N-CSRS 1 a2145337zn-csrs.txt N-CSRS ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: October 31, 2006 Estimated average burden hours per response...... 19.3 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-10223 --------------------------------------------- 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: March 1, 2004 to August 31, 2004 --------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1): SEMI-ANNUAL REPORT [GRAPHIC] FUNDS SEMI-ANNUAL REPORT AUGUST 31, 2004 ING SENIOR INCOME FUND [ING LOGO] ING Senior Income Fund SEMI-ANNUAL REPORT August 31, 2004 Table of Contents Portfolio Managers' Report 2 Statement of Assets and Liabilities 7 Statement of Operations 9 Statements of Changes in Net Assets 10 Statement of Cash Flows 11 Financial Highlights 12 Notes to Financial Statements 14 Additional Information 20 Portfolio of Investments 21
ING Senior Income Fund PORTFOLIO MANAGERS' REPORT Dear Shareholders: ING Senior Income Fund (the "Fund") is a diversified, closed-end management investment company that seeks to provide investors with a high level of monthly income. The Fund seeks to achieve this objective by investing in a professionally managed portfolio comprised primarily of senior loans. PORTFOLIO CHARACTERISTICS AS OF AUGUST 31, 2004 Net Assets $ 1,399,088,157 Total Assets $ 1,634,123,003 Assets Invested in Senior Loans $ 1,544,048,996 Senior Loans Represented 406 Average Amount Outstanding per Loan $ 3,803,076 Industries Represented 37 Average Loan Amount per Industry $ 41,731,054 Portfolio Turnover Rate (YTD) 76% Weighted Average Days to Interest Rate Reset 41 days Average Loan Final Maturity 65 months
PERFORMANCE SUMMARY During the six months ended August 31, 2004, the Fund's Class A and Q shares each distributed total dividends from income of $0.28, resulting in an average annualized distribution rate of 3.53%(1) and 3.54%(1), respectively. During the same period, the Fund's Class B and C shares each distributed total dividends from income of $0.24, representing an average annualized distribution rate of 3.04%(1) and 3.03%(1), respectively. This represents a spread of 2.23%, 1.74%, 1.73% and 2.24%, for Class A, B, C and Q, respectively, over the average 30-day LIBOR for the period under review. The Fund's total return for the six months ended August 31, 2004, for each of the share classes, excluding sales charges, ranged from 2.06% on Class A and Q to 1.80% on Class B and C. The Fund ran slightly behind the S&P/LSTA Leveraged Loan Index, which posted a total return of 2.08%(2). MARKET OVERVIEW The non-investment grade loan market continued to exhibit both technical and fundamental strength during the six-month period ended August 31, 2004. The primary drivers of loan performance continue to be credit market conditions and liquidity, the overall vigor of the U.S. economy, and the directional nature of short-term interest rates. Each of these elements has been favorably aligned for virtually all of this year; the most recent quarter offered no exception. During the second calendar quarter of 2004, domestic GDP expanded at an approximate 2.8% pace. While revised downward from earlier estimates, this pace provides a solid footing from which most economists envision renewed acceleration into 2005. Clearly, a vigorous economic backdrop is an essential ingredient to a sustained level of corporate merger and acquisition ("M&A") activity, and in turn, a hearty pipeline of new loan transactions. Coinciding with increasingly robust growth, third quarter M&A-related loan volumes posted their highest totals since the second quarter of 2000. Further, as the economy continues to expand, even at a somewhat uneven pace, and as commodity prices move ever upward, so has the expectation of a continued rise in short-term interest rates. Importantly, unlike fixed rate bonds, returns for which ---------- (1) The distribution rate is calculated by dividing the total distributions declared during the period 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. See additional information regarding the Index on page 5. 2 ING Senior Income Fund PORTFOLIO MANAGERS' REPORT (continued) are inversely related to changes in interest rates, the loan asset class, by way of its floating rate profile, is expected to benefit as rates rise. Rounding out the triumvirate of positive factors affecting the loan market, credit trends continue to look relatively stable. Trailing default rates continue to hover near historical lows, and the percentage of the market comprised of loans rated CCC+ or lower by Standard & Poor's recently fell to a level not seen in roughly six years. For the considerable number of favorable trends impacting the loan market, there are a small number of emerging issues that offer a degree of pause. The price of oil, for one, if sustained at current levels, will certainly have a crimping effect on the pace of economic growth, and more specifically, those corporations that use crude oil as a direct or indirect input. Moreover, strong demand for loans, coupled with high levels of uninvested cash in the hands of investors, has bred a bit of an issuer's market. Not unexpectedly, as a result, we've seen both the compression of borrowing spreads to historical lows over the last few quarters and an increasing inflow of slightly lower quality loans coming to market. We are actively monitoring each of these developments. TOP TEN INDUSTRY SECTORS AS OF AUGUST 31, 2004 AS A PERCENTAGE OF:
TOTAL NET ASSETS ASSETS ------ ------ Healthcare, Education and Childcare 9.4% 10.9% Cable Television 7.2% 8.4% Printing and Publishing 6.8% 8.0% Chemicals, Plastics and Rubber 6.4% 7.5% Automobile 4.8% 5.6% Cellular Communications 4.5% 5.2% Containers, Packaging and Glass 4.3% 5.0% Leisure, Amusement and Entertainment 4.2% 5.0% Utilities 3.9% 4.5% Radio and TV Broadcasting 3.9% 4.5%
Portfolio holdings are subject to change daily. PORTFOLIO SPECIFICS The Fund during the period benefited from the robust supply of new loans, ongoing broad-based price support due to strong demand for floating rate assets, and solid performance by several of the larger individual holdings. Notable changes in sector holdings during the period include an increase in healthcare (9.4% of total assets at period-end, as compared to 7.0% at the end of February 2004), driven largely by new investment in several large cap issuers in the medical device and or services sub-sectors. We continue to view favorably these components of the healthcare industry based on high barriers to entry and relative stability of cash flows. Industry groups that experienced significant reduction in overall exposure during the period included cable television (7.2% of total assets at period-end, down from 12.7%) and cellular communications (4.5%, versus 8.3%). While we still view these as attractive sectors from a risk-return perspective, increasingly receptive capital markets have offered cable and wireless companies the option of refinancing substantial debt loads at lower overall borrowing costs. The two benchmark issuers, Charter Communications Operating, LLC (third largest U.S. cable operator) and Nextel Finance Company (one of the largest independent wireless providers) both refinanced (and in the case of Nextel, substantially reduced) their loan facilities during the period. We opted at that time to reduce the Fund's respective exposures TOP TEN SENIOR LOAN ISSUERS AS OF AUGUST 31, 2004 AS A PERCENTAGE OF:
TOTAL NET ASSETS ASSETS ------ ------ Charter Communications Operating, LLC 1.9% 2.2% Davita, Inc. 1.5% 1.8% Allied Waste North America, Inc. 1.2% 1.3% Community Health Systems, Inc. 1.1% 1.3% Century Cable Holdings, LLC 1.1% 1.2% Huntsman International LLC 1.0% 1.2% Owens-Illinois Group, Inc. 1.0% 1.1% Nextel Finance Company 0.9% 1.1% Metro-Goldwyn-Mayer Studios, Inc. 0.9% 1.1% Dex Media West, LLC 0.9% 1.0%
Portfolio holdings are subject to change daily. 3 ING Senior Income Fund PORTFOLIO MANAGERS' REPORT (continued) to these companies and simultaneously lock in realized gains. Charter at period-end represented approximately 1.9% of total assets, as compared to 3.2% at the end of February 2004, and Nextel accounted for 0.9%, versus 3.0% (the latter representing the Fund's number two holding at that time). In short, these adjustments were made to improve an already high level of portfolio diversification. As of August 31, 2004, only seven holdings accounted for more than 1.0% of total assets, and the average amount outstanding per loan represented 0.2% of the Fund's total assets (as compared to 0.3% at the end of February 2004). At approximately 2.6% of total assets, the average sector concentration remained very comfortable. Importantly, the level of non-performing loans in the Fund (classified as those not currently paying interest and/or principal as contractually stipulated) remained negligible. [CHART] INVESTMENT TYPES AS OF AUGUST 31, 2004 (AS A PERCENT OF TOTAL INVESTMENTS) Short-Term Investments 0.8% Senior Loans 98.9% Other Corporate Debt 0.2% Equities and Other Assets 0.1%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY. USE OF LEVERAGE The Fund seeks to prudently utilize financial leverage in order to increase the yield to shareholders. As of August 31, 2004, the Fund had $125 million outstanding under a $350 million revolving credit facility. OUTLOOK Fundamentally, our near-term outlook for the loan asset class remains positive. Investor demand for floating rate loans, already at a level not seen in several years, is expected to remain quite healthy as the Federal Reserve continues on its path of systematically increasing short-term interest rates. Strong demand typically translates into firm loan prices and stable net asset values. Further, at this point, there appears to be little on the immediate horizon that would threaten what is currently viewed as a fairly benign non-investment grade credit environment. We are on watch, however, for increasingly aggressive transaction structures (e.g., second lien and covenant-light loan facilities). Our strategy remains focused on delivering attractive risk-adjusted returns. As in the past, we will continue to forfeit yield in order to maintain credit discipline. 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 SENIOR PORTFOLIO MANAGER SENIOR PORTFOLIO MANAGER ING INVESTMENT MANAGEMENT CO. ING INVESTMENT MANAGEMENT CO. ING Senior Income Fund September 27, 2004 4 ING Senior Income Fund PORTFOLIO MANAGERS' REPORT (continued)
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED AUGUST 31, 2004 ------------------------------------------------------------- SINCE INCEPTION SINCE INCEPTION OF CLASS A, B AND C OF CLASS Q 1 YEAR 3 YEAR APRIL 2, 2001 DECEMBER 15, 2000 ------ ------ ------------------- ----------------- Including Sales Charge: Class A(1) 1.28% 3.86% 4.38% -- Class B(2) 2.81% 4.37% 4.92% -- Class C(3) 4.80% 5.00% 5.33% -- Class Q 6.28% 5.48% -- 5.77% Excluding Sales Charge: Class A 6.33% 5.56% 5.88% -- Class B 5.81% 4.98% 5.31% -- Class C 5.80% 5.00% 5.33% -- Class Q 6.28% 5.48% -- 5.77% S&P/LSTA Leveraged Loan Index(4) 6.55% 4.78% 4.98% 5.24%
The table above illustrates the total return of ING Senior Income Fund against the S&P/LSTA Leveraged Loan Index. The Index has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The 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. THE FUND'S PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA SHOWN. PLEASE LOG ON TO www.ingfunds.com OR CALL (800) 992-0180 TO GET PERFORMANCE THROUGH THE MOST RECENT MONTH-END. THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING" STATEMENTS. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND HOLDINGS ARE SUBJECT TO CHANGE DAILY. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. Subsequent to the period end, on October 11, 2004, the front-end sales load for Class A Common Shares was reduced to a maximum sales charge of 2.50%. There is no front-end sales charge if you purchase Class A Common Shares in an amount of $1 million or more. However, the shares will be subject to a 1.00% EWC if they are repurchased by the Fund within one year of purchase. (2) Class B maximum Early Withdrawal Charge ("EWC") is 3% in the first year, declining to 1% in the fifth year and eliminated thereafter. (3) Class C maximum EWC is 1% for the first year. (4) Source: S&P/Loan Syndication Trading Association. The S&P/LSTA Leveraged Loan Index ("LLI") is an unmanaged 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 the LLI to establish a performance benchmark for the syndicated leveraged loan industry. An investor cannot invest directly in an index. Since inception performance for the index is shown from March 31, 2001 for Class A, B and C and from December 31, 2000 for Class Q. 5 ING Senior Income Fund PORTFOLIO MANAGERS' REPORT (continued) YIELDS AND DISTRIBUTIONS RATES
30-DAY SEC YIELDS(1) AVERAGE ANNUALIZED DISTRIBUTION RATES(2) -------------------------------------- ---------------------------------------- CLASS A CLASS B CLASS C CLASS Q CLASS A CLASS B CLASS C CLASS Q -------------------------------------- ---------------------------------------- August 31, 2004(3) 3.05% 2.71% 2.71% 3.21% 3.53% 3.04% 3.03% 3.54% February 29, 2004(4) 3.08% 2.73% 2.73% 3.21% 4.24% 3.74% 3.74% 4.25%
(1) 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. (2) 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. (3) If the Investment Manager had not waived certain Fund expenses, the 30-Day SEC yield would have been 2.94% for Class A shares, 2.60% for Class B and Class C shares and 3.10% for Class Q shares. (4) If the Investment Manager had not waived certain Fund expenses, the 30-Day SEC yield would have been 3.00% for Class A shares, 2.66% for Class B and Class C shares and 3.13% for Class Q shares. PRINCIPAL RISK FACTOR(S): This closed-end Fund may invest in below investment grade senior loans. Investment in the Fund involves the risk that borrowers may default on obligations, or that lenders may have difficulty liquidating the collateral securing the loans or enforcing their rights under the terms of the senior loans. Senior loans are subject to credit risks and the potential for non-payment of scheduled principal or interest payments, which may result in a reduction of the Fund's NAV. The use of leverage for investment purposes increases both investment opportunity and investment risk. In the event of a general market decline in the value of assets such as those in which the Fund invests, the effect of that decline will be magnified in the Fund because of the additional assets purchased with the proceeds of the leverage. The Fund may be limited in its ability to sell loans in its portfolio in a timely fashion and/or at a favorable price due to the limited secondary market for loans. The price of loans can increase in the secondary market and the rate of interest payable on new loans can be adversely affected by an increase in demand for loans. If more than 5% of Common Shares are tendered, investors may not be able to completely liquidate their holdings in any one month. Investments in foreign borrowers involve the following possible risks: potential for political, social and economic adversity, differing legal systems and laws, and less rigorous regulatory requirements than U.S. borrowers. INTEREST RATE RISK: Changes in market interest rates will affect the yield on the Fund's Common Shares. If market interest rates fall, the yield on the Fund's Common Shares will also fall. In addition, changes in market interest rates may cause the Fund's NAV to experience moderate volatility because of the lag between changes in market rates and the resetting of the floating rates on assets in the Fund's portfolio. To the extent that market interest rate changes are reflected as a change in the market spreads for loans of the type and quality in which the Fund invests, the value of the Fund's portfolio may decrease in response to an increase in such spreads. Finally, substantial increases in interest rates may cause an increase in loan defaults as borrowers may lack the resources to meet higher debt service requirements. 6 ING Senior Income Fund STATEMENT OF ASSETS AND LIABILITIES as of August 31, 2004 (Unaudited) ASSETS: Investments in securities at value (Cost $1,538,178,415) $ 1,548,256,328 Repurchase Agreement 12,000,000 Cash 41,447,226 Receivables: Fund shares sold 22,074,048 Interest 6,158,869 Investment securities sold 3,670,961 Prepaid expenses 409,081 Prepaid arrangement fees on notes payable 189 Reimbursement due from manager 106,301 ----------------- Total assets 1,634,123,003 ----------------- LIABILITIES: Payable for investments purchased 102,984,568 Notes payable 125,000,000 Accrued interest payable 164,619 Deferred arrangement fees 1,289,858 Payable to affiliates 1,615,779 Income distribution payable 3,542,869 Accrued trustee fees 1,448 Other accrued expenses and liabilities 435,705 ----------------- Total liabilities 235,034,846 ----------------- NET ASSETS $ 1,399,088,157 ================= NET ASSETS CONSIST OF: Paid-in capital $ 1,384,831,604 Accumulated distributions in excess of net investment income (1,421,974) Accumulated net realized gain on investments 5,600,614 Net unrealized appreciation on investments 10,077,913 ----------------- NET ASSETS $ 1,399,088,157 =================
See Accompanying Notes to Financial Statements 7 ING Senior Income Fund STATEMENT OF ASSETS AND LIABILITIES as of August 31, 2004 (Unaudited) (continued) CLASS A: Net assets $ 451,168,632 Shares authorized unlimited Par value $ 0.01 Shares outstanding 29,090,243 Net asset value and redemption price per share $ 15.51 Maximum offering price per share (4.75%)(1) $ 16.28 CLASS B: Net assets $ 108,907,301 Shares authorized unlimited Par value $ 0.01 Shares outstanding 7,032,915 Net asset value and redemption price per share (2) $ 15.49 Maximum offering price per share $ 15.49 CLASS C: Net assets $ 600,568,734 Shares authorized unlimited Par value $ 0.01 Shares outstanding 38,753,017 Net asset value and redemption price per share (2) $ 15.50 Maximum offering price per share $ 15.50 CLASS Q: Net assets $ 238,443,490 Shares authorized unlimited Par value $ 0.01 Shares outstanding 15,436,058 Net asset value and redemption price per share $ 15.45 Maximum offering price per share $ 15.45
---------- (1) Maximum offering price is computed at 100/95.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable Early Withdrawal Charge. See Accompanying Notes to Financial Statements 8 ING Senior Income Fund STATEMENT OF OPERATIONS for the six months ended August 31, 2004 (Unaudited) INVESTMENT INCOME: Interest $ 21,150,298 Arrangement fees earned 383,263 Other 824,711 ----------------- Total investment income 22,358,272 ----------------- EXPENSES: Investment management fees 3,908,008 Administration fees 497,945 Distribution and service fees: Class A 356,293 Class B 431,165 Class C 1,566,618 Class Q 207,613 Transfer agent fees: Class A 65,526 Class B 20,304 Class C 97,190 Class Q 38,688 Shareholder reporting expense 220,541 Interest expense 371,216 Custodian fees 229,150 Credit facility fees 262,252 Professional fees 176,872 Trustee fees 5,628 Registration fees 222,680 Miscellaneous expense 21,410 ----------------- Total expenses 8,699,099 ----------------- Less: Net waived and reimbursed fees 251,178 ----------------- Net expenses 8,447,921 ----------------- Net investment income 13,910,351 ----------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 3,956,809 Net change in value of investments (957,692) ----------------- Net realized and unrealized gain on investments 2,999,117 ----------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 16,909,468 =================
See Accompanying Notes to Financial Statements 9 ING Senior Income Fund STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
SIX MONTHS YEAR ENDED ENDED AUGUST 31, FEBRUARY 29, 2004 2004 ----------------- ----------------- FROM OPERATIONS: Net investment income $ 13,910,351 $ 16,291,872 Net realized gain on investments 3,956,809 5,249,490 Net change in value of investments (957,692) 12,520,783 ----------------- ----------------- Net increase in net assets resulting from operations 16,909,468 34,062,145 ----------------- ----------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class A (4,952,144) (2,804,728) Class B (1,301,639) (1,277,656) Class C (6,256,393) (4,349,387) Class Q (2,931,544) (8,270,536) Net realized gain on investments: Class A -- (107,928) Class B -- (46,487) Class C -- (181,082) Class Q -- (159,555) ----------------- ----------------- Total distributions (15,441,720) (17,197,359) ----------------- ----------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 878,119,256 585,241,477 Dividends reinvested 7,972,535 9,503,996 ----------------- ----------------- 886,091,791 594,745,473 Cost of shares repurchased (157,198,271) (219,625,660) ----------------- ----------------- Net increase in net assets resulting from capital share transactions 728,893,520 375,119,813 ----------------- ----------------- Net increase in net assets 730,361,268 391,984,599 ----------------- ----------------- NET ASSETS: Beginning of period 668,726,889 276,742,290 ----------------- ----------------- End of period $ 1,399,088,157 $ 668,726,889 ================= ================= Undistributed net investment income (accumulated distributions in excess of net investment income) at end of period $ (1,421,974) $ 109,395 ================= =================
See Accompanying Notes to Financial Statements 10 ING Senior Income Fund STATEMENT OF CASH FLOWS for the six months ended August 31, 2004 (Unaudited) INCREASE (DECREASE) IN CASH CASH FLOWS FROM OPERATING ACTIVITIES: Interest received $ 17,116,111 Facility fees paid (17,779) Arrangement fee received 527,938 Other income received 824,711 Interest paid (214,900) Other operating expenses paid (3,463,360) Purchases of investment securities (2,296,139,282) Proceeds from disposition of investment securities 1,490,729,140 ----------------- Net cash used in operating activities (790,637,421) ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions paid to common shareholders (7,469,185) Proceeds from capital shares sold 867,969,255 Disbursements for capital shares repurchased (157,198,271) Net issuance of notes payable 125,000,000 ----------------- Net cash provided by financing activities 828,301,799 ----------------- Net increase in cash 37,664,378 Cash at beginning of period 3,782,848 ----------------- Cash at end of period $ 41,447,226 ================= RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES: Net increase in net assets resulting from operations $ 16,909,468 ----------------- Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: Change in unrealized appreciation on investments 957,692 Net accretion of discounts on investments (607,489) Realized gain on sale of investments (3,956,809) Purchases of investment securities (2,296,139,282) Proceeds from disposition of investment securities 1,490,729,140 Increase in interest receivable (3,426,698) Decrease in prepaid arrangement fees on notes payable 244,473 Increase in prepaid expenses (207,170) Increase in deferred arrangement fees 144,675 Increase in accrued interest payable 156,316 Increase in reimbursement due from manager (10,223) Increase in payable to affiliates 897,022 Decrease in accrued trustee fees (1,425) Increase in income distribtuion payable 3,542,869 Increase in accrued expenses 130,020 ----------------- Total adjustments (807,546,889) ----------------- Net cash used in operating activities $ (790,637,421) ================= NONCASH FINANCING ACTIVITIES Receivable for shares sold $ 22,074,048 Reinvestment of dividends $ 7,972,535
See Accompanying Notes to Financial Statements 11 ING SENIOR INCOME FUND (UNAUDITED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS A ----------------------------------------------------- SIX MONTHS YEAR ENDED APRIL 2, ENDED FEBRUARY 28 OR 29, 2001(1) TO AUGUST 31, ---------------------- FEBRUARY 28, 2004 2004 2003 2002 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 15.47 14.83 14.92 15.00 Income (loss) from investment operations: Net investment income $ 0.26 0.61 0.69 0.81 Net realized and unrealized gain (loss) on investments $ 0.06 0.69 (0.09) (0.09) Total income from investment operations $ 0.32 1.30 0.60 0.72 Less distributions from: Net investment income $ 0.28 0.64 0.69 0.80 Net realized gain on investments $ -- 0.02 -- -- Total distributions $ 0.28 0.66 0.69 0.80 Net asset value, end of period $ 15.51 15.47 14.83 14.92 TOTAL INVESTMENT RETURN(2) % 2.06 8.93 4.15 4.92 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 451,169 172,975 11,106 2,411 Average borrowings (000's)(3) $ 21,511 20,771 17,655 19,797 Asset coverage per $1,000 of debt $ 1,219 --* 689 3,220 RATIOS TO AVERAGE NET ASSETS AFTER REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.37 1.36 1.42 1.47 Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 1.50 1.43 1.63 1.73 Net investment income(4)(5) % 3.17 3.84 4.88 5.58 RATIOS TO AVERAGE NET ASSETS BEFORE REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.40 1.46 1.57 1.82 Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 1.53 1.53 1.78 2.07 Net investment income(4)(5) % 3.14 3.74 4.73 5.26 Portfolio turnover rate % 76 72 60 65 Shares outstanding at end of period (000's) 29,090 11,180 749 162 CLASS B ----------------------------------------------------- SIX MONTHS YEAR ENDED APRIL 2, ENDED FEBRUARY 28 OR 29, 2001(1) TO AUGUST 31, ---------------------- FEBRUARY 28, 2004 2004 2003 2002 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 15.45 14.82 14.92 15.00 Income (loss) from investment operations: Net investment income $ 0.21 0.53 0.62 0.75 Net realized and unrealized gain (loss) on investments $ 0.07 0.69 (0.10) (0.10) Total income from investment operations $ 0.28 1.22 0.52 0.65 Less distributions from: Net investment income $ 0.24 0.57 0.62 0.73 Net realized gain on investments $ -- 0.02 -- -- Total distributions $ 0.24 0.59 0.62 0.73 Net asset value, end of period $ 15.49 15.45 14.82 14.92 TOTAL INVESTMENT RETURN(2) % 1.80 8.33 3.57 4.45 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 108,907 62,852 17,648 12,776 Average borrowings (000's)(3) $ 21,511 20,771 17,655 19,797 Asset coverage per $1,000 of debt $ 1,595 --* 689 3,220 RATIOS TO AVERAGE NET ASSETS AFTER REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.87 1.87 1.91 1.96 Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 2.00 1.97 2.09 2.23 Net investment income(4)(5) % 2.67 3.47 4.12 5.19 RATIOS TO AVERAGE NET ASSETS BEFORE REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 2.15 2.22 2.31 2.29 Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 2.28 2.31 2.49 2.54 Net investment income(4)(5) % 2.39 3.13 3.72 4.89 Portfolio turnover rate % 76 72 60 65 Shares outstanding at end of period (000's) 7,033 4,068 1,191 856
(1) Commencement of operations. (2) Total investment returns are not annualized for periods of less than one year and do not include sales load. (3) Based on the active days of borrowing. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage commissions, leverage expenses, other investment related costs and extraordinary expenses, subject to possible recoupment by the Investment Manager within three years. * There were no loans outstanding at period end. See Accompanying Notes to Financial Statements 12 ING SENIOR INCOME FUND (UNAUDITED) (CONTINUED) FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each period.
CLASS C ----------------------------------------------------- SIX MONTHS YEAR ENDED APRIL 2, ENDED FEBRUARY 28 OR 29, 2001(1) TO AUGUST 31, ---------------------- FEBRUARY 28, 2004 2004 2003 2002 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 15.46 14.82 14.92 15.00 Income (loss) from investment operations: Net investment income $ 0.22 0.53 0.62 0.75 Net realized and unrealized gain (loss) on investments $ 0.06 0.70 (0.10) (0.10) Total income from investment operations $ 0.28 1.23 0.52 0.65 Less distributions from: Net investment income $ 0.24 0.57 0.62 0.73 Net realized gain on investments $ -- 0.02 -- -- Total distributions $ 0.24 0.59 0.62 0.73 Net asset value, end of period $ 15.50 15.46 14.82 14.92 TOTAL INVESTMENT RETURN(2) % 1.80 8.40 3.57 4.45 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 600,569 275,849 32,647 19,391 Average borrowings (000's)(3) $ 21,511 20,771 17,655 19,797 Asset coverage per $1,000 of debt $ 1,595 --* 689 3,220 RATIOS TO AVERAGE NET ASSETS AFTER REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.87 1.86 1.91 1.96 Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 2.00 1.94 2.09 2.23 Net investment income(4)(5) % 2.68 3.38 4.19 5.20 RATIOS TO AVERAGE NET ASSETS BEFORE REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.90 1.96 2.06 2.29 Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 2.04 2.04 2.24 2.54 Net investment income(4)(5) % 2.65 3.28 4.04 4.89 Portfolio turnover rate % 76 72 60 65 Shares outstanding at end of period (000's) 38,753 17,841 2,202 1,300 CLASS Q ------------------------------------------------------ SIX MONTHS YEAR ENDED DECEMBER 15, ENDED FEBRUARY 28 OR 29, 2000(1) TO AUGUST 31, -------------------------- FEBRUARY 28, 2004 2004 2003 2002(6) 2001 -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 15.41 14.79 14.89 15.30 15.02 Income from investment operations: Net investment income $ 0.26 0.63 0.69 0.81 0.14 Net realized and unrealized gain (loss) on investments $ 0.06 0.65 (0.10) (0.32) 0.14 Total income from investment operations $ 0.32 1.28 0.59 0.49 0.28 Less distributions from: Net investment income $ 0.28 0.64 0.69 0.90 -- Net realized gain on investments $ -- 0.02 -- -- -- Total distributions $ 0.28 0.66 0.69 0.90 -- Net asset value, end of period $ 15.45 15.41 14.79 14.89 15.30 TOTAL INVESTMENT RETURN(2) % 2.06 8.82 4.09 3.73 1.80 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 238,443 157,051 215,341 215,029 94,096 Average borrowings (000's)(3) $ 21,511 20,771 17,655 19,797 -- Asset coverage per $1,000 of debt $ 1,595 --* 689 3,220 --* RATIOS TO AVERAGE NET ASSETS AFTER REIMBURSEMENT: Expenses (before interest and other fees related to revolving credit facility)(4)(5) % 1.37 1.40 1.41 1.43 -- Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 1.50 1.54 1.59 1.63 1.85 Net investment income(4)(5) % 3.17 4.17 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) % 1.40 1.48 1.56 1.70 -- Expenses (with interest and other fees related to revolving credit facility)(4)(5) % 1.53 1.62 1.74 1.90 1.85 Net investment income(4)(5) % 3.14 4.09 4.54 5.67 7.00 Portfolio turnover rate % 76 72 60 65 11 Shares outstanding at end of period (000's) 15,436 10,188 14,559 14,439 6,152
(1) Commencement of operations. (2) Total investment returns are not annualized for periods of less than one year and do not include sales load. (3) Based on the active days of borrowing. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage commissions, leverage expenses, other investment related costs and extraordinary expenses, subject to possible recoupment by the Investment Manager within three years. (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. * There were no loans outstanding at period end. See Accompanying Notes to Financial Statements 13 ING Senior Income Fund NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) 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, management investment company. 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. During the period December 15, 2000 through March 30, 2001, the Fund issued 19,933,953 Class Q shares to an affiliate 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. The Fund currently offers four classes of shares; A, B, C and Q. 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% 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. To maintain a measure of liquidity, the Fund offers to repurchase between 5% and 25% of its outstanding common shares on a monthly basis. This is a fundamental policy that can not be changed without shareholder approval. The Fund currently anticipates offerings to repurchase 5% of its outstanding common shares each month. The Fund may not repurchase more than 25% in any calendar quarter. Other than these monthly repurchases, no market for the Fund's common shares is expected to exist. 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 and realized gains / losses from all portfolios pro rata on the average daily net assets of each class, without distinction between share classes. 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. 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 market value quotations are not readily 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 of the loan being valued. 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 August 31, 2004, 98.4% of total investments were valued based on these procedures. 14 ING Senior Income Fund NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 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 related agreements, 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 market value quotations are not readily available and all other assets will be valued at their respective fair values as determined in good faith by, and under procedures established by, the Board of Trustees of the Fund. Investments in securities maturing in 60 days or less from the date of valuation are valued at amortized cost, which, when combined with accrued interest, approximates market value. B. DISTRIBUTIONS TO SHAREHOLDERS. The Fund declares and goes ex-dividend daily and pays dividends monthly for net investment income. Distributions from capital gains, if any, are declared and paid annually. The Fund may make additional distributions to comply with the distribution requirements of the Internal Revenue Code. The character and amounts of income and gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. 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 Fund records distributions to its shareholders on the ex-dividend date. C. SECURITY TRANSACTIONS AND REVENUE RECOGNITION. Revolver and delayed draw loans are booked on a settlement date basis. Security transactions and senior loans 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 sold. 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 non-accrual loans are generally applied as a reduction to the recorded investment of the loan. Loans are generally returned to accrual status only after all past due amounts have been received and the borrower has demonstrated sustained performance. Premium amortization 15 ING Senior Income Fund NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 received on revolving credit facilities, which represent non-refundable fees or purchase discounts 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. Dividend income is recorded on the ex-dividend date. D. FEDERAL INCOME TAXES. It is the Fund's policy to comply with subchapter M of the Internal Revenue Code and related excise tax provisions applicable to regulated investment companies and to distribute substantially all of its net investment income and net realized capital gains to its shareholders. Therefore, no federal income tax provision is required. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expire. E. 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 for investment companies. Actual results could differ from these estimates. NOTE 3 -- INVESTMENTS For the six months ended August 31, 2004, the cost of purchases and the proceeds from principal repayment and sales of investments, excluding short-term investments, totaled $1,315,493,213 and $411,900,101, respectively. At August 31, 2004, the Fund held senior loans valued at $1,544,048,996 representing 99.7% of its total investments (excluding short-term investments). The market value of these assets is established as set forth in Note 2. The senior loans acquired by the Fund may take the form of a direct lending relationship with the borrower or an assignment of 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. Warrants and shares of common stock held in the portfolio were acquired in conjunction with 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. Dates of acquisition and cost or assigned basis of restricted securities are as follows:
DATE OF COST OR ACQUISITION ASSIGNED BASIS ----------- -------------- Decision One Corporation -- Common Shares 09/27/01 $ -- Galey & Lord -- Common Shares 03/31/04 -- Murray's Discount Auto Stores, Inc. -- Escrow 08/11/03 133,153 Neoplan USA Corporation -- Common Shares 08/29/03 -- Neoplan USA Corporation -- Preferred B Shares 08/29/03 -- Neoplan USA Corporation -- Preferred C Shares 08/29/03 40,207 Neoplan USA Corporation -- Preferred D Shares 08/29/03 330,600 New World Restaurant Group, Inc. -- Warrants 02/20/02 20 Norwood Promotional Products, Inc. -- Common Shares 08/23/04 10,046 Safelite Glass Corporation -- Common Shares 06/21/01 -- Safelite Realty -- Common Shares 06/21/01 -- Targus Group, Inc. -- Warrants 03/11/03 -- -------------- Total restricted securities excluding senior loans (market value of $1,657,184 was 0.1% of net assets at August 31, 2004.) $ 514,026 ==============
16 ING Senior Income Fund NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued) NOTE 4 -- MANAGEMENT AND ADMINISTRATION AGREEMENTS 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 is sub-advised by ING Investment Management Co. (formerly, Aeltus Investment Management, Inc. "ING IM"). Under the Sub-Advisory Agreement, ING IM is responsible for managing the assets of the Fund in accordance with its investment objective and policies, subject to oversight by the Investment Manager. Both ING IM and the Investment Manager are indirect wholly-owned subsidiaries of ING Groep N.V. and affiliates of each other. The Fund has also entered into an Administration Agreement with ING Funds Services, LLC (the "Administrator"), an indirect wholly-owned subsidiary of ING Groep N.V., 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 six months ended August 31, 2004, 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 August 31, 2004, the amounts of reimbursed fees that are subject to possible recoupment by the Investment Manager, and the related expiration dates are as follows:
AUGUST 31, -------------------------------------------------- 2005 2006 2007 TOTAL --------- --------- --------- ----------- $ 732,873 $ 292,265 $ 419,364 $ 1,444,502
17 ING Senior Income Fund NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued) NOTE 7 -- COMMITMENTS The Fund has entered into a one-year revolving credit agreement, collateralized by assets of the Fund, to borrow up to $350 million maturing May 26, 2005. Borrowing rates under this agreement are based on a commercial paper pass through rate plus 0.25% on the funded portion. A facility fee of 0.15% is charged on the entire facility. There was $125 million of borrowings outstanding at August 31, 2004 at a rate of 1.82%, excluding other fees related to the entire facility. Average borrowings for the six months ended August 31, 2004 was $21,510,870 and the average annualized interest rate was 1.39%, excluding other fees related to the entire facility. NOTE 8 -- SENIOR LOAN COMMITMENTS At August 31, 2004, the Fund had unfunded loan commitments pursuant to the terms of the following loan agreements: Allied Waste North America, Inc. $ 1,440,650 Baker & Taylor, Inc. 525,000 Celanese Corporation 2,481,476 Cincinnati Bell, Inc. 1,966,599 Concentra Operating Corporation 4,000,000 Envirosolutions, Inc. 545,455 Federal-Mogul Corporation 171,662 GEO Specialty Chemicals, Inc. 330,000 Huntsman International, LLC 5,000,000 IESI Corporation 1,055,625 Innophos, Inc. $ 286,364 Nutrasweet Acquisition Corporation 670,608 Pinnacle Entertainment 672,981 Primedia, Inc. 3,419,204 Saguara Utility Group 1 Corporation 3,500,000 SBA Senior Finance, Inc. 996,154 Six Flags Theme Parks, Inc. 1,000,000 United Defense Industries, Inc. 2,000,000 United Rentals (North America), Inc. 898,462 --------------- $ 30,960,240 ===============
NOTE 9 -- TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES At August 31, 2004, the Fund had the following amounts recorded in payable to affiliates on the accompanying Statement of Assets and Liabilities (see Notes 4 and 5):
ACCRUED INVESTMENT ACCRUED ACCRUED DISTRIBUTION MANAGEMENT FEES ADMINISTRATIVE FEES AND SERVICE FEES TOTAL --------------- ------------------- ---------------- ----- $ 934,591 $ 120,539 $ 560,649 $ 1,615,779
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 six months ended August 31, 2004. 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 August 31, 2004, the Fund held 0.16% of its total assets in subordinated loans and unsecured loans. 18 ING Senior Income Fund NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued) NOTE 12 -- CAPITAL SHARES Transactions in capital shares and dollars were as follows:
CLASS A CLASS B ---------------------------------- ---------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, FEBRUARY 29, AUGUST 31, FEBRUARY 29, 2004 2004 2004 2004 ---- ---- ---- ---- NUMBER OF SHARES Shares sold 20,288,653 11,471,958 3,328,224 3,176,454 Dividends reinvested 165,742 128,609 43,186 50,168 Shares redeemed (2,543,809) (1,169,710) (406,334) (349,656) --------------- --------------- --------------- --------------- Net increase in shares outstanding 17,910,586 10,430,857 2,965,076 2,876,966 =============== =============== =============== =============== DOLLAR AMOUNT ($) Shares sold $ 314,655,679 $ 175,247,213 $ 51,531,642 $ 48,393,642 Dividends reinvested 2,571,116 1,970,610 669,010 765,311 Shares redeemed (39,470,449) (17,948,478) (6,292,459) (5,333,591) --------------- --------------- --------------- --------------- Net increase $ 277,756,346 $ 159,269,345 $ 45,908,193 $ 43,825,362 =============== =============== =============== =============== CLASS C CLASS Q ---------------------------------- ---------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED AUGUST 31, FEBRUARY 29, AUGUST 31, FEBRUARY 29, 2004 2004 2004 2004 ---- ---- ---- ---- NUMBER OF SHARES Shares sold 22,400,106 16,799,564 10,666,549 6,897,835 Dividends reinvested 232,677 219,973 72,833 226,785 Shares redeemed (1,721,018) (1,380,540) (5,491,723) (11,495,246) --------------- --------------- --------------- --------------- Net increase (decrease) in shares outstanding 20,911,765 15,638,997 5,247,659 (4,370,626) =============== =============== =============== =============== DOLLAR AMOUNT ($) Shares sold $ 347,148,461 $ 256,292,793 $ 164,783,474 $ 105,307,829 Dividends reinvested 3,606,980 3,363,842 1,125,429 3,404,233 Shares redeemed (26,663,680) (21,108,863) (84,771,683) (175,234,728) --------------- --------------- --------------- --------------- Net increase (decrease) $ 324,091,761 $ 238,547,772 $ 81,137,220 $ (66,522,666) =============== =============== =============== ===============
NOTE 13 -- FEDERAL INCOME TAXES The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. These book/tax differences may be either temporary or permanent. Permanent differences are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences are not reclassified. Key differences include the treatment of short-term capital gains, organizational and offering expenses, and wash sale deferrals. Distributions in excess of net investment income and/or net realized capital gains for tax purposes are reported as distributions of paid-in capital. Dividends paid by the 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 was as follows:
SIX MONTHS ENDED AUGUST 31, 2004 YEAR ENDED FEBRUARY 29, 2004 -------------------------------- ---------------------------- LONG-TERM ORDINARY INCOME ORDINARY INCOME CAPITAL GAIN --------------- --------------- ------------ $ 15,441,720 $ 16,702,307 $ 495,052
19 ING Senior Income Fund NOTES TO FINANCIAL STATEMENTS as of August 31, 2004 (Unaudited) (continued) NOTE 13 -- FEDERAL INCOME TAXES (CONTINUED) The tax-basis components of distributable earnings and the expiration dates of the capital loss carryforwards which may be used to offset future realized capital gains for federal income tax purposes as of February 29, 2004 were as follows:
UNDISTRIBUTED UNREALIZED POST-OCTOBER CAPITAL UNDISTRIBUTED LONG-TERM APPRECIATION/ CAPITAL LOSSES LOSS EXPIRATION ORDINARY INCOME CAPITAL GAINS (DEPRECIATION) DEFERRED CARRYFORWARDS DATES --------------- ------------- -------------- -------- ------------- ----- $ 2,239,630 $ 194,558 $ 11,020,385 $ -- $ -- --
NOTE 14 -- SUBSEQUENT EVENTS DIVIDENDS DECLARED Subsequent to August 31, 2004, the Fund declared the following dividends:
PER SHARE AMOUNT TYPE DECLARATION DATE RECORD DATE PAYABLE DATE ---------------- ---- ---------------- ----------- ------------ $ 0.04449(A) NII Daily Daily October 1, 2004 $ 0.03813(B) NII Daily Daily October 1, 2004
NII -- Net Investment Income (A) For Class A and Q shares. (B) For Class B and C shares. Effective October 11, 2004, the front-end sales load for Class A Common Shares was reduced. In addition, the breakpoints in the Early Withdrawal Charge ("EWC") have been eliminated for purchases of Class A Common Shares of $1 million or more resulting in a 1.00% EWC for 1 year for all shareholders. ADDITIONAL INFORMATION PROXY VOTING INFORMATION A description of the policies and procedures that the Registrant uses to determine how to vote proxies related to portfolio securities is available (1) without charge, upon request, by calling Shareholder Services toll-free at 800-992-0180; (2) on the Registrant's website at www.ingfunds.com and (3) on the SEC's website at www.sec.gov. Information regarding how the Registrant voted proxies related to portfolio securities during the most recent 12-month period ended June 30 is available without charge on the Registrant's website at www.ingfunds.com and on the SEC's website at www.sec.gov. QUARTERLY PORTFOLIO HOLDINGS The Registrant files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Registrant's Forms N-Q are available on the SEC's website at www.sec.gov. The Registrant's Forms N-Q may be reviewed and copied at the Commissions Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330; and is available upon request from the Registrant by calling Shareholder Services toll-free at 800-992-0180. 20 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) SENIOR LOANS*: 110.4%
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- AEROSPACE AND DEFENSE: 1.2% ALLIANT TECHSYSTEMS, INC. Ba2 BB $ 1,995,000 Term Loan, maturing March 31, 2011 $ 2,016,197 ARINC, INC. Ba3 BB 997,500 Term Loan, maturing March 10, 2011 1,012,463 CERADYNE, INC. Ba3 BB- 2,500,000 Term Loan, maturing August 18, 2011 2,525,000 STANDARD AERO HOLDINGS, INC. B2 B+ 4,500,000 Term Loan, maturing August 20, 2012 4,553,437 TRANSDIGM, INC. B1 B+ 3,487,509 Term Loan, maturing July 22, 2010 3,540,913 UNITED DEFENSE INDUSTRIES, INC. Ba2 BB 3,217,255 Term Loan, maturing August 13, 2009 3,247,751 -------------- 16,895,761 -------------- AUTOMOBILE: 5.6% AFTERMARKET TECHNOLOGY CORPORATION Ba3 BB- 723,101 Term Loan, maturing January 08, 2007 712,255 313,301 Term Loan, maturing February 08, 2008 314,448 429,116 Term Loan, maturing February 08, 2008 432,334 CCC INFORMATION SERVICES, INC. B1 B+ 3,000,000 Term Loan, maturing August 20, 2010 8,060,000 COLLINS & AIKMAN PRODUCTS B1 B+ 1,229,416 Term Loan, maturing December 31, 2005 1,231,721 DAYCO PRODUCTS, LLC B1 BB- 5,500,000 Term Loan, maturing June 23, 2011 5,591,097 DURA OPERATING CORPORATION Ba3 BB 3,992,565 Term Loan, maturing December 31, 2008 4,026,254 (1) FEDERAL-MOGUL CORPORATION Ca NR 3,328,338 Revolver, maturing February 24, 2004 3,097,435 2,024,500 Term Loan, maturing February 24, 2004 1,890,377 5,144,500 Term Loan, maturing February 24, 2005 4,808,502 GOODYEAR TIRE & RUBBER COMPANY B1 BB 1,500,000 Term Loan, maturing March 31, 2006 1,522,970 GOODYEAR TIRE & RUBBER COMPANY B2 B 4,000,000 Term Loan, maturing March 31, 2006 4,052,500 GRAND VEHICLE WORKS HOLDINGS CORPORATION B2 B+ 3,000,000 Term Loan, maturing July 31, 2010 2,990,625 GUILFORD MILLS, INC. B2 B+ 1,826,087 Term Loan, maturing May 31, 2010 1,798,696 HLI OPERATING COMPANY, INC. Ba3 BB- 3,431,667 Term Loan, maturing June 03, 2009 3,502,445 JL FRENCH AUTOMOTIVE CASTINGS B3 B 3,500,000 Term Loan, maturing July 31, 2011 3,530,625 JL FRENCH AUTOMOTIVE CASTINGS Caa1 CCC+ 1,500,000 Term Loan, maturing July 31, 2012 1,501,875 KEY AUTOMOTIVE GROUP B1 BB- 2,500,000 Term Loan, maturing June 29, 2010 2,531,250 KEYSTONE AUTOMOTIVE INDUSTRIES, INC. B1 BB- 952,174 Term Loan, maturing October 30, 2009 964,076
See Accompanying Notes to Financial Statements 21 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- AUTOMOBILE: (CONTINUED) MERIDIAN AUTOMOTIVE SYSTEMS, INC. B2 B+ $ 1,997,500 Term Loan, maturing April 28, 2010 $ 1,970,867 METALDYNE COMPANY, LLC B2 BB- 3,202,649 Term Loan, maturing December 31, 2009 3,211,322 PLASTECH, INC. Ba3 BB- 1,484,483 Term Loan, maturing February 12, 2010 1,506,750 RJ TOWER CORPORATION B1 B+ 4,000,000 Term Loan, maturing May 21, 2009 4,007,500 SAFELITE GLASS CORPORATION B3 B+ 2,156,661 Term Loan, maturing September 30, 2007 2,027,261 3,468,622 Term Loan, maturing September 30, 2007 3,260,505 TENNECO AUTOMOTIVE, INC. B1 B+ 1,373,100 Term Loan, maturing December 12, 2010 1,398,846 TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. B2 B 1,496,250 Term Loan, maturing March 14, 2009 1,508,718 TRW AUTOMOTIVE ACQUISITIONS CORPORATION Ba2 BB+ 1,600,000 Term Loan, maturing February 28, 2009 1,617,166 4,163,478 Term Loan, maturing February 28, 2011 4,238,941 UNITED COMPONENTS, INC. B1 BB- 1,285,000 Term Loan, maturing June 30, 2010 1,303,472 -------------- 78,610,833 -------------- BEVERAGE, FOOD AND TOBACCO: 3.1% B & G FOODS, INC. B1 B 992,500 Term Loan, maturing August 31, 2009 998,289 BIRDS EYE FOODS, INC. B1 B+ 4,672,421 Term Loan, maturing June 30, 2008 4,736,667 COMMONWEALTH BRANDS, INC. Ba3 BB- 814,833 Term Loan, maturing August 28, 2007 824,509 CONSTELLATION BRANDS, INC. Ba1 BB 3,250,000 Term Loan, maturing November 30, 2008 3,267,774 DEL MONTE CORPORATION Ba3 BB- 1,858,600 Term Loan, maturing December 20, 2010 1,888,512 DR. PEPPER BOTTLING COMPANY OF TEXAS B1 BB- 4,786,742 Term Loan, maturing December 19, 2010 4,841,340 DS WATERS ENTERPRISES, L.P. B3 B+ 1,462,500 Term Loan, maturing November 07, 2009 1,395,773 GOLDEN STATE FOODS CORPORATION B1 B+ 4,488,750 Term Loan, maturing February 28, 2011 4,547,665 INTERSTATE BRANDS CORPORATION B2 CCC+ 1,477,157 Term Loan, maturing July 19, 2007 1,377,449 KEYSTONE FOODS HOLDINGS, LLC Ba3 B+ 4,500,000 Term Loan, maturing June 16, 2011 4,539,375 MICHAEL FOODS, INC. B1 B+ 2,977,500 Term Loan, maturing November 21, 2010 3,023,559 PIERRE FOODS, INC. B1 B+ 7,000,000 Term Loan, maturing June 30, 2010 7,056,875 PINNACLE FOODS CORPORATION B1 BB- 1,995,000 Term Loan, maturing November 25, 2010 2,019,938
See Accompanying Notes to Financial Statements 22 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- BEVERAGE, FOOD AND TOBACCO: (CONTINUED) SOUTHERN WINE & SPIRITS OF AMERICA, INC. Ba3 BB+ $ 2,217,466 Term Loan, maturing July 02, 2008 $ 2,244,492 -------------- 42,762,217 -------------- BUILDINGS AND REAL ESTATE: 4.0% ASSOCIATED MATERIALS, INC. Ba3 B+ 1,473,684 Term Loan, maturing August 02, 2010 1,493,333 ATRIUM COMPANIES, INC. B1 B+ 4,619,643 Term Loan, maturing December 10, 2008 4,675,462 BUILDERS FIRSTSOURCE, INC. B1 B+ 2,992,500 Term Loan, maturing February 25, 2010 3,018,684 BUILDING MATERIALS HOLDING CORPORATION Ba2 BB- 990,000 Term Loan, maturing August 21, 2010 993,712 CRESCENT REAL ESTATE EQUITIES, L.P. B1 BB+ 5,753,612 Term Loan, maturing January 12, 2006 5,820,141 DMB NEWCO, LLC NR NR 4,962,662 Term Loan, maturing February 28, 2009 4,975,069 GGPLP, LLC Ba1 BBB- 3,387,687 Term Loan, maturing April 16, 2006 3,408,860 7,904,603 Term Loan, maturing April 16, 2006 7,954,007 NCI BUILDING SYSTEMS, INC. Ba2 BB 3,800,000 Term Loan, maturing September 15, 2008 3,848,689 NORTEK, INC. B1 B+ 6,000,000 Term Loan, maturing August 25, 2011 6,066,750 PGT INDUSTRIES, INC. B1 B 2,492,487 Term Loan, maturing January 29, 2010 2,529,874 PLY GEM INDUSTRIES B1 B+ 822,938 Term Loan, maturing March 15, 2010 826,282 6,163,313 Term Loan, maturing October 01, 2011 6,188,354 ST. MARYS CEMENT, INC. B1 BB- 2,985,000 Term Loan, maturing December 04, 2009 3,011,119 WERNER HOLDINGS COMPANY, INC. B1 B 916,667 Term Loan, maturing June 11, 2009 895,326 -------------- 55,705,662 -------------- CABLE TELEVISION: 8.4% (1) ADELPHIA COMMUNICATIONS CORPORATION NR BBB 1,932,267 Debtor In Possession Term Loan, maturing March 31, 2005 1,941,526 ATLANTIC BROADBAND FINANCE, LLC B2 B 4,000,000 Term Loan, maturing September 01, 2011 4,055,000 BRAGG COMMUNICATIONS, INC. 2,500,000 Term Loan, maturing August 31, 2011 2,525,000 BRESNAN COMMUNICATIONS, LLC B1 BB- 4,000,000 Term Loan, maturing December 31, 2007 4,058,752 CEBRIDGE CONNECTIONS, INC. NR NR 3,491,250 Term Loan, maturing February 04, 2009 3,395,241 1,496,250 Term Loan, maturing February 23, 2009 1,502,796
See Accompanying Notes to Financial Statements 23 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- CABLE TELEVISION: (CONTINUED) (1) CENTURY CABLE HOLDINGS, LLC Caa1 NR $ 820,000 Revolver, maturing March 31, 2009 $ 791,300 13,000,000 Term Loan, maturing June 30, 2009 12,701,702 4,000,000 Term Loan, maturing December 31, 2009 3,900,832 CHARTER COMMUNICATIONS OPERATING, LLC B2 B 4,750,000 Term Loan, maturing April 27, 2010 4,640,047 26,500,000 Term Loan, maturing April 27, 2011 26,188,069 (1) HILTON HEAD COMMUNICATIONS, L.P. Caa1 NR 3,000,000 Revolver, maturing September 30, 2007 2,888,250 7,000,000 Term Loan, maturing March 31, 2008 6,767,250 INSIGHT MIDWEST HOLDINGS, LLC Ba3 BB+ 2,350,000 Term Loan, maturing June 30, 2009 2,352,056 1,990,000 Term Loan, maturing December 31, 2009 2,021,094 7,462,500 Term Loan, maturing December 31, 2009 7,579,684 MEDIACOM COMMUNICATIONS CORPORATION Ba3 BB+ 5,250,000 Term Loan, maturing March 31, 2010 5,240,975 5,000,000 Term Loan, maturing September 30, 2010 5,038,670 (1) OLYMPUS CABLE HOLDINGS, LLC B2 NR 7,000,000 Term Loan, maturing June 30, 2010 6,797,497 6,500,000 Term Loan, maturing September 30, 2010 6,353,750 PERSONA COMMUNICATION, INC. B2 B+ 2,500,000 Term Loan, maturing May 31, 2011 2,524,220 YANKEENETS, LLC NR NR 2,742,857 Term Loan, maturing June 25, 2007 2,777,143 YANKEES HOLDINGS, L.P. NR NR 1,257,143 Term Loan, maturing June 25, 2007 1,272,857 -------------- 117,313,711 -------------- CARGO TRANSPORT: 2.0% (1) AMERICAN COMMERCIAL LINES, LLC Ba3 NR 282,594 Debtor In Possession Term Loan, maturing December 31, 2004 282,064 ATLANTIC EXPRESS TRANSPORT B3 B 4,000,000 Floating Rate Note, maturing April 15, 2008 3,880,000 BAKER TANKS, INC. B1 B+ 4,370,717 Term Loan, maturing January 30, 2011 4,407,597 HELM HOLDING CORPORATION B2 B+ 4,000,000 Term Loan, maturing July 02, 2010 4,051,668 HORIZON LINES, LLC B2 B+ 2,500,000 Term Loan, maturing July 04, 2011 2,542,708 NEOPLAN USA CORPORATION NR NR 505,395 Term Loan, maturing June 30, 2006 505,395 PACER INTERNATIONAL, INC. B1 BB- 1,754,902 Term Loan, maturing June 10, 2010 1,780,129 RAILAMERICA, INC. Ba3 BB 406,322 Term Loan, maturing May 22, 2009 412,366 2,769,308 Term Loan, maturing May 22, 2009 2,810,501 TEREX CORPORATION B1 BB- 1,910,182 Term Loan, maturing July 03, 2009 1,936,447
See Accompanying Notes to Financial Statements 24 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- CARGO TRANSPORT: (CONTINUED) TRANSPORT INDUSTRIES, L.P. B2 B+ $ 3,000,000 Term Loan, maturing June 13, 2010 $ 3,005,625 UNITED STATES SHIPPING, LLC Ba2 BB 2,445,988 Term Loan, maturing April 14, 2010 2,471,977 YELLOW ROADWAY CORPORATION Baa3 BBB 389,610 Term Loan, maturing June 11, 2008 393,141 -------------- 28,479,618 -------------- CELLULAR COMMUNICATIONS: 5.2% AIRGATE PCS, INC. B2 CCC+ 187,900 Term Loan, maturing June 06, 2007 187,430 8,337,607 Term Loan, maturing September 30, 2008 8,316,763 CELLULAR SOUTH, INC. Ba3 B+ 5,275,000 Term Loan, maturing May 04, 2011 5,340,937 CENTENNIAL CELLULAR OPERATING COMPANY B2 B- 9,952,494 Term Loan, maturing February 09, 2011 9,987,487 DOBSON CELLULAR SYSTEMS, INC. B1 B- 4,470,000 Term Loan, maturing March 31, 2010 4,468,324 INDEPENDENT WIRELESS ONE CORPORATION Caa1 NR 3,250,538 Term Loan, maturing December 20, 2007 3,144,895 2,912,873 Term Loan, maturing June 20, 2008 2,818,205 MICROCELL SOLUTIONS, INC. B3 B- 2,962,500 Term Loan, maturing March 17, 2011 2,978,548 MICROCELL SOLUTIONS, INC. Caa2 CCC- 997,500 Term Loan, maturing February 15, 2011 1,022,438 NEXTEL FINANCE COMPANY Ba1 BBB 15,130,708 Term Loan, maturing December 15, 2010 15,227,605 NEXTEL PARTNERS OPERATING CORPORATION B1 B+ 6,000,000 Term Loan, maturing May 31, 2011 6,084,750 RURAL CELLULAR CORPORATION B2 B- 1,500,000 Floating Rate Note, maturing March 15, 2010 1,522,500 US UNWIRED, INC. B2 CCC+ 1,750,000 Floating Rate Note, maturing June 15, 2010 1,776,250 WESTERN WIRELESS CORPORATION B2 B- 10,000,000 Term Loan, maturing May 31, 2011 10,151,790 -------------- 73,027,922 -------------- CHEMICALS, PLASTICS AND RUBBER: 7.5% BRENNTAG, AG B1 BB- 3,000,000 Term Loan, maturing December 09, 2011 3,039,375 CELANESE Ba3 B+ 5,518,524 Term Loan, maturing April 06, 2011 5,593,543 CP KELCO APS B3 B 1,641,645 Term Loan, maturing March 31, 2008 1,651,221 538,748 Term Loan, maturing September 30, 2008 541,442 FMC CORPORATION Ba1 BBB- 4,959,167 Term Loan, maturing December 22, 2007 5,017,283 (1) GEO SPECIALTY CHEMICALS, INC. Caa1 NR 830,101 Term Loan, maturing December 31, 2007 795,859
See Accompanying Notes to Financial Statements 25 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- CHEMICALS, PLASTICS AND RUBBER: (CONTINUED) HERCULES, INC. Ba1 BB $ 8,553,563 Term Loan, maturing October 08, 2010 $ 8,625,738 HUNTSMAN INTERNATIONAL LLC B1 B 16,500,000 Term Loan, maturing December 31, 2010 16,747,500 HUNTSMAN LLC B2 B 3,536,623 Term Loan, maturing March 31, 2007 3,554,939 557,326 Term Loan, maturing March 31, 2007 560,212 INEOS GROUP HOLDINGS, PLC Ba2 BB+ 4,192,083 Term Loan, maturing April 26, 2009 4,254,964 INNOPHOS, INC. B1 B+ 1,213,636 Term Loan, maturing August 13, 2010 1,223,497 JOHNSONDIVERSEY, INC. Ba3 BB- 5,873,623 Term Loan, maturing November 03, 2009 5,974,209 KOSA, B.V. Ba3 BB 4,858,824 Term Loan, maturing April 29, 2011 4,889,191 2,141,176 Term Loan, maturing April 29, 2011 2,154,559 KRATON POLYMERS B1 BB- 1,961,668 Term Loan, maturing December 23, 2010 1,964,120 NALCO COMPANY B1 BB- 8,737,015 Term Loan, maturing November 04, 2010 8,881,333 NUTRASWEET ACQUISITION CORPORATION Ba3 NR 346,184 Term Loan, maturing May 24, 2005 330,606 1,152,436 Term Loan, maturing May 25, 2009 1,140,911 POLYPORE, INC. B1 B+ 9,000,000 Term Loan, maturing November 12, 2011 9,073,125 RIPPLEWOOD HOLDINGS, LLC NR B+ 5,750,000 Term Loan, maturing June 21, 2011 5,807,500 ROCKWOOD SPECIALTIES GROUP, INC. B1 B+ 12,000,000 Term Loan, maturing July 30, 2012 12,099,648 WESTLAKE CHEMICAL CORPORATION Ba2 BB+ 886,381 Term Loan, maturing July 23, 2010 898,015 -------------- 104,818,790 -------------- CONTAINERS, PACKAGING AND GLASS: 5.0% APPLETON PAPERS, INC. Ba3 BB 1,500,000 Term Loan, maturing June 11, 2010 1,517,812 BERRY PLASTICS CORPORATION B1 B+ 4,776,739 Term Loan, maturing June 30, 2010 4,838,440 BWAY CORPORATION B1 B+ 1,500,000 Term Loan, maturing June 30, 2011 1,522,500 CROWN CORK & SEAL COMPANY, INC. Ba3 BB- 1,425,000 Term Loan, maturing September 15, 2008 1,427,227 GRAPHIC PACKAGING INTERNATIONAL, INC. B1 B+ 11,944,925 Term Loan, maturing August 09, 2010 12,124,099 GREIF BROS. CORPORATION Ba3 BB 2,662,801 Term Loan, maturing August 23, 2009 2,694,089 INTERTAPE POLYMER GROUP Ba3 B+ 2,750,000 Term Loan, maturing July 28, 2011 2,780,938
See Accompanying Notes to Financial Statements 26 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------ CONTAINERS, PACKAGING AND GLASS: (CONTINUED) JEFFERSON SMURFIT CORPORATION B1 B+ $ 2,234,910 Term Loan, maturing March 31, 2007 $ 2,254,117 KERR GROUP, INC. B1 BB- 1,307,128 Term Loan, maturing August 13, 2010 1,320,363 KOCH CELLULOSE B1 BB 1,496,250 Term Loan, maturing May 07, 2011 1,510,277 OWENS-ILLINOIS GROUP, INC. B1 BB- 7,500,000 Term Loan, maturing April 01, 2008 7,512,503 8,000,000 Term Loan, maturing April 01, 2008 8,124,168 SILGAN HOLDINGS, INC. Ba3 BB 4,944,925 Term Loan, maturing November 30, 2008 4,996,693 SMURFIT-STONE CONTAINER CANADA, INC. B1 B+ 777,035 Term Loan, maturing June 30, 2009 785,777 SOLO CUP, INC. B1 B+ 7,961,259 Term Loan, maturing February 27, 2011 8,052,479 STONE CONTAINER CORPORATION B1 B+ 5,869,868 Term Loan, maturing June 30, 2009 5,924,898 U.S. CAN COMPANY B2 B 2,493,750 Term Loan, maturing June 21, 2011 2,499,984 -------------- 69,886,364 -------------- DATA AND INTERNET SERVICES: 0.2% MITCHELL INTERNATIONAL, INC. B1 B+ 2,500,000 Term Loan, maturing August 15, 2011 2,518,750 -------------- 2,518,750 -------------- DIVERSIFIED / CONGLOMERATE MANUFACTURING: 2.1% AXIA, INC. B2 B 1,916,667 Term Loan, maturing November 30, 2010 1,939,427 BRAND SERVICES, INC. B1 B 793,372 Term Loan, maturing October 16, 2009 799,818 CINRAM INTERNATIONAL, INC. Ba3 BB 3,817,708 Term Loan, maturing September 30, 2009 3,862,448 1,000,000 Term Loan, maturing September 30, 2009 1,002,969 DRESSER, INC. Ba3 BB- 951,220 Term Loan, maturing April 10, 2009 965,637 FLOWSERVE CORPORATION Ba3 BB- 2,138,121 Term Loan, maturing June 30, 2009 2,167,520 ITRON, INC. Ba3 BB- 1,000,000 Term Loan, maturing June 28, 2011 1,010,000 MUELLER GROUP, INC. B2 B+ 5,669,725 Term Loan, maturing April 23, 2011 5,698,074 RLC INDUSTRIES COMPANY B1 BB+ 2,977,506 Term Loan, maturing February 26, 2010 3,007,281 ROPER INDUSTRIES, INC. Ba2 BB+ 1,950,000 Term Loan, maturing December 29, 2008 1,979,250 SENSUS METERING SYSTEMS, INC. B2 B+ 1,713,043 Term Loan, maturing December 17, 2010 1,731,244 256,957 Term Loan, maturing December 17, 2010 259,687
See Accompanying Notes to Financial Statements 27 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- DIVERSIFIED / CONGLOMERATE MANUFACTURING: (CONTINUED) SPX CORPORATION Ba2 BBB- $ 5,216,363 Term Loan, maturing September 30, 2009 $ 5,295,422 -------------- 29,718,777 -------------- DIVERSIFIED / CONGLOMERATE SERVICE: 1.2% AMERCO, INC. NR BB 8,469,566 Term Loan, maturing February 27, 2009 8,660,131 IRON MOUNTAIN, INC. B1 BB- 5,320,000 Term Loan, maturing April 02, 2011 5,354,915 RELIZON COMPANY B1 BB- 3,112,187 Term Loan, maturing February 20, 2011 3,129,693 -------------- 17,144,739 -------------- ECOLOGICAL: 2.0% ALLIED WASTE NORTH AMERICA, INC. Ba3 BB 59,350 Revolver, maturing June 30, 2010 58,682 16,515,179 Term Loan, maturing January 15, 2010 16,788,307 1,000,000 Term Loan, maturing January 15, 2010 1,015,625 1,000,000 Term Loan, maturing January 15, 2010 1,016,563 ENVIROSOLUTIONS, INC. NR NR 1,423,636 Term Loan, maturing March 01, 2009 1,423,636 30,909 Term Loan, maturing March 31, 2009 30,909 GREAT LAKES DREDGE & DOCK CORPORATION B2 B- 958,541 Term Loan, maturing December 22, 2010 958,541 IESI COPRORATION B1 B+ 194,375 Revolver, maturing September 30, 2008 191,945 992,500 Term Loan, maturing September 30, 2010 1,009,249 WASTE CONNECTIONS, INC. Ba2 BB+ 5,500,000 Term Loan, maturing October 22, 2010 5,555,000 -------------- 28,048,457 -------------- ELECTRONICS: 0.5% ANTEON CORPORATION Ba3 BB 995,000 Term Loan, maturing December 31, 2010 1,007,231 DECISION ONE CORPORATION B3 CCC 2,789,500 (2) Term Loan, maturing April 18, 2005 1,436,593 INVENSYS INTERNATIONAL HOLDINGS, LTD. Ba3 B+ 997,923 Term Loan, maturing September 05, 2009 1,011,644 KNOWLES ELECTRONICS, INC. B3 B- 1,832,013 Term Loan, maturing June 29, 2007 1,850,714 SEAGATE TECHNOLOGY (US) HOLDINGS, INC. Ba1 BB+ 1,960,000 Term Loan, maturing May 13, 2007 1,986,705 -------------- 7,292,887 -------------- FARMING AND AGRICULTURE: 1.4% AGCO CORPORATION Ba1 BB+ 4,615,833 Term Loan, maturing January 31, 2006 4,646,127 SCOTTS COMPANY Ba1 BB 1,000,000 Term Loan, maturing September 30, 2010 1,000,000
See Accompanying Notes to Financial Statements 28 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- FARMING AND AGRICULTURE: (CONTINUED) UNITED INDUSTRIES CORPORATION B1 B+ $ 101,538 Revolver, maturing April 30, 2010 $ 100,015 8,492,500 Term Loan, maturing April 29, 2011 8,603,964 VICAR OPERATING, INC. Ba3 BB- 5,165,546 Term Loan, maturing June 30, 2009 5,243,029 -------------- 19,593,135 -------------- FINANCE: 0.6% REFCO GROUP B1 BB- 5,000,000 Term Loan, maturing August 05, 2011 4,991,145 RENT-A-CENTER, INC. Ba2 BB+ 4,000,000 Term Loan, maturing June 30, 2010 4,049,500 -------------- 9,040,645 -------------- FOREIGN CABLE, FOREIGN TV, RADIO AND EQUIPMENT: 0.2% NTL INVESTMENT HOLDING, LTD. B1 BB- 3,000,000 Term Loan, maturing May 19, 2012 2,970,000 -------------- 2,970,000 -------------- GAMING: 2.3% ALLIANCE GAMING CORPORATION Ba3 BB- 3,638,651 Term Loan, maturing September 04, 2009 3,687,165 AMERISTAR CASINOS, INC. Ba3 BB- 1,787,698 Term Loan, maturing December 20, 2006 1,811,721 ARGOSY GAMING COMPANY Ba2 BB 1,914,084 Term Loan, maturing July 31, 2008 1,936,216 BOYD GAMING CORPORATION Ba2 BB 5,000,000 Term Loan, maturing June 30, 2011 5,055,470 GLOBAL CASH ACCESS, LLC B2 B+ 2,962,500 Term Loan, maturing March 10, 2010 3,006,938 GREEN VALLEY RANCH GAMING, LLC B1 B+ 995,000 Term Loan, maturing December 22, 2010 1,009,925 ISLE OF CAPRI CASINOS, INC. Ba2 BB- 827,500 Term Loan, maturing April 26, 2008 837,844 PENN NATIONAL GAMING Ba3 BB- 945,590 Term Loan, maturing September 01, 2007 960,956 RUFFIN GAMING, LLC NR NR 4,000,000 Term Loan, maturing July 14, 2007 4,032,500 UNITED AUBURN INDIAN COMMUNITY Ba3 BB 985,843 Term Loan, maturing January 24, 2009 990,772 VENETIAN CASINO RESORTS, LLC B1 B+ 8,635,000 Term Loan, maturing August 06, 2011 8,753,731 -------------- 32,083,238 -------------- GROCERY: 0.4% GIANT EAGLE, INC. Ba2 BB+ 1,904,667 Term Loan, maturing August 02, 2009 1,927,285 2,989,763 Term Loan, maturing August 06, 2009 3,025,266 -------------- 4,952,551 --------------
See Accompanying Notes to Financial Statements 29 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE ------------------------------------------------------------------------------------------------------------------------- HEALTHCARE, EDUCATION AND CHILDCARE: 10.9% ACCREDO HEALTH, INC. Ba2 BB $ 8,500,000 Term Loan, maturing March 31, 2009 $ 8,553,125 1,852,740 Term Loan, maturing April 30, 2011 1,864,320 ADVANCED MEDICAL OPTICS, INC. B1 BB- 3,825,000 Term Loan, maturing June 25, 2009 3,882,375 ALLIANCE IMAGING, INC. B1 B+ 354,962 Term Loan, maturing November 02, 2006 350,525 2,000,000 Term Loan, maturing June 10, 2008 1,992,500 APRIA HEALTHCARE GROUP, INC. Ba1 BBB- 4,776,271 Term Loan, maturing July 20, 2008 4,831,795 ARDENT HEALTHCARE B1 B+ 6,000,000 Term Loan, maturing August 12, 2011 6,015,000 BEVERLY ENTERPRISES, INC. Ba3 BB 3,471,256 Term Loan, maturing October 22, 2008 3,523,325 COLGATE MEDICAL, LTD. Ba2 BB- 3,824,359 Term Loan, maturing December 30, 2008 3,866,190 COMMUNITY HEALTH SYSTEMS, INC. Ba3 BB- 17,659,100 Term Loan, maturing August 19, 2011 17,659,100 CONCENTRA OPERATING CORPORATION B1 B+ 3,000,000 Term Loan, maturing June 30, 2009 3,015,624 DAVITA, INC. Ba2 BB 21,350,195 Term Loan, maturing March 31, 2009 21,565,597 3,000,000 Term Loan, maturing June 30, 2010 3,023,439 DJ ORTHOPEDICS, LLC Ba3 BB- 975,000 Term Loan, maturing May 15, 2009 985,969 EMPI CORPORATION B1 B+ 1,400,795 Term Loan, maturing November 24, 2009 1,404,297 EXPRESS SCRIPTS, INC. Ba1 BBB 997,500 Term Loan, maturing February 13, 2010 1,007,267 FISHER SCIENTIFIC INTERNATIONAL, INC. Ba2 BBB 2,500,000 Term Loan, maturing August 02, 2011 2,524,220 FRESENIUS MEDICAL CARE HOLDINGS, INC. Ba1 BB+ 3,000,000 Term Loan, maturing October 31, 2007 3,010,314 7,730,625 Term Loan, maturing February 21, 2010 7,795,044 HCA, INC. Ba1 BBB- 937,500 Term Loan, maturing April 30, 2006 937,207 IASIS HEALTHCARE CORPORATION B1 B+ 6,500,000 Term Loan, maturing June 30, 2011 6,588,361 INSIGHT HEALTH SERVICES CORPORATION B1 B+ 1,933,333 Term Loan, maturing October 07, 2008 1,928,500 600,000 Term Loan, maturing October 07, 2008 598,500 300,000 Term Loan, maturing October 07, 2008 299,250 661,561 Term Loan, maturing October 17, 2008 666,523 KINETIC CONCEPTS, INC. B1 BB- 5,020,417 Term Loan, maturing August 11, 2010 5,089,448 LEINER HEALTH PRODUCTS GROUP, INC. B1 B 3,500,000 Term Loan, maturing May 27, 2011 3,543,750
See Accompanying Notes to Financial Statements 30 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE -------------------------------------------------------------------------------------------------------------------------- HEALTHCARE, EDUCATION AND CHILDCARE: (CONTINUED) MAGELLAN HEALTH SERVICES, INC. B1 B+ $ 770,833 Term Loan, maturing August 15, 2008 $ 781,432 MEDCATH CORPORATION B2 B+ 1,000,000 Term Loan, maturing June 30, 2011 1,014,375 MEDICAL DEVICE MANUFACTURING, INC. B2 B+ 1,750,000 Term Loan, maturing June 30, 2010 1,767,500 PACIFICARE HEALTH SYSTEMS, INC. Ba3 BBB- 990,000 Term Loan, maturing June 03, 2008 1,004,025 SKILLED HEALTHCARE GROUP B1 B 4,000,000 Term Loan, maturing June 28, 2010 4,038,752 SOLA INTERNATIONAL, INC. Ba3 BB- 1,975,000 Term Loan, maturing December 11, 2009 2,002,156 STERIGENICS INTERNATIONAL, INC. B2 B+ 4,500,000 Term Loan, maturing June 14, 2011 4,556,250 TRIAD HOSPITALS, INC. Ba3 BB 3,347,291 Term Loan, maturing September 30, 2008 3,406,705 VANGUARD HEALTH SYSTEMS, INC. Ba3 B 13,000,000 Term Loan, maturing May 18, 2009 13,000,000 VWR INTERNATIONAL, INC. B1 BB- 5,034,334 Term Loan, maturing April 07, 2011 5,115,513 --------------- 153,208,273 --------------- HOME AND OFFICE FURNISHING, HOUSEWARES: 2.6% BUHRMANN U.S., INC. Ba3 BB- 3,990,000 Term Loan, maturing December 31, 2010 4,044,033 GLOBAL IMAGING SYSTEMS, INC. Ba3 BB- 3,481,250 Term Loan, maturing May 10, 2010 3,520,414 HILLMAN GROUP, INC. B2 B 1,995,000 Term Loan, maturing March 30, 2011 2,017,444 HOLMES GROUP, INC. B1 B 6,000,000 Term Loan, maturing November 08, 2010 5,970,000 MAAX CORPORATION B1 B+ 4,000,000 Term Loan, maturing June 04, 2011 4,022,500 SEALY MATTRESS COMPANY B2 B+ 6,687,500 Term Loan, maturing August 06, 2012 6,764,125 SIMMONS COMPANY B2 B+ 7,420,479 Term Loan, maturing December 19, 2011 7,488,888 XEROX CORPORATION Ba1 BB- 2,000,000 Term Loan, maturing September 30, 2008 2,010,416 --------------- 35,837,820 --------------- INSURANCE: 0.7% CONSECO, INC. B2 BB- 10,000,000 Term Loan, maturing June 22, 2010 10,152,080 --------------- 10,152,080 --------------- LEISURE, AMUSEMENT AND ENTERTAINMENT: 5.0% AMF BOWLING WORLDWIDE, INC. B1 B 1,496,250 Term Loan, maturing August 27, 2009 1,509,811 CINEMARK USA, INC. Ba3 BB- 2,493,750 Term Loan, maturing March 31, 2011 2,512,453
See Accompanying Notes to Financial Statements 31 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE -------------------------------------------------------------------------------------------------------------------------- LEISURE, AMUSEMENT AND ENTERTAINMENT: (CONTINUED) FITNESS HOLDINGS WORLDWIDE, INC. B1 B $ 3,980,000 Term Loan, maturing July 01, 2009 $ 4,029,750 LODGENET ENTERTAINMENT CORPORATION B1 B+ 1,847,917 Term Loan, maturing June 30, 2006 1,859,466 LOEWS CINEPLEX ENTERTAINMENT CORPORATION B1 B 7,500,000 Term Loan, maturing July 31, 2011 7,564,845 METRO-GOLDWYN-MAYER STUDIOS, INC. Ba3 B+ 15,000,000 Term Loan, maturing April 30, 2011 15,073,125 PURE FISHING B1 BB- 2,760,937 Term Loan, maturing September 30, 2010 2,798,900 REGAL CINEMAS, INC. Ba3 BB- 7,737,576 Term Loan, maturing November 10, 2010 7,834,296 SIX FLAGS THEME PARKS, INC. Ba3 B 8,790,820 Term Loan, maturing June 30, 2009 8,837,526 UNIVERSAL CITY DEVELOPMENT PARTNERS, L.P. B1 B+ 5,000,000 Term Loan, maturing June 30, 2007 5,018,750 WALLACE THEATERS B2 B 2,750,000 Term Loan, maturing July 15, 2009 2,763,750 WARNER MUSIC GROUP B1 B+ 9,458,734 Term Loan, maturing February 28, 2011 9,593,861 --------------- 69,396,533 --------------- LODGING: 1.0% BOCA RESORTS HOTEL CORPORATION NR NR 7,000,000 Term Loan, maturing July 22, 2009 7,000,000 CNL HOSPITALITY PARTNERS, L.P. NR NR 5,281,690 Term Loan, maturing January 02, 2005 5,281,690 WYNDHAM INTERNATIONAL, INC. NR NR 1,095,520 Term Loan, maturing June 30, 2006 1,073,382 --------------- 13,355,072 --------------- MACHINERY: 1.8% ALLIANCE LAUNDRY HOLDINGS, LLC B1 B 1,481,865 Term Loan, maturing August 02, 2007 1,487,422 BLOUNT, INC. B2 B+ 2,000,000 Term Loan, maturing July 31, 2010 2,030,000 BUCYRUS INTERNATIONAL, INC. Ba3 BB- 2,500,000 Term Loan, maturing July 28, 2010 2,523,438 ENERSYS, INC. Ba3 BB 3,326,262 Term Loan, maturing March 17, 2011 3,365,242 JUNO LIGHTING, INC. B1 B+ 2,372,538 Term Loan, maturing November 21, 2010 2,408,126 NATIONAL WATERWORKS, INC. B1 BB- 1,423,469 Term Loan, maturing November 22, 2009 1,445,711 REXNORD CORPORATION B1 B+ 1,777,778 Term Loan, maturing November 25, 2009 1,795,926 UNITED RENTALS (NORTH AMERICA), INC. Ba3 BB 8,116,754 Term Loan, maturing February 14, 2011 8,211,111 VUTEK, INC. B1 B+ 2,000,000 Term Loan, maturing June 25, 2010 1,995,000 --------------- 25,261,976 ---------------
See Accompanying Notes to Financial Statements 32 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE -------------------------------------------------------------------------------------------------------------------------- MINING, STEEL, IRON AND NON-PRECIOUS METALS: 1.0% FOUNDATION COAL CORPORATION Ba3 BB- $ 3,750,000 Term Loan, maturing July 30, 2011 $ 3,791,719 PEABODY ENERGY CORPORATION Ba1 BB+ 7,962,500 Term Loan, maturing March 21, 2010 10,079,251 --------------- 13,870,970 --------------- OIL AND GAS: 2.2% GETTY PETROLEUM MARKETING, INC. B1 BB- 4,500,000 Term Loan, maturing May 19, 2010 4,574,533 LA GRANGE ACQUISTION, L.P. NR NR 5,500,000 Term Loan, maturing January 18, 2008 5,582,500 LYONDELL-CITGO REFINING, L.P. Ba3 BB 5,000,000 Term Loan, maturing May 21, 2007 5,084,375 TRANSWESTERN PIPELINE COMPANY B1 BB 5,500,000 Term Loan, maturing April 30, 2009 5,550,419 VULCAN ENERGY CORPORATION B1 BB 5,000,000 Term Loan, maturing March 31, 2010 5,071,875 WILLIAMS PRODUCTION RMT COMPANY B2 BB 4,961,328 Term Loan, maturing May 30, 2007 5,037,817 --------------- 30,901,519 --------------- OTHER BROADCASTING AND ENTERTAINMENT: 1.5% DIRECTV HOLDINGS, LLC Ba2 BB 5,390,714 Term Loan, maturing March 06, 2010 5,468,206 LIBERTY MEDIA CORPORATION Baa3 BBB- 6,000,000 Floating Rate Note, maturing September 17, 2006 6,072,120 RAINBOW NATIONAL SERVICES, LLC B1 B+ 9,250,000 Term Loan, maturing March 31, 2012 9,370,250 --------------- 20,910,576 --------------- OTHER TELECOMMUNICATIONS: 4.0% ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC. Ba3 BB- 1,492,500 Term Loan, maturing February 14, 2009 1,507,735 CINCINNATI BELL, INC. B1 B+ 35,316 Revolver, maturing November 09, 2004 34,932 7,685,744 Term Loan, maturing June 30, 2008 7,767,405 CONSOLIDATED COMMUNICATIONS, INC. B1 B+ 2,500,000 Term Loan, maturing March 31, 2010 2,506,250 3,500,000 Term Loan, maturing October 14, 2011 3,548,125 D&E COMMUNICATIONS, INC. Ba3 BB- 1,989,947 Term Loan, maturing March 05, 2012 2,020,419 ECHOSTAR DBS CORPORATION Ba3 BB- 5,000,000 Floating Rate Note, maturing October 01, 2008 5,200,000 FAIRPOINT COMMUNICATIONS, INC. B2 B+ 2,500,000 Term Loan, maturing March 31, 2009 2,519,533 GCI HOLDINGS, INC. Ba3 BB+ 1,394,858 Term Loan, maturing October 31, 2007 1,407,500 PANAMSAT CORPORATION Ba3 BB+ 10,000,000 Term Loan, maturing August 20, 2011 10,019,690
See Accompanying Notes to Financial Statements 33 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE -------------------------------------------------------------------------------------------------------------------------- OTHER TELECOMMUNICATIONS: (CONTINUED) QWEST COMMUNICATIONS INTERNATIONAL, INC. B3 CCC+ $ 10,000,000 Floating Rate Note, maturing February 15, 2009 $ 9,300,000 QWEST CORPORATION B2 BB- 2,500,000 Term Loan, maturing June 30, 2007 2,586,875 TIME WARNER TELECOM HOLDINGS B1 B 2,000,000 Floating Rate Note, maturing February 15, 2011 1,950,000 VALOR COMMUNICATIONS GROUP B2 B+ 5,000,000 Term Loan, maturing June 15, 2010 5,062,500 --------------- 55,430,964 --------------- PERSONAL AND NON-DURABLE CONSUMER PRODUCTS: 1.7% AMSCAN HOLDINGS, INC. B1 B+ 2,000,000 Term Loan, maturing April 30, 2012 2,025,000 CHURCH & DWIGHT COMPANY, INC. Ba2 BB 6,500,000 Term Loan, maturing May 30, 2011 6,586,326 JARDEN CORPORATION Ba3 B+ 1,333,333 Term Loan, maturing April 08, 2008 1,342,500 992,500 Term Loan, maturing April 24, 2008 999,323 JOSTENS, INC. Ba3 B+ 2,694,150 Term Loan, maturing July 29, 2010 2,734,562 NORWOOD PROMOTIONAL PRODUCTS, INC. NR NR 3,700,076 Term Loan, maturing August 16, 2009 3,589,074 NORWOOD PROMOTIONAL PRODUCTS HOLDINGS, INC. NR NR 1,673,710 (2) Term Loan, maturing August 16, 2011 753,170 PRESTIGE BRANDS HOLDINGS, INC. B1 B 3,985,000 Term Loan, maturing April 06, 2011 3,998,282 RAYOVAC CORPORATION B1 B+ 1,443,091 Term Loan, maturing September 30, 2009 1,459,626 --------------- 23,487,863 --------------- PERSONAL, FOOD AND MISCELLANEOUS SERVICES: 2.1% AFC ENTERPRISES, INC. B1 B 1,841,718 Term Loan, maturing May 23, 2009 1,848,625 ALDERWOODS GROUP, INC. B1 BB- 3,621,824 Term Loan, maturing August 19, 2009 6,021,002 ALLIED SECURITY HOLDINGS B2 B+ 2,000,000 Term Loan, maturing June 30, 2010 2,020,000 COINMACH CORPORATION B1 B+ 2,925,000 Term Loan, maturing July 25, 2009 2,959,003 COINSTAR, INC. Ba3 BB- 3,250,000 Term Loan, maturing July 07, 2011 3,312,675 DOMINO'S, INC. Ba3 B+ 5,702,900 Term Loan, maturing June 25, 2010 5,800,026 JACK IN THE BOX, INC. Ba2 BB 5,480,000 Term Loan, maturing January 09, 2010 5,555,350 N.E.W. CUSTOMER SERVICES COMPANIES, INC. B1 B+ 1,666,667 Term Loan, maturing August 01, 2009 1,677,084 --------------- 29,193,765 ---------------
See Accompanying Notes to Financial Statements 34 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE -------------------------------------------------------------------------------------------------------------------------- PRINTING AND PUBLISHING: 8.0% ADAMS OUTDOOR ADVERTISING, L.P. B1 B+ $ 6,549,606 Term Loan, maturing October 15, 2011 $ 6,628,745 AMERICAN ACHIEVEMENT CORPORATION B1 B+ 995,000 Term Loan, maturing March 25, 2011 1,003,706 AMERICAN MEDIA OPERATIONS, INC. Ba3 B+ 20,146 Term Loan, maturing April 01, 2006 20,121 2,954,196 Term Loan, maturing April 01, 2007 3,003,126 AMERICAN REPROGRAPHICS COMPANY B1 BB 2,487,500 Term Loan, maturing June 18, 2009 2,524,813 AMERICAN REPROGRAPHICS COMPANY B3 B 948,284 Term Loan, maturing December 18, 2009 993,327 CANWEST MEDIA, INC. Ba3 B+ 6,024,372 Term Loan, maturing August 15, 2009 6,103,442 DEX MEDIA EAST, LLC Ba2 BB- 6,570,917 Term Loan, maturing November 08, 2008 6,650,313 6,055,132 Term Loan, maturing May 08, 2009 6,139,649 DEX MEDIA WEST, LLC Ba2 BB- 4,024,288 Term Loan, maturing September 09, 2009 4,077,944 10,148,340 Term Loan, maturing March 09, 2010 10,304,797 FREEDOM COMMUNICATIONS Ba3 BB 8,000,000 Term Loan, maturing May 18, 2012 8,123,752 HERALD MEDIA, INC. B1 B 2,500,000 Term Loan, maturing July 22, 2011 2,531,250 JOURNAL REGISTER COMPANY Ba2 BB+ 5,000,000 Term Loan, maturing September 29, 2006 5,019,530 LAMAR MEDIA CORPORATION Ba2 BB- 4,500,000 Term Loan, maturing June 30, 2009 4,526,721 5,200,000 Term Loan, maturing June 30, 2010 5,252,000 MC COMMUNICATIONS, LLC B2 B 3,500,000 Term Loan, maturing December 31, 2010 3,465,000 MERRILL COMMUNICATIONS, LLC B1 B 2,000,000 Term Loan, maturing July 30, 2009 2,020,000 PRIMEDIA, INC. B3 B 1,580,796 Revolver, maturing June 30, 2008 1,483,479 4,970,712 Term Loan, maturing June 30, 2009 4,780,582 1,500,000 Term Loan, maturing December 31, 2009 1,477,500 R.H. DONNELLEY, INC. Ba3 BB 1,989,932 Term Loan, maturing December 31, 2008 2,000,505 1,970,518 Term Loan, maturing June 30, 2010 1,987,760 READER'S DIGEST ASSOCIATIONS, INC. Ba1 BB 3,000,000 Term Loan, maturing May 21, 2007 3,040,314 1,995,000 Term Loan, maturing May 20, 2008 2,021,809 TRANSWESTERN PUBLISHING COMPANY B1 B+ 5,193,782 Term Loan, maturing February 25, 2011 5,237,607 TRANSWESTERN PUBLISHING COMPANY B3 B- 2,992,500 Term Loan, maturing February 25, 2012 3,014,477 ZIFF DAVIS MEDIA, INC. B3 CCC 8,149,269 Term Loan, maturing March 31, 2007 8,105,980 --------------- 111,538,249 ---------------
See Accompanying Notes to Financial Statements 35 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE -------------------------------------------------------------------------------------------------------------------------- RADIO AND TV BROADCASTING: 4.5% CUMULUS MEDIA, INC. Ba3 B+ $ 2,000,000 Term Loan, maturing March 28, 2009 $ 2,013,750 3,500,000 Term Loan, maturing March 28, 2010 3,529,533 EMMIS OPERATING COMPANY Ba2 B+ 11,000,000 Term Loan, maturing November 10, 2011 11,089,375 ENTRAVISION COMMUNICATIONS CORPORATION B1 B+ 2,500,000 Term Loan, maturing February 24, 2012 2,519,792 FISHER BROADCASTING, INC. Ba3 B+ 633,111 Term Loan, maturing February 28, 2010 635,881 GRAY TELEVISION, INC. Ba2 B+ 5,500,000 Term Loan, maturing June 30, 2011 5,544,687 LIN TELEVISION CORPORATION Ba1 BB 498,571 Term Loan, maturing December 31, 2007 505,026 MISSION BROADCASTING, INC. Ba3 B+ 3,072,340 Term Loan, maturing December 31, 2010 3,080,021 NEP BROADCASTING B1 B 3,000,000 Term Loan, maturing November 30, 2010 3,033,750 NEXSTAR BROADCASTING Ba3 B+ 1,677,660 Term Loan, maturing December 31, 2010 1,681,854 PAXSON COMMUNICATIONS CORPORATION B1 B 7,500,000 Floating Rate Note, maturing January 15, 2010 7,462,500 SINCLAIR BROADCAST GROUP, INC. Ba2 BB 3,000,000 Term Loan, maturing June 30, 2009 3,018,750 4,000,000 Term Loan, maturing December 31, 2009 4,045,832 SPANISH BROADCASTING SYSTEMS B1 B+ 5,223,750 Term Loan, maturing October 30, 2009 5,308,636 SUSQUEHANNA MEDIA COMPANY Ba2 BB- 9,000,000 Term Loan, maturing March 31, 2012 9,126,567 TELEVICENTRO OF PUERTO RICO, LLC Ba1 BB 461,429 Term Loan, maturing December 31, 2007 467,403 --------------- 63,063,357 --------------- RETAIL: 3.7% ADVANCE STORES COMPANY, INC. Ba2 BB 380,682 Term Loan, maturing November 30, 2006 385,560 3,390,645 Term Loan, maturing November 30, 2007 3,437,266 ALIMENTATION COUCHE-TARD, INC. Ba2 BB 609,184 Term Loan, maturing December 17, 2010 613,372 BAKER & TAYLOR, INC. B1 B 975,000 Revolver, maturing May 06, 2009 965,250 1,000,000 Term Loan, maturing May 06, 2011 1,012,500 BLOCKBUSTER ENTERTAINMENT CORPORATION Ba2 BB 12,000,000 Term Loan, maturing August 19, 2011 12,003,756 CH OPERATING, LLC B2 B+ 554,446 Term Loan, maturing June 21, 2007 555,832 CSK AUTOMOTIVE, INC. 2,492,500 Term Loan, maturing June 19, 2009 2,522,099
See Accompanying Notes to Financial Statements 36 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE -------------------------------------------------------------------------------------------------------------------------- RETAIL: (CONTINUED) HARBOR FREIGHT TOOLS B1 B+ $ 5,000,000 Term Loan, maturing June 24, 2010 $ 5,028,125 JEAN COUTU GROUP, INC. B1 BB 7,000,000 Term Loan, maturing July 30, 2011 7,068,411 NEBRASKA BOOK COMPANY, INC. B2 B 1,496,250 Term Loan, maturing March 04, 2011 1,516,823 ORIENTAL TRADING COMPANY, INC. B1 B+ 2,372,241 Term Loan, maturing August 06, 2010 2,405,849 ORIENTAL TRADING COMPANY, INC. B2 B- 1,411,696 Term Loan, maturing January 08, 2011 1,438,754 PANTRY, INC. B1 B+ 5,436,232 Term Loan, maturing March 12, 2011 5,517,775 PETCO ANIMAL SUPPLIES, INC. Ba3 BB 723,928 Term Loan, maturing October 26, 2008 733,656 RITE AID CORPORATION Ba3 BB 3,980,000 Term Loan, maturing April 30, 2008 4,029,750 TRAVELCENTERS OF AMERICA, INC. Ba3 BB 2,624,600 Term Loan, maturing November 14, 2008 2,659,594 --------------- 51,894,372 --------------- TELECOMMUNICATIONS EQUIPMENT: 2.0% AAT COMMUNICATIONS CORPORATION B1 B- 3,500,000 Term Loan, maturing January 16, 2012 3,543,750 AMERICAN TOWER, L.P. B1 B 5,000,000 Term Loan, maturing August 31, 2011 5,075,780 CROWN CASTLE OPERATING COMPANY B1 B- 1,239,729 Term Loan, maturing September 15, 2007 1,242,829 SBA SENIOR FINANCE, INC. B2 CCC+ 8,253,846 Term Loan, maturing October 31, 2008 8,327,355 SPECTRASITE COMMUNICATIONS, INC. B1 B+ 7,288,221 Term Loan, maturing December 31, 2007 7,397,544 1,790,735 Term Loan, maturing December 31, 2007 1,800,061 --------------- 27,387,319 --------------- TEXTILES AND LEATHER: 0.3% (1) GALEY & LORD, INC. NR NR 650,310 (2) Term Loan, maturing September 05, 2009 268,253 POLYMER GROUP, INC. B2 B+ 2,000,000 Term Loan, maturing April 27, 2010 2,014,584 WILLIAM CARTER COMPANY Ba3 BB+ 2,430,064 Term Loan, maturing September 08, 2008 2,452,846 --------------- 4,735,683 --------------- UTILITIES: 4.5% ALLEGHENY ENERGY SUPPLY COMPANY B1 B+ 7,318,333 Term Loan, maturing March 08, 2011 7,434,512 3,659,167 Term Loan, maturing June 08, 2011 3,722,822 ASTORIA ENERGY, LLC Ba3 B+ 8,500,000 Term Loan, maturing April 15, 2012 8,634,580 CALPINE CONSTRUCTION FINANCE COMPANY, L.P. NR B+ 2,979,950 Term Loan, maturing August 26, 2009 3,191,526
See Accompanying Notes to Financial Statements 37 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
BANK LOAN RATINGS+ (UNAUDITED) PRINCIPAL AMOUNT BORROWER/TRANCHE DESCRIPTION MOODY'S S&P VALUE -------------------------------------------------------------------------------------------------------------------------- UTILITIES: (CONTINUED) CALPINE CORPORATION B2 B $ 1,970,050 Term Loan, maturing July 16, 2007 $ 1,977,847 1,994,962 Term Loan, maturing July 16, 2007 1,695,718 CALPINE GENERATING COMPANY, LLC B1 B+ 3,500,000 Term Loan, maturing March 23, 2009 3,511,596 CENTERPOINT ENERGY, INC. Ba1 BBB 6,978,349 Term Loan, maturing October 07, 2006 7,012,368 COLETO CREEK WLE, L.P. Ba2 BB 1,000,000 Term Loan, maturing June 30, 2011 1,015,625 COLETO CREEK WLE, L.P. Ba3 BB- 1,000,000 Term Loan, maturing June 30, 2012 1,016,250 DYNEGY HOLDINGS, INC. B2 BB- 6,000,000 Term Loan, maturing May 27, 2010 6,114,378 PIKE ELECTRIC, INC. Ba3 BB 4,428,750 Term Loan, maturing July 01, 2012 4,510,868 RIVERSIDE ENERGY CENTER, LLC Ba3 BB- 403,552 Term Loan, maturing June 24, 2010 407,588 3,804,306 Term Loan, maturing June 24, 2011 3,842,349 5,292,139 Term Loan, maturing June 24, 2011 5,345,060 TETON POWER FUNDING Ba3 B+ 4,084,615 Term Loan, maturing March 12, 2011 4,125,461 --------------- 63,558,548 --------------- TOTAL SENIOR LOANS (COST $1,535,106,708) 1,544,048,996 --------------- OTHER CORPORATE DEBT: 0.2% FINANCE: 0.1% VALUE ASSET MANAGEMENT, INC. B3 B 1,558,824 Senior Subordinated Bridge Note, maturing August 31, 2005 1,527,648 --------------- 1,527,648 --------------- HOME AND OFFICE FURNISHINGS, HOUSEWARES: 0.1% SEALY MATTRESS COMPANY B3 B- 1,000,000 Unsecured Term Loan, maturing April 05, 2013 1,022,500 --------------- 1,022,500 --------------- TOTAL OTHER CORPORATE DEBT (COST $2,557,681) 2,550,148 --------------- EQUITIES AND OTHER ASSETS: 0.1% SECURITY DESCRIPTION VALUE -------------------------------------------------------------------------------------------------------------------------- (@), (R) Decision One Corporation (92,638 Common Shares) $ -- (@), (R) Galey & Lord (49,843 Common Shares) -- (@), (R) Murray's Discount Auto Stores, Inc. (Escrow Interest) 133,153 (@), (R) Neoplan USA Corporation (1,627 Common Shares) --
See Accompanying Notes to Financial Statements 38 ING Senior Income Fund PORTFOLIO OF INVESTMENTS as of August 31, 2004 (Unaudited) (continued)
SECURITY DESCRIPTION VALUE -------------------------------------------------------------------------------------------------------------------------- (@), (R) Neoplan USA Corporation (170,180 Series B Preferred Shares) $ -- (@), (R) Neoplan USA Corporation (101,690 Series C Preferred Shares) 19,321 (@), (R) Neoplan USA Corporation (330,600 Series D Preferred Shares) 330,600 (@), (R) New World Restaurant Group, Inc. (Warrants for 2,244 Common Shares, Expires June 15, 2006) 30,788 (@), (R) Norwood Promotional Products, Inc. (16,551 Common Shares) -- (@), (R) Safelite Glass Corporation (99,495 Common Shares) 1,106,384 (@), (R) Safelite Realty (6,716 Common Shares) 36,938 (@), (R) Targus Group, Inc. (Warrants for 47,931 Common Shares, Expires December 6, 2012) -- --------------- TOTAL FOR EQUITIES AND OTHER ASSETS (COST $514,026) 1,657,184 --------------- TOTAL LONG-TERM INVESTMENTS (COST $1,538,178,415) 1,548,256,328 --------------- SHORT-TERM INVESTMENTS: 0.8% PRINCIPAL AMOUNT SECURITY DESCRIPTION VALUE -------------------------------------------------------------------------------------------------------------------------- $ 12,000,000 State Street Repurchase Agreement dated 08/31/04, 0.750% due 09/01/04, $12,000,250 due upon repurchase (Collateralized by $11,650,000 Federal Home Loan Mortgage Association, 7.000%, Market Value $12,240,224 due 07/15/05) 12,000,000 --------------- TOTAL SHORT-TERM INVESTMENTS (COST $12,000,000) 12,000,000 --------------- TOTAL INVESTMENTS (COST $1,550,178,415)** 111.5% $ 1,560,256,328 OTHER ASSETS AND LIABILITIES -- NET (11.5) (161,168,171) ----- --------------- NET ASSETS 100.0% $ 1,399,088,157 ===== ===============
---------- * 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. + 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. NR Not Rated. (2) Loan is on non-accrual basis. (@) Non-income producing security. (R) Restricted security. ** For federal income tax purposes cost of investments is $1,550,193,635 and net unrealized appreciation consists of the following: Gross Unrealized Appreciation $ 14,463,860 Gross Unrealized Depreciation (4,401,167) ------------- Net Unrealized Appreciation $ 10,062,693 =============
See Accompanying Notes to Financial Statements 39 (THIS PAGE INTENTIONALLY LEFT BLANK) INVESTMENT MANAGER ING Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 SUB-ADVISER ING Investment Management Co. 230 Park Avenue New York, NY 10169 ADMINISTRATOR ING Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 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 1-800-334-3444 TRANSFER AGENT DST Systems, Inc. P.O. Box 219368 Kansas City, Missouri 64141 CUSTODIAN State Street Bank and Trust Company 801 Pennsylvania Avenue Kansas City, Missouri 64105 LEGAL COUNSEL Dechert LLP 1775 I Street, N.W. Washington, D.C. 20006 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 Funds Services, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 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 (800) 992-0180 FOR MORE COMPLETE INFORMATION, OR TO OBTAIN A PROSPECTUS ON ANY ING FUND, PLEASE CALL YOUR INVESTMENT PROFESSIONAL OR ING FUNDS DISTRIBUTOR, LLC AT (800) 992-0180 OR LOG ON TO www.ingfunds.com. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE INVESTING. CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS INFORMATION AND OTHER INFORMATION ABOUT THE FUND. [ING FUNDS LOGO] PRSAR-SIF (0804-102904) ITEM 2. CODE OF ETHICS. Not required for semi-annual filing. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not required for semi-annual filing. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not required for semi-annual filing. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not required for semi-annual filing. ITEM 6. SCHEDULE OF INVESTMENTS. Schedule is included as part of the report to shareholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not required for semi-annual filing. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Board has a Nominating Committee for the purpose of considering and presenting to the Board candidates it proposes for nomination to fill Independent Trustee vacancies on the Board. The Committee currently consists of all Independent Trustees of the Board (6 individuals). The Nominating Committee operates pursuant to a Charter approved by the Board. The primary purpose of the Nominating Committee is to consider and present to the Board the candidates it proposes for nomination to fill vacancies on the Board. In evaluating candidates, the Nominating Committee may consider a variety of factors, but it has not at this time set any specific minimum qualifications that must be met. Specific qualifications of candidates for Board membership will be based on the needs of the Board at the time of nomination. The Nominating Committee is willing to consider nominations received from shareholders and shall assess shareholder nominees in the same manner as it reviews its own nominees. A shareholder nominee for director should be submitted in writing to the Fund's Secretary. Any such shareholder nomination should include at a minimum the following information as to each individual proposed for nomination as trustee: such individual's written consent to be named in the proxy statement as a nominee (if nominated) and to serve as a trustee (if elected), and all information relating to such individual that is required to be disclosed in the solicitation of proxies for election of trustees, or is otherwise required, in each case under applicable federal securities laws, rules and regulations. The Secretary shall submit all nominations received in a timely manner to the Nominating Committee. To be timely, any such submission must be delivered to the Fund's Secretary not earlier than the 90th day prior to such meeting and not later than the close of business on the later of the 60th day prior to such meeting or the 10th day following the day on which public announcement of the date of the meeting is first made, by either disclosure in a press release or in a document publicly filed by the Fund with the Securities and Exchange Commission. ITEM 10. CONTROLS AND PROCEDURES. (a) Based on our evaluation conducted within 90 days of the filing date, hereof, the design and operation of the registrant's disclosure controls and procedures are effective to ensure that material information relating to the registrant is made known to the certifying officers by others within the appropriate entities, particularly during the period in which Forms N-CSR are being prepared, and the registrant's disclosure controls and procedures allow timely preparation and review of the information for the registrant's Form N-CSR and the officer certifications of such Form N-CSR. (b) There were no significant changes in the registrant's internal controls that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) The Code of Ethics is not required for the semi-annual filing. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT. (a)(3) Not required for semi-annual filing. (b) 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: NOVEMBER 5, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James M. Hennessy --------------------- James M. Hennessy President and Chief Executive Officer Date: NOVEMBER 5, 2004 By /s/ Michael J. Roland --------------------- Michael J. Roland Executive Vice President and Chief Financial Officer Date: NOVEMBER 5, 2004