N-CSRS 1 a2123950zn-csrs.txt N-CSRS OMB APPROVAL OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 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: 811-08895 --------- ING Funds Trust --------------- (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 Company, 1209 Orange Street, Wilmington, DE 19801 ----------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-992-0180 --------------- Date of fiscal year end: March 31 -------- Date of reporting period: September 30, 2003 ------------------ 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): SEMI-ANNUAL REPORT SEMI-ANNUAL REPORT SEPTEMBER 30, 2003 CLASSES A, B, C AND M FIXED INCOME FUNDS ING GNMA INCOME FUND ING HIGH YIELD BOND FUND ING HIGH YIELD OPPORTUNITY FUND ING INTERMEDIATE BOND FUND ING NATIONAL TAX-EXEMPT BOND FUND ING STRATEGIC BOND FUND MONEY MARKET FUNDS ING CLASSIC MONEY MARKET FUND ING MONEY MARKET FUND ING LEXINGTON MONEY MARKET TRUST [GRAPHIC] [ING FUNDS LOGO] TABLE OF CONTENTS President's Letter 1 Market Perspective 3 Portfolio Managers' Reports 4 Index Descriptions 19 Statements of Assets and Liabilities 20 Statements of Operations 24 Statements of Changes in Net Assets 26 Financial Highlights 35 Notes to Financial Statements 52 Portfolios of Investments 68 Shareholder Meeting Information 100 Trustee and Officer Information 101
(THIS PAGE INTENTIONALLY LEFT BLANK) PRESIDENT'S LETTER [PHOTO OF JAMES M. HENNESSY] JAMES M. HENNESSY Dear Shareholder, What a difference a half a year can make. When writing my last letter to our shareholders -- six months ago -- it was hard to escape the sense of anxiety that many investors everywhere were experiencing. Now, less than a year later, I believe there may be a renewed sense of optimism among investors -- cautious optimism, to be sure, but optimism nonetheless. And I believe there are good, solid reasons for this improved outlook. For one, many key corporations have been reporting profits in recent months. Granted, the numbers are modest, but they have been noteworthy, consistent and credible because many of these same companies are employing stricter accounting standards following the Enron debacle. Going hand-in-hand with these upbeat figures are the improving price-to-earning ratios and improving valuations that many investors are now seeing. The reasons for renewed confidence continue. A year ago, there was much uncertainty regarding the prospect of war. Now, much of that uncertainty is behind us. Although many questions remain about the U.S.'s future role in Iraq, the speed at which Baghdad fell was unprecedented and it brought a sense of calm to many investors and triggered a positive impact on equities markets, which reacted to the news with steady growth during the summer months. And while mortgage and treasury-related sectors may have suffered in the blossoming equity market, high-yield, floating-rate loan and convertible markets remain strong enough to attract investors still squeamish about stocks. This renewed confidence has been tempered, however, by recent events and news stories concerning mutual fund trading practices, including after-hours trading and market timing. I want to clearly state that ING Funds does not condone the illegal practice of after-hours trading. In addition, it has been our long-standing policy to discourage inappropriate market timing in our funds. In fact, over the years, ING Funds has taken a variety of steps to address inappropriate fund trading activity. We were among the first fund groups to employ innovative techniques such as making extensive use of fair-value pricing for foreign securities. ING Funds believes that mutual funds are an important vehicle for individual investors, because mutual funds provide the opportunity for investment in professionally managed and monitored, diversified portfolios. As such, we consider the fair treatment of committed investors to be of the utmost importance. We continue to look for effective strategies to address fund trading issues. We hope that the increased attention this issue is now receiving will make it easier for the industry to effectively address inappropriate fund trading in the future. On behalf of everyone at ING Funds, thank you for your continued support. We look forward to helping you meet your investment goals in the future. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds November 15, 2003 1 (THIS PAGE INTENTIONALLY LEFT BLANK) MARKET PERSPECTIVE: SIX MONTHS ENDED SEPTEMBER 30, 2003 This was a remarkable six months for the world's financial markets. The quick end to major conflict in Iraq meant that risk premia(1) could and did decline across all major asset classes. Equities and the riskier sectors of the fixed income markets soared. The less risky parts of the bond market went on a wild ride and ended up not very far from where they started. In the FIXED INCOME MARKETS, post-war relief predictably reduced the risk premia in high yield bonds. They are, after all, high yield because there is greater chance that investors won't get some or all of their principal back. A more stable business environment reduces that risk. The Credit Suisse First Boston (CSFB) High Yield Bond Index gained 13.1% during the six months ended September 30th. Less risky bonds did not perform as well. The Lehman Brothers U.S. Credit Index, measuring returns on investment grade bonds, rose by 4.7%, while as a whole government bonds were hard pressed to return their coupons. The Lehman Brothers Government Bond Index rose just 1.7%. This, however, conceals the tumult in high-grade bond markets during the period, when almost stock-like volatility was seen. Much of this can be attributed to Federal Reserve Board's Federal Open Market Committee ("FOMC" or the "Fed") Chairman Alan Greenspan. In May, he moved markets by saying that the risk of deflation was small but that the Federal Reserve might even buy bonds to forestall it, and that a second half recovery was expected. This sent Treasury yields to decades-long low levels, even as stocks continued their advance. The ten-year Treasury yield had started April at 3.82%. It sank to 3.10% on June 13th. Bond yields had already come off their low points when the FOMC disappointed markets on June 25th by reducing the Fed Funds rate by only 1/4%. But, in mid-July, when Greenspan appeared to downplay the likelihood that the FOMC would buy bonds after all and presented a sanguine view of the economy, bond yields started to soar. Bond markets stabilized in August as it became clear that the slump of the previous month had been overdone. The ten-year Treasury yield peaked at 4.60%. Then in September, as new doubts emerged about the strength of the U.S. recovery, and supported by massive Treasury purchases from abroad, bonds recovered most of what they had lost. By the end of the period, stressed investors in the ten-year Treasury could reflect that for all that volatility, the yield on September 30th was 3.94%; just 12 basis points above the rate on March 31st. And, if they sought a quieter life in Treasury Bills, the price of the three-month T-Bill at September 30th was the not-so-princely yield of 0.94% per annum. World EQUITY MARKETS had their best six months in years. Global equities, as measured by the Morgan Stanley Capital International (MSCI) World Index, jumped 22.7%. In the U.S., the Standard & Poors (S&P) 500 Index rose 18.5%. In tune with the theme of shrinking risk premia, small cap stocks did much better than mid cap stocks which in turn substantially outperformed large cap stocks. To justify this there were increasingly encouraging signs. Second quarter Gross Domestic Product (GDP) growth estimates were revised up to 3.3%, within which corporate profits from current production rose 14.3% from the same quarter in 2002. Spending on equipment and software, a proxy for business investment, rose by 8.3% (quarter over quarter at an annualized rate). Productivity growth was estimated at the remarkable rate of 6.8%. And yet where were the jobs? The September unemployment report showed another 93,000 decline in payrolls. The nagging concern is that while growth, strong productivity and expanding profit margins are eminently desirable, without jobs growth the recovery must surely fade as consumers' incomes cannot rise fast enough to sustain it and those who have a job feel less secure and confident about spending. In CURRENCIES, the euro and the yen advanced to levels against the dollar not seen in years, as the belief took hold that the U.S.'s burgeoning trade and budget deficits, both approaching 5% of GDP, were unsustainable. ---------- (1) Risk premium (plural - "premia") is the expected additional return required by investors for securities that are perceived to be riskier than safer investments. See accompanying index descriptions on page 19. 3 ING GNMA INCOME FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT TEAM: Denis P. Jamison, CFA and Roseann G. McCarthy, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING GNMA Income Fund (the "Fund") seeks to generate a high level of current income, consistent with liquidity and safety of principal, through investment primarily in Government National Mortgage Association ("Ginnie Mae", "GNMA") mortgage-backed securities (also known as GNMA Certificates) that are guaranteed as to the timely payment of principal and interest by the U.S. Government. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class A shares, excluding sales charges, provided a total return of 1.42% compared to 1.18% for the Lehman Brothers Mortgage-Backed Securities Index ("Lehman Mortgage Index"). PORTFOLIO SPECIFICS: The Fund has a large percentage of its assets invested in call-protected, multi-family mortgages, and active duration management often gives the Fund exposure to thirty-year U.S. Treasury bonds. Accordingly, the Fund tends to be more sensitive to interest rate changes than other GNMA-oriented mutual funds. That was apparent in the results for the six months ended September 30th. From mid-April to mid-June, ten-year bond yields tumbled about 4% to 3.1%. This was actually bad news for most mortgage investors because borrowers increasingly refinanced their loans. These prepayments limited the appreciation of mortgage securities and reduced investment income. With our emphasis on securities with reduced call risk, the Fund outperformance continued. For the three months ended June 30th, the Fund out performed the Lehman Mortgage Index by forty basis points. The market, however, reversed quickly late June when it became clear that the Federal Reserve wasn't going to support the bond market bubble. Yields started to climb and the ten-year U.S. Treasury bonds reached 4.6% by early September. Unfortunately, we added mortgage exposure in early July and despite our efforts to reduce interest rate sensitivity later in the quarter, we couldn't salvage the return. We under performed our benchmark by about twenty basis points in the three months ended September 30, 2003, and the losses would have been a lot worse except for a September bond rally. However, for the six month period as a whole we outperformed the benchmark, especially due to a September bond market rally. MARKET OUTLOOK: Bond price volatility increased during the September quarter. Mortgage investors accounted for some of the increase as they bought and sold U.S. Treasury securities to offset the swings in portfolio maturity caused by changes in prepayments. However, investors also were reacting to uncertainties regarding the pace of economic expansion, the value of the U.S. dollar, and the massive increase in the Federal budget deficit. These will likely remain concerns in the coming months. So, we anticipate continued wide price swings for bonds; this will create both risks and opportunities. The Fund closed the quarter with 6.5% of its assets in short-term U.S. Treasury securities. If yields spike higher and investor sentiment for fixed income securities weakens, we will likely use that liquidity to purchase longer-term bonds and increase the interest rate sensitivity of the portfolio. And this process will likely be reversed if the market rallies. We do not anticipate any significant trend toward either higher or lower yields developing during the next six months. Caution, flexibility, and liquidity may be the keys to good relative performance in such a trendless, volatile market, and your Fund appears to be properly positioned for this environment. 4 Portfolio Managers' Report ING GNMH INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 -------------------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION SINCE INCEPTION OF CLASS B OF CLASS C OF CLASS M 1 YEAR 5 YEAR 10 YEAR 10/6/00 10/13/00 2/23/01 ------ ------ ------- --------------- --------------- --------------- Including Sales Charge: Class A(1) -2.07% 5.52% 6.40% -- -- -- Class B(2) -2.94% -- -- 6.42% -- -- Class C(3) 1.08% -- -- -- 7.21% -- Class M(4) -1.07% -- -- -- -- 5.11% Excluding Sales Charge: Class A 2.81% 6.55% 6.92% -- -- -- Class B 1.95% -- -- 7.30% -- -- Class C 2.06% -- -- -- 7.21% -- Class M 2.25% -- -- -- -- 6.45% Lehman Brothers Mortgage-Backed Securities Index 3.50% 6.52% 6.89% 7.67%(5) 7.67%(5) 6.50%(6)
The table above illustrates the total return of ING GNMA Income Fund against the Lehman Brothers Mortgage-Backed Securities 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 Fund's performance is shown both with and without the imposition of sales charges. The performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Reflects deduction of the maximum Class M sales charge of 3.25%. (5) Since inception performance for index is shown from 10/01/00. (6) Since inception performance for index is shown from 03/01/01. PRINCIPAL RISK FACTOR(S): The market value of the Fund's portfolio securities and the Fund's shares are neither insured or guaranteed by the U.S. Government. GNMA certificates in the Fund's portfolio are subject to early prepayment. Net Asset Value and Yield fluctuate. The value of the Fund's investment may fall when interest rates rise. This Fund may be particularly sensitive to interest rates because it primarily invests in U.S. Government securities. Debt securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more voatile then debt securities with shorter durations. Although FNMA and FHLMC are government sponsored enterprises, their securities are not backed by the full faith and credit of the U.S. Government. Consequently, there are somewhat greater credit risks involved with investing in securities issued by those entities. See accompanying index descriptions on page 19. 5 ING HIGH YIELD BOND FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Greg Jacobs, CFA and Kurt Kringelis, CFA, CPA, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING High Yield Bond Fund (the "Fund") seeks to provide investors with a high level of current income and total return by investing at least 80% of its assets in high yield (high risk) bonds, which are commonly referred to as "Junk Bonds", that are unrated or rated below investment grade. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class A shares, excluding sales charges, provided a total return of 7.53% compared to 13.16% for the Lehman Brothers High Yield Bond Index. PORTFOLIO SPECIFICS: The health of the high yield bond market is often dependent on factors generally associated with equity investments. Recent economic releases have demonstrated that consumers are willing to spend their tax relief, and massive mortgage refinancing continues to have a beneficial impact on disposable incomes. A number of monthly barometers have exceeded consensus forecasts recently. Despite decreasing job contraction and the pace of layoffs, many observers remain disquieted by the slow pace of recovery, the domestic unemployment picture and poor consumer confidence. Returns for the Fund lagged the index over the last six months primarily due to the portfolio's conservative quality and sector positioning. Specifically, the Fund's underweight in CCC and lower grade securities, as well as its underweight in volatile sectors such as finance and utilities, contributed significantly to underperformance. From a fundamental standpoint, we remain constructive on the high yield market. Issuers in general have been more focused on balance sheet maintenance than financing growth plans. Many companies have taken advantage of the strong market in 2003 to refinance debt and extend scheduled maturities. As a result, we have seen the annual default rate for the high yield market drop from over 10% a year to about 5% currently. MARKET OUTLOOK: Notwithstanding the fundamental improvements and achieved returns, opportunities abound. We believe that current trends will continue over the next 6-12 months, causing further spread tightening across the market. The outlook for a stronger fourth calendar quarter is compelling especially with the consumer so willing to spend. The twin deficits -- federal and current account -- will remain challenges; and we are not optimistic on the dollar. An upward economic trajectory is becoming more apparent, but the slope and speed of improvement may be less than past recoveries. As the fundamental environment improves, we expect that the high yield market will continue to reward risk takers, and we have added exposure to lower-rated, more volatile credits. However, we have not and will not deviate from our long-term investment philosophy of building a portfolio consisting of sound fundamental credits with solid balance sheets and improving operations. Consistent with our philosophy, we will continue to be conservatively positioned compared to the benchmark, though we have taken steps to bridge the risk gap between the Fund and the benchmark. 6 Portfolio Managers' Report ING HIGH YIELD BOND FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 ------------------------------------ SINCE INCEPTION 1 YEAR 12/15/98 ------ --------------- Including Sales Charge: Class A(1) 11.62% 4.26% Class B(2) 11.32% 4.25% Class C(3) 15.40% 4.56% Excluding Sales Charge: Class A 17.19% 5.32% Class B 16.32% 4.55% Class C 16.40% 4.56% Lehman Brothers High Yield Bond Securities Index 29.98% 4.19%(4)
The table above illustrates the total return of ING High Yield Bond Fund against the Lehman Brothers High Yield Bond Securities 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 Fund's performance is shown both with and without the imposition of sales charges. The performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for index is shown from 12/01/98. PRINCIPAL RISK FACTOR(S): Investments in high yield bonds are high risk investments. Certain high yield/high risk bonds carry particular market, prepayment and credit risks and may experience greater volatility in market value than investment grade corporate bonds. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are soley domestic. The value of the Fund's investments may fall when interest rates rise. The Fund may be sensitive to changes in interest rates because it may invest in debt securities with intermediate and long terms to maturity. Debt securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than debt securities with shorter durations. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Investment in small-capitalization companies involves greater risk than is customarily associated with larger, more-established companies. The securities may have limited market stability and may be subject to more erratic market movements than securities of larger, more established companies or the market averages in general. See accompanying index descriptions on page 19. 7 ING HIGH YIELD OPPORTUNITY FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Greg Jacobs, CFA and Kurt Kringelis, CFA, CPA, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING High Yield Opportunity Fund (the "Fund") seeks a high level of current income and capital growth primarily through investments in high yield (high risk) debt securities, which are commonly referred to as "Junk Bonds", including those in the lowest ratings. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class A shares, excluding sales charges, provided a total return of 7.85% compared to 13.07% for the Credit Suisse First Boston High Yield Bond Index ("CSFB High Yield Bond Index"). PORTFOLIO SPECIFICS: The health of the high yield bond market is often dependent on factors generally associated with equity investments. Recent economic releases have demonstrated that consumers are willing to spend their tax relief, and massive mortgage refinancing continues to have a beneficial impact on disposable incomes. A number of monthly barometers have exceeded consensus forecasts recently. Despite decreasing job contraction and the pace of layoffs, many observers remain disquieted by the slow pace of recovery, the domestic unemployment picture and poor consumer confidence. Returns for the Fund lagged the index over the last six months primarily due to the portfolio's conservative quality and sector positioning. Specifically, the Fund's underweight in CCC and lower grade securities, as well as its underweight in volatile sectors such as finance and utilities, contributed significantly to underperformance. From a fundamental standpoint, we remain constructive on the high yield market. Issuers in general have been more focused on balance sheet maintenance than financing growth plans. Many companies have taken advantage of the strong market in 2003 to refinance debt and extend scheduled maturities. As a result, we have seen the annual default rate for the high yield market drop from over 10% a year to about 5% currently. MARKET OUTLOOK: Notwithstanding the fundamental improvements and achieved returns, opportunities abound. We believe that current trends will continue over the next 6-12 months, causing further spread tightening across the market. The outlook for a stronger fourth calendar quarter is compelling especially with the consumer so willing to spend. The twin deficits -- federal and current account -- will remain challenges; and we are not optimistic on the dollar. An upward economic trajectory is becoming more apparent, but the slope and speed of improvement may be less than past recoveries. As the fundamental environment improves, we expect that the high yield market will continue to reward risk takers, and we have added exposure to lower-rated, more volatile credits. However, we have not and will not deviate from our long-term investment philosophy of building a portfolio consisting of sound fundamental credits with solid balance sheets and improving operations. Consistent with our philosophy, we will continue to be conservatively positioned compared to the benchmark, though we have taken steps to bridge the risk gap between the Fund and the benchmark. 8 Portfolio Managers' Report ING HIGH YIELD OPPORTUNITY FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 ------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS A, B AND C OF CLASS M 1 YEAR 5 YEAR 3/27/98 5/17/02 ------ ------ ------------------- --------------- Including Sales Charge: Class A(1) 12.04% 0.04% -0.99% -- Class B(2) 11.95% 0.16% -0.80% -- Class C(3) 15.96% 0.42% -0.69% -- Class M(4) 13.54% -- -- 0.71% Excluding Sales Charge: Class A 17.62% 1.02% -0.11% -- Class B 16.95% 0.40% -0.70% -- Class C 16.96% 0.42% -0.69% -- Class M 17.36% -- -- 3.18% Credit Suisse First Boston High Yield Bond Index 28.05% 5.81% 4.30%(5) 14.73%(6)
The table above illustrates the total return of ING High Yield Opportunity Fund against the Credit Suisse First Boston High Yield Bond 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 Fund's performance is shown both with and without the imposition of sales charges. The performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B deferred sales charge of 5%, 2% and 1% respectively, for the 1 year, 5 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Reflects deduction of the maximum Class M sales charge of 3.25%. (5) Since inception performance for index is shown from 04/01/98. (6) Since inception performance for index is shown from 06/01/02. PRINCIPAL RISK FACTOR(S): The Fund may be subject to more credit risk than other income funds because it invests in high yield (or junk bond) debt securities, which are considered predominately speculative with respect to the issuer's continuing ability to meet interest and principal payments. This is especially true during periods of economic uncertainty or economic downturns. The value of the Fund's investments may fall when interest rates rise. Debt securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than debt securities with shorter durations. High yield bonds carry particular market risks and may experience greater volatility and may be less liquid than higher quality investments. Foreign investing and emerging markets do 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. Investment in small-capitalization companies involves greater risk than is customarily associated with larger, more established companies. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Investment in small-capitalization companies involves greater risk than is customarily associated with larger, more-established companies. The securities may have limited market stability and may be subject to more erratic market movements than securities of larger, more established companies or the market averages in general. See accompanying index descriptions on page 19. 9 ING INTERMEDIATE BOND FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT: A team of investment professionals led by James B. Kauffmann, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING Intermediate Bond Fund (the "Fund") seeks to provide investors with a high level of current income, consistent with the preservation of capital and liquidity by investing at least 80% of its assets in investment grade debt securities. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class A shares, excluding sales charges, provided a total return of 2.66% compared to 2.35% for the Lehman Brothers Aggregate Bond Index. PORTFOLIO SPECIFICS: Our investment process seeks to outperform the Lehman Brothers Aggregate Bond Index by emphasizing bond categories we believe are attractive in terms of relative value and by selecting specific bonds that we believe are the best opportunities in each category. Over the six-month period, we tended to favor bonds issued by corporations, for example industrial, financial and utility bonds, and also bonds supported by pools of mortgages on real estate of various kinds. From March 31, 2003 through September 30, 2003 the bond market produced positive returns each month except June and July. The Fund generated its best return compared to the Index in April, primarily because corporate bonds were the best performing category, the Fund had an above-benchmark allocation to them, and the bonds we owned produced better returns than the average for the corporate bond sector. After reaching forty-five year lows early in June, bond yields abruptly reversed direction and climbed over 100 basis points (based on the ten-year U.S. Treasury note), leaving July with the worst monthly decline in bond market values in several years. In fact, July witnessed one of the worst bond routs in memory, and it was the only month in which the Fund did not outperform the Index. Hedging in the mortgage market, confusing announcements from the Federal Reserve Board, and positive economic releases together motivated investors to sell bonds and invest elsewhere. Our process seldom leads us to make major adjustments based on the outlook for interest rates. Accordingly, the Fund's modest underperformance in July, when rates climbed sharply, was solely due to the Fund's positioning in sectors and securities, and not a consequence of any attempt to forecast rates. In the third calendar quarter overall, lower risk issues lagged behind as buyers scrambled to add yield and became more comfortable with the macro economic outlook. The bond groups we follow closely included, Agency bonds, which posted a -0.35% return relative to similar U.S. Treasuries, following a summer full of negative headlines, and mortgage-backed securities which sagged as well, -1.19% during the quarter. On the other hand, credit-sensitive bonds had positive excess returns, as risk aversion seemed to diminish. Industrials posted 0.89%, financials posted 0.68%, and, despite a massive power blackout in the northeast and mid-west, utilities were up 0.38% (all compared to similar U.S. Treasuries). In general, the Fund benefited from a modest overweight to credit sensitive bonds -- especially lower rated issues. In particular, our investment in high yield bonds (issued by corporations judged to have relatively high credit risk) and emerging market debt (bonds issued in developing market countries) produced strong returns. Both sectors' returns are well into double digits calendar year-to-date, and enhanced the Fund's performance over the entire reporting period. Some deft trading in mortgage-backed securities and Agency bonds also added value. MARKET OUTLOOK: We believe that tax cuts, reduced corporate borrowing costs, and negative real short rates are pushing the economy forward. Most domestic economic measures are improving with the exception of unemployment, and near-term prospects for inflationary problems remain muted. In our view, the outlook going forward is compelling, especially with the consumer so willing to spend. The twin deficits -- federal and current account -- will remain challenges; and we are not optimistic on the dollar. Tactically, we are overweight home and commercial mortgage-backed bonds, asset-backed securities, and longer-dated corporate bonds, as well as high yield and emerging market debt. 10 Portfolio Managers' Report ING INTERMEDIATE BOND FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 -------------------------------------------- SINCE INCEPTION 1 YEAR 12/15/98 ------ --------------- Including Sales Charge: Class A(1) 0.94% 7.20% Class B(2) 0.07% 7.13% Class C(3) 4.18% 7.49% Excluding Sales Charge: Class A 5.97% 8.29% Class B 5.07% 7.45% Class C 5.18% 7.49% Lehman Brothers Aggregate Bond Index 5.41% 6.86%(4)
The table above illustrates the total return of ING Intermediate Bond Fund against the Lehman Brothers Aggregate Bond 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 Fund's performance is shown both with and without the imposition of sales charges. The performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B defferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for index is shown from 12/01/98. PRINCIPAL RISK FACTOR(S): Exposure to financial, market, prepayment and interst rate risks. The value of an investment in the Fund is not guaranteed and will fluctuate. Higher yeilding bonds are subject to greater volatility and credit risks. The Fund invests in securities guaranteed by the U.S. Government as to timely payment of interest and principal if held to maturity, but Fund shares are not insured or guaranteed. Bonds have fixed principal and return if held to maturity, but may fluctuate in the interim. The principal risks of investing in the Fund are those generally attributable to bond investing, including increases in interest rates. Generally, when interest rates rise, bond prices fall. Bonds with longer maturities tend to be more sensitive to changes in interest rates. International investing involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties and differences in accounting standards. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Derivatives are subject to 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 Fund. See accompanying index descriptions on page 19. 11 ING NATIONAL TAX-EXEMPT BOND FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT TEAM: Robert Schonbrunn and Karen Cronk, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING National-Tax Exempt Bond Fund, (the "Fund") seeks to provide investors with a high level of current income that is exempt from federal income taxes, and consistent with preservation of capital. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class A shares, excluding sales charges, returned 2.17% compared to a return of 2.66% for the Lehman Brothers Municipal Bond Index and 2.35% for the Lehman Brothers Aggregate Bond Index. PORTFOLIO SPECIFICS The economic outlook was weak and uncertain at the beginning of the second calendar quarter, but gained strength through the spring and summer. The consumer, supported by tax cuts and attractive financing terms, continued to spend, particularly on autos and housing. Capital spending remained in a slow mode, and weak employment and subdued industrial activity were particular concerns. As for interest rate changes over the past six months, tax-exempt bonds were subject to the same influences as other bond categories. Interest rates declined dramatically and then rose dramatically, but ended the period very close to the levels achieved in March. Ten year AAA General Obligation bonds went from yielding 3.75% in March to 3.67% in September. However, these same bonds hit a low yield of near 3.0% in mid June and then rose above the 4.0% level in August. In addition to interest rate volatility the municipal bond market had a number of specific issues to deal with. The general economic weakness has negatively affected tax revenue flow to the states and cities. Although all were affected, California had one of the most negative situations. The state bonds were downgraded to BBB and lost value relative to the national scale. Airport and tobacco bonds improved in price from the lows established in the first calendar quarter of the year, but remained volatile. Performance for the period was enhanced by over weighting the intermediate maturities in the middle of the yield curve. This sector of the yield curve weathered the volatility in rates better than the long end of the curve. Our heavy weighting in New York issues also helped as these bonds outperformed relative to the national scale. Our portfolio duration (sensitivity to interest rate movement) was lower than the index throughout the period, but had minimal impact because the net change in interest rates was so small. Low quality bonds rebounded from low levels in the first calendar quarter and performed relatively well in the current reporting period. Our emphasis on quality and under exposure to the lower quality issues was a negative factor. The Fund's performance also was penalized by exposure to California issues during their period of under performance following the quality rating downgrade. MARKET OUTLOOK: Looking ahead, we believe economic activity may strengthen which will put upward pressure on interest rates. The outlook for corporate earnings is stronger and the worst of the unemployment news should be behind us. However, because the Federal Reserve is committed to holding short-term rates down, inflation is low and the economy is still struggling. Rates are unlikely to rise substantially in the next six months. The Fund expects to maintain its defensive posture in anticipation of a stronger economy and higher interest rates. Duration will remain relatively low as a defensive measure. Although overall credit quality will continue at a high level, we will be investing in some higher yielding issues in the lower quality range. An improving economy enhances expectations for revenues by tax-exempt issuers judged to be of lower quality, and the stronger economic footing increases our comfort level. As interest rates rise and the yield curve flattens, we would expect to take a more defensive position and shift from an over weight in the middle of the yield curve to heavy exposure at both the short and long ends of the curve. 12 Portfolio Managers' Report ING NATIONAL TAX-EXEMPT BOND FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 -------------------------------------------- SINCE INCEPTION 1 YEAR 11/8/99 ------ --------------- Including Sales Charge: Class A(1) -0.88% 5.53% Class B(2) -1.67% 5.38% Class C(3) 2.33% 6.06% Excluding Sales Charge: Class A 4.06% 6.85% Class B 3.31% 6.04% Class C 3.33% 6.06% Lehman Brothers Municipal Bond Index 3.89% 7.78%(4) Lehman Brothers Aggregate Bond Index 5.41% 8.54%(4)
The table above illustrates the total return of ING National Tax-Exempt Bond Fund against the Lehman Brothers Municipal Bond Index, Lehman Brothers Aggregate Bond 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 Fund's performance is shown both with and without the imposition of sales charges. The performance table does not reflect the deduction of taxes that a shareholder will pay (if any) on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B defferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for index is shown from 11/01/99. PRINCIPAL RISK FACTOR(S): Exposure to credit, market and interest rate risk. Fluctuations in the value of the Fund's shares can be expected in response to changes in interest rates. The Fund's investments in mortgage-related securities may entail prepayment risk. Investments in municipal obligations pose special risks. To the extent that the Fund's assets are invested in municipal obligations payable from revenue or similar projects, the Fund will be subject to the peculiar risks presented by such projects. Income recieved from the Fund may be subject to state and local taxes, as well as the federal alternative minimum tax. Derivatives are subject to the risk of changes in the market 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 Fund. See accompanying index descriptions on page 19. 13 ING STRATEGIC BOND FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT: A team of the Sub-Adviser's investment professionals led by James B. Kaufmann, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING Strategic Bond Fund (the "Fund") seeks maximum total return by investing primarily in debt securities issued by U. S. and foreign entities, as well as U. S. and foreign governments and their agencies and instrumentalities, that are rated investment grade by a nationally recognized statistical rating agency, or of comparable quality if unrated. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class A shares, excluding sales charges, provided a total return of 2.34% compared to the Lehman Brothers Aggregate Bond Index, which returned 2.35% for the same period. PORTFOLIO SPECIFICS: Our investment process seeks to outperform the Lehman Brothers Aggregate Bond Index by emphasizing bond categories we believe are attractive in terms of relative value and by selecting specific bonds that we believe are the best opportunities in each category. Over the six-month period, we tended to favor bonds issued by corporations, for example industrial, financial and utility bonds, and also bonds supported by pools of mortgages on real estate of various kinds. From March 31, 2003 through September 30, 2003 the bond market produced positive returns each month except June and July. The Fund generated its best return compared to the Index in April, primarily because corporate bonds were the best performing category, the Fund had an above-benchmark allocation to them, and the bonds we owned produced better returns than the average for the corporate bond sector. After reaching forty-five year lows early in June, bond yields abruptly reversed direction and climbed over 100 basis points (based on the ten-year U.S. Treasury note), leaving July with the worst monthly decline in bond market values in several years. In fact, July witnessed one of the worst bond routs in memory, and it was the only month in which the Fund did not outperform the Index. Hedging in the mortgage market, confusing announcements from the Federal Reserve Board, and positive economic releases together motivated investors to sell bonds and invest elsewhere. Our process seldom leads us to make major adjustments based on the outlook for interest rates. Accordingly, the Fund's modest underperformance in July, when rates climbed sharply, was solely due to the Fund's positioning in sectors and securities, and not a consequence of any attempt to forecast rates. In the third calendar quarter overall, lower-risk issues lagged behind as buyers scrambled to add yield and became more comfortable with the macro economic outlook. The bond groups we follow closely, Agency bonds, posted a -0.35% return relative to similar U.S. Treasuries, which following a summer full of negative headlines, and mortgage-backed securities which sagged as well, -1.19% during the quarter. On the other hand, credit-sensitive bonds had positive excess returns, as risk aversion seemed to diminish. Industrials posted 0.89%, financials posted 0.68%, and despite a massive power blackout in the northeast and mid-west, utilities were up 0.38% (all compared to similar U.S. Treasuries). In general, the Fund benefited from a modest overweight to credit sensitive bonds -- especially lower rated issues. In particular, our investment in high yield bonds (issued by corporations judged to have relatively high credit risk) and emerging market debt (bonds issued in developing market countries) produced strong returns. Both sectors' returns are well into double digits calendar year-to-date, and enhanced the portfolio's performance over the entire reporting period. Some deft trading in mortgage-backed securities and Agency bonds also added value. MARKET OUTLOOK: We believe that tax cuts, reduced corporate borrowing costs, and negative real short rates are pushing the economy forward. Most domestic economic measures are improving with the exception of unemployment, and near-term prospects for inflationary problems remain muted. In our view, the outlook going forward is compelling, especially with the consumer so willing to spend. The twin deficits -- federal and current account -- will remain challenges; and we are not optimistic on the dollar. Tactically, we are overweight home and commercial mortgage-backed bonds, asset-backed securities, and longer-dated corporate bonds, as well as high yield and emerging market debt. 14 Portfolio Managers' Report ING STRATEGIC BOND FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 ------------------------------------ SINCE INCEPTION 1 YEAR 5 YEAR 7/27/98 ------ ------ --------------- Including Sales Charge: Class A(1) 2.74% 2.60% 2.97% Class B(2) 2.53% 2.95% 3.45% Class C(3) 6.47% 3.25% 3.59% Excluding Sales Charge: Class A 7.86% 3.60% 3.95% Class B 7.53% 3.25% 3.59% Class C 7.47% 3.25% 3.59% Lehman Brothers Aggregate Bond Index 5.41% 6.63% 7.22%(4)
The table above illustrates the total return of ING Strategic Bond Fund against the Lehman Brothers Aggregate Bond 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 Fund's performance is shown both with and without the imposition of sales charges. The performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B defferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for index is shown from 08/01/98. PRINCIPAL RISK FACTOR(S): High yield bonds have exposure to financial, market and interest rate risks. High yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio, and in some cases, the lower market prices for those instruments. The Fund's investments in mortgage-related securities may entail prepayment risk. The Fund may invest up to 30% of its total assets in securities payable in foriegn currencies. International investing does pose special risks, including currency fluctuation and political risks not found in domestic investments. High yield securities may be less liquid than higher quality investments. The Fund could lose money if it cannot sell a secruity at the time and price that would be most beneficial to the Fund. Derivatives are subject to the risk of changes in the market 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 Fund. See accompanying index descriptions on page 19. 15 ING CLASSIC MONEY MARKET FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT: A team of investment professionals led by Jennifer J. Thompson, CFA, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING Classic Money Market Fund (the "Fund") seeks to provide investors with a high level of current income, consistent with the preservation of capital and liquidity and the maintenance of a stable $1.00 net asset value per share. PORTFOLIO SPECIFICS: The period covered by this report was volatile for the fixed income markets. After the end of major fighting in Iraq, market participants began focusing on the economy. Concerns about a weakened economy, falling inflation and the potential consequences of deflation caused a significant rally in U.S. Treasury bonds. The Federal Reserve Board's Federal Open Market Committee (the "Fed") provided stimulus by lowering its Federal Funds ("Fed Funds") target rate to 1.0% from 1.25% in June. Stable economic fundamentals and technical factors in the marketplace caused a subsequent and significant sell-off in the Treasury market. By the end of the period, concerns about the lack of follow-through and ongoing weakness in the labor markets prevailed causing Treasury bonds to rally back to where they began the semi-annual period. In the short-end of the market (securities maturing in 13 months or less), the London-Inter-Bank Offered Rate ("LIBOR") yield curve from one-month to twelve-months was flat or inverted until the Fed lowered rates in June. It then began to steepen in conjunction with the Treasury market sell-off as investors became more optimistic about the economy's outlook. Finally, as the labor markets remained subdued, the yield curve flattened leaving the spread between one-month LIBOR and 12-month LIBOR at 18 basis points, down from an August high of 38 basis points. With this market backdrop, during most of the period the fund utilized a barbell strategy, whereby maturities of the securities in the portfolio were concentrated at the two extremes of the suitable maturity range. When the yield curve was flat or inverted, purchases were kept short in the one-month to three-month area. In addition, the Fund increased its purchase of floating rate notes. However, prior to the Fed ease in June and as the yield curve steepened when 12-month rates increased in July and August, the fund purchased long paper to take advantage of the higher rates. At the semi-annual period end, the Fund's weighted average maturity was generally longer than competitors. MARKET OUTLOOK: Going forward, we expect the Fed to leave its Fed Funds target rate unchanged until the labor markets show clear and continued signs of improvement. Additionally, we believe that LIBOR rates will fluctuate within a very narrow range until market participants can better ascertain the point at which the Fed will raise rates. The Fund will continue to use a barbell strategy and attempt to buy long paper when LIBOR rates are at the top-end of their trading range. Otherwise, purchases will be limited primarily to floating rate notes or securities maturing in the one-month to three-month time frame. The average maturity is expected to remain longer than competitors but may fluctuate based upon the level of interest rates. PRINCIPAL RISK FACTOR(S): An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 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. Fund 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. See accompanying index descriptions on page 19. 16 Portfolio Managers' Report ING MONEY MARKET FUND PORTFOLIO MANAGEMENT: A team of investment professionals led by Jennifer J. Thompson, CFA, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING Money Market Fund (the "Fund") seeks to provide a high level of current income while preserving capital and liquidity. The Fund may achieve this objective by investing in a portfolio of high quality U.S. denominated short-term debt obligations. PORTFOLIO SPECIFICS: The period covered by this report was volatile for the fixed income markets. After the end of major fighting in Iraq, market participants began focusing on the economy. Concerns about a weakened economy, falling inflation and the potential consequences of deflation caused a significant rally in U.S. Treasury bonds. The Federal Reserve Board's Federal Open Market Committee (the "Fed") provided stimulus by lowering its Federal Funds ("Fed Funds") target rate to 1.0% from 1.25% in June. Stable economic fundamentals and technical factors in the marketplace caused a subsequent and significant sell-off in the Treasury market. By the end of the period, concerns about the lack of follow-through and ongoing weakness in the labor markets prevailed causing Treasury bonds to rally back to where they began the semi-annual period. In the short-end of the market (securities maturing in 13 months or less), the London-Inter-Bank-Offered Rate ("LIBOR") yield curve from one-month to twelve-months was flat or inverted until the Fed lowered rates in June. It then began to steepen in conjunction with the Treasury market sell-off as investors became more optimistic about the economy's outlook. Finally, as the labor markets remained subdued, the yield curve flattened leaving the spread between one-month LIBOR and 12-month LIBOR at 18 basis points, down from an August high of 38 basis points. With this market backdrop, the Fund utilized a barbell strategy, whereby maturities of the securities in the portfolio were concentrated at the two extremes of the suitable maturity range. When the yield curve was flat or inverted, purchases were kept short in the one-month to three-month area. In addition, the Fund increased its purchase of floating rate notes. However, prior to the Fed ease in June and as the yield curve steepened when 12-month rates increased in July and August, the Fund purchased long paper to take advantage of the higher rates. At the semi-annual period end, the Fund's weighted average maturity was generally longer than competitors. MARKET OUTLOOK: Going forward, we expect the Fed to leave its Fed Funds target rate unchanged until the labor markets show clear and continued signs of improvement. Additionally, we believe that LIBOR rates will fluctuate within a very narrow range until market participants can better ascertain the point at which the Fed will raise rates. The Fund will continue to use a barbell strategy and attempt to buy long paper when LIBOR rates are at the top-end of their trading range. Otherwise, purchases will be limited primarily to floating rate notes or securities maturing in the one-month to three-month time frame. The average maturity is expected to remain longer than competitors but may fluctuate based upon the level of interest rates. PRINCIPAL RISK FACTOR(S): An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 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. Fund 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. See accompanying index descriptions on page 19. 17 ING LEXINGTON MONEY MARKET TRUST Portfolio Managers' Report PORTFOLIO MANAGEMENT: A team of investment professionals led by Jennifer J. Thompson, CFA, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING Lexington Money Market Trust (the "Trust") seeks to provide high current income while preserving capital and liquidity. This objective is achieved by investing in a portfolio of high quality U.S. denominated short-term debt obligations. PORTFOLIO SPECIFICS: The period covered by this report was volatile for the fixed income markets. After the end of major fighting in Iraq, market participants began focusing on the economy. Concerns about a weakened economy, falling inflation and the potential consequences of deflation caused a significant rally in U.S. Treasury bonds. The Federal Reserve Board's Federal Open Market Committee (the "Fed") provided stimulus by lowering its Federal Funds ("Fed Funds") target rate to 1.0% from 1.25% in June. Stable economic fundamentals and technical factors in the marketplace caused a subsequent and significant sell-off in the Treasury market. By the end of the period, concerns about the lack of follow-through and ongoing weakness in the labor markets prevailed causing Treasury bonds to rally back to where they began the semi-annual period. In the short-end of the market (securities maturing in 13 months or less), the London-Inter-Bank Offered Rate ("LIBOR") yield curve from one-month to twelve-months was flat or inverted until the Fed lowered rates in June. It then began to steepen in conjunction with the Treasury market sell-off as investors became more optimistic about the economy's outlook. Finally, as the labor markets remained subdued, the yield curve flattened leaving the spread between one-month LIBOR and 12-month LIBOR at 18 basis points, down from an August high of 38 basis points. With this market backdrop, the Trust utilized a barbell strategy, whereby maturities of the securities in the portfolio were concentrated at the two extremes of the suitable maturity range. When the yield curve was flat or inverted, purchases were kept short in the one-month to three-month area. In addition, the Trust increased its purchase of floating rate notes. However, prior to the Fed ease in June and as the yield curve steepened when 12-month rates increased in July and August, the Trust purchased long paper to take advantage of the higher rates. At the semi-annual period end, the Fund's weighted average maturity was generally longer than competitors. MARKET OUTLOOK: Going forward, we expect the Fed to leave its Fed Funds target rate unchanged until the labor markets show clear and continued signs of improvement. Additionally, we believe that LIBOR rates will fluctuate within a very narrow range until market participants can better ascertain the point at which the Fed will raise rates. The Trust will continue to use a barbell strategy and attempt to buy long paper when LIBOR rates are at the top-end of their trading range. Otherwise, purchases will be limited primarily to floating rate notes or securities maturing in the one-month to three-month time frame. The average maturity is expected to remain longer than competitors but may fluctuate based upon the level of interest rates. PRINCIPAL RISK FACTOR(S): An investment in the Trust is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Trust seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Trust. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. Trust holdings are subject to change daily. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. See accompanying index descriptions on page 19. 18 INDEX DESCRIPTIONS THE CREDIT SUISSE FIRST BOSTON HIGH YIELD BOND INDEX serves as a benchmark to evaluate the performance of low quality bonds. Low quality is defined as those bonds in the range from BBB to CCC and defaults. THE LEHMAN BROTHERS AGGREGATE BOND INDEX is a widely recognized, unmanaged index of publicly issued investment grade U.S. Government, mortgage-backed, asset-backed and corporate debt securities. THE LEHMAN BROTHERS GOVERNMENT BOND INDEX is an index made up of the Treasury Bond Index and the Agency Bond Index as well as the 1-3 Year Government Index and the 20+ Year Treasury Index. THE LEHMAN BROTHERS HIGH YIELD BOND INDEX is an unmanaged index that includes all fixed income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $100m, and at least 1 year to maturity. Investors cannot invest directly in an index. THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is an unmanaged index composed of fixed income security mortgage pools sponsored by GNMA, FNMA and FHLMC, including GNMA Graduated Payment Mortgages. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an unmanaged index of approximately 1,100 investment grade tax-exempt bonds classified into four sectors: general obligation, revenue, insured and pre-refunded. THE LEHMAN BROTHERS U.S. CREDIT INDEX includes investment grade bonds issued by corporations and non-corporate entities. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an unmanaged index that measures the performance of over 1,400 securities listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand and the Far East. THE STANDARD & POORS 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. All indices are unmanaged. An investor cannot invest directly in an index. 19 STATEMENTS OF ASSETS AND LIABILITIES as of September 30, 2003 (Unaudited)
ING ING ING ING HIGH YIELD HIGH YIELD INTERMEDIATE GNMA INCOME BOND OPPORTUNITY BOND FUND FUND FUND FUND ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 843,124,561 $ 64,022,017 $ 299,092,061 $ 373,571,405 Short-term investments at amortized cost -- 2,507,000 7,261,000 12,634,000 Cash 404,959 169,375 778,977 -- Receivables: Investment securities sold -- 21,350 640,575 43,744,094 Fund shares sold 517,672 27,392 212,115 1,071,712 Dividends and interest 3,915,629 1,472,682 7,498,567 2,364,897 Other -- 6,769 -- -- Other investments -- 16,602,023 82,978,167 71,635,383 Prepaid expenses 69,256 20,971 69,998 32,882 Reimbursement due from manager -- -- -- 2,005 ------------- ------------- ------------- ------------- Total assets 848,032,077 84,849,579 398,531,460 505,056,378 ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased 1,040,827 306,188 1,406,650 101,369,045 Payable for fund shares redeemed 413,821 48,669 1,173,772 358,494 Income distribution payable -- 361,678 1,421,474 786,367 Payable upon return of securities loaned -- 16,602,023 82,978,167 71,635,383 Payable to affiliates 715,354 75,941 409,318 303,946 Payable to custodian -- -- -- 155,520 Payable for trustee fees 47,233 179 12,838 1,013 Other accrued expenses and liabilities 539,660 87,320 363,632 136,126 ------------- ------------- ------------- ------------- Total liabilities 2,756,895 17,481,998 87,765,851 174,745,894 ------------- ------------- ------------- ------------- NET ASSETS $ 845,275,182 $ 67,367,581 $ 310,765,609 $ 330,310,484 ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in Capital $ 822,679,957 $ 72,530,095 $ 780,359,904 $ 321,181,852 Undistributed net investment income (accumulated net investment loss) 4,995,837 (3,259) (6,382,367) 390,371 Accumulated net realized gain (loss) on investments and foreign currencies (14,898,286) (8,547,318) (431,430,648) 3,823,574 Net unrealized appreciation (depreciation) of investments and foreign currencies 32,497,674 3,388,063 (31,781,280) 4,914,687 ------------- ------------- ------------- ------------- NET ASSETS $ 845,275,182 $ 67,367,581 $ 310,765,609 $ 330,310,484 ============= ============= ============= ============= * Cost of securities $ 810,626,887 $ 60,633,954 $ 330,873,783 $ 368,656,718
See Accompanying Notes to Financial Statements 20 STATEMENTS OF ASSETS AND LIABILITIES as of September 30, 2003 (Unaudited)
ING ING ING ING HIGH YIELD HIGH YIELD INTERMEDIATE GNMA INCOME BOND OPPORTUNITY BOND FUND FUND FUND FUND ------------- ------------- ------------- ------------- CLASS A: Net Assets $ 615,775,686 $ 41,710,367 $ 90,696,180 $ 184,329,456 Shares authorized unlimited unlimited unlimited unlimited Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 69,121,800 4,843,305 13,137,554 17,351,942 Net asset value and redemption price per share $ 8.91 $ 8.61 $ 6.90 $ 10.62 Maximum offering price per share (4.75%)(1) $ 9.35 $ 9.04 $ 7.24 $ 11.15 CLASS B: Net Assets $ 142,380,380 $ 16,843,329 $ 191,575,361 $ 66,223,305 Shares authorized unlimited unlimited unlimited unlimited Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 16,055,457 1,955,671 27,597,254 6,245,459 Net asset value and redemption price per share(2) $ 8.87 $ 8.61 $ 6.94 $ 10.60 Maximum offering price per share $ 8.87 $ 8.61 $ 6.94 $ 10.60 CLASS C: Net Assets $ 78,337,481 $ 8,813,885 $ 25,114,873 $ 65,973,569 Shares authorized unlimited unlimited unlimited unlimited Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 8,823,856 1,023,336 3,620,176 6,217,644 Net asset value and redemption price per share(2) $ 8.88 $ 8.61 $ 6.94 $ 10.61 Maximum offering price per share $ 8.88 $ 8.61 $ 6.94 $ 10.61 CLASS I: Net Assets $ 8,190,350 n/a n/a $ 13,784,154 Shares authorized unlimited n/a n/a unlimited Par value $ 0.001 n/a n/a $ 0.001 Shares outstanding 918,588 n/a n/a 1,297,446 Net asset value and redemption price per share $ 8.92 n/a n/a $ 10.62 Maximum offering price per share $ 8.92 n/a n/a $ 10.62 CLASS M: Net Assets $ 438,450 n/a $ 3,216,991 n/a Shares authorized unlimited n/a unlimited n/a Par value $ 0.001 n/a $ 0.001 n/a Shares outstanding 49,156 n/a 466,367 n/a Net asset value and redemption price per share $ 8.92 n/a $ 6.90 n/a Maximum offering price per share (3.25%)(3) $ 9.22 n/a $ 7.13 n/a CLASS Q: Net Assets $ 152,835 n/a $ 162,204 n/a Shares authorized unlimited n/a unlimited n/a Par value $ 0.001 n/a $ 0.001 n/a Shares outstanding 17,139 n/a 23,429 n/a Net asset value and redemption price per share $ 8.92 n/a $ 6.92 n/a Maximum offering price per share $ 8.92 n/a $ 6.92 n/a
---------- (1) Maximum offering price is computed at 100/95.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.75 of net asset value. On purchases of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 21 STATEMENTS OF ASSETS AND LIABILITIES as of September 30, 2003 (Unaudited)
ING ING ING ING NATIONAL STRATEGIC CLASSIC ING LEXINGTON TAX-EXEMPT BOND BOND MONEY MARKET MONEY MARKET MONEY MARKET FUND FUND FUND FUND TRUST --------------- ------------- ------------- ------------- ------------- ASSETS: Investments in securities at value* $ 27,542,708 $ 44,959,770 $ -- $ -- $ -- Short-term investments at amortized cost -- 9,050,000 446,659,291 54,383,978 47,964,405 Cash 88,745 7,237 4,814 1,677 1,191 Receivables: Investment securities sold -- 5,502,122 -- -- -- Fund shares sold 19,207 27,279 85,829 76,857 -- Dividends and interest 405,432 357,341 1,114,676 172,007 117,138 Other investments -- 7,753,044 -- -- -- Prepaid expenses 30,229 34,898 82,338 28,300 13,131 Reimbursement due from manager -- 2,789 -- 32,202 -- --------------- ------------- ------------- ------------- ------------- Total assets 28,086,321 67,694,480 447,946,948 54,695,021 48,095,865 --------------- ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased -- 12,700,783 4,600,000 500,000 500,000 Payable for fund shares redeemed -- 64,181 4,163 60,784 -- Payable upon return of securities loaned -- 7,753,044 -- -- -- Payable to affiliates 22,176 39,969 206,577 55,653 23,229 Payable for trustee fees 393 5,635 1,098 1,744 66,509 Other accrued expenses and liabilities 122,721 165,080 720,749 126,650 140,197 --------------- ------------- ------------- ------------- ------------- Total liabilities 145,290 20,728,692 5,532,587 744,831 729,935 --------------- ------------- ------------- ------------- ------------- NET ASSETS $ 27,941,031 $ 46,965,788 $ 442,414,361 $ 53,950,190 $ 47,365,930 =============== ============= ============= ============= ============= NET ASSETS WERE COMPRISED OF: Paid-in capital $ 25,742,447 $ 57,414,336 $ 442,447,710 $ 53,876,583 $ 47,366,545 Undistributed net investment income (accumulated net investment loss) 259 (108,578) 2,071 75,355 -- Accumulated net realized gain (loss) on investments and foreign currencies 387,404 (10,786,814) (35,420) (1,748) (615) Net unrealized appreciation of investments and foreign currencies 1,810,921 446,844 -- -- -- --------------- ------------- ------------- ------------- ------------- NET ASSETS $ 27,941,031 $ 46,965,788 $ 442,414,361 $ 53,950,190 $ 47,365,930 =============== ============= ============= ============= ============= * Cost of securities $ 25,731,787 $ 44,512,926 $ -- $ -- $ --
See Accompanying Notes to Financial Statements 22 STATEMENTS OF ASSETS AND LIABILITIES as of September 30, 2003 (Unaudited)
ING ING ING ING NATIONAL STRATEGIC CLASSIC ING LEXINGTON TAX-EXEMPT BOND BOND MONEY MARKET MONEY MARKET MONEY MARKET FUND FUND FUND FUND TRUST --------------- ------------- ------------- ------------- ------------- CLASS A: Net Assets $ 23,975,812 $ 30,255,617 $ 440,840,037 $ 17,221,564 $ 47,365,930 Shares authorized unlimited unlimited unlimited unlimited unlimited Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 2,195,912 2,669,979 440,894,786 17,231,587 47,366,545 Net asset value and redemption price per share $ 10.92 $ 11.33 $ 1.00 $ 1.00 $ 1.00 Maximum offering price per share $ 11.46(1) $ 11.90(1) $ 1.00 $ 1.00 $ 1.00 CLASS B: Net Assets $ 2,759,390 $ 13,144,211 $ 1,034,339 $ 29,229,390 n/a Shares authorized unlimited unlimited unlimited unlimited n/a Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 n/a Shares outstanding 252,857 1,190,974 1,034,804 29,232,126 n/a Net asset value and redemption price per share(2) $ 10.91 $ 11.04 $ 1.00 $ 1.00 n/a Maximum offering price per share $ 10.91 $ 11.04 $ 1.00 $ 1.00 n/a CLASS C: Net Assets $ 1,205,829 $ 3,470,322 $ 539,985 $ 7,499,236 n/a Shares authorized unlimited unlimited unlimited unlimited n/a Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 n/a Shares outstanding 110,415 298,567 539,843 7,502,330 n/a Net asset value and redemption price per share(2) $ 10.92 $ 11.62 $ 1.00 $ 1.00 n/a Maximum offering price per share $ 10.92 $ 11.62 $ 1.00 $ 1.00 n/a CLASS Q: Net Assets n/a $ 95,638 n/a n/a n/a Shares authorized n/a unlimited n/a n/a n/a Par value n/a $ 0.001 n/a n/a n/a Shares outstanding n/a 8,952 n/a n/a n/a Net asset value and redemption price per share n/a $ 10.68 n/a n/a n/a Maximum offering price per share n/a $ 10.68 n/a n/a n/a
---------- (1) Maximum offering price (4.75%) is computed at 100/95.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 23 STATEMENTS OF OPERATIONS for the six months ended September 30, 2003 (Unaudited)
ING ING ING ING HIGH YIELD HIGH YIELD INTERMEDIATE GNMA INCOME BOND OPPORTUNITY BOND FUND(1) FUND FUND(1) FUND ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ -- $ 40,165 $ 166,163 $ 7,072 Interest 25,464,540 2,737,767 13,178,984 6,583,738 Securities lending income 116,805 1,997 12,889 10,211 ------------- ------------- ------------- ------------- Total investment income 25,581,345 2,779,929 13,358,036 6,601,021 ------------- ------------- ------------- ------------- EXPENSES: Investment management fees 2,159,348 218,871 997,546 784,868 Distribution and service fees: Class A 809,912 77,151 184,934 301,498 Class B 744,711 74,212 973,705 328,762 Class C 430,468 37,862 131,865 307,873 Class M 3,154 -- 12,457 -- Class Q 220 -- 934 -- Class T 6,436 -- 5,355 -- Transfer agent fees: Class A 369,169 34,611 88,597 132,390 Class B 86,228 12,839 160,226 50,572 Class C 49,841 6,551 21,646 47,497 Class I 2,112 -- -- 226 Class M 493 -- 1,300 -- Class Q 46 -- 194 -- Class T 1,947 -- 1,697 -- Administrative service fees 446,081 33,672 166,445 156,972 Shareholder reporting expense 126,710 2,410 91,613 22,331 Registration fees 71,133 18,648 50,085 26,722 Professional fees 64,263 5,939 81,478 16,080 Custody and accounting expense 85,886 15,665 30,515 40,251 Trustee fees 18,856 549 5,686 1,607 Insurance expense 7,644 497 3,953 925 Miscellaneous expense 9,461 646 5,911 1,998 ------------- ------------- ------------- ------------- Total expenses 5,494,119 540,123 3,016,142 2,220,572 ------------- ------------- ------------- ------------- Less: Net waived and reimbursed fees -- 21,482 94,043 85,791 ------------- ------------- ------------- ------------- Net expenses 5,494,119 518,641 2,922,099 2,134,781 ------------- ------------- ------------- ------------- Net investment income 20,087,226 2,261,288 10,435,937 4,466,240 ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND FUTURES: Net realized gain (loss) on: Investments 958,028 705,855 (5,673,866) 1,863,310 Foreign currencies -- -- -- 11,870 Futures -- -- -- (916,783) ------------- ------------- ------------- ------------- Net realized gain (loss) on investments and foreign currencies 958,028 705,855 (5,673,866) 958,397 ------------- ------------- ------------- ------------- Net change in unrealized appreciation (depreciation) on Investments (10,656,605) 1,762,414 20,471,526 1,563,727 ------------- ------------- ------------- ------------- Net realized and unrealized gain (loss) on investments, foreign currencies and futures (9,698,577) 2,468,269 14,797,660 2,522,124 ------------- ------------- ------------- ------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,388,649 $ 4,729,557 $ 25,233,597 $ 6,988,364 ============= ============= ============= =============
---------- (1) Effective June 2, 2003, Class "T" shares converted into the corresponding Class "A" shares within this portfolio. See Accompanying Notes to Financial Statements 24 STATEMENTS OF OPERATIONS for the six months ended September 30, 2003 (Unaudited)
ING ING ING ING NATIONAL STRATEGIC CLASSIC ING LEXINGTON TAX-EXEMPT BOND BOND MONEY MARKET MONEY MARKET MONEY MARKET FUND FUND FUND FUND TRUST --------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ -- $ 14,434* $ -- $ -- $ -- Interest 648,500 1,250,177 2,797,580 354,528 292,751 Securities lending income -- 1,240 -- -- -- --------------- ------------- ------------- ------------- ------------- Total investment income 648,500 1,265,851 2,797,580 354,528 292,751 --------------- ------------- ------------- ------------- ------------- EXPENSES: Investment management fees 71,623 109,522 561,339 101,322 120,368 Distribution and service fees: Class A 43,157 54,042 1,678,023 23,042 -- Class B 14,133 51,632 5,326 153,713 -- Class C 5,806 14,783 2,666 43,615 -- Class Q -- 119 -- -- -- Transfer agent fees: Class A 20,962 36,580 224,406 16,601 26,475 Class B 2,402 16,316 534 27,644 -- Class C 987 4,671 267 7,829 -- Class Q -- 24 -- -- -- Administrative service fees 14,325 24,354 -- 28,939 24,074 Shareholder reporting expense 3,861 11,644 105,055 27,520 3,130 Registration fees 18,114 29,915 40,155 27,262 12,958 Professional fees 2,818 6,792 57,636 10,060 3,371 Custody and accounting expense 1,457 5,940 51,440 10,840 5,819 Trustee fees 465 1,716 8,967 1,281 534 Insurance expense 274 565 5,088 39 588 Miscellaneous expense 625 355 5,812 1,116 851 --------------- ------------- ------------- ------------- ------------- Total expenses 201,009 368,970 2,746,714 480,823 198,168 --------------- ------------- ------------- ------------- ------------- Less: Net waived and reimbursed fees 20,729 52,817 1,011,800 196,297 -- --------------- ------------- ------------- ------------- ------------- Net expenses 180,280 316,153 1,734,914 284,526 198,168 --------------- ------------- ------------- ------------- ------------- Net investment income 468,220 949,698 1,062,666 70,002 94,583 --------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments 79,614 1,405,950 (52) (12) (7) Net change in unrealized appreciation (depreciation) on investments 52,646 (829,192) -- -- -- --------------- ------------- ------------- ------------- ------------- Net realized and unrealized gain (loss) on investments 132,260 576,758 (52) (12) (7) --------------- ------------- ------------- ------------- ------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 600,480 $ 1,526,456 $ 1,062,614 $ 69,990 $ 94,576 =============== ============= ============= ============= =============
---------- * Dividends from investment in mutual fund(s) that are within the ING Family of Funds. See Accompanying Notes to Financial Statements 25 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING GNMA INCOME FUND ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003(1) 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 20,087,226 $ 36,889,960 Net realized gain on investments 958,028 5,042,643 Net change in unrealized appreciation (depreciation) of investments (10,656,605) 34,018,750 --------------- --------------- Net increase in net assets resulting from operations 10,388,649 75,951,353 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (15,571,568) (29,495,907) Class B (3,051,558) (4,693,328) Class C (1,758,472) (2,537,958) Class I (207,999) (220,288) Class M (18,709) (40,111) Class Q (4,291) (10,700) Class T (101,868) (469,273) --------------- --------------- Total distributions (20,714,465) (37,467,565) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 198,548,726 821,729,875 Dividends reinvested 13,884,174 30,193,127 --------------- --------------- 212,432,900 851,923,002 Cost of shares redeemed (279,591,762) (633,633,432) --------------- --------------- Net increase (decrease) in net asset resulting from capital share transactions (67,158,862) 218,289,570 --------------- --------------- Net increase (decrease) in net assets (77,484,678) 256,773,358 NET ASSETS: Net assets, beginning of period 922,759,860 665,986,502 --------------- --------------- Net assets, end of period $ 845,275,182 $ 922,759,860 =============== =============== Undistributed net investment income $ 4,995,837 $ 5,623,076 =============== ===============
---------- (1) Effective June 2, 2003, Class "T" shares converted into the corresponding Class "A" shares within this portfolio. See Accompanying Notes to Financial Statements 26 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING HIGH YIELD BOND FUND ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 2,261,288 $ 3,445,168 Net realized gain (loss) on investments 705,855 (3,397,962) Net change in unrealized appreciation of investments 1,762,414 1,176,457 --------------- --------------- Net increase in net assets resulting from operations 4,729,557 1,223,663 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (1,574,578) (2,766,837) Class B (459,136) (521,174) Class C (234,351) (156,078) --------------- --------------- Total distributions (2,268,065) (3,444,089) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 32,516,066 29,329,351 Dividends reinvested 743,910 2,417,063 --------------- --------------- 33,259,976 31,746,414 Cost of shares redeemed (28,594,264) (16,116,161) --------------- --------------- Net increase in net asset resulting from capital share transactions 4,665,712 15,630,253 --------------- --------------- Net increase in net assets 7,127,204 13,409,827 NET ASSETS: Net assets, beginning of period 60,240,377 46,830,550 --------------- --------------- Net assets, end of period $ 67,367,581 $ 60,240,377 =============== =============== Undistributed net investment income (accumulated net investment loss) at end of period $ (3,259) $ 3,518 =============== ===============
See Accompanying Notes to Financial Statements 27 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING HIGH YIELD OPPORTUNITY FUND ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003(1) 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 10,435,937 $ 30,457,234 Net realized loss on investments and foreign currencies (5,673,866) (96,633,896) Net change in unrealized appreciation of investments and foreign currencies 20,471,526 56,996,543 --------------- --------------- Net increase (decrease) in net assets resulting from operations 25,233,597 (9,180,119) --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (4,317,058) (9,456,286) Class B (7,216,672) (21,289,988) Class C (981,907) (2,702,939) Class M (127,743) (371,212) Class Q (32,884) (155,515) Class T (77,747) (768,604) --------------- --------------- Total distributions (12,754,011) (34,744,544) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 160,250,385 133,859,674 Net proceeds from shares issued in merger -- 165,224,943 Dividends reinvested 4,112,746 12,333,581 --------------- --------------- 164,363,131 311,418,198 Cost of shares redeemed (195,711,533) (171,385,626) --------------- --------------- Net increase (decrease) in net asset resulting from capital share transactions (31,348,402) 140,032,572 --------------- --------------- Net increase (decrease) in net assets (18,868,816) 96,107,909 NET ASSETS: Net assets, beginning of period 329,634,425 233,526,516 --------------- --------------- Net assets, end of period $ 310,765,609 $ 329,634,425 =============== =============== Accumulated net investment loss $ (6,382,367) $ (4,064,293) =============== ===============
---------- (1) Effective June 2, 2003, Class "T" Shares converted into the corresponding "A" Shares within this portfolio. See Accompanying Notes to Financial Statements 28 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING INTERMEDIATE BOND FUND ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 4,466,240 $ 4,368,653 Net realized gain on investments 958,397 6,354,721 Net change in unrealized appreciation of investments 1,563,727 3,644,655 --------------- --------------- Net increase in net assets resulting from operations 6,988,364 14,368,029 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (2,687,394) (2,646,393) Class B (787,682) (883,176) Class C (734,231) (640,872) Class I (268,643) (477,266) Net realized gain from investments: Class A -- (1,231,072) Class B -- (615,852) Class C -- (439,608) Class I -- (189,306) --------------- --------------- Total distributions (4,477,950) (7,123,545) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 169,029,601 332,254,935 Dividends reinvested 2,368,595 5,172,910 --------------- --------------- 171,398,196 337,427,845 Cost of shares redeemed (119,816,449) (137,354,984) --------------- --------------- Net increase in net asset resulting from capital share transactions 51,581,747 200,072,861 --------------- --------------- Net increase in net assets 54,092,161 207,317,345 NET ASSETS: Net assets, beginning of period 276,218,323 68,900,978 --------------- --------------- Net assets, end of period $ 330,310,484 $ 276,218,323 =============== =============== Undistributed net investment income $ 390,371 $ 402,081 =============== ===============
See Accompanying Notes to Financial Statements 29 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING NATIONAL TAX-EXEMPT BOND FUND ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 468,220 $ 942,720 Net realized gain on investments 79,614 554,367 Net change in unrealized appreciation of investments 52,646 1,064,463 --------------- --------------- Net increase in net assets resulting from operations 600,480 2,561,550 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (415,868) (864,277) Class B (37,084) (65,210) Class C (15,269) (13,233) Net realized gain from investments: Class A -- (278,763) Class B -- (28,167) Class C -- (5,340) --------------- --------------- Total distributions (468,221) (1,254,990) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 3,723,832 5,127,333 Dividends reinvested 162,190 1,192,567 --------------- --------------- 3,886,022 6,319,900 Cost of shares redeemed (3,580,054) (4,528,460) --------------- --------------- Net increase in net asset resulting from capital share transactions 305,968 1,791,440 --------------- --------------- Net increase in net assets 438,227 3,098,000 NET ASSETS: Net assets, beginning of period 27,502,804 24,404,804 --------------- --------------- Net assets, end of period $ 27,941,031 $ 27,502,804 =============== =============== Undistributed net investment income $ 259 $ 260 =============== ===============
See Accompanying Notes to Financial Statements 30 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING STRATEGIC BOND FUND ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 949,698 $ 2,452,863 Net realized gain (loss) on investments and foreign currencies 1,405,950 (1,656,314) Net change in unrealized appreciation (depreciation) of investments and foreign currencies (829,192) 3,254,804 --------------- --------------- Net increase in net assets resulting from operations 1,526,456 4,051,353 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (741,219) (1,899,039) Class B (305,178) (676,354) Class C (80,738) (238,634) Class Q (2,596) (13,330) --------------- --------------- Total distributions (1,129,731) (2,827,357) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 29,822,446 47,353,582 Dividends reinvested 555,178 2,080,078 --------------- --------------- 30,377,624 49,433,660 Cost of shares redeemed (33,193,802) (52,572,135) --------------- --------------- Net decrease in net asset resulting from capital share transactions (2,816,178) (3,138,475) --------------- --------------- Net increase in net assets (2,419,453) (1,914,479) NET ASSETS: Net assets, beginning of period 49,385,241 51,299,720 --------------- --------------- Net assets, end of period $ 46,965,788 $ 49,385,241 =============== =============== Undistributed net investment income (Accumulated net investment loss) $ (108,578) $ 71,455 =============== ===============
See Accompanying Notes to Financial Statements 31 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING CLASSIC MONEY MARKET FUND ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 1,062,666 $ 5,124,447 Net realized loss on investments (52) (57) --------------- --------------- Net increase in net assets resulting from operations 1,062,614 5,124,390 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (1,059,502) (5,114,775) Class B (729) (7,398) Class C (364) (2,274) --------------- --------------- Total distributions (1,060,595) (5,124,447) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 311,750,260 574,919,432 Dividends reinvested 1,039,295 4,997,911 --------------- --------------- 312,789,555 579,917,343 Cost of shares redeemed (331,022,020) (671,848,890) --------------- --------------- Net decrease in net asset resulting from capital share transactions (18,232,465) (91,931,547) --------------- --------------- Net decrease in net assets (18,230,446) (91,931,604) NET ASSETS: Net assets, beginning of period 460,644,807 552,576,411 --------------- --------------- Net assets, end of period $ 442,414,361 $ 460,644,807 =============== =============== Undistributed net investment income $ 2,071 $ -- =============== ===============
See Accompanying Notes to Financial Statements 32 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING MONEY MARKET FUND ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 70,002 $ 186,079 Net realized gain (loss) on investments (12) 4,302 --------------- --------------- Net increase in net assets resulting from operations 69,990 190,381 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (72,799) (182,584) Class B (90) (1,872) Class C (14) (1,623) --------------- --------------- Total distributions (72,903) (186,079) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 98,781,799 273,325,312 Dividends reinvested 64,281 143,653 --------------- --------------- 98,846,080 273,468,965 Cost of shares redeemed (106,231,752) (281,446,484) --------------- --------------- Net decrease in net asset resulting from capital share transactions (7,385,672) (7,977,519) --------------- --------------- Net decrease in net assets (7,388,585) (7,973,217) NET ASSETS: Net assets, beginning of period 61,338,775 69,311,992 --------------- --------------- Net assets, end of period $ 53,950,190 $ 61,338,775 =============== =============== Undistributed net investment income $ 75,355 $ 78,256 =============== ===============
See Accompanying Notes to Financial Statements 33 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING LEXINGTON MONEY MARKET TRUST ---------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 94,583 $ 361,267 Net realized loss on investments (7) (608) --------------- --------------- Net increase in net assets resulting from operations 94,576 360,659 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income (94,583) (361,267) --------------- --------------- Total distributions (94,583) (361,267) --------------- --------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 9,232,139 20,789,645 Dividends reinvested 91,078 347,083 --------------- --------------- 9,323,217 21,136,728 Cost of shares redeemed (12,109,800) (26,205,992) --------------- --------------- Net decrease in net asset resulting from capital share transactions (2,786,583) (5,069,264) --------------- --------------- Net decrease in net assets (2,786,590) (5,069,872) NET ASSETS: Net assets, beginning of period 50,152,520 55,222,392 --------------- --------------- Net assets, end of period $ 47,365,930 $ 50,152,520 =============== =============== Undistributed net investment income $ -- $ -- =============== ===============
See Accompanying Notes to Financial Statements 34 ING GNMA INCOME FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ------------------------------------------------------------------------------- THREE SIX MONTHS YEAR YEAR MONTHS ENDED ENDED ENDED ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, ------------------------------- 2003(1) 2003 2002 2001(2) 2000(3) 1999 1998 --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.00 8.53 8.63 8.41 8.08 8.53 8.40 Income (loss) from investment operations: Net investment income $ 0.21 0.42 0.46 0.12 0.54 0.50 0.48 Net realized and unrealized gain (loss) on investments $ (0.09) 0.49 (0.09) 0.22 0.27 (0.45) 0.13 Total from investment operations $ 0.12 0.91 0.37 0.34 0.81 0.05 0.61 Less distributions from: Net investment income $ 0.21 0.44 0.47 0.12 0.48 0.50 0.48 Total distributions $ 0.21 0.44 0.47 0.12 0.48 0.50 0.48 Net asset value, end of period $ 8.91 9.00 8.53 8.63 8.41 8.08 8.53 TOTAL RETURN(4) % 1.42 10.82 4.38 4.09 10.36 0.58 7.52 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 615,776 666,433 535,903 449,460 368,615 376,580 273,591 Ratios to average net assets: Expenses(5) % 1.03 1.13 1.22 1.16 1.06 0.99 1.01 Net investment income(5) % 4.64 4.78 5.32 5.75 6.54 6.04 5.85 Portfolio turnover rate % 101 75 76 33 65 25 54 CLASS B ---------------------------------------------------------------- SIX MONTHS YEAR YEAR THREE MONTHS OCTOBER 6, ENDED ENDED ENDED ENDED 2000(6) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, DEC. 31, 2003(1) 2003 2002 2001(2) 2000 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.96 8.50 8.61 8.40 8.20 Income (loss) from investment operations: Net investment income $ 0.18 0.35 0.39 0.13 0.09 Net realized and unrealized gain (loss) on investments $ (0.09) 0.48 (0.09) 0.19 0.18 Total from investment operations $ 0.09 0.83 0.30 0.32 0.27 Less distributions from: Net investment income $ 0.18 0.37 0.41 0.11 0.07 Total distributions $ 0.18 0.37 0.41 0.11 0.07 Net asset value, end of period $ 8.87 8.96 8.50 8.61 8.40 TOTAL RETURN(4) % 1.04 9.95 3.53 3.70 3.32 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 142,380 150,549 79,302 47,406 866 Ratios to average net assets: Expenses(5) % 1.78 1.88 1.98 1.90 1.81 Net investment income(5) % 3.94 3.98 4.55 4.88 5.79 Portfolio turnover rate % 101 75 76 33 65
(1) Effective August 1, 2003, ING Investments, LLC appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Effective July 26, 2000, ING Investments, LLC became the Investment Adviser of the Fund. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) Commencement of operations of class. See Accompanying Notes to Financial Statements. 35 ING GNMA INCOME FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ---------------------------------------------------------------- THREE SIX MONTHS YEAR YEAR MONTHS OCTOBER 13, ENDED ENDED ENDED ENDED 2000(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, DEC. 31, 2003(1) 2003 2002 2001(2) 2000 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.97 8.51 8.61 8.40 8.24 Income (loss) from investment operations: Net investment income $ 0.18 0.36 0.40 0.11 0.09 Net realized and unrealized gain (loss) on investments $ (0.09) 0.47 (0.09) 0.21 0.14 Total from investment operations $ 0.09 0.83 0.31 0.32 0.23 Less distributions from: Net investment income $ 0.18 0.37 0.41 0.11 0.07 Total distributions $ 0.18 0.37 0.41 0.11 0.07 Net asset value, end of period $ 8.88 8.97 8.51 8.61 8.40 TOTAL RETURN(4) % 1.03 9.95 3.65 3.69 2.82 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 78,337 87,970 37,193 13,744 1,833 Ratios to average net assets: Expenses(5) % 1.78 1.88 1.99 1.93 1.81 Net investment income(5) % 3.93 3.97 4.52 4.87 5.79 Portfolio turnover rate % 101 75 76 33 65 CLASS M -------------------------------------------------------- SIX MONTHS YEAR YEAR FEBRUARY 23, ENDED ENDED ENDED 2001(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, 2003(1) 2003 2002 2001 -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.01 8.54 8.63 8.51 Income (loss) from investment operations: Net investment income $ 0.26 0.37 0.41 0.04 Net realized and unrealized gain (loss) on investments $ (0.16) 0.49 (0.07) 0.08 Total from investment operations $ 0.10 0.86 0.34 0.12 Less distributions from: Net investment income $ 0.19 0.39 0.43 -- Total distributions $ 0.19 0.39 0.43 -- Net asset value, end of period $ 8.92 9.01 8.54 8.63 TOTAL RETURN(4) % 1.12 10.29 4.03 1.41 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 438 1,111 495 247 Ratios to average net assets: Expenses(5) % 1.53 1.62 1.73 1.61 Net investment income(5) % 4.25 4.19 4.81 4.88 Portfolio turnover rate % 101 75 76 33
(1) Effective August 1, 2003, ING Investments, LLC appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Commencement of operations of class. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. See Accompanying Notes to Financial Statements. 36 ING HIGH YIELD BOND FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(2) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(6) 2003 2002 2001(1) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.29 8.74 9.36 9.24 9.96 10.00 Income (loss) from investment operations: Net investment income $ 0.29 0.61 0.78 0.39 0.85 0.67 Net realized and unrealized gain (loss) on investments $ 0.33 (0.45) (0.62) 0.12 (0.65) (0.04) Total from investment operations $ 0.62 0.16 0.16 0.51 0.20 0.63 Less distributions from: Net investment income $ 0.30 0.61 0.78 0.39 0.86 0.67 Net realized gain on investments $ -- -- -- -- 0.06 -- Total distributions $ 0.30 0.61 0.78 0.39 0.92 0.67 Net asset value, end of period $ 8.61 8.29 8.74 9.36 9.24 9.96 TOTAL RETURN(3) % 7.53 2.24 1.94 5.61 1.89 6.37 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 41,710 43,375 38,525 33,459 33,220 30,537 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.30 1.30 1.30 1.09 1.04 1.00 Gross expenses prior to expense reimbursement(4) % 1.40 1.43 1.79 1.63 2.16 2.32 Net investment income after expense reimbursement(4)(5) % 6.94 7.48 8.67 10.24 8.75 7.53 Portfolio turnover rate % 52 122 344 253 481 756 CLASS B ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(2) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(6) 2003 2002 2001(1) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.28 8.74 9.36 9.23 9.96 10.00 Income (loss) from investment operations: Net investment income $ 0.26 0.55 0.72 0.36 0.78 0.60 Net realized and unrealized gain (loss) on investments $ 0.33 (0.46) (0.62) 0.14 (0.66) (0.05) Total from investment operations $ 0.59 0.09 0.10 0.50 0.12 0.55 Less distributions from: Net investment income $ 0.26 0.55 0.72 0.37 0.79 0.59 Net realized gain on investments $ -- -- -- -- 0.06 -- Total distributions $ 0.26 0.55 0.72 0.37 0.85 0.59 Net asset value, end of period $ 8.61 8.28 8.74 9.36 9.23 9.96 TOTAL RETURN(3) % 7.25 1.37 1.29 5.43 1.02 5.57 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 16,843 11,584 6,673 5,025 3,702 2,374 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.05 2.05 2.05 1.84 1.79 1.72 Gross expenses prior to expense reimbursement(4) % 2.05 2.07 2.44 2.28 2.41 2.64 Net investment income after expense reimbursement(4)(5) % 6.20 6.73 7.85 9.49 7.99 6.90 Portfolio turnover rate % 52 122 344 253 481 756
(1) The Fund changed its fiscal year end to March 31. (2) Commencement of operations. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Adviser has agreed to limit expenses (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (6) Effective September 2, 2003 Aeltus Investment Management, Inc., replaced ING Investment Management, LLC as the Sub-Adviser. See Accompanying Notes to Financial Statements. 37 ING HIGH YIELD BOND FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(2) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(6) 2003 2002 2001(1) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 8.28 8.74 9.36 9.23 9.96 10.00 Income (loss) from investment operations: Net investment income $ 0.27 0.56 0.71 0.37 0.78 0.62 Net realized and unrealized gain (loss) on investments $ 0.33 (0.46) (0.61) 0.12 (0.66) (0.06) Total from investment operations $ 0.60 0.10 0.10 0.49 0.12 0.56 Less distributions from: Net investment income $ 0.27 0.56 0.72 0.36 0.79 0.60 Net realized gain on investments $ -- -- -- -- 0.06 -- Total distributions $ 0.27 0.56 0.72 0.36 0.85 0.60 Net asset value, end of period $ 8.61 8.28 8.74 9.36 9.23 9.96 TOTAL RETURN(3) % 7.27 1.43 1.21 5.39 1.02 5.67 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 8,814 5,281 1,633 1,314 1,578 776 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.05 2.04 2.05 1.84 1.79 1.73 Gross expenses prior to expense reimbursement(4) % 2.05 2.06 2.44 2.29 2.40 2.66 Net investment income after expense reimbursement(4)(5) % 6.21 6.72 7.92 9.42 7.98 7.01 Portfolio turnover rate % 52 122 344 253 481 756
(1) The Fund changed its fiscal year end to March 31. (2) Commencement of operations. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (6) Effective September 2, 2003 Aeltus Investment Management Inc., replaced ING Investment Management, LLC as the Sub-Adviser. See Accompanying Notes to Financial Statements. 38 ING HIGH YIELD OPPORTUNITY FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A -------------------------------------------------------------------------------------- THREE SIX MONTHS YEAR YEAR NINE MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30, MARCH 31, 2003(1) 2003 2002 2001(2) 2000 1999(3) 1999 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 6.66 7.51 8.69 10.80 11.57 11.66 12.72 Income (loss) from investment operations: Net investment income $ 0.23 0.78 0.88 0.84 1.18 0.28 1.12 Net realized and unrealized gain (loss) on investments $ 0.31 (0.84) (1.07) (2.09) (0.75) (0.09) (1.00) Total from investment operations $ 0.54 (0.06) (0.19) (1.25) 0.43 0.19 0.12 Less distributions from: Net investment income $ 0.30 0.79 0.99 0.86 1.20 0.28 1.18 Total distributions $ 0.30 0.79 0.99 0.86 1.20 0.28 1.18 Net asset value, end of period $ 6.90 6.66 7.51 8.69 10.80 11.57 11.66 TOTAL RETURN(4) % 7.85 (0.40) (1.84) (11.87) 3.96 1.60 1.13 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 90,696 101,603 53,122 55,230 34,416 16,795 17,327 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.34 1.13 1.17 1.10 1.18 1.10 1.12 Gross expenses prior to expense reimbursement(5) % 1.39 1.47 1.45 1.32 1.37 1.37 1.53 Net investment income after expense reimbursement(5)(6) % 6.75 10.14 11.02 11.43 10.63 9.68 9.44 Portfolio turnover rate % 70 131 102 113 113 44 242 CLASS B -------------------------------------------------------------------------------------- THREE SIX MONTHS YEAR YEAR NINE MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30, MARCH 31, 2003(1) 2003 2002 2001(2) 2000 1999(3) 1999 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 6.69 7.54 8.71 10.81 11.58 11.66 12.71 Income (loss) from investment operations: Net investment income $ 0.23 0.70 0.81 0.81 1.11 0.27 1.04 Net realized and unrealized gain (loss) on investments $ 0.30 (0.81) (1.05) (2.10) (0.75) (0.09) (0.99) Total from investment operations $ 0.53 (0.11) (0.24) (1.29) 0.36 0.18 0.05 Less distributions from: Net investment income $ 0.28 0.74 0.93 0.81 1.13 0.26 1.10 Total distributions $ 0.28 0.74 0.93 0.81 1.13 0.26 1.10 Net asset value, end of period $ 6.94 6.69 7.54 8.71 10.81 11.58 11.66 TOTAL RETURN(4) % 7.62 (1.07) (2.49) (12.22) 3.28 1.53 0.55 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 191,575 192,643 143,742 181,175 103,246 41,882 42,960 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.97 1.78 1.82 1.75 1.83 1.75 1.77 Gross expenses prior to expense reimbursement(5) % 2.02 2.12 2.10 1.97 2.02 2.02 2.18 Net investment income after expense reimbursement(5)(6) % 6.02 9.56 10.48 10.97 9.98 9.03 8.84 Portfolio turnover rate % 70 131 102 113 113 44 242
(1) Effective August 1, 2003 ING Investments, LLC, appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Effective May 24, 1999, ING Investments, LLC, became the Investment Adviser of the Fund and the Fund changed its year end to June 30. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment 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. 39 ING HIGH YIELD OPPORTUNITY FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C -------------------------------------------------------------------------------------- THREE SIX MONTHS YEAR YEAR NINE MONTHS YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30, MARCH 31, 2003(1) 2003 2002 2001(2) 2000 1999(3) 1999 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 6.69 7.53 8.71 10.81 11.58 11.66 12.71 Income (loss) from investment operations: Net investment income $ 0.22 0.69 0.80 0.81 1.10 0.27 1.04 Net realized and unrealized gain (loss) on investments $ 0.31 (0.79) (1.05) (2.10) (0.74) (0.09) (0.99) Total from investment operations $ 0.53 (0.10) (0.25) (1.29) 0.36 0.18 0.05 Less distributions from: Net investment income $ 0.28 0.74 0.93 0.81 1.13 0.26 1.10 Total distributions $ 0.28 0.74 0.93 0.81 1.13 0.26 1.10 Net asset value, end of period $ 6.94 6.69 7.53 8.71 10.81 11.58 11.66 TOTAL RETURN(4) % 7.62 (0.96) (2.60) (12.22) 3.28 1.53 0.55 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 25,115 26,163 24,674 33,463 23,324 18,618 21,290 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.97 1.78 1.81 1.75 1.83 1.75 1.77 Gross expenses prior to expense reimbursement(5) % 2.02 2.13 2.09 1.97 2.02 2.02 2.18 Net investment income after expense reimbursement(5)(6) % 6.04 9.61 10.47 10.93 9.98 9.03 8.79 Portfolio turnover rate % 70 131 102 113 113 44 242 CLASS M ------------------------------- SIX MONTHS MAY 17, ENDED 2002(7) TO SEPTEMBER 30, MARCH 31, 2003(1) 2003 ------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 6.65 7.58 Income (loss) from investment operations: Net investment income (loss) $ 0.24 0.54 Net realized and unrealized gain (loss) on investments $ 0.30 (0.81) Total from investment operations $ 0.54 (0.27) Less distributions from: Net investment income $ 0.29 0.66 Total distributions $ 0.29 0.66 Net asset value, end of period $ 6.90 6.65 TOTAL RETURN(4) % 7.80 (3.16) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 3,217 3,353 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.62 1.52 Gross expenses prior to expense reimbursement(5) % 1.69 1.82 Net investment income after expense reimbursement(5)(6) % 6.38 9.41 Portfolio turnover rate % 70 131
(1) Effective August 1, 2003 ING Investments, LLC, appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Effective May 24, 1999, ING Investments, LLC, became the Investment Adviser of the Fund and the Fund changed its year end to June 30. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (7) Commencement of operations of class. See Accompanying Notes to Financial Statements. 40 ING INTERMEDIATE BOND FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.51 9.91 10.18 9.52 9.40 10.00 Income (loss) from investment operations: Net investment income $ 0.17 0.35 0.51 0.28 0.61 0.45 Net realized and unrealized gain (loss) on investments $ 0.11 0.77 0.42 0.66 0.12 (0.60) Total from investment operations $ 0.28 1.12 0.93 0.94 0.73 (0.15) Less distributions from: Net investment income $ 0.17 0.37 0.53 0.28 0.61 0.45 Net realized gain on investments $ -- 0.15 0.67 -- -- -- Total distributions $ 0.17 0.52 1.20 0.28 0.61 0.45 Net asset value, end of period $ 10.62 10.51 9.91 10.18 9.52 9.40 TOTAL RETURN(4) % 2.66 11.48 9.27 10.01 8.11 (1.46) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 184,329 146,649 41,503 33,597 29,893 32,013 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.07 1.14 1.15 1.13 1.00 0.96 Gross expenses prior to expense reimbursement(5) % 1.17 1.24 1.36 1.53 2.08 2.12 Net investment income after expense reimbursement(5)(6) % 3.12 3.21 4.93 6.94 6.48 5.38 Portfolio turnover rate % 313 639 1,216* 838 733 432 CLASS B ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.50 9.90 10.18 9.52 9.40 10.00 Income (loss) from investment operations: Net investment income $ 0.13 0.28 0.44 0.26 0.53 0.40 Net realized and unrealized gain (loss) on investments $ 0.10 0.76 0.40 0.66 0.13 (0.61) Total from investment operations $ 0.23 1.04 0.84 0.92 0.66 (0.21) Less distributions from: Net investment income $ 0.13 0.29 0.45 0.26 0.54 0.39 Net realized gain on investments $ -- 0.15 0.67 -- -- -- Total distributions $ 0.13 0.44 1.12 0.26 0.54 0.39 Net asset value, end of period $ 10.60 10.50 9.90 10.18 9.52 9.40 TOTAL RETURN(4) % 2.18 10.64 8.37 9.74 7.30 (2.13) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 66,223 61,544 11,216 2,807 1,523 1,958 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.82 1.89 1.90 1.88 1.74 1.70 Gross expenses prior to expense reimbursement(5) % 1.82 1.89 2.01 2.18 2.33 2.39 Net investment income after expense reimbursement(5)(6) % 2.38 2.39 4.09 6.20 5.71 4.83 Portfolio turnover rate % 313 639 1,216* 838 733 432
(1) Effective September 2, 2003 Aeltus Investment Management, Inc., replaced ING Investment Management, LLC as the Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Commencement of operations. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments LLC within three years. * Portfolio turnover was greater than expected during this period due to active trading undertaken in response to market conditions that existed at that time. See Accompanying Notes to Financial Statements. 41 ING INTERMEDIATE BOND FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.50 9.90 10.19 9.52 9.40 10.00 Income (loss) from investment operations: Net investment income $ 0.13 0.28 0.44 0.26 0.54 0.42 Net realized and unrealized gain (loss) on investments $ 0.11 0.76 0.39 0.67 0.12 (0.63) Total from investment operations $ 0.24 1.04 0.83 0.93 0.66 (0.21) Less distributions from: Net investment income $ 0.13 0.29 0.45 0.26 0.54 0.39 Net realized gain on investments $ -- 0.15 0.67 -- -- -- Total distributions $ 0.13 0.44 1.12 0.26 0.54 0.39 Net asset value, end of period $ 10.61 10.50 9.90 10.19 9.52 9.40 TOTAL RETURN(4) % 2.28 10.68 8.24 9.86 7.32 (2.10) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 65,974 52,979 6,382 4,470 5,248 1,082 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.82 1.90 1.90 1.85 1.73 1.71 Gross expenses prior to expense reimbursement(5) % 1.82 1.90 2.01 2.18 2.32 2.44 Net investment income after expense reimbursement(5)(6) % 2.37 2.36 4.20 6.37 5.74 4.94 Portfolio turnover rate % 313 639 1,216* 838 733 432
(1) Effective September 2, 2003 Aeltus Investment Management, Inc., replaced ING Investment Management, LLC as the Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Commencement of operations. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments LLC within three years. * Portfolio turnover was greater than expected during this period due to active trading undertaken in response to market conditions that existed at that time. See Accompanying Notes to Financial Statements. 42 ING NATIONAL TAX-EXEMPT BOND FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ---------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS NOVEMBER 8, ENDED ENDED ENDED ENDED 1999(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.87 10.32 10.50 10.11 10.00 Income (loss) from investment operations: Net investment income $ 0.18 0.39 0.41 0.19 0.48 Net realized and unrealized gain (loss) on investments $ 0.05 0.67 (0.18) 0.39 0.11 Total from investment operations $ 0.23 1.06 0.23 0.58 0.59 Less distributions from: Net investment income $ 0.18 0.39 0.41 0.19 0.48 Net realized gain on investments $ -- 0.12 -- -- -- Total distributions $ 0.18 0.51 0.41 0.19 0.48 Net asset value, end of period $ 10.92 10.87 10.32 10.50 10.11 TOTAL RETURN(4) % 2.17 10.44 2.25 5.79 6.09 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 23,976 23,647 22,868 22,074 21,592 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.15 1.15 1.10 1.06 0.95 Gross expenses prior to expense reimbursement(5) % 1.31 1.28 1.52 1.50 2.12 Net investment income after expense reimbursement(5)(6) % 3.36 3.64 3.97 4.45 4.92 Portfolio turnover rate % 4 22 27 7 50 CLASS B ---------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS NOVEMBER 8, ENDED ENDED ENDED ENDED 1999(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.86 10.31 10.48 10.09 10.00 Income (loss) from investment operations: Net investment income $ 0.14 0.31 0.34 0.17 0.38 Net realized and unrealized gain (loss) on investments $ 0.05 0.67 (0.17) 0.39 0.11 Total from investment operations $ 0.19 0.98 0.17 0.56 0.49 Less distributions from: Net investment income $ 0.14 0.31 0.34 0.17 0.40 Net realized gain on investments $ -- 0.12 -- -- -- Total distributions $ 0.14 0.43 0.34 0.17 0.40 Net asset value, end of period $ 10.91 10.86 10.31 10.48 10.09 TOTAL RETURN(4) % 1.79 9.65 1.59 5.54 5.02 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 2,759 2,792 1,265 588 311 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.90 1.90 1.84 1.83 1.67 Gross expenses prior to expense reimbursement(5) % 1.96 1.94 2.16 2.17 2.32 Net investment income after expense reimbursement(5)(6) % 2.62 2.86 3.22 3.69 3.93 Portfolio turnover rate % 4 22 27 7 50
(1) Effective September 2, 2003, Aeltus Investment Management, Inc., replaced Furman Selz Capital Management, LLC as the Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Commencement of operations. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment 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. 43 ING NATIONAL TAX-EXEMPT BOND FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ---------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS NOVEMBER 8, ENDED ENDED ENDED ENDED 1999(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.87 10.33 10.49 10.11 10.00 Income (loss) from investment operations: Net investment income $ 0.14 0.31 0.34 0.16 0.39 Net realized and unrealized gain (loss) on investments $ 0.05 0.66 (0.16) 0.38 0.12 Total from investment operations $ 0.19 0.97 0.18 0.54 0.51 Less distributions from: Net investment income $ 0.14 0.31 0.34 0.16 0.40 Net realized gains on investments $ -- 0.12 -- -- -- Total distributions $ 0.14 0.43 0.34 0.16 0.40 Net asset value, end of period $ 10.92 10.87 10.33 10.49 10.11 TOTAL RETURN(4) % 1.79 9.56 1.69 5.34 5.29 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 1,206 1,065 271 440 439 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.90 1.90 1.83 1.81 1.68 Gross expenses prior to expense reimbursement(5) % 1.96 1.94 2.18 2.16 2.33 Net investment income after expense reimbursement(5)(6) % 2.62 2.84 3.21 3.70 4.00 Portfolio turnover rate % 4 22 27 7 50
(1) Effective September 2, 2003, Aeltus Investment Management, Inc., replaced Furman Selz Capital Management, LLC as the Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Commencement of operations. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment 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. 44 ING STRATEGIC BOND FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A -------------------------------------------------------------------------------------- THREE SIX MONTHS YEAR YEAR NINE MONTHS YEAR MONTHS JULY 27, ENDED ENDED ENDED ENDED ENDED ENDED 1998(4) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30, MARCH 31, 2003(1) 2003 2002 2001(2) 2000 1999(3) 1999 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 11.24 10.95 11.79 12.07 12.59 12.89 13.08 Income (loss) from investment operations: Net investment income $ 0.23 0.54 0.75 0.23 0.92 0.26 0.53 Net realized and unrealized gain (loss) on investments $ 0.13 0.38 (0.72) 0.08 (0.52) (0.42) (0.08) Total from investment operations $ 0.36 0.92 0.03 0.31 0.40 (0.16) 0.45 Less distributions from: Net investment income $ 0.27 0.63 0.87 0.59 0.92 0.14 0.53 Net realized gain on investments $ -- -- -- -- -- -- 0.11 Total distributions $ 0.27 0.63 0.87 0.59 0.92 0.14 0.64 Net asset value, end of period $ 11.33 11.24 10.95 11.79 12.07 12.59 12.89 TOTAL RETURN(5) % 3.24 8.73 0.26 2.69 3.42 (1.23) 5.60 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 30,256 31,599 34,387 39,105 2,726 2,736 5,751 Ratios to average net assets: Net expenses after expense reimbursement(6)(7) % 1.15 0.95 0.97 1.03 0.96 0.90 0.96 Gross expenses prior to expense reimbursement(6) % 1.37 1.40 1.34 1.73 2.64 1.56 1.98 Net investment income after expense reimbursement(6)(7) % 4.03 5.09 6.55 6.30 7.69 5.88 5.81 Portfolio turnover rate % 273 254 211 132 168 69 274
CLASS B -------------------------------------------------------------------------------------- THREE SIX MONTHS YEAR YEAR NINE MONTHS YEAR MONTHS JULY 27, ENDED ENDED ENDED ENDED ENDED ENDED 1998(4) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30, MARCH 31, 2003(1) 2003 2002 2001(2) 2000 1999(3) 1999 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.95 10.68 11.53 11.80 12.33 12.61 12.78 Income (loss) from investment operations: Net investment income $ 0.20 0.50 0.60 0.36 0.88 0.18 0.45 Net realized and unrealized gain (loss) on investments $ 0.13 0.36 (0.62) (0.08) (0.53) (0.33) (0.05) Total from investment operations $ 0.33 0.86 (0.02) 0.28 0.35 (0.15) 0.40 Less distributions from: Net investment income $ 0.24 0.59 0.83 0.55 0.88 0.13 0.46 Net realized gain on investments $ -- -- -- -- -- -- 0.11 Total distributions $ 0.24 0.59 0.83 0.55 0.88 0.13 0.57 Net asset value, end of period $ 11.04 10.95 10.68 11.53 11.80 12.33 12.61 TOTAL RETURN(5) % 3.08 8.36 (0.18) 2.52 3.00 (1.20) 5.17 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 13,144 13,581 11,848 8,894 4,460 5,658 6,637 Ratios to average net assets: Net expenses after expense reimbursement(6)(7) % 1.55 1.35 1.38 1.53 1.36 1.29 1.37 Gross expenses prior to expense reimbursement(6) % 1.77 1.80 1.75 2.55 3.04 1.95 2.42 Net investment income after expense reimbursement(6)(7) % 3.64 4.68 5.98 6.71 7.29 5.49 5.35 Portfolio turnover rate % 273 254 211 132 168 69 274
(1) Effective August 1, 2003 ING Investments, LLC, appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Effective May 24, 1999, ING Investments, LLC, became the Investment Adviser of the Fund and the Fund changed its year end to June 30. (4) Commencement of operations. (5) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (6) Annualized for periods less than one year. (7) The Investment Manager 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. 45 ING STRATEGIC BOND FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C -------------------------------------------------------------------------------------- THREE SIX MONTHS YEAR YEAR NINE MONTHS YEAR MONTHS JULY 27, ENDED ENDED ENDED ENDED ENDED ENDED 1998(4) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30, MARCH 31, 2003(1) 2003 2002 2001(2) 2000 1999(3) 1999 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 11.52 11.20 12.05 12.30 12.81 13.10 13.27 Income (loss) from investment operations: Net investment income $ 0.21 0.61 0.66 0.43 0.87 0.19 0.48 Net realized and unrealized gain (loss) on investments $ 0.13 0.30 (0.68) (0.13) (0.51) (0.35) (0.06) Total from investment operations $ 0.34 0.91 (0.02) 0.30 0.36 (0.16) 0.42 Less distributions from: Net investment income $ 0.24 0.59 0.83 0.55 0.87 0.13 0.48 Net realized gain on investments $ -- -- -- -- -- -- 0.11 Total distributions $ 0.24 0.59 0.83 0.55 0.87 0.13 0.59 Net asset value, end of period $ 11.62 11.52 11.20 12.05 12.30 12.81 13.10 TOTAL RETURN(5) % 2.98 8.38 (0.17) 2.55 3.02 (1.21) 5.19 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 3,470 4,091 4,964 5,196 3,966 7,965 8,128 Ratios to average net assets: Net expenses after expense reimbursement(6)(7) % 1.55 1.35 1.38 1.51 1.36 1.29 1.36 Gross expenses prior to expense reimbursement(6) % 1.77 1.80 1.75 2.55 3.04 1.95 2.41 Net investment income after expense reimbursement(6)(7) % 3.65 4.70 6.04 6.71 7.29 5.49 5.36 Portfolio turnover rate % 273 254 211 132 168 69 274
(1) Effective August 1, 2003 ING Investments, LLC, appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Effective May 24, 1999, ING Investments, LLC, became the Investment Adviser of the Fund and the Fund changed its year end to June 30. (4) Commencement of operations. (5) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (6) Annualized for periods less than one year. (7) The Investment Manager 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. 46 ING CLASSIC MONEY MARKET FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 1.00 Income from investment operations: Net investment income $ 0.00* 0.01 0.03 0.02 0.06 0.04 Total from investment operations $ 0.00* 0.01 0.03 0.02 0.06 0.04 Less distributions from: Net investment income $ 0.00* 0.01 0.03 0.02 0.06 0.04 Total distributions $ 0.00* 0.01 0.03 0.02 0.06 0.04 Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 1.00 TOTAL RETURN(4) % 0.24 1.06 2.83 2.36 5.70 3.98 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 440,840 458,964 549,999 515,651 440,651 228,124 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 0.77 0.77 0.77 0.77 0.74 0.73 Gross expenses prior to expense reimbursement(5) % 1.22 1.27 1.27 1.30 1.42 1.67 Net investment income after expense reimbursement(5)(6) % 0.47 1.06 2.75 5.61 5.59 4.59 CLASS B ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 1.00 Income from investment operations: Net investment income $ 0.00* 0.00* 0.02 0.02 0.05 0.03 Total from investment operations $ 0.00* 0.00* 0.02 0.02 0.05 0.03 Less distributions from: Net investment income $ 0.00* 0.00* 0.02 0.02 0.05 0.03 Total distributions $ 0.00* 0.00* 0.02 0.02 0.05 0.03 Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 1.00 TOTAL RETURN(4) % 0.07 0.43 2.21 2.11 5.03 3.31 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 1,034 1,156 1,987 2,714 2,706 1,173 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.11 1.40 1.37 1.41 1.38 1.41 Gross expenses prior to expense reimbursement(5) % 1.47 1.52 1.53 1.55 1.67 1.79 Net investment income after expense reimbursement(5)(6) % 0.14 0.46 2.27 5.10 4.93 3.85
(1) Effective September 2, 2003, Aeltus Investment Management, Inc. replaced ING Investment Management, LLC as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Commencement of operations. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Amount is less than $0.01 per share. See Accompanying Notes to Financial Statements. 47 ING CLASSIC MONEY MARKET FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR FIVE MONTHS YEAR DECEMBER 15, ENDED ENDED ENDED ENDED ENDED 1998(3) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, OCTOBER 31, OCTOBER 31, 2003(1) 2003 2002 2001(2) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 1.00 Income from investment operations: Net investment income $ 0.00* 0.00* 0.02 0.02 0.05 0.03 Total from investment operations $ 0.00* 0.00* 0.02 0.02 0.05 0.03 Less distributions from: Net investment income $ 0.00* 0.00* 0.02 0.02 0.05 0.03 Total distributions $ 0.00* 0.00* 0.02 0.02 0.05 0.03 Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 1.00 TOTAL RETURN(4) % 0.07 0.42 2.20 2.08 5.03 3.30 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 540 524 590 2,583 2,035 444 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.11 1.40 1.38 1.40 1.39 1.41 Gross expenses prior to expense reimbursement(5) % 1.47 1.52 1.53 1.55 1.67 1.78 Net investment income after expense reimbursement(5)(6) % 0.14 0.42 2.44 5.00 5.03 3.89
(1) Effective September 2, 2003, Aeltus Investment Management, Inc. replaced ING Investment Management, LLC as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Commencement of operations. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Amount is less than $0.01 per share. See Accompanying Notes to Financial Statements. 48 ING MONEY MARKET FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR NINE MONTHS NOVEMBER 24, ENDED ENDED ENDED ENDED 1999(4) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, 2003(1) 2003 2002(2) 2001(3) 2000 -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 Income from investment operations: Net investment income $ 0.00+ 0.01 0.02* 0.04* 0.02* Total from investment operations $ 0.00+ 0.01 0.02 0.04 0.02 Less distributions from: Net investment income $ 0.00+ 0.01 0.02 0.04 0.02 Total distributions $ 0.00+ 0.01 0.02 0.04 0.02 Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 TOTAL RETURN(5) % 0.38 0.76 2.10 3.86 3.58 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 17,222 16,127 28,668 73,290 75,430 Ratios to average net assets: Net expenses after expense reimbursement(6)(7) % 0.46 0.92 0.93** 0.91** 0.85** Gross expenses prior to expense reimbursement(6) % 1.14 1.14 0.99 0.74 2.28 Net investment income after expense reimbursement(6)(7) % 0.75 0.77 2.26 5.23 5.18 CLASS B ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR NINE MONTHS JULY 12, ENDED ENDED ENDED ENDED 1999(4) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, 2003(1) 2003 2002(2) 2001(3) 2000 -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 Income from investment operations: Net investment income $ 0.00+ 0.00+ 0.01* 0.03* 0.03* Total from investment operations $ 0.00+ 0.00+ 0.01 0.03 0.03 Less distributions from: Net investment income $ 0.00+ 0.00+ 0.01 0.03 0.03 Total distributions $ 0.00+ 0.00+ 0.01 0.03 0.03 Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 TOTAL RETURN(5) % 0.00++ 0.00++ 1.38 3.34 3.60 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 29,229 34,548 30,241 32,117 12,035 Ratios to average net assets: Net expenses after expense reimbursement(6)(7) % 1.22 1.61 1.70** 1.64** 1.60** Gross expenses prior to expense reimbursement(6) % 1.90 1.91 1.75 1.50 3.03 Net investment income after expense reimbursement(6)(7) % 0.00++ 0.01 1.26 4.31 3.96
(1) Effective August 1, 2003 ING Investments, LLC, appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) Effective May 21, 2001, ING Investments, LLC took over direct management of the Fund. (3) The Fund changed its fiscal year end to March 31. (4) Commencement of operations of class. (5) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (6) Annualized for periods less than one year. (7) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Recognition of net investment income by the Fund was affected by the timing of the declaration of dividends by the underlying investment company in which the Fund invested. ** Does not include expenses of the investment company in which the Fund invested prior to May 2001. + Amount is less than $0.01 per share. ++ Amount is less than 0.01% per share. See Accompanying Notes to Financial Statements. 49 ING MONEY MARKET FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ---------------------------------------------------------------------------- SIX MONTHS YEAR YEAR NINE MONTHS JULY 12, ENDED ENDED ENDED ENDED 1999(4) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, 2003(1) 2003 2002(2) 2001(3) 2000 -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 Income from investment operations: Net investment income $ 0.00+ 0.00+ 0.01* 0.03* 0.02* Total from investment operations $ 0.00+ 0.00+ 0.01 0.03 0.02 Less distributions from: Net investment income $ 0.00+ 0.00+ 0.01 0.03 0.02 Total distributions $ 0.00+ 0.00+ 0.01 0.03 0.02 Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 TOTAL RETURN(5) % 0.00++ 0.01 1.33 3.34 3.58 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 7,499 10,664 10,403 27,404 5,431 Ratios to average net assets: Net expenses after expense reimbursement(6)(7) % 1.22 1.62 1.68** 1.59** 1.60** Gross expenses prior to expense reimbursement(6) % 1.90 1.90 1.71 1.49 3.03 Net investment income after expense reimbursement(6)(7) % 0.00++ 0.01 1.60 4.36 3.96
(1) Effective August 1, 2003 ING Investments, LLC, appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) Effective May 21, 2001, ING Investments, LLC took over direct management of the Fund. (3) The Fund changed its fiscal year end to March 31. (4) Commencement of operations of class. (5) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (6) Annualized for periods less than one year. (7) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Recognition of net investment income by the Fund was affected by the timing of the declaration of dividends by the underlying investment company in which the Fund invested. ** Does not include expenses of the investment company in which the Fund invested prior to May 2001. + Amount is less than $0.01 per share. ++ Amount is less than 0.01% per share. See Accompanying Notes to Financial Statements. 50 ING LEXINGTON MONEY MARKET TRUST (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
THREE SIX MONTHS YEAR YEAR MONTHS ENDED ENDED ENDED ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, ------------------------------- 2003(1) 2003 2002 2001(2) 2000(3) 1999 1998 ---------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Income from investment operations: Net investment income $ 0.00* 0.01 0.02 0.01 0.05 0.0425 0.0455 Total from investment operations $ 0.00* 0.01 0.02 0.01 0.05 0.0425 0.0455 Less distributions from: Net investment income $ 0.00* 0.01 0.02 0.01 0.05 0.0425 0.0455 Total distributions $ 0.00* 0.01 0.02 0.01 0.05 0.0425 0.0455 Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 TOTAL RETURN(4) % 0.20 0.69 2.11 1.22 5.57 4.34 4.64 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 47,366 50,153 55,222 63,177 62,859 97,850 87,488 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 0.82 0.92 0.98 0.92 1.00 1.00 1.00 Gross expenses prior to expense reimbursement(5) % 0.82 0.92 1.08 0.92 1.08 1.01 1.05 Net investment income after expense reimbursement(5)(6) % 0.39 0.69 2.15 4.85 5.53 4.26 4.56
(1) Effective August 1, 2003 ING Investments, LLC, appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Trust changed its fiscal year end to March 31. (3) Effective July 26, 2000 ING Investments, LLC became the Investment Adviser of the Trust. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (5) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. (6) Annualized for periods less than one year. See Accompanying Notes to Financial Statements. 51 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) NOTE 1 -- ORGANIZATION ORGANIZATION. ING Funds Trust ("Trust") is a Delaware business trust registered as an open-end management investment company. The Trust was organized on July 30, 1998. It consists of nine separately managed series: ING GNMA Income Fund ("GNMA Fund"), ING High Yield Bond Fund ("High Yield Bond Fund"), ING High Yield Opportunity Fund ("High Yield Opportunity Fund"), ING Intermediate Bond Fund ("Intermediate Bond Fund"), ING National Tax-Exempt Bond Fund ("National Tax-Exempt Bond Fund"), ING Strategic Bond Fund ("Strategic Bond Fund"), ING Lexington Money Market Trust ("Money Market Trust"), ING Classic Money Market Fund and ING Money Market Fund. The investment objective of each Fund is described in each Fund's prospectus. Each Fund offers at least three of the following classes of shares: Class A, Class B, Class C, Class I, Class M, Class Q and Class R, except for Money Market Trust which only offers Class A Shares. The separate classes of shares differ principally in the applicable sales charges (if any), transfer agent fees, distribution fees and shareholder servicing fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Fund and earn income from the portfolio pro rata based on the average daily net assets of each class, without distinction between share classes. Dividends and distributions are determined separately for each class based on income and expenses allocable to each class. Realized gains are allocated to each class pro rata based on the net assets of each class on the date of distribution. 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. Class B shares, along with their pro rata reinvested dividend shares, automatically convert to Class A shares approximately eight years after purchase. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Funds in the preparation of their financial statements, and such policies are in conformity with accounting principles generally accepted in the United States 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 the NASDAQ will be valued at NASDAQ official closing price. 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 the time such valuation is determined by each Fund's custodian. Debt securities are valued at bid prices obtained from independent services or from one or more dealers making markets in the securities and may be adjusted based on the Fund's 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 for which market quotations are not readily available are valued at their respective fair values as determined in good faith and in accordance with policies set by the Board of Trustees ("Board") of the Funds. Among 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 Fund calculates its net asset value. Investments in securities maturing in less than 60 days at the date of acquisition are valued at amortized cost, which approximates market value. Money Market Trust, ING Classic Money Market Fund and ING Money Market Fund use the amortized cost method to value their portfolios securities. The amortized cost method involves valuing a security at its cost and amortizing any discount or premium over the period until maturity. At September 30, 2003, the Intermediate Bond Fund contained four securities for which bid prices obtained from one or more dealers making markets in the securities were adjusted based on the Funds' valuation procedures. These securities 52 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) had a total value of $6,806,264 (this represents 2.46% of net assets) for the Intermediate Bond Fund. In addition, at September 30, 2003, the High Yield Bond Fund, the High Yield Opportunity Fund and the Strategic Bond Fund contained one, eleven and two securities, respectively, for which market quotations were not readily available and which were valued at their fair value as determined in good faith and in accordance with policies set by the Board. These securities had a total value of $0 (represents 0.00% of net assets), $2,616,819 (represents 0.79% of net assets) and $200 (represents 0.00% of net assets) for the High Yield Bond Fund, the High Yield Opportunity Fund and the Strategic Bond Fund, respectively. 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 funds. Premium amortization and discount accretion are determined by the effective yield method. C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds 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 Funds 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 that 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 values. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund'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 re-evaluation 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 Funds 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 Funds 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 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 Fund may enter into futures contracts involving foreign currency, interest rates, 53 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) securities and securities indices, for hedging purposes only. 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 Fund 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 Fund 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 Fund. When the contract is closed, the Fund 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 Funds record distributions to their shareholders on ex-dividend date. National Tax-Exempt Bond Fund, Intermediate Bond Fund, High Yield Opportunity Fund, High Yield Bond Fund, ING Money Market Fund, ING Classic Money Market Fund and Money Market Trust declare and become ex-dividend daily and pay dividends monthly. GNMA Fund and Strategic Bond Fund declare and become ex-dividend monthly and pay dividends monthly. Each Fund distributes capital gains, to the extent available, annually. F. FEDERAL INCOME TAXES. It is the policy of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code that are 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, a federal income tax or excise tax provision is not required. In addition, by distributing during each calendar year substantially all of its net investment income and net realized capital gains, each Fund intends not to be subject to any federal excise tax. The Board intends to offset any net capital gains with any available capital loss carryforward until each carryforward has been fully utilized or expires. In addition, no capital gain distribution shall be made until the capital loss carryforward has been fully utilized or expires. G. USE OF ESTIMATES. Management of the Funds 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. Actual results could differ from these estimates. H. REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System or with member banks of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase the security 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 Fund will always 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 Fund. 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 Fund might incur a loss or delay in the realization of proceeds if the value of the collateral securing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. I. SECURITIES LENDING. Each Fund (except GNMA Fund) 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. J. OPTIONS CONTRACTS. Certain Funds may purchase put and call options and may write (sell) put options and covered call options. The Funds 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 Funds will realize a gain or loss upon 54 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 Funds 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 Funds 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 Funds 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. K. ILLIQUID AND RESTRICTED 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 Funds to sell them promptly at an acceptable price. Restricted securities are those sold under Rule 144A of the Securities Act of 1933 (1933 Act) or are securities offered pursuant to Section 4(2) of the 1933 Act, and are subject to legal or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. Restricted securities may be considered liquid pursuant to procedures adopted by the Board or may be deemed illiquid because they may not be readily marketable. GNMA Fund may not invest in illiquid securities. Money Market Trust may not invest more than 5% of its net assets, in illiquid securities, Money Market Fund and Classic Money Market Fund may not invest more than 10% of their net assets in illiquid securities and all other Funds may not invest more than 15% of their net assets in illiquid securities. 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 TRANSACTION. The Funds 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 Funds' 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 Funds are required to hold liquid assets as collateral with the Funds' custodian sufficient to cover the purchase price. M. DOLLAR ROLL TRANSACTIONS. Certain Funds 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 Fund 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 Funds account for dollar roll transactions as purchases and sales. N. CONSTRUCTION LOAN SECURITIES (GNMA FUND). The GNMA Fund may purchase construction loan securities, which are issued to finance building costs. The funds are disbursed as needed or in accordance with a prearranged plan. The securities provide for the timely payment to the registered holder of interest at the specified rate plus scheduled installments of principal. Upon completion of the construction phase, the construction loan securities are terminated and project loan securities are issued. It is the Fund's policy to record these GNMA certificates on trade date, and to segregate assets to cover its commitments on trade date as well. NOTE 3 -- INVESTMENT TRANSACTIONS For the six-months ended September 30, 2003, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows:
PURCHASES SALES --------------- ---------------- GNMA Fund $ 878,195,136 $ 970,238,719 High Yield Bond Fund 36,882,059 31,763,874 High Yield Opportunity Fund 215,346,692 210,781,369 Intermediate Bond Fund 95,272,259 84,959,962 National Tax-Exempt Bond Fund 1,868,480 1,051,080 Strategic Bond Fund 113,834,958 110,653,954
55 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 3 -- INVESTMENT TRANSACTIONS (CONTINUED) U.S. Government securities not included above were as follows:
PURCHASES SALES --------------- ---------------- GNMA Fund $ 878,195,136 $ 970,238,719 High Yield Bond Fund -- -- High Yield Opportunity Fund -- -- Intermediate Bond Fund 857,363,349 792,973,265 National Tax-Exempt Bond Fund -- -- Strategic Bond Fund 90,514,813 84,669,694
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES All the Funds included in this report have an Investment Management Agreement with ING Investments, LLC (the "Investment Manager" or the "Adviser"), a wholly-owned subsidiary of ING Groep N.V. The investment management agreements compensate the Adviser with a fee, computed daily and payable monthly, based on the average daily net assets of each Fund, at the following annual rates: For GNMA Fund -- 0.60% for the first $150 million, 0.50% of the next $250 million, 0.45% of the next $400 million and 0.40% in excess of $800 million; for National Tax-Exempt Bond and Intermediate Bond -- 0.50%; for Strategic Bond Fund -- 0.45% for the first $500 million, 0.40% of the next $250 million and 0.35% in excess of $750 million; for High Yield Opportunity Fund -- 0.60%; for High Yield Bond Fund -- 0.65%; for ING Money Market Fund -- 0.35%; for ING Classic Money Market Fund -- 0.25%; for Money Market Trust -- 0.50% for the first $500 million and 0.45% in excess of $500 million. The fees payable to the Adviser were discounted for the National Tax-Exempt Bond Fund, the Intermediate Bond Fund, the High Yield Bond Fund and the ING Classic Money Market Fund by 75% in each Fund's first year of operations, and by 50% in each Fund's second year of operations. Prior to May 21, 2001, the Adviser did not charge a management fee for ING Money Market Fund since the Fund invested solely in another open-end regulated investment company. However, the Fund compensated the Adviser with an administrative fee, computed daily and payable monthly, at an annual rate of 0.25% of average daily net assets. Effective August 1, 2003, ING Aeltus serves as Sub-Adviser to the GNMA Fund, High Yield Opportunity Fund, Strategic Bond Fund, ING Money Market Fund and Money Market Trust pursuant to a sub-advisory agreement between the Adviser and ING Aeltus. Effective September 2, 2003, ING Aeltus serves as Sub-Adviser to High Yield Bond Fund, Intermediate Bond Fund, National Tax-Exempt Bond Fund, and ING Classic Money Market Fund pursuant to a sub-advisory agreement between the Adviser and ING Aeltus. Prior to September 2, 2003, Furman Selz Capital Management LLC (FSCM), an affiliated registered investment advisor, served as Sub-Adviser to the National Tax-Exempt Bond pursuant to a sub-advisory agreement between the Adviser and FSCM. ING Investment Management LLC (IIM), a registered investment advisor, served as Sub-Adviser to the Intermediate Bond Fund, High Yield Bond Fund and ING Classic Money Market Fund pursuant to a sub-advisory agreement between the Adviser and IIM. ING Funds Services, LLC ("IFS") acts as administrator and provides certain administrative and shareholder services necessary for Fund operations and is responsible for the supervision of other service providers. For its services, IFS is entitled to receive from the GNMA Fund, High Yield Bond Fund, High Yield Opportunity Fund, Intermediate Bond Fund, National Tax-Exempt Bond Fund, Strategic Bond Fund, ING Money Market Fund and Money Market Trust a fee at an annual rate of 0.10% of its average daily net assets. NOTE 5 -- DISTRIBUTION AND SERVICE FEES Each share class of the Funds (except as noted below) has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, LLC (the "Distributor") is reimbursed or compensated (depending on the class of shares) by the Funds for expenses incurred in the distribution of each Fund's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to payment each month for actual expenses incurred in the distribution and promotion of each Fund'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 56 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 5 -- DISTRIBUTION AND SERVICE FEES (CONTINUED) have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, each class of shares of the Fund pays the Distributor a combined Distribution and Service Fee based on average daily net assets at the following annual rates:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q ------- ------- ------- ------- ------- ------- GNMA Fund 0.25% 1.00% 1.00% N/A 0.75% 0.25% High Yield Bond Fund 0.35% 1.00% 1.00% N/A N/A N/A High Yield Opportunity Fund 0.35% 1.00% 1.00% N/A 0.75% 0.25% Intermediate Bond Fund 0.35% 1.00% 1.00% N/A N/A N/A National Tax-Exempt Bond Fund 0.35% 1.00% 1.00% N/A N/A N/A Strategic Bond Fund 0.35% 0.75% 0.75% N/A N/A 0.25% ING Classic Money Market Fund 0.75% 1.00% 1.00% N/A N/A N/A ING Money Market Fund 0.25% 1.00% 1.00% N/A N/A N/A Money Market Trust N/A N/A N/A N/A N/A N/A
During the six months ended September 30, 2003, the Distributor waived 0.10% of the Distribution fee for National Tax-Exempt Bond Fund, Intermediate Bond Fund and High Yield Bond Fund for Class A only and waived 0.45% of the Distribution Fee for ING Classic Money Market Fund for Class A only. During the six months ended September 30, 2003, the Distributor voluntarily waived Distribution and Service fees of $1,008,896, $1,931 and $931 for the ING Classic Money Market Fund for Class A, Class B and Class C, respectively. The Distributor also receives the proceeds of initial sales charge paid by shareholders upon the purchase of Class A and Class M shares, and the contingent deferred sales charge paid by shareholders upon certain redemptions for Class A, Class B, and Class C shares. For the six months ended September 30, 2003, the Distributor earned the following amounts in sales charges:
CLASS A CLASS B CLASS C CLASS M SHARES SHARES SHARES SHARES ---------- -------- -------- -------- Initial Sales Charges $ 116,349 n/a n/a $ 54 Contingent Deferred Sales Charges $ 114,108 $ -- $ 94,764 n/a
NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES At September 30, 2003 the Funds 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 --------------- --------------- ----------------- --------------- GNMA Fund $ 338,455 $ 69,243 $ 307,656 $ 715,354 High Yield Bond Fund 41,446 5,580 28,915 75,941 High Yield Opportunity Fund 175,471 26,137 207,710 409,318 Intermediate Bond Fund 132,659 26,531 144,756 303,946 National Tax-Exempt Bond Fund 11,636 2,327 8,213 22,176 Strategic Bond Fund 17,291 3,842 18,836 39,969 ING Classic Money Market Fund 92,263 -- 114,314 206,577 ING Money Market Fund 16,377 4,679 34,597 55,653 Money Market Trust 19,358 3,871 -- 23,229
At September 30, 2003, ING Life Insurance and Annuity Co., a wholly-owned indirect subsidiary of ING Groep N.V., held 39.3%, 8.2%, 77.9% and 37.5% of the shares outstanding of High Yield Bond Fund, Intermediate Bond Fund, National Tax-Exempt Bond Fund and Strategic Bond Fund, respectively. Control is defined by the Investment Company Act of 1940 ("1940 Act") as the beneficial ownership, either directly or through one or more controlled companies, of more than 25% of the voting securities of a company. The 1940 Act defines affiliates as companies that are under common control. Therefore, because High Yield Bond, National Tax Exempt Bond, and Strategic Bond have a common owner that owns over 25% of the outstanding securities of each of them, the three Funds may be deemed to be affiliates of each other. Each Fund has adopted a Retirement Policy covering all independent trustees of the Fund who will have served as an independent trustee for at least five years at the time of retirement. Benefits under this plan are based on an annual rate as defined in the plan agreement. A summary of the sales transactions during the six-months ended September 30, 2003, in which the issuer was part of the ING Family of Funds are presented 57 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) below. There were no purchases during the period and no shares were held at September 30, 2003.
REALIZED SALES GAIN/(LOSS) ON ------------------------------ INVESTMENT STRATEGIC BOND FUND: SHARES PROCEEDS SECURITIES -------- --------------- --------------- High Yield Bond Fund 159,416 $ 1,321,563 $ (41,587) High Yield Opportunity Fund 330,000 2,263,800 96,600 ING Prime Rate Trust 103,100 749,060 59,815
NOTE 7 -- OTHER ACCRUED EXPENSES AND LIABILITIES At September 30, 2003 the ING Money Market Fund and Money Market Trust had the following payables included in Other Accrued Expenses and Liabilities on the Statements of Assets and Liabilities that exceeded 5% of total liabilities:
PAYABLE FOR SHAREHOLDER REPORTING EXPENSE ----------- ING Money Market $ 43,771 PAYABLE FOR TRANSFER AGENT FEES ----------- Money Market Trust $ 58,541
NOTE 8 -- EXPENSE LIMITATIONS For the following Funds, pursuant to written expense limitation agreements, the Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the following annual expenses to average daily net assets ratios:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q ------- ------- ------- ------- ------- ------- GNMA Fund 1.29% 2.04% 2.04% 1.04% 1.79% 1.29% High Yield Bond Fund 1.30% 2.05% 2.05% N/A N/A N/A High Yield Opportunity Fund(1) 1.30% 1.95% 1.95% N/A 1.70% 1.20% Intermediate Bond Fund 1.15% 1.90% 1.90% 0.90% N/A N/A National Tax-Exempt Bond Fund 1.15% 1.90% 1.90% N/A N/A N/A Strategic Bond Fund(2) 1.15% 1.55% 1.55% N/A N/A 1.05% ING Classic Money Market Fund 0.77% 1.41% 1.41% 0.31% N/A N/A ING Money Market Fund 1.50% 2.25% 2.25% N/A N/A N/A Money Market Trust 1.00% N/A N/A N/A N/A N/A
---------- (1) Prior to April 1, 2003, the expense limitation rates for Class A, Class B, Class C, Class M, Class Q and Class T were 1.10%, 1.75%, 1.75%, 1.50%, 1.00% and 1.40% respectively. (2) Prior to April 1, 2003, the expense limitation rates for Class A, Class B, Class C, and Class Q were 0.95%, 1.35%, 1.35% and 0.85% respectively. Each Fund will at a later date reimburse the Investment Manager for management fees waived and other expenses assumed by the Investment Manager during the previous 36 months, but only if, after such reimbursement, the Fund'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 Fund. During the six months ended September 30, 2003, the Investment Manager voluntarily reimbursed Class A, Class B and Class C of the ING Money Market Fund $62,769, $104,031 and $29,497, respectively. These voluntary reimbursements were in addition to any contractual obligations under the expense limitation agreement. As of September 30, 2003, the cumulative amounts of reimbursed fees that are subject to possible recoupment by the Manager are as follows: High Yield Bond Fund $ 302,682 High Yield Opportunity Fund 2,063,620 Intermediate Bond Fund 192,324 National Tax-Exempt Bond Fund 192,489 Strategic Bond Fund 553,521 ING Classic Money Market Fund 2,041,879 ING Money Market Fund 503,668
NOTE 9 -- LINE OF CREDIT All of the Funds included in this report with the exception of GNMA Fund, in addition to certain other funds managed by the Adviser, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement") with Bank of New York for an aggregate amount of $125,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the Funds; and (3) enable the Funds to meet other emergency expenses as defined in the Credit Agreement. The Funds to which the line of credit is available pay a commitment fee equal to 0.09% per annum on the daily unused portion of the committed line amount payable quarterly in arrears. At September 30, 2003, the Funds did not have any loans outstanding. 58 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 10 -- CAPITAL SHARES Transaction in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ------------------------------ ------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- -------------- -------------- -------------- -------------- GNMA FUND (NUMBER OF SHARES) Shares sold 17,395,145 73,137,649 2,527,512 10,383,663 2,474,742 8,354,803 Dividends reinvested 1,501,244 2,826,216 215,858 323,671 120,278 181,211 Shares redeemed (23,811,381) (64,721,314) (3,487,921) (3,236,075) (3,576,955) (3,100,664) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) in shares outstanding (4,914,992) 11,242,551 (744,551) 7,471,259 (981,935) 5,435,350 ============== ============== ============== ============== ============== ============== GNMA FUND ($) Shares sold $ 150,583,452 $ 647,417,851 $ 22,445,176 $ 92,311,001 $ 22,024,570 $ 73,988,441 Dividends reinvested 10,691,981 25,045,619 1,904,595 2,864,197 1,062,957 1,606,627 Shares redeemed (205,236,552) (572,367,002) (30,831,380) (28,732,321) (31,593,326) (27,312,111) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) $ (43,961,119) $ 100,096,468 $ (6,481,609) $ 66,442,877 $ (8,505,799) $ 48,282,957 ============== ============== ============== ============== ============== ============== CLASS I SHARES CLASS M SHARES CLASS Q SHARES ------------------------------ ------------------------------ ------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- -------------- -------------- -------------- -------------- GNMA FUND (NUMBER OF SHARES) Shares sold 386,847 791,663 3,038 89,509 -- 14,313 Dividends reinvested 23,481 24,697 1,553 3,490 316 544 Shares redeemed (262,760) (234,440) (78,786) (27,626) (3,531) (18,365) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) in shares outstanding 147,568 581,920 (74,195) 65,373 (3,215) (3,508) ============== ============== ============== ============== ============== ============== GNMA FUND ($) Shares sold $ 3,468,333 $ 7,072,323 $ 27,195 $ 796,808 $ -- $ 126,826 Dividends reinvested 208,028 220,288 13,812 31,077 2,801 4,854 Shares redeemed (2,330,803) (2,096,498) (700,431) (247,442) (30,852) (164,519) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) $ 1,345,558 $ 5,196,113 $ (659,424) $ 580,443 $ (28,051) $ (32,839) ============== ============== ============== ============== ============== ============== CLASS T SHARES ------------------------------ SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003(1) 2003 -------------- -------------- GNMA FUND (NUMBER OF SHARES) Shares sold -- 1,849 Dividends reinvested -- 47,505 Shares redeemed (1,062,777) (307,685) -------------- -------------- Net decrease in shares outstanding (1,062,777) (258,331) ============== ============== GNMA FUND ($) Shares sold -- $ 16,625 Dividends reinvested -- 420,465 Shares redeemed $ (8,868,418) (2,713,539) -------------- -------------- Net decrease $ (8,868,418) $ (2,276,449) ============== ==============
---------- (1) Effective June 2, 2003, Class "T" shares converted into the corresponding Class "A" shares within this portfolio. 59 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 10 -- CAPITAL SHARES (CONTINUED)
CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ------------------------------ ------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- -------------- -------------- -------------- -------------- HIGH YIELD BOND FUND (NUMBER OF SHARES) Shares sold 2,448,386 1,975,025 873,538 983,987 581,974 621,983 Dividends reinvested 104,605 263,756 22,158 24,180 10,111 7,984 Shares redeemed (2,945,033) (1,412,180) (338,633) (373,376) (206,413) (179,197) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) in shares outstanding (392,042) 826,601 557,063 634,791 385,672 450,770 ============== ============== ============== ============== ============== ============== HIGH YIELD BOND FUND ($) Shares sold $ 20,112,740 $ 16,233,041 $ 7,435,058 $ 8,021,700 $ 4,968,268 $ 5,074,610 Dividends reinvested 501,617 2,154,434 165,879 197,420 76,414 65,209 Shares redeemed (23,987,826) (11,625,324) (2,850,859) (3,042,382) (1,755,579) (1,448,455) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) $ (3,373,469) $ 6,762,151 $ 4,750,078 $ 5,176,738 $ 3,289,103 $ 3,691,364 ============== ============== ============== ============== ============== ============== CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ------------------------------ ------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- -------------- -------------- -------------- -------------- HIGH YIELD OPPORTUNITY FUND (NUMBER OF SHARES) Shares sold 12,907,896 16,263,300 1,577,065 2,298,165 919,640 1,076,535 Shares issued in merger -- 6,407,106 -- 14,095,676 -- 590,240 Dividends reinvested 215,038 585,206 317,552 993,995 48,732 136,259 Shares redeemed (15,240,303) (15,075,372) (3,072,209) (7,674,507) (1,258,019) (1,167,865) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) in shares outstanding (2,117,369) 8,180,240 (1,177,592) 9,713,329 (289,647) 635,169 ============== ============== ============== ============== ============== ============== HIGH YIELD OPPORTUNITY FUND ($) Shares sold $ 142,817,488 $ 110,029,139 $ 10,885,481 $ 15,652,565 $ 6,306,253 $ 7,417,867 Shares issued in merger -- 48,565,867 -- 107,380,857 -- 4,492,905 Dividends reinvested 1,524,437 3,931,634 2,174,783 6,722,293 333,640 925,570 Shares redeemed (104,407,850) (103,807,585) (21,065,857) (52,283,480) (8,618,215) (8,007,182) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) $ 39,934,075 $ 58,719,055 $ (8,005,593) $ 77,472,235 $ (1,978,322) $ 4,829,160 ============== ============== ============== ============== ============== ============== CLASS M SHARES CLASS Q SHARES CLASS T SHARES ------------------------------ ------------------------------ ------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003(1) 2003 -------------- -------------- -------------- -------------- -------------- -------------- HIGH YIELD OPPORTUNITY FUND (NUMBER OF SHARES) Shares sold 525 2,138 34,730 116,562 -- 1 Shares issued in merger -- 628,797 -- 2,500 -- -- Dividends reinvested 7,028 25,070 4,684 8,930 -- 77,085 Shares redeemed (45,366) (151,825) (152,385) (211,906) (743,254) (707,547) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) in shares outstanding (37,813) 504,180 (112,971) (83,914) (743,254) (630,461) ============== ============== ============== ============== ============== ============== HIGH YIELD OPPORTUNITY FUND ($) Shares sold $ 3,569 $ 14,387 $ 237,594 $ 745,712 -- $ 4 Shares issued in merger -- 4,766,282 -- 19,032 -- -- Dividends reinvested 47,817 166,801 32,069 60,422 -- 526,861 Shares redeemed (310,162) (1,021,019) (1,031,766) (1,400,699) $ (60,277,683) (4,865,661) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) $ (258,776) $ 3,926,451 $ (762,103) $ (575,533) $ (60,277,683) $ (4,338,796) ============== ============== ============== ============== ============== ==============
---------- (1) Effective June 2, 2003, Class "T" shares converted into the corresponding Class "A" shares within this portfolio. 60 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 10 -- CAPITAL SHARES (CONTINUED)
CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ------------------------------ ------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- -------------- -------------- -------------- -------------- INTERMEDIATE BOND FUND (NUMBER OF SHARES) Shares sold 11,813,334 20,485,344 1,690,327 5,721,047 2,541,919 5,249,312 Dividends reinvested 137,403 281,375 36,598 90,480 29,011 64,460 Shares redeemed (8,553,586) (10,999,640) (1,344,428) (1,081,565) (1,399,528) (912,120) -------------- -------------- -------------- -------------- -------------- -------------- Net increase in shares outstanding 3,397,151 9,767,079 382,497 4,729,962 1,171,402 4,401,652 ============== ============== ============== ============== ============== ============== INTERMEDIATE BOND FUND ($) Shares sold $ 122,825,392 $ 212,009,071 $ 17,812,430 $ 59,045,245 $ 26,964,879 $ 54,232,649 Dividends reinvested 1,450,612 2,905,320 386,304 934,949 306,299 666,529 Shares redeemed (87,885,447) (113,708,272) (14,156,311) (11,172,225) (14,720,738) (9,420,954) -------------- -------------- -------------- -------------- -------------- -------------- Net increase $ 36,390,557 $ 101,206,119 $ 4,042,423 $ 48,807,969 $ 12,550,440 $ 45,478,224 ============== ============== ============== ============== ============== ============== CLASS I SHARES ------------------------------ SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 -------------- -------------- INTERMEDIATE BOND FUND (NUMBER OF SHARES) Shares sold 140,152 675,432 Dividends reinvested 21,313 64,547 Shares redeemed (295,440) (296,980) -------------- -------------- Net increase (decrease) in shares outstanding (133,975) 442,999 ============== ============== INTERMEDIATE BOND FUND ($) Shares sold $ 1,426,900 $ 6,967,970 Dividends reinvested 225,380 666,112 Shares redeemed (3,053,953) (3,053,533) -------------- -------------- Net increase (decrease) $ (1,401,673) $ 4,580,549 ============== ============== CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ------------------------------ ------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- -------------- -------------- -------------- -------------- NATIONAL TAX EXEMPT BOND FUND (NUMBER OF SHARES) Shares sold 359,067 201,630 28,317 186,918 23,912 89,524 Dividends reinvested 20,105 106,045 1,197 3,809 816 1,437 Shares redeemed (358,966) (347,173) (33,639) (56,464) (12,240) (19,282) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) in shares outstanding 20,206 (39,498) (4,125) 134,263 12,488 71,679 ============== ============== ============== ============== ============== ============== NATIONAL TAX EXEMPT BOND FUND ($) Shares sold $ 3,147,761 $ 2,164,822 $ 312,063 $ 1,990,453 $ 264,008 $ 972,058 Dividends reinvested 140,363 1,136,322 12,973 40,820 8,854 15,425 Shares redeemed (3,084,214) (3,715,337) (364,172) (604,556) (131,668) (208,567) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) $ 203,910 $ (414,193) $ (39,136) $ 1,426,717 $ 141,194 $ 778,916 ============== ============== ============== ============== ============== ==============
61 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 10 -- CAPITAL SHARES (CONTINUED)
CLASS A SHARES CLASS B SHARES ------------------------------------ ------------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 ---------------- ---------------- ---------------- ---------------- STRATEGIC BOND FUND (NUMBER OF SHARES) Shares sold 1,353,689 2,926,400 133,465 512,495 Dividends reinvested 45,264 155,509 11,432 25,027 Shares redeemed (1,539,887) (3,411,267) (194,167) (406,134) ---------------- ---------------- ---------------- ---------------- Net increase (decrease) in shares outstanding (140,934) (329,358) (49,270) 131,388 ================ ================ ================ ================ STRATEGIC BOND FUND ($) Shares sold $ 25,717,473 $ 32,008,296 $ 1,580,115 $ 5,478,867 Dividends reinvested 413,219 1,696,951 108,127 266,404 Shares redeemed (27,741,780) (37,277,857) (2,216,839) (4,331,111) ---------------- ---------------- ---------------- ---------------- Net increase (decrease) $ (1,611,088) $ (3,572,610) $ (528,597) $ 1,414,160 ================ ================ ================ ================ CLASS C SHARES CLASS Q SHARES ------------------------------------ ------------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 ---------------- ---------------- ---------------- ---------------- STRATEGIC BOND FUND (NUMBER OF SHARES) Shares sold 214,843 471,183 293 446,425 Dividends reinvested 3,258 9,972 241 511 Shares redeemed (274,764) (569,042) (2,418) (445,870) ---------------- ---------------- ---------------- ---------------- Net increase (decrease) in shares outstanding (56,663) (87,887) (1,884) 1,066 ================ ================ ================ ================ STRATEGIC BOND FUND ($) Shares sold $ 2,521,270 $ 5,276,764 $ 3,588 $ 4,589,655 Dividends reinvested 31,727 111,460 2,105 5,263 Shares redeemed (3,209,524) (6,375,279) (25,659) (4,587,888) ---------------- ---------------- ---------------- ---------------- Net increase (decrease) $ (656,527) $ (987,055) $ (19,966) $ 7,030 ================ ================ ================ ================ CLASS A SHARES CLASS B SHARES ------------------------------------ ------------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 ---------------- ---------------- ---------------- ---------------- CLASSIC MONEY MARKET FUND (NUMBER OF SHARES) Shares sold 311,574,473 574,042,376 156,437 715,606 Dividends reinvested 1,038,210 4,988,511 720 7,165 Shares redeemed (330,737,844) (670,065,555) (279,115) (1,553,711) ---------------- ---------------- ---------------- ---------------- Net decrease in shares outstanding (18,125,161) (91,034,668) (121,958) (830,940) ================ ================ ================ ================ CLASSIC MONEY MARKET FUND ($) Shares sold $ 311,574,325 $ 574,042,376 $ 156,551 $ 715,606 Dividends reinvested 1,038,210 4,988,511 720 7,165 Shares redeemed (330,739,124) (670,065,555) (279,115) (1,553,711) ---------------- ---------------- ---------------- ---------------- Net decrease $ (18,126,589) $ (91,034,668) $ (121,844) $ (830,940) ================ ================ ================ ================
62 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 10 -- CAPITAL SHARES (CONTINUED)
CLASS C SHARES CLASS I SHARES ------------------------------------ ------------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 ---------------- ---------------- ---------------- ---------------- CLASSIC MONEY MARKET FUND (NUMBER OF SHARES) Shares sold 19,325 161,450 -- -- Dividends reinvested 365 2,235 -- -- Shares redeemed (3,781) (229,528) -- (96) ---------------- ---------------- ---------------- ---------------- Net increase (decrease) in shares outstanding 15,909 (65,843) -- (96) ================ ================ ================ ================ CLASSIC MONEY MARKET FUND ($) Shares sold $ 19,384 $ 161,450 $ -- $ -- Dividends reinvested 365 2,235 -- -- Shares redeemed (3,781) (229,528) -- (96) ---------------- ---------------- ---------------- ---------------- Net increase (decrease) $ 15,968 $ (65,843) $ -- $ (96) ================ ================ ================ ================ CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ------------------------------ ------------------------------ SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- -------------- -------------- -------------- -------------- MONEY MARKET FUND (NUMBER OF SHARES) Shares sold 51,888,081 184,248,289 30,635,692 42,880,018 16,388,672 46,197,005 Dividends reinvested 64,233 141,234 46 1,413 2 1,006 Shares redeemed (50,854,595) (196,931,916) (35,954,433) (38,576,774) (19,553,005) (45,937,794) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) in shares outstanding 1,097,719 (12,542,393) (5,318,695) 4,304,657 (3,164,331) 260,217 ============== ============== ============== ============== ============== ============== MONEY MARKET FUND ($) Shares sold $ 51,888,092 $ 184,248,289 $ 30,566,683 $ 42,880,018 $ 16,327,024 $ 46,197,005 Dividends reinvested 64,233 141,234 46 1,413 2 1,006 Shares redeemed (50,854,970) (196,931,916) (35,885,404) (38,576,774) (19,491,378) (45,937,794) -------------- -------------- -------------- -------------- -------------- -------------- Net increase (decrease) $ 1,097,355 $ (12,542,393) $ (5,318,675) $ 4,304,657 $ (3,164,352) $ 260,217 ============== ============== ============== ============== ============== ============== CLASS A SHARES -------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 --------------- --------------- LEXINGTON MONEY MARKET TRUST (NUMBER OF SHARES) Shares sold 9,232,139 20,789,645 Dividends reinvested 91,078 347,083 Shares redeemed (12,109,800) (26,205,992) --------------- --------------- Net decrease in shares outstanding (2,786,583) (5,069,264) =============== =============== LEXINGTON MONEY MARKET TRUST ($) Shares sold $ 9,232,139 $ 20,789,645 Dividends reinvested 91,078 347,083 Shares redeemed (12,109,800) (26,205,992) --------------- --------------- Net decrease $ (2,786,583) $ (5,069,264) =============== ===============
---------- (1) As of 8/25/03 Class I shares are no longer offered for sale. 63 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 11 -- CREDIT RISK AND DEFAULTED SECURITIES Although each Fund has a diversified portfolio, High Yield Opportunity Fund and High Yield Bond Fund had 91.37% and 89.54%, respectively, of their portfolios invested in lower rated and comparable quality unrated high yield securities. Investments in high yield securities are accompanied by a greater degree of credit risk and such lower rated securities tend to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for the holders of high yielding securities, because such securities are generally unsecured and are often subordinated to other creditors of the issuer. Funds that held defaulted securities at September 30, 2003 were as follows:
FUND SECURITY MARKET VALUE ---- -------- ------------ Strategic Bond Fund WinStar Commnunications, Inc. $ 100 ========= High Yield International Utility Structures, Inc. $ 85,960 Opportunity Source Media, Inc. 1 Fund SA Telecommunications, Inc. 18 US Interactive 170,309 --------- $ 256,288 =========
For financial reporting purposes, it is each Fund's accounting practice to discontinue the accrual of income and to provide an estimate for probable losses due to unpaid interest income on defaulted bonds for the current reporting period. The High Yield Opportunity Fund and the the Intermediate Bond Fund had interest write-offs of $159,640 and $523, respectively, as a result of defaulted securities. NOTE 12 -- FEDERAL INCOME TAXES Dividends paid by the Funds 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. The tax composition of dividends and distributions to shareholders were as follows:
SIX MONTHS ENDED ORDINARY TAX EXEMPT LONG-TERM SEPTEMBER 30, 2003 INCOME INCOME CAPITAL GAINS -------- ---------- ------------- GNMA Fund $ 20,714,465 $ -- $ -- High Yield Bond Fund 2,268,065 -- -- High Yield Opportunity Fund 12,754,011 -- -- Intermediate Bond Fund 4,477,950 -- -- National Tax-Exempt Fund -- 468,221 -- Strategic Bond Fund 1,129,731 -- -- ING Classic Money Market Fund 1,060,595 -- -- ING Money Market Fund 72,903 -- -- Money Market Trust 94,583 -- -- YEAR ENDED ORDINARY TAX EXEMPT LONG-TERM MARCH 31, 2003 INCOME INCOME CAPITAL GAINS -------- ---------- ------------- GNMA Fund $ 37,467,565 $ -- $ -- High Yield Bond Fund 3,444,089 -- -- High Yield Opportunity Fund 34,744,544 -- -- Intermediate Bond Fund 7,068,340 -- 55,205 National Tax-Exempt Fund 16,602 926,118 312,270 Strategic Bond Fund 2,827,357 -- -- ING Classic Money Market Fund 5,124,447 -- -- ING Money Market Fund 186,079 -- -- Money Market Trust 361,267 -- --
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 generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. Key differences are the treatment of short-term capital gains, foreign currency transactions, wash sale deferrals, adjustments from mergers and other temporary or permanent differences. To the extent that these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassifications. Capital loss carryforwards, which may be used to offset future realized capital gains for federal income tax purposes were as follows at March 31, 2003:
AMOUNT EXPIRATION DATES ------ ---------------- GNMA Income Fund $ 13,788,569 2004-2010 High Yield Bond Fund 8,468,506 2008-2011 High Yield Opportunity Fund 373,214,651 2004-2011 Strategic Bond Fund 12,105,934 2007-2011 ING Classic Money Market Fund 35,311 2011 ING Money Market Fund 1,279 2011 Money Market Trust 164 2011
64 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 12 -- FEDERAL INCOME TAXES (CONTINUED) The capital loss carryforwards in High Yield Opportunity Fund includes $64,227,424 of losses acquired from ING High Yield Fund. Utilization of GNMA Fund, High Yield Opportunity Fund and Strategic Bond Fund capital loss carryforwards will be subject to an annual limitation as prescribed by the Internal Revenue Code. NOTE 13 -- REORGANIZATIONS On May 17, 2002, the High Yield Opportunity Fund as listed below ("Acquiring Fund"), acquired the assets and certain liabilities of High Yield Fund, also listed below ("Acquired Fund"), in a tax-free reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired Fund's shareholders. The number and value of shares issued by the Acquiring Fund are presented in Note 10 -- Capital Shares. Net assets and unrealized appreciation/(depreciation) as of the reorganization date were as follows:
ACQUIRED FUND UNREALIZED ACQUIRING ACQUIRED TOTAL NET ASSETS OF TOTAL NET ASSETS OF APPRECIATION FUND FUND ACQUIRED FUND (000) ACQUIRING FUND (000) (DEPRECIATION)(000) --------- -------- ------------------- -------------------- ------------------- High Yield Opportunity Fund ING High Yield Fund $ 165,225 $ 242,666 $ (3,897)
The net assets of High Yield Opportunity Fund after the reorganization were $407,891,000. NOTE 14 -- ILLIQUID SECURITIES Pursuant to guidelines adopted by the Funds' Board of Trustees, the following securities have been deemed to be illiquid. The Funds currently limit investment in illiquid securities to 15% (10% for ING Classic Money Market, ING Money Market and Money Market Trust) of the Fund's net assets, at market value, at time of purchase.
PRINCIPAL INITIAL PERCENT AMOUNT/ ACQUISITION OF NET FUND SECURITY SHARES DATE COST VALUE ASSETS ---- -------- --------- ----------- ---- ----- ------- High Yield Bond Fund O Sullivan Industries, Inc. 373 09/05/03 $ 3,300,000 $ -- 0.0% O Sullivan Industries, Inc. 1,000 09/12/03 3,300,000 -- 0.0% GT Group Telecom, Inc. 500 01/28/03 4,000,000 -- 0.0% ------------ ------------ --- $ 10,600,000 $ -- 0.0% ============ ============ === ING Classic Money Market Fund Goldman Sachs Group, Inc., 1.130%, due 12/04/03 4,500,000 09/05/03 $ 4,500,000 $ 4,500,000 1.0% Goldman Sachs Group, Inc., 1.140%, due 12/12/03 4,500,000 09/12/03 4,500,000 4,500,000 1.0% Goldman Sachs Group, Inc., 1.400%, due 10/27/03 5,000,000 01/28/03 5,000,000 5,000,000 1.1% M-MKT Trust Lly, 1.220%, due 02/19/04 5,400,000 02/19/03 5,398,957 5,398,957 1.2% M-MKT Trust Series A-1, 1.270%, due 10/08/04 9,200,000 03/12/03 9,200,000 9,200,000 2.1% ------------ ------------ --- $ 28,598,957 $ 28,598,957 6.4% ============ ============ === ING Money Market Fund Goldman Sachs Group, Inc., 1.130%, due 12/04/03 600,000 09/05/03 $ 600,000 $ 600,000 1.1% Goldman Sachs Group, Inc., 1.140%, due 12/12/03 600,000 09/12/03 600,000 600,000 1.1% M-MKT Trust Series A-1, 1.270%, due 10/08/04 1,300,000 03/17/03 1,300,000 1,300,000 2.4% ------------ ------------ --- $ 2,500,000 $ 2,500,000 4.6% ============ ============ === Money Market Trust Goldman Sachs Group, Inc., 1.130%, due 12/04/03 500,000 09/05/03 $ 500,000 $ 500,000 1.1% Goldman Sachs Group, Inc., 1.140%, due 12/12/03 500,000 09/12/03 500,000 500,000 1.1% M-MKT Trust Series A-1, 1.270%, due 10/08/04 1,000,000 03/12/03 1,000,000 1,000,000 2.1% ------------ ------------ --- $ 2,000,000 $ 2,000,000 4.3% ============ ============ ===
65 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 15 -- SECURITIES LENDING Under an agreement with Bank of New York ("BNY"), the Funds (except GNMA Fund) 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 cash collateral received is reflected on the Statement of Assets and Liabilities as Other Investments. Generally, in the event of counterparty default, the Funds 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 Funds in the event the Funds are delayed or prevented from exercising their right to dispose of the collateral. The Funds 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 Fund. At September 30, 2003, the following Funds had securities on loan with the following market values:
VALUE OF SECURITIES VALUE OF PORTFOLIO LOANED COLLATERAL --------- ---------- ---------- High Yield Bond Fund $ 16,237,223 $ 16,602,023 High Yield Opportunity Fund 81,157,392 82,978,167 Intermediate Bond Fund 70,544,278 71,635,383 Strategic Bond Fund 7,637,266 7,753,044
NOTE 16 -- CHANGE IN FUNDS' AUDITORS PricewaterhouseCoopers, LLP ("PwC") served as independent auditors for the Funds. On May 28, 2003, the Funds' Board dismissed PwC and selected KPMG LLP ("KPMG") as independent auditors for the Funds for the fiscal year ending March 31, 2004 upon the recommendation of the Funds' Audit Committee. During the two most recent fiscal years and through May 28, 2003, there was no disagreement with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to PwC's satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement. The audit reports of PwC on the financial statements of the Funds as of and for the years ended March 31, 2003 and 2002 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. NOTE 17 -- SUBSEQUENT EVENTS DIVIDENDS. Subsequent to September 30, 2003 the following Funds declared dividends from net investment income of:
PER SHARE AMOUNT PAYABLE DATE RECORD DATE --------- ------------ ----------- GNMA FUND Class A $ 0.0360 October 3, 2003 September 30, 2003 Class B $ 0.0306 October 3, 2003 September 30, 2003 Class C $ 0.0305 October 3, 2003 September 30, 2003 Class I $ 0.0383 October 3, 2003 September 30, 2003 Class M $ 0.0321 October 3, 2003 September 30, 2003 Class Q $ 0.0365 October 3, 2003 September 30, 2003 Class A $ 0.0360 November 5, 2003 October 31, 2003 Class B $ 0.0304 November 5, 2003 October 31, 2003 Class C $ 0.0304 November 5, 2003 October 31, 2003 Class I $ 0.0384 November 5, 2003 October 31, 2003 Class M $ 0.0317 November 5, 2003 October 31, 2003 Class Q $ 0.0363 November 5, 2003 October 31, 2003 HIGH YIELD BOND FUND Class A $ 0.0497 November 3, 2003 Daily Class B $ 0.0442 November 3, 2003 Daily Class C $ 0.0442 November 3, 2003 Daily HIGH YIELD OPPORTUNITY FUND Class A $ 0.0350 November 3, 2003 Daily Class B $ 0.0306 November 3, 2003 Daily Class C $ 0.0306 November 3, 2003 Daily Class M $ 0.0318 November 3, 2003 Daily Class Q $ 0.0346 November 3, 2003 Daily INTERMEDIATE BOND FUND Class A $ 0.0287 November 3, 2003 Daily Class B $ 0.0227 November 3, 2003 Daily Class C $ 0.0221 November 3, 2003 Daily Class I $ 0.0314 November 3, 2003 Daily
66 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 17 -- SUBSEQUENT EVENTS (CONTINUED)
PER SHARE AMOUNT PAYABLE DATE RECORD DATE --------- ------------ ----------- NATIONAL TAX-EXEMPT BOND FUND Class A $ 0.0302 November 3, 2003 Daily Class B $ 0.0233 November 3, 2003 Daily Class C $ 0.0233 November 3, 2003 Daily STRATEGIC BOND FUND Class A $ 0.0400 October 3, 2003 September 30, 2003 Class B $ 0.0366 October 3, 2003 September 30, 2003 Class C $ 0.0358 October 3, 2003 September 30, 2003 Class Q $ 0.0429 October 3, 2003 September 30, 2003 Class A $ 0.0400 November 5, 2003 October 31, 2003 Class B $ 0.0364 November 5, 2003 October 31, 2003 Class C $ 0.0360 November 5, 2003 October 31, 2003 Class Q $ 0.0429 November 5, 2003 October 31, 2003 ING CLASSIC MONEY MARKET FUND Class A $ 0.0003 November 3, 2003 Daily Class B $ 0.0000 November 3, 2003 Daily Class C $ 0.0000 November 3, 2003 Daily ING MONEY MARKET FUND Class A $ 0.0006 November 3, 2003 Daily Class B $ 0.0000 November 3, 2003 Daily Class C $ 0.0000 November 3, 2003 Daily MONEY MARKET TRUST Class A $ 0.0003 November 3, 2003 Daily
67 ING GNMA Income Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 87.9% FEDERAL HOME LOAN MORTGAGE CORPORATION: 0.4% $ 708,994 7.000%, due 11/01/14 $ 753,013 1,773,443 7.500%, due 12/01/14-01/01/30 1,890,584 350,148 8.000%, due 01/01/30 377,302 --------------- 3,020,899 --------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 0.4% 384,846 409,600 281,745 6.500%, due 06/01/14 298,003 613,862 7.500%, due 05/01/28 656,047 1,787,755 S 8.500%, due 08/01/11-09/01/15 1,987,153 --------------- 3,350,803 --------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 87.1% 979,994 10.250%, due 08/15/29 1,069,973 55,531,485 5.000%, due 04/15/33-07/15/33 55,703,865 95,250,077 5.500%, due 02/20/23-07/15/33 97,739,104 553,463 5.650%, due 07/15/29 558,210 169,058,357 6.000%, due 04/20/24-09/15/33 175,295,995 1,784,126 6.250%, due 04/15/26-04/15/28 1,867,133 135,340 6.340%, due 02/15/29 137,161 574,186 6.350%, due 09/15/33 630,459 5,820,455 6.400%, due 10/15/33-08/15/38 6,408,481 1,170,272 6.470%, due 09/15/33 1,290,941 56,962,273 6.500%, due 02/15/22-02/15/40 61,175,561 15,420,232 6.625%, due 07/15/33-01/15/40 17,332,005 4,668,846 6.650%, due 12/15/13-09/15/32 5,200,466 3,525,311 6.670%, due 01/15/40 3,984,456 6,210,297 6.687%, due 07/15/40 7,042,676 395,226 6.700%, due 08/15/14-12/15/14 419,535 4,319,450 6.745%, due 10/15/39 4,889,893 13,468,691 6.750%, due 06/15/13-01/15/41 15,119,995 2,854,475 6.810%, due 07/15/39 3,246,536 4,090,695 6.820%, due 05/15/27-04/15/34 4,625,324 9,866,540 6.840%, due 10/15/36 11,271,338 1,806,448 6.870%, due 03/15/39 2,063,072 5,925,429 6.875%, due 01/15/29-02/15/40 6,725,436 2,185,841 6.900%, due 01/15/32 2,499,651 2,904,734 6.950%, due 12/15/29 2,910,254 99,794,392 7.000%, due 07/15/22-12/15/35 106,463,877 8,999,757 7.010%, due 02/15/37 10,264,141 956,985 7.050%, due 07/15/29 1,016,837 5,569,920 7.100%, due 11/15/39 6,393,762 8,966,962 7.125%, due 09/15/39 10,277,305 3,351,792 7.150%, due 07/15/36 3,854,921 4,202,918 7.250%, due 08/15/22-09/15/31 4,572,220 2,961,114 7.300%, due 08/15/36 3,414,143 10,034,934 7.500%, due 12/15/19-09/15/32 10,802,559 7,019,577 7.600%, due 08/15/31-06/15/40 8,044,330 10,944,891 7.625%, due 08/15/32-07/15/38 12,289,669 83,127 7.650%, due 12/15/12 87,792 532,244 7.700%, due 08/15/13 563,065 6,217,888 7.750%, due 06/15/14-12/15/35 6,994,049 1,103,887 7.800%, due 05/15/19-01/15/42 1,270,647 10,008,505 7.875%, due 09/15/29-04/15/38 11,143,756 14,147,633 8.000%, due 08/15/12-11/15/38 15,842,434 201,371 8.050%, due 07/15/19-04/15/21 220,241 1,361,823 8.100%, due 06/15/12-07/15/12 1,446,613 4,993,364 8.125%, due 05/15/38 5,721,115 5,574,874 8.150%, due 12/15/11-09/15/15 5,935,686 $ 5,745,292 S 8.200%, due 10/15/11-05/15/13 $ 6,114,192 2,053,264 8.250%, due 10/15/24-03/15/41 2,340,258 7,008,255 8.500%, due 12/15/29-10/15/31 7,555,477 119,017 8.750%, due 10/15/23-06/15/27 125,795 2,840,068 9.000%, due 05/15/20-12/15/34 3,026,322 1,377,893 9.250%, due 06/15/30 1,477,693 --------------- 736,466,419 --------------- Total U.S. Government Agency Obligations (Cost $710,509,366) 742,838,121 --------------- U.S. TREASURY OBLIGATIONS: 5.3% U.S. TREASURY NOTES: 5.3% 32,000,000 1.250%, due 05/31/05 31,991,264 13,000,000 1.500%, due 07/31/05 13,034,034 --------------- 45,025,298 --------------- Total U.S. Treasury Obligations (Cost $44,864,119) 45,025,298 --------------- Total Long-Term Investments (Cost $755,373,485) 787,863,419 --------------- SHORT-TERM INVESTMENTS: 6.5% U.S. TREASURY BILLS: 6.5% 500,000 0.000%, due 02/12/04 498,247 55,000,000 0.000%, due 03/11/04 54,762,895 --------------- 55,261,142 --------------- Total Short-term Investments (Cost $55,253,402) 55,261,142 --------------- TOTAL INVESTMENTS IN SECURITIES (COST $810,626,887)* 99.7% $ 843,124,561 OTHER ASSETS AND LIABILITIES-NET 0.3 2,150,621 ----- --------------- NET ASSETS 100.0% $ 845,275,182 ===== ===============
* Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 35,761,802 Gross Unrealized Depreciation (3,264,128) --------------- Net Unrealized Appreciation $ 32,497,674 ===============
See Accompanying Notes to Financial Statements 68 ING High Yield Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 93.3% ADVERTISING: 0.4 $ 10,000 # RH Donnelley Finance Corp. I, due 10.875%, 12/15/12 $ 11,850 265,000 # Vertis, Inc., 9.750%, due 04/01/09 280,238 --------------- 292,088 --------------- AEROSPACE/DEFENSE: 0.7% 45,000 L Armor Holdings, Inc., 8.250%, due 08/15/13 47,813 155,000 L-3 Communications Corp., 7.625%, due 06/15/12 168,563 215,000 Sequa Corp., 9.000%, due 08/01/09 236,499 --------------- 452,875 --------------- AGRICULTURE: 0.2% 155,000 # Dimon, Inc., 7.750%, due 06/01/13 159,650 --------------- 159,650 --------------- APPAREL: 0.4% 250,000 # Phillips-Van Heusen, 8.125%, due 05/01/13 263,125 --------------- 263,125 --------------- AUTO MANUFACTURERS: 0.0% 15,000 L General Motors Corp., 7.125%, due 07/15/13 15,763 5,000 L General Motors Corp., 7.200%, due 01/15/11 5,276 --------------- 21,039 --------------- AUTO PARTS & EQUIPMENT: 3.1% 500,000 CSK Auto, Inc., 12.000%, due 06/15/06 561,250 120,000 Dana Corp., 10.125%, due 03/15/10 134,700 180,000 Dura Operating Corp., 8.625%, due 04/15/12 187,650 140,000 # Eagle-Picher Industries, 9.750%, due 09/01/13 147,700 235,000 Lear Corp., 8.110%, due 05/15/09 271,425 170,000 Rexnord Corp., 10.125%, due 12/15/12 189,550 220,000 # Tenneco Automotive, Inc., 10.250%, due 07/15/13 239,800 310,000 # TRW Automotive, Inc., 11.000%, due 02/15/13 362,700 --------------- 2,094,775 --------------- BEVERAGES: 0.3% 190,000 L Constellation Brands, Inc., 8.500%, due 03/01/09 201,400 --------------- 201,400 --------------- BUILDING MATERIALS: 0.3% 175,000 Nortek Holdings, Inc., 9.875%, due 06/15/11 185,938 --------------- 185,938 --------------- CHEMICALS: 2.6% $ 130,000 L Equistar Funding Corp., 10.125%, due 09/01/08 $ 129,350 120,000 # Equistar Funding Corp., 10.625%, due 05/01/11 119,400 640,000 IMC Global, Inc., 10.875%, due 06/01/08 668,800 460,000 L Lyondell Chemical Co., 9.625%, due 05/01/07 439,300 345,000 # Rockwood Specialties Group, Inc., 10.625%, due 05/15/11 369,150 --------------- 1,726,000 --------------- COMMERCIAL SERVICES: 2.9% 325,000 Coinmach Corp., 9.000%, due 02/01/10 347,750 205,000 Corrections Corp. of America, 7.500%, due 05/01/11 212,431 595,000 @@ Quebecor Media, Inc., 11.125%, due 07/15/11 681,275 520,000 United Rentals North America, Inc., 10.750%, due 04/15/08 578,500 100,000 United Rentals North America, Inc., 10.750%, due 04/15/08 111,250 --------------- 1,931,206 --------------- COMPUTERS: 0.2% 150,000 @@ Seagate Technology HDD Holdings, 8.000%, due 05/15/09 166,125 --------------- 166,125 --------------- COSMETICS/PERSONAL CARE: 0.5% 365,000 L Chattem, Inc., 8.875%, due 04/01/08 366,825 --------------- 366,825 --------------- DISTRIBUTION/WHOLESALE: 0.5% 340,000 # Aviall, Inc., 7.625%, due 07/01/11 350,200 --------------- 350,200 --------------- DIVERSIFIED FINANCIAL SERVICES: 3.0% 145,000 @@,#,L Eircom Funding, 8.250%, due 08/15/13 156,600 170,000 # HLI Operating Co., Inc., 10.500%, due 06/15/10 186,150 521,571 # Hollinger Participation Trust, 12.125%, due 11/15/10 590,027 460,000 Nexstar Finance, Inc., 12.000%, due 04/01/08 517,500 325,000 Technical Olympic USA, Inc., 9.000%, due 07/01/10 344,500 165,000 Technical Olympic USA, Inc., 10.375%, due 07/01/12 178,200 50,000 # Universal City Development Partners, 11.750%, due 04/01/10 56,500 --------------- 2,029,477 --------------- ELECTRIC: 3.6% 745,000 # AES Corp., 8.750%, due 05/15/13 785,975 470,000 #,L Calpine Corp., 8.750%, due 07/15/13 432,400 215,000 Homer City Funding LLC, 8.734%, due 10/01/26 221,450
See Accompanying Notes to Financial Statements 69 ING High Yield Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- ELECTRIC (CONTINUED) $ 250,000 Illinois Power Co., 11.500%, due 12/15/10 $ 301,250 275,000 # PG&E Corp., 6.875%, due 07/15/08 290,125 385,000 Teco Energy, Inc., 7.500%, due 06/15/10 392,219 --------------- 2,423,419 --------------- ELECTRICAL COMPONENTS & EQUIPMENT: 0.2% 145,000 @@ FIMEP SA, 10.500%, due 02/15/13 164,575 --------------- 164,575 --------------- ELECTRONICS: 0.8% 200,000 Fisher Scientific Intl., 8.125%, due 05/01/12 213,500 170,000 L Flextronics Intl. Ltd., 6.500%, due 05/15/13 169,575 165,000 Stoneridge, Inc., 11.500%, due 05/01/12 189,338 --------------- 572,413 --------------- ENTERTAINMENT: 1.7% 100,000 Argosy Gaming Co., 9.000%, due 09/01/11 108,750 205,000 Carmike Cinemas, Inc., 10.375%, due 02/01/09 216,275 315,000 Cinemark USA, Inc., 9.000%, due 02/01/13 337,838 255,000 Regal Cinemas, Inc., 9.375%, due 02/01/12 288,150 190,000 L Six Flags, Inc., 9.750%, due 06/15/07 187,625 --------------- 1,138,638 --------------- ENVIRONMENTAL CONTROL: 2.1% 925,000 Allied Waste North America, 8.500%, due 12/01/08 1,003,625 360,000 L Allied Waste North America, 10.000%, due 08/01/09 391,950 --------------- 1,395,575 --------------- FOOD: 3.0% 400,000 # Del Monte Corp., 8.625%, due 12/15/12 438,999 250,000 #,L Domino's, Inc., 8.250%, due 07/01/11 265,313 300,000 Great Atlantic & Pacific Tea Co., 9.125%, due 12/15/11 283,500 268,000 Michael Foods, Inc., 11.750%, due 04/01/11 314,900 245,000 Pilgrims Pride Corp., 9.625%, due 09/15/11 265,825 135,000 Roundy's, Inc., 8.875%, due 06/15/12 141,750 25,000 # Smithfield Foods, Inc., 7.750%, due 05/15/13 26,938 280,000 # Swift & Co., 12.500%, due 01/01/10 310,800 --------------- 2,048,025 --------------- FOREST PRODUCTS & PAPER: 3.5% $ 685,000 Appleton Papers, Inc., 12.500%, due 12/15/08 $ 750,075 580,000 L Georgia-Pacific Corp., 8.125%, due 05/15/11 606,100 180,000 L Georgia-Pacific Corp., 8.875%, due 02/01/10 198,000 280,000 Georgia-Pacific Corp., 9.375%, due 02/01/13 313,950 475,000 @@ Tembec Industries, Inc., 8.625%, due 06/30/09 470,250 --------------- 2,338,375 --------------- HEALTHCARE-PRODUCTS: 0.3% 215,000 # Medex, Inc., 8.875%, due 05/15/13 228,438 --------------- 228,438 --------------- HEALTHCARE-SERVICES: 3.3% 300,000 L Alliance Imaging, Inc., 10.375%, due 04/15/11 313,500 80,000 Coventry Health Care, Inc., 8.125%, due 02/15/12 85,600 450,000 HCA, Inc., 7.875%, due 02/01/11 503,085 450,000 HCA, Inc., 8.750%, due 09/01/10 524,308 755,000 Tenet Healthcare Corp., 7.375%, due 02/01/13 764,438 --------------- 2,190,931 --------------- HOME BUILDERS: 2.0% 165,000 Beazer Homes USA, Inc., 8.375%, due 04/15/12 179,025 195,000 # K. Hovnanian Enterprises, Inc., 7.750%, due 05/15/13 201,825 140,000 KB Home, 7.750%, due 02/01/10 148,400 155,000 Meritage Corp., 9.750%, due 06/01/11 170,500 95,000 Ryland Group, Inc., 8.000%, due 08/15/06 102,244 80,000 Ryland Group, Inc., 9.125%, due 06/15/11 90,500 165,000 Standard-Pacific Corp., 7.750%, due 03/15/13 169,125 20,000 # WCI Communities, Inc., 7.875%, due 10/01/13 20,150 250,000 WCI Communities, Inc., 10.625%, due 02/15/11 275,000 --------------- 1,356,769 --------------- HOUSEHOLD PRODUCTS/WARES: 1.0% 450,000 American Greetings, 11.750%, due 07/15/08 515,250 155,000 # Rayovac Corp., 8.500%, due 10/01/13 160,425 --------------- 675,675 --------------- IRON/STEEL: 0.3% 210,000 United States Steel Corp., 9.750%, due 05/15/10 216,300 --------------- 216,300 ---------------
See Accompanying Notes to Financial Statements 70 ING High Yield Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- LEISURE TIME: 0.7% $ 300,000 @@ Royal Caribbean Cruises Ltd., 8.000%, due 05/15/10 $ 318,000 160,000 # Worldspan Financing Corp., 9.625%, due 06/15/11 168,400 --------------- 486,400 --------------- LODGING: 7.0% 490,000 Ameristar Casinos, Inc., 10.750%, due 02/15/09 559,825 275,000 Aztar Corp., 9.000%, due 08/15/11 298,719 225,000 Extended Stay America, Inc., 9.875%, due 06/15/11 249,469 200,000 Hilton Hotels Corp., 7.625%, due 05/15/08 220,000 129,000 Host Marriott Corp., 7.875%, due 08/01/05 132,870 95,000 Host Marriott Corp., 7.875%, due 08/01/08 98,088 590,000 Mandalay Resort Group, 9.500%, due 08/01/08 679,974 450,000 L MGM Mirage, 8.375%, due 02/01/11 497,250 75,000 MGM Mirage, 9.750%, due 06/01/07 85,219 155,000 Park Place Entertainment Corp., 7.000%, due 04/15/13 161,006 520,000 L Park Place Entertainment Corp., 7.875%, due 03/15/10 559,000 195,000 Park Place Entertainment Corp., 9.375%, due 02/15/07 215,963 565,000 Starwood Hotels & Resorts Worldwide, Inc., 7.875%, due 05/01/12 621,499 290,000 Venetian Casino Resort LLC, 11.000%, due 06/15/10 332,050 --------------- 4,710,932 --------------- MEDIA: 13.4% 230,000 Allbritton Communications Co., 7.750%, due 12/15/12 235,750 325,000 Block Communications, Inc., 9.250%, due 04/15/09 349,375 265,000 @@ Canwest Media, Inc., 10.625%, due 05/15/11 302,100 630,000 Charter Communications Holdings Capital Corp., 9.625%, due 11/15/09 489,825 180,000 L CSC Holdings, Inc., 7.625%, due 04/01/11 180,450 325,000 L CSC Holdings, Inc., 10.500%, due 05/15/16 359,125 75,000 Dex Media East Finance Co., 9.875%, due 11/15/09 85,313 680,000 L Dex Media East Finance Co., 12.125%, due 11/15/12 824,499 125,000 # Dex Media Finance Co., 8.500%, due 08/15/10 136,563 400,000 #,L Dex Media Finance Co., 9.875%, due 08/15/13 454,000 450,000 DirecTV Holdings LLC, 8.375%, due 03/15/13 509,625 $ 280,000 # Echostar DBS Corp., 5.750%, due 10/01/08 $ 281,750 165,000 Entravision Communications Corp., 8.125%, due 03/15/09 173,663 70,000 Granite Broadcasting Corp., 8.875%, due 05/15/08 67,638 470,000 Granite Broadcasting Corp., 10.375%, due 05/15/05 465,300 515,000 Gray Television, Inc., 9.250%, due 12/15/11 570,362 415,000 Hollinger Intl. Publishing, 9.000%, due 12/15/10 439,381 65,000 @@,# Hollinger, Inc., 11.875%, due 03/01/11 72,150 125,000 Houghton Mifflin Co., 8.250%, due 02/01/11 131,563 170,000 L Mediacom Broadband LLC, 11.000%, due 07/15/13 179,775 230,000 #,+ Nexstar Finance Holdings, Inc., 0.000%, due 04/01/08 162,150 330,000 Paxson Communications Corp., 10.750%, due 07/15/08 350,213 110,000 Primedia, Inc., 8.875%, due 05/15/11 114,675 140,000 Salem Communications Holding Corp., 9.000%, due 07/01/11 151,375 195,000 Sinclair Broadcast Group, Inc., 8.000%, due 03/15/12 206,700 240,000 Spanish Broadcasting System, 9.625%, due 11/01/09 255,000 565,000 @@,# Vivendi Universal SA, 9.250%, due 04/15/10 651,868 0 Young Broadcasting, Inc., 8.500%, due 12/15/08 0 198,000 Young Broadcasting, Inc., 9.000%, due 01/15/06 199,980 498,000 Young Broadcasting, Inc., 10.000%, due 03/01/11 530,369 --------------- 8,930,537 --------------- MINING: 0.7% 415,000 Compass Minerals Group, Inc., 10.000%, due 08/15/11 462,725 --------------- 462,725 --------------- MISCELLANEOUS MANUFACTURING: 1.6% 180,000 Samsonite Corp, 10.750%, due 06/15/08 189,000 145,000 SPX Corp., 7.500%, due 01/01/13 153,338 720,000 @@ Tyco Intl. Group SA, 6.750%, due 02/15/11 763,200 --------------- 1,105,538 --------------- OFFICE/BUSINESS EQUIP: 0.6% 375,000 Xerox Corp., 7.625%, due 06/15/13 371,719 --------------- 371,719 --------------- OIL AND GAS: 4.2% 465,000 # Chesapeake Energy Corp., 7.500%, due 09/15/13 490,575 90,000 # Energy Partners Ltd., 8.750%, due 08/01/10 92,700 400,000 Nuevo Energy Co., 9.375%, due 10/01/10 435,000
See Accompanying Notes to Financial Statements 71 ING High Yield Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- OIL AND GAS (CONTINUED) $ 37,000 Nuevo Energy Co., 9.500%, due 06/01/08 $ 39,081 470,000 Swift Energy Co., 9.375%, due 05/01/12 509,949 225,000 Vintage Petroleum, Inc., 8.250%, due 05/01/12 243,563 550,000 @@ Western Oil Sands, Inc., 8.375%, due 05/01/12 625,624 375,000 Westport Resources Corp., 8.250%, due 11/01/11 411,563 --------------- 2,848,055 --------------- OIL AND GAS SERVICES: 2.2% 175,000 Grant Prideco Escrow Corp., 9.000%, due 12/15/09 189,438 500,000 Grant Prideco, Inc., 9.625%, due 12/01/07 550,000 675,000 Hanover Equipment Trust, 8.500%, due 09/01/08 698,625 50,000 Hanover Equipment Trust, 8.750%, due 09/01/11 51,750 --------------- 1,489,813 --------------- PACKAGING AND CONTAINERS: 5.7% 105,000 Ball Corp., 6.875%, due 12/15/12 108,806 430,000 # BWAY Finance Corp., 10.000%, due 10/15/10 466,550 395,000 @@,# Crown European Holdings SA, 10.875%, due 03/01/13 437,463 375,000 Greif, Inc., 8.875%, due 08/01/12 407,813 180,000 @@,#,L Norampac, Inc., 6.750%, due 06/01/13 184,500 320,000 # Owens-Brockway, 8.250%, due 05/15/13 328,000 965,000 Owens-Brockway, 8.875%, due 02/15/09 1,032,549 300,000 L Owens-Illinois, Inc., 7.150%, due 05/15/05 308,250 540,000 Smurfit-Stone Container Corp., 8.250%, due 10/01/12 566,999 --------------- 3,840,930 --------------- PHARMACEUTICALS: 0.8% 50,000 AmerisourceBergen Corp., 7.250%, due 11/15/12 51,125 425,000 AmerisourceBergen Corp., 8.125%, due 09/01/08 463,250 --------------- 514,375 --------------- PIPELINES: 3.4% 265,000 ANR Pipeline Co., 8.875%, due 03/15/10 284,875 245,000 L EL Paso Corp., 7.875%, due 06/15/12 207,025 125,000 GulfTerra Energy Finance Corp., 10.625%, due 12/01/12 147,188 200,000 GulfTerra Energy Partners LP, 8.500%, due 06/01/10 216,500 200,000 Southern Natural Gas Co., 7.350%, due 02/15/31 185,000 310,000 Southern Natural Gas Co., 8.000%, due 03/01/32 303,025 $ 245,000 Tennessee Gas Pipeline Co., 8.375%, due 06/15/32 $ 240,100 505,000 Transcontinental Gas Pipe Line Corp., 8.875%, due 07/15/12 573,805 95,000 Williams Cos., Inc., 8.625%, due 06/01/10 101,413 --------------- 2,258,931 --------------- REITs: 0.9% 350,000 L Felcor Lodging LP, 9.500%, due 09/15/08 378,000 65,000 Host Marriott LP, 9.500%, due 01/15/07 71,500 170,000 # La Quinta Properties, Inc., 8.875%, due 03/15/11 185,088 --------------- 634,588 --------------- RETAIL: 3.7% 400,000 Dollar General Corp., 8.625%, due 06/15/10 446,500 70,000 # Group 1 Automotive, Inc., 8.250%, due 08/15/13 75,775 335,000 L JC Penney Co., Inc., 7.600%, due 04/01/07 363,475 165,000 Rent-A-Center, Inc., 7.500%, due 05/01/10 174,281 415,000 S Rite Aid Corp., 7.625%, due 04/15/05 427,450 175,000 # Rite Aid Corp., 9.250%, due 06/01/13 186,375 80,000 Saks, Inc., 8.250%, due 11/15/08 88,000 330,000 Star Gas Finance Co., 10.250%, due 02/15/13 353,100 310,000 Yum! Brands, Inc., 8.875%, due 04/15/11 362,700 --------------- 2,477,656 --------------- SEMICONDUCTORS: 0.3% 70,000 AMI Semiconductor, Inc., 10.750%, due 02/01/13 79,450 70,000 # Amkor Technology, Inc., 7.750%, due 05/15/13 70,700 60,000 Amkor Technology, Inc., 9.250%, due 02/15/08 65,100 --------------- 215,250 --------------- TELECOMMUNICATIONS: 11.2% 470,000 #,L ACC Escrow Corp., 10.000%, due 08/01/11 507,600 540,000 #,L American Tower Corp., 9.375%, due 02/01/09 553,500 275,000 + American Tower Escrow Corp., .000%, due 08/01/08 184,250 280,000 # Centennial Communications Corp., 10.125%, due 06/15/13 289,800 225,000 L Crown Castle Intl. Corp., 9.375%, due 08/01/11 241,313 350,000 L Crown Castle Intl. Corp., 10.750%, due 08/01/11 390,250 205,000 # Dobson Communications Corp., 8.875%, due 10/01/13 208,331 160,000 Dobson Communications Corp., 10.875%, due 07/01/10 175,200
See Accompanying Notes to Financial Statements 72 ING High Yield Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) $ 125,000 Dobson/Sygnet Communications Co., 12.250%, due 12/15/08 $ 134,688 115,000 # MetroPCS, Inc., 10.750%, due 10/01/11 117,875 540,000 L Nextel Communications, Inc., 7.375%, due 08/01/15 548,100 600,000 L Nextel Communications, Inc., 9.375%, due 11/15/09 653,999 110,000 L Nextel Partners, Inc., 12.500%, due 11/15/09 125,950 445,000 Panamsat Corp., 8.500%, due 02/01/12 468,363 610,000 Qwest Communications Intl., 7.500%, due 11/01/08 588,649 65,000 # Qwest Corp., 8.875%, due 03/15/12 72,475 601,000 # Qwest Services Corp., 14.000%, due 12/15/14 725,707 295,000 @@ Rogers Wireless Communications, Inc., 9.625%, due 05/01/11 340,725 210,000 # Spectrasite, Inc., 8.250%, due 05/15/10 222,600 295,000 @@ TELUS Corp., 8.000%, due 06/01/11 344,992 255,000 Triton PCS, Inc., 8.500%, due 06/01/13 274,763 305,000 # Western Wireless Corp., 9.250%, due 07/15/13 312,625 --------------- 7,481,755 --------------- Total Corporate Bonds (Cost $59,474,872) 62,819,060 --------------- SHARES VALUE --------------------------------------------------------------------------------------------------- PREFERRED STOCK: 1.8% MEDIA: 1.8% 5,050 Cablevision Systems Corp. 528,987 2,919 @ Paxson Communications Corp. 263,462 4,150 Primedia, Inc. 399,438 --------------- 1,191,887 --------------- TELECOMMUNICATIONS: 0.0% 373 @,@@,I,X O Sullivan Industries, Inc. -- --------------- -- --------------- Total Preferred Stock (Cost $1,152,405) 1,191,887 --------------- NUMBER OF WARRANTS VALUE --------------------------------------------------------------------------------------------------- WARRANTS: 0.0% TELECOMMUNICATIONS: 0.0%: 90 American Tower Corp., Expires 8/1/2008 11,070 500 @,@@,I,X GT Group Telecom, Inc., Expires 2/1/2010 -- 1,000 @,@@,I,X O Sullivan Industries, Inc., Expires 10/15/2009 -- --------------- 11,070 --------------- Total Warrants (Cost $6,677) 11,070 --------------- Total Long Term Investments (Cost $60,633,954) 64,022,017 --------------- PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.7% REPURCHASE AGREEMENT: 3.7% $ 2,507,000 Goldman Sachs Repurchase Agreement dated 09/30/03, 1.090%, due 10/01/03, $2,507,076 to be received upon repurchase (Collateralized by various U.S. Government Securities, 0.000%-6.500%, market value $2,524,579, due 05/15/05-05/15/11) $ 2,507,000 --------------- Total Short-term Investments (Cost $2,507,000) 2,507,000 --------------- TOTAL INVESTMENTS IN SECURITIES (COST $63,140,954)* 98.8% $ 66,529,017 OTHER ASSETS AND LIABILITIES-NET 1.2 838,564 ----- --------------- NET ASSETS 100.0% $ 67,367,581 ===== ===============
@ Non-income producing security @@ Foreign Issuer + Step-up basis bonds. Interest rates shown reflect current and future coupon rates. # Securities with purchased 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 Fund's Board of Trustees. I Illiquid Security X Market Value determined by ING Valuation Committee appointed by the Fund's Board of Trustees. L Loaned security, a portion or all of the security is on loan at September 30, 2003. REITs Real Estate Investment Trusts * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 3,494,683 Gross Unrealized Depreciation (106,620) --------------- Net Unrealized Appreciation $ 3,388,063 ===============
See Accompanying Notes to Financial Statements 73 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 93.2% ADVERTISING: 0.5%$ $ 55,000 # RH Donnelley Finance Corp. I, 10.875%, due 12/15/12 $ 65,175 1,390,000 # Vertis, Inc., 9.750%, due 04/01/09 1,469,925 --------------- 1,535,100 --------------- AEROSPACE/DEFENSE: 0.7% 210,000 # Armor Holdings, Inc., 8.250%, due 08/15/13 223,125 660,000 L L-3 Communications Corp., 7.625%, due 06/15/12 717,750 1,075,000 L Sequa Corp., 8.875%, due 04/01/08 1,155,625 50,000 Sequa Corp., 9.000%, due 08/01/09 55,000 --------------- 2,151,500 --------------- AGRICULTURE: 0.2% 600,000 # Dimon, Inc., 7.750%, due 06/01/13 618,000 --------------- 618,000 --------------- APPAREL: 0.4% 1,225,000 # Phillips-Van Heusen, 8.125%, due 05/01/13 1,289,313 --------------- 1,289,313 --------------- AUTO MANUFACTURERS: 0.0% 70,000 General Motors Corp., 7.125%, due 07/15/13 73,557 20,000 L General Motors Corp., 7.200%, due 01/15/11 21,105 --------------- 94,662 --------------- AUTO PARTS & EQUIPMENT: 2.4% 630,000 Dana Corp., 10.125%, due 03/15/10 707,175 900,000 L Dura Operating Corp., 8.625%, due 04/15/12 938,250 630,000 # Eagle-Picher Industries, 9.750%, due 09/01/13 664,650 1,030,000 Lear Corp., 8.110%, due 05/15/09 1,189,650 960,000 Rexnord Corp., 10.125%, due 12/15/12 1,070,400 1,070,000 #,L Tenneco Automotive, Inc., 10.250%, due 07/15/13 1,166,300 1,485,000 #,L TRW Automotive, Inc., 11.000%, due 02/15/13 1,737,450 --------------- 7,473,875 --------------- BEVERAGES: 0.3% 895,000 Constellation Brands, Inc., 8.500%, due 03/01/09 948,700 --------------- 948,700 --------------- BUILDING MATERIALS: 0.3% 2,456,000 @,I,XX International Utility Structures, @@,** Inc., 13.000%, due 02/01/08 85,960 895,000 Nortek Holdings, Inc., 9.875%, due 06/15/11 950,938 --------------- 1,036,898 --------------- CHEMICALS: 2.5% $ 590,000 #,L Equistar Funding Corp., 10.125%, due 09/01/08 $ 587,050 610,000 Equistar Funding Corp., 10.625%, due 05/01/11 606,950 1,450,000 L IMC Global, Inc., 10.875%, due 06/01/08 1,515,250 1,400,000 IMC Global, Inc., 11.250%, due 06/01/11 1,463,000 1,685,000 L Lyondell Chemical Co., 9.625%, due 05/01/07 1,609,175 1,735,000 #,L Rockwood Specialties Group, Inc., 10.625%, due 05/15/11 1,856,450 --------------- 7,637,875 --------------- COMMERCIAL SERVICES: 2.9% 1,365,000 Coinmach Corp., 9.000%, due 02/01/10 1,460,550 1,245,000 Corrections Corp. of America, 7.500%, due 05/01/11 1,290,131 3,205,000 @@ Quebecor Media, Inc., 11.125%, due 07/15/11 3,669,725 2,220,000 L United Rentals North America, Inc., 10.750%, due 04/15/08 2,469,750 --------------- 8,890,156 --------------- COMPUTERS: 0.3% 800,000 @@ Seagate Technology HDD Holdings, 8.000%, due 05/15/09 886,000 --------------- 886,000 --------------- COSMETICS/PERSONAL CARE: 0.5% 1,630,000 L Chattem, Inc., 8.875%, due 04/01/08 1,638,150 --------------- 1,638,150 --------------- DISTRIBUTION/WHOLESALE: 0.6% 1,720,000 #,L Aviall, Inc., 7.625%, due 07/01/11 1,771,600 --------------- 1,771,600 --------------- DIVERSIFIED FINANCIAL SERVICES: 3.4% 680,000 @@,#,L Eircom Funding, 8.250%, due 08/15/13 734,400 850,000 # HLI Operating Co., Inc., 10.500%, due 06/15/10 930,750 2,839,436 # Hollinger Participation Trust, 12.125%, due 11/15/10 3,212,112 2,305,000 Nexstar Finance, Inc., 12.000%, due 04/01/08 2,593,125 1,630,000 L Technical Olympic USA, Inc., 9.000%, due 07/01/10 1,727,800 895,000 Technical Olympic USA, Inc., 10.375%, due 07/01/12 966,600 280,000 #,L Universal City Development Partners, 11.750%, due 04/01/10 316,400 --------------- 10,481,187 --------------- ELECTRIC: 3.8% 3,485,000 # AES Corp., 8.750%, due 05/15/13 3,676,675
See Accompanying Notes to Financial Statements 74 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- ELECTRIC (CONTINUED) $ 2,190,000 #,L Calpine Corp., 8.750%, due 07/15/13 $ 2,014,800 1,065,000 L Homer City Funding LLC, 8.734%, due 10/01/26 1,096,950 1,250,000 Illinois Power Co, 11.500%, due 12/15/10 1,506,250 1,285,000 # PG&E Corp., 6.875%, due 07/15/08 1,355,675 2,005,000 L Teco Energy, Inc., 7.500%, due 06/15/10 2,042,594 --------------- 11,692,944 --------------- ELECTRICAL COMPONENTS & EQUIPMENT: 0.3% 800,000 @@ FIMEP SA, 10.500%, due 02/15/13 908,000 --------------- 908,000 --------------- ELECTRONICS: 0.8% 400,000 Fisher Scientific Intl., 8.125%, due 05/01/12 427,000 910,000 @@,#,L Flextronics Intl. Ltd., 6.500%, due 05/15/13 907,725 925,000 Stoneridge, Inc., 11.500%, due 05/01/12 1,061,438 --------------- 2,396,163 --------------- ENTERTAINMENT: 2.3% 400,000 Argosy Gaming Co., 9.000%, due 09/01/11 435,000 2,900,000 Carmike Cinemas, Inc., 10.375%, due 02/01/09 3,059,500 1,510,000 L Cinemark USA, Inc., 9.000%, due 02/01/13 1,619,475 1,200,000 Regal Cinemas, Inc., 9.375%, due 02/01/12 1,356,000 835,000 L Six Flags, Inc., 9.750%, due 06/15/07 824,563 --------------- 7,294,538 --------------- ENVIRONMENTAL CONTROL: 2.1% 750,000 Allied Waste North America, 7.875%, due 01/01/09 781,875 1,815,000 Allied Waste North America, 8.500%, due 12/01/08 1,969,275 1,700,000 Allied Waste North America, 8.875%, due 04/01/08 1,848,750 1,900,000 L Allied Waste North America, 10.000%, due 08/01/09 2,068,625 --------------- 6,668,525 --------------- FOOD: 3.4% 2,120,000 #,L Del Monte Corp., 8.625%, due 12/15/12 2,326,699 1,230,000 # Domino's, Inc., 8.250%, due 07/01/11 1,305,338 1,680,000 Great Atlantic & Pacific Tea Co., 9.125%, due 12/15/11 1,587,600 1,345,000 Michael Foods, Inc., 11.750%, due 04/01/11 1,580,375 1,150,000 Pilgrims Pride Corp., 9.625%, due 09/15/11 1,247,750 625,000 Roundy's, Inc., 8.875%, due 06/15/12 656,250 $ 385,000 # Smithfield Foods, Inc., 7.750%, due 05/15/13 $ 414,838 1,240,000 #,L Swift & Co., 12.500%, due 01/01/10 1,376,400 --------------- 10,495,250 --------------- FOREST PRODUCTS & PAPER: 3.3% 3,200,000 Appleton Papers, Inc., 12.500%, due 12/15/08 3,504,000 1,660,000 L Georgia-Pacific Corp., 8.125%, due 05/15/11 1,734,700 930,000 L Georgia-Pacific Corp., 8.875%, due 02/01/10 1,023,000 1,870,000 Georgia-Pacific Corp., 9.375%, due 02/01/13 2,096,738 630,000 @@ Tembec Industries, Inc., 7.750%, due 03/15/12 595,350 1,350,000 @@ Tembec Industries, Inc., 8.625%, due 06/30/09 1,336,500 --------------- 10,290,288 --------------- HEALTHCARE-PRODUCTS: 0.4% 1,210,000 # Medex, Inc., 8.875%, due 05/15/13 1,285,625 --------------- 1,285,625 --------------- HEALTHCARE-SERVICES: 1.6% 1,405,000 L Alliance Imaging, Inc., 10.375%, due 04/15/11 1,468,225 3,460,000 Tenet Healthcare Corp., 7.375%, due 02/01/13 3,503,250 --------------- 4,971,475 --------------- HOME BUILDERS: 2.6% 1,650,000 DR Horton, Inc., 9.375%, due 03/15/11 1,806,750 970,000 # K. Hovnanian Enterprises, Inc., 7.750%, due 05/15/13 1,003,950 430,000 KB Home, 7.750%, due 02/01/10 455,800 770,000 Meritage Corp., 9.750%, due 06/01/11 847,000 1,400,000 Ryland Group, Inc., 9.125%, due 06/15/11 1,583,750 815,000 L Standard-Pacific Corp., 7.750%, due 03/15/13 835,375 15,000 # WCI Communities, Inc., 7.875%, due 10/01/13 15,113 1,310,000 WCI Communities, Inc., 10.625%, due 02/15/11 1,441,000 --------------- 7,988,738 --------------- HOUSEHOLD PRODUCTS/WARES: 1.2% 2,725,000 American Greetings, 11.750%, due 07/15/08 3,120,125 695,000 #,L Rayovac Corp, 8.500%, due 10/01/13 719,325 --------------- 3,839,450 --------------- IRON/STEEL: 0.5% 875,000 Armco, Inc., 9.000%, due 09/15/07 634,375 750,000 L United States Steel Corp., 9.750%, due 05/15/10 772,500 --------------- 1,406,875 ---------------
See Accompanying Notes to Financial Statements 75 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- LEISURE TIME: 0.7% $ 1,300,000 @@,L Royal Caribbean Cruises Ltd., 8.000%, due 05/15/10 $ 1,378,000 765,000 # Worldspan Financing Corp., 9.625%, due 06/15/11 805,163 --------------- 2,183,163 --------------- LODGING: 6.2% 2,170,000 Ameristar Casinos, Inc., 10.750%, due 02/15/09 2,479,224 1,070,000 Aztar Corp., 9.000%, due 08/15/11 1,162,288 1,050,000 Extended Stay America, Inc., 9.875%, due 06/15/11 1,164,188 910,000 L Hilton Hotels Corp., 7.625%, due 05/15/08 1,001,000 440,000 Host Marriott Corp., 7.875%, due 08/01/05 453,200 545,000 Host Marriott Corp., 7.875%, due 08/01/08 562,713 960,000 Mandalay Resort Group, 9.500%, due 08/01/08 1,106,400 1,575,000 L MGM Mirage, 8.375%, due 02/01/11 1,740,375 1,150,000 MGM Mirage, 9.750%, due 06/01/07 1,306,688 740,000 Park Place Entertainment Corp., 7.000%, due 04/15/13 768,675 2,495,000 L Park Place Entertainment Corp., 7.875%, due 03/15/10 2,682,124 335,000 Park Place Entertainment Corp., 9.375%, due 02/15/07 371,013 2,540,000 Starwood Hotels & Resorts Worldwide, Inc., 7.875%, due 05/01/12 2,793,999 1,490,000 L Venetian Casino Resort LLC, 11.000%, due 06/15/10 1,706,050 --------------- 19,297,937 --------------- MEDIA: 13.5% 1,170,000 Allbritton Communications Co., 7.750%, due 12/15/12 1,199,250 1,520,000 Block Communications, Inc., 9.250%, due 04/15/09 1,634,000 750,000 @@ Canwest Media, Inc., 10.625%, due 05/15/11 855,000 950,000 L Charter Communications Holdings Capital Corp., 9.625%, due 11/15/09 738,625 1,750,000 L Charter Communications Holdings, LLC, 11.125%, due 01/15/11 1,439,375 845,000 L CSC Holdings, Inc., 7.625%, due 04/01/11 847,113 1,640,000 L CSC Holdings, Inc., 10.500%, due 05/15/16 1,812,200 365,000 L Dex Media East Finance Co., 9.875%, due 11/15/09 415,188 2,950,000 L Dex Media East Finance Co., 12.125%, due 11/15/12 3,576,874 625,000 # Dex Media Finance Co., 8.500%, due 08/15/10 682,813 1,665,000 # Dex Media Finance Co., 9.875%, due 08/15/13 1,889,775 $ 2,315,000 DirecTV Holdings LLC, 8.375%, due 03/15/13 $ 2,621,738 1,260,000 # Echostar DBS Corp., 5.750%, due 10/01/08 1,267,875 840,000 Entravision Communications Corp., 8.125%, due 03/15/09 884,100 1,185,000 Granite Broadcasting Corp., 8.875%, due 05/15/08 1,145,006 1,915,000 Granite Broadcasting Corp., 10.375%, due 05/15/05 1,895,850 2,460,000 Gray Television, Inc., 9.250%, due 12/15/11 2,724,450 2,100,000 Hollinger Intl. Publishing, 9.000%, due 12/15/10 2,223,375 320,000 @@,# Hollinger, Inc., 11.875%, due 03/01/11 355,200 590,000 Houghton Mifflin Co, 8.250%, due 02/01/11 620,975 920,000 Mediacom Broadband LLC, 11.000%, due 07/15/13 972,900 1,180,000 Nexstar Finance Holdings, Inc., 0.000%, due 04/01/13 831,900 1,645,000 L Paxson Communications Corp., 10.750%, due 07/15/08 1,745,756 215,000 #,L Primedia, Inc., 8.000%, due 05/15/13 218,225 655,000 Salem Communications Holding Corp., 9.000%, due 07/01/11 708,219 875,000 Sinclair Broadcast Group, Inc., 8.000%, due 03/15/12 927,500 623,056 @,X,** Source Media, Inc., 12.000%, due 11/01/04 1 1,105,000 Spanish Broadcasting System, 9.625%, due 11/01/09 1,174,063 2,935,000 @@,#,L Vivendi Universal SA, 9.250%, due 04/15/10 3,386,255 0 L Young Broadcasting, Inc., 8.500%, due 12/15/08 0 2,605,000 Young Broadcasting, Inc., 10.000%, due 03/01/11 2,774,324 --------------- 41,567,925 --------------- MINING: 0.7% 2,035,000 Compass Minerals Group, Inc., 10.000%, due 08/15/11 2,269,025 --------------- 2,269,025 --------------- MISCELLANEOUS MANUFACTURING: 1.7% 875,000 Samsonite Corp, 10.750%, due 06/15/08 918,750 725,000 L SPX Corp., 7.500%, due 01/01/13 766,688 3,260,000 @@ Tyco Intl. Group SA, 6.750%, due 02/15/11 3,455,600 --------------- 5,141,038 --------------- OFFICE/BUSINESS EQUIP: 0.5% 1,705,000 Xerox Corp., 7.625%, due 06/15/13 1,690,081 --------------- 1,690,081 --------------- OIL AND GAS: 3.9% 2,330,000 # Chesapeake Energy Corp., 7.500%, due 09/15/13 2,458,149
See Accompanying Notes to Financial Statements 76 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- OIL AND GAS (CONTINUED) $ 430,000 # Energy Partners Ltd., 8.750%, due 08/01/10 $ 442,900 1,113,000 Nuevo Energy Co., 9.500%, due 06/01/08 1,175,606 2,155,000 Swift Energy Co., 9.375%, due 05/01/12 2,338,175 955,000 Vintage Petroleum, Inc., 8.250%, due 05/01/12 1,033,788 2,250,000 @@ Western Oil Sands, Inc., 8.375%, due 05/01/12 2,559,374 975,000 # Westport Resources Corp., 8.250%, due 11/01/11 1,070,063 950,000 Westport Resources Corp., 8.250%, due 11/01/11 1,042,625 --------------- 12,120,680 --------------- OIL AND GAS SERVICES: 2.3% 2,950,000 Grant Prideco Escrow Corp., 9.000%, due 12/15/09 3,193,375 2,040,000 L Hanover Equipment Trust, 8.500%, due 09/01/08 2,111,400 1,800,000 L Hanover Equipment Trust, 8.750%, due 09/01/11 1,863,000 --------------- 7,167,775 --------------- PACKAGING AND CONTAINERS: 5.5% 580,000 L Ball Corp., 6.875%, due 12/15/12 601,025 2,105,000 # BWAY Finance Corp., 10.000%, due 10/15/10 2,283,925 2,145,000 @@,# Crown European Holdings SA, 10.875%, due 03/01/13 2,375,588 1,600,000 Greif, Inc., 8.875%, due 08/01/12 1,740,000 860,000 @@,#,L Norampac, Inc., 6.750%, due 06/01/13 881,500 1,850,000 # Owens-Brockway, 8.250%, due 05/15/13 1,896,250 4,215,000 Owens-Brockway, 8.875%, due 02/15/09 4,510,049 16,823 X,#,& Russell-Stanley Holdings, Inc., 9.000%, due 11/30/08 8,159 500,000 Smurfit-Stone Container Corp., 8.250%, due 10/01/12 525,000 2,000,000 Stone Container Corp., 9.750%, due 02/01/11 2,190,000 --------------- 17,011,496 --------------- PHARMACEUTICALS: 0.5% 1,615,000 AmerisourceBergen Corp., 7.250%, due 11/15/12 1,651,338 --------------- 1,651,338 --------------- PIPELINES: 3.6% 1,110,000 L ANR Pipeline Co., 8.875%, due 03/15/10 1,193,250 1,130,000 #,L EL Paso Corp, 7.875%, due 06/15/12 954,850 1,950,000 GulfTerra Energy Partners LP, 8.500%, due 06/01/10 2,110,875 1,230,000 L Southern Natural Gas Co., 7.350%, due 02/15/31 1,137,750 1,300,000 Southern Natural Gas Co., 8.000%, due 03/01/32 1,270,750 $ 1,375,000 Tennessee Gas Pipeline Co., 8.375%, due 06/15/32 $ 1,347,500 2,355,000 L Transcontinental Gas Pipe Line Corp., 8.875%, due 07/15/12 2,675,868 455,000 L Williams Cos., Inc., 8.625%, due 06/01/10 485,713 --------------- 11,176,556 --------------- REITs: 1.2% 270,000 Felcor Lodging LP, 8.500%, due 06/01/11 288,900 1,900,000 L Felcor Lodging LP, 9.500%, due 09/15/08 2,052,000 400,000 L Host Marriott LP, 9.500%, due 01/15/07 440,000 885,000 # La Quinta Properties, Inc., 8.875%, due 03/15/11 963,544 --------------- 3,744,444 --------------- RETAIL: 3.7% 1,365,000 Dollar General Corp., 8.625%, due 06/15/10 1,523,681 330,000 # Group 1 Automotive, Inc., 8.250%, due 08/15/13 357,225 1,570,000 L JC Penney Co., Inc., 7.600%, due 04/01/07 1,703,450 995,000 Rent-A-Center, Inc., 7.500%, due 05/01/10 1,050,969 2,270,000 L Rite Aid Corp., 7.625%, due 04/15/05 2,338,100 965,000 #,L Rite Aid Corp., 9.250%, due 06/01/13 1,027,725 370,000 L Saks, Inc., 8.250%, due 11/15/08 407,000 1,540,000 Star Gas Finance Co., 10.250%, due 02/15/13 1,647,800 1,365,000 Yum! Brands, Inc., 8.875%, due 04/15/11 1,597,050 --------------- 11,653,000 --------------- SEMICONDUCTORS: 0.3% 360,000 AMI Semiconductor, Inc., 10.750%, due 02/01/13 408,600 345,000 #,L Amkor Technology, Inc., 7.750%, due 05/15/13 348,450 290,000 Amkor Technology, Inc., 9.250%, due 02/15/08 314,650 --------------- 1,071,700 --------------- TELECOMMUNICATIONS: 11.2% 2,210,000 #,L ACC Escrow Corp., 10.000%, due 08/01/11 2,386,800 2,450,000 L American Tower Corp., 9.375%, due 02/01/09 2,511,250 1,430,000 American Tower Escrow Corp., 0.000%, due 08/01/08 958,100 1,315,000 # Centennial Communications Corp., 10.125%, due 06/15/13 1,361,025 3,245,000 L Crown Castle Intl. Corp., 10.750%, due 08/01/11 3,618,174 940,000 # Dobson Communications Corp., 8.875%, due 10/01/13 955,275 800,000 Dobson Communications Corp., 10.875%, due 07/01/10 876,000
See Accompanying Notes to Financial Statements 77 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) $ 670,000 Dobson/Sygnet Communications Co., 12.250%, due 12/15/08 $ 721,925 3,600,000 X,I ICG Services, Inc., 10.000%, due 02/15/08 4 525,000 # MetroPCS, Inc., 10.750%, due 10/01/11 538,125 2,420,000 L Nextel Communications, Inc., 7.375%, due 08/01/15 2,456,300 2,710,000 L Nextel Communications, Inc., 9.375%, due 11/15/09 2,953,899 630,000 L Nextel Partners, Inc., 12.500%, due 11/15/09 721,350 2,085,000 Panamsat Corp., 8.500%, due 02/01/12 2,194,463 1,370,000 Qwest Communications Intl., 7.500%, due 11/01/08 1,322,050 315,000 #,L Qwest Corp., 8.875%, due 03/15/12 351,225 3,714,000 #,L Qwest Services Corp., 13.500%, due 12/15/10 4,345,379 405,000 #,L Qwest Services Corp., 14.000%, due 12/15/14 489,038 1,415,000 @@ Rogers Wireless Communications, Inc., 9.625%, due 05/01/11 1,634,325 17,300,000 @,X,I, SA Telecommunications, Inc., #,** 10.000%, due 08/15/06 18 985,000 # Spectrasite, Inc., 8.250%, due 05/15/10 1,044,100 325,000 @@ TELUS Corp., 8.000%, due 06/01/11 380,076 1,215,000 L Triton PCS, Inc., 8.500%, due 06/01/13 1,309,163 8,267,451 @,X,I,** US Interactive, 12.000%, due 04/17/05 170,309 1,410,000 #,L Western Wireless Corp., 9.250%, due 07/15/13 1,445,250 6,250,000 I,**,@ WinStar Communications, Inc., 12.750%, due 04/15/10 625 --------------- 34,744,248 --------------- TRANSPORTATION: 0.4% 1,120,000 Gulfmark Offshore, Inc., 8.750%, due 06/01/08 1,142,400 --------------- 1,142,400 --------------- Total Corporate Bonds (Cost $307,369,902) 289,323,693 --------------- SHARES VALUE --------------------------------------------------------------------------------------------------- COMMON STOCK: 1.1% MEDIA: 1.1% 52,616 @,X Classic Cable, Inc. 3,456,872 --------------- 3,456,872 --------------- PACKAGING AND CONTAINERS: 0.0% 100,000 @,#,X Russell-Stanley Holdings, Inc. 10 --------------- 10 --------------- RETAIL: 0.0% 341,370 @,X International Fast Food Corp. -- --------------- -- --------------- TELECOMMUNICATIONS: 0.0% 61,806 @,X Adelphia Business Solutions $ 6 132 @,@@ Completel Europe NV 2,744 483,445 X,I International Wireless Communications Holdings, Inc. 48 2,350 X,I Jordan Telecommunications 95,504 15 @ Mpower Holding Corp. 22 --------------- 98,324 --------------- Total Common Stock (Cost $17,296,914) 3,555,206 --------------- PREFERRED STOCK: 2.0% MEDIA: 2.0% 26,100 Cablevision Systems Corp. 2,733,974 15,956 @ Paxson Communications Corp. 1,440,018 20,550 Primedia, Inc. 1,977,938 --------------- Total Preferred Stock (Cost $5,956,238) 6,151,930 --------------- NUMBER OF WARRANTS VALUE --------------------------------------------------------------------------------------------------- WARRANTS: 0.0% BUILDING MATERIALS: 0.0% 3,100 @,#,I Dayton Superior Corp., Expires 06/15/09 31 --------------- 31 --------------- COMMERCIAL SERVICES: 0.0% 92,950 @,X,I Comforce Corp., Expires 12/01/09 930 --------------- 930 --------------- DIVERSIFIED FINANCIAL SERVICES: 0.0% 5,480 @,X,I North Atlantic Trading Co., Expires 6/15/2007 1 --------------- 1 --------------- TELECOMMUNICATIONS: 0.0% 490 @,# American Tower Corp., Expires 8/1/2008 60,269 6,600 @,#,X ICG Communications, Inc., Expires 10/15/05 1 3,833 @,X US Interactive, Expires 04/17/05 -- --------------- 60,270 --------------- Total Warrants (Cost $250,729) 61,232 --------------- Total Long-Term Investments (Cost $330,873,783) 299,092,061 ---------------
See Accompanying Notes to Financial Statements 78 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 2.3% REPURCHASE AGREEMENT: 2.3% $ 7,261,000 Morgan Stanley Repurchase Agreement dated 9/30/03, 1.050%, due 10/01/03, 7,261,000 to be received upon repurchase (Collateralized by $7,265,000 Federal Home Loan Mortgage Notes, 2.500% Market Value $7,408,786 due 12/15/2005) $ 7,261,000 --------------- Total Short-term Investments (Cost $7,261,000) 7,261,000 --------------- TOTAL INVESTMENTS IN SECURITIES (COST $338,134,783)* 98.6% $ 306,353,061 OTHER ASSETS AND LIABILITIES-NET 1.4 4,412,548 ----- --------------- NET ASSETS 100.0% $ 310,765,609 ===== ===============
@ Non-income producing security @@ Foreign Issuer & Payment-in-kind REITs Real Estate Investment Trusts # 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 September 30, 2003 ** Defaulted 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 which have been adjusted based on the Fund's valuation procedures * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 15,316,007 Gross Unrealized Depreciation (47,097,729) --------------- Net Unrealized Depreciation $ (31,781,722) ===============
See Accompanying Notes to Financial Statements 79 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- CORPORATE BONDS: 26.8% AGRICULTURE: 0.0% $ 35,000 #,L Dimon, Inc., 7.750%, due 06/01/13 $ 36,050 --------------- 36,050 --------------- AIRLINES: 0.9% 327,695 American Airlines, Inc., 6.977%, due 05/23/21 283,208 2,042,000 American Airlines, Inc., 7.024%, due 10/15/09 1,996,033 472,170 Continental Airlines, Inc., 6.545%, due 08/02/20 462,609 381,907 US Airways Pass Through Trust, 6.850%, due 01/30/18 357,890 --------------- 3,099,740 --------------- APPAREL: 0.0% 55,000 # Phillips-Van Heusen, 8.125%, due 05/01/13 57,888 --------------- 57,888 --------------- AUTO MANUFACTURERS: 1.2% 847,000 Ford Motor Co., 6.375%, due 02/01/29 691,801 1,038,000 Ford Motor Co., 6.625%, due 10/01/28 877,373 2,164,000 L General Motors Corp., 8.375%, due 07/15/33 2,269,051 --------------- 3,838,225 --------------- AUTO PARTS & EQUIPMENT: 0.0% 45,000 Rexnord Corp., 10.125%, due 12/15/12 50,175 15,000 #,L TRW Automotive, Inc., 11.000%, due 02/15/13 17,550 --------------- 67,725 --------------- BANKS: 4.0% 583,000 Bank of America Corp., 6.375%, due 02/15/08 656,406 500,000 # BankAmerica Institutional, Class A, 8.070%, due 12/31/26 586,195 148,000 # BankAmerica Institutional, Class B, 7.700%, due 12/31/26 167,056 74,000 Barnett Capital I, 8.060%, due 12/01/26 86,163 180,000 Barnett Capital II, 7.950%, due 12/01/26 207,265 140,000 BNY Capital I, 7.970%, due 12/31/26 160,650 1,175,000 @@,# Credit Suisse First Boston/London, 7.900%, due 05/29/49 1,340,521 2,045,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 2,243,597 74,000 FBS Capital I, 8.090%, due 11/15/26 84,497 397,000 First Union Institutional Capital II, 7.850%, due 01/01/27 455,142 150,000 Fleet Capital Trust II, 7.920%, due 12/11/26 164,646 973,000 @@ HSBC Holdings PLC, 7.500%, due 07/15/09 1,154,809 $ 588,000 M&T Bank Corp., 3.850%, due 04/01/13 $ 590,362 1,110,000 Mellon Capital I, 7.720%, due 12/01/26 1,262,547 380,000 S NB Capital Trust IV, 8.250%, due 04/15/27 452,983 1,630,000 L RBS Capital Trust I, 4.709%, due 12/29/49 1,580,200 670,000 S Wells Fargo & Co., 3.120%, due 08/15/08 668,238 80,000 # Wells Fargo Capital A, 7.730%, due 12/01/26 91,089 865,000 #,L Westpac Capital Trust III, 5.819%, due 12/29/49 901,184 --------------- 12,853,550 --------------- BEVERAGES: 0.8% 1,060,000 @@,#,L Cia Brasileira de Bebidas, 8.750%, due 09/15/13 1,075,900 295,000 @@,# Coca-Cola HBC Finance BV, 5.125%, due 09/17/13 304,042 284,000 @@,#,L Coca-Cola HBC Finance BV, 5.500%, due 09/17/15 299,141 990,000 #,S Miller Brewing Co., 4.250%, due 08/15/08 1,018,231 --------------- 2,697,314 --------------- CHEMICALS: 0.1% 217,000 L Dow Chemical Co., 5.750%, due 11/15/09 232,542 --------------- 232,542 --------------- COMMERCIAL SERVICES: 0.0% 75,000 Coinmach Corp., 9.000%, due 02/01/10 80,250 --------------- 80,250 --------------- DIVERSIFIED FINANCIAL SERVICES: 3.2% 838,000 L Boeing Capital Corp., 7.375%, due 09/27/10 975,339 1,175,000 @@,#,XX Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 1,158,843 559,000 Capital One Bank, 5.750%, due 09/15/10 589,206 417,000 CitiCorp Capital I, 7.933%, due 02/15/27 485,078 85,000 X Corestates Capital Trust I, 8.000%, due 12/15/26 98,941 953,000 S Countrywide Home Loans, Inc., 4.250%, due 12/19/07 983,083 15,000 @@,#,L Eircom Funding, 8.250%, due 08/15/13 16,200 449,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 421,358 555,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 492,955 351,000 L Ford Motor Credit Co., 5.625%, due 10/01/08 355,404 409,000 Ford Motor Credit Co., 7.375%, due 10/28/09 436,488 865,000 S General Electric Capital Corp., 3.500%, due 08/15/07 881,791
See Accompanying Notes to Financial Statements 80 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (CONTINUED) $ 412,000 General Motors Acceptance Corp., 6.625%, due 10/15/05 $ 439,154 10,000 # HLI Operating Co., Inc., 10.500%, due 06/15/10 10,950 4,447 # Hollinger Participation Trust, 12.125%, due 11/15/10 5,031 679,000 S,L Lehman Brothers Holdings, Inc., 3.500%, due 08/07/08 681,120 645,000 #,XX Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 637,312 5,000 S Nexstar Finance, Inc., 12.000%, due 04/01/08 5,625 680,000 @@,# PF Export Receivables Master Trust, 3.748%, due 06/01/13 675,182 696,800 @@,# PF Export Receivables Master Trust, 6.436%, due 06/01/15 697,319 5,000 Technical Olympic USA, Inc., 9.000%, due 07/01/10 5,300 10,000 #,L Universal City Development Partners, 11.750%, due 04/01/10 11,300 315,000 # Wachovia Capital Trust V, 7.965%, due 06/01/27 383,170 --------------- 10,446,149 --------------- ELECTRIC: 2.4% 335,000 # Calpine Corp., 6.853%, due 07/15/07 315,319 360,000 #,S,L Consumers Energy Co., 4.250%, due 04/15/08 365,260 667,000 #,S Consumers Energy Co., 4.800%, due 02/17/09 684,854 45,000 L Homer City Funding LLC, 8.734%, due 10/01/26 46,350 910,000 # Indianapolis Power & Light, 6.300%, due 07/01/13 934,969 639,000 Nisource Finance Corp., 6.150%, due 03/01/13 685,368 411,000 Nisource Finance Corp., 7.625%, due 11/15/05 454,729 911,000 #,S Ohio Edison Co., 4.000%, due 05/01/08 901,528 1,310,000 Ohio Power Co., 6.375%, due 07/15/33 1,334,892 600,000 # Oncor Electric Delivery Co., 6.375%, due 01/15/15 659,819 490,000 Penn Electric Co., 6.625%, due 04/01/19 519,478 535,000 #,S PG&E Corp., 6.875%, due 07/15/08 564,425 523,000 #,L TXU Energy Co., 7.000%, due 03/15/13 569,734 --------------- 8,036,725 --------------- ELECTRONICS: 0.0% 50,000 Fisher Scientific Intl., 8.125%, due 05/01/12 53,375 40,000 Stoneridge, Inc., 11.500%, due 05/01/12 45,900 --------------- 99,275 --------------- ENTERTAINMENT: 0.0% $ 45,000 S Carmike Cinemas, Inc., 10.375%, due 02/01/09 $ 47,475 --------------- 47,475 --------------- ENVIRONMENTAL CONTROL: 0.1% 403,000 Allied Waste North America, 7.625%, due 01/01/06 423,150 --------------- 423,150 --------------- FOOD: 1.3% 65,000 Great Atlantic & Pacific Tea Co., 9.125%, due 12/15/11 61,425 292,000 L Kroger Co., 5.500%, due 02/01/13 305,973 427,000 Kroger Co., 7.250%, due 06/01/09 497,451 784,000 Safeway, Inc., 4.800%, due 07/16/07 826,366 1,150,000 Supervalu, Inc., 7.875%, due 08/01/09 1,345,672 1,077,000 Tyson Foods, Inc., 7.250%, due 10/01/06 1,200,370 --------------- 4,237,257 --------------- FOREST PRODUCTS & PAPER: 0.7% 570,000 @@ Abitibi-Consolidated, Inc., 6.950%, due 12/15/06 594,582 321,000 @@,S Abitibi-Consolidated, Inc., 6.950%, due 04/01/08 330,760 472,000 S Fort James Corp., 6.625%, due 09/15/04 486,160 60,000 Georgia-Pacific Corp., 9.375%, due 02/01/13 67,275 742,000 Weyerhaeuser Co., 6.875%, due 12/15/33 787,207 --------------- 2,265,984 --------------- HOME BUILDERS: 0.0% 30,000 Beazer Homes USA, Inc., 8.375%, due 04/15/12 32,550 10,000 # K. Hovnanian Enterprises, Inc., 7.750%, due 05/15/13 10,350 15,000 Meritage Corp., 9.750%, due 06/01/11 16,500 15,000 Ryland Group, Inc., 8.000%, due 08/15/06 16,144 30,000 Ryland Group, Inc., 9.125%, due 06/15/11 33,937 --------------- 109,481 --------------- INSURANCE: 0.8% 839,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 858,266 644,000 #,S Monumental Global Funding II, 3.850%, due 03/03/08 658,686 1,043,000 #,L Zurich Capital Trust I, 8.376%, due 06/01/37 1,199,362 --------------- 2,716,314 ---------------
See Accompanying Notes to Financial Statements 81 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- LODGING: 0.5% $ 40,000 S,L Hilton Hotels Corp., 7.625%, due 05/15/08 $ 44,000 674,000 MGM Mirage, 6.000%, due 10/01/09 680,739 20,000 Park Place Entertainment Corp., 7.000%, due 04/15/13 20,775 403,000 Park Place Entertainment Corp., 9.375%, due 02/15/07 446,323 403,000 Starwood Hotels & Resorts Worldwide, Inc., 7.375%, due 05/01/07 434,233 --------------- 1,626,070 --------------- MEDIA: 0.5% 25,000 Allbritton Communications Co., 7.750%, due 12/15/12 25,625 330,000 L AOL Time Warner, Inc., 6.875%, due 05/01/12 371,001 20,000 DirecTV Holdings LLC, 8.375%, due 03/15/13 22,650 271,000 # Echostar DBS Corp., 4.410%, due 10/01/08 277,436 373,000 # Echostar DBS Corp., 5.750%, due 10/01/08 375,331 5,000 S Granite Broadcasting Corp., 8.875%, due 05/15/08 4,831 60,000 Granite Broadcasting Corp., 10.375%, due 05/15/05 59,400 10,000 Gray Television, Inc., 9.250%, due 12/15/11 11,075 15,000 S,L Paxson Communications Corp., 10.750%, due 07/15/08 15,919 30,000 Salem Communications Holding Corp., 9.000%, due 07/01/11 32,438 445,000 Time Warner, Inc., 6.950%, due 01/15/28 471,655 --------------- 1,667,361 --------------- MISCELLANEOUS MANUFACTURING: 0.3% 1,120,000 General Electric Co., 5.000%, due 02/01/13 1,150,269 5,000 L SPX Corp., 7.500%, due 01/01/13 5,288 --------------- 1,155,557 --------------- MULTI-NATIONAL: 0.6% 946,000 @@ Corp Andina de Fomento CAF, 5.200%, due 05/21/13 939,576 913,000 @@ Corp Andina de Fomento CAF, 6.875%, due 03/15/12 1,015,809 --------------- 1,955,385 --------------- OIL AND GAS: 2.3% 721,000 Amerada Hess Corp., 5.900%, due 08/15/06 777,740 655,000 L Amerada Hess Corp., 7.125%, due 03/15/33 690,985 15,000 # Energy Partners Ltd., 8.750%, due 08/01/10 15,450 923,000 Enterprise Products Partners LP, 6.875%, due 03/01/33 998,154 2,384,000 @@,+ Husky Oil Co., 8.900%, due 08/15/28 2,804,179 $ 46,000 S Nuevo Energy Co., 9.500%, due 06/01/08 $ 48,588 1,149,000 L Pemex Project Funding Master Trust, 7.375%, due 12/15/14 1,240,920 490,000 L Valero Energy Corp., 7.500%, due 04/15/32 547,348 499,000 Valero Energy Corp., 8.750%, due 06/15/30 624,210 --------------- 7,747,574 --------------- PACKAGING AND CONTAINERS: 0.6% 50,000 Greif, Inc., 8.875%, due 08/01/12 54,375 911,000 #,L Sealed Air Corp., 5.625%, due 07/15/13 924,578 1,019,000 #,S Sealed Air Corp., 6.950%, due 05/15/09 1,140,374 --------------- 2,119,327 --------------- PIPELINES: 0.7% 926,000 L CenterPoint Energy Resources Corp., 8.125%, due 07/15/05 993,508 184,000 Duke Energy Field Services LLC, 7.500%, due 08/16/05 201,886 25,000 GulfTerra Energy Finance Corp., 10.625%, due 12/01/12 29,438 809,000 Kinder Morgan Energy Partners LP, 7.300%, due 08/15/33 936,027 45,000 Southern Natural Gas Co., 7.350%, due 02/15/31 41,625 20,000 Transcontinental Gas Pipe Line Corp., 8.875%, due 07/15/12 22,725 --------------- 2,225,209 --------------- REAL ESTATE: 0.7% 875,000 S EOP Operating LP, 7.750%, due 11/15/07 1,018,461 1,043,000 S Liberty Property LP, 7.750%, due 04/15/09 1,240,444 --------------- 2,258,905 --------------- REITs: 0.6% 580,000 Simon Property Group LP, 4.875%, due 03/18/10 599,143 1,125,000 S Simon Property Group LP, 6.375%, due 11/15/07 1,252,675 --------------- 1,851,818 --------------- RETAIL: 0.2% 25,000 Dollar General Corp., 8.625%, due 06/15/10 27,906 482,000 S Sears Roebuck Acceptance, 6.250%, due 05/01/09 535,961 --------------- 563,867 --------------- SAVINGS AND LOANS: 0.3% 985,000 S Washington Mutual, Inc., 4.375%, due 01/15/08 1,022,505 --------------- 1,022,505 ---------------
See Accompanying Notes to Financial Statements 82 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- SEMICONDUCTORS: 0.0% $ 15,000 AMI Semiconductor, Inc., 10.750%, due 02/01/13 $ 17,025 10,000 #,L Amkor Technology, Inc., 7.750%, due 05/15/13 10,100 --------------- 27,125 --------------- SOVEREIGN: 0.6% 475,000 @@ Dominican Republic, 9.040%, due 01/23/13 415,710 874,000 @@ Federal Republic of Brazil, 2.188%, due 04/15/12 707,128 478,000 @@ Republic of Ecuador, 10.000%, due 08/15/30 300,889 293,000 @@ Republic of El Salvador, 7.750%, due 01/24/23 310,057 402,046 @@ Republic of Panama, 1.938%, due 07/17/16 345,538 --------------- 2,079,322 --------------- TELECOMMUNICATIONS: 3.4% 25,000 #,L ACC Escrow Corp., 10.000%, due 08/01/11 27,000 15,000 #,S,L American Tower Corp., 9.375%, due 02/01/09 15,375 623,000 S AT&T Corp., 6.000%, due 03/15/09 671,758 770,000 L AT&T Corp., 7.800%, due 11/15/11 891,628 365,000 L AT&T Corp., 8.500%, due 11/15/31 433,660 864,000 AT&T Wireless Services, Inc., 8.125%, due 05/01/12 1,027,814 5,000 L Crown Castle Intl. Corp., 10.750%, due 08/01/11 5,575 15,000 S Qwest Communications Intl., 7.500%, due 11/01/08 14,475 5,000 #,L Qwest Services Corp., 14.000%, due 12/15/14 6,038 921,000 Sprint Capital Corp., 6.000%, due 01/15/07 992,012 1,491,000 Sprint Capital Corp., 6.875%, due 11/15/28 1,459,124 1,648,000 TCI Communications Finance, 9.650%, due 03/31/27 1,954,939 1,015,000 @@ TELUS Corp., 8.000%, due 06/01/11 1,187,007 1,472,000 L Verizon Florida, Inc., 6.125%, due 01/15/13 1,613,130 740,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 729,683 --------------- 11,029,218 --------------- Total Corporate Bonds (Cost $85,706,947) 88,674,337 --------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 41.2% FEDERAL HOME LOAN MORTGAGE CORPORATION: 5.3% 2,553,530 1.245%, due 05/25/31 2,554,280 1,629,076 1.260%, due 04/25/30 1,629,739 1,111,062 1.270%, due 01/25/32 1,112,419 2,249,861 1.460%, due 02/15/32 2,255,784 43,046 1.510%, due 10/15/24 43,079 $ 3,220,000 L 2.875%, due 09/15/05 $ 3,298,575 235,000 4.000%, due 04/15/21 240,773 3,081,499 5.500%, due 05/15/31 3,138,229 2,880,000 5.875%, due 03/21/11 3,172,461 --------------- 17,445,339 --------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 34.9% 477,796 1.320%, due 11/26/32 476,097 1,345,175 1.510%, due 04/18/28 1,351,436 742,007 1.570%, due 12/25/29 721,256 1,048,086 1.670%, due 01/25/32 1,063,840 3,330,000 L 2.375%, due 04/13/06 3,340,087 975,000 2.859%, due 12/26/29 980,571 3,320,000 L 2.875%, due 05/19/08 3,274,068 3,253,000 4.000%, due 09/02/08 3,342,337 1,734,000 4.000%, due 06/25/16 1,776,441 3,000,000 4.500%, due 10/18/18 TBA 3,025,314 1,509,000 XX 4.750%, due 12/25/42 1,543,660 9,010,000 5.000%, due 10/15/18 TBA 9,232,439 12,535,000 5.000%, due 11/15/33 TBA 12,495,828 5,820,000 L 5.250%, due 04/15/07 6,364,519 85,000 5.500%, due 10/15/18 TBA 87,948 1,606,487 5.500%, due 02/01/23 1,654,173 11,820,000 5.500%, due 11/01/32 TBA 12,015,763 131,013 6.000%, due 08/01/16 136,797 4,500,000 6.000%, due 09/01/17 4,698,832 1,444,047 6.000%, due 11/01/22 1,497,078 2,030,670 6.000%, due 07/25/24 2,143,616 2,564,615 6.000%, due 06/25/27 2,577,455 612,482 6.000%, due 07/25/29 616,101 2,097,078 6.000%, due 08/01/33 2,176,702 18,685,000 6.000%, due 11/15/33 TBA 19,233,872 88,612 6.500%, due 07/01/29 92,476 1,000,100 6.500%, due 08/01/29 1,045,348 1,000,000 6.500%, due 07/25/30 1,061,167 774,003 6.500%, due 06/01/31 807,094 7,642 6.500%, due 06/01/31 7,969 2,527,379 6.500%, due 07/01/31 2,640,072 4,247 6.500%, due 07/01/31 4,428 103,771 6.500%, due 08/01/31 108,207 64,830 6.500%, due 09/01/31 67,657 9,071 6.500%, due 09/01/31 9,459 33,711 6.500%, due 09/01/31 35,152 960,307 6.500%, due 11/01/31 1,001,363 30,522 6.500%, due 11/01/31 31,827 517,634 6.500%, due 04/01/32 539,740 74,352 6.500%, due 04/01/32 77,527 747,156 6.500%, due 06/01/32 779,064 440,713 6.500%, due 06/01/32 459,535 164,133 6.500%, due 07/01/32 171,142 563,093 6.500%, due 07/01/32 587,141 28,950 6.500%, due 07/01/32 30,186 434,957 6.500%, due 07/01/32 453,532 654,349 6.500%, due 07/01/32 682,294 165,530 6.500%, due 07/01/32 172,599 179,097 6.500%, due 08/01/32 186,745 302,794 6.500%, due 08/01/32 315,726 161,067 6.500%, due 08/01/32 167,946 42,757 6.500%, due 08/01/32 44,583 717,118 6.500%, due 09/01/32 747,743 1,310,782 6.500%, due 09/01/32 1,366,762 362,455 6.500%, due 01/01/33 377,934
See Accompanying Notes to Financial Statements 83 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 490,292 6.500%, due 02/01/33 $ 511,206 11,111,602 6.565%, due 02/17/29 932,817 25,554 7.000%, due 09/01/28 27,084 25,975 7.000%, due 03/01/30 27,515 26,055 7.000%, due 12/01/31 27,584 26,283 7.000%, due 02/01/32 27,818 1,895,934 7.000%, due 04/01/32 2,007,209 284,972 7.000%, due 06/01/32 301,550 1,318,632 7.500%, due 12/25/41 1,446,787 --------------- 115,208,218 --------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 1.0% 2,000,000 6.000%, due 10/01/32 TBA 2,077,500 209,693 7.000%, due 09/15/29 223,234 2,616,214 7.130%, due 06/16/31 320,482 234,784 8.000%, due 01/20/31 251,981 74,159 10.000%, due 03/15/19 84,162 60,763 10.000%, due 01/15/21 69,045 119,144 10.000%, due 01/15/21 135,383 94,091 10.000%, due 01/15/21 106,915 --------------- 3,268,702 --------------- Total U.S. Government Agency Obligations (Cost $135,546,175) 135,922,259 --------------- U.S. TREASURY OBLIGATIONS: 12.4% U.S. TREASURY BONDS: 1.8% 5,436,000 S,L 5.375%, due 02/15/31 5,835,209 --------------- 5,835,209 --------------- U.S. TREASURY NOTES: 10.6% 19,252,000 S,L 2.000%, due 08/31/05 19,465,582 300,000 L 2.375%, due 08/15/06 304,254 2,500,000 S,L 3.000%, due 01/31/04 2,517,190 3,483,000 L 3.125%, due 09/15/08 3,532,525 9,191,000 S,L 4.250%, due 08/15/13 9,424,727 --------------- 35,244,278 --------------- Total U.S. Treasury Obligations (Cost $40,259,615) 41,079,487 --------------- ASSET-BACKED SECURITIES: 5.6% AUTOMOBILE ASSET BACKED SECURITIES: 0.8% 1,500,000 Capital Auto Receivables Asset Trust, 2.750%, due 04/16/07 1,528,208 910,000 Nissan Auto Receivables Owner Trust, 2.610%, due 07/15/08 919,459 200,000 USAA Auto Owner Trust, 2.040%, due 02/16/10 199,146 --------------- 2,646,813 --------------- CREDIT CARD ASSET BACKED SECURITIES: 1.0% 560,000 Bank One Issuance Trust, 4.540%, due 09/15/10 574,548 530,000 Capital One Master Trust, 4.900%, due 03/15/10 566,035 1,335,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 1,451,851 $ 650,000 Fleet Credit Card Master Trust II, 2.400%, due 07/15/08 $ 656,335 --------------- 3,248,769 --------------- HOME EQUITY ASSET BACKED SECURITIES: 3.7% 3,582,491 EQCC Trust, 1.420%, due 11/25/31 3,587,553 975,000 Equity One Abs, Inc., 2.976%, due 09/25/33 987,848 1,198,111 New Century Home Equity Loan Trust, 1.400%, due 07/25/30 1,197,040 2,267,087 New Century Home Equity Loan Trust, 1.400%, due 06/20/31 2,265,498 846,289 Residential Asset Securities Corp., 1.350%, due 09/25/31 844,816 1,444,353 Residential Asset Securities Corp., 1.420%, due 06/25/32 1,446,473 488,000 Residential Funding Mortgage Securities II, 3.450%, due 01/25/16 498,508 1,500,000 Saxon Asset Securities Trust, 3.960%, due 06/25/33 1,506,268 --------------- 12,334,004 --------------- OTHER ASSET BACKED SECURITIES: 0.1% 210,932 @@,#,I,S Garanti Trade Payment Rights Master Trust, 10.810%, due 06/15/04 213,947 --------------- 213,947 --------------- Total Asset Backed Securities (Cost $18,372,720) 18,443,533 --------------- COLLATERALIZED MORTGAGE OBLIGATION: 23.7% AGENCY COLLATERAL MORTGAGE OBLIGATION: 0.5% 1,525,675 Vendee Mortgage Trust, 5.847%, due 09/15/23 1,566,091 --------------- 1,566,091 --------------- COMMERCIAL MORTGAGE BACKED SECURITIES: 5.9% 1,170,000 Chase Manhattan Bank - First Union National Bank, 7.439%, due 08/15/31 1,376,867 950,000 CS First Boston Mortgage Securities Corp., 3.382%, due 05/15/38 919,151 702,635 CS First Boston Mortgage Securities Corp., 3.727%, due 03/15/35 705,113 688,000 DLJ Commercial Mortgage Corp., 7.300%, due 06/10/32 805,714 1,050,000 GE Capital Commercial Mortgage Corp., 5.994%, due 12/10/35 1,163,949 645,000 JP Morgan Chase Commercial Mortgage Securities Corp., 5.161%, due 10/12/37 673,493
See Accompanying Notes to Financial Statements 84 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES (CONTINUED) $ 1,350,000 JP Morgan Chase Commercial Mortgage Securities Corp., 6.162%, due 05/12/34 $ 1,504,618 1,780,000 JP Morgan Chase Commercial Mortgage Securities Corp., 6.244%, due 04/15/35 1,984,191 1,330,000 LB-UBS Commercial Mortgage Trust, 4.659%, due 12/15/26 1,369,364 1,040,000 LB-UBS Commercial Mortgage Trust, 6.226%, due 03/15/26 1,162,887 400,000 Morgan Stanley Capital I, 7.020%, due 03/15/32 462,244 1,780,000 Mortgage Capital Funding, Inc., 6.663%, due 03/18/30 2,010,970 4,046,431 Prudential Commercial Mortgage Trust, 3.669%, due 02/11/36 4,055,133 400,000 Salomon Brothers Mortgage Securities VII, 7.520%, due 12/18/09 473,290 750,000 Wachovia Bank Commercial Mortgage Trust, 3.989%, due 06/15/35 717,404 --------------- 19,384,388 --------------- WHOLE LOAN COLLATERALLIZED MORTGAGE: 15.9% 987,996 ABN Amro Mortgage Corp, 1.610%, due 03/25/18 991,665 825,654 ABN Amro Mortgage Corp., 6.500%, due 02/25/32 839,786 1,644,529 Bank of America Alternative Loan Trust, 5.500%, due 02/25/33 1,701,480 680,863 Bank of America Mortgage Securities, 4.413%, due 03/25/33 693,430 237,038 Bank of America Mortgage Securities, 5.242%, due 02/25/32 241,538 61,087 Bank of America Mortgage Securities, 6.250%, due 10/25/32 61,090 245,360 Bank of America Mortgage Securities, 6.500%, due 01/25/32 252,868 490,719 Bank of America Mortgage Securities, 6.500%, due 01/25/32 506,790 4,546,133 Bear Stearns Asset Backed Securities, Inc., 5.625%, due 11/25/32 4,641,383 1,085,481 CitiCorp Mortgage Securities, Inc., 1.570%, due 03/25/33 1,086,888 71,165 CitiCorp Mortgage Securities, Inc., 6.250%, due 11/25/16 72,385 4,105,581 Countrywide Alternative Loan Trust, 1.670%, due 04/25/33 4,114,757 5,618,741 Countrywide Home Loans, 1.510%, due 08/25/18 5,576,709 1,324,638 Countrywide Home Loans, 1.620%, due 04/25/18 1,330,814 512,537 Countrywide Home Loans, 1.620%, due 11/25/32 513,281 $ 292,368 GSR Mortgage Loan Trust, 1.820%, due 07/25/32 $ 293,209 2,932,905 MASTR Alternative Loans Trust, 6.500%, due 05/25/33 2,993,859 849,442 MASTR Asset Securitization Trust, 8.000%, due 06/25/33 879,738 4,200,000 +,XX MLCC Mortgage Investors Inc, 1.440%, due 10/25/28 4,200,000 358,139 Residential Accredit Loans, Inc., 7.750%, due 05/25/27 357,940 9,384,551 Residential Funding Mortgage Sec I, 1.560%, due 11/25/18 9,348,468 2,378,462 Washington Mutual, 1.620%, due 01/25/18 2,384,319 3,010,150 Washington Mutual, 1.720%, due 03/25/33 3,016,738 4,738,805 Washington Mutual, 5.000%, due 06/25/18 4,892,103 1,460,000 Wells Fargo Mortgage Backed Securities Trust, 4.500%, due 08/25/18 1,395,983 101,824 Wells Fargo Mortgage Backed Securities Trust, 6.000%, due 12/25/16 103,845 --------------- 52,491,066 --------------- WHOLE LOAN COLLATERALLIZED PLANNED AMORTIZATION CLASS: 1.4% 2,178,202 MASTR Alternative Loans Trust, 8.500%, due 05/25/33 2,321,432 1,672,534 Residential Funding Mortgage Sec I, 1.520%, due 11/25/17 1,681,304 611,305 Residential Funding Securities Corp., 8.500%, due 05/25/33 679,042 --------------- 4,681,778 --------------- Total Collateralized Mortgage Obligation (Cost $78,081,436) 78,123,323 --------------- OTHER BONDS: 3.4% SOVEREIGN: 3.4% 571,000 @@ ARG Boden, 0.000%, due 08/03/12 358,874 740,000 @@ Brazilian Government Intl. Bond, 10.000%, due 08/07/11 728,900 515,000 @@ Brazilian Government Intl. Bond, 11.000%, due 08/17/40 489,250 943,000 @@,XX Central Bank of Nigeria, 0.000%, due 01/05/10 365,413 700,000 @@ Colombia Government Intl. Bond, 10.000%, due 01/23/12 764,750 336,000 @@,L Colombia Government Intl. Bond, 11.750%, due 02/25/20 395,640 518,000 @@,S,L Mexico Government Intl. Bond, 4.625%, due 10/08/08 529,655 809,000 @@,L Mexico Government Intl. Bond, 6.625%, due 03/03/15 851,876 389,000 @@,L Peru Government Intl. Bond, 9.125%, due 02/21/12 434,708 711,000 @@ Philippine Government Intl. Bond, 9.875%, due 01/15/19 775,879 476,000 @@ Republic of Bulgaria, 8.250%, due 01/15/15 544,699
See Accompanying Notes to Financial Statements 85 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- SOVEREIGN (CONTINUED) $ 202,000 @@ Republic of Peru, 4.500%, due 03/07/17 $ 178,940 1,844,000 @@ Russia Government Intl. Bond, 5.000%, due 03/31/30 1,747,189 135,000 @@,L Turkey Government Intl. Bond, 9.500%, due 01/15/14 138,038 1,037,000 @@,L Turkey Government Intl. Bond, 12.375%, due 06/15/09 1,221,067 150,000 @@,# Ukraine Government Intl. Bond, 7.650%, due 06/11/13 150,000 168,562 @@ Ukraine Government Intl. Bond, 11.000%, due 03/15/07 187,797 385,000 @@,L Uruguay Government Intl. Bond, 7.500%, due 03/15/15 298,375 659,000 @@ Venezuela Government Intl. Bond, 9.250%, due 09/15/27 512,702 634,000 @@,# Venezuela Government Intl. Bond, 10.750%, due 09/19/13 586,450 --------------- Total Other Bonds (Cost $10,623,097) 11,260,202 --------------- SHARES VALUE --------------------------------------------------------------------------------------------------- PREFERRED STOCK: 0.0% MEDIA: 0.0% 100 Cablevision Systems Corp. 10,475 27 @ Paxson Communications Corp. 2,392 550 Primedia, Inc. 52,937 --------------- Total Preferred Stock (Cost $65,226) 65,804 --------------- NUMBER OF WARRANTS VALUE --------------------------------------------------------------------------------------------------- WARRANTS: 0.0% TELECOMMUNICATIONS: 0.0% 20 American Tower Corp., Expires 8/1/2008 2,460 --------------- Total Warrants (Cost $1,502) 2,460 --------------- Total Long Term Investments (Cost $368,656,718 ) 373,571,405 --------------- PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.8% REPURCHASE AGREEMENT: 3.8% $ 12,634,000 Morgan Stanley Repurchase Agreement dated 09/30/03, 1.050%, due 10/01/03, $12,634,368 to be received upon repurchase (Collateralized by various U.S. Government Securities, 2.750%-6.500%, market value $12,959,452, due 11/15/05-03/14/08) $ 12,634,000 --------------- Total Short-term Investments (Cost $12,634,000) 12,634,000 --------------- TOTAL INVESTMENTS IN SECURITIES (COST $381,290,718)* 116.9% $ 386,205,405 OTHER ASSETS AND LIABILITIES-NET (16.9) (55,894,921) ----- --------------- NET ASSETS 100.0% $ 330,310,484 ===== ===============
@ Non-income producing security @@ Foreign Issuer PLC Public Limited Company REITs Real Estate Investment Trusts TBA To be announced + Step-up basis bonds. Interest rates shown reflect current and future coupon rates. # 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 September 30, 2003. XX Value of securities obtained from one or more dealers making markets in the securities which have been adjusted based on the Fund's valuation procedures. * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 6,221,204 Gross Unrealized Depreciation (1,306,517) --------------- Net Unrealized Appreciation $ 4,914,687 ===============
See Accompanying Notes to Financial Statements 86 ING National Tax Exempt Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT RATINGS(1) VALUE ------------------------------------------------------------------------------------ MUNICIPAL BONDS: 98.6% CALIFORNIA: 10.5% $ 500,000 California State Department of Veterans Affairs, 4.700%, due 12/01/09 Aa2/AA- $ 534,070 1,000,000 California State Department of Water Resources, 5.500%, due 05/01/07 A3/BBB+ 1,110,070 1,000,000 California State General Obligation, 5.000%, due 02/01/14 A2/A 1,065,500 200,000 Los Angeles County Metropolitan Transportation Authority, 6.000%, due 07/01/08 A1/A+ 233,668 ------------- 2,943,308 ------------- COLORADO: 3.9% 1,000,000 Interlocken Metropolitan District Colorado Reference, Series A, 5.750%, due 12/15/19 NR/AA 1,081,050 ------------- 1,081,050 ------------- FLORIDA: 3.9% 1,000,000 Florida State Board of Education, Series A, MBIA Insured, 5.000%, due 06/01/14 NR/AAA 1,086,260 ------------- 1,086,260 ------------- ILLINOIS: 8.9% 1,000,000 Chicago Illinois Skyway Toll Bridge, 5.500%, due 01/01/31 Aaa/AAA 1,058,680 1,250,000 De Kalb-Ogle Etc. Counties Community College District No. 523, Fsa Insured, 5.750%, due 02/01/11 Aaa/NR 1,428,050 ------------- 2,486,730 ------------- MASSACHUSETTS: 7.6% 1,000,000 Massachusetts Housing Finance Agency, 3.700%, due 12/01/09 Aa3/AA- 1,039,640 5,000 Massachusetts Housing Finance Agency, 6.375%, due 04/01/21 A1/A+ 5,110 1,000,000 Massachusetts State Port Authority Revenue, Series C, 5.750%, due 07/01/29 Aa3/A+ 1,071,180 ------------- 2,115,930 ------------- NEVADA: 4.1% 1,100,000 Washoe County Nevada Gas & Water Facilities, 6.300%, due 12/01/14 Aaa/AAA 1,142,240 ------------- 1,142,240 ------------- NEW YORK: 22.5% 750,000 New York City Industrial Development Agency, 6.250%, due 11/15/06 Aaa/AAA 806,805 $ 1,000,000 New York NY, General Obligation, Series A, 5.625%, due 12/01/13 A2/A $ 1,101,180 1,000,000 New York NY, General Obligation, Series B, 5.000%, due 08/01/07 A2/A 1,095,670 1,000,000 New York State Dormitory Authority Revenue, Series A, 5.500%, due 07/01/15 Aaa/AAA 1,115,550 1,000,000 New York State Dormitory Authority Revenue, Series C, 5.250%, due 04/01/16 Aaa/AAA 1,108,470 1,000,000 Tobacco Settlement Financing Authority, 5.000%, due 06/01/10 NR/AA- 1,046,210 ------------- 6,273,885 ------------- NORTH CAROLINA: 1.2% 295,000 New Hanover County, 5.750%, due 11/01/12 Aa2/AA 339,678 ------------- 339,678 ------------- OHIO: 0.9% 225,000 Euclid City School District, 5.200%, due 12/01/10 Aaa/AAA 248,015 ------------- 248,015 ------------- OKLAHOMA: 8.4% 1,000,000 Oklahoma State Industrial Authority Revenue Reference, Health System Obligation Group, Series A, 6.000%, due 08/15/19 Aaa/AAA 1,136,920 1,000,000 Payne County Oklahoma Economic Development Authority, Student Housing Revenue, Collegiate Housing Foundation, Series A, 6.375%, due 06/01/30 Baa3/NR 1,211,100 ------------- 2,348,020 ------------- PENNSYLVANIA: 7.3% 1,000,000 Pennsylvania State Finance Authority, 6.600%, due 11/01/09 NR/A 1,024,430 1,000,000 Philadelphia Pennsylvania Hospitals & Higher Education Facilities Authority Revenue, Jefferson Health System, 5.000%, due 05/15/18 A1/AA- 1,015,460 ------------- 2,039,890 ------------- RHODE ISLAND: 7.8% 1,000,000 Rhode Island Clean Water Finance Agency Revenue, 5.000%, due 10/01/14 Aaa/AAA 1,090,570 1,000,000 Rhode Island State & Providence Plantations, 5.000%, due 06/01/15 Aaa/AAA 1,084,120 ------------- 2,174,690 -------------
See Accompanying Notes to Financial Statements 87 ING National Tax Exempt Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT RATINGS(1) VALUE ------------------------------------------------------------------------------------ TEXAS: 8.0% $ 1,000,000 Laredo Texas Independent School District, General Obligation, PSF Guaranteed, 5.500%, due 08/01/20 Aaa/AAA $ 1,093,380 1,050,000 San Felipe Del Rio Texas Independent School District, General Obligation, PSF Guaranteed, 5.500%, due 08/15/19 Aaa/AAA 1,155,662 ------------- 2,249,042 ------------- WASHINGTON: 3.6% 1,000,000 Seattle Washington Municipal Light & Power Revenue, Series B, MBIA Insured, 5.000%, due 06/01/24 Aaa/AAA 1,013,970 ------------- 1,013,970 ------------- Total Municipal Bonds (Cost $25,731,787) 27,542,708 ------------- 27,542,708 ------------- TOTAL INVESTMENTS IN SECURITIES (COST $25,731,787)* 98.6% $ 27,542,708 OTHER ASSETS AND LIABILITIES-NET 1.4 398,323 ----- ------------- NET ASSETS 100.0% $ 27,941,031 ===== =============
* Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 1,832,734 Gross Unrealized Depreciation (21,813) ------------- Net Unrealized Appreciation $ 1,810,921 =============
(1) Credit ratings are provided by Moody's Investor Service, Inc. and Standard and Poor's Rating Group (Unaudited) MBIA Municipal Bond Insurance Association FSA Financial Security Assurance PSF Permanent School Fund See Accompanying Notes to Financial Statements 88 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------- CORPORATE BONDS: 27.0% AIRLINES: 1.0% $ 48,788 American Airlines, Inc., 6.977%, due 05/23/21 $ 42,165 300,000 American Airlines, Inc., 7.024%, due 10/15/09 293,247 68,569 Continental Airlines, Inc., 6.545%, due 08/02/20 67,180 55,311 US Airways Pass Through Trust, 6.850%, due 01/30/18 51,832 ------------- 454,424 ------------- AUTO MANUFACTURERS: 1.2% 122,000 Ford Motor Co., 6.375%, due 02/01/29 99,645 157,000 Ford Motor Co., 6.625%, due 10/01/28 132,705 320,000 L General Motors Corp., 8.375%, due 07/15/33 335,535 ------------- 567,885 ------------- BANKS: 4.2% 84,000 Bank of America Corp., 6.375%, due 02/15/08 94,577 135,000 # Bank of New York Institutional Capital Trust A, 7.780%, due 12/01/26 151,377 21,000 # BankAmerica Institutional, Class B, 7.700%, due 12/31/26 23,704 86,000 Barnett Capital I, 8.060%, due 12/01/26 100,136 25,000 Barnett Capital II, 7.950%, due 12/01/26 28,787 190,000 @@,# Credit Suisse First Boston/London, 7.900%, due 05/29/49 216,765 299,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 328,036 86,000 FBS Capital I, 8.090%, due 11/15/26 98,199 175,000 First Union Institutional Capital II, 7.850%, due 01/01/27 200,629 141,000 @@ HSBC Holdings PLC, 7.500%, due 07/15/09 167,346 84,000 M&T Bank Corp., 3.850%, due 04/01/13 84,337 239,000 RBS Capital Trust I, 4.709%, due 12/29/49 231,698 110,000 Wells Fargo & Co., 3.120%, due 08/15/08 109,711 125,000 #,L Westpac Capital Trust III, 5.819%, due 12/29/49 130,229 ------------- 1,965,531 ------------- BEVERAGES: 0.8% 158,000 @@,# Cia Brasileira de Bebidas, 8.750%, due 09/15/13 160,369 44,000 @@,# Coca-Cola HBC Finance BV, 5.125%, due 09/17/13 45,349 43,000 @@,#,L Coca-Cola HBC Finance BV, 5.500%, due 09/17/15 45,293 140,000 # Miller Brewing Co., 4.250%, due 08/15/08 143,992 ------------- 395,003 ------------- CHEMICALS: 0.1% $ 31,000 L Dow Chemical Co., 5.750%, due 11/15/09 $ 33,220 ------------- 33,220 ------------- DIVERSIFIED FINANCIAL SERVICES: 3.1% 122,000 Boeing Capital Corp., 7.375%, due 09/27/10 141,994 175,000 @@,#,XX Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 172,594 82,000 Capital One Bank, 5.750%, due 09/15/10 86,431 21,000 CitiCorp Capital I, 7.933%, due 02/15/27 24,428 139,000 Countrywide Home Loans, Inc., 4.250%, due 12/19/07 143,388 145,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 136,073 32,000 L Ford Motor Credit Co., 5.625%, due 10/01/08 32,401 62,000 Ford Motor Credit Co., 7.375%, due 10/28/09 66,167 126,000 General Electric Capital Corp., 3.500%, due 08/15/07 128,446 60,000 General Motors Acceptance Corp., 6.625%, due 10/15/05 63,954 99,000 L Lehman Brothers Holdings, Inc., 3.500%, due 08/07/08 99,309 95,000 XX,# Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 93,868 554 @@,I Nordea Kredit Realkreditaktieselskab, 6.000%, due 07/01/29 90 95,000 @@,# PF Export Receivables Master Trust, 3.748%, due 06/01/13 94,327 97,455 @@,# PF Export Receivables Master Trust, 6.436%, due 06/01/15 97,527 50,000 # Wachovia Capital Trust V, 7.965%, due 06/01/27 60,821 ------------- 1,441,818 ------------- ELECTRIC: 2.7% 47,000 # Calpine Corp., 6.853%, due 07/15/07 44,239 149,000 # Consumers Energy Co., 4.800%, due 02/17/09 152,988 56,347 I East Coast Power LLC, 7.536%, due 06/30/17 58,037 94,000 @@ Empresa Nacional de Electricidad SA/Chile, 8.500%, due 04/01/09 102,300 20,000 @@,I Enersis SA/Cayman Island, 6.600%, due 12/01/26 20,055 129,000 # Indianapolis Power & Light, 6.300%, due 07/01/13 132,540 92,000 Nisource Finance Corp., 6.150%, due 03/01/13 98,676 59,000 Nisource Finance Corp., 7.625%, due 11/15/05 65,277 131,000 # Ohio Edison Co., 4.000%, due 05/01/08 129,638 195,000 Ohio Power Co., 6.375%, due 07/15/33 198,706
See Accompanying Notes to Financial Statements 89 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------- ELECTRIC (CONTINUED) $ 89,000 # Oncor Electric Delivery Co., 6.375%, due 01/15/15 $ 97,873 71,000 Penn Electric Co., 6.625%, due 04/01/19 75,271 77,000 # TXU Energy Co., 7.000%, due 03/15/13 83,880 ------------- 1,259,480 ------------- ENVIRONMENTAL CONTROL: 0.1% 58,000 L Allied Waste North America, 7.625%, due 01/01/06 60,900 ------------- 60,900 ------------- FOOD: 1.3% 43,000 Kroger Co., 5.500%, due 02/01/13 45,058 63,000 Kroger Co., 7.250%, due 06/01/09 73,394 114,000 Safeway, Inc., 4.800%, due 07/16/07 120,160 169,000 Supervalu, Inc., 7.875%, due 197,756 158,000 Tyson Foods, Inc., 7.250%, due 10/01/06 176,099 ------------- 612,467 ------------- FOREST PRODUCTS & PAPER: 0.7% 83,000 @@ Abitibi-Consolidated, Inc., 6.950%, due 12/15/06 86,580 47,000 @@ Abitibi-Consolidated, Inc., 6.950%, due 04/01/08 48,429 69,000 Fort James Corp., 6.625%, due 09/15/04 71,070 110,000 Weyerhaeuser Co., 6.875%, due 12/15/33 116,701 ------------- 322,780 ------------- INSURANCE: 0.8% 134,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 137,077 94,000 # Monumental Global Funding II, 3.850%, due 03/03/08 96,144 132,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 151,788 ------------- 385,009 ------------- IRON/STEEL: 0.0% 25,000 Armco, Inc., 9.000%, due 09/15/07 18,125 ------------- 18,125 ------------- LODGING: 0.5% 100,000 MGM Mirage, 6.000%, due 10/01/09 101,000 58,000 Park Place Entertainment Corp., 9.375%, due 02/15/07 64,235 59,000 Starwood Hotels & Resorts Worldwide, Inc., 7.375%, due 05/01/07 63,573 ------------- 228,808 ------------- MEDIA: 0.7% 48,000 L AOL Time Warner, Inc., 6.875%, due 05/01/12 53,964 39,000 # Echostar DBS Corp., 0.000%, due 10/01/08 39,926 54,000 # Echostar DBS Corp., 5.750%, due 10/01/08 54,338 $ 100,000 L Mediacom Broadband LLC, 11.000%, due 07/15/13 $ 105,750 66,000 Time Warner, Inc., 6.950%, due 01/15/28 69,953 ------------- 323,931 ------------- MISCELLANEOUS MANUFACTURING: 0.4% 170,000 General Electric Co., 5.000%, due 02/01/13 174,594 ------------- 174,594 ------------- MULTI-NATIONAL: 0.6% 138,000 @@ Corp Andina de Fomento CAF, 5.200%, due 05/21/13 137,063 135,000 @@ Corp Andina de Fomento CAF, 6.875%, due 03/15/12 150,202 ------------- 287,265 ------------- OIL AND GAS: 2.4% 105,000 Amerada Hess Corp., 5.900%, due 08/15/06 113,263 95,000 L Amerada Hess Corp., 7.125%, due 03/15/33 100,219 134,000 Enterprise Products Partners LP, 6.875%, due 03/01/33 144,911 355,000 @@ Husky Oil Co., 8.900%, due 417,569 170,000 L Pemex Project Funding Master Trust, 7.375%, due 12/15/14 183,600 73,000 Valero Energy Corp., 7.500%, due 04/15/32 81,544 73,000 Valero Energy Corp., 8.750%, due 06/15/30 91,317 ------------- 1,132,423 ------------- PACKAGING AND CONTAINERS: 0.6% 134,000 #,L Sealed Air Corp., 5.625%, due 07/15/13 135,997 150,000 # Sealed Air Corp., 6.950%, due 05/15/09 167,867 ------------- 303,864 ------------- PIPELINES: 0.6% 136,000 CenterPoint Energy Resources Corp., 8.125%, due 07/15/05 145,915 118,000 Kinder Morgan Energy Partners LP, 7.300%, due 08/15/33 136,528 ------------- 282,443 ------------- REAL ESTATE: 0.7% 127,000 EOP Operating LP, 7.750%, due 11/15/07 147,822 153,000 Liberty Property LP, 7.750%, due 04/15/09 181,964 ------------- 329,786 ------------- REITs: 0.6% 85,000 Simon Property Group LP, 4.875%, due 03/18/10 87,805 165,000 Simon Property Group LP, 6.375%, due 11/15/07 183,726 ------------- 271,531 -------------
See Accompanying Notes to Financial Statements 90 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------- RETAIL: 0.2% $ 65,000 Sears Roebuck Acceptance, 6.250%, due 05/01/09 $ 72,277 ------------- 72,277 ------------- SAVINGS AND LOANS: 0.3% 142,000 Washington Mutual, Inc., 4.375%, due 01/15/08 147,407 ------------- 147,407 ------------- TELECOMMUNICATIONS: 3.4% 91,000 AT&T Corp., 6.000%, due 03/15/09 98,122 115,000 L AT&T Corp., 7.800%, due 11/15/11 133,165 55,000 L AT&T Corp., 8.500%, due 11/15/31 65,346 128,000 AT&T Wireless Services, Inc., 8.125%, due 05/01/12 152,269 135,000 Sprint Capital Corp., 6.000%, due 01/15/07 145,409 216,000 Sprint Capital Corp., 6.875%, due 11/15/28 211,382 244,000 TCI Communications Finance, 9.650%, due 03/31/27 289,445 150,000 @@ TELUS Corp., 8.000%, due 06/01/11 175,420 59,000 Verizon Florida, Inc., 6.125%, due 01/15/13 64,657 280,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 276,096 1,000,000 I,** WinStar Communications, Inc., 0.000%, due 04/15/10 100 ------------- 1,611,411 ------------- Total Corporate Bonds (Cost $12,721,557) 12,682,382 ------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 43.6% FEDERAL HOME LOAN MORTGAGE CORPORATION: 3.2% 480,000 L 2.875%, due 09/15/05 491,712 51,955 5.500%, due 01/01/14 54,022 25,316 5.500%, due 02/01/14 26,323 440,000 5.875%, due 03/21/11 484,682 224,153 6.500%, due 02/01/32 234,132 232,960 7.000%, due 06/01/29 246,216 867 I 9.000%, due 06/01/06 907 ------------- 1,537,994 ------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 38.6% 480,000 L 2.375%, due 04/13/06 481,454 490,000 L 2.875%, due 05/19/08 483,221 455,000 4.000%, due 09/02/08 467,496 228,000 XX 4.750%, due 12/25/42 233,237 1,300,000 5.000%, due 10/15/18 1,332,094 2,700,000 5.000%, due 11/15/33 2,691,562 850,000 5.250%, due 04/15/07 929,526 400,000 5.500%, due 10/15/18 413,875 1,750,000 5.500%, due 11/01/32 1,778,984 825,000 6.000%, due 09/01/17 861,452 298,224 6.000%, due 07/25/24 314,811 1,281,807 6.000%, due 02/01/32 1,323,191 606,485 6.000%, due 10/01/32 626,111 68,002 6.000%, due 10/01/32 70,203 1,000,000 6.000%, due 11/15/33 1,029,375 21,491 I 6.500%, due 02/01/09 22,773 76,446 6.500%, due 08/01/15 80,793 $ 491,591 6.500%, due 06/01/28 $ 513,511 584,653 6.500%, due 12/01/31 609,649 249,975 6.500%, due 07/01/32 260,573 442,750 6.500%, due 08/01/32 461,658 99,990 6.500%, due 09/01/32 104,261 84,094 6.500%, due 10/01/32 87,685 71,373 7.000%, due 03/01/15 75,964 450,000 7.000%, due 09/01/28 476,950 822,408 7.000%, due 09/01/32 870,252 89,832 7.000%, due 11/01/32 95,058 318,205 7.500%, due 07/01/21 340,073 1,035,881 7.500%, due 02/01/31 1,110,970 8,409 8.000%, due 08/01/30 9,087 861 I 9.500%, due 06/01/05 890 1,343 I 9.500%, due 07/01/06 1,358 1,798 I 9.500%, due 05/01/07 1,809 ------------- 18,159,906 ------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 1.8% 117,197 6.500%, due 06/15/29 123,221 457,424 6.500%, due 05/15/31 480,848 45,193 7.500%, due 11/15/29 48,403 143,226 8.000%, due 06/20/30 153,741 15,452 8.000%, due 07/15/30 16,700 605 8.500%, due 02/15/21 667 ------------- 823,580 ------------- Total U.S. Government Agency Obligations (Cost $20,135,625) 20,521,480 ------------- U.S. TREASURY OBLIGATIONS: 10.2% U.S. TREASURY BONDS: 1.8% 793,000 L 5.375%, due 02/15/31 851,236 ------------- 851,236 ------------- U.S. TREASURY NOTES: 8.4% 665,000 L 2.000%, due 08/31/05 672,378 607,000 L 2.375%, due 08/15/06 615,607 700,000 S, L 3.000%, due 01/31/04 704,813 836,000 L 3.125%, due 09/15/08 847,887 1,093,000 L 4.250%, due 08/15/13 1,120,795 ------------- 3,961,480 ------------- Total U.S. Treasury Obligations (Cost $4,681,863) 4,812,716 ------------- ASSET-BACKED SECURITIES: 3.3% AUTOMOBILE ASSET BACKED SECURITIES: 0.6% 300,000 USAA Auto Owner Trust, 2.040%, due 02/16/10 298,719 ------------- 298,719 ------------- COMMERCIAL MORTGAGE BACKED SECURITIES: 0.2% 68,000 GMAC Commercial Mortgage Securities, Inc., 6.700%, due 04/15/34 78,154 ------------- 78,154 ------------- CREDIT CARD ASSET BACKED SECURITIES: 1.5% 85,000 Bank One Issuance Trust, 4.540%, due 09/15/10 87,208
See Accompanying Notes to Financial Statements 91 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------- CREDIT CARD ASSET BACKED SECURITIES (CONTINUED) $ 88,000 Capital One Master Trust, 4.900%, due 03/15/10 $ 93,983 305,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 331,696 156,000 MBNA Credit Card Master Note Trust, 4.950%, due 06/15/09 168,168 ------------- 681,055 ------------- HOME EQUITY ASSET BACKED SECURITIES: 0.5% 207,814 Emergent Home Equity Loan Trust, 7.080%, due 12/15/28 223,311 ------------- 223,311 ------------- OTHER ASSET BACKED SECURITIES: 0.5% 85,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 2.734%, due 09/25/24 85,199 50,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 4.045%, due 05/25/33 50,182 115,000 Residential Asset Mortgage Products, Inc., 2.140%, due 02/25/30 113,670 ------------- 249,051 ------------- Total Asset Backed Securities (Cost $1,517,331) 1,530,290 ------------- COLLATERALIZED MORTGAGE OBLIGATION: 7.5% COMMERCIAL MORTGAGE BACKED SECURITIES: 5.9% 200,000 CS First Boston Mortgage Securities Corp., 3.382%, due 05/15/38 193,505 480,000 CS First Boston Mortgage Securities Corp., 3.861%, due 03/15/36 487,718 64,000 CS First Boston Mortgage Securities Corp., 7.808%, due 04/14/62 76,645 350,000 DLJ Commercial Mortgage Corp., 6.240%, due 11/12/31 391,743 925,000 DLJ Commercial Mortgage Corp., 7.300%, due 06/10/32 1,083,264 160,000 GE Capital Commercial Mortgage Corp., 5.994%, due 12/10/35 177,364 100,000 JP Morgan Chase Commercial Mortgage Securities Corp., 5.161%, due 10/12/37 104,417 250,000 Wachovia Bank Commercial Mortgage Trust, 3.989%, due 06/15/35 239,135 ------------- 2,753,791 ------------- WHOLE LOAN COLLATERALLIZED MORTGAGE: 0.7% 122,792 MASTR Asset Securitization Trust, 8.000%, due 06/25/33 127,172 200,000 Wells Fargo Mortgage Backed Securities Trust, 4.500%, due 08/25/18 191,230 ------------- 318,402 ------------- WL COLLATERALLIZED PLANNED AMORTIZATION CLASS: 0.9% $ 314,865 MASTR Alternative Loans Trust, 8.500%, due 05/25/33 $ 335,569 88,036 Residential Funding Securities Corp., 8.500%, due 05/25/33 97,791 ------------- 433,360 ------------- Total Collateralized Mortgage Obligation (Cost $3,562,947) 3,505,553 ------------- OTHER BONDS: 4.1% SOVEREIGN: 4.1% 128,000 @@ Brazilian Government Intl. Bond, 2.188%, due 04/15/12 103,561 150,000 @@ Brazilian Government Intl. Bond, 10.000%, due 08/07/11 147,750 70,000 @@ Brazilian Government Intl. Bond, 11.000%, due 08/17/40 66,500 138,000 XX Central Bank of Nigeria, 0.000%, due 01/05/10 53,475 91,000 @@ Colombia Government Intl. Bond, 10.000%, due 01/23/12 99,418 49,000 @@ Colombia Government Intl. Bond, 11.750%, due 02/25/20 57,698 70,000 @@ Dominican Republic Intl. Bond, 9.040%, due 01/23/13 61,262 70,000 @@ Ecuador Government Intl. Bond, 6.000%, due 08/15/30 44,063 41,000 @@,# El Salvador Government Intl. Bond, 7.750%, due 01/24/23 43,255 75,000 @@ Mexico Government Intl. Bond, 4.625%, due 10/08/08 76,688 118,000 @@,L Mexico Government Intl. Bond, 6.625%, due 03/03/15 124,254 50,399 @@ Panama Government Intl. Bond, 1.938%, due 07/17/16 43,315 47,000 @@ Peru Government Intl. Bond, 9.125%, due 02/21/12 52,523 100,000 @@ Philippine Government Intl. Bond, 9.875%, due 01/15/19 109,125 79,000 @@ Republic of Argentina, 1.369%, due 08/03/12 49,652 70,000 @@ Republic of Bulgaria, 8.250%, due 01/15/15 80,103 30,000 @@ Republic of Peru, 4.500%, due 03/07/17 26,575 254,000 @@ Russia Government Intl. Bond, 5.000%, due 03/31/30 240,664 19,000 @@,L Turkey Government Intl. Bond, 9.500%, due 01/15/14 19,428 140,000 @@ Turkey Government Intl. Bond, 12.375%, due 06/15/09 164,849 22,000 @@ Ukraine Government Intl. Bond, 7.650%, due 06/11/13 22,000 20,907 @@,# Ukraine Government Intl. Bond, 11.000%, due 03/15/07 23,293 53,000 @@ Uruguay Government Intl. Bond, 7.500%, due 03/15/15 41,075 91,000 @@ Venezuela Government Intl. Bond, 9.250%, due 09/15/27 70,798 93,000 @@,# Venezuela Government Intl. Bond, 10.750%, due 09/19/13 86,025 ------------- Total Other Bonds (Cost $1,893,603) 1,907,349 -------------
See Accompanying Notes to Financial Statements 92 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
NUMBER OF WARRANTS VALUE --------------------------------------------------------------------------------------- WARRANTS: 0.0% DIVERSIFIED FINANCIAL SERVICES: 0.0% 250 @,I,X North Atlantic Trading Co., Expires 9/30/2003 $ -- ------------- Total Warrants (Cost $0) -- ------------- Total Long-Term Investments (Cost $44,512,926) 44,959,770 ------------- PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 19.3% REPURCHASE AGREEMENT: 19.3% $ 9,050,000S Goldman Sachs Repurchase Agreement dated 9/30/03, 1.090%, due 10/01/03 $9,050,274 to be received upon repurchase (Collateralized by $9,141,000 Various U.S. Government obligations, 0.000% to 6.875% Market Value $9,232,167 due 10/09/2003 to 09/30/2013) 9,050,000 ------------- Total Short-term Investments (Cost $9,050,000) 9,050,000 ------------- TOTAL INVESTMENTS IN SECURITIES (COST $53,562,926)* 115.0% $ 54,009,770 OTHER ASSETS AND LIABILITIES-NET (15.0) (7,043,982) ----- ------------- NET ASSETS 100.0% $ 46,965,788 ===== =============
@ Non-income producing security @@ Foreign Issuer REITs Real Estate Investment Trusts # 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 September 30, 2003 S Segregated securities for when-issued or delayed delivery securities held at September 30, 2003. ** Defaulted 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 which have been adjusted based on the Fund's valuation procedures. * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 1,034,812 Gross Unrealized Depreciation (587,968) ------------- Net Unrealized Appreciation $ 446,844 =============
See Accompanying Notes to Financial Statements 93 ING Classic Money Market(1) PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- CORPORATE NOTES: 47.4% $ 4,500,000 American Honda Finance, 1.100%, due 10/23/03 $ 4,500,024 4,312,000 Associates Corp. NA, 5.750%, due 11/01/03 4,327,528 2,900,000 Bank of America Corp., 5.750%, due 03/01/04 2,953,048 2,750,000 Bank of New York Co., Inc., 1.110%, due 10/27/04 2,750,000 1,800,000 Bank of Scotland, 1.110%, due 01/22/04 1,800,204 3,500,000 Bank One NA, 1.040%, due 02/24/04 3,499,859 4,400,000 Bank One NA, 1.160%, due 02/23/04 4,402,442 5,900,000 @@ Barclays Bank PLC, 1.030%, due 03/08/04 5,899,744 3,100,000 Bear Stearns Co., Inc., 1.730%, due 05/24/04 3,112,665 1,180,000 Bell Atlantic, 5.875%, due 02/01/04 1,196,797 5,000,000 Bellsouth Corp., 1.180%, due 10/04/04 5,000,000 5,000,000 Bellsouth Corp., 4.160%, due 04/26/04 5,076,826 5,000,000 BP Amoco Capital PLC, 1.045%, due 03/08/04 5,000,000 3,500,000 Chase Manhattan Bank, 1.080%, due 06/30/04 3,500,000 2,500,000 First Union National Bank, 1.316%, due 06/08/04 2,504,583 1,900,000 First Union National Bank, 1.370%, due 02/20/04 1,902,196 3,100,000 First Union National Bank, 1.403%, due 07/30/04 3,109,059 5,800,000 First USA Bank, 1.360%, due 08/06/04 5,813,455 3,000,000 General Electric Capital Corp., 1.120%, due 01/28/04 3,000,591 10,500,000 General Electric Capital Corp., 1.180%, due 10/22/03 10,500,981 6,000,000 General Electric Capital Corp., 1.200%, due 10/08/04 6,000,000 5,000,000 I Goldman Sachs Group Inc, 1.400%, due 10/27/03 5,000,000 2,000,000 GTE California, Inc., 6.750%, due 03/15/04 2,047,583 4,650,000 GTE North, Inc., 6.000%, due 01/15/04 4,713,024 6,100,000 HBOS Treasury Services PLC, 1.130%, due 10/22/04 6,100,000 4,500,000 HBOS Treasury Services PLC, 1.150%, due 08/23/04 4,503,252 1,800,000 Heller Financial, Inc., 6.000%, due 03/19/04 1,838,567 3,000,000 JP Morgan Chase & Co., 1.256%, due 02/05/04 3,001,876 7,700,000 Key Bank NA, 1.134%, due 08/03/04 7,703,179 4,600,000 Lehman Brothers Holdings, 1.420%, due 06/10/04 4,610,602 5,400,000 I M-MKT Trust Lly, 1.220%, due 02/19/04 5,398,957 $ 2,800,000 Merrill Lynch & Co., 1.160%, due 11/19/03 $ 2,800,325 7,300,000 Merrill Lynch & Co., 1.420%, due 03/08/04 7,310,922 4,000,000 Morgan Stanley, 1.414%, due 02/02/04 4,004,681 5,500,000 @@ Rabobank Nederland NV, 1.043%, due 01/22/04 5,500,000 5,500,000 @@ Rabobank Nederland NV, 1.045%, due 01/23/04 5,500,000 3,600,000 @@ Royal Bank of Canada, 1.030%, due 03/15/04 3,599,669 6,000,000 Salomon Smith Barney, 1.240%, due 02/20/04 6,003,912 9,200,000 SBC Communications, Inc., 4.180%, due 06/05/04 9,383,338 9,400,000 Toyota Motor Corp., 1.070%, due 01/16/04 9,400,000 4,500,000 U.S. Bank National Association, 1.260%, due 04/13/04 4,504,573 2,500,000 US Bank NA, 1.170%, due 11/14/03 2,500,287 5,900,000 Wells Fargo Bank NA, 1.060%, due 11/24/03 5,900,000 5,500,000 Wells Fargo Bank NA, 1.060%, due 01/26/04 5,500,000 3,000,000 Wells Fargo Bank NA, 1.060%, due 02/06/04 3,000,000 3,500,000 Wells Fargo Bank NA, 1.109%, due 10/01/04 3,500,000 --------------- Total Corporate Notes (Cost $209,174,749) 209,174,749 --------------- COMMERCIAL PAPER: 25.1% 4,500,000 Concord Minutemen Capital Co., 1.080%, due 01/13/04 4,485,960 8,050,000 Concord Minutemen Capital Co., 1.150%, due 10/07/04 8,049,999 5,050,000 Concord Minutemen Capital Co., 1.150%, due 10/08/04 5,050,000 4,500,000 Concord Minutemen Capital Co., 1.150%, due 10/15/04 4,500,000 4,500,000 Crown Point Capital Co., 1.060%, due 10/03/03 4,499,735 4,500,000 Crown Point Capital Co., 1.060%, due 10/07/03 4,499,205 4,500,000 Crown Point Capital Co., 0.950%, due 10/09/03 4,499,050 4,500,000 Crown Point Capital Co., 1.060%, due 10/14/03 4,498,278 4,500,000 Edison Asset Securitization, 1.070%, due 11/03/03 4,495,586 4,400,000 Edison Asset Securitization, 1.140%, due 11/17/03 4,393,451 4,500,000 I Goldman Sachs Group, Inc., 1.130%, due 12/04/03 4,500,000 4,500,000 I Goldman Sachs Group, Inc., 1.140%, due 12/12/03 4,500,000 4,500,000 Jupiter Securitization Corp., 1.070%, due 10/08/03 4,499,064 9,200,000 I M-MKT Trust Series A-1, 1.270%, due 10/08/04 9,200,000 4,500,000 Old Line Funding Corp., 1.060%, due 10/06/03 4,499,338
See Accompanying Notes to Financial Statements 94 ING Classic Money Market(1) PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- COMMERCIAL PAPER (CONTINUED) $ 9,100,000 St. Germain Holdings Ltd., 1.080%, due 10/10/03 $ 9,097,565 4,500,000 St. Germain Holdings Ltd., 1.060%, due 10/16/03 4,497,975 4,500,000 Thunder Bay Funding, Inc., 1.050%, due 10/15/03 4,498,163 8,000,000 Verizon Global Funding, 1.230%, due 10/14/04 8,000,000 4,500,000 Yorktown Capital LLC, 1.050%, due 10/02/03 4,499,869 4,500,000 Yorktown Capital LLC, 1.050%, due 10/20/03 4,497,506 --------------- Total Commercial Paper (Cost $111,260,744) 111,260,744 --------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 12.5% 4,200,000 Federal Home Loan Bank, 1.500%, due 09/03/04 4,200,000 6,300,000 Federal Home Loan Bank, 5.375%, due 01/05/04 6,369,481 2,700,000 Federal Home Loan Bank, 5.500%, due 02/25/04 2,744,266 1,200,000 Federal Home Loan Mortgage Corp., 3.400%, due 02/20/04 1,209,294 4,600,000 Federal National Mortgage Association, 5.125%, due 02/13/04 4,664,596 5,000,000 Federal National Mortgage Association, 1.200%, due 08/23/04 5,000,000 4,500,000 Federal National Mortgage Association, 1.250%, due 07/07/04 4,500,000 4,400,000 Federal National Mortgage Association, 1.250%, due 08/27/04 4,400,000 4,400,000 Federal National Mortgage Association, 1.300%, due 08/30/04 4,400,000 6,800,000 Federal National Mortgage Association, 1.450%, due 09/14/04 6,800,000 8,600,000 Freddie Mac, 3.250%, due 01/15/04 8,649,057 2,300,000 Student Loan Marketing Association, 1.023%, due 11/20/03 2,299,896 --------------- Total U.S. Government Agency Obligations (Cost $55,236,590) 55,236,590 --------------- CERTIFICATE OF DEPOSIT: 8.8% 5,500,000 @@ Bank of Scotland Treasury Service, 1.620%, due 12/09/03 5,501,749 4,400,000 @@ Canadian Imperial Bank, 1.045%, due 12/15/03 4,400,046 4,500,000 Credit Suisse First Boston, 1.045%, due 10/16/03 4,499,931 5,900,000 State Street Bank & Trust, 1.220%, due 07/06/04 5,900,000 4,600,000 Washington Mutual Bank, 1.100%, due 11/13/03 4,600,000 4,600,000 Washington Mutual Bank, 1.106%, due 07/29/04 4,600,000 $ 4,500,000 Washington Mutual Bank, 1.220%, due 11/25/03 $ 4,500,000 5,100,000 Washington Mutual Bank, 1.290%, due 10/17/03 5,100,000 --------------- Total Certificate Of Deposit (Cost $39,101,726) 39,101,726 --------------- ASSET-BACKED SECURITIES: 2.4% 3,519,405 Chase Manhattan Auto Owner Trust, 1.060%, due 08/16/04 3,519,405 2,499,076 John Deere Owner Trust, 1.081%, due 08/13/04 2,499,076 4,600,000 Putnam Structured Product Funding, 1.140%, due 11/17/03 4,600,001 --------------- Total Asset Backed Securities (Cost $10,618,482) 10,618,482 --------------- REPURCHASE AGREEMENT: 4.8% 21,267,000 Goldman Sachs Repurchase Agreement dated 09/30/03, 1.090%, due 10/01/03, $21,267,644 to be received upon repurchase (Collateralized by various U.S. Government Securities, 0.000%, market value $21,905,010, due 08/15/05-02/15/25) 21,267,000 --------------- Total Repurchase Agreement (Cost $21,267,000) 21,267,000 --------------- TOTAL INVESTMENTS IN SECURITIES (COST $446,659,291)* 101.0% $ 446,659,291 OTHER ASSETS AND LIABILITIES-NET (1.0) (4,244,930) ----- --------------- NET ASSETS 100.0% $ 442,414,361 ===== ===============
* Also represents cost for income tax purposes. @@ Foreign Issuer PLC Public Limited Company I Illiquid Security (1) All securities with a maturity date greater than one year have either a variable rate, a demand feature, prerefunded, optional or mandatory put resulting in an effective maturity of one year or less. Rate shown reflects current rate.
PERCENTAGE OF INDUSTRY NET ASSETS -------------------------------------------------------------------------------- Asset Backed Commercial Paper 21.7% Bank Holding Companies 5.4 Federal and Federally Sponsored Credit Agencies 12.4 Foreign Bank, Branches and Agencies 9.8 Management Services 1.8 National Commercial Banks 15.0 Personal Credit Institutions 11.9 Pharmaceutical Preparations 1.2 Security Brokers and Dealers 10.4 Short-term Business Credit 0.4 Telephone Communications 6.2 Repurchase Agreement 4.8 Other Assets and Liabilities (1.0) ----- NET ASSETS 100.0% =====
See Accompanying Notes to Financial Statements 95 ING Money Market Fund(1) PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- CORPORATE NOTES: 48.4% $ 1,200,000 American Honda Finance, 1.100%, due 10/23/03 $ 1,200,007 500,000 American Honda Finance, 1.260%, due 04/26/04 500,524 1,400,000 Associates Corp. NA, 5.750%, due 11/01/03 1,405,212 800,000 Bank of America Corp., 1.364%, due 05/03/04 801,391 400,000 Bank of America Corp., 5.750%, due 03/01/04 407,317 500,000 Bank of New York Co., Inc., 1.110%, due 10/27/04 500,000 1,080,000 Bank One Corp., 5.625%, due 02/17/04 1,097,558 500,000 Bank One NA, 1.160%, due 02/23/04 500,277 800,000 @@ Barclays Bank PLC, 1.030%, due 03/08/04 799,965 400,000 Bear Stearns Co., Inc., 1.730%, due 05/24/04 401,634 700,000 Bellsouth Corp., 4.160%, due 04/06/04 710,756 400,000 Chase Manhattan Bank, 1.080%, due 06/30/04 400,000 350,000 First Union National Bank, 1.316%, due 06/08/04 350,642 400,000 First Union National Bank, 1.403%, due 07/30/04 401,169 750,000 First USA Bank, 1.360%, due 08/06/04 751,740 1,300,000 General Electric Capital Corp., 1.180%, due 10/22/03 1,300,101 1,000,000 General Electric Capital Corp., 1.200%, due 10/08/04 1,000,000 1,290,000 GTE California, Inc., 6.750%, due 03/15/04 1,320,600 800,000 HBOS Treasury Services PLC, 1.130%, due 10/22/04 800,000 500,000 HBOS Treasury Services PLC, 1.150%, due 08/23/04 500,361 500,000 JP Morgan Chase & Co., 1.240%, due 12/29/03 500,176 300,000 JP Morgan Chase & Co., 1.256%, due 02/05/04 300,188 1,000,000 Key Bank NA, 1.134%, due 08/03/04 1,000,413 500,000 Keycorp, 1.390%, due 08/30/04 501,067 500,000 Lehman Brothers Holdings, 1.420%, due 06/10/04 501,152 400,000 Merrill Lynch & Co., 1.160%, due 11/19/03 400,046 700,000 Merrill Lynch & Co., 6.800%, due 11/03/03 703,439 700,000 Morgan Stanley Dean Witter, 5.625%, due 01/20/04 709,110 500,000 @@ Royal Bank of Canada, 1.030%, due 03/15/04 499,954 800,000 Salomon Smith Barney, 1.240%, due 02/20/04 800,522 450,000 Salomon Smith Barney, 1.260%, due 11/13/03 450,096 1,260,000 SBC Communications, Inc., 4.180%, due 06/05/04 1,285,109 $ 1,200,000 U.S. Bank National Association, 1.260%, due 04/13/04 $ 1,201,220 2,100,000 Wells Fargo Bank NA, 1.060%, due 11/24/03 2,099,999 --------------- Total Corporate Notes (Cost $26,101,745) 26,101,745 --------------- COMMERCIAL PAPER: 26.3% 500,000 Concord Minutemen Capital Co., 1.080%, due 01/13/04 498,440 1,250,000 Concord Minutemen Capital Co., 1.150%, due 10/07/04 1,249,999 250,000 Concord Minutemen Capital Co., 1.150%, due 10/08/04 250,000 500,000 Concord Minutemen Capital Co., 1.150%, due 10/15/04 500,000 500,000 Crown Point Capital Co., 1.060%, due 10/03/03 499,971 600,000 Crown Point Capital Co., 1.060%, due 10/07/03 599,894 550,000 Crown Point Capital Co., 1.060%, due 10/14/03 549,789 600,000 Edison Asset Securitization, 1.140%, due 11/17/03 599,107 600,000 I Goldman Sachs Group, Inc., 1.130%, due 12/04/03 600,000 600,000 I Goldman Sachs Group, Inc., 1.140%, due 12/12/03 600,000 1,300,000 I M-MKT Trust Series A-1, 1.270%, due 10/08/04 1,300,000 600,000 Old Line Funding Corp., 1.050%, due 10/02/03 599,983 600,000 Old Line Funding Corp., 1.060%, due 10/06/03 599,912 1,100,000 St. Germain Holdings Ltd., 1.080%, due 10/10/03 1,099,706 600,000 St. Germain Holdings Ltd., 1.060%, due 10/16/03 599,730 357,000 Stellar Funding Group, 1.250%, due 10/14/03 356,839 502,000 Thunder Bay Funding, Inc., 1.070%, due 10/07/03 501,910 505,000 Thunder Bay Funding, Inc., 1.110%, due 10/14/03 504,798 1,150,000 Verizon Global Funding, 1.230%, due 10/14/04 1,150,000 500,000 Windmill Funding, 1.060%, due 10/21/03 499,706 500,000 Yorktown Capital LLC, 1.050%, due 10/02/03 499,985 550,000 Yorktown Capital LLC, 1.050%, due 10/20/03 549,695 --------------- Total Commercial Paper (Cost $14,209,464) 14,209,464 --------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 12.4% 400,000 Federal Home Loan Bank, 1.500%, due 09/03/04 400,000 700,000 Federal Home Loan Bank, 5.375%, due 01/05/04 707,720 700,000 Federal National Mortgage Association, 5.125%, due 02/13/04 709,830
See Accompanying Notes to Financial Statements 96 ING Money Market Fund(1) PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED) $ 600,000 Federal National Mortgage Association, 1.200%, due 08/23/04 $ 600,000 600,000 Federal National Mortgage Association, 1.250%, due 07/07/04 600,000 500,000 Federal National Mortgage Association, 1.250%, due 08/27/04 500,000 500,000 Federal National Mortgage Association, 1.300%, due 08/30/04 500,000 950,000 Federal National Mortgage Association, 1.450%, due 09/14/04 950,000 1,200,000 Freddie Mac, 3.250%, due 01/15/04 1,206,849 500,000 Student Loan Marketing Association, 1.023%, due 11/20/03 499,977 --------------- Total U.S. Government Agency Obligations (Cost $6,674,376) 6,674,376 --------------- CERTIFICATES OF DEPOSIT: 7.0% 600,000 @@ Canadian Imperial Bank, 1.045%, due 12/15/03 600,006 500,000 Credit Suisse First Boston, 1.045%, due 10/16/03 499,992 800,000 State Street Bank & Trust, 1.220%, due 07/06/04 800,001 600,000 Washington Mutual Bank, 1.100%, due 11/13/03 600,000 600,000 Washington Mutual Bank, 1.220%, due 11/25/03 600,000 700,000 Washington Mutual Bank, 1.290%, due 10/17/03 700,000 --------------- Total Certificates Of Deposit (Cost $3,799,999) 3,799,999 --------------- ASSET-BACKED SECURITIES: 2.3% 399,932 Chase Manhattan Auto Owner Trust, 1.060%, due 08/16/04 399,932 322,461 John Deere Owner Trust, 1.081%, due 08/13/04 322,461 500,000 Putnam Structured Product Funding, 1.140%, due 11/17/03 500,001 --------------- Total Asset Backed Securities (Cost $1,222,394) 1,222,394 --------------- REPURCHASE AGREEMENT: 4.4% $ 2,376,000 Goldman Sachs Repurchase Agreement dated 09/30/03, 1.090%, due 10/01/03, $2,376,072 to be received upon repurchase (Collateralized by $6,715,733 U.S. Treasury Bond, 0.000%, market value $2,447,280, due 05/15/22) $ 2,376,000 --------------- Total Repurchase Agreement (Cost $2,376,000) 2,376,000 --------------- TOTAL INVESTMENTS IN SECURITIES (COST $54,383,978)* 100.8% $ 54,383,978 OTHER ASSETS AND LIABILITIES-NET (0.8) (433,788) ----- --------------- NET ASSETS 100.0% $ 53,950,190 ===== ===============
* Also represents cost for income tax purposes. @@ Foreign Issuer PLC Public Limited Company I Illiquid Security (1) All securities with a maturity date greater than one year have either a variable rate, a demand feature, prerefunded, optional or mandatory put resulting in an effective maturity of one year or less. Rate shown reflects current rate.
PERCENTAGE OF INDUSTRY NET ASSETS --------------------------------------------------------------------------------------------------- Asset Backed Commercial Paper 21.9% Bank Holding Companies 7.6 Federal and Federally Sponsored Credit Agencies 12.4 Foreign Bank, Branches and Agencies 7.2 Management Services 2.1 National Commercial Banks 16.2 Personal Credit Institutions 12.4 Security Brokers and Dealers 10.5 Telephone Communications 6.1 Repurchase Agreement 4.4 Other Assets and Liabilities-Net (0.8) ----- NET ASSETS 100.0% =====
See Accompanying Notes to Financial Statements 97 ING Lexington Money Market Trust(1) PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- CORPORATE NOTES: 44.7% $ 800,000 Bank of America Corp., 1.364%, due 05/03/04 $ 801,396 300,000 Bank of America Corp., 5.750%, due 03/01/04 305,488 500,000 Bank of New York Co., Inc., 1.110%, due 10/27/04 500,000 770,000 Bank One Corp., 5.625%, due 02/17/04 782,519 500,000 Bank One NA, 1.160%, due 02/23/04 500,277 600,000 @@ Barclays Bank PLC, 1.030%, due 03/08/04 599,974 300,000 Bear Stearns Co., Inc., 1.730%, due 05/24/04 301,226 600,000 Bellsouth Corp., 4.160%, due 04/26/04 609,219 400,000 Chase Manhattan Bank, 1.080%, due 06/30/04 400,000 250,000 First Union National Bank, 1.316%, due 06/08/04 250,458 400,000 First Union National Bank, 1.403%, due 07/30/04 401,169 600,000 First USA Bank, 1.360%, due 08/06/04 601,392 1,100,000 General Electric Capital Corp., 1.180%, due 10/22/03 1,100,086 910,000 GTE California, Inc., 6.750%, due 03/15/04 931,587 350,000 GTE North, Inc., 6.000%, due 01/15/04 354,858 700,000 HBOS Treasury Services PLC, 1.130%, due 10/22/04 700,000 500,000 HBOS Treasury Services PLC, 1.150%, due 08/23/04 500,361 200,000 Heller Financial, Inc., 6.000%, due 03/19/04 204,285 500,000 Household Finance Corp., 1.376%, due 10/15/03 500,049 700,000 JP Morgan Chase & Co., 1.256%, due 02/05/04 700,438 900,000 Key Bank NA, 1.134%, due 08/03/04 900,367 500,000 Keycorp, 1.390%, due 08/30/04 501,067 400,000 Lehman Brothers Holdings, 1.420%, due 06/10/04 400,922 300,000 Merrill Lynch & Co., 1.160%, due 11/19/03 300,035 400,000 Merrill Lynch & Co., 1.420%, due 03/08/04 400,598 500,000 Merrill Lynch & Co., 6.800%, due 11/03/03 502,456 500,000 Morgan Stanley Dean Witter, 5.625%, due 01/20/04 506,507 900,000 @@ Royal Bank of Canada, 1.030%, due 03/15/04 899,917 700,000 Salomon Smith Barney, 1.240%, due 02/20/04 700,456 1,650,000 Salomon Smith Barney, 1.260%, due 11/13/03 1,650,351 1,070,000 SBC Communications, Inc., 4.180%, due 06/05/04 1,091,323 500,000 US Bank National Association, 1.260%, due 04/13/04 500,508 $ 1,800,000 Wells Fargo Bank NA, 1.060%, due 11/24/03 $ 1,799,999 --------------- Total Corporate Notes (Cost $21,199,288) 21,199,288 --------------- COMMERCIAL PAPER: 30.1% 500,000 Ciesco L.P., 1.070%, due 10/07/03 499,911 500,000 Concord Minutemen Capital Co., 1.080%, due 01/13/04 498,440 700,000 Concord Minutemen Capital Co., 1.150%, due 10/07/04 699,999 1,100,000 Concord Minutemen Capital Co., 1.150%, due 10/08/04 1,099,999 500,000 Crown Point Capital Co., 1.060%, due 10/03/03 499,971 500,000 Crown Point Capital Co., 1.060%, due 10/07/03 499,912 500,000 Crown Point Capital Co., 1.060%, due 10/14/03 499,809 500,000 Crown Point Capital Co., 1.060%, due 10/20/03 499,720 600,000 Edison Asset Securitization, 1.070%, due 11/03/03 599,412 500,000 Edison Asset Securitization, 1.140%, due 11/17/03 499,256 500,000 I Goldman Sachs Group, Inc., 1.130%, due 12/04/03 500,000 500,000 I Goldman Sachs Group, Inc., 1.140%, due 12/12/03 500,000 500,000 Jupiter Securitization Corp., 1.070%, due 10/08/03 499,896 1,000,000 I M-MKT Trust Series A-1, 1.270%, due 10/08/04 1,000,000 500,000 Old Line Funding Corp., 1.050%, due 10/02/03 499,985 500,000 Old Line Funding Corp., 1.060%, due 10/06/03 499,926 500,000 St. Germain Holdings Ltd., 1.060%, due 10/10/03 499,868 500,000 St. Germain Holdings Ltd., 1.080%, due 10/01/03 500,000 500,000 St. Germain Holdings Ltd., 1.080%, due 10/16/03 499,775 500,000 Thunder Bay Funding, Inc., 1.050%, due 10/15/03 499,796 500,000 Thunder Bay Funding, Inc., 1.060%, due 10/28/03 499,603 500,000 Thunder Bay Funding, Inc., 1.070%, due 10/07/03 499,911 500,000 Thunder Bay Funding, Inc., 1.110%, due 10/14/03 499,800 850,000 Verizon Global Funding, 1.230%, due 10/14/04 850,000 500,000 Yorktown Capital LLC, 1.050%, due 10/02/03 499,985 --------------- Total Commercial Paper (Cost $14,244,974) 14,244,974 ---------------
See Accompanying Notes to Financial Statements 98 ING Lexington Money Market Trust(1) PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 12.0% $ 400,000 Federal Home Loan Bank, 1.500%, due 09/03/04 $ 400,000 600,000 Federal Home Loan Bank, 5.375%, due 01/05/04 606,617 500,000 Federal National Mortgage Association, 5.125%, due 02/13/04 507,021 600,000 Federal National Mortgage Association, 1.200%, due 08/23/04 600,000 500,000 Federal National Mortgage Association, 1.250%, due 07/07/04 500,000 500,000 Federal National Mortgage Association, 1.250%, due 08/27/04 500,000 500,000 Federal National Mortgage Association, 1.300%, due 08/30/04 500,000 650,000 Federal National Mortgage Association, 1.450%, due 09/14/04 650,000 900,000 Freddie Mac, 3.250%, due 01/15/04 905,136 500,000 Student Loan Marketing Association, 1.023%, due 11/20/03 499,977 --------------- Total U.S. Government Agency Obligations (Cost $5,668,751) 5,668,751 --------------- CERTIFICATES OF DEPOSIT: 6.8% 500,000 @@ Canadian Imperial Bank, 1.045%, due 12/15/03 500,005 500,000 Credit Suisse First Boston, 1.045%, due 10/16/03 499,992 600,000 State Street Bank & Trust, 1.220%, due 07/06/04 600,000 500,000 Washington Mutual Bank, 1.100%, due 11/13/03 500,000 500,000 Washington Mutual Bank, 1.220%, due 11/25/03 500,000 600,000 Washington Mutual Bank, 1.290%, due 10/17/03 600,001 --------------- Total Certificates Of Deposit (Cost $3,199,998) 3,199,998 --------------- ASSET-BACKED SECURITIES: 2.6% 399,932 Chase Manhattan Auto Owner Trust, 1.060%, due 08/16/04 399,932 322,461 John Deere Owner Trust, 1.081%, due 08/13/04 322,461 500,000 Putnam Structured Product Funding, 1.140%, due 11/17/03 500,001 --------------- Total Asset Backed Securities (Cost $1,222,394) 1,222,394 --------------- REPURCHASE AGREEMENT: 5.1% $ 2,429,000 Goldman Sachs Repurchase Agreement dated 09/30/03, 1.090%, due 10/01/03, $2,429,074 to be received upon repurchase (Collateralized by $6,865,537 U.S. Treasury Bond, 0.000%, market value $2,501,870 due 05/15/22) $ 2,429,000 --------------- Total Repurchase Agreement (Cost $2,429,000) 2,429,000 --------------- TOTAL INVESTMENTS IN SECURITIES (COST $47,964,405)* 101.3% $ 47,964,405 OTHER ASSETS AND LIABILITIES-NET (1.3) (598,475) ----- --------------- NET ASSETS 100.0% $ 47,365,930 ===== ===============
* Also represents cost for income tax purposes. @@ Foreign Issuer PLC Public Limited Company I Illiquid Security (1) All securities with a maturity date greater than one year have either a variable rate, a demand feature, prerefunded, optional or mandatory put resulting in an effective maturity of one year or less. Rate shown reflects current rate.
PERCENTAGE OF INDUSTRY NET ASSETS --------------------------------------------------------------------------------------------------- Asset Backed Commercial Paper 26.7% Bank Holding Companies 7.6 Federal and Federally Sponsored Credit Agencies 11.9 Foreign Bank, Branches and Agencies 6.0 Management Services 1.8 National Commercial Banks 16.7 Personal Credit Institutions 5.5 Security Brokers And Dealers 13.3 Short-term Business Credit 0.4 Telephone Communications 6.3 Repurchase Agreement 5.1 Other Assets and Liabilities-Net (1.3) ----- NET ASSETS 100.0% =====
See Accompanying Notes to Financial Statements 99 SHAREHOLDER MEETING INFORMATION (Unaudited) A SPECIAL MEETING OF SHAREHOLDERS OF THE FUNDS WAS HELD JULY 22, 2003, AT THE OFFICES OF ING FUNDS, 7337 EAST DOUBLETREE RANCH ROAD, SCOTTSDALE, AZ 85258. A BRIEF DESCRIPTION OF EACH MATTER VOTED UPON AS WELL AS THE RESULTS ARE OUTLINED BELOW: 1. To approve a Sub-Advisory Agreement between ING Investments, LLC and Aeltus Investment Management, Inc., with no change in the Adviser, the portfolio manager(s), or the overall management fee paid by the Fund. 3. To transact such other business, not currently contemplated, that may properly come before the Special Meeting or any adjournment(s) thereof in the discretion of the proxies or their substitutes.
SHARES VOTED AGAINST OR SHARES BROKER TOTAL SHARES PROPOSAL SHARES VOTED FOR WITHHELD ABSTAINED NON-VOTE VOTED -------- ---------------- ------------ --------- -------- ------------ ING GNMA Income Fund 1 78,774,693 1,440,831 2,032,327 -- 82,247,851 ING High Yield Opportunity Fund 1 44,274,656 691,453 904,261 -- 45,870,370 ING Strategic Bond Fund 1 3,660,225 88,691 60,347 -- 3,809,263 ING Money Market Fund 1 42,187,033 353,246 638,918 -- 43,179,197 ING Lexington Money Market Trust 1 22,746,719 1,122,465 1,899,996 -- 25,769,180 ING GNMA Income Fund 3 78,000,056 1,897,914 2,349,881 -- 82,247,851 ING High Yield Opportunity Fund 3 43,993,421 921,466 955,483 -- 45,870,370 ING Strategic Bond Fund 3 3,686,231 63,037 59,995 -- 3,809,263 ING Money Market Fund 3 41,846,993 518,632 813,572 -- 43,179,197 ING Lexington Money Market Trust 3 22,388,083 878,281 2,502,816 -- 25,769,180
100 TRUSTEE AND OFFICER INFORMATION (Unaudited) The business and affairs of the Funds are managed under the direction of the Funds' Board of Trustees. A trustee who is not an interested person of the Fund, as defined in the 1940 Act, is an independent trustee ("Independent Trustee"). The Trustees of the Funds are listed below. The Statement of Additional Information includes additional information about trustees of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH THE TIME DURING THE OVERSEEN HELD BY AND AGE REGISTRANT(S) SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------------------------------ ------------- ---------- -------------------------- ------------- -------------------------- NON-INTERESTED TRUSTEES: Paul S. Doherty(2) Trustee February Mr. Doherty is President 116 None 7337 E. Doubletree Ranch Rd. 2001 - and Partner, Doherty, Scottsdale, Arizona 85258 present Wallace, Pillsbury and Born: 1934 Murphy, P.C., Attorneys (1996 - Present); Director, Tambrands, Inc. (1993 - 1998); and Trustee of each of the funds managed by Northstar Investment Management Corporation (1993 - 1999). J. Michael Earley(3) Trustee February President and Chief 116 None 7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, Bankers Scottsdale, Arizona 85258 present Trust Company, N.A. (1992 Born: 1945 - Present). R. Barbara Gitenstein(2) Trustee February President, College of New 116 None 7337 E. Doubletree Ranch Rd. 2002 - Jersey (1999 - Present). Scottsdale, Arizona 85258 present Formerly, Executive Vice Born: 1948 President and Provost, Drake University (1992 - 1998). Walter H. May(2) Trustee February Retired. Formerly, 116 Best Prep Charity 7337 E. Doubletree Ranch Rd. 2001 - Managing Director and (1991 - Present). Scottsdale, Arizona 85258 present Director of Marketing, Born: 1936 Piper Jaffray, Inc.; Trustee of each of the funds managed by Northstar Investment Management Corporation (1996 - 1999).
101 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH THE TIME DURING THE OVERSEEN HELD BY AND AGE REGISTRANT(S) SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------------------------------ ------------- ----------- -------------------------- ------------- -------------------------- David W.C. Putnam(3) Trustee February President and Director, 116 Director of F.L. Putnam 7337 E. Doubletree Ranch Rd. 2001 - F.L. Putnam Securities Securities company, Inc. Scottsdale, Arizona 85258 present Company, Inc. and its (June 1978 to Present); Born: 1939 affiliates; President, F.L. Putnam Investment Secretary and Trustee, The Managment Company Principled Equity Market (December 2001 to Fund. Formerly, Trustee, Present); Asian Amerrican Trust Realty Trust Bank and Trust company (December Corp.; Anchor (June 1992 to Persent); Investment Trust; Bow 2000 and Notre Dame Health Care - Present); Ridge Mining Center (1991 to Present). Company and each of the He is also a Trustee of F.L. Putnam funds managed The Principiled Equity by Northstar Investment Market Fund (November 1996 Foundation Management to Present); Anchor Corporation (1994 - 1999). International Bond (December 2000 - Present); Progressive Capital Accumulation Trust (August 1998 - Present); Principled Equity Market Fund (November 1996 - Present), Mercy Endowment Foundation (1995 - Present); Director, F.L. Putnam Investment Management Company (December 2001 - Present); Asian American Bank and Trust Company (June 1992 - Present); and Notre Dame Health Care Center (1991 - Present) F.L. Putnam Securities Company, Inc. (June 1978 - Present); and an Honorary Trustee, Mercy Hospital (1973 - Present). Blaine E. Rieke(3) Trustee October General Partner, Huntington 116 Morgan Chase Trust Co. 7337 E. Doubletree Ranch Rd. 1998 - Partners (January 1997 - (January 1998 - Present). Scottsdale, Arizona 85258 present Present). Chairman of the Born: 1933 Board and Trustee of each of the funds managed by ING Investment Management Co. LLC (November 1998 - February 2001). Roger B. Vincent(3) Trustee February President, Springwell 116 Director, AmeriGas 7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - Propane, Inc. (1998 - Scottsdale, Arizona 85258 present Present). Formerly, Present). Born: 1945 Director Tatham Offshore, Inc. (1996 - 2000).
102 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH THE TIME DURING THE OVERSEEN HELD BY AND AGE REGISTRANT(S) SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------------------------------ ------------- ----------- -------------------------- ------------- -------------------------- Richard A. Wedemeyer(3) Trustee October Retired. Mr. Wedemeyer was 116 Touchstone Consulting 7337 E. Doubletree Ranch Rd. 1998 - formerly Vice President - Group (1997 - Present). Scottsdale, Arizona 85258 present Finance and Born: 1936 Administration, Channel Corporation (June 1996 - April 2002). Formerly Trustee, First Choice Funds (1997 - 2001); and of each of the funds managed by ING Investment Management Co. LLC (1998 - 2001). INTERESTED TRUSTEES: Thomas J. McInerney(4) Trustee February Chief Executive Officer, 170 Director, Hemisphere, Inc. 7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial (May 2003 - Present). Scottsdale, Arizona 85258 present Services (September 2001 Director, Equitable Life Born: 1956 to present); General Insurance Co., Golden Manager and Chief American Life Insurance Executive Officer, ING Co., Life Insurance U.S. Worksite Financial Company of Georgia, Services (December 2000 to Midwestern United Life present); Member, ING Insurance Co., ReliaStar Americas Executive Life Insurance Co., Committee (2001 to Security Life of Denver, present); President, Chief Security Connecticut Life Executive Officer and Insurance Co., Southland Director of Northern Life Life Insurance Co., USG Insurance Company (2001 to Annuity and Life Company present), ING Aeltus and United Life and Holding Company, Inc. Annuity Insurance Co. Inc. (2000 to present), ING (March 2001 - Present); Retail Holding Company Trustee, Ameribest Life (1998 to present). Insurance Co., (2001 - Formerly, ING Life 2003); Trustee, First Insurance and Annuity Columbine Life Insurance Company (1997 to November Co., (2001 - 2002); Member 2002), ING Retirement of the Board, National Holdings, Inc. (1997 to Commission on Retirement March 2003); General Policy. Competitiveness Manager and Chief and Technology of Executive Officer, ING Connecticut, Connecticut Worksite Division Business and Industry (December 2000 to October Association, Bushnell; 2001), President, ING-SCI, Connecticut Forum; Metro Inc. (August 1997 to Hartford Chamber of December 2000); President, Commerce and is Chairman, Aetna Financial Services Concerned Citzens for (August 1997 to December Effective Government. 2000); and has held a variety of line and corporate staff positions since 1978.
103 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH THE TIME DURING THE OVERSEEN HELD BY AND AGE REGISTRANT(S) SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------------------------------ ------------- ----------- -------------------------- ------------- -------------------------- John G. Turner(5) Trustee February Chairman, Hillcrest 116 Director, Hormel Foods 7337 E. Doubletree Ranch Rd. 2001 - Capital Partners (May 2002 Corporation (March 2000 - Scottsdale, Arizona 85258 present - Present); President, Present); Shopko Stores, Born: 1939 Turner Investment Company Inc. (August 1999 - (January 2002 - Present). Present); and M.A. Mr. Turner was formerly Mortenson Company (March Vice Chairman of ING 2002 - Present). Americas (2000 - 2002); Chairman and Chief Executive Officer of ReliaStar Financial Corp.
---------- (1) Trustees serve until their successors are duly elected and qualified, subject to the Board's retirement policy. (2) Valuation Committee member. (3) Audit Committee member. (4) Mr. McInerney is an "interested person," as defined by the 1940 Act, because of his affiliation with ING U.S. Financial Services and ING U.S. Worksite Financial Services, both affiliates of ING Investments. (5) Mr. Turner is an "interested person," as defined by the 1940 Act, because of his affiliation with ING Americas, an affiliate of ING Investments. 104 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ----------------------------- --------------------------------- -------------------------- ----------------------------------- James M. Hennessy President and Chief Executive February 2001 - present President and Chief Executive 7337 E. Doubletree Ranch Rd. Officer Officer of ING Capital Corporation, Scottsdale, Arizona 85258 LLC, ING Funds Services, LLC, ING Born: 1949 Chief Operating Officer February 2002 - present Advisors, Inc., ING Investments, LLC, Lexington Funds Distributor, Senior Executive Vice President October 2000 - February Inc., Express America T.C. Inc. and and Secretary 2001 EAMC Liquidation Corp. (since December 2001); Executive Vice President and Chief Operating Officer of ING Funds Distributor, LLC (since June 2000). Michael J. Roland Executive Vice President and February 2002 - present Executive Vice President, Chief 7337 E. Doubletree Ranch Rd. Assistant Secretary Financial Officer and Treasurer of Scottsdale, Arizona 85258 ING Funds Services, LLC, ING Funds Born: 1958 Principal Financial Officer October 2000 - present Distributor, LLC, ING Advisors, Inc., ING Investments, LLC Senior Vice President October 2000 - February (December 2001 to present), 2002 Lexington Funds Distributor, Inc., Express America T.C. Inc. and EAMC Liquidation Corp. (since December 2001). Formerly, Executive Vice President, Chief Financial Officer and Treasurer of ING Quantitative Management, Inc. (December 2001 to October 2002); and Senior Vice President, ING Funds Services, LLC, ING Investments, LLC, and ING Funds Distributor, LLC (June 1998 to December 2001). Stanley D. Vyner Executive Vice President October 2000 - present Executive Vice President of ING 7337 E. Doubletree Ranch Rd. Advisors, Inc. and ING Investments, Scottsdale, Arizona 85258 LLC (July 2000 to present) and Born: 1950 Chief Investment Officer of the International Portfolios, ING Investments, LLC (July 1996 to present). Formerly, President and Chief Executive Officer of ING Investments, LLC (August 1996 to August 2000). Robert S. Naka Senior Vice President and October 2000 - present Senior Vice President and Assistant 7337 E. Doubletree Ranch Rd. Assistant Secretary Secretary of ING Funds Services, Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC, Born: 1963 ING Advisors, Inc., ING Investments, LLC (October 2001 to present) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Senior Vice President and Assistant Secretary for ING Quantitative Management, Inc. (October 2001 to October 2002); Vice President, ING Investments, LLC (April 1997 to October 1999), and ING Funds Services, LLC (February 1997 to August 1999). Kimberly A. Anderson Vice President February 2001 - present Vice President and Assistant 7337 E. Doubletree Ranch Rd. Secretary of ING Funds Services, Scottsdale, Arizona 85258 Secretary February 2001 - August LLC, ING Funds Distributor, LLC, Born: 1964 2003 ING Advisors, Inc., ING Investments, LLC (since October 2001) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Vice President for ING Quantitative Management, Inc. (October 2001 to October 2002); Assistant Vice President of ING Funds Services, LLC (November 1999 to January 2001) and has held various other positions with ING Funds Services, LLC for more than the last five years.
105 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ----------------------------- --------------------------------- -------------------------- ----------------------------------- Robyn L. Ichilov Vice President October 2000 - present Vice President of ING Funds 7337 E. Doubletree Ranch Rd. Services, LLC (October 2001 to Scottsdale, Arizona 85258 Treasurer March 2001 - present present) and ING Investments, LLC Born: 1967 (August 1997 to present); Accounting Manager, ING Investments, LLC (November 1995 to present). J. David Greenwald Vice President August 2003 - present Vice President of Mutual Fund 7337 E. Doubletree Ranch Rd. Compliance of ING Funds Services, Scottsdale, Arizona 85258 LLC (May 2003 - Present). Formerly Born: 1957 Assistant Treasurer and Director of Mutual Fund Compliance and Operations of American Skandia, A Prudential Financial Company (October 1996 - May 2003). Lauren D. Bensinger Vice President February 2003 - present Vice President and Chief Compliance 7337 E. Doubletree Ranch Rd. Officer, ING Funds Distributor, Scottsdale, Arizona 85258 LLC. (July 1995 - Present); Vice Born: 1957 President (February 1996 - Present) and Chief Compliance Officer (October 2001 - Present) ING Investments, LLC; Vice President and Chief Compliance Officer, ING Advisors, Inc. (July 2000 - Present), Vice President and Chief Compliance Officer, ING Quantitative Management, Inc. (July 2000 - September 2002), and Vice President, ING Fund Services, LLC (July 1995 - Present). Theresa Kelety Secretary August 2003 - present Counsel, ING U.S. Financial 7337 E. Doubletree Ranch Rd. Services (April 2003 - Present). Scottsdale, Arizona 85258 Formerly, Senior Associate with Born: 1963 Shearman & Sterling (February 2000 - April 2003) and Associate with Sutherland Asbill & Brennan (1996 - February 2000). Todd Modic Vice President August 2003 - present Vice President of Financial 7337 E. Doubletree Ranch Rd. Reporting - Fund Accounting of ING Scottsdale, Arizona 85258 Assistant Vice President August 2001 - August 2003 Funds Services, LLC (September 2002 Born: 1967 to present). Director of Financial Reporting of ING Investments, LLC ( March 2001 to September 2002). Formerly, Director of Financial Reporting, Axient Communications, Inc. (May 2000 to January 2001) and Director of Finance, Rural/Metro Corporation (March 1995 to May 2000). Susan P. Kinens Assistant Vice President February 2003 - present Assistant Vice President and 7337 E. Doubletree Ranch Rd. and Assistant Secretary Assistant Secretary, ING Funds Scottsdale, Arizona 85258 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. Maria M. Anderson Assistant Vice President August 2001 - present Assistant Vice President of ING 7337 E. Doubletree Ranch Rd. Funds Services, LLC (since October Scottsdale, Arizona 85258 2001). Formerly, Manager of Fund Born: 1958 Accounting and Fund Compliance, ING Investments, LLC (September 1999 to November 2001); and Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 to August 1999).
---------- (1) The officers hold office until the next annual meeting of the Trustees and until their successors have been elected and qualified. 106 ING Funds Distributor, LLC offers the funds listed below. Before investing in a fund, shareholders should carefully review the fund's prospectus. Investors may obtain a copy of a prospectus of any ING Fund by calling (800) 992-0180. INTERNATIONAL EQUITY FUNDS ING Emerging Countries Fund ING Foreign Fund ING International Fund ING International Growth Fund ING International SmallCap Growth Fund ING International Value Fund ING Precious Metals Fund ING Russia Fund INTERNATIONAL GLOBAL EQUITY FUNDS ING Global Equity Dividend Fund ING Global Real Estate Fund ING Worldwide Growth Fund DOMESTIC EQUITY GROWTH FUNDS ING Growth Fund ING Growth + Value Fund ING Growth Opportunities Fund ING LargeCap Growth Fund ING MidCap Opportunities Fund ING SmallCap Opportunities Fund ING Small Company Fund ING Technology Fund ING Disciplined LargeCap Fund DOMESTIC EQUITY INDEX FUNDS ING Index Plus LargeCap Fund ING Index Plus MidCap Fund ING Index Plus SmallCap Fund DOMESTIC EQUITY VALUE FUNDS ING Financial Services Fund ING MagnaCap Fund ING Tax Efficient Equity Fund ING Value Opportunity Fund ING SmallCap Value Fund ING MidCap Value Fund DOMESTIC EQUITY GROWTH AND INCOME FUNDS ING Equity and Bond Fund ING Convertible Fund ING Real Estate Fund ING Balanced Fund ING Growth and Income Fund FIXED INCOME FUNDS ING Bond Fund ING Classic Money Market Fund* ING Government Fund ING GNMA Income Fund ING High Yield Opportunity Fund ING High Yield Bond Fund ING Intermediate Bond Fund ING Lexington Money Market Trust* ING National Tax Exempt Bond Fund ING Money Market Fund* ING Aeltus Money Market Fund* ING Strategic Bond Fund STRATEGIC ALLOCATION FUNDS ING Strategic Allocation Growth Fund ING Strategic Allocation Balanced Fund ING Strategic Allocation Income Fund LOAN PARTICIPATION FUND ING Prime Rate Trust ING Senior Income Fund * An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 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 85258-2034 1-800-334-3444 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141-6368 CUSTODIAN Bank of New York 100 Colonial Center Parkway, Suite 300 Lake Mary, FL 32746 LEGAL COUNSEL Dechert 1775 Eye Street, N.W. Washington, D.C. 20006 INDEPENDENT AUDITORS KPMG LLP 99 High Street Boston, MA 02110-2371 Prospectus containing more complete information regarding the Funds, including charges and expenses, may be obtained by calling ING Funds Distributor, LLC at 1-800-992-0180. Please read the prospectus carefully before you invest or send money. The Form N-PX (Proxy Voting Record) will be available without charge, upon request, by calling 800-992-0180 on or about August 31, 2004; and on the fund's website at www.ingfunds.com; and on the SEC's website www.sec.gov. [ING FUNDS LOGO] FIABCSAR0903-112803 SEMI-ANNUAL REPORT SEMI-ANNUAL REPORT SEPTEMBER 30, 2003 CLASSES I AND Q FIXED INCOME FUNDS ING GNMA INCOME FUND ING HIGH YIELD OPPORTUNITY FUND ING INTERMEDIATE BOND FUND ING STRATEGIC BOND FUND [GRAPHIC] [ING FUNDS LOGO] TABLE OF CONTENTS President's Letter 1 Market Perspective 3 Portfolio Managers' Reports 4 Index Descriptions 12 Statements of Assets and Liabilities 13 Statements of Operations 15 Statements of Changes in Net Assets 16 Financial Highlights 20 Notes to Financial Statements 24 Portfolios of Investments 36 Shareholder Meeting Information 55 Trustee and Officer Information 56
(THIS PAGE INTENTIONALLY LEFT BLANK) PRESIDENT'S LETTER [PHOTO OF JAMES M. HENNESSY] JAMES M. HENNESSY Dear Shareholder, What a difference a half a year can make. When writing my last letter to our shareholders -- six months ago -- it was hard to escape the sense of anxiety that many investors everywhere were experiencing. Now, less than a year later, I believe there may be a renewed sense of optimism among investors -- cautious optimism, to be sure, but optimism nonetheless. And I believe there are good, solid reasons for this improved outlook. For one, many key corporations have been reporting profits in recent months. Granted, the numbers are modest, but they have been noteworthy, consistent and credible because many of these same companies are employing stricter accounting standards following the Enron debacle. Going hand-in-hand with these upbeat figures are the improving price-to-earning ratios and improving valuations that many investors are now seeing. The reasons for renewed confidence continue. A year ago, there was much uncertainty regarding the prospect of war. Now, much of that uncertainty is behind us. Although many questions remain about the U.S.'s future role in Iraq, the speed at which Baghdad fell was unprecedented and it brought a sense of calm to many investors and triggered a positive impact on equities markets, which reacted to the news with steady growth during the summer months. And while mortgage and treasury-related sectors may have suffered in the blossoming equity market, high-yield, floating-rate loan and convertible markets remain strong enough to attract investors still squeamish about stocks. This renewed confidence has been tempered, however, by recent events and news stories concerning mutual fund trading practices, including after-hours trading and market timing. I want to clearly state that ING Funds does not condone the illegal practice of after-hours trading. In addition, it has been our long-standing policy to discourage inappropriate market timing in our funds. In fact, over the years, ING Funds has taken a variety of steps to address inappropriate fund trading activity. We were among the first fund groups to employ innovative techniques such as making extensive use of fair-value pricing for foreign securities. ING Funds believes that mutual funds are an important vehicle for individual investors, because mutual funds provide the opportunity for investment in professionally managed and monitored, diversified portfolios. As such, we consider the fair treatment of committed investors to be of the utmost importance. We continue to look for effective strategies to address fund trading issues. We hope that the increased attention this issue is now receiving will make it easier for the industry to effectively address inappropriate fund trading in the future. On behalf of everyone at ING Funds, thank you for your continued support. We look forward to helping you meet your investment goals in the future. Sincerely, /s/ James M. Hennessy James M. Hennessy President ING Funds November 15, 2003 1 (THIS PAGE INTENTIONALLY LEFT BLANK) MARKET PERSPECTIVE: SIX MONTHS ENDED SEPTEMBER 30, 2003 This was a remarkable six months for the world's financial markets. The quick end to major conflict in Iraq meant that risk premia(1) could and did decline across all major asset classes. Equities and the riskier sectors of the fixed income markets soared. The less risky parts of the bond market went on a wild ride and ended up not very far from where they started. In the FIXED INCOME MARKETS, post-war relief predictably reduced the risk premia in high yield bonds. They are, after all, high yield because there is significant chance that investors won't get their principal back. A more stable business environment reduces that risk. The Credit Suisse First Boston (CSFB) High Yield Bond Index gained 13.1% during the six months ended September 30th. Less risky bonds did not perform as well. The Lehman Brothers U.S. Credit Index, measuring returns on investment grade bonds, rose by 4.7%, while as a whole government bonds were hard pressed to return their coupons. The Lehman Brothers Government Bond Index rose just 1.7%. This, however, conceals the tumult in high-grade bond markets during the period, when almost stock-like volatility was seen. Much of this can be attributed to Federal Reserve Board's Federal Open Market Committee ("FOMC" or the "Fed") Chairman Alan Greenspan. In May, he moved markets by saying that the risk of deflation was small but that the Federal Reserve might even buy bonds to forestall it, and that a second half recovery was expected. This sent Treasury yields to decades-long low levels, even as stocks continued their advance. The ten-year Treasury yield had started April at 3.82%. It sank to 3.10% on June 13th. Bond yields had already come off their low points when the FOMC disappointed markets on June 25th by reducing the Fed Funds rate by only 1/4%. But, in mid-July, when Greenspan appeared to downplay the likelihood that the FOMC would buy bonds after all and presented a sanguine view of the economy, bond yields started to soar. Bond markets stabilized in August as it became clear that the slump of the previous month had been overdone. The ten-year Treasury yield peaked at 4.60%. Then in September, as new doubts emerged about the strength of the U.S. recovery, and supported by massive Treasury purchases from abroad, bonds recovered most of what they had lost. By the end of the period, stressed investors in the ten-year Treasury could reflect that for all that volatility, the yield on September 30th was 3.94%; just 12 basis points above the rate on March 31st. And, if they sought a quieter life in Treasury Bills, the price of the three-month T-Bill at September 30th was the not-so-princely yield of 0.94% per annum. World EQUITY MARKETS had their best six months in years. Global equities, as measured by the Morgan Stanley Capital International (MSCI) World Index, jumped 22.7%. In the U.S., the Standard & Poors (S&P) 500 Index rose 18.5%. In tune with the theme of shrinking risk premia, small cap stocks did much better than mid cap stocks which in turn substantially outperformed large cap stocks. To justify this there were increasingly encouraging signs. Second quarter Gross Domestic Product (GDP) growth estimates were revised up to 3.3%, within which corporate profits from current production rose 14.3% from the same quarter in 2002. Spending on equipment and software, a proxy for business investment, rose by 8.3% (quarter over quarter at an annualized rate). Productivity growth was estimated at the remarkable rate of 6.8%. And yet where were the jobs? The September unemployment report showed another 93,000 decline in payrolls. The nagging concern is that while growth, strong productivity and expanding profit margins are eminently desirable, without jobs growth the recovery must surely fade as consumers' incomes cannot rise fast enough to sustain it and those who have a job feel less secure and confident about spending. In CURRENCIES, the euro and the yen advanced to levels against the dollar not seen in years, as the belief took hold that the U.S.'s burgeoning trade and budget deficits, both approaching 5% of GDP, were unsustainable. ---------- (1) Risk premium (plural -- "premia") is the expected additional return required by investors for securities that are perceived to be riskier than safer investments. See accompanying index descriptions on page 12. 3 ING GNMA INCOME FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT TEAM: Denis P. Jamison, CFA and Roseann G. McCarthy, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING GNMA Income Fund (the "Fund") seeks to generate a high level of current income, consistent with liquidity and safety of principal, through investment primarily in Government National Mortgage Association ("Ginnie Mae", "GNMA") mortgage-backed securities (also known as GNMA Certificates) that are guaranteed as to the timely payment of principal and interest by the U.S. Government. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class Q shares provided a total return of 1.44% compared to 1.18% for the Lehman Brothers Mortgage-Backed Securities Index ("Lehman Mortgage Index"). PORTFOLIO SPECIFICS: The Fund has a large percentage of its assets invested in call-protected, multi-family mortgages, and active duration management often gives the Fund exposure to thirty-year U.S. Treasury bonds. Accordingly, the Fund tends to be more sensitive to interest rate changes than other GNMA-oriented mutual funds. That was apparent in the results for the six months ended September 30th. From mid-April to mid-June, ten-year bond yields tumbled about 4% to 3.1%. This was actually bad news for most mortgage investors because borrowers increasingly refinanced their loans. These prepayments limited the appreciation of mortgage securities and reduced investment income. With our emphasis on securities with reduced call risk, the Fund outperformance continued. For the three months ended June 30th, the Fund out performed the Lehman Mortgage Index by forty basis points. The market, however, reversed quickly in late June when it became clear that the Federal Reserve wasn't going to support the bond market bubble. Yields started to climb and the ten-year U.S. Treasury bonds reached 4.6% by early September. Unfortunately, we added mortgage exposure in early July and despite our efforts to reduce interest rate sensitivity later in the quarter, we couldn't salvage the return. We under performed our benchmark by about twenty basis points in the three months ended September 30, 2003, and the losses would have been a lot worse except for a September bond rally. However, for the six month period as a whole we outperformed the benchmark, especially due to a September bond market rally. MARKET OUTLOOK: Bond price volatility increased during the September quarter. Mortgage investors accounted for some of the increase as they bought and sold U.S. Treasury securities to offset the swings in portfolio maturity caused by changes in prepayments. However, investors also were reacting to uncertainties regarding the pace of economic expansion, the value of the U.S. dollar, and the massive increase in the Federal budget deficit. These will likely remain concerns in the coming months. So, we anticipate continued wide price swings for bonds; this will create both risks and opportunities. The Fund closed the quarter with 6.5% of its assets in short-term U.S. Treasury securities. If yields spike higher and investor sentiment for fixed income securities weakens, we will likely use that liquidity to purchase longer-term bonds and increase the interest rate sensitivity of the portfolio. And this process will likely be reversed if the market rallies. We do not anticipate any significant trend toward either higher or lower yields developing during the next six months. Caution, flexibility, and liquidity may be the keys to good relative performance in such a trendless, volatile market, and your Fund appears to be properly positioned for this environment. 4 Portfolio Managers' Report ING GNMA INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 ---------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS I OF CLASS Q 1 YEAR 01/07/02 02/26/01 ------ --------------- --------------- Class I 3.14% 7.31% -- Class Q 2.88% -- 7.00% Lehman Brothers Mortgage-Backed Securities Index 3.50% 6.17%(1) 6.50%(2)
The table above illustrates the total return of ING GNMA Income Fund against the Lehman Brothers Mortgage-Backed Securities 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 performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (1) Since inception performance for index is shown from 01/01/02. (2) Since inception performance for index is shown from 03/01/01. PRINCIPAL RISK FACTOR(S): The market value of the Fund's portfolio securities and the Fund's shares are neither insured or guaranteed by the U.S. Government. GNMA certificates in the Fund's portfolio are subject to early prepayment. Net Asset Value and Yield fluctuate. The value of the Fund's investment may fall when interest rates rise. This Fund may be particularly sensitive to interest rates because it primarily invests in U.S. Government securities. Debt securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more voatile then debt securities with shorter durations. Although FNMA and FHLMC are government sponsored enterprises, their securities are not backed by the full faith and credit of the U.S. Government. Consequently, there are somewhat greater credit risks involved with investing in securities issued by those entities. See accompanying index descriptions on page 12. 5 ING HIGH YIELD OPPORTUNITY FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Greg Jacobs, CFA and Kurt Kringelis, CFA, CPA, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING High Yield Opportunity Fund (the "Fund") seeks a high level of current income and capital growth primarily through investments in high yield (high risk) debt securities, which are commonly referred to as "Junk Bonds", including those in the lowest ratings. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class Q shares provided a total return of 7.95% compared to 13.07% for the Credit Suisse First Boston High Yield Bond Index ("CSFB High Yield Bond Index"). PORTFOLIO SPECIFICS: The health of the high yield bond market is often dependent on factors generally associated with equity investments. Recent economic releases have demonstrated that consumers are willing to spend their tax relief, and massive mortgage refinancing continues to have a beneficial impact on disposable incomes. A number of monthly barometers have exceeded consensus forecasts recently. Despite decreasing job contraction and the pace of layoffs, many observers remain disquieted by the slow pace of recovery, the domestic unemployment picture and poor consumer confidence. Returns for the Fund lagged the index over the last six months primarily due to the portfolio's conservative quality and sector positioning. Specifically, the Fund's underweight in CCC and lower grade securities, as well as its underweight in volatile sectors such as finance and utilities, contributed significantly to underperformance. From a fundamental standpoint, we remain constructive on the high yield market. Issuers in general have been more focused on balance sheet maintenance than financing growth plans. Many companies have taken advantage of the strong market in 2003 to refinance debt and extend scheduled maturities. As a result, we have seen the annual default rate for the high yield market drop from over 10% a year to about 5% currently. MARKET OUTLOOK: Notwithstanding the fundamental improvements and achieved returns, opportunities abound. We believe that current trends will continue over the next 6-12 months, causing further spread tightening across the market. The outlook for a stronger fourth calendar quarter is compelling especially with the consumer so willing to spend. The twin deficits -- federal and current account -- will remain challenges; and we are not optimistic on the dollar. An upward economic trajectory is becoming more apparent, but the slope and speed of improvement may be less than past recoveries. As the fundamental environment improves, we expect that the high yield market will continue to reward risk takers, and we have added exposure to lower-rated, more volatile credits. However, we have not and will not deviate from our long-term investment philosophy of building a portfolio consisting of sound fundamental credits with solid balance sheets and improving operations. Consistent with our philosophy, we will continue to be conservatively positioned compared to the benchmark, though we have taken steps to bridge the risk gap between the Fund and the benchmark. 6 Portfolio Managers' Report ING HIGH YIELD OPPORTUNITY FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 -------------------------------------------------------- SINCE INCEPTION OF CLASS Q 1 YEAR 5 YEAR 03/27/98 ------ ------ --------------- Class Q 17.68% 1.17% 0.06% Credit Suisse First Boston High Yield Bond Index 28.05% 5.81% 4.30%(1)
The table above illustrates the total return of ING High Yield Opportunity Fund against the Credit Suisse First Boston High Yield Bond 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 performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for index is shown from 04/01/98. PRINCIPAL RISK FACTOR(S): The Fund may be subject to more credit risk than other income funds because it invests in high yield (or junk bond) debt securities, which are considered predominately speculative with respect to the issuer's continuing ability to meet interest and principal payments. This is especially true during periods of economic uncertainty or economic downturns. The value of the Fund's investments may fall when interest rates rise. Debt securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than debt securities with shorter durations. High yield bonds carry particular market risks and may experience greater volatility and may be less liquid than higher quality investments. Foreign investing and emerging markets do 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. Investment in small-capitalization companies involves greater risk than is customarily associated with larger, more established companies. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Investment in small-capitalization companies involves greater risk than is customarily associated with larger, more-established companies. The securities may have limited market stability and may be subject to more erratic market movements than securities of larger, more established companies or the market averages in general. See accompanying index descriptions on page 12. 7 ING INTERMEDIATE BOND FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT: A team of investment professionals led by James B. Kauffmann, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING Intermediate Bond Fund (the "Fund") seeks to provide investors with a high level of current income, consistent with the preservation of capital and liquidity by investing at least 80% of its assets in investment grade debt securities. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class I shares provided a total return of 2.86% compared to 2.35% for the Lehman Brothers Aggregate Bond Index. PORTFOLIO SPECIFICS: Our investment process seeks to outperform the Lehman Brothers Aggregate Bond Index by emphasizing bond categories we believe are attractive in terms of relative value and by selecting specific bonds that we believe are the best opportunities in each category. Over the six-month period, we tended to favor bonds issued by corporations, for example industrial, financial and utility bonds, and also bonds supported by pools of mortgages on real estate of various kinds. From March 31, 2003 through September 30, 2003 the bond market produced positive returns each month except June and July. The Fund generated its best return compared to the Index in April, primarily because corporate bonds were the best performing category, the Fund had an above-benchmark allocation to them, and the bonds we owned produced better returns than the average for the corporate bond sector. After reaching forty-five year lows early in June, bond yields abruptly reversed direction and climbed over 100 basis points (based on the ten-year U.S. Treasury note), leaving July with the worst monthly decline in bond market values in several years. In fact, July witnessed one of the worst bond routs in memory, and it was the only month in which the Fund did not outperform the Index. Hedging in the mortgage market, confusing announcements from the Federal Reserve Board, and positive economic releases together motivated investors to sell bonds and invest elsewhere. Our process seldom leads us to make major adjustments based on the outlook for interest rates. Accordingly, the Fund's modest underperformance in July, when rates climbed sharply, was solely due to the Fund's positioning in sectors and securities, and not a consequence of any attempt to forecast rates. In the third calendar quarter overall, lower risk issues lagged behind as buyers scrambled to add yield and became more comfortable with the macro economic outlook. The bond groups we follow closely included, Agency bonds, which posted a -0.35% return relative to similar U.S. Treasuries, following a summer full of negative headlines, and mortgage-backed securities which sagged as well, -1.19% during the quarter. On the other hand, credit-sensitive bonds had positive excess returns, as risk aversion seemed to diminish. Industrials posted 0.89%, financials posted 0.68%, and, despite a massive power blackout in the northeast and mid-west, utilities were up 0.38% (all compared to similar U.S. Treasuries). In general, the Fund benefited from a modest overweight to credit sensitive bonds -- especially lower rated issues. In particular, our investment in high yield bonds (issued by corporations judged to have relatively high credit risk) and emerging market debt (bonds issued in developing market countries) produced strong returns. Both sectors' returns are well into double digits calendar year-to-date, and enhanced the Fund's performance over the entire reporting period. Some deft trading in mortgage-backed securities and Agency bonds also added value. MARKET OUTLOOK: We believe that tax cuts, reduced corporate borrowing costs, and negative real short rates are pushing the economy forward. Most domestic economic measures are improving with the exception of unemployment, and near-term prospects for inflationary problems remain muted. In our view, the outlook going forward is compelling, especially with the consumer so willing to spend. The twin deficits -- federal and current account -- will remain challenges; and we are not optimistic on the dollar. Tactically, we are overweight home and commercial mortgage-backed bonds, asset-backed securities, and longer-dated corporate bonds, as well as high yield and emerging market debt. 8 Portfolio Managers' Report ING INTERMEDIATE BOND FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 ---------------------------------------- SINCE INCEPTION 1 YEAR 01/08/02 ------ --------------- Class I 6.28% 8.70% Lehman Brothers Aggregate Bond Index 5.41% 8.00%(1)
The table above illustrates the total return of ING Intermediate Bond Fund against the Lehman Brothers Aggregate Bond 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 performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for index is shown from 01/01/02. PRINCIPAL RISK FACTOR(S): Exposure to financial, market, prepayment and interst rate risks. The value of an investment in the Fund is not guaranteed and will fluctuate. Higher yeilding bonds are subject to greater volatility and credit risks. The Fund invests in securities guaranteed by the U.S. Government as to timely payment of interest and principal, but Fund shares are not insured or guaranteed. Bonds have fixed principal and return if held to maturity, but may fluctuate in the interim. The principal risks of investing in the Fund are those generally attributable to bond investing, including increases in interest rates. Generally, when interest rates rise, bond prices fall. Bonds with longer maturities tend to be more sensitive to changes in interest rates. International investing involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties and differences in accounting standards. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Derivatives are subject to 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 Fund. See accompanying index descriptions on page 12. 9 ING STRATEGIC BOND FUND Portfolio Managers' Report PORTFOLIO MANAGEMENT: A team of the Sub-Adviser's investment professionals led by James B. Kaufmann, Aeltus Investment Management, Inc. -- the Sub-Adviser. GOAL: The ING Strategic Bond Fund (the "Fund") seeks maximum total return by investing primarily in debt securities issued by U.S. and foreign entities, as well as U.S. and foreign governments and their agencies and instrumentalities, that are rated investment grade by a nationally recognized statistical rating agency, or of comparable quality if unrated. PERFORMANCE: For the six months ended September 30, 2003, the Fund's class Q shares provided a total return of 3.36% compared to the Lehman Brothers Aggregate Bond Index, which returned 2.35% for the same period. PORTFOLIO SPECIFICS: Our investment process seeks to outperform the Lehman Brothers Aggregate Bond Index by emphasizing bond categories we believe are attractive in terms of relative value and by selecting specific bonds that we believe are the best opportunities in each category. Over the six-month period, we tended to favor bonds issued by corporations, for example industrial, financial and utility bonds, and also bonds supported by pools of mortgages on real estate of various kinds. From March 31, 2003 through September 30, 2003 the bond market produced positive returns each month except June and July. The Fund generated its best return compared to the Index in April, primarily because corporate bonds were the best performing category, the Fund had an above-benchmark allocation to them, and the bonds we owned produced better returns than the average for the corporate bond sector. After reaching forty-five year lows early in June, bond yields abruptly reversed direction and climbed over 100 basis points (based on the ten-year U.S. Treasury note), leaving July with the worst monthly decline in bond market values in several years. In fact, July witnessed one of the worst bond routs in memory, and it was the only month in which the Fund did not outperform the Index. Hedging in the mortgage market, confusing announcements from the Federal Reserve Board, and positive economic releases together motivated investors to sell bonds and invest elsewhere. Our process seldom leads us to make major adjustments based on the outlook for interest rates. Accordingly, the Fund's modest underperformance in July, when rates climbed sharply, was solely due to the Fund's positioning in sectors and securities, and not a consequence of any attempt to forecast rates. In the third calendar quarter overall, lower-risk issues lagged behind as buyers scrambled to add yield and became more comfortable with the macro economic outlook. The bond groups we follow closely, Agency bonds, posted a -0.35% return relative to similar U.S. Treasuries, which following a summer full of negative headlines, and mortgage-backed securities which sagged as well, -1.19% during the quarter. On the other hand, credit-sensitive bonds had positive excess returns, as risk aversion seemed to diminish. Industrials posted 0.89%, financials posted 0.68%, and despite a massive power blackout in the northeast and mid-west, utilities were up 0.38% (all compared to similar U.S. Treasuries). In general, the Fund benefited from a modest overweight to credit sensitive bonds -- especially lower rated issues. In particular, our investment in high yield bonds (issued by corporations judged to have relatively high credit risk) and emerging market debt (bonds issued in developing market countries) produced strong returns. Both sectors' returns are well into double digits calendar year-to-date, and enhanced the portfolio's performance over the entire reporting period. Some deft trading in mortgage-backed securities and Agency bonds also added value. MARKET OUTLOOK: We believe that tax cuts, reduced corporate borrowing costs, and negative real short rates are pushing the economy forward. Most domestic economic measures are improving with the exception of unemployment, and near-term prospects for inflationary problems remain muted. In our view, the outlook going forward is compelling, especially with the consumer so willing to spend. The twin deficits -- federal and current account -- will remain challenges; and we are not optimistic on the dollar. Tactically, we are overweight home and commercial mortgage-backed bonds, asset-backed securities, and longer-dated corporate bonds, as well as high yield and emerging market debt. 10 Portfolio Managers' Report ING STRATEGIC BOND FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED SEPTEMBER 30, 2003 ---------------------------------------- SINCE INCEPTION 1 YEAR 5 YEAR 7/27/98 ------ ------ --------------- Class Q 8.11% 3.88% 4.22% Lehman Brothers Aggregate Bond Index 5.41% 6.63% 7.22%(1)
The table above illustrates the total return of ING Strategic Bond Fund against the Lehman Brothers Aggregate Bond 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 performance table does not reflect the deduction of taxes that a shareholder will pay on Fund distributions or the redemption of Fund shares. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Since inception performance for index is shown from 08/01/98. PRINCIPAL RISK FACTOR(S): High yield bonds have exposure to financial, market and interest rate risks. High yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio, and in some cases, the lower market prices for those instruments. The Fund's investments in mortgage-related securities may entail prepayment risk. The Fund may invest up to 30% of its total assets in securities payable in foriegn currencies. International investing does pose special risks, including currency fluctuation and political risks not found in domestic investments. High yield securities may be less liquid than higher quality investments. The Fund could lose money if it cannot sell a secruity at the time and price that would be most beneficial to the Fund. Derivatives are subject to the risk of changes in the market 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 Fund. See accompanying index descriptions on page 12. 11 INDEX DESCRIPTIONS THE CREDIT SUISSE FIRST BOSTON HIGH YIELD BOND INDEX serves as a benchmark to evaluate the performance of low quality bonds. Low quality is defined as those bonds in the range from BBB to CCC and defaults. THE LEHMAN BROTHERS AGGREGATE BOND INDEX is a widely recognized, unmanaged index of publicly issued investment grade U.S. Government, mortgage-backed, asset-backed and corporate debt securities. THE LEHMAN BROTHERS GOVERNMENT BOND INDEX is an index made up of the Treasury Bond Index and the Agency Bond Index as well as the 1-3 Year Government Index and the 20+ Year Treasury Index. THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is an unmanaged index composed of fixed income security mortgage pools sponsored by GNMA, FNMA and FHLMC, including GNMA Graduated Payment Mortgages. THE LEHMAN BROTHERS U.S. CREDIT INDEX includes investment grade bonds issued by corporations and non-corporate entities. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an unmanaged index that measures the performance of over 1,400 securities listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand and the Far East. THE STANDARD & POORS 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. All indices are unmanaged. An investor cannot invest directly in an index. 12 STATEMENTS OF ASSETS AND LIABILITIES as of September 30, 2003 (Unaudited)
ING ING ING ING HIGH YIELD INTERMEDIATE STRATEGIC GNMA INCOME OPPORTUNITY BOND BOND FUND FUND FUND FUND -------------- -------------- -------------- -------------- ASSETS: Investments in securities at value* $ 843,124,561 $ 299,092,061 $ 373,571,405 $ 44,959,770 Short-term investments at amortized cost -- 7,261,000 12,634,000 9,050,000 Cash 404,959 778,977 -- 7,237 Receivables: Investment securities sold -- 640,575 43,744,094 5,502,122 Fund shares sold 517,672 212,115 1,071,712 27,279 Dividends and interest 3,915,629 7,498,567 2,364,897 357,341 Other investments -- 82,978,167 71,635,383 7,753,044 Prepaid expenses 69,256 69,998 32,882 34,898 Reimbursement due from manager -- -- 2,005 2,789 -------------- -------------- -------------- -------------- Total assets 848,032,077 $ 398,531,460 $ 505,056,378 $ 67,694,480 -------------- -------------- -------------- -------------- LIABILITIES: Payable for investment securities purchased 1,040,827 1,406,650 101,369,045 12,700,783 Payable for fund shares redeemed 413,821 1,173,772 358,494 64,181 Income distribution payable -- 1,421,474 786,367 -- Payable upon return of securities loaned -- 82,978,167 71,635,383 7,753,044 Payable to affiliates 715,354 409,318 303,946 39,969 Payable to custodian -- -- 155,520 -- Payable for trustee fees 47,233 12,838 1,013 5,635 Other accrued expenses and liabilities 539,660 363,632 136,126 165,080 -------------- -------------- -------------- -------------- Total liabilities 2,756,895 87,765,851 174,745,894 20,728,692 -------------- -------------- -------------- -------------- NET ASSETS $ 845,275,182 $ 310,765,609 $ 330,310,484 $ 46,965,788 ============== ============== ============== ============== NET ASSETS WERE COMPRISED OF: Paid-in capital $ 822,679,957 $ 780,359,904 $ 321,181,852 $ 57,414,336 Undistributed net investment income (accumulated net investment loss) 4,995,837 (6,382,367) 390,371 (108,578) Accumulated net realized gain (loss) on investments and foreign currencies (14,898,286) (431,430,648) 3,823,574 (10,786,814) Net unrealized appreciation (depreciation) of investments and foreign currencies 32,497,674 (31,781,280) 4,914,687 446,844 -------------- -------------- -------------- -------------- NET ASSETS $ 845,275,182 $ 310,765,609 $ 330,310,484 $ 46,965,788 ============== ============== ============== ============== * Cost of securities $ 810,626,887 $ 330,873,783 $ 368,656,718 $ 44,512,926
See Accompanying Notes to Financial Statements 13 STATEMENTS OF ASSETS AND LIABILITIES as of September 30, 2003 (Unaudited)
ING ING ING ING HIGH YIELD INTERMEDIATE STRATEGIC GNMA INCOME OPPORTUNITY BOND BOND FUND FUND FUND FUND -------------- -------------- -------------- -------------- CLASS A: Net Assets $ 615,775,686 $ 90,696,180 $ 184,329,456 $ 30,255,617 Shares authorized unlimited unlimited unlimited unlimited Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 69,121,800 13,137,554 17,351,942 2,669,979 Net asset value and redemption price per share $ 8.91 $ 6.90 $ 10.62 $ 11.33 Maximum offering price per share (4.75%)(1) $ 9.35 $ 7.24 $ 11.15 $ 11.90 CLASS B: Net Assets $ 142,380,380 $ 191,575,361 $ 66,223,305 $ 13,144,211 Shares authorized unlimited unlimited unlimited unlimited Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 16,055,457 27,597,254 6,245,459 1,190,974 Net asset value and redemption price per share(2) $ 8.87 $ 6.94 $ 10.60 $ 11.04 Maximum offering price per share $ 8.87 $ 6.94 $ 10.60 $ 11.04 CLASS C: Net Assets $ 78,337,481 $ 25,114,873 $ 65,973,569 $ 3,470,322 Shares authorized unlimited unlimited unlimited unlimited Par value $ 0.001 $ 0.001 $ 0.001 $ 0.001 Shares outstanding 8,823,856 3,620,176 6,217,644 298,567 Net asset value and redemption price per share(2) $ 8.88 $ 6.94 $ 10.61 $ 11.62 Maximum offering price per share $ 8.88 $ 6.94 $ 10.61 $ 11.62 CLASS I: Net Assets $ 8,190,350 n/a $ 13,784,154 n/a Shares authorized unlimited n/a unlimited n/a Par value $ 0.001 n/a $ 0.001 n/a Shares outstanding 918,588 n/a 1,297,446 n/a Net asset value and redemption price per share $ 8.92 n/a $ 10.62 n/a Maximum offering price per share $ 8.92 n/a $ 10.62 n/a CLASS M: Net Assets $ 438,450 $ 3,216,991 n/a n/a Shares authorized unlimited unlimited n/a n/a Par value $ 0.001 $ 0.001 n/a n/a Shares outstanding 49,156 466,367 n/a n/a Net asset value and redemption price per share $ 8.92 $ 6.90 n/a n/a Maximum offering price per share (3.25%)(3) $ 9.22 $ 7.13 n/a n/a CLASS Q: Net Assets $ 152,835 $ 162,204 n/a $ 95,638 Shares authorized unlimited unlimited n/a unlimited Par value $ 0.001 $ 0.001 n/a $ 0.001 Shares outstanding 17,139 23,429 n/a 8,952 Net asset value and redemption price per share $ 8.92 $ 6.92 n/a $ 10.68 Maximum offering price per share $ 8.92 $ 6.92 n/a $ 10.68
---------- (1) Maximum offering price is computed at 100/95.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.75 of net asset value. On purchases of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 14 STATEMENTS OF OPERATIONS for the six months ended September 30, 2003 (Unaudited)
ING ING ING ING HIGH YIELD INTERMEDIATE STRATEGIC GNMA INCOME OPPORTUNITY BOND BOND FUND(1) FUND(1) FUND FUND -------------- -------------- -------------- -------------- INVESTMENT INCOME: Dividends $ -- $ 166,163 $ 7,072 $ 14,434* Interest 25,464,540 13,178,984 6,583,738 1,250,177 Securities lending income 116,805 12,889 10,211 1,240 -------------- -------------- -------------- -------------- Total investment income 25,581,345 13,358,036 6,601,021 1,265,851 -------------- -------------- -------------- -------------- EXPENSES: Investment management fees 2,159,348 997,546 784,868 109,522 Distribution and service fees: Class A 809,912 184,934 301,498 54,042 Class B 744,711 973,705 328,762 51,632 Class C 430,468 131,865 307,873 14,783 Class M 3,154 12,457 -- -- Class Q 220 934 -- 119 Class T 6,436 5,355 -- -- Transfer agent fees: Class A 369,169 88,597 132,390 36,580 Class B 86,228 160,226 50,572 16,316 Class C 49,841 21,646 47,497 4,671 Class I 2,112 -- 226 -- Class M 493 1,300 -- -- Class Q 46 194 -- 24 Class T 1,947 1,697 -- -- Administrative service fees 446,081 166,445 156,972 24,354 Shareholder reporting expense 126,710 91,613 22,331 11,644 Registration fees 71,133 50,085 26,722 29,915 Professional fees 64,263 81,478 16,080 6,792 Custody and accounting expense 85,886 30,515 40,251 5,940 Trustee fees 18,856 5,686 1,607 1,716 Insurance expense 7,644 3,953 925 565 Miscellaneous expense 9,461 5,911 1,998 355 -------------- -------------- -------------- -------------- Total expenses 5,494,119 3,016,142 2,220,572 368,970 -------------- -------------- -------------- -------------- Less: Net waived and reimbursed fees -- 94,043 85,791 52,817 -------------- -------------- -------------- -------------- Net expenses 5,494,119 2,922,099 2,134,781 316,153 -------------- -------------- -------------- -------------- Net investment income 20,087,226 10,435,937 4,466,240 949,698 -------------- -------------- -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND FUTURES: Net realized gain (loss) on: Investments 958,028 (5,673,866) 1,863,310 1,405,950 Foreign currencies -- -- 11,870 -- Futures -- -- (916,783) -- -------------- -------------- -------------- -------------- Net realized gain (loss) on investments and foreign currencies 958,028 (5,673,866) 958,397 1,405,950 -------------- -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) on Investments (10,656,605) 20,471,526 1,563,727 (829,192) -------------- -------------- -------------- -------------- Net realized and unrealized gain (loss) on investments, foreign currencies and futures (9,698,577) 14,797,660 2,522,124 576,758 -------------- -------------- -------------- -------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,388,649 $ 25,233,597 $ 6,988,364 $ 1,526,456 ============== ============== ============== ==============
---------- (1) Effective June 2, 2003, Class "T" shares converted into the corresponding Class "A" shares within this portfolio. * Dividends from investment in mutual fund(s) that are within the ING Family of Funds. See Accompanying Notes to Financial Statements 15 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING GNMA INCOME FUND ------------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003(1) 2003 -------------- -------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 20,087,226 $ 36,889,960 Net realized gain on investments 958,028 5,042,643 Net change in unrealized appreciation (depreciation) of investments (10,656,605) 34,018,750 -------------- -------------- Net increase in net assets resulting from operations 10,388,649 75,951,353 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (15,571,568) (29,495,907) Class B (3,051,558) (4,693,328) Class C (1,758,472) (2,537,958) Class I (207,999) (220,288) Class M (18,709) (40,111) Class Q (4,291) (10,700) Class T (101,868) (469,273) -------------- -------------- Total distributions (20,714,465) (37,467,565) -------------- -------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 198,548,726 821,729,875 Dividends reinvested 13,884,174 30,193,127 -------------- -------------- 212,432,900 851,923,002 Cost of shares redeemed (279,591,762) (633,633,432) -------------- -------------- Net increase (decrease) in net asset resulting from capital share transactions (67,158,862) 218,289,570 -------------- -------------- Net increase (decrease) in net assets (77,484,678) 256,773,358 NET ASSETS: Net assets, beginning of period 922,759,860 665,986,502 -------------- -------------- Net assets, end of period $ 845,275,182 $ 922,759,860 ============== ============== Undistributed net investment income $ 4,995,837 $ 5,623,076 ============== ==============
---------- (1) Effective June 2, 2003, Class "T" shares converted into the corresponding Class "A" shares within this portfolio. See Accompanying Notes to Financial Statements 16 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING HIGH YIELD OPPORTUNITY FUND ------------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003(1) 2003 -------------- -------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 10,435,937 $ 30,457,234 Net realized loss on investments and foreign currencies (5,673,866) (96,633,896) Net change in unrealized appreciation of investments and foreign currencies 20,471,526 56,996,543 -------------- -------------- Net increase (decrease) in net assets resulting from operations 25,233,597 (9,180,119) -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (4,317,058) (9,456,286) Class B (7,216,672) (21,289,988) Class C (981,907) (2,702,939) Class M (127,743) (371,212) Class Q (32,884) (155,515) Class T (77,747) (768,604) -------------- -------------- Total distributions (12,754,011) (34,744,544) -------------- -------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 160,250,385 133,859,674 Net proceeds from shares issued in merger -- 165,224,943 Dividends reinvested 4,112,746 12,333,581 -------------- -------------- 164,363,131 311,418,198 Cost of shares redeemed (195,711,533) (171,385,626) -------------- -------------- Net increase (decrease) in net asset resulting from capital share transactions (31,348,402) 140,032,572 -------------- -------------- Net increase (decrease) in net assets (18,868,816) 96,107,909 NET ASSETS: Net assets, beginning of period 329,634,425 233,526,516 -------------- -------------- Net assets, end of period $ 310,765,609 $ 329,634,425 ============== ============== Accumulated net investment loss $ (6,382,367) $ (4,064,293) ============== ==============
---------- (1) Effective June 2, 2003, Class "T" Shares converted into the corresponding "A" Shares within this portfolio. See Accompanying Notes to Financial Statements 17 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING INTERMEDIATE BOND FUND ------------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 -------------- -------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 4,466,240 $ 4,368,653 Net realized gain on investments 958,397 6,354,721 Net change in unrealized appreciation of investments 1,563,727 3,644,655 -------------- -------------- Net increase in net assets resulting from operations 6,988,364 14,368,029 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (2,687,394) (2,646,393) Class B (787,682) (883,176) Class C (734,231) (640,872) Class I (268,643) (477,266) Net realized gain from investments: Class A -- (1,231,072) Class B -- (615,852) Class C -- (439,608) Class I -- (189,306) -------------- -------------- Total distributions (4,477,950) (7,123,545) -------------- -------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 169,029,601 332,254,935 Dividends reinvested 2,368,595 5,172,910 -------------- -------------- 171,398,196 337,427,845 Cost of shares redeemed (119,816,449) (137,354,984) -------------- -------------- Net increase in net asset resulting from capital share transactions 51,581,747 200,072,861 -------------- -------------- Net increase in net assets 54,092,161 207,317,345 NET ASSETS: Net assets, beginning of period 276,218,323 68,900,978 -------------- -------------- Net assets, end of period $ 330,310,484 $ 276,218,323 ============== ============== Undistributed net investment income $ 390,371 $ 402,081 ============== ==============
See Accompanying Notes to Financial Statements 18 STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
ING STRATEGIC BOND FUND ------------------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 -------------- -------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 949,698 $ 2,452,863 Net realized gain (loss) on investments and foreign currencies 1,405,950 (1,656,314) Net change in unrealized appreciation (depreciation) of investments and foreign currencies (829,192) 3,254,804 -------------- -------------- Net increase in net assets resulting from operations 1,526,456 4,051,353 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (741,219) (1,899,039) Class B (305,178) (676,354) Class C (80,738) (238,634) Class Q (2,596) (13,330) -------------- -------------- Total distributions (1,129,731) (2,827,357) -------------- -------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 29,822,446 47,353,582 Dividends reinvested 555,178 2,080,078 -------------- -------------- 30,377,624 49,433,660 Cost of shares redeemed (33,193,802) (52,572,135) -------------- -------------- Net decrease in net asset resulting from capital share transactions (2,816,178) (3,138,475) -------------- -------------- Net decrease in net assets (2,419,453) (1,914,479) NET ASSETS: Net assets, beginning of period 49,385,241 51,299,720 -------------- -------------- Net assets, end of period $ 46,965,788 $ 49,385,241 ============== ============== Undistributed net investment income (accumulated net investment loss) $ (108,578) $ 71,455 ============== ==============
See Accompanying Notes to Financial Statements 19 ING GNMA INCOME FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I CLASS Q ------------------------------------ ------------------------------------------------- SIX MONTHS YEAR JANUARY 7, SIX MONTHS YEAR YEAR FEBRUARY 26, ENDED ENDED 2002(2) TO ENDED ENDED ENDED 2001(2) TO SEPTEMBER 30, MARCH 31, MARCH 31, SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, 2003(1) 2003 2002 2003(1) 2003 2002 2001 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.01 8.54 8.61 9.01 8.54 8.63 8.51 Income (loss) from investment operations: Net investment income $ 0.21 0.44 0.10 0.22 0.44 0.39 0.04 Net realized and unrealized gain (loss) on investments $ (0.07) 0.50 (0.10) (0.09) 0.47 (0.01) 0.08 Total from investment operations $ 0.14 0.94 0.00 0.13 0.91 0.38 0.12 Less distributions from: Net investment income $ 0.23 0.47 0.07 0.22 0.44 0.47 -- Total distributions $ 0.23 0.47 0.07 0.22 0.44 0.47 -- Net asset value, end of period $ 8.92 9.01 8.54 8.92 9.01 8.54 8.63 TOTAL RETURN(3) % 1.57 11.18 0.04 1.44 10.90 4.50 1.41 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 8,190 6,946 1,615 153 183 204 476 Ratios to average net assets: Expenses(4) % 0.72 0.78 0.88 0.97 1.04 1.12 1.14 Net investment income(4) % 4.96 5.00 5.83 4.75 4.89 5.35 5.42 Portfolio turnover rate % 101 75 76 101 75 76 33
(1) Effective August 1, 2003, ING Investments, LLC appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) Commencement of operations of class. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. See Accompanying Notes to Financial Statements. 20 ING HIGH YIELD OPPORTUNITY FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS Q ------------------------------------------------------------------------------------- SIX MONTHS YEAR YEAR NINE MONTHS YEAR THREE MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30, MARCH 31, 2003(1) 2003 2002 2001(2) 2000 1999(3) 1999 --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 6.68 7.54 8.71 10.82 11.59 11.68 12.72 Income (loss) from investment operations: Net investment income $ 0.34 0.57 0.78 0.83 1.20 0.30 1.16 Net realized and unrealized gain (loss) on investments $ 0.21 (0.62) (0.94) (2.07) (0.76) (0.11) (1.01) Total from investment operations $ 0.55 (0.05) (0.16) (1.24) 0.44 0.19 0.15 Less distributions from: Net investment income $ 0.31 0.81 1.01 0.87 1.21 0.28 1.19 Total distributions $ 0.31 0.81 1.01 0.87 1.21 0.28 1.19 Net asset value, end of period $ 6.92 6.68 7.54 8.71 10.82 11.59 11.68 TOTAL RETURN(4) % 7.95 (0.29) (1.56) (11.80) 4.04 1.63 1.40 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 162 912 1,660 3,041 6,882 3,229 6,502 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.09 0.86 0.93 1.00 1.08 0.90 0.87 Gross expenses prior to expense reimbursement(5) % 1.14 1.21 1.20 1.22 1.27 1.17 1.28 Net investment income after expense reimbursement(5)(6) % 7.20 10.87 11.33 11.28 10.73 9.88 10.01 Portfolio turnover rate % 70 131 102 113 113 44 242
(1) Effective August 1, 2003, ING Investments, LLC appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Effective May 24, 1999, ING Investments, LLC became the Investment Adviser of the Fund and the Fund changed its year end to June 30. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment Adviser 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. 21 ING INTERMEDIATE BOND FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS I ------------------------------------ SIX MONTHS YEAR JANUARY 8, ENDED ENDED 2002(2) TO SEPTEMBER 30, MARCH 31, MARCH 31, 2003(1) 2003 2002 ---------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.51 9.91 9.99 Income (loss) from investment operations: Net investment income $ 0.19 0.39 0.11 Net realized and unrealized gain (loss) on investments $ 0.11 0.76 (0.07) Total from investment operations $ 0.30 1.15 0.04 Less distributions from: Net investment income $ 0.19 0.40 0.12 Net realized gain on investments $ -- 0.15 -- Total distributions $ 0.19 0.55 0.12 Net asset value, end of period $ 10.62 10.51 9.91 TOTAL RETURN(3) % 2.86 11.88 0.36 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 13,784 15,046 9,800 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 0.65 0.73 0.82 Gross expenses prior to expense reimbursement(4) % 0.65 0.73 0.90 Net investment income after expense reimbursement(4)(5) % 3.56 3.70 0.05 Portfolio turnover rate % 313 639 1,216*
(1) Effective September 2, 2003, Aeltus Investment Management, Inc., replaced ING Investment Management, LLC as the Sub-Adviser. (2) Commencement of operations of class. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Adviser has agreed to limit expenses, (excluding interest, taxes, brokerage and extraordinary expenses) subject to possible recoupment by ING Investments, LLC within three years. * Portfolio turnover was greater than expected during this period due to active trading undertaken in response to market conditions that existed at that time. See Accompanying Notes to Financial Statements. 22 ING STRATEGIC BOND FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS Q -------------------------------------------------------------------------------------- SIX MONTHS YEAR YEAR NINE MONTHS YEAR THREE MONTHS JULY 27, ENDED ENDED ENDED ENDED ENDED ENDED 1998(4) TO SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, JUNE 30, JUNE 30, MARCH 31, 2003(1) 2003 2002 2001(2) 2000 1999(3) 1999 ---------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 10.61 10.36 11.18 11.45 11.99 12.26 12.43 Income (loss) from investment operations: Net investment income $ 0.23 0.26 1.18 0.50 0.94 0.25 0.48 Net realized and unrealized gain (loss) on investments $ 0.12 0.63 (1.12) (0.17) (0.54) (0.38) (0.04) Total from investment operations $ 0.35 0.89 0.06 0.33 0.40 (0.13) 0.44 Less distributions from: Net investment income $ 0.28 0.64 0.88 0.60 0.94 0.14 0.50 Net realized gain on investments $ -- -- -- -- -- -- 0.11 Total distributions $ 0.28 0.64 0.88 0.60 0.94 0.14 0.61 Net asset value, end of period $ 10.68 10.61 10.36 11.18 11.45 11.99 12.26 TOTAL RETURN(5) % 3.36 8.92 0.49 3.00 3.55 1.16 5.78 RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 96 115 101 236 228 171 314 Ratios to average net assets: Net expenses after expense reimbursement(6)(7) % 0.87 0.67 0.73 1.00 0.86 0.71 0.69 Gross expenses prior to expense reimbursement(6) % 1.08 1.12 1.10 2.06 2.54 1.37 1.74 Net investment income after expense reimbursement(6)(7) % 4.32 5.21 7.12 7.17 7.79 6.07 6.03 Portfolio turnover rate % 273 254 211 132 168 69 274
(1) Effective August 1, 2003, ING Investments, LLC appointed Aeltus Investment Management, Inc. as Sub-Adviser. (2) The Fund changed its fiscal year end to March 31. (3) Effective May 24, 1999, ING Investments, LLC became the Investment Adviser of the Fund and the Fund changed its year end to June 30. (4) Commencement of operations. (5) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value. Total return for less than one year is not annualized. (6) Annualized for periods less than one year. (7) The Investment 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. 23 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) NOTE 1 -- ORGANIZATION ORGANIZATION. ING Funds Trust ("Trust") is a Delaware business trust registered as an open-end management investment company. The Trust was organized on July 30, 1998. It consists of nine separately managed series. Four of the funds in this report are: ING GNMA Income Fund ("GNMA Fund"), ING High Yield Opportunity Fund ("High Yield Opportunity Fund"), ING Intermediate Bond Fund ("Intermediate Bond Fund") and ING Strategic Bond Fund ("Strategic Bond Fund"). The investment objective of each Fund is described in each Fund's prospectus. Each Fund offers at least three of the following classes of shares: Class A, Class B, Class C, Class I, Class M, Class Q and Class R. The separate classes of shares differ principally in the applicable sales charges (if any), transfer agent fees, distribution fees and shareholder servicing fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Fund and earn income from the portfolio pro rata based on the average daily net assets of each class, without distinction between share classes. Dividends and distributions are determined separately for each class based on income and expenses allocable to each class. Realized gains are allocated to each class pro rata based on the net assets of each class on the date of distribution. 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. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Funds in the preparation of their financial statements, and such policies are in conformity with accounting principles generally accepted in the United States 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 the NASDAQ will be valued at NASDAQ official closing price. 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 the time such valuation is determined by each Fund's custodian. Debt securities are valued at bid prices obtained from independent services or from one or more dealers making markets in the securities and may be adjusted based on the Fund's 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 for which market quotations are not readily available are valued at their respective fair values as determined in good faith and in accordance with policies set by the Board of Trustees ("Board") of the Funds. Among 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 Fund calculates its net asset value. Investments in securities maturing in less than 60 days at the date of acquisition are valued at amortized cost, which approximates market value. At September 30, 2003, the Intermediate Bond Fund contained four securities for which bid prices obtained from one or more dealers making markets in the securities were adjusted based on the Funds' valuation procedures. These securities had a total value of $6,806,264 (this represents 2.46% of net assets) for the Intermediate Bond Fund. In addition, at September 30, 2003, the High Yield Opportunity Fund and the Strategic Bond Fund contained eleven and two securities, respectively, for which market quotations were not readily available and which were valued at their fair value as determined in good faith and in accordance with policies set by the Board. These securities had a total value of $2,616,819 (represents 0.79% of net assets) and $200 (represents 0.00% of net assets) for the High Yield Opportunity Fund and the Strategic Bond Fund, respectively. 24 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (continued) 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 funds. Premium amortization and discount accretion are determined by the effective yield method. C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds 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 Funds 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 that 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 values. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund'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 re-evaluation 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 Funds 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 Funds 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 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 Fund may enter into futures contracts involving foreign currency, interest rates, securities and securities indices, for hedging purposes only. 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 Fund 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 Fund 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 25 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (continued) gains or losses by the Fund. When the contract is closed, the Fund 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 Funds record distributions to their shareholders on ex-dividend date. Intermediate Bond Fund and High Yield Opportunity Fund declare and become ex-dividend daily and pay dividends monthly. GNMA Fund and Strategic Bond Fund declare and become ex-dividend monthly and pay dividends monthly. Each Fund distributes capital gains, to the extent available, annually. F. FEDERAL INCOME TAXES. It is the policy of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code that are 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, a federal income tax or excise tax provision is not required. In addition, by distributing during each calendar year substantially all of its net investment income and net realized capital gains, each Fund intends not to be subject to any federal excise tax. The Board intends to offset any net capital gains with any available capital loss carryforward until each carryforward has been fully utilized or expires. In addition, no capital gain distribution shall be made until the capital loss carryforward has been fully utilized or expires. G. USE OF ESTIMATES. Management of the Funds 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. Actual results could differ from these estimates. H. REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System or with member banks of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase the security 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 Fund will always 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 Fund. 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 Fund might incur a loss or delay in the realization of proceeds if the value of the collateral securing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. I. SECURITIES LENDING. Each Fund (except GNMA Fund) 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. J. OPTIONS CONTRACTS. Certain Funds may purchase put and call options and may write (sell) put options and covered call options. The Funds 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 Funds 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 Funds 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 Funds 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 Funds pay a premium whether or not the option is exercised. 26 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (continued) Risks may also arise from an illiquid secondary market or from the inability of counterparties to meet the terms of the contract. K. ILLIQUID AND RESTRICTED 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 Funds to sell them promptly at an acceptable price. Restricted securities are those sold under Rule 144A of the Securities Act of 1933 (1933 Act) or are securities offered pursuant to Section 4(2) of the 1933 Act, and are subject to legal or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. Restricted securities may be considered liquid pursuant to procedures adopted by the Board or may be deemed illiquid because they may not be readily marketable. GNMA Fund may not invest in illiquid securities and all other Funds may not invest more than 15% of their net assets in illiquid securities. 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 TRANSACTION. The Funds 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 Funds' 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 Funds are required to hold liquid assets as collateral with the Funds' custodian sufficient to cover the purchase price. M. DOLLAR ROLL TRANSACTIONS. Certain Funds 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 Fund 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 Funds account for dollar roll transactions as purchases and sales. N. CONSTRUCTION LOAN SECURITIES (GNMA FUND). The GNMA Fund may purchase construction loan securities, which are issued to finance building costs. The funds are disbursed as needed or in accordance with a prearranged plan. The securities provide for the timely payment to the registered holder of interest at the specified rate plus scheduled installments of principal. Upon completion of the construction phase, the construction loan securities are terminated and project loan securities are issued. It is the Fund's policy to record these GNMA certificates on trade date, and to segregate assets to cover its commitments on trade date as well. NOTE 3 -- INVESTMENT TRANSACTIONS For the six-months ended September 30, 2003, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows:
PURCHASES SALES -------------- -------------- GNMA Fund $ 878,195,136 $ 970,238,719 High Yield Opportunity Fund 215,346,692 210,781,369 Intermediate Bond Fund 95,272,259 84,959,962 Strategic Bond Fund 113,834,958 110,653,954
U.S. Government securities not included above were as follows:
PURCHASES SALES -------------- -------------- GNMA Fund $ 878,195,136 $ 970,238,719 High Yield Opportunity Fund -- -- Intermediate Bond Fund 857,363,349 792,973,265 Strategic Bond Fund 90,514,813 84,669,694
NOTE 4 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES All the Funds included in this report have an Investment Management Agreement with ING Investments, LLC (the "Investment Manager" or the "Adviser"), a wholly-owned subsidiary of ING Groep N.V. The investment management agreements compensate the Adviser with a fee, computed daily 27 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) and payable monthly, based on the average daily net assets of each Fund, at the following annual rates: For GNMA Fund -- 0.60% for the first $150 million, 0.50% of the next $250 million, 0.45% of the next $400 million and 0.40% in excess of $800 million; for Intermediate Bond -- 0.50%; for Strategic Bond Fund -- 0.45% for the first $500 million, 0.40% of the next $250 million and 0.35% in excess of $750 million; for High Yield Opportunity Fund -- 0.60%. The fees payable to the Adviser were discounted for the Intermediate Bond Fund by 75% in the Fund's first year of operations, and by 50% in the Fund's second year of operations. Effective August 1, 2003, ING Aeltus serves as Sub-Adviser to the GNMA Fund, High Yield Opportunity Fund and Strategic Bond Fund pursuant to a sub-advisory agreement between the Adviser and ING Aeltus. Effective September 2, 2003, ING Aeltus serves as Sub-Adviser to Intermediate Bond Fund pursuant to a sub-advisory agreement between the Adviser and ING Aeltus. Prior to September 2, 2003, ING Investment Management LLC (IIM), a registered investment advisor, served as Sub-Adviser to the Intermediate Bond Fund pursuant to a sub-advisory agreement between the Adviser and IIM. ING Funds Services, LLC ("IFS") acts as administrator and provides certain administrative and shareholder services necessary for Fund operations and is responsible for the supervision of other service providers. For its services, IFS is entitled to receive from the GNMA Fund, High Yield Opportunity Fund, Intermediate Bond Fund and Strategic Bond Fund a fee at an annual rate of 0.10% of its average daily net assets. NOTE 5 -- DISTRIBUTION AND SERVICE FEES Each share class of the Funds (except as noted below) has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Funds Distributor, LLC (the "Distributor") is reimbursed or compensated (depending on the class of shares) by the Funds for expenses incurred in the distribution of each Fund's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to payment each month for actual expenses incurred in the distribution and promotion of each Fund'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, each class of shares of the Fund pays the Distributor a combined Distribution and Service Fee based on average daily net assets at the following annual rates:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q ------- ------- ------- ------- ------- ------- GNMA Fund 0.25% 1.00% 1.00% N/A 0.75% 0.25% High Yield Opportunity Fund 0.35% 1.00% 1.00% N/A 0.75% 0.25% Intermediate Bond Fund 0.35% 1.00% 1.00% N/A N/A N/A Strategic Bond Fund 0.35% 0.75% 0.75% N/A N/A 0.25%
The Distributor also receives the proceeds of initial sales charge paid by shareholders upon the purchase of Class A and Class M shares, and the contingent deferred sales charge paid by shareholders upon certain redemptions for Class A, Class B, and Class C shares. For the six months ended September 30, 2003, the Distributor earned the following amounts in sales charges:
CLASS A CLASS B CLASS C CLASS M SHARES SHARES SHARES SHARES --------- ------- -------- ------- Initial Sales Charges $ 103,841 n/a n/a $ 54 Contingent Deferred Sales Charges $ 54,098 $ -- $ 81,109 n/a
NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES At September 30, 2003 the Funds 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 ---------- -------------- ----------------- ------------ GNMA Fund $ 338,455 $ 69,243 $ 307,656 $ 715,354 High Yield Opportunity Fund 175,471 26,137 207,710 409,318 Intermediate Bond Fund 132,659 26,531 144,756 303,946 Strategic Bond Fund 17,291 3,842 18,836 39,969
At September 30, 2003, ING Life Insurance and Annuity Co., a wholly-owned indirect subsidiary of ING Groep N.V., held 8.2% and 37.5% of the shares outstanding of Intermediate Bond Fund and Strategic Bond Fund, respectively. 28 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 6 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (continued) Each Fund has adopted a Retirement Policy covering all independent trustees of the Fund who will have served as an independent trustee for at least five years at the time of retirement. Benefits under this plan are based on an annual rate as defined in the plan agreement. A summary of the sales transactions during the six-months ended September 30, 2003, in which the issuer was part of the ING Family of Funds are presented below. There were no purchases during the period and no shares were held at September 30, 2003.
REALIZED STRATEGIC BOND FUND: SALES GAIN/(LOSS) ON ---------------------- INVESTMENT SHARES PROCEEDS SECURITIES -------- ----------- -------------- High Yield Bond Fund 159,416 $ 1,321,563 $ (41,587) High Yield Opportunity Fund 330,000 2,263,800 96,600 ING Prime Rate Trust 103,100 749,060 59,815
NOTE 7 -- EXPENSE LIMITATIONS For the following Funds, pursuant to written expense limitation agreements the Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the following annual expenses to average daily net assets ratios:
CLASS A CLASS B CLASS C CLASS I CLASS M CLASS Q ------- ------- ------- ------- ------- ------- GNMA Fund 1.29% 2.04% 2.04% 1.04% 1.79% 1.29% High Yield Opportunity Fund(1) 1.30% 1.95% 1.95% N/A 1.70% 1.20% Intermediate Bond Fund 1.15% 1.90% 1.90% 0.90% N/A N/A Strategic Bond Fund(2) 1.15% 1.55% 1.55% N/A N/A 1.05%
---------- (1) Prior to April 1, 2003, the expense limitation rates for Class A, Class B, Class C, Class M, Class Q and Class T were 1.10%, 1.75%, 1.75%, 1.50%, 1.00% and 1.40% respectively. (2) Prior to April 1, 2003, the expense limitation rates for Class A, Class B, Class C, and Class Q were 0.95%, 1.35%, 1.35% and 0.85% respectively. Each Fund will at a later date reimburse the Investment Manager for management fees waived and other expenses assumed by the Investment Manager during the previous 36 months, but only if, after such reimbursement, the Fund'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 Fund. As of September 30, 2003, the cumulative amounts of reimbursed fees that are subject to possible recoupment by the Manager are as follows: High Yield Opportunity Fund $ 2,063,620 Intermediate Bond Fund 192,324 Strategic Bond Fund 553,521
NOTE 8 -- LINE OF CREDIT All of the Funds included in this report with the exception of GNMA Fund, in addition to certain other funds managed by the Adviser, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement") with Bank of New York for an aggregate amount of $125,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the Funds; and (3) enable the Funds to meet other emergency expenses as defined in the Credit Agreement. The Funds to which the line of credit is available pay a commitment fee equal to 0.09% per annum on the daily unused portion of the committed line amount payable quarterly in arrears. At September 30, 2003, the Funds did not have any loans outstanding. 29 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 9 -- CAPITAL SHARES Transaction in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ---------------------------- ---------------------------- SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- ------------- ------------- ------------- ------------- GNMA FUND (NUMBER OF SHARES) Shares sold 17,395,145 73,137,649 2,527,512 10,383,663 2,474,742 8,354,803 Dividends reinvested 1,501,244 2,826,216 215,858 323,671 120,278 181,211 Shares redeemed (23,811,381) (64,721,314) (3,487,921) (3,236,075) (3,576,955) (3,100,664) -------------- -------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (4,914,992) 11,242,551 (744,551) 7,471,259 (981,935) 5,435,350 ============== ============== ============= ============= ============= ============= GNMA FUND ($) Shares sold $ 150,583,452 $ 647,417,851 $ 22,445,176 $ 92,311,001 $ 22,024,570 $ 73,988,441 Dividends reinvested 10,691,981 25,045,619 1,904,595 2,864,197 1,062,957 1,606,627 Shares redeemed (205,236,552) (572,367,002) (30,831,380) (28,732,321) (31,593,326) (27,312,111) -------------- -------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (43,961,119) $ 100,096,468 $ (6,481,609) $ 66,442,877 $ (8,505,799) $ 48,282,957 ============== ============== ============= ============= ============= ============= CLASS I SHARES CLASS M SHARES CLASS Q SHARES ------------------------------ ---------------------------- ---------------------------- SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- ------------- ------------- ------------- ------------- GNMA FUND (NUMBER OF SHARES) Shares sold 386,847 791,663 3,038 89,509 -- 14,313 Dividends reinvested 23,481 24,697 1,553 3,490 316 544 Shares redeemed (262,760) (234,440) (78,786) (27,626) (3,531) (18,365) -------------- -------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 147,568 581,920 (74,195) 65,373 (3,215) (3,508) ============== ============== ============= ============= ============= ============= GNMA FUND ($) Shares sold $ 3,468,333 $ 7,072,323 $ 27,195 $ 796,808 $ -- $ 126,826 Dividends reinvested 208,028 220,288 13,812 31,077 2,801 4,854 Shares redeemed (2,330,803) (2,096,498) (700,431) (247,442) (30,852) (164,519) -------------- -------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ 1,345,558 $ 5,196,113 $ (659,424) $ 580,443 $ (28,051) $ (32,839) ============== ============== ============= ============= ============= ============= CLASS T SHARES ------------------------------ SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003(1) 2003 -------------- -------------- GNMA FUND (NUMBER OF SHARES) Shares sold -- 1,849 Dividends reinvested -- 47,505 Shares redeemed (1,062,777) (307,685) -------------- -------------- Net decrease in shares outstanding (1,062,777) (258,331) ============== ============== GNMA FUND ($) Shares sold -- $ 16,625 Dividends reinvested -- 420,465 Shares redeemed $ (8,868,418) (2,713,539) -------------- -------------- Net decrease $ (8,868,418) $ (2,276,449) ============== ==============
---------- (1) Effective June 2, 2003, Class "T" shares converted into the corresponding Class "A" shares within this portfolio. 30 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 9 -- CAPITAL SHARES (continued)
CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ---------------------------- ---------------------------- SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- ------------- ------------- ------------- ------------- HIGH YIELD OPPORTUNITY FUND (NUMBER OF SHARES) Shares sold 12,907,896 16,263,300 1,577,065 2,298,165 919,640 1,076,535 Shares issued in merger -- 6,407,106 -- 14,095,676 -- 590,240 Dividends reinvested 215,038 585,206 317,552 993,995 48,732 136,259 Shares redeemed (15,240,303) (15,075,372) (3,072,209) (7,674,507) (1,258,019) (1,167,865) -------------- -------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (2,117,369) 8,180,240 (1,177,592) 9,713,329 (289,647) 635,169 ============== ============== ============= ============= ============= ============= HIGH YIELD OPPORTUNITY FUND ($) Shares sold $ 142,817,488 $ 110,029,139 $ 10,885,481 $ 15,652,565 $ 6,306,253 $ 7,417,867 Shares issued in merger -- 48,565,867 -- 107,380,857 -- 4,492,905 Dividends reinvested 1,524,437 3,931,634 2,174,783 6,722,293 333,640 925,570 Shares redeemed (104,407,850) (103,807,585) (21,065,857) (52,283,480) (8,618,215) (8,007,182) -------------- -------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ 39,934,075 $ 58,719,055 $ (8,005,593) $ 77,472,235 $ (1,978,322) $ 4,829,160 ============== ============== ============= ============= ============= ============= CLASS M SHARES CLASS Q SHARES CLASS T SHARES ------------------------------ ---------------------------- ---------------------------- SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003(1) 2003 -------------- -------------- ------------- ------------- ------------- ------------- HIGH YIELD OPPORTUNITY FUND (NUMBER OF SHARES) Shares sold 525 2,138 34,730 116,562 -- 1 Shares issued in merger -- 628,797 -- 2,500 -- -- Dividends reinvested 7,028 25,070 4,684 8,930 -- 77,085 Shares redeemed (45,366) (151,825) (152,385) (211,906) (743,254) (707,547) -------------- -------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (37,813) 504,180 (112,971) (83,914) (743,254) (630,461) ============== ============== ============= ============= ============= ============= HIGH YIELD OPPORTUNITY FUND ($) Shares sold $ 3,569 $ 14,387 $ 237,594 $ 745,712 -- $ 4 Shares issued in merger -- 4,766,282 -- 19,032 -- -- Dividends reinvested 47,817 166,801 32,069 60,422 -- 526,861 Shares redeemed (310,162) (1,021,019) (1,031,766) (1,400,699) $ (60,277,683) (4,865,661) -------------- -------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (258,776) $ 3,926,451 $ (762,103) $ (575,533) $ (60,277,683) $ (4,338,796) ============== ============== ============= ============= ============= ============= CLASS A SHARES CLASS B SHARES CLASS C SHARES ------------------------------ ---------------------------- ---------------------------- SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 2003 2003 -------------- -------------- ------------- ------------- ------------- ------------- INTERMEDIATE BOND FUND (NUMBER OF SHARES) Shares sold 11,813,334 20,485,344 1,690,327 5,721,047 2,541,919 5,249,312 Dividends reinvested 137,403 281,375 36,598 90,480 29,011 64,460 Shares redeemed (8,553,586) (10,999,640) (1,344,428) (1,081,565) (1,399,528) (912,120) -------------- -------------- ------------- ------------- ------------- ------------- Net increase in shares outstanding 3,397,151 9,767,079 382,497 4,729,962 1,171,402 4,401,652 ============== ============== ============= ============= ============= ============= INTERMEDIATE BOND FUND ($) Shares sold $ 122,825,392 $ 212,009,071 $ 17,812,430 $ 59,045,245 $ 26,964,879 $ 54,232,649 Dividends reinvested 1,450,612 2,905,320 386,304 934,949 306,299 666,529 Shares redeemed (87,885,447) (113,708,272) (14,156,311) (11,172,225) (14,720,738) (9,420,954) -------------- -------------- ------------- ------------- ------------- ------------- Net increase $ 36,390,557 $ 101,206,119 $ 4,042,423 $ 48,807,969 $ 12,550,440 $ 45,478,224 ============== ============== ============= ============= ============= =============
---------- (1) Effective June 2, 2003, Class "T" shares converted into the corresponding Class "A" shares within this portfolio. 31 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 9 -- CAPITAL SHARES (continued)
CLASS I SHARES ----------------------------- SIX MONTHS YEAR ENDED ENDED SEPTEMBER 30, MARCH 31, 2003 2003 -------------- ------------- INTERMEDIATE BOND FUND (NUMBER OF SHARES) Shares sold 140,152 675,432 Dividends reinvested 21,313 64,547 Shares redeemed (295,440) (296,980) -------------- ------------- Net increase (decrease) in shares outstanding (133,975) 442,999 ============== ============= INTERMEDIATE BOND FUND ($) Shares sold $ 1,426,900 $ 6,967,970 Dividends reinvested 225,380 666,112 Shares redeemed (3,053,953) (3,053,533) -------------- ------------- Net increase (decrease) $ (1,401,673) $ 4,580,549 ============== ============= CLASS A SHARES CLASS B SHARES ----------------------------- ---------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 -------------- ------------- ------------- ------------- STRATEGIC BOND FUND (NUMBER OF SHARES) Shares sold 1,353,689 2,926,400 133,465 512,495 Dividends reinvested 45,264 155,509 11,432 25,027 Shares redeemed (1,539,887) (3,411,267) (194,167) (406,134) -------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (140,934) (329,358) (49,270) 131,388 ============== ============= ============= ============= STRATEGIC BOND FUND ($) Shares sold $ 25,717,473 $ 32,008,296 $ 1,580,115 $ 5,478,867 Dividends reinvested 413,219 1,696,951 108,127 266,404 Shares redeemed (27,741,780) (37,277,857) (2,216,839) (4,331,111) -------------- ------------- ------------- ------------- Net increase (decrease) $ (1,611,088) $ (3,572,610) $ (528,597) $ 1,414,160 ============== ============= ============= ============= CLASS C SHARES CLASS Q SHARES ----------------------------- ---------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, 2003 2003 2003 2003 -------------- ------------- ------------- ------------- STRATEGIC BOND FUND (NUMBER OF SHARES) Shares sold 214,843 471,183 293 446,425 Dividends reinvested 3,258 9,972 241 511 Shares redeemed (274,764) (569,042) (2,418) (445,870) -------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (56,663) (87,887) (1,884) 1,066 ============== ============= ============= ============= STRATEGIC BOND FUND ($) Shares sold $ 2,521,270 $ 5,276,764 $ 3,588 $ 4,589,655 Dividends reinvested 31,727 111,460 2,105 5,263 Shares redeemed (3,209,524) (6,375,279) (25,659) (4,587,888) -------------- ------------- ------------- ------------- Net increase (decrease) $ (656,527) $ (987,055) $ (19,966) $ 7,030 ============== ============= ============= =============
32 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 10 -- CREDIT RISK AND DEFAULTED SECURITIES Although each Fund has a diversified portfolio, High Yield Opportunity Fund had 91.37% of its portfolio invested in lower rated and comparable quality unrated high yield securities. Investments in high yield securities are accompanied by a greater degree of credit risk and such lower rated securities tend to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for the holders of high yielding securities, because such securities are generally unsecured and are often subordinated to other creditors of the issuer. Funds that held defaulted securities at September 30, 2003 were as follows:
FUND SECURITY MARKET VALUE ---- -------- ------------ Strategic Bond Fund WinStar Commnunications, Inc. $ 100 ========= High Yield International Utility Structures, Inc. $ 85,960 Opportunity Source Media, Inc. 1 Fund SA Telecommunications, Inc. 18 US Interactive 170,309 --------- $ 256,288 =========
For financial reporting purposes, it is each Fund's accounting practice to discontinue the accrual of income and to provide an estimate for probable losses due to unpaid interest income on defaulted bonds for the current reporting period. The High Yield Opportunity Fund and the the Intermediate Bond Fund had interest write-offs of $159,640 and $523, respectively, as a result of defaulted securities. NOTE 11 -- FEDERAL INCOME TAXES Dividends paid by the Funds 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. The tax composition of dividends and distributions to shareholders were as follows:
SIX MONTHS ENDED ORDINARY TAX EXEMPT LONG-TERM SEPTEMBER 30, 2003 INCOME INCOME CAPITAL GAINS ------------ ---------- ------------- GNMA Fund $ 20,714,465 $ -- $ -- High Yield Opportunity Fund 12,754,011 -- -- Intermediate Bond Fund 4,477,950 -- -- Strategic Bond Fund 1,129,731 -- -- YEAR ENDED ORDINARY TAX EXEMPT LONG-TERM MARCH 31, 2003 INCOME INCOME CAPITAL GAINS ------------ ---------- ------------- GNMA Fund $ 37,467,565 $ -- $ -- High Yield Opportunity Fund 34,744,544 -- -- Intermediate Bond Fund 7,068,340 -- 55,205 Strategic Bond Fund 2,827,357 -- --
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 generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. Key differences are the treatment of short-term capital gains, foreign currency transactions, wash sale deferrals, adjustments from mergers and other temporary or permanent differences. To the extent that these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassifications. Capital loss carryforwards, which may be used to offset future realized capital gains for federal income tax purposes were as follows at March 31, 2003:
AMOUNT EXPIRATION DATES ------------- ---------------- GNMA Income Fund $ 13,788,569 2004-2010 High Yield Opportunity Fund 373,214,651 2004-2011 Strategic Bond Fund 12,105,934 2007-2011
The capital loss carryforwards in High Yield Opportunity Fund includes $64,227,424 of losses acquired from ING High Yield Fund. Utilization of GNMA Fund, High Yield Opportunity Fund and Strategic Bond Fund capital loss carryforwards will be subject to an annual limitation as prescribed by the Internal Revenue Code. 33 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 12 -- REORGANIZATIONS On May 17, 2002, the High Yield Opportunity Fund as listed below ("Acquiring Fund"), acquired the assets and certain liabilities of High Yield Fund, also listed below ("Acquired Fund"), in a tax-free reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired Fund's shareholders. The number and value of shares issued by the Acquiring Fund are presented in Note 9 -- Capital Shares. Net assets and unrealized appreciation/(depreciation) as of the reorganization date were as follows:
ACQUIRED FUND UNREALIZED ACQUIRING ACQUIRED TOTAL NET ASSETS OF TOTAL NET ASSETS OF APPRECIATION FUND FUND ACQUIRED FUND (000) ACQUIRING FUND (000) (DEPRECIATION)(000) --------- -------- ------------------- -------------------- ------------------- High Yield Opportunity Fund ING High Yield Fund $ 165,225 $ 242,666 $ (3,897)
The net assets of High Yield Opportunity Fund after the reorganization were $407,891,000. NOTE 13 -- SECURITIES LENDING Under an agreement with Bank of New York ("BNY"), the Funds (except GNMA Fund) 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 cash collateral received is reflected on the Statement of Assets and Liabilities as Other Investments. Generally, in the event of counterparty default, the Funds 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 Funds in the event the Funds are delayed or prevented from exercising their right to dispose of the collateral. The Funds 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 Fund. At September 30, 2003, the following Funds had securities on loan with the following market values:
VALUE OF SECURITIES VALUE OF PORTFOLIO LOANED COLLATERAL --------- ------------ ------------ High Yield Opportunity Fund $ 81,157,392 $ 82,978,167 Intermediate Bond Fund 70,544,278 71,635,383 Strategic Bond Fund 7,637,266 7,753,044
34 NOTES TO FINANCIAL STATEMENTS as of September 30, 2003 (Unaudited) (Continued) NOTE 14 -- CHANGE IN FUNDS' AUDITORS PricewaterhouseCoopers, LLP ("PwC") served as independent auditors for the Funds. On May 28, 2003, the Funds' Board dismissed PwC and selected KPMG LLP ("KPMG") as independent auditors for the Funds for the fiscal year ending October 31, 2003 upon the recommendation of the Funds' Audit Committee. During the two most recent fiscal years and through May 28, 2003, there was no disagreement with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to PwC's satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement. The audit reports of PwC on the financial statements of the Funds as of and for the years ended March 31, 2003 and 2002 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. NOTE 15 -- SUBSEQUENT EVENTS DIVIDENDS. Subsequent to September 30, 2003 the following Funds declared dividends from net investment income of:
PER SHARE AMOUNT PAYABLE DATE RECORD DATE --------- ---------------- ------------------ GNMA FUND Class A $ 0.0360 October 3, 2003 September 30, 2003 Class B $ 0.0306 October 3, 2003 September 30, 2003 Class C $ 0.0305 October 3, 2003 September 30, 2003 Class I $ 0.0383 October 3, 2003 September 30, 2003 Class M $ 0.0321 October 3, 2003 September 30, 2003 Class Q $ 0.0365 October 3, 2003 September 30, 2003 Class A $ 0.0360 November 5, 2003 October 31, 2003 Class B $ 0.0304 November 5, 2003 October 31, 2003 Class C $ 0.0304 November 5, 2003 October 31, 2003 Class I $ 0.0384 November 5, 2003 October 31, 2003 Class M $ 0.0317 November 5, 2003 October 31, 2003 Class Q $ 0.0363 November 5, 2003 October 31, 2003 PER SHARE AMOUNT PAYABLE DATE RECORD DATE --------- ---------------- ------------------ HIGH YIELD OPPORTUNITY FUND Class A $ 0.0350 November 3, 2003 Daily Class B $ 0.0306 November 3, 2003 Daily Class C $ 0.0306 November 3, 2003 Daily Class M $ 0.0318 November 3, 2003 Daily Class Q $ 0.0346 November 3, 2003 Daily INTERMEDIATE BOND FUND Class A $ 0.0287 November 3, 2003 Daily Class B $ 0.0227 November 3, 2003 Daily Class C $ 0.0221 November 3, 2003 Daily Class I $ 0.0314 November 3, 2003 Daily STRATEGIC BOND FUND Class A $ 0.0400 October 3, 2003 September 30, 2003 Class B $ 0.0366 October 3, 2003 September 30, 2003 Class C $ 0.0358 October 3, 2003 September 30, 2003 Class Q $ 0.0429 October 3, 2003 September 30, 2003 Class A $ 0.0400 November 5, 2003 October 31, 2003 Class B $ 0.0364 November 5, 2003 October 31, 2003 Class C $ 0.0360 November 5, 2003 October 31, 2003 Class Q $ 0.0429 November 5, 2003 October 31, 2003
35 ING GNMA Income Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 87.9% FEDERAL HOME LOAN MORTGAGE CORPORATION: 0.4% $ 708,994 7.000%, due 11/01/14 $ 753,013 1,773,443 7.500%, due 12/01/14-01/01/30 1,890,584 350,148 8.000%, due 01/01/30 377,302 ---------------- 3,020,899 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 0.4% 384,846 409,600 281,745 6.500%, due 06/01/14 298,003 613,862 7.500%, due 05/01/28 656,047 1,787,755 S 8.500%, due 08/01/11-09/01/15 1,987,153 ---------------- 3,350,803 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 87.1% 979,994 10.250%, due 08/15/29 1,069,973 55,531,485 5.000%, due 04/15/33-07/15/33 55,703,865 95,250,077 5.500%, due 02/20/23-07/15/33 97,739,104 553,463 5.650%, due 07/15/29 558,210 169,058,357 6.000%, due 04/20/24-09/15/33 175,295,995 1,784,126 6.250%, due 04/15/26-04/15/28 1,867,133 135,340 6.340%, due 02/15/29 137,161 574,186 6.350%, due 09/15/33 630,459 5,820,455 6.400%, due 10/15/33-08/15/38 6,408,481 1,170,272 6.470%, due 09/15/33 1,290,941 56,962,273 6.500%, due 02/15/22-02/15/40 61,175,561 15,420,232 6.625%, due 07/15/33-01/15/40 17,332,005 4,668,846 6.650%, due 12/15/13-09/15/32 5,200,466 3,525,311 6.670%, due 01/15/40 3,984,456 6,210,297 6.687%, due 07/15/40 7,042,676 395,226 6.700%, due 08/15/14-12/15/14 419,535 4,319,450 6.745%, due 10/15/39 4,889,893 13,468,691 6.750%, due 06/15/13-01/15/41 15,119,995 2,854,475 6.810%, due 07/15/39 3,246,536 4,090,695 6.820%, due 05/15/27-04/15/34 4,625,324 9,866,540 6.840%, due 10/15/36 11,271,338 1,806,448 6.870%, due 03/15/39 2,063,072 5,925,429 6.875%, due 01/15/29-02/15/40 6,725,436 2,185,841 6.900%, due 01/15/32 2,499,651 2,904,734 6.950%, due 12/15/29 2,910,254 99,794,392 7.000%, due 07/15/22-12/15/35 106,463,877 8,999,757 7.010%, due 02/15/37 10,264,141 956,985 7.050%, due 07/15/29 1,016,837 5,569,920 7.100%, due 11/15/39 6,393,762 8,966,962 7.125%, due 09/15/39 10,277,305 3,351,792 7.150%, due 07/15/36 3,854,921 4,202,918 7.250%, due 08/15/22-09/15/31 4,572,220 2,961,114 7.300%, due 08/15/36 3,414,143 10,034,934 7.500%, due 12/15/19-09/15/32 10,802,559 7,019,577 7.600%, due 08/15/31-06/15/40 8,044,330 10,944,891 7.625%, due 08/15/32-07/15/38 12,289,669 83,127 7.650%, due 12/15/12 87,792 532,244 7.700%, due 08/15/13 563,065 6,217,888 7.750%, due 06/15/14-12/15/35 6,994,049 1,103,887 7.800%, due 05/15/19-01/15/42 1,270,647 10,008,505 7.875%, due 09/15/29-04/15/38 11,143,756 14,147,633 8.000%, due 08/15/12-11/15/38 15,842,434 201,371 8.050%, due 07/15/19-04/15/21 220,241 1,361,823 8.100%, due 06/15/12-07/15/12 1,446,613 4,993,364 8.125%, due 05/15/38 5,721,115 5,574,874 8.150%, due 12/15/11-09/15/15 5,935,686 $ 5,745,292 S 8.200%, due 10/15/11-05/15/13 $ 6,114,192 2,053,264 8.250%, due 10/15/24-03/15/41 2,340,258 7,008,255 8.500%, due 12/15/29-10/15/31 7,555,477 119,017 8.750%, due 10/15/23-06/15/27 125,795 2,840,068 9.000%, due 05/15/20-12/15/34 3,026,322 1,377,893 9.250%, due 06/15/30 1,477,693 ---------------- 736,466,419 ---------------- Total U.S. Government Agency Obligations (Cost $710,509,366) 742,838,121 ---------------- U.S. TREASURY OBLIGATIONS: 5.3% U.S. TREASURY NOTES: 5.3% 32,000,000 1.250%, due 05/31/05 31,991,264 13,000,000 1.500%, due 07/31/05 13,034,034 ---------------- 45,025,298 ---------------- Total U.S. Treasury Obligations (Cost $44,864,119) 45,025,298 ---------------- Total Long-Term Investments (Cost $755,373,485) 787,863,419 ---------------- SHORT-TERM INVESTMENTS: 6.5% U.S. TREASURY BILLS: 6.5% 500,000 0.000%, due 02/12/04 498,247 55,000,000 0.000%, due 03/11/04 54,762,895 ---------------- 55,261,142 ---------------- Total Short-term Investments (Cost $55,253,402) 55,261,142 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $810,626,887)* 99.7% $ 843,124,561 OTHER ASSETS AND LIABILITIES-NET 0.3 2,150,621 ----- ---------------- NET ASSETS 100.0% $ 845,275,182 ===== ================
* Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 35,761,802 Gross Unrealized Depreciation (3,264,128) ---------------- Net Unrealized Appreciation $ 32,497,674 ================
See Accompanying Notes to Financial Statements 36 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- CORPORATE BONDS: 93.2% ADVERTISING: 0.5% $ 55,000 # RH Donnelley Finance Corp. I, 10.875%, due 12/15/12 $ 65,175 1,390,000 # Vertis, Inc., 9.750%, due 04/01/09 1,469,925 ---------------- 1,535,100 ================ AEROSPACE/DEFENSE: 0.7% 210,000 # Armor Holdings, Inc., 8.250%, due 08/15/13 223,125 660,000 L L-3 Communications Corp., 7.625%, due 06/15/12 717,750 1,075,000 L Sequa Corp., 8.875%, due 04/01/08 1,155,625 50,000 Sequa Corp., 9.000%, due 08/01/09 55,000 ---------------- 2,151,500 ---------------- AGRICULTURE: 0.2% 600,000 # Dimon, Inc., 7.750%, due 06/01/13 618,000 ---------------- 618,000 ---------------- APPAREL: 0.4% 1,225,000 # Phillips-Van Heusen, 8.125%, due 05/01/13 1,289,313 ---------------- 1,289,313 ---------------- AUTO MANUFACTURERS: 0.0% 70,000 General Motors Corp., 7.125%, due 07/15/13 73,557 20,000 L General Motors Corp., 7.200%, due 01/15/11 21,105 ---------------- 94,662 ---------------- AUTO PARTS & EQUIPMENT: 2.4% 630,000 Dana Corp., 10.125%, due 03/15/10 707,175 900,000 L Dura Operating Corp., 8.625%, due 04/15/12 938,250 630,000 # Eagle-Picher Industries, 9.750%, due 09/01/13 664,650 1,030,000 Lear Corp., 8.110%, due 05/15/09 1,189,650 960,000 Rexnord Corp., 10.125%, due 12/15/12 1,070,400 1,070,000 #,L Tenneco Automotive, Inc., 10.250%, due 07/15/13 1,166,300 1,485,000 #,L TRW Automotive, Inc., 11.000%, due 02/15/13 1,737,450 ---------------- 7,473,875 ---------------- BEVERAGES: 0.3% 895,000 Constellation Brands, Inc., 8.500%, due 03/01/09 948,700 ---------------- 948,700 ---------------- BUILDING MATERIALS: 0.3% 2,456,000 @,I,XX International Utility Structures, @@,** Inc., 13.000%, due 02/01/08 85,960 895,000 Nortek Holdings, Inc., 9.875%, due 06/15/11 950,938 ---------------- 1,036,898 ---------------- CHEMICALS: 2.5% $ 590,000 #,L Equistar Funding Corp., 10.125%, due 09/01/08 $ 587,050 610,000 Equistar Funding Corp., 10.625%, due 05/01/11 606,950 1,450,000 L IMC Global, Inc., 10.875%, due 06/01/08 1,515,250 1,400,000 IMC Global, Inc., 11.250%, due 06/01/11 1,463,000 1,685,000 L Lyondell Chemical Co., 9.625%, due 05/01/07 1,609,175 1,735,000 #,L Rockwood Specialties Group, Inc., 10.625%, due 05/15/11 1,856,450 ---------------- 7,637,875 ---------------- COMMERCIAL SERVICES: 2.9% 1,365,000 Coinmach Corp., 9.000%, due 02/01/10 1,460,550 1,245,000 Corrections Corp. of America, 7.500%, due 05/01/11 1,290,131 3,205,000 @@ Quebecor Media, Inc., 11.125%, due 07/15/11 3,669,725 2,220,000 L United Rentals North America, Inc., 10.750%, due 04/15/08 2,469,750 ---------------- 8,890,156 ---------------- COMPUTERS: 0.3% 800,000 @@ Seagate Technology HDD Holdings, 8.000%, due 05/15/09 886,000 ---------------- 886,000 ---------------- COSMETICS/PERSONAL CARE: 0.5% 1,630,000 L Chattem, Inc., 8.875%, due 04/01/08 1,638,150 ---------------- 1,638,150 ---------------- DISTRIBUTION/WHOLESALE: 0.6% 1,720,000 #,L Aviall, Inc., 7.625%, due 07/01/11 1,771,600 ---------------- 1,771,600 ---------------- DIVERSIFIED FINANCIAL SERVICES: 3.4% 680,000 @@,#,L Eircom Funding, 8.250%, due 08/15/13 734,400 850,000 # HLI Operating Co., Inc., 10.500%, due 06/15/10 930,750 2,839,436 # Hollinger Participation Trust, 12.125%, due 11/15/10 3,212,112 2,305,000 Nexstar Finance, Inc., 12.000%, due 04/01/08 2,593,125 1,630,000 L Technical Olympic USA, Inc., 9.000%, due 07/01/10 1,727,800 895,000 Technical Olympic USA, Inc., 10.375%, due 07/01/12 966,600 280,000 #,L Universal City Development Partners, 11.750%, due 04/01/10 316,400 ---------------- 10,481,187 ---------------- ELECTRIC: 3.8% 3,485,000 # AES Corp., 8.750%, due 05/15/13 3,676,675
See Accompanying Notes to Financial Statements 37 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- ELECTRIC (CONTINUED) $ 2,190,000 #,L Calpine Corp., 8.750%, due 07/15/13 $ 2,014,800 1,065,000 L Homer City Funding LLC, 8.734%, due 10/01/26 1,096,950 1,250,000 Illinois Power Co, 11.500%, due 12/15/10 1,506,250 1,285,000 # PG&E Corp., 6.875%, due 07/15/08 1,355,675 2,005,000 L Teco Energy, Inc., 7.500%, due 06/15/10 2,042,594 ---------------- 11,692,944 ---------------- ELECTRICAL COMPONENTS & EQUIPMENT: 0.3% 800,000 @@ FIMEP SA, 10.500%, due 02/15/13 908,000 ---------------- 908,000 ---------------- ELECTRONICS: 0.8% 400,000 Fisher Scientific Intl., 8.125%, due 05/01/12 427,000 910,000 @@,#,L Flextronics Intl. Ltd., 6.500%, due 05/15/13 907,725 925,000 Stoneridge, Inc., 11.500%, due 05/01/12 1,061,438 ---------------- 2,396,163 ---------------- ENTERTAINMENT: 2.3% 400,000 Argosy Gaming Co., 9.000%, due 09/01/11 435,000 2,900,000 Carmike Cinemas, Inc., 10.375%, due 02/01/09 3,059,500 1,510,000 L Cinemark USA, Inc., 9.000%, due 02/01/13 1,619,475 1,200,000 Regal Cinemas, Inc., 9.375%, due 02/01/12 1,356,000 835,000 L Six Flags, Inc., 9.750%, due 06/15/07 824,563 ---------------- 7,294,538 ---------------- ENVIRONMENTAL CONTROL: 2.1% 750,000 Allied Waste North America, 7.875%, due 01/01/09 781,875 1,815,000 Allied Waste North America, 8.500%, due 12/01/08 1,969,275 1,700,000 Allied Waste North America, 8.875%, due 04/01/08 1,848,750 1,900,000 L Allied Waste North America, 10.000%, due 08/01/09 2,068,625 ---------------- 6,668,525 ---------------- FOOD: 3.4% 2,120,000 #,L Del Monte Corp., 8.625%, due 12/15/12 2,326,699 1,230,000 # Domino's, Inc., 8.250%, due 07/01/11 1,305,338 1,680,000 Great Atlantic & Pacific Tea Co., 9.125%, due 12/15/11 1,587,600 1,345,000 Michael Foods, Inc., 11.750%, due 04/01/11 1,580,375 1,150,000 Pilgrims Pride Corp., 9.625%, due 09/15/11 1,247,750 625,000 Roundy's, Inc., 8.875%, due 06/15/12 656,250 $ 385,000 # Smithfield Foods, Inc., 7.750%, due 05/15/13 $ 414,838 1,240,000 #,L Swift & Co., 12.500%, due 01/01/10 1,376,400 ---------------- 10,495,250 ---------------- FOREST PRODUCTS & PAPER: 3.3% 3,200,000 Appleton Papers, Inc., 12.500%, due 12/15/08 3,504,000 1,660,000 L Georgia-Pacific Corp., 8.125%, due 05/15/11 1,734,700 930,000 L Georgia-Pacific Corp., 8.875%, due 02/01/10 1,023,000 1,870,000 Georgia-Pacific Corp., 9.375%, due 02/01/13 2,096,738 630,000 @@ Tembec Industries, Inc., 7.750%, due 03/15/12 595,350 1,350,000 @@ Tembec Industries, Inc., 8.625%, due 06/30/09 1,336,500 ---------------- 10,290,288 ---------------- HEALTHCARE-PRODUCTS: 0.4% 1,210,000 # Medex, Inc., 8.875%, due 05/15/13 1,285,625 ---------------- 1,285,625 ---------------- HEALTHCARE-SERVICES: 1.6% 1,405,000 L Alliance Imaging, Inc., 10.375%, due 04/15/11 1,468,225 3,460,000 Tenet Healthcare Corp., 7.375%, due 02/01/13 3,503,250 ---------------- 4,971,475 ---------------- HOME BUILDERS: 2.6% 1,650,000 DR Horton, Inc., 9.375%, due 03/15/11 1,806,750 970,000 # K. Hovnanian Enterprises, Inc., 7.750%, due 05/15/13 1,003,950 430,000 KB Home, 7.750%, due 02/01/10 455,800 770,000 Meritage Corp., 9.750%, due 06/01/11 847,000 1,400,000 Ryland Group, Inc., 9.125%, due 06/15/11 1,583,750 815,000 L Standard-Pacific Corp., 7.750%, due 03/15/13 835,375 15,000 # WCI Communities, Inc., 7.875%, due 10/01/13 15,113 1,310,000 WCI Communities, Inc., 10.625%, due 02/15/11 1,441,000 ---------------- 7,988,738 ---------------- HOUSEHOLD PRODUCTS/WARES: 1.2% 2,725,000 American Greetings, 11.750%, due 07/15/08 3,120,125 695,000 #,L Rayovac Corp, 8.500%, due 10/01/13 719,325 ---------------- 3,839,450 ---------------- IRON/STEEL: 0.5% 875,000 Armco, Inc., 9.000%, due 09/15/07 634,375 750,000 L United States Steel Corp., 9.750%, due 05/15/10 772,500 ---------------- 1,406,875 ----------------
See Accompanying Notes to Financial Statements 38 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- LEISURE TIME: 0.7% $ 1,300,000 @@,L Royal Caribbean Cruises Ltd., 8.000%, due 05/15/10 $ 1,378,000 765,000 # Worldspan Financing Corp., 9.625%, due 06/15/11 805,163 ---------------- 2,183,163 ---------------- LODGING: 6.2% 2,170,000 Ameristar Casinos, Inc., 10.750%, due 02/15/09 2,479,224 1,070,000 Aztar Corp., 9.000%, due 08/15/11 1,162,288 1,050,000 Extended Stay America, Inc., 9.875%, due 06/15/11 1,164,188 910,000 L Hilton Hotels Corp., 7.625%, due 05/15/08 1,001,000 440,000 Host Marriott Corp., 7.875%, due 08/01/05 453,200 545,000 Host Marriott Corp., 7.875%, due 08/01/08 562,713 960,000 Mandalay Resort Group, 9.500%, due 08/01/08 1,106,400 1,575,000 L MGM Mirage, 8.375%, due 02/01/11 1,740,375 1,150,000 MGM Mirage, 9.750%, due 06/01/07 1,306,688 740,000 Park Place Entertainment Corp., 7.000%, due 04/15/13 768,675 2,495,000 L Park Place Entertainment Corp., 7.875%, due 03/15/10 2,682,124 335,000 Park Place Entertainment Corp., 9.375%, due 02/15/07 371,013 2,540,000 Starwood Hotels & Resorts Worldwide, Inc., 7.875%, due 05/01/12 2,793,999 1,490,000 L Venetian Casino Resort LLC, 11.000%, due 06/15/10 1,706,050 ---------------- 19,297,937 ---------------- MEDIA: 13.5% 1,170,000 Allbritton Communications Co., 7.750%, due 12/15/12 1,199,250 1,520,000 Block Communications, Inc., 9.250%, due 04/15/09 1,634,000 750,000 @@ Canwest Media, Inc., 10.625%, due 05/15/11 855,000 950,000 L Charter Communications Holdings Capital Corp., 9.625%, due 11/15/09 738,625 1,750,000 L Charter Communications Holdings, LLC, 11.125%, due 01/15/11 1,439,375 845,000 L CSC Holdings, Inc., 7.625%, due 04/01/11 847,113 1,640,000 L CSC Holdings, Inc., 10.500%, due 05/15/16 1,812,200 365,000 L Dex Media East Finance Co., 9.875%, due 11/15/09 415,188 2,950,000 L Dex Media East Finance Co., 12.125%, due 11/15/12 3,576,874 625,000 # Dex Media Finance Co., 8.500%, due 08/15/10 682,813 1,665,000 # Dex Media Finance Co., 9.875%, due 08/15/13 1,889,775 $ 2,315,000 DirecTV Holdings LLC, 8.375%, due 03/15/13 $ 2,621,738 1,260,000 # Echostar DBS Corp., 5.750%, due 10/01/08 1,267,875 840,000 Entravision Communications Corp., 8.125%, due 03/15/09 884,100 1,185,000 Granite Broadcasting Corp., 8.875%, due 05/15/08 1,145,006 1,915,000 Granite Broadcasting Corp., 10.375%, due 05/15/05 1,895,850 2,460,000 Gray Television, Inc., 9.250%, due 12/15/11 2,724,450 2,100,000 Hollinger Intl. Publishing, 9.000%, due 12/15/10 2,223,375 320,000 @@,# Hollinger, Inc., 11.875%, due 03/01/11 355,200 590,000 Houghton Mifflin Co, 8.250%, due 02/01/11 620,975 920,000 Mediacom Broadband LLC, 11.000%, due 07/15/13 972,900 1,180,000 Nexstar Finance Holdings, Inc., 0.000%, due 04/01/13 831,900 1,645,000 L Paxson Communications Corp., 10.750%, due 07/15/08 1,745,756 215,000 #,L Primedia, Inc., 8.000%, due 05/15/13 218,225 655,000 Salem Communications Holding Corp., 9.000%, due 07/01/11 708,219 875,000 Sinclair Broadcast Group, Inc., 8.000%, due 03/15/12 927,500 623,056 @,X,** Source Media, Inc., 12.000%, due 11/01/04 1 1,105,000 Spanish Broadcasting System, 9.625%, due 11/01/09 1,174,063 2,935,000 @@,#,L Vivendi Universal SA, 9.250%, due 04/15/10 3,386,255 0 L Young Broadcasting, Inc., 8.500%, due 12/15/08 0 2,605,000 Young Broadcasting, Inc., 10.000%, due 03/01/11 2,774,324 ---------------- 41,567,925 ---------------- MINING: 0.7% 2,035,000 Compass Minerals Group, Inc., 10.000%, due 08/15/11 2,269,025 ---------------- 2,269,025 ---------------- MISCELLANEOUS MANUFACTURING: 1.7% 875,000 Samsonite Corp, 10.750%, due 06/15/08 918,750 725,000 L SPX Corp., 7.500%, due 01/01/13 766,688 3,260,000 @@ Tyco Intl. Group SA, 6.750%, due 02/15/11 3,455,600 ---------------- 5,141,038 ---------------- OFFICE/BUSINESS EQUIP: 0.5% 1,705,000 Xerox Corp., 7.625%, due 06/15/13 1,690,081 ---------------- 1,690,081 ---------------- OIL AND GAS: 3.9% 2,330,000 # Chesapeake Energy Corp., 7.500%, due 09/15/13 2,458,149
See Accompanying Notes to Financial Statements 39 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- OIL AND GAS (CONTINUED) $ 430,000 # Energy Partners Ltd., 8.750%, due 08/01/10 $ 442,900 1,113,000 Nuevo Energy Co., 9.500%, due 06/01/08 1,175,606 2,155,000 Swift Energy Co., 9.375%, due 05/01/12 2,338,175 955,000 Vintage Petroleum, Inc., 8.250%, due 05/01/12 1,033,788 2,250,000 @@ Western Oil Sands, Inc., 8.375%, due 05/01/12 2,559,374 975,000 # Westport Resources Corp., 8.250%, due 11/01/11 1,070,063 950,000 Westport Resources Corp., 8.250%, due 11/01/11 1,042,625 ---------------- 12,120,680 ---------------- OIL AND GAS SERVICES: 2.3% 2,950,000 Grant Prideco Escrow Corp., 9.000%, due 12/15/09 3,193,375 2,040,000 L Hanover Equipment Trust, 8.500%, due 09/01/08 2,111,400 1,800,000 L Hanover Equipment Trust, 8.750%, due 09/01/11 1,863,000 ---------------- 7,167,775 ---------------- PACKAGING AND CONTAINERS: 5.5% 580,000 L Ball Corp., 6.875%, due 12/15/12 601,025 2,105,000 # BWAY Finance Corp., 10.000%, due 10/15/10 2,283,925 2,145,000 @@,# Crown European Holdings SA, 10.875%, due 03/01/13 2,375,588 1,600,000 Greif, Inc., 8.875%, due 08/01/12 1,740,000 860,000 @@,#,L Norampac, Inc., 6.750%, due 06/01/13 881,500 1,850,000 # Owens-Brockway, 8.250%, due 05/15/13 1,896,250 4,215,000 Owens-Brockway, 8.875%, due 02/15/09 4,510,049 16,823 X,#,& Russell-Stanley Holdings, Inc., 9.000%, due 11/30/08 8,159 500,000 Smurfit-Stone Container Corp., 8.250%, due 10/01/12 525,000 2,000,000 Stone Container Corp., 9.750%, due 02/01/11 2,190,000 ---------------- 17,011,496 ---------------- PHARMACEUTICALS: 0.5% 1,615,000 AmerisourceBergen Corp., 7.250%, due 11/15/12 1,651,338 ---------------- 1,651,338 ---------------- PIPELINES: 3.6% 1,110,000 L ANR Pipeline Co., 8.875%, due 03/15/10 1,193,250 1,130,000 #,L EL Paso Corp, 7.875%, due 06/15/12 954,850 1,950,000 GulfTerra Energy Partners LP, 8.500%, due 06/01/10 2,110,875 1,230,000 L Southern Natural Gas Co., 7.350%, due 02/15/31 1,137,750 1,300,000 Southern Natural Gas Co., 8.000%, due 03/01/32 1,270,750 $ 1,375,000 Tennessee Gas Pipeline Co., 8.375%, due 06/15/32 $ 1,347,500 2,355,000 L Transcontinental Gas Pipe Line Corp., 8.875%, due 07/15/12 2,675,868 455,000 L Williams Cos., Inc., 8.625%, due 06/01/10 485,713 ---------------- 11,176,556 ---------------- REITs: 1.2% 270,000 Felcor Lodging LP, 8.500%, due 06/01/11 288,900 1,900,000 L Felcor Lodging LP, 9.500%, due 09/15/08 2,052,000 400,000 L Host Marriott LP, 9.500%, due 01/15/07 440,000 885,000 # La Quinta Properties, Inc., 8.875%, due 03/15/11 963,544 ---------------- 3,744,444 ---------------- RETAIL: 3.7% 1,365,000 Dollar General Corp., 8.625%, due 06/15/10 1,523,681 330,000 # Group 1 Automotive, Inc., 8.250%, due 08/15/13 357,225 1,570,000 L JC Penney Co., Inc., 7.600%, due 04/01/07 1,703,450 995,000 Rent-A-Center, Inc., 7.500%, due 05/01/10 1,050,969 2,270,000 L Rite Aid Corp., 7.625%, due 04/15/05 2,338,100 965,000 #,L Rite Aid Corp., 9.250%, due 06/01/13 1,027,725 370,000 L Saks, Inc., 8.250%, due 11/15/08 407,000 1,540,000 Star Gas Finance Co., 10.250%, due 02/15/13 1,647,800 1,365,000 Yum! Brands, Inc., 8.875%, due 04/15/11 1,597,050 ---------------- 11,653,000 ---------------- SEMICONDUCTORS: 0.3% 360,000 AMI Semiconductor, Inc., 10.750%, due 02/01/13 408,600 345,000 #, L Amkor Technology, Inc., 7.750%, due 05/15/13 348,450 290,000 Amkor Technology, Inc., 9.250%, due 02/15/08 314,650 ---------------- 1,071,700 ---------------- TELECOMMUNICATIONS: 11.2% 2,210,000 #,L ACC Escrow Corp., 10.000%, due 08/01/11 2,386,800 2,450,000 L American Tower Corp., 9.375%, due 02/01/09 2,511,250 1,430,000 American Tower Escrow Corp., 0.000%, due 08/01/08 958,100 1,315,000 # Centennial Communications Corp., 10.125%, due 06/15/13 1,361,025 3,245,000 L Crown Castle Intl. Corp., 10.750%, due 08/01/11 3,618,174 940,000 # Dobson Communications Corp., 8.875%, due 10/01/13 955,275 800,000 Dobson Communications Corp., 10.875%, due 07/01/10 876,000
See Accompanying Notes to Financial Statements 40 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) $ 670,000 Dobson/Sygnet Communications Co., 12.250%, due 12/15/08 $ 721,925 3,600,000 X,I ICG Services, Inc., 10.000%, due 02/15/08 4 525,000 # MetroPCS, Inc., 10.750%, due 10/01/11 538,125 2,420,000 L Nextel Communications, Inc., 7.375%, due 08/01/15 2,456,300 2,710,000 L Nextel Communications, Inc., 9.375%, due 11/15/09 2,953,899 630,000 L Nextel Partners, Inc., 12.500%, due 11/15/09 721,350 2,085,000 Panamsat Corp., 8.500%, due 02/01/12 2,194,463 1,370,000 Qwest Communications Intl., 7.500%, due 11/01/08 1,322,050 315,000 #,L Qwest Corp., 8.875%, due 03/15/12 351,225 3,714,000 #,L Qwest Services Corp., 13.500%, due 12/15/10 4,345,379 405,000 #,L Qwest Services Corp., 14.000%, due 12/15/14 489,038 1,415,000 @@ Rogers Wireless Communications, Inc., 9.625%, due 05/01/11 1,634,325 17,300,000 @,X,I, SA Telecommunications, Inc., #,** 10.000%, due 08/15/06 18 985,000 # Spectrasite, Inc., 8.250%, due 05/15/10 1,044,100 325,000 @@ TELUS Corp., 8.000%, due 06/01/11 380,076 1,215,000 L Triton PCS, Inc., 8.500%, due 06/01/13 1,309,163 8,267,451 @,X,I,** US Interactive, 12.000%, due 04/17/05 170,309 1,410,000 #,L Western Wireless Corp., 9.250%, due 07/15/13 1,445,250 6,250,000 I,**,@ WinStar Communications, Inc., 12.750%, due 04/15/10 625 ---------------- 34,744,248 ---------------- TRANSPORTATION: 0.4% 1,120,000 Gulfmark Offshore, Inc., 8.750%, due 06/01/08 1,142,400 ---------------- 1,142,400 ---------------- Total Corporate Bonds (Cost $307,369,902) 289,323,693 ---------------- SHARES VALUE ---------------------------------------------------------------------------------------------------- COMMON STOCK: 1.1% MEDIA: 1.1% 52,616 @,X Classic Cable, Inc. 3,456,872 ---------------- 3,456,872 ---------------- PACKAGING AND CONTAINERS: 0.0% 100,000 @,#,X Russell-Stanley Holdings, Inc. 10 ---------------- 10 ---------------- RETAIL: 0.0% 341,370 @,X International Fast Food Corp. -- ---------------- -- ---------------- TELECOMMUNICATIONS: 0.0% 61,806 @,X Adelphia Business Solutions $ 6 132 @,@@ Completel Europe NV 2,744 483,445 X,I International Wireless Communications Holdings, Inc. 48 2,350 X,I Jordan Telecommunications 95,504 15 @ Mpower Holding Corp. 22 ---------------- 98,324 ---------------- Total Common Stock (Cost $17,296,914) 3,555,206 ---------------- PREFERRED STOCK: 2.0% MEDIA: 2.0% 26,100 Cablevision Systems Corp. 2,733,974 15,956 @ Paxson Communications Corp. 1,440,018 20,550 Primedia, Inc. 1,977,938 ---------------- Total Preferred Stock (Cost $5,956,238) 6,151,930 ---------------- NUMBER OF WARRANTS VALUE ---------------------------------------------------------------------------------------------------- WARRANTS: 0.0% BUILDING MATERIALS: 0.0% 3,100 @,#,I Dayton Superior Corp., Expires 06/15/09 31 ---------------- 31 ---------------- COMMERCIAL SERVICES: 0.0% 92,950 @,X,I Comforce Corp., Expires 12/01/09 930 ---------------- 930 ---------------- DIVERSIFIED FINANCIAL SERVICES: 0.0% 5,480 @,X,I North Atlantic Trading Co., Expires 6/15/2007 1 ---------------- 1 ---------------- TELECOMMUNICATIONS: 0.0% 490 @,# American Tower Corp., Expires 8/1/2008 60,269 6,600 @,#,X ICG Communications, Inc., Expires 10/15/05 1 3,833 @,X US Interactive, Expires 04/17/05 -- ---------------- 60,270 ---------------- Total Warrants (Cost $250,729) 61,232 ---------------- Total Long-Term Investments (Cost $330,873,783) 299,092,061 ----------------
See Accompanying Notes to Financial Statements 41 ING High Yield Opportunity Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 2.3% REPURCHASE AGREEMENT: 2.3% $ 7,261,000 Morgan Stanley Repurchase Agreement dated 9/30/03, 1.050%, due 10/01/03, 7,261,000 to be received upon repurchase (Collateralized by $7,265,000 Federal Home Loan Mortgage Notes, 2.500% Market Value $7,408,786 due 12/15/2005) $ 7,261,000 ---------------- Total Short-term Investments (Cost $7,261,000) 7,261,000 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $338,134,783)* 98.6% $ 306,353,061 OTHER ASSETS AND LIABILITIES-NET 1.4 4,412,548 ----- ---------------- NET ASSETS 100.0% $ 310,765,609 ===== ================
@ Non-income producing security @@ Foreign Issuer & Payment-in-kind REITs Real Estate Investment Trusts # 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 September 30, 2003 ** Defaulted 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 which have been adjusted based on the Fund's valuation procedures * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 15,316,007 Gross Unrealized Depreciation (47,097,729) ---------------- Net Unrealized Depreciation $ (31,781,722) ================
See Accompanying Notes to Financial Statements 42 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- CORPORATE BONDS: 26.8% AGRICULTURE: 0.0% $ 35,000 #,L Dimon, Inc., 7.750%, due 06/01/13 $ 36,050 ---------------- 36,050 ---------------- AIRLINES: 0.9% 327,695 American Airlines, Inc., 6.977%, due 05/23/21 283,208 2,042,000 American Airlines, Inc., 7.024%, due 10/15/09 1,996,033 472,170 Continental Airlines, Inc., 6.545%, due 08/02/20 462,609 381,907 US Airways Pass Through Trust, 6.850%, due 01/30/18 357,890 ---------------- 3,099,740 ---------------- APPAREL: 0.0% 55,000 # Phillips-Van Heusen, 8.125%, due 05/01/13 57,888 ---------------- 57,888 ---------------- AUTO MANUFACTURERS: 1.2% 847,000 Ford Motor Co., 6.375%, due 02/01/29 691,801 1,038,000 Ford Motor Co., 6.625%, due 10/01/28 877,373 2,164,000 L General Motors Corp., 8.375%, due 07/15/33 2,269,051 ---------------- 3,838,225 ---------------- AUTO PARTS & EQUIPMENT: 0.0% 45,000 Rexnord Corp., 10.125%, due 12/15/12 50,175 15,000 #,L TRW Automotive, Inc., 11.000%, due 02/15/13 17,550 ---------------- 67,725 ---------------- BANKS: 4.0% 583,000 Bank of America Corp., 6.375%, due 02/15/08 656,406 500,000 # BankAmerica Institutional, Class A, 8.070%, due 12/31/26 586,195 148,000 # BankAmerica Institutional, Class B, 7.700%, due 12/31/26 167,056 74,000 Barnett Capital I, 8.060%, due 12/01/26 86,163 180,000 Barnett Capital II, 7.950%, due 12/01/26 207,265 140,000 BNY Capital I, 7.970%, due 12/31/26 160,650 1,175,000 @@,# Credit Suisse First Boston/London, 7.900%, due 05/29/49 1,340,521 2,045,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 2,243,597 74,000 FBS Capital I, 8.090%, due 11/15/26 84,497 397,000 First Union Institutional Capital II, 7.850%, due 01/01/27 455,142 150,000 Fleet Capital Trust II, 7.920%, due 12/11/26 164,646 973,000 @@ HSBC Holdings PLC, 7.500%, due 07/15/09 1,154,809 $ 588,000 M&T Bank Corp., 3.850%, due 04/01/13 $ 590,362 1,110,000 Mellon Capital I, 7.720%, due 12/01/26 1,262,547 380,000 S NB Capital Trust IV, 8.250%, due 04/15/27 452,983 1,630,000 L RBS Capital Trust I, 4.709%, due 12/29/49 1,580,200 670,000 S Wells Fargo & Co., 3.120%, due 08/15/08 668,238 80,000 # Wells Fargo Capital A, 7.730%, due 12/01/26 91,089 865,000 #,L Westpac Capital Trust III, 5.819%, due 12/29/49 901,184 ---------------- 12,853,550 ---------------- BEVERAGES: 0.8% 1,060,000 @@,#,L Cia Brasileira de Bebidas, 8.750%, due 09/15/13 1,075,900 295,000 @@,# Coca-Cola HBC Finance BV, 5.125%, due 09/17/13 304,042 284,000 @@,#,L Coca-Cola HBC Finance BV, 5.500%, due 09/17/15 299,141 990,000 #,S Miller Brewing Co., 4.250%, due 08/15/08 1,018,231 ---------------- 2,697,314 ---------------- CHEMICALS: 0.1% 217,000 L Dow Chemical Co., 5.750%, due 11/15/09 232,542 ---------------- 232,542 ---------------- COMMERCIAL SERVICES: 0.0% 75,000 Coinmach Corp., 9.000%, due 02/01/10 80,250 ---------------- 80,250 ---------------- DIVERSIFIED FINANCIAL SERVICES: 3.2% 838,000 L Boeing Capital Corp., 7.375%, due 09/27/10 975,339 1,175,000 @@,#,XX Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 1,158,843 559,000 Capital One Bank, 5.750%, due 09/15/10 589,206 417,000 CitiCorp Capital I, 7.933%, due 02/15/27 485,078 85,000 X Corestates Capital Trust I, 8.000%, due 12/15/26 98,941 953,000 S Countrywide Home Loans, Inc., 4.250%, due 12/19/07 983,083 15,000 @@,#,L Eircom Funding, 8.250%, due 08/15/13 16,200 449,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 421,358 555,000 # Farmers Exchange Capital, 7.200%, due 07/15/48 492,955 351,000 L Ford Motor Credit Co., 5.625%, due 10/01/08 355,404 409,000 Ford Motor Credit Co., 7.375%, due 10/28/09 436,488 865,000 S General Electric Capital Corp., 3.500%, due 08/15/07 881,791
See Accompanying Notes to Financial Statements 43 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (CONTINUED) $ 412,000 General Motors Acceptance Corp., 6.625%, due 10/15/05 $ 439,154 10,000 # HLI Operating Co., Inc., 10.500%, due 06/15/10 10,950 4,447 # Hollinger Participation Trust, 12.125%, due 11/15/10 5,031 679,000 S,L Lehman Brothers Holdings, Inc., 3.500%, due 08/07/08 681,120 645,000 #,XX Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 637,312 5,000 S Nexstar Finance, Inc., 12.000%, due 04/01/08 5,625 680,000 @@,# PF Export Receivables Master Trust, 3.748%, due 06/01/13 675,182 696,800 @@,# PF Export Receivables Master Trust, 6.436%, due 06/01/15 697,319 5,000 Technical Olympic USA, Inc., 9.000%, due 07/01/10 5,300 10,000 #,L Universal City Development Partners, 11.750%, due 04/01/10 11,300 315,000 # Wachovia Capital Trust V, 7.965%, due 06/01/27 383,170 ---------------- 10,446,149 ---------------- ELECTRIC: 2.4% 335,000 # Calpine Corp., 6.853%, due 07/15/07 315,319 360,000 #,S,L Consumers Energy Co., 4.250%, due 04/15/08 365,260 667,000 #,S Consumers Energy Co., 4.800%, due 02/17/09 684,854 45,000 L Homer City Funding LLC, 8.734%, due 10/01/26 46,350 910,000 # Indianapolis Power & Light, 6.300%, due 07/01/13 934,969 639,000 Nisource Finance Corp., 6.150%, due 03/01/13 685,368 411,000 Nisource Finance Corp., 7.625%, due 11/15/05 454,729 911,000 #,S Ohio Edison Co., 4.000%, due 05/01/08 901,528 1,310,000 Ohio Power Co., 6.375%, due 07/15/33 1,334,892 600,000 # Oncor Electric Delivery Co., 6.375%, due 01/15/15 659,819 490,000 Penn Electric Co., 6.625%, due 04/01/19 519,478 535,000 #,S PG&E Corp., 6.875%, due 07/15/08 564,425 523,000 #,L TXU Energy Co., 7.000%, due 03/15/13 569,734 ---------------- 8,036,725 ---------------- ELECTRONICS: 0.0% 50,000 Fisher Scientific Intl., 8.125%, due 05/01/12 53,375 40,000 Stoneridge, Inc., 11.500%, due 05/01/12 45,900 ---------------- 99,275 ---------------- ENTERTAINMENT: 0.0% $ 45,000 S Carmike Cinemas, Inc., 10.375%, due 02/01/09 $ 47,475 ---------------- 47,475 ---------------- ENVIRONMENTAL CONTROL: 0.1% 403,000 Allied Waste North America, 7.625%, due 01/01/06 423,150 ---------------- 423,150 ---------------- FOOD: 1.3% 65,000 Great Atlantic & Pacific Tea Co., 9.125%, due 12/15/11 61,425 292,000 L Kroger Co., 5.500%, due 02/01/13 305,973 427,000 Kroger Co., 7.250%, due 06/01/09 497,451 784,000 Safeway, Inc., 4.800%, due 07/16/07 826,366 1,150,000 Supervalu, Inc., 7.875%, due 08/01/09 1,345,672 1,077,000 Tyson Foods, Inc., 7.250%, due 10/01/06 1,200,370 ---------------- 4,237,257 ---------------- FOREST PRODUCTS & PAPER: 0.7% 570,000 @@ Abitibi-Consolidated, Inc., 6.950%, due 12/15/06 594,582 321,000 @@,S Abitibi-Consolidated, Inc., 6.950%, due 04/01/08 330,760 472,000 S Fort James Corp., 6.625%, due 09/15/04 486,160 60,000 Georgia-Pacific Corp., 9.375%, due 02/01/13 67,275 742,000 Weyerhaeuser Co., 6.875%, due 12/15/33 787,207 ---------------- 2,265,984 ---------------- HOME BUILDERS: 0.0% 30,000 Beazer Homes USA, Inc., 8.375%, due 04/15/12 32,550 10,000 # K. Hovnanian Enterprises, Inc., 7.750%, due 05/15/13 10,350 15,000 Meritage Corp., 9.750%, due 06/01/11 16,500 15,000 Ryland Group, Inc., 8.000%, due 08/15/06 16,144 30,000 Ryland Group, Inc., 9.125%, due 06/15/11 33,937 ---------------- 109,481 ---------------- INSURANCE: 0.8% 839,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 858,266 644,000 #,S Monumental Global Funding II, 3.850%, due 03/03/08 658,686 1,043,000 #,L Zurich Capital Trust I, 8.376%, due 06/01/37 1,199,362 ---------------- 2,716,314 ----------------
See Accompanying Notes to Financial Statements 44 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- LODGING: 0.5% $ 40,000 S,L Hilton Hotels Corp., 7.625%, due 05/15/08 $ 44,000 674,000 MGM Mirage, 6.000%, due 10/01/09 680,739 20,000 Park Place Entertainment Corp., 7.000%, due 04/15/13 20,775 403,000 Park Place Entertainment Corp., 9.375%, due 02/15/07 446,323 403,000 Starwood Hotels & Resorts Worldwide, Inc., 7.375%, due 05/01/07 434,233 ---------------- 1,626,070 ---------------- MEDIA: 0.5% 25,000 Allbritton Communications Co., 7.750%, due 12/15/12 25,625 330,000 L AOL Time Warner, Inc., 6.875%, due 05/01/12 371,001 20,000 DirecTV Holdings LLC, 8.375%, due 03/15/13 22,650 271,000 # Echostar DBS Corp., 4.410%, due 10/01/08 277,436 373,000 # Echostar DBS Corp., 5.750%, due 10/01/08 375,331 5,000 S Granite Broadcasting Corp., 8.875%, due 05/15/08 4,831 60,000 Granite Broadcasting Corp., 10.375%, due 05/15/05 59,400 10,000 Gray Television, Inc., 9.250%, due 12/15/11 11,075 15,000 S,L Paxson Communications Corp., 10.750%, due 07/15/08 15,919 30,000 Salem Communications Holding Corp., 9.000%, due 07/01/11 32,438 445,000 Time Warner, Inc., 6.950%, due 01/15/28 471,655 ---------------- 1,667,361 ---------------- MISCELLANEOUS MANUFACTURING: 0.3% 1,120,000 General Electric Co., 5.000%, due 02/01/13 1,150,269 5,000 L SPX Corp., 7.500%, due 01/01/13 5,288 ---------------- 1,155,557 ---------------- MULTI-NATIONAL: 0.6% 946,000 @@ Corp Andina de Fomento CAF, 5.200%, due 05/21/13 939,576 913,000 @@ Corp Andina de Fomento CAF, 6.875%, due 03/15/12 1,015,809 ---------------- 1,955,385 ---------------- OIL AND GAS: 2.3% 721,000 Amerada Hess Corp., 5.900%, due 08/15/06 777,740 655,000 L Amerada Hess Corp., 7.125%, due 03/15/33 690,985 15,000 # Energy Partners Ltd., 8.750%, due 08/01/10 15,450 923,000 Enterprise Products Partners LP, 6.875%, due 03/01/33 998,154 2,384,000 @@,+ Husky Oil Co., 8.900%, due 08/15/28 2,804,179 $ 46,000 S Nuevo Energy Co., 9.500%, due 06/01/08 $ 48,588 1,149,000 L Pemex Project Funding Master Trust, 7.375%, due 12/15/14 1,240,920 490,000 L Valero Energy Corp., 7.500%, due 04/15/32 547,348 499,000 Valero Energy Corp., 8.750%, due 06/15/30 624,210 ---------------- 7,747,574 ---------------- PACKAGING AND CONTAINERS: 0.6% 50,000 Greif, Inc., 8.875%, due 08/01/12 54,375 911,000 #,L Sealed Air Corp., 5.625%, due 07/15/13 924,578 1,019,000 #,S Sealed Air Corp., 6.950%, due 05/15/09 1,140,374 ---------------- 2,119,327 ---------------- PIPELINES: 0.7% 926,000 L CenterPoint Energy Resources Corp., 8.125%, due 07/15/05 993,508 184,000 Duke Energy Field Services LLC, 7.500%, due 08/16/05 201,886 25,000 GulfTerra Energy Finance Corp., 10.625%, due 12/01/12 29,438 809,000 Kinder Morgan Energy Partners LP, 7.300%, due 08/15/33 936,027 45,000 Southern Natural Gas Co., 7.350%, due 02/15/31 41,625 20,000 Transcontinental Gas Pipe Line Corp., 8.875%, due 07/15/12 22,725 ---------------- 2,225,209 ---------------- REAL ESTATE: 0.7% 875,000 S EOP Operating LP, 7.750%, due 11/15/07 1,018,461 1,043,000 S Liberty Property LP, 7.750%, due 04/15/09 1,240,444 ---------------- 2,258,905 ---------------- REITs: 0.6% 580,000 Simon Property Group LP, 4.875%, due 03/18/10 599,143 1,125,000 S Simon Property Group LP, 6.375%, due 11/15/07 1,252,675 ---------------- 1,851,818 ---------------- RETAIL: 0.2% 25,000 Dollar General Corp., 8.625%, due 06/15/10 27,906 482,000 S Sears Roebuck Acceptance, 6.250%, due 05/01/09 535,961 ---------------- 563,867 ---------------- SAVINGS AND LOANS: 0.3% 985,000 S Washington Mutual, Inc., 4.375%, due 01/15/08 1,022,505 ---------------- 1,022,505 ----------------
See Accompanying Notes to Financial Statements 45 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- SEMICONDUCTORS: 0.0% $ 15,000 AMI Semiconductor, Inc., 10.750%, due 02/01/13 $ 17,025 10,000 #,L Amkor Technology, Inc., 7.750%, due 05/15/13 10,100 ---------------- 27,125 ---------------- SOVEREIGN: 0.6% 475,000 @@ Dominican Republic, 9.040%, due 01/23/13 415,710 874,000 @@ Federal Republic of Brazil, 2.188%, due 04/15/12 707,128 478,000 @@ Republic of Ecuador, 10.000%, due 08/15/30 300,889 293,000 @@ Republic of El Salvador, 7.750%, due 01/24/23 310,057 402,046 @@ Republic of Panama, 1.938%, due 07/17/16 345,538 ---------------- 2,079,322 ---------------- TELECOMMUNICATIONS: 3.4% 25,000 #,L ACC Escrow Corp., 10.000%, due 08/01/11 27,000 15,000 #, S,L American Tower Corp., 9.375%, due 02/01/09 15,375 623,000 S AT&T Corp., 6.000%, due 03/15/09 671,758 770,000 L AT&T Corp., 7.800%, due 11/15/11 891,628 365,000 L AT&T Corp., 8.500%, due 11/15/31 433,660 864,000 AT&T Wireless Services, Inc., 8.125%, due 05/01/12 1,027,814 5,000 L Crown Castle Intl. Corp., 10.750%, due 08/01/11 5,575 15,000 S Qwest Communications Intl., 7.500%, due 11/01/08 14,475 5,000 #,L Qwest Services Corp., 14.000%, due 12/15/14 6,038 921,000 Sprint Capital Corp., 6.000%, due 01/15/07 992,012 1,491,000 Sprint Capital Corp., 6.875%, due 11/15/28 1,459,124 1,648,000 TCI Communications Finance, 9.650%, due 03/31/27 1,954,939 1,015,000 @@ TELUS Corp., 8.000%, due 06/01/11 1,187,007 1,472,000 L Verizon Florida, Inc., 6.125%, due 01/15/13 1,613,130 740,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 729,683 ---------------- 11,029,218 ---------------- Total Corporate Bonds (Cost $85,706,947) 88,674,337 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 41.2% FEDERAL HOME LOAN MORTGAGE CORPORATION: 5.3% 2,553,530 1.245%, due 05/25/31 2,554,280 1,629,076 1.260%, due 04/25/30 1,629,739 1,111,062 1.270%, due 01/25/32 1,112,419 2,249,861 1.460%, due 02/15/32 2,255,784 43,046 1.510%, due 10/15/24 43,079 $ 3,220,000 L 2.875%, due 09/15/05 $ 3,298,575 235,000 4.000%, due 04/15/21 240,773 3,081,499 5.500%, due 05/15/31 3,138,229 2,880,000 5.875%, due 03/21/11 3,172,461 ---------------- 17,445,339 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 34.9% 477,796 1.320%, due 11/26/32 476,097 1,345,175 1.510%, due 04/18/28 1,351,436 742,007 1.570%, due 12/25/29 721,256 1,048,086 1.670%, due 01/25/32 1,063,840 3,330,000 L 2.375%, due 04/13/06 3,340,087 975,000 2.859%, due 12/26/29 980,571 3,320,000 L 2.875%, due 05/19/08 3,274,068 3,253,000 4.000%, due 09/02/08 3,342,337 1,734,000 4.000%, due 06/25/16 1,776,441 3,000,000 4.500%, due 10/18/18 TBA 3,025,314 1,509,000 XX 4.750%, due 12/25/42 1,543,660 9,010,000 5.000%, due 10/15/18 TBA 9,232,439 12,535,000 5.000%, due 11/15/33 TBA 12,495,828 5,820,000 L 5.250%, due 04/15/07 6,364,519 85,000 5.500%, due 10/15/18 TBA 87,948 1,606,487 5.500%, due 02/01/23 1,654,173 11,820,000 5.500%, due 11/01/32 TBA 12,015,763 131,013 6.000%, due 08/01/16 136,797 4,500,000 6.000%, due 09/01/17 4,698,832 1,444,047 6.000%, due 11/01/22 1,497,078 2,030,670 6.000%, due 07/25/24 2,143,616 2,564,615 6.000%, due 06/25/27 2,577,455 612,482 6.000%, due 07/25/29 616,101 2,097,078 6.000%, due 08/01/33 2,176,702 18,685,000 6.000%, due 11/15/33 TBA 19,233,872 88,612 6.500%, due 07/01/29 92,476 1,000,100 6.500%, due 08/01/29 1,045,348 1,000,000 6.500%, due 07/25/30 1,061,167 774,003 6.500%, due 06/01/31 807,094 7,642 6.500%, due 06/01/31 7,969 2,527,379 6.500%, due 07/01/31 2,640,072 4,247 6.500%, due 07/01/31 4,428 103,771 6.500%, due 08/01/31 108,207 64,830 6.500%, due 09/01/31 67,657 9,071 6.500%, due 09/01/31 9,459 33,711 6.500%, due 09/01/31 35,152 960,307 6.500%, due 11/01/31 1,001,363 30,522 6.500%, due 11/01/31 31,827 517,634 6.500%, due 04/01/32 539,740 74,352 6.500%, due 04/01/32 77,527 747,156 6.500%, due 06/01/32 779,064 440,713 6.500%, due 06/01/32 459,535 164,133 6.500%, due 07/01/32 171,142 563,093 6.500%, due 07/01/32 587,141 28,950 6.500%, due 07/01/32 30,186 434,957 6.500%, due 07/01/32 453,532 654,349 6.500%, due 07/01/32 682,294 165,530 6.500%, due 07/01/32 172,599 179,097 6.500%, due 08/01/32 186,745 302,794 6.500%, due 08/01/32 315,726 161,067 6.500%, due 08/01/32 167,946 42,757 6.500%, due 08/01/32 44,583 717,118 6.500%, due 09/01/32 747,743 1,310,782 6.500%, due 09/01/32 1,366,762 362,455 6.500%, due 01/01/33 377,934
See Accompanying Notes to Financial Statements 46 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 490,292 6.500%, due 02/01/33 $ 511,206 11,111,602 6.565%, due 02/17/29 932,817 25,554 7.000%, due 09/01/28 27,084 25,975 7.000%, due 03/01/30 27,515 26,055 7.000%, due 12/01/31 27,584 26,283 7.000%, due 02/01/32 27,818 1,895,934 7.000%, due 04/01/32 2,007,209 284,972 7.000%, due 06/01/32 301,550 1,318,632 7.500%, due 12/25/41 1,446,787 ---------------- 115,208,218 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 1.0% 2,000,000 6.000%, due 10/01/32 TBA 2,077,500 209,693 7.000%, due 09/15/29 223,234 2,616,214 7.130%, due 06/16/31 320,482 234,784 8.000%, due 01/20/31 251,981 74,159 10.000%, due 03/15/19 84,162 60,763 10.000%, due 01/15/21 69,045 119,144 10.000%, due 01/15/21 135,383 94,091 10.000%, due 01/15/21 106,915 ---------------- 3,268,702 ---------------- Total U.S. Government Agency Obligations (Cost $135,546,175) 135,922,259 ---------------- U.S. TREASURY OBLIGATIONS: 12.4% U.S. TREASURY BONDS: 1.8% 5,436,000 S,L 5.375%, due 02/15/31 5,835,209 ---------------- 5,835,209 ---------------- U.S. TREASURY NOTES: 10.6% 19,252,000 S,L 2.000%, due 08/31/05 19,465,582 300,000 L 2.375%, due 08/15/06 304,254 2,500,000 S,L 3.000%, due 01/31/04 2,517,190 3,483,000 L 3.125%, due 09/15/08 3,532,525 9,191,000 S,L 4.250%, due 08/15/13 9,424,727 ---------------- 35,244,278 ---------------- Total U.S. Treasury Obligations (Cost $40,259,615) 41,079,487 ---------------- ASSET-BACKED SECURITIES: 5.6% AUTOMOBILE ASSET BACKED SECURITIES: 0.8% 1,500,000 Capital Auto Receivables Asset Trust, 2.750%, due 04/16/07 1,528,208 910,000 Nissan Auto Receivables Owner Trust, 2.610%, due 07/15/08 919,459 200,000 USAA Auto Owner Trust, 2.040%, due 02/16/10 199,146 ---------------- 2,646,813 ---------------- CREDIT CARD ASSET BACKED SECURITIES: 1.0% 560,000 Bank One Issuance Trust, 4.540%, due 09/15/10 574,548 530,000 Capital One Master Trust, 4.900%, due 03/15/10 566,035 1,335,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 1,451,851 $ 650,000 Fleet Credit Card Master Trust II, 2.400%, due 07/15/08 $ 656,335 ---------------- 3,248,769 ---------------- HOME EQUITY ASSET BACKED SECURITIES: 3.7% 3,582,491 EQCC Trust, 1.420%, due 11/25/31 3,587,553 975,000 Equity One Abs, Inc., 2.976%, due 09/25/33 987,848 1,198,111 New Century Home Equity Loan Trust, 1.400%, due 07/25/30 1,197,040 2,267,087 New Century Home Equity Loan Trust, 1.400%, due 06/20/31 2,265,498 846,289 Residential Asset Securities Corp., 1.350%, due 09/25/31 844,816 1,444,353 Residential Asset Securities Corp., 1.420%, due 06/25/32 1,446,473 488,000 Residential Funding Mortgage Securities II, 3.450%, due 01/25/16 498,508 1,500,000 Saxon Asset Securities Trust, 3.960%, due 06/25/33 1,506,268 ---------------- 12,334,004 ---------------- OTHER ASSET BACKED SECURITIES: 0.1% 210,932 @@,#,I,S Garanti Trade Payment Rights Master Trust, 10.810%, due 06/15/04 213,947 ---------------- 213,947 ---------------- Total Asset Backed Securities (Cost $18,372,720) 18,443,533 ---------------- COLLATERALIZED MORTGAGE OBLIGATION: 23.7% AGENCY COLLATERAL MORTGAGE OBLIGATION: 0.5% 1,525,675 Vendee Mortgage Trust, 5.847%, due 09/15/23 1,566,091 ---------------- 1,566,091 ---------------- COMMERCIAL MORTGAGE BACKED SECURITIES: 5.9% 1,170,000 Chase Manhattan Bank - First Union National Bank, 7.439%, due 08/15/31 1,376,867 950,000 CS First Boston Mortgage Securities Corp., 3.382%, due 05/15/38 919,151 702,635 CS First Boston Mortgage Securities Corp., 3.727%, due 03/15/35 705,113 688,000 DLJ Commercial Mortgage Corp., 7.300%, due 06/10/32 805,714 1,050,000 GE Capital Commercial Mortgage Corp., 5.994%, due 12/10/35 1,163,949 645,000 JP Morgan Chase Commercial Mortgage Securities Corp., 5.161%, due 10/12/37 673,493
See Accompanying Notes to Financial Statements 47 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES (CONTINUED) $ 1,350,000 JP Morgan Chase Commercial Mortgage Securities Corp., 6.162%, due 05/12/34 $ 1,504,618 1,780,000 JP Morgan Chase Commercial Mortgage Securities Corp., 6.244%, due 04/15/35 1,984,191 1,330,000 LB-UBS Commercial Mortgage Trust, 4.659%, due 12/15/26 1,369,364 1,040,000 LB-UBS Commercial Mortgage Trust, 6.226%, due 03/15/26 1,162,887 400,000 Morgan Stanley Capital I, 7.020%, due 03/15/32 462,244 1,780,000 Mortgage Capital Funding, Inc., 6.663%, due 03/18/30 2,010,970 4,046,431 Prudential Commercial Mortgage Trust, 3.669%, due 02/11/36 4,055,133 400,000 Salomon Brothers Mortgage Securities VII, 7.520%, due 12/18/09 473,290 750,000 Wachovia Bank Commercial Mortgage Trust, 3.989%, due 06/15/35 717,404 ---------------- 19,384,388 ---------------- WHOLE LOAN COLLATERALLIZED MORTGAGE: 15.9% 987,996 ABN Amro Mortgage Corp, 1.610%, due 03/25/18 991,665 825,654 ABN Amro Mortgage Corp., 6.500%, due 02/25/32 839,786 1,644,529 Bank of America Alternative Loan Trust, 5.500%, due 02/25/33 1,701,480 680,863 Bank of America Mortgage Securities, 4.413%, due 03/25/33 693,430 237,038 Bank of America Mortgage Securities, 5.242%, due 02/25/32 241,538 61,087 Bank of America Mortgage Securities, 6.250%, due 10/25/32 61,090 245,360 Bank of America Mortgage Securities, 6.500%, due 01/25/32 252,868 490,719 Bank of America Mortgage Securities, 6.500%, due 01/25/32 506,790 4,546,133 Bear Stearns Asset Backed Securities, Inc., 5.625%, due 11/25/32 4,641,383 1,085,481 CitiCorp Mortgage Securities, Inc., 1.570%, due 03/25/33 1,086,888 71,165 CitiCorp Mortgage Securities, Inc., 6.250%, due 11/25/16 72,385 4,105,581 Countrywide Alternative Loan Trust, 1.670%, due 04/25/33 4,114,757 5,618,741 Countrywide Home Loans, 1.510%, due 08/25/18 5,576,709 1,324,638 Countrywide Home Loans, 1.620%, due 04/25/18 1,330,814 512,537 Countrywide Home Loans, 1.620%, due 11/25/32 513,281 $ 292,368 GSR Mortgage Loan Trust, 1.820%, due 07/25/32 $ 293,209 2,932,905 MASTR Alternative Loans Trust, 6.500%, due 05/25/33 2,993,859 849,442 MASTR Asset Securitization Trust, 8.000%, due 06/25/33 879,738 4,200,000 +,XX MLCC Mortgage Investors Inc, 1.440%, due 10/25/28 4,200,000 358,139 Residential Accredit Loans, Inc., 7.750%, due 05/25/27 357,940 9,384,551 Residential Funding Mortgage Sec I, 1.560%, due 11/25/18 9,348,468 2,378,462 Washington Mutual, 1.620%, due 01/25/18 2,384,319 3,010,150 Washington Mutual, 1.720%, due 03/25/33 3,016,738 4,738,805 Washington Mutual, 5.000%, due 06/25/18 4,892,103 1,460,000 Wells Fargo Mortgage Backed Securities Trust, 4.500%, due 08/25/18 1,395,983 101,824 Wells Fargo Mortgage Backed Securities Trust, 6.000%, due 12/25/16 103,845 ---------------- 52,491,066 ---------------- WHOLE LOAN COLLATERALLIZED PLANNED AMORTIZATION CLASS: 1.4% 2,178,202 MASTR Alternative Loans Trust, 8.500%, due 05/25/33 2,321,432 1,672,534 Residential Funding Mortgage Sec I, 1.520%, due 11/25/17 1,681,304 611,305 Residential Funding Securities Corp., 8.500%, due 05/25/33 679,042 ---------------- 4,681,778 ---------------- Total Collateralized Mortgage Obligation (Cost $78,081,436) 78,123,323 ---------------- OTHER BONDS: 3.4% SOVEREIGN: 3.4% 571,000 @@ ARG Boden, 0.000%, due 08/03/12 358,874 740,000 @@ Brazilian Government Intl. Bond, 10.000%, due 08/07/11 728,900 515,000 @@ Brazilian Government Intl. Bond, 11.000%, due 08/17/40 489,250 943,000 @@,XX Central Bank of Nigeria, 0.000%, due 01/05/10 365,413 700,000 @@ Colombia Government Intl. Bond, 10.000%, due 01/23/12 764,750 336,000 @@,L Colombia Government Intl. Bond, 11.750%, due 02/25/20 395,640 518,000 @@,S,L Mexico Government Intl. Bond, 4.625%, due 10/08/08 529,655 809,000 @@,L Mexico Government Intl. Bond, 6.625%, due 03/03/15 851,876 389,000 @@,L Peru Government Intl. Bond, 9.125%, due 02/21/12 434,708 711,000 @@ Philippine Government Intl. Bond, 9.875%, due 01/15/19 775,879 476,000 @@ Republic of Bulgaria, 8.250%, due 01/15/15 544,699
See Accompanying Notes to Financial Statements 48 ING Intermediate Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- SOVEREIGN (CONTINUED) $ 202,000 @@ Republic of Peru, 4.500%, due 03/07/17 $ 178,940 1,844,000 @@ Russia Government Intl. Bond, 5.000%, due 03/31/30 1,747,189 135,000 @@,L Turkey Government Intl. Bond, 9.500%, due 01/15/14 138,038 1,037,000 @@,L Turkey Government Intl. Bond, 12.375%, due 06/15/09 1,221,067 150,000 @@,# Ukraine Government Intl. Bond, 7.650%, due 06/11/13 150,000 168,562 @@ Ukraine Government Intl. Bond, 11.000%, due 03/15/07 187,797 385,000 @@,L Uruguay Government Intl. Bond, 7.500%, due 03/15/15 298,375 659,000 @@ Venezuela Government Intl. Bond, 9.250%, due 09/15/27 512,702 634,000 @@,# Venezuela Government Intl. Bond, 10.750%, due 09/19/13 586,450 ---------------- Total Other Bonds (Cost $10,623,097) 11,260,202 ---------------- SHARES VALUE ---------------------------------------------------------------------------------------------------- PREFERRED STOCK: 0.0% MEDIA: 0.0% 100 Cablevision Systems Corp. 10,475 27 @ Paxson Communications Corp. 2,392 550 Primedia, Inc. 52,937 ---------------- Total Preferred Stock (Cost $65,226) 65,804 ---------------- NUMBER OF WARRANTS VALUE ---------------------------------------------------------------------------------------------------- WARRANTS: 0.0% TELECOMMUNICATIONS: 0.0% 20 American Tower Corp., Expires 8/1/2008 2,460 ---------------- Total Warrants (Cost $1,502) 2,460 ---------------- Total Long Term Investments (Cost $368,656,718 ) 373,571,405 ---------------- PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 3.8% REPURCHASE AGREEMENT: 3.8% $ 12,634,000 Morgan Stanley Repurchase Agreement dated 09/30/03, 1.050%, due 10/01/03, $12,634,368 to be received upon repurchase (Collateralized by various U.S. Government Securities, 2.750%-6.500%, market value $12,959,452, due 11/15/05-03/14/08) $ 12,634,000 ---------------- Total Short-term Investments (Cost $12,634,000) 12,634,000 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $381,290,718)* 116.9% $ 386,205,405 OTHER ASSETS AND LIABILITIES-NET (16.9) (55,894,921) ----- ---------------- NET ASSETS 100.0% $ 330,310,484 ===== ================
@ Non-income producing security @@ Foreign Issuer PLC Public Limited Company REITs Real Estate Investment Trusts TBA To be announced + Step-up basis bonds. Interest rates shown reflect current and future coupon rates. # 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 September 30, 2003. XX Value of securities obtained from one or more dealers making markets in the securities which have been adjusted based on the Fund's valuation procedures. * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 6,221,204 Gross Unrealized Depreciation (1,306,517) ---------------- Net Unrealized Appreciation $ 4,914,687 ================
See Accompanying Notes to Financial Statements 49 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- CORPORATE BONDS: 27.0% AIRLINES: 1.0% $ 48,788 American Airlines, Inc., 6.977%, due 05/23/21 $ 42,165 300,000 American Airlines, Inc., 7.024%, due 10/15/09 293,247 68,569 Continental Airlines, Inc., 6.545%, due 08/02/20 67,180 55,311 US Airways Pass Through Trust, 6.850%, due 01/30/18 51,832 ---------------- 454,424 ---------------- AUTO MANUFACTURERS: 1.2% 122,000 Ford Motor Co., 6.375%, due 02/01/29 99,645 157,000 Ford Motor Co., 6.625%, due 10/01/28 132,705 320,000 L General Motors Corp., 8.375%, due 07/15/33 335,535 ---------------- 567,885 ---------------- BANKS: 4.2% 84,000 Bank of America Corp., 6.375%, due 02/15/08 94,577 135,000 # Bank of New York Institutional Capital Trust A, 7.780%, due 12/01/26 151,377 21,000 # BankAmerica Institutional, Class B, 7.700%, due 12/31/26 23,704 86,000 Barnett Capital I, 8.060%, due 12/01/26 100,136 25,000 Barnett Capital II, 7.950%, due 12/01/26 28,787 190,000 @@,# Credit Suisse First Boston/London, 7.900%, due 05/29/49 216,765 299,000 # Dresdner Funding Trust I, 8.151%, due 06/30/31 328,036 86,000 FBS Capital I, 8.090%, due 11/15/26 98,199 175,000 First Union Institutional Capital II, 7.850%, due 01/01/27 200,629 141,000 @@ HSBC Holdings PLC, 7.500%, due 07/15/09 167,346 84,000 M&T Bank Corp., 3.850%, due 04/01/13 84,337 239,000 RBS Capital Trust I, 4.709%, due 12/29/49 231,698 110,000 Wells Fargo & Co., 3.120%, due 08/15/08 109,711 125,000 #,L Westpac Capital Trust III, 5.819%, due 12/29/49 130,229 ---------------- 1,965,531 ---------------- BEVERAGES: 0.8% 158,000 @@,# Cia Brasileira de Bebidas, 8.750%, due 09/15/13 160,369 44,000 @@,# Coca-Cola HBC Finance BV, 5.125%, due 09/17/13 45,349 43,000 @@,#,L Coca-Cola HBC Finance BV, 5.500%, due 09/17/15 45,293 140,000 # Miller Brewing Co., 4.250%, due 08/15/08 143,992 ---------------- 395,003 ---------------- CHEMICALS: 0.1% $ 31,000 L Dow Chemical Co., 5.750%, due 11/15/09 $ 33,220 ---------------- 33,220 ---------------- DIVERSIFIED FINANCIAL SERVICES: 3.1% 122,000 Boeing Capital Corp., 7.375%, due 09/27/10 141,994 175,000 @@,#,XX Brazilian Merchant Voucher Receivables Ltd., 5.911%, due 06/15/11 172,594 82,000 Capital One Bank, 5.750%, due 09/15/10 86,431 21,000 CitiCorp Capital I, 7.933%, due 02/15/27 24,428 139,000 Countrywide Home Loans, Inc., 4.250%, due 12/19/07 143,388 145,000 # Farmers Exchange Capital, 7.050%, due 07/15/28 136,073 32,000 L Ford Motor Credit Co., 5.625%, due 10/01/08 32,401 62,000 Ford Motor Credit Co., 7.375%, due 10/28/09 66,167 126,000 General Electric Capital Corp., 3.500%, due 08/15/07 128,446 60,000 General Motors Acceptance Corp., 6.625%, due 10/15/05 63,954 99,000 L Lehman Brothers Holdings, Inc., 3.500%, due 08/07/08 99,309 95,000 XX,# Mangrove Bay Pass-Through Trust, 6.102%, due 07/15/33 93,868 554 @@,I Nordea Kredit Realkreditaktieselskab, 6.000%, due 07/01/29 90 95,000 @@,# PF Export Receivables Master Trust, 3.748%, due 06/01/13 94,327 97,455 @@,# PF Export Receivables Master Trust, 6.436%, due 06/01/15 97,527 50,000 # Wachovia Capital Trust V, 7.965%, due 06/01/27 60,821 ---------------- 1,441,818 ---------------- ELECTRIC: 2.7% 47,000 # Calpine Corp., 6.853%, due 07/15/07 44,239 149,000 # Consumers Energy Co., 4.800%, due 02/17/09 152,988 56,347 I East Coast Power LLC, 7.536%, due 06/30/17 58,037 94,000 @@ Empresa Nacional de Electricidad SA/Chile, 8.500%, due 04/01/09 102,300 20,000 @@,I Enersis SA/Cayman Island, 6.600%, due 12/01/26 20,055 129,000 # Indianapolis Power & Light, 6.300%, due 07/01/13 132,540 92,000 Nisource Finance Corp., 6.150%, due 03/01/13 98,676 59,000 Nisource Finance Corp., 7.625%, due 11/15/05 65,277 131,000 # Ohio Edison Co., 4.000%, due 05/01/08 129,638 195,000 Ohio Power Co., 6.375%, due 07/15/33 198,706
See Accompanying Notes to Financial Statements 50 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- ELECTRIC (CONTINUED) $ 89,000 # Oncor Electric Delivery Co., 6.375%, due 01/15/15 $ 97,873 71,000 Penn Electric Co., 6.625%, due 04/01/19 75,271 77,000 # TXU Energy Co., 7.000%, due 03/15/13 83,880 ---------------- 1,259,480 ---------------- ENVIRONMENTAL CONTROL: 0.1% 58,000 L Allied Waste North America, 7.625%, due 01/01/06 60,900 ---------------- 60,900 ---------------- FOOD: 1.3% 43,000 Kroger Co., 5.500%, due 02/01/13 45,058 63,000 Kroger Co., 7.250%, due 06/01/09 73,394 114,000 Safeway, Inc., 4.800%, due 07/16/07 120,160 169,000 Supervalu, Inc., 7.875%, due 197,756 158,000 Tyson Foods, Inc., 7.250%, due 10/01/06 176,099 ---------------- 612,467 ---------------- FOREST PRODUCTS & PAPER: 0.7% 83,000 @@ Abitibi-Consolidated, Inc., 6.950%, due 12/15/06 86,580 47,000 @@ Abitibi-Consolidated, Inc., 6.950%, due 04/01/08 48,429 69,000 Fort James Corp., 6.625%, due 09/15/04 71,070 110,000 Weyerhaeuser Co., 6.875%, due 12/15/33 116,701 ---------------- 322,780 ---------------- INSURANCE: 0.8% 134,000 # Farmers Insurance Exchange, 8.625%, due 05/01/24 137,077 94,000 # Monumental Global Funding II, 3.850%, due 03/03/08 96,144 132,000 # Zurich Capital Trust I, 8.376%, due 06/01/37 151,788 ---------------- 385,009 ---------------- IRON/STEEL: 0.0% 25,000 Armco, Inc., 9.000%, due 09/15/07 18,125 ---------------- 18,125 ---------------- LODGING: 0.5% 100,000 MGM Mirage, 6.000%, due 10/01/09 101,000 58,000 Park Place Entertainment Corp., 9.375%, due 02/15/07 64,235 59,000 Starwood Hotels & Resorts Worldwide, Inc., 7.375%, due 05/01/07 63,573 ---------------- 228,808 ---------------- MEDIA: 0.7% 48,000 L AOL Time Warner, Inc., 6.875%, due 05/01/12 53,964 39,000 # Echostar DBS Corp., 0.000%, due 10/01/08 39,926 54,000 # Echostar DBS Corp., 5.750%, due 10/01/08 54,338 $ 100,000 L Mediacom Broadband LLC, 11.000%, due 07/15/13 $ 105,750 66,000 Time Warner, Inc., 6.950%, due 01/15/28 69,953 ---------------- 323,931 ---------------- MISCELLANEOUS MANUFACTURING: 0.4% 170,000 General Electric Co., 5.000%, due 02/01/13 174,594 ---------------- 174,594 ---------------- MULTI-NATIONAL: 0.6% 138,000 @@ Corp Andina de Fomento CAF, 5.200%, due 05/21/13 137,063 135,000 @@ Corp Andina de Fomento CAF, 6.875%, due 03/15/12 150,202 ---------------- 287,265 ---------------- OIL AND GAS: 2.4% 105,000 Amerada Hess Corp., 5.900%, due 08/15/06 113,263 95,000 L Amerada Hess Corp., 7.125%, due 03/15/33 100,219 134,000 Enterprise Products Partners LP, 6.875%, due 03/01/33 144,911 355,000 @@ Husky Oil Co., 8.900%, due 417,569 170,000 L Pemex Project Funding Master Trust, 7.375%, due 12/15/14 183,600 73,000 Valero Energy Corp., 7.500%, due 04/15/32 81,544 73,000 Valero Energy Corp., 8.750%, due 06/15/30 91,317 ---------------- 1,132,423 ---------------- PACKAGING AND CONTAINERS: 0.6% 134,000 #,L Sealed Air Corp., 5.625%, due 07/15/13 135,997 150,000 # Sealed Air Corp., 6.950%, due 05/15/09 167,867 ---------------- 303,864 ---------------- PIPELINES: 0.6% 136,000 CenterPoint Energy Resources Corp., 8.125%, due 07/15/05 145,915 118,000 Kinder Morgan Energy Partners LP, 7.300%, due 08/15/33 136,528 ---------------- 282,443 ---------------- REAL ESTATE: 0.7% 127,000 EOP Operating LP, 7.750%, due 11/15/07 147,822 153,000 Liberty Property LP, 7.750%, due 04/15/09 181,964 ---------------- 329,786 ---------------- REITs: 0.6% 85,000 Simon Property Group LP, 4.875%, due 03/18/10 87,805 165,000 Simon Property Group LP, 6.375%, due 11/15/07 183,726 ---------------- 271,531 ----------------
See Accompanying Notes to Financial Statements 51 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- RETAIL: 0.2% $ 65,000 Sears Roebuck Acceptance, 6.250%, due 05/01/09 $ 72,277 ---------------- 72,277 ---------------- SAVINGS AND LOANS: 0.3% 142,000 Washington Mutual, Inc., 4.375%, due 01/15/08 147,407 ---------------- 147,407 ---------------- TELECOMMUNICATIONS: 3.4% 91,000 AT&T Corp., 6.000%, due 03/15/09 98,122 115,000 L AT&T Corp., 7.800%, due 11/15/11 133,165 55,000 L AT&T Corp., 8.500%, due 11/15/31 65,346 128,000 AT&T Wireless Services, Inc., 8.125%, due 05/01/12 152,269 135,000 Sprint Capital Corp., 6.000%, due 01/15/07 145,409 216,000 Sprint Capital Corp., 6.875%, due 11/15/28 211,382 244,000 TCI Communications Finance, 9.650%, due 03/31/27 289,445 150,000 @@ TELUS Corp., 8.000%, due 06/01/11 175,420 59,000 Verizon Florida, Inc., 6.125%, due 01/15/13 64,657 280,000 Verizon Virginia, Inc., 4.625%, due 03/15/13 276,096 1,000,000 I,** WinStar Communications, Inc., 0.000%, due 04/15/10 100 ---------------- 1,611,411 ---------------- Total Corporate Bonds (Cost $12,721,557) 12,682,382 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS: 43.6% FEDERAL HOME LOAN MORTGAGE CORPORATION: 3.2% 480,000 L 2.875%, due 09/15/05 491,712 51,955 5.500%, due 01/01/14 54,022 25,316 5.500%, due 02/01/14 26,323 440,000 5.875%, due 03/21/11 484,682 224,153 6.500%, due 02/01/32 234,132 232,960 7.000%, due 06/01/29 246,216 867 I 9.000%, due 06/01/06 907 ---------------- 1,537,994 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION: 38.6% 480,000 L 2.375%, due 04/13/06 481,454 490,000 L 2.875%, due 05/19/08 483,221 455,000 4.000%, due 09/02/08 467,496 228,000 XX 4.750%, due 12/25/42 233,237 1,300,000 5.000%, due 10/15/18 1,332,094 2,700,000 5.000%, due 11/15/33 2,691,562 850,000 5.250%, due 04/15/07 929,526 400,000 5.500%, due 10/15/18 413,875 1,750,000 5.500%, due 11/01/32 1,778,984 825,000 6.000%, due 09/01/17 861,452 298,224 6.000%, due 07/25/24 314,811 1,281,807 6.000%, due 02/01/32 1,323,191 606,485 6.000%, due 10/01/32 626,111 68,002 6.000%, due 10/01/32 70,203 1,000,000 6.000%, due 11/15/33 1,029,375 21,491 I 6.500%, due 02/01/09 22,773 76,446 6.500%, due 08/01/15 80,793 $ 491,591 6.500%, due 06/01/28 $ 513,511 584,653 6.500%, due 12/01/31 609,649 249,975 6.500%, due 07/01/32 260,573 442,750 6.500%, due 08/01/32 461,658 99,990 6.500%, due 09/01/32 104,261 84,094 6.500%, due 10/01/32 87,685 71,373 7.000%, due 03/01/15 75,964 450,000 7.000%, due 09/01/28 476,950 822,408 7.000%, due 09/01/32 870,252 89,832 7.000%, due 11/01/32 95,058 318,205 7.500%, due 07/01/21 340,073 1,035,881 7.500%, due 02/01/31 1,110,970 8,409 8.000%, due 08/01/30 9,087 861 I 9.500%, due 06/01/05 890 1,343 I 9.500%, due 07/01/06 1,358 1,798 I 9.500%, due 05/01/07 1,809 ---------------- 18,159,906 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 1.8% 117,197 6.500%, due 06/15/29 123,221 457,424 6.500%, due 05/15/31 480,848 45,193 7.500%, due 11/15/29 48,403 143,226 8.000%, due 06/20/30 153,741 15,452 8.000%, due 07/15/30 16,700 605 8.500%, due 02/15/21 667 ---------------- 823,580 ---------------- Total U.S. Government Agency Obligations (Cost $20,135,625) 20,521,480 ---------------- U.S. TREASURY OBLIGATIONS: 10.2% U.S. TREASURY BONDS: 1.8% 793,000 L 5.375%, due 02/15/31 851,236 ---------------- 851,236 ---------------- U.S. TREASURY NOTES: 8.4% 665,000 L 2.000%, due 08/31/05 672,378 607,000 L 2.375%, due 08/15/06 615,607 700,000 S, L 3.000%, due 01/31/04 704,813 836,000 L 3.125%, due 09/15/08 847,887 1,093,000 L 4.250%, due 08/15/13 1,120,795 ---------------- 3,961,480 ---------------- Total U.S. Treasury Obligations (Cost $4,681,863) 4,812,716 ---------------- ASSET-BACKED SECURITIES: 3.3% AUTOMOBILE ASSET BACKED SECURITIES: 0.6% 300,000 USAA Auto Owner Trust, 2.040%, due 02/16/10 298,719 ---------------- 298,719 ---------------- COMMERCIAL MORTGAGE BACKED SECURITIES: 0.2% 68,000 GMAC Commercial Mortgage Securities, Inc., 6.700%, due 04/15/34 78,154 ---------------- 78,154 ---------------- CREDIT CARD ASSET BACKED SECURITIES: 1.5% 85,000 Bank One Issuance Trust, 4.540%, due 09/15/10 87,208
See Accompanying Notes to Financial Statements 52 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- CREDIT CARD ASSET BACKED SECURITIES (CONTINUED) $ 88,000 Capital One Master Trust, 4.900%, due 03/15/10 $ 93,983 305,000 Citibank Credit Card Issuance Trust, 5.650%, due 06/16/08 331,696 156,000 MBNA Credit Card Master Note Trust, 4.950%, due 06/15/09 168,168 ---------------- 681,055 ---------------- HOME EQUITY ASSET BACKED SECURITIES: 0.5% 207,814 Emergent Home Equity Loan Trust, 7.080%, due 12/15/28 223,311 ---------------- 223,311 ---------------- OTHER ASSET BACKED SECURITIES: 0.5% 85,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 2.734%, due 09/25/24 85,199 50,000 Chase Funding Mortgage Loan Asset-Backed Certificates, 4.045%, due 05/25/33 50,182 115,000 Residential Asset Mortgage Products, Inc., 2.140%, due 02/25/30 113,670 ---------------- 249,051 ---------------- Total Asset Backed Securities (Cost $1,517,331) 1,530,290 ---------------- COLLATERALIZED MORTGAGE OBLIGATION: 7.5% COMMERCIAL MORTGAGE BACKED SECURITIES: 5.9% 200,000 CS First Boston Mortgage Securities Corp., 3.382%, due 05/15/38 193,505 480,000 CS First Boston Mortgage Securities Corp., 3.861%, due 03/15/36 487,718 64,000 CS First Boston Mortgage Securities Corp., 7.808%, due 04/14/62 76,645 350,000 DLJ Commercial Mortgage Corp., 6.240%, due 11/12/31 391,743 925,000 DLJ Commercial Mortgage Corp., 7.300%, due 06/10/32 1,083,264 160,000 GE Capital Commercial Mortgage Corp., 5.994%, due 12/10/35 177,364 100,000 JP Morgan Chase Commercial Mortgage Securities Corp., 5.161%, due 10/12/37 104,417 250,000 Wachovia Bank Commercial Mortgage Trust, 3.989%, due 06/15/35 239,135 ---------------- 2,753,791 ---------------- WHOLE LOAN COLLATERALLIZED MORTGAGE: 0.7% 122,792 MASTR Asset Securitization Trust, 8.000%, due 06/25/33 127,172 200,000 Wells Fargo Mortgage Backed Securities Trust, 4.500%, due 08/25/18 191,230 ---------------- 318,402 ---------------- WL COLLATERALLIZED PLANNED AMORTIZATION CLASS: 0.9% $ 314,865 MASTR Alternative Loans Trust, 8.500%, due 05/25/33 $ 335,569 88,036 Residential Funding Securities Corp., 8.500%, due 05/25/33 97,791 ---------------- 433,360 ---------------- Total Collateralized Mortgage Obligation (Cost $3,562,947) 3,505,553 ---------------- OTHER BONDS: 4.1% SOVEREIGN: 4.1% 128,000 @@ Brazilian Government Intl. Bond, 2.188%, due 04/15/12 103,561 150,000 @@ Brazilian Government Intl. Bond, 10.000%, due 08/07/11 147,750 70,000 @@ Brazilian Government Intl. Bond, 11.000%, due 08/17/40 66,500 138,000 XX Central Bank of Nigeria, 0.000%, due 01/05/10 53,475 91,000 @@ Colombia Government Intl. Bond, 10.000%, due 01/23/12 99,418 49,000 @@ Colombia Government Intl. Bond, 11.750%, due 02/25/20 57,698 70,000 @@ Dominican Republic Intl. Bond, 9.040%, due 01/23/13 61,262 70,000 @@ Ecuador Government Intl. Bond, 6.000%, due 08/15/30 44,063 41,000 @@,# El Salvador Government Intl. Bond, 7.750%, due 01/24/23 43,255 75,000 @@ Mexico Government Intl. Bond, 4.625%, due 10/08/08 76,688 118,000 @@,L Mexico Government Intl. Bond, 6.625%, due 03/03/15 124,254 50,399 @@ Panama Government Intl. Bond, 1.938%, due 07/17/16 43,315 47,000 @@ Peru Government Intl. Bond, 9.125%, due 02/21/12 52,523 100,000 @@ Philippine Government Intl. Bond, 9.875%, due 01/15/19 109,125 79,000 @@ Republic of Argentina, 1.369%, due 08/03/12 49,652 70,000 @@ Republic of Bulgaria, 8.250%, due 01/15/15 80,103 30,000 @@ Republic of Peru, 4.500%, due 03/07/17 26,575 254,000 @@ Russia Government Intl. Bond, 5.000%, due 03/31/30 240,664 19,000 @@,L Turkey Government Intl. Bond, 9.500%, due 01/15/14 19,428 140,000 @@ Turkey Government Intl. Bond, 12.375%, due 06/15/09 164,849 22,000 @@ Ukraine Government Intl. Bond, 7.650%, due 06/11/13 22,000 20,907 @@,# Ukraine Government Intl. Bond, 11.000%, due 03/15/07 23,293 53,000 @@ Uruguay Government Intl. Bond, 7.500%, due 03/15/15 41,075 91,000 @@ Venezuela Government Intl. Bond, 9.250%, due 09/15/27 70,798 93,000 @@,# Venezuela Government Intl. Bond, 10.750%, due 09/19/13 86,025 ---------------- Total Other Bonds (Cost $1,893,603) 1,907,349 ----------------
See Accompanying Notes to Financial Statements 53 ING Strategic Bond Fund PORTFOLIO OF INVESTMENTS as of September 30, 2003 (Unaudited) (Continued)
NUMBER OF WARRANTS VALUE ---------------------------------------------------------------------------------------------------- WARRANTS: 0.0% DIVERSIFIED FINANCIAL SERVICES: 0.0% 250 @,I,X North Atlantic Trading Co., Expires 9/30/2003 $ -- ---------------- Total Warrants (Cost $0) -- ---------------- Total Long-Term Investments (Cost $44,512,926) 44,959,770 ---------------- PRINCIPAL AMOUNT VALUE ---------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 19.3% REPURCHASE AGREEMENT: 19.3% $ 9,050,000S Goldman Sachs Repurchase Agreement dated 9/30/03, 1.090%, due 10/01/03 $9,050,274 to be received upon repurchase (Collateralized by $9,141,000 Various U.S. Government obligations, 0.000% to 6.875% Market Value $9,232,167 due 10/09/2003 to 09/30/2013) 9,050,000 ---------------- Total Short-term Investments (Cost $9,050,000) 9,050,000 ---------------- TOTAL INVESTMENTS IN SECURITIES (COST $53,562,926)* 115.0% $ 54,009,770 OTHER ASSETS AND LIABILITIES-NET (15.0) (7,043,982) ----- ---------------- NET ASSETS 100.0% $ 46,965,788 ===== ================
@ Non-income producing security @@ Foreign Issuer REITs Real Estate Investment Trusts # 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 September 30, 2003 S Segregated securities for when-issued or delayed delivery securities held at September 30, 2003. ** Defaulted 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 which have been adjusted based on the Fund's valuation procedures. * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 1,034,812 Gross Unrealized Depreciation (587,968) ---------------- Net Unrealized Appreciation $ 446,844 ================
See Accompanying Notes to Financial Statements 54 SHAREHOLDER MEETING INFORMATION (Unaudited) A SPECIAL MEETING OF SHAREHOLDERS OF THE FUNDS WAS HELD JULY 22, 2003, AT THE OFFICES OF ING FUNDS, 7337 EAST DOUBLETREE RANCH ROAD, SCOTTSDALE, AZ 85258. A BRIEF DESCRIPTION OF EACH MATTER VOTED UPON AS WELL AS THE RESULTS ARE OUTLINED BELOW: 1. To approve a Sub-Advisory Agreement between ING Investments, LLC and Aeltus Investment Management, Inc., with no change in the Adviser, the portfolio manager(s), or the overall management fee paid by the Fund. 3. To transact such other business, not currently contemplated, that may properly come before the Special Meeting or any adjournment(s) thereof in the discretion of the proxies or their substitutes.
SHARES VOTED AGAINST OR SHARES BROKER TOTAL SHARES PROPOSAL SHARES VOTED FOR WITHHELD ABSTAINED NON-VOTE VOTED -------- ---------------- ------------ ---------- -------- ------------- ING GNMA Income Fund 1 78,774,693 1,440,831 2,032,327 -- 82,247,851 ING High Yield Opportunity Fund 1 44,274,656 691,453 904,261 -- 45,870,370 ING Strategic Bond Fund 1 3,660,225 88,691 60,347 -- 3,809,263 ING GNMA Income Fund 3 78,000,056 1,897,914 2,349,881 -- 82,247,851 ING High Yield Opportunity Fund 3 43,993,421 921,466 955,483 -- 45,870,370 ING Strategic Bond Fund 3 3,686,231 63,037 59,995 -- 3,809,263
55 TRUSTEE AND OFFICER INFORMATION (Unaudited) The business and affairs of the Funds are managed under the direction of the Funds' Board of Trustees. A trustee who is not an interested person of the Fund, as defined in the 1940 Act, is an independent trustee ("Independent Trustee"). The Trustees of the Funds are listed below. The Statement of Additional Information includes additional information about trustees of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH THE TIME DURING THE OVERSEEN HELD BY AND AGE REGISTRANT(S) SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ---------------------------- ---------------- ------------- ------------------------- --------------- ----------------------- NON-INTERESTED TRUSTEES: Paul S. Doherty(2) Trustee February Mr. Doherty is 116 None 7337 E. Doubletree Ranch Rd. 2001 - President and Partner, Scottsdale, Arizona 85258 present Doherty, Wallace, Born: 1934 Pillsbury and Murphy, P.C., Attorneys (1996 - Present); Director, Tambrands, Inc. (1993 - 1998); and Trustee of each of the funds managed by Northstar Investment Management Corporation (1993 - 1999). J. Michael Earley(3) Trustee February President and Chief 116 None 7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, Scottsdale, Arizona 85258 present Bankers Trust Company, Born: 1945 N.A. (1992 - Present). R. Barbara Gitenstein(2) Trustee February President, College of 116 None 7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - Scottsdale, Arizona 85258 present Present). Formerly, Born: 1948 Executive Vice President and Provost, Drake University (1992 - 1998). Walter H. May(2) Trustee February Retired. Formerly, 116 Best Prep Charity 7337 E. Doubletree Ranch Rd. 2001 - Managing Director and (1991 - Present). Scottsdale, Arizona 85258 present Director of Marketing, Born: 1936 Piper Jaffray, Inc.; Trustee of each of the funds managed by Northstar Investment Management Corporation (1996 - 1999).
56 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH THE TIME DURING THE OVERSEEN HELD BY AND AGE REGISTRANT(S) SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ---------------------------- ---------------- ------------- ------------------------- -------------- ----------------------- David W.C. Putnam(3) Trustee February President and Director, 116 Director of F.L. 7337 E. Doubletree Ranch Rd. 2001 - F.L. Putnam Securities Putnam Securities Scottsdale, Arizona 85258 present Company, Inc. and its company, Inc. (June Born: 1939 affiliates; President, 1978 to Present); Secretary and Trustee, F.L. Putnam The Principled Equity Investment Managment Market Fund. Formerly, Company (December Trustee, Trust Realty 2001 to Present); Trust (December Corp.; Asian Amerrican Bank Anchor Investment and Trust company Trust; Bow 2000 - (June 1992 to Present); Ridge Mining Persent); and Notre Company and each of Dame Health Care the F.L. Putnam funds Center (1991 to managed by Northstar Present). He is also Investment Foundation a Trustee of The Management Corporation Principiled Equity (1994 - 1999). Market Fund (November 1996 to Present); Anchor International Bond (December 2000 - Present); Progressive Capital Accumulation Trust (August 1998 - Present); Principled Equity Market Fund (November 1996 - Present), Mercy Endowment Foundation (1995 - Present); Director, F.L. Putnam Investment Management Company (December 2001 - Present); Asian American Bank and Trust Company (June 1992 - Present); and Notre Dame Health Care Center (1991 - Present) F.L. Putnam Securities Company, Inc. (June 1978 - Present); and an Honorary Trustee, Mercy Hospital (1973 - Present). Blaine E. Rieke(3) Trustee October General Partner, 116 Morgan Chase Trust Co. 7337 E. Doubletree Ranch Rd. 1998 - Huntington Partners (January 1998 - Scottsdale, Arizona 85258 present (January 1997 - Present). Born: 1933 Present). Chairman of the Board and Trustee of each of the funds managed by ING Investment Management Co. LLC (November 1998 - February 2001). Roger B. Vincent(3) Trustee February President, Springwell 116 Director, AmeriGas 7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - Propane, Inc. (1998 - Scottsdale, Arizona 85258 present Present). Formerly, Present). Born: 1945 Director Tatham Offshore, Inc. (1996 - 2000).
57 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH THE TIME DURING THE OVERSEEN HELD BY AND AGE REGISTRANT(S) SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ---------------------------- ---------------- ------------- ------------------------- --------------- ----------------------- Richard A. Wedemeyer(3) Trustee October Retired. 116 Touchstone Consulting 7337 E. Doubletree Ranch Rd. 1998 - Mr. Wedemeyer was Group (1997 - Present). Scottsdale, Arizona 85258 present formerly Vice Born: 1936 President - Finance and Administration, Channel Corporation (June 1996 - April 2002). Formerly Trustee, First Choice Funds (1997 - 2001); and of each of the funds managed by ING Investment Management Co. LLC (1998 - 2001). INTERESTED TRUSTEES: Thomas J. McInerney(4) Trustee February Chief Executive Officer, 170 Director, Hemisphere, 7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial Inc. (May 2003 - Scottsdale, Arizona 85258 present Services (September Present). Director, Born: 1956 2001 to present); Equitable Life General Manager and Insurance Co., Golden Chief Executive Officer, American Life ING U.S. Worksite Insurance Co., Life Financial Services Insurance Company of (December 2000 to Georgia, Midwestern present); Member, ING United Life Insurance Americas Executive Co., ReliaStar Life Committee (2001 to Insurance Co., present); President, Security Life of Chief Executive Officer Denver, Security and Director of Connecticut Life Northern Life Insurance Insurance Co., Company (2001 to Southland Life present), ING Aeltus Insurance Co., USG Holding Company, Inc. Annuity and Life (2000 to present), ING Company and United Retail Holding Life and Annuity Company (1998 to Insurance Co. Inc. present). Formerly, ING (March 2001 - Life Insurance and Present); Trustee, Annuity Company Ameribest Life (1997 to November Insurance Co., (2001 - 2002), ING Retirement 2003); Trustee, First Holdings, Inc. (1997 to Columbine Life March 2003); General Insurance Co., (2001 - Manager and Chief 2002); Member of the Executive Officer, ING Board, National Worksite Division Commission on (December 2000 to Retirement Policy. October 2001), Competitiveness and President, ING-SCI, Inc. Technology of (August 1997 to Connecticut, December 2000); Connecticut Business President, Aetna and Industry Financial Services Association, Bushnell; (August 1997 to Connecticut Forum; December 2000); and Metro Hartford Chamber has held a variety of of Commerce and is line and corporate staff Chairman, Concerned positions since 1978. Citzens for Effective Government.
58 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH THE TIME DURING THE OVERSEEN HELD BY AND AGE REGISTRANT(S) SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ---------------------------- ---------------- ------------- ------------------------- --------------- ----------------------- John G. Turner(5) Trustee February Chairman, Hillcrest 116 Director, Hormel Foods 7337 E. Doubletree Ranch Rd. 2001 - Capital Partners Corporation (March Scottsdale, Arizona 85258 present (May 2002 - Present); 2000 - Present); Shopko Born: 1939 President, Turner Stores, Inc. (August Investment Company 1999 - Present); and (January 2002 - M.A. Mortenson Present). Mr. Turner Company (March 2002 - was formerly Vice Present). Chairman of ING Americas (2000 - 2002); Chairman and Chief Executive Officer of ReliaStar Financial Corp.
---------- (1) Trustees serve until their successors are duly elected and qualified, subject to the Board's retirement policy. (2) Valuation Committee member. (3) Audit Committee member. (4) Mr. McInerney is an "interested person," as defined by the 1940 Act, because of his affiliation with ING U.S. Worksite Financial Services, an affiliate of ING Investments. (5) Mr. Turner is an "interested person," as defined by the 1940 Act, because of his affiliation with ING Americas, an affiliate of ING Investments. 59 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ---------------------------- ------------------------- ------------------------- --------------------------------------- James M. Hennessy President and Chief February 2001 - President and Chief Executive 7337 E. Doubletree Ranch Rd. Executive Officer present Officer of ING Capital Corporation, Scottsdale, Arizona 85258 LLC, ING Funds Services, LLC, ING Born: 1949 Chief Operating February 2002 - Advisors, Inc., ING Investments, Officer present LLC, Lexington Funds Distributor, Inc., Express America T.C. Inc. and Senior Executive Vice October 2000 - EAMC Liquidation Corp. (since President and February 2001 December 2001); Executive Vice Secretary President and Chief Operating Officer of ING Funds Distributor, LLC (since June 2000). Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief 7337 E. Doubletree Ranch Rd. President and present Financial Officer and Treasurer of Scottsdale, Arizona 85258 Assistant Secretary ING Funds Services, LLC, ING Funds Born: 1958 Distributor, LLC, ING Advisors, Inc., Principal Financial October 2000 - ING Investments, LLC Officer present (December 2001 to present), Lexington Funds Distributor, Inc., Senior Vice President October 2000 - Express America T.C. Inc. and February 2002 EAMC Liquidation Corp. (since December 2001). Formerly, Executive Vice President, Chief Financial Officer and Treasurer of ING Quantitative Management, Inc. (December 2001 to October 2002); and Senior Vice President, ING Funds Services, LLC, ING Investments, LLC, and ING Funds Distributor, LLC (June 1998 to December 2001). Stanley D. Vyner Executive Vice October 2000 - Executive Vice President of ING 7337 E. Doubletree Ranch Rd. President present Advisors, Inc. and ING Investments, Scottsdale, Arizona 85258 LLC (July 2000 to present) and Born: 1950 Chief Investment Officer of the International Portfolios, ING Investments, LLC (July 1996 to present). Formerly, President and Chief Executive Officer of ING Investments, LLC (August 1996 to August 2000). Robert S. Naka Senior Vice President October 2000 - Senior Vice President and Assistant 7337 E. Doubletree Ranch Rd. and Assistant present Secretary of ING Funds Services, Scottsdale, Arizona 85258 Secretary LLC, ING Funds Distributor, LLC, Born: 1963 ING Advisors, Inc., ING Investments, LLC (October 2001 to present) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Senior Vice President and Assistant Secretary for ING Quantitative Management, Inc. (October 2001 to October 2002); Vice President, ING Investments, LLC (April 1997 to October 1999), and ING Funds Services, LLC (February 1997 to August 1999). Kimberly A. Anderson Vice President February 2001 - Vice President and Assistant 7337 E. Doubletree Ranch Rd. present Secretary of ING Funds Services, Scottsdale, Arizona 85258 LLC, ING Funds Distributor, LLC, Born: 1964 Secretary February 2001 - ING Advisors, Inc., ING Investments, August 2003 LLC (since October 2001) and Lexington Funds Distributor, Inc. (since December 2001). Formerly, Vice President for ING Quantitative Management, Inc. (October 2001 to October 2002); Assistant Vice President of ING Funds Services, LLC (November 1999 to January 2001) and has held various other positions with ING Funds Services, LLC for more than the last five years.
60 TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued)
PRINCIPAL TERM OF OFFICE OCCUPATION(S) NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS ---------------------------- ------------------------- ------------------------- --------------------------------------- Robyn L. Ichilov Vice President October 2000 - Vice President of ING Funds 7337 E. Doubletree Ranch Rd. present Services, LLC (October 2001to Scottsdale, Arizona 85258 present) and ING Investments, LLC Born: 1967 Treasurer March 2001 - present (August 1997 to present); Accounting Manager, ING Investments, LLC (November 1995 to present). J. David Greenwald Vice President August 2003 - present Vice President of Mutual Fund 7337 E. Doubletree Ranch Rd. Compliance of ING Funds Services, Scottsdale, Arizona 85258 LLC (May 2003 - Present). Formerly Born: 1957 Assistant Treasurer and Director of Mutual Fund Compliance and Operations of American Skandia, A Prudential Financial Company (October 1996 - May 2003). Lauren D. Bensinger Vice President February 2003 - Vice President and Chief 7337 E. Doubletree Ranch Rd. present Compliance Officer, ING Funds Scottsdale, Arizona 85258 Distributor, LLC. (July 1995 - Born: 1957 Present); Vice President (February 1996 - Present) and Chief Compliance Officer (October 2001 - Present) ING Investments, LLC; Vice President and Chief Compliance Officer, ING Advisors, Inc. (July 2000 - Present), Vice President and Chief Compliance Officer, ING Quantitative Management, Inc. (July 2000 - September 2002), and Vice President, ING Fund Services, LLC (July 1995 - Present). Theresa Kelety Secretary August 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). Todd Modic Vice President August 2003 - present Vice President of Financial 7337 E. Doubletree Ranch Rd. Reporting - Fund Accounting of Scottsdale, Arizona 85258 Assistant Vice August 2001 - ING Funds Services, LLC Born: 1967 President August 2003 (September 2002 to present). Director of Financial Reporting of ING Investments, LLC ( March 2001 to September 2002). Formerly, Director of Financial Reporting, Axient Communications, Inc. (May 2000 to January 2001) and Director of Finance, Rural/Metro Corporation (March 1995 to May 2000). Susan P. Kinens Assistant Vice February 2003 - Assistant Vice President and 7337 E. Doubletree Ranch Rd. President and present 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. Maria M. Anderson Assistant Vice August 2001 - present Assistant Vice President of ING 7337 E. Doubletree Ranch Rd. President Funds Services, LLC (since Scottsdale, Arizona 85258 October 2001). Formerly, Manager Born: 1958 of Fund Accounting and Fund Compliance, ING Investments, LLC (September 1999 to November 2001); and Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 to August 1999).
---------- (1) The officers hold office until the next annual meeting of the Trustees and until their successors have been elected and qualified. 61 (THIS PAGE INTENTIONALLY LEFT BLANK) ING Funds Distributor, LLC offers the funds listed below. Before investing in a fund, shareholders should carefully review the fund's prospectus. Investors may obtain a copy of a prospectus of any ING Fund by calling (800) 992-0180. INTERNATIONAL EQUITY FUNDS ING Emerging Countries Fund ING Foreign Fund ING International Fund ING International Growth Fund ING International SmallCap Growth Fund ING International Value Fund ING Precious Metals Fund ING Russia Fund INTERNATIONAL GLOBAL EQUITY FUNDS ING Global Equity Dividend Fund ING Global Real Estate Fund ING Worldwide Growth Fund DOMESTIC EQUITY GROWTH FUNDS ING Growth Fund ING Growth + Value Fund ING Growth Opportunities Fund ING LargeCap Growth Fund ING MidCap Opportunities Fund ING SmallCap Opportunities Fund ING Small Company Fund ING Technology Fund ING Disciplined LargeCap Fund DOMESTIC EQUITY INDEX FUNDS ING Index Plus LargeCap Fund ING Index Plus MidCap Fund ING Index Plus SmallCap Fund DOMESTIC EQUITY VALUE FUNDS ING Financial Services Fund ING MagnaCap Fund ING Tax Efficient Equity Fund ING Value Opportunity Fund ING SmallCap Value Fund ING MidCap Value Fund DOMESTIC EQUITY GROWTH AND INCOME FUNDS ING Equity and Bond Fund ING Convertible Fund ING Real Estate Fund ING Balanced Fund ING Growth and Income Fund FIXED INCOME FUNDS ING Bond Fund ING Classic Money Market Fund* ING Government Fund ING GNMA Income Fund ING High Yield Opportunity Fund ING High Yield Bond Fund ING Intermediate Bond Fund ING Lexington Money Market Trust* ING National Tax Exempt Bond Fund ING Money Market Fund* ING Aeltus Money Market Fund* ING Strategic Bond Fund STRATEGIC ALLOCATION FUNDS ING Strategic Allocation Growth Fund ING Strategic Allocation Balanced Fund ING Strategic Allocation Income Fund LOAN PARTICIPATION FUND ING Prime Rate Trust ING Senior Income Fund * An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 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 85258-2034 1-800-334-3444 TRANSFER AGENT DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141-6368 CUSTODIAN Bank of New York 100 Colonial Center Parkway, Suite 300 Lake Mary, FL 32746 LEGAL COUNSEL Dechert 1775 Eye Street, N.W. Washington, D.C. 20006 INDEPENDENT AUDITORS KPMG LLP 99 High Street Boston, MA 02110-2371 Prospectus containing more complete information regarding the Funds, including charges and expenses, may be obtained by calling ING Funds Distributor, LLC at 1-800-992-0180. Please read the prospectus carefully before you invest or send money. The Form N-PX (Proxy Voting Record) will be available without charge, upon request, by calling 800-992-0180 on or about August 31, 2004; and on the fund's website at www.ingfunds.com; and on the SEC's website www.sec.gov. [ING FUNDS LOGO] FII&QSAR0903-112803 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEMS 4-8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Based on our evaluation conducted within 90 days of the filing date, hereof, the design and operation of the registrant's disclosure controls and procedures are effective to ensure that material information relating to the registrant is made known to the certifying officers by others within the appropriate entities, particularly during the period in which Forms N-CSR are being prepared, and the registrant's disclosure controls and procedures allow timely preparation and review of the information for the registrant's Form N-CSR and the officer certifications of such Form N-CSR. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. (a) Not applicable. (b) 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. The officer certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): ING Funds Trust ---------------- By /s/ James M. Hennessy ----------------------------------------------------- James M. Hennessy President and Chief Executive Officer Date December 9, 2003 -------------------------------------------------- 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 December 9, 2003 --------------------------------------------------- By /s/ Michael J. Roland ----------------------------------------------------- Michael J. Roland Executive Vice President and Chief Financial Officer Date December 9, 2003 ---------------------------------------------------