SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ING PRIME RATE TRUST
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
PRIME RATE TRUST
7337 EAST DOUBLETREE RANCH ROAD
SCOTTSDALE, ARIZONA 85258-2034
(800) 992-0180
July 9, 2003
Dear Shareholder:
On behalf of the Board of Trustees of ING Prime Rate Trust (the
"Trust"), we are pleased to invite you to the annual meeting of shareholders
(the "Annual Meeting"), to be held at 10:00 a.m. Local time, on August 19, 2003
at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258-2034. Formal
notice of the Annual Meeting appears on the next page, followed by the Proxy
Statement. Please take the time to read the Proxy Statement and cast your vote,
since it covers matters that are important to the Trust and to you as a
shareholder.
At the Annual Meeting, you will be asked to consider and vote on the following
matters:
1. To elect nine members of the Board of Trustees to represent
the interests of the holders of Common Shares of the Trust
until the election and qualification of their successors.
2. To elect two members of the Board of Trustees to represent the
interests of the holders of Auction Rate Cumulative Preferred
Shares - Series M, T, W, TH and F of the Trust - until the
election and qualification of their successors.
3. Ratification of the selection of KPMG LLP as the current
independent auditor of the Trust.
4. To approve a Sub-Advisory Agreement between ING Investments,
LLC and ING Aeltus Investment Management, Inc., with no change
in the Adviser, the portfolio managers, or the overall
management fee paid by the Trust.
5. To transact such other business as may properly come before
the Annual Meeting or any adjournment(s) or postponement(s)
thereof.
Each proposal is discussed in detail in the enclosed Proxy Statement,
which you should read carefully. The Board of Trustees has concluded that the
proposals are in the best interests of the Trust and its shareholders and
recommend that you vote "FOR" each of the proposals. We are asking you to
consider them carefully and express your vote on the enclosed Proxy Ballot or at
the Annual Meeting.
The Trust is using Georgeson Shareholder Communications, Inc., a
professional proxy solicitation firm, to assist shareholders in the voting
process. As the date of the Annual Meeting approaches, if we have not already
heard from you, you may receive a telephone call from Georgeson Shareholder
Communications, Inc. reminding you to exercise your right to vote.
We look forward to your attendance at the Annual Meeting or to
receiving your Proxy Ballot so that your shares may be voted at the Annual
Meeting. If you have any questions, please do not hesitate to call us at
1-800-992-0180.
Sincerely,
James M. Hennessy
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
ING PRIME RATE TRUST
To Shareholders:
PLEASE TAKE NOTE THAT the annual meeting of shareholders (the "Annual Meeting")
of ING Prime Rate Trust (the "Trust") will be held at 10:00 a.m. Local time, on
August 19, 2003, at 7337 East Doubletree Ranch Road, Scottsdale, Arizona
85258-2034, for the purpose of considering and voting upon the following
matters:
1. To elect nine members of the Board of Trustees to represent
the interests of the holders of Common Shares of the Trust
until the election and qualification of their successors.
2. To elect two members of the Board of Trustees to represent the
interests of the holders of Auction Rate Cumulative Preferred
Shares - Series M, T, W, TH and F of the Trust - until the
election and qualification of their successors.
3. Ratification of the selection of KPMG LLP as the current
independent auditor of the Trust.
4. To approve a Sub-Advisory Agreement between ING Investments,
LLC and ING Aeltus Investment Management, Inc., with no change
in the Adviser, the portfolio managers, or the overall
management fee paid by the Trust.
5. To transact such other business as may properly come before
the Annual Meeting or any adjournment(s) or postponement(s)
thereof.
Please read the enclosed Proxy Statement carefully for information concerning
the proposals to be placed before the Annual Meeting.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSALS.
Shareholders of record as of the close of business on June 9, 2003 are entitled
to notice of, and to vote at, the Annual Meeting or any adjournment(s) or
postponement(s) thereof.
By Order of the Board of Trustees,
Kimberly A. Anderson
Secretary
July 9, 2003
YOUR VOTE IS IMPORTANT REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
PLEASE VOTE VIA THE INTERNET, BY TELEPHONE OR BY RETURNING
YOUR PROXY BALLOT TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
YOU MAY ALSO VOTE IN PERSON AT THE ANNUAL MEETING.
PROXY STATEMENT
ING PRIME RATE TRUST
JULY 9, 2003
TOLL-FREE: (800) 992-0180
7337 EAST DOUBLETREE RANCH ROAD
SCOTTSDALE, AZ 85258-2034
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 19, 2003
WHO IS ASKING FOR MY VOTE?
The Board of Trustees (the "Board") of ING Prime Rate Trust (the
"Trust") is sending this Proxy Statement, the attached Notice of Annual Meeting,
and the enclosed Proxy Ballot on or about July 9, 2003 to you and all other
shareholders. The Board is soliciting your vote for the annual meeting of
shareholders of the Trust (the "Annual Meeting").
WHAT ARE THE PROPOSALS AND WHO CAN VOTE ON EACH PROPOSAL?
The following table gives a brief description of each Proposal and indicates
which class of shares is being solicited with respect to each Proposal to be
considered at the Annual Meeting.
HOLDERS OF HOLDERS OF
PROPOSAL COMMON SHARES PREFERRED SHARES
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1. To elect nine members of the Board to represent the interests Yes No
of the holders of Common Shares of the Trust until the
election and qualification of their successors.
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2. To elect two members of the Board to represent the interests No Yes
of the holders of the Auction Rate Cumulative Preferred Shares
- Series M, T, W, TH and F of the Trust - until the election
and qualification of their successors.
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3. Ratification of the selection of KPMG LLP as the current Yes Yes
independent auditor of the Trust.
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4. To approve a Sub-Advisory Agreement between ING Investments, Yes Yes
LLC and ING Aeltus Investment
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1
HOLDERS OF HOLDERS OF
PROPOSAL COMMON SHARES PREFERRED SHARES
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Management, Inc., with no change in the Adviser, the portfolio
managers, or the overall management fee paid by the Trust.
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5. To transact such other business as may properly come before Yes Yes
the Annual Meeting or any adjournment(s) or postponement(s).
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If the Proposal regarding the approval of the proposed Sub-Advisory
Agreement ("Proposed Sub-Advisory Agreement") is approved by shareholders, ING
Aeltus Investment Management, Inc. ("ING Aeltus" or "Proposed Sub-Adviser") will
become the sub-adviser to the Trust under the Proposed Sub-Advisory Agreement.
Please keep the following in mind when considering the changes:
THE PEOPLE MANAGING THE TRUST WILL NOT CHANGE. This Proposal will
generally not result in a change in the actual portfolio management
personnel who manage the Trust. While ING Aeltus will become the
sub-adviser to the Trust, ING Investments, LLC ("ING Investments" or
the "Adviser"), the investment adviser to the Trust (the "Adviser"),
would be responsible for monitoring the investment program and
performance of ING Aeltus.
THE INVESTMENT OBJECTIVES OF THE TRUST WILL NOT CHANGE. While ING
Aeltus will become the sub-adviser of the Trust, the investment
objectives will remain the same.
THE ADVISORY FEE PAID BY THE TRUST WILL NOT INCREASE. The fee payable
to ING Aeltus will be paid by the Adviser, and not by the Trust. The
overall management fee of the Trust will not increase.
WHY DID YOU SEND ME THIS BOOKLET?
This booklet is a Proxy Statement. It provides you with information you
should review before voting on the matters listed above and in the Notice of
Annual Meeting for the Trust. You are receiving these proxy materials--a booklet
that includes the Proxy Statement and one Proxy Ballot--because you have the
right to vote on the important Proposals concerning your investment in the
Trust.
WHO IS ELIGIBLE TO VOTE?
Shareholders who owned shares in the Trust at the close of business on
June 9, 2003 (the "Record Date") are eligible to vote. As of the Record Date,
the Trust had 121,537,771 Common Shares outstanding. As of the Record Date, the
Trust had the following Auction Rate Cumulative Preferred Shares ("Preferred
Shares") outstanding: 3,600 shares of Series M; 3,600 shares of Series T; 3,600
shares of Series W; 3,600 shares of Series Th and 3,600 shares of
2
Series F. To the best of the Trust's knowledge, as of June 17, 2003, no person
owned beneficially more than 5% of any class of the Trust. The word "you" is
used in this Proxy Statement to refer to the person or entity who owns the
shares and who accordingly has voting rights in connection with the shares.
HOW DO I VOTE?
Shareholders may give voting instructions via the Internet or by
touchtone telephone by following the instructions on the Proxy Ballot.
Shareholders may also sign and mail the Proxy Ballot received with the Proxy
Statement or attend the Annual Meeting in person.
Georgeson Shareholder Communications, Inc. (the "Solicitor") has been
engaged to assist in the solicitation of proxies, at an estimated cost of
$1,100. As the date of the Annual Meeting approaches, certain Trust shareholders
may receive a telephone call from a representative of the Solicitor if their
votes have not yet been received. Authorization to permit the Solicitor to
execute proxies may be obtained by telephonic instructions from shareholders of
the Trust. Proxies that are obtained telephonically will be recorded in
accordance with certain procedures, as explained further below. The Board
believes that these procedures are reasonably designed to ensure that both the
identity of the shareholder casting the vote and the voting instructions of the
shareholder are accurately determined.
In situations where a telephonic proxy is solicited, the Solicitor's
representative is required to ask for each shareholder's full name, address,
social security or employer identification number, title (if the shareholder is
authorized to act on behalf of an entity, such as a corporation), the number of
shares owned, and to confirm that the shareholder has received the proxy
materials in the mail. If the information solicited agrees with the information
provided to the Solicitor, then the Solicitor's representative has the
responsibility to explain the process, read the Proposal on the Proxy Ballot(s),
and ask for the shareholder's instructions on the Proposal. Although the
Solicitor's representative is permitted to answer questions about the process,
he or she is not permitted to recommend to the shareholder how to vote, other
than to read any recommendation set forth in the Proxy Statement. The
Solicitor's representative will record the shareholder's instructions on the
Ballot. Within 72 hours, the shareholder will be sent a letter or mailgram to
confirm his or her vote and asking the shareholder to call the Solicitor
immediately if his or her instructions are not correctly reflected in the
confirmation.
In addition to solicitation by mail, certain officers and
representatives of the Trust, officers and employees of ING Investments, the
investment adviser to the Trust, or its affiliates and certain financial
services firms and their representatives, who will receive no extra compensation
for their services, may solicit proxies by telephone, telegram, facsimile, or
oral communication. Shareholders of the Trust whose shares are held by nominees,
such as brokers, can vote their proxies by contacting their respective nominee.
If a shareholder wishes to participate in the Annual Meeting, but does
not wish to give a proxy by telephone, the shareholder may still submit the
Proxy Ballot(s) originally sent with the Proxy Statement or attend in person.
Should shareholders require additional information regarding the proxy or
require replacement Proxy Ballot(s), they may contact the Solicitor toll-free at
1-866-821-1463.
3
WHEN AND WHERE WILL THE ANNUAL MEETING BE HELD?
The Annual Meeting will be held at 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258-2034, on August 19, 2003, at 10:00 a.m., Local time,
and, if the Annual Meeting is adjourned or postponed, at any adjournment or
postponement of that Meeting. If you expect to attend the Annual Meeting in
person, please notify the Trust by calling 1-800-992-0180.
CAN I REVOKE MY PROXY AFTER I VOTE IT?
A shareholder may revoke the accompanying proxy at any time prior to
its use by filing with the Trust a written revocation or duly executed proxy
ballot bearing a later date. In addition, any shareholder who attends the Annual
Meeting in person may vote by ballot at the Annual Meeting, thereby canceling
any proxy previously given. The persons named in the accompanying proxy will
vote as directed by the proxy, but in the absence of voting directions in any
proxy that is signed and returned, they intend to vote "FOR" each of the
Proposals and may vote in their discretion with respect to other matters not now
known to the Board that may be presented at the Annual Meeting.
WHO PAYS FOR THIS PROXY SOLICITATION?
The Trust will pay the expenses incurred in connection with the Notice
of Annual Meeting, Proxy Statement and the Annual Meeting, including printing,
mailing, solicitation and vote tabulation expenses, legal fees, and out of
pocket expenses associated with Proposals 1, 2, 3 and 5. ING Aeltus will pay the
expenses incurred in connection with the printing, mailing, solicitation, vote
tabulation, legal fees and out of pocket expenses associated with Proposal 4 and
will pay for the solicitation services of the Solicitor described above.
HOW CAN I OBTAIN MORE INFORMATION ABOUT THE TRUST?
Copies of the Trust's Annual Report for the fiscal year ended February
28, 2003 and the Trust's Semi-Annual Report for the period ended August 31, 2002
have previously been mailed to shareholders. This Proxy Statement should be read
in conjunction with the Annual and Semi-Annual Reports. You can obtain copies of
those Reports, without charge, by writing to The ING Funds, 7337 East Doubletree
Ranch Road, Scottsdale, Arizona, 85258-2034, Attention: Literature Fulfillment,
or by calling 1-800-992-0180.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
The Board recommends that shareholders vote "FOR" each of the Proposals
described in this Proxy Statement.
4
PROPOSAL 1
ELECTION OF TRUSTEES -- COMMON SHARES
WHAT IS THE PROPOSAL?
The Board has nominated nine individuals for election to the Board as
Trustees of the Common Shares (the "Common Nominees"). Holders of Common Shares
are asked to elect the Common Nominees to serve as Trustees, each to serve until
his or her successor is duly elected and qualified. Information about each
Common Nominee is set forth below. All of the Common Nominees are currently
Trustees of the Trust and each has consented to continue to serve as a Trustee
if reelected by holders of Common Shares.
WHAT FACTORS DID THE BOARD CONSIDER IN SELECTING THE COMMON NOMINEES?
The Board nominated all of the individuals who currently serve as
Trustees of the Common Shares of the Trust. The Board met to discuss Board
candidates and, after due consideration, recommend to shareholders the Common
Nominees indicated below. In making such recommendation, the Board took into
consideration the knowledge, background, and experience of the Common Nominees.
WHAT IS THE REQUIRED VOTE?
The affirmative vote of a plurality of the Common Shares of the Trust
present in person or by proxy at the Annual Meeting is required to approve the
election of each Common Nominee to the Board.
WHO ARE THE COMMON NOMINEES?
For election of Trustees at the Annual Meeting, the Board has approved
the nomination of:
Paul S. Doherty
J. Michael Earley
R. Barbara Gitenstein
Thomas J. McInerney
David W.C. Putnam
Blaine E. Rieke
John G. Turner
Roger B. Vincent
Richard A. Wedemeyer
The persons named as proxies will vote for election of each of these
Common Nominees unless you withhold authority to vote for any or all of them on
the enclosed Proxy Ballot. If any or all of the Common Nominees should become
unavailable for election due to events not now known or anticipated, the persons
named as proxies will vote for such other nominee or nominees as the current
Trustees may recommend or the Board may reduce the number of
5
Trustees as provided for in the Trust's Agreement and Declaration of Trust dated
December 2, 1987, as amended (the "Declaration").
No Common Nominee is a party adverse to the Trust or any of its
affiliates in any material pending legal proceeding, nor does any Common Nominee
have an interest materially adverse to the Trust.
The following table sets forth information concerning the Common
Nominees. The address for each Common Nominee is 7337 E. Doubletree Ranch Road,
Scottsdale, Arizona 85258-2034.
NUMBER OF
TERM OF PORTFOLIOS
OFFICE AND IN FUND
POSITION(S) LENGTH OF COMPLEX
NAME AND HELD WITH TIME PRINCIPAL OCCUPATION(S)- OVERSEEN OTHER DIRECTORSHIPS
DATE OF BIRTH TRUST SERVED(1) DURING THE PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
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INDEPENDENT TRUSTEES
PAUL S. DOHERTY Trustee October Mr. Doherty is President and 106 Director/Trustee of each
1999 - Partner, Doherty, Wallace, of the other Funds in the
Date of Birth: Present Pillsbury and Murphy, P.C., ING Funds complex
04/28/1934 Attorneys (1996 -Present); (February 2002 - Present).
Director, Tambrands, Inc. (1993 -
1998); and Trustee of each of the
funds managed by Northstar
Investment Management Corporation
(1993 - 1999).
J. MICHAEL EARLEY Trustee February President and Chief Executive 106 Director/Trustee of each
2002 - Officer, Bankers Trust Company, of the other Funds in the
Date of Birth: Present N.A. (1992 - Present). ING Funds complex (1997 -
05/02/1945 Present).
R. BARBARA GITENSTEIN Trustee February President, College of New Jersey 106 Director/Trustee of each
2002 - (1999 - Present). Formerly, of the other Funds in the
Date of Birth: Present Executive Vice President and ING Funds complex (1997 -
02/18/1948 Provost, Drake University (1992 - Present).
1998).
DAVID W.C. PUTNAM Trustee October President and Director, F.L. 106 Director/Trustee of each
1999 - Putnam Securities Company, Inc. of the other Funds in the
Date of Birth: Present and its affiliates; President, ING Funds complex
10/08/1939 Secretary and Trustee, The (February 2002 - Present),
Principled Equity Market Fund Anchor International Bond
(1999 - Present). Formerly, Trust (December 2000 -
Trustee, Trust Realty Corp.; Present); F.L. Putnam
Anchor Investment Trust; Bow Foundation (December 2000
Ridge Mining Company and each of - Present); Progressive
the funds managed by Northstar Capital Accumulation Trust
Investment Management Corporation (August 1998 - Present);
(1994 - 1999). Principled Equity Market
Fund (November 1996 -
Present), Mercy Endowment
Foundation (1995 -
Present); Director, F.L.
Putnam Investment
Management Company
(December 2001 - Present);
Asian American Bank and
Trust Company
6
NUMBER OF
TERM OF PORTFOLIOS
OFFICE AND IN FUND
POSITION(S) LENGTH OF COMPLEX
NAME AND HELD WITH TIME PRINCIPAL OCCUPATION(S)- OVERSEEN OTHER DIRECTORSHIPS
DATE OF BIRTH TRUST SERVED(1) DURING THE PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
------------- ----- --------- ----------------------- ---------- ---------------
(June 1992 - Present); and
Notre Dame Health Care
Center (1991 - Present)
F.L. Putnam Securities
Company, Inc. (June 1978 -
Present); and an Honorary
Trustee, Mercy Hospital
(1973 - Present).
BLAINE E. RIEKE Trustee February General Partner, Huntington 106 Director/Trustee of each
2001 - Partners (January 1997 - of the other Funds in the
Date of Birth: Present Present). Chairman of the Board ING Funds complex
09/10/1933 and Trustee of each of the funds (February 2002 - Present);
managed by ING Investment and Trustee Morgan Chase
Management Co. LLC (November 1998 Trust Co. (January 1998 -
- February 2001). Present).
ROGER B. VINCENT Trustee February President, Springwell Corporation 106 Director/Trustee of each
2002 - (1989 - Present). Formerly, of the other Funds in the
Date of Birth: Present Director, Tatham Offshore, Inc. ING Funds complex (1994 -
08/26/1945 (1996 - 2000). Present); and Director,
AmeriGas Propane, Inc.
(1998 - Present).
RICHARD A. WEDEMEYER Trustee February Retired. Mr. Wedemeyer was 106 Director/Trustee of each
2001 - formerly Vice President - Finance of the other Funds in the
Date of Birth: Present and Administration, Channel ING Funds complex
03/23/1936 Corporation (June 1996 - April (February 2002 - Present);
2002). Formerly, Vice President, and Trustee Touchstone
Operations and Administration, Consulting Group (1997 -
Jim Henson Productions (1979 - Present).
1997); Trustee, First Choice
Funds (1997 - 2001); and of each
of the funds managed by ING
Investment Management Co. LLC
(1998 - 2001).
TRUSTEES WHO ARE "INTERESTED PERSONS"
THOMAS J. MCINERNEY(2) Trustee February Chief Executive Officer, ING U.S. 161 Director, Hemisphere, Inc.
2001 - Financial Services (September (May 2003 - Present);
Date of Birth: Present 2001 - Present); General Manager Director/Trustee of each
05/05/1956 and Chief Executive Officer, ING of the other Funds in the
U.S. Worksite Financial Services ING Funds complex
(December 2000 - Present); (February 2002 - Present);
Member, ING Americas Executive Director/Trustee Equitable
Committee (2001 - Present); Life Insurance Co., Golden
President, Chief Executive American Life Insurance
Officer and Director of Northern Co., Life Insurance
Life Insurance Company (March Company of Georgia,
2001 - October 2002), ING Aeltus Midwestern United Life
Holding Company, Inc. (2000 - Insurance Co., ReliaStar
Present), ING Retail Holding Life Insurance Co.,
Company (1998 - Present), ING Security Life of Denver,
Life Insurance and Annuity Security Connecticut Life
Company (September 1997 - Insurance Co., Southland
November 2002) and ING Retirement Life Insurance Co., USG
Holdings, Inc. (1997 - Present). Annuity and Life Company,
Formerly, General Manager and and United Life and
Chief Executive Officer, ING Annuity Insurance Co. Inc
Worksite Division (December 2000 (March 2001 - Present);
- October 2001), Director, Ameribest Life
7
NUMBER OF
TERM OF PORTFOLIOS
OFFICE AND IN FUND
POSITION(S) LENGTH OF COMPLEX
NAME AND HELD WITH TIME PRINCIPAL OCCUPATION(S)- OVERSEEN OTHER DIRECTORSHIPS
DATE OF BIRTH TRUST SERVED(1) DURING THE PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
------------- ----- --------- ----------------------- ---------- ---------------
President, ING-SCI, Inc. (August Insurance Co., (March 2001
1997 - December 2000); President, to January 2003);
Aetna Financial Services (August Director, First Columbine
1997 -December 2000). Life Insurance Co. (March
2001 to December 2002);
Member of the Board,
National Commission on
Retirement Policy,
Governor's Council on
Economic Competitiveness
and Technology of
Connecticut, Connecticut
Business and Industry
Association, Bushnell;
Connecticut Forum; Metro
Hartford Chamber of
Commerce; and is Chairman,
Concerned Citizens for
Effective Government.
JOHN G. TURNER(3) Trustee October Chairman, Hillcrest Capital 106 Director/Trustee of each
1999 - Partners (May 2002-Present); of the other Funds in the
Date of Birth: Present President, Turner Investment ING Funds complex, Hormel
10/03/1939 Company (January 2002 - Foods Corporation (March
Present). Mr. Turner was 2000 - Present); Shopko
formerly Vice Chairman of ING Stores, Inc. (August 1999
Americas (2000 - 2002); Chairman - Present); and M.A.
and Chief Executive Officer of Mortenson Company (March
ReliaStar Financial Corp. and 2002 - Present).
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
(2) Mr. McInerney is an "interested person," as defined by the 1940 Act,
because of his affiliation with ING U.S. Worksite Financial Services, an
affiliate of ING Investments, LLC
(3) Mr. Turner is an "interested person," as defined by the 1940 Act, because
of his former affiliation with ING Americas, an affiliate of ING
Investments, LLC.
Please read the section "Further Information About the Trustees and Officers"
starting on page [___] of this Proxy Statement before voting on this Proposal 1.
[UPDATE PRIOR TO FILE]
8
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 1?
The Board recommends that shareholders vote FOR the election of each of
the Common Nominees to the Board subject to their terms commencing and
continuing as described above. If any of the Common Nominees are not elected by
shareholders, the current Trustees may consider other courses of action.
9
PROPOSAL 2
ELECTION OF TRUSTEES -- PREFERRED SHARES
WHAT IS THE PROPOSAL?
The Board has nominated two individuals for election to the Board as
Trustees of the Preferred Shares ("Preferred Nominees"). Holders of Preferred
Shares are asked to elect the Preferred Nominees to serve as Trustees, each to
serve until his or her successor is duly elected and qualified. Information
about each Preferred Nominee is set forth below. Both Preferred Nominees are
currently Trustees of the Trust and both have consented to continue to serve as
a Trustee if reelected by holders of Preferred Shares.
WHAT FACTORS DID THE BOARD CONSIDER IN SELECTING THE PREFERRED NOMINEES?
The Board nominated all of the individuals who currently serve as
Trustees of the preferred shareholders of the Trust. The Board met to discuss
Board candidates and, after due consideration, recommend to shareholders the
Preferred Nominees indicated below. In making such recommendation, the Board
took into consideration the knowledge, background, and experience of the
Preferred Nominees.
WHAT IS THE REQUIRED VOTE?
The affirmative vote of a plurality of the Preferred Shares of the
Trust present in person or by proxy at the Annual Meeting is required to approve
the election of each Preferred Nominee to the Board.
WHO ARE THE PREFERRED NOMINEES?
For election of Trustees at the Annual Meeting, the Board has approved
the nomination of:
Walter H. May
Jock Patton
The persons named as proxies will vote for election of each of these
Preferred Nominees unless you withhold authority to vote for either or both of
them on the enclosed Proxy Ballot. If any or all of the Preferred Nominees
should become unavailable for election due to events not now known or
anticipated, the persons named as proxies will vote for such other nominee or
nominees as the current Trustees may recommend or the Board may reduce the
number of Trustees as provided for in the Declaration.
Neither Preferred Nominee is a party adverse to the Trust or any of its
affiliates in any material pending legal proceeding, nor does either Preferred
Nominee have an interest materially adverse to the Trust.
10
The following table sets forth information concerning the Preferred Nominees.
The address for each Preferred Nominee is 7337 E. Doubletree Ranch Road,
Scottsdale, Arizona 85258-2034.
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
NAME AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) - OVERSEEN BY OTHER DIRECTORSHIPS
DATE OF BIRTH TRUST TIME SERVED* DURING THE PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
------------- ----- ------------ ----------------------- ------- ---------------
INDEPENDENT TRUSTEES
WALTER H. MAY Trustee October 1999 - Retired. Formerly, Managing 106 Director/Trustee of each of
Present Director and Director of the other Funds in the ING
Date of Birth: Marketing, Piper Jaffray, Inc.; Funds complex (February
12/21/1936 Trustee of each of the funds 2002 - Present) and Best
managed by Northstar Investment Prep Charity (1991 -
Management Corporation (1996 - Present).
1999).
JOCK PATTON Trustee August 1995 - Private Investor (June 1997 - 106 Director/Trustee of each of
Present Present). Formerly, Director and the other Funds in the ING
Date of Birth: Chief Executive Officer, Rainbow Funds complex (February
12/11/1945 Multimedia Group, Inc. (January 2002 - Present); Director,
1999 - December 2001); Director of Hypercom, Inc. (January
Stuart Entertainment, Inc.; 1999 - Present); JDA
Director of Artisoft, Inc. (1994 - Software Group, Inc.
1998). (January 1999 - Present);
Buick of Scottsdale, Inc.;
National Airlines, Inc.; BG
Associates, Inc.; BK
Entertainment, Inc.; and
Arizona Rotorcraft, Inc.
* Trustees serve until their successors are duly elected and qualified.
Please read the section "Further Information About the Trustees and Officers"
starting on page ____ of this Proxy Statement before voting on this Proposal 2.
[UPDATE PRIOR TO FILE]
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 2?
The Board recommends that shareholders vote FOR the election of each of
the Preferred Nominees to the Board subject to their terms commencing and
continuing as described above. If shareholders do not elect either of the
Preferred Nominees, the current Trustees may consider other courses of action.
11
FURTHER INFORMATION ABOUT THE TRUSTEES AND OFFICERS
HOW LONG WILL THE TRUSTEES SERVE ON THE BOARD?
Trustees generally hold office until their successors are elected and
qualified. A Trustee may, at any time, resign or be removed by a vote of the
holders of a majority of the outstanding shares of the applicable class of the
Trust. In addition, pursuant to a retirement policy adopted by the Board, each
duly elected or appointed Trustee who is not an "interested person" of the
Trust, as defined in the 1940 Act ("Independent Trustees"), shall retire from
service as a Trustee at the first regularly scheduled quarterly meeting of the
Board that is held after the Trustee reaches the age of 70. A unanimous vote of
the Board may extend the retirement date of a Trustee for up to one year. An
extension may be permitted if the retirement would trigger a requirement to hold
a meeting of shareholders of the Trust under applicable law, whether for
purposes of appointing a successor to the Trustee or if otherwise necessary
under applicable law, in which event the extension would apply until such time
as the shareholder meeting can be held or is no longer needed.
DO THE TRUSTEES OWN SHARES OF THE TRUST OR CERTAIN AFFILIATED ENTITIES?
To the best of the Trust's knowledge, as of June 17, 2003 no Trustee
owned 1% or more of the outstanding shares of any class of the Trust, and the
Trustees owned, as a group, less than 1% of the shares of each class of the
Trust.
The following table sets forth information regarding the dollar range
of equity securities of the Trust and other investment companies within the ING
family of investment companies beneficially owned by each Trustee as of May 31,
2003.
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES IN TRUSTEE IN FAMILY OF INVESTMENT
NAME OF TRUSTEE THE TRUST COMPANIES
--------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
--------------------------------------------------------------------------------------------------------------------
Paul S. Doherty $0 Over $100,000
--------------------------------------------------------------------------------------------------------------------
J. Michael Earley $0 $10,001 - $50,000
--------------------------------------------------------------------------------------------------------------------
R. Barbara Gitenstein $0 $50,001 - $100,000
--------------------------------------------------------------------------------------------------------------------
Walter H. May $0 Over $100,000
--------------------------------------------------------------------------------------------------------------------
Jock Patton $10,001 - $50,000 $50,001 - $100,000
--------------------------------------------------------------------------------------------------------------------
David W. C. Putnam Over $100,000 Over $100,000
--------------------------------------------------------------------------------------------------------------------
Blaine E. Rieke $0 $50,001 - $100,000
--------------------------------------------------------------------------------------------------------------------
Roger B. Vincent $0 Over $100,000
--------------------------------------------------------------------------------------------------------------------
Richard A. Wedemeyer $0 $10,001 - $50,000
--------------------------------------------------------------------------------------------------------------------
TRUSTEES WHO ARE "INTERESTED PERSONS"
--------------------------------------------------------------------------------------------------------------------
Thomas J. McInerney $0 $50,000 - $100,000
--------------------------------------------------------------------------------------------------------------------
John G. Turner Over $100,000 Over $100,000
--------------------------------------------------------------------------------------------------------------------
12
The following table sets forth information regarding each Independent
Trustee's (and his or her immediate family members') share ownership in
securities of the Trust's investment adviser or principal underwriter, and the
ownership of securities in an entity controlling, controlled by or under common
control with the investment adviser or principal underwriter of the Trust (not
including registered investment companies) as of May 31, 2003.
NAME OF OWNERS
AND RELATIONSHIP VALUE OF PERCENTAGE OF
NAME OF TRUSTEE TO TRUSTEE COMPANY TITLE OF CLASS SECURITIES CLASS
------------------------------------------------------------------------------------------------------------------------
Paul S. Doherty N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
J. Michael Earley N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
R. Barbara Gitenstein N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
Walter H. May N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
Jock Patton N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
David W. C. Putnam N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
Blaine E. Rieke N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
Roger B. Vincent N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
Richard A. Wedemeyer N/A N/A N/A $0 N/A
------------------------------------------------------------------------------------------------------------------------
WHAT ARE THE COMMITTEES OF THE BOARD?
AUDIT COMMITTEE. The Board has an Audit Committee whose function is to
meet with the independent auditor of the Trust to review the scope of the
Trust's audit, the Trust's financial statements and interim accounting controls,
and to meet with management concerning these matters, among other things. The
Committee currently consists of four Independent Trustees: Messrs. Earley,
Putnam, Rieke, and Vincent. Mr. Earley serves as Chairman of the Committee.
During the fiscal year ended February 28, 2003, the Committee held four
meetings.
The Audit Committee operates pursuant to a charter approved by the
Board, a copy of which is attached APPENDIX 1. The charter sets forth the
responsibilities of the Audit Committee.
AUDIT COMMITTEE REPORT: As part of its oversight of the Trust's
financial statements, the Audit Committee reviewed and discussed with ING
Investments and KPMG LLC ("KPMG"), the independent auditor for the Trust, the
Trust's financial statements for the fiscal year ended February 28, 2003. The
Audit Committee also discussed with KPMG the matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees, as
amended, by the Auditing Standards Board of the American Institute of Certified
Public Accountants. The Audit Committee received and reviewed the written
disclosures and the letter from KPMG required by Independence Standard's Board
Standard No. 1, Independence Discussions with Audit Committees, as amended, by
the Independence Standards Board, and have discussed KPMG's independence with
KPMG.
13
Based on the reviews and discussions referred to above, the Audit
Committee recommended that the Board ratify the inclusion of the financial
statements as of and for the fiscal year ended February 28, 2003, be included in
the Trust's Annual Report to shareholders.
2003 Audit Committee
J. Michael Earley
David W.C. Putnam
Blaine E. Rieke
Roger B. Vincent
VALUATION COMMITTEE. The Board has a Valuation Committee whose function
is to review the determination of the value of securities held by the Trust for
which market quotations are not available. The Committee currently consists of
five Independent Trustees: Messrs. May, Doherty, Patton, and Wedemeyer and Dr.
Gitenstein. Mr. Patton serves as Chairman of the Committee. During the fiscal
year ended February 28, 2003, the Committee held four meetings.
EXECUTIVE COMMITTEE. The Board has an Executive Committee whose
function is to act for the full Board if necessary in the event that Board
action is needed between regularly scheduled Board meetings. The Committee
currently consists of two Independent Trustees and two Trustees who are
"interested persons," as defined in the 1940 Act: Messrs. May, McInerney, Patton
and Turner. Mr. Turner serves as Chairman of the Committee. During the fiscal
year ended February 28, 2003, the Committee held five meetings.
NOMINATING COMMITTEE. The Board has a Nominating Committee for the
purpose of considering and presenting to the Board candidates it proposes for
nomination to fill Independent Trustee vacancies on the Board. The Committee
currently consists of four Independent Trustees: Messrs. Doherty, May and
Wedemeyer and Dr. Gitenstein. Mr. May serves as Chairman of the Committee. The
Committee does not currently have a policy regarding whether it will consider
nominees recommended by shareholders. During the fiscal year ended February 28,
2003, the Committee did not hold a meeting.
INVESTMENT REVIEW COMMITTEE. The Board has an Investment Review
Committee whose function is to monitor the investment performance of the Trust
and to make recommendations to the Board with respect to the Trust. The
Committee currently consists of five Independent Trustees and one Trustee who is
an "interested person," as defined in the 1940 Act: Messrs. Doherty, May,
McInerney, Patton, and Wedemeyer and Dr. Gitenstein. Mr. Wedemeyer serves as
Chairman of the Committee. During the fiscal year ended February 28, 2003, the
Committee held four meetings.
14
HOW OFTEN DOES THE BOARD MEET?
The Board currently conducts regular meetings four times a year. The
Audit, Valuation and Investment Review Committees also meet regularly four times
per year and the remaining Committees meet as needed. In addition, the Board or
the Committees may hold special meetings by telephone or in person to discuss
specific matters that may require action prior to the next regular meeting.
During the fiscal year ended February 28, 2003, the Board held nine meetings,
including regularly scheduled and special meetings.
WHAT ARE THE TRUSTEES PAID FOR THEIR SERVICES?
Each Independent Trustee receives a fee, allocated among the ING Funds
for which he or she serves as a Director/Trustee, which consists of an annual
retainer component and a per meeting fee component. Each Independent Trustee is
reimbursed for expenses incurred in connection with each meeting of the Board or
any Committee meeting attended.
The Trust currently pays each Independent Trustee a pro rata share, as
described below, of: (i) an annual retainer of $40,000 (Messrs. May and Patton,
as lead trustees, receive an annual retainer of $55,000); (ii) $7,000 for each
in person meeting of the Board; (iii) $2,000 for attendance at any Committee
meeting; (iv) $1,000 for meeting attendance as a chairperson; (v) $2,000 per
telephonic meeting; (vi) out-of-pocket expenses. The pro rata share paid by the
Trust is based on the Trust's average net assets as a percentage of the average
net assets of all the funds managed by ING Investments for which the Trustees
serve in common as Directors/Trustees.
The Trustees who are "interested persons" of the Trust receive no
compensation from the Trust.
The following table has been provided to the Trust by ING Investments
and sets forth information regarding the compensation paid to the Trustees for
the Trust's fiscal year ended February 28, 2003 for service on the Boards of the
ING Funds complex.
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS ESTIMATED FROM TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COMPLEX
COMPENSATION PART OF TRUST BENEFITS UPON PAID TO
NAME OF TRUSTEE FROM TRUST EXPENSES RETIREMENT(4) TRUSTEES(5)
--------------------------------------------------------------------------------------------------------------
Paul S. Doherty $5,252 N/A N/A $76,532
--------------------------------------------------------------------------------------------------------------
J. Michael Earley $5,157 N/A N/A $48,304
--------------------------------------------------------------------------------------------------------------
R. Barbara Gitenstein $4,754 N/A N/A $50,658
--------------------------------------------------------------------------------------------------------------
R. Glenn Hilliard(1) $ 0 N/A N/A $ 0
--------------------------------------------------------------------------------------------------------------
Walter H. May $5,913 N/A N/A $88,288
--------------------------------------------------------------------------------------------------------------
Thomas J. McInerney(2) $ 0 N/A N/A $ 0
--------------------------------------------------------------------------------------------------------------
Jock Patton $5,913 N/A N/A $88,759
--------------------------------------------------------------------------------------------------------------
David W.C. Putnam $4,961 N/A N/A $76,855
--------------------------------------------------------------------------------------------------------------
Blaine E. Rieke $4,823 N/A N/A $74,771
--------------------------------------------------------------------------------------------------------------
John G. Turner(3) $ 0 N/A N/A $ 0
--------------------------------------------------------------------------------------------------------------
Roger B. Vincent $4,893 N/A N/A $76,011
--------------------------------------------------------------------------------------------------------------
15
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS ESTIMATED FROM TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COMPLEX
COMPENSATION PART OF TRUST BENEFITS UPON PAID TO
NAME OF TRUSTEE FROM TRUST EXPENSES RETIREMENT(4) TRUSTEES(5)
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Richard A. Wedemeyer $4,961 N/A N/A $70,133
--------------------------------------------------------------------------------------------------------------
(1) An "interested person," as defined in the 1940 Act, because of his
relationship with ING Americas, an affiliate of ING Investments, LLC.
Mr. Hilliard resigned as of April 30, 2003.
(2) An "interested person," as defined in the 1940 Act, because of his
affiliation with ING U.S. Financial Services, an affiliate of ING
Investments, LLC.
(3) An "interested person," as defined in the 1940 Act, because of his
former affiliation with ING Americas, an affiliate of ING Investments,
LLC.
(4) The ING Funds have adopted a retirement policy under which a
director/trustee who has served as an Independent Director/Trustee for
five years or more will be paid by the ING Funds at the time of his or
her retirement an amount equal to twice the compensation normally paid
to the Independent Director/Trustee for one year of service.
(5) Represents compensation from 103 funds.
WHO ARE THE OFFICERS OF THE TRUST?
The Trust's officers are elected annually by the Board and hold office
until they resign, are removed or are otherwise disqualified to serve. The chart
below lists the officers of the Trust. The address for the officers of the Trust
is 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258-2034.
NAME AND POSITIONS HELD WITH TERM OF OFFICE AND PRINCIPAL OCCUPATION(S)
DATE OF BIRTH THE TRUST LENGTH OF TIME SERVED * DURING THE LAST FIVE YEARS
------------- --------- ----------------------- --------------------------
JAMES M. HENNESSY President, Chief February 2001 - Present President and Chief Executive Officer, ING
Executive Officer Capital Corporation, LLC, ING Funds
Date of Birth: and Chief Operating Services, LLC, ING Advisors, Inc., and ING
04/09/1949 Officer Investments, LLC, (December 2001 -
Present); Executive Vice President and Chief
Operating Officer, ING Funds Distributor, LLC
(June 2000 - Present).
Senior Executive June 2000 - February 2001 President, Chief Executive Officer and Chief
Vice President and Operating Officer of each of the other funds
Chief Operating in the ING family of funds. Has served as a
Officer senior executive officer of ING Investments,
LLC and its affiliates for more than the last
5 years.
MICHAEL J. ROLAND Executive Vice March 2002 - Present Executive Vice President, Chief Financial
President, Assistant Officer and Treasurer, ING Funds Services,
Date of Birth: Secretary and LLC, ING Funds Distributor, LLC, ING
05/30/1958 Principal Financial Advisors, Inc., ING Investments, LLC, Inc.,
Officer Lexington Funds Distributor, Inc., Express
Senior Vice June 1998 - March 2002 America T.C., Inc. and EAMC Liquidation
President and Corp. (December 2001 - Present). Executive
Principal Financial Vice President, Assistant Secretary and
Officer Chief Executive Officer of each of the funds
in the ING family of funds.
Chief Financial December 2002 - Present
Officer (For the IPI Funds)
16
NAME AND POSITIONS HELD WITH TERM OF OFFICE AND PRINCIPAL OCCUPATION(S)
DATE OF BIRTH THE TRUST LENGTH OF TIME SERVED * DURING THE LAST FIVE YEARS
------------- --------- ----------------------- --------------------------
ROBERT S. NAKA Senior Vice November 1999 - Present Senior Vice President and Assistant
President and Secretary, ING Funds Services, LLC, ING
Date of Birth: Assistant Secretary Funds Distributor, LLC, ING Advisors, Inc.,
06/17/1963 ING Capital Corporation, LLC, ING
Assistant Secretary July 1996 - November 1999 Investments, LLC (October 2001 - Present)
and Lexington Funds Distributor, Inc.
(December 2001 - Present). Formerly,
Senior Vice President and Assistant
Secretary, ING Quantitative Management,
Inc. (October 2001 - September 2002), Vice
President, ING Investments, LLC (April 1997
- October 1999), ING Funds Services, LLC
(February 1997 - August 1999) and Assistant
Vice President, ING Funds Services, LLC
(August 1995 - February 1997).
DANIEL NORMAN Senior Vice April 1995 - Present Senior Vice President, ING Investments, LLC
President and (December 1994 - Present); and ING Funds
Date of Birth: 12/29/1957 Treasurer Distributor, LLC (December 1995 - Present);
has served as an officer of other
affiliates of ING Investments, LLC since
Co-Senior Portfolio November 1999 - Present February 1992.
Manager
Treasurer June 1997 - Present
JEFFREY A. BAKALAR Senior Vice President January 1998 - Present Senior Vice President, ING Investments, LLC
(November 1999- Present). Formerly, Vice
Date of Birth: President and Assistant Portfolio Manager,
12/15/1959 Co-Senior Portfolio November 1999 - Present ING Investments, LLC (February 1998 --
Manager November 1999); Vice President of The
Communications Positions of First National
Bank of Chicago (July 1994 - January 1998).
ELLIOT ROSEN Senior Vice President May 2002 - Present Senior Vice President, ING Investments, LLC
(February 1999 - Present). Formerly,
Date of Birth: Senior Vice President IPS-Sendero (May 1997
05/07/1953 - February 1999) and President of Sendero,
which merged into IPS (August 1993 - May
1997).
17
NAME AND POSITIONS HELD WITH TERM OF OFFICE AND PRINCIPAL OCCUPATION(S)
DATE OF BIRTH THE TRUST LENGTH OF TIME SERVED * DURING THE LAST FIVE YEARS
------------- --------- ----------------------- --------------------------
WILLIAM H. RIVOIR Senior Vice February 2001 - Present Senior Vice President and Secretary of ING
III President and Capital Corporation, LLC and ING Funds
Date of Birth: Assistant Secretary Services, LLC (February 2001 - Present),
01/19/1951 ING Funds Distributor, LLC, ING Advisors,
Inc. and ING Investments, LLC. (October
2001 - Present), Senior Vice President and
Secretary, ING Quantitative Management,
Inc. (October 2001 - September 2002).
Lexington Funds Distributor, Inc., ING
Pilgrim Funding, Inc., Pilgrim America
Financial, Inc., Express America TC, Inc.
and EAMC Liquidation Corp. (December 2001 -
Present). Formerly, Senior Vice President
and Assistant Secretary of ING Funds
Services, LLC (June 1998 - Present), ING
Investments, LLC, and Pilgrim America
Financial, Inc. (February 1999 - Present),
Senior Vice President of ING Investments,
LLC (December - Present 1998) and Assistant
Secretary of ING Funds Distributor, LLC
(February 1999 - Present) and ING
Investments, LLC (June 1998 - Present).
CURTIS F. LEE Senior Vice January 2001 - Present Senior Vice President and Chief Credit
President and Chief Officer - Senior Loans of ING Investments,
Date of Birth: Credit Officer LLC (August 1999 - Present). Formerly, held
06/05/1954 a series of positions with Standard
Chartered Bank in the credit approval and
problem loan management functions (August
1992 - June 1999).
KIMBERLY A. ANDERSON Vice President and February 2001 - Present Vice President and Secretary, ING Funds
Secretary Services, LLC, ING Funds Distributor, LLC,
Date of Birth: ING Advisors, Inc., ING Investments, LLC
07/25/1964 (October 2001 - Present) and Lexington
Funds Distributor, Inc. (December 2001 -
Present). Formerly, Vice President, ING
Quantitative Management, Inc. (October 2001
- September 2002); Assistant Vice President,
ING Funds Services, LLC (November 1999 -
January 2001) and has held various other
positions with ING Funds Services, LLC for
more than the last five years.
ROBYN L. ICHILOV Vice President and May 1998 - Present Vice President, ING Funds Services, LLC
Treasurer (October 2001 - Present) and ING
Date of Birth: Investments, LLC (August 1997 - Present);
09/25/1967 Vice President November 1997 - May 1998 Accounting Manager, ING Investments, LLC
(November 1995 - Present).
*The officers hold office until the next annual meeting of the Trustees and
until their successors shall have been elected and qualified.
18
WHAT ARE OFFICERS PAID FOR THEIR SERVICES?
The Trust does not pay its officers for the services they provide to
the Trust. Instead, the officers, who are also officers or employees of the
investment adviser or its affiliates, are compensated by the investment adviser
or its affiliates.
WHO ARE THE TRUST'S INVESTMENT ADVISER, DISTRIBUTOR, AND ADMINISTRATOR?
ING Investments, ING Funds Distributor, LLC and ING Funds Services, LLC serve as
the Trust's investment adviser, distributor and administrator, respectively.
Their address is 7337 East Doubletree Ranch Road, Scottsdale, Arizona
85258-2034.
19
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITOR
WHAT IS THE PROPOSAL?
The accounting firm of KPMG LLP ("KPMG") currently serves as the
independent auditor for the Trust. Shareholders of the Trust are asked to ratify
the selection of KPMG as the independent auditor of the Trust.
The following table shows fees paid to KPMG for professional audit
services during the Trust's most recent fiscal years ended February 28, 2003 and
2002, as well as, fees billed for other services rendered by KPMG to the Trust.
Fee information is also presented for all other ING funds within the investment
company complex for the corresponding fiscal years.
2003 2002
------------------------------- --------------------------------
All Other All Other
Entities within Entities within
Trust the Complex Trust the Complex
----- ----------- ----- -----------
Audit Fees $ 108,100 $ 1,460,400 $ 110,750 $ 1,544,750
Audit Related Fees (1) $ 33,500 - $ 45,000 -
Tax Fees (2) $ 12,898 $ 661,102 $ 9,642 $ 547,358
All Other Fees (3) $ 5,000 $ 371,000 $ 7,500 $ 469,500
(1) Audit related fees consist principally of fees for performing agreed
upon procedures engagements relating to the credit rating agency
requirements.
(2) Tax fess consist of fees for the preparation of tax returns, as well
as, tax advice pertaining to complying with Subchapter M of the
Internal Revenue Code.
(3) All other fees related to the review and issuance of consents on
various SEC filings, AIMR verification services, and SAS 70 reviews.
The Audit Committee of the Board will periodically consider whether
KPMG's receipt of non-audit fees from the Trust, ING Investments and all
entities controlling, controlled by, or under common control with ING
Investments that provide services to the Trust is compatible with maintaining
KPMG's independence.
KPMG has advised the Trust that neither KPMG nor any of its partners
has any direct or material indirect financial interest in the Trust.
Representatives of KPMG are not expected to be at the Annual Meeting but have
been given the opportunity to make a statement if they wish, and will be
available telephonically should any matter arise requiring their participation.
WHAT IS THE REQUIRED VOTE?
The affirmative vote of a majority of all of the shares of the Trust
present in person or by proxy at the Annual Meeting is required to confirm KPMG
as the independent auditor to the Trust.
20
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 3?
The Board recommends that you vote FOR the confirmation of KPMG as the
independent auditor to examine and report on the financial statements of the
Trust for the fiscal year ending February 28, 2004.
21
PROPOSAL 4
APPROVAL OF THE PROPOSED SUB-ADVISORY AGREEMENT
WHAT IS THE PROPOSAL?
The Trust and ING Investments, Adviser to the Trust, wish to retain the
services of ING Aeltus as a Sub-Adviser to the Trust. ING Aeltus would serve the
Trust under the Proposed Sub-Advisory Agreement between ING Investments and ING
Aeltus, a copy of which is included as APPENDIX 2. The description of the
Proposed Sub-Advisory Agreement that follows is qualified in its entirety by
reference to APPENDIX 2.
WHO IS THE ADVISER?
ING Investments, whose principal office is located at 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258-2034, is an Arizona limited
liability company, which serves as the investment adviser to the Trust. See
APPENDIX 3 for a listing of the names, addresses, and the principal occupations
of the principal executive officers of ING Investments. ING Investments is
registered with the SEC as an investment adviser. ING Investments is an indirect
wholly-owned subsidiary of ING Groep N.V. ("ING Group"). ING Group is a global
financial institution active in the fields of insurance, banking and asset
management in more than 65 countries, with more than 100,000 employees. As of
May 31, 2003, ING Investments managed over $45.4 billion in assets. The last
date upon which shareholders approved each advisory agreement is set out in
APPENDIX 4. APPENDIX 4 also sets out the aggregate investment advisory fees paid
by each Fund for its last fiscal year.
WHO IS THE PROPOSED SUB-ADVISER?
ING has undertaken a reorganization plan that will, among other things,
integrate its portfolio management professionals across the U.S. under a common
management structure known as ING Investment Management Americas, which includes
ING Aeltus. One of the primary purposes of the integration plan is to use the
resources of several ING Group companies to promote consistently high levels of
performance in terms of investment standards, research, policies and procedures
and infrastructure support provided to the Trust. As a result of this
integration plan the operational and supervisory functions will be separated
from the portfolio management functions related to the Trust, with the former
continuing to be provided by ING Investments and the latter provided by ING
Aeltus. The portfolio management personnel currently employed by ING Investments
will become employees of ING Aeltus, which will assume primary responsibility
for all portfolio management issues, including the purchase, retention, or sale
of portfolio securities. Each current portfolio manager will continue to manage
the Trust utilizing the same investment philosophy, but will do so as an
employee of ING Aeltus, not ING Investments.
ING Aeltus, whose principal office is located at 10 State House Square,
Hartford, CT 06103, is an indirect, wholly-owned subsidiary of ING Group and an
affiliate of ING Investments. ING Aeltus, a registered investment adviser, has
been managing client assets for more than a quarter of a century. As of May 31,
2003, ING Aeltus managed over $41 billion in assets. See APPENDIX 3 for a
listing of the names, addresses, and the principal occupations of the
22
principal executive officers of ING Aeltus. As of May 31, 2003, the only
Director/Trustee or officer of the Funds who was an officer, director, employee,
general partner or shareholder of ING Aeltus was Tom McInerney, who serves as
President, Chief Executive Officer and Director.
There are no other investment companies, with investment objectives
similar to the Trust, for which ING Aeltus acts as an investment adviser or
sub-adviser, as of December 31, 2002.
HOW WILL THIS AFFECT THE MANAGEMENT OF THE TRUST?
Currently, the Trust is managed by ING Investments. If the proposed
Sub-Advisory Agreement is approved, ING Aeltus would provide day-to-day
management of the Trust's portfolio. ING Investments would be responsible for
monitoring the investment program and performance of ING Aeltus.
WHAT ARE THE TERMS OF THE CURRENT INVESTMENT MANAGEMENT AGREEMENT?
The Trust's current Investment Management Agreement requires the
Adviser to oversee the provision of all investment advisory and portfolio
management services for the Trust. The Investment Management Agreement requires
the Adviser to provide, subject to the supervision of the Board, investment
advice and investment services to the Trust and to furnish advice and
recommendations with respect to the investment of the Trust's assets and the
purchase or sale of its portfolio securities. The Investment Management
Agreement also permits the Adviser to delegate certain management
responsibilities, pursuant to a sub-advisory agreement, to other investment
advisers. ING Investments, as Adviser, is required to oversee the investment
management services of any sub-adviser.
The current Investment Management Agreement provides that the Adviser
is not subject to liability to the Trust for any act or omission in the course
of, or connected with, rendering services under the Agreement, except by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties under the Agreement. After the initial term, the current
Investment Management Agreement continues in effect from year to year so long as
such continuance is specifically approved at least annually by (a) the Board or
(b) the vote of a "majority" (as defined in the 1940 Act) of the Trust's
outstanding shares voting as a single class; provided, that in either event the
continuance is also approved by at least a majority of the Board who are not
"interested persons" (as defined in the 1940 Act) of the Adviser by vote cast in
person at a meeting called for the purpose of voting on such approval.
The Investment Management Agreement provides that ING Investments is
paid an advisory fee at a specified annual rate of the average daily net assets
of the Trust (see APPENDIX 5). The Proposed Sub-Advisory Agreement will not
result in a change in the overall management fee for the Trust. ING Investments,
not the Trust, will pay sub-advisory fees under the Proposed Sub-Advisory
Agreement.
WHAT ARE THE TERMS OF THE PROPOSED SUB-ADVISORY AGREEMENT?
The Proposed Sub-Advisory Agreement requires ING Aeltus to provide,
subject to the supervision of the Board and ING Investments, a continuous
investment program for the Trust
23
and to determine the composition of the assets of the Trust, including
determination of the purchase, retention or sale of the securities, cash and
other investments for the Trust, in accordance with the Trust's investment
objectives, policies and restrictions and applicable laws and regulations. The
Proposed Sub-Advisory Agreement also requires ING Aeltus to use reasonable
compliance techniques as the Adviser or the Board may reasonably adopt,
including any written compliance procedures.
The fee payable to ING Aeltus, which will be paid by ING Investments
and not by the Trust, will not increase the overall management fee of the Trust
(see APPENDIX 5). The fee to be paid to ING Aeltus by the Adviser will equal 45%
(gross) of the fee paid by the Trust to the Adviser.
The Proposed Sub-Advisory Agreement provides that ING Aeltus is not
subject to liability for any damages, expenses, or losses to the Trust connected
with or arising out of any investment advisory services rendered under the
agreement, except by reason of willful misfeasance, bad faith, or negligence in
the performance of its duties, or by reason of reckless disregard of obligations
and duties under the Sub-Advisory Agreement.
The Proposed Sub-Advisory Agreement provides, in part, that under
certain circumstances, the Adviser will indemnify and hold harmless the Proposed
Sub-Adviser to the agreement against any and all losses (including legal and
other expenses), based on (1) the Adviser's negligence, willful misfeasance, or
bad faith, in the performance of its duties, (which could include a negligent
action or a negligent omission to act), or by reason of the Adviser's reckless
disregard of its obligations under the agreement, or (2) any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement or prospectus of the Trust, unless such statement was made in reliance
upon information furnished to the Adviser or the Trust by ING Aeltus. The
Proposed Sub-Advisory Agreement also provides, in part, that under certain
circumstances, the Proposed Sub-Adviser will indemnify and hold harmless the
Adviser to the agreement against any and all losses (including legal and other
expenses), based on (1) the Proposed Sub-Adviser's negligence, willful
misfeasance, or bad faith, in the performance of its duties, (which could
include a negligent action or a negligent omission to act), or by reason of the
Adviser's reckless disregard of its obligations under the agreement, or (2) any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement or prospectus of the Trust, such statement was made in
reliance upon information furnished to the Adviser or the Trust by ING Aeltus.
The Proposed Sub-Advisory Agreement may be terminated at any time by
the Trust by a vote of the majority of the Board of the Trust or by a vote of a
majority of the outstanding voting securities. The Proposed Sub-Advisory
Agreement also may be terminated by: (i) the Adviser upon sixty (60) days'
written notice to the Trust and the Sub-Adviser; (ii) at any time, without
payment of a penalty by the Trust, by the Trust's Board or a majority of the
outstanding voting securities of the Trust upon sixty (60) days' written notice
to the Adviser and the Sub-Adviser; or (iii) by the Sub-Adviser upon three (3)
months' written notice unless the Trust or the Adviser requests additional time
to find a replacement for the Sub-Adviser, in which case, the Sub-Adviser shall
allow additional time, not to exceed three (3) additional months beyond the
initial three (3) month period; provided, however, that the Sub-Adviser can
terminate the contract at any time, if the Sub-Adviser or the Adviser is legally
incapable of providing services under the
24
contract or ceases to be a registered investment company. The Proposed
Sub-Advisory Agreement will terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).
The Proposed Sub-Advisory Agreement was approved by the Trustees of the
Trust, including a majority of the Trustees who are not "interested persons" of
the Adviser or the Trust, on May 29, 2003.
WHO ARE THE OTHER SERVICE PROVIDERS TO THE TRUST?
ING Funds Services, LLC ("ING Funds Services"), an affiliate of the
Adviser and ING Aeltus, serves as the Administrator to the Trust. ING Funds
Distributor, LLC ("ING Funds Distributor"), also an affiliate of the Adviser and
ING Aeltus, serves as Principal Underwriter to the Trust. ING Funds Services and
ING Funds Distributor have their principal offices located at 7337 East
Doubletree Ranch Road, Scottsdale, Arizona 85258-2034. See APPENDIX 3 for a
listing of the names, addresses, and the principal occupations of their
principal executive officers.
There were no commissions paid to affiliated brokers by the Trust for
the fiscal year ended February 28, 2003.
WHAT IS THE REQUIRED VOTE?
Shareholders of the Trust must approve the Proposed Sub-Advisory
Agreement. Approval of the Proposed Sub-Advisory Agreement requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Trust, which, for this purpose, means the affirmative vote of the lesser of (i)
more than 50% of the outstanding shares of the Trust, or (ii) 67% or more of the
shares of the Trust present at the meeting, if more than 50% of the outstanding
shares of the Trust are represented at the meeting in person or by proxy.
WHAT HAPPENS IF SHAREHOLDERS DO NOT APPROVE THE PROPOSAL?
If shareholders of the Trust do not approve the Proposed Sub-Advisory
Agreement, the Trust will continue to be managed under the current Investment
Management Agreement and the Board will determine what action, if any, should be
taken.
WHAT ARE THE FACTORS THAT WERE CONSIDERED BY THE BOARD?
On August 20, 2002 and November 22, 2002, the Board and ING Investments
held preliminary discussions regarding the possibility of a reorganization of
certain of ING's U.S. based asset management groups. On February 25, the Board
and ING Investments discussed, among other matters, the process for integrating
these asset management groups and the benefits and challenges presented by this
process.
The Proposed Sub-Advisory Agreement for the Trust, the draft proxy
solicitation materials to be sent to the Trust's shareholders seeking approval
of the Proposed Sub-Advisory Agreement, and ING Investments recommendation to
seek the necessary shareholder approvals
25
were considered by the Board, including the Independent Board Members, at a
meeting of the Board held on May 29, 2003. During the Meeting, the Independent
Trustees met in executive session with their independent counsel to discuss the
legal standards applicable to the proposed transaction. They considered the
advantages of a manager-of-managers format and the ongoing duty that ING
Investments would have to monitor and oversee the Proposed Sub-Adviser.
In determining whether or not it was appropriate to approve the
Proposed Sub-Advisory Agreement and to recommend approval to shareholders, the
Board, including a majority of the Independent Trustees, considered several
factors. Foremost among them was the fact that the proposed new arrangement will
not affect the fees charged to the Trust, nor the provision of portfolio
management services to the Trust. In their approval of the proposed arrangement,
the Board considered several factors including, but not limited to, the
following: (1) the centralization of asset managers will allow ING to access and
leverage the capabilities of its portfolio management personnel among all
subsidiaries, (2) the reorganization will facilitate more effective use of
research and trading facilities and capabilities for greater efficiency, (3) the
consolidation of portfolio management within one entity will permit certain
future changes in portfolio management personnel without the potential expense
of shareholder proxy solicitations, (4) the reorganization can help ING Aeltus
to build a larger, more coherent management structure and to retain and attract
highly qualified portfolio managers. The Board noted that ING Aeltus had taken
steps to ameliorate any disadvantages, which might result from the
reorganization. In addition, the Board considered: (1) the current portfolio
managers will remain and continue to provide services under the direction of the
Proposed Sub-Adviser, (2) the nature and quality of the services provided to the
other mutual funds advised by the Proposed Sub-Adviser, (3) the fairness of the
compensation under the Sub-Advisory Agreement in light of the services being
provided, (4) the personnel, operations, financial condition, and investment
management capabilities and methodologies of ING Aeltus after the
reorganization, (5) the expectation of management that the reorganization will
enable the Proposed Sub-Adviser to attract additional highly qualified personnel
and to leverage its compensation and the fact that the cost of the Proposed
Sub-Adviser will be paid by the Adviser and not directly by the Trust. The Board
also considered the advisory fee to be retained by ING Investments for its
oversight and monitoring services that will be provided to the sub-advised Trust
and the fee waiver arrangements, which will continue if the Proposal is
approved. After considering ING Investments' recommendation and these other
factors, the Board concluded that engaging ING Aeltus as Sub-Adviser would be in
the best interest of the Trust and its shareholders.
WHAT IS THE RECOMMENDATION OF THE BOARD?
Based upon its review, the Board has determined that facilitating the
reorganization of the ING investment advisory functions by permitting ING Aeltus
to become the sub-adviser to the Trust is in the best interest of the Trust and
its shareholders. Accordingly, after consideration of the above factors, and
such factors and information it considered relevant, the Board, including all of
the Independent Trustees present at the meeting, unanimously approved the
proposed Sub-Advisory Agreements and voted to recommend their approval.
26
GENERAL INFORMATION
WHAT HAPPENS TO MY PROXY ONCE I VOTE IT?
The Board has named Robert S. Naka, Kimberly A. Anderson and Jeffrey A.
Bakalar as proxies of the Trust. If you follow the instructions when you vote,
your proxies will vote your shares as you have directed. If you submit your
Proxy Ballot but do not vote on any Proposal, your proxies will vote on that
Proposal as recommended by the Board.
WHAT IF A PROPOSAL THAT IS NOT IN THE PROXY STATEMENT COMES UP AT THE ANNUAL
MEETING?
If any other matter is properly presented, your proxies will vote in
accordance with their best judgment. At the time this Proxy Statement was
printed, the Board knew of no matter that needed to be acted on at the Annual
Meeting other than those discussed in this Proxy Statement.
I WANT TO ATTEND THE ANNUAL MEETING AND VOTE IN PERSON. HOW DO I DO THIS?
The Annual Meeting will be held at 7337 East Doubletree Ranch Road,
Scottsdale, Arizona 85258-2034. If you attend the Annual Meeting and wish to
vote in person, you will be given a ballot at the meeting. However, if your
shares are held in the name of your broker, bank or other nominee, you must
bring a letter from the nominee indicating that you are the beneficial owner of
the shares on the Record Date and authorizing you to vote. If you expect to
attend the Annual Meeting in person, please notify the Trust by calling
1-800-992-0180.
WHAT ARE MY VOTING RIGHTS AND THE QUORUM REQUIREMENTS?
Each share of each class of the Trust is entitled to one vote.
Shareholders of the Trust at the close of business on the Record Date will be
entitled to be present and to give voting instructions for the Trust at the
Annual Meeting and any adjournments thereof with respect to their shares owned
as of the Record Date. A majority of the outstanding shares of the Trust on the
Record Date entitled to vote for each Proposal, present in person or represented
by proxy, must be present to constitute a quorum.
If a quorum is not present at the Annual Meeting, or if a quorum is
present but sufficient votes to approve any or all of the Proposals are not
received, the persons named as proxies may propose one or more adjournments of
the Annual Meeting to permit further solicitation of proxies. A shareholder vote
may be taken on one or more of the Proposals in this Proxy Statement prior to
any adjournment if sufficient votes have been received with respect to a
Proposal. Any adjournment will require the affirmative vote of a majority of
those shares represented at the Annual Meeting in person or by proxy. The
persons named as proxies will vote in favor of such adjournment those proxies
which they are entitled to vote in favor of any Proposal that has not been
adopted, will vote against any adjournments those proxies required to be voted
against any Proposal that has not been adopted, and will not vote any proxies
that direct them to abstain from voting on such Proposals.
The Trust expects that, before the Annual Meeting, broker-dealer firms
holding shares of the Trust in "street name" for their customers will request
voting instructions from their customers and beneficial owners. If these
instructions are not received by the date specified in the broker-
27
dealer firms' proxy solicitation materials, the Trust understands that the
broker-dealers that are members of the New York Stock Exchange may vote on the
items to be considered at the Annual Meeting on behalf of their customers and
beneficial owners under the rules of the New York Stock Exchange.
If a shareholder abstains from voting as to any matter, or if a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on a matter,
then the shares represented by such abstention or non-vote will be considered to
be present at the Annual Meeting for purposes of determining the existence of a
quorum. However, abstentions and broker non-votes will be disregarded in
determining the "votes cast" on an issue. For this reason, with respect to
matters requiring the affirmative vote of a majority of the total shares
outstanding, an abstention or broker non-vote will have the effect of a vote
against such matters.
EXPLAIN THE REQUIREMENTS OF SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
Section 30(h) of the 1940 Act, as applied to the Trust, require the Trust's
officers, Trustees, investment adviser, affiliates of the investment adviser,
and persons who beneficially own more than 10% of a registered class of the
Trust's outstanding securities ("Reporting Persons"), to file reports of
ownership of the Trust's securities and changes in such ownership with the SEC
and the New York Stock Exchange. Such persons are required by SEC regulations to
furnish the Trust with copies of all such filings.
Based solely on its review of the copies of such forms received by it
and written representations from certain Reporting Persons that no year-end
reports were required for those persons, the Trust believes that during the
fiscal year ended February 28, 2003, its Reporting Persons complied with all
applicable filing requirements. However, Messrs. Early and Vincent, and Dr.
Gitenstein each filed a Form 3 subsequent to the required date. Mr. Wedemeyer
filed a Form 4 reporting one transaction and a Form 5 reporting two transactions
subsequent to the required dates. Mr. Putnam filed a Form 4 reporting one
transaction and Mr. Bakalar filed a Form 5 reporting one transaction subsequent
to the required dates.
WHAT IS THE DEADLINE FOR SUBMITTING A SHAREHOLDER PROPOSAL FOR THE TRUST'S 2004
ANNUAL MEETING?
Any proposals of shareholders that are intended to be presented at the Trust's
next annual meeting must be in writing and received at the Trust's principal
executive offices, no later than March 11, 2003, in order for the proposal to be
considered for inclusion in the Trust's proxy statement for that meeting. The
submission of a proposal does not guarantee its inclusion in the Trust's proxy
statement or presentation at the meeting.
In addition, under Rule 14a-4 of the SEC's proxy rules a company may
use discretionary voting authority to vote on matters coming before an annual
meeting of shareholders if the company does not have notice of the matter at
least 45 days before the date corresponding to the date on which the company
first mailed its proxy materials for the prior year's annual meeting of
stockholders or the date specified by an overriding advance notice provision in
the company's bylaws. As the Trust's bylaws do not contain such an advance
notice provision, the Trust may use discretionary voting authority to vote on
matters coming before the Trust's
28
2004 Annual Meeting of shareholders, if the Trust does not have written notice
of a shareholder proposal on or before May 25, 2004.
PLEASE VOTE VIA THE INTERNET, BY TELEPHONE OR BY RETURNING YOUR PROXY
BALLOT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Kimberly A. Anderson, Secretary
July 9, 2003
29
APPENDIX 1
CHARTER
OF THE
ING FUNDS
AUDIT COMMITTEE
A. ESTABLISHMENT OF THE COMMITTEE
The Audit Committees (collectively, the "Committee") of each of the
Boards of Directors/Trustees (collectively, the "Board") of the ING Funds (each
a "Fund," collectively, the "Funds"1) set out on Exhibit A hereto, as such
exhibit may be amended from time to time, shall be governed in accordance with
this ING Funds Audit Committee Charter (this "Charter").
B. PURPOSE
The purpose of the Committee is to (1) oversee each Fund's accounting
and financial reporting processes and its internal controls; (2) oversee the
quality and objectivity of the Fund's financial statements and the independent
audit of those financial statements; and (3) act as a liaison between the Fund's
independent auditors and the full Board.
[SOURCE: Section 2 of Sarbanes-Oxley; Existing Funds charters; ICI Best
Practices.]
The function of the Committee is oversight. Management of the Funds is
responsible for the preparation, presentation and integrity of the Funds'
financial statements. Management also is responsible for maintaining appropriate
accounting and financial reporting principles and policies and internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible for
planning and carrying out proper audits and reviews of the Funds' financial
statements.
In fulfilling their responsibilities under this Charter, it is
recognized that members of the Committee are not full-time employees of the
Funds and are not, and do not represent themselves to be, accountants or
auditors by profession or experts in the fields of accounting or auditing
including in respect of auditor independence. As such, it is not the duty or
responsibility of the Committee or its members to conduct "field work" or other
types of auditing or accounting reviews or procedures or to set auditor
independence standards, and the Committee and its members are not providing any
expert or special assurance as to the Funds' financial statements or any
professional certification as to the independent auditors' work. Absent actual
knowledge to the contrary, each member of the Committee will be entitled to rely
upon (1) the integrity of those persons and organizations within and outside the
Funds from whom the Committee receives information; (2) the accuracy of the
financial and other information provided to the Committee by such persons or
organizations; and (3) representations made by management as to any information
technology, internal audit and other non-audit services provided by the auditors
to the Funds.
----------
(1) Reference in this Charter to one or more Funds shall, as applicable,
mean those Funds that are under the jurisdiction of the particular Committee at
issue. No provision in this Charter is intended to impose any duty upon a
particular Fund's Committee with respect to any other Funds.
30
[SOURCE: Sample charters; Section 8.30 of the Model Business Corporation Act.]
The Committee will have access, as deemed necessary or appropriate by
the Committee, to the applicable Funds' trustees or directors, their independent
auditors and Fund counsel and the executive and financial management of the
Funds. The Committee may also seek to meet with internal audit staff of the
Funds' investment adviser, administrator or accounting agent. The Committee may
meet with any such persons without the participation of any other
representatives of Fund management.
[SOURCE: Existing Funds charters; ICI Best Practices.]
C. MEETINGS
The Committee will meet at least twice each fiscal year of a Fund, and
the chair of the Committee or a majority of the members may call special
meetings of the Committee as circumstances require. In order to foster open
communication, the Committee may meet privately in separate executive sessions
with management and the independent auditors and as a committee to discuss any
matters that the Committee, management or the independent auditors believe
should be discussed separately.
A majority of the Committee's members will constitute a quorum. At any
meeting of the Committee, the decision of a majority of the members present and
voting will determine any matter submitted to a vote. The Committee will keep
minutes of its meetings, which will be available to the Board for its review.
[SOURCE: Existing Funds charters.]
D. COMMITTEE MEMBERS; AUDIT COMMITTEE FINANCIAL EXPERT
1. Members. The members of the Committee are identified on Exhibit B to
this Charter, as such Exhibit may be amended from time to time to
reflect changes in Committee membership. The Board will review and
consider Committee membership annually. No "interested person" of the
Funds as defined in Section 2(a)(19) of the Investment Company Act of
1940 (the "1940 Act") may be a member of the Committee. The Committee
members may appoint a chairperson from its members.
[SOURCE: Section 301 of Sarbanes-Oxley; Rule 32a-4 under the 1940 Act.]
2. Audit Committee Financial Expert. Unless the Board determines that no
member of the Committee qualifies as an audit committee financial
expert, the Board will identify one (or in the Board's discretion, more
than one) member of the Committee as an audit committee financial
expert in accordance with the criteria set out below. The Committee is
not required to have an audit committee financial expert.
- To be identified as an audit committee financial expert, the
Committee member must have the following attributes: (a) an
understanding of generally accepted accounting principles
("GAAP") and financial statements; (b) the ability to assess
31
the general application of GAAP in connection with the
accounting for estimates, accruals and reserves; (c)
experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable
to the breadth and complexity of issues that can reasonably be
expected to be raised by the Funds' financial statements, or
experience actively supervising one or more persons engaged in
such activities; (d) an understanding of internal controls and
procedures for financial reporting; and (e) an understanding
of audit committee functions.
- A Committee member may acquire the attributes required of an
audit committee financial expert through any combination of
the following: (a) education and experience as a public
accountant or auditor, or a principal financial officer,
controller, or principal accounting officer of a company; (b)
experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant,
auditor or person performing similar functions, (c) experience
overseeing or assessing the performance of companies or public
accountants in the preparation, audit or evaluation of
financial statements; or (d) other experience determined by
the Board as -- relevant to the inquiry of whether the
Committee member qualifies as an audit committee financial
expert.
The attributes and experience required for identification as an audit committee
financial expert under this Charter will be identical to, and are
qualified in their entirety by, those set out in the rules of the
Securities and Exchange Commission ("SEC") in Form N-CSR. The
identification of a Committee member as an audit committee financial
expert does not impose on the member any duties, obligations, or
liability that are greater than the duties, obligations, and liability
imposed on Committee members in general.
[SOURCE: Section 407 of Sarbanes-Oxley; Rules promulgated under Sections 13(a)
and 15(d) of the Exchange Act relating to the disclosure of "audit
committee financial expert". COMPLIANCE DATE: Comply in annual report
for fiscal years ending on or after JULY 15, 2003.]
E. PRE-APPROVAL OF SERVICES
1. Pre-Approval of Audit Services. The Committee must approve prior to
retention all audit, review or attest engagements required under the
securities laws that are provided to a Fund by its independent
auditors. The Committee will not grant such approval to any auditors
that are proposed to perform an --- audit for a Fund if a chief
executive officer, controller, chief financial officer, chief
accounting officer or any person serving in an equivalent position for
the Fund or any other entity within the ING investment company complex
that is responsible for the financial reporting or operations of the
Fund was employed by those auditors and participated in any capacity in
an audit of the Fund during the 1-year period (or such other period
acceptable under the SEC rules) preceding the date of initiation of
such audit.
[SOURCE: Section 202 of Sarbanes-Oxley; Rules promulgated under Section
10A(i) of the Exchange Act. COMPLIANCE DATE: Accounting firms'
independence is not impaired as a result of audit and non-audit
services provided under contracts in existence on MAY 6,
32
2003, even if not pre-approved. Former audit team members employed on
or before May 6, 2003 are also grandfathered. Going forward,
pre-approval process will need to be in place.]
2. Pre-Approval of Non-Audit Services. The Committee must pre-approve any
non-audit services to be provided to a Fund by its independent auditors
(except those within applicable de minimis statutory or regulatory
exceptions(2)) provided that a Fund's auditors will not provide the
following non-audit services to a Fund: (a) bookkeeping or other
services related to the accounting records or financial statements of
the Fund; (b) financial information systems design and implementation;
(c) appraisal or valuation services, fairness opinions, or
contribution-in-kind reports; (d) actuarial services; (e) internal
audit outsourcing services; (f) management functions or human
resources; (g) broker-dealer, investment adviser, or investment banking
services; (h) legal services; (i) expert services unrelated to the
audit; and (j) any other service that the Public Company Accounting
Oversight Board determines, by regulation, is impermissible.(3)
[SOURCE: Sections 201/202 of Sarbanes-Oxley; Rules promulgated under
Sections 10A(g)/(h)(i) of the Exchange Act. COMPLIANCE DATE: Accounting
firms may provide accounting services that have not been pre-approved
until MAY 6, 2004 if provided in accordance with a contract in
existence on May 6, 2003.]
3. Pre-approval with respect to Non-Fund Entities. The Committee must
pre-approve any non-audit services that relate directly to the
operations and financial reporting of a Fund (except those within
applicable de minimis statutory or regulatory exceptions(4)) to be
----------
(2) No pre-approval is required as to non-audit services provided to a Fund
if: (a) the aggregate amount of all non-audit services provided to the
Fund constitute not more than 5% of the total amount of revenues paid
by the Fund to the independent auditors during the fiscal year in which
the services are provided; (b) THESE SERVICES WERE NOT RECOGNIZED BY
THE FUND AT THE TIME OF THE ENGAGEMENT TO BE NON-AUDIT SERVICES; and
(c) the services are promptly brought to the attention of the Committee
and approved by the Committee prior to the completion of the audit.
(3) With respect to the prohibitions on (a) bookkeeping; (b) financial
information systems design and implementation; (c) appraisal,
valuation, fairness opinions, or contribution-in-kind reports; (d)
actuarial; and (e) internal audit outsourcing, such services are
permitted to be provided if it is reasonable to conclude that the
results of these services will not be subject to audit procedures
during an audit of the audit client's financial statements.
(4) For non-audit services provided to the adviser and entities in a
control relationship with the adviser, no pre-approval is required if:
(a) the aggregate amount of all non-audit services provided constitute
not more than 5% of the total amount of revenues paid to the
independent auditors during the fiscal year in which the services are
provided by the Fund, the Fund's investment adviser, and any entity
controlling, controlled by, or under common control with the investment
adviser if that entity provides ongoing services to a Fund; (b) THESE
SERVICES WERE NOT RECOGNIZED BY THE FUND AT THE TIME OF THE ENGAGEMENT
TO BE NON-AUDIT SERVICES; and (c) the services are promptly brought to
the attention of the Committee and approved by the Committee prior to
the completion of the audit.
(5) No pre-approval is required by the Committee as to non-audit services
provided to: (a) the Fund's sub-adviser that primarily provides
portfolio management services and is under the direction of another
33
provided by the Fund's auditors to (a) the Fund's investment adviser;
and (b) any entity controlling, controlled by, or under common control
with the investment adviser if that entity provides ongoing services to
a Fund.(5) The Committee may approve audit and non-audit services on a
case-by-case basis or adopt pre-approval policies and procedures that
are detailed as to a particular service, provided that the Committee is
informed promptly of each service, or use a combination of these
approaches.
[SOURCE: Section 202 of Sarbanes-Oxley (see discussion above)]
4. 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 to the Committee at its next scheduled meeting.
[SOURCE: Section 202 of Sarbanes-Oxley (see discussion above).]
F. RELATIONSHIP WITH AUDITORS AND MANAGEMENT
1. Auditor Qualifications. The Committee will, at least
annually, review the qualifications of the Funds' independent auditors.
[SOURCE OF PROVISIONS IN THIS SECTION: Existing Funds charters; ICI
Best Practices; in general, Rule 32a-4]
- The Committee will determine whether the auditors are
independent. This determination will take into consideration
whether the auditors provide any consulting or other non-audit
services to the Fund, its adviser and other entities in the
ING investment company complex and their potential effect on
the issue of independence. The Committee will secure from Fund
auditors an annual representation of the auditors'
independence under applicable standards of independence
established from time to time by the SEC and other regulatory
and professional authorities.
- The Committee will review the fees charged by the
auditors for audit and non-audit services and may make
recommendations to the Board or the independent members of the
Board with respect to the approval of audit and non-audit
service fee estimates. As part of its review, the Committee
will annually obtain from the independent auditors a summary
of any non-audit services provided to the Fund and the ING
investment company complex and the fees billed for non-audit
services to the Fund and other entities in the ING investment
company complex.
----------
investment adviser and is not affiliated with the Fund's primary
investment advisor; (b) another Fund in the ING investment company
complex (unless otherwise required to pre-approve services to such
other Fund in accordance with this Charter), or (c) other entities
within the ING investment company complex that do not provide services
to that Fund.
34
2. Rotation of Audit Partners. The Committee will seek assurances that any
of the auditors' personnel who serve as lead and concurring audit
partners(6) to a Fund are rotated every five years, followed by a
five-year "time out" period, and that those who serve as audit partners
(other than lead or concurring audit partners) are subject to a
seven-year rotation period, with a two-year "time out" period.(7) Audit
partners may not serve other Funds in the ING investment company
complex during their "time out" periods.
[SOURCE: Section 203 of the Sarbanes-Oxley; Rules promulgated under
Section 10A(j) of the Exchange Act relating to lead partner rotation.
COMPLIANCE DATE: Phase-in for fiscal years ending after MAY 6, 2003
(see footnote 4).]
3. Meetings with Auditors. The Committee will meet with the Funds'
independent auditors for the purposes set out below. The Committee may
determine to conduct these meetings outside the presence of Fund
management.
- Prior to an audit, the Committee will review with auditors
the arrangements for and scope of the annual audit and any
special audits. [SOURCE: Existing Funds charters; ICI
Best Practices.]
- At the conclusion of each audit, the Committee will review the
audit with the independent auditors, including the auditors'
comments or recommendations and the form of opinion the
auditors propose to render or have rendered to the Board
Fund shareholders. The Committee also will discuss with
the auditors any matters of concern relating to the Funds'
financial statements, including adjustments to such statements
recommended by the auditors or other results of the audit.
[SOURCE: Existing Funds charters; ICI Best Practices.]
- The Committee will discuss with the auditors, at least
annually and prior to filing each Fund's annual report,
the auditors' report as to: (a) all critical accounting
policies and practices to be used in preparing the annual
report; (b) all alternative treatments within GAAP for
policies
----------
(6) "Audit Partner" means a member of a Fund's audit engagement team who
has decision-making responsibility for significant auditing, accounting
and reporting matters that affect the Fund's financial statements or
who maintains regular contact with the Fund's management and the
Committee. The term includes lead and concurring partners and partners
who provide more than 10 hours of audit, review or attest services in
connection with the Fund's financial statements.
(7) The rotational periods will be phased in as follows: (1) lead partners
must rotate upon reaching 5 years of service, and service for fiscal
years beginning before May 6, 2003 counts; (2) concurring partners must
rotate upon reaching 5 years of service, and service for fiscal years
beginning before May 6, 2004 counts; (3) all other partners will
receive a "fresh start" for audits for years beginning after May 6,
2003, so that fiscal years ending in 2004 constitute the first year of
a seven-year rotation period. For investment companies, the SEC accepts
an extended "year," to encompass the fiscal year ends of all funds in a
fund complex.
35
and practices that have been discussed with Fund management,
including ramifications of the use of such alternative
disclosures and treatments and the treatments preferred by the
independent auditors; and (c) written communications between
the auditors and Fund management that are material to the
financial statements, such as any management letter or
schedule of unadjusted differences; (d) a description of all
non-audit services provided, including fees associated with
the services, to the ING investment company complex since the
last annual report or update that were not subject to the
pre-approval requirements as discussed above; and (e) any
other matters of concern relating to a Fund's financial
statements, including any uncorrected misstatements (or audit
differences) whose effects management believes are immaterial,
both individually and in aggregate, to the financial
statements taken as a whole. If these communications are not
made within 90 days prior to the Funds' annual filing, the
Committee will discuss with the independent auditors any
reported updates to the information within 90 days prior to
the Funds' annual filing. The Committee may discuss these
matters with management.
[SOURCE: Required for auditors under Section 204 of
Sarbanes-Oxley and Section 10A(k) of the Exchange Act relating
to auditor reports to audit committees. COMPLIANCE DATE: As of
MAY 6, 2003, reports by auditors to an audit committee must be
made prior to the filing of the audit report with the SEC.]
- The Committee from time to time will discuss with auditors the
adequacy and effectiveness of internal controls and procedures
for each Fund and the quality of staff implementing those
controls and procedures. The Committee will consider the
auditors' comments with respect to the Funds' financial
policies, procedures and internal accounting controls and
management's compliance with these policies and controls and
will make recommendations to the Board with respect to any
further actions necessary or desirable in response to such
auditor comments. [SOURCE: Existing Funds charters; ICI Best
Practices.]
- The Committee will meet with Fund auditors for such other
purposes as the Committee may deem necessary or appropriate.
4. Discussions with Management. The Committee may, as deemed necessary or
appropriate by the Committee, discuss with management the following:
(1) unusual accounting issues; (2) the nature of any unusual or
significant commitments or contingent liabilities; (3) any significant
difference in format or disclosure from that adopted by other
investment companies; (4) the procedures and controls of management,
including the adequacy and effectiveness of internal controls and
procedures and the quality of staff implementing
36
those controls and procedures; (5) if the Fund's investment adviser has
internal audit staff, the staff's objectives and resources; and (6)
such other matters as the Committee deems appropriate. [SOURCE:
Existing Funds charters.]
5. Changes in Accounting Principles or Practices. The Committee will
consider the effect upon the Funds of any changes in accounting
principles or practices proposed by management or the independent
auditors. The Committee may consider whether proposed changes will have
a significant effect on the amounts reported for a current year or may
have an effect in the future, management's and the independent
auditors' concurrence with the change and management's or the auditors'
underlying rationale for the change. The Committee will discuss with
management and the independent auditors the significance and potential
effect of any changes in accounting policies proposed by the
independent auditors or by management. [SOURCE: Existing Funds
charters; ICI Best Practices.]
6. Illegal Acts and Other Matters. As necessary the Committee will review
with the independent auditors and management any "illegal act," as
defined in Section 10A of the 1934 Act and required by that statute to
be reported to the Committee and any other significant issues reported
to the Committee that could have a material effect on a Fund's
financial statements. With the advice of legal counsel and the
independent auditors, as appropriate, the Committee will develop a
recommendation to management designed to remedy any "illegal acts" or
any other significant matters brought to the Committee's attention. The
Committee will seek assurances from management that appropriate
remedial actions are taken with respect to any such illegal act
identified by the independent auditors. The Committee also may review
with management and the independent auditors any compliance matter and
any comments or criticisms that the staff of the SEC brought to the
attention of the Committee or management, and may develop a
recommendation to management.(8) The Committee will report all such
matters to the full Board no later than the next regular meeting of the
Board. The Committee shall have the authority to retain special counsel
and other experts or consultants at the expense of the appropriate
Funds.
7. Receive Certifying Officers' Reports. The Committee will receive, in
accordance with regulations adopted by the SEC, reports from each
Fund's principal executive officer and principal financial officer,
based on their periodic evaluations, regarding: (a) significant
deficiencies in the design or operation of disclosure controls and
procedures that could adversely affect the Fund's ability to record,
process, summarize, and report financial data; (b) material weaknesses
in internal controls; and (c) fraud, whether or not material, that
involves management or other employees who have a significant role in
the Fund's internal controls. [SOURCE: Section 302 of Sarbanes-Oxley;
Rule 30a-3 under the 1940 Act; Rules 13a-1 and 15d-15 under the 1934
Act.]
----------
(8) The Committee may make recommendations to management with respect to
any illegal act, significant matter or compliance matter, and its
recommendations are not limited to matters related only to accounting
and financial reporting.
37
G. OTHER
1. Review Charter. The Committee will review this Charter (including any
addendum to the Charter, if applicable) at least annually and will make
recommendations with respect to any amendment or supplement to the
Charter it determines to be necessary or desirable.
2. Counsel Reports. If the Board has not established a qualified legal
compliance committee, the Committee will receive and investigate
reports of counsel required to be submitted to it by the rules of the
SEC that establish standards of professional conduct for attorneys
practicing before the SEC. [SOURCE: Section 307 of Sarbanes-Oxley
governing professional conduct for attorneys.]
3. Amendments. If the Audit Committee is composed of all of the members of
the Board who are not "interested persons" of the Funds as defined in
Section 2(a)(19) of the 1940 Act, the Committee may amend this Charter
by vote of a majority of Committee members. If the Audit Committee is
composed of fewer than all of the members of the Board who are not
"interested persons," the Committee will recommend any amendment to the
full Board, and the Board may amend this Charter by a vote of a
majority of its members who are not "interested persons."
4. Board Communications. At least annually, the Committee will report to
the Board a summary of its activities, conclusions and recommendations.
5. Records. A copy of this Charter will be maintained by the Funds in an
easily accessible place.
38
ADDENDUM
TO THE
AUDIT COMMITTEE CHARTER
WITH RESPECT TO
ING PRIME RATE TRUST
As an issuer listed on the New York Stock Exchange ("NYSE"), ING Prime
Rate Trust ("PPR") must comply with the rules and regulations of the NYSE, which
include, among other things, standards for audit committees of listed issuers.
Therefore, the Board of Trustees of PPR (the "Board") has adopted this Addendum
("Addendum") to the ING Funds Audit Committee Charter (the "Charter"). This
Addendum sets forth additional requirements for the Audit Committee (the
"Committee") of PPR. The terms and provisions of the Charter remain applicable
to PPR, as modified or supplemented by this Addendum.
[SOURCE: The provisions set out in this Addendum generally are derived from Rule
10A/10A-3 under the Exchange Act, which requires national securities exchanges
to adopt rules implementing Rule 10A-3 provisions by December 1, 2003. In
general, PPR would need to comply with the new listing rules by the earlier of
the earlier of the first annual shareholders meeting after JAN. 15 2004, or
OCTOBER 31, 2004.]
A. PURPOSE OF THE COMMITTEE
In addition to the purpose of the Committee set out in paragraph B of
the Charter, the Committee will serve the following purposes: (1) to assist
Board oversight of (a) the integrity of PPR's financial statements; (b) PPR's
compliance with legal and regulatory requirements; (c) the independent auditors'
qualifications and independence; and (d) the performance of any internal audit
staff and the independent auditors; and (2) to prepare the report that SEC rules
require be included in PPR's annual proxy statement. [SOURCE: Proposed NYSE
Listing Standards.]
The Committee will have the authority to engage, on PPR's behalf,
outside independent counsel and other advisers as it deems necessary to carry
out its duties. [SOURCE: Rule 10A-3(b)(4)]. The Committee will determine the
appropriate levels of funding for payment of (a) compensation of the independent
auditors; (b) compensation of any advisors employed by the Committee under the
Charter; and (c) ordinary administrative expenses of the Committee necessary or
appropriate in carrying out its duties under the Charter. [SOURCE: Rule
10A-3(b)(5)]
B. INDEPENDENCE OF COMMITTEE MEMBERS
1. Independence. The Committee will have at least three members.
The Board will affirmatively determine that each Committee member is
independent. In order to be considered independent, a member of the Committee
may not, other than in his or her capacity as a member of the Committee, the
Board or any other Board committee, (a) be an "interested person" of PPR as
defined in Section 2(a)(19) of the Investment Company Act of 1940 (the "1940
Act"); or (b) accept directly or indirectly any consulting, advisory or other
compensatory fee from PPR.
- 39 -
[SOURCE: Section 301 of Sarbanes-Oxley; Rule 10A-3(b)(1)(iii); Proposed NYSE
Listing Standards.]
2. Former Affiliations. Former employees of PPR or its investment
adviser and natural persons affiliated with or employed by current and former
auditors to PPR will not be deemed to be independent until five years after the
employment, affiliation or the auditing relationship has ended. [SOURCE:
Proposed NYSE Listing Standards.]
3. Compensation. The only compensation a Committee member may
receive from PPR is directors' or trustees' fees, provided that a Committee
member who is a former employee of PPR or its investment adviser may receive
deferred compensation if the deferred compensation is not contingent on
continued service. [SOURCE: Proposed NYSE Listing Standards.]
C. RELATIONSHIP WITH INDEPENDENT AUDITORS
1. Selection and Termination of Independent Auditors. The
Committee will be responsible for the oversight of the work of the independent
auditors (including resolution of disagreements between management and the
auditors regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work, and each independent auditor will report
directly to the Committee. [SOURCE: Section 301 of Sarbanes-Oxley.] The
Committee has the ultimate authority and responsibility to appoint and, when
appropriate, replace the independent auditors, and, if applicable, to nominate
the independent auditors to be proposed for shareholder ratification in any
proxy statement. The Committee will set clear hiring policies for employees or
former employees of the independent auditors. The Committee will also be
responsible for determining auditor compensation. [SOURCE: Rule 10A-3(b)(2);
Proposed NYSE Listing Standards.] The Committee will recommend the selection of
the independent auditors for ratification by the vote of a majority of all of
PPR's independent trustees in accordance with Section 32(a) of the 1940 Act.
[SOURCE: Section 32(a) of the 1940 Act.]
2. Significant Non-audit Relationships. The Committee will have
sole authority to approve any significant non-audit relationships with PPR's
independent auditors. [SOURCE: Proposed NYSE Listing Standards.]
3. Rotation of Auditors. In addition to assuring that the lead,
concurring and other audit partners are rotated in accordance with paragraph
F(2) of the Charter and as required by law, the Committee will consider whether
there should be a regular rotation of PPR's independent auditing firm. .
[SOURCE: Proposed NYSE Listing Standards.]
4. Annual Auditors' Report. At least annually, the Committee will
obtain and review a report by the independent auditors describing: (a) the
auditors' internal quality-control procedures; (b) any material issues raised by
the most recent internal quality-control review, or peer review, of the
auditors, or by any inquiry or investigation by governmental or professional
authorities, within the preceding five years, with respect to one or more
independent audits of any issuer carried out by the auditors, and any steps
taken to deal with any such issues; and (c) all relationships between the
independent auditors and the Funds, for purposes of assessing the auditors'
independence. [SOURCE: Proposed NYSE Listing Standards.] The Committee also will
consider any reports or communications (and management's responses to such
reports or communications) submitted by the independent auditors required by or
referred to in SAS 61 (as
- 40 -
codified by AU Section 380), as may be modified or supplemented. [SOURCE: Item
306 of Regulation S-K.]
D. DISCUSSIONS WITH AUDITORS AND MANAGEMENT [SOURCE OF PROVISIONS IN THIS
SECTION: PROPOSED NYSE LISTING STANDARDS.]
1. Annual Financial Statements. The Committee will discuss the
annual audited financial statements with management and the independent
auditors, including the Funds' disclosures under "Management's Discussion of
Fund Performance."
2. Press Releases and Other Information. The Committee will
discuss with management earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating agencies.
3. Risk Management. The Committee will discuss with management
and the independent auditors policies with respect to risk assessment and risk
management. [The Committee will report any material risks of a type not
previously approved by the Board identified during such discussions to the
Board.]
4. Ongoing Dialogue. The Committee periodically will meet with
management, with any internal audit staff of PPR and with the independent
auditors. The Committee will review with the independent auditor any audit
problems or difficulties and management's response.
E. OTHER
1. Establishment of Procedures. The Committee will establish
procedures for: (a) the receipt, retention, and treatment of complaints received
by PPR regarding accounting, internal accounting controls, or auditing matters;
and (b) the confidential, anonymous submission by employees of PPR of concerns
regarding questionable accounting, internal control or auditing matters.
[SOURCE: Rule 10A-3(b)(3); Proposed NYSE Listing Standards.]
2. Self-Evaluation. The Committee, on an annual basis, must
evaluate its performance with respect to its duties and responsibilities.
[SOURCE: Proposed NYSE Listing Standards.]
3. Written Affirmation. The Board shall establish procedures for
PPR's providing a "Written Affirmation" to the NYSE at the time of any changes
in the composition of the Committee, and on an annual basis within one month of
the Fund's annual shareholder meeting regarding: (a) any determination that the
Board has made regarding the independence of [directors/trustees] in accordance
with Rule 303.01(B)(3) of the NYSE Listed Company Manual; (b) the financial
literacy of Committee members; (c) the determination that at least one Committee
member has accounting or related financial management expertise; and (d) the
annual review and reassessment of the adequacy of the Charter and this Addendum.
[SOURCE: NYSE Listing Standards.]
- 41 -
4. Reporting. The Committee will approve the content of any
report the substance of which is required by the rules of the SEC to be included
in the proxy statement for the Fund. [SOURCE: Proxy requirements; Item 306 of
Regulation S-K.]
5. Board Communications. The Committee will periodically report
to the Board. [SOURCE: Proposed NYSE Listing Standards.]
- 42 -
APPENDIX 2
FORM OF SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT
ING PRIME RATE TRUST
AGREEMENT made this ____ day of ________, 2003 between ING
Investments, LLC, a Delaware limited liability company (the "Manager"), and
Aeltus Investment Management, Inc., a Connecticut corporation (the
"Sub-Adviser").
WHEREAS, ING Prime Rate Trust (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an
[open-end/closed-end], management investment company; and
WHEREAS, pursuant to an Investment Management Agreement, dated
September 1, 2000 (the "Management Agreement"), a copy of which has been
provided to the Sub-Adviser, the Fund has retained the Manager to render
advisory and management services to the Fund; and
WHEREAS, pursuant to authority granted to the Manager in the
Management Agreement, the Manager wishes to retain the Sub-Adviser to furnish
investment advisory services to the Fund, and the Sub-Adviser is willing to
furnish such services to the Fund and the Manager.
NOW, THEREFORE, in consideration of the premises and the
promises and mutual covenants herein contained, it is agreed between the Manager
and the Sub-Adviser as follows:
1. Appointment. The Manager hereby appoints the
Sub-Adviser to act as the investment adviser and manager to the Fund for the
period and on the terms set forth in this Agreement. The Sub-Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Sub-Adviser Duties. Subject to the supervision of the
Fund's Board of Trustees and the Manager, the Sub-Adviser will provide a
continuous investment program for the Fund's portfolio and determine in its
discretion the composition of the assets of the Fund's portfolio, including
determination of the purchase, retention, or sale of the securities, cash, and
other investments contained in the portfolio. The Sub-Adviser will provide
investment research and conduct a continuous program of evaluation, investment,
sales, and reinvestment of the Fund's assets by determining the securities and
other investments that shall be purchased, entered into, sold, closed, or
exchanged for the Fund, when these transactions should be executed, and what
portion of the assets of the Fund should be held in the various securities and
other investments in which it may invest. To the extent permitted by the
investment policies of the Fund, the Sub-Adviser shall make decisions for the
Fund as to foreign currency matters and make determinations as to and execute
and perform foreign currency exchange contracts on behalf of the Fund. The
Sub-Adviser will provide the services under this Agreement in
- 43 -
accordance with the Fund's investment objective or objectives, policies, and
restrictions as stated in the Fund's Registration Statement filed with the
Securities and Exchange Commission ("SEC"), as amended, copies of which shall be
sent to the Sub-Adviser by the Manager prior to the commencement of this
Agreement and promptly following any such amendment. The Sub-Adviser further
agrees as follows:
(a) The Sub-Adviser will conform with the 1940 Act and
all rules and regulations thereunder, all other applicable federal and state
laws and regulations, with any applicable procedures adopted by the Fund's Board
of Trustees of which the Sub-Adviser has been sent a copy, and the provisions of
the Registration Statement of the Fund filed under the Securities Act of 1933
(the "1933 Act") and the 1940 Act, as supplemented or amended, of which the
Sub-Adviser has received a copy, and with the Manager's portfolio manager
operating policies and procedures as in effect on the date hereof, as such
policies and procedures may be revised or amended by the Manager and agreed to
by the Sub-Adviser. In carrying out its duties under the Sub-Adviser Agreement,
the Sub-Adviser will comply with the following policies and procedures:
(i) The Sub-Adviser will manage the Fund so that it meets
the income and asset diversification requirements of Section 851 of the Internal
Revenue Code.
(ii) The Sub-Adviser will assist in voting all proxies
solicited by or with respect to the issuers of securities which assets of the
Fund are invested consistent with any procedures or guidelines approved by the
Board of Trustees, and the Manager or Sub-Adviser. If requested, the Sub-Adviser
will maintain appropriate records detailing its voting of proxies on behalf of
the Fund and will provide to the Fund at least quarterly a report setting forth
the proposals voted on and how the Fund's shares were voted since the prior
report, including the name of the corresponding issuers.
(iii) In connection with the purchase and sale of
securities for the Fund, the Sub-Adviser will arrange for the transmission to
the custodian and portfolio accounting agent for the Fund on a daily basis, such
confirmation, trade tickets, and other documents and information, including, but
not limited to, Cusip, Cedel, or other numbers that identify securities to be
purchased or sold on behalf of the Fund, as may be reasonably necessary to
enable the custodian and portfolio accounting agent to perform its
administrative and record keeping responsibilities with respect to the Fund.
With respect to portfolio securities to be settled through the Depository Trust
Company, the Sub-Adviser will arrange for the prompt transmission of the
confirmation of such trades to the Fund's custodian and portfolio accounting
agent.
(iv) The Sub-Adviser will assist the custodian and
portfolio accounting agent for the Fund in determining or confirming, consistent
with the procedures and policies stated in the Registration Statement for the
Fund or adopted by the Board of Trustees, the value of any portfolio securities
or other assets of the Fund for which the custodian and portfolio accounting
agent seeks assistance from or identifies for review by the Sub-Adviser. The
parties acknowledge that the Sub-Adviser is not a custodian of the Fund's assets
and will not take possession or custody of such assets.
- 44 -
(v) The Sub-Adviser will provide the Manager, no later
than the 10th business day following the end of the Fund's semi-annual period
and fiscal year, a letter to shareholders (to be subject to review and editing
by the Manager) containing a discussion of those factors referred to in Item
5(a) of 1940 Act Form N-1A in respect of both the prior quarter and the fiscal
year to date.
(vi) The Sub-Adviser will complete and deliver to the
Manager a written compliance checklist in a form provided by the Manager for
each month by the 10th business day of the following month.
(b) The Sub-Adviser will complete and deliver to the
Manager by the 10th business day of each month a written report regarding the
Fund that contains the following information as of the immediately previous
month's end:
(i) A performance comparison to the Fund's benchmark
listed in the prospectus as well as a comparison to other mutual funds as listed
in the rankings prepared by Lipper Analytical Services, Inc., Morningstar, Inc.,
or similar independent services that monitor the performance of mutual funds or
with other appropriate indexes of investment securities;
(ii) Composition of the assets of the Fund's portfolio and
the impact of key portfolio holdings and sector concentrations on the Fund; and
(iii) Confirmation of the Fund's current investment
objective and Sub-Adviser's projected plan to realize the Fund's investment
objectives.
(c) The Sub-Adviser will contact Morningstar to clarify
any style box conflicts with the Fund's style and the anticipated timeframe in
which Morningstar will remedy such conflicts, if any.
(d) The Sub-Adviser will make available to the Fund and
the Manager, promptly upon request, any of the Fund's investment records and
ledgers maintained by the Sub-Adviser (which shall not include the records and
ledgers maintained by the custodian or portfolio accounting agent for the Fund)
as are necessary to assist the Fund and the Manager to comply with requirements
of the 1940 Act and the Investment Advisers Act of 1940 (the "Advisers Act"), as
well as other applicable laws. The Sub-Adviser will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with such services in respect to the Fund which may be requested in
order to ascertain whether the operations of the Fund are being conducted in a
manner consistent with applicable laws and regulations.
(e) The Sub-Adviser will provide reports to the Fund's
Board of Trustees for consideration at meetings of the Board of Trustees on the
investment program for the Fund and the issuers and securities represented in
the Fund's portfolio, and will furnish the Fund's Board of Trustees with respect
to the Fund such periodic and special reports as the Trustees and the Manager
may reasonably request.
- 45 -
3. Broker-Dealer Selection. The Sub-Adviser is authorized to
make decisions to buy and sell securities and other investments for the Fund's
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates in effecting a security transaction. The Sub-Adviser's primary
consideration in effecting a security transaction will be to obtain the best
execution for the Fund, taking into account the factors specified in the
prospectus and/or statement of additional information for the Fund, and
determined in consultation with the Manager, which include price (including the
applicable brokerage commission or dollar spread), the size of the order, the
nature of the market for the security, the timing of the transaction, the
reputation, the experience and financial stability of the broker-dealer
involved, the quality of the service, the difficulty of execution, and the
execution capabilities and operational facilities of the firm involved, and the
firm's risk in positioning a block of securities. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified, in the judgment of the
Sub-Adviser in the exercise of its fiduciary obligations to the Fund, by other
aspects of the portfolio execution services offered. Subject to such policies as
the Fund's Board of Trustees or Manager may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, the Sub-Adviser shall not
be deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Fund to pay a
broker-dealer for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's or the Manager's overall
responsibilities with respect to the Fund and to their respective other clients
as to which they exercise investment discretion. The Sub-Adviser will consult
with the Manager to the end that portfolio transactions on behalf of a Fund are
directed to broker-dealers on the basis of criteria reasonably considered
appropriate by the Manager. To the extent consistent with these standards, the
Sub-Adviser is further authorized to allocate the orders placed by it on behalf
of the Fund to the Sub-Adviser if it is registered as a broker-dealer with the
SEC, to an affiliated broker-dealer, or to such brokers and dealers who also
provide research or statistical material, or other services to the Fund, the
Sub-Adviser, or an affiliate of the Sub-Adviser. Such allocation shall be in
such amounts and proportions as the Sub-Adviser shall determine consistent with
the above standards, and the Sub-Adviser will report on said allocation
regularly to the Fund's Board of Trustees indicating the broker-dealers to which
such allocations have been made and the basis therefore.
4. Disclosure about Sub-Adviser. The Sub-Adviser has reviewed
the most recent Post-Effective Amendment to the Registration Statement for the
Fund filed with the SEC that contains disclosure about the Sub-Adviser, and
represents and warrants that, with respect to the disclosure about the
Sub-Adviser or information relating, directly or indirectly, to the Sub-Adviser,
such Registration Statement contains, as of the date hereof, no untrue statement
of any material fact and does not omit any statement of a material fact which
was required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. The Sub-Adviser further represents and warrants that it is a duly
registered investment adviser under the Advisers Act and will maintain such
registration so long as this Agreement remains in effect. The Sub-Adviser will
provide the Manager with a copy of the Sub-Adviser's Form ADV, Part II at the
time the Form ADV is filed with the SEC.
- 46 -
5. Expenses. During the term of this Agreement, the
Sub-Adviser will pay all expenses incurred by it and its staff and for their
activities in connection with its portfolio management duties under this
Agreement. The Manager or the Fund shall be responsible for all the expenses of
the Fund's operations.
6. Compensation. For the services provided to the Fund, the
Manager will pay the Sub-Adviser an annual fee equal to the amount specified for
the Fund in Schedule A hereto, payable monthly in arrears. The fee will be
appropriately prorated to reflect any portion of a calendar month that this
Agreement is not in effect among the parties. In accordance with the provisions
of the Management Agreement, the Manager is solely responsible for the payment
of fees to the Sub-Adviser, and the Sub-Adviser agrees to seek payment of its
fees solely from the Manager; provided, however, that if the Fund fails to pay
the Manager all or a portion of the management fee under said Management
Agreement when due, and the amount that was paid is insufficient to cover the
Sub-Adviser's fee under this Agreement for the period in question, then the
Sub-Adviser may enforce against the Fund any rights it may have as a third-party
beneficiary under the Management Agreement and the Manager will take all steps
appropriate under the circumstances to collect the amount due from the Fund.
7. Marketing Materials.
(a) During the term of this Agreement, the Sub-Adviser
agrees to furnish the Manager at its principal office for prior review and
approval by the Manager all written and/or printed materials, including but not
limited to, PowerPoint(R) or slide presentations, news releases, advertisements,
brochures, fact sheets and other promotional, informational or marketing
materials (the "Marketing Materials") for internal use or public dissemination,
that are produced or are for use or reference by the Sub-Adviser, its affiliates
or other designees, broker-dealers or the public in connection with the Fund,
and Sub-Adviser shall not use any such materials if the Manager reasonably
objects in writing within five business days (or such other period as may be
mutually agreed) after receipt thereof. Marketing Materials may be furnished to
the Manager by first class or overnight mail, facsimile transmission equipment,
electronic delivery or hand delivery.
(b) During the term of this Agreement, the Manager agrees
to furnish the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, or Marketing Materials prepared for
distribution to shareholders of the Fund, or the public that refer to the
Sub-Adviser in any way, prior to the use thereof, and the Manager shall not use
any such materials if the Sub-Adviser reasonably objects in writing within five
business days (or such other period as may be mutually agreed) after receipt
thereof. The Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser, its
services and its clients. The Manager agrees to use its reasonable best efforts
to ensure that materials prepared by its employees or agents or its affiliates
that refer to the Sub-Adviser or its clients in any way are consistent with
those materials previously approved by the Sub-Adviser as referenced in the
first sentence of this paragraph. Marketing Materials may be furnished to the
Sub-Adviser by first class or overnight mail, facsimile transmission equipment,
electronic delivery or hand delivery.
8. Compliance.
- 47 -
(a) The Sub-Adviser agrees to use reasonable compliance
techniques as the Manager or the Board of Trustees may adopt, including any
written compliance procedures.
(b) The Sub-Adviser agrees that it shall promptly notify
the Manager and the Fund (1) in the event that the SEC has censured the
Sub-Adviser; placed limitations upon its activities, functions or operations;
suspended or revoked its registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, or (2)
upon having a reasonable basis for believing that the Fund has ceased to qualify
or might not qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code. The Sub-Adviser further agrees to notify the Manager and
the Fund promptly of any material fact known to the Sub-Adviser respecting or
relating to the Sub-Adviser that is not contained in the Registration Statement
or prospectus for the Fund, or any amendment or supplement thereto, or if any
statement contained therein that becomes untrue in any material respect.
(c) The Manager agrees that it shall promptly notify the
Sub-Adviser (1) in the event that the SEC has censured the Manager or the Fund;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Manager's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, or (2) upon having a reasonable basis for believing that the Fund has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code.
9. Books and Records. The Sub-Adviser hereby agrees that all
records which it maintains for the Fund are the property of the Fund and further
agrees to surrender promptly to the Fund any of such records upon the Fund's or
the Manager's request in compliance with the requirements of Rule 31a-3 under
the 1940 Act, although the Sub-Adviser may, at its own expense, make and retain
a copy of such records. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-l under the 1940 Act.
10. Cooperation; Confidentiality. Each party to this Agreement
agrees to cooperate with the other party and with all appropriate governmental
authorities having the requisite jurisdiction (including, but not limited to,
the SEC) in connection with any investigation or inquiry relating to this
Agreement or the Fund. Subject to the foregoing, the Sub-Adviser shall treat as
confidential all information pertaining to the Fund and actions of the Fund, the
Manager and the Sub-Adviser, and the Manager shall treat as confidential and use
only in connection with the Fund all information furnished to the Fund or the
Manager by the Sub-Adviser, in connection with its duties under the agreement
except that the aforesaid information need not be treated as confidential if
required to be disclosed under applicable law, if generally available to the
public through means other than by disclosure by the Sub-Adviser or the Manager,
or if available from a source other than the Manager, Sub-Adviser or this Fund.
11. Representations Respecting Sub-Adviser. The Manager agrees
that neither the Manager, nor affiliated persons of the Manager, shall give any
information or make any representations or statements in connection with the
sale of shares of the Fund concerning the Sub-Adviser or the Fund other than the
information or representations contained in the Registration Statement,
prospectus, or statement of additional information for the Fund's shares,
- 48 -
as they may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional material
approved in advance by the Sub-Adviser, except with the prior permission of the
Sub-Adviser.
12. Control. Notwithstanding any other provision of the
Agreement, it is understood and agreed that the Fund shall at all times retain
the ultimate responsibility for and control of all functions performed pursuant
to this Agreement and has reserved the right to reasonably direct any action
hereunder taken on its behalf by the Sub-Adviser.
13. Liability. Except as may otherwise be required by the 1940
Act or the rules thereunder or other applicable law, the Manager agrees that the
Sub-Adviser, any affiliated person of the Sub-Adviser, and each person, if any,
who, within the meaning of Section 15 of the 1933 Act controls the Sub-Adviser
(1) shall bear no responsibility and shall not be subject to any liability for
any act or omission respecting the Fund, and (2) shall not be liable for, or
subject to any damages, expenses, or losses in connection with, any act or
omission connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Sub-Adviser's duties, or by reason of
reckless disregard of the Sub-Adviser's obligations and duties under this
Agreement.
14. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the
Sub-Adviser, any affiliated person of the Sub-Adviser, and each person, if any,
who, within the meaning of Section 15 of the 1933 Act controls ("controlling
person") the Sub-Adviser (all of such persons being referred to as "Sub-Adviser
Indemnified Persons") against any and all losses, claims, damages, liabilities,
or litigation (including legal and other expenses) to which a Sub-Adviser
Indemnified Person may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, under any other statute, at common law or otherwise, arising out
of the Manager's responsibilities to the Fund which (1) may be based upon the
Manager's negligence, willful misfeasance, or bad faith in the performance of
its duties (which could include a negligent action or a negligent omission to
act), or by reason of the Manager's reckless disregard of its obligations and
duties under this Agreement, or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering shares of the Fund, or any amendment thereof or
any supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon information furnished to the Manager or the Fund or to any affiliated
person of the Manager by a Sub-Adviser Indemnified Person; provided however,
that in no case shall the indemnity in favor of the Sub-Adviser Indemnified
Person be deemed to protect such person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or by reason of its
reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 13 of this Agreement, the
Sub-Adviser agrees to indemnify and hold harmless the Manager, any affiliated
person of the Manager, and any controlling person of the Manager (all of such
persons being referred to as "Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation
- 49 -
(including legal and other expenses) to which a Manager Indemnified Person may
become subject under the 1933 Act, 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of the Sub-Adviser's
responsibilities as Sub-Adviser of the Fund which (1) may be based upon the
Sub-Adviser's negligence, willful misfeasance, or bad faith in the performance
of its duties (which could include a negligent action or a negligent omission to
act), or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Agreement, or (2) may be based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering the shares of the Fund, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact known or which should have been known to the Sub-Adviser and was
required to be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Manager, the Fund, or any affiliated person of the
Manager or Fund by the Sub-Adviser or any affiliated person of the Sub-Adviser;
provided, however, that in no case shall the indemnity in favor of a Manager
Indemnified Person be deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or by
reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Manager shall not be liable under Paragraph (a)
of this Section 14 with respect to any claim made against a Sub-Adviser
Indemnified Person unless such Sub-Adviser Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Sub-Adviser Indemnified Person (or after such
Sub-Adviser Indemnified Person shall have received notice of such service on any
designated agent), but failure to notify the Manager of any such claim shall not
relieve the Manager from any liability which it may have to the Sub-Adviser
Indemnified Person against whom such action is brought except to the extent the
Manager is prejudiced by the failure or delay in giving such notice. In case any
such action is brought against the Sub-Adviser Indemnified Person, the Manager
will be entitled to participate, at its own expense, in the defense thereof or,
after notice to the Sub-Adviser Indemnified Person, to assume the defense
thereof, with counsel satisfactory to the Sub-Adviser Indemnified Person. If the
Manager assumes the defense of any such action and the selection of counsel by
the Manager to represent the Manager and the Sub-Adviser Indemnified Person
would result in a conflict of interests and therefore, would not, in the
reasonable judgment of the Sub-Adviser Indemnified Person, adequately represent
the interests of the Sub-Adviser Indemnified Person, the Manager will, at its
own expense, assume the defense with counsel to the Manager and, also at its own
expense, with separate counsel to the Sub-Adviser Indemnified Person, which
counsel shall be satisfactory to the Manager and to the Sub-Adviser Indemnified
Person. The Sub-Adviser Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Manager shall not be liable to
the Sub-Adviser Indemnified Person under this Agreement for any legal or other
expenses subsequently incurred by the Sub-Adviser Indemnified Person
independently in connection with the defense thereof other than reasonable costs
of investigation. The Manager shall not have the right to compromise on or
settle the litigation without the prior written consent of the Sub-Adviser
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Sub-Adviser Indemnified Person.
- 50 -
(d) The Sub-Adviser shall not be liable under Paragraph
(b) of this Section 14 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Sub-Adviser in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Manager Indemnified Person (or after such Manager
Indemnified Person shall have received notice of such service on any designated
agent), but failure to notify the Sub-Adviser of any such claim shall not
relieve the Sub-Adviser from any liability which it may have to the Manager
Indemnified Person against whom such action is brought except to the extent the
Sub-Adviser is prejudiced by the failure or delay in giving such notice. In case
any such action is brought against the Manager Indemnified Person, the
Sub-Adviser will be entitled to participate, at its own expense, in the defense
thereof or, after notice to the Manager Indemnified Person, to assume the
defense thereof, with counsel satisfactory to the Manager Indemnified Person. If
the Sub-Adviser assumes the defense of any such action and the selection of
counsel by the Sub-Adviser to represent both the Sub-Adviser and the Manager
Indemnified Person would result in a conflict of interests and therefore, would
not, in the reasonable judgment of the Manager Indemnified Person, adequately
represent the interests of the Manager Indemnified Person, the Sub-Adviser will,
at its own expense, assume the defense with counsel to the Sub-Adviser and, also
at its own expense, with separate counsel to the Manager Indemnified Person,
which counsel shall be satisfactory to the Sub-Adviser and to the Manager
Indemnified Person. The Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Sub-Adviser shall not
be liable to the Manager Indemnified Person under this Agreement for any legal
or other expenses subsequently incurred by the Manager Indemnified Person
independently in connection with the defense thereof other than reasonable costs
of investigation. The Sub-Adviser shall not have the right to compromise on or
settle the litigation without the prior written consent of the Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Manager Indemnified Person.
15. Duration and Termination.
(a) This Agreement shall become effective on the date
first indicated above, subject to the condition that the Fund's Board of
Trustees, including a majority of those Trustees who are not interested persons
(as such term is defined in the 1940 Act) of the Manager or the Sub-Adviser, and
the shareholders of the Fund, shall have approved this Agreement. Unless
terminated as provided herein, this Agreement shall remain in full force and
effect for two years from such date and continue on an annual basis thereafter
with respect to the Fund covered by this Agreement; provided that such annual
continuance is specifically approved each year by (a) the Board of Trustees of
the Fund, or by the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and (b) the vote of a majority of those
Trustees who are not parties to this Agreement or interested persons (as such
term is defined in the 1940 Act) of any such party to this Agreement cast in
person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated with respect to
the Fund: (a) by the Manager at any time, upon sixty (60) days' written notice
to the Sub-Adviser and the Fund, (b) at any time without payment of any penalty
by the Fund, by the Fund's Board of Trustees or a majority of the outstanding
voting securities of
- 51 -
the Fund, upon sixty (60) days' written notice to the Manager and the
Sub-Adviser, or (c) by the Sub-Adviser upon three (3) months' written notice
unless the Fund or the Manager requests additional time to find a replacement
for the Sub-Adviser, in which case the Sub-Adviser shall allow the additional
time requested by the Fund or Manager not to exceed three (3) additional months
beyond the initial three-month notice period; provided, however, that the
Sub-Adviser may terminate this Agreement at any time without penalty, effective
upon written notice to the Manager and the Fund, in the event either the
Sub-Adviser (acting in good faith) or the Manager ceases to be registered as an
investment adviser under the Advisers Act or otherwise becomes legally incapable
of providing investment management services pursuant to its respective contract
with the Fund, or in the event the Manager becomes bankrupt or otherwise
incapable of carrying out its obligations under this Agreement, or in the event
that the Sub-Adviser does not receive compensation for its services from the
Manager or the Fund as required by the terms of this agreement.
In the event of termination for any reason, all records of the
Fund shall promptly be returned to the Manager or the Fund, free from any claim
or retention of rights in such record by the Sub-Adviser, although the
Sub-Adviser may, at its own expense, make and retain a copy of such records.
This Agreement shall automatically terminate in the event of its assignment (as
such term is described in the 1940 Act). In the event this Agreement is
terminated or is not approved in the manner described above, the Sections or
Paragraphs numbered 9, 10, 11, 12, 13, 14 and 17 of this Agreement shall remain
in effect, as well as any applicable provision of this Section numbered 15 and,
to the extent that only amounts are owed to the Sub-Adviser as compensation for
services rendered while the agreement was in effect, Section 6.
(b) Notices.
Any notice must be in writing and shall be sufficiently given
(1) when delivered in person, (2) when dispatched by telegram or electronic
facsimile transfer (confirmed in writing by postage prepaid first class air mail
simultaneously dispatched), (3) when sent by internationally recognized
overnight courier service (with receipt confirmed by such overnight courier
service), or (4) when sent by registered or certified mail, to the other party
at the address of such party set forth below or at such other address as such
party may from time to time specify in writing to the other party.
If to the Fund:
ING Prime Rate Trust
7337 East Doubletree Ranch Road
Scottsdale, AZ 85258
Attention: Kimberly A. Anderson
If to the Sub-Adviser:
Aeltus Investment Management, Inc.
10 State House Square
Hartford, CT 06103-3602
Attention: Michael Gioffre
- 52 -
16. Amendments. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Agreement shall be effective
until approved as required by applicable law.
17. Miscellaneous.
(a) This Agreement shall be governed by the laws of the
State of Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder, and without regard for the conflicts of laws principle thereof. The
term "affiliate" or "affiliated person" as used in this Agreement shall mean
"affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(b) The Manager and the Sub-Adviser acknowledge that the
Fund enjoys the rights of a third-party beneficiary under this Agreement, and
the Manager acknowledges that the Sub-Adviser enjoys the rights of a third party
beneficiary under the Management Agreement.
(c) The captions of this Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(d) To the extent permitted under Section 15 of this
Agreement, this Agreement may only be assigned, as defined in the Investment
Company Act of 1940, by any party with the prior written consent of the other
parties.
(e) If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby, and to this extent, the provisions
of this Agreement shall be deemed to be severable.
(f) Nothing herein shall be construed as constituting the
Sub-Adviser as an agent or co-partner of the Manager, or constituting the
Manager as an agent or co-partner of the Sub-Adviser.
(g) This agreement may be executed in counterparts.
- 53 -
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed as of the day and year first above written.
ING INVESTMENTS, LLC
By:_______________________________________
_______________________________________
Title
AELTUS INVESTMENT MANAGEMENT, INC.
By:_______________________________________
_______________________________________
Title
SCHEDULE A
WITH RESPECT TO THE
SUB-ADVISORY AGREEMENT
BETWEEN
ING INVESTMENTS, LLC
AND
AELTUS INVESTMENT MANAGEMENT, INC.
ANNUAL
SUB-ADVISER FEE
(AS A PERCENTAGE OF
AVERAGE DAILY NET LAST CONTINUED/
FUND ASSETS) APPROVED BY BOARD REAPPROVAL DATE
---- ----------------- ---------------
ING Prime Rate Trust .4500% April 9, 2003 September 1, 2003
- 55 -
APPENDIX 3
PRINCIPAL EXECUTIVE OFFICERS OF ING INVESTMENTS, LLC
7337 E. DOUBLETREE RANCH ROAD
SCOTTSDALE, AZ 85258
NAME AND TITLE
James M. Hennessy - President and CEO
Stanley D. Vyner - Executive VP & Chief Investment Risk Officer
Michael J. Roland - Executive VP, CFO & Treasurer
Lydia L. Homer - Senior VP & Controller
Robert S. Naka - Senior VP & Assistant Secretary
Daniel A. Norman - Senior VP & Co-Senior Portfolio Manager-Senior Loans
William H. Rivoir, III - Senior VP & Secretary
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS OF
ING AELTUS INVESTMENT MANAGEMENT, INC.
10 STATE HOUSE SQUARE
HARTFORD, CT 06103
NAME AND TITLE
Thomas J. McInerney, Director
Robert J. Crispin, Director
J. Scott Fox, Director, Chief Executive Officer and President
Neil Kochen, Executive Vice President
Jeffrey T. Becker, Senior Vice President and Chief Financial Officer
Michael Gioffre, Senior Vice President, Counsel and Secretary
PRINCIPAL EXECUTIVE OFFICERS OF ING FUNDS SERVICES, LLC
7337 E. DOUBLETREE RANCH ROAD
SCOTTSDALE, AZ 85258
NAME AND TITLE
James M. Hennessy - President and CEO
Michael J. Roland - Executive VP, CFO & Treasurer
Lydia L. Homer - Senior VP & Controller
William H. Rivoir III - Senior VP & Secretary
Robert S. Naka - Senior VP & Assistant Secretary
PRINCIPAL EXECUTIVE OFFICERS OF ING FUNDS DISTRIBUTOR, LLC
7337 E. DOUBLETREE RANCH ROAD
SCOTTSDALE, AZ 85258
NAME AND TITLE
Robert J. Boulware - President & CEO
James M. Hennessy - Senior Executive VP & Chief Operating Officer
Michael J. Roland - Executive VP, CFO & Treasurer
Lydia L. Homer - Senior VP & Controller
Lauren Bensinger - VP & Chief Compliance Officer
- 56 -
APPENDIX 4
MANAGEMENT
AGREEMENT LAST
FISCAL YEAR AGGREGATE ADVISORY APPROVED BY
NAME OF FUND END FEES PAID SHAREHOLDERS
------------ ---- --------- ------------
Prime Rate Trust 02/28/03 $12,698,403 08/25/2000
- 57 -
APPENDIX 5
CURRENT ADVISER AND PROPOSED SUB-ADVISER FEES
FUND ADVISER FEE PROPOSED SUB-ADVISER FEE
---- ----------- ------------------------
Prime Rate Trust 0.80% 0.3600%
- 58 -
ING PRIME RATE TRUST- COMMON SHARES
ANNUAL MEETING OF SHAREHOLDERS SCHEDULED FOR AUGUST 19, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby instructs Kimberly A. Anderson, Jeffrey A. Bakalar or
Michael J. Roland (Proxies) to vote the shares held by him or her at the Annual
Meeting of shareholders (the "Annual Meeting") of the ING Prime Rate Trust (the
"Trust") to be held at: 7337 East Doubletree Ranch Road, Scottsdale, Arizona
85258-2034, on August 19, 2003, at 10:00 a.m., Local time and at any adjournment
thereof, in the manner directed below with respect to the matters referred to in
the Proxy Statement for the Annual Meeting, receipt of which is hereby
acknowledged, and in the Proxies' discretion, upon such other matters as may
properly come before the meeting or any adjournment(s) thereof.
Please vote, sign and date this proxy card and return it in the enclosed
envelope.
These voting instructions will be voted as specified. IF NO SPECIFICATION IS
MADE, THIS VOTING INSTRUCTION WILL BE VOTED "FOR" ALL PROPOSALS.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE STRONGLY
URGE YOU TO REVIEW, COMPLETE AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow the
simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow the
simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
Please indicate your vote by an "X" in the appropriate box below.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
- 59 -
FOR WITHHOLD FOR ALL
VOTE ON TRUSTEES ALL ALL EXCEPT
---------------- --- --- ------
1. To elect nine members of the Board of Trustees to To withhold
represent the interests of the holders of Common authority to vote,
Shares of the Trust until the election and mark "For All
qualification of their successors. [ ] [ ] [ ] Except" and write
the nominee's
01) Paul S. Doherty, 02) J. Michael Early, 03) R. number on the line
Barbara Gitenstein, 04) Thomas J. McInerney, 05) David below.
W.C. Putnam, 06) Blaine E. Rieke, 07) John G. Turner,
08) Roger B. Vincent, and 09) Richard A. Wedemeyer.
_____________________
2. Not Applicable
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
----------------- --- ------- -------
3. Ratification of the selection of KPMG LLP as the
current independent auditor of the Trust. [ ] [ ] [ ]
4. To approve a Sub-Advisory Agreement between ING
Investments, LLC and ING Aeltus Investment Management,
Inc., with no change in the Adviser, the portfolio [ ] [ ] [ ]
managers, or the overall management fee paid by the
Trust.
5. Such other business as may properly come before the
Annual Meeting or any adjournment(s) or [ ] [ ] [ ]
postponement(s) thereof.
This proxy card must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
________________________________________ __________________________________
Signature Date Signature (Joint Owners) Date
- 60 -
ING PRIME RATE TRUST- AUCTION RATE CUMULATIVE PREFERRED SHARES SERIES
M, T, W, TH AND F
ANNUAL MEETING OF SHAREHOLDERS SCHEDULED FOR AUGUST 19, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby instructs Kimberly A. Anderson, Jeffrey A. Bakalar or
Michael J. Roland (Proxies) to vote the shares held by him or her at the Annual
Meeting of shareholders (the "Annual Meeting") of the ING Prime Rate Trust (the
"Trust") to be held at: 7337 East Doubletree Ranch Road, Scottsdale, Arizona
85258-2034, on August 19, 2003, at 10:00 a.m., Local time and at any adjournment
thereof, in the manner directed below with respect to the matters referred to in
the Proxy Statement for the Annual Meeting, receipt of which is hereby
acknowledged, and in the Proxies' discretion, upon such other matters as may
properly come before the meeting or any adjournment(s) thereof.
Please vote, sign and date this proxy card and return it in the enclosed
envelope.
These voting instructions will be voted as specified. IF NO SPECIFICATION IS
MADE, THIS VOTING INSTRUCTION WILL BE VOTED "FOR" ALL PROPOSALS.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE STRONGLY
URGE YOU TO REVIEW, COMPLETE AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the proxy card and follow the
simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the proxy card and follow the
simple instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
Please indicate your vote by an "X" in the appropriate box below.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
- 61 -
FOR WITHHOLD FOR ALL
VOTE ON TRUSTEES ALL ALL EXCEPT
---------------- --- -------- -------
1. Not Applicable
2. To elect two members of the Board of Trustees to To withhold
represent the interests of the holders of Auction Rate authority to vote,
Cumulative Preferred Shares - Series M, T, W, TH and F mark "For All
of the Trust - until the election and qualification of Except" and write
their successors. [ ] [ ] [ ] the nominee's
number on the line
(1) Walter H. May and (2) Jock Patton below.
____________________
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
----------------- --- ------- -------
3. Ratification of the selection of KPMG LLP as the
current independent auditor of the Trust. [ ] [ ] [ ]
4. To approve a Sub-Advisory Agreement between ING
Investments, LLC and ING Aeltus Investment Management,
Inc., with no change in the Adviser, the portfolio [ ] [ ] [ ]
managers, or the overall management fee paid by the
Trust.
5. Such other business as may properly come before the
Annual Meeting or any adjournment(s) or [ ] [ ] [ ]
postponement(s) thereof.
This proxy card must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
__________________________________ ____________________________________
Signature Date Signature (Joint Owners) Date
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