fund, whether by transferring values from the other accumulation options, or by Purchase Payments. The Allocation Period is the only time during which amounts may be allocated to a series. At its discretion, prior to the beginning of an Allocation Period, the Company may specify a minimum amount per transfer and per Purchase Payment amount for each series. A new series will be established for each Allocation Period. 3. Guaranteed Period - The length of time to which the Guarantee applies for a series. This period will be specified for a series before its Allocation Period begins. 4. Maturity Date - The date at which the Guaranteed Period for that series will end and the GET Fund Record Units for that series will be liquidated. Another accumulation option must then be elected. If no such election is made by the Maturity Date, Contract Values based on that GET Fund series will be transferred to ING Variable Encore Fund. Transfers made for this reason will not be counted as one of the four free transfers. The Maturity Date will be specified before the Allocation Period for that series begins. 5. Guarantee - The Company guarantees that on a series' Maturity Date, if the value of each GET Fund Record Unit then outstanding in that series is less than the value of that Record Unit at a date specified before the Allocation Period began, such date being the beginning of the Guaranteed Period, it will transfer to the Separate Account, from its General Account, any amount necessary to bring that Record Unit value to the guaranteed level. This Guarantee does not apply to GET Fund Record Unit values withdrawn or transferred before the Maturity Date. 6. Net Return Factor - Separate Account: The Net Return Factor for GET Fund is equal to 1.0000000 plus the Net Return Rate. The Net Return Rate for each series of GET Fund, notwithstanding any other provision of this Contract, is equal to: a. The value of the shares of that series of GET Fund held by the Separate Account at the end of a Valuation Period; minus b. The value of the shares of that series of GET Fund held by the Separate Account at the start of the Valuation Period; plus or minus c. The proportional share of taxes (or reserves for taxes) on the Separate Account (if any); divided by d. The total value of the GET Fund Record Units of the Separate Account for that series at the start of the Valuation Period; minus e. A daily actuarial charge at an annual rate of 1.25% for annuity mortality and expense risks and profit; f. A daily fee at an annual rate of .25% during the Guaranteed Period for the Company's guarantee of Record Unit values and profit; and 1 g. A daily administrative charge which will not exceed .25% on an annual basis. The Net Return Rate may be more or less than 0. The value of a share of a GET Fund series is equal to the net assets of that series divided by the number of outstanding shares of that series. 7. Withdrawals and Transfers - Withdrawals or transfers from a GET Fund series before the Maturity Date will be at the then applicable GET Fund Record Unit value, which may be more or less than the value guaranteed at the Maturity Date. 8. Election of an Annuity Option - Contract values based on any GET Fund series must be transferred to another accumulation option prior to election of an Annuity Option. 9. Current Value shall include the sum of any GET Fund Record Units. 10. Unless specifically indicated otherwise in this endorsement, all references to Fund(s) in this Contract shall include each GET Fund series. Endorsed and made a part of this Contract on July 1, 1987 or the effective date of the Contract whichever is later. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company 2 EX-99.B(4)(10) 8 a2094824zex-99_b410.txt EXH-99.B(4)(10) EX. 99-B.4.10 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed to delete Section 3.13 Payment of Surrender Value and replace it with the following: 3.13. Payment of Surrender Value: Under certain emergency conditions, the Company may defer payment: (a) For a period of up to 6 months (unless not allowed by state law); or (b) As provided by federal law. In addition, the Company may pay any Fixed Account surrender requested from the Contract, Plan Account, or from any one or more Individual Accounts, with interest, in equal payments over a period not to exceed 60 months, when: (a) The Fixed Account value for such Contract, Plan Account or for the total of the Individual Account(s) under the Contract exceeds $250,000 on the day prior to the current surrender; and (b) The sum of the current Fixed Account surrender and the total of all Fixed Account surrenders from the Contract, Plan Account, or any Individual Account within the past 12 calendar months exceeds 20% of the amount in the Fixed Account on the day prior to the current surrender. Interest, as used above will not be more than two percentage points below any rate determined prospectively by the Board of Directors for this class of Contract. In no event, will the interest rate be less than 4%. Endorsed and made a part of this Contract on January 1, 1988 or the effective date of the Contract whichever is later. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company EX-99.B(4)(11) 9 a2094824zex-99_b411.txt EXH-99.B(4)(11) EX. 99-B.4.11 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed to restate and amend the following: Section 3.01. Net Purchase Payment(s) - Delete the last paragraph and replace it with the following: During any calendar year, the Company may be told to change the investment mix twelve times. Should the Company allow additional changes, each may be subject to a fee of up to $10. Section 3.08. Transfer of Current Value from the Funds - Delete the last paragraph and replace it with the following: Twelve transfers of Current Value can be made during a calendar year period. Should the Company allow additional transfers, each may be subject to a fee of up to $10. Endorsed and made a part of this Contract effective May 1, 1989. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company EX-99.B(4)(12) 10 a2094824zex-99_b412.txt EXH-99.B(4)(12) EX. 99-B.4.12 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed to add the following new provision to INDIVIDUAL ANNUITY PLAN, Section 6.02, SURRENDER FEE: (c) In an amount equal to or less than 10% of the current Contract Cash Value, as part of the first partial surrender request in a calendar year. The Contract Cash Value is calculated as of the date the partial surrender request is received in good order at the Company's Home Office. This provision does not apply to full surrender requests. Endorsed and made a part of this Contract effective September 1, 1989. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company EX-99.B(4)(13) 11 a2094824zex-99_b413.txt EXH-99.B(4)(13) EX. 99-B.4.13 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed to add the following new provisions to the end of Section 6.02 - SURRENDER FEE: No Surrender Fee is deducted from any portion of the Individual Account which is paid: On and after the tenth anniversary of the Effective Date of the Individual Account; or When the Individual Account Cash Value is $2,500 or less and no surrenders have been taken from the Individual Account within the prior 12 months. If there is more than one Individual Account under the Contract for a Participant, then this provision will only apply when the total in all of the Participant's Individual Accounts is $2,500 or less. Endorsed and made a part of this Contract on May 1, 1989 or the Effective Date of the Contract whichever is later. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company EX-99.B(4)(14) 12 a2094824zex-99_b414.txt EXH-99.B(4)(14) EX. 99-B.4.14 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed to add the following new provisions to the end of Section 6.02 entitled SURRENDER FEE as follows: No Surrender Fee is deducted from any portion of the Current Value which is paid: (c) When the Current Value is $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. If there is more than one Contract, then this provision will only apply when the total in all of the contracts is $2,500 or less. Endorsed and made a part of this Contract. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company EX-99.B(4)(15) 13 a2094824zex-99_b415.txt EXH-99.B(4)(15) EX. 99-B.4.15 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed to add the following new provisions to the end of Section 6.02 entitled Surrender Fee as follows: No Surrender Fee is deducted from any portion of the Current Value which is paid: (d) When the Current Value is $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. If there is more than one Contract, then this provision will only apply when the total in all of the Contracts is $2,500 or less. Endorsed and made a part of this Contract. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company EX-99.B(4)(16) 14 a2094824zex-99_b416.txt EXH-99.B(4)(16) EX. 99-B.4.16 ING LIFE INSURANCE AND ANNUITY COMPANY ENDORSEMENT This Contract is hereby endorsed to include the following provision: Any Payments to a beneficiary named pursuant to Section 72(s) of the Internal Revenue Code of 1954, as amended, will be made in accordance with Section 72(s) and any associated regulations. Endorsed and made a part of this Contract on the later of January 19, 1985 or the effective date of this Contract. /s/ Thomas J. McInerney President ING Life Insurance and Annuity Company EX-99.B(9) 15 a2094824zex-99_b9.txt EXH 99.B(9) EX. 99-B.9 [ING LOGO] AMERICAS US Legal Services MICHAEL A. PIGNATELLA COUNSEL (860) 723-2239 FAX: (860) 723-2216 April 16, 2003 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 RE: ING LIFE INSURANCE AND ANNUITY COMPANY AND ITS VARIABLE ANNUITY ACCOUNT B POST-EFFECTIVE AMENDMENT NO. 18 TO REGISTRATION STATEMENT ON FORM N-4 PROSPECTUS TITLE: INDIVIDUAL NONQUALIFIED VARIABLE ANNUITY CONTRACTS FILE NOS.: 33-75998 AND 811-2512 Dear Sir or Madam: The undersigned serves as counsel to ING Life Insurance and Annuity Company, a Connecticut life insurance company (the "Company"). It is my understanding that the Company, as depositor, has registered an indefinite amount of securities (the "Securities") under the Securities Act of 1933 (the "Securities Act") as provided in Rule 24f-2 under the Investment Company Act of 1940 (the "Investment Company Act"). In connection with this opinion, I have reviewed the N-4 Registration Statement, as amended to the date hereof, and this Post-Effective Amendment No. 18. I have also examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, trust records and other instruments I have deemed necessary or appropriate for the purpose of rendering this opinion. For purposes of such examination, I have assumed the genuineness of all signatures on original documents and the conformity to the original of all copies. I am admitted to practice law in Connecticut, and do not purport to be an expert on the laws of any other state. My opinion herein as to any other law is based upon a limited inquiry thereof which I have deemed appropriate under the circumstances. Based upon the foregoing, and, assuming the Securities are sold in accordance with the provisions of the prospectus, I am of the opinion that the Securities being registered will be legally issued and will represent binding obligations of the Company. Hartford Site ING North America Insurance Corporation 151 Farmington Avenue, TS31 Hartford, CT 06156-8975 I consent to the filing of this opinion as an exhibit to the Registration Statement. Sincerely, /S/ Michael A. Pignatella Michael A. Pignatella EX-99.B(10) 16 a2094824zex-99_b10.txt EXH-99.B(10) Ex. 99-B.10 CONSENT OF INDEPENDENT AUDITORS The Board of Directors of ING Life Insurance and Annuity Company and Contract Owners of Variable Annuity Account B: We consent to the use of our report dated March 27, 2001 relating to the consolidated financial statements of ING Life Insurance and Annuity Company (formerly Aetna Life Insurance and Annuity Company) for the period from December 1, 2000 to December 31, 2000 ("Successor Company") and for the period from January 1, 2000 to November 30, 2000 ("Preacquisition Company") which are included in the Registration Statement on Form N-4 (33-75998). We also consent to the reference to our firm under the heading "INDEPENDENT AUDITORS" in the Statement of Additional Information. Our reports refer to the acquisition, effective November 30, 2000, by ING America Insurance Holdings Inc. of all of the outstanding stock of Aetna Inc., Aetna Life Insurance and Annuity Company's indirect parent and sole shareholder in a business combination accounted for as a purchase. As a result of the acquisition, the financial information for the periods after the acquisition is presented on a different cost basis than that for the periods before the acquisition and, therefore, is not comparable. /s/ KPMG LLP Hartford, Connecticut April 16, 2003 Ex. 99-B.10 Consent of Ernst and Young LLP, Independent Auditors We consent to the reference to our firm under the captions "Independent Auditors" and "Condensed Financial Information" and to the use of our report dated March 25, 2003, with respect to the consolidated financial statements of ING Life Insurance and Annuity Company as of December 31, 2002 and 2001 and for each of the two years in the period ended December 31, 2002, and to the use of our report dated March 14, 2003, with respect to the statement of assets and liabilities of ING Life Insurance and Annuity Company Variable Annuity Account B as of December 31, 2002, 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. 18 to the Registration Statement under the Securities Act of 1933 (Form N-4 No. 33-75998) 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 14, 2003 -----END PRIVACY-ENHANCED MESSAGE-----