-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JYi+udXmSTz5qMuWA8C4quXc6F1UPI3uC9+29Z7hDYe0hTs5CeQvfvfu3mWLdyzh 52Oa0X24OcTaCzM4yMBwtA== 0001047469-04-027537.txt : 20040830 0001047469-04-027537.hdr.sgml : 20040830 20040830161534 ACCESSION NUMBER: 0001047469-04-027537 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040830 DATE AS OF CHANGE: 20040830 EFFECTIVENESS DATE: 20040830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING VARIABLE PORTFOLIOS INC CENTRAL INDEX KEY: 0001015965 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07651 FILM NUMBER: 041005609 BUSINESS ADDRESS: STREET 1: ING FUNDS SERVICES STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 480-477-3000 MAIL ADDRESS: STREET 1: ING FUNDS SERVICES STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: AETNA VARIABLE PORTFOLIOS INC DATE OF NAME CHANGE: 20020322 FORMER COMPANY: FORMER CONFORMED NAME: ING VARIABLE PORTFOLIOS INC DATE OF NAME CHANGE: 20020320 FORMER COMPANY: FORMER CONFORMED NAME: AETNA VARIABLE PORTFOLIOS INC DATE OF NAME CHANGE: 19960604 N-CSRS 1 a2142241zn-csrs.txt N-CSRS ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: October 31, 2006 Estimated average burden hours per response: 19.3 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-07651 --------------------------------------------- ING Variable Portfolios, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) The Corporation Trust Inc., 300 E. Lombard Street, Baltimore, MD 21202 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-992-0180 ----------------------------- Date of fiscal year end: December 31 -------------------------- Date of reporting period: January 1, 2004 to June 30, 2004 --------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1): 1 SEMI-ANNUAL REPORT SEMI-ANNUAL REPORT JUNE 30, 2004 CLASSES I AND S [GRAPHIC] ING VARIABLE PRODUCT PORTFOLIOS GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO (FORMERLY, ING VP TECHNOLOGY PORTFOLIO) ING VP INTERNATIONAL EQUITY PORTFOLIO DOMESTIC EQUITY GROWTH PORTFOLIOS ING VP GROWTH PORTFOLIO ING VP SMALL COMPANY PORTFOLIO DOMESTIC EQUITY VALUE PORTFOLIO ING VP VALUE OPPORTUNITY PORTFOLIO DOMESTIC EQUITY AND INCOME PORTFOLIOS ING VP BALANCED PORTFOLIO ING VP GROWTH AND INCOME PORTFOLIO FIXED INCOME PORTFOLIOS ING VP BOND PORTFOLIO ING VP MONEY MARKET PORTFOLIO [ING FUNDS LOGO] TABLE OF CONTENTS President's Letter 1 Market Perspective 2 Portfolio Managers' Reports: Global and International Equity Portfolios 4 Domestic Equity Growth Portfolios 8 Domestic Equity Value Portfolio 12 Domestic Equity and Income Portfolios 14 Fixed Income Portfolios 18 Statements of Assets and Liabilities 21 Statements of Operations 23 Statements of Changes in Net Assets 25 Financial Highlights 30 Notes to Financial Statements 39 Portfolios of Investments 49 Director and Officer Information 82
(THIS PAGE INTENTIONALLY LEFT BLANK) PRESIDENT'S LETTER [PHOTO OF JAMES M. HENNESSY] JAMES M. HENNESSY Dear Shareholder, The past year has been unpredictable for investors. Strong growth in the overall economy coupled with questions concerning mutual fund trading practices have challenged investors. In general, economic activity has continued to increase, with the growth being widespread. Personal consumption of goods and services is leading the recovery supported by corporate purchases of equipment and software and by Government spending on defense. Worries of possible interest rate increases, worsening global turmoil and increasing oil prices have reduced the gains the market realized in the first few months of 2004. However, investors remain steadfast as nearly each of the last six months has seen an overall increase in assets invested in mutual funds despite continuing investigations into late trading and market timing issues at some of the largest and most respected financial services companies in the country. You should have received a letter from Thomas J. McInerney, the Chief Executive Officer of ING U.S. Financial Services, which provided information about the internal review ING management conducted regarding trading practices in ING mutual fund products. If you did not receive a copy of the letter, please contact Investor Services at 1-800-992-0180 and we will provide you with a copy. I wish to thank you on behalf of everyone here at ING Funds for your continued confidence. We look forward to helping you meet your investment goals in the future. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds July 19, 2004 1 MARKET PERSPECTIVE: SIX MONTHS ENDED JUNE 30, 2004 OVERVIEW Perhaps it was inevitable that the markets should be a little neurotic after the heady gains of 2003. But whatever the reasons, investors in 2004 alternately cheered and fretted over the developing economic outlook, sending markets up, down and up again before ending the first six months of 2004 with modest and distinctly fragile gains. At first the worry was the so-called jobless recovery, then half way through the six-month period a very strong U.S. employment report was released. The report generated euphoria until people realized that as the job market tightens, inflation picks up and rising interest rates were likely not far away. Investors took comfort from Federal Open Market Committee ("FOMC") Chairman Greenspan's soothing advice that the rebound in interest rates would be "measured". But as the six months ended June 30, 2004 drew to a close, attention switched nervously to the impending U.S. earnings season and the strong possibility that the splendid results of the last few quarters would likely not be maintained. GLOBAL EQUITIES managed a 3.52% return, net of withholding tax on dividends, for the six months ended June 30, 2004 according to the Morgan Stanley Capital International ("MSCI") World Index(1) in dollars, after peaking on average in mid February and spending much of May in negative territory. Among CURRENCIES, the euro reached a post launch record also in mid February before retreating and ending about 3.0% lower for the six months ended June 30, 2004. The British pound ended the six months 2.0% higher against the dollar, as the Bank of England became the first of the major central banks to raise interest rates. The yen lost approximately 1.5%, ironically after the Bank of Japan stopped buying dollars to keep the yen weak, spending a staggering $144 billion in the first quarter of 2004 to do so. FIXED INCOME MARKET U.S. FIXED INCOME classes started 2004 as they had ended 2003. Disappointing jobs reports, together with stubbornly high new unemployment claims, suggested continuing weakness, and gave bond investors a solid first quarter of gains. That all changed on the first Friday in April 2004, with the very bullish U.S. employment report. Investment grade bonds unsurprisingly bore the brunt of fears that a new cycle of rising interest rates from multi-decade low levels was about to start. For the six months ended June 30, 2004, the Lehman Brothers Aggregate Bond Index(2) of investment grade bonds returned a tiny 0.16%. The Lehman Brothers Corporate Index(3) component and the Lehman Brothers Treasury Bond Index(4) fell by 0.26% and 0.20%, respectively. Ten-year Treasury yields rose by 36 basis points to 4.62%, passing through rates not seen in nearly two years. Yields on 90-day Treasury Bills rose 39 basis points to 1.3%, emphatically breaching the 1.0% level, a rate above which they had not closed since June 9, 2003. High yield bonds did better, the Lehman Brothers U.S. Corporate High Yield Bond Index(5) hung on to return 1.35% for the six-month period. DOMESTIC EQUITY MARKET The U.S. EQUITIES market rose 3.44% in the six months ended June 30, 2004, based on the Standard & Poor's ("S&P") 500 Index(6) including dividends. This implies a price-to-earnings (P/E) level of just over 17 times 2004 earnings. Three strong employment reports in the second quarter of 2004 were welcomed, but all was not in harmony. For while successive, upbeat economic statistics sang of good economic times, there was also a steady drumbeat of evidence that inflation was picking up. The Federal Funds rate at just 1.0% meant that real interest rates were becoming ever more negative at the same time, while the economy was growing at over 4.0%. With labor markets tightening and oil prices breaking above $40 per barrel, this appears to be an increasingly unstable situation. Meanwhile, the FOMC took almost the entire second quarter of 2004 before increasing the Federal Funds rate to 1.25% on June 30, 2004. However, in the week before the increase, the wind seemed to shift again. First quarter of 2004 gross domestic product ("GDP") growth was revised down to 3.9%, durable goods orders fell, and retailers and auto companies complained of slack sales. On the day the FOMC raised rates, the Chicago Purchasing Managers' Index(7) had its largest monthly drop in 30 years. Perhaps Greenspan's "measured" policy was right, but perhaps something else was wrong. The first half of 2004 ended, with investors again nervously awaiting the employment report two days later. 2 MARKET PERSPECTIVE: SIX MONTHS ENDED JUNE 30, 2004 INTERNATIONAL MARKETS Most INTERNATIONAL MARKETS eked out similarly modest gains for the six months ended June 30, 2004, but JAPAN was the star, rising 10.73% in dollars according to the MSCI Japan Index(8). Sentiment was encouraged by first quarter GDP growth, reported at a surprisingly strong 6.1% annualized, suggesting that the world's second largest economy was at last emerging from its slump of more than a decade. EUROPEAN EX UK MARKETS gained 2.88% in dollars in the six months ended June 30, 2004, according to the MSCI Europe ex UK Index(9). Buoyant exports were about the only good news, as domestic demand still languished under unemployment of 9.0%. Still, these markets look relatively cheap. Finally the UK market rose 3.32% in dollars during the first six months of 2004, based on the MSCI UK Index(10). The economy appears to be strong, but the troubling imbalances of an over-indebted consumer and a housing price bubble led to three interest rate increases by the Bank of England, with more likely on the way. - ---------- (1) The MSCI WORLD INDEX reflects the stock markets of 22 countries, including the United States, Europe, Canada, Australia, New Zealand and the Far East - -- comprising approximately 1,500 securities -- with values expressed in U.S. dollars. (2) The LEHMAN BROTHERS AGGREGATE BOND INDEX is composed of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. (3) The LEHMAN BROTHERS CORPORATE INDEX includes all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt. (4) The LEHMAN BROTHERS TREASURY BOND INDEX (U.S. Dollars) is composed of all bonds covered by the Lehman Brothers Aggregate Bond Index with maturities of 10 years or greater. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. (5) The LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD BOND INDEX is generally representative of corporate bonds rated below investment-grade. (6) The S&P 500 INDEX is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. (7) The CHICAGO PURCHASING MANAGERS' INDEX measures manufacturing activity in the industrial Midwest. (8) The MSCI JAPAN INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Japan. (9) The MSCI EUROPE EX UK INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe, excluding the UK. (10) The MSCI UK INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in the UK. ALL INDICES ARE UNMANAGED AND INVESTORS CANNOT INVEST DIRECTLY IN AN INDEX. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIOS' PERFORMANCE IS SUBJECT TO CHANGE SINCE THE PERIOD'S END AND MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA SHOWN. FOR VARIABLE ANNUITY CONTRACTS, PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. MARKET PERSPECTIVE REFLECTS THE VIEWS OF THE CHIEF INVESTMENT RISK OFFICER ONLY THROUGH THE END OF THE PERIOD, AND IS SUBJECT TO CHANGE BASED ON MARKET AND OTHER CONDITIONS. 3 ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: Thomas P. Callan, CFA, Managing Director and Senior Portfolio Manager, Daniel M. Rea, Vice President and Portfolio Manager, BlackRock Advisors, Inc. -- the Sub-Adviser (*). GOAL: The ING VP Global Science and Technology Portfolio (formerly, ING VP Technology Portfolio, the "Portfolio") seeks long-term capital appreciation. PERFORMANCE: During the six months ended June 30, 2004, the Portfolio's Class I shares provided a total return of -5.43% compared to 3.44% for the Standard & Poor's ("S&P") 500 Index(1) and 5.64% for the Pacific Stock Exchange ("PSE") Technology Index(2). PORTFOLIO SPECIFICS: During the period January 1, 2004 through June 30, 2004, the Portfolio underperformed its benchmark, the PSE Technology Index. Throughout the period, market participants became increasingly concerned about the sustainability of the global economic recovery. The lack of confidence was likely fueled by the increasing likelihood of tighter U.S. monetary policy, the potential for controlled GDP deceleration in China, global terrorism concerns, and a more contentious U.S. presidential election. These macroeconomic and geopolitical issues resulted in a reassessment of risk and precipitated a shift away from economically sensitive sectors including technology, industrials, and materials. Within technology, the more cyclical sub-industries such as semiconductor capital equipment and semiconductor devices experienced weak performance. As for the healthcare sector, performance was driven by capital flow into segments with greater revenue and earnings visibility as investors favored medical devices over biotechnology. The majority of the relative underperformance for the period can be attributed to stock selection, particularly in the semiconductor devices and internet software and services industries. Within the semiconductor devices industry, the Portfolio's excessive exposure to small and mid cap stocks, which underperformed, resulted in the negative contribution to performance from that group. In the internet software and services industry, stock selection was also negative due to the Portfolio's lack of exposure to Check Point Software Technologies, Inc., which gained over 60% in the period. Other detractors from performance include the Portfolio's underweight in the medical equipment group and overweight in the semiconductor devices industry, as well as stock selection in the computer peripherals and communications equipment industries. On a positive note, the Portfolio benefited from an overweight to the internet software and services industry, which was a strong performing group in the benchmark during the period. Stock selection in the systems software sub-industry also contributed positively to performance. Companies including Adobe Systems, Inc. and Symantec Corp. appreciated notably, returning 19% and 27%, respectively, for the period January 1 through June 30, 2004, as underlying business fundamentals continued to improve. Finally, category-dominant Internet companies such as eBay, Inc. and Yahoo!, Inc., which returned 42% and 62%, respectively for the same period, benefited from increasing on-line traffic and transaction volumes, as well as an acceleration in online advertising. MARKET OUTLOOK: For the past several quarters, global economic data have pointed to a broad-based industrial recovery. In the United States, accommodative monetary policy and stimulative fiscal policy have produced a dramatic re-acceleration in GDP. Furthermore, corporations appear to have successfully realigned their cost structures and improved their balance sheets, which has generally led to improved profitability. Although increasing inflationary pressures have led to monetary tightening, we don't anticipate substantial increases in the Fed Funds rate over the intermediate term. Furthermore, a low nominal interest rate environment is still supportive of additional capital investment and we anticipate greater enterprise spending in the next several quarters. In addition, we believe many IT companies have sufficient operating leverage to drive earnings growth and can outperform throughout this portion of the economic cycle. However, unlike much of 2003 where multiple expansion was a major contributor to returns, we believe the market will begin to reward higher quality companies with consistent top-line growth and the ability to expand margins. We would characterize the recent pullback as a mid-cycle correction and view it as an attractive opportunity to increase our exposure to selective segments of the market. In our view, many of the factors that drove recent weakness were macro in nature and have not directly impacted the investment dynamics within the technology sector. - ---------- (*) Effective January 1, 2004, BlackRock Advisors, Inc. ("BlackRock") began acting as sub-adviser to ING VP Technology Portfolio under an interim sub-advisory agreement. On March 23, 2004, the Portfolio's shareholders approved the change in sub-adviser of ING VP Technology Portfolio from AIC Asset Management, LLC to BlackRock. In connection with the change in sub-adviser were the following changes to the name and non-fundamental investment strategy and policies of the Portfolio: (1) a name change to ING VP Global Science and Technology Portfolio from ING VP Technology Portfolio; (2) strategy and policy changes so that the Portfolio became a global fund investing 80% of its assets in common stocks and securities convertible into common stock of companies in the science and technology sectors; and (3) the comparative index for the Portfolio was changed from the Goldman Sachs Technology Industry Composite Index to the Standard & Poor's 500 Index and the Pacific Stock Exchange Technology Index was added as a comparative index. 4 PORTFOLIO MANAGERS' REPORT ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 ------------------------------------ SINCE INCEPTION OF CLASS I 1 YEAR MAY 1, 2000 ------ --------------- Class I 18.45% (21.43)% S&P 500 Index(1) 19.11% (4.19)% PSE Technology Index(2) 31.19% (31.73)% Goldman Sachs Technology Industry Composite Index(3) 17.10% (20.28)%
The table above illustrates the total return of ING VP Global Science and Technology Portfolio against the S&P 500 Index, the PSE Technology Index and the Goldman Sachs Technology Industry Composite Index. The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large capitalization companies whose securities are traded on major U.S. stock markets. (2) The PSE Technology Index, an unmanaged index published by the Pacific Exchange, is comprised of 100 listed and over-the-counter stocks from 15 different industries including computer hardware, software, semiconductors, telecommunications, data storage and processing, electronics and biotechnology. (3) The Goldman Sachs Technology Industry Composite Index is a widely recognized, unmanaged index of technology stocks. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. The Portfolio focuses its investments in science and technology sectors. The Portfolio's focus on stocks in the science and technology sectors makes it more susceptible to factors affecting those sectors and more volatile than funds that invest in many different sectors. In addition, investing in science and technology companies exposes the Portfolio to special risks. For example, rapid advances in science and technology might cause existing products to become obsolete, and the Portfolio's returns could suffer to the extent it holds an affected company's shares. The Portfolio's investments in small- and mid-sized companies may be more susceptible to price swings than larger companies. International investing involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Portfolio. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. 5 ING VP INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of investment specialists, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP International Equity Portfolio (the "Portfolio") seeks long-term capital growth primarily through investment in a diversified portfolio of common stocks principally traded in countries outside of the United States. The Portfolio will not target any given level of current income. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares provided a total return of 3.71% compared to the Morgan Stanley Capital International Europe, Australasia and Far East ("MSCI EAFE") Index(1), which returned 4.86% for the same period. PORTFOLIO SPECIFICS: International markets commenced the new year on a strong note, supported by rising growth expectations and investor confidence, but ran out of steam by mid-February. This period was reminiscent of the post-March 2003 recovery, in which speculative, generally smaller stocks led the advance. Rising oil prices, a steadily deteriorating security situation in Iraq, concerns that the Chinese economy was heading for a hard landing, and higher global long-term interest rates combined to undermine sentiment, and markets have essentially traded sideways since. This latter phase saw an increasing focus on company fundamentals, a move that benefited the relative performance of the Portfolio in the period mid-February 2004 through June 30, 2004; however, the Portfolio did underperform the benchmark. Our regional allocation strategy added some value in the review period due to our positive allocation in the strongly performing Japanese market and being underweight in the lesser performing Pan-European and Developed Asia/Australian regions. The performance deficit was the result of stock selection within the aforementioned regions. Positive selection results in Japan were offset by a negative outcome in Developed Asia/Australia. The sector strategy result was negative largely due to being underweight in consumer staples, which had strong relative performance. Our focus on the energy sector and underweight exposure to the poorly performing technology sector impacted positively on the sector allocation result. While stock selection proved to be successful in most of the economic sectors, performance deficits in the consumer discretionary, health care, and information technology sectors yielded an overall adverse stock selection outcome. In Hong Kong, CITIC International Financial Holdings Ltd. was impacted by the suddenly escalating China concerns. Weakness in the previously held cellular telephone equipment manufacturer Nokia impacted the result in technology, as did a lack of exposure to competitor L.M. Ericsson, which was gaining market share at its cost. A lack of exposure to French oil producer Total SA also hurt performance, as did our exposure to Japanese automaker Nissan Motor Co., Ltd., which was previously held, and Australian media company Seven Network Ltd. On the positive side, our accent on the recovering Japanese banks proved rewarding, especially our holdings in The Sumitomo Trust & Banking Co. Ltd. and Bank of Yokohama Ltd., which was held during the period. Japanese industrial holding Itochu Corp. and supermarket operator Ito-Yokado, which was previously held, were also material positive contributors. MARKET OUTLOOK: The maturing of the global economic recovery and the potential for continued interest rate increases suggests a less pro-cyclical portfolio stance, with a focus on stocks with steady earnings growth and sustainable and growing dividends. Our Portfolio evolved from a modest pro-cyclical positioning to a cyclically neutral stance in the course of the six month period. In our view, the potential for upside earnings surprises remains strongest in Japan, where we maintain a modest overweight position and maintain a slightly aggressive positioning offset elsewhere. For EAFE as a whole, the upside remains modest, with the benefit of continued, albeit reducing, earnings momentum likely to be partly offset by the lower valuations demanded by rising interest rates. A stronger outlook is contingent on the continued combination of high earnings growth and stable interest rates, which, while not impossible, is deemed an unlikely outcome. On balance, the Portfolio currently has a price/earnings multiple approximating that of the benchmark, but we expect it to generate higher and more visible earnings growth in both 2004 and 2005. 6 PORTFOLIO MANAGERS' REPORT ING VP INTERNATIONAL EQUITY PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 22, 1997 NOVEMBER 1, 2001 ------ ------ ----------------- ---------------- Class I 28.09% (3.53)% 1.83% -- Class S 27.72% -- -- 2.13% MSCI EAFE Index(1) 32.85% 0.40% 3.85%(2) 9.82%
The table above illustrates the total return of ING VP International Equity Portfolio against the MSCI EAFE Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The MSCI EAFE Index is an unmanaged index that measures the performance of securities listed on exchanges in markets in Europe, Australia and the Far East. (2) Since inception performance for the index is shown from January 1, 1998. PRINCIPAL RISK FACTOR(S): Those generally attributable to stock investing. These risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. Derivatives are subject to the risk of changes in the market price of the security and the risk of loss due to changes in interest rates. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Portfolio. The value of convertible securities may fall when interest rates rise. Convertible securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than convertible securities with shorter maturities. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. 7 ING VP GROWTH PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of equity investment specialists led by Kenneth Bragdon, CFA, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Growth Portfolio (the "Portfolio") seeks growth of capital through investment in a diversified portfolio consisting primarily of common stocks and securities convertible into common stocks believed to offer growth potential. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares provided a total return of 1.34% compared to the Russell 1000 Growth Index(1), which returned 2.74% for the same period. PORTFOLIO SPECIFICS: The market rose during the six months ended June 30, 2004; however, economic data remained positive, but concerns about the outlook for interest rates and sustainability of the economic expansion may have caused some of the more cyclically sensitive sectors, such as technology and materials, to lag the market. Energy and transportation were the strong sectors year-to-date 2004. Energy was helped by a constructive outlook for commodity prices and margins going forward. Despite higher energy prices, demand for transportation services may have provided an opportunity to raise prices at a faster rate than input costs. For the six month period, the Portfolio underperformed its benchmark. The sectors with the greatest positive impact to the Portfolio's performance during the period were energy, other (multi-industry), and most importantly, our overweight in industrials. Offsetting these positive contributors were technology, materials and consumer staples. The Portfolio was overweight several large multi-industry companies with strong six month results. Tyco International Ltd., Eaton Corp., and 3M Co. were significant contributors due to stronger-than-expected international growth and product positioning. Record energy prices and strong refining margins caused the energy sector to outperform, as demand for energy outstripped supply. Halliburton Co., Pogo Producing Co., and previously held Valero all benefited from these industry trends. In health care, the Portfolio remained underexposed to pharmaceutical companies, which benefited performance, although stock selection within the sector was weak. Stock selection in the technology sector was a large detractor to performance year-to-date. Semiconductor companies were the worst performing subcategories of technology. Company-specific shortfalls at SanDisk Corp. and VERITAS Software Corp., which were held during the period, drove their stock prices lower. In addition, large bellwethers, such as EMC Corp. and Intel Corp., depreciated in the first half of the year as high expectations for robust results began to ebb. An overweight position in materials, which was lightened by period-end, detracted from results as concerns over high economic growth in Asia and the outlook for interest rates began to weigh on company prospects. These growth concerns benefited the consumer staples sector as investors rotated into companies and industries with more stable and predictable earnings prospect. The Portfolio's underweight exposure to the sector hurt results in the first half of 2004. MARKET OUTLOOK: Our outlook for the market remains constructive. We believe the prospect for strong corporate profits and the ability of companies to successfully pass through rising input prices is the foundation for a solid earnings outlook going forward. The risk of inflation and volatile interest rates is higher than it was a year ago. That said, the Federal Reserve's ability to maintain price stability during moderate growth is not our concern at this time. We would expect rising earnings to offset any interest rate or inflation concerns and keep equities relatively attractive. We will continue to follow our disciplined approach of investing in companies that we believe demonstrate improving business fundamentals. 8 PORTFOLIO MANAGERS' REPORT ING VP GROWTH PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 13, 1996 NOVEMBER 1, 2001 ------ ------ ----------------- ---------------- Class I 15.88% (6.45)% 5.64% -- Class S 15.70% -- -- (0.74)% Russell 1000 Growth Index(1) 17.88% (6.48)% 4.56%(2) 1.91%
The table above illustrates the total return of ING VP Growth Portfolio against the Russell 1000 Growth Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Russell 1000 Growth Index measures the performance of the 1,000 largest companies in the Russell 3000 Index with higher price-to-book ratios and higher forecasted growth. The Russell 3000 Index is an unmanaged index that measures the performance of 3,000 U.S. companies based on total market capitalization. (2) Since inception performance for the index is shown from December 1, 1996. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. Growth-oriented stocks typically sell at relatively high valuations as compared to other types of stocks. Historically, growth-oriented stocks have been more volatile than value-oriented stocks. The value of convertible securities may fall when interest rates rise. Stocks of small- and mid-sized companies tend to be less liquid and more volatile than stocks of larger companies. Stocks of small- and mid-sized companies also can be particularly sensitive to unexpected changes in interest rates, borrowing costs and earnings. The Portfolio's investments in derivatives are subject to the risk that changes in market prices of securities or interest rates may result in a loss. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio and may reduce its returns. The Portfolio's investments in high yield securities are subject to greater risk than higher quality securities, including the risks associated with greater price volatility, principal and income risk. The Portfolio's investments in foreign securities involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. 9 ING VP SMALL COMPANY PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of equity investment specialists led by Carolie Burroughs, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Small Company Portfolio (the "Portfolio") seeks growth of capital primarily through investment in a diversified portfolio of common stocks and securities convertible into common stocks of companies with smaller market capitalizations. PERFORMANCE: For the period ended June 30, 2004, the Portfolio's Class I shares returned 2.86% compared to the Russell 2000 Index(1), which returned 6.76% for the same period. PORTFOLIO SPECIFICS: For the six months ended June 30, 2004, the Russell 2000 Index rose 6.76%, while the Portfolio returned 2.86%. Energy was a strong performing sector, while telecommunications was weak. The Russell 2000 Value Index beat the Russell 2000 Growth Index by 1.50%. Small-cap stocks outperformed all other asset classes, as evidenced by the major equity indices. During the six month period, the Standard & Poor's ("S&P") 500 Index(3) was up 3.44% and the Dow Jones Industrial Average(4) gained only 0.80%, while the S&P SmallCap 600 Index(5) returned 10.05%. The U.S. economy, the war in Iraq, corporate profits, and the Federal Reserve's ("Fed") language with respect to monetary tightening dominated the headlines and the U.S. equities market during the period. Equities experienced strong funds flow through mid-January 2004, as the economy and corporate profits improved and the situation in Iraq appeared to be relatively controlled. However, flows decelerated as company managements provided 2004 guidance below consensus expectations, citing continued caution on the economy and their business environments. Outflows eventually accompanied the dwindling public support of the U.S. involvement in Iraq and the change in Fed rhetoric indicating that the first rate increase would be much sooner than expected. Sector rotation was prevalent in the market as investors alternated between growth and value, fundamentals and speculation, and market risk and headline risk. Stock selection in the telecommunications and materials sectors contributed positively to the Portfolio's performance. Stock selection in the health care and technology sectors contributed negatively. The large individual positive contributors to performance during the period were Briggs & Stratton, Eon Labs, Inc., and Louisiana-Pacific Corp. The large negative contributors were Knight Trading Group, Inc., Lexar Media, Inc. and Alliance Gaming, which was held during the period. During the period, we continued to add to the materials and processing sector and producer durables, as the outlook for the U.S. and global economy improved. We lowered the weight in technology and shifted the mix to more defensive industrial technology stocks. Toward the end of the period, we trimmed our health care exposure as investors began to take their profits and move on and trimmed our financial services exposure since this group typically underperforms in a rising rate environment. We maintain the +/- 5% collar for all of our sector active weights and a style neutral position to mitigate the harm caused by market swings. On average, our cash position during the period was 7%. MARKET OUTLOOK: We expect a choppy market for U.S. equities over the next six months of 2004, given geopolitical issues, a rising interest rate environment, and the U.S. presidential campaign. Despite this near-term volatility, we expect the U.S. equities market to trend upward. We have witnessed pockets of outperformance by stocks with better fundamentals, though it is sometimes short-lived and not as widespread as we expected. Although a rising rate environment will likely accompany the summer slowdown in the market, we expect the market to broaden and to continue rewarding better quality stocks, although price volatility in the small-cap asset class may initially mask the effect. We expect the small-cap cycle to remain on course and for smaller capitalization stocks to outperform large-cap stocks. First, smaller capitalization stocks offer comparable earnings and revenue growth to large-cap stocks but generally provide a better value on a price-to-earnings, price-to-book, and price-to-free cash flow basis. Although rising interest rates may cause an interruption in the cycle, this should serve to make smaller capitalization stocks even more attractive relative to large-cap stocks. Second, access to capital for small-cap stocks continues through strong equity and debt issuance. A rebound in commercial lending by the banking industry will likely help to fuel their growth, as well. Finally, merger and acquisition activity remains strong. On a price-to-cash basis, large-cap companies tend to trump their smaller capitalization counterparts. We expect consolidation to continue with most deals occurring in the small-cap space. We look forward to the new fiscal year. Whatever challenges the market presents in the short term, we believe the Portfolio is well positioned to benefit as the small-cap cycle continues to move up the market cap spectrum and better quality stocks begin to consistently outperform. 10 PORTFOLIO MANAGERS' REPORT ING VP SMALL COMPANY PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 27, 1996 NOVEMBER 1, 2001 ------ ------ ----------------- ---------------- Class I 24.16% 7.61% 10.86% -- Class S 23.83% -- -- 7.09% Russell 2000 Index(1) 33.37% 6.63% 8.12%(2) 14.35%
The table above illustrates the total return of ING VP Small Company Portfolio against the Russell 2000 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index is an unmanaged index that measures the performance of 3,000 U.S. companies based on total market capitalization. (2) Since inception performance for the index is shown from January 1, 1997. (3) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large, capitalization companies whose securities are traded on major U.S. stock markets. (4) The Dow Jones Industrial Average is an unmanaged U.S. stock index based on the stock prices of 30 large and actively traded U.S. companies. (5) The S&P SmallCap 600 Index is an unmanaged index that measures the performance of the small-size company segment of the U.S. market. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility and less liquidity than investing in stocks of larger companies. The Portfolio may invest in foreign securities. International investing does pose special risks including currency fluctuation, economical and political risks not found in domestic investments. Risks of foreign investing are generally intensified in emerging markets. The value of convertible securities may fall when interest rates rise. Investments in derivatives are subject to the risk that changes in market prices of securities or interest rates may result in a loss. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio and may reduce returns. The Portfolio's investments in high yield securities are subject to greater risk than higher quality securities, including the risks associated with greater price volatility, principal and income risk. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. 11 ING VP VALUE OPPORTUNITY PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of equity investment specialists led by William F. Coughlin, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Value Opportunity Portfolio (the "Portfolio ") seeks growth of capital primarily through investment in a diversified portfolio of common stocks and securities convertible into common stock. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares returned 2.65% compared to the Standard & Poor's ("S&P") 500 Index(1), which returned 3.44% over the same period. PORTFOLIO SPECIFICS: The positive contribution from favorable sector allocation was not able to overcome the negative impact of unfavorable stock selection during the six months ended June 30, 2004. With regard to sector allocation, an overweighted position in energy and underweighting the information technology sector were key positive contributors. Within the industrials group, holdings of General Dynamics Corp., Honeywell International, Inc., and Masco Corp. all provided double-digit returns. On the other hand, stock selection in the financial services and energy sectors, led on the downside by Morgan Stanley, Merrill Lynch & Co., Inc., and Royal Dutch Petroleum, which was held during the period, had the most important negative impact on performance. The S&P 500 Index has more than 20% of its market capitalization in the financial services sector. We have also invested a large percentage of the Portfolio in this interest rate sensitive group as a risk control measure. However, as interest rates trended higher during the second quarter, this group has been under pressure and has been a negative factor to overall performance. MARKET OUTLOOK: Given the favorable environment we see ahead for stocks, we believe the Portfolio is well positioned in high quality, large-capitalization companies with strong balance sheets, low valuations, strong management teams, favorable operating outlooks, and catalysts in place that will, in our opinion, lead to higher share prices. 12 PORTFOLIO MANAGERS' REPORT ING VP VALUE OPPORTUNITY PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 13, 1996 JULY 16, 2001 ------ ------ ----------------- ---------------- Class I 16.56% 0.41% 9.35% -- Class S 16.22% -- -- (5.04)% S&P 500 Index(1) 19.11% (2.17)% 7.19%(2) (0.37)%(3)
The table above illustrates the total return of ING VP Value Opportunity Portfolio against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large-capitalization companies whose securities are traded on major U.S. stock markets. (2) Since inception performance for the index is shown from December 1, 1996. (3) Since inception performance for the index is shown from August 1, 2001. PRINCIPAL RISK FACTOR(S): The principal risks of investing in the Portfolio are those generally attributable to stock investing. They include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. Because the prices of value-oriented stocks tend to correlate more closely with economic cycles than growth-oriented stocks, they generally are more sensitive to changing economic conditions, such as changes in interest rates, corporate earnings and industrial production. Stocks of small- and mid-sized companies tend to be less liquid and more volatile than stocks of larger companies. Derivatives are subject to the risk that changes in market prices of securities or interest rates may result in a loss. The value of convertible securities may fall when interest rates rise. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. The Portfolio's investments in high yield securities are subject to greater risk than higher quality securities, including the risks associated with greater price volatility, principal and income risk. The Portfolio's investments in foreign securities involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. 13 ING VP BALANCED PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: Hugh T. Whelan and James B. Kauffmann, ING Investment Management Co.(formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Balanced Portfolio (the "Portfolio") seeks to maximize investment return consistent with reasonable safety of principal, by investing in a diversified portfolio of one or more of the following asset classes: stocks, bonds and cash equivalents, based on the judgment of the Portfolio's management, of which of those sectors or mix thereof offers the best investment prospects. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares returned 2.32%, compared to 3.44% for the Standard & Poor's ("S&P") 500 Index(1) and the composite index consisting of 60% of the return of the S&P 500 Index and 40% of the return of the Lehman Brothers Aggregate Bond Index(2), which returned 2.13% for the same period. PORTFOLIO SPECIFICS: During the six months ended June 30, 2004, the Portfolio underperformed the S&P 500 Index. The equity component of the Portfolio, however, outperformed the S&P 500 Index for the period, primarily due to strong security selection. Stock selection in the health care and financial sectors had a strong positive impact on results, while selection among telecom and consumer staples names detracted from performance. Sector allocation had a small negative impact on results, notably through an overweight in technology. Our short duration stance was a major source of the good performance of the fixed income portion relative to the Lehman Brothers Aggregate Bond Index. During the period, we reduced our exposure to longer-dated and lower-rated corporates in the face of stretched valuations. As a rule, longer-dated credit-sensitive paper underperformed. Our exposure in securitized sectors generally proved beneficial. In the second half we were underweight the financials sector, which also contributed positively to relative performance as the sector fared poorly as the market prepared for Federal Reserve ("Fed") tightening. We were also underweight in dollar-denominated issues of foreign countries, another sector that had a negative return. Mortgages produced a small positive excess return, and our position varied from neutral to underweight during the period. Exposure to emerging market debt contributed to returns in the first half of the reporting period but was a significant drag on our performance in the second half as incremental yield was not sufficient to offset price depreciation. Our high yield exposure was also a drag on performance. MARKET OUTLOOK: The second quarter ended a little softer as inflation crept up slightly, employment took a sideways move, and oil continued to be high. The second-quarter corporate profit outlook continues to be revised upward by analysts and likely will exceed the increased optimism as it has for the past five quarters. Despite this potentially strong earnings season, the S&P 500 Index turned in lackluster performance. On June 30, at the much anticipated Federal Open Market Committee meeting, the Fed Funds rate was increased to 1.25%, a 25 basis point increase that was in line with consensus expectations. The Fed's comments pointed to a measured path of tightenings versus aggressive tightenings going forward. The equity component of the Portfolio is overweight in the consumer discretionary energy and technology sectors and underweight in the health care, consumer staples, and telecom sectors. However, our overall sector exposures are by design quite close to those of the S&P 500 Index so that nearly all of our relative performance is driven by individual stock selection. Tactically, the fixed income component of the Portfolio is still short in duration in the face of anticipated improving global economic fundamentals, but we have reduced the magnitude of that posture following the recent rise in rates. We are neutral home mortgages, overweight asset-backed and commercial mortgage-backed securities, and underweight the front-end of the yield curve, which appears most vulnerable in a tightening cycle. We are underweight agencies. Stretched valuations in investment-grade credit and plus sectors warrant some caution, and we have reduced the contribution to duration of these spread sectors. Additionally, we have reduced our exposure in emerging markets, and our high yield position has been eliminated with the exception of a few crossover and special situation issues that tend to track the investment-grade market. However, we are watchful for points of potential re-entry. 14 PORTFOLIO MANAGERS' REPORT ING VP BALANCED PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION OF CLASS S 1 YEAR 5 YEAR 10 YEAR MAY 29, 2003 ------ ------ ------- --------------- Class I 10.97% 2.08% 9.83% -- Class S 10.78% -- -- 11.77% S&P 500 Index(1) 19.11% (2.17)% 11.87% 18.90%(3) Lehman Brothers Aggregate Bond Index(2) 0.32% 6.95% 7.39% 0.12%(3) Composite Index (60% S&P 500 Index/ 40% Lehman Brothers Aggregate Bond Index) 11.36% 1.78% 10.41% 11.14%(3)
The table above illustrates the total return of ING VP Balanced Portfolio against the S&P 500 Index, the Lehman Brothers Aggregate Bond Index and the Composite Index (60% S&P 500 Index, 40% Lehman Brothers Aggregate Bond Index). The Indices have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large capitalization companies whose securities are traded on major U.S. stock markets. (2) The Lehman Brothers Aggregate Bond Index is an unmanaged index composed of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. (3) Since inception performance for the index is shown from June 1, 2003. PRINCIPAL RISK FACTOR(S): The principal risks of investing in the Portfolio are those generally attributable to stock and bond investing. Because the Portfolio's assets are allocated between equities and fixed income securities, the Portfolio may underperform stock funds when stocks are in favor and underperform bond funds when bonds are in favor. Investments in high yield bonds are high risk investments. Certain high yield/high risk bonds carry particular market and credit risks and may experience greater volatility in market value than investment grade corporate bonds. The Portfolio's investments in mortgage-related securities may entail prepayment risk. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. Stocks of smaller companies tend to be less liquid and more volatile than stocks of larger companies. Further, stocks of smaller companies also can be particularly sensitive to expected changes in interest rates, borrowing costs and earnings. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. Some U.S. Government agency securities may be subject to varying degrees of credit risk, particularly those not backed by the full faith and credit of the U.S. Government. The value of convertible securities may fall when interest rates rise. 15 ING VP GROWTH AND INCOME PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Christopher F. Corapi, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Growth and Income Portfolio (the "Portfolio") seeks to maximize total return through investments in a diversified portfolio of common stocks and securities convertible into common stock. It is anticipated that capital appreciation and investment income will both be major factors in achieving total return. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares returned 3.05% compared to the Standard & Poor's ("S&P") 500 Index(1), which returned 3.44% over the same period. PORTFOLIO SPECIFICS: For this period, positive contribution from stock selection was virtually offset by negative impact from sector allocation. Stock selection impact varied widely, with significant gains in the consumer discretionary, financials, and telecom sectors being largely offset by the negative impact of selections in consumer staples, information technology and materials. A new portfolio management team was assigned to the Portfolio effective May 1, 2004. The Portfolio was successfully transitioned to reflect the new team's views at both the sector and stock level. There were only minor adjustments to the sector weightings, although a significant number of existing positions were sold and new stocks were purchased in their place. The overall number of holdings remained virtually unchanged. MARKET OUTLOOK: We believe that the market is poised to generate positive returns in 2004. Our research indicates that the underlying fundamentals of the economy remain sound, and we anticipate continued positive earnings reports from much of corporate America. Despite these strong undercurrents, investor psychology has been complicated by both the rise in interest rates and increasing geopolitical tensions. We do not believe that the recent rise in interest rates will be so large as to offset the underlying earnings trends. However, we do expect the mood shifts that accompany both the global political situation and the U.S. presidential elections may continue to result in market volatility. 16 PORTFOLIO MANAGERS' REPORT ING VP GROWTH AND INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION OF CLASS S 1 YEAR 5 YEAR 10 YEAR JUNE 11, 2003 ------ ------- ------- --------------- Class I 17.95% (5.44)% 7.61% -- Class S 17.67% -- -- 14.30% S&P 500 Index(1) 19.11% (2.17)% 11.87% 18.90%(2)
The table above illustrates the total return of ING VP Growth and Income Portfolio against the S&P 500 Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large-capitalization companies whose securities are traded on major U.S. stock markets. (2) Since inception performance for the index is shown from June 1, 2003. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. International investing involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. Risks of foreign investing are generally intensified for investment in emerging markets. In exchange for higher growth potential, investing in stocks of mid-size and smaller companies may entail greater price volatility and less liquidity than investing in stocks of larger companies. The value of convertible securities may fall when interest rates rise. Although the Sub-Adviser emphasizes large-cap stocks, to the extent the Portfolio is diversified across asset classes, it may not perform as well as less diversified funds when large-caps stocks are in favor. The use of certain derivatives may increase the volatility of the Portfolio. Because the Portfolio may invest in other investment companies, you may pay a proportionate share of the expenses of that other investment company (including management fees, administration fees and custodial fees) in addition to the expenses of the Portfolio. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. The Portfolio's investments in high yield securities are subject to greater risk than higher quality securities, including the risks associated with greater price volatility, principal and income risk. The Portfolio's investments in mortgage-related securities may entail prepayment risk. 17 ING VP BOND PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT: James B. Kauffmann, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Bond Portfolio* (the "Portfolio") seeks to maximize total return consistent with reasonable risk, through investments in a diversified portfolio consisting of investment-grade corporate bonds and debt securities issued by the U.S. Government, its agencies or instrumentalities. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares returned 0.37% compared to the Lehman Brothers Aggregate Bond Index(1), which returned 0.16% over the same period. PORTFOLIO SPECIFICS: Our short duration stance was a major source of the positive performance of the fixed income portion relative to the benchmark. During the period, we reduced our exposure to longer-dated and lower-rated corporates in the face of stretched valuations. As a rule, longer-dated credit-sensitive paper underperformed. Our exposure in securitized sectors generally proved beneficial. We were underweight in dollar-denominated issues of foreign countries, a sector that had a negative return. Mortgages produced a small positive excess return, and our position varied from neutral to underweight during the period. Exposure to emerging market debt contributed to returns in the first half of the reporting period, but was a significant drag on our performance in the second half as incremental yield was not sufficient to offset price depreciation. Our high yield exposure was also a drag on performance. MARKET OUTLOOK: In our opinion, Treasury yields do not yet fully reflect the quickening pace of the economy and the recent rise in a number of inflation metrics, but the bond market has begun to incorporate a cycle of less accommodative monetary policy. Now that Dr. Greenspan has navigated the economy past the immediate concerns of deflation, we are anxious to see if he can avoid the effects of inflation. While the recent rise in inflation releases were likely amplified by increases in hotel rates, apparel, medical care, and adjustments to owners' equivalent rent, the trajectory is worrisome. One observer drew the analogy that Federal Reserve ("Fed") tightening cycles are like confronting a tee shot with a putter. Should inflationary expectations become manifest in unit labor costs, the Fed may be forced into a more aggressive stance. Many in the bond market believe that the Fed's reactive approach will be tardy in responding to increasing inflation, and we are cognizant of the lagged effect of monetary policy. Historically, changes in the Fed Funds rate can take 12 to 18 months to influence economic activity, but one may argue that today's domestic scene of high consumer indebtedness and increased variable rate financing could indicate speedier transmission of policy changes. In the months ahead, employment and inflation releases and comments from Fed officials will remain key data as bond market observers seek to divine the timing, frequency, and magnitude of future tightenings. Tactically, the Portfolio is still short in duration in the face of anticipated improving global economic fundamentals, but we have reduced the magnitude of that posture following the recent rise in rates. We are neutral home mortgages, overweight asset-backed and commercial mortgage-backed securities, and underweight the front-end of the yield curve, which appears most vulnerable in a tightening cycle. We are underweight agencies. Stretched valuations in investment-grade credit and plus sectors warrant some caution, and we have reduced the contribution to duration of these spread sectors. Additionally, we have reduced our exposure in emerging markets, and our high yield position has been eliminated with the exception of a few crossover and special situation issues that tend to track the investment grade market. However, we are watchful for points of potential re-entry. - ---------- * On August 6, 2004, the ING VP Bond Portfolio changed its name to ING VP Intermediate Bond Portfolio. 18 PORTFOLIO MANAGERS' REPORT ING VP BOND PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------------------------- SINCE INCEPTION OF CLASS S 1 YEAR 5 YEAR 10 YEAR MAY 3, 2002 ------ ------ ------- --------------- Class I 1.37% 6.71% 7.11% -- Class S 1.12% -- -- 6.33% Lehman Brothers Aggregate Bond Index(1) 0.32% 6.95% 7.39% 5.66%(2)
The table above illustrates the total return of ING VP Bond Portfolio against the Lehman Brothers Aggregate Bond Index. The Index has has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on portfolio distributions or the redemption of portfolio shares. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Lehman Brothers Aggregate Bond Index is an unmanaged index composed of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. (2) Since inception performance for the index is shown from May 1, 2002. PRINCIPAL RISK FACTOR(S): The principal risks of investing in the Portfolio are those generally attributable to debt investing, including increases in interest rates and loss of principal. Generally, when interest rates rise, bond prices fall. Bonds with longer maturities tend to be more sensitive to changes in interest rates. For all bonds there is a risk that the issuer will default. High-yield bonds generally are more susceptible to the risk of default than higher rated bonds. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. The use of certain derivatives may also have a leveraging effect, which may increase the volatility of the Portfolio. In order to generate additional income, the Portfolio may lend portfolio securities and may, therefore, lose the opportunity to sell the securities at a desirable price. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. Some U.S. Government agency securities may be subject to varying degrees of credit risk, particularly those not backed by the full faith and credit of the U.S. Government. The value of convertible securities may fall when interest rates rise. The Portfolio's investments in mortgage-related securities may entail prepayment risk. Borrowers can pay off their mortgages sooner than scheduled and if interest rates are falling, the Portfolio will be forced to reinvest this money at lower yields. Slower than expected principal payments on amortgage-backed or asset-backed security may cause an increase in the security's duration, reduce the value of the security and lock in a below-market interest rate. 19 ING VP MONEY MARKET PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of fixed-income specialists led by Jennifer J. Thompson, CFA, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Money Market Portfolio (the "Portfolio ") seeks to provide high current return, consistent with preservation of capital and liquidity, through investment in high-quality money market instruments. PORTFOLIO SPECIFICS: The first six months of 2004 yielded varying and dramatic shifts in interest rate expectations and ended with the Federal Reserve Board's ("Fed") Federal Open Market Committee ("FOMC") raising the Federal Funds target rate 25 basis points to 1.25% on June 30, 2004. As market participants changed their views of the economy's strength throughout the period, the LIBOR yield curve flattened initially and then steepened dramatically. Specifically, the LIBOR yield curve (the difference between 1-month to 12-month LIBOR) steepened by 76 basis points to 109 basis points. The curve reached its flattest point of 19 basis points in mid-March, but a significant shift in Fed Funds expectations shortly thereafter caused yield levels to rise with the back-end of the LIBOR curve incurring the greatest change. Over the period, 12-month LIBOR increased by 100 basis points to 2.46% from 1.46%. Throughout the first quarter of 2004, the Portfolio utilized a barbell portfolio strategy that called for purchasing longer-dated paper (nine to thirteen months) balanced by the purchase of short-term commercial paper and floating rate notes. The strategy worked well and resulted in strong performance. The Portfolio's weighted average maturity remained significantly longer than competitors' funds early in the year. However, in early April, as the market priced in an earlier start to the tightening cycle beginning with the June 30, 2004 meeting, the Portfolio eased off its barbell strategy and limited investments solely to short commercial paper and floating rate notes. This better positioned the Portfolio to take advantage of the higher interest rate environment. Accordingly, the Portfolio's weighted average maturity significantly declined during the second half of the reporting period and finished the period at 53 days compared with 45 days for the benchmark, iMoneyNet First Tier Retail Index. MARKET OUTLOOK: The June 30 FOMC statement clearly signaled the Fed's intent to gradually raise the target interest rate. At the end of the period, the market priced in a year-end Fed Funds rate of roughly 2.00% to 2.25%, or 25 basis points per FOMC meeting. But some market observers believe inflation will accelerate, causing the Fed to move more aggressively than the market currently thinks it will. Given such high level of uncertainty, particularly in light of current market levels for longer term maturities, we believe that continuing our strategy of limiting purchases to short-term commercial paper or floating rate notes is most appropriate. PRINCIPAL RISK FACTOR(S): An investment in the Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Portfolio seeks to preserve the value of your investment, it is possible to lose money by investing in the Portfolio. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. Portfolio holdings are subject to change daily. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. 20 STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 2004 (Unaudited)
ING ING ING ING VP GLOBAL SCIENCE VP INTERNATIONAL ING VP SMALL VP VALUE AND TECHNOLOGY EQUITY VP GROWTH COMPANY OPPORTUNITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------- ---------------- -------------- -------------- -------------- ASSETS: Investments in securities at value+* $ 85,609,579 $ 43,493,216 $ 207,510,907 $ 431,511,442 $ 235,418,724 Short-term investments at amortized cost 12,041,461 -- 39,914,157 129,809,897 10,534,791 Repurchase agreement -- 2,054,000 8,012,000 60,724,000 5,224,000 Cash 1,506,587 69,757 -- 820 170 Cash collateral for futures -- -- 448,000 1,890,000 -- Foreign currencies at value** 151 113,505 -- -- -- Receivables: Investment securities sold 1,076,870 -- 1,819,363 10,201,453 -- Dividends and interest 19,563 99,154 119,382 300,067 352,165 Variation margin receivable -- 1,512 24,150 160,475 -- Prepaid expenses 3,474 955 2,569 10,849 2,883 ----------------- ---------------- -------------- -------------- -------------- Total assets 100,257,685 45,832,099 257,850,528 634,609,003 251,532,733 ----------------- ---------------- -------------- -------------- -------------- LIABILITIES: Payable for investment securities purchased 268,200 -- 2,555,791 11,391,724 -- Payable for futures variation margin -- 6,403 -- -- -- Payable upon receipt of securities loaned 12,041,461 -- 39,914,157 129,809,897 10,534,791 Payable to affiliates 71,173 35,544 114,527 317,432 129,515 Payable to custodian -- -- 41,751 -- -- Payable for director fees 917 470 5,662 4,202 2,045 Other accrued expenses and liabilities 49,306 134,359 77,720 59,897 52,183 ----------------- ---------------- -------------- -------------- -------------- Total liabilities 12,431,057 176,776 42,709,608 141,583,152 10,718,534 ----------------- ---------------- -------------- -------------- -------------- NET ASSETS $ 87,826,628 $ 45,655,323 $ 215,140,920 $ 493,025,851 $ 240,814,199 ================= ================ ============== ============== ============== NET ASSETS WERE COMPRISED OF: Paid-in capital $ 138,974,901 $ 68,689,305 $ 402,652,466 $ 443,241,791 $ 267,855,555 Undistributed net investment income (accumulated net investment loss) (429,047) 775,662 465,757 1,626,316 4,189,074 Accumulated net realized loss on investments, foreign currencies and futures (50,011,537) (26,859,812) (206,564,742) (14,859,940) (41,283,030) Net unrealized appreciation (depreciation) on investments foreign currencies and futures (707,689) 3,050,168 18,587,439 63,017,684 10,052,600 ----------------- ---------------- -------------- -------------- -------------- NET ASSETS $ 87,826,628 $ 45,655,323 $ 215,140,920 $ 493,025,851 $ 240,814,199 ================= ================ ============== ============== ============== + Including securities loaned at value $ 11,372,281 $ -- $ 39,180,149 $ 126,746,371 $ 10,289,939 * Cost of investments in securities $ 86,317,267 $ 40,447,433 $ 188,948,892 $ 368,949,010 $ 225,366,124 ** Cost of foreign currencies $ 151 $ 113,867 $ -- $ -- $ -- CLASS I: Net assets $ 87,826,628 $ 45,462,779 $ 214,813,231 $ 481,074,663 $ 237,820,321 Shares authorized 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 24,026,166 5,803,948 23,741,530 26,749,796 19,185,638 Net asset value and redemption price per share $ 3.66 $ 7.83 $ 9.05 $ 17.98 $ 12.40 CLASS S: Net assets n/a $ 192,544 $ 327,689 $ 11,951,188 $ 2,993,878 Shares authorized 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding n/a 24,684 36,458 664,976 242,752 Net asset value and redemption price per share n/a $ 7.80 $ 8.99 $ 17.97 $ 12.33
See Accompanying Notes to Financial Statements 21 STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 2004 (Unaudited)
ING ING ING VP GROWTH AND ING VP MONEY VP BALANCED INCOME VP BOND MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------- ---------------- ---------------- ---------------- ASSETS: Investments in securities at value+* $ 1,416,090,991 $ 3,597,567,675 $ 1,335,748,331 $ -- Short-term investments at value** 395,607,785 643,061,669 327,923,351 898,477,634 Repurchase agreement 29,936,000 113,822,000 49,253,000 261,232,000 Cash 60,599 53,188 207,088 38,472 Cash collateral for futures 361,314 2,784,000 983,356 -- Foreign currencies at value*** -- -- 180 -- Receivables: Investment securities sold 49,024,049 24,200,817 12,998,757 -- Dividends and interest 4,986,599 3,078,688 9,564,620 1,564,964 Variation margin receivable 112,500 200,100 -- -- Prepaid expenses 16,741 46,174 16,256 17,357 ---------------- ---------------- ---------------- ---------------- Total assets 1,896,196,578 4,384,814,311 1,736,694,939 1,161,330,427 ---------------- ---------------- ---------------- ---------------- LIABILITIES: Payable for investment securities purchased 158,789,902 74,967,823 237,864,525 -- Payable for futures variation margin 133,000 -- 81,125 -- Payable upon receipt of securities loaned 326,812,169 643,061,669 246,144,339 23,715,619 Payable to affiliates 636,986 1,659,210 493,730 285,211 Payable for director fees 32,616 128,654 33,048 55,385 Other accrued expenses and liabilities 163,649 573,669 219,431 252,459 ---------------- ---------------- ---------------- ---------------- Total liabilities 486,568,322 720,391,025 484,836,198 24,308,674 ---------------- ---------------- ---------------- ---------------- NET ASSETS $ 1,409,628,256 $ 3,664,423,286 $ 1,251,858,741 $ 1,137,021,753 ================ ================ ================ ================ NET ASSETS WERE COMPRISED OF: Paid-in capital $ 1,440,920,979 $ 6,064,019,281 $ 1,228,037,752 $ 1,137,424,580 Undistributed net investment income 42,196,236 16,765,784 24,096,536 4,855,885 Accumulated net realized gain (loss) on investments, foreign currencies and futures (144,139,594) (2,785,440,950) 3,961,603 (4,752,109) Net unrealized appreciation (depreciation) on investments foreign currencies and futures 70,650,635 369,079,171 (4,237,150) (506,603) ---------------- ---------------- ---------------- ---------------- NET ASSETS $ 1,409,628,256 $ 3,664,423,286 $ 1,251,858,741 $ 1,137,021,753 ================ ================ ================ ================ + Including securities loaned at value $ 325,683,288 $ 659,243,749 $ 242,006,106 $ 30,296,992 * Cost of investments in securities $ 1,345,551,576 $ 3,228,921,230 $ 1,340,153,753 $ -- ** Cost of short-term investments $ 395,613,399 $ 643,061,669 $ 327,929,225 $ 898,984,237 *** Cost of foreign currencies $ -- $ -- $ 161 $ -- CLASS I: Net assets $ 1,407,343,261 $ 3,662,458,341 $ 1,086,747,283 $ 1,137,021,753 Shares authorized 2,000,000,000 unlimited unlimited unlimited Par value $ 0.001 $ 1.000 $ 1.000 $ 1.000 Shares outstanding 110,019,482 196,139,645 82,012,624 88,526,987 Net asset value and redemption price per share $ 12.79 $ 18.67 $ 13.25 $ 12.84 CLASS S: Net assets $ 2,284,995 $ 1,964,945 $ 165,111,458 n/a Shares authorized 2,000,000,000 unlimited unlimited n/a Par value $ 0.001 $ 1.000 $ 1.000 n/a Shares outstanding 179,085 105,414 12,489,837 n/a Net asset value and redemption price per share $ 12.76 $ 18.64 $ 13.22 n/a
See Accompanying Notes to Financial Statements 22 STATEMENTS OF OPERATIONS for the six months ended June 30, 2004 (Unaudited)
ING ING ING ING VP GLOBAL SCIENCE VP INTERNATIONAL ING VP SMALL VP VALUE AND TECHNOLOGY EQUITY VP GROWTH COMPANY OPPORTUNITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------- ---------------- -------------- -------------- -------------- INVESTMENT INCOME: Dividends, net of foreign taxes withheld* $ 76,253 $ 532,230 $ 877,274 $ 1,909,386 $ 2,974,189 Interest 966 71,940 29,730 176,284 27,204 Securities lending income 10,896 -- 10,154 81,137 2,963 ----------------- ---------------- -------------- -------------- -------------- Total investment income 88,115 604,170 917,158 2,166,807 3,004,356 ----------------- ---------------- -------------- -------------- -------------- EXPENSES: Investment management fees 455,843 186,507 659,393 1,799,173 756,367 Distribution and service fees: Class S -- 215 403 2,736 3,387 Transfer agent fees 4,487 5,204 4,691 5,027 5,000 Administrative service fees 26,390 12,068 60,443 131,937 69,332 Shareholder reporting expense 5,278 5,784 8,918 9,106 8,008 Registration fees 1,303 2,802 -- 3,159 1,371 Professional fees 13,860 15,430 15,263 18,721 15,627 Custody and accounting expense 5,132 50,271 13,286 19,528 13,468 Directors' fees 2,002 1,092 6,188 10,010 4,509 Miscellaneous expense 2,867 1,949 5,743 12,283 6,770 ----------------- ---------------- -------------- -------------- -------------- Total expenses 517,162 281,322 774,328 2,011,680 883,839 Less: Net waived and reimbursed fees -- 29,201 -- -- -- ----------------- ---------------- -------------- -------------- -------------- Net expenses 517,162 252,121 774,328 2,011,680 883,839 ----------------- ---------------- -------------- -------------- -------------- Net investment income (loss) (429,047) 352,049 142,830 155,127 2,120,517 ----------------- ---------------- -------------- -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND FUTURES: Net realized gain (loss) on: Investments 12,743,707 4,606,960 12,728,932 29,866,473 (167,447) Foreign currencies 545 14,038 -- -- -- Futures (32,325) 51,763 390,715 971,034 -- ----------------- ---------------- -------------- -------------- -------------- Net realized gain (loss) on investments, foreign currencies, and futures 12,711,927 4,672,761 13,119,647 30,837,507 (167,447) ----------------- ---------------- -------------- -------------- -------------- Net change in unrealized appreciation or depreciation on: Investments (18,332,432) (3,491,706) (10,417,437) (18,224,277) 4,477,852 Foreign currencies -- (2,029) -- -- -- Futures -- (873) (22,864) 223,925 -- ----------------- ---------------- -------------- -------------- -------------- Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (18,332,432) (3,494,608) (10,440,301) (18,000,352) 4,477,852 ----------------- ---------------- -------------- -------------- -------------- Net realized and unrealized gain (loss) on investments, foreign currencies and futures (5,620,505) 1,178,153 2,679,346 12,837,155 4,310,405 ----------------- ---------------- -------------- -------------- -------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,049,552) $ 1,530,202 $ 2,822,176 $ 12,992,282 $ 6,430,922 ================= ================ ============== ============== ============== * Foreign taxes $ 2,542 $ 69,268 $ 4,549 $ 2,234 $ 64,166
See Accompanying Notes to Financial Statements 23 STATEMENTS OF OPERATIONS for the six months ended June 30, 2004 (Unaudited)
ING ING ING VP GROWTH AND ING VP MONEY VP BALANCED INCOME VP BOND MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------- ---------------- ---------------- ---------------- INVESTMENT INCOME: Dividends, net of foreign taxes withheld* $ 5,910,713 $ 27,252,473 $ 275,755 $ -- Interest 11,425,729 327,388 26,043,464 6,898,324 Securities lending income 144,476 140,463 197,442 3,480 ---------------- ---------------- ---------------- ---------------- Total investment income 17,480,918 27,720,324 26,516,661 6,901,804 ---------------- ---------------- ---------------- ---------------- EXPENSES: Investment management fees 3,501,729 9,304,610 2,453,186 1,458,467 Distribution and service fees: Class S 2,183 2,333 139,957 -- Transfer agent fees 2,537 9,265 10,951 1,869 Administrative service fees 385,182 1,023,485 337,305 320,856 Shareholder reporting expense 34,540 155,850 24,392 37,856 Registration fees 634 1,967 5,281 2,581 Professional fees 41,400 93,565 32,988 36,650 Custody and accounting expense 75,996 143,293 69,000 93,080 Directors' fees 42,224 123,542 42,042 52,234 Miscellaneous expense 35,432 91,266 54,267 37,282 ---------------- ---------------- ---------------- ---------------- Total expenses 4,121,857 10,949,176 3,169,369 2,040,875 ---------------- ---------------- ---------------- ---------------- Net investment income 13,359,061 16,771,148 23,347,292 4,860,929 ---------------- ---------------- ---------------- ---------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND FUTURES: Net realized gain (loss) on: Investments 62,021,426 373,323,913 4,442,625 (244,961) Foreign currencies -- 40,007 -- -- Futures (44,179) 1,013,571 45,635 -- ---------------- ---------------- ---------------- ---------------- Net realized gain (loss) on investments, foreign currencies and futures 61,977,247 374,377,491 4,488,260 (244,961) ---------------- ---------------- ---------------- ---------------- Net change in unrealized appreciation or depreciation on: Investments (44,145,766) (277,984,949) (25,479,065) (748,257) Foreign currencies -- 16,066 19 -- Futures 399,632 356,054 935,832 -- ---------------- ---------------- ---------------- ---------------- Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (43,746,134) (277,612,829) (24,543,214) (748,257) ---------------- ---------------- ---------------- ---------------- Net realized and unrealized gain (loss) on investments, foreign currencies and futures 18,231,113 96,764,662 (20,054,954) (993,218) ---------------- ---------------- ---------------- ---------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 31,590,174 $ 113,535,810 $ 3,292,338 $ 3,867,711 ================ ================ ================ ================ * Foreign taxes $ 8,976 $ 4,059 $ -- $ --
See Accompanying Notes to Financial Statements 24 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP GLOBAL SCIENCE AND ING VP INTERNATIONAL TECHNOLOGY PORTFOLIO EQUITY PORTFOLIO -------------------------------- -------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 -------------- -------------- -------------- -------------- FROM OPERATIONS: Net investment income (loss) $ (429,047) $ (570,560) $ 352,049 $ 347,432 Net realized gain (loss) on investments, foreign currencies and futures 12,711,927 (4,912,495) 4,672,761 680,469 Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (18,332,432) 29,432,822 (3,494,608) 8,992,547 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations (6,049,552) 23,949,767 1,530,202 10,020,448 -------------- -------------- -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- -- -- (358,677) Class S -- -- -- (496) -------------- -------------- -------------- -------------- Total distributions -- -- -- (359,173) -------------- -------------- -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 14,159,690 71,880,902 12,244,747 72,160,848 Dividends reinvested -- -- -- 359,173 -------------- -------------- -------------- -------------- 14,159,690 71,880,902 12,244,747 72,520,021 Cost of shares redeemed (18,025,988) (43,653,684) (8,853,335) (70,372,573) -------------- -------------- -------------- -------------- Net increase (decrease) in net asset resulting from capital share transactions (3,866,298) 28,227,218 3,391,412 2,147,448 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (9,915,850) 52,176,985 4,921,614 11,808,723 -------------- -------------- -------------- -------------- NET ASSETS: Beginning of period 97,742,478 45,565,493 40,733,709 28,924,986 -------------- -------------- -------------- -------------- End of period $ 87,826,628 $ 97,742,478 $ 45,655,323 $ 40,733,709 ============== ============== ============== ============== Undistributed net investment income (accumulated net investment loss) at end of period $ (429,047) $ -- $ 775,662 $ 423,613 ============== ============== ============== ==============
See Accompanying Notes to Financial Statements 25 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP GROWTH PORTFOLIO ING VP SMALL COMPANY PORTFOLIO -------------------------------- -------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 -------------- -------------- -------------- -------------- FROM OPERATIONS: Net investment income $ 142,830 $ 265,408 $ 155,127 $ 1,659,651 Net realized gain on investments and futures 13,119,647 12,843,906 30,837,507 27,374,998 Net change in unrealized appreciation or depreciation on investments and futures (10,440,301) 40,849,949 (18,000,352) 85,411,831 -------------- -------------- -------------- -------------- Net increase in net assets resulting from operations 2,822,176 53,959,263 12,992,282 114,446,480 -------------- -------------- -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- -- -- (922,009) Class S -- -- -- (698) -------------- -------------- -------------- -------------- Total distributions -- -- -- (922,707) -------------- -------------- -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 3,535,212 12,590,272 44,889,614 156,127,616 Dividends reinvested -- -- -- 922,707 -------------- -------------- -------------- -------------- 3,535,212 12,590,272 44,889,614 157,050,323 Cost of shares redeemed (15,838,812) (23,009,289) (29,924,639) (94,578,973) -------------- -------------- -------------- -------------- Net increase (decrease) in net asset resulting from capital share transactions (12,303,600) (10,419,017) 14,964,975 62,471,350 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (9,481,424) 43,540,246 27,957,257 175,995,123 -------------- -------------- -------------- -------------- NET ASSETS: Beginning of period 224,622,344 181,082,098 465,068,594 289,073,471 -------------- -------------- -------------- -------------- End of period $ 215,140,920 $ 224,622,344 $ 493,025,851 $ 465,068,594 ============== ============== ============== ============== Undistributed net investment income at end of period $ 465,757 $ 265,408 $ 1,626,316 $ 1,457,156 ============== ============== ============== ==============
See Accompanying Notes to Financial Statements 26 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP VALUE OPPORTUNITY PORTFOLIO ING VP BALANCED PORTFOLIO ---------------------------------- -------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 -------------- -------------- -------------- -------------- FROM OPERATIONS: Net investment income $ 2,120,517 $ 2,072,095 $ 13,359,061 $ 25,882,905 Net realized gain (loss) on investments and futures (167,447) 37,412,990 61,977,247 46,751,111 Net change in unrealized appreciation or depreciation on investments and futures 4,477,852 12,066,267 (43,746,134) 148,117,399 -------------- -------------- -------------- -------------- Net increase in net assets resulting from operations 6,430,922 51,551,352 31,590,174 220,751,415 -------------- -------------- -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- (1,764,212) -- (25,549,004) Class S -- (9,646) -- (288) -------------- -------------- -------------- -------------- Total distributions -- (1,773,858) -- (25,549,292) -------------- -------------- -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 8,942,740 21,198,747 56,426,115 38,550,583 Dividends reinvested -- 1,773,858 -- 25,549,292 -------------- -------------- -------------- -------------- 8,942,740 22,972,605 56,426,115 64,099,875 Cost of shares redeemed (34,283,608) (25,587,631) (54,130,830) (106,333,010) -------------- -------------- -------------- -------------- Net increase (decrease) in net asset resulting from capital share transactions (25,340,868) (2,615,026) 2,295,285 (42,233,135) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (18,909,946) 47,162,468 33,885,459 152,968,988 -------------- -------------- -------------- -------------- NET ASSETS: Beginning of period 259,724,145 212,561,677 1,375,742,797 1,222,773,809 -------------- -------------- -------------- -------------- End of period $ 240,814,199 $ 259,724,145 $1,409,628,256 $1,375,742,797 ============== ============== ============== ============== Undistributed net investment income at end of period $ 4,189,074 $ 2,068,557 $ 42,196,236 $ 28,837,175 ============== ============== ============== ==============
See Accompanying Notes to Financial Statements 27 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP GROWTH AND INCOME PORTFOLIO ING VP BOND PORTFOLIO ---------------------------------- ------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 -------------- -------------- -------------- -------------- FROM OPERATIONS: Net investment income $ 16,771,148 $ 33,181,040 $ 23,347,292 $ 48,262,109 Net realized gain on investments, foreign currencies and futures 374,377,491 89,606,751 4,488,260 39,308,980 Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (277,612,829) 694,994,792 (24,543,214) (10,863,858) -------------- -------------- -------------- --------------- Net increase in net assets resulting from operations 113,535,810 817,782,583 3,292,338 76,707,231 -------------- -------------- -------------- --------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I (33,180,765) -- (48,490,127) (9,725,157) Class S (15,555) -- (5,040,175) (564,795) Net realized gains: Class I -- -- (28,294,467) (10,936,141) Class S -- -- (2,991,690) (736,552) -------------- -------------- -------------- --------------- Total distributions (33,196,320) -- (84,816,459) (21,962,645) -------------- -------------- -------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 59,626,477 14,108,788 187,886,909 184,777,059 Dividends reinvested 33,178,022 -- 84,771,009 21,950,695 -------------- -------------- -------------- --------------- 92,804,499 14,108,788 272,657,918 206,727,754 Cost of shares redeemed (305,884,912) (559,975,741) (137,078,511) (319,226,990) -------------- -------------- -------------- --------------- Net increase (decrease) in net asset resulting from capital share transactions (213,080,413) (545,866,953) 135,579,407 (112,499,236) -------------- -------------- -------------- --------------- Net increase (decrease) in net assets (132,740,923) 271,915,630 54,055,286 (57,754,650) -------------- -------------- -------------- --------------- NET ASSETS: Beginning of period 3,797,164,209 3,525,248,579 1,197,803,455 1,255,558,105 -------------- -------------- -------------- --------------- End of period $3,664,423,286 $3,797,164,209 $1,251,858,741 $ 1,197,803,455 ============== ============== ============== =============== Undistributed net investment income at end of period $ 16,765,784 $ 33,190,956 $ 24,096,536 $ 54,279,546 ============== ============== ============== ===============
See Accompanying Notes to Financial Statements 28 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP MONEY MARKET PORTFOLIO ------------------------------------ SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 ---------------- ---------------- FROM OPERATIONS: Net investment income $ 4,860,929 $ 12,932,100 Net realized loss on investments (244,961) (169) Net change in unrealized appreciation or depreciation on investments (748,257) (56,131) ---------------- ---------------- Net increase in net assets resulting from operations 3,867,711 12,875,800 ---------------- ---------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I (12,932,164) (24,741,578) ---------------- ---------------- Total distributions (12,932,164) (24,741,578) ---------------- ---------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 172,059,361 1,899,695,014 Dividends reinvested 12,932,164 24,741,578 ---------------- ---------------- 184,991,525 1,924,436,592 Cost of shares redeemed (276,488,945) (2,226,653,637) ---------------- ---------------- Net decrease in net asset resulting from capital share transactions (91,497,420) (302,217,045) ---------------- ---------------- Net decrease in net assets (100,561,873) (314,082,823) ---------------- ---------------- NET ASSETS: Beginning of period 1,237,583,626 1,551,666,449 ---------------- ---------------- End of period $ 1,137,021,753 $ 1,237,583,626 ================ ================ Undistributed net investment income at end of period $ 4,855,885 $ 12,927,120 ================ ================
See Accompanying Notes to Financial Statements 29 ING VP GLOBAL SCIENCE AND TECHNOLOGY PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ----------------------------------------------------------------- SIX MONTHS MAY 1, ENDED YEAR ENDED DECEMBER 31, 2000(4) TO JUNE 30, ----------------------------------- DECEMBER 31, 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 3.87 2.66 4.53 5.88 10.00 Income (loss) from investment operations: Net investment loss $ (0.02) (0.02) (0.03) (0.02) (0.02) Net realized and unrealized gain (loss) on investments $ (0.19) 1.23 (1.84) (1.33) (4.10) Total from investment operations $ (0.21) 1.21 (1.87) (1.35) (4.12) Net asset value, end of period $ 3.66 3.87 2.66 4.53 5.88 TOTAL RETURN(1) % (5.43) 45.49 (41.28) (22.96) (41.20) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 87,827 97,742 45,559 62,878 44,621 Ratios to average net assets: Net expenses after expense reimbursement/recoupment(2)(3) % 1.08 1.11 1.11 1.11 1.15 Gross expenses prior to expense reimbursement/recoupment(2) % 1.08 1.10 1.12 1.11 1.20 Net investment loss after expense reimbursement/recoupment(2)(3) % (0.90) (0.88) (0.89) (0.49) (0.61) Portfolio turnover rate % 99 15 61 129 150
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) The Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (4) Commencement of operations of class. See Accompanying Notes to Financial Statements 30 ING VP INTERNATIONAL EQUITY PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 7.55 5.78 7.90 10.40 15.92 11.59 Income (loss) from investment operations: Net investment income (loss) $ 0.05 0.06 0.03 0.02 (0.02) (0.01) Net realized and unrealized gain (loss) on investments $ 0.23 1.78 (2.13) (2.51) (3.17) 5.78 Total from investment operations $ 0.28 1.84 (2.10) (2.49) (3.19) 5.77 Less distributions from: Net investment income $ -- 0.07 0.02 0.01 0.01 0.15 Net realized gains on investments $ -- -- -- -- 2.32 1.29 Total distributions $ -- 0.07 0.02 0.01 2.33 1.44 Net asset value, end of period $ 7.83 7.55 5.78 7.90 10.40 15.92 TOTAL RETURN(1) % 3.71 32.05 (26.68) (23.88) (20.33) 51.33 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 45,463 40,537 28,917 48,652 52,210 43,548 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 1.15 1.15 1.15 1.15 1.15 1.15 Gross expenses prior to expense reimbursement(2) % 1.28 1.38 1.46 1.26 1.34 1.62 Net investment income (loss) after expense reimbursement(2)(3) % 1.61 1.04 0.40 0.23 (0.18) 0.13 Portfolio turnover rate % 84 85 266 229 212 169
CLASS S --------------------------------------------------------------- SIX MONTHS NOVEMBER 1, ENDED YEAR ENDED DECEMBER 31, 2001(4) TO JUNE 30, ---------------------------- DECEMBER 31, 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 7.53 5.78 7.90 7.38 Income (loss) from investment operations: Net investment income $ 0.05 (0.01) 0.01 -- Net realized and unrealized gain (loss) on investments $ 0.22 1.82 (2.13) 0.52 Total from investment operations $ 0.27 1.81 (2.12) 0.52 Less distributions from: Net investment income $ -- 0.06 -- -- Total distributions $ -- 0.06 -- -- Net asset value, end of period $ 7.80 7.53 5.78 7.90 TOTAL RETURN(1) % 3.59 31.62 (26.84) 7.05 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 193 197 8 11 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 1.40 1.40 1.40 1.39 Gross expenses prior to expense reimbursement(2) % 1.53 1.63 1.71 1.49 Net investment income after expense reimbursement(2)(3) % 1.22 0.79 0.15 0.01 Portfolio turnover rate % 84 85 266 229
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) The Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (3) Annualized for periods less than one year. (4) Commencement of operations of class. See Accompanying Notes to Financial Statements 31 ING VP GROWTH PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.93 6.85 9.64 14.99 17.32 13.53 Income (loss) from investment operations: Net investment income (loss) $ 0.01 0.01 (0.01) (0.01) 0.01 0.03 Net realized and unrealized gain (loss) on investments $ 0.11 2.07 (2.78) (3.87) (2.02) 4.62 Total from investment operations $ 0.12 2.08 (2.79) (3.88) (2.01) 4.65 Less distributions from: Net investment income $ -- -- -- 0.01 0.01 0.02 Net realized gains on investments $ -- -- -- 1.46 0.31 0.84 Total distributions $ -- -- -- 1.47 0.32 0.86 Net asset value, end of period $ 9.05 8.93 6.85 9.64 14.99 17.32 TOTAL RETURN(1) % 1.34 30.36 (28.94) (27.06) (11.95) 34.97 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 214,813 224,330 181,029 305,624 460,578 369,845 Ratios to average net assets: Expenses(2) % 0.70 0.71 0.72 0.70 0.70 0.71 Net investment income (loss)(2) % 0.13 0.13 (0.06) (0.08) 0.06 0.20 Portfolio turnover rate % 59 162 241 216 179 138
CLASS S --------------------------------------------------------------- SIX MONTHS NOVEMBER 1, ENDED YEAR ENDED DECEMBER 31, 2001(3) TO JUNE 30, ---------------------------- DECEMBER 31, 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.88 6.83 9.63 8.96 Income (loss) from investment operations: Net investment income (loss) $ (0.01) 0.00* (0.01) 0.00* Net realized and unrealized gain (loss) on investments $ 0.12 2.05 (2.79) 0.67 Total from investment operations $ 0.11 2.05 (2.80) 0.67 Net asset value, end of period $ 8.99 8.88 6.83 9.63 TOTAL RETURN(1) % 1.24 30.01 (29.08) 7.48 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 328 292 53 11 Ratios to average net assets: Expenses(2) % 0.95 0.96 0.97 0.94 Net investment loss(2) % (0.11) (0.10) (0.31) (0.32) Portfolio turnover rate % 59 162 241 216
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. * Amount is less than $0.01 per share. See Accompanying Notes to Financial Statements 32 ING VP SMALL COMPANY PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 17.48 12.75 16.68 16.65 16.52 12.79 Income (loss) from investment operations: Net investment income $ 0.01 0.06 0.05 0.06 0.11 0.08 Net realized and unrealized gain (loss) on investments $ 0.49 4.71 (3.91) 0.58 1.09 3.84 Total from investment operations $ 0.50 4.77 (3.86) 0.64 1.20 3.92 Less distributions from: Net investment income $ -- 0.04 0.07 0.10 0.02 0.06 Net realized gains on investments $ -- -- -- 0.51 1.05 0.13 Total distributions $ -- 0.04 0.07 0.61 1.07 0.19 Net asset value, end of period $ 17.98 17.48 12.75 16.68 16.65 16.52 TOTAL RETURN(1) % 2.86 37.47 (23.23) 4.00 6.72 30.85 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 481,075 464,228 288,890 341,332 273,617 149,416 Ratios to average net assets: Expenses(2) % 0.84 0.85 0.87 0.86 0.87 0.88 Net investment income(2) % 0.07 0.47 0.39 0.50 0.80 0.64 Portfolio turnover rate % 54 178 371 240 330 256
CLASS S --------------------------------------------------------------- SIX MONTHS NOVEMBER 1, ENDED YEAR ENDED DECEMBER 31, 2001(3) TO JUNE 30, ---------------------------- DECEMBER 31, 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 17.49 12.72 16.68 14.90 Income (loss) from investment operations: Net investment income (loss) $ (0.05) 0.01 (0.04) 0.00* Net realized and unrealized gain (loss) on investments $ 0.53 4.79 (3.86) 1.78 Total from investment operations $ 0.48 4.80 (3.90) 1.78 Less distribution from: Net investment income $ -- 0.03 0.06 -- Total distribution $ -- 0.03 0.06 -- Net asset value, end of period $ 17.97 17.49 12.72 16.68 TOTAL RETURN(1) % 2.74 37.76 (23.45) 11.95 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 11,951 840 184 11 Ratios to average net assets: Expenses(2) % 1.11 1.10 1.12 1.10 Net investment income(2) % (0.01) 0.22 0.14 0.29 Portfolio turnover rate % 54 178 371 240
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. * Amount is less than $0.01 per share. See Accompanying Notes to Financial Statements 33 ING VP VALUE OPPORTUNITY PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.08 9.77 13.25 15.34 16.42 14.41 Income (loss) from investment operations: Net investment income $ 0.12 0.10 0.04 0.03 0.07 0.10 Net realized and unrealized gain (loss) on investments $ 0.20 2.29 (3.47) (1.43) 1.49 2.71 Total from investment operations $ 0.32 2.39 (3.43) (1.40) 1.56 2.81 Less distributions from: Net investment income $ -- 0.08 0.05 0.05 0.03 0.08 Net realized gains on investments $ -- -- -- 0.64 2.61 0.72 Total distributions $ -- 0.08 0.05 0.69 2.64 0.80 Net asset value, end of period $ 12.40 12.08 9.77 13.25 15.34 16.42 TOTAL RETURN(1) % 2.65 24.59 (25.96) (9.62) 10.19 19.58 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 237,820 257,448 211,470 219,287 116,029 85,030 Ratios to average net assets: Expenses(2) % 0.70 0.70 0.72 0.71 0.75 0.73 Net investment income(2) % 1.68 0.91 0.51 0.54 0.58 0.69 Portfolio turnover rate % 8 251 304 185 171 125
CLASS S --------------------------------------------------------------- SIX MONTHS JULY 16, ENDED YEAR ENDED DECEMBER 31, 2001(3) TO JUNE 30, ---------------------------- DECEMBER 31, 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.03 9.75 13.24 14.58 Income (loss) from investment operations: Net investment income $ 0.06 0.04 0.01 0.00* Net realized and unrealized gain (loss) on investments $ 0.24 2.31 (3.46) (1.34) Total from investment operations $ 0.30 2.35 (3.45) (1.34) Less distributions from: Net investment income $ -- 0.07 0.04 -- Total distributions $ -- 0.07 0.04 -- Net asset value, end of period $ 12.33 12.03 9.75 13.24 TOTAL RETURN(1) % 2.49 24.21 (26.12) (9.19) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 2,994 2,277 1,092 307 Ratios to average net assets: Expenses(2) % 0.95 0.95 0.97 0.96 Net investment income(2) % 1.46 0.64 0.26 0.29 Portfolio turnover rate % 8 251 304 185
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. * Amount is less than $0.01 per share. See Accompanying Notes to Financial Statements 34 ING VP BALANCED PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.50 10.73 12.09 13.40 15.57 15.73 Income (loss) from investment operations: Net investment income $ 0.12 0.25 0.25 0.31 0.43 0.44 Net realized and unrealized gain (loss) on investments $ 0.17 1.76 (1.49) (0.87) (0.49) 1.56 Total from investment operations $ 0.29 2.01 (1.24) (0.56) (0.06) 2.00 Less distributions from: Net investment income $ -- 0.24 0.12 0.28 0.46 0.40 Net realized gains on investments $ -- -- -- 0.47 1.65 1.76 Total distributions $ -- 0.24 0.12 0.75 2.11 2.16 Net asset value, end of period $ 12.79 12.50 10.73 12.09 13.40 15.57 TOTAL RETURN(1) % 2.32 18.87 (10.31) (4.21) (0.56) 13.60 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 1,407 1,375 1,223 1,591 1,777 1,988 Ratios to average net assets: Expenses(2) % 0.59 0.60 0.60 0.59 0.59 0.59 Net investment income(2) % 1.91 2.04 2.00 2.46 2.72 2.81 Portfolio turnover rate % 136 333 345 167 182 136
CLASS S ------------------------- SIX MONTHS MAY 29, ENDED 2003(3) TO JUNE 30, DECEMBER 31, 2004 2003 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.49 11.53 Income (loss) from investment operations: Net investment income $ 0.09* 0.34 Net realized and unrealized gain on investments $ 0.18 0.85 Total from investment operations $ 0.27 1.19 Less distributions from: Net investment income $ -- 0.23 Total distributions $ -- 0.23 Net asset value, end of period $ 12.76 12.49 TOTAL RETURN(1) % 2.16 10.51 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 2 1 Ratios to average net assets: Expenses(2) % 0.84 0.83 Net investment income(2) % 1.66 3.06 Portfolio turnover rate % 136 333
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. * Per share data calculated using average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 35 ING VP GROWTH AND INCOME PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 18.28 14.50 19.54 24.12 30.69 31.87 Income (loss) from investment operations: Net investment income $ 0.09 0.16 0.16 0.14 0.17 0.31 Net realized and unrealized gain (loss) on investments $ 0.46 3.62 (5.04) (4.58) (3.46) 4.86 Total from investment operations $ 0.55 3.78 (4.88) (4.44) (3.29) 5.17 Less distributions from: Net investment income $ 0.16 -- 0.16 0.14 0.16 0.34 Net realized gains on investments $ -- -- -- -- 3.12 6.01 Total distributions $ 0.16 -- 0.16 0.14 3.28 6.35 Net asset value, end of period $ 18.67 18.28 14.50 19.54 24.12 30.69 TOTAL RETURN(1): % 3.05 26.07 (24.99) (18.40) (10.97) 17.42 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 3,662 3,795 3,525 5,639 7,797 10,029 Ratios to average net assets: Expenses(2) % 0.59 0.60 0.59 0.59 0.58 0.58 Net investment income(2) % 0.90 0.95 0.83 0.62 0.55 0.89 Portfolio turnover rate % 78 150 246 185 149 133
CLASS S ------------------------- SIX MONTHS JUNE 11, ENDED 2003(3) TO JUNE 30, DECEMBER 31, 2004 2003 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 18.26 16.32 Income (loss) from investment operations: Net investment income $ 0.06 0.04 Net realized and unrealized gain on investments $ 0.47 1.90 Total from investment operations $ 0.53 1.94 Less distributions from: Net investment income $ 0.15 -- Total distributions $ 0.15 -- Net asset value, end of period $ 18.64 18.26 TOTAL RETURN(1): % 2.91 11.89 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 2 2 Ratios to average net assets: Expenses(2) % 0.84 0.84 Net investment income(2) % 0.66 0.57 Portfolio turnover rate % 78 150
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. See Accompanying Notes to Financial Statements 36 ING VP BOND PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.15 13.53 12.95 12.61 12.17 13.06 Income (loss) from investment operations: Net investment income $ 0.26 0.56 0.45 0.59 0.79 0.76 Net realized and unrealized gain (loss) on investments $ (0.19) 0.29 0.63 0.51 0.37 (0.86) Total from investment operations $ 0.07 0.85 1.08 1.10 1.16 (0.10) Less distributions from: Net investment income $ 0.61 0.11 0.43 0.65 0.72 0.75 Net realized gains on investments $ 0.36 0.12 0.07 0.11 0.04 Total distributions $ 0.97 0.23 0.50 0.76 0.72 0.79 Net asset value, end of period $ 13.25 14.15 13.53 12.95 12.61 12.17 TOTAL RETURN(1) % 0.37 6.30 8.33 8.75 9.64 (0.74) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 1,087 1,126 1,206 1,024 711 717 Ratios to average net assets: Expenses(2) % 0.50 0.50 0.49 0.50 0.50 0.49 Net investment income(2) % 3.83 3.77 3.50 5.06 6.29 5.77 Portfolio turnover rate % 213 521 565 219 334 201
CLASS S ---------------------------------------- SIX MONTHS YEAR MAY 3, ENDED ENDED 2002(3) TO JUNE 30, DECEMBER 31, DECEMBER 31, 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.13 13.53 13.05 Income (loss) from investment operations: Net investment income $ 0.01 0.49 0.16 Net realized and unrealized gain on investments $ 0.04 0.32 0.81 Total from investment operations $ 0.05 0.81 0.97 Less distributions from: Net investment income $ 0.60 0.09 0.42 Net realized gains on investments $ 0.36 0.12 0.07 Total distributions $ 0.96 0.21 0.49 Net asset value, end of period $ 13.22 14.13 13.53 TOTAL RETURN(1) % 0.23 6.04 7.45 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 165 71 50 Ratios to average net assets: Expenses(2) % 0.75 0.75 0.74 Net investment income(2) % 3.56 3.52 3.25 Portfolio turnover rate % 213 521 565
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of operations of class. See Accompanying Notes to Financial Statements 37 ING VP MONEY MARKET PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- 2004 2003 2002 2001 2000 1999 --------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.94 13.03 13.33 13.61 13.42 13.39 Income (loss) from investment operations: Net investment income $ 0.06 0.08 0.21 0.50 0.83 0.59 Net realized and unrealized gain(loss) on investments $ (0.02) 0.03 -- 0.01 (0.02) 0.06 Total from investment operations $ 0.04 0.11 0.21 0.51 0.81 0.65 Less distributions from: Net investment income $ 0.14 0.20 0.51 0.79 0.62 0.62 Total distributions $ 0.14 0.20 0.51 0.79 0.62 0.62 Net asset value, end of period $ 12.84 12.94 13.03 13.33 13.61 13.42 TOTAL RETURN(1) % 0.28 0.92 1.66 3.94 6.38 5.08 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 1,137 1,238 1,552 1,519 1,196 1,158 Ratios to average net assets: Expenses(2) % 0.35 0.35 0.34 0.34 0.34 0.34 Net investment income(2) % 0.83 0.91 1.63 4.07 6.20 5.04
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and does not reflect the effect of insurance contract charges. (2) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 38 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) NOTE 1 -- ORGANIZATION Organization. The ING Variable Product Portfolios are comprised of ING Variable Portfolios, Inc., ING VP Balanced Portfolio, Inc., ING Variable Funds, ING VP Bond Portfolio and ING VP Money Market Portfolio, all of which are open-end investment management companies registered under the Investment Company Act of 1940, as amended. ING Variable Portfolios, Inc. is a company incorporated under the laws of Maryland on June 4, 1996 and has eight separate portfolios. The five portfolios that are in this report are: ING VP Global Science and Technology ("Global Science and Technology", formerly, ING VP Technology Portfolio), ING VP International Equity Portfolio ("International"), ING VP Growth Portfolio ("Growth"), ING VP Small Company Portfolio ("Small Company"), and ING VP Value Opportunity Portfolio ("Value Opportunity"). ING VP Balanced Portfolio, Inc. ("Balanced") is a company incorporated under the laws of Maryland on December 14, 1988. ING Variable Funds is a business trust formed under the laws of Massachusetts on January 25, 1984 with one portfolio, ING VP Growth and Income Portfolio ("Growth and Income"). ING VP Bond Portfolio is a business trust formed under the laws of Massachusetts on January 25, 1984 with one portfolio, ING VP Bond Portfolio ("Bond"). ING VP Money Market Portfolio is a business trust under the laws of Massachusetts on January 25, 1984 with one portfolio, ING VP Money Market Portfolio ("Money Market"). Each Portfolio offers Class I shares (formerly, Class R). Global Science and Technology International, Growth, Small Company, Value Opportunity, Balanced, Growth and Income and Bond also offer Class S shares. The two classes differ principally in applicable distribution and service fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Portfolios and earn income and realized gains/losses from the Portfolio pro rata based on the average daily net assets of each class, without discrimination between share classes. No class has preferential dividend rights. Differences in per share dividend rates generally result from the relative weighting of pro rata income and realized gain allocations and from differences in separate class expenses, including distribution, and shareholder servicing fees. ING Investments, LLC ("ING Investments"), an Arizona limited liability company, serves as the investment adviser to the Portfolios. ING Investments has engaged ING Investment Management Co. (formerly, Aeltus Investment Management, Inc., "ING IM"), a Connecticut corporation, to serve as the Sub-Adviser to each Portfolio, with the exception of the Global Science and Technology Portfolio. ING Funds Distributor, LLC is the principal underwriter of the Portfolios. ING Funds Distributor, LLC, ING Investments and ING IM are indirect wholly-owned subsidiaries of ING Groep N.V. ING Groep N.V. is a global financial institution active in the field of insurance, banking and asset management. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Portfolios in the preparation of their financial statements. Such policies are in conformity with accounting principles generally accepted in the United States of America for investment companies. A. SECURITY VALUATION. Investments in equity securities traded on a national securities exchange are valued at the last reported sale price. Securities reported by NASDAQ will be valued at the NASDAQ official closing prices. Securities traded on an exchange or NASDAQ for which there has been no sale and securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at that time. Debt securities are valued at prices obtained from independent services or from one or more dealers making markets in the securities and may be adjusted based on the Portfolios' valuation procedures. U.S. Government obligations are valued by using market quotations or independent pricing services that use prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Securities and assets for which market quotations are not readily available (which may include certain restricted securities which are subject to limitations as to their sale) are valued at their fair values as determined in good faith by or under the supervision of the Portfolios' Board of Directors ("Board"), in accordance with methods that are specifically authorized by the Board. 39 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Securities traded on exchanges, including foreign exchanges, which close earlier than the time that a Portfolio calculates its net asset value may also be valued at their fair values as determined in good faith by or under the supervision of a Portfolio's Board, in accordance with methods that are specifically authorized by the Board. If a significant event which is likely to impact the value of one or more foreign securities held by a Portfolio occurs after the time at which the foreign market for such security(ies) closes but before the time that the Portfolio's net asset value is calculated on any business day, such event may be taken into account in determining the fair value of such security(ies) at the time the Portfolio calculates its net asset value. For these purposes, significant events after the close of trading on a foreign market may include, among others, securities trading in the U.S. and other markets, corporate announcements, natural and other disasters, and political and other events. Among other elements of analysis, the Board has authorized the use of one or more research services to assist with the determination of the fair value of foreign securities in light of significant events. Research services use statistical analyses and quantitative models to help determine fair value as of the time a Portfolio calculates its net asset value. Unlike the closing price of a security on an exchange, fair value determinations employ elements of judgment, and the fair value assigned to a security may not represent the actual value that a Portfolio could obtain if it were to sell the security at the time of the close of the NYSE. Investments in securities maturing in less than 60 days at the date of valuation are valued at amortized cost, which, when combined with accrued interest, approximates market value. B. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Securities transactions are accounted for on the trade date. Realized gains and losses are reported on the basis of identified cost of securities sold. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the Portfolios. Premium amortization and discount accretion are determined by the effective yield method. C. FOREIGN CURRENCY TRANSLATION. The books and records of the portfolios are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Portfolios do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities, which are subject to foreign withholding tax upon disposition, liabilities are recorded on the Statements of Assets and Liabilities for the estimated tax withholding based on the securities' current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Portfolio's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. Government securities. These risks include, but are not limited to, revaluation of currencies and future adverse political and economic developments, which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and U.S. Government securities. D. FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS. Certain Portfolios may enter into 40 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) foreign currency exchange transactions to convert to and from different foreign currencies and to and from the U.S. dollar in connection with the planned purchases or sales of securities. The Portfolios either enter into these transactions on a spot basis at the spot rate prevailing in the foreign currency exchange market or use forward foreign currency contracts to purchase or sell foreign currencies. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation. Risks may arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Each Portfolio may enter into futures contracts involving foreign currency, interest rates, securities and securities indices. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Portfolio is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Portfolio agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margins and are recorded as unrealized gains or losses by the Portfolio. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. E. DISTRIBUTIONS TO SHAREHOLDERS. The Portfolios record distributions to their shareholders on the ex-dividend date. Global Science and Technology, International, Growth, Small Company, Value Opportunity, Balanced and Money Market Portfolios declare and pay dividends annually. Bond and Growth and Income Portfolios declare and pay dividends semi-annually. The Portfolios may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code. The characteristics of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. F. FEDERAL INCOME TAXES. It is the policy of the Portfolios to comply with subchapter M of the Internal Revenue Code and related excise tax provisions applicable to requlated investment companies and to distribute substantially all of their net investment income and any net realized capital gains to their shareholders. Therefore, no federal income tax provision is required. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired. G. USE OF ESTIMATES. Management of the Portfolios has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America for investment companies. Actual results could differ from these estimates. H. REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase it at a mutually agreed upon time and price. The resale price is in excess of the purchase price and reflects an agreed upon interest rate for the period of time the agreement is outstanding. The period of the repurchase agreements is usually short, from overnight to one week, while the underlying securities generally have longer maturities. Each Portfolio will receive as collateral securities acceptable to it whose market value is equal to at least 100% of the carrying amount of the repurchase agreements, plus accrued interest, being invested by the Portfolio. The underlying collateral is valued daily on a mark-to-market basis to assure that the value, including accrued interest is at least equal to the repurchase price. If the seller defaults, a Portfolio might incur a loss or delay in the realization of proceeds if the value of the security collateralizing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. I. SECURITIES LENDING. Each Portfolio has the option to temporarily loan up to 30% of its total assets to brokers, dealers or other financial institutions in exchange for a negotiated lender's fee. The borrower is required to fully collateralize the loans with cash or U.S. Government securities. Generally, in the event of counterparty default, the Portfolio has the right to use collateral to offset losses incurred. There would be potential loss to the Portfolio in the event the Portfolio is delayed or prevented from exercising its right to dispose of the collateral. The Portfolio bears the 41 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) risk of loss with respect to the investment of collateral. Engaging in securities lending could have a leveraging effect, which may intensify the credit, market and other risks associated with investing in a Portfolio. J. ILLIQUID AND RESTRICTED SECURITIES. The Portfolios may not invest more than 15% (10% for Money Market) of their net assets in illiquid securities. Illiquid securities are not readily marketable. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the Portfolios to sell them promptly at an acceptable price. The Portfolios may also invest in restricted securities, which include those sold under Rule 144A of the Securities Act of 1933 (1933 Act) or securities offered pursuant to Section 4(2) of the 1933 Act, and/or are subject to legal or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. Certain restricted securities may be considered liquid pursuant to guidelines approved by the Board or may be deemed to be illiquid because they may not be readily marketable. Illiquid and restricted securities are valued using market quotations when readily available. In the absence of market quotations, the securities are valued based upon their fair value determined under procedures approved by the Board. K. DELAYED DELIVERY TRANSACTIONS. Balanced, Growth and Income, and Bond Portfolios may purchase or sell securities on a when-issued or forward commitment basis. The price of the underlying securities and date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The market value of such is identified in the Portfolios' Portfolio of Investments. Losses may arise due to changes in the market value of the securities or from the inability of counterparties to meet the terms of the contract. In connection with such purchases, the Portfolios are required to hold liquid assets as collateral with the Portfolios' custodian sufficient to cover the purchase price. L. MORTGAGE DOLLAR ROLL TRANSACTIONS. In connection with a portfolio's ability to purchase or sell securities on a when-issued basis, Balanced, Growth and Income, and Bond Portfolios may engage in dollar roll transactions with respect to mortgage-backed securities issued by Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corp. In a dollar roll transaction, a Portfolio sells a mortgage-backed security to a financial institution, such as a bank or broker/dealer, and simultaneously agrees to repurchase a substantially similar (i.e., same type, coupon, and maturity) security from the institution on a delayed delivery basis at an agreed upon price. The mortgage-backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. The Portfolios account for dollar roll transactions as purchases and sales. M. OPTIONS CONTRACTS. Balanced, Growth and Income, and Bond may purchase put and call options and may write (sell) put options and covered call options. The Portfolios may engage in option transactions as a hedge against adverse movements in the value of portfolio holdings or to increase market exposure. Option contracts are valued daily and unrealized gains or losses are recorded based upon the last sales price on the principal exchange on which the options are traded. The Portfolios will realize a gain or loss upon the expiration or closing of the option contract. When an option is exercised, the proceeds on sales of the underlying security for a written call option, the purchase cost of the security for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Realized and unrealized gains or losses on option contracts are reflected in the accompanying financial statements. The risk in writing a call option is that the Portfolios give up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Portfolios may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolios pay a premium whether or not the option is exercised. Risks may also arise from an illiquid secondary market or from the inability of counterparties to meet the terms of the contract. N. SWAP CONTRACTS. The Balanced and Bond Portfolios may enter into interest rate swaps, currency swaps and other types of swap agreements, including swaps on securities and indices. A swap is an agreement between two parties pursuant to which each party agrees to make one or more payments to the other on regularly scheduled dates over a stated term, based on different interest rates, currency exchange rates, security prices, the prices or rates of other types of financial instruments or assets or the levels of specified indices. During the term of the swap, changes in the value of the swap are recognized by marking-to-market the value of the 42 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) swap. For each swap contract, a capital gain or loss is recognized on each contract's respective payment date. NOTE 3 -- INVESTMENT TRANSACTIONS For the six months ended June 30, 2004, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows:
PURCHASES SALES --------------- --------------- Global Science and Technology $ 94,774,123 $ 99,122,962 International 39,243,494 35,136,137 Growth 125,794,753 142,477,939 Small Company 241,514,523 264,700,417 Value Opportunity 19,446,355 33,904,940 Balanced 883,456,289 909,481,517 Growth and Income 2,847,464,862 3,111,069,065 Bond 543,036,966 552,981,053
U.S. Government securities not included above were as follows:
PURCHASES SALES --------------- --------------- Balanced $ 1,044,433,062 $ 1,030,893,588 Bond 2,360,041,814 2,316,922,598
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES The Portfolios entered into Investment Management Agreements with ING Investments (the "Investment Manager"). The Investment Management Agreements compensate the Investment Manager with a fee, computed daily and payable monthly, based on the average daily net assets of each Portfolio, at the following annual rates: Global Science and Technology 0.95% International 0.85% Growth 0.60% Small Company 0.75% Value Opportunity 0.60% Balanced 0.50% Growth and Income 0.50% on first $10 billion; 0.45% on next $5 billion; and 0.425% over $15 billion Bond 0.40% Money Market 0.25%
The Investment Manager entered into Sub-Advisory Agreements with ING IM. ING IM acts as Sub-Adviser to all Portfolios except for the Global Science and Technology Portfolio. Subject to such policies as the Board or the Investment Manager may determine, ING IM manages the Portfolios' assets in accordance with the Portfolios' investment objectives, policies, and limitations. BlackRock Advisors, Inc., ("BlackRock"), a Delaware Corporation, serves as Sub-Adviser to the Global Science and Technology Portfolio pursuant to a Sub-Advisory Agreement effective April 1, 2004 between the Investment Manager and BlackRock through December 31, 2005. From January 1, 2004 to March 31, 2004, the Global Science and Technology Portfolio was sub-advised by BlackRock under an interim Sub-Advisory Agreement. Pursuant to Administration Agreements, ING Funds Services, LLC ("IFS") acts as administrator and provides certain administrative and shareholder services necessary for Portfolio operations and is responsible for the supervision of other service providers. IFS is entitled to receive from each Portfolio a fee at an annual rate of 0.055% on the first $5 billion of daily net assets and 0.03% thereafter. NOTE 5 -- DISTRIBUTION AND SERVICE FEES Class S shares of the Portfolios have adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, LLC (the "Distributor") is reimbursed or compensated by the Portfolios for expenses incurred in the distribution of each Portfolio's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to a payment each month to reimburse or compensate expenses incurred in the distribution and promotion of each Portfolio's shares, including expenses incurred in printing prospectuses and reports used for sales purposes, expenses incurred in preparing and printing sales literature and other such distribution related expenses, including any distribution or shareholder servicing fees ("Service Fees") paid to securities dealers who have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, Class S shares of the Portfolios pay the Distributor a fee calculated at an annual rate of 0.25% of average daily net assets. NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATED AND RELATED PARTIES At June 30, 2004, the Portfolios had the following amounts recorded in payable to affiliates on the accompanying Statements of Assets and Liabilities (see Notes 4 and 5):
ACCRUED ACCRUED INVESTMENT ACCRUED SHAREHOLDER MANAGEMENT ADMINISTRATIVE SERVICES AND FEES FEES DISTRIBUTION FEES TOTAL ----------- -------------- ----------------- ----------- Global Science and Technology $ 67,279 $ 3,894 $ -- $ 71,173 International 31,249 2,022 2,273 35,544 Growth 104,854 9,609 64 114,527 Small Company 294,392 21,583 1,457 317,432 Value Opportunity 118,088 10,821 606 129,515 Balanced 573,487 63,075 424 636,986 Growth and Income 1,494,464 164,364 382 1,659,210 Bond 406,425 55,864 31,441 493,730 Money Market 233,794 51,417 -- 285,211
43 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) The Portfolios have adopted a Deferred Compensation Plan (the "Plan"), which allows eligible non-affiliated directors as described in the Plan to defer the receipt of all or a portion of the directors' fees payable. Deferred fees are invested in various funds advised by ING Investments, LLC until distribution in accordance with the Plan. NOTE 7 -- EXPENSE LIMITATIONS ING Investments entered into written Expense Limitation Agreements with each of the following Portfolios whereby the Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the levels listed below:
CLASS I CLASS S ------- ------- Global Science and Technology 1.15% 1.40% International 1.15% 1.40% Growth 0.80% 1.05% Small Company 0.95% 1.20% Value Opportunity 0.80% 1.05%
The Investment Manager may at a later date recoup from a Portfolio management fees waived and other expenses assured by the Investment Manager during the previous 36 months, but only if, after such recoupment, the Portfolio's expense ratio does not exceed the percentage described above. Waived and reimbursed fees net of any recoupment by the Investment Manager of such waived and reimbursed fees are reflected on the accompanying Statements of Operations. Amounts payable by the Investment Manager are reflected on the accompanying Statements of Assets and Liabilities for each Portfolio. As of June 30, 2004, the amounts of reimbursed fees that are subject to possible recoupment by the Investment Manager, and the related expiration dates are as follows:
JUNE 30, --------------------------- 2005 2006 2007 TOTAL ------- --------- -------- ---------- International $ 7,643 $ 127,644 $ 56,488 $ 191,775
The Expense Limitation Agreements are contractual and shall renew automatically for one-year terms unless ING Investments provides written notice of the termination of an Expense Limitation Agreement within 90 days of the end of the then current term. NOTE 8 -- LINE OF CREDIT The Portfolios, in addition to certain other funds managed by the Investment Manager, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement ") with a syndicate of banks led by Citibank, N.A. for an aggregate amount of $150,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the funds; and (3) enable the funds to meet other emergency expenses as defined in the Credit Agreement. The funds to which the line of credit is available pay a commitment fee equal to 0.09% per annum on the daily unused portion of the committed line amount. Each of the Portfolios will pay its pro rata share of both the agent and commitment fee. Generally, borrowings under the Credit Agreement accrue interest at the Federal Funds Rate plus a specified margin. Repayments generally must be made within 30 days after the date of a revolving credit advance. The Value Opportunity Portfolio utilized the line of credit for five days during the six months ended June 30, 2004, with an approximate average daily balance of $5,808,000 and an approximate weighted average interest rate of 1.50%. NOTE 9 -- CAPITAL SHARES TRANSACTIONS Transactions in capital shares and dollars were as follows:
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004(1) 2003 ------------- ------------- ------------- ------------- GLOBAL SCIENCE AND TECHNOLOGY (NUMBER OF SHARES) Shares sold 3,570,055 22,057,248 -- -- Shares redeemed (4,795,050) (13,940,003) -- (2,551) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,224,995) 8,117,245 -- (2,551) ============= ============= ============= ============= GLOBAL SCIENCE AND TECHNOLOGY ($) Shares sold $ 14,159,690 $ 71,880,902 $ -- $ -- Shares redeemed (18,025,988) (43,644,308) -- (9,376) ------------- ------------- ------------- ------------- Net increase (decrease) $ (3,866,298) $ 28,236,594 $ -- $ (9,376) ============= ============= ============= =============
44 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 9 -- CAPITAL SHARES TRANSACTIONS (CONTINUED)
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- INTERNATIONAL (NUMBER OF SHARES) Shares sold 1,540,168 11,733,163 44,348 27,260 Dividends reinvested -- 58,321 -- 81 Shares redeemed (1,105,169) (11,428,928) (45,811) (2,549) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 434,999 362,556 (1,463) 24,792 ============= ============= ============= ============= INTERNATIONAL ($) Shares sold $ 11,904,823 $ 71,979,031 $ 339,924 $ 181,817 Dividends reinvested -- 358,677 -- 496 Shares redeemed (8,498,808) (70,356,174) (354,527) (16,399) ------------- ------------- ------------- ------------- Net increase (decrease) $ 3,406,015 $ 1,981,534 $ (14,603) $ 165,914 ============= ============= ============= =============
- ---------- (1) There was no capital share activity for Class S during the six months ended June 30, 2004.
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- GROWTH (NUMBER OF SHARES) Shares sold 383,518 2,152,470 4,800 32,996 Shares redeemed (1,756,286) (3,481,590) (1,249) (7,885) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,372,768) (1,329,120) 3,551 25,111 ============= ============= ============= ============= GROWTH ($) Shares sold $ 3,491,145 $ 12,336,815 $ 44,067 $ 253,457 Shares redeemed (15,827,526) (22,951,012) (11,286) (58,277) ------------- ------------- ------------- ------------- Net increase (decrease) $ (12,336,381) $ (10,614,197) $ 32,781 $ 195,180 ============= ============= ============= =============
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- SMALL COMPANY (NUMBER OF SHARES) Shares sold 1,872,544 10,395,221 624,125 40,070 Dividends reinvested -- 63,065 -- 48 Shares redeemed (1,680,285) (6,562,287) (7,194) (6,503) ------------- ------------- ------------- ------------- Net increase in shares outstanding 192,259 3,895,999 616,931 33,615 ============= ============= ============= ============= SMALL COMPANY ($) Shares sold $ 34,017,246 $ 155,510,623 $ 10,872,368 $ 616,993 Dividends reinvested -- 922,009 -- 698 Shares redeemed (29,799,135) (94,475,400) (125,504) (103,573) ------------- ------------- ------------- ------------- Net increase $ 4,218,111 $ 61,957,232 $ 10,746,864 $ 514,118 ============= ============= ============= =============
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- VALUE OPPORTUNITY (NUMBER OF SHARES) Shares sold 655,441 2,108,112 71,320 92,628 Dividends reinvested -- 164,266 -- 901 Shares redeemed (2,785,901) (2,598,835) (17,795) (16,336) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (2,130,460) (326,457) 53,525 77,193 ============= ============= ============= ============= VALUE OPPORTUNITY ($) Shares sold $ 8,071,730 $ 20,200,109 $ 871,010 $ 998,638 Dividends reinvested -- 1,764,212 -- 9,646 Shares redeemed (34,066,102) (25,416,002) (217,506) (171,629) ------------- ------------- ------------- ------------- Net increase (decrease) $ (25,994,372) $ (3,451,681) $ 653,504 $ 836,655 ============= ============= ============= =============
45 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 9 -- CAPITAL SHARES TRANSACTIONS (CONTINUED)
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS PERIOD ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003(1) ------------- ------------- ------------- ------------- BALANCED (NUMBER OF SHARES) Shares sold 4,352,581 3,154,493 88,844 101,813 Dividends reinvested -- 2,206,304 -- 25 Shares redeemed (4,257,695) (9,380,661) (8,117) (3,480) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 94,886 (4,019,864) 80,727 98,358 ============= ============= ============= ============= BALANCED ($) Shares sold $ 55,302,673 $ 37,356,123 $ 1,123,442 $ 1,194,460 Dividends reinvested -- 25,549,004 -- 288 Shares redeemed (54,028,576) (106,290,993) (102,254) (42,017) ------------- ------------- ------------- ------------- Net increase (decrease) $ 1,274,097 $ (43,385,866) $ 1,021,188 $ 1,152,731 ============= ============= ============= =============
- ---------- (1) Class S commenced operations on May 29, 2003.
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS PERIOD ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003(1) ------------- ------------- ------------- ------------- GROWTH AND INCOME (NUMBER OF SHARES) Shares sold 3,162,847 801,513 18,317 98,693 Dividends reinvested 1,799,374 -- 845 -- Shares redeemed (16,436,250) (36,272,651) (8,107) (4,334) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (11,474,029) (35,471,138) 11,055 94,359 ============= ============= ============= ============= GROWTH AND INCOME ($) Shares sold $ 59,284,079 $ 12,502,845 $ 342,398 $ 1,605,943 Dividends reinvested 33,162,467 -- 15,555 -- Shares redeemed (305,733,636) (559,904,868) (151,276) (70,873) ------------- ------------- ------------- ------------- Net increase (decrease) $(213,287,090) $(547,402,023) $ 206,677 $ 1,535,070 ============= ============= ============= =============
CLASS I SHARES CLASS S SHARES ------------------------------ ----------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- BOND (NUMBER OF SHARES) Shares sold 5,954,528 8,501,280 7,472,462 6,385,067 Dividends reinvested 5,675,974 1,474,950 595,394 93,017 Shares redeemed (9,220,246) (19,495,518) (629,585) (5,092,213) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 2,410,256 (9,519,288) 7,438,271 1,385,871 ============= ============= ============= ============= BOND ($) Shares sold $ 84,932,947 $ 103,976,909 $ 102,953,962 $ 80,800,150 Dividends reinvested 76,739,144 20,649,302 8,031,865 1,301,393 Shares redeemed (128,540,269) (256,344,288) (8,538,242) (62,882,702) ------------- ------------- ------------- ------------- Net increase (decrease) $ 33,131,822 $(131,718,077) $ 102,447,585 $ 19,218,841 ============= ============= ============= =============
CLASS I SHARES ---------------------------------- SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 -------------- ---------------- MONEY MARKET (NUMBER OF SHARES) Shares sold 13,370,319 168,980,560 Dividends reinvested 1,009,615 1,928,116 Shares redeemed (21,511,895) (194,376,129) -------------- ---------------- Net decrease in shares outstanding (7,131,961) (23,467,453) ============== ================ MONEY MARKET ($) Shares sold $ 172,059,361 $ 1,899,695,014 Dividends reinvested 12,932,164 24,741,578 Shares redeemed (276,488,945) $ (2,226,653,637) -------------- ---------------- Net decrease $ (91,497,420) $ (302,217,045) ============== ================
- ---------- (1) Class S commenced operations on June 11, 2003. 46 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 10 -- ILLIQUID SECURITIES Pursuant to guidelines adopted by the Portfolios' Board, the following securities have been deemed to be illiquid. Each Portfolio currently limits investment in illiquid securities to 15% (10% for Money Market) of the Portfolios' net assets, at market value, at time of purchase.
INITIAL PERCENT PRINCIPAL ACQUISITION OF NET PORTFOLIO SECURITY AMOUNT DATE COST VALUE ASSETS - ---------- --------------------------------------------------- ------------ ----------- ------------ ------------ ------- Money Market Money Market Trust, LLY, 1.175%, due 06/03/05 $ 13,500,000 05/15/03 $ 13,500,000 $ 13,499,960 1.2% Newcastle CDO I Ltd., 1.321% due 09/24/38 13,900,000 10/23/03 13,900,000 13,900,000 1.2% Putnam Structured Product CDO, 1.259%, due 10/15/38 13,700,000 09/23/03 13,700,000 13,700,000 1.2% ------------ ------------ --- $ 41,100,000 $ 41,099,960 3.6% ============ ============ ===
NOTE 11 -- SECURITIES LENDING Under an agreement with The Bank of New York ("BNY"), the Portfolios can lend their securities to approved brokers, dealers and other financial institutions. Loans are collateralized by cash and U.S. Government securities. The collateral must be in an amount equal to at least 105% of the market value of non-U.S. securities loaned and 102% of the market value of U.S. securities loaned. The cash collateral received is invested in approved investments as defined in the Securities Lending Agreement with BNY (the "Agreement"). The securities purchased with cash collateral received are reflected in the Portfolio of Investments. Generally, in the event of counterparty default, the Portfolios have the right to use the collateral to offset losses incurred. The Agreement contains certain guarantees by BNY in the event of counterparty default and/or a borrower's failure to return a loaned security, however there would be a potential loss to the Portfolios in the event the Portfolios are delayed or prevented from exercising their right to dispose of the collateral. The Portfolios bear the risk of loss with respect to the investment of collateral. Engaging in securities lending could have a leveraging effect, which may intensify the credit, market and other risks associated with investing in a Portfolio. At June 30, 2004, the Portfolios had securities on loan with the following market values:
VALUE OF VALUE OF SECURITIES PURCHASED VALUE OF TOTAL VALUE SECURITIES LOANED WITH CASH COLLATERAL NON-CASH COLLATERAL* OF COLLATERAL ----------------- -------------------- -------------------- ------------- Global Science and Technology $ 11,372,281 $ 12,041,461 $ -- $ 12,041,461 Growth 39,180,149 39,914,157 -- 39,914,157 Small Company 126,746,371 129,809,897 -- 129,809,897 Value Opportunity 10,289,939 10,534,791 -- 10,534,791 Balanced 325,683,288 326,812,169 6,388,103 333,200,272 Growth and Income 659,243,749 643,061,669 38,706,834 681,768,503 Bond 242,006,106 246,144,339 -- 246,144,339 Money Market 30,296,992 23,715,619 7,388,059 31,103,678
- ---------- * Various U.S. Treasury obligations, 2.000%-8.750%, 01/15/14-11/15/27. NOTE 12 -- FEDERAL INCOME TAXES The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. These book/tax differences may be either temporary or permanent. Permanent differences are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences are not reclassified. Key differences include the treatment of short-term capital gains, foreign currency transactions, and wash sale deferrals. Distributions in excess of net investment income and/or net realized capital gains for tax purposes are reported as distributions of paid-in capital. The tax composition of dividends and distributions to shareholders was as follows:
SIX MONTHS ENDED LONG-TERM YEAR ENDED JUNE 30, 2004: ORDINARY INCOME CAPITAL GAINS DECEMBER 31, 2003: ORDINARY INCOME --------------- ------------- --------------- Growth and Income $ 33,196,320 $ -- International $ 359,173 Bond 53,530,302 31,286,157 Small Company 922,707 Money Market 12,932,164 -- Value Opportunity 1,773,858 Balanced 25,549,292 Growth and Income -- Bond 21,962,645 Money Market 24,741,578
Dividends paid by the Porfolios from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. 47 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 12 -- FEDERAL INCOME TAXES (CONTINUED) The tax-basis components of distributable earnings and the expiration dates of the capital loss carryforwards which may be used to offset future realized capital gains for federal income tax purposes at December 31, 2003 were as follows:
UNDISTRIBUTED UNREALIZED POST OCTOBER CAPITAL UNDISTRIBUTED LONG-TERM APPRECIATION/ CURRENCY LOSSES LOSS EXPIRATION ORDINARY INCOME CAPITAL GAINS (DEPRECIATION) DEFERRED CARRYFORWARDS DATES --------------- ------------- -------------- --------------- ---------------- ---------- Global Science and Technology $ -- $ -- $ 16,945,141 $ -- $ (5,550,749) 2008 (36,046,186) 2009 (15,534,432) 2010 (4,912,495) 2011 ---------------- (62,043,862) ================ International 545,405 -- 6,033,217 -- (21,861,016) 2009 (9,221,611) 2010 ---------------- (31,082,627) ================ Growth 265,408 -- 23,195,510 -- $ (150,586,967) 2009 (63,207,672) 2010 ---------------- (213,794,639) ================ Small Company 1,348,855 -- 80,538,898 -- $ (45,095,976) 2010 ================ Value Opportunity 2,068,557 -- 4,530,305 -- $ (40,071,141) 2010 ================ Balanced 28,837,555 -- 88,019,444 -- $ (179,731,625) 2010 ================ Growth and Income 33,190,956 -- 557,309,702 -- $ (602,830,008) 2009 (2,401,044,421) 2010 (63,082,574) 2011 ---------------- $ (3,066,957,003) ================ Bond 83,876,309 932,079 20,650,719 (91,082) -- 2012 Money Market 12,927,121 -- 241,654 -- $ (751,862) 2008 (3,715,968) 2009 (169) 2011 ---------------- $ (4,467,999) ================
NOTE 13 -- OTHER INFORMATION As with many financial services companies, ING Investments and affiliates of ING Investments (collectively, "ING") have received requests for information from various governmental and self-regulatory agencies in connection with investigations related to trading in investment company shares. In each case, full cooperation and responses are being provided. In addition to responding to regulatory requests, ING management initiated an internal review of trading in ING insurance, retirement, and mutual fund products. The goal of this review has been to identify whether there have been any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel. Additionally, ING reviewed its controls and procedures in a continuing effort to deter improper frequent trading in ING products. ING's internal reviews related to mutual fund trading are continuing. The internal review has identified several arrangements allowing third parties to engage in frequent trading of mutual funds within our variable insurance and mutual fund products, and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. In addition, the review has identified five arrangements that allowed frequent trading in certain ING Funds. ING entities did not receive special benefits in return for any of these arrangements, which have all been terminated. The internal review also identified two investment professionals who engaged in improper frequent trading in ING Funds. ING will reimburse any ING Fund or its shareholders affected by inappropriate trading for any improper profits that accrued to any person who engaged in improper frequent trading for which ING is responsible. NOTE 14 -- SUBSEQUENT EVENTS On August 6, 2004, the ING VP Bond Portfolio changed its name to ING VP Intermediate Bond Portfolio. 48 ING VP GLOBAL SCIENCE AND PORTFOLIO OF INVESTMENTS TECHNOLOGY PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 97.5% BIOTECHNOLOGY: 6.5% 37,900 @ Arqule, Inc. $ 199,733 19,200 @ Corgentech, Inc. 309,504 32,000 @ Genentech, Inc. 1,798,400 12,700 @ Invitrogen Corp. 914,273 28,400 @,L Medimmune, Inc. 664,560 30,600 @ Nektar Therapeutics 610,776 32,200 @ Protein Design Labs, Inc. 615,986 257,500 @ ViroLogic, Inc. 630,875 ------------ 5,744,107 ------------ COMMERCIAL SERVICES: 1.2% 37,400 @,@@ Accenture Ltd. 1,027,752 ------------ 1,027,752 ------------ COMPUTERS: 3.8% 24,650 @ Dell, Inc. 882,963 79,500 @ EMC Corp. 906,300 39,400 Hewlett-Packard Co. 831,340 112,800 @,L Maxtor Corp. 747,864 ------------ 3,368,467 ------------ ELECTRICAL COMPONENTS AND EQUIPMENT: 1.1% 108,700 @,L General Cable Corp. 929,385 ------------ 929,385 ------------ ELECTRONICS: 1.1% 104,300 @,L Sanmina-SCI Corp. 949,130 ------------ 949,130 ------------ HEALTHCARE-PRODUCTS: 2.0% 103,900 @ Caliper Life Sciences, Inc. 483,135 8,000 @,@@ Given Imaging Ltd. 283,280 16,900 Guidant Corp. 944,372 ------------ 1,710,787 ------------ HEALTHCARE-SERVICES: 0.6% 18,100 @ Inveresk Research Group, Inc. 558,204 ------------ 558,204 ------------ INTERNET: 10.0% 105,610 @,L aQuantive, Inc. 1,043,427 92,300 @ Centillium Communications, Inc. 353,509 59,100 @,L Digitas, Inc. 651,873 16,000 @ eBay, Inc. 1,471,200 44,700 @ iVillage Inc 283,845 53,300 @ SonicWALL, Inc. 458,380 21,200 @ Symantec Corp. 928,136 109,800 @ TIBCO Software, Inc. 927,810 59,400 @,L Verisign, Inc. 1,182,060 40,700 @ Yahoo!, Inc. 1,478,631 ------------ 8,778,871 ------------ MEDIA: 2.4% 106,800 @ Mediacom Communications Corp. 835,176 140,000 @,L Sirius Satellite Radio, Inc. 431,200 114,400 @ UnitedGlobalCom, Inc. 830,544 ------------ 2,096,920 ------------ PHARMACEUTICALS: 9.5% 31,300 @,L Amylin Pharmaceuticals, Inc. 713,640 19,900 @ Andrx Corp. 555,807 39,300 @ Dendreon Corp. $ 481,425 14,000 @,L Eyetech Pharmaceuticals, Inc. 600,880 23,900 @,@@ Flamel Technologies ADR 588,657 10,600 @ Gilead Sciences, Inc. 710,200 14,700 @ Medco Health Solutions, Inc. 551,250 10,700 @ Neurocrine Biosciences, Inc. 554,795 67,100 @ NitroMed, Inc. 403,271 37,700 @ Noven Pharmaceuticals, Inc. 830,154 22,400 @ NPS Pharmaceuticals, Inc. 470,400 48,900 @ Nuvelo, Inc. 470,418 14,500 @ Onyx Pharmaceuticals, Inc. 614,220 16,100 @@,L Shire Pharmaceuticals PLC 430,514 31,900 @ Vicuron Pharmaceuticals, Inc. 400,664 ------------ 8,376,295 ------------ SEMICONDUCTORS: 30.1% 315,500 @,L Agere Systems, Inc. 725,650 57,600 @ Altera Corp. 1,279,872 26,950 @ Analog Devices, Inc. 1,268,806 68,900 @ Applied Materials, Inc. 1,351,818 16,800 @,L ATMI, Inc. 458,808 68,900 @ August Technology Corp. 864,006 396,200 @@ Bookham Technology PLC 380,352 48,100 @,L Brooks Automation, Inc. 969,215 46,900 @,L Emulex Corp. 671,139 50,900 @ Fairchild Semiconductor Intl., Inc. 833,233 77,850 Intel Corp. 2,148,660 30,100 @ International Rectifier Corp. 1,246,742 54,100 Intersil Corp. 1,171,806 27,900 @,L Kla-Tencor Corp. 1,377,702 35,250 @,L Lam Research Corp. 944,700 35,000 Linear Technology Corp. 1,381,450 67,500 @ LTX Corp. 729,675 20,100 Maxim Integrated Products 1,053,642 71,000 @,L MEMC Electronic Materials, Inc. 701,480 30,700 @ MKS Instruments, Inc. 700,574 110,000 @ ON Semiconductor Corp. 552,200 33,700 @,L PMC - Sierra, Inc. 483,595 19,000 @,L Qlogic Corp. 505,210 105,000 @ Skyworks Solutions, Inc. 916,650 107,478 @@,L Taiwan Semiconductor Manufacturing Co. Ltd. 893,142 51,050 Texas Instruments, Inc. 1,234,389 18,300 @,L Varian Semiconductor Equipment Associates, Inc. 705,648 26,800 @ Xilinx, Inc. 892,708 ------------ 26,442,872 ------------ SOFTWARE: 18.6% 19,600 Adobe Systems, Inc. 911,400 52,300 @,L Citrix Systems, Inc. 1,064,828 49,500 Computer Associates Intl., Inc. 1,388,970 140,400 @ Compuware Corp. 926,640 58,800 @ Digi Intl., Inc. 630,336 19,200 @ Electronic Arts, Inc. 1,047,360 16,650 @,L Intuit, Inc. 642,357 117,800 @ Lawson Software, Inc. 834,024 58,000 Microsoft Corp. 1,656,480 219,600 @ OpenTV Corp. 456,768 112,700 @ Oracle Corp. 1,344,511 75,900 @ Packeteer, Inc. 1,225,785 49,400 @ Peoplesoft, Inc. 913,900 33,800 @@ SAP AG 1,413,178 29,200 @ Seachange Intl., Inc. 492,896
See Accompanying Notes to Financial Statements 49 ING VP GLOBAL SCIENCE AND PORTFOLIO OF INVESTMENTS TECHNOLOGY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- SOFTWARE (CONTINUED) 60,900 @ Siebel Systems, Inc. $ 650,412 25,500 @ Veritas Software Corp. 706,350 ------------ 16,306,195 ------------ TELECOMMUNICATIONS: 10.6% 317,500 @ ADC Telecommunications, Inc. 901,700 58,900 @ Alamosa Holdings, Inc. 432,915 50,600 @ Avaya, Inc. 798,974 118,300 @ Cisco Systems, Inc. 2,803,710 36,400 @,L Juniper Networks, Inc. 894,348 5,300 @@ Mobile Telesystems 646,600 21,800 @ Safenet, Inc. 603,424 65,000 @,L Tekelec 1,181,050 33,678 @@ Telekomunikasi Indonesia Tbk PT 523,693 17,400 @@ Turkcell Iletisim Hizmet AS 534,180 ------------ 9,320,594 ------------ Total Common Stock (Cost $86,317,267) 85,609,579 ------------ PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 13.7% SECURITIES LENDING COLLATERAL: 13.7% $ 12,041,461 The Bank of New York Institutional Cash Reserve Fund, 1.250% 12,041,461 ------------ Total Short-Term Investments (Cost $12,041,461) 12,041,461 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $98,358,728)* 111.2% $ 97,651,040 OTHER ASSETS AND LIABILITIES-NET (11.2) (9,824,412) ----- ------------ NET ASSETS 100.0% $ 87,826,628 ===== ============
@ Non-income producing security @@ Foreign issuer ADR American Depositary Receipt L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $99,038,330. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 7,467,498 Gross Unrealized Depreciation (8,854,788) ------------ Net Unrealized Depreciation $ (1,387,290) ============
See Accompanying Notes to Financial Statements 50 PORTFOLIO OF INVESTMENTS ING VP INTERNATIONAL EQUITY PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- AUSTRALIA: 2.4% 50,400 BHP Billiton Ltd. $ 439,913 63,700 Boral Ltd. 286,653 40,400 Seven Network Ltd. 144,935 14,100 St. George Bank Ltd. 216,282 ------------ 1,087,783 ------------ AUSTRIA: 0.5% 13,500 Telekom Austria AG 206,131 ------------ 206,131 ------------ BELGIUM: 1.9% 1,500 Electrabel 480,880 18,000 Fortis 398,574 ------------ 879,454 ------------ DENMARK: 0.7% 11,800 Group 4 Falck A/S 303,245 ------------ 303,245 ------------ FINLAND: 0.4% 12,200 Stora Enso OYJ 165,501 ------------ 165,501 ------------ FRANCE: 9.8% 7,000 Aventis SA 528,451 20,300 AXA 447,033 7,900 Bouygues 264,509 10,900 @ Cap Gemini SA 437,496 18,100 Credit Agricole SA 440,427 2,200 Groupe Danone 191,914 3,400 Lafarge SA 303,213 6,000 Peugeot SA 334,116 2,800 Pinault-Printemps-Redoute 287,689 4,800 Total SA 915,114 12,400 @ Vivendi Universal SA 343,971 ------------ 4,493,933 ------------ GERMANY: 9.2% 5,600 Altana AG 337,255 3,600 Deutsche Boerse AG 183,738 37,600 @ Deutsche Telekom AG 661,029 5,600 E.ON AG 403,343 4,900 Fresenius Medical Care AG 363,060 7,700 Metro AG 365,360 8,800 RWE AG 414,342 2,500 SAP AG 416,702 9,600 Siemens AG 690,862 20,900 Thyssenkrupp AG 357,263 ------------ 4,192,954 ------------ GREECE: 1.1% 9,600 Alpha Bank A.E. 244,108 11,200 Public Power Corp. 267,079 ------------ 511,187 ------------ HONG KONG: 1.4% 48,000 Cheung Kong Holdings Ltd. 353,855 744,000 CITIC Intl. Financial Holdings Ltd. 271,853 ------------ 625,708 ------------ ITALY: 2.1% 185,700 Telecom Italia S.p.A. 577,255 80,100 Unicredito Italiano S.p.A. 395,661 ------------ 972,916 ------------ JAPAN: 25.9% 4,650 Aiful Corp. $ 485,392 23,000 Bridgestone Corp. 432,113 40,000 Calsonic Kansei Corp. 285,204 56,000 Chiba Bank Ltd/The 342,831 17,800 Chubu Electric Power Co., Inc. 376,016 19,000 Dai Nippon Printing Co. Ltd. 303,506 48,000 Daiwa Securities Group, Inc. 344,884 76 East Japan Railway Co. 426,266 13,200 Eisai Co. Ltd. 379,856 47,000 Hitachi Ltd. 323,484 82,000 @ Itochu Corp. 368,235 19,800 JFE Holdings, Inc. 485,405 23,000 Makita Corp 344,847 54,000 Mitsui OSK Lines Ltd 284,067 136 Mizuho Financial Group, Inc. 616,963 106 Nippon Telegraph & Telephone Corp. 566,357 68,000 OJI Paper Co. Ltd. 436,237 22,000 Onward Kashiyama Co. Ltd. 352,839 13,000 Sanken Electric Co. Ltd. 169,656 17,600 Sankyo Co. Ltd. 381,469 8,500 Secom Co. Ltd. 360,675 29,000 Sharp Corp. 463,246 13,300 Sony Corp. 500,966 62,000 The Sumitomo Trust & Banking Co. Ltd. 441,498 109,000 Toshiba Corp. 438,537 8,000 Trend Micro, Inc. 354,855 6,800 Uni-Charm Corp. 339,018 34,000 UNY Co Ltd. 435,302 28,200 Yamaha Corp. 462,613 23,000 Yamaha Motor Co. Ltd. 358,127 ------------ 11,860,464 ------------ NETHERLANDS: 2.4% 23,600 Aegon NV 284,545 12,800 ASML Holding NV 216,622 5,400 DSM NV 264,964 14,100 TPG NV 322,166 ------------ 1,088,297 ------------ NORWAY: 1.3% 8,900 Norsk Hydro ASA 578,439 ------------ 578,439 ------------ PORTUGAL: 1.2% 51,200 Portugal Telecom SGPS SA 552,534 ------------ 552,534 ------------ SINGAPORE: 0.3% 19,000 DBS Group Holdings Ltd. 158,844 ------------ 158,844 ------------ SPAIN: 4.0% 38,000 Banco Bilbao Vizcaya Argentaria SA 507,635 4,600 Banco Popular Espanol 259,793 21,300 Endesa SA 410,488 29,200 Repsol YPF SA 639,471 ------------ 1,817,387 ------------ SWEDEN: 1.7% 14,500 Electrolux AB 278,145 172,200 @ Telefonaktiebolaget LM Ericsson 507,482 ------------ 785,627 ------------
See Accompanying Notes to Financial Statements 51 ING VP INTERNATIONAL PORTFOLIO OF INVESTMENTS EQUITY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- SWITZERLAND: 6.3% 34,190 @ ABB Ltd. $ 187,002 20,060 Clariant AG 293,116 8,360 Roche Holding AG 827,723 4,610 Swiss Reinsurance 299,444 11,490 UBS AG 809,639 2,792 @ Zurich Financial Services AG 440,848 ------------ 2,857,772 ------------ UNITED KINGDOM: 22.7% 15,700 AstraZeneca PLC 704,396 84,500 BAE Systems PLC 335,980 195,133 BP PLC 1,723,365 30,300 British American Tobacco PLC 469,540 108,100 Dixons Group PLC 323,955 22,600 Enterprise Inns PLC 235,664 24,500 @ GlaxoSmithKline PLC 1,015,770 75,600 HSBC Holdings PLC 1,124,225 266,900 Legal & General Group PLC 459,822 37,800 Prudential PLC 325,271 47,900 Reed Elsevier PLC 465,605 21,103 Royal Bank of Scotland Group PLC 607,732 163,600 Shell Transport & Trading Co. PLC 1,200,105 92,200 Team Partners Group 904,577 45,200 WPP Group PLC 459,033 ------------ 10,355,040 ------------ Total Common Stock (Cost $40,447,433) 43,493,216 ------------ PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 4.5% REPURCHASE AGREEMENT: 4.5% $2,054,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $2,054,086 to be received upon repurchase (Collateralized by $1,995,000 Federal National Mortgage Association, 5.500%, Market Value plus accrued interest $2,079,169 due 05/02/06) 2,054,000 ------------ Total Short-Term Investments (Cost $2,054,000) 2,054,000 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $42,501,433)* 99.8% $ 45,547,216 OTHER ASSETS AND LIABILITIES-NET 0.2 108,107 ----- ------------ NET ASSETS 100.0% $ 45,655,323 ===== ============
@ Non-income producing security ADR American Depositary Receipt S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. * Cost for federal income tax purposes is $43,011,324. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 3,038,493 Gross Unrealized Depreciation (502,601) ------------ Net Unrealized Appreciation $ 2,535,892 ============
Information concerning open futures contracts at May 31, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN/(LOSS) - -------------- --------- ------------ ---------- ----------- Topix Index 3 $ 327,315 Sep-04 $ 598 FTSE 100 Index 4 324,326 Sep-04 (2,181) Dow Jones Euro Stoxx 50 Index 17 582,641 Sep-04 (5,274) ------------ --------- $ 1,234,282 $ (6,857) ============ =========
PERCENTAGE OF INDUSTRY NET ASSETS - ----------------------------------------------------------------------- Advertising 1.0% Aerospace/Defense 0.7 Agriculture 1.0 Apparel 0.8 Auto Manufacturers 0.7 Auto Parts and Equipment 1.6 Banks 15.0 Building Materials 1.3 Chemicals 1.2 Commercial Services 1.3 Computers 1.0 Cosmetics/Personal Care 0.7 Distribution/Wholesale 0.8 Diversified Financial Services 2.2 Electric 5.2 Electrical Components and Equipment 2.7 Electronics 0.8 Engineering and Construction 1.0 Food 3.2 Forest Products and Paper 1.3 Hand/Machine Tools 0.8 Healthcare-Products 0.8 Home Furnishings 2.7 Insurance 5.0 Internet 0.8 Iron/Steel 1.9 Leisure Time 0.8 Media 2.1 Mining 1.0 Miscellaneous Manufacturing 1.5 Oil and Gas 11.1 Pharmaceuticals 9.0 Real Estate 0.8 Retail 2.8 Semiconductors 0.8 Software 0.9 Telecommunications 6.7 Transportation 2.3 Repurchase Agreement 4.5 Other Assets and Liabilities, Net 0.2 ----- NET ASSETS 100.0% =====
See Accompanying Notes to Financial Statements 52 PORTFOLIO OF INVESTMENTS ING VP GROWTH PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 96.5% AEROSPACE/DEFENSE: 0.8% 53,400 L Goodrich Corp. $ 1,726,422 ------------ 1,726,422 ------------ APPAREL: 1.3% 37,100 Nike, Inc. 2,810,325 ------------ 2,810,325 ------------ AUTO MANUFACTURERS: 1.0% 37,550 Paccar, Inc. 2,177,525 ------------ 2,177,525 ------------ BIOTECHNOLOGY: 2.4% 49,572 @ Amgen, Inc. 2,705,144 33,200 @ Invitrogen Corp. 2,390,068 ------------ 5,095,212 ------------ COMMERCIAL SERVICES: 1.5% 117,500 @,@@,L Accenture Ltd. 3,228,900 ------------ 3,228,900 ------------ COMPUTERS: 5.7% 101,700 @ Dell, Inc. 3,642,894 251,400 @ EMC Corp. 2,865,960 47,100 International Business Machines Corp. 4,151,865 58,400 @,L Storage Technology Corp. 1,693,600 ------------ 12,354,319 ------------ COSMETICS/PERSONAL CARE: 2.8% 62,000 Estee Lauder Cos., Inc. 3,024,360 54,000 Procter & Gamble Co. 2,939,760 ------------ 5,964,120 ------------ DIVERSIFIED FINANCIAL SERVICES: 4.0% 49,000 L Capital One Financial Corp. 3,350,620 28,500 Goldman Sachs Group, Inc. 2,683,560 47,100 Morgan Stanley 2,485,467 ------------ 8,519,647 ------------ ENTERTAINMENT: 0.5% 24,400 GTECH Holdings Corp. 1,129,964 ------------ 1,129,964 ------------ HEALTHCARE-PRODUCTS: 8.8% 38,900 @@,L Alcon, Inc. 3,059,485 105,500 @ Boston Scientific Corp. 4,515,400 147,500 Johnson & Johnson 8,215,750 27,500 @ St. Jude Medical, Inc. 2,080,375 13,209 @,L Varian Medical Systems, Inc. 1,048,134 ------------ 18,919,144 ------------ HEALTHCARE-SERVICES: 5.2% 30,500 Aetna, Inc. 2,592,500 106,257 @ DaVita Inc 3,275,903 57,300 @,L Pacificare Health Systems 2,215,218 73,700 @,L Wellchoice, Inc. 3,051,180 ------------ 11,134,801 ------------ HOME FURNISHINGS: 1.3% 29,700 Harman Intl. Industries, Inc. 2,702,700 ------------ 2,702,700 ------------ INTERNET: 1.1% 25,200 @,L eBay, Inc. $ 2,317,140 ------------ 2,317,140 ------------ MACHINERY-DIVERSIFIED: 1.3% 40,100 Deere & Co. 2,812,614 ------------ 2,812,614 ------------ MEDIA: 3.7% 193,181 @,L DIRECTV Group, Inc. 3,303,395 181,000 L Walt Disney Co. 4,613,690 ------------ 7,917,085 ------------ MINING: 1.2% 77,300 Alcoa, Inc. 2,553,219 ------------ 2,553,219 ------------ MISCELLANEOUS MANUFACTURING: 9.9% 65,414 3M Co. 5,887,914 52,594 L Danaher Corp. 2,726,999 29,300 Eaton Corp. 1,896,882 177,560 S General Electric Co. 5,752,944 151,200 @@ Tyco Intl. Ltd. 5,010,768 ------------ 21,275,507 ------------ OIL AND GAS: 1.5% 14,100 Amerada Hess Corp. 1,116,579 40,800 Pogo Producing Co. 2,015,520 ------------ 3,132,099 ------------ OIL AND GAS SERVICES: 1.9% 137,300 L Halliburton Co. 4,154,698 ------------ 4,154,698 ------------ PHARMACEUTICALS: 12.8% 106,800 @,L Andrx Corp. 2,982,924 161,300 @ Caremark Rx, Inc. 5,313,222 90,900 @,L Gilead Sciences, Inc. 6,090,300 352,480 Pfizer, Inc. 12,083,015 67,700 L Valeant Pharmaceuticals Intl. 1,354,000 ------------ 27,823,461 ------------ RETAIL: 6.8% 49,100 Federated Department Stores 2,410,810 129,900 Home Depot, Inc. 4,572,480 115,100 Limited Brands 2,152,370 59,700 McDonald's Corp. 1,552,200 74,300 Wal-Mart Stores, Inc. 3,920,068 ------------ 14,607,928 ------------ SEMICONDUCTORS: 6.7% 47,600 @,L Altera Corp. 1,057,672 328,800 Intel Corp. 9,074,880 44,300 L Maxim Integrated Products 2,322,206 55,700 @,L Xilinx, Inc. 1,855,367 ------------ 14,310,125 ------------ SOFTWARE: 5.7% 351,200 Microsoft Corp. 10,030,272 189,800 @ Oracle Corp. 2,264,314 ------------ 12,294,586 ------------
See Accompanying Notes to Financial Statements 53 PORTFOLIO OF INVESTMENTS ING VP GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- TELECOMMUNICATIONS: 8.6% 441,900 @ Cisco Systems, Inc. $ 10,473,030 150,400 @,L Crown Castle Intl. Corp. 2,218,400 116,800 @,L Nextel Communications, Inc. 3,113,888 37,600 Qualcomm, Inc. 2,744,048 ------------ 18,549,366 ------------ Total Common Stock (Cost $188,948,892) 207,510,907 ------------ PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 22.2% REPURCHASE AGREEMENT: 3.7% $ 8,012,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $8,012,325 to be received upon repurchase (Collateralized by Federal National Mortgage Association, 6.000%, Market Value plus accrued interest $8,153,101, due 12/15/05) 8,012,000 ------------ Total Repurchase Agreement (Cost $8,012,000) 8,012,000 ------------ SECURITIES LENDING COLLATERAL(cc): 18.5% 39,914,157 The Bank of New York Institutional Cash Reserve Fund, 1.250% 39,914,157 ------------ Total Securities Lending Collateral (Cost $39,914,157) 39,914,157 ------------ Total Short-Term Investments (Cost $47,926,157) 47,926,157 ------------ TOTAL INVESTMENTS IN SECURITIES (COST $236,875,049)* 118.7% $ 255,437,064 OTHER ASSETS AND LIABILITIES-NET (18.7) (40,296,144) ----- ------------ NET ASSETS 100.0% $ 215,140,920 ===== =============
@ Non-income producing security @@ Foreign issuer S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $242,658,991. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 15,982,266 Gross Unrealized Depreciation (3,204,193) ------------ Net Unrealized Appreciation $ 12,778,073 ============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN - -------------- --------- ------------ ---------- ---------- S&P 500 Index 21 $ 587,100 Sep-04 $ 25,423 ========== ========
See Accompanying Notes to Financial Statements 54 PORTFOLIO OF INVESTMENTS ING VP SMALL COMPANY PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 87.6% AEROSPACE/DEFENSE: 2.4% 80,600 Engineered Support Systems, Inc. $ 4,715,906 116,800 @,L Teledyne Technologies, Inc. 2,338,336 134,100 @,L United Defense Industries, Inc. 4,693,500 ------------ 11,747,742 ------------ AIRLINES: 0.9% 233,500 @,L Northwest Airlines Corp. 2,596,520 131,800 @,L Republic Airways Holdings, Inc. 1,878,150 ------------ 4,474,670 ------------ APPAREL: 1.7% 201,200 @ Quiksilver, Inc. 4,790,572 168,800 @,L Warnaco Group, Inc. 3,590,376 ------------ 8,380,948 ------------ BANKS: 3.5% 116,950 L Chittenden Corp. 4,110,793 167,900 L Greater Bay BanCorp. 4,852,310 167,900 Hudson United BanCorp. 6,259,311 33,627 IBERIABANK Corp. 1,990,046 ------------ 17,212,460 ------------ BIOTECHNOLOGY: 0.8% 201,700 @ Ariad Pharmaceuticals, Inc. 1,510,733 107,500 @,L Telik, Inc. 2,566,025 ------------ 4,076,758 ------------ COMMERCIAL SERVICES: 1.3% 93,247 L Bowne & Co., Inc. 1,477,965 20,000 @ Exponent, Inc. 537,400 160,900 Gevity HR, Inc. 4,213,971 ------------ 6,229,336 ------------ COMPUTERS: 4.5% 159,526 Agilysys, Inc. 2,199,864 91,200 @ Brooktrout, Inc. 985,872 181,400 @ Covansys Corp. 1,873,862 167,900 @ Electronics For Imaging 4,744,854 166,800 @,L InterVoice, Inc. 1,913,196 121,200 @,L Komag, Inc. 1,693,164 303,560 @,L Lexar Media, Inc. 2,027,781 114,269 @,L Manhattan Associates, Inc. 3,528,627 150,400 MTS Systems Corp. 3,526,880 6,773 @ SI Intl., Inc. 138,101 ------------ 22,632,201 ------------ DISTRIBUTION/WHOLESALE: 0.4% 134,600 @,L Brightpoint, Inc. 1,850,750 ------------ 1,850,750 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.1% 536,500 @,L Knight Trading Group, Inc. 5,375,730 ------------ 5,375,730 ------------ ELECTRICAL COMPONENTS AND EQUIPMENT: 1.5% 186,700 Ametek, Inc. 5,769,030 174,000 @ Artesyn Technologies, Inc. 1,566,000 ------------ 7,335,030 ------------ ELECTRONICS: 3.6% 148,473 @ Benchmark Electronics, Inc. 4,320,564 208,600 @,L Checkpoint Systems, Inc. $ 3,740,198 87,950 @ Itron, Inc. 2,017,573 39,100 @,L NVE Corp. 1,562,045 55,751 @ SBS Technologies, Inc. 895,919 187,450 @ Trimble Navigation Ltd. 5,209,235 ------------ 17,745,534 ------------ ENERGY-ALTERNATE SOURCES: 1.0% 183,600 @,L Headwaters, Inc. 4,760,748 ------------ 4,760,748 ------------ ENGINEERING AND CONSTRUCTION: 1.7% 176,500 @ URS Corp. 4,836,100 92,200 @,L Washington Group Intl., Inc. 3,309,058 ------------ 8,145,158 ------------ FOOD: 2.3% 83,200 L Cal-Maine Foods, Inc. 1,164,800 125,800 Corn Products Intl., Inc. 5,855,990 80,600 L Pilgrim's Pride Corp. 2,332,564 142,500 @,L Wild Oats Markets, Inc. 2,004,975 ------------ 11,358,329 ------------ FOREST PRODUCTS AND PAPER: 2.9% 251,500 L,@ Louisiana-Pacific Corp. 5,947,975 134,300 Pope & Talbot, Inc. 2,655,111 134,300 L Potlatch Corp. 5,592,252 ------------ 14,195,338 ------------ HEALTHCARE-PRODUCTS: 1.0% 134,100 @ Wright Medical Group, Inc. 4,773,960 ------------ 4,773,960 ------------ HEALTHCARE-SERVICES: 3.3% 233,800 @,L Kindred Healthcare, Inc. 6,160,630 419,200 Select Medical Corp. 5,625,664 84,000 @,L Sierra Health Services 3,754,800 ------------ 15,541,094 ------------ HOUSEHOLD PRODUCTS/WARES: 0.7% 92,700 @ Central Garden And Pet Co. 3,315,879 ------------ 3,315,879 ------------ INSURANCE: 1.4% 167,800 L AmerUs Group Co. 6,946,920 ------------ 6,946,920 ------------ INTERNET: 1.6% 161,000 @,L 1-800-FLOWERS.COM, Inc. 1,310,540 52,100 @,L Equinix, Inc. 1,768,274 156,350 @ Netegrity, Inc. 1,322,721 292,100 @,L Valueclick, Inc. 3,499,358 ------------ 7,900,893 ------------ INVESTMENT COMPANIES: 0.3% 103,200 Apollo Investment Corp. 1,421,064 ------------ 1,421,064 ------------ IRON/STEEL: 0.6% 80,600 Carpenter Technology 2,744,430 ------------ 2,744,430 ------------ LEISURE TIME: 0.5% 168,850 @,L K2, Inc. 2,650,945 ------------ 2,650,945 ------------
See Accompanying Notes to Financial Statements 55 PORTFOLIO OF INVESTMENTS ING VP SMALL COMPANY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- LODGING: 1.0% 235,400 @ Interstate Hotels& Resorts, Inc. $ 1,268,806 419,300 @ La Quinta Corp. 3,522,120 ------------ 4,790,926 ------------ MACHINERY-CONSTRUCTION AND MINING: 1.4% 204,400 @,L Terex Corp. 6,976,172 ------------ 6,976,172 ------------ MACHINERY-DIVERSIFIED: 3.1% 114,200 L Briggs & Stratton 10,089,570 42,723 L Middleby Corp. 2,333,530 147,900 Wabtec Corp. 2,668,116 ------------ 15,091,216 ------------ MEDIA: 2.7% 161,000 @,L 4Kids Entertainment, Inc. 3,851,120 268,700 @,L Cumulus Media, Inc. 4,516,847 80,600 L Liberty Corp. 3,784,170 130,000 Sinclair Broadcast Group, Inc. 1,335,100 ------------ 13,487,237 ------------ MISCELLANEOUS MANUFACTURING: 0.9% 126,838 @,L Ceradyne, Inc. 4,536,995 ------------ 4,536,995 ------------ OIL AND GAS: 6.0% 234,800 @,L Denbury Resources, Inc. 4,919,060 336,500 @ KCS Energy, Inc. 4,482,180 125,100 @ Newfield Exploration Co. 6,973,075 166,800 L Patina Oil & Gas Corp. 4,982,316 149,670 @ Plains Exploration & Production Co. 2,746,445 208,244 @,L Southwestern Energy Co. 5,970,355 ------------ 30,073,431 ------------ OIL AND GAS SERVICES: 0.2% 32,500 @ Hydril Co. 1,023,750 ------------ 1,023,750 ------------ PHARMACEUTICALS: 4.5% 210,400 @,L Alkermes, Inc. 2,861,440 62,300 @,L American Pharmaceutical Partners, Inc. 1,892,674 131,500 @,L Amylin Pharmaceuticals, Inc. 2,998,200 183,400 @@,L Angiotech Pharmaceuticals, Inc. 3,695,510 156,300 L Critical Therapeutics, Inc. 1,094,100 33,400 @,L Eon Labs, Inc. 1,367,062 22,700 @,L Eyetech Pharmaceuticals, Inc. 974,284 108,400 @,L MGI Pharma, Inc. 2,927,884 80,700 @,L Nabi Biopharmaceuticals 1,147,554 45,500 @,L OSI Pharmaceuticals, Inc. 3,205,020 ------------ 22,163,728 ------------ REAL ESTATE: 0.4% 93,700 @,L CB Richard Ellis Group Inc 1,789,670 ------------ 1,789,670 ------------ REAL ESTATE INVESTMENT TRUST: 38.6% 106,500 Alexandria Real Estate Equities, Inc. 6,047,070 62,550 CBL& Associates Properties, Inc. 3,440,250 114,100 Corporate Office Properties Trust Sbi MD 2,835,385 268,400 @ Felcor Lodging Trust, Inc. $ 3,247,640 118,000 LaSalle Hotel Properties 2,879,200 216,900 @,L Meristar Hospitality Corp. 1,483,596 133,500 Newcastle Investment Corp. 3,998,325 317,350 Reckson Associates Realty Corp. 8,714,431 95,900 SL Green Realty Corp. 4,488,120 65,200 Washington Real Estate Investment Trust 1,915,576 ------------ 39,049,593 ------------ RETAIL: 3.1% 201,550 @,L Aeropostale, Inc. 5,423,711 335,900 Claire's Stores, Inc. 7,289,030 99,400 @,L Electronics Boutique Holdings Corp. 2,618,196 ------------ 15,330,937 ------------ SAVINGS AND LOANS: 1.0% 268,700 First Niagara Financial Group, Inc. 3,224,400 33,800 WSFS Financial Corp. 1,645,046 ------------ 4,869,446 ------------ SEMICONDUCTORS: 4.2% 436,300 @ Cirrus Logic, Inc. 2,622,163 117,600 @,L Cree, Inc. 2,737,728 247,700 @,L Cypress Semiconductor Corp. 3,514,863 235,200 @ Pericom Semiconductor Corp. 2,518,992 150,100 @,L Photronics, Inc. 2,842,894 102,700 @,L Varian Semiconductor Equipment Associates, Inc. 3,960,112 100,600 @,L Veeco Instruments, Inc. 2,596,486 ------------ 20,793,238 ------------ SOFTWARE: 5.7% 419,250 @ Activision, Inc. 6,666,075 187,500 @,L Aspen Technology, Inc. 1,361,250 201,100 @,L,S Avid Technology, Inc. 10,974,027 117,500 @ Progress Software Corp. 2,546,225 72,000 @,L Take-Two Interactive Software, Inc. 2,206,080 211,850 @,L THQ, Inc. 4,851,365 ------------ 28,605,022 ------------ TELECOMMUNICATIONS: 4.1% 500,500 @,L Adaptec, Inc. 4,234,230 134,300 @,L Anixter Intl., Inc. 4,570,229 120,700 @,L Aspect Communications Corp. 1,713,940 89,656 @ Comtech Telecommunications 2,022,639 100,600 @ Intrado, Inc. 1,618,654 65,100 @,L Plantronics, Inc. 2,740,710 456,700 @,L RF Micro Devices, Inc. 3,425,250 ------------ 20,325,652 ------------ TRANSPORTATION: 2.4% 94,300 @ Landstar System, Inc. 4,985,641 66,700 Overseas Shipholding Group 2,943,471 167,800 @ Sirva, Inc. 3,859,400 ------------ 11,788,512 ------------ Total Common Stock (Cost $368,949,010) 431,511,442 ------------
See Accompanying Notes to Financial Statements 56 PORTFOLIO OF INVESTMENTS ING VP SMALL COMPANY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 38.6% REPURCHASE AGREEMENT: 12.3% $ 60,724,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $8,012,325 to be received upon repurchase (Collateralized by Federal National Mortgage Association, 6.000%, Market Value plus accrued interest $8,153,101, due 12/15/05) $ 60,724,000 ------------- Total Repurchase Agreement (Cost $60,724,000) 60,724,000 ------------- SECURITIES LENDING COLLATERAL(cc): 26.3% 129,809,897 The Bank of New York Institutional Cash Reserve Fund, 1.250% 129,809,897 ------------- Total Securities Lending Collateral (Cost $129,809,897) 129,809,897 ------------- Total Short-Term Investments (Cost $190,444,375) 190,533,897 ------------- TOTAL INVESTMENTS IN SECURITIES (COST $559,482,907)* 126.2% $ 622,045,339 OTHER ASSETS AND LIABILITIES-NET (26.2) (129,019,488) ----- ------------- NET ASSETS 100.0% $ 493,025,851 ===== =============
@ Non-income producing security @@ Foreign issuer S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $559,730,718. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 75,167,700 Gross Unrealized Depreciation (12,853,079) ------------- Net Unrealized Appreciation $ 62,314,621 =============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN - -------------- --------- ------------ ---------- ---------- Russell 2000 Index 35 $ 10,366,125 Sep-04 $ 455,252 ============ ==========
See Accompanying Notes to Financial Statements 57 PORTFOLIO OF INVESTMENTS ING VP VALUE OPPORTUNITY PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 97.7% AEROSPACE/DEFENSE: 3.2% 77,700 General Dynamics Corp. $ 7,715,610 ------------ 7,715,610 ------------ AGRICULTURE: 3.0% 143,200 Altria Group, Inc. 7,167,160 ------------ 7,167,160 ------------ APPAREL: 1.8% 56,800 Nike, Inc. 4,302,600 ------------ 4,302,600 ------------ BANKS: 6.5% 96,100 Bank of America Corp. 8,131,982 131,200 Wells Fargo & Co. 7,508,576 ------------ 15,640,558 ------------ BUILDING MATERIALS: 1.6% 126,100 Masco Corp. 3,931,798 ------------ 3,931,798 ------------ CHEMICALS: 4.1% 155,300 Dow Chemical Co. 6,320,710 88,700 Praxair, Inc. 3,540,017 ------------ 9,860,727 ------------ COMPUTERS: 2.3% 266,000 Hewlett-Packard Co. 5,612,600 ------------ 5,612,600 ------------ COSMETICS/PERSONAL CARE: 2.8% 103,900 Kimberly-Clark Corp. 6,844,932 ------------ 6,844,932 ------------ DIVERSIFIED FINANCIAL SERVICES: 13.3% 118,500 Citigroup, Inc. 5,510,250 121,200 Fannie Mae 8,648,831 79,400 Freddie Mac 5,026,020 141,500 Merrill Lynch & Co., Inc. 7,638,170 99,200 Morgan Stanley 5,234,784 ------------ 32,058,055 ------------ ELECTRICAL COMPONENTS AND EQUIPMENT: 2.8% 107,300 Emerson Electric Co. 6,818,915 ------------ 6,818,915 ------------ ELECTRONICS: 2.9% 258,800 @@ Koninklijke Philips Electronics NV 7,039,360 ------------ 7,039,360 ------------ FOOD: 4.4% 107,300 @@ Nestle SA ADR 7,153,906 51,500 @@,L Unilever NV 3,528,265 ------------ 10,682,171 ------------ FOREST PRODUCTS AND PAPER: 2.2% 120,500 L Iternational Paper Co. 5,386,350 ------------ 5,386,350 ------------ HEALTHCARE-PRODUCTS: 2.6% 102,300 Beckman Coulter, Inc. $ 6,240,300 ------------ 6,240,300 ------------ HEALTHCARE-SERVICES: 2.6% 72,300 Quest Diagnostics 6,141,885 ------------ 6,141,885 ------------ INSURANCE: 5.7% 104,700 American Intl. Group 7,463,016 172,800 Metlife, Inc. 6,194,880 ------------ 13,657,896 ------------ MEDIA: 2.3% 65,400 Gannett Co., Inc. 5,549,190 ------------ 5,549,190 ------------ MISCELLANEOUS MANUFACTURING: 3.5% 234,700 Honeywell Intl., Inc. 8,597,061 ------------ 8,597,061 ------------ OIL AND GAS: 13.2% 146,600 Apache Corp. 6,384,430 175,400 @@ BP PLC ADR 9,396,178 91,400 ChevronTexaco Corp. 8,601,654 165,000 Exxon Mobil Corp. 7,327,650 ------------ 31,709,912 ------------ OIL AND GAS SERVICES: 2.1% 166,130 L Halliburton Co. 5,027,094 ------------ 5,027,094 ------------ PHARMACEUTICALS: 3.6% 167,200 Bristol-Myers Squibb Co. 4,096,400 97,600 Merck & Co., Inc. 4,636,000 ------------ 8,732,400 ------------ RETAIL: 2.3% 210,300 L McDonald's Corp. 5,467,800 ------------ 5,467,800 ------------ SAVINGS AND LOANS: 5.1% 213,400 L Sovereign Bancorp, Inc. 4,716,140 192,900 Washington Mutual, Inc. 7,453,656 ------------ 12,169,796 ------------ TELECOMMUNICATIONS: 3.8% 177,400 SBC Communications, Inc. 4,301,950 131,600 Verizon Communications, Inc. 4,762,604 ------------ 9,064,554 ------------ Total Common Stock (Cost $225,366,124) 235,418,724 ------------
See Accompanying Notes to Financial Statements 58 PORTFOLIO OF INVESTMENTS ING VP VALUE OPPORTUNITY PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 6.6% REPURCHASE AGREEMENT: 2.2% $ 5,224,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $5,224,218 to be received upon repurchase (Collateralized by $5,070,000 Federal National Mortgage Association, 5.500%, Market Value plus accrued interest $5,283,903, due 05/02/06) $ 5,224,000 ------------- Total Repurchase Agreement (Cost $5,224,000) 5,224,000 ------------- SECURITIES LENDING COLLATERAL(cc): 4.4% 10,534,791 The Bank of New York Institutional Cash Reserve Fund, 1.25% 10,534,791 ------------- Total Securities Lending Collateral (Cost $10,534,791) 10,534,791 ------------- Total Short-Term Investments (Cost $15,758,791) 15,758,791 ------------- TOTAL INVESTMENTS IN SECURITIES (COST $241,124,915)* 104.3% $ 251,177,515 OTHER ASSETS AND LIABILITIES-NET (4.3) (10,363,316) ----- ------------- NET ASSETS 100.0% $ 240,814,199 ===== =============
@@ Foreign issuer L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $242,169,358. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 13,820,993 Gross Unrealized Depreciation (4,812,836) ------------- Net Unrealized Appreciation $ 9,008,157 =============
See Accompanying Notes to Financial Statements 59 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK: 58.6% AEROSPACE/DEFENSE: 1.1% 137,800 L Boeing Co. $ 7,040,202 47,200 General Dynamics Corp. 4,686,960 33,550 United Technologies Corp. 3,069,154 ------------ 14,796,316 ------------ AGRICULTURE: 0.6% 127,900 Altria Group, Inc. 6,401,395 61,825 L Bunge Ltd. 2,407,466 ------------ 8,808,861 ------------ AIRLINES: 0.1% 123,850 @,L Expressjet Holdings, Inc. 1,503,539 ------------ 1,503,539 ------------ APPAREL: 0.8% 41,750 L Jones Apparel Group, Inc. 1,648,290 59,650 L Nike, Inc. 4,518,488 101,050 L Reebok Intl. Ltd. 3,635,779 32,300 L VF Corp. 1,573,010 ------------ 11,375,567 ------------ AUTO MANUFACTURERS: 0.7% 353,150 L Ford Motor Co. 5,526,798 33,300 L General Motors Corp. 1,551,447 57,400 Paccar, Inc. 3,328,626 ------------ 10,406,871 ------------ AUTO PARTS AND EQUIPMENT: 0.2% 90,425 L Cooper Tire & Rubber Co. 2,079,775 42,750 @ Dura Automotive Systems, Inc. 391,163 ------------ 2,470,938 ------------ BANKS: 3.3% 209,500 L Bank of America Corp. 17,727,889 68,200 Bank One Corp. 3,478,200 109,475 Hibernia Corp. 2,660,243 118,500 L KeyCorp 3,541,965 118,200 US Bancorp 3,257,592 43,850 W Holding Co., Inc. 752,905 190,150 Wachovia Corp. 8,461,674 102,550 Wells Fargo & Co. 5,868,937 ------------ 45,749,405 ------------ BEVERAGES: 1.4% 266,650 Coca-Cola Co. 13,460,492 104,350 PepsiCo, Inc. 5,622,378 ------------ 19,082,870 ------------ BIOTECHNOLOGY: 0.7% 77,950 @,L Amgen, Inc. 4,253,731 167,950 @ Applera Corp - Celera Genomics Group 1,933,105 144,075 @,L Intermune, Inc. 2,221,636 27,925 @,L Invitrogen Corp. 2,010,321 ------------ 10,418,793 ------------ BUILDING MATERIALS: 0.4% 129,850 Masco Corp. 4,048,723 109,175 @,L USG Corp. 1,919,297 ------------ 5,968,020 ------------ CHEMICALS: 0.9% 56,250 Dow Chemical Co. $ 2,289,375 40,768 Engelhard Corp. 1,317,214 73,300 Georgia Gulf Corp. 2,628,538 130,400 @,L Hercules, Inc. 1,589,576 54,650 PPG Industries, Inc. 3,415,078 47,850 L Sherwin-Williams Co. 1,988,168 ------------ 13,227,949 ------------ COMMERCIAL SERVICES: 1.0% 209,650 L Cendant Corp. 5,132,232 29,775 L Corporate Executive Board Co. 1,720,697 103,100 Paychex, Inc. 3,493,028 83,575 @ Rent-A-Center, Inc. 2,501,400 50,400 L Robert Half Intl., Inc. 1,500,408 ------------ 14,347,765 ------------ COMPUTERS: 2.0% 312,200 @ Dell, Inc. 11,183,004 193,350 Hewlett-Packard Co. 4,079,685 102,500 International Business Machines Corp. 9,035,375 56,150 @,L PalmOne, Inc. 1,952,336 93,450 @,L Unisys Corp. 1,297,086 ------------ 27,547,486 ------------ COSMETICS/PERSONAL CARE: 1.6% 29,350 Alberto-Culver Co. 1,471,609 166,150 L Gillette Co. 7,044,760 93,550 Kimberly-Clark Corp. 6,163,074 157,200 Procter & Gamble Co. 8,557,968 ------------ 23,237,411 ------------ DISTRIBUTION/WHOLESALE: 0.1% 32,000 L WW Grainger, Inc. 1,840,000 ------------ 1,840,000 ------------ DIVERSIFIED FINANCIAL SERVICES: 4.7% 67,425 @,L Affiliated Managers Group 3,396,197 77,450 American Express Co. 3,979,381 322,100 Citigroup, Inc. 14,977,649 65,800 L Countrywide Financial Corp. 4,622,450 40,025 L Doral Financial Corp. 1,380,863 103,600 @,L E*TRADE Group, Inc. 1,155,140 60,100 Fannie Mae 4,288,736 75,650 Goldman Sachs Group, Inc. 7,123,204 125,750 JP Morgan Chase & Co. 4,875,328 144,450 L Merrill Lynch & Co., Inc. 7,797,411 161,450 Morgan Stanley 8,519,716 283,425 @,L Providian Financial Corp. 4,157,845 ------------ 66,273,920 ------------ ELECTRIC: 1.0% 180,650 @,L AES Corp. 1,793,855 97,550 L Centerpoint Energy, Inc. 1,121,825 101,850 Edison Intl. 2,604,304 42,150 L Exelon Corp. 1,403,174 53,575 L Great Plains Energy, Inc. 1,591,178 49,550 L Southern Co. 1,444,383 92,700 L TXU Corp. 3,755,276 ------------ 13,713,995 ------------
See Accompanying Notes to Financial Statements 60 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- ELECTRICAL COMPONENTS AND EQUIPMENT: 0.1% 89,525 @,L Artesyn Technologies, Inc. $ 805,725 ------------ 805,725 ------------ ELECTRONICS: 0.7% 128,275 @,L Arrow Electronics, Inc. 3,440,335 80,075 @ Benchmark Electronics, Inc. 2,330,183 87,650 @,L Itron, Inc. 2,010,691 39,250 Parker Hannifin Corp. 2,333,805 ------------ 10,115,014 ------------ ENGINEERING AND CONSTRUCTION: 0.2% 33,575 Granite Construction, Inc. 612,072 259,625 @,L Shaw Group, Inc. 2,630,002 ------------ 3,242,074 ------------ ENTERTAINMENT: 0.1% 35,125 GTECH Holdings Corp. 1,626,639 ------------ 1,626,639 ------------ FOOD: 0.4% 189,050 Sara Lee Corp. 4,346,260 46,800 Supervalu, Inc. 1,432,548 ------------ 5,778,808 ------------ FOREST PRODUCTS AND PAPER: 0.8% 83,550 Georgia-Pacific Corp. 3,089,679 29,450 L International Paper Co. 1,316,415 122,450 L Louisiana-Pacific Corp. 2,895,943 62,100 Weyerhaeuser Co. 3,919,752 ------------ 11,221,789 ------------ GAS: 0.3% 60,400 L Oneok, Inc. 1,328,196 71,750 Sempra Energy 2,470,353 ------------ 3,798,549 ------------ HAND/MACHINE TOOLS: 0.2% 25,000 L Black & Decker Corp. 1,553,250 28,950 L Stanley Works 1,319,541 ------------ 2,872,791 ------------ HEALTHCARE-PRODUCTS: 2.0% 75,650 L Bausch & Lomb, Inc. 4,922,546 70,350 L Becton Dickinson and Co. 3,644,130 30,000 CR Bard, Inc. 1,699,500 184,550 Johnson & Johnson 10,279,435 73,100 Medtronic, Inc. 3,561,432 53,600 @ Zimmer Holdings, Inc. 4,727,520 ------------ 28,834,563 ------------ HEALTHCARE-SERVICES: 2.1% 43,900 Aetna, Inc. 3,731,500 67,025 @,L Amerigroup Corp. 3,297,630 39,450 @,L Anthem, Inc. 3,533,142 90,875 @ Humana, Inc. 1,535,788 47,625 Oxford Health Plans 2,621,280 101,550 @,L Pacificare Health Systems 3,925,923 117,702 L UnitedHealth Group, Inc. 7,326,949 37,650 @ WellPoint Health Networks 4,217,176 ------------ 30,189,388 ------------ HOME FURNISHINGS: 0.2% 28,600 L Harman Intl. Industries, Inc. $ 2,602,600 ------------ 2,602,600 ------------ HOUSEHOLD PRODUCTS/WARES: 0.1% 24,800 Blyth, Inc. 855,352 ------------ 855,352 ------------ INSURANCE: 3.2% 83,850 @@ ACE Ltd. 3,545,178 158,750 American Intl. Group, Inc. 11,315,699 52,750 Chubb Corp. 3,596,495 43,150 L Cigna Corp. 2,969,152 49,802 Fidelity National Financial, Inc. 1,859,607 92,850 First American Corp. 2,403,887 67,150 Hartford Financial Services Group, Inc. 4,615,891 58,400 L Landamerica Financial Group, Inc. 2,273,512 54,900 Loews Corp 3,291,804 51,100 Progressive Corp. 4,358,830 129,400 L St Paul Travelers Cos., Inc. 5,245,875 ------------ 45,475,930 ------------ INTERNET: 0.8% 176,550 @,L Autobytel, Inc. 1,603,074 36,600 @,L eBay, Inc. 3,365,370 133,400 @,L GoRemote Internet Communications, Inc. 245,456 86,725 @,L Priceline.com, Inc. 2,335,504 86,150 @,L Symantec Corp. 3,771,647 ------------ 11,321,051 ------------ IRON/STEEL: 0.1% 33,100 L United States Steel Corp. 1,162,472 ------------ 1,162,472 ------------ LEISURE TIME: 0.1% 37,250 L Carnival Corp. 1,750,750 ------------ 1,750,750 ------------ MACHINERY-CONSTRUCTION & MINING: 0.1% 45,525 @,L Terex Corp. 1,553,768 ------------ 1,553,768 ------------ MACHINERY-DIVERSIFIED: 0.3% 42,825 L Briggs & Stratton 3,783,588 17,850 L Tecumseh Products Co. 735,242 ------------ 4,518,830 ------------ MEDIA: 1.4% 51,750 McGraw-Hill Cos., Inc. 3,962,498 735,500 @,L Sirius Satellite Radio, Inc. 2,265,340 282,900 @ Time Warner, Inc. 4,973,381 159,775 @,L UnitedGlobalCom, Inc. 1,159,967 102,850 L Viacom, Inc. 3,673,802 127,900 Walt Disney Co. 3,260,171 ------------ 19,295,159 ------------ METAL FABRICATE/HARDWARE: 0.3% 51,075 L Quanex Corp. 2,487,353 78,925 Worthington Industries 1,620,330 ------------ 4,107,683 ------------
See Accompanying Notes to Financial Statements 61 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - -------------------------------------------------------------------------------- MINING: 0.3% 55,150 Alcoa, Inc. $ 1,821,605 28,450 @,L Phelps Dodge Corp 2,205,159 ------------ 4,026,764 ------------ MISCELLANEOUS MANUFACTURING: 3.1% 107,200 L 3M Co 9,649,071 657,700 General Electric Co. 21,309,479 53,550 Honeywell Intl., Inc. 1,961,537 19,950 Illinois Tool Works, Inc. 1,913,006 277,200 @@ Tyco International Ltd 9,186,408 ------------ 44,019,501 ------------ OFFICE/BUSINESS EQUIPMENT: 0.1% 78,175 L IKON Office Solutions, Inc. 896,667 ------------ 896,667 ------------ OIL AND GAS: 4.5% 87,600 L Burlington Resources, Inc. 3,169,368 103,000 ChevronTexaco Corp. 9,693,329 82,450 ConocoPhillips 6,290,111 49,450 Devon Energy Corp. 3,263,700 473,650 Exxon Mobil Corp. 21,034,796 80,100 @,L Giant Industries, Inc. 1,762,200 42,875 @,L Houston Exploration Co. 2,222,640 79,000 Marathon Oil Corp. 2,989,360 74,300 Occidental Petroleum Corp. 3,596,863 55,950 Pogo Producing Co. 2,763,930 20,450 L Sunoco, Inc. 1,301,029 103,350 @,L Tesoro Petroleum Corp. 2,852,460 32,250 L Valero Energy Corp. 2,378,760 ------------ 63,318,546 ------------ PACKAGING AND CONTAINERS: 0.1% 87,050 @ Owens-Illinois, Inc. 1,458,958 ------------ 1,458,958 ------------ PHARMACEUTICALS: 2.0% 70,950 L Eli Lilly and Co. 4,960,115 135,100 Merck & Co., Inc. 6,417,250 474,250 Pfizer, Inc. 16,257,290 ------------ 27,634,655 ------------ PIPELINES: 0.1% 42,275 National Fuel Gas Co. 1,056,875 ------------ 1,056,875 ------------ REAL ESTATE: 0.4% 56,675 Chelsea Property Group, Inc. 3,696,344 41,225 L LNR Property Corp. 2,236,456 ------------ 5,932,800 ------------ RETAIL: 4.2% 78,950 Best Buy Co., Inc. 4,005,923 50,950 Federated Department Stores 2,501,645 184,700 L Gap, Inc. 4,478,974 137,450 Home Depot, Inc. 4,838,239 84,900 JC Penney Co., Inc. 3,205,824 141,600 Limited Brands 2,647,920 46,750 Lowe's Cos., Inc. 2,456,713 78,000 L McDonald's Corp. 2,028,000 39,150 Nordstrom, Inc. 1,668,182 89,250 @,L Office Depot, Inc. 1,598,468 47,100 L RadioShack Corp. 1,348,473 128,400 Staples, Inc. $ 3,763,404 100,300 @,L Starbucks Corp. 4,361,044 55,500 Target Corp. 2,357,085 171,375 @,L Toys R US, Inc. 2,730,004 262,600 Wal-Mart Stores, Inc. 13,854,775 35,200 Wendy's Intl., Inc. 1,226,368 ------------ 59,071,041 ------------ SAVINGS AND LOANS: 0.2% 18,325 @ FirstFed Financial Corp. 762,320 126,800 Flagstar Bancorp, Inc. 2,520,784 ------------ 3,283,104 ------------ SEMICONDUCTORS: 1.5% 27,275 @,L Advanced Micro Devices, Inc. 433,673 525,025 @,L Applied Micro Circuits Corp. 2,793,133 304,500 @,L Cirrus Logic, Inc. 1,830,045 394,250 Intel Corp. 10,881,300 274,250 @,L LSI Logic Corp. 2,089,785 114,300 Texas Instruments, Inc. 2,763,774 ------------ 20,791,710 ------------ SOFTWARE: 3.4% 229,800 @ Activision, Inc. 3,653,820 33,200 Autodesk, Inc. 1,421,292 25,600 @,L Avid Technology, Inc. 1,396,992 195,500 @ BMC Software, Inc. 3,616,750 122,600 @,L Compuware Corp. 809,160 20,300 @ D&B Corp. 1,094,373 59,350 First Data Corp. 2,642,262 77,600 L IMS Health, Inc. 1,818,944 970,250 L Microsoft Corp. 27,710,339 325,650 @ Oracle Corp. 3,885,005 ------------ 48,048,937 ------------ TELECOMMUNICATIONS: 3.5% 159,775 @,L Adaptec, Inc. 1,351,697 88,800 Alltel Corp. 4,495,056 317,200 Bellsouth Corp. 8,316,983 418,350 @ Cisco Systems, Inc. 9,914,894 387,850 L Motorola, Inc. 7,078,262 50,550 Qualcomm, Inc. 3,689,139 65,125 @ Safenet, Inc. 1,802,660 46,950 L Scientific-Atlanta, Inc. 1,619,775 157,625 @ Sycamore Networks, Inc. 666,754 221,800 @,L Tellabs, Inc. 1,938,532 186,850 Verizon Communications, Inc. 6,762,102 248,100 @,L Zhone Technologies, Inc. 967,590 ------------ 48,603,444 ------------ TOYS/GAMES/HOBBIES: 0.1% 57,200 L Hasbro, Inc. 1,086,800 ------------ 1,086,800 ------------ TRANSPORTATION: 1.0% 40,550 L CH Robinson Worldwide, Inc. 1,858,812 64,350 FedEx Corp. 5,256,751 68,650 L United Parcel Service, Inc. 5,160,421 52,200 @,L Yellow Roadway Corp. 2,080,692 ------------ 14,356,676 ------------ Total Common Stock (Cost $754,104,457) 825,485,119 ------------
See Accompanying Notes to Financial Statements 62 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - --------------------------------------------------------------------------------------------------- PREFERRED STOCK: 0.2% BANKS: 0.2% 272 #,XX DG Funding Trust $ 2,924,000 ---------------- Total Preferred Stock (Cost $2,957,509) 2,924,000 ---------------- WARRANTS: 0.0% DISTRIBUTION/WHOLESALE: 0.0% 2,978 Timco Aviation Services -- ---------------- SOVEREIGN: 0.0% 250 @@ Central Bank of Nigeria -- ---------------- Total Warrants (Cost $210) -- ---------------- PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 10.3% AIRLINES: 0.1% $ 421,000 # American Airlines, Inc., 7.250%, due 02/05/09 402,581 1,930,000 American Airlines, Inc., 7.324%, due 10/15/09 1,589,117 ---------------- 1,991,698 ---------------- AUTO MANUFACTURERS: 0.0% 421,000 L Ford Motor Co., 6.625%, due 10/01/28 369,706 ---------------- 369,706 ---------------- BANKS: 2.5% 580,000 @@ Australia & New Zealand Banking Group Ltd., 1.494%, due 10/29/49 493,972 940,000 #,@@ Banco Bradesco SA, 8.750%, due 10/24/13 947,050 2,188,000 @@ Banco Santander Chile SA, 7.375%, due 07/18/12 2,411,611 590,000 @@ Bank of Ireland, 1.800%, due 12/29/49 497,888 475,000 # Bank of New York Institutional Capital Trust A, 7.780%, due 12/01/26 508,739 163,000 # BankAmerica Institutional Capital B, 7.700%, due 12/31/26 174,687 320,000 Barnett Capital I, 8.060%, due 12/01/26 350,767 200,000 Barnett Capital II, 7.950%, due 12/01/26 219,887 310,000 BNY Capital I, 7.970%, due 12/31/26 337,155 929,000 L,@@,# Danske Bank A/S, 5.914%, due 12/29/49 943,389 2,710,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 3,027,505 112,000 FBS Capital I, 8.090%, due 11/15/26 123,795 448,000 First Union Capital I, 7.935%, due 01/15/27 490,317 587,000 First Union Institutional Capital II, 7.850%, due 01/01/27 631,308 $ 335,000 Fleet Capital Trust II, 7.920%, due 12/11/26 $ 358,152 1,016,000 L,@@,# HBOS Capital Funding LP, 6.071%, due 06/30/49 1,021,950 320,000 @@ Hongkong & Shanghai Banking Corp. Ltd., 1.313%, due 07/29/49 271,779 1,890,000 @@ HSBC Bank PLC, 1.975%, due 06/29/49 1,599,985 1,020,000 @@ HSBC Bank PLC, 2.125%, due 06/29/49 864,450 1,350,000 @@ Lloyds TSB Bank PLC, 1.270%, due 08/29/49 1,162,910 1,210,000 @@ Lloyds TSB Bank PLC, 2.188%, due 06/29/49 1,057,121 1,439,000 M&T Bank Corp., 3.850%, due 04/01/13 1,412,707 1,770,000 Mellon Capital I, 7.720%, due 12/01/26 1,919,448 500,000 @@ National Westminster Bank PLC, 1.375%, due 08/29/49 431,537 1,510,000 @@ National Westminster Bank PLC, 1.438%, due 11/29/49 1,277,093 250,000 NB Capital Trust, 7.830%, due 12/15/26 271,830 925,000 NB Capital Trust IV, 8.250%, due 04/15/27 1,028,441 737,000 #,@@ Northern Rock PLC, 5.600%, due 04/30/49 717,414 1,211,000 # Rabobank Capital Funding II, 5.260%, due 12/29/49 1,174,017 630,000 @@ Royal Bank of Canada, 1.750%, due 06/29/85 541,550 280,000 @@ Royal Bank of Scotland Group PLC, 2.063%, due 12/29/49 241,653 390,000 @@ Societe Generale, 1.688%, due 11/29/49 326,103 870,000 @@ Standard Chartered PLC, 1.315%, due 01/29/49 682,231 790,000 @@ Standard Chartered PLC, 1.375%, due 07/29/49 619,623 2,060,000 @@ Standard Chartered PLC, 1.800%, due 11/29/49 1,626,840 1,980,000 @@ Standard Chartered PLC, 2.070%, due 12/29/49 1,559,250 180,000 # Wells Fargo Capital A, 7.730%, due 12/01/26 196,049 690,000 @@ Westpac Banking Corp., 1.338%, due 09/29/49 582,688 2,138,000 L,# Westpac Capital Trust IV, 5.256%, due 12/29/49 1,973,802 ---------------- 34,076,693 ---------------- BEVERAGES: 0.3% 1,915,000 #,@@ Cia Brasileira de Bebidas, 8.750%, due 09/15/13 2,029,900 201,000 L,@@ Cia Brasileira de Bebidas, 10.500%, due 12/15/11 231,150 1,624,000 # Miller Brewing Co., 4.250%, due 08/15/08 1,617,585 ---------------- 3,878,635 ----------------
See Accompanying Notes to Financial Statements 63 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CHEMICALS: 0.1% $ 386,000 Dow Chemical Co., 5.750%, due 11/15/09 $ 403,276 365,000 @,#,@@ Sociedad Quimica y Minera de Chile SA, 7.700%, due 09/15/06 390,753 ---------------- 794,029 ---------------- DISTRIBUTION/WHOLESALE: 0.0% 2,985 X Timco Aviation Services, 8.000%, due 01/02/07 -- ---------------- -- ---------------- DIVERSIFIED FINANCIAL SERVICES: 1.6% 812,000 #,@@ Arcel Finance Ltd., 6.361%, due 05/01/12 807,213 480,000 #,@@ Arcel Finance Ltd., 7.048%, due 09/01/11 477,600 1,372,000 L Boeing Capital Corp., 7.375%, due 09/27/10 1,553,335 2,061,000 #,@@ Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 2,004,323 930,000 CitiCorp Capital I, 7.933%, due 02/15/27 1,017,692 212,000 Citigroup Capital II, 7.750%, due 12/01/36 228,536 195,000 # Corestates Capital Trust I, 8.000%, due 12/15/26 213,631 360,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 346,486 1,760,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 1,706,352 520,000 @@ Financiere CSFB NV, 1.250%, due 03/29/49 416,638 858,000 L Ford Motor Credit Co, 7.000%, due 10/01/13 867,583 853,000 L General Motors Acceptance Corp, 6.875%, due 08/28/12 869,064 577,000 General Motors Acceptance Corp, 8.000%, due 11/01/31 592,847 1,140,000 General Motors Acceptance Corp., 7.750%, due 01/19/10 1,238,952 7,652 # Hollinger Participation Trust, 12.125%, due 11/15/10 8,953 232,000 JPM Capital Trust I, 7.540%, due 01/15/27 246,391 2,343,000 XX,# Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 2,319,147 621,000 # Mizuho JGB Investment LLC, 9.870%, due 12/29/49 703,056 416,000 # Mizuho Preferred Capital Co LLC, 8.790%, due 12/29/49 457,600 1,163,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 1,109,322 1,548,465 #,@@ PF Export Receivables Master Trust, 6.436%, due 06/01/15 1,527,925 $ 645,000 L,# SB Treasury Co LLC, 9.400%, due 12/29/49 $ 728,850 2,235,000 #,L Tokai Preferred Capital Co. LLC, 9.980%, due 12/29/49 2,517,905 15,000 Universal City Development Partners, 11.750%, due 04/01/10 17,438 510,000 #,L Wachovia Capital Trust V, 7.965%, due 06/01/27 560,185 ---------------- 22,537,024 ---------------- ELECTRIC: 1.7% 1,022,000 @@,#,L AES Gener SA, 7.500%, due 03/25/14 970,900 934,951 # Allegheny Energy Supply Statutory Trust 2001, 10.250%, due 11/15/07 1,012,084 97,807 # Allegheny Energy Supply Statutory Trust 2001, 13.000%, due 11/15/07 100,252 680,000 L Consumers Energy Co., 4.250%, due 04/15/08 674,491 963,000 L Consumers Energy Co., 4.800%, due 02/17/09 964,768 1,344,000 DTE Energy Co, 2.324%, due 06/01/07 1,343,445 2,549,000 @@,L Empresa Nacional de Electricidad SA/Chile, 7.750%, due 07/15/08 2,722,375 3,331,000 Enserch Capital I, 2.460%, due 07/01/28 3,117,180 1,523,000 Enterprise Capital Trust II, 2.806%, due 06/30/28 1,441,087 1,007,000 L FirstEnergy Corp., 6.450%, due 11/15/11 1,045,540 1,459,000 # Monongahela Power Co, 6.700%, due 06/15/14 1,480,218 2,103,000 Ohio Power Co., 6.375%, due 07/15/33 2,064,679 3,801,000 # PG&E Corp., 6.875%, due 07/15/08 3,991,051 268,029 # Power Contract Financing LLC, 5.200%, due 02/01/06 269,781 2,112,000 #,L Power Contract Financing LLC, 6.256%, due 02/01/10 2,153,199 331,905 PPL Montana LLC, 8.903%, due 07/02/20 361,984 538,000 # Tenaska Virginia Partners LP, 6.119%, due 03/30/24 533,164 ---------------- 24,246,198 ---------------- FOOD: 0.4% 739,000 Kroger Co., 7.250%, due 06/01/09 821,815 1,308,000 Safeway, Inc., 4.800%, due 07/16/07 1,337,948 881,000 Supervalu, Inc., 7.875%, due 08/01/09 996,132 1,743,000 Tyson Foods, Inc., 7.250%, due 10/01/06 1,878,287 ---------------- 5,034,182 ----------------
See Accompanying Notes to Financial Statements 64 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- GAS: 0.1% $ 1,604,000 # Williams Gas Pipelines Central, Inc., 7.375%, due 11/15/06 $ 1,722,295 ---------------- 1,722,295 ---------------- HOME BUILDERS: 0.0% 50,000 Technical Olympic USA, Inc., 9.000%, due 07/01/10 51,500 ---------------- 51,500 ---------------- INSURANCE: 0.3% 1,459,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 1,638,286 1,105,000 # Monumental Global Funding II, 3.850%, due 03/03/08 1,103,396 758,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 839,696 ---------------- 3,581,378 ---------------- LODGING: 0.0% 621,000 Caesars Entertainment, Inc., 9.375%, due 02/15/07 676,114 ---------------- 676,114 ---------------- MEDIA: 0.0% 540,000 L Time Warner, Inc., 6.875%, due 05/01/12 584,409 ---------------- 584,409 ---------------- MINING: 0.2% 578,000 @@,# Corp Nacional del Cobre de Chile - CODELCO, 6.375%, due 11/30/12 612,935 204,000 @@ Vale Overseas Ltd., 8.250%, due 01/17/34 178,500 1,623,000 @@ Vale Overseas Ltd., 8.625%, due 03/08/07 1,744,725 ---------------- 2,536,160 ---------------- MISCELLANEOUS MANUFACTURING: 0.2% 2,667,000 @@,#,L Bombardier, Inc., 6.300%, due 05/01/14 2,269,148 ---------------- 2,269,148 ---------------- MULTI-NATIONAL: 0.2% 1,655,000 @@ Corp. Andina de Fomento CAF, 5.200%, due 05/21/13 1,594,859 1,628,000 @@ Corp. Andina de Fomento CAF, 6.875%, due 03/15/12 1,753,262 ---------------- 3,348,121 ---------------- OIL AND GAS: 0.8% 985,000 L Amerada Hess Corp., 6.650%, due 08/15/11 1,043,809 1,372,000 Amerada Hess Corp., 7.875%, due 10/01/29 1,486,406 1,326,000 @@,# Empresa Nacional de Petroleo ENAP, 4.875%, due 03/15/14 1,237,137 20,000 Energy Partners Ltd., 8.750%, due 08/01/10 21,000 2,955,000 @@ Husky Oil Co., 8.900%, due 08/15/28 3,348,925 $ 3,023,000 L,# Pemex Project Funding Master Trust, 2.820%, due 06/15/10 $ 3,044,161 606,000 L Pemex Project Funding Master Trust, 7.375%, due 12/15/14 621,150 851,000 Valero Energy Corp., 8.750%, due 06/15/30 1,064,826 ---------------- 11,867,414 ---------------- PACKAGING AND CONTAINERS: 0.2% 541,000 # Sealed Air Corp., 5.375%, due 04/15/08 559,944 1,677,000 # Sealed Air Corp., 6.950%, due 05/15/09 1,832,600 ---------------- 2,392,544 ---------------- REAL ESTATE: 0.2% 1,409,000 EOP Operating LP, 7.750%, due 11/15/07 1,564,841 360,000 Liberty Property LP, 6.375%, due 08/15/12 378,645 1,116,000 Liberty Property LP, 7.750%, due 04/15/09 1,268,787 ---------------- 3,212,273 ---------------- REAL ESTATE INVESTMENT TRUSTS: 0.4% 1,120,000 # iStar Financial, Inc., 5.700%, due 03/01/14 1,056,873 2,096,000 # iStar Financial, Inc., 5.125%, due 04/01/11 2,003,869 1,011,000 Simon Property Group LP, 4.875%, due 03/18/10 1,001,944 1,946,000 Simon Property Group LP, 6.375%, due 11/15/07 2,084,522 ---------------- 6,147,208 ---------------- RETAIL: 0.0% 40,000 L Dollar General Corp., 8.625%, due 06/15/10 44,650 ---------------- 44,650 ---------------- SAVINGS AND LOANS: 0.3% 1,177,000 Great Western Financial, 8.206%, due 02/01/27 1,281,729 1,704,000 Sovereign Bancorp, Inc., 10.500%, due 11/15/06 1,953,271 1,632,000 L Washington Mutual, Inc., 4.375%, due 01/15/08 1,643,710 ---------------- 4,878,710 ---------------- TELECOMMUNICATIONS: 0.6% 710,000 @@,# Brasil Telecom SA, 9.375%, due 02/18/14 692,250 1,309,000 @@,L Cia de Telecomunicaciones de Chile SA, 7.625%, due 07/15/06 1,411,844 1,906,000 L Sprint Capital Corp., 4.780%, due 08/17/06 1,943,859 594,000 L Sprint Capital Corp., 8.750%, due 03/15/32 694,161 1,185,000 L Sprint Capital Corp., 6.875%, due 11/15/28 1,142,360
See Accompanying Notes to Financial Statements 65 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) $ 1,336,000 Verizon Florida Inc., 6.125%, due 01/15/13 $ 1,375,528 950,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 888,610 -------------- 8,148,612 -------------- TRANSPORTATION: 0.1% 830,000 @@,# MISC Capital Ltd, 5.000%, due 07/01/09 832,207 -------------- 832,207 -------------- Total Corporate Bonds (Cost $145,731,456) 145,220,908 -------------- COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET-BACKED SECURITIES: 10.5% AUTOMOBILE ASSET BACKED SECURITIES: 0.2% 300,000 Capital Auto Receivables Asset Trust, 2.750%, due 04/16/07 299,641 500,000 Household Automotive Trust, 2.310%, due 04/17/08 495,651 1,590,000 Nissan Auto Receivables Owner Trust, 2.610%, due 07/15/08 1,573,263 ---------------- 2,368,555 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES: 1.4% 877,000 Bear Stearns Commercial Mortgage Securities, 1.400%, due 06/25/34 876,452 1,412,000 Bear Stearns Commercial Mortgage Securities, 4.170%, due 01/12/41 1,398,832 2,060,000 Chase Manhattan Bank-First Union National Bank, 7.439%, due 08/15/31 2,321,385 1,311,578 CS First Boston Mortgage Securities Corp., 3.727%, due 03/15/35 1,270,581 3,120,000 JP Morgan Chase Commercial Mortgage Securities Corp., 6.244%, due 04/15/35 3,328,850 3,150,000 LB-UBS Commercial Mortgage Trust, 6.226%, due 03/15/26 3,382,748 3,000,000 LB-UBS Commercial Mortgage Trust, 7.370%, due 08/15/26 3,391,219 3,120,000 Mortgage Capital Funding, Inc., 6.663%, due 03/18/30 3,363,898 198,842 Prudential Commercial Mortgage Trust, 3.669%, due 02/11/36 192,229 ---------------- 19,526,194 ---------------- CREDIT CARD ASSET BACKED SECURITIES: 0.1% 775,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 812,695 1,270,000 Fleet Credit Card Master Trust II, 2.400%, due 07/15/08 1,262,692 ---------------- 2,075,387 ---------------- HOME EQUITY ASSET BACKED SECURITIES: 1.6% $ 916,313 Argent Securities, Inc., 1.620%, due 03/25/34 $ 917,169 1,051,715 Asset Backed Funding Certificates, 1.580%, due 11/25/33 1,052,081 3,103,862 XX Bayview Financial Acquisition Trust, 1.820%, due 12/28/34 3,109,681 240,000 Equity One ABS, Inc., 2.976%, due 09/25/33 240,316 2,485,849 Merrill Lynch Mortgage Investors, Inc., 1.660%, due 07/25/34 2,493,193 2,906,000 New Century Home Equity Loan Trust, 1.570%, due 04/25/34 2,906,000 800,073 Residential Asset Mortgage Products, Inc., 1.610%, due 06/25/33 799,652 524,000 Residential Asset Securities Corp., 1.580%, due 02/25/34 524,305 6,743,483 Residential Asset Securities Corp., 1.610%, due 12/25/33 6,760,936 940,000 Residential Funding Mortgage Securities II, 3.450%, due 01/25/16 942,478 2,625,000 Saxon Asset Securities Trust, 3.960%, due 06/25/33 2,571,209 ---------------- 22,317,020 ---------------- OTHER ASSET-BACKED SECURITIES: 0.6% 904,122 XX Amortizing Residential Collateral Trust, 1.550%, due 05/25/32 904,051 941,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 1.600%, due 07/25/33 942,404 5,290,000 PP&L Transition Bond Co. LLC, 7.050%, due 06/25/09 5,734,197 1,190,000 Residential Asset Mortgage Products, Inc., 2.140%, due 02/25/30 1,177,897 ---------------- 8,758,549 ---------------- WHOLE LOAN COLLATERALLIZED MORTGAGE: 5.7% 330,865 Bank of America Alternative Loan Trust, 1.750%, due 12/25/33 330,115 5,851,602 Bank of America Mortgage Securities, 1.750%, due 12/25/33 5,859,785 1,789,330 Bank of America Mortgage Securities, 4.413%, due 03/25/33 1,792,006 2,441,848 Bank of America Mortgage Securities, 5.000%, due 06/25/33 2,463,858
See Accompanying Notes to Financial Statements 66 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- WHOLE LOAN COLLATERALLIZED MORTGAGE (CONTINUED) $ 2,116,247 CitiCorp. Mortgage Securities, Inc., 1.800%, due 10/25/33 $ 2,116,995 1,293,767 Countrywide Alternative Loan Trust, 1.700%, due 07/25/18 1,296,658 5,530,000 CS First Boston Mortgage Securities Corp., 4.187%, due 10/25/33 5,569,551 7,025,788 XX First Horizon Alternative Mortgage Securities, 4.875%, due 06/25/34 7,073,976 5,679,000 First Horizon Asset Securities, Inc., 1.750%, due 10/25/32 5,679,000 2,707,741 GMAC Mortgage Corp Loan Trust, 5.250%, due 04/25/34 2,744,965 4,000,000 GMAC Mortgage Corp. Loan Trust, 5.500%, due 01/25/34 4,030,823 572,283 GSR Mortgage Loan Trust, 6.500%, due 01/25/34 594,728 1,773,882 MASTR Alternative Loans Trust, 6.500%, due 05/25/33 1,817,534 1,756,030 MASTR Asset Securitization Trust, 1.750%, due 11/25/33 1,753,598 845,351 MASTR Asset Securitization Trust, 8.000%, due 06/25/33 893,452 5,156,227 MLCC Mortgage Investors, Inc., 1.620%, due 01/25/29 5,163,085 401,671 Prime Mortgage Trust, 1.700%, due 02/25/34 401,693 2,721,952 Residential Accredit Loans, Inc., 1.750%, due 03/25/18 2,730,035 706,001 Residential Funding Mtg Sec I, 1.600%, due 12/25/33 706,506 9,221,609 Sequoia Mortgage Trust, 1.600%, due 01/20/34 9,201,013 4,600,000 Structured Asset Securities Corp., 6.000%, due 03/25/34 4,710,570 3,036,000 Thornburg Mortgage Securities Trust, 1.610%, due 05/25/44 3,036,000 4,631,863 Washington Mutual, 1.900%, due 01/25/34 4,572,000 3,581,617 Washington Mutual, 5.000%, due 06/25/18 3,565,710 611,893 Wells Fargo Mortgage Backed Securities Trust, 1.800%, due 02/25/34 611,771 2,225,000 Wells Fargo Mortgage Backed Securities Trust, 4.500%, due 08/25/18 2,066,984 ---------------- 80,782,411 ---------------- WHOLE LOAN COLLATERALIZED PLANNED AMORTIZATION CLASS: 0.8% 3,095,605 GSR Mortgage Loan Trust, 1.700%, due 10/25/32 3,096,667 $ 888,173 MASTR Alternative Loans Trust, 1.700%, due 11/25/33 $ 889,534 2,609,765 MASTR Alternative Loans Trust, 8.500%, due 05/25/33 2,678,303 3,138,000 Residential Funding Securities Corp., 4.750%, due 02/25/33 3,176,079 885,183 Residential Funding Securities Corp., 8.500%, due 05/25/33 942,060 739,796 Washington Mutual, 1.700%, due 03/25/34 740,012 ---------------- 11,522,655 ---------------- WHOLE LOAN COLLATERALIZED SUPPORT CMO: 0.1% 1,231,039 Bank of America Mortgage Securities, 5.500%, due 11/25/33 1,217,463 ---------------- 1,217,463 ---------------- Total Collateralized Mortgage Obligations and Asset-Backed Securities (Cost $148,630,608) 148,568,234 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 14.0% AGENCY COLLATERAL CMO: 0.9% 9,037,470 1.890%, due 04/15/32 9,136,778 3,209,735 6.000%, due 01/15/29 3,269,185 ---------------- 12,405,963 ---------------- AGENCY COLLATERAL PAC CMO: 0.4% 3,441,000 6.000%, due 01/15/28 3,581,384 2,276,000 6.000%, due 01/15/29 2,325,903 ---------------- 5,907,287 ---------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 2.9% 11,120,000 L 2.700%, due 03/16/07 10,938,665 5,330,000 2.750%, due 02/09/07 5,258,733 561 5.500%, due 05/01/23 569 6,800,000 5.500%, due 07/15/34 6,770,250 3,661,946 6.000%, due 01/15/29 3,697,946 9,930,000 6.000%, due 07/15/33 10,141,013 859,685 6.500%, due 11/01/28 898,680 2,490,000 6.500%, due 08/15/34 2,585,711 ---------------- 40,291,567 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 9.0% 240,000 2.859%, due 12/26/29 238,594 5,345,000 L 2.875%, due 05/19/08 5,150,298 8,382,000 4.500%, due 07/01/17 8,190,790 2,403,000 4.750%, due 12/25/42 2,409,572 11,393,000 5.000%, due 07/01/18 11,407,240 3,103,000 5.000%, due 08/15/19 3,096,211 34,534,000 5.000%, due 07/15/34 33,357,702 2,705,000 L 5.250%, due 08/01/12 2,707,429 109,980 5.500%, due 07/15/19 112,489 4,075,000 5.500%, due 08/15/19 4,152,678 8,115,000 5.500%, due 07/15/34 8,076,957
See Accompanying Notes to Financial Statements 67 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 187,511 6.000%, due 06/01/16 $ 195,720 823,672 6.000%, due 07/01/16 859,729 168,593 6.000%, due 07/01/16 175,974 127,305 6.000%, due 08/01/16 132,878 191,516 6.000%, due 08/01/16 199,899 138,433 6.000%, due 10/01/16 144,493 4,807 6.000%, due 10/01/16 5,017 135,905 6.000%, due 10/01/16 141,854 1,128,607 6.000%, due 03/01/17 1,177,524 217,702 6.000%, due 04/01/17 227,137 179,892 6.000%, due 04/01/17 187,689 129,483 6.000%, due 04/01/17 135,096 597,910 6.000%, due 06/01/17 623,826 154,264 6.000%, due 09/01/17 160,950 118,129 6.000%, due 10/01/17 123,249 654,309 6.000%, due 11/01/17 682,951 659,713 6.000%, due 12/01/17 688,307 691,195 6.000%, due 12/01/18 721,191 3,844,223 6.000%, due 07/25/29 3,900,682 1,633,458 6.000%, due 07/25/29 1,657,975 2,316,472 6.000%, due 04/25/31 2,347,629 5,605,000 6.000%, due 08/01/33 5,699,584 3,675,000 6.000%, due 07/15/34 3,751,947 4,923,750 6.500%, due 04/01/30 5,139,455 5,182,000 6.500%, due 07/15/33 5,395,758 2,320,000 L 6.625%, due 11/15/10 2,579,274 16,734 7.000%, due 06/01/29 17,721 158,764 7.000%, due 06/01/29 168,123 71,032 7.000%, due 06/01/29 75,308 1,637 7.000%, due 08/01/29 1,733 14,991 7.000%, due 10/01/29 15,875 448,387 7.000%, due 11/01/29 474,821 1,014 7.000%, due 01/01/30 1,074 277,269 7.000%, due 01/01/30 293,615 430,225 7.000%, due 03/01/30 455,589 308,613 7.000%, due 01/01/31 326,713 2,265,437 7.000%, due 06/01/31 2,400,429 16,692 7.000%, due 08/01/31 17,671 587,694 7.000%, due 08/01/31 621,667 74,047 7.000%, due 10/01/31 78,327 64,431 7.000%, due 01/01/32 68,155 64,930 7.000%, due 01/01/32 68,683 17,309 7.000%, due 04/01/32 18,274 41,000 7.000%, due 05/01/32 43,285 73,945 7.000%, due 07/01/32 78,065 2,591,000 7.000%, due 07/15/33 2,732,697 154,585 7.500%, due 10/01/30 165,766 217,097 7.500%, due 10/01/30 232,800 74,975 7.500%, due 11/01/30 80,398 190,653 7.500%, due 11/01/30 204,443 1,314,791 7.500%, due 06/25/32 1,409,699 1,678,085 7.500%, due 01/25/48 1,790,364 ---------------- 127,797,043 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 0.8% 90,060 4.000%, due 12/20/29 91,220 339,936 4.375%, due 04/20/28 340,913 443,464 6.500%, due 10/15/31 464,149 1,171,877 7.000%, due 09/15/24 1,251,834 1,217,927 7.000%, due 10/15/24 1,301,031 523,377 7.000%, due 10/15/24 559,089 $ 313,674 7.000%, due 11/15/24 $ 335,105 3,058,125 7.500%, due 12/15/23 3,317,198 2,521,426 8.000%, due 12/15/17 2,777,792 195,280 8.000%, due 07/15/24 215,529 ---------------- 10,653,860 ---------------- Total U.S. Government Agency Obligations (Cost $196,329,374) 197,055,720 ---------------- U.S. TREASURY OBLIGATIONS: 6.2% U.S. TREASURY BONDS: 4.4% 10,287,000 L,S 4.000%, due 02/15/14 9,807,214 11,429,000 W,L,S 4.750%, due 05/15/14 11,551,782 6,104,000 L 5.290%, due 05/15/16 3,310,712 12,583,000 L 5.375%, due 02/15/31 12,694,586 5,186,000 L 5.500%, due 08/15/28 5,255,487 5,010,000 L 6.250%, due 08/15/23 5,549,362 5,019,000 L,S 10.375%, due 11/15/12 6,130,242 5,173,000 L 13.250%, due 05/15/14 7,327,477 ---------------- 61,626,862 ---------------- U.S. TREASURY NOTES: 1.8% 12,500,000 L,S 1.625%, due 01/31/05 12,496,587 5,653,000 L,S 2.500%, due 05/31/06 5,635,781 4,927,000 L,S 3.125%, due 05/15/07 4,928,542 2,145,000 L,S 4.000%, due 06/15/09 2,164,022 ---------------- 25,224,932 ---------------- Total U.S. Treasury Obligations (Cost $87,502,562) 86,851,794 ---------------- OTHER BONDS: 0.7% SOVEREIGN: 0.7% 518,588 @@ Brazilian Government Intl. Bond, 2.188%, due 04/15/12 436,708 606,000 @@ Brazilian Government Intl. Bond, 10.000%, due 08/07/11 590,850 1,078,000 @@ Colombia Government Intl. Bond, 10.000%, due 01/23/12 1,121,120 989,000 @@ Dominican Republic Intl. Bond, 9.040%, due 01/23/13 613,180 455,000 @@ Ecuador Government Intl. Bond, 7.000%, due 08/15/30 322,481 106,000 @@ Panama Government International Bond, 9.375%, due 07/23/12 116,335 304,000 @@ Panama Government Intl. Bond, 9.375%, due 01/16/23 311,600 1,059,000 @@ Peru Government Intl. Bond, 4.500%, due 03/07/17 860,069 276,000 @@,L Philippine Government Intl. Bond, 9.875%, due 01/15/19 276,000 2,206,000 @@ Russia Government Intl. Bond, 5.000%, due 03/31/30 2,019,593
See Accompanying Notes to Financial Statements 68 PORTFOLIO OF INVESTMENTS ING VP BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- SOVEREIGN (CONTINUED) $ 979,000 @@,L Turkey Government Intl. Bond, 12.375%, due 06/15/09 $ 1,124,626 464,000 #,@@ Ukraine Government Intl. Bond, 7.650%, due 06/11/13 444,280 823,729 @@,XX Uruguay Government Intl. Bond, 10.500%, due 10/20/06 906,036 853,000 @@,L Venezuela Government Intl. Bond, 10.750%, due 09/19/13 842,338 ---------------- Total Other Bonds (Cost $10,295,400) 9,985,216 ---------------- Total Long-Term Investments (Cost $1,345,551,576) 1,416,090,991 ---------------- SHORT-TERM INVESTMENTS: 31.9% COMMERCIAL PAPER: 4.9% 3,000,000 Concord Minutemen Cap., 1.160%, due 07/07/05 2,999,955 4,000,000 S DaimlerChrystler Holdings Corp., 1.450%, due 07/14/04 3,997,744 6,300,000 S DaimlerChrystler Holdings Corp., 1.250%, due 07/07/04 6,298,469 4,315,000 S Ford Motor Credit Co., 1.410%, due 07/19/04 4,311,789 6,000,000 S General Motors Corp., 1.270%, due 07/01/04 5,999,788 6,000,000 S General Motors Corp., 1.280%, due 07/06/04 5,998,720 9,600,000 S Hertz Corp., 1.520%, due 07/08/04 9,596,753 10,000,000 S Kraft Foods, 1.180%, due 07/01/04 9,999,673 6,000,000 Royal Bank of Scotland, 1.400%, due 10/21/04 5,996,700 8,000,000 S St. Germain Holdings Ltd., 1.230%, due 07/06/04 7,998,360 2,550,000 S St. Germain Holdings Ltd., 1.230%, due 07/13/04 2,548,867 3,049,000 S Thunder Bay Funding Corp., 1.190%, due 07/02/04 3,048,798 ---------------- Total Commercial Paper (Cost $68,801,230) 68,795,616 ---------------- REPURCHASE AGREEMENT: 2.1% 29,936,000 S Goldman Sachs Repurchase Agreement dated, 1.500%, due 07/01/04, $29,937,247 to be received upon repurchase (Collateralized by $30,065,000 Federal National Mortgage Association, 5.250%, Market Value plus accrued interest $30,539,701 due 08/01/12) 29,936,000 ---------------- Total Repurchase Agreement (Cost $29,936,000) 29,936,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 24.9% $ 326,812,169 The Bank of New York Institutional Cash Reserve Fund, 1.250% $ 326,812,169 ---------------- Total Securities Lending Collateral (Cost $326,812,169) 326,812,169 ---------------- Total Short-Term Investments (Cost $425,549,399) 425,543,785 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $1,771,100,975)* 130.6% $ 1,841,634,776 OTHER ASSETS AND LIABILITIES-NET (30.6) (432,006,520) ----- ---------------- NET ASSETS 100.0% $ 1,409,628,256 ===== ================
@ Non-income producing security @@ Foreign issuer # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. L Loaned security, a portion or all of the security is on loan at June 30, 2004. S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. W When-issued or delayed delivery security. X Fair value determined by ING Funds Valuation Committee appointed by the Funds' Board of Directors/Trustees. XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $1,797,761,098. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 63,450,963 Gross Unrealized Depreciation (19,577,285) -------------- Net Unrealized Appreciation $ 43,873,678 ==============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED SHORT CONTRACTS CONTRACTS MARKET VALUE DATE GAIN/(LOSS) - --------------- --------- ------------ ---------- ----------- U.S. 2 Year Treasury Note 116 $(24,423,438) Sep-04 $ (27,128) U.S. 5 Year Treasury Note 150 (16,303,125) Sep-04 (122,625) ------------ ----------- $(40,726,563) $ (149,753) ============ =========== LONG CONTRACTS - -------------- U.S. Long Bond 120 $ 12,765,000 Sep-04 $ 266,588 ============ ===========
See Accompanying Notes to Financial Statements 69 PORTFOLIO OF INVESTMENTS ING VP GROWTH AND INCOME PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - --------------------------------------------------------------------------------------------------- COMMON STOCK: 98.2% AEROSPACE/DEFENSE: 5.6% 1,386,400 L Boeing Co. $ 70,831,176 1,413,600 L Northrop Grumman Corp. 75,910,320 650,300 United Technologies Corp. 59,489,444 ---------------- 206,230,940 ---------------- AGRICULTURE: 2.0% 1,486,500 Altria Group, Inc. 74,399,325 ---------------- 74,399,325 ---------------- APPAREL: 1.0% 963,500 Jones Apparel Group, Inc. 38,038,980 ---------------- 38,038,980 ---------------- BANKS: 6.4% 1,375,000 L Bank of America Corp. 116,352,500 162,709 City National Corp. 10,689,981 1,254,700 Mellon Financial Corp. 36,800,351 1,218,200 Wells Fargo & Co. 69,717,586 ---------------- 233,560,418 ---------------- BEVERAGES: 1.2% 900,000 Coca-Cola Co. 45,432,000 ---------------- 45,432,000 ---------------- BIOTECHNOLOGY: 1.2% 785,000 @,L Amgen, Inc. 42,837,450 ---------------- 42,837,450 ---------------- BUILDING MATERIALS: 0.7% 600,000 @,L American Standard Cos., Inc. 24,186,000 ---------------- 24,186,000 ---------------- COMPUTERS: 2.1% 3,566,400 L Hewlett-Packard Co. 75,251,040 ---------------- 75,251,040 ---------------- DIVERSIFIED FINANCIAL SERVICES: 12.9% 331,400 Bear Stearns Cos., Inc. 27,940,334 526,400 L Capital One Financial Corp. 35,995,232 2,859,700 L Citigroup, Inc. 132,976,050 760,500 L Countrywide Financial Corp. 53,425,125 2,413,000 @,L E*Trade Financial Corp. 26,904,950 509,800 Fannie Mae 36,379,328 721,000 Franklin Resources, Inc. 36,107,680 1,078,000 JP Morgan Chase & Co. 41,794,060 599,800 Lehman Brothers Holdings, Inc. 45,134,950 673,100 @ Morgan Stanley 35,519,487 ---------------- 472,177,196 ---------------- ELECTRIC: 0.8% 2,193,200 @,L Calpine Corp. 9,474,624 700,000 Edison Intl. 17,899,000 ---------------- 27,373,624 ---------------- ELECTRONICS: 0.8% 975,000 @,L Agilent Technologies, Inc. 28,548,000 ---------------- 28,548,000 ---------------- ENGINEERING AND CONSTRUCTION: 0.6% 575,082 @ Jacobs Engineering Group, Inc. 22,646,729 ---------------- 22,646,729 ---------------- ENTERTAINMENT: 2.1% 1,950,000 International Game Technology $ 75,270,000 ---------------- 75,270,000 ---------------- FOOD: 1.0% 2,198,000 Archer-Daniels-Midland Co. 36,882,440 ---------------- 36,882,440 ---------------- HEALTHCARE-PRODUCTS: 3.4% 314,200 Guidant Corp. 17,557,496 1,950,100 L Johnson & Johnson 108,620,570 ---------------- 126,178,066 ---------------- HEALTHCARE-SERVICES: 1.9% 500,000 Aetna, Inc. 42,500,000 1,236,400 L Health Management Associates, Inc. 27,720,088 ---------------- 70,220,088 ---------------- INSURANCE: 1.5% 816,600 L Hartford Financial Services Group, Inc. 56,133,084 ---------------- 56,133,084 ---------------- INTERNET: 2.2% 880,200 @,L eBay, Inc. 80,934,390 ---------------- 80,934,390 ---------------- LODGING: 1.1% 2,726,200 @,L Caesars Entertainment, Inc. 40,893,000 ---------------- 40,893,000 ---------------- MEDIA: 2.5% 2,662,800 @,L Time Warner, Inc. 46,812,024 1,204,300 L Viacom, Inc. 43,017,596 ---------------- 89,829,620 ---------------- MISCELLANEOUS MANUFACTURING: 7.7% 1,390,000 L Danaher Corp. 72,071,500 2,425,300 General Electric Co. 78,579,720 555,000 ITT Industries, Inc. 46,065,000 2,524,200 @@ Tyco Intl. Ltd. 83,651,988 ---------------- 280,368,208 ---------------- OIL AND GAS: 8.1% 660,000 L Burlington Resources, Inc. 23,878,800 900,000 L ChevronTexaco Corp. 84,699,000 2,618,500 Exxon Mobil Corp. 116,287,585 1,410,000 @@,L Royal Dutch Petroleum Co. ADR 72,854,700 ---------------- 297,720,085 ---------------- OIL AND GAS SERVICES: 0.7% 894,000 L Halliburton Co. 27,052,440 ---------------- 27,052,440 ---------------- PHARMACEUTICALS: 5.1% 1,600,000 Bristol-Myers Squibb Co. 39,200,000 3,555,200 Pfizer, Inc. 121,872,256 408,000 @@,L Teva Pharmaceutical Industries ADR 27,454,320 ---------------- 188,526,576 ----------------
See Accompanying Notes to Financial Statements 70 PORTFOLIO OF INVESTMENTS ING VP GROWTH AND INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - --------------------------------------------------------------------------------------------------- RETAIL: 5.6% 750,000 L CVS Corp. $ 31,515,000 3,360,000 L Gap, Inc. 81,480,000 500,000 Limited Brands 9,350,000 220,282 L RadioShack Corp. 6,306,674 1,425,000 L Wal-Mart Stores, Inc. 75,183,000 ---------------- 203,834,674 ---------------- SEMICONDUCTORS: 4.9% 1,442,800 @ Applied Materials, Inc. 28,307,736 2,566,900 Intel Corp. 70,846,440 596,100 @,L Kla-Tencor Corp. 29,435,418 2,250,000 @,L LSI Logic Corp. 17,145,000 1,417,800 Texas Instruments, Inc. 34,282,404 ---------------- 180,016,998 ---------------- SOFTWARE: 7.5% 725,800 @,L Electronic Arts, Inc. 39,592,390 6,886,600 L,S Microsoft Corp. 196,681,296 272,100 @,L Pixar, Inc. 18,913,671 1,700,000 @,L Siebel Systems, Inc. 18,156,000 ---------------- 273,343,357 ---------------- TELECOMMUNICATIONS: 7.6% 4,950,000 @ Cisco Systems, Inc. 117,315,000 8,300,000 @,L JDS Uniphase Corp. 31,457,000 1,969,000 Motorola, Inc. 35,934,250 1,559,700 @,L Nextel Communications, Inc. 41,581,602 1,510,000 L Scientific-Atlanta, Inc. 52,095,000 ---------------- 278,382,852 ---------------- Total Common Stock (Cost $3,227,963,988) 3,596,267,580 ---------------- PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 0.0% OIL AND GAS: 0.0% $ 532,000 L,S Devon Energy Corp., 4.90%, due 08/15/08 551,285 727,000 S Devon Energy Corp., 4.95%, due 08/15/08 748,810 ---------------- Total Corporate Bonds (Cost $957,242) 1,300,095 ---------------- Total Long-Term Investments (Cost $3,228,921,230) 3,597,567,675 ---------------- SHORT-TERM INVESTMENTS: 20.6% REPURCHASE AGREEMENT: 3.1% 113,822,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $113,826,743 to be received upon repurchase (Collateralized by $110,985,000 Various U.S. Government Agencies, 4.750%-6.250%, Market Value plus accrued interest $116,831,216, due 01/02/07-08/01/12) 113,822,000 ---------------- Total Repurchase Agreement (Cost $113,822,000) 113,822,000 ---------------- SECURITIES LENDING COLLATERAL: 17.5% $ 21,013,568 Allstate Financial, 1.400%, due 11/15/04 $ 21,013,568 622,048,101 The Bank of New York Institutional Cash Reserve Fund, 1.250% 622,048,101 ---------------- Total Securities Lending Collateral (Cost $643,061,669) 643,061,669 ---------------- Total Short-Term Investments (Cost $756,883,669) 756,883,669 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $3,985,804,899)* 118.8% $ 4,354,451,344 OTHER ASSETS AND LIABILITIES-NET (18.8) (690,028,058) ----- ---------------- NET ASSETS 100.0% $ 3,664,423,286 ===== ================
@ Non-income producing security @@ Foreign issuer S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. * Cost for federal income tax purposes is $4,075,187,197. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 334,891,770 Gross Unrealized Depreciation (55,627,623) -------------- Net Unrealized Appreciation $ 279,264,147 ==============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN - -------------- --------- ------------ ---------- ---------- S&P 500 Index 174 $ 49,607,400 Sep-04 $ 416,660 ============ =========
See Accompanying Notes to Financial Statements 71 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 26.1% AIRLINES: 0.4% $ 1,065,000 # American Airlines, Inc., 7.250%, due 02/05/09 $ 1,018,406 4,447,000 American Airlines, Inc., 7.324%, due 10/15/09 3,661,556 ---------------- 4,679,962 ---------------- AUTO MANUFACTURERS: 0.1% 951,000 L Ford Motor Co., 6.625%, due 10/01/28 835,132 ---------------- 835,132 ---------------- BANKS: 6.5% 1,410,000 @@ Australia & New Zealand Banking Group Ltd., 1.494%, due 10/29/49 1,200,862 2,242,000 #,@@,L Banco Bradesco SA, 8.750%, due 10/24/13 2,258,815 5,031,000 @@ Banco Santander Chile SA, 7.375%, due 07/18/12 5,545,163 1,370,000 @@ Bank of Ireland, 1.800%, due 12/29/49 1,156,113 569,000 # BankAmerica Institutional Capital B, 7.700%, due 12/31/26 609,796 777,000 Barnett Capital I, 8.060%, due 12/01/26 851,706 695,000 Barnett Capital II, 7.950%, due 12/01/26 764,107 810,000 BNY Capital I, 7.970%, due 12/31/26 880,953 2,136,000 #,L Danske Bank A/S, 5.914%, due 12/29/49 2,169,085 6,412,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 7,163,235 289,000 FBS Capital I, 8.090%, due 11/15/26 319,434 1,180,000 First Union Capital I, 7.935%, due 01/15/27 1,291,460 1,560,000 First Union Institutional Capital II, 7.850%, due 01/01/27 1,677,752 885,000 Fleet Capital Trust II, 7.920%, due 12/11/26 946,161 2,312,000 #,@@,L HBOS Capital Funding LP, 6.071%, due 06/30/49 2,325,539 735,000 @@ Hongkong & Shanghai Banking Corp. Ltd., 1.313%, due 07/29/49 624,243 4,450,000 @@ HSBC Bank PLC, 1.975%, due 06/29/49 3,767,161 2,300,000 @@ HSBC Bank PLC, 2.125%, due 06/29/49 1,949,250 3,180,000 @@ Lloyds TSB Bank PLC, 1.270%, due 08/29/49 2,739,300 2,850,000 @@ Lloyds TSB Bank PLC, 2.188%, due 06/29/49 2,489,914 3,363,000 M&T Bank Corp., 3.850%, due 04/01/13 3,301,551 4,770,000 Mellon Capital I, 7.720%, due 12/01/26 5,172,750 1,190,000 @@ National Westminster Bank PLC, 1.375%, due 08/29/49 1,027,057 $ 3,560,000 @@ National Westminster Bank PLC, 1.438%, due 11/29/49 $ 3,010,895 500,000 NB Capital Trust, 7.830%, due 12/15/26 543,660 2,415,000 NB Capital Trust IV, 8.250%, due 04/15/27 2,685,065 1,792,000 #,@@ Northern Rock PLC, 5.600%, due 04/30/49 1,744,378 2,773,000 # Rabobank Capital Funding II, 5.260%, due 12/29/49 2,688,315 1,520,000 @@ Royal Bank of Canada, 1.750%, due 06/29/85 1,306,597 650,000 @@ Royal Bank of Scotland Group PLC, 2.063%, due 12/29/49 560,981 890,000 @@ Societe Generale, 1.688%, due 11/29/49 744,183 2,510,000 @@ Standard Chartered PLC, 1.315%, due 01/29/49 1,968,274 1,850,000 @@ Standard Chartered PLC, 1.375%, due 07/29/49 1,451,016 4,710,000 @@ Standard Chartered PLC, 1.800%, due 11/29/49 3,719,619 4,240,000 @@ Standard Chartered PLC, 2.070%, due 12/29/49 3,339,000 470,000 # Wells Fargo Capital A, 7.730%, due 12/01/26 511,906 1,620,000 @@ Westpac Banking Corp., 1.338%, due 09/29/49 1,368,050 5,028,000 #,L Westpac Capital Trust IV, 5.256%, due 12/29/49 4,641,850 ---------------- 80,515,196 ---------------- BEVERAGES: 0.7% 4,358,000 #,@@ Cia Brasileira de Bebidas, 8.750%, due 09/15/13 4,619,480 482,000 @@ Cia Brasileira de Bebidas, 10.500%, due 12/15/11 554,300 3,762,000 # Miller Brewing Co., 4.250%, due 08/15/08 3,747,140 ---------------- 8,920,920 ---------------- CHEMICALS: 0.1% 901,000 Dow Chemical Co., 5.750%, due 11/15/09 941,324 874,000 # Sociedad Quimica y Minera de Chile SA, 7.700%, due 09/15/06 935,667 ---------------- 1,876,991 ---------------- DIVERSIFIED FINANCIAL SERVICES: 4.3% 1,918,000 # Arcel Finance Ltd., 6.361%, due 05/01/12 1,906,693 1,127,000 # Arcel Finance Ltd., 7.048%, due 09/01/11 1,121,365 3,163,000 L Boeing Capital Corp., 7.375%, due 09/27/10 3,581,047 4,840,000 #,@@ Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 4,706,900 444,000 CitiCorp Capital I, 7.933%, due 02/15/27 485,866 487,000 Citigroup Capital II, 7.750%, due 12/01/36 524,987
See Accompanying Notes to Financial Statements 72 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (CONTINUED) $ 1,119,000 # Corestates Capital Trust I, 8.000%, due 12/15/26 $ 1,225,916 708,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 681,422 4,087,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 3,962,420 1,225,000 @@ Financiere CSFB NV, 1.250%, due 03/29/49 981,502 2,053,000 L Ford Motor Credit Co, 7.000%, due 10/01/13 2,075,930 2,043,000 L General Motors Acceptance Corp, 6.875%, due 08/28/12 2,081,474 1,382,000 General Motors Acceptance Corp, 8.000%, due 11/01/31 1,419,957 2,735,000 General Motors Acceptance Corp., 7.750%, due 01/19/10 2,972,398 20,089 # Hollinger Participation Trust, 12.125%, due 11/15/10 23,504 600,000 JPM Capital Trust I, 7.540%, due 01/15/27 637,218 5,426,000 XX,# Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 5,370,763 1,231,000 L,S Merrill Lynch & Co., Inc., 6.150%, due 01/26/06 1,297,542 1,480,000 # Mizuho JGB Investment LLC, 9.870%, due 12/29/49 1,675,560 985,000 #,L Mizuho Preferred Capital Co LLC, 8.790%, due 12/29/49 1,083,500 2,801,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 2,671,720 3,716,676 #,@@ PF Export Receivables Master Trust, 6.436%, due 06/01/15 3,667,375 1,530,000 #,L SB Treasury Co LLC, 9.400%, due 12/29/49 1,728,900 5,257,000 # Tokai Preferred Capital Co. LLC, 9.980%, due 12/29/49 5,922,430 50,000 Universal City Development Partners, 11.750%, due 04/01/10 58,125 1,340,000 # Wachovia Capital Trust V, 7.965%, due 06/01/27 1,471,857 ---------------- 53,336,371 ---------------- ELECTRIC: 4.6% 2,405,000 #,L AES Gener SA, 7.500%, due 03/25/14 2,284,750 2,291,484 # Allegheny Energy Supply Statutory Trust 2001, 10.250%, due 11/15/07 2,480,531 241,216 # Allegheny Energy Supply Statutory Trust 2001, 13.000%, due 11/15/07 247,246 1,700,000 L Consumers Energy Co., 4.250%, due 04/15/08 1,686,227 2,287,000 L Consumers Energy Co., 4.800%, due 02/17/09 2,291,199 3,047,000 DTE Energy Co., 2.324%, due 06/01/07 3,045,742 5,863,000 @@,L Empresa Nacional de Electricidad SA/Chile, 7.750%, due 07/15/08 6,261,784 7,810,000 Enserch Capital I, 2.460%, due 07/01/28 7,308,668 $ 3,494,000 Enterprise Capital Trust II, 2.806%, due 06/30/28 $ 3,306,079 2,330,000 L FirstEnergy Corp., 6.450%, due 11/15/11 2,419,174 3,337,000 # Monongahela Power Co., 6.700%, due 06/15/14 3,385,530 4,868,000 Ohio Power Co., 6.375%, due 07/15/33 4,779,295 9,040,000 # PG&E Corp., 6.875%, due 07/15/08 9,492,000 624,237 #,L,S Power Contract Financing LLC, 5.200%, due 02/01/06 628,317 4,900,000 #,L Power Contract Financing LLC, 6.256%, due 02/01/10 4,995,584 747,660 PPL Montana LLC, 8.903%, due 07/02/20 815,417 1,273,000 # Tenaska Virginia Partners LP, 6.119%, due 03/30/24 1,261,558 ---------------- 56,689,101 ---------------- FOOD: 0.9% 1,728,000 Kroger Co., 7.250%, due 06/01/09 1,921,645 3,042,000 Safeway, Inc., 4.800%, due 07/16/07 3,111,650 2,073,000 L Supervalu, Inc., 7.875%, due 08/01/09 2,343,906 4,036,000 Tyson Foods, Inc., 7.250%, due 10/01/06 4,349,266 ---------------- 11,726,467 ---------------- GAS: 0.3% 3,728,000 # Williams Gas Pipelines Central, Inc., 7.375%, due 11/15/06 4,002,940 ---------------- 4,002,940 ---------------- HOME BUILDERS: 0.0% 117,000 Technical Olympic USA, Inc., 9.000%, due 07/01/10 120,510 ---------------- 120,510 ---------------- INSURANCE: 0.7% 3,353,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 3,765,027 2,582,000 # Monumental Global Funding II, 3.850%, due 03/03/08 2,578,251 1,727,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 1,913,134 ---------------- 8,256,412 ---------------- LODGING: 0.1% 1,494,000 Caesars Entertainment, Inc., 9.375%, due 02/15/07 1,626,593 ---------------- 1,626,593 ---------------- MEDIA: 0.1% 1,218,000 L Time Warner, Inc., 6.875%, due 05/01/12 1,318,166 ---------------- 1,318,166 ---------------- MINING: 0.5% 1,350,000 #,@@ Corp Nacional del Cobre de Chile - CODELCO, 6.375%, due 11/30/12 1,431,595
See Accompanying Notes to Financial Statements 73 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- MINING (CONTINUED) $ 474,000 L Vale Overseas Ltd., 8.250%, due 01/17/34 $ 414,750 3,763,000 L Vale Overseas Ltd., 8.625%, due 03/08/07 4,045,225 ---------------- 5,891,570 ---------------- MISCELLANEOUS MANUFACTURING: 0.4% 6,078,000 #,L Bombardier, Inc., 6.300%, due 05/01/14 5,171,308 ---------------- 5,171,308 ---------------- MULTI-NATIONAL: 0.6% 4,113,000 @@ Corp. Andina de Fomento CAF, 5.200%, due 05/21/13 3,963,538 3,588,000 @@ Corp. Andina de Fomento CAF, 6.875%, due 03/15/12 3,864,068 ---------------- 7,827,606 ---------------- OIL AND GAS: 2.2% 2,328,000 Amerada Hess Corp., 6.650%, due 08/15/11 2,466,993 3,271,000 Amerada Hess Corp., 7.875%, due 10/01/29 3,543,756 3,125,000 #,@@ Empresa Nacional de Petroleo ENAP, 4.875%, due 03/15/14 2,915,575 50,000 Energy Partners Ltd., 8.750%, due 08/01/10 52,500 7,101,000 @@ Husky Oil Co., 8.900%, due 08/15/28 8,047,620 6,943,000 #,L Pemex Project Funding Master Trust, 2.820%, due 06/15/10 6,991,601 1,416,000 Pemex Project Funding Master Trust, 7.375%, due 12/15/14 1,451,400 1,947,000 Valero Energy Corp., 8.750%, due 06/15/30 2,436,211 ---------------- 27,905,656 ---------------- PACKAGING AND CONTAINERS: 0.4% 1,357,000 # Sealed Air Corp., 5.375%, due 04/15/08 1,404,517 3,796,000 # Sealed Air Corp., 6.950%, due 05/15/09 4,148,212 ---------------- 5,552,729 ---------------- REAL ESTATE: 0.6% 3,262,000 EOP Operating LP, 7.750%, due 11/15/07 3,622,791 548,000 Liberty Property LP, 6.375%, due 08/15/12 576,381 2,884,000 Liberty Property LP, 7.750%, due 04/15/09 3,278,837 ---------------- 7,478,009 ---------------- RETAIL: 0.0% 115,000 L Dollar General Corp., 8.625%, due 06/15/10 128,369 ---------------- 128,369 ---------------- SAVINGS AND LOANS: 0.9% 2,843,000 L Great Western Financial, 8.206%, due 02/01/27 3,095,970 3,909,000 Sovereign Bancorp, Inc., 10.500%, due 11/15/06 4,480,832 $ 3,779,000 L Washington Mutual, Inc., 4.375%, due 01/15/08 $ 3,806,114 ---------------- 11,382,916 ---------------- TELECOMMUNICATIONS: 1.5% 1,720,000 # Brasil Telecom SA, 9.375%, due 02/18/14 1,677,000 3,063,000 S Cia de Telecomunicaciones de Chile SA, 7.625%, due 07/15/06 3,303,651 4,543,000 L,S Sprint Capital Corp., 4.780%, due 08/17/06 4,633,238 1,425,000 L Sprint Capital Corp., 8.750%, due 03/15/32 1,665,285 2,695,000 L Sprint Capital Corp., 6.875%, due 11/15/28 2,598,026 3,220,000 Verizon Florida, Inc., 6.125%, due 01/15/13 3,315,270 2,080,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 1,945,588 ---------------- 19,138,058 ---------------- TRANSPORTATION: 0.2% 1,910,000 # MISC Capital Ltd., 5.000%, due 07/01/09 1,915,079 ---------------- 1,915,079 ---------------- Total Corporate Bonds (Cost $327,320,764) 326,296,061 ---------------- COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET-BACKED SECURITIES: 28.2% AGENCY COLLATERAL CMO: 0.3% 4,145,247 Vendee Mortgage Trust, 5.840%, due 09/15/23 4,106,924 ---------------- 4,106,924 ---------------- AUTOMOBILE ASSET BACKED SECURITIES: 1.1% 9,200,000 Capital Auto Receivables Asset Trust, 2.750%, due 04/16/07 9,188,998 4,320,000 Nissan Auto Receivables Owner Trust, 2.610%, due 07/15/08 4,274,525 ---------------- 13,463,523 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES: 4.3% 5,078,000 Bear Stearns Commercial Mortgage Securities, 1.400%, due 06/25/34 5,074,826 3,372,000 Bear Stearns Commercial Mortgage Securities, 4.170%, due 01/12/41 3,340,553 6,167,579 Chase Manhattan Bank-First Union National Bank, 7.439%, due 08/15/31 6,950,158 3,639,033 CS First Boston Mortgage Securities Corp., 3.727%, due 03/15/35 3,525,285 9,380,000 JP Morgan Chase Commercial Mortgage Securities Corp., 6.244%, due 04/15/35 10,007,888 5,220,000 LB-UBS Commercial Mortgage Trust, 6.226%, due 03/15/26 5,605,697
See Accompanying Notes to Financial Statements 74 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO As of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED) $ 4,500,000 L LB-UBS Commercial Mortgage Trust, 7.370%, due 08/15/26 $ 5,086,829 9,380,000 Mortgage Capital Funding, Inc., 6.663%, due 03/18/30 10,113,257 4,336,658 Prudential Commercial Mortgage Trust, 3.669%, due 02/11/36 4,192,416 ---------------- 53,896,909 ---------------- CREDIT CARD ASSET BACKED SECURITIES: 1.0% 8,800,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 9,228,022 3,460,000 Fleet Credit Card Master Trust II, 2.400%, due 07/15/08 3,440,090 ---------------- 12,668,112 ---------------- HOME EQUITY ASSET BACKED SECURITIES: 3.8% 2,748,940 Argent Securities, Inc., 1.620%, due 03/25/34 2,751,506 2,377,792 Asset Backed Funding Certificates, 1.580%, due 11/25/33 2,378,619 7,164,525 Bayview Financial Acquisition Trust, 1.820%, due 12/28/34 7,177,958 3,766,167 Centex Home Equity, 1.580%, due 01/25/34 3,769,209 695,000 Equity One ABS, Inc., 2.976%, due 09/25/33 695,914 5,689,154 Merrill Lynch Mortgage Investors, Inc., 1.660%, due 07/25/34 5,705,962 3,542,000 New Century Home Equity Loan Trust, 1.570%, due 04/25/34 3,542,000 1,831,636 Residential Asset Mortgage Products, Inc., 1.610%, due 06/25/33 1,830,671 2,373,000 Residential Asset Securities Corp., 1.580%, due 02/25/34 2,374,379 7,347,025 Residential Asset Securities Corp., 1.610%, due 12/25/33 7,366,042 2,602,000 Residential Funding Mortgage Securities II, 3.450%, due 01/25/16 2,608,860 7,465,000 Saxon Asset Securities Trust, 3.960%, due 06/25/33 7,312,029 ---------------- 47,513,149 ---------------- OTHER ASSET-BACKED SECURITIES: 0.7% 856,489 Ameriquest Mortgage Securities, Inc., 1.600%, due 02/25/34 857,688 2,069,714 Amortizing Residential Collateral Trust, 1.550%, due 05/25/32 2,069,552 2,154,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 1.600%, due 07/25/33 2,157,214 3,256,000 Residential Asset Mortgage Products, Inc., 2.140%, due 02/25/30 3,222,884 ---------------- 8,307,338 ---------------- WHOLE LOAN COLLATERALIZED MORTGAGE: 14.4% $ 3,643,985 Bank of America Alternative Loan Trust, 1.750%, due 12/25/33 $ 3,635,725 1,195,797 Bank of America Alternative Loan Trust, 5.500%, due 02/25/33 1,218,073 6,123,702 Bank of America Mortgage Securities, 1.750%, due 12/25/33 6,132,265 2,182,982 Bank of America Mortgage Securities, 4.413%, due 03/25/33 2,186,248 5,548,405 Bank of America Mortgage Securities, 5.000%, due 06/25/33 5,598,417 3,297,076 Bear Stearns Asset Backed Securities, Inc., 5.625%, due 11/25/32 3,360,642 4,892,072 CitiCorp. Mortgage Securities, Inc., 1.800%, due 10/25/33 4,893,801 2,949,183 Countrywide Alternative Loan Trust, 1.700%, due 07/25/18 2,955,773 7,810,000 CS First Boston Mortgage Securities Corp., 4.187%, due 10/25/33 7,865,858 10,317,016 First Horizon Alternative Mortgage Securities, 4.875%, due 06/25/34 10,387,778 6,523,574 GMAC Mortgage Corp. Loan Trust, 5.250%, due 04/25/34 6,613,254 9,269,000 GMAC Mortgage Corp. Loan Trust, 5.500%, due 01/25/34 9,340,424 6,928,715 GSR Mortgage Loan Trust, 6.500%, due 01/25/34 7,200,458 5,225,482 MASTR Alternative Loans Trust, 6.500%, due 05/25/33 5,354,071 4,058,008 MASTR Asset Securitization Trust, 1.750%, due 11/25/33 4,052,388 2,169,461 MASTR Asset Securitization Trust, 8.000%, due 06/25/33 2,292,906 11,905,434 MLCC Mortgage Investors, Inc., 1.620%, due 01/25/29 11,921,268 3,531,036 Prime Mortgage Trust, 1.700%, due 02/25/34 3,531,231 6,290,157 Residential Accredit Loans, Inc., 1.750%, due 03/25/18 6,308,836 1,765,002 Residential Funding Mtg Sec I, 1.600%, due 12/25/33 1,766,266 2,342,860 Residential Funding Mtg Sec I, 1.750%, due 05/25/33 2,340,056 9,221,609 Sequoia Mortgage Trust, 1.600%, due 01/20/34 9,201,012 9,947,295 Structured Asset Mortgage Investments, Inc., 1.580%, due 07/19/34 9,936,019 4,351,909 Structured Asset Securities Corp., 5.500%, due 07/25/33 4,309,427 11,900,000 Structured Asset Securities Corp., 6.000%, due 03/25/34 12,186,039 4,588,000 Thornburg Mortgage Securities Trust, 1.610%, due 05/25/44 4,588,000 6,564,012 Thornburg Mortgage Securities Trust, 1.650%, due 12/25/33 6,565,561
See Accompanying Notes to Financial Statements 75 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- WHOLE LOAN COLLATERALIZED MORTGAGE (CONTINUED) $ 6,871,013 Washington Mutual, 1.900%, due 01/25/34 $ 6,782,211 3,195,040 Washington Mutual, 5.000%, due 06/25/18 3,180,850 1,223,786 Wells Fargo Mortgage Backed Securities Trust, 1.800%, due 02/25/34 1,223,543 5,950,000 Wells Fargo Mortgage Backed Securities Trust, 4.500%, due 08/25/18 5,527,439 9,021,964 Wells Fargo Mortgage Backed Securities Trust, 5.000%, due 12/25/33 8,867,989 ---------------- 181,323,828 ---------------- WHOLE LOAN COLLATERALIZED PLANNED AMORTIZATION CLASS: 2.3% 7,146,204 GSR Mortgage Loan Trust, 1.700%, due 10/25/32 7,148,655 3,330,649 MASTR Alternative Loans Trust, 1.700%, due 11/25/33 3,335,754 6,697,182 MASTR Alternative Loans Trust, 8.500%, due 05/25/33 6,873,065 7,610,000 Residential Funding Securities Corp., 4.750%, due 02/25/33 7,702,345 2,270,522 Residential Funding Securities Corp., 8.500%, due 05/25/33 2,416,414 1,479,592 Washington Mutual, 1.700%, due 03/25/34 1,480,024 ---------------- 28,956,257 ---------------- WL COLLATERALIZED SUPPORT CMO: 0.3% 3,226,514 Bank of America Mortgage Securities, 5.500%, due 11/25/33 3,190,932 ---------------- 3,190,932 ---------------- Total Collateralized Mortgage Obligations and Asset-Backed (Cost $355,626,761) 353,426,972 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 34.6% AGENCY COLLATERAL CMO: 2.3% 20,687,932 1.890%, due 04/15/32 20,915,259 7,571,434 6.000%, due 01/15/29 7,711,671 ---------------- 28,626,930 ---------------- AGENCY COLLATERAL PAC CMO: 1.1% 7,875,000 6.000%, due 01/15/28 8,196,280 5,136,000 6.000%, due 01/15/29 5,248,610 614,529 10.000%, due 02/25/19 694,461 ---------------- 14,139,351 ---------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 7.7% 25,560,000 2.700%, due 03/16/07 25,143,193 12,325,000 2.750%, due 02/09/07 12,160,202 4,563,103 4.500%, due 04/01/14 4,478,054 4,275,000 5.500%, due 07/15/34 4,256,297 8,394,266 6.000%, due 01/15/29 8,476,788 35,130,000 6.000%, due 07/15/33 35,876,513 4,000,000 6.500%, due 07/15/34 4,168,752 $ 1,198,518 7.500%, due 11/01/28 $ 1,294,204 ---------------- 95,854,003 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 21.7% 695,000 2.859%, due 12/26/29 690,930 12,455,000 L 2.875%, due 05/19/08 12,001,302 20,090,000 4.500%, due 07/01/17 19,631,707 6,167,000 4.750%, due 12/25/42 6,183,866 32,826,000 5.000%, due 07/01/18 32,867,034 72,167,000 5.000%, due 07/15/34 69,708,849 6,140,000 L 5.250%, due 08/01/12 6,145,514 44,221 5.500%, due 11/01/16 45,397 246,504 5.500%, due 12/01/16 253,063 26,101 5.500%, due 04/01/17 26,780 81,713 5.500%, due 02/01/18 83,837 20,771 5.500%, due 06/01/18 21,303 122,374 5.500%, due 10/01/18 125,555 2,861,270 5.500%, due 07/15/19 2,926,541 6,975,000 5.500%, due 08/15/19 7,107,957 12,327,000 5.500%, due 07/15/34 12,269,211 315,669 6.000%, due 06/01/16 329,487 32,642 6.000%, due 08/01/16 34,071 11,034 6.000%, due 08/01/16 11,517 268,058 6.000%, due 10/01/16 279,792 372,028 6.000%, due 10/01/16 388,313 281,755 6.000%, due 01/01/17 294,089 422,008 6.000%, due 01/01/17 440,299 256,841 6.000%, due 02/01/17 267,974 17,848 6.000%, due 02/01/17 18,622 6,007 6.000%, due 02/01/17 6,268 272,590 6.000%, due 04/01/17 284,405 453,570 6.000%, due 04/01/17 473,229 399,193 6.000%, due 04/01/17 416,495 405,715 6.000%, due 04/01/17 423,300 260,122 6.000%, due 05/01/17 271,397 277,638 6.000%, due 05/01/17 289,672 268,447 6.000%, due 05/01/17 280,082 365,668 6.000%, due 05/01/17 381,517 126,741 6.000%, due 06/01/17 132,234 290,553 6.000%, due 06/01/17 303,147 481,697 6.000%, due 07/01/17 502,575 425,611 6.000%, due 07/01/17 444,058 323,364 6.000%, due 08/01/17 337,380 393,622 6.000%, due 08/01/17 410,683 258,392 6.000%, due 08/01/17 269,591 241,575 6.000%, due 08/01/17 252,230 910,610 6.000%, due 09/01/17 950,078 3,175,141 6.000%, due 09/01/17 3,312,761 20,637 6.000%, due 10/01/17 21,532 1,014,891 6.000%, due 11/01/17 1,059,318 22,387 6.000%, due 02/01/18 23,357 925,336 6.000%, due 04/01/18 965,547 278,077 6.000%, due 09/01/18 290,145 246,383 6.000%, due 11/01/18 257,075 394,509 6.000%, due 12/01/18 411,778 1,349,290 6.000%, due 07/01/29 1,384,709 8,836,317 6.000%, due 07/25/29 8,966,094 3,756,548 6.000%, due 07/25/29 3,812,933 5,262,170 6.000%, due 04/25/31 5,332,946 12,630,000 6.000%, due 07/15/34 12,894,447 5,923,436 6.500%, due 08/01/29 6,182,936 470,799 6.500%, due 01/01/32 491,123 534,744 6.500%, due 09/01/32 557,364
See Accompanying Notes to Financial Statements 76 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 861,785 6.500%, due 10/01/32 $ 898,238 372,045 6.500%, due 10/01/32 387,783 15,090,000 6.500%, due 07/15/33 15,712,463 5,560,000 L 6.625%, due 11/15/10 6,181,363 49,300 7.000%, due 08/01/25 52,341 51,907 7.000%, due 10/01/25 55,108 15,141 7.000%, due 11/01/25 16,075 47,092 7.000%, due 12/01/25 49,996 43,480 7.000%, due 12/01/25 46,161 80,983 7.000%, due 12/01/25 85,978 69,849 7.000%, due 02/01/26 74,157 148,508 7.000%, due 02/01/26 157,668 49,923 7.000%, due 03/01/26 52,958 133,592 7.000%, due 03/01/26 141,712 100,241 7.000%, due 03/01/26 106,423 47,753 7.000%, due 03/01/26 50,655 67,868 7.000%, due 03/01/26 72,054 404,580 7.000%, due 01/01/30 428,432 5,011,746 7.000%, due 06/01/31 5,310,384 7,545,000 7.000%, due 07/15/33 7,957,621 270,179 7.500%, due 10/01/30 289,722 178,613 7.500%, due 11/01/30 191,533 336,115 7.500%, due 11/01/30 360,426 3,255,173 7.500%, due 06/25/32 3,490,147 4,154,408 7.500%, due 01/25/48 4,432,376 ---------------- 271,147,190 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 1.8% 253,095 4.000%, due 12/20/29 256,357 362,737 4.375%, due 04/20/28 363,780 7,784,726 6.500%, due 10/15/31 8,147,824 263,884 7.000%, due 04/15/26 281,481 237,788 7.000%, due 04/15/26 253,645 367,098 7.000%, due 04/15/26 391,579 230,877 7.000%, due 04/15/26 246,273 657,271 7.000%, due 05/15/32 698,640 72,750 7.500%, due 04/15/22 78,912 14,725 7.500%, due 05/15/22 15,972 6,773 7.500%, due 06/15/22 7,347 6,749 7.500%, due 06/15/22 7,321 9,209 7.500%, due 08/15/22 9,989 7,837 7.500%, due 06/15/24 8,486 7,736 7.500%, due 06/15/24 8,377 45,087 7.500%, due 01/15/26 48,721 3,687 7.500%, due 07/15/26 3,984 68,340 7.500%, due 03/15/29 73,789 159,819 7.500%, due 04/15/29 172,562 237,448 7.500%, due 08/15/29 256,380 2,016 7.500%, due 08/15/29 2,176 82,155 7.500%, due 09/15/29 88,706 72,208 7.500%, due 10/15/29 77,965 113,371 7.500%, due 12/15/29 122,409 87,451 7.500%, due 01/15/30 94,389 1,764 7.500%, due 02/15/30 1,904 271,542 7.500%, due 02/15/30 293,085 156,823 7.500%, due 05/15/30 169,265 31,231 7.500%, due 06/15/30 33,709 19,490 7.500%, due 06/15/30 21,037 3,279 7.500%, due 07/15/30 3,539 94,402 7.500%, due 07/15/30 101,891 4,670 7.500%, due 07/15/30 5,040 44,217 7.500%, due 08/15/30 47,725 $ 2,294 7.500%, due 08/15/30 $ 2,476 2,593 7.500%, due 08/15/30 2,799 141,409 7.500%, due 10/15/30 152,628 2,895 7.500%, due 11/15/30 3,121 2,389 7.500%, due 11/15/30 2,578 3,913 7.500%, due 11/15/30 4,223 2,489 7.500%, due 11/15/30 2,687 4,561 7.500%, due 12/15/30 4,922 40,108 7.500%, due 12/15/30 43,290 471 7.500%, due 01/15/31 508 3,008 7.500%, due 01/15/31 3,243 2,138 7.500%, due 01/15/31 2,305 645 7.500%, due 02/15/31 695 2,226 7.500%, due 02/15/31 2,403 45,288 7.500%, due 02/15/31 48,825 2,774 7.500%, due 02/15/31 2,991 5,562 7.500%, due 02/15/31 5,997 4,866 7.500%, due 03/15/31 5,246 62,031 7.500%, due 03/15/31 66,875 51,690 7.500%, due 04/15/31 55,726 14,375 7.500%, due 09/15/31 15,497 1,582,404 7.500%, due 12/15/31 1,707,600 233,611 7.500%, due 01/15/32 252,160 153,280 7.500%, due 02/15/32 165,257 200,387 7.500%, due 03/15/32 216,297 44,870 7.500%, due 03/15/32 48,376 8,860 7.500%, due 04/15/32 9,552 103,915 7.500%, due 05/15/32 112,035 204,027 7.500%, due 06/15/32 219,970 38,524 7.500%, due 06/15/32 41,534 110,505 7.500%, due 07/15/32 119,140 499,558 7.500%, due 08/15/32 538,594 1,740,221 7.500%, due 09/15/32 1,876,206 4,242,980 8.000%, due 12/15/17 4,674,383 ---------------- 22,804,398 ---------------- Total U.S. Government Agency Obligations (Cost $431,319,567) 432,571,872 ---------------- U.S. TREASURY OBLIGATIONS: 14.3% U.S. TREASURY BONDS: 11.3% 24,123,000 L,S 4.000%, due 02/15/14 22,997,903 26,265,000 L,S 4.750%, due 05/15/14 26,547,165 13,879,000 L,S 5.290%, due 05/15/16 7,527,748 22,285,000 L,S 5.375%, due 02/15/31 22,482,623 6,855,000 L,S 5.500%, due 08/15/28 6,946,850 20,180,000 L,S 6.250%, due 08/15/23 22,352,518 11,955,000 L,S 10.375%, due 11/15/12 14,601,921 12,394,000 L,S 13.250%, due 05/15/14 17,555,915 ---------------- 141,012,643 ---------------- U.S. TREASURY NOTES: 3.0% 2,000,000 L,S 1.625%, due 01/31/05 1,999,454 9,378,000 L,S 2.500%, due 05/31/06 9,349,435 16,489,000 L,S 3.125%, due 05/15/07 16,494,161 10,028,000 L,S 4.000%, due 06/15/09 10,116,928 ---------------- 37,959,978 ---------------- Total U.S. Treasury Obligations (Cost $180,635,764) 178,972,621 ----------------
See Accompanying Notes to Financial Statements 77 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- OTHER BONDS: 1.9% SOVEREIGN: 1.9% $ 1,182,118 @@ Brazilian Government Intl. Bond, 2.188%, due 04/15/12 995,472 1,474,000 @@ Brazilian Government Intl. Bond, 10.000%, due 08/07/11 1,437,150 2,615,000 @@ Colombia Government Intl. Bond, 10.000%, due 01/23/12 2,719,600 2,322,000 @@ Dominican Republic Intl. Bond, 9.040%, due 01/23/13 1,439,640 1,096,000 @@ Ecuador Government Intl. Bond, 7.000%, due 08/15/30 776,790 260,000 @@ Panama Government Intl. Bond, 9.375%, due 07/23/12 285,350 722,000 @@ Panama Government Intl. Bond, 9.375%, due 01/16/23 740,050 2,423,000 @@ Peru Government Intl. Bond, 4.500%, due 03/07/17 1,967,844 658,000 @@,L Philippine Government Intl. Bond, 9.875%, due 01/15/19 658,000 5,260,000 @@ Russia Government Intl. Bond, 5.000%, due 03/31/30 4,815,529 2,244,000 @@ Turkey Government Intl. Bond, 12.375%, due 06/15/09 2,577,795 1,107,000 #,@@,XX Ukraine Government Intl. Bond, 7.650%, due 06/11/13 1,059,953 1,918,644 @@ Uruguay Government Intl. Bond, 10.500%, due 10/20/06 2,110,355 1,953,000 @@,L Venezuela Government Intl. Bond, 10.750%, due 09/19/13 1,928,588 ---------------- Total Other Bonds (Cost $24,253,417) 23,512,116 ---------------- SHARES VALUE - --------------------------------------------------------------------------------------------------- COMMON STOCK: 1.1% REAL ESTATE INVESTMENT TRUSTS: 1.1% 2,546,000 # iStar Financial, Inc., 5.700%, due 03/01/14 2,402,500 4,766,000 # iStar Financial, Inc., 5.125%, due 04/01/11 4,556,506 2,478,000 Simon Property Group LP, 4.875%, due 03/18/10 2,455,805 4,564,000 L Simon Property Group LP, 6.375%, due 11/15/07 4,888,878 ---------------- 14,303,689 ---------------- Total Common Stock (Cost $14,255,526) 14,303,689 ---------------- PREFERRED STOCK: 0.5% BANKS: 0.5% 620 #,XX DG Funding Trust 6,665,000 Total Preferred Stock ---------------- (Cost $6,741,324) 6,665,000 ---------------- WARRANTS: 0.0% SOVEREIGN: 0.0% 750 XX Central Bank of Nigeria -- ---------------- Total Warrants (Cost $630) -- ---------------- Total Long-Term Investments (Cost $1,340,153,753) 1,335,748,331 ---------------- PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 30.1% COMMERCIAL PAPER: 6.6% $ 3,000,000 S Concord Minutemen Cap., 1.160%, due 07/07/05 $ 2,999,955 ---------------- 8,300,000 S DaimlerChrystler Holdings Corp., 1.450%, due 07/14/04 8,295,320 4,000,000 S Ford Motor Credit Co., 5.280%, due 07/19/04 3,997,023 5,500,000 S Ford Motor Credit Corp., 1.350%, due 07/06/04 5,498,763 11,000,000 S General Motors Corp., 1.270%, due 07/01/04 10,999,611 3,600,000 S Hertz Corp., 5.300%, due 07/08/04 3,598,782 6,000,000 S Jupiter Securities Corp., 1.170%, due 07/09/04 5,998,110 7,400,000 S Kraft Foods, 1.180%, due 07/01/04 7,399,758 5,000,000 S Kraft Foods, 1.270%, due 07/08/04 4,998,589 6,000,000 S Royal Bank of Scotland, 1.400%, due 10/21/04 5,996,700 10,000,000 S St. Germain Holdings Ltd., 1.230%, due 07/06/04 9,997,950 2,000,000 S St. Germain Holdings Ltd., 1.230%, due 07/13/04 1,999,112 10,000,000 S Thunder Bay Funding Corp., 1.190%, due 07/02/04 9,999,339 ---------------- Total Commercial Paper (Cost $81,784,886) 81,779,012 ---------------- REPURCHASE AGREEMENT: 3.9% 49,253,000 S Goldman Sachs Repurchase Agreement dated, 1.500%, due 07/01/04, $49,255,052 to be received upon repurchase (Collateralized by $49,460,000 Federal National Mortgage Association, 5.250%, Market Value plus accrued interest $50,240,932 due 08/01/12), 1.500%, due 07/01/04 49,253,000 ---------------- Total Repurchase Agreement (Cost $49,253,000) 49,253,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 19.6% 2,001,292 Allstate Financial, 1.400%, due 11/15/04 2,001,292 4,004,099 Nationwide Global Funding, 1.500%, due 11/15/04 4,004,099 240,138,948 The Bank of New York Institutional Cash Reserve Fund, 1.250% 240,138,948 ---------------- Total Securities Lending Collateral (Cost $246,114,339) 246,144,339 ---------------- Total Short-Term Investments (Cost $377,152,226) 377,176,351 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $1,717,305,978)* 136.8% $ 1,712,894,682 OTHER ASSETS AND LIABILITIES-NET (36.8) (461,035,941) ----- ---------------- NET ASSETS 100.0% $ 1,251,858,741 ===== ================
See Accompanying Notes to Financial Statements 78 PORTFOLIO OF INVESTMENTS ING VP BOND PORTFOLIO as of June 30, 2004 (Unaudited) (continued) # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. L Loaned security, a portion or all of the security is on loan at June 30, 2004. @@ Foreign issuer XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. ## Restricted securities (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $1,717,723,028. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 10,264,474 Gross Unrealized Depreciation (15,092,820) -------------- Net Unrealized Depreciation $ (4,828,346) ==============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED SHORT CONTRACTS CONTRACTS MARKET VALUE DATE GAIN/(LOSS) - --------------- --------- ------------ ---- ----------- U.S. 2 Year Treasury Note 231 $ (48,636,329) Sep-04 $ (54,267) U.S. 5 Year Treasury Note 400 (43,475,000) Sep-04 (327,000) ------------- ----------- $ (92,111,329) $ (381,267) ============= =========== LONG CONTRACTS U.S. Long Bond 250 $ 26,593,750 Sep-04 $ 555,391 ============= ===========
See Accompanying Notes to Financial Statements 79 PORTFOLIO OF INVESTMENTS ING VP MONEY MARKET PORTFOLIO(1) as of June 30, 2004 (Unaudited)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CORPORATE NOTES: 26.2% $ 11,400,000 ABN Amro Bank NV/Chicago, 1.189%, due 03/18/05 $ 11,398,378 12,900,000 # American Honda Finance, 1.491%, due 09/16/04 12,900,039 9,500,000 # Bank of New York Co., Inc., 1.340%, due 07/28/05 9,500,000 18,100,000 Bank One Delaware NA, 1.400%, due 08/06/04 18,102,394 9,500,000 # Concord Minutemen Cap, 1.160%, due 07/07/05 9,499,858 9,500,000 First Union, 1.891%, due 03/31/05 9,526,980 3,750,000 Fleet National Bank, 1.280%, due 11/22/04 3,750,934 11,500,000 Fleet National Bank, 1.800%, due 09/21/04 11,501,633 16,000,000 L General Electric Capital Corp., 1.250%, due 07/08/05 16,020,000 16,007,000 L General Electric Capital Corp., 1.645%, due 03/15/05 16,027,008 7,800,000 HBOS Treasury Services PLC, 1.100%, due 08/01/05 7,804,282 14,000,000 # HBOS Treasury Services PLC, 1.315%, due 08/23/04 14,002,144 19,500,000 # HBOS Treasury Services PLC, 1.579%, due 07/22/05 19,500,585 5,700,000 HSBC Bank USA, 1.555%, due 04/22/05 5,672,583 23,900,000 KeyBank National Association, 1.199%, due 08/03/04 23,898,679 3,800,000 PNC Bank NA, 1.460%, due 05/18/05 3,804,750 11,500,000 Royal Bank of Canada/ New York, 1.270%, due 03/30/05 11,498,656 9,900,000 Toyota Motor Credit Corp., 1.170%, due 02/07/05 9,900,000 9,600,000 Toyota Motor Credit Corp., 4.100%, due 09/08/04 9,636,000 9,800,000 Wachovia Bank NA/Charlotte, 1.449%, due 07/30/04 9,800,000 31,200,000 Wal-Mart Stores, 1.238%, due 02/22/05 31,200,000 14,100,000 Washington Mutual Bank, 1.160%, due 07/29/04 14,099,182 10,800,000 Wells Fargo/Old, 1.134%, due 08/02/05 10,786,500 7,800,000 Westpac Bank, 1.408%, due 07/11/05 7,799,072 ---------------- Total Corporate Notes (Cost $297,692,655) 297,629,657 ---------------- COMMERCIAL PAPER: 28.7% 11,364,000 # Barton Capital Corp., 1.050%, due 07/01/04 11,363,669 11,600,000 Blue Ridge Asset Funding, 1.070%, due 07/02/04 11,599,310 10,000,000 # Concord Minutemen Cap, 1.210%, due 07/11/05 9,999,730 9,000,000 # Concord Minutemen Cap, 1.210%, due 07/12/05 8,999,640 26,000,000 # Concord Minutemen Cap, 1.270%, due 07/15/05 25,998,804 $ 11,900,000 Crown Point Capital Co., 1.600%, due 10/06/04 $ 11,848,354 11,500,000 Edison Asset Securitization, 1.050%, due 07/07/04 11,497,704 11,500,000 Galaxy Funding 1.040%, due 07/08/04 11,497,345 10,300,000 Goldman Sachs Group, 1.180%, due 07/12/04 10,300,036 12,300,000 Goldman Sachs Group, 1.280%, due 10/27/04 12,284,625 11,600,000 Household Financial, 1.100%, due 07/01/04 11,599,646 11,600,000 HSBC USA, Inc., 1.180%, due 08/10/04 11,584,484 22,800,000 Jupiter Securities Corp., 1.160%, due 07/09/04 22,793,388 11,500,000 Lasalle Bank, 1.160%, due 12/17/04 11,461,705 12,000,000 Lasalle Bank Note, 1.210%, due 11/05/04 11,985,000 31,400,000 Money Market Trust Series A, 1.645%, due 07/08/05 31,400,000 13,500,000 Royal Bank of Scotland, 1.400%, due 10/21/04 13,492,575 20,000,000 # St. Germain Holdings, 1.500%, due 07/01/04 19,999,167 19,588,000 # St. Germain Holdings, 1.170%, due 07/08/04 19,582,911 11,500,000 # St. Germain Holdings, 1.230%, due 07/13/04 11,494,892 11,300,000 # Tulip Funding Corp., 1.210%, due 07/12/04 11,295,442 24,600,000 # Verizon Global Funding, 1.630%, due 07/13/05 24,599,016 ---------------- Total Commercial Paper (Cost $326,775,368) 326,677,443 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 11.3% FEDERAL HOME LOAN BANK: 7.0% 11,600,000 1.240%, due 03/01/05 11,600,000 12,100,000 1.400%, due 02/25/05 12,065,999 11,700,000 1.425%, due 04/04/05 11,653,727 7,900,000 1.470%, due 02/28/05 7,880,613 12,700,000 1.500%, due 12/07/04 12,700,000 7,900,000 1.500%, due 03/01/05 7,881,767 7,800,000 L 1.510%, due 12/08/04 7,800,000 7,200,000 1.600%, due 05/16/05 7,164,000 ---------------- 78,746,106 ---------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 1.0% 11,900,000 1.219%, due 02/14/05 11,900,000 ---------------- 11,900,000 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 3.3% 13,300,000 L 1.400%, due 02/25/05 13,262,627 11,500,000 1.550%, due 05/04/05 11,450,389 5,400,000 1.610%, due 05/13/05 5,379,750 8,000,000 1.630%, due 01/03/05 7,990,000 ---------------- 38,082,766 ---------------- Total U.S. Government Agency Obligations (Cost $129,000,000) 128,728,872 ----------------
See Accompanying Notes to Financial Statements 80 PORTFOLIO OF INVESTMENTS ING VP MONEY MARKET PORTFOLIO(1) as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT: 4.1% $ 11,700,000 Dexia Bank, 1.508%, due 12/07/04 $ 11,685,609 11,700,000 UBS AG Stanford, 1.195%, due 12/06/04 11,670,282 11,000,000 Washington Mutual Bank, 1.120%, due 07/14/04 10,999,957 12,200,000 Washington Mutual Bank, 1.300%, due 12/27/04 12,171,940 ---------------- Total Certificates Of Deposit (Cost $46,600,595) 46,527,788 ---------------- COLLATERALIZED MORTGAGE OBLIGATIONS: 5.4% 11,000,000 #,XX Blue Heron Funding Ltd., 1.310%, due 05/18/05 10,999,450 11,500,000 XX Blue Ridge Asset Funding, 1.310%, due 03/18/05 11,499,425 11,600,000 XX Blue Ridge Asset Funding, 1.330%, due 02/23/05 11,599,420 13,900,000 #,I,XX Newcastle CDO I Ltd., 1.321%, due 09/24/38 13,900,000 13,700,000 #,I,XX Putnam Structured Product CDO, 1.259%, due 10/15/38 13,700,000 ---------------- Total Collateralized Mortgage Obligations (Cost $61,700,000) 61,698,295 ---------------- INVESTMENT COMPANY: 1.2% 13,500,000 #,I,XX Money Market Trust LLY, 1.175%, due 06/03/05 13,499,960 ---------------- Total Investment Company (Cost $13,500,000) 13,499,960 ---------------- REPURCHASE AGREEMENT: 23.0% 261,232,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500% due 07/01/04, $261,242,885 to be received upon repurchase (Collateralized by $265,947,000 various U.S. Government Agency Obligations, 2.500%-7.125%, Market Value plus accrued interest $266,457,599, 1.500%, due 07/01/04 261,232,000 ---------------- Total Repurchase Agreement (Cost $261,232,000) 261,232,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 2.7% 23,715,619 The Bank of New York Institutional Cash Reserve Fund, 1.250% 23,715,619 ---------------- Total Securities Lending Collateral (Cost $23,715,619) 23,715,619 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $1,160,216,237)* 102.0% $ 1,159,709,634 OTHER ASSETS AND LIABILITIES-NET (2.0) (22,687,881) ----- ---------------- NET ASSETS 100.0% $ 1,137,021,753 ===== ================
(1) All securities with a maturity date greater than one year have either a variable rate, a demand feature, are prerefunded, or an optional or mandatory put resulting in an effective maturity of one year or less. Rate shown reflects current rate. # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. I Illiquid security L Loaned security, a portion or all of the security is on loan at June 30, 2004. X Fair value determined by ING Funds Valuation Committee appointed by the Funds' Board of Directors/Trustees. XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 25,408 Gross Unrealized Depreciation (532,011) -------------- Net Unrealized Depreciation $ (506,603) ==============
PERCENTAGE OF INDUSTRY NET ASSETS - -------------------------------------------------------------- Consumer Banks - Central U.S. 2.6% Consumer Banks - Eastern U.S. 2.4 Consumer Banks - Southern U.S. 4.2 Diversified Financial Services 3.8 Fiduciary Banks 0.8 Finance - Auto Loans 2.9 Finance - Consumer Loans 1.4 Finance - Investment Banker/Broker 2.0 Finance - Other Services 2.0 Money Center Banks 8.4 Other ABS 6.2 S&L/Thrifts - Western U.S. 3.3 Sovereign Agency 12.7 Special Purpose Entity 20.0 Super-Regional Banks - U.S. 2.0 Telecom Services 2.2 Repurchase Agreement 23.0 Securities Lending Collateral 2.7 Other Assets and Liabilities, Net (2.6) ----- NET ASSETS 100.0% =====
See Accompanying Notes to Financial Statements 81 DIRECTOR AND OFFICER INFORMATION (Unaudited) The business and affairs of the Funds are managed under the direction of the Fund's Board of Directors. A director who is not an interested person of the Funds, as defined in the 1940 Act, is an independent director ("Non-Interested Director"). The Directors of the Funds are listed below. The Statement of Additional Information includes additional information about directors of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE THE COMPANY SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR ------- ----------- --------- --------------- ----------- -------- NON-INTERESTED DIRECTORS: Albert E. DePrince, Jr. Director June 1998 - Director, Business and 53 Director, International 7337 E. Doubletree Ranch Rd. present Economic Research Center Atlantic Economic Society Scottsdale, Arizona 85258 (August 1999 - present) and (October 2002 - Present); Born: 1941 Professor of Economics and Academy of Economics and Finance, Middle Tennessee Finance (February 2001 - State University (1991 to Present). present). Maria T. Fighetti Director April Retired. Formerly, Attorney, 53 None 7337 E. Doubletree Ranch Rd. 1994 - New York City Department of Scottsdale, Arizona 85258 present Mental Health (June 1973 Born: 1943 - October 2002) and Associate Commissioner (1995 - 2002). Sidney Koch Director April Financial Adviser, 53 Director, Northwest 7337 E. Doubletree Ranch Rd. 1994 - Self-Employed (January 1993 - Center for the Arts, Scottsdale, Arizona 85258 present present). Torrington, CT. Born: 1935 Corine T. Norgaard Director June 1991 - Retired. Formerly, Dean, 53 Director/Trustee, Mass 7337 E. Doubletree Ranch Rd. present Barney School of Business, Mutual Corporate and Scottsdale, Arizona 85258 University of Hartford Participation Investors Born: 1937 (August 1996 - June 2004). (April 1997 - Present) Director, Advest Trust Company (1998 - Present); Director, Connecticut Health Foundation (2002 - Present). Edward T. O'Dell Director June 2002 - Retired. Formerly, 53 None 7337 E. Doubletree Ranch Rd. present Partner/Chairman of Financial Scottsdale, Arizona 85258 Service Group, Goodwin Procter Born: 1935 LLP (June 1966 - September 2000); Joseph E. Obermeyer(2) Director January President, Obermeyer & 53 None 7337 E. Doubletree Ranch Rd. 2003 - Associates, Inc. (Consulting Scottsdale, Arizona 85258 present firm) (Novemeber 1999 - Born: 1957 present) and Senior Manager, Arthur Andersen LLP (1995 - October 1999).
82 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE THE COMPANY SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR ------- ----------- --------- --------------- ----------- -------- DIRECTORS WHO ARE "INTERESTED PERSONS" J. Scott Fox(3) Director December Vice Chairman and Chief 53 Director of IPC Financial Aeltus Investment 1997 - Operating Officer, ING Network, Inc. (January Management, Inc. present Investment Management 2001 - present); 10 State House Square (September 2002 - present); Director, Metro Hartford Hartford, Connecticut President and Chief Executive Chamber of Commmerce and Born: 1955 Officer (April 2001 - The Greater Hartford Arts present), Managing Director Council. and Chief Operating Officer (April 1994 - April 2001), Aeltus Investment Management, Inc. Thomas J. McInerney(4) Director March Chief Executive Officer, ING 171 Director, Equitable Life 7337 E. Doubletree Ranch Rd. 2002 - U.S. Financial Services Insurance Co., Golden Scottsdale, Arizona 85258 present (September 2001 - present); American Life Insurance Born: 1956 Member, ING Americas Co., Life Insurance Executive Committee (2001 - Company of Georgia, present); ING Aeltus Holding Midwestern United Life Company, Inc. (2000 - Insurance Co., ReliaStar present), ING Retail Holding Life Insurance Co., Company (1998 - present), and Security Life of Denver, ING Retirement Holdings, Inc. Security Connecticut Life (1997 - present). Formerly, Insurance Co., Southland President, ING Life Insurance Life Insurance Co., USG Annuity Company (September Annuity and Life Company, 1997 - November 2002); and United Life and President, Chief Executive Annuity Insurance Co., Officer and Director of Inc. (March 2001 - Northern Life Insurance Present); Member of the Company (March 2001 - October Board, Bushnell 2002); General Manager and Performing Arts Center; Chief Executive Officer, ING St. Francis Hospital; Worksite Division (December National Conference for 2000 - October 2001), Community Justice; and President, ING-SCI, Inc. Metro Atlanta Chamber of (August 1997 - December Commerce. 2000); President, Aetna Financial Services (August 1997 - December 2000).
- ---------------- (1) Directors serve until their successors are duly elected and qualified, subject to the Board's retirement policy. (2) Mr. Obermeyer was elected to the Board on January 1, 2003. (3) Mr. Fox is an "interested person," as defined under the 1940 Act, because of his relationship with ING Aeltus, an affiliate of ING Investments. (4) Mr. McInerney is an "interested person," as defined under the 1940 Act, because of his affiliation with ING Groep N.V., the parent corporation of the Investment Manager, ING Investments, LLC and the Distributor, ING Funds Distributor, LLC. 83 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE COMPANY TIME SERVED(1) PAST FIVE YEARS ------- --------------------- -------------- --------------- James M. Hennessy President, Chief March 2002 - present President and Chief Executive 7337 E. Doubletree Ranch Rd. Executive Officer and Officer, ING Investments, LLC Scottsdale, Arizona 85258 Chief Operating (December 2001 - Present). Born: 1949 Officer Formerly, Senior Executive Vice President and Chief Operating Officer, ING Investments, LLC (April 1995 - December 2000); and Executive Vice President, ING Investments, LLC (May 1998 - June 2000). Stanley D. Vyner Executive Vice March 2002 - present Executive Vice President, ING 7337 E. Doubletree Ranch Rd. President Investments, LLC and certain of its Scottsdale, Arizona 85258 affiliates (July 2000 - Present) and Born: 1950 Chief Investment Risk Officer (June 2003 - Present); Formerly, Chief Investment Officer the International Portfolios, ING Investments, LLC (July 1996 - June 2003); and President and Chief Executive Officer, ING Investments, LLC (August 1996 - August 2000). Michael J. Roland Executive Vice April 2002 - present Executive Vice President, Chief 7337 E. Doubletree Ranch Rd. President and Financial Officer and Treasurer, Scottsdale, Arizona 85258 Assistant Secretary ING Investments, LLC (December Born: 1958 2001 - Present). Formerly, Senior Principal Financial March 2002 - present Vice President, ING Investments, Officer LLC (June 1998 - December 2001). Robert S. Naka Senior Vice President March 2002 - present Senior Vice President and Assistant 7337 E. Doubletree Ranch Rd. and Assistant Secretary, ING Funds Services, LLC Scottsdale, Arizona 85258 Secretary (October 2001 - Present). Born: 1963 Formerly, Senior Vice President and Assistant Secretary, ING Funds Services, LLC (February 1997 - August 1999). Kimberly A. Anderson Senior Vice President December 2003 - present Senior Vice President, ING 7337 E. Doubletree Ranch Rd. Investments, LLC (October 2003 - Scottsdale, Arizona 85258 Present). Formerly, Vice President Born: 1964 and Assistant Secretary, ING Investments, LLC (October 2001 - October 2003); 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 March 2002 - present Vice President, ING Funds Services, 7337 E. Doubletree Ranch Rd. Treasurer LLC (October 2001 - Present) and Scottsdale, Arizona 85258 ING Investments, LLC (August Born: 1967 1997 - Present). Lauren D. Bensinger Vice President March 2003 - present Vice President and Chief 7337 E. Doubletree Ranch Rd. Compliance Officer, ING Funds Scottsdale, Arizona 85258 Distributor, LLC (July 1995 - Born: 1954 Present); Vice President (February 1996 - Present) and Chief Compliance Officer (October 2001 - Present), ING Investments, LLC. Theresa Kelety Secretary September 2003 - present Counsel, ING U.S. Financial Services 7337 E. Doubletree Ranch Rd. (April 2003 - Present). Formerly, Scottsdale, Arizona 85258 Senior Associate with Shearman & Born: 1963 Sterling (February 2000 - April 2003); and Associate with Sutherland Asbill & Brennan (1996 - February 2000).
84 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE COMPANY TIME SERVED(1) PAST FIVE YEARS ------- --------------------- -------------- --------------- Todd Modic Vice President September 2003 - present Vice President of Financial 7337 E. Doubletree Ranch Rd. Reporting - Fund Accounting of Scottsdale, Arizona 85258 ING Funds Services, LLC Born: 1967 (September 2002 - Present). Formerly, Director of Financial Reporting, ING Investments, LLC (March 2001 - September 2002); Director of Financial Reporting, Axient Communications, Inc. (May 2000 - January 2001); and Director of Finance, Rural/Metro Corporation (March 1995 - May 2000). Susan P. Kinens Assistant Vice March 2003 - present Assistant Vice President and 7337 E. Doubletree Ranch Rd. President and Assistant Secretary, ING Funds Scottsdale, Arizona 85258 Assistant Secretary Services, LLC (December 2002 - Born: 1976 Present); and has held various other positions with ING Funds Services, LLC for more than the last five years. Huey P. Falgout, Jr. Assistant Secretary September 2003 - present Chief Counsel, ING U.S. Financial 7337 E. Doubletree Ranch Rd. Services (September 2003 - Scottsdale, Arizona 85258 Present). Formerly, Counsel, ING Born: 1963 U.S. Financial Services (November 2002 - September 2003); and Associate General Counsel of AIG American General (January 1999 - November 2002). Maria M. Anderson Assistant Vice April 2002 - present Assistant Vice President of ING 7337 E. Doubletree Ranch Rd. President Funds Services, LLC (October 2001 - Scottsdale, Arizona 85258 Present). Formerly, Manager of Born: 1958 Fund Accounting and Fund Compliance, ING Investments, LLC (September 1999 - November 2001); and Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 - August 1999).
- ---------- (1) The officers hold office until the next annual meeting of the Trustees and until their successors have been elected and qualified. 85 INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 ADMINISTRATOR ING Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 DISTRIBUTOR ING Funds Distributor, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 1-800-334-3444 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141 CUSTODIAN The Bank of New York 100 Colonial Center Parkway, Suite 300 Lake Mary, FL 32746 LEGAL COUNSEL Goodwin Procter LLP Exchange Place 53 State Street Boston, MA 02109 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 99 High Street Boston, MA 02110 BEFORE INVESTING, CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE VARIABLE ANNUITY CONTRACT AND THE UNDERLYING VARIABLE INVESTMENT OPTIONS. THIS AND OTHER INFORMATION IS CONTAINED IN THE PROSPECTUS FOR THE VARIABLE ANNUITY CONTRACT AND THE UNDERLYING VARIABLE INVESTMENT OPTIONS. OBTAIN THESE PROSPECTUSES FROM YOUR AGENT/REGISTERED REPRESENTATIVE AND READ THEM CAREFULLY BEFORE INVESTING. THE PORTFOLIOS' PROXY VOTING RECORD WILL BE AVAILABLE WITHOUT CHARGE ON OR ABOUT AUGUST 31, 2004 ON THE PORTFOLIOS' WEBSITE AT www.ingfunds.com AND ON THE SEC'S WEBSITE AT www.sec.gov. [ING FUNDS LOGO] PRESORTED STANDARD U.S. POSTAGE PAID BOSTON MA PERMIT NO. 57842 VPSAR-CAPAPP (0604-081804) SEMI-ANNUAL REPORT JUNE 30, 2004 CLASSES I AND S [GRAPHIC] DOMESTIC EQUITY INDEX PORTFOLIOS ING VP INDEX PLUS LARGECAP PORTFOLIO ING VP INDEX PLUS MIDCAP PORTFOLIO ING VP INDEX PLUS SMALLCAP PORTFOLIO STRATEGIC ALLOCATION PORTFOLIOS ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO [ING FUNDS LOGO] TABLE OF CONTENTS President's Letter 1 Market Perspective 2 Portfolio Managers' Reports 4 Statements of Assets and Liabilities 17 Statements of Operations 18 Statements of Changes in Net Assets 19 Financial Highlights 22 Notes to Financial Statements 28 Portfolios of Investments 37 Director and Officer Information 82
(THIS PAGE INTENTIONALLY LEFT BLANK) PRESIDENT'S LETTER [PHOTO OF JAMES M. HENNESSY] Dear Shareholder, The past year has been unpredictable for investors. Strong growth in the overall economy coupled with questions concerning mutual fund trading practices have challenged investors. In general, economic activity has continued to increase, with the growth being widespread. Personal consumption of goods and services is leading the recovery supported by corporate purchases of equipment and software and by Government spending on defense. Worries of possible interest rate increases, worsening global turmoil and increasing oil prices have reduced the gains the market realized in the first few months of 2004. However, investors remain steadfast as nearly each of the last six months has seen an overall increase in assets invested in mutual funds despite continuing investigations into late trading and market timing issues at some of the largest and most respected financial services companies in the country. You should have received a letter from Thomas J. McInerney, the Chief Executive Officer of ING U.S. Financial Services, which provided information about the internal review ING management conducted regarding trading practices in ING mutual fund products. If you did not receive a copy of the letter, please contact Investor Services at 1-800-992-0180 and we will provide you with a copy. I wish to thank you on behalf of everyone here at ING Funds for your continued confidence. We look forward to helping you meet your investment goals in the future. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds July 19, 2004 1 MARKET PERSPECTIVE: SIX MONTHS ENDED JUNE 30, 2004 OVERVIEW Perhaps it was inevitable that the markets should be a little neurotic after the heady gains of 2003. But whatever the reasons, investors in 2004 alternately cheered and fretted over the developing economic outlook, sending markets up, down and up again before ending the first six months of 2004 with modest and distinctly fragile gains. At first the worry was the so-called jobless recovery, then half way through the six-month period a very strong U.S. employment report was released. The report generated euphoria until people realized that as the job market tightens, inflation picks up and rising interest rates were likely not far away. Investors took comfort from Federal Open Market Committee ("FOMC") Chairman Greenspan's soothing advice that the rebound in interest rates would be "measured". But as the six months ended June 30, 2004 drew to a close, attention switched nervously to the impending U.S. earnings season and the strong possibility that the splendid results of the last few quarters would likely not be maintained. GLOBAL EQUITIES managed a 3.52% return, net of withholding tax on dividends, for the six months ended June 30, 2004 according to the Morgan Stanley Capital International ("MSCI") World Index(1) in dollars, after peaking on average in mid February and spending much of May in negative territory. Among CURRENCIES, the euro reached a post launch record also in mid February before retreating and ending about 3.0% lower for the six months ended June 30, 2004. The British pound ended the six months 2.0% higher against the dollar, as the Bank of England became the first of the major central banks to raise interest rates. The yen lost approximately 1.5%, ironically after the Bank of Japan stopped buying dollars to keep the yen weak, spending a staggering $144 billion in the first quarter of 2004 to do so. FIXED INCOME MARKET U.S. FIXED INCOME classes started 2004 as they had ended 2003. Disappointing jobs reports, together with stubbornly high new unemployment claims, suggested continuing weakness, and gave bond investors a solid first quarter of gains. That all changed on the first Friday in April 2004, with the very bullish U.S. employment report. Investment grade bonds unsurprisingly bore the brunt of fears that a new cycle of rising interest rates from multi-decade low levels was about to start. For the six months ended June 30, 2004, the Lehman Brothers Aggregate Bond Index(2) of investment grade bonds returned a tiny 0.16%. The Lehman Brothers Corporate Index(3) component and the Lehman Brothers Treasury Bond Index(4) fell by 0.26% and 0.20%, respectively. Ten-year Treasury yields rose by 36 basis points to 4.62%, passing through rates not seen in nearly two years. Yields on 90-day Treasury Bills rose 39 basis points to 1.3%, emphatically breaching the 1.0% level, a rate above which they had not closed since June 9, 2003. High yield bonds did better, the Lehman Brothers U.S. Corporate High Yield Bond Index(5) hung on to return 1.35% for the six-month period. DOMESTIC EQUITY MARKET The U.S. EQUITIES market rose 3.44% in the six months ended June 30, 2004, based on the Standard & Poor's ("S&P") 500 Index(6) including dividends. This implies a price-to-earnings (P/E) level of just over 17 times 2004 earnings. Three strong employment reports in the second quarter of 2004 were welcomed, but all was not in harmony. For while successive, upbeat economic statistics sang of good economic times, there was also a steady drumbeat of evidence that inflation was picking up. The Federal Funds rate at just 1.0% meant that real interest rates were becoming ever more negative at the same time, while the economy was growing at over 4.0%. With labor markets tightening and oil prices breaking above $40 per barrel, this appears to be an increasingly unstable situation. Meanwhile, the FOMC took almost the entire second quarter of 2004 before increasing the Federal Funds rate to 1.25% on June 30, 2004. However, in the week before the increase, the wind seemed to shift again. First quarter of 2004 gross domestic product ("GDP") growth was revised down to 3.9%, durable goods orders fell, and retailers and auto companies complained of slack sales. On the day the FOMC raised rates, the Chicago Purchasing Managers' Index(7) had its largest monthly drop in 30 years. Perhaps Greenspan's "measured" policy was right, but perhaps something else was wrong. The first half of 2004 ended, with investors again nervously awaiting the employment report two days later. 2 MARKET PERSPECTIVE: SIX MONTHS ENDED JUNE 30, 2004 INTERNATIONAL MARKETS Most INTERNATIONAL MARKETS eked out similarly modest gains for the six months ended June 30, 2004, but JAPAN was the star, rising 10.73% in dollars according to the MSCI Japan Index(8). Sentiment was encouraged by first quarter GDP growth, reported at a surprisingly strong 6.1% annualized, suggesting that the world's second largest economy was at last emerging from its slump of more than a decade. EUROPEAN EX UK MARKETS gained 2.88% in dollars in the six months ended June 30, 2004, according to the MSCI Europe ex UK Index(9). Buoyant exports were about the only good news, as domestic demand still languished under unemployment of 9.0%. Still, these markets look relatively cheap. Finally the UK market rose 3.32% in dollars during the first six months of 2004, based on the MSCI UK Index(10). The economy appears to be strong, but the troubling imbalances of an over-indebted consumer and a housing price bubble led to three interest rate increases by the Bank of England, with more likely on the way. - ---------- (1) The MSCI WORLD INDEX reflects the stock markets of 22 countries, including the United States, Europe, Canada, Australia, New Zealand and the Far East -- comprising approximately 1,500 securities -- with values expressed in U.S. dollars. (2) The LEHMAN BROTHERS AGGREGATE BOND INDEX is composed of securities from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. (3) The LEHMAN BROTHERS CORPORATE INDEX includes all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt. (4) The LEHMAN BROTHERS TREASURY BOND INDEX (U.S. Dollars) is composed of all bonds covered by the Lehman Brothers Aggregate Bond Index with maturities of 10 years or greater. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. (5) The LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD BOND INDEX is generally representative of corporate bonds rated below investment-grade. (6) The S&P 500 INDEX is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. (7) The CHICAGO PURCHASING MANAGERS' INDEX measures manufacturing activity in the industrial Midwest. (8) The MSCI JAPAN INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Japan. (9) The MSCI EUROPE EX UK INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe, excluding the UK. (10) The MSCI UK INDEX is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in the UK. ALL INDICES ARE UNMANAGED AND INVESTORS CANNOT INVEST DIRECTLY IN AN INDEX. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT AND/OR A VARIABLE UNIVERSAL LIFE POLICY. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIOS' PERFORMANCE IS SUBJECT TO CHANGE SINCE THE PERIOD'S END AND MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA SHOWN. FOR VARIABLE ANNUITY CONTRACTS, PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. FOR VARIABLE UNIVERSAL LIFE POLICIES, PLEASE LOG ON TO www.ingfunds.com/us TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. MARKET PERSPECTIVE REFLECTS THE VIEWS OF THE CHIEF INVESTMENT RISK OFFICER ONLY THROUGH THE END OF THE PERIOD, AND IS SUBJECT TO CHANGE BASED ON MARKET AND OTHER CONDITIONS. 3 ING VP INDEX PLUS LARGECAP PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: Hugh T.M. Whelan Sr., Portfolio Manager, Douglas Cote, Portfolio Manager, ING Investment Management, Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Index Plus LargeCap Portfolio (the "Portfolio") seeks to outperform the total return performance of the Standard & Poor's ("S&P") 500 Index(1), while maintaining a market level of risk. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares provided a return of 3.10%, compared to the S&P 500 Index, which returned 3.44% for the same period. PORTFOLIO SPECIFICS: In the first six months of 2004, leadership within the S&P 500 Index moved decisively away from inflation-sensitive sectors toward defensive value sectors and sectors that typically benefit from a rising price environment, in particular energy. The market continued its positive run on the backdrop of stellar first-quarter profits that marked the third consecutive quarter of 20% plus year-over-year earnings growth, significantly surpassing Wall Street analysts' expectations. The strong performing sectors were energy and industrials. The information technology and materials sectors were the weak performers during the period. Free cash flow to price and change in working capital were helpful in stock selection during the reporting period; however price momentum and capital expenditure intensity were not helpful in identifying stocks likely to outperform. The positive contributors to performance were from our overweight positions in TXU Corp. and Microsoft Corp. The detractors from performance were our underweight positions in AT&T Wireless Services, Inc. and Yahoo!, Inc.. TXU Corp. rose in response to its excellent financial results and upward estimate revisions. Microsoft Corp., which had declined in the beginning of the year, jumped up after delivering better-than-expected quarterly earnings, reducing costs to boost profits, raising guidance, and announcing a large share buyback. AT&T Wireless Services, Inc. rose sharply in the beginning of the year after SBC Communications, Inc. and BellSouth Corp. announced their plan to purchase AT&T Wireless Services, Inc. and merge with their Cingular Wireless venture. After flat performance in the first part of the year, Yahoo!, Inc. rose steadily through the second quarter on record profits, increased earnings forecasts, strong advertising sales, reports of launching a new Chinese-language Internet search portal, and on release of a new and improved email service. MARKET OUTLOOK: We believe the third calendar quarter 2004 outlook is positive with second calendar quarter earnings expected to mark the fourth consecutive quarter of 20% plus year-over-year growth, defying forecasts of a slowing earnings year in 2004. The Federal Reserve (the "Fed") calmed markets by meeting its "measured" increase in rates, raising the Fed Funds rate to a meager 1.25% from a 46-year low. The markets are adjusting to a "measured" rising rate environment to fight nascent inflation, and so far the bond market has applauded with yields actually dropping on the news. This along with continued strong corporate profits bodes well for equities. The Portfolio is overweight in the industrials and energy sectors and underweight in the health care and consumer staples sectors. However, our overall sector exposures are by design quite close to the S&P 500 Index so that nearly all of our relative performance is driven by individual stock selection. 4 PORTFOLIO MANAGERS' REPORT ING VP INDEX PLUS LARGECAP PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 ---------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR SEPTEMBER 16, 1996 JULY 16, 2001 ------ ------ ------------------ --------------- Class I 17.88% (2.42)% 8.71% -- Class S 17.63% -- -- (1.13)% S&P 500 Index(1) 19.11% (2.17)% 8.43%(2) (0.37)%(3)
The table above illustrates the total return of ING VP Index Plus LargeCap Portfolio against the S&P 500 Index. The Index is unmanaged and has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract or life insurance policy. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on Portfolio distributions or the redemption of Portfolio shares. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT AND/OR A VARIABLE UNIVERSAL LIFE POLICY. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR VARIABLE ANNUITY CONTRACTS, PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. FOR VARIABLE UNIVERSAL LIFE POLICIES, PLEASE LOG ON TO www.ing.com/us TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large-capitalization companies whose securities are traded on major U.S. stock markets. (2) Since inception performance for the index is shown from October 1, 1996. (3) Since inception performance for the index is shown from August 1, 2001. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. These risks include sudden and unpredictable drops in the value of the market as a whole and periods of lackluster or negative performance. The value of convertible securities may fall when interest rates rise. Convertible securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter maturities. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio. The success of the Portfolio's strategy depends significantly on the Sub-Adviser's skill in determining which securities to overweight, underweight or avoid altogether. In order to generate additional income, the Portfolio may lend portfolio securities and it may lose the opportunity to sell them at a desirable price. 5 ING VP INDEX PLUS MIDCAP PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: Hugh T.M. Whelan Sr., Portfolio Manager, Douglas Cote, Portfolio Manager, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Index Plus MidCap Portfolio (the "Portfolio") seeks to outperform the total return performance of the Standard & Poor's ("S&P") MidCap 400 Index(1), while maintaining a market level of risk. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares provided a return of 6.84%, compared to the S&P MidCap 400 Index, which returned 6.09%. PORTFOLIO SPECIFICS: Performance was positive mainly due to individual security selection particularily in the consumer discretionary sector. Stock selection was especially positive within the information technology, energy, and financials sectors. A positive contributor to performance was our overweight in Valero Energy Corp., which was held during the period. The detractors to performance came from our overweight positions in ITT Educational Services, Inc. and SPX Corp. Valero Energy Corp. rose sharply as the company made new acquisitions, signed a new distribution agreement, posted good earnings, and increased its profit estimates. ITT Educational Services, Inc. declined on news that the company was served with federal search warrants, which was followed by multiple analyst downgrades and a class action lawsuit. SPX Corp. fell sharply after multiple downward earnings revisions and a class action lawsuit filed against it. Our individual security selections were helped by the effectiveness of factors historically successful at identifying outperforming stocks, especially analyst estimate revisions, capital expenditure intensity, and change in working capital. Factors that proved not to be helpful over the period were price momentum and relative value. MARKET OUTLOOK: We believe the near-term outlook is positive, with second-quarter earnings expected to mark the fourth consecutive quarter of 20% plus year-over-year growth, defying forecasts of a slowing earnings year in 2004. The Federal Reserve (the "Fed") calmed markets by meeting its "measured" increase in rates, raising the Fed Funds rate to a meager 1.25% from a 46-year low. The markets appear to be adjusting to a "measured" rising rate environment to fight nascent inflation and so far the bond market has applauded with yields actually dropping on the news. This along with continued strong corporate profits bodes well for equities. The Portfolio is modestly overweight in the consumer discretionary and information technology sectors and underweight in the energy and utilities sectors. However, our overall sector exposures are, by design, quite close to the S&P MidCap 400 Index so that nearly all of our relative performance is driven by individual stock selection. 6 PORTFOLIO MANAGERS' REPORT ING VP INDEX PLUS MIDCAP PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 ---------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 16, 1997 JULY 16, 2001 ------ ------ ------------------ --------------- Class I 27.05% 10.16% 12.75% -- Class S 26.81% -- -- 7.80% S&P MidCap 400 Index(1) 27.99% 9.05% 10.93%(2) 7.33%(3)
The table above illustrates the total return of ING VP Index Plus MidCap Portfolio against the S&P MidCap 400 Index. The Index is unmanaged and has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract or life insurance policy. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on Portfolio distributions or the redemption of Portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT AND/OR A VARIABLE UNIVERSAL LIFE POLICY. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR VARIABLE ANNUITY CONTRACTS, PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. FOR VARIABLE UNIVERSAL LIFE POLICIES, PLEASE LOG ON TO www.ing.com/us TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P MidCap 400 Index is an unmanaged index that measures the performance of the mid-size company segment of the U.S. market. (2) Since inception performance for the index is shown from January 1, 1998. (3) Since inception performance for the index is shown from August 1, 2001. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. Investing in stocks of mid-sized companies may entail greater price volatility and less liquidity than investing in stocks of larger companies. The value of convertible securities may fall when interest rates rise. Convertible securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter maturities. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio. The success of the Portfolio's strategy depends significantly on the Sub-Adviser's skill in determining which securities to overweight, underweight or avoid altogether. In order to generate additional income, the Portfolio may lend portfolio securities and it may lose the opportunity to sell them at a desirable price. 7 ING VP INDEX PLUS SMALLCAP PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: Hugh T.M. Whelan Sr., Portfolio Manager, Douglas Cote, Portfolio Manager, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Index Plus SmallCap Portfolio (the "Portfolio") seeks to outperform the total return performance of the Standard & Poor's ("S&P") SmallCap 600 Index(1), while maintaining a market level of risk. PERFORMANCE: For the six months ended June 30, 2004, the Portfolio's Class I shares provided a return of 9.62%, compared to the S&P SmallCap 600 Index, which returned 10.05%. PORTFOLIO SPECIFICS: Performance modestly trailed the S&P SmallCap 600 Index due to security selection, especially in the information technology and energy sectors. The positive contributors to performance were from our overweight positions in UICI Corp. and Vicor Corp. The detractors from performance were our overweight in ESS Technology, Inc. and underweight in Midway Games, Inc., which was previously held. Diversified financial services firm UICI Corp. nearly doubled over the period helped by an astounding quarterly report that was almost 75% above analyst expectations. Vicor Corp., an electronic equipment stock, surged in the last part of the period on significantly improved quarterly results. ESS Technology, Inc., despite impressive earnings that may have been ignored by investors, tumbled as semi-conductors took the brunt of investor profit-taking and new fears of terrorism. Midway Games, Inc. tripled over the last six months as the company beat sales forecasts and raised its guidance for the rest of this year and next year, although still losing money. Individual security selection was hurt by factors that we historically have found successful at identifying outperforming stocks, specifically price momentum and analyst estimate revision. Free cash flow to price and capital expenditure intensity were helpful in stock selection over the period. MARKET OUTLOOK: We believe the near-term outlook is positive, with second-quarter earnings expected to mark the fourth consecutive quarter of 20% plus year-over-year growth, defying forecasts of a slowing earnings year in 2004. The Federal Reserve (the "Fed") calmed markets by meeting its "measured" increase in rates, raising the Fed Funds rate to a meager 1.25% from a 46-year low. The markets appear to be adjusting to a "measured" rising rate environment to fight nascent inflation and so far the bond market has applauded with yields actually dropping on the news. This along with continued strong corporate profits bodes well for equities. The Portfolio is overweight in the consumer discretionary and materials sectors and underweight in the health care and information technology sectors. However, our overall sector exposures are by design quite close to the S&P SmallCap 600 Index so that nearly all of our relative performance is driven by individual stock selection. 8 PORTFOLIO MANAGERS' REPORT ING VP INDEX PLUS SMALLCAP PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 ---------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS S 1 YEAR 5 YEAR DECEMBER 19, 1997 JULY 16, 2001 ------ ------ ----------------- --------------- Class I 33.30% 9.21% 8.07% -- Class S 32.96% -- -- 9.78% S&P SmallCap 600 Index(1) 35.25% 10.69% 8.73%(2) 10.27%(3)
The table above illustrates the total return of ING VP Index Plus SmallCap Portfolio against the S&P SmallCap 600 Index. The Index is unmanaged and has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract or life insurance policy. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on Portfolio distributions or the redemption of Portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT AND/OR A VARIABLE UNIVERSAL LIFE POLICY. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR VARIABLE ANNUITY CONTRACTS, PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. FOR VARIABLE UNIVERSAL LIFE POLICIES, PLEASE LOG ON TO www.ing.com/us TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The S&P SmallCap 600 Index is an unmanaged index that measures the performance of the small-size company segment of the U.S. market. (2) Since inception performance for the index is shown from January 1, 1998. (3) Since inception performance for the index is shown from August 1, 2001. PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany investments in equities. Investing in stocks of smaller companies may entail greater price volatility and less liquidity than investing in stocks of larger companies. The value of convertible securities may fall when interest rates rise. Convertible securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter maturities. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio. The Portfolio's investments in high yield securities are subject to greater risk than high quality securities, including greater price volatility and principal and income risk. The success of the Portfolio's strategy depends significantly on the Sub-Adviser's skill in determining which securities to overweight, underweight or avoid altogether. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. In order to generate additional income, the Portfolio may lend portfolio securities and it may lose the opportunity to sell them at a desirable price. 9 ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Mary Ann Fernandez, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Strategic Allocation Growth Portfolio (the "Portfolio") seeks to provide capital appreciation. Performance: For the six months ended June 30, 2004, the Class I shares of the Portfolio provided a return of 2.93%, compared to its custom benchmark, which returned 3.02%. PORTFOLIO SPECIFICS: The Portfolio's asset allocation posture helped performance for the six months ended June 30, 2004, as an overweight in domestic equities and an underweight in fixed income securities paid off for the period, one in which the Russell 3000 Index (representing approximately 98% of U.S. equity market capitalization) returned 3.59% and the Lehman Brothers Aggregate Bond Index was essentially flat, rising 0.16%. International equities posted solid results as the Morgan Stanley Capital International ("MSCI") EAFE Index rose 4.86%. Our asset allocation, which was established in June of 2003, was modified in February of 2004 as we increased our exposure to international equity, given its performance and prospects, while decreasing exposure to fixed income securities. These changes helped returns as international equity was a strong performing asset class for the four months ended June 30, 2004, and fixed income was weak. Just before the end of the period, we further increased our exposure to international securities, bringing it in line with our benchmark weight, and reduced domestic equities to fund the increase. The domestic equity component of the Portfolio outperformed its sub-benchmark, the Russell 3000 Index, primarily due to strong security selection among large-cap names. Stock selection was particularly strong in large-cap healthcare, consumer discretionary and utilities, though these positive results were likely offset partially by weak performance of our large-cap technology and consumer staples holdings plus small/mid-cap industrials and utilities. Sector allocation had only a slight, negative effect on returns. The international equity component lagged its sub-benchmark, the MSCI EAFE Index, due to adverse security selection, notably among consumer goods and manufacturing, though selection was strong in basic materials and banks. Regional allocations helped return, chiefly through an overweight in Japan, which was a strong performing region in the MSCI EAFE Index. Our short duration stance was a major source of the good performance of the fixed income portion relative to the benchmark. During the period, we reduced our exposure to longer-dated and lower-rated corporates in the face of stretched valuations. As a rule, longer-dated, credit-sensitive paper underperformed during the reporting period. Our exposure in securitized sectors generally proved beneficial. We were also underweight in dollar-denominated issues of foreign countries, another sector that had a negative return. Mortgages produced a small positive excess return, and our position varied from neutral to underweight during the period. Exposure to emerging market debt contributed to returns in the first half of the reporting period, but was a significant drag on our performance in the second half as incremental yield was not sufficient to offset price depreciation. However, our declining high yield exposure broadly supported returns. MARKET OUTLOOK: The second quarter ended a little softer as inflation crept up slightly, employment took a sideways move and oil prices continued to be high. Second-quarter corporate profit outlook continues to be revised upward by analysts and we believe it will likely exceed the increased optimism as it has for the past five quarters. Despite this potentially strong earnings season, the Standard & Poor's ("S&P") 500 Index turned in lackluster performance. On June 30, at the much anticipated Federal Open Market Committee meeting, the Federal Reserve ("Fed") Funds rate was increased to 1.25%, a 25 basis point increase that was in line with consensus expectations. The Fed's comments pointed to a measured path of tightenings versus aggressive tightenings going forward. We remain overweight equities due to our positive outlook for stocks and are underweight fixed income securities, principally for valuation reasons. SEE INDEX DESCRIPTIONS ON PAGE 16. 10 PORTFOLIO MANAGERS' REPORT ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------- SINCE INCEPTION OF CLASS I 1 YEAR 5 YEAR JULY 5, 1995 ------ ------ --------------- Class I 15.87% 0.70% 7.35% Russell 3000 Index(1) 20.46% (1.07)% 10.28%(3) Strategic Allocation Growth Composite Index(2) 17.40% 2.78% 8.89%(3)
The table above illustrates the total return of ING VP Strategic Allocation Growth Portfolio against the Russell 3000 Index and the Strategic Allocation Growth Composite Index. The Indices are unmanaged and have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on Portfolio distributions or the redemption of Portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Russell 3000 Index is an unmanaged index that measures the performance of 3000 U.S. companies based on total market capitalization. (2) The Strategic Allocation Growth Composite is comprised of the asset class indices that correspond to the particular asset classes in which the Portfolio invests and their benchmark weightings. From time to time, adjustments have been made in the asset classes and/or weightings applicable to the Portfolio, and corresponding adjustments have been made to the composite. (3) Since inception performance for the index is shown from July 1, 1995. PRINCIPAL RISK FACTOR(S): The success of the Portfolio's strategy depends significantly on the Manager's skill in choosing investments and in allocating assets among different investment classes. Exposure to financial and market risks that accompany investments in stocks and bonds. Investing in stocks of small- and mid-sized companies may entail greater volatility and less liquidity than larger companies. International investing involves special risks, including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. High yield fixed-income securities carry particular market risks and may experience greater volatility in market value than investment grade fixed-income securities. Investments in mortgage-related securities may entail prepayment risk. Generally when interest rates rise, bond prices fall. If the seller in a repurchase agreement transaction defaults and the collateral value declines, the Portfolio many incur a loss. The value of convertible securities may fall when interest rates rise. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio. Some U.S. Government agency securities may be subject to varying degrees of credit risk, particularly those not backed by the full faith and credit of the United States Government. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. In order to generate additional income, the Portfolio may lend portfolio securities and it may lose the opportunity to sell them at a desirable price. 11 ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Mary Ann Fernandez, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Strategic Allocation Balanced Portfolio (the "Portfolio") seeks to provide total return. PERFORMANCE: For the six months ended June 30, 2004, the Class I shares of the Portfolio provided a return of 2.50%, compared to its custom benchmark, which returned 2.29%. PORTFOLIO SPECIFICS: The Portfolio's asset allocation posture helped performance for the six months ended June 30, 2004, as an overweight in domestic equities and an underweight in fixed income securities paid off for the period, one in which the Russell 3000 Index (representing approximately 98% of U.S. equity market capitalization) returned 3.59% and the Lehman Brothers Aggregate Bond Index was essentially flat, rising 0.16%. International equities posted solid results as the MSCI EAFE Index rose 4.86%. Our asset allocation, which was established in June of 2003, was modified in February of 2004 as we increased our exposure to international equity, given its performance and prospects, while decreasing exposure to fixed income securities. These changes helped returns as international equity was a strong performing asset class for the four months ended June 30, 2004 and fixed income was weak. Just before the end of the period, we further increased our exposure to international securities, bringing it in line with our benchmark weight, and reduced domestic equities to fund the increase. The domestic equity component of the Portfolio outperformed its sub-benchmark, the Russell 3000 Index, primarily due to strong security selection among large-cap names. Stock selection was particularly strong in large-cap health care, consumer discretionary and utilities, though these positive results were likely offset partially by weak selection in large-cap technology and consumer staples holdings plus small/mid-cap industrials and utilities. Sector allocation had only a slight, negative effect on returns. The international equity component lagged its sub-benchmark, the MSCI EAFE Index, due to security selection among consumer goods and manufacturing, though selection was strong in basic materials and banks. Regional allocations helped performance. Our short duration stance was a major source of the good performance of the fixed income portion relative to the benchmark. During the period, we reduced our exposure to longer-dated and lower-rated corporates in the face of stretched valuations. As a rule, longer-dated, credit-sensitive paper underperformed during the reporting period. Our exposure in securitized sectors generally proved beneficial. A slight overweight in financial institutions early in the year contributed positively. In the second half of the period, we were underweight the sector, which also contributed positively to relative performance as the sector fared poorly as the market prepared for Federal Reserve ("Fed") tightening. We were also underweight in dollar-denominated issues of foreign countries, another sector that had a negative return. Mortgages produced a small positive excess return, and our position varied from neutral to underweight during the period. Exposure to emerging market debt contributed to returns in the first half of the reporting period but was a significant drag on our performance in the second half as incremental yield was not sufficient to offset price depreciation. However, our declining high yield exposure broadly supported returns. MARKET OUTLOOK: The second quarter ended a little softer as inflation crept up slightly, employment took a sideways move, and oil prices continued to be high. The second-quarter corporate profit outlook continues to be revised upward by analysts and we believe it will likely exceed the increased optimism as it has for the past five quarters. Despite this potentially strong earnings season, the Standard & Poor's ("S&P") 500 Index turned in lackluster performance. On June 30, at the much anticipated Federal Open Market Committee meeting, the Fed Funds rate was increased to 1.25%, a 25 basis point increase that was in line with consensus expectations. The Fed's comments pointed to a measured path of tightenings versus aggressive tightenings going forward. We remain overweight equities due to our positive outlook for stocks and are underweight fixed income securities, principally for valuation reasons. SEE INDEX DESCRIPTIONS ON PAGE 16. 12 PORTFOLIO MANAGERS' REPORT ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------- SINCE INCEPTION OF CLASS I 1 YEAR 5 YEAR JULY 5, 1995 ------ ------ --------------- Class I 12.52% 1.70% 7.04% Russell 3000 Index(1) 20.46% (1.07)% 10.28%(3) Strategic Allocation Balanced Composite Index(2) 12.72% 3.93% 8.35%(3)
The table above illustrates the total return of ING VP Strategic Allocation Balanced Portfolio against the Russell 3000 Index and the Strategic Allocation Balanced Composite Index. The Indices are unmanaged and have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on Portfolio distributions or the redemption of Portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Russell 3000 Index is an unmanaged index that measures the performance of 3000 U.S. companies based on total market capitalization. (2) The Strategic Allocation Balanced Composite is comprised of the asset class indices that correspond to the particular asset classes in which the Portfolio invests and their benchmark weightings. From time to time, adjustments have been made in the asset classes and/or weightings applicable to the Portfolio, and corresponding adjustments have been made to the composite. (3) Since inception performance for the index is shown from July 1, 1995. PRINCIPAL RISK FACTOR(S): The success of the Portfolio's strategy depends significantly on the Manager's skill in choosing investments and in allocating assets among different investment classes. Exposure to financial and market risks that accompany investments in stocks and bonds. Investing in stocks of small- and mid-sized companies may entail greater volatility and less liquidity than larger companies. International investing involves special risks, including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. High yield fixed-income securities carry particular market risks and may experience greater volatility in market value than investment grade fixed-income securities. Investments in mortgage-related securities may entail prepayment risk. Generally when interest rates rise, bond prices fall. If the seller in a repurchase agreement transaction defaults and the collateral value declines, the Portfolio many incur a loss. The value of convertible securities may fall when interest rates rise. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio. Some U.S. Government agency securities may be subject to varying degrees of credit risk, particularly those not backed by the full faith and credit of the United States Government. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. In order to generate additional income, the Portfolio may lend portfolio securities and it may lose the opportunity to sell them at a desirable price. 13 ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO PORTFOLIO MANAGERS' REPORT PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Mary Ann Fernandez, ING Investment Management Co. (formerly, Aeltus Investment Management, Inc.) -- the Sub-Adviser. GOAL: The ING VP Strategic Allocation Income Portfolio (the "Portfolio") seeks to provide total return consistent with preservation of capital. PERFORMANCE: For the six months ended June 30, 2004, the Class I shares of the Portfolio provided a return of 1.79%, compared to its custom benchmark, which returned 1.38%. PORTFOLIO SPECIFICS: The Portfolio's asset allocation posture helped performance for the six months ended June 30, 2004, as an overweight in domestic equities and an underweight in fixed income securities paid off for the period, one in which the Russell 3000 Index (representing approximately 98% of U.S. equity market capitalization) returned 3.59% and the Lehman Brothers Aggregate Bond Index was essentially flat, rising 0.16%. These allocations were established in June of 2003 and modified only slightly throughout the following year. The domestic equity component of the Portfolio outperformed its sub-benchmark, the Russell 3000 Index, primarily due to strong security selection among large-cap names. Stock selection was particularly strong in large-cap health care, consumer discretionary and utilities, though these positive results were likely offset partially by weak selection in large-cap technology and consumer staples plus small/mid-cap industrials and utilities. Our short duration stance was a major source of the good performance of the fixed income portion relative to the benchmark. During the period, we reduced our exposure to longer-dated and lower-rated corporates in the face of stretched valuations. As a rule, longer-dated, credit-sensitive paper underperformed during the reporting period. Our exposure in securitized sectors generally proved beneficial. We were also underweight in dollar-denominated issues of foreign countries, another sector that had a negative return. Mortgages produced a small positive excess return, and our position varied from neutral to underweight during the period. Exposure to emerging market debt contributed to returns in the first half of the reporting period, but was a significant drag on our performance in the second half as incremental yield was not sufficient to offset price depreciation. However, our high yield exposure broadly supported returns. MARKET OUTLOOK: The second quarter ended a little softer as inflation crept up slightly, employment took a sideways move, and oil prices continued to be high. The second-quarter corporate profit outlook continues to be revised upward by analysts and we believe it will likely exceed the increased optimism as it has for the past five quarters. Despite this potentially strong earnings season, the Standard & Poor's ("S&P") 500 Index turned in lackluster performance. On June 30, at the much anticipated Federal Open Market Committee meeting, the Federal Reserve ("Fed") Funds rate was increased to 1.25%, a 25 basis point increase that was in line with consensus expectations. The Fed's comments pointed to a measured path of tightenings versus aggressive tightenings going forward. We remain overweight equities due to our positive outlook for stocks and are underweight fixed income securities, principally for valuation reasons. SEE INDEX DESCRIPTIONS ON PAGE 16. 14 PORTFOLIO MANAGERS' REPORT ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2004 -------------------------------------------- SINCE INCEPTION OF CLASS I 1 YEAR 5 YEAR JULY 5, 1995 ------ ------ --------------- Class I 8.63% 3.21% 6.99% Lehman Brothers Aggregate Bond Index(1) 0.32% 6.95% 6.83%(3) Strategic Allocation Income Composite Index(2) 7.15% 4.61% 7.50%(3)
The table above illustrates the total return of ING VP Strategic Allocation Income Portfolio against the Lehman Brothers Aggregate Bond Index and the Strategic Allocation Income Composite Index. The Indices are unmanaged and have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Portfolio's performance is shown without the imposition of any expenses or charges which are, or may be, imposed under your annuity contract. Total returns would have been lower if such expenses or charges were included. The performance table does not reflect the deduction of taxes that a shareholder will pay on Portfolio distributions or the redemption of Portfolio shares. Total returns reflect the fact that the Investment Manager has waived certain fees and operating expenses otherwise payable by the Portfolio, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no waiver to the Portfolio. THE PERFORMANCE UPDATE ILLUSTRATES PERFORMANCE FOR A VARIABLE INVESTMENT OPTION AVAILABLE THROUGH A VARIABLE ANNUITY CONTRACT. THE PERFORMANCE SHOWN INDICATES PAST PERFORMANCE AND IS NOT A PROJECTION OR PREDICTION OF FUTURE RESULTS. ACTUAL INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES AND/OR UNITS, AT REDEMPTION, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE CALL (800) 366-0066 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) The Lehman Brothers Aggregate Bond Index is a widely recognized, unmanaged index of publicly issued fixed rate U.S. Government, investment grade, mortgaged-backed and corporate debt securities. (2) The Strategic Allocation Income Composite is comprised of the asset class indices that correspond to the particular asset classes in which the Portfolio invests and their benchmark weightings. From time to time, adjustments have been made in the asset classes and/or weightings applicable to the Portfolio, and corresponding adjustments have been made to the composite. (3) Since inception performance for the index is shown from July 1, 1995. PRINCIPAL RISK FACTOR(S): The success of the Portfolio's strategy depends significantly on the Manager's skill in choosing investments and in allocating assets among different investment classes. Exposure to financial and market risks that accompany investments in stocks and bonds. Investing in stocks of small- and mid-sized companies may entail greater volatility and less liquidity than larger companies. International investing involves special risks, including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. High yield fixed-income securities carry particular market risks and may experience greater volatility in market value than investment grade fixed-income securities. Investments in mortgage-related securities may entail prepayment risk. Generally when interest rates rise, bond prices fall. If the seller in a repurchase agreement transaction defaults and the collateral value declines, the Portfolio many incur a loss. The value of convertible securities may fall when interest rates rise. The use of certain derivatives may have a leveraging effect, which may increase the volatility of the Portfolio. Some U.S. Government agency securities may be subject to varying degrees of credit risk, particularly those not backed by the full faith and credit of the United States Government. The Portfolio is generally expected to engage in frequent and active trading of portfolio securities, which may result in an increase in brokerage commissions and other transaction costs. In order to generate additional income, the Portfolio may lend portfolio securities and it may lose the opportunity to sell them at a desirable price. 15 PORTFOLIO MANAGERS' REPORT ADDITIONAL INFORMATION ASSET CLASS
ING VP ING VP ING VP STRATEGIC STRATEGIC STRATEGIC ALLOCATION ALLOCATION ALLOCATION GROWTH PORTFOLIO BALANCED PORTFOLIO(1) INCOME PORTFOLIO(2) - -------------------------------------------------------------------------------------------------- EQUITIES DOMESTIC STOCKS Range 10-100% 0-80% 0-70% INTERNATIONAL STOCKS Range 0-20% 0-10% 0-10% FIXED INCOME Range 0-40% 0-70% 0-100% MONEY MARKET INSTRUMENTS Range 0-30% 0-30% 0-30%
(1) ING VP Strategic Allocation Balanced Portfolio will invest no more than 60% of its assets in any combination of the following asset sub-classes: small-/mid-capitalization stocks, high-yield bonds, international stocks and international fixed-income securities. (2) ING VP Strategic Allocation Income Portfolio will invest no more than 35% of its assets in any combination of the following asset sub-classes: small-/mid-capitalization stocks, high-yield bonds, international stocks and international fixed-income securities. The Sub-Adviser uses the Strategic Allocation Growth Composite, Strategic Allocation Income Composite, and Strategic Allocation Balanced Composite indices as benchmarks to which it compares the performance of ING VP Strategic Allocation Growth Portfolio, ING VP Strategic Allocation Income Portfolio and ING VP Strategic Allocation Balanced Portfolio, respectively. Each Composite index is a blended index that is derived from the asset class comparative indices set out in the chart below. The chart shows the weightings for each asset class comparative index represented in each benchmark Composite Index, as a percentage of the Composite Index.
MORGAN STANLEY CAPITAL INTERNATIONAL 91-DAY U.S. RUSSELL 3000 EUROPE, AUSTRALIA AND LEHMAN BROTHERS TREASURY COMPOSITE INDEX INDEX(3) FAR EAST INDEX(4) AGGREGATE BOND INDEX(5) BILL RATE Strategic Allocation Growth Composite(6) 70% 10% 20% 0% Strategic Allocation Balanced Composite(7) 55% 5% 35% 5% Strategic Allocation Income Composite(8) 35% 0% 55% 10%
(3) The Russell 3000 Index measures performance of the 3,000 largest U.S. companies based on total market capitalization. (4) The Morgan Stanley Capital International Europe, Australia and Far East (MSCI EAFE) Index measures the performance of securities listed on exchanges in markets in Europe, Australasia and the Far East. (5) The Lehman Brothers Aggregate Bond Index is composed of publicly issued, fixed-rate U.S. Government, investment grade, mortgaged-backed and corporate debt securities. (6) The Strategic Allocation Growth Composite is comprised of the asset class indices that correspond to the particular asset classes in which the Portfolio invests and their benchmark weightings. From time to time, adjustments have been made in the asset classes and/or weightings applicable to the Portfolio, and corresponding adjustments have been made to the composite. Prior to March 1, 2000, the benchmark weightings for the Portfolio and the composite were 20% in large capitalization stocks, 20% for small-/mid-cap stocks, 20% in international stocks, 20% in real estate stocks, 10% in U.S. dollar bonds, and 10% in international bonds. The composite for the period March 1, 2000 through September 30, 2002 reflects benchmark weightings of 35% in large cap stocks, 20% in small-/mid-cap stocks, 20% in international stocks, 5% in real estate stocks, 15% in U.S. dollar bonds, and 5% in international bonds. Effective October 1, 2002, a single category of domestic stocks replaced the group of categories of large cap stocks, small-/mid-cap stocks, and real estate stocks, and the category of international bonds was removed. (7) The Strategic Allocation Balanced Composite is comprised of the asset class indices that correspond to the particular asset classes in which the Portfolio invests and their benchmark weightings. From time to time, adjustments have been made in the asset classes and/or weightings applicable to the Portfolio, and corresponding adjustments have been made to the composite. Prior to March 1, 2000, the benchmark weightings for the Portfolio and the composite were 15% in large capitalization stocks, 15% for small-/mid-cap stocks, 15% in international stocks, 15% in real estate stocks, 25% in U.S. dollar bonds, and 10% in international bonds and 5% in money market instruments. The composite for the period March 1, 2000 through September 30, 2002 reflects benchmark weightings of 25% in large cap stocks, 15% in small-/mid-cap stocks, 15% in international stocks, 5% in real estate stocks, 30% in U.S. dollar bonds, and 5% in international bonds and 5% in money market instruments. Effective October 1, 2002, a single category of domestic stocks replaced the group of categories of large cap stocks, small-/mid-cap stocks, and real estate stocks, and the category of international bonds was removed. (8) The Strategic Allocation Income Composite is comprised of the asset class indices that correspond to the particular asset classes in which the Portfolio invests and their benchmark weightings. From time to time, adjustments have been made in the asset classes and/or weightings applicable to the Portfolio, and corresponding adjustments have been made to the composite. Prior to March 1, 2000, the benchmark weightings for the Portfolio and the composite were 10% in large capitalization stocks, 10% for small-/mid-cap stocks, 10% in international stocks, 10% in real estate stocks, 40% in U.S. dollar bonds, and 10% in international bonds and 10% in money market instruments. The composite for the period March 1, 2000 through December 31, 2001 reflects benchmark weightings of 15% in large cap stocks, 10% in small-/mid-cap stocks, 10% in international stocks, 5% in real estate stocks, 45% in U.S. dollar bonds, and 5% in international bonds and 10% in money market instruments. Effective October 1, 2002, a single category of domestic stocks replaced the group of categories of large cap stocks, small-/mid-cap stocks, and real estate stocks, and the category of international bonds was removed. ALL INDICES ARE UNMANAGED. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX. 16 STATEMENTS OF ASSETS AND LIABILITIES as of June 30, 2004 (Unaudited)
ING VP ING VP ING VP ING VP ING VP ING VP STRATEGIC STRATEGIC STRATEGIC INDEX PLUS INDEX PLUS INDEX PLUS ALLOCATION ALLOCATION ALLOCATION LARGECAP MIDCAP SMALLCAP GROWTH BALANCED INCOME PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------------- ------------- ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value+* $ 1,543,126,646 $ 622,099,617 $ 254,125,362 $ 224,358,739 $ 219,515,686 $ 129,524,146 Short-term investments at value** 289,647,767 157,046,588 42,869,181 44,076,237 69,434,762 46,571,146 Repurchase agreement 12,919,000 8,994,000 4,752,000 4,490,000 7,054,000 6,610,000 Cash 9,253 564 2,145 61,478 15,095 18,034 Cash collateral for futures 160,000 196,000 -- 7,200 14,300 6,165 Foreign currencies at value*** -- -- -- 30,023 15,055 -- Receivables: Investment securities sold 31,893,868 -- 12,666,405 9,756,851 8,062,709 3,640,095 Dividends and interest 1,661,826 352,776 146,014 424,979 625,395 539,480 Variation margin receivable 11,500 64,414 -- 5,262 9,375 5,625 Prepaid expenses 37,576 15,434 6,669 3,618 4,158 1,714 Reimbursement due from manager -- -- -- -- 435 7,465 --------------- ------------- ------------- ------------- ------------- ------------- Total assets 1,879,467,436 788,769,393 314,567,776 283,214,387 304,750,970 186,923,870 --------------- ------------- ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased 36,464,600 -- 13,118,419 15,541,268 23,933,291 18,663,049 Payable for futures variation margin -- -- -- 9,848 8,500 6,500 Payable upon receipt of securities loaned 289,647,767 157,046,588 42,869,181 31,729,658 41,857,544 27,785,465 Payable to affiliates 528,135 234,013 96,645 129,971 126,640 74,528 Payable for director fees 9,836 3,437 656 2,872 1,124 3,184 Other accrued expenses and liabilities 42,365 44,397 56,226 73,034 65,036 61,596 --------------- ------------- ------------- ------------- ------------- ------------- Total liabilities 326,692,703 157,328,435 56,141,127 47,486,651 65,992,135 46,594,322 --------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 1,552,774,733 $ 631,440,958 $ 258,426,649 $ 235,727,736 $ 238,758,835 $ 140,329,548 =============== ============= ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 1,791,116,685 $ 539,798,799 $ 213,500,693 $ 229,962,725 $ 229,922,878 $ 132,977,542 Undistributed net investment income 24,342,500 4,626,681 860,719 3,900,527 4,791,828 4,014,875 Accumulated net realized gain (loss) on investments, foreign currencies and futures (410,424,833) 31,786,757 20,721,013 (23,583,533) (15,969,537) (5,719,623) Net unrealized appreciation on investments, foreign currencies and futures 147,740,381 55,228,721 23,344,224 25,448,017 20,013,666 9,056,754 --------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 1,552,774,733 $ 631,440,958 $ 258,426,649 $ 235,727,736 $ 238,758,835 $ 140,329,548 =============== ============= ============= ============= ============= ============= + Including securities loaned at value $ 282,080,747 $ 153,848,269 $ 41,876,955 $ 32,361,461 $ 40,650,898 $ 27,223,210 * Cost of investments in securities $ 1,395,552,456 $ 566,928,513 $ 230,781,137 $ 198,915,552 $ 199,523,696 $ 120,477,269 ** Cost of short-term investments $ 289,647,767 $ 157,046,588 $ 42,869,181 $ 44,076,627 $ 69,435,682 $ 46,571,787 *** Cost of foreign currencies $ -- $ -- $ -- $ 30,043 $ 15,116 $ -- CLASS I: Net assets $ 1,453,240,236 $ 576,029,274 $ 224,057,484 $ 235,727,736 $ 238,758,835 $ 140,329,548 Shares authorized 200,000,000 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 104,112,693 34,474,344 15,116,596 17,188,129 18,228,863 11,197,782 Net asset value and redemption price per share $ 13.96 $ 16.71 $ 14.82 $ 13.71 $ 13.10 $ 12.53 CLASS S: Net assets $ 99,534,497 $ 55,411,684 $ 34,369,165 n/a n/a n/a Shares authorized 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 7,166,623 3,334,565 2,332,817 n/a n/a n/a Net asset value and redemption price per share $ 13.89 $ 16.62 $ 14.73 n/a n/a n/a
See Accompanying Notes to Financial Statements 17 STATEMENTS OF OPERATIONS for the six months ended June 30, 2004 (Unaudited)
ING VP ING VP ING VP ING VP ING VP ING VP STRATEGIC STRATEGIC STRATEGIC INDEX PLUS INDEX PLUS INDEX PLUS ALLOCATION ALLOCATION ALLOCATION LARGECAP MIDCAP SMALLCAP GROWTH BALANCED INCOME PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes withheld* $ 11,963,070 $ 3,413,093 $ 984,195 $ 1,696,583 $ 1,317,320 $ 550,499 Interest 74,394 34,636 15,872 474,205 1,205,600 1,198,998 Securities lending income 68,906 30,706 37,187 13,785 20,811 17,688 ------------- ------------- ------------- ------------- ------------- ------------- Total investment income 12,106,370 3,478,435 1,037,254 2,184,573 2,543,731 1,767,185 ------------- ------------- ------------- ------------- ------------- ------------- EXPENSES: Investment management fees 2,616,521 1,086,683 434,473 684,414 676,677 413,260 Distribution and service fees: Class S 97,704 37,776 27,789 -- -- -- Transfer agent fees 5,077 5,051 5,053 1,702 1,702 1,702 Administrative service fees 411,161 149,415 59,739 62,737 62,028 37,881 Shareholder reporting expense 18,773 10,192 4,550 7,826 4,710 5,460 Registration fees 8,942 6,879 3,118 454 688 58 Professional fees 54,869 20,675 16,231 16,595 16,286 15,503 Custody and accounting expense 59,817 28,068 19,157 22,090 28,489 13,286 Directors' fees 33,476 8,736 4,594 5,824 3,640 4,186 Miscellaneous expense 27,352 11,133 4,759 6,101 4,849 3,816 ------------- ------------- ------------- ------------- ------------- ------------- Total expenses 3,333,692 1,364,608 579,463 807,743 799,069 495,152 ------------- ------------- ------------- ------------- ------------- ------------- Less: Net waived and reimbursed (recouped) fees -- -- -- (13,792) 5,713 45,658 ------------- ------------- ------------- ------------- ------------- ------------- Net expenses 3,333,692 1,364,608 579,463 821,535 793,356 449,494 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income 8,772,678 2,113,827 457,791 1,363,038 1,750,375 1,317,691 ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND FUTURES: Net realized gain (loss) on: Investments 68,863,596 41,464,461 23,410,120 11,223,971 8,197,275 3,786,111 Foreign currencies -- -- -- 22,712 18,814 1,164 Futures 769,833 615,462 -- (890) 8,600 5,160 ------------- ------------- ------------- ------------- ------------- ------------- Net realized gain on investments, foreign currencies and futures 69,633,429 42,079,923 23,410,120 11,245,793 8,224,689 3,792,435 ------------- ------------- ------------- ------------- ------------- ------------- Net change in unrealized appreciation or depreciation on: Investments (33,015,357) (8,241,405) (3,781,294) (5,950,814) (4,712,432) (2,705,301) Foreign currencies -- -- -- (1,966) (61) (1) Futures 13,403 34,957 -- (6,380) 15,118 8,918 ------------- ------------- ------------- ------------- ------------- ------------- Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (33,001,954) (8,206,448) (3,781,294) (5,959,160) (4,697,375) (2,696,384) ------------- ------------- ------------- ------------- ------------- ------------- Net realized and unrealized gain on investments, foreign currencies and futures 36,631,475 33,873,475 19,628,826 5,286,633 3,527,314 1,096,051 ------------- ------------- ------------- ------------- ------------- ------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 45,404,153 $ 35,987,302 $ 20,086,617 $ 6,649,671 $ 5,277,689 $ 2,413,742 ============= ============= ============= ============= ============= ============= *Foreign taxes $ -- $ -- $ -- $ 40,402 $ 22,375 $ 1,135
See Accompanying Notes to Financial Statements 18 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP INDEX PLUS ING VP INDEX PLUS LARGECAP PORTFOLIO MIDCAP PORTFOLIO ---------------------------------- ---------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 --------------- --------------- --------------- --------------- FROM OPERATIONS: Net investment income $ 8,772,678 $ 15,642,091 $ 2,113,827 $ 2,557,072 Net realized gain (loss) on investments and futures 69,633,429 (21,820,234) 42,079,923 14,450,365 Net change in unrealized appreciation or depreciation on investments and futures (33,001,954) 288,630,476 (8,206,448) 81,403,828 --------------- --------------- --------------- --------------- Net increase in net assets resulting from operations 45,404,153 282,452,333 35,987,302 98,411,265 --------------- --------------- --------------- --------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- (12,348,811) -- (1,377,191) Class S -- (156,715) -- (27,291) --------------- --------------- --------------- --------------- Total distributions -- (12,505,526) -- (1,404,482) --------------- --------------- --------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 104,160,009 1,567,948,548 126,648,729 138,161,411 Dividends reinvested -- 12,505,526 -- 1,404,482 --------------- --------------- --------------- --------------- 104,160,009 1,580,454,074 126,648,729 139,565,893 Cost of shares redeemed (45,587,884) (1,349,719,284) (2,368,655) (22,990,593) --------------- --------------- --------------- --------------- Net increase in net asset resulting from capital share transactions 58,572,125 230,734,790 124,280,074 116,575,300 --------------- --------------- --------------- --------------- Net increase in net assets 103,976,278 500,681,597 160,267,376 213,582,083 --------------- --------------- --------------- --------------- NET ASSETS: Beginning of period 1,448,798,455 948,116,858 471,173,582 257,591,499 --------------- --------------- --------------- --------------- End of period $ 1,552,774,733 $ 1,448,798,455 $ 631,440,958 $ 471,173,582 =============== =============== =============== =============== Undistributed net investment income at end of period $ 24,342,500 $ 15,569,822 $ 4,626,681 $ 2,512,854 =============== =============== =============== ===============
See Accompanying Notes to Financial Statements 19 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP INDEX PLUS ING VP STRATEGIC SMALLCAP PORTFOLIO ALLOCATION GROWTH PORTFOLIO ---------------------------------- ---------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 --------------- --------------- --------------- --------------- FROM OPERATIONS: Net investment income $ 457,791 $ 426,372 $ 1,363,038 $ 2,462,819 Net realized gain on investments, foreign currencies and futures 23,410,120 6,040,106 11,245,793 4,775,617 Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (3,781,294) 33,092,580 (5,959,160) 34,258,082 --------------- --------------- --------------- --------------- Net increase in net assets resulting from operations 20,086,617 39,559,058 6,649,671 41,496,518 --------------- --------------- --------------- --------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- (212,503) -- (1,692,396) Class S -- (6,458) -- -- --------------- --------------- --------------- --------------- Total distributions -- (218,961) -- (1,692,396) --------------- --------------- --------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 59,761,869 77,170,982 16,844,172 23,016,183 Dividends reinvested -- 218,960 -- 1,692,396 --------------- --------------- --------------- --------------- 59,761,869 77,389,942 16,844,172 24,708,579 Cost of shares redeemed (5,876,014) (22,784,198) (7,025,635) (10,985,790) --------------- --------------- --------------- --------------- Net increase in net asset resulting from capital share transactions 53,885,855 54,605,744 9,818,537 13,722,789 --------------- --------------- --------------- --------------- Net increase in net assets 73,972,472 93,945,841 16,468,208 53,526,911 --------------- --------------- --------------- --------------- NET ASSETS: Beginning of period 184,454,177 90,508,336 219,259,528 165,732,617 --------------- --------------- --------------- --------------- End of period $ 258,426,649 $ 184,454,177 $ 235,727,736 $ 219,259,528 =============== =============== =============== =============== Undistributed net investment income at end of period $ 860,719 $ 402,928 $ 3,900,527 $ 2,537,489 =============== =============== =============== ===============
See Accompanying Notes to Financial Statements 20 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING VP STRATEGIC ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO ALLOCATION INCOME PORTFOLIO ---------------------------------- ---------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 --------------- --------------- --------------- --------------- FROM OPERATIONS: Net investment income $ 1,750,375 $ 3,101,737 $ 1,317,691 $ 2,737,295 Net realized gain on investments, foreign currencies and futures 8,224,689 4,796,268 3,792,435 3,808,774 Net change in unrealized appreciation or depreciation on investments, foreign currencies and futures (4,697,375) 24,406,773 (2,696,384) 9,681,310 --------------- --------------- --------------- --------------- Net increase in net assets resulting from operations 5,277,689 32,304,778 2,413,742 16,227,379 --------------- --------------- --------------- --------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class I -- (2,679,069) -- (2,954,235) --------------- --------------- --------------- --------------- Total distributions -- (2,679,069) -- (2,954,235) --------------- --------------- --------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 30,959,603 29,723,305 13,489,525 15,209,893 Dividends reinvested -- 2,679,069 -- 2,954,235 --------------- --------------- --------------- --------------- 30,959,603 32,402,374 13,489,525 18,164,128 Cost of shares redeemed (6,315,679) (11,359,470) (11,201,821) (16,424,023) --------------- --------------- --------------- --------------- Net increase in net asset resulting from capital share transactions 24,643,924 21,042,904 2,287,704 1,740,105 --------------- --------------- --------------- --------------- Net increase in net assets 29,921,613 50,668,613 4,701,446 15,013,249 --------------- --------------- --------------- --------------- NET ASSETS: Beginning of period 208,837,222 158,168,609 135,628,102 120,614,853 --------------- --------------- --------------- --------------- End of period $ 238,758,835 $ 208,837,222 $ 140,329,548 $ 135,628,102 =============== =============== =============== =============== Undistributed net investment income at end of period $ 4,791,828 $ 3,041,453 $ 4,014,875 $ 2,697,184 =============== =============== =============== ===============
See Accompanying Notes to Financial Statements 21 ING VP INDEX PLUS LARGECAP PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.54 10.85 13.86 16.73 20.87 17.59 Income (loss) from investment operations: Net investment income $ 0.08 0.14 0.14 0.15 0.13 0.12 Net realized and unrealized gain (loss) on investments $ 0.34 2.68 (3.12) (2.40) (1.99) 4.09 Total from investment operations $ 0.42 2.82 (2.98) (2.25) (1.86) 4.21 Less distributions from: Net investment income $ -- 0.13 0.03 0.13 0.14 0.10 Net realized gain on investments $ -- -- -- 0.49 2.14 0.83 Total distributions $ -- 0.13 0.03 0.62 2.28 0.93 Net asset value, end of period $ 13.96 13.54 10.85 13.86 16.73 20.87 TOTAL RETURN(1) % 3.10 26.14 (21.53) (13.62) (9.41) 24.30 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 1,453,240 1,389,298 943,520 1,165,893 1,248,768 1,162,472 Ratios to average net assets: Expenses(2) % 0.43 0.43 0.45 0.45 0.44 0.45 Net investment income(2) % 1.19 1.33 1.18 1.05 0.73 0.78 Portfolio turnover rate % 32 88 139 125 111 88 CLASS S -------------------------------------------------------- SIX MONTHS JULY 16, ENDED YEAR ENDED DECEMBER 31, 2001(3) TO JUNE 30, --------------------------- DECEMBER 31, 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.49 10.83 13.86 14.80 Income (loss) from investment operations: Net investment income $ 0.05 0.15 0.12 --* Net realized and unrealized gain (loss) on investments $ 0.35 2.63 (3.13) (0.83) Total from investment operations $ 0.40 2.78 (3.01) (0.83) Less distributions from: Net investment income $ -- 0.12 0.02 0.11 Net realized gain on investments $ -- -- -- -- Total distributions $ -- 0.12 0.02 0.11 Net asset value, end of period $ 13.89 13.49 10.83 13.86 TOTAL RETURN(1) % 2.97 25.84 (21.74) (5.56) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 99,534 59,500 4,597 821 Ratios to average net assets: Expenses(2) % 0.68 0.68 0.71 0.69 Net investment income(2) % 0.95 1.11 0.93 0.80 Portfolio turnover rate % 32 88 139 125
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distribution at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) Commencement of offering of shares. * Per share data calculated using average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 22 ING VP INDEX PLUS MIDCAP PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 15.64 11.86 13.54 14.67 12.40 12.20 Income (loss) from investment operations: Net investment income $ 0.05 0.09 0.04 0.07 0.04 0.06 Net realized and unrealized gain (loss) on investments $ 1.02 3.75 (1.67) (0.26) 2.43 1.76 Total from investment operations $ 1.07 3.84 (1.63) (0.19) 2.47 1.82 Less distributions from: Net investment income $ -- 0.06 0.05 0.03 -- 0.06 Net realized gain on investments $ -- -- -- 0.91 0.20 1.56 Total distributions $ -- 0.06 0.05 0.94 0.20 1.62 Net asset value, end of period $ 16.71 15.64 11.86 13.54 14.67 12.40 TOTAL RETURN(1) % 6.84 32.45 (12.09) (1.32) 19.91 15.81 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 576,029 451,213 251,674 161,663 94,727 19,244 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 0.49 0.50 0.53 0.55 0.58 0.60 Gross expenses prior to expense reimbursement(2) % 0.49 0.50 0.53 0.55 0.62 0.80 Net investment income after expense reimbursement(2)(3) % 0.79 0.78 0.61 0.77 0.66 0.68 Portfolio turnover rate % 57 113 139 189 154 143 CLASS S ----------------------------------------------------------- SIX MONTHS JULY 16, ENDED YEAR ENDED DECEMBER 31, 2001(4) TO JUNE 30, ----------------------- DECEMBER 31, 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 15.57 11.83 13.52 13.58 Income (loss) from investment operations: Net investment income $ 0.00* ** 0.04 0.01 -- Net realized and unrealized gain (loss) on investments $ 1.05 3.74 (1.66) (0.06) Total from investment operations $ 1.05 3.78 (1.65) (0.06) Less distributions from: Net investment income $ -- 0.04 0.04 -- Net realized gain on investments $ -- -- -- -- Total distributions $ -- 0.04 0.04 -- Net asset value, end of period $ 16.62 15.57 11.83 13.52 TOTAL RETURN(1) % 6.74 32.06 (12.26) (0.44) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 55,412 19,960 5,917 830 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 0.74 0.75 0.78 0.80 Gross expenses prior to expense reimbursement(2) % 0.74 0.75 0.78 0.80 Net investment income after expense reimbursement(2)(3) % 0.54 0.54 0.37 0.51 Portfolio turnover rate % 57 113 139 189
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distribution at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) The Adviser has agreed to limit expenses (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (4) Commencement of offering of shares. * Amount represents less than $0.01. ** Per share data calculated using average number of shares outstanding throughout the period. See Accompanying Notes to Financial Statements 23 ING VP INDEX PLUS SMALLCAP PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.52 9.95 11.60 11.97 10.90 9.86 Income (loss) from investment operations: Net investment income $ 0.02 0.03 0.01 0.02 0.02 0.02 Net realized and unrealized gain (loss) on investments $ 1.28 3.56 (1.53) 0.25 1.05 1.04 Total from investment operations $ 1.30 3.59 (1.52) 0.27 1.07 1.06 Less distributions from: Net investment income $ -- 0.02 0.01 0.02 -- 0.02 Net realized gain on investments $ -- -- 0.12 0.62 -- -- Total distributions $ -- 0.02 0.13 0.64 -- 0.02 Net asset value, end of period $ 14.82 13.52 9.95 11.60 11.97 10.90 TOTAL RETURN(1) % 9.62 36.15 (13.21) 2.41 9.82 10.79 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 224,057 168,035 86,494 46,547 20,484 12,484 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 0.51 0.56 0.58 0.60 0.60 0.60 Gross expenses prior to expense reimbursement(2) % 0.51 0.56 0.63 0.71 0.86 0.90 Net investment income after expense reimbursement(2)(3) % 0.45 0.37 0.30 0.35 0.28 0.28 Portfolio turnover rate % 68 120 134 134 142 107 CLASS S ----------------------------------------------------------- SIX MONTHS JULY 16, ENDED YEAR ENDED DECEMBER 31, 2001(4) TO JUNE 30, ------------------------ DECEMBER 31, 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.46 9.92 11.58 11.40 Income (loss) from investment operations: Net investment income (loss) $ (0.00)* 0.01 0.00* -- Net realized and unrealized gain (loss) on investments $ 1.27 3.54 (1.53) 0.18 Total from investment operations $ 1.27 3.55 (1.53) 0.18 Less distributions from: Net investment income $ -- 0.01 0.01 -- Net realized gain on investments $ -- -- 0.12 -- Total distributions $ -- 0.01 0.13 -- Net asset value, end of period $ 14.73 13.46 9.92 11.58 TOTAL RETURN(1) % 9.44 35.83 (13.39) 1.58 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 34,369 16,419 4,014 690 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 0.76 0.80 0.84 0.85 Gross expenses prior to expense reimbursement(2) % 0.76 0.80 0.88 0.96 Net investment income after expense reimbursement(2)(3) % 0.21 0.13 0.05 0.10 Portfolio turnover rate % 68 120 134 134
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distribution at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) The Adviser has agreed to limit expenses (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (4) Commencement of offering of shares. * Amount represents less than $0.01. See Accompanying Notes to Financial Statements 24 ING VP STRATEGIC ALLOCATION GROWTH PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 13.32 10.81 12.75 14.65 14.92 14.02 Income (loss) from investment operations: Net investment income $ 0.07 0.15 0.13 0.20 0.23 0.39 Net realized and unrealized gain (loss) on investments $ 0.32 2.47 (1.87) (1.88) (0.32) 1.56 Total from investment operations $ 0.39 2.62 (1.74) (1.68) (0.09) 1.95 Less distributions from: Net investment income $ -- 0.11 0.20 0.22 0.06 0.33 Net realized gain on investments $ -- -- -- -- 0.12 0.72 Total distributions $ -- 0.11 0.20 0.22 0.18 1.05 Net asset value, end of period $ 13.71 13.32 10.81 12.75 14.65 14.92 TOTAL RETURN(1) % 2.93 24.34 (13.76) (11.54) (0.67) 14.35 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 235,728 219,260 165,733 197,038 216,319 214,412 Ratios to average net assets: Net expenses after expense reimbursement/recoupment(2)(3) $ 0.72 0.75 0.75 0.74 0.75 0.74 Gross expenses prior to expense reimbursement/recoupment $ 0.71 0.74 0.77 0.74 0.75 0.74 Net investment income after expense(2) reimbursement(2)(3) $ 1.19 1.32 1.14 1.58 1.59 2.31 Portfolio turnover rate % 99 232 271 247 215 135
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distribution at net asset value and does not reflect the effect of insurance contract charges. (2) Annualized for periods less than one year. (3) The Adviser has agreed to limit expenses (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 25 ING VP STRATEGIC ALLOCATION BALANCED PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.78 10.86 12.31 13.58 13.77 13.32 Income (loss) from investment operations: Net investment income $ 0.08 0.18 0.20 0.29 0.35 0.45 Net realized and unrealized gain (loss) on investments $ 0.24 1.92 (1.36) (1.23) (0.29) 0.87 Total from investment operations $ 0.32 2.10 (1.16) (0.94) 0.06 1.32 Less distributions from: Net investment income $ -- 0.18 0.29 0.33 0.09 0.36 Net realized gain on investments $ -- -- -- -- 0.16 0.51 Total distributions $ -- 0.18 0.29 0.33 0.25 0.87 Net asset value, end of period $ 13.10 12.78 10.86 12.31 13.58 13.77 TOTAL RETURN(1) % 2.50 19.47 (9.54) (6.99) 0.41 10.22 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 238,759 208,837 158,169 181,296 189,109 197,702 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 0.70 0.70 0.70 0.70 0.70 0.74 Gross expenses prior to expense reimbursement % 0.71 0.74 0.77 0.74 0.75 0.74 Net investment income after expense(2) reimbursement(2)(3) % 1.55 1.75 1.71 2.39 2.53 3.05 Portfolio turnover rate % 131 278 267 195 213 142
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distribution at net asset value and does not reflect the effect of insurance contract charges. (2) Annualized for periods less than one year. (3) The Adviser has agreed to limit expenses (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 26 ING VP STRATEGIC ALLOCATION INCOME PORTFOLIO (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.31 11.09 11.99 12.84 12.49 12.37 Income (loss) from investment operations: Net investment income $ 0.11 0.25 0.27 0.38 0.49 0.52 Net realized and unrealized gain (loss) on investments $ 0.11 1.25 (0.78) (0.68) 0.11 0.34 Total from investment operations $ 0.22 1.50 (0.51) (0.30) 0.60 0.86 Less distributions from: Net investment income $ -- 0.28 0.39 0.46 0.11 0.41 Net realized gain on investments $ -- -- -- 0.09 0.14 0.33 Total distributions $ -- 0.28 0.39 0.55 0.25 0.74 Net asset value, end of period $ 12.53 12.31 11.09 11.99 12.84 12.49 TOTAL RETURN(1) % 1.79 13.65 (4.34) (2.37) 4.81 7.10 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 140,330 135,628 120,615 129,998 128,379 131,207 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 0.65 0.65 0.65 0.65 0.65 0.75 Gross expenses prior to expense reimbursement(2) % 0.72 0.74 0.77 0.76 0.76 0.75 Net investment income after expense reimbursement(2)(3) % 1.91 2.18 2.36 3.30 3.81 3.75 Portfolio turnover rate % 155 332 248 155 180 140
(1) Total return is calculated assuming reinvestment of all dividends and capital gain distribution at net asset value and does not reflect the effect of insurance contract charges. Total return for periods less than one year is not annualized. (2) Annualized for periods less than one year. (3) The Adviser has agreed to limit expenses (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. See Accompanying Notes to Financial Statements 27 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) NOTE 1 -- ORGANIZATION ORGANIZATION. The ING Variable Portfolios, Inc. and the ING Strategic Allocation Portfolios, Inc. are each registered under the Investment Company Act of 1940 as an open-end management investment company. The ING Variable Portfolios, Inc. is a company incorporated under the laws of Maryland on June 4, 1996. There are eight separate investment portfolios that comprise the ING Variable Portfolios, Inc. The three portfolios (each a "Portfolio", collectively the "Portfolios") that are in this report are: ING VP Index Plus LargeCap Portfolio ("VP Index Plus LargeCap"), ING VP Index Plus MidCap Portfolio ("VP Index Plus MidCap") and ING VP Index Plus SmallCap Portfolio ("VP Index Plus SmallCap"). The ING Strategic Allocation Portfolios, Inc. is a company incorporated under the laws of Maryland on October 14, 1994. There are three separate investment portfolios (each a "Portfolio", collectively the "Portfolios") that comprise the ING Strategic Allocation Portfolios: ING VP Strategic Allocation Growth Portfolio ("VP Strategic Allocation Growth"), ING VP Strategic Allocation Balanced Portfolio ("VP Strategic Allocation Balanced") and ING VP Strategic Allocation Income Portfolio ("VP Strategic Allocation Income"). Each Portfolio offers Class I (formerly, Class R) shares. VP Index Plus LargeCap, VP Index Plus MidCap and VP Index Plus SmallCap also offer Class S. The two classes differ principally in the applicable shareholder service fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Portfolio and earn income and realized gains/losses from the portfolio pro rata based on the average daily net assets of each class, without distinction between share classes. No class has preferential dividend rights. Differences in per share dividend rates generally result from the relative weighting of pro rata income and realized gain allocations and from differences in separate class expenses, including shareholder servicing fees. ING Investments, LLC ("ING Investments"), an Arizona limited liability company, serves as the investment adviser to the Portfolios. ING Investments has engaged ING Investment Management Co. (formerly, Aeltus Investment Management, Inc., "ING IM"), a Connecticut corporation, to serve as the Sub-Adviser to the Portfolios. ING Funds Distributor, LLC is the principal underwriter of the Portfolios. ING Funds Distributor, LLC, ING Investments and ING IM are indirect wholly-owned subsidiaries of ING Groep N.V. ING Groep N.V. is a global financial institution active in the fields of insurance, banking and asset management. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Portfolios in the preparation of their financial statements. Such policies are in conformity with accounting principles generally accepted in the United States of America for investment companies. A. SECURITY VALUATION. Investments in equity securities traded on a national securities exchange are valued at the last reported sale price. Securities reported by NASDAQ will be valued at the NASDAQ official closing prices. Securities traded on an exchange or NASDAQ for which there has been no sale and securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at that time. Debt securities are valued at prices obtained from independent services or from one or more dealers making markets in the securities and may be adjusted based on the Portfolios' valuation procedures. U.S. Government obligations are valued by using market quotations or independent pricing services that use prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Securities and assets for which market quotations are not readily available (which may include certain restricted securities which are subject to limitations as to their sale) are valued at their fair values as determined in good faith by or under the supervision of the Portfolio's Board of Directors ("Board"), in accordance with methods that are specifically authorized by the Board. Securities traded on exchanges, including foreign exchanges, which close earlier than the time that a Portfolio calculates its net asset value may also be valued at their fair values as determined in good faith by or under the supervision of a Portfolio's Board, in accordance with methods 28 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) that are specifically authorized by the Board. If a significant event which is likely to impact the value of one or more foreign securities held by a Portfolio occurs after the time at which the foreign market for such security(ies) closes but before the time that the Portfolio's net asset value is calculated on any business day, such event may be taken into account in determining the fair value of such security(ies) at the time the Portfolio calculates its net asset value. For these purposes, significant events after the close of trading on a foreign market may include, among others, securities trading in the U.S. and other markets, corporate announcements, natural and other disasters, and political and other events. Among other elements of analysis, the Board has authorized the use of one or more research services to assist with the determination of the fair value of foreign securities in light of significant events. Research services use statistical analyses and quantitative models to help determine fair value as of the time a Portfolio calculates its net asset value. Unlike the closing price of a security on an exchange, fair value determinations employ elements of judgment, and the fair value assigned to a security may not represent the actual value that a Portfolio could obtain if it were to sell the security at the time of the close of the NYSE. Investments in securities maturing in less than 60 days are valued at amortized cost, which, when combined with accrued interest, approximates market value. B. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Securities transactions are accounted for on the trade date. Realized gains and losses are reported on the basis of identified cost of securities sold. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the Portfolios. Premium amortization and discount accretion are determined by the effective yield method. C. FOREIGN CURRENCY TRANSLATION. The books and records of the Portfolios are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Portfolios do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities, which are subject to foreign withholding tax upon disposition, liabilities are recorded on the Statement of Assets and Liabilities for the estimated tax withholding based on the securities' current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Portfolio's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. Government securities. These risks include, but are not limited to revaluation of currencies and future adverse political and economic developments which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and U.S. Government securities. D. FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS. Certain Portfolios may enter into foreign currency exchange transactions to convert to and from different foreign currencies and to and from the U.S. dollar in connection with the planned purchases or sales of securities. The Portfolios either enter into these transactions on a spot basis at the spot rate prevailing in the foreign currency exchange market or use forward 29 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) foreign currency contracts to purchase or sell foreign currencies. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation. Risks may arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Each Portfolio may enter into futures contracts involving foreign currency, interest rates, securities and security indices. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Portfolio is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Portfolio agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margins and are recorded as unrealized gains or losses by the Portfolio. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. E. DISTRIBUTIONS TO SHAREHOLDERS. The Portfolios record distributions to their shareholders on ex-dividend date. Dividends from net investment income and capital gains, if any, are declared and paid annually by the Portfolios. The Portfolios may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code. The characteristics of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. F. FEDERAL INCOME TAXES. It is the policy of the Portfolios to comply with subchapter M of the Internal Revenue Code and related excise tax provisions applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized capital gains to their shareholders. Therefore, no federal income tax provision is required. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired. G. USE OF ESTIMATES. Management of the Portfolios has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America for investment companies. Actual results could differ from these estimates. H. REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase it at a mutually agreed upon time and price. The resale price is in excess of the purchase price and reflects an agreed upon interest rate for the period of time the agreement is outstanding. The period of the repurchase agreements is usually short, from overnight to one week, while the underlying securities generally have longer maturities. Each Portfolio will receive as collateral securities acceptable to it whose market value is equal to at least 100% of the carrying amount of the repurchase agreements, plus accrued interest, being invested by the Portfolio. The underlying collateral is valued daily on a mark to market basis to assure that the value, including accrued interest is at least equal to the repurchase price. If the seller defaults, a Portfolio might incur a loss or delay in the realization of proceeds if the value of the security collateralizing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. I. SECURITIES LENDING. Each Portfolio has the option to temporarily loan up to 30% of its total assets to brokers, dealers or other financial institutions in exchange for a negotiated lender's fee. The borrower is required to fully collateralize the loans with cash or U.S. Government securities. Generally, in the event of counterparty default, the Portfolio has the right to use collateral to offset losses incurred. There would be potential loss to the Portfolio in the event the Portfolio is delayed or prevented from exercising its right to dispose of the collateral. The Portfolio bears the 30 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) risk of loss with respect to the investment of collateral. Engaging in securities lending could have a leveraging effect, which may intensify the credit, market and other risks associated with investing in a Fund. J. SWAP CONTRACTS. VP Strategic Allocation Growth, VP Strategic Allocation Balanced and VP Strategic Allocation Income may enter into interest rate swaps, currency swaps and other types of swap agreements, including swaps on securities and indices. A swap is an agreement between two parties pursuant to which each party agrees to make one or more payments to the other on regularly scheduled dates over a stated term, based on different interest rates, currency exchange rates, security prices, the prices or rates of other types of financial instruments or assets or the levels of specified indices. During the term of the swap, changes in the value of the swap are recognized by marking-to-market the value of the swap. K. ILLIQUID AND RESTRICTED SECURITIES. VP Strategic Allocation Growth, VP Strategic Allocation Balanced and VP Strategic Allocation Income each may not invest more than 15% of its net assets in illiquid securities. VP Index Plus LargeCap, VP Index Plus MidCap and VP Index Plus SmallCap each may not invest more than 10% of its net assets in illiquid securities. Illiquid securities are not readily marketable. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the Portfolios to sell them promptly at an acceptable price. Each Portfolio may also invest in restricted securities, which include those sold under Rule 144A of the Securities Act of 1933 (1933 Act) or securities offered pursuant to Section 4(2) of the 1933 Act, and/or are subject to legal or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. Certain restricted securities may be considered liquid pursuant to procedures adopted by the Board or may be deemed to be illiquid because they may not be readily marketable. Illiquid and restricted securities are valued using market quotations when readily available. In the absence of market quotations, the securities are valued based upon their fair value determined under procedures approved by the Board. L. DELAYED DELIVERY TRANSACTIONS. VP Strategic Allocation Growth, VP Strategic Allocation Balanced and VP Strategic Allocation Income Portfolios may purchase or sell securities on a when-issued or forward commitment basis. The price of the underlying securities and date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The market value of such is identified in each Portfolio's Portfolio of Investments. Losses may arise due to changes in the market value of the securities or from the inability of counterparties to meet the terms of the contract. In connection with such purchases, the Portfolios are required to segregate liquid assets sufficient to cover the purchase price. M. MORTGAGE DOLLAR ROLL TRANSACTIONS. In connection with a Portfolio's ability to purchase or sell securities on a when-issued basis, VP Strategic Allocation Growth, VP Strategic Allocation Balanced and VP Strategic Allocation Income Portfolios may engage in dollar roll transactions with respect to mortgage-backed securities issued by Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corp. In a dollar roll transaction, a Portfolio sells a mortgage-backed security to a financial institution, such as a bank or broker/dealer, and simultaneously agrees to repurchase a substantially similar (i.e., same type, coupon, and maturity) security from the institution on a delayed delivery basis at an agreed upon price. The mortgage-backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. The Portfolios account for dollar roll transactions as purchases and sales. NOTE 3 -- INVESTMENT TRANSACTIONS For the six months ended June 30, 2004, the cost of purchases and the proceeds from the sales of securities, excluding short-term securities, were as follows:
PURCHASES SALES ------------- ------------- VP Index Plus LargeCap $ 549,585,599 $ 473,805,292 VP Index Plus MidCap 432,048,527 307,671,670 VP Index Plus SmallCap 197,534,306 146,006,967 VP Strategic Allocation Growth 184,292,153 191,372,243 VP Strategic Allocation Balanced 156,159,794 155,472,195 VP Strategic Allocation Income 72,673,841 89,505,319
31 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 3 -- INVESTMENT TRANSACTIONS (CONTINUED) U.S. Government securities not included above were as follows:
PURCHASES SALES ------------- ------------- VP Strategic Allocation Growth $ 46,717,835 $ 27,562,182 VP Strategic Allocation Balanced 143,208,125 124,826,156 VP Strategic Allocation Income 136,201,999 117,102,817
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES The Portfolios entered into Investment Management Agreements with ING Investments (the "Investment Manager"). The Investment Management Agreement compensates the Investment Manager with a fee, computed daily and payable monthly, based on the average daily net assets of each Portfolio, at the following annual rates: VP Index Plus LargeCap 0.35% VP Index Plus MidCap 0.40% VP Index Plus SmallCap 0.40% VP Strategic Allocation Growth 0.60% VP Strategic Allocation Balanced 0.60% VP Strategic Allocation Income 0.60%
The Investment Manager entered into a Sub-Advisory Agreement with ING IM. Subject to such policies as the Board or the Investment Manager may determine, ING IM manages the Portfolios' assets in accordance with the Portfolios' investment objectives, policies, and limitations. Pursuant to the Administration Agreements ING Funds Services, LLC ("IFS"), a wholly-owned subsidiary of ING Groep N.V., acts as administrator and provides certain administrative and shareholder services necessary for Portfolio operations and is responsible for the supervision of other service providers. IFS is entitled to receive from each Portfolio a fee at an annual rate of 0.055% on the first $5 billion of daily net assets and 0.03% thereafter. NOTE 5 -- DISTRIBUTION FEES Each Class S share of the Portfolios has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, LLC (the "Distributor") is reimbursed or compensated by the Portfolios for expenses incurred in the distribution of the Portfolio's Class S shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to a payment each month to reimburse or compensate expenses incurred in the distribution and promotion of the Portfolio's S shares, including expenses incurred in printing prospectuses and reports used for sales purposes, expenses incurred in preparing and printing sales literature and other such distribution related expenses, including any distribution or shareholder servicing fees ("Service Fees") paid to securities dealers who have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, Class S of the Portfolios pays the Distributor a Distribution Fee at a rate of 0.25% based on average daily net assets. NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATED AND RELATED PARTIES At June 30, 2004, the Portfolios had the following amounts recorded in payable to affiliates on the accompanying Statements of Assets and Liabilities (see Notes 4 and 5):
ACCRUED ACCRUED INVESTMENT ACCRUED SHAREHOLDER MANAGEMENT ADMINISTRATIVE SERVICES AND FEES FEES DISTRIBUTION FEES TOTAL ---------------- ---------------- ----------------- ---------------- VP Index Plus LargeCap $ 440,064 $ 69,146 $ 18,925 $ 528,135 VP Index Plus MidCap 197,693 27,176 9,144 234,013 VP Index Plus SmallCap 79,719 10,959 5,967 96,645 VP Strategic Allocation Growth 114,536 10,496 4,939 129,971 VP Strategic Allocation Balanced 116,009 10,631 -- 126,640 VP Strategic Allocation Income 68,272 6,256 -- 74,528
The Portfolios have adopted a Deferred Compensation Plan (the "Plan"), which allows eligible non-affiliated directors as described in the Plan to defer the receipt of all or a portion of the directors' fees payable. Deferred fees are invested in various funds advised by ING Investments until distribution in accordance with the Plan. NOTE 7 -- EXPENSE LIMITATIONS ING Investments entered into written Expense Limitation Agreements with each of the Portfolios whereby the Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the levels listed below:
CLASS I CLASS S ------- ------- VP Index Plus LargeCap 0.55% 0.80% VP Index Plus MidCap 0.60% 0.85% VP Index Plus SmallCap 0.60% 0.85% VP Strategic Allocation Growth 0.75% N/A VP Strategic Allocation Balanced 0.70% N/A VP Strategic Allocation Income 0.65% N/A
32 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 7 -- EXPENSE LIMITATIONS (CONTINUED) The Investment Manager may at a later date recoup from a Portfolio for management fees waived and other expenses assumed by the Investment Manager during the previous 36 months, but only if, after such recoupment, the Portfolio's expense ratio does not exceed the percentage described above. Waived and reimbursed fees and any recoupment by the Investment Manager of such waived and reimbursed fees are reflected on the accompanying Statements of Operations for each Portfolio. Amounts payable by the Investment Manager are reflected on the accompanying Statements of Assets and Liabilities for each Portfolio. As of June 30, 2004, the amounts of reimbursed fees that are subject to possible recoupment by the Investment Manager, and the related expiration dates are as follows:
JUNE 30, ------------------------------------------------------ 2005 2006 2007 TOTAL ---------------- ---------------- ---------------- ---------------- VP Index Plus LargeCap $ -- $ 26,169 $ -- $ 26,169 VP Strategic Allocation Balanced 18,501 143,044 16,153 177,698 VP Strategic Allocation Income 32,579 161,447 87,001 281,027
The Expense Limitation Agreements are contractual and shall renew automatically for one-year terms unless ING Investments provides written notice of the termination of an Expense Limitation Agreement within 90 days of the end of the then current term. NOTE 8 -- LINE OF CREDIT All of the Portfolios included in this report, in addition to certain other Portfolios managed by the Investment Manager, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement") with a syndicate of banks led by Citibank, N.A. for an aggregate amount of $150,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the Portfolios; and (3) enable the Portfolios to meet other emergency expenses as defined in the Credit Agreement. The Portfolios to which the line of credit is available pay a commitment fee equal to 0.09% per annum on the daily unused portion of the committed line amount. Each of the Portfolios will pay its pro rata share of both the agent and commitment fee. Generally, borrowings under the Credit Agreement accrue interest at the Federal Funds Rate plus a specified margin. Repayments generally must be made within 30 days after the date of a revolving credit advance. During the six months ended June 30, 2004, the Portfolios did not have any loans outstanding under the line of credit. NOTE 9 -- CAPITAL SHARE TRANSACTIONS Transaction in capital shares and dollars were as follows:
CLASS I SHARES CLASS S SHARES ----------------------------------- ----------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ---------------- ---------------- ---------------- ---------------- VP INDEX PLUS LARGECAP (NUMBER OF SHARES) Shares sold 4,568,391 22,640,138 3,009,070 5,101,101 Dividends reinvested -- 932,690 -- 13,158 Shares redeemed (3,076,767) (7,924,422) (254,169) (1,127,031) ---------------- ---------------- ---------------- ---------------- Net increase in shares outstanding 1,491,624 15,648,406 2,754,901 3,987,228 ================ ================ ================ ================ VP INDEX PLUS LARGECAP ($) Shares sold $ 62,894,719 $ 1,506,897,350 $ 41,265,290 $ 61,069,198 Dividends reinvested -- 12,348,811 -- 156,715 Shares redeemed (42,127,324) (1,337,529,687) (3,460,560) (12,189,597) ---------------- ---------------- ---------------- ---------------- Net increase $ 20,767,395 $ 181,716,474 $ 37,804,730 $ 49,036,316 ================ ================ ================ ================
33 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 10 -- CAPITAL SHARE TRANSACTIONS (CONTINUED)
CLASS I SHARES CLASS S SHARES ----------------------------------- ----------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ---------------- ---------------- ---------------- ---------------- VP INDEX PLUS MIDCAP (NUMBER OF SHARES) Shares sold 5,749,912 8,999,559 2,074,905 1,219,454 Dividends reinvested -- 104,017 -- 2,068 Shares redeemed (125,486) (1,471,636) (22,005) (440,135) ---------------- ---------------- ---------------- ---------------- Net increase in shares outstanding 5,624,426 7,631,940 2,052,900 781,387 ================ ================ ================ ================ VP INDEX PLUS MIDCAP ($) Shares sold $ 93,169,844 $ 121,968,447 $ 33,478,885 $ 16,192,964 Dividends reinvested -- 1,377,191 -- 27,291 Shares redeemed (2,016,892) (17,897,180) (351,763) (5,093,413) ---------------- ---------------- ---------------- ---------------- Net increase $ 91,152,952 $ 105,448,458 $ 33,127,122 $ 11,126,842 ================ ================ ================ ================ CLASS I SHARES CLASS S SHARES ----------------------------------- ----------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2004 2003 2004 2003 ---------------- ---------------- ---------------- ---------------- VP INDEX PLUS SMALLCAP (NUMBER OF SHARES) Shares sold 2,991,450 5,422,840 1,237,042 1,184,635 Dividends reinvested -- 19,041 -- 581 Shares redeemed (299,859) (1,712,672) (124,140) (370,022) ---------------- ---------------- ---------------- ---------------- Net increase in shares outstanding 2,691,591 3,729,209 1,112,902 815,194 ================ ================ ================ ================ VP INDEX PLUS SMALLCAP ($) Shares sold $ 42,334,708 $ 63,427,915 $ 17,427,161 $ 13,743,067 Dividends reinvested -- 212,503 -- 6,457 Shares redeemed (4,194,454) (19,025,127) (1,681,560) (3,759,071) ---------------- ---------------- ---------------- ---------------- Net increase $ 38,140,254 $ 44,615,291 $ 15,745,601 $ 9,990,453 ================ ================ ================ ================ CLASS I SHARES ----------------------------------- SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 ---------------- ---------------- VP STRATEGIC ALLOCATION GROWTH (NUMBER OF SHARES) Shares sold 1,243,822 2,058,284 Dividends reinvested -- 141,946 Shares redeemed (520,466) (1,070,683) ---------------- ---------------- Net increase in shares outstanding 723,356 1,129,547 ================ ================ VP STRATEGIC ALLOCATION GROWTH ($) Shares sold $ 16,844,172 $ 23,016,183 Dividends reinvested -- 1,692,396 Shares redeemed (7,025,635) (10,985,790) ---------------- ---------------- Net increase $ 9,818,537 $ 13,722,789 ================ ================ CLASS I SHARES ----------------------------------- SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 ---------------- ---------------- VP STRATEGIC ALLOCATION BALANCED (NUMBER OF SHARES) Shares sold 2,379,745 2,725,924 Dividends reinvested -- 228,713 Shares redeemed (486,165) (1,180,144) ---------------- ---------------- Net increase in shares outstanding 1,893,580 1,774,493 ================ ================ VP STRATEGIC ALLOCATION BALANCED ($) Shares sold $ 30,959,603 $ 29,723,305 Dividends reinvested -- 2,679,069 Shares redeemed (6,315,679) (11,359,470) ---------------- ---------------- Net increase $ 24,643,924 $ 21,042,904 ================ ================
34 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 10 -- CAPITAL SHARE TRANSACTIONS (CONTINUED)
CLASS I SHARES ----------------------------------- SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 ---------------- ---------------- VP STRATEGIC ALLOCATION INCOME (NUMBER OF SHARES) Shares sold 1,078,755 1,584,623 Dividends reinvested -- 255,069 Shares redeemed (897,058) (1,702,803) ---------------- ---------------- Net increase in shares outstanding 181,697 136,889 ================ ================ VP STRATEGIC ALLOCATION INCOME ($) Shares sold $ 13,489,525 $ 15,209,893 Dividends reinvested -- 2,954,235 Shares redeemed (11,201,821) (16,424,023) ---------------- ---------------- Net increase $ 2,287,704 $ 1,740,105 ================ ================
NOTE 10 -- SECURITIES LENDING Under an agreement with The Bank of New York ("BNY"), the Portfolios can lend their securities to approved brokers, dealers and other financial institutions. Loans are collateralized by cash and U.S. Government securities. The collateral must be in an amount equal to at least 105% of the market value of non-U.S. securities loaned and 102% of the market value of U.S. securities loaned. The cash collateral received is invested in approved investments as defined in the Securities Lending Agreement with BNY (the "Agreement"). The securities purchased with cash collateral received are reflected in the Portfolio of Investments. Generally, in the event of counterparty default, the Portfolios have the right to use the collateral to offset losses incurred. The Agreement contains certain guarantees by BNY in the event of counterparty default and/or a borrower's failure to return a loaned security, however there would be a potential loss to the Portfolios in the event the Portfolios are delayed or prevented from exercising their right to dispose of the collateral. The Portfolios bear the risk of loss with respect to the investment of collateral. Engaging in securities lending could have a leveraging effect, which may intensify the credit, market and other risks associated with investing in a Portfolio. At June 30, 2004, the Portfolios had securities on loan and received collateral with the following market values:
VALUE OF SECURITIES VALUE OF TOTAL VALUE VALUE OF PURCHASED WITH NON-CASH OF SECURITIES LOANED CASH COLLATERAL COLLATERAL* COLLATERAL ----------------- ---------------- ---------------- ---------------- VP Index Plus LargeCap $ 282,080,747 $ 289,647,767 $ -- $ 289,647,767 VP Index Plus MidCap 153,848,269 157,046,588 -- 157,046,588 VP Index Plus SmallCap 41,876,955 31,729,658 -- 42,869,181 VP Strategic Allocation Growth 32,361,461 33,541,721 1,812,063 33,541,721 VP Strategic Allocation Balanced 40,650,898 41,857,544 -- 41,857,544 VP Strategic Allocation Income 27,223,210 27,785,465 -- 27,785,465
- ---------- * Various U.S. Treasury obligations, 6.125%-8.750%, 05/15/16-11/15/27. NOTE 11 -- FEDERAL INCOME TAXES The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America for Investment companies. These book/tax differences may be either temporary or permanent. Permanent differences are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences are not reclassified. Key differences include the treatment of short-term capital gains, foreign currency transactions, and wash sale deferrals. Distributions in excess of net investment income and/or net realized capital gains for tax purposes are reported as distributions of paid-in capital. Dividends paid by the Portfolios from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. 35 NOTES TO FINANCIAL STATEMENTS as of June 30, 2004 (Unaudited) (continued) NOTE 11 -- FEDERAL INCOME TAXES (CONTINUED) There were no distributions to shareholders during the six months ended June 30, 2004. Dividends to shareholders from ordinary income for the year ended December 31, 2003 were: VP Index Plus LargeCap $ 12,505,526 VP Index Plus MidCap 1,404,482 VP Index Plus SmallCap 218,961 VP Strategic Allocation Growth 1,692,396 VP Strategic Allocation Balanced 2,679,069 VP Strategic Allocation Income 2,954,235
The tax-basis components of distributable earnings and the expiration dates of the capital loss carryforwards which may be used to offset future realized capital gains for federal income tax purposes as of December 31, 2003 were as follows:
UNDISTRIBUTED UNREALIZED CAPITAL UNDISTRIBUTED LONG-TERM APPRECIATION/ LOSS EXPIRATION ORDINARY INCOME CAPITAL GAINS (DEPRECIATION) CARRYFORWARDS DATES --------------- ------------- -------------- --------------- ---------- VP Index Plus LargeCap $ 15,567,006 $ -- $ 70,008,802 $ (136,370,770) 2009 (181,519,180) 2010 (51,431,965) 2011 --------------- $ (369,321,915) =============== VP Index Plus MidCap 2,507,023 -- 55,306,134 $ (2,158,301) 2010 VP Index Plus SmallCap 1,128,137 622,991 23,088,210 -- -- VP Strategic Allocation Growth 2,499,340 -- 28,540,561 $ (20,509,023) 2009 (11,415,536) 2010 --------------- $ (31,924,559) =============== VP Strategic Allocation Balanced 2,983,867 -- 21,862,264 $ (13,731,864) 2009 (7,555,999) 2010 --------------- $ (21,287,863) =============== VP Strategic Allocation Income 2,659,706 -- 10,138,289 $ (4,578,703) 2009 (3,281,028) 2010 --------------- $ (7,859,731) ===============
NOTE 12 -- ILLIQUID SECURITIES Pursuant to guidelines adopted by the Portfolios' Board, the following securities have been deemed to be illiquid. The VP Index Plus LargeCap, VP Index Plus MidCap and VP Index Plus LargeCap Portfolios currently limit investment in illiquid securities to 10% of the Portfolios' net assets, at market value, at time of purchase. The VP Strategic Allocation Growth, VP Strategic Allocation Balanced and VP Strategic Allocation Income Portfolios limit investments in illiquid securities to 15%.
INITIAL PERCENT PRINCIPAL ACQUISITION OF NET PORTFOLIO SECURITY AMOUNT DATE COST VALUE ASSETS - --------- -------- --------- ----------- ---- ----- ------- VP Index Plus SmallCap MascoTech, Inc. $ 2,000 11/29/00 $ -- $ -- 0.0%
NOTE 13 -- OTHER INFORMATION As with many financial services companies, ING Investments and affiliates of ING Investments (collectively, "ING") have received requests for information from various governmental and self-regulatory agencies in connection with investigations related to trading in investment company shares. In each case, full cooperation and responses are being provided. In addition to responding to regulatory requests, ING management initiated an internal review of trading in ING insurance, retirement, and mutual fund products. The goal of this review has been to identify whether there have been any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel. Additionally, ING reviewed its controls and procedures in a continuing effort to deter improper frequent trading in ING products. ING's internal reviews related to mutual fund trading are continuing. The internal review has identified several arrangements allowing third parties to engage in frequent trading of mutual funds within our variable insurance and mutual fund products, and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. In addition, the review has identified five arrangements that allowed frequent trading in certain ING Funds. ING entities did not receive special benefits in return for any of these arrangements, which have all been terminated. The internal review also identified two investment professionals who engaged in improper frequent trading in ING Funds. ING will reimburse any ING Fund or its shareholders affected by inappropriate trading for any improper profits that accrued to any person who engaged in improper frequent trading for which ING is responsible. 36 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS LARGECAP PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - ---------------------------------------------------------------------------------------- COMMON STOCK: 99.4% ADVERTISING: 0.2% 54,850 @,L Interpublic Group of Cos., Inc. $ 753,091 24,500 L Omnicom Group 1,859,305 ---------------- 2,612,396 ---------------- AEROSPACE/DEFENSE: 2.1% 185,050 L Boeing Co. 9,454,204 65,600 General Dynamics Corp. 6,514,080 23,950 L Goodrich Corp. 774,304 61,150 L Lockheed Martin Corp. 3,184,692 50,400 Northrop Grumman Corp. 2,706,480 56,800 Raytheon Co. 2,031,736 35,050 Rockwell Collins, Inc. 1,167,866 69,000 United Technologies Corp. 6,312,120 ---------------- 32,145,482 ---------------- AGRICULTURE: 1.2% 277,300 Altria Group, Inc. 13,878,865 76,577 Archer-Daniels-Midland Co. 1,284,962 35,700 Monsanto Co. 1,374,450 11,700 L Reynolds American, Inc. 790,803 22,850 L UST, Inc. 822,600 ---------------- 18,151,680 ---------------- AIRLINES: 0.0% 42,500 L Southwest Airlines Co. 712,725 ---------------- 712,725 ---------------- APPAREL: 0.7% 29,650 Jones Apparel Group, Inc. 1,170,582 12,800 Liz Claiborne, Inc. 460,544 86,300 Nike, Inc. 6,537,225 9,700 Reebok Intl. Ltd. 349,006 37,300 L VF Corp. 1,816,510 ---------------- 10,333,867 ---------------- AUTO MANUFACTURERS: 1.1% 620,600 L Ford Motor Co. 9,712,390 71,200 L General Motors Corp. 3,317,208 56,987 L Paccar, Inc. 3,304,676 ---------------- 16,334,274 ---------------- AUTO PARTS AND EQUIPMENT: 0.1% 15,400 L Dana Corp. 301,840 10,400 Johnson Controls, Inc. 555,152 ---------------- 856,992 ---------------- BANKS: 6.6% 45,000 AmSouth Bancorp 1,146,150 341,487 Bank of America Corp. 28,896,629 96,300 L Bank of New York Co., Inc. 2,838,924 149,750 Bank One Corp. 7,637,250 29,400 BB&T Corp. 1,086,918 26,615 Charter One Financial, Inc. 1,176,117 23,100 L Comerica, Inc. 1,267,728 75,950 Fifth Third Bancorp 4,084,591 13,400 L First Horizon National Corp. 609,298 25,060 L Huntington Bancshares, Inc. 573,874 94,400 L Keycorp 2,821,616 25,000 Marshall & Ilsley Corp. 977,250 48,700 Mellon Financial Corp. 1,428,371 80,800 L National City Corp. 2,828,808 18,450 North Fork Bancorporation, Inc. $ 702,023 24,700 Northern Trust Corp. 1,044,316 33,450 PNC Financial Services Group, Inc. 1,775,526 26,250 L Regions Financial Corp. 959,438 43,950 SouthTrust Corp. 1,705,700 45,250 State Street Corp. 2,219,060 34,450 SunTrust Banks, Inc. 2,238,906 37,950 L Synovus Financial Corp. 960,894 26,800 Union Planters Corp. 798,908 264,497 US Bancorp 7,289,537 267,150 Wachovia Corp. 11,888,174 225,300 Wells Fargo & Co. 12,893,918 19,800 Zions Bancorporation 1,216,710 ---------------- 103,066,634 ---------------- BEVERAGES: 2.6% 44,650 Anheuser-Busch Cos., Inc. 2,411,100 18,200 L Brown-Forman Corp. 878,514 427,400 Coca-Cola Co. 21,575,152 48,800 Coca-Cola Enterprises, Inc. 1,414,712 43,500 Pepsi Bottling Group, Inc. 1,328,490 227,650 PepsiCo, Inc. 12,265,782 ---------------- 39,873,750 ---------------- BIOTECHNOLOGY: 0.8% 171,740 @,L Amgen, Inc. 9,371,851 17,550 @,L Biogen Idec, Inc. 1,110,038 25,700 @,L Chiron Corp. 1,147,248 11,800 @,L Genzyme Corp. 558,494 ---------------- 12,187,631 ---------------- BUILDING MATERIALS: 0.4% 27,900 @ American Standard Cos., Inc. 1,124,649 149,350 Masco Corp. 4,656,733 24,800 Vulcan Materials Co. 1,179,240 ---------------- 6,960,622 ---------------- CHEMICALS: 1.3% 30,350 Air Products & Chemicals, Inc. 1,591,858 8,700 Ashland, Inc. 459,447 124,400 Dow Chemical Co. 5,063,079 32,750 L Ecolab, Inc. 1,038,175 52,750 EI Du Pont de Nemours & Co. 2,343,155 18,350 Engelhard Corp. 592,889 9,200 L International Flavors & Fragrances, Inc. 344,080 58,100 PPG Industries, Inc. 3,630,669 47,200 Praxair, Inc. 1,883,752 28,400 Rohm & Haas Co. 1,180,872 30,350 L Sherwin-Williams Co. 1,261,043 9,600 L Sigma-Aldrich Corp. 572,256 ---------------- 19,961,275 ---------------- COMMERCIAL SERVICES: 1.2% 21,350 @,L Apollo Group, Inc. 1,884,992 342,550 @ Cendant Corp. 8,385,623 3,000 L Deluxe Corp. 130,500 26,487 L Equifax, Inc. 655,553 24,200 L H&R Block, Inc. 1,153,856 19,100 L Moody's Corp. 1,235,006
See Accompanying Notes to Financial Statements 37 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS LARGECAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- COMMERCIAL SERVICES (CONTINUED) 81,700 Paychex, Inc. $ 2,767,996 40,050 L Robert Half International, Inc. 1,192,289 14,650 L RR Donnelley & Sons Co. 483,743 ---------------- 17,889,558 ---------------- COMPUTERS: 3.9% 48,300 @,L Apple Computer, Inc. 1,571,682 25,650 @,L Computer Sciences Corp. 1,190,930 475,650 @ Dell, Inc. 17,037,782 317,450 @ EMC Corp. - Mass. 3,618,930 100,050 @ Gateway, Inc. 450,225 398,718 Hewlett-Packard Co. 8,412,950 230,500 International Business Machines Corp. 20,318,574 17,450 @ Lexmark Intl., Inc. 1,684,449 22,850 @,L NCR Corp. 1,133,132 71,850 @,L Network Appliance, Inc. 1,546,931 169,900 @ Sun Microsystems, Inc. 737,366 37,250 @ Sungard Data Systems, Inc. 968,500 102,600 @,L Unisys Corp. 1,424,088 ---------------- 60,095,539 ---------------- COSMETICS/PERSONAL CARE: 3.0% 13,050 Alberto-Culver Co. 654,327 62,400 L Avon Products, Inc. 2,879,136 74,650 Colgate-Palmolive Co. 4,363,293 303,400 Gillette Co. 12,864,160 114,500 Kimberly-Clark Corp. 7,543,260 344,900 Procter & Gamble Co. 18,776,356 ---------------- 47,080,532 ---------------- DISTRIBUTION/WHOLESALE: 0.1% 23,000 Genuine Parts Co. 912,640 23,200 WW Grainger, Inc. 1,334,000 ---------------- 2,246,640 ---------------- DIVERSIFIED FINANCIAL SERVICES: 8.2% 172,400 American Express Co. 8,857,912 13,450 Bear Stearns Cos., Inc. 1,133,970 31,750 L Capital One Financial Corp. 2,171,065 165,550 Charles Schwab Corp. 1,590,936 683,300 Citigroup, Inc. 31,773,449 90,525 L Countrywide Financial Corp. 6,359,381 133,000 @,L E*Trade Financial Corp. 1,482,950 130,200 Fannie Mae 9,291,072 13,150 Federated Investors, Inc. 398,971 29,350 Franklin Resources, Inc. 1,469,848 87,700 Freddie Mac 5,551,410 102,200 Goldman Sachs Group, Inc. 9,623,152 35,250 Janus Capital Group, Inc. 581,273 275,950 JPMorgan Chase & Co. 10,698,581 36,650 Lehman Brothers Holdings, Inc. 2,757,913 164,475 MBNA Corp. 4,241,810 204,900 L Merrill Lynch & Co, Inc. 11,060,501 226,150 Morgan Stanley 11,933,935 76,700 @,L Providian Financial Corp. 1,125,189 52,650 L SLM Corp. 2,129,693 15,450 L T Rowe Price Group, Inc. 778,680 ---------------- 125,011,691 ---------------- ELECTRIC: 2.3% 205,950 @,l AES Corp. $ 2,045,084 23,300 L Ameren Corp. 1,000,968 55,500 L American Electric Power Co, Inc. 1,776,000 108,900 L Centerpoint Energy, Inc. 1,252,350 23,250 L Cinergy Corp. 883,500 12,100 L Consolidated Edison, Inc. 481,096 36,150 Constellation Energy Group, Inc. 1,370,085 50,250 L Duke Energy Corp. 1,019,573 117,150 Edison Intl. 2,995,525 33,650 L Entergy Corp. 1,884,737 102,700 L Exelon Corp. 3,418,882 43,300 L FirstEnergy Corp. 1,619,853 24,050 L FPL Group, Inc. 1,537,998 23,500 L NiSource, Inc. 484,570 65,200 @,L PG&E Corp. 1,821,688 4,900 L Pinnacle West Capital Corp. 197,911 32,950 PPL Corp. 1,512,405 32,400 Progress Energy, Inc. 1,427,220 29,250 L Public Service Enterprise Group, Inc. 1,170,878 96,150 Southern Co. 2,802,773 110,800 L TXU Corp. 4,488,507 51,200 Xcel Energy, Inc. 855,552 ---------------- 36,047,155 ---------------- ELECTRICAL COMPONENTS AND EQUIPMENT: 0.2% 56,200 Emerson Electric Co. 3,571,510 ---------------- 3,571,510 ---------------- ELECTRONICS: 0.6% 55,550 @,L Agilent Technologies, Inc. 1,626,504 27,000 L Applera Corp. - Applied Biosystems Group 587,250 21,850 @,L Jabil Circuit, Inc. 550,183 42,300 Parker Hannifin Corp. 2,515,158 25,800 PerkinElmer, Inc. 517,032 74,950 @,L Sanmina-SCI Corp. 682,045 105,000 @,L Solectron Corp. 679,350 18,300 Tektronix, Inc. 622,566 18,300 @ Thermo Electron Corp. 562,542 17,850 @,L Waters Corp. 852,873 ---------------- 9,195,503 ---------------- ENTERTAINMENT: 0.1% 53,800 International Game Technology 2,076,680 ---------------- 2,076,680 ---------------- ENVIRONMENTAL CONTROL: 0.2% 52,500 @,L Allied Waste Industries, Inc. 691,950 77,050 Waste Management, Inc. 2,361,583 ---------------- 3,053,533 ---------------- FOOD: 1.3% 46,300 Albertson's, Inc. 1,228,802 69,050 L ConAgra Foods, Inc. 1,869,874 20,400 L General Mills, Inc. 969,612 33,400 L Hershey Foods Corp. 1,545,418 44,500 HJ Heinz Co. 1,744,400
See Accompanying Notes to Financial Statements 38 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS LARGECAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- FOOD (CONTINUED) 47,000 Kellogg Co. $ 1,966,950 16,750 McCormick & Co, Inc. 569,500 24,200 @,L Safeway, Inc. 613,228 184,450 L Sara Lee Corp. 4,240,506 35,500 Supervalu, Inc. 1,086,655 85,700 Sysco Corp. 3,074,059 26,100 WM Wrigley Jr Co. 1,645,605 ---------------- 20,554,609 ---------------- FOREST PRODUCTS AND PAPER: 0.7% 5,000 Boise Cascade Corp. 188,200 61,250 Georgia-Pacific Corp. 2,265,025 65,500 L International Paper Co. 2,927,850 41,350 L Louisiana-Pacific Corp. 977,928 27,600 L MeadWestvaco Corp. 811,164 21,800 L Plum Creek Timber Co, Inc. 710,244 6,900 L Temple-Inland, Inc. 477,825 49,450 Weyerhaeuser Co. 3,121,284 ---------------- 11,479,520 ---------------- GAS: 0.2% 20,950 L KeySpan Corp. 768,865 45,850 L Sempra Energy 1,578,616 ---------------- 2,347,481 ---------------- HAND/MACHINE TOOLS: 0.2% 23,550 L Black & Decker Corp. 1,463,162 5,100 Snap-On, Inc. 171,105 27,150 L Stanley Works 1,237,497 ---------------- 2,871,764 ---------------- HEALTHCARE-PRODUCTS: 3.6% 6,300 L Bausch & Lomb, Inc. 409,941 79,650 Baxter Intl., Inc. 2,748,722 55,900 Becton Dickinson & Co. 2,895,620 28,750 L Biomet, Inc. 1,277,650 108,950 @,L Boston Scientific Corp. 4,663,060 21,600 CR Bard, Inc. 1,223,640 16,250 Guidant Corp. 908,050 402,950 Johnson & Johnson 22,444,315 161,400 Medtronic, Inc. 7,863,408 22,100 @ St Jude Medical, Inc. 1,671,865 55,300 L Stryker Corp. 3,041,500 80,500 @ Zimmer Holdings, Inc. 7,100,100 ---------------- 56,247,871 ---------------- HEALTHCARE-SERVICES: 1.5% 33,050 Aetna, Inc. 2,809,250 32,900 @,L Anthem, Inc. 2,946,524 26,650 HCA, Inc. 1,108,374 50,150 @ Humana, Inc. 847,535 11,800 L Manor Care, Inc. 385,624 13,250 Quest Diagnostics 1,125,588 139,400 L UnitedHealth Group, Inc. 8,677,649 53,250 @ WellPoint Health Networks 5,964,533 ---------------- 23,865,077 ---------------- HOME BUILDERS: 0.1% 27,700 L Centex Corp. 1,267,275 6,000 L KB Home 411,780 ---------------- 1,679,055 ---------------- HOME FURNISHINGS: 0.1% 22,900 L Leggett & Platt, Inc. $ 611,659 16,700 L Whirlpool Corp. 1,145,620 ---------------- 1,757,279 ---------------- HOUSEHOLD PRODUCTS/WARES: 0.2% 13,850 L Avery Dennison Corp. 886,539 26,650 L Clorox Co. 1,433,237 19,400 Fortune Brands, Inc. 1,463,342 ---------------- 3,783,118 ---------------- INSURANCE: 5.2% 91,100 @@ ACE Ltd. 3,851,708 60,700 L Aflac, Inc. 2,477,167 95,700 Allstate Corp. 4,454,835 12,700 AMBAC Financial Group, Inc. 932,688 345,574 American International Group, Inc. 24,632,514 38,650 L AON Corp. 1,100,366 41,900 Chubb Corp. 2,856,742 45,450 L Cigna Corp. 3,127,415 20,422 Cincinnati Financial Corp. 888,765 65,550 Hartford Financial Services Group, Inc. 4,505,907 19,025 L Jefferson-Pilot Corp. 966,470 23,950 Lincoln National Corp. 1,131,638 40,950 Loews Corp. 2,455,362 28,200 Marsh & McLennan Cos., Inc. 1,279,716 18,600 L MBIA, Inc. 1,062,432 94,350 Metlife, Inc. 3,382,448 13,050 L MGIC Investment Corp. 989,973 43,400 L Principal Financial Group 1,509,452 73,350 Progressive Corp. 6,256,754 68,300 L Prudential Financial, Inc. 3,173,901 30,950 Safeco Corp. 1,361,800 147,769 L St Paul Travelers Cos., Inc. 5,990,555 18,700 Torchmark Corp. 1,006,060 18,500 @@,L XL Capital Ltd. 1,396,010 ---------------- 80,790,678 ---------------- INTERNET: 0.9% 86,800 @,L eBay, Inc. 7,981,260 15,700 @,L Monster Worldwide, Inc. 403,804 68,650 @,L Symantec Corp. 3,005,497 71,500 @,L Yahoo!, Inc. 2,597,595 ---------------- 13,988,156 ---------------- IRON/STEEL: 0.1% 9,850 Nucor Corp. 756,086 17,250 L United States Steel Corp. 605,820 ---------------- 1,361,906 ---------------- LEISURE TIME: 0.4% 13,800 Brunswick Corp. 563,040 80,750 L Carnival Corp. 3,795,250 37,650 L Harley-Davidson, Inc. 2,332,041 ---------------- 6,690,331 ---------------- LODGING: 0.3% 22,800 Harrah's Entertainment, Inc. 1,233,480 32,700 Hilton Hotels Corp. 610,182 31,200 L Marriott International, Inc. 1,556,256
See Accompanying Notes to Financial Statements 39 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS LARGECAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- LODGING (CONTINUED) 23,650 L Starwood Hotels & Resorts Worldwide, Inc. $ 1,060,703 ---------------- 4,460,621 ---------------- MACHINERY-CONSTRUCTION AND MINING: 0.2% 45,350 Caterpillar, Inc. 3,602,604 ---------------- 3,602,604 ---------------- MACHINERY-DIVERSIFIED: 0.2% 32,550 Deere & Co. 2,283,057 37,900 L Rockwell Automation, Inc. 1,421,629 ---------------- 3,704,686 ---------------- MEDIA: 2.7% 83,500 Clear Channel Communications, Inc. 3,085,325 10,700 L Dow Jones & Co, Inc. 482,570 34,450 L Gannett Co., Inc. 2,923,083 10,400 L Knight-Ridder, Inc. 748,800 63,700 McGraw-Hill Cos., Inc. 4,877,509 10,000 L Meredith Corp. 549,600 17,350 L New York Times Co. 775,719 618,400 @,L Time Warner, Inc. 10,871,471 38,150 L Tribune Co. 1,737,351 237,800 L Viacom, Inc. 8,494,216 259,350 L Walt Disney Co. 6,610,832 ---------------- 41,156,476 ---------------- MINING: 0.5% 117,300 Alcoa, Inc. 3,874,419 24,200 Newmont Mining Corp. 937,992 32,850 L Phelps Dodge Corp. 2,546,204 ---------------- 7,358,615 ---------------- MISCELLANEOUS MANUFACTURING: 6.2% 203,450 L 3M Co. 18,312,534 10,350 Cooper Industries Ltd. 614,894 15,100 Crane Co. 473,989 42,300 L Danaher Corp. 2,193,255 28,900 Dover Corp. 1,216,690 35,300 L Eastman Kodak Co. 952,394 19,900 Eaton Corp. 1,288,326 1,417,750 General Electric Co. 45,935,099 111,150 Honeywell Intl., Inc. 4,071,424 38,550 Illinois Tool Works, Inc. 3,696,560 22,850 @@ Ingersoll-Rand Co. 1,560,884 10,100 ITT Industries, Inc. 838,300 16,200 L Pall Corp. 424,278 17,750 L Textron, Inc. 1,053,463 396,950 @@ Tyco International Ltd. 13,154,922 ---------------- 95,787,012 ---------------- OFFICE/BUSINESS EQUIPMENT: 0.2% 29,300 Pitney Bowes, Inc. 1,296,525 96,100 @,L Xerox Corp. 1,393,450 ---------------- 2,689,975 ---------------- OIL AND GAS: 6.9% 15,200 L Amerada Hess Corp. 1,203,688 29,600 Anadarko Petroleum Corp. 1,734,560 41,304 Apache Corp. 1,798,789 131,400 Burlington Resources, Inc. $ 4,754,052 239,200 ChevronTexaco Corp. 22,511,111 137,394 ConocoPhillips 10,481,788 72,950 L Devon Energy Corp. 4,814,700 14,700 EOG Resources, Inc. 877,737 995,200 Exxon Mobil Corp. 44,196,831 13,650 L Kerr-McGee Corp. 733,961 67,300 Marathon Oil Corp. 2,546,632 17,500 @,@@,L Nabors Industries Ltd. 791,350 18,250 @ Noble Corp. 691,493 87,100 Occidental Petroleum Corp. 4,216,511 15,600 L Sunoco, Inc. 992,472 37,350 @,L Transocean, Inc. 1,080,909 30,250 Unocal Corp. 1,149,500 43,750 L Valero Energy Corp. 3,227,000 ---------------- 107,803,084 ---------------- OIL AND GAS SERVICES: 0.2% 18,800 L Baker Hughes, Inc. 707,820 18,550 L BJ Services Co. 850,332 31,250 Schlumberger Ltd. 1,984,688 ---------------- 3,542,840 ---------------- PACKAGING AND CONTAINERS: 0.1% 6,950 Ball Corp. 500,748 11,800 Bemis Co. 333,350 28,450 @ Pactiv Corp. 709,543 11,500 @,L Sealed Air Corp. 612,605 ---------------- 2,156,246 ---------------- PHARMACEUTICALS: 5.9% 83,250 Abbott Laboratories 3,393,270 15,950 L Allergan, Inc. 1,427,844 16,050 L AmerisourceBergen Corp. 959,469 253,850 Bristol-Myers Squibb Co. 6,219,325 57,600 Cardinal Health, Inc. 4,034,880 60,250 @,L Caremark Rx, Inc. 1,984,635 148,200 L Eli Lilly & Co. 10,360,662 9,900 @,L Express Scripts, Inc. 784,377 46,200 @,L Forest Laboratories, Inc. 2,616,306 20,700 @,L Hospira, Inc. 571,320 53,266 @ King Pharmaceuticals, Inc. 609,896 36,604 @ Medco Health Solutions, Inc. 1,372,650 302,450 Merck & Co, Inc. 14,366,374 34,650 Mylan Laboratories 701,663 1,012,200 Pfizer, Inc. 34,698,215 21,250 @,L Watson Pharmaceuticals, Inc. 571,625 177,150 Wyeth 6,405,744 ---------------- 91,078,255 ---------------- PIPELINES: 0.1% 16,050 Kinder Morgan, Inc. 951,605 104,700 L Williams Cos., Inc. 1,245,930 ---------------- 2,197,535 ---------------- REAL ESTATE INVESTMENT TRUSTS: 0.0% 10,900 L Simon Property Group, Inc. 560,478 ---------------- 560,478 ---------------- RETAIL: 7.2% 35,800 @,L Autonation, Inc. 612,180 37,400 @ Bed Bath & Beyond, Inc. 1,438,030 113,000 Best Buy Co, Inc. 5,733,620
See Accompanying Notes to Financial Statements 40 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS LARGECAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- RETAIL (CONTINUED) 62,900 L Costco Wholesale Corp. $ 2,583,303 53,700 CVS Corp. 2,256,474 22,800 L Darden Restaurants, Inc. 468,540 44,150 Dollar General Corp. 863,574 22,950 L Family Dollar Stores, Inc. 698,139 39,450 Federated Department Stores 1,936,995 311,050 L Gap, Inc. 7,542,962 305,100 Home Depot, Inc. 10,739,519 95,750 JC Penney Co, Inc. Holding Co. 3,615,520 175,200 Limited Brands 3,276,240 99,150 Lowe's Cos., Inc. 5,210,333 38,950 L May Department Stores Co. 1,070,736 168,050 L McDonald's Corp. 4,369,300 43,300 Nordstrom, Inc. 1,845,013 98,900 @,L Office Depot, Inc. 1,771,299 51,400 RadioShack Corp. 1,471,582 11,550 L Sears Roebuck and Co. 436,128 167,500 Staples, Inc. 4,909,425 84,100 @ Starbucks Corp. 3,656,668 115,950 Target Corp. 4,924,397 64,650 L TJX Cos, Inc. 1,560,651 49,200 @,L Toys R US, Inc. 783,756 573,440 L Wal-Mart Stores, Inc. 30,254,693 134,700 L Walgreen Co. 4,877,487 39,600 Wendy's International, Inc. 1,379,664 49,800 Yum! Brands, Inc. 1,853,556 ---------------- 112,139,784 ---------------- SAVINGS AND LOANS: 0.4% 18,550 L Golden West Financial Corp. 1,972,793 115,200 L Washington Mutual, Inc. 4,451,328 ---------------- 6,424,121 ---------------- SEMICONDUCTORS: 3.2% 46,300 @, Advanced Micro Devices, Inc. 736,170 48,500 @,L Altera Corp. 1,077,670 41,750 Analog Devices, Inc. 1,965,590 225,250 @ Applied Materials, Inc. 4,419,405 83,000 @,L Applied Micro Circuits Corp. 441,560 17,150 @,L Broadcom Corp. 802,106 877,550 Intel Corp. 24,220,379 25,350 @,L Kla-Tencor Corp. 1,251,783 37,700 L Linear Technology Corp. 1,488,019 79,800 @,L LSI Logic Corp. 608,076 43,000 L Maxim Integrated Products 2,254,060 78,250 @,L Micron Technology, Inc. 1,198,008 41,900 @,L National Semiconductor Corp. 921,381 25,300 @,L Teradyne, Inc. 574,310 226,300 Texas Instruments, Inc. 5,471,934 47,100 L Xilinx, Inc. 1,568,901 ---------------- 48,999,352 ---------------- SOFTWARE: 5.8% 31,600 Adobe Systems, Inc. 1,469,400 39,250 Autodesk, Inc. 1,680,293 79,500 Automatic Data Processing, Inc. 3,329,460 81,000 @ BMC Software, Inc. 1,498,500 47,600 @,L Citrix Systems, Inc. 969,136 76,000 Computer Associates Intl., Inc. $ 2,132,560 89,300 @,L Compuware Corp. 589,380 39,500 @,L Electronic Arts, Inc. 2,154,725 113,589 First Data Corp. 5,056,982 23,100 @ Fiserv, Inc. 898,359 71,750 L IMS Health, Inc. 1,681,820 23,500 @,L Intuit, Inc. 906,630 4,550 @,L Mercury Interactive Corp. 226,727 1,956,000 L Microsoft Corp. 55,863,359 41,700 @ Novell, Inc. 349,863 698,050 @ Oracle Corp. 8,327,736 36,350 @,L Peoplesoft, Inc. 672,475 63,000 @ Siebel Systems, Inc. 672,840 57,100 @,L Veritas Software Corp. 1,581,670 ---------------- 90,061,915 ---------------- TELECOMMUNICATIONS: 6.4% 71,900 L Alltel Corp. 3,639,578 101,460 L AT&T Corp. 1,484,360 145,550 @ AT&T Wireless Services, Inc. 2,084,276 60,250 @,L Avaya, Inc. 951,348 397,600 BellSouth Corp. 10,425,072 28,550 L CenturyTel, Inc. 857,642 921,650 @,L Cisco Systems, Inc. 21,843,104 33,950 L Citizens Communications Co. 410,795 51,500 @,L Comverse Technology, Inc. 1,026,910 175,650 @,L Corning, Inc. 2,293,989 556,550 @,L Lucent Technologies, Inc. 2,103,759 708,000 L Motorola, Inc. 12,920,999 147,400 @,L Nextel Communications, Inc. 3,929,684 106,950 Qualcomm, Inc. 7,805,211 439,750 SBC Communications, Inc. 10,663,938 49,550 L Scientific-Atlanta, Inc. 1,709,475 74,900 L Sprint Corp-FON Group 1,318,240 101,950 @,L Tellabs, Inc. 891,043 377,550 Verizon Communications, Inc. 13,663,534 ---------------- 100,022,957 ---------------- TEXTILES: 0.1% 21,000 L Cintas Corp. 1,001,070 ---------------- 1,001,070 ---------------- TOYS/GAMES/HOBBIES: 0.1% 57,700 L Hasbro, Inc. 1,096,300 ---------------- 1,096,300 ---------------- TRANSPORTATION: 1.3% 47,050 Burlington Northern Santa Fe Corp. 1,650,044 69,400 FedEx Corp. 5,669,286 49,700 L Norfolk Southern Corp. 1,318,044 13,100 Ryder System, Inc. 524,917 149,500 L United Parcel Service, Inc. 11,237,915 ---------------- 20,400,206 ---------------- Total Common Stock (Cost $1,395,552,456) 1,543,126,646 ----------------
See Accompanying Notes to Financial Statements 41 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS LARGECAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 19.5% REPURCHASE AGREEMENT: 0.8% $ 12,919,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $12,919,538 to be received upon repurchase (Collateralized by $13,512,000 Federal National Mortgage Association, 4.850%, Market Value plus accrued interest $13,177,634, due 05/21/13) $ 12,919,000 ---------------- Total Repurchase Agreement (Cost $12,919,000) 12,919,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 18.7% 289,647,767 The Bank of New York Institutional Cash Reserve Fund, 1.250% 289,647,767 ---------------- Total Securities Lending Collateral (Cost $289,647,767) 289,647,767 ---------------- Total Short-Term Investments (Cost $302,566,767) 302,566,767 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $1,698,119,223)* 118.9% $ 1,845,693,413 OTHER ASSETS AND LIABILITIES-NET (18.9) (292,918,680) ----- ---------------- NET ASSETS 100.0% $ 1,552,774,733 ===== ================
@ Non-income producing security @@ Foreign issuer S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $1,808,699,968. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 59,379,289 Gross Unrealized Depreciation (22,385,844) ---------------- Net Unrealized Appreciation $ 36,993,445 ================
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE LOSS -------------- --------- ------------ ---------- ---------- S&P 500 Index 10 $ 2,851,000 September-04 $ (1,090)
See Accompanying Notes to Financial Statements 42 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS MIDCAP PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - ---------------------------------------------------------------------------------------- COMMON STOCK: 98.5% ADVERTISING: 0.2% 21,700 @,L Catalina Marketing Corp. $ 396,893 47,900 Harte-Hanks, Inc. 1,169,239 ---------------- 1,566,132 ---------------- AEROSPACE/DEFENSE: 0.9% 21,250 @ Alliant Techsystems, Inc. 1,345,975 60,600 L L-3 Communications Holdings, Inc. 4,048,080 5,200 @ Sequa Corp. 304,044 ---------------- 5,698,099 ---------------- AGRICULTURE: 0.1% 11,250 Universal Corp.-VA 573,075 ---------------- 573,075 ---------------- AIRLINES: 0.0% 10,550 @,L Alaska Air Group, Inc. 251,829 ---------------- 251,829 ---------------- APPAREL: 1.1% 109,000 @ Coach, Inc. 4,925,710 33,250 @ Timberland Co. 2,147,618 ---------------- 7,073,328 ---------------- AUTO PARTS AND EQUIPMENT: 0.8% 16,050 L ArvinMeritor, Inc. 314,099 10,000 Bandag, Inc. 445,300 12,300 BorgWarner, Inc. 538,371 40,050 Lear Corp. 2,362,549 31,550 Modine Manufacturing Co. 1,004,867 15,350 Superior Industries Intl. 513,458 ---------------- 5,178,644 ---------------- BANKS: 5.2% 58,990 Associated Banc-Corp. 1,747,874 52,050 Bank of Hawaii Corp. 2,353,701 97,750 L Banknorth Group, Inc. 3,174,919 26,600 City National Corp. 1,747,620 72,650 Colonial BancGroup, Inc. 1,320,051 43,450 Commerce Bancorp, Inc. 2,390,185 68,250 Compass Bancshares, Inc. 2,934,749 26,650 Cullen/Frost Bankers, Inc. 1,192,588 49,450 Greater Bay BanCorp. 1,429,105 82,550 Hibernia Corp. 2,005,965 37,250 L Investors Financial Services Corp. 1,623,355 16,700 Mercantile Bankshares Corp. 781,894 113,600 National Commerce Financial Corp. 3,691,999 25,950 L Provident Financial Group, Inc. 1,023,987 18,000 @ Silicon Valley Bancshares 713,700 38,150 TCF Financial Corp. 2,214,608 18,780 L Westamerica Bancorporation 985,011 37,900 Wilmington Trust Corp. 1,410,638 ---------------- 32,741,949 ---------------- BEVERAGES: 0.6% 60,600 @,L Constellation Brands, Inc. 2,250,078 76,900 PepsiAmericas, Inc. 1,633,356 ---------------- 3,883,434 ---------------- BIOTECHNOLOGY: 0.4% 43,350 @,L Charles River Laboratories Intl., Inc. 2,118,515 39,600 @,L Vertex Pharmaceuticals, Inc. 429,264 ---------------- 2,547,779 ---------------- BUILDING MATERIALS: 0.3% 26,950 Martin Marietta Materials, Inc. $ 1,194,694 20,300 York Intl. Corp. 833,721 ---------------- 2,028,415 ---------------- CHEMICALS: 2.6% 34,450 Airgas, Inc. 823,700 25,750 L Albemarle Corp. 814,988 93,350 L Cabot Corp. 3,799,344 59,500 Crompton Corp. 374,850 21,200 Cytec Industries, Inc. 963,540 21,950 L Ferro Corp. 585,626 35,750 @,L FMC Corp. 1,541,183 64,400 L IMC Global, Inc. 862,960 25,950 Lubrizol Corp. 950,289 92,550 L Lyondell Chemical Co. 1,609,445 41,550 L Olin Corp. 732,111 60,350 RPM Intl., Inc. 917,320 10,900 Sensient Technologies Corp. 234,132 50,050 Valspar Corp. 2,522,019 ---------------- 16,731,507 ---------------- COAL: 0.5% 31,750 L Arch Coal, Inc. 1,161,733 36,800 L Peabody Energy Corp. 2,060,432 ---------------- 3,222,165 ---------------- COMMERCIAL SERVICES: 3.3% 13,800 Banta Corp. 612,858 56,150 @,L Career Education Corp. 2,558,193 49,000 @ ChoicePoint, Inc. 2,237,340 20,250 @,L Corinthian Colleges, Inc. 500,985 41,550 @ Education Management Corp. 1,365,333 22,000 @,L First Health Group Corp. 343,420 73,800 @,L Gartner, Inc. 975,636 68,300 @ ITT Educational Services, Inc. 2,596,765 31,350 @ Korn/Ferry Intl. 607,250 49,050 Manpower, Inc. 2,490,269 56,850 @,L MPS Group, Inc. 689,022 56,850 @ Quanta Services, Inc. 353,607 41,200 @ Rent-A-Center, Inc. 1,233,116 23,525 Rollins, Inc. 541,310 34,800 @,L Sotheby's Holdings 555,408 34,800 @,L United Rentals, Inc. 622,572 30,750 @,L Valassis Communications, Inc. 936,953 49,950 L Viad Corp. 1,349,150 ---------------- 20,569,187 ---------------- COMPUTERS: 4.3% 55,250 @,L BISYS Group, Inc. 776,815 150,800 @,L Cadence Design Systems, Inc. 2,206,204 83,700 @ Ceridian Corp. 1,883,250 127,900 @ Cognizant Technology Solutions Corp. 3,249,938 39,100 Diebold, Inc. 2,067,217 45,950 @,L DST Systems, Inc. 2,209,736 7,550 L Imation Corp. 321,706 126,200 Jack Henry & Associates, Inc. 2,536,619 45,300 @,L McData Corp. 243,714 40,875 L National Instruments Corp. 1,252,819 35,900 Reynolds & Reynolds Co. 830,367 93,450 @,L Sandisk Corp. 2,026,931 167,150 @ Storage Technology Corp. 4,847,349 84,150 @ Synopsys, Inc. 2,392,385 ---------------- 26,845,050 ----------------
See Accompanying Notes to Financial Statements 43 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS MIDCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- DISTRIBUTION/WHOLESALE: 1.0% 46,150 CDW Corp. $ 2,942,524 43,600 L Fastenal Co. 2,477,788 29,050 @ Tech Data Corp. 1,136,727 ---------------- 6,557,039 ---------------- DIVERSIFIED FINANCIAL SERVICES: 2.8% 42,750 AG Edwards, Inc. 1,454,783 236,700 @,L AmeriCredit Corp. 4,622,750 34,950 L Eaton Vance Corp. 1,335,440 30,900 L IndyMac Bancorp, Inc. 976,440 53,750 L Jefferies Group, Inc. 1,661,950 29,900 L LaBranche & Co., Inc. 251,758 36,450 L Legg Mason, Inc. 3,317,314 103,350 Raymond James Financial, Inc. 2,733,608 48,950 Waddell & Reed Financial, Inc. 1,082,285 ---------------- 17,436,328 ---------------- ELECTRIC: 4.6% 87,400 Allete, Inc. 2,910,419 59,350 L Alliant Energy Corp. 1,547,848 86,400 @ Aquila, Inc. 307,584 16,600 Black Hills Corp. 522,900 72,600 L DPL, Inc. 1,409,892 43,950 L Duquesne Light Holdings, Inc. 848,675 84,950 Energy East Corp. 2,060,037 39,600 L Great Plains Energy, Inc. 1,176,120 43,800 L Hawaiian Electric Industries 1,143,180 7,850 L Idacorp, Inc. 211,950 63,650 MDU Resources Group, Inc. 1,529,510 67,450 Northeast Utilities 1,313,252 29,250 NSTAR 1,400,490 122,055 OGE Energy Corp. 3,108,740 92,500 L Pepco Holdings, Inc. 1,690,899 27,300 PNM Resources, Inc. 567,021 23,250 L Puget Energy, Inc. 509,408 63,550 L SCANA Corp. 2,311,313 67,900 @,L Sierra Pacific Resources 523,509 43,250 Westar Energy, Inc. 861,108 64,450 Wisconsin Energy, Corp. 2,101,714 19,750 WPS Resources Corp. 915,413 ---------------- 28,970,982 ---------------- ELECTRICAL COMPONENTS AND EQUIPMENT: 1.1% 35,200 Ametek, Inc. 1,087,680 45,700 @ Energizer Holdings, Inc. 2,056,500 88,000 Hubbell, Inc. 4,110,480 ---------------- 7,254,660 ---------------- ELECTRONICS: 1.5% 109,250 @,L Arrow Electronics, Inc. 2,930,085 67,350 @,L Avnet, Inc. 1,528,845 44,600 Gentex Corp. 1,769,728 48,450 @ Kemet Corp. 592,059 17,250 @ Varian, Inc. 727,088 87,800 @,L Vishay Intertechnology, Inc. 1,631,324 ---------------- 9,179,129 ---------------- ENGINEERING AND CONSTRUCTION: 0.5% 45,800 @,L Dycom Industries, Inc. 1,282,400 20,900 Granite Construction, Inc. 381,007 30,100 @ Jacobs Engineering Group, Inc. 1,185,338 ---------------- 2,848,745 ---------------- ENTERTAINMENT: 0.8% 57,050 GTECH Holdings Corp. $ 2,641,985 30,600 International Speedway Corp. 1,488,384 26,550 @,L Macrovision Corp. 664,547 38,550 Six Flags, Inc. 279,873 ---------------- 5,074,789 ---------------- ENVIRONMENTAL CONTROL: 0.6% 87,050 Republic Services, Inc. 2,519,227 21,800 @,L Stericycle, Inc. 1,127,932 ---------------- 3,647,159 ---------------- FOOD: 3.3% 89,950 @ Dean Foods Co. 3,356,034 76,400 Hormel Foods Corp. 2,376,040 33,010 JM Smucker Co. 1,515,489 69,400 Ruddick Corp. 1,558,030 64,700 @,L Smithfield Foods, Inc. 1,902,180 30,493 Tootsie Roll Industries, Inc. 991,023 287,905 Tyson Foods, Inc. 6,031,609 34,400 Whole Foods Market, Inc. 3,283,480 ---------------- 21,013,885 ---------------- FOREST PRODUCTS AND PAPER: 0.6% 12,500 L Bowater, Inc. 519,875 26,950 Longview Fibre Co. 396,974 40,300 Potlatch Corp. 1,678,092 27,063 Rayonier, Inc. 1,202,950 ---------------- 3,797,891 ---------------- GAS: 0.4% 32,700 AGL Resources, Inc. 949,935 43,400 Vectren Corp. 1,088,906 27,150 WGL Holdings, Inc. 779,748 ---------------- 2,818,589 ---------------- HAND/MACHINE TOOLS: 0.1% 19,150 Kennametal, Inc. 877,070 ---------------- 877,070 ---------------- HEALTHCARE-PRODUCTS: 3.1% 46,500 @,L Apogent Technologies, Inc. 1,488,000 34,300 Beckman Coulter, Inc. 2,092,300 58,800 @,L Cytyc Corp. 1,491,756 73,100 Dentsply Intl., Inc. 3,808,510 10,150 @,L Henry Schein, Inc. 640,871 33,800 Hillenbrand Industries, Inc. 2,043,210 36,950 @ Steris Corp. 833,592 80,600 @ Varian Medical Systems, Inc. 6,395,610 23,650 @,L Visx, Inc. 631,928 ---------------- 19,425,777 ---------------- HEALTHCARE-SERVICES: 5.4% 29,900 @,L Apria Healthcare Group, Inc. 858,130 55,850 @ Community Health Systems, Inc. 1,495,105 92,250 @ Covance, Inc. 3,559,005 112,075 @,L Coventry Health Care, Inc. 5,480,467 63,150 @,L Health Net, Inc. 1,673,475 19,550 @ LifePoint Hospitals, Inc. 727,651 55,750 @,L Lincare Holdings, Inc. 1,831,945 73,400 Oxford Health Plans, Inc. 4,039,936 119,100 @,L Pacificare Health Systems 4,604,405 59,150 @,L Patterson Dental Co. 4,524,383 100,200 @,L Renal Care Group, Inc. 3,319,626
See Accompanying Notes to Financial Statements 44 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS MIDCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- HEALTHCARE-SERVICES (CONTINUED) 16,900 @ Triad Hospitals, Inc. $ 629,187 32,050 Universal Health Services, Inc. 1,470,775 ---------------- 34,214,090 ---------------- HOLDING COMPANIES-DIVERSIFIED: 0.3% 37,650 L Leucadia National Corp. 1,871,205 ---------------- 1,871,205 ---------------- HOME BUILDERS: 1.6% 131,400 L DR Horton, Inc. 3,731,760 88,600 L Lennar Corp. 3,962,192 5,650 Ryland Group, Inc. 441,830 30,450 Thor Industries, Inc. 1,018,857 15,700 @,L Toll Brothers, Inc. 664,424 ---------------- 9,819,063 ---------------- HOME FURNISHINGS: 1.2% 28,050 L Furniture Brands Intl., Inc. 702,653 74,350 S Harman Intl. Industries, Inc. 6,765,850 ---------------- 7,468,503 ---------------- HOUSEHOLD PRODUCTS/WARES: 1.0% 99,800 @,L American Greetings 2,313,364 44,900 L Blyth, Inc. 1,548,601 20,050 L Church & Dwight, Inc. 917,889 18,000 @,L Scotts Co. 1,149,840 29,450 L Tupperware Corp. 572,214 ---------------- 6,501,908 ---------------- INSURANCE: 6.8% 79,250 @ Allmerica Financial Corp. 2,678,650 111,300 American Financial Group, Inc. 3,402,441 21,800 L AmerUs Group Co. 902,520 50,200 Arthur J Gallagher & Co. 1,528,590 15,900 Brown & Brown, Inc. 685,290 69,750 @@ Everest Re Group Ltd. 5,605,109 98,782 Fidelity National Financial, Inc. 3,688,520 51,700 First American Corp. 1,338,513 32,750 HCC Insurance Holdings, Inc. 1,094,178 23,350 Horace Mann Educators Corp. 408,158 29,050 @,L Mony Group, Inc. 909,265 33,550 @,L Ohio Casualty Corp. 675,362 103,775 Old Republic Intl. Corp. 2,461,543 55,550 PMI Group, Inc. 2,417,536 66,900 Protective Life Corp. 2,587,023 52,000 Radian Group, Inc. 2,490,800 14,500 Stancorp Financial Group, Inc. 971,500 101,900 Unitrin, Inc. 4,340,940 111,275 WR Berkley Corp. 4,779,260 ---------------- 42,965,198 ---------------- INTERNET: 0.8% 27,900 @ Avocent Corp. 1,025,046 14,400 @,L Checkfree Corp. 432,000 35,850 @ Macromedia, Inc. 880,118 89,050 McAfee, Inc. 1,614,476 57,750 @ RSA Security, Inc. 1,182,143 ---------------- 5,133,783 ---------------- LEISURE TIME: 0.1% 38,300 L Callaway Golf Co. 434,322 ---------------- 434,322 ---------------- LODGING: 1.2% 34,850 L Boyd Gaming Corp. $ 925,965 286,800 @,L Caesars Entertainment, Inc. 4,302,000 38,750 Mandalay Resort Group 2,659,800 ---------------- 7,887,765 ---------------- MACHINERY-DIVERSIFIED: 1.3% 46,250 @,L AGCO Corp. 942,113 50,550 @ Flowserve Corp. 1,260,717 65,975 Graco, Inc. 2,048,523 23,450 Nordson, Corp. 1,017,027 10,150 Tecumseh Products Co. 418,079 25,400 @,L Zebra Technologies Corp. 2,209,799 ---------------- 7,896,258 ---------------- MEDIA: 2.0% 64,650 Belo Corp. 1,735,852 31,250 @ Emmis Communications Corp. 655,625 27,350 @ Entercom Communications Corp. 1,020,155 24,250 Lee Enterprises, Inc. 1,164,243 12,800 Media General, Inc. 822,016 54,400 L Reader's Digest Association, Inc. 869,856 18,650 @,L Scholastic Corp. 558,568 5,550 Washington Post 5,161,555 20,050 @ Westwood One, Inc. 477,190 ---------------- 12,465,060 ---------------- METAL FABRICATE/HARDWARE: 0.3% 36,900 Precision Castparts Corp. 2,018,061 ---------------- 2,018,061 ---------------- MISCELLANEOUS MANUFACTURING: 2.6% 82,850 Brink's Co. 2,837,613 16,800 Carlisle Cos., Inc. 1,045,800 49,950 Donaldson Co., Inc. 1,463,535 22,400 Harsco Corp. 1,052,800 19,000 L Lancaster Colony Corp. 791,160 141,850 Pentair, Inc. 4,771,834 73,400 @,L SPX Corp. 3,408,696 20,000 Teleflex, Inc. 1,003,000 ---------------- 16,374,438 ---------------- OFFICE FURNISHINGS: 0.4% 57,012 HNI Corp. 2,413,318 ---------------- 2,413,318 ---------------- OIL AND GAS: 4.1% 35,550 ENSCO Intl., Inc. 1,034,505 12,650 @,L Forest Oil Corp. 345,598 52,800 L Murphy Oil Corp. 3,891,360 54,200 @ Newfield Exploration Co. 3,021,108 53,950 Noble Energy, Inc. 2,751,450 155,550 L Pioneer Natural Resources Co. 5,456,693 42,250 @ Plains Exploration & Production Co. 775,288 94,950 Pogo Producing Co. 4,690,529 136,587 XTO Energy, Inc. 4,068,927 ---------------- 26,035,458 ---------------- OIL AND GAS SERVICES: 1.2% 33,300 @,L Cooper Cameron Corp. 1,621,710 40,200 @ FMC Technologies, Inc. 1,157,760 29,200 @ Grant Prideco, Inc. 539,032 34,900 @,L Hanover Compressor Co. 415,310 18,000 @,L National-Oilwell, Inc. 566,820
See Accompanying Notes to Financial Statements 45 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS MIDCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- OIL AND GAS SERVICES (CONTINUED) 24,950 @ Smith Intl., Inc. $ 1,391,212 23,250 @ Varco Intl., Inc. 508,943 29,450 @ Weatherford Intl. Ltd. 1,324,661 ---------------- 7,525,448 ---------------- PACKAGING AND CONTAINERS: 0.3% 24,300 Packaging Corp. of America 580,770 58,130 Sonoco Products Co. 1,482,315 ---------------- 2,063,085 ---------------- PHARMACEUTICALS: 3.3% 23,050 @ Barr Laboratories, Inc. 776,785 32,900 @,L Cephalon, Inc. 1,776,600 123,500 @ Gilead Sciences, Inc. 8,274,499 111,400 @,L IVAX Corp. 2,672,486 57,900 Omnicare, Inc. 2,478,699 17,250 @,L Par Pharmaceutical Cos., Inc. 607,373 37,200 L Perrigo Co. 705,684 45,500 @,L Sepracor, Inc. 2,406,950 44,700 L Valeant Pharmaceuticals Intl. 894,000 ---------------- 20,593,076 ---------------- PIPELINES: 1.2% 35,250 Equitable Resources, Inc. 1,822,778 76,550 National Fuel Gas Co. 1,913,750 47,500 Questar Corp. 1,835,400 71,000 Western Gas Resources, Inc. 2,306,080 ---------------- 7,878,008 ---------------- REAL ESTATE INVESTMENT TRUSTS: 0.5% 15,250 L Hospitality Properties Trust 645,075 18,850 Liberty Property Trust 757,959 13,800 Mack-Cali Realty Corp. 571,044 52,400 New Plan Excel Realty Trust 1,224,064 ---------------- 3,198,142 ---------------- RETAIL: 8.3% 92,500 L Abercrombie & Fitch Co. 3,584,374 104,650 @,L American Eagle Outfitters 3,025,432 64,600 @,L AnnTaylor Stores Corp. 1,872,108 45,000 Applebees Intl., Inc. 1,035,900 102,350 @,L Barnes & Noble, Inc. 3,477,853 35,800 @,L BJ's Wholesale Club, Inc. 895,000 43,900 Borders Group, Inc. 1,029,016 50,750 @,L Brinker Intl., Inc. 1,731,590 23,700 L CBRL Group, Inc. 731,145 11,200 @,L Cheesecake Factory 445,648 49,050 @,L Chico's FAS, Inc. 2,215,098 148,050 Claire's Stores, Inc. 3,212,685 82,200 @ Copart, Inc. 2,194,740 26,050 @ Dollar Tree Stores, Inc. 714,552 91,500 Michaels Stores, Inc. 5,032,499 30,850 @,L O'Reilly Automotive, Inc. 1,394,420 41,750 L Outback Steakhouse, Inc. 1,726,780 117,400 @ Pacific Sunwear Of California 2,297,518 68,550 @,L Payless Shoesource, Inc. 1,022,081 130,100 L Petsmart, Inc. 4,221,744 41,500 Pier 1 Imports, Inc. 734,135 25,450 Regis Corp. 1,134,816 86,400 Ross Stores, Inc. 2,312,064 34,300 L Ruby Tuesday, Inc. 941,535 215,950 @,L Saks, Inc. 3,239,250 62,500 @,L Williams-Sonoma, Inc. 2,060,000 ---------------- 52,281,983 ---------------- SAVINGS AND LOANS: 2.9% 43,050 Astoria Financial Corp. $ 1,574,769 115,950 Greenpoint Financial Corp. 4,603,215 80,750 Independence Community Bank Corp. 2,939,300 146,816 L New York Community Bancorp, Inc. 2,881,998 172,750 Sovereign Bancorp, Inc. 3,817,775 41,350 Washington Federal, Inc. 992,400 29,800 L Webster Financial Corp. 1,401,196 ---------------- 18,210,653 ---------------- SEMICONDUCTORS: 3.1% 698,200 @,L Atmel Corp. 4,133,344 52,250 @,L Credence Systems Corp. 721,050 15,950 @,L Cree, Inc. 371,316 65,350 @,L Cypress Semiconductor Corp. 927,317 65,700 @ Fairchild Semiconductor Intl., Inc. 1,075,509 50,100 @,L Integrated Device Technology, Inc. 693,384 34,000 @,L International Rectifier Corp. 1,408,280 30,500 @,L Lam Research Corp. 817,400 54,450 @,L Lattice Semiconductor Corp. 381,695 30,800 @ LTX Corp. 332,948 48,300 @ Micrel, Inc. 586,845 173,850 L Microchip Technology, Inc. 5,483,228 38,150 @,L Semtech Corp. 898,051 26,900 @,L Silicon Laboratories, Inc. 1,246,815 66,400 @,L Triquint Semiconductor, Inc. 362,544 ---------------- 19,439,726 ---------------- SOFTWARE: 2.6% 131,550 @ Activision, Inc. 2,091,645 48,100 L Acxiom Corp. 1,194,323 22,800 @,L Advent Software, Inc. 411,996 34,550 Certegy, Inc. 1,340,540 80,400 @ CSG Systems Intl. 1,664,280 41,300 @ Dun & Bradstreet Corp. 2,226,483 41,150 L Fair Isaac Corp. 1,373,587 36,500 @,L Keane, Inc. 499,685 57,750 SEI Investments Co. 1,677,060 146,550 @,L Sybase, Inc. 2,637,900 37,250 @ Transaction Systems Architects, Inc. 801,993 44,300 @ Wind River Systems, Inc. 520,968 ---------------- 16,440,460 ---------------- TELECOMMUNICATIONS: 3.0% 214,350 @ 3Com Corp. 1,339,688 45,050 L Adtran, Inc. 1,503,319 45,600 @ Advanced Fibre Communications, Inc. 921,120 138,450 @ Cincinnati Bell, Inc. 614,718 84,700 @,L CommScope, Inc. 1,816,815 92,350 L Harris Corp. 4,686,762 19,250 @ Newport Corp. 311,273 24,600 @,L Plantronics, Inc. 1,035,660 142,400 @ Polycom, Inc. 3,191,183 22,650 @ Powerwave Technologies, Inc. 174,405 107,550 @,L RF Micro Devices, Inc. 806,625 32,550 Telephone & Data Systems, Inc. 2,317,560 ---------------- 18,719,128 ---------------- TEXTILES: 0.2% 14,500 @ Mohawk Industries, Inc. 1,063,285 ---------------- 1,063,285 ----------------
See Accompanying Notes to Financial Statements 46 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS MIDCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- TRANSPORTATION: 2.0% 22,150 Alexander & Baldwin, Inc. $ 740,918 73,750 CNF, Inc. 3,065,049 57,250 Expeditors International Washington, Inc. 2,828,722 46,400 JB Hunt Transport Services, Inc. 1,790,112 56,650 Overseas Shipholding Group 2,499,965 48,700 @ Swift Transportation Co., Inc. 874,165 39,787 Werner Enterprises, Inc. 839,506 ---------------- 12,638,437 ---------------- TRUCKING AND LEASING: 0.1% 27,100 L GATX Corp. 737,120 ---------------- 737,120 ---------------- Total Common Stock (Cost $566,928,513) 622,099,617 ---------------- PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 26.3% REPURCHASE AGREEMENT: 1.4% $ 8,994,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $8,994,375 to be received upon repurchase (Collateralized by $8,743,000 Federal National Mortgage Association, 6.000%, Market value plus accrued interest $9,174,729, due 12/15/05) 8,994,000 ---------------- Total Repurchase Agreement (Cost $8,994,000) 8,994,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 24.9% 157,046,588 The Bank of New York Institutional Cash Reserve Fund, 1.250% 157,046,588 ---------------- Total Securities Lending Collateral (Cost $157,046,588) 157,046,588 ---------------- Total Short-Term Investments (Cost $166,040,588) 166,040,588 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $732,969,101)* 124.8% $ 788,140,205 OTHER ASSETS AND LIABILITIES-NET (24.8) (156,699,247) ----- ---------------- NET ASSETS 100.0% $ 631,440,958 ===== ================
@ Non-income producing security @@ Foreign issuer S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $741,075,476 financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 60,284,457 Gross Unrealized Depreciation (13,219,728) ---------------- Net Unrealized Appreciation $ 47,064,729 ================
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED LONG CONTRACTS CONTRACTS MARKET VALUE DATE GAIN -------------- --------- ------------ ---------- ---------- S&P MidCap 400 Index 30 $ 9,123,750 September-04 $ 57,617
See Accompanying Notes to Financial Statements 47 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS SMALLCAP PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - ---------------------------------------------------------------------------------------- COMMON STOCK: 98.4% ADVERTISING: 0.2% 14,100 Advo, Inc. $ 464,172 ---------------- 464,172 ---------------- AEROSPACE/DEFENSE: 1.7% 15,550 L AAR Corp. 176,493 16,400 @,L Armor Holdings, Inc. 557,599 12,450 Curtiss-Wright Corp. 699,565 12,400 @ DRS Technologies, Inc. 395,560 8,050 EDO Corp. 194,166 12,875 Engineered Support Systems, Inc. 753,315 9,950 @ Esterline Technologies Corp. 293,824 8,350 L GenCorp, Inc. 111,807 7,350 Kaman Corp. 102,827 12,425 @ Moog, Inc. 461,092 26,150 @,L Teledyne Technologies, Inc. 523,523 7,450 @ Triumph Group, Inc. 237,879 ---------------- 4,507,650 ---------------- AGRICULTURE: 0.1% 7,500 Delta & Pine Land Co. 164,625 22,350 Dimon, Inc. 127,842 ---------------- 292,467 ---------------- AIRLINES: 0.2% 7,250 @,L Atlantic Coast Airlines Holdings, Inc. 41,615 42,450 @,L Mesa Air Group, Inc. 343,421 2,376 Skywest, Inc. 41,366 ---------------- 426,402 ---------------- APPAREL: 2.0% 13,400 @ Ashworth, Inc. 111,354 11,600 @ Gymboree Corp. 178,176 7,250 Haggar Corp. 146,088 44,600 K-Swiss, Inc. 901,366 21,750 Kellwood Co. 947,212 3,454 Oshkosh B'Gosh, Inc. 86,246 7,800 Oxford Industries, Inc. 339,768 26,600 Phillips-Van Heusen 512,050 28,500 @ Quiksilver, Inc. 678,585 15,500 Russell Corp. 278,380 48,550 Stride Rite Corp. 535,507 19,600 Wolverine World Wide, Inc. 514,500 ---------------- 5,229,232 ---------------- AUTO MANUFACTURERS: 0.6% 17,200 Oshkosh Truck Corp. 985,732 17,100 @ Wabash National Corp. 471,105 ---------------- 1,456,837 ---------------- AUTO PARTS AND EQUIPMENT: 0.1% 8,150 Standard Motor Products, Inc. 120,050 19,650 @,L Tower Automotive, Inc. 71,526 ---------------- 191,576 ---------------- BANKS: 5.8% 750 Boston Private Financial Holdings, Inc. 17,370 7,100 Chittenden Corp. 249,565 19,150 Community First Bankshares, Inc. 616,439 26,250 East-West Bancorp, Inc. $ 805,875 20,200 @@,L First Bancorp Puerto Rico 823,150 22,312 First Midwest Bancorp, Inc. 785,606 6,950 First Republic Bank 299,406 95,550 Fremont General Corp. 1,686,457 20,300 Gold Banc Corp., Inc. 314,650 23,250 Hudson United BanCorp. 866,760 36,700 Irwin Financial Corp. 968,879 14,839 Provident Bankshares Corp. 427,957 31,010 Republic Bancorp, Inc. 431,039 23,650 L Riggs National Corp. 499,488 29,600 South Financial Group, Inc. 838,864 6,750 Southwest Bancorp of Texas, Inc. 297,810 17,004 Sterling Bancshares, Inc. 241,287 23,900 Susquehanna Bancshares, Inc. 601,324 33,848 Trustco Bank Corp. NY 443,409 23,450 UCBH Holdings, Inc. 926,743 11,650 Umpqua Holdings Corp. 244,534 21,800 United Bankshares, Inc. 708,500 33,525 Whitney Holding Corp. 1,497,561 9,550 Wintrust Financial Corp. 482,371 ---------------- 15,075,044 ---------------- BIOTECHNOLOGY: 0.5% 19,050 @ Arqule, Inc. 100,394 13,700 Cambrex Corp. 345,651 7,000 @,L CryoLife, Inc. 36,890 4,930 @ Enzo Biochem, Inc. 73,950 13,550 @,L Integra Lifesciences Holdings Corp. 477,908 26,350 @,L Regeneron Pharmaceuticals, Inc. 277,466 18,750 @ Savient Pharmaceuticals, Inc. 46,500 ---------------- 1,358,759 ---------------- BUILDING MATERIALS: 1.2% 10,900 Apogee Enterprises, Inc. 113,360 8,250 ElkCorp. 197,505 22,350 Florida Rock Industries, Inc. 942,499 28,852 L Lennox Intl., Inc. 522,221 11,650 Simpson Manufacturing Co., Inc. 653,798 10,800 Texas Industries, Inc. 444,636 7,550 Universal Forest Products, Inc. 243,488 ---------------- 3,117,507 ---------------- CHEMICALS: 1.7% 12,050 Arch Chemicals, Inc. 347,281 16,050 Georgia Gulf Corp. 575,553 40,900 Macdermid, Inc. 1,384,464 38,650 @ OM Group, Inc. 1,275,837 19,800 @ Omnova Solutions, Inc. 120,780 6,050 Penford Corp. 106,178 43,850 @ PolyOne Corp. 326,244 3,300 Quaker Chemical Corp. 91,146 6,410 Schulman (A.), Inc. 137,751 5,000 Wellman, Inc. 40,650 ---------------- 4,405,884 ---------------- COAL: 0.4% 36,850 L Massey Energy Co. 1,039,539 ---------------- 1,039,539 ---------------- COMMERCIAL SERVICES: 4.0% 15,325 Aaron Rents, Inc. 507,871
See Accompanying Notes to Financial Statements 48 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS SMALLCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- COMMERCIAL SERVICES (CONTINUED) 24,750 ABM Industries, Inc. $ 481,883 36,600 @ Administaff, Inc. 607,560 15,500 @ Arbitron, Inc. 566,060 14,900 Bowne & Co., Inc. 236,165 10,000 CDI Corp. 346,000 15,700 Central Parking Corp. 293,433 2,300 Chemed Corp 111,550 8,150 @,L Coinstar, Inc. 179,056 17,800 @ Consolidated Graphics, Inc. 784,089 8,450 CPI Corp. 124,384 12,500 @ Cross Country Healthcare, Inc. 226,875 7,900 @ Heidrick & Struggles Intl., Inc. 234,472 25,300 Hooper Holmes, Inc. 145,222 2,800 @ Insurance Auto Auctions, Inc. 47,600 20,150 @,L Kroll, Inc. 743,131 35,400 @,L Labor Ready, Inc. 548,700 13,250 @ Maximus, Inc. 469,845 13,750 @,L Memberworks, Inc. 407,275 20,600 @ Midas, Inc. 358,440 15,300 @ NCO Group, Inc. 408,357 8,200 @ On Assignment, Inc. 48,380 11,300 @ Parexel Intl. Corp. 223,740 25,900 @ Pharmaceutical Product Development, Inc. 822,842 6,350 @,L Pre-Paid Legal Services, Inc. 151,321 18,650 @ PRG-Schultz Intl., Inc. 102,016 14,850 @ SourceCorp. 408,672 2,950 Startek, Inc. 105,610 6,100 @ Volt Information Sciences, Inc. 192,211 16,000 Watson Wyatt & Co. Holdings 426,400 ---------------- 10,309,160 ---------------- COMPUTERS: 2.4% 15,700 Agilysys, Inc. 216,503 14,700 @ Brooktrout, Inc. 158,907 14,100 @ CACI Intl., Inc. 570,204 31,750 @ Carreker Corp. 318,135 16,900 @ Catapult Communications Corp. 388,700 32,850 @,L Ciber, Inc. 270,027 15,500 L Factset Research Systems, Inc. 732,685 13,550 @,L Hutchinson Technology, Inc. 333,195 16,037 @ Kronos, Inc. 660,724 15,600 @,L Manhattan Associates, Inc. 481,728 8,600 @,L Mercury Computer Systems, Inc. 213,280 24,100 @ Micros Systems, Inc. 1,156,076 12,700 @,L Nyfix, Inc. 62,103 11,500 @ Radiant Systems, Inc. 53,935 14,400 @,L Radisys Corp. 267,408 7,850 @ SCM Microsystems, Inc. 51,025 6,050 Talx Corp. 147,802 ---------------- 6,082,437 ---------------- DISTRIBUTION/WHOLESALE: 1.6% 5,900 L Building Material Holding Corp. 111,687 25,350 L Hughes Supply, Inc. 1,493,876 18,150 Owens & Minor, Inc. 470,085 6,150 @ Scansource, Inc. 365,433 17,125 @ SCP Pool Corp. 770,625 16,650 @ United Stationers, Inc. 661,338 12,500 Watsco, Inc. 350,875 ---------------- 4,223,919 ---------------- DIVERSIFIED FINANCIAL SERVICES: 1.2% 7,750 @,L Financial Federal Corp. $ 273,265 21,900 @ Investment Technology Group, Inc. 280,101 39,900 New Century Financial Corp. 1,868,118 10,200 @,L Piper Jaffray Cos. 461,346 7,900 SWS Group, Inc. 120,870 9,750 @ World Acceptance Corp. 178,718 ---------------- 3,182,418 ---------------- ELECTRIC: 1.1% 24,250 Avista Corp. 446,685 6,900 Central Vermont Public Service Corp. 141,381 8,000 CH Energy Group, Inc. 371,520 23,810 L Cleco Corp. 428,104 25,200 @ El Paso Electric Co. 389,088 2,250 Green Mountain Power Corp. 58,725 7,000 UIL Holdings Corp. 340,830 29,250 L Unisource Energy Corp. 726,862 ---------------- 2,903,195 ---------------- ELECTRICAL COMPONENTS AND EQUIPMENT: 1.7% 50 @ Advanced Energy Industries, Inc. 786 20,500 @,L Artesyn Technologies, Inc. 184,500 21,350 Belden, Inc. 457,531 10,500 C&D Technologies, Inc. 187,215 7,100 @ Intermagnetics General Corp. 241,613 19,150 @,L Littelfuse Inc 812,152 12,600 @,L Magnetek, Inc. 105,084 43,800 @ Rayovac Corp. 1,230,779 55,550 @,L Vicor Corp. 1,014,898 8,650 @ Wilson Greatbatch Technologies, Inc. 241,768 ---------------- 4,476,326 ---------------- ELECTRONICS: 4.6% 5,500 Analogic Corp. 233,365 12,200 BEI Technologies, Inc. 345,382 14,500 Bel Fuse, Inc. 604,650 22,100 @ Benchmark Electronics, Inc. 643,110 12,100 Brady Corp. 557,810 19,018 @ Checkpoint Systems, Inc. 340,993 15,050 @ Coherent, Inc. 449,243 15,900 CTS Corp. 191,754 11,950 Cubic Corp. 250,114 18,100 @,L Cymer, Inc. 677,663 7,600 @,L Daktronics Inc 189,620 10,455 @ Dionex Corp. 576,802 13,600 @ Electro Scientific Industries, Inc. 385,016 16,800 @,L FEI Co. 401,688 6,350 @ Flir Systems, Inc. 348,615 22,800 @,L Invision Technologies, Inc. 1,137,719 3,450 @ Itron, Inc. 79,143 7,350 Keithley Instruments, Inc. 162,803 7,350 @ Meade Instruments Corp. 23,447 16,050 Methode Electronics 208,169 25,800 Park Electrochemical Corp. 651,449 19,800 @,L Paxar Corp. 386,496 5,900 @,L Planar Systems, Inc. 79,001 8,400 @ Rogers Corp. 587,160 7,350 @ SBS Technologies, Inc. 118,115 21,150 @ Technitrol, Inc. 463,185
See Accompanying Notes to Financial Statements 49 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS SMALLCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- ELECTRONICS (CONTINUED) 10,400 @ Trimble Navigation Ltd. $ 289,016 15,600 Watts Industries, Inc. 420,420 11,556 Woodward Governor Co. 833,302 11,700 X-Rite, Inc. 170,118 ---------------- 11,805,368 ---------------- ENERGY-ALTERNATE SOURCES: 0.1% 6,900 @,L Headwaters, Inc. 178,917 ---------------- 178,917 ---------------- ENGINEERING AND CONSTRUCTION: 0.6% 7,350 @,L Emcor Group, Inc. 323,253 9,950 @,L Insituform Technologies, Inc. 161,887 36,500 @ URS Corp. 1,000,100 ---------------- 1,485,240 ---------------- ENTERTAINMENT: 0.3% 13,400 @ Argosy Gaming Co. 503,840 12,300 @ Pinnacle Entertainment, Inc. 155,103 4,650 @ Shuffle Master, Inc. 168,842 ---------------- 827,785 ---------------- ENVIRONMENTAL CONTROL: 0.4% 6,850 @ Imco Recycling, Inc. 90,557 25,731 @ Tetra Tech, Inc. 419,930 20,400 @,L Waste Connections, Inc. 605,064 ---------------- 1,115,551 ---------------- FOOD: 1.8% 31,950 Corn Products Intl., Inc. 1,487,272 23,625 Flowers Foods, Inc. 617,793 14,600 @,L Great Atlantic & Pacific Tea Co. 111,836 6,850 @ Hain Celestial Group, Inc. 123,985 4,900 @ J&J Snack Foods Corp. 200,067 18,324 Lance, Inc. 282,190 9,950 L Nash Finch Co. 249,049 22,600 @,L Performance Food Group Co. 599,804 14,250 @ Ralcorp Holdings, Inc. 501,600 19,400 @ United Natural Foods, Inc. 560,854 ---------------- 4,734,450 ---------------- FOREST PRODUCTS AND PAPER: 0.7% 17,550 @ Buckeye Technologies, Inc. 201,825 20,700 @ Caraustar Industries, Inc. 292,077 2,500 Deltic Timber Corp. 96,000 8,050 Pope & Talbot, Inc. 159,149 17,100 Rock-Tenn Co. 289,845 7,950 Schweitzer-Mauduit Intl., Inc. 243,509 25,750 Wausau-Mosinee Paper Corp. 445,474 ---------------- 1,727,879 ---------------- GAS: 2.4% 26,800 Atmos Energy Corp. 686,080 3,400 Cascade Natural Gas Corp. 75,038 18,950 Energen Corp. 909,410 9,350 Laclede Group, Inc. 256,284 15,500 New Jersey Resources Corp. 644,490 14,550 Northwest Natural Gas Co. 443,775 9,000 L NUI Corp. 131,400 20,450 L Piedmont Natural Gas Co. 873,214 38,374 @ Southern Union Co. 808,924 16,800 Southwest Gas Corp. $ 405,384 26,625 UGI Corp. 854,663 ---------------- 6,088,662 ---------------- HAND/MACHINE TOOLS: 0.3% 16,450 Baldor Electric Co. 384,108 12,700 L Milacron, Inc. 50,800 10,600 Regal-Beloit Corp. 235,956 ---------------- 670,864 ---------------- HEALTHCARE-PRODUCTS: 6.7% 24,800 @,L Advanced Medical Optics, Inc. 1,055,735 16,300 @ American Medical Systems Holdings, Inc. 549,310 11,500 @,L Biolase Technology, Inc. 154,790 12,700 @ Conmed Corp. 347,980 15,950 L Cooper Cos., Inc. 1,007,561 10,100 @,L Cyberonics, Inc. 336,936 14,691 Datascope Corp. 583,086 14,450 Diagnostic Products Corp. 634,933 19,150 @ Haemonetics Corp. 567,798 17,550 @ Hologic, Inc. 408,038 6,200 @,L ICU Medical, Inc. 207,886 17,250 @ Idexx Laboratories, Inc. 1,085,714 15,800 @ Immucor, Inc. 514,290 16,650 @,L Inamed Corp. 1,046,452 15,350 Invacare Corp. 686,452 20,700 Mentor Corp. 709,803 17,550 @ Merit Medical Systems, Inc. 279,572 5,100 @ Osteotech, Inc. 33,099 3,850 L PolyMedica Corp. 119,504 8,850 @ Possis Medical, Inc. 302,228 16,100 @,L Resmed, Inc. 820,456 37,950 @ Respironics, Inc. 2,229,562 14,700 @ Sola Intl., Inc. 253,281 31,350 @ Sybron Dental Specialties, Inc. 935,798 46,850 @,L Techne Corp. 2,035,632 13,800 @ Viasys Healthcare, Inc. 288,558 6,400 Vital Signs, Inc. 185,856 ---------------- 17,380,310 ---------------- HEALTHCARE-SERVICES: 2.9% 13,600 @,L American Healthways, Inc. 362,032 20,750 @ Amerigroup Corp. 1,020,899 15,150 @,L Amsurg Corp. 380,720 17,150 @ Centene Corp. 661,133 8,950 @,L Orthodontic Centers of America 73,301 20,250 @ Pediatrix Medical Group, Inc. 1,414,462 19,750 @,L Province Healthcare Co. 338,713 13,450 @,L Rehabcare Group, Inc. 358,174 35,000 @ Sierra Health Services 1,564,499 9,900 @,L Sunrise Senior Living, Inc. 387,486 14,150 @ United Surgical Partners Intl., Inc. 558,501 33,700 @ US Oncology, Inc. 496,064 ---------------- 7,615,984 ---------------- HOME BUILDERS: 2.7% 88,800 @,L Champion Enterprises, Inc. 815,184 15,635 Mdc Holdings, Inc. 994,542 36,500 Monaco Coach Corp. 1,028,205 6,300 @,L NVR, Inc. 3,050,460 6,150 Skyline Corp. 249,998 6,700 Standard-Pacific Corp. 330,310
See Accompanying Notes to Financial Statements 50 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS SMALLCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- HOME BUILDERS (CONTINUED) 15,850 Winnebago Industries $ 590,888 ---------------- 7,059,587 ---------------- HOME FURNISHINGS: 0.6% 12,250 @ Applica, Inc. 109,025 13,600 Bassett Furniture Industries, Inc. 295,936 17,200 Ethan Allen Interiors, Inc. 617,652 12,600 Fedders Corp. 54,810 24,650 L La-Z-Boy, Inc. 443,207 ---------------- 1,520,630 ---------------- HOUSEHOLD PRODUCTS/WARES: 0.7% 4,150 @ AT Cross Co. 19,796 33,050 @,L Fossil, Inc. 900,612 13,750 Harland John H. Co. 403,562 8,050 Russ Berrie & Co., Inc. 156,412 3,393 Standard Register Co. 40,377 8,300 Wd-40 Co. 248,502 ---------------- 1,769,261 ---------------- HOUSEWARES: 1.0% 8,150 @ Enesco Group, Inc. 73,024 5,150 Libbey, Inc. 142,964 8,450 National Presto Industries, Inc. 348,394 28,400 Toro Co. 1,989,988 ---------------- 2,554,370 ---------------- INSURANCE: 3.8% 28,226 L Delphi Financial Group 1,256,056 18,250 Hilb Rogal & Hamilton Co. 651,160 9,450 Landamerica Financial Group, Inc. 367,889 29,750 @ Philadelphia Consolidated Holding Co. 1,787,082 13,300 Presidential Life Corp. 239,666 14,250 @ Proassurance Corp. 486,068 12,700 RLI Corp. 463,550 3,650 SCPIE Holdings, Inc. 33,215 36,203 Selective Insurance Group 1,443,775 8,750 Stewart Information Services Corp. 295,488 63,550 @ UICI 1,513,125 25,800 L Zenith National Insurance Corp. 1,253,880 ---------------- 9,790,954 ---------------- INTERNET: 1.0% 24,300 @,L Internet Security Systems 372,762 12,050 @,L j2 Global Communications, Inc. 334,990 13,650 @ Netegrity, Inc. 115,479 9,850 @ PC-Tel, Inc. 116,230 7,000 @ QRS Corp. 45,850 19,950 @ Verity, Inc. 269,525 21,800 @,L Webex Communications, Inc. 474,368 19,450 @,L Websense, Inc. 724,123 15,800 @,L Zix Corp 125,452 ---------------- 2,578,779 ---------------- IRON/STEEL: 1.1% 30,000 Carpenter Technology 1,021,499 2,050 @,L Cleveland-Cliffs, Inc. 115,600 5,800 @ Material Sciences Corp. 61,770 15,600 Reliance Steel & Aluminum Co. $ 628,992 12,600 Ryerson Tull, Inc. 200,088 25,350 L Steel Dynamics, Inc. 725,771 2,454 Steel Technologies, Inc. 54,184 ---------------- 2,807,904 ---------------- LEISURE TIME: 1.0% 8,150 Arctic Cat, Inc. 224,370 14,750 @,L Bally Total Fitness Holding Corp. 73,750 20,750 @ K2, Inc. 325,775 5,350 @ Multimedia Games Inc 143,487 16,900 L Nautilus Group, Inc. 329,719 21,850 L Polaris Industries, Inc. 1,048,800 13,150 @,L WMS Industries, Inc. 391,870 ---------------- 2,537,771 ---------------- LODGING: 0.5% 15,550 @ Aztar Corp. 435,400 11,600 Marcus Corp. 200,100 51,177 @ Prime Hospitality Corp. 543,500 ---------------- 1,179,000 ---------------- MACHINERY-CONSTRUCTION AND MINING: 0.2% 21,649 @ Astec Industries, Inc. 407,650 7,750 JLG Industries, Inc. 107,648 ---------------- 515,298 ---------------- MACHINERY-DIVERSIFIED: 2.0% 16,720 Albany Intl. Corp. 561,123 9,500 Applied Industrial Technologies, Inc. 286,140 11,750 L Briggs & Stratton 1,038,112 23,150 Cognex Corp. 890,812 9,800 @ Gardner Denver, Inc. 273,420 16,300 @ Gerber Scientific, Inc. 115,078 24,675 IDEX Corp. 847,586 4,800 Lindsay Manufacturing Co. 115,296 13,050 Manitowoc Co. 441,743 7,350 Robbins & Myers, Inc. 165,008 13,950 Stewart & Stevenson Services 249,984 7,500 Thomas Industries, Inc. 249,000 ---------------- 5,233,302 ---------------- MEDIA: 0.3% 4,800 @ 4Kids Entertainment, Inc. 114,816 8,800 @,L Information Holdings, Inc. 240,856 17,000 Thomas Nelson, Inc. 386,580 ---------------- 742,252 ---------------- METAL FABRICATE/HARDWARE: 1.8% 1,000 @ AM Castle & Co 10,750 15,050 Commercial Metals Co. 488,373 6,600 Intermet Corp. 28,380 36,470 Kaydon Corp. 1,128,017 11,609 Lawson Products 442,883 16,350 Mueller Industries, Inc. 585,330 8,600 Quanex Corp. 418,820 46,450 Timken Co. 1,230,460 11,950 Valmont Industries, Inc. 273,655 2,850 @ Wolverine Tube, Inc. 31,065 ---------------- 4,637,733 ----------------
See Accompanying Notes to Financial Statements 51 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS SMALLCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- MINING: 0.6% 7,100 @ Brush Engineered Materials, Inc. $ 134,190 41,750 @ Century Aluminum Co. 1,034,982 4,250 Commonwealth Industries, Inc. 43,945 23,950 @ RTI Intl. Metals, Inc. 382,003 ---------------- 1,595,120 ---------------- MISCELLANEOUS MANUFACTURING: 1.7% 19,850 Acuity Brands, Inc. 535,949 5,750 AO Smith Corp. 182,793 19,250 Aptargroup, Inc. 841,032 9,750 Barnes Group, Inc. 282,555 11,700 Clarcor, Inc. 535,859 9,000 @ Concord Camera Corp. 29,700 8,550 @ Cuno, Inc. 456,143 13,270 @,L Griffon Corp. 295,656 4,800 @ Lydall, Inc. 46,896 2,000 @,XX,I MascoTech, Inc. 0 12,916 Myers Industries, Inc. 182,116 7,100 Roper Industries, Inc. 403,990 9,200 Standex Intl. Corp. 250,240 8,450 Sturm Ruger & Co., Inc. 102,330 19,350 Tredegar Corp. 312,116 ---------------- 4,457,375 ---------------- OFFICE FURNISHINGS: 0.1% 17,350 @ Interface, Inc. 151,466 ---------------- 151,466 ---------------- OFFICE/BUSINESS EQUIPMENT: 0.3% 10,650 @,L Global Imaging Systems, Inc. 390,429 7,250 @ Imagistics Intl., Inc. 256,650 ---------------- 647,079 ---------------- OIL AND GAS: 4.1% 5,700 @ Atwood Oceanics, Inc. 237,975 27,100 Cabot Oil & Gas Corp. 1,146,330 36,600 @,L Cimarex Energy Co. 1,106,418 20,950 @,L Evergreen Resources, Inc. 846,380 13,250 Frontier Oil Corp. 280,768 34,236 Patina Oil & Gas Corp. 1,022,629 9,950 @ Prima Energy Corp. 393,722 34,300 @,L Remington Oil & Gas Corp. 809,480 19,000 @ Southwestern Energy Co. 544,730 29,700 @,L Spinnaker Exploration Co. 1,169,585 14,050 St. Mary Land & Exploration Co. 500,883 36,400 @ Stone Energy Corp. 1,662,751 22,450 @ Swift Energy Co. 495,247 8,500 @ Unit Corp. 267,325 12,800 Vintage Petroleum, Inc. 217,216 ---------------- 10,701,439 ---------------- OIL AND GAS SERVICES: 1.2% 18,300 @ Cal Dive Intl., Inc. 554,856 8,350 Carbo Ceramics, Inc. 569,887 7,100 @ Dril-Quip, Inc. 132,770 12,150 @ Hydril Co. 382,725 8,200 @,L Maverick Tube Corp. 215,332 4,600 @ Oceaneering Intl., Inc. 157,550 9,350 @ Seacor Smit, Inc. 410,746 11,650 @ Tetra Technologies, Inc. 312,803 16,200 @,L Veritas DGC, Inc. 375,030 4,200 @ W-H Energy Services, Inc. $ 82,320 ---------------- 3,194,019 ---------------- PACKAGING AND CONTAINERS: 0.1% 9,400 Chesapeake Corp. 250,792 ---------------- 250,792 ---------------- PHARMACEUTICALS: 2.2% 23,550 @ Accredo Health, Inc. 917,273 22,600 Alpharma, Inc. 462,848 2,900 @ Cima Labs, Inc. 97,817 3,700 @ Curative Health Services, Inc. 32,042 26,500 Medicis Pharmaceutical 1,058,674 33,600 @ MGI Pharma, Inc. 907,536 18,100 Natures Sunshine Prods, Inc. 257,744 32,550 @ NBTY, Inc. 956,645 29,950 @,L Noven Pharmaceuticals, Inc. 659,499 8,508 @,L Priority Healthcare Corp. 195,259 16,400 @ Theragenics Corp. 75,768 ---------------- 5,621,105 ---------------- PIPELINES: 0.1% 9,550 @ Plains Resources, Inc. 161,873 ---------------- 161,873 ---------------- REAL ESTATE INVESTMENT TRUSTS: 0.9% 17,000 L Capital Automotive REIT 498,610 5,000 Colonial Properties Trust 192,650 12,050 Entertainment Properties Trust 430,667 5,900 Glenborough Realty Trust, Inc. 108,265 13,900 Kilroy Realty Corp. 473,990 9,150 L Lexington Corporate Properties Trust 182,177 9,000 Shurgard Storage Centers, Inc. 336,600 ---------------- 2,222,959 ---------------- RETAIL: 8.9% 8,850 Brown Shoe Co., Inc. 362,231 20,900 Burlington Coat Factory Warehouse Corp. 403,370 28,700 Casey's General Stores, Inc. 525,210 11,300 Cash America Intl., Inc. 259,900 7,150 Cato Corp. 160,518 18,300 @,L CEC Entertainment, Inc. 540,033 12,950 @ Childrens Place 304,584 19,625 L Christopher & Banks Corp. 347,559 39,250 @ Dress Barn, Inc. 671,959 5,400 @,L Duane Reade, Inc. 88,182 13,333 @,L Electronics Boutique Holdings Corp. 351,191 25 L Fred's, Inc. 552 17,650 @,L Genesco, Inc. 417,070 39,650 Goody's Family Clothing, Inc. 411,171 11,650 @ Group 1 Automotive, Inc. 386,897 11,650 @,L Guitar Center, Inc. 518,076 30,050 Haverty Furniture Cos., Inc. 525,274 29,650 @,L Hibbett Sporting Goods, Inc. 810,927 24,475 @,L HOT Topic, Inc. 501,493 10,700 Ihop Corp. 382,632 25,750 @ Insight Enterprises, Inc. 457,320 24,700 @ J Jill Group, Inc. 582,673 30,050 @,L Jack in The Box, Inc. 892,484 10,632 @ Jo-Ann Stores, Inc. 312,581 13,250 Landry's Restaurants, Inc. 396,043
See Accompanying Notes to Financial Statements 52 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS SMALLCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- RETAIL (CONTINUED) 22,800 @ Linens 'N Things, Inc. $ 668,267 18,950 Lone Star Steakhouse & Saloon 515,251 20,200 L Longs Drug Stores Corp. 482,174 30,150 @ Men's Wearhouse, Inc. 795,658 16,450 Movie Gallery, Inc. 321,598 9,400 @ O'Charleys, Inc. 161,586 15,450 @,L Panera Bread Co. 554,346 7,570 @,L Papa John's Intl., Inc. 223,618 48,700 Pep Boys-Manny Moe & Jack 1,234,544 11,700 @,L PF Chang's China Bistro, Inc. 481,455 15,525 @ Rare Hospitality Intl., Inc. 386,573 36,800 @ Ryan's Restaurant Group Inc 581,440 8,250 @,L School Specialty, Inc. 299,558 16,900 @ Select Comfort Corp. 479,960 11,350 @ Shopko Stores, Inc. 160,489 27,093 @ Sonic Corp. 616,366 11,350 @ Steak N Shake Co. 206,797 56,850 @ Stein Mart, Inc. 924,380 10,650 @ TBC Corp. 253,470 14,700 @,L Too, Inc. 245,490 17,900 @ Tractor Supply Co. 748,577 13,900 L Triarc Cos. 141,363 20,200 @ Urban Outfitters, Inc. 1,230,381 4,650 @,L Wet Seal, Inc. 24,320 24,100 @ Zale Corp. 656,966 ---------------- 23,004,557 ---------------- SAVINGS AND LOANS: 2.3% 19,701 Anchor Bancorp Wisconsin, Inc. 520,894 15,700 @ Bankunited Financial Corp. 405,060 11,850 Brookline BanCorp, Inc. 173,840 20,550 Commercial Federal Corp. 556,905 18,050 Dime Community Bancshares 315,514 13,350 L Downey Financial Corp. 710,888 14,150 @ Firstfed Financial Corp. 588,640 51,550 Flagstar Bancorp, Inc. 1,024,814 14,700 Seacoast Financial Services Corp. 508,620 18,175 @ Sterling Financial Corp. 579,237 16,587 Waypoint Financial Corp. 457,635 ---------------- 5,842,047 ---------------- SEMICONDUCTORS: 2.9% 13,350 @ Actel Corp. 246,975 39,300 @ Alliance Semiconductor Corp. 233,835 16,250 @,L ATMI, Inc. 443,788 51,650 @ Axcelis Technologies, Inc. 642,525 23,150 @,L Brooks Automation, Inc. 466,473 10,350 Cohu, Inc. 197,064 37,028 @ DSP Group, Inc. 1,008,642 3,800 @,L Dupont Photomasks, Inc. 77,254 35,100 @ ESS Technology 375,921 18,150 @ Exar Corp. 266,079 12,800 Helix Technology Corp. 273,024 7,100 @ Kopin Corp. 36,281 26,600 @,L Kulicke & Soffa Industries, Inc. 291,536 31,450 @ Microsemi Corp. 446,905 11,550 @ Pericom Semiconductor Corp. 123,701 14,550 @,L Photronics, Inc. 275,577 7,350 @,L Rudolph Technologies, Inc. 133,697 30,450 @,L Skyworks Solutions, Inc. 265,829 23,200 @ Standard Microsystems Corp. 541,023 5,500 @ Supertex, Inc. 89,870 6,500 @ Three-Five Systems, Inc. 33,150 18,100 @ Varian Semiconductor Equipment Associates, Inc. $ 697,935 15,350 @,L Veeco Instruments, Inc. 396,184 ---------------- 7,563,268 ---------------- SOFTWARE: 3.7% 13,900 @ Ansys, Inc. 653,300 16,200 @,L Avid Technology, Inc. 884,033 40,000 @ Captaris, Inc. 258,400 16,250 @,L Cerner Corp. 724,424 17,650 @ Concord Communications, Inc. 201,387 18,400 @,L Dendrite Intl., Inc. 341,872 23,000 @ Digi Intl., Inc. 246,560 26,100 @ eFunds Corp. 456,750 50 @,L EPIQ Systems, Inc. 725 53,600 @ Filenet Corp. 1,692,151 7,710 Global Payments, Inc. 347,104 20,450 @,L Hyperion Solutions Corp. 894,073 13,200 Inter-Tel, Inc. 329,604 11,650 @,L JDA Software Group, Inc. 153,431 6,750 @,L Mantech Intl. Corp. 126,698 23,700 @ Mapinfo Corp. 251,220 9,550 @ MRO Software, Inc. 129,976 16,250 LNDCHealth Corp. 377,000 9,350 @ Phoenix Technologies Ltd. 65,357 20,250 @ Progress Software Corp. 438,818 9,800 @,L Roxio, Inc. 48,118 23,250 @,L Serena Software, Inc. 443,843 9,300 @ SPSS, Inc. 167,121 19,900 @,L THQ, Inc. 455,710 ---------------- 9,687,675 ---------------- STORAGE/WAREHOUSING: 0.0% 4,050 @,L Mobile Mini, Inc. 115,061 ---------------- 115,061 ---------------- TELECOMMUNICATIONS: 2.3% 144,250 @,L Adaptec, Inc. 1,220,355 37,500 @ Aeroflex, Inc. 537,375 18,300 @ Anixter Intl., Inc. 622,749 9,150 Black Box Corp. 432,429 4,700 @,L Boston Communications Group 48,175 57,400 @ C-COR.net Corp. 590,646 18,525 @,L Cable Design Technologies Corp. 196,365 18,050 @ Commonwealth Telephone Enterprises, Inc. 808,099 21,600 @ General Communication 171,504 36,800 @ Harmonic, Inc. 313,536 13,800 @ Intrado, Inc. 222,042 12,650 @,L Network Equipment Technologies, Inc. 103,224 19,550 @ Symmetricom, Inc. 173,995 5,800 @ Tollgrade Communications, Inc. 61,596 13,900 @ Viasat, Inc. 346,805 ---------------- 5,848,895 ---------------- TEXTILES: 0.2% 2,600 Angelica Corp. 65,286 10,100 G&K Services, Inc. 405,919 ---------------- 471,205 ---------------- TOYS/GAMES/HOBBIES: 0.2% 2,550 L Action Performance Cos., Inc. 38,429
See Accompanying Notes to Financial Statements 53 ING VP PORTFOLIO OF INVESTMENTS INDEX PLUS SMALLCAP PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- TOYS/GAMES/HOBBIES (CONTINUED) 18,100 @ Department 56 $ 278,740 10,100 @,L Jakks Pacific, Inc. 209,979 ---------------- 527,148 ---------------- TRANSPORTATION: 2.6% 12,300 Arkansas Best Corp. 404,916 21,800 @,L EGL, Inc. 579,880 10,500 @ Forward Air Corp. 392,700 23,850 Heartland Express, Inc. 652,536 33,050 @,L Kansas City Southern 512,275 11,600 @ Kirby Corp. 451,240 19,800 @ Knight Transportation, Inc. 568,854 25,700 @ Landstar System, Inc. 1,358,759 15,850 @ Offshore Logistics, Inc. 445,702 12,400 USF Corp. 435,612 24,070 @,L Yellow Roadway Corp 959,430 ---------------- 6,761,904 ---------------- Total Common Stock (Cost $230,781,133) 254,125,362 ---------------- WARRANTS: 0.0% DISTRIBUTION/WHOLESALE: 0.0% 116 Timco Aviation Services -- ---------------- Total Warrants (Cost $0) -- ---------------- PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- CORPORATE BONDS: 0.0% DISTRIBUTION/WHOLESALE: 0.0% $ 116 Timco Aviation Services, 8.000%, due 01/02/07 -- ---------------- Total Corporate Bonds (Cost $4) -- ---------------- Total Long-Term Investments (Cost $230,781,137) 254,125,362 ---------------- SHORT-TERM INVESTMENTS: 18.4% REPURCHASE AGREEMENT: 1.8% 4,752,000 Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $4,752,198 to be received upon repurchase (Collateralized by $4,881,000 various U.S. Agency Obligations, 4.375%-5.650%, Market value plus accrued interest $4,847,401, due 02/04/10-03/16/29) 4,752,000 ---------------- Total Repurchase Agreement (Cost $4,752,000) 4,752,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 16.6% $ 42,869,181 The Bank of New York Institutional Cash Reserve Fund, 1.250% $ 42,869,181 ---------------- Total Securities Lending Collateral (Cost $42,869,181) 42,869,181 ---------------- Total Short-Term Investments (Cost $47,621,181) 47,621,181 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $278,402,319)* 116.8% $ 301,746,543 OTHER ASSETS AND LIABILITIES-NET (16.8) (43,319,894) ----- ---------------- NET ASSETS 100.0% $ 258,426,649 ===== ================
@ Non-income producing security @@ Foreign issuer I Illiquid security L Loaned security, a portion or all of the security is on loan at June 30, 2004. * Cost for federal income tax purposes is $282,439,627. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 25,220,750 Gross Unrealized Depreciation (5,913,834) ---------------- Net Unrealized Appreciation $ 19,306,916 ================
See Accompanying Notes to Financial Statements 54 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - ---------------------------------------------------------------------------------------- COMMON STOCK: 85.8% ADVERTISING: 0.1% 24,300 @@ WPP Group PLC $ 246,781 ---------------- 246,781 ---------------- AEROSPACE/DEFENSE: 1.5% 39,700 BAE Systems PLC 157,851 30,350 Boeing Co. 1,550,582 10,750 General Dynamics Corp. 1,067,475 7,150 United Technologies Corp. 654,082 ---------------- 3,429,990 ---------------- AGRICULTURE: 0.9% 28,050 Altria Group, Inc. 1,403,903 15,300 @@ British American Tobacco PLC 237,094 10,300 L Bunge Ltd. 401,082 ---------------- 2,042,079 ---------------- AIRLINES: 0.1% 21,075 @,L ExpressJet Holdings, Inc. 255,851 ---------------- 255,851 ---------------- APPAREL: 1.1% 9,200 Jones Apparel Group, Inc. 363,216 13,600 Nike, Inc. 1,030,200 10,000 @@ Onward Kashiyama Co. Ltd. 160,381 17,625 Reebok Intl. Ltd. 634,148 7,250 VF Corp. 353,075 ---------------- 2,541,020 ---------------- AUTO MANUFACTURERS: 1.1% 78,500 L Ford Motor Co. 1,228,525 7,400 L General Motors Corp 344,766 12,750 L Paccar, Inc. 739,373 3,000 @@ Peugeot SA 167,058 ---------------- 2,479,722 ---------------- AUTO PARTS AND EQUIPMENT: 0.3% 13,000 @@ Bridgestone Corp. 244,238 19,000 @@ Calsonic Kansei Corp. 135,472 15,425 L Cooper Tire & Rubber Co. 354,774 7,225 @ Dura Automotive Systems, Inc. 66,109 ---------------- 800,593 ---------------- BANKS: 5.7% 4,800 @@ Alpha Bank A.E. 122,054 20,200 @@ Banco Bilbao Vizcaya Argentaria SA 269,848 2,300 @@ Banco Popular Espanol 129,897 46,550 Bank of America Corp. 3,939,060 15,050 Bank One Corp. 767,550 28,000 @@ China Bank Ltd. 171,415 350,000 @@ CITIC Intl. Financial Holdings Ltd. 127,888 9,100 @@ Credit Agricole SA 221,430 10,000 @@ DBS Group Holdings Ltd. 83,602 8,700 @@ Fortis 192,644 18,525 Hibernia Corp. 450,158 39,400 @@ HSBC Holdings PLC 585,905 25,950 Keycorp 775,646 68 @@ Mizuho Financial Group, Inc. 308,482 11,225 @@ Royal Bank of Scotland Group PLC 323,262 7,000 @@ St. George Bank Ltd. 107,374 34,000 The Sumitomo Trust & Banking Co. Ltd. $ 242,112 5,950 @@ UBS AG 419,265 38,000 @@ Unicredito Italiano S.p.A. 187,705 26,250 US Bancorp 723,450 7,350 @@ W Holding Co., Inc. 126,200 42,250 Wachovia Corp. 1,880,124 23,350 Wells Fargo & Co. 1,336,321 ---------------- 13,491,392 ---------------- BEVERAGES: 1.8% 58,750 Coca-Cola Co. 2,965,700 23,650 PepsiCo, Inc. 1,274,262 ---------------- 4,239,962 ---------------- BIOTECHNOLOGY: 0.8% 17,800 @ Amgen, Inc. 971,345 28,150 @ Applera Corp. - Celera Genomics Group 324,007 24,025 @,L InterMune, Inc. 370,466 4,650 @,L Invitrogen Corp. 334,754 ---------------- 2,000,572 ---------------- BUILDING MATERIALS: 0.6% 30,700 @@ Boral Ltd. 138,152 1,916 @@ Lafarge SA 170,870 28,250 Masco Corp. 880,834 18,650 @,L USG Corp. 327,867 ---------------- 1,517,723 ---------------- CHEMICALS: 1.3% 9,710 @,@@ Clariant AG 141,882 12,400 Dow Chemical Co. 504,680 2,600 @@ DSM NV 127,575 9,043 Engelhard Corp 292,179 12,400 L Georgia Gulf Corp. 444,664 22,225 @,L Hercules, Inc. 270,923 12,000 PPG Industries, Inc. 749,880 10,650 Sherwin-Williams Co. 442,508 ---------------- 2,974,291 ---------------- COMMERCIAL SERVICES: 1.4% 46,650 @ Cendant Corp. 1,141,991 5,000 @ Corporate Executive Board Co. 288,950 9,000 @@ Dai Nippon Printing Co. Ltd. 143,766 5,700 @@ Group 4 Falck A/S 146,483 24,450 Paychex, Inc. 828,366 14,150 @ Rent-A-Center, Inc. 423,510 11,950 @,L Robert Half Intl., Inc. 355,752 ---------------- 3,328,818 ---------------- COMPUTERS: 2.8% 5,700 @,@@ Cap Gemini SA 228,782 68,800 @ Dell, Inc. 2,464,416 42,250 Hewlett-Packard Co. 891,475 23,100 International Business Machines Corp. 2,036,265 9,175 @,L PalmOne, Inc. 319,015 45,800 @,@@ Team Partners Group 449,345 20,600 @ Unisys Corp. 285,928 ---------------- 6,675,226 ----------------
See Accompanying Notes to Financial Statements 55 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- COSMETICS/PERSONAL CARE: 2.3% 6,350 Alberto-Culver Co. $ 318,389 36,350 Gillette Co. 1,541,240 20,400 Kimberly-Clark Corp. 1,343,952 35,650 Procter & Gamble Co. 1,940,786 3,700 @@ Uni-Charm Corp. 184,466 ---------------- 5,328,833 ---------------- DISTRIBUTION/WHOLESALE: 0.3% 44,000 @,@@ Itochu Corp. 197,590 6,900 WW Grainger, Inc. 396,750 ---------------- 594,340 ---------------- DIVERSIFIED FINANCIAL SERVICES: 6.3% 11,625 @,L Affiliated Managers Group 585,551 2,500 @@ Aiful Corp. 260,963 17,900 American Express Co. 919,702 71,600 Citigroup, Inc. 3,329,399 14,524 L Countrywide Financial Corp. 1,020,311 24,000 @@ Daiwa Securities Group Inc. 172,442 1,700 @@ Deutsche Boerse AG 86,765 6,825 @@,L Doral Financial Corp. 235,463 22,500 @ E*Trade Financial Corp. 250,875 13,500 Fannie Mae 963,360 17,150 Goldman Sachs Group, Inc. 1,614,844 27,700 JP Morgan Chase & Co. 1,073,929 31,550 Merrill Lynch & Co., Inc. 1,703,069 35,900 Morgan Stanley 1,894,443 52,475 @ Providian Financial Corp. 769,808 ---------------- 14,880,924 ---------------- ELECTRIC: 1.8% 45,300 @ AES Corp. 449,828 20,700 Centerpoint Energy, Inc. 238,050 9,500 @@ Chubu Electric Power Co., Inc. 200,683 2,800 @@ E.ON AG 201,672 22,050 Edison Intl. 563,818 700 @@ Electrabel 224,411 11,700 @@ Endesa SA 225,479 9,100 L Exelon Corp. 302,939 8,925 L Great Plains Energy, Inc. 265,073 5,500 @@ Public Power Corp. 131,155 4,300 RWE AG 202,463 10,850 L Southern Co. 316,278 21,700 @@,L TXU Corp. 879,066 ---------------- 4,200,915 ---------------- ELECTRICAL COMPONENTS AND EQUIPMENT: 0.3% 14,925 @,L Artesyn Technologies, Inc. 134,325 24,000 @@ Hitachi Ltd. 165,184 15,000 @@ Sharp Corp. 239,610 59,000 @@ Toshiba Corp. 237,373 ---------------- 776,492 ---------------- ELECTRONICS: 0.8% 21,700 @,L Arrow Electronics, Inc. 581,994 13,150 @ Benchmark Electronics, Inc. 382,665 14,600 @ Itron, Inc. 334,924 8,700 Parker Hannifin Corp. 517,302 4,000 @@ Secom Co. Ltd. 169,729 ---------------- 1,986,614 ---------------- ENGINEERING AND CONSTRUCTION: 0.3% 16,125 @,@@ ABB Ltd. $ 88,196 3,800 @@ Bouygues 127,232 5,475 Granite Construction, Inc. 99,809 43,450 @,L Shaw Group, Inc. 440,149 ---------------- 755,386 ---------------- ENTERTAINMENT: 0.1% 6,000 GTECH Holdings Corp. 277,860 ---------------- 277,860 ---------------- FOOD: 0.6% 1,000 @@ Groupe Danone 87,234 3,700 @@ Metro AG 175,562 41,650 Sara Lee Corp. 957,533 9,850 Supervalu, Inc. 301,509 ---------------- 1,521,838 ---------------- FOREST PRODUCTS AND PAPER: 1.2% 18,550 Georgia-Pacific Corp. 685,979 6,950 L International Paper Co. 310,665 21,475 @ Louisiana-Pacific Corp. 507,884 35,000 @@ OJI Paper Co. Ltd. 224,534 3,900 Plum Creek Timber Co., Inc. 127,062 1,500 Rayonier, Inc. 66,675 5,800 @@ Stora Enso OYJ 78,681 14,400 Weyerhaeuser Co. 908,927 ---------------- 2,910,407 ---------------- GAS: 0.3% 10,025 L Oneok, Inc. 220,450 15,500 Sempra Energy 533,665 ---------------- 754,115 ---------------- HAND/MACHINE TOOLS: 0.3% 5,500 Black & Decker Corp. 341,715 12,000 @@ Makita Corp 179,920 6,450 L Stanley Works 293,991 ---------------- 815,626 ---------------- HEALTHCARE-PRODUCTS: 2.7% 13,550 L Bausch & Lomb, Inc. 881,699 15,500 Becton Dickinson & Co. 802,900 6,650 CR Bard, Inc. 376,723 2,700 @@ Fresenius Medical Care AG 200,054 41,000 Johnson & Johnson 2,283,699 16,900 Medtronic, Inc. 823,368 11,800 @ Zimmer Holdings, Inc. 1,040,760 ---------------- 6,409,203 ---------------- HEALTHCARE-SERVICES: 2.6% 10,050 Aetna, Inc. 854,250 11,175 @ Amerigroup Corp. 549,810 9,100 @,L Anthem, Inc. 814,996 19,250 @ Humana, Inc. 325,325 7,925 Oxford Health Plans, Inc. 436,192 16,900 @,L Pacificare Health Systems 653,354 25,025 l UnitedHealth Group, Inc. 1,557,806 8,600 @ WellPoint Health Networks 963,286 ---------------- 6,155,019 ----------------
See Accompanying Notes to Financial Statements 56 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- HOME FURNISHINGS: 0.5% 7,000 @@ Electrolux AB $ 134,277 4,875 Harman Intl. Industries, Inc. 443,625 7,100 @@ Sony Corp. 267,433 14,200 @@ Yamaha Corp 232,947 ---------------- 1,078,282 ---------------- HOUSEHOLD PRODUCTS/WARES: 0.1% 4,200 Blyth, Inc. 144,858 ---------------- 144,858 ---------------- INSURANCE: 4.7% 18,650 @@ ACE Ltd. 788,522 14,300 @@ Aegon NV 172,415 36,050 American Intl. Group, Inc. 2,569,643 10,300 @@ AXA 226,820 11,650 Chubb Corp. 794,297 9,550 Cigna Corp. 657,136 8,442 Fidelity National Financial, Inc. 315,224 15,675 First American Corp. 405,826 14,800 Hartford Financial Services Group, Inc. 1,017,352 10,050 LandAmerica Financial Group, Inc. 391,247 137,900 @@ Legal & General Group PLC 237,578 13,150 Loews Corp. 788,474 11,450 Progressive Corp. 976,685 18,400 @@ Prudential PLC 158,333 28,500 St. Paul Cos. 1,155,389 2,230 @@ Swiss Reinsurance 144,850 1,320 @,@@ Zurich Financial Services AG 208,424 ---------------- 11,008,215 ---------------- INTERNET: 1.0% 29,425 @ Autobytel, Inc. 267,179 8,200 @,L eBay, Inc. 753,990 22,150 @,L GoRemote Internet Communications, Inc. 40,756 14,825 @,L Priceline.com, Inc. 399,237 18,600 @,L Symantec Corp. 814,309 4,000 @@ Trend Micro, Inc. 177,427 ---------------- 2,452,898 ---------------- IRON/STEEL: 0.3% 9,900 @@ JFE Holdings, Inc. 242,703 10,500 @@ Thyssenkrupp AG 179,486 7,300 L United States Steel Corp. 256,376 ---------------- 678,565 ---------------- LEISURE TIME: 0.2% 7,950 L Carnival Corp. 373,650 11,000 @@ Yamaha Motor Co. Ltd. 171,278 ---------------- 544,928 ---------------- LODGING: 0.1% 4,000 L Starwood Hotels & Resorts Worldwide, Inc. 179,400 ---------------- 179,400 ---------------- MACHINERY-CONSTRUCTION & MINING: 0.1% 7,625 @ Terex Corp. 260,241 ---------------- 260,241 ---------------- MACHINERY-DIVERSIFIED: 0.3% 7,250 L Briggs & Stratton Corp. $ 640,538 3,100 Tecumseh Products Co. 127,689 ---------------- 768,227 ---------------- MEDIA: 1.9% 11,500 McGraw-Hill Cos., Inc. 880,555 26,000 @@ Reed Elsevier PLC 252,729 20,200 @@ Seven Network Ltd. 72,468 125,400 @,L Sirius Satellite Radio, Inc. 386,232 62,850 @,L Time Warner, Inc. 1,104,903 27,175 @,L UnitedGlobalCom, Inc. 197,291 22,200 Viacom, Inc. 792,984 6,100 @,@@ Vivendi Universal SA 169,211 28,400 Walt Disney Co. 723,916 ---------------- 4,580,289 ---------------- METAL FABRICATE/HARDWARE: 0.3% 8,500 Quanex Corp. 413,950 13,100 Worthington Industries 268,943 ---------------- 682,893 ---------------- MINING: 0.5% 12,050 Alcoa, Inc. 398,012 26,600 @@ BHP Billiton Ltd. 232,176 6,250 @ Phelps Dodge Corp. 484,437 ---------------- 1,114,625 ---------------- MISCELLANEOUS MANUFACTURING: 4.3% 23,950 3M Co. 2,155,740 146,150 General Electric Co. 4,735,260 11,200 Honeywell Intl., Inc. 410,256 4,300 Illinois Tool Works, Inc. 412,327 5,100 @@ Siemens AG 367,020 61,100 @@ Tyco Intl. Ltd. 2,024,854 ---------------- 10,105,457 ---------------- OFFICE PROPERTY: 0.1% 6,500 Reckson Associates Realty Corp. 178,490 800 SL Green Realty Corp. 37,440 ---------------- 215,930 ---------------- OFFICE/BUSINESS EQUIPMENT: 0.1% 13,025 L IKON Office Solutions, Inc. 149,397 ---------------- 149,397 ---------------- OIL AND GAS: 6.9% 99,507 @@ BP PLC 878,820 19,450 Burlington Resources, Inc. 703,701 22,900 ChevronTexaco Corp. 2,155,119 18,300 ConocoPhillips 1,396,107 11,000 Devon Energy Corp. 726,000 105,250 Exxon Mobil Corp. 4,674,152 13,300 @ Giant Industries, Inc. 292,600 7,150 @ Houston Exploration Co. 370,656 17,550 Marathon Oil Corp. 664,092 4,200 @@ Norsk Hydro ASA 272,971 16,500 Occidental Petroleum Corp. 798,765 9,125 Pogo Producing Co. 450,775 15,300 @@ Repsol YPF SA 335,065 84,400 @@ Shell Transport & Trading Co. PLC 619,125 4,500 L Sunoco, Inc. 286,290
See Accompanying Notes to Financial Statements 57 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- OIL AND GAS (CONTINUED) 17,300 @ Tesoro Petroleum Corp. $ 477,480 2,500 @@ Total SA 476,622 7,150 L Valero Energy Corp. 527,384 ---------------- 16,105,724 ---------------- PACKAGING AND CONTAINERS: 0.1% 13,925 @,L Owens-Illinois, Inc. 233,383 ---------------- 233,383 ---------------- PHARMACEUTICALS: 3.5% 2,700 @@ Altana AG 162,605 7,800 @@ AstraZeneca PLC 349,955 3,700 @@ Aventis SA 279,324 6,400 @@ Eisai Co. Ltd. 184,173 15,050 Eli Lilly & Co. 1,052,146 12,000 @@,L GlaxoSmithKline PLC 497,520 30,700 Merck & Co., Inc. 1,458,250 103,850 Pfizer, Inc. 3,559,977 4,440 @@ Roche Holding AG 439,604 8,800 @@ Sankyo Co. Ltd. 190,735 ---------------- 8,174,289 ---------------- PIPELINES: 0.1% 6,900 National Fuel Gas Co. 172,500 ---------------- 172,500 ---------------- REAL ESTATE: 0.2% 23,000 @@ Cheung Kong Holdings Ltd. 169,556 6,875 L LNR Property Corp. 372,968 ---------------- 542,524 ---------------- REAL ESTATE INVESTMENT TRUSTS: 2.1% 10,700 @ Acadia Realty Trust 147,018 2,000 @ Affordable Residential Communities 33,200 2,100 Alexandria Real Estate Equities, Inc. 119,238 3,000 Apartment Investment & Management Co. 93,390 4,132 Archstone-Smith Trust 121,192 2,000 Avalonbay Communities, Inc. 113,040 2,700 Boston Properties, Inc. 135,216 2,400 Camden Property Trust 109,920 2,700 Carramerica Realty Corp. 81,621 1,500 CBL & Associates Properties, Inc. 82,500 1,700 L Centerpoint Properties Trust 130,475 9,600 Chelsea Property Group, Inc. 626,111 1,500 Colonial Properties Trust 57,795 8,800 Corporate Office Properties Trust Sbi MD 218,680 4,300 Developers Diversified Realty Corp. 152,091 10,169 L Equity Office Properties Trust 276,597 3,904 Equity Residential 116,066 900 Essex Property Trust, Inc. 61,515 7,800 @ Felcor Lodging Trust, Inc. 94,380 6,100 L General Growth Properties, Inc. 180,377 3,200 Hospitality Properties Trust 135,360 12,600 @ Host Marriott Corp. 155,736 4,400 Istar Financial, Inc. 176,000 2,300 Kimco Realty Corp. 104,650 4,500 LaSalle Hotel Properties 109,800 2,400 Mack-Cali Realty Corp. 99,312 9,800 @ Meristar Hospitality Corp. $ 67,032 3,300 Newcastle Investment Corp. 98,835 1,700 Pennsylvania Real Estate Investment Trust 58,225 3,700 Prologis 121,804 1,600 PS Business Parks, Inc. 64,384 2,250 Public Storage, Inc. 103,523 2,400 L Regency Centers Corp. 102,960 3,200 Rouse Co. 152,000 5,100 L Simon Property Group, Inc. 262,242 7,700 United Dominion Realty Trust, Inc. 152,306 ---------------- 4,914,591 ---------------- RETAIL: 5.8% 18,050 Best Buy Co., Inc. 915,857 52,600 @@ Dixons Group PLC 157,632 11,000 @@ Enterprise Inns PLC 114,704 11,300 Federated Department Stores 554,830 42,250 L Gap, Inc. 1,024,562 30,300 Home Depot, Inc. 1,066,559 18,850 JC Penney Co., Inc. Holding Co. 711,776 31,000 Limited Brands 579,700 9,850 Lowe's Cos., Inc. 517,618 17,350 McDonald's Corp. 451,100 9,900 Nordstrom, Inc. 421,839 19,250 @ Office Depot, Inc. 344,768 1,400 @@ Pinault-Printemps-Redoute 143,844 10,950 RadioShack Corp. 313,499 29,200 @ Staples, Inc. 855,852 21,550 @,L Starbucks Corp. 936,994 12,250 @ Target Corp. 520,258 31,925 @,L Toys R US, Inc. 508,565 17,000 @@ UNY Co Ltd 217,651 59,500 Wal-Mart Stores, Inc. 3,139,219 7,750 Wendy's Intl., Inc. 270,010 ---------------- 13,766,837 ---------------- SAVINGS AND LOANS: 0.2% 3,100 @ FirstFed Financial Corp. 128,960 21,450 Flagstar Bancorp, Inc. 426,426 ---------------- 555,386 ---------------- SEMICONDUCTORS: 1.9% 4,450 @ Advanced Micro Devices, Inc. 70,755 90,375 @ Applied Micro Circuits Corp. 480,795 6,200 @@ ASML Holding NV 104,926 51,300 @,L Cirrus Logic, Inc. 308,313 88,100 Intel Corp. 2,431,560 46,350 @,L LSI Logic Corp. 353,187 6,000 @@ Sanken Electric Co. Ltd. 78,303 22,900 Texas Instruments, Inc. 553,722 ---------------- 4,381,561 ---------------- SOFTWARE: 4.4% 38,437 @ Activision, Inc. 611,148 8,300 Autodesk, Inc. 355,323 4,325 @,L Avid Technology, Inc. 236,015 36,100 @ BMC Software, Inc. 667,850 26,100 @ Compuware Corp. 172,260 3,325 @ Dun & Bradstreet Corp. 179,251 12,700 First Data Corp. 565,404 15,300 L IMS Health, Inc. 358,632
See Accompanying Notes to Financial Statements 58 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- SOFTWARE (CONTINUED) 215,600 Microsoft Corp. $ 6,157,536 71,300 @ Oracle Corp. 850,609 1,300 @@ SAP AG 216,685 ---------------- 10,370,713 ---------------- TELECOMMUNICATIONS: 5.1% 26,750 @ Adaptec, Inc. 226,305 19,750 Alltel Corp. 999,745 70,500 Bellsouth Corp. 1,848,510 92,200 @ Cisco Systems, Inc. 2,185,140 18,800 @,@@ Deutsche Telekom AG 330,515 86,200 Motorola, Inc. 1,573,150 53 @@ Nippon Telegraph & Telephone Corp. 283,178 27,400 @@ Portugal Telecom SGPS SA 295,692 10,650 Qualcomm, Inc. 777,237 10,850 @ SafeNet, Inc. 300,328 10,400 Scientific-Atlanta, Inc. 358,800 26,275 @ Sycamore Networks, Inc. 111,143 91,700 @@ Telecom Italia S.p.A. 285,053 85,600 @ Telefonaktiebolaget LM Ericsson 252,268 6,600 @@ Telekom Austria AG 100,775 42,850 @,L Tellabs, Inc. 374,509 41,500 Verizon Communications, Inc. 1,501,885 42,100 @,L Zhone Technologies, Inc. 164,190 ---------------- 11,968,423 ---------------- TOYS/GAMES/HOBBIES: 0.1% 11,900 Hasbro, Inc. 226,100 ---------------- 226,100 ---------------- TRANSPORTATION: 1.5% 6,850 L CH Robinson Worldwide, Inc. 314,004 42 @@ East Japan Railway Co. 235,568 14,300 FedEx Corp 1,168,166 27,000 @@ Mitsui OSK Lines Ltd 142,034 6,900 @@ TPG NV 157,656 15,500 L United Parcel Service, Inc. 1,165,135 8,700 @,L Yellow Roadway Corp. 346,782 ---------------- 3,529,345 ---------------- Total Common Stock (Cost $176,786,170) 202,297,173 ---------------- PREFERRED STOCK: 0.1% BANKS: 0.1% 12 XX,# DG Funding Trust 129,000 ---------------- Total Preferred Stock (Cost $130,511) 129,000 ---------------- PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- CORPORATE BONDS: 2.1% AUTO MANUFACTURERS: 0.0% $ 21,000 L Ford Motor Co., 6.625%, due 10/01/28 $ 18,442 11,000 L General Motors Corp., 8.375%, due 07/15/33 11,676 ---------------- 30,118 ---------------- BANKS: 0.6% $ 20,000 @@ Australia & New Zealand Banking Group Ltd., 1.494%, due 10/29/49 $ 17,034 39,000 #,@@ Banco Bradesco SA/Cayman Islands, 8.750%, due 10/24/13 39,293 94,000 @@ Banco Santander Santiago Chile SA, 7.375%, due 07/18/12 103,607 30,000 @@ Bank of Ireland, 1.800%, due 12/29/49 25,316 65,000 # Bank of New York Institutional Capital Trust A, 7.780%, due 12/01/26 69,617 52,000 BankAmerica Capital II, 8.000%, due 12/15/26 57,092 7,000 # BankAmerica Institutional Capital B, 7.700%, due 12/31/26 7,502 13,000 Barnett Capital I, 8.060%, due 12/01/26 14,250 9,000 Barnett Capital II, 7.950%, due 12/01/26 9,895 90,000 Citibank NA/New York State, 1.800%, due 11/29/49 71,076 35,000 @@,L Danske Bank A/S, 5.914%, due 12/29/49 35,542 112,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 125,121 6,000 FBS Capital I, 8.090%, due 11/15/26 6,632 29,000 First Union Institutional Capital II, 7.850%, due 01/01/27 31,189 43,000 @@,L HBOS Capital Funding LP, 6.071%, due 06/30/49 43,252 15,000 @@ Hongkong & Shanghai Banking Corp. Ltd., 1.313%, due 07/29/49 12,740 80,000 @@ HSBC Bank PLC, 1.975%, due 06/29/49 67,724 60,000 @@ HSBC Bank PLC, 2.125%, due 06/29/49 50,850 65,000 @@ Industrial Bank Of Korea, 4.000%, due 05/19/14 60,883 60,000 @@ Lloyds TSB Bank PLC, 1.270%, due 08/29/49 51,685 50,000 @@ Lloyds TSB Bank PLC, 2.188%, due 06/29/49 43,683 60,000 M&T Bank Corp., 3.850%, due 04/01/13 58,904 10,000 Mellon Capital I, 7.720%, due 12/01/26 10,844 20,000 National Westminster Bank PLC, 1.375%, due 08/29/49 17,261 60,000 @@ National Westminster Bank PLC, 1.438%, due 11/29/49 50,745 31,000 @@ Northern Rock PLC, 5.600%, due 04/30/49 30,176 63,000 # Rabobank Capital Funding II, 5.260%, due 12/29/49 61,076 30,000 @@ Royal Bank of Canada, 1.750%, due 06/29/85 25,788
See Accompanying Notes to Financial Statements 59 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- BANKS (CONTINUED) $ 10,000 @@ Royal Bank of Scotland Group PLC, 2.063%, due 12/29/49 $ 8,630 10,000 @@ Societe Generale, 1.688%, due 11/29/49 8,362 40,000 @@ Standard Chartered PLC, 1.315%, due 01/29/49 31,367 30,000 @@ Standard Chartered PLC, 1.375%, due 07/29/49 23,530 80,000 @@ Standard Chartered PLC, 2.070%, due 12/29/49 63,000 30,000 @@ Westpac Banking Corp., 1.338%, due 09/29/49 25,334 92,000 L Westpac Capital Trust IV, 5.256%, due 12/29/49 84,934 ---------------- 1,443,934 ---------------- BEVERAGES: 0.0% 21,000 @@ Coca-Cola HBC Finance BV, 5.125%, due 09/17/13 20,741 70,000 # Miller Brewing Co., 4.250%, due 08/15/08 69,724 ---------------- 90,465 ---------------- CHEMICALS: 0.0% 20,000 Dow Chemical Co., 5.750%, due 11/15/09 20,895 16,000 @@ Sociedad Quimica y Minera de Chile SA, 7.700%, due 09/15/06 17,129 ---------------- 38,024 ---------------- DIVERSIFIED FINANCIAL SERVICES: 0.4% 54,000 @@ Arcel Finance Ltd., 7.048%, due 09/01/11 53,730 58,000 L Boeing Capital Corp., 7.375%, due 09/27/10 65,666 90,000 #,@@ Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 87,525 28,000 Citicorp Capital I, 7.933%, due 02/15/27 30,640 10,000 Citigroup Capital II, 7.750%, due 12/01/36 10,780 136,000 # Corestates Capital Trust I, 8.000%, due 12/15/26 148,994 19,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 18,287 65,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 63,019 20,000 Financiere CSFB NV, 1.250%, due 03/29/49 16,025 35,000 L Ford Motor Credit Co., 7.000%, due 10/01/13 35,391 34,000 L General Motors Acceptance Corp., 6.875%, due 08/28/12 34,640 47,000 General Motors Acceptance Corp., 7.750%, due 01/19/10 51,080 25,000 General Motors Acceptance Corp., 8.000%, due 11/01/31 25,687 10,000 L JPM Capital Trust I, 7.540%, due 01/15/27 10,620 $ 103,000 # Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 $ 101,951 50,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 47,692 68,262 #,@@ PF Export Receivables Master Trust, 6.436%, due 06/01/15 67,356 ---------------- 869,083 ---------------- ELECTRIC: 0.2% 18,000 Consumers Energy Co., 4.250%, due 04/15/08 17,854 56,000 L Consumers Energy Co., 4.800%, due 02/17/09 56,103 51,000 DTE Energy Co, 2.324%, due 06/01/07 50,979 76,000 FirstEnergy Corp., 7.375%, due 11/15/31 79,451 64,000 Ohio Edison Co., 4.000%, due 05/01/08 62,657 88,000 Ohio Power Co., 6.375%, due 07/15/33 86,396 13,096 # Power Contract Financing LLC, 5.200%, due 02/01/06 13,181 100,000 # Power Contract Financing LLC, 6.256%, due 02/01/10 101,952 16,595 PPL Montana LLC, 8.903%, due 07/02/20 18,099 22,000 Tenaska Virginia Partners LP, 6.119%, due 03/30/24 21,802 69,000 TXU Australia Holdings Partnership LP, 6.150%, due 11/15/13 72,010 ---------------- 580,484 ---------------- FOOD: 0.1% 30,000 Kroger Co., 7.250%, due 06/01/09 33,362 57,000 Safeway, Inc., 4.800%, due 07/16/07 58,305 38,000 Supervalu, Inc., 7.875%, due 08/01/09 42,966 72,000 Tyson Foods, Inc., 7.250%, due 10/01/06 77,588 ---------------- 212,221 ---------------- INSURANCE: 0.1% 69,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 77,478 47,000 # Monumental Global Funding II, 3.850%, due 03/03/08 46,932 33,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 36,557 ---------------- 160,967 ---------------- MEDIA: 0.0% 37,000 Comcast Cable Communications, 7.125%, due 06/15/13 40,511 29,000 L Time Warner, Inc., 6.875%, due 05/01/12 31,385 ---------------- 71,896 ----------------
See Accompanying Notes to Financial Statements 60 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- MINING: 0.1% $ 58,000 @@ Alcan, Inc., 6.125%, due 12/15/33 $ 56,306 46,000 @@ Corp Nacional del Cobre de Chile, 5.500%, due 10/15/13 45,775 14,000 @@ Corp Nacional del Cobre de Chile, 6.375%, due 11/30/12 14,846 53,000 @@ Vale Overseas Ltd., 8.625%, due 03/08/07 56,975 ---------------- 173,902 ---------------- MULTI-NATIONAL: 0.1% 74,000 @@ Corp Andina de Fomento CAF, 5.200%, due 05/21/13 71,311 71,000 @@ Corp Andina de Fomento CAF, 6.875%, due 03/15/12 76,463 ---------------- 147,774 ---------------- OIL AND GAS: 0.1% 58,000 @@ Empresa Nacional de Petroleo ENAP, 4.875%, due 03/15/14 54,113 126,000 L Pemex Project Funding Master Trust, 2.820%, due 06/15/10 126,882 27,000 L Pemex Project Funding Master Trust, 7.375%, due 12/15/14 27,675 33,000 Valero Energy Corp., 6.125%, due 04/15/07 34,990 37,000 Valero Energy Corp., 8.750%, due 06/15/30 46,297 ---------------- 289,957 ---------------- PACKAGING AND CONTAINERS: 0.0% 26,000 Sealed Air Corp., 5.375%, due 04/15/08 26,910 72,000 # Sealed Air Corp., 6.950%, due 05/15/09 78,681 ---------------- 105,591 ---------------- REAL ESTATE: 0.1% 60,000 EOP Operating LP, 7.750%, due 11/15/07 66,636 20,000 Liberty Property-LP, 6.375%, due 08/15/12 21,036 5,000 Liberty Property-LP, 6.950%, due 12/01/06 5,408 48,000 Liberty Property-LP, 7.750%, due 04/15/09 54,571 70,000 Simon Property Group LP, 7.375%, due 01/20/06 74,724 ---------------- 222,375 ---------------- REAL ESTATE INVESTMENT TRUSTS: 0.0% 53,000 Simon Property Group LP, 4.875%, due 03/18/10 52,525 9,000 Simon Property Group LP, 6.375%, due 11/15/07 9,641 ---------------- 62,166 ---------------- SAVINGS AND LOANS: 0.1% $ 49,000 L Great Western Financial, 8.206%, due 02/01/27 $ 53,360 72,000 Washington Mutual, Inc., 4.375%, due 01/15/08 72,517 ---------------- 125,877 ---------------- TELECOMMUNICATIONS: 0.1% 30,000 @@ Brasil Telecom SA, 9.375%, due 02/18/14 29,250 54,000 @@ Cia de Telecomunicaciones de Chile SA, 7.625%, due 07/15/06 58,243 79,000 Sprint Capital Corp., 4.780%, due 08/17/06 80,568 50,000 Sprint Capital Corp., 6.875%, due 11/15/28 48,201 25,000 L Sprint Capital Corp., 8.750%, due 03/15/32 29,216 60,000 Verizon Florida, Inc., 6.125%, due 01/15/13 61,775 39,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 36,480 ---------------- 343,733 ---------------- Total Corporate Bonds (Cost $4,978,873) 4,968,567 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 3.9% FEDERAL HOME LOAN BANK: 0.2% 355,000 L 2.500%, due 12/15/05 354,532 ---------------- 354,532 ---------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 1.0% 475,000 2.700%, due 03/16/07 467,254 239,000 2.750%, due 02/09/07 235,804 406,000 4.500%, due 10/15/12 408,522 180,000 5.500%, due 07/15/34 179,213 165,000 6.000%, due 01/15/28 171,732 34,096 6.000%, due 06/01/28 35,006 193,607 6.000%, due 01/15/29 195,511 681,000 6.500%, due 07/15/34 709,729 ---------------- 2,402,771 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 2.6% 230,000 L 3.500%, due 01/28/08 226,926 310,000 4.500%, due 07/01/17 302,928 236,000 L 4.625%, due 10/15/13 227,671 610,000 5.000%, due 07/01/18 610,762 45,000 5.000%, due 08/15/19 44,902 1,663,000 5.000%, due 07/15/34 1,606,354 235,000 5.250%, due 08/01/12 235,211 172,710 5.500%, due 02/01/18 177,108 16,860 5.500%, due 07/15/19 17,245 88,000 5.500%, due 08/15/19 89,677 405,000 5.500%, due 07/15/34 403,101 196,464 6.000%, due 10/01/08 205,688 244,818 6.000%, due 08/01/16 255,535 120,257 6.000%, due 04/25/31 121,875 272,000 6.000%, due 08/01/33 276,590 80,000 6.000%, due 07/15/34 81,675
See Accompanying Notes to Financial Statements 61 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 115,093 6.500%, due 04/01/27 $ 120,347 203,314 6.500%, due 10/01/32 211,914 210,000 6.500%, due 07/15/33 218,663 95,000 6.625%, due 11/15/10 105,617 21,934 7.000%, due 12/01/27 23,254 371,386 7.000%, due 02/01/31 393,167 105,000 7.000%, due 07/15/33 110,742 75,643 7.500%, due 09/01/31 81,094 ---------------- 6,148,046 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 0.1% 65,213 6.500%, due 01/15/29 68,289 61,874 6.500%, due 01/15/32 64,746 19,908 7.000%, due 04/15/26 21,235 18,239 7.000%, due 04/15/26 19,455 2,315 7.000%, due 01/15/28 2,465 83,829 7.000%, due 02/15/28 89,243 68,308 8.000%, due 07/15/24 75,391 ---------------- 340,824 ---------------- Total U.S. Government Agency Obligations (Cost $9,237,254) 9,246,173 ---------------- U.S. TREASURY OBLIGATIONS: 1.9% U.S. TREASURY BONDS: 0.5% 600,000 L 1.625%, due 01/31/05 599,837 303,000 10.375%, due 11/15/12 370,086 229,000 L 13.250%, due 05/15/14 324,375 ---------------- 1,294,298 ---------------- U.S. TREASURY NOTES: 1.4% 271,000 L 2.500%, due 05/31/06 270,175 243,000 L 3.125%, due 05/15/07 243,076 428,000 L 4.000%, due 06/15/09 431,796 1,045,000 W,L 4.750%, due 05/15/14 1,056,225 263,000 5.290%, due 05/15/16 142,647 622,000 L 5.375%, due 02/15/31 627,516 400,000 L 6.250%, due 08/15/23 443,063 ---------------- 3,214,498 ---------------- Total U.S. Treasury Obligations (Cost $4,508,489) 4,508,796 ---------------- COLLATERALIZED MORTGAGE OBLIGATIONS: 1.4% AUTOMOBILE ASSET-BACKED SECURITIES: 0.0% 120,000 USAA Auto Owner Trust, 2.040%, due 02/16/10 117,516 ---------------- 117,516 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES: 0.5% 350,000 CS First Boston Mortgage Securities Corp., 3.861%, due 03/15/36 343,876 30,000 CS First Boston Mortgage Securities Corp., 7.810%, due 04/14/62 34,330 166,000 DLJ Commercial Mortgage Corp., 6.240%, due 11/12/31 178,119 $ 400,000 DLJ Commercial Mortgage Corp., 7.300%, due 06/10/32 $ 448,211 74,000 GE Capital Commercial Mortgage Corp., 5.994%, due 12/10/35 78,600 ---------------- 1,083,136 ---------------- CREDIT CARD ASSET-BACKED SECURITIES: 0.2% 45,000 Bank One Issuance Trust, 4.540%, due 09/15/10 45,421 42,000 Capital One Master Trust, 4.900%, due 03/15/10 43,560 130,000 Chemical Master Credit Card Trust 1, 7.090%, due 02/15/09 139,778 140,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 146,810 ---------------- 375,569 ---------------- OTHER ASSET-BACKED SECURITIES: 0.1% 120,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 2.734%, due 09/25/24 117,810 70,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 4.045%, due 05/25/33 68,258 ---------------- 186,068 ---------------- WHOLE LOAN COLLATERALIZED MORTGAGE: 0.5% 168,197 Bank of America Mortgage Securities, 4.413%, due 03/25/33 168,449 251,000 CS First Boston Mortgage Securities Corp., 4.187%, due 10/25/33 252,795 206,000 GMAC Mortgage Corp Loan Trust, 5.500%, due 01/25/34 207,587 434,390 MASTR Asset Securitization Trust, 5.500%, due 06/25/33 411,003 198,244 Washington Mutual, 5.000%, due 06/25/18 197,364 ---------------- 1,237,198 ---------------- WHOLE LOAN COLLATERALIZED SUPPORT CMO: 0.0% 53,249 Bank of America Mortgage Securities, 5.500%, due 11/25/33 52,662 ---------------- 52,662 ---------------- WHOLE LOAN COLLATERALIZED PLANNED AMORTIZATION CLASS: 0.1% 155,000 Residential Funding Securities Corp., 4.750%, due 02/25/33 156,881 ---------------- 156,881 ---------------- Total Collateralized Mortgage Obligations (Cost $3,274,256) 3,209,030 ---------------- Total Long-Term Investments (Cost $198,915,552) 224,358,739 ----------------
See Accompanying Notes to Financial Statements 62 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS GROWTH PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 21.3% COMMERCIAL PAPER: 5.2% $ 1,300,000 Blue Ridge Asset Funding, 1.300%, due 07/15/04 $ 1,299,296 1,400,000 Concord Minutemen Cap B, 1.210%, due 07/12/05 1,399,944 2,300,000 Concord Minutemen Cap B, 1.160%, due 07/07/05 2,299,965 2,300,000 S Park Avenue Receivables Corp., 1.100%, due 07/07/04 2,299,508 1,750,000 S Park Avenue Receivables Corp., 1.230%, due 07/15/04 1,749,103 2,300,000 S Park Avenue Receivables Corp., 1.380%, due 07/09/04 2,299,207 1,000,000 St. Germain Holdings, 1.230%, due 07/13/04 999,556 ---------------- Total Commercial Paper (Cost $12,346,969) 12,346,579 ---------------- REPURCHASE AGREEMENT: 1.9% 4,490,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $4,490,187 to be received upon repurchase (Collateralized by $4,395,000 Federal National Mortgage Association, 5.500%, Market Value plus accrued interest $4,619,370, due 05/02/06) 4,490,000 ---------------- Total Repurchase Agreement (Cost $4,490,000) 4,490,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 14.2% 31,729,658 The Bank of New York Institutional Cash Reserve Fund, 1.250% 31,729,658 ---------------- Total Securities Lending Collateral (Cost $31,729,658) 31,729,658 ---------------- Total Short-Term Investments (Cost $48,566,627) 48,566,237 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $247,482,179)* 115.8% $ 272,924,976 OTHER ASSETS AND LIABILITIES-NET (15.8) (37,197,240) ----- ---------------- NET ASSETS 100.0% $ 235,727,736 ===== ================
@ Non-income producing security @@ Foreign issuer ADR American Depositary Receipt # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. ## Illiquid and restricted securities W When-issued or delayed delivery security. S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $250,346,893. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 25,128,948 Gross Unrealized Depreciation (2,550,865) ---------------- Net Unrealized Appreciation $ 22,578,083 ================
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED CONTRACTS MARKET VALUE DATE GAIN/(LOSS) --------- -------------- ---------- ----------- SHORT CONTRACTS U.S. 2 Year Treasury Note 2 $ (421,094) Sept-04 $ (448) U.S. 5 Year Treasury Note 8 (869,500) Sept-04 (6,540) ------------- --------- $ (1,290,594) $ (6,988) ============= ========= LONG CONTRACTS U.S. Long Bond 4 $ 425,500 Sept-04 $ 8,886 DJ Euro Stoxx 50 Index 13 445,549 Sept-04 (202) FTSE 100 Index 3 243,245 Sept-04 (2,958) Topix Index 3 327,315 Sept-04 (208) ------------- --------- $ 1,441,609 $ 5,518 ============= =========
See Accompanying Notes to Financial Statements 63 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - ---------------------------------------------------------------------------------------- COMMON STOCK: 65.8% ADVERTISING: 0.0% 11,700 @@ WPP Group PLC $ 118,821 ---------------- 118,821 ---------------- AEROSPACE/DEFENSE: 1.1% 21,700 BAE Systems PLC 86,281 24,400 Boeing Co. 1,246,596 8,300 General Dynamics Corp. 824,190 5,500 United Technologies Corp. 503,140 ---------------- 2,660,207 ---------------- AGRICULTURE: 0.7% 22,600 Altria Group, Inc. 1,131,130 7,900 @@ British American Tobacco PLC 122,421 8,125 L Bunge Ltd. 316,388 ---------------- 1,569,939 ---------------- AIRLINES: 0.1% 17,175 @,L ExpressJet Holdings, Inc. 208,505 ---------------- 208,505 ---------------- APPAREL: 0.8% 7,400 Jones Apparel Group, Inc. 292,152 10,600 Nike, Inc. 802,950 6,000 @@ Onward Kashiyama Co. Ltd. 96,229 13,900 Reebok Intl. Ltd. 500,122 5,850 VF Corp. 284,895 ---------------- 1,976,348 ---------------- AUTO MANUFACTURERS: 0.8% 63,750 L Ford Motor Co. 997,687 5,600 L General Motors Corp. 260,904 10,250 Paccar, Inc. 594,398 1,700 @@ Peugeot SA 94,666 ---------------- 1,947,655 ---------------- AUTO PARTS AND EQUIPMENT: 0.2% 6,000 @@ Bridgestone Corp. 112,725 10,000 @@ Calsonic Kansei Corp. 71,301 12,500 Cooper Tire & Rubber Co. 287,500 6,675 @ Dura Automotive Systems, Inc. 61,076 ---------------- 532,602 ---------------- BANKS: 4.0% 2,640 @@ Alpha Bank A.E. 67,130 10,100 @@ Banco Bilbao Vizcaya Argentaria SA 134,924 1,300 @@ Banco Popular Espanol 73,420 37,500 Bank of America Corp. 3,173,249 12,100 Bank One Corp. 617,100 15,000 @@ Chiba Bank Ltd. 91,830 183,000 @@,L CITIC Intl. Financial Holdings Ltd. 66,867 5,000 @@ Credit Agricole SA 121,665 5,000 @@ DBS Group Holdings Ltd. 41,801 4,700 @@ Fortis 104,072 14,675 Hibernia Corp. 356,603 21,000 @@ HSBC Holdings PLC 312,285 20,950 L Keycorp 626,195 35 @@ Mizuho Financial Group, Inc. 158,777 5,515 @@ Royal Bank of Scotland Group PLC 158,823 3,700 @@ St. George Bank Ltd. $ 56,755 17,000 @@ The Sumitomo Trust & Banking Co. Ltd. 121,056 3,070 @@ UBS AG 216,327 20,400 @@ Unicredito Italiano S.p.A. 100,768 21,150 US Bancorp 582,894 5,750 @@ W Holding Co., Inc. 98,728 33,050 Wachovia Corp. 1,470,724 18,700 Wells Fargo & Co. 1,070,200 ---------------- 9,822,193 ---------------- BEVERAGES: 1.4% 47,250 Coca-Cola Co. 2,385,180 18,400 PepsiCo, Inc. 991,392 ---------------- 3,376,572 ---------------- BIOTECHNOLOGY: 0.7% 13,750 @ Amgen, Inc. 750,338 22,475 @ Applera Corp. - Celera Genomics Group 258,687 18,950 @ InterMune, Inc. 292,209 3,725 @,L Invitrogen Corp. 268,163 ---------------- 1,569,397 ---------------- BUILDING MATERIALS: 0.5% 16,300 @@ Boral Ltd. 73,351 944 @@ Lafarge SA 84,186 22,450 Masco Corp. 699,991 15,125 @,L USG Corp. 265,898 ---------------- 1,123,426 ---------------- CHEMICALS: 1.0% 5,210 @,@@ Clariant AG 76,128 9,950 Dow Chemical Co. 404,965 1,400 @@ DSM NV 68,694 7,302 Engelhard Corp 235,928 10,100 Georgia Gulf Corp. 362,186 17,475 @,L Hercules, Inc. 213,020 9,700 PPG Industries, Inc. 606,153 8,550 Sherwin-Williams Co. 355,253 ---------------- 2,322,327 ---------------- COMMERCIAL SERVICES: 1.1% 37,650 @ Cendant Corp. 921,672 3,900 @ Corporate Executive Board Co. 225,381 5,000 @@ Dai Nippon Printing Co. Ltd. 79,870 3,100 @@ Group 4 Falck A/S 79,666 19,450 Paychex, Inc. 658,966 10,900 @ Rent-A-Center, Inc. 326,237 9,600 @,L Robert Half Intl., Inc. 285,792 ---------------- 2,577,584 ---------------- COMPUTERS: 2.2% 2,900 @,@@ Cap Gemini SA 116,398 55,300 @ Dell, Inc. 1,980,846 32,900 Hewlett-Packard Co. 694,190 18,800 International Business Machines Corp. 1,657,220 7,200 @,L PalmOne, Inc. 250,344 23,900 @,@@ Team Partners Group 234,484 16,000 @ Unisys Corp. 222,080 ---------------- 5,155,562 ----------------
See Accompanying Notes to Financial Statements 64 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- COSMETICS/PERSONAL CARE: 1.8% 5,150 Alberto-Culver Co. $ 258,221 29,350 Gillette Co. 1,244,440 16,450 Kimberly-Clark Corp. 1,083,726 28,700 Procter & Gamble Co. 1,562,428 1,700 @@ Uni-Charm Corp. 84,755 ---------------- 4,233,570 ---------------- DISTRIBUTION/WHOLESALE: 0.2% 20,000 @,@@ Itochu Corp. 89,814 5,600 WW Grainger, Inc. 322,000 ---------------- 411,814 ---------------- DIVERSIFIED FINANCIAL SERVICES: 4.8% 9,187 @, L Affiliated Managers Group 462,749 1,200 @@ Aiful Corp. 125,262 13,800 American Express Co. 709,044 57,650 Citigroup, Inc. 2,680,724 11,299 Countrywide Financial Corp. 793,755 12,000 @@ Daiwa Securities Group Inc. 86,221 800 @@,L Deutsche Boerse AG 40,831 5,525 @@,L Doral Financial Corp. 190,613 17,850 @,L E*Trade Financial Corp. 199,028 10,400 Fannie Mae 742,144 13,750 Goldman Sachs Group, Inc. 1,294,700 22,300 JP Morgan Chase & Co. 864,571 26,000 Merrill Lynch & Co., Inc. 1,403,480 28,900 Morgan Stanley 1,525,052 42,425 @,L Providian Financial Corp. 622,375 ---------------- 11,740,549 ---------------- ELECTRIC: 1.3% 36,350 @ AES Corp. 360,956 15,950 Centerpoint Energy, Inc. 183,425 4,600 @@ Chubu Electric Power Co., Inc. 97,173 1,500 @@ E.ON AG 108,038 17,800 Edison Intl. 455,146 400 @@ Electrabel 128,235 5,500 @@ Endesa SA 105,994 8,000 L Exelon Corp. 266,320 6,825 L Great Plains Energy, Inc. 202,703 2,900 @@ Public Power Corp. 69,154 2,300 @@ RWE AG 108,294 8,600 L Southern Co. 250,690 17,600 L TXU Corp. 712,976 ---------------- 3,049,104 ---------------- ELECTRICAL COMPONENTS AND EQUIPMENT: 0.2% 11,825 @ Artesyn Technologies, Inc. 106,425 12,000 @@ Hitachi Ltd. 82,592 8,000 @@ Sharp Corp. 127,792 29,000 @@ Toshiba Corp. 116,675 ---------------- 433,484 ---------------- ELECTRONICS: 0.6% 17,675 @,L Arrow Electronics, Inc. 474,043 10,350 @ Benchmark Electronics, Inc. 301,185 11,775 @,L Itron, Inc. 270,119 7,000 Parker Hannifin Corp. 416,220 2,000 @@ Secom Co. Ltd. 84,865 ---------------- 1,546,432 ---------------- ENGINEERING AND CONSTRUCTION: 0.2% 8,650 @,@@ ABB Ltd. $ 47,311 2,000 @@ Bouygues 66,964 4,275 Granite Construction, Inc. 77,933 34,650 @,L Shaw Group, Inc. 351,005 ---------------- 543,213 ---------------- ENTERTAINMENT: 0.1% 4,750 GTECH Holdings Corp. 219,973 ---------------- 219,973 ---------------- FOOD: 0.5% 600 @@ Groupe Danone 52,340 2,000 @@ Metro AG 94,899 33,500 Sara Lee Corp. 770,165 7,600 Supervalu, Inc. 232,636 ---------------- 1,150,040 ---------------- FOREST PRODUCTS AND PAPER: 0.9% 14,950 Georgia-Pacific Corp. 552,851 5,150 L International Paper Co. 230,205 16,925 @ Louisiana-Pacific Corp. 400,276 17,000 @@ OJI Paper Co. Ltd. 109,059 3,900 L Plum Creek Timber Co., Inc. 127,062 1,500 Rayonier, Inc. 66,675 3,100 @@ Stora Enso OYJ 42,053 11,650 Weyerhaeuser Co. 735,349 ---------------- 2,263,530 ---------------- GAS: 0.3% 8,200 L Oneok, Inc. 180,318 14,150 Sempra Energy 487,185 ---------------- 667,503 ---------------- HAND/MACHINE TOOLS: 0.3% 4,400 L Black & Decker Corp. 273,372 6,000 @@ Makita Corp 89,960 5,200 L Stanley Works 237,016 ---------------- 600,348 ---------------- HEALTHCARE-PRODUCTS: 2.1% 10,750 L Bausch & Lomb, Inc. 699,503 12,450 Becton Dickinson & Co. 644,910 6,250 CR Bard, Inc. 354,063 1,300 @@ Fresenius Medical Care AG 96,322 33,000 Johnson & Johnson 1,838,099 13,400 Medtronic, Inc. 652,848 9,500 @ Zimmer Holdings, Inc. 837,900 ---------------- 5,123,645 ---------------- HEALTHCARE-SERVICES: 2.1% 7,550 Aetna, Inc. 641,750 8,825 @ Amerigroup Corp. 434,190 7,550 @,L Anthem, Inc. 676,178 14,025 @ Humana, Inc. 237,023 6,200 Oxford Health Plans, Inc. 341,248 13,625 @,L Pacificare Health Systems 526,743 20,713 L UnitedHealth Group, Inc. 1,289,383 6,900 @ WellPoint Health Networks 772,869 ---------------- 4,919,384 ----------------
See Accompanying Notes to Financial Statements 65 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- HOME FURNISHINGS: 0.3% 3,800 @@ Electrolux AB $ 72,893 3,875 Harman Intl. Industries, Inc. 352,626 3,500 @@ Sony Corp. 131,833 7,300 @@ Yamaha Corp 119,754 ---------------- 677,106 ---------------- HOUSEHOLD PRODUCTS/WARES: 0.0% 3,300 Blyth, Inc. 113,817 ---------------- 113,817 ---------------- INSURANCE: 3.6% 14,400 @@ ACE Ltd. 608,832 6,044 @@ Aegon NV 72,872 29,000 American Intl. Group, Inc. 2,067,119 5,300 @@ AXA 116,713 9,350 Chubb Corp. 637,483 8,000 Cigna Corp. 550,480 6,655 Fidelity National Financial, Inc. 248,498 12,425 First American Corp. 321,683 11,900 Hartford Financial Services Group, Inc. 818,006 7,975 LandAmerica Financial Group, Inc. 310,467 70,400 @@ Legal & General Group PLC 121,287 10,600 Loews Corp. 635,576 9,400 Progressive Corp. 801,820 9,900 @@ Prudential PLC 85,190 22,950 L St. Paul Cos. 930,393 1,200 @@ Swiss Reinsurance 77,946 710 @,@@ Zurich Financial Services AG 112,107 ---------------- 8,516,472 ---------------- INTERNET: 0.8% 23,350 @ Autobytel, Inc. 212,018 6,900 @,L eBay, Inc. 634,455 17,325 @,L GoRemote Internet Communications, Inc. 31,878 12,025 @,L Priceline.com, Inc. 323,833 15,550 @,L Symantec Corp. 680,779 2,500 @@ Trend Micro, Inc. 110,892 ---------------- 1,993,855 ---------------- IRON/STEEL: 0.2% 5,200 @@ JFE Holdings, Inc. 127,480 5,400 @@ Thyssenkrupp AG 92,307 5,850 L United States Steel Corp. 205,452 ---------------- 425,239 ---------------- LEISURE TIME: 0.2% 6,100 L Carnival Corp. 286,700 6,000 @@ Yamaha Motor Co. Ltd. 93,424 ---------------- 380,124 ---------------- LODGING: 0.1% 4,000 L Starwood Hotels & Resorts Worldwide, Inc. 179,400 ---------------- 179,400 ---------------- MACHINERY-CONSTRUCTION AND MINING: 0.1% 6,075 @ Terex Corp. 207,340 ---------------- 207,340 ---------------- MACHINERY-DIVERSIFIED: 0.3% 5,750 L Briggs & Stratton Corp. $ 508,013 2,400 Tecumseh Products Co. 98,856 ---------------- 606,869 ---------------- MEDIA: 1.5% 8,750 McGraw-Hill Cos., Inc. 669,988 12,300 @@ Reed Elsevier PLC 119,560 10,800 @@ Seven Network Ltd. 38,745 101,575 @,L Sirius Satellite Radio, Inc. 312,851 50,600 @,L Time Warner, Inc. 889,548 22,150 @,L UnitedGlobalCom, Inc. 160,809 18,600 Viacom, Inc. 664,392 3,300 @,@@ Vivendi Universal SA 91,541 22,900 Walt Disney Co. 583,721 ---------------- 3,531,155 ---------------- METAL FABRICATE/HARDWARE: 0.2% 6,875 L Quanex Corp. 334,812 10,250 Worthington Industries 210,433 ---------------- 545,245 ---------------- MINING: 0.3% 9,600 Alcoa, Inc. 317,088 13,300 @@ BHP Billiton Ltd. 116,088 4,950 @,L Phelps Dodge Corp. 383,675 ---------------- 816,851 ---------------- MISCELLANEOUS MANUFACTURING: 3.4% 19,000 L 3M Co. 1,710,190 117,653 General Electric Co. 3,811,957 9,600 Honeywell Intl., Inc. 351,648 3,500 Illinois Tool Works, Inc. 335,615 2,500 @@ Siemens AG 179,912 49,100 @@ Tyco Intl. Ltd. 1,627,174 ---------------- 8,016,496 ---------------- OFFICE PROPERTY: 0.1% 6,700 Reckson Associates Realty Corp. 183,982 800 SL Green Realty Corp. 37,440 ---------------- 221,422 ---------------- OFFICE/BUSINESS EQUIPMENT: 0.0% 10,325 IKON Office Solutions, Inc. 118,428 ---------------- 118,428 ---------------- OIL AND GAS: 5.0% 54,263 @@ BP PLC 479,237 15,700 L Burlington Resources, Inc. 568,026 18,450 ChevronTexaco Corp. 1,736,330 14,750 ConocoPhillips 1,125,278 8,850 Devon Energy Corp. 584,100 84,750 Exxon Mobil Corp. 3,763,747 10,800 @ Giant Industries, Inc. 237,600 5,675 @ Houston Exploration Co. 294,192 14,150 Marathon Oil Corp. 535,436 2,300 @@ Norsk Hydro ASA 149,484 13,300 Occidental Petroleum Corp. 643,853 7,125 Pogo Producing Co. 351,975 7,800 @@ Repsol YPF SA 170,817 45,000 @@ Shell Transport & Trading Co. PLC 330,102 3,000 L Sunoco, Inc. 190,860
See Accompanying Notes to Financial Statements 66 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- OIL AND GAS (CONTINUED) 13,800 @,L Tesoro Petroleum Corp. $ 380,880 1,300 @@ Total SA 247,843 5,750 L Valero Energy Corp. 424,120 ---------------- 12,213,880 ---------------- PACKAGING AND CONTAINERS: 0.1% 10,925 @,L Owens-Illinois, Inc. 183,103 ---------------- 183,103 ---------------- PHARMACEUTICALS: 2.5% 1,400 @@ Altana AG 84,314 4,200 @@ AstraZeneca PLC 188,437 1,900 @@ Aventis SA 143,437 3,400 @@ Eisai Co. Ltd. 97,842 12,100 L Eli Lilly & Co. 845,911 6,700 @@,L GlaxoSmithKline PLC 277,782 24,450 Merck & Co., Inc. 1,161,375 84,850 Pfizer, Inc. 2,908,657 2,290 @@ Roche Holding AG 226,733 4,600 @@ Sankyo Co. Ltd. 99,702 ---------------- 6,034,190 ---------------- PIPELINES: 0.1% 5,425 National Fuel Gas Co. 135,625 ---------------- 135,625 ---------------- REAL ESTATE: 0.2% 12,000 @@ Cheung Kong Holdings Ltd. 88,464 5,450 L LNR Property Corp. 295,662 ---------------- 384,126 ---------------- REAL ESTATE INVESTMENT TRUSTS: 2.0% 10,100 Acadia Realty Trust 138,774 2,000 @ Affordable Residential Communities 33,200 2,100 Alexandria Real Estate Equities, Inc. 119,238 3,000 Apartment Investment & Management Co. 93,390 4,140 Archstone-Smith Trust 121,426 2,000 Avalonbay Communities, Inc. 113,040 2,700 Boston Properties, Inc. 135,216 2,400 Camden Property Trust 109,920 2,700 Carramerica Realty Corp. 81,621 1,500 CBL & Associates Properties, Inc. 82,500 1,700 L Centerpoint Properties Trust 130,475 7,600 Chelsea Property Group, Inc. 495,673 1,600 L Colonial Properties Trust 61,648 8,400 Corporate Office Properties Trust Sbi MD 208,740 4,300 Developers Diversified Realty Corp. 152,091 10,272 Equity Office Properties Trust 279,398 4,002 Equity Residential 118,979 900 Essex Property Trust, Inc. 61,515 7,800 @ Felcor Lodging Trust, Inc. 94,380 6,200 General Growth Properties, Inc. 183,334 3,200 Hospitality Properties Trust 135,360 12,000 @,L Host Marriott Corp. 148,320 4,500 Istar Financial, Inc. 180,000 2,350 Kimco Realty Corp. 106,925 4,500 LaSalle Hotel Properties 109,800 2,500 Mack-Cali Realty Corp. 103,450 9,900 @ Meristar Hospitality Corp. $ 67,716 3,400 Newcastle Investment Corp. 101,830 1,800 Pennsylvania Real Estate Investment Trust 61,650 3,800 Prologis 125,096 1,600 L PS Business Parks, Inc. 64,384 2,100 Public Storage, Inc. 96,621 2,500 L Regency Centers Corp. 107,250 3,200 Rouse Co. 152,000 5,200 L Simon Property Group, Inc. 267,384 7,400 United Dominion Realty Trust, Inc. 146,372 ---------------- 4,788,716 ---------------- RETAIL: 4.5% 14,550 Best Buy Co., Inc. 738,267 28,100 @@ Dixons Group PLC 84,210 5,900 @@ Enterprise Inns PLC 61,523 9,300 Federated Department Stores 456,630 34,150 L Gap, Inc. 828,137 24,350 Home Depot, Inc. 857,119 15,200 JC Penney Co., Inc. Holding Co. 573,952 25,000 Limited Brands 467,500 8,350 Lowe's Cos., Inc. 438,793 13,950 McDonald's Corp. 362,700 7,950 Nordstrom, Inc. 338,750 15,600 @ Office Depot, Inc. 279,396 700 @@ Pinault-Printemps-Redoute 71,922 8,250 RadioShack Corp. 236,198 24,100 @,L Staples, Inc. 706,371 17,150 @,L Starbucks Corp. 745,682 9,250 @ Target Corp. 392,848 25,350 @,L Toys R US, Inc. 403,826 9,000 @@ UNY Co Ltd 115,227 47,900 Wal-Mart Stores, Inc. 2,527,203 6,250 Wendy's Intl., Inc. 217,750 ---------------- 10,904,004 ---------------- SAVINGS AND LOANS: 0.2% 2,350 @ FirstFed Financial Corp. 97,760 17,000 Flagstar Bancorp, Inc. 337,960 ---------------- 435,720 ---------------- SEMICONDUCTORS: 1.5% 3,475 @,L Advanced Micro Devices, Inc. 55,253 71,650 @ Applied Micro Circuits Corp. 381,178 3,300 @@ ASML Holding NV 55,848 40,275 @,L Cirrus Logic, Inc. 242,053 71,900 Intel Corp. 1,984,439 37,425 @,L LSI Logic Corp. 285,179 3,000 @@ Sanken Electric Co. Ltd. 39,151 19,000 Texas Instruments, Inc. 459,420 ---------------- 3,502,521 ---------------- SOFTWARE: 3.5% 30,675 @ Activision, Inc. 487,733 6,450 Autodesk, Inc. 276,125 3,375 @,L Avid Technology, Inc. 184,174 29,075 @ BMC Software, Inc. 537,888 20,050 @,L Compuware Corp. 132,330 2,600 @ Dun & Bradstreet Corp. 140,166 9,900 First Data Corp. 440,748 13,800 L IMS Health, Inc. 323,472 173,550 Microsoft Corp. 4,956,587
See Accompanying Notes to Financial Statements 67 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- SOFTWARE (CONTINUED) 56,700 @ Oracle Corp. $ 676,430 700 @@ SAP AG 116,677 ---------------- 8,272,330 ---------------- TELECOMMUNICATIONS: 3.9% 21,000 @,L Adaptec, Inc. 177,660 15,900 Alltel Corp. 804,858 56,750 Bellsouth Corp. 1,487,984 75,600 @ Cisco Systems, Inc. 1,791,719 9,700 @,@@ Deutsche Telekom AG 170,532 69,400 Motorola, Inc. 1,266,550 28 @@ Nippon Telegraph & Telephone Corp. 149,604 14,000 @@ Portugal Telecom SGPS SA 151,083 8,850 Qualcomm, Inc. 645,873 8,775 @ SafeNet, Inc. 242,892 7,950 L Scientific-Atlanta, Inc. 274,275 20,850 @ Sycamore Networks, Inc. 88,196 48,000 @@ Telecom Italia S.p.A. 149,210 44,800 @ Telefonaktiebolaget LM Ericsson 132,028 3,500 @@ Telekom Austria AG 53,441 34,250 @,L Tellabs, Inc. 299,345 33,450 Verizon Communications, Inc. 1,210,556 33,100 @,L Zhone Technologies, Inc. 129,090 ---------------- 9,224,896 ---------------- TOYS/GAMES/HOBBIES: 0.1% 9,400 Hasbro, Inc. 178,600 ---------------- 178,600 ---------------- TRANSPORTATION: 1.1% 5,600 L CH Robinson Worldwide, Inc. 256,704 20 @@ East Japan Railway Co. 112,175 11,500 FedEx Corp. 939,435 14,000 @@ Mitsui OSK Lines Ltd. 73,647 3,700 @@ TPG NV 84,540 12,550 United Parcel Service, Inc. 943,384 6,900 @,L Yellow Roadway Corp. 275,034 ---------------- 2,684,919 ---------------- Total Common Stock (Cost $137,031,802) 157,156,176 ---------------- PREFERRED STOCK: 0.1% BANKS: 0.1% 29 XX,# DG Funding Trust 311,750 ---------------- Total Preferred Stock (Cost $315,328) 311,750 ---------------- PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- CORPORATE BONDS: 5.6% AUTO MANUFACTURERS: 0.0% $ 49,000 Ford Motor Co., 6.625%, due 10/01/28 43,030 25,000 L General Motors Corp., 8.375%, due 07/15/33 26,537 ---------------- 69,567 ---------------- BANKS: 1.7% $ 70,000 @@ Australia & New Zealand Banking Group Ltd., 1.494%, due 10/29/49 $ 59,617 114,000 #,@@ Banco Bradesco SA/Cayman Islands, 8.750%, due 10/24/13 114,855 253,000 @@ Banco Santander Santiago Chile SA, 7.375%, due 07/18/12 278,857 70,000 @@ Bank of Ireland, 1.800%, due 12/29/49 59,071 147,000 # Bank of New York Institutional Capital Trust A, 7.780%, due 12/01/26 157,441 98,000 BankAmerica Capital II, 8.000%, due 12/15/26 107,597 32,000 # BankAmerica Institutional Capital B, 7.700%, due 12/31/26 34,294 37,000 Barnett Capital I, 8.060%, due 12/01/26 40,557 39,000 Barnett Capital II, 7.950%, due 12/01/26 42,878 240,000 Citibank NA/New York State, 1.800%, due 11/29/49 189,536 101,000 @@,L Danske Bank A/S, 5.914%, due 12/29/49 102,564 306,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 341,852 13,000 FBS Capital I, 8.090%, due 11/15/26 14,369 68,000 First Union Institutional Capital II, 7.850%, due 01/01/27 73,133 123,000 @@,L HBOS Capital Funding LP, 6.071%, due 06/30/49 123,720 30,000 @@ Hongkong & Shanghai Banking Corp. Ltd., 1.313%, due 07/29/49 25,479 220,000 @@ HSBC Bank PLC, 1.975%, due 06/29/49 186,242 130,000 @@ HSBC Bank PLC, 2.125%, due 06/29/49 110,175 176,000 @@ Industrial Bank Of Korea, 4.000%, due 05/19/14 164,853 160,000 @@ Lloyds TSB Bank PLC, 1.270%, due 08/29/49 137,826 140,000 @@ Lloyds TSB Bank PLC, 2.188%, due 06/29/49 122,312 168,000 M&T Bank Corp., 3.850%, due 04/01/13 164,930 30,000 Mellon Capital I, 7.720%, due 12/01/26 32,533 60,000 @@ National Westminster Bank PLC, 1.375%, due 08/29/49 51,784 170,000 @@ National Westminster Bank PLC, 1.438%, due 11/29/49 143,779 86,000 @@ Northern Rock PLC, 5.600%, due 04/30/49 83,715 145,000 # Rabobank Capital Funding II, 5.260%, due 12/29/49 140,572 70,000 @@ Royal Bank of Canada, 1.750%, due 06/29/85 60,172
See Accompanying Notes to Financial Statements 68 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- BANKS (CONTINUED) $ 30,000 @@ Royal Bank of Scotland Group PLC, 2.063%, due 12/29/49 $ 25,891 40,000 @@ Societe Generale, 1.688%, due 11/29/49 33,446 100,000 @@ Standard Chartered PLC, 1.315%, due 01/29/49 78,417 100,000 @@ Standard Chartered PLC, 1.375%, due 07/29/49 78,433 210,000 @@ Standard Chartered PLC, 2.070%, due 12/29/49 165,375 80,000 @@ Westpac Banking Corp., 1.338%, due 09/29/49 67,558 251,000 Westpac Capital Trust IV, 5.256%, due 12/29/49 231,724 ---------------- 3,845,557 ---------------- BEVERAGES: 0.1% 51,000 @@,L Coca-Cola HBC Finance BV, 5.125%, due 09/17/13 50,371 189,000 # Miller Brewing Co., 4.250%, due 08/15/08 188,254 ---------------- 238,625 ---------------- CHEMICALS: 0.0% 46,000 Dow Chemical Co., 5.750%, due 11/15/09 48,059 43,000 Sociedad Quimica y Minera de Chile SA, 7.700%, due 09/15/06 46,034 ---------------- 94,093 ---------------- DIVERSIFIED FINANCIAL SERVICES: 1.1% 146,000 @@ Arcel Finance Ltd., 7.048%, due 09/01/11 145,270 156,000 L Boeing Capital Corp., 7.375%, due 09/27/10 176,618 248,000 #,@@ Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 241,180 47,000 Citicorp Capital I, 7.933%, due 02/15/27 51,432 23,000 Citigroup Capital II, 7.750%, due 12/01/36 24,794 322,000 # Corestates Capital Trust I, 8.000%, due 12/15/26 352,765 76,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 73,147 199,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 192,934 60,000 @@ Financiere CSFB NV, 1.250%, due 03/29/49 48,074 96,000 Ford Motor Credit Co., 7.000%, due 10/01/13 97,072 96,000 L General Motors Acceptance Corp., 6.875%, due 08/28/12 97,808 140,000 General Motors Acceptance Corp., 7.750%, due 01/19/10 152,152 69,000 General Motors Acceptance Corp., 8.000%, due 11/01/31 70,895 $ 28,000 L JPM Capital Trust I, 7.540%, due 01/15/27 $ 29,737 273,000 # Mangrove Bay $ Pass-Through Trust, 6.102%, due 07/15/33 270,221 136,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 129,723 182,331 #,@@ PF Export Receivables Master Trust, 6.436%, due 06/01/15 179,912 ---------------- 2,333,734 ---------------- ELECTRIC: 0.6% 48,000 Consumers Energy Co., 4.250%, due 04/15/08 47,611 150,000 L Consumers Energy Co., 4.800%, due 02/17/09 150,275 149,000 DTE Energy Co, 2.324%, due 06/01/07 148,938 211,000 FirstEnergy Corp., 7.375%, due 11/15/31 220,582 152,000 Ohio Edison Co., 4.000%, due 05/01/08 148,810 239,000 Ohio Power Co., 6.375%, due 07/15/33 234,644 30,557 #,L Power Contract Financing LLC, 5.200%, due 02/01/06 30,757 236,000 #,L Power Contract Financing LLC, 6.256%, due 02/01/10 240,603 39,305 PPL Montana LLC, 8.903%, due 07/02/20 42,867 61,000 Tenaska Virginia Partners LP, 6.119%, due 03/30/24 60,452 188,000 @@ TXU Australia Holdings Partnership LP, 6.150%, due 11/15/13 196,202 ---------------- 1,521,741 ---------------- FOOD: 0.2% 86,000 Kroger Co., 7.250%, due 06/01/09 95,637 151,000 Safeway, Inc., 4.800%, due 07/16/07 154,457 102,000 Supervalu, Inc., 7.875%, due 08/01/09 115,330 195,000 Tyson Foods, Inc., 7.250%, due 10/01/06 210,136 ---------------- 575,560 ---------------- INSURANCE: 0.2% 162,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 181,907 128,000 # Monumental Global Funding II, 3.850%, due 03/03/08 127,814 92,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 101,916 ---------------- 411,637 ---------------- MEDIA: 0.1% 100,000 Comcast Cable Communications, 7.125%, due 06/15/13 109,489
See Accompanying Notes to Financial Statements 69 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- MEDIA (CONTINUED) $ 69,000 L Time Warner, Inc., 6.875%, due 05/01/12 $ 74,674 ---------------- 184,163 ---------------- MINING: 0.2%' 171,000 @@,L Alcan, Inc., 6.125%, due 12/15/33 166,006 104,000 @@ Corp Nacional del Cobre de Chile, 5.500%, due 10/15/13 103,490 41,000 @@ Corp Nacional del Cobre de Chile, 6.375%, due 11/30/12 43,478 142,000 @@,L Vale Overseas Ltd., 8.625%, due 03/08/07 152,650 ---------------- 465,624 ---------------- MULTI-NATIONAL: 0.2% 200,000 @@ Corp Andina de Fomento CAF, 5.200%, due 05/21/13 192,732 188,000 @@ Corp Andina de Fomento CAF, 6.875%, due 03/15/12 202,465 ---------------- 395,197 ---------------- OIL AND GAS: 0.3% 157,000 @@ Empresa Nacional de Petroleo ENAP, 4.875%, due 03/15/14 146,478 365,000 L Pemex Project Funding Master Trust, 2.820%, due 06/15/10 367,556 70,000 Pemex Project Funding Master Trust, 7.375%, due 12/15/14 71,750 80,000 Valero Energy Corp., 6.125%, due 04/15/07 84,824 97,000 Valero Energy Corp., 8.750%, due 06/15/30 121,373 ---------------- 791,981 ---------------- PACKAGING AND CONTAINERS: 0.1% 72,000 Sealed Air Corp., 5.375%, due 04/15/08 74,521 189,000 # Sealed Air Corp., 6.950%, due 05/15/09 206,537 ---------------- 281,058 ---------------- REAL ESTATE: 0.2% 162,000 EOP Operating LP, 7.750%, due 11/15/07 179,918 43,000 Liberty Property-LP, 6.375%, due 08/15/12 45,227 12,000 Liberty Property-LP, 6.950%, due 12/01/06 12,979 127,000 Liberty Property-LP, 7.750%, due 04/15/09 144,387 185,000 Simon Property Group LP, 7.375%, due 01/20/06 197,483 ---------------- 579,994 ---------------- REAL ESTATE INVESTMENT TRUSTS: 0.1% 122,000 Simon Property Group LP, 4.875%, due 03/18/10 120,907 65,000 Simon Property Group LP, 6.375%, due 11/15/07 69,627 ---------------- 190,534 ---------------- SAVINGS AND LOANS: 0.1% $ 145,000 Great Western Financial, 8.206%, due 02/01/27 $ 157,902 191,000 Washington Mutual, Inc., 4.375%, due 01/15/08 192,371 ---------------- 350,273 ---------------- TELECOMMUNICATIONS: 0.4% 90,000 @@ Brasil Telecom SA, 9.375%, due 02/18/14 87,750 147,000 @@ Cia de Telecomunicaciones de Chile SA, 7.625%, due 07/15/06 158,549 232,000 Sprint Capital Corp., 4.780%, due 08/17/06 236,609 138,000 Sprint Capital Corp., 6.875%, due 11/15/28 133,034 74,000 L Sprint Capital Corp., 8.750%, due 03/15/32 86,478 160,000 Verizon Florida, Inc., 6.125%, due 01/15/13 164,734 104,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 97,279 ---------------- 964,433 ---------------- TRANSPORTATION: 0.0% 100,000 @@ MISC Capital Ltd, 5.000%, due 07/01/09 100,266 ---------------- 100,266 ---------------- Total Corporate Bonds (Cost $13,429,166) 13,394,037 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 11.1% FEDERAL HOME LOAN BANK: 0.4% 995,000 L 2.500%, due 12/15/05 993,689 ---------------- 993,689 ---------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 2.9% 1,355,000 2.700%, due 03/16/07 1,332,904 645,000 2.750%, due 02/09/07 636,376 961,000 4.500%, due 10/15/12 966,969 274,436 4.500%, due 04/01/14 269,321 91,000 5.500%, due 07/17/18 92,991 335,000 5.500%, due 07/15/34 333,534 384,000 6.000%, due 01/15/28 399,666 442,531 6.000%, due 01/15/29 446,882 276,765 6.000%, due 02/01/29 284,152 200,000 6.000%, due 07/15/33 204,250 1,511,000 6.500%, due 07/15/34 1,574,747 390,919 7.000%, due 11/01/31 413,502 ---------------- 6,955,294 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 7.4% 615,000 L 3.500%, due 01/28/08 606,781 760,000 4.500%, due 07/01/17 742,663 690,000 L 4.625%, due 10/15/13 665,648 1,680,000 5.000%, due 07/01/18 1,682,099 630,000 5.000%, due 08/15/19 628,622 4,754,000 5.000%, due 07/15/34 4,592,068 660,000 5.250%, due 08/01/12 660,593
See Accompanying Notes to Financial Statements 70 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 408,223 5.500%, due 02/01/18 $ 418,618 250,000 5.500%, due 08/15/19 254,766 1,249,000 5.500%, due 07/15/34 1,243,144 7,835 6.000%, due 03/01/17 8,175 207,257 6.000%, due 10/01/18 216,251 668,704 6.000%, due 12/01/18 697,977 269,668 6.000%, due 04/25/31 273,295 868,000 6.000%, due 08/01/33 882,648 570,000 6.000%, due 07/15/34 581,935 186,219 6.500%, due 02/01/28 194,470 481,283 6.500%, due 09/01/32 501,642 560,000 6.500%, due 07/15/33 583,100 285,000 6.625%, due 11/15/10 316,850 247,133 7.000%, due 02/01/31 261,627 175,144 7.000%, due 06/01/31 185,417 430,000 7.000%, due 07/15/33 453,516 718,000 7.000%, due 08/15/34 755,695 162,923 7.500%, due 09/01/31 174,664 ---------------- 17,582,264 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 0.4% 82,145 6.500%, due 01/15/29 86,019 235,710 6.500%, due 01/15/32 246,650 14,174 7.000%, due 12/15/27 15,106 23,760 7.000%, due 01/15/28 25,295 22,855 7.000%, due 01/15/28 24,331 65,668 7.000%, due 02/15/28 69,909 79,937 7.000%, due 02/15/28 85,099 24,892 7.000%, due 02/15/28 26,500 168,098 7.500%, due 12/15/23 182,339 81,969 8.000%, due 07/15/24 90,469 ---------------- 851,717 ---------------- Total U.S. Government Agency Obligations (Cost $26,348,658) 26,382,964 ---------------- U.S. TREASURY OBLIGATIONS: 5.7% U.S. TREASURY BONDS: 2.2% 3,300,000 L 1.625%, due 01/31/05 3,299,099 808,000 L 10.375%, due 11/15/12 986,897 618,000 L 13.250%, due 05/15/14 875,388 ---------------- 5,161,384 ---------------- U.S. TREASURY NOTES: 3.5% 879,000 L 2.500%, due 05/31/06 876,323 627,000 L 3.125%, due 05/15/07 627,196 299,000 L 4.000%, due 06/15/09 301,652 717,000 L 4.000%, due 02/15/14 683,559 2,455,000 W,L 4.750%, due 05/15/14 2,481,373 741,000 5.290%, due 05/15/16 401,907 1,653,000 L 5.375%, due 02/15/31 1,667,658 1,290,000 L 6.250%, due 08/15/23 1,428,878 ---------------- 8,468,546 ---------------- Total U.S. Treasury Obligations (Cost $13,618,311) 13,629,930 ---------------- COLLATERALIZED MORTGAGE OBLIGATIONS: 3.6% AUTOMOBILE ASSET-BACKED SECURITIES: 0.2% $ 185,000 Household Automotive Trust, 2.310%, due 04/17/08 $ 183,391 270,000 USAA Auto Owner Trust, 2.040%, due 02/16/10 264,412 ---------------- 447,803 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES: 1.2% 795,000 CS First Boston Mortgage Securities Corp., 3.861%, due 03/15/36 781,091 68,000 CS First Boston Mortgage Securities Corp., 7.810%, due 04/14/62 77,814 380,000 DLJ Commercial Mortgage Corp., 6.240%, due 11/12/31 407,742 905,000 DLJ Commercial Mortgage Corp., 7.300%, due 06/10/32 1,014,079 170,000 GE Capital Commercial Mortgage Corp., 5.994%, due 12/10/35 180,567 244,000 LB-UBS Commercial Mortgage Trust, 6.226%, due 03/15/26 262,029 232,000 LB-UBS Commercial Mortgage Trust, 7.370%, due 08/15/26 262,254 ---------------- 2,985,576 ---------------- CREDIT CARD ASSET-BACKED SECURITIES: 0.5% 95,000 Bank One Issuance Trust, 4.540%, due 09/15/10 95,889 95,000 Capital One Master Trust, 4.900%, due 03/15/10 98,529 640,000 Chemical Master Credit Card Trust 1, 7.090%, due 02/15/09 688,139 325,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 340,808 ---------------- 1,223,365 ---------------- OTHER ASSET-BACKED SECURITIES: 0.0% 41,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 2.734%, due 09/25/24 40,252 24,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 4.045%, due 05/25/33 23,403 ---------------- 63,655 ---------------- WHOLE LOAN COLLATERALLIZED MORTGAGE: 1.4% 504,591 Bank of America Mortgage Securities, 4.413%, due 03/25/33 505,346 571,000 CS First Boston Mortgage Securities Corp., 4.187%, due 10/25/33 575,084 469,000 GMAC Mortgage Corp Loan Trust, 5.500%, due 01/25/34 472,614 74,707 GSR Mortgage Loan Trust, 6.500%, due 01/25/34 77,637 1,269,953 MASTR Asset Securitization Trust, 5.500%, due 06/25/33 1,201,576
See Accompanying Notes to Financial Statements 71 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- WHOLE LOAN COLLATERALLIZED MORTGAGE (CONTINUED) $ 601,341 Washington Mutual, 5.000%, due 06/25/18 $ 598,670 ---------------- 3,430,927 ---------------- WHOLE LOAN COLLATERAL SUPPORT CMO 0.1% 132,671 Bank of America Mortgage Securities, 5.500%, due 11/25/33 131,208 ---------------- 131,208 ---------------- WHOLE LOAN COLLATERALIZED PLANNED AMORTIZATION CLASS: 0.2% 354,000 Residential Funding Securities Corp., 4.750%, due 02/25/33 358,295 ---------------- 358,295 ---------------- Total Collateralized Mortgage Obligations (Cost $8,780,431) 8,640,829 ---------------- Total Long-Term Investments (Cost $199,523,696) 219,515,686 ---------------- SHORT-TERM INVESTMENTS: 32.1% COMMERCIAL PAPER: 11.6% 1,332,000 S Barton Capital Corp., 1.200%, due 07/07/04 1,331,689 2,300,000 Blue Ridge Asset Funding, 1.300%, due 07/15/04 2,298,754 2,300,000 Concord Minutemen Cap B, 1.160%, due 07/07/05 2,299,966 1,800,000 Concord Minutemen Cap B, 1.210%, due 07/12/05 1,799,928 2,300,000 S Park Avenue Receivables Corp., 1.100%, due 07/07/04 2,299,508 1,754,000 S Park Avenue Receivables Corp., 1.230%, due 07/15/04 1,753,101 4,500,000 S Park Avenue Receivables Corp., 1.380%, due 07/09/04 4,498,447 2,400,000 Preferred Receivable Funding Corp., 1.300%, due 07/22/04 2,398,093 2,300,000 S St. Germain Holdings Ltd., 1.070%, due 07/01/04 2,299,932 2,300,000 S St. Germain Holdings Ltd., 1.230%, due 07/06/04 2,299,529 2,300,000 S St. Germain Holdings Ltd., 1.300%, due 07/16/04 2,298,671 2,000,000 S Yorktown Capital LLC, 1.200%, due 07/06/04 1,999,600 ---------------- Total Commercial Paper (Cost $27,578,138) 27,577,218 ---------------- REPURCHASE AGREEMENT: 3.0% $ 7,054,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $7,054,294 to be received upon repurchase (Collateralized by $6,985,000 various U.S. Government Agency Obligations, 4.750% - 5.500%, Market Value plus accrued interest $7,339,181, due 05/02/06 - 01/02/07) $ 7,054,000 ---------------- Total Repurchase Agreement (Cost $7,054,000) 7,054,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 17.5% 41,857,544 The Bank of New York Institutional Cash Reserve Fund, 1.250% 41,857,544 ---------------- Total Securities Lending Collateral (Cost $41,857,544) 41,857,544 ---------------- Total Short-Term Investments (Cost $76,489,682) 76,488,762 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $276,013,378)* 124.0% $ 296,004,448 OTHER ASSETS AND LIABILITIES-NET (24.0) (57,245,613) ----- ---------------- NET ASSETS 100.0% $ 238,758,835 ===== ================
@ Non-income producing security @@ Foreign issuer ADR American Depositary Receipt # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. ## Illiquid and restricted securities W When-issued or delayed delivery security. S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $278,861,621. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 19,422,984 Gross Unrealized Depreciation (2,280,157) ------------ Net Unrealized Appreciation $ 17,142,827 ============
Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED CONTRACTS MARKET VALUE DATE GAIN/(LOSS) --------- ------------ ---------- ----------- SHORT CONTRACTS U.S. 2 Year Treasury Note 17 $ (3,579,297) Sept-04 $ (3,945) LONG CONTRACTS U.S. Long Bond 10 $ 1,063,750 Sept-04 $ 22,216
See Accompanying Notes to Financial Statements 72 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited)
SHARES VALUE - ---------------------------------------------------------------------------------------- COMMON STOCK: 45.7% AEROSPACE/DEFENSE: 0.8% 10,600 Boeing Co. $ 541,554 3,550 General Dynamics Corp. 352,515 2,550 United Technologies Corp. 233,274 ---------------- 1,127,343 ---------------- AGRICULTURE: 0.5% 9,850 Altria Group, Inc. 492,993 3,750 L Bunge Ltd. 146,025 ---------------- 639,018 ---------------- AIRLINES: 0.1% 7,450 @ ExpressJet Holdings, Inc. 90,443 ---------------- 90,443 ---------------- APPAREL: 0.6% 3,200 Jones Apparel Group, Inc. 126,336 4,750 Nike, Inc. 359,813 6,250 Reebok Intl. Ltd. 224,875 2,500 VF Corp. 121,750 ---------------- 832,774 ---------------- AUTO MANUFACTURERS: 0.6% 26,700 L Ford Motor Co. 417,854 2,550 L General Motors Corp 118,805 4,450 L Paccar, Inc. 258,056 ---------------- 794,715 ---------------- AUTO PARTS AND EQUIPMENT: 0.1% 5,450 Cooper Tire & Rubber Co. 125,350 2,575 @ Dura Automotive Systems, Inc. 23,561 ---------------- 148,911 ---------------- BANKS: 2.5% 16,200 Bank of America Corp. 1,370,843 5,250 Bank One Corp. 267,750 6,450 Hibernia Corp. 156,735 9,150 Keycorp 273,494 9,150 US Bancorp 252,174 2,650 @@ W Holding Co., Inc. 45,501 14,700 Wachovia Corp. 654,149 7,900 Wells Fargo & Co. 452,117 ---------------- 3,472,763 ---------------- BEVERAGES: 1.0% 20,550 Coca-Cola Co. 1,037,364 8,050 PepsiCo, Inc. 433,734 ---------------- 1,471,098 ---------------- BIOTECHNOLOGY: 0.5% 6,300 @ Amgen, Inc. 343,791 10,000 @ Applera Corp. - Celera Genomics Group 115,100 8,550 @,L InterMune, Inc. 131,841 1,650 @,L Invitrogen Corp. 118,784 ---------------- 709,516 ---------------- BUILDING MATERIALS: 0.3% 9,900 Masco Corp. $ 308,682 6,550 @,L USG Corp. 115,149 ---------------- 423,831 ---------------- CHEMICALS: 0.7% 4,350 Dow Chemical Co. 177,045 3,144 Engelhard Corp 101,583 4,425 Georgia Gulf Corp. 158,681 7,925 @,L Hercules, Inc. 96,606 4,200 PPG Industries, Inc. 262,457 3,700 Sherwin-Williams Co. 153,735 ---------------- 950,107 ---------------- COMMERCIAL SERVICES: 0.7% 16,150 L Cendant Corp. 395,352 1,800 @ Corporate Executive Board Co. 104,022 7,850 Paychex, Inc. 265,958 4,925 @ Rent-A-Center, Inc. 147,405 4,150 L Robert Half Intl., Inc. 123,546 ---------------- 1,036,283 ---------------- COMPUTERS: 1.5% 24,050 @,L Dell, Inc. 861,471 14,900 Hewlett-Packard Co. 314,390 7,950 International Business Machines Corp. 700,793 3,425 @,L PalmOne, Inc. 119,087 6,200 @ Unisys Corp. 86,056 ---------------- 2,081,797 ---------------- COSMETICS/PERSONAL CARE: 1.3% 2,250 Alberto-Culver Co. 112,815 12,850 Gillette Co. 544,840 7,250 Kimberly-Clark Corp. 477,630 12,100 Procter & Gamble Co. 658,724 ---------------- 1,794,009 ---------------- DISTRIBUTION/WHOLESALE: 0.1% 2,450 WW Grainger, Inc. 140,875 ---------------- 140,875 ---------------- DIVERSIFIED FINANCIAL SERVICES: 3.5% 4,125 @,L Affiliated Managers Group 207,776 6,300 American Express Co. 323,694 24,950 Citigroup, Inc. 1,160,175 4,900 L Countrywide Financial Corp. 344,225 2,400 @@,L Doral Financial Corp. 82,800 7,900 @ E*Trade Financial Corp. 88,085 4,700 Fannie Mae 335,392 5,800 Goldman Sachs Group, Inc. 546,128 9,700 JP Morgan Chase & Co. 376,069 11,250 Merrill Lynch & Co., Inc. 607,275 12,500 Morgan Stanley 659,625 18,675 @ Providian Financial Corp. 273,962 ---------------- 5,005,206 ---------------- ELECTRIC: 0.8% 15,850 @ AES Corp. 157,391 8,100 L Centerpoint Energy, Inc. 93,150 7,850 Edison Intl. 200,724 3,250 L Exelon Corp. 108,193
See Accompanying Notes to Financial Statements 73 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- ELECTRIC (CONTINUED) 3,225 L Great Plains Energy, Inc. $ 95,783 3,800 L Southern Co. 110,770 7,150 L TXU Corp. 289,646 ---------------- 1,055,657 ---------------- ELECTRICAL COMPONENTS AND EQUIPMENT: 0.0% 5,325 @ Artesyn Technologies, Inc. 47,925 ---------------- 47,925 ---------------- ELECTRONICS: 0.5% 7,725 @,L Arrow Electronics, Inc. 207,185 4,700 @ Benchmark Electronics, Inc. 136,770 5,300 @,L Itron, Inc. 121,582 3,050 Parker Hannifin Corp. 181,353 ---------------- 646,890 ---------------- ENGINEERING & CONSTRUCTION: 0.1% 2,025 Granite Construction, Inc. 36,916 15,425 @,L Shaw Group, Inc. 156,255 ---------------- 193,171 ---------------- ENTERTAINMENT: 0.1% 2,125 GTECH Holdings Corp. 98,409 ---------------- 98,409 ---------------- FOOD: 0.3% 14,550 Sara Lee Corp. 334,505 3,500 Supervalu, Inc. 107,135 ---------------- 441,640 ---------------- FOREST PRODUCTS AND PAPER: 0.7% 6,450 Georgia-Pacific Corp. 238,521 2,250 L International Paper Co. 100,575 7,700 Louisiana-Pacific Corp. 182,105 2,200 L Plum Creek Timber Co., Inc. 71,676 900 Rayonier, Inc. 40,005 4,800 Weyerhaeuser Co. 302,976 ---------------- 935,858 ---------------- GAS: 0.2% 3,700 L Oneok, Inc. 81,363 5,550 Sempra Energy 191,087 ---------------- 272,450 ---------------- HAND/MACHINE TOOLS: 0.2% 1,950 L Black & Decker Corp. 121,154 2,250 L Stanley Works 102,555 ---------------- 223,709 ---------------- HEALTHCARE-PRODUCTS: 1.5% 4,875 L Bausch & Lomb, Inc. 317,216 5,400 Becton Dickinson & Co. 279,720 2,300 CR Bard, Inc. 130,295 14,100 Johnson & Johnson 785,370 6,000 Medtronic, Inc. 292,320 4,150 @ Zimmer Holdings, Inc. 366,030 ---------------- 2,170,951 ---------------- HEALTHCARE-SERVICES: 1.5% 3,300 Aetna, Inc. 280,500 4,075 @ Amerigroup Corp. 200,490 3,050 @,L Anthem, Inc. $ 273,158 6,250 @ Humana, Inc. 105,625 2,875 Oxford Health Plans, Inc. 158,240 6,050 @,L Pacificare Health Systems 233,893 9,111 L UnitedHealth Group, Inc. 567,160 3,000 @ WellPoint Health Networks 336,030 ---------------- 2,155,096 ---------------- HOME FURNISHINGS: 0.1% 1,725 Harman Intl. Industries, Inc. 156,975 ---------------- 156,975 ---------------- HOUSEHOLD PRODUCTS/WARES: 0.0% 1,500 Blyth, Inc. 51,735 ---------------- 51,735 ---------------- INSURANCE: 2.4% 6,150 @@ ACE Ltd. 260,022 12,550 American Intl. Group, Inc. 894,563 4,050 Chubb Corp. 276,129 3,200 Cigna Corp. 220,192 3,025 Fidelity National Financial, Inc. 112,954 5,600 First American Corp. 144,984 5,200 Hartford Financial Services Group, Inc. 357,448 3,575 LandAmerica Financial Group, Inc. 139,175 4,600 Loews Corp. 275,816 4,050 Progressive Corp. 345,465 10,000 St. Paul Cos. 405,399 ---------------- 3,432,147 ---------------- INTERNET: 0.6% 10,500 @ Autobytel, Inc. 95,340 2,800 @,L eBay, Inc. 257,460 8,025 @,L GoRemote Internet Communications, Inc. 14,766 5,200 @,L Priceline.com, Inc. 140,036 6,600 @,L Symantec Corp. 288,948 ---------------- 796,550 ---------------- IRON/STEEL: 0.1% 2,550 L United States Steel Corp. 89,556 ---------------- 89,556 ---------------- LEISURE TIME: 0.1% 2,800 L Carnival Corp. 131,600 ---------------- 131,600 ---------------- LODGING: 0.1% 2,400 L Starwood Hotels & Resorts Worldwide, Inc. 107,640 ---------------- 107,640 ---------------- MACHINERY-CONSTRUCTION AND MINING: 0.1% 2,700 @ Terex Corp. 92,151 ---------------- 92,151 ---------------- MACHINERY-DIVERSIFIED: 0.2% 2,550 L Briggs & Stratton Corp. 225,293 1,100 Tecumseh Products Co. 45,309 ---------------- 270,602 ----------------
See Accompanying Notes to Financial Statements 74 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- MEDIA: 1.0% 4,000 McGraw-Hill Cos., Inc. $ 306,280 44,225 @,L Sirius Satellite Radio, Inc. 136,213 21,900 @,L Time Warner, Inc. 385,002 9,600 @,L UnitedGlobalCom, Inc. 69,696 7,800 Viacom, Inc. 278,616 9,900 Walt Disney Co. 252,351 ---------------- 1,428,158 ---------------- METAL FABRICATE/HARDWARE: 0.2% 3,050 Quanex Corp. 148,535 4,750 Worthington Industries 97,518 ---------------- 246,053 ---------------- MINING: 0.2% 4,250 Alcoa, Inc. 140,378 2,200 Phelps Dodge Corp. 170,522 ---------------- 310,900 ---------------- MISCELLANEOUS MANUFACTURING: 2.4% 8,100 3M Co. 729,081 50,900 General Electric Co. 1,649,159 4,000 Honeywell Intl., Inc. 146,520 1,550 Illinois Tool Works, Inc. 148,630 21,750 @@ Tyco Intl. Ltd. 720,795 ---------------- 3,394,185 ---------------- OFFICE PROPERTY: 0.1% 2,900 Reckson Associates Realty Corp. 79,634 500 SL Green Realty Corp. 23,400 ---------------- 103,034 ---------------- OFFICE/BUSINESS EQUIPMENT: 0.0% 4,650 L IKON Office Solutions, Inc. 53,336 ---------------- 53,336 ---------------- OIL AND GAS: 3.3% 6,800 Burlington Resources, Inc. 246,024 7,950 ChevronTexaco Corp. 748,174 6,400 ConocoPhillips 488,256 3,850 Devon Energy Corp. 254,100 36,650 Exxon Mobil Corp. 1,627,626 4,800 @ Giant Industries, Inc. 105,600 2,550 @ Houston Exploration Co. 132,192 6,100 Marathon Oil Corp. 230,824 5,750 Occidental Petroleum Corp. 278,358 3,325 Pogo Producing Co. 164,255 1,300 L Sunoco, Inc. 82,706 6,150 @,L Tesoro Petroleum Corp. 169,740 2,500 Valero Energy Corp. 184,400 ---------------- 4,712,255 ---------------- PACKAGING AND CONTAINERS: 0.1% 4,925 @,L Owens-Illinois, Inc. 82,543 ---------------- 82,543 ---------------- PHARMACEUTICALS: 1.5% 5,250 L Eli Lilly & Co. 367,028 10,700 Merck & Co., Inc. 508,250 36,700 Pfizer, Inc. 1,258,076 ---------------- 2,133,354 ---------------- PIPELINES: 0.0% 2,575 National Fuel Gas Co. $ 64,375 ---------------- 64,375 ---------------- REAL ESTATE: 0.1% 2,450 L LNR Property Corp. 132,913 ---------------- 132,913 ---------------- REAL ESTATE INVESTMENT TRUSTS: 1.9% 4,900 Acadia Realty Trust 67,326 800 @ Affordable Residential Communities 13,280 1,300 Alexandria Real Estate Equities, Inc. 73,814 1,800 Apartment Investment & Management Co. 56,034 2,457 Archstone-Smith Trust 72,064 800 Avalonbay Communities, Inc. 45,216 1,600 Bedford Property Investors 46,784 1,600 Boston Properties, Inc. 80,128 1,000 Camden Property Trust 45,800 1,600 Carramerica Realty Corp. 48,368 900 CBL & Associates Properties, Inc. 49,500 1,000 Centerpoint Properties Trust 76,750 3,325 Chelsea Property Group, Inc. 216,856 900 L Colonial Properties Trust 34,677 4,000 Corporate Office Properties Trust Sbi MD 99,400 1,700 Developers Diversified Realty Corp. 60,129 6,780 L Equity Office Properties Trust 184,415 3,804 Equity Residential 113,093 400 Essex Property Trust, Inc. 27,340 3,100 @,L Felcor Lodging Trust, Inc. 37,510 3,700 General Growth Properties, Inc. 109,409 1,300 Hospitality Properties Trust 54,990 5,900 @ Host Marriott Corp. 72,924 2,700 Istar Financial, Inc. 108,000 1,350 Kimco Realty Corp. 61,425 1,800 LaSalle Hotel Properties 43,920 1,500 Mack-Cali Realty Corp. 62,070 3,900 @ Meristar Hospitality Corp. 26,676 2,800 National Health Investors, Inc. 76,132 2,000 Newcastle Investment Corp. 59,900 1,000 Pennsylvania Real Estate Investment Trust 34,250 2,200 Prologis 72,424 1,500 PS Business Parks, Inc. 60,360 1,000 Public Storage, Inc. 46,010 1,500 L Regency Centers Corp. 64,350 1,900 L Rouse Co. 90,250 3,100 L Simon Property Group, Inc. 159,402 3,600 United Dominion Realty Trust, Inc. 71,208 ---------------- 2,722,184 ---------------- RETAIL: 3.3% 6,300 Best Buy Co., Inc. 319,662 4,150 Federated Department Stores 203,765 15,100 L Gap, Inc. 366,174 10,600 Home Depot, Inc. 373,119 6,550 JC Penney Co., Inc. Holding Co. 247,328 10,100 Limited Brands 188,870 3,650 Lowe's Cos., Inc. 191,808
See Accompanying Notes to Financial Statements 75 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
SHARES VALUE - ---------------------------------------------------------------------------------------- RETAIL (CONTINUED) 6,050 McDonald's Corp. $ 157,300 3,450 Nordstrom, Inc. 147,005 6,900 @,L Office Depot, Inc. 123,579 3,650 L RadioShack Corp. 104,500 10,300 Staples, Inc. 301,893 7,600 @,L Starbucks Corp. 330,448 4,300 Target Corp. 182,621 11,250 @,L Toys R US, Inc. 179,213 20,750 Wal-Mart Stores, Inc. 1,094,769 2,700 Wendy's Intl., Inc. 94,068 ---------------- 4,606,122 ---------------- SAVINGS AND LOANS: 0.1% 1,050 @ FirstFed Financial Corp. 43,680 7,650 L Flagstar Bancorp, Inc. 152,082 ---------------- 195,762 ---------------- SEMICONDUCTORS: 1.1% 1,650 @,L Advanced Micro Devices, Inc. 26,235 31,850 @ Applied Micro Circuits Corp. 169,442 18,400 @,L Cirrus Logic, Inc. 110,584 30,900 Intel Corp. 852,840 16,625 @,L LSI Logic Corp. 126,683 8,550 Texas Instruments, Inc. 206,739 ---------------- 1,492,523 ---------------- SOFTWARE: 2.5% 13,650 @ Activision, Inc. 217,035 2,550 Autodesk, Inc. 109,166 1,550 @,L Avid Technology, Inc. 84,584 12,775 @ BMC Software, Inc. 236,337 9,200 @,L Compuware Corp. 60,720 1,225 @ Dun & Bradstreet Corp. 66,040 4,350 First Data Corp. 193,662 5,800 L IMS Health, Inc. 135,952 75,100 Microsoft Corp. 2,144,855 25,000 @ Oracle Corp. 298,249 ---------------- 3,546,600 ---------------- TELECOMMUNICATIONS: 2.6% 9,650 @,L Adaptec, Inc. 81,639 6,850 Alltel Corp. 346,747 24,550 Bellsouth Corp. 643,700 32,000 @ Cisco Systems, Inc. 758,399 30,050 Motorola, Inc. 548,412 3,950 Qualcomm, Inc. 288,271 3,925 @,L SafeNet, Inc. 108,644 3,550 Scientific-Atlanta, Inc. 122,475 9,375 @ Sycamore Networks, Inc. 39,656 15,575 @,L Tellabs, Inc. 136,126 14,450 Verizon Communications, Inc. 522,946 15,075 @,L Zhone Technologies, Inc. 58,793 ---------------- 3,655,808 ---------------- TOYS/GAMES/HOBBIES: 0.1% 4,350 Hasbro, Inc. 82,650 ---------------- 82,650 ---------------- TRANSPORTATION: 0.8% 2,450 CH Robinson Worldwide, Inc. 112,308 5,000 FedEx Corp 408,450 5,500 L United Parcel Service, Inc. $ 413,435 3,100 @,L Yellow Roadway Corp. 123,566 ---------------- 1,057,759 ---------------- Total Common Stock (Cost $54,846,569) 64,109,915 ---------------- PREFERRED STOCK: 0.2% BANKS: 0.2% 32 #, XX DG Funding Trust 344,000 ---------------- Total Preferred Stock (Cost $347,967) 344,000 ---------------- PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- CORPORATE BONDS: 10.6% AUTO MANUFACTURERS: 0.1% $ 56,000 Ford Motor Co., 6.625%, due 10/01/28 $ 49,177 28,000 L General Motors Corp., 8.375%, due 07/15/33 29,721 ---------------- 78,898 ---------------- BANKS: 3.0% 70,000 @@ Australia & New Zealand Banking Group Ltd., 1.494%, due 10/29/49 59,617 124,000 #,@@ Banco Bradesco SA/Cayman Islands, 8.750%, due 10/24/13 124,930 285,000 @@ Banco Santander Santiago Chile SA, 7.375%, due 07/18/12 314,127 80,000 @@ Bank of Ireland, 1.800%, due 12/29/49 67,510 166,000 # Bank of New York Institutional Capital Trust A, 7.780%, due 12/01/26 177,791 87,000 BankAmerica Capital II, 8.000%, due 12/15/26 95,520 21,000 # BankAmerica Institutional Capital B, 7.700%, due 12/31/26 22,506 42,000 Barnett Capital I, 8.060%, due 12/01/26 46,038 26,000 Barnett Capital II, 7.950%, due 12/01/26 28,585 280,000 Citibank NA/New York State, 1.800%, due 11/29/49 221,124 107,000 @@ Danske Bank A/S, 5.914%, due 12/29/49 108,657 344,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 384,303 15,000 FBS Capital I, 8.090%, due 11/15/26 16,580 78,000 First Union Institutional Capital II, 7.850%, due 01/01/27 83,888 129,000 @@,L HBOS Capital Funding LP, 6.071%, due 06/30/49 129,755 40,000 @@ Hongkong & Shanghai Banking Corp. Ltd., 1.313%, due 07/29/49 33,972 250,000 @@ HSBC Bank PLC, 1.975%, due 06/29/49 211,638
See Accompanying Notes to Financial Statements 76 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- BANKS (CONTINUED) $ 140,000 HSBC Bank PLC, 2.125%, due 06/29/49 $ 118,650 197,000 @@ Industrial Bank Of Korea, 4.000%, due 05/19/14 184,523 180,000 @@ Lloyds TSB Bank PLC, 1.270%, due 08/29/49 155,055 160,000 @@ Lloyds TSB Bank PLC, 2.188%, due 06/29/49 139,785 188,000 M&T Bank Corp., 3.850%, due 04/01/13 184,565 70,000 Mellon Capital I, 7.720%, due 12/01/26 75,910 60,000 National Westminster Bank PLC, 1.375%, due 08/29/49 51,784 190,000 @@ National Westminster Bank PLC, 1.438%, due 11/29/49 160,694 96,000 @@ Northern Rock PLC, 5.600%, due 04/30/49 93,449 156,000 # Rabobank Capital Funding II, 5.260%, due 12/29/49 151,236 80,000 @@ Royal Bank of Canada, 1.750%, due 06/29/85 68,768 40,000 @@ Royal Bank of Scotland Group PLC, 2.063%, due 12/29/49 34,522 50,000 @@ Societe Generale, 1.688%, due 11/29/49 41,808 120,000 @@ Standard Chartered PLC, 1.315%, due 01/29/49 94,101 110,000 @@ Standard Chartered PLC, 1.375%, due 07/29/49 86,277 220,000 @@ Standard Chartered PLC, 2.070%, due 12/29/49 173,250 90,000 @@ Westpac Banking Corp., 1.338%, due 09/29/49 76,003 282,000 Westpac Capital Trust IV, 5.256%, due 12/29/49 260,342 ---------------- 4,277,263 ---------------- BEVERAGES: 0.2% 57,000 @@,L Coca-Cola HBC Finance BV, 5.125%, due 09/17/13 56,297 212,000 # Miller Brewing Co., 4.250%, due 08/15/08 211,163 ---------------- 267,460 ---------------- CHEMICALS: 0.1% 51,000 Dow Chemical Co., 5.750%, due 11/15/09 53,283 49,000 @@ Sociedad Quimica y Minera de Chile SA, 7.700%, due 09/15/06 52,457 ---------------- 105,740 ---------------- DIVERSIFIED FINANCIAL SERVICES: 1.8% 164,000 @@ Arcel Finance Ltd., 7.048%, due 09/01/11 163,180 175,000 L Boeing Capital Corp., 7.375%, due 09/27/10 198,129 268,000 #,@@ Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 260,630 $ 30,000 Citicorp Capital I, 7.933%, due 02/15/27 $ 32,829 26,000 Citigroup Capital II, 7.750%, due 12/01/36 28,028 368,000 # Corestates Capital Trust I, 8.000%, due 12/15/26 403,161 84,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 80,847 190,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 184,208 65,000 @@ Financiere CSFB NV, 1.250%, due 03/29/49 52,080 108,000 L Ford Motor Credit Co., 7.000%, due 10/01/13 109,206 108,000 L General Motors Acceptance Corp., 6.875%, due 08/28/12 110,034 151,000 General Motors Acceptance Corp., 7.750%, due 01/19/10 164,107 77,000 General Motors Acceptance Corp., 8.000%, due 11/01/31 79,115 31,000 L JPM Capital Trust I, 7.540%, due 01/15/27 32,923 307,000 # Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 303,875 154,000 #,@@ PF Export Receivables Master Trust, 3.748%, due 06/01/13 146,892 205,684 #,@@ PF Export Receivables Master Trust, 6.436%, due 06/01/15 202,955 ---------------- 2,552,199 ---------------- ELECTRIC: 1.2% 54,000 Consumers Energy Co., 4.250%, due 04/15/08 53,562 169,000 L Consumers Energy Co., 4.800%, due 02/17/09 169,310 167,000 DTE Energy Co, 2.324%, due 06/01/07 166,931 240,000 FirstEnergy Corp., 7.375%, due 11/15/31 250,899 172,000 Ohio Edison Co., 4.000%, due 05/01/08 168,390 268,000 Ohio Power Co., 6.375%, due 07/15/33 263,117 33,176 # Power Contract Financing LLC, 5.200%, due 02/01/06 33,393 281,000 # Power Contract Financing LLC, 6.256%, due 02/01/10 286,482 42,798 PPL Montana LLC, 8.903%, due 07/02/20 46,677 68,000 Tenaska Virginia Partners LP, 6.119%, due 03/30/24 67,389 211,000 @@ TXU Australia Holdings Partnership LP, 6.150%, due 11/15/13 220,205 ---------------- 1,726,355 ---------------- FOOD: 0.5% 96,000 Kroger Co., 7.250%, due 06/01/09 106,758 170,000 Safeway, Inc., 4.800%, due 07/16/07 173,892
See Accompanying Notes to Financial Statements 77 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- FOOD (CONTINUED) $ 115,000 Supervalu, Inc., 7.875%, due 08/01/09 $ 130,029 219,000 Tyson Foods, Inc., 7.250%, due 10/01/06 235,998 ---------------- 646,677 ---------------- INSURANCE: 0.3% 183,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 205,488 143,000 # Monumental Global Funding II, 3.850%, due 03/03/08 142,792 97,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 107,455 ---------------- 455,735 ---------------- MEDIA: 0.1% 113,000 Comcast Cable Communications, 7.125%, due 06/15/13 123,722 78,000 Time Warner, Inc., 6.875%, due 05/01/12 84,415 ---------------- 208,137 ---------------- MINING: 0.4% 185,000 @@ Alcan, Inc., 6.125%, due 12/15/33 179,597 114,000 @@ Corp Nacional del Cobre de Chile, 5.500%, due 10/15/13 113,441 46,000 @@ Corp Nacional del Cobre de Chile, 6.375%, due 11/30/12 48,780 159,000 @@,L Vale Overseas Ltd., 8.625%, due 03/08/07 170,925 ---------------- 512,743 ---------------- MULTI-NATIONAL: 0.3% 224,000 @@ Corp Andina de Fomento CAF, 5.200%, due 05/21/13 215,860 212,000 @@ Corp Andina de Fomento CAF, 6.875%, due 03/15/12 228,312 ---------------- 444,172 ---------------- OIL AND GAS: 0.6% 176,000 @@ Empresa Nacional de Petroleo ENAP, 4.875%, due 03/15/14 164,205 385,000 L Pemex Project Funding Master Trust, 2.820%, due 06/15/10 387,695 78,000 Pemex Project Funding Master Trust, 7.375%, due 12/15/14 79,950 89,000 Valero Energy Corp., 6.125%, due 04/15/07 94,367 110,000 Valero Energy Corp., 8.750%, due 06/15/30 137,639 ---------------- 863,856 ---------------- PACKAGING AND CONTAINERS: 0.2% 80,000 Sealed Air Corp., 5.375%, due 04/15/08 82,801 $ 213,000 # Sealed Air Corp., 6.950%, due 05/15/09 $ 232,763 ---------------- 315,564 ---------------- REAL ESTATE: 0.3% 183,000 EOP Operating LP, 7.750%, due 11/15/07 203,240 44,000 Liberty Property-LP, 6.375%, due 08/15/12 46,279 12,000 Liberty Property-LP, 6.950%, due 12/01/06 12,979 143,000 Liberty Property-LP, 7.750%, due 04/15/09 162,578 ---------------- 425,076 ---------------- REAL ESTATE INVESTMENT TRUSTS: 0.3% 132,000 Simon Property Group LP, 4.875%, due 03/18/10 130,818 56,000 Simon Property Group LP, 6.375%, due 11/15/07 59,986 208,000 Simon Property Group LP, 7.375%, due 01/20/06 222,035 ---------------- 412,839 ---------------- SAVINGS AND LOANS: 0.3% 157,000 Great Western Financial, 8.206%, due 02/01/27 170,970 215,000 L Washington Mutual, Inc., 4.375%, due 01/15/08 216,542 ---------------- 387,512 ---------------- TELECOMMUNICATIONS: 0.8% 100,000 @@ Brasil Telecom SA, 9.375%, due 02/18/14 97,500 166,000 @@ Cia de Telecomunicaciones de Chile SA, 7.625%, due 07/15/06 179,042 252,000 Sprint Capital Corp., 4.780%, due 08/17/06 257,005 155,000 Sprint Capital Corp., 6.875%, due 11/15/28 149,423 80,000 L Sprint Capital Corp., 8.750%, due 03/15/32 93,490 181,000 Verizon Florida, Inc., 6.125%, due 01/15/13 186,355 116,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 108,504 ---------------- 1,071,319 ---------------- TRANSPORTATION: 0.1% 106,000 @@ MISC Capital Ltd, 5.000%, due 07/01/09 106,282 ---------------- 106,282 ---------------- Total Corporate Bonds (Cost $14,897,221) 14,857,827 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 19.6% FEDERAL HOME LOAN BANK: 0.7% 1,045,000 L 2.500%, due 12/15/05 1,043,623 ---------------- 1,043,623 ----------------
See Accompanying Notes to Financial Statements 78 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 6.0% $ 1,420,000 2.700%, due 03/16/07 $ 1,396,844 700,000 2.750%, due 02/09/07 690,640 1,103,000 4.500%, due 10/15/12 1,109,851 298,342 4.500%, due 04/01/14 292,781 815,000 5.500%, due 07/15/34 811,434 434,000 6.000%, due 01/15/28 451,706 95,468 6.000%, due 06/01/28 98,016 477,104 6.000%, due 01/15/29 481,794 350,000 6.000%, due 07/15/33 357,438 1,984,000 6.500%, due 07/15/34 2,067,702 562,124 7.000%, due 11/01/31 594,598 ---------------- 8,352,804 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 11.7% 695,000 L 3.500%, due 01/28/08 685,711 860,000 4.500%, due 07/01/17 840,382 707,000 L 4.625%, due 10/15/13 682,048 1,805,000 5.000%, due 07/01/18 1,807,255 530,000 5.000%, due 08/15/19 528,840 4,918,000 5.000%, due 07/15/34 4,750,482 690,000 L 5.250%, due 08/01/12 690,620 32,926 5.500%, due 01/01/18 33,782 441,502 5.500%, due 02/01/18 452,745 393,000 5.500%, due 08/15/19 400,491 476,000 5.500%, due 07/15/34 473,769 652,847 6.000%, due 08/01/16 681,426 290,318 6.000%, due 04/25/31 294,223 778,000 6.000%, due 08/01/33 791,129 260,000 6.000%, due 07/15/34 265,444 789,660 6.500%, due 07/01/29 823,068 630,000 6.500%, due 07/15/33 655,988 310,000 6.625%, due 11/15/10 344,644 184,286 7.000%, due 02/01/31 195,095 315,000 7.000%, due 07/15/33 332,227 500,000 7.000%, due 08/15/34 526,250 25,603 7.500%, due 11/01/30 27,455 87,280 7.500%, due 09/01/31 93,570 ---------------- 16,376,644 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 1.2% 103,055 6.500%, due 01/15/29 107,916 84,919 6.500%, due 10/15/31 88,880 215,085 6.500%, due 01/15/32 225,069 72,269 7.000%, due 01/15/28 76,937 254,214 7.000%, due 02/15/28 270,633 48,327 7.000%, due 02/15/28 51,448 302,109 7.000%, due 02/15/28 321,620 382,891 7.500%, due 12/15/23 415,327 95,631 8.000%, due 07/15/24 105,547 ---------------- 1,663,377 ---------------- Total U.S. Government Agency Obligations (Cost $27,384,183) 27,436,448 ---------------- U.S. TREASURY OBLIGATIONS: 9.4% SOVEREIGN: 0.7% 907,000 L 5.500%, due 08/15/28 919,153 ---------------- 919,153 ---------------- U.S. TREASURY BONDS: 3.3% $ 2,500,000 L 1.625%, due 01/31/05 $ 2,499,318 907,000 L 10.375%, due 11/15/12 1,107,816 695,000 L 13.250%, due 05/15/14 984,457 ---------------- 4,591,591 ---------------- U.S. TREASURY NOTES: 5.4% 706,000 L 2.500%, due 05/31/06 703,850 315,000 L 3.125%, due 05/15/07 315,099 256,000 L 4.000%, due 06/15/09 258,270 1,278,000 L 4.000%, due 02/15/14 1,218,394 2,126,000 W, L 4.750%, due 05/15/14 2,148,839 777,000 5.290%, due 05/15/16 421,432 1,206,000 L 5.375%, due 02/15/31 1,216,695 1,225,000 L 6.250%, due 08/15/23 1,356,880 ---------------- 7,639,459 ---------------- Total U.S. Treasury Obligations (Cost $13,211,981) 13,150,203 ---------------- COLLATERALIZED MORTGAGE OBLIGATIONS: 6.8% AUTOMOBILE ASSET-BACKED SECURITIES: 0.3% 140,000 Household Automotive Trust, 2.310%, due 04/17/08 138,782 325,000 USAA Auto Owner Trust, 2.040%, due 02/16/10 318,274 ---------------- 457,056 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES: 2.2% 975,000 CS First Boston Mortgage Securities Corp., 3.861%, due 03/15/36 957,942 82,000 CS First Boston Mortgage Securities Corp., 7.810%, due 04/14/62 93,834 460,000 DLJ Commercial Mortgage Corp., 6.240%, due 11/12/31 493,583 1,090,000 DLJ Commercial Mortgage Corp., 7.300%, due 06/10/32 1,221,377 204,000 GE Capital Commercial Mortgage Corp., 5.994%, due 12/10/35 216,680 121,000 LB-UBS Commercial Mortgage Trust, 7.370%, due 08/15/26 136,779 ---------------- 3,120,195 ---------------- CREDIT CARD ASSET-BACKED SECURITIES: 1.1% 115,000 Bank One Issuance Trust, 4.540%, due 09/15/10 116,076 115,000 Capital One Master Trust, 4.900%, due 03/15/10 119,272 855,000 Chemical Master Credit Card Trust 1, 7.090%, due 02/15/09 919,312 390,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 408,969 ---------------- 1,563,629 ----------------
See Accompanying Notes to Financial Statements 79 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued)
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------------------------- WHOLE LOAN COLLATERALIZED MORTGAGE: 2.8% $ 679,945 Bank of America Mortgage Securities, 4.413%, due 03/25/33 $ 680,962 629,000 CS First Boston Mortgage Securities Corp., 4.187%, due 10/25/33 633,499 507,000 GMAC Mortgage Corp Loan Trust, 5.500%, due 01/25/34 510,907 15,505 GSR Mortgage Loan Trust, 6.500%, due 01/25/34 16,113 1,383,405 MASTR Asset Securitization Trust, 5.500%, due 06/25/33 1,308,921 799,586 Washington Mutual, 5.000%, due 06/25/18 796,035 ---------------- 3,946,437 ---------------- WHOLE LOAN COLLATERALIZED SUPPORT CMO: 0.1% 145,306 Bank of America Mortgage Securities, 5.500%, due 11/25/33 143,703 ---------------- 143,703 ---------------- WHOLE LOAN COLLATERALIZED PLANNED AMORTIZATION CLASS: 0.3% 390,000 Residential Funding Securities Corp., 4.750%, due 02/25/33 394,733 ---------------- 394,733 ---------------- Total Collateralized Mortgage Obligations (Cost $9,789,348) 9,625,753 ---------------- Total Long-Term Investments (Cost $120,477,269) 129,524,146 ---------------- SHORT-TERM INVESTMENTS: 37.9% COMMERCIAL PAPER: 13.4% 1,400,000 S Blue Ridge Asset Funding, 1.300%, due 07/15/04 1,399,242 1,100,000 Concord Minutemen Cap B, 1.210%, due 07/12/05 1,099,956 1,500,000 Concord Minutemen Cap B, 1.160%, due 07/07/05 1,499,978 1,193,000 S Galaxy Funding, Inc., 1.270%, due 07/09/04 1,192,621 1,400,000 S Park Avenue Receivables Corp., 1.100%, due 07/07/04 1,399,701 1,400,000 S Park Avenue Receivables Corp., 1.300%, due 07/14/04 1,399,292 2,800,000 S Park Avenue Receivables Corp., 1.380%, due 07/09/04 2,799,033 2,800,000 Preferred Receivable Funding Corp., 1.300%, due 07/22/04 2,797,776 1,400,000 S St. Germain Holdings Ltd., 1.230%, due 07/13/04 1,399,378 1,400,000 S St. Germain Holdings Ltd., 1.230%, due 07/06/04 1,399,713 1,400,000 S St. Germain Holdings Ltd., 1.300%, due 07/16/04 1,399,191 $ 1,000,000 S Yorktown Capital LLC, 1.200%, due 07/06/04 $ 999,800 ---------------- Total Commercial Paper (Cost $18,786,322) 18,785,681 ---------------- REPURCHASE AGREEMENT: 4.7% 6,610,000 S Goldman Sachs Repurchase Agreement dated 06/30/04, 1.500%, due 07/01/04, $6,610,275 to be received upon repurchase (Collateralized by $6,550,000 Federal National Mortgage Association, 4.750%, Market Value plus accrued interest $6,881,929, due 01/02/07) 6,610,000 ---------------- Total Repurchase Agreement (Cost $6,610,000) 6,610,000 ---------------- SECURITIES LENDING COLLATERAL(cc): 19.8% 27,785,465 The Bank of New York Institutional Cash Reserve Fund, 1.250% 27,785,465 ---------------- Total Securities Lending Collateral (Cost $27,785,465) 27,785,465 ---------------- Total Short-Term Investments (Cost $53,181,787) 53,181,146 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $173,659,056)* 130.2% $ 182,705,292 OTHER ASSETS AND LIABILITIES-NET (30.2) (42,375,744) ----- ---------------- NET ASSETS 100.0% $ 140,329,548 ===== ================
@ Non-income producing security @@ Foreign issuer ADR American Depositary Receipt # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. These securities have been determined to be liquid under the guidelines established by the Funds' Board of Directors/Trustees. W When-issued or delayed delivery security. S Segregated securities for futures, when-issued or delayed delivery securities held at June 30, 2004. L Loaned security, a portion or all of the security is on loan at June 30, 2004. XX Value of securities obtained from one or more dealers making markets in the securities in accordance with the Fund's valuation procedures. (cc) Securities purchased with cash collateral for securities loaned. * Cost for federal income tax purposes is $175,273,905. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 8,850,347 Gross Unrealized Depreciation (1,418,960) ------------ Net Unrealized Depreciation $ 7,431,387 ============
See Accompanying Notes to Financial Statements 80 ING VP STRATEGIC ALLOCATION PORTFOLIO OF INVESTMENTS INCOME PORTFOLIO as of June 30, 2004 (Unaudited) (continued) Information concerning open futures contracts at June 30, 2004 is shown below:
NO. OF NOTIONAL EXPIRATION UNREALIZED CONTRACTS MARKET VALUE DATE GAIN/(LOSS) --------- ------------ ---------- ----------- SHORT CONTRACTS U.S. 2 Year Treasury Note 7 $ (1,473,828) Sept-04 $ (1,613) U.S. 5 Year Treasury Note 6 (652,125) Sept-04 (1,436) ------------ ---------- $ (2,125,953) $ (3,049) ============ ========== LONG CONTRACTS U.S. Long Bond 6 $ 638,250 Sept-04 $ 13,329
See Accompanying Notes to Financial Statements 81 DIRECTOR AND OFFICER INFORMATION (Unaudited) The business and affairs of the Funds are managed under the direction of the Fund's Board of Directors. A director who is not an interested person of the Funds, as defined in the 1940 Act, is an independent director ("Non-Interested Director"). The Directors of the Funds are listed below. The Statement of Additional Information includes additional information about directors of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE THE COMPANY SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR - ---------------------------- ----------- ---------- --------------------------- ------------- -------------------------- NON-INTERESTED DIRECTORS: Albert E. DePrince, Jr. Director June Director, Business and 53 Director, International 7337 E. Doubletree Ranch Rd. 1998 - Economic Research Center Atlantic Economic Society Scottsdale, Arizona 85258 present (August 1999 - present) and (October 2002 - Present); Born: 1941 Professor of Economics and Academy of Economics and Finance, Middle Tennessee Finance (February 2001 - State University (1991 to Present). present). Maria T. Fighetti Director April Retired. Formerly, 53 None 7337 E. Doubletree Ranch Rd. 1994 - Attorney, New York City Scottsdale, Arizona 85258 present Department of Mental Health Born: 1943 (June 1973 - October 2002) and Associate Commissioner (1995 - 2002). Sidney Koch Director April Financial Adviser, 53 Director, Northwest Center 7337 E. Doubletree Ranch Rd. 1994 - Self-Employed (January 1993 for the Arts, Torrington, Scottsdale, Arizona 85258 present - present). CT. Born: 1935 Corine T. Norgaard Director June Retired. Formerly, Dean, 53 Director/Trustee, Mass 7337 E. Doubletree Ranch Rd. 1991 - Barney School of Business, Mutual Corporate and Scottsdale, Arizona 85258 present University of Hartford Participation Investors Born: 1937 (August 1996 - June 2004). (April 1997 - Present) Director, Advest Trust Company (1998 - Present); Director, Connecticut Health Foundation (2002 - Present). Edward T. O'Dell Director June Retired. Formerly, 53 None 7337 E. Doubletree Ranch Rd. 2002 - Partner/Chairman of Scottsdale, Arizona 85258 present Financial Service Group, Born: 1935 Goodwin Procter LLP (June 1966 - September 2000); Joseph E. Obermeyer(2) Director January President, Obermeyer & 53 None 7337 E. Doubletree Ranch Rd. 2003 - Associates, Inc. Scottsdale, Arizona 85258 present (Consulting firm) Born: 1957 (Novemeber 1999 - present) and Senior Manager, Arthur Andersen LLP (1995 - October 1999).
82 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE THE COMPANY SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR - ---------------------------- ----------- ---------- --------------------------- ------------- -------------------------- DIRECTORS WHO ARE "INTERESTED PERSONS" J. Scott Fox(3) Director December Vice Chairman and Chief 53 Director of IPC Financial Aeltus Investment 1997 - Operating Officer, ING Network, Inc. Management, Inc. present Investment Management (January 2001 - present); 10 State House Square (September 2002 - Director, Metro Hartford Hartford, Connecticut present); President and Chamber of Commmerce Born: 1955 Chief Executive Officer and The Greater (April 2001 - present), Hartford Arts Council. Managing Director and Chief Operating Officer (April 1994 - April 2001), Aeltus Investment Management, Inc. Thomas J. McInerney(4) Director April Chief Executive Officer, 171 Director, Equitable Life 7337 E. Doubletree Ranch Rd. 2002 - ING U.S. Financial Services Insurance Co., Golden Scottsdale, Arizona 85258 present (September 2001 - present); American Life Insurance Born: 1956 Member, ING Americas Co., Life Insurance Executive Committee (2001 - Company of Georgia, present); ING Aeltus Holding Midwestern United Life Company, Inc. (2000 - Insurance Co., ReliaStar present), ING Retail Holding Life Insurance Co., Company (1998 - present), Security Life of Denver, and ING Retirement Holdings, Security Connecticut Life Inc. (1997 - present). Insurance Co., Southland Formerly, President, ING Life Insurance Co., USG Life Insurance Annuity Annuity and Life (September 1997 - November Company, and United 2002); President, Chief Life and Annuity Executive Officer and Insurance Co., Inc. Director of Northern Life (March 2001 - Present); Insurance Company (March Member of the Board, 2001 - October 2002); Bushnell Performing Arts General Manager and Chief Center; St. Francis Executive Officer, ING Hospital; National Worksite Division (December Conference for 2000 - October 2001), Community Justice; and President, ING-SCI, Inc. Metro Atlanta Chamber (August 1997 - December of Commerce. 2000); President, Aetna Financial Services (August 1997 - December 2000).
- ---------- (1) Directors serve until their successors are duly elected and qualified, subject to the Board's retirement policy. (2) Mr. Obermeyer was elected to the Board on January 1, 2003. (3) Mr. Fox is an "interested person," as defined under the 1940 Act, because of his relationship with ING Aeltus, an affiliate of ING Investments. (4) Mr. McInerney is an "interested person," as defined under the 1940 Act, because of his affiliation with ING Groep N.V., the parent corporation of the Investment Manager, ING Investments, LLC and the Distributor, ING Funds Distributor, LLC. 83 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE COMPANY TIME SERVED(1) PAST FIVE YEARS - ---------------------------- --------------------- -------------------- ------------------------------------------------ James M. Hennessy President, Chief March 2002 - present President and Chief Executive Officer, ING 7337 E. Doubletree Ranch Rd. Executive Officer and Investments, LLC (December 2001 - Present). Scottsdale, Arizona 85258 Chief Operating Formerly, Senior Executive Vice President and Born: 1949 Officer Chief Operating Officer, ING Investments, LLC (April 1995 - December 2000); and Executive Vice President, ING Investments, LLC (May 1998 - June 2000). Stanley D. Vyner Executive Vice March 2002 - present Executive Vice President, ING Investments, LLC 7337 E. Doubletree Ranch Rd. President and certain of its affiliates (July 2000 - Scottsdale, Arizona 85258 Present) and Chief Investment Risk Officer (June Born: 1950 2003 - Present); Formerly, Chief Investment Officer the International Portfolios, ING Investments, LLC (July 1996 - June 2003); and President and Chief Executive Officer, ING Investments, LLC (August 1996 - August 2000). Michael J. Roland Executive Vice April 2002 - present Executive Vice President, Chief Financial 7337 E. Doubletree Ranch Rd. President and Officer and Treasurer, ING Investments, LLC Scottsdale, Arizona 85258 Assistant Secretary (December 2001 - Present). Formerly, Senior Vice Born: 1958 President, ING Investments, LLC (June 1998 - Principal Financial March 2002 - present December 2001). Officer Robert S. Naka Senior Vice President March 2002 - present Senior Vice President and Assistant Secretary, 7337 E. Doubletree Ranch Rd. and Assistant ING Funds Services, LLC (October 2001 - Scottsdale, Arizona 85258 Secretary Present). Formerly, Senior Vice President and Born: 1963 Assistant Secretary, ING Funds Services, LLC (February 1997 - August 1999). Kimberly A. Anderson Senior Vice President December 2003 - Senior Vice President, ING Investments, LLC 7337 E. Doubletree Ranch Rd. present (October 2003 - Present). Formerly, Vice Scottsdale, Arizona 85258 President and Assistant Secretary, ING Born: 1964 Investments, LLC (October 2001 - October 2003); 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 March 2002 - present Vice President, ING Funds Services, LLC (October 7337 E. Doubletree Ranch Rd. Treasurer 2001 - Present) and ING Investments, LLC (August Scottsdale, Arizona 85258 1997 - Present). Born: 1967 Lauren D. Bensinger Vice President March 2003 - present Vice President and Chief Compliance Officer, ING 7337 E. Doubletree Ranch Rd. Funds Distributor, LLC (July 1995 - Present); Scottsdale, Arizona 85258 Vice President (February 1996 - Present) and Born: 1954 Chief Compliance Officer (October 2001 - Present), ING Investments, LLC. Theresa Kelety Secretary September 2003 - Counsel, ING U.S. Financial Services (April 2003 7337 E. Doubletree Ranch Rd. present - Present). Formerly, Senior Associate with Scottsdale, Arizona 85258 Shearman & Sterling (February 2000 - April Born: 1963 2003); and Associate with Sutherland Asbill & Brennan (1996 - February 2000).
84 DIRECTOR AND OFFICER INFORMATION (Unaudited) (continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE COMPANY TIME SERVED(1) PAST FIVE YEARS - ---------------------------- --------------------- -------------------- ------------------------------------------------ Todd Modic Vice President September 2003 - Vice President of Financial Reporting - Fund 7337 E. Doubletree Ranch Rd. present Accounting of ING Funds Services, LLC (September Scottsdale, Arizona 85258 2002 - Present). Formerly, Director of Financial Born: 1967 Reporting, ING Investments, LLC (March 2001 - September 2002); Director of Financial Reporting, Axient Communications, Inc. (May 2000 - January 2001); and Director of Finance, Rural/Metro Corporation (March 1995 - May 2000). Susan P. Kinens Assistant Vice March 2003 - present Assistant Vice President and Assistant 7337 E. Doubletree Ranch Rd. President and Secretary, ING Funds Services, LLC (December Scottsdale, Arizona 85258 Assistant Secretary 2002 - Present); and has held various other Born: 1976 positions with ING Funds Services, LLC for more than the last five years. Huey P. Falgout, Jr. Assistant Secretary September 2003 - Chief Counsel, ING U.S. Financial Services 7337 E. Doubletree Ranch Rd. present (September 2003 - Present). Formerly, Counsel, Scottsdale, Arizona 85258 ING U.S. Financial Services (November 2002 - Born: 1963 September 2003); and Associate General Counsel of AIG American General (January 1999 - November 2002). Maria M. Anderson Assistant Vice April 2002 - present Assistant Vice President of ING Funds Services, 7337 E. Doubletree Ranch Rd. President LLC (October 2001 - Present). Formerly, Manager Scottsdale, Arizona 85258 of Fund Accounting and Fund Compliance, ING Born: 1958 Investments, LLC (September 1999 - November 2001); and Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 - August 1999).
- ---------- (1) The officers hold office until the next annual meeting of the Trustees and until their successors have been elected and qualified. 85 INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 ADMINISTRATOR ING Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 DISTRIBUTOR ING Funds Distributor, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 1-800-334-3444 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141 CUSTODIAN The Bank of New York 100 Colonial Center Parkway, Suite 300 Lake Mary, FL 32746 LEGAL COUNSEL Goodwin Procter LLP Exchange Place 53 State Street Boston, MA 02109 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 99 High Street Boston, MA 02110 BEFORE INVESTING, CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE VARIABLE UNIVERSAL LIFE INSURANCE POLICY OR VARIABLE ANNUITY CONTRACT AND THE UNDERLYING VARIABLE INVESTMENT OPTIONS. THIS AND OTHER INFORMATION IS CONTAINED IN THE PROSPECTUS FOR THE VARIABLE UNIVERSAL LIFE POLICY OR VARIABLE ANNUITY CONTRACT AND THE UNDERLYING VARIABLE INVESTMENT OPTIONS. OBTAIN THESE PROSPECTUSES FROM YOUR AGENT/REGISTERED REPRESENTATIVE AND READ THEM CAREFULLY BEFORE INVESTING. THE PORTFOLIOS' PROXY VOTING RECORD WILL BE AVAILABLE WITHOUT CHARGE ON OR ABOUT AUGUST 31, 2004 ON THE PORTFOLIOS' WEBSITE AT www.ingfunds.com AND ON THE SEC'S WEBSITE AT www.sec.gov. [ING FUNDS LOGO] PRESORTED STANDARD U.S. POSTAGE PAID BOSTON MA PERMIT NO. 57842 VPSAR-IP/SA (0604-081804) ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to the Registrant's principal executive officer and principal financial officer. There were no amendments to the Code during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code during the period covered by this report. The code of ethics is filed herewith pursuant to Item 11(a)(1), Exhibit 99.CODE ETH. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees has determined that Corine Norgaard and Joseph Obermeyer are each audit committee financial experts, as defined in Item 3 of Form N-CSR. Ms. Norgaard and Mr. Obermeyer are both "independent" for purposes of Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Schedule is included as part of the report to shareholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board during the period covered by the N-CSR filing. 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 all Independent Trustees of the Board (6 individuals). Currently, there is no written charter for the Nominating Committee and neither the Committee nor the Board has adopted a formal policy regarding the consideration of nominees recommended by shareholders. It is anticipated that these matters will be considered by the Committee and the Board during the upcoming year and that a formal charter containing policies with respect to the consideration of nominees recommended by shareholders will be approved by the Board. ITEM 10. CONTROLS AND PROCEDURES. (a) Based on our evaluation conducted within 90 days of the filing date, hereof, the design and operation of the registrant's disclosure controls and procedures are effective to ensure that material information relating to the registrant is made known to the certifying officers by others within the appropriate entities, particularly during the period in which Forms N-CSR are being prepared, and the registrant's disclosure 2 controls and procedures allow timely preparation and review of the information for the registrant's Form N-CSR and the officer certifications of such Form N-CSR. (b) There were no significant changes in the registrant's internal controls that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT. (b) The officer certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT (3) Not applicable. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): ING VARIABLE PORTFOLIOS, INC. By /s/ James M. Hennessy ---------------------------------------- James M. Hennessy President and Chief Executive Officer Date: August 30, 2004 ------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James M. Hennessy ---------------------------------------- James M. Hennessy President and Chief Executive Officer Date: August 30, 2004 ------------------------------------- By /s/ Michael J. Roland ---------------------------------------- Michael J. Roland Executive Vice President and Chief Financial Officer Date: August 30, 2004 ------------------------------------- 4 EX-99.CODEETH 2 a2142241zex-99_codeeth.txt EX 99.CODEETH Exhibit 99.CODE ETH ING FUNDS SARBANES-OXLEY ACT CODE OF ETHICS A. ADOPTION The Boards of Directors/Trustees (collectively, the "Board") of the ING Funds (each a "Fund," and collectively, the "Funds") set forth on EXHIBIT A hereto, as such exhibit may be amended from time to time, have adopted this code of ethics (the "Code") in connection with the requirements of Section 406 of the Sarbanes-Oxley Act of 2002 (the "Act") concerning disclosure of a code of ethics for the principal executive officer, the principal financial officer, the principal accounting officer or controller, and persons performing similar functions (regardless of whether they are employed by a Fund or a third party) of the Funds (the "Covered Officers"). For the purposes of this Code, the chief executive officer and the chief financial officer of the Funds are the Covered Officers for the Funds. B. POLICY AND PURPOSE; CONFLICTS WITH LAW AND POLICY 1. POLICY AND PURPOSE It is the policy of the Funds to conduct their affairs in an honest and ethical manner, and to comply with all applicable laws, rules and regulations. The purpose of this Code is to assist in the accomplishment of the foregoing policy, to deter wrongdoing and to promote: a. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. b. Full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by a Fund. c. Compliance with applicable laws and governmental rules and regulations. d. The prompt internal reporting of violations of this Code to an appropriate person or persons identified in this Code. e. Accountability for adherence to this Code. 2. CONFLICTS WITH LAW AND POLICY If any part of this Code, or if compliance with any part of this Code, violates or is in conflict with any applicable law, the provisions of such applicable law shall control. If any part of this Code, or if compliance with any part of this Code, violates or is in conflict with any policy or practice of the Funds or of any service provider to the Funds, the provisions of this Code shall control. C. COVERED OFFICER DUTIES Each Covered Officer shall adhere to a high standard of business ethics in his or her dealings with and on behalf of a Fund. Specifically, each Covered Officer shall: 5 1. Conduct himself or herself in an honest and ethical manner when dealing with or on behalf of a Fund. 2. Refrain from engaging in any activity that would compromise his or her professional ethics or otherwise prejudice his or her ability faithfully to carry out his or her duties to the Funds. 3. Refrain from using or appearing to use material non-public information acquired in the course of his or her work for the Funds for unethical or illegal advantage, either directly or indirectly through others. 4. Place the interests of the Funds and their shareholders before his or her personal interests, and handle actual or apparent conflicts of interest between his or her personal interests and the interests of a Fund in an ethical manner. 5. Be familiar with the disclosure requirements generally applicable to the Funds and take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s) to ensure full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the SEC or other governmental authorities, and in other public communications made by a Fund. 6. Comply with applicable laws and governmental rules and regulations in his or her dealings with or on behalf of a Fund, and take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s), to ensure compliance by the Fund with applicable laws and governmental rules and regulations. 7. Take all reasonable actions, consistent with his or her position(s) with a Fund and/or a Fund's service provider(s), to ensure prompt internal reporting of violations of this Code to an appropriate person or persons identified in this Code. 8. Not knowingly misrepresent, or knowingly cause or permit others to misrepresent, facts about a Fund to a Fund's shareholders, directors, counsel or auditors, to governmental regulators or self-regulatory organizations, or to the public. 9. Consult with other officers and employees of a Fund, and its adviser(s), administrator and principal underwriter, with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Funds. 10. Promote compliance by the Funds with the standards and restrictions imposed by applicable laws, rules and regulations. 11. Not influence investment decisions or financial or other reporting by the Fund whereby the Covered Officer would benefit personally. 12. Not cause a Fund to take an action, or fail to take an action, whereby the Covered Officer would benefit personally. 13. Not retaliate or take any adverse action against, or cause or permit any retaliation or adverse action to be taken against, any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations of this Code or of applicable laws and governmental rules and regulations that are made in good faith. D. DEFINITIONS 1. CONFLICTS OF INTEREST For the purposes of this Code (i) an "actual conflict of interest" is a situation in which a Covered Officer, a member of a Covered Officer's immediate family, or an entity other than a Fund on whose behalf a Covered Officer is acting or from which a Covered Officer may receive compensation or other personal benefit, has an interest in a transaction or the results of a transaction in which a Fund is involved that is different from the interests of the Fund with regard to that 6 same transaction, and (ii) an "apparent conflict of interest" is a situation in which a Covered Officer, a member of a Covered Officer's immediate family, or an entity other than a Fund on whose behalf a Covered Officer is acting or from which a Covered Officer may receive compensation or other personal benefit, appears to have an actual conflict of interest, without regard to whether an actual conflict of interest in fact exists. 1 Notwithstanding the foregoing, an actual conflict of interest shall not include situations that are covered by law or by the Funds' and an investment adviser's code of ethics required under Rule 17j-1 of the Investment Company Act of 1940.(2) 2. WAIVER AND IMPLICIT WAIVER The term "waiver" means the approval by a Fund of a material departure from a provision of this Code. The term "implicit waiver" means a failure by a Fund to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to an executive officer(3) of the Fund. 3. BENEFIT PERSONALLY; IMMEDIATE FAMILY With regard to a Covered Officer, the term "benefit personally" means the direct or indirect receipt by the Covered Officer, by a member of the Covered Officer's immediate family, or by any entity (other than a Fund's investment adviser or any affiliate thereof) of which the Covered Officer or any member of the Covered Officer's immediate family owns 5% - ---------- (1) Certain actual conflicts of interest are inherent in the relationship between a Fund and a Covered Officer who is employed by the Fund's investment adviser, administrator or principal underwriter. As a result, this Code recognizes that Covered Officers will, in the normal course of their duties (whether acting on behalf of a Fund or on behalf of the adviser, administrator or principal underwriter, or for a combination thereof), be involved in recommending actions that may have different effects on the respective parties or may redound to the benefit of the adviser, the administrator or the principal underwriter at the expense of the Fund. For example, the negotiation of the underlying advisory, administrative and underwriting agreements necessarily places such Covered Officers in an actual conflict of interest position as to a Fund. These inherent conflicts of interest are known to and understood by the Funds and the Board, and the Board has determined that the existence of these conflicts of interest is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Therefore, the fact that a Covered Officer acts primarily or exclusively on behalf of a party other than a Fund with regard to a transaction that is covered by such inherent conflicts of interest shall not IPSO FACTO cause such conduct to be in violation of the requirements of this Code. Absent specific dishonest or unethical conduct in such a transaction, the actions by a Covered Officer in such regard shall be deemed to be honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. (2) These inherent conflicts of interest are already subject to prohibitions in the Investment Company Act of 1940 (the "Investment Company Act") and the Investment Advisers Act of 1940 (the "Investment Advisers Act"). For example, a Covered Officer may not individually engage in certain transactions (such as the purchase of sale or securities or other property) with a Fund because of his or her status as an "affiliated person" of the Fund. The Funds' and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat and replace those programs and procedures, and such actual and apparent conflicts of interest fall outside of the coverage of this Code. All other actual and apparent conflicts of interest, even if such actual and apparent conflicts of interest are not subject to provisions in the Investment Company Act or the Investment Advisers Act, are covered by this Code. (3) The term "executive officer," when used with reference to a registrant, means its president, any vice president of the registrant in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function or any other person who performs similar policy making functions for the registrant. 7 or more of the beneficial ownership interest or by which the Covered Officer or any member of the Covered Officer's immediate family is employed, or from which the Covered Officer or any member of the Covered Officer's immediate family receives any compensation or other benefit, of any compensation or other personal benefit. For the purposes of this Code, the term "member of the immediate family" means a Covered Officer's parent, spouse of a parent, child, spouse of a child, spouse, brother, or sister, and includes step and adoptive relationships. E. ACTIVITIES REQUIRING PRIOR APPROVAL A Covered Officer and his or her immediate family shall not engage in any of the following activities without the prior written approval of the Funds' Chief Legal Officer (the "Chief Legal Officer") and the Funds' Chief Executive Officer, except that in the case of the Chief Executive Officer or a member of the Chief Executive Officer's immediate family, such approval shall be from the Chief Legal Officer and the Qualified Legal Compliance Committee of the Board (the "QLCC"). To obtain such approval, the Covered Officer shall submit a written statement to the Chief Legal Officer describing in detail the proposed activity and the reasons for it. 1. Service as a director, partner, officer, manager or managing member on the board of any public or private company(4) other than a Fund's investment adviser, administrator, principal underwriter, or an affiliate of any of the foregoing, if such company has current or prospective business dealings with a Fund or if any Fund may invest in securities issued by such company. 2. Receipt of any entertainment(5) or meals from any company with which the Fund has current or prospective business dealings unless such entertainment or meals are business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety. For the purposes of this Code, entertainment and meals that are incidental to a business conference, seminar or meeting shall be deemed business-related, reasonable in cost, and appropriate as to time and place. 3. Having any ownership interest in, or any consulting, employment or compensation relationship with, any of a Fund's service providers, other than its investment adviser(s), administrator, principal underwriter, or any affiliated person thereof. 4. Exploit for his or her own personal gain any opportunity which a Fund may exploit. This prohibition shall not apply to securities trading undertaken in conformance with the Funds' and an investment adviser's code of ethics adopted pursuant to Rule 17j-1 of the Investment Company Act. F. PROHIBITED ACTIVITIES A Covered Officer and his or her immediate family shall not engage in any of the following activities: 1. Have a direct or indirect financial interest, such as compensation or equity ownership, in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment with the Fund's investment adviser, administrator, principal underwriter, or any affiliated person thereof. 2. Receive any gifts in excess of $500 in any calendar year from any entity or person that directly or indirectly currently or prospectively does or will do business with or receives compensation or other benefits from a Fund. For the purposes of this restriction, gifts from different persons employed by the - ---------- (4) For the purposes of this Code, "company" includes any legal or business entity such as a corporation, limited liability company, partnership, limited partnership, trust, association, sole proprietorship, ETC. (5) For the purposes of this Code, "entertainment" means activities or events, such as golfing, theater, sporting events, ETC., at which a representative of the entertaining company is present along with the Covered Officer or his or her immediate family member. If a representative of the entertaining company is not present, such activities or events shall be treated as gifts hereunder. 8 same entity shall be aggregated, along with any gifts from the entity itself, in order to determine whether the $500 limit has been exceeded. 3. Accept employment from any company, other than a Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof), with which the Fund has current or prospective business dealings within one year after the latest to occur of such Covered Officer's termination of employment at the Fund or at the Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof). 4. Borrow money from any Fund, or borrow money from or have any other financial transactions with any company, other than a Fund's investment adviser(s), administrator or principal underwriter (or any affiliate thereof), with which the Fund has current or prospective business dealings, other than routine retail transactions that are effected on the same terms and conditions as are available to the general public. 5. Engage in a transaction directly as a principal with a Fund, except that this prohibition shall not apply to the purchase or redemption of the shares of any Fund on the same terms and conditions as all other shareholders. 6. Any other activity that would cause them to benefit personally at the expense of a Fund. G. REPORTING AND ACCOUNTABILITY 1. REPORTING Each Covered Officer must: a. Upon adoption of this Code (or thereafter, as applicable, upon becoming a Covered Officer), affirm in writing to the Chief Legal Officer and the Board that he or she has received, read and understands this Code. Such affirmation shall be substantially in the form attached hereto as EXHIBIT B. b. Annually thereafter affirm to the Chief Legal Officer and the Board that he or she has complied with the requirements of this Code. Such affirmation shall be substantially in the form attached hereto as EXHIBIT C. c. Report at least annually all employment, ownership, affiliations or other relationships related to conflicts of interest that the Fund's Directors and Officers Questionnaire covers. d. Notify the Chief Legal Officer promptly if he or she knows of any violation of this Code or of any applicable laws and governmental rules and regulations. Failure to do so is itself a violation of this Code. 2. INTERPRETATIONS The Chief Legal Officer has the authority and shall be responsible for applying this Code to specific situations and for making interpretations of this Code in any particular situation. In making interpretations of this Code, the Chief Legal Officer may consult with the Funds' outside counsel. 3. INVESTIGATIONS The Funds will follow these procedures in investigating and enforcing this Code: a. The Chief Legal Officer will take all appropriate action to investigate any potential violations reported to him or her. b. If, after such investigation, the Chief Legal Officer believes that no violation has occurred, the Chief Legal Officer is not required to take any further action. 9 c. If, after such investigation, the Chief Legal Officer believes that a violation has occurred, the Chief Legal Officer shall report such potential violation to the QLCC. d. If the QLCC concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; and a recommendation to discipline or dismiss the Covered Officer or to require reimbursement or disgorgement by the Covered Officer of any personal benefits received. 4. WAIVERS The QLCC and the Chief Legal Officer, as applicable, may grant a waiver to compliance with this Code by a Covered Officer or his or her immediate family if the QLCC or the Chief Legal Officer determines that the proposed activity will not have an adverse impact on any Fund or on the ability of a Covered Officer faithfully to perform his or her duties to the Funds. To obtain a waiver, a Covered Officer shall submit a written statement to the Chief Legal Officer describing in detail the proposed activity, and the reasons for it, and the provision(s) of this Code as to which a waiver is requested. Any waivers of the provisions of this Code shall be disclosed to the extent required by law and SEC rules. H. RELATIONSHIP TO OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' adviser(s), administrator, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. I. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board or committee thereof or the Funds' outside counsel. J. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund or any Covered Officer or his or her immediate family, as to any fact, circumstance, or legal conclusion. K. AMENDMENTS Any amendments to this Code must be approved or ratified by a majority vote of the Board, including a majority of the independent directors. Any amendments to this Code shall be disclosed to the extent required by law and SEC rules. Date: ----------------------------------- 10 EXHIBIT A ING VP BALANCED PORTFOLIO, INC. ING STRATEGIC ALLOCATION PORTFOLIOS, INC. ING GET FUND ING VP BOND PORTFOLIO ING VP MONEY MARKET PORTFOLIO ING VARIABLE FUNDS ING VARIABLE PORTFOLIOS, INC. ING SERIES FUND, INC. 11 EXHIBIT B INITIAL ACKNOWLEDGEMENT Covered Officer Name and Title: ----------------------------------------------- (PLEASE PRINT) I acknowledge that I have received and read a copy of the ING Funds Sarbanes-Oxley Act Code of Ethics (the "Code") and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code. I also acknowledge my responsibility to report any violation of the Code to the Chief Legal Officer of the Funds. I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Funds have the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in their sole discretion, with or without notice. - ------------------------------------------------- -------------------------- Signature Date 12 EXHIBIT C ANNUAL ACKNOWLEDGEMENT Covered Officer Name and Title: ---------------------------------------------- (PLEASE PRINT) I acknowledge that I have received and read a copy of the ING Funds Sarbanes-Oxley Act Code of Ethics (the "Code") and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code. I also acknowledge that I have fully complied with the terms and provisions of the Code during the period of time since the most recent Initial or Annual Acknowledgement provided by me. I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Funds have the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in their sole discretion, with or without notice. - ------------------------------------------------- -------------------------- Signature Date 13 EX-99.CERT 3 a2142241zex-99_cert.txt EX 99.CERT Exhibit 99.Cert CERTIFICATION I, James M. Hennessy, certify that: 1. I have reviewed this report on Form N-CSR of ING VARIABLE PORTFOLIOS, INC.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 30, 2004 /s/ James M. Hennessy --------------- ---------------------------------------- James M. Hennessy President and Chief Executive Officer 14 CERTIFICATION I, Michael J. Roland, certify that: 1. I have reviewed this report on Form N-CSR of ING VARIABLE PORTFOLIOS, INC.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 30, 2004 /s/ Michael J. Roland --------------- -------------------------------- Michael J. Roland Executive Vice President and Chief Financial Officer 15 EX-99.906CERT 4 a2142241zex-99_906cert.txt EX 99.906CERT Exhibit 99.906 Cert CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING VARIABLE PORTFOLIOS, INC. Date of Form N-CSR: JUNE 30, 2004 The undersigned, the principal executive officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING VARIABLE PORTFOLIOS, INC. and will be retained by ING VARIABLE PORTFOLIOS, INC. and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 30th day of August, 2004. /s/ James M. Hennessy --------------------- James M. Hennessy 16 CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING VARIABLE PORTFOLIOS, INC. Date of Form N-CSR: JUNE 30, 2004 The undersigned, the principal executive officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING VARIABLE PORTFOLIOS, INC. and will be retained by ING VARIABLE PORTFOLIOS, INC. and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 30th day of August, 2004. /s/ Michael J. Roland --------------------- Michael J. Roland 17 -----END PRIVACY-ENHANCED MESSAGE-----