-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Atyf9hkEdnJ/9pg4gkUzjvk2Eya1oIzh3sqo1882sChBxuUEzG9hNfCL1Lx94MxM md+xJBMbfFJhBTQnRd9XKQ== 0000950147-03-000571.txt : 20030506 0000950147-03-000571.hdr.sgml : 20030506 20030506172101 ACCESSION NUMBER: 0000950147-03-000571 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030228 FILED AS OF DATE: 20030506 EFFECTIVENESS DATE: 20030506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ING SENIOR INCOME FUND CENTRAL INDEX KEY: 0001124959 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-10223 FILM NUMBER: 03684820 BUSINESS ADDRESS: STREET 1: ING SENIOR INCOME FUND STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 4804773000 MAIL ADDRESS: STREET 1: ING SENIOR INCOME FUND STREET 2: 7337 E. DOUBLETREE RANCH ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM SENIOR INCOME FUND DATE OF NAME CHANGE: 20010316 N-CSR 1 e-9905.txt CERTIFIED SHAREHOLDER'S REPORT DATED 02/28/2003 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: 811-10223 ING Senior Income Fund (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: February 28 Date of reporting period: February 28, 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): ANNUAL REPORT February 28, 2003 ING SENIOR INCOME FUND [GRAPHIC] [LION LOGO] ING FUNDS ING Senior Income Fund ANNUAL REPORT February 28, 2003 ---------- Table of Contents Portfolio Managers' Report ..................................... 2 Statistics ..................................................... 8 Report of Independent Auditors ................................. 9 Statement of Assets and Liabilities ............................ 10 Statement of Operations ........................................ 12 Statements of Changes in Net Assets ............................ 13 Statements of Cash Flows ....................................... 14 Financial Highlights ........................................... 15 Notes to Financial Statements .................................. 16 Portfolio of Investments ....................................... 23 Tax Information ................................................ 34 Trustee and Officer Information ................................ 35 ---------- ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS' REPORT - -------------------------------------------------------------------------------- Dear Shareholders: ING Senior Income Fund (the "Fund") invests in a diversified portfolio of non-investment grade senior secured floating rate loans issued primarily by U.S. based corporations. The Fund's objective is to provide investors with a high level of monthly income. PERFORMANCE OF THE FUND During the fiscal year ended February 28, 2003, the Fund's Class A and Q shares each distributed total dividends of $0.69, representing an average annualized distribution rate of 4.68%(1) and 4.69%(1), respectively. During the same period, the Fund's Class B and C shares each distributed total dividends of $0.62, representing an average annualized distribution rate of 4.19%.(1) The Fund's total return for the fiscal year, for each of the share classes (high of 4.2% on Class A; low of 3.6% on Classes B and C), comfortably outpaced that of the S&P/LSTA Loan Index (gross total return of 3.4%)(2) and earned a top quartile ranking among the Fund's Lipper Loan Participation Fund peer group of forty funds/share classes.(3) Because the Fund commenced operations on April 1, 2001, five- and ten-year performance comparisons are not applicable. Relative to other major asset classes, the Fund, and the senior loan asset class in general, fared well during the difficult market conditions exhibited during the twelve-month period ended February 28, 2003. During the period, the S&P 500 Index declined 22.7%, while the Merrill Lynch U.S High-Yield Master II Index posted a gain of 3.2%. The Fund remains conservatively positioned as to both sector and issuer selection. We continue to strive to further improve industry and issuer diversification, arguably the best line of defense against broad-based credit risk. During the twelve-month period ended February 28, 2003, we were able to decrease the Fund's average position size to roughly 0.48% of total assets, from 0.82% at February 28, 2002, while growing the overall portfolio at a modest pace. Driving recent performance has been a continued slight overweight in several strong performing industry groups, together with a significant improvement in the underlying indicative prices on two of the Fund's larger holdings. Top sector weightings at period-end included Healthcare, Education and Childcare (7.3% of total assets at period-end), Printing and Publishing (7.1%) and Beverage, Food and Tobacco (6.8%), each of which currently balances a relatively defensive profile with an acceptable return. Standout performers among individual holdings during the period included Nextel Communications and subsidiaries ("Nextel", approximately 2.1% of total assets on a consolidated basis at February 28, 2003) and Microcell Connexions, Inc. ("Microcell", 1.2% of total assets at period-end). Nextel has consistently exceeded analysts' operational and financial expectations, a trend that began in the second half of 2002, thereby pushing prices for the company's term loans to near-par levels. Nextel's string of success has also had a tangible positive effect on the Fund's other cellular communications credits, including Microcell. Improved investor confidence in the sector effectively facilitated a restructuring of Microcell's balance sheet via a pre-arranged bankruptcy filing. Several opportunistic purchases of Microcell's term loans at prices well below par enabled us to recoup our original investment. Although our remaining position continues to be classified as a non-performing asset, upon emergence from bankruptcy, we expect this loan to return to performing status. The other non-performing asset in the portfolio at February 28, 2003, consists of two tranches of Norwood Promotional Products, Inc. restructured senior facilities (collectively comprising roughly 0.9% of total assets at period-end), the larger of which is currently paying interest in-kind instead of cash. 2 The Fund prudently utilizes financial leverage to seek to increase the yield to the holders of common shares. As of period-end, the Fund had $47 million of borrowings outstanding under a $100 million revolving credit facility. Total leverage, as a percentage of total assets, was 14.5%, and the average cost of leverage was 2.7%. While the use of leverage for investment purposes increases both investment opportunity and investment risk, we continue to deploy leverage only when it is in the best interest of the Fund's common shareholders. OUTLOOK In our view, the Fund, and the non-investment grade loan market at large, appears to be reasonably well positioned to meet the expected challenges of the coming months. Overall credit conditions continue to slowly improve, as evidenced by another quarter-over-quarter decline in the trailing loan default rate (by principal amount) for the industry to approximately 5.5%, after peaking at 7.4% in June of last year.(2) Further, the supply of new transactions, an important barometer of market health, has been fairly generous. Institutional M&A-related loan volume closed out at $6.2 billion during the first quarter of 2003, the highest level since the first quarter of 2000.(4) Understandably, the forward calendar looks less robust at this point, effectively capped by uncertainty surrounding the outcome of military action in the Middle East. Nonetheless, we do maintain a cautious view of the economic outlook, as it appears today, and once hostilities in Iraq come to an end. Several indicators, not the least being a chronically anemic labor market, point to significantly slower growth than originally anticipated. Whether such weakness is a continuation of the unwinding of the excesses of the 1990s or a by-product of caution on the part of companies and consumers alike, remains to be seen. If macro economic conditions were to deteriorate, it could further pressure a good portion of the non-investment grade issuer universe and increase the prospects for a further rate cut on the part of the Federal Reserve. An additional reduction in already historically low short-term interest rates could continue to depress returns, even if underlying loan values continue to rise. As stated in our prior report, until we gain sufficient clarity on several fronts, we will remain in a relatively defensive posture: that of seeking to maintain a high degree of diversification while attempting to take advantage of selective buying opportunities. We thank you for your continued confidence and encourage your questions and comments. /s/ Jeffrey A. Bakalar /s/ Daniel A. Norman Jeffrey A. Bakalar Daniel A. Norman SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT CO-SENIOR PORTFOLIO MANAGER CO-SENIOR PORTFOLIO MANAGER ING Senior Income Fund April 7, 2003 3 - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS' REPORT FOOTNOTES - -------------------------------------------------------------------------------- 1. The distribution rate is calculated by dividing the total distributions declared during the quarter by the Fund's net asset value at the end of the period. The distribution rate is based solely on the actual dividends and distributions, which are made at the discretion of management. The distribution rate may or may not include all investment income and ordinarily will not include capital gains or losses, if any. 2. Source: As tracked by Standard & Poor's Leveraged Commentary & Portfolio Management Data Group, a leading data provider to the Loan Market. 3. Source: Lipper Loan Participation Fund. Lipper, Inc. rankings are based on average annual total return not including sales charge. For the one year ended February 28th, 2003, ING Senior Income Fund Class A, B, C and Q ranked second, fourth, fourth and third, respectively, among a universe of 40 loan participation funds/classes. 4 - -------------------------------------------------------------------------------- INDEX DESCRIPTIONS - -------------------------------------------------------------------------------- The S&P/LSTA LEVERAGED LOAN INDEX ("LLI") is a total return index that captures accrued interest, repayments, and market value changes. It represents a broad cross section of leveraged loans syndicated in the United States, including dollar-denominated loans to overseas issuers. Standard & Poor's and the Loan Syndications & Trading Association ("LSTA") conceived of the LLI to establish a performance benchmark for the syndicated leveraged loan industry. The S&P 500 INDEX is an unmanaged index that measures the performance of securities of approximately 500 large-capitalization companies whose securities are traded on major U.S. stock markets. The MERRILL LYNCH U.S. HIGH YIELD MASTER II INDEX is an unmanaged market value-weighted index of all domestic and Yankee high yield bonds, including deferred interest bonds and payment-in-kind securities. Issues included in the index have maturities of one year or more and have a credit rating lower than BBB-/Baa3 but are not in default. All indices are unmanaged. An investor cannot invest directly in an index. 5 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS' REPORT - --------------------------------------------------------------------------------
4/2/2001 2/28/2002 2/28/2003 -------- --------- --------- ING Senior Income Fund Class B With Sales Charge $ 9,525 $10,146 $10,571 ING Senior Income Fund Class B Without Sales Charge $10,000 $10,445 $10,818 S&P/LSTA Leveraged Loan Index $10,000 $10,130 $10,057
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED FEBRUARY 28, 2003 ---------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS A, B AND C OF CLASS Q 1 YEAR 4/2/01 12/15/00 ------ ------ -------- Including Sales Charge:(1) Class A (i) -0.77% 2.11% -- Class B (i) 0.59% 2.95% -- Class C (i) 2.57% 4.20% -- Class Q (ii) 4.09% -- 4.66% Excluding Sales Charge: Class A 4.15% 4.75% -- Class B 3.57% 4.20% -- Class C 3.57% 4.20% -- Class Q 4.09% -- 4.66% S&P/LSTA Leveraged Loan Index 1.70% 2.75%(iii) -- Based on a $10,000 initial investment, the table and graph above illustrate the total return of ING Senior Income Fund against the S&P/LSTA Leveraged Loan Index. The Index has an inherent performance advantage over the Fund since it 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. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. 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 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%. Class B maximum CDSC is 3% in the first year, declining to 1% in the fifth year and eliminated thereafter. Class C maximum CDSC is 1% for the first year. Class Q has no front-end sales charge or CDSC charges. (i) Inception Date for Classes A, B and C: April 2, 2001. (ii) Inception Date for Class Q: December 15, 2000. (iii) Source: S&P/Loan Syndication Trading Association, Since Inception performance for the index is shown from March 31, 2001. 6 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS' REPORT - -------------------------------------------------------------------------------- YIELDS AND DISTRIBUTION RATES AS OF FEBRUARY 28, 2003 30-DAY SEC AVERAGE ANNUALIZED YIELDS(2) DISTRIBUTION RATES(3) --------- --------------------- Class A 4.66% 4.68% Class B 4.16% 4.19% Class C 4.16% 4.19% Class Q 4.66% 4.69% (2) Yield is calculated by dividing the Fund's net investment income per share for the most recent thirty days by the net asset value. Yield calculations do not include any commissions or sales charges, and are compounded for six months and annualized for a twelve-month period to derive the Fund's yield consistent with the SEC standardized yield formula for open-end investment companies. If the Investment Manager had not waived certain Fund expenses, the 30-Day SEC yield would have been 4.56% for Class A shares, 4.06% for Class B and Class C shares and 4.56% for Class Q shares. (3) Distribution Rates are calculated by annualizing dividends declared during the period (i.e., divide the monthly dividend amount by the number of days in the month and multiply by the number of days in the fiscal year) and then dividing the resulting annualized dividend by the month-ending NAV. PRINCIPAL RISK FACTOR(S): Loans in the Fund's portfolio will typically be below investment grade credit quality. As a result, investment in the Fund involves the risk that borrowers may default on obligations to pay principal or interest when due and lenders may have difficulty liquidating the collateral securing the loans or enforcing their rights under the terms of the loans, and that the Fund's investment objective may not be realized. 7 ING Senior Income Fund - -------------------------------------------------------------------------------- STATISTICS as of February 28, 2003 - -------------------------------------------------------------------------------- PORTFOLIO CHARACTERISTICS Net Assets $276,742,290 Assets Invested in Senior Loans $313,424,118 Total Number of Senior Loans 208 Average Amount Outstanding per Loan $ 1,506,847 Total Number of Industries 33 Average Loan Amount per Industry $ 9,497,701 Portfolio Turnover Rate 60% Weighted Average Days to Interest Rate Reset 44 days Average Loan Final Maturity 57 months Borrowings as a Percentage of Total Assets 14.5% TOP TEN INDUSTRY SECTORS AS A PERCENTAGE OF: NET ASSETS TOTAL ASSETS ---------- ------------ Healthcare, Education and Childcare 8.5% 7.3% Printing and Publishing 8.4% 7.1% Beverage, Food and Tobacco 8.0% 6.8% Cable Television 7.3% 6.3% Radio and Television Broadcasting 7.3% 6.2% Containers, Packaging and Glass 6.4% 5.4% Chemicals, Plastics and Rubber 5.8% 4.9% Cellular 5.6% 4.7% Leisure, Amusement and Entertainment 5.3% 4.5% Personal & Non Durable Consumer Products 5.2% 4.5% TOP TEN SENIOR LOAN ISSUERS AS A PERCENTAGE OF: NET ASSETS TOTAL ASSETS ---------- ------------ Nextel Operations, Inc. 2.5% 2.1% Safelite Glass Corporation 1.6% 1.4% Playtex Products, Inc. 1.5% 1.3% Microcell Connexions, Inc. 1.4% 1.2% Murray's Discount Auto Stores, Inc. 1.3% 1.1% Pegasus Media and Communications, Inc. 1.3% 1.1% Argosy Gaming Company 1.3% 1.1% Olympus Cable Holdings, LLC 1.2% 1.1% Six Flags Theme Parks, Inc. 1.2% 1.0% Crown Castle Operating Company 1.2% 1.0% See Accompanying Notes to Financial Statements 8 ING Senior Income Fund - -------------------------------------------------------------------------------- Report of Independent Auditors - -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees ING Senior Income Fund: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the ING Senior Income Fund as of February 28, 2003, and the related statements of operations and cash flows for the year then ended, and the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the two-year period then ended and the period from December 15, 2000 (inception) to February 28, 2001. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by mangement, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of February 28, 2003 by correspondence with the custodian and other appropriate auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the ING Senior Income Fund as of February 28, 2003 and the results of its operations and cash flows for the year then ended, and the changes in net assets for each of the years in the two-year period then ended and financial highlights for each of the years in the two-year period then ended and the period from December 15, 2000 to February 28, 2002 in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Los Angeles, California April 11, 2003 9 ING Senior Income Fund - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES as of February 28, 2003 - -------------------------------------------------------------------------------- ASSETS: Investments in securities at value (Cost $319,121,472) $ 317,636,294 Short-term investments at amortized cost 1,999,854 Cash 2,445,588 Receivables: Fund Shares Sold 899,974 Interest 1,534,226 Reimbursement due from Manager 47,349 Prepaid expenses 20,819 Prepaid arrangement fees on notes payable 337,527 ------------- Total assets 324,921,631 ------------- LIABILITIES: Notes payable 47,000,000 Accrued interest payable 71,952 Deferred arrangement fees on senior loans 677,843 Payable to affilates 292,706 Accrued Trustees fees 312 Other accrued expenses and liabilities 136,528 ------------- Total liabilities 48,179,341 ------------- NET ASSETS $ 276,742,290 ============= NET ASSETS CONSIST OF: Paid-in capital $ 280,818,269 Undistributed net investment income 519,830 Accumulated net realized loss on investments (3,110,631) Net unrealized depreciation of investments (1,485,178) ------------- NET ASSETS $ 276,742,290 ============= See Accompanying Notes to Financial Statements 10 ING Senior Income Fund - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES as of February 28, 2003 (Continued) - -------------------------------------------------------------------------------- CLASS A: Net assets $ 11,105,900 Shares authorized unlimited Par value $ 0.01 Shares outstanding 748,800 Net asset value and redemption price per share $ 14.83 Maximum offering price per share (4.75%)(1) $ 15.57 CLASS B: Net assets $ 17,648,123 Shares authorized unlimited Par value $ 0.01 Shares outstanding 1,190,873 Net asset value and redemption price per share(2) $ 14.82 Maximum offering price per share $ 14.82 CLASS C: Net assets $ 32,647,077 Shares authorized unlimited Par value $ 0.01 Shares outstanding 2,202,255 Net asset value and redemption price per share(2) $ 14.82 Maximum offering price per share $ 14.82 CLASS Q: Net assets $ 215,341,190 Shares authorized unlimited Par value $ 0.01 Shares outstanding 14,559,025 Net asset value and redemption price per share $ 14.79 Maximum offering price per share $ 14.79 (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 by any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 11 ING Senior Income Fund - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS for the Year Ended February 28, 2003 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 16,338,451 Arrangement fees earned 238,963 Other 350,392 ------------ Total investment income 16,927,806 ------------ EXPENSES: Investment management fees 2,275,682 Administration fees 284,458 Distribution and service fees: Class A 17,768 Class B 161,045 Class C 214,449 Class Q 544,871 Transfer agent fees: Class A 10,498 Class B 22,682 Class C 40,530 Class Q 302,432 Shareholder reporting expense 74,412 Offering costs 76,370 Interest expense 387,981 Custodian fees 117,404 Revolving credit facility fees 92,841 Pricing expense 29,616 Professional fees 231,806 Trustees' fees 7,112 SEC Registration fees 24,849 Postage expense 28,130 Insurance expense 3,866 ------------ Total expenses 4,948,802 ------------ Less: Net waived and reimbursed fees 441,151 ------------ Net expenses 4,507,651 ------------ Net investment income 12,420,155 ------------ REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS: Net realized loss on investments (1,013,477) Net change in unrealized depreciation of investments (920,901) ------------ Net loss on investments (1,934,378) ------------ Net increase in net assets resulting from operations $ 10,485,777 ============ See Accompanying Notes to Financial Statements 12 ING Senior Income Fund - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 2003 2002 ------------- ------------- INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 12,420,155 $ 12,986,849 Net realized loss on investments (1,013,477) (2,097,154) Net change in unrealized depreciation on investments (920,901) (787,358) ------------- ------------- Net increase in net assets resulting from operations 10,485,777 10,102,337 ============= ============= DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (343,871) (53,413) Class B (655,286) (364,877) Class C (1,183,573) (561,580) Class Q (10,232,636) (12,767,384) Net realized gain from investments Class Q -- (54,347) ------------- ------------- Total Distributions (12,415,366) (13,801,601) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 46,900,491 153,881,286 Shares resulting from dividend reinvestments 11,601,350 13,451,986 ------------- ------------- 58,501,841 167,333,272 Cost of shares repurchased (29,437,098) (8,123,001) ------------- ------------- Net increase in net assets resulting from capital share transactions 29,064,743 159,210,271 ------------- ------------- Net increase in net assets 27,135,154 155,511,007 ------------- ------------- NET ASSETS: Beginning of year 249,607,136 94,096,129 ------------- ------------- End of year $ 276,742,290 $ 249,607,136 ============= ============= Undistributed net investment income at end of year $ 519,830 $ 30,296 ============= ============= See Accompanying Notes to Financial Statements 13 ING Senior Income Fund - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS for the period ended February 28, 2003 - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH CASH FLOWS FROM OPERATING ACTIVITIES: Interest received $ 14,520,628 Facility fees paid 122,456 Arrangement fee received 868,844 Other income received 354,157 Interest paid (338,286) Other operating expenses paid (3,919,025) Purchases of portfolio securities (1,095,310,136) Proceeds from disposition of portfolio securities 1,029,530,544 --------------- Net cash used for operating activities (54,170,818) --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions paid to common shareholders (814,016) Proceeds from capital share sold 46,481,136 Disbursements for capital shares repurchased (29,437,098) Net proceeds from notes payable 39,000,000 --------------- Net cash provided by financing activities 55,230,022 --------------- Net increase in cash 1,059,204 Cash at beginning of year 1,386,384 --------------- Cash at end of year $ 2,445,588 =============== RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES: Net increase in net assets resulting from operations $ 10,485,777 --------------- Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: Change in unrealized depreciation on investments 920,901 Net accretion/amortization of discounts on investments (1,584,366) Realized loss on sale of investments 1,013,477 Purchases of investments (1,095,310,136) Proceeds on sale of investments 1,029,530,544 Decrease in deferred offering costs 76,370 Increase in interest receivable (233,457) Decrease in other assets 3,765 Decrease in prepaid arrangement fees on notes payable 122,456 Decrease in prepaid expenses 11,726 Increase in deferred arrangement fees on senior loans 629,881 Increase in accrued interest payable 49,695 Decrease in reimbursement due from Manager 30,586 Increase in payable to affiliate 57,403 Increase in accrued trustees' fees 312 Increase in accrued expenses 24,248 --------------- Total adjustments (64,656,595) --------------- Net cash used for operating activities $ (54,170,818) =============== NON CASH FINANCING ACTIVITES Receivable for shares sold $ 899,974 Reinvestment of dividends $ 11,601,350 See Accompanying Notes to Financial Statements 14 FINANCIAL HIGHLIGHTS ING SENIOR INCOME FUND - 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CLASS A CLASS B CLASS C ------------------ ------------------ ------------------ YEAR PERIOD YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED FEB. 28, FEB. 28, FEB. 28, FEB. 28, FEB. 28, FEB. 28, 2003 2002(1) 2003 2002(1) 2003 2002(1) ------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.92 15.00 14.92 15.00 14.92 15.00 Income from investment operations: Net investment income $ 0.69 0.81 0.62 0.75 0.62 0.75 Net realized and unrealized loss on investments $ (0.09) (0.09) (0.10) (0.10) (0.10) (0.10) Total from investment operations $ 0.60 0.72 0.52 0.65 0.52 0.65 Less distributions from: Net investment income $ 0.69 0.80 0.62 0.73 0.62 0.73 Net asset value, end of period $ 14.83 14.92 14.82 14.92 14.82 14.92 TOTAL RETURN(3) % 4.15 4.92 3.57 4.45 3.57 4.45 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 11,106 2,411 17,648 12,776 32,647 19,391 Average borrowings (000's)(7) $ 17,655 19,797 17,655 19,797 17,655 19,797 RATIOS TO AVERAGE NET ASSETS AFTER REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.42 1.47 1.91 1.96 1.91 1.96 Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 1.63 1.73 2.09 2.23 2.09 2.23 Net investment income(4)(5) % 4.88 5.58 4.12 5.19 4.19 5.20 RATIOS TO AVERAGE NET ASSETS BEFORE REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.57 1.82 2.31 2.29 2.06 2.29 Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 1.78 2.07 2.49 2.54 2.24 2.54 Net investment income(4)(5) % 4.73 5.26 3.72 4.89 4.04 4.89 Portfolio turnover rate % 60 65 60 65 60 65 Shares outstanding at end of period (000's) 749 162 1,191 856 2,202 1,300 CLASS Q(6) ------------------------------------------------ YEAR YEAR PERIOD ENDED ENDED ENDED FEB. 28, 2003 FEB. 28, 2002 FEB. 28, 2001(2) ------------- ------------- ---------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 14.89 15.30 15.02 Income from investment operations: Net investment income $ 0.69 0.81 0.14 Net realized and unrealized gain (loss) on investments $ (0.10) (0.32) 0.14 Total from investment operations $ 0.59 0.49 0.28 Less distributions from: Net investment income $ 0.69 0.90 -- Net asset value, end of period $ 14.79 14.89 15.30 TOTAL RETURN(3) % 4.09 3.73 1.80 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 215,341 215,029 94,096 Average borrowings (000's)(7) $ 17,655 19,797 -- RATIOS TO AVERAGE NET ASSETS AFTER REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.41 1.43 -- Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 1.59 1.63 1.85 Net investment income(4)(5) % 4.69 5.94 7.00 RATIOS TO AVERAGE NET ASSETS BEFORE REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.56 1.70 -- Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 1.74 1.90 1.85 Net investment income(4)(5) % 4.54 5.67 7.00 Portfolio turnover rate % 60 65 11 Shares outstanding at end of period (000's) 14,559 14,439 6,152
- ---------- (1) Classes A, B and C commenced offering of shares on April 2, 2001. (2) Class Q commenced operations on December 15, 2000. (3) Total returns are not annualized for periods of less than one year. (4) Annualized for periods less than one year. (5) The investment manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses. (6) Effective March 30, 2001, the Management of the Fund effectuated a reverse stock split of 0.6656 of a Share for one Share. Prior period amounts have been restated to reflect the reverse stock split. (7) Based on the active days of borrowing. See Accompanying Notes to Financial Statements 15 ING Senior Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 - -------------------------------------------------------------------------------- NOTE 1 -- ORGANIZATION ING Senior Income Fund (the "Fund"), a Delaware business trust, is registered under the Investment Company Act of 1940 as amended, (the "1940 Act"), as a continuously-offered, diversified, closed-end, investment management company. During the period December 15, 2000 through March 30, 2001, the Fund issued 19,933,953 Class Q shares to Lion Connecticut Holdings, Inc., the indirect parent company of the Fund's manager, ING Investments, LLC (the "Investment Manager") in exchange for $200,000,000. Effective April 2, 2001, the Fund commenced the offering of Class A, Class B, Class C and Class Q shares to the public. Class A shares are subject to a sales charge of up to 4.75%. Class A shares purchased in excess of $1,000,000 are subject to an Early Withdrawal Charge ("EWC") of up to 1% over the two-year period after purchase. Class A shares are available upon conversion of Class B shares eight years after purchase or through an exchange of Class A shares of certain ING Funds. Class B common shares are subject to an EWC of up to 3.0% over the five-year period after purchase and Class C common shares are subject to an EWC of 1% during the first year after purchase. The separate classes of shares differ principally in the distribution fees and shareholder servicing fees. All shareholders bear the common expenses of the Fund and earn income from all portfolios pro rata on the average daily net assets of each class, without distinction between share classes. Dividends for each class are 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 the per share dividend rates generally result from the relative weighting of pro rata income and realized gains allocations and from differences in separate class expenses, including distribution fees and shareholder servicing fees. The Fund invests at least 80% of its assets in senior loans which are exempt from registration under the Securities Act of 1933 as amended (the "'33 Act"), but contain certain restrictions on resale and cannot be sold publicly. These loans bear interest (unless otherwise noted) at rates that float periodically at a margin above the London Inter-Bank Offered Rate ("LIBOR") and other short-term rates. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles in the United States of America. A. SENIOR LOAN AND OTHER SECURITY VALUATION. Loans are normally valued at the mean of the means of one or more bid and asked quotations obtained from a pricing service or other sources determined by the Board of Trustees to be independent and believed to be reliable. Loans for which reliable quotations are not available may be valued with reference to another loan or a group of loans for which quotations are more readily available and whose characteristics are comparable to the loan being valued. Under this approach, the comparable loan or loans serve as a proxy for changes in value. The Fund has engaged an independent pricing service to provide quotations from dealers in loans and to calculate values under the proxy procedure described above. It is expected that most of the loans held by the Fund will be valued with reference to quotations from the independent pricing service or with reference to the proxy procedure described above. As of February 28, 2003, 98.1% of total long-term investments were valued based on these procedures. Prices from a pricing service may not be available for all loans and the Investment Manager may believe that the price for a loan derived from market quotations or the proxy procedure described above is not reliable or accurate. Among other reasons, this may be the result of information about a particular loan or borrower known to the Investment Manager that the Investment Manager believes may not be known to the pricing service or reflected in a price quote. In this event, the loan is valued at fair value as determined in good faith under procedures established by the Fund's Board of Trustees and in accordance with the provisions of the 1940 Act. Under these procedures, fair value is determined by the Investment Manager and 16 ING Senior Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued) - -------------------------------------------------------------------------------- monitored by the Fund's Board of Trustees through its Valuation Committee. In fair valuing a loan, consideration is given to several factors, which may include, among others, the following: (i) the characteristics of and fundamental analytical data relating to the loan, including the cost, size, current interest rate, period until the next interest rate reset, maturity and base lending rate of the loan, the terms and conditions of the loan and any relatedagreements, and the position of the loan in the borrower's debt structure; (ii) the nature, adequacy and value of the collateral, including the Fund's rights, remedies and interests with respect to the collateral; (iii) the creditworthiness of the borrower and the cash flow coverage of outstanding principal and interest, based on an evaluation of its financial condition, financial statements and information about the borrower's business, cash flows, capital structure and future prospects; (iv) information relating to the market for the loan, including price quotations for, and trading in, the loan and interests in similar loans and the market environment and investor attitudes towards the loan and interests in similar loans; (v) the reputation and financial condition of the agent for the loan and any intermediate participants in the loan; (vi) the borrower's management; and (vii) the general economic and market conditions affecting the fair value of the loan. Securities other than senior loans for which reliable quotations are not readily available and all other assets will be valued at their respective fair values as determined in good faith by, or under procedures established by, the Board of Trustees of the Fund. Investments in securities maturing in less than 60 days from the date of acquisition are valued at amortized cost, which, when combined with accrued interest, approximates market value. Short-term investments are carried at amortized cost. B. FEDERAL INCOME TAXES. It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to "regulated investment companies" and to distribute all of its taxable income to its shareholders. Therefore, no provision for Federal income taxes is required. In addition, by distributing during each calendar year substantially all of its net investment income, if any, the Fund intends not to be subject to any federal excise tax. C. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Loans are booked on a settlement basis and security transactions are accounted for on trade date (date the order to buy or sell is executed). Realized gains or losses are reported on the basis of identified cost of securities delivered. Interest income is recorded on an accrual basis at the then-current loan rate. The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to meet payments as they become due. Upon such discontinuance, all unpaid accrued interest is reversed. Cash collections on nonaccrual senior loans are generally applied as a reduction to the recorded investment of the loan. Senior loans are returned to accrual status only after all past due amounts have been received and the borrower has demonstrated sustained performance. Premium amortization and discount accretion are determined by the effective yield method over the shorter of four years or the actual term of the loan. Arrangement fees on revolving credit facilities, which represent non-refundable fees associated with the acquisition of loans, are deferred and recognized using the effective yield method over the shorter of four years or the actual term of the loan. No such fees are recognized on loans which have been placed on non-accrual status. Arrangement fees associated with all other loans, except revolving credit facilities, are treated as discounts and are accreted as described above. D. DISTRIBUTIONS TO SHAREHOLDERS. The Fund records distributions to its shareholders on the ex-dividend date. The Fund declares and goes ex-dividend daily and pays dividends monthly for net investment income. Distributions from capital gains, if any, are declared on an annual basis. 17 ING Senior Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued) - -------------------------------------------------------------------------------- E. ORGANIZATION EXPENSES AND OFFERING COSTS. Costs incurred with the organization of the Fund were expensed as incurred. Costs incurred with the offering of shares of the Fund are deferred and amortized over a twelve-month period on a straight-line basis. F. USE OF ESTIMATES. Management of the Fund has made certain estimates and assumptions relating to the reporting of assets, liabilities, revenues, expenses and contingencies to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. NOTE 3 -- INVESTMENTS For the year ended February 28, 2003, the cost of purchases and the proceeds from principal repayment and sales of investments, excluding short-term investments, totaled $230,058,853 and $166,909,586, respectively. At February 28, 2003, the Fund held senior loans valued at $313,424,118 representing 98.7% of its total investments (excluding short-term investments). The market value of these assets is established as set forth in Note 1. The senior loans acquired by the Fund may take the form of a direct lending relationship with the borrower, an assignment of a lender's interest in a loan, or a participation interest in a lender's interest in a loan. The lead lender in a typical corporate loan syndicate administers the loan and monitors collateral. In the event that the lead lender becomes insolvent, enters FDIC receivership or, if not FDIC insured, enters into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest. Additionally, certain situations may arise where the Fund acquires a participation in a lender's interest in a loan and the Fund does not have privity of contract with or direct recourse against the borrower. Accordingly, the Fund may incur additional credit risk as a participant because it must assume the risk of insolvency or bankruptcy of the lender from which the participation was acquired. Warrants and shares of common shares held in the portfolio were acquired in conjunction with senior loans held by the Fund. Certain of these shares and warrants are restricted and may not be publicly sold without registration under the '33 Act, or without an exemption under the '33 Act. In some cases, these restrictions expire after a designated period of time after the issuance of the stock. The Fund values portfolio securities by using the market value of the securities when market quotations for the securities are readily available. When market quotations are not readily available, the Fund determines, in good faith, the fair value of the securities in accordance with the Fund's fair valuation procedures as established by the Board of Directors. Dates of acquisition and cost or assigned basis of restricted securities are as follows:
DATE OF COST OR ACQUISITION ASSIGNED BASIS ----------- -------------- Safelite Glass Corporation -- Common Shares 6/21/01 $ -- Safelite Realty -- Common Shares 6/21/01 -- Murray's Discount Auto Stores, Inc. -- Common Shares 3/22/02 -- Murray Discount Auto Stores, Inc. -- Warrants 11/30/01 -- New World Restaurant Group, Inc. -- Warrants 02/20/02 20 Decision One Corporation -- Common Shares 09/27/01 -- ----- Total restricted securities excluding senior loans (market value of $2,274,676 was 0.82% of net assets at February 28, 2003) $ 20 =====
18 ING Senior Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 4 -- MANAGEMENT AND ADMINISTRATION AGREEMENT The Fund has entered into an Investment Management Agreement with the Investment Manager to provide advisory and management services. The Investment Management Agreement compensates the Investment Manager with a fee, computed daily and payable monthly, at an annual rate of 0.80% of the Fund's average daily gross asset value, minus the sum of the Fund's accrued liabilities (other than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Fund) ("Managed Assets"). The Fund has also entered into an Administration Agreement with ING Funds Services, LLC (the "Administrator") to provide administrative services. The Administrator is compensated with a fee, computed daily and payable monthly, at an annual rate of 0.10% of the Fund's Managed Assets. NOTE 5 -- DISTRIBUTION AND SERVICE FEES Each share class of the Fund 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 Fund for expenses incurred in the distribution of the Fund's shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to a payment each month for actual expenses incurred in the distribution and promotion of the 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 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 Q ------- ------- ------- ------- 0.25% 1.00% 0.75% 0.25% During the year ended February 28, 2003, the Distributor waived 0.25% of the Service Fee on Class B only. NOTE 6 -- EXPENSE LIMITATIONS The Investment Manager has voluntarily agreed to limit expenses, excluding interest, taxes, brokerage commissions, leverage expenses, other investment-related costs and extraordinary expenses, to the following: Class A -- 0.90% of Managed Assets plus 0.45% of average daily net assets Class B -- 0.90% of Managed Assets plus 1.20% of average daily net assets Class C -- 0.90% of Managed Assets plus 0.95% of average daily net assets Class Q -- 0.90% of Managed Assets plus 0.45% of average daily net assets As of February 28, 2003, the three-year cumulative amount of reimbursed fees that are subject to possible recoupment by the Manager is $1,004,355. NOTE 7 -- COMMITMENTS The Fund has entered into a five-year revolving credit agreement, collateralized by assets of the Fund, to borrow up to $100 million maturing June 13, 2006. Borrowing rates under this agreement are based on a commercial paper pass through rate plus 0.40% on the funded portion. A commitment fee of 0.10% is charged on the unused portion of the facility. The amount of borrowings outstanding at February 28, 2003 was $47.0 million at an interest rate of 1.42%. The amount of borrowings represented 14.5% of net assets plus borrowings at February 28, 2003. Average borrowings for the year ended February 28, 2003 was $17,654,605 and the average annualized cost of borrowings was 2.72%. 19 ING Senior Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 8 -- SENIOR LOAN PARTICIPATION COMMITMENTS At February 28, 2003, the Fund had unfunded loan commitments pursuant to the terms of the following loan agreements: Airgate PCS, Inc. $ 117,264 Citadel Broadcasting Company 934,500 Fleming Companies, Inc. 349,346 Hercules, Inc. 1,000,000 Hilton Hawaiian Village, LLC 235,294 Lyondell Chemical Company 1,000,000 Owens Brockway Glass Container, Inc. 775,253 Riverwood International Corp. 900,000 Six Flags Theme Parks, Inc. 566,667 ---------- $5,878,324 ========== NOTE 9 -- TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES At February 28, 2003, the Fund had the following amounts recorded in payable to affiliates on the accompanying Statement of Assets and Liabilities (see Notes 3 and 4): ACCRUED INVESTMENT ACCRUED ACCRUED DISTRIBUTION MANAGEMENT FEES ADMINISTRATIVE FEES AND SERVICE FEES TOTAL --------------- ------------------- ---------------- -------- $ 196,853 $24,606 $71,247 $292,706 At February 28, 2003, ING Life Insurance and Annuity Company and Equitable Life Insurance Company of Iowa, wholly-owned indirect subsidiaries of ING Groep N.V., held 75.6% of the shares outstanding of the Fund. Investment activities of this shareholder could have a material impact on the Fund. The 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, as amended. NOTE 10 -- CUSTODIAL AGREEMENT State Street Bank and Trust Company ("SSB") serves as the Fund's custodian and recordkeeper. Custody fees paid to SSB may be reduced by earnings credits based on the cash balances held by SSB for the Fund. There were no earning credits for the year ended February 28, 2003. NOTE 11 -- SUBORDINATED LOANS AND UNSECURED LOANS The primary risk arising from investing in subordinated loans or in unsecured loans is the potential loss in the event of default by the issuer of the loans. The Fund may invest up to 10% of its total assets, measured at the time of investment, in subordinated loans and up to 10% of its total assets, measured at the time of investment, in unsecured loans. As of February 28, 2003, the Fund held 1.9% of its total assets in subordinated loans and unsecured loans. NOTE 12 -- RESCISSION OFFER Certain of the Fund's Class B shares sold during the period of April 25, 2002 to June 28, 2002 ("Rescission Period") were not registered with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended. During the Rescission Period, up to 101,617 shares were sold without registration. In August 2002, the Fund filed a Registration Statement on Form N-2 offering to repurchase the unregistered Class B shares sold during the Rescission Period ("Rescission Offer"). The total number of shares repurchased as provided by the Rescission offer was 12,712. The Investment Manager has paid the special costs of the Rescission Offer (i.e., legal and accounting expenses and printing and mailing expenses) of $4,582 to reimburse the Fund for losses from the Rescission Offer. This amount is included in paid-in-capital on the Statement of Assets and Liabilities. 20 ING Senior Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 13 -- CAPITAL SHARES Transactions in capital shares and dollars were as follows:
CLASS A SHARES CLASS B SHARES ------------------------------ -------------------------------- YEAR APRIL 2, 2001(1) YEAR APRIL 2, 2001(1) ENDED TO ENDED TO FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- NUMBER OF SHARES Shares sold 697,541 178,745 529,384 (2) 898,438 Shares issued as reinvestments of dividends 18,011 3,113 22,777 13,329 Shares redeemed (128,377) (20,233) (217,666)(2) (55,389) ------------- ------------- ------------- ------------- Net increase in shares outstanding 587,175 161,625 334,495 856,378 ============= ============= ============= ============= DOLLAR AMOUNT ($) Shares sold $ 10,303,765 $ 2,671,160 $ 7,862,602 (3) $ 13,454,949 Shares issued as reinvestments of dividends 265,212 46,451 336,436 198,883 Shares redeemed (1,890,380) (300,937) (3,212,215)(3) (825,942) ------------- ------------- ------------- ------------- Net increase $ 8,678,597 $ 2,416,674 $ 4,986,823 $ 12,827,890 ============= ============= ============= ============= CLASS C SHARES CLASS Q SHARES ------------------------------ ------------------------------- YEAR APRIL 2, 2001(1) YEAR YEAR ENDED TO ENDED ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 2003 2002 2003 2002 ------------- ------------- ------------- ------------- NUMBER OF SHARES Shares sold 1,548,667 1,605,545 374,311 11,143,439 Shares issued as reinvestments of dividends 63,192 27,934 682,409 883,363 Shares adjustment resulting from reverse stock-split -- -- -- (6,696,383)(4) Shares redeemed (709,214) (333,869) (936,355) (134,443) ------------- ------------- ------------- ------------- Net increase in shares outstanding 902,645 1,299,610 120,365 5,195,976 ============= ============= ============= ============= DOLLAR AMOUNT ($) Shares sold $ 22,961,598 $ 24,067,664 $ 5,582,887 $ 113,687,513 Shares issued as reinvestments of dividends 932,572 416,985 10,067,130 12,789,667 Shares redeemed (10,428,994) (5,001,438) (13,715,870) (1,994,684) ------------- ------------- ------------- ------------- Net increase $ 13,465,176 $ 19,483,211 $ 1,934,147 $ 124,482,496 ============= ============= ============= =============
- ---------- (1) Classes A, B and C commenced offering of shares on April 2, 2001. (2) Excludes 12,712 shares rescinded. (3) Excludes $189,639 for shares rescinded. (4) On March 30, 2001, the Management of the Fund effectuated a reverse stock split of 0.6656 of a share for one share to achieve a net asset value of $15.00 per share. 21 ING Senior Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS as of February 28, 2003 (Continued) - -------------------------------------------------------------------------------- NOTE 14 -- FEDERAL INCOME TAXES Dividends paid by the Fund 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 for years ended February 28, 2003 and 2002 were as follow: ORDINARY LONG-TERM TAX RETURN INCOME CAPITAL GAINS OF CAPITAL ----------- ------------- ---------- 2003 $12,415,366 $ -- $ -- 2002 $13,801,601 $ -- $ -- 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, organization costs and other temporary differences. To the extend 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. To the extent distributions exceed net investment income and/or net realized capital gains for tax purposes, they are reported as distributions of paid-in capital. Accordingly, the following amounts represent current year permanent tax differences that have been reclassified as of February 28, 2003: PAID-IN UNDISTRIBUTED NET CAPITAL INVESTMENT INCOME ------- ----------------- $(484,745) $ 484,745 Capital loss carryforwards, which may be used to offset future realized capital gains for federal income tax purposes were as follows at February 28, 2003: AMOUNT EXPIRATION DATES ---------- ---------------- $2,454,651 2010-2011 The following represents the tax-basis components of distributable earnings as of February 28, 2003: UNDISTRIBUTED CAPITAL POST OCTOBER UNDISTRIBUTED LONG-TERM UNREALIZED LOSS LOSSES ORDINARY INCOME CAPITAL GAINS DEPRECIATION CARRYFORWARDS DEFERRED - --------------- ------------- ------------ ------------- -------- $ 530,830 $ -- $ (1,485,500) $ (2,454,651) $(655,659) NOTE 15 -- SUBSEQUENT EVENTS Subsequent to February 28, 2003, the Fund declared the following dividends: PER SHARE AMOUNT TYPE DECLARATION DATE RECORD DATE PAYABLE DATE - ---------------- ---- ---------------- ----------- ------------ $0.00193 (A) NII Daily Daily 04/01/03 $0.00173 (B) NII Daily Daily 04/01/03 NII -- Net Investment Income (A) For Class A and Q shares. (B) For Class B and C shares. 22 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 - -------------------------------------------------------------------------------- SENIOR LOANS*: 113.3%
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- AEROSPACE AND DEFENSE: 2.5% ALLIANT TECHSYSTEMS, INC. Ba2 BB- $ 2,638,955 Term Loan, maturing April 20, 2009 $ 2,645,882 DRS TECHNOLOGIES, INC. Ba3 BB- 987,509 Term Loan, maturing September 30, 2008 994,093 TITAN CORPORATION Ba3 BB- 1,990,000 Term Loan, maturing June 30, 2009 1,990,000 TRANSDIGM HOLDING CORPORATION B1 B+ 218,993 Term Loan, maturing May 15, 2006 220,396 573,101 Term Loan, maturing May 15, 2007 576,772 UNITED DEFENSE INDUSTRIES, INC. Ba3 BB- 637,289 Term Loan, maturing August 13, 2009 639,395 ------------ 7,066,538 ------------ AUTOMOBILE: 3.1% AFTERMARKET TECHNOLOGY CORPORATION Ba2 BB- 411,471 Term Loan, maturing February 8, 2008 412,168 563,555 Term Loan, maturing February 8, 2008 564,510 COLLINS & AIKMAN PRODUCTS Ba3 BB- 978,703 Term Loan, maturing December 31, 2005 981,863 POLYPORE, INC. Ba3 B+ 1,488,750 Term Loan, maturing December 31, 2007 1,493,093 SAFELITE GLASS CORPORATION B3 B+ 2,750,821 Term Loan, maturing September 30, 2007 2,709,559 1,841,404 Term Loan, maturing September 30, 2007 1,813,783 STONERIDGE, INC. Ba3 BB 492,500 Term Loan, maturing April 30, 2008 492,192 ------------ 8,467,168 ------------ BEVERAGE, FOOD AND TOBACCO: 8.0% AURORA FOODS, INC. B3 CCC 2,943,750 Term Loan, maturing September 30, 2006 2,675,133 BIRDS EYE FOODS, INC. Ba3 B+ 1,496,250 Term Loan, maturing June 30, 2008 1,499,679 COMMONWEALTH BRANDS, INC. Ba3 BB- 1,850,000 Term Loan, maturing August 28, 2007 1,848,844 COTT BEVERAGES, INC. Ba3 BB- 1,176,363 Term Loan, maturing December 31, 2006 1,181,509 CP KELCO APS B3 B+ 1,410,075 Term Loan, maturing March 31, 2008 1,363,719 475,307 Term Loan, maturing September 30, 2008 460,156 DEAN FOODS COMPANY Ba1 BB+ 2,985,000 Term Loan, maturing July 15, 2008 2,988,173 DEL MONTE CORPORATION Ba3 BB- 2,000,000 Term Loan, maturing December 20, 2010 2,017,000 FLEMING COMPANIES, INC. Ba3 B 427,273 Revolver, maturing June 18, 2007 383,121 981,575 Term Loan, maturing June 18, 2008 961,453
See Accompanying Notes to Financial Statements 23 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- BEVERAGE, FOOD AND TOBACCO (CONTINUED) FLOWERS FOODS, INC. Ba2 BBB- $ 2,462,500 Term Loan, maturing March 26, 2007 $ 2,472,762 INTERSTATE BRANDS CORPORATION Ba1 BBB- 1,970,000 Term Loan, maturing July 19, 2007 1,970,008 NATIONAL DAIRY HOLDINGS, L.P. Ba2 BB+ 992,500 Term Loan, maturing April 30, 2009 992,086 SOUTHERN WINE & SPIRITS OF AMERICA, INC. Ba3 BBB- 1,243,750 Term Loan, maturing July 2, 2008 1,246,860 ------------ 22,060,503 ------------ BUILDINGS AND REAL ESTATE: 0.8% ASSOCIATED MATERIALS, INC. Ba3 BB- 612,000 Term Loan, maturing April 19, 2009 615,443 MACERICH PARTNERSHIP, L.P. Ba2 NR 1,638,400 Term Loan, maturing July 26, 2005 1,640,448 ------------ 2,255,891 ------------ CABLE TELEVISION: 7.3% (1) ADELPHIA COMMUNICATIONS CORPORATION NR BBB 2,000,000 Debtor in Possession Term Loan, maturing June 25, 2004 2,005,000 CC VIII OPERATING, LLC B2 B- 2,970,000 Term Loan, maturing February 2, 2008 2,506,998 (1) CENTURY CABLE HOLDINGS, LLC Caa1 D 820,000 Revolver, maturing March 31, 2009 568,260 1,000,000 Term Loan, maturing December 31, 2009 706,111 CHARTER COMMUNICATIONS OPERATING, LLC B2 B 2,955,000 Term Loan, maturing March 18, 2008 2,488,243 (1) FRONTIERVISION OPERATING PARTNERS, L.P. B2 D 1,000,000 Revolver, maturing October 31, 2005 880,000 1,136,364 Term Loan, maturing September 30, 2005 1,000,000 1,000,000 Term Loan, maturing March 31, 2006 880,000 INSIGHT MIDWEST HOLDINGS, LLC Ba3 BB+ 3,000,000 Term Loan, maturing December 31, 2009 2,897,625 MCC IOWA MEDIACOM BROADBAND Ba3 BB+ 3,000,000 Term Loan, maturing September 30, 2010 2,938,125 (1) OLYMPUS CABLE HOLDINGS, LLC B2 D 4,250,000 Term Loan, maturing September 30, 2010 3,447,328 ------------ 20,317,690 ------------
See Accompanying Notes to Financial Statements 24 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- CARGO TRANSPORT: 0.9% RAILAMERICA, INC. Ba3 BB $ 1,413,333 Term Loan, maturing May 23, 2009 $ 1,411,213 266,667 Term Loan, maturing May 23, 2009 266,267 320,000 Term Loan, maturing May 23, 2009 319,520 TEREX CORPORATION B1 BB- 496,250 Term Loan, maturing December 31, 2009 480,535 ------------ 2,477,535 ------------ CELLULAR: 5.6% AIRGATE PCS, INC. B3 CCC- 169,300 Term Loan, maturing June 6, 2007 122,742 1,706,840 Term Loan, maturing September 30, 2008 1,237,459 AMERICAN CELLULAR CORPORATION B3 CC 790,144 Term Loan, maturing March 31, 2008 595,571 906,725 Term Loan, maturing March 31, 2009 683,444 (3) MICROCELL CONNEXIONS, INC. Ca D 3,242,968 (2) Term Loan, maturing March 1, 2006 2,393,776 2,000,000 (2) Term Loan, maturing February 22, 2007 1,477,500 NEXTEL FINANCE COMPANY Ba3 BB- 3,000,000 Term Loan, maturing March 31, 2009 2,802,990 NEXTEL OPERATIONS, INC. Ba3 BB- 1,850,222 Term Loan, maturing March 15, 2005 1,815,275 2,353,577 Term Loan, maturing February 10, 2007 2,251,258 WESTERN WIRELESS CORPORATION B3 B 2,500,000 Term Loan, maturing March 31, 2008 1,993,125 ------------ 15,373,140 ------------ CHEMICALS, PLASTICS AND RUBBER: 5.8% EQUISTAR CHEMICALS, L.P. Ba2 BB+ 1,984,975 Term Loan, maturing August 24, 2007 1,990,558 FMC CORPORATION Ba1 BBB- 1,000,000 Term Loan, maturing October 21, 2007 1,012,500 GEO SPECIALTY CHEMICALS, INC. B1 B+ 1,838,571 Term Loan, maturing December 31, 2007 1,697,614 HERCULES, INC. Ba1 BB 2,500,000 Term Loan, maturing May 15, 2007 2,503,908 HUNTSMAN COMPANY, LLC B3 B+ 675,808 Term Loan, maturing March 31, 2007 555,852 324,192 Term Loan, maturing March 31, 2007 266,648 HUNTSMAN INTERNATIONAL, LLC B2 BB- 1,000,054 Term Loan, maturing June 30, 2007 984,220 999,946 Term Loan, maturing June 30, 2008 984,114 INEOS GROUP HOLDINGS, PLC Ba3 BB 2,390,124 Term Loan, maturing April 26, 2009 2,386,763 JOHNSONDIVERSEY, INC. Ba3 BB- 1,990,000 Term Loan, maturing November 3, 2009 2,001,817 NOVEON, INC. B1 BB- 738,750 Term Loan, maturing September 30, 2008 741,124 OM GROUP, INC. B2 B+ 992,506 Term Loan, maturing April 1, 2006 951,565 ------------ 16,076,683 ------------
See Accompanying Notes to Financial Statements 25 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- CONTAINERS, PACKAGING AND GLASS: 6.4% BERRY PLASTICS CORPORATION B1 B+ $ 1,990,000 Term Loan, maturing July 22, 2010 $ 2,001,194 CONSTAR INTERNATIONAL, INC. B1 BB- 1,995,000 Term Loan, maturing November 20, 2009 2,004,975 GRAPHIC PACKAGING CORPORATION Ba3 BB 990,000 Term Loan, maturing February 28, 2009 994,950 GREIF BROS. CORPORATION Ba3 B+ 995,000 Term Loan, maturing August 23, 2009 999,104 JEFFERSON SMURFIT CORPORATION Ba3 B+ 1,992,727 Term Loan, maturing March 31, 2007 1,989,880 OWENS-BROCKWAY GLASS CONTAINER, INC. B1 BB 2,681,688 Revolver, maturing March 31, 2004 2,647,831 RIVERWOOD INTERNATIONAL CORPORATION B1 B 100,000 Revolver, maturing December 31, 2006 94,938 3,000,000 Term Loan, maturing December 31, 2006 2,997,189 SILGAN HOLDINGS, INC. Ba2 BB- 995,000 Term Loan, maturing November 30, 2008 994,171 SMURFIT-STONE CONTAINER CANADA, INC. Ba3 B+ 807,692 Term Loan, maturing June 30, 2009 798,859 STONE CONTAINER CORPORATION Ba3 B+ 2,192,308 Term Loan, maturing June 30, 2009 2,168,843 ------------ 17,691,934 ------------ DIVERSIFIED/CONGLOMERATE MANUFACTURING: 3.9% BRAND SERVICES, INC. B1 B+ 1,000,000 Term Loan, maturing October 16, 2009 1,003,750 FLOWSERVE CORPORATION Ba3 BB- 3,130,407 Term Loan, maturing June 30, 2009 3,129,846 MUELLER GROUP, INC. B1 B+ 995,000 Term Loan, maturing May 31, 2008 993,756 NEPTUNE TECHNOLOGY GROUP, INC. Ba3 BB- 969,262 Term Loan, maturing November 1, 2008 974,108 REXNORD CORPORATION B1 B+ 1,944,444 Term Loan, maturing November 25, 2009 1,962,067 SPX CORPORATION Ba2 BB+ 1,025,625 Term Loan, maturing September 30, 2009 1,024,087 1,709,375 Term Loan, maturing March 31, 2010 1,706,811 ------------ 10,794,425 ------------ DIVERSIFIED/CONGLOMERATE SERVICE: 1.1% IRON MOUNTAIN, INC. Ba3 BB 998,000 Term Loan, maturing February 15, 2008 1,001,119 US INVESTIGATIONS SERVICES, LLC B1 BB- 2,000,000 Term Loan, maturing January 10, 2009 1,986,250 ------------ 2,987,369 ------------ ECOLOGICAL: 1.0% ALLIED WASTE NORTH AMERICA, INC. Ba3 BB 679,029 Term Loan, maturing July 21, 2005 676,907 CASELLA WASTE SYSTEMS, INC. B1 BB- 2,000,000 Term Loan, maturing May 11, 2007 2,010,000 ------------ 2,686,907 ------------
See Accompanying Notes to Financial Statements 26 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- ELECTRONICS: 2.3% DECISION ONE CORPORATION B3 CCC $ 3,010,000 Term Loan, maturing April 18, 2005 $ 2,558,500 SEAGATE TECHNOLOGY HDD HOLDINGS, INC. Ba1 BB+ 1,421,457 Term Loan, maturing May 13, 2007 1,420,823 SEAGATE TECHNOLOGY (US) HOLDINGS, INC. Ba1 BB+ 568,543 Term Loan, maturing May 13, 2007 568,289 TRANSACTION NETWORK SERVICES, INC. Ba3 BB- 1,804,180 Term Loan, maturing April 3, 2007 1,801,925 ------------ 6,349,537 ------------ FARMING AND AGRICULTURE: 1.0% SCOTTS COMPANY Ba3 BB 2,782,995 Term Loan, maturing December 31, 2007 2,795,866 ------------ 2,795,866 ------------ FINANCE: 0.8% RENT-A-CENTER, INC. Ba2 BB 577,165 Term Loan, maturing January 31, 2006 576,227 1,136,260 Term Loan, maturing January 31, 2007 1,134,413 VALUE ASSET MANAGEMENT, INC. B1 B+ 529,412 Term Loan, maturing April 28, 2003 512,868 ------------ 2,223,508 ------------ GAMING: 4.1% ALLIANCE GAMING CORPORATION B1 BB- 1,985,000 Term Loan, maturing December 31, 2006 1,996,578 AMERISTAR CASINOS, INC. Ba3 BB- 1,994,895 Term Loan, maturing December 20, 2006 2,005,618 ARGOSY GAMING COMPANY Ba2 BB 3,447,500 Term Loan, maturing July 31, 2008 3,469,047 ISLE OF CAPRI CASINOS, INC. Ba2 BB- 992,500 Term Loan, maturing April 26, 2008 995,292 MANDALAY RESORT GROUP Ba2 BB+ 3,000,000 Term Loan, maturing August 22, 2006 2,973,126 ------------ 11,439,661 ------------ GROCERY: 0.7% GIANT EAGLE, INC. Ba2 BB+ 1,990,000 Term Loan, maturing August 2, 2009 1,993,731 ------------ 1,993,731 ------------ HEALTHCARE, EDUCATION AND CHILDCARE: 8.5% ALLIANCE IMAGING, INC. B1 B+ 778,626 Term Loan, maturing November 2, 2006 765,973 895,105 Term Loan, maturing June 10, 2008 883,916 APRIA HEALTHCARE GROUP, INC. Ba1 BBB- 1,970,000 Term Loan, maturing July 20, 2008 1,970,617 CAREMARK RX, INC. Ba2 BB+ 1,486,263 Term Loan, maturing March 31, 2006 1,487,501 COMMUNITY HEALTH SYSTEMS, INC. Ba3 BB- 2,992,500 Term Loan, maturing July 16, 2010 2,983,148 DAVITA, INC. Ba3 BB- 1,980,765 Term Loan, maturing March 31, 2009 1,985,594
See Accompanying Notes to Financial Statements 27 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- HEALTHCARE, EDUCATION AND CHILDCARE (CONTINUED) EXPRESS SCRIPTS, INC. Ba1 BBB- $ 923,077 Term Loan, maturing March 31, 2008 $ 923,489 FRESENIUS MEDICAL CARE HOLDING, INC. Ba1 BB+ 2,000,000 Term Loan, maturing June 30, 2006 2,000,000 GENESIS HEALTH VENTURES, INC. Ba3 B+ 117,498 Term Loan, maturing March 31, 2007 115,736 362,104 Term Loan, maturing March 31, 2007 362,104 HCA, INC. Ba1 BBB- 1,387,500 Term Loan, maturing April 30, 2006 1,369,289 IASIS HEALTHCARE CORPORATION B1 B 2,000,000 Term Loan, maturing February 7, 2009 2,010,834 KINETIC CONCEPTS, INC. Ba3 B+ 1,319,984 Term Loan, maturing March 31, 2006 1,321,222 TRIAD HOSPITALS, INC. Ba3 B+ 1,972,727 Term Loan, maturing September 30, 2008 1,984,687 VANGUARD HEALTH SYSTEMS, INC. Ba3 B+ 1,500,000 Term Loan, maturing January 3, 2010 1,504,687 VICAR OPERATING, INC. B1 B+ 1,990,000 Term Loan, maturing September 30, 2008 2,000,780 ------------ 23,669,577 ------------ HOME AND OFFICE FURNISHING, HOUSEWARES: 0.4% SEALY MATTRESS COMPANY B1 B+ 378,320 Term Loan, maturing December 15, 2004 374,064 272,861 Term Loan, maturing December 15, 2005 269,791 348,819 Term Loan, maturing December 15, 2006 344,895 ------------ 988,750 ------------ INSURANCE: 0.2% FUND AMERICAN COMPANIES, INC. Baa2 BBB+ 491,250 Term Loan, maturing March 31, 2007 489,776 ------------ 489,776 ------------ LEISURE, AMUSEMENT AND ENTERTAINMENT: 5.3% AMF BOWLING WORLDWIDE, INC. B1 B 932,382 Term Loan, maturing February 28, 2008 929,662 BALLY TOTAL FITNESS HOLDING CORPORATION Ba3 B+ 984,519 Term Loan, maturing November 10, 2004 945,138 KERASOTES THEATRES, INC. B1 B+ 1,000,000 Term Loan, maturing December 31, 2008 1,002,500 LOEWS CINEPLEX ENTERTAINMENT CORPORATION NR NR 2,965,111 Term Loan, maturing February 29, 2008 2,914,457 METRO-GOLDWYN-MAYER STUDIOS, INC. Ba3 BB- 3,000,000 Term Loan, maturing June 30, 2008 2,985,468 REGAL CINEMAS, INC. Ba2 BB- 950,000 Term Loan, maturing December 31, 2007 953,563 SIX FLAGS THEME PARKS, INC. Ba2 BB- 433,333 Revolver, maturing June 30, 2008 420,333 3,000,000 Term Loan, maturing June 30, 2009 2,970,000 WASHINGTON FOOTBALL, INC. Baa3 NR 1,500,000 Term Loan, maturing October 16, 2007 1,508,438 ------------ 14,629,559 ------------
See Accompanying Notes to Financial Statements 28 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- LODGING: 3.1% EXTENDED STAY AMERICA, INC. Ba3 BB- $ 1,454,580 Term Loan, maturing January 15, 2008 $1,431,852 HILTON HAWAIIAN VILLAGE, LLC Ba1 BBB- 1,764,706 Revolver, maturing June 1, 2003 1,738,235 KSL RECREATIONAL GROUP, INC. Ba3 B+ 326,460 Term Loan, maturing April 30, 2005 324,148 326,460 Term Loan, maturing April 30, 2006 324,727 801,818 Term Loan, maturing December 22, 2006 799,814 MERISTAR INVESTMENT PARTNERS Ba3 B- 2,024,128 Term Loan, maturing March 31, 2003 2,029,188 WYNDHAM INTERNATIONAL, INC. NR CCC+ 1,088,409 Term Loan, maturing June 30, 2004 825,490 1,356,310 Term Loan, maturing June 30, 2006 985,529 ------------ 8,458,983 ------------ MACHINERY: 1.2% ALLIANCE LAUNDRY HOLDINGS, LLC B1 B 1,896,373 Term Loan, maturing August 2, 2007 1,881,360 NATIONAL WATERWORKS, INC. B1 BB- 1,500,000 Term Loan, maturing November 22, 2009 1,514,062 ------------ 3,395,422 ------------ OIL AND GAS: 2.3% PACIFIC ENERGY GROUP, LLC Ba2 BBB- 1,000,000 Term Loan, maturing July 26, 2009 1,005,938 PLAINS MARKETING, L.P. Ba1 BBB- 990,000 Term Loan, maturing September 21, 2007 994,950 PMC COMPANY Ba1 BBB- 1,980,000 Term Loan, maturing May 5, 2006 1,984,950 TESORO PETROLEUM CORPORATION Ba3 BB 880,033 Term Loan, maturing December 31, 2007 836,911 W-H ENERGY SERVICES, INC. B2 B+ 1,473,750 Term Loan, maturing April 16, 2007 1,451,644 ------------ 6,274,393 ------------ OTHER TELECOMMUNICATIONS: 1.2% BROADWING, INC. B1 B- 1,917,647 Term Loan, maturing November 9, 2004 1,847,332 GCI HOLDINGS, INC. Ba3 B+ 1,500,000 Term Loan, maturing October 15, 2004 1,496,250 ------------ 3,343,582 ------------ PERSONAL AND NON DURABLE CONSUMER PRODUCTS: 5.2% ARMKEL, LLC Ba3 B+ 987,500 Term Loan, maturing March 28, 2009 994,112 CHURCH & DWIGHT COMPANY, INC. Ba2 BB 1,985,013 Term Loan, maturing September 30, 2007 1,997,625 JOSTENS, INC. B1 BB- 2,492,424 Term Loan, maturing December 31, 2009 2,497,098 NORWOOD PROMOTIONAL PRODUCTS, INC. NR NR 2,310,555 Term Loan, maturing February 1, 2005 2,310,555 1,616,156 (2) Term Loan, maturing February 1, 2005 719,189 452,744 (2) Term Loan, maturing February 1, 2005 --
See Accompanying Notes to Financial Statements 29 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- PERSONAL AND NON DURABLE CONSUMER PRODUCTS (CONTINUED) PLAYTEX PRODUCTS, INC. Ba3 BB- $ 4,145,833 Term Loan, maturing May 31, 2009 $ 4,139,615 RAYOVAC CORPORATION Ba3 BB- 1,823,333 Term Loan, maturing September 30, 2009 1,829,031 ------------ 14,487,225 ------------ PERSONAL, FOOD AND MISCELLANEOUS SERVICES: 3.1% AFC ENTERPRISES, INC. Ba2 BB 796,000 Term Loan, maturing May 23, 2009 797,907 COINMACH CORPORATION B1 BB- 980,000 Term Loan, maturing July 25, 2009 983,063 DOMINO'S, INC. Ba3 BB- 995,000 Term Loan, maturing June 30, 2008 998,109 NEW WORLD RESTAURANT GROUP, INC. aa2 CCC+ 2,000,000 Secured Floating Rate Note, maturing June 15, 2003 1,800,000 OTIS SPUNKMEYER, INC. B1 B+ 1,977,273 Term Loan, maturing January 21, 2009 1,976,037 SC INTERNATIONAL SERVICES Ba1 BB 1,963,808 Term Loan, maturing March 1, 2007 1,944,170 ------------ 8,499,286 ------------ PRINTING AND PUBLISHING: 8.4% ADAMS OUTDOOR ADVERTISING, L.P. B1 B+ 1,780,000 Term Loan, maturing February 8, 2008 1,786,305 ADVANSTAR COMMUNICATIONS, INC. B2 B 420,404 Term Loan, maturing April 11, 2007 389,924 AMERICAN MEDIA OPERATIONS, INC. Ba3 B+ 61,105 Term Loan, maturing April 1, 2006 60,972 3,136,469 Term Loan, maturing April 1, 2007 3,146,271 BELL ACTIMEDIA, INC. Ba3 BB- 1,000,000 Term Loan, maturing November 29, 2010 1,007,125 CANWEST MEDIA, INC. Ba3 B+ 606,200 Term Loan, maturing May 15, 2008 606,873 917,055 Term Loan, maturing May 15, 2009 918,074 DEX MEDIA EAST, LLC Ba3 BB- 2,500,000 Term Loan, maturing May 8, 2009 2,526,823 HOLLINGER INTERNATIONAL PUBLISHING, INC. Ba2 BB- 1,000,000 Term Loan, maturing September 30, 2009 1,005,000 LAMAR MEDIA CORPORATION Ba2 BB- 1,600,000 Term Loan, maturing March 1, 2006 1,581,333 1,000,000 Term Loan, maturing February 1, 2007 1,000,250 READER'S DIGEST ASSOCIATIONS, INC. Baa3 BB+ 2,985,000 Term Loan, maturing May 20, 2008 2,937,559 R.H. DONNELLEY, INC. Ba3 BB 2,000,000 Term Loan, maturing June 30, 2010 2,014,250 TRANSWESTERN PUBLISHING COMPANY Ba3 BB- 2,462,500 Term Loan, maturing June 27, 2008 2,460,961 ZIFF DAVIS MEDIA, INC. B3 CCC- 2,000,000 Term Loan, maturing March 31, 2007 1,720,000 ------------ 23,161,720 ------------
See Accompanying Notes to Financial Statements 30 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- RADIO AND TELEVISION BROADCASTING: 7.3% CITADEL BROADCASTING COMPANY Ba2 B+ $ 540,000 Revolver, maturing April 2, 2008 $ 503,550 500,000 Term Loan, maturing April 2, 2008 498,750 1,600,000 Term Loan, maturing June 26, 2009 1,606,400 CUMULUS MEDIA, INC. Ba3 B+ 2,000,000 Term Loan, maturing March 28, 2010 2,014,376 EMMIS OPERATING COMPANY Ba2 B+ 1,692,932 Term Loan, maturing August 31, 2009 1,700,339 853,275 Term Loan, maturing February 28, 2009 855,675 FISHER BROADCASTING, INC. Ba3 B+ 1,000,000 Term Loan, maturing February 28, 2010 1,001,250 GRAY TELEVISION, INC. Ba3 B+ 2,000,000 Term Loan, maturing December 31, 2010 2,010,416 LIN TELEVISION CORPORATION Ba2 BB 525,714 Term Loan, maturing December 31, 2007 526,372 TELEVICENTRO OF PUERTO RICO, LLC Ba2 BB 474,286 Term Loan, maturing December 31, 2007 474,879 PEGASUS MEDIA & COMMUNICATIONS, INC. B3 B- 3,915,063 Term Loan, maturing April 30, 2005 3,538,778 SINCLAIR BROADCAST GROUP, INC. Ba2 BB 2,000,000 Term Loan, maturing December 31, 2009 2,004,554 1,000,000 Term Loan, maturing December 31, 2009 1,002,545 SUSQUEHANNA MEDIA COMPANY Ba1 BB- 2,481,250 Term Loan, maturing June 30, 2008 2,493,656 ------------ 20,231,540 ------------ RETAIL STORES: 4.9% ADVANCE STORES COMPANY, INC. Ba3 BB- 3,000,000 Term Loan, maturing November 30, 2007 3,005,625 CH OPERATING, LLC B2 B+ 810,345 Term Loan, maturing June 30, 2007 804,267 K MART CORPORATION Ba1 BBB Debtor in Possession Term Loan, maturing 1,500,000 April 22, 2004 1,485,626 MURRAY'S DISCOUNT AUTO STORES, INC. NR B 3,642,593 Term Loan, maturing June 30, 2003 3,618,967 PETCO ANIMAL SUPPLIES, INC. Ba3 BB- 994,832 Term Loan, maturing October 2, 2008 998,252 RITE AID CORPORATION B2 BB- 2,940,405 Term Loan, maturing June 27, 2005 2,911,001 SHOPPERS DRUG MART CORPORATION Ba1 BBB+ 882,353 Term Loan, maturing February 4, 2009 884,449 ------------ 13,708,187 ------------ TELECOMMUNICATIONS EQUIPMENT: 3.7% AMERICAN TOWER, L.P. B2 B 3,347,738 Term Loan, maturing June 30, 2007 3,105,445 CROWN CASTLE OPERATING COMPANY Ba3 B- 3,400,000 Term Loan, maturing March 15, 2008 3,224,332
See Accompanying Notes to Financial Statements 31 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- TELECOMMUNICATIONS EQUIPMENT (CONTINUED) SPECTRASITE COMMUNICATIONS, INC. B3 CC $ 1,803,511 Term Loan, maturing December 31, 2007 $ 1,600,616 TSI TELECOMMUNICATION SERVICES, INC. Ba3 B+ 2,372,159 Term Loan, maturing December 31, 2006 2,266,895 ------------ 10,197,288 ------------ TEXTILES AND LEATHER: 1.5% LEVI STRAUSS & COMPANY B1 BB 1,000,000 Term Loan, maturing July 31, 2006 1,002,708 TARGUS GROUP, INC. NR NR 2,378,246 Term Loan, maturing August 31, 2006 2,104,748 WILLIAM CARTER COMPANY Ba3 BB 987,500 Term Loan, maturing September 30, 2008 994,906 ------------ 4,102,362 ------------ UTILITIES: 1.7% MICHIGAN ELECTRIC TRANSMISSION COMPANY Baa2 BB+ 995,000 Term Loan, maturing May 1, 2007 995,311 PIKE ELECTRIC, INC. Ba3 BB- 1,717,647 Term Loan, maturing April 18, 2010 1,728,383 SOUTHERN CALIFORNIA EDISON COMPANY Ba2 BB 2,000,000 Term Loan, maturing March 1, 2005 2,004,688 ------------ 4,728,382 ------------ TOTAL SENIOR LOANS (COST $317,126,685) 313,424,118 ------------ OTHER CORPORATE DEBT: 0.7% FINANCE: 0.7% VALUE ASSET MANAGEMENT, INC. B3 B 2,000,000 Senior Subordinated Bridge, maturing August 31, 2005 1,937,500 ------------ TOTAL OTHER CORPORATE DEBT (COST $1,994,767) 1,937,500 ------------ EQUITIES AND OTHER ASSETS: 0.8% (@),(R) Decision One Corporation (92,638 Common Shares) 249,196 (@),(R) Murray's Discount Auto Stores, Inc. (10 Common Shares) 39,631 (@),(R) Murray's Discount Auto Stores, Inc. (Warrants for 244 Common Shares, Expires January 22, 2007) 973,311 (@),(R) New World Restaurant Group, Inc. (Warrants for 2,244 Common Shares, Expires June 15, 2006) 18,583 (@),(R) Safelite Glass Corporation (99,495 Common Shares) 993,955 (@),(R) Safelite Realty (6,716 Common Shares) -- ------------ TOTAL FOR EQUITIES AND OTHER ASSETS (COST $20) 2,274,676 ------------ TOTAL LONG-TERM INVESTMENTS (COST $319,121,472) 317,636,294 ------------
See Accompanying Notes to Financial Statements 32 ING Senior Income Fund - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS as of February 28, 2003 (Continued) - --------------------------------------------------------------------------------
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE - -------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 0.7% COMMERCIAL PAPER: 0.7% $ 2,000,000 State Street Bank & Trust, 1.310%, due 03/03/03 $ 1,999,854 ------------ TOTAL SHORT TERM INVESTMENTS (COST $1,999,854) 1,999,854 ------------ TOTAL INVESTMENTS (COST $321,121,326) 115.5% $319,636,148 OTHER ASSETS AND LIABILITIES-NET (15.5) (42,893,858) ------ ------------ NET ASSETS 100.0% $276,742,290 ====== ============
- ---------- (@) Non-income producing security. (R) Restricted security. * Senior loans, while exempt from registration under the Securities Act of 1933, as amended, contain certain restrictions on resale and cannot be sold publicly. These senior loans bear interest (unless otherwise noted) at rates that float periodically at a margin above the London Inter-Bank Offered Rate ("LIBOR") and other short-term rates. NR Not Rated + Bank Loans rated below Baa by Moody's Investor Services, Inc. or BBB by Standard & Poor's Group are considered to be below investment grade. (1) The borrower filed for protection under Chapter 11 of the U.S. Federal bankruptcy code. (2) Loan is on non-accrual basis. (3) The borrower filed for protection under the Canadian Bankruptcy and Insolvency Act. (4) For federal income tax purposes, cost of investments (excluding short-term investments) is $319,121,794 and net unrealized depreciation consists of the following: Gross Unrealized Appreciation $ 5,575,769 Gross Unrealized Depreciation (7,061,269) ------------ Net Unrealized Depreciation $ (1,485,500) ============ See Accompanying Notes to Financial Statements 33 ING Senior Income Fund - -------------------------------------------------------------------------------- TAX INFORMATION (Unaudited) - -------------------------------------------------------------------------------- Dividends paid during the year ended February 28, 2003 were as follows: TYPE PER SHARE AMOUNT ---- ---------------- Class A NII $ 0.6925 Class B NII $ 0.6186 Class C NII $ 0.6186 Class Q NII $ 0.6925 - ---------- NII -- Net investment income 34 ING Senior Income Fund - -------------------------------------------------------------------------------- TRUSTEE AND OFFICER INFORMATION (Unaudited) - -------------------------------------------------------------------------------- The business and affairs of the Fund are managed under the direction of the Fund's 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 Fund are listed below. The Statement of Additional Information includes additional information about trustees of the Registrant and is available, without charge, upon request at 1-800-992-0180.
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- INDEPENDENT TRUSTEES Paul S. Doherty(2) Trustee January Mr. Doherty is Presi- 103 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - dent and Partner, (February 2002 - Scottsdale, Arizona 85258 Present Doherty, Wallace, Present). Born: 1934 Pillsbury and Murphy, P.C., Attorneys (1996 -Present); Director, Tambrands, Inc. (1993 - 1998); and Trustee of each of the funds man- aged by Northstar In- vestment Management Corporation (1993 - 1999). J. Michael Earley(3) Trustee February President and Chief Ex- 103 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2002 - ecutive Officer, Bankers (1997 - Present). Scottsdale, Arizona 85258 Present Trust Company, N.A. Born: 1945 (1992 - Present). R. Barbara Gitenstein(2) Trustee February President, College of 103 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2002 - New Jersey (1999 - (1997 - Present). Scottsdale, Arizona 85258 Present Present). Formerly, Ex- Born: 1948 ecutive Vice President and Provost, Drake Uni- versity (1992 - 1998). Walter H. May(2) Trustee January Retired. Formerly, Man- 103 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - aging Director and Di- (February 2002 - Scottsdale, Arizona 85258 Present rector of Marketing, Present) and Best Born: 1936 Piper Jaffray, Inc.; Prep Charity Trustee of each of the (1991 - Present). funds managed by Northstar Investment Management Corpora- tion (1996 - 1999). Jock Patton(2) Trustee January Private Investor (June 103 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - 1997 - Present). For- (February 2002 - Scottsdale, Arizona 85258 Present merly, Director and Present); Director, Born: 1945 Chief Executive Officer, Hypercom, Inc. (January Rainbow Multimedia 1999 - Present); JDA Group, Inc. (January Software Group, Inc. 1999 - December 2001); (January 1999 - Director of Stuart En- Present); Buick of tertainment, Inc.; Direc- Scottsdale, Inc.; Na- tor of Artisoft, Inc. tional Airlines, Inc.; BG (1994 - 1998). Associates, Inc.; BK En- tertainment, Inc.; and Arizona Rotorcraft, Inc.
35 ING Senior Income Fund - -------------------------------------------------------------------------------- TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- David W.C. Putnam(3) Trustee January President and Director, 103 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - F.L. Putnam Securities (February 2002 - Scottsdale, Arizona 85258 Present Company, Inc. and its Present), Anchor Born: 1939 affiliates; President, International Bond Trust Secretary and Trustee, (December 2000 - The Principled Equity Present); F.L. Putnam Market Fund. Formerly, Foundation (December Trustee, Trust Realty 2000 - Present); Corp.; Anchor Progressive Capital Investment Trust; Bow Accumulation Trust Ridge Mining Company (August 1998 - Present); and each of the funds Principled Equity Market managed by Northstar Fund (November 1996 - Investment Present), Mercy Management Endowment Foundation Corporation (1994 - (1995 - Present); 1999). 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 February General Partner, 103 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - Huntington Partners (February 2002 - Scottsdale, Arizona 85258 Present (January 1997 - Present) and Morgan Born: 1933 Present). Chairman of Chase Trust Co. (January the Board and Trustee 1998 - Present). of each of the funds managed by ING Investment Management Co. LLC (November 1998 - February 2001). Roger B. Vincent(3) Trustee February President, Springwell 103 Trustee, GCG Trust (1994 7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - - Present); and Director, Scottsdale, Arizona 85258 Present Present). Formerly, AmeriGas Propane, Inc. Born: 1945 Director, Tatham (1998 - Present). Offshore, Inc. (1996 - 2000). Richard A. Wedemeyer(2) Trustee February Retired. Mr. 103 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - Wedemeyer was (February 2002 - Scottsdale, Arizona 85258 Present formerly Vice President Present) and Touchstone Born: 1936 - Finance and ConsultingGroup (1997 - Administration, Present). Channel Corporation (June 1996 - April 2002). Formerly, Vice President, Operations and Administration, Jim Henson Productions (1979 - 1997); Trustee, First Choice Funds (1997 - 2001); and of each of the funds managed by ING Investment Management Co. LLC (1998 - 2001).
36 ING Senior Income Fund - -------------------------------------------------------------------------------- TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- TRUSTEES WHO ARE "INTERESTED PERSONS" R. Glenn Hilliard(4) Trustee February Chairman and CEO, ING 103 Trustee, GCG Trust ING Americas 2002 - Americas and Member, (February 2002 - 5780 Powers Ferry Road, NW Present Americas Executive Present) and Woodruff Atlanta, GA 30327 Committee (1999 - Arts Center; Member of Born: 1943 Present). Formerly, the Board of Directors, Chairman and CEO, ING Clemson University North America (1994 - Foundation, the Board 1999). of Councilors, Carter Center, and the High Museum of Art. Thomas J. McInerney(5) Trustee February Chief Executive Officer, 157 Trustee, GCG Trust 7337 E. Doubletree Ranch Rd. 2001 - ING U.S. Financial (February 2002 - Scottsdale, Arizona 85258 Present Services (September Present); Equitable Life Born: 1956 2001 - Present); Insurance Co., Golden General Manager and American Life Chief Executive Officer, Insurance Co., Life ING U.S. Worksite Insurance Company of Financial Services Georgia, Midwestern (December 2000 - United Life Insurance Present); Member, ING Co., ReliaStar Life Americas Executive Insurance Co., Security Committee (2001 - Life of Denver, Security Present); President, Connecticut Life Chief Executive Officer Insurance Co., and Director of Southland Life Northern Life Insurance Insurance Co., USG Company (March 2001 - Annuity and Life October 2002), ING Company, and United Aeltus Holding Life and Annuity Company, Inc. (2000 - Insurance Co. Inc Present), ING Retail (March 2001 - Present); Holding Company Director, Ameribest Life (1998 - Present), ING Insurance Co., (March Life Insurance and 2001 to January 2003); Annuity Company Director, First (September 1997 - Columbine Life November 2002) and Insurance Co. (March ING Retirement 2001 to December Holdings, Inc. (1997 - 2002); Member of the Present). Formerly, Board, National General Manager and Commission on Chief Executive Officer, Retirement Policy, ING Worksite Division Governor's Council on (December 2000 - Economic October 2001), Competitiveness and President, ING-SCI, Inc. Technology of (August 1997 - Connecticut, December 2000); Connecticut Business President, Aetna and Industry Financial Services Association, Bushnell; (August 1997 - Connecticut Forum; December 2000). Metro Hartford Chamber of Commerce; and is Chairman, Concerned Citizens for Effective Government.
37 ING Senior Income Fund - -------------------------------------------------------------------------------- TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - --------------------------------------------------------------------------------
TERM OF NUMBER OF OFFICE AND PRINCIPAL PORTFOLIOS IN OTHER POSITION(S) LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS HELD WITH TIME DURING THE OVERSEEN HELD BY AND AGE FUND SERVED(1) PAST FIVE YEARS BY TRUSTEE TRUSTEE ------- ---- --------- --------------- ---------- ------- John G. Turner(6) Trustee January Chairman, Hillcrest 157 Trustee, GCG; Director, 7337 E. Doubletree Ranch Rd. 2001 - Capital Partners (May Hormel Foods Scottsdale, Arizona 85258 Present 2002-Present); Corporation (March Born: 1939 President, Turner 2000 - Present); Shopko Investment Company Stores, Inc. (August (January 2002 - 1999 - Present); and Present). Mr. Turner M.A. Mortenson was formerly Vice Company (March 2002 - Chairman of ING Present). Americas (2000 - 2002); Chairman and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar Life Insurance Company (1993 - 2000); Chairman of ReliaStar United Services Life Insurance Company (1995 - 1998); Chairman of ReliaStar Life Insurance Company of New York (1995 - 2001); Chairman of Northern Life Insurance Company (1992 - 2001); Chairman and Trustee of the Northstar affiliated investment companies (1993 - 2001) and Director, Northstar Investment Management Corporation and its affiliates (1993 - 1999).
- ------------ (1) Trustees serve until their successors are duly elected and qualified. (2) Valuation Committee Members. (3) Audit Committee Members. (4) Mr. Hilliard is an "interested person," as defined by the Investment Company Act of 1940, as amended (the "1940 Act"), because of his relationship with ING Americas, an affiliate of ING Investments, LLC. (5) Mr. McInerney is an "interested person," as defined by the 1940 Act, because of his affiliation with ING U.S. Worksite Financial Services, an affiliate of ING Investments, LLC. (6) Mr. Turner is an "interested person," as defined by the 1940 Act, because of his affiliation with ING Americas, an affiliate of ING Investments, LLC. 38 ING Senior Income Fund - -------------------------------------------------------------------------------- TRUSTEE AND OFFICER INFORMATION (Unaudited) (Continued) - -------------------------------------------------------------------------------- Information about the Fund's officers is set forth in the table below:
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, January 2001 - President and Chief Executive 7337 E. Doubletree Ranch Rd. Chief Executive Present Officer, ING Capital Corpora- Scottsdale, Arizona 85258 Officer and tion, LLC, ING Funds Services, Born: 1949 Chief Operating LLC, ING Advisors, Inc., ING Officer Investments, LLC, Lexington Funds Distributor, Inc., Express America T.C., Inc. and EAMC Liquidation Corp. (December 2001 - Present); Executive Vice President and Chief Operating Officer and ING Funds Distributor, LLC (June 2000 - Present). Formerly, Executive Vice President and Chief Operating Officer, ING Quanti- tative Management, Inc. (Octo- ber 2001 - September 2002), Senior Executive Vice President (June 2000 - December 2000) and Secretary (April 1995 - De- cember 2000), ING Capital Cor- poration, LLC, ING Funds Services, LLC, ING Investments, LLC, ING Advisors, Inc., Express America T.C., Inc. and EAMC Liquidation Corp.; Executive Vice President, ING Capital Cor- poration, LLC and its affiliates (May 1998 - June 2000); and Senior Vice President, ING Capi- tal Corporation, LLC and its af- filiates (April 1995 - April 1998). Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief 7337 E. Doubletree Ranch Rd. President, Assistant Present Financial Officer and Treasurer, Scottsdale, Arizona 85258 Secretary ING Funds Services, LLC, ING Born: 1958 Funds Distributor, LLC, ING Ad- Chief Financial Officer January 2001 - visors, Inc., ING Investments, Present LLC, Inc., Lexington Funds Dis- tributor, Inc., Express America T.C., Inc. and EAMC Liquidation Corp. (December 2001 - Present). Formerly, Executive Vice President, Chief Financial Officer and Treasurer ING Quantitative Management (De- cember 2001 - September 2002), Senior Vice President, ING Funds Services, LLC, ING Investments, LLC and ING Funds Distributor, LLC (June 1998 - December 2001) and Chief Fi- nancial Officer of Endeavor Group (April 1997 - June 1998). Daniel Norman Senior Vice President January 2001 - Senior Vice President, ING In- 7337 E. Doubletree Ranch Rd. and Treasurer Present vestments, LLC (December 1994 Scottsdale, Arizona 85258 - Present); and ING Funds Dis- Born: 1957 Co-Senior Portfolio tributor, LLC (December 1995 - Manager Present); has served as an of- ficer of other affiliates of ING since February 1992.
39 ING Senior Income Fund - -------------------------------------------------------------------------------- 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 ------- ------------------- -------------- --------------- Jeffrey A. Bakalar Senior Vice President January 2001 - Senior Vice President, ING 7337 E. Doubletree Ranch Rd. Present Investments, LLC (November Scottsdale, Arizona 85258 Co-Senior Portfolio 1999 - Present). Formerly, Vice Born: 1959 Manager President and Assistant Portfolio Manager, ING Investments, LLC (February 1998 -- November 1999); Vice President of The Communications Positions of First National Bank of Chicago (July 1994 -- January 1998). Elliot Rosen Senior Vice President May 2002 - Present Senior Vice President, ING 7337 E. Doubletree Ranch Rd. Investments, LLC (February Scottsdale, Arizona 85258 1999 - Present). Formerly, Born: 1953 Senior Vice President IPS-Sendero (May 1997 - February 1999) and President of Sendero, which merged into IPS (August 1993 - May 1997). Robert S. Naka Senior Vice President January 2001 - Senior Vice President and 7337 E. Doubletree Ranch Rd. and Assistant Present Assistant Secretary, ING Funds Scottsdale, Arizona 85258 Secretary Services, LLC, ING Funds Born: 1963 Distributor, LLC, ING Advisors, Inc., ING Capital Corporation, LLC, ING Investments, LLC (October 2001 - Present) and Lexington Funds Distributor, Inc. (December 2001 - Present). Formerly, Senior Vice President and Assistant Secretary, ING Quantitative Management, Inc. (October 2001 - September 2002), Vice President, ING Investments, LLC (April 1997 - October 1999), ING Funds Services, LLC (February 1997 - August 1999) and Assistant Vice President, ING Funds Services, LLC (August 1995 - February 1997). William H. Rivoir III Senior Vice President January 2001 - Senior Vice President and 7337 E. Doubletree Ranch Rd. and Assistant Present Secretary of ING Capital Scottsdale, Arizona 85258 Secretary Corporation, LLC and ING Born: 1951 Funds Services, LLC (February 2001 - Present), ING Funds Distributor, LLC, ING Advisors, Inc. and ING Investments, LLC. (October 2001 - Present), Senior Vice President and Secretary, ING Quantitative Management, Inc. (October 2001 - September 2002). Lexington Funds Distributor, Inc., ING Pilgrim Funding, Inc., Pilgrim America Financial, Inc., Express America TC, Inc. and EAMC Liquidation Corp. (December 2001 - Present). Formerly, Senior Vice President and Assistant Secretary of ING Funds Services, LLC (June 1998 - Present), ING Investments, LLC, and Pilgrim America Financial, Inc. (February 1999 - Present), Senior Vice President of ING Investments, LLC (December - Present 1998) and Assistant Secretary of ING Funds Distributor, LLC (February 1999 - Present) and ING Investments, LLC (June 1998 - Present).
40 ING Senior Income Fund - -------------------------------------------------------------------------------- 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 ------- ------------------- -------------- --------------- Curtis F. Lee Senior Vice President January 2001 - Senior Vice President and Chief 7337 E. Doubletree Ranch Rd. and Chief Credit Present Credit Officer - Senior Loans of Scottsdale, Arizona 85258 Officer ING Investments, LLC (August Born: 1954 1999 - Present). Formerly, held a series of positions with Standard Chartered Bank in the credit approval and problem loan management functions (August 1992 - June 1999). Kimberly A. Anderson Vice President January 2001 - Vice President and Secretary, 7337 E. Doubletree Ranch Rd. Present ING Funds Services, LLC, ING Scottsdale, Arizona 85258 Funds Distributor, LLC, ING Born: 1964 Secretary February 2001 - Advisors, Inc., ING Investments, Present LLC (October 2001 - Present) and Lexington Funds Distributor, Inc. (December 2001 - Present). Formerly, Vice President, ING Quantitative Management, Inc. (October 2001 - September 2002); Assistant Vice President, ING Funds Services, LLC (November 1999 - January 2001) and has held various other positions with ING Funds Services, LLC for more than the last five years. Robyn L. Ichilov Vice President January 2001 - Vice President, ING Funds 7337 E. Doubletree Ranch Rd. Present Services, LLC (October 2001 - Scottsdale, Arizona 85258 Present) and ING Investments, Born: 1967 LLC (August 1997 - Present); Accounting Manager, ING Investments, LLC (November 1995 - Present). Maria M. Anderson Assistant Vice August 2001 - Assistant Vice President, ING 7337 E. Doubletree Ranch Rd. President Present Funds Services, LLC (October Scottsdale, Arizona 85258 2001 - Present). Formerly, Born: 1958 Manager of Fund Accounting and Fund Compliance, ING Investments, LLC (September 1999 - November 2001); Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 - August 1999); and Financial Reporting Analyst, Stein Roe Mutual Funds (August 1997 - July 1998). Todd Modic Assistant Vice August 2001 - Director of Financial Reporting, 7337 E. Doubletree Ranch Rd. President Present ING Investments, LLC (March Scottsdale, Arizona 85258 2001 - Present). Formerly, Born: 1967 Director of Financial Reporting, Axient Communications, Inc. (May 2000 - January 2001) and Director of Finance, Rural/Metro Corporation (March 1995 - May 2000). Susan P. Kinens Assistant Vice February 2003 - Assistant Vice President and 7337 E. Doubletree Ranch Rd. President Present 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 the last five years.
- ---------- (1) The officers hold office until the next annual meeting of the Trustees and until their successors shall have been elected and qualified. 41 INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258-2034 ADMINISTRATOR ING Fund Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258-2034 1-800-992-0180 INSTITUTIONAL INVESTORS AND ANALYSTS Call ING Senior Income Fund 1-800-336-3436 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 219368 Kansas City, Missouri 64141-9368 CUSTODIAN State Street Bank and Trust Company 801 Pennsylvania Avenue Kansas City, Missouri 64105 LEGAL COUNSEL Dechert 1775 Eye Street, N.W. Washington, D.C. 20006 INDEPENDENT AUDITORS KPMG LLP 355 South Grand Avenue Los Angeles, California 90071 WRITTEN REQUESTS Please mail all account inquiries and other comments to: ING Senior Income Fund c/o ING Fund Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258-2034 TOLL-FREE SHAREHOLDER INFORMATION Call us from 9:00 a.m. to 7:00 p.m. Eastern time on any business day for account or other information, at 1-800-992-0180 A prospectus containing more complete information regarding the Fund, including charges and expenses, may be obtained by calling ING Funds Distributor, LLC, Distributor, at 1-800-992-0180. Please read the prospectus carefully before you invest or send money. [LION LOGO] ING FUNDS SIFAR022803-042803 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) Not applicable. (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 Senior Income Fund By /s/ James M. Hennessy -------------------------------------- James M. Hennessy President and Chief Executive Officer Date May 6, 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 May 6, 2003 By /s/ Michael J. Roland -------------------------------------- Michael J. Roland Executive Vice President and Chief Financial Officer Date May 6, 2003 EX-99.CERT 3 ex99-cert.txt CERTIFICATION PURSUANT TO SARBANES-OXLEY ACT EX-99.CERT CERTIFICATION I, James M. Hennessy, certify that: 1. I have reviewed this report on Form N-CSR of ING Senior Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. Not applicable. 5. Not applicable. 6. Not Applicable. /s/ James M. Hennessy Date: May 6, 2003 - ------------------------------------- James M. Hennessy President and Chief Executive Officer CERTIFICATION I, Michael J. Roland, certify that: 1. I have reviewed this report on Form N-CSR of ING Senior Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. Not applicable. 5. Not applicable. 6. Not applicable. /s/ Michael J. Roland Date: May 6, 2003 - ------------------------------------- Michael J. Roland Executive Vice President and Chief Financial Officer EX-99.906CERT 4 ex99-906cert.txt CERTIFICATION PURSUANT TO SECTION 906 OF SARBANES EX-99.906CERT CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING Senior Income Fund Date of Form N-CSR: May 6, 2003 The undersigned, the principal executive officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING Senior Income Fund and will be retained by ING Senior Income Fund and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 6th day of May, 2003. /s/ James M. Hennessy ---------------------------- James M. Hennessy CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Registrant: ING Senior Income Fund Date of Form N-CSR: May 6, 2003 The undersigned, the principal financial officer of the above named registrant (the "Fund"), hereby certifies that, with respect to the Form N-CSR referred to above, to the best of his knowledge and belief, after reasonable inquiry: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. A signed original of this written statement required by Section 906 has been provided to ING Senior Income Fund and will be retained by ING Senior Income Fund and furnished to the Securities and Exchange Commission or its staff upon request. IN WITNESS WHEREOF, the undersigned has executed this Certification below, as of this 6th day of May, 2003. /s/ Michael J. Roland ---------------------------- Michael J. Roland -----END PRIVACY-ENHANCED MESSAGE-----