[Federal Register Volume 69, Number 228 (Monday, November 29, 2004)]
[Notices]
[Pages 69421-69431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3353]



[[Page 69421]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26682; File No. 812-13101]


ING USA Annuity & Life Insurance Company, et al.

November 23, 2004.
AGENCY: The Securities and Exchange Commission (``SEC'' or 
``Commission'').

ACTION: Notice of application for an order pursuant to Section 26(c) of 
the Investment Company Act of 1940 (the ``Act'') approving certain 
substitutions of securities and for an order of exemption pursuant to 
Section 17(b) of the Act.

-----------------------------------------------------------------------

APPLICANTS: ING Insurance Company of America, ING Life Insurance and 
Annuity Company, ING USA Annuity and Life Insurance Company, ReliaStar 
Life Insurance Company, ReliaStar Life Insurance Company of New York, 
and Security Life of Denver Insurance Company (each a ``Company'' and 
together, the ``Companies''), Variable Annuity Account I of ING 
Insurance Company of America (``ING America I''), Variable Annuity 
Account B of ING Life Insurance and Annuity Company (``ING Life B''), 
Variable Annuity Account C of ING Life Insurance and Annuity Company 
(``ING Life C''), Variable Annuity Account G of ING Life Insurance and 
Annuity Company (ING Life G''), Separate Account B of ING USA Annuity 
and Life Insurance Company (``ING USA B''), Select*Life Variable 
Account of ReliaStar Life Insurance Company (``ReliaStar SL''), 
ReliaStar Select Variable Account of ReliaStar Life Insurance Company 
(``ReliaStar VA''), Separate Account N of ReliaStar Life Insurance 
Company (``ReliaStar N''), ReliaStar Life Insurance Company of New York 
Separate Account NY-B (``ReliaStar NY B''), ReliaStar Life Insurance 
Company of New York Variable Annuity Funds P & Q (``ReliaStar NY 
P&Q''), ReliaStar Life Insurance Company of New York Variable Life 
Separate Account I (``ReliaStar NY I''), Security Life Separate Account 
L1 (``Security Life L1''), Security Life Separate Account S-A1 
(``Security Life S-A1''), and Security Life Separate Account S-L1 
(``Security Life S-L1'') (each, an ``Account'' and together, the 
``Accounts''), and ING Partners, Inc. (``ING Partners''). The 
Companies, the Accounts and ING Partners are collectively referred to 
herein as the ``Applicants.''
SUMMARY: The Applicants have submitted an application (the 
``Application'') for an order of the Securities and Exchange Commission 
(the ``Commission''), pursuant to Section 26(c), formerly Section (b), 
of the Investment Company Act of 1940, as amended (the ``1940 Act''), 
permitting the substitutions of securities issued by certain registered 
investment companies held by the Accounts to support certain in force 
variable life insurance policies and variable annuity contracts 
(collectively, the ``Contracts'') issued by the Companies. More 
particularly, the Applicants propose to substitute shares of certain 
series of ING Partners (the ``Substitute Funds'') for shares of certain 
registered investment companies currently held by subaccounts of the 
various Accounts (the ``Replaced Funds'') as follows:

------------------------------------------------------------------------
             Replaced funds                      Substitute funds
------------------------------------------------------------------------
Janus Aspen Balanced Portfolio--         ING Van Kampen Equity and
 Institutional Shares.                    Income Portfolio--Initial
                                          Class.
Janus Aspen Balanced Portfolio---        ING Van Kampen Equity and
 Service Shares.                          Income Portfolio--Initial
                                          Class.
ING Van Kampen Equity and Income         ING Van Kampen Equity and
 Portfolio--Service Class.                Income Portfolio--Initial
                                          Class.
Janus Aspen Capital Appreciation         ING Salomon Brothers Large Cap
 Portfolio--Service Shares.               Growth Portfolio--Initial
                                          Class.
Janus Twenty Fund--Class I.............  ING Salomon Bros Large Cap
                                          Growth Portfolio--Initial
                                          Class.
Janus Aspen Flexible Income Portfolio--  ING Oppenheimer Strategic
 Institutional Shares.                    Income Portfolio--Initial
                                          Class.
Oppenheimer Strategic Bond Fund/VA--Non- ING Oppenheimer Strategic
 Service Shares.                          Income Portfolio--Initial
                                          Class.
Janus Aspen Flexible Income Portfolio--  ING Oppenheimer Strategic
 Service Shares.                          Income Portfolio--Service
                                          Class.
Oppenheimer Strategic Bond Fund/VA--     ING Oppenheimer Strategic
 Service Shares.                          Income Portfolio--Service
                                          Class.
Janus Aspen Growth Portfolio--           ING American Century Select
 Institutional Shares.                    Portfolio--Initial Class.
ING American Century Select Portfolio--  ING American Century Select
 Service Class.                           Portfolio--Initial Class.
Janus Aspen Growth Portfolio--Service    ING American Century Select
 Shares.                                  Portfolio--Initial Class.
Janus Aspen Mid Cap Growth Portfolio--   ING T. Rowe Price Diversified
 Institutional Shares.                    Mid Cap Growth Portfolio--
                                          Initial Class.
ING T. Rowe Price Diversified Mid Cap    ING T. Rowe Price Diversified
 Growth Portfolio--Service Class.         Mid Cap Growth Portfolio--
                                          Initial Class.
Janus Aspen Mid Cap Growth Portfolio--   ING T. Rowe Price Diversified
 Service Shares.                          Mid Cap Growth Portfolio--
                                          Initial Class.
Janus Aspen Worldwide Growth Portfolio-- ING Oppenheimer Global
 Institutional Shares.                    Portfolio--Initial Class.
Oppenheimer Global Securities Fund/VA--  ING Oppenheimer Global
 Non-Service Shares.                      Portfolio--Initial Class.
ING Oppenheimer Global Portfolio--       ING Oppenheimer Global
 Service Class.                           Portfolio--Initial Class.
Janus Aspen Worldwide Growth Portfolio-- ING Oppenheimer Global
 Service Shares.                          Portfolio--Initial Class.
Oppenheimer Global Securities Fund/VA--  ING Oppenheimer Global
 Service Shares.                          Portfolio--Initial Class.
------------------------------------------------------------------------


FILING DATE: The application was filed on June 10, 2004. The 
application was amended and restated on November 5, 2004 and November 
19, 2004.

HEARING OR NOTIFICATION OF HEARING:  An order granting the Application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Secretary of the 
Commission and serving Applicants with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on December 17, 2004, and should be accompanied 
by proof of service on Applicants, in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the writer's interest, the reason for the request, and the 
issues contested. Persons who wish to be notified of a hearing may 
request notification by writing to the Secretary of the Commission.

ADDRESSES: For the Commission: Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. For 
Applicants, J. Neil McMurdie, Esquire, ING U.S. Legal Services, 151 
Farmington Avenue, TS31, Hartford, CT 06156-8975.

FOR FURTHER INFORMATION CONTACT: Alison White, Senior Counsel, or Lorna 
MacLeod, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
Application. The complete Application is available for a fee from the 
Public Reference Branch of the Commission.

[[Page 69422]]

The Application

    The Applicants have requested that the Commission issue an order to 
permit the substitution (``Substitution'') of certain shares of certain 
investment management companies currently held by sub-accounts of the 
various Accounts for shares of certain series of the Substitute Funds.

The Applicants, Funds and Contracts

    1. The Companies. Each of the Companies is an indirect wholly owned 
subsidiary of ING Groep, N.V. (``ING''). ING is a global financial 
services holding company based in The Netherlands which is active in 
the field of insurance, banking and asset management. As a result, each 
Company likely would be deemed to be an affiliate of the others.
    a. ING Insurance Company of America (``ING America''). ING America 
is a stock life insurance company organized under the laws of the State 
of Connecticut in 1990 and redomesticated under the insurance laws of 
the State of Florida in 2000. Prior to May 1, 2002, ING America was 
known as Aetna Insurance Company of America (``Aetna America''). ING 
America is principally engaged in the business of issuing life 
insurance and annuities. ING America is the depositor of Variable 
Annuity Account I, a separate account which is registered with the 
Commission as a unit investment trust.
    b. ING Life Insurance and Annuity Company (``ING Life''). ING Life 
is a stock life insurance company organized under the laws of the State 
of Connecticut in 1976 as Forward Life Insurance Company. Through a 
December 31, 1976 merger ING Life's operations include the business of 
Aetna Variable Annuity Life Insurance Company (formerly known as 
Participating Annuity Life Insurance Company). Prior to May 1, 2002, 
ING Life was known as Aetna Life Insurance and Annuity Company 
(``Aetna''). ING Life is principally engaged in the business of issuing 
life insurance and annuities. ING Life is the depositor of Variable 
Annuity Account B, Variable Annuity Account C and Variable Annuity 
Account G, separate accounts which are registered with the Commission 
as unit investment trusts.
    c. ING USA Annuity and Life Insurance Company (``ING USA''). ING 
USA is an Iowa stock life insurance company which was originally 
organized in 1973 under the insurance laws of Minnesota. Through a 
January 1, 2004 merger ING USA's operations include the business of 
Equitable Life Insurance Company of Iowa, United Life and Annuity 
Insurance Company, and USG Annuity and Life Company. Prior to January 
1, 2004, ING USA was known as Golden American Life Insurance Company 
(``Golden''). ING USA is principally engaged in the business of issuing 
life insurance and annuities. ING USA is the depositor of Separate 
Account B, a separate account which is registered with the Commission 
as a unit investment trust.
    d. ReliaStar Life Insurance Company (``ReliaStar''). ReliaStar is a 
stock life insurance company organized in 1885 and incorporated under 
the laws of the State of Minnesota. Through an October 1, 2002 merger 
ReliaStar's operations include the business of Northern Life Insurance 
Company (``Northern''). ReliaStar is principally engaged in the 
business of issuing life insurance, annuities, employee benefits and 
retirement contracts. ReliaStar is the depositor of ReliaStar Select 
Variable Account, Select*Life Variable Account and Separate Account N, 
separate accounts which are registered with the Commission as unit 
investment trusts.
    e. ReliaStar Life Insurance Company of New York (``ReliaStar NY''). 
ReliaStar NY is a stock life insurance company which was incorporated 
under the laws of the State of New York in 1917. Through an April 1, 
2002 merger ReliaStar NY's operations include the business of First 
Golden American Life Insurance Company of New York (``First Golden''). 
ReliaStar NY is principally engaged in the business of issuing life 
insurance and annuities. ReliaStar NY is the depositor of Separate 
Account NY-B, Variable Annuity Funds P & Q and Variable Life Separate 
Account I, separate accounts which are registered with the Commission 
as unit investment trusts.
    f. Security Life of Denver Insurance Company (``Security Life''). 
Security Life is a stock life insurance company organized under the 
laws of the State of Colorado in 1929. Security Life is principally 
engaged in the business of issuing life insurance and annuities. 
Security Life is the depositor of Security Life Separate Account L1, 
Security Life Separate Account S-A1, and Security Life Separate Account 
S-L1, separate accounts which are registered with the Commission as 
unit investment trusts.
    2. The Accounts. Each of the Accounts is a segregated asset account 
of the applicable Company, and is registered under the 1940 Act as a 
unit investment trust. Each of the respective Accounts is used by the 
Company of which it is a part to support the Contracts that it issues.
    Each Account is administered and accounted for as part of the 
general business of the Company of which it is a part. The assets of 
each Account attributable to the Contracts issued through it are owned 
by each Company but are held separately from all other assets of that 
Company for the benefit of the owners of, and persons entitled to 
benefits under such Contracts. Pursuant to applicable state insurance 
law and to the extent provided in the Contracts, such assets are not 
chargeable with liabilities arising out of any other business that each 
Company may conduct. Income, if any, gains and losses, realized or 
unrealized, from each Account are credited to or charged against the 
assets of that Account, without regard to other income, gains or losses 
of its Company or any of its other segregated asset accounts. Each 
Account is a ``separate account'' as defined by Rule 0-1(e) under the 
1940 Act.
    Each Account is divided into subaccounts, each of which invests 
exclusively in shares of one investment company portfolio of ING 
Partners, a Replaced Fund or another mutual fund. Each investment 
company portfolio has its own distinct investment objective(s) and 
policies. Income, gains and losses, realized or unrealized, of a 
portfolio are credited to or charged against the corresponding 
subaccount of each Account without regard to any other income, gains or 
losses of the applicable Company. To the extent provided in the 
Contracts, assets equal to the reserves and other contract liabilities 
with respect to an Account are not chargeable with liabilities arising 
out of any other business of the Company that is the depositor of the 
Account.
    Each of the prospectuses for the Contracts discloses that the 
Companies reserve the right, subject to Commission approval and 
compliance with applicable law, to substitute shares of another open-
end management investment company for shares of an open-end management 
investment company held by a subaccount of an Account whenever the 
Company, in its judgment, determines that a portfolio no longer suits 
the purpose of the Contract.
    3. The Substitute Funds. Each of the Substitute Funds is a series 
of ING Partners. ING Partners, formerly known as Portfolio Partners, 
Inc., was organized as a Maryland corporation in 1997 and commenced 
operations on November 28, 1997. ING Partners is registered under the 
1940 Act as an open-end management investment company (File No. 811-
08319). ING Partners is a series investment company as defined by Rule 
18f-2 under the 1940 Act and currently consists of 21 investment 
portfolios which are offered by prospectus dated May 1, 2004. ING 
Partners issues a

[[Page 69423]]

separate series of shares of beneficial interest in connection with 
each portfolio and has registered these shares under the Securities Act 
of 1933 on Form N-1A (File No. 333-32575) which was last updated in an 
amendment to the registration statement filed on August 18, 2004.
    ING Life serves as the investment adviser for each ING Partners' 
portfolio. ING Life is an investment adviser registered under the 
Investment Advisers Act of 1940, as amended (the ``Advisers Act''). ING 
Life maintains its offices at 151 Farmington Avenue, Hartford, 
Connecticut 06156. As of December 31, 2003, the Adviser managed over 
$3.5 billion in registered investment company assets.
    ING Life delegates to sub-advisers the responsibility for day-to-
day management of the investments of each portfolio, subject to the ING 
Life's oversight. ING Life also recommends the appointment of 
additional or replacement sub-advisers to the Board. ING Partners and 
ING Life have received exemptive relief from the Commission that 
permits ING Life and ING Partners to add or terminate a portfolio's 
sub-adviser without shareholder approval.
    4. The Replaced Funds. Each fund to be replaced with a Substitute 
Fund is a portfolio of the Janus Aspen Series, the Janus Investment 
Fund, the Oppenheimer Variable Account Funds, or ING Partners, Inc.
    5. The Contracts. The Contracts are flexible premium variable 
annuity and variable life insurance contracts. The variable annuity 
Contracts provide for the accumulation of values on a variable basis, 
fixed basis, or both, during the accumulation period, and provide 
settlement or annuity payment options on a variable or fixed basis. The 
variable life insurance Contracts provide for the accumulation of 
values on a variable basis, fixed basis, or both throughout the 
insured's life and for a death benefit, upon the death of the insured. 
Under each of the prospectuses for the Contracts, each Company reserves 
the right to substitute shares of one fund or portfolio for shares of 
another.
    A Contract owner may transfer all or any part of the Contract value 
from one subaccount to any other subaccount or a fixed account as long 
as the Contract remains in effect and at any time up to 30 days before 
the due date of the first annuity payment for variable annuity 
contracts. For many of the Contracts, the Company issuing the Contract 
reserves the right to limit the number of transfers during a specified 
period.

The Substitutions

    1. The Funds and the Accounts. Subject to the approval of the 
Commission under Section 26(c) of the Act, Applicants propose, as set 
forth below, to substitute shares of each Substitute Fund for those of 
the applicable Replaced Fund and transfer cash or securities held by 
each Replaced Fund to the applicable Substitute Fund.

------------------------------------------------------------------------
                                                      Accounts holding
       Replaced funds           Substitute funds    replaced fund assets
------------------------------------------------------------------------
Janus Aspen Balanced          ING Van Kampen        ING Life C; ING Life
 Portfolio--Institutional      Equity and Income     B; ING America I;
 Shares.                       Portfolio--Initial    Security Life S-L1;
                               Class.                Security Life S-A1.
Janus Aspen Balanced          ING Van Kampen        Security Life S-L1;
 Portfolio--Service Shares.    Equity and Income     Security Life S-A1;
                               Portfolio--Initial    ING USA B.
                               Class.
ING Van Kampen Equity and     ING Van Kampen        ING Life C; ING Life
 Income Portfolio--Service     Equity and Income     B; ING America I;
 Class.                        Portfolio--Initial    ING USA B.
                               Class.
Janus Aspen Capital           ING Salomon Brothers  ING Life C.
 Appreciation Portfolio--      Large Cap Growth
 Service Shares.               Portfolio--Initial
                               Class.
Janus Twenty Fund--Class I..  ING Salomon Bros      ING Life C.
                               Large Cap Growth
                               Portfolio--Initial
                               Class.
Janus Aspen Flexible Income   ING Oppenheimer       ING Life C; ING Life
 Portfolio--Institutional      Strategic Income      B; ING America I.
 Shares.                       Portfolio--Initial
                               Class.
Oppenheimer Strategic Bond    ING Oppenheimer       ING America I; ING
 Fund/VA--Non-Service Shares.  Strategic Income      Life B; ING Life C;
                               Portfolio--Initial    ING Life G;
                               Class.                ReliaStar NY P&Q.
Janus Aspen Flexible Income   ING Oppenheimer       ING USA B.
 Portfolio--Service Shares.    Strategic Income
                               Portfolio--Service
                               Class.
Oppenheimer Strategic Bond    ING Oppenheimer       ING USA B.
 Fund/VA--Service Shares.      Strategic Income
                               Portfolio--Service
                               Class.
Janus Aspen Growth            ING American Century  ING Life C; ING Life
 Portfolio--Institutional      Select Portfolio--    B; ING America I;
 Shares.                       Initial Class.        ReliaStar N;
                                                     ReliaStar SL;
                                                     ReliaStar NY I.
ING American Century Select   ING American Century  ING Life C; ING Life
 Portfolio--Service Class.     Select Portfolio--    B; ING America I;
                               Initial Class.        ING USA B.
Janus Aspen Growth            ING American Century  ING USA B.
 Portfolio--Service Shares.    Select Portfolio--
                               Initial Class.
Janus Aspen Mid Cap Growth    ING T. Rowe Price     Security Life S-L1;
 Portfolio--Institutional      Diversified Mid Cap   Security Life S-A1;
 Shares.                       Growth Portfolio--    ING Life C; ING
                               Initial Class.        Life B; ING America
                                                     I; ReliaStar N;
                                                     ReliaStar SL;
                                                     ReliaStar NY I;
                                                     ReliaStar VA.
ING T. Rowe Price             ING T. Rowe Price     ING Life C; ING Life
 Diversified Mid Cap Growth    Diversified Mid Cap   B; ING America I;
 Portfolio--Service Class.     Growth Portfolio--    ING USA B.
                               Initial Class.
Janus Aspen Mid Cap Growth    ING T. Rowe Price     Security Life S-L1;
 Portfolio--Service Shares.    Diversified Mid Cap   Security Life S-A1;
                               Growth Portfolio--    Security Life L1.
                               Initial Class.
Janus Aspen Worldwide Growth  ING Oppenheimer       ING Life C; ING Life
 Portfolio--Institutional      Global Portfolio--    B; ING America I;
 Shares.                       Initial Class.        ReliaStar N;
                                                     ReliaStar SL;
                                                     ReliaStar NY I;
                                                     Security Life S-L1;
                                                     Security Life S-A1;
                                                     ReliaStar VA.
Oppenheimer Global            ING Oppenheimer       ING America I; ING
 Securities Fund/VA--Non-      Global Portfolio--    Life B; ING Life C;
 Service Shares.               Initial Class.        ING Life G;
                                                     ReliaStar NY P&Q.
ING Oppenheimer Global        ING Oppenheimer       ING Life C; ING Life
 Portfolio--Service Class.     Global Portfolio--    B; ING America I;
                               Initial Class.        ING USA B;
                                                     ReliaStar NY B.
Janus Aspen Worldwide Growth  ING Oppenheimer       Security Life S-A1;
 Portfolio--Service Shares.    Global Portfolio--    Security Life S-L1;
                               Initial Class.        Security Life L1;
                                                     ReliaStar NY B; ING
                                                     USA B.

[[Page 69424]]

 
Oppenheimer Global            ING Oppenheimer       ING USA B.
 Securities Fund/VA--Service   Global Portfolio--
 Shares.                       Initial Class.
------------------------------------------------------------------------

    Each Substitute Fund and Replaced Fund is registered as an open-end 
management investment company under the Act. Further, each is a series 
investment company as defined by Rule 18f-2 under the Act and issues 
separate series of shares of stock (for corporations) or of beneficial 
interest (for business trusts) in connection with each portfolio. The 
shares of each fund are registered under the 1933 Act on Form N-1A
    2. Investment Objectives and Policies. With respect to each 
Replaced Fund, the Applicants have determined that the investment 
objective and the investment policies of the corresponding Substitute 
Fund are the same as, similar to or consistent with those of the 
Replaced Fund and therefore the essential objectives and risk 
expectations of those Contract owners with interests in subaccounts of 
each Replaced Fund will continue to be met after the Substitutions.
    a. The ING Van Kampen Equity and Income Portfolio (``ING Equity and 
Income Portfolio'') for the Janus Aspen Balanced Portfolio (``Janus 
Balanced Portfolio''). The investment objective of the ING Equity and 
Income Portfolio is total return, consisting of long-term capital 
appreciation and current income. The investment objective of the Janus 
Balanced Portfolio is long-term capital growth, consistent with 
preservation of capital and balanced by current income. Although not 
articulated in exactly the same way, both funds seek to achieve a 
balance of capital growth and current income in their investment 
portfolios over the long term.
    Furthermore, each of these funds is diversified and categorized as 
a domestic hybrid fund by Morningstar, although the Janus Balanced 
Portfolio is considered conservative in that categorization while the 
ING Equity and Income Portfolio is considered moderate. Additionally, 
the investment policies of the Janus Balanced Portfolio and ING Equity 
and Income Portfolio are the same as, similar to or consistent with 
each other. Although the ratios vary slightly, each fund invests in 
equity and debt securities and each fund may invest in domestic and 
foreign issuers. Each fund may also invest in options, futures and 
derivatives.
    b. The ING Salomon Brothers Large Cap Growth Portfolio (``ING Large 
Cap Growth Portfolio'') for the Janus Aspen Capital Appreciation 
Portfolio (``Janus Capital Appreciation Portfolio'') and the Janus 
Twenty Fund. The investment objectives of the ING Large Cap Growth 
Portfolio, the Janus Capital Appreciation Portfolio and the Janus 
Twenty Fund are essentially the same. Specifically, the ING Large Cap 
Growth Portfolio seeks long-term capital appreciation and the Janus 
Capital Appreciation Portfolio and the Janus Twenty Fund seek long-term 
growth of capital.
    Furthermore, each of these funds is included in the same fund 
category by Morningstar and each has a large cap growth style. Each 
fund pursues its investment objectives by investing in companies deemed 
to have growth potential. Although the ING Large Cap Growth Portfolio 
invests under normal circumstances at least 80% of its assets in 
equities of companies with large market capitalizations and the Janus 
Capital Appreciation Portfolio and Janus Twenty Fund may invest in 
equities of companies of any size, historically the Janus Capital 
Appreciation Portfolio and Janus Twenty Fund have also concentrated 
their investments in large capitalization companies. Additionally, each 
manager uses a bottom up approach to investing and focuses on 
individual companies.
    c. The ING Oppenheimer Strategic Income Portfolio (``ING Strategic 
Income Portfolio'') for the Janus Aspen Flexible Income Portfolio 
(Janus Flexible Income Portfolio'') and the Oppenheimer Strategic Bond 
Fund/VA (``Oppenheimer Strategic Bond Fund''). The ING Strategic Income 
Portfolio will be a ``clone'' of the Oppenheimer Strategic Bond Fund 
and these two funds will have the same investment objective and 
policies. Additionally, the investment adviser for the Oppenheimer 
Strategic Bond Fund will be the sub-adviser to the ING Strategic Income 
Portfolio and will manage the two funds in the same way.
    The investment objective of the ING Strategic Income Portfolio is a 
high level of current income principally derived from interest on debt 
securities. The investment objective of the Janus Flexible Income 
Portfolio is to obtain maximum total return consistent with 
preservation of capital. Notwithstanding the differences between the 
funds' investment objectives and emphasis (current income versus total 
return), each fund's investment strategy focuses on investing in 
income-producing debt securities.
    Each fund has the principal strategy of investing the majority of 
its net assets (80% for the Oppenheimer Strategic Bond Fund and 65% for 
the Janus Flexible Income Portfolio) in debt securities. Each fund also 
invests in government securities, corporate bonds and notes and lower 
grade high yield debt in an effort to achieve its objective. Each fund 
also allows borrowing for investment purposes.
    Furthermore, to determine how differences in fund objectives 
translate into investment policies, we reviewed portfolio 
characteristics from the most recent 8 quarters for each fund and make 
the following observations:
     Both funds have had similar high yield exposure. Janus 
Flexible Income Portfolio's high yield weighting ranged from 6.0% to 
12.0%. Oppenheimer Strategic Income Fund's high yield exposure ranged 
from 7.6% to 13.4%.
     Both funds have been invested, on average, in over 90% 
debt securities. Janus Flexible Income Portfolio's debt security 
exposure ranged from 91.6% to 98.4%. Oppenheimer Strategic Income 
Fund's debt security exposure ranged from 83.2% to 94.7%.
     Both funds have had minimal equity exposure (less than 2% 
each quarter for each fund).
     The remainder of assets in each fund was invested in cash 
equivalents.
    Additionally, the risk characteristics for both of the funds (as 
measured by 3-year standard deviation) have been lower than the Multi-
Sector Bond Morningstar average. Janus Flexible Income Portfolio's 3-
year standard deviation was 5.18, Oppenheimer Strategic Income Fund's 
standard deviation was 5.38, and the Morningstar category average was 
5.96.
    The Applicants believe that the Oppenheimer Strategic Bond Fund and 
the Janus Flexible Income Portfolio have generally comparable 
investment strategies, that the similarities between these funds are 
greater than the differences and that an Affected Contract Owner's 
fundamental investment objective can continue to be met after this 
Substitution.
    d. ING American Century Select Portfolio (``ING Select Portfolio'') 
for the Janus Aspen Growth Portfolio (``Janus Growth Portfolio''). The 
investment objectives of the ING Select Portfolio

[[Page 69425]]

and the Janus Growth Portfolio are essentially the same. Specifically, 
the investment objective of the ING Select Portfolio is long-term 
capital appreciation. The investment objective for the Janus Growth 
Portfolio is long-term growth of capital in a manner consistent with 
preservation of capital.
    Furthermore, each of these funds is diversified and is included in 
the same fund category by Morningstar. Each has a large cap style. 
Additionally, the investment policies of the each of these funds are 
the same as, similar to or consistent with each other. Each fund 
invests primarily in stocks of companies with growth potential. Each 
fund invests in larger companies, but may invest in companies of any 
size. Each fund also uses a bottom up approach and makes investment 
decisions based on the fundamentals of individual businesses rather 
than economic forecasts or outlooks for industries or market sectors. 
Also, each of these funds may invest without limit in foreign 
companies.
    e. The ING T. Rowe Price Diversified Mid Cap Growth Portfolio 
(``ING Diversified Mid Cap Growth Portfolio'') for the Janus Aspen Mid 
Cap Growth Portfolio (``Janus Mid Cap Growth Portfolio''). The 
investment objective of the ING Diversified Mid Cap Growth Portfolio is 
long-term capital appreciation. The investment objective of the Janus 
MidCap Growth Portfolio is long-term growth of capital. Although not 
articulated in exactly the same way, each of these funds seeks to 
achieve growth in their investment portfolios over the long term using 
a growth strategy.
    Furthermore, each of these funds is diversified and is included in 
the same fund category by Morningstar. Each has a mid-cap growth style. 
Additionally, the investment policies of each of these funds are the 
same as, similar to or consistent with each other. Each fund invests 
80% of its net assets in equity securities of mid-sized companies whose 
market capitalization falls in the Russell MidCap Growth Index. The ING 
Diversified Mid Cap Growth Portfolio also looks at the S&P Mid Cap 400 
Index when determining market capitalization. Also, each fund uses a 
bottom up investment approach.
    f. ING Oppenheimer Global Portfolio (``ING Global Portfolio'') for 
the Janus Aspen Worldwide Growth Portfolio (``Janus Worldwide Growth 
Portfolio'') and the Oppenheimer Global Securities Fund/VA 
(``Oppenheimer Global Securities Fund''). The ING Global Portfolio will 
be patterned after the Oppenheimer Global Securities Fund and these two 
funds will have substantially the same investment objective and 
policies. Additionally, the investment adviser for the Oppenheimer 
Global Securities Fund will be the sub-adviser to the ING Global 
Portfolio and will manage the two funds in a similar way.
    The investment objective of the ING Global Portfolio is capital 
appreciation. The investment objective of the Janus Worldwide Growth 
Portfolio is long-term growth of capital in a manner consistent with 
the preservation of capital. Both of these funds pursue their 
respective investment objectives by investing principally in common 
stocks of companies of any size located throughout the world.
    Furthermore, each of these funds is diversified and is included in 
the same fund category by Morningstar. Each has a large-cap style. 
Additionally, the investment policies of each of these funds are the 
same as, similar to or consistent with each other. As noted above, the 
ING Global Portfolio and the Janus Worldwide Growth Portfolio both 
invest primarily in common stocks of companies of any size located 
throughout the world. Each fund also invests in companies in emerging 
markets. While the ING Global Portfolio normally invests in issuers 
from at least three different countries, the Janus Worldwide Growth 
Portfolio normally invests in issuers from at least five different 
countries (although it may invest in issuers from even a single 
country).
    g. ING Equity and Income Portfolio--Initial Class for the ING 
Equity and Income Portfolio--Service Class; ING Select Portfolio--
Initial Class for the ING Select Portfolio--Service Class; ING 
Diversified Mid Cap Growth Portfolio--Initial Class for the ING 
Diversified Mid Cap Growth Portfolio--Service Class; ING Global 
Portfolio--Initial Class for the ING Global Portfolio--Service Class. 
Each of these Substitute Funds is the same as the corresponding 
Replaced Fund with the exact same investment objective and policies and 
managed by the exact same investment adviser/sub-adviser.
    These Substitutions are necessary to prevent Contracts from 
offering two classes of shares of the same Substitute Fund and ensure 
that no affected Contract Owner will have Contract values allocated to 
two different classes of shares of the same Substitute Fund after the 
Effective Date.
    3. Fees and Expenses. As is detailed below, the overall expenses of 
the Substitute Funds are lower than or equal to those of the Replaced 
Funds. Applicants believe that, because each Substitute Fund will be 
offered over a substantially larger asset base than the applicable 
Replaced Fund, there is a potential that Contract owners will, over 
time, realize the benefits from additional economies of scale with 
respect to the advisory fees.

                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                    Management  Distribution     Other        annual      Expense     Net annual
                                       fees     (12b-1) fees    expenses     expenses     waivers      expenses
----------------------------------------------------------------------------------------------------------------
Substitute Fund:
     ING Equity and               0.55  ............         0.02         0.57  ...........         0.57
     Income Portfolio--Initial
     Class.......................
Replaced Fund:
     Janus Balanced               0.55  ............         0.02         0.57  ...........         0.57
     Portfolio--Institutional
     Shares......................
Replaced Fund:
     Janus Balanced               0.55          0.25         0.02         0.82  ...........         0.82
     Portfolio--Service Shares...
Replaced Fund:
     ING Equity and               0.55  ............         0.27         0.82  ...........         0.82
     Income Portfolio--Service
     Class.......................
Substitute Fund:
     ING Large Cap Growth         0.64  ............         0.20         0.84  ...........         0.84
     Portfolio--Initial Class....
Replaced Fund:
     Janus Capital                0.64          0.25         0.03         0.92  ...........         0.92
     Appreciation Portfolio--
     Service Shares..............
Replaced Fund:
     Janus Twenty Fund--          0.64  ............         0.23         0.87  ...........         0.87
     Class I.....................

[[Page 69426]]

 
Substitute Fund:
     ING Strategic Income         0.50  ............         0.04         0.54  ...........         0.54
     Portfolio--Initial Class....
Replaced Fund:
     Janus Flexible               0.50  ............         0.04         0.54  ...........         0.54
     Income Portfolio--
     Institutional Shares........
Replaced Fund:
     Oppenheimer                  0.72  ............         0.03         0.75  ...........         0.75
     Strategic Bond Fund--Non-
     Service Shares..............
Substitute Fund:
     ING Strategic Income         0.50  ............         0.29         0.79         0.04         0.75
     Portfolio--Service Class....
Replaced Fund:
     Janus Flexible               0.50          0.25         0.04         0.79  ...........         0.79
     Income Portfolio--Service
     Shares......................
Replaced Fund:
     Oppenheimer                  0.72          0.25         0.05         1.02  ...........         1.02
     Strategic Bond Fund--Service
     Shares......................
Substitute Fund:
     ING Select                   0.64  ............         0.02         0.66  ...........         0.66
     Portfolio--Initial Class....
Replaced Fund:
     Janus Growth                 0.64  ............         0.02         0.66  ...........         0.66
     Portfolio--Institutional
     Shares......................
Replaced Fund:
     ING Select                   0.64  ............         0.27         0.91  ...........         0.91
     Portfolio--Service Class....
Replaced Fund:
     Janus Growth                 0.64          0.25         0.02         0.91  ...........         0.91
     Portfolio--Service Shares...
Substitute Fund:
     ING Diversified Mid          0.64  ............         0.02         0.66  ...........         0.66
     Cap Growth Portfolio--
     Initial Class...............
Replaced Fund:
     Janus Mid Cap Growth         0.64  ............         0.02         0.66  ...........         0.66
     Portfolio--Institutional
     Shares......................
Replaced Fund:
     ING Diversified Mid          0.64  ............         0.27         0.91  ...........         0.91
     Cap Growth Portfolio--
     Service Class...............
Replaced Fund:
     Janus Mid Cap Growth         0.64          0.25         0.02         0.91  ...........         0.91
     Portfolio--Service Shares...
Substitute Fund:
     ING Global                   0.60  ............         0.06         0.66  ...........         0.66
     Portfolio--Initial Class....
Replaced Fund:
     Janus Worldwide              0.60  ............         0.06         0.66  ...........         0.66
     Growth Portfolio--
     Institutional Shares........
Replaced Fund:
     Oppenheimer Global           0.63  ............         0.04         0.67  ...........         0.67
     Securities Fund--Non-Service
     Shares......................
Replaced Fund:
     ING Global                   0.60  ............         0.31         0.91  ...........         0.91
     Portfolio--Service Class....
Replaced Fund:
     Janus Worldwide              0.60          0.25         0.06         0.91  ...........         0.91
     Growth Portfolio--Service
     Shares......................
Replaced Fund:
     Oppenheimer Global           0.63          0.25         0.05         0.93  ...........         0.93
     Securities Fund--Service
     Shares......................
----------------------------------------------------------------------------------------------------------------

    No brokerage commissions, fees or other remuneration will be paid 
by any Replaced Fund or any Substitute Fund or Contract owner in 
connection with the Substitutions.
    4. Expense Ratios and Total Returns. The following chart shows the 
expense ratio (ratio of operating expenses as a percentage of average 
net assets) and total return for each Substitute Fund and the 
corresponding Replaced Fund.

                              [In percent]
------------------------------------------------------------------------
                                                                Total
                                                  Expense     return (as
                                                   ratio     of June 30,
                                                                2004)
------------------------------------------------------------------------
Substitute Fund:
     ING Equity and Income Portfolio--         0.57        16.93
     Initial Class............................
Replaced Fund:
     Janus Balanced Portfolio--                0.57         9.32
     Institutional Shares.....................
Replaced Fund:
     Janus Balanced Portfolio--Service         0.82         9.09
     Shares...................................

[[Page 69427]]

 
Replaced Fund:
     ING Equity and Income Portfolio--         0.82        16.63
     Service Class............................
Substitute Fund:
     ING Large Cap Growth Portfolio--          0.84        18.93
     Initial Class............................
Replaced Fund:
     Janus Capital Appreciation                0.92        17.11
     Portfolio--Service Shares................
Replaced Fund:
     Janus Twenty Fund--Class I.......         0.87        22.04
Substitute Fund:
     ING Strategic Income Portfolio--          0.54          N/A
     Initial Class............................
Replaced Fund:
     Janus Flexible Income Portfolio--         0.54         0.40
     Institutional Shares.....................
Replaced Fund:
     Oppenheimer Strategic Bond Fund--         0.75         7.58
     Non-Service Shares.......................
Substitute Fund:
     ING Strategic Income Portfolio--          0.75          N/A
     Service Class 7..........................
Replaced Fund:
     Janus Flexible Income Portfolio--         0.79         0.15
     Service Shares...........................
Replaced Fund:
     Oppenheimer Strategic Bond Fund--         1.02         6.91
     Service Shares...........................
Substitute Fund:
     ING Select Portfolio--Initial             0.66        18.96
     Class....................................
Replaced Fund:
     Janus Growth Portfolio--                  0.66        20.59
     Institutional Shares.....................
Replaced Fund:
     ING Select Portfolio--Service             0.91        18.80
     Class....................................
Replaced Fund:
     Janus Growth Portfolio--Service           0.91        20.24
     Shares...................................
Substitute Fund:
     ING Diversified Mid Cap Growth            0.66        25.56
     Portfolio--Initial Class.................
Replaced Fund:
     Janus Mid Cap Growth Portfolio--          0.66        26.07
     Institutional Shares.....................
Replaced Fund:
     ING Diversified Mid Cap Growth            0.91        25.20
     Portfolio--Service Class.................
Replaced Fund:
     Janus Mid Cap Growth Portfolio--          0.91        25.76
     Service Shares...........................
Substitute Fund:
     ING Global Portfolio--Initial             0.66        25.14
     Class....................................
Replaced Fund:
     Janus Worldwide Growth Portfolio--        0.66        12.56
     Institutional Shares.....................
Replaced Fund:
     Oppenheimer Global Securities             0.67        32.29
     Fund--Non-Service Shares.................
Replaced Fund:
     ING Global Portfolio--Service             0.91        23.59
     Class....................................
Replaced Fund: James Worlwide Growth portfolio
     Janus Worldwide Growth Portfolio--        0.91        12.31
     Service Shares...........................
Replaced Fund:
     Oppenheimer Global Securities             0.93        32.14
     Fund--Service Shares.....................
------------------------------------------------------------------------

    5. Estimated Net Assets after the Substitutions. The following 
chart shows the estimated size (in net assets) for each Substitute Fund 
immediately following the Effective Date. Estimates are based on actual 
net assets as of May 24, 2004.

------------------------------------------------------------------------
                                                        Estimated total
                  Substitute funds                        net assets
------------------------------------------------------------------------
ING Equity and Income Portfolio--Initial Class......      $1,173,946,084
ING Large Cap Growth Portfolio--Initial Class.......          23,597,475
ING Strategic Income Portfolio--Initial Class.......         335,297,373
ING Strategic Income Portfolio--Service Class.......           4,148,994
ING Select Portfolio--Initial Class.................         636,945,554
ING Diversified Mid Cap Growth Portfolio--Initial          1,123,324,459
 Class..............................................
ING Global Portfolio--Initial Class.................       1,989,859,052
------------------------------------------------------------------------


[[Page 69428]]

Implementation

    Applicants will effect the Substitutions as soon as practicable 
following the issuance of the requested order. As of the effective date 
of the Substitutions (``Effective Date''), shares of each Replaced Fund 
will be redeemed for cash or in-kind. The Companies, on behalf of each 
Replaced Fund subaccount of each relevant Account, will simultaneously 
place a redemption request with the Replaced Fund and a purchase order 
with the corresponding Substitute Fund so that the purchase of 
Substitute Fund shares will be for the exact amount of the redemption 
proceeds. Thus, Contract values will remain fully invested at all 
times. The proceeds of such redemptions will then be used to purchase 
the appropriate number of shares of the applicable Substitute Fund.
    1. The Substitutions will take place at relative net asset value 
(in accordance with Rule 22c-1 under the 1940 Act) with no change in 
the amount of any affected Contract owner's account value or death 
benefit, or in the dollar value of his or her investment in the 
applicable Account. Any in-kind redemption of shares of a Replaced Fund 
or in-kind purchase of shares of the corresponding Substitute Fund 
will, except as noted below, take place in substantial compliance with 
the conditions of Rule 17a-7 under the 1940 Act. No brokerage 
commissions, fees or other remuneration will be paid by either the 
Replaced Fund or the corresponding Substitute Fund or by affected 
Contract owners in connection with the Substitutions. The transactions 
comprising the Substitutions will be consistent with the policies of 
each investment company involved and with the general purposes of the 
1940 Act.
    2. Affected Contract owners will not incur any fees or charges as a 
result of the Substitutions nor will their rights or the Companies' 
obligations under the Contracts be altered in any way. The Companies or 
their affiliates will pay all expenses and transaction costs of the 
Substitutions, including legal and accounting expenses, any applicable 
brokerage expenses, and other fees and expenses. In addition, the 
Substitutions will not impose any tax liability on affected Contract 
owners. The Substitutions will not cause the Contract fees and charges 
currently being paid by affected Contract owners to be greater after 
the Substitutions than before the Substitutions. Also, as described 
more fully below, after notification of the Substitutions and for 30 
days after the Substitutions, affected Contract owners may reallocate 
to any other investment options available under their Contract the 
subaccount value of the Replaced Fund without incurring any 
administrative costs or allocation (transfer) charges.
    3. All affected Contract owners were notified of the Substitutions 
by means of supplements to the Contract prospectuses or prospectus 
summaries. Among other information regarding the Substitutions, the 
supplements informed affected Contract owners that beginning on the 
date of the first supplement the Companies would not exercise any 
rights reserved by them under the Contracts to impose restrictions or 
fees on transfers from the Replaced Funds (other than restrictions 
related to frequent or disruptive transfers) until at least 30 days 
after the Effective Date of the Substitutions. Following the date the 
order requested by the Application is issued, but before the Effective 
Date, affected Contract owners will receive a second supplement to the 
Contract prospectus or prospectus summary, as applicable, setting forth 
the Effective Date and advising affected Contract owners of their 
right, if they so choose, at any time prior to the Effective Date, to 
reallocate or withdraw accumulated value in the relevant Replaced Fund 
subaccounts under their Contracts or otherwise terminate their interest 
therein in accordance with the terms and conditions of their Contracts. 
If affected Contract Owners reallocate account value prior to the 
Effective Date or within 30 days after the Effective Date, there will 
be no charge for the reallocation of accumulated value from each 
Replaced Fund subaccount and the reallocation will not count as a 
transfer when imposing any applicable restriction or limit under the 
Contract on transfers. The Companies will not exercise any right they 
may have under the Contracts to impose additional restrictions or fees 
on transfers from the Replaced Funds under the Contracts (other than 
restrictions related to frequent or disruptive transfers) for a period 
of at least 30 days following the Effective Date of the Substitutions. 
Additionally, all current Contract Owners will be sent prospectuses of 
the Substitute Funds before the Effective Date. Alternatively, ING 
America and ING Life may determine to send to Participants summaries of 
the prospectuses of the Substitute Funds.
    4. Within five (5) business days after the Effective Date, affected 
Contract Owners will receive a written confirmation (``Post-
Substitution Confirmation'') indicating that shares of the Replaced 
Funds have been redeemed and that the shares of Substitute Funds have 
been substituted. The Post-Substitution Confirmation will show how the 
allocation of the Contract Owner's account value before and immediately 
following the Substitutions have changed as a result of the 
Substitutions and detail the transactions effected on behalf of the 
respective affected Contract Owner because of the Substitutions.

Applicants' Legal Analysis

    1. Section 26(c) of the Act requires the depositor of a registered 
unit investment trust holding the securities of a single issuer to 
receive Commission approval before substituting the securities held by 
the trust. Prior to the enactment of this provision in 1970, a 
depositor of a unit investment trust could substitute new securities 
for those held by the trust by notifying the trust's security holders 
of the substitution within five days of the substitution. In 1966, the 
Commission, concerned with the high sales charges then common to most 
unit investment trusts and the disadvantageous position in which such 
charges placed investors who did not want to remain invested in the 
substituted fund, recommended that the Act be amended to require that a 
proposed substitution of the underlying investments of a trust receive 
prior Commission approval.
    2. Each of the prospectuses for the Contracts expressly disclose 
the reservation of the Companies the right, subject to compliance with 
applicable law, to substitute shares of another open-end management 
investment company for shares of an open-end management investment 
company held by a subaccount of an Account.
    3. The Companies reserved this right of substitution both to 
protect themselves and their Contract owners in situations where either 
might be harmed or disadvantaged by circumstances surrounding the 
issuer of the shares held by one or more of its separate accounts and 
to afford the opportunity to replace such shares where to do so could 
benefit the Contract owners and Companies.
    4. Applicants maintain that Contract owners will be better served 
by the proposed Substitutions. Applicants anticipate that the 
replacement of certain Replaced Funds will result in a Contract that is 
administered and managed more efficiently, and one that is more 
competitive with other variable products in both wholesale and retail 
markets. For all of the proposed substitutions, each Substitute Fund 
generally has had comparable or superior investment performance than 
the corresponding Replaced Fund that it

[[Page 69429]]

would replace. Moreover, each Substitute Fund has fees that are the 
same as or less than the corresponding Replaced Fund. Applicants state 
that for all of the proposed substitutions, the investment objective 
and policies of each Substitute Fund are the same as, similar to, or 
consistent with the investment objective and policies of the 
corresponding Replaced Fund.
    5. In addition to the foregoing, Applicants submit that for two 
years following the implementation of the Substitutions described 
herein, the net annual expenses of each Substitute Fund will not exceed 
the net annual expenses of the corresponding Replaced Fund immediately 
preceding the Substitutions. To achieve this limitation, ING Life will 
waive fees or reimburse the appropriate Substitute Fund in certain 
amounts to maintain expenses at or below the limit. Any adjustments 
required by the waiver and/or reimbursement arrangement will be made at 
least on a quarterly basis. In addition, the Companies will not 
increase the Contract fees and charges that would otherwise be assessed 
under the terms of the Contracts for a period of at least two years 
following the Substitutions.
    6. Applicants also generally submit that the proposed Substitutions 
meet the standards that the Commission and its staff have applied to 
similar substitutions that have been approved in the past.
    7. Applicants anticipate that Contract owners will be at least as 
well off with the proposed array of subaccounts to be offered after the 
proposed substitutions as they have been with the array of subaccounts 
offered before the substitutions. The proposed substitutions retain for 
Contract owners the investment flexibility which is a central feature 
of the Contracts. If the proposed substitutions are carried out, all 
Contract owners will be permitted to allocate purchase payments and 
transfer accumulated values and contract values between and among the 
remaining subaccounts as they could before the proposed substitutions.
    8. Applicants assert that each of the proposed substitutions is not 
the type of substitution which Section 26(c) was designed to prevent. 
Unlike traditional unit investment trusts where a depositor could only 
substitute an investment security in a manner which permanently 
affected all the investors in the trust, the Contracts provide each 
Contract owner with the right to exercise his or her own judgment and 
transfer contract values into other subaccounts. Moreover, the 
Contracts will offer Contract owners the opportunity to transfer 
amounts out of the subaccounts which invest in the Replaced Funds into 
any of the remaining subaccounts without cost or other disadvantage. 
The proposed substitutions, therefore, will not result in the type of 
costly forced redemption which Section 26(c) was designed to prevent.
    9. Applicants maintain that the proposed substitutions also are 
unlike the type of substitution which Section 26(c) was designed to 
prevent in that by purchasing a Contract, Contract owners select much 
more than a particular investment company in which to invest their 
account values. They also select the specific types of insurance 
coverages offered by the various Companies under the Contracts as well 
as numerous other rights and privileges set forth in each Contract. 
Contract owners may also have considered the size, financial condition, 
type, and reputation of ING and the various Companies. These factors 
will not change because of the proposed substitutions.
    10. Applicants submit that, for all the reasons stated above, the 
proposed substitutions are consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act.
    11. Section 17(a)(1) of the Act, in relevant part, prohibits any 
affiliated person of a registered investment company, or any affiliated 
person of such person, acting as principal, from knowingly selling any 
security or other property to that company. Section 17(a)(2) of the Act 
generally prohibits the persons described above, acting as principals, 
from knowingly purchasing any security or other property from the 
registered investment company. Section 17(b) of the Act provides that 
the Commission may, upon application, grant an order exempting any 
transaction from the prohibitions of Section 17(a) if the evidence 
establishes that: (a) The terms of the proposed transaction, including 
the consideration to be paid or received, are reasonable and fair and 
do not involve overreaching on the part of any person concerned; (b) 
the proposed transaction is consistent with the policy of each 
registered investment company concerned, as recited in its registration 
statement and records filed under the Act; and (c) the proposed 
transaction is consistent with the general purposes of the Act.
    12. Applicants maintain that the terms of the Substitutions, 
including the consideration to be paid and received by each Replaced 
Fund or Substitute Fund, are reasonable, fair and do not involve 
overreaching principally because the transactions do not cause owners' 
interests under a Contract to be diluted and because the transactions 
will conform with the principal conditions enumerated in Rule 17a-7. 
The proposed transactions will take place at relative net asset value 
with no change in the amount of any Contract owner's Contract or cash 
value or death benefit or in the dollar value of his or her investment 
in any of the Accounts. Even though the Applicants may not rely on Rule 
17a-7, Applicants believe that the Rule's conditions outline the type 
of safeguards that result in transactions that are fair and reasonable 
to registered investment company participants and preclude overreaching 
in connection with an investment company by its affiliated persons.
    13. The boards of trustees or directors, as applicable of each 
Replaced Fund and the ING Partners have adopted procedures, as required 
by paragraph (e)(1) of Rule 17a-7, pursuant to which the portfolios or 
funds of each may purchase and sell securities to and from their 
affiliates. The Companies and the investment advisers will carry out 
the Substitutions in conformity with the principal conditions of Rule 
17a-7 and each Replaced Fund's and the Substitute Fund's procedures 
thereunder. Nevertheless, the circumstances surrounding the 
Substitutions will be such as to offer the same degree of protection to 
each Substitute Fund and each Replaced Fund from overreaching that Rule 
17a-7 provides to them generally in connection with their purchase and 
sale of securities under that Rule in the ordinary course of their 
business. In particular, because of the circumstances surrounding the 
Substitutions, no investment manager to a replaced Portfolio could 
``dump'' undesirable securities on the corresponding Substitute Fund or 
retain its desirable securities for other portfolios or have them 
transferred to its other advisory clients. Nor can the Companies (or 
any of the affiliates of each) effect the proposed transactions at a 
price that is disadvantageous to any Substitute Fund or Replaced Fund. 
Although the transaction may not be entirely for cash, it will be 
effected based upon (a) the independent market price of the portfolio 
securities valued as specified in paragraph (b) of Rule 17a-7, and (b) 
the net asset value per share of each Substitute Fund and the 
corresponding Replaced Fund valued in accordance with the procedures 
disclosed in the registration statements for each Substitute Fund and 
as required by Rule 22c-1 under the 1940 Act. No brokerage

[[Page 69430]]

commission, fee, or other remuneration will be paid to any party in 
connection with the proposed transactions. In addition, the ING 
Partners Board will subsequently review the Substitutions and make the 
determinations required by paragraph (e)(3) of Rule 17a-7.
    14. Except as noted below, applicants state that the Substitutions 
will take place in accordance with the requirements enumerated in Rule 
17a-7 under the 1940 Act and with the approval of the ING Partners, 
except that the Substitutions may be effected in cash or in-kind. Among 
other things, Rule 17a-7 requires, in relevant part, that

    (a) [t]he transaction is a purchase or sale, for no 
consideration other than cash payment against prompt delivery of a 
security for which market quotations are readily available; (b) 
[t]he transaction is effected at the independent current market 
price of the security. For purposes of this paragraph, the ``current 
market price'' shall be * * * the average of the highest current 
independent bid and lowest current independent offer determined on 
the basis of reasonable inquiry * * * (c) [t]he transaction is 
consistent with the policy of each registered investment company and 
separate series of a registered investment company participating in 
the transaction, as recited in its registration statement and 
reports filed under the [1940] Act; (d) [n]o brokerage commission, 
fee (except for customary transfer fees), or other remuneration is 
paid in connection with the transaction; (e) [t]he board of 
directors of the investment company * * *, (1) [a]dopts procedures 
pursuant to which such purchase or sales transactions may be 
effected for the company, which are reasonably designed to provide 
that all of the conditions of this section * * * have been complied 
with, (2) [m]akes and approves such changes as the board deems 
necessary, and (3) [d]etermines no less frequently than quarterly 
that all such purchases or sales made during the preceding quarter 
were effected in compliance with such procedures; (f) (1) [a] 
majority of the directors of the investment company are not 
interested persons of the company, and those directors select and 
nominate any other disinterested directors of the company; and (2) 
[a]ny person who acts as legal counsel for the disinterested 
directors of the company is an independent legal counsel; and (g) 
[t]he investment company: (1) maintains and preserves permanently in 
an easily accessible place a written copy of the procedures (and any 
modifications thereto) described in paragraph (e) of this section, 
and (2) maintains and preserves for a period of not less than six 
years from the end of the fiscal year in which any transactions 
occurred, the first two years in an easily accessible place, a 
written record of each such transaction setting forth a description 
of the security purchased or sold, the identity of the person on the 
other side of the transaction, and the information or materials upon 
which the determination described in * * * [this section] were made.

    In addition, Applicants further submit that the Substitutions are 
consistent with the investment policy of each Replaced Fund and each 
Substitute Fund, as recited in the current prospectuses relating to 
each.
    15. With regard to the Substitutions involving in-kind transfers, 
ING Life as the investment adviser of each Substitute Fund and the 
investment adviser to the Replaced Fund intend to value securities 
selected for transfer between the two funds in a manner that is 
consistent with the current methodology used to calculate the daily net 
asset value of the Replaced Fund. Where a Replaced Fund's investment 
adviser employs certain third party, independent pricing services to 
value securities held by the Replaced Fund (``Vendor Pricing''), the 
ING Life and the Replaced Fund's investment adviser intend to employ 
Vendor Pricing to value securities held by the Replaced Fund that are 
selected for transfer to the Substitute Fund. Vendor Pricing may be 
used in each of the Substitutions. Generally, the redemption of 
securities from the Replaced Fund and subsequent transfer to the 
Substitute Fund will be done on a pro-rata basis. In the event that a 
Replaced fund holds illiquid or restricted securities or assets that 
are not otherwise readily distributable or if a pro-rata transfer of 
securities would result in the parties holding odd lots, the investment 
advisers may agree to have a Replaced Fund transfer to the Substitute 
Fund an equivalent amount of cash instead of securities.
    16. After the assets have been contributed to the Substitute Fund, 
responsibility for valuation of the securities held by the Substitute 
Fund will shift to the valuation committee of the Board of ING 
Partners. At the end of the first trading following the transfer, the 
valuation agent and custodian for ING Partners, Investors Bank and 
Trust, will value the securities held by the Substitute Fund. The 
foregoing notwithstanding, the Board of ING Partners will retain 
ultimate responsibility for valuation decisions.
    17. The Applicants believe that the use of neutral, third party 
vendor prices will ensure that both portfolios utilize unbiased 
evaluations in determining respective security and, ultimately, 
portfolio market values. In the event that independent pricing services 
do not provide valuations for a specific security selected for 
transfer, ING Life and the Replaced Fund's investment adviser, in 
accordance with paragraph (b)(4) of Rule 17a-7 under the 1940 Act, will 
rely on the ``average of the highest current independent bid and lowest 
current independent offer determined on the basis of reasonable 
inquiry. * * *'' in valuing any such security.
    18. Applicants submit that the terms of the Substitutions by the 
Companies, including the consideration to be paid and received are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned. Applicants also submit that the Substitutions by the 
Companies are consistent with the policies of each Substitute Fund and 
each Replaced Fund, as recited in the current registration statements 
and reports filed by each under the 1940 Act. Finally, Applicants 
submit that the Substitutions are consistent with the general purposes 
of the 1940 Act.
    19. Applicants submit that, to the extent that the Substitutions 
are deemed to involve principal transactions between affiliates, the 
procedures and terms and descriptions described in the Application 
demonstrate that neither the Replaced Funds, the Substitute Funds, the 
Accounts nor any other Applicant will be participating in the 
Substitutions on a basis less advantageous than that of any other 
participant.
    20. The Substitutions are consistent with the general purposes of 
the 1940 Act, as enunciated in the Findings and Declaration of Policy 
in Section 1 of the 1940 Act. The proposed transactions do not present 
any of the issues or abuses that the 1940 Act is designed to prevent. 
Moreover, the proposed transactions will be effected in a manner 
consistent with the public interest and the protection of investors, as 
required by Section 6(c) of the 1940 Act. Contract owners will be fully 
informed of the terms of the Substitutions through the supplements and 
the Post-Substitution Confirmation and will have an opportunity to 
withdraw from the Replaced Fund through reallocation to another 
subaccount or otherwise terminate their interest thereof in accordance 
with the terms and conditions of their Contract prior to the Effective 
Date.

Applicants' Conditions

    For purposes of the approval sought pursuant to Section 26(c) of 
the Act, the substitutions described in the application will not be 
completed unless all of the following conditions are met:
    1. The Commission shall have issued an order (a) approving the 
Substitutions under Section 26(c) of the 1940 Act; and (b) exempting 
the in-kind redemptions from the provisions of Section 17(a) of the 
1940 Act as necessary to carry out the transactions described in this 
Application.

[[Page 69431]]

    2. A registration statement for the ING Oppenheimer Strategic 
Income Portfolio is effective and the sub-adviser changes, fund name 
changes, changes in investment objectives and/or policies, as 
applicable, and fee reductions for each of the other Substitute Funds 
have been implemented.
    3. Each affected Contract owner will have been sent a copy of (a) a 
supplement to the prospectus or prospectus summary informing 
shareholders of the Application; (b) a prospectus or summary of the 
prospectus for the appropriate Substitute Fund, and (c) a second 
supplement to the prospectus or prospectus summary setting forth the 
Effective Date and advising affected Contract owners of their right to 
reconsider the Substitutions and, if they so choose, any time prior to 
the Effective Date and for at least 30 days after the Effective Date, 
to reallocate or withdraw amounts under their affected Contract without 
charge or otherwise terminate their interest therein in accordance with 
the terms and conditions of their Contract.
    4. The Companies shall have satisfied themselves, that (a) the 
Contracts allow the substitution of investment company shares in the 
manner contemplated by the Substitutions and related transactions 
described herein; (b) the transactions can be consummated as described 
in the Application under applicable insurance laws; and (c) that any 
regulatory requirements in each jurisdiction where the Contracts are 
qualified for sale, have been complied with to the extent necessary to 
complete the transactions.
    5. Within five business days of the Effective Date of the 
Substitutions, the Applicants will forward to affected Contract owners 
a Post-Substitution Confirmation.

Conclusion

    Applicants assert that for the reasons summarized above the 
proposed substitutions and related transactions meet the standards of 
Section 26(c) of the Act and are consistent with the standards of 
Section 17(b) of the Act and that the requested orders should be 
granted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E4-3353 Filed 11-26-04; 8:45 am]
BILLING CODE 8010-01-P