-----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, JxhZH3nJI6eMzWTFN/pKAnNJgi51mA9tMjNRw69YCF2DnxX2x7RKDVa0N4xdTqTP uA3Sd+VaSRAYPJEsi2bP+Q== 0001047469-04-006781.txt : 20040305 0001047469-04-006781.hdr.sgml : 20040305 20040305162529 ACCESSION NUMBER: 0001047469-04-006781 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040305 EFFECTIVENESS DATE: 20040305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING VP NATURAL RESOURCES TRUST CENTRAL INDEX KEY: 0000844070 IRS NUMBER: 222932678 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05710 FILM NUMBER: 04652413 BUSINESS ADDRESS: STREET 1: THE PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 1-800-992-0180 MAIL ADDRESS: STREET 1: THE PILGRIM FUNDS STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM NATURAL RESOURCES TRUST DATE OF NAME CHANGE: 20020405 FORMER COMPANY: FORMER CONFORMED NAME: ING NATURAL RESOURCES TRUST DATE OF NAME CHANGE: 20020320 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM NATURAL RESOURCES TRUST DATE OF NAME CHANGE: 20010508 N-CSR 1 a2125854zn-csr.txt N-CSR ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: October 31, 2006 Estimated average burden hours per response.......19.3 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05710 --------------------------------------------- ING VP Natural Resources Trust - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) CT Corporation System, 101 Federal Street, Boston, MA 02110 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-992-0180 ---------------------------- Date of fiscal year end: December 31 -------------------------- Date of reporting period: December 31, 2003 ------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1): ANNUAL REPORT ANNUAL REPORT December 31, 2003 ING VP NATURAL RESOURCES TRUST [GRAPHIC] [ING FUNDS LOGO] TABLE OF CONTENTS President's Letter 1 Market Perspective 2 Portfolio Managers' Reports 4 Index Descriptions 6 Independent Auditors' Report 7 Statement of Assets and Liabilities 8 Statement of Operations 9 Statements of Changes in Net Assets 10 Financial Highlights 11 Notes to Financial Statements 12 Portfolio of Investments 16 Shareholder Meeting Information 17 Trustee and Officer Information 18
(THIS PAGE INTENTIONALLY LEFT BLANK) PRESIDENT'S LETTER [PHOTO OF JAMES M. HENNESSY] Dear Shareholder, What a difference a few months can make. In my last letter to our shareholders in the semi-annual report, it was hard to escape the sense of anxiety that many investors were experiencing. Now, six months later, I believe there may be a renewed sense of optimism among investors -- cautious optimism, to be sure, but optimism never the less. And I believe there are good, solid reasons for this improved outlook. For one, many key corporations have been reporting profits in recent months. Granted, the numbers are modest, but they have been noteworthy, consistent and credible because many of these same companies are employing stricter accounting standards following the Enron debacle. Going hand-in-hand with these upbeat figures are the improving price-to-earning ratios and improving valuations that many investors are now seeing. The reasons for renewed confidence reach beyond the shores of the U.S. as well. Overall, world markets are reporting strong gains. This is certainly true of Japan, where the economy has been showing welcome signs of recovery in recent months. That recovery, in turn, has helped trigger increases in business activity and consumer confidence there. We are seeing similar surges in consumer confidence in several key European markets, and, although, some European markets remain sluggish, overall, financial benchmarks from Europe reflect steady growth. Markets in the United Kingdom, in particular, are reporting impressive returns, thanks in no small part to England's robust housing market as well as strong figures coming from the consumer in that country. This renewed confidence has been tempered, however, by recent events and news stories concerning mutual fund trading practices, including after-hours trading and market timing. As with many financial services companies, ING Investments, LLC ("ING Investments"), investment adviser to the ING Funds and affiliates of ING Investments (collectively, "ING") have received requests for information from various governmental and self-regulatory agencies in connection with investigations related to trading in investment company shares. In each case, full cooperation and responses are being provided. ING is also completing an internal review of investment company share trading as well as a review of their policies and procedures in this area. ING will reimburse any ING Portfolio affected by inappropriate late trading or market timing for any improper profits that accrued to any person who engaged in improper frequent or late trading for which ING is responsible. Also, I want to clearly state that ING Funds does not condone the illegal practice of after-hours trading. In addition, it has been our long-standing policy to discourage inappropriate market timing in our funds. In fact, over the years, ING Funds has taken a variety of steps to address inappropriate fund trading activity. We were among the first fund groups to employ innovative techniques such as making extensive use of fair-value pricing for foreign securities. We consider the fair treatment of committed investors to be of the utmost importance. We continue to look for effective strategies to address fund trading issues. We hope that the increased attention this issue is now receiving will make it easier for the industry to effectively address inappropriate fund trading in the future. On behalf of everyone at ING Funds, thank you for your continued support. We look forward to helping you meet your investment goals in the future. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds February 16, 2004 1 MARKET PERSPECTIVE: YEAR ENDED DECEMBER 31, 2003 In 2003 GLOBAL EQUITIES recorded their first year of positive returns since 1999. As measured by the Morgan Stanley Capital International ("MSCI") World Index, global stocks rose 33.8% for the year. For the second half of 2003, global stocks returned 19.8%. In both figures about three quarters of the return was due to stock market movements and the rest to dollar weakness. The dollar occupied the financial spotlight for much of the second six months. Japanese and particularly Chinese government intervention to keep their currencies low against the dollar underscored frustration in the U.S. that signs of an improving economy were not being accompanied by job growth. However, the dollar weakened against the freely floating euro and other European currencies as even increasingly impressive economic reports from the U.S. could not banish fears about its large trade and budget deficits. For the second six months of the period, the euro appreciated 9.8% against the dollar, 20.2% for all of 2003. At year-end, the Bank of Japan announced that it had spent an astonishing $187 billion in 2003 to stem the rise in the yen. Most U.S. FIXED INCOME classes had a much more subdued second six months as one might expect in a strong environment for equities. Bond prices were supported by the apparent absence of any inflationary pressures and the belief that until they appear, the Federal Reserve ("Fed") will not raise interest rates. For the six-month period, the Lehman Brothers Aggregate Bond Index of investment grade bonds returned 0.17%, much less than the average coupon. For the year, the total return was 4.10%. Within this the Lehman Brothers U.S. Corporate Investment Grade Index returned 0.49% for the second six months and the U.S. Treasury Index lost 1.45%. For 2003 these indices returned 8.24% and 2.24%, respectively. There was a pronounced steepening of the yield curve as ten-year Treasury yields rose from 3.53% at the end of June to 4.26% at year end while the 90-day Treasury Bill yield rose just 7 basis points to 91 basis points, never spending a day above 100 basis points. By contrast, 2003 was the year in which the high yield market redeemed itself after several years of disappointing performance. The rally that began late in October of 2002 continued throughout 2003, leading to the best high yield market performance since 1991. For the year, the high yield market returned 28.97%. While 2002 was a year that was marred by fraud and corporate malfeasance, 2003 was a year of balance sheet repair. Many troubled issuers resorted to creative financing techniques to take out bank debt and to refinance and extend maturities. Bond prices for most issuers rose as this future refinancing risk was far outweighed by the immediate benefit of a significantly diminished near- to medium- term risk of default. The declining default risk was manifested throughout the year by a fall in the default rate from a peak of 11.7% in February 2002 to 5.26% in December 2003. THE U.S. EQUITIES market returned 15.2% in the second half of 2003 based on the Standard & Poor's ("S&P") 500 Index including dividends and returned 28.71% for the whole year. At current price-to-earnings levels, 18 times 2004 earnings, many are worried about valuations after the tremendous rebound from the lows in early March. Much of the recent acceleration in gross domestic product ("GDP"), to 8.2% growth in the third quarter and the strength in consumer demand, has come from the effect of large tax cuts, the mortgage refinancing boom as interest rates declined and an accommodative monetary policy by which the Fed has kept real short term interest rates negative, even with very tame inflation. Corporate profits have improved and balance sheets have been repaired, without question, but this in large measure has been based on cost cutting and a lack of hiring. Only from about the middle of the last quarter did the level of new unemployment claims break convincingly below the 400,000 level. This has restrained employment costs both because the number of employees has been kept down and because their wage bargaining power has accordingly remained low. Some commentators argue that these bullish forces are surely unsustainable. The bulls say this is just the "wall of worry" that markets tend to climb, that employment growth will reinvigorate demand and that major indices are still well off their all time highs. True, the advance in 2003 was powered by smaller, lower quality stocks but this is natural as sentiment improves after a bear market. By the end of 2003, the recovery was becoming more broadly based and there is still plenty of appreciation left in the bigger companies, say the optimists. In INTERNATIONAL MARKETS, Japan soared 32.1% in dollar terms in the second half of 2003 based on the MSCI Japan Index, slightly more than half of this due to the strength of the yen despite the efforts of the Bank of Japan, as noted earlier, to hold it down. For the year, Japanese stocks returned 35.9%. By the end of the year the broad market was trading at just over 18 times earnings for 2004, similar to the S&P 500. 2 MARKET PERSPECTIVE: YEAR ENDED DECEMBER 31, 2003 Since the semi-annual report, the news has been mixed for Japanese business. The good news of the seventh consecutive quarter of economic growth, rising machinery orders and industrial production was soured by the realization that it was entirely driven by exports, with domestic demand weak. Japan's twin problems: chronic deflation and a banking system paralyzed by non-performing loans remain to be solved. Much of the strength of the Japanese market seems to have been fueled by foreign money, with the local investor still not convinced. European excluding United Kingdom ("ex UK") markets advanced 26.7% in dollars in the last six months of 2003, including nearly 10% currency appreciation, according to the MSCI Europe ex UK Index. By the end of 2003, dollar investors had a gain of 42.6% for the year and markets in this region were still trading on average at just 14.6 times 2004 earnings. Third quarter GDP managed a 0.4% increase after a decline in the second quarter. As in Japan, this was entirely sourced from exports despite the strengthening euro, since consumer spending was stagnant and business investment down. Nonetheless industrial production in France and Germany, over half of the Eurozone's economy, was rising smartly by the end of the year and unemployment edging down. German business confidence rose to the highest in three years. Many commentators believe that regional stocks are cheap in relation to earnings growth projected to be more than 20% in 2004 and that the rally is not over. The UK market gained 22.3% in dollars in the second half of 2003, nearly half of this due to currency, according to the MSCI UK Index. For the whole year, the dollar return was 32.1%. At those levels the UK market was trading at about 18 times 2004 earnings, again similar to the S&P 500. As in other regions, UK business and economic prospects improved during the six months. But there was more to this than exports. Services, manufacturing and construction were all accelerating by year-end. Third quarter GDP growth was revised up to 0.8% over the second quarter, while the unemployment rate fell to 5%, the lowest in decades. In November, the Bank of England became the first of the world's major central banks to raise interest rates. See accompanying index descriptions on page 6. 3 ING VP NATURAL RESOURCES TRUST Portfolio Managers' Report PORTFOLIO MANAGER TEAM: A team of investment professionals led by James A. Vail, CFA, Senior Vice President and Portfolio Manager, Aeltus Investment Management, Inc. - the Sub-Adviser. GOAL: The ING VP Natural Resources Trust (the "Trust") seeks long-term growth of capital through investment primarily in common stocks of companies that own or develop natural resources and other basic commodities, or supply goods and services to such companies. Current income will not be a factor. Total return will consist primarily of capital appreciation. PERFORMANCE: For the year ended December 31, 2003, the Trust, excluding any charges, provided a total return of 30.53% compared to a 28.71% for the Standard & Poor's ("S&P") 500 Index and a 31.49% return for the Goldman Sachs Natural Resources Index. PORTFOLIO SPECIFICS: During 2003, energy and material prices experienced upward movements, reflecting an improvement in the U.S. economy, and this trend accelerated during the final quarter. One of the major contributing factors to the price increases was that the Chinese economy was importing commodities at a fast pace to feed its growing internal and export industries. To cite the price performance of a few commodities, natural gas in the United States went from $5.00 per metric cubic foot to $7.00, copper grew exponentially from $0.70 a pound to $1.10; and gold rose from $357 per ounce and finished the year at $416. Approximately 30% of the Trust's assets are invested in a broad array of metals, including aluminum, copper, nickel and steel. These sectors turned in dramatic performances. The leading stock was United States Steel, which more than doubled, followed by First Quantum Minerals, an African metals provider, which went from C$4.00 to just under C$15.00 (Canadian $). Phelps Dodge began the year at $36.00 and closed at $77.00. Other large gainers were ALCOA (+52%) and INCO (+90%). Energy shares also turned in strong performance but only later in the year. MARKET OUTLOOK: We believe commodity prices, in general, will surprise on the upside as global economic recovery gains momentum in 2004 and beyond. China, over the long term, provides a substantial market for metals, energy, paper and forest products, etc. This, coupled with the fact that the commodities sector generally has been starved for capital, could lead to periodic shortages and therefore higher commodity prices. While new projects could be announced, lead times prevent near-term solutions. The Trust will continue to hold a broad base of commodity producers, overweighing specific sectors as warranted. We remain bullish on the commodity outlook. 4 Portfolio Managers' Report ING VP NATURAL RESOURCES TRUST [CHART]
ING VP NATURAL RESOURCES TRUST S&P 500 INDEX 12/31/1993 $ 10,000 $ 10,000 12/31/1994 $ 9,462 $ 10,133 12/31/1995 $ 11,058 $ 13,933 12/31/1996 $ 14,032 $ 17,172 12/31/1997 $ 15,035 $ 22,903 12/31/1998 $ 12,085 $ 29,489 12/31/1999 $ 13,788 $ 35,722 12/31/2000 $ 16,321 $ 32,440 12/31/2001 $ 13,721 $ 28,588 12/31/2002 $ 13,433 $ 22,270 12/31/2003 $ 17,534 $ 28,664
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 2003 -------------------------------------------- 1 YEAR 5 YEAR 10 YEAR ------ ------ ------- ING VP Natural Resources Trust 30.53% 7.72% 5.77% S&P 500 Index(1) 28.71% -0.57% 11.10% Goldman Sachs Natural Resources Index(2) 31.49% 5.98% N/A(3)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of ING VP Natural Resources Trust against the S&P 500 Index and the Goldman Sachs Natural Resources Index. The Indices are unmanaged, have no cash in their portfolio, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Trust's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract or life insurance policy. Total returns would have been lower if such expenses or charges were included. Performance graph and table do not reflect the deduction of taxes that a shareholder will pay on Trust distributions or the redemption of Trust shares. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE TRUST WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. TRUST HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 INDEX is a widely recognized unmanaged index of 500 common stocks. (2) The GOLDMAN SACHS NATURAL RESOURCES INDEX is a market-capitalization-weighted index of 112 stocks designed to measure the performance of companies in the natural resources sector, which includes energy, precious metals, timber, and other sub-sectors. (3) The Index commenced August 1996. PRINCIPAL RISK FACTOR(S): Since the Trust is a non-diversified investment company that invests primarily in securities of companies engaged in natural resources activities, the Trust may be subject to greater risks and market fluctuations than other portfolios that are more diversified by industry. The Trust's investments in foreign securities may involve risks greater than those attendant to investments in securities of U.S. issuers. This Trust should be considered as a vehicle for diversification and not as a balanced investment program. Risks of foreign investing are generally intensified for investments in emerging markets. The value of convertible or debt securities may fall when interest rates rise. See accompanying index descriptions on page 6. 5 INDEX DESCRIPTIONS The GOLDMAN SACHS NATURAL RESOURCES INDEX is a market-capitalization-weighted index of 112 stocks designed to measure the performance of companies in the natural resources sector, which includes energy, precious metals, timber, and other sub-sectors. The LEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index composed of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization. The LEHMAN BROTHERS HIGH YIELD BOND INDEX is an unmanaged index that includes all fixed income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $100 million, and at least 1 year to maturity. The MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE INDEX consists of more than 1,000 securities taken from the largest market capitalization companies based in Europe, Australia and Asia (Australasia), and the Far East. The MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE, EX UK, INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe, excluding the UK. The MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Japan. The MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) UK INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in the UK. The MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX is an unmanaged index that reflects the stock markets of 22 countries, including the United States, Europe, Canada, Australia, New Zealand and the Far East - comprising approximately 1,500 securities - with values expressed in U.S. dollars. The RUSSELL 1000 GROWTH INDEX is an index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The STANDARD AND POOR'S ("S&P") 500 INDEX is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged. An investor cannot invest directly in an index. 6 INDEPENDENT AUDITORS' REPORT The Board of Trustees and Shareholders of ING VP Natural Resources Trust We have audited the accompanying statement of assets and liabilities of ING VP Natural Resources Trust, including the portfolio of investments, as of December 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits 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 and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian. 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 and financial highlights referred to above present fairly, in all material respects, the financial position of ING VP Natural Resources Trust as of December 31, 2003, the results of its operations, the changes in its net assets, and the financial highlights for the periods specified in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Boston, Massachusetts February 16, 2004 7 STATEMENT OF ASSETS AND LIABILITIES as of December 31, 2003 ASSETS: Investments in securities at value* $ 24,075,697 Short-term investments, at amortized cost 789,000 Cash 342 Foreign currencies at value** 303 Receivable for dividends and interest 4,593 Prepaid expenses 503 ------------ Total assets 24,870,438 ------------ LIABILITIES: Payable to affiliates 21,958 Payable to trustees 54,976 Other accrued expenses and liabilities 58,131 ------------ Total liabilities 135,065 ------------ NET ASSETS (EQUIVALENT TO $15.82 PER SHARE ON 1,563,347 SHARES OUTSTANDING) $ 24,735,373 ============ NET ASSETS WERE COMPRISED OF: Paid-in capital -- shares of beneficial interest at no par value (unlimited shares authorized) $ 19,933,836 Undistributed net investment income 249,924 Accumulated net realized loss on investments and foreign currencies (41,881) Net unrealized appreciation of investments and foreign currencies 4,593,494 ------------ NET ASSETS $ 24,735,373 ============ - ---------- * Cost of securities $ 19,482,210 ** Cost of foreign currencies $ 296
See Accompanying Notes to Financial Statements 8 STATEMENT OF OPERATIONS for the Year Ended December 31, 2003 INVESTMENT INCOME: Dividends net of foreign taxes* $ 207,973 Interest 7,429 ------------ Total Investment Income 215,402 ------------ EXPENSES: Investment management fees 208,414 Administrative service fees 20,841 Shareholder reporting expense 14,078 Custody and accounting expense 9,565 Transfer agent fees 35,285 Professional fees 38,870 Trustees' fees 5,925 Insurance expense 395 Registration and filing fees 53 Miscellaneous expense 2,543 ------------ Total expenses 335,969 ------------ Net investment loss (120,567) ------------ REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain on: Investments 1,038,572 Foreign currencies 370,491 ------------ Net realized gain on investments and foreign currencies 1,409,063 ------------ Net change in unrealized appreciation of investments and foreign currencies 4,436,012 ------------ Net realized and unrealized gain on investments and foreign currencies 5,845,075 ------------ INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,724,508 ============ - ---------- * Foreign taxes $ 4,194
See Accompanying Notes to Financial Statements 9 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ------------ ------------ FROM OPERATIONS: Net investment loss $ (120,567) $ (94,961) Net realized gain (loss) on investments and foreign currencies 1,409,063 (278,728) Net change in unrealized appreciation or depreciation of investments and foreign currencies 4,436,012 (362,262) ------------ ------------ Net increase (decrease) in net assets resulting from operations 5,724,508 (735,951) ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income -- (41,560) ------------ ------------ Total distributions -- (41,560) ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 4,418,070 6,211,430 Dividends reinvested -- 41,560 Cost of shares redeemed (6,643,754) (7,979,545) ------------ ------------ Net decrease in net assets resulting from capital share transactions (2,225,684) (1,726,555) ------------ ------------ Net increase (decrease) in net assets 3,498,824 (2,504,066) NET ASSETS: Beginning of year 21,236,549 23,740,615 ------------ ------------ End of year $ 24,735,373 $ 21,236,549 ============ ============ Undistributed net investment income at end of year $ 249,924 $ -- ============ ============
See Accompanying Notes to Financial Statements 10 ING VP NATURAL RESOURCES TRUST FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 2003 2002 2001 2000(2) 1999 - ----------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year $ 12.12 12.40 14.75 12.51 11.03 Income (loss) from investment operations: Net investment income (loss) $ (0.08) (0.05) 0.03 (0.07) 0.06 Net realized and unrealized gain (loss) on investments $ 3.78 (0.21) (2.38) 2.36 1.50 Total income (loss) from investment operations $ 3.70 (0.26) (2.35) 2.29 1.56 Less distributions from: Net investment income $ -- 0.02 -- 0.05 0.08 Total distributions $ -- 0.02 -- 0.05 0.08 Net asset value, end of year $ 15.82 12.12 12.40 14.75 12.51 TOTAL RETURN(1) % 30.53 (2.10) (15.93) 18.37 14.09 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of year (000s) $ 24,735 21,237 23,741 32,291 31,737 Ratio to average net assets: Expenses % 1.61 1.64 1.35 1.66 1.33 Net investment income (loss) % (0.58) (0.41) 0.17 (0.53) 0.34 Portfolio turnover rate % 121 80 85 72 41
(1) Total return is calculated assuming reinvestment of all dividend and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. (2) Effective July 26, 2000, ING Investments, LLC, became the Adviser to the Fund. See Accompanying Notes to Financial Statements 11 NOTES TO FINANCIAL STATEMENTS as of December 31, 2003 NOTE 1 -- ORGANIZATION ORGANIZATION. ING VP Natural Resources Trust (the "Trust") is an open-end, non-diversified management investment company registered under the Investment Company Act of 1940, as amended. The Trust was organized on November 15, 1988 and commenced operation in 1991. The Trust's Investment objective is to seek long-term growth of capital through investment primarily in common stock of companies which own or develop natural resources and other basic commodities, or supply goods and services to such companies. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Trust in the preparation of its financial statements: A. SECURITY VALUATION. Investments in equity securities traded on a national securities exchange are valued at the last reported sale price. Portfolio securities reported by NASDAQ will be valued at NASDAQ official closing price. Securities traded on an exchange or NASDAQ for which there has been no sale and equity securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at that time. Debt securities are valued at prices obtained from independent services or from one or more dealers making markets in the securities. U.S. Government obligations are valued by using market quotations or independent pricing services which use prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Securities and assets for which market quotations are not readily available (which may include certain restricted securities which are subject to limitations as to their sale) are valued at their fair values as determined in good faith by or under the supervision of the Trust's Board of Directors ("Board"), in accordance with methods that are specifically authorized by the Board. Securities traded on exchanges, including foreign exchanges, which close earlier than the time that a Trust calculates its net asset value may also be valued at their fair values as determined in good faith by or under the supervision of a Trust's Board, in accordance with methods that are specifically authorized by the Board. If a significant event which is likely to impact the value of one or more foreign securities held by a Trust occurs after the time at which the foreign market for such security(ies) closes but before the time that the Trust's net asset value is calculated on any business day, such event may be taken into account in determining the fair value of such security(ies) at the time the Trust calculates its net asset value. For these purposes, significant events after the close of trading on a foreign market may include, among others, securities trading in the U.S. and other markets, corporate announcements, natural and other disasters, and political and other events. Among other elements of analysis, the Board has authorized the use of one or more research services to assist with the determination of the fair value of foreign securities in light of significant events. Research services use statistical analyses and quantitative models to help determine fair value as of the time a Trust calculates its net asset value. Unlike the closing price of a security on an exchange, fair value determinations employ elements of judgment, and the fair value assigned to a security may not represent the actual value that a Trust could obtain if it were to sell the security at the time of the close of the NYSE. Investments in securities maturing in less than 60 days are valued at amortized cost, which, when combined with accrued interest, approximates market value. B. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Securities transactions are accounted for on the trade date. Realized gains and losses are reported on the basis of identified cost of securities sold. Interest income is recorded on an accrual basis except when collection is not expected. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the portfolios. Premium amortization and discount accretion are determined by the effective yield method. 12 NOTES TO FINANCIAL STATEMENTS as of December 31, 2003 (Continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. FEDERAL INCOME TAXES. It is the policy of the Trust to comply with subchapter M of the Internal Revenue Code and related excise tax provisons applicable to regulated investment companies and to distribute substantially all of its net investment income and any net realized capital gains to its shareholders. Therefore, no federal income tax provision is required. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired. D. DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment income and net realized gains, if any are declared and paid annually by the Trust. Distributions are determined annually in accordance with federal tax principles which may differ from accounting principles generally accepted in the United States of America for investment companies. The Trust may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code. Distributions are recorded on the ex-dividend date. E. USE OF ESTIMATES. Management of the Trust has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. F. FOREIGN CURRENCY TRANSLATION. The books and records of the Trust are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Trust does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities which are subject to foreign withholding tax upon disposition, liabilities are recorded on the statement of assets and liabilities for the estimated tax withholding based on the securities current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Trust's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at period end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. Government Securities. These risks include, but are not limited, to revaluation of currencies and future adverse political and economic developments which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and U.S. Government Securities. G. FORWARD FOREIGN CURRENCY CONTRACTS. The Trust may enter into forward foreign currency contracts primarily to hedge against foreign currency exchange rate risks on their non-U.S. dollar denominated investment securities. When entering into a currency forward contract, the Trust agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. These contracts are valued daily and the Trust's net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the statement of assets and liabilities. Realized and unrealized gains and losses are included in the statement of operations. These instruments involve market and/or credit risk in excess of the amount recognized in the statement of assets and 13 NOTES TO FINANCIAL STATEMENTS as of December 31, 2003 (Continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates. At December 31, 2003, the Trust did not have any open forward foreign currency contracts. NOTE 3 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES The Trust pays an investment advisory fee to ING Investments, LLC (the "Investment Adviser" or the "Adviser") at an annual rate of 1.00% of the Trust's average daily net assets. The Investment Adviser voluntarily agreed to reimburse the Trust if total annual expenses (including management fees, but excluding interest, taxes, brokerage commission and extraordinary expenses) exceed 2.50% of the Trust's average net assets. No reimbursement was required for the period ended December 31, 2003. At a special meeting held on July 22, 2003, Shareholders approved a Sub-Advisory Agreement between ING Investments, LLC and ING Aeltus Investment Management, Inc., with no change in the Adviser, the portfolio manager(s), or the overall management fee paid by each Fund. ING Funds Services, LLC (the "Administrator") serves as Administrator to the Trust. The Trust pays the Administrator a fee calculated at an annual rate of 0.10% of the Trust's average daily net assets. NOTE 4 -- OTHER TRANSACTIONS WITH AFFILIATED AND RELATED PARTIES At December 31, 2003, the Trust had the following amounts recorded in payable to affiliates on the accompanying Statements of Assets and Liabilities:
ACCRUED INVESTMENT ACCRUED MANAGEMENT ADMINISTRATIVE FEES FEES TOTAL ---------- -------------- ----- $ 19,962 $ 1,996 $ 21,958
The Trust has adopted a Retirement Policy covering all independent trustees of the Trust who will have served as an independent trustee for at least five years at the time of retirement. Benefits under this plan are based on an annual rate as defined in the plan agreement. NOTE 5 -- INVESTMENT TRANSACTIONS The cost of purchases and proceeds from sales of investments for the year ended December 31, 2003, excluding short-term securities, were $24,525,046 and $25,665,203, respectively. NOTE 6 -- CONCENTRATION OF INVESTMENT RISKS The Trust may invest in foreign securities and has a policy of investing in the securities of companies that own or develop natural resources and other basic commodities, or supply goods and services to such companies. There are certain risks involved in investing in foreign securities or concentrating in specific industries such as natural resources that are in addition to the usual risks inherent in domestic investments. These risks include those resulting from future adverse political and economic developments, as well as the possible imposition of foreign exchange or other foreign governmental restrictions or laws, all of which could affect the market and/or credit risk of the investments. NOTE 7 -- LINE OF CREDIT The Trust, in addition to certain other funds managed by the Adviser, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement") with The Bank of New York for an aggregate amount of $125,000,000. The proceeds may be used to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the funds; and (3) enable the funds to meet other emergency expenses as defined in the Credit agreement. The funds to which the line of credit is available pay a commitment fee equal to 0.09% per annum on the daily unused portion of the committed line amount payable quarterly in arrears. At December 31, 2003 the Trust did not have any loans outstanding. NOTE 8 -- CAPITAL SHARE TRANSACTIONS Transactions in capital shares and dollars were as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, 2003 DECEMBER 31, 2002 ----------------------- ----------------------- SHARES DOLLARS SHARES DOLLARS --------- ------------ --------- ------------ Shares sold 352,152 $ 4,418,070 503,557 $ 6,211,430 Dividends reinvested -- -- 3,247 41,560 Shares redeemed (540,397) (6,643,754) (670,496) (7,979,545) --------- ------------ --------- ----------- Net decrease (188,245) $ (2,225,684) (163,692) $ (1,726,555) ========= ============ ========= ============
14 NOTES TO FINANCIAL STATEMENTS as of December 31, 2003 (Continued) NOTE 9 -- FEDERAL INCOME TAXES The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. These book/tax differences may be either temporary or permanent. Permanent differences are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences are not reclassified. Key differences include the treatment of short-term capital gains, foreign currency transactions, and wash sale deferrals. Distributions in excess of net investment income and/or net realized capital gains for tax purposes are reported as distributions of paid-in capital. The following permanent tax differences have been reclassified as of December 31, 2003:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED INCOME ON GAINS INVESTMENTS (LOSSES) -------------- ------------ $ 370,491 $ (370,491)
There were no distributions to shareholders during the year ended December 31, 2003. The tax composition of dividends and distributions to shareholders was ordinary income in the amount of $41,560 for the year ended December 31, 2002. The tax-basis components of distributable earnings and the expiration dates of the capital loss carryforwards which may be used to offset future realized capital gains for federal income tax purposes as of December 31, 2003 are as follows:
UNDISTRIBUTED UNREALIZED CAPITAL ORDINARY APPRECIATION/ LOSS EXPIRATION INCOME (DEPRECIATION) CARRYFORWARDS DATES ------------- -------------- ------------- ---------- $ 249,931 $ 4,593,487 $ (41,881) 2010
NOTE 10 -- OTHER INFORMATION (UNAUDITED) As with many financial services companies, ING Investments and affiliates of ING Investments (collectively, "ING") have received requests for information from various governmental and self-regulatory agencies in connection with investigations related to trading in investment company shares. In each case, full cooperation and responses are being provided. ING is also completing an internal review of investment company share trading as well as a review of their policies and procedures in this area. ING will reimburse any ING Trust affected by inappropriate late trading or market timing for any improper profits that accrued to any person who engaged in improper frequent or late trading for which ING is responsible. 15 ING VP Natural Resources Trust PORTFOLIO OF INVESTMENTS as of December 31, 2003
SHARES VALUE - ----------------------------------------------------------------------------- COMMON STOCK: 97.3% COAL: 1.7% 10,000 Peabody Energy Corp. $ 417,100 ---------------- 417,100 ---------------- FOREST PRODUCTS & PAPER: 2.6% 10,000 Weyerhaeuser Co. 640,000 ---------------- 640,000 ---------------- IRON/STEEL: 3.5% 25,000 United States Steel Corp. 875,500 ---------------- 875,500 ---------------- MINING: 35.7% 15,000 Alcan, Inc. 704,250 20,000 Alcoa, Inc. 760,000 50,000 Barrick Gold Corp. 1,135,500 150,000 @ First Quantum Minerals Ltd. 1,633,198 25,000 Freeport-McMoRan Copper & Gold, Inc. 1,053,250 15,000 @ Inco Ltd. 597,300 546,666 @ Minara Resources Ltd. 1,223,298 25,000 Newmont Mining Corp. 1,215,250 250,000 @ Northgate Exploration Ltd. 516,541 ---------------- 8,838,587 ---------------- OIL AND GAS: 38.2% 20,000 Anadarko Petroleum Corp. 1,020,200 13,000 Burlington Resources, Inc. 719,940 74,900 Chesapeake Energy Corp. 1,017,142 30,000 Ensco Intl., Inc. 815,100 18,000 Murphy Oil Corp. 1,175,580 10,400 @,@@ Nabors Industries Ltd. 431,600 16,500 Noble Energy, Inc. 733,095 25,500 @ Pioneer Natural Resources Co. 814,215 26,200 @ Pride Intl., Inc. 488,368 25,000 @ Rowan Cos., Inc. 579,250 14,000 @ Spinnaker Exploration Co. 451,780 50,000 @ Transocean, Inc. 1,200,500 ---------------- 9,446,770 ---------------- OIL AND GAS SERVICES: 15.6% 24,000 Baker Hughes, Inc. 771,840 24,000 @ Cooper Cameron Corp. 1,118,400 50,000 @ Varco Intl., Inc. 1,031,500 26,000 @ Weatherford Intl. Ltd. 936,000 ---------------- 3,857,740 ---------------- Total Common Stock (Cost $19,482,210) 24,075,697 ---------------- PRINCIPAL AMOUNT VALUE - ----------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.2% REPURCHASE AGREEMENT: 3.2% $ 789,000 Goldman Sachs Repurchase Agreement dated 12/31/03, 0.990%, due 01/02/04, $789,043 to be received upon repurchase (Collateralized by $789,448 Federal National Mortgage Association, 2.500%, Market Value $803,724, due 12/04/06) $ 789,000 ---------------- Total Short-term Investments (Cost $789,000) 789,000 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $20,271,210)* 100.5% $ 24,864,697 OTHER ASSETS AND LIABILITIES-NET (0.5) (129,324) ----- ---------------- NET ASSETS 100.0% $ 24,735,373 ===== ================
@ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is the same as for financial statement purposes. Gross Unrealized Appreciation $ 5,074,277 Gross Unrealized Depreciation (480,790) ---------------- Net Unrealized Appreciation $ 4,593,487 ================
See Accompanying Notes to Financial Statements 16 SHAREHOLDER MEETING INFORMATION (Unaudited) A special meeting of shareholders of the ING Retail Funds (formerly Pilgrim Retail Funds) and Variable Products was held July 22, 2003, at the offices of ING Funds, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outlined below: 1. To approve a Sub-Advisory Agreement between ING Investments, LLC and ING Aeltus Investment Management, Inc., with no change in the Adviser, the portfolio manager(s), or the overall management fee paid by the Fund. 2. To transact such other business, not currently contemplated, that may properly come before the Special Meeting or any adjournment(s) thereof in the discretion of the proxies or their substitutes.
SHARES VOTED AGAINST OR SHARES BROKER TOTAL SHARES PROPOSAL SHARES VOTED FOR WITHHELD ABSTAINED NON-VOTE VOTED -------- ---------------- ------------ --------- -------- ------------ ING VP Natural Resources Trust 1 1,302,173 184,125 63,737 -- 1,550,035 ING VP Natural Resources Trust 2 1,207,203 206,635 136,197 -- 1,550,035
17 TRUSTEE AND OFFICER INFORMATION (Unaudited) The business and affairs of the Trusts are managed under the direction of the Trusts' Board of Trustees. A Trustee who is not an interested person of the Trusts, as defined in the 1940 Act, is an independent trustee ("Independent Trustee"). The Trustees and Officers of the Trust are listed below. The Statement of Additional Information includes additional information about trustees of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE TRUST SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------------- ----------- ---------- --------------- ------------- ------------- INDEPENDENT TRUSTEES Paul S. Doherty(2) Trustee July Mr. Doherty is President 116 -- 7337 E. Doubletree Ranch Rd. 2000 - and Partner, Doherty, Scottsdale, AZ 85258 Present Wallace, Pillsbury and Born: 1934 Murphy, P.C., Attorneys (1996 - Present); and Trustee of each of the funds managed by Northstar Investment Management Corporation (1993 - 1999). J. Michael Earley(3) Trustee February President and Chief 116 -- 7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, Bankers Scottsdale, AZ 85258 Present Trust Company, N.A. (1992 Born: 1945 Present). R. Barbara Gitenstein(2) Trustee February President, College of 116 -- 7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - Scottsdale, AZ 85258 Present Present). Born: 1948 Walter H. May(2) Trustee July Retired. Formerly, 116 Best Prep Charity (1991 - 7337 E. Doubletree Ranch Rd. 2000 - Managing Director and Present). Scottsdale, AZ 85258 Present Director of Marketing, Born: 1936 Piper Jaffray, Inc.; Trustee of each of the funds managed by Northstar Investment Management Corporation (1996 - 1999). Jock Patton(2) Trustee July Private Investor (June 116 Director, Hypercom, Inc. 7337 E. Doubletree Ranch Rd. 2000 - 1997 - Present). Formerly (January 1999 - Present); Scottsdale, AZ 85258 Present Director and Chief JDA Software Group, Inc. Born: 1945 Executive Officer, Rainbow (January 1999 - Present); Multimedia Group, Inc. Buick of Scottsdale, Inc.; (January 1999 - December and National Airlines, Inc. 2001).
18 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE TRUST SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------------- ----------- ---------- --------------- ------------- ------------- David W.C. Putnam(3) Trustee July President and Director, 116 Anchor International Bond 7337 E. Doubletree Ranch Rd. 2000 - F.L. Putnam Securities (December 2000 - Present); Scottsdale, AZ 85258 Present Company, Inc. and its Progressive Capital Born: 1939 affiliates; President, Accumulation Trust (August Secretary and Trustee, The 1998 - Present); Principled Principled Equity Market Equity Market Fund Fund. Formerly, Trustee, (November 1996 - Present), Trust Realty Trust Mercy Endowment Foundation (December Corp.; Anchor (1995 - Present); Director, Investment Trust; Bow F.L. Putnam Investment 2000 - Present); Ridge Management Company Mining Company and each (December 2001 - Present); of the F.L. Putnam funds Asian American Bank and managed by Northstar Trust Company (June 1992 - Investment Foundation Present); and Notre Dame Management Corporation Health Care Center (1991 - (1994 - 1999). Present) F.L. Putnam Securities Company, Inc. (June 1978 - Present); and an Honorary Trustee, Mercy Hospital (1973 - Present). Blaine E. Rieke(3) Trustee February General Partner, 116 Morgan Chase Trust Co. 7337 E. Doubletree Ranch Rd. 2001 - Huntington Partners (January 1998 - Present). Scottsdale, AZ 85258 Present (January 1997 - Present). Born: 1933 Chairman of the Board and Trustee of each of the funds managed by ING Investment Management Co. LLC (November 1998 - February 2001). Roger B. Vincent(3) Trustee February President, Springwell 116 Director, AmeriGas 7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - Propane, Inc. (1998 - Scottsdale, AZ 85258 Present Present). Formerly, Present). Born: 1945 Director Tatham Offshore, Inc. (1996 - 2000). Richard A. Wedemeyer(2) Trustee February Retired. Mr. Wedemeyer 116 Touchstone Consulting 7337 E. Doubletree Ranch Rd. 2001 - was formerly Vice Group (1997 - Present). Scottsdale, AZ 85258 Present President -- Finance Born: 1936 and Administration, Channel Corporation (June 1996 - April 2002). Trustee, First Choice Funds (1997 - 2001); and of each of the funds managed by ING Investment Management Co. LLC (1998 - 2001).
19 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE TRUST SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------------- ----------- ---------- --------------- ------------- ------------- TRUSTEES WHO ARE "INTERESTED PERSONS" Thomas J. McInerney(4) Trustee February Chief Executive Officer, 170 Director, Hemisphere Inc. 7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial (May 2003 - Present); Scottsdale, AZ 85258 Present Services (September 2001 - Equitable Life Insurance Born: 1956 Present); General Manager Co., Golden American Life and Chief Executive Insurance Co., Life Officer, ING U.S. Worksite Insurance Company of Financial Services Georgia, Midwestern United (December 2000 - Present); Life Insurance Co., Member ING Americas ReliaStar Life Insurance Executive Committee (2001 Co., Security Life of - Present); President, Denver, Security Chief Executive Officer Connecticut Life Insurance and Director of Northern Co., Southland Life Life Insurance Company Insurance Co., USG Annuity (March 2001 - October and Life Company, and 2002), ING Aeltus Holding United Life and Annuity Company, Inc. (2000 - Insurance Co. Inc (March Present), ING Retail 2001 - Present); Director, Holding Company (1998 - Ameribest Life Insurance Present), ING Life Co., (March 2001 to Insurance and Annuity January 2003); Director, Company (September 1997 - First Columbine Life November 2002) and ING Insurance Co. (March 2001 Retirement Holdings, Inc. to December 2002); Member (1997 - Present). of the Board, National Formerly, General Manager Commission on Retirement and Chief Executive Policy, Governor's Council Officer, ING Worksite on Economic Division (December 2000 - Competitiveness and October 2001), President Technology of Connecticut, ING-SCI, Inc. (August 1997 Connecticut Business and - December 2000); Industry Association, President, Aetna Financial Bushnell; Connecticut Services (August 1997 - Forum; Metro Hartford December 2000). Chamber of Commerce; and is Chairman, Concerned Citizens for Effective Government.
20 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE TRUST SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------------- ----------- ---------- --------------- ------------- ------------- John G. Turner(5) Trustee July Chairman, Hillcrest 116 Hormel Foods Corporation 7337 E. Doubletree Ranch Rd. 2000 - Capital Partners (May 2002 (March 2000 - Present); Scottsdale, AZ 85258 Present - Present); President, Shopko Stores, Inc. Born: 1939 Turner Investment Company (August 1999 - Present); (January 2002 - Present). and M.A. Mortenson Mr. Turner was formerly Company (March 2002 - Vice Chairman of ING Present). Americas (2000 - 2002); Chairman and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company (1993 - 2000); Chairman of ReliaStar United Services Life Insurance Company (1995 - 1998); Chairman of ReliaStar Life Insurance Company of New York (1995 - 2001); Chairman of Northern Life Insurance Company (1992 - 2001); Chairman and Trustee of the Northstar affiliated investment companies (1993 - 2001) and Director, Northstar Investment Management Corporation and its affiliates (1993 - 1999).
- ---------- (1) Trustees serve until their successors are duly elected and qualified, subject to the Board's retirement policy. (2) Valuation Committee member. (3) Audit Committee member. (4) Mr. McInerney is an "interested person," as defined under the 1940 Act, because of his affiliation with ING U.S. Financial Services and ING U.S. Worksite Financial Services, both affiliates of ING Investments, LLC. (5) Mr. Turner is an "interested person," as defined under the 1940 Act, because of his affiliation with ING Americas, an affiliate of ING Investments, LLC. 21 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH TRUST TIME SERVED(1) PAST FIVE YEARS ------------- --------------- -------------- --------------- OFFICERS: James M. Hennessy President and Chief February 2001 - President and Chief Executive Officer of ING 7337 E. Doubletree Ranch Rd. Executive Officer Present Capital Corporation, LLC, ING Funds Services, LLC, Scottsdale, AZ 85258 ING Advisors, Inc., ING Investments, LLC, Born: 1949 Chief Operating July 2000 - Present Lexington Funds Distributor, Inc., Express America Officer T.C. Inc. and EAMC Liquidation Corp. (since December 2001); Executive Vice President and Chief Senior Executive July 2000 - Operating Officer of ING Funds Distributor, LLC Vice President February 2001 (since June 2000). Formerly, Executive Vice President and Chief Operating Officer of ING Secretary July 2000 - Quantitative Management, Inc. (October 2001 to February 2001 September 2002); Senior Executive Vice President (June 2000 to December 2000) and Secretary (April 1995 to December 2000) of ING Capital Corporation, LLC, ING Funds Services, LLC, ING Investments, LLC, ING Advisors, Inc., Express America T.C. Inc., and EAMC Liquidation Corp.; and Executive Vice President, ING Capital Corporation, LLC and its affiliates (May 1998 to June 2000) and Senior Vice President, ING Capital Corporation, LLC and its affiliates (April 1995 to April 1998). Stanley D. Vyner Executive Vice July 2000 - Present Executive Vice President of ING Advisors, Inc. and 7337 E. Doubletree Ranch Rd. President ING Investments, LLC (July 2000 to present) and Scottsdale, Arizona 85258 Chief Investment Officer of the International Born: 1950 Portfolios, ING Investments, LLC (July 1996 to present). Formerly, President and Chief Executive Officer of ING Investments, LLC (August 1996 to August 2002). Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief Financial Officer 7337 E. Doubletree Ranch Rd. President and Present and Treasurer of ING Funds Services, LLC, ING Scottsdale, AZ 85258 Assistant Secretary Funds Distributor, LLC, ING Advisors, Inc., ING Born: 1958 Investments, LLC (December 2001 to present), Principal Financial July 2000 - Present Lexington Funds Distributor, Inc., Express America Officer T.C. Inc. and EAMC Liquidation Corp. (since December 2001). Formerly, Executive Vice Senior Vice July 2000 - February President, Chief Financial Officer and Treasurer President 2002 of ING Quantitative Management, Inc. (December 2001 to October 2002); Senior Vice President, ING Funds Services, LLC, ING Investments, LLC, and ING Funds Distributor, LLC (June 1998 to December 2001) and Chief Financial Officer of Endeavor Group (April 1997 to June 1998).
22 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH TRUST TIME SERVED(1) PAST FIVE YEARS ------------- --------------- -------------- --------------- Robert S. Naka Senior Vice July 2000 - Present Senior Vice President and Assistant Secretary of 7337 E. Doubletree Ranch Rd. President and ING Funds Services, LLC, ING Funds Distributor, Scottsdale, AZ 85258 LLC, ING Advisors, Inc., ING Investments, LLC Born: 1963 Assistant Secretary July 2000 - Present (October 2001 to present) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Senior Vice President and Assistant Secretary for ING Quantitative Management, Inc. (October 2001 to October 2002); Vice President, ING Investments, LLC (April 1997 to October 1999), ING Funds Services, LLC (February 1997 to August 1999) and Assistant Vice President, ING Funds Services, LLC (August 1995 to February 1997). Kimberly A. Anderson Senior Vice November 2003 - Vice President and Assistant Secretary of ING 7337 E. Doubletree Ranch Rd. President Present Funds Services, LLC, ING Funds Distributor, LLC, Scottsdale, AZ 85258 ING Advisors, Inc., ING Investments, LLC (since Born: 1964 Vice President February 2001 - October 2001) and Lexington Funds Distributor, November 2003 Inc. (since December 2001). Formerly, Vice President for ING Quantitative Management, Inc. Secretary February 2001 - (October 2001 to October 2002); Assistant Vice August 2003 President of ING Funds Services, LLC (November 1999 to January 2001) and has held various other Assistant Vice July 2000 - positions with ING Funds Services, LLC for more President and February 2001 than the last five years. Assistant Secretary Robyn L. Ichilov Vice President and July 2000 - Present Vice President of ING Funds Services, LLC (since 7337 E. Doubletree Ranch Rd Treasurer October 2001) and ING Investments, LLC (since Scottsdale, AZ 85258 August 1997); Accounting Manager, ING Investments, Born: 1967 LLC (since November 1995). J. David Greenwald Vice President August 2003 - Vice President of Mutual Fund Compliance of ING 7337 E. Doubletree Ranch Rd. Present Funds Services, LLC (May 2003 - Present). Formerly Scottsdale, Arizona 85258 Assistant Treasurer and Director of Mutual Fund Born: 1957 Compliance and Operations of American Skandia, A Prudential Financial Company (October 1996 - May 2003). Lauren D. Bensinger Vice President February 2003 - Vice President and Chief Compliance Officer, ING 7337 E. Doubletree Ranch Rd. Present Funds Distributor, LLC. (July 1995 to Present); Scottsdale, Arizona 85258 Vice President (February 1996 to Present) and Born: 1954 Chief Compliance Officer (October 2001 to Present) ING Investments, LLC; Vice President and Chief Compliance Officer, ING Advisors, Inc. (July 2000 to Present), Formerly Vice President and Chief Compliance Officer ING Quantitative Management, Inc. (July 2000 to September 2002), and Vice President, ING Fund Services, LLC (July 1995 to Present).
23 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH TRUST TIME SERVED(1) PAST FIVE YEARS ------------- --------------- -------------- --------------- Todd Modic Vice President August 2003 - Vice President of Financial Reporting-Fund 7337 E. Doubletree Ranch Rd. Present Accounting of ING Funds Services, LLC (September Scottsdale, AZ 85258 Assistant Vice 2002 to present). Formerly, Director of Financial Born: 1967 President August 2001 - Reporting of ING Investments, LLC (March 2001 to August 2003 September 2002), Director of Financial Reporting, Axient Communications, Inc. (May 2000 to January 2001) and Director of Finance, Rural/Metro Corporation (March 1995 to May 2000). Huey P. Falgout, Jr. Secretary August 2003 - Counsel, ING U.S. Financial Services (November 7337 E. Doubletree Ranch Rd. Present 2002 - Present). Formerly, Associate General Scottsdale, Arizona 85258 Counsel of AIG American General (January 1999 - Born: 1963 November 2002) and Associate General Counsel of Van Kampen, Inc. (April 1992 - January 1999). Susan P. Kinens Assistant Vice February 2003 - Assistant Vice President and Assistant Secretary, 7337 E. Doubletree Ranch Rd. President and Present ING Funds Services, LLC (December 2002 - Present); Scottsdale, AZ 85258 Assistant Secretary and has held various other positions with ING Born: 1976 Funds Services, LLC for the last five years. Maria M. Anderson Assistant Vice August 2001 - Assistant Vice President of ING Funds Services, 7337 E. Doubletree Ranch Rd. President Present LLC (since October 2001). Formerly, Manager of Scottsdale, AZ 85258 Fund Accounting and Fund Compliance, ING Born: 1958 Investments, LLC (September 1999 to November 2001); Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 to August 1999); and Financial Reporting Analyst, Stein Roe Mutual Funds (August 1997 to July 1998). Theresa Kelety Assistant Secretary August 2003 - Counsel, ING U.S. Financial Services (April 2003 - 7337 E. Doubletree Ranch Rd. Present Present). Formerly, Senior Associate with Shearman Scottsdale, Arizona 85258 & Sterling (February 2000 - April 2003) and Born: 1963 Associate with Sutherland Asbill & Brennan (1996 - February 2000).
- ---------- (1) The officers hold office until the next annual meeting of the Trustees and until their successors have been elected and qualified. 24 (THIS PAGE INTENTIONALLY LEFT BLANK) (THIS PAGE INTENTIONALLY LEFT BLANK) INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 ADMINISTRATOR ING Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 DISTRIBUTOR ING Funds Distributor, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 1-800-334-3444 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141-6368 CUSTODIAN Bank of New York 100 Colonial Center Parkway, Suite 300 Lake Mary, FL 32746 LEGAL COUNSEL Dechert LLP 1775 Eye Street, N.W. Washington, D.C. 20006 INDEPENDENT AUDITORS KPMG LLP 99 High Street Boston, MA 02110 A prospectus containing more complete information regarding the Trust, including charges and expenses, may be obtained by calling ING Variable Annuities' Customer Service Desk at 1-800-366-0066. Please read the prospectus carefully before you invest or send money. The Trust's proxy voting record will be available without charge on or about August 31, 2004 on the Trust's website at www.ingfunds.com and on the SEC's website at www.sec.gov. [ING FUNDS LOGO] VPNRTAR1203-021804 ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to the Registrant's principal executive officer and principal financial officer. There were no amendments to the Code during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code during the period covered by this report. The code of ethics is filed herewith pursuant to Item 10(a)(1), Exhibit 99.CODE ETH. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees has determined that David Putnam is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Putnam is "independent" for purposes of Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) AUDIT FEES: The aggregate fees billed for each of the last two fiscal years for professional services rendered by KPMG LLP ("KPMG"), the principal accountant, for the audit of the registrant's annual financial statements and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $15,000 for the year ended December 31, 2003 and $20,744 for the year ended December 31, 2002. (b) AUDIT-RELATED FEES: The aggregate fees billed in each of the last two fiscal years for assurance and related services by KPMG that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. None (c) TAX FEES: The aggregate fees billed in each of the last two fiscal years for professional services rendered by KPMG for tax compliance, tax advice, and tax planning were $3,500 in the year ended December 31, 2003 and $3,950 in the year ended December 31, 2002. Such services included review of excise distribution calculations (if applicable), preparation of the Funds' federal, state and excise tax returns, tax services related to mergers and routine consulting. (d) ALL OTHER FEES: The aggregate fees billed in each of the last two fiscal years for products and services provided by KPMG, other than the services reported in paragraphs (a) through (c) of this Item. None (e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES MODEL AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY I. STATEMENT OF PRINCIPLES Under the Sarbanes-Oxley Act of 2002 (the "Act"), the Audit Committee of the Board of Directors or Trustees (the "Committee") of the ING Funds (each a "Fund," collectively, the "Funds") set out under Paragraph I on EXHIBIT A to this Audit and Non-Audit Services Pre-Approval Policy ("Policy") is responsible for the oversight of the work of the Funds' independent auditors. As part of its responsibilities, the Committee must pre-approve the audit and non-audit services performed by the auditors in order to assure that the provision of these services does not impair the auditors' independence from the Funds. The Committee has adopted, and the Board has ratified, this Policy, which sets out the procedures and conditions under which the services of the independent auditors may be pre-approved. Under Securities and Exchange Commission ("SEC") rules promulgated in accordance with the Act, the Funds' may establish two different approaches to pre-approving audit and non-audit services. The Committee may approve services without consideration of specific case-by-case services ("general pre-approval") or it may pre-approve specific services ("specific pre-approval"). The Committee believes that the combination of these approaches contemplated in this Policy results in an effective and efficient method for pre-approving audit and non-audit services to be performed by the Funds' independent auditors. Under this Policy, services that are not of a type that may receive general pre-approval require specific pre-approval by the Committee. Any proposed services that exceed pre-approved cost levels or budgeted amounts will also require the Committee's specific pre-approval. For both types of approval, the Committee considers whether the subject services are consistent with the SEC's rules on auditor independence and that such services are compatible with maintaining the auditors independence. The Committee also considers whether a particular audit firm is in the best position to provide effective and efficient services to the Funds. Reasons that the auditors are in the best position include the auditors' familiarity with the Funds' business, personnel, culture, accounting systems, risk profile, and other factors, and whether the services will enhance the Funds' ability to manage and control risk or improve audit quality. Such factors will be considered as a whole, with no one factor being determinative. The appendices attached to this Policy describe the audit, audit-related, tax-related, and other services that have the Committee's general pre-approval. For any service that has been approved through general pre-approval, the general pre-approval will remain in place for a period 12 months from the date of pre-approval, unless the Committee determines that a different period is appropriate. The Committee will annually review and pre-approve the services that may be provided by the independent auditors without specific pre-approval. The Committee will revise the list of services subject to general pre-approval as appropriate. This Policy does not serve as a delegation to Fund management of the Committee's duty to pre-approve services performed by the Funds' independent auditors. II. AUDIT SERVICES The annual audit services engagement terms and fees are subject to the Committee's specific pre-approval. Audit services are those services that are normally provided by auditors in connection with statutory and regulatory filings or engagements or those that generally only independent auditors can reasonably provide. They include the Funds' annual financial statement audit and procedures that the independent auditors must perform in order to form an opinion on the Funds' financial statements (E.G., information systems and procedural reviews and testing). The Committee will monitor the audit services engagement and approve any changes in terms, conditions or fees deemed by the Committee to be necessary or appropriate. The Committee may grant general pre-approval to other audit services, such as statutory audits and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or issued in connection with securities offerings. The Committee has pre-approved the audit services listed on Appendix A. The Committee must specifically approve all audit services not listed on Appendix A. III. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or the review of the Funds' financial statements or are traditionally performed by the independent auditors. The Committee believes that the provision of audit-related services will not impair the independent auditors' independence, and therefore may grant pre-approval to audit-related services. Audit-related services include accounting consultations related to accounting, financial reporting or disclosure matters not classified as "audit services;" assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures relating to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Form N-SAR or Form N-CSR. The Committee has pre-approved the audit-related services listed on Appendix B. The Committee must specifically approve all audit-related services not listed on Appendix B. IV. TAX SERVICES The Committee believes the independent auditors can provide tax services to the Funds, including tax compliance, tax planning, and tax advice, without compromising the auditors' independence. Therefore, the Committee may grant general pre-approval with respect to tax services historically provided by the Funds' independent auditors that do not, in the Committee's view, impair auditor independence and that are consistent with the SEC's rules on auditor independence. The Committee will not grant pre-approval if the independent auditors initially recommends a transaction the sole business purpose of which is tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Committee may consult outside counsel to determine that tax planning and reporting positions are consistent with this Policy. The Committee has pre-approved the tax-related services listed on Appendix C. The Committee must specifically approve all tax-related services not listed on Appendix C. V. OTHER SERVICES The Committee believes it may grant approval of non-audit services that are permissible services for independent auditors to a Fund. The Committee has determined to grant general pre-approval to other services that it believes are routine and recurring, do not impair auditor independence, and are consistent with SEC rules on auditor independence. The Committee has pre-approved the non-audit services listed on Appendix D. The Committee must specifically approve all non-audit services not listed on Appendix D. A list of the SEC's prohibited non-audit services is attached to this Policy as Appendix E. The SEC's rules and relevant guidance should be consulted to determine the precise definitions of these impermissible services and the applicability of exceptions to certain of the SEC's prohibitions. VI. PRE-APPROVAL OF FEE LEVELS AND BUDGETED AMOUNTS The Committee will annually establish pre-approval fee levels or budgeted amounts for audit, audit-related, tax and non-audit services to be provided to the Funds by the independent auditors. Any proposed services exceeding these levels or amounts require the Committee's specific pre-approval. The Committee considers fees for audit and non-audit services when deciding whether to pre-approve services. The Committee may determine, for a pre-approval period of 12 months, the appropriate ratio between the total amount of fees for the Fund's audit, audit-related, and tax services (including fees for services provided to Fund affiliates that are subject to pre-approval), and the total amount of fees for certain permissible non-audit services for the Fund classified as other services (including any such services provided to Fund affiliates that are subject to pre-approval). VII. PROCEDURES Requests or applications for services to be provided by the independent auditors will be submitted to management. If management determines that the services do not fall within those services generally pre-approved by the Committee and set out in the appendices to these procedures, management will submit the services to the Committee or its delagee. Any such submission will include a detailed description of the services to be rendered. Notwithstanding this paragraph, the Committee will, on an annual basis, receive from the independent auditors a list of services provided by the auditors during the prior 12-month period. VIII. DELEGATION The Committee may delegate pre-approval authority to one or more of the Committee's members. Any member or members to whom such pre-approval authority is delegated must report any pre-approval decisions, including any pre-approved services, to the Committee at its next scheduled meeting. The Committee will identify any member to whom pre-approval authority is delegated in writing. The member will retain such authority for a period of 12 months from the date of pre-approval unless the Committee determines that a different period is appropriate. The period of delegated authority may be terminated by the Committee or at the option of the member. IX. ADDITIONAL REQUIREMENTS The Committee will take any measures the Committee deems necessary or appropriate to oversee the work of the independent auditors and to assure the auditors' independence from the Funds. This may include reviewing a formal written statement from the independent auditors delineating all relationships between the auditors and the Funds, consistent with Independence Standards Board No. 1, and discussing with the auditors their methods and procedures for ensuring independence. Appendix A Pre-Approved Audit Services for the Pre-Approval Period June 1, 2003 through May 31, 2004 Service
THE FUND(S) FEE RANGE - --------------------------------------------------------------- --------------- ------------------ Statutory audits or financial audits (including tax services /X/ As presented to associated with non-audit services) Audit Committee Services associated with SEC registration statements, periodic /X/ Not to exceed reports and other documents filed with the SEC or other $8,500 per filing documents issued in connection with securities offerings (E.G., consents), and assistance in responding to SEC comment letters. Consultations by Fund management with respect to accounting or /X/ Not to exceed disclosure treatment of transactions or events and/or the $8,000 during actual or potential effect of final or proposed rules, the Pre-Approval standards or interpretations by the SEC, Financial Accounting Period Standards Board, or other regulatory or standard setting bodies.
Appendix B Pre-Approved Audit-Related Services for the Pre-Approval Period June 1, 2003 through May 31, 2004 Service
FUND THE FUND(S) AFFILIATES FEE RANGE - ---------------------------------------------- --------------- ----------------- ------------------- Services related to Fund mergers /X/ /X/ Not to exceed $10,000 per merger Consultations by Fund management with /X/ Not to exceed respect to accounting or disclosure $5,000 per treatment of transactions or events and/or occurrence during the actual or potential effect of final or the Pre-Approval proposed rules, standards or interpretations Period by the SEC, Financial Accounting Standards Board, or other regulatory or standard setting bodies. [NOTE: Under SEC rules some consultations may be "audit" services and others may be "audit-related" services.] Review of the Funds' semi-annual financial /X/ Not to exceed statements $5,000 for each set of financial statements Reports to regulatory or government agencies /X/ Up to $5,000 per related to the annual engagement occurrence during the Pre-Approval Period Regulatory compliance assistance /X/ /X/ Not to exceed $5,000 per quarter Training courses /X/ Not to exceed $2,000 per course For Prime Rate Trust, agreed upon procedures /X/ Not to exceed for quarterly reports to rating agencies $9,000 per quarter
Appendix C Pre-Approved Tax Services for the Pre-Approval Period June 1, 2003 through May 31, 2004 Service
FUND THE FUND(S) AFFILIATES FEE RANGE - ---------------------------------------------- --------------- ----------------- ------------------- Preparation of federal and state income tax /X/ Not to exceed returns and federal excise tax returns for the $6,000 per Fund Funds including assistance and review with during the excise tax distributions. Pre-Approval Period Review of IRC Sections 851(b) and 817(h) /X/ Not to exceed diversification testing on a real-time basis $2,000 per Fund during the Pre-Approval Period Review of year-end reporting for 1099's /X/ Not to exceed $800 per Fund during the Pre-Approval Period Tax assistance and advice regarding statutory, /X/ /X/ Not to exceed regulatory or administrative developments $5,000 for the Funds or for the Funds' investment adviser during the Pre-Approval Period International tax services (e.g., Taiwan and /X/ Not to exceed India) $5,000 per Fund during the Pre-Approval Period Tax training courses /X/ Not to exceed $2,000 per course during the Pre-Approval Period
Service
FUND THE FUND(S) AFFILIATES FEE RANGE - ---------------------------------------------- --------------- ----------------- ------------------- Tax services associated with Fund mergers /X/ Not to exceed $8,000 per merger during the Pre-Approval Period Tax services related to the preparation of annual /X/ Not to exceed PFIC statements and annual Form 5471(Controlled $18,000 during Foreign Corporation) for structured finance the Pre-Approval vehicles Period Tax services related to CLOs and CBOs /X/ Not to exceed $15,000 per quarter
Appendix D Pre-Approved Other Services for the Pre-Approval Period June 1, 2003 through May 31, 2004 Service
THE FUND(S) FUND AFFILIATES FEE RANGE - ---------------------------------------------- --------------- ----------------- ------------------- Agreed-upon procedures for Class B share /X/ Not to exceed 12b-1 programs $25,000 during the Pre-Approval Period AIMR assistance, and/or verification of /X/ Not to exceed composites $25,000 during the Pre-Approval Period Security counts performed pursuant to Rule /X/ Not to exceed 17f-2 of the 1940 Act (I.E., counts for $5,000 per Fund Funds holding securities with affiliated during the sub-custodians) Pre-Approval Period
Appendix E Prohibited Non-Audit Services Dated: 200X - Bookkeeping or other services related to the accounting records or financial statements of the Funds - Financial information systems design and implementation - Appraisal or valuation services, fairness opinions, or contribution-in-kind reports - Actuarial services - Internal audit outsourcing services - Management functions - Human resources - Broker-dealer, investment adviser, or investment banking services - Legal services - Expert services unrelated to the audit - Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible (e) (2) PERCENTAGE OF SERVICES REFERRED TO IN 4(b) - (4)(d) THAT WERE APPROVED BY THE AUDIT COMMITTEE 100% of the services were approved by the audit committee. (f) PERCENTAGE OF HOURS EXPENDED ATTRIBUTABLE TO WORK PERFORMED BY OTHER THAN FULL TIME EMPLOYEES OF KPMG IF GREATER THAN 50%. Not applicable. (g) NON-AUDIT FEES: The non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were $344,373 for year ended December 31, 2003 and $374,718 for the year ended December 31, 2002. (h) PRINCIPAL ACCOUNTANTS INDEPENDENCE: The Registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is compatible with maintaining KPMG's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. RESERVED. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. RESERVED. ITEM 9. CONTROLS AND PROCEDURES. (a) Based on our evaluation conducted within 90 days of the filing date, hereof, the design and operation of the registrant's disclosure controls and procedures are effective to ensure that material information relating to the registrant is made known to the certifying officers by others within the appropriate entities, particularly during the period in which Forms N-CSR are being prepared, and the registrant's disclosure controls and procedures allow timely preparation and review of the information for the registrant's Form N-CSR and the officer certifications of such Form N-CSR. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. (a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT. (b) The officer certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): ING VP NATURAL RESOURCES TRUST By /s/ James M. Hennessy ---------------------- James M. Hennessy President and Chief Executive Officer Date March 5, 2004 - ------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James M. Hennessy ---------------------- James M. Hennessy President and Chief Executive Officer Date March 5, 2004 - ------------------ By /s/ Michael J. Roland ---------------------- Michael J. Roland Executive Vice President and Chief Financial Officer DATE March 5, 2004 - ------------------ EX-99.CODEETH 3 a2125854zex-99_codeeth.txt EX-99.CODE ETH EX-99.CODEETH ING FUNDS SARBANES-OXLEY ACT CODE OF ETHICS A. ADOPTION The Boards of Directors/Trustees (collectively, the "Board") of the ING Funds (each a "Fund," and collectively, the "Funds") set forth on EXHIBIT A hereto, as such exhibit may be amended from time to time, have adopted this code of ethics (the "Code") in connection with the requirements of Section 406 of the Sarbanes-Oxley Act of 2002 (the "Act") concerning disclosure of a code of ethics for the principal executive officer, the principal financial officer, the principal accounting officer or controller, and persons performing similar functions (regardless of whether they are employed by a Fund or a third party) of the Funds (the "Covered Officers"). For the purposes of this Code, the chief executive officer and the chief financial officer of the Funds are the Covered Officers for the Funds. B. POLICY AND PURPOSE; CONFLICTS WITH LAW AND POLICY 1. POLICY AND PURPOSE It is the policy of the Funds to conduct their affairs in an honest and ethical manner, and to comply with all applicable laws, rules and regulations. The purpose of this Code is to assist in the accomplishment of the foregoing policy, to deter wrongdoing and to promote: a. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. b. Full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by a Fund. c. Compliance with applicable laws and governmental rules and regulations. d. The prompt internal reporting of violations of this Code to an appropriate person or persons identified in this Code. e. Accountability for adherence to this Code. 1 2. CONFLICTS WITH LAW AND POLICY If any part of this Code, or if compliance with any part of this Code, violates or is in conflict with any applicable law, the provisions of such applicable law shall control. If any part of this Code, or if compliance with any part of this Code, violates or is in conflict with any policy or practice of the Funds or of any service provider to the Funds, the provisions of this Code shall control. C. COVERED OFFICER DUTIES Each Covered Officer shall adhere to a high standard of business ethics in his or her dealings with and on behalf of a Fund. Specifically, each Covered Officer shall: 1. Conduct himself or herself in an honest and ethical manner when dealing with or on behalf of a Fund. 2. Refrain from engaging in any activity that would compromise his or her professional ethics or otherwise prejudice his or her ability faithfully to carry out his or her duties to the Funds. 3. Refrain from using or appearing to use material non-public information acquired in the course of his or her work for the Funds for unethical or illegal advantage, either directly or indirectly through others. 4. Place the interests of the Funds and their shareholders before his or her personal interests, and handle actual or apparent conflicts of interest between his or her personal interests and the interests of a Fund in an ethical manner. 5. Be familiar with the disclosure requirements generally applicable to the Funds and take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s) to ensure full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the SEC or other governmental authorities, and in other public communications made by a Fund. 6. Comply with applicable laws and governmental rules and regulations in his or her dealings with or on behalf of a Fund, and take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s), to ensure compliance by the Fund with applicable laws and governmental rules and regulations. 7. Take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s), to ensure prompt internal reporting of violations of this Code to an appropriate person or persons identified in this Code. 8. Not knowingly misrepresent, or knowingly cause or permit others to misrepresent, facts about a Fund to a Fund's shareholders, directors, counsel or auditors, to governmental regulators or self-regulatory organizations, or to the public. 2 9. Consult with other officers and employees of a Fund, and its adviser(s), administrator and principal underwriter, with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Funds. 10. Promote compliance by the Funds with the standards and restrictions imposed by applicable laws, rules and regulations. 11. Not influence investment decisions or financial or other reporting by the Fund whereby the Covered Officer would benefit personally. 12. Not cause a Fund to take an action, or fail to take an action, whereby the Covered Officer would benefit personally. 13. Not retaliate or take any adverse action against, or cause or permit any retaliation or adverse action to be taken against, any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations of this Code or of applicable laws and governmental rules and regulations that are made in good faith. D. DEFINITIONS 1. CONFLICTS OF INTEREST For the purposes of this Code (i) an "actual conflict of interest" is a situation in which a Covered Officer, a member of a Covered Officer's immediate family, or an entity other than a Fund on whose behalf a Covered Officer is acting or from which a Covered Officer may receive compensation or other personal benefit, has an interest in a transaction or the results of a transaction in which a Fund is involved that is different from the interests of the Fund with regard to that same transaction, and (ii) an "apparent conflict of interest" is a situation in which a Covered Officer, a member of a Covered Officer's immediate family, or an entity other than a Fund on whose behalf a Covered Officer is acting or from which a Covered Officer may receive compensation or other personal benefit, appears to have an actual conflict of interest, without regard to whether an actual conflict of interest in fact exists.(1) Notwithstanding the foregoing, - ---------- (1) Certain actual conflicts of interest are inherent in the relationship between a Fund and a Covered Officer who is employed by the Fund's investment adviser, administrator or principal underwriter. As a result, this Code recognizes that Covered Officers will, in the normal course of their duties (whether acting on behalf of a Fund or on behalf of the adviser, administrator or principal underwriter, or for a combination thereof), be involved in recommending actions that may have different effects on the respective parties or may redound to the benefit of the adviser, the administrator or the principal underwriter at the expense of the Fund. For example, the negotiation of the underlying advisory, administrative and underwriting agreements necessarily places such Covered Officers in an actual conflict of interest position as to a Fund. These inherent conflicts of interest are known to and understood by the Funds and the Board, and the Board has determined that the existence of these conflicts of interest is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Therefore, the fact that a Covered Officer acts primarily or exclusively on behalf of a party other than a Fund with regard to a transaction that is covered by 3 an actual conflict of interest shall not include situations that are covered by law or by the Funds' and an investment adviser's code of ethics required under Rule 17j-1 of the Investment Company Act of 1940.(2) 2. WAIVER AND IMPLICIT WAIVER The term "waiver" means the approval by a Fund of a material departure from a provision of this Code. The term "implicit waiver" means a failure by a Fund to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to an executive officer(3) of the Fund. 3. BENEFIT PERSONALLY; IMMEDIATE FAMILY With regard to a Covered Officer, the term "benefit personally" means the direct or indirect receipt by the Covered Officer, by a member of the Covered Officer's immediate family, or by any entity (other than a Fund's investment adviser or any affiliate thereof) of which the Covered Officer or any member of the Covered Officer's immediate family owns 5% or more of the beneficial ownership interest or by which the Covered Officer or any member of the Covered Officer's immediate family is employed, or from which the Covered Officer or any member of the Covered Officer's immediate family receives any compensation or other benefit, of any compensation or other personal benefit. For the purposes of this Code, the term "member of the immediate family" means a Covered Officer's parent, spouse of a parent, child, spouse of a child, spouse, brother, or sister, and includes step and adoptive relationships. E. ACTIVITIES REQUIRING PRIOR APPROVAL A Covered Officer and his or her immediate family shall not engage in any of the following activities without the prior written approval of the Funds' Chief Legal Officer (the "Chief Legal Officer") and the Funds' Chief Executive Officer, except that in the case of the Chief Executive Officer or a member of the Chief Executive Officer's immediate family, such approval shall be from the Chief Legal Officer and the Coordination and Compliance - ---------- such inherent conflicts of interest shall not IPSO FACTO cause such conduct to be in violation of the requirements of this Code. Absent specific dishonest or unethical conduct in such a transaction, the actions by a Covered Officer in such regard shall be deemed to be honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. (2) These inherent conflicts of interest are already subject to prohibitions in the Investment Company Act of 1940 (the "Investment Company Act") and the Investment Advisers Act of 1940 (the "Investment Advisers Act"). For example, a Covered Officer may not individually engage in certain transactions (such as the purchase of sale or securities or other property) with a Fund because of his or her status as an "affiliated person" of the Fund. The Funds' and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat and replace those programs and procedures, and such actual and apparent conflicts of interest fall outside of the coverage of this Code. All other actual and apparent conflicts of interest, even if such actual and apparent conflicts of interest are not subject to provisions in the Investment Company Act or the Investment Advisers Act, are covered by this Code. (3) The term "executive officer," when used with reference to a registrant, means its president, any vice president of the registrant in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function or any other person who performs similar policy making functions for the registrant. 4 Committee of the Board. To obtain such approval, the Covered Officer shall submit a written statement to the Chief Legal Officer describing in detail the proposed activity and the reasons for it. 1. Service as a director, partner, officer, manager or managing member on the board of any public or private company(4) other than a Fund's investment adviser, administrator, principal underwriter, or an affiliate of any of the foregoing, if such company has current or prospective business dealings with a Fund or if any Fund may invest in securities issued by such company. 2. Receipt of any entertainment(5) or meals from any company with which the Fund has current or prospective business dealings unless such entertainment or meals are business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety. For the purposes of this Code, entertainment and meals that are incidental to a business conference, seminar or meeting shall be deemed business-related, reasonable in cost, and appropriate as to time and place. 3. Having any ownership interest in, or any consulting, employment or compensation relationship with, any of a Fund's service providers, other than its investment adviser(s), administrator, principal underwriter, or any affiliated person thereof. 4. Exploit for his or her own personal gain any opportunity which a Fund may exploit. This prohibition shall not apply to securities trading undertaken in conformance with the Funds' and an investment adviser's code of ethics adopted pursuant to Rule 17j-1 of the Investment Company Act. F. PROHIBITED ACTIVITIES A Covered Officer and his or her immediate family shall not engage in any of the following activities: 1. Have a direct or indirect financial interest, such as compensation or equity ownership, in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment with the Fund's investment adviser, administrator, principal underwriter, or any affiliated person thereof. 2. Receive any gifts in excess of $500 in any calendar year from any entity or - ---------- (4) For the purposes of this Code, "company" includes any legal or business entity such as a corporation, limited liability company, partnership, limited partnership, trust, association, sole proprietorship, ETC. (5) For the purposes of this Code, "entertainment" means activities or events, such as golfing, theater, sporting events, ETC., at which a representative of the entertaining company is present along with the Covered Officer or his or her immediate family member. If a representative of the entertaining company is not present, such activities or events shall be treated as gifts hereunder. 5 person that directly or indirectly currently or prospectively does or will do business with or receives compensation or other benefits from a Fund. For the purposes of this restriction, gifts from different persons employed by the same entity shall be aggregated, along with any gifts from the entity itself, in order to determine whether the $500 limit has been exceeded. 3. Accept employment from any company, other than a Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof), with which the Fund has current or prospective business dealings within one year after the latest to occur of such Covered Officer's termination of employment at the Fund or at the Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof). 4. Borrow money from any Fund, or borrow money from or have any other financial transactions with any company, other than a Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof), with which the Fund has current or prospective business dealings, other than routine retail transactions that are effected on the same terms and conditions as are available to the general public. 5. Engage in a transaction directly as a principal with a Fund, except that this prohibition shall not apply to the purchase or redemption of the shares of any Fund on the same terms and conditions as all other shareholders. 6. Any other activity that would cause them to benefit personally at the expense of a Fund. G. REPORTING AND ACCOUNTABILITY 1. REPORTING Each Covered Officer must: a. Upon adoption of this Code (or thereafter, as applicable, upon becoming a Covered Officer), affirm in writing to the Chief Legal Officer and the Board that he or she has received, read and understands this Code. Such affirmation shall be substantially in the form attached hereto as EXHIBIT B. b. Annually thereafter affirm to the Chief Legal Officer and the Board that he or she has complied with the requirements of this Code. Such affirmation shall be substantially in the form attached hereto as EXHIBIT C. c. Report at least annually all employment, ownership, affiliations or other relationships related to conflicts of interest that the Fund's Directors and Officers Questionnaire covers. d. Notify the Chief Legal Officer promptly if he or she knows of any violation of this Code or of any applicable laws and governmental rules and regulations. Failure to do so is itself a violation of this Code. 6 2. INTERPRETATIONS The Chief Legal Officer has the authority and shall be responsible for applying this Code to specific situations and for making interpretations of this Code in any particular situation. In making interpretations of this Code, the Chief Legal Officer may consult with the Funds' outside counsel. 3. INVESTIGATIONS The Funds will follow these procedures in investigating and enforcing this Code: a. The Chief Legal Officer will take all appropriate action to investigate any potential violations reported to him or her. b. If, after such investigation, the Chief Legal Officer believes that no violation has occurred, the Chief Legal Officer is not required to take any further action. c. If, after such investigation, the Chief Legal Officer believes that a violation has occurred, the Chief Legal Officer shall report such potential violation to the Coordination and Compliance Committee. d. If the Coordination and Compliance Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; and a recommendation to discipline or dismiss the Covered Officer or to require reimbursement or disgorgement by the Covered Officer of any personal benefits received. 4. WAIVERS The Coordination and Compliance Committee and the Chief Legal Officer, as applicable, may grant a waiver to compliance with this Code by a Covered Officer or his or her immediate family if the Coordination and Compliance Committee or the Chief Legal Officer determines that the proposed activity will not have an adverse impact on any Fund or on the ability of a Covered Officer faithfully to perform his or her duties to the Funds. To obtain a waiver, a Covered Officer shall submit a written statement to the Chief Legal Officer describing in detail the proposed activity, and the reasons for it, and the provision(s) of this Code as to which a waiver is requested. Any waivers of the provisions of this Code shall be disclosed to the extent required by law and SEC rules. H. RELATIONSHIP TO OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' 7 adviser(s), administrator, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. I. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board or committee thereof or the Funds' outside counsel. J. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund or any Covered Officer or his or her immediate family, as to any fact, circumstance, or legal conclusion. K. AMENDMENTS Any amendments to this Code must be approved or ratified by a majority vote of the Board, including a majority of the independent directors. Any amendments to this Code shall be disclosed to the extent required by law and SEC rules. Date: ---------------------- 8 EXHIBIT A ING INVESTORS TRUST ING EQUITY TRUST ING FUNDS TRUST ING INVESTMENT FUNDS, INC. ING MAYFLOWER TRUST ING MUTUAL FUNDS ING PRIME RATE TRUST ING SENIOR INCOME FUND ING VARIABLE INSURANCE TRUST ING VARIABLE PRODUCTS TRUST ING VP EMERGING MARKETS FUND, INC. ING VP NATURAL RESOURCES TRUST USLICO SERIES FUND 9 EXHIBIT B INITIAL ACKNOWLEDGEMENT Covered Officer Name and Title:_______________________________________________ (PLEASE PRINT) I acknowledge that I have received and read a copy of the ING Funds Sarbanes-Oxley Act Code of Ethics (the "Code") and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code. I also acknowledge my responsibility to report any violation of the Code to the Chief Legal Officer of the Funds. I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Funds have the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in their sole discretion, with or without notice. - ---------------------------------------- ----------------- Signature Date 10 EXHIBIT C ANNUAL ACKNOWLEDGEMENT Covered Officer Name and Title:_______________________________________________ (PLEASE PRINT) I acknowledge that I have received and read a copy of the ING Funds Sarbanes-Oxley Act Code of Ethics (the "Code") and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code. I also acknowledge that I have fully complied with the terms and provisions of the Code during the period of time since the most recent Initial or Annual Acknowledgement provided by me. I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Funds have the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in their sole discretion, with or without notice. - ---------------------------------------- ----------------- Signature Date EX-99.CERT 4 a2125854zex-99_cert.txt EX 99.CERT EXHIBIT-99.CERT CERTIFICATION I, James M. Hennessy, certify that: 1. I have reviewed this report on Form N-CSR of ING VP NATURAL RESOURCES TRUST; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ James M. Hennessy Date: March 5, 2004 - --------------------- ------------------- James M. Hennessy President and Chief Executive Officer CERTIFICATION I, Michael J. Roland, certify that: 1. I have reviewed this report on Form N-CSR of ING VP NATURAL RESOURCES TRUST; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Michael J. Roland Date: March 5, 2004 - --------------------- ------------------- Michael J. Roland Executive Vice President and Chief Financial Officer EX-99.906CERT 5 a2125854zex-99_906cert.txt EX 99.906CERT EXHIBIT-99.906CERT CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING VP NATURAL RESOURCES TRUST Date of Form N-CSR: MARCH 5, 2004 The undersigned, the principal executive officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING VP Natural Resources Trust and will be retained by ING VP Natural Resources Trust and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 5TH day of March, 2004. /s/ James M. Hennessy ------------------------- James M. Hennessy CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING VP NATURAL RESOURCES TRUST Date of Form N-CSR: MARCH 5, 2004 The undersigned, the principal financial officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING VP Natural Resources Trust and will be retained by ING VP Natural Resources Trust and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 5TH day of March, 2004. /s/ Michael J. Roland ------------------------- Michael J. Roland -----END PRIVACY-ENHANCED MESSAGE-----